UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

ANNUAL REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2004
Commission File Number—0-7277

INTERMET Corporation

5445 Corporate Drive, Suite 200, Troy, Michigan 48098-2683
Telephone: (248) 952 -2500
(Address of principal executive offices)

Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:

Common Stock, $0.10 par value

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 twelve months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes o No x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No o

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day of the registrant’s most recently completed second quarter (June 30, 2004) was $108,540,888.

At May 31, 2005 there were 25,665,257 shares of Common Stock, $0.10 par value, outstanding.

TABLE OF CONTENTS

Item Number

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PART I

ITEM 1. BUSINESS

Proceedings under Chapter 11 of the Bankruptcy Code

On September 29, 2004, INTERMET Corporation and 17 of its wholly-owned domestic subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (“the Bankruptcy Code”) in the United States Bankruptcy Court for the Eastern District of Michigan (the “Bankruptcy Court”). These Chapter 11 cases have been consolidated for the purposes of joint administration as In re: INTERMET Corporation, et al. (Case No. 04-67597).

INTERMET’s subsidiaries for which bankruptcy petitions were filed are Alexander City Casting Company, Inc., Cast-Matic Corporation, Columbus Foundry, L.P., Diversified Diemakers, Inc., Ganton Technologies, Inc., INTERMET Holding Company, INTERMET Illinois, Inc., INTERMET International, Inc., INTERMET U.S. Holding, Inc., Ironton Iron, Inc., Lynchburg Foundry Company, Northern Castings Corporation, Sudbury, Inc., SUDM, Inc., Tool Products, Inc., Wagner Castings Company and Wagner Havana, Inc., all of which, together with INTERMET, are currently operating as debtors and debtors-in-possession. Other INTERMET subsidiaries, including foreign subsidiaries, are not parties to the Chapter 11 proceedings and are operating in the normal course.

Our bankruptcy proceedings were initiated primarily in response to substantial and unprecedented increases in the cost of raw materials, especially scrap steel. The price of scrap steel, which is our primary raw material, increased from approximately $160 per net ton at the beginning of 2003 to approximately $210 per net ton at the end of 2003 and to approximately $400 per net ton by the end of 2004. This included record increases of $85 per gross ton ($75 per net ton) and $65 per gross ton ($58 per net ton) in July and August of 2004, respectively. The price of scrap steel reached a peak of $440 per net ton in November, 2004. Because of pre-existing contractual pricing terms with most of our customers, we were limited in our ability to pass these and other raw material cost increases to our customers. At the same time, some of our largest trade creditors began to tighten or eliminate credit terms, which increased our working capital requirements. We also experienced operational difficulties at our Pulaski, Tennessee and Racine, Wisconsin light-metals plants.

These financial and operational difficulties impaired our ability to continue to draw on our pre-petition revolving credit facility. In an effort to avoid anticipated defaults under our loan covenants, which would have occurred as of September 30, 2004, we entered into discussions with the agent for our pre-petition lenders, seeking waivers of certain conditions contained in the pre-petition revolving credit facility. We were unable to obtain waivers on acceptable terms and, consequently, the Chapter 11 cases were filed on September 29, 2004.

We have continued to operate our U.S. businesses as debtors-in-possession under bankruptcy court protection from creditors. We continue to review all aspects of our business for opportunities to improve performance, while seeking to restructure our secured and unsecured debt, rationalize our facilities and cost structure and effect a customer strategy focused on scrap steel cost recovery and other commercial and financial issues.

We currently anticipate that all vendors will be paid for all goods furnished and services provided after our bankruptcy filing. As a consequence of our bankruptcy proceedings, pending litigation against our U.S. subsidiaries has been stayed (subject to certain exceptions in the case of governmental authorities), and no party may take any action to pursue or collect pre-petition claims except pursuant to an order of the bankruptcy court.

Two committees, representing unsecured creditors and equity security holders, have been appointed as official committees in the bankruptcy proceedings and, in accordance with the provisions of the Bankruptcy Code, have the right to be heard on all matters that come before the bankruptcy court. These committees play important roles in the bankruptcy proceedings.

We are unable to predict at this time what treatment will ultimately be accorded to claims of the various creditor classes, nor are we able to predict what treatment will ultimately be accorded to claims arising from intercompany

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indebtedness, licenses, executory contracts, transfers of goods and services, and other intercompany arrangements, transactions and relationships that were entered into prior to the filing of our bankruptcy. Various parties in the bankruptcy proceedings may challenge these arrangements, transactions and relationships, and the outcome of those challenges, if any, may have an impact on the treatment of various claims under such plan of reorganization.

Business Overview

INTERMET is one of the largest independent producers of ductile iron, aluminum, magnesium and zinc castings in the world. In addition, we provide machining and tooling related to our casting business along with a range of other products and services to the automotive and industrial markets. We specialize in the design and manufacture of highly engineered, cast automotive components for the global light truck, passenger car, light vehicle and heavy-duty vehicle markets. These products are primarily structural and safety components and are used in vehicle powertrain, chassis, brake and body/interior parts.

INTERMET supplies cast products to a broad array of automotive and industrial customers. Original equipment manufacturers (“OEMs”) and Tier 1 and Tier 2 suppliers of automotive components increasingly rely on their suppliers to design and engineer parts based on specific design parameters, including weight, size, cost and performance criteria. In addition, OEMs, Tier 1 and Tier 2 suppliers look to their suppliers to solve problems arising in the design and manufacturing process. We provide a broad range of full-service capabilities, including advanced design and engineering, casting, machining and sub-assembly.

Our ferrous metal products include ductile iron castings and related machining operations. These castings include crankshafts, brackets, bearing caps, steering knuckles, wheel spindles, differential carriers and cases, brake anchors and calipers and suspension control arms. Our light metals products include aluminum, magnesium and zinc castings and related machining operations. These castings include engine covers, brackets, instrument panel frames, connector housings, steering knuckles, airbag controller enclosures, heat sinks, steering column components and windshield wiper motor enclosures.

We provide cast products used by automotive OEMs including, but not limited to, DaimlerChrysler, Ford, General Motors, PSA Peugeot Citroën, Volkswagen, BMW, Honda and Toyota, as well as their leading suppliers, such as Delphi, Visteon, PBR Automotive, TRW, Continental Teves, Knorr, Denso, Metaldyne and Dana.

As of December 31, 2004, our Ferrous Metals segment had a total average straight time casting capacity of 625,000 net tons, a decrease of 18,000 net tons as compared to 643,000 net tons in 2003. The decrease was due to the closure of our Havana, Illinois plant in 2004. Our Light Metals segment has a total average straight time available casting capacity of 75,600 net tons as of December 31, 2004, an increase of 4,000 net tons as compared to 71,600 net tons in 2003.

INTERMET’s casting facilities, including our European facilities, operated at an average annual capacity utilization of 74% in 2004, 68% in 2003 and 70% in 2002.

Acquisitions and Closures

Columbus Machining Closure

In October 2004, we announced the closure of our Columbus Machining Plant, located in Midland, Georgia, which occurred during the first quarter of 2005. As a result of this decision we recorded a $0.3 million restructuring and impairment charge that was primarily comprised of the write-down of inventory. See additional discussion in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 5 to the Consolidated Financial Statements, Restructuring and Impairment Charges.

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Racine Closure

In December 2004, we announced the closure of our Racine (die-casting) Plant and Racine Machining Plant, both of which are located in Sturtevant, Wisconsin. We closed these plants during the second quarter of 2005. As a result of this decision, we recorded a $10.3 million restructuring and impairment charge in 2004. This charge consisted of a write-down of fixed assets of $6.5 million, write-down of inventory of $2.4 million, a pension plan curtailment of $1.2 million and an additional $0.1 million each for severance pay and other contractual benefits included in the collective bargaining agreement that was in place at the plant. See additional discussion in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 5 to the Consolidated Financial Statements, Restructuring and Impairment Charges.

Decatur Closure

On March 29, 2005, we announced our plan to close our Decatur Foundry located in Decatur, Illinois during the fourth quarter of 2005. See additional discussion in Note 19 to the Consolidated Financial Statements, Subsequent Events.

Porto, Portugal

Pursuant to our agreement dated June 25, 2003 with Melfina — Estudos, Servicos e Participacoes, S.A., we made a final payment in December 2004 to acquire 100% ownership of the shares of Fundicao Nodular, S.A. (“Porto Foundry”), which is located in Porto, Portugal. Under the terms of the agreement, we acquired the final 25% of the shares for a cash investment of Euro 4.9 million (approximately $6.2 million). The Porto Foundry is a caster of various ductile-iron automotive components.

Financial Information about Segments

Sales and operating loss for our Ferrous Metals segment in 2004 were $562.6 million and $16.9 million, respectively, compared with sales and operating income of $493.4 million and $13.2 million, respectively, in 2003. Sales and operating loss in our Light Metals segment in 2004 were $274.6 million and $124.6 million, respectively, compared to sales and operating loss of $237.8 million and $44.2 million, respectively, in 2003. See additional discussion in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 14 to the Consolidated Financial Statements, Reporting for Business Segments.

Products, Markets and Sales

We focus on value-added cast metal products, which we supply mainly to the automotive market. In 2004, 2003 and 2002, approximately 95.4%, 94.1% and 95.2% of our sales, respectively, were attributable to the automotive market. Within the automotive market, our products generally fall into four major categories:

•		Chassis and suspension components such as steering knuckles, control arms, steering gear housings, torsion bar adjusters, spindle carriers and spring seats;
•		Powertrain components such as electronic control module housings, engine crankshafts, bearing caps, front covers and cam covers; transmission housings, retainers and bodies; and differential cases, carriers and bearing caps;
•		Brake components such as light vehicle and heavy vehicle calipers, anchors and brackets; and
•		Interior/body components such as steering column and lock housings, electronic enclosures, mirror supports and brackets.

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We also manufacture a variety of products for the industrial and appliance markets. In 2004, 2003 and 2002, approximately 4.6%, 5.9% and 4.8% of our sales, respectively, were attributable to the industrial and appliance markets.

Reportable segment sales for continuing operations by market for 2004 were as follows:

Reportable segment sales for continuing operations by market for 2003 were as follows:

Reportable segment sales for continuing operations by market for 2002 were as follows:

All of our foundry facilities that supply the automotive industry have QS-9000 and ISO-9001 or ISO-9002 certification. All of our European and many of our North American operations have been certified to the new TS-16949 quality standard.

We primarily market our products through our own sales and customer service staff. To a limited degree, we use independent sales representatives. INTERMET’s principal sales offices are in Troy, Michigan and Saarbrucken, Germany, but are also supported by a smaller sales office in Tokyo, Japan. We primarily produce to customer orders and do not maintain any significant inventory of finished goods not on order.

Our sales staff acts as a liaison between our customers and our production personnel. Through our applications and product engineering groups, we offer engineering and design capabilities and customer assistance at the design stage of customer programs. We utilize quality assurance representatives and engineers to work with our customers’ manufacturing personnel to detect and avoid potential problems as well as to evaluate new product opportunities. In addition to working with our customers’ design engineers and other technical staff, our product design engineers frequently work closely with customers’ purchasing personnel and our own sales personnel to present our ideas and secure production purchase orders.

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We supply cast products to automotive OEMs directly and through Tier 1 and Tier 2 suppliers. During the past three years, net sales to significant customers were as follows (as a percentage of consolidated net sales):

During the past three years, net sales by market were as follows (as a percentage of consolidated net sales):

Sales of ferrous metals castings for continuing operations were 478,000, 455,000 and 429,000 net tons in 2004, 2003 and 2002, respectively. The increase in net tons sold in 2004 compared to 2003 is primarily because of increased European sales, the full effect of the consolidation of the Porto Foundry in July, 2003 and the use of our products for a new DaimlerChrysler program in North America. The increase in net tons sold in 2003 compared to 2002 is primarily because of our consolidation of the Porto Foundry’s operating results beginning in July 2003.

Sales of light metals castings were 41,000, 34,000 and 41,000 net tons in 2004, 2003 and 2002, respectively. The increase in net tons sold in 2004 compared to 2003 is primarily because we are supplying products for new programs for DaimlerChrysler and Ford. The decrease in net tons sold in 2003 compared to 2002 was due primarily to lower market demand and the conversion of one high-volume magnesium program to plastic.

Design, Manufacturing and Machining

We have a technical center located in Lynchburg, Virginia, and engineering capability in Troy, Michigan, Saarbrucken, Germany and Tokyo, Japan, that provide development, engineering and design services to our customers. In addition, we provide technical support to all of our plants. We furnish our customers with design support using their native computer-aided design and engineering languages as well as our cast metal process simulation software. Our design and engineering teams also assist our customers in the initial stages of product creation and development.

Our capabilities include computer-aided engineering analysis, design optimization, prototyping, modeling enhancements and testing. We use three-dimensional solid modeling software in conjunction with rapid prototype development, among other computer-aided design techniques, to support our customers in the initial stages of product design and prototype creation. Our goal is to continually improve product quality and performance. We also strive to reduce costs by offering new product solutions that optimize designs, reduce weight, consider the use of alternative materials or incorporate more efficient manufacturing processes. We believe that our design and engineering capabilities serve as a competitive advantage as our customers continue to outsource these critical activities to their suppliers.

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Our Ferrous Metals segment produces ductile iron castings. Our ferrous metal castings range from small parts weighing only a few ounces each to products weighing up to 75 pounds each. The ferrous metals cast production process involves melting scrap steel and pig iron in a cupola melter or an electric furnace, adding various alloys and pouring the molten metal into molds made primarily of sand. The molten metal cools and solidifies in the molds. The molds are then broken apart and the castings are removed.

Our Light Metals segment produces castings of aluminum, magnesium and zinc. Our light metal castings range from small products weighing only a few ounces each to products weighing up to 50 pounds each. To produce light metal castings, we use a process called die-casting, in which molten aluminum, magnesium or zinc is introduced into a metal die and solidified. We also produce light metal castings using pressure-counter-pressure casting (PCPC ™), which is a casting method in which molten metal, usually aluminum, is introduced into a permanent die cavity with low-pressure gas applied to the metal in a sealed furnace.

Customers usually specify the properties that are required in their castings, such as strength, ductility and hardness, and we then determine how best to meet those specifications. Constant testing and monitoring of the casting process is necessary to maintain both the quality and performance consistency of the castings. Electronic analysis and monitoring equipment, including x-ray, real-time radioscopy, ultrasonic and magnetic-particle testing and chemical spectroscopy is used extensively in grading scrap metal, analyzing molten metal and testing castings.

Most castings require machining before they can be put to their ultimate use. This machining may include drilling, boring, milling, threading or cutting operations. Many customers provide their own machining for castings or have them machined by third parties. Most of our light metals casting plants have some machining operations integral in the casting operation. We also contract with other companies to machine castings that we produce, before the castings are shipped to customers.

Raw Materials

Scrap steel is the primary raw material that we use to manufacture ferrous metals castings. We purchase scrap steel from numerous sources, using a combination of spot market purchases and short-term contract commitments. We have no material long-term contractual commitments with any scrap steel supplier, nor is it generally possible to secure long-term commitments in this market. Sharp increases in scrap steel cost have had a significant negative impact on our financial results and were the major factor in our initiation of our bankruptcy proceedings. As part of our bankruptcy proceedings, we have negotiated revised surcharge policies related to the products in which scrap steel is a major input. These agreements provide for price adjustments that are linked to the change in value of certain steel indices, which we believe are representative of our true scrap costs. These new policies became effective with a majority of our customers on January 1, 2005. In addition, lag times between scrap steel price movements and our ability to adjust prices have been reduced from between one and six months to approximately one month with most of our major customers. Our customers have also agreed in some cases to additional surcharges intended to cover price increases in other materials and transportation.

In our light metals business, our primary raw materials are primary and secondary aluminum alloy and primary magnesium ingots. We purchase aluminum using spot market purchases and short-term contract commitments. We have no material long-term contractual commitments with any aluminum suppliers. We have contractual arrangements with many of our major customers that allow us to adjust our castings prices to reflect fluctuations in the cost of aluminum ingot. Adjustments are typically made after a time period specified by the customers and always lag the market.

See Item 7A, Quantitative and Qualitative Disclosures about Market Risks for further discussion of raw materials purchases.

We had contractual arrangements with some of our suppliers, which expired at various times through 2004, for the purchase of various materials, other than scrap steel, primary and secondary aluminum ingot and primary magnesium ingot, used in the manufacturing process. These contracts provided limited protection against price increases of raw materials. Many of these contracts were renewed in 2004. Other than as noted above, we do not

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have specific arrangements in place to adjust casting prices for fluctuations in the prices of alloy and other materials.

Cyclicality and Seasonality

Although most of our products are generally not affected by year-to-year automotive style changes, model changes may have an impact on sales. In addition, the inherent cyclicality of the automotive industry has affected our sales and earnings during periods of slow economic growth or recession. Our third and fourth quarter sales are usually lower than first and second quarter sales due to plant closings by automakers for holidays, vacations and model changeovers.

Backlog

Most of our business involves supplying all or a portion of the customer’s requirements under blanket purchase orders that are issued on an annual basis. Customers typically issue firm releases and shipping schedules on a periodic basis, typically monthly or weekly. Many of our customers’ purchase orders permit cancellation of the orders at any time at the convenience of the customer. Our backlog at any time generally consists only of the orders that have not been released for shipment.

Competition

We compete with many other foundries domestically and internationally. Some of these foundries are owned by major users of castings. For example, many automobile manufacturers in North America and Europe, which are among our customer base, operate their own foundries. However, they also purchase a significant number of castings from INTERMET and other companies. Our castings also compete, to some degree, with other types of metal castings, plastics, and steel and aluminum forgings and stampings.

The machining industry is highly fragmented and competitive. As in the foundry industry, major purchasers of machined components often have significant in-house capabilities to perform their own machining work.

We compete primarily on the basis of product quality, engineering, service and price. We emphasize our ability to produce complex products in order to compete for value-added castings.

Research and Development

We conduct process, material and product development programs for both our ferrous metals and light metals products, principally at a technical center and a research foundry in Lynchburg, Virginia. In addition, we established an engineering center at our European headquarters in Saarbrucken, Germany in 2003. This facility complements the capabilities of the Lynchburg Technical Center and our engineering capability in Troy, Michigan to facilitate a global network of engineering research and development operations.

Current research and testing projects encompass both new manufacturing processes and materials and product development. Our research foundry has a self-contained melting and molding facility with extensive metallurgical, physical and chemical testing capabilities. Our work on new manufacturing processes focuses on ways to lower costs and improve quality. Our product development work includes projects to extend the performance range for existing materials such as with austempering of ductile iron and special alloying for creep-resistant magnesium alloys. In addition, we are currently working to develop new materials, improve manufacturing processes and improve material properties. We directly expensed $1.5 million, $1.2 million and $1.3 million in 2004, 2003 and 2002, respectively, for basic research and development.

Employees

At April 30, 2005, we had 5,311 employees, comprised of 3,880 and 1,431 employees in North America and Europe, respectively. Our workforce included 3,183 and 1,190 hourly manufacturing workers in North America and Europe, respectively. The remaining employees are management, engineering, sales and clerical personnel.

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Financial Information About Geographic Areas

Long-lived and deferred tax assets were located as follows for 2004, 2003 and 2002 (in thousands of dollars):

For the year ended December 31,

Sales by geographic locations for external customers for 2004, 2003 and 2002 were as follows (in thousands of dollars):

For the year ended December 31,

Available Information on our Website

Our website address is http://www.intermet.com. We make available on our website, free of charge, the periodic reports that we file with or furnish to the Securities and Exchange Commission (the “SEC”), as well as all amendments to these reports, as soon as reasonably practicable after such reports are filed with or furnished to the SEC.

ITEM 2. PROPERTIES

The following are our 18 domestic and international manufacturing locations and the types of products produced at each location as of December 31, 2004:

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All of our manufacturing locations are owned, except the Jackson Plants and Columbus Foundry facilities, which are leased pursuant to financing arrangements utilizing industrial revenue bonds. All of our U.S. owned properties are subject to liens securing bank borrowings. For further information on debt, see discussion in Management’s Discussion and Analysis of Financial Condition and Results of Operation and Note 8 to the Consolidated Financial Statements, Debt.

We own a research and development foundry and lease a technical center, both located in Lynchburg, Virginia, and lease a management information systems data center in Columbus, Georgia. We also lease a headquarters office, which is located in Troy, Michigan, and a European headquarters, which is located in Saarbrucken, Germany. The lease for our executive office in Troy, Michigan expires on October 31, 2005 and we will be required to vacate our current space at that time. We expect to be entering into a lease for new comparable office space in the Troy, Michigan area.

ITEM 3. LEGAL PROCEEDINGS

On September 29, 2004, INTERMET Corporation and 17 of its wholly-owned domestic subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Michigan. The Chapter 11 cases have been consolidated for the purposes of joint administration as In re: INTERMET Corporation, et al (Case No. 04-67597). Subsidiaries other than the above described domestic subsidiaries, including foreign subsidiaries, not parties to the Chapter 11 cases are operating in the normal course. For further discussion, see Item 1, Business, “Proceedings Under Chapter 11 of the Bankruptcy Code.”

On March 14, 2002, we entered into a consent order with the U.S. Environmental Protection Agency (“USEPA”), which requires investigation of the nature and extent of any hazardous waste disposed of at our Radford, Virginia

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facilities. We 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 adversely affected or could adversely affect groundwater or human health. Because we historically disposed of waste material at this site, it is probable that remedial action will be required with respect to that on-site disposal. We have accrued $2.5 million for such remediation activity based on our investigation to date. However, our investigation of this site will continue and it is possible that ultimate remediation costs could exceed the amounts we have accrued.

We received a Notice of Violation from the Illinois EPA dated March 11, 2005 in connection with alleged releases of contaminants to the soil and groundwater at our Havana, Illinois foundry, which is closed. We have proposed to address the allegations contained in the notice by continuing our remediation activities at the property, as we have been doing for the past several years pursuant to the Illinois Site Remediation Program. To date, the Illinois EPA has not responded to our proposal. Although we cannot predict the amount of any potential fines or penalties, we do not believe that they would be material to our business or financial condition.

We received a separate Notice of Violation from the Illinois EPA dated April 20, 2005 in connection with alleged releases of contaminants to the soil and groundwater at our Decatur, Illinois foundry. We have not yet responded to the notice. Although we cannot predict the amount of any potential fines or penalties, we do not believe that they would be material to our business or financial condition.

We are also a party to a number of other legal proceedings in the ordinary course of our business, most of which were stayed upon the filing of our bankruptcy cases on September 29, 2004. We do not believe that such pending or threatened legal proceedings 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.

For further discussion, see Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 11 to the Consolidated Financial Statements, Commitments and Contingencies.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the fourth quarter of the fiscal year covered by this report.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

On October 1, 2004, we received a written notice from The NASDAQ Stock Market (“Nasdaq”) that our shares of common stock would be delisted at the opening of business on October 12, 2004 in accordance with Marketplace Rule 4815(a), based on Nasdaq’s determination that we did not comply with the continued listing requirements under Marketplace Rules 4300 and 4450(f). Since October 12, 2004, our common stock, $0.10 par value, has been traded on the Pink Sheets under the symbol “INMTQ” and had a closing price of $0.13 on June 14, 2005. On June 14, 2005, there were approximately 460 record holders of our common stock. The following table sets forth the high and low sale prices of our common stock for each calendar quarter during our last two fiscal years:

During 2004, 2003 and 2002, we declared and paid dividends of approximately $2.1 million, $4.1 million and $4.1 million, respectively ($0.04 per share per quarter during 2002 and 2003, and $0.04 per share in the first and second quarters of 2004). On July 15, 2004 the Board of Directors declared a dividend of $0.01 per share for the third quarter of 2004. However, on September 22, 2004, the Board of Directors decided, in view of our financial condition, to suspend payment of this dividend. No dividend was declared for the fourth quarter of 2004. Under our loan agreements, we are subject to restrictions on the payment of dividends. As of December 31, 2004, no retained earnings were available for the payment of dividends under those agreements. For further discussion of debt, see Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 8 to the Consolidated Financial Statements, Debt.

We have not sold unregistered securities during the past three years.

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ITEM 6. SELECTED FINANCIAL DATA

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ITEM 7. 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 Risks 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. We undertake no obligation to publicly update or revise any forward-looking statements. The following factors are important and should be considered carefully in connection with any evaluation of INTERMET’s business, financial condition, results of operations and prospects. The following factors could cause our actual results to differ materially from those reflected in any forward-looking statements we may make from time to time. The factors identified here do not represent an exhaustive list of potential risks involved in our business and we undertake no obligation to publicly update or revise the following risk factors:

•		On September 29, 2004, we and seventeen of our wholly-owned domestic subsidiaries filed voluntary bankruptcy petitions for reorganization under Chapter 11 of the United States Bankruptcy Code, and we are currently operating as debtors-in-possession under the supervision of the bankruptcy court. Although we are working to develop and obtain confirmation of a plan of reorganization, we need to secure adequate equity and/or debt financing to do so to fund payments under a plan and to provide adequate liquidity for our post-bankruptcy operations. Our inability to timely exit bankruptcy could materially and adversely impact our business if it affects our ability to obtain new product awards or renewals of existing product awards from our customers.
•		In connection with our September, 2004 bankruptcy filing we entered into a debtor-in-possession revolving credit facility in October, 2004, which expires in October 2005. This facility contains a number of financial covenants and other requirements. We rely on this facility to fund our operations and provide necessary liquidity during the pendency of our Chapter 11 proceeding. Our business would be materially and adversely impacted if we were unable to borrow under this facility due to our failure to meet the covenants and other conditions required for continued borrowings under this facility.
•		Sales to the automotive industry accounted for substantially all of our sales in 2004. In addition, our automotive sales are highly concentrated among a few major customers, and our products are generally sold for specific vehicle programs. Therefore, the loss of any significant customer or vehicle program could have a material adverse effect on our business. Additionally, sales of our products are dependent on unit sales of the applicable vehicle models and any reduction in sales or failure to meet sales estimates of vehicle models could also have a material adverse effect on our business.
•		As is typical in the automotive supply industry, we have no long-term contracts with our customers for most of the products that we supply. While our customers provide annual estimates of their requirements and update those estimates from time to time throughout the year, most of our sales are made on a short-term purchase order basis, which generally can be terminated by the customer.
•		If one or more of our customers were to initiate bankruptcy or insolvency proceedings, it could render a material portion of our accounts receivable uncollectible or substantially impaired, which could have a material adverse effect on our financial condition.
•		A challenge that we and other automotive industry suppliers face is the pressure from our customers to reduce the prices we charge for our products. To the extent this trend continues, it puts pressure on our margins and profitability, and could have a material and adverse effect on our financial condition.

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•		The automotive industry is cyclical and dependent on consumer spending. General economic factors that adversely affect automotive sales could adversely impact our business. In addition, our business is seasonal due to lower sales in the third and fourth quarters due to the pass-through effect of plant closings by OEMs for holidays, vacations and model changeovers. Nevertheless, a substantial percentage of our costs are generally not seasonal due to our need for continued expenditures for capital equipment, product development and ongoing production improvements and support, as well as other factors, making it difficult for us to significantly reduce operating expenses in a particular period even if our net sales forecasts for that period are less than other periods.
•		Our product lines are subject to change as OEMs introduce new or redesigned products and vehicles. We compete for new business both at the beginning of the development phase of new vehicles, which generally begins two to five years prior to the marketing and public sale of models based upon such vehicles, and upon redesign of existing vehicles. Our sales would be adversely affected if we fail to obtain business for new vehicles, or fail to retain or increase business on redesigned existing vehicles.
•		The substantial increases in scrap steel and other raw material costs that we have experienced were the primary factors leading to our bankruptcy filing in September of 2004. Energy costs have also risen. If raw material and energy costs continue to increase, and we are unable to pass a substantial portion of those costs on to our customers on a timely basis, it could have a material adverse effect on our financial condition.
•		We are substantially leveraged and must generate enough cash to make required interest and other payments under our debtor-in-possession revolving credit facility. In the event we do not generate enough cash, a default would occur under the facility unless the lenders agreed to an amendment or a waiver. Any default would have a material adverse effect on our business. Additionally, our debt under the facility accrues interest at a rate that varies with prevailing market rates. Therefore, increases in market interest rates would increase our interest payment obligations under the facility and could have a material adverse effect on our financial condition.
•		A substantial percentage of our hourly employees, as well as those of our OEM and Tier 1 customers, are represented by labor unions and work pursuant to collective bargaining agreements. Our failure, or the failure of any of our significant customers, to reach agreement with a labor union on a timely basis, resulting in either a work stoppage or strike, could have a material adverse effect on our business.
•		We operate production facilities in Germany and Portugal, in addition to our production facilities in the United States, that expose us to the risks associated with non-U.S. operations, including: (i) fluctuations in currency exchange rates; (ii) compliance with the law and other regulatory requirements of non-U.S. jurisdictions; (iii) overlapping and potentially inconsistent tax structures; and (iv) possible restrictions or limitations imposed on the repatriation of funds. Any of these risks could lave a material adverse effect on our business or financial condition.
•		We are subject to U.S. and non-U.S. environmental laws and regulations governing the emission, discharge, generation, handling, storage, transportation, treatment and disposal of hazardous and waste materials and the clean-up of contaminated property. Although we have made and continue to make expenditures to comply with environmental laws and regulations, future compliance with these laws may have a material adverse effect on our business or financial condition. Additionally, if an improper release of hazardous materials occurs on or from our property or from any offsite disposal site that receives or has received such materials from us or any of our predecessors, or if contamination is discovered at any of our or our predecessors current or former properties, we could be held liable for such release or for the cost to remediate contaminated property, and such liability could have a material adverse effect on our financial condition.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the other sections of this report, including “Item 1. Business”, “Item 6. Selected Financial Data” and “Item 8. Financial Statements and Supplementary Data”. The various sections of this MD&A contain a number of forward-looking statements, all of which are based on our current expectations and could be materially affected by the uncertainties and risk factors described throughout this report.

Accounting Impact of Restructuring Proceedings

As described above, on September 29, 2004 INTERMET and 17 of its wholly-owned subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code. Pursuant to AICPA Statement of Position 90-7 (“SOP 90-7”), “Financial Reporting by Entities in Reorganization under the Bankruptcy Code”, our prepetition liabilities that are subject to compromise are reported separately in the consolidated balance sheet at the expected amount of the allowed claims. Note 2 to our consolidated financial statements, “Voluntary Reorganization under Chapter 11 and Administration”, includes the detail of “Liabilities subject to compromise” as of December 31, 2004. We also recorded reorganization-related expenses of $14.8 million for the year ended December 31, 2004. See Note 1 to our consolidated financial statements in Item 8 of this report for further information concerning our bankruptcy proceedings.

Critical Accounting Policies and Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. There were no material changes in the methods or policies used to establish estimates and assumptions in 2004. Generally, matters subject to estimation and judgment include accounts receivable realization, inventory obsolescence, long-lived asset impairment, pension and other postretirement benefit obligations, accruals related to litigation and environmental costs and valuation reserves for deferred tax assets. Actual results may differ from the estimates provided.

Our critical accounting policies and estimates are as follows:

Revenue Recognition

We recognize revenue when persuasive evidence of a final agreement exists, delivery has occurred, title has transferred, the selling price is fixed or determinable and collectibility is reasonably assured. We record provisions against our gross revenue for estimated product returns and allowances in the period when the related revenue is recorded. These estimates are primarily based on factors such as historical sales returns, credit memo activities and changes in our customers’ demand. Should our actual product returns and allowances exceed our estimates, additional provisions against our revenue would result.

Allowance for Doubtful Accounts

We evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of customer charge-backs or a specific customer’s inability to meet its financial obligations to us, we record a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. Unless active discussions with the specific customer are occurring, we record bad debt charges based on our past loss history and the length of time the receivables are past due. In those situations with active discussions, the amount of bad debt recognized is based on the status of the discussions. If circumstances change, our estimates of the recoverability of amounts due to us could be reduced by a material amount.

Inventory Valuation

We regularly assess the valuation of our inventories and write down those inventories that are obsolete or have estimated realizable value less than their cost. Our estimates of realizable value are based on our analyses and assumptions including, but not limited to, expected inventory useful lives and our production plans and future

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demand requirements. If actual demand from our customers is lower than our estimates, we may be required to record additional inventory write-downs. If demand is higher than expected, we may sell our inventories that had previously been written down.

Valuation of Financial Instruments

Cash and cash equivalents have a readily identified market value. For debt, we evaluate the year-end market rates for similar debt instruments to assess fair value. These values represent the estimated amount we would receive or pay to terminate agreements taking into consideration current interest rates and the terms of the agreements.

Income Taxes and Deferred Tax Assets and Liabilities

We account for taxes on income using the asset and liability method where deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using statutory tax rates.

We regularly assess the likelihood that the deferred tax assets, including net operating loss carryforwards, are recoverable. This process requires substantial management judgment. To the extent that we believe the recoverability is less than likely, we will establish a valuation reserve against the deferred tax assets. Actual results could differ from our estimates and such differences could be material to the financial statements. For the year ended December 31, 2004, we recorded a valuation reserve of $42.9 million against our domestic net deferred tax assets due to the accumulation of losses experienced at our domestic operations between 2002 and 2004.

There are limitations on the use of operating loss carryforwards included in the deferred tax assets. Domestic operating loss carryforwards have a life of 15 to 20 years.

Derivatives

We do not hold or issue derivative instruments for trading purposes. Hedge accounting is applied when we designate and document the hedging relationships involving these derivative instruments. While we intend to continue to meet the conditions for hedge accounting, if a hedge did not qualify as highly effective, the ineffective portion of the derivative would be reflected in earnings.

We may hold derivative financial instruments to hedge a variety of risk exposures including interest rate risks associated with our long-term debt, foreign currency fluctuations for transactions with our overseas subsidiaries and customers and purchase commitments for certain raw materials used in our production processes.

At December 31, 2002, we held an interest rate swap agreement, with a notional amount of $50 million, to hedge interest rate risk. This derivative qualified for hedge accounting. Under the terms of the interest rate swap agreement, we paid a fixed rate and received a variable rate. This instrument was valued using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments were based on an expectation of future interest rates derived from observed market interest rate curves. We did not change our methods of calculating these fair values or developing the underlying assumptions. The value of this derivative changed over time as cash receipts and payments were made and as market conditions changed. The interest rate swap agreement expired in October 2003.

To hedge foreign currency risks, we periodically use over-the-counter forward contracts. To hedge our European operations, we had outstanding foreign exchange contracts with a notional amount of Euro 15.5 million (approximately $19.1 million) and Euro 15.9 million (approximately $16.7 million) at December 31, 2003 and 2002, respectively. We had no outstanding foreign exchange contracts at December 31, 2004. The market value of such foreign exchange contracts was minimal at December 31, 2003 and 2002.

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We do not believe we are exposed to more than a nominal amount of credit risk in our interest rate and/or foreign currency hedges, as the counter parties are established, well-capitalized financial institutions. Information about the fair values, notional amounts and contractual terms of these instruments can be found in Note 18, Derivative Financial Instruments, to our Consolidated Financial Statements.

In addition to these derivative financial instruments, we have other contracts that have the characteristics of derivatives but are not required to be accounted for as derivatives. These contracts for the physical delivery of commodities qualify for the normal purchases and normal sales exception under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” as we take physical delivery of the commodity and use it in the production process. This exception is an election and, if not elected, these contracts would be carried in the balance sheet at fair value with changes in the fair value reflected in earnings. These contracts are used to cover our raw materials and energy purchases.

Goodwill

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” we review our goodwill for impairment annually, or more frequently if certain events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying values of assets, including goodwill, and liabilities are assigned to each reporting unit. We then determine the fair value of each of our two reporting units based on a combination of an income method, which estimates the fair value of our reporting units based on future discounted cash flows, and a market method, which estimates the fair values based on comparable market prices. If the carrying value exceeds fair value, then a possible impairment of goodwill exists and requires further evaluation.

Assumptions including, but not limited to, future growth rates and discount rates are used in our goodwill testing. These assumptions may be affected by factors such as market conditions, which are beyond our control.

Long-Lived Assets Other Than Goodwill

We evaluate our property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. The carrying amount of a long-lived asset is considered to be not recoverable if it exceeds our estimates of its undiscounted future cash flows based on our operation forecasts. Impairment charges will be measured and recorded as the amount by which the carrying values of the long-lived assets exceed their fair values.

Litigation and Contingencies

We are a defendant in a number of claims, legal proceedings and other contingencies in the ordinary course of our business. We accrue our best estimate of the cost for the resolution of these contingencies where we are able to estimate the cost and where we have determined that it is probable that we will incur them in accordance with SFAS No. 5, “Accounting for Contingencies”. At present, we do not believe that any of our current legal proceedings will have a material adverse effect on our results of operations. To the extent additional information arises, it is possible that our best estimate of our probable liability in these matters could change. We recognize the costs of defense in the periods incurred. Accordingly, the future costs of defending claims are not included in our estimated liability.

We are subject to examination from domestic and foreign tax authorities regarding the amount of taxes we owe. These examinations include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposure associated with our various tax filing positions, we record reserves for potential exposures. To the extent we were to prevail in matters for which accruals have been established or we were required to pay amounts in excess of our reserves, our effective tax rate in a given financial statement period may be materially impacted. However, based on our evaluation of tax positions, we believe we have appropriately accrued for probable exposures. The United States Internal Revenue Service completed its examination of our 2001 tax year during the second quarter of 2004. We received refunds of $2.7 million in 2004 attributable to the audit of our 2001 federal tax return and resulting carryback claims to our 2002, 1999 and 1996 tax returns.

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Retirement Benefits

Assumptions used in determining projected benefit obligations and the fair values of plan assets for our benefit plans are evaluated periodically by management with the assistance of independent actuaries. Critical assumptions such as the discount rate, expected long-term rate of return on plan assets and health care cost trend rates are evaluated and updated at least annually. The discount rate used in determining the actuarial present value of the projected benefit obligations was 5.75% and 6.00% in 2004 and 2003, respectively. The expected long-term rate of return on plan assets used in calculating net pension expense is based on the historical and projected rates of return on the types of plan assets in which the plans are targeted to be invested. The expected long-term rate of return was 8.50% and 8.75% for 2004 and 2003, respectively. We develop our estimate of health care cost trend rates through the review of our recent health care cost trend and discussions with our actuaries. As of December 31, 2004, we assumed that the health care cost trend rates will gradually decrease from 10.5% in 2004 to 5.0% in 2015. The assumed health care cost trend rate for 2005 is 10.0%. A one-percentage-point increase or decrease in the assumed health care cost trend rates would have increased and decreased our 2004 postretirement benefit obligations by $2.3 million and $2.1 million, respectively.

Results of Operations

2004 Compared to 2003

For the year ended December 31, 2004, we had sales from continuing operations of $837.2 million compared to sales of $731.2 million in 2003, an increase of $106.0 million, or 14.5%. Sales for the Ferrous Metals segment were $562.4 million in 2004 compared with $493.4 million in 2003, an increase of $68.8 million, or 13.9%. European sales during 2004 were $175.8 million, an increase of $59.4 million or 51% as compared to $116.4 million in 2003. European sales are included in our Ferrous Metals segment. The increase in the Ferrous Metals segment sales was attributable to higher sales volume, the consolidation of the financial results of our Porto Foundry beginning in July 2003 and favorable foreign currency exchange on European sales. Our Porto Foundry had sales of $42.2 million in 2004 compared to $14.6 million during the period from July 1, 2003 to December 31, 2003, an increase of $27.6 million. Sales in the Light Metals segment were $274.6 million in 2004 compared with $237.8 million in 2003, an increase of $36.8 million or 15.5%.

Our gross profit for 2004 of $16.2 million was 1.9% of sales compared with gross profit for 2003 of $63.8 million representing 8.7% of sales. The decrease in gross profit margin was primarily due to increased cost of raw materials, especially scrap steel. Other items affecting gross margin were increased pricing pressure from our customers, start-up costs associated with product launches, cost savings programs and new technology implementation.

Selling, general and administrative expenses increased by $3.9 million from $39.4 million in 2003 to $43.3 million in 2004 and decreased as a percent of sales from 5.4% in 2003 to 5.1% in 2004. The increase in total expense was primarily attributable to the consolidation of our Porto Foundry’s operating results beginning in July 2003, customer support costs and the start up of our European engineering center.

We recorded a goodwill impairment charge of $165.9 million in 2004. This impairment charge was quantified during impairment testing as of the end of the third quarter, which indicated that the carrying value of both the Ferrous Metals and the Light Metals reporting units were in excess of fair value, causing the entire carrying value of goodwill of $165.9 million to be written off. Restructuring and impairment charges of $32.2 million were also recorded in 2004. These charges consisted of $10.3 million for our Racine Plant shutdown, $0.3 million for our Columbus Machining Plant shutdown, an additional $1.7 million of costs relating to our Havana Foundry closing that was announced in 2003, the write-down of impaired fixed assets of $19.6 million and other write-downs of $0.3 million. Impairment charges of $10.0 million were recorded in 2003, including an $8.5 million charge for the closure of our Havana Foundry, and $1.5 million in write-downs of other long-lived assets. Reorganization related expenses of $14.8 million were also recorded in 2004, consisting primarily of professional fees and writeoff of capitalized debt issuance costs in connection with our bankruptcy proceedings.

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Net interest expense for the years ended December 31, 2004 and 2003 was $30.5 million and $29.9 million, respectively. The increase was the result of higher interest rates on our debt, partially offset by $4.3 million for the cessation of interest expense accrual on our senior notes after our bankruptcy filing on September 29, 2004.

Net other expense of $0.5 million for 2004 was mainly comprised of a loss on disposal of fixed assets.

The effective income tax expense rate for 2004 was (0.3)%, primarily due to the recording of a valuation reserve against our domestic net deferred tax assets on continuing operations of $42.9 million and the fact that there was no tax benefit on the non-deductible goodwill impairment charge of $141.5 million. For information concerning the provision for income taxes, as well as information regarding differences between effective tax rates and statutory rates, see Note 13 to our Consolidated Financial Statements, Income Taxes.

Loss from continuing operations for 2004 was $270.7 million compared to the loss from continuing operations of $82.3 million in 2003. The decrease of $188.4 million in income from continuing operations was due to reduced gross profit resulting from the increase in the price of scrap steel and other raw materials, the 2004 pre-tax goodwill impairment charge of $165.9 million (an increase of $114.8 million compared to the 2003 charge of $51.1 million), the 2004 pre-tax restructuring and impairment charges of $32.2 million (an increase of $22.2 million compared to the 2003 charge of $10.0 million) and the 2004 reorganization charges of $10.8 million.

Our net loss for 2004 was $273.6 million compared to a net loss of $98.9 million in 2003. Diluted earnings per share decreased from diluted loss per share of $3.87 in 2003 to diluted loss per share of $10.69 in 2004. The decrease was mainly because of the factors described above, plus our loss from discontinued operations of $3.0 million.

2003 Compared to 2002

For the year ended December 31, 2003, we had sales from continuing operations of $731.2 million compared to sales of $755.7 million in 2002, a decrease of $24.5 million, or 3.2%. Sales for the Ferrous Metals segment were $493.4 million in 2003 compared with $484.1 million in 2002, an increase of $9.3 million, or 1.9%. European sales during 2003 were $116.4 million, an increase of $28.4 million or 32.3% as compared to $88.0 million in 2002. European sales are included in our Ferrous Metals segment. The overall increase in the Ferrous Metals segment sales was mainly attributable to the consolidation of our Porto Foundry beginning in July 2003 and favorable foreign currency exchange on European sales. Our Porto Foundry had sales of $14.6 million during the period from July 1, 2003 to December 31, 2003. These sales increases in the Ferrous Metals segment were partly offset by lower volumes resulting from a decrease in vehicle production in North America and Europe by 3.1% and 0.8%, respectively. The favorable effect of changes in exchange rates on 2003 European sales was $18.9 million, or 19.4%, when compared with European sales using exchange rates for 2002. Sales in the Light Metals segment were $237.8 million in 2003 compared with $271.6 million in 2002, a decrease of $33.8 million, or 12.4%. The decrease was due to lower production volumes on the vehicle programs that we supply.

Our gross profit for 2003 of $63.8 million was 8.7% of sales compared with gross profit for 2002 of $72.5 million representing 9.6% of sales. The decrease in gross profit margin was because of lower sales volume, increased pricing pressure from our customers, increased cost of raw materials, especially scrap steel, inefficiencies associated with product launches and start-up expenses associated with cost savings programs and new technology implementation.

Selling, general and administrative expenses increased by $6.6 million from $32.8 million in 2002 to $39.4 million in 2003, and increased as a percent of sales from 4.3% in 2002 to 5.4% in 2003. The increase was attributable to the consolidation of our Porto Foundry beginning in July 2003, customer support costs and the start up of our European engineering center. A goodwill impairment charge of $51.1 million was recorded in 2003. This impairment charge was determined during our annual impairment testing, which indicated that the carrying value of the Light Metals reporting unit was in excess of its fair value. Additional restructuring and impairment charges of $10.0 million were recorded in 2003, including an $8.5 million charge for the closure of our Havana Foundry and $1.5 million in write-downs of other long-lived assets.

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Net interest expense for the years ended December 31, 2003 and 2002 was $29.9 million and $28.3 million, respectively. The increase was the result of higher interest rates on our senior notes, along with the consolidation of our Porto Foundry beginning in July 2003.

Net other income of $2.0 million for 2003 was mainly comprised of a $1.5 million gain on disposal of fixed assets.

In 2003, the Company recorded tax expense of $18.5 million on a pre-tax net loss of $80.4 million, primarily due to the recording of a valuation reserve against our domestic net deferred tax assets on continuing operations of $23.9 million and the fact that there was no tax benefit on our non-deductible goodwill impairment charge of $39.3 million. For information concerning the provision for income taxes, as well as information regarding differences between effective tax rates and statutory rates, see Note 13, Income Taxes, to our Consolidated Financial Statements.

Loss from continuing operations for 2003 was $82.3 million compared to income from continuing operations of $10.5 million in 2002. The decrease in income from continuing operations was mainly because of the pre-tax goodwill impairment charge of $51.1 million, the pre-tax restructuring and impairment charges of $10.0 million and the recording of a valuation reserve against our domestic net deferred tax assets for continuing operations of $23.9 million. There was no tax benefit on the goodwill impairment charge or the restructuring and impairment charges. The deterioration in our profitability was also the result of lower sales volumes and selling prices, as well as higher raw material costs, particularly scrap steel. Foreign exchange rates had a $0.9 million favorable impact on our 2003 after-tax operating results when compared with exchange rates for 2002.

The net loss for 2003 was $98.9 million compared to a net income of $9.0 million in 2002. Diluted earnings per share decreased from diluted earnings per share of $0.35 in 2002 to diluted loss per share of $3.87 in 2003. The decrease was due mainly to factors described above, plus the after-tax loss from discontinued operations of $16.6 million.

Goodwill Impairment

On January 1, 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” under which goodwill is reviewed for impairment annually or more frequently if certain events or changes in circumstances indicate that the carrying value may not be recoverable. In the second quarter of 2002, with the assistance of an independent valuation firm, we performed our initial impairment test on our goodwill as of January 1, 2002. In addition, we performed our annual impairment test of goodwill as of November 30, 2002. Both tests indicated that goodwill was not impaired as of those dates.

In December 2003, with the assistance of an independent valuation firm, we performed our annual impairment test of goodwill as of November 30, 2003. Under the first step of the annual impairment test, the fair values of our Ferrous Metals reporting unit and Light Metals reporting unit were determined based on a combination of an income method, which estimates the fair value based on the future discounted cash flows, and a market method, which estimates the fair values based on comparable market prices. Under the income method, we assumed a cash flow period of 10 years, a discount rate of 11.5%, a compound annual growth rate of 4.5% and 7.7% for Ferrous Metals reporting unit and Light Metals reporting unit, respectively, for the ten year period and a terminal growth rate of 1.0%. Due to the erosion of the profitability of the Light Metals reporting unit and the revision of our forecast as a result of the changing market conditions, our estimated discounted cash flows from the Light Metals reporting unit decreased as compared to our impairment tests performed in 2002. Based on the first step of the impairment test, we determined that the carrying value of the Light Metals reporting unit was in excess of its fair value as of November 30, 2003. Accordingly, we were required to perform the second step of the impairment test on the Light Metals reporting unit to determine the amount of the impairment. The second step of the impairment test indicated that the pre-tax goodwill impairment charge was $51.1 million, which is reported as “Goodwill Impairment Charge” in the accompanying statements of operations in 2003.

In December 2004, with the assistance of an independent valuation firm, we performed our annual impairment test of goodwill as of September 30, 2004. Under the first step of the impairment test, the fair values of our

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Ferrous Metals reporting unit and Light Metals reporting unit were determined based on a combination of an income method, which estimates the fair value based on the future discounted cash flows, and a market method, which estimates the fair values based on comparable market prices. Under the income method, we assumed a cash flow period of 10 years, a discount rate of 16.0%, a compound annual growth rate of 1.6% and 0.4% for the Ferrous Metals reporting unit and Light Metals reporting unit, respectively, for the ten year period and a terminal growth rate of 1.1%. The discount rate was increased and the annual growth rate was decreased from the prior year because of the uncertainties and risks associated with our bankruptcy proceedings. Because of the erosion of the profitability of the Ferrous Metals reporting unit (due primarily to increased costs for scrap steel and other raw materials), operational difficulties in the Light Metals reporting unit, the filing of our bankruptcy petitions and the revision of our forecast and assumptions as a result of changing market conditions, our estimated discounted cash flows from the Ferrous and Light Metals reporting units and estimated values using the market method decreased compared to the results of our impairment tests performed in 2003. Based on the first step of the impairment test, we determined that the carrying amounts of the Ferrous and Light Metals reporting units were in excess of their fair value as of September 30, 2004. Accordingly, we were required to perform the second step of the impairment test on each of these reporting units to determine the amount of the impairment. The second step indicated that the total goodwill of both units was fully impaired. The amount of pre-tax goodwill impairment charge was $59.7 million for the Ferrous Metals unit and $106.2 million for the Light Metals unit, which are reported as “Goodwill Impairment Charge” in the accompanying statements of operations for 2004.

Plant Closures and Dispositions

Racine Closure

In December 2004, we announced the closure of our Racine Plant and Racine Machining Plant, both of which are located in Sturtevant, Wisconsin. We closed these plants during the second quarter of 2005. We recognized plant closure and asset impairment charges in 2004 of $10.3 million. See additional discussion in Note 5 to our Consolidated Financial Statements, Restructuring and Impairment Charges.

Columbus Machining Closure

In October 2004, we announced the closure of our Columbus Machining Plant, located in Midland, Georgia. We closed this plant during the first quarter of 2005. We recognized plant closure costs of $0.3 million. See additional discussion in Note 5 to our Consolidated Financial Statements, Restructuring and Impairment Charges.

Havana Foundry Closure

In December 2003, we decided to close our ductile iron foundry in Havana, Illinois. The Havana Foundry manufactured ductile iron components for the automotive industry, and had approximately 33 salaried and 141 hourly employees. The plant closure was completed in 2004.

Due to the announced closing, we recorded an $8.5 million pre-tax charge during the fourth quarter of 2003. In 2004 we recognized an additional $1.7 million pre-tax impairment charge. These charges are included in the “Restructuring and impairment charges” in the accompanying statements of operations. See additional discussion in Note 5 to our Consolidated Financial Statements, Restructuring and Impairment Charges.

Sale of Frisby P.M.C., Incorporated Assets

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 is due to be paid by July 31, 2008. This transaction resulted in an after-tax loss of $0.1 million. See additional discussion in Note 5 to our Consolidated Financial Statements, Restructuring and Impairment Charges.

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Radford Foundry Closure

In May 2003, we decided to close our foundry in Radford, Virginia due to changes in market conditions and production technology, as well as a substantial investment in environmental controls that would have been necessary for continued operation. The facility is included in the Ferrous Metals segment in Note 14 to our Consolidated Financial Statements, Reporting for Business Segments. The Radford Foundry had revenues of $34.8 million and $45.6 million for the years ended December 31, 2003 and 2002, respectively.

As a result of the decision to close the Radford Foundry, we recorded $11.6 million in pre-tax charges during the second quarter of 2003. The Radford Foundry was closed, and all the hourly employees and substantially all the salaried employees were terminated by December 2003. We expect to incur environmental remediation costs in connection with the Radford Foundry, which are discussed in Note 11 to our Consolidated Financial Statements, Commitments and Contingencies. See also additional discussion in Note 5 to our Consolidated Financial Statements, Restructuring and Impairment Charges.

Hannibal Plant

Some customers of our Hannibal facility have informed us that present product programs will end or they intend to move their magnesium die casting work from that facility to other suppliers or transition to alternative processes. A portion of the work in that facility will end on or about July 1, 2005. If the customers proceed with plans to move the remaining work, we anticipate that this would occur in late 2005 or early 2006. If we are unable to secure new business for the plant within that timeframe, we anticipate that operations at the Hannibal plant would be suspended until the Company is able to utilize that capacity, and all remaining work would be transferred to the Palmyra facility, which also produces magnesium die castings.

Deferred Tax Charges

During 2004, we recorded a valuation reserve against our domestic net deferred tax assets of $42.9 million. This is due to the accumulation of losses experienced at our domestic operations between 2002 and 2004. Further details are included in Note 13 to our Consolidated Financial Statements, Income Taxes.

Other Long-Lived Assets Impairment

On January 1, 2002, we adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” under which long-lived assets other than goodwill are tested for recoverability if certain events or changes in circumstances indicate that the carrying value may not be recoverable. During our impairment review in the fourth quarter of 2004, we identified certain tangible fixed assets with carrying values not recoverable and exceeding their fair values as of September 30, 2004. The carrying values of long-lived assets are considered to be not recoverable if they exceed our estimates of their undiscounted future cash flows, which are affected by our operations forecasts and strategic planning. The annual growth rate of each segment was decreased from the prior year because of the uncertainties and risks associated with our bankruptcy proceedings, compiled with changing market conditions. As a result, in addition to the impairment charges for the closure of our Racine, Columbus and Havana facilities as described above, we recorded a pre-tax impairment charge of $19.9 million in the third quarter of 2004 which was reported as “Restructuring and Impairment Charges” in the accompanying statements of operations in 2004.

Liquidity and Capital Resources

Cash Flow Provided by Operating Activities

One of the sources of our liquidity is the cash provided by operating activities. Due primarily to the increasing cost of scrap steel and other raw materials, cash flow used in operating activities was $25.1 million in 2004 compared to cash provided from operating activities of $33.1 million in 2003. Cash used in operating activities combined with related earnings loss led to our inability to meet loan covenants and the filing of our bankruptcy proceedings. Cash flow was positively impacted by the bankruptcy proceedings as a result of staying certain any payments for liabilities subject to compromise at the date of the filing.

The impact of changes that were positive to cash flow were increased accounts payable and current liabilities of $29.0 million and decreased inventories of $4.0 million, offset by increased accounts receivable of $28.0 million and other assets and liabilities of $17.6 million, which included loss on discontinued operations of $3.0 million and funding of pension benefits of $8.8 million.

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Cash Flow Used by Investing Activities

Cash flow used by investing activities was $28.1 million in 2004. Capital expenditures amounted to $22.9 million, including our investment in the Porto Foundry to acquire 100% ownership of $6.2 million, offset by proceeds from the divestiture of various businesses.

Cash flow used by investing activities was $19.6 million in 2003. Capital expenditures amounted to $19.5 million, investment in an additional 25% interest in the Porto Foundry to bring our ownership to 75% of $5.6 million, offset by proceeds from the sale of assets of various businesses.

Cash Flow Provided by Financing Activities

In connection with our bankruptcy proceedings, on October 22, 2004 we entered into a $60.0 million debtor-in-possession credit Facility (the “DIP Facility”) to supplement our liquidity and fund operations during our restructuring. The DIP Facility has a maturity date of October 21, 2005 and requires us to maintain certain financial covenants. The key financial covenants are limitations on capital expenditures and requirements that we achieve certain minimum consolidated EBITDA thresholds. We have a formula-based borrowing mechanism that is tied to our domestic accounts receivable and inventory values. In addition, our borrowings are limited based on a cash flow budget. The DIP Facility is secured by all domestic assets of certain of our U.S. subsidiaries and 65% of the capital stock of certain foreign subsidiaries.

Cash flow provided by financing activities was $62.0 million in 2004, resulting primarily from our term loan financing, offset by payments on our pre-petition credit facility prior to our bankruptcy filing. Cash flow provided from financing activities was $13.6 million in 2003, resulting from net borrowings on our available credit facilities.

Our ability to obtain cash adequate to fund our needs will depend on the results of operations, restructuring initiatives, the bankruptcy court’s approval of management’s plans and the availability of financing. We believe that cash on hand, cash flow from operations and available borrowings under our DIP Facility will be sufficient to fund capital expenditures and meet our post-petition operating obligations during the term of the DIP facility maturing in October 2005. However, there can be no assurance that such initiatives are achievable or that the terms available for any future financing, if required, would be available or favorable to us.

At December 31, 2004 and April 30, 2005, we were in compliance with all debt covenants under our DIP Facility, as amended.

Off Balance Sheet Arrangements

Our off balance sheet arrangements consist of operating leases for machinery and equipment and real estate facility leases under which we occupy our executive offices, technical center and management information systems facilities. Our commitments under these arrangements are set forth under “Operating Lease Obligations” in the Tabular Disclosure of Contractual Obligations set forth below.

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Tabular Disclosure of Contractual Obligations

As of December 31, 2004, our contractual obligations and commercial commitments were (in thousands of dollars):

Contingent Liabilities

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. In addition, 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.

We have recurring costs related to environmental clean-up, pollution prevention measures and disposal of waste (primarily non-hazardous) generated as part of ongoing operations. These environmental expenses totaled $13.9 million in 2003 and $12.9 million in 2002. A portion of our capital expenditures is regularly incurred to prevent or monitor pollution.

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 or formerly owned, by us or our subsidiaries. For known environmental sites, we have accrued $6.9 million as of December 31, 2004 to cover estimated future environmental expenditures. This amount includes a $3.1 million cash escrow account acquired as a part of our acquisition of Ganton Technologies in 1999 that is being used to fund the clean-up of an inactive property located in Addison, Illinois. We currently expect that the clean-up will occur in 2005. This amount also includes $2.3 million in environmental reserves for our closed Radford Foundry. 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 for environmental matters.

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On March 14, 2002, we entered into a consent order with the U.S. Environmental Protection Agency (“USEPA”), which requires investigation of the nature and extent of any hazardous waste disposed of at our Radford Foundry. 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 adversely effected or could adversely affect groundwater or human health. Because we historically disposed of waste material at this site, it is probable that remedial action will be required with respect to that on-site disposal. We have accrued $2.3 million for such remediation activity based on our investigation to date. However, our investigation of this site will continue and it is possible that ultimate remediation costs could exceed the amounts we have accrued.

We are also a party to other legal proceedings in the ordinary course of our business. At the present time, we do not believe that any of these proceedings will have a material adverse effect in our results of operation. We self-insure a significant portion of our health care and property and casualty insurance risks. However, we purchase additional insurance for catastrophic losses. We carry a $2.5 million property deductible per occurrence.

While the contingencies mentioned above are estimates of our future obligations and their ultimate impact on us is unknown, we do not believe that these contingencies will have a material adverse effect on our consolidated financial position, results of operations or cash flows taken as a whole. However, we cannot be assured that our activities will not give rise to actions by private parties or governmental agencies that could cause us to incur liability for damages, fines, penalties, operational shutdowns, cleanup costs or other similar expenses, any of which could be material.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We have exposure to four types of market risk. The first is the risk of interest rate changes and how it impacts our interest expense and 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. 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.

Interest rate risk

We periodically use derivative instruments such as interest rate swap agreements to manage our interest rate risk. In October 2000 we entered into an interest rate swap on $50 million of bank debt to insulate against the risk of rising interest rates on a portion of our debt that has a variable interest rate. This swap agreement expired in October 2003. A 1% increase in interest rates on the debt not covered by swap agreements would have increased interest expense by approximately $1.8 million, $1.2 million and $2.3 million for 2004, 2003 and 2002, respectively. This interest rate sensitivity analysis does not consider the effects of the reduced or increased level of overall economic activity that could result from a change in interest rates. At December 31, 2004, approximately 95% of our outstanding debt, excluding liabilities subject to compromise, was at variable interest rates.

Foreign currency risk

We periodically use derivative instruments such as foreign exchange contracts to manage our foreign currency exchange rate risk.

Due to the size of our European operations, our earnings may also be affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominately the Euro. A 5% appreciation or depreciation in the value of the U.S. dollar relative to the currencies in which our sales are denominated (the Euro starting in 2001) would not have a material impact on our net income for the years ended December 31, 2004, 2003 and 2002. This sensitivity analysis of the effects of the changes in foreign currency exchange rates does not factor in a potential change in the sales levels or local currency sales prices.

Commodity price risk

Scrap steel, pig iron and aluminum ingot, along with energy, are our primary raw materials. Fluctuations in the costs of these raw materials have a direct effect on our profitability and our cash flow. During 2003 and 2004, we experienced significant increases in the cost of scrap steel in the Unites States and Europe. Scrap steel is the primary raw material in our Ferrous Metals segment. Our cost of scrap steel increased from approximately $210 per net ton at the end of 2003 to approximately $400 per net ton at the end of 2004. This included record increases of $85 per gross ton and $65 per gross ton in July and August of 2004, respectively. The price of scrap steel reached a peak of $440 per net ton in November, 2004. The cost of scrap steel has declined in 2005. Our cost as of the end of May 2005 decreased to approximately $255 per net ton.

We have historically had contractual arrangements with many of our customers to pass through increases in the cost of scrap steel by increasing the prices of our products. However, there was a delay between the time when we experienced cost increases and the time when we were able to begin charging the relevant customer. This time delay varied by customer, but was generally from 30 days to 180 days. In addition, we were not able to pass through 100% of cost increases in all cases. Therefore, the actual amount of the total scrap steel price increases that we were able to pass through depended on the amount and timing of the price movements, the base price from which increases were measured, the amount of the increase that was recoverable, as well as the amount of scrap steel we used on each particular customer program.

We purchase scrap steel from numerous sources, generally regional scrap brokers, using a combination of spot market purchases and short-term contract commitments. We have no long-term contractual commitments with any scrap steel supplier fixing the cost of scrap steel, nor is it possible to secure such long-term commitments in

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this market. The sharp increases in scrap steel cost described above have had a significant negative impact on our financial results and were a major factor for our initiation of the bankruptcy proceedings.

As part of the bankruptcy proceedings, we have negotiated revised surcharge policies related to the products in which scrap steel is a major raw material. These agreements provide for price increases that are linked to the change in value of certain steel indices. These new policies became effective with a majority of our customers on January 1, 2005. In addition, lag times between scrap steel price movements and our ability to increases prices have been reduced from between one and six months to approximately one month with most of our major customers. Many of our customers have also agreed to additional surcharges intended to cover price increases in other materials and transportation.

We monitor our procurement activities to address the price risk associated with the purchase of commodities. In addition, we purchase raw materials from diversified supplier sources and may utilize stockpiles to minimize our risk exposure to the extent possible. We may also use derivative instruments to manage our exposure for the commitments relating to raw materials used in our production processes and related energy costs. Specifically, we review our operation and liability structure on a recurring basis and make the determination as to whether our risk exposure should be adjusted using derivative instruments. We are unable to use derivatives to manage our exposure to the cost fluctuations in scrap steel.

Consumer risk

We operate in a cyclical business. Our sales relate directly to the production volumes of cars and light trucks, which are affected by general economic conditions. In addition, our sales are primarily to U.S. based manufacturers, which in recent years have generally had declining market shares.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INTERMET Corporation
Consolidated Statements of Operations

See accompanying notes.

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INTERMET Corporation
Consolidated Statements of Comprehensive Income

See accompanying notes.

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INTERMET Corporation
Consolidated Balance Sheets

See accompanying notes.

33

INTERMET Corporation
Consolidated Statements of Cash Flows

See accompanying notes.

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INTERMET Corporation
Consolidated Statements of Shareholders’ Equity (Deficit)

See accompanying notes.

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INTERMET Corporation

Notes to Consolidated Financial Statements

Years ended December 31, 2004, 2003 and 2002

1. Description of Business and Summary of Significant Accounting Policies

Business

INTERMET Corporation produces castings in North America and Europe for light and heavy vehicles, including powertrain, chassis, brake, and body / interior components, as well as industrial products. In addition, we perform value-added services including advanced design and engineering, prototype casting and machining and sub-assembly, principally for our automotive customers.

Our business segments include two groups: the Ferrous Metals Group and the Light Metals Group. Ferrous Metals consists of ductile iron casting and related manufacturing. Light Metals consists of aluminum, magnesium and zinc casting, along with associated value-added activities.

Basis of Presentation

The accompanying condensed consolidated financial statements, presented in conformity with accounting principles generally accepted in the United States (“GAAP”), include the accounts of INTERMET and its domestic and foreign subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. All subsidiaries have a fiscal year ending December 31. Investments in 20% to 50% owned companies are accounted for under the equity method.

On September 29, 2004, INTERMET Corporation and 17 of its wholly-owned domestic subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Michigan. These Chapter 11 cases have been consolidated for the purposes of joint administration as In re: INTERMET Corporation, et al. (Case No. 04-67597).

The accompanying consolidated financial statements have been prepared in accordance with AICPA Statement of Position 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code” (“SOP 90-7”) using a going concern assumption. However, as a result of the Chapter 11 proceedings, such realization of assets and liquidation of liabilities, without substantial adjustments and/or change of ownership, is highly uncertain. Given this uncertainty, there is substantial doubt about our ability to continue as a going concern. However, we expect to propose a plan of reorganization to the Bankruptcy Court by June 27, 2005. When filed, the plan of reorganization will set forth the means for treating claims, including liabilities subject to compromise. The plan of reorganization may result in, among other things, significant dilution of equity interests as a result of issuance of equity securities to creditors or new investors. The confirmation of any plan of reorganization will require creditor acceptance as required under the Bankruptcy Code and approval of the Bankruptcy Court. Further, the plan of reorganization could materially change the amounts and classifications in our historical consolidated financial statements. While operating the businesses as debtors-in-possession, we and our subsidiaries may dispose of assets or settle liabilities for amounts materially different from those in the accompanying consolidated financial statements. The appropriateness of using a going concern assumption in the preparation of the accompanying consolidated financial statements is dependent upon, among other things, our ability to comply with the covenants of our secured debtor-in-possession revolving credit facility and our ability to generate cash from operations.

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INTERMET Corporation

Notes to Consolidated Financial Statements

1. Description of Business and Summary of Significant Accounting Policies (continued)

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. During 2004, there were no material changes in the methods or policies used to establish estimates and assumptions. Generally, matters subject to estimation and judgment include accounts receivable realization, inventory obsolescence, long-lived asset impairment, pension and other postretirement benefit obligations, accruals related to litigation and environmental costs and valuation reserves for deferred tax assets. Actual results may differ from the estimates provided.

Reclassifications

Certain other amounts previously reported in the 2003 financial statements and notes thereto have been reclassified to conform to the 2004 presentation.

Revenue Recognition

We recognize revenue upon shipment of products and transfer of title.

Shipping and Handling Costs

We record shipping and handling costs as components of “Cost of Sales” within our statements of operations.

Stock-Based Compensation

We grant stock options to employees and directors with an exercise price equal to the fair value of the shares at the date 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, recognize no compensation expense for the stock option grants. Had compensation expense for these stock option grants been determined based on the fair value at the grant dates for awards under the stock option plans consistent with the method of Statement of Financial Accounting Standards (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 be the following:

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INTERMET Corporation

Notes to Consolidated Financial Statements (continued)

1. Description of Business and Summary of Significant Accounting Policies (continued)

We use the Black-Scholes option pricing model to estimate the fair value of our stock options as described in Note 10 to our Consolidated Financial Statements, Stock Compensation.

Cash and Cash Equivalents

All short-term investments with original maturities of less than 90 days are deemed to be cash equivalents for purposes of the statements of cash flows.

Allowance for Doubtful Accounts

Allowance for doubtful accounts reduces trade accounts receivable to its net recognizable amount. It is determined by a combination of factors, such as customer charge-backs, a customer’s inability to meet its financial obligations to us, our past loss history and the length of time the trade account receivables are past due. If circumstances change, our estimates of the recoverability of trade accounts receivable could be reduced by a material amount. We typically do not require collateral from our customers.

Inventories

Inventories are stated at the lower of cost or market. Certain raw materials and supplies inventories are valued on a weighted average cost basis. Average production cost is used for certain work in process. Finished goods inventories and other inventories are valued by the first-in, first-out (“FIFO”) method. The specific identification method is used for pattern inventories. Cost is determined on the last-in, first-out (“LIFO”) method for 5.4% and 3.2% of inventories as of December 31, 2004 and 2003, respectively. If LIFO inventories were valued using the same cost methods used for other inventories, their carrying values would have increased by $2.2 million and $0.9 million at December 31, 2004 and 2003, respectively. Supplies inventories are evaluated for obsolescence based on length of time in the store-room and expected near-term use.

The components of inventories are as follows (in thousands of dollars):

Prepaid Expenses

We recognize payments made in advance for future services as prepaid expenses and include them in “Other Current Assets” in the accompanying balance sheets.

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INTERMET Corporation

Notes to Consolidated Financial Statements (continued)

1. Description of Business and Summary of Significant Accounting Policies (continued)

Property, Plant and Equipment

Property, plant and equipment are stated at cost. The provision for depreciation and amortization of property, plant and equipment is determined using the straight-line method on the basis of the following estimated useful lives: 2 to 40 years for buildings and improvements and 2 to 21 years for machinery and equipment. The amortization of property, plant and equipment under capital leases is included in depreciation expense. Industrial development grants provided by the federal and state governments of Germany are included as reductions of property, plant and equipment and are being amortized over the estimated useful lives of the related assets.

We evaluate our property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. The carrying amount of a long-lived asset is considered to be not recoverable if it exceeds our estimates of its undiscounted future cash flows based on our operation forecasts. Impairment charges will be measured and recorded as the amount by which the carrying values of the long-lived assets exceed their fair values.

The components of property, plant and equipment are as follows (in thousands of dollars):

Goodwill

Goodwill represents the excess acquisition cost over the fair value of net assets acquired and is not amortized, but is reviewed for impairment annually or more frequently if certain events or changes in circumstances indicate that the carrying value may not be recoverable. We perform impairment tests of our goodwill as required. We evaluate our goodwill recoverability based on a combination of an income method, which estimates the fair value of our reporting units based on the future discounted cash flows, and a market method, which estimates the fair values based on comparable market prices. In December 2004, we recorded an impairment charge against goodwill of $165.9 million, which represented the total value of goodwill in both of our reporting segments. As a result, as of December 31, 2004, the carrying value of goodwill was $0. See Note 6, Goodwill, for further discussion.

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INTERMET Corporation

Notes to Consolidated Financial Statements (continued)

1. Description of Business and Summary of Significant Accounting Policies (continued)

Derivatives

SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” requires us to recognize all of our derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, we designate the hedging instrument as either a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation, based upon the exposure being hedged.

Environmental Matters

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. These accruals are adjusted periodically as assessment and remediation efforts progress or other information becomes available. Related insurance or other third-party recoveries for environmental liabilities are recorded as a reduction of environmental reserve when it is probable that a recovery will be realized.

Environmental costs are capitalized if the costs extend the life of the property, increase its capacity and / or mitigate or prevent contamination from future operations. Costs related to environmental contamination treatment and clean-up are charged to expense.

Income Taxes

We account for taxes on income using the asset and liability method where deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using statutory tax rates.

We regularly assess the likelihood that the deferred tax assets, including net operating loss carryforwards, are recoverable. This process requires substantial management judgment. To the extent that we believe the recoverability is less than likely, we will establish a valuation reserve against the deferred tax assets. Actual results could differ from our estimates and such differences could be material to the financial statements. For the years ended December 31, 2004 and 2003, we recorded a valuation reserve of $42.9 million and $23.9 million, respectively, against our domestic net deferred tax assets due to the accumulation of losses experienced at our domestic operations between 2002 and 2004.

Foreign Currency Translation

All assets and liabilities of foreign subsidiaries for which the local currency is the functional currency are translated into U.S. dollars at year-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the year. The resulting translation adjustments are recorded in Accumulated Other Comprehensive Income as a component of Shareholders’ Equity.

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INTERMET Corporation

Notes to Consolidated Financial Statements (continued)

1. Description of Business and Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements

In December 2004, the FASB issued Statement No. 123 (revised 2004) (FAS 123R), “Share-Based Payment.” FAS 123R replaces FASB Statement No. 123 (FAS 123), “Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” FAS 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. The approach to accounting for share-based payments in FAS 123R is similar to the fair-value approach permitted in FAS 123, however, FAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values and the current pro forma disclosure is no longer an alternative to financial statement recognition. In April 2005, the SEC delayed the effective date for FAS 123R until the first fiscal year beginning after June 15, 2005. We are currently assessing the effect of FAS 123R and believe the effect will not be material to our results of operations.

2. Voluntary Reorganization under Chapter 11 and Administration

On September 29, 2004, INTERMET and 17 of its wholly-owned domestic subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Michigan. These Chapter 11 cases have been consolidated for the purposes of joint administration as In re: INTERMET Corporation, et al. (Case No. 04-67597).

INTERMET’s subsidiaries for which bankruptcy petitions were filed are Alexander City Casting Company, Inc., Cast-Matic Corporation, Columbus Foundry, L.P., Diversified Diemakers, Inc., Ganton Technologies, Inc., INTERMET Holding Company, INTERMET Illinois, Inc., INTERMET International, Inc., INTERMET U.S. Holding, Inc., Ironton Iron, Inc., Lynchburg Foundry Company, Northern Castings Corporation, Sudbury, Inc., SUDM, Inc., Tool Products, Inc., Wagner Castings Company and Wagner Havana, Inc., all of which, together with INTERMET, are currently operating as debtors and debtors-in-possession. Other INTERMET subsidiaries, including foreign subsidiaries, are not parties to the Chapter 11 proceedings and are operating in the normal course.

Our bankruptcy proceedings were initiated primarily in response to substantial and unprecedented increases in the cost of raw materials, especially scrap steel. The price of scrap steel, which is our primary raw material, increased from approximately $160 per net ton at the beginning of 2003 to approximately $210 per net ton at the end of 2003 to approximately $400 per net ton by the end of 2004. This included record increases of $85 per gross ton and $65 per gross ton in July and August of 2004, respectively. The price of scrap steel reached a peak of $440 per net ton in November, 2004. Because of pre-existing contractual pricing terms with most of our customers, we were limited in our ability to pass these cost increases to our customers. At the same time, some of our largest trade creditors began to tighten or eliminate credit terms, which increased our working capital requirements. We also experienced operational difficulties at our Pulaski, Tennessee and Racine, Wisconsin light-metals plants.

These financial and operational difficulties impaired our ability to continue to draw on our pre-petition revolving credit facility. In an effort to avoid anticipated defaults under our loan covenants, which would have occurred as of September 30, 2004, we entered into discussions with the agent for our pre-petition lenders, seeking waivers of certain conditions contained in the pre-petition credit facility. We were unable to obtain waivers on acceptable terms and, consequently, the Chapter 11 cases were filed on September 29, 2004.

We have continued to operate our U.S. businesses as debtors-in-possession under bankruptcy court protection from creditors. We continue to review all aspects of our business for opportunities to improve performance, while seeking to restructure our secured and unsecured debt, rationalize our facilities and cost structure and effect a customer strategy focused on scrap steel cost recovery and other commercial and financial issues.

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INTERMET Corporation

Notes to Consolidated Financial Statements (continued)

2. Voluntary Reorganization under Chapter 11 and Administration (continued)

On December 8, 2004, our Board of Directors adopted an Amended and Restated Key Employee Retention Plan in order to retain certain key employees during our bankruptcy proceedings. The plan provides for the payment of bonuses to participants who remain employed by us through a successful reorganization or sale of the company. The plan was approved by the bankruptcy court on December 22, 2004. The number of employees who are participants in the plan is approximately 100, and we estimate that the total amount payable to participants will be approximately $5.2 million. One third (1/3) of each participant’s payment is due following confirmation of a plan of reorganization and the remaining two thirds (2/3) is due between January 1, 2006 and January 10, 2006. The plan also provides for severance benefits under certain conditions.

Liabilities Subject to Compromise

Liabilities subject to compromise refers to liabilities of the debtors incurred prior to September 29, 2004, and represent the estimates of known or potential pre-petition claims to be resolved in connection with the bankruptcy proceedings. Such claims remain subject to future proceedings. Payment terms for these claims will be established in connection with the bankruptcy proceedings.

The amounts of the various liabilities that are subject to compromise are set forth below (in thousands of dollars):

Debtors’ Financial Statements

The condensed consolidated financial statements of the debtors are presented below. These statements reflect the financial position, results of operations and cash flows of the combined Debtor companies, including certain amounts and activities between Debtor and non-Debtor subsidiaries of the Company, which are eliminated in the consolidated financial statements.

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INTERMET Corporation

Notes to Consolidated Financial Statements (continued)

2. Voluntary Reorganization under Chapter 11 and Administration (continued)

Debtors’ Condensed Consolidated Statements of Operations
(in thousands of dollars)

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INTERMET Corporation

Notes to Consolidated Financial Statements (continued)

2. Voluntary Reorganization under Chapter 11 and Administration (continued)

Debtors’ Condensed Consolidated Balance Sheet
(in thousands of dollars)

44

INTERMET Corporation

Notes to Consolidated Financial Statements (continued)

2. Voluntary Reorganization under Chapter 11 and Administration (continued)

Debtors’ Condensed Consolidated Statement of Cash Flows
(in thousands of dollars)

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INTERMET Corporation

Notes to Consolidated Financial Statements (continued)

3. Acquisition

On June 25, 2003, we entered into an agreement with Melfina — Estudos, Servicos e Participacoes, S.A. to acquire 100% ownership of the shares of Fundicao Nodular, S.A. (“Porto Foundry”), which is located in Porto, Portugal. Previously we owned a 50% interest in the Porto Foundry. The Porto Foundry is a caster of various ductile-iron automotive components. Under the terms of the agreement, we acquired an additional 25% of the Porto Foundry’s shares for a cash investment of Euro 4.9 million (approximately $5.6 million) on July 1, 2003, increasing our ownership from 50% to 75%. We had a call option to acquire, and Melfina — Estudos, Servicos e Participacoes, S.A. had a put option, requiring us to buy the remaining 25% ownership for an additional cash investment of Euro 4.9 million (approximately $6.2 million based on the exchange rate on December 31, 2003) on July 1, 2004. Because of the put option, we recorded $6.0 million, the net present value of the $6.2 million future cash investment, as “Accounts payable” in the accompanying balance sheet as of December 31, 2003.

On July 1, 2004, we exercised the call option to acquire the remaining 25% ownership of the Porto Foundry. The purchase price of approximately Euro 4.9 million (approximately $6.2 million at the exchange rates at the time of the payments) together with interest accruing at European Interbank Offered Rate (“EURIBOR”) was paid in six equal monthly installments beginning July 2004.

We accounted for the acquisition of additional shares 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. As the Porto Foundry became our consolidated subsidiary at July 1, 2003, the results of its operations from that date are included in our consolidated results of operations. Our equity in the net income of the Porto Foundry 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.

4. Discontinued Operations

Frisby

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 is due to be paid by July 31, 2008. This disposition is consistent with our strategy to divest non-strategic assets. This transaction resulted in a pre-tax loss on sale of $1.2 million (after-tax loss $0.1 million). Frisby operated a machining plant that manufactured 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 14 to our Consolidated Financial Statements, Reporting for Business Segments.

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INTERMET Corporation

Notes to Consolidated Financial Statements (continued)

4. Discontinued Operations (continued)

Major classes of assets and liabilities of Frisby were (in thousands of dollars):

The results of operations of Frisby included in the accompanying statements of operations as discontinued operations were (in thousands of dollars):