SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 2001 | | Commission File Number 1-7256 |
INTERNATIONAL ALUMINUM CORPORATION
(Exact name of Registrant as specified in its charter)
California | | 95-2385235 |
(State of incorporation) | | (I.R.S. Employer No.) |
767 Monterey Pass Road
Monterey Park, California 91754
(323) 264-1670
(Principal executive office)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
At November 1, 2001 there were 4,244,794 shares of Common Stock outstanding.
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
INDEX
PART I
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | Unaudited | | Audited | |
Assets | | Sept. 30, 2001 | | June 30, 2001 | |
| | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 5,029,000 | | $ | 5,915,000 | |
Accounts receivable, net | | 39,505,000 | | 37,711,000 | |
Inventories | | 37,800,000 | | 37,731,000 | |
Prepaid expenses and deposits | | 2,656,000 | | 2,597,000 | |
Future income tax benefits | | 1,405,000 | | 1,406,000 | |
| | | | | |
Total current assets | | 86,395,000 | | 85,360,000 | |
| | | | | |
Property, plant and equipment, at cost | | 116,088,000 | | 114,693,000 | |
Accumulated depreciation | | (61,809,000 | ) | (61,145,000 | ) |
| | | | | |
Net property, plant and equipment | | 54,279,000 | | 53,548,000 | |
| | | | | |
Other assets: | | | | | |
Costs in excess of net assets of purchased businesses | | 8,951,000 | | 8,966,000 | |
Other | | 247,000 | | 196,000 | |
| | | | | |
Total other assets | | 9,198,000 | | 9,162,000 | |
| | | | | |
| | $ | 149,872,000 | | $ | 148,070,000 | |
| �� | | | | |
Liabilities and Shareholders' Equity | | | | | |
| | | | | |
Current liabilities: | | | | | |
Accounts payable | | $ | 10,458,000 | | $ | 9,235,000 | |
Accrued liabilities | | 9,298,000 | | 9,347,000 | |
Advances payable to banks | | 1,026,000 | | 165,000 | |
Income taxes payable | | 830,000 | | 516,000 | |
| | | | | |
Total current liabilities | | 21,612,000 | | 19,263,000 | |
| | | | | |
Deferred income taxes | | 5,052,000 | | 5,052,000 | |
| | | | | |
Total liabilities | | 26,664,000 | | 24,315,000 | |
| | | | | |
Shareholders' equity | | 123,208,000 | | 123,755,000 | |
| | | | | |
| | $ | 149,872,000 | | $ | 148,070,000 | |
See accompanying notes to consolidated financial statements.
Unaudited
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| | Three Months Ended | |
| | September 30, | |
| | 2001 | | 2000 | |
| | | | | |
Net sales | | $ | 54,146,000 | | $ | 54,897,000 | |
Cost of sales | | 44,555,000 | | 44,595,000 | |
Gross profit | | 9,591,000 | | 10,302,000 | |
Selling, general and administrative expenses | | 8,160,000 | | 7,708,000 | |
Income from operations | | 1,431,000 | | 2,594,000 | |
Interest (income) expense, net | | (21,000 | ) | 141,000 | |
Income before income taxes | | 1,452,000 | | 2,453,000 | |
Provision for income taxes | | 520,000 | | 920,000 | |
Net income | | $ | 932,000 | | $ | 1,533,000 | |
| | | | | |
| | | | | |
Earnings per share: | | | | | |
Basic | | $ | .22 | | $ | .36 | |
Diluted | | $ | .22 | | $ | .36 | |
| | | | | |
Shares used to compute EPS: | | | | | |
Basic | | 4,244,794 | | 4,244,794 | |
Diluted | | 4,244,794 | | 4,244,794 | |
| | | | | |
Cash dividends per share | | $ | .30 | | $ | .30 | |
See accompanying notes to consolidated financial statements.
Unaudited
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | Three Months Ended | |
| | September 30, | |
| | 2001 | | 2000 | |
| | | | | |
Cash flows from operating activities: | | | | | |
Net income | | $ | 932,000 | | $ | 1,533,000 | |
Adjustments for noncash transactions: | | | | | |
Depreciation and amortization | | 1,768,000 | | 1,868,000 | |
Change in deferred income taxes | | 1,000 | | - | |
Gain on sale of fixed assets | | (631,000 | ) | - | |
Changes in assets and liabilities: | | | | | |
Receivables | | (1,794,000 | ) | 2,065,000 | |
Inventories | | (69,000 | ) | 5,309,000 | |
Prepaid expenses and deposits | | (110,000 | ) | (363,000 | ) |
Accounts payable | | 1,223,000 | | 2,067,000 | |
Accrued liabilities | | (49,000 | ) | (930,000 | ) |
Income taxes payable | | 314,000 | | 432,000 | |
| | | | | |
Net cash provided by operating activities | | 1,585,000 | | 11,981,000 | |
| | | | | |
Cash flows from investing activities: | | | | | |
Capital expenditures | | (3,711,000 | ) | (1,373,000 | ) |
Proceeds from sales of capital assets | | 1,652,000 | | 43,000 | |
| | | | | |
Net cash used in investing activities | | (2,059,000 | ) | (1,330,000 | ) |
| | | | | |
Cash flows from financing activities: | | | | | |
Dividends paid to shareholders | | (1,273,000 | ) | (1,273,000 | ) |
Net borrowing under lines of credit | | 861,000 | | (9,470,000 | ) |
| | | | | |
Net cash used in financing activities | | (412,000 | ) | (10,743,000 | ) |
| | | | | |
Net change in cash and cash equivalents | | (886,000 | ) | (92,000 | ) |
| | | | | |
Cash and cash equivalents at beginning of period | | 5,915,000 | | 1,678,000 | |
| | | | | |
Cash and cash equivalents at end of period | | $ | 5,029,000 | | $ | 1,586,000 | |
See accompanying notes to consolidated financial statements.
Unaudited
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which consist solely of normal recurring adjustments unless otherwise disclosed) necessary to present fairly, in all material respects, its financial position as of September 30, 2001 and June 30, 2001, and the results of operations and cash flows for the three month periods ended September 30, 2001 and 2000. The results of operations for the three month periods ended September 30, 2001 and 2000 are not necessarily indicative of the results to be expected for the full year.
The financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K.
Comprehensive Income
Comprehensive income, defined as net income and other comprehensive income, for the first quarters ended September 30, 2001 and 2000 was $727,000 and $1,458,000, respectively. Other comprehensive income includes foreign currency translation adjustments recorded directly in shareholders' equity.
Balance Sheet Components | | | Sept. 30, 2001 | | June 30, 2001 | |
| | | | | |
Inventories, lower of FIFO Cost or Market | | | | | |
Raw materials | | $ | 32,400,000 | | $ | 32,153,000 | |
Work in process | | 1,270,000 | | 1,332,000 | |
Finished goods | | 4,130,000 | | 4,246,000 | |
| | $ | 37,800,000 | | $ | 37,731,000 | |
| | | | | |
Shareholders' Equity | | | | | |
Common stock | | $ | 4,765,000 | | $ | 4,765,000 | |
Paid-in capital | | 4,123,000 | | 4,123,000 | |
Retained earnings | | 114,677,000 | | 115,018,000 | |
Accumulated other comprehensive income | | (357,000 | ) | (151,000 | ) |
| | $ | 123,208,000 | | $ | 123,755,000 | |
Segment Information
The following presents the Company's net sales, operating income and total assets by operating segment, reconciling to the Company's totals. All data presented in thousands of dollars.
Net Sales: | | Three Months Ended | |
| | September 30, | |
| | 2001 | | 2000 | |
| | | | | |
Commercial | | $ | 29,636 | | $ | 28,135 | |
Residential | | 14,490 | | 15,623 | |
Aluminum Extrusion | | 25,705 | | 22,068 | |
Total Segments | | 69,831 | | 65,826 | |
Eliminations | | (15,685 | ) | (10,929 | ) |
Total | | $ | 54,146 | | $ | 54,897 | |
| | | | | |
| | | | | |
Operating Income (Loss): | | Three Months Ended | |
| | September 30, | |
| | 2001 | | 2000 | |
| | | | | |
Commercial | | $ | 2,491 | | $ | 3,027 | |
Residential | | (163 | ) | 1,213 | |
Aluminum Extrusion | | 343 | | (226 | ) |
Total Segments | | 2,671 | | 4,014 | |
Eliminations | | 157 | | 461 | |
Corporate | | (1,397 | ) | (1,881 | ) |
Total | | $ | 1,431 | | $ | 2,594 | |
| | | | | |
| | | | | |
Total Assets: | | Sept. 30, | | June 30, | |
| | 2001 | | 2001 | |
| | | | | |
Commercial | | $ | 70,235 | | $ | 66,994 | |
Residential | | 31,914 | | 32,405 | |
Aluminum Extrusion | | 37,319 | | 38,032 | |
Total Segments | | 139,468 | | 137,431 | |
Corporate | | 10,404 | | 10,639 | |
Total | | $ | 149,872 | | $ | 148,070 | |
Current and Pending Accounting Changes
The Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets” effective July 1, 2001, and as a result are not required to expense goodwill in the amount of $139,000 for the three months ended September 30, 2001. Excluding goodwill amortization for the same period last year would have increased reported net income to $1,672,000 and Basic and Diluted earnings per share to $.39.
In October 2001, the Financial Accounting Standards Board issued SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets”. This pronouncement provides specific guidance for long-lived assets to be disposed of by sale, abandoned, exchanged for a similar productive asset or distributed to owners in a spin-off. The impact, if any, of the adoption of SFAS No. 144 on our consolidated results of operations or financial position is not known at this time.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Significant Changes in Results of Operations
Net sales for the first quarter ended September 30, 2001 decreased by $751,000 or 1.4% from the comparable quarter of the prior year. This decrease includes $1,198,000 or 7.7% posted by the Residential Products Group and $1,040,000 or 9.2% posted by the Aluminum Extrusion Group. While the sluggish economy has impacted both groups, the Residential Products Group has also suffered due to a trade union strike in September at our South Gate, California plant, hampering our ability to maintain normal delivery schedules to our customers in the territory serviced by this facility. The downturn in the Extrusion Group stems from a general softening in demand particularly in the area served by our Texas facility. Partially offsetting these decreases is an increase of $1,487,000 or 5.3% posted by the Commercial Products Group reflecting continued demand for these products.
Cost of sales as a percentage of net sales was 82.3% for the quarter ended September 30, 2001 as opposed to 81.2% for the comparable prior year period. This increase is attributable to several factors. The major factor is higher material cost at our Commercial Products Group. Due to competitive pressures, in order to maintain market share, overall selling prices declined compared to the same period last year while underlying material costs remained somewhat constant. The Residential Products Group experienced somewhat higher percentage labor and overhead costs due to production inefficiencies as a result of the aforementioned strike coupled with recurring costs being spread over diminished sales. Operations at our South Gate plant are returning to normal as newly trained workers have been hired to replace those on strike. Partially offsetting these increases is a decrease in the labor percentage at our Extrusion Group reflecting their continuing efforts to improve production efficiency.
Selling, general and administrative expenses increased by $452,000 or 5.9% for the quarter compared to the same quarter last year. The increased expenses are primarily due to a significant swing from recovery to additional expense for retrospective workers’ compensation adjustments for prior year claims. The current quarter also contains administrative costs related to the aforementioned strike and increased selling expenses related to the increase in sales for the Commercial Products Group. Partially offsetting these costs is a gain realized on the sale of our former Glass Group facility in South Carolina.
The swing from net interest expense for the prior year quarter to net interest income in the current year quarter relates to the increase in funds available for investment. The prior year net expense reflects utilization of a line of credit used in part to finance heavy capital expenditures during the preceding year.
The effective tax rate for the quarter ended September 30, 2001 was 35.8% whereas the comparable period of the prior year was 37.5%. This decrease is primarily attributable to available tax credits offsetting a smaller taxable income.
Liquidity and Capital Resources
Working capital at September 30, 2001 stood at $64,783,000, a decrease of $1,314,000 from June 30, 2001. The ratio of current assets to current liabilities is currently 4.0 as compared to 4.4 as of the beginning of the year.
The Company's projected net capital expenditures for fiscal 2002 and related financing remain unchanged from those described in the June 30, 2001 Annual Report. The Company's domestic line of credit remains unchanged from that described in the June 30, 2001 Annual Report to Shareholders.
Forward-Looking Information
This report contains forward-looking statements with respect to the financial condition, results of operations and business of the Company. Such items are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | International Aluminum Corporation |
| | (Registrant) |
| | |
| | |
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Date: | November 13, 2001 | | MITCHELL K. FOGELMAN |
| | Mitchell K. Fogelman |
| | Senior Vice President – Finance |
| | (Principal Financial Officer) |
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Date: | November 13, 2001 | | MICHAEL J. NORRING |
| | Michael J. Norring |
| | Controller |
| | (Principal Accounting Officer) |
