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 March 31, 2000 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 X No
At May 1, 2000 there were 4,244,794 shares of Common Stock outstanding.
Page 1 of 11 Pages
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
INDEX
Page
PART I. Financial Information
Consolidated Balance Sheets -
March 31, 2000 and June 30, 1999 3
Consolidated Statements of Income -
three and nine month periods ended
March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows -
nine months ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Signatures 11
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PART I
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Unaudited Audited
Assets March 31, 2000 June 30, 1999
Current assets:
Cash and cash equivalents $ 659,000 $ 2,269,000
Accounts receivable, net 36,203,000 39,371,000
Inventories 46,911,000 41,576,000
Prepaid expenses and deposits 5,062,000 4,909,000
Future income tax benefits 1,492,000 1,492,000
Total current assets 90,327,000 89,617,000
Property, plant and equipment, at cost 109,795,000 109,907,000
Accumulated depreciation (54,680,000) (55,591,000)
Net property, plant and equipment 55,115,000 54,316,000
Other assets:
Costs in excess of net assets of
purchased businesses 9,682,000 9,760,000
Other 68,000 -
Total other assets 9,750,000 9,760,000
$155,192,000 $153,693,000
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 4,123,000 $ 8,079,000
Accrued liabilities 10,199,000 12,415,000
Advances payable to banks 11,968,000 -
Income taxes payable - 93,000
Total current liabilities 26,290,000 20,587,000
Deferred income taxes 4,405,000 4,405,000
Total liabilities 30,695,000 24,992,000
Shareholders' equity 124,497,000 128,701,000
$155,192,000 $153,693,000
<FN>
See accompanying notes to consolidated financial statements.
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Unaudited
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
Net sales $50,878,000 $55,350,000 $160,593,000 $171,132,000
Cost of sales 39,438,000 39,244,000 119,049,000 118,586,000
Gross profit 11,440,000 16,106,000 41,544,000 52,546,000
Selling, gen. and admin. expenses 13,393,000 13,109,000 41,254,000 39,603,000
Income (loss) from operations (1,953,000) 2,997,000 290,000 12,943,000
Interest (income) expense, net 121,000 - 125,000 (243,000)
Income (loss) from continuing
operations before income taxes (2,074,000) 2,997,000 165,000 13,186,000
Provision for income taxes (850,000) 1,090,000 90,000 4,990,000
Income (loss) from continuing
operations (1,224,000) 1,907,000 75,000 8,196,000
Loss from discontinued operations - (60,000) ( 52,000) (150,000)
Gain on disposition of
discontinued operations - - 377,000 -
Net income (loss) $(1,224,000) $ 1,847,000 $ 400,000 $ 8,046,000
Basic and diluted EPS:
Continuing operations $(.29) $ .45 $ .01 $1.91
Discontinued operations - (.02) .08 (.04)
$(.29) $ .43 $ .09 $1.87
Shares used to compute EPS:
Basic 4,280,044 4,291,719 4,287,094 4,291,384
Diluted 4,280,044 4,299,183 4,287,094 4,299,044
Cash dividends per share $.30 $.30 $.90 $.90
<FN>
See accompanying notes to consolidated financial statements.
- 4 -
Unaudited
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
March 31,
2000 1999
Cash flows from operating activities:
Net income $ 400,000 $ 8,046,000
Adjustments for noncash transactions:
Depreciation and amortization 5,339,000 4,700,000
Gain on disposition of discontinued operations (587,000)
Changes in assets and liabilities:
Receivables 1,717,000 (3,753,000)
Inventories (6,206,000) (7,263,000)
Prepaid expenses and deposits (399,000) (929,000)
Accounts payable (3,624,000) (1,208,000)
Accrued liabilities (1,800,000) 630,000
Income taxes payable (93,000) (358,000)
Net cash used in operating activities (5,253,000) (135,000)
Cash flows from investing activities:
Capital expenditures (6,558,000) (12,852,000)
Acquisition of businesses (1,222,000) (1,300,000)
Disposition of businesses 3,921,000
Proceeds from sales of capital assets 245,000 656,000
Net cash used in investing activities (3,614,000) (13,496,000)
Cash flows from financing activities:
Dividends paid to shareholders (3,862,000) (3,863,000)
Net borrowing under lines of credit 11,894,000 6,093,000
Common stock repurchased (775,000) -
Proceeds from exercises of stock options - 37,000
Net cash provided by financing activities 7,257,000 2,267,000
Net change in cash and cash equivalents (1,610,000) (11,364,000)
Cash and cash equivalents at beginning
of period 2,269,000 14,320,000
Cash and cash equivalents at end of period $ 659,000 $ 2,956,000
<FN>
See accompanying notes to consolidated financial statements.
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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 March 31, 2000 and
June 30, 1999, and the results of operations for the three and nine month
periods ended March 31, 2000 and 1999 and the cash flows for the nine month
periods ended March 31, 2000 and 1999 The results of operations for the three
and nine month periods ended March 31, 2000 and 1999 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 third quarters ended March 31, 2000 and 1999 was $(1,237,000) and
$1,895,000, respectively. Comprehensive income for the nine months ended
March 31, 2000 and 1999 was $433,000 and $7,984,000, respectively. Other
comprehensive income includes foreign currency translation adjustments
recorded directly in shareholders' equity.
Balance Sheet Components March 31, 2000 June 30, 1999
Inventories, lower of FIFO Cost or Market
Raw materials $ 40,295,000 $ 34,915,000
Work in process 1,621,000 1,466,000
Finished goods 4,995,000 5,195,000
$ 46,911,000 $ 41,576,000
Shareholders' Equity
Common stock $ 4,765,000 $ 4,765,000
Paid-in capital 4,123,000 4,123,000
Retained earnings 115,559,000 119,796,000
Accumulated other comprehensive income 50,000 17,000
$124,497,000 $128,701,000
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Unaudited
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 Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
Commercial $ 24,794 $ 29,712 $ 81,292 $ 92,425
Residential 14,404 11,399 45,164 38,335
Aluminum Extrusion 27,776 28,653 77,363 87,506
Total Segments 66,974 69,764 203,819 218,266
Eliminations (16,096) (14,414) (43,226) (47,134)
Total $ 50,878 $ 55,350 $160,593 $171,132
Operating Income (Loss): Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
Commercial $ 655 $ 2,735 $ 5,925 $ 10,384
Residential 449 162 2,178 1,658
Aluminum Extrusion (961) 1,894 (3,352) 7,223
Total Segments 143 4,791 4,751 19,265
Eliminations (218) 664 1,171 463
Corporate (1,878) (2,458) (5,632) (6,785)
Total $ (1,953) $ 2,997 $ 290 $ 12,943
Total Assets: March 31, June 30,
2000 1999
Commercial $ 70,804 $ 69,306
Residential 31,484 28,874
Aluminum Extrusion 44,229 38,543
Glass - 8,156
Total Segments 146,517 144,879
Corporate 8,675 8,814
Total $155,192 $153,693
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Unaudited
Discontinued Operations
During the second quarter, the Company sold most all of the operating assets
of its Glass segment, excluding the land and buildings, for $3,921,000. The
land and buildings were leased to the buyer. The Glass segment is accounted
for as a discontinued operation, and accordingly, amounts in the income
statements and related notes for all periods shown have been restated to
reflect discontinued operations accounting. Summarized results of the
discontinued businesses are shown separately as discontinued operations in the
accompanying income statements. Operating results of the discontinued
segment, in thousands of dollars, are as follows:
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
Net sales $ - $ 3,953 $ 6,914 $11,590
Loss before income taxes $ - $ (90) $ (82) $ (240)
Income tax benefit - (30) (30) (90)
Loss from discontinued ops. - (60) (52) (150)
Gain on disposition of disc. ops.,
net of $210 income tax expense - - 377 -
Net income (loss) from
discontinued segment $ - $ (60) $ 325 $ (150)
Earnings per diluted share:
Discontinued operations $ - $(.02) $(.01) $(.04)
Gain on disposition of disc. ops. - - .09 -
New Canadian Subsidiary
The Company recently formed a wholly-owned subsidiary named United States
Aluminum Of Canada-Ontario, Ltd. which became a member of the Commercial
Products Group. In March 2000, this subsidiary completed the $1,222,000 cash
purchase of selected assets and liabilities of a Toronto, Ontario commercial
storefront and curtain wall company. The estimated fair value of the net
assets acquired was $720,000. The $502,000 excess of the purchase price over
the estimated fair value was allocated to goodwill and is being amortized on
a straight line basis over 5 years. Proforma financial statements of this
acquisition are not presented as they are not materially different from
historical amounts.
Year 2000
The Company completed its planned changes to obtain compliance prior to
December 31, 1999. To date, the Company has not had any material failures
related with non-compliance nor is it aware of any material failures of any
of its significant customers or suppliers.
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Unaudited
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Significant Changes in Results of Operations
Net sales decreased by $4,472,000 or 8.1% for the quarter ended March 31,
2000 and by $10,539,000 or 6.2% for the nine months then ended when compared
with the respective 1999 periods. The decreases in sales include decreases
of $4,912,000 or 16.5% for the quarter and $11,111,000 or 12.0% for the nine
months by the Commercial Products Group primarily resulting from an inadequate
supply of raw materials from our aluminum extrusion operations. Also included
are decreases of $2,573,000 or 17.9% for the quarter and $6,200,000 or 15.2%
for the nine months by the Aluminum Extrusion Group primarily resulting from
lower production due to extended downtime during equipment upgrades and the
implementation of continuous flow manufacturing processing. Partially
offsetting these are increases of $2,937,000 or 25.8% for the quarter and
$6,728,000 or 17.6% for the nine months by the Residential Products Group
reflecting the strong market for these products.
Cost of sales as a percentage of net sales increased by 6.6% for the quarter
ended March 31, 2000 and by 4.8% for the nine months then ended when compared
with the respective 1999 periods. These increases are largely attributable
to higher material, labor and overhead expenses incurred in our extrusion
operations resulting from downtime and inefficiencies associated with
retraining personnel for the aforementioned conversion to continuous flow
manufacturing.
Selling, general and administrative expenses increased by $284,000 or 2.2%
for the quarter and by $1,651,000 or 4.2% for the nine month period. The
increased expenses are primarily attributable to additional compensation,
recruiting, relocation and severance costs associated with realigning
operating group management teams.
The swing from net interest income for the prior year nine month period to
net interest expense for the current year period relates to the depletion of
funds available for investment due primarily to heavy capital expenditures and
increases in raw material inventories.
The effective tax rate for the nine months ended March 31, 2000 was 54.5%
whereas the comparable period of the prior year was 37.8%. This increase is
primarily attributable to losses in states with no related tax benefit coupled
with nondeductible expenses being spread over a lower income base.
- 9 -
Unaudited
Liquidity and Capital Resources
Working capital at March 31, 2000 stood at $64,037,000, a decrease of
$4,993,000 from June 30, 1999. The ratio of current assets to current
liabilities is currently 3.4 as compared to 4.4 as of the beginning of the
year.
In addition to the $1,222,000 cash purchase of business assets in Toronto,
Canada, (see note), the Company's projected capital expenditures for fiscal
2000 include $8,000,000 for scheduled expansion of production capacity in
addition to the normal annual noncapitalized expenditures for replacement
items. The Company anticipates financing these expenditures through internal
cash flow and the utilization of its line of credit.
The Company's line of credit was increased to $20,000,000. The terms of the
line remain unchanged from those noted in the June 30, 1999 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.
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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)
Date: May 12, 2000 DAVID C. TREINEN
David C. Treinen
Senior Vice President - Finance
and Administration
(Principal Financial Officer)
Date: May 12, 2000 MITCHELL K. FOGELMAN
Mitchell K. Fogelman
Vice President - Controller
(Principal Accounting Officer)
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