**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON, D.C. 20549**

 

 

**FORM 10-Q**

 

 

**QUARTERLY REPORTPURSUANT TO SECTION 13**

**OF THE SECURITIESEXCHANGE ACT OF 1934**

 

 

 

| **For quarter ended September  30, 2001** |   | **Commission File Number 1-7256** |
|-------------------------------------------|--------|-----------------------------------|

 

 

 

**INTERNATIONAL ALUMINUM CORPORATION**

(Exact name of Registrant as specified in itscharter)

 

 

| **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 bycheck mark whether the Registrant (1) has filed all reports required to befiled by Section 13 of the Securities Exchange Act of 1934 during the preceding12 months and (2) has been subject to such filing requirements for the past 90days.  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.  Financial Information |                                            |
|--------------------------------------|-------------------------------------------------|
|                                 |                                            |   |
|                                 | Consolidated Balance Sheets  -                  |   |
|                                 | September 30, 2001 and June  30, 2001           |   |
|                                 |                                            |   |
|                                 | Consolidated  Statements of Income -            |   |
|                                 | three months ended  September 30, 2001 and 2000 |   |
|                                 |                                            |   |
|                                 | Consolidated  Statements of Cash Flows -        |   |
|                                 | three months ended  September 30, 2001 and 2000 |   |
|                                 |                                            |   |
|                                 | Notes to  Consolidated Financial Statements     |   |
|                                 |                                            |   |
|                                 | Management's  Discussion and Analysis of        |   |
|                                 | Financial  Condition and Results of Operations  |   |
|                                 |                                            |   |
|                                 | Signatures                                      |   |

 

 

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 |   |

 

Seeaccompanying 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 |   |

 

Seeaccompanying 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 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

 

Unaudited

 

 

 

INTERNATIONAL ALUMINUM CORPORATION

AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Basisof Presentation

 

        In the opinion of management, theaccompanying unaudited consolidated financial statements contain alladjustments (which consist solely of normal recurring adjustments unlessotherwise disclosed) necessary to present fairly, in all material respects, itsfinancial position as of September 30, 2001 and June 30, 2001, and theresults of operations and cash flows for the three month periods endedSeptember 30, 2001 and 2000.  Theresults of operations for the three month periods ended September 30, 2001 and2000 are not necessarily indicative of the results to be expected for the fullyear.

 

        The financial statements included hereinhave been prepared by the Company pursuant to the rules and regulations of theSecurities and Exchange Commission. Certain information and footnote disclosures normally included infinancial statements prepared in accordance with generally accepted accountingprinciples have been condensed or omitted pursuant to such rules andregulations, although the Company believes that the disclosures are adequate tomake the information presented not misleading. It is suggested that these financial statements be read in conjunctionwith the financial statements and the notes thereto included in the Company'slatest annual report on Form 10-K.

 

ComprehensiveIncome

 

        Comprehensive income, defined as netincome and other comprehensive income, for the first quarters ended September30, 2001 and 2000 was $727,000 and $1,458,000, respectively.  Other comprehensive income includes foreigncurrency 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 |   |

SegmentInformation

 

        The following presents the Company's netsales, operating income and total assets by operating segment, reconciling tothe Company's totals.  All datapresented 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 resultare not required to expense goodwill in the amount of $139,000 for the threemonths ended September 30, 2001. Excluding goodwill amortization for the same period last year would haveincreased reported net income to $1,672,000 and Basic and Diluted earnings pershare to $.39.

 

        In October 2001, the FinancialAccounting Standards Board issued SFAS No. 144, “Accounting for Impairment orDisposal of Long-Lived Assets”. This pronouncement provides specific guidancefor long-lived assets to be disposed of by sale, abandoned, exchanged for asimilar productive asset or distributed to owners in a spin-off.  The impact, if any, of the adoption of SFASNo. 144 on our consolidated results of operations or financial position is notknown at this time.

 

 

 

 

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION

AND RESULTS OF OPERATIONS

 

 

SignificantChanges in Results of Operations

 

        Net sales for the first quarter endedSeptember 30, 2001 decreased by $751,000 or 1.4% from the comparable quarter ofthe prior year. This decrease includes $1,198,000 or 7.7% posted by theResidential Products Group and $1,040,000 or 9.2% posted by the AluminumExtrusion Group.  While the sluggisheconomy has impacted both groups, the Residential Products Group has alsosuffered due to a trade union strike in September at our South Gate, Californiaplant, hampering our ability to maintain normal delivery schedules to ourcustomers in the territory serviced by this facility.  The downturn in the Extrusion Group stems from a generalsoftening in demand particularly in the area served by our Texas facility.  Partially offsetting these decreases is anincrease of $1,487,000 or 5.3% posted by the Commercial Products Groupreflecting continued demand for these products.

 

        Cost of sales as a percentage of netsales 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 severalfactors.  The major factor is highermaterial 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 whileunderlying material costs remained somewhat constant.  The Residential Products Group experienced somewhat higherpercentage labor and overhead costs due to production inefficiencies as aresult of the aforementioned strike coupled with recurring costs being spreadover diminished sales.  Operations atour South Gate plant are returning to normal as newly trained workers have beenhired to replace those on strike. Partially offsetting these increases is a decrease in the laborpercentage at our Extrusion Group reflecting their continuing efforts toimprove production efficiency.

        Selling, general and administrativeexpenses increased by $452,000 or 5.9% for the quarter compared to the samequarter last year.  The increasedexpenses are primarily due to a significant swing from recovery to additionalexpense for retrospective workers’ compensation adjustments for prior yearclaims.  The current quarter alsocontains administrative costs related to the aforementioned strike andincreased selling expenses related to the increase in sales for the CommercialProducts Group.  Partially offsettingthese costs is a gain realized on the sale of our former Glass Group facilityin South Carolina.

 

        The swing from net interest expense forthe prior year quarter to net interest income in the current year quarterrelates to the increase in funds available for investment.  The prior year net expense reflectsutilization of a line of credit used in part to finance heavy capitalexpenditures during the preceding year.

 

        The effective tax rate for the quarterended September 30, 2001 was 35.8% whereas the comparable period of the prioryear was 37.5%.  This decrease isprimarily attributable to available tax credits offsetting a smaller taxableincome.

 

 

Liquidityand Capital Resources

 

        Working capital at September 30, 2001stood at $64,783,000, a decrease of $1,314,000 from June 30, 2001.  The ratio of current assets to currentliabilities is currently 4.0 as compared to 4.4 as of the beginning of theyear.

 

        The Company's projected net capitalexpenditures for fiscal 2002 and related financing remain unchanged from thosedescribed in the June 30, 2001 Annual Report. The Company's domestic line of credit remains unchanged from thatdescribed in the June 30, 2001 Annual Report to Shareholders.

 

 

Forward-LookingInformation

 

        This report contains forward-lookingstatements with respect to the financial condition, results of operations andbusiness of the Company.  Such items aresubject to certain risks and uncertainties that could cause actual results todiffer materially from those set forth in such statements.  Readers are cautioned not to place unduereliance on these forward-looking statements, which speak only as of the datethe statement was made.  The Companyundertakes no obligation to publicly update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise.

 

INTERNATIONAL ALUMINUM CORPORATION

AND SUBSIDIARIES

 

SIGNATURES

 

 

        Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 
|   |              | International Aluminum Corporation   |
|--------|-------------------|--------------------------------------|
|   |              | (Registrant)                         |
|   |              |                                 |
|   |              |                                 |
|   |              |                                 |
|   |              |                                 |
| Date:  | November 13, 2001 |                                 | MITCHELL K. FOGELMAN |
|   |              | Mitchell K. Fogelman                 |
|   |              | Senior Vice President – Finance |
|   |              | (Principal Financial Officer)        |
|   |              |                                 |
|   |              |                                 |
|   |              |                                 |
|   |              |                                 |
| Date:  | November 13, 2001 |                                 | MICHAEL J. NORRING |
|   |              | Michael J. Norring                   |
|   |              | Controller                           |
|   |              | (Principal Accounting Officer)       |