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, 1999 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 3, 1999 there were 4,291,794 shares of Common Stock outstanding.
Page 1 of 9 Pages
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INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
INDEX
Page
PART I. Financial Information
Consolidated Balance Sheets -
March 31, 1999 and June 30, 1998 3
Consolidated Statements of Income -
three and nine month periods ended
March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows -
nine months ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Signatures 9
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<TABLE>
PART I
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
Unaudited Audited
Assets March 31, 1999 June 30, 1998
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,956,000 $ 14,320,000
Accounts receivable, net 38,809,000 34,850,000
Inventories 45,896,000 38,135,000
Prepaid expenses and deposits 4,298,000 2,827,000
Future income tax benefits 1,521,000 1,521,000
Total current assets 93,480,000 91,653,000
Property, plant and equipment, at cost 107,971,000 96,692,000
Accumulated depreciation (54,241,000) (51,316,000)
Net property, plant and equipment 53,730,000 45,376,000
Other assets:
Costs in excess of net assets of
purchased businesses 9,904,000 9,752,000
Other 517,000
Total other assets 9,904,000 10,269,000
$157,114,000 $147,298,000
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 7,183,000 $ 7,932,000
Accrued liabilities 11,593,000 10,921,000
Advances payable to banks 6,093,000
Income taxes payable 272,000 630,000
Total current liabilities 25,141,000 19,483,000
Deferred income taxes 4,366,000 4,366,000
Total liabilities 29,507,000 23,849,000
Shareholders' equity 127,607,000 123,449,000
$157,114,000 $147,298,000
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE> <TABLE> Unaudited
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales $59,303,000 $52,988,000 $182,722,000 $168,156,000
Costs and expenses:
Cost of sales 42,286,000 36,972,000 127,795,000 116,907,000
Selling, general and admin. 14,062,000 12,325,000 42,102,000 37,088,000
Interest (income) expense, net 48,000 (96,000) (121,000) (177,000)
Income before income taxes 2,907,000 3,787,000 12,946,000 14,338,000
Provision for income taxes 1,060,000 1,510,000 4,900,000 5,500,000
Net income $ 1,847,000 $ 2,277,000 $ 8,046,000 $ 8,838,000
Earnings per share:
Basic $.43 $.53 $1.87 $2.06
Diluted $.43 $.53 $1.87 $2.06
Shares used to compute EPS:
Basic 4,291,719 4,290,244 4,291,384 4,280,572
Diluted 4,299,183 4,324,295 4,299,044 4,298,940
Cash dividends per share $.30 $.30 $.90 $.85
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE> <TABLE> Unaudited
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended
March 31,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,046,000 $ 8,838,000
Adjustments for noncash transactions:
Depreciation and amortization 4,700,000 4,339,000
Gain on disposition of business (1,235,000)
Changes in assets and liabilities:
Receivables (3,753,000) 1,315,000
Inventories (7,263,000) (52,000)
Prepaid expenses and other (929,000) (729,000)
Accounts payable (1,208,000) 1,243,000
Accrued liabilities and other 630,000 (807,000)
Income taxes payable (358,000) (397,000)
Net cash provided by operating activities (135,000) 12,515,000
Cash flows from investing activities:
Capital expenditures (12,852,000) (5,282,000)
Disposition (acquisition) of businesses (1,300,000) 1,021,000
Proceeds from sales of capital assets 656,000 92,000
Net cash used in investing activities (13,496,000) (4,169,000)
Cash flows from financing activities:
Dividends paid to shareholders (3,863,000) (3,642,000)
Net borrowing under lines of credit 6,093,000
Proceeds from exercises of stock options 37,000 301,000
Net cash used in financing activities 2,267,000 (3,341,000)
Effect of exchange rate changes on cash 7,000
Net change in cash and cash equivalents (11,364,000) 5,012,000
Cash and cash equivalents at beginning
of period 14,320,000 6,485,000
Cash and cash equivalents at end of period $ 2,956,000 $11,497,000
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE> 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, 1999 and
June 30, 1998, and the results of operations for the three and nine month
periods ended March 31, 1999 and 1998 and the cash flows for the nine month
periods ended March 31, 1999 and 1998. The results of operations for the
three and nine month periods ended March 31, 1999 and 1998 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.
This report contains forward-looking statements with respect to the
financial conditions, 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.
Comprehensive Income
Comprehensive income, defined as net income and other comprehensive income,
for the third quarters ended March 31, 1999 and 1998 was $1,895,000 and
$2,276,000, respectively. Comprehensive income for the nine months ended
March 31, 1999 and 1998 was $7,984,000 and $6,551,000, respectively. Other
comprehensive income includes foreign currency translation adjustments
recorded directly in shareholders' equity.
Disposition of Foreign Subsidiary
During the second quarter of the prior year, the Company sold it Dutch
subsidiary, Eland-Brandt BV, for approximately $1,021,000 in net cash
proceeds. The sale generated a pretax gain of $1,235,000 (after-tax gain of
$1,156,000 or $.27 per share), including the recognition of $2,145,000 of
previously deferred cumulative translation adjustment. The Company's
consolidated financial statements for the prior year include the results of
Eland-Brandt through the date of disposal.
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<PAGE> Unaudited
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Significant Changes in Results of Operations
Sales increased by $6,315,000 or 11.9% for the quarter ended March 31, 1999
and by $14,566,000 or 8.7% for the nine months then ended when compared with
the 1998 periods. The sale of the Company's Dutch subsidiary, Eland-Brandt
BV, during the first quarter of fiscal 1998 impacts year to date comparisons.
Exclusion of Eland-Brandt from the prior year results in an increase of
$16,549,000 or 9.8% for the nine months. Sales from continuing operations
include increases of $4,080,000 or 15.9% for the quarter and $11,310,000 or
14.0% for the nine months by the Commercial Products Group, $960,000 or 9.2%
for the quarter and by $3,395,000 or 9.8% for the nine months by the
Residential Products Group and $1,792,000 or 14.3% for the quarter and by
$3,090,000 or 8.2% for the nine months by the Aluminum Extrusion Group.
Cost of sales as a percentage of net sales increased by 1.5% for the quarter
ended March 31, 1999 and by 0.4% for the nine months then ended when compared
with the 1998 periods. These increases are primarily attributable to
increased labor and overhead percentages incurred during the second and third
quarters by the Commercial Products Group and the Aluminum Extrusion Group.
Selling, general and administrative expenses increased by $1,737,000 or
14.1% for the quarter and by $5,014,000 or 13.5% for the nine month period.
These increases are primarily associated with the increased sales volume.
Included in the current quarter are $470,000 of costs incurred for recruitment
and relocation costs of management personnel to partially implement designed
organizational and marketing changes. $525,000 of the increase for the nine
months relates to the sale of the subsidiary during the prior year.
The decrease in net interest income for the quarter and nine month periods
relate to significantly decreased levels of funds available for investment
during the current year due primarily to increased capital expenditures.
The effective tax rate for the nine months ended March 31, 1999 was 37.8%
whereas the comparable period of the prior year was 38.4%.
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<PAGE> Unaudited
Liquidity and Capital Resources
Working capital at March 31, 1999 stood at $68,339,000, a decrease of
$3,831,000 from June 30, 1998. The ratio of current assets to current
liabilities is currently 3.7 as compared to 4.7 as of the beginning of the
year.
In addition to the $1,300,000 cash purchase of business assets in Colorado,
(see the note below), the Company's projected capital expenditures for fiscal
1999 include $14,000,000 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, cash reserves and the utilization of its line of credit.
The Company's line of credit was increased to $15,000,000 during the current
fiscal year.
Year 2000
The Company performed a review of the financial and operational software it
uses in its business for Year 2000 compliance and determined that it was not
compliant. The Company is in the process of migrating to new compliant
releases it its financial software. The Company had previously purchased new
operational software to be used by all of its entities to enhance
manufacturing information and customer service. The Aluminum Extrusion and
Glass Products groups have completed implementation of this new software,
which is Year 2000 compliant. The Commercial and Residential Products groups
have completed partial implementation, with one member of the Commercial
Products Group and three members of the Residential Products Group having
completed the migration to the new software. The Company has targeted Year
2000 compliance of its financial and operational software by no later than
mid-1999, and thus has not developed contingency plans.
The Company will continue to incur expenses related to these efforts,
however, such expenses are not expected to have a material impact on the
Company's results of operations. Although not anticipated, the consequence
of non-compliance by the Company, its customers or suppliers could have a
material adverse impact on the Company's operations.
New Domestic Subsidiary
The Company recently formed a wholly-owned subsidiary named International
Window-Colorado, Inc. (IW-CO) which will be a member of the Residential
Products Group. On October 1, 1998, IW-CO completed the $1,300,000 cash
purchase of selected assets and liabilities of a Denver, Colorado residential
window and door company. The estimated fair value of the net assets acquired
was $726,000. The $574,000 excess of the purchase price over the estimated
fair value was allocated to goodwill and is being amortized on a straight line
basis over 15 years.
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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, 1999 DAVID C. TREINEN
David C. Treinen
Senior Vice President - Finance
and Administration
(Principal Financial Officer)
Date: May 12, 1999 MITCHELL K. FOGELMAN
Mitchell K. Fogelman
Vice President - Controller
(Principal Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,956
<SECURITIES> 0
<RECEIVABLES> 38,809
<ALLOWANCES> 0
<INVENTORY> 45,896
<CURRENT-ASSETS> 93,480
<PP&E> 107,971
<DEPRECIATION> 54,241
<TOTAL-ASSETS> 157,114
<CURRENT-LIABILITIES> 25,141
<BONDS> 0
0
0
<COMMON> 8,880
<OTHER-SE> 118,727
<TOTAL-LIABILITY-AND-EQUITY> 157,114
<SALES> 182,722
<TOTAL-REVENUES> 182,722
<CGS> 127,795
<TOTAL-COSTS> 127,795
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 524
<INTEREST-EXPENSE> 85
<INCOME-PRETAX> 12,946
<INCOME-TAX> 4,900
<INCOME-CONTINUING> 8,046
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,046
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 1.87
</TABLE>
