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 December 31, 1998 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 February 1, 1999 there were 4,291,794 shares of Common Stock outstanding.
Page 1 of 10 Pages
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INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
INDEX
Page
PART I. Financial Information
Consolidated Balance Sheets -
December 31, 1998 and June 30, 1998 3
Consolidated Statements of Income -
three and six month periods ended
December 31, 1998 and 1997 4
Consolidated Statements of Cash Flows -
six months ended December 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 9
Signatures 10
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<TABLE>
PART I
INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
Unaudited Audited
Assets Dec. 31, 1998 June 30, 1998
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,014,000 $ 14,320,000
Accounts receivable, net 38,706,000 34,850,000
Inventories 44,875,000 38,135,000
Prepaid expenses and deposits 3,759,000 2,827,000
Future income tax benefits 1,521,000 1,521,000
Total current assets 93,875,000 91,653,000
Property, plant and equipment, at cost 103,404,000 96,692,000
Accumulated depreciation (52,966,000) (51,316,000)
Net property, plant and equipment 50,438,000 45,376,000
Other assets:
Costs in excess of net assets of
purchased businesses 10,049,000 9,752,000
Other 517,000
Total other assets 10,049,000 10,269,000
$154,362,000 $147,298,000
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 11,396,000 $ 7,932,000
Accrued liabilities 11,609,000 10,921,000
Income taxes payable 630,000
Total current liabilities 23,005,000 19,483,000
Deferred income taxes 4,366,000 4,366,000
Total liabilities 27,371,000 23,849,000
Shareholders' equity 126,991,000 123,449,000
$154,362,000 $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 Six Months Ended
December 31, December 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $61,269,000 $55,659,000 $123,419,000 $115,168,000
Costs and expenses:
Cost of sales 42,682,000 38,214,000 85,509,000 79,935,000
Selling, general and admin. 14,170,000 11,686,000 28,040,000 24,763,000
Interest (income) expense, net (63,000) (68,000) (169,000) (81,000)
Income before income taxes 4,480,000 5,827,000 10,039,000 10,551,000
Provision for income taxes 1,690,000 1,970,000 3,840,000 3,990,000
Net income $ 2,790,000 $ 3,857,000 $ 6,199,000 $ 6,561,000
Earnings per share:
Basic $.65 $.90 $1.44 $1.53
Diluted $.65 $.90 $1.44 $1.53
Shares used to compute EPS:
Basic 4,291,494 4,282,994 4,291,208 4,276,319
Diluted 4,299,195 4,294,837 4,298,966 4,286,778
Cash dividends per share $.30 $.30 $.60 $.55
<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>
Six Months Ended
December 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,199,000 $ 6,561,000
Adjustments for noncash transactions:
Depreciation and amortization 3,059,000 2,881,000
Gain on disposition of business (1,235,000)
Changes in assets and liabilities:
Receivables (3,650,000) (544,000)
Inventories (6,242,000) 4,277,000
Prepaid expenses and other (390,000) (1,066,000)
Accounts payable 3,005,000 (806,000)
Accrued liabilities and other 646,000 (989,000)
Income taxes payable (630,000) (432,000)
Net cash provided by operating activities 1,997,000 8,647,000
Cash flows from investing activities:
Capital expenditures (8,056,000) (3,505,000)
Disposition (acquisition) of businesses (1,300,000) 1,021,000
Proceeds from sales of capital assets 600,000 48,000
Net cash used in investing activities (8,756,000) (2,436,000)
Cash flows from financing activities:
Dividends paid to shareholders (2,576,000) (2,355,000)
Proceeds from exercises of stock options 29,000 272,000
Net cash used in financing activities (2,547,000) (2,083,000)
Effect of exchange rate changes on cash 7,000
Net change in cash and cash equivalents (9,306,000) 4,135,000
Cash and cash equivalents at beginning
of period 14,320,000 6,485,000
Cash and cash equivalents at end of period $ 5,014,000 $10,620,000
<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 December 31, 1998 and
June 30, 1998, and the results of operations for the three and six month
periods ended December 31, 1998 and 1997 and the cash flows for the six month
periods ended December 31, 1998 and 1997. The results of operations for the
three and six month periods ended December 31, 1998 and 1997 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 second quarters ended December 31, 1998 and 1997 was $2,793,000 and
$1,706,000, respectively. Comprehensive income for the six months ended
December 31, 1998 and 1997 was $6,089,000 and $4,275,000, 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 its 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>
<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 $5,610,000 or 10.1% for the quarter ended December 31,
1998 and increased by $8,251,000 or 7.2% for the six months then ended when
compared with the 1997 periods. The sale of the Company's Dutch subsidiary,
Eland-Brandt BV, during the prior year impacts period comparisons. Exclusion
of Eland-Brandt from the prior year results in increases of $5,610,000 or
10.1% for the quarter and $10,234,000 or 9.0% for the six months. Sales from
continuing operations include increases of $2,461,000 or 8.7% for the quarter
and $7,229,000 or 13.0% for the six months by the Commercial Products Group
and $2,303,000 or 20.1% for the quarter and by $2,435,000 or 10.0% for the six
months by the Residential Products Group.
Cost of sales as a percentage of net sales increased by 1.0% for the quarter
ended December 31, 1998 but decreased by 0.1% for the six months then ended
when compared with the 1997 periods. Exclusion of Eland-Brandt from the prior
year results in increases of 1.0% for the quarter and 0.4% for the six months
which are primarily attributable to slightly increased labor percentages
incurred by each of the Company's operating groups during the second quarter
of the current year.
Selling, general and administrative expenses increased by $2,484,000 or
17.5% for the quarter and by $3,277,000 or 11.7% for the six month period.
The expenses from continuing operations increased by $1,249,000 for the
quarter and by $2,452,000 for the six months associated with the increased
sales volume. The non-recurring portion of the changes relate to the sale of
the subsidiary during the prior year.
The increase in net interest income for the six month period relates to the
increased level of funds available for investment during the first quarter of
the current year.
The effective tax rate for the six months ended December 31, 1998 was 38.3%
whereas the comparable period of the prior year was 37.8%. This increase is
primarily related to the sale of the foreign subsidiary in the prior year
which incurred a small taxable gain in relation to the book gain.
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<PAGE> Unaudited
Liquidity and Capital Resources
Working capital at December 31, 1998 stood at $70,870,000, a decrease of
$1,300,000 from June 30, 1998. The ratio of current assets to current
liabilities is currently 4.1 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 remains unchanged from that noted in the
June 30, 1998 Annual Report to Shareholders.
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 of 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 at least one member of each group
being completed. 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 its 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. which will conduct business as International
Window/Excel (IW/E) and be a member of the Residential Products Group. On
October 1, 1998, IW/E 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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PART II. OTHER INFORMATION
Item 4(c). Submission of Matters to a Vote of Security Holders
On October 29, 1998, the Company held its 1998 Annual Shareholders Meeting.
Shareholders voted proxies representing 3,950,884 shares which was 92.1% of
the 4,291,494 shares outstanding on the record date. The proposed slate of
directors were elected with 3,948,166 shares and the selected independent
accountants were ratified with 3,946,231 shares.
- 9 -<PAGE>
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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: February 11, 1999 DAVID C. TREINEN
David C. Treinen
Senior Vice President - Finance
and Administration
(Principal Financial Officer)
Date: February 11, 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 5,014
<SECURITIES> 0
<RECEIVABLES> 38,706
<ALLOWANCES> 0
<INVENTORY> 44,875
<CURRENT-ASSETS> 93,875
<PP&E> 103,404
<DEPRECIATION> 52,966
<TOTAL-ASSETS> 154,362
<CURRENT-LIABILITIES> 23,005
<BONDS> 0
0
0
<COMMON> 8,880
<OTHER-SE> 145,482
<TOTAL-LIABILITY-AND-EQUITY> 154,362
<SALES> 123,419
<TOTAL-REVENUES> 123,419
<CGS> 85,509
<TOTAL-COSTS> 85,509
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 356
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> 10,039
<INCOME-TAX> 3,840
<INCOME-CONTINUING> 6,199
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,199
<EPS-PRIMARY> 1.44
<EPS-DILUTED> 1.44
</TABLE>
