SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

 

FORM 10-Q

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13

OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

 

 

 

INTERNATIONAL ALUMINUM CORPORATION

(Exact name of Registrant as specified in its charter)

 

 

 

 

 

 

 

 

 

 

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, 2002 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, 2002 and June 30, 2002
	Consolidated Statements of Income - three months ended September 30, 2002 and 2001
	Consolidated Statements of Cash Flows - three months ended September 30, 2002 and 2001
	Notes to Consolidated Financial Statements
	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Signatures
	Certifications
	Exhibit
	99.	Certifications Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

2

 

PART I

 

INTERNATIONAL ALUMINUM CORPORATION

AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

 

		Unaudited			Audited
Assets		Sept. 30, 2002			June 30, 2002
Current assets:
Cash and cash equivalents		$	8,132,000		$	3,495,000
Accounts receivable, net		32,961,000			31,811,000
Inventories		31,932,000			33,401,000
Prepaid expenses and deposits		3,512,000			3,665,000
Future income tax benefits		1,661,000			1,675,000
Total current assets		78,198,000			74,047,000
Property, plant and equipment, at cost		120,661,000			122,759,000
Accumulated depreciation		(66,631,000		)	(65,466,000		)
Net property, plant and equipment		54,030,000			57,293,000
Other assets:
Costs in excess of net assets of purchased businesses		1,016,000			1,030,000
Other		368,000			354,000
Total other assets		1,384,000			1,384,000
		$	133,612,000		$	132,724,000
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	7,878,000		$	6,575,000
Accrued liabilities		8,879,000			8,295,000
Advances payable to banks		662,000			1,034,000
Income taxes payable		356,000			86,000
Total current liabilities		17,775,000			15,990,000
Deferred income taxes		5,929,000			5,929,000
Total liabilities		23,704,000			21,919,000
Shareholders’ equity		109,908,000			110,805,000
		$	133,612,000		$	132,724,000

 

 

See accompanying notes to consolidated financial statements.

 

 

3

 

		Unaudited

 

INTERNATIONAL ALUMINUM CORPORATION

AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME

 

 

		Three Months Ended
		September 30,
		2002			2001
Net sales		$	49,728,000		$	53,264,000
Cost of sales		40,366,000			43,591,000
Gross profit		9,362,000			9,673,000
Selling, general and administrative expenses		8,254,000			7,950,000
Income from operations		1,108,000			1,723,000
Interest (income) expense, net		(1,000		)	(21,000		)
Income from continuing operations before income taxes		1,109,000			1,744,000
Provision for income taxes		410,000			636,000
Income from continuing operations		699,000			1,108,000
Income (loss) from discontinued operations		—			(176,000		)
Cumulative effect of accounting change		—			(7,935,000		)
Net income (loss)		$	699,000		$	(7,003,000	)
Earnings per share — Basic and Diluted:
Continuing operations		$	.16		$	.26
Discontinued operations		—			(.04		)
Cumulative effect of accounting change		—			(1.87		)
Total		$	.16		$	(1.65	)
Shares used to compute EPS:
Basic and Diluted		4,244,794			4,244,794
Cash dividends per share		$	.30		$	.30

 

 

 

See accompanying notes to consolidated financial statements.

 

 

 

4

 

Unaudited

 

 

INTERNATIONAL ALUMINUM CORPORATION

AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

		Three Months Ended
		September 30,
		2002			2001
Cash flows from operating activities:
Net income		$	699,000		$	(7,003,000	)
Adjustments for noncash transactions:
Depreciation and amortization		1,735,000			1,785,000
Change in deferred income taxes		—			1,000
Gain on sale of fixed assets		—			(631,000		)
Cumulative effect of accounting change		—			7,935,000
Changes in assets and liabilities:
Receivables		(1,222,000		)	(1,871,000		)
Inventories		915,000			(152,000		)
Prepaid expenses and deposits		135,000			(117,000		)
Accounts payable		1,350,000			1,316,000
Accrued liabilities		267,000			(49,000		)
Income taxes payable		273,000			314,000
Net cash provided by operating activities		4,152,000			1,528,000
Cash flows from investing activities:
Capital expenditures		(391,000		)	(3,655,000		)
Proceeds from sales of capital assets		2,497,000			1,652,000
Net cash provided by (used in) investing activities		2,106,000			(2,003,000		)
Cash flows from financing activities:
Dividends paid to shareholders		(1,273,000		)	(1,273,000		)
Net borrowing under lines of credit		(333,000		)	868,000
Net cash used in financing activities		(1,606,000		)	(405,000		)
Effect of exchange rate changes		(15		)	(6		)
Net change in cash and cash equivalents		4,637,000			(886,000		)
Cash and cash equivalents at beginning of period		3,495,000			5,915,000
Cash and cash equivalents at end of period		$	8,132,000		$	5,029,000

 

 

 

See accompanying notes to consolidated financial statements.

 

 

5

 

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, 2002 and June 30, 2002, and the results of operations and cash flows for the three month periods ended September 30, 2002 and 2001.  The results of operations for the three month periods ended September 30, 2002 and 2001 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, 2002 and 2001 was $376,000 and $(7,209,000), respectively.  Other comprehensive income includes foreign currency translation adjustments recorded directly in shareholders’ equity.

 

 

Balance Sheet Components		Sept. 30, 2002			June 30, 2002
Inventories, lower of FIFO Cost or Market
Raw materials		$	27,247,000		$	28,576,000
Work in process		447,000			560,000
Finished goods		4,238,000			4,265,000
		$	31,932,000		$	33,401,000
Shareholders’ Equity
Common stock		$	4,765,000		$	4,765,000
Paid-in capital		4,123,000			4,123,000
Retained earnings		101,367,000			101,941,000
Accumulated other comprehensive income		(347,000		)	(24,000		)
		$	109,908,000		$	110,805,000

 

 

6

 

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
		September 30,
		2002			2001
Commercial		$	25,571		$	29,636
Residential		13,545			13,608
Aluminum Extrusion		21,114			25,705
Total Segments		60,230			68,949
Eliminations		(10,502		)	(15,685		)
Total		$	49,728		$	53,264

 

 

 

 

Operating Income (Loss):		Three Months Ended
		September 30,
		2002			2001
Commercial		$	2,433		$	2,491
Residential		824			129
Aluminum Extrusion		(121		)	343
Total Segments		3,136			2,963
Eliminations		(60		)	157
Corporate		(1,968		)	(1,397		)*
Total		$	1,108		$	1,723

 

 

 

 

Total Assets:		Sept. 30,			June 30,
		2002			2002
Commercial		$	63,594		$	63,537
Residential		26,175			28,776
Aluminum Extrusion		35,003			34,915
Total Segments		124,772			127,228
Corporate		8,840			5,496
Total		$	133,612		$	132,724

*Net of $631 gain on sale of former operating facility

 

 

 

7

 

Unaudited

 

Change In Accounting

 

    The Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets” effective July 1, 2001, which required that existing goodwill be reviewed for impairment using a revised methodology.  The Company completed the transitional impairment test and determined that a $7,935,000 non-cash transition charge was required to reduce goodwill.  The transition charge is reflected as a cumulative effect of an accounting change effective July 1, 2001 and the previously reported results for the quarter ended September 30, 2001 were retroactively adjusted.

 

 

 

 

 

 

 

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, 2002 decreased by $3,536,000 or 6.6% from the comparable quarter of the prior year. Sales of the Commercial Products Group declined by $4,175,000 or 14.1% reflective of the continued soft commercial construction market coupled with increased competitive conditions.  Partially offsetting this decrease is an increase of $565,000 or 5.5% by the Aluminum Extrusion Group.  Although net tonnage shipped, particularly in the area served by our Texas facility, increased by 12.7% compared to the same period last year there is continued pressure on pricing.  Sales of Residential Products increased marginally compared to the prior year period.  This increase reflects their continuing efforts to replace sales lost due to last year’s trade union strike at our South Gate, California facility as well as volume formerly contributed by a big-box store, amounting to 11.3% of sales last year compared to only 2.8% this year.

 

 

    Cost of sales as a percentage of net sales was 81.2% for the quarter ended September 30, 2002 as opposed to 81.8% for the comparable prior year period. This decrease is attributable to several somewhat offsetting factors. All segments of our business achieved decreases in their material costs.  In addition, the Residential Products Group decreased their labor and overhead costs reflecting their continued recovery from prior year’s strike related inefficiencies.  Partially offsetting these gains were increased labor and overhead cost percentages in the Commercial Products Group resulting from normal production costs being spread over significantly diminished sales coupled with increased costs associated with the start up of two new horizontal paint lines.  Higher labor cost percentages were also incurred in our Extrusion Group as their decline in overall volume increased unit cost of production.

 

 

8

 

Unaudited

 

    Selling, general and administrative expenses increased by $304,000 from the prior year.  Excluding the $631,000 profit on the sale of a former operating facility recorded as an offset to expenses last year this comparison would have shown a net decrease of $327,000 or 3.8%. The decrease reflects reduced employment costs in the current year as well as the prior year containing some additional costs for strike related security and legal services.

 

 

    The effective tax rate for the quarter ended September 30, 2002 was 37.0% whereas the comparable period of the prior year was 35.8%.

 

 

 

Liquidity and Capital Resources

 

    Working capital at September 30, 2002 stood at $60,423,000, an increase of $2,366,000 from June 30, 2002.  The ratio of current assets to current liabilities is currently 4.4 as compared to 4.6 as of the beginning of the year.

 

    The Company’s projected net capital expenditures for fiscal 2003 and related financing remain unchanged from those described in the June 30, 2002 Annual Report.  The Company’s domestic line of credit remains unchanged from that described in the June 30, 2002 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.

 

 

 

Controls and Procedures

 

    Within 90 days prior to the filing date of this report, a review was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures.  Based on that review, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective.  There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the completion of their review.

 

 

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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:	November 13, 2002	MITCHELL K. FOGELMAN
		Mitchell K. Fogelman
		Senior Vice President — Finance
		(Principal Financial Officer)
Date:	November 13, 2002	MICHAEL J. NORRING
		Michael J. Norring
		Controller
		(Principal Accounting Officer)

 

 

 

10

 

 

CERTIFICATION

 

I, Cornelius C. Vanderstar, certify that:

 

1.               I have reviewed this quarterly report on Form 10-Q of International Aluminum Corporation;

 

2.               Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.               Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.               The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a.               designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b.              evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c.               presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

 

5.               The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a.               all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b.              any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

 

6.               The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

 

Date: November 11, 2002	CORNELIUS C. VANDERSTAR
	Cornelius C. Vanderstar
	Chairman of the Board and
	Chief Executive Officer

 

 

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CERTIFICATION

 

I, Mitchell K. Fogelman, certify that:

 

1.               I have reviewed this quarterly report on Form 10-Q of International Aluminum Corporation;

 

2.               Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.               Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

 

4.               The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a.               designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b.              evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c.               presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

 

5.               The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a.               all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b.              any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

 

6.               The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

 

Date: November 11, 2002	MITCHELL K. FOGELMAN
	Mitchell K. Fogelman
	Senior Vice President — Finance
	and Chief Financial Officer

 

 

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