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 September 30, 2003

Commission File Number 1-7256

 

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

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes ý  No o

 

At November 3, 2003 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, 2003 and June 30, 2003
	Consolidated Statements of Income - three months ended September 30, 2003 and 2002
	Consolidated Statements of Cash Flows - three months ended September 30, 2003 and 2002
	Notes to Consolidated Financial Statements
	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Signatures
	Exhibits
	31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

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PART I

 

INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

		Unaudited			Audited
		Sept. 30, 2003			June 30, 2003
Assets
Current assets:
Cash and cash equivalents		$	18,097,000		$	12,570,000
Accounts receivable, net		33,285,000			34,336,000
Inventories		30,317,000			28,551,000
Prepaid expenses and deposits		2,722,000			2,583,000
Future income tax benefits		2,239,000			2,239,000
Total current assets		86,660,000			80,279,000
Property, plant and equipment, at cost		120,593,000			120,829,000
Accumulated depreciation		(69,930,000		)	(68,999,000		)
Net property, plant and equipment		50,663,000			51,830,000
Other assets:
Costs in excess of net assets of purchased businesses		604,000			605,000
Other		574,000			529,000
Total other assets		1,178,000			1,134,000
		$	138,501,000		$	133,243,000
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	11,248,000		$	7,407,000
Accrued liabilities		9,767,000			9,054,000
Advances payable to banks		263,000			590,000
Income taxes payable		1,043,000			299,000
Total current liabilities		22,321,000			17,350,000
Deferred income taxes		6,357,000			6,357,000
Total liabilities		28,678,000			23,707,000
Shareholders’ equity		109,823,000			109,536,000
		$	138,501,000		$	133,243,000

 

See accompanying notes to consolidated financial statements.

 

3

 

Unaudited

 

INTERNATIONAL ALUMINUM CORPORATION
AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF INCOME

 

		Three Months Ended September 30,
		2003			2002
Net sales		$	52,956,000		$	49,144,000
Cost of sales		42,398,000			39,538,000
Gross profit		10,558,000			9,606,000
Selling, general and administrative expenses		7,955,000			8,160,000
Income from operations		2,603,000			1,446,000
Interest (income) expense, net		4,000			(1,000		)
Income from continuing operations before income taxes		2,599,000			1,447,000
Provision for income taxes		1,061,000			535,000
Income from continuing operations		1,538,000			912,000
Income (loss) from discontinued operations		41,000			(213,000		)
Net income		$	1,579,000		$	699,000
Earnings per share - Basic and Diluted:
Continuing operations		$	.36		$	.21
Discontinued operations		.01			(.05		)
Total		$	.37		$	.16
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,
		2003			2002
Cash flows from operating activities:
Net income		$	1,579,000		$	699,000
Adjustments for noncash transactions:
Depreciation and amortization		1,654,000			1,735,000
Changes in assets and liabilities:
Receivables		1,047,000			(1,222,000		)
Inventories		(1,769,000		)	915,000
Prepaid expenses and deposits		(184,000		)	135,000
Accounts payable		3,844,000			1,350,000
Accrued liabilities		713,000			267,000
Income taxes payable		743,000			273,000
Net cash provided by operating activities		7,627,000			4,152,000
Cash flows from investing activities:
Capital expenditures		(585,000		)	(391,000		)
Proceeds from sales of capital assets		85,000			2,497,000
Net cash provided by (used in) investing activities		(500,000		)	2,106,000
Cash flows from financing activities:
Dividends paid to shareholders		(1,273,000		)	(1,273,000		)
Net borrowing under lines of credit		(326,000		)	(333,000		)
Net cash used in financing activities		(1,599,000		)	(1,606,000		)
Effect of exchange rate changes		(1,000		)	(15,000		)
Net change in cash and cash equivalents		5,527,000			4,637,000
Cash and cash equivalents at beginning of period		12,570,000			3,495,000
Cash and cash equivalents at end of period		$	18,097,000		$	8,132,000

 

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, 2003 and June 30, 2003, and the results of operations and cash flows for the three month periods ended September 30, 2003 and 2002.  The results of operations for the three month periods ended September 30, 2003 and 2002 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 quarter ended September 30, 2003 and 2002 was $1,561,000 and $376,000, respectively.  Other comprehensive income includes foreign currency translation adjustments recorded directly in shareholders’ equity.

 

Balance Sheet Components		Sept. 30, 2003			June 30, 2003
Inventories, lower of FIFO Cost or Market
Raw materials		$	25,216,000		$	23,374,000
Work in process		596,000			430,000
Finished goods		4,505,000			4,747,000
		$	30,317,000		$	28,551,000
Shareholders’ Equity
Common stock		$	4,765,000		$	4,765,000
Paid-in capital		4,123,000			4,123,000
Retained earnings		99,882,000			99,576,000
Accumulated other comprehensive income		1,053,000			1,072,000
		$	109,823,000		$	109,536,000

 

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.

 

		Three Months Ended September 30,
Net Sales:		2003			2002
Commercial		$	23,820		$	25,571
Residential		16,070			12,961
Aluminum Extrusion		24,893			21,114
Total Segments		64,783			59,646
Eliminations		(11,827		)	(10,502		)
Total		$	52,956		$	49,144

 

		Three Months Ended September 30,
Operating Income (Loss):		2003			2002
Commercial		$	1,587		$	2,433
Residential		2,873			1,162
Aluminum Extrusion		857			(121		)
Total Segments		5,317			3,474
Eliminations		(491		)	(60		)
Corporate		(2,223		)	(1,968		)
Total		$	2,603		$	1,446

 

Total Assets:		Sept. 30, 2003			June 30, 2003
Commercial		$	58,238		$	59,397
Residential		24,937			25,135
Aluminum Extrusion		37,881			36,016
Total Segments		121,056			120,548
Corporate		17,445			12,695
Total		$	138,501		$	133,243

 

7

 

Unaudited

 

Discontinued Operations

 

During the fourth quarter of fiscal year 2003, the Company announced the closure of International Window-Colorado, a vinyl window and door subsidiary, which was a component of the Residential Products segment.  In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company wrote-down the net assets of International Window-Colorado to their estimated net realizable value and reported International Window-Colorado’s results as discontinued operations.  Due primarily to favorable results experienced in selling a portion of International Window-Colorado’s equipment and inventory, the Company recognized a net gain in fiscal year 2004 which has also been classified as discontinued operations.

 

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, 2003 increased by $3,812,000 or 7.8% from the comparable quarter of the prior year. Sales of the Residential Products Group increased by $3,101,000 or 24.1%.  Low interest rates continue to stimulate demand from the new construction and home improvement markets.  Sales of the Aluminum Extrusion Group increased by $2,498,000 or 23.0%.  Net tonnage shipped, particularly in the area served by our Texas facility, increased by 22.5% compared to the same period last year. Although continuing to experience strong pressure on pricing, the Extrusion Group is benefiting from expanded geographic market penetration, particularly the area served by our Texas facility.  Sales of Commercial Products decreased by $1,787,000 or 7.0%.  This decrease reflects the continuing soft commercial construction market coupled with increased competitive conditions.

 

Cost of sales as a percentage of net sales was 80.1% for the quarter ended September 30, 2003 as opposed to 80.5% for the comparable prior year period. This marginal decrease is attributable to several somewhat offsetting factors. The Residential Products Group decreased their material, labor and overhead cost percentages compared to the prior year reflecting the substantially higher sales volume.  The Aluminum Extrusion Group also achieved decreased labor and overhead cost percentages due to production efficiencies gained from the higher tonnage output.  Partially offsetting these gains were increased material, labor and overhead cost percentages in the Commercial Products Group resulting from normal production costs being spread over significantly diminished sales in a highly competitive marketplace.

 

8

 

Unaudited

 

Selling, general and administrative expenses decreased by $205,000 from the prior year.  The decrease is mainly attributable to retrospective workers’ compensation policies, which provided income of $3,000 in the September 2003 quarter, compared to expense of $463,000 in the same period last year.  This swing results from anticipated refunds of previously expensed premiums due to favorable changes in actual and projected claim activity.  The decrease is partially offset by higher employment related costs.

 

The effective tax rate for the quarter ended September 30, 2003 was 40.8% whereas the comparable period of the prior year was 37.0%.  The lower prior year rate reflects benefits available for foreign losses.

 

Liquidity and Capital Resources

 

Working capital at September 30, 2003 stood at $64,339,000, an increase of $1,410,000 from June 30, 2003.  The ratio of current assets to current liabilities is currently 3.9 as compared to 4.6 as of the beginning of the year.

 

The Company’s projected net capital expenditures for fiscal 2004 and related financing remain unchanged from those described in the June 30, 2003 Annual Report.  The Company’s domestic line of credit remains unchanged from that described in the June 30, 2003 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

 

As of the end of the period covered by this report, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures under the supervision and with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”).  Based on this evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective.  There have been no significant changes in our internal controls or in other factors that could significantly affect internal control subsequent to the evaluation.

 

9

 

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 12, 2003		MITCHELL K. FOGELMAN
			Mitchell K. Fogelman
			Senior Vice President - Finance
			(Principal Financial Officer)
Date:	November 12, 2003		MICHAEL J. NORRING
			Michael J. Norring
			Controller
			(Principal Accounting Officer)

 

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