SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
| For the fiscal year ended June 30, 2001 | Commission File Number 1-7256 |
INTERNATIONAL ALUMINUM CORPORATION
(Exact name of Registrant as specified in its charter)
| California (Incorporation) |
95-2385235 (I.R.S. Employer No.) |
767 Monterey Pass Road
Monterey Park, California 91754
(323) 264-1670
(Principal executive office)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class |
Names of Exchanges on Which Registered |
|
|---|---|---|
Common Stock ($1.00 Par Value) |
New York Stock Exchange Pacific Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X
At September 5, 2001 there were 4,244,794 shares of Registrant's Common Stock outstanding. The aggregate market value of shares held by non-affiliates was $55,503,398 based on the New York Stock Exchange composite closing price on that date.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Annual Report to Shareholders for fiscal year ended June 30, 2001 is incorporated by reference into Parts I and II.
Registrant's Proxy Statement dated September 24, 2001 for the Annual Meeting of Shareholders to be held on October 25, 2001 is incorporated by reference, other than the Stock Performance Graph, the Compensation Committee Report, and the Audit Committee Report, into Part III.
ITEM 1. BUSINESS
International Aluminum Corporation is an integrated building products manufacturer of diversified lines of quality aluminum, vinyl and wood products. The Company was incorporated in California in 1963 as successor to an aluminum fabricating business begun in 1957 and maintains its executive offices at 767 Monterey Pass Road, Monterey Park, California 91754. The Company's telephone number is (323) 264-1670. Reference to the "Registrant", "International Aluminum Corporation" or the "Company" includes International Aluminum Corporation and its subsidiaries unless the context indicates otherwise.
This information is included on pages 4 and 15 of the Registrant's 2001 Annual Report to Shareholders and is hereby incorporated by reference.
Processes and Products
Residential
Residential products are fabricated from aluminum, vinyl and wood into a broad line of horizontal sliding windows, vertical sliding windows, casement windows, garden windows, bay and bow windows, special configuration windows, louvre windows, patio doors, tub enclosures, shower doors, wardrobe mirror doors and related products. These products are used in new residential construction and in remodeling, home improvement and replacement.
Commercial
Commercial products are fabricated from aluminum into curtain walls, window walls, slope glazed systems, storefront framing, entrance doors and frames for exterior applications and officefronts, office partitions, doors and frames for interior applications. These products are utilized in varying combinations to produce systems used for office and commercial construction, remodeling and tenant improvement applications.
Aluminum Extrusion
In the extrusion process, heated aluminum billets are hydraulically forced through steel dies to produce a piece of metal of the desired cross-sectional shape and length. The extrusions are then cut and, when requested, anodized or painted in a variety of finishes in the Company's anodizing and painting departments.
Aluminum extrusions produced by the Company are used in fabricating substantially all of its other aluminum products. In addition, during fiscal 2001 approximately 43% of the extrusions produced were sold to users in its own or other industries, including manufacturers of fixtures, electronic equipment, automotive products, sailboats, skylights and truck bodies. The Company furnishes design services to assist its customers in developing or better utilizing custom extrusions.
1
Sales and Distribution
The Company markets its residential products primarily to mass merchandisers, builders, independent dealers and distributors, with whom the Company has no long-term contracts. Commercial building products are marketed primarily to glazing and tenant improvement contractors. Aluminum extrusions are marketed principally by direct sales to other manufacturers.
Each of the Company's subsidiaries has its own administrative and sales organizations. Sales are made primarily in North America.
No customer accounted for more than 5% of net sales in 2001, and no material part of the business is dependent upon a single customer or a few customers, the loss of any one or more of whom would have a materially adverse effect on the business of the Company. The Company does business on a current basis and has no significant backlog of unfilled firm orders.
Seasonality
Sales of products designed for residential and commercial applications are subject to cyclical swings in new construction and seasonal fluctuations due to reduced construction activity in some marketing areas during the winter months (second and third quarters).
Materials
The Company purchases its aluminum ingot requirements from primary aluminum producers or spot metal brokers. Although increased worldwide demand produces periods of tight supply of aluminum ingot and scrap, the Company has had satisfactory experience to date in obtaining sufficient raw materials to meet its requirements and does not anticipate material shortages that would significantly hamper its operations.
Flat glass is purchased from domestic glass manufacturers. The Company has had satisfactory experience to date in obtaining sufficient glass to meet its requirements.
The Company produces the aluminum extrusions used in the products it manufactures and sells. Vinyl, wood, hardware and small parts are purchased from outside sources.
Working Capital
To maintain an adequate supply of aluminum to meet customer delivery requirements and to assure itself of a continuous allotment of materials from its suppliers, the Company at times carries a significant inventory of aluminum ingot. Depending on price and availability, bulk quantities of ingot are purchased from either primary aluminum producers or from spot metal brokers.
The Company does not believe there are any abnormal working capital requirements associated with any of its product groups as merchandise is normally produced for specific customer orders or shipped from inventory and as a general practice extended payment terms are not granted to customers.
Employees
As of June 30, 2001, the Company had approximately 1,750 full-time employees.
2
Patents
The Company has no material patents, either issued or pending, and is not a party to any significant licensing agreements.
Competition and Risk
The business of International Aluminum is highly competitive. Competition in all product lines is on the basis of price, service and product quality. The manner and extent of such competition depends on the product being marketed and the relevant marketing area. In selling its residential products to mass merchandisers, dealers and distributors, the Company faces competition primarily from numerous fabricators. Several of the Company's major competitors in selling commercial products and aluminum extrusions are substantially larger, more diversified and have greater resources than the Company.
The Company anticipates that expansion of its product lines may result in its competing with certain of its present customers. While the Company cannot accurately predict the effect, if any, that such development will have on its business, the Company anticipates no material adverse effect.
Since a substantial portion of the Company's business is connected with residential and commercial building construction, any significant decrease in new or remodeling construction could adversely affect revenues. Experience has shown that high interest rates for construction financing and residential mortgage and home improvement loans may adversely affect revenues.
Environmental Controls
The Company's domestic aluminum extrusion, anodizing, painting and manufacturing facilities are subject to water and air pollution control standards mandated by federal, state and local law. While the Company anticipates no material capital expenditures to meet established environmental quality control standards, there can be no assurance that more stringent standards will not be established which might require such expenditures.
The information concerning income before taxes of foreign and domestic operations for fiscal years 2001, 2000 and 1999 is set forth in Note 10 to the consolidated financial statements included on page 14 of the Company's 2001 Annual Report incorporated herein by reference. Other related information regarding foreign operations is not significant for disclosure.
ITEM 2. PROPERTIES
The following table sets forth information concerning the location, size and use of the Company's present facilities:
| Location |
Square Feet (A) |
Use |
||
|---|---|---|---|---|
| Alhambra, CA | 221,000 | Aluminum extrusions, foundry & finishing | ||
| Waxahachie, TX | 272,000 | Aluminum extrusions, foundry & finishing | ||
| South Gate, CA | 189,000 | Residential products | ||
| Hayward, CA | 103,000 | Residential products | ||
| Phoenix, AZ | 100,000 | Residential products | ||
| Moreno Valley, CA | 67,000 | Residential products | ||
| Denver, CO | 29,000 | (L) | Residential products | |
| Vernon, CA | 134,000 | Commercial products |
3
| Bedford Park, IL | 81,000 | Commercial products | ||
| Boston, MA | 21,000 | (L) | Commercial products | |
| Detroit, MI | 12,000 | (L) | Commercial products | |
| Waxahachie, TX | 159,000 | Commercial products | ||
| Denver, CO | 16,000 | (L) | Commercial products | |
| St. Louis, MO | 14,000 | (L) | Commercial products | |
| Dallas, TX | 36,000 | (L) | Commercial products | |
| Houston, TX | 19,000 | (L) | Commercial products | |
| Rock Hill, SC | 74,000 | Commercial products | ||
| Atlanta, GA | 37,000 | (L) | Commercial products | |
| Baltimore, MD | 20,000 | (L) | Commercial products | |
| Langley, B.C., Canada | 63,000 | Commercial products | ||
| Burlington, Ontario, Canada | 21,000 | (L) | Commercial products | |
| Houston, TX | 57,000 | Commercial products | ||
| Waxahachie, TX | 60,000 | Commercial products | ||
| Rock Hill, SC | 84,000 | Leased to others | ||
| Monterey Park, CA | 19,000 | (L) | Executive offices |
Of the 1,908,000 square feet exhibited above, 1,664,000 square feet are owned by the Company. The balance of 244,000 square feet is leased under agreements expiring at various dates. The Company believes that its facilities are adequate for anticipated levels of operations.
ITEM 3. LEGAL PROCEEDINGS
The Company has litigation pending, both offensive and defensive, arising from the conduct of its business, none of which are expected to have any material effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of security holders that are required to be reported under the instructions to this item.
4
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The market and dividend information is included on pages 6 and 16 of the Company's 2001 Annual Report to Shareholders and is incorporated herein by reference.
There are no restrictions of future cash dividends.
There were approximately 400 shareholders of record of the Company's common stock at June 30, 2001.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data pertaining to the Company for the last five years is set forth on page 4 of the Company's 2001 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This information is set forth on pages 2 through 6 of the Company's 2001 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 7A. DISCLOSURES ABOUT MARKET RISK
The Company has no market risk sensitive instruments that are required to be reported under the instructions to this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Part IV, Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements that are required to be reported under the instructions to this item.
The information required under Part III is contained in the Company's Proxy Statement for the Annual Meeting of Shareholders to be held October 25, 2001, which information is incorporated herein by reference.
5
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
| |
|
Page |
||
|---|---|---|---|---|
| (a) 1. | Financial Statements | |||
| Consolidated Financial Statements (See Note): | ||||
| Balance sheets—June 30, 2001 and 2000 | ||||
| Statements for the three years ended June 30, 2001— | ||||
| Income | ||||
| Shareholders' equity | ||||
| Cash flows | ||||
| Notes to consolidated financial statements | ||||
| 2. | Financial Statement Schedules | |||
| Report of Independent Accountants on Financial Statement Schedules | F-1 | |||
| Schedule for the three years ended June 30, 2001— II Valuation and qualifying accounts |
F-2 | |||
| 3. | Exhibits |
3. Articles of incorporation and by-laws. This information is set forth as Exhibits 2.2 and 2.3 to the September 9, 1977 Registration Statement on Form S-7, and was amended by Proxy Statements dated September 26, 1978 and September 21, 1988 furnished to shareholders in connection with the related Annual Meeting of Shareholders held on October 26, 1978 and October 27, 1988, respectively. These documents were filed by the Registrant with the Securities and Exchange Commission and are incorporated herein by reference.
4. Instruments defining the rights of security holders, including the indentures. This information is set forth on page 10 of the August 1, 1968 Registration Statement on Form S-1, as amended, filed by the Registrant with the Securities and Exchange Commission and is incorporated herein by reference.
13. Annual Report to Shareholders.
22. Subsidiaries of the registrant.
23. Consent of PricewaterhouseCoopers LLP (on page F-1 herein).
(b) No reports on Form 8-K were required to be filed during the last quarter of 2001.
NOTE: The consolidated financial statements referred to above are included in the 2001 Annual Report to Shareholders and are incorporated herein by reference.
6
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
INTERNATIONAL ALUMINUM CORPORATION |
|||
Date: September 21, 2001 |
By: |
/s/ MITCHELL K. FOGELMAN Mitchell K. Fogelman Senior Vice President—Finance and Chief Financial Officer |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signature |
Title |
Date |
||
|---|---|---|---|---|
/s/ CORNELIUS C. VANDERSTAR Cornelius C. Vanderstar |
Chairman of the Board and Chief Executive Officer |
September 21, 2001 |
||
/s/ DAVID C. TREINEN David C. Treinen |
Director; President; Secretary and Chief Operating Officer |
September 21, 2001 |
||
/s/ MITCHELL K. FOGELMAN Mitchell K. Fogelman |
Senior Vice President—Finance and Chief Financial Officer |
September 21, 2001 |
||
/s/ MICHAEL J. NORRING Michael J. Norring |
Controller and Chief Accounting Officer |
September 21, 2001 |
||
/s/ DAVID M. ANTONINI David M. Antonini |
Director |
September 21, 2001 |
||
/s/ JOHN P. CUNNINGHAM John P. Cunningham |
Director |
September 21, 2001 |
7
/s/ ALEXANDER L. DEAN Alexander L. Dean |
Director |
September 21, 2001 |
||
/s/ JOEL F. MCINTYRE Joel F. McIntyre |
Director |
September 21, 2001 |
||
/s/ KENNETH D. PETERSON, JR. Kenneth D. Peterson, Jr. |
Director |
September 21, 2001 |
8
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To
the Board of Directors of
International Aluminum Corporation
Our audits of the consolidated financial statements referred to in our report dated August 21, 2001 appearing in the 2001 Annual Report to Shareholders of International Aluminum Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a)2 of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
PRICEWATERHOUSECOOPERS LLP
Los
Angeles, California
August 21, 2001
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-57109) of International Aluminum Corporation of our report dated August 21, 2001 relating to the financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated August 21, 2001 relating to the financial statement schedule, which appears in this Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Los
Angeles, California
September 21, 2001
F–1
INTERNATIONAL ALUMINUM CORPORATION AND SUBSIDIARIES
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
For The Three Years Ended June 30, 2001
| Description |
Balance at Beginning of Year |
Amounts Charged to Income |
Amounts Written Off |
Balance at End of Year |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Reserves for doubtful accounts | |||||||||||||
| 2001 | $ | 730,000 | $ | 497,000 | $ | 452,000 | $ | 775,000 | |||||
| 2000 | 735,000 | 481,000 | 486,000 | 730,000 | |||||||||
| 1999 | 697,000 | 414,000 | 376,000 | 735,000 | |||||||||
F–2
Exhibit 13
| INTERNATIONAL ALUMINUM CORPORATION |
||
| 2001 Annual Report |
COMPANY PROFILE
INTERNATIONAL ALUMINUM CORPORATION is an integrated building products manufacturer of diversified lines of quality aluminum, vinyl, and wood products. The Company is headquartered in Monterey Park, California and has approximately 1,750 employees. Operations are conducted through fourteen North American subsidiaries. The Company's primary internet website is located at www.intlalum.com.
PRODUCTS BY SEGMENT
COMMERCIAL—Curtain walls, window walls, slope glazed systems, storefront framing, entrance doors and frames, interior officefronts, office partitions and interior doors and frames for the commercial building and tenant improvement markets. Product information is available at www.usalum.com.
RESIDENTIAL—Expansive lines of windows and patio doors manufactured from vinyl, aluminum or wood, in addition to aluminum tub and shower enclosures and wardrobe mirror doors, for the residential building and remodeling markets. Product information is available at www.intlwindow.com.
ALUMINUM EXTRUSION—Mill finish, anodized, painted and fabricated aluminum extrusions. Product information is available at www.intlextrusion.com.
CONTENTS
| |
Page |
|
|---|---|---|
Financial Highlights |
1 |
|
Letter to Shareholders |
2 |
|
Selected Financial Data |
4 |
|
Management's Discussion and Analysis of Financial Condition and Results of Operations |
5 |
|
Quarterly Financial Data |
8 |
|
Report of Independent Accountants |
9 |
|
Consolidated Financial Statements |
10 |
|
Notes to Consolidated Financial Statements |
14 |
|
Corporate Information |
20 |
|
Subsidiaries by Segment |
21 |
Fiscal Years Ended June 30, 2001, 2000 and 1999
| |
2001 |
2000 |
1999 |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Operating Results: | ||||||||||
| Net sales | $ | 212,895,000 | $ | 220,175,000 | $ | 234,301,000 | ||||
| Income from operations | 7,198,000 | 2,349,000 | 16,263,000 | |||||||
| Net income | 4,634,000 | 1,579,000 | 10,339,000 | |||||||
Financial Data: |
||||||||||
| Net cash provided by operating activities | $ | 23,151,000 | $ | 1,861,000 | $ | 8,715,000 | ||||
| Capital expenditures including acquisitions | 7,749,000 | 10,253,000 | 16,359,000 | |||||||
Working capital |
66,097,000 |
63,586,000 |
69,030,000 |
|||||||
| Long-term debt | 0 | 0 | 0 | |||||||
| Shareholders' equity | 123,755,000 | 124,326,000 | 128,701,000 | |||||||
Per Share Data: |
||||||||||
| Net income—Diluted | $ | 1.09 | $ | .37 | $ | 2.41 | ||||
| Dividends declared | 1.20 | 1.20 | 1.20 | |||||||
| Book value at yearend | 29.15 | 29.29 | 29.99 | |||||||
| Market price at yearend | 21.15 | 17.25 | 27.56 | |||||||
1
On a 3.3% decline in revenues, net income from continuing operations increased nearly threefold. While net margins are not yet at acceptable levels, we are encouraged by the progress made during fiscal 2001. Net income from continuing operations increased to $4,634,000 or $1.09 per share, up 269% from $1,254,000 or $.29 per share in fiscal 2000. Other significant financial results for fiscal 2001 include:
Residential Products
Our Residential Products Group faced many unexpected challenges during fiscal 2001. We entered the year on an up note and with a quite optimistic outlook. Unexpectedly, Home Base, our largest customer and with whom we had shared a successful relationship for many years, announced the closure of all its stores. The closure of this home improvement chain, to which we supplied product to approximately 80 stores and which accounted for close to 10% of our residential products net sales in fiscal 2000, adversely affected all our residential operations. However, through expanded marketing efforts, nearly all this volume had been replaced by yearend. Most of our demand in the California market is derived from the retrofit-remodeling market. This segment of the market seems to have suffered most from the slowdown in the economy and the accompanying drop in consumer confidence. During the year, we intentionally shrank the size of the market area of our wood window and door subsidiary. We found it not to be cost effective to continue to ship these products into Northern California and Arizona. Not only were delivery and transport costs excessive but the after-sale service area grew beyond a manageable size. The decline in wood products sales accounted for essentially 100% of the residential products revenue decline. With our highly resourceful management team, we are committed to maintaining excellent service to our customers.
Commercial Products
While net sales for this product segment increased only 2% for the year, net income increased 52%. Sales of our engineered products, typically exterior glazing systems for buildings 3 to 20 stories tall, had been stagnant for two years. The loss of key personnel and the delivery problems experienced in fiscal 2000 seriously hampered this portion of our business. With many of our experienced personnel back on board and with excellent service from our extrusion facilities, we anticipate rekindled growth in engineered products. We currently have Engineered Products teams in place at both our California and Texas facilities. Upon completion, Engineered Products will be added at the new Ontario, Canada facility. With regards to the Ontario facility, after several attempts at locating a suitable land site, we have acquired a parcel in Guelph (a suburb of Toronto), Ontario and construction of a 70,000 sq. foot facility is now underway, with completion anticipated in late calendar 2001. The facility, with full fabrication capability and a horizontal paint line, will service the greater Toronto area as well as the upper Midwest and Northeastern U.S. market.
We continue to press our engineering staff to keep us at the forefront of new product development. Testing of a new curtainwall system has been completed and product literature is being added to all our catalogs. Originally designed for the Canadian market, this system has sparked considerable interest in
2
the U.S. market and will thus be offered throughout North America. We will soon be offering impact products for the Gulf Coast states and are in the early design stages on a unitized curtainwall system.
Extruded Products
The West Coast energy crisis, including a significant upward spike in natural gas prices, and the general slowdown in the nationwide economy did not bode well for our extrusion operations in fiscal 2001. Net tonnage shipped, including shipments to related companies, declined 9% from fiscal 2000 and were down 25% from fiscal 1999. We intend to increase our market share by offering a quality product with on time delivery at a competitive price. This has been our focus in fiscal 2001 and will remain so in fiscal 2002.
As was commented on last year at this time, we cannot let the mistakes of the past impede us in undertaking modernization projects necessary to keep us competitive in the future. During the year, without restricting our ability to meet customer demands, we successfully completed the overhaul of one of the five extrusion presses at our Alhambra facility. Currently scheduled are the reconditioning of two additional presses in fiscal 2002, one to be completed in late fall and the other in early calendar 2002. To meet ever tightening environmental standards and with rapidly escalating energy costs, during fiscal 2001 we successfully completed a major rework of our Alhambra remelt casthouse. We are now positioned to cast higher quality billet at reduced energy cost while at the same time meeting stringent emission standards.
Our management teams have demonstrated their ability to weather adverse market conditions. We intend to concentrate on the execution of our core competencies while remaining steadfast in our goal of improving shareholder value.
Cornelius C. Vanderstar Chairman Of The Board Chief Executive Officer |
David C. Treinen President Chief Operating Officer |
August 31, 2001
3
| Year Ended June 30 |
2001 |
2000 |
1999 |
1998 |
1997 |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sales by segment | |||||||||||||||||
| Commercial | $ | 114,436,000 | $ | 112,522,000 | $ | 124,839,000 | $ | 112,179,000 | $ | 104,919,000 | |||||||
| Residential | 58,374,000 | 60,967,000 | 53,045,000 | 49,546,000 | 54,767,000 | ||||||||||||
| Aluminum Extrusion | 40,085,000 | 46,686,000 | 56,417,000 | 51,021,000 | 52,443,000 | ||||||||||||
| Total net sales | $ | 212,895,000 | $ | 220,175,000 | $ | 234,301,000 | $ | 212,746,000 | $ | 212,129,000 | |||||||
Earnings |
|||||||||||||||||
| Gross profit | $ | 40,287,000 | $ | 40,300,000 | $ | 53,900,000 | $ | 50,915,000 | $ | 44,780,000 | |||||||
| Continuing operations | 4,634,000 | 1,254,000 | 10,422,000 | 11,459,000 | 5,791,000 | ||||||||||||
| Net income | 4,634,000 | 1,579,000 | 10,339,000 | 12,122,000 | 5,938,000 | ||||||||||||
Per share: |
|||||||||||||||||
| Continuing operations—Diluted | $ | 1.09 | $ | .29 | $ | 2.43 | $ | 2.66 | $ | 1.36 | |||||||
| Net income-Diluted | 1.09 | .37 | 2.41 | 2.82 | 1.39 | ||||||||||||
| Dividends declared | 1.20 | 1.20 | 1.20 | 1.15 | 1.00 | ||||||||||||
Financial Data at Yearend |
|||||||||||||||||
| Working capital | $ | 66,097,000 | $ | 63,586,000 | $ | 69,030,000 | $ | 72,170,000 | $ | 65,820,000 | |||||||
| Total assets | 148,070,000 | 154,585,000 | 153,693,000 | 147,298,000 | 145,041,000 | ||||||||||||
| Long-term debt | 0 | 0 | 0 | 0 | 0 | ||||||||||||
| Shareholders' equity | 123,755,000 | 124,326,000 | 128,701,000 | 123,449,000 | 118,240,000 | ||||||||||||
Prior year amounts for Sales and Gross Profit reflect reclassification of shipping and handling fees and costs as required by the adoption of EITF 00-10. See Current and Pending Accounting Changes on page 6 for more information.
4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Significant Changes in Results of Operations
2001 vs. 2000
Net sales for fiscal 2001 decreased by $7,280,000 or 3.3% from net sales of fiscal 2000. Included is a $6,601,000 or 14.1% decrease by the Aluminum Extrusion Group, which continues its marketing efforts to regain customer confidence, which had been eroded as a result of last year's severe operational problems. Also included is a $2,593,000 or 4.3% decrease in sales of residential products resulting from management's decision to shrink the marketing area of our wood products subsidiary. This reduction in market area was undertaken to improve on-time delivery and bring the after-sale service area to a manageable size. Also a factor was the closure of the Home Base stores, a large chain of big box stores, to which we provided product to approximately 80 stores in their Western region. Through increased marketing efforts most of this volume had been replaced by yearend. Partially offsetting the decreases is a $1,914,000 or 1.7% increase in commercial products largely reflecting the full year contribution of our Ontario, Canada facility purchased in March 2000.
Gross profit increased to 18.9% of sales in 2001 as compared to 18.3% in 2000. Contributing to the increase are reduced costs at our extrusion operations reflecting the continuing recovery from the prior year's severe operational problems. As a group they achieved an 18% increase in shipments per man-hour in spite of an 8.7% decrease in total pounds shipped during the year. Somewhat offsetting these savings were higher production costs incurred by our Residential Group.
Selling, general and administrative expenses decreased by $4,862,000 or 12.8% from the prior year. The decreased expenses are primarily attributable to lower employment costs directly related to the aforementioned decrease in sales coupled with the prior year containing nonrecurring costs associated with realigning operating group management teams.
The decrease in net interest expense relates to increased funds available for investment during the year. Prior year net interest expense reflected credit line utilization, repaid during the September 2000 quarter, to fund heavy capital expenditures and increases in raw material inventories.
2000 vs. 1999
Net sales for fiscal 2000 decreased by $14,126,000 or 6.0% from net sales of fiscal 1999. Included is a $12,317,000 or 9.9% decrease in sales of commercial products primarily resulting from an inadequate supply of raw materials from our aluminum extrusion operations. Also included is a $9,731,000 or 17.2% decrease by the Aluminum Extrusion Group primarily resulting from lower production due to extended downtime during equipment upgrades and the problems encountered in the implementation of continuous flow manufacturing. Partially offsetting these is a $7,922,000 or 15.0% increase in residential products sales reflecting the strong market for these products.
Gross profit decreased to 18.3% of sales in 2000 as compared to 23.0% in 1999. The decrease is primarily attributable to higher material, labor and overhead expenses incurred in our extrusion operations resulting from downtime and inefficiencies associated with retraining personnel for the aforementioned conversion to continuous flow manufacturing.
Selling, general and administrative expenses increased by $314,000 or 0.1% from the prior year. Decreased continuing expenses to support the lower sales volume were offset by additional compensation, recruiting, relocation and severance costs associated with realigning operating group management teams.
5
The swing from net interest income in the prior year to net interest expense in the current year relates to the depletion of funds available for investment due primarily to heavy capital expenditures and increases in raw material inventories.
The gain on disposition of discontinued operations relates to the sale of most of the operating assets of the glass segment. Information related to this sale is included in Note 9.
Liquidity and Capital Resources
Working capital at June 30, 2001 was $66,097,000 compared to $63,586,000 at June 30, 2000 and $69,030,000 at June 30, 1999. The ratio of current assets to current liabilities was 4.4 at the end of 2001 compared to 3.5 at the end of 2000 and 4.4 at the end of 1999. The Company continues to be in excellent position to meet its short-term operating and discretionary cash requirements. Funds in excess of current operating requirements are invested in short-term interest-bearing instruments.
Capital expenditures for property, plant and equipment of approximately $7,749,000 in 2001, $9,031,000 in 2000 and $15,059,000 in 1999 were financed through internal cash flow, cash reserves and utilization of the lines of credit. Cash flows for fiscal 2001 include proceeds of $3,060,000 for sale of an excess facility. Additional cash flows include the fiscal year 2000 expenditure of $1,222,000 for an acquisition and the receipt of $3,921,000 from the sale of operating assets of the glass segment (see Note 9) and the fiscal year 1999 expenditure of $1,300,000 for an acquisition. The Company projects net capital expenditures of $13,000,000 for fiscal 2002. These expenditures are for expansion of production capacity as well as normal recurring capitalized replacement items. The Company anticipates financing these expenditures through internal cash flow, cash reserves and the utilization of its line of credit.
The Company had $20,000,000 in available credit at the end of 2001 under a short-term borrowing arrangement with a domestic bank.
The Company's financial condition remains strong. The Company believes that its cash, other liquid assets, operating cash flows and borrowing capacity, taken together, provide more than adequate resources to fund ongoing operating requirements and future capital expenditures related to the expansion of existing businesses.
Current and Pending Accounting Changes
The Emerging Issues Task Force (EITF) issued Number 00-10 (EITF 00-10) "Accounting for Shipping and Handling Fees and Costs", which the Company was required to adopt this year. In preparing the financial statements for the current year, the Company has applied the provisions of EITF 00-10 for all periods presented. Under the new requirements, shipping and handling charges incurred by the Company, which previously were included in Selling, General and Administrative expenses, are included in Costs of Sales. Shipping charges billed to customers, which previously were included as an offset to the Selling, General and Administrative expenses, are included in Net Sales.
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 141 (SFAS 141) "Business Combinations" and Statement No. 142 (SFAS 142) "Goodwill and Other Intangible Assets". SFAS 141 requires that all future business combinations be accounted for under the purchase method. Management believes that SFAS 141 will not have a material effect on the Company's consolidated financial position or results of operations. SFAS 142 requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment. The Company will adopt SFAS 142 effective July 1, 2001. Management estimates that this adoption will contribute approximately $570,000 to consolidated pre-tax earnings in fiscal 2002.
6
Forward-Looking Information
This annual 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.
7
QUARTERLY FINANCIAL DATA (UNAUDITED)
For the years ended June 30, 2001 and 2000
| |
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2001 | ||||||||||||
| Net sales | $ | 54,897,000 | $ | 53,594,000 | $ | 50,221,000 | $ | 54,183,000 | ||||
| Gross profit | 10,302,000 | 10,682,000 | 8,067,000 | 11,236,000 | ||||||||
| Net income | 1,533,000 | 1,733,000 | (216,000 | ) | 1,584,000 | |||||||
| Earnings per share—Basic and Diluted | .36 | .41 | (.05 | ) | .37 | |||||||
| Dividends declared | .30 | .30 | .30 | .30 | ||||||||
| Stock price—High | 18.44 | 21.19 | 19.94 | 22.48 | ||||||||
| Stock price—Low | 16.69 | 14.81 | 18.00 | 17.99 | ||||||||
2000 |
||||||||||||
| Net sales | $ | 59,991,000 | $ | 52,328,000 | $ | 51,987,000 | $ | 55,869,000 | ||||
| Gross profit | 13,567,000 | 8,381,000 | 7,486,000 | 10,866,000 | ||||||||
| Net income | 1,972,000 | (348,000 | ) | (1,224,000 | ) | 1,179,000 | ||||||
| Earnings per share—Basic and Diluted | .46 | (.08 | ) | (.29 | ) | .28 | ||||||
| Dividends declared | .30 | .30 | .30 | .30 | ||||||||
| Stock price—High | 27.88 | 27.56 | 23.56 | 17.50 | ||||||||
| Stock price—Low | 27.38 | 23.38 | 15.00 | 14.00 | ||||||||
8
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of International Aluminum Corporation
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, cash flows and shareholders' equity present fairly, in all material respects, the financial position of International Aluminum Corporation and its subsidiaries at June 30, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers
LLP
Los Angeles, California
August 21, 2001
9
CONSOLIDATED STATEMENTS OF INCOME
For the years ended June 30, 2001, 2000 and 1999
| |
2001 |
2000 |
1999 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | $ | 212,895,000 | $ | 220,175,000 | $ | 234,301,000 | ||||||
| Cost of sales | 172,608,000 | 179,875,000 | 180,401,000 | |||||||||
| Gross profit | 40,287,000 | 40,300,000 | 53,900,000 | |||||||||
| Selling, general and administrative expenses | 33,089,000 | 37,951,000 | 37,637,000 | |||||||||
| Income from operations | 7,198,000 | 2,349,000 | 16,263,000 | |||||||||
| Interest income | 71,000 | 3,000 | 379,000 | |||||||||
| Interest expense | (155,000 | ) | (428,000 | ) | (130,000 | ) | ||||||
| Income from continuing operations before income taxes | 7,114,000 | 1,924,000 | 16,512,000 | |||||||||
| Provision for income taxes | 2,480,000 | 670,000 | 6,090,000 | |||||||||
| Income from continuing operations | 4,634,000 | 1,254,000 | 10,422,000 | |||||||||
| Loss from discontinued operations | — | (52,000 | ) | (83,000 | ) | |||||||
| Gain on disposition of discontinued operations | — | 377,000 | — | |||||||||
| Net income | $ | 4,634,000 | $ | 1,579,000 | $ | 10,339,000 | ||||||
| Earnings per share—Basic and Diluted: | ||||||||||||
| Continuing operations | $ | 1.09 | $ | .29 | $ | 2.43 | ||||||
| Discontinued operations | — | .08 | (.02 | ) | ||||||||
| Total | $ | 1.09 | $ | .37 | $ | 2.41 | ||||||
See accompanying notes to consolidated financial statements.
10
June 30, 2001 and 2000
| |
2001 |
2000 |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| Assets | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 5,915,000 | $ | 1,678,000 | |||||
| Accounts receivable, less reserve of $775,000 in 2001 and $730,000 in 2000 |
37,711,000 | 39,971,000 | |||||||
| Inventories | 37,731,000 | 43,384,000 | |||||||
| Prepaid expenses and deposits | 2,597,000 | 3,114,000 | |||||||
| Future income tax benefits | 1,406,000 | 1,113,000 | |||||||
| Total current assets | 85,360,000 | 89,260,000 | |||||||
| Property, plant and equipment, at cost | 114,693,000 | 111,149,000 | |||||||
| Accumulated depreciation | (61,145,000 | ) | (55,455,000 | ) | |||||
| Net property, plant and equipment | 53,548,000 | 55,694,000 | |||||||
| Other assets: | |||||||||
| Costs in excess of net assets of purchased businesses | 8,966,000 | 9,533,000 | |||||||
| Other | 196,000 | 98,000 | |||||||
| Total other assets | 9,162,000 | 9,631,000 | |||||||
| $ | 148,070,000 | $ | 154,585,000 | ||||||
| Liabilities and Shareholders' Equity | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 9,235,000 | $ | 6,503,000 | |||||
| Accrued liabilities | 9,347,000 | 9,452,000 | |||||||
| Advances payable to banks | 165,000 | 9,470,000 | |||||||
| Income taxes payable | 516,000 | 249,000 | |||||||
| Total current liabilities | 19,263,000 | 25,674,000 | |||||||
Deferred income taxes |
5,052,000 |
4,585,000 |
|||||||
| Total liabilities | 24,315,000 | 30,259,000 | |||||||
Commitments (Note 5) |
|||||||||
Shareholders' equity: |
|||||||||
| Common stock | 4,765,000 | 4,765,000 | |||||||
| Paid-in capital | 4,123,000 | 4,123,000 | |||||||
| Retained earnings | 115,018,000 | 115,478,000 | |||||||
| Accumulated other comprehensive income | (151,000 | ) | (40,000 | ) | |||||
| Total shareholders' equity | 123,755,000 | 124,326,000 | |||||||
| $ | 148,070,000 | $ | 154,585,000 | ||||||
See accompanying notes to consolidated financial statements.
11
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 30, 2001, 2000 and 1999
| |
2001 |
2000 |
1999 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 4,634,000 | $ | 1,579,000 | $ | 10,339,000 | ||||||
| Adjustments for noncash transactions: | ||||||||||||
| Depreciation and amortization | 7,507,000 | 7,156,000 | 6,503,000 | |||||||||
| Change in deferred income taxes | 174,000 | 559,000 | 68,000 | |||||||||
| Gain on disposition of businesses | — | (587,000 | ) | — | ||||||||
| Gain on sale of fixed assets | (390,000 | ) | — | — | ||||||||
| Changes in assets and liabilities: | ||||||||||||
| Receivables | 2,260,000 | (2,051,000 | ) | (4,315,000 | ) | |||||||
| Inventories | 5,653,000 | (2,679,000 | ) | (2,943,000 | ) | |||||||
| Prepaid expenses and other | 419,000 | 1,519,000 | (1,540,000 | ) | ||||||||
| Accounts payable | 2,732,000 | (1,244,000 | ) | (312,000 | ) | |||||||
| Accrued liabilities | (105,000 | ) | (2,547,000 | ) | 1,452,000 | |||||||
| Income taxes payable | 267,000 | 156,000 | (537,000 | ) | ||||||||
| Net cash provided by operating activities | 23,151,000 | 1,861,000 | 8,715,000 | |||||||||
Cash flows from investing activities: |
||||||||||||
| Capital expenditures | (7,749,000 | ) | (9,031,000 | ) | (15,059,000 | ) | ||||||
| Proceeds from sales of capital assets | 3,234,000 | 381,000 | 707,000 | |||||||||
| Acquisition of businesses | — | (1,222,000 | ) | (1,300,000 | ) | |||||||
| Disposition of businesses | — | 3,921,000 | — | |||||||||
| Net cash used in investing activities | (4,515,000 | ) | (5,951,000 | ) | (15,652,000 | ) | ||||||
Cash flows from financing activities: |
||||||||||||
| Dividends paid to shareholders | (5,094,000 | ) | (5,122,000 | ) | (5,151,000 | ) | ||||||
| Net borrowings under lines of credit | (9,305,000 | ) | 9,396,000 | — | ||||||||
| Common stock repurchased | — | (775,000 | ) | — | ||||||||
| Proceeds from exercises of stock options | — | — | 37,000 | |||||||||
| Net cash provided by (used in) financing activities | (14,399,000 | ) | 3,499,000 | (5,114,000 | ) | |||||||
Net change in cash and cash equivalents |
4,237,000 |
(591,000 |
) |
(12,051,000 |
) |
|||||||
| Cash and cash equivalents at beginning of year | 1,678,000 | 2,269,000 | 14,320,000 | |||||||||
| Cash and cash equivalents at end of year | $ | 5,915,000 | $ | 1,678,000 | $ | 2,269,000 | ||||||
See accompanying notes to consolidated financial statements.
12
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended June 30, 2001, 2000 and 1999
| |
Common Stock |
|
|
Accumulated Other Comprehensive Income |
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
Paid-in Capital |
Retained Earnings |
|
|||||||||||||||||
| |
Shares |
Amount |
Total |
|||||||||||||||||
| Balance, June 30, 1998 | 4,290,494 | $ | 4,764,000 | $ | 4,087,000 | $ | 114,608,000 | $ | (10,000 | ) | $ | 123,449,000 | ||||||||
Net income |
10,339,000 |
10,339,000 |
||||||||||||||||||
| Translation adjustment | 27,000 | 27,000 | ||||||||||||||||||
| Total comprehensive income | 10,366,000 | |||||||||||||||||||
| Exercise of stock options | 1,300 | 1,000 | 36,000 | 37,000 | ||||||||||||||||
| Cash dividends | (5,151,000 | ) | (5,151,000 | ) | ||||||||||||||||
| Balance, June 30, 1999 | 4,291,794 | 4,765,000 | 4,123,000 | 119,796,000 | 17,000 | 128,701,000 | ||||||||||||||
Net income |
1,579,000 |
1,579,000 |
||||||||||||||||||
| Translation adjustment | (57,000 | ) | (57,000 | ) | ||||||||||||||||
| Total comprehensive income | 1,522,000 | |||||||||||||||||||
| Repurchase of stock | (47,000 | ) | (775,000 | ) | (775,000 | ) | ||||||||||||||
| Cash dividends | (5,122,000 | ) | (5,122,000 | ) | ||||||||||||||||
| Balance, June 30, 2000 | 4,244,794 | 4,765,000 | 4,123,000 | 115,478,000 | (40,000 | ) | 124,326,000 | |||||||||||||
Net income |
4,634,000 |
4,634,000 |
||||||||||||||||||
| Translation adjustment | (111,000 | ) | (111,000 | ) | ||||||||||||||||
| Total comprehensive income | 4,523,000 | |||||||||||||||||||
| Cash dividends | (5,094,000 | ) | (5,094,000 | ) | ||||||||||||||||
| Balance, June 30, 2001 | 4,244,794 | $ | 4,765,000 | $ | 4,123,000 | $ | 115,018,000 | $ | (151,000 | ) | $ | 123,755,000 | ||||||||
See accompanying notes to consolidated financial statements.
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies and Procedures
Principles of Consolidation
The consolidated financial statements include the accounts of International Aluminum Corporation (the Company) and its domestic and foreign subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. Certain reclassifications of prior year information were made to conform to the current presentation.
Estimates and Assumptions
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and marketable securities with original maturities of three months or less.
Foreign Currency Translation
Assets and liabilities of the Company's foreign subsidiaries are translated into U.S. dollars at year-end exchange rates and revenues and expenses are translated at average rates prevailing during the year. Local currency is considered to be the functional currency. Translation adjustments are deferred into accumulated other comprehensive income, a separate component of shareholders' equity. Foreign currency transaction gains and losses are included in results of operations as incurred.
Depreciation and Amortization
Depreciation and amortization are provided over the estimated useful lives of the assets or the remaining terms of the leases, whichever is shorter, using the straight-line method for financial reporting purposes and accelerated methods for tax purposes.
The excess of the purchase price over the underlying book value of the companies acquired is classified as "Costs in excess of net assets of purchased businesses". The related amount of $12,655,000 is being amortized using the straight-line method over periods of up to forty years. Accumulated amortization totaled $3,689,000 at June 30, 2001 and $3,122,000 at June 30, 2000.
Long-Lived Assets
Whenever events indicate that the carrying values of long-lived assets including any related goodwill may not be recoverable, the Company evaluates the carrying values of such assets using future undiscounted cash flows. Management believes that, as of June 30, 2001, the carrying values of such assets are appropriate.
Shipping and Handling Fees and Costs
During the fiscal year ended June 30, 2001 the Company adopted EITF 00-10, "Accounting for Shipping and Handling Fees and Costs." Accordingly, shipping and handling charges incurred by the Company are included in Cost of Sales and shipping charges billed to customers are included in Net Sales. Prior year information was reclassified to conform to the current presentation.
14
Note 2. Balance Sheet Components
| Inventories, at the Lower of FIFO Cost or Market |
2001 |
2000 |
||||
|---|---|---|---|---|---|---|
| Raw materials | $ | 32,153,000 | $ | 36,693,000 | ||
| Work in process | 1,332,000 | 2,054,000 | ||||
| Finished goods | 4,246,000 | 4,637,000 | ||||
| $ | 37,731,000 | $ | 43,384,000 | |||
| Property, Plant and Equipment, at Cost |
2001 |
2000 |
||||
|---|---|---|---|---|---|---|
| Land | $ | 7,738,000 | $ | 7,719,000 | ||
| Buildings and improvements | 29,149,000 | 31,473,000 | ||||
| Machinery and equipment | 76,463,000 | 71,957,000 | ||||
| Construction in process | 1,343,000 | — | ||||
| $ | 114,693,000 | $ | 111,149,000 | |||
| Accrued Liabilities |
2001 |
2000 |
||||
|---|---|---|---|---|---|---|
| Wages and compensated absences | $ | 4,246,000 | $ | 3,567,000 | ||
| Taxes, other than income taxes | 1,678,000 | 1,506,000 | ||||
| Dividends | 1,273,000 | 1,273,000 | ||||
| Other | 2,150,000 | 3,106,000 | ||||
| $ | 9,347,000 | $ | 9,452,000 | |||
Note 3. Statement of Cash Flows
Cash payments for interest were $242,000 in 2001, $513,000 in 2000 and $132,000 in 1999. Cash payments for income taxes were $1,841,000 in 2001, $2,129,000 in 2000 and $6,701,000 in 1999.
Note 4. Short-Term Debt and Lines of Credit
The Company has a loan agreement with a domestic bank providing for a $20,000,000 unsecured short-term line of credit at 55 basis points below the prevailing prime interest rate (6.20 percent at June 30, 2001 and 8.95 percent at June 30, 2000). There was no amount outstanding under the agreement at June 30, 2001. There was $9,000,000 outstanding under the agreement at June 30, 2000.
Note 5. Commitments
The Company is committed under real property lease agreements expiring at various dates to 2004. Certain of the leases have renewal options for periods up to five years and others provide for rent revisions at various dates. Under the leases the Company is obligated to pay property taxes, insurance and maintenance. All facility leases are classified as operating leases.
Real property rental expense was $1,065,000 in 2001, $1,125,000 in 2000 and $1,178,000 in 1999. Real property rental commitments are $917,000 in 2002, $655,000 in 2003 and $380,000 in 2004.
Note 6. Capital Stock
The Company has 500,000 shares of preferred stock authorized, with a $10 par value, of which none is outstanding. There are 10,000,000 shares of common stock authorized, $1 par value, of which there were 4,244,794 shares outstanding at June 30, 2001 and 2000.
15
Note 7. Stock Options
The Company grants stock options for the purchase of common stock to certain executive and managerial employees under the Company's 1991 Stock Option Plan. Options have an exercise price equal to the market price of the stock on the date of grant, a term of ten years and generally become exercisable over a five-year period. The Company applies APB Opinion 25 and related Interpretations in accounting for the plan, accordingly, no compensation cost has been recognized for those stock options. There would have been no material change in reported net income and earnings per share had compensation cost been determined based on the fair value at the grant dates as prescribed by SFAS 123, "Accounting for Stock-Based Compensation". The transactions for shares under options for the three years ended June 30, 2001 were:
| |
Outstanding |
Exercisable |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| |
Number Of Shares |
Weighted-Average Exercise Price |
Number Of Shares |
Weighted-Average Exercise Price |
||||||
| Outstanding, June 30, 1998 | 248,000 | $ | 28.86 | 72,800 | $ | 28.00 | ||||
| Exercised | (1,300 | ) | 28.00 | |||||||
| Forfeited | (31,500 | ) | 28.85 | |||||||
| Outstanding, June 30, 1999 | 215,200 | 28.87 | 105,720 | 28.35 | ||||||
| Forfeited | (67,500 | ) | 29.11 | |||||||
| Outstanding, June 30, 2000 | 147,700 | 28.76 | 103,300 | 28.43 | ||||||
| Forfeited | (27,200 | ) | 29.64 | |||||||
| Outstanding, June 30, 2001 | 120,500 | 28.56 | 111,100 | 28.36 | ||||||
| Stock Option Summary at June 30, 2001: | ||||||||||
| $28.00-$31.56 (Life: 4.4-6.6 years) | 120,500 | 28.56 | 111,100 | 28.36 | ||||||
| Available for future grants | 377,200 | |||||||||
Note 8. Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income by the weighted average common and potentially dilutive common equivalent shares outstanding determined as follows:
| |
2001 |
2000 |
1999 |
|||
|---|---|---|---|---|---|---|
| Weighted average shares outstanding used to compute basic EPS | 4,244,794 | 4,277,332 | 4,291,479 | |||
| Incremental shares issuable upon the exercise of stock options | — | — | 4,186 | |||
| Shares used to compute diluted EPS | 4,244,794 | 4,277,332 | 4,295,665 | |||
Incremental shares issuable upon the assumed exercise of outstanding stock options are computed using the average market price during the related period.
Note 9. Acquisitions and Divestitures
During the second quarter of the prior year, the Company sold most all of the operating assets of its Glass segment, excluding land and buildings, for $3,921,000. The land and buildings were leased to the buyer. The Glass segment is accounted for as a discontinued operation, and accordingly, amounts in the income statements and related notes for all periods shown have been restated to reflect discontinued operations accounting. Summarized results of the discontinued businesses are shown separately as
16
discontinued operations in the accompanying income statements. Operating results of the discontinued segment, in thousands of dollars, are as follows:
| |
2000 |
1999 |
||||||
|---|---|---|---|---|---|---|---|---|
| Net sales | $ | 6,760 | $ | 15,265 | ||||
Loss before income taxes |
$ |
(82 |
) |
$ |
(133 |
) |
||
| Income tax benefit | (30 | ) | (50 | ) | ||||
| Loss from discontinued operations | (52 | ) | (83 | ) | ||||
| Gain on disposition of discontinued operations, net of $210 income tax expense | 377 | — | ||||||
| Net income (loss) from discontinued segment | $ | 325 | $ | (83 | ) | |||
| Earnings per share: | ||||||||
| Discontinued operations | $ | (.01 | ) | $ | (.02 | ) | ||
| Gain on disposition of discontinued operations | .09 | — | ||||||
Also during the prior year, the Company formed a wholly owned subsidiary named United States Aluminum of Canada-Ontario, Ltd., which became a member of the Commercial Products Group. In March 2000, the new subsidiary completed the $1,222,000 cash purchase of selected assets and liabilities of a Toronto, Ontario commercial storefront and curtain wall company. The $502,000 excess of the purchase price over the estimated fair value of the net assets was allocated to goodwill and is being amortized on a straight-line basis over 5 years. Proforma information has not been presented, as it is not materially different from historical results.
During the second quarter of fiscal 1999, International Window-Colorado, Inc., a member of the Residential Products Group, completed the $1,300,000 cash purchase of selected assets and liabilities of a Denver, Colorado residential window and door company. The $574,000 excess of the purchase price over the estimated fair value of the net assets was allocated to goodwill and is being amortized on a straight-line basis over 15 years.
Note 10. Income Taxes
The components of income before United States and foreign income taxes are:
| |
2001 |
2000 |
1999 |
||||||
|---|---|---|---|---|---|---|---|---|---|
| Domestic | $ | 6,495,000 | $ | 1,768,000 | $ | 15,958,000 | |||
| Foreign | 619,000 | 661,000 | 421,000 | ||||||
| $ | 7,114,000 | $ | 2,429,000 | $ | 16,379,000 | ||||
17
The provision for income taxes is comprised of the following:
| |
2001 |
2000 |
1999 |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Current — | ||||||||||
| Federal | $ | 1,857,000 | $ | 197,000 | $ | 5,338,000 | ||||
| State | 191,000 | (157,000 | ) | 634,000 | ||||||
| Foreign | 258,000 | 251,000 | — | |||||||
| 2,306,000 | 291,000 | 5,972,000 | ||||||||
| Deferred — | ||||||||||
| Federal | 200,000 | 524,000 | 63,000 | |||||||
| State | (2,000 | ) | 35,000 | 5,000 | ||||||
| Foreign | (24,000 | ) | — | — | ||||||
| 174,000 | 559,000 | 68,000 | ||||||||
| $ | 2,480,000 | $ | 850,000 | $ | 6,040,000 | |||||
A reconciliation between the provisions for income taxes, computed by applying the Federal statutory rate to income before taxes, and the book provisions for income taxes follows:
| |
2001 |
2000 |
1999 |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Taxes on book income at statutory rate | $ | 2,419,000 | $ | 826,000 | $ | 5,733,000 | |||||
| Increases (decreases) resulting from: | |||||||||||
| State income taxes, net of Federal income tax benefit | 125,000 | (81,000 | ) | 415,000 | |||||||
| Nondeductible goodwill | 22,000 | 143,000 | 189,000 | ||||||||
| Federal tax credits | (94,000 | ) | (116,000 | ) | (142,000 | ) | |||||
| Other | 8,000 | 78,000 | (155,000 | ) | |||||||
| Provision for income taxes | $ | 2,480,000 | $ | 850,000 | $ | 6,040,000 | |||||
Deferred income taxes result from temporary differences in the recognition of income and expenses for tax and financial statement purposes. The tax effects of the significant temporary differences that comprise the deferred tax assets and liabilities at yearend are as follows:
| |
2001 |
2000 |
|
||||||
|---|---|---|---|---|---|---|---|---|---|
| Inventory | $ | 389,000 | $ | 371,000 | |||||
| Accrued liabilities | 855,000 | 730,000 | |||||||
| Other | 162,000 | 12,000 | |||||||
| Net deferred tax asset | $ | 1,406,000 | $ | 1,113,000 | |||||
| Property, plant and equipment | $ | 4,866,000 | $ | 4,390,000 | |||||
| Other | 186,000 | 195,000 | |||||||
| Net deferred tax liability | $ | 5,052,000 | $ | 4,585,000 | |||||
No provision for U.S. taxes has been made for undistributed earnings of the foreign subsidiaries since it is expected that the major portion of such earnings will continue to be reinvested for an indefinite period.
18
Note 11. Segment Information
The Company's operations are organized and managed by product type. The Company currently operates in three segments of the building products industry: Commercial Products, Residential Products and Aluminum Extrusions. See Note 9 for information regarding the prior year sale of the operating assets of the Glass Products segment. See the front cover for a description of the products of each segment and the back cover for a listing of the subsidiaries of each segment.
The Company uses a portion of its aluminum extrusion production in its Commercial and Residential segments. Transfers are made at market prices. Accounting policies for the segments are the same as those described in Note 1. The Company evaluates performance based on operating income or loss before any allocation of corporate overhead, interest or taxes.
The following is significant financial information by operating segment, reconciling to the Company's totals.
| |
Sales |
Operating Income |
||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands) |
2001 |
2000 |
1999 |
2001 |
2000 |
1999 |
||||||||||||||
| Commercial | $ | 114,822 | $ | 112,587 | $ | 124,903 | $ | 11,616 | $ | 8,618 | $ | 13,171 | ||||||||
| Residential | 58,991 | 61,398 | 53,266 | 3,215 | 3,977 | 2,803 | ||||||||||||||
| Aluminum Extrusion | 91,860 | 100,148 | 114,162 | 677 | (3,583 | ) | 8,016 | |||||||||||||
| Total segments | 265,673 | 274,133 | 292,331 | 15,508 | 9,012 | 23,990 | ||||||||||||||
| Eliminations | (52,778 | ) | (53,958 | ) | (58,030 | ) | (184 | ) | 893 | 1,188 | ||||||||||
| Corporate | — | — | — | (8,126 | ) | (7,556 | ) | (8,915 | ) | |||||||||||
| Total | $ | 212,895 | $ | 220,175 | $ | 234,301 | $ | 7,198 | $ | 2,349 | $ | 16,263 | ||||||||
| |
Capital Expenditures |
Depreciation and Amortization |
||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands) |
2001 |
2000 |
1999 |
2001 |
2000 |
1999 |
||||||||||||
| Commercial | $ | 2,075 | $ | 825 | $ | 2,388 | $ | 2,172 | $ | 2,096 | $ | 1,951 | ||||||
| Residential | 2,739 | 3,760 | 2,871 | 2,262 | 2,005 | 1,767 | ||||||||||||
| Aluminum Extrusion | 2,585 | 4,188 | 6,370 | 2,323 | 2,241 | 1,811 | ||||||||||||
| Glass | — | — | 2,542 | — | — | 326 | ||||||||||||
| Total segments | 7,399 | 8,773 | 14,171 | 6,757 | 6,342 | 5,855 | ||||||||||||
| Corporate | 350 | 258 | 888 | 750 | 814 | 648 | ||||||||||||
| Total | $ | 7,749 | $ | 9,031 | $ | 15,059 | $ | 7,507 | $ | 7,156 | $ | 6,503 | ||||||
| |
Total Assets |
|
|
|
|
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands) |
2001 |
2000 |
|
|
|
|
|||||||||
| Commercial | $ | 66,994 | $ | 66,937 | |||||||||||
| Residential | 32,405 | 32,510 | |||||||||||||
| Aluminum Extrusion | 38,032 | 43,779 | |||||||||||||
| Total segments | 137,431 | 143,226 | |||||||||||||
| Corporate | 10,639 | 11,359 | |||||||||||||
| Total | $ | 148,070 | $ | 154,585 | |||||||||||
19
| DIRECTORS |
OFFICERS |
|
|---|---|---|
Cornelius C. Vanderstar Chairman of the Board Chief Executive Officer |
David C. Treinen President; Secretary Chief Operating Officer |
|
David C. Treinen |
Ronald L. Rudy Senior Vice President—Operations |
|
David M. Antonini Partner in White, Nelson & Co. LLP |
Mitchell K. Fogelman Senior Vice President—Finance |
|
John P. Cunningham Retired President of International Aluminum Corporation |
Stanley M. Kutch Vice President—Information Systems |
|
Alexander L. Dean President of David Brooks Company |
Susan L. Leone Vice President—Human Resources |
|
Joel F. McIntyre Attorney At Law |
||
Kenneth D. Peterson, Jr. Chief Executive Officer of Columbia Ventures Corporation |
||
STOCK TRANSFER AGENT AND REGISTRAR |
ELECTRONIC TRANSFER OF DIVIDENDS |
|
Continental Stock Transfer & Trust Company 2 Broadway New York, NY 10004 (212) 509-4000 Internet at www.continentalstock.com |
For information and forms, write to: Corporate Secretary International Aluminum Corporation P. O. Box 6 Monterey Park, CA 91754 |
|
STOCK EXCHANGE LISTINGS |
ANNUAL SHAREHOLDERS MEETING |
|
The Company's common stock (trading symbol: IAL) is listed on the New York Stock Exchange and the Pacific Exchange |
2 p.m., Thursday, October 25, 2001 International Aluminum Corporation 767 Monterey Pass Road Monterey Park, CA 91754 |
20
| COMMERCIAL (Exterior Products) |
RESIDENTIAL |
|
|---|---|---|
Douglas R. Ellerbrock Executive Vice President Commercial Products Group |
George L. Hall Executive Vice President Residential Products Group |
|
United States Aluminum Corporation Vernon, California |
International Window Corporation South Gate, California |
|
United States Aluminum Corporation-Illinois Bedford Park, Illinois Boston, Massachusetts Detroit, Michigan |
International Window-Northern California Hayward, California International Window-Arizona, Inc. Phoenix, Arizona |
|
United States Aluminum Corporation-Texas Waxahachie, Texas Denver, Colorado St. Louis, Missouri Dallas, Texas Houston, Texas |
Maestro Products, Inc. Moreno Valley, California International Window-Colorado, Inc. Denver, Colorado |
|
United States Aluminum Corporation-Carolina Rock Hill, South Carolina Atlanta, Georgia Baltimore, Maryland |
||
United States Aluminum of Canada-British Columbia, Ltd. Langley, British Columbia, Canada |
||
United States Aluminum of Canada-Ontario, Ltd. Burlington, Ontario, Canada |
||
ALUMINUM EXTRUSION |
||
COMMERCIAL (Interior Products) |
Robert Dunn Executive Vice President Aluminum Extrusion Group |
|
John C. Poe General Manager |
International Extrusion Corporation Alhambra, California |
|
Raco Interior Products, Inc. Houston, Texas Waxahachie, Texas |
International Extrusion Corporation-Texas Waxahachie, Texas |
21
| International Aluminum Corporation 767 Monterey Pass Road Monterey Park, California 91754 |
||
| Tel: | (323) 264-1670 | |
| Fax: | (323) 266-3838 | |
| Web: | www.intlalum.com | |
22
Exhibit 22
INTERNATIONAL ALUMINUM CORPORATION
SUBSIDIARIES
The following is a list of the significant subsidiaries of the Registrant and the jurisdiction under which each is organized. The Company owns 100 percent of the voting securities of each such subsidiary.
| Name Of Subsidiary |
Jurisdiction Of Organization |
|
|---|---|---|
International Window Corporation |
California |
|
General Window Corporation* |
California |
|
International Window-Arizona, Inc. |
California |
|
Maestro Products, Inc. |
California |
|
International Window-Colorado, Inc. |
Colorado |
|
United States Aluminum Corporation |
California |
|
United States Aluminum Corporation-Illinois |
California |
|
United States Aluminum Corporation-Texas |
Texas |
|
United States Aluminum Corporation-Carolina |
California |
|
United States Aluminum Of Canada-British Columbia Ltd. |
Canada |
|
United States Aluminum Of Canada-Ontario Ltd. |
Canada |
|
Raco Interior Products, Inc. |
Texas |
|
International Extrusion Corporation |
California |
|
International Extrusion Corporation-Texas |
California |