ITEM 1. BUSINESS
a. GENERAL DEVELOPMENT OF BUSINESS
International Aluminum Corporation is an integrated manufacturer and supplier of a broad line of quality aluminum, wood, vinyl and glass 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 (213) 264-1670. Reference to the "Registrant", "International Aluminum Corporation" or the "Company" includes International Aluminum Corporation and its subsidiaries unless the context indicates otherwise.
b. INDUSTRY SEGMENTS, LINES OF BUSINESS AND CLASSES OF PRODUCTS
This information is included on pages 4 and 13 respectively, of the Registrant's 1996 Annual Report to Shareholders and is hereby incorporated by reference.
c. NARRATIVE DESCRIPTION OF BUSINESS
Processes and Products
Building Products
Residential. Residential products are fabricated from aluminum, wood and vinyl 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, storefront framing, entrance doors and frames, interior doors and frames and interior wall systems. These products are utilized in varying combinations to produce systems used for office and commercial construction, remodeling and tenant improvement applications.
Aluminum Extrusions. In the extrusion process, heated aluminum billets are hydraulically forced through steel dies to produce a piece of metal of the desired length and cross-section shape. The extrusions are then cut and, when requested, anodized or painted in a variety of finishes in the Company's anodizing and painting departments.
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The Company currently has five extrusion presses at its Alhambra, California plant and four presses at its plant in Waxahachie, Texas.
Aluminum extrusions produced by the Company are used in fabricating substantially all of its other aluminum products. In addition, during fiscal 1996 approximately 53% of the extrusions produced were sold to users in its own or other industries, including manufacturers of fixtures, electronic equipment, fitness products, sailboats, skylights and truck bodies. The Company furnishes design services to assist its customers in developing or better utilizing custom extrusions.
Glass Products
This product group shapes, bends, bevels, etches, polishes and tempers bulk flat glass. The fabricated glass is primarily utilized in the Company's store display systems and in its glass furniture lines. Glass is also processed to customer specifications for incorporation into their end products, which include residential, patio and office furniture, truck and recreational vehicle windows, light fixtures and appliances.
Sales and Distribution
The Company markets its residential products primarily to mass merchandisers, 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, some of which produce aluminum products of the Company's design. The Company's glass products are marketed to manufacturers, distributors and retailers.
Each of the Company's subsidiaries has its own administrative and sales organizations. Sales are made largely in the United States and Europe.
No customer accounted for more than 5% of net sales in 1996, 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.
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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 which 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. Wood, vinyl, hardware, fasteners and screening are purchased from outside sources.
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).
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.
Patents
The Company has no material patents, either issued or pending, and is not a party to any significant licensing agreements.
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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.
Employees
As of June 30, 1996, the Company had approximately 2,000 full-time employees.
d. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
The information concerning sales, net income and identifiable assets of foreign and domestic operations for fiscal years 1996, 1995 and 1994 is set forth in Note 9 to the consolidated financial statements included on page 13 of the Company's 1996 Annual Report incorporated herein by reference.
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ITEM 3.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of security holders which are required to be reported under the instructions to this item.
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PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The market and dividend information is included on pages 14 and 16 of the Company's 1996 Annual Report to Shareholders and is incorporated herein by reference.
There are no restrictions of future cash dividends.
There were approximately 600 shareholders of record of the Company's common stock at June 30, 1996.
ITEM 6.
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 1996 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This information is set forth on pages 2 through 5 of the Company's 1996 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Part IV, Item 14.
ITEM 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements which are required to be reported under the instructions to this item.
PART III
The information required under Part III is contained in the Company's Proxy Statement for the Annual Meeting of Shareholders to be held October 31, 1996, which information is incorporated herein by reference.
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PART IV
ITEM 14.
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, 1996 and 1995 Statements for the three years ended June 30, 1996 - Income Shareholders' equity Cash flows Notes to consolidated financial statements
2. Financial Statement Schedules Report of Independent Accountants on Financial Statement Schedules Schedule for the three years ended June 30, 1996 - II Valuation and qualifying accounts
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 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 Price Waterhouse LLP (included on page herein).
27. Financial Data Schedule.
(b) No reports on Form 8-K were required to be filed during the last quarter of 1996.
NOTE: The consolidated statements referred to above are included in the 1996 Annual Report to Shareholders and are incorporated herein by reference.
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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 20, 1996 appearing on page 15 of the 1996 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.
PRICE WATERHOUSE LLP
Los Angeles, California August 20, 1996
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 20, 1996 appearing on page 15 of 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 on the Financial Statement Schedule which appears on page of this Form 10-K.
PRICE WATERHOUSE LLP
Los Angeles, California September 19, 1996
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.
Jurisdiction of Name of Subsidiary Organization
International Window Corporation California International Extrusion Corporation California United States Aluminum Corporation California General Window Corporation* California International California Glass Corporation California United States Aluminum Corporation-Illinois California International Window-Arizona, Inc. California United States Aluminum Corporation-Texas Texas International Extrusion Corporation-Texas California United States Aluminum Corporation-Carolina California International Carolina Glass Corporation California Ragland Manufacturing Company, Inc. Texas Maestro Products, Inc. California Eland-Brandt, B.V. The Netherlands
______________________________________________ * dba International Window-Northern California
Exhibit 22