<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20459
Quarterly Report under Section 13 or 15 (d) of the Securities Act of 1934
For Quarter Ended September 30, 1997 Commission File No. 0-3680
- ------------------------------------ ------
Industrial Acoustics Company, Inc.
- -------------------------------------------------------------------------------
New York 13-1713318
- -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS employer
Incorporation or organization) Identification #)
1160 Commerce Avenue, Bronx, New York 10462
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(718) 931-8000
- -------------------------------------------------------------------------------
(Registrant's Telephone Number, including Area Code)
- -------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if changed from last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
2,978,961
-----------------
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
Unaudited
Nine months ended Three months ended
September 30 September 30 September 30 September 30
------------ ------------ ------------ ------------
1997 1996 1997 1996
---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C>
REVENUES
Net Sales $ 49,638 $ 51,183 $ 18,757 $ 15,365
Interest Income 1,185 1,162 389 489
Other (Net) 547 481 48 (62)
-------- -------- -------- --------
51,370 52,826 19,220 15,692
-------- -------- -------- --------
COST AND EXPENSES
Cost of Products Sold 42,898 43,646 14,840 12,998
Selling General and
Administrative Expenses 9,025 8,726 3,012 2,827
Interest 744 662 274 289
-------- -------- -------- --------
52,667 53,034 18,126 16,114
-------- -------- -------- --------
(Loss) Income before provision
for income taxes (1,297) (208) 1,094 (422)
Provision/(Benefit) for income taxes (387) 64 372 (125)
-------- -------- -------- --------
Net (Loss) Income ( $910) ($ 272) $ 722 ($ 297)
======== ======== ======== ========
Net (Loss) Income Per Common Share ($ 0.31) ($ 0.09) $ 0.24 ($ 0.10)
======== ======== ======== ========
Dividends per Common Share $ 0.10 $ 0.10
Average number Common
Share Outstanding 2,979 2,979 2,979 2,979
</TABLE>
See notes to financial statements.
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Unaudited
September 30, 1997 December 31, 1996
------------------ -----------------
(In thousands, except per share data)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 982 $ 1,254
Short-term Investments, available for sale 254 218
Receivables 23,494 25,161
Costs and Estimated Earnings in Excess
Of Billings on Uncompleted Contracts 6,733 5,108
Inventories 5,261 4,605
Income Taxes 149 685
Deferred Income Taxes 721 130
Prepaid Expenses 948 1,389
------- -------
TOTAL CURRENT ASSETS 38,640 38,634
MARKETABLE SECURITIES, available for sale 22,207 20,584
PROPERTY, PLANT AND EQUIPMENT - Net 12,317 13,028
DEFERRED INCOME TAXES 22 124
OTHER ASSETS 120 475
------- -------
TOTAL ASSETS $73,306 $72,845
======= =======
</TABLE>
See notes to financial statements.
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Unaudited
September 30, 1997 December 31, 1996
------------------ -----------------
(In thousands, except per share data)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Loans Payable $ 10,936 $ 8,775
Accounts Payable and Accrued Expenses 12,007 15,606
Customer Deposits 854 389
Current Portion of Long-term Debt
and Capital Lease Obligations 76 71
Billings in Excess of Costs
on Uncompleted Contracts 3,979 1,128
-------- --------
TOTAL CURRENT LIABILITIES $ 27,852 $ 25,969
CAPITAL LEASE OBLIGATIONS 3,081 3,132
DEFERRED COMPENSATION 1,364 1,367
-------- --------
TOTAL LIABILITIES $ 32,297 $ 30,468
======== ========
COMMITMENTS
SHAREHOLDERS' EQUITY
Common Stock, par value $0.10 a share; authorized 5,000 shares; issued
and outstanding 2,979 in 1997 and 1996 excluding 87 shares in
treasury at par value 298 298
Additional Paid-in Capital 2,223 2,223
Equity adjustments:
Cumulative Currency Translation Adjustments (183) 152
Net unrealized (loss)/gain on marketable securities 7 (167)
Retained Earnings 38,664 39,871
-------- --------
TOTAL SHAREHOLDERS' EQUITY $ 41,009 $ 42,377
-------- --------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 73,306 $ 72,845
======== ========
</TABLE>
See notes to financial statements.
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 and 1996
<TABLE>
<CAPTION>
Unaudited
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Net cash (used in)/provided by operating activities $ (326) $ (935)
Investing Activities
Purchase of property, plant and equipment, net (543) (996)
Sale of investments and marketable securities 2,809 15,134
Purchase of investments and marketable securities (4,178) (13,633)
-------- --------
Net cash provided by/(used in) investing activities (1,912) 505
-------- --------
Financing Activities
Dividends paid (298) (298)
Increase in loan payable, net 2,352 568
Payments on long term debt and capital less obligations (46) (44)
-------- --------
Net cash provided by financing activities 2,008 226
-------- --------
Effect of exchange rate on changes on cash (42) (7)
-------- --------
Decrease in Cash and Cash Equivalents (272) (211)
Cash and cash equivalents at beginning of period 1,254 1,506
-------- --------
Cash and cash equivalents at end of period $ 982 $ 1,295
======== ========
</TABLE>
See notes to financial statements.
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of regulations S-X. Accordingly, they do not include all the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management all adjustments considered
necessary for a fair presentation have been included. All such adjustment are
of a normal recurring nature. Including the settlement of claims, which in the
third quarter of 1997 resulted in Revenue and Profit increases of $1,276,000.
Operating results for the nine month period ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997.
The year end consolidated balance sheet was derived from audited financial
statements, but, as presented here, does not include all disclosures required
by generally accepted accounting principles. The interim consolidated financial
statements should be read in conjunction with financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended December 31, 1996.
2. INVENTORIES
Inventories are comprised of the following:
September 30, 1997 December 31, 1996
------------------ -----------------
Materials and Supplies 2,108 1,492
Work in Process 3,153 3,113
----- -----
Total 5,261 4,605
3. RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share ("SFAS 128"), which
simplifies existing computational guidelines, revises disclosure requirements
and increases the comparability of earnings per share data on an international
basis. This statement is effective for periods ending after December 17, 1997
and requires restatement of all prior-period earnings per share data presented.
Earnings per share calculated under SFAS 128 would be the same as reported
earnings per share.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AN ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Pre-tax losses for the nine month period ended September 30, 1997 of $1,297,000
show a major decline over the $208,000 loss suffered through the same period
last year due to the substantial pre-tax profit contribution for the 1997 third
quarter compared to last year. The losses are primarily driven by lower volume
in overseas operations.
Sales for the three months ended September 30, 1997 increased 22% compared to
the same period last year. The higher volume, combined with a 7% decrease in
Cost of Products Sold , resulted in gross profits of $3,917,000 compared to
$2,367,000 in 1996. The results for the quarter contain Revenue and Profit of
$1,276,000, recognized from the settlement of a contract claim. The increase in
selling, general and administrative expenses can be attributabed to accruals
for domestic bonuses which have been partially offset by overhead reductions in
the overseas operations. Interest expense increased due to higher borrowings.
Pre-tax income for the quarter of $1,094,000 (compared to losses of $423,000
in 1996) is offset by a $372,000 tax provision resulting in after tax profits
of $722,000 or 24 cents a share (against an after tax loss of $297,000 or
10 cents a share loss in 1996).
Sales for the nine months ended September 30, 1997 decreased 3% compared to the
same period last year. The reduced volume, combined with a 1% increase in Cost
of Products Sold, resulted in a gross profit decrease to $6,740,000 from
$7,737,000. Other income rose because of increases in Royalty Income. Selling,
general and administrative expenses are higher because of domestic bonus
accruals which are partly offset by overhead reductions in the U.K. operations.
Interest expense rose due to higher borrowings. Pre-tax losses for the nine
months of $1,297,000 (compared to losses of $208,000 in 1996) are offset by a
$387,000 benefit for taxes resulting in an after tax loss of $910,000 or 31
cents a share (compared to an after tax loss of $272,000 or 9 cents a share in
1996).
Net cash used by the Company's operations in the nine month period ended
September 30, 1997 was $326,000 compared to $935,000 in the same period in
1996. The major changes arose from increases in billings on uncompleted
contracts and accounts payable which were offset by ongoing costs incurred on
contracts in progress. Current year borrowings were used for the financing of
operations, the payment of dividends, and the purchase of fixed assets.
Order intake for the nine months ended September 30, 1997 was $56,412,000
resulting in a Company Revenue backlog of $51,872,000 (unbilled backlog of
$55,220,000) compared to Revenue backlog of $47,336,000 (unbilled backlog of
$49,891,000) at the same time in 1996. Backlog includes only firm orders which
are primarily expected to be delivered and installed within one year. At any
time, backlog is not necessarily indicative of the level of business to be
expected in the ensuing period.
In June 1997, the Company reached an understanding, in principle, with a U.K.
pension fund to sell and lease back IAC Ltd.'s factory in Winchester, England,
for approximately four million pounds (US$6,440,000 at September 30, 1997), the
proceeds of which will be used to pay off bank debt. The gain on the sale, of
approximately one million four hundred thousand pounds (US$2,254,000), will be
amortized over the lease term. Contracts are currently being completed.
<PAGE>
The Company's financial position remains strong and should assure adequate
capital for the contracts the Company is actively pursuing.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995:
This report contains forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans,""expects" and similar expressions are
intended to identify forward looking statements. There are a number of factors
that could cause the Company's actual results to differ materially from those
indicated by such forward looking statements. These factors include, without
limitation, general economic conditions in the Company's markets, including
inflation, recession, interest rates and other economic factors, especially in
the United States and the United Kingdom but also including other areas of the
world where the Company markets its products, any loss of the services of the
Company's key management personnel, changes in the cost and availability of raw
materials, fluctuations in exchange rates relative to the US dollar for
currencies of the United Kingdom and other nations where the Company does
business, casualty to or disruption of the Company's production facilities and
equipment, delays and disruptions in the shipment of the Company's products and
raw materials, and other factors that generally affect the business of
manufacturing companies with international operations.
PART II- OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is involved as a defendant in several actions instituted by others
in the ordinary course of business. In the opinion of management, none of the
actions will result in liability.
ITEM 5 - OTHER MATERIALLY IMPORTANT FACTS
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) All required exhibits are incorporated by reference from the Form 10-K
filed for the year ended December 31, 1996.
(b) No reports on Form 8-K have been filed for the quarter ending
September 30, 1997.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be singed on its behalf by the
undersigned thereunto duly authorized.
INDUSTRIAL ACOUSTICS COMPANY, INC.
Date: November 10, 1997 By: /s/ Arnold W. Kanarek
-----------------------
Arnold W. Kanarek
Senior Vice President, Secretary
Date: November 10, 1997 By: /s/ Robert N. Bertrand
-----------------------
Robert N. Bertrand
Vice President - Finance, Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 982
<SECURITIES> 254
<RECEIVABLES> 23,494
<ALLOWANCES> 6,733
<INVENTORY> 5,261
<CURRENT-ASSETS> 38,640
<PP&E> 12,317
<DEPRECIATION> 0
<TOTAL-ASSETS> 73,306
<CURRENT-LIABILITIES> 27,852
<BONDS> 0
0
0
<COMMON> 2,979
<OTHER-SE> 2,223
<TOTAL-LIABILITY-AND-EQUITY> 73,306
<SALES> 49,638
<TOTAL-REVENUES> 51,370
<CGS> 42,898
<TOTAL-COSTS> 52,667
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 744
<INCOME-PRETAX> (1,297)
<INCOME-TAX> (387)
<INCOME-CONTINUING> (910)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (910)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
