<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 June 30, 1997 Commission File No. 0-3680
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Industrial Acoustics Company, Inc.
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New York 13-1713318
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(State or other jurisdiction of (IRS employer
Incorporation or organization) Identification #)
1160 Commerce Avenue, Bronx, New York 10462
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(Address of Principal Executive Offices) (Zip Code)
(718) 931-8000
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(Registrant's Telephone Number, including Area Code)
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(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
-----------------------
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS - UNAUDITED
INDUSTRIAL ACOUSTICS COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Six months ended Three months ended
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June 30 June 30 June 30 June 30
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1997 1996 1997 1996
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(In thousands, except per share data)
<S> <C> <C> <C> <C>
REVENUES
Net Sales $ 30,881 $ 35,818 $ 15,521 $ 20,496
Interest Income 770 772 384 401
Other 499 546 373 165
--------------------------------------------
32,150 37,136 16,278 21,062
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COST AND EXPENSES
Cost of Products Sold 28,058 30,649 13,927 16,165
Selling General and
Administrative Expenses 6,013 5,899 2,958 3,170
Interest 470 373 253 210
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34,541 36,921 17,138 19,545
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(Loss)/Income before benefit/
(provision) for income taxes (2,391) 215 (860) 1,517
Benefit/(Provision) for income taxes 759 (187) 642 (429)
--------------------------------------------
Net (Loss)/Income ($1,632) $28 ($218) $1,088
============================================
PER COMMON SHARE DATA:
Net (Loss)/Income ($0.55) $0.01 ($0.07) $0.37
============================================
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
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INDUSTRIAL ACOUSTICS COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
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(In thousands, except per share data)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 1,529 $ 1,254
Short-term Investments, available for sale 140 218
Receivables 19,909 25,161
Costs and Estimated Earnings in Excess
Of Billings on Uncompleted Contracts 6,414 5,108
Inventories 4,967 4,605
Income Taxes Receivable 272 685
Deferred Income Taxes 702 130
Prepaid Expenses 1,480 1,473
------------------------
TOTAL CURRENT ASSETS 35,413 38,634
MARKETABLE SECURITIES, available for sale 21,248 20,584
PROPERTY, PLANT AND EQUIPMENT - Net 12,660 13,028
DEFERRED INCOME TAXES 189 124
OTHER ASSETS 122 475
------------------------
TOTAL ASSETS $69,632 $72,845
========================
</TABLE>
See Notes to Financial Statements
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1997
-------------------------------------
(In thousands, except per share data)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Loans Payable $ 12,675 $ 8,775
Accounts Payable and Accrued Expenses 10,061 15,606
Customer Deposits 1,107 389
Current Portion of Long-term Debt
and Capital Lease Obligations 69 71
Billings in Excess of Costs
on Uncompleted Contracts 1,134 1,128
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TOTAL CURRENT LIABILITIES $ 25,046 $ 25,969
CAPITAL LEASE OBLIGATIONS 3,102 3,132
DEFERRED COMPENSATION 1,341 1,367
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TOTAL LIABILITIES $ 29,489 $ 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 (66) 152
Net unrealized (loss)/gain on marketable securities (254) (167)
Retained Earnings 37,942 39,871
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TOTAL SHAREHOLDERS' EQUITY $ 40,143 $ 42,377
=======================
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 69,632 $ 72,845
=======================
</TABLE>
See Notes to Financial Statements
<PAGE>
INDUSTRIAL ACOUSTICS COMPANY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 and 1996
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
-------------------------------------
(In thousands, except per share data)
<S> <C> <C>
Net cash (used in)/provided by operating activities (2,211) (1,903)
--------------------------
Investing Activities
Purchase of property, plant and equipment, net (436) (849)
Sale of investments and marketable securities 394 12,107
Purchase of investments and marketable securities (1,125) (12,731)
--------------------------
Net cash (used in)/provided by investing activities (1,167) (1,473)
--------------------------
Financing Activities
Dividends paid (298) (298)
Short Term Loan 4,002 2,730
Payments on long term debt and capital less obligations (33) (29)
--------------------------
Net cash provided by/(used in) financing activities 3,671 2,403
--------------------------
Effect of exchange rate on changes on cash (18) (18)
--------------------------
Increase/(Decrease) in Cash and Cash Equivalents 275 (991)
Cash and cash equivalents at beginning of year 1,254 1,506
--------------------------
Cash and cash equivalents at end of period $ 1,529 $ 515
==========================
</TABLE>
See notes to Financial Statements
<PAGE>
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. Operating results for the six month period ended
June 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. For further information, refer
to the consolidated financial statements and footnotes 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:
June 30, 1997 December 31, 1996
------------- -----------------
Materials and Supplies 1,580 1,492
Work in Process 3,387 3,113
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Total 4,967 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.
ITEM 2
MANAGEMENT'S DISCUSSION AN ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Pre Tax Losses for the six month period ended June 30, 1996 of $1,632,000 shows
a major decline over the $28,000 profit earned in the same period last year.
The losses are driven by lower volume in both the domestic and overseas
operations.
Sales for the three months ended June 30, 1996 decreased 24% compared to the
same period last year. The lower volume, combined with a 14% increase in Cost
of Products Sold, resulted in a reduced gross profit increase to $1,594,000
from $4,331,000. Other income rose due to rental income not having been
generated in 1996. The decrease in selling, general and administrative expenses
can be attributed to legal expenses incurred in 1996 which did not recur in
1997. Interest expense is up because of higher borrowings and interest rates.
Pre Tax Losses for the quarter of $860,000 (compared to a $1,517,000 profit in
1996) is offset by a $642,000 tax benefit resulting in
<PAGE>
an after tax loss of $218,000 or 7 cents a share (against an after tax profit
of $1,088,000 or 37 cents a share in 1996).
Sales for the six months ended June 30, 1997 decreased 14% compared to the same
period last year. The reduced volume, combined with a 6% increase in Cost of
Products Sold, has resulted in a gross profit decrease to $2,823,000 from
$5,169,000. Other income rose because 1996 results contained insurance claim
income and gains on the sale of investments which did not recur in 1997.
Selling, general and administrative expenses are higher in 1997 due to costs
associated with the reduction in the U.K. workforce. These costs were partially
offset by other reductions. Interest expense is up due to higher borrowing and
interest rates. Pre Tax Losses for the six months of $2,391,000 (compared to a
$215,000 profit in 1996) is offset by a $759,000 benefit for taxes resulting in
an after tax loss of $1,632,000 or 55 cent a share (compared to an after tax
profit of $28,000 or 1 cent a share in 1996).
The reduction in accounts payable and accrued expenses has been financed by
cash flow from receivables and additional bank borrowings. Order intake for the
period ended June 30, 1997 was $40,898,000 resulting in a Company Revenue
backlog of $55,941,000 (unbilled backlog of $61,221,000) compared to Revenue
Backlog of $45,187,000 (unbilled backlog of $50,867,000) 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$6,640,000), 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$2,324,000), will be amortized over the
lease term. Contracts are currently being completed.
The Company's financial position remains strong and should assure adequate
capital for the projects 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
<PAGE>
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
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: August 14, 1997 By: /s/ Arnold W. Kanarek
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Arnold W. Kanarek
Senior Vice President, Secretary
Date: August 14, 1997 By: /s/ Robert N. Bertrand
------------------------
Robert N. Bertrand
Vice President, Finance, Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,529
<SECURITIES> 140
<RECEIVABLES> 19,909
<ALLOWANCES> 6,414
<INVENTORY> 4,967
<CURRENT-ASSETS> 35,413
<PP&E> 12,660
<DEPRECIATION> 0
<TOTAL-ASSETS> 69,632
<CURRENT-LIABILITIES> 25,046
<BONDS> 0
0
0
<COMMON> 2,979
<OTHER-SE> 2,223
<TOTAL-LIABILITY-AND-EQUITY> 69,632
<SALES> 30,881
<TOTAL-REVENUES> 32,150
<CGS> 28,058
<TOTAL-COSTS> 34,541
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 470
<INCOME-PRETAX> (2,391)
<INCOME-TAX> 759
<INCOME-CONTINUING> (1,632)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,632)
<EPS-PRIMARY> (0.55)
<EPS-DILUTED> (0.55)
</TABLE>
