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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year ended December 31, 1997
Commission file number 0-3680
INDUSTRIAL ACOUSTICS COMPANY, INC.
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(Exact name of registrant as specified in its charter)
New York 13-1713318
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1160 Commerce Avenue, Bronx, New York 10462
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (718) 931-8000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $0.10 par value
Indicate by check mark whether the registrant (1) has filed all
reports 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 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]
The aggregate market value of the Common Stock held by non-affiliates
of the registrant on March 23, 1998 was $6,250,570.
The number of shares outstanding of registrant's common stock, as of
December 31, 1997, was 2,978,961.
Documents Incorporated by Reference.
A portion of the Form 8-K filed on April 1, 1998 is incorporated by
reference in Item 13, Part III hereof.
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Part III
Item 10. Directors and Executive Officers of the Registrant
Identification of Directors
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Director
Name Age Position with Company Since
---- --- --------------------- -----
Martin Hirschorn 77 Chairman, Director 1957
Frederic M. Oran 65 President, Director 1973
James A. Read 48 Director 1998
Robert M. Davies 47 Director 1998
Maarten D. Hemsley 48 Director 1998
Martin P. Dineen 32 Director 1998
Robert N. Haidinger 64 Director 1998
The directors shall serve until the 1998 Annual Meeting of
Shareholders or until their successors are elected and qualified.
Executive Officers of the Registrant
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Name Age Position Officer Since
- ---- --- -------- -------------
Martin Hirschorn 77 Chairman July 27, 1951
Frederic M. Oran 65 President June 12, 1962
Robert N. Bertrand 43 Senior Vice April 9, 1990
President-Finance
and Administration,
Secretary
Robert E. Schmitt 49 Senior Vice April 14, 1978
President, General
Manager, IAC, SC
Robert A. Schmidt 45 Senior Vice April 1, 1987
President --
Marketing and Sales
T. Joseph Looney 40 Vice President, June 14, 1993
Finance; Treasurer
Jasjit T. Ahluvalia 61 Vice President, May 2, 1981
Management
Information Systems
Peter Kohner 50 Vice President, September 18, 1986
Manufacturing
Albert J. Cirulli 68 Vice President, October 12, 1987
Design Services
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All officers are elected each year by the Board of Directors to serve
until the next annual election and at the pleasure of the Board of Directors.
There are no arrangements or understandings between any nominees and any other
person pursuant to which he or she has been nominated or previously elected as
an officer.
Family Relationships. None.
Business Experience. All of the executives and directors of the
Company have held their positions or other positions with the Company for at
least the past five years, except for James A. Read, Robert M. Davies, Martin
P. Dineen, Maarten D. Hemsley and Robert N. Haidinger. Since 1989, Mr. Read has
been the Managing Director of Mezzanine Management Limited, an investment
advisory business with principal offices in London, England. Mr. Davies is a
merchant banker, and is the Managing Director of The Renai Group LLC. Prior to
that time, Mr. Davies had served as a director of Wexford Capital Corp. and
Executive Vice President of Wexford Management LLC, an investment management
company, as Managing Director of Steinhardt Enterprises, Inc., an investment
management company and as director and Executive Vice president of The Hallwood
Group Incorporated, a merchant banking company. Mr. Hemsley is President of
Bryanston Management Ltd., which he established in 1993 to provide specialized
services to distressed companies and to investors in such opportunities, both
in the United State and Europe. Prior to that, he was the President of Integra
- - A Hotel and Restaurant Company, a publicly-held company with more than thirty
hotels in the United States. Mr. Dineen is a Vice President of Mezzanine
Management LLC. Prior to 1997, he was employed as a corporate banker at
BankBoston and Chase Manhattan Bank. Since 1990, Mr. Haidinger has been the
President of JJI Lighting Group, a commercial-institutional lighting fixture
manufacturer and marketer.
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Item 11. Executive Compensation
COMPENSATION COMMITTEE REPORT
During 1997, the Compensation Committee consisted of Martin Hirschorn,
the President of the Company, Frederic M. Oran, the Executive Vice President
and Arnold W. Kanarek, the Senior Vice President-Secretary. This Committee
reviewed and determined the Corporation's policies on compensation of salaried
and hourly employees not covered by union contracts. The Company has maintained
policies to provide senior managers, including executive officers, with strong
motivation to produce and maintain a high level of profitability.
The principal element of the policies is to maximize the total
compensation packages based on profitability. Base salaries are therefore
increased only as the result of promotions or to establish parity among senior
managers. The intent is to provide senior managers with base salaries more or
less equal to their peers at similar companies; however, total compensation
packages after inclusion of cash bonuses based on pre-established performance
targets, have generally been, the Committee believes, to be above the industry
average.
At the beginning of every year, the Committee establishes sales and
profit targets in its annual budgets. The budgets are revised periodically to
reflect actual business conditions, which, along with departmental performance,
overseas assignments and consolidated profitability, determine the cash bonuses
for senior managers.
The Committee believes its long-standing incentive programs have
contributed to the Company's financial performance. The Committee reviews the
compensation of the Company's executive officers annually and believes such
compensation has been in the best interests of both the executives and the
Company's shareholders.
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1997 RESULTS
Fiscal 1997 was a disappointing year for the Company. The Compensation
Committee, in reviewing the total compensation packages for senior managers,
determined that only a few performance bonuses were to be paid based upon
current year results. Year end adjustments were made only to bring compensation
to a level which approximated the average for similar positions in the
industry. The Committee's determination was consistent with that made in both
1995 and 1996, which had marked a departure from prior years, when a
substantial portion of the compensation packages for senior managers consisted
of performance bonuses. The Committee believes that its determination was
consistent with long-established policy that such individuals have an
inducement for the Corporation to be financially successful. In a year where
the Company reported a loss, most senior managers were affected adversely in
comparison to years prior to 1995 in their total compensation packages as
performance objectives were not attained.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee, after reviewing the Company's financial results for
1997, determined that Mr. Hirschorn's base salary of $110,000, as well as his
performance-based bonus, would not be increased. His total compensation package
remains at a level substantially reduced from years prior to 1994, and was
determined to be below the average for a similar position within the industry.
The additional benefits paid or payable to Mr. Hirschorn are established
pursuant to the terms of compensation plans which have been in existence for
periods in excess of 15 years.
Mr. Oran's compensation is the same as in 1996, however his total
compensation package also remains at a level substantially reduced from years
prior to 1994.
Martin Hirschorn, Chairman
Frederic M. Oran
Arnold W. Kanarek
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The following table summarizes, for the years indicated, the
compensation paid or accrued by the Corporation and its subsidiaries to the
highest paid executive officers of the Corporation whose remuneration exceeds
$100,000.
No executive officer of the Corporation was compensated for services
performed as a director of the Corporation. Each director of the Corporation
who is not an officer or employee receives an annual fee of $5,000.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Name and
Principal Position Year Salary Bonus(2)(3) Other(4)
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<S> <C> <C> <C> <C>
Martin Hirschorn, 1997 $110,000 $69,782 $16,785
President and Chief 1996 $110,000 $69,782 $16,785
Executive Officer; 1995 $110,000 $39,325 $16,785
Director
Frederic M. Oran, 1997 $107,000 $48,420 $ 5,922
Executive Vice 1996 $107,000 $48,420 $ 5,922
President; Director 1995 $107,000 $48,420 $ 5,922
</TABLE>
(1) The Corporation has no long-term compensation awards and payouts, and such
categories are omitted from this table.
(2) Includes cash bonus as incentive compensation pursuant to individual
agreements with the named executives. Such additional compensation is based
upon increases in the Corporation's annual pre-tax profits. A description of
the Corporation's bonus plan is set forth below under "Cash Bonuses".
(3) Includes amount deferred under the Corporation's Savings Plan (see "Savings
Plan" below).
(4) Includes contributions by the Corporation under deferred compensation plans
for the benefit of Mr. Hirschorn and Mr. Oran adopted in 1968 and 1978,
respectively. A description of such deferred compensation plans is set forth
below in paragraph (a) under "Deferred Compensation Agreements".
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REMUNERATION UNDER EXISTING PLANS AND ARRANGEMENTS
CASH BONUSES
As incentive compensation, Management selects employees on a
discretionary basis to receive annual cash bonuses based upon the Corporation's
annual pre-tax profits. Payments to the participants have ranged from 0% to
245% of their base annual salary. Amounts distributed to executive officers in
1996 are included in the Summary Compensation Table set forth above.
DEFERRED COMPENSATION AGREEMENTS
(a) The Corporation adopted deferred compensation plans for the
benefit of Mr. Hirschorn and Mr. Oran in 1968 and 1978, respectively. These
plans provide in substance that if Mr. Hirschorn and Mr. Oran continue in the
employ of the Corporation until the age 65 or later, they will receive 120
monthly payments of not less than $1,220.02 and $874.12, respectively, upon
their retirement. If they die while employed by the Corporation prior to
attaining the age of 65, their widows, children or estate will receive 120
monthly payments of not less than $3,096.45 and $2,189.13, respectively. If
they become permanently disabled as determined pursuant to the plans, while
employed by the Corporation prior to attaining the age of 65, they or their
lawful representatives will receive 120 monthly payments of an amount,
depending on the year of disability (the earlier the disability the smaller the
payment), of not less than $1,220.02 and $874.12, respectively, if such
disability occurs prior to retirement. Unless otherwise granted by the Board of
Directors, no payments will be made other than upon terminations of employment
as listed above. In January 1992, the Board of Directors approved payments to
Mr. Martin Hirschorn, the cost of which is included in the Summary Compensation
Table above.
(b) The deferred cash bonus plan adopted in 1979 and amended
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on July 16, 1980 is administered by the Deferred Compensation Committee
appointed by the Board of Directors. Eligible participants have been previously
selected by such Committee. Under the plan, a portion specified by the
individual participant of such participant's annual bonus was deferred, and
interest on any or all such amounts accrued at the rate set forth in each
participation contract, to be compounded annually. Deferred funds are earmarked
and may be kept in cash or invested, at the discretion of the Committee,
provided that no funds are to be invested in stock or bonds of the Corporation.
Payments are to be made upon the death, retirement, or age 65
whichever comes first, or disability of the participant in 180 monthly
installments as set forth in the plan, beginning on the first day of the month
following such death, such retirement or determination by the Committee of such
disability. Participants whose termination of employment is other than a result
of death, disability or retirement are to be paid in monthly installments, the
number of which is the product of the numbers of years of participation in the
plan multiplied by 12, to commence on the first day of the month following the
third anniversary of said termination. If a participant withdraws from the
plan, payments are to be made in 36 monthly installments, to commence on the
first day of the month following the fifth anniversary of such withdrawal.
SAVINGS PLAN
The Corporation adopted a defined contribution plan, the Industrial
Acoustics Company, Inc. Employees Tax Deferred Savings Plan (the "Savings
Plan"), effective January 1, 1987, which includes a cash or deferred
arrangement (commonly known as a " 401(k) plan" ). The Savings Plan is
maintained for non-union employees who have completed six months of service
with the Corporation. A participant may elect to defer up to the lesser of 15%
of compensation or $9,500 per year, adjusted for cost of living increases in
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accordance with the Internal Revenue Code of 1986 (the " Code" ), subject to
other Code limitations. Each participant is fully vested in deferral
contributions allocated to such participant's account. The Savings Plan also
allows the Corporation to make discretionary contributions, which vest over a
period of seven years or upon the participant's retirement, disability or
death. The Corporation's discretionary contribution is based on corporate
profitability and is allocated to employees based on a five year average salary
basis and is integrated with Social Security. Benefits are payable following
termination of employment with the Corporation, or at age 65 if the participant
elects to defer payment, in an annuity, installment payments or a lump sum.
Under the Savings Plan, during the fiscal year ended December 31, 1997, Messrs.
Hirschorn and Oran deferred $0 and $9,500 respectively (which amounts are
included in the Summary Compensation Table). The contributions for Mr.
Hirschorn and Mr. Oran for 1996 were $0 and $9,500, respectively.
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
On March 19, 1992, the Corporation entered into a Split-Dollar Life
Insurance Agreement with Michael Hirschorn, a director of the Corporation,
wherein the Corporation agreed to advance up to one-half of the amount of
premiums on an insurance policy owned by Michael Hirschorn on the life of
Martin Hirschorn, his father and President of the Corporation. The Corporation
shall be reimbursed for such advances by Michael Hirschorn upon the earlier to
occur of the surrender of such policy or the payment of proceeds upon the death
of Martin Hirschorn.
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Item 12. Security Ownership of Certain Beneficial Owners and Management
The Company has one class of stock, consisting of Common Stock, with
$0.10 par value per share. The following data is supplied with respect to the
Company's Common Stock, as of March 20, 1998:
Security Ownership of Certain Beneficial Owners
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<TABLE>
<CAPTION>
Name & Address Amount & Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
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<S> <C> <C>
IAC Holdings Corp.
100 First Stamford Place
Suite 600
Stamford, CT 06902 2,353,904 79.0%
David L. Babson & Co., Inc.
One Memorial Drive
Cambridge, MA 02142-1300 279,100 9.4%
</TABLE>
Except as shown above, no other person or group is known to the
Company to be the beneficial owner of more than 5% of the Common Stock of the
Company.
Item 13. Certain Relationships and Related Transactions
The information required to be furnished under this Item is
incorporated by reference from the Company's Form 8-K filed on April 1, 1998.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
INDUSTRIAL ACOUSTICS COMPANY, INC.
April 30, 1998 By: /s/ Frederic M. Oran
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Frederic M. Oran,
President
April 30, 1998 By: /s/ Robert N. Bertrand
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Robert N. Bertrand,
Senior Vice President
