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 March 31, 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 ----------------- INDUSTRIAL ACOUSTICS COMPANY, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE QUARTERS ENDED MARCH 31, 1997 AND 1996 Unaudited March 31 1997 1996 ----- ----- (In thousands, except per share data) REVENUES Net Sales $15,361 $15,322 Interest Income 386 371 Other (Net) 126 380 ------------ -------- 15,873 16,073 ------------ ------- COST AND EXPENSES Cost of Products Sold 14,130 14,484 Selling General and Administrative Expenses 3,055 2,729 Interest 217 163 ------------ --------- 17,402 17,376 ----------- -------- (Loss) Income before provision for income taxes (1,529) (1,303) Benefit for income taxes 117 240 ------------ ---------- Net Loss ($1,412) ($1,063) ============ ========== PER COMMON SHARE DATA: Net Loss ($0.47) ($0.36) ============= ========== See notes to the consolidated financial statements Dividends per Common Share $0.10 $0.10 Average number Common Share Outstanding 2,979 2,979 INDUSTRIAL ACOUSTICS COMPANY, INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1997 December 31, 1996 -------------- ----------------- (in thousands, except per share data) ASSETS CURRENT ASSETS Cash and Cash Equivalents $574 $1,254 Short-term Investments, available for sale 140 218 Receivables 20,456 25,161 Costs and Estimated Earnings in Excess Of Billings on Uncompleted Contracts 6,646 5,108 Inventories 4,848 4,605 Income Taxes Receivable 341 685 Deferred Income Taxes 143 130 Prepaid Expenses 1,432 1,473 ----------- -------- TOTAL CURRENT ASSETS 34,580 38,634 MARKETABLE SECURITIES, available for sale 20,470 20,584 PROPERTY, PLANT AND EQUIPMENT - Net 12,885 13,028 DEFERRED INCOME TAXES 382 124 OTHER ASSETS 124 475 ----------- -------- TOTAL ASSETS $68,441 $72,845 =========== ======= INDUSTRIAL ACOUSTICS COMPANY, INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1997 December 31, 1996 -------------- ----------------- (in thousands, except per share data) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Loans Payable $10,627 $8,775 Accounts Payable and Accrued Expenses 11,743 15,606 Customer Deposits 460 389 Current Portion of Long-term Debt and Capital Lease Obligations 54 71 Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts 1,046 1,128 ---------- -------- TOTAL CURRENT LIABILITIES $23,930 $25,969 CAPITAL LEASE OBLIGATIONS 3,132 3,132 DEFERRED COMPENSATION 1,342 1,367 --------- --------- TOTAL LIABILITIES $28,404 $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 (108) 152 Net unrealized (loss) on marketable securities (537) (167) Retained Earnings 38,161 39,871 -------- -------- TOTAL SHAREHOLDERS' EQUITY $40,037 $42,377 ------- ------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $68,441 $72,845 ======= ======= INDUSTRIAL ACOUSTICS COMPANY, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE QUARTERS ENDED MARCH 31, 1997 and 1996 Unaudited March 31, 1997 March 31, 1996 -------------- ---------------- Net cash (used in) operating activities $ (1,479) $ (571) Investing Activities Purchase of property, plant and equipment, net (425) (209) Sale of investments and marketable securities 393 10,865 Purchase of investments and marketable securities (819) (11,720) -------- --------- Net cash (used in) investing activities (851) (1,064) -------- --------- Financing Activities Dividends paid (298) (297) Loans payable, net 2,000 1,265 Payments on long term debt and capital less obligations (19) (15) ------- ---------- Net cash provided by/(used in) financing activities 1,683 953 ------- --------- Effect of exchange rate on changes on cash (33) (17) ------- --------- (Decrease) in Cash and Cash Equivalents (680) (699) Cash and cash equivalents at beginning of period 1,254 1,506 ------- --------- Cash and cash equivalents at end of period $574 $807 ======= ========= 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 three month period ended March 31, 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. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Earnings for the first quarter of 1997 continue to be very unsatisfactory. Despite good order intake, shipments are hampered by customer imposed delays to convert backlog into manufactured products and installations. Sales for the three months ended March 31, 1997 increased $39,000 compared to the same period last year. Despite the slight increase, gross profit is $1,231,000 compared to $830,000 in 1996 due primarily to lower costs in the Domestic Aviation business. Other income decreased $254,000 because 1996 included gains on the sale of investments which did not recur in 1997. The increase in selling, general and administrative expenses is due to expense reversals in 1996 which did not recur in 1997. The first quarter pre-tax loss of $1,529,000 is partly offset by a $117,000 benefit from income taxes compared to a pre-tax loss of $1,303,000 offset by a $240,000 benefit from income taxes in 1996. The reduced tax benefit in 1997 is caused by the Company's inability to carry back losses in the United Kingdom. The reductions in accounts payable and accrued expenses and the loss for the quarter were financed by strong cash flow from receivables and additional bank borrowings. First quarter order intake for 1997 was $16,181,000 which gives the Company a Revenue Backlog of $46,673 (unbilled backlog of $52,273,000) compared to Revenue Backlog of $50,322,000 (unbilled backlog of $55,479,000) 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. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - contd. The Company believes that its 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 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 During March 1997, the Company declared an annual cash dividend of $0.10 per share, payable to shareholders of record on March 14, 1997. This was paid on March 21, 1997. 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: May 9, 1997 By: /s/ Arnold W. Kanarek ------------------------------------- Arnold W. Kanarek Senior Vice President, Secretary Date: May 9, 1997 By: /s/ Robert N. Bertrand ----------------------------------------- Robert N. Bertrand Vice President - Finance, Treasurer