-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S5vyp9ISONhsMg325uYdHyEhdaaKGCNAijnrljh72lXW/yvH30otp5c8kUs0GCeA zqS9n9AG07F+dCcZu8/srA== 0000049728-03-000005.txt : 20030210 0000049728-03-000005.hdr.sgml : 20030210 20030210152237 ACCESSION NUMBER: 0000049728-03-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021227 FILED AS OF DATE: 20030210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IEC ELECTRONICS CORP CENTRAL INDEX KEY: 0000049728 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 133458955 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06508 FILM NUMBER: 03547148 BUSINESS ADDRESS: STREET 1: 105 NORTON ST CITY: NEWARK STATE: NY ZIP: 14513 BUSINESS PHONE: 3153317742 MAIL ADDRESS: STREET 1: PO BOX 271 CITY: NEWARK STATE: NY ZIP: 14513 FORMER COMPANY: FORMER CONFORMED NAME: INTERCONTINENTAL ELECTRONICS CORP DATE OF NAME CHANGE: 19730601 10-Q 1 iec10q1q2003.txt 10Q FOR 1Q03 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange - - - Act of 1934 For the quarterly period ended December 27, 2002 Commission file Number 0-6508 IEC ELECTRONICS CORP. ----------------------------------------------------- (Exact name of registrant as specified in its charter.) Delaware 13-3458955 ----------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 105 Norton Street, Newark, New York 14513 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices (Zip Code) (315) 331-7742 - -------------------------------------------------------------------------------- Registrant's telephone number, including area code: 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 practical date: Common Stock, $0.01 Par Value - 7,942,075 shares as of February 6, 2003. Page 1 of 17 PART 1 FINANCIAL INFORMATION Page Number Item 1. Financial Statements Consolidated Balance Sheets as of: December 27, 2002 (Unaudited) and September 30, 2002.......... 3 Consolidated Statements of Operations for the three months ended: December 27, 2002 (Unaudited) and December 28, 2001 (Unaudited)................................................... 4 Consolidated Statements of Cash Flows for the three months ended: December 27, 2002 (Unaudited) and December 28, 2001 (Unaudited)................................................... 5 Notes to Consolidated Financial Statements (Unaudited)........ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 11 Item 3. Quantitative and Qualitatve Disclosures about Market Risk........ 14 Item 4. Controls and Procedures.......................................... 14 PART II OTHER INFORMATION Item 1. Legal Proceedings.............................................. 15 Item 2. Changes in Securities.......................................... 15 Item 3. Defaults Upon Senior Securities................................ 15 Item 4. Submission of Matters to a Vote of Security Holders............ 15 Item 5. Other Information.............................................. 15 Item 6. Exhibits and Reports on Form 8-K............................... 15 Signature ............................................................. 15 Page 2 of 17 PART 1 FINANCIAL INFORMATION Item 1 -- Financial Statements IEC ELECTRONICS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 27, 2002 AND SEPTEMBER 30, 2002 (in thousands)
DECEMBER 27,2002 SEPTEMBER 30,2002 ---------------- ----------------- ASSETS (Unaudited) Current Assets: Accounts receivable $ 4,578 $ 5,480 Inventories 2,847 3,412 Other current assets 205 186 Current assets-discontinued operations 286 348 ---------- ---------- Total current assets 7,916 9,426 ---------- ---------- Fixed Assets: Land and land improvements 768 768 Building and improvements 3,995 3,995 Machinery and equipment 46,501 46,501 Furniture and fixtures 5,850 5,850 ---------- ---------- Sub-total gross property 57,114 57,114 Less accumulated depreciation (53,195) (52,781) ---------- ---------- Total fixed assets - net 3,919 4,333 Asset held for sale - 497 Other non-current assets 139 - Non-current assets - discontinued operations 801 809 ---------- ---------- $ 12,775 $ 15,065 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 2,987 $ 3,128 Accounts payable 4,311 6,250 Accrued payroll and related expenses 550 697 Other accrued expenses 1,164 1,497 Other current liabilities - discontinued operations 645 1,426 ---------- ---------- Total current liabilities 9,657 12,998 ---------- ---------- Long-term vendor payable 736 - Long-term debt 1,141 1,268 ---------- ---------- Total liabilities 11,534 14,266 ---------- ---------- Shareholders' Equity: Preferred stock, par value $.01 per share Authorized - 500,000 shares; Issued and outstanding - none - - Common stock, par value $.01 per share Authorized - 50,000,000 shares Issued and outstanding - 7,692,076 77 77 Treasury stock, 573 shares; at cost (11) (11) Additional paid-in capital 38,418 38,418 Retained earnings (37,197) (37,640) Accumulated other comprehensive loss - Cumulative translation adjustments (46) (45) ---------- ---------- Total shareholders' equity 1,241 799 ---------- ---------- $ 12,775 $ 15,065 ========== ========== The accompanying notes are an integral part of these financial statements
Page 3 of 17 IEC ELECTRONICS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 27, 2002 AND DECEMBER 28, 2001 (in thousands, except share and per share data)
3 MONTHS ENDED 3 MONTHS ENDED DECEMBER 27, 2002 DECEMBER 28, 2001 -------------- ------------------ (Unaudited) (Unaudited) Net sales $ 9,601 $ 11,209 Cost of sales 8,612 10,830 ------- ------- Gross profit 989 379 ------- ------- Selling and administrative expenses 753 1,296 Restructuring benefit (63) - ------- ------- Operating profit (loss) 299 (917) Interest and financing expense (197) (157) Forgiveness of accounts payable 245 - Other income, net 96 - ------- ------- Net income (loss) before income taxes 443 (1,074) Income taxes - - ------- ------- Net income (loss) from continuing operations 443 (1,074) Discontinued operations: Loss from operations of IEC- Mexico disposed of (net of income taxes of $0 in 2003 and $(7) in 2002) - (1,088) --------- ---------- Net income (loss) $ 443 $ (2,162) ========= ========== Net loss per common and common equivalent share: Basic and Diluted Income (loss) from continuing operations $ 0.06 $ (0.14) Loss from discontinued operations $ - $ (0.14) Income (loss) available to common shareholders $ 0.06 $ (0.28) Weighted average number of common and common equivalent shares outstanding: Basic 7,691,503 7,691,503 Diluted 7,838,378 7,691,503 The accompanying notes are an integral part of these financial statements.
Page 4 of 17 IEC ELECTRONICS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 27, 2002 AND DECEMBER 28, 2001 (in thousands)
3 MONTHS 3 MONTHS ENDED ENDED DECEMBER 27, DECEMBER 28, 2002 2001 ----------- ------------ (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 443 $ (2,162) Loss from discontinued operations - 1,088 Depreciation 414 403 Gain on sale of fixed assets (50) - Changes in operating assets and liabilities: Accounts receivable 902 3,412 Inventories 565 1,019 Other current assets (19) 96 Accounts payable 254 568 Accrued payroll and related expenses (147) (504) Accrued insurance (98) (59) Other accrued expenses (235) (42) ------- -------- Net cash flows from operating activities 2,029 3,819 ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property 547 - -------- -------- Net cash flows from investing activities 547 - -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in drafts payable (246) (259) Repayments under line of credit agreements (1,479) (4,170) Debt issuance costs (139) - -------- --------- Net cash flows from financing activities (1,864) (4,429) -------- --------- Cash (used in)from discontinued operations (711) 626 -------- --------- Change in cash and cash equivalents 1 16 Effect of exchange rate changes (1) (16) Cash and cash equivalents at beginning of period - - -------- --------- Cash and cash equivalents at end of period $ - $ - ======== ========= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 127 $ 328 ======== ========= Income taxes $ - $ - ======== ========= Conversion of accounts payable to long-term payable $ 736 - ======== ========= NON-CASH INVESTING AND FINANCING ACTIVITIES: Conversion of accounts payable to debt $ 1,211 - ======== ========= The accompanying notes are an integral part of these financial statements.
Page 5 of 17 IEC ELECTRONICS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 27, 2002 (1) Business and Summary of Significant Accounting Policies Business - -------- IEC Electronics Corp. ("IEC", the "Company") is an independent electronics manufacturing services ("EMS") provider of complex printed circuit board assemblies and electronic products and systems. The Company is a significant provider of high quality electronics manufacturing services with state-of-the-art manufacturing capabilities and production capacity. Utilizing computer controlled manufacturing and test machinery and equipment, the Company provides manufacturing services employing surface mount technology ("SMT") and pin-through-hole ("PTH") interconnection technologies. As an independent full-service EMS provider, the Company offers its customers a wide range of manufacturing and management services, on either a turnkey or consignment basis, including design, prototype, material procurement and control, manufacturing and test engineering support, statistical quality assurance, complete resource management and distribution. The Company's strategy is to cultivate strong manufacturing relationships with established and emerging original equipment manufacturers ("OEMs"). Consolidation - ------------- The consolidated financial statements include the accounts of IEC and its wholly-owned subsidiaries, IEC Electronics-Edinburg, Texas Inc. ("Texas") and IEC Electronics-Arab, Alabama, Inc. ("Alabama") until January 26, 2000 when each of Texas and Alabama merged into IEC; IEC Electronics-Ireland Ltd. ("Longford") from August 31, 1998, until September 4, 2001, when it was merged into IEC; and IEC Electronicos de Mexico ("Mexico") from February 2001, (collectively, "IEC"). Operations in Alabama were closed in October 1998, in Longford in December 1999 and in Texas and Mexico in July 2002. All significant intercompany transactions and accounts have been eliminated. Revenue Recognition - ------------------- The Company recognizes revenue upon shipment of product for both turnkey and consignment contracts. Cash and Cash Equivalents - ------------------------- Cash and cash equivalents include highly liquid investments with original maturities of three months or less. The Company's cash and cash equivalents are held and managed by institutions which follow the Company's investment policy. The fair value of the Company's financial instruments approximates carrying amounts due to the relatively short maturities and variable interest rates of the instruments, which approximate current market interest rates. Inventories - ----------- Inventories are stated at the lower of cost (first-in, first-out) or market. The major classifications of inventories are as follows at period end (in thousands): December 27, 2002 September 30, 2002 ---------------- ------------------ (Unaudited) Raw materials $ 1,839 $ 2,175 Work-in-process 965 1,214 Finished goods 43 23 ---------------- ---------------- $ 2,847 $ 3,412 ================ ================ Accounts Payable - ---------------- Trade accounts payable include drafts payable of $56,000 and $302,000 at December 27, 2002 and September 30, 2002, respectively. Page 6 of 17 IEC ELECTRONICS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 27, 2002 Long-Lived Assets - ----------------- As of October 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets", which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This standard harmonizes the accounting for impaired assets and resolves some of the implementation issues of Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". It retains the fundamental provisions of SFAS 121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. It also retains the basic provisions for presenting discontinued operations in the income statement but broadens the scope to include a component of an entity rather than a segment of a business. This pronouncement did not have a material impact on the Company's financial position, results of operations or cash flows. During April 2001, IEC initiated a plan to dispose of its Edinburg, Texas facility. In conjunction with this decision, the asset was written down to its estimated recoverable sales value, net of commissions. The facility is recorded at its carrying value of $800,000 at December 27, 2002 and is included in non-current assets-discontinued operations. Foreign Currency Translation - ---------------------------- The assets and liabilities of the Company's foreign subsidiaries are translated based on the current exchange rate at the end of the period for the balance sheet and a weighted-average rate for the period of the consolidated statement of operations. Translation adjustments are recorded as a separate component of equity. Transaction gains or losses are included in operations. Unaudited Financial Statements - ------------------------------- The accompanying unaudited financial statements as of December 27, 2002, and for the three months ended December 27, 2002 have been prepared in accordance with generally accepted accounting principles for interim financia1 information. In the opinion of management, all adjustments considered necessary for a fair presentation, which consist solely of normal recurring adjustments have been included. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 2002 Annual Report on Form 10-K. Earnings Per Share - ------------------ Net income (loss) per share is computed in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share". Basic earnings per share is calculated by dividing income available to common shareholders by the weighted-average number of shares outstanding for each period. Diluted earnings per common share is calculated by adjusting the weighted-average shares outstanding assuming conversion of all potentially dilutive stock options, warrants and convertible securities. New Pronouncements - ------------------ In April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 145, Rescission of FASB Statements No. 4, 44,and 64, Amendment of FASB Statement No. 13, and technical Corrections (SFAS No. 145). SFAS No. 145 requires that gains and losses from extinguishment of debt be classified as extraordinary items only if they meet the criteria in Accounting Principles Board Opinion No. 30 ("Opinion No. 30"). Applying the provisions of Opinion No. 30 will distinguish transactions that are part of an entity's recurring operations from those that are unusual and infrequent and meet the criteria for classification as an extraordinary item. SFAS No. 145 is effective for the Company beginning January 1, 2003. Management does not expect the adoption of SFAS 145 to have a material impact on the financial statements. Page 7 of 17 In June 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" (SFAS 146). SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Costs covered by SFAS 146 include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. SFAS 146 applies to all exit or disposal activities initiated after December 31, 2002. Management does not expect the adoption of SFAS 146 to have a material impact on the financial statements. In October 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 147, "Accounting for Acquisitions of Certain Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9" (SFAS 147). SFAS 147 amends SFAS 72 and no longer requires companies to recognize, and subsequently amortize, any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset. In addition, SFAS 147 amends SFAS 144 to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor and borrower relationship intangible assets and credit cardholder intangible assets. Consequently, those intangible assets are subject to the same undiscounted cash flow recoverability test and impairment loss recognition and measurement provisions that SFAS 144 requires for other long-lived assets that are held and used. Management does not expect the adoption of SFAS 147 to have a material impact on the financial statements. In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure - an amendment of FASB Statement No. 123" (SFAS 148). SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 is effective for fiscal years ending after December 15, 2002 and for financial reports containing financial statements for interim periods beginning after December 15, 2002. Management is evaluating what impact this statement will have on the financial statements. (2) Comprehensive Income (Loss) --------------------------- The Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130") on October 1, 1998. SFAS 130 requires comprehensive income and its components to be presented in the financial statements. Comprehensive income, which includes net income (loss) and foreign currency translation adjustments, was as follows for the three months ended December 27, 2002 and December 28, 2001(in thousands): 3 MONTHS 3 MONTHS ENDED ENDED DECEMBER 27, DECEMBER 28, 2002 2001 ----------- ------------ (Unaudited) (Unaudited) Net income (loss) $ 443 $ (2,162) Other comprehensive loss: Foreign currency translation adjustments (1) (16) ---------- ----------- Total comprehensive income (loss) $ 442 $ (2,178) ========== ===========
Page 8 of 17 IEC ELECTRONICS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 27, 2002 (3) Discontinued Operations ----------------------- On June 18, 2002, the Company signed an Asset Purchase Agreement to sell substantially all of the assets of IEC-Mexico to Electronic Product Integration Corporation (EPI) for $730,000 plus payments of an Earn-out Amount, based upon sales revenues received by EPI from certain former customers of the Company during the period between July 1, 2002 and January 31, 2003, in an amount up to $700,000. In addition, EPI will pay to the Company commissions based on the net selling price of products shipped to certain former customers of the Company during various time periods between June 18, 2002 and March 31, 2003. As of December 27, 2002, no additional amounts were earned under the agreement. Under the terms of a related agreement, the Company and IEC-Mexico were also released of all of their lease obligations to the landlord of the Mexican facility. EPI paid the Company $315,000 in June 2002, $265,000 in July 2002 and $150,000 in September 2002. The Company recorded an after-tax loss on the sale of the business of approximately $3.1 million in fiscal 2002. The reserve balance at December 27, 2002 was $235,000. It is anticipated that all remaining charges against the accrual will be made by September 2003. The Consolidated Financial Statements and related notes have been restated, where applicable, to reflect IEC-Mexico as a discontinued operation. Net sales of IEC-Mexico for the three months ended December 27, 2002 and December 28, 2001 were $0 and $4.6 million, respectively. These amounts are not included in net sales in the accompanying consolidated statements of operations. Assets and liabilities of discontinued operations consisted of the following:
December 27, 2002 September 30, 2002 ----------------- ------------------ Accounts receivable $ 80,697 $ 141,075 Inventories - - Other current assets 205,292 206,746 --------- ---------- Total current assets 285,989 347,821 Property, plant and equipment, net 800,000 800,000 Other assets 836 9,166 --------- ---------- Total non-current assets 800,836 809,166 --------- ---------- Total assets $1,086,825 $1,156,987 ========== ========== Accounts payable $ 393,890 $ 668,232 Accrued payroll and related expenses 17,460 37,044 Other accrued expenses 233,559 720,222 ---------- ----------- Total current liabilities $ 644,909 $1,425,498 ========== =========== Net assets of discontinued operations $ 441,916 $ (268,511) ========== ===========
(4) Financing Arrangements ---------------------- As of September 30, 2001, the Company was not in compliance with certain financial covenants under its secured asset-based credit agreement. As of December 21, 2001, the Company's banks waived the non-compliance, amended certain covenants to allow the Company more flexibility and changed the expiration date of the credit agreement to February 15, 2002 from January 31, 2003. Subsequent amendments were made to the credit agreement as of February 15, 2002, February 28, 2002, March 15, 2002, April 8, 2002, June 20, 2002, October 1, 2002, November 12, 2002 and January 1, 2003 which, among other things, continued to extend the expiration date of the credit agreement. As a result of the January 1, 2003 amendment, the expiration date of the credit agreement was January 17, 2003. Page 9 of 17 IEC ELECTRONICS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 27, 2002 As last amended, the credit agreement provided for a revolving credit facility component of $1.0 million. Amounts borrowed were limited to 85% of qualified accounts receivable. The interest rate on the revolving credit facility was increased at the time of the various amendments and on December 27, 2002 was prime rate plus 6.00%. On January 14, 2003 it was prime rate plus 6.00%. The second component of the credit facility consisted of a $10 million three-year term loan with monthly principal installments based on a five-year amortization which began in April 2000. The interest rate on the term loan facility was increased at the time of the various amendments and at December 27, 2002 was prime rate plus 6.00%. On January 14, 2003 it was prime rate plus 6.00%. At December 27, 2002, $2.9 million was outstanding, consisting of $1.7 million and $1.2 million relating to the revolving credit facility and term loan, respectively, with an additional $43,000 available under the revolving credit facility. See discussion of the new financing facility in Note 6 to the financial statements. (5) Litigation - -------------- The Company is from time to time subject to routine legal proceedings and claims which arise in the ordinary course of its business. Although occasional adverse decisions (or settlements) may occur, the Company believes that the final disposition of such matters will not have a material adverse effect on the financial position or results of operations of the Company. On August 12, 2002, an action was commenced in United States District Court for the Southern Division of Texas (Civil Action No. M-02-358) against the Company and several other corporate defendants. The plaintiffs (Armando Gonzalez and Maria Sylvia Gonzalez, husband and wife, as Next Friends of Adrian Gonzalez, a Minor, et al.) allege a "toxic tort" action against the defendants, for exposure to lead, lead dust, chemicals and other substances used in the manufacture of products by the defendants. The essence of the complaint relates to alleged "in utero" exposure to the circulatory system of the then unborn children, resulting in alleged tissue toxicity through the mothers, causing damage to the central nervous system, brain and other organs of the fetus. The complaint alleges theories of negligence, gross negligence, strict liability, breach of warranty and fraud/negligent misrepresentation, and claims unspecified damages for pain and suffering, a variety of special damages, punitive damages and attorneys fees. An answer has been filed denying liability on the part of the Company. Discovery has not begun and no trial date has been set. Royal & Sunalliance Insurance Company has agreed to provide a defense of the claims with a reservation of rights, but has expressly excluded any coverage for the claim for punitive damages. (6) Subsequent Events ----------------- On January 14, 2003, the Company completed a new $7,300,000 financing agreement composed of a $5,000,000 Senior Secured Facility (the "Facility), a $2,200,000 Secured Term Loan (the "Term Loan") and a $100,000 infusion by certain of the Company's directors. The Facility, which has a 3 year maturity, bears interest at the rate of prime plus 2%. It involves a revolving line of credit for up to $3,850,000 based upon advances on eligible accounts receivable and inventory, a term loan of $600,000, secured by machinery and equipment, to be amortized over a 36 month period and a term loan of $550,000 secured by a first mortgage lien against the Company's Edinburg, Texas real estate which loan is due at the earlier of the sale of that real estate or one year from the date of closing. The Term Loan is secured by a general security agreement, and indirectly by the assignment of a certain promissory note and a first mortgage on the Company's plant in Newark, New York. It is payable with interest at prime plus 1.5% in monthly installments over a period of 3 years. Of the funds provided by the new financing, $1,540,016 was used to repay all but $100,000 of indebtedness to the Company's prior lenders who will retain a subordinated interest in substantially all of the Company's assets until the Texas real estate is sold. On January 14, 2003, following the completion of the financing, the availability under the revolver was $1,200,000. The financing agreements contain various affirmative and negative covenants including, among others, limitations on the amount available under the revolving line of credit relative to the borrowing base, capital expenditures, fixed charge coverage ratios, and minimum earnings before interest, taxes, depreciation and amortization (EBITDA). Page 10 of 17 Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations ----------------------------------------------------------- Results of Operations - Three Months Ended December 27, 2002, Compared to the Three Months Ended December 28, 2001. ----------------------------------------------------------- Net sales for the three month period ended December 27, 2002, were $9.6 million, compared to $11.2 million for the comparable period of the prior fiscal year, a decrease of 14.3 percent. The decrease in sales is due to the prolonged overall softening in the telecommunications and industrial sectors of the U.S. economy and the consequential impact on IEC's financial position. Turnkey sales were 92 percent of net sales in the quarter as compared to 93 percent for the comparable period of the prior year. Gross profit was $1.0 million or 10.3 percent of sales for the three month period ended December 27, 2002, versus $0.4 million or 3.4 percent of sales in the comparable period of the prior fiscal year. The increase in gross profit percentage is primarily due to a $450,000 adjustment in an inventory reserve recorded during the current quarter related to excess inventory that was used in operations or sold back to customers. This accounted for 4.7% of the improvement. In addition, gross profit margin was improved by a reduction in manufacturing overhead costs due to IEC's concerted efforts to reduce costs in all areas. Selling and administrative expenses decreased to $0.8 million for the three month period ended December 27, 2002, from $1.3 million in the comparable period of the prior fiscal year, a decrease of 41.9 percent. This decrease is primarily due to lower commission expense from lower sales volume as well as a decrease in the number of employees. As a percentage of net sales, selling and administrative expenses decreased to 7.8 percent from 11.6 percent in comparison to the same quarter of the prior fiscal year. IEC recorded a benefit from restructuring of $63,000 in the three months ended December 27, 2002. This was due to certain severance payments accrued in the prior fiscal year that will no longer be paid out. IEC had other income of $341,000 for the three months ended December 27, 2002. Of the other income, $245,000 was related to negotiated forgiveness of accounts payable owed to various creditors and $50,000 was related to a gain recorded on the sale of its Arab, Alabama facility during the quarter. IEC recorded approximately $184,000 of special charges in the three months ended December 27, 2002, due to bank and consulting fees incurred to comply with new bank requirements under the then current amendment to the banking agreement, of which $102,000 is included in interest and financing expense. IEC has recorded no benefit from income tax as a result of its cumulative net losses, and accordingly, has a full valuation allowance against its net deferred tax asset including the net operating loss carry-forward. Net income from continuing operations for the three months ended December 27, 2002 was $0.4 million versus a net loss from continuing operations of $1.1 million in the comparable quarter of the prior fiscal year. Diluted income per share from continuing operations was $0.06 as compared to diluted loss per share from continuing operations of $(0.14) in the comparable quarter of the prior fiscal year. Discontinued Operations - ----------------------- On June 18, 2002, IEC signed an Asset Purchase Agreement to sell substantially all of the assets of IEC-Mexico to Electronic Product Integration Corporation (EPI) for $730,000 plus payments of an Earn-out Amount, based upon sales revenues received by EPI from certain former customers of IEC during the period between July 1, 2002 and January 31, 2003, in an amount up to $700,000. In addition, EPI will pay to IEC commissions based on the net selling price of products shipped to certain former customers of IEC during various time periods between June 18, 2002 and March 31, 2003. As of December 27, 2002, no additional amounts were earned under the agreement. Under the terms of a related agreement, IEC and IEC-Mexico were also released of all of their lease obligations to the landlord of the Mexican facility. EPI paid IEC $315,000 in June 2002, $265,000 in July 2002 and $150,000 in September 2002. IEC recorded an after-tax loss on the sale of the business of approximately $3.1 million in fiscal 2002. The reserve balance at December 27, 2002 was $235,000. It is anticipated that all remaining charges against the accrual will be made by September 2003. The Consolidated Financial Statements and related notes have been restated, where applicable, to reflect IEC-Mexico as a discontinued operation. Page 11 of 17 Liquidity and Capital Resources - ------------------------------- Net sales for the month of December 2002 were $3.3 million, representing 34.3 percent of the total net sales for the three month period ending December 27, 2002. Net sales for the month of December 2001 were $5.1 million, representing 45.6 percent of the total net sales for the three month period ending December 28, 2001. IEC operates on a fiscal quarter consisting of four weeks in the first and second months and five weeks in the third month. As reflected in the Consolidated Statements of Cash Flows for the three months ending December 27, 2002, net cash was provided by: operating activities ($2.0 million) and investing activities ($0.5 million). Net cash was used to pay down bank debt ($1.7 million). Depreciation for the three month periods ending December 27, 2002 and December 28, 2001 was $0.4 million. Improvement in collection terms with major customers and improved collection efforts has resulted in a $0.9 million reduction in accounts receivable. Inventory levels have been reduced by $0.6 million due to consumption of freed up excess material as new orders have been received, as well as inventory being sold back to customers. As of September 30, 2001, IEC was not in compliance with certain financial covenants under its secured asset-based credit agreement. As of December 21, 2001, IEC's banks waived the non-compliance, amended certain covenants to allow IEC more flexibility and changed the expiration date of the credit agreement to February 15, 2002 from January 31, 2003. Subsequent amendments were made to the credit agreement as of February 15, 2002, February 28, 2002, March 15, 2002, April 8, 2002, June 20, 2002, October 1, 2002, November 12, 2002 and January 1, 2003 which, among other things, continued to extend the expiration date of the credit agreement. As a result of the January 1, 2003 amendment, the expiration date of the credit agreement was January 17, 2003. As last amended, the credit agreement provided for a revolving credit facility component of $1.0 million. Amounts borrowed were limited to 85% of qualified accounts receivable. The interest rate on the revolving credit facility was increased at the time of the various amendments and on December 27, 2002 was prime rate plus 6.00%. On January 14, 2003 it was prime rate plus 6.00%. The second component of the credit facility consisted of a $10 million three-year term loan with monthly principal installments based on a five-year amortization which began in April 2000. The interest rate on the term loan facility was increased at the time of the various amendments and at December 27, 2002 was prime rate plus 6.00%. On January 14, 2003 it was prime rate plus 6.00%. At December 27, 2002, $2.9 million was outstanding, consisting of $1.7 million and $1.2 million relating to the revolving credit facility and term loan, respectively, with an additional $43,000 available under the revolving credit facility. On January 14, 2003, IEC completed a new $7,300,000 financing agreement composed of a $5,000,000 Senior Secured Facility (the "Facility"), a $2,200,000 Secured Term Loan (the "Term Loan") and a $100,000 infusion by certain of the IEC directors. The Facility, which has a 3 year maturity, bears interest at the rate of prime plus 2%. It involves a revolving line of credit for up to $3,850,000 based upon advances on eligible accounts receivable and inventory, a term loan of $600,000, secured by machinery and equipment, to be amortized over a 36 month period and a term loan of $550,000 secured by a first mortgage lien against IEC's Edinburg, Texas real estate which loan is due at the earlier of the sale of that real estate or one year from the date of closing. The Term Loan is secured by a general security agreement, and indirectly by the assignment of a certain promissory note and a first mortgage on the IEC plant in Newark, New York. It is payable with interest at prime plus 1.5% in monthly installments over a period of 3 years. Of the funds provided by the new financing, $1,540,016 was used to repay all but $100,000 of indebtedness to IEC's prior lenders who will retain a subordinated interest in substantially all of IEC's assets until the Texas real estate is sold. On January 14, 2003, following the completion of the financing, the availability under the revolver was $1,200,000. The financing agreements contain various affirmative and negative covenants including, among others, limitations on the amount available under the revolving line of credit relative to the borrowing base, capital expenditures, fixed charge coverage ratios, and minimum earnings before interest, taxes, depreciation and amortization (EBITDA). In connection with the financing, IEC entered into agreements with certain of its trade creditors providing for extended payment terms involving an aggregate of approximately $1,400,000 of past due balances. In addition, certain trade creditors agreed to discounted payment terms. Such discounts amounted to $245,000 and were recorded in the first quarter of fiscal 2003. Page 12 of 17 Application of Critical Accounting Policies - ------------------------------------------- IEC's financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. Critical accounting policies for IEC include revenue recognition, impairment of marketing rights, accounting for legal contingencies and accounting for income taxes. IEC recognizes revenue in accordance with Staff Accounting Bulletin No.101, "Revenue Recognition in Financial Statements." Sales are recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances and other adjustments are provided for in the same period the related sales are recorded. IEC evaluates its long-lived assets for financial impairment on a regular basis in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." IEC evaluates the recoverability of long-lived assets not held for sale by measuring the carrying amount of the assets against the estimated discounted future cash flows associated with them. At the time such evaluations indicate that the future discounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values. IEC is subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty. Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies", requires that an estimated loss from a loss contingency should be accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of a contingency is required if there is at least a reasonable possibility that a loss has been incurred. IEC evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact IEC's financial position or its results of operations. Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," establishes financial accounting and reporting standards for the effect of income taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity's financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in IEC's financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could materially impact IEC's financial position or its results of operations. Impact of Inflation - ------------------- The impact of inflation on IEC's operations has been minimal due to the fact that it is able to adjust its bids to reflect any inflationary increases in cost. New Pronouncements - ------------------ In April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 145, Rescission of FASB Statements No. 4, 44,and 64, Amendment of FASB Statement No. 13, and technical Corrections (SFAS No. 145). SFAS No. 145 requires that gains and losses from extinguishment of debt be classified as extraordinary items only if they meet the criteria in Accounting Principles Board Opinion No. 30 ("Opinion No. 30"). Applying the provisions of Opinion No. 30 will distinguish transactions that are part of an entity's recurring operations from those that are unusual and infrequent and meet the criteria for classification as an extraordinary item. SFAS No. 145 is effective for IEC beginning January 1, 2003. Management does not expect the adoption of SFAS 145 to have a material impact on the financial statements. In June 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" (SFAS 146). SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Costs covered by SFAS 146 include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. SFAS 146 applies to all exit or disposal activities initiated after December 31, 2002. Management does not expect the adoption of SFAS 146 to have a material impact on the financial statements. Page 13 of 17 In October 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 147, "Accounting for Acquisitions of Certain Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9" (SFAS 147). SFAS 147 amends SFAS 72 and no longer requires companies to recognize, and subsequently amortize, any excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset. In addition, SFAS 147 amends SFAS 144 to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor and borrower relationship intangible assets and credit cardholder intangible assets. Consequently, those intangible assets are subject to the same undiscounted cash flow recoverability test and impairment loss recognition and measurement provisions that SFAS 144 requires for other long-lived assets that are held and used. Management does not expect the adoption of SFAS 147 to have a material impact on the financial statements. In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure - an amendment of FASB Statement No. 123" (SFAS 148). SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 is effective for fiscal years ending after December 15, 2002 and for financial reports containing financial statements for interim periods beginning after December 15, 2002. Management is evaluating what impact this statement will have on the financial statements. Item 3 -- Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- Quantitative and Qualitative Disclosures about Market Risk represents the risk of loss that may impact the consolidated financial position, results of operations or cash flows of IEC due to adverse changes in financial rates. IEC is exposed to market risk in the area of interest rates. This exposure is directly related to its Term Loan and Revolving Credit borrowings under the Credit Agreement, due to their variable interest rate pricing. Management believes that interest rate fluctuations will not have a material impact on IEC's results of operations. Item 4 -- Controls and Procedures ----------------------- (a) Evaluation of disclosure controls and procedures. Based on their evaluation as of a date within 90 days of the filing date of this Quarterly Report on Form 10-Q, IEC's principal executive officer and principal financial officer have concluded that IEC's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the "Exchange Act") are effective to ensure that information required to be disclosed by IEC in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. (b) Changes in internal controls. There were no significant changes in IEC's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Forward-looking Statements - -------------------------- Except for historical information, statements in this quarterly report are forward-looking made pursuant to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are therefore subject to certain risks and uncertainties including timing of orders and shipments, availability of material, product mix and general market conditions that could cause actual results to differ materially from those projected in the forward looking statements. Investors should consider the risks and uncertainties discussed in the September 30, 2002, Form 10K and its other filings with the Securities and Exchange Commission. Page 14 of 17 PART II. OTHER INFORMATION Item 1 -- Legal Proceedings The description of IEC's legal proceedings set forth in Item 3 of IEC's Annual Report on Form 10-K for the fiscal year ended September 30, 2002 are incorporated herein by reference. Item 2 -- Changes in Securities None. Item 3 -- Defaults Upon Senior Securities None. Item 4 -- Submission of Matters to a Vote of Security Holders None. Item 5 -- Other Information None. Item 6 -- Exhibits and Reports on Form 8-K a. Exhibits The following documents are filed as exhibits to this Report: 99.1 A certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. 99.2 A certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. b. Reports on Form 8-K (i) A current report on Form 8-K was filed with the Securities and Exchange Commission on October 25, 2002. The report contained information about IEC's Bank Amendment Number 10 with HSBC Bank USA and General Electric Capital Corporation. (ii) A current report on Form 8-K was filed with the Securities and Exchange Commission on November 1, 2002. The report contained information about IEC's acceptance of term sheets involving a new senior secured credit facility and secured term loan. The report also contained information about it's imminent delisting from the NASDAQ SmallCap Market. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IEC ELECTRONICS CORP. REGISTRANT Dated: February 10, 2003 /s/W. Barry Gilbert ----------------------------- W. Barry Gilbert Chairman and Acting Chief Executive Officer Dated: February 10, 2003 /s/Kevin J. Monacelli ------------------------------ Kevin J. Monacelli Controller (Principal Financial and Accounting Officer) Page 15 of 17 CERTIFICATIONS I, W. Barry Gilbert, certify that: 1. I have reviewed this quarterly report on Form 10-Q of IEC Electronics Corp.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly represent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 10, 2003 IEC Electronics Corp. By: /s/ W. Barry Gilbert ------------------------ W. Barry Gilbert Acting Chief Executive Officer Page 16 of 17 CERTIFICATIONS I, Kevin J. Monacelli, certify that: 1. I have reviewed this quarterly report on Form 10-Q of IEC Electronics Corp.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly represent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 10, 2003 IEC Electronics Corp. By: /s/ Kevin J. Monacelli -------------------------- Kevin J. Monacelli Controller & Principal Financial Accounting Officer Page 17 of 17 EX-99.1 3 exhibit9911q03.txt CEO CERTIFICATION Exhibit 99.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 In connection with the Quarterly Report of IEC Electronics Corp. (the "Company") on Form 10-Q for the period ended December 27, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, W. Barry Gilbert, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 10, 2003 /s/W. Barry Gilbert ----------------------- W. Barry Gilbert Chairman, Acting Chief Executive Officer EX-99.2 4 exhibit9921q03.txt CFO CERTIFICATION Exhibit 99.2 Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 In connection with the Quarterly Report of IEC Electronics Corp. (the "Company") on Form 10-Q for the period ended December 27, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kevin J. Monacelli, Controller, Chief Accounting Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 10, 2003 /s/Kevin J. Monacelli --------------------- Kevin J. Monacelli Controller, Chief Accounting Officer & Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----