10-Q

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 March 31, 2017

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____ to ____

Commission File Number 001-34376

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)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since 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 by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x
Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the

Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $0.01 par value – 10,316,623 shares as of May 1, 2017

TABLE OF CONTENTS

Part I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32
Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	33
SIGNATURES		34
INDEX TO EXHIBITS		35

2

Part I     FINANCIAL INFORMATION

Item 1.  Condensed Financial Statements

IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 2017 and SEPTEMBER 30, 2016

(in thousands, except share and per share data)

	March 31, 2017			September 30, 2016
	(unaudited)
ASSETS
Current assets:
Cash	$	509		$	845
Accounts receivable, net of allowance	14,713			17,140
Inventories, net	16,477			15,384
Assets held for sale	—			4,611
Other current assets	997			1,214
Total current assets	32,696			39,194
Property, plant & equipment, net	17,010			10,994
Intangible assets, net	75			95
Goodwill	101			101
Other long term assets	8			13
Total assets	$	49,890		$	50,397
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	1,530		$	2,908
Current portion of capital lease	206			—
Accounts payable	11,784			10,864
Accrued payroll and related expenses	1,207			3,365
Other accrued expenses	496			529
Customer deposits	2,161			1,756
Total current liabilities	$	17,384		$	19,422
Long-term debt	12,950			16,732
Long-term capital lease	5,471			—
Other long-term liabilities	1,425			379
Total liabilities	37,230			36,533
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value:	—			—
500,000 shares authorized; none issued or outstanding
Common stock, $0.01 par value:
Authorized: 50,000,000 shares
Issued: 11,372,111 and 11,330,151 shares, respectively
Outstanding: 10,316,623 and 10,274,663 shares, respectively	114			113
Additional paid-in capital	46,557			46,294
Retained earnings/(accumulated deficit)	(32,422		)	(30,954		)
Treasury stock, at cost: 1,055,488 shares	(1,589		)	(1,589		)
Total stockholders’ equity	12,660			13,864
Total liabilities and stockholders’ equity	$	49,890		$	50,397

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED INCOME STATEMENTS

THREE and SIX MONTHS ENDEDMARCH 31, 2017 and APRIL 1, 2016

(unaudited; in thousands, except share and per share data)

	Three Months Ended					Six Months Ended
	March 31, 2017			April 1, 2016		March 31, 2017			April 1, 2016
Net sales	$	21,368		$	33,148	$	42,344		$	66,081
Cost of sales	19,089			27,412		38,269			54,528
Gross profit	2,279			5,736		4,075			11,553
Selling and administrative expenses	2,665			3,762		5,095			7,747
Operating profit/(loss)	(386		)	1,974		(1,020		)	3,806
Interest and financing expense	229			513		448			802
Income/(loss) before income taxes	(615		)	1,461		(1,468		)	3,004
Provision for/(benefit from) income taxes	—			—		—			—
Net income/(loss)	$	(615	)	$	1,461	$	(1,468	)	$	3,004
Net income/(loss) per common and common equivalent share:
Basic	$	(0.06	)	$	0.14	$	(0.14	)	$	0.29
Diluted	(0.06		)	0.14		(0.14		)	0.29
Weighted average number of common and common equivalent shares outstanding:
Basic	10,173,388			10,205,031		10,168,339			10,210,539
Diluted	10,173,388			10,205,031		10,168,339			10,210,539

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS of CHANGES in STOCKHOLDERS’ EQUITY

SIX MONTHS ENDEDMARCH 31, 2017 and APRIL 1, 2016

(unaudited; in thousands)

	Common Stock, par $0.01		Additional Paid-In Capital			Retained Earnings (Deficit)			Treasury Stock, at cost			Total Stockholders’ Equity
Balances, October 1, 2015	$	112	$	45,845		$	(35,740	)	$	(1,529	)	$	8,688
Net income	—		—			3,004			—			3,004
Stock-based compensation	—		162			—			—			162
Restricted (non-vested) stock grants, net of     forfeitures	1		(1		)	—			—			—
Employee stock plan purchase	—		7			—			—			7
Return of incentive compensation shares	—		—			—			(60		)	(60		)
Balances, April 1, 2016	$	113	$	46,013		$	(32,736	)	$	(1,589	)	$	11,801

	Common Stock, par $0.01		Additional Paid-In Capital			Retained Earnings (Deficit)			Treasury Stock, at cost			Total Stockholders’ Equity
Balances, October 1, 2016	$	113	$	46,294		$	(30,954	)	$	(1,589	)	$	13,864
Net loss	—		—			(1,468		)	—			(1,468		)
Stock-based compensation	—		252			—			—			252
Restricted (non-vested) stock grants, net of     forfeitures	1		—			—			—			1
Employee stock plan purchases	—		13			—			—			13
Shares withheld for payment of taxes upon     vesting of restricted stock	—		(2		)	—			—			(2		)
Balances, March 31, 2017	$	114	$	46,557		$	(32,422	)	$	(1,589	)	$	12,660

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS

SIX MONTHS ENDEDMARCH 31, 2017 and APRIL 1, 2016

(unaudited; in thousands)

	Six Months Ended
	March 31, 2017			April 1, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss)	$	(1,468	)	$	3,004
Non-cash adjustments:
Stock-based compensation	252			162
Incentive compensation shares returned	—			(60		)
Depreciation and amortization	1,330			1,681
(Gain)/loss on sale of property, plant and equipment	—			1
Reserve for doubtful accounts	(151		)	270
Provision for excess/obsolete inventory	(196		)	279
Amortization of deferred gain on sale leaseback	(30		)	—
Changes in assets and liabilities:
Accounts receivable	2,578			6,422
Inventory	(897		)	1,580
Other current assets	217			185
Other long term assets	5			(11		)
Accounts payable	920			(6,497		)
Accrued expenses	(2,191		)	629
Customer deposits	405			(1,015		)
Other long term liabilities	(85		)	(14		)
Net cash flows from operating activities	689			6,616
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment	(1,536		)	(1,270		)
Proceeds from sale-leaseback	5,750			—
Net cash flows from investing activities	4,214			(1,270		)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from revolving line of credit	21,448			30,271
Repayments of revolving line of credit	(19,868		)	(32,998		)
Repayments under other loan agreements	(6,758		)	(1,696		)
Repayments under capital lease	(73		)	—
Debt issuance costs	—			(211		)
Proceeds from employee stock plan purchases	13			7
Shares withheld for payment of taxes upon vesting of restricted stock	(1		)	—
Net cash flows from financing activities	(5,239		)	(4,627		)
Net cash flows for the period	(336		)	719
Cash, beginning of period	845			407
Cash, end of period	$	509		$	1,126
Supplemental cash flow information
Interest paid	$	429		$	803
Income taxes paid	79			—
Borrowings under capital lease	5,750			—

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

IEC ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our Business

IEC Electronics Corp. (“IEC,” “we,” “our,” “us,” the “Company”) provides electronic manufacturing services (“EMS”) to advanced technology companies that produce life-saving and mission critical products for the medical, industrial, aerospace and defense sectors. The Company specializes in delivering technical solutions for the custom manufacture of complex full system assemblies by providing on-site analytical testing laboratories, custom design and test engineering services combined with a broad array of manufacturing services encompassing electronics, interconnect solutions, and precision metalworking. As a full service EMS provider, IEC holds all appropriate certifications for the market sectors it supports including ISO 9001:2008, AS9100C, ISO 13485, Nadcap and IPC QML.  IEC is headquartered in Newark, NY and also has operations in Rochester, NY and Albuquerque, NM.  Additional information about IEC can be found on its website at www.iec-electronics.com. The contents of this website are not incorporated by reference into this quarterly report.

Generally Accepted Accounting Principles

IEC’s financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).

Fiscal Calendar

The Company’s fiscal year ends on September 30th and the first three quarters generally end on the Friday closest to the last day of the calendar quarter.

Consolidation

The consolidated financial statements include the accounts of IEC and its wholly-owned subsidiaries: IEC Electronics Wire and Cable, Inc. (“Wire and Cable”) that merged into IEC on December 28, 2016; IEC Electronics Corp-Albuquerque (“Albuquerque”); IEC Analysis & Testing Laboratory, LLC (“ATL”), formerly Dynamic Research and Testing Laboratories, LLC; and IEC California Holdings, Inc. The Rochester unit, formerly Celmet, operates as a division of IEC. All significant intercompany transactions and accounts are eliminated in consolidation. 

Unaudited Financial Statements

The accompanying unaudited financial statements for the six months endedMarch 31, 2017 and April 1, 2016 have been prepared in accordance with GAAP for interim financial information.  In the opinion of management, all adjustments required for a fair presentation of the information have been made.  The accompanying financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016 (“fiscal 2016”).

Reclassifications

Prior year financial statement amounts are reclassified as necessary to conform to the current year presentation. There was no impact on net income or accumulated deficit as a result of the reclassification.

Cash

The Company’s cash represents deposit accounts with Manufacturers and Traders Trust Company (“M&T Bank”), a banking corporation headquartered in Buffalo, NY.

Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability.  Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote.

7

Inventory Valuation

Inventories are stated at the lower of cost or market value under the first-in, first-out method.  The Company regularly assesses slow-moving, excess and obsolete inventory and maintains balance sheet reserves in amounts required to reduce the recorded value of inventory to the lower of cost or market.

Property, Plant and Equipment

Property, plant and equipment (“PP&E”) are stated at cost and are depreciated over various estimated useful lives using the straight-line method.  Maintenance and repairs are charged to expense as incurred, while renewals and improvements are capitalized.  At the time of retirement or other disposition of PP&E, cost and accumulated depreciation are removed from the accounts and any gain or loss is recorded in earnings.

Depreciable lives generally used for PP&E are presented in the table below.  Leasehold improvements are amortized over the shorter of the lease term or estimated useful life of the improvement.

PP&E Lives	Estimated Useful Lives
	(years)
Land improvements	10
Buildings and improvements	5 to 40
Machinery and equipment	3 to 5
Furniture and fixtures	3 to 7

Intangible Assets

Intangible assets (other than goodwill) are those that lack physical substance and are not financial assets.  Such assets held by IEC were acquired in connection with business combinations or represent economic benefits associated with a property tax abatement.  Values assigned to individual intangible assets are amortized using the straight-line method over their estimated useful lives. 

Reviewing Long-Lived Assets for Potential Impairment

ASC 360-10 (Property, Plant and Equipment) and ASC 350-30 (Intangibles) require the Company to test long-lived assets (PP&E and definitive lived assets) for recoverability whenever events or circumstances indicate that the carrying amount may not be recoverable.  If carrying value exceeds undiscounted future cash flows attributable to an asset, it is considered impaired and the excess of carrying value over fair value must be charged to earnings.  No impairment charges were identified or recorded by IEC for PP&E or intangibles during the six months endedMarch 31, 2017.

Goodwill

Goodwill represents the excess of cost over fair value of net assets acquired in a business combination.   Under ASC 350, goodwill is not amortized but is reviewed for impairment at least annually or when events or circumstances indicate that carrying value may exceed fair value.  The Company may elect to precede a quantitative review for impairment with a qualitative assessment of the likelihood that fair value of a particular reporting unit exceeds carrying value.  If the qualitative assessment leads to a conclusion that it is more than 50 percent likely that fair value exceeds carrying value, no further testing is required.  In the event of a less favorable outcome, the Company is required to proceed with quantitative testing. 

The quantitative process entails comparing the overall fair value of the unit to which goodwill relates to carrying value.  If fair value exceeds carrying value, no further assessment of potential impairment is required.  If fair value of the unit is less than carrying value, a valuation of the unit’s individual assets and liabilities is required to determine whether or not goodwill is impaired.  Goodwill impairment losses are charged to earnings. 

IEC’s remaining goodwill as of March 31, 2017 of $0.1 million relates to its acquisition of the Rochester division in July 2010. There has been no impairment for this goodwill since the acquisition date.  

8

Leases

At the inception of a lease covering equipment or real estate, the lease agreement is evaluated under criteria discussed in ASC 840-10-25 (Leases).  Leases meeting one of four key criteria are accounted for as capital leases and all others are treated as operating leases.  Under a capital lease, the discounted value of future lease payments becomes the basis for recognizing an asset and a borrowing, and lease payments are allocated between debt reduction and interest.  For operating leases, payments are recorded as rent expense.  Criteria for a capital lease include (i) transfer of ownership during the lease term; (ii) existence of a bargain purchase option under terms that make it likely to be exercised; (iii) a lease term equal to 75 percent or more of the economic life of the leased property; and (iv) minimum lease payments that equal or exceed 90 percent of the fair value of the property.

Legal Contingencies

When legal proceedings are brought or claims are made against us and the outcome is uncertain, ASC 450-10 (Contingencies) requires that we determine whether it is probable that an asset has been impaired or a liability has been incurred.  If such impairment or liability is probable and the amount of loss can be reasonably estimated, the loss must be charged to earnings. 

When it is considered probable that a loss has been incurred, but the amount of loss cannot be estimated, disclosure but not accrual of the probable loss is required.  Disclosure of a loss contingency is also required when it is reasonably possible, but not probable, that a loss has been incurred. 

Customer Deposits

Customer deposits represent amounts invoiced to customers for which the revenue has not yet been earned and therefore represent a commitment for the Company to deliver goods or services in the future. Deposits are generally short term in nature and are recognized as revenue when earned.

Grants from Outside Parties

Grants from outside parties are recorded as other long-term liabilities and are amortized over the same period during which the associated PP&E are depreciated. The Company received grants for certain facility improvements and equipment from state and local agencies in which the Company operates.  These grants reimbursed the Company for a portion of the actual cost or provided in kind services in support of capital projects. 

There were no deferred grants recorded during the six months endedMarch 31, 2017 or the fiscal year ended September 30, 2016. The outstanding grant balance was $0.2 million and $0.3 million at March 31, 2017 and September 30, 2016, respectively.

Derivative Financial Instruments

The Company actively monitors its exposure to interest rate risk and from time to time may use derivative financial instruments to manage the impact of this risk.  The Company uses derivatives only for purposes of managing risk associated with underlying exposures.  The Company does not trade or use instruments with the objective of earning financial gains on the interest rate nor does the Company use derivative instruments where it does not have underlying exposures.  The Company did not have any derivative financial instruments at March 31, 2017 or September 30, 2016.

Fair Value Measurements

Under ASC 825 (Financial Instruments), the Company is required to disclose the fair value of financial instruments for which it is practicable to estimate value.  The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and borrowings.  IEC believes that recorded value approximates fair value for all cash, accounts receivable, accounts payable and accrued liabilities. See Note 7—Fair Value of Financial Instruments for a discussion of the fair value of IEC’s borrowings.

9

ASC 820 (Fair Value Measurements and Disclosures) defines fair value, establishes a framework for measurement, and prescribes related disclosures.  ASC 820 defines fair value as the price that would be received upon sale of an asset or would be paid to transfer a liability in an orderly transaction.  Inputs used to measure fair value are categorized under the following hierarchy:

Level 1: Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable market data.

Level 3: Model-derived valuations in which one or more significant inputs are unobservable.

The Company deems a transfer between levels of the fair value hierarchy to have occurred at the beginning of the reporting period.  There were no such transfers during each of the first six months of the fiscal year ending September 30, 2017 (“fiscal 2017”) or fiscal 2016.

Revenue Recognition

The Company’s revenue is principally derived from the sale of electronic products built to customer specifications, but also from other value-added support services and repair work.  Revenue from product sales is recognized when (i) goods are shipped or title and risk of ownership have passed, (ii) the price to the buyer is fixed or determinable, and (iii) realization is reasonably assured. Service revenue is generally recognized once the service has been rendered.  Services revenue, including material management, design and repair work revenue, amounted to less than 5% of total revenue in each of the first six months of fiscal2017 and fiscal 2016.

Provisions for discounts, allowances, rebates, estimated returns and other adjustments are recorded in the period the related sales are recognized.

Stock-Based Compensation

ASC 718 (Stock Compensation) requires that compensation expense be recognized for equity awards based on fair value as of the date of grant.  For stock options, the Company uses the Black-Scholes pricing model to estimate grant date fair value.  Costs associated with stock awards are recorded over requisite service periods, generally the vesting period.  If vesting is contingent on the achievement of performance objectives, fair value is accrued over the period the objectives are expected to be achieved only if it is considered probable that the objectives will be achieved.  The Company also has an employee stock purchase plan (“ESPP”) that provides for the purchase of Company common stock at a discounted stock purchase price. Compensation expense related to the discount is recognized as employees contribute to the plan. During the fiscal year ended September 30, 2015 (“fiscal 2015”) and the first quarter of fiscal 2016, the ESPP was suspended in connection with the 2014 restatements of the Company’s financial statements. The ESPP was reinstated as of the beginning of the second quarter of fiscal 2016.

Legal Expense Accrual

The Company records legal expenses as they are incurred, based on invoices received or estimates provided by legal counsel. Future estimated legal expenses are not recorded until incurred.

Income Taxes and Deferred Taxes

ASC 740 (Income Taxes) requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns, but not in both.  Deferred tax assets are also established for tax benefits associated with tax loss and tax credit carryforwards.  Such deferred balances reflect tax rates that are scheduled to be in effect, based on currently enacted legislation, in the years the book/tax differences reverse and tax loss and tax credit carryforwards are expected to be realized.  An allowance is established for any deferred tax asset for which realization is not likely.

ASC 740 also prescribes the manner in which a company measures, recognizes, presents and discloses in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return.  The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the position will be sustained following examination by taxing authorities, based on technical merits of the position.  The Company believes that it has no material uncertain tax positions.

10

Any interest incurred is reported as interest expense. Any penalties incurred are reported as tax expense.   The Company’s income tax filings are subject to audit by various tax jurisdictions and current open years are the fiscal year ended September 30, 2010 through fiscal year ended September 30, 2012, and fiscal year ended September 30, 2014 through fiscal 2015.  The federal income tax audit for the fiscal year ended September 30, 2013 concluded during the first six months of fiscal 2017 and resulted in no change to reported tax.

Earnings Per Share

Basic earnings per common share are calculated by dividing income available to common stockholders by the weighted average number of shares outstanding during each period.  Diluted earnings per common share add to the denominator incremental shares resulting from the assumed exercise of all potentially dilutive stock options, as well as restricted (non-vested) stock, restricted stock units (“RSUs”) and anticipated issuances under the ESPP.  Options, restricted stock and RSUs are primarily held by directors, officers and certain employees. 

A summary of shares used in the earnings per share (“EPS”) calculations follows:

	Three Months Ended		Six Months Ended
Shares for EPS Calculation	March 31, 2017	April 1, 2016	March 31, 2017	April 1, 2016
Weighted average shares outstanding	10,173,388	10,205,031	10,168,339	10,210,539
Incremental shares	—	—	—	—
Diluted shares	10,173,388	10,205,031	10,168,339	10,210,539
Anti-dilutive shares excluded	1,157,356	804,965	1,157,356	804,965

As a result of the net loss and incremental shares being negative for the three and six months endedMarch 31, 2017, the Company calculated diluted earnings per share using weighted average basic shares outstanding, as using diluted shares would be anti-dilutive to loss per share.

As a result of the incremental shares being negative for the three and six months ended and April 1, 2016, the Company calculated diluted earnings per share using weighted average basic shares outstanding, as using diluted shares would be anti-dilutive. 

Dividends

IEC does not pay dividends on its common stock as it is the Company’s current policy to retain earnings for use in the business.  Furthermore, the Company’s Fifth Amended and Restated Credit Facility Agreement, as amended, with M&T Bank includes certain restrictions on paying cash dividends, as more fully described in Note 6—Credit Facilities. 

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities.  Actual results may differ from management’s estimates.

Statements of Cash Flows

The Company presents operating cash flows using the indirect method of reporting under which non-cash income and expense items are removed from net income. 

Recently Issued Accounting Standards

FASB Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“Topic 606”) was issued May 2014 and updates the principles for recognizing revenue.  This ASU will supersede most of the existing revenue recognition requirements in GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which a company expects to be entitled in exchange for transferring goods or services to a customer.  This ASU also amends the required disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. FASB ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent

11

Considerations” was issued in March 2016 and improves implementation guidance on principal versus agent considerations. FASB ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” was issued in April 2016 and adds further guidance on identifying performance obligations as well as improving licensing implementation guidance. FASB ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” was issued in June 2016 and clarifies the objective of the collectability criterion, presentation of taxes collected from customers, non-cash consideration, contract modifications at transition, completed contracts at transition and how guidance in Topic 606 is retrospectively applied. The amendments do not change the core principle of the guidance in Topic 606. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within that period.  Early adoption is permitted for annualperiods beginning after December 15, 2016.  The Company is identifying key personnel to evaluate the guidance and determine the transition method, while also formulating a time line to review the potential impact of the new standard on the Company's existing revenue recognition policies and procedures. Although Management has not completed its evaluation of all the issued guidance under Topic 606, the Company does not currently expect the guidance to have a material effect on its financial position, results of operations or cash flows.

FASB ASU 2015-11, “Simplifying the Measurement of Inventory” was issued in July 2015. This requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. This ASU will not apply to inventories that are measured by using either the last-in, first-out method or the retail inventory method. For public business entities, this ASU is effective prospectively for annual periods beginning after December 15, 2016, and interim periods therein. Upon transition, entities must disclose the nature of and reason for the accounting change. The Company does not anticipate a significant impact on its financial statements upon adoption.

FASB ASU 2015-17, “Income Taxes Balance Sheet Classification of Deferred Taxes” was issued in November 2015. This requires entities to classify deferred tax liabilities and assets as noncurrent in a classified statement of financial position and applies to all entities that present a classified statement of financial position. For public entities, this update is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company does not anticipate a significant impact on its financial statements upon adoption.

FASB ASU 2016-02, “Leases” was issued in February 2016. The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. For public entities, the new guidance is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted for all entities. The Company is evaluating the impact this ASU will have on its financial statements.

FASB ASU 2016-09, “Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting” was issued in March 2016. This simplifies accounting for several aspects of share-based payment including income tax consequences, classification of awards as either equity or liability and classification on the statement of cash flows. For public entities, this update is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company does not anticipate a significant impact on its financial statements upon adoption.

NOTE 2—ALLOWANCE FOR DOUBTFUL ACCOUNTS

A summary of activity in the allowance for doubtful accounts during the six months endedMarch 31, 2017 and April 1, 2016 follows:

	Six Months Ended
Allowance for Doubtful Accounts	March 31, 2017			April 1, 2016
(in thousands)
Allowance, beginning of period	$	226		$	423
Provision for doubtful accounts	(151		)	270
Write-offs/recoveries	15			(158		)
Allowance, end of period	$	90		$	535

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NOTE 3—INVENTORIES

A summary of inventory by category at period end follows:

Inventories	March 31, 2017			September 30, 2016
(in thousands)
Raw materials	$	9,711		$	9,138
Work-in-process	6,676			5,932
Finished goods	1,519			1,939
Total inventories	17,906			17,009
Reserve for excess/obsolete inventory	(1,429		)	(1,625		)
Inventories, net	$	16,477		$	15,384

NOTE 4—PROPERTY, PLANT & EQUIPMENT

A summary of property, plant and equipment and accumulated depreciation at period end follows:

Property, Plant & Equipment	March 31, 2017			September 30, 2016
(in thousands)
Land and improvements	$	788		$	788
Buildings and improvements	8,910			8,910
Building under capital lease	5,750			—
Machinery and equipment	28,371			26,905
Furniture and fixtures	7,503			7,489
Construction in progress	3,135			3,079
Total property, plant and equipment, at cost	54,457			47,171
Accumulated depreciation	(37,447		)	(36,177		)
Property, plant and equipment, net	$	17,010		$	10,994

Depreciation expense during the three and six months endedMarch 31, 2017 and April 1, 2016 follows:

	Three Months Ended				Six Months Ended
	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016
(in thousands)
Depreciation expense	$	652	$	807	$	1,298	$	1,647

NOTE 5—INTANGIBLE ASSETS

IEC’s intangible assets (other than goodwill) were acquired in connection with the purchase of Albuquerque during the fiscal year ended September 30, 2010.

Albuquerque’s building and land were acquired subject to an Industrial Revenue Bond (“IRB”) that exempted the property from real estate taxes for the term of the IRB.  The tax abatement was valued at $0.4 million at the date of acquisition, and such value was being amortized over the 9.2 year exemption period that remained as of the acquisition date.  No impairment was taken for this asset since the Albuquerque acquisition. The IRB was paid off in connection with the sale-leaseback transaction described in Note 14—Capital Lease.

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A summary of intangible assets by category and accumulated amortization at period end follows:

Intangible Assets	March 31, 2017			September 30, 2016
(in thousands)
Property tax abatement - Albuquerque	$	360		$	360
Accumulated amortization	(285		)	(265		)
Intangible assets, net	$	75		$	95

Amortization expense during the three and six months endedMarch 31, 2017 and April 1, 2016 follows:

	Three Months Ended				Six Months Ended
Amortization Expense	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016
(in thousands)
Intangible amortization expense	$	10	$	10	$	20	$	20

A summary of amortization expense for the next five years follows:

Future Amortization	Estimated future amortization
(in thousands)
Twelve months ended March,
2018	$	40
2019	35
2020 and thereafter	—

NOTE 6—CREDIT FACILITIES

A summary of borrowings at period end follows:   

			March 31, 2017					September 30, 2016
Debt	Fixed/ Variable Rate	Maturity  Date	Balance			Interest Rate		Balance			Interest Rate
($ in thousands)
M&T credit facilities:
Revolving Credit Facility	v	1/18/2018	$	5,541		5.23	%	$	3,961		3.28	%
Term Loan A(1)	f	2/1/2020	—			—		3,693			3.98
Term Loan B	v	2/1/2023	8,283			4.03		8,983			3.03
Albuquerque Mortgage Loan(1)	v	2/1/2018	—			—		2,200			3.55
Celmet Building Term Loan	f	11/7/2018	867			4.72		932			4.72
Other credit facilities:
Albuquerque Industrial Revenue Bond(1)	f	3/1/2019	—			—		100			5.63
Total debt, gross			14,691					19,869
Unamortized debt issuance costs			(211		)			(229		)
Total debt, net			14,480					19,640
Less: current portion			(1,530		)			(2,908		)
Long-term debt			$	12,950				$	16,732

⁽¹⁾ The Albuquerque Mortgage Loan and the Albuquerque Industrial Revenue Bond were repaid in connection with the sale-leaseback transaction described in Note 14—Capital Lease. The proceeds from the transaction were also used to pay down Term Loan A, which was subsequently paid off in due course.

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M&T Bank Credit Facilities

On November 28, 2016, the Company and M&T Bank entered into the Second Amendment to Fifth Amended and Restated Credit Facility Agreement (the “Second Amendment”), that amended the Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by the First Amendment to the Fifth Amended and Restated Credit Facility, dated as of June 20, 2016 (“Fifth Amended Credit Agreement”). The Second Amendment reduced M&T Bank’s revolving credit commitment to $16.0 million and modified the trigger for maintenance of the cash management system. The Second Amendment also modified the level adjustment dates for the Applicable Margin and the Applicable Unused Fee, as such terms are defined under the Fifth Amended Credit Agreement. In addition, the Second Amendment amended the covenants regarding the Company’s Debt to EBITDAS Ratio, Minimum Quarterly EBITDAS amounts and the Fixed Charge Coverage Ratio, as such terms are defined under the Fifth Amended Credit Agreement. The Fifth Amended Credit Agreement prohibits the Company from paying dividends or repurchasing or redeeming its common stock without first obtaining the consent of M&T Bank.

On May 5, 2017, the Company and M&T Bank entered into the Third Amendment to Fifth Amended and Restated Credit Facility Agreement (the “Third Amendment”). See Note 15—Subsequent Events for a discussion of the Third Amendment.

Individual debt facilities provided under the Fifth Amended Credit Agreement, as amended, are described below:

a) Revolving Credit Facility (“Revolver”): Up to $16.0 million is available through January 18, 2018. The maximum amount the Company may borrow is determined based on a borrowing base calculation described below.

b) Term Loan A: $10.0 million was borrowed on January 18, 2013. Principal was being repaid in 108 equal monthly installments of $93 thousand. The proceeds of the sale-leaseback transaction described in Note 14—Capital Lease were used to pay down the loan, which was subsequently paid off in due course.

c) Term Loan B:$14.0 million was borrowed on January 18, 2013. Principal is being repaid in 120 equal monthly installments of $117 thousand.

d) AlbuquerqueMortgage Loan: $4.0 million was borrowed on December 16, 2009. The loan was secured by real property in Albuquerque, NM, and principal was being repaid in equal monthly installments of $22 thousand. The loan was repaid in connection with the sale-leaseback transaction described in Note 14—Capital Lease.

e) Celmet Building Term Loan:$1.3 million was borrowed on November 8, 2013 pursuant to an amendment to the Fourth Amended and Restated Credit Facility Agreement dated as of January 18, 2013. The proceeds were used to reimburse the Company’s cost of purchasing its Rochester, New York facility. Principal is being repaid in 59 equal monthly installments of $11 thousand plus a balloon payment due at maturity. 

Borrowing Base

Under the Fifth Amended Credit Agreement, as amended, the maximum amount the Company can borrow under the Revolver is the lesser of (i) 85% of eligible receivables plus 35% of eligible inventories (up to a cap of $3.75 million) or (ii) $16.0 million at March 31, 2017 and $20.0 million at September 30, 2016.

At March 31, 2017 and September 30, 2016, the upper limit on Revolver borrowings was $13.8 million and $16.4 million, respectively. Average Revolver balances amounted to $3.4 million during the six months endedMarch 31, 2017.

Interest Rates

Under the Fifth Amended Credit Agreement, variable rate debt accrues interest at LIBOR plus the applicable marginal interest rate that fluctuates based on the Company’s Debt to EBITDAS Ratio, as defined below. Under the Second Amendment, the applicable marginal interest rate was fixed on November 28, 2016 through the fiscal quarter ending September 30, 2017, as follows: 4.25% for the Revolver and 3.25% for Term Loan B.  Beginning October 1, 2017, variable rate debt will again accrue interest at LIBOR plus the applicable margin interest rate that is based on the Company’s Debt to EBITDAS Ratio. Changes to applicable margins and unused fees resulting from the Debt to EBITDAS Ratio generally become effective mid-way through the subsequent quarter.

Prior to December 14, 2015, the Sixth Amendment fixed each facility’s applicable margin through March 31, 2016 as follows: 4.25% for the Revolver, 4.50% for the Albuquerque Mortgage Loan and 3.25% for the Term Loan B. The applicable unused line fee of 0.50% also was extended through March 31, 2016.

The Company incurs quarterly unused commitment fees ranging from 0.250% to 0.500% of the excess of $16.0 million over average borrowings under the Revolver. Fees incurred amounted to $50.1 thousand and $23.8 thousand during the six months endedMarch 31, 2017 and April 1, 2016, respectively. The fee percentage varies based on the Company’s Debt to EBITDAS Ratio, as defined below.

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Financial Covenants

The Fifth Amended Credit Agreement, as amended, also contains various affirmative and negative covenants including financial covenants. The Company is required to maintain (i) a minimum level of quarterly EBITDAS, as defined below (“Quarterly EBITDAS”), (ii) a ratio of total debt to twelve month EBITDAS (“Debt to EBITDAS Ratio”) that is below a specified limit, (iii) a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”), (iv) a maximum level of inventory (“Maximum Inventory”), and (v) a maximum amount of capital expenditures (“Maximum Capital Expenditures”). The Debt to EBITDAS Ratio is the ratio of debt to earnings before interest, taxes, depreciation, amortization and non-cash stock compensation expense (“EBITDAS”). “Adjusted EBITDA” means, for the applicable period, EBITDAS less unfinanced capital expenditures and cash paid for taxes, all on a consolidated basis. The Fixed Charge Coverage Ratio compares (i) 12 month Adjusted EBITDA plus non-cash stock compensation expense minus unfinanced capital expenditures minus taxes paid, to (ii) the sum of interest expense, principal payments and dividends, if any (fixed charges). The Maximum Inventory covenant allows for specific levels of inventory as defined by the agreement. The Maximum Capital Expenditures covenants allow for a maximum amount of capital expenditures on an annual basis.

Covenant ratios in effect at March 31, 2017, pursuant to the Fifth Amended Credit Agreement, as amended by the Second Amendment, are as follows:

Debt to EBITDAS Ratio:
12/31/2016 through and including 3/31/2017	< 4.7 to 1.00
Minimum Quarterly EBITDAS:
Fiscal Quarter ending 3/31/2017	$	240,000
Fixed Charge Coverage Ratio:
12/31/2016 through and including 3/31/2017	> 0.3 to 1.00
Maximum Inventory:
As of 3/31/2017	$	25.0	m
Maximum Capital Expenditures:	Measured annually; maximum $4.5m

The Company was in compliance with all debt covenants at March 31, 2017.

Other Borrowings

When IEC acquired Albuquerque, the Company assumed responsibility for a $0.1 million Industrial Revenue Bond issued by the City of Albuquerque. Interest on the bond was paid semiannually, and principal was due in its entirety at maturity. The Bond was repaid in connection with the sale-leaseback transaction described in Note 14—Capital Lease.

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Contractual Principal Payments

A summary of contractual principal payments under IEC’s borrowings for the next five years taking into consideration the Fifth Amended Credit Agreement, as amended, follows:

Debt Repayment Schedule		Contractual Principal Payments
(in thousands)
Twelve months ended March
2018		$	1,530
2019	(1)	2,137
2020		1,400
2021		1,400
2022 and thereafter (2)		8,224
		$	14,691

⁽¹⁾ Includes final payment of Celmet Building Term Loan on November 7, 2018.

⁽²⁾ Includes Revolver balance of $5.5 million at March 31, 2017.

NOTE 7—FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial Instruments Carried at Historical Cost

The Company’s long-term debt is not quoted.  Fair value was estimated using a discounted cash flow analysis based on Level 2 valuation inputs, including borrowing rates the Company believes are currently available to it for loans with similar terms and maturities.

The Company’s debt is carried at historical cost on the balance sheet.  A summary of the fair value and carrying value of fixed rate debt at period end follows:

	March 31, 2017				September 30, 2016
	Fair Value		Carrying Value		Fair Value		Carrying Value
(in thousands)
Term Loan A	$	—	$	—	$	3,489	$	3,693
Celmet Building Term Loan	811		867		864		932

The fair value of the remainder of the Company’s debt approximated carrying value at March 31, 2017 and September 30, 2016 as it is variable rate debt.

NOTE 8—WARRANTY RESERVES

IEC generally warrants its products and workmanship for up to twelve months from date of sale.  As an offset to warranty claims, the Company is sometimes able to obtain reimbursement from suppliers for warranty-related costs or losses.  Based on historical warranty claims experience and in consideration of sales trends, a reserve is maintained for estimated future warranty costs to be incurred on products and services sold through the balance sheet date.

A summary of additions to and charges against IEC’s warranty reserves during the period follows: 

	Six Months Ended
Warranty Reserve	March 31, 2017			April 1, 2016
(in thousands)
Reserve, beginning of period	$	180		$	399
Provision	111			123
Warranty costs	(101		)	(183		)
Reserve, end of period	$	190		$	339

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NOTE 9—STOCK-BASED COMPENSATION

The 2010 Omnibus Incentive Compensation Plan (the “2010 Plan”), was approved by the Company’s stockholders at the January 2011 Annual Meeting. The Company also has an ESPP, adopted in 2011, that provides for the purchase of Company common stock at a discounted stock purchase price. The 2010 Plan replaced IEC’s 2001 Stock Option and Incentive Plan (the “2001 Plan”), which expired in December 2011.  The 2010 Plan, which is administered by the Compensation Committee of the Board of Directors, provides for the following types of awards: incentive stock options, nonqualified options, stock appreciation rights, restricted shares, restricted stock units, performance compensation awards, cash incentive awards, director stock and other equity-based and equity-related awards.  Awards are generally granted to certain members of management and employees, as well as directors.  Under the 2010 Plan, up to 2,000,000 shares of common stock may be issued over a term of ten years.

Stock-based compensation expense recorded under the 2010 and 2001 Plans as well as the ESPP totaled $0.1 million and $0.3 million for the three and six months endedMarch 31, 2017, respectively. Stock-based compensation expense recorded under the 2010 and 2001 Plans as well as the ESPP totaled $0.1 million and $0.2 million for the three and six months endedApril 1, 2016, respectively. During the six months endedApril 1, 2016, incentive compensation shares were returned by the Company’s former CEO resulting in a reduction to compensation expense of $60.0 thousand. 

At March 31, 2017, there were 240,790 shares available to be issued under the 2010 Plan.

Expenses relating to stock options that comply with certain U.S. income tax rules are neither deductible by the Company nor taxable to the employee.  Further information regarding awards granted under the 2001 Plan, 2010 Plan and ESPP is provided below.

Stock Options

When options are granted, IEC estimates the fair value of the option using the Black-Scholes option pricing model and recognizes the computed value as compensation cost over the vesting period, which is typically four years.  The contractual term of options granted under the 2010 Plan is generally seven years. 

Assumptions used in the Black-Scholes model and the estimated value of options granted during the six months endedMarch 31, 2017 are included in the table below. There were no options granted during the six months endedApril 1, 2016.

	Six Months Ended
Valuation of Options	March 31, 2017
Assumptions for Black-Scholes:
Risk-free interest rate	1.48		%
Expected term in years	4.0
Volatility	40		%
Expected annual dividends	none
Value of options granted:
Number of options granted	50,000
Weighted average fair value per share	$	1.18
Fair value of options granted (000s)	$	59

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A summary of stock option activity, together with other related data, follows:

	Six Months Ended
	March 31, 2017				April 1, 2016
Stock Options	Number of Options		Wgtd. Avg. Exercise Price		Number of Options		Wgtd. Avg. Exercise Price
Outstanding, beginning of period	759,795		$	4.43	717,645		$	4.40
Granted	50,000		3.60		—		—
Exercised	—		—		—		—
Forfeited	(30,500	)	5.70		(15,500	)	5.99
Expired	(19,750	)	5.37		—		—
Outstanding, end of period	759,545		$	4.30	702,145		$	4.37
For options expected to vest
Number expected to vest	738,410		$	4.30	558,596		$	4.44
Weighted average remaining term, in years	4.9				5.3
Intrinsic value (000s)			$	11			$	239
For exercisable options
Number exercisable	324,472		$	4.46	260,036		$	4.84
Weighted average remaining term, in years	4.3				4.4
Intrinsic value (000s)			$	—			$	77
For non-exercisable options
Expense not yet recognized (000s)			$	526			$	597
Weighted average years to be recognized	2.3				3.1
For options exercised
Intrinsic value (000s)			$	—			$	—

Changes in the number of non-vested options outstanding, together with other related data, follows: 

	Six Months Ended
	March 31, 2017				April 1, 2016
Stock Options	Number of Options		Wgtd. Avg. Grant Date Fair Value		Number of Options		Wgtd. Avg. Grant Date Fair Value
Non-vested, beginning of period	489,109		$	1.43	546,145		$	1.41
Granted	50,000		1.18		—		—
Vested	(104,036	)	1.45		(104,036	)	1.45
Forfeited	—		—		—		—
Non-vested, end of period	435,073		$	1.40	442,109		$	1.40

Restricted (Non-vested) Stock

Holders of IEC restricted stock have voting and dividend rights as of the date of grant, but until vested, the shares may be forfeited and cannot be sold or otherwise transferred.  At the end of the vesting period, which is typically four or five years (three years in the case of directors), holders have all the rights and privileges of any other IEC common stockholder.  The fair value of a share of restricted stock is its market value on the date of grant, and that value is recognized as stock compensation expense over the vesting period. 

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A summary of restricted stock activity, together with related data, follows: 

	Six Months Ended
	March 31, 2017				April 1, 2016
Restricted (Non-vested) Stock	Number of Non-vested Shares		Wgtd. Avg. Grant Date Fair Value		Number of Non-vested Shares		Wgtd. Avg. Grant Date Fair Value
Outstanding, beginning of period	228,759		$	4.40	54,960		$	4.23
Granted	194,766		3.62		59,560		4.03
Vested	(25,131	)	4.22		(11,700	)	4.23
Shares withheld for payment of taxes upon vesting of restricted stock	(583	)	3.60		—		—
Forfeited	—		—		—		—
Outstanding, end of period	397,811		$	4.03	102,820		$	4.11
For non-vested shares
Expense not yet recognized (000s)			$	1,075			$	357
Weighted average remaining years for vesting	2.4				2.5
For shares vested
Aggregate fair value on vesting dates (000s)			$	94			$	43

Employee Stock Purchase Plan

The Company administers an ESPP that provides for a discounted stock purchase price.  On February 13, 2015, the Compensation Committee of the Company’s Board of Directors suspended operation of the ESPP indefinitely in connection with the 2014 restatements of the Company’s financial statements. The Compensation Committee of the Company’s Board of Directors reinstated the ESPP on December 2, 2015; however, participants were not able to contribute to the ESPP until January 2016.

Employees currently receive a 10% discount on stock purchases through the ESPP. Employee contributions to the plan, net of withdrawals were $16.7 thousand and $8.1 thousand for the six months endedMarch 31, 2017 and April 1, 2016, respectively. Compensation expense recognized under the ESPP was $1.9 thousand and $1.0 thousand for the six months endedMarch 31, 2017 and April 1, 2016, respectively.

Stock Issued to Board Members

In addition to annual grants of restricted stock, included in the table above, Board members may elect to have their meeting fees paid in the form of shares of the Company’s common stock.   The Company has not paid any meeting fees in stock since May 21, 2013. 

NOTE 10—RETIREMENT PLAN

The Company administers a retirement savings plan for the benefit of its eligible employees and their beneficiaries under the provisions of Sections 401(a) and (k) of the Internal Revenue Code.  Eligible employees may contribute a portion of their compensation to the plan, and the Company is permitted to make discretionary contributions as determined by the Board of Directors.  The Company contributes 25% of the first 6% contributed by all employees at all locations. Company contributions during the six months endedMarch 31, 2017 and April 1, 2016 totaled $0.1 million and $0.1 million, respectively.

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NOTE 11—INCOME TAXES

Provision for income taxes during each of the three and six months endedMarch 31, 2017 and April 1, 2016 follows:

	Three Months Ended				Six Months Ended
Income Tax Provision/Benefit	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016
(in thousands)
Provision for/(benefit from) income taxes	$	—	$	—	$	—	$	—

The Company has recorded a full valuation allowance on all deferred tax assets. Although we have recorded a full valuation allowance for all deferred tax assets, including net operating loss carryforwards (“NOLs”), these NOLs remain available to the Company to offset taxable income and reduce tax payments. IEC had federal NOLs for income tax purposes of approximately $31.7 million at September 30, 2016, expiring mainly in years 2022 through 2025 and 2034 through 2035. The Company also has additional state NOLs available in several jurisdictions in which it files state tax returns.

Recent New York state corporate tax reform has resulted in the reduction of the business income base rate for qualified manufactures in New York state to 0% beginning in fiscal 2015 for IEC. At September 30, 2016, the Company had $1.2 million of New York State investment tax and other credit carryforwards, expiring in various years through 2030.  The credits cannot be utilized unless the New York state tax rate is no longer 0%.

NOTE 12—MARKET SECTORS AND MAJOR CUSTOMERS

A summary of sales, according to the market sector within which IEC’s customers operate, follows:

	Three Months Ended		Six Months Ended
% of Sales by Sector	March 31, 2017	April 1, 2016	March 31, 2017	April 1, 2016
Aerospace & Defense	44%	34%	47%	37%
Medical	32%	50%	30%	46%
Industrial	21%	14%	20%	15%
Communications & Other	3%	2%	3%	2%
	100%	100%	100%	100%

Two individual customers each represented 10% or more of sales for the six months endedMarch 31, 2017. One customer was from the Aerospace & Defense sector and represented 13% of sales, while the other was from the Medical sector and also represented 13% of sales for the six months endedMarch 31, 2017. Two individual customers each represented 10% or more of sales for the six months endedApril 1, 2016.  Both customers were from the Medical sector, with one representing 18% of sales, while the other customer represented 17% of sales, for the six months endedApril 1, 2016.

Three individual customers represented 10% or more of receivables and accounted for 40% the outstanding balance at March 31, 2017. Two individual customers represented 10% or more of receivables and accounted for 29% of the outstanding balances at April 1, 2016.

Credit risk associated with individual customers is periodically evaluated by analyzing the entity’s financial condition and payment history.  Customers generally are not required to post collateral.

NOTE 13—LITIGATION

From time to time, the Company may be involved in legal action in the ordinary course of its business, but management does not believe that any such proceedings commenced through the date of the financial statements included in this Form 10-Q, individually or in the aggregate, will have a material adverse effect on the Company’s consolidated financial position.

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NOTE 14—CAPITAL LEASE

Leases

On November 18, 2016, the Company entered into a sale-leaseback agreement, pursuant to the terms of the Purchase and Sale Agreement (the “PSA”), with Store Capital Acquisitions, LLC, a Delaware limited liability company (the “Purchaser”), for the sale of certain property, including the manufacturing facility located in Albuquerque, New Mexico (the “Property”). Albuquerque (the “Seller”) completed the sale of the Property to the Purchaser for an aggregate purchase price of approximately $5.8 million including a $0.1 million holdback held subject to a holdback of funds agreement. The net book value of assets sold was $4.6 million and the value of the assets acquired under the lease is $5.8 million. The Company recorded a deferred gain of $1.1 million related to the transaction, which is recorded in other long-term liabilities section of the consolidated balance sheet. The proceeds from the transaction were used to payoff the Albuquerque Mortgage Loan and pay down Term Loan A. As part of the transaction, a Lease Agreement dated as of November 18, 2016 was entered into between the Seller and the Purchaser (the “Lease”). Pursuant to the Lease, the Seller is leasing the Property for an initial term of 15 years, with two renewal options of five years each. The initial base annual rent is approximately $0.5 million and is subject to an annual increase equal to the lesser of two percent or 1.25 times the change in the Consumer Price Index. Late payments incur a charge of 5% and bear interest at a rate of 18% or the highest rate permitted by law. If an event of default occurs under the terms of the Lease, among other things, all rental amounts accelerate and become due and owing, subject to certain adjustments.  In addition, the Company entered into a separate payment and performance guaranty with the Purchaser with respect to the Lease.

A summary of capital lease payments for the next five years follows:

Capital Lease Payment Schedule	Contractual Principal Payments
(in thousands)
Twelve months ended March
2018	$	478
2019	487
2020	497
2021	549
2022 and thereafter	6,101
Total capital lease payments	$	8,112
Less: amounts representing interest	(2,435		)
Present value of minimum lease payment	$	5,677

NOTE 15—SUBSEQUENT EVENTS

Effective as of May 5, 2017, the Company and M&T Bank entered into the Third Amendment to Fifth Amended Credit Agreement (the “Third Amendment”), that amended the Fifth Amended Credit Agreement. The Third Amendment extended the Revolver termination date to May 5, 2022. In connection with the Third Amendment, the Company issued the Term Loan B to M&T Bank, that amended and restated the Amended and Restated Term Loan B dated December 14, 2015. The Third Amendment revised certain covenants to provide that the Company may use Revolver proceeds to refinance existing indebtedness. As a result, the Term Loan B, which matures on May 5, 2022, now has a principal amount of $6.0 million. The Third Amendment also revised the maximum amount the Company can borrow under the Revolver to the lesser of $16.0 million or 85% of eligible receivables plus $7.0 million of eligible inventories.

Pursuant to the Third Amendment, as of March 31, 2017, certain financial covenants of the credit facility were eliminated or revised to be less complex, including the Maximum Inventory covenant, Debt to EBITDAS ratios, the Maximum Capital Expenditures limit after the fiscal year ending September 30, 2017, and future requirements of Minimum Quarterly EBITDAS except for the fiscal quarter ending June 30, 2017. The Third Amendment also modified the definitions of Applicable Margin and Applicable Unused Fee to provide that each is calculated using the applicable Fixed Charge Coverage Ratio, as redefined by the Third Amendment. The Third Amendment established a Borrowing Base computed using monthly Borrowing Base Reports that, if inaccurate, allow M&T Bank, in its discretion, to suspend the making of or limit Revolving Credit Loans. Further, the Third Amendment provides for the Company’s repurchase of its common stock under certain circumstances without M&T Bank’s prior written consent.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information in this Management’s Discussion and Analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes.  All references to “Notes” are to the accompanying condensed consolidated financial statements and notes included in this Quarterly Report on Form 10-Q (“Form 10-Q”).

Cautionary Note Regarding Forward-Looking Statements

References in this report to “IEC,” the “Company,” “we,” “our,” or “us” mean IEC Electronics Corp. and its subsidiaries except where the context otherwise requires. This Form 10-Q contains forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements regarding future sales and operating results, future prospects, the capabilities and capacities of business operations, any financial or other guidance and all statements that are not based on historical fact, but rather reflect our current expectations concerning future results and events. The ultimate correctness of these forward-looking statements is dependent upon a number of known and unknown risks and events and is subject to various uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those views expressed or implied in our forward-looking statements: business conditions and growth or contraction in our customers’ industries, the electronic manufacturing services industry and the general economy; variability of our operating results; our ability to control our material, labor and other costs; our dependence on a limited number of major customers; the potential consolidation of our customer base; availability of component supplies; dependence on certain industries; variability and timing of customer requirements; technological, engineering and other start-up issues related to new programs and products; uncertainties as to availability and timing of governmental funding for our customers; the impact of government regulations, including FDA regulations; the types and mix of sales to our customers; litigation and governmental investigations or proceedings arising out of or relating to accounting and financial reporting matters; intellectual property litigation; our ability to maintain effective internal controls over financial reporting; unforeseen product failures and the potential product liability claims that may be associated with such failures; the availability of capital and other economic, business and competitive factors affecting our customers, our industry and business generally; failure or breach of our information technology systems; and natural disasters. Any one or more of such risks and uncertainties could have a material adverse effect on us or the value of our common stock. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in this Form 10-Q, our Annual Report on Form 10-K for the fiscal year ended September 30, 2016, and our other filings with the Securities and Exchange Commission (the “SEC”).

All forward-looking statements included in this Form-10-Q are made only as of the date indicated or as of the date of this Form 10-Q. We do not undertake any obligation to, and may not, publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or which we hereafter become aware of, except as required by law. New risks and uncertainties arise from time to time and we cannot predict these events or how they may affect us and cause actual results to differ materially from those expressed or implied by our forward-looking statements. Therefore, you should not rely on our forward-looking statements as predictions of future events. When considering these risks, uncertainties and assumptions, you should keep in mind the cautionary statements contained in this report and any documents incorporated herein by reference. You should read this document and the documents that we reference in this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

Overview

IEC Electronics Corp. (“IEC,” “we,” “our,” “us,” the “Company”) conducts business directly, as well as through its subsidiaries, IEC Electronics Wire and Cable, Inc (“Wire and Cable”) that merged into IEC on December 28, 2016, IEC Electronics Corp-Albuquerque (“Albuquerque”), IEC Analysis & Testing Laboratory, LLC (“ATL”) and IEC California Holdings, Inc. The Rochester unit, formerly Celmet, operates as a division of IEC.

We are a premier provider of electronic manufacturing services (“EMS”) to advanced technology companies that produce life-saving and mission critical products for the medical, industrial, aerospace and defense sectors. We specialize in delivering

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technical solutions for the custom manufacturing, product configuration, and verification testing of highly engineered complex products that require a sophisticated level of manufacturing to ensure quality and performance.

Within the EMS sector, we have unique capabilities which allow our customers to rely on us to solve their complex challenges, minimize their supply chain risk and deliver full system solutions for their supply chain. These capabilities include, among others:

• Our engineering services include the design, development, and fabrication of customized stress testing platforms to simulate a product’s end application, such as thermal cycling and vibration, in order to ensure reliable performance and avoid catastrophic failure when the product is placed in service.

• Our vertical manufacturing model offers customers the ability to simplify their supply chain by utilizing a single supplier for their critical components including complex printed circuit board assembly (“PCBA”), precision metalworking, and interconnect solutions. This service model allows us to control the cost, lead time, and quality of these critical components which are then integrated into full system assemblies and minimizes our customers’ supply chain risk.

• We provide direct order fulfillment services for our customers by integrating with their configuration management process to obtain their customer orders, customize the product to the specific requirements, functionally test the product and provide verification data, and direct ship to their end customer in order to reduce time, cost, and complexity within our customers’ supply chain.

• We are the only EMS provider with an on-site laboratory that has been approved by the Defense Logistics Agency (“DLA”) for their Qualified Testing Supplier List (“QTSL”) program which deems the site suitable to conduct various QTSL and military testing standards including counterfeit component analysis. In addition, this advanced laboratory is utilized for complex design analysis and manufacturing process development to solve challenges and accelerate our customers’ time to market.

We are a 100% U.S. manufacturer which attracts customers who are unlikely to utilize offshore suppliers due to the proprietary nature of their products, governmental restrictions or volume considerations. Our locations include:

• Newark, New York - Located approximately one hour east of Rochester, New York, our Newark location is our corporate headquarters and is the largest manufacturing location providing complex circuit board manufacturing, interconnect solutions, and system-level assemblies along with an on-site material analysis laboratory for advanced manufacturing process development.

• Rochester, New York - Focuses on precision metalworking services including complex metal chassis and assemblies.

• Albuquerque, New Mexico - Specializes in the aerospace and defense markets with complex circuit board and system-level assemblies along with a state of the art analysis and testing laboratory which conducts counterfeit component analysis and complex design analysis.

We excel at complex, highly engineered products that require sophisticated manufacturing support where quality and reliability are of paramount importance. With our customers at the center of everything we do, we have created a high-intensity, rapid response culture capable of reacting and adapting to their ever-changing needs.  Our customer-centric approach offers a high degree of flexibility while simultaneously complying with rigorous quality and on-time delivery standards. 

We proactively invest in areas we view as important for our continued long-term growth. All of our locations are ISO 9001:2008 certified and ITAR registered. We are Nadcap accredited and AS9100C certified at our Newark and Albuquerque locations to support the stringent quality requirements of the aerospace industry. Our Newark location is ISO 13485 certified to serve the medical market sector and is an approved supplier by the National Security Agency (“NSA”) under the COMSEC standard regarding communications security. ATL in Albuquerque is ISO 17025 accredited, an IPC-approved Validation Services test Laboratory, and is the only on-site EMS laboratory that has been approved by the DLA for their QTSL program which deems the site suitable to conduct various QTSL and military testing standards including counterfeit component analysis. Albuquerque also performs work per NASA-STD-8739 and J-STD-001ES space standards.

The technical expertise of our experienced workforce enables us to build some of the most advanced electronic, wire and cable, interconnect solutions, and precision metal systems sought by original equipment manufacturers (“OEMs”).

Employees are our single greatest resource. IEC’s total employees numbered 579, all of which are full time employees, at March 31, 2017. The Company decreased by 55 employees during fiscal 2017, mainly driven by lower volumes in fiscal 2017. Some of our full-time employees are temporary employees. We make a concerted effort to engage our employees in initiatives that improve our business and provide opportunities for growth, and we believe that our employee relations are good. We have access to large and technically qualified workforces in close proximity to our operating locations in Rochester, NY and Albuquerque, NM.

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Three Months Results

A summary of selected income statement amounts for the three months ended follows:

	Three Months Ended
Income Statement Data	March 31, 2017			April 1, 2016
(in thousands)
Net sales	$	21,368		$	33,148
Gross profit	2,279			5,736
Selling and administrative expenses	2,665			3,762
Interest and financing expense	229			513
Income/(loss) before income taxes	(615		)	1,461
Provision for/(benefit from) income taxes	—			—
Net income/(loss)	$	(615	)	$	1,461

A summary of sales, according to the market sector within which IEC’s customers operate, follows:

	Three Months Ended
% of Sales by Sector	March 31, 2017	April 1, 2016
Aerospace & Defense	44%	34%
Medical	32%	50%
Industrial	21%	14%
Communications & Other	3%	2%
	100%	100%

Revenue decreased in the second quarter of fiscal 2017 by $11.8 million or 35.5% as compared to the second quarter of the prior fiscal year. Revenues from all three major market sectors decreased year over year. The medical market sector decreased $9.6 million, the aerospace & defense market sector decreased $1.9 million and the industrial market sector decreased $0.5 million. Offsetting these decreases was an increase of $0.3 million in the communication & other market sector.

Revenue for the medical market sector decreased $9.6 million primarily due to decreases in demand from two customers. The lower demand was due to a decline in their end market demand as well as their high inventory position. We anticipate the demand from one customer will increase during the second half of fiscal 2017. We expect the other customer will not increase their demand until early 2018. We had several other medical customers with lower demand during the second quarter of fiscal 2017 that was caused by the stage of their programs.

Various increases and decreases for our aerospace & defense customers resulted in a net decrease of $1.9 million in the second quarter of fiscal 2017. Programs frequently fluctuate in demand or end and are replaced by new programs. Aggregate decreases of $3.4 million in the quarter were partially offset by $1.6 million in increases from other customers. Another $0.5 million decrease was due to our decision to disengage with a customer due to lack of profitability. Two new customers were added that increased revenue by $ 0.6 million.

The net decrease in demand in the industrial market sector of $0.5 million resulted primarily from decreased demand from customers whose end market has softened.

Gross profit for the second quarter of fiscal 2017 decreased to 10.7% of sales versus 17.3% in the second quarter of the prior fiscal year. The reduction in revenue year over year had the most significant impact on gross profit. Reductions in overhead costs lessened the impact of the lower revenue. Direct labor costs as a percentage of sales were consistent with the same period of the prior year while material costs increased due to customer mix.

Selling and administrative (“S&A”) expense decreased $1.1 million and represented 12.5% of sales in the second quarter of fiscal 2017 compared to 11.3% of sales in the same quarter of the prior fiscal year. The decrease in S&A expense was primarily

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due to lower wage and related expenses of $0.7 million driven by headcount reductions and $0.3 million of severance incurred in the second quarter of fiscal 2016. Also, legal and other professional expenses were lower in the second quarter of fiscal 2017 by $0.1 million compared to the second quarter of fiscal 2016.

Interest expense decreased by $0.3 million in the second quarter of fiscal 2017 compared to the same quarter of the prior fiscal year. The net impact of adjusting the interest rate swap to fair value contributed $0.2 million to the expense in the second quarter of the prior fiscal year compared to this fiscal year. The weighted average interest rate on IEC’s debt, excluding the impact of the interest rate swap, was 0.13% higher during the second quarter of fiscal 2017 than in the second quarter of the prior fiscal year. Our average outstanding debt balances decreased by $14.6 million in the second quarter of fiscal 2017 compared to the second quarter of fiscal 2016 because of the repayment of Term Loan A and the Albuquerque Mortgage Loan as well as lower balances on the Revolving Credit Facility. In the second quarter of fiscal 2017, we incurred roughly $56.0 thousand of interest related to the sale-leaseback obligation for the Albuquerque, New Mexico facility. Cash paid for interest on credit facility debt was approximately $0.2 million and $0.4 million for the second quarter of fiscal 2017 and fiscal 2016, respectively. Detailed information regarding our borrowings is provided in Note 6—Credit Facilities.

There was no material income tax expense or benefit in the second quarter of fiscal 2017 or fiscal 2016 as we have net operating loss (“NOL”) carryforwards to offset any current tax expense and a full valuation on all deferred tax assets.

With respect to tax payments, in the near term IEC expects to be largely sheltered by sizable NOL carryforwards for federal income tax purposes. In the first six months of fiscal 2017, we paid $0.1 million in taxes. At the end of fiscal 2016, the NOL carryforwards amounted to approximately $31.7 million. The NOL carryforwards expire in varying amounts between 2022 and 2035, unless utilized prior to these dates.

Six Months Results

A summary of selected income statement amounts for the six months ended follows:

	Six Months Ended
Income Statement Data	March 31, 2017			April 1, 2016
(in thousands)
Net sales	$	42,344		$	66,081
Gross profit	4,075			11,553
Selling and administrative expenses	5,095			7,747
Interest and financing expense	448			802
Income/(loss) before income taxes	(1,468		)	3,004
Provision for/(benefit from) income taxes	—			—
Net income/(loss)	$	(1,468	)	$	3,004

A summary of sales, according to the market sector within which IEC’s customers operate, follows:

	Six Months Ended
% of Sales by Sector	March 31, 2017	April 1, 2016
Aerospace & Defense	47%	37%
Medical	30%	46%
Industrial	20%	15%
Communications & Other	3%	2%
	100%	100%

Revenue decreased in the first six months of fiscal 2017 by $23.7 million or 35.9% as compared to the first six months of the prior fiscal year. Revenues from all three major market sectors decreased year over year. The medical market sector decreased $17.2 million, the aerospace & defense market sector decreased $4.9 million and the industrial market sector decreased $1.5 million.

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Revenue for the medical market sector decreased $17.2 million primarily due to decreases in demand from two of our larger customers. The lower demand was due to a decline in their end market demand as well as their high inventory position. One of these customers has started ordering again, while we believe the other customer will not increase their demand until early 2018. There were several other customers with more modest reductions year over year due to the stage of their programs.

Various increases and decreases for our aerospace & defense customers resulted in a net decrease of $4.9 million in the first six months of fiscal 2017. Programs frequently fluctuate in demand or come to an end and are replaced by new programs. Aggregate decreases of $5.3 million were partially offset by $3.6 million in increases from other customers. Increases were primarily due to higher demand at several existing customers of $2.5 million while new programs from existing customers increased revenue by another $1.2 million. Also, the winding down of older programs caused a decrease of $2.5 million and the ending of one customer relationship due to low profitability caused an additional decrease of $1.3 million. However, two new customers added $0.8 million in revenue year over year.

The net decrease in demand in the industrial market sector of $1.5 million resulted primarily from decreases in demand due to the softness of the railroad industry. The decreases were partially offset by increased demand from two of our other customers of $0.3 million.

The gross profit for the first six months of fiscal 2017 decreased to 9.6% of sales versus 17.5% in the first six months of the prior fiscal year. The reduction in revenue year over year had the most significant impact on gross profit. Reductions in overhead costs lessened the impact of the lower revenue. Direct labor costs as a percentage of sales were consistent with the same period of the prior year while material costs increased due to customer mix.

Selling and administrative (“S&A”) expense decreased $2.7 million and represented 12.0% of sales in the first six months of fiscal 2017 compared to 11.7% of sales in the first six months of the prior fiscal year. The decrease in S&A expense was primarily due to lower wage and related expenses of $1.3 million driven by headcount reductions and severance costs in the first six months of the prior fiscal year of $0.5 million. Lower bad debt expense of $0.4 million was due to better cash collections and reduced accounts receivable aging. Also, legal and other professional expenses were $0.4 million lower in fiscal 2017 compared to fiscal 2016.

Interest expense decreased by $0.4 million in the first six months of fiscal 2017 compared to the first six months of the prior fiscal year. The net impact of adjusting the interest rate swap to fair value contributed $0.05 million to the expense in the first six months of the prior fiscal year compared to this fiscal year. The weighted average interest rate on IEC’s debt, excluding the impact of the interest rate swap, was 0.16% lower during the first six months of fiscal 2017 than in the first six months of the prior fiscal year. Our average outstanding debt balances decreased by $14.2 million in the first six months of fiscal 2017 compared to the first six months of fiscal 2016 because of the repayment of Term Loan A and the Albuquerque Mortgage Loan as well as lower balances on the Revolving Credit Facility. In the first six months of fiscal 2017, we incurred roughly $0.1 million of interest related to the sale-leaseback obligation for the Albuquerque, New Mexico facility. Cash paid for interest on credit facility debt was approximately $0.3 million and $0.8 million for the first six months of fiscal 2017 and fiscal 2016, respectively. Detailed information regarding our borrowings is provided in Note 6—Credit Facilities.

There was no material income tax expense or benefit in the first six months of fiscal2017 or fiscal 2016 as we have net operating loss (“NOL”) carryforwards to offset any current tax expense and a full valuation on all deferred tax assets.

With respect to tax payments, in the near term IEC expects to be largely sheltered by sizable NOL carryforwards for federal income tax purposes. In the first six months of fiscal2017, we paid $0.1 million in taxes. At the end of fiscal 2016, the NOL carryforwards amounted to approximately $31.7 million. The NOL carryforwards expire in varying amounts between 2022 and 2035, unless utilized prior to these dates.

Liquidity and Capital Resources

Capital Resources

As of March 31, 2017, there were $0.1 million of outstanding capital expenditure commitments for manufacturing equipment.  We generally fund capital expenditures with cash flow from operations and our revolving credit facility.

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Summary of Cash Flows

A summary of selected cash flow amounts for the six months ended follows:

	Six Months Ended
Cash Flow Data	March 31, 2017			April 1, 2016
(in thousands)
Cash, beginning of period	$	845		$	407
Net cash flow from:
Operating activities	689			6,616
Investing activities	4,214			(1,270		)
Financing activities	(5,239		)	(4,627		)
Net (decrease) increase in cash and cash equivalents	(336		)	719
Cash and cash equivalents at end of period	$	509		$	1,126

Operating activities

Cash flows used by operations, before considering changes in IEC’s working capital accounts, was $0.3 million for the first six months of fiscal2017.  Cash flow provided by operations, before considering changes in working capital, in the first six months of fiscal2016 was $5.3 million.  Net loss of $1.5 million in the first six months of fiscal2017 compared to net income of $3.0 million during the first six months of the prior fiscal year was the largest component of the change.

Working capital provided cash flows of $1.0 million and $1.3 million in the first six months of fiscal2017 and fiscal 2016, respectively. The change in working capital in the the first six months of fiscal2017 was primarily due to decreases in accounts receivable of $2.6 million and increases in accounts payable of $0.9 million. These increases to cashflow were offset by uses of cash related to an increase in inventory of $0.9 million and decrease in accrued expenses of $2.2 million. Accounts receivable decreases were primarily due to lower sales. The increase in accounts payable was due primarily to an increase of inventory purchases, as well as timing of purchases and payments.

Investing activities

Cash flows provided by investing activities were $4.2 million for the first six months of fiscal2017 and used $1.3 million for the first six months of fiscal2016, respectively.  Cash flows provided in the first six months of fiscal2017 consisted of proceeds from the Albuquerque sale-leaseback, offset by the purchases of equipment and capitalized software costs resulting from the ongoing implementation of a new enterprise resource planning system. Cash flows used in the first six months of fiscal 2016 consisted of purchases of equipment and capitalized software costs.

Financing activities

Cash flows used in financing activities were $5.2 million and $4.6 million for the first six months of fiscal2017 and 2016, respectively.  During the first six months of fiscal2017, net repayments under all credit facilities were $5.2 million, with $1.6 million of net borrowings under the Revolver, as defined below, and repayments of $6.8 million for term debt, due largely to the Albuquerque sale-leaseback transaction. During the first six months of fiscal 2016, net repayments under all credit facilities were $4.4 million, with $2.7 million of net repayments under the revolver and repayments of $1.7 million for term debt.

Credit Facilities

At March 31, 2017, borrowings outstanding under the revolving credit facility (the “Revolver”) under the Second Amendment to the Fifth Amended and Restated Credit Facility Agreement (the “Second Amendment”), that amended the Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by the First Amendment to the Fifth Amended and Restated Credit Facility, dated as of June 20, 2016 (“Fifth Amended Credit Agreement”) amounted to $5.5 million, and the maximum available was $13.8 million.  Repayments on the Revolver during the current fiscal year were driven by cash flow from operations discussed above.  We believe that our liquidity is sufficient to satisfy anticipated operating requirements during the next twelve months.

Effective as of May 5, 2017, the Company and M&T Bank entered into the Third Amendment to Fifth Amended Credit Agreement (the “Third Amendment”), that amended the Fifth Amended Credit Agreement. The Third Amendment extended the Revolver termination date to May 5, 2022. In connection with the Third Amendment, the Company issued the Term Loan B to

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M&T Bank, that amended and restated the Amended and Restated Term Loan B dated December 14, 2015. The Third Amendment revised certain covenants to provide that the Company may use Revolver proceeds to refinance existing indebtedness. As a result, the Term Loan B , which matures on May 5, 2022, now has a principal amount of $6.0 million. The Third Amendment also revised the maximum amount the Company can borrow under the Revolver to the lesser of $16.0 million or 85% of eligible receivables plus $7.0 million of eligible inventories.

The Fifth Amended Credit Agreement, as amended, also contains various affirmative and negative covenants including financial covenants. The Company is required to maintain (i) a minimum level of quarterly EBITDAS, as defined below (“Quarterly EBITDAS”), (ii) a ratio of total debt to twelve month EBITDAS (“Debt to EBITDAS Ratio”) that is below a specified limit, (iii) a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”), (iv) a maximum level of inventory (“Maximum Inventory”), and (v) a maximum amount of capital expenditures (“Maximum Capital Expenditures”). The Debt to EBITDAS Ratio is the ratio of debt to earnings before interest, taxes, depreciation, amortization and non-cash stock compensation expense (“EBITDAS”). The Fixed Charge Coverage Ratio compares (i) 12 month Adjusted EBITDA plus non-cash stock compensation expense minus unfinanced capital expenditures minus cash taxes paid, to (ii) the sum of interest expense, principal payments and dividends, if any (fixed charges). “Adjusted EBITDA” means, for the applicable period, EBITDAS less unfinanced capital expenditures and cash paid for taxes, all on a consolidated basis. The Maximum Inventory covenant allows for specific levels of inventory as defined by the Fifth Amended Credit Agreement, as amended. The Maximum Capital Expenditures covenants allow for a maximum amount of capital expenditures on an annual basis.

Pursuant to the Third Amendment, as of March 31, 2017, certain financial covenants of the credit facility were eliminated or revised to be less complex, including the Maximum Inventory covenant, Debt to EBITDAS ratios, the Maximum Capital Expenditures limit after the fiscal year ending September 30, 2017, and future requirements of Minimum Quarterly EBITDAS except for the fiscal quarter ending June 30, 2017. The Third Amendment also modified the definitions of Applicable Margin and Applicable Unused Fee to provide that each is calculated using the applicable Fixed Charge Coverage Ratio, as redefined by the Third Amendment. The Third Amendment established a Borrowing Base computed using monthly Borrowing Base Reports that, if inaccurate, allow M&T Bank, in its discretion, to suspend the making of or limit Revolving Credit Loans. Further, the Third Amendment provides for the Company’s repurchase of its common stock under certain circumstances without M&T Bank’s prior written consent.

The Company was in compliance with all debt covenants at March 31, 2017.

The calculation of financial covenants as of the dates indicated follows:

	Limit at		Calculated Amount At
Debt Covenant	March 31, 2017	September 30, 2016	March 31, 2017	September 30, 2016
Quarterly EBITDAS (000s)	Minimum $240	Minimum $1,080	$375	$1,269
Debt to EBITDAS Ratio	Maximum 4.7	Maximum 3.1x	4.4x	2.0x
Fixed Charge Coverage Ratio	Minimum 0.3x	Minimum 1.25x	0.3x	1.5x
Maximum Inventory	Maximum $25.0m	Maximum $27.0m	$17.9m	$17.0m
Maximum Capital Expenditures	Maximum $4.5m annually	Maximum $4.5m annually	Measured Annually	$3.3m

A reconciliation of EBITDAS to Net income follows:

	Three Months Ended
	March 31, 2017
(in thousands)
Net income/(loss)	$	(615	)
Provision for/(benefit from) income taxes	—
Depreciation and amortization expense	644
Interest expense	229
Non-cash stock compensation	117
EBITDAS	$	375

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A reconciliation of Adjusted EBITDA to Net income follows: 

	Three Months Ended
	March 31, 2017
(in thousands)
Net income/(loss)	$	(615	)
Provision for/(benefit from) income taxes	—
Depreciation and amortization expense	644
Interest expense	229
Non-cash stock compensation	117
Unfinanced capital expenditures	(1,079		)
Income taxes paid	—
Adjusted EBITDA	$	(704	)

We present EBITDAS and Adjusted EBITDA because certain covenants in our credit facilities are tied to these measures. EBITDAS and Adjusted EBITDA are not measures of financial performance under GAAP and are not calculated through the application of GAAP. As such, they should not be considered as substitutes or alternatives for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. EBITDAS and Adjusted EBITDA, as presented, may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.

Off-Balance Sheet Arrangements

IEC is not a party to any material off-balance sheet arrangements.

Application of Critical Accounting Policies

Our application of critical accounting policies are disclosed in our 2016 Annual Report on Form 10-K filed for the fiscal year ended September 30, 2016.  During the six months ended March 31, 2017, there have been no material changes to these policies.

Recently Issued Accounting Standards

See Note 1—Our Business and Summary of Significant Accounting Policies for further information concerning recently issued accounting pronouncements.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

As a result of its financing activities, the Company is exposed to changes in interest rates that may adversely affect operating results. The Company actively monitors its exposure to interest rate risk and from time to time may use derivative financial instruments to manage the impact of this risk.  The Company may use derivatives only for the purpose of managing risk associated with underlying exposures.  The Company does not trade or use instruments with the objective of earning financial gains on the interest rate nor does the Company use derivatives instruments where it does not have underlying exposure.  The Company did not have any derivative financial instruments at March 31, 2017 or September 30, 2016.

At March 31, 2017, the Company had $14.7 million of debt, comprised of $13.8 million with variable interest rates and $0.9 million with fixed interest rates.  Interest rates on variable loans are based on London interbank offered rate (“LIBOR”). The credit facilities are more fully described in Note 6—Credit Facilities.  Interest rates based on LIBOR currently adjust daily, causing interest on such loans to vary from period to period.  A sensitivity analysis as of March 31, 2017 indicates that a one-percentage point increase or decrease in our variable interest rates, which represents more than a 10% change, would increase or decrease the Company’s annual interest expense by approximately $0.1 million.

The Company is exposed to credit risk to the extent of non-performance by M&T Bank under the Fifth Amended Credit Agreement, as amended.  M&T Bank’s credit rating (reaffirmed A by Fitch in October 2016) is monitored by the Company, and IEC expects that M&T Bank will perform in accordance with the terms of the Fifth Amended Credit Agreement, as amended.

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Item 4.    Controls and Procedures

Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2017, the end of the period covered by this Form 10-Q.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2017, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting

Our management carried out an evaluation of the internal controls over financial reporting to determine whether any change occurred during the quarter ended March 31, 2017. Based on such evaluation, there has been no change in our internal control over financial reporting that occurred during the most recently completed fiscal quarter ended March 31, 2017 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the effectiveness of control systems

IEC’s management does not expect that our disclosure controls and internal controls will prevent all errors and fraud. Because of inherent limitations in any such control system (e.g. faulty judgments, human error, information technology system error, or intentional circumvention), there can be no assurance that the objectives of a control system will be met under all circumstances. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The benefits of a control system also must be considered relative to the costs of the system and management’s judgments regarding the likelihood of potential events. In summary, there can be no assurance that any control system will succeed in achieving its goals under all possible future conditions, and as a result of these inherent limitations, misstatements due to error or fraud may occur and may or may not be detected.

32

Part II         OTHER INFORMATION

Item 1.    Legal Proceedings

From time to time, the Company may be involved in legal actions in the ordinary course of its business, but management does not believe that any such proceedings commenced through the date of the financial statements included in this Form 10-Q, individually or in the aggregate, will have a material adverse effect on the Company’s consolidated financial position.

Item 1A.   Risk Factors

There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended September 30, 2016 filed with the SEC on December 16, 2016.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.    Defaults Upon Senior Securities

None

Item 4.    Mine Safety Disclosures

Not Applicable

Item 5.    Other Information

None

Item 6.    Exhibits

For the exhibits that are filed herewith or incorporated herein by reference, see the Index to Exhibits located immediately following the signature page to this Form 10-Q.  The Index to Exhibits is incorporated herein by reference.

33

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)
May 10, 2017	By:	/s/ Jeffrey T. Schlarbaum
		Jeffrey T. Schlarbaum
		President & Chief Executive Officer
May 10, 2017	By:	/s/ Michael T. Williams
		Michael T. Williams
		Chief Financial Officer

34

IEC ELECTRONICS CORP.

Form 10-Q for Quarter Ended March 31, 2017

INDEX TO EXHIBITS

Exhibit No.	Description
10.1	Waiver of Annual Bonus for 2017 Fiscal Year dated as of March 23, 2017 between IEC Electronics Corp. and Jeffrey T. Schlarbaum
10.2	Waiver of Annual Bonus for 2017 Fiscal Year dated as of March 23, 2017 between IEC Electronics Corp. and Michael T. Williams
10.3	Waiver of Annual Bonus for 2017 Fiscal Year dated as of March 23, 2017 between IEC Electronics Corp. and Jens Hauvn
10.4	Third Amendment to Fifth Amended and Restated Credit Facility Agreement dated as of May 5, 2017
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
101	The following items from this Quarterly Report on Form 10-Q formatted in Extensible Business Reporting Language: (i) Consolidated Balance Sheets (unaudited), (ii) Consolidated Income Statements (unaudited), (iii) Consolidated Statements of Changes in Stockholders’ Equity (unaudited), (iv) Consolidated Statements of Cash Flows (unaudited), and (v) Notes to Consolidated Financial Statements.

35

EX-10.1

Exhibit 10.1

WAIVER OF ANNUAL BONUS FOR 2017 FISCAL YEAR

WHEREAS, Jeffrey T. Schlarbaum (“Executive”) and IEC Electronics Corp. (“Company”), collectively referred to as “the Parties,” are parties to an Employment Agreement (“Agreement”) dated March 20, 2015, which sets forth the terms and conditions of the Executive’s employment by the Company; and

WHEREAS, Section 3.2 of the Agreement provides that Executive shall be eligible to receive an annual performance bonus for each fiscal year of the Company; and

WHEREAS, Section 3.2 of the Agreement further provides that Executive’s eligibility for the annual performance bonus shall be determined pursuant to the terms of the Company’s Management Incentive Plan or any successor arrangement thereto (“MIP”), with payment to be made within 15 days of the receipt by the Company of the audited financial statements for such fiscal year; and

WHEREAS, based on the Company’s current performance year to date for fiscal year 2017, the Parties acknowledge that it is unlikely that reasonable eligibility targets will be achieved or that Executive will be eligible for an annual performance bonus for the 2017 fiscal year; and

WHEREAS, the Parties wish to waive the requirement, in Section 3.2 of the Agreement, for an annual performance bonus for each of the fiscal years 2017 and 2018 only, so as to allow the Company to instead implement an MIP that looks at performance over a two-year period rather than on a single fiscal year basis;

NOW, THEREFORE, in consideration of Executive’s continued employment by the Company and in exchange for the other mutual covenants and promises herein, the Parties agree as follows:

1.Executive waives his right to be considered for, or paid, an annual performance bonus for the 2017 fiscal year, regardless of whether targets for the 2017 fiscal year are likely to be achieved, or whether Executive would otherwise be eligible for a performance bonus based solely on 2017 fiscal year performance. Executive also waives his right to be considered for, or paid, an annual performance bonus based solely on 2018 fiscal year performance.

2.In exchange for Executive’s waiver of his right to be considered for an annual performance bonus based solely on single year performance for each of the 2017 and 2018 fiscal years, the Company will implement a two-year MIP that will cover the 2017 and 2018 fiscal years. Executive’s eligibility for a performance bonus under the two-year MIP will be determined based on performance against targets over the combined two-year period, with payment of the bonus to be made within 15 days of receipt of the Company’s audited financial statements for the 2018 fiscal year. The target value of Executive’s bonus shall be at least 65% of his base salary for the combined two-year period.

Exhibit 10.1

3.In light of Executive’s waiver of his right to an annual performance bonus based on single year performance for each of the 2017 and 2018 fiscal years, Executive acknowledges and agrees that the Company’s failure to determine Executive’s eligibility for an annual performance bonus based solely on fiscal year performance in each of the 2017 and 2018 fiscal years, or to pay an annual performance bonus based on fiscal year performance within 15 days of the Company’s receipt of the audited financial statements for each of the 2017 and 2018 fiscal years, shall not constitute a material breach under Section 4.5 of the Agreement or otherwise provide “good cause” for Executive to terminate the Agreement.

DATED: March 23, 2017	JEFFREY T. SCHLARBAUM
		/s/ Jeffrey T. Schlarbaum
	By:	Jeffrey T. Schlarbaum

DATED: March 23, 2017	IEC ELECTRONICS CORP.
		/s/ Lynn Hartrick
	By:	Lynn Hartrick
	Title:	Board of Director

2

EX-10.2

Exhibit 10.2

WAIVER OF ANNUAL BONUS FOR 2017 FISCAL YEAR

WHEREAS, Michael T. Williams (“Employee”) and IEC Electronics Corp. (“Company”), collectively referred to as “the Parties,” are parties to an Employment Agreement (“Agreement”) dated March 20, 2015, which sets forth the terms and conditions of the Employee’s employment by the Company; and

WHEREAS, Section 3.2 of the Agreement provides that Employee shall be eligible to receive an annual performance bonus for each fiscal year of the Company; and

WHEREAS, Section 3.2 of the Agreement further provides that Employee’s eligibility for the annual performance bonus shall be determined pursuant to the terms of the Company’s Management Incentive Plan or any successor arrangement thereto (“MIP”), with payment to be made within 15 days of the receipt by the Company of the audited financial statements for such fiscal year; and

WHEREAS, based on the Company’s current performance year to date for fiscal year 2017, the Parties acknowledge that it is unlikely that reasonable eligibility targets will be achieved or that Employee will be eligible for an annual performance bonus for the 2017 fiscal year; and

WHEREAS, the Parties wish to waive the requirement, in Section 3.2 of the Agreement, for an annual performance bonus for each of the fiscal years 2017 and 2018 only, so as to allow the Company to instead implement an MIP that looks at performance over a two-year period rather than on a single fiscal year basis;

NOW, THEREFORE, in consideration of Employee’s continued employment by the Company and in exchange for the other mutual covenants and promises herein, the Parties agree as follows:

1.Employee waives his right to be considered for, or paid, an annual performance bonus for the 2017 fiscal year, regardless of whether targets for the 2017 fiscal year are likely to be achieved, or whether Employee would otherwise be eligible for a performance bonus based solely on 2017 fiscal year performance. Employee also waives his right to be considered for, or paid, an annual performance bonus based solely on 2018 fiscal year performance.

2.In exchange for Employee’s waiver of his right to be considered for an annual performance bonus based solely on single year performance for each of the 2017 and 2018 fiscal years, the Company will implement a two-year MIP that will cover the 2017 and 2018 fiscal years. Employee’s eligibility for a performance bonus under the two-year MIP will be determined based on performance against targets over the combined two-year period, with payment of the bonus to be made within 15 days of receipt of the Company’s audited financial statements for the 2018 fiscal year. The target value of Employee’s bonus shall be at least 45% of his base salary for the combined two-year period.

Exhibit 10.2

3.In light of Employee’s waiver of his right to an annual performance bonus based on single year performance for each of the 2017 and 2018 fiscal years, Employee acknowledges and agrees that the Company’s failure to determine Employee’s eligibility for an annual performance bonus based solely on single year performance in each of the 2017 and 2018 fiscal years, or to pay an annual performance bonus based on fiscal year performance within 15 days of the Company’s receipt of the audited financial statements for each of the 2017 and 2018 fiscal years, shall not constitute a material breach under Section 4.5 of the Agreement or otherwise provide “good cause” for Employee to terminate the Agreement.

DATED: March 23, 2017	MICHAEL T. WILLIAMS
		/s/ Michael T. Williams
	By:	Michael T. Williams

DATED: March 23, 2017	IEC ELECTRONICS CORP.
		/s/ Jennifer Brown
	By:	Jennifer Brown
	Title:	VP of Human Resources & Corporate Secretary

2

EX-10.3

Exhibit 10.3

WAIVER OF ANNUAL BONUS FOR 2017 FISCAL YEAR

WHEREAS, Jens Hauvn (“Employee”) and IEC Electronics Corp. (“Company”), collectively referred to as “the Parties,” are parties to an Employment Agreement (“Agreement”) dated March 20, 2015, which sets forth the terms and conditions of the Employee’s employment by the Company; and

WHEREAS, Section 3.2 of the Agreement provides that Employee shall be eligible to receive an annual performance bonus for each fiscal year of the Company; and

WHEREAS, Section 3.2 of the Agreement further provides that Employee’s eligibility for the annual performance bonus shall be determined pursuant to the terms of the Company’s Management Incentive Plan or any successor arrangement thereto (“MIP”), with payment to be made within 15 days of the receipt by the Company of the audited financial statements for such fiscal year; and

WHEREAS, based on the Company’s current performance year to date for fiscal year 2017, the Parties acknowledge that it is unlikely that reasonable eligibility targets will be achieved or that Employee will be eligible for an annual performance bonus for the 2017 fiscal year; and

WHEREAS, the Parties wish to waive the requirement, in Section 3.2 of the Agreement, for an annual performance bonus for each of the fiscal years 2017 and 2018 only, so as to allow the Company to instead implement an MIP that looks at performance over a two-year period rather than on a single fiscal year basis;

NOW, THEREFORE, in consideration of Employee’s continued employment by the Company and in exchange for the other mutual covenants and promises herein, the Parties agree as follows:

1.Employee waives his right to be considered for, or paid, an annual performance bonus for the 2017 fiscal year, regardless of whether targets for the 2017 fiscal year are likely to be achieved, or whether Employee would otherwise be eligible for a performance bonus based solely on 2017 fiscal year performance. Employee also waives his right to be considered for, or paid, an annual performance bonus based solely on 2018 fiscal year performance.

2.In exchange for Employee’s waiver of his right to be considered for an annual performance bonus based solely on single year performance for each of the 2017 and 2018 fiscal years, the Company will implement a two-year MIP that will cover the 2017 and 2018 fiscal years. Employee’s eligibility for a performance bonus under the two-year MIP will be determined based on performance against targets over the combined two-year period, with payment of the bonus to be made within 15 days of receipt of the Company’s audited financial statements for the 2018 fiscal year. The target value of Employee’s bonus shall be at least 45% of his base salary for the combined two-year period.

Exhibit 10.3

3.In light of Employee’s waiver of his right to an annual performance bonus based on single year performance for each of the 2017 and 2018 fiscal years, Employee acknowledges and agrees that the Company’s failure to determine Employee’s eligibility for an annual performance bonus based solely on single year performance in each of the 2017 and 2018 fiscal years, or to pay an annual performance bonus based on fiscal year performance within 15 days of the Company’s receipt of the audited financial statements for each of the 2017 and 2018 fiscal years, shall not constitute a material breach under Section 4.5 of the Agreement or otherwise provide “good cause” for Employee to terminate the Agreement.

DATED: March 23, 2017	JENS HAUVN
		/s/ Jens Hauvn
	By:	Jens Hauvn

DATED: March 23, 2017	IEC ELECTRONICS CORP.
		/s/ Jennifer Brown
	By:	Jennifer Brown
	Title:	VP of Human Resources & Corporate Secretary

2

EX-10.4

Exhibit 10.4

THIRD AMENDMENT TO

FIFTH AMENDED AND RESTATED CREDIT FACILITY AGREEMENT

THIS THIRD AMENDMENT TO FIFTH AMENDED AND RESTATED CREDIT FACILITY AGREEMENT (this “Amendment”) is made effective as of the 5th day of May, 2017, except as otherwise stated herein, by and between IEC ELECTRONICS CORP., a corporation formed under the laws of the State of Delaware (“Borrower”) and MANUFACTURERS AND TRADERS TRUST COMPANY (“Lender”).

W I T N E S S E T H:

WHEREAS, the parties hereto are parties to a Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by that certain First Amendment to Fifth Amended and Restated Credit Facility Agreement dated as of June 20, 2016 and that certain Second Amendment to Fifth Amended and Restated Credit Facility Agreement dated as of November 28, 2016 (as amended, and as the same may be further amended, modified, supplemented or restated from time to time, the “Credit Agreement”); and

WHEREAS, Borrower has requested and the Lender has agreed to make certain amendments to the Credit Agreement, all on the terms and conditions herein set forth.

NOW, THEREFORE, for due consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.DEFINITIONS. All capitalized terms used herein and not defined shall have the meaning given such terms in the Credit Agreement.

2.AMENDMENTS. Except as otherwise set forth below, effective as of the Third Amendment Closing Date:

(A)Section 1.1 of the Credit Agreement is hereby amended by amending and restating the following definitions in their entirety to read as follows:

““Applicable Margin” means, with respect to the applicable facility, the per annum percentage points shown in the applicable column of the table below based on the applicable Fixed Charge Coverage Ratio, calculated for Borrower on a consolidated basis and without duplication in accordance with GAAP:

Pricing Grid - Applicable Margin
	Fixed Charge Coverage
Level	Ratio	Revolver	Term Loan B
I	x ≤ 1.60:1.00	2.75%	3.00%
II	1.60:1.00 < x ≤ 1.85:1.00	2.50%	2.75%
III	x > 1.85:1.00	2.25%	2.50%

provided, however, that commencing on the Third Amendment Closing Date and continuing through and including the Fiscal Quarter ending March 31, 2018, the Applicable Margin shall be fixed at Level II. Effective on the tenth (10th) day following the date on which the Borrower’s QCC Sheet is required to be delivered to the Lender pursuant to Section 12.6 for the Fiscal Quarter ending March 31, 2018, the Applicable Margin will be adjusted based upon the Fixed Charge Coverage Ratio shown therein. Thereafter, changes, if any, in the Level applicable to Loans will be effective on the tenth (10th) day following each date on which the Borrower’s QCC Sheet is required to be delivered

to the Lender pursuant to Section 12.6, based upon the Fixed Charge Coverage Ratio shown therein. In the event that any QCC Sheet is not delivered by the date required, pricing will revert to Level I until the tenth (10th) day following the date of delivery of the delayed QCC Sheet, on which tenth (10th) day pricing will be adjusted to the applicable level shown by the QCC Sheet. Upon the occurrence of a Default or Event of Default, the Applicable Margin shall immediately be adjusted to Level I and no reduction shall occur thereafter unless the Default is cured, or if the Default is also an Event of Default, the Event of Default is waived in writing by the Lender.”

““Applicable Unused Fee” means the per annum percentage points shown in the table below based on the applicable Fixed Charge Coverage Ratio, calculated for Borrower on a consolidated basis and without duplication in accordance with GAAP:

Level	Fixed Charge Coverage Ratio	Unused Fee
I	x ≤ 1.60:1.00	0.375%
II	1.60:1.00 < x ≤ 1.85:1.00	0.375%
III	x > 1.85:1.00	0.250%

provided, however, that commencing on the Third Amendment Closing Date and continuing through and including the Fiscal Quarter ending March 31, 2018, the Applicable Unused Fee shall be fixed at Level II. Effective on the tenth (10th) day following the date on which the Borrower’s QCC Sheet is required to be delivered to the Lender pursuant to Section 12.6 for the Fiscal Quarter ending March 31, 2018, the Applicable Unused Fee will be adjusted based upon the Fixed Charge Coverage Ratio shown therein. Thereafter, changes, if any, in the Level applicable will be effective on the tenth (10th) day following each date on which the Borrower’s QCC Sheet is required to be delivered to the Lender pursuant to Section 12.6, based upon the Fixed Charge Coverage Ratio shown therein. In the event that any QCC Sheet is not delivered by the date required, the Applicable Unused Fee will revert to Level I until the tenth (10th) day following the date of delivery of the delayed QCC Sheet, on which tenth (10th) day the Applicable Unused Fee will be adjusted to the applicable level shown by the QCC Sheet. Upon the occurrence of a Default or Event of Default, the Applicable Unused Fee shall immediately be adjusted to Level I and no reduction shall occur thereafter unless the Default is cured, or if the Default is also an Event of Default, the Event of Default is waived in writing by the Lender.”

““Borrowing Base” means, at any time, an amount equal to the sum of (a) eighty-five percent (85%) of the Eligible Accounts of the Credit Parties; plus (b) (i) from the Third Amendment Closing Date until the first Advance Rate Reset, the lesser of (A) thirty-five percent (35%) of Eligible Inventories (excluding work in process) and (B) Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000), and (ii) upon each Advance Rate Reset, the lesser of (A) eighty-five percent (85%) of the then updated Eligible Inventory NOLV and (B) Seven Million Dollars ($7,000,000), minus (c) Reserves.

The Borrowing Base shall be computed based on the Borrowing Base Report required by this Agreement and most recently delivered to and accepted by the Lender in its sole and absolute discretion. In the event the Borrower fails to furnish a Borrowing Base Report, or in the event the Lender believes that a Borrowing Base Report is no longer accurate, valid, or current - defined as information provided aged no more than forty-five (45) days - the Lender may, in its sole and absolute discretion exercised from time to time and without limiting other rights and remedies under this Agreement, suspend the making of or limit Revolving Credit Loans. The Borrowing Base shall be subject to reduction by the amount of Reserves applicable from time to time, and by the amount of any Account or any Inventory that was included in the Borrowing Base but that the Lender determines fails to meet the respective criteria applicable from time to time for Eligible Accounts or Eligible Inventories.

Without implying any limitation on the Lender’s discretion with respect to the Borrowing Base, the criteria for Eligible Accounts and for Eligible Inventories contained in the respective definitions of Eligible Accounts and of Eligible Inventories are in part based upon the business operations of the Credit Parties existing on or about the Closing Date and upon information and records furnished to the Lender by the Credit Parties. If at any time or from time to time hereafter, the business operations of one or more of the Credit Parties change or such information and records furnished to the Lender is incorrect or misleading, the Lender in its discretion, may at any time and from time to time during the duration of this Agreement change such criteria or add new criteria. The Lender will communicate such

changed or additional criteria to the Borrower from time to time, which communication shall be either orally or in writing.”

““Revolving Credit Termination Date”means May 5, 2022.”

““Term Loan B” means the term loan made to Borrower by the Lender pursuant to that Amended and Restated Term Loan B Note dated December 14, 2015, as was restated on or about the Third Amendment Closing Date by the Term Loan B Note, as is further described in Article 6 hereof.”

““Term Loan B Maturity Date” means May 5, 2022.”

““Term Loan B Note” means the Second Amended and Restated Term Loan B Note evidencing the Term Loan B, as such note may be amended, modified, supplemented or restated from time to time.”

(B)Effective as of the Amended Financial Covenants Effective Date, Section 1.1 of the Credit Agreement is hereby amended by amending and restating the following definitions in their entirety to read as follows:

““EBITDAS”” means, for the applicable period, EBITDA plus non-cash stock option expense, all on a consolidated basis and determined in accordance with GAAP on a consistent basis.

““Fixed Charge Coverage Ratio” means, as of the applicable measurement date for the applicable measurement period, the ratio of (a) EBITDAS, minus Unfinanced Capital Expenditures, minus Tax expense, to (b) the sum of (i) Interest Expense, plus (ii) principal payments due or paid with respect to Debt, plus (iii) payments on all capital lease obligations (including payments related to the sale-leaseback of certain property in New Mexico which closed on or about November 18, 2016) plus (iv) Distributions (other than Permitted Stock Repurchases), as such term is defined in Section 11.5); provided, however that: that partial prepayment made from proceeds of a Revolving Credit Loan pursuant to that Borrowing Request and Payment Direction Letter effective as of the Third Amendment Closing Date towards principal amounts outstanding under that Amended and Restated Term Loan B Note dated December 14, 2015, shall be excluded from principal payments for purposes of clause (b) above. The Fixed Charge Coverage Ratio shall be measured quarterly on a rolling-twelve month basis; provided, however, that (x) for the measurement period ending September 30, 2017, such calculation shall only consider the six (6) month period then ended; and (y) for the measurement period ending December 31, 2017, such calculation shall only consider the nine (9) month period then ended; and (z) for the measurement period ending March 31, 2018 and as of the end of each Fiscal Quarter thereafter, the measurement period shall be the twelve (12) months then ended.”

““Guarantor(s)” means GTC, DRTL and each Subsidiary which becomes a Guarantor pursuant to Section 10.12.”

““IECW&C” means IEC Electronics Wire and Cable, Inc., a New York corporation, formerly a wholly-owned Subsidiary of Borrower, and predecessor in interest by merger into the Borrower effective January 1, 2017.”

““Principal Office” means the Lender’s office at 180 South Clinton Avenue, Suite 700, Rochester, New York 14604.”

(C)Effective as of the Amended Financial Covenants Effective Date, Section 1.1 of the Credit Agreement is hereby amended by adding the following definitions thereto in alphabetical order:

““Advance Rate Reset” shall mean the date upon which the Lender is in receipt of an initial, or updated, Eligible Inventory NOLV appraisal and such Eligible Inventory NOLV has been included in the calculation of the Borrowing Base in the Borrowing Base Report.”

““Amended Financial Covenants Effective Date” means March 31, 2017.”

““Eligible Inventory NOLV” shall mean the net orderly liquidation value of Eligible Inventories (including raw materials, work in process and finished goods as each is determined in accordance with GAAP), as set forth in the annual inventory appraisal provided for in Section 10.17 of this Agreement.”

““Third Amendment Closing Date” means May 5, 2017.”

(D)Section 2.6 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“2.6 Unused Commitment Fee.Borrower agrees to pay to the Lender the Applicable Unused Fee on the average amount of the Revolving Credit Commitment unused during each Fiscal Quarter. Such fee shall be payable monthly in arrears and (i) during the period auto-deduct is elected by Borrower, the Lender is hereby authorized to charge Borrower’s account with Lender for the amount of such fee, and the Lender will deliver to Borrower an invoice setting forth the amount of such fee and the basis upon which it was calculated no later than two (2) Business Days after such fee is so charged, and (ii) if auto-deduct is not elected by Borrower, the Lender will deliver to Borrower an invoice setting forth the amount of such fee and the basis upon which it was calculated and such fee will be due and payable within five Business Days after delivery of such invoice.”

(E)Section 2.7 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“2.7[Intentionally Omitted].”

(F)Section 2.8 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“2.8Use of Proceeds. Proceeds of the Revolving Credit Loans shall be used for the Borrower’s working capital needs and to refinance existing indebtedness.”

(G)Section 6.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“6.1Term Loan B.Pursuant to the Term Loan B Note, which amended and restated that Amended and Restated Term Loan B Note dated December 14, 2015, the Lender agrees to lend and Borrower agrees to borrow from Lender, as of the Third Amendment Closing Date, subject to the terms and conditions in this Agreement, $6,000,000 for the use set forth in Section 6.5. This Term Loan B is evidenced by the Term Loan B Note which will accrue interest as further specified in this Agreement and the Term Loan B Note.”

(H)Section 6.3(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“(a)The Borrower shall repay the principal amount of the Term Loan B in sixty (60) consecutive monthly principal installments of $71,429 each, each to be made on the first day of each calendar month, with the next such payment to occur on the first such day to occur after the Third Amendment Closing Date.”

(I)A new Section 7.15 shall be added to the Credit Agreement, immediately following existing Section 7.14, to read as follows:

“7.15Collateral Monitoring Fee: So long as any Obligations shall be outstanding, the Commitment shall be in effect, or this Agreement shall remain in effect, Borrower shall pay to Lender a monthly collateral monitoring fee in the amount of $500 per month, in arrears, on the first day of each calendar month.”

(J)Section 10.1(c) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“(c) Provide to the Lender by the 20^th day of each month for the most recently ended calendar month, monthly borrowing base reports (“Borrowing Base Reports”) in substantially the form of Exhibit G attached hereto, accompanied by an accounts receivable aging, account payable aging, monthly Inventory report, and such other supporting detail as may be required by the Lender in its sole discretion to address all reporting deficiencies in any Borrowing Base Report; provided, that upon a Dominion Trigger Event under Section 10.15 such Borrowing Base Reports shall be provided by the second Business Day of each week for the most recently ended week, and such weekly reporting shall continue until the Dominion Trigger Event is no longer continuing, at which point reporting shall revert to monthly in accordance with this Section.”

(K)Section 10.1(d) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“(d)Provide to the Lender, within thirty (30) days after the end of each Fiscal Year of the Borrower, an annual operating budget for the Credit Parties, including projections, prepared on a monthly basis for Borrower’s consolidated and consolidating operations, a balance sheet, statements of operations, schedule of projected Unused Availability, projected financial covenants, and cash flow statement, with supporting assumptions, in detail reasonably satisfactory to Lender.”

(L)Section 10.1(f) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“(f)Provide to the Lender, upon the Lender’s request, key performance indicator (KPI) scorecards from each of the Borrower’s profit centers.”

(M)A new Section 10.1(m) will be added to the Credit Agreement to read as follows

“(m) Provide to Lender (i) within thirty (30) days after the end of each month, for the most recently ended calendar months, monthly unaudited consolidated and consolidating financial statements which shall include an income statement, balance sheet, statement of cash flow and reconciliations to the general ledger and financial statements, (ii) within twenty (20) days after the of each month, for the most recently ended calendar months, a monthly accounts receivable aging, inventory reports and account payable aging, and (iii) within twenty (20) days after the of each month that represents the last month of a Fiscal Quarter, a quarterly backlog report.”

(N)Section 10.17 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“10.17Inventory Appraisal.Engage, at Borrower’s expense, an appraiser selected annually by the Lender in its sole discretion, to conduct an annual inventory appraisal of the Credit Parties’ Inventory, the results of which will determine the Eligible Inventory NOLV.”

(O)Section 11.5 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“11.5Distributions. Make any Distributions without the prior written consent of Lender, except Distributions from any Guarantor(s) to Borrower; provided, however, that following the initial Advance Rate Reset the repurchase by Borrower of its common stock will be permitted (such repurchases, “Permitted Stock Repurchases”) so long as (a) the repurchases do not exceed $3,000,000 in the aggregate from the Third Amendment Closing Date through the Revolving Credit Termination Date, (b) Unused Availability, calculating giving pro forma effect to any such repurchase, is greater than $4,000,000 for the five (5) consecutive Business Days preceding any such repurchase, (c) no Event of Default exists prior to any such repurchase or shall exist as a result of such repurchase, and (d) prior to any such repurchase, the Lender has received a certificate of the Chief Financial Officer of Borrower, in substantially the form

of Exhibit H attached hereto, certifying that conditions (a) through (c) above have been met with respect to such stock repurchase.”

(P)A new Section 11.12 will be added to the Credit Agreement, after Section 11.11 to read as follows:

“11.12No Further Negative Pledges.No Credit Party nor any of its Subsidiaries shall enter into or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon the ability of such Credit Party or any of its Subsidiaries to create, incur or permit to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired except: (a) pursuant to this Agreement and the other Loan Documents; (b) agreements prohibiting Liens on specific property encumbered to secure payment of particular indebtedness permitted pursuant to Section 11.1; (c) restrictions by reason of customary provisions restricting assignments, subletting or other transfers contained in leases, licenses and similar agreements entered into in the ordinary course of business (provided, such restrictions are limited to the property or assets secured by such Liens or the property or assets subject to such leases, licenses or similar agreements, as the case may be); and (d) any negative pledge incurred or provided in connection with any Lien permitted by Section 11.1(c) or any document or instrument governing any Lien permitted by Section 11.1(c), provided that any such restriction contained therein relates only to the asset or assets subject to such Lien permitted by Section 11.1(c).”

(Q)Effective as of the Amended Financial Covenants Effective Date, Section 12.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“12.1[Intentionally Omitted].”

(R)Effective as of the Amended Financial Covenants Effective Date, Section 12.2 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“12.2Minimum Quarterly EBITDAS. Maintain, for the Fiscal Quarter ending 6/30/17, a minimum EBITDAS of $2,323,300 for the trailing twelve months then ended.”

(S)Effective as of the Amended Financial Covenants Effective Date, Section 12.3 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“12.3Fixed Charge Coverage Ratio. Maintain at all times a Fixed Charge Coverage Ratio, on a consolidated basis, of no less than 1.10:1.00, reported at the end of each Fiscal Quarter.”

(T)Effective as of the Amended Financial Covenants Effective Date, Section 12.4 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“12.4[Intentionally Omitted].”

(U)Effective as of the Amended Financial Covenants Effective Date, Section 12.5 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“12.5 Maximum Capital Expenditures. Not permit Capital Expenditures of the Borrower, on a consolidated basis, to exceed $3,500,000 for the Fiscal Year ending September 30, 2017, without the Lender’s consent.”

(V)Lender’s notice information in Section 15.4 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

“If to Lender:

Manufacturers and Traders Trust Company

180 South Clinton Avenue, Suite 700

Rochester, New York 14604

Attention: J. Theodore Smith

Facsimile: (585) 325-5105

Email: jtsmith@mtb.com

and:

Manufacturers and Traders Trust Company

25 S. Charles Street, 18th Floor

Baltimore, Maryland 21201

Attention: Michael D. Pick

Facsimile: (410) 244-4960

Email: mpick@mtb.com

with a copy to:

Nixon Peabody LLP

40 Fountain Plaza, Suite 500

Buffalo, New York 14202

Attention: Martha Anderson

Facsimile: (716) 853-8105

Email: manderson@nixonpeabody.com”

(W)Exhibit F of the Credit Agreement is hereby renamed “Form of Second Amended and Restated Term Loan B Note” and amended and restated to read in its entirety as Exhibit F attached to this Amendment.

(X)Effective as of the Amended Financial Covenants Effective Date, Exhibit A of the Credit Agreement is hereby amended and restated to read in its entirety as Exhibit A attached to this Amendment.

(Y)A new Exhibit H shall be added to the Credit Agreement in the form attached to this Amendment as Exhibit H.

3.Representations and Warranties. Borrower hereby makes the following representations and warranties to the Lender as of the Amended Financial Covenants Effective Date and as of the Third Amendment Closing Date, each of which shall survive the effectiveness of this Amendment and continue in effect as of the date hereof so long as any Obligations remain unpaid:

3.1Authorization. Borrower has full power and authority to borrow under the Credit Agreement, as amended by this Amendment, and to execute, deliver and perform this Amendment and any documents delivered in connection with it and all other related documents and transactions, all of which have been duly authorized by all proper and necessary corporate action. The execution and delivery of this Amendment by Borrower will not violate the provisions of, or cause a default under, Borrower’s Organizational Documents, any law or any agreement to which Borrower is a party or by which it or its assets are bound.

3.2Binding Effect. This Amendment has been duly executed and delivered by Borrower, and the Credit Agreement, as amended by this Amendment, is the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except to the extent that enforcement

of any such obligations of the Borrower may be limited by bankruptcy, insolvency, reorganization or similar laws of general application affecting the rights and remedies of creditors generally.

3.3Consents; Governmental Approvals. Except as may be specifically identified in a written agreement to which Borrower and Lender are parties, no consent, approval or authorization of, or registration, declaration or filing with, any Governmental Authority or any other Person is required in connection with the valid execution, delivery or performance of this Amendment or any other document executed and delivered by Borrower herewith or in connection with any other transactions contemplated hereby.

3.4Representations and Warranties. The representations and warranties contained in the Credit Agreement, as amended by this Amendment, are true on and as of the date hereof with the same force and effect as if made on and as of the date hereof, except forthose representations and warranties that by their terms are made as of a specific date, which representations and warranties Borrower hereby remakes as of such date.

3.5No Events of Default. No Default or Event of Default has occurred or is continuing.

3.6No Material Misstatements. Neither this Amendment nor any document delivered to Lender by Borrower or any Credit Party to induce Lender to enter into this Amendment contains any untrue statement of a material fact or, taken as a whole with the other Loan Documents, omits to state a material fact necessary to make the statements herein or therein not misleading in light of the circumstances in which they were made.

4.CONDITIONS OF AMENDMENT. The Lender shall have no obligation to execute or deliver this Amendment until each of the following conditions shall have been satisfied:

4.1Authorization. Borrower shall have taken all appropriate corporate action to authorize, and its directors, if and as required by Borrower’s Organizational Documents, shall have adopted resolutions authorizing the execution, delivery and performance of this Amendment and the taking of all other action contemplated by this Amendment, and Lender shall have been furnished with copies of all such corporate action, certified by an authorized officer of Borrower as being true and correct and in full force and effect without amendment on the date hereof, and such other corporate documents as Lender may request.

4.2Consents. Borrower shall have delivered to Lender any and all consents, if any, necessary to permit the transactions contemplated by this Amendment.

4.3Fees. Borrower shall have paid to the Lender all reasonable fees and disbursements of Lender’s counsel and all recording fees, search fees, charges and taxes in connection with this Amendment and all transactions contemplated hereby or made other arrangements with respect to such payment as are satisfactory to Lender.

4.4Deliveries. Borrower shall have delivered to Lender, each of the following documents, duly executed by the Borrower or as specified: (i) this Amendment, (ii) the Term Loan B Note, (iii) a Reaffirmation executed by the Borrower and each of the Guarantors, and (iv) such additional documents, consents, authorizations, insurance certificates, governmental consents and other instruments and agreements as Lender or its counsel may reasonably require and all documents, instruments and other legal matters in connection with the Loan Documents shall be reasonably satisfactory to Lender and its counsel.

4.5Representations and Warranties. The representations and warranties set forth in this Amendment and in the Loan Documents shall be true, correct and complete as of the Amended Financial

Covenants Effective Date and as of the Third Amendment Closing Date, except those representations and warranties that by their terms are made as of a specific date, which representations and warranties Borrower hereby remakes as of such date.

4.6No Event of Default. No Event of Default or Default shall have occurred and be continuing as of the Amended Financial Covenants Effective Date or as of the Third Amendment Closing Date.

4.7No Material Misstatements. Neither this Amendment nor any document delivered to Lender by or on behalf of Borrower to induce Lender to enter into this Amendment contains any untrue statement of a material fact or, taken as a whole with the other Loan Documents, omits to state a material fact necessary to make the statements herein or therein not misleading in light of the circumstances in which they were made.

4.8No Material Adverse Change. As of the Amended Financial Covenants Effective Date and as of the Third Amendment Closing Date, no Material Adverse Effect shall have occurred with respect to the Borrower and its Subsidiaries taken as a whole since September 30, 2016, including, without limitation, the Credit Parties’ ability to meet the projections delivered by the Borrower to the Bank prior to the Third Amendment Closing Date.

4.9No Litigation. As of the Amended Financial Covenants Effective Date and as of the Third Amendment Closing Date, except as set forth on Schedule 8.5 to the Credit Agreement, there shall not be any claim, action, suit, investigation, litigation, or legal proceeding pending or threatened in any court or before any arbitrator or governmental authority which relates to the legality, validity or enforceability of the Credit Agreement (as amended by this Amendment) or the transactions contemplated hereby or that, if adversely determined, is not adequately covered by insurance or would have a Material Adverse Effect on the Borrower or its Subsidiaries.

4.10Inventory Appraisal. As of the Third Amendment Closing Date, an appraisal of the Credit Parties’ Inventory shall have been ordered and scheduled to take place. For clarity, such inventory appraisal need not take place prior to the Third Amendment Closing Date.

4.11Revolving Credit Loan. As of the Third Amendment Closing Date, Borrower shall have delivered to the Lender a Borrowing Request and Payment Direction Letter which, to the satisfaction of the Lender: (a) requests a Revolving Credit Loan, effective as of Third Amendment Closing Date, in the amount of $2,049,983.00; and (b) directs that the entirety of such Revolving Credit Loan be applied towards any outstanding balance under that certain Amended and Restated Term Loan B Note dated December 14, 2015.

5.MISCELLANEOUS.

5.1Reaffirmation of Security Documents. As of the Amended Financial Covenants Effective Date and as of the Third Amendment Closing Date, Borrower hereby (a) acknowledges and reaffirms the execution and delivery of the Security Documents, (b) acknowledges, reaffirms and agrees that the security interests granted under the Security Documents continue in full force and effect as security for all indebtedness, obligations and liabilities under the Loan Documents, as may be amended from time to time, and (c) remakes the representations and warranties set forth in the Security Documents, except those representations and warranties that by their terms are made as of a specific date, which representations and warranties Borrower hereby remakes as of such date.

5.2Entire Agreement; Binding Effect. The Credit Agreement, as amended by this Amendment, represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof. This Amendment supersedes all prior negotiations and any course of dealing between the parties with respect to the subject matter hereof. This Amendment shall be binding upon Borrower and its successors and assigns, and shall inure to the benefit of, and be enforceable by the Lender and its successors and assigns. The Credit Agreement, as amended hereby, is in full force and effect and, as so amended, is hereby ratified and reaffirmed in its entirety.

5.3Severability. If any provision of this Amendment shall be determined by a court to be invalid, such provision shall be deemed modified to conform to the minimum requirements of applicable law.

5.4Headings. The section headings inserted in this Amendment are provided for convenience of reference only and shall not be used in the construction or interpretation of this Amendment.

5.5Counterparts. This Amendment may be executed by the parties hereto in separate counterparts (including those delivered by facsimile or other electronic means), each of which, when so executed and delivered, shall be an original, but all such counterparts shall together constitute one and the same instrument.

[signature page follows]

[Third Amendment to Fifth Amended and Restated Credit Facility Agreement]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be signed by their duly authorized officers as of the day and year first above written.

MANUFACTURERS AND TRADERS TRUST COMPANY

By:	/s/ Michael D. Pick
	Name:Michael D. Pick
	Title:    Vice President

IEC ELECTRONICS CORP.

By:	/s/ Michael T. Williams
	Name: Michael T. Williams
	Title:    Chief Financial Officer

Exhibit A to Exhibit 10.4

EXHIBIT A

FORM OF QUARTERLY COVENANT COMPLIANCE SHEET

See attached.

M&T Bank - Quarterly Covenant Calculations & Management Certification
	Q1 FY20XX	Q2 FY20XX	Q3 FY20XX	Q4 FY20XX
Covenant 12.2	Compliant/ Violation	Compliant/ Violation	Compliant/ Violation	Compliant/ Violation
Minimum Quarterly EBITDAS	—	—	—	—
Covenant 12.3	Compliant/ Violation	Compliant/ Violation	Compliant/ Violation	Compliant/ Violation
Fixed Charge Coverage Ratio	—	—	—	—
Covenant 12.5	Compliant/ Violation	Compliant/ Violation	Compliant/ Violation	Compliant/ Violation
Maximum Capital Expenditures	—	—	—	—
Supporting Calculations
EBITDAS
Net Income	—	—	—	—
Tax expense	—	—	—	—
depreciation and amortization of intangible assets	—	—	—	—
Interest Expense	—	—	—	—
EBITDA	—	—	—	—
Non-cash stock option expense	—	—	—	—
EBITDAS	—	—	—	—
Rolling 4-Quarter EBITDAS				—
Fixed Charge Coverage Ratio
EBITDAS	—	—	—	—
Unfinanced Capital Expenditures	—	—	—	—
Tax expense	—	—	—	—
Total	—	—	—	—
Interest Expense	—	—	—	—
principal payments due or paid with respect to Debt (excluding exceptions)	—	—	—	—
payments on all capital lease obligations	—	—	—	—
Distributions	—	—	—	—
Total	—	—	—	—
Applicable Fixed Charge Coverage Ratio
[Date]
As required by section 12.6 of the Fifth Amended and Restated Credit Facility Agreement (the "Credit Agreement"), I hereby certify that no Default or Event of Default has occurred under the Credit Agreement. In addition, I hereby certify the accuracy of the above schedule showing computation of financial covenants contained in Article 12 of the Credit Agreement.
[Signature of Chief Financial Officer]

Exhibit F to Exhibit 10.4

EXHIBIT F

FORM OF SECOND AMENDED AND RESTATED TERM LOAN B NOTE

See attached.

SECOND AMENDED AND RESTATED TERM LOAN B NOTE

$6,000,000.00  May 5, 2017

IEC ELECTRONICS CORP. (“Borrower”), a corporation organized under the laws of the State of Delaware, for value received, hereby promises to pay to the order of MANUFACTURERS AND TRADERS TRUST COMPANY (“Lender”) the principal sum of Six Million Dollars ($6,000,000.00), in lawful money of the United States of America and in immediately available funds in consecutive installments of principal on the first day of each month in the amount of $71,429.00 each. The entire unpaid principal balance of this Second Amended and Restated Term Loan B Note (“Term Loan B Note”) shall be due and payable on the Term Loan B Maturity Date. Borrower also promises to pay interest on the unpaid principal balance hereof, for the period such balance is outstanding, in like money, at the rates of interest as provided in the Agreement described below, on the date(s) and in the manner further provided in said Agreement.

This is the Term Loan B Note referred to in that certain Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by that certain First Amendment to Fifth Amended and Restated Credit Facility Agreement dated as of June 20, 2016, that certain Second Amendment to Fifth Amended and Restated Credit Facility Agreement dates as of November 28, 2016, and that certain Third Amendment to Fifth Amended and Restated Credit Facility Agreement dated as of the date hereof (as amended, supplemented, and restated from time to time, the “Agreement”), made between Borrower and Lender, and evidences the Term Loan B described therein. All capitalized terms used but not defined in this Term Loan B Note shall have the meanings given to them in the Agreement.

Borrower waives presentment, notice of dishonor, protest and any other notice or formality with respect to this Term Loan B Note.

This Term Loan B Note shall be governed by the laws of the State of New York.

This Term Loan B Note amends, restates and supersedes the Amended and Restated Term Loan B Note dated as of December 14, 2015 in the original principal amount of $10,033,322.00 delivered by Borrower to Lender and any amendments, restatements or replacements thereof (as so amended, restated or replaced, the “Existing Note”). Further, the indebtedness created under the Existing Note is continuing and subsisting pursuant to this Term Loan B Note and all collateral provided in conjunction with the Existing Note is hereby ratified and affirmed as collateral security for all obligations under this Term Loan B Note.

[signature page follows]

[SECOND AMENDED AND RESTATED TERM LOAN B NOTE]

IN WITNESS WHEREOF, and intending to be legally bound hereby, the undersigned has executed this Second Amended and Restated Term Loan B Note by its duly authorized officer as of the date first written above.

IEC ELECTRONICS CORP.

By:	/s/ Michael T. Williams
	Name: Michael T. Williams
	Title:    Chief Financial Officer

Exhibit H to Exhibit 10.4

EXHIBIT H

PERMITTED STOCK REPURCHASE COMPLIANCE CERTIFICATE

See attached.

EXHIBIT H

FORM OF STOCK REPURCHASE COMPLIANCE CERTIFICATE

As required by Section 11.5 of that Fifth Amended and Restated Credit Facility Agreement by and between IEC Electronics Corp. (“Borrower”) and Manufacturers and Traders Trust Company (“Lender”) (as amended, and as the same may be further amended, modified, supplemented or restated from time to time, the “Credit Agreement”), I hereby certify the following as of ______ __, 20__:

1) Borrower is planning on effectuating a Permitted Stock Repurchase on the date first above written (“Planned Permitted Stock Repurchase”) in the amount of $___________.

2) Should the Planned Permitted Stock Repurchase occur, the aggregate of all Permitted Stock Repurchases by Borrower, inclusive of the Planned Permitted Stock Repurchase, from the Third Amendment Closing Date through the Revolving Credit Termination Date will not exceed $3,000,000.00.

3) The Unused Availability, calculated giving pro forma effect to the Planned Permitted Stock Repurchase, is greater than $4,000,000.00 for each of the five (5) consecutive Business Days preceding the Planned Permitted Stock Repurchase.

4) No Event of Default has occurred or will occur as a result of effectuating the Planned Permitted Stock Repurchase.

All capitalized terms used herein and not defined shall have the meaning given such terms in the Credit Agreement

IEC Electronics Corp.

______________________

Name:

Title:Chief Financial Officer

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jeffrey T. Schlarbaum, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the three and six months ended March 31, 2017 for IEC Electronics Corp.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present 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 report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be

designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: May 10, 2017	By:	/s/ Jeffrey T. Schlarbaum
		Jeffrey T. Schlarbaum
		President & Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael T. Williams, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the three and six months ended March 31, 2017 for IEC Electronics Corp.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present 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 report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: May 10, 2017	By:	/s/ Michael T. Williams
		Michael T. Williams
		Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the the quarterly report of IEC Electronics Corp., (the "Company") on Form 10-Q for the quarter ended

March 31, 2017 as filed with the Securities and Exchange Commission on the day hereof (the "Report"), I, Jeffrey T. Schlarbaum, President and Chief Executive Officer of the Company and Michael T. Williams, Chief 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, as amended; 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: May 10, 2017	By:	/s/ Jeffrey T. Schlarbaum
		Jeffrey T. Schlarbaum
		President & Chief Executive Officer

Dated: May 10, 2017	By:	/s/ Michael T. Williams
		Michael T. Williams
		Chief Financial Officer

XML

Document And Entity Information - shares	6 Months Ended
	Mar. 31, 2017	May 01, 2017
Document And Entity Information [Abstract]
Entity Registrant Name	IEC ELECTRONICS CORP
Entity Central Index Key	0000049728
Current Fiscal Year End Date	--09-30
Entity Filer Category	Smaller Reporting Company
Trading Symbol	IEC
Entity Common Stock, Shares Outstanding		10,316,623
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2017

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Current assets:
Cash	$ 509	$ 845
Accounts receivable, net of allowance	14,713	17,140
Inventories, net	16,477	15,384
Assets held for sale	0	4,611
Other current assets	997	1,214
Total current assets	32,696	39,194
Property, plant & equipment, net	17,010	10,994
Intangible assets, net	75	95
Goodwill	101	101
Other long term assets	8	13
Total assets	49,890	50,397
Current liabilities:
Current portion of long-term debt	1,530	2,908
Current portion of capital lease	206	0
Current portion of capital lease	11,784	10,864
Accounts payable	1,207	3,365
Accrued payroll and related expenses	496	529
Customer deposits	2,161	1,756
Total current liabilities	17,384	19,422
Long-term debt	12,950	16,732
Long-term capital lease	5,471	0
Other long-term liabilities	1,425	379
Total liabilities	37,230	36,533
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value: 500,000 shares authorized; none issued or outstanding	0	0
Common stock, $0.01 par value: Authorized: 50,000,000 shares; Issued: 11,372,111 and 11,330,151 shares, respectively; Outstanding: 10,316,623 and 10,274,663 shares, respectively	114	113
Additional paid-in capital	46,557	46,294
Retained earnings/(accumulated deficit)	(32,422)	(30,954)
Treasury stock, at cost: 1,055,488 shares	(1,589)	(1,589)
Total stockholders’ equity	12,660	13,864
Total liabilities and stockholders’ equity	$ 49,890	$ 50,397

XML

CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] - $ / shares	Mar. 31, 2017	Sep. 30, 2016
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	11,372,111	11,330,151
Common stock, shares outstanding	10,313,623	10,274,663
Treasury stock, shares	1,055,488	1,055,488

XML

CONDENSED CONSOLIDATED INCOME STATEMENTS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016	Mar. 31, 2017	Apr. 01, 2016
Income Statement [Abstract]
Net sales	$ 21,368	$ 33,148	$ 42,344	$ 66,081
Cost of sales	19,089	27,412	38,269	54,528
Gross profit	2,279	5,736	4,075	11,553
Selling and administrative expenses	2,665	3,762	5,095	7,747
Operating profit/(loss)	(386)	1,974	(1,020)	3,806
Interest and financing expense	229	513	448	802
Income/(loss) before income taxes	(615)	1,461	(1,468)	3,004
Provision for/(benefit from) income taxes	0	0	0	0
Net income/(loss)	$ (615)	$ 1,461	$ (1,468)	$ 3,004
Net income/(loss) per common and common equivalent share:
Basic (in dollars per share)	$ (0.06)	$ 0.14	$ (0.14)	$ 0.29
Diluted (in dollars per share)	$ (0.06)	$ 0.14	$ (0.14)	$ 0.29
Weighted average number of common and common equivalent shares outstanding:
Basic (in shares)	10,173,388	10,205,031	10,168,339	10,210,539
Diluted (in shares)	10,173,388	10,205,031	10,168,339	10,210,539

XML

CONDENSED CONSOLIDATED STATEMENTS of CHANGES in STOCKHOLDERS' EQUITY - USD ($)	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings/ (Accumulated Deficit) [Member]	Treasury Stock, at cost [Member]
Beginning Balance at Sep. 30, 2015	$ 8,688,000	$ 112,000	$ 45,845,000	$ (35,740,000)	$ (1,529,000)
Net income (loss)	3,004,000			3,004,000
Stock-based compensation	162,000		162,000
Restricted (non-vested) stock grants, net of forfeitures	0	1,000	(1,000)
Employee stock plan purchases	7,000		7,000
Return of incentive compensation shares	(60,000)				(60,000)
Ending Balance at Apr. 01, 2016	11,801,000	113,000	46,013,000	(32,736,000)	(1,589,000)
Beginning Balance at Sep. 30, 2016	13,864,000	113,000	46,294,000	(30,954,000)	(1,589,000)
Net income (loss)	(1,468,000)			(1,468,000)
Stock-based compensation	252,000		252,000
Restricted (non-vested) stock grants, net of forfeitures	1,000	1,000	0
Employee stock plan purchases	13,000		13,000
Return of incentive compensation shares	(60,000)
Shares withheld for payment of taxes upon vesting of restricted stock	(2,000)		(2,000)
Ending Balance at Mar. 31, 2017	$ 12,660,000	$ 114,000	$ 46,557,000	$ (32,422,000)	$ (1,589,000)

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CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss)	$ (1,468)	$ 3,004
Non-cash adjustments:
Stock-based compensation	252	162
Incentive compensation shares returned	0	(60)
Depreciation and amortization	1,330	1,681
(Gain)/loss on sale of property, plant and equipment	0	1
Reserve for doubtful accounts	(151)	270
Provision for excess/obsolete inventory	(196)	279
Amortization of deferred gain on sale leaseback	(30)	0
Changes in assets and liabilities:
Accounts receivable	2,578	6,422
Inventory	(897)	1,580
Other current assets	217	185
Other long term assets	5	(11)
Accounts payable	920	(6,497)
Accrued expenses	(2,191)	629
Customer deposits	405	(1,015)
Other long term liabilities	(85)	(14)
Net cash flows from operating activities	689	6,616
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment	(1,536)	(1,270)
Proceeds from sale-leaseback	5,750	0
Net cash flows from investing activities	4,214	(1,270)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from revolving line of credit	21,448	30,271
Repayments of revolving line of credit	(19,868)	(32,998)
Repayments under other loan agreements	(6,758)	(1,696)
Repayments under capital lease	(73)	0
Debt issuance costs	0	(211)
Proceeds from employee stock plan purchases	13	7
Repayments under other loan agreements	(1)	0
Net cash flows from financing activities	(5,239)	(4,627)
Net cash flows for the period	(336)	719
Cash, beginning of period	845	407
Cash, end of period	509	1,126
Supplemental cash flow information
Interest paid	429	803
Income taxes paid	79	0
Borrowings under capital lease	$ 5,750	$ 0

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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1—OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our Business

IEC Electronics Corp. (“IEC,” “we,” “our,” “us,” the “Company”) provides electronic manufacturing services (“EMS”) to advanced technology companies that produce life-saving and mission critical products for the medical, industrial, aerospace and defense sectors. The Company specializes in delivering technical solutions for the custom manufacture of complex full system assemblies by providing on-site analytical testing laboratories, custom design and test engineering services combined with a broad array of manufacturing services encompassing electronics, interconnect solutions, and precision metalworking. As a full service EMS provider, IEC holds all appropriate certifications for the market sectors it supports including ISO 9001:2008, AS9100C, ISO 13485, Nadcap and IPC QML.  IEC is headquartered in Newark, NY and also has operations in Rochester, NY and Albuquerque, NM.  Additional information about IEC can be found on its website at www.iec-electronics.com. The contents of this website are not incorporated by reference into this quarterly report.

Generally Accepted Accounting Principles

IEC’s financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).

Fiscal Calendar

The Company’s fiscal year ends on September 30th and the first three quarters generally end on the Friday closest to the last day of the calendar quarter.

Consolidation

The consolidated financial statements include the accounts of IEC and its wholly-owned subsidiaries: IEC Electronics Wire and Cable, Inc. (“Wire and Cable”) that merged into IEC on December 28, 2016; IEC Electronics Corp-Albuquerque (“Albuquerque”); IEC Analysis & Testing Laboratory, LLC (“ATL”), formerly Dynamic Research and Testing Laboratories, LLC; and IEC California Holdings, Inc. The Rochester unit, formerly Celmet, operates as a division of IEC. All significant intercompany transactions and accounts are eliminated in consolidation. 

Unaudited Financial Statements

The accompanying unaudited financial statements for the six months endedMarch 31, 2017 and April 1, 2016 have been prepared in accordance with GAAP for interim financial information.  In the opinion of management, all adjustments required for a fair presentation of the information have been made.  The accompanying financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016 (“fiscal 2016”).

Reclassifications

Prior year financial statement amounts are reclassified as necessary to conform to the current year presentation. There was no impact on net income or accumulated deficit as a result of the reclassification.

Cash

The Company’s cash represents deposit accounts with Manufacturers and Traders Trust Company (“M&T Bank”), a banking corporation headquartered in Buffalo, NY.

Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability.  Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote.

Inventory Valuation

Inventories are stated at the lower of cost or market value under the first-in, first-out method.  The Company regularly assesses slow-moving, excess and obsolete inventory and maintains balance sheet reserves in amounts required to reduce the recorded value of inventory to the lower of cost or market.

Property, Plant and Equipment

Property, plant and equipment (“PP&E”) are stated at cost and are depreciated over various estimated useful lives using the straight-line method.  Maintenance and repairs are charged to expense as incurred, while renewals and improvements are capitalized.  At the time of retirement or other disposition of PP&E, cost and accumulated depreciation are removed from the accounts and any gain or loss is recorded in earnings.

Depreciable lives generally used for PP&E are presented in the table below.  Leasehold improvements are amortized over the shorter of the lease term or estimated useful life of the improvement.

PP&E Lives	Estimated Useful Lives
	(years)
Land improvements	10
Buildings and improvements	5 to 40
Machinery and equipment	3 to 5
Furniture and fixtures	3 to 7

Intangible Assets

Intangible assets (other than goodwill) are those that lack physical substance and are not financial assets.  Such assets held by IEC were acquired in connection with business combinations or represent economic benefits associated with a property tax abatement.  Values assigned to individual intangible assets are amortized using the straight-line method over their estimated useful lives. 

Reviewing Long-Lived Assets for Potential Impairment

ASC 360-10 (Property, Plant and Equipment) and ASC 350-30 (Intangibles) require the Company to test long-lived assets (PP&E and definitive lived assets) for recoverability whenever events or circumstances indicate that the carrying amount may not be recoverable.  If carrying value exceeds undiscounted future cash flows attributable to an asset, it is considered impaired and the excess of carrying value over fair value must be charged to earnings.  No impairment charges were identified or recorded by IEC for PP&E or intangibles during the six months endedMarch 31, 2017.

Goodwill

Goodwill represents the excess of cost over fair value of net assets acquired in a business combination.   Under ASC 350, goodwill is not amortized but is reviewed for impairment at least annually or when events or circumstances indicate that carrying value may exceed fair value.  The Company may elect to precede a quantitative review for impairment with a qualitative assessment of the likelihood that fair value of a particular reporting unit exceeds carrying value.  If the qualitative assessment leads to a conclusion that it is more than 50 percent likely that fair value exceeds carrying value, no further testing is required.  In the event of a less favorable outcome, the Company is required to proceed with quantitative testing. 

The quantitative process entails comparing the overall fair value of the unit to which goodwill relates to carrying value.  If fair value exceeds carrying value, no further assessment of potential impairment is required.  If fair value of the unit is less than carrying value, a valuation of the unit’s individual assets and liabilities is required to determine whether or not goodwill is impaired.  Goodwill impairment losses are charged to earnings. 

IEC’s remaining goodwill as of March 31, 2017 of $0.1 million relates to its acquisition of the Rochester division in July 2010. There has been no impairment for this goodwill since the acquisition date.  

Leases

At the inception of a lease covering equipment or real estate, the lease agreement is evaluated under criteria discussed in ASC 840-10-25 (Leases).  Leases meeting one of four key criteria are accounted for as capital leases and all others are treated as operating leases.  Under a capital lease, the discounted value of future lease payments becomes the basis for recognizing an asset and a borrowing, and lease payments are allocated between debt reduction and interest.  For operating leases, payments are recorded as rent expense.  Criteria for a capital lease include (i) transfer of ownership during the lease term; (ii) existence of a bargain purchase option under terms that make it likely to be exercised; (iii) a lease term equal to 75 percent or more of the economic life of the leased property; and (iv) minimum lease payments that equal or exceed 90 percent of the fair value of the property.

Legal Contingencies

When legal proceedings are brought or claims are made against us and the outcome is uncertain, ASC 450-10 (Contingencies) requires that we determine whether it is probable that an asset has been impaired or a liability has been incurred.  If such impairment or liability is probable and the amount of loss can be reasonably estimated, the loss must be charged to earnings. 

When it is considered probable that a loss has been incurred, but the amount of loss cannot be estimated, disclosure but not accrual of the probable loss is required.  Disclosure of a loss contingency is also required when it is reasonably possible, but not probable, that a loss has been incurred. 

Customer Deposits

Customer deposits represent amounts invoiced to customers for which the revenue has not yet been earned and therefore represent a commitment for the Company to deliver goods or services in the future. Deposits are generally short term in nature and are recognized as revenue when earned.

Grants from Outside Parties

Grants from outside parties are recorded as other long-term liabilities and are amortized over the same period during which the associated PP&E are depreciated. The Company received grants for certain facility improvements and equipment from state and local agencies in which the Company operates.  These grants reimbursed the Company for a portion of the actual cost or provided in kind services in support of capital projects. 

There were no deferred grants recorded during the six months endedMarch 31, 2017 or the fiscal year ended September 30, 2016. The outstanding grant balance was $0.2 million and $0.3 million at March 31, 2017 and September 30, 2016, respectively.

Derivative Financial Instruments

The Company actively monitors its exposure to interest rate risk and from time to time may use derivative financial instruments to manage the impact of this risk.  The Company uses derivatives only for purposes of managing risk associated with underlying exposures.  The Company does not trade or use instruments with the objective of earning financial gains on the interest rate nor does the Company use derivative instruments where it does not have underlying exposures.  The Company did not have any derivative financial instruments at March 31, 2017 or September 30, 2016.

Fair Value Measurements

Under ASC 825 (Financial Instruments), the Company is required to disclose the fair value of financial instruments for which it is practicable to estimate value.  The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and borrowings.  IEC believes that recorded value approximates fair value for all cash, accounts receivable, accounts payable and accrued liabilities. See Note 7—Fair Value of Financial Instruments for a discussion of the fair value of IEC’s borrowings.

ASC 820 (Fair Value Measurements and Disclosures) defines fair value, establishes a framework for measurement, and prescribes related disclosures.  ASC 820 defines fair value as the price that would be received upon sale of an asset or would be paid to transfer a liability in an orderly transaction.  Inputs used to measure fair value are categorized under the following hierarchy:

Level 1: Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable market data.

Level 3: Model-derived valuations in which one or more significant inputs are unobservable.

The Company deems a transfer between levels of the fair value hierarchy to have occurred at the beginning of the reporting period.  There were no such transfers during each of the first six months of the fiscal year ending September 30, 2017 (“fiscal 2017”) or fiscal 2016.

Revenue Recognition

The Company’s revenue is principally derived from the sale of electronic products built to customer specifications, but also from other value-added support services and repair work.  Revenue from product sales is recognized when (i) goods are shipped or title and risk of ownership have passed, (ii) the price to the buyer is fixed or determinable, and (iii) realization is reasonably assured. Service revenue is generally recognized once the service has been rendered.  Services revenue, including material management, design and repair work revenue, amounted to less than 5% of total revenue in each of the first six months of fiscal2017 and fiscal 2016.

Provisions for discounts, allowances, rebates, estimated returns and other adjustments are recorded in the period the related sales are recognized.

Stock-Based Compensation

ASC 718 (Stock Compensation) requires that compensation expense be recognized for equity awards based on fair value as of the date of grant.  For stock options, the Company uses the Black-Scholes pricing model to estimate grant date fair value.  Costs associated with stock awards are recorded over requisite service periods, generally the vesting period.  If vesting is contingent on the achievement of performance objectives, fair value is accrued over the period the objectives are expected to be achieved only if it is considered probable that the objectives will be achieved.  The Company also has an employee stock purchase plan (“ESPP”) that provides for the purchase of Company common stock at a discounted stock purchase price. Compensation expense related to the discount is recognized as employees contribute to the plan. During the fiscal year ended September 30, 2015 (“fiscal 2015”) and the first quarter of fiscal 2016, the ESPP was suspended in connection with the 2014 restatements of the Company’s financial statements. The ESPP was reinstated as of the beginning of the second quarter of fiscal 2016.

Legal Expense Accrual

The Company records legal expenses as they are incurred, based on invoices received or estimates provided by legal counsel. Future estimated legal expenses are not recorded until incurred.

Income Taxes and Deferred Taxes

ASC 740 (Income Taxes) requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns, but not in both.  Deferred tax assets are also established for tax benefits associated with tax loss and tax credit carryforwards.  Such deferred balances reflect tax rates that are scheduled to be in effect, based on currently enacted legislation, in the years the book/tax differences reverse and tax loss and tax credit carryforwards are expected to be realized.  An allowance is established for any deferred tax asset for which realization is not likely.

ASC 740 also prescribes the manner in which a company measures, recognizes, presents and discloses in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return.  The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the position will be sustained following examination by taxing authorities, based on technical merits of the position.  The Company believes that it has no material uncertain tax positions.

Any interest incurred is reported as interest expense. Any penalties incurred are reported as tax expense.   The Company’s income tax filings are subject to audit by various tax jurisdictions and current open years are the fiscal year ended September 30, 2010 through fiscal year ended September 30, 2012, and fiscal year ended September 30, 2014 through fiscal 2015.  The federal income tax audit for the fiscal year ended September 30, 2013 concluded during the first six months of fiscal 2017 and resulted in no change to reported tax.

Earnings Per Share

Basic earnings per common share are calculated by dividing income available to common stockholders by the weighted average number of shares outstanding during each period.  Diluted earnings per common share add to the denominator incremental shares resulting from the assumed exercise of all potentially dilutive stock options, as well as restricted (non-vested) stock, restricted stock units (“RSUs”) and anticipated issuances under the ESPP.  Options, restricted stock and RSUs are primarily held by directors, officers and certain employees. 

A summary of shares used in the earnings per share (“EPS”) calculations follows:

	Three Months Ended		Six Months Ended
Shares for EPS Calculation	March 31, 2017	April 1, 2016	March 31, 2017	April 1, 2016
Weighted average shares outstanding	10,173,388	10,205,031	10,168,339	10,210,539
Incremental shares	—	—	—	—
Diluted shares	10,173,388	10,205,031	10,168,339	10,210,539
Anti-dilutive shares excluded	1,157,356	804,965	1,157,356	804,965

As a result of the net loss and incremental shares being negative for the three and six months endedMarch 31, 2017, the Company calculated diluted earnings per share using weighted average basic shares outstanding, as using diluted shares would be anti-dilutive to loss per share.

As a result of the incremental shares being negative for the three and six months ended and April 1, 2016, the Company calculated diluted earnings per share using weighted average basic shares outstanding, as using diluted shares would be anti-dilutive. 

Dividends

IEC does not pay dividends on its common stock as it is the Company’s current policy to retain earnings for use in the business.  Furthermore, the Company’s Fifth Amended and Restated Credit Facility Agreement, as amended, with M&T Bank includes certain restrictions on paying cash dividends, as more fully described in Note 6—Credit Facilities. 

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities.  Actual results may differ from management’s estimates.

Statements of Cash Flows

The Company presents operating cash flows using the indirect method of reporting under which non-cash income and expense items are removed from net income. 

Recently Issued Accounting Standards

FASB Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“Topic 606”) was issued May 2014 and updates the principles for recognizing revenue.  This ASU will supersede most of the existing revenue recognition requirements in GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which a company expects to be entitled in exchange for transferring goods or services to a customer.  This ASU also amends the required disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. FASB ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” was issued in March 2016 and improves implementation guidance on principal versus agent considerations. FASB ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” was issued in April 2016 and adds further guidance on identifying performance obligations as well as improving licensing implementation guidance. FASB ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” was issued in June 2016 and clarifies the objective of the collectability criterion, presentation of taxes collected from customers, non-cash consideration, contract modifications at transition, completed contracts at transition and how guidance in Topic 606 is retrospectively applied. The amendments do not change the core principle of the guidance in Topic 606. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within that period.  Early adoption is permitted for annualperiods beginning after December 15, 2016.  The Company is identifying key personnel to evaluate the guidance and determine the transition method, while also formulating a time line to review the potential impact of the new standard on the Company's existing revenue recognition policies and procedures. Although Management has not completed its evaluation of all the issued guidance under Topic 606, the Company does not currently expect the guidance to have a material effect on its financial position, results of operations or cash flows.

FASB ASU 2015-11, “Simplifying the Measurement of Inventory” was issued in July 2015. This requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. This ASU will not apply to inventories that are measured by using either the last-in, first-out method or the retail inventory method. For public business entities, this ASU is effective prospectively for annual periods beginning after December 15, 2016, and interim periods therein. Upon transition, entities must disclose the nature of and reason for the accounting change. The Company does not anticipate a significant impact on its financial statements upon adoption.

FASB ASU 2015-17, “Income Taxes Balance Sheet Classification of Deferred Taxes” was issued in November 2015. This requires entities to classify deferred tax liabilities and assets as noncurrent in a classified statement of financial position and applies to all entities that present a classified statement of financial position. For public entities, this update is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company does not anticipate a significant impact on its financial statements upon adoption.

FASB ASU 2016-02, “Leases” was issued in February 2016. The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. For public entities, the new guidance is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted for all entities. The Company is evaluating the impact this ASU will have on its financial statements.

FASB ASU 2016-09, “Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting” was issued in March 2016. This simplifies accounting for several aspects of share-based payment including income tax consequences, classification of awards as either equity or liability and classification on the statement of cash flows. For public entities, this update is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company does not anticipate a significant impact on its financial statements upon adoption.

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ALLOWANCE FOR DOUBTFUL ACCOUNTS

6 Months Ended

Mar. 31, 2017

Receivables [Abstract]

ALLOWANCE FOR DOUBTFUL ACCOUNTS

NOTE 2—ALLOWANCE FOR DOUBTFUL ACCOUNTS

A summary of activity in the allowance for doubtful accounts during the six months endedMarch 31, 2017 and April 1, 2016 follows:

	Six Months Ended
Allowance for Doubtful Accounts	March 31, 2017			April 1, 2016
(in thousands)
Allowance, beginning of period	$	226		$	423
Provision for doubtful accounts	(151		)	270
Write-offs/recoveries	15			(158		)
Allowance, end of period	$	90		$	535

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INVENTORIES

6 Months Ended

Mar. 31, 2017

Inventory Disclosure [Abstract]

INVENTORIES

NOTE 3—INVENTORIES

A summary of inventory by category at period end follows:

Inventories	March 31, 2017			September 30, 2016
(in thousands)
Raw materials	$	9,711		$	9,138
Work-in-process	6,676			5,932
Finished goods	1,519			1,939
Total inventories	17,906			17,009
Reserve for excess/obsolete inventory	(1,429		)	(1,625		)
Inventories, net	$	16,477		$	15,384

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PROPERTY, PLANT & EQUIPMENT

6 Months Ended

Mar. 31, 2017

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT & EQUIPMENT

NOTE 4—PROPERTY, PLANT & EQUIPMENT

A summary of property, plant and equipment and accumulated depreciation at period end follows:

Property, Plant & Equipment	March 31, 2017			September 30, 2016
(in thousands)
Land and improvements	$	788		$	788
Buildings and improvements	8,910			8,910
Building under capital lease	5,750			—
Machinery and equipment	28,371			26,905
Furniture and fixtures	7,503			7,489
Construction in progress	3,135			3,079
Total property, plant and equipment, at cost	54,457			47,171
Accumulated depreciation	(37,447		)	(36,177		)
Property, plant and equipment, net	$	17,010		$	10,994

Depreciation expense during the three and six months endedMarch 31, 2017 and April 1, 2016 follows:

	Three Months Ended				Six Months Ended
	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016
(in thousands)
Depreciation expense	$	652	$	807	$	1,298	$	1,647

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INTANGIBLE ASSETS

6 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

NOTE 5—INTANGIBLE ASSETS

IEC’s intangible assets (other than goodwill) were acquired in connection with the purchase of Albuquerque during the fiscal year ended September 30, 2010.

Albuquerque’s building and land were acquired subject to an Industrial Revenue Bond (“IRB”) that exempted the property from real estate taxes for the term of the IRB.  The tax abatement was valued at $0.4 million at the date of acquisition, and such value was being amortized over the 9.2 year exemption period that remained as of the acquisition date.  No impairment was taken for this asset since the Albuquerque acquisition. The IRB was paid off in connection with the sale-leaseback transaction described in Note 14—Capital Lease.

A summary of intangible assets by category and accumulated amortization at period end follows:

Intangible Assets	March 31, 2017			September 30, 2016
(in thousands)
Property tax abatement - Albuquerque	$	360		$	360
Accumulated amortization	(285		)	(265		)
Intangible assets, net	$	75		$	95

Amortization expense during the three and six months endedMarch 31, 2017 and April 1, 2016 follows:

	Three Months Ended				Six Months Ended
Amortization Expense	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016
(in thousands)
Intangible amortization expense	$	10	$	10	$	20	$	20

A summary of amortization expense for the next five years follows:

Future Amortization	Estimated future amortization
(in thousands)
Twelve months ended March,
2018	$	40
2019	35
2020 and thereafter	—

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CREDIT FACILITIES

6 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

CREDIT FACILITIES

NOTE 6—CREDIT FACILITIES

A summary of borrowings at period end follows:   

			March 31, 2017					September 30, 2016
Debt	Fixed/ Variable Rate	Maturity  Date	Balance			Interest Rate		Balance			Interest Rate
($ in thousands)
M&T credit facilities:
Revolving Credit Facility	v	1/18/2018	$	5,541		5.23	%	$	3,961		3.28	%
Term Loan A(1)	f	2/1/2020	—			—		3,693			3.98
Term Loan B	v	2/1/2023	8,283			4.03		8,983			3.03
Albuquerque Mortgage Loan(1)	v	2/1/2018	—			—		2,200			3.55
Celmet Building Term Loan	f	11/7/2018	867			4.72		932			4.72
Other credit facilities:
Albuquerque Industrial Revenue Bond(1)	f	3/1/2019	—			—		100			5.63
Total debt, gross			14,691					19,869
Unamortized debt issuance costs			(211		)			(229		)
Total debt, net			14,480					19,640
Less: current portion			(1,530		)			(2,908		)
Long-term debt			$	12,950				$	16,732

⁽¹⁾ The Albuquerque Mortgage Loan and the Albuquerque Industrial Revenue Bond were repaid in connection with the sale-leaseback transaction described in Note 14—Capital Lease. The proceeds from the transaction were also used to pay down Term Loan A, which was subsequently paid off in due course.

M&T Bank Credit Facilities

On November 28, 2016, the Company and M&T Bank entered into the Second Amendment to Fifth Amended and Restated Credit Facility Agreement (the “Second Amendment”), that amended the Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by the First Amendment to the Fifth Amended and Restated Credit Facility, dated as of June 20, 2016 (“Fifth Amended Credit Agreement”). The Second Amendment reduced M&T Bank’s revolving credit commitment to $16.0 million and modified the trigger for maintenance of the cash management system. The Second Amendment also modified the level adjustment dates for the Applicable Margin and the Applicable Unused Fee, as such terms are defined under the Fifth Amended Credit Agreement. In addition, the Second Amendment amended the covenants regarding the Company’s Debt to EBITDAS Ratio, Minimum Quarterly EBITDAS amounts and the Fixed Charge Coverage Ratio, as such terms are defined under the Fifth Amended Credit Agreement. The Fifth Amended Credit Agreement prohibits the Company from paying dividends or repurchasing or redeeming its common stock without first obtaining the consent of M&T Bank.

On May 5, 2017, the Company and M&T Bank entered into the Third Amendment to Fifth Amended and Restated Credit Facility Agreement (the “Third Amendment”). See Note 15—Subsequent Events for a discussion of the Third Amendment.

Individual debt facilities provided under the Fifth Amended Credit Agreement, as amended, are described below:

a) Revolving Credit Facility (“Revolver”): Up to $16.0 million is available through January 18, 2018. The maximum amount the Company may borrow is determined based on a borrowing base calculation described below.

b) Term Loan A: $10.0 million was borrowed on January 18, 2013. Principal was being repaid in 108 equal monthly installments of $93 thousand. The proceeds of the sale-leaseback transaction described in Note 14—Capital Lease were used to pay down the loan, which was subsequently paid off in due course.

c) Term Loan B:$14.0 million was borrowed on January 18, 2013. Principal is being repaid in 120 equal monthly installments of $117 thousand.

d) AlbuquerqueMortgage Loan: $4.0 million was borrowed on December 16, 2009. The loan was secured by real property in Albuquerque, NM, and principal was being repaid in equal monthly installments of $22 thousand. The loan was repaid in connection with the sale-leaseback transaction described in Note 14—Capital Lease.

e) Celmet Building Term Loan:$1.3 million was borrowed on November 8, 2013 pursuant to an amendment to the Fourth Amended and Restated Credit Facility Agreement dated as of January 18, 2013. The proceeds were used to reimburse the Company’s cost of purchasing its Rochester, New York facility. Principal is being repaid in 59 equal monthly installments of $11 thousand plus a balloon payment due at maturity. 

Borrowing Base

Under the Fifth Amended Credit Agreement, as amended, the maximum amount the Company can borrow under the Revolver is the lesser of (i) 85% of eligible receivables plus 35% of eligible inventories (up to a cap of $3.75 million) or (ii) $16.0 million at March 31, 2017 and $20.0 million at September 30, 2016.

At March 31, 2017 and September 30, 2016, the upper limit on Revolver borrowings was $13.8 million and $16.4 million, respectively. Average Revolver balances amounted to $3.4 million during the six months endedMarch 31, 2017.

Interest Rates

Under the Fifth Amended Credit Agreement, variable rate debt accrues interest at LIBOR plus the applicable marginal interest rate that fluctuates based on the Company’s Debt to EBITDAS Ratio, as defined below. Under the Second Amendment, the applicable marginal interest rate was fixed on November 28, 2016 through the fiscal quarter ending September 30, 2017, as follows: 4.25% for the Revolver and 3.25% for Term Loan B.  Beginning October 1, 2017, variable rate debt will again accrue interest at LIBOR plus the applicable margin interest rate that is based on the Company’s Debt to EBITDAS Ratio. Changes to applicable margins and unused fees resulting from the Debt to EBITDAS Ratio generally become effective mid-way through the subsequent quarter.

Prior to December 14, 2015, the Sixth Amendment fixed each facility’s applicable margin through March 31, 2016 as follows: 4.25% for the Revolver, 4.50% for the Albuquerque Mortgage Loan and 3.25% for the Term Loan B. The applicable unused line fee of 0.50% also was extended through March 31, 2016.

The Company incurs quarterly unused commitment fees ranging from 0.250% to 0.500% of the excess of $16.0 million over average borrowings under the Revolver. Fees incurred amounted to $50.1 thousand and $23.8 thousand during the six months endedMarch 31, 2017 and April 1, 2016, respectively. The fee percentage varies based on the Company’s Debt to EBITDAS Ratio, as defined below.

Financial Covenants

The Fifth Amended Credit Agreement, as amended, also contains various affirmative and negative covenants including financial covenants. The Company is required to maintain (i) a minimum level of quarterly EBITDAS, as defined below (“Quarterly EBITDAS”), (ii) a ratio of total debt to twelve month EBITDAS (“Debt to EBITDAS Ratio”) that is below a specified limit, (iii) a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”), (iv) a maximum level of inventory (“Maximum Inventory”), and (v) a maximum amount of capital expenditures (“Maximum Capital Expenditures”). The Debt to EBITDAS Ratio is the ratio of debt to earnings before interest, taxes, depreciation, amortization and non-cash stock compensation expense (“EBITDAS”). “Adjusted EBITDA” means, for the applicable period, EBITDAS less unfinanced capital expenditures and cash paid for taxes, all on a consolidated basis. The Fixed Charge Coverage Ratio compares (i) 12 month Adjusted EBITDA plus non-cash stock compensation expense minus unfinanced capital expenditures minus taxes paid, to (ii) the sum of interest expense, principal payments and dividends, if any (fixed charges). The Maximum Inventory covenant allows for specific levels of inventory as defined by the agreement. The Maximum Capital Expenditures covenants allow for a maximum amount of capital expenditures on an annual basis.

Covenant ratios in effect at March 31, 2017, pursuant to the Fifth Amended Credit Agreement, as amended by the Second Amendment, are as follows:

Debt to EBITDAS Ratio:
12/31/2016 through and including 3/31/2017	< 4.7 to 1.00
Minimum Quarterly EBITDAS:
Fiscal Quarter ending 3/31/2017	$	240,000
Fixed Charge Coverage Ratio:
12/31/2016 through and including 3/31/2017	> 0.3 to 1.00
Maximum Inventory:
As of 3/31/2017	$	25.0	m
Maximum Capital Expenditures:	Measured annually; maximum $4.5m

The Company was in compliance with all debt covenants at March 31, 2017.

Other Borrowings

When IEC acquired Albuquerque, the Company assumed responsibility for a $0.1 million Industrial Revenue Bond issued by the City of Albuquerque. Interest on the bond was paid semiannually, and principal was due in its entirety at maturity. The Bond was repaid in connection with the sale-leaseback transaction described in Note 14—Capital Lease.

Contractual Principal Payments

A summary of contractual principal payments under IEC’s borrowings for the next five years taking into consideration the Fifth Amended Credit Agreement, as amended, follows:

Debt Repayment Schedule		Contractual Principal Payments
(in thousands)
Twelve months ended March
2018		$	1,530
2019	(1)	2,137
2020		1,400
2021		1,400
2022 and thereafter (2)		8,224
		$	14,691

⁽¹⁾ Includes final payment of Celmet Building Term Loan on November 7, 2018.

⁽²⁾ Includes Revolver balance of $5.5 million at March 31, 2017.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

6 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 7—FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial Instruments Carried at Historical Cost

The Company’s long-term debt is not quoted.  Fair value was estimated using a discounted cash flow analysis based on Level 2 valuation inputs, including borrowing rates the Company believes are currently available to it for loans with similar terms and maturities.

The Company’s debt is carried at historical cost on the balance sheet.  A summary of the fair value and carrying value of fixed rate debt at period end follows:

	March 31, 2017				September 30, 2016
	Fair Value		Carrying Value		Fair Value		Carrying Value
(in thousands)
Term Loan A	$	—	$	—	$	3,489	$	3,693
Celmet Building Term Loan	811		867		864		932

The fair value of the remainder of the Company’s debt approximated carrying value at March 31, 2017 and September 30, 2016 as it is variable rate debt.

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WARRANTY RESERVES

6 Months Ended

Mar. 31, 2017

Product Warranties Disclosures [Abstract]

WARRANTY RESERVES

NOTE 8—WARRANTY RESERVES

IEC generally warrants its products and workmanship for up to twelve months from date of sale.  As an offset to warranty claims, the Company is sometimes able to obtain reimbursement from suppliers for warranty-related costs or losses.  Based on historical warranty claims experience and in consideration of sales trends, a reserve is maintained for estimated future warranty costs to be incurred on products and services sold through the balance sheet date.

A summary of additions to and charges against IEC’s warranty reserves during the period follows: 

	Six Months Ended
Warranty Reserve	March 31, 2017			April 1, 2016
(in thousands)
Reserve, beginning of period	$	180		$	399
Provision	111			123
Warranty costs	(101		)	(183		)
Reserve, end of period	$	190		$	339

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STOCK-BASED COMPENSATION

6 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

NOTE 9—STOCK-BASED COMPENSATION

The 2010 Omnibus Incentive Compensation Plan (the “2010 Plan”), was approved by the Company’s stockholders at the January 2011 Annual Meeting. The Company also has an ESPP, adopted in 2011, that provides for the purchase of Company common stock at a discounted stock purchase price. The 2010 Plan replaced IEC’s 2001 Stock Option and Incentive Plan (the “2001 Plan”), which expired in December 2011.  The 2010 Plan, which is administered by the Compensation Committee of the Board of Directors, provides for the following types of awards: incentive stock options, nonqualified options, stock appreciation rights, restricted shares, restricted stock units, performance compensation awards, cash incentive awards, director stock and other equity-based and equity-related awards.  Awards are generally granted to certain members of management and employees, as well as directors.  Under the 2010 Plan, up to 2,000,000 shares of common stock may be issued over a term of ten years.

Stock-based compensation expense recorded under the 2010 and 2001 Plans as well as the ESPP totaled $0.1 million and $0.3 million for the three and six months endedMarch 31, 2017, respectively. Stock-based compensation expense recorded under the 2010 and 2001 Plans as well as the ESPP totaled $0.1 million and $0.2 million for the three and six months endedApril 1, 2016, respectively. During the six months endedApril 1, 2016, incentive compensation shares were returned by the Company’s former CEO resulting in a reduction to compensation expense of $60.0 thousand. 

At March 31, 2017, there were 240,790 shares available to be issued under the 2010 Plan.

Expenses relating to stock options that comply with certain U.S. income tax rules are neither deductible by the Company nor taxable to the employee.  Further information regarding awards granted under the 2001 Plan, 2010 Plan and ESPP is provided below.

Stock Options

When options are granted, IEC estimates the fair value of the option using the Black-Scholes option pricing model and recognizes the computed value as compensation cost over the vesting period, which is typically four years.  The contractual term of options granted under the 2010 Plan is generally seven years. 

Assumptions used in the Black-Scholes model and the estimated value of options granted during the six months endedMarch 31, 2017 are included in the table below. There were no options granted during the six months endedApril 1, 2016.

	Six Months Ended
Valuation of Options	March 31, 2017
Assumptions for Black-Scholes:
Risk-free interest rate	1.48		%
Expected term in years	4.0
Volatility	40		%
Expected annual dividends	none
Value of options granted:
Number of options granted	50,000
Weighted average fair value per share	$	1.18
Fair value of options granted (000s)	$	59

A summary of stock option activity, together with other related data, follows:

	Six Months Ended
	March 31, 2017				April 1, 2016
Stock Options	Number of Options		Wgtd. Avg. Exercise Price		Number of Options		Wgtd. Avg. Exercise Price
Outstanding, beginning of period	759,795		$	4.43	717,645		$	4.40
Granted	50,000		3.60		—		—
Exercised	—		—		—		—
Forfeited	(30,500	)	5.70		(15,500	)	5.99
Expired	(19,750	)	5.37		—		—
Outstanding, end of period	759,545		$	4.30	702,145		$	4.37
For options expected to vest
Number expected to vest	738,410		$	4.30	558,596		$	4.44
Weighted average remaining term, in years	4.9				5.3
Intrinsic value (000s)			$	11			$	239
For exercisable options
Number exercisable	324,472		$	4.46	260,036		$	4.84
Weighted average remaining term, in years	4.3				4.4
Intrinsic value (000s)			$	—			$	77
For non-exercisable options
Expense not yet recognized (000s)			$	526			$	597
Weighted average years to be recognized	2.3				3.1
For options exercised
Intrinsic value (000s)			$	—			$	—

Changes in the number of non-vested options outstanding, together with other related data, follows: 

	Six Months Ended
	March 31, 2017				April 1, 2016
Stock Options	Number of Options		Wgtd. Avg. Grant Date Fair Value		Number of Options		Wgtd. Avg. Grant Date Fair Value
Non-vested, beginning of period	489,109		$	1.43	546,145		$	1.41
Granted	50,000		1.18		—		—
Vested	(104,036	)	1.45		(104,036	)	1.45
Forfeited	—		—		—		—
Non-vested, end of period	435,073		$	1.40	442,109		$	1.40

Restricted (Non-vested) Stock

Holders of IEC restricted stock have voting and dividend rights as of the date of grant, but until vested, the shares may be forfeited and cannot be sold or otherwise transferred.  At the end of the vesting period, which is typically four or five years (three years in the case of directors), holders have all the rights and privileges of any other IEC common stockholder.  The fair value of a share of restricted stock is its market value on the date of grant, and that value is recognized as stock compensation expense over the vesting period. 

A summary of restricted stock activity, together with related data, follows: 

	Six Months Ended
	March 31, 2017				April 1, 2016
Restricted (Non-vested) Stock	Number of Non-vested Shares		Wgtd. Avg. Grant Date Fair Value		Number of Non-vested Shares		Wgtd. Avg. Grant Date Fair Value
Outstanding, beginning of period	228,759		$	4.40	54,960		$	4.23
Granted	194,766		3.62		59,560		4.03
Vested	(25,131	)	4.22		(11,700	)	4.23
Shares withheld for payment of taxes upon vesting of restricted stock	(583	)	3.60		—		—
Forfeited	—		—		—		—
Outstanding, end of period	397,811		$	4.03	102,820		$	4.11
For non-vested shares
Expense not yet recognized (000s)			$	1,075			$	357
Weighted average remaining years for vesting	2.4				2.5
For shares vested
Aggregate fair value on vesting dates (000s)			$	94			$	43

Employee Stock Purchase Plan

The Company administers an ESPP that provides for a discounted stock purchase price.  On February 13, 2015, the Compensation Committee of the Company’s Board of Directors suspended operation of the ESPP indefinitely in connection with the 2014 restatements of the Company’s financial statements. The Compensation Committee of the Company’s Board of Directors reinstated the ESPP on December 2, 2015; however, participants were not able to contribute to the ESPP until January 2016.

Employees currently receive a 10% discount on stock purchases through the ESPP. Employee contributions to the plan, net of withdrawals were $16.7 thousand and $8.1 thousand for the six months endedMarch 31, 2017 and April 1, 2016, respectively. Compensation expense recognized under the ESPP was $1.9 thousand and $1.0 thousand for the six months endedMarch 31, 2017 and April 1, 2016, respectively.

Stock Issued to Board Members

In addition to annual grants of restricted stock, included in the table above, Board members may elect to have their meeting fees paid in the form of shares of the Company’s common stock.   The Company has not paid any meeting fees in stock since May 21, 2013.

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RETIREMENT PLAN

6 Months Ended

Mar. 31, 2017

Compensation and Retirement Disclosure [Abstract]

RETIREMENT PLAN

NOTE 10—RETIREMENT PLAN

The Company administers a retirement savings plan for the benefit of its eligible employees and their beneficiaries under the provisions of Sections 401(a) and (k) of the Internal Revenue Code.  Eligible employees may contribute a portion of their compensation to the plan, and the Company is permitted to make discretionary contributions as determined by the Board of Directors.  The Company contributes 25% of the first 6% contributed by all employees at all locations. Company contributions during the six months endedMarch 31, 2017 and April 1, 2016 totaled $0.1 million and $0.1 million, respectively.

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INCOME TAXES

6 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 11—INCOME TAXES

Provision for income taxes during each of the three and six months endedMarch 31, 2017 and April 1, 2016 follows:

	Three Months Ended				Six Months Ended
Income Tax Provision/Benefit	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016
(in thousands)
Provision for/(benefit from) income taxes	$	—	$	—	$	—	$	—

The Company has recorded a full valuation allowance on all deferred tax assets. Although we have recorded a full valuation allowance for all deferred tax assets, including net operating loss carryforwards (“NOLs”), these NOLs remain available to the Company to offset taxable income and reduce tax payments. IEC had federal NOLs for income tax purposes of approximately $31.7 million at September 30, 2016, expiring mainly in years 2022 through 2025 and 2034 through 2035. The Company also has additional state NOLs available in several jurisdictions in which it files state tax returns.

Recent New York state corporate tax reform has resulted in the reduction of the business income base rate for qualified manufactures in New York state to 0% beginning in fiscal 2015 for IEC. At September 30, 2016, the Company had $1.2 million of New York State investment tax and other credit carryforwards, expiring in various years through 2030.  The credits cannot be utilized unless the New York state tax rate is no longer 0%.

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MARKET SECTORS AND MAJOR CUSTOMERS

6 Months Ended

Mar. 31, 2017

Risks and Uncertainties [Abstract]

MARKET SECTORS AND MAJOR CUSTOMERS

NOTE 12—MARKET SECTORS AND MAJOR CUSTOMERS

A summary of sales, according to the market sector within which IEC’s customers operate, follows:

	Three Months Ended		Six Months Ended
% of Sales by Sector	March 31, 2017	April 1, 2016	March 31, 2017	April 1, 2016
Aerospace & Defense	44%	34%	47%	37%
Medical	32%	50%	30%	46%
Industrial	21%	14%	20%	15%
Communications & Other	3%	2%	3%	2%
	100%	100%	100%	100%

Two individual customers each represented 10% or more of sales for the six months endedMarch 31, 2017. One customer was from the Aerospace & Defense sector and represented 13% of sales, while the other was from the Medical sector and also represented 13% of sales for the six months endedMarch 31, 2017. Two individual customers each represented 10% or more of sales for the six months endedApril 1, 2016.  Both customers were from the Medical sector, with one representing 18% of sales, while the other customer represented 17% of sales, for the six months endedApril 1, 2016.

Three individual customers represented 10% or more of receivables and accounted for 40% the outstanding balance at March 31, 2017. Two individual customers represented 10% or more of receivables and accounted for 29% of the outstanding balances at April 1, 2016.

Credit risk associated with individual customers is periodically evaluated by analyzing the entity’s financial condition and payment history.  Customers generally are not required to post collateral.

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LITIGATION

6 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

LITIGATION

NOTE 13—LITIGATION

From time to time, the Company may be involved in legal action in the ordinary course of its business, but management does not believe that any such proceedings commenced through the date of the financial statements included in this Form 10-Q, individually or in the aggregate, will have a material adverse effect on the Company’s consolidated financial position.

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CAPITAL LEASE

6 Months Ended

Mar. 31, 2017

Leases [Abstract]

CAPITAL LEASE

NOTE 14—CAPITAL LEASE

Leases

On November 18, 2016, the Company entered into a sale-leaseback agreement, pursuant to the terms of the Purchase and Sale Agreement (the “PSA”), with Store Capital Acquisitions, LLC, a Delaware limited liability company (the “Purchaser”), for the sale of certain property, including the manufacturing facility located in Albuquerque, New Mexico (the “Property”). Albuquerque (the “Seller”) completed the sale of the Property to the Purchaser for an aggregate purchase price of approximately $5.8 million including a $0.1 million holdback held subject to a holdback of funds agreement. The net book value of assets sold was $4.6 million and the value of the assets acquired under the lease is $5.8 million. The Company recorded a deferred gain of $1.1 million related to the transaction, which is recorded in other long-term liabilities section of the consolidated balance sheet. The proceeds from the transaction were used to payoff the Albuquerque Mortgage Loan and pay down Term Loan A. As part of the transaction, a Lease Agreement dated as of November 18, 2016 was entered into between the Seller and the Purchaser (the “Lease”). Pursuant to the Lease, the Seller is leasing the Property for an initial term of 15 years, with two renewal options of five years each. The initial base annual rent is approximately $0.5 million and is subject to an annual increase equal to the lesser of two percent or 1.25 times the change in the Consumer Price Index. Late payments incur a charge of 5% and bear interest at a rate of 18% or the highest rate permitted by law. If an event of default occurs under the terms of the Lease, among other things, all rental amounts accelerate and become due and owing, subject to certain adjustments.  In addition, the Company entered into a separate payment and performance guaranty with the Purchaser with respect to the Lease.

A summary of capital lease payments for the next five years follows:

Capital Lease Payment Schedule	Contractual Principal Payments
(in thousands)
Twelve months ended March
2018	$	478
2019	487
2020	497
2021	549
2022 and thereafter	6,101
Total capital lease payments	$	8,112
Less: amounts representing interest	(2,435		)
Present value of minimum lease payment	$	5,677

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SUBSEQUENT EVENTS

6 Months Ended

Mar. 31, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 15—SUBSEQUENT EVENTS

Effective as of May 5, 2017, the Company and M&T Bank entered into the Third Amendment to Fifth Amended Credit Agreement (the “Third Amendment”), that amended the Fifth Amended Credit Agreement. The Third Amendment extended the Revolver termination date to May 5, 2022. In connection with the Third Amendment, the Company issued the Term Loan B to M&T Bank, that amended and restated the Amended and Restated Term Loan B dated December 14, 2015. The Third Amendment revised certain covenants to provide that the Company may use Revolver proceeds to refinance existing indebtedness. As a result, the Term Loan B, which matures on May 5, 2022, now has a principal amount of $6.0 million. The Third Amendment also revised the maximum amount the Company can borrow under the Revolver to the lesser of $16.0 million or 85% of eligible receivables plus $7.0 million of eligible inventories.

Pursuant to the Third Amendment, as of March 31, 2017, certain financial covenants of the credit facility were eliminated or revised to be less complex, including the Maximum Inventory covenant, Debt to EBITDAS ratios, the Maximum Capital Expenditures limit after the fiscal year ending September 30, 2017, and future requirements of Minimum Quarterly EBITDAS except for the fiscal quarter ending June 30, 2017. The Third Amendment also modified the definitions of Applicable Margin and Applicable Unused Fee to provide that each is calculated using the applicable Fixed Charge Coverage Ratio, as redefined by the Third Amendment. The Third Amendment established a Borrowing Base computed using monthly Borrowing Base Reports that, if inaccurate, allow M&T Bank, in its discretion, to suspend the making of or limit Revolving Credit Loans. Further, the Third Amendment provides for the Company’s repurchase of its common stock under certain circumstances without M&T Bank’s prior written consent.

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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Our Business

Our Business

IEC Electronics Corp. (“IEC,” “we,” “our,” “us,” the “Company”) provides electronic manufacturing services (“EMS”) to advanced technology companies that produce life-saving and mission critical products for the medical, industrial, aerospace and defense sectors. The Company specializes in delivering technical solutions for the custom manufacture of complex full system assemblies by providing on-site analytical testing laboratories, custom design and test engineering services combined with a broad array of manufacturing services encompassing electronics, interconnect solutions, and precision metalworking. As a full service EMS provider, IEC holds all appropriate certifications for the market sectors it supports including ISO 9001:2008, AS9100C, ISO 13485, Nadcap and IPC QML.  IEC is headquartered in Newark, NY and also has operations in Rochester, NY and Albuquerque, NM.  Additional information about IEC can be found on its website at www.iec-electronics.com.

Generally Accepted Accounting Principles

Generally Accepted Accounting Principles

IEC’s financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).

Fiscal Calendar

Fiscal Calendar

The Company’s fiscal year ends on September 30th and the first three quarters generally end on the Friday closest to the last day of the calendar quarter.

Consolidation

Consolidation

The consolidated financial statements include the accounts of IEC and its wholly-owned subsidiaries: IEC Electronics Wire and Cable, Inc. (“Wire and Cable”) that merged into IEC on December 28, 2016; IEC Electronics Corp-Albuquerque (“Albuquerque”); IEC Analysis & Testing Laboratory, LLC (“ATL”), formerly Dynamic Research and Testing Laboratories, LLC; and IEC California Holdings, Inc. The Rochester unit, formerly Celmet, operates as a division of IEC. All significant intercompany transactions and accounts are eliminated in consolidation. 

Unaudited Financial Statements

Unaudited Financial Statements

The accompanying unaudited financial statements for the six months endedMarch 31, 2017 and April 1, 2016 have been prepared in accordance with GAAP for interim financial information.  In the opinion of management, all adjustments required for a fair presentation of the information have been made.  The accompanying financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016 (“fiscal 2016”).

Reclassifications

Reclassifications

Prior year financial statement amounts are reclassified as necessary to conform to the current year presentation. There was no impact on net income or accumulated deficit as a result of the reclassification.

Cash

Cash

The Company’s cash represents deposit accounts with Manufacturers and Traders Trust Company (“M&T Bank”), a banking corporation headquartered in Buffalo, NY.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability.  Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote.

Inventory Valuation

Inventory Valuation

Inventories are stated at the lower of cost or market value under the first-in, first-out method.  The Company regularly assesses slow-moving, excess and obsolete inventory and maintains balance sheet reserves in amounts required to reduce the recorded value of inventory to the lower of cost or market.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment (“PP&E”) are stated at cost and are depreciated over various estimated useful lives using the straight-line method.  Maintenance and repairs are charged to expense as incurred, while renewals and improvements are capitalized.  At the time of retirement or other disposition of PP&E, cost and accumulated depreciation are removed from the accounts and any gain or loss is recorded in earnings.

Depreciable lives generally used for PP&E are presented in the table below.  Leasehold improvements are amortized over the shorter of the lease term or estimated useful life of the improvement.

PP&E Lives	Estimated Useful Lives
	(years)
Land improvements	10
Buildings and improvements	5 to 40
Machinery and equipment	3 to 5
Furniture and fixtures	3 to 7

Intangible Assets

Intangible Assets

Intangible assets (other than goodwill) are those that lack physical substance and are not financial assets.  Such assets held by IEC were acquired in connection with business combinations or represent economic benefits associated with a property tax abatement.  Values assigned to individual intangible assets are amortized using the straight-line method over their estimated useful lives. 

Reviewing Long-Lived Assets for Potential Impairment

Reviewing Long-Lived Assets for Potential Impairment

ASC 360-10 (Property, Plant and Equipment) and ASC 350-30 (Intangibles) require the Company to test long-lived assets (PP&E and definitive lived assets) for recoverability whenever events or circumstances indicate that the carrying amount may not be recoverable.  If carrying value exceeds undiscounted future cash flows attributable to an asset, it is considered impaired and the excess of carrying value over fair value must be charged to earnings.

Goodwill

Goodwill

Goodwill represents the excess of cost over fair value of net assets acquired in a business combination.   Under ASC 350, goodwill is not amortized but is reviewed for impairment at least annually or when events or circumstances indicate that carrying value may exceed fair value.  The Company may elect to precede a quantitative review for impairment with a qualitative assessment of the likelihood that fair value of a particular reporting unit exceeds carrying value.  If the qualitative assessment leads to a conclusion that it is more than 50 percent likely that fair value exceeds carrying value, no further testing is required.  In the event of a less favorable outcome, the Company is required to proceed with quantitative testing. 

The quantitative process entails comparing the overall fair value of the unit to which goodwill relates to carrying value.  If fair value exceeds carrying value, no further assessment of potential impairment is required.  If fair value of the unit is less than carrying value, a valuation of the unit’s individual assets and liabilities is required to determine whether or not goodwill is impaired.  Goodwill impairment losses are charged to earnings. 

Leases

Leases

At the inception of a lease covering equipment or real estate, the lease agreement is evaluated under criteria discussed in ASC 840-10-25 (Leases).  Leases meeting one of four key criteria are accounted for as capital leases and all others are treated as operating leases.  Under a capital lease, the discounted value of future lease payments becomes the basis for recognizing an asset and a borrowing, and lease payments are allocated between debt reduction and interest.  For operating leases, payments are recorded as rent expense.  Criteria for a capital lease include (i) transfer of ownership during the lease term; (ii) existence of a bargain purchase option under terms that make it likely to be exercised; (iii) a lease term equal to 75 percent or more of the economic life of the leased property; and (iv) minimum lease payments that equal or exceed 90 percent of the fair value of the property.

Legal Contingencies

Legal Contingencies

When legal proceedings are brought or claims are made against us and the outcome is uncertain, ASC 450-10 (Contingencies) requires that we determine whether it is probable that an asset has been impaired or a liability has been incurred.  If such impairment or liability is probable and the amount of loss can be reasonably estimated, the loss must be charged to earnings. 

When it is considered probable that a loss has been incurred, but the amount of loss cannot be estimated, disclosure but not accrual of the probable loss is required.  Disclosure of a loss contingency is also required when it is reasonably possible, but not probable, that a loss has been incurred. 

Customer Deposits

Customer Deposits

Customer deposits represent amounts invoiced to customers for which the revenue has not yet been earned and therefore represent a commitment for the Company to deliver goods or services in the future. Deposits are generally short term in nature and are recognized as revenue when earned.

Grants from Outside Parties

Grants from Outside Parties

Grants from outside parties are recorded as other long-term liabilities and are amortized over the same period during which the associated PP&E are depreciated. The Company received grants for certain facility improvements and equipment from state and local agencies in which the Company operates.  These grants reimbursed the Company for a portion of the actual cost or provided in kind services in support of capital projects. 

Derivative Financial Instruments

Derivative Financial Instruments

The Company actively monitors its exposure to interest rate risk and from time to time may use derivative financial instruments to manage the impact of this risk.  The Company uses derivatives only for purposes of managing risk associated with underlying exposures.  The Company does not trade or use instruments with the objective of earning financial gains on the interest rate nor does the Company use derivative instruments where it does not have underlying exposures.

Fair Value Measurements

Fair Value Measurements

Under ASC 825 (Financial Instruments), the Company is required to disclose the fair value of financial instruments for which it is practicable to estimate value.  The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and borrowings.  IEC believes that recorded value approximates fair value for all cash, accounts receivable, accounts payable and accrued liabilities. See Note 7—Fair Value of Financial Instruments for a discussion of the fair value of IEC’s borrowings.

ASC 820 (Fair Value Measurements and Disclosures) defines fair value, establishes a framework for measurement, and prescribes related disclosures.  ASC 820 defines fair value as the price that would be received upon sale of an asset or would be paid to transfer a liability in an orderly transaction.  Inputs used to measure fair value are categorized under the following hierarchy:

Level 1: Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable market data.

Level 3: Model-derived valuations in which one or more significant inputs are unobservable.

The Company deems a transfer between levels of the fair value hierarchy to have occurred at the beginning of the reporting period.

Revenue Recognition

Revenue Recognition

The Company’s revenue is principally derived from the sale of electronic products built to customer specifications, but also from other value-added support services and repair work.  Revenue from product sales is recognized when (i) goods are shipped or title and risk of ownership have passed, (ii) the price to the buyer is fixed or determinable, and (iii) realization is reasonably assured. Service revenue is generally recognized once the service has been rendered.  Services revenue, including material management, design and repair work revenue, amounted to less than 5% of total revenue in each of the first six months of fiscal2017 and fiscal 2016.

Provisions for discounts, allowances, rebates, estimated returns and other adjustments are recorded in the period the related sales are recognized.

Stock-Based Compensation

Stock-Based Compensation

ASC 718 (Stock Compensation) requires that compensation expense be recognized for equity awards based on fair value as of the date of grant.  For stock options, the Company uses the Black-Scholes pricing model to estimate grant date fair value.  Costs associated with stock awards are recorded over requisite service periods, generally the vesting period.  If vesting is contingent on the achievement of performance objectives, fair value is accrued over the period the objectives are expected to be achieved only if it is considered probable that the objectives will be achieved.  The Company also has an employee stock purchase plan (“ESPP”) that provides for the purchase of Company common stock at a discounted stock purchase price. Compensation expense related to the discount is recognized as employees contribute to the plan.

Legal Expenses Accrual

Legal Expense Accrual

The Company records legal expenses as they are incurred, based on invoices received or estimates provided by legal counsel. Future estimated legal expenses are not recorded until incurred.

Income Taxes and Deferred Taxes

Income Taxes and Deferred Taxes

ASC 740 (Income Taxes) requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns, but not in both.  Deferred tax assets are also established for tax benefits associated with tax loss and tax credit carryforwards.  Such deferred balances reflect tax rates that are scheduled to be in effect, based on currently enacted legislation, in the years the book/tax differences reverse and tax loss and tax credit carryforwards are expected to be realized.  An allowance is established for any deferred tax asset for which realization is not likely.

ASC 740 also prescribes the manner in which a company measures, recognizes, presents and discloses in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return.  The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the position will be sustained following examination by taxing authorities, based on technical merits of the position.  The Company believes that it has no material uncertain tax positions.

Any interest incurred is reported as interest expense. Any penalties incurred are reported as tax expense.   The Company’s income tax filings are subject to audit by various tax jurisdictions and current open years are the fiscal year ended September 30, 2010 through fiscal year ended September 30, 2012, and fiscal year ended September 30, 2014 through fiscal 2015. 

Earnings Per Share

Earnings Per Share

Basic earnings per common share are calculated by dividing income available to common stockholders by the weighted average number of shares outstanding during each period.  Diluted earnings per common share add to the denominator incremental shares resulting from the assumed exercise of all potentially dilutive stock options, as well as restricted (non-vested) stock, restricted stock units (“RSUs”) and anticipated issuances under the ESPP.  Options, restricted stock and RSUs are primarily held by directors, officers and certain employees. 

Dividends

Dividends

IEC does not pay dividends on its common stock as it is the Company’s current policy to retain earnings for use in the business.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities.  Actual results may differ from management’s estimates.

Statements of Cash Flows

Statements of Cash Flows

The Company presents operating cash flows using the indirect method of reporting under which non-cash income and expense items are removed from net income. 

Recently Issued Accounting Standards

Recently Issued Accounting Standards

FASB Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“Topic 606”) was issued May 2014 and updates the principles for recognizing revenue.  This ASU will supersede most of the existing revenue recognition requirements in GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which a company expects to be entitled in exchange for transferring goods or services to a customer.  This ASU also amends the required disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. FASB ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” was issued in March 2016 and improves implementation guidance on principal versus agent considerations. FASB ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” was issued in April 2016 and adds further guidance on identifying performance obligations as well as improving licensing implementation guidance. FASB ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” was issued in June 2016 and clarifies the objective of the collectability criterion, presentation of taxes collected from customers, non-cash consideration, contract modifications at transition, completed contracts at transition and how guidance in Topic 606 is retrospectively applied. The amendments do not change the core principle of the guidance in Topic 606. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within that period.  Early adoption is permitted for annualperiods beginning after December 15, 2016.  The Company is identifying key personnel to evaluate the guidance and determine the transition method, while also formulating a time line to review the potential impact of the new standard on the Company's existing revenue recognition policies and procedures. Although Management has not completed its evaluation of all the issued guidance under Topic 606, the Company does not currently expect the guidance to have a material effect on its financial position, results of operations or cash flows.

FASB ASU 2015-11, “Simplifying the Measurement of Inventory” was issued in July 2015. This requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. This ASU will not apply to inventories that are measured by using either the last-in, first-out method or the retail inventory method. For public business entities, this ASU is effective prospectively for annual periods beginning after December 15, 2016, and interim periods therein. Upon transition, entities must disclose the nature of and reason for the accounting change. The Company does not anticipate a significant impact on its financial statements upon adoption.

FASB ASU 2015-17, “Income Taxes Balance Sheet Classification of Deferred Taxes” was issued in November 2015. This requires entities to classify deferred tax liabilities and assets as noncurrent in a classified statement of financial position and applies to all entities that present a classified statement of financial position. For public entities, this update is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company does not anticipate a significant impact on its financial statements upon adoption.

FASB ASU 2016-02, “Leases” was issued in February 2016. The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. For public entities, the new guidance is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted for all entities. The Company is evaluating the impact this ASU will have on its financial statements.

FASB ASU 2016-09, “Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting” was issued in March 2016. This simplifies accounting for several aspects of share-based payment including income tax consequences, classification of awards as either equity or liability and classification on the statement of cash flows. For public entities, this update is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company does not anticipate a significant impact on its financial statements upon adoption.

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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Property, Plant and Equipment

Depreciable lives generally used for PP&E are presented in the table below.  Leasehold improvements are amortized over the shorter of the lease term or estimated useful life of the improvement.

PP&E Lives	Estimated Useful Lives
	(years)
Land improvements	10
Buildings and improvements	5 to 40
Machinery and equipment	3 to 5
Furniture and fixtures	3 to 7

A summary of property, plant and equipment and accumulated depreciation at period end follows:

Property, Plant & Equipment	March 31, 2017			September 30, 2016
(in thousands)
Land and improvements	$	788		$	788
Buildings and improvements	8,910			8,910
Building under capital lease	5,750			—
Machinery and equipment	28,371			26,905
Furniture and fixtures	7,503			7,489
Construction in progress	3,135			3,079
Total property, plant and equipment, at cost	54,457			47,171
Accumulated depreciation	(37,447		)	(36,177		)
Property, plant and equipment, net	$	17,010		$	10,994

Depreciation expense during the three and six months endedMarch 31, 2017 and April 1, 2016 follows:

	Three Months Ended				Six Months Ended
	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016
(in thousands)
Depreciation expense	$	652	$	807	$	1,298	$	1,647

Schedule of Weighted Average Number of Shares

A summary of shares used in the earnings per share (“EPS”) calculations follows:

	Three Months Ended		Six Months Ended
Shares for EPS Calculation	March 31, 2017	April 1, 2016	March 31, 2017	April 1, 2016
Weighted average shares outstanding	10,173,388	10,205,031	10,168,339	10,210,539
Incremental shares	—	—	—	—
Diluted shares	10,173,388	10,205,031	10,168,339	10,210,539
Anti-dilutive shares excluded	1,157,356	804,965	1,157,356	804,965

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ALLOWANCE FOR DOUBTFUL ACCOUNTS (Tables)

6 Months Ended

Mar. 31, 2017

Receivables [Abstract]

Allowance for Credit Losses on Financing Receivables

A summary of activity in the allowance for doubtful accounts during the six months endedMarch 31, 2017 and April 1, 2016 follows:

	Six Months Ended
Allowance for Doubtful Accounts	March 31, 2017			April 1, 2016
(in thousands)
Allowance, beginning of period	$	226		$	423
Provision for doubtful accounts	(151		)	270
Write-offs/recoveries	15			(158		)
Allowance, end of period	$	90		$	535

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INVENTORIES (Tables)

6 Months Ended

Mar. 31, 2017

Inventory Disclosure [Abstract]

Schedule of Inventory

A summary of inventory by category at period end follows:

Inventories	March 31, 2017			September 30, 2016
(in thousands)
Raw materials	$	9,711		$	9,138
Work-in-process	6,676			5,932
Finished goods	1,519			1,939
Total inventories	17,906			17,009
Reserve for excess/obsolete inventory	(1,429		)	(1,625		)
Inventories, net	$	16,477		$	15,384

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PROPERTY, PLANT & EQUIPMENT (Tables)

6 Months Ended

Mar. 31, 2017

Property, Plant and Equipment [Abstract]

Summary of Property, Plant and Equipment

Depreciable lives generally used for PP&E are presented in the table below.  Leasehold improvements are amortized over the shorter of the lease term or estimated useful life of the improvement.

PP&E Lives	Estimated Useful Lives
	(years)
Land improvements	10
Buildings and improvements	5 to 40
Machinery and equipment	3 to 5
Furniture and fixtures	3 to 7

A summary of property, plant and equipment and accumulated depreciation at period end follows:

Property, Plant & Equipment	March 31, 2017			September 30, 2016
(in thousands)
Land and improvements	$	788		$	788
Buildings and improvements	8,910			8,910
Building under capital lease	5,750			—
Machinery and equipment	28,371			26,905
Furniture and fixtures	7,503			7,489
Construction in progress	3,135			3,079
Total property, plant and equipment, at cost	54,457			47,171
Accumulated depreciation	(37,447		)	(36,177		)
Property, plant and equipment, net	$	17,010		$	10,994

Depreciation expense during the three and six months endedMarch 31, 2017 and April 1, 2016 follows:

	Three Months Ended				Six Months Ended
	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016
(in thousands)
Depreciation expense	$	652	$	807	$	1,298	$	1,647

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INTANGIBLE ASSETS (Tables)

6 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Indefinite-Lived Intangible Assets (Excluding Goodwill)

A summary of intangible assets by category and accumulated amortization at period end follows:

Intangible Assets	March 31, 2017			September 30, 2016
(in thousands)
Property tax abatement - Albuquerque	$	360		$	360
Accumulated amortization	(285		)	(265		)
Intangible assets, net	$	75		$	95

Schedule of Amortization Expense

Amortization expense during the three and six months endedMarch 31, 2017 and April 1, 2016 follows:

	Three Months Ended				Six Months Ended
Amortization Expense	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016
(in thousands)
Intangible amortization expense	$	10	$	10	$	20	$	20

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

A summary of amortization expense for the next five years follows:

Future Amortization	Estimated future amortization
(in thousands)
Twelve months ended March,
2018	$	40
2019	35
2020 and thereafter	—

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CREDIT FACILITIES (Tables)

6 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Schedule of Debt

A summary of borrowings at period end follows:   

			March 31, 2017					September 30, 2016
Debt	Fixed/ Variable Rate	Maturity  Date	Balance			Interest Rate		Balance			Interest Rate
($ in thousands)
M&T credit facilities:
Revolving Credit Facility	v	1/18/2018	$	5,541		5.23	%	$	3,961		3.28	%
Term Loan A(1)	f	2/1/2020	—			—		3,693			3.98
Term Loan B	v	2/1/2023	8,283			4.03		8,983			3.03
Albuquerque Mortgage Loan(1)	v	2/1/2018	—			—		2,200			3.55
Celmet Building Term Loan	f	11/7/2018	867			4.72		932			4.72
Other credit facilities:
Albuquerque Industrial Revenue Bond(1)	f	3/1/2019	—			—		100			5.63
Total debt, gross			14,691					19,869
Unamortized debt issuance costs			(211		)			(229		)
Total debt, net			14,480					19,640
Less: current portion			(1,530		)			(2,908		)
Long-term debt			$	12,950				$	16,732

⁽¹⁾ The Albuquerque Mortgage Loan and the Albuquerque Industrial Revenue Bond were repaid in connection with the sale-leaseback transaction described in Note 14—Capital Lease. The proceeds from the transaction were also used to pay down Term Loan A, which was subsequently paid off in due course.

Schedule of Debt Covenant

Covenant ratios in effect at March 31, 2017, pursuant to the Fifth Amended Credit Agreement, as amended by the Second Amendment, are as follows:

Debt to EBITDAS Ratio:
12/31/2016 through and including 3/31/2017	< 4.7 to 1.00
Minimum Quarterly EBITDAS:
Fiscal Quarter ending 3/31/2017	$	240,000
Fixed Charge Coverage Ratio:
12/31/2016 through and including 3/31/2017	> 0.3 to 1.00
Maximum Inventory:
As of 3/31/2017	$	25.0	m
Maximum Capital Expenditures:	Measured annually; maximum $4.5m

Schedule of Maturities of Long-term Debt

A summary of contractual principal payments under IEC’s borrowings for the next five years taking into consideration the Fifth Amended Credit Agreement, as amended, follows:

Debt Repayment Schedule		Contractual Principal Payments
(in thousands)
Twelve months ended March
2018		$	1,530
2019	(1)	2,137
2020		1,400
2021		1,400
2022 and thereafter (2)		8,224
		$	14,691

⁽¹⁾ Includes final payment of Celmet Building Term Loan on November 7, 2018.

⁽²⁾ Includes Revolver balance of $5.5 million at March 31, 2017

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Schedule of Fair Value and Carrying Value of Variable Rate Debt

A summary of the fair value and carrying value of fixed rate debt at period end follows:

	March 31, 2017				September 30, 2016
	Fair Value		Carrying Value		Fair Value		Carrying Value
(in thousands)
Term Loan A	$	—	$	—	$	3,489	$	3,693
Celmet Building Term Loan	811		867		864		932

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WARRANTY RESERVES (Tables)

6 Months Ended

Mar. 31, 2017

Product Warranties Disclosures [Abstract]

Schedule of Product Warranty Liability

A summary of additions to and charges against IEC’s warranty reserves during the period follows: 

	Six Months Ended
Warranty Reserve	March 31, 2017			April 1, 2016
(in thousands)
Reserve, beginning of period	$	180		$	399
Provision	111			123
Warranty costs	(101		)	(183		)
Reserve, end of period	$	190		$	339

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STOCK-BASED COMPENSATION (Tables)

6 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

Assumptions used in the Black-Scholes model and the estimated value of options granted during the six months endedMarch 31, 2017 are included in the table below. There were no options granted during the six months endedApril 1, 2016.

	Six Months Ended
Valuation of Options	March 31, 2017
Assumptions for Black-Scholes:
Risk-free interest rate	1.48		%
Expected term in years	4.0
Volatility	40		%
Expected annual dividends	none
Value of options granted:
Number of options granted	50,000
Weighted average fair value per share	$	1.18
Fair value of options granted (000s)	$	59

Changes in Number of Options Outstanding with Other Related Data

A summary of stock option activity, together with other related data, follows:

	Six Months Ended
	March 31, 2017				April 1, 2016
Stock Options	Number of Options		Wgtd. Avg. Exercise Price		Number of Options		Wgtd. Avg. Exercise Price
Outstanding, beginning of period	759,795		$	4.43	717,645		$	4.40
Granted	50,000		3.60		—		—
Exercised	—		—		—		—
Forfeited	(30,500	)	5.70		(15,500	)	5.99
Expired	(19,750	)	5.37		—		—
Outstanding, end of period	759,545		$	4.30	702,145		$	4.37
For options expected to vest
Number expected to vest	738,410		$	4.30	558,596		$	4.44
Weighted average remaining term, in years	4.9				5.3
Intrinsic value (000s)			$	11			$	239
For exercisable options
Number exercisable	324,472		$	4.46	260,036		$	4.84
Weighted average remaining term, in years	4.3				4.4
Intrinsic value (000s)			$	—			$	77
For non-exercisable options
Expense not yet recognized (000s)			$	526			$	597
Weighted average years to be recognized	2.3				3.1
For options exercised
Intrinsic value (000s)			$	—			$	—

Schedule of Nonvested Stock Options Activity

Changes in the number of non-vested options outstanding, together with other related data, follows: 

	Six Months Ended
	March 31, 2017				April 1, 2016
Stock Options	Number of Options		Wgtd. Avg. Grant Date Fair Value		Number of Options		Wgtd. Avg. Grant Date Fair Value
Non-vested, beginning of period	489,109		$	1.43	546,145		$	1.41
Granted	50,000		1.18		—		—
Vested	(104,036	)	1.45		(104,036	)	1.45
Forfeited	—		—		—		—
Non-vested, end of period	435,073		$	1.40	442,109		$	1.40

Changes in Number of Restricted Non-vested Stock Outstanding with Other Related Data

A summary of restricted stock activity, together with related data, follows: 

	Six Months Ended
	March 31, 2017				April 1, 2016
Restricted (Non-vested) Stock	Number of Non-vested Shares		Wgtd. Avg. Grant Date Fair Value		Number of Non-vested Shares		Wgtd. Avg. Grant Date Fair Value
Outstanding, beginning of period	228,759		$	4.40	54,960		$	4.23
Granted	194,766		3.62		59,560		4.03
Vested	(25,131	)	4.22		(11,700	)	4.23
Shares withheld for payment of taxes upon vesting of restricted stock	(583	)	3.60		—		—
Forfeited	—		—		—		—
Outstanding, end of period	397,811		$	4.03	102,820		$	4.11
For non-vested shares
Expense not yet recognized (000s)			$	1,075			$	357
Weighted average remaining years for vesting	2.4				2.5
For shares vested
Aggregate fair value on vesting dates (000s)			$	94			$	43

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INCOME TAXES (Tables)

6 Months Ended

Mar. 31, 2017

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit)

Provision for income taxes during each of the three and six months endedMarch 31, 2017 and April 1, 2016 follows:

	Three Months Ended				Six Months Ended
Income Tax Provision/Benefit	March 31, 2017		April 1, 2016		March 31, 2017		April 1, 2016
(in thousands)
Provision for/(benefit from) income taxes	$	—	$	—	$	—	$	—

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MARKET SECTORS AND MAJOR CUSTOMERS (Tables)

6 Months Ended

Mar. 31, 2017

Risks and Uncertainties [Abstract]

Schedules of Concentration of Risk, by Risk Factor

A summary of sales, according to the market sector within which IEC’s customers operate, follows:

	Three Months Ended		Six Months Ended
% of Sales by Sector	March 31, 2017	April 1, 2016	March 31, 2017	April 1, 2016
Aerospace & Defense	44%	34%	47%	37%
Medical	32%	50%	30%	46%
Industrial	21%	14%	20%	15%
Communications & Other	3%	2%	3%	2%
	100%	100%	100%	100%

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CAPITAL LEASE (Tables)

6 Months Ended

Mar. 31, 2017

Leases [Abstract]

Schedule of Future Minimum Lease Payments for Capital Leases

A summary of capital lease payments for the next five years follows:

Capital Lease Payment Schedule	Contractual Principal Payments
(in thousands)
Twelve months ended March
2018	$	478
2019	487
2020	497
2021	549
2022 and thereafter	6,101
Total capital lease payments	$	8,112
Less: amounts representing interest	(2,435		)
Present value of minimum lease payment	$	5,677

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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details)	6 Months Ended
	Mar. 31, 2017
Land improvements [Member]
Estimated useful lives	10 years
Buildings and improvements [Member] | Minimum [Member]
Estimated useful lives	5 years
Buildings and improvements [Member] | Maximum [Member]
Estimated useful lives	40 years
Machinery and equipment [Member] | Minimum [Member]
Estimated useful lives	3 years
Machinery and equipment [Member] | Maximum [Member]
Estimated useful lives	5 years
Furniture and fixtures [Member] | Minimum [Member]
Estimated useful lives	3 years
Furniture and fixtures [Member] | Maximum [Member]
Estimated useful lives	7 years

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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) - USD ($)	3 Months Ended	6 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2017	Apr. 01, 2016	Sep. 30, 2016
Accounting Policies [Abstract]
Asset impairment charges		$ 0
Goodwill	$ 101,000	101,000		$ 101,000
Goodwill impairment		0
Deferred grants recorded	0			0
Outstanding grant balance	$ 200,000	$ 200,000		$ 300,000
Material Management [Member]
Maximum percentage of total revenue		5.00%	5.00%

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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Earnings Per Share (Details) - shares	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016	Mar. 31, 2017	Apr. 01, 2016
Accounting Policies [Abstract]
Weighted average shares outstanding (in shares)	10,173,388	10,205,031	10,168,339	10,210,539
Incremental shares (in shares)	0	0	0	0
Diluted shares (in shares)	10,173,388	10,205,031	10,168,339	10,210,539
Anti-dilutive shares excluded (in shares)	1,157,356	804,965	1,157,356	804,965

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ALLOWANCE FOR DOUBTFUL ACCOUNTS (Details) - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016
Allowance for Doubtful Accounts Receivable [Roll Forward]
Allowance, beginning of period	$ 226	$ 423
Provision for doubtful accounts	(151)	270
Write-offs/recoveries	15	(158)
Allowance, end of period	$ 90	$ 535

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INVENTORIES (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Inventory Disclosure [Abstract]
Raw materials	$ 9,711	$ 9,138
Work-in-process	6,676	5,932
Finished goods	1,519	1,939
Total inventories	17,906	17,009
Reserve for excess/obsolete inventory	(1,429)	(1,625)
Inventories, net	$ 16,477	$ 15,384

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PROPERTY, PLANT & EQUIPMENT - Summary of Fixed Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Property, Plant and Equipment [Abstract]
Land and improvements	$ 788	$ 788
Buildings and improvements	8,910	8,910
Building under capital lease	5,750	0
Machinery and equipment	28,371	26,905
Furniture and fixtures	7,503	7,489
Construction in progress	3,135	3,079
Total property, plant and equipment, at cost	54,457	47,171
Accumulated depreciation	(37,447)	(36,177)
Property, plant and equipment, net	$ 17,010	$ 10,994

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PROPERTY, PLANT & EQUIPMENT - Depreciation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016	Mar. 31, 2017	Apr. 01, 2016
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 652	$ 807	$ 1,298	$ 1,647

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INTANGIBLE ASSETS - Narrative (Details) - Property tax abatement [Member] - Albuquerque [Member] - USD ($)	6 Months Ended
	Mar. 31, 2017	Sep. 30, 2016
Finite-Lived Intangible Assets [Line Items]
Amount allocated to intangibles	$ 360,000	$ 360,000
Estimated useful life	9 years 2 months 12 days
Impairment of intangible assets	$ 0

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INTANGIBLE ASSETS - Summary of Intangibles (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Sep. 30, 2016
Finite-Lived Intangible Assets [Line Items]
Accumulated amortization	$ (285)	$ (265)
Intangible assets, net	75	95
Property tax abatement [Member] | Albuquerque [Member]
Finite-Lived Intangible Assets [Line Items]
Property tax abatement - Albuquerque	$ 360	$ 360

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INTANGIBLE ASSETS - Amortization Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016	Mar. 31, 2017	Apr. 01, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible amortization expense	$ 10	$ 10	$ 20	$ 20

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INTANGIBLE ASSETS - Amortization Expense Maturity Schedule (Details) $ in Thousands	Mar. 31, 2017 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2018	$ 40
2019	35
2020 and thereafter	$ 0

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CREDIT FACILITIES - Summary of Borrowings (Details) - USD ($) $ in Thousands		6 Months Ended
		Mar. 31, 2017	Sep. 30, 2016
Total debt, net		$ 14,480	$ 19,640
Long-term Debt, Gross		14,691	19,869
Unamortized Debt Issuance Expense		(211)	(229)
Less: current portion		(1,530)	(2,908)
Long-term debt		$ 12,950	$ 16,732
Term Loan A [Member]
Fixed/Variable Rate		Fixed Interest Rate
Maturity Date	[1]	Feb. 01, 2020
Interest Rate	[1]	0.00%	3.98%
Total debt, net	[1]	$ 0	$ 3,693
Term Loan B [Member]
Fixed/Variable Rate		Variable Interest Rate
Maturity Date		Feb. 01, 2023
Interest Rate		4.03%	3.03%
Total debt, net		$ 8,283	$ 8,983
Albuquerque Mortgage Loan [Member]
Fixed/Variable Rate		Variable Interest Rate
Maturity Date	[1]	Feb. 01, 2018
Interest Rate	[1]	0.00%	3.55%
Total debt, net	[1]	$ 0	$ 2,200
Celmet Building Term Loan [Member]
Fixed/Variable Rate		Fixed Interest Rate
Maturity Date		Nov. 07, 2018
Interest Rate		4.72%	4.72%
Total debt, net		$ 867	$ 932
Albuquerque Industrial Revenue Bond [Member]
Fixed/Variable Rate		Fixed Interest Rate
Maturity Date	[1]	Mar. 01, 2019
Interest Rate	[1]	0.00%	5.63%
Total debt, net	[1]	$ 0	$ 100
Revolving Credit Facility [Member]
Fixed/Variable Rate		Variable Interest Rate
Maturity Date		Jan. 18, 2018
Interest Rate		5.23%	3.28%
Total debt, net		$ 5,541	$ 3,961

[1] The Albuquerque Mortgage Loan and the Albuquerque Industrial Revenue Bond were repaid in connection with the sale-leaseback transaction described in Note 14—Capital Lease. The proceeds from the transaction were also used to pay down Term Loan A, which was subsequently paid off in due course.

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CREDIT FACILITIES - Narrative (Details) - USD ($)		1 Months Ended			6 Months Ended
	Dec. 14, 2015	Nov. 30, 2013	Jan. 31, 2013	Dec. 31, 2009	Mar. 31, 2017	Apr. 01, 2016	Sep. 30, 2016	Nov. 08, 2013	Jan. 18, 2013	Dec. 16, 2009
Line of Credit Facility [Line Items]
Maximum borrowing capacity					$ 16,000,000
Repayments of long-term debt					14,480,000		$ 19,640,000
Average borrowing capacity					$ 3,400,000
Unused capacity, commitment fee percentage					0.50%
Albuquerque [Member]
Line of Credit Facility [Line Items]
Liabilities assumed					$ 0
Credit Agreement 2013 [Member] | Term Loan A [Member]
Line of Credit Facility [Line Items]
Long-term line of credit									$ 10,000,000
Repayment monthly installments			108 equal monthly installments
Line of credit facility, periodic payment, principal			$ 93,000
Credit Agreement 2013 [Member] | Term Loan B [Member]
Line of Credit Facility [Line Items]
Long-term line of credit									$ 14,000,000
Repayment monthly installments			120 equal monthly installments
Line of credit facility, periodic payment, principal			$ 117,000
Credit Agreement 2013 [Member] | Albuquerque Mortgage Loan [Member]
Line of Credit Facility [Line Items]
Repayment monthly installments		59 equal monthly installments		monthly installments
Credit Agreement 2013 [Member] | Celmet Term Loan [Member]
Line of Credit Facility [Line Items]
Debt instrument, periodic payment, principal		$ 11,000
Sixth Amendment [Member] | Term Loan B [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate					3.25%
Fifth Amendment [Member] | Term Loan B [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate	3.25%
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity					$ 16,000,000.0		20,000,000
Maturity date					Jan. 18, 2018
Repayments of long-term debt					$ 5,541,000		3,961,000
Maximum borrowing capacity as percentage of eligible receivables					85.00%
Maximum borrowing capacity as percentage of eligible inventory					35.00%
Maximum borrowing capacity based on eligible inventories					$ 3,750,000.00
Current borrowing capacity					$ 13,800,000.0		$ 16,400,000
Revolving Credit Facility [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Unused capacity, commitment fee percentage					0.25%
Revolving Credit Facility [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Unused capacity, commitment fee percentage						0.50%
Revolving Credit Facility [Member] | Credit Agreement 2013 [Member]
Line of Credit Facility [Line Items]
Average borrowing capacity					$ 16,000,000
Commitment fee amount						$ 23,800
Revolving Credit Facility [Member] | Sixth Amendment [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate					4.25%
Revolving Credit Facility [Member] | Fifth Amendment [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate	4.25%
Albuquerque Mortgage Loan [Member] | Credit Agreement 2013 [Member]
Line of Credit Facility [Line Items]
Long-term line of credit										$ 4,000,000
Debt instrument, periodic payment, principal				$ 22,000
Albuquerque Mortgage Loan [Member] | Sixth Amendment [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate					4.50%
Celmet Term Loan [Member] | Third Amendment [Member]
Line of Credit Facility [Line Items]
Face amount								$ 1,300,000

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CREDIT FACILITIES - Covenant Ratios (Details) - Fifth Amendment [Member]	6 Months Ended
	Mar. 31, 2017 USD ($)
Maximum Inventory:
Maximum Capital Expenditures:	$ 4,500,000
As of December 30, 2016 [Member]
Maximum Inventory:
Inventory	$ 25,000,000
Fiscal Quarter Ending December 30, 2016 [Member]
Debt to EBITDAS Ratio:
Debt to EBITDAS ratio	0.0470
Minimum Quarterly EBITDAS:
Net earnings before interest,taxes, depreciation and amortization	$ 240,000
Fixed Charge Coverage Ratio:
Fixed charge coverage ratio	0.0030

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CREDIT FACILITIES - Long-term Debt Maturities (Details) - USD ($) $ in Thousands		6 Months Ended
		Mar. 31, 2017	Sep. 30, 2016
Debt Instrument [Line Items]
2017		$ 1,530
2018	[1]	2,137
2019		1,400
2020		1,400
2022 and thereafter (2)		8,224
Total debt, net		$ 14,691	$ 19,869
Celmet Term Loan [Member]
Debt Instrument [Line Items]
Maturity date		Nov. 07, 2018
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Maturity date		Jan. 18, 2018

[1] Includes Revolver balance of $5.5 million at March 31, 2017.

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands		Mar. 31, 2017	Sep. 30, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Carrying Value		$ 14,480	$ 19,640
Term Loan A [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value		0	3,489
Carrying Value	[1]	0	3,693
Celmet Building Term Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value		811	864
Carrying Value		$ 867	$ 932

[1] The Albuquerque Mortgage Loan and the Albuquerque Industrial Revenue Bond were repaid in connection with the sale-leaseback transaction described in Note 14—Capital Lease. The proceeds from the transaction were also used to pay down Term Loan A, which was subsequently paid off in due course.

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WARRANTY RESERVES (Details) - Warranty Reserves [Member] - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016
Warranty Reserve
Reserve, beginning of period	$ 180	$ 399
Provision	111	123
Warranty costs	(101)	(183)
Reserve, end of period	$ 190	$ 339

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STOCK-BASED COMPENSATION - Narrative (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016	Mar. 31, 2017	Apr. 01, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation	$ 100,000	$ 100,000	$ 252,000	$ 162,000
Reduction to compensation expense			$ 60,000	$ 60,000
Number of options granted (in shares)			50,000	0
Compensation expense			$ 252,000	$ 162,000
Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			3 years
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			4 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			5 years
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			4 years
2010 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of common shares that may be issued (in shares)	2,000,000		2,000,000
Common shares, issuance term			10 years
Shares available for issuance (in shares)	240,790		240,790
2010 Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award expiration period			7 years
ESPP [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee stock purchase discount (percent)			10.00%
Employee contributions			$ 16,700	8,100
Compensation expense			$ 1,900	$ 1,000

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STOCK-BASED COMPENSATION - Valuation Assumptions (Details) - USD ($)	6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016
Assumptions for Black-Scholes:
Risk-free interest rate	1.48%
Expected term in years	4 years
Volatility	40.00%
Expected annual dividends	$ 0
Value of options granted:
Number of options granted (in shares)	50,000	0
Weighted average fair value per share (in dollars per share)	$ 1.18	$ 0.00
Fair value of options granted (000s)	$ 59,000

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STOCK-BASED COMPENSATION - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016
Number of Options
Outstanding, beginning of period (in shares)	759,795	717,645
Granted (in shares)	50,000	0
Exercised (in shares)	0	0
Forfeited (in shares)	(30,500)	(15,500)
Expired (in shares)	(19,750)	0
Outstanding, end of period (in shares)	759,545	702,145
Wgtd. Avg. Exercise Price
Outstanding, beginning of period (in dollars per share)	$ 4.43	$ 4.40
Granted (in dollars per share)	3.60	0.00
Exercised (in dollars per share)	0.00	0.00
Forfeited (in dollars per share)	5.70	5.99
Expired (in dollars per share)	5.37	0
Outstanding, end of period (in dollars per share)	$ 4.30	$ 4.37
For options expected to vest
Number expected to vest (in shares)	738,410	558,596
Number expected to vest (in dollars per share)	$ 4.30	$ 4.44
Weighted average remaining term, in years	4 years 10 months 28 days	5 years 3 months 18 days
Intrinsic value (000s)	$ 11	$ 239
For exercisable options
Number exercisable (in shares)	324,472	260,036
Number exercisable (in dollars per share)	$ 4.46	$ 4.84
Weighted average remaining term, in years	4 years 3 months	4 years 4 months 24 days
Intrinsic value (000s)	$ 0	$ 77
For non-exercisable options
Expense not yet recognized (000s)	$ 526	$ 597
Weighted average years to be recognized	2 years 3 months 11 days	3 years 1 month 6 days
For options exercised, Intrinsic value (000s)	$ 0	$ 0

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STOCK-BASED COMPENSATION - Changes in Non-Vested Options Outstanding (Details) - $ / shares	6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016
Number of Options
Non-vested, beginning of period (in shares)	489,109	546,145
Granted (in shares)	50,000	0
Vested (in shares)	(104,036)	(104,036)
Forfeited (in shares)	0	0
Non-vested, end of period (in shares)	435,073	442,109
Wgtd. Avg. Grant Date Fair Value
Non-vested, beginning of period (in dollars per share)	$ 1.43	$ 1.41
Granted (in dollars per share)	1.18	0.00
Vested (in dollars per share)	1.45	1.45
Forfeited (in dollars per share)	0.00	0.00
Non-vested, end of period (in dollars per share)	$ 1.40	$ 1.40

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STOCK-BASED COMPENSATION - Summary of Restricted Stock Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016
Number of Non-vested Shares [Roll Forward]
Vested (in shares)	(25,131)
Wgtd. Avg. Grant Date Fair Value [Roll Forward]
Granted (in dollars per share)	$ 3.62
Restricted Stock [Member]
Number of Non-vested Shares [Roll Forward]
Outstanding, beginning of period (in shares)	228,759	54,960
Granted (in shares)	194,766	59,560
Vested (in shares)		(11,700)
Shares withheld for payment of taxes upon vesting of restricted stock (in shares)	(583)	0
Forfeited (in shares)	0	0
Outstanding, end of period (in shares)	397,811	102,820
Wgtd. Avg. Grant Date Fair Value [Roll Forward]
Outstanding, beginning of period (in dollars per share)	$ 4.40	$ 4.23
Granted (in dollars per share)		4.03
Vested (in dollars per share)	4.22	4.23
Shares withheld for payment of taxes upon vesting of restricted stock (in dollars per share)	3.60	0.00
Forfeited (in dollars per share)	0.00	0.00
Outstanding, end of period (in dollars per share)	$ 4.03	$ 4.11
For non-vested shares
Expense not yet recognized (000s)	$ 1,075	$ 357
Weighted average remaining years for vesting	2 years 4 months 10 days	2 years 6 months
For shares vested
Aggregate fair value on vesting dates (000s)	$ 94	$ 43

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RETIREMENT PLAN (Details) - USD ($) $ in Millions	6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016
Compensation and Retirement Disclosure [Abstract]
Contributions by employer, percentage	25.00%
Employer matching contribution, percentage	6.00%
Contributions by employer	$ 0.1	$ 0.1

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INCOME TAXES - Tax Provision/Benefit (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016	Mar. 31, 2017	Apr. 01, 2016
Income Tax Disclosure [Abstract]
Provision for/(benefit from) income taxes	$ 0	$ 0	$ 0	$ 0

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INCOME TAXES - Narrative (Details) - USD ($) $ in Millions	Mar. 31, 2017	Sep. 30, 2016
Base tax rate	0.00%
Domestic Tax Authority [Member]
Operating loss carryforwards		$ 31.7
State and Local Jurisdiction [Member]
Operating loss carryforwards		$ 1.2

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MARKET SECTORS AND MAJOR CUSTOMERS - Summary of Sales (Details) - Sales Revenue, Segment [Member]	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016	Mar. 31, 2017	Apr. 01, 2016
Concentration Risk [Line Items]
Percentage of Sales by Sector	100.00%	100.00%	100.00%	100.00%
Aerospace & Defense [Member]
Concentration Risk [Line Items]
Percentage of Sales by Sector	44.00%	34.00%	47.00%	37.00%
Medical [Member]
Concentration Risk [Line Items]
Percentage of Sales by Sector	32.00%	50.00%	30.00%	46.00%
Industrial [Member]
Concentration Risk [Line Items]
Percentage of Sales by Sector	21.00%	14.00%	20.00%	15.00%
Communications & Other [Member]
Concentration Risk [Line Items]
Percentage of Sales by Sector	3.00%	2.00%	3.00%	2.00%

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MARKET SECTORS AND MAJOR CUSTOMERS - Narrative (Details) - customer	6 Months Ended
	Mar. 31, 2017	Apr. 01, 2016
Concentration Risk [Line Items]
Concentration risk, number of customers	2	2
Customer Concentration Risk [Member] | Sales [Member] | Industrial [Member]
Concentration Risk [Line Items]
Concentration risk, percentage		18.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration risk, number of customers	3	2
Concentration risk, percentage	40.00%	29.00%
Customer Number Two [Member] | Customer Concentration Risk [Member] | Sales [Member] | Aerospace and Defense [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	13.00%
Customer Number Two [Member] | Customer Concentration Risk [Member] | Sales [Member] | Medical [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	13.00%
Customer Number One [Member] | Customer Concentration Risk [Member] | Sales [Member] | Medical [Member]
Concentration Risk [Line Items]
Concentration risk, percentage		17.00%

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CAPITAL LEASE - Narrative (Details) $ in Millions	Nov. 18, 2016 USD ($) renewal_option
Sale Leaseback Transaction [Line Items]
Aggregate purchase price	$ 5.8
Holdback amount	0.1
Net book value of assets sold	4.6
Value of assets acquired under the lease	$ 5.8
Initial term of lease	15 years
Number of lease renewal options | renewal_option	2
Term of renewal options (in years)	5 years
Annual rental payment	$ 0.5
Late payment fee (percent)	5.00%
Interest rate (percent)	18.00%
Maximum [Member]
Sale Leaseback Transaction [Line Items]
Annual percentage increase	2.00%
Minimum [Member]
Sale Leaseback Transaction [Line Items]
Consumer pricing index multiplier (lesser of)	1.25
Other Noncurrent Liabilities [Member]
Sale Leaseback Transaction [Line Items]
Deferred gain recorded	$ 1.1

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CAPITAL LEASE - Summary of Future Minimum Payments on Capital Leases (Details) $ in Thousands	Mar. 31, 2017 USD ($)
Leases [Abstract]
2018	$ 478
2019	487
2020	497
2021	549
2022 and thereafter	6,101
Total capital lease payments	8,112
Less: amounts representing interest	(2,435)
Present value of minimum lease payment	$ 5,677

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SUBSEQUENT EVENTS (Details) - USD ($)	May 05, 2017	Mar. 31, 2017	Sep. 30, 2016
Subsequent Event [Line Items]
Maximum borrowing capacity		$ 16,000,000
Revolving Credit Facility [Member]
Subsequent Event [Line Items]
Maximum borrowing capacity		$ 16,000,000.0	$ 20,000,000
Maximum borrowing capacity as percentage of eligible receivables		85.00%
Maximum borrowing capacity based on eligible inventories		$ 3,750,000.00
Credit Agreement 2013 [Member] | Revolving Credit Facility [Member] | Term Loan B [Member] | Scenario, Forecast [Member]
Subsequent Event [Line Items]
Principal amount	$ 6,000,000
Maximum borrowing capacity	$ 16,000,000
Maximum borrowing capacity as percentage of eligible receivables	85.00%
Maximum borrowing capacity based on eligible inventories	$ 7,000,000