NOTE 5—CREDIT FACILITIES

A summary of borrowings at period end follows:



			June 30, 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	5/5/2022	$	9,590		3.72	%	$	3,961		3.28	%
Term Loan A⁽¹⁾	f	2/1/2020	—			—		3,693			3.98
Term Loan B	v	5/5/2022	5,928			3.80		8,983			3.03
Albuquerque Mortgage Loan⁽¹⁾	v	2/1/2018	—			—		2,200			3.55
Celmet Building Term Loan	f	11/7/2018	834			4.72		932			4.72

Other credit facilities:
Albuquerque Industrial Revenue Bond⁽¹⁾	f	3/1/2019	—			—		100			5.63
Total debt, gross			16,352					19,869
Unamortized debt issuance costs			(288		)			(229		)
Total debt, net			16,064					19,640
Less: current portion			(987		)			(2,908		)
Long-term debt			$	15,077				$	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 12—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

Effective as of May 5, 2017, the Company and M&T Bank entered into the Third Amendment to Fifth Amended and Restated Credit Agreement (the “Third Amendment”), that amended the Fifth Amended Credit Agreement dated as of December 14, 2015, as amended by the First Amendment to Fifth Amended and Restated Credit Facility, dated as of June 20, 2016, and the Second Amendment to Fifth Amended and Restated Credit Facility agreement dated as of November 28, 2016 (“Fifth Amended Credit Agreement”). The Third Amendment extended the Revolver termination date to May 5, 2022. In connection with the Third Amendment, the Term Loan B to M&T Bank was amended and restated. 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 up to $7.0 million of eligible inventories. 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.

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 May 5, 2022. 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 12—Capital Lease were used to pay down the loan, which was paid off January 1, 2017.


c)	Term Loan B: $14.0 million was borrowed on January 18, 2013. Principal was being repaid in 120 equal monthly installments of $117 thousand. As part of the Third Amendment, the principal was modified to $6.0 million and principal is being repaid in equal monthly installments of $71 thousand.


d)	Albuquerque Mortgage 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 12—Capital Lease.

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 of $672 thousand 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 a percentage of eligible inventories (up to a cap of $7.0 million) or (ii) $16.0 million at June 30, 2017 and $20.0 million at September 30, 2016.

At June 30, 2017 and September 30, 2016, the upper limit on Revolver borrowings was $16.0 million and $16.4 million, respectively. Average Revolver balances amounted to $5.0 million during the nine months ended June 30, 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 Fixed Charge Coverage Ratio, as defined below. Under the Third Amendment, the applicable marginal interest rate was fixed on May 5, 2017 through the fiscal quarter ending March 31, 2018, as follows: 2.50% for the Revolver and 2.75% for Term Loan B. Changes to applicable margins and unused fees resulting from the Fixed Charge Coverage Ratio generally become effective mid-way through the subsequent quarter.

The Company incurs quarterly unused commitment fees ranging from 0.250% to 0.375% of the excess of $16.0 million over average borrowings under the Revolver. Fees incurred amounted to $11.7 thousand and $21.1 thousand during the three months ended June 30, 2017 and July 1, 2016, respectively. Fees incurred amounted to $43.6 thousand and $44.9 thousand during the nine months ended June 30, 2017 and July 1, 2016, respectively. The fee percentage varies based on the Company’s Fixed Charge Coverage Ratio, as defined below.

Financial Covenants

The Fifth Amended Credit Agreement, as amended, also contains various affirmative and negative covenants including financial covenants. 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 ended June 30, 2017. The Company is required to maintain (i) for the quarter ended June 30, 2017, a minimum level of quarterly EBITDAS, as defined below (“Quarterly EBITDAS”), (ii) a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”), and (iii) a maximum amount of capital expenditures (“Maximum Capital Expenditures”). “EBITDAS” is defined as earnings before interest, taxes, depreciation, amortization and non-cash stock compensation expense. The Fixed Charge Coverage Ratio compares (i) EBITDAS minus unfinanced capital expenditures minus taxes paid, to (ii) the sum of interest expense, principal payments, payments on all capital lease obligations and dividends, if any (fixed charges). The Fixed Charge Coverage Ratio will initially be measured for a trailing six months ended September 30, 2017. The Maximum Capital Expenditures covenants allow for a maximum amount of capital expenditures on an annual basis for fiscal 2017.

Covenant ratios in effect at June 30, 2017, pursuant to the Fifth Amended Credit Agreement, as amended by the Third Amendment, are as follows:



Minimum Quarterly EBITDAS:
Fiscal Quarter ended 6/30/2017, using trailing twelve months	$	2,323,300
Maximum Capital Expenditures:
Measured annually	Maximum $3.5m

The Fifth Amended Credit Agreement provides for customary events of default, subject in certain cases to customary cure periods, in which the outstanding balance and any unpaid interest would become due and payable.

The Company was in compliance with all debt covenants at June 30, 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 12—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 June
2018		$	987
2019	⁽¹⁾	1,561
2020		857
2021		857
2022 and thereafter ⁽²⁾		12,090
		$	16,352

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

⁽²⁾Includes Revolver balance of $9.6 million at June 30, 2017.