-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wc/5KT90M+ohjb15VCX8JrmIae3ZJoE3q3fs91amRJ16/AO6YZ4QiRABKBrfrXF5 INjgajUWlZwWLc5gYN/TVA== 0000049728-97-000005.txt : 19970728 0000049728-97-000005.hdr.sgml : 19970728 ACCESSION NUMBER: 0000049728-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970627 FILED AS OF DATE: 19970725 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IEC ELECTRONICS CORP CENTRAL INDEX KEY: 0000049728 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 160920982 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06508 FILM NUMBER: 97645573 BUSINESS ADDRESS: STREET 1: 105 NORTON ST CITY: NEWARK STATE: NY ZIP: 14513 BUSINESS PHONE: 3153317742 10-Q 1 THIRD QUARTER 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 27, 1997 Commission file Number 0-6508 IEC ELECTRONICS CORP -------------------------------------------------------- (Exact name of registrant as specified in its charter.) Delaware 13-3458955 - ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 105 Norton Street, Newark, New York 14513 - -------------------------------------- ---------- (Address of principal executive offices (Zip Code) (315) 331-7742 - --------------------------------------------------- Registrant's telephone number, including area code: Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: Common Stock, $0.01 Par Value - 7,504,320 shares as of July 25, 1997. Page 1 of 14 IEC ELECTRONICS CORP INDEX PART 1 FINANCIAL INFORMATION Page Number Item 1. Financial Statements Consolidated Balance Sheets as of : June 27, 1997 (Unaudited) and September 30, 1996.......... 4 Consolidated Statements of Income for the three months ended: June 27, 1997 (Unaudited) and June 28, 1996(Unaudited)................................... 5 Consolidated Statements of Income for the nine months ended: June 27, 1997 (Unaudited) and June 28, 1996(Unaudited)................................... 6 Consolidated Statement of Cash Flows for the nine months ended: June 27, 1997 (Unaudited) and June 28, 1996(Unaudited)................................... 7 Consolidated Statement of Changes in Shareholders' Equity for the years ended September 30, 1996 and 1995 and for the nine months ended June 27, 1997 (Unaudited)................. 8 Notes to Consolidated Financial Statements (Unaudited) ...................................... 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................ 11 PART II Item 1. Legal Proceedings............................................ 13 Item 2. Changes in Securities........................................ 13 Page 2 of 14 Item 3. Defaults Upon Senior Securities.............................. 13 Item 4. Submission of Matters to a Vote of Security Holders.......... 13 Item 5. Other Information............................................ 13 Item 6. Exhibits and Reports on Form 8-K............................. 13 Signature ........................................................... 14 Page 3 of 14 IEC ELECTRONICS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 27, 1997 AND SEPTEMBER 30, 1996
JUNE 27, SEPTEMBER 30, 1997 1996 ------------- --------------- ASSETS (Unaudited) (Unaudited) Current Assets: Cash and cash equivalents $2,284,187 $1,481,694 Accounts receivable 32,886,805 28,210,567 Inventories 40,426,451 26,006,235 Income taxes receivable 0 756,879 Deferred income taxes 702,192 702,192 Other current assets (75,716) 165,446 ---------------- -------------- Total current assets 76,223,919 57,323,013 ---------------- -------------- Property, Plant and Equipment, net 36,128,170 39,014,104 ---------------- -------------- Other Assets: Cost in excess of net assets acquired, net 12,463,738 12,818,645 Note receivable from officer 393,464 355,519 Other assets 9,309 9,309 ----------------- ------------- 12,866,511 13,183,473 ----------------- ------------- $125,218,600 $109,520,590 ================ ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Borrowings under lines of credit $9,530,000 $8,530,000 Current portion of long-term debt 2,673,982 2,781,517 Accounts payable 26,120,302 16,974,916 Accrued payroll and related expenses 4,099,221 2,772,330 Accrued income taxes 1,340,163 0 Other accrued expenses 267,420 305,237 ----------------- ------------- Total current liabilities 44,031,088 31,364,000 ----------------- ------------- Deferred Income Taxes 3,290,749 3,290,749 ----------------- ------------- Long-Term Debt 5,255,636 7,409,076 ----------------- ------------- Shareholders' Equity: Preferred stock, par value $.01 per share Authorized - 500,000 shares Outstanding - 0 shares - - Common stock, par value $.01 per share Authorized - 15,000,000 shares Outstanding - 7,476,320 shares 74,763 74,151 Additional paid-in capital 37,549,057 36,973,633 Retained earnings 35,017,307 30,408,981 ----------------- ------------ Total shareholders' equity 72,641,127 67,456,765 ----------------- ------------ $125,218,600 $109,520,590 ================ ============= The accompanying notes to unaudited consolidated financial statements are an integral part of these balance sheets
Page 4 of 14 IEC ELECTRONICS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED JUNE 27, 1997 AND JUNE 28, 1996
3 MONTHS 3 MONTHS ENDED ENDED JUNE 27, 1997 JUNE 28, 1996 -------------- ----------------- (Unaudited) (Unaudited) Net sales $62,797,999 $43,351,935 Cost of sales 54,894,372 42,683,056 -------------- ----------------- Gross profit 7,903,627 668,879 Selling and administrative expenses (exclusive of amortization expense shown below) 4,812,735 3,115,715 Amortization expense 118,490 118,490 -------------- ----------------- Operating income 2,972,402 (2,565,326) Interest expense (396,576) (442,700) Other income, net 228,657 107,352 -------------- ----------------- Net income before income taxes 2,804,483 (2,900,674) Income taxes 981,000 (1,021,000) -------------- ----------------- Net Income $1,823,483 $(1,879,674) ============= ================ Net income per common and common equivalent share $0.24 $(0.25) ----- ----- Common and common equivalent shares 7,682,924 7,446,168 -------------- ----------------- The accompanying notes to unaudited consolidated financial statements are an integral part of these financial statements.
Page 5 OF 14 IEC ELECTRONICS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED JUNE 27, 1997 AND JUNE 28, 1996
9 MONTHS 9 MONTHS ENDED ENDED JUNE 27, 1997 JUNE 28, 1996 -------------- ------------------ (Unaudited) (Unaudited) Net sales $174,422,956 $134,719,082 Cost of sales 154,723,510 123,193,470 ----------------- ---------------- Gross profit 19,699,446 11,525,612 Selling and administrative expenses (exclusive of amortization expense shown below) 11,133,843 9,271,420 Amortization expense 355,469 355,469 ----------------- --------------- Operating income 8,210,134 1,898,723 Interest expense (1,170,158) (1,190,743) Other income, net 406,350 332,706 ----------------- ---------------- Net income before income taxes 7,446,326 1,040,686 Income taxes 2,838,000 588,000 ----------------- ---------------- Net Income $4,608,326 $452,686 ================= ================= Net income per common and common equivalent share $0.61 $0.06 ----- ----- Common and common equivalent shares 7,572,731 7,466,617 ----------------- ---------------- The accompanying notes to unaudited consolidated financial statements are an integral part of these financial statements.
Page 6 of 14 IEC ELECTRONICS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 27, 1997 AND JUNE 28, 1996
9 MONTHS 9 MONTHS ENDED ENDED JUNE 27, 1997 JUNE 28, 1996 --------------- ----------------- (Unaudited) (Unaudited) Cash Flows from Operating Activities: Net Income $4,608,326 $452,686 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 7,055,581 6,383,880 Increase in other assets (37,945) - Gain on sale of fixed assets (70,093) (8,750) Amortization of cost in excess of net assets acquired 355,469 355,469 Changes in operating assets and liabilities: Increase in accounts receivable (4,676,238) (3,683,862) Increase in inventories (14,420,216) (3,866,678) (Increase)Decrease in income taxes receivable 756,879 (831,688) Decrease in other current assets 241,162 90,724 (Decrease)Increase in accounts payable 9,145,386 (1,212,185) Increase (Decrease) in accrued payroll and related expenses 1,326,891 (458,247) Increase (Decrease)in accrued income taxes 1,340,163 (1,246,680) Increase (Decrease)in other accrued expenses (37,817) 99,868 ------------ ---------------- Net cash provided by (used in) operating activities 5,587,548 (3,925,463) ------------ ---------------- Cash Flows from Investing Activities: Purchases of property, plant and equipment (4,377,553) (7,860,072) Proceeds from sale of property 278,000 8,750 Proceeds from exercise of options 576,036 22,895 Merger related costs (563) (3,397) ------------- --------------- Net cash used in investing activities (3,524,080) $(7,831,824) ------------- --------------- Cash Flows from Financing Activities: Net borrowings under line of credit agreements 1,000,000 5,100,000 Proceeds from long-term borrowings - 3,970,000 Principal payments on long-term debt (2,260,975) (2,978,848) ----------- ------------- Net cash (used in)provded by financing activities (1,260,975) 6,091,152 ----------- --------------- Net Increase (Decrease) in cash and cash equivalents 802,493 (5,666,135) Cash and cash equivalents at beginning of period 1,481,694 8,639,803 ----------- ---------------- Cash and cash equivalents at end of period $2,284,187 $2,973,668 ============ =============== Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $1,178,211 $1,190,743 ============ =============== Income taxes $1,633,481 $2,509,680 ============ =============== Cash received during the period for: Income taxes $ 655,523 $ - ============ =============== The accompanying notes to unaudited consolidated financial statements are an integral part of these financial statements.
Page 7 of 14 IEC ELECTRONICS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995 AND THE NINE MONTHS ENDED JUNE 27, 1997
Total Common Stock Additional Retained Shareholders ------------ Shares Amount Capital Earnings Equity ------ ------ ----------- ---------- ----------- Balance, September 30, 1994 7,186,250 $71,863 $35,160,564 $23,222,745$58,455,172 Issuance of Stock- Purchase of Accutek 201,116 2,011 1,752,989 - 1,755,000 Net income - - - 4,688,348 4,688,348 --------- ------- ----------- ----------- ---------- Balance, September 30, 1995 7,387,366 73,874 36,913,553 27,911,093 64,898,520 Exercise of stock options 27,704 277 60,080 - 60,357 Net income - - - 2,497,888 2,497,888 --------- ------- ----------- ----------- ---------- Balance, September 30, 1996 7,415,070 74,151 36,973,633 30,408,981 67,456,765 Exercise of stock options 61,250 612 575,424 576,036 Net income for the nine months ended June 27, 1997 (unaudited) - - - 4,608,326 4,608,326 --------- ------- ----------- ----------- ---------- Balance, June 27, 1997 7,476,320 $74,763 $37,549,057 $35,017,307$72,641,127 (unaudited) ========= ======= =========== =========== ========== The accompanying notes to unaudited consolidated financial statements are an integral part of these financial statements.
Page 8 of 14 IEC ELECTRONICS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 27, 1997 (1) Business and Summary of Significant Accounting Policies Business IEC Electronics Corp. (IEC) is an independent contract manufacturer of complex printed circuit board assemblies and electronic products and systems. IEC offers its customers a wide range of manufacturing services, on either a turnkey or consignment basis, including material procurement and control, manufacturing and test engineering support, statistical quality assurance and complete resource management. Consolidation The consolidated financial statements include the accounts of IEC and its wholly-owned subsidiaries, Calidad Electronics, Inc. (Calidad) and Accutek, Inc. (Accutek)(collectively, the Company). All significant intercompany transactions and accounts have been eliminated. Revenue Recognition - ------------------- The Company recognizes revenues upon shipment of product for both turnkey and consignment contracts. Inventories - ----------- Inventories are stated at the lower of cost (first-in, first-out) or market. The major classifications of inventories are as follows at period end: JUNE 27, SEPTEMBER 30, 1997 1996 ----------------- -------------- (Unaudited) Raw materials $32,623,345 $20,914,619 Work-in-process 7,803,106 5,091,616 ----------- ----------- $40,426,451 $26,006,235 =========== =========== Unaudited Financial Statements - ------------------------------ The accompanying unaudited financial statements as of June 27, 1997, and for the nine months ended June 27, 1997 have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments considered necessary for a fair presentation, which consist solely of normal recurring adjustments have been included. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 1996 Annual Report on Form 10-K. New Pronouncements - ------------------ In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS no.128). The Company is required to adopt SFAS No. 128 effective for periods ending after December 15, 1997, including interim periods. Early adoption is not permitted. Restatement of previously reported earnings per share is required to be presented. Therefore SFAS No.128 will be applicable for the Company with the quarter ended December 31, 1997. SFAS No.128 establishes revised standards for computing and presenting earnings per share. The Company believes the effect of adoption will not be material. Page 9 of 14 IEC ELECTRONICS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 27, 1997 (2) Financing Arrangements At June 27, 1997, $9,500,000 and $6,915,000 is outstanding on the working capital and equipment line of credit, respectively. Amounts borrowed under the equipment line of credit are repayable monthly from date of borrowing over a term of 60 months. (3) Legal Matters The Company is involved with various legal matters in the ordinary course of business. Management believes resolution of these matters will not have a material adverse effect on the Company's financial position, results of operations or cash flow. Page 10 of 14 Management's Discussion and Analysis of Financial Condition and - --------------------------------------------------------------- Results of Operations - ---------------------- Results of Operations - Three months ended June 27, 1997 as compared to three - ------------------------------------------------------------------------------ months ended June 28,1996. - --------------------------- Net sales for the three month period ended June 27, 1997, were $62,797,999 as compared to $43,351,935 for the comparable period of the prior fiscal year, an increase of 44.9%. The increase in sales was primarily due to sales to existing customers and sales to new customers. Sales to new customers were approximately 4% of the sales for the quarter. Turnkey sales were 94% of net sales in the three months ended June 27, 1997, as compared to 92% for the comparable period of the prior year. Gross profit as a percentage of sales was 12.6% in the three months ended June 27, 1997, up from 1.5% in the comparable period of the prior fiscal year. The increase in gross profit as a percentage of sales is primarily due to a lower percentage in the material cost of sales and an increase use of 24 hours a day, 7 days a week manufacturing operations, both of which lead to improved labor efficiencies and absorption of fixed overhead costs. Selling and administrative expenses increased to $4,812,735 in the three months ended June 27, 1997, from $3,115,715 in the comparable period of the prior fiscal year. This increase is primarily due to the bonus accrual based upon improved profitability. As a percentage of net sales, selling and administrative expenses increased to 7.7% from 7.2% in the same quarter of the prior year. Net income for the quarter increased to $1,823,483 from a net loss of $(1,879,674)in the comparable quarter of the prior year. Earnings per share were $.24 as compared to a net loss per share of $(.25) per share in the comparable period of the prior fiscal year. Results of Operations - Nine months ended June 27, 1997 as compared to nine - --------------------------------------------------------------------------- months ended June 28, 1996. - --------------------------- Net sales for the nine month period ended June 27, 1997, were $174,422,956 as compared to $134,719,082 for the comparable period of the prior fiscal year, an increase of 29.5%. The increase in sales was primarily due to increased sales to existing customers and sales to new customers. Turnkey sales were 94% of net sales in the nine months ended June 27, 1997, as compared to 84% for the comparable period of the prior fiscal year. Gross profit as a percentage of sales was 11.3% in the nine months ended June 27, 1997, up from 8.6% in the comparable period of the prior year. This increase is primarily due to the increased labor efficiencies and lower overhead costs in relation to increased sales. Selling and administrative expenses increased to $11,133,843 in the nine months ended June 27, 1997, from $9,271,420 in the comparable period of the prior fiscal year. This increase is due primarily to increased salaries and wages, a bonus accrual based on increased profitability, partially offset by decreased commission expense related to an increase in sales of non-commissioned accounts. As a percentage of net sales, selling and administrative expenses decreased to 6.4% from 6.9% for the comparable period of the prior fiscal year. Net income for the first nine months of fiscal year 1997 increased to $4,608,326 from $452,686 in the same period of fiscal year 1996. Earnings per share were $.61 for the nine months as compared to $.06 per share in the nine months of the prior year. Page 11 of 14 In the contract electronics industry, business is managed by job on a customer basis. The cost of goods and resulting gross profit as a percentage of sales can vary widely among different jobs within both turnkey and consignment sales and are affected by a number of factors including the mix of consignment sales and turnkey contracts, the percentage of material content, the percentage of labor content, quantities ordered, complexity of the assemblies, the degree of automation utilized in the assembly process and the efficiencies achieved by the Company in managing material procurement costs, inventory levels and manufacturing processes. Historically, from time to time, the Company has experienced component shortages which cause inefficiencies due to frequent customer rescheduling, short manufacturing lot sizes, production interruptions and restarts, set-up duplication and production line downtime. Other rescheduling has been the result of customers adjusting to their current business conditions. All of these factors are continually changing and are interrelated. The effect of each factor cannot be separately determined. If component shortages should occur in future months, they may have an impact on the Company's results. However, the scope and magnitude of their aggregate effects on sales and profits cannot be determined until close to the end of a given quarter when it becomes known that the short material in question will not arrive before quarter end and therefore will have a determinable effect on the resultant mix of production and delivery schedules. Accordingly, these factors may result in quarter to quarter fluctuations in both future revenues and earnings. Liquidity and Capital Resources Net sales for the month of June 1997 were $24,631,401, representing 39% of the total net sales for the three month period ending June 27, 1997. The Company operates on a calendar quarter consisting of four weeks in the first and second months and five weeks in the third month. At June 28, 1997, $9,500,000 and $6,915,000 is outstanding on the working capital and equipment line of credit, respectively. Amounts borrowed under the equipment line of credit are repayable monthly from date of borrowing over a term of 60 months. At June 27, 1997, approximately $16,585,000 was available for borrowing under these existing lines of credit. The Company believes that its cash balances, funds generated from operations and its existing credit facilities will be sufficient for the Company to meet its capital expenditures and working capital needs for its operations as presently conducted. As part of its overall business strategy, the Company may from time to time evaluate acquisition opportunities. The funding for these future transactions, if any, may require the Company to obtain additional sources of financing. The impact of inflation on the Company's operations has been minimal due to the fact that it is able to adjust its bids to reflect any inflationary increases in cost. Except for historical information, statements in this quarterly report are forward-looking made pursuant to the safe harbor created by the Private Securities Litigation Reform Act of 1995 and are therefore subject to certain risks and uncertainties including timing of orders and shipments, availability of material, product mix and general market conditions that could cause actual results to differ materially from those projected in the forward looking statements. Investors should consider the risks and uncertainties discussed in the Company's September 30, 1996, Form 10-K and in its other filings with the Securities and Exchange Commission. Page 12 of 14 PART II. OTHER INFORMATION Item 1 -- Legal Proceedings None. Item 2 -- Changes in Securities None. Item 3 -- Defaults Upon Senior Securities None. Item 4 -- Submission of Matters to a Vote of Security Holders None. Item 5 -- Other Information Effective June 13, 1997, David W. Fradin joined the Company as President and Chief Operating Officer. Russell Stingel, previous president was named Chairman of the Board and Chief Executive Officer. In addition, Bill Anderson was promoted to Executive Vice President and General Manager. Item 6 -- Exhibits and Reports on Form 8-K a. Exhibits None. b. Reports on Form 8-K None. Page 13 of 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IEC ELECTRONICS CORP. REGISTRANT Dated: July 23, 1997 /s/Russell E. Stingel ----------------------------- Russell E. Stingel Chief Executive Officer Dated: July 23, 1997 /s/Timothy J. Kennedy ------------------------------ Timothy J. Kennedy Vice President, Treasurer, Secretary and Chief Finanical Officer Page 14 of 14 EX-27 2
5 1 9-MOS SEP-30-1997 JUN-27-1997 2,284,187 0 32,886,805 0 40,426,451 76,223,919 36,128,170 0 125,218,600 44,031,088 5,255,636 0 0 74,763 72,566,364 125,218,600 174,422,956 174,829,306 154,723,510 8,210,134 0 0 1,170,158 7,446,326 2,838,000 4,608,326 0 0 0 4,608,326 0.61 0.61
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