-----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, G0BXPEMk+MpsGk5SXd+/JjTXvMA4QSaoCat88EPZCi2iqH6ySTOXchlkEqnJrIP/ To1pjEIvCL/Df1bd69X4rw== 0001019056-04-000987.txt : 20040729 0001019056-04-000987.hdr.sgml : 20040729 20040729144936 ACCESSION NUMBER: 0001019056-04-000987 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040625 FILED AS OF DATE: 20040729 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IEC ELECTRONICS CORP CENTRAL INDEX KEY: 0000049728 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 133458955 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06508 FILM NUMBER: 04938760 BUSINESS ADDRESS: STREET 1: 105 NORTON ST CITY: NEWARK STATE: NY ZIP: 14513 BUSINESS PHONE: 3153317742 MAIL ADDRESS: STREET 1: PO BOX 271 CITY: NEWARK STATE: NY ZIP: 14513 FORMER COMPANY: FORMER CONFORMED NAME: INTERCONTINENTAL ELECTRONICS CORP DATE OF NAME CHANGE: 19730601 10-Q 1 iec3q_04.txt FORM 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 June 25, 2004 Commission file Number 0-6508 IEC ELECTRONICS CORP. ------------------------------------------------------- (Exact name of registrant as specified in its charter.) Delaware 13-3458955 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 105 Norton Street, Newark, New York 14513 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices (Zip Code) (315) 331-7742 - -------------------------------------------------------------------------------- Registrant's telephone number, including area code: Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark whether the registrant is an accelerated filer (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 practical date: Common Stock, $0.01 Par Value - 8,155,188 shares as of July 26, 2004. Page 1 of 15 PART 1 FINANCIAL INFORMATION Page Number Item 1. Financial Statements Consolidated Balance Sheets as of: June 25, 2004 (Unaudited) and September 30, 2003............. 3 Consolidated Statements of Operations for the three months ended: June 25, 2004 (Unaudited) and June 27, 2003 (Unaudited).................................................. 4 Consolidated Statements of Operations for the nine months ended: June 25, 2004 (Unaudited) and June 27, 2003 (Unaudited) ................................................. 5 Consolidated Statements of Cash Flows for the nine months ended: June 25, 2004 (Unaudited) and June 27, 2003 (Unaudited).................................................. 6 Notes to Consolidated Financial Statements (Unaudited)....... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................... 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk...... 13 Item 4. Controls and Procedures......................................... 13 PART II OTHER INFORMATION Item 1. Legal Proceedings.............................................. 14 Item 2. Changes in Securities.......................................... 14 Item 3. Defaults Upon Senior Securities................................ 14 Item 4. Submission of Matters to a Vote of Security Holders............ 14 Item 5. Other Information.............................................. 15 Item 6. Exhibits and Reports on Form 8-K............................... 15 Signatures............................................................. 15 Page 2 of 15 Part 1. Financial Information Item 1 -- Financial Statements IEC ELECTRONICS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 25, 2004 AND SEPTEMBER 30, 2003 (in thousands)
JUNE 25, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ ASSETS (Unaudited) CURRENT ASSETS: Cash $ 176 $ 793 Accounts receivable 2,991 4,004 Inventories 3,679 1,633 Deferred income taxes 250 250 Other current assets 250 329 Current assets-discontinued operations 55 121 ------------------ ------------------ Total current assets 7,401 7,130 ------------------ ------------------ FIXED ASSETS: Land and land improvements 768 768 Building and improvements 3,994 3,995 Machinery and equipment 41,030 46,702 Furniture and fixtures 5,283 5,870 ------------------ ------------------ SUB-TOTAL GROSS PROPERTY 51,075 57,335 LESS ACCUMULATED DEPRECIATION (48,577) (54,161) ------------------ ------------------ 2,498 3,174 OTHER NON-CURRENT ASSETS 136 202 ------------------ ------------------ $ 10,035 $ 10,506 ================== ================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short term borrowings $ 1,534 $ 1,277 Accounts payable 3,779 2,740 Accrued payroll and related expenses 623 794 Other accrued expenses 686 675 Current liabilities-discontinued operations 197 216 ------------------ ------------------ Total current liabilities 6,819 5,702 ------------------ ------------------ LONG TERM VENDOR NOTES 264 456 LONG TERM BANK DEBT 408 934 ------------------ ------------------ TOTAL LIABILITIES 7,491 7,092 ------------------ ------------------ SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value, Authorized - 500,000 shares; None issued or outstanding -- -- Common stock, $.01 par value, Authorized - 50,000,000 shares; Issued - 8,143,505 and - 8,021,387 shares (net of 573 treasury shares) 70 69 Additional paid-in capital 38,498 38,479 Accumulated deficit (35,932) (35,042) Accumulated translation adjustments (92) (92) ------------------ ------------------ Total shareholders' equity 2,544 3,414 ------------------ ------------------ $ 10,035 $ 10,506 ================== ==================
The accompanying notes are an integral part of these financial statements. Page 3 of 15 IEC ELECTRONICS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 25, 2004 AND JUNE 27, 2003 (in thousands, except share and per share data) 3 MONTHS ENDED 3 MONTHS ENDED JUNE 25, 2004 JUNE 27, 2003 ------------- ------------- (Unaudited) (Unaudited) Net sales $ 6,168 $ 14,030 Cost of sales 6,362 12,222 ------------- ------------- Gross profit (194) 1,808 ------------- ------------- Selling and administrative expenses 624 788 Restructuring charge 240 -- ------------- ------------- Operating profit (loss) (1,058) 1,020 Interest and financing expense (90) (148) Forgiveness of accounts payable -- (45) Other income, net 2 26 ------------- ------------- Net income (loss) before income taxes (1,146) 853 Income taxes -- -- ------------- ------------- Net income (loss) $ (1,146) $ 853 ============= ============= Net income (loss) per common and common equivalent share: Basic $ (0.14) $ 0.11 Diluted $ (0.14) $ 0.10 Weighted average number of common and common equivalent shares outstanding: Basic 8,139,937 7,980,953 Diluted 8,139,937 8,418,332 The accompanying notes are an integral part of these financial statements. Page 4 of 15 IEC ELECTRONICS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 25, 2004 AND JUNE 27, 2003 (in thousands, except share and per share data) 9 MONTHS ENDED 9 MONTHS ENDED JUNE 25, 2004 JUNE 27, 2003 ------------- ------------- (Unaudited) (Unaudited) Net sales $ 19,985 $ 39,099 Cost of sales 18,885 35,056 ------------- ------------- Gross profit 1,100 4,043 ------------- ------------- Selling and administrative expenses 1,796 2,441 Restructuring charge / (benefit) 240 (63) ------------- ------------- Operating profit (loss) (936) 1,665 Interest and financing expense (275) (536) Forgiveness of accounts payable 9 578 Other income, net 312 131 ------------- ------------- Net income (loss) before income taxes (890) 1,838 Income taxes -- -- ------------- ------------- Net income (loss) from continuing operations (890) 1,838 Discontinued Operations: Income from operations of IEC-Mexico disposed of (net of Income taxes of $0 in 2004 and (7) in 2003) -- 184 ------------- ------------- Net income (loss) $ (890) $ 2,022 ============= ============= Net income (loss) per common and common equivalent share: Basic Continuing operations $ (0.11) $ 0.24 Discontinued operations $ 0.00 $ 0.02 Total $ (0.11) $ 0.26 Diluted Continuing operations $ (0.11) $ 0.23 Discontinued operations $ 0.00 $ 0.02 Total $ (0.11) $ 0.25 Weighted average number of common and common equivalent shares outstanding: Basic 8,094,502 7,858,203 Diluted 8,094,502 8,165,833 The accompanying notes are an integral part of these financial statements. Page 5 of 15 IEC ELECTRONICS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 25, 2004 AND JUNE 27, 2003 (in thousands)
9 MONTHS ENDED 9 MONTHS ENDED JUNE 25, 2004 JUNE 27, 2003 ------------- ------------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (890) $ 2,022 Income from discontinued operations -- (184) Depreciation 851 1,145 Gain on sale of fixed assets (293) (50) Common stock issued under directors' stock plan 12 8 Changes in operating assets and liabilities: Accounts receivable 1,012 1,198 Inventories (2,046) (93) Other current assets 79 (69) Accounts payable 1,039 (370) Accrued payroll and related expenses (171) 62 Other accrued expenses 11 (776) ------------- ------------- Net cash flows from operating activities (396) 2,893 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property 293 547 Purchases of plant, property & equipment (109) (254) Proceeds from sale of discontinued operations property -- 875 ------------- ------------- Net cash flows from investing activities 184 1,168 ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments under loan agreements (461) (6,297) Proceeds from borrowings -- 3,500 Debt issuance costs -- (263) Common stock issued under refinancing plan -- 50 Proceeds from exercise of stock options 8 -- ------------- ------------- Net cash flows from financing activities (453) (3,010) ------------- ------------- Cash from (used in) discontinued operations 48 (789) ------------- ------------- Change in cash and cash equivalents (617) 262 Effect of exchange rate changes -- (40) Cash and cash equivalents at beginning of period 793 -- ------------- ------------- Cash and cash equivalents at end of period $ 176 $ 222 ============= ============= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 275 $ 536 ============= ============= Income taxes $ -- $ -- ============= ============= Conversion of accounts payable to long-term payable $ -- $ 760 ============= ============= NON-CASH INVESTING AND FINANCING ACTIVITIES: Conversion of accounts payable to debt $ -- $ 1,187 ============= =============
The accompanying notes are an integral part of these financial statements. Page 6 of 15 IEC ELECTRONICS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 25, 2004 (1) Business and Summary of Significant Accounting Policies IEC Electronics Corp. ("IEC", "the Company") is an independent electronics manufacturing services ("EMS") provider of complex printed circuit board assemblies and electronic products and systems. The Company provides high quality electronics manufacturing services with state-of-the-art manufacturing capabilities and production capacity. Utilizing computer controlled manufacturing and test machinery and equipment, the Company provides manufacturing services employing surface mount technology ("SMT") and pin-through-hole ("PTH") interconnection technologies. As an independent full-service EMS provider, the Company offers its customers a wide range of manufacturing and management services, on either a turnkey or consignment basis, including design, prototype, material procurement and control, manufacturing and test engineering support, statistical quality assurance, complete resource management and distribution. The Company's strategy is to cultivate strong manufacturing relationships with established and emerging original equipment manufacturers ("OEMs"). Consolidation The consolidated financial statements include the accounts of IEC and its Wholly-owned subsidiary, IEC Electronicos de Mexico ("Mexico"), (collectively, "IEC"). Operations in Texas and Mexico were closed in July 2002. All significant intercompany transactions and accounts have been eliminated. Revenue Recognition The Company recognizes revenue upon shipment of product for both turnkey and consignment contracts. Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments with original maturities of three months or less. The Company's cash and cash equivalents are held and managed by institutions that follow the Company's investment policy. The fair value of the Company's financial instruments approximates carrying amounts due to the relatively short maturities and variable interest rates of the instruments, which approximate current market interest rates. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market. The major classifications of inventories are as follows at period end (in thousands): JUNE 25, 2004 September 30, 2003 ------------------ ------------------ (Unaudited) Raw materials $ 1,859 $ 1,128 Work-in-process 1,744 498 Finished goods 76 7 ------------------ ------------------ $ 3,679 $ 1,633 ================== ================== Long-Lived Assets In October 2002, the Company sold its Alabama facility for $547,000. A gain of $50,000 was recorded in other income. In February 2003, the Company sold its Texas facility for $875,000. A gain of $75,000 was recorded as part of discontinued operations. Page 7 of 15 IEC ELECTRONICS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 25, 2004 Unaudited Financial Statements The accompanying unaudited financial statements as of June 25, 2004, and for the three month and nine months ended June 25, 2004 have been prepared in accordance with generally accepted accounting principles for interim financia1 information. In the opinion of management, all adjustments considered necessary for a fair presentation, which consist solely of normal recurring adjustments, have been included. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 2003 Annual Report on Form 10-K. Earnings Per Share Net income per share is computed in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share". Basic earnings per share is calculated by dividing income available to common shareholders by the weighted-average number of shares outstanding for each period. Diluted earnings per common share is calculated by adjusting the weighted-average shares outstanding, assuming conversion of all potentially dilutive stock options. New Pronouncements In November 2002, the EITF reached a consensus on issue 00-21, "Revenue Arrangements with Multiple Deliverables" (EITF 00-21). EITF 00-21 addresses revenue recognition on arrangements encompassing multiple elements that are delivered at different points in time, defining criteria that must be met for elements to be considered to be a separate unit of accounting. If an element is determined to be a separate unit of accounting, the revenue for the element is recognized at the time of delivery. EITF 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company adopted this standard as of October 1, 2003 with no material impact on its financial position, results of operations or cash flows. (2) Financing Agreements The company's financing agreements contain various affirmative and negative covenants including, among others, limitations on the amount available under the revolving line of credit relative to the borrowing base, capital expenditures, fixed charge coverage ratios, and minimum earnings before interest, taxes, depreciation and amortization (EBITDA). IEC's lender granted the company a waiver for its failure to comply with the fixed charge coverage ratio and EBITDA covenants during the quarter ended June 25, 2004. (3) Discontinued Operations On June 18, 2002, the Company signed an Asset Purchase Agreement to sell substantially all of the assets of IEC-Mexico to Electronic Product Integration Corporation for $730,000. The Company recorded an after-tax loss on the sale of approximately $3.1 million in fiscal 2002. The reserve balance at June 25, 2004 was $197,000. On February 28, 2003, the Company sold its Edinburg, Texas facility for $875,000 and completed its restructuring initiative. The Company recorded an $184,000 restructuring benefit during Q2 2003 due to certain facility payments accrued in a prior fiscal year that will no longer be paid out. Assets and liabilities of discontinued operations consisted of the following: JUNE 25, 2004 September 30, 2003 ------------------ ------------------ (Unaudited) Current assets $ 55 $ 121 Accrued expenses 197 216 ------------------ ------------------ Net assets of discontinued operations $ (142) $ (95) ================== ================== Page 8 of 15 IEC ELECTRONICS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 25, 2004 (4) Stock Option Plans The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations in accounting for its stock option plans. Accordingly, no compensation expense has been recognized for its stock option plans. SFAS No. 123, "Accounting for Stock-Based Compensation", as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure", requires disclosure of pro forma net income per share as if the fair valued-based method had been applied in measuring compensation cost for the stock-based awards. The following table illustrates the effect on net earnings and earnings per share had the Company adopted the fair value based method of accounting for stock-based employee compensation for all periods presented.
3 MONTHS ENDED 3 MONTHS ENDED 9 MONTHS ENDED 9 MONTH ENDED JUNE 25, 2004 JUNE 27, 2003 JUNE 25, 2004 JUNE 27, 2003 (Unaudited) (Unaudited) (Unaudited) (Unaudited) ------------- ------------- ------------- ------------- Net earnings, as reported $ (1,146) $ 853 $ (890) $ 2,022 Pro forma net earnings $ (1,162) $ 695 $ (938) $ 2,143 Earnings per share: Basic - as reported $ (0.14) $ 0.11 $ (0.11) $ 0.26 Basic - pro forma $ (0.14) $ 0.09 $ (0.12) $ 0.27 Diluted - as reported $ (0.14) $ 0.10 $ (0.11) $ 0.25 Diluted - pro forma $ (0.14) $ 0.08 $ (0.12) $ 0.26
(5) Litigation Except as set forth below, there are no material legal proceedings pending to which the Company or any of its subsidiaries is a party or to which any of the Company or its subsidiaries' property is subject. To our knowledge, there are no material legal proceedings to which any director, officer or affiliate of the Company, or any beneficial owner of more than 5 percent (5%) of Common Stock, or any associate of any of the foregoing, is a party adverse to the Company or any of its subsidiaries. An action was commenced in United States District Court for the Southern Division of Texas against the Company and several other corporate defendants, on August 12,2002. Three plaintiffs alleged a "toxic tort" action against the defendants, for exposure to lead, lead dust, chemicals and other substances used in the manufacture of products by various defendants. The essence of the complaint relates to alleged "in utero" exposure to the circulatory system of their unborn children, resulting in alleged tissue toxicity through the mothers, causing damage to the central nervous system, brain and other organs of the fetus. The complaint alleges theories of negligence, gross negligence, strict liability, breach of warranty and fraud/negligent misrepresentation, and claims unspecified damages for pain and suffering, a variety of special damages, punitive damages and attorneys' fees. Royal & Sunalliance Insurance Company has agreed to provide a defense of the claims with a reservation of rights, but has expressly excluded any coverage for the claim for punitive damages. The company denied liability. The parties have arrived at a settlement, which would not materially impact the Company. The settlement is subject to court approval. A hearing is scheduled in September, 2004." On August 13, 2003 General Electric Company ("GE") commenced an action in the state of Connecticut against the Company and Vishay Intertechnology, Inc. The action alleges causes of action for breach of a manufacturing services contract, which had an initial value of $4.4 million, breach of express warranty, breach of implied warranty and a violation of the Connecticut Unfair Trade Practices Act. Vishay supplied a component that the Company used to assemble printed circuit boards for GE that GE contends failed to function properly requiring a product recall. GE claims damages "in excess of $15,000" plus interest and attorneys' fees. The Company has made a motion to dismiss the action in Connecticut for lack of jurisdiction and the motion is pending. GE has filed a motion seeking leave to file an amended complaint, which the Company has opposed. This motion is also pending. The position of the Company is that the contract with GE was substantially completed and that it has meritorious defenses and basis for a cross claim against Vishay. (6) Restructuring During May 2004, we commenced a restructuring initiative that included hiring a new Vice President of Sales and Marketing and a separation agreement for our Chief Operating Officer. The $240,000 cost associated with this initiative was charged against income during the current quarter. The accrued portion will be paid out by November, 2004. Page 9 of 15 Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations ----------------------------------------------------------- Results of Operations - Three Months Ended June 25, 2004, Compared to the Three Months Ended June 27, 2003. ----------------------------------------------------------- Net sales for the three month period ended June 25, 2004, were $6.2 million, compared to $14.0 million for the comparable period of the prior fiscal year, a decrease of 56 percent. The decrease in sales is due to a decline in orders from one of our major customers. Turnkey sales were 90 percent of net sales in the quarter as compared to 95 percent for the comparable period of the prior year. Five customers accounted for 73% of our sales for the quarter ended June 25, 2004. Gross profit was ($0.2) million or (3) percent of sales for the three month period ended June 25, 2004, versus $1.8 million or 13 percent of sales in the comparable period of the prior fiscal year. The decrease in gross profit percentage was largely due to a $394,000 bad debt provision, and extra costs required to support start up efforts for three new customers. The remainder of the decrease was due to fixed overhead costs being spread over fewer sales dollars. Selling and administrative expenses were $0.6 million for the three month period ended June 25, 2004, and $0.8 million for the comparable period of the prior fiscal year. The decrease was primarily due to lower sales commissions. Selling and administrative expenses were 10 percent of sales during the current period, compared to 6 percent of sales during the same quarter of the prior fiscal year. The percentage increase is due to fixed costs being spread over fewer sales dollars. Restructuring costs were $240,000 for the three month period ended June 25, 2004. The costs were primarily related to hiring a new Vice President of Sales and Marketing, and a separation agreement for our former Chief Operating Officer. Interest expense was $90,000 for the three month period ended June 25, 2004, down from $148,000 in the comparable period of the prior fiscal year. The decrease of 39 percent was primarily due to a reduction in debt. During the three month period ended June 27, 2003, we recorded a $45,000 charge against forgiveness of accounts payable. This was done to correct an improper estimate that was made in a prior period. We have recorded no benefit from income tax. As a result of our cumulative net losses, we have recorded a full valuation allowance against the deferred tax asset, which was generated from the net operating loss. Net loss for the three months ended June 25, 2004 was ($1.1) million versus a net income of $0.9 million in the comparable quarter of the prior fiscal year. Diluted loss per share was $0.14 as compared to diluted income per share of $0.10 in the comparable quarter of the prior fiscal year. Page 10 of 15 ----------------------------------------------------------- Results of Operations - Nine Months Ended June 25, 2004, Compared to the Nine Months Ended June 27, 2003. ----------------------------------------------------------- Net sales for the nine month period ended June 25, 2004, were $20.0 million, compared to $39.1 million for the comparable period of the prior fiscal year, a decrease of 49 percent. The decrease in sales is due to a decline in orders from one of our major customers. Turnkey sales were 91 percent of net sales in the nine months as compared to 93 percent for the comparable period of the prior year. Five customers accounted for 81% of our sales for the nine months ended June 25, 2004. Gross profit was $1.1 million or 6 percent of sales for the nine month period ended June 25, 2004, versus $4.0 million or 10 percent of sales in the comparable period of the prior fiscal year. The prior year result included a $557,000 charge to write off a promissory note from Acterna Corporation. The current year results include $380,000 of bad debt expense. The balance of the year over year decrease in gross profit percentage is due to new customer start up costs, and fixed overhead costs being spread over fewer sales dollars. Selling and administrative expenses decreased to $1.8 million for the nine month period ended June 25, 2004, from $2.4 million in the comparable period of the prior fiscal year, a decrease of 26 percent. This decrease is primarily due to lower sales commissions. As a percentage of net sales, selling and administrative expenses increased to 9 percent compared to 6 percent in the same period of the prior fiscal year. Restructuring costs were $240,000 for the nine month period ended June 25, 2004, compared to a benefit of $63,000 for the comparable period of the prior fiscal year. The current period restructuring costs were primarily related to hiring a new Vice President of Sales and Marketing, and a separation agreement for our former Chief Operating Officer. The prior year benefit was due to a reversal of excess accruals associated with the closure of our Texas operations. Interest expense decreased to $275,000 for the nine month period ended June 25, 2004, from $536,000 in the comparable period of the prior fiscal year, a decrease of 49 percent. This decrease is primarily due to a reduction in debt. During the nine month period ended June 27, 2003, we were able to negotiate a $578,000 forgiveness of accounts payable. We had other income of $312,000 for the nine months ended June 25, 2004. This income was primarily related to a gain on the sale of excess equipment. We had other income of $131,000 for the nine months ended June 27, 2003. This income was primarily related to a gain on the sale of our Alabama operation. We have recorded no benefit from income tax. As a result of our cumulative net losses, we have recorded a full valuation allowance against the deferred tax asset, which was generated from the net operating loss. Net loss for the nine months ended June 25, 2004 was ($0.9) million versus a net income of $1.8 million in the comparable period of the prior fiscal year. Diluted loss per share was $0.11 as compared to diluted income per share of $0.23 in the comparable period of the prior fiscal year. Discontinued Operations On February 28, 2003, IEC sold its Edinburg, Texas facility and completed its restructuring initiative. As a result, IEC recorded a $184,000 restructuring benefit due to certain facility payments accrued in a prior fiscal year that will no longer be paid out. Page 11 of 15 Liquidity and Capital Resources Cash decreased to $0.2 million at June 25, 2004, from $0.8 million at September 30, 2003. Availability under our line of credit was $0.8 million on June 25, 2004. As reflected in the Consolidated Statements of Cash Flows for the nine months ending June 25, 2004, net cash from operating activities was ($0.4 million) and cash from investing activities was $0.2 million. Cash was used to pay down bank debt ($0.5 million). Depreciation for the nine month periods ending June 25, 2004 and June 27, 2003 was $0.8 million and $1.1 million, respectively. Accounts receivable decreased by $1.0 million because of lower sales. Inventory increased by $2.0 million, and accounts payable increased by $1.0 million. Both changes are due to materials purchased in anticipation of fourth quarter 2004 production requirements. We currently have a $4,450,000 Senior Secured Facility (the "Facility") and a $2,200,000 Secured Term Loan (the "Term Loan"). The Facility, which matures on January 14, 2006, bears interest at the rate of prime plus 2%. It involves a revolving line of credit for up to $3,850,000 based upon advances on eligible accounts receivable and inventory and a term loan of $600,000, secured by machinery and equipment, to be amortized over a 36 month period. The Term Loan is secured by a general security agreement, and indirectly by the assignment of a certain promissory note and a first mortgage on the IEC plant in Newark, New York. It is payable with interest at prime plus 1.5% in monthly installments over a period of 3 years, maturing on January 14, 2006. $599,000, $317,000, and $792,000 were outstanding at June 25, 2004 under the revolving line of credit with Keltic, the term loan with Keltic and the SunTrust loan, respectively. The financing agreements contain various affirmative and negative covenants including, among others, limitations on the amount available under the revolving line of credit relative to the borrowing base, capital expenditures, fixed charge coverage ratios, and minimum earnings before interest, taxes, depreciation and amortization (EBITDA). Our lender has granted us a waiver for our failure to comply with the fixed charge coverage ratio and EBITDA covenants during the quarter ended June 25, 2004. Application of Critical Accounting Policies Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. Critical accounting policies for us include revenue recognition, impairment of long-lived assets, accounting for legal contingencies and accounting for income taxes. We recognize revenue in accordance with Staff Accounting Bulletin No.101, "Revenue Recognition in Financial Statements." Sales are recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances and other adjustments are provided for in the same period the related sales are recorded. We evaluate our long-lived assets for financial impairment on a regular basis in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." We evaluate the recoverability of long-lived assets not held for sale by measuring the carrying amount of the assets against the estimated discounted future cash flows associated with them. At the time such evaluations indicate that the future discounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values. We are subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty. Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies", requires that an estimated loss from a loss contingency should be accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Page 12 of 15 Disclosure of a contingency is required if there is at least a reasonable possibility that a loss has been incurred. We evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our financial position or our results of operations. Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," establishes financial accounting and reporting standards for the effect of income taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity's financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could materially impact our financial position or our results of operations Impact of Inflation The impact of inflation on our operations has been minimal due to the fact that we are able to adjust our bids to reflect any inflationary increases in costs. New Pronouncements In November 2002, the EITF reached a consensus on issue 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF 00-21"). EITF 00-21 addresses revenue recognition on arrangements encompassing multiple elements that are delivered at different points in time, defining criteria that must be met for elements to be considered to be a separate unit of accounting. If an element is determined to be a separate unit of accounting, the revenue for the element is recognized at the time of delivery. EITF 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. We adopted this standard on October 1, 2003 with no impact on our financial position, results of operations or cash flow. Item 3 -- Quantitative and Qualitative Disclosures About Market Risk Quantitative and Qualitative Disclosures about Market Risk represents the risk of loss that may impact the consolidated financial position, results of operations or cash flows of IEC due to adverse changes in financial rates. We are exposed to market risk in the area of interest rates. One exposure is directly related to our Term Loan and Revolving Credit borrowings under the Credit Agreement, due to their variable interest rate pricing. Management believes that interest rate fluctuations will not have a material impact on IEC's results of operations. Item 4 -- Controls and Procedures An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q as required by Rule 13a-15 under the Securities Exchange Act of 1934 (the "Exchange Act"). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by the Quarterly Report on 10-Q to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC rules and forms. In connection with the evaluation described above, our management, including our Chief Executive Officer and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during our fiscal quarter ended June 25, 2004, and that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. Page 13 of 15 Forward-looking Statements Forward-looking statements in this Form 10-Q include, without limitation, statements relating to the Company's plans, future prospects, strategies, objectives, expectations, intentions and adequacy of resources and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may be identified by their use of words like "plans", "expects", "aims", "believes", "projects", "anticipates", "intends", "estimates", "will", "should", "could", and other expressions that indicate future events and trends. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievement of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, among others, the following: general economic and business conditions, the timing of orders and shipments, availability of material, product mix, changes in customer requirements and in the volume of sales to principal customers, competition and technological change, the ability of the Company to control manufacturing and operating costs, and satisfactory relationships with vendors. The Company's actual results of operations may differ significantly from those contemplated by such forward-looking statements as a result of these and other factors, including factors set forth in the Company's Annual Report on Form 10-K for the year ended September 30, 2003 and in other filings with the Securities and Exchange Commission. PART II. OTHER INFORMATION Item 1 -- Legal Proceedings The descriptions of our legal proceedings set forth in Item 3 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2003, and in note (4) to the notes to the consolidated financial statements contained herein, are incorporated herein by reference. Item 2 -- Changes in Securities None. Item 3 -- Defaults Upon Senior Securities None. Item 4 -- Submission of Matters to a Vote of Security Holders None Page 14 of 15 Item 5 -- Other Information None. Item 6 -- Exhibits and Reports on Form 8-K a. Exhibits The following documents are filed as exhibits to this Report: 10.1 Waiver, dated as of June 25, 2004, to the Revolving Loan Agreement, dated January 14, 2003, by and between Keltic Financial Partners, LP and IEC Electronics Corp. 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Principal 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 b. Reports on Form 8-K (i) A current report on Form 8-K was filed with the Securities and Exchange Commission on April 23, 2004. The report announced earnings for the three and six month periods ended March 26, 2004 and a press release relating to the earnings was attached thereto. (ii) A current report on Form 8-K was filed with the Securities and Exchange Commission on May 7, 2004 to announce the appointment of a new Vice-President of Sales and Marketing and the retirement of the Chief Operating Officer. 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 29, 2004 /s/ W. BARRY GILBERT -------------------------------------- W. Barry Gilbert Chairman and Chief Executive Officer Dated: July 29, 2004 /s/ BRIAN H. DAVIS -------------------------------------- Brian H. Davis Chief Financial Officer and Controller Page 15 of 15 EX-10.1 2 ex10_1.txt EXHIBIT 10.1 Exhibit 10.1 WAIVER TO THE REVOLVING LOAN AGREEMENT WAIVER, dated as of June 25, 2004 (this "Waiver"), to the Loan Agreement, dated January 14, 2003, as previously amended modified or otherwise supplemented (the "Loan Agreement") by and between KELTIC FINANCIAL PARTNERS, LP, a Delaware limited partnership ("Lender"), and IEC ELECTRONICS CORP. ("Borrower"), a corporation organized and existing pursuant to the laws of the state of Delaware. The above referenced documents and all other agreements, instruments, certificates and documents pursuant to or incident thereto or in connection therewith are herein referred to as the "Loan Documents". W I T N E S S E T H : - - - - - - - - - - - WHEREAS, Lender and Borrower are parties to the Loan Agreement and the related Loan Documents; and WHEREAS, Borrower will be in Default of Sections 9.19 and 9.21 of the Loan Agreement for the period ended June 25, 2004, and has requested Lender to waive such Defaults; and WHEREAS, Lender has agreed to grant Borrower a waiver of the above referenced Defaults, but only subject to the terms and conditions contained herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties to this Waiver hereby agree as follows: 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement. 2. Waiver. Subject to the terms, conditions, representations and warranties contained herein, Lender hereby agrees to waive the Default of Sections 9.19 and 9.21 of the Loan Agreement for the period ended June 25, 2004. 3. Representations and Warranties. To induce Lender to enter into this Waiver, Borrower hereby represents, warrants and acknowledges that: A. The execution, delivery and performance by Borrower of this Waiver and the continued performance of the Loan Agreement: i) are within its powers; ii) have been duly authorized by all necessary corporate action; and iii) are not in contravention of any provision of its certificate of formation, articles of incorporation or other organizational documents. B. Except as expressly waived hereby, no Defaults or Events of Default have occurred and are continuing as of the date hereof. C. This Waiver has been duly executed and delivered by or on behalf of Borrower by an authorized signator. D. The Loan Agreement, as may be amended hereby, constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditor's rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). E. All Obligations outstanding under the Loan Agreement are duly payable in accordance with the terms of the Loan Agreement without any defense, offset, counterclaim or recoupment whatsoever. F. The representations and warranties of Borrower contained in the Loan Agreement and each other Loan Document shall be true and correct on and as of the date first written above with the same effect as if such representations and warranties had been made on and as of such date, except that any such representation and warranty which is expressly made only as of a specified date need only be true as of such date. 4. Conditions Precedent. The obligations of Lender under this Waiver are subject to and conditioned upon each of the following conditions precedent: (a) Execution of this Waiver by an authorized officer(s) of Borrower. (b) Receipt of legal documentation expenses in the amount of $500.00. Borrower authorizes and directs Lender to charge such amount to the Revolving Loan. 5. No Other Consents/Waivers.Except as otherwise provided for herein, the Loan Agreement shall be unmodified and shall continue in full force and effect in accordance with its terms, and except as expressly provided for herein, this Waiver shall not be deemed to be a waiver of, or consent under, any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 6. Non-Waiver. Except as otherwise provided for herein, Lender's agreement to enter into this Waiver is not and shall not be construed as a waiver of any current or future default under the Revolving Note, the Term Note, the Loan Agreement or any other Loan Document, nor shall it preclude Lender from proceeding against Borrower on any such default other than those expressly waived herein. This Waiver is also not a relinquishment of any rights or 2 remedies Lender may have in connection with the Revolving Note, the Term Note, the Loan Agreement or any other Loan Document except with respect to any Defaults or Events of Default expressly waived herein. 7. Waiver of Rights. By its execution of this Waiver, Borrower expressly waives any and all rights to assert a claim, counterclaim or defense which now exists against Lender arising out of or in any way connected with the Loan Agreement, the Revolving Note, the Term Note, or any other Loan Document or in any other transaction between Lender and Borrower. The foregoing waiver shall apply to any action instituted by any of the undersigned and to any action or proceeding brought against any of the undersigned by Lender. 8. Acknowledgement of Debt. By execution of this Waiver, Borrower acknowledges that there is due and owing as of June 25, 2004 the principal sum of $915,529.67, which sums are not subject to any defense, counterclaim or set-off. 9. Further Discussions. Borrower acknowledges that discussions may take place between itself and Lender after the date hereof concerning additional modifications of the Revolving Note,the Term Note, the Loan Agreement and the Loan Documents. Lender in its sole and absolute discretion may terminate any such discussions at any time and for any reason or no reason and Lender shall have no liability for failing to engage in or terminating any such discussions. While the parties hereto may reach preliminary agreement as to any additional modifications of one or more provisions of the Loan Agreement, the Revolving Note, the Term Note and/or the Loan Documents, none of the undersigned shall be bound by any such agreement on any individual point until agreement is reached on every issue and the agreement on all such issues has been reduced to a written agreement signed by Lender and Borrower. Further, the Loan Agreement may only be amended by a written agreement executed by Borrower and Lender and no negotiations or other actions undertaken by Lender shall constitute a waiver of Lender's rights under this agreement, the Loan Agreement, the Revolving Note, the Term Note or other Loan Documents except to the extent specifically set forth in a written agreement complying with the provisions of this paragraph. 10. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT OF LAW PRINCIPLES. 11. WAIVER OF JURY TRIAL. BORROWER AND LENDER ACKNOWLEDGE AND AGREE THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY BORROWER OR LENDER ON OR WITH RESPECT TO ANY LOANS, THE OBLIGATIONS OR THE RELEVANT DOCUMENTS OR THE DEALINGS OF THE PARTIES WITH RESPECT HERETO OR THERETO SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY AND EACH PARTY HEREBY WAIVES THE RIGHT TO TRIAL BY JURY. 3 12. Counterparts. This Waiver may be executed by the parties hereto on any number of separate counterparts and all said counterparts, when taken together, shall be deemed to constitute one and the same original instrument. IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly executed and delivered as of the day and year first written above. KELTIC FINANCIAL PARTNERS, LP By its General Partner, Keltic Financial Services LLC /s/ JOHN P. REILLY ------------------------------------ By: John P. Reilly Title: Managing Partner IEC ELECTRONICS CORP. ------------------------------------ By: Title: 4 EX-31.1 3 ex31_1.txt EXHIBIT 31.1 Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, W. Barry Gilbert, certify that: 1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended June 25, 2004 of IEC Electronics Corp.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements and other financial information included in this quarterly report fairly 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 quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15 d-15(e) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls 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 quarterly report is being prepared; b) 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, c) 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 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 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 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: July 29, 2004 /s/ W. BARRY GILBERT -------------------------------- W. Barry Gilbert Chairman and Chief Executive Officer Page 1 of 1 EX-31.2 4 ex31_2.txt EXHIBIT 31.2 Exhibit 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Brian H. Davis, certify that: 1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended June 25, 2004 of IEC Electronics Corp.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements and other financial information included in this quarterly report fairly 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 quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15 d-15(e) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls 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 quarterly report is being prepared; b) 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, c) 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 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 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 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: July 29, 2004 /s/ Brian H. Davis ------------------------------- Brian H. Davis Vice President, Chief Financial Officer, and Controller Page 1 of 1 EX-32.1 5 ex32_1.txt EXHIBIT 32.1 Exhibit 32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. In connection with the quarterly report of IEC Electronics Corp., (the "Company") on Form 10-Q for the quarterly period ended June 25, 2004 as filed with Securities and Exchange Commission on the date hereof (the "Report"), we, W. Barry Gilbert, Chief Executive Officer of the Company and Brian H. Davis, 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 requirement of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2.) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: July 29, 2004 /s/ W. BARRY GILBERT ---------------------------------- W. Barry Gilbert Chairman and Chief Executive Officer Dated: July 29, 2004 /s/ BRIAN H. DAVIS ---------------------------------- Brian H. Davis Vice President, Chief Financial Officer and Controller -----END PRIVACY-ENHANCED MESSAGE-----