Delaware
|
13-3458955
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Large accelerated filer ¨
|
Accelerated filer ¨
|
Non-Accelerated filer ¨
|
Smaller Reporting Company x
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Page
|
||
Number
|
||
Item 1.
|
Financial Statements
|
|
Consolidated Balance Sheets as of July 1, 2011 (Unaudited) and September 30, 2010
|
3
|
|
Consolidated Income Statements for the three-month and nine-month periods ended July 1, 2011 and June 25, 2010 (Unaudited)
|
4
|
|
Consolidated Statements of Changes in Shareholders' Equity for the nine-month periods ended July 1, 2011 and June 25, 2010 (Unaudited)
|
5
|
|
Consolidated Statements of Cash Flows for the nine-month periods ended July 1, 2011 and June 25, 2010 (Unaudited)
|
6
|
|
Notes to Consolidated Financial Statements (Unaudited)
|
7
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
27
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
30
|
Item 4.
|
Controls and Procedures
|
30
|
PART II - OTHER INFORMATION
|
||
Item 1.
|
Legal Proceedings
|
32
|
Item 1A.
|
Risk Factors
|
32
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
32
|
Item 3.
|
Defaults Upon Senior Securities
|
32
|
Item 4.
|
(Removed and Reserved)
|
32
|
Item 5.
|
Other Information
|
32
|
Item 6.
|
Exhibits
|
32
|
Signatures
|
33
|
July 1,
|
September 30,
|
|||||||
2011
|
2010
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash (see Accounting Policies note)
|
$ | - | $ | - | ||||
Accounts receivable, net of allowance
|
20,303 | 16,315 | ||||||
Inventories (see Inventories note)
|
17,481 | 12,068 | ||||||
Deferred income taxes
|
3,940 | 3,359 | ||||||
Other current assets
|
356 | 234 | ||||||
Total current assets
|
42,080 | 31,976 | ||||||
Fixed assets, net of accumulated depreciation (see Fixed Assets note)
|
18,195 | 13,098 | ||||||
Intangible assets, net of accumulated amortization (see Intangibles note)
|
6,077 | 331 | ||||||
Goodwill
|
13,810 | 58 | ||||||
Deferred income taxes (see Income Taxes note)
|
7,430 | 10,113 | ||||||
Other assets
|
192 | 106 | ||||||
Total assets
|
$ | 87,784 | $ | 55,682 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term debt
|
$ | 6,939 | $ | 2,899 | ||||
Accounts payable
|
7,766 | 8,145 | ||||||
Accrued payroll and related expenses
|
2,212 | 2,279 | ||||||
Other accrued expenses
|
1,155 | 941 | ||||||
Customer deposits
|
406 | - | ||||||
Total current liabilities
|
18,478 | 14,264 | ||||||
Long-term debt (see Credit Facilities note)
|
38,438 | 15,999 | ||||||
Total liabilities
|
56,916 | 30,263 | ||||||
SHAREHOLDERS' EQUITY
|
||||||||
Preferred stock, $.01 par value: 500,000 shares authorized; none issued or outstanding
|
- | - | ||||||
Common stock, $.01 par value: 50,000,000 shares authorized; 10,811,188 and 10,100,589 shares issued, respectively
|
108 | 101 | ||||||
Additional paid-in capital
|
42,473 | 41,138 | ||||||
Accumulated deficit
|
(10,278 | ) | (14,407 | ) | ||||
Treasury stock, at cost: 1,015,458 and 1,012,873 shares, respectively
|
(1,435 | ) | (1,413 | ) | ||||
Total shareholders' equity
|
30,868 | 25,419 | ||||||
Total liabilities and shareholders' equity
|
$ | 87,784 | $ | 55,682 |
Three months ended
|
Nine months ended
|
|||||||||||||||
July 1,
|
June 25,
|
July 1,
|
June 25,
|
|||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Net sales
|
$ | 34,626 | $ | 26,095 | $ | 98,355 | $ | 69,387 | ||||||||
Cost of sales
|
28,470 | 21,439 | 80,672 | 57,900 | ||||||||||||
Gross profit
|
6,156 | 4,656 | 17,683 | 11,487 | ||||||||||||
Selling and administrative expenses
|
3,533 | 2,388 | 9,774 | 5,922 | ||||||||||||
Operating profit
|
2,623 | 2,268 | 7,909 | 5,565 | ||||||||||||
Interest and financing expense
|
491 | 238 | 1,214 | 594 | ||||||||||||
Other (income)/expense
|
4 | 17 | 134 | 205 | ||||||||||||
Income before provision for income taxes
|
2,128 | 2,013 | 6,561 | 4,766 | ||||||||||||
Provision for income taxes
|
795 | 775 | 2,432 | 1,739 | ||||||||||||
Net income
|
$ | 1,333 | $ | 1,238 | $ | 4,129 | $ | 3,027 | ||||||||
Net income per common and common equivalent share:
|
||||||||||||||||
Basic
|
$ | 0.14 | $ | 0.14 | $ | 0.43 | $ | 0.34 | ||||||||
Diluted
|
0.13 | 0.13 | 0.42 | 0.32 | ||||||||||||
Weighted average number of common and common equivalent shares outstanding:
|
||||||||||||||||
Basic
|
9,776,888 | 9,055,280 | 9,524,874 | 8,955,212 | ||||||||||||
Diluted
|
10,021,932 | 9,629,326 | 9,932,446 | 9,606,748 |
Common
|
Additional
|
Retained
|
Treasury
|
Total
|
||||||||||||||||
Stock,
|
Paid-In
|
Earnings
|
Stock,
|
Shareholders'
|
||||||||||||||||
par $.01
|
Capital
|
(Deficit)
|
at cost
|
Equity
|
||||||||||||||||
Balances, September 30, 2009
|
$ | 97 | $ | 40,632 | $ | (19,062 | ) | $ | (1,413 | ) | $ | 20,254 | ||||||||
Stock compensation accruals
|
183 | 183 | ||||||||||||||||||
Directors' fees paid in stock
|
21 | 21 | ||||||||||||||||||
Restricted (non-vested) stock grants
|
1 | 1 | ||||||||||||||||||
Exercise of stock options
|
3 | 183 | 186 | |||||||||||||||||
Employee stock plan purchases
|
8 | 8 | ||||||||||||||||||
Net income
|
3,027 | 3,027 | ||||||||||||||||||
Balances, June 25, 2010
|
$ | 101 | $ | 41,027 | $ | (16,035 | ) | $ | (1,413 | ) | $ | 23,680 | ||||||||
Balances, September 30, 2010
|
$ | 101 | $ | 41,138 | $ | (14,407 | ) | $ | (1,413 | ) | $ | 25,419 | ||||||||
Stock compensation accruals
|
345 | 345 | ||||||||||||||||||
Directors' fees paid in stock
|
26 | 26 | ||||||||||||||||||
Restricted (non-vested) stock grants
|
2 | 2 | ||||||||||||||||||
Exercise of stock options
|
4 | 333 | (22 | ) | 315 | |||||||||||||||
Shares issued in SCB acquisition
|
1 | 608 | 609 | |||||||||||||||||
Employee stock plan purchases
|
23 | 23 | ||||||||||||||||||
Net income
|
4,129 | 4,129 | ||||||||||||||||||
Balances, July 1, 2011
|
$ | 108 | $ | 42,473 | $ | (10,278 | ) | $ | (1,435 | ) | $ | 30,868 |
Nine months ended
|
||||||||
July 1,
|
June 25,
|
|||||||
2011
|
2010
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income
|
$ | 4,129 | $ | 3,027 | ||||
Non-cash adjustments:
|
||||||||
Stock-based compensation
|
345 | 183 | ||||||
Depreciation and amortization
|
2,188 | 725 | ||||||
Directors' fees paid in stock
|
26 | 21 | ||||||
(Gain)/loss on sale of fixed assets
|
2 | (10 | ) | |||||
Gain on corporate acquisition
|
(170 | ) | - | |||||
Deferred tax expense
|
2,180 | 1,553 | ||||||
Changes in current assets and liabilities:
|
||||||||
Accounts receivable
|
(2,412 | ) | (1,771 | ) | ||||
Inventories
|
(2,517 | ) | 654 | |||||
Other current assets
|
(93 | ) | (94 | ) | ||||
Accounts payable
|
(939 | ) | 1,201 | |||||
Accrued expenses
|
18 | (81 | ) | |||||
Customer deposits
|
406 | (75 | ) | |||||
Net cash flows from operating activities
|
3,163 | 5,333 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases of fixed assets
|
(4,244 | ) | (1,004 | ) | ||||
Proceeds from (net cost of) disposal of fixed assets
|
(2 | ) | 10 | |||||
Acquisition of SCB, cash portion (see Acquisitions note)
|
(25,782 | ) | - | |||||
Acquisition of Albuquerque (see Acquisitions note)
|
170 | (15,111 | )(a) | |||||
Net cash flows from investing activities
|
(29,858 | ) | (16,105 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Increase in borrowings under revolving line
|
10,374 | (b) | 4,127 | (c) | ||||
Borrowings under other loan agreements
|
20,840 | 9,316 | ||||||
Repayments under loan agreements and notes
|
(4,735 | ) | (1,518 | ) | ||||
Proceeds from exercise of stock options
|
317 | 187 | ||||||
Proceeds from shares issued through employee purchase plan
|
23 | 8 | ||||||
Financing costs capitalized
|
(124 | ) | (74 | ) | ||||
Net cash flows from financing activities
|
26,695 | 12,046 | ||||||
Net cash flows for the period
|
0 | 1,274 | ||||||
Cash and cash equivalents, beginning of period
|
0 | 0 | ||||||
Cash and cash equivalents, end of period
|
$ | 0 | $ | 1,274 | ||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
$ | 1,200 | $ | 543 | ||||
Income taxes
|
216 | 116 | ||||||
Supplemental disclosure of non-cash adjustments:
|
||||||||
100,000 common shares issued in SCB acquisition
|
$ | 609 | $ | - | ||||
Stock options exercised by delivering common shares
|
22 | - |
|
§
|
A world class Technology Center that combines dedicated prototype manufacturing with an on-site Materials Analysis Lab, enabling the seamless transition of complex electronics from design to production.
|
|
§
|
In-house, custom, functional testing and troubleshooting of complex system-level assemblies, in support of end-order fulfillment.
|
|
§
|
Build-to-print precision sheet metal and complex wire harness assemblies supporting just-in-time delivery of critical end-market, system-level electronics.
|
|
§
|
A Lean/Six Sigma continuous improvement program supported by a team of Six Sigma Blackbelts delivering best-in-class results.
|
|
§
|
Proprietary software-driven Web Portal providing customers real-time access to a wide array of operational data.
|
Estimated
|
||
PP&E Lives
|
Useful Lives
|
|
(years)
|
||
Land improvements
|
10
|
|
Buildings and improvements
|
5 to 40
|
|
Machinery and equipment
|
3 to 5
|
|
Furniture and fixtures
|
3 to 7
|
Three months ended
|
Nine months ended
|
|||||||||||||||
July 1,
|
June 25,
|
July 1,
|
June 25,
|
|||||||||||||
Shares for EPS Calculation
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Weighted avg. shares outstanding
|
9,776,888 | 9,055,280 | 9,524,874 | 8,955,212 | ||||||||||||
Incremental shares from assumed exercise of stock options
|
245,044 | 574,046 | 407,572 | 651,536 | ||||||||||||
Diluted shares
|
10,021,932 | 9,629,326 | 9,932,446 | 9,606,748 | ||||||||||||
Options excluded from diluted shares due to exercise price being higher than average market price
|
10,000 | 30,000 | 10,000 | 30,000 |
As of December 17, 2010
|
||||||||
for 7/1/11
|
from 4/1/11
|
|||||||
SCB Opening Balance Sheet
|
Form 10-Q
|
Form 10-Q
|
||||||
(thousands, except shares)
|
||||||||
Accounts receivable, net
|
$ | 1,576 | $ | 1,620 | ||||
Inventories
|
2,896 | 2,790 | ||||||
Leasehold improvements
|
1,169 | 1,169 | ||||||
Machinery & equipment
|
1,344 | 3,177 | ||||||
Furniture & fixtures
|
236 | 236 | ||||||
Intangible assets
|
6,000 | 5,156 | ||||||
Goodwill
|
13,708 | 12,950 | ||||||
Deferred income taxes
|
122 | 106 | ||||||
Other assets
|
29 | - | ||||||
Total assets acquired
|
27,080 | 27,204 | ||||||
Accounts payable
|
$ | 560 | $ | 503 | ||||
Accruals and other liabilities
|
129 | 62 | ||||||
Total liabilities assumed
|
689 | 565 | ||||||
Net assets acquired/purchase price
|
$ | 26,391 | $ | 26,639 | ||||
Funded with bank debt
|
$ | 25,782 | $ | 26,030 | ||||
Funded with 100,000 shares of IEC common stock
|
609 | 609 | ||||||
Total funding for SCB acquisition
|
$ | 26,391 | $ | 26,639 |
Celmet Division Opening Balance Sheet
|
July 30, 2010
|
|||
(thousands)
|
||||
Accounts receivable, net
|
$ | 577 | ||
Inventories
|
364 | |||
Other current assets
|
23 | |||
Equipment
|
1,058 | |||
Goodwill
|
101 | |||
Deferred income taxes
|
19 | |||
Total assets acquired
|
2,142 | |||
Accounts payable
|
$ | 214 | ||
Accruals and other liabilities
|
30 | |||
Total liabilities assumed
|
244 | |||
Net assets acquired/purchase price
|
$ | 1,898 | ||
(Purchase price was funded with bank debt.)
|
As of December 16, 2009
|
||||||||
Final
|
Preliminary
|
|||||||
Albuquerque Opening Balance Sheet
|
December 2010
|
December 2009
|
||||||
(thousands)
|
||||||||
Accounts receivable, net
|
$ | 3,931 | $ | 3,945 | ||||
Inventories
|
4,275 | 4,444 | ||||||
Other current assets
|
69 | 69 | ||||||
Land
|
813 | 813 | ||||||
Building
|
5,074 | 5,087 | ||||||
Equipment
|
2,761 | 2,761 | ||||||
Intangible asset
|
360 | 360 | ||||||
Deferred income taxes
|
485 | - | ||||||
Total assets acquired
|
17,768 | 17,479 | ||||||
Accounts payable
|
$ | 1,128 | $ | 1,111 | ||||
Accruals and other liabilities
|
1,191 | 1,157 | ||||||
Gain on acquisition
|
588 | - | ||||||
Long-term debt
|
100 | 100 | ||||||
Total liabilities assumed
|
3,007 | 2,368 | ||||||
Net assets acquired/purchase price
|
$ | 14,761 | $ | 15,111 | ||||
(Purchase price was funded with bank debt.)
|
Nine months ended | ||||||||
Operating Results of Acquired Businesses
|
July 1,
|
June 25,
|
||||||
and IEC Pro Forma Results
|
2011
|
2010
|
||||||
(in thousands, except share and per share data)
|
(Unaudited) | |||||||
SCB results in 2011 and Albuquerque results in 2010 from respective dates of acquisition
|
||||||||
Net sales
|
$ | 8,332 | $ | 12,098 | ||||
Income before income taxes
|
1,126 | 2,073 | ||||||
Net income
|
676 | 1,316 | ||||||
IEC pro forma results as if SCB, Celmet and Albuquerque were acquired in the year prior to the year of acquisition
|
||||||||
Net sales
|
$ | 102,286 | $ | 90,518 | ||||
Income before income taxes
|
7,165 | 6,696 | ||||||
Net income
|
4,491 | 4,178 | ||||||
Earnings per share:
|
||||||||
Basic
|
$ | 0.47 | $ | 0.46 | ||||
Diluted
|
0.45 | 0.43 | ||||||
Weighted average common and common equivalent shares:
|
||||||||
Basic
|
9,552,976 | 9,055,212 | ||||||
Diluted
|
9,960,548 | 9,706,748 |
Nine months ended
|
||||||||
Adjustments Used in Arriving at
|
July 1,
|
June 25,
|
||||||
Pro Forma Results in Table Above
|
2011
|
2010
|
||||||
(in thousands, except share data)
|
(Unaudited)
|
|||||||
Increase (decrease)
|
||||||||
Sales
|
||||||||
Eliminate sales to former affiliate
|
$ | - | $ | (73 | ) | |||
Cost of sales
|
||||||||
Eliminate cost of sales to former affiliate
|
$ | - | $ | (104 | ) | |||
Depreciation expense
|
65 | 459 | ||||||
Other
|
- | (46 | ) | |||||
Total cost-of-sales adjustments
|
$ | 65 | $ | 309 | ||||
Selling and administrative expenses
|
||||||||
Compensation
|
$ | (458 | ) | $ | (1,572 | ) | ||
Sales/marketing expenses
|
(248 | ) | (582 | ) | ||||
Insurance premiums
|
(62 | ) | (234 | ) | ||||
Legal and accounting expenses
|
(154 | ) | (430 | ) | ||||
Amortization of intangibles
|
87 | 310 | ||||||
Other
|
(165 | ) | (497 | ) | ||||
Total selling and administrative expense adjustments
|
$ | (1,000 | ) | $ | (3,005 | ) | ||
Interest expense
|
||||||||
Interest on acquisition debt
|
$ | 203 | $ | 930 | ||||
Other
|
(1 | ) | (24 | ) | ||||
Total interest expense adjustments
|
$ | 202 | $ | 906 | ||||
Other (income) expense
|
||||||||
Costs of integrating acquirees' information systems
|
$ | - | $ | 150 | ||||
Other
|
(109 | ) | 40 | |||||
Total other (income) expense adjustments
|
$ | (109 | ) | $ | 190 | |||
Weighted average common shares outstanding
|
||||||||
Shares of IEC common stock issued to acquire SCB
|
100,000 | |||||||
Weighted shares relating to pre-acquisition period
|
28,102 |
Nine months ended
|
||||||||
July 1,
|
June 25,
|
|||||||
Allowance for Doubtful Accounts
|
2011
|
2010
|
||||||
(thousands)
|
||||||||
Allowance, beginning of period
|
$ | 250 | $ | 85 | ||||
Allowances of acquired companies
|
25 | - | ||||||
Provision for doubtful accounts
|
41 | 51 | ||||||
Write-offs
|
(15 | ) | (6 | ) | ||||
Recoveries
|
1 | - | ||||||
Allowance, end of period
|
$ | 302 | $ | 130 |
July 1,
|
September 30,
|
|||||||
Inventories
|
2011
|
2010
|
||||||
(thousands)
|
||||||||
Raw materials
|
$ | 10,225 | $ | 7,993 | ||||
Work-in-process
|
7,354 | 3,974 | ||||||
Finished goods
|
1,164 | 1,012 | ||||||
Total inventories
|
18,743 | 12,979 | ||||||
Reserve for excess/obsolete inventory
|
(1,262 | ) | (911 | ) | ||||
Inventories, net
|
$ | 17,481 | $ | 12,068 |
July 1,
|
September 30,
|
|||||||
Fixed Assets
|
2011
|
2010
|
||||||
(thousands)
|
||||||||
Land and improvements
|
$ | 1,556 | $ | 1,556 | ||||
Buildings and improvements
|
9,790 | 9,581 | ||||||
Leasehold improvements
|
1,182 | - | ||||||
Machinery and equipment
|
20,512 | 15,434 | ||||||
Furniture and fixtures
|
5,337 | 4,833 | ||||||
Total fixed assets, at cost
|
38,377 | 31,404 | ||||||
Accumulated depreciation
|
(20,182 | ) | (18,306 | ) | ||||
Net fixed assets
|
$ | 18,195 | $ | 13,098 |
July 1,
|
September 30,
|
|||||||
Intangible Assets
|
2011
|
2010
|
||||||
(thousands)
|
||||||||
Customer relationships
|
$ | 5,900 | $ | - | ||||
Property tax abatement
|
360 | 360 | ||||||
Non-compete agreement
|
100 | - | ||||||
Total intangibles, at cost
|
6,360 | 360 | ||||||
Accumulated amortization
|
(283 | ) | (29 | ) | ||||
Net intangible assets
|
$ | 6,077 | $ | 331 | ||||
Nine months ended
|
||||||||
July 1,
|
June 25,
|
|||||||
Amortization Expense
|
2011 | 2010 | ||||||
(thousands)
|
||||||||
Amortization expense, relating to intangibles
|
$ | 254 | $ | 20 |
Estimated
|
||||
future
|
||||
Future Amortization
|
amortization
|
|||
(thousands)
|
||||
Three months ending September 30,
|
||||
2011
|
$ | 113 | ||
Years ending September 30,
|
||||
2012
|
$ | 452 | ||
2013
|
452 | |||
2014
|
452 | |||
2015
|
452 | |||
2016
|
437 |
Fixed/
|
Balances
|
|||||||||||||||||||
Variable
|
Interest Rate
|
July 1,
|
September 30,
|
|||||||||||||||||
Debt
|
Rate
|
Maturity
|
7/1/11
|
9/30/10
|
2011
|
2010
|
||||||||||||||
(percents)
|
(thousands)
|
|||||||||||||||||||
M&T borrowings
|
||||||||||||||||||||
Revolving credit facility
|
v |
12/17/13
|
3.46 | 3.50 | $ | 16,197 | $ | 5,823 | ||||||||||||
SCB term loan
|
v |
12/17/15
|
3.69 | - | 17,666 | - | ||||||||||||||
Abq term loan
|
v |
12/16/14
|
3.69 | 3.75 | 3,578 | 4,250 | ||||||||||||||
Abq mortgage loan
|
v |
12/16/14
|
3.69 | 3.75 | 3,417 | 3,800 | ||||||||||||||
Celmet term loan
|
v |
07/30/15
|
3.69 | 3.75 | 1,633 | 1,933 | ||||||||||||||
Equipment loans (2), variable
|
v |
12/17/13
|
3.69 | 3.75 | 991 | 273 | ||||||||||||||
Equipment loans (3), fixed
|
f |
11/01/12
|
3.05 | 3.07 | 349 | 521 | ||||||||||||||
Term loan
|
f |
01/01/12
|
6.70 | 6.70 | 152 | 435 | ||||||||||||||
Energy loan
|
f |
04/02/13
|
2.08 | 2.08 | 71 | 105 | ||||||||||||||
Other borrowings
|
||||||||||||||||||||
Seller notes, Wire & Cable
|
f |
06/01/13
|
4.00 | 4.00 | 1,223 | 1,658 | ||||||||||||||
Abq industrial revenue bond
|
f |
03/01/19
|
5.63 | 5.63 | 100 | 100 | ||||||||||||||
Total debt
|
45,377 | 18,898 | ||||||||||||||||||
Less: current portion
|
(6,939 | ) | (2,899 | ) | ||||||||||||||||
Long-term debt
|
$ | 38,438 | $ | 15,999 |
Actual at
|
||||||
Debt Covenant
|
Limit
|
July 1, 2011
|
||||
Quarterly EBITDARS (000's)
|
Must be above $1,500
|
$ 3,721 | ||||
Total debt to EBITDARS
|
Must be below 3.50x
|
2.71x | ||||
Fixed charge coverage ratio (a)
|
Must be above 1.25x
|
2.19x |
Contractual
|
||||
principal
|
||||
Debt Repayment Schedule
|
payments
|
|||
(thousands)
|
||||
Three months ending September 30,
|
||||
2011
|
$ | 1,236 | ||
Years ending September 30,
|
||||
2012
|
6,888 | |||
2013
|
6,541 | |||
2014*
|
22,158 | |||
2015
|
7,454 | |||
2016
|
1,000 | |||
2017 and thereafter
|
100 | |||
$ | 45,377 |
Three months ended
|
Nine months ended
|
|||||||||||||||
July 1,
|
June 25,
|
July 1,
|
June 25,
|
|||||||||||||
Income Tax Provision
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
(thousands)
|
||||||||||||||||
Provision for income taxes
|
$ | 795 | $ | 775 | $ | 2,432 | $ | 1,739 |
Nine months ended
|
||||||||
July 1,
|
June 25,
|
|||||||
Warranty Reserve
|
2011
|
2010
|
||||||
(thousands)
|
||||||||
Reserve, beginning of period
|
$ | 303 | $ | 111 | ||||
Reserves of acquired companies
|
62 | 376 | ||||||
Provision
|
404 | 71 | ||||||
Warranty costs
|
(269 | ) | (175 | ) | ||||
Reserve, end of period
|
$ | 500 | $ | 383 |
Nine months ended
|
||||||||
July 1,
|
June 25,
|
|||||||
Valuation of Options
|
2011
|
2010
|
||||||
Assumptions for Black-Scholes:
|
||||||||
Risk-free interest rate
|
1.90% | 2.35% | ||||||
Expected term in years
|
4.9 | 4.9 | ||||||
Volatility
|
53% | 54% | ||||||
Expected annual dividends
|
none
|
none
|
||||||
Value of options granted:
|
||||||||
Number of options granted
|
71,500 | 105,382 | ||||||
Weighted average fair value/share
|
$ | 2.82 | $ | 2.27 | ||||
Fair value of options granted (000's)
|
$ | 202 | $ | 239 |
Nine months ended
|
||||||||||||||||
July 1, 2011
|
June 25, 2010
|
|||||||||||||||
Wgtd Avg.
|
Wgtd Avg.
|
|||||||||||||||
Number
|
Exercise
|
Number
|
Exercise
|
|||||||||||||
Stock Options
|
of Options
|
Price
|
of Options
|
Price
|
||||||||||||
Outstanding at September 30, 2010 and 2009, respectively
|
764,595 | $ | 1.66 | 973,722 | $ | 1.10 | ||||||||||
Granted
|
71,500 | 6.07 | 105,382 | 4.88 | ||||||||||||
Exercised
|
(431,246 | ) | 0.78 | (228,567 | ) | 0.83 | ||||||||||
Forfeited
|
(4,000 | ) | 5.17 | (92,408 | ) | 1.73 | ||||||||||
Outstanding at end of period
|
400,849 | $ | 3.35 | 758,129 | $ | 1.60 | ||||||||||
For exercisable options at period end:
|
||||||||||||||||
Number exercisable
|
85,958 | $ | 1.37 | 440,743 | $ | 0.72 | ||||||||||
Wgtd. avg. remaining term, in years
|
2.5 | 2.4 |
Nine months ended
|
||||||||||||||||
July 1, 2011
|
June 25, 2010
|
|||||||||||||||
Number of
|
Wgtd Avg.
|
Number of
|
Wgtd Avg.
|
|||||||||||||
Non-vested
|
Grant Date
|
Non-vested
|
Grant Date
|
|||||||||||||
Restricted (Non-vested) Stock
|
Shares
|
Fair Value
|
Shares
|
Fair Value
|
||||||||||||
Outstanding at September 30, 2010 and 2009, respectively
|
122,098 | $ | 4.10 | 10,000 | $ | 3.41 | ||||||||||
Granted
|
173,960 | 6.67 | 145,351 | 4.04 | ||||||||||||
Becoming vested
|
(17,050 | ) | 4.26 | - | - | |||||||||||
Forfeited
|
(3,000 | ) | 8.70 | (25,753 | ) | 3.68 | ||||||||||
Outstanding at end of period
|
276,008 | $ | 5.75 | 129,598 | $ | 3.72 | ||||||||||
For non-vested shares at period end:
|
||||||||||||||||
Expense not yet recognized (000s)
|
$ | 1,300 | $ | 449 | ||||||||||||
Wgtd. average remaining years for vesting
|
2.5 | 3.0 |
Three months ended
|
Nine months ended
|
|||||||||||||||
July 1,
|
June 25,
|
July 1,
|
June 25,
|
|||||||||||||
% of Sales by Sector
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Military & Aerospace
|
50% | 64% | 52% | 59% | ||||||||||||
Industrial & Communications
|
28% | 24% | 27% | 29% | ||||||||||||
Medical & Other
|
22% | 12% | 21% | 12% | ||||||||||||
100% | 100% | 100% | 100% |
Obligation
|
||||
Future Rental Obligations
|
to pay rent
|
|||
(thousands)
|
||||
Three months ended September 30,
|
||||
2011
|
$ | 324 | ||
Years ending September 30,
|
||||
2012
|
$ | 1,289 | ||
2013
|
940 | |||
2014
|
249 | |||
2015
|
16 | |||
2016
|
3 | |||
Total rent expense for nine-month periods ended:
|
||||
July 1, 2011
|
$ | 1,057 | ||
June 25, 2010
|
556 |
Nine months ended
|
||||||||
July 1,
|
June 25,
|
|||||||
Income Statement Data
|
2011
|
2010
|
||||||
(thousands)
|
||||||||
Net sales
|
$ | 98,355 | $ | 69,387 | ||||
Gross profit
|
17,683 | 11,487 | ||||||
Selling & administrative expense
|
9,774 | 5,922 | ||||||
Interest & financing expense
|
1,214 | 594 | ||||||
Other (income)/expense
|
134 | 205 | ||||||
Income before taxes
|
6,561 | 4,766 | ||||||
Provision for income taxes
|
2,432 | 1,739 | ||||||
Net income
|
$ | 4,129 | $ | 3,027 |
Three months ended
|
||||||||
July 1,
|
June 25,
|
|||||||
Income Statement Data
|
2011
|
2010
|
||||||
(thousands)
|
||||||||
Net sales
|
$ | 34,626 | $ | 26,095 | ||||
Gross profit
|
6,156 | 4,656 | ||||||
Selling & administrative expense
|
3,533 | 2,388 | ||||||
Interest & financing expense
|
491 | 238 | ||||||
Other (income)/expense
|
4 | 17 | ||||||
Income before taxes
|
2,128 | 2,013 | ||||||
Provision for income taxes
|
795 | 775 | ||||||
Net income
|
$ | 1,333 | $ | 1,238 |
Exhibit No.
|
Page
|
|||
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, (ii) Consolidated Income Statements, (iii) Consolidated Statements of Changes in Shareholders' Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, the latter being tagged as blocks of text. Pursuant to Rule 406T of Regulation S-T, the interactive files in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended; are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended; and otherwise are not subject to liability under those sections.
|
IEC Electronics Corp.
|
|
(Registrant)
|
|
August 11, 2011
|
/s/ W. Barry Gilbert
|
W. Barry Gilbert
|
|
Chairman and Chief Executive Officer
|
|
August 11, 2011
|
/s/ Susan E. Topel-Samek
|
Susan E. Topel-Samek
|
|
Vice President and Chief Financial Officer
|
1.
|
I have reviewed this report on Form 10-Q for the fiscal quarter ended July 1, 2011 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 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 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 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: August 11, 2011
|
/s/ W. Barry Gilbert
|
W. Barry Gilbert
|
|
Chairman and Chief Executive Officer
|
1.
|
I have reviewed this report on Form 10-Q for the fiscal quarter ended July 1, 2011 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 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 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 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: August 11, 2011
|
/s/ Susan E. Topel-Samek
|
Susan E. Topel-Samek
|
|
Vice President and Chief Financial Officer
|
1.
|
The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated: August 11, 2011
|
/s/ W. Barry Gilbert
|
W. Barry Gilbert
|
|
Chairman and Chief Executive Officer
|
|
/s/ Susan E. Topel-Samek
|
|
Susan E. Topel-Samek
|
|
Vice President and Chief Financial Officer
|
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
|
Jul. 01, 2011
|
Sep. 30, 2010
|
---|---|---|
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 500,000 | 500,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 10,811,188 | 10,100,589 |
Treasury stock, shares | 1,015,458 | 1,012,873 |
CONSOLIDATED INCOME STATEMENTS (USD $)
In Thousands, except Share data |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jul. 01, 2011
|
Jun. 25, 2010
|
Jul. 01, 2011
|
Jun. 25, 2010
|
|
Net sales | $ 34,626 | $ 26,095 | $ 98,355 | $ 69,387 |
Cost of sales | 28,470 | 21,439 | 80,672 | 57,900 |
Gross profit | 6,156 | 4,656 | 17,683 | 11,487 |
Selling and administrative expenses | 3,533 | 2,388 | 9,774 | 5,922 |
Operating profit | 2,623 | 2,268 | 7,909 | 5,565 |
Interest and financing expense | 491 | 238 | 1,214 | 594 |
Other (income)/expense | 4 | 17 | 134 | 205 |
Income before provision for income taxes | 2,128 | 2,013 | 6,561 | 4,766 |
Provision for income taxes | 795 | 775 | 2,432 | 1,739 |
Net income | $ 1,333 | $ 1,238 | $ 4,129 | $ 3,027 |
Net income per common and common equivalent share: | Â | Â | Â | Â |
Basic | $ 0.14 | $ 0.14 | $ 0.43 | $ 0.34 |
Diluted | $ 0.13 | $ 0.13 | $ 0.42 | $ 0.32 |
Weighted average number of common and common equivalent shares outstanding: | Â | Â | Â | Â |
Basic | 9,776,888 | 9,055,280 | 9,524,874 | 8,955,212 |
Diluted | 10,021,932 | 9,629,326 | 9,932,446 | 9,606,748 |
Document and Entity Information
|
9 Months Ended | |
---|---|---|
Jul. 01, 2011
|
Aug. 05, 2011
|
|
Document Information [Line Items] | Â | Â |
Document Type | 10-Q | Â |
Amendment Flag | false | Â |
Document Period End Date | Jul. 01, 2011 | |
Document Fiscal Year Focus | 2011 | Â |
Document Fiscal Period Focus | Q3 | Â |
Trading Symbol | IEC | Â |
Entity Registrant Name | IEC ELECTRONICS CORP | Â |
Entity Central Index Key | 0000049728 | Â |
Current Fiscal Year End Date | --09-30 | Â |
Entity Filer Category | Smaller Reporting Company | Â |
Entity Common Stock, Shares Outstanding | Â | 9,799,808 |
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FIXED ASSETS
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 01, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FIXED ASSETS |
NOTE 5. FIXED ASSETS
Fixed
assets and accumulated depreciation consist of the
following:
|
STOCK-BASED COMPENSATION
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 01, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION |
NOTE 10. STOCK-BASED COMPENSATION
Under
IEC's 2001 Stock Option and Incentive Plan, as amended from time to
time, officers, key employees, directors and other individuals may
be granted stock options, restricted (non-vested) stock and other
types of equity awards. The plan, which expires in
December 2011, was approved by shareholders in February
2002. Up to 3,100,000 common shares were authorized for
issuance under the plan, and 209,292 and 461,106 shares
remained available for grant at July 1, 2011 and September 30,
2010, respectively.
At
the January 2011 Annual Meeting of Shareholders, a new plan
entitled the 2010 Omnibus Incentive Compensation Plan was voted on
and approved by our shareholders. The plan, which
will be administered by the Compensation Committee of the Board of
Directors, provides for grant of 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. Over a
term of ten (10) years, up to 2,000,000 common shares may be
issued. Through July 1, 2011, no awards have been made
under the 2010 Plan.
The
Compensation Committee intends to continue making awards under the
2001 Plan for the remainder of its term, as long as shares remain
available for grant. Further information regarding stock
options and restricted shares under the 2001 plan is provided
below.
Stock Options
When
options are granted, IEC estimates fair value using the
Black-Scholes option pricing model, and amortizes the computed
value as compensation cost over the vesting period. A
summary follows of assumptions used in the model and the estimated
value of options granted during the first nine months of fiscal
2011 and 2010.
Changes
in the number of options outstanding during the first nine months
of 2011 and 2010, together with the number exercisable at period
end, are summarized below.
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, holders have all the rights and privileges of
any other IEC common shareholder. The fair value of a
share of restricted stock is its market value on the date of grant,
and that value is amortized as stock compensation expense over the
vesting period. A summary of restricted stock activity
and balances during the nine-month periods ending in July 2011 and
June 2010 is presented below, along with the amount of restricted
stock expense yet to be recognized.
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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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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”,
“Company”) is a premier provider of electronic
manufacturing services (“EMS”) to advanced technology
companies. We specialize in the custom manufacture of
high reliability, complex circuit cards and system-level
assemblies; a wide array of cable and wire harness assemblies
capable of withstanding extreme environments; and precision sheet
metal components. We excel where quality and reliability
are of paramount importance and when low to medium volume, high mix
production is the norm. We utilize state-of-the-art,
automated circuit card assembly equipment together with a full
complement of high-reliability manufacturing stress testing
methods. 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. While many EMS
services are viewed as commodities, we believe we set ourselves
apart through an uncommon mix of capabilities,
including:
Fiscal Calendar
The
Company’s fiscal year ends on September 30th, and the first
three quarters generally end on the Friday closest to the end 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”); IEC Electronics Corp.-Albuquerque
("Albuquerque") formerly known as General Technology Corporation;
and since December 17, 2010, Southern California Braiding, Inc.
(“SCB”). The Celmet unit acquired on July
30, 2010 operates as a division of IEC. See further
discussion of SCB, Albuquerque and Celmet in the Acquisitions
note. All significant intercompany transactions and
accounts are eliminated in the consolidation process.
Unaudited Financial Statements
The
accompanying unaudited financial statements for the nine months
ended July 1, 2011 have been prepared in accordance with generally
accepted accounting principles for interim financia1
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 September 30, 2010 Annual Report on
Form 10-K.
Reclassifications
Amounts
in prior year financial statements are reclassified as necessary to
conform to the current year presentation.
Cash and Cash Equivalents
The
Company's cash and cash equivalents principally represent deposit
accounts with Manufacturers and Traders Trust Company ("M&T"),
a banking corporation headquartered in Buffalo,
NY. Since cash receipts and disbursements repay or draw
on IEC's revolving loan balance with M&T, cash balances are
typically de minimis.
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 lower of cost or market.
Property, Plant and Equipment
Property,
plant and equipment are stated at cost and 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 other
income.
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.
Leases
At
the inception of a lease covering equipment or real estate, the
Company evaluates the lease under criteria discussed in FASB 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.
In
June 2008, IEC entered into a sale-leaseback arrangement with
M&T under which fixed assets with a net book value of $2.0
million and an original cost of $15.6 million were sold to M&T
and were leased back under a five-year operating
lease. The sold assets were removed from the accounts
and minimal loss on the transaction is being amortized over the
lease term.
Intangible Assets
One
of SCB’s key attributes as an acquisition candidate was the
favorable reputation it has established with a number of military
and defense contractors. The anticipated profitability
of relationships with such customers was considered by IEC in
arriving at an amount to offer for the firm and also became the
basis for allocating a portion of the purchase price to a related
intangible asset. Based upon several assumptions, a
detailed analysis of value was completed and the amount allocated
to customer intangible is $5.9 million. The asset is
being amortized over its fifteen-year estimated life under the
straight-line method.
IEC
also allocated $100 thousand to an intangible asset representing
the estimated value of a five-year, non-compete agreement entered
into with SCB’s selling shareholders. That
intangible is being amortized evenly over its contractual
life.
While
valuations of SCB’s intangible assets are preliminary and
purchase price allocations are subject to change, any potential
adjustment would primarily affect recorded goodwill rather than
earnings. The expected earnings impact of any such
adjustment would be limited to changes in previously recorded
amortization.
Albuquerque’s
building and land were acquired in December 2009 subject to an
Industrial Revenue Bond (“IRB”) that exempts the
property from real estate taxes for the term of the
IRB. At date of acquisition, the tax abatement was
valued at $360 thousand to be amortized over the remaining term of
the bond which matures in March 2019.
Goodwill
Under
FASB ASC 805 (Business Combinations), goodwill represents the
excess of cost over fair value of net assets acquired in a
corporate acquisition. While income tax rules allow
fifteen-year, straight-line amortization, ASC 350 (Intangibles
& Goodwill) does not permit amortization of goodwill for
financial reporting purposes. In lieu of amortizing, ASC
350 requires that goodwill be reviewed for impairment at least
annually or when events or circumstances indicate that carrying
value may exceed fair value. The review process entails
comparing the overall fair value of the unit to which goodwill
relates to carrying value. If fair value exceeds
carrying value, no goodwill write-down 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 should be written down to a lower
value.
Most
of IEC's recorded goodwill relates to the SCB unit acquired in
December 2010 and a small portion relates to Celmet, which was
acquired in July 2010 (see Acquisitions note). No
goodwill impairment has been experienced to date by either
unit.
Reviewing Long-Lived Assets for Potential Impairment
FASB
ASC 360-10 (Property, Plant and Equipment) and 350-30 (Intangibles)
require the Company to test long-lived assets (PP&E and
amortizing intangible 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 carrying amount must be reduced to fair value. No
impairment charges were recorded by IEC during 2010 or the first
nine months of fiscal 2011.
Fair Value Measurements
Under
FASB 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 mainly floating-rate
borrowings. IEC believes that recorded value
approximates fair value for all such instruments.
FASB
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 hierarchy that follows.
Level
1: Quoted prices for identical assets or liabilities in active
markets.
Level
2: Quoted prices for similar assets or liabilities in markets
whether active or not, and model-derived
valuations
based on observable inputs or value-drivers.
Level
3: Model-derived valuations using inputs for which active markets
do not exist.
Incorporating
level 2 or level 3 inputs into the measurement process requires
significant judgment. Level 2 inputs were used in
valuing fixed assets acquired in connection with IEC's fiscal 2011
and 2010 business combinations. Inputs of this nature
included comparable sales values and depreciated cost values
utilized in appraising acquired property and
equipment.
Intangible
asset valuations completed in connection with the Company's
corporate acquisitions have been based on level 3
inputs. The most significant such valuation, prepared
for SCB's customer intangible, was derived from estimated future
cash flows attributable to SCB's acquisition-date customer
base. Key input assumptions utilized in the valuation
process included the rate of customer attrition, cost-of-sales
percent, and discount rate.
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 (a)
goods are shipped or title and risk of ownership have passed, (b)
the price to the buyer is fixed or determinable, and (c)
realization is reasonably assured.
Service
revenues are generally recognized once the service has been
rendered. IEC enters into agreements with certain
customers to provide material management services that may include
some or all of: design, bid, procurement, testing, storage or other
services relating to materials the customer expects to incorporate
into equipment that it manufactures. Through the term of
these agreements, no manufacturing services are provided by
IEC. For these types of arrangements, which represented
less than 5% of revenue and gross profits during the first nine
months of fiscal 2011, the Company recognizes revenues in
proportion to the services provided or materials procured to date
as compared to the total services or materials covered by the
agreement.
Provisions
for discounts, allowances, rebates, estimated returns and other
adjustments are recorded in the period the related sales are
recognized.
Stock-Based Compensation
FASB
ASC 718 (Stock Compensation) requires equity awards granted to
employees to be accounted for at fair value as of the date of
grant. Costs associated with the awards are recorded
over periods the employees render requisite services (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. Performance awards are accrued only if it is
considered probable that the objectives will be
achieved.
Income Taxes and Deferred Taxes
FASB
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 a comprehensive model for how a company should
measure, recognize, present, and disclose in its financial
statements uncertain tax positions that the company has taken or
expects to take on a tax return. The Company recognizes
the 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.
To
be recognized in the financial statements, an uncertain tax
position must have a greater-than-50% likelihood of ultimately
being realized. Any interest or penalties incurred are
reported as interest expense. The Company’s income
tax filings are subject to audit by various tax jurisdictions, and
current open years run from fiscal 2007 through
2010. The Company believes that it has no material
uncertain tax positions.
Earnings Per Share
Basic
earnings per common share are calculated by dividing income
available to common shareholders by the weighted-average number of
shares outstanding during each period. Diluted earnings
per common share are calculated by adding to weighted-average
shares the incremental shares resulting from the assumed exercise
of all potentially dilutive stock options, those with an exercise
price below the average market price during the
period. Restricted (non-vested) shares are reported as
outstanding from date of grant. A summary of shares used
in earnings per share calculations follows.
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, certain covenants in the Credit
Agreement with M&T restrict the Company from paying cash
dividends. The Company does not expect to pay cash
dividends on common stock in the foreseeable future.
Use of Estimates
The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported amounts of revenues and expenses
during the reporting period. Actual results may differ
from management’s estimates.
Statements of Cash Flows
The
Company prepares Consolidated Statements of Cash Flows utilizing
the indirect method of reporting. For businesses
acquired during the periods presented, reported cash flows include
cash disbursed to the sellers and normal business activity
occurring subsequent to the acquisition date.
Recently Issued Accounting Standards
FASB
Accounting Standards Update 2011-05, "Presentation of Comprehensive
Income," was issued in June 2011 to be effective for fiscal years
beginning after December 15, 2011. Comprehensive income
includes certain items that are recognized as "other comprehensive
income" ("OCI") and are excluded from net
income. Examples include unrealized gains/losses on
certain investments and gains/losses on derivative instruments
designated as hedges. Under provisions of the update,
the components of OCI must be presented in one of two formats:
either (i) together with net income in a continuous statement of
comprehensive income or (ii) in a second statement of comprehensive
income to immediately follow the income statement. An
existing option to present the components of OCI as part of the
statement of changes in shareholders' equity is being
eliminated. IEC presently has no items classified as OCI
and expects the update to have minimal effect on its financial
statements.
FASB Accounting Standards Update
2011-04, "Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and IFRS," was issued in May
2011 to be effective for fiscal years beginning after December 15,
2011. The update changes the wording for certain
measurement and disclosure requirements relating to fair value
determinations under U.S. GAAP in order to make them more
consistent with International Financial Reporting Standards
(IFRS). While many of the modifications are not expected
to change the application of U.S. GAAP, additional disclosure
requirements relating to the use of Level 3 inputs in determining
fair value do apply to IEC. The Company uses such inputs
in valuing certain assets acquired in business combinations, and
will be required to provide additional information regarding the
sensitivity of derived values to changes in the inputs.
FASB
Accounting Standards Update 2010-29, "Disclosure of Supplementary
Pro Forma Information for Business Combinations," was issued in
December 2010 to be effective for fiscal years beginning
after December 15, 2010. The update clarifies that when prior
period financial statements are presented, the assumed acquisition
date for preparing pro forma information is to be the start of the
year preceding the year of acquisition. The update also
requires disclosure of the nature and amount of material,
nonrecurring pro forma adjustments that affect the information
presented. IEC implemented this update during the
quarter ended December 31, 2010.
FASB
Accounting Standards Update 2010-20, "Disclosures about the Credit
Quality of Financing Receivables and the Allowance for Credit
Losses," was issued in July 2010. The update requires
entities to (i) describe methods used to estimate the allowance for
doubtful accounts; (ii) disclose policies for charging off
uncollectible receivables; and (iii) present a summary of
provisions, charge-offs and recoveries recorded in the allowance
during each period. No changes in accounting methods are
required. Period-end disclosures were required beginning
in IEC's December 2010 quarter, and transaction-oriented
disclosures have been required in subsequent
periods. IEC implemented the requirements of this update
at September 30, 2010.
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CREDIT FACILITIES |
NOTE 7. CREDIT FACILITIES
A
summary of borrowings at July 1, 2011 and September 30, 2010
follows:
Note:
Sale-leaseback agreement with M&T is accounted for as an
operating lease, not as debt.
Abq
= Albuquerque
M&T Credit Facilities
On
December 17, 2010, IEC entered into the Third Amended and Restated
Credit Facility Agreement (“Credit Agreement”) with
M&T, replacing a prior agreement dated July 30,
2010. The new arrangement added a $20.0 million term
loan to be used for the SCB acquisition; increased the revolving
credit facility by $5.0 million to $20.0 million; eliminated a
minimum threshold for variable interest tied to Libor (London
interbank offered rate); and modified certain other provisions as
discussed below. The basic structure of the agreement
and many of the terms and conditions remained unchanged from the
prior agreement. Except as otherwise noted below,
Revolver and Term Loan borrowings under the Credit Agreement bear
interest at Libor plus a margin that varies based on the Company's
ratio of debt to EBITDARS, as defined. Individual
facilities provided under the agreement are as
follows:
(a)
Revolving Credit
Facility (“Revolver”): Up to $20
million is available through December 17, 2013. The
Company may borrow up to the lesser of (i) 85% of eligible
receivables plus 35% of eligible inventories or (ii) $20
million. At IEC's election, another 35% of eligible
inventories will be included in the borrowing base for limited
periods of time during which a higher rate of interest is charged
on the Revolver. Borrowings based on inventory balances
are further limited to a cap of $3.75 million, or when subject to
the higher percentage limit, $4.75 million. At July 1,
2011, the upper limit on Revolver borrowings was $20.0
million. Average outstanding balances amounted to $12.1
million and $6.3 million during the nine-month periods ended July
1, 2011 and June 25, 2010, respectively.
Unused
commitments under the Revolver are subject to a 0.375% fee, which
amounted to $11 thousand for the nine months ended July 1,
2011. This fee varies based on IEC's ratio of debt to
EBITDARS.
(b)
SCB Term
Loan: $20 million was borrowed on December 17,
2010 and principal is being repaid in 60 equal monthly
installments.
(c) Albuquerque Term
Loan: $5 million was borrowed on December 16,
2009, and principal is being repaid in 60 equal monthly
installments.
(d)
Albuquerque
Mortgage Loan: $4 million was borrowed on
December 16, 2009. The loan is effectively secured by
real property in Albuquerque, NM, and principal is being repaid in
60 monthly installments of $22 thousand plus a balloon payment at
maturity.
(e)
Celmet Term
Loan: $2 million was borrowed on July 30, 2010,
and principal is being repaid in 60 equal monthly
installments.
(f)
Equipment Line of
Credit: Up to $1.5 million, reduced by
outstanding loans, is available through December 17,
2011. The line is utilized for purchases of capital
equipment, and borrowings under the line are supported by separate
notes that specify fixed or variable interest, as selected by the
Company, and principal repayment terms. Equal payments
of principal are being made over 48 months for four of the loans
and over 60 months for one loan.
(g)
Term
Loan: $1.7 million was borrowed on May 30,
2008. The interest rate on this loan is fixed at 6.70%,
and principal is being repaid in monthly installments of $28
thousand. The loan's original repayment period of 60
months was shortened as a result of a $0.5 million prepayment made
in the fourth quarter of fiscal 2008.
(h)
Energy
Loan (also
referred to as the "NYSERDA” loan): $0.2
million was borrowed under this facility for which interest is
subsidized by New York State and fixed at 2.08% for the
term. Principal is being repaid in 60 equal monthly
installments.
Other Credit Facilities
(i)
Seller
Notes: The May 2008 acquisition of Wire and Cable
was financed in part by three promissory notes totaling $3.8
million that were given to the sellers. These notes are
subordinated to borrowings under the Credit Agreement and are being
repaid in quarterly installments of $160 thousand, including
interest.
(j)
Albuquerque
Industrial Revenue Bond: When IEC acquired
Albuquerque, the Company assumed responsibility for an Industrial
Revenue Bond issued by the City of Albuquerque. Interest
on the bond is paid semiannually and principal is due in its
entirety at maturity.
Borrowings
under the M&T Credit Agreement are secured by, among other
things, the assets of IEC, Wire and Cable, Albuquerque, Celmet, and
SCB and a mortgage encumbering property in Albuquerque, as
mentioned above. The Agreement also contains various
affirmative and negative covenants including financial
covenants. The Company is required to maintain (i) a
minimum level of quarterly EBITDARS, (ii) a ratio of debt to
twelve-month EBITDARS that is below a specified limit, and (iii) a
minimum fixed-charge coverage ratio as described in the table
below. The Company was in compliance with the three
covenants at July 1, 2011.
For
the purpose of calculating compliance with the covenants, IEC's
operating lease obligation to M&T for certain equipment sold to
the bank on June 27, 2008 and leased back for a period of five
years, is treated as debt. Rental payments amount to
$389 thousand per year, and payments remaining at July 1, 2011
total $746 thousand.
(a)
The ratio compares (i) 12-month EBITDA plus non-cash stock
compensation expense minus unfinanced capital expenditures minus
cash taxes paid, to (ii) the sum of interest expense, principal
payments, sale-leaseback payments and dividends, if any (fixed
charges).
Aggregate contractual principal payments under
IEC's borrowings for the next five years are summarized
below:
*Includes
Revolver balance of $16,197 as of July 1, 2011.
|
LITIGATION
|
9 Months Ended |
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Jul. 01, 2011
|
|
LITIGATION |
NOTE 12. LITIGATION
There
are no material, pending legal proceedings that involve IEC, its
subsidiaries or their properties. From time to time, the
Company may be involved in legal actions in the ordinary course of
its business. However, management does not believe that
any such proceedings commenced through the date of these financial
statements, individually or in the aggregate, will have a material
adverse effect on the Company’s consolidated financial
position.
|
INCOME TAXES
|
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Jul. 01, 2011
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INCOME TAXES |
NOTE 8. INCOME TAXES
The
provisions for income taxes for the three- and nine-month periods
are presented below:
The
estimated annual effective income tax rate for the three months
ended July 1, 2011 was 37.4% compared with 38.5% for the three
months ended June 25, 2010. The estimated annual
effective income tax rate for the nine months ended July 1, 2011
was 37.1% compared with 36.5% for the nine months ended June 25,
2010. The increase in the nine-month rate is primarily
the result of additional state tax expense attributable to the
Company’s recent acquisition of SCB.
IEC
has a federal net operating loss carryforward (“NOL”)
for income tax purposes of approximately $33.2 million as of
September 30, 2010, expiring mainly in years 2020 through
2025. It is estimated that the federal and state NOLs
will produce future tax benefits totaling $11.9 million, as
reflected in the Company’s income tax returns.
In
addition, $1.7 million of New York State investment tax and other
credits are available to the Company as carryforwards, expiring in
various years through 2017. Since these credits cannot
be utilized until the New York net operating loss carryforward is
exhausted, and we do not currently envision being able to utilize
all of these tax credits, they are fully reserved for in the
Company’s deferred tax valuation allowance. As the
credits expire unused, the deferred tax asset and offsetting
valuation allowance will be reduced.
|
INTANGIBLE ASSETS
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INTANGIBLE ASSETS |
NOTE 6. INTANGIBLE ASSETS
Intangible
assets by category, amortization expense for the periods, and
estimated future amortization are presented below:
|
ACQUISITIONS
|
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Jul. 01, 2011
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ACQUISITIONS |
NOTE 2. ACQUISITIONS
SCB: On
December 17, 2010, IEC acquired substantially all of the assets of
Southern California Braiding Company, Inc. of Bell Gardens, CA, a
privately held manufacturer of high reliability wire, cable and
harness products for military and defense markets. The
contracted purchase price was $25.0 million, subject to adjustment
for any increase or decrease in working capital between the
contract date and the closing date. The closing-date
working capital adjustment amounted to $1.6 million, resulting in a
$26.6 million price at closing. $609 thousand was paid
with 100,000 shares of newly issued IEC common stock and the $26.0
million remainder was paid with the cash proceeds from M&T
borrowings.
As
required under the asset purchase agreement, a further analysis and
reconciliation of closing-date working capital was completed in May
2011, and an additional adjustment of $248 thousand was refunded to
IEC. The cash refund was recorded as a reduction in
goodwill. The agreement also provides for a potential
further refund of purchase price if SCB’s gross sales and
backlog for calendar year 2011 do not reach specified
targets.
$3.1
million of the purchase price was deposited in escrow accounts to
be released to the sellers or returned to purchaser under certain
specified circumstances through March 31, 2012. On
February 3, 2011, $623 thousand of the escrow was released to the
sellers upon satisfaction of applicable provisions in the asset
purchase agreement. The remaining $2.5 million remains
in escrow subject to sellers' further performance under the
agreement.
Selling
shareholders entered into a five-year agreement not to compete with
SCB, and the firm’s president continues in that capacity for
SCB under IEC ownership. Concurrent with the
acquisition, the Company assumed operating leases for SCB's
premises at an annual rent of approximately $350
thousand.
Under
the acquisition method of accounting, the Company is required to
measure and record the fair value of assets acquired and
liabilities assumed. If the purchase price is greater
than the value of identifiable net assets acquired, as in the case
of SCB, the difference is recorded as goodwill. If net
asset value exceeds the amount paid, the excess is recorded in
other income as a gain.
Our
current estimates of fair value for the assets acquired and
liabilities assumed in the SCB acquisition are summarized below, as
compared to estimates at the end of the prior
quarter. Adjustments in the current quarter resulted
from the working capital analysis mentioned above and further
refinement of asset appraisals and
valuations. Allocations of purchase price may be subject
to further revision in amounts that could be material as appraisals
and valuations continue to be reviewed by the Company and its
advisors and auditors.
Celmet: On
July 30, 2010, the Company acquired certain assets and liabilities
of Celmet Co., Inc., a privately held, precision sheet-metal
fabrication, component assembly and metal stamping company located
in Rochester, NY. The acquired business is being
operated as the Celmet division of IEC. The purchase
price of $1.9 million was funded with senior bank debt, and the
Company entered into a 48-month operating lease for Celmet’s
operating facility at rental of approximately $190 thousand per
year.
Fair
values of the assets acquired and liabilities assumed in connection
with the Celmet acquisition are summarized below. An
analysis in the most recent quarter of Celmet's tax attributes
resulted in a $43 thousand reduction in deferred taxes and an
offsetting increase in goodwill. The price paid exceeded
fair value of the net assets acquired by $101 thousand, which has
been recorded as goodwill.
Albuquerque: On December 16, 2009, the Company
acquired all of the stock of General Technology Corporation from
Crane International Holdings, Inc. The purchase price of
$14.8 million was funded entirely with senior bank
debt. In April 2011, the Company changed the name of
this subsidiary to IEC Electronics Corp.-Albuquerque.
The
acquisition resulted in a gain of $588 thousand, $418 thousand of
which was recognized during the fourth quarter of fiscal
2010. The remaining $170 thousand was recorded in
December 2010 upon IEC’s receipt of a purchase price refund
from the seller.
During
the twelve-month period following the Albuquerque acquisition,
certain adjustments were made to the purchase price and to the
valuation of assets and liabilities acquired as refunds were
received and new information became available. The
summary of Albuquerque’s acquisition-date balance sheet
provided below compares preliminary balances recorded in December
2009 with final balances reflected in IEC’s 2011 financial
statements.
Operating and Pro Forma Results: The table that
follows displays revenue and earnings for SCB in 2011 and
Albuquerque in 2010 for periods from the respective dates of
acquisition to the end of the third quarters of both fiscal
years. Those amounts are included in IEC's consolidated
financial statements.
The
summary below also presents IEC's unaudited pro forma consolidated
results for nine months of fiscal 2011 and 2010 as if the SCB,
Celmet and Albuquerque acquisitions had occurred on the first day
of the year prior to the year of acquisition. The pro
forma results combine IEC's actual consolidated results for the
nine-month periods with revenue and earnings generated by SCB,
Celmet and Albuquerque for any time-periods within the nine months
that they were not members of the IEC consolidated
group. While the pro forma results take into
consideration certain estimated changes in expenses resulting from
the merged operations, they do not reflect additional revenues that
may be generated by combining SCB, Celmet, Albuquerque and
IEC. The pro forma results are not necessarily
equivalent to those that would have been obtained by consummating
the acquisitions on the earlier dates, nor are they necessarily
indicative of future results.
In developing pro forma (as if combined) financial results, the
acquirees’ pre-merger data is adjusted to account for some of
the changes expected to result from operating the entities as part
of the IEC consolidated group. For example, depreciation
will change due to asset revaluations; newly identified intangibles
will be amortized; interest will be incurred on acquisition-related
debt; and certain expenses will decrease or increase based on the
manner in which IEC intends to operate the entity. As
mentioned above, certain other expected changes, such as potential
revenue increases, are not factored into the pro forma
information. A summary of adjustments made in preparing
IEC’s pro forma information above is provided in the table
that follows.
|
ALLOWANCE FOR DOUBTFUL ACCOUNTS
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
|
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ALLOWANCE FOR DOUBTFUL ACCOUNTS |
NOTE 3. ALLOWANCE FOR DOUBTFUL ACCOUNTS
A
summary follows of allowance for doubtful accounts activity for the
nine-month periods ending July 1, 2011 and June 25,
2010:
|
INDUSTRY SECTORS AND MAJOR CUSTOMERS
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
|
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INDUSTRY SECTORS AND MAJOR CUSTOMERS |
NOTE 11. INDUSTRY SECTORS AND MAJOR
CUSTOMERS
An
analysis of sales according to the industry sector within which
IEC's customers operate is presented below.
Individual
customers representing over 10% of sales accounted for 15% of sales
in the 2011 nine-month period, and 13% in the 2010 nine-month
period. Individual customers representing over 10% of
receivables accounted for 15% of outstanding balances at July 1,
2011, and 12% at June 25, 2010.
Credit
risk associated with individual customers is periodically evaluated
by analyzing the entity's financial condition and payment
history. IEC generally does not require customers to
post collateral.
|
INVENTORIES
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
|
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INVENTORIES |
NOTE 4. INVENTORIES
A
summary of inventory by category follows:
|
RETIREMENT PLAN
|
9 Months Ended |
---|---|
Jul. 01, 2011
|
|
RETIREMENT PLAN |
NOTE 14. 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. Company contributions on behalf of
Albuquerque employees totaled $26 thousand during the nine months
ended July 1, 2011, and $15 thousand during the comparable 2010
period. There were no other Company contributions to the
plan.
|
CONSOLIDATED STATEMENTS of CHANGES in SHAREHOLDERS' EQUITY (USD $)
In Thousands |
Total
|
Common Stock, par $.01
|
Additional Paid-In Capital
|
Retained Earnings (Deficit)
|
Treasury Stock, at cost
|
---|---|---|---|---|---|
Beginning balance at Sep. 30, 2009 | $ 20,254 | $ 97 | $ 40,632 | $ (19,062) | $ (1,413) |
Stock compensation accruals | 183 | Â | 183 | Â | Â |
Directors' fees paid in stock | 21 | Â | 21 | Â | Â |
Restricted (non-vested) stock grants | 1 | 1 | Â | Â | Â |
Exercise of stock options | 186 | 3 | 183 | Â | Â |
Employee stock plan purchases | 8 | Â | 8 | Â | Â |
Net income | 3,027 | Â | Â | 3,027 | Â |
Ending Balance at Jun. 25, 2010 | 23,680 | 101 | 41,027 | (16,035) | (1,413) |
Beginning balance at Sep. 30, 2010 | 25,419 | 101 | 41,138 | (14,407) | (1,413) |
Stock compensation accruals | 345 | Â | 345 | Â | Â |
Directors' fees paid in stock | 26 | Â | 26 | Â | Â |
Restricted (non-vested) stock grants | 2 | 2 | Â | Â | Â |
Exercise of stock options | 315 | 4 | 333 | Â | (22) |
Shares issued in SCB acquisition | 609 | 1 | 608 | Â | Â |
Employee stock plan purchases | 23 | Â | 23 | Â | Â |
Net income | 4,129 | Â | Â | 4,129 | Â |
Ending Balance at Jul. 01, 2011 | $ 30,868 | $ 108 | $ 42,473 | $ (10,278) | $ (1,435) |
CONSOLIDATED STATEMENTS of CASH FLOWS (Parenthetical) (USD $)
In Thousands |
9 Months Ended | |
---|---|---|
Jul. 01, 2011
|
Jun. 25, 2010
|
|
Purchase price for Albuquerque, after adjustments from seller | Â | $ 14,761 |
Revolver borrowings utilized to partially fund acquisitions of SCB and Albuquerque | $ 5,782 | $ 6,111 |
WARRANTY RESERVES
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
|
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WARRANTY RESERVES |
NOTE 9. 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. An analysis of additions to and charges
against IEC's consolidated warranty reserves during the nine-month
periods ended July 1, 2011 and June 25, 2010 is provided
below.
|
COMMITMENTS AND CONTINGENCIES
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 01, 2011
|
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COMMITMENTS AND CONTINGENCIES |
NOTE 13. COMMITMENTS AND CONTINGENCIES
The
Company is obligated under non-cancelable operating leases,
primarily for manufacturing equipment, buildings and office
equipment. Leases for buildings occupied by IEC's
businesses expire as follows: Wire and Cable in December 2012,
Celmet in July 2014, and SCB primarily in September
2013. These operating leases generally contain renewal
options and provide for payment of executory costs by the lessee
(the Company). Executory costs typically include taxes,
insurance and maintenance. Approximate minimum lease
obligations for the next five years, together with rent expense
incurred during the year-to-date periods covered by these financial
statements, are as follows:
|
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands |
Jul. 01, 2011
|
Sep. 30, 2010
|
---|---|---|
Current assets: | Â | Â |
Cash (see Accounting Policies note) | $ 0 | $ 0 |
Accounts receivable, net of allowance | 20,303 | 16,315 |
Inventories (see Inventories note) | 17,481 | 12,068 |
Deferred income taxes | 3,940 | 3,359 |
Other current assets | 356 | 234 |
Total current assets | 42,080 | 31,976 |
Fixed assets, net of accumulated depreciation (see Fixed Assets note) | 18,195 | 13,098 |
Intangible assets, net of accumulated amortization (see Intangibles note) | 6,077 | 331 |
Goodwill | 13,810 | 58 |
Deferred income taxes (see Income Taxes note) | 7,430 | 10,113 |
Other assets | 192 | 106 |
Total assets | 87,784 | 55,682 |
Current liabilities: | Â | Â |
Current portion of long-term debt | 6,939 | 2,899 |
Accounts payable | 7,766 | 8,145 |
Accrued payroll and related expenses | 2,212 | 2,279 |
Other accrued expenses | 1,155 | 941 |
Customer deposits | 406 | 0 |
Total current liabilities | 18,478 | 14,264 |
Long-term debt (see Credit Facilities note) | 38,438 | 15,999 |
Total liabilities | 56,916 | 30,263 |
SHAREHOLDERS' EQUITY | Â | Â |
Preferred stock, $.01 par value: 500,000 shares authorized; none issued or outstanding | 0 | 0 |
Common stock, $.01 par value: 50,000,000 shares authorized; 10,811,188 and 10,100,589 shares issued, respectively | 108 | 101 |
Additional paid-in capital | 42,473 | 41,138 |
Accumulated deficit | (10,278) | (14,407) |
Treasury stock, at cost: 1,015,458 and 1,012,873 shares, respectively | (1,435) | (1,413) |
Total shareholders' equity | 30,868 | 25,419 |
Total liabilities and shareholders' equity | $ 87,784 | $ 55,682 |
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