SCB ACQUISITION

12 Months Ended

Sep. 30, 2012

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

NOTE 2. SCB ACQUISITION

On December 17, 2010, IEC, through a subsidiary now known as Southern California Braiding, Inc., 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 cash proceeds from certain borrowings under the M&T Credit Agreement.

The cash portion of the purchase price was decreased to $25.8 million based on a further analysis of closing date working capital as required under the asset purchase agreement. The resulting $248 thousand adjustment, which was refunded to IEC in May 2011, was recorded as a reduction of goodwill.

$3.1 million of the amount paid for SCB (consisting of $2.5 million in cash and 96,413 shares of IEC common stock) was deposited in escrow accounts to be released to the sellers or returned to the purchaser under certain specified circumstances through March 31, 2012. In February 2011, $623 thousand (consisting of $506 thousand in cash and 19,237 shares of IEC common stock) was released to the sellers upon satisfaction of applicable provisions in the asset purchase agreement. The balance of the escrow, which remained subject to buyer indemnity claims, if any, and sellers' further performance under the agreement, was released during the third quarter of fiscal 2012 as described below.

The asset purchase agreement provided for a potential return of contingent consideration held in escrow if SCB’s gross sales and backlog for calendar year 2011 did not reach specified targets. The Company recorded the estimated amount of contingent consideration at the end of each applicable fiscal quarter, resulting in a receivable of $1.1 million as of September 30, 2011. During the fiscal year ended September 30, 2012, $1.1 million of additional income was recorded for contingent consideration and is reported as "other income". Combined with the $1.1 million estimate recorded in the fiscal year ended September 30, 2011, the total gain related to the contingent consideration is $2.2 million. As previously reported on Form 8-K, the Company received payment in the form of cash and 68,625 shares of Company common stock during the fiscal quarter ended June 29, 2012 through settlement of the escrow account established at the time of the SCB acquisition.

Concurrent with the acquisition, IEC assumed responsibility for operating leases covering SCB's premises, for which rent approximates $350 thousand per year. In accordance with another provision in the asset purchase agreement, the former shareholders of SCB agreed that they would not compete with the Company for a five year period after the closing.

Under the acquisition method of accounting, the Company is required to measure and record the fair value of assets acquired and liabilities assumed, as summarized below. The excess of purchase price over the value of identifiable net assets acquired is recorded as goodwill.

	December 17,
SCB Opening Balance Sheet	2010
(thousands, except shares)
Accounts receivable	$	1,576
Inventories		2,896
Other current assets		29
Leasehold improvements		1,169
Machinery & equipment		1,344
Furniture & fixtures		236
Intangible assets		6,000
Goodwill		13,708
Deferred income taxes		122
Total assets acquired		27,080
Accounts payable		560
Accruals and other liabilities		129
Total liabilities assumed		689
Net assets acquired/purchase price	$	26,391
Funded with bank debt	$	25,782
Funded with 100,000 shares of IEC common stock		609
Total funding for SCB acquisition	$	26,391

Operating and Pro Forma Results:

The following table displays the revenue and earnings of SCB from date of acquisition to the end of the fiscal year ending September 30, 2011. The disclosed amounts are included in the accompanying consolidated financial statements.

SCB Operating Results	290 Days Ended
Subsequent to Date of Acquisition	September 30, 2011
(thousands)	(unaudited)
Net sales	$	11,363
Income before provision for income taxes		(233	)
Net income		(222	)

The following table presents IEC's unaudited, pro forma, consolidated operating results for the fiscal year ending September 30, 2011 as if the SCB acquisition had occurred on the first day of the preceding fiscal year. The pro forma results combine IEC's actual consolidated results for the fiscal year with revenue and earnings generated by SCB during the 2.5-month portion of the fiscal year when it was not a member 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 with other members of the IEC group. The pro forma results are not necessarily equivalent to those that would have been obtained by consummating the SCB acquisition on the earlier date, nor are they necessarily indicative of future results.

	Year Ended
IEC Pro Forma Operating Results	September 30, 2011
(thousands, except share and per share data)	(unaudited)
Net sales	$	137,227
Income before provision for income taxes		10,304
Net income		7,053
Earnings per share:
Basic	$	0.74
Diluted		0.71
Weighted average common and common equivalent shares:
Basic		9,482,336
Diluted		9,988,798

In developing pro forma (as if combined) financial results, the acquiree's pre-merger data is adjusted to account for some of the changes that are estimated to result from operating the entity as part of the IEC consolidated group. For example, depreciation changes due to asset revaluations; newly identified intangibles are amortized; interest is incurred on acquisition-related debt; and certain expenses 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 changes, 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.

Adjustments Reflected in	Year Ended
Pro Forma Results Table Above	September 30, 2011
(in thousands, except share data)	(unaudited)
	Increase/(decrease)
Cost of sales
Depreciation expense	$	64
Selling and administrative expenses
Compensation	$	(379	)
Sales/marketing expenses		(364	)
Insurance premiums		(76	)
Legal and accounting expenses		(154	)
Contract staffing		(122	)
Amortization of intangibles		86
Corporate allocation		150
Other		(33	)
Total selling and administrative expense adjustments	$	(892	)
Interest expense
Interest on acquisition debt	$	201
Other		(2	)
Total interest expense adjustments	$	199
Other (income)/expense
Eliminate acquisition expenses (legal, accounting, etc.)	$	(109	)
Weighted average common shares outstanding 100,000 shares issued in SCB acquisition, weighted to cover 77 days prior to the acquisition date		21,096