CREDIT FACILITIES

3 Months Ended

Dec. 28, 2012

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

NOTE 8. CREDIT FACILITIES

A summary of borrowings at period end follows:

	Fixed/		Interest Rate				Balances
	Variable		December 28,		September 30,		December 28,			September 30,
Debt	Rate	Maturity	2012		2012		2012			2012
			(percents)				(thousands)
M&T borrowings:
Revolving credit facility	v	12/17/13		2.50		3.00	$	12,255		$	6,588
SCB term loan	v	12/17/15		2.75		3.25		12,000			13,000
Albuquerque term loan	v	12/16/14		2.75		3.25		2,000			2,250
Albuquerque mortgage loan	v	12/16/14		2.75		3.25		3,200			3,267
Celmet term loan	v	07/30/15		2.75		3.25		1,067			1,166
Equipment loans (2)	v	12/17/13		3.25		3.25		604			672
Equipment loan	f	06/03/13		2.85		2.93		62			108
Energy loan	f	04/02/13		2.08		2.08		13			23
Other borrowings:
Seller notes, Wire and Cable	f	06/01/13		3.00		3.00		306			463
Albuquerque industrial revenue bond	f	03/01/19		5.63		5.63		100			100
Total debt								31,607			27,637
Less: current portion								(3,380	)		(6,533	)
Long-term debt							$	28,227		$	21,104

Note: Sale-leaseback agreement with M&T is accounted for as an operating lease, and therefore is not included above.

M&T Credit Facilities

On December 17, 2010, IEC entered into the Third Amended and Restated Credit Facility Agreement (“2010 Credit Agreement”) with M&T, replacing a prior agreement dated July 30, 2010. This 2010 Credit Agreement added a $20.0 million term loan used for the SCB acquisition; increased the limit on the revolving credit facility from $15.0 million to $20.0 million; and eliminated a minimum threshold for variable interest tied to London interbank offered rate(“Libor”). The basic structure of the agreement and many of the terms and conditions remained unchanged from the prior agreement. Except as otherwise noted below, the revolving credit facility and term loan borrowings under the 2010 Credit Agreement bear interest at Libor plus a margin that varies between 2.25% and 3.75% based on the Company's ratio of debt to earnings before interest, taxes, depreciation, amortization, rent expense and non-cash stock compensation expense (“EBITDARS”), as defined.

The 2010 Credit Agreement has been superseded and replaced by the Fourth Amended and Restated Credit Facility Agreement (“2013 Credit Agreement”), described below.

The 2010 Credit Agreement was modified on November 17, 2011 by a letter agreement that extended the equipment line to December 17, 2013 and made all loans under such line due and payable no later than that date. The 2010 Credit Agreement required prepayments of term loans equal to 50% of excess cash flow for fiscal years ending after September 30, 2010 and the letter agreement changed that requirement to fiscal years ending after September 30, 2011.

Individual debt facilities provided under the 2010 Credit Agreement are described below:

(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 December 28, 2012, the upper limit on Revolver borrowings was $20.0 million. Average available balances amounted to $11.9 million and $13.1 million during the three months ended December 28, 2012 and December 30, 2011, respectively.

The Company incurs quarterly unused commitment fees approximating 0.375% of the excess of $20 million over average borrowings under the Revolver. Fees incurred amounted to $6 thousand and $8 thousand during the quarters ended December 28, 2012 and December 30, 2011, respectively. The fee percentage 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 due 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, 2013. The line is available for purchases of capital equipment. Borrowings under the line are supported by individual notes that specify interest and principal repayment terms. The Company has the option to select whether the interest rate is fixed or variable. Equal payments of principal are being made over 48 months for two of the loans and over 60 months for one loan.

(g) Energy Loan (also referred to as the "NYSERDA” loan): $0.2 million was borrowed on April 2, 2008 under this facility, for which interest at a fixed rate of 2.08% is subsidized by the State of New York. Principal is being repaid in 60 equal monthly installments.

Borrowings under the 2010 Credit Agreement are secured by, among other things, the assets of IEC and its subsidiaries. The 2010 Credit 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.

Debt Covenant	Limit
Quarterly EBITDARS (000s)		Must be above $1,500
Total debt to EBITDARS		Must be below 3.00x
Fixed charge coverage ratio (a)		Must be above 1.25x

(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).

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 for the remainder of the lease term ending June 2013 total $163 thousand.

Subsequent to the date of these financial statements, on January 18, 2013, the Company and M&T entered into the 2013 Credit Agreement. Many of the terms, conditions and covenants remain unchanged from the 2010 Credit Agreement. Although the financial covenants remain unchanged, the terms of the 2013 Credit Agreement provide that measurement of financial covenants will not occur until the end of the fiscal quarter ending in March 2013. As a result of the restatement as described in Note 2 - Restatement of Consolidated Financial Statements, the Company was in default of the Credit Agreement for failure to deliver financial statements prepared in accordance with GAAP. The Company received a waiver from M&T regarding this event of default.

Significant modifications made in the 2013 Credit Agreement to the financing arrangements previously in effect under the 2010 Credit Agreement include:

· Consolidation of all outstanding term debt, except the Albuquerque Mortgage Loan and the Energy Loan, and an $8,876,237 portion of outstanding loans under the Revolver, into two new and increased term loans, described below (“Term Loan A” and “Term Loan B”);

· Creation of a new Term Loan A in the original principal amount of $10,000,000, bearing interest at the fixed rate of 3.98% per annum, payable in equal monthly principal payments of $92,593 each plus accrued interest, with a final maturity date of February 1, 2022;

· Creation of a new Term Loan B in the original principal amount of $14,000,000, bearing interest at a variable rate equal to 2.50 percentage points above the LIBOR in effect from time to time, payable in equal monthly principal payments of $116,667 each plus accrued interest, with a final maturity date of February 1, 2023;

· Extension of the maturity date of the Albuquerque Mortgage Loan from December 16, 2014 to February 1, 2018, with no change to the monthly principal payments of $22,222 each plus accrued interest;

· Modification of the interest rate applicable to the Albuquerque Mortgage Loan from (i) a range on the applicable quarterly adjustment date of 2.50% to 3.75% above LIBOR based upon the Company’s then ratio of Debt to EBITDARS (ranging from 1.75:1.00 to 3.25:1.00), to (ii) a range on the applicable quarterly adjustment date of 2.00% to 3.25% above LIBOR based upon the Company’s then ratio of Debt to EBITDARS (ranging from 0.75:1.00 to 2.75:1.00);

· Continuation of the Revolver in the maximum available principal amount of the lesser of $20,000,000 or the amount available under the borrowing base (the formula for which, and interest rate surcharge applicable to optional over-base advances, remains unchanged), with an outstanding principal balance immediately after the closing of $3,656,140;

· Extension of the maturity date of the Revolver from December 17, 2013 to January 18, 2016;

· Modification of the interest rate applicable to the Revolver from (i) a range on the applicable quarterly adjustment date of 2.25% to 3.50% above LIBOR based upon the Company’s then ratio of Debt to EBITDARS (ranging from 1.75:1.00 to 3.25:1.00), to (ii) a range on the applicable quarterly adjustment date of 1.75% to 3.00% above LIBOR based upon the Company’s then ratio of Debt to EBITDARS (ranging from 0.75:1.00 to 2.75:1.00);

· Modification of the unused fee applicable to the Revolver from (i) a range on the applicable quarterly adjustment date of 0.125% to 0.500% based upon the Company’s then ratio of Debt to EBITDARS (ranging from 1.75:1.00 to 3.25:1.00), to (ii) a range on the applicable quarterly adjustment date of 0.125% to 0.500% based upon the Company’s then ratio of Debt to EBITDARS (ranging from 0.75:1.00 to 2.75:1.00);

· Elimination of mandatory prepayments based upon excess cash flow;

· Continuation, unchanged, of existing covenants requiring minimum quarterly EBITDARS, a maximum Debt to EBITDARS ratio, and minimum Fixed Charge Coverage Ratio, all measured at the end of each quarter commencing with the quarter ending in March 2013;

· Modification of the prohibition against dividends and stock repurchases to permit an aggregate maximum of $3,500,000 of such distributions prior to February 1, 2023 absent default at the time of the applicable payment; and

· Continuation of other terms, conditions, covenants, guarantees and collateral substantially unchanged.

In connection with the 2013 Credit Agreement, on January 18, 2013, the Company and M&T entered into an interest rate swap arrangement (“Swap Transaction”). The Swap Transaction is for a notional amount of $14,000,000 with an effective date of February 1, 2013 and a termination date of February 1, 2023. The Swap Transaction is designed to reduce the variability of future interest payments with respect to Term Loan B by effectively fixing the annual interest rate payable on outstanding principal of Term Loan B. Pursuant to the interest rate swap, the Company’s one-month LIBOR rate is swapped for a fixed rate of 1.32%. When the swap fixed rate is added to the Term Loan B Spread of 2.50%, the Company’s interest rate applicable to Term Loan B is effectively fixed at 3.82%.

Other Credit Facilities

(h) Seller Notes: The May 2008 acquisition of Wire and Cable was financed in part by three promissory notes payable to the sellers and totaling $3.8 million. These notes are subordinated to borrowings under the Credit Agreement and are being repaid in quarterly installments of $160 thousand, including interest. Effective October 1, 2011, the interest rate on the notes was reduced from 4.0% to 3.0% without altering any other terms of the borrowings.

(i) Albuquerque Industrial Revenue Bond: When IEC acquired Albuquerque, the Company assumed responsibility for a $100 thousand 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. 

A summary of contractual principal payments under IEC's borrowings for the next five years taking into consideration the 2013 Credit Agreement follows: 

	Contractual
	Principal
Debt Repayment Schedule	Payments
	(thousands)
Twelve months ending December 28,
2013	$	3,380
2014		2,778
2015		2,778
2016*		6,157
2017 and thereafter		16,514
	$	31,607

*Includes Revolver balance of $3,379 as of December 28, 2012.