UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
- -Act of 1934
For the quarterly period ended December 29, 2000
Commission file Number 0-6508
IEC ELECTRONICS CORP.
---------------------------------------------------------
(Exact name of registrant as specified in its charter.)
Delaware 13-3458955
----------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
105 Norton Street, Newark, New York 14513
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices (Zip Code)
(315) 331-7742
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code:
Indicate by check mark whether the registrant(1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common Stock, $0.01 Par Value - 7,632,621 shares as of January 30, 2001.
Page 1 of 12
PART 1 FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Consolidated Balance Sheets as of :
December 29, 2000 (Unaudited) and September 30, 2000........... 3
Consolidated Statements of Operations for the three months ended:
December 29, 2000 (Unaudited) and December 31, 1999(Unaudited). 4
Consolidated Statements of Cash Flows for the three months ended:
December 29, 2000 (Unaudited) and December 31, 1999(Unaudited). 5
Notes to Consolidated Financial
Statements (Unaudited)......................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 9
PART II
Item 1. Legal Proceedings............................................... 11
Item 2. Changes in Securities........................................... 11
Item 3. Defaults Upon Senior Securities................................. 11
Item 4. Submission of Matters to a Vote of Security Holders............. 11
Item 5. Other Information............................................... 11
Item 6. Exhibits and Reports on Form 8-K................................ 11
Signature .............................................................. 12
Page 2 of 12
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 29, 2000 AND SEPTEMBER 30, 2000
(in thousands, except share data)
DECEMBER 29, SEPTEMBER 30,
2000 2000
------------- --------------
ASSETS (Unaudited)
Current Assets:
Accounts receivable $ 30,266 $ 27,915
Inventories 35,465 36,157
Other current assets 142 75
------------- ------------
Total current assets 65,873 64,147
------------- ------------
Property, Plant and Equipment, net 14,035 15,225
--------------- ------------
Other Assets:
Cost in excess of net assets acquired, net 9,732 9,820
Other assets 268 300
-------------- ------------
10,000 10,120
-------------- -------------
$ 89,908 $ 89,492
=============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 2,105 $ 2,105
Accounts payable 30,168 25,295
Accrued payroll and related expenses 2,729 2,572
Accrued insurance 1,459 1,583
Other accrued expenses 1,811 1,663
--------------- ------------
Total current Liabilities 38,272 33,218
--------------- ------------
Long-term Debt 12,149 15,266
--------------- ------------
Shareholders' Equity:
Preferred stock, par value $.01 per share
Authorized - 500,000 shares
Outstanding - 0 shares - -
Common stock, par value $.01 per share
Authorized - 50,000,000 shares
Outstanding - 7,629,421 shares and
7,626,565 shares, respectively 76 76
Additional paid-in capital 38,337 38,332
Retained earnings 1,085 2,611
Treasury Stock, at cost - 573 shares (11) (11)
--------------- -----------
Total shareholders' equity 39,487 41,008
--------------- -----------
$ 89,908 $ 89,492
================ =============
<FN>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these financial statements.
</FN>
Page 3 of 12
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 29, 2000
AND DECEMBER 31, 1999
(in thousands, except share data)
3 MONTHS 3 MONTHS
ENDED ENDED
DECEMBER DECEMBER
29, 2000 31, 1999
----------- ----------
(Unaudited) (Unaudited)
Net sales $59,655 $43,770
Cost of sales 57,886 43,741
----------- -----------
Gross profit 1,769 29
Selling and Administrative expenses 2,813 2,906
----------- ------------
Operating loss (1,044) (2,877)
Interest expense (504) (361)
Life insurance proceeds - 2,000
Other income 23 15
----------- ------------
Loss before benefit from income taxes (1,525) (1,223)
Benefit from income taxes - -
------------- -------------
Net loss ($1,525) ($1,223)
============== ==============
Net loss per common and
common equivalent share
Basic and Diluted ($0.20) ($0.16)
Weighted average number of common and
common equivalent shares outstanding
Basic and Diluted 7,628,277 7,565,078
------------- -------------
<FN>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these financial statements.
</FN>
Page 4 of 12
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 29, 2000 AND
DECEMBER 31, 1999
(in thousands)
3 MONTHS 3 MONTHS
ENDED ENDED
DECEMBER DECEMBER
29, 2000 31, 1999
---------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,525) ($1,223)
Adjustments to reconcile net loss
to net cash (used in) operating activities:
Depreciation and amortization 1,400 1,892
Gain on sale of fixed assets (23) -
Amortization of cost in excess of
net assets acquired 88 88
Common stock issued under Directors Stock Plan 5 4
Changes in operating assets and liabilities:
(Increase) decrease:
Accounts receivable (2,352) (6,289)
Inventories 692 (9,742)
Income taxes receivable - 2,966
Life insurance receivable - (2,016)
Other current assets (67) (256)
Other assets 32 (244)
Increase (decrease):
Accounts payable 5,273 8,258
Accrued payroll and related expenses 157 (1,429)
Accrued insurance expense (124) -
Other accrued expenses 148 516
---------- -----------
Net cash provided by (used in)
operating activities 3,704 (7,475)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (210) (190)
Proceeds from sales of equipment 23 52
---------- -----------
Net cash used in
investing activities (187) (138)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in drafts payable (400) -
(Repayments) Borrowings under line
of credit agreements (2,591) 3,871
Cost incurred to secure debt facility - (243)
Principal payments on long-term debt (526) -
---------- -----------
Net cash (used in) provided by
financing activities (3,517) 3,628
---------- -----------
Net decrease in cash and cash equivalents - (3,985)
Effect of exchange rate changes - (22)
Cash and cash equivalents at beginning of period - 4,007
=========== ===========
Cash and cash equivalents at end of period $ - $ -
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $284 $330
======== ========
Income taxes - ($2,954)
======== ========
<FN>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these financial statements.
</FN>
Page 5 of 12
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 29, 2000
(1) Business and Summary of Significant Accounting Policies
Business
- --------
IEC Electronics Corp. (IEC) is an independent contract manufacturer of complex
printed circuit board assemblies and electronic products and systems. IEC offers
its customers a wide range of manufacturing and management services, on either
a turnkey or consignment basis, including material procurement and control,
manufacturing and test engineering support, statistical quality assurance, and
complete resource management.
Consolidation
- -------------
The consolidated financial statements include the accounts of IEC and its
wholly-owned subsidiaries, Edinburg and Arab, until January 26, 2000 when each
of Edinburg and Arab merged into IEC; and also includes from August 31, 1998,
Longford (collectively, the "Company"). In December 1999, the Company closed
its underutilized Longford operations and transferred some of the customers
served there to its other operations in New York and Texas. All significant
intercompany transactions and accounts have been eliminated.
Revenue Recognition
- -------------------
The Company recognizes revenues upon shipment of product for both turnkey and
consignment contracts.
In December 1999, the United States Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin 101, "Revenues Recognition in Financial State-
ments" subsequently updated by SAB 101A and SAB 101B ("SAB 101"). SAB 101
summarizes certain of the SEC's views in applying generally accepted accounting
principles to revenue recognition in financial statements. The Company is
required to adopt SAB 101 as of the beginning of the fourth quarter of fiscal
2001. Management is in the process of assessing the potential impact on the
results of operations.
Accounts Payable
- -------------------------
Trade accounts payable include drafts payable of $4.0 million and $4.4 million
at December 29, 2000 and September 30, 2000, respectively.
Cash and Cash Equivalents
- -------------------------
Cash and Cash equivalents include highly liquid investments with original
maturities of three months or less. The Company's cash and cash equivalents are
held and managed by institutions which follow the Company's investment policy.
The fair value of the Company's financial instruments approximates carrying
amounts due to the relatively short maturities and variable interest rates of
the instruments, which approximate current market interest rates.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out) or market. The
major classifications of inventories are as follows at period end
(in thousands):
December September
29, 30,
2000 2000
-----------------------
(Unaudited)
Raw materials $25,462 $23,331
Work-in-process 9,271 8,418
Finished goods 732 4,408
=======================
$35,465 $36,157
=======================
Foreign Currency Translation
- ----------------------------
The assets and liabilities of the Company's foreign subsidiary are translated
based on the current exchange rate at the end of the period for the balance
sheet and a weighted-average rate for the period of the consolidated statement
of operations. Translation adjustments are recorded as a separate component of
equity. Transaction gains or losses are included in operations.
Page 6 of 12
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 29, 2000
Unaudited Financial Statements
- ------------------------------
The accompanying unaudited financial statements as of December 29, 2000, and for
the three months ended December 29, 2000 have been prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of management, all adjustments considered necessary for a fair
presentation, which consist solely of normal recurring adjustments have been
included. The accompanying financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's
September 30, 2000 Annual Report on Form 10-K.
Net Loss per Common and Common Equivalent Share
- --------------------------------------------------------
(in thousands, except for share and per share data)
(Loss) Shares Per Share
Three Months Ended (Numerator) (Denominator) Amount
- -------------------------------------------------------------------------------
December 29, 2000
Basic EPS
Loss available to common Shareholders ($1,525) 7,628,277 ($0.20)
====================================
December 31, 1999
Basic EPS
Loss available to common Shareholders ($1,223) 7,565,078 ($0.16)
====================================
Basic EPS was computed by dividing reported earnings available to common
shareholders by weighted-average common shares outstanding during the three
month period. No reconciliation is provided as the effect would be antidilutive.
Page 7 of 12
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 29, 2000
(2) Financing Arrangements
----------------------
On December 28, 1999, the Company entered into a three-year secured
asset-based facility for $35.0 million. The credit facility consists of two
components, the first a $25.0 million revolving credit facility based on
eligibility criteria for receivables and inventory. Amounts borrowed are limited
to 85 percent of qualified accounts receivable, 20 percent of raw materials, and
30 percent of finished goods inventory, respectively. The second component
consists of a $10 million three-year term loan with monthly principal
installlments based on a five-year amortization which began in April 2000. At
December 29, 2000, $14.3 million was outstanding consisting of $5.8 million and
$8.5 million relating to the revolving credit facility and term loan,
respectively, with $16.5 million available under the revolving credit facility.
The credit facility contains specific affirmative and negative covenants,
including, among others, the maintenance of certain financial covenants, as well
as limitations on amounts available under the lines of credit relating to the
borrowing base, capital expenditures, lease payments and additional debt. The
more restrictive of the covenants require the Company to maintain a minimum net
worth, minimum net income after taxes, maximum debt-to-worth ratio, and minimum
cash flow coverage. As of the date of this filing, the Company is in compliance
with these debt covenants.
(3) Life Insurance Proceeds
-----------------------
The Company's President and Chief Executive Officer died suddenly on
December 11, 1999. In the first quarter of fiscal 2000, the Company received
non-taxable income from insurance proceeds of approximately $2.0 million
(4) Litigation
-----------
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. Although occasional adverse decisions
(or settlements) may occur, the Company believes that the final disposition of
such matters will not have a material adverse effect on the financial position
or results of operations of the Company.
Page 8 of 12
Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
Results of Operations - Three months ended December 29, 2000 as
- --------------------------------------------------------------------------------
compared to three months ended December 31, 1999.
- -------------------------------------------------
Net sales for the three month period ended December 29, 2000, were $59.7 million
as compared to $43.8 million for the comparable period of the prior fiscal year,
an increase of 36.3 percent. The increase in sales was primarily due to the
corporate strategy to broaden its customer base, while maintaining the current
level of production with its larger customers. Sales to new customers were
approximately 28 percent of the sales for the quarter. Turnkey sales were 97
percent of net sales in the quarter as compared to 97 percent for the comparable
period of the prior fiscal year.
The gross profit was $1.8 million or 3.0 percent of sales in the three months
ended December 29, 2000 versus a gross profit of $29,000 or 0.1 percent
of sales in the comparable period of 1999. The increase was due to higher
volumes and lower labor and overhead costs as a percent of sales.
Selling and administrative expenses decreased to $2.8 million in the three
months ended December 29, 2000, from $2.9 million in the comparable period of
the prior fiscal year, a decrease of 3.4 percent. This decrease is primarily
due to the Company's effort to contain costs while increasing sales levels. As a
percentage of net sales, selling and administrative expenses decreased to 4.7
percent from 6.6 percent in the same quarter of the prior year.
The Company has recorded no benefit from income tax as a result of the net loss,
and accordingly, has a full valuation allowance against its net deferred tax
asset including the net operating loss carry-forward.
Net loss for the quarter was ($1.5) million versus ($1.2) million in the
comparable quarter of the prior year. Diluted loss per share was ($.20) as
compared to diluted loss per share of ($.16) per share in the comparable
period of the prior fiscal year. Excluding the effects of the life insurance
proceeds of $2.0 million, the net loss would have been ($3.2) million or ($0.42)
per share for the 3 months ended December 31, 1999.
The Company has experienced a reduction in new orders of existing products from
Lucent Technologies and anticipates a significant decline in revenues from this
customer during Fiscal Year 2001. However, new orders from JDS Uniphase Corp.
and GenRad, Inc. are expected to generate sufficient revenue to compensate for
the revenue decline from Lucent Technologies, although there can be no assurance
that this will happen.
Liquidity and Capital Resources
- -------------------------------
Net sales for the month of December 2000 were $22.4 million, representing 38
percent of the total net sales for the three month period ending
December 29, 2000. Net sales for the month of December 1999 were $23.2 million,
representing 53 percent of the total net sales for the three month period ending
December 31, 1999. The Company operates on a calendar quarter consisting of four
weeks in the first and second months and five weeks in the third month.
On December 28, 1999, the Company entered into a three-year secured asset-based
facility for $35.0 million. The credit facility consists of two components. The
first is a $25.0 million revolving credit facility based on eligibility
criteria for receivables and inventory. Amounts borrowed are limited to 85
percent of qualified accounts receivable, 20 percent of raw materials, and 30
percent of finished goods inventory, respectively. The second component consists
of a $10.0 million three-year term loan with monthly principal installments
based on a five-year amortization which began in April 2000. At December 29,
2000, $14.3 million was outstanding consisting of $5.8 million and $8.5 million
relating to the revolving credit facility and term loan, respectively, with
$16.5 million available under the revolving credit facility.
The Company believes its funds generated from operations and its existing
credit facilities will be sufficient for the Company to meet its capital
expenditures and working capital needs for its operations as presently
conducted. As part of its overall business strategy, the Company may from time
to time evaluate acquisition opportunities. The funding of these future
transactions, if any, may require The Company to obtain additional sources of
financing.
The impact of inflation on the Company's operations has been minimal due to the
fact that it is able to adjust its bids to reflect any inflationary increases in
cost.
Page 9 of 12
Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------
Quantitative and Qualitative Disclosures about Market Risk represents the risk
of loss that may impact the consolidated financial position, results of
operations or cash flows of the Company due to adverse changes in financial
rates. The Company is exposed to market risk in the area of interest rates.
This exposure is directly related to its Term Loan and Revolving Credit bor-
rowings under the Credit Agreement, due to their variable interest rate pricing.
Management believes that interest rate fluctuations will not have a material
impact on the Company's results of operations.
Forward-Looking Statements
- --------------------------
Except for historical information, statements in this quarterly report are
forward-looking made pursuant to the safe harbor created by the Private
Securities Litigation Reform Act of 1995 and are therefore subject to certain
risks and uncertainties, including timing of orders and shipments, availability
of material, product mix and general market conditions that could cause actual
results to differ materially from those projected in the forward- looking
statements. Investors should consider the risks and uncertainties discussed in
the September 30, 2000, Form 10-K and its other filings with the Securities and
Exchange Commission.
Page 10 of 12
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
None.
Item 2 -- Changes in Securities
None.
Item 3 -- Defaults Upon Senior Securities
None.
Item 4 -- Submission of Matters to a Vote of Security Holders
None.
Item 5 -- Other Information
None.
Item 6 -- Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
None
Page 11 of 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IEC ELECTRONICS CORP.
REGISTRANT
Dated:January 31, 2001 By:/s/Thomas W. Lovelock
-----------------------
Thomas W. Lovelock
President and
Chief Executive Officer
Dated:January 31, 2001 By:/s/Richard L. Weiss
-----------------------
Vice President and
Chief Financial Officer
Page 12 of 12