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 28, 2001
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 - 7,692,076 shares as of February 8, 2002.
Page 1 of 12
PART 1 FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Consolidated Balance Sheets as of :
December 28, 2001 (Unaudited) and September 30, 2001........... 3
Consolidated Statements of Operations for the three months ended:
December 28, 2001 (Unaudited) and December 29, 2000(Unaudited). 4
Consolidated Statements of Cash Flows for the three months ended:
December 28, 2001 (Unaudited) and December 29, 2000(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 28, 2001 AND SEPTEMBER 30, 2001
(in thousands, except share data)
DECEMBER 28, SEPTEMBER 30,
2001 2001
------------- --------------
ASSETS (Unaudited)
Current Assets:
Accounts receivable $ 10,629 $ 14,926
Inventories 10,610 12,032
Other current assets 407 522
------------ ------------
Total current assets 21,646 27,480
------------ ------------
Property, Plant and Equipment, net 10,143 10,637
------------ ------------
Other Assets 9 9
------------ ------------
$ 31,798 $ 38,126
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 9,212 $ 13,382
Accounts payable 8,612 7,398
Accrued payroll and related expenses 1,238 2,014
Accrued insurance expense 790 848
Other accrued expenses 2,315 2,675
--------------- ------------
Total current liabilities 22,167 26,317
--------------- ------------
Long-term Debt - -
--------------- ------------
Shareholders' Equity:
Preferred stock, par value $.01 per share
Authorized - 500,000 shares
Issued and outstanding - none - -
Common stock, par value $.01 per share
Authorized - 50,000,000 shares
Issued and outstanding - 7,692,076 shares 77 77
Additional paid-in capital 38,418 38,418
Retained deficit (28,823) (26,661)
Accumulated other comprehensive loss -
Cumulative translation adjustment (30) (14)
Treasury Stock, at cost - 573 shares (11) (11)
--------------- -----------
Total shareholders' equity 9,631 11,809
--------------- -----------
$ 31,798 $ 38,126
=============== ===========
<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 28, 2001
AND DECEMBER 29, 2000
(in thousands, except share and per share data)
3 MONTHS 3 MONTHS
ENDED ENDED
DECEMBER DECEMBER
28, 2001 29, 2000
----------- ----------
(Unaudited) (Unaudited)
Net sales $15,785 $59,655
Cost of sales 16,141 57,886
----------- -----------
Gross (loss) profit (356) 1,769
Selling and administrative expenses 1,591 2,813
----------- ------------
Operating loss (1,947) (1,044)
Interest expense (213) (504)
Other income 5 23
----------- ------------
Loss before provision for income taxes (2,155) (1,525)
Provision for income taxes 7 -
----------- ------------
Net loss ($2,162) ($1,525)
=========== ============
Net loss per common and common equivalent share:
Basic and diluted ($0.28) ($0.20)
Weighted average number of common and common
equivalent shares outstanding:
Basic and diluted 7,691,503 7,628,277
----------- -------------
<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 28, 2001 AND
DECEMBER 29, 2000
(in thousands)
3 MONTHS 3 MONTHS
ENDED ENDED
DECEMBER DECEMBER
28, 2001 29, 2000
---------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($2,162) ($1,525)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 513 1,400
Gain on sale of fixed assets - (23)
Amortization of cost in excess of
net assets acquired - 88
Common stock issued under Directors Stock Plan - 5
Changes in operating assets and liabilities:
(Increase) decrease:
Accounts receivable 4,297 (2,352)
Inventories 1,422 692
Other current assets 115 (67)
Other assets - 32
Increase (decrease):
Accounts payable 1,404 5,273
Accrued payroll and related expenses (776) 157
Accrued insurance expense (58) (124)
Other accrued expenses (360) 148
---------- -----------
Net cash provided by operating activities 4,395 3,704
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (19) (210)
Proceeds from sales of equipment - 23
---------- -----------
Net cash used in investing activities (19) (187)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in drafts payable (190) (400)
Repayments under revolving credit facilities (3,644) (2,591)
Principal payments on long-term debt (526) (526)
---------- -----------
Net cash used in financing activities (4,360) (3,517)
---------- -----------
Net increase in cash and cash equivalents 16 -
Effect of exchange rate changes (16) -
Cash and cash equivalents at beginning of period - -
=========== ===========
Cash and cash equivalents at end of period $ - $ -
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 328 $ 284
======== ========
Income taxes $ - $ -
======== ========
<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 28, 2001
(1) Business and Summary of Significant Accounting Policies
Business
- --------
IEC Electronics Corp. (IEC) is an independent electronics manufacturing services
("EMS") provider 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.
The Company has suffered recurring net losses. As a result of these losses, the
Company was in violation of certain financial covenants under its credit
agreement as of September 30, 2001. On December 21, 2001, the Company's banks
waived the non-compliance, amended certain covenants to allow the Company more
flexibility and changed the expiration date of the credit agreement from January
31, 2003 to February 15, 2002. As a result of certain charges to inventory and
receivables recorded on January 11, 2002, included in the financial statements
as of September 30, 2001, primarily to reflect contingencies involved in pending
litigation, the Company is in violation of the amended agreement. The Company is
currently in discussions with other lending institutions with respect to a new
credit agreement. While the Company believes it will be successful, there can be
no assurance that it will meet the February 15, 2002 expiration date. In
addition, management has been endeavoring to increase revenues and reduce
expenses in an effort to improve operating cash flow.
Consolidation
- -------------
The consolidated financial statements include the accounts of IEC and its
wholly-owned subsidiaries, IEC Electronics-Edinburg, Texas Inc. ("Texas")and IEC
Electronics-Arab, Alabama Inc. ("Alabama"), until January 26, 2000 when each of
Texas and Alabama merged into IEC; IEC Electronics-Ireland Limited ("Longford")
from August 31, 1998, until September 4, 2001, when it was merged into IEC; and
IEC Electronicos de Mexico from February 2001, (collectively, the "Company").
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.
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
28, 30,
2001 2001
-----------------------
(Unaudited)
Raw materials $ 6,153 $ 7,280
Work-in-process 4,249 4,034
Finished goods 208 718
=======================
$10,610 $12,032
=======================
Accounts Payable
- -------------------------
Trade accounts payable include drafts payable of $900,000 and $1.1 million
at December 28, 2001 and September 30, 2001, respectively.
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 28, 2001
Unaudited Financial Statements
- ------------------------------
The accompanying unaudited financial statements as of December 28, 2001, and for
the three months ended December 28, 2001 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, 2001 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 28, 2001
Basic and diluted EPS
Loss available to common Shareholders ($2,162) 7,691,503 ($0.28)
====================================
December 29, 2000
Basic and diluted EPS
Loss available to common Shareholders ($1,525) 7,628,277 ($0.20)
====================================
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.
New Pronouncements
- ------------------
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, ("FAS 141") "Business Combinations" and
No. 142 ("FAS 142"), "Goodwill and Other Intangible Assets." FAS No. 141
requires that all business combinations be accounted for under the purchase
method only and that certain acquired intangible assets in a business
combination be recognized as assets apart from goodwill. FAS No. 142 requires
that ratable amortization of goodwill be replaced with periodic tests of the
goodwill's impairment and that intangible assets other than goodwill be
amortized over their useful lives. FAS No. 141 is effective for all business
combinations initiated after June 30, 2001 and for all business combinations
accounted for by the purchase method for which the date of acquisition is before
June 30, 2001. The provisions of FAS No. 142 are effective for fiscal years
beginning after December 15, 2001; however, as the Company wrote-off all
goodwill during fiscal 2001, adoption of this pronouncement will have no impact
on the Company.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations" (FAS No. 143). We will adopt this standard on October 1, 2002.
Upon adoption of FAS No. 143, the fair value of a liability for an asset
retirement obligation will be recognized in the period in which it is incurred.
The associated retirement costs will be capitalized as part of the carrying
amount of the long-lived asset and subsequently allocated to expense over the
asset's useful life. Management does not expect the adoption of FAS No. 143 to
have a material effect on the financial results of the Company.
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("FAS No. 144"). FAS No. 144 supercedes FASB
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". FAS No. 144 applies to all long-lived
assets (including discontinued operations) and consequently amends Accounting
Principles Board Opinion No. 30, "Reporting Results of Operations - Reporting
the Effects of Disposal of a Segment of a Business". FAS No. 144 is effective
for financial statements issued for fiscal years beginning after December 15,
2001, and will thus be adopted by the Company, as required, on October 1, 2002.
Management is currently determining what effect, if any, FAS No. 144 will have
on its financial position and results of operations.
Page 7 of 12
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 28, 2001
(2) Financing Arrangements
----------------------
As of September 30, 2001, the Company was not in compliance with certain
financial covenants under its secured asset-based credit agreement. As of
December 21, 2001, the Company's banks waived the non-compliance, amended
certain covenants to allow the Company more flexibility and changed the
expiration date of the credit agreement from January 31, 2003 to February 15,
2002. Under the terms of the amendment, the revolving credit facility component
of the agreement, based on eligibility criteria for receivables and inventory,
was reduced from $25 million to $5 million. Amounts borrowed are limited to 85%
of qualified accounts receivable, 20% of raw materials and 30% of finished goods
inventory, but in no event is the inventory borrowing base greater than $2
million. The second component consists of a $10 million three-year term loan
with monthly principal installments based on a five-year amortization which
began in April 2000. At December 28, 2001, $9.2 million was outstanding,
consisting of $2.9 million and $6.3 million relating to the revolving credit
facility and term loan, respectively, with an additional $948,000 available
under the revolving credit facility. As a result of certain charges to inventory
and receivables primarily to reflect contingencies involved in pending
litigation, the Company is currently in violation of the amended agreement.
Subject to resolution related to the Company's violation of the amended
agreement, the availability under the revolver at January 25, 2002, under the
most recent amendment was $2.1 million.
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
tangible net worth, maximum debt-to-tangible net worth ratio, and a minimum
earnings before interest and taxes (EBIT). As previously mentioned, as a result
of certain charges to inventory and receivables to reflect contingencies
involved in pending litigation recorded on January 11, 2002, included in the
financial statements as of September 30, 2001, the Company is in violation of
the amended agreement. The Company is currently in discussions with other
lending institutions with respect to a new credit agreement. While the Company
believes it will be successful, there can be no assurance that it will meet the
February 15, 2002, expiration date of the current agreement.
Since the Company's loan agreement currently expires on February 15, 2002, it
has classified the entire term loan and revolver as current debt. The Company's
liquidity is dependent on the ability to generate positive cash flow. Provided
the Company obtains a new credit agreement by February 15, 2002 or obtains an
extension of its existing credit agreement, and providing it meets with
substantial success in its pending litigation and meets its performance targets,
management believes the Company will generate sufficient cash flows in 2002 to
meet the obligations.
(3) Litigation
-----------
The Company is from time to time subject to routine 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.
On November 16, 2001, the Company commenced an action in New York State Supreme
Court against Acterna Corporation. The complaint asserts claims for unpaid
invoices and breach of contract for which the Company seeks approximately $7.0
million. The defendant's answer was served on January 8, 2002 and consists of a
general denial and various affirmative defenses. The Company has moved for
summary judgment, and oral arguments are scheduled to be heard on February 13,
2002. The Company will prosecute the action vigorously, as management believes
its case to be meritorious and regards the answer as a delaying tactic.
On October 4, 2001, the Company commenced an action against ID Systems, Inc.
seeking approximately $177,000 for unpaid invoices and breach of contract. An
answer was served on December 14, 2001, denying the Company's claims and
asserting counterclaims totaling $700,000. The Company believes its case to be
meritorious and will vigorously prosecute the action.
Page 8 of 12
Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
Results of Operations - Three months ended December 28, 2001 as
- --------------------------------------------------------------------------------
compared to three months ended December 29, 2000.
- -------------------------------------------------
Net sales for the three month period ended December 28, 2001, were $15.8 million
as compared to $59.7 million for the comparable period of the prior fiscal year,
a decrease of 73.5 percent. The decrease in sales was primarily due to a
significant downturn in the telecommunications and industrial sectors of the
U.S. economy. However, with the book-to-bill ratio improving, sales are expected
to trend upward. Turnkey sales were 95 percent of net sales in the quarter as
compared to 97 percent for the comparable period of the prior fiscal year.
The gross loss was ($356,000) or 2.3 percent of sales in the three months ended
December 28, 2001 versus a gross profit of $1.8 million or 3.0 percent of sales
in the comparable period of 2000. The decrease in gross profit percentage was
primarily due to fixed manufacturing overhead costs being absorbed by a
significantly lower sales volume.
Selling and administrative expenses decreased to $1.6 million in the three
months ended December 28, 2001, from $2.8 million in the comparable period of
the prior fiscal year, a decrease of 42.9 percent. This decrease is primarily
due to lower commission expense from lower sales volume as well as a decrease in
the number of employees. As a percentage of net sales, selling and
administrative expenses increased to 10.1 percent from 4.7 percent in the same
quarter of the prior year as certain costs remained fixed with a significantly
lower sales volume.
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. The Company has recorded
$7,000 of tax expense related to foreign taxes.
Net loss for the quarter was ($2.2) million versus ($1.5) million in the
comparable quarter of the prior fiscal year. Diluted loss per share was ($.28)
as compared to diluted loss per share of ($.20) in the comparable period of the
prior fiscal year.
Liquidity and Capital Resources
- -------------------------------
Net sales for the month of December 2001 were $7.0 million, representing 44
percent of the total net sales for the three month period ending December 28,
2001. 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. The Company operates on a calendar quarter consisting of four weeks in the
first and second months and five weeks in the third month.
As reflected in the Consolidated Statements of Cash Flows for the three months
ending December 28, 2001, net cash provided by operations of $4.4 million was
used to decrease the Company's debt. Depreciation for the three month period
ending December 2001 was $513,000, as compared to $1.4 million for the
comparable period of the prior fiscal year. This decrease is primarily
attributable to fewer purchases of property, plant and equipment the last three
years and a $3.0 million writedown of impaired property, plant and equipment
taken in the 4th quarter of last year. The overall decrease in sales caused by
the slowdown in the Electronic Manufacturing Services industry has resulted in
accounts receivable collections, including those of inventory sold back to
customers, outpacing new billings by $4.3 million. The lower sales volume has
also resulted in reducing inventory levels by $1.4 million since inventory is
not being replaced as existing orders are being filled or inventory is being
sold back to customers. An additional $1.4 million of cash flow was generated
from an increase in accounts payable.
As of September 30, 2001, the Company was not in compliance with certain
financial covenants under its secured asset-based credit agreement. As of
December 21, 2001, the Company's banks waived the non-compliance, amended
certain covenants to allow the Company more flexibility and changed the
expiration date of the credit agreement from January 31, 2003 to February 15,
2002. Under the terms of the amendment, the revolving credit facility component
of the agreement, based on eligibility criteria for receivables and inventory,
was reduced from $25 million to $5 million. Amounts borrowed are limited to 85%
of qualified accounts receivable, 20% of raw materials and 30% of finished goods
inventory, but in no event is the inventory borrowing base greater than $2
million. The second component consists of a $10 million three-year term loan
with monthly principal installments based on a five-year amortization which
began in April 2000. At December 28, 2001, $9.2 million was outstanding,
consisting of $2.9 million and $6.3 million relating to the revolving credit
facility and term loan, respectively, with an additional $948,000 available
under the revolving credit facility. As a result of certain changes to inventory
and receivables to reflect contingencies involved in pending litigation, the
Company is currently in violation of the amended agreement. Subject to
resolution related to the Company's violation of the amended agreement, the
availability under the revolver at January 25, 2002, under the most recent
amendment was $2.1 million.
Page 9 of 12
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
tangible net worth, maximum debt-to-tangible net worth ratio, and a minimum
earnings before interest and taxes (EBIT). As previously mentioned, as a result
of certain charges to inventory and receivables to reflect contingencies
involved in pending litigation recorded on January 11, 2002, included in the
financial statements as of September 30, 2001, the Company is in violation of
the amended agreement. The Company is currently in discussions with other
lending institutions with respect to a new credit agreement. While the Company
believes it will be successful, there can be no assurance that it will meet the
February 15, 2002 expiration date of the current agreement.
Since the Company's loan agreement currently expires on February 15, 2002, it
has classified the entire term loan and revolver as current debt. The Company's
liquidity is dependent on the ability to generate positive cash flow. Provided
the Company obtains a new credit agreement by February 15, 2002 or obtains an
extension of its existing credit agreement, and providing it meets with
substantial success in its pending litigation and meets its performance targets,
management believes the Company will generate sufficient cash flows in 2002 to
meet the obligations.
Impact of Inflation
- -------------------
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.
New Pronouncements
- ------------------
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, ("FAS 141") "Business Combinations" and
No. 142 ("FAS 142"), "Goodwill and Other Intangible Assets." FAS No. 141
requires that all business combinations be accounted for under the purchase
method only and that certain acquired intangible assets in a business
combination be recognized as assets apart from goodwill. FAS No. 142 requires
that ratable amortization of goodwill be replaced with periodic tests of the
goodwill's impairment and that intangible assets other than goodwill be
amortized over their useful lives. FAS No. 141 is effective for all business
combinations initiated after June 30, 2001 and for all business combinations
accounted for by the purchase method for which the date of acquisition is before
June 30, 2001. The provisions of FAS No. 142 will be effective for fiscal years
beginning after December 15, 2001; however, as the Company wrote-off all
goodwill during fiscal 2001, adoption of this pronouncement will have no impact
on the Company.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations" (FAS No. 143). We will adopt this standard on October 1, 2002.
Upon adoption of FAS No. 143, the fair value of a liability for an asset
retirement obligation will be recognized in the period in which it is incurred.
The associated retirement costs will be capitalized as part of the carrying
amount of the long-lived asset and subsequently allocated to expense over the
asset's useful life. Management does not expect the adoption of FAS No. 143 to
have a material effect on the financial results of the Company.
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("FAS No. 144"). FAS No. 144 supercedes FASB
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". FAS No. 144 applies to all long-lived
assets (including discontinued operations) and consequently amends Accounting
Principles Board Opinion No. 30, "Reporting Results of Operations - Reporting
the Effects of Disposal of a Segment of a Business". FAS No. 144 is effective
for financial statements issued for fiscal years beginning after December 15,
2001, and will thus be adopted by the Company, as required, on October 1, 2002.
Management is currently determining what effect, if any, FAS No. 144 will have
on its financial position and results of operations.
Page 10 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 borrowings
under the Credit Agreement, due to their variable interest rate pricing.
Management believes that interest rate fluctuations will not have a material
impact on 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, 2001, Form 10-K and its other filings with the Securities and
Exchange Commission.
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
The description of the Company's legal proceedings set forth in Item 3 of the
Company's Annual Report on Form 10-K for the fiscal period ended September 30,
2001 is incorporated herein by reference, except that the amount of ID Systems'
counterclaims set forth in said Annual Report is hereby corrected by changing
the amount stated therein from $950,000 to $700,000.
Acterna Corporation
- -------------------
The Company has submitted a motion for summary judgment and oral arguments are
scheduled to be heard on February 13, 2002.
ID Systems, Inc.
- ----------------
In January 2002, the Company submitted a reply denying ID Systems' counter-
claims. Discovery proceedings are in progress.
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: February 11, 2002 By:/s/Thomas W. Lovelock
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Thomas W. Lovelock
President and
Chief Executive Officer
Dated: February 11, 2002 By:/s/Richard L. Weiss
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Vice President, Treasurer and
Chief Financial Officer
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