UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 28, 1996
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
incorporation or organization) Identification No.)
105 Norton Street, Newark, New York 14513
_______________________________________ __________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(315) 331-7742
___________________________________________________
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 [ ]
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BACKRUPTCY
PROCEEDING DURING THE PRECEEDING FIVE YEARS)
Applicable _____________ Not Applicable______X________
<PAGE>
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
7,391,945 shares of $.01 Par Value Common Stock outstanding as of
August 12,1996
<PAGE>
<TABLE>
Part I. - FINANCIAL INFORMATION
Item I. - FINANCIAL STATEMENTS
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 28,1996 AND SEPTEMBER 30, 1995
<CAPTION>
JUNE 28, SEPTEMBER 30,
1996 1995
________ _____________
(unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,973,668 $ 8,639,803
Accounts receivable 21,061,927 17,378,065
Inventories 27,963,443 24,096,765
Income taxes receivable 831,688 _
Other current assets 360,720 451,444
____________ ____________
53,191,446 50,566,077
____________ ____________
Property, Plant and Equipment,net 39,703,836 38,227,647
Other Assets:
Cost in excess of net assets
acquired,net 12,937,135 13,289,205
Note receivable from officer 355,519 355,519
Other assets 9,309 9,309
____________ ____________
13,301,963 13,654,033
____________ _____________
$106,197,245 $102,447,757
============ =============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Borrowing under lines of credit 8,530,000 3,540,000
Current portion of long term debt 3,768,506 3,018,497
Accounts payable 15,758,999 16,971,184
Accrued payroll and related
expenses 2,588,956 3,047,203
Accrued income taxes - 1,246,680
Other accrued expenses 344,581 234,713
___________ ____________
30,981,042 28,058,277
___________ ____________
Deferred income taxes 2,633,557 2,633,557
___________ _____________
Long-Term Debt 7,208,546 6,857,403
____________ _____________
Shareholders' Equity:
Preferred stock, par value $.01
per share
Authorized-500,000 shares
Outstanding-0 shares
Common stock, par value $.01
per share
Authorized-15,000,000 shares
Outstanding-7,391,945 and
7,387,366 shares repectively 73,919 73,874
Additional paid in capital 36,936,402 36,913,553
Retained Earnings 28,363,779 27,911,093
____________ ____________
Total shareholder's equity 65,374,100 64,898,520
____________ _____________
$106,197,245 $102,447,757
============ ==============
<FN>
The accompanying notes to unaudited consolidated finanical statements are an
integral part of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
IEC ELECTRONICS CORP.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 28, 1996 AND 1995
<CAPTION>
3 MONTHS ENDED 3 MONTHS ENDED
June 28, 1996 JUNE 30, 1995
_______________ _______________
(unaudited) (unaudited)
<S> <C> <C>
Net sales $ 43,351,935 $ 32,550,107
Cost of sales 42,683,056 26,197,671
____________ ___________
Gross profit 668,879 6,352,436
Selling, general and
administrative expenses 3,115,715 2,936,627
(exclusive of amortization
expense shown below)
Amortization expense 118,490 119,038
____________ ___________
Operating(loss)income (2,565,326) 3,296,771
Interest expense (442,700) (252,528)
Other income,net 107,352 137,092
_____________ ____________
Net(Loss) income
before Taxes (2,900,674) 3,181,335
Income taxes (1,021,000) 1,275,000
_____________ ___________
Net(loss)income (1,879,674) 1,906,335
============= ===========
Net (loss)income per
common and common
equivalent shares $(0.25) $ 0.25
_____________ ____________
Common and common
equivalent shares 7,446,168 7,476,065
_____________ ____________
<FN>
The accompanying notes to unaudited consolidated financial statements are
an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
IEC ELECTRONICS CORP.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED JUNE 28,1996 AND JUNE 30, 1995
<CAPTION>
9 MONTHS ENDED 9 MONTHS ENDED
JUNE 28, 1996 JUNE 30, 1995
_______________ ______________
(unaudited) (unaudited)
<S> <C> <C>
Net sales $134,719,082 $ 89,537,727
Cost of sales 123,193,470 77,224,818
___________ ___________
Gross profit 11,525,612 12,312,909
Selling and
adminstrative expense 9,271,420 7,386,807
(Exclusive of amortization
expense shown below)
Amortization expense 355,469 335,340
____________ ____________
Operating income 1,898,723 4,590,762
Interest expense (1,190,743) (870,064)
Other income,net 332,706 453,360
____________ _____________
Net income before
income taxes 1,040,686 4,237,058
Income taxes 588,000 1,695,000
____________ _____________
Net income 452,686 2,542,058
============ =============
Net income per common
and common equivalent
share $0.06 $0.34
_____________ ______________
Common and common
equivalent shares 7,466,617 7,440,024
_____________ _______________
<FN>
The accompanying notes to unaudited consolidated finanical statements are an
integral part of these finanical statements.
</TABLE>
<PAGE>
<TABLE>
IEC ELECTRONICS CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1994
AND THE NINE MONTHS ENDED JUNE 28, 1996
<CAPTION>
Total
Common Stock Additional Retained Shareholders'
_________________ Capital Earnings Equity
Shares Amount
________ ______ __________ ____________ ____________
<S> <C> <C> <C> <C> <C>
Balance,
September 30, 1993 7,140,000 $ 71,400 $34,811,101 $12,262,899 $47,145,400
Exercise of stock
options and re-
lated income tax
benefit 46,250 463 349,463 349,463
Net income 10,959,846 10,959,846
_________ _________ ___________ ___________ ___________
Balance,
September 30, 1994 7,186,250 71,863 35,160,564 23,222,745 58,455,172
Issuance of Stock
Purchase of Accutek 201,116 2,011 1,752,989 1,755,000
Net income 4,688,348 4,688,348
__________ __________ ____________ ___________ ___________
Balance,
September 30,1995 7,387,366 73,874 36,913,553 27,911,093 64,898,520
Excise of stock
options 4,579 45 22,849 22,849
Net income for
thenine months
ended June 28,
1996
(unaudited) 452,686 452,686
Balance,
June 28,1996
(unaudited) 7,391,945 73,919 $36,936,402 $28,363,779 $65,374,100
========= ============ ============ =========== ===========
<FN>
The accompanying notes to unaudited consolidated finanical statements are an
integral part of these finanical statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
IEC ELECTRONICS CORP.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 28, 1996 AND JUNE 30, 1995
<CAPTION>
9 MONTHS ENDED 9 MONTHS ENDED
JUNE 28, 1996 JUNE 30,1995
_______________ ______________
(unaudited) (unaudited)
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income $ 452,686 $ 2,542,058
Adjustments to reconcile net
income to net cash (used in)
provided by operating activities
Depreciation 6,383,880 5,549,208
Increase in other assets _ 43.561
Gain on sale of fixed assets (8,750) (60,000)
Amortization of cost in excess
of net assets acquired 355,469 335,340
Changes in operating assets
and liabilities:
Increase accounts receivables (3,683,862) (914,719)
(Increase) decrease inventories (3,866,678) (1,010,767)
(Increase) decrease in income
taxes receivable (831,688) 1,366,056
(Increase) decrease in other
current assets 90,724 (44,452)
Decrease in accounts payable (1,212,185) (1,960,604)
Decrease in accrued payroll
and related expenses (458,247) (680,501)
(Increase) decrease in
accrued income taxes (1,246,680) 858,568
Increase in other accrued expenses 99,868 102,053
___________ _____________
Net cash used in operating activities $ (3,925,463) $ 8,145,335
Cash Flow From Investing Activities:
Purchases property, plant and
equipment (7,860,072) (5,706,216)
Purchase of Accutek,
net of cash acquired _ (1,751,832)
Merger related costs (3,397) (855)
Proceeds from exercise of options 22,895 _
Proceeds from sale of fixed assets 8,750 62,000
___________ ____________
Net cash used in
investing activities $ (7,831,824) $ (7,396,903)
Cash Flow From Financing Activities:
Net borrowing under line of Credit
agreements 5,100,000 1,991,000
Proceeds from long term debt 3,970,000 _
Principal payments on long term debt (2,978,848) (1,154,723)
___________ __________
Net cash provided from
financing activities $ 6,091,152 $ 836,277
____________ __________
Net(Decrease) Increase in cash
and cash equivalents (5,666,135) 1,584,709
Cash and cash equivalents at
beginning of period $ 8,639,803 $ 6,859,073
___________ ___________
Cash and cash equivalents
at end of period $ 2,973,668 $ 8,443,782
=========== ===========
Supplemental Disclosures for Cash Flow
Information:
Cash paid during period for:
Interest $ 1,190,743 $ 870,064
=========== ==============
Income taxes $ 2,509,680 $ 10,775
=========== ==============
Cash received during the period:
Income taxes - 555,843
=========== =============
Non cash investing activities:
Issuance of Common stock for
purchase of Accutek Inc. - 1,755,000
============ ============
Liabilities assumed - 2,356,162
============ ============
<FN>
The accompanying notes to unaudited consolidated financial statements are an
intgeral part of these financial statements.
</TABLE>
<PAGE>
IEC ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 28, 1996
Note 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 services,
on either a turnkey or consignment basis, including material procurement
and control, manufacturing and test engineering support, statistical
quality assurance and complete resource mangement.
Consolidation
______________
The consolidated finanical statements include the accounts of IEC and its
wholly-owned subsidiaries, Calidad Electronics, Inc. (Calidad) and
Accutek,Inc. (Accutek)(collectively, the Company). All significant
intercompany transactions and accounts have been eliminated.
Effective November 21, 1994, the Company acquired all of the outstanding
common stock of Accutek, a contract contract electronics manufacturer for
approximately $4 million in cash and common stock. The acquistion has been
accounted for using the purchase method of accounting, and accordngly,
Acutek's net assets and results of operations are included in the
consolidated financial statements since the date of acquistion. The
purchase price has been allocated to the assets acquired and liabilities
assumed based on estimated fair values at the date of acquistion.
Cost in excess of net assets acquired related to the acquistion is being
amortized on a straight line basis over a period of 15 years.
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquistion had occurred on October 1, 1994, after
giving effect to certain adjustments, including related income
tax effects. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what could have
occurred had the acquistion been made at the beginning of
fiscal 1995 or of results which may occur in the future. Furthermore,
no effect has been given in the pro forma information
for anticipated operating and synergistic benefits.
<PAGE>
IEC ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANICAL STATEMENTS
JUNE 28, 1996
3 Months 9 Months
Ended Ended
June 28, 1995 June 30, 1995
______________ _____________
(Unaudited) (Unaudited)
Net Sales 32,550,107 91,368,342
______________ _____________
Net Income 1,906,335 2,713,710
______________ ______________
Net Income per common and
common share equivalent $0.25 $0.36
______________ _____________
Revenue Recognition
___________________
The Company recognizes revenues upon shipment of product for both turnkey and
consignment contracts.
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:
June 28, September 30,
1996 1995
______________ __________________
(unaudited)
Raw Materials 22,621,057 18,502,374
Work-in-process 5,342,386 5,594,391
______________ __________________
Total $ 27,963,443 $ 24,096,765
============== ===================
Unaudited Finanical Statements
______________________________
The accompanying unaudited finanical statements as of June 28, 1996,
and for the nine months ended June 28, 1996 and June 30, 1995 have been
prepared in accordance with generally accepted accounting principles for
interm 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 conjuction with the finanical
statements and notes thereto included in the Company's September 30, 1995
Annual Report on Form 10-K.
<PAGE>
IEC ELECTRONICS CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1996
Financing Arrangements
______________________
At June 28, 1996, $8,500,000 and $9,451,163, is outstanding on the working
capital and equipment line of credit repectively. Amounts borrowed under the
equipment line of credit are repayable monthly from date of borrowing over a
term of 60 months.
Legal Matters
_____________
In March 1994, the Company and certain of its officers were named as
defendants in three separate complaints filed by certain shareholders
who claim to represent a class of shareholders (the Class), alleging that
the defendants violated the federal securities laws. In March 1995 these
three action into a single action in which it is alleged that the
plaintiffs and the Class purchased common stock of the Company at
inflated prices in reliance upon statements made by the defendants and
that they were thereby damaged. An answer in which the defendants denied
all wrongdoing was served in January 1996. To date, No documents have been
produced and no depositions have been taken. Plaintiff's motion for class
certification was withdrawn in July 1996. The amount of the alleged
damages, if any, has not been quantified. While the outcome can not be
predicated with certainty, it is the opinion of mangement following a
review with counsel that the allegations are without merit and the
ultimate resolution of this ligation will not have a material adverse
effect on the Company's financial position or results of operations.
The Company is also involved with other legal matters in the ordinary course
of business, including certain employment matters. The outcomes of these
matters are also uncertain at this time and related loss contingencies,
if any, are currently not estimable. Management believes these matters to be
without merit and believes that resolution of these matters will likewise not
have a material adverse effect on the Company's financial position or results
of operations.
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
_______________________________________________________________
RESULTS OF OPERATIONS
_____________________
Results of Operations-Three months ended June 28, 1996, as compared to the
_______________________________________________________________________________
three months ended June 30, 1995.
_________________________________
Net sales for the three month period ended June 28, 1996, were $43,351,935
as compared to $32,550,107 for the comparable period of the prior fiscal
year, a increase of 33.2% The increase in sales is primarily due to sales
to new customers and an increase in turnkey sales to 92%, as compared to
57% for the prior fiscal year. While the shortages of components has eased,
certain specific shortages and customer rescheduling, especially in the
computer and telecommunication segments, continue to impact both
sales and earnings.
Gross profit as a percentage of sales decreased to 1.5% in the three months
ended June 28, 1996, from 19.5% in the comparable period of the prior year.
The decrease in gross profit as a percentage of sales is primarily due to
higher material content in the cost of goods sold and excess overhead
expense caused by underutilized manufacturing capacity.
Selling and administrative expense increased to $3,115,715 in the three
months ended June 28,1996, from $2,936,627 in the comparable period of
the prior fiscal year. This increase is primarily due to an increase in
salaries and related costs and an increase in commission expense related
to the increased sales. As a percentage of net sales, selling and general
adminstrative expenses decreased to 7.2% in the current fiscal quarter
from 9.0% of net sales in the same quarter of the prior fiscal year.
Net Income for the quarter decreased from $1,906,335 in the prior fiscal year
to a net loss of $1,879,674 in the current quarter. The current quarter loss
per share was $.25 as compared to earnings per share of $.25 in the prior
fiscal year quarter.
Results of Operations-Nine months ended June 28, 1996, as compared to the nine
______________________________________________________________________________
months ended June 30, 1995.
__________________________
Net sales for the frist nine months of the fiscal year 1996 were $134,719,082
as compared to $89,537,727 for the same period of the prior fiscal year. Sales
for the nine months period increased 50.5% from those in the same period of
fiscal year 1995. The increase is primarily due to sales to new customers and
continued sales to existing customers. Turnkey sales were 84% of net sales in
the nine months ended June 28, 1996, as compared to 63% for the comparable
period of the prior fiscal year.
As a result of the substantial increase in net turnkey sales and the
resultant increase in material content and manufacturing inefficencies,
gross profit decreased to 8.6% in the nine months ended June 28, 1996, from
13.8% in the same period of fiscal year 1995.
Selling and adminstrative expenses increased to $9,271,420 in the frist nine
months of fiscal year 1996, from $7,386,807 in the frist nine months of fiscal
year 1995. The increase is primarily due to increases in salaries and related
costs and increases in commission expense related to increased sales. As a
percentage of net sales, selling and adminstrative expenses decreased to 6.9%
to 6.9% in the current fiscal year from 8.2% of the net sales in the prior
year.
Net income for the frist nine months of fiscal year 1996 decreased to
$452,686 from $2,542,686 in the same period of fiscal year 1995. Earings per
share were $.06 for the nine months as compared to $.34 per share in the same
period of the fiscal year 1995.
<PAGE>
In the contract electronics industry, business is managed by job on a
customer basis. The cost of goods and resulting gross profit as a
percentage of sales can vary widely amoung different jobs within both
turnkey and consignment sales and are affected by a number of factors
including the mix of consignment sales and turnkey contracts, the
percentage of material content, the percentage of labor content, quantities
ordered, complexity of the assemblies, the degree of automation utilized
in the assembly process and the efficiencies achieved by the Company in
managing material procurement costs, inventory levels and manufacturing
processes.
The Company has experienced component shortages eariler in the year which
cause inefficiencies due to frequent customer rescheduling, short
manufacturing lot sizes, production interruptions and restarts, set-up
duplication and production line downtime. Other rescheduling has been the
result of customers adjusting to their current business conditions.
All of these factors are continually changing and are interrelated. The
effect of each factor cannot be separately determined.
Certain specific components shortages are expected to continue in future
months and will continue to have an impact on the Company's results.
However, the scope and magnitude of their aggregate effects on sales and
profits cannot be determined until close to the end of a given quarter when
it becomes known that the short material in question will not arrive before
quarter end and therefore will have a determinable effect on the resultant
mix of production and delivery schedules. Accordingly, these factors may
result in quarter to quarter fluctuations in both revenue and earnings.
<PAGE>
Liquidity and Capital Resources
Net sales for the month of June 1996 were $18,018,711, representing 42% of
the total net sales for the three month period ending June 28, 1996. The
Company operates on a calendar quarter consisting of four weeks in the first
and second months and five weeks in the third month.
At June 28,1996, approximately $8,500,000 and $9,451,000 is outstanding on
the working capital and equipment line of credit, respectively. Amounts
borrowed under the equipment line of credit are repayable monthly from the
date of borrowing over a term of 60 months. At June 28, 1996, approximately
$15,050,000 was available for borrowing under these existing lines of credit.
Delivery schedules continue to be paced by certain specific component
shortages and long lead times which adversely affect operations and
working capital utilization.
The Company believes that its cash balances, 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 acquistion opportunities.
The funding for 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>
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
_________________
On March 23, 1994,three class action complaints were filed against the
Company and certain of its officers and directors in the United States District
Court for the Western District of New York located in Rochester, New York.
The respective plainiffs are Jacqueline Bowkey, Jeffrey Sadler and Maude
Thompson and the defendants in each action are the Company, Roger E. Main
(now deceased), the former Chairman and Chief Executive Officer of the Company,
Timothy J. Kennedy, Vice President, Secretary, Treasurer and Chief Financial
Officer of the Company, Russell E. Stingel, President of the Company, and
Edward Butka, Vice President of the Company.
In each action the plainiff, claiming to represent a class of shareholders
who purchased common stock of the Company between January 24,1994 and March
22, 1994 (the "Class"), alleges (1) that defendants violated the federal
securities laws by making mispresentations regarding the future earnings
and business propects of the Company and (2) that Plantiff and the Class
purchased common stock of the Company at artificially inflated prices in
reliance upon said statements and that they were damaged thereby. In each
action, plainiff seeks unspecified damages.
The three actions were consolidated in March 1995. An answer, in which
defendants denied all allegations of wrongdoing, was served in January 1996.
To date, no documents have been produced and no depositions have been taken.
A motion for class certification made by plainiffs, returnable July 11,
1996, was withdrawn and accordingly no class has been certified. Counsel for
plainiffs have stated that they intend to voluntarily discontinue the
action if the details of such dismissal can be agreed upon. Such a
discontinuance would not involve any payment by the Company. At this time there
is no way in which the Company can quantify its monetary exposure since, even
if the action is not voluntarily discontinued and even if a Class is
certified,the Company has no way of knowing how many people will be in the
Class or what almount their claimed losses may aggregate. The defendants
believe that the claims are totally without merit and will continue to
defend the actions vigorously.
Item 2. Changes in Securities
_____________________
None.
Item 3. Defaults Upon Senior Securities
_______________________________
None.
<PAGE>
Item 4. Submission of Matters to a Vote of Securities Holders.
_____________________________________________________
None.
Item 5. Other Information
_________________
On July 8, 1996, Roger E. Main, the Company's Chief Executive Officer
and a director of the Company, died. Russell E. Stingel, the Company's
President and Chief Operating Officer is acting Chief Executive Officer.
Item 6 Exhibits and Reports on Form 8-K
________________________________
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
IEC ELECTRONICS CORP.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of
1934, the registrant has duly cause this report to be signed on its
behalf by the undersigned thereunto duly authorized.
IEC ELECTRONICS CORP.
Registrant
August 12, 1996 By:/s/Russell E. Stingel
Date ______________________
Russell E. Stingel
President, Chief Operating Officer and
Acting Chief Executive Officer
August 12, 1996 By:/s/Timothy J. Kennedy
____________________
Date Timothy J. Kennedy
Vice President, Treasurer, Secretary
and Chief Finanical Chief
