<PAGE>
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 27, 1996
Commission file Number 0-6508
IEC ELECTRONICS CORP
-----------------------------------------------------
(Exact name of registrant as specified in its charter.)
Delware 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 - 7,415,070 shares as of February 10, 1997.
Page 1 of 14
<PAGE>
IEC ELECTRONICS CORP
INDEX
PART 1 FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Consolidated Balance Sheets as of :
December 27, 1996 (Unaudited) and September 30, 1996....... 4
Consolidated Statements of Income
for the three months ended:
December 27, 1996 (Unaudited) and
December 29, 1995(Unaudited)................................ 5
Consolidated Statement of Cash Flows
for the three months ended:
December 27, 1996 (Unaudited) and
December 29, 1995(Unaudited)................................ 6
Consolidated Statement of Changes
in Shareholders' Equity for the years ended
September 30, 1996 and 1995 and for the
three months ended December 27, 1996 (Unaudited)............ 7
Notes to Consolidated Financial
Statements (Unaudited) ...................................... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ................ 11
PART II
Item 1. Legal Proceedings............................................ 13
Item 2. Changes in Securities........................................ 13
Page 2 of 13
<PAGE>
Item 3. Defaults Upon Senior Securities.............................. 13
Item 4. Submission of Matters to a Vote of Security Holders.......... 13
Item 5. Other Information............................................ 13
Item 6. Exhibits and Reports on Form 8-K............................. 13
Signature ........................................................... 14
Page 3 of 14
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 27, 1996 AND SEPTEMBER 30, 1996
<CAPTION>
DECEMBER 27,1996 SEPTEMBER 30,1996
---------------- ------------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $2,066,330 $1,481,694
Accounts receivable 28,643,442 28,210,567
Inventories 28,642,442 26,006,235
Income taxes receivable 0 756,879
Deferred income taxes 702,192 702,192
Other current assets (63,467) 165,446
------------- -------------
Total current assets 59,990,939 57,323,013
------------- -------------
Property, Plant and Equipment, net 38,748,165 39,014,104
------------ -------------
Other Assets:
Cost in excess of net assets acquired, net 12,700,156 12,818,645
Note receivable from officer 393,464 355,519
Other assets 9,309 9,309
------------ ------------
13,102,929 13,183,473
------------ ------------
$111,842,033 $109,520,590
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Borrowings under lines of credit $8,530,000 $8,530,000
Current portion of long-term debt 2,753,464 2,781,517
Accounts payable 19,537,263 16,974,916
Accrued payroll and related expenses 2,208,391 2,772,330
Accrued income taxes 259,121 0
Other accrued expenses 211,910 305,237
------------ -------------
Total current liabilities 33,500,149 31,364,000
------------ -------------
Deferred Income Taxes 3,290,749 3,290,749
------------ -------------
Long-Term Debt 6,682,102 7,409,076
------------ -------------
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 - 7,415,070 shares 74,151 74,151
Additional paid-in capital 36,973,633 36,973,633
Retained earnings 31,321,249 30,408,981
------------ ------------
Total shareholders' equity 68,369,033 67,456,765
------------ ------------
$111,842,033 $109,520,590
============ ============
<FN>
The accompanying notes to unaudited consolidated financial statements are an
integral part of these balance sheets
</FN>
</TABLE>
Page 4 of 14
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 27, 1996 AND DECEMBER 29, 1995
<CAPTION>
3 MONTHS ENDED 3 MONTHS ENDED
DECEMBER 27,1996 DECEMBER 29, 1995
---------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $50,522,239 $46,982,183
Cost of sales 45,814,201 40,402,751
---------- ----------
Gross profit 4,708,038 6,579,432
Selling and administrative
expenses (exclusive of
amortization expense shown below) 2,733,673 3,076,093
Amortization expense 118,490 118,490
---------- ----------
Operating income 1,855,875 3,384,849
Interest expense (390,209) (336,519)
Other income, net 95,602 122,203
---------- ----------
Net income before income 1,561,268 3,170,533
taxes
Income taxes 649,000 1,257,000
---------- ----------
Net Income $912,268 $1,913,533
========== ===========
Net income per common and common
equivalent share $0.12 $0.26
---------- ----------
Common and common equivalent shares 7,503,400 7,475,073
---------- ----------
<FN>
The accompanying notes to unaudited consolidated financial statements are an
integral part of these financial statements.
</FN>
</TABLE>
Page 5 of 14
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 27, 1996 AND DECEMBER 29, 1995
<CAPTION>
3 MONTHS 3 MONTHS
ENDED ENDED
DECEMBER 27, 1996 DECEMBER 29,1995
----------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $912,268 $1,913,533
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 2,351,760 1,935,960
Increase in other assets (37,945) -
Gain on sale of fixed assets (14,000) -
Amortization of cost in excess of
net assets acquired 118,490 118,490
Changes in operating assets and
liabilities:
(Increase)in accounts receivable (432,875) (4,420,049)
(Increase)in inventories (2,636,207) (2,930,220)
Decrease in income taxes receivable 756,879 -
Decrease in other current assets 228,913 204,962
Increase (Decrease) in accounts payable 2,562,347 960,701
Decrease in accrued payroll and
related expenses (563,939) (884,854)
Decrease in accrued income taxes 259,121 (95,240)
(Decrease)Increase in other
accrued expenses (93,327) 135,688
------------ -----------
Net cash provided by (used in)
operating activities 3,411,485 (3,061,029)
------------ -----------
Cash Flows from Investing Activities:
Purchases of property, plant and equipment (2,085,822) (2,788,522)
Proceeds from sale of property 14,000 -
Merger related costs - (3,285)
------------ -----------
Net cash used in investing activities (2,071,822) (2,791,807)
------------ -----------
Cash Flows from Financing Activities:
Net borrowings under line of credit - 4,000,000
agreements
Proceeds from long-term borrowings - 2,398,000
Principal payments on long-term debt (755,027) (888,210)
----------- -----------
Net cash (used in)provided by
financing activities (755,027) 5,509,790
------------ -----------
Net Increase (Decrease) in cash and
cash equivalents 584,636 (343,046)
Cash and cash equivalents at beginning
of period 1,481,694 8,639,803
Cash and cash equivalents at end of period $2,066,330 $8,296,757
=========== ===========
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $390,209 $336,519
======== ==========
Income taxes $ - $1,352,240
======== ==========
Cash received during the period for:
Income taxes $367,000 $ -
======== =========
<FN>
The accompanying notes to unaudited consolidated financial statements are an
integral partof these financial statements.
</FN>
</TABLE>
Page 6 of 14
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1995 AND 1996
AND THE THREE MONTHS ENDED DECEMBER 27, 1996
<CAPTION>
Total
Common Stock Additional Retained Shareholders'
-----------------
Shares Amount Capital Earnings Equity
------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
Exercise of stock options 27,704 277 60,080 - 60,357
Net income - - - 2,497,888 2,497,888
----------------------------------------------------
Balance,September 30, 1996 7,415,070 74,151 36,973,633 30,408,981 67,456,765
Net income for the three
months ended
December 27, 1996 - - - 912,268 912,268
(unaudited)
=====================================================
Balance,December 27, 1996 7,415,070 $74,151 $36,973,633 $31,321,249 $68,369,033
(unaudited)
=====================================================
<FN>
The accompanying notes to unaudited consolidated financial statements are an
integral part of these financial statements.
</FN>
</TABLE>
Page 7 of 14
<PAGE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 27, 1996
(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 management.
Consolidation
-------------
The consolidated financial 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 electronics manufacturer for
approximately $4 million in cash and common stock. The acquisition has been
accounted for using the purchase method of accounting, and accordingly,
Accutek's net assets and results of operations are included in the
consolidated financial statements since the date of acquisition. The
purchase price has been allocated to the assets acquired and liabilities
assumed based on estimated fair values at the date of acquisition. Cost in
excess of net assets acquired related to the acquisition is being amortized
on a straight-line basis over a period of 15 years.
Page 8 of 14
<PAGE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 27, 1996
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:
December 27, September 30,
1996 1996
---------------- ----------------
(Unaudited)
Raw materials $23,775,299 $20,914,619
Work-in-process 4,867,143 5,091,616
---------------- ----------------
$28,642,442 $26,006,235
================ ================
Unaudited Finanical Statements
------------------------------
The accompanying unaudited financial statements as of December 27, 1996, and
for the three months ended December 27, 1996 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, 1996 Annual Report on
Form 10-K.
Page 9 of 14
<PAGE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 27, 1996
(2) Financing Arrangements
At December 27, 1996, $8,500,000 and $8,179,000 is outstanding on the
working capital and equipment line of credit, respectively. Amounts borrowed
under the equipment line of credit are repayable monthly from date of
borrowing over a term of 60 months.
(3) Legal Matters
The Company is involved with various legal matters in the ordinary course
of business, including certain employment matters. The outcomes of these
matters are 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 not have a material
adverse effect on the Company's financial position or results of operations.
Page 10 of 14
<PAGE>
Item 2:Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations - Three months ended December 27, 1996 as
---------------------------------------------------------------
compared to three months ended December 29,1995.
------------------------------------------------
Net sales for the three month period ended December 27, 1996, were
$50,522,239 as compared to $46,982,183 for the comparable period of the
prior fiscal year, an increase of 7.5%. The increase in sales is
primarily due to sales to new customers, offset by a decrease in sales to
some existing customers. Turnkey sales were 91% of net sales in the three
months ended December 27,1996, as compared to 76% for the comparable
period of the prior year. Customer reschedules and the resulting material
shortages impacted both sales and earnings for the quarter.
Gross profit as a percentage of sales was 9.3% in the three months ended
December 27, 1996, down from 14% in the comparable period of the prior
year. This decrease is primarily due to the increased raw material
value in the cost of sales and underutilized manufacturing capacity.
This underutilization is primarily the effect of customer rescheduling
which, in turn, causes production interruption and restarts, set-up
expense and production downtime resulting in direct labor inefficiency.
All of these factors are continually changing and are interrelated.
The effect of each factor cannot be separately determined. While
component shortages have eased, certain component shortages also affected
operating results. Accordingly, these factors may result in
quarter-to-quarter fluctuations in both future revenues and earnings.
The cost of sales and resulting gross profit as a percentage of sales can
vary widely among different jobs within both turnkey and consignment
sales and are affected by a number of factors including the mix of
consignment 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.
Selling and administrative expenses decreased to $2,733,673 in the three
months ended December 27, 1996, from $3,076,093 in the comparable period
of the prior fiscal year. This decrease can be attributed primarily to
decreased commission expense related to an increase in sales of
non-commission accounts and decrease in sales of commission accounts. As
a percentage of net sales, selling and administrative expenses decreased
to 5.4% from 6.5% in the same quarter of the prior year.
Net income for the quarter decreased to $912,268 from $1,913,533 in the
first quarter of fiscal year 1996. Earnings per share were $.12 as
compared to $.26 per share in the comparable period of fiscal 1996.
Page 11 of 14
<PAGE>
Liquidity and Capital Resources
Net sales for the month of December 1996 were $19,363,836, representing
38% of the total net sales for the three month period ending December 27,
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
December 27, 1996, $8,500,000 and $8,179,000 is outstanding on the
working capital and equipment line of credit, respectively. Amounts
borrowed under the equipment line of credit are repayable monthly from
date of borrowing over a term of 60 months. At December 27, 1996,
approximately $16,321,000 was available for borrowing under these
existing lines of credit. 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 acquisition 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 12 of 14
<PAGE>
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 13 of 14
<PAGE>
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 10, 1997 By:/s/Russell E. Stingel
------------------------------
Russell E. Stingel
President, Chief Executive Officer
Dated: February 10, 1997 By:/s/Timothy J. Kennedy
------------------------------
Timothy J. Kennedy
Vice President, Treasurer, Secretary and
Chief Finanical Officer
Page 14 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<MULTIPLIER> 1
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,066,330
<SECURITIES> 0
<RECEIVABLES> 28,643,442
<ALLOWANCES> 0
<INVENTORY> 28,642,442
<CURRENT-ASSETS> 59,288,747
<PP&E> 66,355,210
<DEPRECIATION> 33,282,863
<TOTAL-ASSETS> 111,139,841
<CURRENT-LIABILITIES> 33,500,000
<BONDS> 6,682,102
0
0
<COMMON> 74,151
<OTHER-SE> 68,294,882
<TOTAL-LIABILITY-AND-EQUITY> 111,139,841
<SALES> 50,582,237
<TOTAL-REVENUES> 50,617,841
<CGS> 45,814,201
<TOTAL-COSTS> 2,733,673
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 390,209
<INCOME-PRETAX> 1,679,758
<INCOME-TAX> 649,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 912,268
<EPS-PRIMARY> 0.120
<EPS-DILUTED> 0.120
</TABLE>
