<PAGE>
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 27, 1997
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)
(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 - 7,504,320 shares as of July 25, 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 :
June 27, 1997 (Unaudited) and September 30, 1996.......... 4
Consolidated Statements of Income
for the three months ended:
June 27, 1997 (Unaudited) and
June 28, 1996(Unaudited)................................... 5
Consolidated Statements of Income
for the nine months ended:
June 27, 1997 (Unaudited) and
June 28, 1996(Unaudited)................................... 6
Consolidated Statement of Cash Flows
for the nine months ended:
June 27, 1997 (Unaudited) and
June 28, 1996(Unaudited)................................... 7
Consolidated Statement of Changes
in Shareholders' Equity for the years ended
September 30, 1996 and 1995 and for the
nine months ended June 27, 1997 (Unaudited)................. 8
Notes to Consolidated Financial
Statements (Unaudited) ...................................... 9
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 14
<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
JUNE 27, 1997 AND SEPTEMBER 30, 1996
<CAPTION>
JUNE 27, SEPTEMBER 30,
1997 1996
------------- ---------------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $2,284,187 $1,481,694
Accounts receivable 32,886,805 28,210,567
Inventories 40,426,451 26,006,235
Income taxes receivable 0 756,879
Deferred income taxes 702,192 702,192
Other current assets (75,716) 165,446
---------------- --------------
Total current assets 76,223,919 57,323,013
---------------- --------------
Property, Plant and Equipment, net 36,128,170 39,014,104
---------------- --------------
Other Assets:
Cost in excess of net assets acquired, net 12,463,738 12,818,645
Note receivable from officer 393,464 355,519
Other assets 9,309 9,309
----------------- -------------
12,866,511 13,183,473
----------------- -------------
$125,218,600 $109,520,590
================ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Borrowings under lines of credit $9,530,000 $8,530,000
Current portion of long-term debt 2,673,982 2,781,517
Accounts payable 26,120,302 16,974,916
Accrued payroll and related expenses 4,099,221 2,772,330
Accrued income taxes 1,340,163 0
Other accrued expenses 267,420 305,237
----------------- -------------
Total current liabilities 44,031,088 31,364,000
----------------- -------------
Deferred Income Taxes 3,290,749 3,290,749
----------------- -------------
Long-Term Debt 5,255,636 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 - 7,476,320 shares 74,763 74,151
Additional paid-in capital 37,549,057 36,973,633
Retained earnings 35,017,307 30,408,981
----------------- ------------
Total shareholders' equity 72,641,127 67,456,765
----------------- ------------
$125,218,600 $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 JUNE 27, 1997 AND JUNE 28, 1996
<CAPTION>
3 MONTHS 3 MONTHS
ENDED ENDED
JUNE 27, 1997 JUNE 28, 1996
-------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $62,797,999 $43,351,935
Cost of sales 54,894,372 42,683,056
-------------- -----------------
Gross profit 7,903,627 668,879
Selling and administrative
expenses (exclusive of
amortization expense shown below) 4,812,735 3,115,715
Amortization expense 118,490 118,490
-------------- -----------------
Operating income 2,972,402 (2,565,326)
Interest expense (396,576) (442,700)
Other income, net 228,657 107,352
-------------- -----------------
Net income before income taxes 2,804,483 (2,900,674)
Income taxes 981,000 (1,021,000)
-------------- -----------------
Net Income $1,823,483 $(1,879,674)
============= ================
Net income per common and common
equivalent share $0.24 $(0.25)
----- -----
Common and common equivalent shares 7,682,924 7,446,168
-------------- -----------------
<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 INCOME
FOR THE NINE MONTHS ENDED JUNE 27, 1997 AND JUNE 28, 1996
<CAPTION>
9 MONTHS 9 MONTHS
ENDED ENDED
JUNE 27, 1997 JUNE 28, 1996
-------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $174,422,956 $134,719,082
Cost of sales 154,723,510 123,193,470
----------------- ----------------
Gross profit 19,699,446 11,525,612
Selling and administrative
expenses (exclusive of
amortization expense shown below) 11,133,843 9,271,420
Amortization expense 355,469 355,469
----------------- ---------------
Operating income 8,210,134 1,898,723
Interest expense (1,170,158) (1,190,743)
Other income, net 406,350 332,706
----------------- ----------------
Net income before income taxes 7,446,326 1,040,686
Income taxes 2,838,000 588,000
----------------- ----------------
Net Income $4,608,326 $452,686
================= =================
Net income per common and common
equivalent share $0.61 $0.06
----- -----
Common and common equivalent shares 7,572,731 7,466,617
----------------- ----------------
<FN>
The accompanying notes to unaudited consolidated financial
statements are an integral part of these financial statements.
</FN>
</TABLE>
Page 6 of 14
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 27, 1997 AND JUNE 28, 1996
<CAPTION>
9 MONTHS 9 MONTHS
ENDED ENDED
JUNE 27, 1997 JUNE 28, 1996
--------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $4,608,326 $452,686
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 7,055,581 6,383,880
Increase in other assets (37,945) -
Gain on sale of fixed assets (70,093) (8,750)
Amortization of cost in excess of
net assets acquired 355,469 355,469
Changes in operating assets and
liabilities:
Increase in accounts receivable (4,676,238) (3,683,862)
Increase in inventories (14,420,216) (3,866,678)
(Increase)Decrease in income
taxes receivable 756,879 (831,688)
Decrease in other current assets 241,162 90,724
(Decrease)Increase in accounts payable 9,145,386 (1,212,185)
Increase (Decrease) in
accrued payroll and related expenses 1,326,891 (458,247)
Increase (Decrease)in accrued
income taxes 1,340,163 (1,246,680)
Increase (Decrease)in other
accrued expenses (37,817) 99,868
------------ ----------------
Net cash provided by (used in)
operating activities 5,587,548 (3,925,463)
------------ ----------------
Cash Flows from Investing Activities:
Purchases of property, plant and
equipment (4,377,553) (7,860,072)
Proceeds from sale of property 278,000 8,750
Proceeds from exercise of options 576,036 22,895
Merger related costs (563) (3,397)
------------- ---------------
Net cash used in investing activities (3,524,080) $(7,831,824)
------------- ---------------
Cash Flows from Financing Activities:
Net borrowings under line of credit
agreements 1,000,000 5,100,000
Proceeds from long-term borrowings - 3,970,000
Principal payments on long-term debt (2,260,975) (2,978,848)
----------- -------------
Net cash (used in)provded by
financing activities (1,260,975) 6,091,152
----------- ---------------
Net Increase (Decrease) in cash
and cash equivalents 802,493 (5,666,135)
Cash and cash equivalents at beginning
of period 1,481,694 8,639,803
----------- ----------------
Cash and cash equivalents at end of
period $2,284,187 $2,973,668
============ ===============
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest $1,178,211 $1,190,743
============ ===============
Income taxes $1,633,481 $2,509,680
============ ===============
Cash received during the period for:
Income taxes $ 655,523 $ -
============ ===============
<FN>
The accompanying notes to unaudited consolidated financial
statements are an integral part of these financial statements.
</FN>
</TABLE>
Page 7 of 14
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
AND THE NINE MONTHS ENDED JUNE 27, 1997
<CAPTION>
Total
Common Stock Additional Retained Shareholders
------------
Shares Amount Capital Earnings Equity
------ ------ ----------- ---------- -----------
<S> <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
Exercise of stock options 61,250 612 575,424 576,036
Net income for the nine
months ended June 27, 1997
(unaudited) - - - 4,608,326 4,608,326
--------- ------- ----------- ----------- ----------
Balance, June 27, 1997 7,476,320 $74,763 $37,549,057 $35,017,307$72,641,127
(unaudited) ========= ======= =========== =========== ==========
<FN>
The accompanying notes to unaudited consolidated financial
statements are an integral part of these financial statements.
</FN>
</TABLE>
Page 8 of 14
<PAGE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1997
(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.
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 27, SEPTEMBER 30,
1997 1996
----------------- --------------
(Unaudited)
Raw materials $32,623,345 $20,914,619
Work-in-process 7,803,106 5,091,616
----------- -----------
$40,426,451 $26,006,235
=========== ===========
Unaudited Financial Statements
- ------------------------------
The accompanying unaudited financial statements as of June 27, 1997, and for the
nine months ended June 27, 1997 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.
New Pronouncements
- ------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS no.128). The
Company is required to adopt SFAS No. 128 effective for periods ending after
December 15, 1997, including interim periods. Early adoption is not permitted.
Restatement of previously reported earnings per share is required to be
presented. Therefore SFAS No.128 will be applicable for the Company with the
quarter ended December 31, 1997. SFAS No.128 establishes revised standards for
computing and presenting earnings per share. The Company believes the effect of
adoption will not be material.
Page 9 of 14
<PAGE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1997
(2) Financing Arrangements
At June 27, 1997, $9,500,000 and $6,915,000 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. Management believes resolution of these matters will not have a
material adverse effect on the Company's financial position, results of
operations or cash flow.
Page 10 of 14
<PAGE>
Management's Discussion and Analysis of Financial Condition and
- ---------------------------------------------------------------
Results of Operations
- ----------------------
Results of Operations - Three months ended June 27, 1997 as compared to three
- ------------------------------------------------------------------------------
months ended June 28,1996.
- ---------------------------
Net sales for the three month period ended June 27, 1997, were $62,797,999 as
compared to $43,351,935 for the comparable period of the prior fiscal year, an
increase of 44.9%. The increase in sales was primarily due to sales to existing
customers and sales to new customers. Sales to new customers were approximately
4% of the sales for the quarter. Turnkey sales were 94% of net sales in the
three months ended June 27, 1997, as compared to 92% for the comparable period
of the prior year.
Gross profit as a percentage of sales was 12.6% in the three months ended June
27, 1997, up from 1.5% in the comparable period of the prior fiscal year. The
increase in gross profit as a percentage of sales is primarily due to a lower
percentage in the material cost of sales and an increase use of 24 hours a day,
7 days a week manufacturing operations, both of which lead to improved labor
efficiencies and absorption of fixed overhead costs.
Selling and administrative expenses increased to $4,812,735 in the three months
ended June 27, 1997, from $3,115,715 in the comparable period of the prior
fiscal year. This increase is primarily due to the bonus accrual based upon
improved profitability. As a percentage of net sales, selling and administrative
expenses increased to 7.7% from 7.2% in the same quarter of the prior year.
Net income for the quarter increased to $1,823,483 from a net loss of
$(1,879,674)in the comparable quarter of the prior year. Earnings per share were
$.24 as compared to a net loss per share of $(.25) per share in the comparable
period of the prior fiscal year.
Results of Operations - Nine months ended June 27, 1997 as compared to nine
- ---------------------------------------------------------------------------
months ended June 28, 1996.
- ---------------------------
Net sales for the nine month period ended June 27, 1997, were $174,422,956 as
compared to $134,719,082 for the comparable period of the prior fiscal year, an
increase of 29.5%. The increase in sales was primarily due to increased sales to
existing customers and sales to new customers. Turnkey sales were 94% of net
sales in the nine months ended June 27, 1997, as compared to 84% for the
comparable period of the prior fiscal year.
Gross profit as a percentage of sales was 11.3% in the nine months ended June
27, 1997, up from 8.6% in the comparable period of the prior year. This increase
is primarily due to the increased labor efficiencies and lower overhead costs in
relation to increased sales.
Selling and administrative expenses increased to $11,133,843 in the nine months
ended June 27, 1997, from $9,271,420 in the comparable period of the prior
fiscal year. This increase is due primarily to increased salaries and wages, a
bonus accrual based on increased profitability, partially offset by decreased
commission expense related to an increase in sales of non-commissioned accounts.
As a percentage of net sales, selling and administrative expenses decreased to
6.4% from 6.9% for the comparable period of the prior fiscal year.
Net income for the first nine months of fiscal year 1997 increased to $4,608,326
from $452,686 in the same period of fiscal year 1996. Earnings per share were
$.61 for the nine months as compared to $.06 per share in the nine months of the
prior year.
Page 11 of 14
<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 among 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.
Historically, from time to time, the Company has experienced component shortages
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.
If component shortages should occur in future months, they may 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 future revenues and
earnings.
Liquidity and Capital Resources
Net sales for the month of June 1997 were $24,631,401, representing 39% of the
total net sales for the three month period ending June 27, 1997. 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, 1997, $9,500,000 and $6,915,000 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 June 27, 1997, approximately $16,585,000 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.
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 Company's September 30, 1996, Form 10-K and in its other filings with the
Securities and Exchange Commission.
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
Effective June 13, 1997, David W. Fradin joined the Company as President
and Chief Operating Officer. Russell Stingel, previous president was named
Chairman of the Board and Chief Executive Officer. In addition, Bill
Anderson was promoted to Executive Vice President and General Manager.
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: July 23, 1997 /s/Russell E. Stingel
-----------------------------
Russell E. Stingel
Chief Executive Officer
Dated: July 23, 1997 /s/Timothy J. Kennedy
------------------------------
Timothy J. Kennedy
Vice President, Treasurer, Secretary and
Chief Finanical Officer
Page 14 of 14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-27-1997
<CASH> 2,284,187
<SECURITIES> 0
<RECEIVABLES> 32,886,805
<ALLOWANCES> 0
<INVENTORY> 40,426,451
<CURRENT-ASSETS> 76,223,919
<PP&E> 36,128,170
<DEPRECIATION> 0
<TOTAL-ASSETS> 125,218,600
<CURRENT-LIABILITIES> 44,031,088
<BONDS> 5,255,636
0
0
<COMMON> 74,763
<OTHER-SE> 72,566,364
<TOTAL-LIABILITY-AND-EQUITY> 125,218,600
<SALES> 174,422,956
<TOTAL-REVENUES> 174,829,306
<CGS> 154,723,510
<TOTAL-COSTS> 8,210,134
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,170,158
<INCOME-PRETAX> 7,446,326
<INCOME-TAX> 2,838,000
<INCOME-CONTINUING> 4,608,326
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,608,326
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.61
</TABLE>
