<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 26, 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 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 - 7,557,701 shares as of Feburary 9, 1998.
Page 1 of 12
<PAGE>
PART 1 FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Consolidated Balance Sheets as of :
December 26, 1997 (Unaudited) and September 30, 1997.......... 4
Consolidated Statements of Income
for the three months ended:
December 26, 1997 (Unaudited) and
September 30, 1997............................................ 5
Consolidated Statement of Cash Flows
for the three months ended:
December 26, 1997 (Unaudited) and
December 27, 1996............................................. 6
Notes to Consolidated Financial
Statements (Unaudited)......................................... 7
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
Page 2 of 12
<PAGE>
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 3 of 12
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 26, 1997 AND SEPTEMBER 30, 1997
(in thousands, except for share and per share data)
<CAPTION>
DECEMBER 26,1997 SEPTEMBER 30,1997
---------------- ------------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $146 $3,921
Accounts receivable 55,569 49,045
Inventories 41,545 45,360
Deferred income taxes 1,900 1,900
Other current assets 121 98
--------- ----------
Total current assets 99,281 100,324
--------- ----------
Property, Plant and Equipment, net 40,788 39,391
---------- ----------
Other Assets:
Cost in excess of net assets acquired, net 12,227 12,346
Other assets 9 9
----------- ----------
$152,305 $152,070
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Borrowings under lines of credit $21,030 $10,530
Current portion of long-term debt 3,658 3,291
Accounts payable 32,365 43,904
Accrued payroll and related expenses 3,733 5,611
Accrued income taxes 1,612 1,887
Other accrued expenses 517 479
------- -------
Total current liabilities 62,915 65,702
------- -------
Deferred Income Taxes 3,919 3,919
------- -------
Long-Term Debt 7,648 6,988
------- ------
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 - 7,557,701 shares and
7,552,201 shares 76 75
Additional paid-in capital 38,464 38,430
Retained earnings 39,694 37,367
Treasury Stock, at cost - 20,573 shares -411 -411
------- -------
Total shareholders' equity 77,823 75,461
------- --------
$152,305 $152,070
======== ========
<FN>
The accompanying notes to unaudited consolidated financial statements are an
integral part of these balance sheets
</FN>
</TABLE>
Page 4 of 12
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 26, 1997 AND DECEMBER 27, 1996
(in thousands, except per share data)
<CAPTION>
3 MONTHS ENDED 3 MONTHS ENDED
DECEMBER 26, 1997 DECEMBER 27, 1996
-------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales $94,115 $50,522
Cost of sales 85,427 45,814
------- -------
Gross profit 8,688 4,708
Selling and administrative expenses 4,300 2,852
------- -------
Operating income 4,388 1,856
Interest expense (648) (390)
Other income, net 44 95
------- -------
income before income taxes 3,784 1,561
Income taxes 1,457 649
------- -------
Net Income $2,327 $912
======= =======
Net income per share:
Basic $0.31 $0.12
Diluted $0.30 $0.12
Weighted average number of shares:
Basic 7,534 7,415
Diluted 7,784 7,786
<FN>
The accompanying notes to unaudited consolidated financial statements are an
integral part of these financial statements.
</FN>
</TABLE>
Page 5 of 12
<PAGE>
<TABLE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 26, 1997 AND DECEMBER 27, 1996
(in thousands)
<CAPTION>
3 MONTHS 3 MONTHS
ENDED ENDED
DECEMBER 26, DECEMBER 27,
1997 1996
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $2,327 $912
Adjustments to reconcile net income to net
cash provided by(used in)operating activities:
Depreciation and amortization 2,450 2,351
Increase in other assets - (37)
Gain on sale of fixed assets - (14)
Amortization of cost in excess of net assets
acquired 118 118
Changes in operating assets and liabilities:
Increase in accounts receivable (6,523) (432)
Decrease (Increase) in inventories 3,815 (2,636)
Decrease in income taxes receivable - 757
Decrease (Increase)in other current assets (22) 229
Increase (Decrease) in accounts payable (11,539) 2,562
Decrease in accrued payroll and related
expenses (1,878) (564)
Increase (Decrease)in accrued income taxes (275) 259
Increase (Decrease) in other accrued expenses 37 (93)
------- -------
Net cash provided by (used in)operating
activities (11,490) 3,411
------- -------
Cash Flows from Investing Activities:
Purchases of property, plant and equipment (3,847) (2,086)
Proceeds from sale of property - 14
------- --------
Net cash used in investing activities (3,847) (2,072)
------- --------
Cash Flows from Financing Activities:
Exercise of stock options 34 -
Net borrowings under line of credit agreements 12,500 -
Principal payments on long-term debt (972) (755)
-------- ---------
Net cash provided by financing activities 11,562 (755)
-------- ---------
Net increase(decrease)in cash and cash equivalents (3,775) 584
Cash and cash equivalents at beginning of period 3,921 1,482
-------- ---------
Cash and cash equivalents at end of period $146 $2,066
========== ==========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $648 $390
Income taxes $1,745 $ -
========== ==========
Cash received during the period for:
Income taxes $ - $367 -
========== ==========
<FN>
The accompanying notes to unaudited consolidated financial statements are an
integral part of these financial statements.
</FN>
</TABLE>
Page 6 of 12
<PAGE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 26, 1997
Dollar amounts are presented in thousands of dollars
(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, IEC-Edinburg, Texas Inc. (previously Calidad
Electronics Inc.)and IEC-Arab, Alabama Inc. (previously Accutek, Inc.)
(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 money market and bank account balances. The
Company's cash and cash equivlents are held and managed by institutions which
follow the Company's investment policy. The fair value of the Company's
finanical instruments approximates carrying amounts due to the relatively short
maturies 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:
December 26, September 30,
1997 1997
---------------- ----------------
(Unaudited)
Raw materials $33,064 $38,209
Work-in-process 8,481 7,151
---------------- ----------------
$41,545 $45,360
================ ================
Unaudited Finanical Statements
- ------------------------------
The accompaning unaudited finanical statements as of December 26, 1997, and for
the three months ended December 27, 1996 have been prepared in accordance with
generally accepted accounting princples for the interm finanica1 information. In
the opinion management, all adjustments considered necessary for a fair
presenation, which consist solely of normal recurring adjustments have been
included. The accompaning finanical statements should be read in conjuction with
the financial statements and notes thereto included in the Company's
September 30, 1997 Annual Report on Form 10-K.
Page 7 of 12
<PAGE>
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 26, 1997
Dollar amounts are presented in thousands of dollars
New Pronouncements
- ------------------
The Company adopted, Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 128 "Earnings per Share" (SFAS No.128),
during the quarter ended December 26, 1997 and restated previously reported
earnings per share. Basic earnings per common share were computed by dividing
net income by the weighted average number of shares of common stock outstanding
during the three month periods ending December 26, 1997 and December 27, 1996.
Diluted earnings earnings per share were computed by the weighted number of
common shares outstanding and common stock equivalents using the treasury stock
method for the three month periods ending December 26, 1997 and December 27,
1996. All references to net income per share should be assumed to have been
calculated under SFAS No. 128.
(2) Financing Arrangements
At December 26, 1997, $21,000 and $10,504 were 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
life term of 60 months.
On January 23, 1998, the Company received a commitment from Chase Manhattan Bank
to underwrite and to act as adminstative agent for a $75 million senior credit
facility. The commitment is subject to customary conditions including the
execution of a definitive Credit Agreement, which is expected to close in late
February 1998.
(3) Legal Matters
There are no material legal proceedings pending to which the Company or any of
its subsidiaries is a party or to which any of the Company's or subsidiaries'
property is subject. To the Company's knowledge, there are no material legal
proceedings to which any director, officer or affiliate of the Company, or any
beneficial owner of more than 5 percent (5%) of Common Stock, or any associate
of any of the foregoing, is a party adverse to the Company or any of its
subsidiaries.
Page 8 of 12
<PAGE>
Management's Discussion and Analysis of Financial Condition and
- ---------------------------------------------------------------
Results of Operations
- ---------------------
Results of Operations - Three months ended December 26, 1997 as
- ---------------------------------------------------------------
compared to three months ended December 27, 1996.
- ------------------------------------------------
Net sales for the three month period ended December 26, 1997, were $94,115 as
compared to $50,522 for the comparable period of the prior fiscal year, an
increase of 86.3%. The increase in sales is primarily due to increases in demand
and a further shift to turnkey sales, which represented 98% and 91% of net sales
in the first quarter of 1998 and 1997, respectively. This quarter was also
affected by the unusally high material content of a large job.
Gross profit as a percentage of sales was 9.2% in the three months ended
December 26, 1997, down from 9.3% in the comparable period of the prior year.
This decrease is primarily due to the high material content noted in the sales
discussion.
The cost of sales 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 and turnkey
contracts, the percentage of material content, the percentage of labor content,
quantities ordered, and the 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 selling and administrative expenses increased to $4,300 in the three months
ended December 26, 1997, from $2,734 in the comparable period of the prior
fiscal year. This increase can be attributed primarily to staff additions,
increases in salaries, bonuses and related costs and to increases in commission
expenses related to higher net sales.
As a percentage of net sales, selling and administrative expenses decreased to
4.6% from 5.4% in the same quarter of the prior year.
Interest expense of $648 for the three months ended December 26, 1997 was
substantially higher than the $390 of interest expense in the comparable
period last year as a result of higher average borrowing levels during the
current period.
Net income for the quarter increased to $2,327 from $912 in the first quarter of
fiscal year 1997. Earnings per share were $.31 as compared to $.12 per share in
the comparable period of fiscal 1997.
Page 9 of 12
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Net sales for the month of December 1997 were $37,730, representing 40% of the
total net sales for the three month period ending December 26, 1997. The Company
operates on a fiscal quarter consisting of four weeks in the first and second
months and five weeks in the third month.
At December 26, 1997, $21,000 and $10,504 was 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 26, 1997, approximately $1,496 was available for borrowing
under these existing lines of credit.
On January 23, 1998, the Company received a commitment from Chase Manhattan Bank
to underwrite and to act as adminstative agent for a $75 million senior credit
facility. The commitment is subject to customary conditions including the
execution of a definitive Credit Agreement, which is expected to close in late
February 1998. 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.
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 uncertainites discussed in
the September 30, 1997, Form 10K and its other filings with the Securities and
Exchange Commission.
Page 10 of 12
<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 11 of 12
<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 9, 1998 /s/Russell E. Stingel
-----------------------------
Russell E. Stingel
Chief Executive Officer
Dated: February 9, 1998 /s/Diana R. Kurty
------------------------------
Diana R. Kurty
Vice President of Finance,
Chief Finanical Officer and
Treasurer
Page 12 of 12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-26-1997
<CASH> 146
<SECURITIES> 0
<RECEIVABLES> 55,569
<ALLOWANCES> 0
<INVENTORY> 41,545
<CURRENT-ASSETS> 99,281
<PP&E> 40,788
<DEPRECIATION> 0
<TOTAL-ASSETS> 152,305
<CURRENT-LIABILITIES> 62,915
<BONDS> 7,648
0
0
<COMMON> 76
<OTHER-SE> 77,823
<TOTAL-LIABILITY-AND-EQUITY> 152,305
<SALES> 94,115
<TOTAL-REVENUES> 94,159
<CGS> 85,427
<TOTAL-COSTS> 4,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 648
<INCOME-PRETAX> 3,874
<INCOME-TAX> 1,457
<INCOME-CONTINUING> 1,457
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,327
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.30
</TABLE>
