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 29, 2006
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)
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 [_]
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act.
Large accelerated filer [_] Accelerated filer [_] Non-Accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
YES [_] NO [X]
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 - 8,429,793 shares as of February 7, 2007.
Page 1 of 12
PART 1 FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Balance Sheets as of:
December 29, 2006 (Unaudited) and September 30, 2006.......... 3
Statements of Operations for the three months
ended: December 29, 2006 (Unaudited) and December 30, 2005
(Unaudited)................................................... 4
Statements of Cash Flows for the three months
ended: December 29, 2006 (Unaudited) and December 30, 2005
(Unaudited)................................................... 5
Notes to Financial Statements (Unaudited)..................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................. 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk..... 11
Item 4. Controls and Procedures........................................ 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings............................................. 12
Item 1A. Risk Factors.................................................. 12
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds... 12
Item 3. Defaults Upon Senior Securities............................... 12
Item 4. Submission of Matters to a Vote of Security Holders........... 12
Item 5. Other Information............................................. 12
Item 6. Exhibits ..................................................... 12
Signatures............................................................. 12
Page 2 of 12
Part 1. Financial Information
Item 1 -- Financial Statements
IEC ELECTRONICS CORP.
BALANCE SHEETS
DECEMBER 29, 2006 AND SEPTEMBER 30, 2006
(in thousands)
DECEMBER 29, SEPTEMBER 30,
2006 2006
------------ ------------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash $ -- $ --
Accounts receivable (net of allowance for 5,528 4,941
Doubtful accounts of $65 and $59 respectively)
Inventories 4,775 5,114
Deferred income taxes 250 250
Other current assets 32 124
------------ ------------
Total current assets 10,585 10,429
------------ ------------
FIXED ASSETS:
Land and land improvements 707 707
Building and improvements 4,104 4,089
Machinery and equipment 22,622 22,164
Furniture and fixtures 4,174 4,170
------------ ------------
SUB-TOTAL GROSS PROPERTY 31,607 31,130
LESS ACCUMULATED DEPRECIATION (29,972) (29,870)
------------ ------------
1,635 1,260
OTHER NON-CURRENT ASSETS 26 29
------------ ------------
$ 12,246 $ 11,718
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term borrowings $ 4,036 $ 3,765
Accounts payable 4,335 3,853
Accrued payroll and related expenses 265 265
Other accrued expenses 404 344
------------ ------------
Total current liabilities 9,040 8,227
------------ ------------
LONG TERM VENDOR NOTES 11 14
LONG TERM BANK DEBT 648 385
------------ ------------
TOTAL LIABILITIES 9,699 8,626
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, Authorized
- 500,000 shares; None issued or outstanding -- --
Common stock, $.01 par value, Authorized
- 50,000,000 shares; Issued - 8,429,793 and
8,401,133 shares 84 84
Treasury Shares at Cost 412,873 and 412,873
Shares, Respectively (223) (223)
Additional paid-in capital 38,633 38,601
Accumulated deficit (35,947) (35,370)
------------ ------------
Total shareholders' equity 2,547 3,092
------------ ------------
$ 12,246 $ 11,718
============ ============
The accompanying notes are an integral part of these financial statements.
Page 3 of 12
IEC ELECTRONICS CORP.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 29, 2006
AND DECEMBER 30, 2005 (in thousands,
except share and per share data)
3 MONTHS ENDED 3 MONTHS ENDED
DECEMBER 29, DECEMBER 30,
2006 2005
------------ ------------
(Unaudited) (Unaudited)
Net sales $ 9,246 $ 3,607
Cost of sales 9,038 3,088
------------ ------------
Gross profit 208 519
------------ ------------
Selling and administrative expenses 607 483
------------ ------------
Operating profit (loss) (399) 36
Interest and financing expense (124) (84)
Other Expense (50) --
------------ ------------
Net loss before income taxes (573) (48)
Provision for income taxes (3) --
------------ ------------
Net(loss) $ (576) $ (48)
============ ============
Net (loss) per common and common equivalent share:
Basic $ (0.07) $ (0.01)
Diluted $ (0.07) $ (0.01)
Weighted average number of common and common equivalent shares outstanding:
Basic 8,428,889 8,012,849
Diluted 8,428,889 8,012,849
The accompanying notes are an integral part of these financial statements.
Page 4 of 12
IEC ELECTRONICS CORP.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 29, 2006 AND DECEMBER 30, 2005
(in thousands)
3 MONTHS ENDED 3 MONTHS ENDED
DECEMBER 29, DECEMBER 30,
2006 2005
------------ ------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (576) $ (48)
Non-cash adjustments:
Compensation Expense - Stock Options 18 10
Depreciation 102 249
Issuance of director's fees in stock 5 5
Changes in operating assets and liabilities:
Accounts receivable (587) (132)
Inventories 339 (1,530)
Other assets 95 89
Accounts payable 482 1,153
Accrued expenses 60 (71)
------------ ------------
Net cash flows from operating activities (62) (275)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of plant, property & equipment (477) (248)
------------ ------------
Net cash flows from investing activities (477) (248)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments under loan agreements (59) (109)
Borrowings (payments) on line of credit 139 (383)
Proceeds from Equipment Loan 450 --
Proceeds from exercise of stock options 9 --
Purchase of Treasury Stock -- (212)
------------ ------------
Net cash flows from financing activities 539 62
------------ ------------
Change in cash and cash equivalents -- (461)
Cash and cash equivalents at beginning of period -- 461
------------ ------------
Cash and cash equivalents at end of period $ -- $ --
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 121 $ 58
Income taxes $ 3 $ -
The accompanying notes are an integral part of these financial statements.
Page 5 of 12
IEC ELECTRONICS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 29, 2006
(1) Business and Summary of Significant Accounting Policies
IEC Electronics Corp. ("IEC", the "Company") is an independent electronics
manufacturing services ("EMS") provider of complex printed circuit board
assemblies and electronic products and systems. The Company provides high
quality electronics manufacturing services with state-of-the-art manufacturing
capabilities and production capacity. Utilizing automated manufacturing and test
machinery and equipment, IEC provides manufacturing services employing surface
mount technology ("SMT") and pin-through-hole ("PTH") interconnection
technologies. As an independent full-service EMS provider, the Company offers
its customers a wide range of manufacturing services, on either a turnkey or
consignment basis. These services include product development, prototype
assembly, material procurement, volume assembly, test engineering support,
statistical quality assurance, order fulfillment and repair services. The
Company's strategy is to cultivate strong manufacturing relationships with
established and emerging original equipment manufacturers ("OEMs"). Our quarters
end on the last Friday of the final month in the quarter, except that our fiscal
year ends on September 30.
Revenue Recognition
The Company's net revenue is derived from the sale of electronic products
built to customer specifications. The Company also derives revenue from design
services and repair work. Revenue from sales is generally recognized, net of
estimated product return costs, when goods are shipped; title and risk of
ownership have passed; the price to the buyer is fixed or determinable; and
recovery is reasonably assured. Service related revenues are recognized upon
completion of the services. The Company assumes no significant obligations after
product shipment.
Allowance for Doubtful Accounts
The Company establishes an allowance for uncollectable trade accounts
receivable based on the age of outstanding invoices and management's evaluation
of collectibility of outstanding balances.
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 that 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 29, 2006 September 30, 2006
----------------- ------------------
(Unaudited)
Raw materials $ 2,688 $ 3,270
Work-in-process 2,065 1,836
Finished goods 22 8
----------------- ----------------
$ 4,775 $ 5,114
================= ================
Unaudited Financial Statements
The accompanying unaudited financial statements as of December 29, 2006,
and for the three months ended December 29, 2006 have been prepared in
accordance with generally accepted accounting principles for interim financia1
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, 2006 Annual Report on Form 10-K.
Page 6 of 12
IEC ELECTRONICS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 29, 2006
Earnings Per Share
Net income per share is computed in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share". Basic earnings per share is
calculated by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for each period. Diluted
earnings per common share is calculated by adjusting the weighted-average shares
outstanding, assuming conversion of all potentially dilutive stock options.
New Pronouncements
In September 2006, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 157, "Fair Value
Measurements". SFAS 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements.
SFAS 157 is effective as of the beginning of the first fiscal year that begins
after November 15, 2007. As such, the Company is required to adopt these
provisions at the beginning of the fiscal year ended September 30, 2009. The
Company is currently evaluating the impact of SFAS 157 on its financial
statements, but does not expect this to have a material impact.
In June 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections", a replacement of APB Opinion No. 20, "Accounting Changes", and
SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements". SFAS
No. 154 changes the requirements of the accounting for and reporting of a change
in accounting principle. Previously, most voluntary changes in accounting
principles required recognition via a cumulative effect adjustment within net
income of the period of the change. SFAS No. 154 requires retrospective
application to prior periods' financial statements, unless it is impractical to
determine either the period-specific effects or the cumulative effect of the
change. SFAS No. 154 is effective for accounting changes made in fiscal years
beginning after December 15, 2005; however, the Statement does not change the
transition provisions of any of the existing accounting pronouncements. We do
not believe adoption of SFAS No. 154 will have a material effect on our
financial position, results of operations or cash flows.
(2) Financing Agreements
The Company's financing agreements contain various affirmative and negative
covenants including, among others, limitations on the amount available under the
revolving line of credit relative to the borrowing base, capital expenditures,
and minimum earnings before interest, taxes, depreciation and amortization
(EBITDA). The Company received a waiver to the EBITDA covenant for the three
month period ended December 29, 2006 and was therefore compliant as of this
date.
(3) Stock Option Plans
In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment".
SFAS No. 123R requires all share-based payments to employees, including grants
of employee stock options, to be recognized as compensation expense in the
financial statements based on their fair values. That expense will be recognized
over the period during which an employee is required to provide services in
exchange for the award, known as the requisite service period (usually the
vesting period). We adopted SFAS No. 123R effective beginning October 1, 2005
using the Modified Prospective Application Method. Under this method, SFAS No.
123R applies to new awards and to awards modified, repurchased or cancelled
after the effective date. The impact of adopting SFAS No. 123R was an increase
of $18,000 to selling and administrative expenses for the period ending December
29, 2006.
During the three months ended December 29, 2006 the Company issued 22,500
options. No options were issued during the three months ended December 30, 2005.
The fair value of each option issued during these periods was estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions:
3 MO. ENDED 3 MO. ENDED
DEC 29, 2006 DEC 30, 2005
------------ ------------
Risk free interest rate 4.6% n/a
Expected term 5 years n/a
Volatility 56% n/a
Expected annual dividends none n/a
The weighted average fair value of options granted during the three months
ended December 29, 2006 was $.70 with an aggregate total value of $16,000.
Page 7 of 12
IEC ELECTRONICS CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 29, 2006
(4) Litigation
Except as set forth below, there are no material legal proceedings pending
to which IEC property is subject. To our knowledge, there are no material legal
proceedings to which any director, officer or affiliate of IEC, 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 IEC.
On August 13, 2003 General Electric Company ("GE") commenced an action in
the state of Connecticut against IEC and Vishay Intertechnology, Inc.
("Vishay"). The action alleges cause of action for breach of a manufacturing
services contract, which had an initial value of $4.4 million, breach of express
warranty, breach of implied warranty, and a violation of the Connecticut Unfair
Trade Practices Act. Vishay supplied a component that IEC used to assemble
printed circuit boards for GE that GE contends failed to function properly
requiring a product recall. GE claims damages "in excess of $15,000" plus
interest and attorney's fees. IEC made a motion to dismiss the action in
Connecticut for lack of jurisdiction. During the pendency of the motion, IEC
filed for a protective cross claim against Vishay, and GE filed a second action
against IEC and Vishay in New York State Supreme Court as a protective measure
in the event that its Connecticut action were dismissed. In March 2006, the New
York action was voluntarily discontinued by consent of all the parties. IEC and
Vishay are proceeding to defend GE's Connecticut action on the merits and IEC is
proceeding with its cross claim against Vishay. IEC filed a motion for summary
judgment directed to all counts. On January 11, 2007, the Court granted the
motion in part, dismissing the claim for violation of the Connecticut Unfair
Trade Practices Act, but determined that factual issues were disputed on the
contract and warranty claims. IEC intends to vigorously defend the claims and is
proceeding with the discovery process.
(5) Treasury Shares
On November 11, 2005, the Board of Directors authorized the Company to
purchase up to 10% of its outstanding common stock, at a price not to exceed
$1.00 per share and a maximum aggregate price not to exceed $425,000. This
repurchase program remained in effect until November 10, 2006. During the fiscal
quarter ended December 30, 2005, the Company purchased 412,300 shares at a cost
of $212,000. During the fiscal quarter ended June 30, 2006, the Company
purchased 45,000 shares at a cost of $29,250. These were privately negotiated
transactions.
Page 8 of 12
Item 2 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - Three Months Ended December 29,
2006, Compared to the Three Months Ended December 30, 2005.
Net sales for the three month period ended December 29, 2006, were $9.2
million, compared to $3.6 million for the comparable period of the prior fiscal
year, an increase of 156 percent. The increase in sales is due to the addition
of several new customers, and an increase in orders from existing customers.
Our five largest customers accounted for 69% of our sales for the quarter
ended December 29, 2006, and 61% of our sales for the quarter ended December 30,
2005. Although the concentration among the top five customers increased slightly
during the most recent fiscal quarter, we continue to diversify our sales base
and reduce our dependency on any one customer.
Gross profit was $0.2 million or 2 percent of sales for the three month
period ended December 29, 2006. On January 24, 2007, one of our customers,
Mangrove Systems, announced that it was ceasing operations. As a result of this
announcement, we recorded a $0.3 million charge against cost of sales to cover
our accounts receivable and inventory exposure. Without this adjustment, gross
profit would have been $0.5 million or 6 percent of sales versus $0.5 million or
14 percent of sales in the comparable period of the prior fiscal year. This
decrease in gross profit percentage was due to low productivity levels
associated with the training of new employees and the learning curve on new
products. We expect productivity levels to improve during the next few quarters,
but we are prepared to sacrifice short-term profits to support our growth
initiatives. As we grow, we are determined to maintain the high quality and on
time delivery levels that our customers have come to expect.
Selling and administrative expenses were $0.6 million for the three month
period ended December 29, 2006, and $0.5 million for the comparable period of
the prior fiscal year. The slight increase in cost is due to higher commissions
paid to our manufacturer's representatives related to the higher sales revenue.
Selling and administrative expenses were 7 percent of sales during the current
period, compared to 13 percent of sales during the same quarter of the prior
fiscal year. The percentage reduction is due to fixed costs being spread over
more sales.
Interest expense was $124,000 for the three month period ended December
29, 2006, up from $84,000 in the comparable period of the prior fiscal year.
Interest expense was $46,000 lower than prior year because we were able to
negotiate lower fees with our lender. This was offset by an $86,000 increase
associated with increased borrowing from our line of credit which has been
necessary to support our revenue growth.
Other expense was $50,000 for the three month period ended December 29,
2006. During 2004, we provided engineering services to Mangrove Systems in
exchange for a de minimis equity investment in their company. On January 24,
2007, Mangrove announced that they were ceasing operations. We charged this
investment against other expense as a result of this announcement. We had no
other expenses in the comparable period of the prior fiscal year.
Net income (loss) for the three months ended December 29, 2006 was
($576,000) versus a net income (loss) of ($48,000) in the comparable quarter of
the prior fiscal year.
Diluted income (loss) per share was ($0.07) as compared to diluted income
(loss) per share of ($0.01) in the comparable quarter of the prior fiscal year.
Accounts receivable increased by $0.6 million during the three month
period ended December 29, 2006. The increase was due to higher sales compared to
the prior quarter ($0.9 million), offset by an adjustment related to the closure
of one of our customers operations ($0.3 million). Inventory decreased by $0.3
million during the quarter. The decrease was primarily due to the shipment of
aged backlog.
We spent $0.5 million on new equipment during the three month period ended
December 29, 2006. This equipment provides new test capabilities necessary to
support our new business. We financed this purchase with a new $450,000 term
loan through our primary lender.
Page 9 of 12
Liquidity and Capital Resources
Cash flow provided by (used in) operating activities was ($62,000) for the
three months ended December 29, 2006 compared to ($275,000) for the three months
ended December 30, 2005. We used $477,000 and $248,000 to purchase new equipment
(investing activities) during the three month periods ending on December 29,
2006 and December 30, 2005 respectively. Operating cash flow during the three
months ended December 29, 2006 was negatively impacted by the write-off of
assets related to a customer who ceased operations. Operating cash flow was also
negatively impacted by high training costs and reduced productivity associated
with our rapid revenue growth.
Working capital on December 29, 2006 totaled $1.5 million, compared to
$2.2 million in the same period of the prior year. On December 29, 2006, we were
borrowing $3.7 million under our revolving credit facility. The maximum
borrowing limit under our revolving credit facility is limited to the lesser of
(i) $6.0 million or (ii) an amount equal to the sum of 85% of the receivables
borrowing base and 35% of the inventory borrowing base. Availability under the
line of credit was $1.0 million on December 29, 2006. We believe that our
liquidity is adequate to cover operating requirements for the next 12 months.
We also have a term loan balance of $498,000 that is secured by a first
mortgage on the IEC plant in Newark, New York (the "Real Estate Loan"), and
another term loan balance of $450,000 that is secured by certain manufacturing
equipment (the "Equipment Loan"). The Real Estate Loan is payable in 39 monthly
installments of $12,500 that commenced on October 1, 2005, and a final payment
of the remaining balance on January 1, 2009. The Equipment Loan is payable in 39
monthly installments of $12,500 that commenced on January 2, 2007, and a final
payment of the remaining balance on September 12, 2009. Both term loans have an
interest rate of prime plus 1.0%.
The financing agreements contain various affirmative and negative
covenants including, among others, limitations on the amount available under the
revolving line of credit relative to the borrowing base, capital expenditures,
and minimum earnings before interest, taxes, depreciation and amortization
(EBITDA). The Company received a waiver to the EBITDA covenant for the three
month period ended December 29, 2006 and was therefore compliant as of this
date.
Application of Critical Accounting Policies
Our financial statements and accompanying notes are prepared in accordance
with generally accepted accounting principles in the United States. Preparing
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue, and expenses. These
estimates and assumptions are affected by management's application of accounting
policies. Critical accounting policies for us include revenue recognition,
provisions for doubtful accounts, provisions for inventory obsolescence,
impairment of long-lived assets, accounting for legal contingencies and
accounting for income taxes.
We recognize revenue in accordance with Staff Accounting Bulletin No.101,
"Revenue Recognition in Financial Statements." Sales are recorded when products
are shipped to customers. Provisions for discounts and rebates to customers,
estimated returns and allowances and other adjustments are provided for in the
same period the related sales are recorded.
We evaluate our long-lived assets for financial impairment on a regular
basis in accordance with Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." We evaluate
the recoverability of long-lived assets not held for sale by measuring the
carrying amount of the assets against the estimated discounted future cash flows
associated with them. At the time such evaluations indicate that the future
discounted cash flows of certain long-lived assets are not sufficient to recover
the carrying value of such assets, the assets are adjusted to their fair values.
We are subject to various legal proceedings and claims, the outcomes of
which are subject to significant uncertainty. Statement of Financial Accounting
Standards No. 5, "Accounting for Contingencies", requires that an estimated loss
from a loss contingency should be accrued by a charge to income if it is
probable that an asset has been impaired or a liability has been incurred and
the amount of the loss can be reasonably estimated.
Disclosure of a contingency is required if there is at least a reasonable
possibility that a loss has been incurred. We evaluate, among other factors, the
degree of probability of an unfavorable outcome and the ability to make a
reasonable estimate of the amount of loss. Changes in these factors could
materially impact our financial position or our results of operations.
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," establishes financial accounting and reporting standards for the
effect of income taxes. The objectives of accounting for income taxes are to
recognize the amount of taxes payable or refundable for the current year and
deferred tax liabilities and assets for the future tax consequences of events
that have been recognized in an entity's financial statements or tax returns.
Judgment is required in assessing the future tax consequences of events that
have been recognized in our financial statements or tax returns. Fluctuations in
the actual outcome of these future tax consequences could impact our financial
position or our results of operations.
Page 10 0f 12
Impact of Inflation
The impact of inflation on our operations has been minimal due to the fact
that we have been able to adjust our bids to reflect any inflationary increases
in costs.
New Pronouncements
In September 2006, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 157, "Fair Value
Measurements". SFAS 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements.
SFAS 157 is effective as of the beginning of the first fiscal year that begins
after November 15, 2007. As such, the Company is required to adopt these
provisions at the beginning of the fiscal year ended September 30, 2009. The
Company is currently evaluating the impact of SFAS 157 on its financial
statements, but does not expect this to have a material impact.
In June 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections", a replacement of APB Opinion No. 20, "Accounting Changes", and
SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements". SFAS
No. 154 changes the requirements of the accounting for and reporting of a change
in accounting principle. Previously, most voluntary changes in accounting
principles required recognition via a cumulative effect adjustment within net
income of the period of the change. SFAS No. 154 requires retrospective
application to prior periods' financial statements, unless it is impractical to
determine either the period-specific effects or the cumulative effect of the
change. SFAS No. 154 is effective for accounting changes made in fiscal years
beginning after December 15, 2005; however, the Statement does not change the
transition provisions of any of the existing accounting pronouncements. We do
not believe adoption of SFAS No. 154 will have a material effect on our
financial position, results of operations or cash flows.
Item 3 -- 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 IEC due to adverse changes in financial rates. We
are exposed to market risk in the area of interest rates. One exposure is
directly related to our 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
IEC's results of operations.
Item 4 -- Controls and Procedures
Based on their evaluation as of the end of the period covered by this
Report, IEC's Chief Executive Officer and Chief Financial Officer have concluded
that IEC's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) are
effective to ensure that information required to be disclosed by IEC in reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms.
There were no changes in IEC's internal control over financial reporting
during the first quarter of fiscal 2007 or in other factors that materially
affected or are reasonably likely to materially affect our internal control over
financial reporting.
Forward-looking Statements
Forward-looking statements in this Form 10-Q include, without limitation,
statements relating to the Company's plans, future prospects, strategies,
objectives, expectations, intentions and adequacy of resources and are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These statements may be identified by their use of words
like "plans", "expects", "aims", "believes", "projects", "anticipates",
"intends", "estimates", "will", "should", "could", and other expressions that
indicate future events and trends. These forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievement of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. These factors include, among others,
the following: general economic and business conditions, the timing of orders
and shipments, availability of material, product mix, changes in customer
requirements and in the volume of sales to principal customers, competition and
technological change, the ability of the Company to control manufacturing and
operating costs, and satisfactory relationships with vendors. The Company's
actual results of operations may differ significantly from those contemplated by
such forward-looking statements as a result of these and other factors,
including factors set forth in the Company's Annual Report on Form 10-K for the
year ended September 30, 2006 and in other filings with the Securities and
Exchange Commission.
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PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
The information set forth in Note 4 of the Notes to Financial Statements
included in Part I -Item 1 of this Form 10-Q is incorporated by reference.
Item 1A - Risk Factors
There are no material changes to the Risk Factors described in Item 1A in
our Annual Report on Form 10-K for the fiscal year ended September 30, 2006.
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
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
The following documents are filed as exhibits to this Report:
31.1 Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350
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 , 2007 /s/ W. Barry Gilbert
------------------------------
W. Barry Gilbert
Chairman and
Chief Executive Officer
Dated: February 9, 2007 /s/ Brian H. Davis
------------------------------
Brian H. Davis
Chief Financial Officer
and Controller
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