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EX-31.1 - IEC ELECTRONICS CORPv165990_ex31-1.htm
EX-31.2 - IEC ELECTRONICS CORPv165990_ex31-2.htm
EX-23.1 - IEC ELECTRONICS CORPv165990_ex23-1.htm
EX-10.22 - IEC ELECTRONICS CORPv165990_ex10-22.htm
EX-10.21 - IEC ELECTRONICS CORPv165990_ex10-21.htm
EX-10.20 - IEC ELECTRONICS CORPv165990_ex10-20.htm
EX-10.19 - IEC ELECTRONICS CORPv165990_ex10-19.htm
    
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended September 30, 2009 or
¨ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _________ to _________

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
(IRS Employer ID No.)
incorporation or organization)
 

105 Norton Street, Newark, New York  14513
(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: 315-331-7742

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.01 par value
NYSE Amex
(Title of Class)
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.                 Yes  ¨ No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.              Yes  ¨ No  x

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)    Yes  ¨    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one)

¨ Large accelerated filer
¨ Accelerated filer
x Non-accelerated filer
¨ Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).       Yes  ¨ No  x
 
At March 27, 2009, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the shares of Common Stock held by non-affiliates for the registrant was $ 9,558,887(based on the closing price of the registrant’s Common Stock on The Over-the-Counter Bulletin Board on such date).  Shares of Common Stock held by each executive officer and director and by each person and entity who beneficially owns more than 10% of the outstanding Common Stock have been excluded in that such person or entity under certain circumstances may be deemed to be an affiliate.  Such exclusion should not be deemed a determination or admission by registrant that such individuals or entities are, in fact, affiliates of the registrant.

As of November 9, 2009, there were outstanding 8,750,455 shares of Common Stock.

Documents incorporated by reference:

Portions of IEC Electronics Corp.'s definitive Proxy Statement for the 2010 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

 
 

 

TABLE OF CONTENTS

   
PAGE
PART I
 
 
   
 
PART II
 
 
 
 
PART III
 
 
 
 
PART IV
 

"SAFE HARBOR" CAUTIONARY STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

References in this report to “IEC”, the “Company”, “we”, “our”, or “us” mean IEC Electronics Corp. and its subsidiaries, except where the context otherwise requires.  This Annual Report on Form 10-K contains certain statements that are, or may be deemed to be, forward-looking   statements  within  the  meaning  of section-27A of the Securities Act of 1933 and section-21E of the Securities Exchange Act of 1934, and are made in reliance upon the protections provided by such Acts for forward-looking statements.  These forward-looking statements (such as when we describe what we “believe”, “expect” or “anticipate” will occur, and other similar statements) include, but are not limited to, statements regarding future sales and operating results, future prospects, the capabilities and capacities of business operations, any financial or other guidance and all statements that are not based on historical fact, but rather reflect our current expectations concerning future results and events. The ultimate correctness of these forward-looking statements is dependent upon a number of known and unknown risks and events, and is subject to various uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance or achievements expressed or implied by these statements.  The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those expressed or implied in our forward-looking   statements:  business conditions and growth in our customer's industries, the electronic manufacturing services industry and the general economy, variability of operating results, our dependence on a limited number of major customers, the potential consolidation of our customer base, availability of components,  dependence  on  certain industries,  variability of customer requirements, our ability to assimilate acquired businesses and to achieve the anticipated benefits of such acquisitions, other economic, business and competitive factors affecting our customers, our industry and business generally and other factors that we may not have currently identified or quantified. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the "Risk Factors” and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections elsewhere in this document.  All forward-looking statements included in this Report on Form-10-K are made only as of the date of this Report on Form-10-K, and we do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or which we hereafter become aware of. You should read this document and the documents that we incorporate by reference into this Annual Report on Form-10-K completely and with the understanding that our actual future results may be materially different from what we expect.  We may not update these forward-looking statements, even if our situation changes in the future.  All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

 
2

 

PART I

Overview

IEC Electronics Corp.,("IEC", "we", "our", “us” the “Company”), is a premier provider of electronic manufacturing services,(“EMS”), to advanced technology companies. We specialize in the custom manufacture of high reliability, complex circuit cards, system level assemblies and a wide array of custom cable/wire harness assemblies.  We excel where quality is paramount and where low to medium volume, high mix production is the norm.  We utilize state-of-the art, automated circuit card assembly equipment coupled with a full complement of high reliability manufacturing stress testing technologies.  We have created a “high intensity response culture” to react and adapt to our customer’s ever-changing needs.  Our customer focused approach offers a high degree of flexibility while simultaneously complying with the industry’s rigorous quality and on-time delivery standards.  As a true extension of our customer’s operation, we have applied industry leading Six Sigma and Lean Manufacturing principles to eliminate waste and lower our customer’s total cost of ownership. While many EMS services are viewed as a commodity, we have set ourselves apart through an uncommon mix of features including:
 
 
§
A world class Technology Center that combines a dedicated prototype manufacturing center with an on-site Materials Analysis Lab (headed by two staff PhD’s) for the seamless introduction of complex electronics
 
 
§
A sophisticated Lean/Sigma continuous improvement program supported by five certified Six Sigma Blackbelts delivering best-in-class results
 
 
§
Industry-leading Web Portal providing real-time access to a wide array of critical customer data
 
 
§
In-house custom functional test development to support complex system-level assembly, test, troubleshoot and end-order fulfillment
 
IEC Electronics Corp., a Delaware corporation, is the successor by merger in 1990 to IEC Electronics Corp., a New York corporation, which was organized in 1966.  On May 30, 2008, IEC acquired all of the stock of Val-U-Tech Corp., a wire and cable-harness inter-connect business, located in Victor, New York.  Val-U-Tech was renamed IEC Electronics Wire and Cable, Inc. (“Wire and Cable”) during 2009.  IEC Electronics Wire and Cable, Inc. is a premier cable and wire harness manufacturer specializing in high-reliability applications for companies in the military, medical, industrial and transportation market sectors.  Wire and Cable manufactures a diverse portfolio of custom cable/wire harness assemblies, mechanical sub-assemblies, circuit card assemblies and box builds with an emphasis on perfect quality delivered precisely on time.

IEC is a world-class ISO 9001-2000, AS9100 and ISO13485 certified company. The AS9100 certification enables IEC to service the military and commercial aerospace markets.  The ISO13485 certification supports the quality requirements of the medical device markets.  We are also ITAR registered and NSA approved under the COMSEC standard.  Our manufacturing processes encompass the best aspects of Lean Manufacturing and Six Sigma Principles. Many customers consider these certifications crucial when qualifying an EMS provider.  Our state-of-the-art Technology Center includes prototype assembly, design engineering services, and an Advanced Materials Technology Laboratory.

We continually evaluate emerging technologies and maintain a technology road map to ensure relevant processes and advances in new equipment are available to our customers when commercial and design factors so indicate.  The current generation of interconnection technologies includes chip scale packaging and ball grid array (BGA) assembly techniques.  We have placed millions of plastic and ceramic BGA's since 1994. Future advances will be directed by our Technology Center, which combines Prototype and Pilot Build Services with the capabilities of our Advanced Materials Technology Laboratory and our Design Engineering Group.

Our experienced workforce has a high level of technical expertise.  Our emphasis is on building the most challenging complex systems serving original equipment manufacturers (“OEMs”) with advanced electronics technology.  IEC has positioned itself as a leader of lead-free solder assembly technology through early development and technical publications.  Lead-free was mandated by July 2006 for many electronic products sold in Europe.

Our executive offices are located at 105 Norton Street, Newark, New York 14513.  Our telephone number is (315)331-7742, and our Internet address is www.iec-electronics.com.

 
3

 

Electronics Manufacturing Services:  The Industry
 
The EMS industry specializes in providing program management, technical support and manufacturing expertise required to take a product from the early design and prototype stages through volume production and distribution.  Primarily as a response to rapid technological change and increased competition in the electronics industry, OEMs have recognized that by utilizing EMS providers they can improve their competitive position, realize an improved return on investment and concentrate on their core competencies such as research, product design and development and marketing.  In addition, EMS providers allow OEMs to bring new products to market rapidly and adjust more quickly to fluctuations in product demand; avoid additional investment in plant, equipment and personnel; reduce inventory and other overhead costs; and establish known unit costs over the life of a contract.  Many OEMs now consider EMS providers an integral part of their business and manufacturing strategy.

OEMs increasingly require EMS providers to provide complete turnkey manufacturing and material handling services, rather than working on a consignment basis in which the OEM supplies all materials and the EMS provider supplies labor. Turnkey contracts involve design, manufacturing and engineering support, the procurement of all materials, and sophisticated in-circuit and functional testing and distribution.

IEC's Strategy

Our strategy is to cultivate strong manufacturing partnerships with established and emerging OEMs in the ruggedized industrial, communications, medical, homeland security, and military and aerospace industries that require high reliability final assemblies.  These long-term business partnerships involve the joint development of manufacturing and support strategies with OEM customers and promote customer satisfaction. In implementing this strategy, we offer our customers a full range of manufacturing solutions through flexibility in production, high quality and fast-turnaround manufacturing services and computer-aided testing.
 
We generally enter into formal agreements with our significant customers. These agreements generally provide for fixed prices for one year, absent any customer changes which impact cost of labor or material, and rolling forecasts of customer requirements.  After establishing an OEM relationship, we offer our consultation services with respect to the manufacturability and testability of the product design.  We often recommend design changes to reduce manufacturing costs and to improve the quality of the finished assemblies.

Products and Services

We manufacture a wide range of assemblies, which are incorporated into many different products. We provide electronic manufacturing services primarily for wireless communication systems, test diagnostic equipment, military and defense systems, transportation products, and medical systems and instrumentation.  During the fiscal year ended September 30, 2009 we provided electronics and cable harness manufacturing services to approximately 80 different customers. We provide our services to multiple divisions and product lines of many of our customers and typically manufacture successive product generations for our customers.  In some cases, we are the sole contract manufacturer for the customer site or division, providing all services, prototype through box build and functional test.

Materials Management

We generally procure material only to meet specific contract requirements.  In addition, our agreements with our significant customers generally provide for cancellation charges equal to the costs, which are incurred by us as a result of a customer's cancellation of contracted quantities. Our internal systems provide effective controls for all materials, whether purchased by us or provided by the customer, through all stages of the manufacturing process, from receiving to final shipment.

Availability of Components

Substantially all of our net sales are derived from turnkey manufacturing in which we provide both materials procurement and assembly services.  We are well positioned with supplier relationships and material procurement expertise to acquire needed materials.  However, availability of customer-consigned parts and unforeseen shortages of components on the world market are beyond our control and could adversely affect revenue levels and operating efficiencies.

Suppliers

We operate in a strategic partnership arrangement with our key distribution suppliers. These strategic partnerships and associated automated trading methodologies provide benefits such as better payment terms, consignment or bonded inventories, reduced procurement lead-time, competitive pricing, reduced quotation processing, some protection during periods of supply allocation and opens access to global resources.  We also have preferred supplier partnership agreements in place for custom commodities such as printed circuit boards and metals.

 
4

 

Marketing and Sales

Our sales increased during 2009, primarily due to the addition of several new customers, and increased market share with existing customers.  These customers, along with the customers we anticipate adding, are expected to generate further revenue growth during 2010.  We utilize a direct sales force as well as a nationwide network of Manufacturers Representatives.  Through this hybrid sales approach, we execute a focused sales strategy targeting only those customers with product profiles aligned with our core areas of expertise.  For example, we focus on customers developing complex, advanced technology products for a wide array of market sectors ranging from satellite communications, medical, military and ruggedized industrial.

Typically, the demand profiles associated with these customers are in the low to moderate volume range with high variability of quantity and mix requirements for end item configurations.  In fact, these products often represent emerging technologies requiring high intensity of manufacturing support to seamlessly transfer them from the early product development stage through prototyping onto volume manufacturing. As these products exit the product development phase, specialized capabilities are required to support rapid response prototyping requirements in a dynamic engineering change environment.  As a result, the usual industry outsourcing models associated with these customers rarely include supply alternatives in low cost labor regions such as Asia and Mexico.

Our sales efforts are driven by focused marketing and sales activities in targeted areas supported by customer presentations.  Sales leads resulting from these marketing activities are assigned to a representative covering a customer's location for qualification and further development.  Referrals by existing customers continue to be one of our sources of new opportunities.

Backlog

During fiscal 2009 our backlog remained solid, an excellent result given the commercial turbulence of the last year.  We closed the year with backlog of $41.4 million as compared to a fiscal 2008 closing backlog of $43.9 million.  Backlog consists of two categories; orders, and firm forecasted commitments.  We also receive orders during the quarter, to ship in the same period, that do not appear in our backlog information.  Substantially, the entire current backlog is expected to be shipped within our current fiscal year.  Variations in the magnitude and duration of contracts received by us, and customer delivery requirements may result in fluctuations in backlog from period to period.

Governmental Regulation

Our operations are subject to certain federal, state and local regulatory requirements relating to environmental, waste management, health and safety matters.  Management believes that our business is operated in compliance with all applicable regulations promulgated by the Occupational Safety and Health Administration and the Environmental Protection Agency and corresponding state agencies, which respectively, pertain to health and safety in the work place and the use, discharge, and storage of chemicals employed in the manufacturing process.  Current costs of compliance are not material to us.  However, new or modified requirements, not presently anticipated, could be adopted creating additional expense for us.

Employees

The Company added 18 employees during fiscal 2009. IEC's employees numbered 368 at September 30, 2009, including 295 employees engaged in manufacturing and manufacturing support, 38 in engineering, and 35 in administrative and marketing functions.  None of our employees are covered by a collective bargaining agreement.  We have not experienced any work stoppages and believe that our employee relations are good.  We have access to a large work force by virtue of our northeast location midway between Rochester and Syracuse, two upstate New York industrial cities.  IEC's employees numbered 350 at September 30, 2008, including 300 employees engaged in manufacturing and manufacturing support, 28 in engineering, and 22 in administrative and marketing functions.

Patents and Trademarks

We hold patents unrelated to electronics manufacturing services and also employ various registered trademarks.  We do not believe that either patent or trademark protection is material to the operation of our business.

 
5

 


OUR OPERATING RESULTS MAY FLUCTUATE DUE TO A NUMBER OF FACTORS, MANY OF WHICH ARE BEYOND OUR CONTROL.

Our annual and quarterly results may vary significantly depending on various factors, including, but not limited to, the following:

 
-
adverse changes in general economic conditions

 
-
the level and timing of customer orders and the accuracy of their forecasts

 
-
the level of capacity utilization of our manufacturing facility and associated fixed costs

 
price competition

 
-
market acceptance of our customers products

 
-
business conditions in our customers’ end markets

 
-
our level of experience in manufacturing a particular product

 
-
change in the sales mix of our customers

 
-
the efficiencies achieved in managing inventories and fixed assets

 
-
fluctuations in materials costs and availability of materials

 
-
the timing of expenditures in anticipation of future orders

 
-
changes in cost and availability of labor and components

 
-
our effectiveness in managing manufacturing process.

The EMS industry is impacted by the state of the U.S. and global economies, which are both impacted by world events.  An economic slowdown, in particular in the industries served by us, may result in our customers reducing their forecasts.  The demand for our services could weaken, which in turn could substantially influence our sales, capacity utilization, margins and financial results.  Historically, we have seen periods, such as in fiscal 2003 and 2002, when EMS industry sales were adversely affected by a slowdown in wireless/networking and wireless infrastructure sectors as a result of reduced end-market demand and reduced availability of capital to fund existing and emerging technologies.

WE DEPEND ON A RELATIVELY SMALL NUMBER OF CUSTOMERS, AND IF WE LOSE ANY OF THESE CUSTOMERS OUR SALES AND OPERATING RESULTS COULD DECLINE SIGNIFICANTLY.

A small number of customers are responsible for a significant portion of our net sales.  During fiscal 2009, 2008, and 2007, our five largest customers accounted for 55%, 62%, and 61% of net sales, respectively.  During fiscal 2009, 2008, and 2007, our single largest customer in each year accounted for 15%, 21%, and 26% of net sales, respectively.   The percentage of IEC's sales to its major customers may fluctuate from period to period.  Our principal customers have varied from period to period, and our principal customers may not continue to purchase services from us at the current levels, or at all.

WE DEPEND ON THE ELECTRONICS INDUSTRY, WHICH CONTINUALLY PRODUCES TECHNOLOGICALLY ADVANCED PRODUCTS WITH SHORT LIFE CYCLES.

Factors affecting the electronics industry in general could seriously harm our customers and, as a result, us.  These factors include:

 
-
the inability of our customers to adapt to rapidly changing technology and evolving industry standards, which result in short product life cycles;

 
-
the inability of our customers to develop and market their products, some of which are new and untested;

 
-
the potential that our customers' products may become obsolete or the failure of our customers' products to gain widespread commercial acceptance; and

 
-
recessionary periods in our customers' markets.

 
6

 

OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY GLOBAL ECONOMIC AND FINANCIAL MARKETS CONDITIONS.

Current global economic and financial markets conditions, including severe disruptions in the credit markets and the potential for a significant and prolonged global economic recession, may materially and adversely affect our results of operations and financial condition.  These conditions may also materially impact our customers and suppliers.  Economic and financial market conditions that adversely affect our customers may cause them to terminate existing purchase orders or to reduce the volume of products they purchase from us in the future.  We may have significant balances owing from customers that operate in cyclical industries and under leveraged conditions that may impair the collectability of those receivables.  Failure to collect a significant portion of those receivables could have a material adverse effect on our results of operations and financial condition.  Adverse economic and financial credit terms our suppliers extend to us, such as shortening the required payment period for outstanding accounts receivable or reducing the maximum amount of trade credit available to us could have an adverse effect on our results of operations and financial condition.  Changes of this type could significantly affect our liquidity and could have a material adverse effect on our results of operations and financial condition.  If we are unable to successfully anticipate changing economic and financial markets conditions, we may be unable to effectively plan for and respond to those changes, and our business could be negatively affected.

FALILURE TO MANAGE GROWTH AND CONTRACTION, IF ANY, MAY SERIOUSLY HARM OUR BUSINESS

In late 2006 and early 2007 we expanded our operations and added many new employees.  These actions resulted in additional costs and start-up inefficiencies.  If we are unable to effectively manage the currently anticipated growth or if the anticipated net sales are not realized, our operating results could be adversely affected.

ENERGY PRICE INCREASES MAY NEGATIVELY IMPACT OUR RESULTS OF OPERATIONS

Certain of the components used in our manufacturing activities are petroleum-based.  In addition, we, along with our suppliers and customers, rely on various energy sources (including oil) in our transportation activities.  Over the past several years, energy prices have sharply increased and have experienced significant volatility.  These increased energy prices have resulted in an increase to our raw material costs and transportation costs.  In addition, the transportation costs of certain of our suppliers and customers have increased, and some of these increased costs may be passed along to us.  We may not be able to increase our product prices enough to offset these increased costs.  In addition, any increase in our product prices may reduce our future customer orders and profitability.

START-UP COSTS AND INEFFICIENCIES RELATED TO NEW OR TRANSFERRED PROGRAMS CAN ADVERSELY AFFECT OUR OPERATING RESULTS AND MAY NOT BE RECOVERABLE.

Start-up costs, the management of labor and equipment resources in connection with establishing new programs and new customer relationships, and the need to estimate required resources, and the timing of those resources in advance of production, can adversely affect our gross margins and operating margins. If new programs or new customer relationships are terminated or delayed, our operating results may be harmed, particularly in the near term.  We may not be able to recoup our start-up costs or quickly replace anticipated new program revenues.

MOST OF THE CUSTOMERS IN OUR INDUSTRY DO NOT COMMIT TO LONG-TERM PRODUCTION SCHEDULES, WHICH CAN MAKE IT DIFFICULT FOR US TO SCHEDULE PRODUCTION.

Customers may cancel their orders, change production quantities or delay production for a number of reasons that are beyond our control.  Cancellations, reductions or delay by a significant customer or by a group of customers could negatively impact our operating results.  Such cancellations, reductions or delays have occurred and may continue to occur.  The volume and timing of sales to our customers may vary due to:

 
§
variation in demand for our customers' products in their end markets
 
§
our customers' attempts to manage their inventory
 
§
electronic design changes
 
§
changes in our customers' manufacturing strategy
 
§
recessionary conditions in customers' industries

Due in part to these factors, most of our customers do not commit to firm production schedules. We make significant decisions based on our estimates of customers’ requirements, including deciding on the levels of business that we will seek, production schedules, component procurement commitments, equipment requirements, personnel needs and other resource requirements.  The short-term nature of our customers’ commitments and the possibility of rapid changes in demand for their products reduce our ability to accurately estimate and forecast the future requirements of those customers. Since many of our costs and operating expenses are relatively fixed, a reduction in customer demand can impact our revenue and harm our gross margins and operating results.

 
7

 

INCREASED COMPETITION MAY RESULT IN DECREASED DEMAND OR REDUCED PRICES FOR OUR SERVICES.

     The EMS industry is highly fragmented and is characterized by intense competition.  We may be operating at a cost disadvantage compared to other EMS providers who have greater direct buying power from component suppliers, distributors and raw material suppliers or who have lower cost structures as a result of their geographic location.  As a result, competitors may have a competitive advantage.  Our manufacturing processes are generally not subject to significant proprietary protection, and companies with greater resources or a greater market presence may enter our market or increase their competition with us. We also expect our competitors to continue to improve the performance of their current products or services, to reduce their current products or service sales prices and to introduce new products or services that may offer greater performance and improved pricing.  Any of these could cause a decline in sales, loss of market acceptance of our products or services, profit margin compression, or loss of market share.

THE INTEGRATION OF ACQUIRED OPERATIONS MAY POSE DIFFICULTIES FOR US.

In May 2008, we completed our acquisition of Wire and Cable.  We may continue to acquire additional businesses in the future.  This acquisition and future acquisitions involve risks, including:

 
integration and management of the operations;
 
retention of key personnel;
 
integration of information systems, internal procedures, accounts receivable and management, financial and operational controls;
 
retention of customer base of acquired businesses;
 
diversion of management’s attention from other ongoing business concerns; and
 
exposure to unanticipated liabilities of acquired companies.

These and other factors could harm our ability to achieve anticipated levels of profitability or realize other anticipated benefits of an acquisition and could adversely affect our business and operating results.

IF WE DO NOT MANAGE OUR BUSINESS EFFECTIVELY, OUR PROFITABILITY COULD DECLINE.

Our ability to manage our business effectively will require us to continue to implement and improve our operational, financial and management information systems; continue to develop the management skills of our managers and supervisors; and continue to train, motivate and manage our employees.  Our failure to effectively do so could harm our business.

WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS FOR COMPONENTS THAT ARE CRITICAL TO OUR MANUFACTURING PROCESSES.  A SHORTAGE OF THESE COMPONENTS OR AN INCREASE IN THEIR PRICE COULD INTERRUPT OUR OPERATIONS AND REDUCE OUR PROFITS.

Much of our net revenue is derived from turnkey manufacturing in which we provide materials procurement.  While some of our customer agreements permit periodic adjustments to pricing based on decreases and increases in component prices and other factors, we typically bear the risk of component price increases that occur between any such re-pricing or, if such re-pricing is not permitted, during the balance of the term of the particular customer contract.  Accordingly, certain component price increases could adversely affect our gross profit margins.

Almost all of the products we manufacture require one or more components that are available from a limited number of suppliers. Some of these components are allocated from time to time in response to supply shortages. In some cases, supply shortages could substantially curtail production of those assemblies using a particular component.  At times, component shortages have been prevalent in our industry, and such shortages may be expected to recur from time to time.  In some cases, supply shortages and delays in deliveries of particular components have resulted in curtailed or delayed production of assemblies, which contributed to an increase in our inventory levels.  An increase in economic activity could result in shortages, if manufacturers of components do not adequately anticipate the increased orders and/or have previously excessively cut back their production capabilities in view of reduced activity in recent years.  World events, armed conflict and epidemics, could also affect our supply chain.  An inability to obtain sufficient components on a timely basis could harm relationships with our customers.

In addition, due to the specialized nature of some components and the needs of our customers’ products, we may be required to use suppliers which are the sole provider of certain components.  Such suppliers may encounter financial difficulties or may not have adequate financial resources, which could preclude them from delivering components on time or at all.

 
8

 

OUR TURNKEY MANUFACTURING SERVICES INVOLVE INVENTORY RISK

Most of our services are provided on a turnkey basis, where we purchase some or all of the materials required for product assembling and manufacturing.  These services involve greater resource investment and inventory risk management than consignment services, where the customer provides materials.  Accordingly, various component price increases and inventory obsolescence could adversely affect our selling price, gross margins and operating results.

In our turnkey operations, we must order parts and supplies based on customer forecasts, which may be for a larger quantity of product than is included in the firm orders ultimately received from those customers. Customers' cancellation or reduction of orders can result in additional expense to us.  While most of our customer agreements typically include provisions which require customers to reimburse us for excess inventory specifically ordered to meet their forecasts, we actually may not be reimbursed on these obligations.  In that case, we could have excess inventory and/or cancellation or return charges from our suppliers.

In addition, we are starting to provide managed inventory programs for some of our customers under which we hold and manage finished goods inventories.  This managed inventory program may result in higher finished goods inventory levels, further reduce our inventory turns and increase our financial exposure with such customers.  Even though they will generally have contractual obligations to purchase such inventories from us, we may remain subject to the risk of enforcing those obligations.

PRODUCTS WE MANUFACTURE MAY CONTAIN MANUFACTURING DEFECTS, WHICH COULD RESULT IN REDUCED DEMAND FOR OUR SERVICES AND LIABILITY CLAIMS AGAINST US.

We manufacture products to our customers' specifications, which are highly complex and may, at times, contain design or manufacturing errors or failures.  Despite our quality control and quality assurance efforts, defects may occur. Defects in the products we manufacture, whether caused by a customer design, manufacturing or component failure or error, may result in delayed shipments to customers or reduced or cancelled customer orders and may affect our business reputation.  In addition, these defects may result in liability claims against us.  Even if customers or component suppliers are responsible for the defects, they may be unwilling or unable to assume responsibility for any costs or payments.

WE MAY NOT BE ABLE TO MAINTAIN OUR ENGINEERING, TECHNOLOGICAL AND MANUFACTURING PROCESS EXPERTISE.

The markets for our manufacturing and engineering services are characterized by rapidly changing technology and evolving process development.  The continued success of our business will depend upon our ability to:

 
hire and retain our qualified engineering and technical personnel;
 
maintain and enhance our technological leadership; and
 
develop and market manufacturing services that meet changing customer needs.

Although we believe that our operations provide the assembly and testing technologies, equipment and processes that are currently required by our customers, we cannot be certain that we will develop the capabilities required by our customers in the future.  The emergence of new technology industry standards or customer requirements may render our equipment, inventory or processes obsolete or noncompetitive.  In addition, we may have to acquire new assembly and testing technologies and equipment to remain competitive.  The acquisition and implementation of new technologies and equipment may require significant expense or capital investment, which could reduce our operating margins and our operating results.  Our failure to anticipate and adapt to our customers' changing technological needs and requirements could have an adverse effect on our business.

FAILURE TO ATTRACT AND RETAIN KEY PERSONNEL AND SKILLED EMPLOYEES COULD HURT OUR OPERATIONS.

Our continued success depends to a large extent on our ability to recruit, train, and retain skilled employees, particularly executive management and technical employees.  The competition for these individuals is significant; hence the loss of the services of certain of these key employees or an inability to attract or retain qualified employees could negatively impact us.  While we do have an employment agreement with W. Barry Gilbert, our Chief Executive Officer, we do not have employment agreements or non-competition agreements with any of our other key employees.

COMPLIANCE OR THE FAILURE TO COMPLY WITH CURRENT AND FUTURE ENVIRONMENTAL REGULATIONS COULD CAUSE US SIGNIFICANT EXPENSE.

We are subject to a variety of federal, state, and local environmental regulations relating to the use, storage, discharge and disposal of hazardous chemicals used during our manufacturing process.  If we fail to comply with any present and future regulations, we could be subject to future liabilities or the suspension of production. In addition, such regulations could restrict our ability to expand our facilities or could require us to acquire costly equipment, or to incur other significant expenses to comply with environmental regulations.  While we are not currently aware of any violations, we may have to spend funds to comply with present and future regulations or be required to perform site remediation.

 
9

 

IF WE ARE UNABLE TO MAINTAIN EFFECTIVE INTERNAL CONTROL OVER OUR FINANCIAL REPORTING, INVESTORS COULD LOSE CONFIDENCE IN THE RELIABILITY OF OUR FINANCIAL STATEMENTS, WHICH COULD RESULT IN A REDUCTION IN THE VALUE OF OUR COMMON STOCK.

As required by Section 404 of the Sarbanes-Oxley Act, the SEC adopted rules requiring public companies to include a report of management on the company’s internal control over financial reporting in their annual reports on Form 10-K; that report must contain an assessment by management of the effectiveness of our internal control over financial reporting.

We are continuing our comprehensive efforts to comply with Section 404 of the Sarbanes-Oxley Act.  If we are unable to maintain effective internal control over financial reporting, this could lead to a failure to meet reporting obligations to the SEC, which in turn could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

THE AGREEMENTS GOVERNING OUR DEBT CONTAIN VARIOUS COVENANTS THAT IMPACT THE OPERATION OF OUR BUSINESS.

The agreements and instruments governing our existing debt and our secured credit facility contain various restrictive covenants that, among other things, require us to comply with or maintain certain financial tests and ratios 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, rent and lease payments and stock option expense(EBITDARS) and restrict our ability to:

 
incur debt;
 
incur or maintain liens;
 
make acquisitions of businesses or entities;
 
make investments, including loans, guarantees and advances;
 
engage in mergers, consolidations or certain sales of assets;
 
engage in transactions with affiliates; and
 
pay dividends or engage in stock redemptions or repurchases.

Our credit facilities are secured by a general security agreement in the assets of the Company and its subsidiaries, a pledge of the Company’s equity interest in its subsidiary, a negative pledge on the Company’s real property, and a guarantee by the Company’s subsidiary.

Our ability to comply with covenants contained in our existing debt and secured credit facility may be affected by events beyond our control, including prevailing economic, financial and industry conditions.  Our failure to comply with our debt-related covenants could result in an acceleration of our indebtedness and cross-defaults under our other indebtedness, which may have a material adverse effect on our financial condition.  We are currently in compliance with all of our covenants.

OUR STOCK PRICE MAY BE VOLATILE DUE TO FACTORS BEYOND OUR CONTROL.

Our Common Stock is traded on the NYSE AMEX.  The market price of our Common Stock has fluctuated substantially in the past and could fluctuate substantially in the future, based on a variety of factors, including future announcements concerning us or our key customers or competitors, government regulations, litigation, fluctuations in quarterly operating results, or general conditions in the EMS industry.


None


We own our administrative and main manufacturing facility which is located in Newark, New York and contains an aggregate of approximately 300,000 square feet.  We also lease a manufacturing facility in Victor, New York, which contains an aggregate of approximately 18,000 square feet.  We believe that our properties are generally in good condition, are well maintained, and are generally suitable and adequate to carry on our business in its current form.


There are no material legal proceedings pending to which IEC or its subsidiary is a party or of which any of their property is the 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 five percent (5%) of Common Stock of IEC, or any associate of any of the foregoing, is a party adverse to IEC or its subsidiary or has a material interest adverse to IEC or its subsidiary.


During the fourth quarter of fiscal 2009, no matters were submitted to vote of security holders.

 
10

 


IEC's executive officers as of September 30, 2009, were as follows:

Name
 
Age
 
Position
         
W. Barry Gilbert
 
63
 
Chairman of the Board, and Chief Executive Officer
         
Jeffrey T. Schlarbaum
 
43
 
Executive Vice President and President of IEC Contract Manufacturing
         
Donald S. Doody
 
43
 
Senior Vice President of Operations
         
Michael R. Schlehr
  
47
  
Vice President and Chief Financial Officer

W. Barry Gilbert has served as Chief Executive Officer since June 2002.  He has been a director of IEC since February 1993, and Chairman of the Board since February 2001. He is an adjunct faculty member at the William E. Simon Graduate School of Business Administration of the University of Rochester. Mr. Gilbert previously held the position of President of the Thermal Management Group of Bowthorpe (now known as Spirent) and was corporate Vice President and President of the Analytical Products Division of Milton Roy Company, a manufacturer of analytical instrumentation.  He holds an MBA from the University of Rochester in Applied Economics and Finance.

Jeffrey T. Schlarbaum was promoted to Executive Vice President and President of IEC Contract Manufacturing in May 2008.  He joined IEC in May 2004 as Vice President of Sales and Marketing and in November 2006 he was appointed Executive Vice President of Sales and Marketing.  Before joining IEC, he had over 15 years of sales experience in the electronics industry.  Most recently, he served as Regional Vice President of Sales for Plexus Corp., a contract manufacturer of electronics products, Neenah, Wisconsin.  Prior to that, he worked as Vice President of Sales, Eastern Region for MCMS as well as holding various senior sales and marketing management positions with MACK Technologies and Conner Peripherals. He holds a Bachelors of Business Administration degree from National University, and an MBA from Pepperdine University.

Donald S. Doody, was promoted to Senior Vice President of Operations in May 2008. He joined IEC in November 2004 as Vice President of Operations.  Before joining IEC, he had more than 8 years of experience in the contract electronics manufacturing industry. He started his career with GE Transportation and Industrial Systems and became a Master Black Belt/Supplier Quality Engineer. Mr. Doody was a senior manufacturing engineer at Plexus Corporation, then became VP/GM of MCMS’s North Carolina facility. When Plexus acquired MCMS he became responsible for leading Lean Manufacturing and Six Sigma initiatives throughout the company. Mr. Doody holds a Bachelor’s degree in Engineering from the State University of New York, College at Buffalo and a M.S. degree in Industrial Sciences from Colorado State University.

Michael R. Schlehr joined IEC in February of 2008 with more than 20 years experience in operations and financial management for manufacturers in diverse industries.  Mr. Schlehr started his career with RJR Nabisco in various facility accounting roles and eventually as a Senior Investment Analyst at the corporate level.  He was a Controller and Production Manager for a subsidiary of Smurfit/Stone.  Mr. Schlehr held positions of Operations Manager and Corporate Controller before relocating to Rochester, NY for Birdseye Foods, Inc. where he functioned as Director of Operations Accounting.  Mr. Schlehr’s most recent position was Vice President of Finance and Administration for the Process Solutions Division of Robbins & Myers, Inc.  He holds a BS degree with Honors in dual majors of Accounting and Management from Canisius College in Buffalo, NY.

 
11

 

PART II
 
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

(a)   Market Information.

IEC's Common Stock began trading on the NYSE Amex on June 9, 2009 under the symbol "IEC".  Prior to that, IEC's Common Stock was traded on The Over-the-Counter Bulletin Board ("OTCBB") under the symbol "IECE.OB".

The following table sets forth, for the fiscal quarter indicated, the high and low closing sales prices for the Common Stock as reported on the OTCBB or NYSE Amex, as applicable.  The quotations on the OTCBB reflect inter-dealer prices, without mark-up, mark-down or commission, and may not represent actual transactions.

Quarter
 
High
   
Low
 
October 1, 2007 – December 28, 2007
  $ 2.50     $ 1.60  
December 29, 2007 – March 28, 2008
  $ 1.90     $ 1.60  
March 29, 2008 – June 27, 2008
  $ 2.20     $ 1.50  
June 28, 2008 – September 30, 2008
  $ 2.20     $ 1.76  
October 1, 2008 – December 26, 2008
  $ 1.90     $ 1.40  
December 27, 2008 – March 27, 2009
  $ 1.60     $ 1.19  
March 28, 2009 – June 26, 2009
  $ 3.98     $ 1.35  
June 27, 2009 – September 30, 2009
  $ 7.45     $ 3.30  

The closing price of IEC's Common Stock on the NYSE Amex on November 9, 2009, was $ 4.57 per share.

(b)   Holders.

As of November 9, 2009, there were approximately 165 holders of record of IEC's Common Stock, which does not include shareholders whose stock is held through securities position listings.  Many of our shares of Common Stock are held in street name by brokers and other institutions, and we are unable to estimate the number of their beneficial stockholders.

(c)   Dividends.

IEC has never paid dividends on its Common Stock.  It is the current policy of the Board of Directors of IEC to retain earnings for use in our business.  Certain financial covenants set forth in IEC's current loan agreement prohibit IEC from paying cash dividends.  We do not plan to pay cash dividends on our Common Stock in the foreseeable future.

(d)   Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth information concerning IEC's equity compensation plans as of September 30, 2009.

               
Number of securities
 
   
Number of securities
         
remaining available for
 
   
to be issued upon
   
Weighted-average
   
future issuance under
 
   
exercise of
   
exercise price of
   
equity compensation plans
 
   
outstanding options,
   
outstanding options,
   
(excluding securities
 
Plan Category
 
warrants and rights
   
warrants and rights
   
reflected in column (a))
 
                   
   
(a)(2)
   
(b)
   
(c)(3)
 
                   
Equity compensation plans:
                 
                   
approved by security holders(1)
    971,988     $ 1.10       602,786  
not approved by security holders
    -0-       N/A       -0-  
                         
Total
    971,988     $ 1.10       602,786  

(1)  Consists of IEC's 2001 Stock Option and Incentive Plan (the "2001 Plan")
(2)  Under the 2001 Plan, in addition to options, we have granted share-based compensation awards to outside directors, restricted stock awards, other stock-based awards and stock purchase programs.  As of September 30, 2009, there were 545,602 such awards under the 2001 Plan, all of which shares were issued and outstanding.
(3)  These shares may be issued in the form of stock options, restricted stock, performance shares or other share-based awards.

Issuance of Unregistered Securities:
Not Applicable
   
Repurchases of IEC Securities:
We repurchased no shares during the last quarter of Fiscal 2009.
 
 
12

 


IEC ELECTRONICS CORP. AND ITS SUBSIDIARIES
SELECTED FINANCIAL DATA
(in thousands, except per share data)

Years Ended September 30,
 
2009(#1)
   
2008(#1)
   
2007
   
2006
   
2005
 
                               
INCOME STATEMENT DATA
                             
                               
Net sales
  $ 67,811     $ 51,092     $ 40,914     $ 22,620     $ 19,066  
                                         
Gross profit
  $ 10,826     $ 6,217     $ 3,877     $ 2,753     $ 2,630  
Percent of net sales
    16.0 %     12.2 %     9.5 %     12.2 %     13.8 %
                                         
Operating income
  $ 4,819     $ 2,392     $ 985     $ 598     $ 346  
Percent of net sales
    7.1 %     4.7 %     2.4 %     2.6 %     1.8 %
                                         
Net income before tax
  $ 4,718     $ 1,634     $ 503     $ 215     $ 257  
                                         
Net income
  $ 4,956     $ 10,477     $ 875     $ 215     $ 285  
                                         
Net income (loss) per common and common equivalent share:
                                       
Basic
  $ 0.57     $ 1.22     $ 0.11     $ 0.03     $ 0.03  
Diluted
  $ 0.52     $ 1.12     $ 0.10     $ 0.03     $ 0.03  
                                         
Common and common equivalent shares
                                       
Basic
    8,729       8,554       8,114       7,973       8,261  
Diluted
    9,554       9,337       8,896       8,276       8,571  
                                         
BALANCE SHEET DATA
                                       
                                         
Working capital(#2)
  $ 11,295     $ 9,247     $ 3,985     $ 5,775     $ 2,038  
                                         
Total assets
  $ 34,469     $ 34,184     $ 12,344     $ 11,894     $ 5,538  
                                         
Long-term debt, including current maturities(#3)
  $ 7,747     $ 10,008     $ 1,751     $ 4,164     $ 937  
                                         
Shareholders' equity
  $ 20,254     $ 15,976     $ 4,163     $ 3,092     $ 3,020  

Notes:
#1.) Comparability of 2009 to prior year is affected by 2008 late-year acquisition of Wire and Cable.
#2.) 2009 Customer deposits included in current liabilities.  Previously an offset to assets.
#3.) Revolving Line of Credit categorized as Long Term Debt.

 
13

 

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information in this Management's Discussion & Analysis should be read in conjunction with the accompanying financial statements, the related Notes to Consolidated Financial Statements and the Five-Year Summary of Financial Data.  Forward-looking statements in this Management's Discussion and Analysis are qualified by the cautionary statement preceding Item 1 of this Form 10-K.

Overview

During 2004, we refocused our sales efforts on high technology products that are less likely to migrate to offshore suppliers due to proprietary technology content, governmental restriction or volume considerations.  Since then we have continued to expand our business adding new customers and new markets.  Our customer base is stronger and more diverse than ever.  We continue to expand in areas we view as important for our continued growth.  IEC is ISO-9001:2000 registered, and an NSA approved supplier under the COMSEC standard.  Both IEC and Wire and Cable, our cable harness and interconnect business, are AS9100 certified to service the military and commercial aerospace market sector and ISO13485 certified to service the medical market sector.  We have identified and gained entry into advantageous markets by leveraging our ability to provide products of the highest quality and reliability, including significantly complex, low-run volume assemblies.  Currently, the markets we serve include military, governmental agencies, aerospace, communications, medical, computing and a variety of industrial sectors.  During fiscal 2009 our backlog remained solid, an excellent result given the commercial turbulence of the last year.  We closed the year with backlog of $41.4 million as compared to a fiscal 2008 closing backlog of $43.9 million.  Backlog consists of two categories; orders, and firm forecasted commitments.  We also receive orders during the quarter, to ship in the same period, that do not appear in our backlog information.  Substantially, the entire current backlog is expected to be shipped within our current fiscal year.  Variations in the magnitude and duration of contracts received by us, and customer delivery requirements may result in fluctuations in backlog from period to period.  We continue to improve our internal bench strength and skills, our reliability testing capabilities and our machinery and equipment infrastructure to optimize production performance and effectively manage the steady growth in volume and complexity that we are experiencing.   Despite the recessionary outlook for the economy, based upon cautiously optimistic comments from our customers in the military and aerospace sectors, we expect continued growth in both revenue and profitability throughout fiscal 2010.

Analysis of Operations

Sales     (dollars in millions)
                 
                   
For Year Ended September 30,
 
2009
   
2008
   
2007
 
                   
Net sales
  $ 67.8     $ 51.1     $ 40.9  

IEC continues to experience strong top-line growth.  Revenue has increased 33% over 2008 and 66% over the sales achieved in 2007.  While the current fiscal year included twelve months of Wire and Cable revenues compared to four months in the previous fiscal year, the Company also enjoyed healthy organic growth in its core business.  This significant growth has been fueled by the expansion of product offerings and by market segment diversification as discussed above.  Because of our execution, our customers have rewarded us with ongoing programs and additional business.  The ongoing programs have become a stable core of our operation. The most significant revenue growth in recent years has occurred for IEC in the aerospace, medical and industrial market sectors.

Gross Profit    (dollars in thousands and as a % of Net Sales)  
                   
For Year Ended September 30,
 
2009
   
2008
   
2007
 
                   
Gross profit
  $ 10,826     $ 6,217     $ 3,877  
                         
Gross profit percent
    16.0 %     12.2 %     9.5 %

IEC continues to show an increasing Gross Profit measured as a percentage of Net Sales.  Versus the prior year, fiscal 2009 gross profit as a percentage of net sales improved over 2008 by 3.8%.  Since fiscal 2007, the Company has increased its gross profit as a percentage of net sales by 6.5%.  This trend of significant increase, at a materially higher revenue level, further demonstrates the strength of our Company.  This improvement in gross margin was expected and was discussed in the 2007 year end SEC filing.  In fiscal 2007 IEC transitioned from low volume prototype work to new programs with larger production volumes.  The associated learning curves for new employees and for new products affected our efficiency and therefore our profitability.  In fiscal 2008 and 2009 labor efficiency improved through effective training of production employees, investments in capital equipment that served to modernize some processes, and through further implementation of continuous improvement and lean manufacturing principles.  Our workforce has expanded in size and in capability.  Our continued increases in productivity and improvements in execution have resulted in further penetration into profitable market sectors.

 
14

 

Selling and Administrative Expense    (dollars in thousands and as a % of Net Sales)
                   
For Year Ended September 30,
 
2009
   
2008
   
2007
 
                   
Selling and administrative expense
  $ 6,007     $ 3,825     $ 2,892  
                         
Selling and administrative expense percent
    8.9 %     7.5 %     7.1 %

Selling and administrative expenses as a percentage of sales increased to 8.9% in fiscal 2009. Fiscal 2009 included twelve months of Wire and Cable SG&A costs as compared to fiscal 2008 which included only four months of Wire and Cable SG&A costs.  This accounts for $618 of the increase in SG&A costs.  Incremental costs were also incurred in fiscal 2009 to strengthen our sales and marketing team.  Sales commissions, advertising, public relations and travel costs were higher as would be expected with incremental sales efforts and our efforts to expand into newer markets.  Additionally, costs were incurred to improve our information systems and technology infrastructure.  We also have accrued for plant-wide performance-based incentives which includes a provision for the next segment of Mr. Gilbert’s contractual incentives.

Other Income and Expense    (dollars in millions)
 
                   
For Year Ended September 30,
 
2009
   
2008
   
2007
 
                   
Interest and financing expense
  $ 0.4     $ 0.5     $ 0.4  
Other (income)/expense
  $ (0.3 )   $ 0.3     $ -  

Interest and financing expense was reduced in 2009.  Favorable interest rates and reduced debt levels resulted in lower financing costs.  The Company has consistently remained ahead of schedule with respect to the reduction of debt associated with its acquisition of the Wire and Cable business. From fiscal year end 2008 to fiscal year end 2009 the Company’s debt was reduced by $2.3 million. Total cash available to reduce debt was offset by $1.8 million of capital investments and $2.0 million of payments to suppliers to capture discounts.

We had “Other income” of $0.3 million during fiscal 2009 versus $0.3 million of “Other expense” in fiscal 2008.  Other Income for the current year is comprised mainly of a refund of sales tax, penalties and accrued interest from the State of Alabama and the City of Arab, Alabama in settlement of a long standing dispute over a previous sales tax assessment.  Additionally, we received a rebate on utilities associated with our recent capital project to reduce electricity usage for plant lighting.
 
Income Taxes    (dollars in thousands)
                 
                   
For Year Ended September 30,
 
2009
   
2008
   
2007
 
                   
Effective tax (benefit)
  $ (238 )   $ (8,843 )   $ (372 )

Our 2009 tax benefit included a $1.9 million reversal of the valuation allowance against our deferred tax asset.  Our 2008 tax benefit included an $8.9 million reversal of the valuation allowance against our deferred tax asset.  (See Note #4 in Notes to Consolidated Financial Statements)

Liquidity and Capital Resources

Cash Flow provided by (used in) operating activities was $3.0 million for the fiscal year ended September 30, 2009 compared to $0.1 million for fiscal 2008.  The principal reason for this variance of $2.9 million versus prior year is the improvement in Net Income Before Tax.  Improved cash inflows from collections on customer receivables was offset by cash used to reduced payables and capture vendor discounts which was a benefit to earnings.

Cash Flow provided by (used in) investing activities was ($1.8) million for the fiscal year end versus ($4.4) million for fiscal 2008.  The prior year’s investing activities included the cash investment in Wire and Cable.  During fiscal 2009 we invested ($1.8) million in new production equipment to improve efficiency and capacity.
 
Cash Flow provided by (used in) financing activities was a use of ($1.2) million in fiscal 2009 versus a net source of cash of $4.4 million in fiscal 2008.  In fiscal 2009 we reduced our term debt and our revolving debt by an aggregate total of $2.2 million.  We also borrowed $0.8 million on our capital financing line of credit.  The prior year included the funding from our new credit facility which enabled the acquisition of Wire and Cable.

 
15

 


At September 30, 2009 we had a $3.9 million balance under our revolving credit facility.  The maximum borrowing limit under our revolving credit facility is limited to the lesser of (i) $9.0 million or (ii) an amount equal to the sum of 85% of the receivables borrowing base and 35% of the inventory borrowing base.  On September 30, 2009, the remaining availability under the collateralized portion of our line of credit was $5.1 million.  We believe that our liquidity is adequate to cover operating requirements for the next 12 months.

The Company entered into a $14.2 million senior secured loan agreement (Credit Agreement) and Sale Leaseback agreement with Manufacturers and Traders Trust Company (M&T Bank) on May 30, 2008.  The following is a summary of the Credit and Sale Leaseback agreements:

 
§
A revolving credit facility up to $9.0 million, available for direct borrowings.  The facility is based on a borrowing base formula equal to the sum of 85% of eligible receivables and 35% of eligible inventory.  As of September 30, 2009, outstanding loans under the revolving credit facility were $3.9 million.  The credit facility matures on May 30, 2013.  Interest on the revolver is either prime or a stated rate over LIBOR, whichever is lower based on certain ratios.  On September 30, 2009 the interest rate on our revolving line balance was 1.75%.

 
§
A $1.7 million term loan amortized equally over 60 months beginning July 2008.  IEC’s interest rate is fixed at 6.7%.  The outstanding balance at September 30, 2009 was $0.8 million.  One year prior, at September 30, 2008, the outstanding balance of our term loan was $1.1 million.

 
§
An available $1.5 million equipment line of credit.  The capital credit facility is amortized equally over 60 months and matures on May 30, 2013.  Interest on the equipment line is either prime or a stated rate over LIBOR, whichever is lower based on certain ratios at the time of borrowing.  Using this capital credit line the Company was able to secure additional interest rate subsidies from New York State’s Linked Deposit Program and has used a total of $0.8 million of the $1.5 million available line as of September 30, 2009.  New equipment was purchased to continue driving our increased operating efficiencies.  For the year ended September 30, 2009 the weighted average interest rate on capital financing was 3.08%. The outstanding balance at September 30, 2009 was $0.7 million.

 
§
A $2.0 million Sale Leaseback of the Company’s fixed assets amortized equally over 60 months beginning June 27, 2008.  Annual payments are fixed and are $388,800 per year with a total for the five years of $1.9 million. Assets sold had a cost of $15.6 million inclusive of $1.2 million of assets purchased during the nine months ended June 27, 2008, and an accumulated depreciation of $13.6 million.  A minimal loss will be amortized over the five year period of the lease.  At September 30, 2009 our remaining unpaid balance for the lease was $1.5 million compared to $1.8 million at September 30, 2008.

 
§
All loans and the Sale-Leaseback are secured by a security interest in the assets of the Company and Wire and Cable; a pledge of all the Company’s equity interest in Wire and Cable, a negative pledge on the Company’s real property and a guaranty by Wire and Cable.

In connection with the acquisition of Wire and Cable and the payment of the purchase price to the sellers, a portion of the purchase price was paid in the form of promissory notes (the "Seller Notes") in the aggregate principal amount of $3.9 million with interest at the rate of 4% per annum.  The remaining balance at September 30, 2009 is $2.2 million.

The Company’s financing agreements contain various affirmative and negative covenants concerning the ratio of “EBITDARS” (Earnings Before Interest, Taxes, Depreciation, Amortization, Rent Expense under the Sale Leaseback and Stock Option Expense) to total debt and to fixed charges.  These are calculated on a twelve month rolling basis.  The Company must also maintain a minimum EBITDARS level of $350,000 per individual quarter.   The Company was compliant with these covenants as of September 30, 2009.  The table below provides details on the Company’s performance relative to each of the three covenants as of September 30, 2009:
 
 
Covenant
 
Requirement
   
Actual Performance
 
                   
Minimum quarterly EBITDARS
    $ 350,000     $ 1,641,000  
Fixed Charge Coverage
      1.1 x     3.03 x
Total Debt to EBITDARS
 
<
    3.75 x     1.56 x
 
If evaluated on an annual basis rather than quarterly, the Company’s performance with respect to the “Minimum EBITDARS Covenant” was $5,902,000 versus a four-quarter aggregate required minimum of $1,400,000.

 
16

 

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.

FASB ASC 605-10 (Prior Authoritative Literature: 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.

FASB ASC 360-10 (Prior Authoritative Literature: Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets), requires that we evaluate our long-lived assets for financial impairment on a regular basis.  We evaluate the recoverability of long-lived assets not held for sale by measuring the carrying amount of the assets against the estimated undiscounted 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.

FASB ASC 450-10 (Prior Authoritative Literature: Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies"), requires that when, from time to time, we are subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty, 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.

FASB ASC 740 (Prior Authoritative Literature: 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.

Impact of Inflation

To date, the impact of inflation has been minimal due to the fact that we have been able to adjust many of our bids to reflect most inflationary increases in costs; however it is not clear this will continue and in turn could affect our margins.

RECENTLY ISSUED ACCOUNTING STANDARDS

FASB ASC 805 (Prior Authoritative Literature: Financial Accounting Standards Board Statement of Financial Accounting Standards (“SFAS”) No. 141(R), “Business Combinations”), establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. FASB ASC 805 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended September 30, 2010. The Company is currently evaluating the impact of FASB ASC 805 but does not expect it to have a material effect on its consolidated financial statements.

FASB ASC 810-10-65 (Prior Authoritative Literature: Financial Accounting Standards Board Statement of Financial Accounting Standard (“SFAS”) No. 160, "Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”), establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary.  FASB ASC 810-10-65 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008.  As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended September 30, 2010.  The Company is currently evaluating the impact of FASB ASC 810-10-65 but does not expect it to have a material effect on its consolidated financial statements.

 
17

 

FASB ASC 855-10 (Prior Authoritative Literature: Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standard (“SFAS”) No.165, "Subsequent Events"), establishes requirements for subsequent events. FASB ASC 855-10 is effective for interim or annual periods ending after June 15, 2009.  The Company is required to adopt this standard in the current period.  Adoption of FASB ASC 855 did not have a significant effect on the Company’s consolidated financial statements.


Quantitative and Qualitative Disclosures about Market Risk represents the risk of loss that may impact the 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 Revolving Credit borrowings under the Credit Agreement, due to the variable interest rate pricing.  Management believes that interest rate fluctuations will not have a material impact on IEC's results of operations.


The information required by this item is incorporated herein by reference to pages 25 through 38 of this Form 10-K and is indexed under Item 15(a)(1) and (2).


There have been no changes in or disagreements on accounting and financial disclosure matters.


(a) Evaluation of disclosure controls and procedures

An evaluation was performed under the supervision and with the participation of IEC's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K as required by Rule 13a-15 under the Securities Exchange Act of 1934 (the "Exchange Act").  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the business has disclosure controls and procedures that were effective as of the end of the period covered by this Annual Report on Form 10-K to provide reasonable assurance that information required to be disclosed by IEC in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC rules and forms and that such information is accumulated and communicated to our management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding disclosures.

(b) Changes in internal control over financial reporting

In connection with the evaluation described above, our management, including our Chief Executive Officer and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during our fiscal year ended September 30, 2009, that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

(c) Management's Report on Internal Control over Financial Reporting.
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.  The Company’s internal control over financial reporting includes those policies and procedures that:
 
(i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company,
 
(ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and
 
(iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on financial statements.
 
 
18

 
 
An evaluation, based on the framework entitled Internal Controls - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO), was performed under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer, of the effectiveness of the design and operation of our procedures and internal control over financial reporting. Based on this evaluation, our management, including the principal executive officer and the principal financial officer, concluded that our internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles as of September 30, 2009.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report on internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.

(d)
Inherent Limitations of Internal Controls.

In designing and evaluating our internal control system, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives and that the effectiveness of any system has inherent limitations including, but not limited to, the possibility of human error and the circumvention or overriding of controls and procedures. Management, including the principal executive officer and the principal financial officer, is required to apply judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in a cost-effective control system, internal control over financial reporting may not prevent or detect misstatements. Although unlikely, misstatements due to error or fraud may occur and not be detected in a timely manner.


None.

PART III


The information required by this item is presented under the captions entitled "Election of Directors” and “Section 16 (a) Beneficial Ownership Reporting Compliance” contained in the definitive proxy statement issued in connection with the 2010 Annual Meeting of Stockholders and is incorporated in this report by reference thereto.  The information regarding Executive Officers of the Registrant is found in Part I of this report.

IEC has adopted a Code of Business Conduct and Ethics (the “Code”), which applies to all of its directors, officers (including IEC’s Chief Executive Officer, Chief Financial Officer, and other senior financial officers), and employees.  The Code, a copy of which was filed as Exhibit 14 to IEC’s Current Report on Form 8-K filed on September 1, 2004, may be viewed on IEC’s website, www.iec-electronics.com, under its “Investor Relations – Corporate Governance” captions, and is available in print (free of charge) to any person upon request to Chief Financial Officer, IEC Electronics Corp., 105 Norton Street, Newark, NY  14513, telephone (315) 331-7742.  Any amendment to, or waiver of, a provision of the Code which applies to IEC’s Chief Executive Officer, Chief Financial Officer, or other senior financial officers and relates to the elements of a “code of ethics” as defined by the Securities and Exchange Commission will also be posted on the website.


The information required by this item is presented under the captions entitled "Compensation of Named Executive Officers and Directors” and “Election of Directors – Compensation Committee Interlocks and Insider Participation” contained in the definitive proxy statement issued in connection with the 2010 Annual Meeting of Stockholders and is incorporated in this report by reference thereto, except, however, the section entitled “Compensation Committee Report” shall not be deemed to be “soliciting material” or to be filed with the Commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act of 1934, as amended.


The information required by this item is presented under the caption entitled  "Security Ownership of Certain Beneficial Owners and Management" contained in the definitive proxy statement issued in connection with the 2010 Annual Meeting of Stockholders and is incorporated in this report by reference thereto.  Information relating to Equity Compensation Plans is found in Item 5 of Part II of this report.

 
19

 
 
The information required by this item is presented under the captions “Certain Relationships and Related Person Transactions” and “Election of Directors” contained in the definitive proxy statement issued in connection with the 2010 Annual Meeting of Stockholders and is incorporated in this report by reference thereto.


The information required by this item is presented under the caption "Ratification of Selection of Independent Registered Public Accounting Firm” contained in the definitive proxy statement issued in connection with the 2010 Annual Meeting of Stockholders and is incorporated in this report by reference thereto.

PART IV


 
(a)
The following documents are filed as part of this report and as response to Item 8:

   
Page
(1)
Consolidated Financial Statements and Supplementary Schedules
 
 
Report of Independent Registered Public Accounting Firm
23
 
Consolidated Balance Sheets as of
 
 
September 30, 2009 and 2008
24
 
Consolidated Statements of Operations for the years
 
 
ended September 30, 2009, 2008 and 2007
25
 
Consolidated Statements of Comprehensive Income and Shareholders'
 
 
Equity for the years ended September 30, 2009, 2008 and 2007
26
 
Consolidated Statements of Cash Flows for the years
 
 
ended September 30, 2009, 2008 and 2007
27
 
Notes to Consolidated Financial Statements
28
 
Selected Quarterly Financial Data (unaudited
35
     
 
All other schedules are either inapplicable or the information is included in
 
 
the consolidated financial statements and, therefore, have been omitted.
 
     
(2)
Financial Statement Schedules required to be filed by Item 8 of this Form 10-K:
 
 
Valuation of Qualifying Accounts
36
     
(3)
Exhibits
 
 
Exhibit No.
 
Title
 
Page
         
2.1
 
Agreement and Plan of Merger by and among IEC Electronics Corp.,  VUT Merger Corp. and Val-U-Tech Corp. dated as of May 23, 2008 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 27, 2008)
   
3.1
 
Amended and Restated Certificate of Incorporation of DFT Holdings Corp. (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1, Registration No. 33-56498)
   
3.2
 
Amended Bylaws of IEC Electronics Corp. (incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended September 30, 2002).
   
3.3
 
Agreement and Plan of Merger of IEC Electronics into DFT Holdings Corp. (incorporated by reference to Exhibit 3.3 to the Company's Registration Statement on Form S-1, Registration No. 33-56498)
   
3.4
 
Certificate of Merger of IEC Electronics Corp. into DFT Holdings Corp. - New York. (incorporated by reference to Exhibit 3.4 to the Company's Registration Statement on Form S-1, Registration No. 33-56498)
   
3.5
 
Certificate of Ownership and Merger merging IEC Electronics Corp. into DFT Holdings Corp. - Delaware. (incorporated by reference to Exhibit 3.5 to the Company's Registration Statement on Form S-1, Registration No. 33-56498)
   
3.6
 
Certificate of Merger of IEC Acquisition Corp. into IEC Electronics Corp. (incorporated by reference to Exhibit 3.6 to the Company’s Registration Statement on Form S-1, Registration No. 33-56498)
   
3.7
 
Certificate of Amendment of Certificate of Incorporation of IEC Electronics Corp. filed with the Secretary of State of the State of Delaware on  Feb. 26, 1998 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended March 27, 1998)
   
3.8
 
Certificate of Designations of the Series A Preferred Stock of IEC Electronics Corp. filed with the Secretary of State of the State of Delaware on June 3, 1998. (incorporated by reference to Exhibit 3.8 of the Company's Annual Report on Form 10-K for the year ended September 30, 1998)
   

 
20

 

4.1
 
Specimen of Certificate for Common Stock.  (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1, Registration No. 33-56498)
   
10.1
 
Credit Facility Agreement dated as of May 30, 2008 by and among IEC Electronics Corp. and Manufacturers and Traders Trust Company (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form  10-Q for the quarter ended June 27, 2008)
   
10.2
 
First Amendment to Credit Facility Agreement made July 29, 2008 to be effective as of May 30, 2008 between IEC Electronics Corp. and  Manufacturers and Traders Trust Company (incorporated by reference to Exhibit 10.8  to the Company's Annual Report on Form 10-K for the year ended September 30, 2008)
   
10.3*
 
Form of Indemnity Agreement between the Company and its directors and executive officers. (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 2, 1993)
   
10.4*
 
IEC Electronics Corp. 2001 Stock Option and Incentive Plan, as amended on  February 4, 2009
   
10.5*
 
Form of Incentive Stock Option Agreement pursuant to 2001 Stock Option and  Incentive Plan
   
10.6*
 
Form of Outside Director Stock Option Agreement pursuant to 2001 Stock Option and Incentive Plan
   
10.7*
 
Form of Restricted Stock Award Agreement pursuant to 2001 Stock Option and Incentive Plan
   
10.8*
 
Form of Challenge Award Option Agreement granted to senior management in Fiscal 2005 (Incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2005)
   
10.9*
 
Form of First Amendment to Challenge Award Option Agreement dated as of September 29, 2006 (incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended September 30, 2007)
   
10.10*
 
Form of Second Amendment to Challenge Award Option Agreement dated as of  January 23, 2008 (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended September 30, 2008)
   
10.11*
 
Form of Sales Restriction Agreement between IEC Electronics Corp. and certain option holders, dated as of August 24,2005 (incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2005)
   
10.12*
 
Option Award Agreement between the Company and W. Barry Gilbert dated as of August 12, 2003 (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended September 30, 2008)
   
10.13*
 
First Amendment to Option Award Agreement between the Company and W. Barry Gilbert dated as of August 4, 2006 (incorporated by reference to Exhibit 10.14 to the Company's  Annual Report on Form 10-K for the year ended September 30, 2008)
   
10.14*
 
Restricted Stock Award Agreement between the Company and Jeffrey T. Schlarbaum dated as of May 14, 2008 (incorporated by reference to Exhibit 10.15 to the Company's  Annual Report on Form 10-K for the year ended September 30, 2008)
   
10.15*
 
Restricted Stock Award Agreement between the Company and Donald S. Doody dated as of May 14, 2008 (incorporated by reference to Exhibit 10.16 to the Company's  Annual Report on Form 10-K for the year ended September 30, 2008)
   
10.16*
 
Separation Agreement between the Company and Brian Davis dated February 15, 2008 (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on  Form 10-K for the year ended September 30, 2008)
   
10.17*
 
Independent Consulting Agreement between the Company and Brian Davis dated February 15, 2008 (incorporated by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended September 30, 2008)
   
10.18*
 
Employment Agreement between the Company and W. Barry Gilbert, effective April 24, 2009 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on  Form 8-K filed April 30, 2009)
   
10.19*
 
Summary of the Company's Fiscal 2009 Management Incentive Plan
   
10.20*
 
Summary of the Company's Long-Term Incentive Plan
   
10.21*
 
IEC Electronics Corp. Management Deferred Compensation Plan, effective January 1, 2009
   
10.22*
 
IEC Electronics Corp. Board of Directors Deferred Compensation Plan, effective  January 1, 2009
   
10.23
 
Settlement Agreement dated March 17, 2009 by and among the Company, Val-U-Tech Corp.,  Kathleen Brudek, Michael Brudek and Nicholas Vaseliv (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 23, 2009)
   
14
 
Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14 to the  Company’s Current Report on Form 8-K filed on September 1, 2004)
   
21.1
 
Subsidiaries of IEC Electronics Corp.
   
23.1
 
Consent of EFP Rotenberg, LLP
   
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
   

*Management contract or compensatory plan or arrangement

 
21

 

SIGNATURES

Pursuant to the requirement of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 12, 2009.

IEC Electronics Corp.
 
By:/s/ W. Barry Gilbert
W. Barry Gilbert
Chief Executive Officer and Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature
 
Title
 
Date
/s/W. Barry Gilbert
 
Chief Executive Officer and
   
(W. Barry Gilbert)
 
Chairman of the Board
 
November 12, 2009
         
/s/Michael R. Schlehr
 
Vice President and
   
(Michael R. Schlehr)
 
Chief Financial Officer
 
November 12, 2009
         
/s/Carl E. Sassano
 
Director
 
November 12, 2009
(Carl E. Sassano)
       
         
/s/Jerold L. Zimmerman
 
Director
 
November 12, 2009
(Jerold L. Zimmerman)
       
         
/s/Eben S. Moulton
 
Director
 
November 12, 2009
(Eben S. Moulton)
       
         
/s/Amy L. Tait
 
Director
 
November 12, 2009
(Amy L. Tait)
       
         
/s/James C. Rowe
 
Director
 
November 12, 2009
(James C. Rowe)
       

 
22

 

Report

 
23

 

IEC ELECTRONICS CORP. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2009 AND 2008
(in thousands)

ASSETS

   
2009
   
2008
 
             
CURRENT ASSETS:
           
Cash
  $ -     $ -  
Accounts receivable (net of allowance for doubtful
    10,354       10,345  
Accounts of $85 and $145 respectively)
               
Inventories
    6,491       6,230  
Deferred income taxes
    2,050       1,908  
Other current assets
    110       61  
                 
Total Current Assets
    19,005       18,544  
                 
FIXED ASSETS:
               
Land and land improvements
    742       742  
Building and improvements
    4,339       4,368  
Machinery and equipment
    10,335       8,567  
Furniture and fixtures
    4,131       4,083  
                 
Sub-Total Gross Property
    19,547       17,760  
Less Accumulated Depreciation
    (17,156 )     (16,907 )
                 
Net Fixed Assets
    2,391       853  
                 
NON-CURRENT ASSETS:
               
Deferred income taxes
    13,026       14,727  
Other Non Current Assets
    47       60  
                 
Total Non-Current Assets
    13,073       14,787  
                 
Total Assets
  $ 34,469     $ 34,184  

LIABILITIES AND SHAREHOLDERS' EQUITY

   
2009
   
2008
 
             
CURRENT LIABILITIES:
           
Short term borrowings
  $ 1,147     $ 1,098  
Accounts payable
    4,183       6,125  
Accrued payroll and related expenses
    1,564       808  
Other accrued expenses
    531       603  
Customer deposits
    190       664  
                 
Total current liabilities
    7,615       9,298  
                 
Long term debt
    6,600       8,910  
                 
Total Liabilities
    14,215       18,208  
                 
SHAREHOLDERS' EQUITY:
               
Preferred stock, $.01 par value, Authorized
               
- 500,000 shares; Issued and outstanding - none
    -       -  
Common stock, $.01 par value, Authorized
               
- 50,000,000 shares; Issued - 9,747,283 and
               
9,326,582 shares
    97       93  
Treasury Shares at Cost 1,012,873 and 412,873 shares
    (1,413 )     (223 )
Additional paid-in capital
    40,632       40,124  
Accumulated deficit
    (19,062 )     (24,018 )
                 
Total shareholders' equity
    20,254       15,976  
                 
Total liabilities and shareholders’ equity
  $ 34,469     $ 34,184  

The accompanying notes are an integral part of these financial statements.

 
24

 

IEC ELECTRONICS CORP. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2009, 2008 AND 2007
(in thousands, except per share and share data)

   
2009
   
2008
   
2007
 
                   
Net sales
  $ 67,811     $ 51,092     $ 40,914  
                         
Cost of sales
    56,985       44,875       37,037  
                         
Gross profit
    10,826       6,217       3,877  
                         
Selling and administrative expenses
    6,007       3,825       2,892  
                         
Operating income
    4,819       2,392       985  
                         
Interest and financing expense
    389       452       440  
Other (income)/expense
    (287 )     306       42  
                         
Net income before income taxes
    4,718       1,634       503  
                         
(Benefit from) income taxes (footnote #4)
    (238 )     (8,843 )     (372 )
                         
Net income
  $ 4,956     $ 10,477     $ 875  
                         
Net income per common and common equivalent share:
                       
                         
Basic Income available to common shareholders
  $ 0.57     $ 1.22     $ 0.11  
                         
Diluted Income available to common shareholders
  $ 0.52     $ 1.12     $ 0.10  
                         
Weighted average number of common and common equivalent shares outstanding:
                       
                         
Basic
    8,728,930       8,553,635       8,114,491  
                         
Diluted
    9,553,526       9,337,097       8,895,819  

The accompanying notes are an integral part of these financial statements.

 
25

 

IEC ELECTRONICS CORP. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 2009, 2008 AND 2007
(in thousands)
 
                     
Additional
   
Retained
   
Total
 
   
Comprehensive
   
Common
   
Treasury
   
Paid-In
   
Earnings
   
Shareholders
 
   
Income
   
Stock
   
Stock
   
Capital
   
(Deficit)
   
Equity
 
                                     
                                     
BALANCE, September 30, 2006
        $ 84     $ (223 )   $ 38,601     $ (35,370 )   $ 3,092  
                                               
Shares issued and expensed Under Directors and Employee Stock Plan
        $ 3       -     $ 193       -     $ 196  
                                               
Net Income
  $ 875       -       -       -     $ 875     $ 875  
                                                 
Comprehensive income
  $ 875                                          
                                                 
BALANCE, September 30, 2007
          $ 87     $ (223 )   $ 38,794     $ (34,495 )   $ 4,163  
                                                 
Shares issued and expensed Under Directors and Employee Stock Plan
          $ 1       -     $ 285       -     $ 286  
                                                 
Shares Issued for Wire and Cable Acquisition
          $ 5       -     $ 1,045       -     $ 1,050  
                                                 
Net Income
  $ 10,477       -       -       -     $ 10,477     $ 10,477  
Comprehensive income
  $ 10,477                                          
                                                 
BALANCE, September 30, 2008
          $ 93     $ (223 )   $ 40,124     $ (24,018 )   $ 15,976  
                                                 
Shares issued and expensed Under Directors and Employee Stock Plan
          $ 4       -     $ 508       -     $ 512  
                                                 
Acquisition of Treasury Stock
      $ (1,190 )                   $ (1,190 )
                                                 
Net Income
  $ 4,956       -       -       -     $ 4,956     $ 4,956  
Comprehensive income
  $ 4,956                                          
                                                 
BALANCE, September 30, 2009
          $ 97     $ (1,413 )   $ 40,632     $ (19,062 )   $ 20,254  
 
The accompanying notes are an integral part of these financial statements.

 
26

 

IEC ELECTRONICS CORP. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2009, 2008 AND 2007
(in thousands)

   
2009
   
2008
   
2007
 
                   
CASH FLOWS FROM OPERATING ACTIVITIES:
                 
Net income
  $ 4,956     $ 10,477     $ 875  
Non-cash adjustments:
                       
Compensation Expense - Stock Options
    131       195       80  
Depreciation and amortization (See Note#3)
    282       378       410  
(Gain) loss on sale of fixed assets
    (5 )     1       17  
Issuance of directors fees in stock
    44       35       41  
Changes in operating assets and liabilities:
                       
Accounts receivable
    (9 )     (2,497 )       (1,244 )
Inventories
    (260 )     (595 )     1,788  
Deferred income taxes
    (335 )     (9,014 )     (390 )
Other assets
    (46 )     (23 )     62  
Accounts payable
    (1,942 )     761       1,084  
Accrued expenses
    685       333       385  
Customer Deposits
    (475 )     -       -  
Net cash flows from operating activities
    3,026       51       3,108  
                         
CASH FLOWS FROM INVESTING ACTIVITIES:
                       
Proceeds from sale of property
    11       2,002       17  
Cash Paid for Acquisition of Subsidiary
    -       (5,500 )     -  
Cash Received upon Acquisition of Subsidiary
    -       544       -  
Purchases of property, plant and equipment