UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

or

For the transition period from ____ to ____

 

Commission File Number 0-6508001-34376

 

IEC ELECTRONICS CORP.

(Exact name of registrant as specified in its charter)

 

 

105 Norton Street, Newark, New York   14513

(Address of Principal Executive Offices) (Zip Code)

  

315-331-7742

(Registrant's telephone number, including area code)

 

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

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.

 

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

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):

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

 

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

IEC ELECTRONICS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

 

 

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

IEC ELECTRONICS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS of CHANGES in STOCKHOLDERS' EQUITY

 

 

 

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

IEC ELECTRONICS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS

(unaudited; in thousands) 

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

IEC ELECTRONICS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

IEC Electronics Corp. ("IEC"(“IEC”, "we"“we”, "our"“our”, “us”, or the “Company”) is a provider ofprovides electronic contract manufacturing services (“EMS”) to companies in various industries that require advanced technology.  We specialize in the custom manufacture of high reliability, complex circuit boards and system-level assemblies; a wide array of cable and wire harness assemblies capable of withstanding extreme environments; and precision metal components.  We provide EMS where quality and reliability are of paramount importance and when low-to-medium volume, high-mix production is the norm.  We utilize state-of-the-art, automated circuit board assembly equipment together with a full complement of high-reliability manufacturing stress testing methods.  Our customers are at the center of everything we do and we are capable of reacting and adapting to their ever-changing needs.  Our customer-centric approach offers a high degree of flexibility while simultaneously complying with rigorous quality and on-time delivery standards. 

 

IEC's financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"(“GAAP”), as set forth in the Financial Accounting Standards Board's (“FASB”) Accounting Standards Codification (“ASC”).

 

The Company’s fiscal year ends on September 30th and the first three quarters end generally on the Friday closest to the last day of the calendar quarter.

 

The consolidated financial statements include the accounts of IEC and its wholly owned subsidiaries: IEC Electronics Wire and Cable, Inc. (“Wire and Cable”); IEC Electronics Corp-Albuquerque ("Albuquerque"(“Albuquerque”); and IEC Analysis & Testing Laboratory, LLC (“ATL”), formerly Dynamic Research and Testing Laboratories, LLC (“DRTL”); and Southern California Braiding, Inc. (“SCB”).LLC. The Celmet unit ("Celmet"(“Celmet”) operates as a division of IEC.  As further discussed in Note 2—SCB Divestiture and Discontinued Operations, the operations of our wholly-owned subsidiary, formerly known as Southern California Braiding, Inc. (“SCB”), were divested during the fourth quarter of fiscal 2015.  All significant intercompany transactions and accounts are eliminated in consolidation. 

 

The accompanying unaudited financial statements for the three and nine months ended July 1, 2016 and June 26, 2015 and June 27, 2014 have been prepared in accordance with GAAP for interim financial information.  In the opinion of management, all adjustments required for a fair presentation of the information have been made.  The accompanying financial statements should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K/A10-K for the fiscal year ended September 30, 2014.2015.

 

The Company'sCompany’s cash and cash equivalents principally represent deposit accounts with Manufacturers and Traders Trust Company ("(“M&T Bank" and "M&T"Bank”), a banking corporation headquartered in Buffalo, NY.

 

 

The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management's evaluation of collectability.  Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote.

 

Inventories are stated at the lower of cost or market value under the first-in, first-out method.  The Company regularly assesses slow-moving, excess and obsolete inventory and maintains balance sheet reserves in amounts required to reduce the recorded value of inventory to lower of cost or market.

 

Property, plant and equipment (“PP&E”) are stated at cost and are depreciated over various estimated useful lives using the straight-line method.  Maintenance and repairs are charged to expense as incurred, while renewals and improvements are capitalized.  At the time of retirement or other disposition of PP&E, cost and accumulated depreciation are removed from the accounts and any gain or loss is recorded in earnings.

 

Depreciable lives generally used for PP&E are presented in the table below.  Leasehold improvements are amortized over the shorter of the lease term or estimated useful life of the improvement.

 

 

Intangible assets (other than goodwill) are those that lack physical substance and are not financial assets.  Such assets held by IEC were acquired in connection with business combinations and the remaining assets represent economic benefits associated with acquired customer relationships, a non-compete agreement, and a property tax abatement.  Values assigned to individual intangible assets are amortized using the straight-line method over their estimated useful lives. 

 

TheASC 360-10 (Property, Plant and Equipment) and ASC 350-30 (Intangibles) require the Company teststo test long-lived assets (PP&E and definitive-liveddefinitive lived assets) for recoverability whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable.  If the carrying value of an asset exceeds the undiscounted future cash flows attributable to an asset, it is considered impaired and the excess of carrying value over fair value must be charged to earnings.  No impairment charges were recorded by IEC for property, plant and equipment or intangibles in fiscal 2016.

 

 

Goodwill represents the excess of cost over fair value of net assets acquired in a business combination.   Historically, most of IEC's recordedUnder ASC 350, goodwill related to SCB, which was acquired in December 2010. A lesser portion relates to Celmet, which was acquired in July 2010.  

The quantitative process entails comparing the overall fair value of the unit to which goodwill relates to its carrying value.  If the fair value of the unit exceeds its carrying value, no further assessment of potential impairment is required.  If the fair value of the unit is less than its carrying value, a valuation of the unit'sunit’s individual assets and liabilities is required to determine whether or not goodwill is impaired.  Goodwill impairment losses are charged to earnings. 

 

 

When legal proceedings are brought or claims are made against us and the outcome is uncertain, ASC 450-10 (Contingencies) requires that we determine whether it is probable that an asset has been impaired or a liability has been incurred.  If such impairment or liability is probable and the amount of loss can be reasonably estimated, the loss must be charged to earnings. 

 

When it is considered probable that a loss has been incurred, but the amount of loss cannot be estimated, disclosure but not accrual of the probable loss is required.  Disclosure of a loss contingency is also required when it is reasonably possible, but not probable, that a loss has been incurred. 

 

Grants from outside parties are recorded as other long-term liabilities and are amortized over the same period during which the associated fixed assets are depreciated.

 

The Company actively monitors its exposure to interest rate risk and from time to time uses derivative financial instruments to manage the impact of this risk.  The Company uses derivatives only for purposes of managing risk associated with underlying exposures.  The Company does not trade or use instruments with the objective of earning financial gains on the interest rate, nor does the Company use derivative instruments where it does not have underlying exposures.  The Company manages its hedging position and monitors the credit ratings of counterparties and does not anticipate losses due to counterparty nonperformance.  Management believes its use of derivative instruments to manage risk is in the Company’s best interest.  However, the Company’s use of derivative financial instruments may result in short-term gains or losses and increased earnings volatility.  The Company’s instruments are recorded in the consolidated balance sheets at fair value in other assets or other long-term liabilities.

 

 

Under ASC 825 (Financial Instruments), the Company is required to disclose the fair value of financial instruments for which it is practicable to estimate value.  The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities, borrowings and an interest rate swap agreement.  IEC believes that recorded value approximates fair value for all cash, accounts receivable, accounts payable and accrued liabilities.

 

ASC 820 (Fair Value Measurements and Disclosures) defines fair value, establishes a framework for measurement, and prescribes related disclosures.  ASC 820 defines fair value as the price that would be received upon sale of an asset or would be paid to transfer a liability in an orderly transaction.  Inputs used to measure fair value are categorized under the following hierarchy:

 

Level 1: Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.

 

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable market data.

 

Level 3: Model-derived valuations in which one or more significant inputs are unobservable.

 

The Company deems a transfer between levels of the fair value hierarchy to have occurred at the beginning of the reporting period.  There were no such transfers during the first nine months of fiscal 20152016 or fiscal 2014.2015.

 

The Company’s revenue is principally derived from the sale of electronic products built to customer specifications, but also from other value-added support services and repair work.  Revenue from product sales is recognized when (i) goods are shipped or title and risk of ownership have passed, (ii) the price to the buyer is fixed or determinable, and (iii) realization is reasonably assured. Service revenue is generally recognized once the service has been rendered.  For material management arrangements, revenue is generally recognized as services are rendered.  Under such arrangements, some or all of the following services may be provided: design, bid, procurement, testing, storage or other activities relating to materials the customer expects to incorporate into products that it manufactures.  Value-added support services revenue, including material management and repair work revenue, amounted to less than 5% of total revenue in each of the first nine months of fiscal 2015 or2016 and fiscal 2014.2015.

 

Provisions for discounts, allowances, rebates, estimated returns and other adjustments are recorded in the period the related sales are recognized.

 

ASC 718 (Stock Compensation) requires that compensation expense be recognized for equity awards based on fair value as of the date of grant.  For stock options, the Company uses the Black-Scholes pricing model to estimate grant date fair value.  Costs associated with stock awards are recorded over requisite service periods, generally the vesting period.  If vesting is contingent

 

The Company restated its consolidated financial statements for the fiscal year ended September 30, 2012, and the interim fiscal quarters and year to date periods within the year ended September 30, 2012, included in the Company’s Annual Report on Form10-K/A and the fiscal quarter ended December 28, 2012, as reported in the Company’s Quarterly Report on Form 10-Q/A for that fiscal quarter (the "Prior Restatement"“Prior Restatement”).  The Company also restated its consolidated financial statements for the fiscal year ended September 30, 2014, and its interim financial statements for each quarterly period within the year ended September 30, 2014, included in the Company's Annual Report on Form 10-K/A, to correct an error in the valuation allowance on deferred income tax assets as well as an error in the estimate ofestimating excess and obsolete inventory reserves (the "2014 Restatements"“2014 Restatements”). The Prior Restatement and the 2014 Restatements together are referred to as the "Restatements"“Restatements”.

Restatement and related expenses representsrepresent third-party expenses arising from the Restatements. These expenses include legal and accounting fees incurred by the Company from external counsel and independent accountants directly attributable to the Restatements as well as other matters arising from the Prior Restatement including those more fully described in Note 17—Litigation.  The Company receives insurance reimbursement for certain of these expenses related to the Prior Restatement which may result in a benefit in a given period.

 

ASC 740 (Income Taxes) requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns, but not in both.  Deferred tax assets are also established for tax benefits associated with tax loss and tax credit carryforwards.  Such deferred balances reflect tax rates that are scheduled to be in effect, based on currently enacted legislation, in the years the book/tax differences reverse and tax loss and tax credit carryforwards are expected to be realized.  An allowance is established for any deferred tax asset for which realization is not likely.

 

ASC 740 also prescribes the manner in which a company measures, recognizes, presents, and discloses in its financial statements uncertain tax positions that the Companya company has taken or expects to take on a tax return.  The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the position will be sustained following examination by taxing authorities, based on technical merits of the position.  The Company believes that it has no material uncertain tax positions.

 

Any interest or penalties incurred are reported as interest expense.  The Company’s income tax filings are subject to audit by various tax jurisdictions and current open years are fiscal 2010 through fiscal 2014.  The Company is currently under federal income tax audit for fiscal 2011 concluded in fiscal 2013 and diddoes not expect the audit to have a material impact on the financial statements.

 

Basic earnings per common share are calculated by dividing income available to common stockholders by the weighted average number of shares outstanding during each period.  Diluted earnings per common share add to the denominator incremental shares resulting from the assumed exercise of all potentially dilutive stock options, as well as restricted (non-vested) stock, restricted stock units (“RSUs”) and anticipated issuance throughissuances under the employee stock purchase plan.  Options, and restricted stock and RSUs are primarily held by directors, officers and certain employees.  A summary of shares used in earnings per share (“EPS”) calculations follows.

 

 

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”)GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities.  Actual results may differ from management’s estimates.

 

The Company presents operating cash flows using the indirect method of reporting under which non-cash income and expense items are removed from net income. 

 

 

FASB ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” was issued in March 2016 and improves implementation guidance on principal versus agent considerations. The effective dates are the same as those for Topic 606.

FASB ASU 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” whichConcern” was issued September 2014. This provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued.  An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company does not anticipate a significant impact upon adoption.

FASB ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs” was issued in April 2015. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU applies to all entities and is effective for public business entities for annual periods endingbeginning after December 15, 2015, and interim periods thereafter, with early adoption permitted. The guidance should be applied on a retrospective basis. The Company does not anticipate a significant impact upon adoption.

FASB ASU 2015-11, "Simplifying“Simplifying the Measurement of Inventory"Inventory” was issued onin July 22, 2015. This requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The ASU will not apply to inventories that are measured by using either the last-in, first-outfirst-hout method or the retail inventory method. For public business entities, the ASU is effective prospectively for

annual periods beginning after December 15, 2016, and interim periods therein. Upon transition, entities must disclose the nature of and reason for the accounting change. The Company does not anticipate a significant impact upon adoption.

SCB's revenue and June 27, 2014 have been restated.loss before income taxes follows:

 

NOTE 4—INVENTORIES  

A summary of inventory by category at period end follows:

 

NOTE 5—FIXED ASSETS  

A summary of fixed assets and accumulated depreciation at period end follows:

NOTE 6—INTANGIBLE ASSETS  

IEC's intangible assets (other than goodwill) were acquired in connection with purchasespurchase of SCB in the first quarter of fiscal 2011 and Albuquerque in fiscal 2010.

 

 

Amortization expense during the three and nine months ended July 1, 2016 and June 26, 2015 and June 27, 2014 follows:

 

 

 

NOTE 7—GOODWILL  

Goodwill balances resultingThe goodwill balance of $0.1 million resulted from the acquisitionsacquisition of SCB in the first quarter of fiscal 2011 and Celmet in fiscal 2010 were $13.7 million and $0.1 million, respectively, prior to the impairments described below.

 

 

 

 

Borrowing Base

TheUnder the Fifth Amended Credit Agreement, the maximum amount the Company maycan borrow under the Revolver is the lesser of (i) 85% of eligible receivables plus 35% of eligible inventories (up to a cap of $3.75 million) or (ii) $20$20.0 million. AtThe Sixth Amendment removed the Company's election,provision from the 2013 Credit Agreement, that allowed the Company to elect that another 35% of eligible inventories may be included in the borrowing base for limited periods of time during which a higher rate of interest iswas charged on the Revolver. Borrowings based on inventory balances are furtherwere limited to a cap of $3.75 million, or when subject to the higher percentage limit, $4.75 million.

At June 26,July 1, 2016 and September 30, 2015, the upper limit on Revolver borrowings was $19.5 million.$17.7 million and $20.0 million, respectively. Average available balances on the Revolver amounted to $9.9 million and $10.8$9.7 million during the nine months ended June 26, 2015 and June 27, 2014, respectively.July 1, 2016.

Interest Rates

Prior to December 13, 2013 through December 13, 2014 and if the Company was not compliant with financial covenants on December 13, 2014, during the period of non-compliance. The Fifth Amendment further fixed the applicable margins at the rates noted in the Fourth Amendment through March 27,14, 2015, and if the Company was not compliant with financial covenants on March 27, 2015, during the period of non-compliance. Additionally, the Sixth Amendment to the 2013 Credit Agreement entered into on May 8, 2015 (the "Sixth Amendment") further fixed each facility’s applicable margin at the rates established under the Fourth and Fifth Amendments through March 31, 2016 as follows: 4.25% for the Revolver, 4.50% for the Albuquerque Mortgage Loan and thereafter if3.25% for the Company is not then in compliance with its financial covenants.Term Loan B. The applicable unused line fee of 0.50% also was extended through March 31, 2016, and thereafter if the Company is not in compliance with its financial covenants.

The Company incurs quarterly unused commitment fees ranging from 0.125%0.250% to 0.500% of the excess of $20.0 million over average borrowings under the Revolver. Fees incurred amounted to $38.2$44.9 thousand and $40.5$38.2 thousand during the nine months ended July 1, 2016 and June 26, 2015, and June 27, 2014, respectively. The fee percentage varies based on the Company's Debt to EBITDARS Ratio, as defined below.EBITDAS Ratio.

Interest Rate Swap

In connection with the 2013 Credit Agreement, on January 18, 2013, the Company and M&T Bank entered into an interest rate swap arrangement (“Swap Transaction”). The Swap Transaction is for a notional amount of $14.0 million with an effective date of February 1, 2013 and a termination date of February 1, 2023. The Swap Transaction is designed to reduce the variability of future interest payments with respect to Term Loan B by effectively fixing the annual interest rate payable on the loan’s outstanding principal. Pursuant to the Swap Transaction, the Company’s one month LiborLIBOR rate is swapped for a fixed rate of 1.32%. When the swap fixed rate is added to the Term Loan B spread of 2.50%3.25%, the Company’s interest rate applicable to Term Loan B is effectively fixed at 3.82%. The Fourth Amendment and Fifth Amendment temporarily modified the Term Loan B spread to 3.25% which results in an effectively fixed rate of 4.57%.

Financial Covenants

On May 15, 2013 we obtained an amendmentJune 20, 2016, the Company and M&T entered into a First Amendment to the 2013Fifth Amended and Restated Credit Facility Agreement (the “First Amendment”), which modifiedamended the DebtFifth Amended Credit Facility. The First Amendment increased the Maximum Capital Expenditures, as defined in the Credit Agreement, covenant from $3.5 million to EBITDARS Ratio and Fixed Charge Coverage Ratio covenants. The Second Amendment, obtained on August 6, 2013 modified the Debt to EBITDARS Ratio. On December 13, 2013 we obtained the Fourth Amendment and on February 4, 2014 we obtained a further amendment$4.5 million annually.

Covenant Ratios in effect at July 1, 2016, pursuant to the 2013Fifth Amended Credit Agreement, (the “Fifth Amendment”) which further modifiedas amended by the ratios.First Amendment, are as follows:

The Sixth Amendment also modified the Quarterly EBITDARS covenant to be equal to or greater than $1.25 million for the fiscal quarter ending June 26, 2015, and $1.5 million for each fiscal quarter thereafter.

A summary of financial covenant compliance follows:

As a result of the 2014 Restatements as described in Note 2—Restatement1—Our Business and Summary of Deferred Tax Asset Valuation Allowance and Excess and Obsolete Inventory Reserve,Significant Accounting Policies, the Company was in default of the Credit Agreement for failure to deliver financial statements prepared in accordance with GAAP.GAAP for each of the quarters of fiscal 2014 and the fiscal quarter ending December 26, 2014. The Company received a waiver from M&T regarding this event of default.

 

 

NOTE 9—DERIVATIVE FINANCIAL INSTRUMENTS  

In connection with the 2013 Credit Agreement, on January 18, 2013, the Company and M&T Bank entered into the Swap Transaction.  The Swap Transaction is for a notional amount of $14.0 million with an effective date of February 1, 2013 and a termination date of February 1, 2023.  The Swap Transaction is designed to reduce the variability of future interest payments with respect to Term Loan B by effectively fixing the annual interest rate payable on outstanding principal of Term Loan B.  Pursuant to the interest rate swap, the Company’s one month LIBOR rate is swapped for a fixed rate of 1.32%.  As more fully described in Note 8—Credit Facilities, we are partythe applicable margin on Term Loan B was fixed at 3.25% until the tenth day following the date the Company delivered its quarterly covenant calculation for the second quarter of fiscal 2016.  The applicable margin on Term Loan B based on the quarterly covenant calculation for the second quarter of fiscal 2016 was 3.25%. When the swap fixed rate is added to the Swap Transaction. Term Loan B spread of 3.25%, the Company’s interest rate applicable to Term Loan B is effectively fixed at 4.57%.

The fair value of the Swap Transactioninterest rate swap agreement represented an asseta liability of $0.1 million$163.1 thousand and $0.2 million$46.0 thousand at June 26, 2015July 1, 2016 and September 30, 2014,2015, respectively, and was estimated based on Level 2 valuation inputs.  The Company did not designate the Swap Transactionswap as a cash flow hedge at inception and therefore, the gains or losses from the changes in fair value of the derivative instrument are recognized in earnings for the periodperiods ended June 26,July 1, 2016 and September 30, 2015 within interest expense.

 

The fair value of the Swap Transactioninterest rate swap of $0.1 million$163.1 thousand and $0.2 million$46.0 thousand is recorded in other long term assetslong-term liability in the Consolidated Balance Sheet at June 26, 2015July 1, 2016 and September 30, 2014,2015, respectively.

NOTE 10—FAIR VALUE OF FINANCIAL INSTRUMENTS  

The Company’s Swap Transaction is recorded on the balance sheet as either an asset or a liability measured at fair value.  The Company estimates the fair value of its Swap Transaction based on Level 2 valuation inputs, including fixed interest rates, LiborLIBOR implied forward interest rates and the remaining time to maturity.  At June 26, 2015,July 1, 2016, the Swap Transaction was an asseta liability with a fair value of $0.1 million.$163.1 thousand.

 

The Company’s long-term debt is not quoted.  Fair value was estimated using a discounted cash flow analysis based on Level 2 valuation inputs, including borrowing rates the Company believes are currently available to it for loans with similar terms and maturities.

 

The Company’s debt is carried at historical cost on the balance sheet.  A summary of the fair value and carrying value of fixed rate debt at period end follows: