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IEC IEC Electronics

Filed: 5 May 21, 8:51am

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended April 2, 2021

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 001-34376

IEC ELECTRONICS CORP.

(Exact name of registrant as specified in its charter)

Delaware

    

13-3458955

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

 

105 Norton Street, Newark, New York 14513

(Address of Principal Executive Offices) (Zip Code)

315-331-7742

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

IEC

Nasdaq Global Market

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 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes  No

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the

Exchange Act.

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

Yes No

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

Common Stock, $0.01 par value –10,619,360 shares as of April 28, 2021

Part I  FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

APRIL 2, 2021 and SEPTEMBER 30, 2020

(unaudited; in thousands, except share and per share data)

    

April 2,

    

September 30,

2021

2020

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash

$

391

$

312

Accounts receivable, net of allowance

 

27,655

 

30,361

Unbilled contract revenue

 

18,120

 

8,773

Inventories

 

54,075

 

51,374

Other current assets

 

2,836

 

1,757

Total current assets

 

103,077

 

92,577

Property, plant and equipment, net

 

49,915

 

23,587

Deferred income taxes

 

5,193

 

4,840

Operating lease right-of-use assets, net of accumulated amortization

 

215

 

260

Other long-term assets

 

766

 

1,700

Total assets

$

159,166

$

122,964

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Current portion of long-term debt

$

248

$

Current portion of operating lease obligation

 

63

 

61

Current portion of finance lease obligation

 

1,486

 

436

Accounts payable

 

23,244

 

29,733

Accrued payroll and related expenses

 

1,938

 

3,659

Other accrued expenses

 

455

 

457

Customer deposits

 

27,779

 

19,783

Total current liabilities

 

55,213

 

54,129

Long-term debt

 

34,060

 

21,476

Long-term operating lease obligation

 

152

 

184

Long-term finance lease obligation

 

26,275

 

6,616

Other long-term liabilities

 

2,977

 

1,404

Total liabilities

 

118,677

 

83,809

Commitments and contingencies (Note 11)

 

  

 

  

STOCKHOLDERS’ EQUITY

 

  

 

  

Preferred stock, $0.01 par value:

 

 

500,000 shares authorized; none issued or outstanding

 

 

Common stock, $0.01 par value:

 

  

 

  

Authorized: 50,000,000 shares

 

  

 

  

Issued: 11,665,696 and 11,556,214 shares, respectively

 

  

 

  

Outstanding: 10,610,208 and 10,500,726 shares, respectively

 

106

 

105

Additional paid-in capital

 

49,305

 

49,161

Accumulated deficit

 

(7,333)

 

(8,522)

Treasury stock, at cost: 1,055,488 shares

 

(1,589)

 

(1,589)

Total stockholders’ equity

 

40,489

 

39,155

Total liabilities and stockholders’ equity

$

159,166

$

122,964

3

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

IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND SIX MONTHS ENDED APRIL 2, 2021 and MARCH 27, 2020

(unaudited; in thousands, except share and per share data)

Three Months Ended

Six Months Ended

    

April 2,

    

March 27,

    

April 2,

    

March 27,

    

2021

2020

2021

2020

Net sales

$

45,360

$

44,171

$

92,841

$

88,905

Cost of sales

 

42,048

 

38,668

 

83,789

 

78,163

Gross profit

 

3,312

 

5,503

 

9,052

 

10,742

Selling and administrative expenses

 

3,487

 

3,217

 

7,005

 

6,516

Operating (loss)/profit

 

(175)

 

2,286

 

2,047

 

4,226

Interest expense

 

545

 

396

 

1,002

 

811

(Loss)/income before income taxes

 

(720)

 

1,890

 

1,045

 

3,415

(Benefit from)/provision for income taxes

 

(372)

 

367

 

(144)

 

703

Net (loss)/income

$

(348)

$

1,523

$

1,189

$

2,712

Net (loss)/income per common share:

 

  

 

  

 

  

 

  

Basic

$

(0.03)

$

0.15

$

0.11

$

0.26

Diluted

$

(0.03)

$

0.14

$

0.11

$

0.25

Weighted average number of shares outstanding:

 

  

 

  

 

  

 

  

Basic

 

10,583,581

 

10,393,461

 

10,553,991

 

10,379,846

Diluted

 

10,583,581

 

10,703,112

 

11,024,357

 

10,666,001

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

4

IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENT of CHANGES in STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED APRIL 2, 2021

(unaudited; in thousands, except share and per share data)

    

Number 

    

Common

    

Additional

    

    

Treasury

    

Total

of Shares 

 

Stock,

 

Paid-In

Accumulated 

 

Stock,

 

Stockholders’

Outstanding

 

par $0.01

 

Capital

Deficit

 

at cost

 

Equity

Balances, September 30, 2020

 

10,500,726

$

105

$

49,161

$

(8,522)

$

(1,589)

$

39,155

Net income

 

 

 

 

1,537

 

 

1,537

Stock-based compensation

 

 

 

242

 

 

 

242

Vested restricted stock and restricted stock units, net of shares withheld for payment of taxes

 

57,455

 

1

 

(401)

 

 

 

(400)

Exercise of stock options

 

14,000

 

 

68

 

 

 

68

Employee stock plan purchases

 

5,852

 

 

45

 

 

 

45

Balances, January 1, 2021

 

10,578,033

$

106

$

49,115

$

(6,985)

$

(1,589)

$

40,647

Net loss

 

 

 

 

(348)

 

 

(348)

Stock-based compensation

 

 

 

226

 

 

 

226

Vested restricted stock and restricted stock units, net of shares withheld for payment of taxes

27,603

 

 

(85)

 

 

(85)

Employee stock plan purchases

4,572

 

 

49

 

 

 

49

Balances, April 2, 2021

 

10,610,208

$

106

$

49,305

$

(7,333)

$

(1,589)

$

40,489

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

5

IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENT of CHANGES in STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED MARCH 27, 2020

(unaudited; in thousands, except share and per share data)

    

Number 

    

Common

    

Additional

    

    

Treasury

    

Total

of Shares 

 

Stock,

 

Paid-In

Accumulated 

 

Stock,

 

Stockholders’

Outstanding

 

par $0.01

 

Capital

Deficit

 

at cost

 

Equity

Balances, September 30, 2019

 

10,338,548

$

103

$

48,001

$

(15,275)

$

(1,589)

$

31,240

Net income

 

 

 

 

1,189

 

 

1,189

Stock-based compensation

 

 

 

152

 

 

 

152

Vested restricted stock and restricted stock units, net of shares withheld for payment of taxes

 

6,367

 

 

(24)

 

 

 

(24)

Exercise of stock options

 

24,000

 

 

130

 

 

 

130

Employee stock plan purchases

 

6,449

 

 

40

 

 

 

40

Balances December 27, 2019

10,375,364

$

103

$

48,299

$

(14,086)

$

(1,589)

$

32,727

Net income

 

 

 

 

1,523

 

 

1,523

Stock-based compensation

 

 

 

185

 

 

 

185

Restricted stock vested, net of shares withheld for payment of taxes

 

4,663

 

 

(33)

 

 

 

(33)

Restricted stock units vested, net of shares withheld for payment of taxes

 

10,089

 

 

(35)

 

 

 

(35)

Employee stock plan purchases

 

2,000

 

 

8

 

 

 

8

Balances, March 27, 2020

 

10,392,116

$

103

$

48,424

$

(12,563)

$

(1,589)

$

34,375

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

6

IEC ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS

SIX MONTHS ENDED APRIL 2, 2021 and MARCH 27, 2020

(unaudited; in thousands)

Six Months Ended

    

April 2,

    

March 27,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

 

  

Net income

$

1,189

$

2,712

Non-cash adjustments:

 

  

 

  

Stock-based compensation

 

468

 

337

Depreciation and amortization

 

2,405

 

1,587

Change in reserve for doubtful accounts

(38)

48

Change in inventory reserve and warranty reserve

 

557

 

1,296

Gain on sale of property, plant and equipment

(26)

Deferred tax expense

 

(353)

 

1,201

Amortization of deferred gain

 

(57)

 

(57)

Changes in operating assets and liabilities:

 

  

 

  

Accounts receivable

 

2,744

 

1,031

Unbilled contract revenue

 

(9,347)

 

(1,072)

Inventories

 

(3,010)

 

(2,055)

Federal income tax receivable

 

 

(517)

Other current assets

 

(1,079)

 

(267)

Other long-term assets

 

290

 

(116)

Accounts payable

 

(6,710)

 

(2,771)

Change in book overdraft position

 

 

(231)

Accrued expenses

 

(1,971)

 

(1,898)

Customer deposits

 

7,996

 

2,573

Net change in lease right-of-use assets and liabilities

 

15

 

(1)

Other long-term liabilities

 

134

 

Net cash flows (used in)/provided by operating activities

 

(6,793)

 

1,800

CASH FLOWS FROM INVESTING ACTIVITIES

 

  

 

  

Purchases of property, plant and equipment

 

(9,320)

 

(1,351)

Proceeds from disposal of property, plant and equipment

 

665

 

Proceeds received from capital grants

1,500

Net cash flows used in investing activities

 

(7,155)

 

(1,351)

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

  

Advances from revolving credit facility

 

58,451

 

36,680

Repayments of revolving credit facility

 

(50,034)

 

(36,763)

Borrowings under other loan agreements

 

6,630

 

0

Repayments under other loan agreements

 

(2,171)

 

(685)

Payments under finance lease

 

(583)

 

(182)

Proceeds received from lease financing obligation

 

2,151

 

415

Debt issuance costs

 

(94)

 

Proceeds from exercise of stock options

 

68

 

138

Proceeds from employee stock plan purchases

 

94

 

40

Cash paid for taxes upon vesting of restricted stock

 

(485)

 

(92)

Net cash flows provided by/(used in) financing activities

 

14,027

 

(449)

Net cash change for the period

 

79

 

0

Cash, beginning of period

 

312

 

0

Cash, end of period

$

391

$

0

Supplemental cash flow information

 

  

 

  

Interest paid

$

990

$

779

Income taxes paid

 

230

 

20

Non-cash transactions:

 

  

 

  

Property, plant and equipment purchased with extended payment terms

$

221

$

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

7

IEC ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1—OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our Business

IEC Electronics Corp. (“IEC,” the “Company,” “we,” “our,” or “us”) provides electronic manufacturing services (“EMS”) to advanced technology companies that produce life-saving and mission critical products for the medical, industrial, aerospace and defense sectors. The Company specializes in delivering technical solutions for the custom manufacture of complex full system assemblies by providing on-site analytical testing laboratories, custom design and test engineering services combined with a broad array of manufacturing services encompassing electronics, interconnect solutions, and precision metalworking. As a full service EMS provider, IEC holds all appropriate certifications for the market sectors it supports including ISO 9001:2015, AS9100D, and ISO 13485, and we are Nadcap accredited. IEC is headquartered in Newark, NY and also has operations in Rochester, NY and Albuquerque, NM. Additional information about IEC can be found on its website at www.iec-electronics.com. The contents of this website are not incorporated by reference into this quarterly report.

Generally Accepted Accounting Principles

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

Fiscal Calendar

The Company’s fiscal year ends on September 30 and the first three quarters generally end on the Friday closest to the last day of the calendar quarter. For the fiscal year ending September 30, 2021 (“fiscal 2021”), the fiscal quarters ended or will end on January 1, 2021, April 2, 2021 and July 2, 2021. For the fiscal year ended September 30, 2020 (“fiscal 2020”), the fiscal quarters ended on December 27, 2019, March 27, 2020 and June 26, 2020.

Consolidation

The condensed consolidated financial statements include the accounts of IEC and its wholly-owned subsidiaries: IEC Electronics Corp-Albuquerque (“Albuquerque”); IEC Analysis & Testing Laboratory, LLC (“ATL”). All intercompany transactions and accounts are eliminated in consolidation.

Unaudited Financial Statements

The accompanying unaudited condensed consolidated financial statements for the three and six months ended April 2, 2021 and March 27, 2020 have been prepared without an audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and do not include certain of the information the footnotes require by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, required for a fair presentation of the information have been made. The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

Cash

The Company’s cash represents deposit accounts with Manufacturers and Traders Trust Company (“M&T Bank”), a banking corporation headquartered in Buffalo, NY. The Company’s cash management system provides for the funding of the disbursement accounts on a daily basis as checks are presented for payment. Under this system, outstanding checks in excess of the bank balance create a book overdraft. Book overdrafts are presented in accounts payable in the condensed consolidated balance sheets. There were 0 book overdrafts at April 2, 2021 and September 30, 2020. Changes in the book overdrafts are presented within net cash flows (used in)/provided by operating activities within the condensed consolidated statements of cash flows.

8

Allowance for Doubtful Accounts

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 the likelihood of collection is remote.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable 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 the lower of cost or net realizable value.

Property, Plant and Equipment

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.

    

Estimated 

PP&E Lives

Useful Lives

 

(years)

Land improvements

 

10

Buildings and improvements

 

5 to 40

Machinery and equipment

 

3 to 10

Furniture and fixtures

 

3 to 7

Software

 

3 to 10

Reviewing Long-Lived Assets for Potential Impairment

ASC 360 (Property, Plant and Equipment) requires the Company to test long-lived assets (PP&E and definite lived assets) for recoverability whenever events or circumstances indicate that the carrying amount may not be recoverable. If carrying value exceeds 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. NaN impairment charges were recorded by IEC for long-lived assets during the three and six months ended April 2, 2021 and March 27, 2020.

Legal Contingencies

When legal proceedings are brought or claims are made against the Company and the outcome is uncertain, ASC 450 (Contingencies) requires the Company to 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.

Legal Expense Accrual

The Company records legal expenses as they are incurred, based on invoices received or estimates provided by legal counsel. Future estimated legal expenses are not recorded until incurred.

9

Customer Deposits

Customer deposits represent amounts invoiced to customers for which the revenue has not yet been earned and therefore represent a commitment for the Company to deliver goods or services in the future. Deposits are generally short term in nature and are recognized as revenue when earned.

Fair Value Measurements

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 and borrowings. IEC believes that recorded value approximates fair value for all cash, accounts receivable, accounts payable, accrued liabilities and borrowings.

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 three and six months ended April 2, 2021 and March 27, 2020.

Stock-Based Compensation

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 on the achievement of performance objectives, fair value is accrued over the period the objectives are expected to be achieved only if it is considered probable that the objectives will be achieved. The Company also has an employee stock purchase plan (“ESPP”) that provides for the purchase of Company common stock at a discounted stock purchase price.

Income Taxes and Deferred Taxes

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 tax 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 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.

10

Any interest incurred is reported as interest expense. Any penalties incurred are reported as tax expense. The Company’s income tax filings are subject to audit by various tax jurisdictions and current open years are the fiscal year ended September 30, 2016 through fiscal year ended September 30, 2019.

Dividends

IEC does not pay dividends on its common stock as it is the Company’s current policy to retain earnings for use in the business. Furthermore, the Company’s Sixth Amended and Restated Credit Facility Agreement with M&T Bank includes certain restrictions on paying cash dividends, as more fully described in Note 6—Credit Facilities.

Use of Estimates

The preparation of financial statements in conformity with 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. Significant items subject to such estimates include: excess and obsolete inventory reserve, warranty reserves, the valuation of deferred income tax assets and revenue recognition related to the accounts for over time contracts. Actual results may differ from management’s estimates.

Statements of Cash Flows

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

Segments

The Company’s results of operations for the three and six months ended April 2, 2021 and March 27, 2020 represent a single operating and reporting segment, referred to as contract manufacturing within the EMS industry. The Company strategically directs production between its various manufacturing facilities based on a number of considerations to best meet its customers’ requirements. The Company shares resources between its facilities for sales, marketing, engineering, supply chain, information services, human resources, payroll and corporate accounting functions. Consolidated financial information is evaluated regularly by the chief operating decision maker in assessing performance and allocating resources. The Company’s operations as a whole reflect the level at which the business is managed and how the Company’s chief operating decision maker assesses performance internally.

Leases

At contract inception, the Company determines if the new contractual arrangement is a lease or contains a leasing arrangement. If a contract contains a lease, the Company evaluates whether it should be classified as an operating lease or a finance lease. Upon modification of the contract, the Company will reassess to determine if a contract is or contains a leasing arrangement.

The Company records lease liabilities based on the future estimated cash payments discounted over the lease term, defined as the non-cancellable time period of the lease, together with all the following:

Periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and
Periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option.

Leases may also include options to terminate the arrangement or options to purchase the underlying lease property. Lease components provide the Company with the right to use an identified asset, which consist of real estate properties and equipment. Non-lease components consist primarily of maintenance services.

As an implicit discount rate is not readily available in the Company’s lease agreements, the Company uses its estimated secured incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. For certain leases with original terms of twelve months or less, the Company

11

recognizes lease expense as incurred and does not recognize any lease liabilities. Short-term and long-term portions of operating lease liabilities are classified as other current liabilities and other long-term liabilities, respectively.

A right-of-use (“ROU”) asset is measured as the amount of the lease liability with adjustments, if applicable, for lease prepayments made prior to or at lease commencement, initial direct costs incurred by the Company to implement the lease and lease incentives. ROU assets are classified as other long-term assets, on the Company’s condensed consolidated balance sheets. The Company evaluates the carrying value of ROU assets if there are indicators of potential impairment and performs the analysis concurrent with the review of the recoverability of the related asset group. If the carrying value of the asset group is determined to not be fully recoverable and is in excess of its estimated fair value, the Company will record the impairment loss in its condensed consolidated statements of operations. The Company did not recognize an impairment loss during the three and six months ended April 2, 2021 and March 27, 2020.

Fixed lease expense payments are recognized on a straight-line basis over the lease term. Variable lease payments vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time, and are often due to changes in an external market rate or the value of an index (e.g. Consumer Price Index). The Company did not incur variable lease payments during the three and six months ended April 2, 2021 and March 27, 2020.

Recently Issued Accounting Updates

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this standard apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The amendments in this standard are elective and are effective upon issuance for all entities. The Company is evaluating the expedients and exceptions provided by the amendments in this standard to determine their impact on the Company’s condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which amends the existing guidance relating to the accounting for income taxes. This ASU is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and to improve the consistent application of GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance. This ASU is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is evaluating the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on the Company’s condensed consolidated financial statements.

NOTE 2—REVENUE RECOGNITION

ASC 606: Revenue from Contracts with Customers

Satisfaction of Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Many of the Company’s contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. The Company primarily provides contract manufacturing services to its customers. The customer provides a design, the Company procures materials and manufactures to that design and ships the product to the customer. Revenue is derived primarily from the manufacturing of these electronics components that are built to customer specifications.

The Company’s performance obligations are satisfied at a point in time or over time as work progresses. Revenue from goods and services transferred to customers at a point in time accounted for 48.7% and 49.3% of the Company’s revenue for the three and six months ended April 2, 2021, respectively. Revenue from goods and services transferred to

12

customers at a point in time accounted for 47.4% and 49.9% of the Company’s revenue for the three and six months ended March 27, 2020, respectively. Revenue on these contracts is recognized when obligations under the terms of the customer contract are satisfied, generally this occurs with the transfer of control upon shipment. If there is no enforceable right to payment for work completed to date, or the Company does not recapture costs incurred plus an applicable margin, then the Company records revenue upon shipment to the customer.

Revenue from goods and services transferred to customers over time accounted for 51.3% and 50.7% of the Company’s revenue for the three and six months ended April 2, 2021, respectively. Revenue from goods and services transferred to customers over time accounted for 52.6% and 50.1% of the Company’s revenue for the three and six months ended March 27, 2020, respectively. For revenue recognized over time, the Company uses an input measure to determine progress towards completion. Under this method, sales and gross profit are recognized as work is performed generally based on the relationship between the actual costs incurred and the total estimated costs at completion. If the Company has an enforceable right to payment for work completed to date, with a recapture of costs incurred plus an applicable margin, and the goods do not have an alternative future use once the manufacturing process has commenced, then the Company records an unbilled revenue associated with non-cancellable customer orders.

The Company derives revenue from engineering and design services. 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 3% of total revenue in each of the three and six months ended April 2, 2021 and March 27, 2020.

Returns and Discounts

The Company does not offer its customers a right of return. Rather, the Company warrants that each unit received by the customer will meet the agreed upon technical and quality specifications and requirements. Only when the delivered units do not meet these requirements can the customer return the non-compliant units as a corrective action under the warranty. The remedy offered to the customer is repair of the returned units or replacement if repair is not viable. Accordingly, the Company records a warranty reserve and any warranty activities are not considered to be a separate performance obligation. Historically, warranty reserves have not been material.

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

Shipping and Handling Costs

Amounts billed to customers for shipping and handling activities after the customer obtains control are treated as a promised service performance obligation and recorded in net sales in the accompanying condensed consolidated statements of operations. Shipping and handling costs incurred by the Company for the delivery of goods to customers are considered a cost to fulfill the contract and are included in cost of sales in the accompanying condensed consolidated statements of operations.

Contract Assets

Contract assets consist of unbilled contract amounts resulting from sales under contracts when the revenue recognized exceeds the amount billed to the customer.

Practical Expedients and Exemptions

The Company generally expenses incremental costs of obtaining a contract when incurred because the amortization period would be less than one year. These costs primarily relate to sales commissions and are recorded in selling and administrative expenses in the condensed consolidated statements of operations.

13

The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Disaggregated Revenue

The table below shows net sales from contracts with customers by market sector. See additional information regarding market sectors in Note 10—Market Sectors and Major Customers.

Three Months Ended

April 2, 2021

March 27, 2020

    

Point in Time

    

Over Time

    

Net Sales

    

Point in Time

    

Over Time

    

Net Sales

(in thousands)

 

  

 

  

 

  

 

  

 

  

 

  

Aerospace & Defense

$

11,695

$

20,057

$

31,752

$

12,336

$

14,167

$

26,503

Medical

 

5,924

 

2,694

 

8,618

 

3,151

 

7,450

 

10,601

Industrial

 

4,488

 

502

 

4,990

 

5,430

 

1,637

 

7,067

$

22,107

$

23,253

$

45,360

$

20,917

$

23,254

$

44,171

Six Months Ended

April 2, 2021

March 27, 2020

    

Point in Time

    

Over Time

    

Net Sales

    

Point in Time

    

Over Time

    

Net Sales

(in thousands)

 

  

 

  

 

  

 

  

 

  

 

  

Aerospace & Defense

$

25,373

$

35,902

$

61,275

$

26,792

$

27,440

$

54,232

Medical

 

10,704

 

9,721

 

20,425

 

6,901

 

14,436

 

21,337

Industrial

 

9,736

 

1,405

 

11,141

 

10,628

 

2,708

 

13,336

$

45,813

$

47,028

$

92,841

$

44,321

$

44,584

$

88,905

Customer Deposits

Customer deposits are recorded when cash payments are received or due in advance of revenue recognition from contracts with customers. The timing of revenue recognition may differ from the timing of billings to customers. The changes in customer deposits from the Company’s custom manufacturing services are as follows:

Six Months Ended

    

April 2,

    

March 27,

2021

2020

(in thousands)

 

  

 

  

Beginning balance

$

19,783

$

13,229

Recognition of deferred revenue

 

(12,008)

 

(8,573)

Deferral of revenue

 

20,004

 

11,146

Ending balance

$

27,779

$

15,802

Sales Outside the United States

For each of the three and six months ended April 2, 2021 and March 27, 2020, less than 2% of net sales were shipped to locations outside the United States.

14

NOTE 3—ALLOWANCE FOR DOUBTFUL ACCOUNTS

A summary follows of activity in the allowance for doubtful accounts during the six months ended April 2, 2021 and March 27, 2020:

Six Months Ended

    

April 2,

    

March 27,

Allowance for doubtful accounts

 

2021

 

2020

(in thousands)

 

  

 

  

Allowance, beginning of period

$

185

$

71

(Decrease)/increase in provision for doubtful accounts

 

(38)

 

48

Write-offs

 

(3)

 

0

Allowance, end of period

$

144

$

119

NOTE 4—INVENTORIES

A summary of inventory by category at period end follows:

April 2,

September 30,

Inventories

    

2021

    

2020

(in thousands)

Raw materials

$

39,122

$

32,904

Work-in-process

 

11,180

 

15,009

Finished goods

 

3,773

 

3,461

Total inventories

$

54,075

$

51,374

NOTE 5—PROPERTY, PLANT AND EQUIPMENT, NET

A summary of property, plant and equipment and accumulated depreciation at period end follows:

April 2,

September 30,

Property, Plant and Equipment

    

2021

    

2020

(in thousands)

Land and improvements

$

788

$

788

Buildings and improvements

 

28,194

 

7,430

Buildings under finance lease

 

7,750

 

7,750

Machinery and equipment

 

35,845

 

34,095

Furniture and fixtures

 

8,795

 

8,113

Software

 

5,215

 

5,215

Construction in progress

 

11,570

 

6,079

Total property, plant and equipment, at cost

 

98,157

 

69,470

Accumulated depreciation

 

(48,242)

 

(45,883)

Property, plant and equipment, net

$

49,915

$

23,587

In November 2020, the Company commenced a lease for certain property located in Newark, New York, which includes a new state-of-the art manufacturing facility and administrative offices having approximately 153,000 square feet (the “Property”). The lease for the Property has an initial term of 15 years with one renewal option of 10 years resulting in a right of use asset of $19.1 million.

In October 2020, the Company acquired an industrial and office building and certain equipment located at 50 Jetview Drive, Rochester, New York (“Jetview building”). The value of the Jetview building is recorded at $4.8 million in the construction in progress section of the above schedule for the six months ended April 2, 2021.

15

Depreciation expense during the three and six months ended April 2, 2021 and March 27, 2020 follows:

Three Months Ended

Six Months Ended

April 2,

March 27,

April 2,

March 27,

Depreciation Expense

    

2021

    

2020

    

2021

    

2020

    

(in thousands)

Depreciation expense

 

$

1,256

$

795

 

$

2,359

$

1,552

 

NOTE 6—CREDIT FACILITIES

A summary of borrowings at period end follows:

Fixed/

    

    

April 2, 2021

    

September 30, 2020

 

Variable

Maturity

Interest

Interest

 

Credit Facility Debt

    

Rate

    

Date

    

Balance

    

Rate

    

Balance

    

Rate

 

(in thousands)

 

M&T Bank credit facilities:

 

  

 

  

 

  

 

  

 

  

 

  

Revolving Credit Facility

 

v

 

6/4/2023

$

28,377

 

2.75

%  

$

19,960

 

2.75

%

Master Lease

 

v

 

6/4/2023

 

2,543

 

3.00

 

1,782

 

3.00

Jetview Term Loan

 

v

 

3/1/2026

 

3,698

 

2.78

 

 

Total debt, gross

 

 

 

34,618

 

  

 

21,742

 

  

Unamortized debt issuance costs

 

 

 

(310)

 

  

 

(266)

 

  

Total debt, net

 

 

 

34,308

 

  

 

21,476

 

  

Less: current portion

 

 

 

(248)

 

  

 

0

 

  

Long-term debt

$

34,060

 

  

$

21,476

 

  

M&T Bank Credit Facilities

Effective as of June 4, 2020, the Company and M&T Bank entered into the Sixth Amended and Restated Credit Facility Agreement, as amended by the Consent and First Amendment effective as of September 30, 2020 (as amended the “Credit Facility”) which replaced the Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by various amendments (collectively, the “Prior Credit Facility, as amended”).

Pursuant to the Credit Facility, the Company increased its revolving credit facility to an aggregate principal amount of $45.0 million and added provisions that allow the Company, subject to certain requirements, to request further increases, in minimum amounts of $5.0 million, up to $55.0 million. The Credit Facility also amended the financial covenant, Fixed Charge Coverage Ratio, and set a Minimum Fixed Charge Coverage Ratio. In addition, the Credit Facility modified the definition of Applicable Margin used to determine interest charges on outstanding and unused borrowings under the revolving credit facility and modified the definition of Permitted Acquisitions. The Credit Facility also established a LIBOR floor of 1% and included a mechanism for adoption of a different benchmark rate in the event LIBOR is discontinued. The Credit Facility prohibits the Company from making cash dividends without first obtaining the consent of M&T Bank.

Also, on June 4, 2020, the Company and M&T Bank entered into a master equipment lease (the “Master Lease”) for a lease line of up to $10.0 million in lease value of equipment to the Company. The Master Lease contains terms and provisions customary for transactions of this type, including obligations relating to the use, operation and maintenance of the equipment. The Master Lease also contains customary events of default, including nonpayment of amounts due under the lease and assignments for the benefit of creditors, bankruptcy or insolvency. In the event that an event of default occurs, M&T Bank may exercise one or more remedies specified in the Master Lease. At the conclusion of the lease term, the Company will have the right to purchase the equipment under the Master Lease. The Master Lease will renew automatically for additional 12-month terms until the Company provides M&T Bank with notice of non-renewal.

On March 1, 2021, the Company and M&T Bank entered into the Second Amendment to the Sixth Amended and Restated Credit Facility Agreement (the “Second Amendment”) that amended the Credit Facility. The Second Amendment provides for a mortgage-backed term loan in the principal amount of $3.7 million. The loan is evidenced by

16

a five-year term loan note (the “Jetview Term Loan”) and secured by a lien and security interest in the property located at 50 Jetview Drive, Rochester, New York pursuant to a mortgage by the Company and the County of Monroe Industrial Development Agency (“COMIDA”) to M&T Bank, each dated as of March 1, 2021. As part of this transaction, the Company entered into a separate agreement with COMIDA intended to provide the Company with certain associated tax benefits. The Jetview Term Loan bears interest at a rate equal to one-month LIBOR, adjusting daily, plus 2.65%. The Jetview Term Loan is subject to customary events of default including the non-payment of principal or interest as and when due, which may result in the acceleration of all amounts outstanding under the Jetview Term Loan, the application of an interest rate at a default rate and M&T Bank’s exercise of any rights and remedies available under the Credit Agreement or under applicable law.

The Credit Facility is secured by a general security agreement covering the assets of the Company and its subsidiaries, a pledge of the Company’s equity interest in its subsidiaries, a negative pledge on the Company’s real property, and a guarantee by the Company’s subsidiaries, all of which restrict use of these assets to support other financial instruments.

Individual debt facilities provided under the Credit Facility as of April 2, 2021 and September 30, 2020, are described below:

a)Revolving Credit Facility (“Revolver”): At April 2, 2021 and September 30, 2020, up to $45.0 million was available under the Credit Facility through June 4, 2023. The maximum amount the Company may borrow is determined based on a borrowing base calculation described below.
b)Master Lease: At April 2, 2021 and September 30, 2020, we had drawn down $2.5 million and $1.8 million, respectively, pursuant to the Master Lease that was entered into as of June 4, 2020.
c)Jetview Term Loan: IEC borrowed $3.7 million on March 1, 2021, which remained unchanged as of April 2, 2021. Principal is being repaid in equal monthly installments of $20.7 thousand plus a balloon payment of $2.5 million due at maturity. The maturity date of the loan is March 1, 2026.

Borrowing Base

At April 2, 2021 and September 30, 2020, under the Credit Facility, the maximum amount the Company can borrow under the Revolver was the lesser of (i) 85% of eligible receivables plus (ii) up to 90% of eligible investment grade accounts plus (iii) a percentage of eligible inventories (up to a cap of $30.0 million).

At April 2, 2021, the upper limit on Revolver borrowings was $43.3 million and $15.0 million was available. At September 30, 2020, the upper limit on Revolver borrowings was $39.4 million and $19.4 million was available. Average Revolver balances amounted to $30.9 million and $25.1 million (under the Prior Credit Facility, as amended) during the six months ended April 2, 2021 and March 27, 2020, respectively.

Interest Rates

Under the Credit Facility, variable rate debt accrues interest at LIBOR plus the applicable marginal interest rate that fluctuates based on the Company’s Fixed Charge Coverage Ratio, as defined below. At April 2, 2021, the applicable marginal interest rate was 1.75% for the Revolver. Changes to applicable margins and unused fees resulting from the Fixed Charge Coverage Ratio generally become effective mid-way through the subsequent quarter.

The Company incurs quarterly unused commitment fees ranging from 0.25% to 0.375% of the excess of $45.0 million over average borrowings under the Revolver. For the fiscal quarter ended April 2, 2021, the unused commitment fee was fixed at 0.25%. Fees incurred amounted to $11.1 thousand and $23.5 thousand during the three and six months ended April 2, 2021, respectively. Fees incurred amounted to $6.7 thousand and $12.5 thousand during the three and six months ended March 27, 2020, respectively. The fee percentage varies based on the Company’s Fixed Charge Coverage Ratio, as defined below.

17

Financial Covenants

The Credit Facility contains various affirmative and negative covenants including financial covenants. As of April 2, 2021, the Company had to maintain a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”). The Fixed Charge Coverage Ratio compares (i) EBITDAS minus unfinanced capital expenditures minus income tax expense, to (ii) the sum of interest expense, principal payments, payments on all capital lease obligations and dividends, if any (fixed charges). “EBITDAS” is defined as earnings before interest, income taxes, depreciation, amortization and non-cash stock compensation expense. The Fixed Charge Coverage Ratio was measured for a trailing twelve months ended April 2, 2021 as a minimum of 1.10 times. The Fixed Charge Coverage Ratio was the only covenant in effect at April 2, 2021. The Credit Facility also provides for customary events of default, subject in certain cases to customary cure periods, in which the outstanding balance and any unpaid interest would become due and payable.

The Company was in compliance with the financial debt covenant at April 2, 2021.

Contractual Principal Payments

A summary of contractual principal payments under IEC’s borrowings at April 2, 2021 for the next two years taking into consideration the Credit Facility is as follows:

Contractual  

Principal 

Debt Repayment Schedule

    

 Payments

(in thousands)

Twelve months ending fiscal second quarter

2022

 

248

2023

2,791

2024

28,624

2025 (1)

248

2026 and thereafter

2,707

$

34,618

(1)     Includes Revolver balance of $28.4 million at April 2, 2021.

NOTE 7—WARRANTY RESERVES

IEC generally warrants its products and workmanship for up to twelve months from date of sale. As an offset to warranty claims, the Company is sometimes able to obtain reimbursement from suppliers for warranty-related costs or losses. Based on historical warranty claims experience and in consideration of sales trends, a reserve is maintained for estimated future warranty costs to be incurred on products and services sold through the balance sheet date. The warranty reserve is included in other accrued expenses on the condensed consolidated balance sheets.

A summary of additions to and charges against IEC’s warranty reserves during the period follows:

Six Months Ended

April 2,

March 27,

Warranty Reserve

    

2021

    

2020

(in thousands)

Reserve, beginning of period

$

100

$

165

Provision

 

248

 

27

Warranty costs

 

(214)

 

(50)

Reserve, end of period

$

134

$

142

18

NOTE 8—STOCK-BASED COMPENSATION

The 2019 Stock Incentive Plan (the “2019 Plan”) was approved by the Company’s stockholders at the March 2019 Annual Meeting. The 2019 Plan replaced the 2010 Omnibus Incentive Compensation Plan (“2010 Plan”) that was approved by the Company’s stockholders at the January 2011 Annual Meeting. The 2019 Plan, like the 2010 Plan, is administered by the Compensation Committee of the Board of Directors and provides for the following types of awards: incentive stock options, nonqualified options, stock appreciation rights, restricted shares, restricted stock units, performance compensation awards, cash incentive awards, director stock and other equity-based and equity-related awards. Awards are generally granted to certain members of management and employees, as well as directors. The Company also has an ESPP, adopted in 2011, that provides for the purchase of Company common stock at a discounted stock purchase price. Under the 2019 Plan, 840,360 shares of common stock, plus any shares that are subject to awards granted under the 2010 Plan that expire, are forfeited or canceled without the issuance of shares (other than shares used to pay the exercise price of a stock option under the 2010 Plan and shares used to cover the tax withholding of the award under the 2010 Plan) may be issued over a term of ten years. Under the ESPP, 150,000 shares of common stock may be issued over a term of ten years.

Stock-based compensation expense recorded under the 2010 Plan and the 2019 Plan, totaled $0.2 million and $0.5 million, respectively, for each of the three and six months ended April 2, 2021. Stock-based compensation expense recorded under the 2010 Plan and the 2019 Plan, totaled $0.2 and $0.3 million, respectively, for each of the three and six months ended March 27, 2020.

At April 2, 2021, there were 507,829 shares of common stock available to be issued under the 2019 Plan and 64,294 shares of common stock available to be issued under the ESPP.

Expenses relating to stock options that comply with certain U.S. income tax rules are neither deductible by the Company nor taxable to the employee. Further information regarding awards granted under the 2019 Plan, the 2010 Plan and the ESPP is provided below.

Stock Options

When options are granted, IEC estimates fair value using the Black-Scholes option pricing model and recognizes the computed value as compensation cost over the vesting period, which is typically four years. The contractual term of options granted under the 2010 Plan and 2019 Plan is generally seven years. The volatility rate is based on the historical volatility of IEC’s common stock.

Assumptions used in the Black-Scholes model and the estimated value of options granted during the six months ended April 2, 2021 and March 27, 2020 follows.

Six Months Ended

April 2,

March 27,

Valuation of Options

    

2021

    

2020

 

    

Assumptions for Black-Scholes:

 

  

 

  

 

Risk-free interest rate

 

0.41

%  

0.51

%

 

Expected term in years

 

5.5

 

5.5

 

Volatility

 

40

%  

40

%

 

Expected annual dividends

 

NaN

 

NaN

 

Value of options granted:

 

  

 

  

 

Number of options granted

 

40,000

 

30,000

 

Weighted average fair value per share

$

3.82

$

2.68

Fair value of options granted (000s)

$

153

$

80

19

A summary of stock option activity, together with other related data, follows:

Six Months Ended

April 2, 2021

March 27, 2020

    

    

Wgtd. Avg.

    

    

    

Wgtd. Avg.

Number  

 Exercise 

Number 

Exercise 

Stock Options

of Options

Price

    

 of Options

    

Price

Outstanding, beginning of period

 

670,145

$

4.67

 

743,145

 

$

4.54

Granted

 

40,000

 

9.65

 

30,000

 

5.03

Exercised

 

(14,000)

 

4.84

 

(26,000)

 

5.31

Forfeited

 

(7,000)

 

3.74

 

(10,000)

 

3.58

Expired

 

(3,000)

 

3.74

 

(5,000)

 

6.91

Outstanding, end of period

 

686,145

$

4.97

 

732,145

 

$

4.53

For options expected to vest

 

  

 

  

 

  

 

  

Number expected to vest

 

678,145

$

4.95

 

722,582

 

$

4.51

Weighted average remaining contractual term, in years

 

5.0

 

 

3.3

 

  

Intrinsic value (000s)

$

4,499

 

  

 

$

1,510

For exercisable options

 

  

 

  

 

  

 

  

Number exercisable

 

504,020

$

4.33

 

545,645

 

$

4.16

Weighted average remaining contractual term, in years

 

4.2

 

 

1.9

 

  

Intrinsic value (000s)

$

3,656

 

 

$

1,354

For non-exercisable options

 

  

 

  

 

  

 

  

Expense not yet recognized (000s)

$

408

 

 

$

357

Weighted average years to be recognized

 

2.8

 

 

3.1

 

  

For options exercised

 

  

 

  

 

  

 

  

Intrinsic value (000s)

$

82

 

 

$

75

Restricted (Non-vested) Stock

Certain holders of IEC restricted stock have voting and dividend rights as of the date of grant, and, until vested, the shares may be forfeited and cannot be sold or otherwise transferred. At the end of the vesting period, which is typically four or five years (three years in the case of directors), holders have all the rights and privileges of any other common stockholder of the Company. The fair value of a share of restricted stock is its market value on the date of grant, and that value is recognized as stock compensation expense over the vesting period.

20

A summary of restricted stock activity, together with related data, follows:

Six Months Ended

April 2, 2021

March 27, 2020

Wgtd. Avg. 

Wgtd. Avg. 

Number of Non-

Grant Date 

Number of Non-

Grant Date 

Restricted (Non-vested) Stock

    

vested Shares

    

Fair Value

    

vested Shares

    

Fair Value

Outstanding, beginning of period

 

49,825

$

5.32

 

82,707

$

5.25

Granted

 

17,907

 

11.11

 

24,850

 

5.03

Vested

 

(19,585)

 

4.59

 

(36,812)

 

4.43

Forfeited

 

(1,000)

 

4.12

 

(13,250)

 

6.09

Outstanding, end of period

 

47,147

$

7.85

 

57,495

$

5.49

For non-vested shares

 

  

 

  

 

  

 

  

Expense not yet recognized (000s)

$

329

 

  

$

286

Weighted average remaining years for vesting

2.1

 

 

1.9

 

For shares vested

 

 

  

 

Aggregate fair value on vesting dates (000s)

$

264

 

  

$

260

Stock Issued to Board Members

In addition to annual grants of restricted stock, included in the table above, board members may elect to have their meeting fees paid in the form of shares of the Company’s common stock. The Company has not paid any meeting fees in stock since May 21, 2013.

Restricted Stock Units

Holders of IEC restricted stock units do not have voting and dividend rights as of the date of grant, and, until vested, the unit may be forfeited and cannot be sold or otherwise transferred. At the end of the vesting period, which is typically three years, holders will receive shares of the Company’s common stock and have all the rights and privileges of any other common stockholder of the Company. The fair value of a restricted stock unit is the market value of the underlying shares of the Company’s stock on the date of grant and that value is recognized as stock compensation expense over the vesting period.

21

A summary of restricted stock unit activity, together with related data, follows:

Six Months Ended

April 2, 2021

March 27, 2020

    

    

Wgtd. Avg.

    

    

Wgtd. Avg.

Number of Non-

 

 Grant Date

Number of Non-

 

 Grant Date

Restricted Stock Units

vested Units

    

 Fair Value

    

vested Units

    

 Fair Value

Outstanding, beginning of period

 

186,727

$

6.56

 

153,186

$

5.36

Granted

 

67,597

 

7.65

 

50,556

 

9.19

Vested

 

(102,624)

 

4.28

 

(17,015)

 

3.58

Forfeited

 

 

0

 

0

 

0

Outstanding, end of period

 

151,700

$

8.58

 

186,727

$

6.56

For non-vested shares

 

  

 

  

 

  

 

  

Expense not yet recognized (000s)

$

878

 

  

$

906

Weighted average remaining years for vesting

1.9

 

 

2.2

 

For shares vested

 

  

 

  

 

  

Aggregate fair value on vesting dates (000s)

$

1,268

 

  

$

86

NOTE 9—INCOME TAXES

The provision for income taxes during each of the three and six months ended April 2, 2021 and March 27, 2020 follows:

    

Three Months Ended

    

Six Months Ended

    

April 2,

March 27,

April 2,

March 27,

Income Taxes

2021

    

2020

2021

    

2020

(in thousands)

 

  

 

  

 

  

 

  

 

(Benefit from)/provision for income taxes

$

(372)

$

367

$

(144)

$

703

The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. In response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures may include deferring the due dates of tax payments or other changes to their income and non-income-based tax laws. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020 in the U.S., the Consolidated Appropriations Act, 2021 (the “Consolidated Appropriations Act”), which was enacted on December 21, 2020 in the U.S., and the American Rescue Plan Act of 2021 (the “American Rescue Plan”), which was enacted on March 11, 2021 in the U.S., include measures to assist companies, including temporary changes to income and non-income-based tax laws. The Company has assessed the provisions of the CARES Act, the Consolidated Appropriations Act, and the American Rescue Plan, and has determined that there were no material tax impacts to the condensed consolidated financial statements for the three and six months ended April 2, 2021.

The Company’s effective tax rate for the three and six months ended April 2, 2021 is comprised of the federal tax rate of 21% plus the state tax rate of 1.58%, which is adjusted for permanent book tax differences. During the three and six months ended April 2, 2021, the permanent items included meals and entertainment and stock based compensation. The discrete tax benefit for the three and six month periods ended April 2, 2021 is related to excess tax benefits recognized upon vesting of restricted stock units or exercise of stock options during those quarters.

22

NOTE 10—MARKET SECTORS AND MAJOR CUSTOMERS

A summary of sales, according to the market sector within which IEC’s customers operate, follows:

    

Three Months Ended

    

Six Months Ended

    

April 2,

March 27,

April 2,

March 27,

% of Sales by Sector

 

2021

2020

 

2021

2020

 

Aerospace & Defense

 

70

%  

60

%

 

66

%  

61

%

 

Medical

 

19

%  

24

%

 

22

%  

24

%

 

Industrial

 

11

%  

16

%

 

12

%  

15

%

 

 

100

%  

100

%

 

100

%  

100

%

 

NaN individual customers represented 10% or more of sales for the three months ended April 2, 2021. All 4 of these customers were from the aerospace & defense sector and represented 24%, 17%, 12% and 10% of sales. NaN individual customers represented 10% or more of sales for the six months ended April 2, 2021. NaN of these customers were from the aerospace & defense sector and represented 24%, 13% and 10% of sales. The fourth customer was from the medical sector and represented 11% of sales for the six months ended April 2, 2021.

NaN individual customers represented 10% or more of sales for the three months ended March 27, 2020. NaN of these customers were from the aerospace & defense sector and represented 25%, 12% and 11% of sales. The fourth customer was from the medical sector and represented 17% of sales for the three months ended March 27, 2020. NaN individual customers represented 10% or more of sales for the six months ended March 27, 2020. NaN of these customers were from the aerospace & defense sector and represented 26% and 11% of sales. The third customer was from the medical sector and represented 16% of sales for the three months ended March 27, 2020.

NaN individual customers represented 10% or more of receivables and accounted for 34% of the outstanding balance at April 2, 2021. NaN individual customers represented 10% or more of receivables and accounted for 30% of the outstanding balance at September 30, 2020.

Credit risk associated with individual customers is periodically evaluated by analyzing the entity’s financial condition and payment history. Customers generally are not required to post collateral.

NOTE 11—COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, the Company may be involved in legal actions in the ordinary course of its business, but management does not believe that any such proceedings, individually or in the aggregate, will have a material adverse effect on the Company’s condensed consolidated financial statements.

23

NOTE 12—LEASES

Operating Leases

IEC has a lease portfolio that consists of operating leases for equipment, and has remaining terms from less than one year to up to approximately five years, with contractual terms expiring from 2022 to 2024. None of these leases contain residual value guarantees, substantial restrictions, or covenants.

Supplemental balance sheet information related to the Company’s operating leases were as follows:

April 2,

September 30,

Operating Leases

2021

2020

Weighted average remaining lease term for operating leases (in years)

 

3.3

 

3.8

 

Weighted average discount rate for operating leases

 

5.47

%

 

5.47

%

 

Finance Leases

IEC’s lease portfolio also consists of finance leases for equipment and real estate, and has remaining terms of four years up to approximately fifteen years, with contractual terms expiring in 2024 through 2035.

Supplemental balance sheet information related to the Company’s finance leases were as follows:

April 2,

 

September 30,

 

Finance Leases

2021

2020

Finance lease right-of-use assets, net of accumulated amortization (included in PP&E) (in thousands)

$

27,539

 

$

6,329

 

Weighted average remaining lease term for finance leases (in years)

13.2

 

11.3

 

Weighted average discount rate for finance leases

3.57

%

4.83

%

In November 2020 the Company commenced a lease for the Property located in Newark, New York, which includes a new state-of-the art manufacturing facility and administrative offices. The lease for the property has an initial term of 15 years with one renewal option of 10 years, resulting in a ROU asset of $19.1 million. The Company entered into a finance lease under our Master Lease for certain equipment and leasehold improvements to be located at the property resulting in a ROU asset of $2.1 million during the six months ended April 2, 2021. The equipment and leasehold improvements are included in property, plant and equipment on the condensed consolidated balance sheets. The Master Lease is described in Note 6—Credit Facilities.

24

Lease Expense

The components of lease expense, recorded in cost of sales, selling and administrative expenses and interest expense in the condensed consolidated statements of operations, during the three and six months ended April 2, 2021 and March 27, 2020 were as follows:

    

    

Three Months Ended

Six Months Ended

April 2,

March 27,

April 2,

March 27,

Lease Expense

    

Classification

    

2021

    

2020

2021

    

2020

(in thousands)

  

  

Operating lease expense

  

  

Fixed payment operating lease expense (1)

 

Cost of sales

$

79

$

68

$

130

$

93

Fixed payment operating lease expense

 

Selling and administrative expenses

 

6

 

15

 

19

 

29

Variable payment operating lease expense

 

 

0

 

0

 

0

 

0

Finance lease expense

 

  

 

  

 

  

 

  

 

  

Depreciation of ROU assets

 

Cost of sales

 

497

 

144

 

827

 

273

Depreciation of ROU assets

Selling and administrative expenses

33

0

55

0

Interest

 

Interest expense

 

253

 

88

 

468

 

174

Total lease expense

$

868

$

315

$

1,499

$

569

(1)     Includes short-term leases which are not material.

Supplemental Cash Flow Information

Supplemental cash flow information related to the Company’s leases during the three and six months ended April 2, 2021 and March 27, 2020 were as follows:

    

Six Months Ended

April 2,

March 27,

Supplemental Cash Flow

 

2021

 

2020

(in thousands)

Cash paid for amounts included in the measurement of lease liabilities:

 

  

 

  

Cash paid for operating lease ROU assets

$

36

$

47

Interest paid on finance leases

 

468

 

174

Financing cash flows from finance leases

 

 

Lease liabilities arising from obtaining ROU assets:

 

  

 

  

Operating leases

33

Finance leases

$

19,142

$

25

Contractual Lease Payments

A summary of operating lease payments for the next five years follows:

    

Contractual 

 

 Lease 

Operating Lease Payment Schedule

 

 Payments

(in thousands)

Twelve months ending fiscal second quarter

2022

$

73

2023

 

72

2024

 

71

2025

19

2026 and thereafter

0

Total operating lease payments

 

235

Less: amounts representing interest

 

(20)

Total operating lease obligation

$

215

A summary of finance lease payments for the next five years follows:

    

Contractual 

 

 Lease

Finance Lease Payment Schedule

 

  Payments

(in thousands)

Twelve months ending fiscal second quarter

 

  

2022

$

2,452

2023

 

2,506

2024

 

2,562

2025

2,660

2026 and thereafter

24,985

Total finance lease payments

 

35,165

Less: amounts representing interest

 

(7,404)

Total finance lease obligation

$

27,761

NOTE 13—NET (LOSS)/INCOME PER SHARE

The Company applies the two-class method to calculate and present net (loss)/income per share. Certain of the Company’s restricted (non-vested) share awards contain non-forfeitable rights to dividends and are considered participating securities for purposes of computing net (loss)/income per share pursuant to the two-class method. Under the two-class method, net earnings are reduced by the amount of dividends declared (whether paid or unpaid) and the remaining undistributed earnings are then allocated to common stock and participating securities, based on their respective rights to receive dividends. As the Company incurred a net loss for the three months ended April 2, 2021, and losses are not allocated to participating securities under the two-class method, such method is not applicable for the aforementioned interim reporting period.

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 unvested restricted stock and restricted stock units. Options, restricted stock and restricted stock units are primarily held by directors, officers and certain employees.

The Company uses the two-class method to calculate net (loss)/income per share as both classes share the same rights in dividends. Therefore, basic and diluted earnings per share (“EPS”) are the same for both classes of ordinary shares.

26

A summary of shares used in the EPS calculations follows (in thousands except share and per share data):

    

Three Months Ended

    

Six Months Ended

    

April 2,

March 27,

April 2,

March 27,

Net (Loss)/Income Per Share

 

2021

     

2020

 

2021

     

2020

 

(in thousands, except share and per share data)

Basic net (loss)/income per share:

Net (loss)/income

$

(348)

$

1,523

$

1,189

$

2,712

Less: (Loss)/income attributable to non-vested shares

 

(2)

 

8

 

5

 

15

Net (loss)/income available to common stockholders

$

(346)

$

1,515

$

1,184

$

2,697

Weighted average common shares outstanding

 

10,583,581

 

10,393,461

 

10,553,991

 

10,379,846

Basic net (loss)/income per share

$

(0.03)

$

0.15

$

0.11

$

0.26

Diluted net (loss)/income per share:

 

  

 

  

 

  

 

  

Net (loss)/income

$

(348)

$

1,523

$

1,189

$

2,712

Shares used in computing basic net (loss)/income per share

 

10,583,581

 

10,393,461

 

10,553,991

 

10,379,846

Dilutive effect of options and non-vested shares

 

 

309,651

 

470,366

 

286,155

Shares used in computing diluted net (loss)/income per share

 

10,583,581

 

10,703,112

 

11,024,357

 

10,666,001

Diluted net (loss)/income per share

$

(0.03)

$

0.14

$

0.11

$

0.25

The diluted weighted average share calculations do not include the following shares, which are anti-dilutive to the EPS calculations.

    

Three Months Ended

    

Six Months Ended

    

April 2,

March 27,

April 2,

March 27,

2021

    

2020

2021

    

2020

Anti-dilutive shares excluded

 

 

 

9,325

 

 

27

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information in this Management’s Discussion and Analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes. All references to “Notes” are to the accompanying condensed consolidated financial statements and notes included in this Quarterly Report on Form 10-Q (“Form 10-Q”).

Cautionary Note Regarding Forward-Looking Statements

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 Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. These forward-looking 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 materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those views expressed or implied in our forward-looking statements: the impact of the COVID-19 pandemic on our business, including our supply chain, workforce and customer demand; business conditions and growth or contraction in our customers’ industries, the electronic manufacturing services industry and the general economy; our ability to control our material, labor and other costs; our dependence on a limited number of major customers; uncertainties as to availability and timing of governmental funding for our customers; the impact of government regulations, including U.S. Food and Drug Administration regulations; unforeseen product failures and the potential product liability claims that may be associated with such failures; technological, engineering and other start-up issues related to new programs and products; variability and timing of customer requirements; the potential consolidation of our customer base; availability of component supplies; dependence on certain industries; the ability to realize the full value of our backlog; the types and mix of sales to our customers; litigation and governmental investigations; intellectual property litigation; variability of our operating results; our ability to maintain effective internal controls over financial reporting; the availability of capital and other economic, business and competitive factors affecting our customers, our industry and business generally; failure or breach of our information technology systems; and natural disasters. Any one or more of such risks and uncertainties could have a material adverse effect on us or the value of our common stock. 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 in this Form 10-Q, our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, and our other filings with the Securities and Exchange Commission (the “SEC”).

All forward-looking statements included in this Form-10-Q are made only as of the date indicated or as of the date of this Form 10-Q. We do not undertake any obligation to, and may not, publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or which we hereafter become aware of, except as required by law. New risks and uncertainties arise from time to time and we cannot predict these events or how they may affect us and cause actual results to differ materially from those expressed or implied by our forward-looking statements. Therefore, you should not rely on our forward-looking statements as predictions of future events. When considering these risks, uncertainties and assumptions, you should keep in mind the cautionary statements contained in this report and any documents incorporated herein by reference. You should read this document and the documents that we reference in this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

28

Overview

IEC Electronics Corp. (“IEC,” “we,” “our,” “us,” or the “Company”) conducts business directly, as well as through its subsidiaries, IEC Electronics Corp-Albuquerque (“Albuquerque”), and IEC Analysis & Testing Laboratory, LLC (“ATL”).

We are a premier provider of electronic manufacturing services (“EMS”) to advanced technology companies that produce life-saving and mission critical products for the medical, industrial, aerospace and defense sectors. We specialize in delivering technical solutions for the custom manufacturing, product configuration, and verification testing of highly engineered complex products that require a sophisticated level of manufacturing to ensure quality and performance.

Within the EMS sector, we have unique capabilities which allow our customers to rely on us to solve their complex challenges, minimize their supply chain risk and deliver full system solutions for their supply chain. These capabilities include, among others:

Our engineering services include the design, development, and fabrication of customized stress testing platforms to simulate a product’s end application, such as thermal cycling and vibration, in order to ensure reliable performance and avoid catastrophic failure when the product is placed in service.
Our vertical manufacturing model offers customers the ability to simplify their supply chain by utilizing a single supplier for their critical components including complex printed circuit board assembly (“PCBA”), precision metalworking, and interconnect solutions. This service model allows us to control the cost, lead time, and quality of these critical components which are then integrated into full system assemblies and minimizes our customers’ supply chain risk.
We provide direct order fulfillment services for our customers by integrating with their configuration management process to obtain their customer orders, customize the product to the specific requirements, functionally test the product and provide verification data, and direct ship to their end customer in order to reduce time, cost, and complexity within our customer’s supply chain.
We believe we are the only EMS provider with an on-site laboratory that has been approved by the Defense Logistics Agency (“DLA”) for their Qualified Testing Supplier List (“QTSL”) program which deems the site suitable to conduct various QTSL and military testing standards including counterfeit component analysis and environmental testing to qualify a part fit for use. In addition, this advanced laboratory is utilized for complex design analysis and manufacturing process development to solve challenges and accelerate our customers’ time to market.

We are a 100% U.S. manufacturer which attracts customers who are unlikely to utilize offshore suppliers due to the proprietary nature of their products, governmental restrictions or volume considerations. Our locations include:

Newark, New York - Located approximately one hour east of Rochester, New York, our Newark locations contain our corporate headquarters and our largest manufacturing location providing complex circuit board manufacturing, interconnect solutions, and system-level assemblies along with an on-site material analysis laboratory for advanced manufacturing process development.
Rochester, New York - Focuses on precision metalworking services including complex metal chassis and assemblies. In October 2020, we acquired an additional industrial and office building located in Rochester, New York.
Albuquerque, New Mexico - Specializes in the aerospace and defense markets with complex circuit board and system-level assemblies along with a state of the art analysis and testing laboratory which conducts root cause failure analysis, reliability, inspection and authenticity testing.

We excel at complex, highly engineered products that require sophisticated manufacturing support where quality and reliability are of paramount importance. With our customers at the center of everything we do, we have created a high-intensity, rapid response culture 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.

29

We proactively invest in areas we view as important for our continued long-term growth. Excluding the recently acquired Jetview building, all of our remaining locations are ISO 9001:2015 certified and ITAR registered. We are Nadcap accredited and AS9100D certified at our Newark and Albuquerque locations to support the stringent quality requirements of the aerospace industry. Our Newark location is ISO 13485 certified to serve the medical sector and is an approved supplier by the National Security Agency under the COMSEC standard regarding communications security. Our analysis and testing laboratory in Albuquerque is ISO 17025 accredited, an IPC-approved Validation Services Qualified Test Laboratory, and we believe is the only on-site EMS laboratory that has been approved by the DLA for their QTSL program which deems the site suitable to conduct various QTSL and military testing standards including counterfeit component analysis and environmental testing to qualify a part fit for use. Albuquerque also performs work per NASA-STD-8739 and J-STD-001ES space standards.

The technical expertise of our experienced workforce enables us to build some of the most advanced electronic, wire and cable, interconnect solutions, and precision metal systems sought by original equipment manufacturers (“OEMs”).

COVID-19 Pandemic

The COVID-19 pandemic continues to disrupt supply chains and affect production and sales across a range of industries. The ultimate extent of the impact of the COVID-19 pandemic on our supply chain, workforce, customer demand, operations and financial performance will depend on certain developments, including the duration and spread of the outbreak, the effectiveness of vaccines and speed of distribution of any, as well as the impact on our customers, employees and vendors all of which are uncertain and cannot be predicted.

In accordance with the Department of Defense guidance issued in March 2020, designating the Defense Industrial Base as a critical infrastructure workforce, our production facilities have continued to operate in support of essential products and services required to meet national security commitments to the U.S. government and the U.S. military.

Please see Item 1A. Risk Factors in this report for additional information regarding certain risks associated with the COVID-19 pandemic.

Supply Chain

The COVID-19 pandemic has created a level of uncertainty around the availability of raw material components in future periods. We are aware of some component manufacturers that have been required to shut down temporarily, as a result of COVID-19 related illnesses impacting their employee populations or to comply with government mandates. Due to the lifesaving and mission critical nature of the products we support, many of our suppliers and the related programs were given certain priority ratings, which helped ensure the required supply of material.

We are continually assessing potential supply chain impacts and working with our distribution partners to identify existing, on hand stock that we can access. We are also working with our customer base to determine their interest in participating in inventory pre-purchase arrangements, which would be funded through additional customer deposits.

Workforce

The safety and well-being of our employees has been, and continues to be, our top priority, especially during the COVID-19 pandemic. Although we are deemed an essential business based on the lifesaving and mission critical products we support, and we remain fully operational, we chose early on to ask our non-essential employees to work from home in order to reduce the employee density in our facilities. As circumstances have allowed and in accordance with applicable guidelines, we have assigned non-essential employees into two groups, working alternating weeks in the office to maintain social distancing. In support of those working on site, we have taken numerous actions to help provide for a safe work environment and allow for appropriate social distancing, where possible. Some examples of the actions we have taken include, but are not limited to, the following:

Adjusted shift start and end times to limit the number of people entering and exiting our facilities simultaneously;
Adjusted break and lunch times to reduce the number of people in common areas;

30

Designated stairwells and walkways as one-way to ensure employees are not passing each other in tight quarters; and
Implemented additional cleaning protocols to ensure work surfaces, high touch areas and common spaces are routinely cleaned and disinfected in accordance with guidelines from the Centers for Disease Control and Prevention.

We have also developed contingency plans in the event that one of our employees tests positive for COVID-19. During the first quarter of fiscal 2021, we experienced employee absenteeism across several of our manufacturing facilities due to COVID-19, largely related to contact tracing precautions rather than positive cases. This resulted in underutilization on the production floor for a portion of the first quarter of fiscal 2021. Beginning in the first half of the second quarter of fiscal 2021, we saw employee absenteeism return to more normal levels, as the impacts from the post-holiday spike in virus cases receded. We expect to continue to align practices to remain in conformance with state and federal guidelines.

Customer Demand

Due to the nature of the lifesaving and mission critical products that we support, the majority of our customers are also deemed to be essential businesses and remain operational. At a macro level, we have seen some indices of demand normalizing to pre-COVID-19 pandemic levels. However, certain customers have requested that a portion of their demand be moved out to future periods beyond fiscal 2021. To date, these requests represent a small percentage of our current backlog and we do not expect to see a material impact from these requests. We continue to work in partnership with our customers to continually assess any potential impacts from the pandemic and opportunities to mitigate risk.

Three Months Results

A summary of selected income statement amounts for the three months ended follows:

Three Months Ended

April 2,

March 27,

Income Statement Data

    

2021

    

2020

(in thousands)

Net sales

$

45,360

$

44,171

Gross profit

 

3,312

 

5,503

Selling and administrative expenses

 

3,487

 

3,217

Interest expense

 

545

 

396

(Loss)/income before income taxes

 

(720)

 

1,890

(Benefit from)/provision for income taxes

 

(372)

 

367

Net (loss)/income

$

(348)

$

1,523

A summary of sales, according to the market sector within which our customers operate, follows:

Three Months Ended

 

April 2,

March 27,

Percent of Sales by Sector

    

2021

2020

Aerospace and Defense

 

70

%

60

%

Medical

 

19

%

24

%

Industrial

 

11

%

16

%

 

100

%

100

%

Revenue increased in the second quarter of fiscal 2021 by $1.2 million or 2.7% as compared to the second quarter of the prior fiscal year. Revenues from the aerospace & defense sector increased $5.3 million, revenue from the medical sector decreased $2.0 million and revenue from the industrial sector decreased $2.1 million.

Various increases and decreases in sales to our aerospace & defense customers resulted in a net increase of $5.3 million in the second quarter of fiscal 2021. A new customer resulted in an increase of $8.3 million. Production ramp up for two

31

customers resulted in an increase in revenue of $2.3 million. These increases were partially offset by reductions to revenue from various customers due to decreases in demand of $5.3 million.

The medical sector saw a decrease of $2.0 million in the second quarter of fiscal 2021 compared to the same period of the prior fiscal year. We saw decreases in customer demand of $5.0 million and decreases related to disengaging with one customer of $0.4 million. These decreases were partially offset by increases related to a new program ramping up with one customer amounting to an aggregate of $0.6 million and various net increases in customer demand of $2.5 million. We continue to expect some volatility in the medical sector going forward.

The net decrease in the industrial sector of $1.7 million resulted primarily from the phase-out of one customer amounting to $1.0 million and $0.6 million of customer program delays at two other customers. The remaining decrease of $0.1 million is due to net decreases in demand from various customers.

Gross profit for the second quarter of fiscal 2021 was $3.3 million, or 7.3% of sales, compared to gross profit of $5.5 million, or 12.5% of sales in the second quarter of fiscal 2020.

Selling and administrative expenses increased $0.3 million in the second quarter of fiscal 2021 compared to the second quarter of the prior fiscal year and represented 7.7% and 7.3% of sales in each of the periods, respectively.

Interest expense increased by $0.1 million in the second quarter of fiscal 2021 compared to the same quarter of the prior fiscal year. The weighted average interest rate on our debt was 1.06% lower during the second quarter of fiscal 2021 compared to the second quarter of the prior fiscal year. Our average outstanding debt balances increased by $4.7 million in the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020 due to higher balances on our revolving credit facility and outstanding amounts under the master equipment lease with M&T Bank (the “Master Lease”). Cash paid for interest on credit facility debt was approximately $0.3 million during each of the second quarters of fiscal 2021 and fiscal 2020. Detailed information regarding our borrowings is provided in Note 6—Credit Facilities.

With respect to tax payments, in the near term, we expect to be largely sheltered by sizable net operating loss (“NOL”) carryforwards for federal income tax purposes. During the second quarter of fiscal 2021, we paid minimal taxes. At the end of fiscal 2020, the gross NOL carryforwards amounted to approximately $15.2 million. The NOL carryforwards expire in varying amounts between 2023 and 2034, unless utilized prior to these dates.

Year to Date Results

A summary of selected income statement amounts for the three months ended follows:

Six Months Ended

April 2,

March 27,

Income Statement Data

    

2021

    

2020

(in thousands)

Net sales

$

92,841

$

88,905

Gross profit

 

9,052

 

10,742

Selling and administrative expenses

 

7,005

 

6,516

Interest expense

 

1,002

 

811

Income before income taxes

 

1,045

 

3,415

(Benefit from)/provision for income taxes

 

(144)

 

703

Net income

$

1,189

$

2,712

32

A summary of sales, according to the market sector within which our customers operate, follows:

Six Months Ended

 

April 2,

March 27,

% of Sales by Sector

    

2021

2020

Aerospace & Defense

 

66

%

61

%

Medical

 

22

%

24

%

Industrial

 

12

%

15

%

 

100

%

100

%

Revenue increased in the first six months of fiscal 2021 by $3.9 million or 4.4% as compared to the first six months of the prior fiscal year. Revenues from the aerospace & defense sector increased $6.9 million, revenue from the medical sector decreased $0.8 million and revenue from the industrial sector decreased $2.2 million.

Various increases and decreases in sales to our aerospace & defense customers resulted in a net increase of $6.9 million in the first six months of fiscal 2021. A new customer resulted in an increase of $10.3 million. Production ramp up for three customers resulted in an increase in revenue of $3.6 million. These increases were partially offset by reductions to revenue from various customers due to net decreases in demand of $7.0 million.

The medical sector saw a decrease of $0.8 million in the first six months of fiscal 2021 compared to the same period of the prior fiscal year. We saw increases of $3.7 million related to increases in demand with various customers and increases of $1.4 million related to a new program ramping up. These increases were partially offset by decreases in demand from various customers of $4.7 million and a decrease due to a program ending for one customer of $1.2 million. We continue to expect some volatility in the medical sector going forward.

The net decrease in the industrial sector of $2.2 million resulted from decreases in customer demand of $1.5 million and decreases related to customer program delays of $0.7 million.

Gross profit for the first six months of fiscal 2021 was $9.1 million, or 9.8% of sales, compared to gross profit of $10.7 million, or 12.1% of sales in the first six months of fiscal 2020, which included the negative impact of a one-time inventory reserve of $1.0 million related to a reorganization at one of the Company’s medical customers. Customer mix had the most significant impact on gross profit. During the first six months of the prior fiscal year, due to the Chapter 11 bankruptcy filing of a customer, we incurred a $1.0 million pre-tax non-cash charge, related to the increase in our excess and obsolete inventory reserve. The customer communicated to its vendors to “cease providing all products” under its court-supervised process. No portion of the impairment charge is anticipated to result in future cash expenditures. We intend to preserve all rights and pursue available legal remedies to recover any losses suffered as a result of the customer’s Chapter 11 bankruptcy filing. These charges impacted our financial results reported under accounting principles generally accepted in the United States of America (“GAAP”) financial results. Net income in the first six month of the prior fiscal year was $2.7 million, and, adjusted for the $1.0 million impact from the one-time inventory reserve, adjusted net income was $3.5 million. Information regarding this non-GAAP measure and a reconciliation of net income to adjusted net income is provided below under “Non-GAAP Financial Measures.”

Selling and administrative expenses increased $ 0.5 million in the six months of fiscal 2021 compared to the first six months of the prior fiscal year and represented 7.5% and 7.3% of sales in each of the periods, respectively.

Interest expense increased by $0.2 million in the first six months of fiscal 2021 compared to the same quarter of the prior fiscal year. The weighted average interest rate on our debt was 1.21% lower during the first six months of fiscal 2021 compared to the first six months of the prior fiscal year. Our average outstanding debt balances increased by $2.6 million in the first six months of fiscal 2021 compared to the first six months of fiscal 2020 due to higher balances on our revolving credit facility and outstanding amounts under the Master Lease. Cash paid for interest on credit facility debt was approximately $0.5 million and $0.6 million during the first six months of fiscal 2021 and fiscal 2020, respectively. Detailed information regarding our borrowings is provided in Note 6—Credit Facilities.

33

With respect to tax payments, in the near term, we expect to be largely sheltered by sizable NOL carryforwards for federal income tax purposes. During the first six months of fiscal 2021, we paid minimal taxes. At the end of fiscal 2020, the gross NOL carryforwards amounted to approximately $15.2 million. The NOL carryforwards expire in varying amounts between 2023 and 2034, unless utilized prior to these dates.

Non-GAAP Financial Measures

In addition to reporting net income, gross profit, gross margin and net income per basic and diluted share, U.S. GAAP measures, we present adjusted net income, adjusted gross profit, adjusted gross margin, adjusted net income per common share, basic and adjusted net income per common share, diluted, which are non-GAAP measures, to reflect the impact of a one-time inventory reserve related to a customer’s bankruptcy. We believe these non-GAAP measures are important measures of our performance because they allow management, investors and others to evaluate and compare our performance from period to period by removing the impact of the one-time inventory reserve related to a customer’s bankruptcy. Adjusted net income, adjusted gross profit, adjusted gross margin, adjusted net income per common share, basic and adjusted net income per common share, diluted are not measures of financial performance under GAAP and are not calculated through the application of GAAP. As such, they should not be considered as a substitute for the GAAP measures of net income gross profit, gross margin and net income per basic and diluted share, and therefore, should not be used in isolation of, but in conjunction with, the GAAP measures. These non-GAAP measures may produce results that vary from the GAAP measures and may not be comparable to a similarly titled non-GAAP measure used by other companies.

Six Months Ended

March 27, 2020

Reconciliation of adjusted gross profit:

 

  

Gross profit

$

10,742

Non-cash charge (1)

 

987

Adjusted gross profit

$

11,729

Reconciliation of adjusted gross margin:

 

  

Gross margin

 

12.1

%

Non-cash charge (1)

 

1.1

%

Adjusted gross margin

 

13.2

%

Reconciliation of adjusted net income:

 

  

Net income

$

2,712

Non-cash charge (1)

 

987

Income tax effect (2)

 

(207)

Adjusted net income

$

3,492

Reconciliation of adjusted net income per common share:

Net income per common share, basic

$

0.26

Non-cash charge, per common share, net of tax (1)(2)

0.08

Adjusted net income per common share, basic

$

0.34

Net income per common share, diluted

$

0.25

Non-cash charge, per common share, net of tax (1)(2)

0.07

Adjusted net income per common share, diluted (3)

$

0.32

(1)A non-cash charge related to the increase in our excess and obsolete inventory reserve due to the Chapter 11 bankruptcy filing of a customer of IEC.
(2)The income tax effect related to the non-cash charge was calculated using an effective tax rate of 21%.
(3)Adjusted net income per common share, diluted is calculated based on adjusted net income and reflects the dilutive impact of shares, where applicable, based on adjusted net income.

34

Liquidity and Capital Resources

Capital Resources

As of April 2, 2021, there were $1.4 million of outstanding capital expenditure commitments for manufacturing equipment. We generally fund capital expenditures with cash flows from operations, our revolving credit facility and the Master Lease. Based on our current expectations, we believe that our projected cash flows provided by operations and potential borrowings under the revolving credit facility and the Master Lease are sufficient to meet our working capital, debt service and capital expenditure requirements for the next twelve months.

Our cash management system provides for the funding of the disbursement accounts on a daily basis as checks are presented for payment. Under this system, outstanding checks in excess of the bank balance create a book overdraft.

Summary of Cash Flows

A summary of selected cash flow amounts for the six months ended April 2, 2021 and March 27, 2020 follows:

Six Months Ended

April 2,

March 27,

Cash Flow Data

2021

2020

(in thousands)

    

    

Cash, beginning of period

$

312

$

Net cash provided by/(used in):

 

  

 

  

Operating activities

 

(6,793)

 

1,800

Investing activities

 

(7,155)

 

(1,351)

Financing activities

 

14,027

 

(449)

Net cash change for the period

 

79

 

Cash, end of period

$

391

$

Operating activities

Cash flows from operations, before considering changes in our working capital accounts, provided $4.1 million and $7.1 million for the first six months of fiscal 2021 and fiscal 2020, respectively. The decrease was due to a $1.5 million decrease in net income, an increase of depreciation of $1.0 million and a decrease in deferred tax expense of $1.6 million in the first six months of fiscal 2021 compared to the prior fiscal year, mainly due to a decrease in gross profit.

Working capital used cash flows of $10.9 million in the first six months of fiscal 2021 and provided cash flows of $5.3 million in the first six months of fiscal 2020. The change in working capital in the first six months of fiscal 2021 was due to usage of cash from increases in unbilled contract revenue of $9.3 million, increases in inventories of $3.0 million, increases in other current assets of $1.1 million, decreases in accounts payable of $6.7 million and decreases in accrued expense of $2.0 million. The use of cash was partially offset by cash provided from decreases in accounts receivable of $2.7 million and increases in customer deposits of $8.0 million. Inventory and customer deposit increases were driven by the higher customer demand to meet increased backlog and securing materials for future production. The changes in accounts receivable and unbilled contract revenue was primarily due to the timing of sales and billings. The decrease in accounts payable and accrued expense was due to timing.

Investing activities

Cash flows used in investing activities were $7.2 million and $1.4 million for the first six months of fiscal 2021 and fiscal 2020, respectively. Cash flows used in the first six months of fiscal 2021 consisted of purchases of equipment and the property in Rochester, NY, offset by disposals of certain equipment. During the first six months of fiscal 2021, we received $1.5 million of proceeds from a grant from New York State related to the purchases of certain equipment. During the first six months of fiscal 2021, we commenced a new lease for a new state-of-the art manufacturing facility and administrative offices in Newark, NY. Cash flows used in the first six months of fiscal 2020 consisted of purchases of equipment.

35

Financing activities

Cash flows provided by financing activities were $14.0 million for the first six months of fiscal 2021 compared to cash usage of $0.4 million for the first six months of fiscal 2020. During the first six months of fiscal 2021, net borrowings under all credit facilities were $12.9 million, with $8.4 million of net borrowings under the Revolver, as defined below, and net borrowings of $4.5 million for other debt. During the first six months of fiscal 2020, net repayments under all credit facilities were $0.8 million, with $0.1 million of net repayments under the Revolver and repayments of $0.7 million for all other debt.

Credit Facilities

At April 2, 2021, borrowings outstanding under the revolving credit facility (the “Revolver”) under the Sixth Amended and Restated Credit Facility Agreement, as amended (the “Credit Facility”) which replaced the Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by various amendments (the “Prior Credit Facility, as amended”) amounted to $34.6 million, and the upper limit was $43.3 million. We believe that our liquidity is sufficient to satisfy anticipated operating requirements during the next twelve months.

The Credit Facility contains various affirmative and negative covenants including a financial covenant. As of April 2, 2021, we had to maintain a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”). The Fixed Charge Coverage Ratio compares (i) EBITDAS minus unfinanced capital expenditures minus tax expense, to (ii) the sum of interest expense, principal payments, payments on all capital lease obligations and dividends, if any (fixed charges). “EBITDAS” is defined as earnings before interest, taxes, depreciation, amortization and non-cash stock compensation expense. The Fixed Charge Coverage Ratio was measured for a trailing twelve months ended April 2, 2021. The Credit Facility also provides for customary events of default, subject in certain cases to customary cure periods, in which events, the outstanding balance and any unpaid interest would become due and payable.

Pursuant to the Credit Facility, the Fixed Charge Coverage Ratio covenant of a minimum of 1.10 was the only covenant in effect at April 2, 2021. The Fixed Charge Coverage Ratio was calculated as 2.37 at April 2, 2021. The Company was in compliance with the financial debt covenant at April 2, 2021.

Detailed information regarding our borrowings at April 2, 2021 is provided in Note 6—Credit Facilities.

Application of Critical Accounting Policies

Our application of critical accounting policies is disclosed in our Annual Report on Form 10-K filed for the fiscal year ended September 30, 2020.

Recently Issued Accounting Standards

See Note 1—Our Business and Summary of Significant Accounting Policies for further information concerning recently issued accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a result of its financing activities, the Company is exposed to changes in interest rates that may adversely affect operating results. The Company actively monitors its exposure to interest rate risk and from time to time may use derivative financial instruments to manage the impact of this risk. The Company may use derivatives only for the purpose 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 derivatives instruments where it does not have underlying exposure. The Company did not have any derivative financial instruments at April 2, 2021 or September 30, 2020.

At April 2, 2021, the Company had $34.6 million of debt, all comprised of variable interest rates. Interest rates on variable loans are based on the London interbank offered rate (“LIBOR”). The credit facilities are more fully described in Note 6—Credit Facilities. Interest rates based on LIBOR currently adjust daily, causing interest on such loans to vary

36

from period to period. A sensitivity analysis as of April 2, 2021 indicated that a one-percentage point increase or decrease in our variable interest rates, which represents more than a 10% change, would increase or decrease the Company’s annual interest expense by approximately $0.3 million.

The Company is exposed to credit risk to the extent of non-performance by M&T Bank under the Credit Facility. M&T Bank’s credit rating is monitored by the Company, and IEC expects that M&T Bank will perform in accordance with the terms of the Credit Facility.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial

Officer (our principal financial officer), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of April 2, 2021, the end of the period covered by this Form 10-Q. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of April 2, 2021, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting

The Company is in the process of implementing a financial reporting system, Epicor ERP Software (“Epicor”), as part of a multi-year plan to integrate and upgrade our systems and processes. During the year ended September 30, 2020, the Company began implementation of Epicor by converting one legacy ERP system to Epicor. The implementation of Epicor is occurring in phases and is expected to be fully completed after fiscal 2021.

As part of the Epicor implementation, certain changes to our processes and procedures have and will continue to occur. These changes will result in changes to our internal control over financial reporting. While Epicor is designed to strengthen our internal financial controls by automating certain manual processes and standardizing business processes and reporting across our organization, management will continue to evaluate and monitor our internal controls as each of the affected areas evolve.

In response to the COVID-19 pandemic, some of our employees have worked remotely since the third quarter of fiscal 2020. Management has taken measures to ensure that our internal controls over financial reporting remained effective and were not materially affected by these changes to the working environment during this period. We are continually monitoring and assessing the impact of the COVID-19 pandemic on our internal controls to minimize the impact on their design and operating effectiveness.

During the quarter ended April 2, 2021, there have been no other changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the effectiveness of control systems

IEC’s management does not expect that our disclosure controls and internal controls will prevent all errors and fraud. Because of inherent limitations in any such control system (e.g. faulty judgments, human error, information technology system error, or intentional circumvention), there can be no assurance that the objectives of a control system will be met under all circumstances. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The benefits of a control system also must be considered relative to the costs of the system and management’s judgments regarding the likelihood of potential events. In summary, there can be no assurance that any control system will succeed in achieving its goals under all possible future conditions, and as a result of these inherent limitations, misstatements due to error or fraud may occur and may or may not be detected.

37

Part II OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in legal actions in the ordinary course of our business, but management does not believe that any such proceedings individually or in the aggregate, will have a material effect on our condensed consolidated financial statements.

Item 1A. Risk Factors

For a discussion of the Company’s potential risks or uncertainties, please see “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended September 30, 2020 filed with the SEC on November 20, 2020, and “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein. Other than as described below, there have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended September 30, 2020.

The COVID-19 pandemic may significantly disrupt our workforce and internal operations.

The COVID-19 pandemic may significantly disrupt our workforce, including our ability to hire and onboard employees, if a significant percentage of our employees or any potential hires are unable to work due to illness, quarantines, government actions, facility closures in response to the pandemic, fear of acquiring COVID-19 while performing essential business functions, or as a result of recent changes to unemployment insurance where unemployed workers can receive, in the short-term, benefits in excess of what would be offered for working for us. During the first quarter of fiscal 2021, we experienced employee absenteeism across several of our manufacturing facilities due to COVID-19, largely related to contact tracing precautions rather than positive cases. This resulted in underutilization on the production floor for a portion of the first quarter of fiscal 2021. Beginning in the first half of the second quarter of fiscal 2021, we saw employee absenteeism return to more normal levels, as the impacts from the post-holiday spike in virus cases receded. While we remain fully operational, we cannot guarantee that we will be able to adequately staff our operations when needed, particularly as the COVID-19 pandemic progresses, which may strain our existing personnel, increase costs, and negatively impact our operations. As a result, our internal operations may experience disruptions. The pandemic may create additional challenges in attracting and retaining quality employees in the future. In addition, COVID-19 related illness could impact members of our Board of Directors resulting in absenteeism from meetings of the directors or committees of directors, making it more difficult to convene the quorums of the full Board of Directors or its committees needed to conduct meetings for the management of our affairs. We cannot predict the extent to which the COVID-19 pandemic may disrupt our workforce and internal operations.

The impact of the COVID-19 pandemic may also exacerbate other risks discussed in Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, any of which could have a material effect on us. This situation continues to change rapidly, and additional impacts may arise that we are not aware of currently.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not Applicable

Item 5.Other Information

None

38

Item 6. Exhibits

INDEX TO EXHIBITS

Exhibit No.

    

Description

10.1*

Second Amendment to Sixth Amended and Restated Credit Facility Agreement dated as of March 1, 2021 (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 4, 2021)

10.2**

Term Note issued March 1, 2021 by IEC Electronics Corp. in favor of Manufacturers and Traders Trust Company (incorporated herein by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 4, 2021)

10.3

Mortgage dated as of March 1, 2021 by IEC Electronics Corp. and the County of Monroe Industrial Development Agency to Manufacturers and Traders Trust Company (incorporated herein by reference from Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 4, 2021)

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

101

The following items from this Quarterly Report on Form 10-Q formatted in Extensible Business Reporting Language: (i) Condensed Consolidated Balance Sheets (unaudited), (ii) Condensed Consolidated Income Statements (unaudited), (iii) Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited), (iv) Condensed Consolidated Statements of Cash Flows (unaudited), and (v) Notes to Condensed Consolidated Financial Statements.

*Certain schedules (as indicated by “[*]”) of this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

**Certain personally identifiable information (as indicated by “[***]”) has been omitted from this exhibit pursuant to Item 601(a)(6) of Regulation S-K.

*** Filed herewith.

39

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

IEC Electronics Corp.

 

(Registrant)

 

 

May 5, 2021

By:

/s/ Thomas L. Barbato

 

Thomas L. Barbato

 

Senior Vice President and Chief Financial Officer

(On behalf of the Registrant and as Principal Financial and Accounting Officer)

40