Delaware | 13-3458955 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
Common Stock, $.01 par value | NYSE AMERICAN LLC |
(Title of each class) | (Name of each exchange on which registered) |
Large accelerated filer ¨ | Accelerated filer ¨ | |
Non-accelerated filer x | Smaller reporting company x | |
Emerging growth company ¨ |
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Item 1. | ||
Item 1A. | ||
Item 1B. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
Item 7. | ||
Item 7A. | ||
Item 8. | ||
Item 9. | ||
Item 9A. | ||
Item 9B. | ||
Item 10. | ||
Item 11. | ||
Item 12. | ||
Item 13. | ||
Item 14. | ||
Item 15. | ||
Item 1. | BUSINESS |
• | 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 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. 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. |
• | Newark, New York - Located approximately one hour east of Rochester, New York, our Newark location is our corporate headquarters and is the 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. |
• | 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 counterfeit component analysis and complex design analysis. |
Years Ended | ||||
% of Sales by Sector | September 30, 2018 | September 30, 2017 | ||
Aerospace and Defense | 59% | 52% | ||
Medical | 22% | 28% | ||
Industrial | 19% | 20% | ||
100% | 100% |
Item 1A. | RISK FACTORS |
• | adverse changes in general economic conditions; |
• | natural disasters that may impede our operations, the operation of our customers’ business, or availability of manufacturing inputs from our suppliers; |
• | the level and timing of customer orders and the accuracy of customer forecasts; |
• | the capacity utilization of our manufacturing facilities and associated fixed costs; |
• | price competition; |
• | market acceptance of our customers’ products; |
• | business conditions in our customers’ end markets; |
• | our level of experience in manufacturing a particular product; |
• | changes in the mix of sales to our customers; |
• | variations in efficiencies achieved in managing inventories and property, plant and equipment; |
• | fluctuations in cost and availability of materials; |
• | timing of expenditures in anticipation of future orders; |
• | changes in cost and availability of labor and components; |
• | our effectiveness in managing the high reliability manufacturing process required by our customers; and |
• | failure or external breach of our information technology systems. |
• | incur debt; |
• | incur or maintain liens; |
• | make acquisitions of businesses or entities; |
• | make investments, loans or advances; |
• | enter into guarantee agreements; |
• | engage in mergers, consolidations or certain sales of assets; |
• | engage in transactions with affiliates; |
• | pay dividends or engage in stock redemptions or repurchases; and |
• | make capital expenditures. |
• | the inability of our customers to adapt to rapidly changing technology and evolving industry standards, which result in short product life cycles; |
• | the inability of our customers to develop and market their products, some of which are new and untested; |
• | increased competition among our customers and their competitors, including downward pressure on pricing; |
• | the potential that our customers’ products may become obsolete, or the failure of our customers’ products to gain anticipated commercial acceptance; and |
• | periods of significantly decreased demand in our customers’ markets. |
• | variation in demand for our customers’ products in their end markets; |
• | actions taken by our customers to manage their inventory; |
• | product design changes by our customers; or |
• | changes in our customers’ manufacturing strategy. |
• | deciding on the levels of business that we will seek; |
• | production schedules; |
• | component procurement commitments; |
• | equipment requirements; |
• | personnel needs; and |
• | other resource requirements. |
• | hire and retain qualified engineering and technical personnel; |
• | maintain and enhance our technological leadership; and |
• | develop and market manufacturing services that meet changing customer needs. |
Item 1B. | UNRESOLVED STAFF COMMENTS |
Location | Principal Use | Building SF | Owned/Leased | Lease Expiration |
Newark, New York (1) | AO,E,M,W,D | 235,000 | Owned | N/A |
Rochester, New York | AO,M,W,D | 47,000 | Leased | 5/31/2033 |
Albuquerque, New Mexico | AO,E,M,W,D | 72,000 | Leased | 5/31/2033 |
(1) | Please see the disclosure regarding the expansion of our operations in Newark, NY above under “Expansion of Newark, New York Manufacturing Operations” in Part I, Item 1 of this report. |
Age | ||
Jeffrey T. Schlarbaum | 52 | President and Chief Executive Officer |
Thomas L. Barbato | 49 | Senior Vice President and Chief Financial Officer |
Years Ended September 30, | |||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||
(amounts in thousands, except per share data) | (a) | (b) | (b) | ||||||||||||||||||
Net sales | $ | 116,922 | $ | 96,455 | $ | 127,010 | $ | 126,999 | $ | 120,837 | |||||||||||
Gross profit | 14,157 | 11,257 | 20,287 | 16,295 | 13,689 | ||||||||||||||||
Operating profit/(loss) | 2,719 | 1,060 | 6,248 | (1,660 | ) | 40 | |||||||||||||||
Income/(loss) before income taxes | 1,573 | 143 | 4,856 | (3,770 | ) | (1,772 | ) | ||||||||||||||
(Benefit)/provision for income taxes | (8,837 | ) | 62 | 70 | 1 | 12,876 | |||||||||||||||
Income/(loss) from continuing operations | 10,410 | 81 | 4,786 | (3,771 | ) | (14,648 | ) | ||||||||||||||
Loss from discontinued operations, net | — | — | — | (6,415 | ) | (423 | ) | ||||||||||||||
Net income/(loss) | $ | 10,410 | $ | 81 | $ | 4,786 | $ | (10,186 | ) | $ | (15,071 | ) | |||||||||
Gross margin as % of sales | 12.1 | % | 11.7 | % | 16.0 | % | 12.8 | % | 11.3 | % | |||||||||||
Operating profit/(loss) as % of sales | 2.3 | % | 1.1 | % | 4.9 | % | (1.3 | )% | — | % | |||||||||||
Diluted net income/(loss) per common share: | |||||||||||||||||||||
Earnings/(loss) from continuing operations | $ | 1.01 | $ | 0.01 | $ | 0.47 | $ | (0.37 | ) | $ | (1.49 | ) | |||||||||
Earnings/(loss) from discontinued operations | — | — | — | (0.64 | ) | (0.04 | ) | ||||||||||||||
Net earnings/loss | $ | 1.01 | $ | 0.01 | $ | 0.47 | $ | (1.01 | ) | $ | (1.53 | ) | |||||||||
Working capital | $ | 20,748 | $ | 17,194 | $ | 19,772 | $ | 21,866 | $ | 24,046 | |||||||||||
Total assets | 90,448 | 52,447 | 50,397 | 68,262 | 72,996 | ||||||||||||||||
Long-term debt (excluding current portion) | 16,002 | 14,023 | 16,732 | 28,323 | 28,479 | ||||||||||||||||
Long-term capital lease obligation (excluding current portion) | 7,027 | 5,362 | — | — | — | ||||||||||||||||
Stockholders’ equity | 25,376 | 14,429 | 13,864 | 8,688 | 17,405 | ||||||||||||||||
(a) | Fiscal year 2018 was impacted by the income tax benefit recorded to release the majority of the valuation allowance against the net deferred income tax assets. | ||||||||||||||||||||
(b) | Fiscal years 2015 and 2014 were impacted by the 2014 restatement of our financial statements and related expenses. |
Years Ended | ||||||||
Income Statement Data | September 30, 2018 | September 30, 2017 | ||||||
(in thousands) | ||||||||
Net sales | $ | 116,922 | $ | 96,455 | ||||
Gross profit | 14,157 | 11,257 | ||||||
Selling and administrative expenses | 11,438 | 10,197 | ||||||
Interest expense | 1,146 | 917 | ||||||
Income before income taxes | 1,573 | 143 | ||||||
(Benefit)/provision for income taxes | (8,837 | ) | 62 | |||||
Net income | $ | 10,410 | $ | 81 |
Years Ended | ||||
% of Sales by Sector | September 30, 2018 | September 30, 2017 | ||
Aerospace and Defense | 59% | 52% | ||
Medical | 22% | 28% | ||
Industrial | 19% | 20% | ||
100% | 100% |
Years Ended | ||||||||
Cash Flow Data | September 30, 2018 | September 30, 2017 | ||||||
(in thousands) | ||||||||
Cash, beginning of year | $ | — | $ | 845 | ||||
Net cash flow provided by/(used in): | ||||||||
Operating activities | (203 | ) | 1,759 | |||||
Investing activities | (1,982 | ) | 2,222 | |||||
Financing activities | 2,185 | (4,826 | ) | |||||
Net cash decrease for the year | — | (845 | ) | |||||
Cash, end of year | $ | — | $ | — |
Page | |
September 30, 2018 | September 30, 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | — | $ | — | ||||
Accounts receivable, net of allowance | 25,168 | 17,887 | ||||||
Inventories | 34,126 | 15,605 | ||||||
Other current assets | 1,747 | 1,018 | ||||||
Total current assets | 61,041 | 34,510 | ||||||
Property, plant and equipment, net | 20,110 | 17,777 | ||||||
Deferred income taxes | 8,855 | — | ||||||
Other long-term assets | 442 | 160 | ||||||
Total assets | $ | 90,448 | $ | 52,447 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 1,449 | $ | 987 | ||||
Current portion of capital lease obligation | 306 | 215 | ||||||
Accounts payable | 28,689 | 13,046 | ||||||
Accrued payroll and related expenses | 1,796 | 1,013 | ||||||
Other accrued expenses | 458 | 444 | ||||||
Customer deposits | 7,595 | 1,611 | ||||||
Total current liabilities | 40,293 | 17,316 | ||||||
Long-term debt | 16,002 | 14,023 | ||||||
Long-term capital lease obligation | 7,027 | 5,362 | ||||||
Other long-term liabilities | 1,750 | 1,317 | ||||||
Total liabilities | 65,072 | 38,018 | ||||||
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: 11,304,393 and 11,252,566 shares, respectively | ||||||||
Outstanding: 10,248,905 and 10,197,078 shares, respectively | 102 | 102 | ||||||
Additional paid-in capital | 47,326 | 46,789 | ||||||
Accumulated deficit | (20,463 | ) | (30,873 | ) | ||||
Treasury stock, at cost: 1,055,488 shares | (1,589 | ) | (1,589 | ) | ||||
Total stockholders’ equity | 25,376 | 14,429 | ||||||
Total liabilities and stockholders’ equity | $ | 90,448 | $ | 52,447 |
Years Ended | ||||||||
September 30, 2018 | September 30, 2017 | |||||||
Net sales | $ | 116,922 | $ | 96,455 | ||||
Cost of sales | 102,765 | 85,198 | ||||||
Gross profit | 14,157 | 11,257 | ||||||
Selling and administrative expenses | 11,438 | 10,197 | ||||||
Operating profit | 2,719 | 1,060 | ||||||
Interest expense | 1,146 | 917 | ||||||
Income before income taxes | 1,573 | 143 | ||||||
(Benefit)/provision for income taxes | (8,837 | ) | 62 | |||||
Net income | $ | 10,410 | $ | 81 | ||||
Net income per common share: | ||||||||
Basic | $ | 1.01 | $ | 0.01 | ||||
Diluted | $ | 1.01 | $ | 0.01 | ||||
Weighted average number of shares outstanding: | ||||||||
Basic | 10,228,596 | 10,181,868 | ||||||
Diluted | 10,320,203 | 10,181,868 |
Number of Shares Outstanding | Common Stock, par $0.01 | Additional Paid-In Capital | Retained (Deficit) | Treasury Stock, at cost | Total Stockholders’ Equity | |||||||||||||||||
Balances, October 1, 2016 | 10,160,128 | $ | 102 | $ | 46,305 | $ | (30,954 | ) | $ | (1,589 | ) | $ | 13,864 | |||||||||
Net income | — | — | — | 81 | — | 81 | ||||||||||||||||
Stock-based compensation | — | — | 460 | — | — | 460 | ||||||||||||||||
Vested restricted stock | 31,559 | — | — | — | — | — | ||||||||||||||||
Shares withheld for payment of taxes upon vesting of restricted stock | (1,825 | ) | — | (3 | ) | — | — | (3 | ) | |||||||||||||
Employee stock plan purchase | 7,216 | — | 27 | — | — | 27 | ||||||||||||||||
Balances, September 30, 2017 | 10,197,078 | 102 | 46,789 | (30,873 | ) | (1,589 | ) | 14,429 | ||||||||||||||
Net income | — | — | — | 10,410 | — | 10,410 | ||||||||||||||||
Stock-based compensation | — | — | 489 | — | — | 489 | ||||||||||||||||
Vested restricted stock | 40,107 | — | — | — | ||||||||||||||||||
Shares withheld for payment of taxes upon vesting of restricted stock | (1,743 | ) | — | (8 | ) | — | — | (8 | ) | |||||||||||||
Exercise of stock options | 1,400 | — | 6 | — | — | 6 | ||||||||||||||||
Employee stock plan purchases | 12,063 | — | 50 | — | — | 50 | ||||||||||||||||
Balances, September 30, 2018 | 10,248,905 | $ | 102 | $ | 47,326 | $ | (20,463 | ) | $ | (1,589 | ) | $ | 25,376 |
Years Ended | ||||||||
September 30, 2018 | September 30, 2017 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 10,410 | $ | 81 | ||||
Non-cash adjustments: | ||||||||
Stock-based compensation | 489 | 460 | ||||||
Depreciation and amortization | 2,351 | 2,609 | ||||||
Loss on sale of property, plant and equipment | — | 4 | ||||||
Change in reserve for doubtful accounts | 10 | (151 | ) | |||||
Change in excess/obsolete inventory reserve | 123 | (111 | ) | |||||
Deferred tax benefit | (8,855 | ) | — | |||||
Amortization of deferred gain on sale of leaseback | (83 | ) | (61 | ) | ||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (7,291 | ) | (596 | ) | ||||
Inventories | (18,644 | ) | (110 | ) | ||||
Other current assets | (729 | ) | 196 | |||||
Other long-term assets | (333 | ) | — | |||||
Accounts payable | 13,540 | 1,624 | ||||||
Change in book overdraft position | 2,103 | 558 | ||||||
Accrued expenses | 797 | (2,437 | ) | |||||
Customer deposits | 5,984 | (145 | ) | |||||
Other long-term liabilities | (75 | ) | (162 | ) | ||||
Net cash flows (used in)/provided by operating activities | (203 | ) | 1,759 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchases of property, plant and equipment | (3,934 | ) | (3,533 | ) | ||||
Proceeds from disposal of property, plant and equipment | 5 | 5 | ||||||
Proceeds from sale-leaseback transaction | 1,947 | 5,750 | ||||||
Net cash flows (used in)/provided by investing activities | (1,982 | ) | 2,222 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Advances from revolving line of credit | 62,380 | 46,851 | ||||||
Repayments of revolving line of credit | (58,153 | ) | (42,043 | ) | ||||
Borrowings under other loan agreements | 1,150 | — | ||||||
Repayments under other loan agreements | (2,921 | ) | (9,396 | ) | ||||
Repayments under capital lease | (244 | ) | (173 | ) | ||||
Debt issuance costs | (75 | ) | (89 | ) | ||||
Proceeds from exercise of stock options | 6 | — | ||||||
Proceeds from employee stock plan purchases | 50 | 27 | ||||||
Cash paid for employee taxes upon vesting of restricted stock | (8 | ) | (3 | ) | ||||
Net cash flows provided by/(used in) financing activities | 2,185 | (4,826 | ) | |||||
Net cash decrease for the year | — | (845 | ) | |||||
Cash, beginning of year | — | 845 | ||||||
Cash, end of year | $ | — | $ | — | ||||
Supplemental cash flow information: | ||||||||
Interest paid | $ | 1,151 | $ | 922 | ||||
Income taxes paid | 7 | 127 | ||||||
Property, plant and equipment additions financed through capital lease | 2,000 | 5,750 |
PP&E Lives | Estimated Useful Lives | |
(years) | ||
Land improvements | 10 | |
Buildings and improvements | 5 to 40 | |
Machinery and equipment | 3 to 5 | |
Furniture and fixtures | 3 to 7 | |
Software | 3 to 10 |
Years Ended | ||||||||
Allowance for doubtful accounts | September 30, 2018 | September 30, 2017 | ||||||
(in thousands) | ||||||||
Allowance, beginning of period | $ | 75 | $ | 226 | ||||
Change in provision for doubtful accounts | 10 | (144 | ) | |||||
Write-offs | — | (7 | ) | |||||
Allowance, end of period | $ | 85 | $ | 75 |
Inventories | September 30, 2018 | September 30, 2017 | ||||||
(in thousands) | ||||||||
Raw materials | $ | 21,323 | $ | 8,964 | ||||
Work-in-process | 11,263 | 5,080 | ||||||
Finished goods | 1,540 | 1,561 | ||||||
Total inventories | $ | 34,126 | $ | 15,605 |
Property, Plant and Equipment | September 30, 2018 | September 30, 2017 | ||||||
(in thousands) | ||||||||
Land and improvements | $ | 788 | $ | 788 | ||||
Buildings and improvements | 7,314 | 8,910 | ||||||
Building under capital lease | 7,750 | 5,750 | ||||||
Machinery and equipment | 30,969 | 27,947 | ||||||
Furniture and fixtures | 7,877 | 7,520 | ||||||
Construction in progress | 5,360 | 4,968 | ||||||
Total property, plant and equipment, at cost | 60,058 | 55,883 | ||||||
Accumulated depreciation | (39,948 | ) | (38,106 | ) | ||||
Property, plant and equipment, net | $ | 20,110 | $ | 17,777 |
Years Ended | ||||||||
September 30, 2018 | September 30, 2017 | |||||||
(in thousands) | ||||||||
Depreciation expense | $ | 2,358 | $ | 2,515 |
Fixed/ | September 30, 2018 | September 30, 2017 | ||||||||||||||||
Variable | Interest | Interest | ||||||||||||||||
Debt | Rate | Date | Balance | Rate | Balance | Rate | ||||||||||||
(in thousands) | ||||||||||||||||||
M&T credit facilities: | ||||||||||||||||||
Revolving Credit Facility | v | 5/5/2022 | $ | 12,996 | 5.26 | % | $ | 8,769 | 3.73 | % | ||||||||
Term Loan B | v | 5/5/2022 | 3,636 | 5.36 | 5,714 | 3.99 | ||||||||||||
Celmet Building Term Loan | f | 11/7/2018 | 1 | — | — | 802 | 4.72 | |||||||||||
Equipment Line Advances | v | 12/18/2018 | 314 | 5.56 | — | — | ||||||||||||
Equipment Line Term Note | v | Various | 2 | 794 | 5.56 | — | — | |||||||||||
Total debt, gross | 17,740 | 15,285 | ||||||||||||||||
Unamortized debt issuance costs | (289 | ) | (275 | ) | ||||||||||||||
Total debt, net | 17,451 | 15,010 | ||||||||||||||||
Less: current portion | (1,449 | ) | (987 | ) | ||||||||||||||
Long-term debt | $ | 16,002 | $ | 14,023 |
a) | Revolving Credit Facility (“Revolver”): At September 30, 2018, up to $22.0 million is available through May 5, 2022. The maximum amount the Company may borrow is determined based on a borrowing base calculation described below. |
b) | Term Loan B: $14.0 million was borrowed on January 18, 2013. Principal is being repaid in 120 equal monthly installments of $117 thousand. As part of an amendment to the Credit Facility, as amended, the principal was modified from $8.0 million to $6.0 million and principal is being repaid in equal monthly installments of $71 thousand plus a balloon payment of $0.6 million. The maturity date of the loan is May 5, 2022. The proceeds of the sale-leaseback transaction described in Note 12—Capital Lease, were used to pay down a portion of the loan. |
c) | Celmet Building Term Loan: $1.3 million was borrowed on November 8, 2013 pursuant to an amendment to the Credit Facility, as amended. The proceeds were used to reimburse the Company’s cost of purchasing its Rochester, New York facility. Principal was being repaid in 59 equal monthly installments of $11 thousand plus a balloon payment of $672 thousand due at maturity on November 7, 2018. The loan was repaid in connection with the sale-leaseback transaction described in Note 12—Capital Lease. |
d) | Equipment Line Advances: Up to $1.5 million is available through May 5, 2022. Interest only is paid until maturity. Principal is due six months after borrowing or can be converted to an Equipment Line Term Loan. On September 18, 2018, $0.3 million was borrowed. |
e) | Equipment Line Term Note: $0.8 million was converted from an Equipment Line Advance on July 26, 2018 and is being repaid in 36 equal monthly installments of $21 thousand and matures July 26, 2021. $0.1 million was converted from an Equipment Line Advance on September 27, 2018 and is being repaid in 36 equal monthly installments of $2 thousand and matures September 29, 2021. |
Debt Repayment Schedule | Contractual Principal Payments | ||||||
(in thousands) | |||||||
Twelve months ended September 30, | |||||||
2019 | $ | 1,449 | |||||
2020 | 1,136 | ||||||
2021 | 1,094 | ||||||
2022 | (1) | 14,061 | |||||
$ | 17,740 |
Years Ended | ||||||||
Warranty Reserve | September 30, 2018 | September 30, 2017 | ||||||
(in thousands) | ||||||||
Reserve, beginning of period | $ | 153 | $ | 180 | ||||
Provision | 266 | 137 | ||||||
Warranty costs | (246 | ) | (164 | ) | ||||
Reserve, end of period | $ | 173 | $ | 153 |
Years Ended | ||||||||
Valuation of Options | September 30, 2018 | September 30, 2017 | ||||||
Assumptions for Black-Scholes: | ||||||||
Risk-free interest rate | 2.84 | % | 1.50 | % | ||||
Expected term in years | 5.5 | 4.0 | ||||||
Volatility | 33 | % | 39 | % | ||||
Expected annual dividends | none | none | ||||||
Value of options granted: | ||||||||
Number of options granted | 120,000 | 57,500 | ||||||
Weighted average fair value per share | $ | 1.84 | $ | 1.19 | ||||
Fair value of options granted (000s) | $ | 221 | $ | 68 |
Years Ended | ||||||||||||||
September 30, 2018 | September 30, 2017 | |||||||||||||
Stock Options | Number of Options | Wgtd. Avg. Exercise Price | Number of Options | Wgtd. Avg. Exercise Price | ||||||||||
Outstanding, beginning of period | 743,045 | $ | 4.27 | 759,795 | $ | 4.43 | ||||||||
Granted | 120,000 | 5.19 | 57,500 | 3.64 | ||||||||||
Exercised | (1,400 | ) | 4.08 | — | — | |||||||||
Forfeited | (114,000 | ) | 4.78 | (44,500 | ) | 5.67 | ||||||||
Expired | (10,500 | ) | 5.24 | (29,750 | ) | 5.04 | ||||||||
Outstanding, end of period | 737,145 | $ | 4.33 | 743,045 | $ | 4.27 | ||||||||
For options expected to vest | ||||||||||||||
Number expected to vest | 724,398 | $ | 4.32 | 727,403 | $ | 4.29 | ||||||||
Weighted average remaining life, in years | 4.0 | 4.6 | ||||||||||||
Intrinsic value (000s) | $ | 733 | $ | 545 | ||||||||||
For exercisable options | ||||||||||||||
Number exercisable | 426,358 | $ | 4.24 | 332,472 | $ | 4.40 | ||||||||
Weighted average remaining life, in years | 3.3 | 4.1 | ||||||||||||
Intrinsic value (000s) | $ | 467 | $ | 229 | ||||||||||
For non-exercisable options | ||||||||||||||
Expense not yet recognized (000s) | $ | 343 | $ | 416 | ||||||||||
Weighted average years to be recognized | 2.8 | 1.8 | ||||||||||||
For options exercised | ||||||||||||||
Intrinsic value (000s) | $ | 2 | $ | — |
Years Ended | ||||||||||||||
September 30, 2018 | September 30, 2017 | |||||||||||||
Restricted (Non-vested) Stock | Number of Non-vested Shares | Wgtd. Avg. Grant Date Fair Value | Number of Non-vested Shares | Wgtd. Avg. Grant Date Fair Value | ||||||||||
Outstanding, beginning of period | 109,695 | $ | 4.01 | 115,950 | $ | 4.16 | ||||||||
Granted | 44,878 | 4.29 | 39,576 | 3.79 | ||||||||||
Vested | (40,107 | ) | 4.11 | (31,559 | ) | 4.25 | ||||||||
Shares withheld for payment of taxes upon vesting of restricted stock | (1,743 | ) | 3.70 | (1,825 | ) | 4.27 | ||||||||
Forfeited | (9,490 | ) | 4.20 | (12,447 | ) | 4.03 | ||||||||
Outstanding, end of period | 103,233 | $ | 4.08 | 109,695 | $ | 4.01 | ||||||||
For non-vested shares | ||||||||||||||
Expense not yet recognized (000s) | $ | 315 | $ | 328 | ||||||||||
Weighted average remaining years for vesting | 1.7 | 1.7 | ||||||||||||
For shares vested | ||||||||||||||
Aggregate fair value on vesting dates (000s) | $ | 187 | $ | 123 |
Years Ended | ||||||||||||||
September 30, 2018 | September 30, 2017 | |||||||||||||
Restricted Stock Units | Number of Non-vested Shares | Wgtd. Avg. Grant Date Fair Value | Number of Non-vested Shares | Wgtd. Avg. Grant Date Fair Value | ||||||||||
Outstanding, beginning of period | 267,999 | $ | 4.03 | 112,809 | $ | 4.64 | ||||||||
Granted | 102,864 | 4.28 | 155,190 | 3.58 | ||||||||||
Vested | — | — | — | — | ||||||||||
Forfeited | (200,371 | ) | 4.22 | — | — | |||||||||
Outstanding, end of period | 170,492 | $ | 3.96 | 267,999 | $ | 4.03 | ||||||||
For non-vested shares | ||||||||||||||
Expense not yet recognized (000s) | $ | 352 | $ | 329 | ||||||||||
Weighted average remaining years for vesting | 2.3 | 2.0 |
Years Ended | ||||||||
Income Tax Provision | September 30, 2018 | September 30, 2017 | ||||||
(in thousands) | ||||||||
Current tax: | ||||||||
State | $ | 6 | $ | 53 | ||||
Federal | 12 | 9 | ||||||
Deferred tax: | ||||||||
State | (103 | ) | — | |||||
Federal | 5,088 | — | ||||||
Valuation allowance | (13,840 | ) | — | |||||
(Benefit)/provision for income taxes | $ | (8,837 | ) | $ | 62 |
Years Ended | ||||||
Taxes as Percent of Pretax Income | September 30, 2018 | September 30, 2017 | ||||
Federal statutory rate | 24.2 | % | 34.0 | % | ||
Decrease in valuation allowance | (880.0 | ) | (164.4 | ) | ||
Deferred tax adjustment | (21.2 | ) | 65.8 | |||
Decrease in state deferred tax rate | (6.6 | ) | — | |||
State income taxes, net of federal benefit | 0.4 | 26.8 | ||||
Rate change due to Tax Reform | 316.6 | — | ||||
Stock-based compensation | 7.3 | 57.6 | ||||
Non-deductible expenses | 0.6 | 23.5 | ||||
Other | (3.2 | ) | — | |||
Income tax provision as percent of pretax income | (561.9 | )% | 43.3 | % |
As of | ||||||||
September 30, 2018 | September 30, 2017 | |||||||
(in thousands) | ||||||||
Deferred tax assets: | ||||||||
Federal and state net operating loss carryforward | $ | 6,366 | $ | 11,367 | ||||
Alternative minimum tax credit carryforward | 1,031 | 1,010 | ||||||
Depreciation and fixed assets | 306 | 289 | ||||||
Amortization and impairment of intangibles | 27 | 28 | ||||||
New York State investment tax and other credits | 1,308 | 1,186 | ||||||
Inventories | 382 | 585 | ||||||
Deferred gain on sale-leaseback | 431 | 271 | ||||||
Other | 312 | 412 | ||||||
Total before allowance | 10,163 | 15,148 | ||||||
Valuation allowance | (1,308 | ) | (15,148 | ) | ||||
Deferred tax assets, net | $ | 8,855 | $ | — |
Years Ended | ||||
% of Sales by Sector | September 30, 2018 | September 30, 2017 | ||
Aerospace and Defense | 59% | 52% | ||
Medical | 22% | 28% | ||
Industrial | 19% | 20% | ||
100% | 100% |
Capital Lease Payment Schedule | Contractual Principal Payments | |||
(in thousands) | ||||
Twelve months ended September 30, | ||||
2019 | $ | 658 | ||
2020 | 671 | |||
2021 | 685 | |||
2022 | 698 | |||
2023 and thereafter | 7,413 | |||
Total capital lease payments | 10,125 | |||
Less: amounts representing interest | (2,792 | ) | ||
Present value of minimum lease payment | $ | 7,333 |
Years Ended | ||||||||
Earnings Per Share | September 30, 2018 | September 30, 2017 | ||||||
Basic net income per share: | ||||||||
Net income | $ | 10,410 | $ | 81 | ||||
Less: Income attributable to non-vested shares | 104 | 1 | ||||||
Net income available to common stockholders | $ | 10,306 | $ | 80 | ||||
Weighted average common shares outstanding | 10,228,596 | 10,181,868 | ||||||
Basic net income per share | $ | 1.01 | $ | 0.01 | ||||
Diluted net income per share: | ||||||||
Net income | $ | 10,410 | $ | 81 | ||||
Shares used in computing basic net income per share | 10,228,596 | 10,181,868 | ||||||
Dilutive effect of non-vested shares and options | 91,607 | — | ||||||
Shares used in computing diluted net income per share | 10,320,203 | 10,181,868 | ||||||
Diluted net income per share | $ | 1.01 | $ | 0.01 |
Years Ended | ||||||
September 30, 2018 | September 30, 2017 | |||||
Anti-dilutive shares excluded | 32,788 | 855,836 |
Net Sales | Gross Profit | Net Income/(Loss) | Basic and Diluted Earnings/(Loss) Per Share | |||||||||||||
(Unaudited; in thousands, except per share data) | ||||||||||||||||
Fiscal Quarters | ||||||||||||||||
Fourth 2018 | $ | 34,216 | $ | 4,496 | $ | 9,121 | (a) | $ | 0.89 | |||||||
Third 2018 | 29,782 | 3,359 | 204 | 0.02 | ||||||||||||
Second 2018 | 31,768 | 4,784 | 1,579 | 0.15 | ||||||||||||
First 2018 | 21,156 | 1,518 | (494 | ) | (0.05 | ) | ||||||||||
Fourth 2017 | $ | 27,623 | $ | 3,475 | $ | 755 | $ | 0.07 | ||||||||
Third 2017 | 26,489 | 3,708 | 794 | 0.08 | ||||||||||||
Second 2017 | 21,368 | 2,279 | (603 | ) | (0.06 | ) | ||||||||||
First 2017 | 20,976 | 1,795 | (865 | ) | (0.09 | ) |
(a) | Fourth quarter 2018 was impacted by a $7.8 million income tax benefit recorded to release the majority of the valuation allowance against the net deferred income tax assets. |
Item 9A. | CONTROLS AND PROCEDURES |
(i) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and asset dispositions of the Company; |
(ii) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
(iii) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on financial statements. |
Item 9B. | OTHER INFORMATION |
Exhibit No. | Title |
3.1 | Amended and Restated Certificate of Incorporation of DFT Holdings Corp. (incorporated herein by reference from Exhibit 3.1 to the Company’s Registration Statement on Form S-1, Registration No. 33-56498) |
3.2 | Certificate of Ownership and Merger merging IEC Electronics Corp. into DFT Holdings Corp. (incorporated herein by reference from Exhibit 3.5 to the Company’s Registration Statement on Form S-1, Registration No. 33-56498) |
3.3 | Certificate of Amendment of the Certificate of Incorporation of IEC Electronics Corp. (incorporated herein by reference from Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 27, 1998) |
3.4 | |
3.5 | |
3.6 | |
10.1 | |
10.2 | |
10.3 | |
10.4 | |
10.5 | |
10.6 | |
10.7 | |
10.8 | |
10.9 |
10.10 | |
10.11* | |
10.12* | |
10.13* | |
10.14* | |
10.15* | |
10.16* | |
10.17* | |
10.18* | |
10.19* | |
10.20* | |
10.21* | |
10.22* | |
10.23* | |
10.24* | |
10.25* | |
10.26* | |
10.27* | |
10.28* | |
10.29* | |
10.30* | |
10.31* |
10.32*# | |
21.1# | |
23.1# | |
31.1# | |
31.2# | |
32.1# | |
101 | The following items from this Annual Report on Form 10-K formatted in Extensible Business Reporting Language: (i) Consolidated Balance Sheets, (ii) Consolidated Income Statements, (iii) Consolidated Statements of Changes in Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements. |
IEC Electronics Corp. | ||
(Registrant) | ||
Dated: November 29, 2018 | By: | /s/ Jeffrey T. Schlarbaum |
Jeffrey T. Schlarbaum | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) |
Signature | Title | Date |
/s/ Jeffrey T. Schlarbaum | President and Chief Executive Officer | |
Jeffrey T. Schlarbaum | (Principal Executive Officer and Director) | November 29, 2018 |
/s/ Thomas L. Barbato | Senior Vice President and Chief Financial Officer | November 29, 2018 |
Thomas L. Barbato | (Principal Financial and Accounting Officer) | |
/s/ Keith M. Butler | Director | November 29, 2018 |
Keith M. Butler | ||
/s/ Charles P. Hadeed | Director | November 29, 2018 |
Charles P. Hadeed | ||
/s/ Lynn J. Hartrick | Director | November 29, 2018 |
Lynn J. Hartrick | ||
/s/ Andrew M. Laurence | Director | November 29, 2018 |
Andrew M. Laurence | ||
/s/ Jeremy R. Nowak | Chairman of the Board | November 29, 2018 |
Jeremy R. Nowak | ||
/s/ Michael Osborne | Director | November 29, 2018 |
Michael Osborne |
Subsidiary | State of Incorporation |
IEC Electronics Corp.-Albuquerque | New Mexico |
IEC Analysis & Testing Laboratory, LLC | New Mexico |
IEC California Holdings, Inc. | Delaware |
1. | I have reviewed this Annual Report on Form 10-K for the year ended September 30, 2018 of IEC Electronics Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: November 29, 2018 | /s/ Jeffrey T. Schlarbaum | |
Jeffrey T. Schlarbaum | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) |
1. | I have reviewed this Annual Report on Form 10-K for the year ended September 30, 2018 of IEC Electronics Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: November 29, 2018 | /s/ Thomas L. Barbato | |
Thomas L. Barbato | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: November 29, 2018 | /s/ Jeffrey T. Schlarbaum | |
Jeffrey T. Schlarbaum | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) |
Dated: November 29, 2018 | /s/ Thomas L. Barbato | |
Thomas L. Barbato | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
Document And Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2018 |
Nov. 21, 2018 |
Mar. 30, 2018 |
|
Document And Entity Information [Abstract] | |||
Entity Registrant Name | IEC ELECTRONICS CORP | ||
Entity Central Index Key | 0000049728 | ||
Current Fiscal Year End Date | --09-30 | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Ex Transition Period | false | ||
Entity Shell Company | false | ||
Trading Symbol | IEC | ||
Entity Common Stock, Shares Outstanding | 10,255,309 | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Sep. 30, 2018 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 35,707,488 |
CONSOLIDATED BALANCE SHEETS [Parenthetical] - $ / shares |
Sep. 30, 2018 |
Sep. 30, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 500,000 | 500,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 11,306,136 | 11,252,566 |
Common stock, shares outstanding | 10,250,648 | 10,197,078 |
Treasury stock, shares | 1,055,488 | 1,055,488 |
CONSOLIDATED INCOME STATEMENTS - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Income Statement [Abstract] | ||
Revenues | $ 116,922 | $ 96,455 |
Cost of sales | 102,765 | 85,198 |
Gross profit | 14,157 | 11,257 |
Selling and administrative expenses | 11,438 | 10,197 |
Operating profit | 2,719 | 1,060 |
Interest expense | 1,146 | 917 |
Income before income taxes | 1,573 | 143 |
(Benefit)/provision for income taxes | (8,837) | 62 |
Net income | $ 10,410 | $ 81 |
Net income per common share: | ||
Net earnings/loss (in dollars per share) | $ 0 | $ 0 |
Net earnings/loss (in dollars per share) | $ 0 | $ 0 |
Weighted average number of shares outstanding: | ||
Weighted Average Number of Shares Outstanding, Basic | 10,228,596 | 10,181,868 |
Diluted (in shares) | 10,320,203 | 10,181,868 |
OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
12 Months Ended | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | ||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||
OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 1—OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Our Business IEC Electronics Corp. (“IEC,” or the “Company”) 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 9001:2008, AS9100C, ISO 13485, Nadcap. 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 web site at www.iec-electronics.com. The contents of this website are not incorporated by reference into this annual 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 30th and the first three quarters generally end on the Friday closest to the last day of the calendar quarter. For the fiscal year ended September 30, 2018 (“fiscal 2018”), the fiscal quarters ended on December 29, 2017, March 30, 2018 and June 29, 2018. For the fiscal year ended September 30, 2017 (“fiscal 2017”), the fiscal quarters ended on December 30, 2016, March 31, 2017 and June 30, 2017. Consolidation The consolidated financial statements include the accounts of IEC and its wholly-owned subsidiaries: IEC Electronics Wire and Cable, Inc. (“Wire and Cable”) which merged into IEC on December 28, 2016; IEC Electronics Corp-Albuquerque (“Albuquerque”); IEC Analysis & Testing Laboratory, LLC (“ATL”); and IEC California Holdings, Inc. The Rochester unit, formerly Celmet, operates as a division of IEC. All intercompany transactions and accounts are eliminated in consolidation. 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 consolidated balance sheets. Changes in the book overdrafts are presented within net cash flows provided by operating activities within the consolidated statements of cash flows. 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.
Reviewing Long-Lived Assets for Potential Impairment ASC 360-10 (Property, Plant and Equipment) requires the Company to test long-lived assets (PP&E and definitive 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. No impairment charges were recorded by IEC for long-lived assets during fiscal 2018 and 2017. Leases At the inception of a lease covering equipment or real estate, the lease agreement is evaluated under criteria discussed in ASC 840-10-25 (Leases). Leases meeting one of four key criteria are accounted for as capital leases and all others are treated as operating leases. Under a capital lease, the discounted value of future lease payments becomes the basis for recognizing an asset and a borrowing, and lease payments are allocated between debt reduction and interest. For operating leases, payments are recorded as rent expense. Criteria for a capital lease include (i) transfer of ownership during the lease term; (ii) existence of a bargain purchase option under terms that make it likely to be exercised; (iii) a lease term equal to 75 percent or more of the economic life of the leased property; and (iv) minimum lease payments that equal or exceed 90 percent of the fair value of the property. Legal Contingencies When legal proceedings are brought or claims are made against the Company and the outcome is uncertain, ASC 450-10 (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. 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 and accrued liabilities. See Note 6—Fair Value of Financial Instruments for a discussion of the fair value of IEC’s 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 fiscal 2018 or fiscal 2017. Revenue Recognition The Company’s revenue is principally derived from the sale of electronic products built to customer specifications, but also from other value-added support services and repair work. Revenue from product sales is recognized when (i) goods are shipped or title and risk of ownership have passed, (ii) the price to the buyer is fixed or determinable, and (iii) realization is reasonably assured. Service revenue is generally recognized once the service has been rendered. For material management arrangements, revenue is generally recognized as services are rendered. Under such arrangements, some or all of the following services may be provided: design, bid, procurement, testing, storage or other activities relating to materials the customer expects to incorporate into products that it manufactures. Value-added support services revenue, including material management and repair work revenue, amounted to less than 5% of total revenue in fiscal 2018 and fiscal 2017. Provisions for discounts, allowances, rebates, estimated returns and other adjustments are recorded in the period the related sales are recognized. 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. 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, 2014 through fiscal year ended September 30, 2017. The federal income tax audit for the fiscal year ended September 30, 2013 concluded during fiscal 2017 and resulted in no change to reported tax. 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 Fifth Amended and Restated Credit Facility Agreement, as amended, with M&T Bank includes certain restrictions on paying cash dividends, as more fully described in Note 5—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: allowance for doubtful accounts, excess and obsolete inventory, warranty reserves and the valuation of deferred income tax assets. 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 income. Segments The Company’s results of operations for the years ended September 30, 2018 and 2017 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 for sales, marketing, engineering, supply chain, information services, human resources, payroll and corporate accounting functions. Consolidated financial information is available that 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. Recently Issued Accounting Standards Not Yet Adopted FASB Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“Topic 606”) was issued May 2014 and updates the principles for recognizing revenue. This ASU will supersede most of the existing revenue recognition requirements in GAAP. Under the new standard, revenue will be recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. The standard creates a five-step model that will generally require companies to use more judgment and make more estimates than under current guidance when considering the terms of contracts along with all relevant facts and circumstances. These include the identification of customer contracts and separating performance obligations, the determination of transaction price that potentially includes an estimate of variable consideration, allocating the transaction price to each separate performance obligation, and recognizing revenue in line with the pattern of transfer. Additionally, disclosures required for revenue recognition will include qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments, and assets recognized from costs to obtain or fulfill a contract. Such disclosures are more extensive than what is required under existing GAAP. The guidance is effective for the Company beginning in the first quarter of the fiscal year ending September 30, 2019 (“fiscal 2019”). The Company has identified key personnel to evaluate the guidance and approve a transition method. The Company has assessed that the impact of the new guidance may result in a change of the Company’s revenue recognition model for electronics manufacturing services from “point in time” upon physical delivery to an “over time” model and believes this transition may have a material impact on the Company’s consolidated financial statements upon adoption primarily as it recognizes an increase in contract assets for unbilled receivables with a corresponding reduction in inventories. The Company has commenced implementation in accordance with the planned effective date. The new guidance allows for two transition methods in application: (i) retrospective to each prior reporting period presented, or (ii) modified retrospective with the cumulative effect of adoption recognized on October 1, 2018, the first day of the Company’s fiscal 2019. 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 electronics components which are built to customer specifications. Revenue is recognized as the customer's components are manufactured over time. The Company has an enforceable right to payment for work completed to date and the goods do not have an alternative use once the manufacturing process has commenced. The Company records an unbilled contract asset for finished goods associated with non-cancellable customer orders. The Company also records an unbilled contract asset for revenue related to its work-in-process inventory (“WIP”) when the manufacturing process has commenced and there is a non-cancellable customer purchase order. The Company uses an input method of direct manufacturing labor inputs to measure progress towards satisfying its performance obligation associated with WIP inventory. The Company has contractual arrangements with many of its customers which require the customer to purchase any unused inventory that the Company has purchased to fulfill that customer’s manufacturing demand. Revenue from the sale of any excess inventory to the customer is recognized at a point in time when control transfers, which is typically when title passes to the customer upon shipment. The Company also derives revenue from the sale of procured finished goods, specifically for resale. Revenue from the sales of these goods is recognized when control transfers at a point in time, which is typically when title passes to the customer. The Company also derives revenue from engineering and design services. Service revenue is recognized over time as services are performed. The Company will adopt the new guidance under the modified retrospective approach with a cumulative adjustment increasing the opening balance of retained earnings by approximately $0.5 million to $1.0 million, net of tax. Prior periods will not be retrospectively adjusted. FASB ASU 2016-02, “Leases” was issued in February 2016. The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. For public entities, the new guidance is effective for annual periods beginning after December 15, 2018, or the Company’s fiscal year ending September 30, 2020, and interim periods within those annual periods. Early adoption is permitted for all entities. The Company is evaluating the impact this ASU will have on its consolidated financial statements. |
ALLOWANCE FOR DOUBTFUL ACCOUNTS |
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ALLOWANCE FOR DOUBTFUL ACCOUNTS | A summary of activity in the allowance for doubtful accounts during the years ended September 30, 2018 and 2017 is as follows:
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INVENTORIES |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORIES | A summary of inventory by category at period end is as follows:
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PROPERTY, PLANT AND EQUIPMENT |
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY, PLANT AND EQUIPMENT | A summary of property, plant and equipment and accumulated depreciation at period end is as follows:
Depreciation expense during the years ended September 30, 2018 and 2017 follows:
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CREDIT FACILITIES |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CREDIT FACILITIES | A summary of borrowings at period end is as follows:
1 The Celmet Building Term Loan was repaid in connection with the sale-leaseback transaction described in Note 12—Capital Lease. Proceeds from the transaction were also used to pay down a portion of Term Loan B. 2 On July 26, 2018 and September 27, 2018, $750 thousand and $86 thousand, respectively, of Equipment Line Advances matured and were converted to an Equipment Line Term Note. M&T Bank Credit Facilities Effective as of August 2, 2018, the Company and M&T Bank entered into the Sixth Amendment to the Fifth Amended and Restated Credit Facility Agreement, which amended the Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by various amendments (collectively, the “Credit Facility, as amended”). The Credit Facility, as amended, 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 amended, are described below:
Borrowing Base At September 30, 2018, under the Credit Facility, as amended, the maximum amount the Company can borrow under the Revolver was the lesser of (i) 85% of eligible receivables plus a percentage of eligible inventories (up to a cap of $8.0 million) or (ii) $22.0 million at September 30, 2018 and September 30, 2017. At September 30, 2018, the upper limit on Revolver borrowings was $22.0 million, and $9.0 million was available. At September 30, 2017, the upper limit on Revolver borrowings was $16.0 million with $7.2 million available. Average Revolver balances amounted to $12.5 million and $6.1 million during the years ended September 30, 2018 and September 30, 2017, respectively. Interest Rates Under the Credit Facility, as amended, 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 September 30, 2018, the applicable marginal interest rate was 3.00% for the Revolver and 3.25% for Term Loan B and Equipment Line Advances. At September 30, 2017, the applicable marginal interest rate was 2.50% for the Revolver and 2.75% for Term Loan B. 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 0.250% to 0.375% of the excess of $22.0 million over average borrowings under the Revolver. Fees incurred amounted to $23.3 thousand and $50.0 thousand during the years ended September 30, 2018 and September 30, 2017, respectively. The fee percentage varies based on the Company’s Fixed Charge Coverage Ratio, as defined below. Financial Covenants The Credit Facility, as amended, contains various affirmative and negative covenants including financial covenants. As of September 30, 2018, 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 initially measured for a trailing six months ended September 30, 2017 and was measured for a trailing twelve months ended September 30, 2018 as a minimum of 1.10 times. The Fixed Charge Coverage Ratio was the only covenant in effect at September 30, 2018. The Credit Facility, as amended, 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 all financial debt covenants at September 30, 2018. Contractual Principal Payments A summary of contractual principal payments under IEC’s borrowings at September 30, 2018 for the next four years taking into consideration the Credit Facility, as amended, is as follows:
(1) Includes Revolver balance of $13.0 million at September 30, 2018, maturing on May 5, 2022. |
FAIR VALUE OF FINANCIAL INSTRUMENTS |
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Fair Value Disclosures [Abstract] | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | Financial Instruments Carried at Historical Cost The Company’s long-term debt is not quoted. Fair value was estimated using a discounted cash flow analysis based on Level 2 valuation inputs, including borrowing rates the Company believes are currently available to it for loans with similar terms and maturities. The Company’s debt is carried at historical cost on the consolidated balance sheet. The fair value and carrying value of the Celmet Building Term Loan at September 30, 2017 was $0.8 million. As described in Note 12—Capital Lease, the Celmet Building Term Loan was repaid on May 11, 2018. The fair value of the remainder of the Company’s debt approximated carrying value at September 30, 2018 and September 30, 2017, as it is variable rate debt. |
WARRANTY RESERVES |
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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 consolidated balance sheet. A summary of additions to and charges against IEC’s warranty reserves during the period follows:
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STOCK-BASED COMPENSATION |
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STOCK-BASED COMPENSATION | The 2010 Omnibus Incentive Compensation Plan (“2010 Plan”) was approved by the Company’s stockholders at the January 2011 Annual Meeting of Stockholders. The 2010 Plan, which is administered by the Compensation Committee of the Board of Directors, 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 employee stock purchase plan (“ESPP”), adopted in 2011, that provides for the purchase of Company common stock at a discounted stock purchase price. Under the 2010 Plan, up to 2,000,000 common shares may be issued over a term of ten years. Under the ESPP, 150,000 shares of common stock may be purchased over a term of ten years. Stock-based compensation expense recorded under the 2010 Plan totaled $0.5 million for each of the years ended September 30, 2018 and 2017, respectively. At September 30, 2018, there were 415,710 remaining shares available to be issued under the 2010 Plan and 100,765 remaining shares available to be purchased 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 2010 Plan and 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 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 years ended September 30, 2018 and 2017 follows:
A summary of stock option activity, together with other related data, follows:
Restricted (Non-vested) Stock Certain holders of IEC restricted stock have voting and dividend rights as of the date of grant, but 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. 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-based compensation expense over the vesting period. A summary of restricted stock activity, together with related data, follows:
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 units 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. A summary of restricted stock unit activity, together with related data, follows:
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INCOME TAXES |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | (Benefit)/provision for income taxes during the years ended September 30, 2018 and 2017 follows:
Differences between the federal statutory rate and IEC’s effective tax rates for fiscal 2018 and fiscal 2017 are explained by the following reconciliation.
The following table displays deferred tax assets by category:
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering U.S. corporate income tax rates and implementing a territorial tax system. As the Company has a September 30 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal tax rate of approximately 24.2% for fiscal 2018, and 21% for subsequent fiscal years. The Tax Act eliminates the domestic manufacturing deduction and moves to a territorial system. In addition, previously paid federal AMT will now be refundable regardless of whether there is future income tax liability before AMT credits. The Company has concluded that the Tax Act has caused the Company’s U.S. deferred tax assets and liabilities to be revalued. Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported basis in the financial statements that will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are revalued and any change is adjusted through the provision for income tax expense in the reporting period of the enactment. As of September 30, 2018, the Company has completed its analysis of the impact of the Tax Act under SAB 118. For the year ended September 30, 2018, the impact of the Tax Act resulted in the Company recording a tax expense of approximately $4.7 million due to the change in the tax rate. This was offset by a corresponding decrease to the valuation allowance of approximately $5.8 million, resulting in a net tax benefit of approximately $1.0 million related to the release of the valuation allowance on the Company’s AMT credits. As of September 30, 2018, the Company’s deferred tax assets were primarily the result of U.S. federal net operating loss carryforwards (“NOLs”) and tax credit carryforwards. A valuation allowance of $1.3 million and $15.1 million was recorded against our gross deferred tax asset balance as of September 30, 2018, and September 30, 2017, respectively. During the year ended September 30, 2018, management evaluated both positive and negative evidence to consider the reversal of the valuation allowance on the Company's net deferred income tax assets and determined in the fourth quarter of fiscal 2018 that there was sufficient positive evidence to conclude that it is more likely than not that the Company's deferred income tax assets are realizable. As a result, in the fourth quarter of fiscal 2018 the Company recorded a $7.8 million income tax benefit to release most of the valuation allowance against the Company's net deferred income tax assets. Management performs an assessment of positive and negative evidence regarding the realization of the Company's net deferred income tax assets as required by ASC 740. For the year ended September 30, 2017, we determined that a valuation allowance was needed for all of our net deferred income tax assets, based on the required weight of positive and negative evidence under ASC 740, including consideration of the Company's three-year cumulative losses at that time. IEC has NOLs for income tax purposes of approximately $29.7 million at September 30, 2018, expiring mainly in years 2022 through 2025 and 2031 through 2035. The Company also has additional state NOLs available in several jurisdictions in which it files. Recent New York state corporate tax reform has resulted in the reduction of the business income base rate for qualified manufacturers in New York state to 0% beginning in fiscal 2016 for IEC. At September 30, 2018, the Company had $1.6 million of New York State investment tax and other credit carryforwards, expiring in various years through 2031. The credits cannot be utilized unless the New York state tax rate is no longer 0%, and as such, the Company has recorded a valuation allowance against the full amount of these credit carryforwards (net of the federal benefit). |
MARKET SECTORS AND MAJOR CUSTOMERS |
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Risks and Uncertainties [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
MARKET SECTORS AND MAJOR CUSTOMERS | A summary of sales, according to the market sector within which IEC’s customers operate, is as follows:
Two individual customers represented 10% or more of sales for the year ended September 30, 2018. One customer in the aerospace and defense sector totaled 23% and one customer in the medical sector totaled 11%. In the prior fiscal year, two individual customers represented 10% or more of sales, one customer in the medical sector totaled 14%, while the other customer in the aerospace and defense sector totaled 13%. Three individual customers represented 10% or more of receivables and accounted for 55% of outstanding balances at September 30, 2018. At September 30, 2017, three individual customers represented 10% or more of receivables and accounted for 42% of such outstanding balances. 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. |
LITIGATION |
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Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
LITIGATION | 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 consolidated financial statements. |
CAPITAL LEASE (Notes) |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Lease | Note 12—CAPITAL LEASE Leases On November 18, 2016, the Company entered into a sale-leaseback agreement, pursuant to the terms of a purchase and sale agreement, with Store Capital Acquisitions, LLC, a Delaware limited liability company (the “Purchaser”), for the sale of certain property, including the manufacturing facility located in Albuquerque, New Mexico (the “Albuquerque Property”). Albuquerque (the “Seller”) completed the sale of the Albuquerque Property to the Purchaser for an aggregate purchase price of approximately $5.8 million including a $0.1 million holdback held subject to a holdback of funds agreement. The net book value of assets sold was $4.6 million and the value of the assets acquired under the lease is $5.8 million. The Company recorded a deferred gain of $1.1 million related to the transaction, which is recorded in other long-term liabilities section of the consolidated balance sheets. The proceeds from the transaction were used to pay off the Albuquerque Mortgage Loan and pay down Term Loan A. As part of the transaction, a Lease Agreement dated as of November 18, 2016 was entered into between the Seller and the Purchaser (the “Lease”). Pursuant to the Lease, the Seller is leasing the Albuquerque Property for an initial term of 15 years, with two renewal options of five years each. The initial base annual rent is approximately $0.5 million and is subject to an annual increase equal to the lesser of 2% or 1.25 times the change in the Consumer Price Index. If an event of default occurs under the terms of the Lease, among other things, all rental amounts accelerate and become due and owing, subject to certain adjustments. On April 10, 2018, the Company entered into a purchase and sale agreement, with the Purchaser, for the sale of the Company’s manufacturing facility located in Rochester, New York (the “Rochester Property”). The Rochester Property was sold for $2.0 million, and the net book value of the assets sold was $1.2 million. The Company recorded a deferred gain of $0.7 million related to the transaction, which is recorded in other long-term liabilities section of the consolidated balance sheet. The proceeds from the transaction were used to pay off the Celmet Building Term Loan and pay down a portion of Term Loan B. In conjunction with this purchase, the Lease was amended to include the Rochester Property. The amended Lease includes both the lease-back of the Rochester Property and the Albuquerque Property. The lease term for both properties expires on May 31, 2033 and provides for renewals of two successive periods of 5 years each. A summary of capital lease payments for the next five years is as follows:
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Earnings (Loss) Per Share (Notes) |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||
Earnings Per Share |
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QUARTERLY FINANCIAL DATA (UNAUDITED) |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
QUARTERLY FINANCIAL DATA (UNAUDITED) | The accompanying unaudited financial information for the three month periods specified below have been prepared in accordance with GAAP for interim financial information. In the opinion of management, all adjustments required for a fair presentation of the information have been made. Note that quarterly amounts are rounded separately and as a result the sum of the quarterly amounts may not equal the computed amount for the full year.
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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||
Generally Accepted Accounting Principles | 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”). |
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Fiscal Calendar | Fiscal Calendar The Company’s fiscal year ends on September 30th and the first three quarters generally end on the Friday closest to the last day of the calendar quarter. For the fiscal year ended September 30, 2018 (“fiscal 2018”), the fiscal quarters ended on December 29, 2017, March 30, 2018 and June 29, 2018. For the fiscal year ended September 30, 2017 (“fiscal 2017”), the fiscal quarters ended on December 30, 2016, March 31, 2017 and June 30, 2017. |
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Consolidation | Consolidation |
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Cash and Cash Equivalents | Cash |
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Allowance for Doubtful Accounts | 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. |
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Inventory Valuation | 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. |
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Property, Plant and Equipment | 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.
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Reviewing Long-Lived Assets for Potential Impairment | Reviewing Long-Lived Assets for Potential Impairment |
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Legal Contingencies | Legal Contingencies When legal proceedings are brought or claims are made against the Company and the outcome is uncertain, ASC 450-10 (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. |
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Customer Deposits | 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. |
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Fair Value Measurements | 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 and accrued liabilities. See Note 6—Fair Value of Financial Instruments for a discussion of the fair value of IEC’s 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. |
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Revenue Recognition | Revenue Recognition The Company’s revenue is principally derived from the sale of electronic products built to customer specifications, but also from other value-added support services and repair work. Revenue from product sales is recognized when (i) goods are shipped or title and risk of ownership have passed, (ii) the price to the buyer is fixed or determinable, and (iii) realization is reasonably assured. Service revenue is generally recognized once the service has been rendered. For material management arrangements, revenue is generally recognized as services are rendered. Under such arrangements, some or all of the following services may be provided: design, bid, procurement, testing, storage or other activities relating to materials the customer expects to incorporate into products that it manufactures. Value-added support services revenue, including material management and repair work revenue, amounted to less than 5% of total revenue in fiscal 2018 and fiscal 2017. Provisions for discounts, allowances, rebates, estimated returns and other adjustments are recorded in the period the related sales are recognized. |
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Stock-Based Compensation | 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. |
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Legal Expense Accrual | 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. |
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Income Taxes and Deferred Taxes | 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. 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, 2014 through fiscal year ended September 30, 2017. The federal income tax audit for the fiscal year ended September 30, 2013 concluded during fiscal 2017 and resulted in no change to reported tax. |
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Dividends | 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 Fifth Amended and Restated Credit Facility Agreement, as amended, with M&T Bank includes certain restrictions on paying cash dividends, as more fully described in Note 5—Credit Facilities. |
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Use of Estimates | 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: allowance for doubtful accounts, excess and obsolete inventory, warranty reserves and the valuation of deferred income tax assets. Actual results may differ from management’s estimates. |
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Statements of Cash Flows | tatements 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 income. |
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Recently Issued Accounting Standards | Recently Issued Accounting Standards Not Yet Adopted FASB Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“Topic 606”) was issued May 2014 and updates the principles for recognizing revenue. This ASU will supersede most of the existing revenue recognition requirements in GAAP. Under the new standard, revenue will be recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. The standard creates a five-step model that will generally require companies to use more judgment and make more estimates than under current guidance when considering the terms of contracts along with all relevant facts and circumstances. These include the identification of customer contracts and separating performance obligations, the determination of transaction price that potentially includes an estimate of variable consideration, allocating the transaction price to each separate performance obligation, and recognizing revenue in line with the pattern of transfer. Additionally, disclosures required for revenue recognition will include qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments, and assets recognized from costs to obtain or fulfill a contract. Such disclosures are more extensive than what is required under existing GAAP. The guidance is effective for the Company beginning in the first quarter of the fiscal year ending September 30, 2019 (“fiscal 2019”). The Company has identified key personnel to evaluate the guidance and approve a transition method. The Company has assessed that the impact of the new guidance may result in a change of the Company’s revenue recognition model for electronics manufacturing services from “point in time” upon physical delivery to an “over time” model and believes this transition may have a material impact on the Company’s consolidated financial statements upon adoption primarily as it recognizes an increase in contract assets for unbilled receivables with a corresponding reduction in inventories. The Company has commenced implementation in accordance with the planned effective date. The new guidance allows for two transition methods in application: (i) retrospective to each prior reporting period presented, or (ii) modified retrospective with the cumulative effect of adoption recognized on October 1, 2018, the first day of the Company’s fiscal 2019. 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 electronics components which are built to customer specifications. Revenue is recognized as the customer's components are manufactured over time. The Company has an enforceable right to payment for work completed to date and the goods do not have an alternative use once the manufacturing process has commenced. The Company records an unbilled contract asset for finished goods associated with non-cancellable customer orders. The Company also records an unbilled contract asset for revenue related to its work-in-process inventory (“WIP”) when the manufacturing process has commenced and there is a non-cancellable customer purchase order. The Company uses an input method of direct manufacturing labor inputs to measure progress towards satisfying its performance obligation associated with WIP inventory. The Company has contractual arrangements with many of its customers which require the customer to purchase any unused inventory that the Company has purchased to fulfill that customer’s manufacturing demand. Revenue from the sale of any excess inventory to the customer is recognized at a point in time when control transfers, which is typically when title passes to the customer upon shipment. The Company also derives revenue from the sale of procured finished goods, specifically for resale. Revenue from the sales of these goods is recognized when control transfers at a point in time, which is typically when title passes to the customer. The Company also derives revenue from engineering and design services. Service revenue is recognized over time as services are performed. The Company will adopt the new guidance under the modified retrospective approach with a cumulative adjustment increasing the opening balance of retained earnings by approximately $0.5 million to $1.0 million, net of tax. Prior periods will not be retrospectively adjusted. FASB ASU 2016-02, “Leases” was issued in February 2016. The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. For public entities, the new guidance is effective for annual periods beginning after December 15, 2018, or the Company’s fiscal year ending September 30, 2020, and interim periods within those annual periods. Early adoption is permitted for all entities. The Company is evaluating the impact this ASU will have on its consolidated financial statements. |
Earnings (Loss) Per Share (Policies) |
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Earnings Per Share [Abstract] | |
Earnings Per Share, Policy [Policy Text Block] |
OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||
Property, Plant and Equipment | 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.
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ALLOWANCE FOR DOUBTFUL ACCOUNTS (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Credit Losses on Financing Receivables | A summary of activity in the allowance for doubtful accounts during the years ended September 30, 2018 and 2017 is as follows:
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INVENTORIES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory, Current | A summary of inventory by category at period end is as follows:
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PROPERTY, PLANT AND EQUIPMENT (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Assets Schedule And Accumulated Depreciation Disclosure | A summary of property, plant and equipment and accumulated depreciation at period end is as follows:
Depreciation expense during the years ended September 30, 2018 and 2017 follows:
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CREDIT FACILITIES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt | A summary of borrowings at period end is as follows:
1 The Celmet Building Term Loan was repaid in connection with the sale-leaseback transaction described in Note 12—Capital Lease. Proceeds from the transaction were also used to pay down a portion of Term Loan B. 2 On July 26, 2018 and September 27, 2018, $750 thousand and $86 thousand, respectively, of Equipment Line Advances matured and were converted to an Equipment Line Term Note. |
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Schedule of Debt Covenant | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Maturities of Long-term Debt | A summary of contractual principal payments under IEC’s borrowings at September 30, 2018 for the next four years taking into consideration the Credit Facility, as amended, is as follows:
(1) Includes Revolver balance of $13.0 million at September 30, 2018, maturing on May 5, 2022. |
WARRANTY RESERVES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product Warranties Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Product Warranty Liability | A summary of additions to and charges against IEC’s warranty reserves during the period follows:
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STOCK-BASED COMPENSATION (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | Assumptions used in the Black-Scholes model and the estimated value of options granted during the years ended September 30, 2018 and 2017 follows:
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Changes in Number of Options Outstanding with Other Related Data | A summary of stock option activity, together with other related data, follows:
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Changes in Number of Restricted Non-vested Stock Outstanding with Other Related Data | A summary of restricted stock activity, together with related data, follows:
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INCOME TAXES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Income Tax Expense (Benefit) | rovision for income taxes during the years ended September 30, 2018 and 2017 follows:
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Schedule of Effective Income Tax Rate Reconciliation | Differences between the federal statutory rate and IEC’s effective tax rates for fiscal 2018 and fiscal 2017 are explained by the following reconciliation.
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Schedule of Deferred Tax Assets by Category | The following table displays deferred tax assets by category:
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MARKET SECTORS AND MAJOR CUSTOMERS (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||
Risks and Uncertainties [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedules of Concentration of Risk, by Risk Factor | A summary of sales, according to the market sector within which IEC’s customers operate, is as follows:
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CAPITAL LEASE (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block] | A summary of capital lease payments for the next five years is as follows:
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Earnings (Loss) Per Share (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | A summary of shares used in the EPS calculations is as follows (in thousands except share and per share data):
The diluted weighted average share calculations do not include the following securities, which are not dilutive to the EPS calculations.
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QUARTERLY FINANCIAL DATA (UNAUDITED) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Quarterly Financial Information |
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OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) |
12 Months Ended | |
---|---|---|
Sep. 30, 2018
USD ($)
criteria
|
Sep. 30, 2017 |
|
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | ||
Impairment charges | $ | $ 0 | |
Capital leases, number of key criteria | criteria | 4 | |
Capital lease criteria, lease term to economic life, ratio | 75.00% | |
Capital lease criteria, minimum lease payments to fair value, ratio | 90.00% | |
Material Management | ||
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | ||
Maximum percentage of total revenue | 5.00% | 5.00% |
OUR BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Earnings Per Share (Details) - shares |
12 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
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Accounting Policies [Abstract] | ||
Weighted Average Number of Shares Outstanding, Basic | 10,228,596 | 10,181,868 |
Diluted shares | 10,320,203 | 10,181,868 |
Anti-dilutive shares excluded | 32,788 | 855,836 |
ALLOWANCE FOR DOUBTFUL ACCOUNTS (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Allowance for doubtful accounts | ||
Allowance, beginning of period | $ 75 | $ 226 |
Change in provision for doubtful accounts | 10 | (144) |
Write-offs | 0 | (7) |
Allowance, end of period | $ 85 | $ 75 |
INVENTORIES (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Sep. 30, 2017 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Inventory, Raw Materials, Net of Reserves | $ 21,323 | $ 8,964 |
Work-in-process | 11,263 | 5,080 |
Finished goods | 1,540 | 1,561 |
Inventory, Net | $ 34,126 | $ 15,605 |
PROPERTY, PLANT AND EQUIPMENT - Summary of Property, Plant and Equipment (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Sep. 30, 2017 |
---|---|---|
Property, Plant and Equipment [Abstract] | ||
Land and improvements | $ 788 | $ 788 |
Buildings and improvements | 7,314 | 8,910 |
Building under capital lease | 7,750 | 5,750 |
Machinery and equipment | 30,969 | 27,947 |
Furniture and fixtures | 7,877 | 7,520 |
Construction in progress | 5,360 | 4,968 |
Total property, plant and equipment, at cost | 60,058 | 55,883 |
Accumulated depreciation | (39,948) | (38,106) |
Property, plant and equipment, net | $ 20,110 | $ 17,777 |
PROPERTY, PLANT AND EQUIPMENT - Depreciation Expense (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 2,358 | $ 2,515 |
CREDIT FACILITIES - Contractual Principal Payments (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Sep. 30, 2017 |
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Debt Instrument [Line Items] | ||||
2017 | $ 1,449 | |||
2018 | 1,136 | |||
2019 | [1] | 1,094 | ||
2020 | 14,061 | |||
Long-term Debt, Gross | 17,740 | $ 15,285 | ||
Long-term debt | 17,451 | 15,010 | ||
Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Long-term Debt, Gross | 12,996 | $ 8,769 | ||
Long-term debt | $ 13,000 | |||
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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Sep. 30, 2017 |
---|---|---|
Carrying Value | $ 17,451 | $ 15,010 |
Celmet Building Term Loan | ||
Fair Value | $ 800 |
WARRANTY RESERVES (Details) - Warranty Reserves - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Warranty Reserve | ||
Reserve, beginning of period | $ 153 | $ 180 |
Provision | 266 | 137 |
Warranty costs | (246) | (164) |
Reserve, end of period | $ 173 | $ 153 |
STOCK-BASED COMPENSATION - Valuation Assumptions (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Assumptions for Black-Scholes: | ||
Risk-free interest rate | 2.84% | 1.50% |
Expected term in years | 5 years 6 months | 4 years |
Volatility | 33.00% | 39.00% |
Expected annual dividends | $ 0 | $ 0 |
Value of options granted: | ||
Number of options granted (in shares) | 120,000 | 57,500 |
Weighted average fair value per share (in dollars per share) | $ 1.84 | $ 1.19 |
Fair value of options granted (000s) | $ 221,000 | $ 68,000 |
INCOME TAXES - Provision For/(Benefit From) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Current tax: | ||
State | $ 6 | $ 53 |
Federal | 12 | 9 |
Deferred tax: | ||
State | (103) | 0 |
Federal | 5,088 | 0 |
Deferred Tax Assets, Valuation Allowance | (13,840) | 0 |
Valuation allowance | $ (8,837) | $ 62 |
INCOME TAXES - Effective Tax Rate Reconciliation (Details) |
12 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Income Tax Disclosure [Abstract] | ||
Federal statutory rate | 24.20% | 34.00% |
Decrease in valuation allowance | (880.00%) | (164.40%) |
Deferred tax adjustment | (21.20%) | 65.80% |
Decrease in state deferred tax rate | (6.60%) | 0.00% |
State income taxes, net of federal benefit | 0.40% | 26.80% |
Rate change due to Tax Reform | 316.60% | 0.00% |
Stock-based compensation | 7.30% | 57.60% |
Non-deductible expenses | 0.60% | 23.50% |
Other | (3.20%) | 0.00% |
Income tax provision as percent of pretax income | (561.90%) | 43.30% |
INCOME TAXES - Deferred Income Taxes (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Sep. 30, 2017 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Federal and state net operating loss carryforward | $ 6,366 | $ 11,367 |
Alternative minimum tax credit carryforward | 1,031 | 1,010 |
Depreciation and fixed assets | 306 | 289 |
Amortization and impairment of intangibles | 27 | 28 |
New York State investment tax and other credits | 1,308 | 1,186 |
Inventories | 382 | 585 |
Deferred Tax Assets, Deferred Gain on Sale Leaseback Transaction | 431 | 271 |
Other | 312 | 412 |
Total before allowance | 10,163 | 15,148 |
Valuation allowance | (1,308) | (15,148) |
Deferred tax assets, net | $ 8,855 | $ 0 |
INCOME TAXES - Narrative (Details) $ in Millions |
Sep. 30, 2018
USD ($)
|
---|---|
Internal Revenue Service (IRS) | |
Operating loss carryforwards | $ 29.7 |
MARKET SECTORS AND MAJOR CUSTOMERS - Summary of Sales by Sector (Details) - Sales Revenue |
12 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Concentration Risk [Line Items] | ||
Percentage of sales by sector | 100.00% | 100.00% |
Aerospace and Defense | ||
Concentration Risk [Line Items] | ||
Percentage of sales by sector | 59.00% | 52.00% |
Medical | ||
Concentration Risk [Line Items] | ||
Percentage of sales by sector | 22.00% | 28.00% |
Industrial | ||
Concentration Risk [Line Items] | ||
Percentage of sales by sector | 19.00% | 20.00% |
MARKET SECTORS AND MAJOR CUSTOMERS - Narrative (Details) - Customer Concentration Risk - customer |
12 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Sales | ||
Concentration Risk [Line Items] | ||
Concentration risk, number of customers | 2 | 2 |
Sales | Medical | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 23.00% | 14.00% |
Sales | Medical | Customer One | ||
Concentration Risk [Line Items] | ||
Concentration risk, number of customers | 1 | |
Sales | Aerospace and Defense | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 11.00% | 13.00% |
Accounts Receivable | ||
Concentration Risk [Line Items] | ||
Concentration risk, number of customers | 3 | 3 |
Concentration risk, percentage | 55.00% | 42.00% |
CAPITAL LEASE - Summary of future capital lease payments (Details) |
Sep. 30, 2018
USD ($)
|
---|---|
Leases [Abstract] | |
Capital Leases, Future Minimum Payments Due, Next Twelve Months | $ 658,027 |
Capital Leases, Future Minimum Payments Due in Two Years | 671,188 |
Capital Leases, Future Minimum Payments Due in Three Years | 684,611 |
Capital Leases, Future Minimum Payments Due in Four Years | 698,304 |
Capital Leases, Future Minimum Payments Due in Year Five and Thereafter | 7,412,557 |
Capital Leases, Future Minimum Payments Due | 10,124,687 |
Capital Leases, Future Minimum Payments, Interest Included in Payments | (2,792,149) |
Capital Leases, Future Minimum Payments, Present Value of Net Minimum Payments | $ 7,332,538 |
QUARTERLY FINANCIAL DATA (UNAUDITED) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 29, 2018 |
Mar. 30, 2018 |
Dec. 29, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 30, 2016 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Quarterly Financial Information Disclosure [Abstract] | ||||||||||
Revenues | $ 34,216 | $ 29,782 | $ 31,768 | $ 21,156 | $ 27,623 | $ 26,489 | $ 21,368 | $ 20,976 | $ 116,922 | $ 96,455 |
Gross Profit | 4,496 | 3,359 | 4,784 | 1,518 | 3,475 | 3,708 | 2,279 | 1,795 | 14,157 | 11,257 |
Net income | $ 9,121 | $ 204 | $ 1,579 | $ (494) | $ 755 | $ 794 | $ (603) | $ (865) | $ 10,410 | $ 81 |
Net earnings/loss (in dollars per share) | $ 0 | $ 0.02 | $ 0.15 | $ (0.05) | $ 0.07 | $ 0.08 | $ (0.06) | $ (0.09) | $ 0 | $ 0 |
Diluted Earnings/ (Loss) Per Share (in dollars per share) | $ 0 | $ 0 |
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