Company Quick10K Filing
IEC Electronics
Price7.01 EPS0
Shares11 P/E16
MCap74 P/FCF-7
Net Debt31 EBIT7
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-27 Filed 2020-05-06
10-Q 2019-12-27 Filed 2020-02-05
10-K 2019-09-30 Filed 2019-11-22
10-Q 2019-06-28 Filed 2019-08-07
10-Q 2019-03-29 Filed 2019-05-08
10-Q 2018-12-28 Filed 2019-02-06
10-K 2018-09-30 Filed 2018-11-29
10-Q 2018-06-29 Filed 2018-08-08
10-Q 2018-03-30 Filed 2018-05-09
10-Q 2017-12-29 Filed 2018-02-07
10-K 2017-09-30 Filed 2017-12-06
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-10
10-Q 2016-12-30 Filed 2017-02-10
10-K 2016-09-30 Filed 2016-12-16
10-Q 2016-07-01 Filed 2016-08-10
10-Q 2016-04-01 Filed 2016-05-13
10-Q 2016-01-01 Filed 2016-02-12
10-K 2015-09-30 Filed 2015-12-18
10-Q 2015-06-26 Filed 2015-08-05
10-Q 2015-03-27 Filed 2015-05-11
10-Q 2014-12-26 Filed 2015-05-11
10-K 2014-09-30 Filed 2014-11-25
10-Q 2014-06-27 Filed 2014-08-05
10-Q 2014-03-28 Filed 2014-05-07
10-Q 2013-12-27 Filed 2014-02-10
10-K 2013-09-30 Filed 2013-12-24
10-Q 2013-06-28 Filed 2013-08-12
10-Q 2013-03-29 Filed 2013-07-03
10-Q 2012-12-28 Filed 2013-02-08
10-K 2012-09-30 Filed 2012-11-26
10-Q 2012-06-29 Filed 2012-08-09
10-Q 2012-03-30 Filed 2012-05-10
10-Q 2011-12-30 Filed 2012-02-13
10-K 2011-09-30 Filed 2011-12-16
10-Q 2011-07-01 Filed 2011-08-12
10-Q 2011-04-01 Filed 2011-05-09
10-Q 2010-12-31 Filed 2011-02-08
10-K 2010-09-30 Filed 2010-11-19
10-Q 2010-06-25 Filed 2010-07-28
10-Q 2010-03-26 Filed 2010-04-28
10-Q 2009-12-25 Filed 2010-02-05
8-K 2020-06-05
8-K 2020-05-05
8-K 2020-03-11
8-K 2020-03-11
8-K 2020-02-05
8-K 2019-12-13
8-K 2019-12-10
8-K 2019-11-22
8-K 2019-08-07
8-K 2019-07-08
8-K 2019-06-04
8-K 2019-05-08
8-K 2019-03-14
8-K 2019-03-11
8-K 2019-02-06
8-K 2019-01-22
8-K 2019-01-09
8-K 2018-12-07
8-K 2018-11-28
8-K 2018-09-04
8-K 2018-08-08
8-K 2018-08-02
8-K 2018-06-04
8-K 2018-06-01
8-K 2018-05-09
8-K 2018-04-20
8-K 2018-03-14
8-K 2018-03-14
8-K 2018-03-01
8-K 2018-02-07
8-K 2018-01-26

IEC 10Q Quarterly Report

Part I Financial Information
Item 1. Condensed Consolidated Financial Statements
Note 1 - Our Business and Summary of Significant Accounting Policies
Note 2 - Revenue Recognition
Note 3 - Allowance for Doubtful Accounts
Note 4 - Inventories
Note 5 - Property, Plant and Equipment, Net
Note 6 - Credit Facilities
Note 7 - Warranty Reserves
Note 8 - Stock - Based Compensation
Note 9 - Income Taxes
Note 10 - Market Sectors and Major Customers
Note 11 - Commitments and Contingencies
Note 12 - Leases
Note 13 - Net Income per Share
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 a10-qx20200327xex311.htm
EX-31.2 a10-qx20200327xex312.htm
EX-32.1 a10-qx20200327xex321.htm

IEC Electronics Earnings 2020-03-27

Balance SheetIncome StatementCash Flow
Assets, Equity
Rev, G Profit, Net Income
Ops, Inv, Fin

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Washington, D.C. 20549

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 27, 2020
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ____ to ____
Commission File Number 001-34376
(Exact name of registrant as specified in its charter)
Delaware 13-3458955
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)   
105 Norton Street, Newark, New York   14513
(Address of Principal Executive Offices) (Zip Code)
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueIECNasdaq Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filerAccelerated filer
Non-accelerated filerxSmaller reporting company
Emerging growth company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No x

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

Common Stock, $0.01 par value – 10,478,992 shares as of May 1, 2020


Item 1.  Condensed Consolidated Financial Statements
MARCH 27, 2020 and SEPTEMBER 30, 2019
(unaudited; in thousands, except share and per share data)
 March 27,
September 30,
Current assets:
Cash$  $  
Accounts receivable, net of allowance26,539  27,618  
Unbilled contract revenue10,601  9,529  
Inventories45,053  44,267  
Federal income tax receivable1,034  517  
Other current assets1,721  1,454  
Total current assets84,948  83,385  
Property, plant and equipment, net19,232  19,433  
Deferred income taxes5,953  7,154  
Operating lease right-of-use assets, net of accumulated amortization275    
Other long-term assets976  860  
Total assets$111,384  $110,832  
Current liabilities:
Current portion of long-term debt$1,371  $1,371  
Current portion of operating lease obligation59    
Current portion of finance lease obligation419  338  
Accounts payable20,688  23,690  
Accrued payroll and related expenses1,486  3,174  
Other accrued expenses485  668  
Customer deposits15,802  13,229  
Total current liabilities40,310  42,470  
Long-term debt28,182  28,910  
Long-term operating lease obligation215    
Long-term finance lease obligation6,837  6,685  
Other long-term liabilities1,465  1,527  
Total liabilities77,009  79,592  
Commitments and contingencies (Note 11)
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: 11,447,604 and 11,394,036 shares, respectively
Outstanding: 10,392,116 and 10,338,548 shares, respectively103  103  

Additional paid-in capital48,424  48,001  
Accumulated deficit(12,563) (15,275) 
Treasury stock, at cost: 1,055,488 shares(1,589) (1,589) 
Total stockholders’ equity34,375  31,240  
Total liabilities and stockholders’ equity$111,384  $110,832  
The accompanying notes are an integral part of these condensed consolidated financial statements.

THREE and SIX MONTHS ENDED MARCH 27, 2020 and MARCH 29, 2019
(unaudited; in thousands, except share and per share data)
Three Months EndedSix Months Ended
March 27,
March 29,
March 27,
March 29,
Net sales  $44,171  $37,294  $88,905  $72,735  
Cost of sales  38,668  32,708  78,163  63,090  
Gross profit  5,503  4,586  10,742  9,645  
Selling and administrative expenses  3,217  3,328  6,516  6,680  
Operating income  2,286  1,258  4,226  2,965  
Interest and financing expense  396  385  811  708  
Income before income taxes  1,890  873  3,415  2,257  
Income tax expense  367  203  703  515  
Net income  $1,523  $670  $2,712  $1,742  
Net income per common share:  
Basic  $0.15  $0.06  $0.26  $0.17  
Diluted  $0.14  $0.06  $0.25  $0.16  
Weighted average number of shares outstanding:  
Basic  10,393,461  10,286,876  10,379,846  10,274,772  
Diluted  10,703,112  10,678,058  10,666,001  10,574,076  
The accompanying notes are an integral part of these condensed consolidated financial statements.

(unaudited; in thousands, except share data)
Number of Shares OutstandingCommon
par $0.01
Accumulated DeficitTreasury
at cost
Balances, September 30, 201910,338,548  $103  $48,001  $(15,275) $(1,589) $31,240  
Net income—  —  —  1,189  —  1,189  
Stock-based compensation—  —  152  —  152  
Restricted stock vested, net of shares withheld for payment of taxes6,367  —  (24) —  —  (24) 
Exercise of stock options, net of shares surrendered24,000  —  130  —  —  130  
Employee stock plan purchases6,449  —  40  —  —  40  
Balances, December 27, 201910,375,364  $103  $48,299  $(14,086) $(1,589) $32,727  
Net income—  —  —  1,523  —  1,523  
Stock-based compensation—  —  185  —  185  
Restricted stock vested, net of shares withheld for payment of taxes4,663  —  (33) —  —  (33) 
Restricted stock units vested, net of shares withheld for payment of taxes10,089  —  (35) —  —  (35) 
Exercise of stock options, net of shares surrendered2,000  —  8  —  —  8  
Balances, March 27, 202010,392,116  $103  $48,424  $(12,563) $(1,589) $34,375  

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


(unaudited; in thousands, except share data)
Number of Shares OutstandingCommon
par $0.01
Accumulated DeficitTreasury
at cost
Balances, September 30, 201810,248,905  $102  $47,326  $(20,463) $(1,589) $25,376  
Impact of adoption of ASC 606, net of taxes—  —  —  441  —  441  
Net income—  —  —  1,072  —  1,072  
Stock-based compensation—  —  146  —  146  
Restricted stock vested, net of shares withheld for payment of taxes4,439      —  —    
Exercise of stock options, net of shares surrendered2,553  —  —  —  —    
Employee stock plan purchases5,674  —  20  —  —  20  
Balances, December 28, 201810,261,571  $102  $47,492  $(18,950) $(1,589) $27,055  
Net income—  —  —  670  —  670  
Stock-based compensation—  —  152  —  152  
Restricted stock vested, net of shares withheld for payment of taxes38,538  1  —  —  —  1  
Exercise of stock options, net of shares surrendered11,654  —  51  —  —  51  
Balances, March 29, 201910,311,763  $103  $47,695  $(18,280) $(1,589) $27,929  

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


SIX MONTHS ENDED MARCH 27, 2020 and MARCH 29, 2019
(unaudited; in thousands) 
 Six Months Ended
March 27,
March 29,
Net income$2,712  $1,742  
Non-cash adjustments:
Stock-based compensation337  298  
Depreciation and amortization1,587  1,290  
Change in reserve for doubtful accounts48  (39) 
Change in inventory reserve and warranty reserve1,296  89  
Deferred tax expense1,201  511  
Amortization of deferred gain(57) (56) 
Changes in operating assets and liabilities:
Accounts receivable1,031  (2,615) 
Unbilled contract revenue(1,072) (1,710) 
Inventories(2,055) (8,547) 
Federal income tax receivable(517)   
Other current assets(267) (53) 
Other long-term assets(116) (253) 
Accounts payable(2,771) (1,362) 
Change in book overdraft position(231) (922) 
Accrued expenses(1,898) 220  
Customer deposits2,573  2,631  
Net change in lease right-of-use assets and liabilities(1)   
Other long-term liabilities  (75) 
Net cash flows provided by/(used in) operating activities1,800  (8,851) 
Purchases of property, plant and equipment(1,351) (805) 
Net cash flows used in investing activities(1,351) (805) 
Advances from revolving credit facility36,680  39,307  
Repayments of revolving credit facility(36,763) (29,388) 
Borrowings under other loan agreements  391  
Repayments under other loan agreements(685) (568) 
Payments under finance lease(182) (152) 
Proceeds received from lease financing obligation415    
Debt issuance costs  (6) 
Proceeds from exercise of stock options138  52  
Proceeds from employee stock plan purchases40  20  
Cash paid for taxes upon vesting of restricted stock(92)   
Net cash flows (used in)/provided by financing activities(449) 9,656  
Net cash change for the period    
Cash, beginning of period    
Cash, end of period$  $  
Supplemental cash flow information
Interest paid$779  $753  
Income taxes paid20    


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


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 9001:2015, AS9100D, and ISO 13485, and we are Nadcap accredited.  IEC is headquartered in Newark, NY and also has operations in Rochester, NY and Albuquerque, NM.  Additional information about IEC can be found on its web site at The contents of this website are not incorporated by reference into this quarterly report.
Generally Accepted Accounting Principles
IEC’s financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).
Fiscal Calendar
The Company’s fiscal year ends on September 30 and the first three quarters generally end on the Friday closest to the last day of the calendar quarter. For the fiscal year ending September 30, 2020 (“fiscal 2020”), the fiscal quarters end on December 27, 2019, March 27, 2020 and June 26, 2020. For the fiscal year ended September 30, 2019 (“fiscal 2019”), the fiscal quarters ended on December 28, 2018, March 29, 2019 and June 28, 2019.
The consolidated financial statements include the accounts of IEC and its wholly-owned subsidiaries: IEC Electronics Corp-Albuquerque (“Albuquerque”); IEC Analysis & Testing Laboratory, LLC (“ATL”); and IEC California Holdings, Inc., which was dissolved as of September 18, 2019. The Rochester unit operates as a division of IEC. All intercompany transactions and accounts are eliminated in consolidation. 

Unaudited Financial Statements
The accompanying unaudited condensed consolidated financial statements for the three and six months ended March 27, 2020 and March 29, 2019 have been prepared without an audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and do not include certain of the information the footnotes require by GAAP for complete financial statements.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, required for a fair presentation of the information have been made.  The accompanying financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019.
The Company’s cash represents deposit accounts with Manufacturers and Traders Trust Company (“M&T Bank”), a banking corporation headquartered in Buffalo, NY. The Company’s cash management system provides for the funding of the disbursement accounts on a daily basis as checks are presented for payment. Under this system, outstanding checks in excess of the bank balance create a book overdraft. Book overdrafts are presented in accounts payable in the condensed consolidated balance sheets. Book overdrafts were $0.1 million and $0.3 million as of March 27, 2020 and September 30, 2019, respectively. Changes in the book overdrafts are presented within net cash flows provided by operating activities within the condensed 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.
PP&E LivesEstimated
Useful Lives
Land improvements10
Buildings and improvements5 to 40
Machinery and equipment3 to 10
Furniture and fixtures3 to 7
Software3 to 10
Reviewing Long-Lived Assets for Potential Impairment
ASC 360 (Property, Plant and Equipment) requires the Company to test long-lived assets (PP&E and definite lived assets) for recoverability whenever events or circumstances indicate that the carrying amount may not be recoverable.  If carrying value exceeds undiscounted future cash flows attributable to an asset, it is considered impaired and the excess of carrying value over fair value must be charged to earnings.  No impairment charges were recorded by IEC for long-lived assets during either of the three and six months ended March 27, 2020 and March 29, 2019.
Legal Contingencies
When legal proceedings are brought or claims are made against the Company and the outcome is uncertain, ASC 450 (Contingencies) requires the Company to determine whether it is probable that an asset has been impaired or a liability has been incurred.  If such impairment or liability is probable and the amount of loss can be reasonably estimated, the loss must be charged to earnings. 
When it is considered probable that a loss has been incurred but the amount of loss cannot be estimated, disclosure but not accrual of the probable loss is required.  Disclosure of a loss contingency is also required when it is reasonably possible, but not probable, that a loss has been incurred. 

Legal Expense Accrual

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

Customer Deposits

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

Fair Value Measurements
Under ASC 825 (Financial Instruments), the Company is required to disclose the fair value of financial instruments for which it is practicable to estimate value.  The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and borrowings.  IEC believes that recorded value approximates fair value for all cash, accounts receivable, accounts payable, accrued liabilities and borrowings.
ASC 820 (Fair Value Measurements and Disclosures) defines fair value, establishes a framework for measurement, and prescribes related disclosures.  ASC 820 defines fair value as the price that would be received upon sale of an asset or would be paid to transfer a liability in an orderly transaction.  Inputs used to measure fair value are categorized under the following hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable market data.
Level 3: Model-derived valuations in which one or more significant inputs are unobservable.
The Company deems a transfer between levels of the fair value hierarchy to have occurred at the beginning of the reporting period.  There were no such transfers during each of the three and six months ended March 27, 2020 and March 29, 2019.

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, 2018.
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 6—Credit Facilities. 


Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities. Significant items subject to such estimates include: excess and obsolete inventory reserve, warranty reserves, the valuation of deferred income tax assets and revenue recognition related to the accounts for over time contracts. Actual results may differ from management’s estimates.
Statements of Cash Flows
The Company presents operating cash flows using the indirect method of reporting under which non-cash income and expense items are removed from net income. 


The Company’s results of operations for the three and six months ended March 27, 2020 and March 29, 2019 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.


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

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

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