IEC Electronics Corp. (IEC)
F3Q 2012 Earnings Call
July 31, 2012 10:00 am ET
John Nesbett – Investor Relations, Institutional Marketing Services
W. Barry Gilbert – Chairman and Chief Executive Officer
Vincent A. Leo – Chief Financial Officer
Mark Jordan – Noble Financial Capital Markets
Steve Shaw – Sidoti & Company
William Jones – Singular Research
Jennifer Wolfertz – Comstock Partners
Previous Statements by IEC
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Greetings, and welcome to the IEC Electronics Fiscal 2012 Third Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder this conference is being recorded.
It is now my pleasure to introduce your host, John Nesbett of IMS. Thank you sir, you may begin.
Good morning and thank you for calling in. On the call this morning, we have Barry Gilbert, Chairman and Chief Executive Officer; as well as Vincent Leo, Chief Financial Officer.
Before we get started, I’d like to take a moment to read the Safe Harbor statement. This conference call contains certain forward-looking statements related to the Company’s expectations and prospects that involve risks and uncertainties including uncertainties associated with economic conditions in the electronics industry, particularly in the principal industry sector served by the Company; changes in the customer requirements and in the volume of sales to principal customers; competition and technological change; the ability of the Company to control manufacturing and operating costs, the ability of the Company to develop and maintain satisfactory relationships with vendors, and the ability of the Company to efficiently integrate acquired companies into its business.
The Company’s actual results of operations may differ significantly from those contemplated by any forward-looking statements as a result of these and other factors, including factors set forth in the company’s 2011 Annual Report on Form 10-K and in other filings with the Securities and Exchange Commission.
All of which may be found in the Investor Relations section of the company’s website at iec-electronics.com. The company undertakes no obligation to publicly update or revise forward-looking information, whether as a result of new, updated information and future events or likewise.
In addition, references to non-GAAP financial measures in this presentation are reconciled to GAAP measures in the earnings release for this quarter, which also can be found in the Investor Relations section of the company’s website.
Okay, I will now turn the call over to Barry Gilbert. Please go ahead, Barry.
W. Barry Gilbert
Thank you for joining us this morning. We’re pleased to report a strong third quarter. This quarter can be characterized by a few key items. Our margins were very good. This is the second quarter in a row where our results were well above our historic averages. Gross profit was in excess of 20% and operating income in excess of 9.5%. Vince Leo will discuss our results in greater detail in a few minutes.
During our second quarter’s shareholder call, we discussed that it would take us 18 months to achieve these levels. In a sustained manner, we are working to achieve these goals as that we set out on that call. Our balance sheet remained strong and liquid. We’ve reduced some of our debt not as much in previous quarters, but this is the timing issue and we expect to continue reducing our debt in the fourth quarter. Revenue growth was just over 4%, disappointing. There is little we can do when we have last minute reschedule then as the business we are in, our long term growth rate is far higher. However periodically we will have lower growth. We expect this quarter our fourth quarter to show more appropriate growth.
Let me stand back for a second and a very high level, we are strategically in a good place. The trend toward outsource manufacturing continues, within the broad market some sectors will experience turbulence. We have 44% of our business in the military and aerospace markets. As you have all been reading in the paper, they are concerns about the debated congressional reductions in defense spending. There was certainly turbulence in that sector. We are not experiencing any real cuts in programs we are involved in, a lot of shifting of priorities actually we have been gaining programs and in a few minutes, I’ll expand those thoughts.
We are 100% U.S. manufacturer and we service low volume high value-add sectors. We have made four acquisitions and started a fifth company. The acquisitions over the past few years have enabled us to put together a suite of services for U.S. company that solve a unique set of problems. We also benefit from a diverse customer base. Our sectors are well balanced. Our medical sector has remained relatively constant at 20% of sales for the quarter. Industrial, represents approximately 26% of our business and mentioned about our military, aerospace sector; our largest represents 44% of our revenue.
I will now turn the call over to Vince Leo, CFO who’ll review the numbers. After Vince completes his report, I’ll provide you with more of an operational discussion, before we turn it over to questions, Vince?
Vincent A. Leo
Thank you, Barry, and good morning everyone. This morning we issued a press release detailing our first quarter results. I hope you had enhanced review on it. During the third quarter, IEC realized revenues of approximately $36 million that was compared to $34.6 million in the third quarter of 2011. All of this growth was organic growth. Gross profit margins in the third quarter increased to 20.6% of sales, up slightly from 19.0% of sales in the prior period quarter. Gross profit was impacted primarily by increased revenues for the quarter as well as a favorable change in product mix.