IEC Electronics Corp. ( IEC) Q2 2011 Earnings Call May 3, 2011 10:00 AM ET Executives John Nesbett – Investor Relations Barry Gilbert – Chairman and Chief Executive Officer Susan Topel-Samek – Vice President and Chief Financial Officer Analysts Mark Jordan – Noble Financial Jennifer Wolfertz – Comstock Partners Roger Mantissa – Private Investor Robert Littlehale – JP Morgan Chase Robert Behr – Moloney Securities Presentation Operator
Okay, I will now turn the call over to Barry Gilbert. Please go ahead, Barry.Barry Gilbert Good morning. Thank you for joining us this morning. This is our second investor call. Last quarter, I mentioned I was not [ready] to the idea of regular quarterly calls. We don’t view our business on a quarter-to-quarter basis and don’t want our investors to either. However, two things happened since our last call that prompted us to have a call this quarter. First, a devastation in Japan and during the quarter, I noticed excellent industry peers specifically Benchmark and Plexus along with IEC, we’re experiencing volatility in their equity price. I realized it was inevitable for there to be questions as to how the damage from the earthquake and this Tsunami would impact our ability to get electronic components. Coupled, there were numerous media reports on how different industries were impacted or negatively impacted especially automotive and consumer electronics. In summary, we were modestly impacted. IEC is experiencing limited component shortages from Japan and while they do exist are being replaced by other sources. Now, we continue to monitor the situation on a daily basis. The second reason was a thoughtful conversation I had with an investor from Wyoming. When I asked him his thoughts on quarterly call, he said having quarterly call gives all investors big and small a chance to ask their question. It puts everyone on the same footing, and I agreed. And so with that said, let me continue. IEC had a strong quarter. Over our financial metrics, operating income, gross profit, net income before tax, net income after tax all improved. We grew organically over 20% over the same period year-over-year. And with the acquisition that we have made, all this past year, our sales for comparable period increased 39%.
Specifically, operating margins improved to 9.5% versus 7.9% for the same period. These are some of the best margins in the industry and a testament to the value we provide our customers, the way we conduct our business as the markets we serve. I will now turn the call over to Sue Topel-Samek, who will review our financial information and then I will provide you with more detail from an operating perspective before we take questions. Sue.Susan Topel-Samek Thank you, Barry and good morning, everyone. As you have seen by now, we issued a press release this morning detailing our second quarter results. We will also issue our full 10-Q before May 15. As Barry mentioned, IEC’s top line growth in the second quarter improved fully 39% over the level of sales generated in the second quarter of 2010. The two businesses we acquired during past nine month accounted for just under 50% of that increase. While our continuing operations accounted for just over 50%. IEC’s organic sales increase is fueled by the expansion of our product offering and by increased sales in the medical sector, which in addition to growth also results in a healthy diversification among market sector. Our second quarter growth profit was well above prior year performance, increasing from 16% in 2010 to just over 19% in 2011. This is due in part to operating efficiencies and product mix this quarter and in part to our newly acquired Southern California Grading or SCB as you will hear us refer to it, which typically operates this somewhat higher growth profit. Selling and administrative expense increased during the second quarter as a percentage of sale from 8% in 2010 to 10% in the current year. This increase reflects the addition of the two new businesses during the past nine months and the incremental expenses we have incurred to integrate those new businesses. Read the rest of this transcript for free on seekingalpha.com