IEC Electronics Corp. (IEC) F4Q 2011 (09/30/11) Earnings Conference Call December 8, 2011 10:00 AM EST Executives John Nesbett – IMS Barry Gilbert – Chairman and CEO Susan Topel-Samek – VP and CFO Analysts Mark Jordan – Noble Financial Scott Hodgson – MSI Fund Steve Shaw – Sidoti & Company Robert Littlehale – JPMorgan Chase Presentation Operator Greetings, and welcome to the IEC Electronics Fiscal 2011 Fourth Quarter and Year-End Earnings Call.
Okay. I will now turn the call over to Barry Gilbert. Please go ahead, Barry.Barry Gilbert Good morning and thank you for joining us this morning. We had another solid year. Revenue growth was up 38%, with half of that coming from organic growth, particularly in the medical sector. Our medical sector inroads in the past two years have resulted both in growth of sales, but also just as important of the diversification of our customer base. Backlog at the end of fiscal 2011 was over a $121 million compared to $91 million at the end of fiscal 2010. We are pleased since 20% of the backlog growth was organic, the balance is attributable to the SCB acquisition, and this puts us in a decent position as we head into our new fiscal year. Finally, a key goal in the back half of the year has been debt reduction. We’ve discussed this on previous calls. We’ve reduced our debt $10.2 million in the fourth quarter and by $12.2 million since acquiring SCB last December. Su will expand upon my statements in a moment. Our operating margin for the year was 7.8%, slightly below what we’ve historically achieved, but still industry-leading margins. We have not yet achieved the earning power we envisioned, and I’ll discuss more about that a little later. Our Southern California Braiding acquisition is strategically very important to us. With that said, their sales have been below what we expected. During negotiations of the acquisition agreement, we’ve protected ourselves upfront against sales shortfall. As such, we recognized a favorable adjustment of $1.1 million in our other income for both the fourth quarter and our year-end. I’ll turn the call over to Su to review the numbers and then I’ll provide you a bit more operational color before we open up for questions. Su?
Susan Topel-SamekThank you, Barry, and good morning, everyone. This morning we issued a press release detailing our fourth quarter and year-end 2011 results, which I hope you’ve had a chance to review. We will issue the full 10-K within the next couple of weeks. I’d like to begin this morning by providing a brief overview of fiscal 2011 results and then I’ll address the fourth quarter details. Top-line growth for the year was strong, even allowing for the fact that acquisitions accounted for half of the 38% increase. 2011 revenues were $133.3 million compared to $96.7 million in prior year. Organic growth was driven primarily by expansion of our participation in the medical segment and also by expanding our relationships with some existing customers. Gross margins were approximately 8.2% in the year just ended compared to 16.8% in the prior year. Contributing to this improvement were changes in product mix, improved labor efficiencies due to training, investments in capital equipment, lien process improvements, and accretive acquisitions. 2011 net income after-tax was $6.8 million or $0.68 per diluted share compared to net income after-tax of $4.7 million or $0.48 per diluted share in fiscal 2010. You will also note that net income for the year just ended included an adjustment related to our acquisition of Southern California Braiding which Barry mentioned earlier. As we’ve indicated in prior calls, IEC used bank borrowings to fund 98% of the purchase price of our two most recent acquisitions. As a result, 2011 interest expense increased to $1.6 million compared with $815,000 in the prior year. Having said that, we are also pleased to report that as indicated in our last quarterly call, aggressive attention to working capital management enabled us as Barry already mentioned to reduce our outstanding debt by $10.2 million. This was well ahead of our internal plan and brought our total indebtedness at September 30 th to $35.1 million from the high of more than $45 million, following our acquisition of Southern California Braiding. Through reduction in our leverage ratio, we have just achieved another 25-basis point reduction in our variable interest rate. This reduction was expected last month and reduces our effective borrowing rate to less than 3.5%. Read the rest of this transcript for free on seekingalpha.com