IEC Electronics' CEO Discusses F2Q12 Results - Earnings Call Transcript

IEC Electronics Corp. (IEC)

F2Q12 Earnings Call

May 8, 2012 10:00 am ET

Executives

John Nesbett – Investor Relations, Institutional Marketing Services

W. Barry Gilbert – Chairman and Chief Executive Officer

Vincent A. Leo – Vice President and Chief Financial Officer (Interim)

Analysts

William Jones – Singular Research

Robert Littlehale – JPMorgan Chase

Jennifer Wolfertz – Comstock Partners

Presentation

Operator

Greetings, and welcome to IEC’s Fiscal 2012 Second Quarter Financial Results. 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, Mr. John Nesbett of IMS. Thank you Mr. Nesbett, you may begin.

John Nesbett

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, Interim 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 Investor Relations section of the company’s website at ice-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 otherwise.

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.

I would now like to turn the call over to Barry Gilbert. please go ahead, Barry.

W. Barry Gilbert

Good morning. Thank you for joining us this morning. We’re pleased to report an outstanding second quarter. there are various notable items in the quarter for what stands out about the quarter is the 11.8% operating margin. Anyone who has been following the sector will respect the accomplishment. There is no single magic item, which led to our success this quarter rather this is the combination of a number of things exceptional product mix, cost control, operational improvement, and the benefit of some modest one-time items, which Vince Leo, our CFO will discuss in greater detail.

The biggest operational improvement was Southern California Braiding. They had a solid quarter improving both sales and margins. SCB benefited from the release of some programs that have been delayed. Adding texture to SCB’s progress, they also picked up some new programs and a significant new customer, I’ll provide greater detail in a few minute.

Our sector performance shifted and is now slightly more balanced. The industrial and communication sector improved and now represents 32% of our business, compared to 23% in the second quarter of last year. This increase is a direct reflection of the improvements in the sector of the economy in which we participate, not the broad economy. Our medical sector has remained relatively constant at 21% of sale. Our military aerospace sector remains our largest contributing 43% of revenue in the second quarter, a decrease from 52% of revenue in the same quarter last year.

We continue to experience some delays in military funding however we are seeing signs that funding is being released and expects some strengthening in this sector as we move through the balance of the year. Just as important we’ve had no program cancellation.

I’ll now turn the call over to Vince Leo, who will review the number, after Vince completes his reports, I’ll provide you with more operational fixture and background 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 second quarter results and I hope you had a chance to review it. During the second quarter, IEC realized revenues of $38 million compared to approximately $35.1 million in the second quarter of 2011. The entire 8.4% [Audio Gap] revenue increase was organic growth.

Gross profit in the second quarter increased to 21.7% of sales, up slightly from 21% of sales in the prior year’s quarter. Gross profit was impacted primarily by increased revenues for the quarter, as well as favorable changes in the product mix.

Our SG&A was $3.8 million or approximately 9.9% of sales in the quarter just ended that compared to approximately $4 million or approximately 11.5% of sales in the prior year’s period. The majority of this decrease is attributable to our realignment of our people costs in the current quarter. We have been focused on lowering our SG&A costs and we’ll continue our efforts throughout 2012.

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