IEC Electronics Corp. (Nasdaq: IEC) today announced results for the
fiscal 2020 third quarter and nine months ended June 26, 2020.
IEC reported revenues of $47.4 million for the third quarter of
fiscal 2020, an increase of 17% as compared to revenues of $40.3
million for the third quarter of the year ended September 30,
2019 (“fiscal 2019”) and a sequential increase of 7% compared to
revenues of $44.2 million in the second quarter of fiscal 2020.
Gross profit for the third quarter of fiscal 2020 was $6.6 million,
or 14% of sales, compared to gross profit of $5.6 million, or 13.9%
of sales in the third quarter of fiscal 2019. Selling and
administrative expenses were $3.7 million in the third quarter of
fiscal 2020, consistent with the third quarter of fiscal 2019, and
decreased as a percent of sales to 7.8% as compared to 9.2% in the
third quarter of fiscal 2019. Operating income was $3.0 million for
the third quarter of fiscal 2020, an increase of $1.1 million, or
57% when compared to the same quarter in the prior fiscal year. The
Company reported net income of $2.1 million, or $0.20 per basic and
diluted share for the third quarter of fiscal 2020, compared to net
income of $1.2 million, or $0.12 per basic and $0.11 per diluted
share in the third quarter of fiscal 2019. The Company also
reported operating cash flow of $6.0 million during the third
quarter of fiscal 2020, as compared to a $0.4 million use of cash
flow from operations for the same period in fiscal 2019.
For the first nine months of fiscal 2020, the Company reported
revenues of $136.3 million, an increase of 21% as compared to
revenues of $113.1 million for the first nine months of fiscal
2019. Gross profit for the first nine months of fiscal 2020 was
$17.4 million, or 12.8% of sales, which includes the negative
impact of a one-time inventory reserve of $1.0 million related to a
reorganization at one of the Company’s customers in the medical
sector, compared to gross profit of $15.3 million, or 13.5% of
sales in the first nine months of fiscal 2019. Selling and
administrative expenses were $10.2 million in the first nine months
of fiscal 2020, or 7.5% of sales, as compared to $10.4 million, or
9.2% percent of sales, in the first nine months of fiscal 2019.
Operating income was $7.2 million for the first nine months of
fiscal 2020, an increase of 48% when compared to the same period in
the prior fiscal year. The Company reported net income of $4.8
million, or $0.46 per basic and $0.45 per diluted share for the
first nine months of fiscal 2020, compared to net income of $3.0
million, or $0.28 per basic and diluted share in the first nine
months of fiscal 2019. Adjusted for the impact of the one-time
inventory reserve, taken in the first quarter of fiscal 2020,
adjusted net income per common share would have been $0.54 per
basic and $0.52 per diluted share for the nine months ended
June 26, 2020. Please see the reconciliation tables included
in this release for further information regarding these non-GAAP
measures. The Company also reported operating cash flow of $7.8
million during the first nine months of fiscal 2020, as compared to
a $9.2 million use of cash flow from operations for the same period
in fiscal 2019.
Jeffrey T. Schlarbaum, President and CEO of IEC Electronics
commented, “IEC delivered a strong third quarter as demonstrated by
revenue of $47.4 million, representing growth of 17% year over
year, as well as a sequential increase of 7% compared to the second
quarter of fiscal 2020. Just a year ago, we achieved a Company
milestone by breaking through our internal $40.0 million quarterly
revenue threshold, at which time we reset our internal quarterly
revenue benchmark to $45.0 million. Despite the challenging
economic and public health landscape of the past several months, we
solidly surpassed that revenue benchmark in the quarter, as well as
delivered gross margins of 14%, which we believe is amongst the
highest in our industry, which is a testament to our growing role
as a highly capable and reliable electronic manufacturing solutions
provider for complex products in highly regulated industries, and
also demonstrates the resilience of our employees who have
continued to get the job done while navigating a pandemic.
“We continue to generate bookings from a diverse base of
customers and remain focused on end markets that value our
exclusively U.S.-based production model and who recognize the
advantages of our vertically integrated manufacturing solutions for
mission critical and life-saving products. Our pipeline and backlog
remain strong as we continue to have success attracting new
business from new customers and in securing new projects from
existing customers and we believe this momentum contributes
significantly to our ability to consistently deliver strong organic
results, that continue to grow at better than industry rates.”
Mr. Schlarbaum concluded, “Our focus remains on strengthening
our capabilities to meet the high complexity manufacturing needs of
our customers as a highly capable and reliable electronic
manufacturing solutions provider. We continue to see increased
interest from the marketplace and believe we are positioned well to
achieve continued organic growth and profitability as we close out
fiscal 2020.”
Conference Call
IEC will host a conference call today, Wednesday, August 5,
2020 at 10:00 a.m. Eastern Time, to discuss its financial results
for the fiscal 2020 third quarter ended June 26, 2020.
The conference call may be accessed in the U.S. and Canada by
dialing toll-free (877) 407-9210. International callers may access
the call by dialing (201) 689-8049.
A replay of the teleconference will be available for 30 days
after the call and may be accessed domestically by dialing (877)
481-4010 and international callers may dial (919) 882-2331. Callers
must enter conference ID: 35725.
To access the live webcast, log onto the IEC website at
http://www.iec-electronics.com. The webcast can also be accessed at
https://www.webcaster4.com/Webcast/Page/2149/35725. An online
replay will be available shortly after the call.
About IEC Electronics
IEC Electronics is a provider of 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, ISO 13485, and is Nadcap accredited. IEC
Electronics 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 www.iec-electronics.com.
Note Regarding Forward-Looking Statements
References in this release to “IEC,” “IEC Electronics,” the
“Company,” “we,” “our,” or “us” mean IEC Electronics Corp. and its
subsidiaries except where the context otherwise requires. This
release contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and
the Private Securities Litigation Reform Act of 1995. In some
cases, you can identify forward-looking statements by terms such as
“may,” “will,” “should,” “expects,” “plans,” “anticipates,”
“could,” “intends,” “targets,” “optimistic,” “projects,”
“contemplates,” “believes,” “estimates,” “predicts,” “potential” or
“continue” or the negative of these terms or other similar words or
phrases. These forward-looking statements include, but are not
limited to, statements regarding future sales and operating
results, future prospects, the capabilities and capacities of
business operations, any financial or other guidance and all
statements that are not based on historical fact, but rather
reflect our current expectations concerning future results and
events. The ultimate correctness of these forward-looking
statements is dependent upon a number of known and unknown risks
and events and is subject to various uncertainties and other
factors that may cause our actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by these
forward-looking statements.
The following important factors, among others, could affect
future results and events, causing those results and events to
differ materially from those views expressed or implied in our
forward-looking statements: the impact of the coronavirus
(“COVID-19”) pandemic on our business, including our supply chain,
workforce and customer demand; business conditions and growth or
contraction in our customers’ industries, the electronic
manufacturing services industry and the general economy; our
ability to control our material, labor and other costs; our
dependence on a limited number of major customers; uncertainties as
to availability and timing of governmental funding for our
customers; the impact of government regulations, including FDA
regulations; unforeseen product failures and the potential product
liability claims that may be associated with such failures;
technological, engineering and other start-up issues related to new
programs and products; variability and timing of customer
requirements; the potential consolidation of our customer base;
availability of component supplies; dependence on certain
industries; the ability to realize the full value of our backlog;
the types and mix of sales to our customers; litigation and
governmental investigations; intellectual property litigation;
variability of our operating results; our ability to maintain
effective internal controls over financial reporting; the
availability of capital and other economic, business and
competitive factors affecting our customers, our industry and
business generally; failure or breach of our information technology
systems; and natural disasters. Any one or more of such risks and
uncertainties could have a material adverse effect on us or the
value of our common stock. For a further list and description of
various risks, relevant factors and uncertainties that could cause
future results or events to differ materially from those expressed
or implied in our forward-looking statements, see our Annual Report
on Form 10-K, our Quarterly Reports on Form 10-Q and our other
filings with the Securities and Exchange Commission.
All forward-looking statements included in this release are made
only as of the date indicated or as of the date of this release. We
do not undertake any obligation to, and may not, publicly update or
correct any forward-looking statements to reflect events or
circumstances that subsequently occur or which we hereafter become
aware of, except as required by law. New risks and uncertainties
arise from time to time and we cannot predict these events or how
they may affect us and cause actual results to differ materially
from those expressed or implied by our forward-looking statements.
Therefore, you should not rely on our forward-looking statements as
predictions of future events.
Company
Contact: |
Thomas L. Barbato |
Senior Vice President and
Chief Financial Officer |
IEC Electronics Corp. |
(315) 332-4493 |
tbarbato@iec-electronics.com |
|
Agency
Contact: |
John Nesbett/Jennifer
Belodeau |
IMS Investor Relations |
(203) 972 - 9200 |
jnesbett@institutionalms.com |
IEC ELECTRONICS CORP.CONDENSED CONSOLIDATED
BALANCE SHEETSJUNE 26, 2020 and SEPTEMBER 30, 2019
(unaudited; in thousands, except share and per share data)
|
|
June 26, 2020 |
|
September 30, 2019 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash |
|
$ |
— |
|
|
$ |
— |
|
Accounts receivable, net of allowance |
|
30,320 |
|
|
27,618 |
|
Unbilled contract revenue |
|
10,517 |
|
|
9,529 |
|
Inventories |
|
46,863 |
|
|
44,267 |
|
Federal income tax receivable |
|
1,034 |
|
|
517 |
|
Other current assets |
|
1,386 |
|
|
1,454 |
|
Total current assets |
|
90,120 |
|
|
83,385 |
|
|
|
|
|
|
Property, plant and equipment,
net |
|
20,114 |
|
|
19,433 |
|
Deferred income taxes |
|
5,403 |
|
|
7,154 |
|
Operating lease right-of-use
assets, net of accumulated amortization |
|
260 |
|
|
— |
|
Other long-term assets |
|
1,190 |
|
|
860 |
|
Total assets |
|
$ |
117,087 |
|
|
$ |
110,832 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Current portion of long-term debt |
|
$ |
— |
|
|
$ |
1,371 |
|
Current portion of operating lease obligation |
|
60 |
|
|
— |
|
Current portion of finance lease obligation |
|
427 |
|
|
338 |
|
Accounts payable |
|
22,395 |
|
|
23,690 |
|
Accrued payroll and related expenses |
|
2,923 |
|
|
3,174 |
|
Other accrued expenses |
|
366 |
|
|
668 |
|
Customer deposits |
|
20,439 |
|
|
13,229 |
|
Total current liabilities |
|
46,610 |
|
|
42,470 |
|
|
|
|
|
|
Long-term debt |
|
25,373 |
|
|
28,910 |
|
Long-term operating lease
obligation |
|
200 |
|
|
— |
|
Long-term finance lease
obligation |
|
6,727 |
|
|
6,685 |
|
Other long-term
liabilities |
|
1,435 |
|
|
1,527 |
|
Total liabilities |
|
80,345 |
|
|
79,592 |
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
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: 11,486,214 and
11,394,036 shares, respectively |
|
|
|
|
Outstanding: 10,430,726 and 10,338,548 shares, respectively |
|
104 |
|
|
103 |
|
Additional paid-in
capital |
|
48,676 |
|
|
48,001 |
|
Accumulated deficit |
|
(10,449 |
) |
|
(15,275 |
) |
Treasury stock, at cost:
1,055,488 shares |
|
(1,589 |
) |
|
(1,589 |
) |
Total stockholders’
equity |
|
36,742 |
|
|
31,240 |
|
Total liabilities and
stockholders’ equity |
|
$ |
117,087 |
|
|
$ |
110,832 |
|
IEC ELECTRONICS CORP.CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONSTHREE and NINE MONTHS ENDED JUNE 26,
2020 and JUNE 28, 2019 (unaudited; in thousands, except share
and per share data)
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
June 26, 2020 |
|
June 28, 2019 |
|
June 26, 2020 |
|
June 28, 2019 |
|
|
|
|
|
Net sales |
|
$ |
47,364 |
|
|
$ |
40,324 |
|
|
$ |
136,269 |
|
|
$ |
113,059 |
|
Cost of sales |
|
40,722 |
|
|
34,719 |
|
|
118,885 |
|
|
97,808 |
|
Gross profit |
|
6,642 |
|
|
5,605 |
|
|
17,384 |
|
|
15,251 |
|
|
|
|
|
|
|
|
|
|
Selling and administrative
expenses |
|
3,678 |
|
|
3,721 |
|
|
10,194 |
|
|
10,402 |
|
Operating income |
|
2,964 |
|
|
1,884 |
|
|
7,190 |
|
|
4,849 |
|
|
|
|
|
|
|
|
|
|
Interest and financing
expense |
|
300 |
|
|
452 |
|
|
1,111 |
|
|
1,160 |
|
Income before income taxes |
|
2,664 |
|
|
1,432 |
|
|
6,079 |
|
|
3,689 |
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
550 |
|
|
221 |
|
|
1,253 |
|
|
736 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,114 |
|
|
$ |
1,211 |
|
|
$ |
4,826 |
|
|
$ |
2,953 |
|
|
|
|
|
|
|
|
|
|
Net income per common
share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.20 |
|
|
$ |
0.12 |
|
|
$ |
0.46 |
|
|
$ |
0.28 |
|
Diluted |
|
$ |
0.20 |
|
|
$ |
0.11 |
|
|
$ |
0.45 |
|
|
$ |
0.28 |
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding: |
|
|
|
|
|
|
Basic |
|
10,424,056 |
|
|
10,332,548 |
|
|
10,388,872 |
|
|
10,294,173 |
|
Diluted |
|
10,758,092 |
|
|
10,642,403 |
|
|
10,697,288 |
|
|
10,556,953 |
|
IEC ELECTRONICS CORP.CONDENSED CONSOLIDATED
STATEMENTS of CASH FLOWSNINE MONTHS ENDED JUNE 26, 2020 and
JUNE 28, 2019 (unaudited; in thousands)
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
June 26, 2020 |
|
June 28, 2019 |
|
June 26, 2020 |
|
June 28, 2019 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,114 |
|
|
$ |
1,211 |
|
|
$ |
4,826 |
|
|
$ |
2,953 |
|
Non-cash adjustments: |
|
|
|
|
|
|
|
|
Stock-based compensation |
|
189 |
|
|
117 |
|
|
526 |
|
|
415 |
|
Depreciation and amortization |
|
855 |
|
|
757 |
|
|
2,442 |
|
|
2,047 |
|
Change in reserve for doubtful accounts |
|
46 |
|
|
9 |
|
|
94 |
|
|
(30 |
) |
Change in inventory reserve and warranty reserve |
|
(70 |
) |
|
(70 |
) |
|
1,226 |
|
|
19 |
|
Deferred tax expense |
|
550 |
|
|
221 |
|
|
1,751 |
|
|
732 |
|
Amortization of deferred gain |
|
(29 |
) |
|
(29 |
) |
|
(86 |
) |
|
(85 |
) |
Changes in operating assets
and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
(3,827 |
) |
|
1,201 |
|
|
(2,796 |
) |
|
(1,414 |
) |
Unbilled contract revenue |
|
84 |
|
|
(1,262 |
) |
|
(988 |
) |
|
(2,972 |
) |
Inventories |
|
(1,763 |
) |
|
(5,938 |
) |
|
(3,818 |
) |
|
(14,485 |
) |
Federal income tax receivable |
|
— |
|
|
— |
|
|
(517 |
) |
|
— |
|
Other current assets |
|
335 |
|
|
(93 |
) |
|
68 |
|
|
(146 |
) |
Other long-term assets |
|
(214 |
) |
|
(183 |
) |
|
(330 |
) |
|
(436 |
) |
Accounts payable |
|
1,583 |
|
|
2,655 |
|
|
(1,188 |
) |
|
1,293 |
|
Change in book overdraft position |
|
124 |
|
|
320 |
|
|
(107 |
) |
|
(602 |
) |
Accrued expenses |
|
1,341 |
|
|
1,169 |
|
|
(557 |
) |
|
1,389 |
|
Customer deposits |
|
4,637 |
|
|
(476 |
) |
|
7,210 |
|
|
2,155 |
|
Net change in lease right-of-use assets and liabilities |
|
1 |
|
|
— |
|
|
— |
|
|
— |
|
Other long-term liabilities |
|
— |
|
|
— |
|
|
— |
|
|
(75 |
) |
Net cash flows provided
by/(used in) operating activities |
|
5,956 |
|
|
(391 |
) |
|
7,756 |
|
|
(9,242 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
|
Purchases of property, plant
and equipment |
|
(1,716 |
) |
|
(314 |
) |
|
(3,067 |
) |
|
(1,119 |
) |
Proceeds from disposal of
property, plant and equipment |
|
— |
|
|
20 |
|
|
— |
|
|
20 |
|
Net cash flows used in
investing activities |
|
(1,716 |
) |
|
(294 |
) |
|
(3,067 |
) |
|
(1,099 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
Advances from revolving credit
facility |
|
18,843 |
|
|
18,036 |
|
|
55,523 |
|
|
57,343 |
|
Repayments of revolving credit
facility |
|
(19,742 |
) |
|
(16,943 |
) |
|
(56,505 |
) |
|
(46,331 |
) |
Borrowings under other loan
agreements |
|
— |
|
|
— |
|
|
— |
|
|
391 |
|
Repayments under other loan
agreements |
|
(3,219 |
) |
|
(321 |
) |
|
(3,904 |
) |
|
(889 |
) |
Payments under finance
lease |
|
(102 |
) |
|
(78 |
) |
|
(284 |
) |
|
(230 |
) |
Proceeds received from lease
financing obligation |
|
— |
|
|
— |
|
|
415 |
|
|
— |
|
Debt issuance costs |
|
(84 |
) |
|
(21 |
) |
|
(84 |
) |
|
(27 |
) |
Proceeds from exercise of
stock options |
|
23 |
|
|
27 |
|
|
161 |
|
|
79 |
|
Proceeds from employee stock
plan purchases |
|
47 |
|
|
33 |
|
|
87 |
|
|
53 |
|
Cash paid for taxes upon
vesting of restricted stock |
|
(6 |
) |
|
(48 |
) |
|
(98 |
) |
|
(48 |
) |
Net cash flows (used
in)/provided by financing activities |
|
(4,240 |
) |
|
685 |
|
|
(4,689 |
) |
|
10,341 |
|
|
|
|
|
|
|
|
|
|
Net cash change for the
period |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Cash, beginning of period |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Cash, end of period |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
IEC ELECTRONICS CORP.NON-GAAP FINANCIAL MEASURES
RECONCILIATION TABLENINE MONTHS ENDED JUNE 26, 2020(unaudited;
in thousands, except share and per share data)
|
|
Nine Months Ended |
|
|
June 26, 2020 |
Reconciliation to adjusted
gross profit: |
|
|
Gross profit |
|
$ |
17,384 |
|
Non-cash charge (1) |
|
987 |
|
Adjusted gross profit |
|
$ |
18,371 |
|
|
|
|
Reconciliation to adjusted
gross margin: |
|
|
Gross margin |
|
12.8 |
% |
Non-cash charge (1) |
|
0.7 |
% |
Adjusted gross margin |
|
13.5 |
% |
|
|
|
Reconciliation to adjusted net
income: |
|
|
Net income |
|
$ |
4,826 |
|
Non-cash charge (1) |
|
987 |
|
Income tax effect (2) |
|
(207 |
) |
Adjusted net income |
|
$ |
5,606 |
|
|
|
|
Reconciliation to adjusted net
income per common share: |
|
|
Net income per common share,
basic |
|
$ |
0.46 |
|
Non-cash charge, net of tax
(1)(2) |
|
0.08 |
|
Adjusted net income per common
share, basic |
|
$ |
0.54 |
|
|
|
|
Net income per common share,
diluted |
|
$ |
0.46 |
|
Non-cash charge, net of tax
(1)(2) |
|
0.07 |
|
Adjusted net income per common
share, diluted (3) |
|
$ |
0.52 |
|
(1) A non-cash charge related to the increase in our excess and
obsolete inventory reserve due to the Chapter 11 bankruptcy filing
of a customer of IEC.(2) The income tax effect related to the
non-cash charge was calculated using an effective tax rate of
21%.(3) Adjusted net income per common share, diluted is calculated
based on adjusted net income and reflects the dilutive impact of
shares, where applicable, based on adjusted net income.
Non-GAAP Financial Measures
In addition to reporting net income, net income per share basic
and diluted, gross profit and gross margin, U.S. generally accepted
accounting principle (“GAAP”) measures, we present adjusted net
income, adjusted net income per basic and diluted share, adjusted
gross profit and adjusted gross margin, which are non-GAAP
measures, to reflect the impact of a one-time inventory reserve
related to a Chapter 11 reorganization at one of the Company’s
customers in the medical sector. The Company’s management believes
these non-GAAP measures are important measures of our performance
because it allows management, investors and others to evaluate and
compare our performance from period to period by removing the
impact of the one-time inventory reserve. Adjusted net income,
adjusted net income per basic and diluted share, adjusted gross
profit and adjusted gross margin, are not measures of financial
performance under GAAP and are not calculated through the
application of GAAP. As such, they should not be considered as a
substitute for the GAAP measures of net income, net income per
basic and diluted share, gross profit and gross margin, and
therefore, should not be used in isolation of, but in conjunction
with, the GAAP measures. These non-GAAP measures may produce
results that vary from the GAAP measures and may not be comparable
to a similarly titled non-GAAP measure used by other companies.
IEC Electronics (NASDAQ:IEC)
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