IEC Electronics Corp. (Nasdaq: IEC) today announced results for the
fiscal third quarter ended July 2, 2021 of the fiscal year ending
September 30, 2021 (“fiscal 2021”). Earlier today, IEC announced
the signing of a definitive merger agreement with Creation
Technologies Inc. (“Creation”) under which Creation will acquire
all outstanding shares of IEC for $15.35 per share in cash. For
further information, please refer to the press release issued by
IEC and Creation. In light of this announcement, IEC has determined
that it will not host its earnings call previously scheduled for
today, August 12, 2021 at 10:00 a.m. Eastern Time.
IEC reported revenues of $49.4 million for the third quarter of
fiscal 2021, an increase of 4.2% as compared to revenues of $47.4
million for the third quarter of the year ended September 30, 2020
(“fiscal 2020”). Gross profit for the third quarter of fiscal 2021
was $5.2 million, or 10.6% of sales, compared to gross profit of
$6.6 million, or 14.0% of sales in the third quarter of fiscal
2020. Operating profit was $1.9 million for the third quarter of
fiscal 2021, compared to operating profit of $3.0 million for the
same quarter in the prior fiscal year. The Company reported net
income of $1.0 million or $0.10 per basic share and $0.09 per
diluted share for the third quarter of fiscal 2021, compared net
income of $2.1 million or $0.20 per basic and diluted share in the
third quarter of fiscal 2020.
For the first nine months of fiscal 2021, the Company reported
revenues of $142.2 million, an increase of 4.4% compared to $136.3
million for the first nine months of fiscal 2020. Gross profit for
the first nine months of fiscal 2021 was $14.3 million, or 10.0% of
sales, compared to gross profit of $17.4 million, or 12.8% of sales
in the same period in the prior fiscal year. Selling and
administrative expenses were $10.4 million in the first nine months
of fiscal 2021, or 7.3% of sales, compared to $10.2 million, or
7.5% of sales, in the first nine months of fiscal 2020. Operating
profit was $3.9 million for the first nine months of fiscal 2021,
compared to $7.2 million for the same period in the prior fiscal
year. Due primarily to the investments in both the Company’s new
headquarters facility and incremental manufacturing equipment,
operating profit for the first nine months of fiscal 2021 includes
$1.0 million of additional depreciation expense as compared to the
first nine months of fiscal 2020. The Company reported net income
of $2.2 million, or $0.21 per basic share and $0.20 per diluted
share for the first nine months of fiscal 2021, compared to net
income of $4.8 million, or $0.46 per basic share and $0.45 per
diluted share in the first nine months of fiscal 2020. As
previously discussed, adjusted for the impact of a one-time
inventory reserve in the first quarter of fiscal 2020, adjusted net
income per common share would have been $0.54 per basic share and
$0.52 per diluted share in the first nine months of fiscal 2020.
Please see the reconciliation tables included in this release for
further information regarding these non-GAAP measures.
Jeffrey T. Schlarbaum, President and CEO of IEC Electronics
Corp. commented, “We were pleased to have delivered solid revenue
growth during the third quarter of fiscal 2021 of $49.4 million,
despite headwinds that we, and many in our industry, are
experiencing related to ongoing material shortages and labor
constraints. During the fiscal quarter we continued to ramp
multiple exciting new programs. As we noted last fiscal quarter,
given the complexity of the programs we service, the ramping
process is not linear and frequently includes process development
adaptations which continue to impact profitability. However, once
established, we anticipate that these programs will provide
considerable long-term revenue and margin opportunity for IEC. As
the economy moves beyond the pandemic, we are encouraged by the
increased backlog as compared to year-end fiscal 2020 and a solid
book to bill ratio of 1.76:1 in the third fiscal quarter, which
included a contract extension valued at more than $45 million from
a longstanding customer. We believe this recent contract extension
serves as a strong endorsement of our capabilities and reliability
and speaks to IEC’s position in the marketplace as we pursue new
customers and contracts.
“We believe we remain uniquely positioned to drive long-term
growth for our shareholders. IEC is an established manufacturing
partner with a proven record of success providing a vertically
integrated portfolio of services to companies in attractive and
growing sectors such as medical and aerospace and defense. Our 100%
U.S.-based model positions IEC as the ideal partner for companies
seeking the highest levels of intellectual property protection and
supply chain management. We are pleased to have made solid progress
throughout this challenging year to advance our leadership position
and we are excited about the opportunities we are seeing to win new
customers and programs as we move toward delivering an expected
strong close to fiscal 2021.”
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, and 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,” “appears,”
“anticipates,” “could,” “intends,” “targets,” “forecasts,”
“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, revenues
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 continued impact of the 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 and suppliers; uncertainties as to availability
and timing of governmental funding for our customers; the impact of
government regulations, including U.S. Food and Drug Administration
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. BarbatoSenior Vice
President and Chief Financial OfficerIEC Electronics Corp.(315)
332-4493tbarbato@iec-electronics.com
Agency Contact:John Nesbett/Jennifer
BelodeauIMS Investor Relations(203) 972 -
9200jnesbett@institutionalms.com
IEC ELECTRONICS CORP.CONDENSED CONSOLIDATED
BALANCE SHEETSJULY 2, 2021 and SEPTEMBER 30, 2020(unaudited; in
thousands, except share and per share data)
|
|
|
|
|
|
|
July 2, |
|
September 30, |
|
2021 |
|
2020 |
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash |
$ |
116 |
|
|
$ |
312 |
|
Accounts receivable, net of allowance |
|
31,922 |
|
|
|
30,361 |
|
Unbilled contract revenue |
|
13,313 |
|
|
|
8,773 |
|
Inventories |
|
53,906 |
|
|
|
51,374 |
|
Other current assets |
|
1,678 |
|
|
|
1,757 |
|
Total current assets |
|
100,935 |
|
|
|
92,577 |
|
|
|
|
|
|
|
Property, plant and equipment,
net |
|
50,805 |
|
|
|
23,587 |
|
Deferred income taxes |
|
4,936 |
|
|
|
4,840 |
|
Operating lease right-of-use
assets, net of accumulated amortization |
|
200 |
|
|
|
260 |
|
Other long-term assets |
|
876 |
|
|
|
1,700 |
|
|
|
|
|
|
|
Total assets |
$ |
157,752 |
|
|
$ |
122,964 |
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Current portion of long-term debt |
$ |
248 |
|
|
$ |
— |
|
Current portion of operating lease obligation |
|
63 |
|
|
|
61 |
|
Current portion of finance lease obligation |
|
2,080 |
|
|
|
436 |
|
Accounts payable |
|
25,201 |
|
|
|
29,733 |
|
Accrued payroll and related expenses |
|
1,463 |
|
|
|
3,659 |
|
Other accrued expenses |
|
316 |
|
|
|
457 |
|
Customer deposits |
|
17,578 |
|
|
|
19,783 |
|
Total current liabilities |
|
46,949 |
|
|
|
54,129 |
|
|
|
|
|
|
|
Long-term debt |
|
36,385 |
|
|
|
21,476 |
|
Long-term operating lease
obligation |
|
136 |
|
|
|
184 |
|
Long-term finance lease
obligation |
|
29,690 |
|
|
|
6,616 |
|
Other long-term
liabilities |
|
2,868 |
|
|
|
1,404 |
|
Total liabilities |
|
116,028 |
|
|
|
83,809 |
|
|
|
|
|
|
|
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: 11,675,866 and 11,556,214 shares, respectively |
|
|
|
|
|
Outstanding: 10,620,378 and 10,500,726 shares, respectively |
|
106 |
|
|
|
105 |
|
Additional paid-in
capital |
|
49,514 |
|
|
|
49,161 |
|
Accumulated deficit |
|
(6,307 |
) |
|
|
(8,522 |
) |
Treasury stock, at cost:
1,055,488 shares |
|
(1,589 |
) |
|
|
(1,589 |
) |
Total stockholders’
equity |
|
41,724 |
|
|
|
39,155 |
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
$ |
157,752 |
|
|
$ |
122,964 |
|
IEC ELECTRONICS CORP.CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONSTHREE AND NINE MONTHS ENDED JULY 2, 2021
and JUNE 26, 2020(unaudited; in thousands, except share and per
share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
July 2, |
|
June 26, |
|
July 2, |
|
June 26, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
49,370 |
|
|
$ |
47,364 |
|
|
$ |
142,211 |
|
|
$ |
136,269 |
|
Cost of sales |
|
44,135 |
|
|
|
40,722 |
|
|
|
127,924 |
|
|
|
118,885 |
|
Gross profit |
|
5,235 |
|
|
|
6,642 |
|
|
|
14,287 |
|
|
|
17,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative
expenses |
|
3,357 |
|
|
|
3,678 |
|
|
|
10,362 |
|
|
|
10,194 |
|
Operating profit |
|
1,878 |
|
|
|
2,964 |
|
|
|
3,925 |
|
|
|
7,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
587 |
|
|
|
300 |
|
|
|
1,589 |
|
|
|
1,111 |
|
Income before provision for income taxes |
|
1,291 |
|
|
|
2,664 |
|
|
|
2,336 |
|
|
|
6,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
265 |
|
|
|
550 |
|
|
|
121 |
|
|
|
1,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
1,026 |
|
|
$ |
2,114 |
|
|
$ |
2,215 |
|
|
$ |
4,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.10 |
|
|
$ |
0.20 |
|
|
$ |
0.21 |
|
|
$ |
0.46 |
|
Diluted |
$ |
0.09 |
|
|
$ |
0.20 |
|
|
$ |
0.20 |
|
|
$ |
0.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
10,616,613 |
|
|
|
10,424,056 |
|
|
|
10,574,713 |
|
|
|
10,388,872 |
|
Diluted |
|
11,048,668 |
|
|
|
10,758,092 |
|
|
|
11,032,245 |
|
|
|
10,697,288 |
|
IEC ELECTRONICS CORP.CONDENSED CONSOLIDATED
STATEMENTS of CASH FLOWSNINE MONTHS ENDED JULY 2, 2021 and JUNE 26,
2020(unaudited; in thousands)
|
|
|
|
|
|
|
Nine Months Ended |
|
July 2, |
|
June 26, |
|
2021 |
|
2020 |
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
|
|
|
|
Net income |
$ |
2,215 |
|
|
$ |
4,826 |
|
Non-cash adjustments: |
|
|
|
|
|
Stock-based compensation |
|
650 |
|
|
|
526 |
|
Depreciation and amortization |
|
3,685 |
|
|
|
2,442 |
|
Change in reserve for doubtful accounts |
|
(56 |
) |
|
|
94 |
|
Change in inventory reserve and warranty reserve |
|
467 |
|
|
|
1,226 |
|
Gain on sale of property, plant and equipment |
|
(30 |
) |
|
|
— |
|
Deferred tax (income) expense |
|
(96 |
) |
|
|
1,751 |
|
Amortization of deferred gain |
|
(86 |
) |
|
|
(86 |
) |
|
|
|
|
|
|
Changes in operating assets
and liabilities: |
|
|
|
|
|
Accounts receivable |
|
(1,505 |
) |
|
|
(2,796 |
) |
Unbilled contract revenue |
|
(4,540 |
) |
|
|
(988 |
) |
Inventories |
|
(2,705 |
) |
|
|
(3,818 |
) |
Federal income tax receivable |
|
— |
|
|
|
(517 |
) |
Other current assets |
|
79 |
|
|
|
68 |
|
Other long-term assets |
|
180 |
|
|
|
(330 |
) |
Accounts payable |
|
(4,682 |
) |
|
|
(1,188 |
) |
Change in book overdraft position |
|
— |
|
|
|
(107 |
) |
Accrued expenses |
|
(2,631 |
) |
|
|
(557 |
) |
Customer deposits |
|
(2,205 |
) |
|
|
7,210 |
|
Net change in lease right-of-use assets and liabilities |
|
14 |
|
|
|
— |
|
Other long-term liabilities |
|
114 |
|
|
|
— |
|
Net cash flows (used
in)/provided by operating activities |
|
(11,132 |
) |
|
|
7,756 |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
|
Purchases of property, plant
and equipment |
|
(11,591 |
) |
|
|
(3,067 |
) |
Proceeds from disposal of
property, plant and equipment |
|
668 |
|
|
|
— |
|
Proceeds received from capital
grants |
|
1,500 |
|
|
|
— |
|
Net cash flows used in
investing activities |
|
(9,423 |
) |
|
|
(3,067 |
) |
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
|
Advances from revolving credit
facility |
|
84,121 |
|
|
|
55,523 |
|
Repayments of revolving credit
facility |
|
(71,041 |
) |
|
|
(56,505 |
) |
Borrowings under other loan
agreements |
|
8,699 |
|
|
|
— |
|
Repayments under other loan
agreements |
|
(6,603 |
) |
|
|
(3,904 |
) |
Payments under finance
lease |
|
(944 |
) |
|
|
(284 |
) |
Proceeds received from lease
financing obligation |
|
6,521 |
|
|
|
415 |
|
Debt issuance costs |
|
(98 |
) |
|
|
(84 |
) |
Proceeds from exercise of
stock options |
|
95 |
|
|
|
161 |
|
Proceeds from employee stock
plan purchases |
|
94 |
|
|
|
87 |
|
Cash paid for taxes upon
vesting of restricted stock |
|
(485 |
) |
|
|
(98 |
) |
Net cash flows provided
by/(used in) financing activities |
|
20,359 |
|
|
|
(4,689 |
) |
|
|
|
|
|
|
Net cash change for the
period |
|
(196 |
) |
|
|
— |
|
Cash, beginning of period |
|
312 |
|
|
|
— |
|
Cash, end of period |
$ |
116 |
|
|
$ |
— |
|
IEC ELECTRONICS CORP.NON-GAAP FINANCIAL MEASURES
RECONCILIATION TABLEJUNE 26, 2020(unaudited; in thousands, except
share and per share data)
|
|
|
|
|
Nine Months Ended |
|
|
June 26, 2020 |
|
Reconciliation of adjusted
gross profit: |
|
|
|
Gross profit |
$ |
17,384 |
|
|
Non-cash charge (1) |
|
987 |
|
|
Adjusted gross profit |
$ |
18,371 |
|
|
|
|
|
|
Reconciliation of adjusted
gross margin: |
|
|
|
Gross margin |
|
12.8 |
|
% |
Non-cash charge (1) |
|
0.7 |
|
% |
Adjusted gross margin |
|
13.5 |
|
% |
|
|
|
|
Reconciliation of adjusted net
income: |
|
|
|
Net income |
$ |
4,826 |
|
|
Non-cash charge (1) |
|
987 |
|
|
Income tax effect (2) |
|
(207 |
) |
|
Adjusted net income |
$ |
5,606 |
|
|
|
|
|
|
Reconciliation of adjusted net
income per common share: |
|
|
|
Net income per common share,
basic |
$ |
0.46 |
|
|
Non-cash charge, per common
share, net of tax (1)(2) |
|
0.08 |
|
|
Adjusted net income per common
share, basic |
$ |
0.54 |
|
|
|
|
|
|
Net income per common share,
diluted |
$ |
0.45 |
|
|
Non-cash charge, per common
share, 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 a reorganization at 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 they allow 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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IEC Electronics (NASDAQ:IEC)
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