IEC Electronics Corp. (IEC)

IEC 
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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

Greetings and welcome to the IEC Electronics Second Quarter Earnings Conference Call. 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, John Nesbett. Thank you Mr. Nesbett, you may now 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 Susan Topel-Samek, Vice President and Chief Financial Officer.

Before we get started, I would like to take a quick moment to read the Safe Harbor statement. This conference call contains certain forward-looking statements that involve risks and uncertainties including uncertainties associated with economic conditions in the electronics industry, particularly in the principal industry sectors 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; and satisfactory relationships that matters.

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 2010 annual report on Form 10-K and in other filings with the Securities and Exchange Commission.

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.

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