GlobeNewswire Inc | Aug 5, 2020 08:30AM EDT

August 05, 2020

-- REVENUE OF $47.4 MILLION; UP 17% YEAR OVER YEAR -- GROSS MARGIN OF 14% -- GENERATED $6.0 MILLION OF OPERATING CASH FLOW

NEWARK, N.Y., Aug. 05, 2020 (GLOBE NEWSWIRE) -- IEC Electronics Corp. (Nasdaq: IEC) today announced results for the fiscal 2020 third quarter and nine months ended June26, 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 September30, 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 Companys 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 June26, 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, August5, 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. 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 SHEETSJUNE26, 2020 and SEPTEMBER30, 2019 (unaudited; in thousands, except share and per share data)

June 26, September 2020 30, 2019ASSETS 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 260 ? accumulated amortizationOther 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 ? ? outstandingCommon stock, $0.01 par value: Authorized: 50,000,000 shares Issued: 11,486,214 and 11,394,036 shares, respectivelyOutstanding: 10,430,726 and 10,338,548 shares, 104 103 respectivelyAdditional 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 JUNE26, 2020 and JUNE28, 2019 (unaudited; in thousands, except share and per share data)

Three Months Ended Nine Months Ended June 26, June 28, June 26, June 28, 2020 2019 2020 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 andadministrative 3,678 3,721 10,194 10,402 expensesOperating 2,964 1,884 7,190 4,849 income Interest andfinancing 300 452 1,111 1,160 expenseIncome before 2,664 1,432 6,079 3,689 income taxes Income tax 550 221 1,253 736 expense 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 JUNE26, 2020 and JUNE28, 2019 (unaudited; in thousands)

Three Months Ended Nine Months Ended June 26, June 28, June 26, June 28, 2020 2019 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIESNet 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 46 9 94 (30 )accountsChange in inventory reserve and (70 ) (70 ) 1,226 19 warranty reserveDeferred 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 124 320 (107 ) (602 )positionAccrued expenses 1,341 1,169 (557 ) 1,389 Customer deposits 4,637 (476 ) 7,210 2,155 Net change in leaseright-of-use assets and 1 ? ? ? liabilitiesOther long-term liabilities ? ? ? (75 )Net cash flows provided by/ 5,956 (391 ) 7,756 (9,242 )(used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIESPurchases of property, plant (1,716 ) (314 ) (3,067 ) (1,119 )and equipmentProceeds from disposal of ? 20 ? 20 property, plant and equipmentNet cash flows used in (1,716 ) (294 ) (3,067 ) (1,099 )investing activities CASH FLOWS FROM FINANCING ACTIVITIESAdvances from revolving credit 18,843 18,036 55,523 57,343 facilityRepayments of revolving credit (19,742 ) (16,943 ) (56,505 ) (46,331 )facilityBorrowings under other loan ? ? ? 391 agreementsRepayments under other loan (3,219 ) (321 ) (3,904 ) (889 )agreementsPayments under finance lease (102 ) (78 ) (284 ) (230 )Proceeds received from lease ? ? 415 ? financing obligationDebt issuance costs (84 ) (21 ) (84 ) (27 )Proceeds from exercise of stock 23 27 161 79 optionsProceeds from employee stock 47 33 87 53 plan purchasesCash paid for taxes upon (6 ) (48 ) (98 ) (48 )vesting of restricted stockNet cash flows (used in)/provided by financing (4,240 ) 685 (4,689 ) 10,341 activities 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 JUNE26, 2020(unaudited; in thousands, except share and per share data)

Nine Months Ended June 26, 2020Reconciliation 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 Companys customers in the medical sector. The Companys 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.