IEC Says Lower Q4 Revenue on Slowing Demand
NEWARK, NY -- IEC Electronics' fiscal fourth-quarter sales fell 16.3% year-over-year on lower volume from two key customers.
For the period ended Sept. 30, the EMS company recorded net sales of $28.4 million, while net income was flat at $200,000. The results include a loss on discontinued operations of $700,000 related to its divestiture of its Southern California Braiding subsidiary. Gross profit margin was 11.5%, compared to 15.3% last year.
For the fiscal year IEC reported revenues of $127 million, flat year-over-year. Net income was $4.8 million, compared to a net loss of $10.2 million last year. During fiscal 2015, the company incurred a loss on discontinued operations of $6.4 million related to its divestiture of SCB and corresponding impairment charges. Gross profit margin grew 320 basis points to 16%. IEC reduced debt, net of cash, by $2 million in the fourth quarter of fiscal 2016 and by $11.8 million for the fiscal year. Cash flow was driven by improved operational performance as well as a reduction of net inventory of $10.4 million compared to year-end 2015.
The company said it expects the slowdown to continue for the next couple quarter and has implemented layoffs to mitigate losses.
CEO and president Jeff Schlarbaum said, "2016 was a solid year for us as we continued to drive operational improvements and demonstrate measurable progress with our ongoing turnaround efforts. During the course of the year, we saw a return to profitability and significant reductions in debt and inventory.
"However, in the fourth quarter we began to experience a reduction in volume from certain key customers, which negatively impacted near-term backlog and resulted in our decision to take proactive steps to align our cost structure with a workforce reduction at our Newark, New York, facility. With the visibility we have today, we anticipate that the backlog softness will continue through the first half of fiscal 2017 and strengthen in the second half of fiscal 2017. This softness is not a result of any lost customers or programs, but rather is related to slowdowns for two of our key strategic customers, who are committed to IEC and are working through their own end-market dynamics. We believe this backlog reduction will result in approximately $20 million to $25 million in lower revenue primarily impacting the first half of 2017. While we anticipate a ramp-up with existing and new customers in the second half of 2017, we do not expect to be profitable in the first half of 2017 given the need to retain key skilled labor and expertise to support the life-saving and mission critical products we manufacture. We believe our business is fundamentally strong and our customer base is among the best in our industry. We are prepared to manage through what we anticipate will be a relatively short-term downturn and we expect to exit fiscal 2017 at levels similar to the performance achieved in the first three quarters of 2016, as volume returns to our existing customer programs and as we add new customers.
"Importantly, our focus on driving down our debt and more effectively managing our assets has strengthened our balance sheet, providing us with the needed foundation for future growth and a key element to enable us to compete for new customers and programs. We believe our existing customer relationships have continued to strengthen over the past year and our proven ability to provide unique design and manufacturing solutions that contribute to the production of life-saving and mission critical products is broadening our marketplace recognition and exposing us to new opportunities in the segments in which we operate. As we continue to navigate our turnaround, we believe we are well-positioned to broaden our customer base and drive future growth."
