IEC Electronics Corp. (IEC) is a provider of electronic manufacturing services (EMS) to technology companies in the United States. The Company specializes in the custom manufacture of circuit cards, system level assemblies, and an array of custom cable/wire harness assemblies. The Company manufactures a range of assemblies, which are incorporated into many different products. It also provides EMS, primarily for wireless communication systems, test diagnostic equipment, military and defense systems, transportation products and medical instrumentation.

The Company serves military, governmental agencies, aerospace, communications, medical, computing and other industrial markets through direct sales force and a network of manufacturers’ representatives. During the fiscal year ended September 30, 2008, IEC provided electronics and cable harness manufacturing services to approximately 52 different customers. The Company provides its services to multiple divisions and product lines of its customers, and manufactures successive product generations for its customers. In some cases, IEC is the contract manufacturer for the customer site or division, providing all services, prototype through box build and functional test.

IEC was ranked 30th on the most recent Rochester Business Journal list of man­ufacturers. The Company has 370 work­ers—roughly 270 in Newark and 100 in Victor. IEC was founded in 1965 and is based in Newark, New York.

Source: Reuters.com, SEC Filings, FY ending September 30.

IEC had three successive strong quarters in FY 2009. The Company reported revenue of $17.3 million for the third quarter ended June 26, 2009, as compared to revenue of $11.9 million for the third quarter 2009. Sales from “Wire and Cable” were accretive for the third quarter 2009, and IEC’s core business grew by more than 33% over the same quarter of the prior year. The gross profit margin increased to 16.1% form third quarter 2008 gross profit margin of 11.9%. For the third quarter ended June 26, 2009, net income was $903,000 or $0.10 per share compared to $868,000 or $0.09 per share for the same period in 2008. IEC had revenue of $49.5 million for the first nine months of fiscal 2009 and a net income of $4,053,000 or $0.43 per share. This compares to revenue of $35.0 million for the first nine months of fiscal 2008 and net income of $1,963,000 or $0.21 per share. Both periods were impacted by deferred tax benefit.

Cash Flow provided by operating activities was $1.3 million for the nine-month period ended June 26, 2009, compared to ($2.6) million used in operations during the same nine month period in the prior fiscal year. The increase in cash from operations is mainly attributable to significantly improved earnings. As of June 26, 2009, IEC had no cash or cash equivalents on its balance sheet. The Company’s cash received is applied against its revolving line of credit on a daily basis reducing interest expense. At June 26, 2009, IEC had a $4.9 million balance outstanding under its revolving credit facility. The Company has a $14.2 million senior secured loan agreement and Sale Leaseback agreement with Manufacturers and Traders Trust Company.

The Company’s management remains optimistic about the IEC’s prospects for the remainder of fiscal 2009 and 2010. Sales growth is expected to range between 25%-30% ($64 million to $67 million) for fiscal 2009. The Company expects its gross profit margin as a percent of sales to normalize in a slightly higher range of between 15% and 16%; net income before tax is expected to increase by 150+%.

The market has responded to IEC’s improved results. Shares of IEC are trading at $7+ a share, reaching their highest level since 2000.

No consensus analysis data available.

IEC has experienced substantial improvement in its operating performance over the past few years. While the soft economy has impacted some of IEC’s customers, others continue to grow. The Company has experienced solid new orders and despite the current recessionary forces in the economy, and it expects expect continued growth in both revenue and profitability through the remainder of fiscal 2009. IEC targets $150 million in 2012.

Since 2004 IEC has executed a disciplined turnaround by focusing on providing its services to core constituencies in the military and aerospace sectors. IEC has grown its military and aerospace business from less than 1% of 2005 sales to 39% today. The Company has become one of the leading manufacturers of advanced defense and aerospace equipment such as wired and wireless cockpit communication systems and satellite communication products. IEC has also become a leader in providing systems for the production of products such as locomotive and signaling products for the rail industry and atomic clocks and network synchronization. A portion of IEC’s growth is derived from Val-U-Tech, the privately held manufacturer of wire harness assemblies acquired in June 2008. Val-U-Tech, which provides a new product line and complementary customer base, was renamed to IEC Electronics Wire & Cable Inc.

In fiscal 2008, IEC spent $1.4 million on capital spending to upgrade its ten manufacturing lines. The Company plans to spend an additional $1.2 million in fiscal 2009 and almost $1.0 million in fiscal 2010 in order to completely upgrade all its manufacturing systems. This will continue to contribute to higher margins by reducing the need to rework products and also because of faster manufacturing, will increase overall capacity.

Recently, the Company achieved the ISO13485 certification. This certification applies to its electronic IEC’s manufacturing services operation in Newark, New York, as well as its wire and cable operation in Victor, New York. ISO13485 is the quality management system standard specific to the medical device industry. This certification, an internationally recognized management system standard developed by the International Organization for Standardization, is a requirement for the ongoing manufacturing of commercial medical devices. The addition of ISO13485 complements the Company’s existing AS9100 quality system and reinforces IEC’s commitment to the medical device market. IEC is also AS9100B and ISO 9001:2000 registered, and a NSA approved supplier under the COMSEC standard.

The electronics manufacturing services (EMS) industry specializes in providing program management, technical support and manufacturing expertise required to take a product from the early design and prototype stages through volume production and distribution. EMS industry has undergone tremendous change in the last several years. Despite the recent financial crisis and recessionary fall out, particularly on EMS, growth prospects in the EMS industry remain positive over the long term. Margins in all sectors (except Automotive) are expected to remain relatively constant in the second half 2009 as backlogs and book-to-bill ratios stabilize. Overall, the global EMS market is expected to grow 13.5% annually from a$261 billion market in 2007 to a $492 billion market in 2012. From 2007 to 2012, the annual growth rates for the automotive, defense and industrial end markets are expected to be around 8% annually.

Source: http://stockcharts.com/h-sc/ui

IEC is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

The MACD for IEC currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0 which implies that the underlying moving averages are trending higher.

IEC’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, IEC is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

The Company’s shares commenced trading on the NYSE Amex exchange in June 2009 and there are no consensus estimates still available. IEC announced that despite the recessionary outlook for the economy, the Company expects strong growth in sales and earnings in fiscal 2009. IEC intends to continue its growth and is working with an investment banking firm on acquisition opportunities.

Source: Thomson Financial, Yahoo! Finance, Analyst estimates.

Net Share Purchase Activity

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