IEAM reports and guides:
Industrial Enterprises of America Reports Second Quarter Revenue of $17 Million
NEW YORK, Feb 16, 2007 (BUSINESS WIRE) -- Industrial Enterprises of America, Inc. (IEAM), a specialty automotive aftermarket supplier, today announced results for the fiscal second quarter and six months ended December 31, 2006.
Revenue for the second quarter was a record $17.0 million as compared with $10.0 million in the first fiscal quarter of 2007 and $5.6 million for the same period in fiscal 2006. The increase over last year's second quarter was partially due to the inclusion of the Pitt Penn Group, acquired January 31, 2006, which added approximately $5.0 million in revenue, and also reflects increased demand across the Pitt Penn and Unifide product lines. The 70% sequential revenue gain over the first quarter was due to the company's higher production level, resulting from operating efficiencies combined with strong order flow within the company's end markets.
The company reported gross profit of $4.0 million, representing a gross margin of 23.7%, versus $2.7 million, or 27.1%, in the first quarter of fiscal 2007 and $1.4 million, or 24.7%, in the second quarter of fiscal 2006. The decrease in margins was due to a different product mix as a result of expanding operations and the mild weather in the December quarter. EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter was $2.8 million, or $0.20 per share. Income from operations was $2.3 million in the quarter versus $345,000 in the first quarter. Notably, operating expenses were 25%, or $600,000, lower than the first quarter reflecting the absence of one-time expenses arising from the consolidation of our facilities. The net loss for the quarter was ($1.8 million), which includes $4.1 million in non-cash expenses associated with the company's convertible securities and warrants. The conversion of over 50% of the convertible notes and exercise of warrants resulted in an accelerated charge to income of the valuation of such securities added to the balance sheet arising from their issuance. The company's fully diluted shares calculated using the treasury method as of December 31, 2006 was 13.9 million.
For the six months of fiscal 2007, Industrial Enterprises of America reported revenue of $27.0 million versus $10.6 million in the same period last year, reflecting the acquisition of Pitt Penn and increased demand for its automotive products. Gross profit was $6.8 million, representing a gross margin of 25.2%, versus $2.8 million, or 26.6%, for the same period in fiscal 2006. EBITDA was $5.8 million, or $0.41 per share. The net loss for the period was ($1.1) million, versus a loss of $(0.8) million for the first half of fiscal 2006.
"We exceeded our revenue target while EBITDA came within an acceptable range. We are pleased with these results given that December temperatures in the Northeast were among the highest on record - limiting sales of our higher-margin seasonal products," stated John Mazzuto, Chief Executive Officer of Industrial Enterprises of America. "By focusing on non-seasonal items and limiting our winter inventory, our production, up 70% from just three months ago, allowed us to grow dramatically. Our Pitt Penn facility performed to plan utilizing a single-shift operation, resulting in lower costs as we produced to match order intake. In addition, our integrated sales force expanded our product penetration across existing outlets. Our order flow now outpaces shipments, and we have already begun our second shift at the Pitt Penn facility ahead of schedule
"Strategically, we have also taken a number of steps to expand our product portfolio and further reduce seasonality in the business," Mr. Mazzuto continued. "We are moving to longer production runs to maximize line efficiency, as our end markets are able to absorb the increased output. Our aerosol business - which recently announced a joint venture in China - continues to move forward on a variety of fronts. This operation should contribute substantially in the coming fiscal year.
"In addition, as part of our strategy to acquire virtual marketing companies, we purchased Fire 1st Defense, a firm that sells innovative, consumer-friendly fire extinguishers and suppressants. We anticipate growing demand for this product, boosted by our current distribution channels, and increasing operating efficiency through the utilization of existing capacity at our EMC Packaging plant."
Mr. Mazzuto concluded, "Looking ahead, we are confident that the steps taken in the past six months to improve production efficiencies and rationalize assets place the company in an excellent position to drive top line growth, margin expansion, and return on net assets going forward. We will continue to optimize capacity to meet demand while enhancing productivity."
Between January 17 and February 15, 2007, Industrial Enterprises purchased 100,000 shares of its outstanding common stock. The company has thus purchased 950,000 shares as part of its $10 million buyback program announced December 11, 2006.
Guidance: Management believes that EBITDA is the performance measure that best reflects the company's economic value and provides investors with a consistent metric to track historical results and monitor future results. In providing guidance, management assumes normal weather patterns. For the third fiscal quarter, Industrial Enterprises estimates revenue of approximately $25 million, with EBITDA per share of $0.32-$0.34. For the fourth fiscal quarter, the company estimates revenue of approximately $30 million, with EBITDA per share of $0.50-$0.52. For fiscal year 2007, Industrial Enterprises estimates total revenue of approximately $80 million, with EBITDA per share of $1.22-$1.24 including the first quarter's $2.4 million income from asset sales. EBITDA per share is calculated using the current fully diluted share count, including treasury method, of 13.9 million shares. The company makes use of EBITDA (earnings before interest, taxes, depreciation and amortization) as a financial measure which it believes is a useful performance indicator. EBITDA is not a recognized term under generally accepted accounting principles, or "GAAP," and should not be considered as an alternative to net income/(loss) or net cash provided by operating activities, which are GAAP measures. A reconciliation of EBITDA to net income/(loss) appears at the end of this release, as do both actual results for the quarter and year-to-date periods.
Conference Call: Industrial Enterprises of America will host an earnings conference call at 11:00 a.m. Eastern on February 16, 2007 for the company's fiscal second quarter ended December 31, 2006. During the call, John Mazzuto, Chief Executive Officer, will discuss the company's quarterly performance and financial results. The telephone number for the conference call is 877-407-0782. The call will be webcast and can be accessed at . Investors will be able to access an encore recording of the conference call for one week by calling 877-660-6853 and referencing account number 286, conference number 232183; the recording will be available two hours after the conference call has concluded. In addition, a replay of the webcast will be available for 180 days after the call on .
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