SMTC reports fourth quarter and full year 2006 results



    Reports double digit growth in revenues and record earnings

    TORONTO, March 13 /CNW/ - SMTC Corporation (Nasdaq:   SMTX, TSX: SMX)
("SMTC"), a global electronics manufacturing services provider, announced
today its results for the fourth quarter and year ended December 31, 2006
which are expressed in US dollars.

    
    Fourth quarter and full year highlights

    -   Growth in fourth quarter revenue to $76.1 million, a 31% increase
        over fourth quarter 2005.

    -   Net income of $2.1 million for the fourth quarter, an increase of 49%
        compared to the fourth quarter of 2005.

    -   EBITDA(*) of $5.3 million in the quarter, representing a 66% increase
        over the fourth quarter of 2005.

    -   Growth led by strengthening diversified customer base of both
        long-standing and new customers.

    -   Full year revenue of $262.8 million, an increase of $34.0 million, or
        15% over 2005.

    -   Record net income for the full year 2006 of $10.5 million, including
        one-time items of $5.0 million compared with a loss of $0.1 million
        for 2005

    -   EBITDA(*) of $16.0 million for the full year 2006, representing a 78%
        increase over 2005. The full year EBITDA(*) for 2006 excludes the
        impact of one-time items.
    

    SMTC Corporation reported revenue of $76.1 million and net income of
$2.1 million, or $0.14 per share, for the fourth quarter ended December 31,
2006, compared with revenue of $58.1 million and net income of $1.4 million,
or $0.10 per share, for the fourth quarter of 2005. Revenue for the year ended
December 31, 2006 was $262.8 million and net income was $10.5 million, or
$0.71 per share compared with revenue of $228.8 million and net loss of
$0.1 million, or $0.01 per share for 2005.

    Gross profit was $7.7 million, or 10.1% of revenue, and $26.4 million, or
10.1%, for the fourth quarter of 2006 and year ended December 31, 2006,
respectively. This compared with $4.9 million, or 8.4% of revenue, and
$17.1 million, or 7.5% of revenue, for the fourth quarter and year ended
December 31, 2005, respectively.

    "Our strong fourth quarter results cap a very successful year for SMTC.
For the first time since the year 2000, the Company grew year over year
revenue reflecting a combination of growth from long-standing customers and
the effect of new customer additions in 2005 and 2006", stated John Caldwell,
President and Chief Executive Officer. "As important, SMTC produced seven
consecutive quarters of profitability culminating in record net income for
2006."

    "Strong fourth quarter and full year gross margins reflect the strength
of our business model and continuing diligent cost containment measures",
stated Jane Todd, Senior Vice President Finance and Chief Financial Officer.
"The Company generated significant cash flow from operations which was
invested in working capital and assets to support current and anticipated
future growth."

    The 2006 full year net income contains certain one time items aggregating
$5.0 million including an income tax refund, gain on a sale of surplus real
estate, final proceeds from operations discontinued in 2002 and a net
adjustment to restructuring accruals.

    "We expect continuing revenue and earnings growth in 2007 with improved
working capital management to generate positive cash flow to be applied to
debt reduction. However, the unpredictable nature of our customers' order
patterns may affect our quarterly results. Therefore, we intend to only
provide overall and directional guidance on an annual basis. We will continue
to monitor and update this guidance on a quarterly basis", stated John
Caldwell.

    (*) EBITDA is a non-GAAP measure. EBITDA is computed as Net income from
    continuing operations excluding depreciation, amortization, interest and
    income tax expense. SMTC Corporation provides this non-GAAP calculation
    of EBITDA as supplemental information regarding the operational
    performance of SMTC Corporation's core business. EBITDA is used by SMTC
    Corporation to provide a consistent method of comparison to historical
    periods and to the performance of competitors and peer group companies.
    SMTC Corporation believes that providing non-GAAP measures that
    management uses in its assessment of the business will allow its
    investors to better understand SMTC Corporation's financial performance
    and to evaluate SMTC Corporation's performance using the same methodology
    and information used by SMTC Corporation's management. Non-GAAP measures
    are subject to material limitations as these measures are not in
    accordance with or an alternative for, Generally Accepted Accounting
    Principles and may be different from non-GAAP measures used by other
    companies.
    -------------------------------------------------------------------------

    About the Company: SMTC Corporation, founded in 1985, is a mid-size
provider of end-to-end electronics manufacturing services (EMS) including PCBA
production, systems integration and comprehensive testing services, enclosure
fabrication, as well as product design, sustaining engineering and supply
chain management services. SMTC facilities span a broad footprint in the
United States, Canada, Mexico, and China, with over 1300 full time employees.
SMTC services extend over the entire electronic product life cycle from the
development and introduction of new products through to the growth, maturity
and end-of-life phases. SMTC offers fully integrated contract manufacturing
services with a distinctive approach to global original equipment
manufacturers (OEMs) and emerging technology companies primarily within
industrial, computing and communication market segments.

    SMTC is a public company incorporated in Delaware with its shares traded
on the Nasdaq National Market System under the symbol SMTX and on the Toronto
Stock Exchange under the symbol SMX. For further information on SMTC
Corporation, please visit our website at www.smtc.com (http://www.smtc.com/)

    Note for Investors: The statements contained in this release that are not
purely historical, including our expectations regarding continued revenue and
earnings growth in 2007, are forward-looking statements which involve risk and
uncertainties that could cause actual results to differ materially from those
expressed in the forward-looking statements. These statements may be
identified by their use of forward-looking terminology such as "believes",
"expect", "may", "should", "would", "will", "intends", "plans", "estimates",
"anticipates" and similar words, and include, but are not limited to,
statements regarding the expectations, intentions or strategies of SMTC
Corporation. For these statements, we claim the protection of the safe harbor
for forward-looking statements provisions contained in the Private Securities
Litigation Reform Act of 1995. Risks and uncertainties that may cause future
results to differ from forward-looking statements include the challenges of
managing quickly expanding operations and integrating acquired companies,
fluctuations in demand for customers' products and changes in customers'
product sources, competition in the EMS industry, component shortages, and
others discussed in the Company's most recent filings with securities
regulators in the United States and Canada. The forward-looking statements
contained in this release are made as of the date hereof and the Company
assumes no obligation to update the forward-looking statements, or to update
the reasons why actual results could differ materially from those projected in
the forward-looking statements.



    
    SMTC Corporation

    Consolidated Balance Sheets as of
    (Expressed in thousands of U.S. dollars)


                                                       December     December
                                                       31, 2005     31, 2006
    -------------------------------------------------------------------------
    Assets

    Current assets:
    Accounts receivable - net                            26,899       45,160
    Inventories                                          33,168       42,851
    Prepaid expenses                                      1,698        1,280
    -------------------------------------------------------------------------
                                                         61,765       89,291
    Property, plant and equipment - net                  25,651       24,804
    Other assets                                          2,010        1,310
    Deferred income taxes                                   619          557
    -------------------------------------------------------------------------
                                                    $    90,045  $   115,962
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity

    Current liabilities:
    Accounts payable                                $    30,939  $    36,730
    Accrued liabilities                                  13,849       10,253
    Income taxes payable                                  1,203        1,979
    Current portion of long-term debt                     4,633       18,494
    Current portion of capital lease obligations          1,542          541
    -------------------------------------------------------------------------
                                                         52,166       67,997

    Long-term debt                                       23,857       22,543
    Capital lease obligations                                 -        1,531
    Commitments and contingencies

    Shareholders' equity:
    Capital stock                                        16,986       11,969
    Warrants                                             10,372       10,372
    Loans receivable                                         (5)          (5)
    Additional paid-in capital                          239,380      244,502
    Deficit                                            (252,711)    (242,947)
    -------------------------------------------------------------------------
                                                         14,022       23,891
    -------------------------------------------------------------------------
                                                    $    90,045  $   115,962
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    SMTC Corporation

    Consolidated Statements of Operations for the periods ended (Expressed in
    thousands of U.S. dollars, except number of shares and per share amounts)

                                Three months ended            Years ended
                                    December 31,              December 31,
    -------------------------------------------------------------------------
                                 2005         2006         2005         2006
    ----------------------------------------------- -------------------------

    Revenue               $    58,061  $    76,055  $   228,766  $   262,782
    Cost of sales              53,155       68,386      211,619      236,351
    -------------------------------------------------------------------------
    Gross profit                4,906        7,669       17,147       26,431
    Selling, general
     and administrative
     expenses                   2,908        3,640       13,139       15,162
    Amortization                    -            -            -            -
    Restructuring
     (recoveries)
     charges                       20            -           99       (1,350)
    Gain on sale of
     assets                         -            -          (12)      (1,228)
    Other expenses                  -            -            -          826
    -------------------------------------------------------------------------
    Operating earnings          1,978        4,029        3,921       13,021
    Interest expense            1,190        1,995        4,589        5,395
    -------------------------------------------------------------------------
    Earnings (loss) from
     continuing before
     income taxes                 788        2,034         (668)       7,626
    -------------------------------------------------------------------------
    Income tax
     (recovery) expense          (629)         (79)        (556)      (1,961)
    -------------------------------------------------------------------------
    Net (loss) earnings
     from continuing
     operations                 1,417        2,113         (112)       9,587
    -------------------------------------------------------------------------
    Net earnings from
     discontinued
     operations                     -            -            -          874
    -------------------------------------------------------------------------
    Net earnings (loss),
     also being
     comprehensive
     income (loss)        $     1,417  $     2,113  $      (112) $    10,461
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings
     (loss) per share
       - continuing
          operations      $      0.10  $      0.14  $     (0.01) $      0.65
       - discontinued
          operations      $         -  $         -  $         -  $      0.06
    -------------------------------------------------------------------------
    Basic earnings
     (loss) per share     $      0.10  $      0.14  $     (0.01) $      0.71
    Diluted earnings
     (loss) per share
       - continuing
          operations      $      0.10  $      0.14  $     (0.01) $      0.64
       - discontinued
          operations      $         -  $         -  $         -  $      0.06
    -------------------------------------------------------------------------
    Diluted earnings
     (loss) per share     $      0.10  $      0.14  $     (0.01) $      0.70

    Weighted average
     number of shares
     outstanding
      Basic                14,641,333   14,645,790   14,641,333   14,642,459
      Diluted              14,838,754   14,921,634   14,641,333   15,025,047



    SMTC Corporation

    Consolidated Statements of Cash Flows for the periods ended
    (Expressed in thousands of U.S. dollars)

                                Three months ended            Years ended
                                    December 31,              December 31,
    ----------------------------------------------- -------------------------
                                 2005         2006         2005         2006
    -------------------------------------------------------------------------
    Cash provided by
     (used in):
    Operations:
    Net earnings (loss)   $     1,417  $     2,113  $      (112) $    10,461
    Items not involving
     cash:
    Depreciation                1,173        1,231        4,943        4,688
    (Gain) loss on
     disposition of
     property, plant
     and equipment                 12            -           68       (1,228)
    Other                         247          (40)       1,131            6
    Deferred income
     taxes                       (479)          43         (484)          62
    Non-cash interest             730          900        1,753        1,949
    Stock-based compensation        -           75            -          224
    Discontinued operations         -            -            -         (874)
                          ---------------------------------------------------
                                3,100        4,322        7,299       15,288
    Change in non-cash
     operating working
     capital:
    Accounts receivable         3,769         (824)      (2,963)     (18,373)
    Inventories                (4,272)       6,903         (143)      (9,595)
    Prepaid expenses              (62)         354            4          418
    Income taxes
     recoverable/payable           64           56         (368)         776
    Accounts payable            3,148       (8,608)       4,996        5,791
    Accrued liabilities         1,835         (960)         660       (3,847)
    -------------------------------------------------------------------------
                                7,582        1,243        9,485       (9,542)

    Financing:
    Increase (decrease)
     in long-term debt         (3,762)        (265)           -       14,972
    Repayment of
     long-term debt            (3,227)        (167)      (6,115)      (3,065)
    Principal payment
     of capital lease
     obligations                 (418)        (283)      (1,897)      (1,686)
    Net proceeds from
     issuance of capital
     stock                          -            6            -            6
    Debt issuance and
     deferred financing
     costs                          -            -            -         (606)
    Proceeds from
     discontinued
     operations                     -            -            -          874
    -------------------------------------------------------------------------
                               (7,407)        (709)      (8,012)      10,495
    Investment:
    Purchase of property,
     plant and equipment         (175)        (534)      (2,485)      (2,181)
    Proceeds from sale
     of property, plant
     and equipment                  -            -        1,012        1,228
    -------------------------------------------------------------------------
                                 (175)        (534)      (1,473)        (953)
    -------------------------------------------------------------------------
    (Decrease) Increase
     in cash and cash
     equivalents                    -            -            -            -
    Cash and cash
     equivalents,
     beginning of period            -            -            -            -
    -------------------------------------------------------------------------
    Cash, end of the
     period               $         -  $         -  $         -  $         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Supplementary Information:
    Reconciliation of EBITDA

                                Three months ended            Years ended
                                    December 31,              December 31,
    ----------------------------------------------- -------------------------
                                 2005         2006         2005         2006
    -------------------------------------------------------------------------
    Operating earnings    $     1,978  $     4,029  $     3,921  $    13,021
    Add:
      Depreciation              1,173        1,231        4,943        4,688
      Restructuring
       charges
      (recoveries)                 20            -           99       (1,350)
      Gain on sale
       of assets                    -            -          (12)      (1,228)
      Other                         -            -            -          826
    -------------------------------------------------------------------------
    EBITDA                      3,171        5,260        8,951       15,957
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Jane Todd, Senior Vice President Finance and
Chief Financial Officer, (905) 479-1810, jane.todd@smtc.com

Organization Profile

SMTC CORPORATION

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