SMTC Reports Second Quarter Results



    Reports Year over Year Growth in Revenue, Double Digit Growth YTD and
    Cash Generation

    TORONTO, Aug. 7 /CNW/ - SMTC Corporation (Nasdaq: SMTX, TSE: SMX), a
global electronics manufacturing services provider, announced today its
results for the second quarter ended July 1, 2007 which are expressed in US
dollars.
    SMTC Corporation reported revenue of $66.1 million and net income of
$0.1 million, or $0.01 per share, for the second quarter ended July 1, 2007,
compared with revenue of $61.1 million and net income of $1.3 million, or
$0.09 per share, for the quarter ended July 2, 2006. Second quarter net income
includes a $1.0 million charge for stock-based compensation, primarily the
result of marked-to-market deferred stock unit liabilities reflecting the
sharp rise in the Company's stock price during the second quarter.

    
    Second Quarter Highlights

    -   Revenue growth in second quarter revenue to $66.1 million, an 8%
        increase over the second quarter of 2006. This growth was led by a
        diversified, long-standing customer base and new customers added in
        late 2006.
    -   12% revenue growth for the first six months of 2007 over the
        comparable period last year
    -   Net income of $0.1 million, or $0.01 per share, for the second
        quarter ended July 1, 2007, compared with net income of $1.3 million,
        or $0.09 per share, for the quarter ended July 2, 2006. Second
        quarter net income includes a $1.0 million charge for stock-based
        compensation, primarily the result of marked-to-market deferred stock
        unit liabilities reflecting the sharp rise in the Company's stock
        price during the second quarter.
    -   Net income for the first half of the year increased by 27% to
        $2.9 million compared to $2.3 million in the same period of 2006.
    -   Gross profit of $5.8 million, or 8.8% of revenue for the second
        quarter of 2007, compared with near record profit margins in 2006 of
        $6.8 million, or 11.1% of revenue, for the second quarter of 2006.
    -   This quarter's margins were affected by sales mix and marginally
        higher manufacturing costs.
    -   EBITDA(*) of $2.9 million in the quarter, compared with $3.8 million
        last year. EBITDA(*) for the first half of the year increased to
        $7.2 million, compared to $7.1 million in the same period of 2006.
    -   Generated cash from operations of $8.7 million in the quarter and
        $12.6 million for the first half of 2007. This compares favorable
        with cash usage in the same periods last year of $7.6 million and
        $13.6 million respectively.
    

    "Excluding the effect of the significant charge for stock based
compensation, our first half of 2007 results met our expectations with
continuing growth in both revenue and earnings year over year. Our focus on
improving working capital is showing positive results with over $12 million in
positive cash flow for the first half of the year," stated John Caldwell,
President and Chief Executive Officer.
    "The second quarter marked a significant strengthening of our balance
sheet," stated Jane Todd, Senior Vice President Finance and Chief Financial
Officer. "The Company generated $8.7 million from operations, including an
$8.2 million reduction in inventory. We also successfully negotiated a new,
improved five year credit facility providing the corporation with a solid long
term debt structure with increased flexibility and expected reduction in
interest expense of approximately $1 million on an annualized basis. This
positions us well for future growth."
    "We expect our second half revenue to be affected by some softening in
certain of our customers' end market demand. Accordingly, the back half of the
year is expected to be more challenging than originally anticipated with
revenue and earnings excluding stock-based compensation somewhat lower than
the first six months of 2007. Nevertheless, we expect to produce revenue
growth for the full year and reduce debt through significant positive cash
flow. Early in the third quarter, we trimmed costs to align our cost structure
with forecast revenue," stated John Caldwell. Our business is ultimately tied
to the success of our customers. We have solid relationships with our
customers and continue to add new customers every year. We are confident SMTC
will continue our growth trend in 2008.

    
    (*) 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 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.

    Company Financials To Follow


    
    Consolidated Statements of Operations
    (Unaudited)

                              Three months ended            Six months ended
    -------------------------------------------------------------------------
    (Expressed in
     thousands of U.S.
     dollars, except
     number of shares
     and per share          July 1,       July 2,       July 1,       July 2,
     amounts)                 2007          2006          2007          2006
    -------------------------------------------------------------------------
    Revenue            $    66,110   $    61,143   $   135,587   $   121,050
    Cost of sales           60,265        54,308       123,265       108,150
    -------------------------------------------------------------------------
    Gross profit             5,845         6,835        12,322        12,900
    Selling, general
     and administrative
     expenses                4,118         4,229         7,690         8,141
    -------------------------------------------------------------------------
    Operating earnings       1,727         2,606         4,632         4,759
    Interest expense         1,582         1,227         3,264         2,391
    -------------------------------------------------------------------------
    Earnings before
     income taxes              145         1,379         1,368         2,368
    Income tax
     (recovery)
     expense
    Current                     35            43        (1,445)           81
    Deferred                     -                         (98)            -
    -------------------------------------------------------------------------
                                35            43        (1,543)           81
    -------------------------------------------------------------------------
    Net earnings,
     also being
     comprehensive
     income            $       110   $     1,336   $     2,911   $     2,287
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings
     per share         $      0.01   $      0.09   $      0.20   $      0.16
    Diluted earnings
     per share         $      0.01   $      0.09   $      0.20   $      0.15
    Weighted average
     number of shares
     outstanding
    Basic               14,646,333    14,641,333     14,646,333   14,641,333
    Diluted             14,994,949    14,909,131     14,923,935   14,872,804



    Consolidated Balance Sheets as of
    (Unaudited)
    -------------------------------------------------------------------------
                                                        July 1,  December 31,
    (Expressed in thousands of U.S. dollars)              2007          2006
    -------------------------------------------------------------------------
    Assets

    Current assets:
    Cash                                           $     1,200   $         -
    Accounts receivable - net                           39,523   $    45,160
    Inventories                                         36,542        42,851
    Prepaid expenses                                     1,593         1,280
    -------------------------------------------------------------------------
                                                        78,858        89,291
    Property, plant and equipment - net                 23,744        24,804
    Deferred financing fees                                640         1,310
    Deferred income taxes                                  660           557
    -------------------------------------------------------------------------
                                                   $   103,902   $   115,962
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity

    Current liabilities:
    Accounts payable                               $    34,419   $    36,730
    Accrued liabilities                                  8,616        10,253
    Income taxes payable                                   354         1,979
    Current portion of long-term debt                    3,071        22,405
    Current portion of capital lease obligations           579           541
    -------------------------------------------------------------------------
                                                        47,039        71,908

    Long-term debt                                      28,759        18,632
    Capital lease obligations                            1,171         1,531
    Commitments and contingencies

    Shareholders' equity:
    Capital stock                                        8,990        11,969
    Warrants                                            10,372        10,372
    Loans receivable                                        (5)           (5)
    Additional paid-in capital                         247,611       244,501
    Deficit                                           (240,035)     (242,946)
    -------------------------------------------------------------------------
                                                        26,933        23,891
    -------------------------------------------------------------------------
                                                   $   103,902   $   115,962
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows
    (Unaudited)

                              Three months ended            Six months ended
    -------------------------------------------------------------------------
    (Expressed in
     thousands of U.S.
     dollars)
    -------------------------------------------------------------------------
    Cash provided by        July 1,       July 2,       July 1,       July 2,
     (used in):               2007          2006          2007          2006
    -------------------------------------------------------------------------
    Operations:
    Net earnings
     (loss)            $       110   $     1,336   $     2,911   $     2,287
    Items not
     involving cash:
    Depreciation             1,222         1,153         2,531         2,298
    Other                        -             -             -            46
    Deferred income
     taxes                     (15)           37          (103)           37
    Non-cash interest          812           724         1,096           893
    Stock-based
     compensation            1,001            57         1,067           117
                       --------------------------  --------------------------
                             3,130         3,307         7,502         5,678
    Change in non-
     cash operating
     working capital:
      Accounts
       receivable            5,393       (4,753)         5,637       (11,754)
      Inventories            8,251      (10,592)         6,309       (12,896)
      Prepaid
       expenses               (326)         591           (313)          156
      Income taxes
       recoverable/
       payable                  32           18         (1,625)          (36)
      Accounts payable      (5,097)       5,347         (2,312)        8,518
      Accrued
       liabilities          (2,726)      (1,533)        (2,572)       (3,280)
    -------------------------------------------------------------------------
                             8,657       (7,615)        12,626       (13,614)
    Financing:
    (Decrease) increase
     in long-term debt           -        9,968              -        17,693
    Repayment of
     long-term debt         (6,103)        (911)        (9,633)       (1,900)
    Principal payment
     of capital lease
     obligations              (192)        (437)          (322)         (863)
    -------------------------------------------------------------------------
                            (6,295)       8,620         (9,955)       14,930
    Investing:
    Purchase of
     property, plant
     and equipment          (1,162)      (1,005)        (1,471)       (1,316)
    -------------------------------------------------------------------------
                            (1,162)      (1,005)        (1,471)       (1,316)
    -------------------------------------------------------------------------
    Increase in cash
     and cash
     equivalents             1,200            -          1,200             -
    Cash and cash
     equivalents,
     beginning of
     period                      -            -              -             -
    -------------------------------------------------------------------------
    Cash, end of
     the period        $     1,200   $        -    $     1,200   $         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Supplementary Information:

    Reconciliation of EBITDA

    -------------------------------------------------------------------------

                              Three months ended            Six months ended
                       --------------------------  --------------------------

                            July 1,       July 2,       July 1,       July 2,
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Operating earnings $     1,727   $     2,606   $     4,632   $     4,759
    Add:
    Depreciation             1,222         1,153         2,531         2,298
    -------------------------------------------------------------------------
    EBITDA                   2,949         3,759         7,163         7,057
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Jane Todd, Senior Vice President Finance and
Chief Financial Officer, (905) 413-1300, jane.todd@smtc.com

Organization Profile

SMTC CORPORATION

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