SMTC Reports Second Quarter Fiscal 2016 Results


 TORONTO, Aug. 08, 2016 (GLOBE NEWSWIRE) -- SMTC Corporation (Nasdaq:SMTX), a global electronics manufacturing services provider, today announced second quarter 2016 results.

Second Quarter Fiscal 2016 Results Summary:

  • Revenue of $43.6 million
  • Gross Profit of $3.1 million
  • Net loss of $0.6 million
  • Adjusted EBITDA of $0.9 million
  • Cash flow from operations of $3.1 million
  • Debt, net of cash of $10.6 million

Revenue for the second quarter was $43.6 million compared to $57.7 million in the second quarter of the prior year. The decrease in revenue was primarily the result of reduced revenues from one former and one exiting customer and another customer’s product which has reached end of life.  The decreases were partially offset by increases in new customer revenue and net volume increases with existing customers. 

Gross profit was $3.1 million or 7.1% for the second quarter compared to $5.4 million or 9.4% for the same period in the prior year.  Adjusted gross profit was $3.1 million or 7.2% for the second quarter compared to $4.6 million or 8.0% for the second quarter of the prior year.  The reduction in gross profit in the second quarter of 2016 was the result of product mix and the impact of covering our fixed costs with lower revenues partially offset by improved manufacturing efficiencies and reduced direct labor cost.   

Net loss was $0.6 million for the second quarter of 2016 compared to a net income of $1.0 million for the second quarter in the prior year.  The 2016 second quarter net loss of $0.6 million and the 2015 second quarter net income of $1.0 million included unrealized foreign exchange loss and gain of $0.05 and $0.8 million, respectively on unsettled forward exchange contracts. 

Adjusted EBITDA was $0.9 million for the second quarter of 2016 compared to $1.8 million for the same period in the prior year which was mainly the result of reduced revenues. 

Chief Executive Officer Sushil Dhiman stated “We experienced lower revenue in the quarter due to product ramp delays with some of our customers in addition to the transfer of one customer to a consignment model.  I am pleased with the sequential revenue growth over the first quarter of 2016 and remain confident that revenue will continue to increase quarter over quarter for the remainder the year.”

Cash flow from operations was $3.1 million in the second quarter compared to $0.2 million in the second quarter of the prior year due to continued improved working capital management.

Debt, net of cash was $10.6 million in the second quarter compared to $17.2 million for the second quarter of the prior year.

Chief Financial Officer Roger Dunfield stated “We continue to strengthen our balance sheet  as we actively improve our cash cycle days resulting in the generation of cash flow from operations during the quarter and the pay down of debt.  We are well positioned to support additional growth for the remainder of the year.” 

Non-GAAP information

Adjusted EBITDA, Adjusted Gross Profit and Adjusted Gross Profit percentage are non-GAAP measures.  Adjusted EBITDA is computed as net income (loss) from continuing operations excluding depreciation and amortization, restructuring charges, unrealized foreign exchange gains/losses on unsettled forward foreign exchange contracts, stock based compensation, interest and income tax expense.  SMTC Corporation has provided in this release a non-GAAP calculation of Adjusted EBITDA as supplemental information regarding the operational performance of SMTC’s core business. A reconciliation of Adjusted EBITDA to net earnings (loss) is included in the attachment.  Adjusted Gross Profit is computed as gross profit excluding unrealized gains or losses on unsettled forward foreign exchange contracts.  Adjusted Gross Profit percentage is computed as Adjusted Gross Profit divided by revenue.  A reconciliation of Adjusted Gross Profit to gross profit is included in the attachment. Management uses these non-GAAP financial measures internally in analyzing SMTC’s financial results to assess operational performance and liquidity as well as to provide a consistent method of comparison to historical periods and to the performance of competitors and peer group companies.  SMTC believes that these non-GAAP financial measures are useful for management and investors in assessing SMTC’s performance and when planning, forecasting and analyzing future periods.  SMTC believes these non-GAAP financial measures are useful to investors because it allows for greater transparency with respect to key financial metrics we use in making operating decisions and because investors and analysts use it to help assess the health of our business.  Non-GAAP measures are subject to limitations as these measures are not in accordance with, or an alternative for, United States Generally Accepted Accounting Principles (US GAAP) and may be different from non-GAAP measures used by other companies. Because of these limitations, investors should consider Adjusted EBITDA, Adjusted Gross Profit and Adjusted Gross Profit percentage along with other financial performance measures, including revenue, gross profit and net income (loss), as reflected in SMTC’s consolidated financial statements prepared in accordance with US GAAP.

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. For these statements, we claim the protection of the safe harbor for forward-looking statements 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 risks and uncertainties discussed in SMTC's most recent filings with the SEC. The forward-looking statements contained in this release are made as of the date hereof and SMTC 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.

About SMTC Corporation: 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 manufacturing facilities span a broad footprint in the United States, China and Mexico, with approximately 1,170 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. For further information on SMTC Corporation, please visit our website at www.smtc.com (http://www.smtc.com/).

 

Consolidated Statements of Operations and Comprehensive Income (Loss)     
(Unaudited)         
  Three months ended Six months ended 
(Expressed in thousands of U.S. dollars, except number of shares and per share amounts)July 03,
 2016
 June 28,
2015
 July 03, 
2016
 June 28, 
2015
 
          
Revenue $  43,615  $  57,741  $  85,535  $  106,455  
Cost of sales    40,526     52,311     77,566     97,397  
Gross profit    3,089     5,430     7,969     9,058  
Selling, general and administrative expenses     3,360     3,961     6,913     7,626  
Loss (gain) on sale of property,plant and equipment    -     3     (5)    3  
Restructuring charges    -     -     176     -  
Operating earnings (loss)    (271)    1,466     885     1,429  
Interest expense    203     304     434     614  
Earnings (loss) before income taxes    (474)    1,162     451     815  
Income tax expense (recovery)         
Current    99     157     103     329  
Deferred    31     36     (15)    (59) 
     130     193     88     270  
Net earnings (loss), also being comprehensive income (loss) $  (604) $  969  $  363  $  545  
          
Basic earnings(loss) per share $  (0.04) $  0.06  $  0.02  $  0.03  
Diluted earnings (loss) per share $  (0.04) $  0.06  $  0.02  $  0.03  
          
Weighted average number of shares outstanding         
Basic    16,510,180   16,417,276   16,498,032   16,417,276  
Diluted    16,510,180   16,417,276   17,546,778   16,417,276  
          

 

Consolidated Balance Sheets      
(Unaudited)      
       
(Expressed in thousands of U.S. dollars)  July 03, 
2016
 January 03,
2016
 
Assets      
       
Current assets:      
Cash  $  3,850  $  6,099  
Restricted cash     531     805  
Accounts receivable - net     26,499     29,885  
Inventories      24,752     25,877  
Prepaid expenses and other assets      1,897     1,983  
Derivative assets     139     -  
Income taxes receivable     329     461  
Deferred income taxes - net     367     352  
      58,364     65,462  
Property, plant and equipment - net     15,634     16,443  
Deferred financing costs - net     51     68  
   $  74,049  $  81,973  
Liabilities and Shareholders' Equity      
       
Current liabilities:      
Accounts payable  $  26,687  $  31,045  
Accrued liabilities     4,444     5,562  
Derivative liabilities     1,227     2,087  
Income taxes payable     319     502  
Revolving credit facility     8,972     10,721  
Current portion of long-term debt     1,000     1,000  
Current portion of capital lease obligations     660     538  
      43,309     51,455  
Long-term debt     3,500     4,000  
Capital lease obligations     357     222  
       
Shareholders’ equity:      
Capital stock     391     391  
Additional paid-in capital     264,729     264,505  
Deficit     (238,237)    (238,600) 
      26,883     26,296  
   $  74,049  $  81,973  
       

 

Consolidated Statements of Cash Flows         
(Unaudited)        
  Three months ended Six months ended
(Expressed in thousands of U.S. dollars)        
Cash provided by (used in): July 03, 
2016
 June 28, 
2015
 July 03,
 2016
 June 28, 
2015
Operations:        
Net earnings (loss) $  (604) $  969  $  363  $  545 
Items not involving cash:        
Depreciation    1,021     969     2,021     1,995 
Unrealized foreign exchange loss (gain) on unsettled forward        
  exchange contracts    47     (789)    (999)    (471)
Loss (gain) on sale of property, plant and equipment    -     3     (5)    3 
Deferred income taxes    31     36     (15)    (59)
Amortization of deferred financing fees    8     7     17     15 
Stock-based compensation    128     128     224     218 
Change in non-cash operating working capital:        
Accounts receivable    252     (5,291)    3,386     (327)
Inventories    668     690     1,125     (2,526)
Prepaid expenses and other assets    63     (55)    86     (7)
Income taxes payable    (14)    (11)    (51)    (27)
Accounts payable    1,371     3,458     (4,303)    2,222 
Accrued liabilities    94     40     (1,086)    384 
     3,065     154     763     1,965 
Financing:        
Net (repayment) advances of revolving credit facility    (801)    1,949     (1,749)    710 
Repayment of long-term debt    (250)    -     (500)    - 
Principal payment of capital lease obligations    (122)    (278)    (252)    (635)
Proceeds from sales leaseback    509     -     509     - 
Deferred financing costs    -     (10)    -     (10)
     (664)    1,661     (1,992)    65 
Investing:        
Change in restricted cash    164     -     274     - 
Purchase of property, plant and equipment    (791)    (888)    (1,363)    (1,378)
Proceeds from sale of property, plant and equipment    -     3     69     3 
     (627)    (885)    (1,020)    (1,375)
Increase (decrease)  in cash    1,774     930     (2,249)    655 
Cash, beginning of period    2,076     5,172     6,099     5,447 
Cash, end of the period $  3,850  $  6,102  $  3,850  $  6,102 
    

 

Supplementary Information:        
         
Reconciliation of Adjusted EBITDA         
         
     
  Three months ended Six months ended
  July 03,
2016
 June 28,
2015
 July 03, 
2016
 June 28,
2015
Net earnings (loss) $  (604) $  969  $  363  $  545 
Add (deduct):        
Stock compensation expense    128     128     224     218 
Interest    203     304     434     614 
Unrealized foreign exchange loss (gain)         
on unsettled forward exchange contracts  47   (789)  (999)  (471)
Income tax expense    130     193     88     270 
Depreciation    1,021     969     2,021     1,995 
Restructuring charges    -     -     176     - 
Adjusted EBITDA    925     1,774     2,307     3,171 
         

 

Supplementary Information:        
         
Reconciliation of Adjusted Gross Profit        
     
  Three months ended Six months ended
  July 03, 
2016
 June 28, 
2015
 July 03, 
2016
 June 28, 
2015
         
Gross Profit $  3,089  $  5,430  $  7,969  $  9,058 
Add (deduct):        
Unrealized foreign exchange loss (gain)         
on unsettled forward exchange contracts    47     (789)    (999)    (471)
Adjusted Gross Profit    3,136     4,641     6,970     8,587 
         

 


            

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