SMTC reports Q2 - revenue up and return to profitability

SMTC Corporation(1) (Nasdaq: SMTX, TSE: SMX) reported revenue of $57.0 million and net income of $0.3 million, or $0.02 per share, for the second quarter ended July 3, 2005. This compares with revenue of $49.1 million and a net loss of $2.6 million, or $0.18 per share, for the previous quarter and revenue of $66.3 million and net income of $1.0 million, or $0.11 per share, for the quarter ended July 4, 2004. Net earnings for the second quarter of 2004 included earnings from discontinued operations of $0.8 million, or $0.09 per share. Revenue increased quarter over quarter by 16%, or approximately $7.9 million, resulting in a solid increase in earnings from continuing operations compared with the previous quarter and the second quarter of 2004.
 
Gross profit for the second quarter of 2005 was $4.8 million, or 8.4% of revenue, compared with $2.0 million, or 4.1% of revenue, for the previous quarter and $7.3 million, or 11.0% of revenue, for the second quarter of 2004.

The Company generated cash from operations of $3.7 million during the second quarter of 2005 compared with a use of cash from operations of $4.3 million and $5.3 million, respectively, during the first quarter of 2005 and the second quarter of 2004. Cash generated during the second quarter of 2005 was used to reduce long-term debt and capital lease obligations by $1.6 million and invest $2.1 million in capital assets. Amounts outstanding under the revolving credit facility at July 3, 2005 were $8.4 million compared with $9.3 million at April 3, 2005.

"We are pleased with our results for the second quarter which came in slightly above our plan," stated John Caldwell, President and Chief Executive Officer. "This is our second consecutive quarter of growth, the result of strong orders from both long standing and new customers and the positive effect of cost containment measures completed in previous quarters. We expect continuing growth for the balance of the year and improved bottom line performance. We wish to express our appreciation to our customers, suppliers and employees for their support through the Company's transformation period and look forward to further progress in the quarters ahead."

"This was a quarter of significant financial improvement across the board - returning to profitability, sequential growth, cash generation, improved working capital and debt reduction," said Jane Todd, Senior Vice President and Chief Financial Officer. "We believe we have a solid financial base and capability which we can continue to grow the business."