SMTC Corporation Reports Third Quarter Results



    TORONTO, Nov. 12 /CNW/ - SMTC Corporation (Nasdaq:   SMTX) (TSX: SMX), a
global electronics manufacturing services (EMS) provider, today reported
revenue of $54.0 million and a net loss of $1.2 million, or ($0.08) per share,
for the third quarter ended September 30, 2007. Third quarter net loss 
includes a $1.0 million gain for stock based compensation, the result of
marked-to-market deferred stock liabilities offset in part by approximately
$0.6 million arising from restructuring charges and the write off of certain
deferred financing costs. Third quarter 2006 revenue was $65.7 million and net
income of $6.1 million, or $0.41 per share including certain one-time net
gains aggregating $5.0 million. In the second quarter of 2007, the Company
reported revenue of $66.1 million and net income of $0.1 million, or $0.01 per
share, including a $1.0 million charge for stock based compensation.
    Gross profit for the third quarter of 2007 was $3.4 million, or 6.3% of
revenue, compared with $5.9 million, or 8.9% or revenue, for the previous
quarter and $5.9 million, or 9.0% of revenue, for the third quarter of 2006.
    "It was a particularly difficult quarter as almost all of our customers
reduced orders due to lower end customer demand or to adjust inventory levels.
We believe the changes in end customer demand is not systemic nor the result
of macro economic factors. We took action early in the quarter to lower
expenses balancing the requirement to adjust costs while retaining capability
to support sequential growth expected in the fourth quarter", stated
John Caldwell, President and Chief Executive Officer. "While our third quarter
results are unsatisfactory, we maintained our share of business with all
customers."
    "Through continuing focus on debt reduction, the Company generated over
$10 million in positive cash flow largely through lowering working capital
levels", stated Jane Todd, Senior Vice President Finance and Chief Financial
Officer. "Our total debt level at quarter end of $23.1 million is at its
lowest in eight years."
    "For the fourth quarter, we expect to substantially increase sequential
revenue, although we are unlikely to attain the record level in the fourth
quarter of 2006. We also expect to return to satisfactory margin and
profitability levels", stated John Caldwell.

    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 facilities span a broad footprint in the
United States, Canada, and Mexico, and a partnering relationship in 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.


    
    Consolidated Statements of Operations
    (Unaudited)

                          Three months ended           Nine months ended
    -------------------------------------------------------------------------
    (Expressed in
     thousands of U.S.
     dollars, except
     number of
     shares and per    September 30,   October 1,  September 30,   October 1,
     share amounts)        2007          2006          2007          2006
    -------------------------------------------------------------------------

    Revenue            $    54,046   $    65,677   $   189,633   $   186,727
    Cost of sales           50,621        59,815       173,886       167,965
    -------------------------------------------------------------------------
    Gross profit             3,425         5,862        15,747        18,762
    Selling, general and
     administrative
     expenses                2,676         3,381        10,366        11,522
    -------------------------------------------------------------------------
    Restructuring
     (recoveries)
     charges                   242        (1,350)          242        (1,350)
    Gain on sale of land         -        (1,228)            -        (1,228)
    Loss on
     extinguishment
     of debt                   371             -           371             -
    Other expenses               -           826             -           826
    -------------------------------------------------------------------------
    Operating earnings         136         4,233         4,768         8,992

    Interest expense         1,265         1,009         4,529         3,400
    -------------------------------------------------------------------------
    Earnings before
     income taxes           (1,129)        3,224           239         5,592
    Income tax (recovery)
     expense
    Current                     64        (1,963)       (1,381)       (1,882)
    Deferred                     -             -           (98)            -
    -------------------------------------------------------------------------
                                64        (1,963)       (1,479)       (1,882)
    -------------------------------------------------------------------------
    Net (loss) earnings
     from continuing
     operations             (1,193)        5,187         1,718         7,474
    Net earnings from
     discontinued
     operations                  -           874             -           874
    -------------------------------------------------------------------------
    Net earnings, also
     being comprehensive
     income            $    (1,193)  $     6,061   $     1,718   $     8,348
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings
     per share         $     (0.08)  $      0.41   $      0.12   $      0.57
    Diluted earnings
     per share         $     (0.08)  $      0.41   $      0.11   $      0.56

    Weighted average
     number of shares
     outstanding
    Basic               14,646,333    14,641,333    14,646,333    14,641,333
    Diluted             14,646,333    14,897,406    14,947,018    14,877,066



    Consolidated Balance Sheets as of
    (Unaudited)

    -------------------------------------------------------------------------
                                                  September 30,  December 31,
    (Expressed in thousands of U.S. dollars)          2007          2006
    -------------------------------------------------------------------------
    Assets

    Current assets:
    Cash                                           $       328   $         -
    Accounts receivable - net                           34,887        45,160
    Inventories                                         36,852        42,851
    Prepaid expenses                                     1,497         1,280
    -------------------------------------------------------------------------
                                                        73,564        89,291
    Property, plant and equipment - net                 23,358        24,804
    Deferred financing fees                              1,438         1,310
    Deferred income taxes                                  652           557
    -------------------------------------------------------------------------
                                                   $    99,012   $   115,962
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity

    Current liabilities:
    Accounts payable                               $    39,476   $    36,730
    Accrued liabilities                                  8,087        10,253
    Income taxes payable                                   412         1,979
    Current portion of long-term debt                    3,071        22,405
    Current portion of capital lease obligations           645           541
    -------------------------------------------------------------------------
                                                        51,691        71,908

    Long-term debt                                      20,008        18,632
    Capital lease obligations                            1,508         1,531
    Commitments and contingencies

    Shareholders' equity:
    Capital stock                                        7,854        11,969
    Warrants                                            10,372        10,372
    Loans receivable                                        (5)           (5)
    Additional paid-in capital                         248,812       244,501
    Deficit                                           (241,228)     (242,946)
    -------------------------------------------------------------------------
                                                        25,805        23,891
    -------------------------------------------------------------------------
                                                   $    99,012   $   115,962
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows
    (Unaudited)

                          Three months ended          Nine months ended
    -------------------------------------------------------------------------
    (Expressed in
     thousands of
     U.S. dollars)
    -------------------------------------------------------------------------
    Cash provided by   September 30,   October 1,  September 30,   October 1,
     (used in):            2007          2006          2007          2006
    -------------------------------------------------------------------------
    Operations:
    Net earnings
     (loss)            $    (1,193)  $     6,061   $     1,718   $     8,348
    Items not
     involving cash:
    Depreciation             1,225         1,159         3,756         3,457
    Loss (gain) on
     disposition of
     property, plant
     and equipment               9        (1,228)            9        (1,228)
    Other                        -             -             -            46
    Deferred income
     taxes                       8           (18)          (95)           19
    Non-cash interest          422           156         1,518         1,049
    Stock-based
     compensation           (1,003)           94           135           392
    Loss on
     extinguishment
     of debt                   269             -           269             -
                      -------------------------------------------------------
                              (263)        6,224         7,310        12,083

    Change in non-
     cash operating
     working capital:
      Accounts
       receivable            4,636        (5,795)       10,273       (17,549)
      Inventories             (310)       (3,602)        5,999       (16,498)
      Prepaid expenses          96           (92)         (217)           64
      Income taxes
       recoverable/
       payable                  58           756        (1,567)          720
      Accounts payable       5,057         5,881         2,746        14,399
      Accrued
       liabilities             539           331        (2,104)       (3,130)
    Net proceeds from
     discontinued
     operations                  -          (874)            -          (874)
    -------------------------------------------------------------------------
                             9,813         2,829        22,440       (10,785)
    Financing:

    (Decrease)
     increase in
     long-term debt         21,500        (2,456)       21,500        15,237
    Repayment of
     long-term debt        (30,378)         (998)      (40,012)       (2,898)
    Principal payment
     of capital lease
     obligations              (158)         (540)         (480)       (1,403)
    Net proceeds from
     discontinued
     operations                  -           874             -           874
    Debt issuance and
     deferred financing
     costs                  (1,362)         (606)       (1,362)         (606)
    -------------------------------------------------------------------------
                           (10,398)       (3,726)      (20,354)       11,204
    Investing:

    Purchase of
     property, plant
     and equipment            (287)         (331)       (1,758)       (1,647)
    Proceeds from
     sale of property,
     plant and
     equipment                   -         1,228             -         1,228
    -------------------------------------------------------------------------
                              (287)          897        (1,758)         (419)
    -------------------------------------------------------------------------
    Increase in cash
     and cash
     equivalents              (872)            -           328             -
    Cash and cash
     equivalents,
     beginning of
     period                  1,200             -             -             -
    -------------------------------------------------------------------------
    Cash, end of
     the period        $       328   $         -   $       328   $         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Supplementary Information:

    Reconciliation of EBITDA

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

                           Three months ended          Nine months ended
                      --------------------------- ---------------------------

                       September 30,   October 1,  September 30,   October 1,
                           2007          2006          2007          2006
    --------------------------------------------- ---------------------------
    Operating
     earnings          $       136   $     4,233   $     4,768   $     8,992
    Add:
      Depreciation           1,225         1,159         3,756         3,457
      Loss on
       extinguishment
       of debt                 371             -           371             -
    -------------------------------------------------------------------------
    EBITDA                   1,732         5,392         8,895        12,449
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

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

Organization Profile

SMTC CORPORATION

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