SMTC Reports Positive First Quarter Results

Expects Sequential Second Quarter Revenue Growth

TORONTO, May 11 /CNW/ - SMTC Corporation (Nasdaq: SMTX, TSE: SMX), a global electronics manufacturing services provider, today reported 2010 first quarter results. Revenue for the first quarter was $61.4 million, increasing sequentially by $10.2 million or 20% and $16.5 million or 37% higher than the first quarter of 2009. Net income for the quarter, adjusted to exclude the $.6 million non-cash stock based compensation charge, was $2.6 million, or $0.18 per share. This compared to net income of $1.7 million or $0.12 per share in the fourth quarter of 2009 when adjusted to exclude a $0.5 million tax recovery. The net loss of the comparable period last year was $2.5 million and included restructuring charges and losses from discontinued operations approximating the net loss reported. Gross profit for the first quarter at $6.4 million compares with $5.9 million in the previous quarter and $3.9 million for the first quarter of 2009. Expressed as a percentage of revenue, gross margin remained strong and well ahead of the comparable period last year.

"As expected, SMTC produced strong first quarter results with revenue increasing 20% sequentially, the result of increased orders for most of SMTC's longstanding customers combined with five newer customers ramping production. This was our third consecutive quarter of robust revenue growth," stated John Caldwell, President and Chief Executive Officer. "We converted this increased revenue into more than a 50% sequential increase in net income adjusted for stock based compensation and income tax recoveries through leveraging our current manufacturing capacity and efficient cost structure."

"Despite continuing higher inventory levels to support continuing quarterly growth, SMTC generated $3.7 million in cash during the quarter with most being applied to reduce debt," stated Jane Todd, SVP Finance and Chief Financial Officer.

"We continue to see signs of economic recovery. We experienced wide spread increased customer orders in the first quarter and thus far in the second quarter. With this strong order intake combined with a large opening order backlog, we expect continued sequential second quarter revenue growth. Although we have less visibility beyond the second quarter, at this point we expect aggregate revenue in the last two quarters at least to attain the first half level," stated Mr. 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, Mexico, and China, with more than 1000 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 and Comprehensive Income
    (Unaudited)
                                                        Three months ended
    -------------------------------------------------------------------------
    (Expressed in thousands of U.S. dollars,           April 4,      April 5,
     except number of shares and per share amounts)     2010          2009
    -------------------------------------------------------------------------
    Revenue                                       $     61,354  $     44,938
    Cost of sales                                       54,988        40,998
    -------------------------------------------------------------------------
    Gross profit                                         6,366         3,940
    Selling, general and administrative expenses         3,730         3,519
    Restructuring charges                                    -           815
    -------------------------------------------------------------------------
    Operating earnings (loss)                            2,636          (394)
    Interest expense                                       489           326
    -------------------------------------------------------------------------
    Earnings (loss) before income taxes                  2,147          (720)
    Income tax expense (recovery)
    Current                                                 95            29
    Deferred                                               (15)          135
    -------------------------------------------------------------------------
                                                            80           164
    -------------------------------------------------------------------------
    Net earnings (loss) from continuing operations       2,067          (884)
    Net loss from discontinued operations                    -        (1,604)
    -------------------------------------------------------------------------
    Net income (loss), also being comprehensive
     income (loss)                                $      2,067  $     (2,488)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings (loss) per share
    - continuing operations                       $       0.14  $      (0.06)
    - discontinued operations                     $          -  $      (0.11)
    -------------------------------------------------------------------------
    Basic earnings (loss) per share               $       0.14  $      (0.17)

    Diluted earnings (loss) per share
    - continuing operations                       $       0.14  $      (0.06)
    - discontinued operations                     $          -  $      (0.11)
    -------------------------------------------------------------------------
    Diluted earnings (loss) per share             $       0.14  $      (0.17)
    Weighted average number of shares outstanding
    Basic                                           14,654,392    14,646,333
    Diluted                                         14,819,960    14,646,333



    Consolidated Balance Sheets as of
    (Unaudited)
    -------------------------------------------------------------------------
                                                       April 4,    January 3,
    (Expressed in thousands of U.S. dollars)            2010          2010
    -------------------------------------------------------------------------
    Assets

    Current assets:
    Cash                                          $      1,837  $      1,589
    Accounts receivable - net                           33,380        37,688
    Inventories                                         45,506        37,026
    Prepaid expenses                                     1,448         2,122
    -------------------------------------------------------------------------
                                                        82,171        78,425
    Property, plant and equipment                       14,342        14,266
    Deferred financing fees                                551           627
    Deferred income taxes                                  305           290
    -------------------------------------------------------------------------
                                                  $     97,369  $     93,608
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity

    Current liabilities:
    Accounts payable                              $     45,957  $     41,589
    Accrued liabilities                                  6,177         6,218
    Income taxes payable                                   578           540
    Current portion of long-term debt                    4,663         5,013
    Current portion of capital lease obligations           829           789
    -------------------------------------------------------------------------
                                                        58,204        54,149

    Long-term debt                                      18,429        20,666
    Capital lease obligations                              337           543

    Shareholders' equity:
    Capital stock                                        7,079         7,093
    Additional paid-in capital                         253,400       253,304
    Deficit                                           (240,080)     (242,147)
    -------------------------------------------------------------------------
                                                        20,399        18,250
    -------------------------------------------------------------------------
                                                  $     97,369  $     93,608
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows
    (Unaudited)
                                                        Three months ended
    -------------------------------------------------------------------------
    (Expressed in thousands of U.S. dollars)
    -------------------------------------------------------------------------
                                                       April 4,      April 5,
    Cash provided by (used in):                         2010          2009
    -------------------------------------------------------------------------
    Operations:
    Net earnings (loss)                           $      2,067  $     (2,488)
    Items not involving cash:
    Depreciation                                           607           717
    Deferred income taxes                                  (15)          135
    Non-cash interest                                       76            64
    Stock-based compensation                               574            10
    Change in non-cash operating working capital:
      Accounts receivable                                4,308           762
      Inventories                                       (8,480)        6,540
      Prepaid expenses                                     674          (365)
      Income taxes recoverable                              38           (17)
      Accounts payable                                   4,368        (5,093)
      Accrued liabilities                                 (559)       (1,439)
    -------------------------------------------------------------------------
                                                         3,658        (1,174)
    Financing:
    Repayment of long-term debt - net                   (2,587)         (306)
    Principal payment of capital lease obligations        (166)         (384)
    Proceeds from issuance of common stock                  35             -
    Deferred financing costs                                 -          (151)
    -------------------------------------------------------------------------
                                                        (2,718)         (841)
    Investing:
    Purchase of property, plant and equipment             (692)         (163)
    -------------------------------------------------------------------------
                                                          (692)         (163)
    -------------------------------------------------------------------------
    Increase (decrease) in cash                            248        (2,178)
    Cash, beginning of period                            1,589         2,623
    -------------------------------------------------------------------------
    Cash, end of the period                       $      1,837  $        445
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Supplementary Information:

    Reconciliation of EBITDA
    -------------------------------------------------------------------------
                                                        Three months ended
                                                     ------------------------
                                                       April 4,      April 5,
                                                        2010          2009
    -------------------------------------------------------------------------
    Operating earnings (loss)                     $      2,636  $       (394)
    Add:
      Depreciation                                         607           717
      Restructuring charges                                  -           815
    -------------------------------------------------------------------------
    EBITDA                                               3,243         1,138
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE SMTC CORPORATION

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

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SMTC CORPORATION

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