SMTC Reports Second Quarter Growth, Highest Earnings from Continuing
Operations Since 2000

TORONTO, Aug. 5 /CNW/ - SMTC Corporation (Nasdaq: SMTX, TSE: SMX), a global electronics manufacturing services provider, today reported 2010 second quarter results. Revenue for the quarter increased quarter over quarter by 82% to $71.2 million and up sequentially by $9.8 million or 16% over the first quarter of 2010. Net income for the quarter at $3.2 million is $1.1 million or 52% higher than the preceding quarter. For the second quarter of 2009, the Company incurred a net loss of $3.4 million.

Gross profit for the second quarter was $8.4 million or 11.8% of revenue compared with $6.4 million or 10.4% for the previous quarter and $4.0 million or 10.2% for the second quarter of 2009, and increased primarily due to the increase in revenue.

"SMTC achieved an extremely strong quarterly result with second quarter revenue increasing sequentially by 16% and 82% higher than the comparable quarter of 2009. Nine of our ten top customers increased orders above the first quarter of 2010 and the comparable period last year in response to end customer demand and to rebuild inventory levels. We also generated additional revenue from five new customers in the early stage of ramping production" stated John Caldwell, President and Chief Executive Officer. "Our solid earnings performance reflects the combination of higher revenue and the continuing effect of last year's cost and capacity reduction initiatives to measurably increase margins and overall profitability."

"In the quarter, our working capital and debt levels increased by $5.7 million and $1.8 million respectively largely due to the timing of customer receipts and the effect of industry wide component shortages causing a continuing higher level of customer order backlog," stated Jane Todd, SVP Finance and Chief Financial Officer. "Through the later part of 2010 we expect to increase cash generation and lower debt levels through continued profitability and reduced working capital as supply chain issues abate and timing issues reverse."

"We enter the third quarter with a solid order backlog and continuing demand from our customers. However, we will take a cautious approach given continuing economic uncertainty and lack of visibility into customer end markets and into remaining customer inventory builds. We expect continued profitability through the remainder of the year but as has been our policy, we are not providing specific full year guidance." 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 1500 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       Six months ended
    -------------------------------------------------------------------------
    (Expressed in thousands
     of U.S. dollars, except
     number of shares and       July 4,     July 5,     July 4,     July 5,
     per share amounts)          2010        2009        2010        2009
    -------------------------------------------------------------------------
    Revenue                   $   71,215  $   39,153  $  132,569  $   84,091
    Cost of sales                 62,854      35,178     117,842      76,176
    -------------------------------------------------------------------------
    Gross profit                   8,361       3,975      14,727       7,915
    Selling, general and
     administrative expenses       4,648       3,083       8,378       6,602
    Restructuring charges
     (recovery)                        -         (32)          -         783
    -------------------------------------------------------------------------
    Operating earnings             3,713         924       6,349         530
    Interest expense                 451         539         940         865
    -------------------------------------------------------------------------
    Earnings (loss) before
     income taxes                  3,262         385       5,409        (335)
    Income tax expense
     (recovery)
    Current                           69          15         164          44
    Deferred                          16         (23)          1         112
    -------------------------------------------------------------------------
                                      85          (8)        165         156
    -------------------------------------------------------------------------
    Net earnings (loss) from
     continuing operations         3,177         393       5,244        (491)
    Net loss from
     discontinued operations           -      (3,843)          -      (5,447)
    -------------------------------------------------------------------------
    Net earnings (loss), also
     being comprehensive
     income (loss)            $    3,177  $   (3,450) $    5,244  $   (5,938)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings (loss)
     per share
     - continuing operations  $     0.21  $     0.03  $     0.36  $    (0.03)
     - discontinued
     operations               $        -  $    (0.27) $        -  $    (0.38)
    -------------------------------------------------------------------------
    Basic earnings(loss)
     per share                $     0.21  $    (0.24) $     0.36  $    (0.41)

    Diluted earnings (loss)
     per share
     - continuing operations  $     0.20  $     0.03  $     0.34  $    (0.03)
     - discontinued
     operations               $        -  $    (0.27) $        -  $    (0.38)
    -------------------------------------------------------------------------
    Diluted earnings (loss)
     per share                $     0.20  $    (0.24) $     0.34  $    (0.41)
    Weighted average number
     of shares outstanding
    Basic                     14,820,961  14,646,333  14,737,676  14,646,333
    Diluted                   15,704,178  14,646,333  15,368,658  14,646,333



    Consolidated Balance Sheets as of
    (Unaudited)

    -------------------------------------------------------------------------
                                                        July 4,   January 3,
    (Expressed in thousands of U.S. dollars)             2010        2010
    -------------------------------------------------------------------------
    Assets

    Current assets:
    Cash                                              $    2,103  $    1,589
    Accounts receivable - net                             44,268      37,688
    Inventories                                           46,473      37,026
    Prepaid expenses                                       1,646       2,122
    -------------------------------------------------------------------------
                                                          94,490      78,425
    Property, plant and equipment                         13,835      14,266
    Deferred financing fees                                  590         627
    Deferred income taxes                                    291         290
    -------------------------------------------------------------------------
                                                      $  109,206  $   93,608
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity

    Current liabilities:
    Accounts payable                                  $   51,134  $   41,589
    Accrued liabilities                                    7,453       6,218
    Income taxes payable                                     518         540
    Current portion of long-term debt                      2,053       5,013
    Current portion of capital lease obligations             793         789
    -------------------------------------------------------------------------
                                                          61,951      54,149

    Long-term debt                                        22,840      20,666
    Capital lease obligations                                156         543

    Shareholders' equity:
    Capital stock                                          6,099       7,093
    Additional paid-in capital                           255,063     253,304
    Deficit                                             (236,903)   (242,147)
    -------------------------------------------------------------------------
                                                          24,259      18,250
    -------------------------------------------------------------------------
                                                      $  109,206  $   93,608
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows
    (Unaudited)

                                Three months ended       Six months ended
    -------------------------------------------------------------------------
    (Expressed in thousands
     of U.S. dollars)
    -------------------------------------------------------------------------
    Cash provided by            July 4,     July 5,     July 4,     July 5,
     (used in):                  2010        2009        2010        2009
    -------------------------------------------------------------------------
    Operations:
    Net earnings (loss)       $    3,177  $   (3,450) $    5,244  $   (5,938)
    Items not involving cash:
      Depreciation                   642         681       1,249       1,398
      Gain on disposition of
       property, plant and
       equipment                                (224)                   (224)
      Deferred income taxes           14         (23)         (1)        112
      Non-cash interest               61          64         137         128
      Stock-based compensation        74         178         648         188
    Change in non-cash
     operating working
     capital:
      Accounts receivable        (10,888)      1,740      (6,580)      2,502
      Inventories                   (967)      2,797      (9,447)      9,337
      Prepaid expenses              (198)        494         476         129
      Income taxes recoverable       (60)         30         (22)         13
      Accounts payable             5,177      (3,728)      9,545      (8,821)
      Accrued liabilities          1,261       1,838         702         399
    -------------------------------------------------------------------------
                                  (1,707)        397       1,951        (777)
    Financing:
    Increase (decrease) in
     long-term debt                1,876         714        (636)        808
    Repayment of long-term debt      (75)       (400)       (150)       (800)
    Principal payment of
     capital lease obligations      (217)       (595)       (383)       (979)
    Proceeds from issuance
     of common stock                 633           -         668           -
    Deferred financing costs        (100)          -        (100)       (151)
    -------------------------------------------------------------------------
                                   2,117        (281)       (601)     (1,122)
    Investing:
    Purchase of property,
     plant and equipment            (144)       (119)       (836)       (282)
    Proceeds from sale of
     property, plant and
     equipment                         -         830           -         830
    -------------------------------------------------------------------------
                                    (144)        711        (836)        548
    -------------------------------------------------------------------------
    Increase (decrease) in cash      266         827         514      (1,351)
    Cash, beginning of period      1,837         445       1,589       2,623
    -------------------------------------------------------------------------
    Cash, end of the period   $    2,103  $    1,272  $    2,103  $    1,272
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Supplementary Information:

    Reconciliation of EBITDA

    -------------------------------------------------------------------------
                                Three months ended       Six months ended
                              -----------------------------------------------
                                July 4,     July 5,     July 4,     July 5,
                                 2010        2009        2010        2009
    -------------------------------------------------------------------------
    Operating earnings        $    3,713  $      924  $    6,349  $      530
    Add:
      Depreciation                   642         681       1,249       1,398
      Restructuring charges
       (recoveries)                    -         (32)          -         783
    -------------------------------------------------------------------------
    EBITDA                         4,355       1,573       7,598       2,711
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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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