SMTC Reports Second Quarter Results



    Profit from Continuing Operations

    TORONTO, Aug. 6 /CNW/ - SMTC Corporation (Nasdaq:   SMTX, TSE: SMX), a
global electronics manufacturing services provider, today reported 2009 second
quarter results. Revenue for the quarter was $39.1 million, sequentially lower
by $5.8 million and $15.0 million below the second quarter of 2008. The net
loss for the quarter of $3.4 million compares with net loss of $2.5 million in
the first quarter of 2009 and a $6.3 million loss for the comparable period
last year. The second quarter loss includes a $3.8 million net loss from
discontinued operations as a result of the closure of the Company's Boston
facility. The Company recorded a modest profit from continuing operations of
$0.4 million. Net losses in the first quarter of 2009 and the second quarter
of 2008 were also adversely affected by write-offs and operational losses
sustained by the now closed Boston operation. Gross profit for the second
quarter was $4.0 million or 10.2% of revenue compared with $3.9 million or
8.8% for the previous quarter and $4.5 million or 8.3% for the second quarter
of 2008 reflecting the profitability of the continuing operations following
cost containment initiatives undertaken in the first quarter. Through
continuing solid working capital management, the Company was cash flow
positive in the quarter.
    "As expected, our second quarter performance was adversely affected by
the global recession as customers reduced demand levels in response to end
market softness and made significant inventory corrections. SMTC retained its
share of wallet with all ongoing customers," stated John Caldwell, President
and Chief Executive Officer. "In response to weakening customer demand, we
took aggressive cost reduction actions in the first quarter to significantly
lower our cost structure. As a consequence, we lowered our break-even cost
position such that we were profitable on much lower revenues. The decision to
close the Boston facility and transition enclosure and system integration
capability to our Chihuahua, Mexico site was driven by both overcapacity and a
broader strategy to offer customers high quality manufacturing services from
low cost locales.
    "As stated last quarter, given the uncertainty in the current
recessionary environment, the Company will not be providing specific financial
guidance for the remainder of the year. While the economy may show some
improvement in the second half of 2009, we expect continuing volatility
quarter to quarter. We will manage costs tightly given the uncertainty of any
recovery. However, we are encouraged by the acquisition of several new
customers that will add modest revenue in the latter part of the year, and are
expected to reach meaningful revenue levels as they ramp to full production in
2010," 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 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 per share             July 5,     June 29,      July 5,     June 29,
     amounts)                    2009         2008         2009         2008
    -------------------------------------------------------------------------
    Revenue                $   39,153   $   54,276   $   84,091   $   98,988
    Cost of sales              35,178       49,803       76,176       90,491
    -------------------------------------------------------------------------
    Gross profit                3,975        4,473        7,915        8,497
    Selling, general and
     administrative
     expenses                   3,083        3,738        6,602        6,538
    Restructuring charges
     (recoveries)                 (32)         668          783          443
    -------------------------------------------------------------------------
    Operating earnings            924           67          530        1,516
    Interest expense              539          762          865        1,675
    -------------------------------------------------------------------------
    Earnings (loss) before
     income taxes                 385         (695)        (335)        (159)
    Income tax expense
     (recovery)
    Current                        15           45           44          157
    Deferred                      (23)         (20)         112          (29)
    -------------------------------------------------------------------------
                                   (8)          25          156          128
    -------------------------------------------------------------------------
    Net earnings (loss)
     from continuing
     operations                   393         (720)        (491)        (287)
    Net loss from
     discontinued
     operations                (3,843)      (5,602)      (5,447)      (5,614)
    -------------------------------------------------------------------------
    Net loss, also
     being comprehensive
     loss                  $   (3,450)  $   (6,322)  $   (5,938)  $   (5,901)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings (loss)
     per share
    - continuing
     operations            $     0.03   $    (0.05)  $    (0.03)  $    (0.02)
    - discontinued
     operations            $    (0.27)  $    (0.38)  $    (0.38)  $    (0.38)
    -------------------------------------------------------------------------
    Basic (loss) earnings
     per share             $    (0.24)  $    (0.43)  $    (0.41)  $    (0.40)

    Diluted earnings
     (loss) per share
    - continuing
     operations            $     0.03   $     (0.05) $    (0.03)  $    (0.02)
    - discontinued
     operations            $    (0.27)  $     (0.38) $    (0.38)  $    (0.38)
    -------------------------------------------------------------------------
    Diluted (loss)
     earnings per share    $    (0.24)  $     (0.43) $    (0.41)  $    (0.40)
    Weighted average number
     of shares outstanding
    Basic                  14,646,333    14,646,333  14,646,333   14,646,333
    Diluted                14,646,333    14,646,333  14,646,333   14,646,333



    Consolidated Balance Sheets as of
    (Unaudited)

    -------------------------------------------------------------------------
    (Expressed in thousands of U.S. dollars)             July 5,   January 4,
                                                           2009         2009
    -------------------------------------------------------------------------
    Assets

    Current assets:
    Cash                                             $    1,272   $    2,623
    Accounts receivable - net                            26,146       28,648
    Inventories                                          27,486       36,823
    Prepaid expenses                                      1,074        1,203
    -------------------------------------------------------------------------
                                                         55,978       69,297
    Property, plant and equipment                        15,003       16,743
    Deferred financing fees                                 809          786
    Deferred income taxes                                   367          479
    -------------------------------------------------------------------------
                                                     $   72,157   $   87,305
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity

    Current liabilities:
    Accounts payable                                 $   28,388   $   37,209
    Accrued liabilities                                   7,329        6,909
    Income taxes payable                                    517          504
    Current portion of long-term debt                     4,850        2,738
    Current portion of capital lease obligations          1,430        1,101
    -------------------------------------------------------------------------
                                                         42,514       48,461

    Long-term debt                                       13,839       15,943
    Capital lease obligations                               279        1,587

    Shareholders' equity:
    Capital stock                                         7,419        7,456
    Warrants                                                  -       10,372
    Additional paid-in capital                          252,596      249,655
    Deficit                                            (244,490)    (246,169)
    -------------------------------------------------------------------------
                                                         15,525       21,314
    -------------------------------------------------------------------------
                                                     $   72,157   $   87,305
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows
    (Unaudited)

                               Three months ended         Six months ended
    -------------------------------------------------------------------------
    (Expressed in thousands
     of U.S. dollars)
    -------------------------------------------------------------------------
                               July 5,     June 29,      July 5,     June 29,
                                 2009         2008         2009         2008
    Cash provided by (used
     in):
    -------------------------------------------------------------------------
    Operations:
    Net loss               $   (3,450)  $   (6,322)  $   (5,938)  $   (5,901)
    Items not involving
     cash:
    Depreciation                  681          740        1,398        1,864
    Gain on disposition of
     property, plant and
     equipment                   (224)           -         (224)
    Impairment of property,
     plant and equipment            -        4,921            -        4,921
    Deferred income taxes         (23)         (20)         112          (29)
    Non-cash interest              64          100          128          204
    Stock-based
     compensation                 178          288          188          496
    -------------------------------------------------------------------------
                               (2,774)        (293)      (4,336)       1,555
    Change in non-cash
     operating working
     capital:
      Accounts receivable       1,740       (5,601)       2,502       (1,145)
      Inventories               2,797          876        9,337       (7,140)
      Prepaid expenses            494         (288)         129         (463)
      Income taxes payable         30           (8)          13          (22)
      Accounts payable         (3,728)         456       (8,821)       3,654
      Accrued liabilities       1,838          293          399          726
    -------------------------------------------------------------------------
                                  397       (4,565)        (777)      (2,835)
    Financing:

    Borrowings of long-term
     debt - net                   314        4,529            8        3,509
    Principal payment of
     capital lease
     obligations                 (595)        (233)        (979)        (409)
    Debt issuance and
     deferred financing
     costs                          -            -         (151)           -
    -------------------------------------------------------------------------
                                 (281)       4,296       (1,122)       3,100
    Investing:

    Purchase of property,
     plant and equipment         (119)        (472)        (282)        (715)
    Proceeds from sale of
     property, plant and
     equipment                    830          268          830          268
    -------------------------------------------------------------------------
                                  711         (204)         548         (447)
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash and cash
     equivalents                  827         (473)      (1,351)        (182)
    Cash and cash
     equivalents, beginning
     of period                    445          473        2,623          182
    -------------------------------------------------------------------------
    Cash, end of the
     period                $    1,272   $        -   $    1,272   $        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Supplementary Information:

    Reconciliation of EBITDA
    -------------------------------------------------------------------------
                              Three months ended         Six months ended
                           ------------------------  ------------------------
                               July 5,     June 29,      July 5,     June 29,
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------

    Operating earnings     $      924   $       67   $      530   $    1,516
    Add:
      Depreciation                681          740        1,398        1,864
      Restructuring charges
       (recoveries)               (32)         668          783          443
    -------------------------------------------------------------------------
    EBITDA                      1,573        1,475        2,711        3,823
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





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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