SMTC Reports Third Quarter Results

Sequential Growth of 13% and Continuing Profitability

TORONTO, Nov. 5 /CNW/ - SMTC Corporation (Nasdaq: SMTX, TSE: SMX), a global electronics manufacturing services provider, today reported 2009 third quarter results. Revenue for the quarter increased sequentially by $5.0 million or 13% to $44.2 million. In comparison to the pre-recession third quarter of 2008, revenue was $8.9 million lower.

Net income for the quarter at $0.2 million compares with net loss of $3.4 million in the second quarter of 2009 and net income of $0.1 million for the comparable period last year. Net income includes a $0.3 million net loss from discontinued operations, the result of the closure of the Company's Boston facility in the second quarter of 2009. Consequently, the Company recorded net income from continuing operations of $0.5 million. The second quarter of 2009 was also adversely affected by various write-offs and operational losses associated with the now closed Boston operation, without which the Company posted a modest profit. Gross profit for the third quarter was $3.7 million or 8.5% of revenue compared with $4.0 million or 10.2% for the previous quarter and $5.3 million or 9.9% for the third quarter of 2008 reflecting changes in customer and product mix.

"As expected, our third quarter results improved over the second quarter, thought to be the low point of the economic cycle. Earlier in the year, we took aggressive cost reduction actions including the closure of the Boston site to significantly lower our cost structure as we entered the global recession. As evidenced by this quarter's results, we successfully reduced our break-even cost position to remain profitable at a much lower revenue level," stated John Caldwell, President and Chief Executive Officer.

"As stated previously, given the uncertainty in the current economic climate and limited visibility in our customers' end markets, the Company will not be providing specific financial guidance. However, there are some early signs that the economy is showing some modest improvement. We continue to expect volatility quarter to quarter. We expect sequential growth in the fourth quarter through improved demand from certain longstanding customers and modest revenue from new customers that are ramping to full production in 2010. Our focus will continue to be on solid customer service, new customer acquisition, tight cost containment and working capital management," 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 1,000 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      Nine months ended
    -------------------------------------------------------------------------
    (Expressed in thousands
     of U.S. dollars, except
     number of shares and        October   September     October   September
     per share amounts)          4, 2009    28, 2008     4, 2009    28, 2008
    -------------------------------------------------------------------------

    Revenue                   $   44,181  $   53,089  $  128,272  $  152,077
    Cost of sales                 40,446      47,816     116,622     138,307
    -------------------------------------------------------------------------
    Gross profit                   3,735       5,273      11,650      13,770
    Selling, general and
     administrative expenses       2,760       3,053       9,362       9,591
    Restructuring charges              -           -         783         443
    Loss on extinguishment
     of debt                           -         613           -         613
    -------------------------------------------------------------------------
    Operating earnings               975       1,607       1,505       3,123
    Interest expense                 473         567       1,338       2,242
    -------------------------------------------------------------------------
    Earnings before income
     taxes                           502       1,040         167         881
    Income tax expense (recovery)
    Current                           23           6          67         163
    Deferred                          17          23         129          (6)
    -------------------------------------------------------------------------
                                      40          29         196         157
    -------------------------------------------------------------------------
    Net earnings (loss) from
     continuing operations           462       1,011         (29)        724
    Net loss from discontinued
     operations                     (297)       (868)     (5,744)     (6,482)
    -------------------------------------------------------------------------
    Net income (loss), also
     being comprehensive
     loss                     $      165  $      143  $   (5,773) $   (5,758)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings (loss) per
     share
      - continuing
         operations           $     0.03  $     0.07  $     0.00  $     0.05
      - discontinued
         operations           $    (0.02) $    (0.06) $    (0.39) $    (0.44)
    -------------------------------------------------------------------------
    Basic (loss) earnings per
     share                    $     0.01  $     0.01  $    (0.39) $    (0.39)

    Diluted earnings (loss)
     per share
      - continuing
         operations           $     0.03  $     0.07  $     0.00  $     0.05
      - discontinued
         operations           $    (0.02) $    (0.06) $    (0.39) $    (0.44)
    -------------------------------------------------------------------------
    Diluted (loss) earnings
     per share                $     0.01  $     0.01  $    (0.39) $    (0.39)
    Weighted average number
     of shares outstanding
    Basic                     14,646,333  14,646,333  14,646,333  14,646,333
    Diluted                   14,646,333  14,729,485  14,646,333  14,741,627



    Consolidated Balance Sheets as of
    (Unaudited)
    -------------------------------------------------------------------------
                                                      October 4,   January 4,
    (Expressed in thousands of U.S. dollars)               2009         2009
    -------------------------------------------------------------------------
    Assets

    Current assets:
    Cash                                             $      436   $    2,623
    Accounts receivable - net                            30,133       28,648
    Inventories                                          27,313       36,823
    Prepaid expenses                                      1,458        1,203
    -------------------------------------------------------------------------
                                                         59,340       69,297
    Property, plant and equipment                        15,001       16,743
    Deferred financing fees                                 745          786
    Deferred income taxes                                   350          479
    -------------------------------------------------------------------------
                                                     $   75,436   $   87,305
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
    Accounts payable                                 $   29,710   $   37,209
    Accrued liabilities                                   6,645        6,909
    Income taxes payable                                    578          504
    Current portion of long-term debt                     5,338        2,738
    Current portion of capital lease obligations            845        1,101
    -------------------------------------------------------------------------
                                                         43,116       48,461

    Long-term debt                                       15,905       15,943
    Capital lease obligations                               657        1,587

    Shareholders' equity:
    Capital stock                                         7,211        7,456
    Warrants                                                  -       10,372
    Additional paid-in capital                          252,872      249,655
    Deficit                                            (244,325)    (246,169)
    -------------------------------------------------------------------------
                                                         15,758       21,314
    -------------------------------------------------------------------------
                                                     $   75,436   $   87,305
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows
    (Unaudited)
                                 Three months ended      Nine months ended
    -------------------------------------------------------------------------
    (Expressed in thousands
     of U.S. dollars)
    -------------------------------------------------------------------------
    Cash provided by             October   September     October   September
     (used in):                  4, 2009    28, 2008     4, 2009    28, 2008
    -------------------------------------------------------------------------
    Operations:
    Net earnings (loss)       $      165  $      143  $   (5,773) $   (5,758)
    Items not involving cash:
    Depreciation                     695         724       2,093       2,588
    Gain on disposition of
     property, plant and
     equipment                         -           -        (224)          -
    Impairment of property,
     plant and equipment               -           -           -       4,921
    Deferred income taxes             17          23         129          (6)
    Non-cash interest                 64          91         192         295
    Stock-based compensation          68        (279)        256         217
    Loss on extinguishment
     of debt                           -         613           -         613
    -------------------------------------------------------------------------
                                   1,009       1,315      (3,327)      2,870
    Change in non-cash
     operating working capital:
      Accounts receivable         (3,987)      9,364      (1,485)      8,219
      Inventories                    173      (2,631)      9,510      (9,771)
      Prepaid expenses              (384)       (392)       (255)       (855)
      Income taxes payable            61         (22)         74         (44)
      Accounts payable             1,322        (169)     (7,499)      3,485
      Accrued liabilities           (675)        640        (276)      1,366
    -------------------------------------------------------------------------
                                  (2,481)      8,105      (3,258)      5,270
    Financing:
    Borrowings of long-term
     debt - net                    2,554      (5,316)      2,562      (1,807)
    Principal payment of
     capital lease obligations      (207)       (245)     (1,186)       (654)
    Debt issuance and deferred
     financing costs                   -        (250)       (151)       (250)
    -------------------------------------------------------------------------
                                   2,347      (5,811)      1,225      (2,711)
    Investing:
    Purchase of property, plant
     and equipment                  (702)       (294)       (984)     (1,009)
    Proceeds from sale of
     property, plant and
     equipment                         -           -         830         268
    -------------------------------------------------------------------------
                                    (702)       (294)       (154)       (741)
    -------------------------------------------------------------------------
    Increase (decrease) in cash
     and cash equivalents           (836)      2,000      (2,187)      1,818
    Cash and cash equivalents,
     beginning of period           1,272           -       2,623         182
    -------------------------------------------------------------------------
    Cash, end of the period   $      436  $    2,000  $      436  $    2,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Supplementary Information:

    Reconciliation of EBITDA
    -------------------------------------------------------------------------
                                 Three months ended      Nine months ended
                              ----------------------- -----------------------
                                 October   September     October   September
                                 4, 2009    28, 2008     4, 2009    28, 2008
    -------------------------------------------------------------------------
    Operating earnings        $      975  $    1,607  $    1,505  $    3,123
    Add:
      Depreciation                   695         724       2,093       2,588
      Restructuring charges            -           -         783         443
      Loss on extinguishment
       of debt                         -         613           -         613
    -------------------------------------------------------------------------
    EBITDA                         1,670       2,944       4,381       6,767
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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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