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SMTC Reports Third Quarter Results
Sequential Growth of 13% and Continuing Profitability TORONTO, Nov. 5 /PRNewswire-FirstCall/ - 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
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(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
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Revenue $ 44,181 $ 53,089 $ 128,272 $ 152,077
Cost of sales 40,446 47,816 116,622 138,307
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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
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Operating earnings 975 1,607 1,505 3,123
Interest expense 473 567 1,338 2,242
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Earnings before income
taxes 502 1,040 167 881
Income tax expense (recovery)
Current 23 6 67 163
Deferred 17 23 129 (6)
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40 29 196 157
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Net earnings (loss) from
continuing operations 462 1,011 (29) 724
Net loss from discontinued
operations (297) (868) (5,744) (6,482)
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Net income (loss), also
being comprehensive
loss $ 165 $ 143 $ (5,773) $ (5,758)
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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)
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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)
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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)
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October 4, January 4,
(Expressed in thousands of U.S. dollars) 2009 2009
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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
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59,340 69,297
Property, plant and equipment 15,001 16,743
Deferred financing fees 745 786
Deferred income taxes 350 479
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$ 75,436 $ 87,305
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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
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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)
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15,758 21,314
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$ 75,436 $ 87,305
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Consolidated Statements of Cash Flows
(Unaudited)
Three months ended Nine months ended
-------------------------------------------------------------------------
(Expressed in thousands
of U.S. dollars)
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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
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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
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(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)
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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
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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
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EBITDA 1,670 2,944 4,381 6,767
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