SMTC Corporation Reports Third Quarter Results
TORONTO, Nov. 12 /CNW/ - SMTC Corporation (Nasdaq: SMTX) (TSX: SMX), a
global electronics manufacturing services (EMS) provider, today reported
revenue of $54.0 million and a net loss of $1.2 million, or ($0.08) per share,
for the third quarter ended September 30, 2007. Third quarter net loss
includes a $1.0 million gain for stock based compensation, the result of
marked-to-market deferred stock liabilities offset in part by approximately
$0.6 million arising from restructuring charges and the write off of certain
deferred financing costs. Third quarter 2006 revenue was $65.7 million and net
income of $6.1 million, or $0.41 per share including certain one-time net
gains aggregating $5.0 million. In the second quarter of 2007, the Company
reported revenue of $66.1 million and net income of $0.1 million, or $0.01 per
share, including a $1.0 million charge for stock based compensation.
Gross profit for the third quarter of 2007 was $3.4 million, or 6.3% of
revenue, compared with $5.9 million, or 8.9% or revenue, for the previous
quarter and $5.9 million, or 9.0% of revenue, for the third quarter of 2006.
"It was a particularly difficult quarter as almost all of our customers
reduced orders due to lower end customer demand or to adjust inventory levels.
We believe the changes in end customer demand is not systemic nor the result
of macro economic factors. We took action early in the quarter to lower
expenses balancing the requirement to adjust costs while retaining capability
to support sequential growth expected in the fourth quarter", stated
John Caldwell, President and Chief Executive Officer. "While our third quarter
results are unsatisfactory, we maintained our share of business with all
customers."
"Through continuing focus on debt reduction, the Company generated over
$10 million in positive cash flow largely through lowering working capital
levels", stated Jane Todd, Senior Vice President Finance and Chief Financial
Officer. "Our total debt level at quarter end of $23.1 million is at its
lowest in eight years."
"For the fourth quarter, we expect to substantially increase sequential
revenue, although we are unlikely to attain the record level in the fourth
quarter of 2006. We also expect to return to satisfactory margin and
profitability levels", stated John 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, and Mexico, and a partnering relationship in China,
with over 1300 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
(Unaudited)
Three months ended Nine months ended
-------------------------------------------------------------------------
(Expressed in
thousands of U.S.
dollars, except
number of
shares and per September 30, October 1, September 30, October 1,
share amounts) 2007 2006 2007 2006
-------------------------------------------------------------------------
Revenue $ 54,046 $ 65,677 $ 189,633 $ 186,727
Cost of sales 50,621 59,815 173,886 167,965
-------------------------------------------------------------------------
Gross profit 3,425 5,862 15,747 18,762
Selling, general and
administrative
expenses 2,676 3,381 10,366 11,522
-------------------------------------------------------------------------
Restructuring
(recoveries)
charges 242 (1,350) 242 (1,350)
Gain on sale of land - (1,228) - (1,228)
Loss on
extinguishment
of debt 371 - 371 -
Other expenses - 826 - 826
-------------------------------------------------------------------------
Operating earnings 136 4,233 4,768 8,992
Interest expense 1,265 1,009 4,529 3,400
-------------------------------------------------------------------------
Earnings before
income taxes (1,129) 3,224 239 5,592
Income tax (recovery)
expense
Current 64 (1,963) (1,381) (1,882)
Deferred - - (98) -
-------------------------------------------------------------------------
64 (1,963) (1,479) (1,882)
-------------------------------------------------------------------------
Net (loss) earnings
from continuing
operations (1,193) 5,187 1,718 7,474
Net earnings from
discontinued
operations - 874 - 874
-------------------------------------------------------------------------
Net earnings, also
being comprehensive
income $ (1,193) $ 6,061 $ 1,718 $ 8,348
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings
per share $ (0.08) $ 0.41 $ 0.12 $ 0.57
Diluted earnings
per share $ (0.08) $ 0.41 $ 0.11 $ 0.56
Weighted average
number of shares
outstanding
Basic 14,646,333 14,641,333 14,646,333 14,641,333
Diluted 14,646,333 14,897,406 14,947,018 14,877,066
Consolidated Balance Sheets as of
(Unaudited)
-------------------------------------------------------------------------
September 30, December 31,
(Expressed in thousands of U.S. dollars) 2007 2006
-------------------------------------------------------------------------
Assets
Current assets:
Cash $ 328 $ -
Accounts receivable - net 34,887 45,160
Inventories 36,852 42,851
Prepaid expenses 1,497 1,280
-------------------------------------------------------------------------
73,564 89,291
Property, plant and equipment - net 23,358 24,804
Deferred financing fees 1,438 1,310
Deferred income taxes 652 557
-------------------------------------------------------------------------
$ 99,012 $ 115,962
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 39,476 $ 36,730
Accrued liabilities 8,087 10,253
Income taxes payable 412 1,979
Current portion of long-term debt 3,071 22,405
Current portion of capital lease obligations 645 541
-------------------------------------------------------------------------
51,691 71,908
Long-term debt 20,008 18,632
Capital lease obligations 1,508 1,531
Commitments and contingencies
Shareholders' equity:
Capital stock 7,854 11,969
Warrants 10,372 10,372
Loans receivable (5) (5)
Additional paid-in capital 248,812 244,501
Deficit (241,228) (242,946)
-------------------------------------------------------------------------
25,805 23,891
-------------------------------------------------------------------------
$ 99,012 $ 115,962
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statements of Cash Flows
(Unaudited)
Three months ended Nine months ended
-------------------------------------------------------------------------
(Expressed in
thousands of
U.S. dollars)
-------------------------------------------------------------------------
Cash provided by September 30, October 1, September 30, October 1,
(used in): 2007 2006 2007 2006
-------------------------------------------------------------------------
Operations:
Net earnings
(loss) $ (1,193) $ 6,061 $ 1,718 $ 8,348
Items not
involving cash:
Depreciation 1,225 1,159 3,756 3,457
Loss (gain) on
disposition of
property, plant
and equipment 9 (1,228) 9 (1,228)
Other - - - 46
Deferred income
taxes 8 (18) (95) 19
Non-cash interest 422 156 1,518 1,049
Stock-based
compensation (1,003) 94 135 392
Loss on
extinguishment
of debt 269 - 269 -
-------------------------------------------------------
(263) 6,224 7,310 12,083
Change in non-
cash operating
working capital:
Accounts
receivable 4,636 (5,795) 10,273 (17,549)
Inventories (310) (3,602) 5,999 (16,498)
Prepaid expenses 96 (92) (217) 64
Income taxes
recoverable/
payable 58 756 (1,567) 720
Accounts payable 5,057 5,881 2,746 14,399
Accrued
liabilities 539 331 (2,104) (3,130)
Net proceeds from
discontinued
operations - (874) - (874)
-------------------------------------------------------------------------
9,813 2,829 22,440 (10,785)
Financing:
(Decrease)
increase in
long-term debt 21,500 (2,456) 21,500 15,237
Repayment of
long-term debt (30,378) (998) (40,012) (2,898)
Principal payment
of capital lease
obligations (158) (540) (480) (1,403)
Net proceeds from
discontinued
operations - 874 - 874
Debt issuance and
deferred financing
costs (1,362) (606) (1,362) (606)
-------------------------------------------------------------------------
(10,398) (3,726) (20,354) 11,204
Investing:
Purchase of
property, plant
and equipment (287) (331) (1,758) (1,647)
Proceeds from
sale of property,
plant and
equipment - 1,228 - 1,228
-------------------------------------------------------------------------
(287) 897 (1,758) (419)
-------------------------------------------------------------------------
Increase in cash
and cash
equivalents (872) - 328 -
Cash and cash
equivalents,
beginning of
period 1,200 - - -
-------------------------------------------------------------------------
Cash, end of
the period $ 328 $ - $ 328 $ -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplementary Information:
Reconciliation of EBITDA
-------------------------------------------------------------------------
Three months ended Nine months ended
--------------------------- ---------------------------
September 30, October 1, September 30, October 1,
2007 2006 2007 2006
--------------------------------------------- ---------------------------
Operating
earnings $ 136 $ 4,233 $ 4,768 $ 8,992
Add:
Depreciation 1,225 1,159 3,756 3,457
Loss on
extinguishment
of debt 371 - 371 -
-------------------------------------------------------------------------
EBITDA 1,732 5,392 8,895 12,449
-------------------------------------------------------------------------
-------------------------------------------------------------------------
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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