SMTC Reports Continuing Revenue Growth, Profitability and Cash Generation
TORONTO, Nov. 9 /PRNewswire-FirstCall/ - SMTC Corporation (Nasdaq: SMTX, TSE: SMX), a global electronics manufacturing services provider, today reported 2010 third quarter results. Revenue for the quarter increased by 48% to $65.4 million and net income for the quarter, at $2.6 million, was $2.4 million higher than the same quarter in the prior year.
Gross profit for the third quarter was $7.9 million or 12.0% of revenue, over double that of the comparable period in 2009 of $3.7 million or 8.5%; driven by increased revenue and leveraging the Company's cost structure. Gross margin of 12% was the highest, excluding one-time items, in over 10 years.
The Company generated cash of $4.6 million from operations in the third quarter which was largely used to reduce net debt to $18.0 million.
"Following record second quarter results, SMTC achieved another strong quarter with third quarter revenue increasing almost 50% over the comparable quarter of 2009. Eight of our ten top customers increased orders above the same quarter last year in response to end customer demand. We generated approximately $10 million in revenue from five new customers ramping production" stated John Caldwell, President and Chief Executive Officer. "Our solid earnings performance reflects the combination of higher revenue and leveraging our very efficient cost structure."
"As a result of strong earnings our debt levels are approaching our record low. This was achieved despite carrying additional working capital resulting from continuing parts shortages and anticipation of continuing strong revenue in the fourth quarter," stated Jane Todd, SVP Finance and Chief Financial Officer. "In the fourth quarter we expect to continue to generate cash and reduce debt levels through continued profitability and reduced working capital as supply chain issues ease."
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 Nine months ended
-------------------------------------------------------------------------
(Expressed in thousands
of U.S. dollars, except
number of shares and October 3, October 4, October 3, October 4,
per share amounts) 2010 2009 2010 2009
-------------------------------------------------------------------------
Revenue $ 65,381 $ 44,181 $ 197,950 $ 128,272
Cost of sales 57,518 40,446 175,360 116,622
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Gross profit 7,863 3,735 22,590 11,650
Selling, general and
administrative expenses 4,737 2,760 13,115 9,362
Restructuring charges - - - 783
-------------------------------------------------------------------------
Operating earnings 3,126 975 9,475 1,505
Interest expense 436 473 1,376 1,338
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Earnings before income
taxes 2,690 502 8,099 167
Income tax expense
Current 120 23 284 67
Deferred (11) 17 (10) 129
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109 40 274 196
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Net earnings (loss) from
continuing operations 2,581 462 7,825 (29)
Net loss from
discontinued operations - (297) - (5,744)
-------------------------------------------------------------------------
Net earnings (loss), also
being comprehensive
income (loss) $ 2,581 $ 165 $ 7,825 $ (5,773)
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Basic earnings (loss) per
share
- continuing operations $ 0.17 $ 0.03 $ 0.53 $ -
- discontinued
operations $ - $ (0.02) $ - $ (0.39)
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Basic earnings(loss) per
share $ 0.17 $ 0.01 $ 0.53 $ (0.39)
Diluted earnings (loss)
per share
- continuing operations $ 0.16 $ 0.03 $ 0.51 $ -
- discontinued
operations $ - $ (0.02) $ - $ (0.39)
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Diluted earnings (loss)
per share $ 0.16 $ 0.01 $ 0.51 $ (0.39)
Weighted average number
of shares outstanding
Basic 15,049,688 14,646,333 14,841,673 14,646,333
Diluted 15,745,506 14,646,333 15,422,228 14,646,333
Consolidated Balance Sheets as of
(Unaudited)
-------------------------------------------------------------------------
October 3, January 3,
(Expressed in thousands of U.S. dollars) 2010 2010
-------------------------------------------------------------------------
Assets
Current assets:
Cash $ 2,108 $ 1,589
Accounts receivable - net 35,868 37,688
Inventories 45,069 37,026
Prepaid expenses 1,464 2,122
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84,509 78,425
Property, plant and equipment 13,353 14,266
Deferred financing fees 535 627
Deferred income taxes 300 290
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$ 98,697 $ 93,608
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 41,522 $ 41,589
Accrued liabilities 8,317 6,218
Income taxes payable 554 540
Current portion of long-term debt 2,904 5,013
Current portion of capital lease obligations 870 789
-------------------------------------------------------------------------
54,167 54,149
Long-term debt 17,211 20,666
Capital lease obligations 303 543
Shareholders' equity:
Capital stock 6,046 7,093
Additional paid-in capital 255,292 253,304
Deficit (234,322) (242,147)
-------------------------------------------------------------------------
27,016 18,250
-------------------------------------------------------------------------
$ 98,697 $ 93,608
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Consolidated Statements of Cash Flows
(Unaudited)
Three months ended Nine months ended
-------------------------------------------------------------------------
(Expressed in thousands
of U.S. dollars)
-------------------------------------------------------------------------
Cash provided by October 3, October 4, October 3, October 4,
(used in): 2010 2009 2010 2009
-------------------------------------------------------------------------
Operations:
Net earnings (loss) $ 2,581 $ 165 $ 7,825 $ (5,773)
Items not involving cash:
Depreciation 643 695 1,892 2,093
Gain on disposition of
property, plant and
equipment - - - (224)
Deferred income taxes (9) 17 (10) 129
Non-cash interest 55 64 192 192
Stock-based compensation 217 68 865 256
Change in non-cash
operating working capital:
Accounts receivable 8,400 (3,987) 1,820 (1,485)
Inventories 1,404 173 (8,043) 9,510
Prepaid expenses 182 (384) 658 (255)
Income taxes recoverable 36 61 14 74
Accounts payable (9,612) 1,322 (67) (7,499)
Accrued liabilities 698 (675) 1,400 (276)
-------------------------------------------------------------------------
4,595 (2,481) 6,546 (3,258)
Financing:
Increase (decrease) in
long-term debt (4,703) 3,117 (5,339) 3,925
Repayment of long-term debt (75) (563) (225) (1,363)
Principal payment of
capital lease obligations (211) (207) (594) (1,186)
Proceeds from sale and
leaseback 435 - 435 -
Proceeds from issuance of
common stock 134 - 802 -
Deferred financing costs - - (100) (151)
-------------------------------------------------------------------------
(4,420) 2,347 (5,021) 1,225
Investing:
Purchase of property,
plant and equipment (170) (702) (1,006) (984)
Proceeds from sale of
property, plant and
equipment - - - 830
-------------------------------------------------------------------------
(170) (702) (1,006) (154)
-------------------------------------------------------------------------
Increase (decrease) in
cash 5 (836) 519 (2,187)
Cash, beginning of period 2,103 1,272 1,589 2,623
-------------------------------------------------------------------------
Cash, end of the period $ 2,108 $ 436 $ 2,108 $ 436
-------------------------------------------------------------------------
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Supplementary Information:
Reconciliation of EBITDA
-------------------------------------------------------------------------
Three months ended Nine months ended
----------------------- -----------------------
October 3, October 4, October 3, October 4,
2010 2009 2010 2009
-------------------------------------------------------------------------
Operating earnings $ 3,126 $ 975 $ 9,475 $ 1,505
Add:
Depreciation 643 695 1,892 2,093
Restructuring charges - - - 783
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EBITDA 3,769 1,670 11,367 4,381
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SOURCE SMTC Corporation
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