SMTC Reports Fourth Quarter Results and Record Performance for 2010
Strong Cash Flows Results in All-time Low Debt Levels
TORONTO, March 9 /PRNewswire-FirstCall/ - SMTC Corporation (Nasdaq: SMTX) (TSE: SMX), a global electronics manufacturing services provider, today reported 2010 fourth quarter unaudited results. Revenue for the quarter was $64.6 million; $13.4 million or 26.2% higher compared with $51.2 million in the fourth quarter of 2009 and marginally lower than the 2010 third quarter. Net income for the quarter of $4.5 million increased 110.0% or $2.3 million over the fourth quarter of 2009 (excluding discontinued operations) and up $1.9 million over the 2010 third quarter. Net income for the fourth quarter included the recording of a favorable $2.8 million income tax adjustment related to the expected future usage of certain income tax loss carry-forwards.
Gross profit for the fourth quarter was $6.9 million or 10.7% of revenue compared with $7.9 million or a record 12.1% for the previous quarter and $5.9 million or 11.5% for the fourth quarter of 2009.
Revenue for the entire fiscal 2010 increased 46.3% to $262.6 million; up from $179.5 million in fiscal 2009. For fiscal 2010, net income increased by $10.0 million or over 400% over 2009 excluding discontinued operation in 2009 to a record $12.4 million. Gross profit also increased to 11.2% from 9.8% of revenues.
"SMTC had a superb 2010 with revenue growth from both new and longstanding customers. Our cost effective operational footprint and tight cost containment resulted in earnings growth significantly outpacing the strong increase in revenue," stated John Caldwell, President and Chief Executive Officer. "In the fourth quarter, SMTC had continuing strong performance with increased profitability on continuing solid revenues and excellent cash generation from operations. We rebounded from 2009 to achieve strong revenue and earnings growth and significant debt reduction in 2010. Although we see 2010's strong tailwinds moderating somewhat in 2011, we expect to remain solidly profitable and continue to generate strong free cash flow and further reduce debt."
"We finished 2010 with net bank debt of $9.9 million, a record low for SMTC. This was achieved through strong earnings combined with effective working capital management particularly in light of accelerated top line growth," stated Jane Todd, Senior Vice President, Finance and Chief Financial Officer. "Our goal is to bring SMTC close to debt-free by year-end. In the fourth quarter, we recorded a $2.8 million recovery to recognize a previously written-off deferred income tax asset, reflecting our confidence that we will utilize certain net operating tax loss ("NOL") carry-forwards in the future. Currently we have approximately $100 million in NOLs that if fully utilized would reduce future income taxes by over $30 million."
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 1,500 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, communication and medical 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 Twelve months ended
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(Expressed in thousands
of U.S. dollars, except
number of shares and January 2, January 3, January 2, January 3,
per share amounts) 2011 2010 2011 2010
-------------------------------------------------------------------------
Revenue $ 64,630 $ 51,237 $ 262,580 $ 179,509
Cost of sales 57,701 45,329 233,061 161,951
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Gross profit 6,929 5,908 29,519 17,558
Selling, general and
administrative expenses 4,846 3,405 17,961 12,767
Restructuring charges - - - 783
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Operating earnings 2,083 2,503 11,558 4,008
Interest expense 321 622 1,697 1,960
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Earnings before income
taxes 1,762 1,881 9,861 2,048
Income tax expense
Current 260 (567) 544 (498)
Deferred (3,023) 62 (3,033) 189
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(2,763) (505) (2,489) (309)
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Net earnings from
continuing operations 4,525 2,386 12,350 2,357
Net loss from discontinued
operations - (208) - (5,952)
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Net earnings (loss), also
being comprehensive
income (loss) $ 4,525 $ 2,178 $ 12,350 $ (3,595)
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Basic earnings (loss) per
share
- continuing
operations $ 0.29 $ 0.16 $ 0.82 $ 0.16
- discontinued
operations $ - $ (0.01) $ - $ (0.41)
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Basic earnings(loss) per
share $ 0.29 $ 0.15 $ 0.82 $ (0.25)
Diluted earnings (loss)
per share
- continuing
operations $ 0.28 $ 0.16 $ 0.79 $ 0.16
- discontinued
operations $ - $ (0.01) $ - $ (0.41)
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Diluted earnings (loss)
per share $ 0.28 $ 0.15 $ 0.79 $ (0.25)
Weighted average number
of shares outstanding
Basic 15,764,679 14,646,333 15,072,425 14,646,333
Diluted 16,210,286 14,646,333 15,619,243 14,646,333
Consolidated Balance Sheets as of
(Unaudited)
-------------------------------------------------------------------------
January 2, January 3,
(Expressed in thousands of U.S. dollars) 2011 2010
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Assets
Current assets:
Cash $ 933 $ 1,589
Accounts receivable - net 35,291 37,688
Inventories 42,413 37,026
Prepaid expenses 2,096 2,122
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80,733 78,425
Property, plant and equipment 13,891 14,266
Deferred financing fees 480 627
Deferred income taxes 3,323 290
-------------------------------------------------------------------------
$ 98,427 $ 93,608
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 42,921 $ 41,589
Accrued liabilities 9,299 6,218
Income taxes payable 700 540
Current portion of long-term debt 3,705 5,013
Current portion of capital lease obligations 928 789
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57,553 54,149
Long-term debt 7,086 20,666
Capital lease obligations 959 543
Shareholders' equity:
Capital stock 5,903 7,093
Additional paid-in capital 256,723 253,304
Deficit (229,797) (242,147)
-------------------------------------------------------------------------
32,829 18,250
-------------------------------------------------------------------------
$ 98,427 $ 93,608
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Consolidated Statements of Cash Flows
(Unaudited)
Three months ended Twelve months ended
-------------------------------------------------------------------------
(Expressed in thousands
of U.S. dollars)
-------------------------------------------------------------------------
Cash provided by January 2, January 3, January 2, January 3,
(used in): 2011 2010 2011 2010
-------------------------------------------------------------------------
Operations:
Net earnings (loss) $ 4,525 $ 2,178 $ 12,350 $ (3,595)
Items not involving cash:
Depreciation 657 784 2,549 2,877
Gain on disposition of
property, plant and
equipment - - - (224)
Deferred income taxes (3,023) 60 (3,033) 189
Non-cash interest 55 118 247 310
Stock-based compensation 97 326 962 582
Change in non-cash
operating working capital:
Accounts receivable 577 (7,555) 2,397 (9,040)
Inventories 2,656 (9,713) (5,387) (203)
Prepaid expenses (632) (664) 26 (919)
Income taxes recoverable 146 (38) 160 36
Accounts payable 1,399 11,879 1,332 4,380
Accrued liabilities 1,004 (430) 2,404 (706)
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7,461 (3,055) 14,007 (6,313)
Financing:
Increase (decrease) in
long-term debt (9,199) 5,811 (14,538) 9,736
Repayment of long-term debt (125) (1,375) (350) (2,738)
Principal payment of
capital lease obligations (287) (170) (881) (1,356)
Proceeds from sale and
leaseback - - 435 -
Proceeds from issuance of
common stock 1,178 - 1,980 -
Deferred financing costs - - (100) (151)
-------------------------------------------------------------------------
(8,433) 4,266 (13,454) 5,491
Investing:
Purchase of property, plant
and equipment (203) (58) (1,209) (1,042)
Proceeds from sale of
property, plant and
equipment - - - 830
-------------------------------------------------------------------------
(203) (58) (1,209) (212)
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Increase (decrease) in cash (1,175) 1,153 (656) (1,034)
Cash, beginning of period 2,108 436 1,589 2,623
-------------------------------------------------------------------------
Cash, end of the period $ 933 $ 1,589 $ 933 $ 1,589
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Supplementary Information:
Reconciliation of EBITDA
Three months ended Twelve months ended
----------------------- -----------------------
January 2, January 3, January 2, January 3,
2011 2010 2011 2010
-------------------------------------------------------------------------
Operating earnings $ 2,083 $ 2,503 $ 11,558 $ 4,008
Add:
Depreciation 657 784 2,549 2,877
Restructuring charges - - - 783
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EBITDA 2,740 3,287 14,107 7,668
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SOURCE SMTC Corporation
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