SMTC Reports Fourth Quarter Results and Record Performance for 2010

Mar 09, 2011, 16:10 ET from SMTC Corporation

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
    -------------------------------------------------------------------------
    (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
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
    Operating earnings             2,083       2,503      11,558       4,008
    Interest expense                 321         622       1,697       1,960
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
                                  (2,763)       (505)     (2,489)       (309)
    -------------------------------------------------------------------------
    Net earnings from
     continuing operations         4,525       2,386      12,350       2,357
    Net loss from discontinued
     operations                        -        (208)          -      (5,952)
    -------------------------------------------------------------------------
    Net earnings (loss), also
     being comprehensive
     income (loss)            $    4,525  $    2,178  $   12,350  $   (3,595)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings (loss) per
     share
      - continuing
         operations           $     0.29  $     0.16  $     0.82  $     0.16
      - discontinued
         operations           $        -  $    (0.01) $        -  $    (0.41)
    -------------------------------------------------------------------------
    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)
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
                                                          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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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
    -------------------------------------------------------------------------
                                                          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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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)
    -------------------------------------------------------------------------
                                   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)
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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
    -------------------------------------------------------------------------
    EBITDA                         2,740       3,287      14,107       7,668
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

SOURCE SMTC Corporation