SMTC Reports Third Quarter Results

Oct. 27, 2015 5:00 pm |  More About SMTC Corporation


  • Reports revenue of $53.4 million, compared to $55.5 million in the prior year.
  • Reports gross profit of 5.8% compared to 8.2% in the prior year. When excluding the effects of the unrealized portion of foreign exchange on derivative financial instruments, adjusted gross profit was 7.3% compared to 9.9% in the prior year. Also included in gross profit was a realized foreign exchange loss on derivative instruments of $1.2 million compared to a loss of $0.1 million in the prior year.
  • Reports a net loss of $1.3 million compared to a net loss of $0.8 million in the prior year.
  • Reports $1.0 million or 1.9% in adjusted EBITDA after absorbing $0.5 million in professional fees (described below) and severance compared to prior year of $2.1 million or 3.7%.
  • Positive cash flow from operations of $4.8 million compared to $0.7 million in the prior year.
  • Debt, net of cash of $12.8 million, compared to $21.0 million in the third quarter of 2014; a reduction of $8.2 million.

SAN JOSE, Calif., Oct. 27, 2015 (GLOBE NEWSWIRE) -- SMTC Corporation (Nasdaq:SMTX), a global electronics manufacturing services provider, today announced third quarter 2015 unaudited results.

Chief Executive Officer Sushil Dhiman stated, "We experienced margin challenges during the quarter due to product mix, additional costs related to new customer production ramp and realized foreign exchange losses on derivative instruments. However, I am pleased with our new customer revenue of $13.1 million this quarter and respective year to date revenue of $24.9 million. These new customers continue to ramp and are expected to fully replace the revenues lost from two long standing customers by the year end. We are continuing to add to a healthy sales funnel and our new customer wins are expected to contribute to revenue growth in 2016."

Reports gross profit of $3.1 million compared to $4.6 million in the prior year. The decrease was due to lower revenue, product mix and initial investments required to ramp new customer revenue. This was partially offset by reduced direct labor and overhead charges.

Reports a net loss of $1.3 million compared to a net loss of $0.8 million in the prior year. This was mitigated with a reduction in administrative expenses, which were reduced by $0.4 million or 9.1% over prior year. Administrative expenses also included $0.4 million in professional services related to the merger and acquisition activities. These expenses may or may not occur in the future.

Chief Financial Officer Jim Currie stated "Strong cash flow from operations and inventory turns improvement has allowed us to reduce our net debt by over $8 million in the last twelve months."

Non-GAAP information

Adjusted EBITDA and Adjusted Gross Profit are non-GAAP measures. Adjusted EBITDA is computed as net income from continuing operations excluding depreciation, restructuring charges, unrealized foreign exchange gains/losses on derivative financial instruments, stock based compensation, interest and income tax expense. SMTC Corporation has provided in this release a non-GAAP calculation of adjusted EBITDA as supplemental information regarding the operational performance of SMTC's core business. A reconciliation of adjusted EBITDA to net earnings (loss) is included in the attachment. Adjusted Gross Profit is computed as gross profit excluding unrealized gains or losses on derivative financial instruments. A reconciliation of adjusted gross profit to gross profit is included in the attachment. Management uses these non-GAAP financial measures internally in analyzing SMTC's financial results to assess operational performance and liquidity as well as to provide a consistent method of comparison to historical periods and to the performance of competitors and peer group companies. SMTC believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing SMTC's performance and when planning, forecasting and analyzing future periods. SMTC believes these non-GAAP financial measures are useful to investors because it allows for greater transparency with respect to key financial metrics we use in making operating decisions and because investors and analysts use it to help assess the health of our business. Non-GAAP measures are subject to limitations as these measures are not in accordance with, or an alternative for, Generally Accepted Accounting Principles and may be different from non-GAAP measures used by other companies. Because of these limitations, investors should consider adjusted EBITDA and adjusted gross profit along with other financial performance measures, including revenue, gross profit and net income, as reflected in SMTC's consolidated financial statements prepared in accordance with US GAAP.

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. For these statements, we claim the protection of the safe harbor for forward-looking statements 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 risks and uncertainties discussed in SMTC's most recent filings with the SEC. The forward-looking statements contained in this release are made as of the date hereof and SMTC 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.

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, Mexico, and China, with approximately 1,300 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. For further information on SMTC Corporation, please visit our website at www.smtc.com (http://www.smtc.com/).

The SMTC Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=9800

 
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
         
  Three months ended Nine months ended
(Expressed in thousands of U.S. dollars, except number of shares and per share amounts) September 27, 
2015
September 28, 
2014 (1)
September 27, 
2015
September 28, 
2014 (1)
         
Revenue  $ 53,425  $ 55,528  $ 159,880  $ 171,535
Cost of sales  50,309  50,964  147,706  156,427
Gross profit  3,116  4,564  12,174  15,108
Selling, general and administrative expenses  4,035  4,479  11,661  13,226
Gain on sale of property, plant and equipment  (1)  23  2  23
Restructuring charges  --  187  --  1,366
Operating earnings (loss)  (918)  (125)  511  493
Interest expense  300  470  914  1,337
Loss before income taxes  (1,218)  (595)  (403)  (844)
Income tax expense (recovery)        
Current  152  129  481  574
Deferred  (27)  34  (86)  32
   125  163  395  606
Net loss, also being comprehensive loss  $ (1,343)  $ (758)  $ (798)  $ (1,450)
         
Basic loss per share  $ (0.08)  $ (0.05)  $ (0.05)  $ (0.09)
Diluted loss per share  $ (0.08)  $ (0.05)  $ (0.05)  $ (0.09)
         
Weighted average number of shares outstanding        
Basic 16,417,276 16,417,276 16,417,276 16,417,274
Diluted 16,417,276 16,417,276 16,417,276 16,417,274
         
(1) As revised, see Note 2 in the financial statements included in Form 10-Q
         
 
Consolidated Balance Sheets
(Unaudited)
 
(Expressed in thousands of U.S. dollars) September 27, 
2015
December 28,
2014
Assets    
     
Current assets:    
Cash  $ 4,872  $ 5,447
Accounts receivable - net  27,917  31,024
Inventories  30,466  31,590
Prepaid expenses and other assets  1,834  2,135
Income taxes receivable  287  359
Deferred income taxes - net  514  428
   65,890  70,983
Property, plant and equipment - net  16,561  17,590
Deferred financing costs - net  76  90
   $ 82,527  $ 88,663
Liabilities and Shareholders' Equity    
     
Current liabilities:    
Accounts payable  $ 29,046  $ 29,425
Accrued liabilities  7,124  7,080
Derivative liabilities  3,037  2,703
Income taxes payable  350  449
Revolving credit facility  16,650  21,370
Current portion of capital lease obligations  626  980
   56,833  62,007
Capital lease obligations  358  866
     
Shareholders' equity:    
Capital stock  390  390
Additional paid-in capital  264,340  263,996
Deficit  (239,394)  (238,596)
   25,336  25,790
   $ 82,527  $ 88,663
     
 
Consolidated Statements of Cash Flows
(Unaudited)
  Three months ended Nine months ended
(Expressed in thousands of U.S. dollars)
Cash provided by (used in): September 27, 
2015
September 28, 
2014 (1)
September 27, 
2015
September 28, 
2014 (1)
Operations:        
Net loss  $ (1,343)  $ (758)  $ (798)  $ (1,450)
Items not involving cash:        
Depreciation  981  1,028  2,976  2,960
Unrealized loss (gain) on derivative financial instruments  805  923  334  (171)
(Gain) loss on sale of property, plant and equipment  (1)  23  2  23
Deferred income taxes  (27)  34  (86)  32
Amortization of deferred financing fees  9  137  24  377
Stock-based compensation  126  63  344  168
Change in non-cash operating working capital:        
Accounts receivable  3,434  2,164  3,107  2,477
Inventories  3,650  1,955  1,124  (465)
Prepaid expenses and other assets  308  347  301  567
Income taxes payable  --  8  (27)  (343)
Accounts payable  (2,659)  (5,434)  (487)  (3,065)
Accrued liabilities  (501)  236  (106)  (32)
   4,782  726  6,708  1,078
Financing:        
Advance (net repayment) in revolving debt  (5,430)  (3)  (4,720)  1,525
Principal payment of capital lease obligations  (227)  (560)  (862)  (1,574)
Deferred financing costs  --  (100)  (10)  (200)
   (5,657)  (663)  (5,592)  (249)
Investing:        
Purchase of property, plant and equipment  (358)  (472)  (1,697)  (1,314)
Proceeds from sale of property, plant and equipment  3  20  6  30
   (355)  (452)  (1,691)  (1,284)
Decrease in cash  (1,230)  (389)  (575)  (455)
Cash, beginning of period  6,102  3,229  5,447  3,295
Cash, end of the period  $ 4,872  $ 2,840  $ 4,872  $ 2,840
         
(1) As revised, see Note 2 in the financial statements included in Form 10-Q
         
 
Supplementary Information:
         
Reconciliation of Adjusted EBITDA
 
  Three months ended Nine months ended
  September 27, 
2015
September 28, 
2014 (1)
September 27, 
2015
September 28, 
2014 (1)
Net loss (1,343) (758) (798) (1,450)
Add (deduct):        
Stock compensation expense  126  63  344  168
Interest  300  470  914  1,337
Unrealized loss (gain) on derivative instruments 805 923 334 (171)
Income tax expense  125  163  395  606
Depreciation  981  1,028  2,976  2,960
Restructuring charges  --  187  --  1,366
Adjusted EBITDA  994  2,076  4,165  4,816
         
(1) As revised, see Note 2 in the financial statements included in Form 10-Q
         
 
Supplementary Information:
         
Reconciliation of Adjusted Gross Profit
 
  Three months ended Nine months ended
  September 27, 
2015
September 28, 
2014 (1)
September 27, 
2015
September 28, 
2014 (1)
Gross Profit  $ 3,116  $ 4,564  $ 12,174  $ 15,108
Deduct:        
Unrealized foreign exchange loss (gain) on forward contracts  805  923  334  (171)
Adjusted Gross Profit  3,921  5,487  12,508  14,937
         
(1) As revised, see Note 2 in the financial statements included in Form 10-Q
         
CONTACT: Investor Relations Information:
         Blair McInnis
         Corporate Controller
         Telephone: (408) 934.7040
         Email: blair.mcinnis@smtc.com
         
         Public Relations Information:
         Tom Reilly
         Director of Marketing
         Telephone: (408) 934.7055
         Email: publicrelations@smtc.com

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GlobeNewswire
October 27, 2015 - 5:00 PM EDT


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