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SMTC Reports Third Quarter Results(GlobeNewswire Via Acquire Media NewsEdge) Reports third quarter results of $75.6 million in revenue, $1.3 million in net income, $2.6 million in adjusted EBITDA, and $0.08 adjusted EPS. Presents Q4 guidance of $70 - $77 million in revenue, $3.0 - $3.5 million in adjusted EBITDA and $0.09 - $0.12 adjusted EPS, with expectation for $0.5 million non-recurring charges in Q4 related to Canadian restructuring. Narrows 2012 adjusted EBITDA guidance from $14 - $16 million to $14 - $15 million, up from actual $9.3 million in 2011. Narrows 2012 adjusted EPS guidance from $0.53 - $0.65 to $0.50 - $0.55, up from actual $0.07 in 2011. TORONTO, Nov. 8, 2012 (GLOBE NEWSWIRE) -- SMTC Corporation (Nasdaq:SMTX) ("SMTC"), a global electronics manufacturing services provider, today announced third quarter 2012 unaudited results. Revenue for the quarter was $75.6 million, a 71% increase over third quarter 2011, and a slight increase over the second quarter 2012 revenue. Gross margins were $6.0 million or 7.9% including unrealized gains from foreign currency forward contracts of $1.1 million. Adjusted EBITDA for the quarter was $2.6 million, compared to the $0.7 million in the third quarter of 2011, and $4.3 million in the second quarter 2012. Third quarter results have been impacted by a number of factors that include: a. $429 thousand non-recurring costs in China related to the acquisition of the assets from Alco Electronics. b. $303 thousand in severances and terminations incurred in response to reduced revenue levels in our Canadian manufacturing operation. Adjusted EPS for the quarter was $0.08, and benefited $0.02/share from a non-recurring $360 thousand tax recovery for taxes paid in 2011 and 2012. This compares to $(0.09) in the third quarter of 2011, and $0.17 in the second quarter 2012. Bank debt levels increased to $28.9 million, from $25.4 million in the second quarter, largely due to $4.6 million of anticipated Q3 receivables that were collected shortly after quarter end. Co-Chief Executive Officer Claude Germain stated, "It is worth noting that our guidance does not include any effects of closing, before year end, the previously announced asset purchase from Seksun Array Electronics, nor does it consider any potential impacts from Hurricane Sandy. Note that the purchase of the Seksun Array Electronics assets will cost approximately $2.0 million, which will be funded through our bank debt facility. We expect it to be immediately accretive." "Overall, the third quarter was weaker than expected. We have initiated lean manufacturing initiatives in our Mexican operation in order to improve quality, consistency and planning. We are also reviewing our Canadian operations in order to improve profitability," stated Co-Chief Executive Officer, Alex Walker. "Although our revenue levels are higher than expected, we've maintained our adjusted EBITDA guidance to the lower end of our range largely due to a record number of New Program Introductions across our plants. This new business comes with higher manufacturing complexity at the outset, we are working through it and expect improved margins on these programs going forward." Added Claude Germain, "We also remain focused on reducing our debt through free cash generation. Consistent with what we have stated previously, we expect to achieve year end net debt of less than 1.5 times 2012 adjusted EBITDA by year end." Adjusted EBITDA and adjusted EPS are non-GAAP measures. Adjusted EBITDA is computed as net income from continuing operations excluding depreciation, restructuring charges, loss on extinguishment of debt, acquisition expenses, interest and income tax expense. Adjusted EPS is GAAP EPS excluding the effect of restructuring charges relating to the integration of the ZF Array Technology acquisition. SMTC Corporation has provided in this release non-GAAP calculations of adjusted EBITDA and adjusted EPS as supplemental information regarding the operational performance of SMTC Corporation's core business. Management uses these non-GAAP financial measures internally in analyzing SMTC Corporation'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 Corporation believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing SMTC Corporation's performance and when planning, forecasting and analyzing future periods. SMTC Corporation believes these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key financial metrics we use in making operating decisions and because our investors and analysts use them to help assess the health of our business. Non-GAAP measures are subject to material 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 EPS along with other financial performance measures, including revenue, net income and SMTC Corporation's financial results presented in accordance with 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 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. 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 China, with more than 1,875 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 was recognized in 2012 by Frost & Sullivan with the Global EMS Award for Product Quality Leadership. 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 //www.globenewswire.com/newsroom/prs/ pkgid=9800 Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) Three months endedNine months ended(Expressed in thousands of U.S. dollars, except number of shares and per share amounts)September 30, 2012October 2, 2011September 30, 2012October 2, 2011 Revenue $ 75,575 $ 44,082 $ 223,149 $ 149,243 Cost of sales 69,567 40,361 202,335 135,758 Gross profit 6,008 3,721 20,814 13,485 Selling, general and administrative expenses 4,238 3,693 12,599 10,611 Contingent consideration -- -- (650) -- Restructuring charges -- 686 451 2,793 Loss on extinguishment of debt -- 300 -- 300 Loss on derivative financial instruments -- -- -- -- Operating earnings (loss) 1,770 (958) 8,414 (219) Interest expense 526 326 1,531 981 Earnings (loss) before income taxes 1,244 (1,284) 6,883 (1,200) Income tax expense (recovery) Current (45) 99 374 462 Deferred (33) 73 (46) 43 (78) 172 328 505 Net earnings (loss), also being comprehensive income (loss) $ 1,322 $ (1,456) $ 6,555 $ (1,705) Basic earnings(loss) per share $ 0.08 $ (0.09) $ 0.40 $ (0.11) Diluted earnings (loss) per share $ 0.08 $ (0.09) $ 0.40 $ (0.11) Weighted average number of shares outstanding Basic 16,319,255 16,200,575 16,283,803 16,113,866 Diluted 16,444,053 16,200,575 16,419,272 16,113,866Consolidated Balance Sheets (Unaudited) (Expressed in thousands of U.S. dollars)September 30, 2012January 1, 2012Assets Current assets: Cash $ 955 $ 2,635 Accounts receivable - net 42,015 37,904 Inventories 56,304 52,648 Prepaid expenses 3,100 1,638 Income taxes recoverable 158 -- Current portion of deferred income taxes 278 278 102,810 95,103 Property, plant and equipment 17,947 15,355 Deferred financing costs 613 916 Deferred income taxes 2,968 2,922 $ 124,338 $ 114,296Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 42,501 $ 46,352 Accrued liabilities 7,016 10,164 Income taxes payable -- 367 Current portion of long-term debt 3,473 4,014 Current portion of capital lease obligations 1,712 1,449 54,702 62,346 Long-term debt 26,397 15,233 Capital lease obligations 1,640 2,150 Shareholders' equity: Capital stock 389 5,631 Additional paid-in capital 263,302 257,583 Deficit (222,092) (228,647) 41,599 34,567 $ 124,338 $ 114,296Consolidated Statements of Cash Flows (Unaudited) Three months endedNine months ended(Expressed in thousands of U.S. dollars) Cash provided by (used in):September 30, 2012October 2, 2011September 30, 2012October 2, 2011Operations: Net earnings (loss) $ 1,322 $ (1,456) $ 6,555 $ (1,705) Items not involving cash: Depreciation 786 704 2,310 2,059 Loss on extinguishment of debt -- 300 -- 300 Unrealized (gain)loss on derivative financial instrument (1,119) 125 (1,126) 125 Deferred income taxes (33) 73 (46) 43 Non-cash interest 98 57 303 166 Stock-based compensation 55 27 257 96 Contingent consideration -- -- (650) -- Gain on bargain purchase -- (22) (22) Change in non-cash operating working capital: Accounts receivable (2,169) 3,867 (4,111) 9,734 Inventories 4,396 (10,906) (3,656) (3,092) Prepaid expenses 867 (124) (507) 826 Income taxes payable (266) 3 (525) (42) Accounts payable (5,528) 5,614 (3,851) (10,124) Accrued liabilities (925) 1,353 (1,585) (1,827) (2,516) (385) (6,632) (3,463)Financing: Increase in revolving debt 2,150 6,712 12,784 10,713 Repayment of long-term debt -- (1,235) (2,161) (1,235) Principal payment of capital lease obligations (391) (342) (1,295) (1,174) Payment of contingent consideration (171) -- (742) -- Proceeds from sales leaseback -- -- 170 -- Proceeds from issuance of common stock 27 19 220 317 Deferred financing costs -- (1,021) -- (1,021) 1,615 4,133 8,976 7,600Investing: Purchase of property, plant and equipment (513) (125) (4,024) (434) Acquistion of business, net of cash acquired -- (3,033) -- (3,033) (513) (3,158) (4,024) (3,467) Increase (decrease) in cash (1,414) 590 (1,680) 670 Cash, beginning of period 2,369 1,013 2,635 933 Cash, end of the period $ 955 $ 1,603 $ 955 $ 1,603Supplementary Information: Reconciliation of Adjusted EBITDA Three months endedNine months ended September 30, 2012October 2, 2011September 30, 2012October 2, 2011 Net earnings (loss) $ 1,322 $ (1,456) $ 6,555 $ (1,705) Add: Interest 526 326 1,531 981 Income tax expense (recovery) (78) 172 328 505 Depreciation 786 704 2,310 2,059 Restructuring charges -- 686 451 2,793 Loss on extinguishment of debt -- 300 -- 300 Adjusted EBITDA 2,556 732 11,175 4,933CONTACT: Alex Walker President and Co-Chief Executive Officer, SMTC Corporation (905) 413.1190 Email: [email protected] Investor Relations Information: Alex Walker President and Chief Executive Officer Telephone: (905) 413.1272 Email: [email protected] or John Nesbett / Jennifer Belodeau Institutional Marketing Services (IMS) Telephone: (203) 972-9200 Email: mailto:[email protected] Public Relations Information: Tom Reilly Director of Marketing Telephone: (905) 413.1188 Email: [email protected] Source: SMTC Corporation 2012 GlobeNewswire, Inc. |