SMTC Corporation (NASDAQ:SMTX)

TORONTO, Jan. 5, 2012 (GLOBE NEWSWIRE) -- SMTC Corporation (Nasdaq:SMTX) (TSX:SMX) ("SMTC"), a recognized global electronics manufacturing services provider, today announced changes to its Charter and Bylaws aimed at improving shareholder rights, and an agreement with its largest shareholder, Red Oak Partners, LLC to limit its voting rights in certain circumstances.

Charter and Bylaw Changes

After retaining a leading provider of shareholder corporate governance solutions to recommend ways to make its policies more shareholder friendly, SMTC's Board of Directors adopted changes to its Charter and Bylaws including:

• Special meetings may now be called up to twice per year by holders of 10% or more of shares outstanding. Previously, shareholders were unable to call special meetings;
• Shareholders are no longer limited to the number of Directors they may nominate for election to the Board. Previously, shareholders were limited to nominating three Directors;
• SMTC's Tax benefits preservation shareholder rights plan ("Net Operating Loss Plan," or "NOL plan") may no longer be extended at the Board's discretion – in the future an extension will require shareholder approval;
• Removal of a stakeholder clause considered poor policy by governance experts and which impeded SMTC's singular focus on shareholder value.

Third Quarter 2011 Results

• Announces third quarter results in line with guidance
• Confirms guidance for approximately $69 million revenue, $4 million EBITDA, and $0.16 earnings per share ("EPS") for Q4
• Updates 2012 guidance from $13 million EBITDA on $240 million revenue to guidance range of $13-15 million EBITDA, $240-260 million revenue, and $0.47 - $0.59 EPS
• Closes new banking facility with PNC in late Q3
• Completes acquisition of ZF Array in late Q3

Revenue for the quarter was $44.1 million, in line with guidance. Revenues declined as demand reductions and end of life programs from certain customers in Q3 resulted in what is expected to be SMTC's lowest revenue and profit quarter of 2011. During the quarter, the new management team continued its restructuring plan, and has eliminated 11 corporate positions simultaneous with an increase in direct labor headcount by 550 employees (to 1,750) in order to meet increased demand in Q4 and beyond. One-time charges of $1.1 million in the third quarter included severance costs, the write-off of financing costs related to the previous credit facility, and foreign exchange forward losses. Costs related to the third quarter increase in direct labor headcount were expensed in the quarter and excluded from one-time charges. For the fourth quarter, the Company expects one-time charges, including those related to the closing of ZF Array, to be less than the amount incurred in Q3. The Company anticipates few if any non M&A-related one-time charges in 2012.

Co-Chief Executive Officer Claude Germain added, "We've continued with our plan to restructure the business to make it more customer oriented. Our new customer and program wins are exciting and will allow us to leverage our fixed cost infrastructure, increase site utilization, and improve gross margins. Additional customer wins are expected to ramp in Q4 and 2012, and barring any major macroeconomic downturn, we are looking forward to improved performance going forward."

SMTC Provides Business Update -- Raises Q4 Forecast, Provides 2012 Guidance

-Confirms prior guidance for improved financial performance in Q4 and beyond
-Raises Q4 guidance to $4.0 million EBITDA on revenue of $69 million
-Introduces new 2012 EBITDA guidance to equal or exceed $13 million, and 2012 revenue guidance to equal or exceed $240 million
-Guides for $825,000 Q3 EBITDA, pre 1-time costs (related to restructuring and refinancing) on revenue of $44 million

TORONTO, Oct. 25, 2011 (GLOBE NEWSWIRE) -- SMTC Corporation (Nasdaq:SMTX) (TSX:SMX) ("SMTC"), a recognized global electronics manufacturing services provider, today provided a Q3, Q4, and 2012 business update.

"In an effort to offer increased transparency about the business to our shareholders, we are providing the following update about our expected Q3, Q4 and 2012 results. We continue to expect Q3 to be our weakest quarter of the year, and anticipate generating $825,000 in EBITDA for the quarter. However, due to new program wins from both current and new customers, recent cost reduction initiatives, and our recent acquisition, we now expect the business to generate $4.0 million in EBITDA in Q4, up from our prior guidance of $3.0 million," stated Claude Germain, Co-Chief Executive Officer. "Barring additional major macroeconomic changes and based on forecasts from our customers as well as our internal forecasts, we are also introducing a 2012 EBITDA guidance of $13 million in EBITDA and $240 million in revenues."

Alex Walker, Co-Chief Executive Officer, added, "As recently appointed CEO's, we are cautious about providing new guidance, but our increased forecast reflects the strengthening of the business. In order to meet higher Q4 orders, we added to labor and increased working capital in late Q3. However, we continue to expect to generate positive operating cash flow for the year, and to generate strong free cash flow in 2012. We also expect our sizable tax loss carry-forwards to offset future taxable income and further increase earnings and cash flow."

EBITDA is a non-GAAP measure. EBITDA is computed as Net income from continuing operations excluding depreciation, amortization, restructuring charges, interest and income tax expense. SMTC Corporation provides this non-GAAP calculation of EBITDA as supplemental information regarding the operational performance of SMTC Corporation's core business. EBITDA is used by SMTC Corporation to provide a consistent method of comparison to historical periods and to the performance of competitors and peer group companies. SMTC Corporation believes that providing non-GAAP measures that management uses in its assessment of the business will allow its investors to better understand SMTC Corporation's financial performance and to evaluate SMTC Corporation's performance using the same methodology and information used by SMTC Corporation's management. 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.

SMTC Corporation delivered its third straight quarter of both sequential and year of year EPS growth.

2010 Second quarter highlights:

Comments in the the press release indicated that the 2010 third quarter would also be strong...

 "We enter the third quarter with a solid order backlog and continuing demand from our customers."

...but left a slight cloud of uncertainty regarding growth prospects thereafter:

However, we will take a cautious approach given continuing economic uncertainty and lack of visibility into customer end markets and into remaining customer inventory builds. We expect continued profitability through the remainder of the year but as has been our policy, we are not providing specific full year guidance." stated Mr. Caldwell.

We participated in the earnings conference call to gain more insight into future business prospects.  Management confirmed that the 2010 third quarter would build on the momentum established over the past several quarters. We asked management why it hesitated to give guidance past the third quarter.  It basically said that much of the recent growth was the result of customers restoring inventories that were inadequate to meet current demands. Thus, due to the uncertainty in the market place, the company was unwilling to make a definitive call that customers would not delay purchases until more certainty arrives on the scene.  

The company may also begin stepping up its IR efforts.

The SMTC story suddenly has a fly in the ointment. In its first quarter press release the company was able to make a broad assumption on 2010 as a whole:

"We continue to see signs of economic recovery. We experienced wide spread increased customer orders in the first quarter and thus far in the second quarter. With this strong order intake combined with a large opening order backlog, we expect continued sequential second quarter revenue growth. Although we have less visibility beyond the second quarter, at this point we expect aggregate revenue in the last two quarters at least to attain the first half level," stated Mr. Caldwell.

We have read too many press releases from other technology firms indicating that order bookings are at record highs and that visibility has improved. The question now becomes:  is the company being a little too conservative or does it see some weariness from its customers?  It is likely a little of both and in the end could lead to a disappointing 2010 fourth quarter.

With an erie feeling, we will keep the stock on the GeoSpecial on the Radar list, understanding the medium-term hurdles. With fully taxed adjusted trailing EPS of $0.35, we are not sure investors will take the stock much past a $3.00 to $5.00 range, until more clarity becomes evident about the future.

"As expected, SMTC produced strong first quarter results with revenue increasing 20% sequentially, the result of increased orders for most of SMTC's longstanding customers combined with five newer customers ramping production. This was our third consecutive quarter of robust revenue growth," stated John Caldwell, President and Chief Executive Officer. "We converted this increased revenue into more than a 50% sequential increase in net income adjusted for stock based compensation and income tax recoveries through leveraging our current manufacturing capacity and efficient cost structure."

"We continue to see signs of economic recovery. We experienced wide spread increased customer orders in the first quarter and thus far in the second quarter. With this strong order intake combined with a large opening order backlog, we expect continued sequential second quarter revenue growth. Although we have less visibility beyond the second quarter, at this point we expect aggregate revenue in the last two quarters at least to attain the first half level," stated Mr. Caldwell.

"Historically, the Company has not provided specific full year financial guidance. However, in the first quarter there are signs of some economic recovery and customer inventory rebuilding. Accordingly, we are experiencing continued strong order flow from longstanding and newer customers together with a strong opening backlog, which should result in continued sequential revenue growth in the first quarter, and continuing strength through the first half of the year." stated Mr. Caldwell.

Source: PR Newswire (March 10, 2010)