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SMTC Swings to Profit

SMTC (SMTX - Get Report) swung to a second-quarter profit Monday, as the electronics manufacturing services provider bounced back from a loss-plagued 2003.

For its second quarter ended June 30, the Toronto-based company earned $1 million, or 2 cents a share. That reverses the year-ago charge-heavy loss of $39.9 million, or $1.39 a share.

The company posted the profit despite a 6% slide in revenue to $66.3 million.

Latest-quarter earnings included income from discontinued options of $800,000 and an income tax expense of $500,000 related to recapitalization transactions. Gross profit margin rose to 11.1% from 6.7% in the prior year.

On June 1, SMTC closed its recapitalization, featuring a private placement of 33.4 million special warrants and a three-year, $40 million revolving asset-based credit facility. The company also swapped debt for equity with previous debtholders.

"With the delay in the completion of the recapitalization and the renewal of our sales organization, our new customer acquisition initiatives are just starting to gain traction," said CEO John Caldwell.

"I am pleased to have recently joined SMTC," said finance chief Jane Todd. "I believe I have joined the Company at an optimum time, with the completion of the recapitalization transactions reducing our overall debt, lengthening our repayment terms and introducing our revolving credit facility. The closure of these transactions will provide the additional liquidity and financial flexibility to support our current and future customers' growth."

On Monday, the stock dropped a penny to 43 cents.

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