Quarterly Report (10-q)

Date : 11/12/2019 @ 2:42PM
Source : Edgar (US Regulatory)
Stock : SMTC Corporation (SMTX)
Quote : 3.03  0.13 (4.48%) @ 1:00AM

Quarterly Report (10-q)

 

 



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

  


 

FORM 10-Q

 


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 

 

 

 

For the quarterly period ended September 29, 2019

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

FOR THE TRANSITION PERIOD FROM                 TO

 

COMMISSION FILE NUMBER 000-31051

 


 

SMTC CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 


DELAWARE

98-0197680

(STATE OR OTHER JURISDICTION OF 

INCORPORATION OR ORGANIZATION)

(I.R.S. EMPLOYER IDENTIFICATION NO.)

 

7050 WOODBINE AVENUE

Suite 300

MARKHAM, ONTARIO, CANADA L3R 4G8

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

 

(905) 479-1810

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

SMTX

NASDAQ The Nasdaq Global Market

 

 


Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer    ☐          Accelerated filer    ☐          Non-accelerated filer    ☐          Smaller reporting company    ☒           Emerging growth company    ☐  

      

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

 

As of November 12, 2019, SMTC Corporation had 28,098,474 shares of common stock, par value $0.01 per share, outstanding.

 

 

 

 

 

SMTC CORPORATION

 

Table of Contents

 

PART I FINANCIAL INFORMATION

3

  

  

  

Item 1

Financial Statements

3

  

  

  

 

Interim Consolidated Balance Sheets (unaudited)

3

  

  

  

 

Interim Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited)

4

  

  

  

 

Interim Consolidated Statements of Changes in Shareholders’ Equity (unaudited) 

5

  

  

  

 

Interim Consolidated Statements of Cash Flows (unaudited)

7

  

  

  

 

Notes to Interim Consolidated Financial Statements (unaudited)

8

  

  

  

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

  

  

  

Item 3

Quantitative and Qualitative Disclosures About Market Risk

40

  

  

  

Item 4

Controls and Procedures

42

  

 

PART II OTHER INFORMATION

42

  

  

  

Item 1A

 Risk factors

42

 

 

 

Item 6

Exhibits

43

  

2

 

 

 

SMTC CORPORATION

Part I FINANCIAL INFORMATION

 

Item 1 Financial Statements

 

Interim Consolidated Balance Sheets:

(Expressed in thousands of U.S. dollars)

(Unaudited)

 

   

September 29,

2019

   

December 30,

2018

 

Assets

               

Current assets:

               

Cash

  $ 601     $ 1,601  

Accounts receivable — net (note 4)

    61,208       72,986  

Unbilled contract assets (note 4)

    26,790       20,405  

Inventories (note 4)

    49,535       53,203  

Prepaid expenses and other assets

    6,658       5,548  

Derivative assets (note 11)

          15  

Income taxes receivable

    358       160  

Total current assets

    145,150       153,918  
                 

Property, plant and equipment — net (note 4)

    26,348       28,160  

Operating lease right of use assets — net (notes 2 and 6)

    3,887        

Goodwill (note 4)

    18,165       18,165  

Intangible assets — net (note 4)

    14,403       19,935  

Deferred income taxes — net

    366       380  

Deferred financing costs — net

    899       668  

Total assets

  $ 209,218     $ 221,226  
                 

Liabilities and Shareholders’ Equity

               

Current liabilities:

               

Revolving credit facility (note 5)

  $ 34,840     $ 25,020  

Accounts payable

    67,082       76,893  

Accrued liabilities (note 4)

    13,387       13,040  

Warrant liability (note 5)

    1,090       2,009  

Restructuring liability (note 12)

    2,736        

Contingent consideration (note 4)

          3,050  

Income taxes payable

    94       12  

Current portion of long-term debt (note 5)

    1,250       1,368  

Current portion of operating lease obligations (notes 2 and 6)

    1,483        

Current portion of finance lease obligations (notes 2 and 6)

    1,316       1,547  

Total current liabilities

    123,278       122,939  
                 

Long-term debt (note 5)

    34,154       56,039  

Operating lease obligations (notes 2 and 6)

    2,818        

Finance lease obligations (notes 2 and 6)

    9,105       9,947  

Total liabilities

    169,355       188,925  
                 

Shareholders’ equity:

               

Capital stock (note 7)

    507       458  

Additional paid-in capital

    293,152       278,648  

Deficit

    (253,796 )     (246,805

)

      39,863       32,301  

Total liabilities and shareholders’ equity

  $ 209,218     $ 221,226  

 

Commitments (note 12)

 

See accompanying notes to interim consolidated financial statements.

 

3

 

 

 

SMTC CORPORATION

Interim Consolidated Statements of Operations and Comprehensive Income (Loss)

 

(Expressed in thousands of U.S. dollars, except number of shares and per share amounts)

(Unaudited)

 

   

Three months ended

   

Nine months ended

 
   

September 29, 2019

   

September 30, 2018

   

September 29, 2019

   

September 30, 2018

 

Revenue (note 4)

  $ 88,682     $ 53,677     $ 282,267     $ 135,276  

Cost of sales (note 11)

    79,776       48,440       255,740       121,906  

Gross profit

    8,906       5,237       26,527       13,370  
                                 

Selling, general and administrative expenses

    6,549       3,682       19,908       10,838  

Change in fair value of warrant liability (note 5)

    (858

)

          (919 )      

Change in fair value of contingent consideration (note 4)

                (3,050 )      

Loss on disposal of property, plant and equipment

          3             3  

Restructuring charges (note 12)

    6,454       58       8,624       154  

Operating income (loss)

    (3,239 )     1,494       1,964       2,375  

Interest expense (note 4)

    2,679       485       8,349       1,195  

Income (loss) before income tax expense

    (5,918 )     1,009       (6,385 )     1,180  

Income tax expense (recovery) (note 8):

                               

Current

    (103 )     290       592       596  

Deferred

    (81 )     (145

)

    14       (191

)

      (184 )     145       606       405  

Net income (loss) and comprehensive income (loss)

  $ (5,734 )   $ 864     $ (6,991 )   $ 775  
                                 

Earnings per share of common stock:

                               

Basic

  $ (0.20 )   $ 0.04     $ (0.28 )   $ 0.04  

Diluted

  $ (0.20 )   $ 0.04     $ (0.28 )   $ 0.04  

Weighted average number of shares outstanding (note 9):

                               

Basic

    28,057,763       19,335,253       24,954,875       17,866,399  

Diluted

    28,057,763       19,986,756       24,954,875       18,517,902  

 

See accompanying notes to interim consolidated financial statements.

 

4

 

 

 

SMTC CORPORATION

Interim Consolidated Statements of Changes in Shareholders’ Equity

(Expressed in thousands of U.S. dollars)

 

Three months ended September 29, 2019

(Unaudited)

 

   

Common

Shares

   

Capital
stock

   

Additional
paid-in
capital

   

Deficit

   

Total
Shareholders’
equity

 
                                         

Balance, June 30, 2019

    28,011,088     $ 506     $ 292,829     $ (248,062

)

  $ 45,273  

Treasury stock

    21,264             (75 )           (75 )

Restricted stock units vested and stock options exercised

    87,386       1       45             46  
                                         

Stock-based compensation

                353             353  

Net loss

                      (5,734 )     (5,734 )

Balance, September 29, 2019

    28,119,738       507       293,152       (253,796 )     39,863  

 

 

Three months ended September 30, 2018

(Unaudited)

 

   

 

Common

Shares

   

Capital
stock

   

Additional
paid-in
capital

   

Deficit

   

Total
Shareholders’
equity

 
                                         

Balance, July 1, 2018

    17,303,510     $ 399     $ 265,916     $ (246,446

)

  $ 19,869  
                                         
                                         

Issuance of common shares from rights offering (note 7)

    5,777,768       58       12,529             12,587  

Stock-based compensation

                75             75  

Net income

                      864       864  

Balance, September 30, 2018

    23,081,278       457       278,520       (245,582

)

    33,395  

 

5

 

 

Nine months ended September 29, 2019

(Unaudited)

 

   

Common

Shares

   

Capital
stock

   

Additional
paid-in
capital

   

Deficit

   

Total
Shareholders’
equity

 
                                         

Balance, December 30, 2018

    23,189,381     $ 458     $ 278,648     $ (246,805

)

  $ 32,301  

Treasury stock

    21,264             (75 )           (75 )

RSU vested and stock options exercised

    267,063       3       43             46  

Issuance of common shares from rights offering (note 7)

    4,642,030       46       13,998             14,044  

Stock-based compensation

                538             538  

Net loss

                      (6,991 )     (6,991 )

Balance, September 29, 2019

    28,119,738       507       293,152       (253,796 )     39,863  

 

 

Nine months ended September 30, 2018

(Unaudited)

   

Common

Shares

   

Capital
stock

   

Additional
paid-in
capital

   

Deficit

   

Total
Shareholders’
equity

 
                                         

Balance, December 31, 2017

    16,992,627     $ 396     $ 265,355     $ (246,677

)

  $ 19,074  

Impact of adoption of ASC 606 (note 2)

                      320       320  

RSU vested and stock options exercised

    310,883       3       358             361  

Issuance of common shares from rights offering (note 6)

    5,777,768       58       12,529             12,587  

Stock-based compensation

                278             278  

Net income

                      775       775  

Balance, September 30, 2018

    23,081,278       457       278,520       (245,582

)

    33,395  

 

See accompanying notes to interim consolidated financial statements.

  

6

 

 

 

SMTC CORPORATION

Interim Consolidated Statements of Cash Flows

(Expressed in thousands of U.S. dollars)

(Unaudited)

 

   

Nine months ended

 
   

September 29,

2019

   

September 30,

2018

 

Cash provided by (used in):

               

Operations:

               
                 

Net income (loss)

  $ (6,991 )   $ 775  
                 

Items not involving cash:

               
                 

Depreciation of property, plant & equipment

    4,902       2,426  

Amortization of intangible assets

    5,532        

Unrealized foreign exchange gain on unsettled forward exchange contracts

          (338

)

Loss on sale of property, plant and equipment

          3  

Write down of property, plant and equipment

    261        

Deferred income taxes (recovery)

    14       (191

)

Amortization of deferred financing fees

    1,300       34  

Stock-based compensation

    538       278  

Change in fair value of warrant liability

    (919 )      

Change in fair value of contingent consideration

    (3,050 )      
                 

Change in non-cash operating working capital:

               

Accounts receivable

    11,778       (12,096

)

Unbilled contract assets

    (6,385 )     (8,183

)

Inventories

    3,668       (6,009

)

Prepaid expenses and other assets

    (1,095 )     (1,002

)

Income taxes payable

    (116 )     (32

)

Accounts payable

    (9,845 )     16,582  

Accrued liabilities

    (265 )     2,449  

Restructuring liability

    2,736        

Net change in operating lease right of use asset and liability

    414        
      2,477       (5,304

)

Financing:

               

Net advances of revolving credit facility

    9,820       4,515  

Repayment of long-term debt

    (22,625 )     (1,500

)

Advance of equipment facility

          2,629  

Deferred financing fees

    (371 )     (48

)

Principal repayments of finance lease obligations

    (1,199 )     (189

)

Proceeds from issuance of common stock through exercise of stock options

    45       361  

Proceeds from issuance of common stock through rights offerings

    14,044       12,587  
      (286 )     18,355  

Investing:

               

Purchase of property, plant and equipment

    (3,191 )     (3,898

)

      (3,191 )     (3,898

)

                 

(Decrease) increase in cash

    (1,000 )     9,153  

Cash, beginning of period

    1,601       5,536  

Cash, end of the period

  $ 601     $ 14,689  
                 

Supplemental Information

               

Property, plant and equipment acquired that was unpaid in cash and included in accounts payable and accruals

    418       55  
                 

Property, plant and equipment acquired through capital lease

    126       627  

 

See accompanying notes to interim consolidated financial statements.

   

7

 

 

SMTC CORPORATION

 

Unaudited Notes to Interim Consolidated Financial Statements

(Expressed in thousands of U.S. dollars, except number of shares and per share amounts)

 

 

1.

Nature of the business

 

SMTC Corporation (the “Company,” “SMTC,” “we,” “us,” or “our”) is a provider of end-to-end electronics manufacturing services, including product design and engineering services, printed circuit board assembly, production, enclosure, cable assembly, precision metal fabrication, systems integration and comprehensive testing services, configuration to order, build to order and direct order fulfillment. We have more than 50 manufacturing and assembly lines at strategically located facilities in the United States, Mexico, and China that provide local support and manufacturing capabilities to our global customers. Our services extend over the entire electronic product life cycle from new product development and new product introduction through to growth, maturity and end of life phases. As of September 29, 2019, we had 2,941 employees of which 2,541 were full time and contract employees.

 

In September 2019, the Company announced plans to close its manufacturing operations in China before the end of fiscal 2019. See Note 4 and Note 12 for further disclosure.

 

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with the accounting principles and methods of application disclosed in the audited consolidated financial statements within the Company’s Form 10-K for the fiscal period ended December 30, 2018, (“Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2019, except for the adoption of the new accounting policies related to leases which is outlined in note 2. The accompanying unaudited interim consolidated financial statements include adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair statement of the consolidated financial statements under generally accepted accounting principles in the United States (“U.S. GAAP”). These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements contained in the Company’s Form 10-K. The consolidated balance sheet at December 30, 2018 was derived from the audited annual consolidated financial statements, but does not contain all of the footnote disclosures from the annual consolidated financial statements.

 

Unless otherwise specified or the context requires otherwise, all statements in these notes to the interim consolidated financial statements regarding financial figures are expressed in thousands of U.S. dollars.

 

8

 

 

 

2.

Impact of adoption of ASC 842

 

The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), as of December 31, 2018, using the modified retrospective approach, which allows comparative periods not to be restated. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed the Company to carry forward the historical lease classification, not reassess whether any expired or existing contracts are or contain leases and not to reassess initial direct costs for any existing leases. The Company also elected the hindsight expedient to determine the lease terms for existing leases. The election of the hindsight expedient did not have a significant impact on the calculation of the expected lease term.

 

The Company leases various office facilities and manufacturing equipment. The Company determines if an arrangement contains a lease at contract inception. An arrangement is, or contains, a lease if the agreement identifies an asset, implicitly or explicitly, that the Company has the right to use over a period of time. If an arrangement contains a lease, the Company classifies the lease as either an operating lease or as a finance lease based on the five criteria defined in Accounting Standards Codification (“ASC”) 842.

 

Lease liabilities are recognized at commencement date based on the present value of the remaining lease payments over the lease term. The corresponding right-of-use asset is recognized for the same amount as the lease liability adjusted for any payments made at or before the commencement date, any lease incentives received, and any initial direct costs. The Company’s lease agreements may include options to renew, extend or terminate the lease. These clauses are included in the initial measurement of the lease liability when at lease commencement the Company is reasonably certain that it will exercise such options. The discount rate used is the interest rate implicit in the lease or, if that cannot be readily determined, the Company's incremental borrowing rate.

 

Operating lease expense is recognized on a straight-line basis over the lease term and presented within cost of sales on the Company’s consolidated statements of operations. Finance lease right-of-use assets are amortized on a straight-line basis over the shorter of the useful life of the asset or the lease term. Interest expense on the finance lease liability is recognized using the effective interest rate method and is presented within interest expense on the Company’s consolidated statements of operations and comprehensive income. Variable rent payments related to both operating and finance leases are expensed as incurred. The Company’s variable lease payments primarily consists of real estate taxes, maintenance and usage charges. The Company made an accounting policy election to combine lease and non-lease components.

 

The Company has elected to exclude short-term leases from the recognition requirements of ASC 842. A lease is short-term if, at the commencement date, it has a term of less than or equal to one year. Lease expense related to short-term leases is recognized on a straight-line basis over the lease term. 

 

The adoption of the new standard resulted in the recognition of operating lease right of use assets and operating lease obligations of $5,452 and $5,915, respectively on December 31, 2018. The difference between the operating lease right of use asset and operating lease obligation related to accrued and prepaid rent of $463, which was reclassified to the operating lease right of use asset. The standard did not materially impact consolidated net loss and had no impact on cash flows.

 

9

 

 

 

3.

Recent Accounting Pronouncements Adopted

 

In June 2018, the Financial Accounting Standards Board (the “FASB”) published ASU 2018-07: Compensation – Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting. The amendment simplifies the application of share-based payment accounting for non-employees. The amendments in this ASU are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The impact of the adoption of the standard did not have a material impact on the consolidated financial statements.

 

 

Recent Accounting Pronouncements Not Yet Adopted

 

In May 2016, the FASB published ASU 2016-13 Financial Instruments – Credit losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The main objective of Topic 326 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendment is effective for years beginning after December 15, 2019 including interim periods with those years. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

 

In January 2017, the FASB published ASU 2017-04: Intangibles – Goodwill and Other (Topic 350): Topic 350 seeks to simplify goodwill impairment testing requirements for public entities. Under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The impact of the adoption of the standard is being considered, however it is expected that this may reduce the complexity of evaluating goodwill for impairment.

 

In August 2018, the FASB published ASU 2018-13: Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. Topic 820 includes the removal, modification and additional of disclosure requirements. Topic 820 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The impact of the adoption of the standard is not expected to have a material impact on the consolidated financial statements.

 

10

 

 

 

4.

Interim Consolidated financial statement details

 

The following consolidated financial statement details are presented as of the period ended for the consolidated balance sheets and for the periods ended for each of the consolidated statements of operations and comprehensive income (loss).

 

   

 

(a)

Accounts receivable – net:

 

   

September 29,

2019

   

December 30,

2018

 

Trade accounts receivable

  $ 62,330     $ 72,937  

Other receivables

    723       447  

Allowance for doubtful accounts

    (1,845 )     (398 )

Total

  $ 61,208     $ 72,986  

 

The increase of $1,447 in allowance for doubtful accounts was primarily the result of specific provisions of $1,691 on customers serviced in the Dongguan manufacturing facility (note 12).

 

 

(b)

Unbilled contract assets

 

   

September 29,

2019

   

December 30,

2018

 

Opening

  $ 20,405     $ 3,734  

Contract assets additions

    266,778       205,387  

Contract assets invoiced

    (260,393 )     (188,716 )

Ending

  $ 26,790     $ 20,405  

 

 

(c)

Inventories:

 

   

September 29,

2019

   

December 30,

2018

 

Raw materials

  $ 50,465     $ 52,102  

Finished goods

          418  

Parts and other

    633       896  

Provision for obsolescence

    (1,563 )     (213

)

Total

  $ 49,535     $ 53,203  

 

The increase of $1,350 in the provision for obsolescence was due to specific provisions of $1,550 for customers serviced out of the Dongguan manufacturing facility (note 12).

 

11

 

 

4.

Interim Consolidated financial statement details cont’d

 

 

(d)

Property, plant and equipment – net:

 

   

September 29,

2019

   

December 30,

2018

 

Cost:

               

Land

  $ 1,648     $ 1,648  

Buildings (b)

    18,985       18,985  

Machinery and equipment (a) (d)

    41,702       40,083  

Office furniture and equipment (c)(d)

    979       845  

Computer hardware and software (d)

    3,894       3,945  

Leasehold improvements (d)

    4,230       3,863  
      71,439       69,368  
                 

Less accumulated depreciation:

               

Land

           

Buildings (b)

    (10,113

)

    (9,190

)

Machinery and equipment (a) (d)

    (29,548 )     (27,093

)

Office furniture and equipment (c)(d)

    (509 )     (457

)

Computer hardware and software (d)

    (3,164 )     (3,053

)

Leasehold improvements (d)

    (1,756 )     (1,415

)

      (45,091 )     (41,208

)

Property, plant and equipment—net (d)

  $ 26,348     $ 28,160  

 

 

(a)

Included within machinery and equipment were assets under capital leases with costs of $2,275 and associated accumulated depreciation of $834 and $409 as of September 29, 2019 and December 30, 2018, respectively. The related depreciation expense for the three months ended September 29, 2019 and September 30, 2018 was $142 and $34, respectively. The related depreciation expense for the nine months ended September 29, 2019 and September 30, 2018 was $426 and $70, respectively.

 

  

(b)

 

Included within buildings are costs associated with Melbourne facility under finance lease of $9,082 and associated accumulated depreciation of $699 and $96 as of September 29, 2019 and December 30, 2018, respectively. The related depreciation expense for the three months ended September 29, 2019 and September 30, 2018 was $201 and $Nil, respectively. The related depreciation expense for the nine months ended September 29, 2019 and September 30, 2018 was $603 and $Nil, respectively.

   

(c)

Included within office furniture and equipment were assets under finance leases with costs of $297 and associated accumulated depreciation of $35 and $NIL as of September 29, 2019 and December 30, 2018, respectively. The related depreciation expense for the three months ended September 29, 2019 and September 30, 2018 was $9 and $NIL, respectively. The related depreciation expense for the nine months ended September 29, 2019 and September 30, 2018 was $29 and $NIL, respectively.

   

(d)

Included in restructuring and closure charges for the three months ended September 29, 2019 were write down charges of $261 associated with property, plant and equipment with no future benefit related to the Dongguan manufacturing facility (note 12). Write down charges of $129 were incurred on machinery and equipment with cost of $883 and accumulated amortization of $754. Write down charges of $10 were incurred on office furniture and fixtures with cost of $35 and accumulated amortization of $25. Write down charges of $39 were incurred on computer hardware and software with cost of $252 and accumulated amortization of $213. Write down charges of $83 were incurred on leasehold improvements with cost of $111 and accumulated amortization of $28.

  

12

 

 

4.

Interim Consolidated financial statement details cont’d

 

 

(e)

Intangible assets:

 

   

September 29,

2019

   

December 30,

2018

 

Cost:

               

Customer relationships

  $ 12,350     $ 12,350  

Order backlog

    6,990       6,990  

Trade name

    1,300       1,300  

Non-compete agreements

    360       360  
      21,000       21,000  
                 

Less accumulated amortization:

               

Customer relationships

    (1,105 )     (178 )

Order backlog

    (4,168 )     (673 )

Trade name

    (1,163 )     (188 )

Non-compete agreements

    (161 )     (26 )
      (6,597 )     (1,065 )

Intangible assets—net

  $ 14,403     $ 19,935  

 

Amortization expense of $1,844 for the three months ended September 29, 2019 and $5,532 for the nine months ended September 29, 2019 are recorded in cost of sales in the consolidated statement of operations and comprehensive income (loss).

 

 

 

 

(f)

Goodwill:

 

The carrying value of goodwill as at September 29, 2019 was $18,165 (December 30, 2018 – $18,165). The carrying value of goodwill is assessed annually as well as assessed each reporting period for impairment triggers to determine whether there exists any indicators of impairment.

 

 

 

 

(g)

Accrued liabilities: 

 

   

September 29,

2019

   

December 30,

2018

 

Payroll

  $ 5,655     $ 5,637  

Customer related

    2,764       2,237  

Vendor related

    2,464       2,048  

Professional services

    1,248       702  
                 

Rebates

          236  

Interest

    552       381  

Rent

          428  

Other

    704       1,371  

Total

  $ 13,387     $ 13,040  

  

13

 

 

 

(h)

Contingent Consideration Gain

 

During the first quarter of 2019, fair value of the contingent consideration liability was determined to be $0 which resulted in a gain of $3,050 being recognized. The contingent consideration liability was initially recognized at fair value in the fourth quarter of 2018 and related to a contingent earn-out payment associated with the acquisition of MC Assembly. Fair value estimate under purchase accounting of $3,050 was derived from a multiple of earnings based on MC Assembly’s forecasted twelve-month earnings for the period ended March 31, 2019. Based on actual earnings, the contingent consideration liability was resolved and no longer payable as at March 31, 2019.

 

 

 

(i)

Interest expense:

 

   

Three months ended

   

Nine months ended

 
   

September 29,

2019

   

September 30,

2018

   

September 29,

2019

   

September 30,

2018

 

Long-term debt

  $ 1,135     $ 107     $ 4,596     $ 321  

Revolving credit facility

    597       318       1,813       718  

Equipment facility

          43             57  

Amortization of deferred financing fees

    50       11       122       32  

Amortization of debt issuance costs (1)

    705             1,178        

Obligations under capital leases

    192       6       640       67  

Interest expense

  $ 2,679     $ 485     $ 8,349     $ 1,195  

 

 

(1)

During three months ended September 29, 2019, $477 was expensed related to unamortized deferred financing fees on Term Loan B when it was paid in full during the quarter.

 

14

 

 

 

5.

Debt

 

 (a) Revolving credit and long-term debt facilities 

 

The Company borrows money under an Amended and Restated Revolving Credit and Security Agreement with PNC Bank, National Association (“PNC”), which governs the Company’s Revolving Credit Facility (“PNC Facility”). The PNC Facility has a term ending on November 8, 2023. Advances made under the PNC Facility bear interest at the U.S. base rate plus an applicable margin ranging from 0.75% to 1.25%, or LIBOR plus an applicable margin ranging from 2.5% to 3.00%. The base commercial lending rate should approximate U.S. prime rate.  

 

The Company also borrows money under a Financing Agreement (the “Financing Agreement”), by and among us and certain of our subsidiaries, the lenders party to the Financing Agreement from time to time (collectively, the “Lenders”), and TCW Asset Management Company LLC, as collateral agent for the Lenders (“TCW”), which governs a term loan A facility (“Term A Loan Facility” and, together with the PNC Facility, the “Credit Facilities”) and previously governed a term loan B facility (the “Term Loan B Facility”) until it was paid in full on July 3, 2019. The Term A Loan Facility matures on November 8, 2023 (the “Maturity Date”). The Term Loan A Facility bears interest LIBOR plus an applicable margin of 8.75% through June 30, 2020, and borrowings under the Financing Agreement will thereafter bear interest at LIBOR plus an applicable margin ranging from 7.25% to 8.75%. Payments made under the Term Loan A Facility at any time prior to the Maturity Date (other than scheduled amortization payments and mandatory prepayments) are subject to an applicable premium equal to the amount of such payment multiplied by (i) 3.00% in the event that such payment occurs before November 8, 2019, (ii) 2.00% in the event that such payment occurs after November 8, 2019 and on or before November 8, 2020 and (iii) 1.00% in the event that such payment occurs after November 8, 2020 and on or before November 8, 2021. No such applicable premium is payable for any payment of loans made under the Term Loan A Facility occurring after November 8, 2021.

 

On August 8, 2019, the Company and certain of its subsidiaries entered into that certain Amendments No. 2 to the Amended and Restated Revolving Credit and Security Agreement (the “PNC Amendment No. 2”) and that certain Amendment No. 3. to the Financing Agreement (the “TCW Amendment No. 3”).  The PNC Amendment No. 2, among other things, (i) increased the total amount available for borrowings under the PNC Facility to $65,000, (ii) provided for borrowings of up to $15,000 on assets located in Mexico, (iii) provided that borrowings under the PNC Facility bear interest at the U.S. base rate plus an applicable margin ranging from 0.75% to 1.25%, or LIBOR plus an applicable margin ranging from 2.50% to 3.00%, (iv) reset the financial covenants, and (v) permitted the pay down of the Term A Loan Facility by up to $10,000.  The TCW Amendment No. 3, among other things, (i) provided for a $20,000 increase in the total amount available for borrowings under the PNC Facility, (ii) provided for the pay down of the Term A Loan Facility by up to $10,000, (iii) provided that the interest rate for borrowings under the Financing Agreement was reset to LIBOR plus an applicable margin of 8.75% through June 30, 2020, and borrowings under the Financing Agreement will thereafter bear interest at LIBOR plus an applicable margin ranging from 7.25% to 8.75%, (iv) deleted the senior leverage ratio covenant, (v) amended the total leverage ratio covenant, including the definition of total leverage ratio, to increase the maximum total leverage on a quarterly basis beginning with the fiscal quarter ended September 30, 2019, (vi) amended the fixed charge coverage ratio covenant to decrease the minimum fixed charge coverage ratio on a quarterly basis beginning with the fiscal quarter ending September 30, 2020 through the fiscal quarter ending December 31, 2021 and (vii) reset the call protection on the Term Loan A Facility. 

 

On September 27, 2019, the Company and certain of its subsidiaries entered into that certain Amendments No. 3 to the Amended and Restated Revolving Credit and Security Agreement (the “PNC Amendment No. 3”) and that certain Amendment No. 4. to the Financing Agreement (the “TCW Amendment No. 4”).  The PNC Amendment No. 3, among other things, amended the (i) definition of “Consolidated EBITDA” by permitting an addback for restructuring and transition costs and charges incurred on or before December 31, 2020 in connection with the Company’s previously announced closure of business operations in Dongguan, China, subject to certain exceptions, not to exceed (a) with respect to cash restructuring costs, $2,300, (b) with respect to write-offs of accounts receivable, $1,623, and (c) with respect to write-offs of Inventory (as defined in the Amended and Restated Revolving Credit and Security Agreement), $1,607, (ii) definition of “Permitted Intercompany Investments” by permitting certain investments by a Domestic Loan Party (as defined in the Amended and Restated Revolving Credit and Security Agreement) to or in SMTC Electronics Dongguan Company Limited, a limited liability company organized under the laws of China (“SMTC Dongguan”), solely to facilitate the closure of business operations in Dongguan, China, so long as, among other things, (a) such Investments (as defined in the PNC Agreement) are made prior to March 31, 2020, (b) the aggregate amount of all such Investments does not exceed $2,300 during the term of the Amended and Restated Revolving Credit and Security Agreement, (c) the Borrowers (as defined in the Amended and Restated Revolving Credit and Security Agreement) maintain certain minimum liquidity requirements and (iii) negative covenant regarding excess cash.  The TCW Amendment No. 4, among other things, amended the (i) definition of “Consolidated EBITDA” by permitting an addback for restructuring and transition costs and charges incurred on or before December 31, 2020 in connection with the closure of business operations in Dongguan, China, subject to certain exceptions, not to exceed (a) with respect to cash restructuring costs, $2,300, (b) with respect to write-offs of accounts receivable, $1,623, and (c) with respect to write-offs of Inventory (as defined in the Financing Agreement), $1,607, (ii) definition of “Permitted Intercompany Investments” by permitting certain investments by a Domestic Loan Party (as defined in the Financing Agreement) to or in SMTC Dongguan solely to facilitate the closure of business operations in Dongguan, China, so long as, among other things, (a) such Investments (as defined in the Financing Agreement) are made prior to March 31, 2020, (b) the aggregate amount of all such Investments does not exceed $2,300 during the term of the Financing Agreement and (c) the Borrowers (as defined in the Financing Agreement) maintain certain minimum liquidity requirements and (iii) negative covenant regarding excess cash.

 

15

 

 

At September 29, 2019, $34,840 (December 30, 2018 - $25,020) was outstanding under the PNC Facility and is classified as a current liability based on the requirement to hold a “lock-box” under the terms of the PNC Facility. As at September 29, 2019, the funds available to borrow under the PNC Facility after deducting the current borrowing base conditions was $21,356 (December 30, 2018 - $13,974). The maximum amount of funds that could be available under the PNC Revolving Credit Facility is $65,000. However, availability under the PNC Revolving Credit Facility is subject to certain conditions, including borrowing base conditions based on eligible inventory and accounts receivable, and certain conditions as determined by PNC. The Company is required to use a “lock-box” arrangement for the PNC Facility, whereby remittances from customers are swept daily to reduce the borrowings under this facility.

 

At September 29, 2019, $39,376 (December 30, 2018 - $50,000) was outstanding under the TCW Term Loan A Facility and $Nil (December 30, 2018 - $12,000) under the TCW Term Loan B Facility. The Term Loan A Facility is reported on the consolidated balance sheet net of deferred financing fees of $2,413 (December 30, 2018 - $2,749) and a discount on debt of $1,559 (December 30, 2018 - $1,843) related to the outstanding warrants described below. On July 3, 2019, the Company repaid the TCW Term Loan B Facility in full.

 

The Credit Facilities are joint and several obligations of the Company and its subsidiaries that are borrowers under the Credit Facilities and are jointly and severally guaranteed by certain other subsidiaries of the Company. Repayments under the PNC Facility and the Term A Loan Facility are collateralized by the assets of the Company and each of its subsidiaries.

 

 

(b) Covenants

 

The Credit Facilities contain certain financial and non-financial covenants. The financial covenants under each Credit Facility require the Company to maintain a fixed charge coverage ratio and a total leverage ratio quarterly during the term of the Credit Facilities.

 

The Company was in compliance with the covenants included in the Credit Facilities as at September 29, 2019.  Management projects compliance with the financial covenants included in the Credit Facilities, however note that there are key assumptions included in these cash flow projections to support covenant calculations specifically related to earnings before interest, income taxes and depreciation, as well as anticipated debt levels.  The estimate of cash flows are sensitive to these key assumptions, for instance, when considering our anticipated earnings before interest, income taxes and depreciation over the next six months period, a reduction of approximately 5% could result in the breach of a covenant relative to its impact on our trailing twelve months results used in calculating covenant compliance in our first quarter 2020 results.  The Company safeguards against this through taking measures to reduce its inventory, revolving credit facility and term debt balances accordingly in order to comply with lenders covenants.  The Company will continue to monitor operations and results closely and manage debt levels relative to our operational results to ensure compliance with its lenders covenants.

 

 

 

(c) Warrant liability

 

      On November 8, 2018, 504,735 warrants were issued to TCW in connection with the Term Loan A Facility and the Term Loan B Facility and outstanding as at December 30, 2018.  These warrants are exercisable on a cashless basis, or for an exercise price of $0.01.  The Company initially recorded the value of the warrants as a warrant liability with a corresponding discount on the long-term debt in the amount of $1,898. The fair value has been assessed at $2.13 per unit or $1,090 as at September 29, 2019.  As a result of the anti-dilution provision contained in the warrants that was triggered in connection with the Rights Offering and the Registered Direct Offering, the warrants were exercisable to purchase 511,949 shares of common stock at September 29, 2019.  The fair value of the warrant obligation is presented as a warrant liability on the consolidated balance sheet with changes to the fair value recorded each reporting period as either a gain or a loss in the consolidated statement of operations and comprehensive income (loss).

 

16

 

 

 

6.

Leases 

 

 

The Company leases certain facility leases in various jurisdictions, including office space and manufacturing, warehouse space. The Company also leases certain production equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized on a straight-line basis over the lease term. Total short-term lease costs for the three and nine months ended September 29, 2019 was not significant.

 

Most leases contain renewal options, which are exercisable at the Company’s sole discretion. The extension terms are typically one to five years. Some leases may include options to purchase the leased property. The depreciable life is limited to the lease term unless title transfers or it is reasonably certain that a purchase option will be exercised. Operating lease liabilities recognized do not include $1,522 related to options to extend lease terms that are not reasonably certain of being exercised at September 29, 2019. Finance lease liabilities do not include $6,456 related to options to extend lease terms that are not reasonably certain of being exercised at September 29, 2019.

 

We rent and sublease one facility lease that is not occupied by SMTC.    

 

 

Leases

Classification

 

September 29, 2019 ($)

 

Assets

         

Operating lease assets

Operating lease right-of-use-asset

    3,887  

Finance lease assets (a)

Property, plant and equipment

    10,134  
Total leased assets          

Liabilities

         

Current

         

Operating leases

Current portion of operating lease obligations

    1,483  

Finance leases

Current portion of finance lease obligations

    1,316  

Noncurrent

         

Operating leases

Operating lease obligations

    2,818  

Finance leases

Finance lease obligations

    9,105  
Total lease liabilities       14,722  

 

 

(a)

Refer to note 4 for details of the corresponding balances and accumulated amortization included within property, plant and equipment

 

 

     

Three months

ended

   

Nine months

ended

 

Lease Cost

Classification

 

September 29,

2019 ($)

   

September 29,

2019 ($)

 

Operating lease costs

                 

Fixed lease costs

Cost of sales

    647       1,974  
                   
                   

Finance lease costs

                 

Depreciation of leased assets

Cost of sales

    360       1,081  

Interest on lease liabilities

Interest expense

    192       640  

Sublease income

Selling, general and administrative expenses

    47       176  

 

17

 

 

Maturity of lease liabilities as at September 29, 2019

 

Operating leases

   

Finance

leases

   

Total

 

2019

    635       559       1,194  

2020

    1,371       1,982       3,353  

2021

    930       1,665       2,595  

2022

    632       1,323       1,955  

2023

    606       1,261       1,867  

Thereafter

    872       7,660       8,532  

Total lease payments

    5,046       14,450       19,496  

Less: Interest

    (745 )     (4,029 )     (4,774 )

Present value of lease liabilities

    4,301       10,421       14,722  

 

The company’s future minimum lease payments as of December 30, 2018, in accordance with legacy lease accounting standards, under non-cancelable operating and financing lease agreements were as follows:

 

   

Operating leases

   

Finance leases

 

2019

    2,575       2,417  

2020

    1,371       1,953  

2021

    930       1,633  

2022

    632       1,291  

2023

    606       1,229  

Thereafter

    872       7,637  

Total minimum lease payments

    6,986       16,160  

Less interest

    (1,047 )     (4,666 )

Present value of capital lease obligations

    5,939       11,494  

 

 

Lease term and discount rate

 

September 29, 2019

 

Weighted average remaining term (years)

       

Operating leases

    4.1  

Finance leases

    8.8  

Weighted average discount rate

       

Operating leases

    8.0 %

Finance leases

    7.8 %

 

 

Other information

 

Three months ended

September 29, 2019

   

Nine months ended

September 29, 2019

 

Cash paid for amounts included in the measurement of lease liabilities

               

Operating cash flows from operating leases

    609       1,614  

Operating cash flows from finance leases

    N/A       N/A  

Financing cash flows from finance leases

    390       1,199  

Leased assets obtained in exchange for new operating lease liabilities

           

Leased assets obtained in exchange for new finance lease liabilities

    126       126  

 

18

 

 

 

7.

Capital stock 

 

Common stock

 

Issued and outstanding:

 

The issued and outstanding number of shares common stock included in shareholders’ equity consisted of the following:

 

   

Number
of shares

    $  
                 

Balance at December 30, 2018

    23,189,381       458  

New share issuance - rights offering and registered direct offering

    4,642,030       46  

New share issuance - vested stock awards

    267,063       3  

Treasury stock (1)

    21,264        

Balance as September 29, 2019

    28,119,738       507  

 

 

 

(1)

Treasury stock represents vested restricted stock awards issued into shares of common stock withheld by the Company which employees forfeited to address the corresponding tax withholding during the nine months ended September 29, 2019.

 

Stock Options

 

For more detailed information regarding the Company’s stock option arrangements, see Note 6 of the consolidated financial statements within the Company’s Form 10-K. A summary of stock option activity for the nine-month period ended September 29, 2019 is as follows:

 

 

   

Number
of options

   

Weighted
average
exercise
price

   

Aggregate
intrinsic
value

   

Weighted
average
remaining
contractual
term (years)

 

Outstanding at December 30, 2018

    1,719,824     $ 1.55       1,998       8.6  
                                 

Options granted

    650,000       3.67                  

Options exercised

    (25,450 )     1.80                  

Outstanding at September 29, 2019

    2,344,374       2.14       639       8.2  

Exercisable at September 29, 2019

    1,075,640       1.54       639       7.4  

 

During the three-month periods ended September 29, 2019 and September 30, 2018, the Company recorded stock-based compensation expense related to stock options and a corresponding increase in additional paid-in capital of $57 and $27, respectively. During the nine-month periods ended September 29, 2019 and September 30, 2018, the Company recorded stock-based compensation expense related to stock options and a corresponding increase in additional paid-in capital of $120 and $86, respectively.

 

Certain stock options outstanding have market conditions such that the awards are vested and exercisable only if the Company’s stock exceeds specified targets during the vesting period. If the market conditions are not met, the stock options will not vest and will expire.

 

19

 

 

7.

Capital stock cont’d

  

Restricted Stock Units

 

For more detailed information regarding the Company’s Restricted Stock Units (“RSUs”) arrangements, see Note 6 of the annual consolidated financial statements for the year ended December 30, 2018, included in the Company’s Annual Report on Form 10-K. A summary of the RSU activity for the nine-month period ended September 29, 2019 is as follows:

  

   

Outstanding
RSU

   

Weighted
average
stock
price

   

Weighted
average
remaining
contractual
term (years)

 

Outstanding balance at December 30, 2018

    357,377     $ 0.96       1.21  

RSUs granted

    122,500       3.58          

RSUs vested and issued in common shares

    (262,877 )     1.31          

RSUs forfeited

    (25,000 )     1.38          

Outstanding balance at September 29, 2019

    192,000       2.10       1.63  

  

Certain RSUs outstanding have a market condition such that the awards are vested and issuable only if the market price of the Company’s stock meets or exceeds a specified target during the vesting period. If the market condition is not met, the RSUs will not vest and will be forfeited.

 

Stock based compensation recognized during the three-month period ended September 29, 2019 and September 30, 2018 related to the restricted stock units was $296 and $48, respectively.  Stock based compensation recognized during the nine-month period ended September 29, 2019 and September 30, 2018 related to the restricted stock units was $418 and $192, respectively.  

 

Rights Offering and Registered Direct Offering

 

In June 2019, the Company completed its (i) offering of subscription rights (the “Rights Offering”) to the Company’s stockholders and holders of the Company’s outstanding warrants as of the close of business on May 24, 2019, which was fully subscribed for the maximum offering amount of $9,136, and (ii) registered direct offering (the “Registered Direct Offering” and, together with the Rights Offering, the “Offerings”) of 1,732,483 shares of the Company’s common stock directly to certain investors, resulting in net proceeds to the Company of approximately $14,044, after deducting the offering expenses of approximately $532 and fees payable by the Company.

 

20

 

 

 

8.

Income taxes 

 

During the three month periods ended September 29, 2019 and September 30, 2018, the Company recorded a current income tax benefit of $103 and expense of $290, respectively, in connection with U.S. state taxes and taxes on profits in certain foreign jurisdictions, and deferred income tax recovery of $81 and $145, respectively, in connection with temporary differences related to the Mexican operations. The current income tax benefit of $103 recorded during the three months ended September 29, 2019, is comprised of additional current tax expense of $210, net of prior period income tax recoveries of $183 from the US and foreign jurisdictions together with a reduction in estimated current income tax expense attributable to foreign jurisdictions in the amount of $130.

 

During the nine month period ended September 29, 2019 and September 30, 2018, the Company recorded current income tax expense of $592 and $596, respectively, in connection with U.S. state taxes and taxes on profits in certain foreign jurisdictions, and deferred income tax expense of $14 and recovery of $191, respectively, in connection with temporary differences related to the Mexican operations.

 

     In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management considers the scheduled reversal of deferred tax liabilities, change of control limitations, projected future taxable income and tax planning strategies in making this assessment. Guidance under ASC 740, Income Taxes, (“ASC 740”) states that forming a conclusion that a valuation allowance is not needed is difficult when there is observable negative evidence, such as cumulative losses in recent years in the jurisdictions to which the deferred tax assets relate. The U.S., Canadian and Asian jurisdictions continue to have a full valuation allowance recorded against the deferred tax assets. 

 

 

9.

Earnings per share

 

The following table details the weighted average number of shares of common stock outstanding for the purposes of computing basic and diluted earnings per share for the following periods:

 

   

Three months ended

   

Nine months ended

 
   

September 29,

2019

   

September 30,

2018

   

September 29,

2019

   

September 30,

2018

 

Basic weighted average shares outstanding

    28,057,763       19,335,253       24,954,875       17,866,399  

Dilutive stock awards (1) (a)

          651,503             651,503  

Diluted weighted average shares outstanding

    28,057,763       19,986,756       24,954,875       18,517,902  

 

(1)

Dilutive stock awards include outstanding restricted stock units, warrants and in the money stock options determined using the treasury stock method

 

(a)

For the three and nine months ended September 29, 2019, as a result of net loss for the period, dilutive stock awards are not presented as this would be antidilutive. Had there been net income for the periods, the dilutive stock awards would have been calculated as 754,820 for the three and nine months ended September 29, 2019 related to outstanding unvested restricted stock units incremental in-the-money stock options and outstanding warrants.

 

21

 

 

 

10.

Segmented information

 

 

General description

 

The Company is operated and managed geographically and has production facilities in the United States, Mexico and China. The Company utilizes reportable segment’s site contribution (site revenue minus operating expenses, excluding unrealized foreign exchange, corporate allocations and restructuring expenses) to monitor reportable segment performance. Site contribution is utilized by the chief operating decision-maker as the indicator of reportable segment performance, as it reflects costs which our operating site management is directly responsible for. Intersegment adjustments reflect intersegment sales that are generally recorded at prices that approximate arm’s-length transactions. In assessing the performance of the reportable segments, management attributes site revenue to the reportable segment that ships the product to the customer, irrespective of the product’s destination. Information about the reportable segments is as follows:

 

   

Three months ended

   

Nine months ended

 
   

September 29,

2019

   

September 30,

2018

   

September 29,

2019

   

September 30,

2018

 

Revenues

                               

Mexico

  $ 57,328     $ 40,485     $ 182,424     $ 105,139  

China

    8,092       8,073       22,541       19,092  

U.S.

    27,426       8,581       86,448       19,167  

Total

  $ 92,846     $ 57,139     $ 291,413     $ 143,398  
                                 

Intersegment revenue

                               

Mexico

  $ (550 )   $ (1,206

)

  $ (1,293 )   $ (1,944

)

China

    (3,580 )     (2,183

)

    (7,687 )     (5,962

)

U.S.

    (34 )     (73

)

    (166 )     (216

)

Total

  $ (4,164 )   $ (3,462

)

  $ (9,146 )   $ (8,122

)

                                 

Net external revenue

                               

Mexico

  $ 56,778     $ 39,279     $ 181,131     $ 103,195  

China

    4,512       5,890       14,854       13,130  

U.S.

    27,392       8,508       86,282       18,951  

Total segment revenue (which also equals consolidated revenue)

  $ 88,682     $ 53,677     $ 282,267     $ 135,276  
                                 

Site Contribution

                               

Mexico

  $ 4,815     $ 3,552     $ 15,456     $ 9,267  

China

    1,313       556       3,012       998  

U.S.

    2,191       214       5,378       175  

Total

  $ 8,319     $ 4,322     $ 23,846     $ 10,440  
                                 

Corporate costs

    5,962       2,878       17,227       8,249  

Change in fair value of warrant liability

    (858 )           (919 )      

Change in fair value of contingent consideration

                (3,050 )      

Unrealized foreign exchange gain on unsettled forward exchange contracts

          (108

)

          (338

)

Interest

    2,679       485       8,349       1,195  

Restructuring and closure charges

    6,454       58       8,624       154  

Earnings (loss) before income taxes

  $ (5,918 )   $ 1,009     $ (6,385 )   $ 1,180  

 

22

 

 

Three months ended September 29, 2019

 

Mexico

   

U.S.

   

China

   

Total

 

Market Sector:

                               

Test and Measurement

  $ 19,188     $ 8,287     $     $ 27,475  

Retail and Payment Systems

    10,460                   10,460  

Telecom, Networking and Communications

    3,986       1,393       4,192       9,571  

Medical

    7,861       2,637       40       10,538  

Industrial, Power and Clean Technology

    10,154       9,851       280       20,285  

Semiconductor

    5,129                   5,129  

Aerospace and Defense

          5,224             5,224  

Segment Revenue

    56,778       27,392       4,512       88,682  

 

 

 

Three months ended September 30, 2018

 

Mexico

   

U.S.

   

China

   

Total

 

Market Sector:

                               

Test and Measurement

  $ 3,277     $ 7,181     $     $ 10,458  

Retail and Payment Systems

    10,815                   10,815  

Telecom, Networking and Communications

    3,596       833       5,613       10,042  

Medical

    7,400       91       37       7,528  

Industrial, Power and Clean Technology

    6,495       403       240       7,138  

Semiconductor

    7,696                   7,696  
                                 

Segment Revenue

    39,279       8,508       5,890       53,677  

 

 

 

Nine months ended September 29, 2019

 

Mexico

   

U.S.

   

China

   

Total

 

Market Sector:

                               

Test and Measurement

  $ 59,054     $ 29,054     $ 2,447     $ 90,555  

Retail and Payment Systems

    35,537                   35,537  

Telecom, Networking and Communications

    11,495       5,783       11,078       28,356  

Medical

    24,362       9,393       482       34,237  

Industrial, Power and Clean Technology

    32,502       25,008       847       58,357  

Semiconductor

    18,181       16             18,197  

Aerospace and Defense

          17,028             17,028  

Segment Revenue

    181,131       86,282       14,854       282,267  

 

 

 

Nine months ended September 30, 2018

 

Mexico

   

U.S.

   

China

   

Total

 

Market Sector:

                               

Test and Measurement

  $ 10,772     $ 14,039     $     $ 24,811  

Retail and Payment Systems

    27,215                   27,215  

Telecom, Networking and Communications

    9,053       3,672       12,022       24,747  

Medical

    21,788       270       44       22,102  

Industrial, Power and Clean Technology

    13,561       970       1,064       15,595  

Semiconductor

    20,806                   20,806  
                                 

Segment Revenue

    103,195       18,951       13,130