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 October 2, 2016

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 0-31051

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.)

635 HOOD ROAD

MARKHAM, ONTARIO, CANADA L3R 4N6

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(905) 479-1810

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).   Yes  ☒    No  ☐

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

Large accelerated filer    ☐        accelerated filer    ☐        Non-accelerated filer    ☐        Smaller reporting company    ☒

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 October 28, 2016, SMTC Corporation had 16,510,180 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)	6
	Notes to Interim Consolidated Financial Statements (unaudited)	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4	Controls and Procedures	31
PART II OTHER INFORMATION		31
Item 1A	Risk factors	31
Item 6	Exhibits	31

2

Part I FINANCIAL INFORMATION

Item 1 Financial Statements

SMTC CORPORATION

Interim Consolidated Balance Sheets

(Expressed in thousands of U.S. dollars)

(Unaudited)

	October 2, 2016			January 3, 2016
Assets
Current assets:
Cash	$	7,371		$	6,099
Restricted cash (note 3)		537			805
Accounts receivable — net (note 3)		23,665			29,885
Inventories (note 3)		22,991			25,877
Prepaid expenses and other assets		1,943			1,983
Derivative assets (note 9)		83			—
Income taxes receivable		267			461
Deferred income taxes — net		448			352
		57,305			65,462
Property, plant and equipment — net (note 3)		14,929			16,443
Deferred financing costs — net		42			68
	$	72,276		$	81,973
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	25,630		$	31,045
Accrued liabilities (note 3)		4,780			5,562
Derivative liabilities (note 9)		1,175			2,087
Income tax payable		328			502
Revolving credit facility (note 4)		8,040			10,721
Current portion of long-term debt (note 4)		1,000			1,000
Current portion of capital lease obligations		526			538
		41,479			51,455
Long-term debt (note 4)		3,500			4,000
Capital lease obligations		314			222
Shareholders’ equity:
Capital stock (note 5)		391			391
Additional paid-in capital		264,848			264,505
Deficit		(238,256	)		(238,600	)
		26,983			26,296
	$	72,276		$	81,973

Commitments (note 11)

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
	October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015
Revenue	$	42,683		$	53,425		$	128,218		$	159,880
Cost of sales (note 9)		39,049			50,309			116,615			147,706
Gross profit		3,634			3,116			11,603			12,174
Selling, general and administrative expenses		3,493			4,035			10,406			11,661
Loss (gain) on disposal of property, plant and equipment		(20	)		(1	)		(25	)		2
Restructuring charges (note 10)		—			—			176			—
Operating earnings (loss)		161			(918	)		1,046			511
Interest expense (note 3)		164			300			598			914
Earnings (loss) before income taxes		(3	)		(1,218	)		448			(403	)
Income tax expense (recovery) (note 6):
Current		97			152			200			481
Deferred		(81	)		(27	)		(96	)		(86	)
		16			125			104			395
Net earnings (loss) and comprehensive income (loss)		(19	)		(1,343	)		344			(798	)
Earnings (loss) per share of common stock:
Basic	$	(0.00	)	$	(0.08	)	$	0.02		$	(0.05	)
Diluted	$	(0.00	)	$	(0.08	)	$	0.02		$	(0.05	)
Weighted average number of shares outstanding (note 7):
Basic		16,510,180			16,417,276			16,502,081			16,417,276
Diluted		16,510,180			16,417,276			17,550,155			16,417,276

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)

Nine months ended October 2, 2016

(Unaudited)

	Capital stock		Additional paid-in capital		Deficit			Total shareholders’ equity
Balance, January 3, 2016	$	391	$	264,505	$	(238,600	)	$	26,296
Stock-based compensation		—		343		—			343
Net earnings		—		—		344			344
Balance, October 2, 2016	$	391	$	264,848	$	(238,256	)	$	26,983

See accompanying notes to interim consolidated financial statements.

5

SMTC CORPORATION

Interim Consolidated Statements of Cash Flows

(Expressed in thousands of U.S. dollars)

(Unaudited)

	Nine months ended
	October 2, 2016			September 27, 2015
Cash provided by (used in):
Operations:
Net earnings (loss)	$	344		$	(798	)
Items not involving cash:
Depreciation		3,066			2,976
Unrealized foreign exchange (gain) loss on unsettled forward exchange contracts		(995	)		334
Loss (gain) on sale of property, plant and equipment		(25	)		2
Deferred income taxes		(96	)		(86	)
Amortization of deferred financing fees		26			24
Stock-based compensation		343			344
Change in non-cash operating working capital:
Accounts receivable		6,220			3,107
Inventories		2,886			1,124
Prepaid expenses and other assets		40			301
Income taxes receivable/payable		20			(27	)
Accounts payable		(5,244	)		(487	)
Accrued liabilities		(742	)		(106	)
		5,843			6,708
Financing:
Net repayment of revolving credit facility		(2,681	)		(4,720	)
Repayment of long-term debt		(500	)		—
Principal payment of capital lease obligations		(429	)		(862	)
Proceeds from sales leaseback		509			—
Deferred financing fees		—			(10	)
		(3,101	)		(5,592	)
Investing:
Change in restricted cash		268			—
Purchase of property, plant and equipment		(1,864	)		(1,697	)
Proceeds from sale of property, plant and equipment		126			6
		(1,470	)		(1,691	)
Increase (decrease) in cash		1,272			(575	)
Cash, beginning of period		6,099			5,447
Cash, end of the period	$	7,371		$	4,872
Supplemental Information
Property, plant and equipment acquired that was included in accounts payable and accrued liabilities		36			359

See accompanying notes to interim consolidated financial statements.

6

SMTC CORPORATION

Notes to Interim Consolidated Financial Statements

1. Nature of the business

SMTC Corporation (the “Company”) is a mid-tier provider of end-to-end electronics manufacturing services, or EMS, including product design and sustaining engineering services, printed circuit board assembly, or PCBA, production, enclosure fabrication, systems integration and comprehensive testing services. SMTC facilities span a broad footprint in the United States, Mexico, and China, with approximately 1,330 full-time employees. SMTC’s services extend over the entire electronic product life cycle from the development and introduction of new products through to growth, maturity and end-of-life phases. SMTC offers fully integrated contract manufacturing services with a distinctive approach to global original equipment manufacturers, or OEMs, and technology companies primarily within the industrial, computing and communications, power and energy and medical market segments. In addition, the Company operates an international sourcing and procurement office in Hong Kong.

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 January 3, 2016, (“Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2016. 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 January 3, 2016 was derived from the audited annual consolidated financial statements, but does not contain all of the footnote disclosures from the annual consolidated financial statements.

2. Recent Adopted Accounting Pronouncements

In June 2014, the FASB published ASU 2014-12: Compensation – Stock Compensation (Topic 718). The standard is amended to require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The standard is effective for all entities for years, and interim periods within those years, beginning after December 15, 2015. The adoption of ASU 2014-12 had no impact on our consolidated financial statements.

In April 2015, the FASB published ASU 2015-03: Presentation of Debt Issuance Costs (Topic 835-30). The standard provides guidance about simplifying the presentation of debt issuance costs. Under this ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. Effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of ASU 2015-03 had no impact on our consolidated financial statements as our current debt issuance costs relate to a revolving credit facility.

In April 2015, the FASB published ASU 2015-04: Retirement Benefits (Topic 715). The amendments intend to reduce complexity by providing a practical expedient that permits the entity to measure defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply that practical expedient consistently from year to year. The amendments in this Update are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The adoption of ASU 2015-04 had no impact on our consolidated financial statements.

Recent Accounting Pronouncements

In May 2014, the FASB published ASU 2014-09: Revenue from Contracts with Customers (Topic 606), which supersedes (i) revenue recognition requirements in Topic 605 and most related industry-specific guidance, and (ii) cost guidance included in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and amends existing requirements for recognition of a gain/loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) to be consistent with the new requirements. In August 2015, the FASB published ASU 2015-14 Topic 606 which effectively postponed the effective adoption requirement by one year such that the standard is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2016. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

7

Recent Accounting Pronouncements cont’d

In August 2014, the FASB published ASU 2014-15 Topics 205-40: Presentation of Financial Statements – Going Concern. The standard provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. Effective for years ending after December 15, 2016 and for years and interim periods thereafter. The impact of adoption of the standard has not yet been determined.

In July 2015, the FASB published ASU 2015-11: Simplifying the Measurement of Inventory (Topic 330). The amendments in this Update more closely align the measurement of inventory in U.S. GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). FASB has amended some of the other guidance in Topic 330 to more clearly articulate the requirements for the measurement and disclosure of inventory. However, the FASB does not intend for those clarifications to result in any changes in practice. Other than the change in the subsequent measurement guidance from the lower of cost or market to the lower of cost and net realizable value for inventory within the scope of this Update, there are no other substantive changes to the guidance on measurement of inventory. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. All other amendments will be effective upon the issuance of this Update. The impact of adoption of the standard has not yet been determined.

In November 2015, the FASB published ASU 2015-17: Income Taxes (Topic 740). The amendment requires that deferred tax assets and liabilities be classified as non-current in a classified statement of financial position. The amendments in this Update are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The impact of adoption of the standard has not yet been determined.

In January 2016, the FASB published ASU 2016-01: Financial Instruments - Overall (Topic 825-10). The amendment addresses certain aspects of recognition, measurement, presentation and disclosure of financial assets and liabilities. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The impact of adoption of the standard has not yet been determined.

In February 2016, the FASB published ASU 2016-02: Leases (Topic 842). The amendment proposes that all lessees should recognize the assets and liabilities that arise from leases. Elections may be available for those leases with terms of 12 months or less. The amendment still retains the distinction between finance leases and operating leases. 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 adoption of the standard has not yet been determined.

In March 2016, the FASB published ASU 2016-09: Compensation – Stock Compensation (Topic 718). The amendment simplifies several aspects of accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and accounting for forfeitures. Some of the areas for simplification apply only to nonpublic entities. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The impact of adoption of the standard has not yet been determined.

In March 2016, the FASB published ASU 2016-08: Revenue from Contracts with Customers (Topic 606). The amendment clarifies the implementation guidance on principal versus agent considerations. The amendments of this update do not change the core principles of the guidance. The amendment of this ASU is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2016. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

8

Recent Accounting Pronouncements cont’d

In April 2016, the FASB published ASU 2016-10: Revenue from Contracts with Customers (Topic 606), which clarified application of the standard in identifying performance obligations and licensing arrangements. The amendments in this Update affect the guidance in Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The amendment is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2016. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

In May 2016, the FASB published ASU 2016-12: Revenue from Contracts with Customers (Topic 606), which included narrow-scope improvements and practical expedients. Specifically the update addresses application of collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The amendments in this Update affect the guidance in Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The amendment is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2016. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

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 this Update 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. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2018. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

In August 2016, the FASB published ASU 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This Accounting Standards Update addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendment is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted. The impact of adoption of the standard has not yet been determined.

9

3. 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).

Consolidated Balance Sheets

Restricted cash:

	October 2, 2016		January 3, 2016
Restricted cash	$	537	$	805

Restricted cash pertains to deposits which have been guaranteed to a government agency pertaining to the estimated value added taxes (VAT) on the expected value of imported raw materials inventory in Suzhou, China. Cash is generally restricted for a contractual term of 12 months or less and is released when the finished goods are exported or the purchase orders for the expected imported raw materials are cancelled.

Accounts receivable – net:

	October 2, 2016			January 3, 2016
Trade accounts receivable	$	23,387		$	28,797
Other receivables		539			1,347
Allowance for doubtful accounts		(261	)		(259	)
Accounts receivable—net	$	23,665		$	29,885

Inventories:

	October 2, 2016		January 3, 2016
Raw materials	$	16,787	$	19,385
Work in process		3,503		1,416
Finished goods		1,912		4,400
Parts		789		676
Inventories	$	22,991	$	25,877

Inventories are recorded net of a provision for obsolescence as at October 2, 2016 and January 3, 2016 of $278 and $673 respectively. The decrease in the provision for obsolescence was due primarily to the write down of inventory for two customers that was previously provided for.

10

3. Interim Consolidated financial statement details cont’d

Property, plant and equipment – net:

	October 2, 2016			January 3, 2016
Cost:
Land	$	1,648		$	1,648
Buildings		9,852			9,852
Machinery and equipment (a)		31,663			30,707
Office furniture and equipment		654			599
Computer hardware and software (b)		3,612			3,447
Leasehold improvements		3,494			3,232
		50,923			49,485
Less accumulated depreciation:
Land		—			—
Buildings		(8,062	)		(7,719	)
Machinery and equipment (a)		(22,113	)		(20,347	)
Office furniture and equipment		(535	)		(496	)
Computer hardware and software (b)		(2,783	)		(2,284	)
Leasehold improvements		(2,501	)		(2,196	)
		(35,994	)		(33,042	)
Property, plant and equipment—net	$	14,929		$	16,443

(a) Included within machinery and equipment were assets under capital leases with costs of $2,193 and $2,528 and associated accumulated depreciation of $595 and $865 as of October 2, 2016 and January 3, 2016, respectively. The related depreciation expense for the three months ended October 2, 2016 and September 27, 2015 was $78 and $92, respectively. The related depreciation expense for the nine months ended October 2, 2016 and September 27, 2015 was $233 and $327, respectively. 

(b) Included within computer hardware and software are assets under capital leases with costs of $83 and $119 as at October 2, 2016 and January 3, 2016 and associated accumulated depreciation of $77 and $86 as at October 2, 2016 and January 3, 2016, respectively. The related depreciation expense for the three months ended October 2, 2016 and September 27, 2015 was $6 and $10, respectively. The related depreciation expense for the nine months ended October 2, 2016 and September 27, 2015 was $26 and $34, respectively.

11

3. Interim Consolidated financial statement details cont’d

Accrued liabilities:

	October 2, 2016		January 3, 2016
Customer related	$	937	$	1,852
Payroll		2,528		2,649
Professional services		273		367
Restructuring (note 10)		66		—
Vendor related		493		383
Other		483		311
Accrued liabilities	$	4,780	$	5,562

Interim consolidated statements of operations and comprehensive income (loss)

Interest expense:

	Three months ended				Nine months ended
	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015
Revolving credit facility	$	83	$	267	$	373	$	795
Long-term debt		52		—		145		—
Amortization of deferred financing fees		9		7		26		24
Obligations under capital leases		20		26		54		95
Interest expense	$	164	$	300	$	598	$	914

12

4. Debt

(a) Revolving credit facility

The Company borrows money under a Revolving Credit and Security Agreement with PNC Bank, National Association (“PNC”) which governs the PNC Revolving Credit Facility and the PNC Long-Term Debt Facility (collectively the “PNC Facilities”) with a term to January 2, 2018. Advances made under the PNC Revolving Credit Facility bear interest at the U.S. base rate, which should approximate prime rate, plus 0.50%. The applicable interest rate for the PNC Long-Term Debt Facility is U.S. base rate plus 1.00%.  

The maximum amount of funds available under the PNC Revolving Credit Facility is $35,000. 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 the lender. The Company is required to use a “lock-box” arrangement for the PNC Revolving Credit Facility, whereby remittances from customers are swept daily to reduce the borrowings under this facility. The PNC Long-Term Debt Facility of $5,000 matures on January 2, 2018 with quarterly principal payments of $250. Note, a $250 payment was scheduled for October 1, 2016 which was a Saturday, so the payment was processed subsequent to our quarter end on Monday, October 3, 2016.

At October 2, 2016, $8,040 (January 3, 2016 - $10,721) was outstanding under the PNC Revolving Credit Facility and is classified as a current liability based on the requirement to hold a “lock-box” under the terms of the PNC Revolving Credit Facility.

At October 2, 2016, $4,500 (January 3, 2016 – $5,000) was outstanding under the PNC Long-Term Debt Facility.

The PNC Facilities are a joint and several obligations of the Company and its subsidiaries that are borrowers under the facilities and are jointly and severally guaranteed by other subsidiaries of the Company. Repayment under the PNC Facilities is collateralized by the assets of the Company and each of its subsidiaries.

(b) Covenants

The PNC Facilities agreement contains certain financial and non-financial covenants.

The financial covenants require the Company to maintain minimum consolidated fixed charge coverage ratio and limit unfunded capital expenditures (all as defined in the credit agreement governing the PNC Facilities).  The financial covenant relating to a minimum consolidated fixed charge coverage ratio is in effect for the twelve months ended October 2, 2016 and thereafter on a rolling twelve month basis until January 2, 2018.

The Company is in compliance with the financial covenants included in the PNC Facilities as of October 2, 2016.

13

5. Capital stock

Common shares

Issued and outstanding:

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

	Number of shares			$
Balance at January 3, 2016		16,417,276	$	391
Share issuance		25,125		—
Balance at October 2, 2016		16,510,180		391

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 for the fiscal period ended January 3, 2016. Stock options of 155,403 were granted during the nine month period ended October 2, 2016. A summary of stock option activity for the nine month period ended October 2, 2016 is as follows:

	Number of options			Weighted average exercise price		Aggregate intrinsic value		Weighted average remaining contractual term (years)
Outstanding at January 3, 2016		655,114		$	1.98		—		6.5
Options granted		155,403		$	1.34
Expired		(61,757	)	$	3.46
Forfeited		(18,603	)	$	3.14
Outstanding at October 2, 2016		730,157		$	1.76	$	19		6.9
Exercisable at October 2, 2016		365,673		$	1.92	$	—		5.1

During the three month periods ended October 2, 2016 and September 27, 2015, the Company recorded stock-based compensation expense and a corresponding increase in additional paid-in capital of $20 and $45, respectively. During the nine month periods ended October 2, 2016 and September 27, 2015, the Company recorded stock-based compensation expense and a corresponding increase in additional paid-in capital of $62 and $122, respectively.

14

Restricted Stock Units 

For more detailed information regarding the Company’s Restricted Stock Units (“RSU”) arrangements, see Note 6 of the consolidated financial statements within the Company’s Form 10-K for the fiscal period ended January 3, 2016. RSU’s of 595,339 were issued during the nine months ended October 2, 2016. A summary of the RSU activity for the nine month period ended October 2, 2016 is as follows: 

	Outstanding RSU			Weighted average stock price		Weighted average remaining contractual term (years)
Outstanding balance at January 3, 2016		479,564		$	1.88		0.7
RSU granted		595,339		$	0.68
RSU forfeited		(20,066	)	$	1.14
RSU vested and issued in common shares		(25,125	)	$	1.99
Outstanding balance at April 3, 2016		1,029,714		$	1.15		1.1

Certain RSUs granted during 2014 and 2016 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 October 2, 2016 and September 27, 2015 related to the restricted stock units was $99 and $81. Stock based compensation recognized during the nine month period ended October 2, 2016 and September 27, 2015 related to the restricted stock units was $281 and $222.

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6. Income taxes

During the three months period ended October 2, 2016 and September 27, 2015, the Company recorded current income tax expenses of $97 and $152, respectively on minimum taxes and taxes on profits in certain foreign jurisdictions. For the three months period ended October 2, 2016 and September 27, 2015, deferred tax recovery of $81 and $27, respectively was recorded on temporary differences related to the Mexican operations. During the nine months period ended October 2, 2016 and September 27, 2015, the Company recorded current income tax expenses of $200 and $481, respectively on minimum taxes and taxes on profits in certain foreign jurisdictions. For the nine months period ended October 2, 2016 and September 27, 2015 deferred tax recoveries of $96 and $86 was recorded on 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 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.

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7. Earnings (loss) per common share

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

	Three months ended				Nine months ended
	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015
Basic weighted average shares outstanding		16,510,180		16,417,276		16,502,081		16,417,276
Dilutive stock awards (a) (b) (c)		—		—		1,048,074		—
Diluted weighted average shares outstanding		16,510,180		16,417,276		17,550,155		16,417,276

(a)

Dilutive stock awards include outstanding RSU’s and in-the money stock options determined using the treasury stock method

(b)

Dilutive options were determined using the treasury stock method, using an average price of $1.52 per share for three months ended October 2, 2016. As a result of the net loss for the three months ended October 2, 2016, diluted earnings per share was calculated using the basic weighted average shares outstanding as the effect of potential common shares would have been anti-dilutive. Had there been net income for the three months ended October 2, 2016, dilutive stock awards would have been calculated as 1,046,730. For the nine months ended October 2, 2016, dilutive options were determined using the treasury stock method, using an average price of $1.47 per share. Total dilutive stock awards were calculated as 1,048,074.

(c) For the three months and nine months ended September 27, 2015, as a result of the net loss, diluted earnings per share was calculated using the basic weighted average shares outstanding as the effect of potential common shares would have been anti-dilutive. Had there been net income for the three and nine months ended September 27, 2015, there still would be no dilutive stock awards as no outstanding stock options were considered in the money.

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8. 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 revenues minus operating expenses, excluding unrealized foreign exchange gain (loss) on unsettled forward exchange contracts, 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
	October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015
Revenues
Mexico	$	24,857		$	34,753		$	77,321		$	109,515
China		15,134			12,055			41,891			33,547
U.S.		5,009			9,218			15,689			24,804
Total	$	45,000		$	56,026		$	134,901		$	167,866
Intersegment revenue
Mexico	$	(141	)	$	(126	)	$	(396	)	$	(336	)
China		(2,108	)		(2,361	)		(5,952	)		(7,451	)
U.S.		(68	)		(114	)		(335	)		(199	)
Total	$	(2,317	)	$	(2,601	)	$	(6,683	)	$	(7,986	)
Net external revenue
Mexico	$	24,716		$	34,627		$	76,925		$	109,179
China		13,026			9,694			35,939			26,096
U.S.		4,941			9,104			15,354			24,605
Total segment revenue (which also equals consolidated revenue)	$	42,683		$	53,425		$	128,218		$	159,880
Site Contribution
Mexico	$	1,642		$	2,007		$	6,513		$	7,682
China		1,643			804			2,808			1,773
U.S.		(331	)		243			(771	)		728
Total	$	2,954		$	3,054		$	8,550		$	10,183
Corporate allocations		2,789			3,167			8,323			9,338
Unrealized foreign exchange (gain) loss on unsettled forward exchange contracts		4			805			(995	)		334
Interest		164			300			598			914
Restructuring charges		—			—			176			—
Earnings (loss) before income taxes	$	(3	)	$	(1,218	)	$	448		$	(403	)

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Additions to property, plant and equipment

The following table contains additions to property, plant and equipment including those acquired through capital leases for the three and nine months ended October 2, 2016 and September 27, 2015:

	Three months ended				Nine months ended
	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015
Mexico	$	256	$	107	$	590	$	503
China		95		150		575		777
U.S.		12		221		303		606
Segment total		363		478		1,468		1,886
Corporate and other		14		30		185		69
Total	$	377	$	508	$	1,653	$	1,955

Property, plant and equipment ^(a)

	October 2, 2016		January 3, 2016
Mexico	$	9,220	$	10,674
China		3,157		2,217
U.S.		2,311		3,255
Segment total		14,688		16,146
Corporate and other		241		297
Total	$	14,929	$	16,443

^(a) Property, plant and equipment information is based on the principal location of the asset.

Geographic revenues

The following table contains geographic revenues based on the product shipment destination, for the three and nine months ended October 2, 2016 and September 27, 2015:

	Three months ended				Nine months ended
	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015
U.S.	$	29,470	$	41,821	$	83,848	$	128,214
Canada		9,132		7,186		32,832		18,973
Europe		592		1,163		1,497		3,524
China		1,751		584		4,403		2,134
Africa		1,738		2,672		5,638		7,066
Total	$	42,683	$	53,425	$	128,218	$	159,880

Significant customers and concentration of credit risk:

Sales of the Company’s products are concentrated in certain cases among specific customers in the same industry. The Company is subject to concentrations of credit risk in trade receivables. The Company considers concentrations of credit risk in establishing the allowance for doubtful accounts and believes the recorded allowances are adequate.

The Company expects to continue to depend upon a relatively small number of customers for a significant percentage of its revenue. In addition to having a limited number of customers, the Company manufactures a limited number of products for each customer. If the Company loses any of its larger customers or any product line manufactured for one of its larger customers, it could experience a significant reduction in revenue. Also, the insolvency of one or more of its larger customers or the inability of one or more of its larger customers to pay for its orders could decrease revenue. As many costs and operating expenses are relatively fixed, a reduction in net revenue can decrease profit margins and adversely affect the business, financial condition and results of operations.

During the three months ended October 2, 2016, two customers exceeded 10% of total revenues representing 15.6% and 10.2% respectively (September 27, 2015 – two customers represented 16.0% and 11.7%) of total revenue for the third quarter of 2016. During the nine months ended October 2, 2016 two customers individually comprised 15.8% and 15.4% (September 27, 2015 – two customers individually comprised 14.5% and 11.6%) of total revenue for the nine months ended October 2, 2016.

As of October 2, 2016, two customers exceeded 10% of the Company’s accounts receivable representing 12.1% and 10.6% respectively, (January 3, 2016, one customer represented 16.8% of the Company’s accounts receivable).

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9. Derivative financial instruments

The Company enters into forward foreign exchange contracts to reduce its exposure to foreign exchange currency rate fluctuations related to forecasted Canadian dollar and Mexican Peso denominated payroll, rent and utility cash flows for the three remaining months of fiscal 2016 and a portion of the first nine months of fiscal 2017. These contracts are effective economic hedges but do not qualify for hedge accounting under ASC 815 “Derivatives and Hedging”. Accordingly, changes in the fair value of these derivative contracts are recognized into cost of sales in the consolidated statement of operations and comprehensive income (loss). The Company does not enter into forward foreign exchange contracts for trading or speculative purposes.

The following table presents a summary of the outstanding foreign currency forward contracts as at October 2, 2016:

Currency	Buy/Sell	Foreign Currency Amount	Notional Contract Value in USD
Canadian Dollar	Buy	CAD 6,000	$	4,496
Mexican Peso	Buy	MXN 197,070	$	11,160

The unrealized loss recognized in earnings for the three month period as a result of revaluing the outstanding instruments to fair value on October 2, 2016 was $4 (September 27, 2015 – unrealized loss $805), and the unrealized gain for the nine month period ended October 2, 2016 was $995 (September 27, 2015 – unrealized loss $334), which was included in cost of sales in the consolidated statement of operations and comprehensive income (loss). The realized loss on the settled contracts for the three months period ended October 2, 2016 was $619 (September 27, 2015 – realized loss $1,237), and the realized loss for the nine month period ended October 2, 2016 was $2,197 (September 27, 2015 – realized loss $3,119), which is included in cost of sales in the consolidated statement of operations and comprehensive income (loss). Fair value was determined using the market approach with valuation based on market observables (Level 2 quantitative inputs in the hierarchy set forth under ASC 820 “Fair Value Measurements”).

	October 2, 2016		January 3, 2016
Average USD:CAD contract rate		1.33		1.26
Average USD:CAD mark-to-market rate		1.31		1.38
Average USD:PESO contract rate		17.66		15.88
Average USD:PESO mark-to-market rate		19.74		17.47

The derivative asset as at October 2, 2016 was $83 ($Nil as at January 3, 2016) and derivative liability as at October 2, 2016 was $1,175 ($2,087 as at January 3, 2016) which reflected the fair market value of the unsettled forward foreign exchange contracts.

10. Restructuring charges

During the first quarter of 2016, one employee was terminated in the Markham facility which resulted in severance charges of $176 based on the termination payments which will be paid monthly until the first quarter of 2017. No restructuring charges were incurred for the three months ended October 2, 2016.

	Severance
Balance as at January 3, 2016	$	—
Charges		176
Payments		(110	)
Balance as at October 2, 2016	$	66

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11. Commitments

Purchase obligations not recorded on the balance sheet as at October 2, 2016 consist of open non-cancellable purchase orders for raw materials for $15,753 (September 27, 2015 - $18,538), which are expected to be received within 12 months of the purchase order issue date.

The Company executed two new facility lease agreements located in Fremont, California during the quarter. One location represents a lease term of three years commencing on October 1, 2016 for approximately 46,940 rentable square feet with a base rent of $46 per month with an escalation factor each year thereafter. The second location represents a lease term of five years commencing on August 1, 2016 for approximately 20,828 rentable square feet with a base rent of $23 per month with an escalation factor each year thereafter. The Company plans to transfer current operations in the San Jose, California leased location to these two new facilities by the end of the fourth quarter of 2016. The current San Jose facility lease expires on December 31, 2016.

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Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Where we say “we”, “us”, “our”, the “Company” or “SMTC”, we mean SMTC Corporation or SMTC Corporation and its subsidiaries, as the context may require. Where we refer to the “industry”, we mean the electronics manufacturing services industry.

You should read this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in combination with the accompanying unaudited interim consolidated financial statements and related notes as well as the audited consolidated financial statements and the accompanying notes to the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) included within the Company’s Annual Report on Form 10-K filed on March 17, 2016. The forward-looking statements in this discussion regarding the electronics manufacturing services industry, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion include numerous risks and uncertainties, some of which are as described in the “Risk Factors” section in the Annual Report on Form 10-K filed on March 17, 2016, as updated by Item 1A in Part II of this quarterly report. Certain statements in this MD&A contain words such as “could”, “expects”, “may”, “anticipates”, “believes”, “intends”, “estimates”, “plans”, “envisions”, “seeks” and other similar language and are considered forward looking statements or information under applicable securities laws. These statements are based on our current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which we operate. These statements are subject to important assumptions, risks and uncertainties, which are difficult to predict and the actual outcome may be materially different. We may not update these forward-looking statements after the date of this Form 10-Q, even though our situation may change in the future. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

This MD&A contains discussion in U.S. dollars (US$) unless specifically stated otherwise.

Background

SMTC Corporation is a mid-tier provider of end-to-end electronics manufacturing services, or EMS, including product design and sustaining engineering services, printed circuit board assembly, or PCBA, production, enclosure fabrication, systems integration and comprehensive testing services. SMTC facilities span a broad footprint in the United States, Mexico, and China, with approximately 1,330 full-time employees. SMTC’s services extend over the entire electronic product life cycle from the development and introduction of new products through to growth, maturity and end-of-life phases. SMTC offers fully integrated contract manufacturing services with a distinctive approach to global original equipment manufacturers, or OEMs, and technology companies primarily within the industrial, computing and communications, power and energy and medical market segments. In addition, the Company operates an international sourcing and procurement office in Hong Kong.

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Results of Operations

The interim consolidated financial statements of SMTC are prepared in accordance with U.S. GAAP.

Quarter ended October 2, 2016 compared with the quarter ended September 27, 2015:  

The following table sets forth summarized operating results in millions of US$ for the periods indicated:

	Three months ended October 2, 2016						Three months ended September 27, 2015						Change 2015 to 2016
		$		%				$		%				$		%
Revenue		42.7			100.0			53.4			100.0			(10.7	)		(20.0	)
Cost of sales		39.1			91.6			50.3			94.2			(11.2	)		(22.3	)
Gross profit		3.6			8.4			3.1			5.8			0.5			16.1
Selling, general and administrative expenses		3.5			8.2			4.0			7.5			(0.5	)		(12.5	)
Operating earnings (loss)		0.1			0.2			(0.9	)		(1.7	)		1.0			111.1
Interest expense		0.2			0.5			0.3			0.6			(0.1	)		(33.3	)
Loss before income taxes		(0.1	)		(0.2	)		(1.2	)		(2.3	)		1.1			91.7
Income tax expense		0.0			0.0			0.1			0.2			(0.1	)		100.0
Net loss		(0.1	)		(0.2	)		(1.3	)		(2.4	)		1.2			92.3

Revenue

Revenue decreased by $10.7 million, or 20.0%, from $53.4 million for the third quarter of 2015 to $42.7 million for the third quarter of 2016. The decrease was primarily the result of reduced volumes of $17.0 million, of which a decrease of $8.8 million resulted from two customers which have transferred all business to other contract manufacturers while a reduction of $8.2 million was due to one customer’s reduced demand. The decreases were partially offset by increases in new customer revenue, specifically two new customers which represented $6.1 million of additional revenue during the quarter.

During the third quarter of 2016, revenue from the industrial sector decreased to $15.9 million compared with $26.4 million for the same period in 2015, mainly due to reduced volumes from three customers, two of which have transferred all business to other contract manufacturers. Revenue from the industrial sector as a percentage of total revenue decreased to 37.2% from 49.4% in the third quarters of 2016 and 2015, respectively.

Revenue from the networking and communications sector decreased in the third quarter of 2016 to $16.1 million compared to $21.0 million for the third quarter of 2015. The decrease was due to reductions in revenues from one customer which experienced lower demand partially offset by new customer revenue of $1.8 million and volume increases with an existing customer of $1.2 million. Revenue from the networking and communications sector as a percentage of total revenue decreased to 37.7% from 39.3% in the third quarters of 2016 and 2015, respectively.

Revenue from the power and energy sector decreased to $2.5 million or 5.9% of total revenue for the third quarter of 2016 compared with $3.0 million or 5.6% of total revenue for the same period in 2015. The decrease in revenue was due to reduced volume from two customers which had reduced demand partially offset by revenue from three new customers.

Revenue for the medical sector increased to $8.2 million in the third quarter of 2016, compared to $3.0 million in the third quarter of 2015 primarily as a result of increased revenues of $4.6 million related to two new customers which ramped during the quarter in addition to increased volumes with one long standing customer. Revenue from the medical sector as a percentage of total revenue increased to 19.2% in the third quarter of 2016 compared with 5.7% in the third quarter of 2015.

During the third quarter of 2016 and 2015, the Company recorded approximately $2.8 million and $1.6 million, respectively of sales of raw materials inventory to customers, which carried limited margin. The Company purchases raw materials based on customer purchase orders. When a customer requires an order to be altered or changed, the customer is generally obligated to purchase the original on-order raw material at cost, to the extent the materials are not consumed within a specified period.

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Due to changes in market conditions, the life cycle of products, the nature of specific programs and other factors, revenues from a particular customer typically varies from quarter-to-quarter and year-to-year. The Company’s ten largest customers represented 78.4% of revenue during the third quarter of 2016, compared with 80.1% in the third quarter of 2015. Revenue from the two largest customers during the third quarter of 2016 was $6.6 million and $4.4 million representing 15.6% and 10.2% respectively. This compares with revenues from the largest customers during the third quarter of 2015 which was $8.5 million and $6.2 million representing 16.0% and 11.7% respectively. No other customers represented more than 10% of revenue in either period.

During the third quarter of 2016, 57.9% of our revenue was attributable to production from our operations in Mexico, 30.5% in China and 11.6% in the US. During the third quarter of 2015, 64.8% of our revenue was attributable to production from our operations in Mexico, 18.2% in China and 17.0% in the US.

Gross Profit

Gross profit for the third quarter of 2016 increased by $0.5 million to $3.6 million or 8.4% of revenue compared with $3.1 million or 5.8% of revenue for the same period in 2015. When removing the impact of the unrealized foreign exchange loss on unsettled forward contracts the adjusted gross profit percentage in the third quarter of 2016 was 8.4% compared to 7.3% in the same period of prior year. Revenues decreased by 20.0% in the third quarter of 2016 compared to the same period in prior year, however the gross profit percentage increased. The increase in gross profit percentage was due to improved margins due to product mix, reduced manufacturing expenses and reduced direct labor charges and more favorable foreign exchange rates.

Non-GAAP Gross Profit and Adjusted Gross Profit Reconciliation:

The Company presents this adjusted gross profit amount as we evaluate gross margins internally excluding the non-cash unrealized foreign exchange loss on unsettled forward exchange contracts as management does not consider this to be a relevant financial indicator in evaluating the Company’s operating performance. Management does not however, eliminate the realized loss on the cash settled forward exchange contracts from gross profit. Below is the reconciliation from the U.S. GAAP measure of gross profit to adjusted gross profit:

	Three months ended October 2, 2016		Three months ended September 27, 2015
Gross profit	$	3,634	$	3,116
Add:
Unrealized foreign exchange loss on unsettled forward exchange contracts		4		805
Adjusted gross profit	$	3,638	$	3,921

The Company entered into forward foreign exchange contracts to reduce its exposure to foreign exchange currency rate fluctuations related to forecasted Canadian dollar and Mexican peso expenditures. These contracts were effective as hedges from an economic perspective, but did not meet the requirements for hedge accounting under ASC Topic 815 “Derivatives and Hedging”. Accordingly, changes in the fair value of these contracts were recognized into cost of sales in the consolidated statement of operations and comprehensive loss. Included in cost of sales for the third quarter of 2016 was a nominal unrealized loss recognized as a result of revaluing the instruments to fair value, and a realized loss of $0.6 million. Included in cost of sales for the third quarter of 2015 was an unrealized loss recognized as a result of revaluing the instruments to fair value of $0.8 million, and a realized loss of $1.2 million.

	October 2, 2016		January 3, 2016
Average USD:CAD contract rate		1.33		1.26
Average USD:CAD mark-to-market rate		1.31		1.38
Average USD:PESO contract rate		17.66		15.88
Average USD:PESO mark-to-market rate		19.74		17.47

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Non-GAAP EBITDA and Adjusted EBITDA Reconciliation:

Management has presented EBITDA and adjusted EBITDA, as it is utilized to monitor performance against budget as well as compliance with bank covenants. We also believe EBITDA and adjusted EBITDA provides useful information to investors in understanding and evaluating our operating results in the same manner as management.

Below is the reconciliation of net loss to EBITDA and adjusted EBITDA, both of which are non-GAAP measures.

	Three months ended October 2, 2016			Three months ended September 27, 2015
Net loss	$	(19	)	$	(1,343	)
Add:
Depreciation		1,045			981
Interest		164			300
Taxes		16			125
EBITDA	$	1,206		$	63
Add:
Stock based compensation		119			126
Unrealized foreign exchange loss on unsettled forward exchange contracts		4			805
Adjusted EBITDA	$	1,329		$	994

Despite the reduction in revenue, adjusted EBITDA increased to $1.3 million in the third quarter of 2016 up from $1.0 million for the same period in the prior year mainly due to reduced selling, general and administrative expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $0.5 million during the third quarter of 2016 to $3.5 million compared to $4.0 million in the third quarter of 2015. The reduced selling, general and administrative expenses was primarily the result of professional service fees of $0.4 million incurred in the third quarter of 2015 in connection with the mergers and acquisitions strategy that were not incurred in 2016. In addition, there were reduced labor and business travel expenses incurred in the third quarter of 2016 compared to the same period in prior year.

Interest Expense

Interest expense decreased to $0.2 million in the third quarter of 2016 from $0.3 million for the same period in 2015. The decrease of $0.1 million resulted from a lower average debt balance and lower weighted average interest rates. The weighted average interest rates with respect to the debt were 4.1% and 4.2% for the third quarters of 2016 and 2015, respectively.

Income Tax Expense

The Company recorded income tax expense of $0.02 million in the third quarter of 2016 compared to $0.1 million for the same period in 2015 due to minimum taxes and taxes on profits in certain jurisdictions. For the third quarters of 2016 and 2015 a deferred income tax recovery of less than $0.1 million was recorded on temporary differences related to the Mexican operations.

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Six months ended October 2, 2016 compared with nine months ended September 27, 2015:

The following table sets forth summarized operating results in millions of US$ for the periods indicated:  

	Nine months ended October 2, 2016				Nine months ended September 27, 2015						Change 2015 to 2016
		$	%			$		%				$		%
Revenue		128.2		100.0		159.9			100.0			(31.7	)		(19.8	)
Cost of sales		116.6		91.0		147.7			92.4			(31.1	)		(21.1	)
Gross profit		11.6		9.0		12.2			7.6			(0.6	)		(4.9	)
Selling, general and administrative expenses		10.4		8.1		11.7			7.3			(1.3	)		(11.1	)
Restructuring charges		0.2		0.2		—			—			0.2			—
Operating earnings		1.0		0.8		0.5			0.3			0.5			100.0
Interest expense		0.6		0.5		0.9			0.6			(0.3	)		(33.3	)
Income (loss) before income taxes		0.4		0.3		(0.4	)		(0.3	)		0.8			200.0
Income tax expense		0.1		0.1		0.4			0.2			(0.3	)		(75.0	)
Net income (loss)		0.3		0.2		(0.8	)		(0.5	)		1.1			137.5

Revenue

Revenue decreased by $31.7 million, or 19.8%, from $159.9 million for the nine months period ended 2015 to $128.2 million for the nine months period ended 2016. The decrease was primarily the result of reduced volumes of $42.5 million due to two customers which have transferred all business to other contract manufacturers and one customer’s product which has reached end of life. This decreased was partially offset by new customer revenue of $12.7 million in addition to net volume increases with existing customers of $1.9 million.

During the nine months period ended 2016, revenue from the industrial sector decreased to $51.7 million from $81.0 million for the same period in 2015, representing a 36.2% reduction. This was primarily due to reduced revenues from two customers which have transferred all business to other contract manufacturers which was partially offset by net volume increases with other existing customers. Revenue from the industrial sector as a percentage of total revenue decreased to 40.3% for the nine months ended 2016 down from 50.7% for the same period in 2015.

Revenue from the networking and communications sector decreased for the nine months period ended 2016 to $53.2 million compared to $63.2 million for the same period in 2015. The decrease of 15.8% was due to reductions in revenues of $27.3 million from two customers; one customer decrease was due to the product going end of life and an additional customer experienced higher product demand for the same period in the prior year. These reductions were partially offset by demand increases with two customers of $9.4 million in addition to two new customers which represented additional revenue of $6.3 million. Revenue from the networking and communications sector as a percentage of total revenue increased to 41.5% up from 39.5% for the nine months ended 2016 and 2015, respectively.

Revenue from the power and energy sector was $7.0 million for nine months period ended 2016 and $7.5 million for the same period in 2015, representing 5.5% and 4.7%, respectively. The reduction was a result of reduced revenues from two customers which experienced lower demand partially offset by revenue from two new customers.

Revenue for the medical sector increased to $16.3 million for the nine months period ended 2016, compared to $8.2 million for the same period in 2015 due to increased volumes from one customer in addition to revenue from one new customer. Revenue from the medical sector as a percentage of total revenue increased to 12.7% and 5.1%, respectively.

During the nine months period ended 2016, the Company recorded approximately $5.2 million of sales of raw materials inventory to customers, which carried limited margin, compared with $3.8 million for the same period in 2015. The Company purchases raw materials based on customer purchase orders. When a customer requires an order to be altered or changed, the customer is generally obligated to purchase the original on-order raw material at cost, to the extent the materials are not consumed within a specified period.

26

Due to changes in market conditions, the life cycle of products, the nature of specific programs and other factors, revenues from a particular customer typically varies from quarter to quarter and year to year. The Company’s ten largest customers represented 78.6% of revenue from continuing operations for the nine months period ended 2016, compared with 82.8% for the same period in 2015. Revenue from the two largest customers during the nine months period ended 2016 was $20.2 million and $19.8 million, representing 15.8% and 15.4%, respectively of total revenue for the nine months period ended 2016. Revenue from the two largest customers during the nine months period ended 2015 was $23.2 million and $18.6 million, representing 14.5% and 11.6%, respectively of total revenue for the nine months period ended 2015. No other customers represented more than 10% of revenue in either period.

During the nine months period ended 2016, 60.0% of our revenue was attributable to production from our operations in Mexico, 28.0% in China and 12.0% in the US. During the nine months period ended 2015, 68.3% of our revenue was attributable to production from our operations in Mexico, 16.3% in China and 15.4% in the US.

Gross Profit

Gross profit for the nine months period ended 2016 decreased by $0.6 million to $11.6 million or 9.0% of revenue compared with 7.6% of revenue for the same period in 2015. However, when removing the effects of unrealized foreign exchange (gains) losses on unsettled forward exchange contracts, the adjusted gross profit is 8.3% and 7.8% for the nine months period ended 2016 and 2015, respectively. For the nine months period ended 2016, the reduction in gross margin is due to reduced revenues and the resulting impact to cover fixed costs compared to the same period in prior year which was partially offset by manufacturing efficiencies and reduced labor costs. Margins also improved due to reduced material costs due to product mix and an adjustment the Company recognized during the first quarter which decreased cost of sales by $0.6 million relating to settled liabilities. In addition, more favorable foreign exchange rates resulted in reduced realized foreign exchange losses for the nine months period ended 2016 when compared to the same period in prior year.

Non-GAAP Gross Profit and Adjusted Gross Profit Reconciliation:

The Company presents this adjusted gross profit amount as we evaluate gross margins internally excluding the non-cash unrealized foreign exchange loss (gain) on unsettled forward exchange contracts as management does not consider this to be a relevant financial indicator in evaluating the Company’s operating performance. Management does not however, eliminate the realized loss on the cash settled forward exchange contracts from gross profit. Below is the reconciliation from U.S. GAAP measure of gross profit to adjusted gross profit.

	Nine months ended October 2, 2016			Nine months ended September 27, 2015
Gross profit	$	11,603		$	12,174
Add (deduct):
Unrealized foreign exchange (gain) loss on unsettled forward exchange contracts		(995	)		334
Adjusted gross profit	$	10,608		$	12,508

The Company entered into forward foreign exchange contracts to reduce its exposure to foreign exchange currency rate fluctuations related to forecasted Canadian dollar and Mexican peso expenditures. These contracts were effective as hedges from an economic perspective, but did not meet the requirements for hedge accounting under ASC Topic 815 “Derivatives and Hedging”. Accordingly, changes in the fair value of these contracts were recognized into cost of sales in the consolidated statement of operations and comprehensive income (loss). Included in cost of sales for the nine months period ended 2016 was an unrealized gain recognized as a result of revaluing the instruments to fair value of $1.0 million, and a realized loss of $2.2 million. Included in cost of sales for the nine months period ended 2015 was an unrealized loss recognized as a result of revaluing the instruments to fair value of $0.3 million, and a realized loss of $3.1 million.

	October 2, 2016		January 3, 2016
Average USD:CAD contract rate		1.33		1.26
Average USD:CAD mark-to-market rate		1.31		1.38
Average USD:PESO contract rate		17.66		15.88
Average USD:PESO mark-to-market rate		19.74		17.47

27

Non-GAAP EBITDA and Adjusted EBITDA Reconciliation:

Management has presented EBITDA and adjusted EBITDA, as it is utilized to monitor performance against budget as well as compliance with bank covenants. We also believe EBITDA and adjusted EBITDA provides useful information to investors in understanding and evaluating our operating results in the same manner as management.

Below is the reconciliation of net earnings to EBITDA and adjusted EBITDA, both of which are non-GAAP measures.

	Nine months ended October 2, 2016			Nine months ended September 27, 2015
Net earnings (loss)	$	344		$	(798	)
Add:
Depreciation		3,066			2,976
Interest		598			914
Taxes		104			395
EBITDA	$	4,112		$	3,487
Add (deduct):
Restructuring		176			—
Stock based compensation		343			344
Unrealized foreign exchange (gain) loss on unsettled forward exchange contracts		(995	)		334
Adjusted EBITDA	$	3,636		$	4,165

Adjusted EBITDA reduced to $3.6 million in the nine month period ended 2016 from $4.2 million for the same period in the prior year, however represented 2.8% of revenue for nine months period ended 2016 compared to 2.6% for the same period in 2015. The reduction in Adjusted EBITDA was due to lower revenue and gross profit, slightly offset by a reduction in selling, general and administrative expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $1.3 million for the nine months period ended 2016 to $10.4 million compared to $11.7 million for the same period in the prior year. The decrease was mainly due to reduced professional fees, business trip expenses and administrative headcount.

Restructuring Charges

Restructuring charges were incurred of $0.2 million in the nine months period ended 2016 related to a termination of one executive position in the Markham, Canada office location in the first quarter of 2016. These charges will be paid until the first quarter of 2017. No restructuring charges were incurred for the nine months period ended 2015.

Interest Expense

Interest expense decreased from $0.9 million for the nine months period ended 2015 to $0.6 million for the nine months period ended 2016. The decrease of $0.3 million was primarily the result of lower average debt balances in addition to reduced interest rates. The weighted average interest rate reduced to 4.2% for the nine months period ended 2016 compared to 4.4% for the nine months period ended 2015.

28

Income Tax Expense

During the nine months period ended 2016, the Company recorded current income tax charges of $0.3 million for taxes on profits in foreign jurisdictions offset by tax recoveries of less than $0.1 million in the U.S. During the nine months period ended 2015, the Company recorded a current income tax expense of $0.5 million, primarily related to minimum taxes and taxes on profits in certain jurisdictions. For the nine months period ended 2016 and 2015 a deferred income tax recovery of $0.1 million was recorded on temporary differences related to the Mexican operations. 

Liquidity 

Net cash provided from operating activities for the nine months period ended 2016 was $5.8 million compared to $6.7 million for the nine months period ended 2015 driven by a reduction of accounts receivable compared to the same period in prior year and reduced inventory purchases due to lower sales. This was offset by increased payments of accounts payable and accrued liabilities for the nine months period ended 2016 compared to the same period in prior year which resulted in a decrease in overall cash flow from operations. In addition, the nine months ended 2016 generated net earnings from operations as a result of improved gross margin compared to the same period in prior year and reduced selling, general and administrative expenses for the nine months period ended 2016 due to costs controls, and lower professional fees. Accounts receivable days sales outstanding were 50 and 48 days for the nine months period ended 2016 and 2015, respectively. The increase was largely due to the timing of collections compared to the same period in prior year and changes in customer mix with longer payment terms. Inventory turnover, on an annualized basis increased from 6.5 times in the nine months period ended 2015 to 6.8 times in the nine months period ended 2016 due to improved inventory management. Accounts payable days outstanding increased to 60 days at the end of the nine months period ended 2016 compared to 54 days for the same period in 2015. The increase was due to the timing of payments and improved terms with some vendors.

Net cash used by financing activities during the nine months period ended 2016 was $3.1 million compared to cash used from financing activities of $5.6 million for the nine months period ended 2015. The cash used was the result of debt repayments. During the nine months period ended 2016, the Company made revolving debt repayments of $2.7 million, compared to $4.7 million during the same period in 2015. The Company also made scheduled term debt repayments of $0.5 million for the nine months period ended 2016. There was no term debt in 2015. The Company made principal payments for capital leases of $0.4 million for the nine months period ended 2016 compared to $0.9 million for the same period in prior year. Payments were partially offset by proceeds from a sale leaseback transaction of $0.5 million for the nine months period ended 2016 which did not occur in the same period in prior year. 

Net cash used in investing activities during the nine months period ended 2016 and 2015 was $1.5 million and $1.7 million, respectively, primarily consisting of additions of property, plant and equipment. For the nine months period ended 2016 restricted cash deposits were released in the amount of $0.3 million and proceeds were received from the sale of property, plant and equipment of $0.1 million.

Capital Resources

The Company borrows money under a Revolving Credit and Security Agreement with PNC which governs the PNC Revolving Credit Facility and the PNC Long-Term Debt Facility which expires on January 2, 2018. Advances made under the PNC Revolving Credit Facility bear interest at the U.S. base rate plus 0.50%. The Company also has a Long-Term Debt Facility with PNC which also expires on January 2, 2018 and bears interest at the U.S. base rate plus 1.00%. Collectively, the PNC Revolving Credit Facility and the PNC Long-Term Debt Facility are referred to as the PNC Facilities.

We believe that cash generated from operations, available cash and amounts available under our PNC Facilities and additional financing sources such as leasing companies and other lenders will be adequate to meet our debt service requirements, capital expenditures and working capital needs at our current level of operations for the foreseeable future, although no assurance can be given in this regard, particularly with respect to amounts available from lenders. We have agreed to a borrowing base formula under which the amount we are permitted to borrow under the PNC Facilities is based on our accounts receivable and inventory. Further, there can be no assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available to enable us to service our indebtedness. Our future operating performance and ability to service indebtedness will be subject to future economic conditions and to financial, business and other factors, certain of which are beyond our control.

29

Item 3 Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The PNC Facilities bears interest at a floating rate. The weighted average interest rate incurred on the PNC Facilities for the quarter ended October 2, 2016 was 4.1%. At October 2, 2016, the interest rate on the PNC Revolving Credit Facility was 4.0% based on the U.S. prime rate plus 0.50% and the interest rate on the PNC Long-Term Debt Facility was 4.5% based on U.S. prime plus 1.00%.

The impact of a 10% change in interest rates would not have a significant impact on our reported earnings.

Foreign Currency Exchange Risk

As a result of operating a global business, we are exposed to exchange rate fluctuations on expenditures denominated in foreign currencies. However, most of our sales and component purchases are denominated in U.S. dollars, which limits our foreign currency risk. Our foreign exchange risk relates primarily to our Canadian, Mexican and Asian payroll, Euro based component purchases and other various operating expenses denominated in local currencies in our geographic locations. To mitigate this risk, the Company enters into forward foreign exchange contracts to reduce its exposure to foreign exchange currency rate fluctuations related to forecasted Canadian dollar and Mexican peso. The strengthening of the Canadian dollar and Mexican peso would result in an increase in costs to the organization and may lead to a reduction in reported earnings.

The impact of a 10% change in exchange rates would not have a significant impact on our reported earnings, with the assumption that management has effectively hedged its foreign exchange risk with the purchase of forward exchange contracts.

Credit Risk

In the normal course of operations, there is a risk that a counterparty may default on its contractual obligations to us which would result in a financial loss that could impact our reported earnings. In order to mitigate this risk, we complete credit approval procedures for new and existing customers and obtain credit insurance where it is financially viable to do so given anticipated revenue volumes, in addition to monitoring our customers’ financial performance. We believe our procedures in place to mitigate customer credit risk and the respective allowance for doubtful accounts are adequate.

There is limited risk of financial loss from defaults on our outstanding forward currency contracts as the counterparty to the transactions had a Standard and Poor’s rating of A- or above as at September 30, 2016.

Liquidity Risk

There is a risk that we may not have sufficient cash available to satisfy our financial obligations as they come due. The financial liabilities we have recorded in the form of accounts payable, accrued liabilities and other current liabilities are primarily due within 90 days with the exception of the current portion of capital lease obligations which could exceed 90 days and the PNC Revolving Credit Facility which utilizes a lock-box to pay down the obligation effectively daily. Principal payments for the PNC Long-Term Debt Facility are made on a quarterly basis. We believe that cash flow from operations, together with cash on hand and our PNC Revolving Credit Facility, which has a credit limit of $35 million and PNC Long-Term Debt Facility of $4.5 million are sufficient to fund our financial obligations.

30

Item 4 Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

As of the end of the period covered by this quarterly report, the Company’s Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Accounting Officer) have conducted an evaluation of the Company’s disclosure controls and procedures. Based on their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective during and as at October 2, 2016 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the applicable Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended October 2, 2016 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Part II OTHER INFORMATION

Item 1A Risk Factors

There are no material changes to the risk factors disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended January 3, 2016.

31

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, SMTC Corporation has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.

	SMTC CORPORATION
	By:	/s/ Sushil Dhiman
	Name:	Sushil Dhiman
	Title:	President and Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Roger Dunfield
	Name:	Roger Dunfield
	Title:	Chief Financial Officer (Principal
		Accounting Officer)
Date: November 3, 2016

32

EXHIBIT INDEX

31.1	Certification of Sushil Dhiman pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 3, 2016.
31.2	Certification of Roger Dunfield pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 3, 2016.
32.1	Certification of Sushil Dhiman, pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated November 3, 2016.
32.2	Certification of Roger Dunfield, pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated November 3, 2016.
101.INS**	XBRL Instance
101.SCH**	XBRL Taxonomy Extension Schema
101.CAL**	XBRL Taxonomy Extension Calculation
101.DEF**	XBRL Taxonomy Extension Definition
101.LAB**	XBRL Taxonomy Extension Labels
101.PRE**	XBRL Taxonomy Extension Presentation

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

33

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Sushil Dhiman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of SMTC Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles of the United States of America;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2016
	By:	/s/ Sushil Dhiman
		Sushil Dhiman
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Roger Dunfield, certify that:

1. I have reviewed this quarterly report on Form 10-Q of SMTC Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles of the United States of America;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2016
	By:	/s/ Roger Dunfield
		Roger Dunfield
		Chief Financial Officer

EX-32.1

Exhibit 32.1 

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Chief Executive Officer of SMTC Corporation (the “Company”), does hereby certify that to the undersigned’s knowledge:

1) the Company’s quarterly report on Form 10-Q for the quarter ended October 2, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) the information contained in the Company’s quarterly report on Form 10-Q for the quarter ended October 2, 2016 fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Sushil Dhiman
	Sushil Dhiman
	President and Chief Executive Officer
Date: November 3, 2016

A signed original of this written statement required by Section 906 has been provided to SMTC Corporation and will be retained by SMTC Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2 

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Chief Financial Officer of SMTC Corporation (the “Company”), does hereby certify that to the undersigned’s knowledge:

1) the Company’s quarterly report on Form 10-Q for the quarter ended October 2, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) the information contained in the Company’s quarterly report on Form 10-Q for the quarter ended October 2, 2016 fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Roger Dunfield
	Roger Dunfield
	Chief Financial Officer
Date: November 3, 2016

A signed original of this written statement required by Section 906 has been provided to SMTC Corporation and will be retained by SMTC Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	9 Months Ended
	Oct. 02, 2016	Oct. 28, 2016
Document Information [Line Items]
Entity Registrant Name	SMTC CORP
Entity Central Index Key	0001108320
Trading Symbol	smtx
Current Fiscal Year End Date	--01-01
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		16,510,180
Document Type	10-Q
Document Period End Date	Oct. 02, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Interim Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Oct. 02, 2016	Jan. 03, 2016
Current assets:
Cash	$ 7,371	$ 6,099
Restricted cash	537	805
Accounts receivable — net (note 3)	23,665	29,885
Inventories (note 3)	22,991	25,877
Prepaid expenses and other assets	1,943	1,983
Derivative assets (note 9)	83
Income taxes receivable	267	461
Deferred income taxes — net	448	352
	57,305	65,462
Property, plant and equipment—net	14,929	16,443
Deferred financing costs — net	42	68
	72,276	81,973
Current liabilities:
Accounts payable	25,630	31,045
Accrued liabilities (note 3)	4,780	5,562
Derivative liabilities (note 9)	1,175	2,087
Income tax payable	328	502
Revolving credit facility (note 4)	8,040	10,721
Current portion of long-term debt (note 4)	1,000	1,000
Current portion of capital lease obligations	526	538
	41,479	51,455
Long-term debt (note 4)	3,500	4,000
Capital lease obligations	314	222
Shareholders’ equity:
Capital stock (note 5)	391	391
Additional paid-in capital	264,848	264,505
Deficit	(238,256)	(238,600)
	26,983	26,296
	$ 72,276	$ 81,973

XML

Interim Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Oct. 02, 2016	Sep. 27, 2015	Oct. 02, 2016	Sep. 27, 2015
Revenue	$ 42,683,000	$ 53,425,000	$ 128,218,000	$ 159,880,000
Cost of sales (note 9)	39,049,000	50,309,000	116,615,000	147,706,000
Gross profit	3,634,000	3,116,000	11,603,000	12,174,000
Selling, general and administrative expenses	3,493,000	4,035,000	10,406,000	11,661,000
Loss (gain) on disposal of property, plant and equipment	(20,000)	(1,000)	(25,000)	2,000
Restructuring charges (note 10)	0		176,000
Operating earnings (loss)	161,000	(918,000)	1,046,000	511,000
Interest expense (note 3)	164,000	300,000	598,000	914,000
Earnings (loss) before income taxes	(3,000)	(1,218,000)	448,000	(403,000)
Current	97,000	152,000	200,000	481,000
Deferred	(81,000)	(27,000)	(96,000)	(86,000)
	16,000	125,000	104,000	395,000
Net earnings (loss) and comprehensive income (loss)	$ (19,000)	$ (1,343,000)	$ 344,000	$ (798,000)
Earnings (loss) per share of common stock:
Basic (in dollars per share)	$ 0	$ (0.08)	$ 0.02	$ (0.05)
Diluted (in dollars per share)	$ 0	$ (0.08)	$ 0.02	$ (0.05)
Weighted average number of shares outstanding (note 7):
Basic (in shares)	16,510,180	16,417,276	16,502,081	16,417,276
Diluted (in shares)	16,510,180	16,417,276	17,550,155	16,417,276

XML

Interim Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - 9 months ended Oct. 02, 2016 - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance at Jan. 03, 2016	$ 391	$ 264,505	$ (238,600)	$ 26,296
Stock-based compensation		343		343
Net earnings			344	344
Balance, October 2, 2016 at Oct. 02, 2016	$ 391	$ 264,848	$ (238,256)	$ 26,983

XML

Interim Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
Operations:
Net earnings	$ 344	$ (798)
Items not involving cash:
Depreciation	3,066	2,976
Unrealized foreign exchange (gain) loss on unsettled forward exchange contracts	(995)	334
Loss (gain) on disposal of property, plant and equipment	(25)	2
Deferred income taxes	(96)	(86)
Amortization of deferred financing fees	26	24
Stock-based compensation	343	344
Change in non-cash operating working capital:
Accounts receivable	6,220	3,107
Inventories	2,886	1,124
Prepaid expenses and other assets	40	301
Income taxes receivable/payable	20	(27)
Accounts payable	(5,244)	(487)
Accrued liabilities	(742)	(106)
	5,843	6,708
Financing:
Net repayment of revolving credit facility	(2,681)	(4,720)
Repayment of long-term debt	(500)
Principal payment of capital lease obligations	(429)	(862)
Proceeds from sales leaseback	509
Deferred financing fees		(10)
	(3,101)	(5,592)
Investing:
Change in restricted cash	268
Purchase of property, plant and equipment	(1,864)	(1,697)
Proceeds from sale of property, plant and equipment	126	6
	(1,470)	(1,691)
Increase (decrease) in cash	1,272	(575)
Cash, beginning of period	6,099	5,447
Cash, end of the period	7,371	4,872
Supplemental Information
Property, plant and equipment acquired that was included in accounts payable and accrued liabilities	$ 36	$ 359

XML

Note 1 - Nature of the Business

9 Months Ended

Oct. 02, 2016

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

1. Nature of the business

SMTC Corporation (the “Company”) is a mid-tier provider of end-to-end electronics manufacturing services, or EMS, including product design and sustaining engineering services, printed circuit board assembly, or PCBA, production, enclosure fabrication, systems integration and comprehensive testing services. SMTC facilities span a broad footprint in the United States, Mexico, and China, with approximately 1,330 full-time employees. SMTC’s services extend over the entire electronic product life cycle from the development and introduction of new products through to growth, maturity and end-of-life phases. SMTC offers fully integrated contract manufacturing services with a distinctive approach to global original equipment manufacturers, or OEMs, and technology companies primarily within the industrial, computing and communications, power and energy and medical market segments. In addition, the Company operates an international sourcing and procurement office in Hong Kong.

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 January 3, 2016, (“Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2016. 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 January 3, 2016 was derived from the audited annual consolidated financial statements, but does not contain all of the footnote disclosures from the annual consolidated financial statements.

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Note 2 - Recent Adopted Accounting Pronouncements

9 Months Ended

Oct. 02, 2016

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

2. Recent Adopted Accounting Pronouncements

In June 2014, the FASB published ASU 2014-12: Compensation – Stock Compensation (Topic 718). The standard is amended to require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The standard is effective for all entities for years, and interim periods within those years, beginning after December 15, 2015. The adoption of ASU 2014-12 had no impact on our consolidated financial statements.

In April 2015, the FASB published ASU 2015-03: Presentation of Debt Issuance Costs (Topic 835-30). The standard provides guidance about simplifying the presentation of debt issuance costs. Under this ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. Effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of ASU 2015-03 had no impact on our consolidated financial statements as our current debt issuance costs relate to a revolving credit facility.

In April 2015, the FASB published ASU 2015-04: Retirement Benefits (Topic 715). The amendments intend to reduce complexity by providing a practical expedient that permits the entity to measure defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply that practical expedient consistently from year to year. The amendments in this Update are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The adoption of ASU 2015-04 had no impact on our consolidated financial statements.

Recent Accounting Pronouncements

In May 2014, the FASB published ASU 2014-09: Revenue from Contracts with Customers (Topic 606), which supersedes (i) revenue recognition requirements in Topic 605 and most related industry-specific guidance, and (ii) cost guidance included in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and amends existing requirements for recognition of a gain/loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) to be consistent with the new requirements. In August 2015, the FASB published ASU 2015-14 Topic 606 which effectively postponed the effective adoption requirement by one year such that the standard is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2016. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

In August 2014, the FASB published ASU 2014-15 Topics 205-40: Presentation of Financial Statements – Going Concern. The standard provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. Effective for years ending after December 15, 2016 and for years and interim periods thereafter. The impact of adoption of the standard has not yet been determined.

In July 2015, the FASB published ASU 2015-11: Simplifying the Measurement of Inventory (Topic 330). The amendments in this Update more closely align the measurement of inventory in U.S. GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). FASB has amended some of the other guidance in Topic 330 to more clearly articulate the requirements for the measurement and disclosure of inventory. However, the FASB does not intend for those clarifications to result in any changes in practice. Other than the change in the subsequent measurement guidance from the lower of cost or market to the lower of cost and net realizable value for inventory within the scope of this Update, there are no other substantive changes to the guidance on measurement of inventory. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. All other amendments will be effective upon the issuance of this Update. The impact of adoption of the standard has not yet been determined.

In November 2015, the FASB published ASU 2015-17: Income Taxes (Topic 740). The amendment requires that deferred tax assets and liabilities be classified as non-current in a classified statement of financial position. The amendments in this Update are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The impact of adoption of the standard has not yet been determined.

In January 2016, the FASB published ASU 2016-01: Financial Instruments - Overall (Topic 825-10). The amendment addresses certain aspects of recognition, measurement, presentation and disclosure of financial assets and liabilities. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The impact of adoption of the standard has not yet been determined.

In February 2016, the FASB published ASU 2016-02: Leases (Topic 842). The amendment proposes that all lessees should recognize the assets and liabilities that arise from leases. Elections may be available for those leases with terms of 12 months or less. The amendment still retains the distinction between finance leases and operating leases. 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 adoption of the standard has not yet been determined.

In March 2016, the FASB published ASU 2016-09: Compensation – Stock Compensation (Topic 718). The amendment simplifies several aspects of accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and accounting for forfeitures. Some of the areas for simplification apply only to nonpublic entities. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The impact of adoption of the standard has not yet been determined.

In March 2016, the FASB published ASU 2016-08: Revenue from Contracts with Customers (Topic 606). The amendment clarifies the implementation guidance on principal versus agent considerations. The amendments of this update do not change the core principles of the guidance. The amendment of this ASU is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2016. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

In April 2016, the FASB published ASU 2016-10: Revenue from Contracts with Customers (Topic 606), which clarified application of the standard in identifying performance obligations and licensing arrangements. The amendments in this Update affect the guidance in Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The amendment is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2016. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

In May 2016, the FASB published ASU 2016-12: Revenue from Contracts with Customers (Topic 606), which included narrow-scope improvements and practical expedients. Specifically the update addresses application of collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The amendments in this Update affect the guidance in Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The amendment is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2016. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

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 this Update 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. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2018. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

In August 2016, the FASB published ASU 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This Accounting Standards Update addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendment is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted. The impact of adoption of the standard has not yet been determined.

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Note 3 - Interim Consolidated Financial Statement Details

9 Months Ended

Oct. 02, 2016

Notes to Financial Statements

Condensed Financial Statements [Text Block]

3. 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).

Consolidated Balance Sheets

Restricted cash:

	October 2, 2016		January 3, 2016
Restricted cash	$	537	$	805

Restricted cash pertains to deposits which have been guaranteed to a government agency pertaining to the estimated value added taxes (VAT) on the expected value of imported raw materials inventory in Suzhou, China. Cash is generally restricted for a contractual term of 12 months or less and is released when the finished goods are exported or the purchase orders for the expected imported raw materials are cancelled.

Accounts receivable – net:

	October 2, 2016			January 3, 2016
Trade accounts receivable	$	23,387		$	28,797
Other receivables		539			1,347
Allowance for doubtful accounts		(261	)		(259	)
Accounts receivable—net	$	23,665		$	29,885

Inventories:

	October 2, 2016		January 3, 2016
Raw materials	$	16,787	$	19,385
Work in process		3,503		1,416
Finished goods		1,912		4,400
Parts		789		676
Inventories	$	22,991	$	25,877

Inventories are recorded net of a provision for obsolescence as at October 2, 2016 and January 3, 2016 of $278 and $673 respectively. The decrease in the provision for obsolescence was due primarily to the write down of inventory for two customers that was previously provided for.

Property, plant and equipment – net:

	October 2, 2016			January 3, 2016
Cost:
Land	$	1,648		$	1,648
Buildings		9,852			9,852
Machinery and equipment (a)		31,663			30,707
Office furniture and equipment		654			599
Computer hardware and software (b)		3,612			3,447
Leasehold improvements		3,494			3,232
		50,923			49,485
Less accumulated depreciation:
Land		—			—
Buildings		(8,062	)		(7,719	)
Machinery and equipment (a)		(22,113	)		(20,347	)
Office furniture and equipment		(535	)		(496	)
Computer hardware and software (b)		(2,783	)		(2,284	)
Leasehold improvements		(2,501	)		(2,196	)
		(35,994	)		(33,042	)
Property, plant and equipment—net	$	14,929		$	16,443

(a) Included within machinery and equipment were assets under capital leases with costs of $2,193 and $2,528 and associated accumulated depreciation of $595 and $865 as of October 2, 2016 and January 3, 2016, respectively. The related depreciation expense for the three months ended October 2, 2016 and September 27, 2015 was $78 and $92, respectively. The related depreciation expense for the nine months ended October 2, 2016 and September 27, 2015 was $233 and $327, respectively. 

(b) Included within computer hardware and software are assets under capital leases with costs of $83 and $119 as at October 2, 2016 and January 3, 2016 and associated accumulated depreciation of $77 and $86 as at October 2, 2016 and January 3, 2016, respectively. The related depreciation expense for the three months ended October 2, 2016 and September 27, 2015 was $6 and $10, respectively. The related depreciation expense for the nine months ended October 2, 2016 and September 27, 2015 was $26 and $34, respectively.

Accrued liabilities:

	October 2, 2016		January 3, 2016
Customer related	$	937	$	1,852
Payroll		2,528		2,649
Professional services		273		367
Restructuring (note 10)		66		—
Vendor related		493		383
Other		483		311
Accrued liabilities	$	4,780	$	5,562

Interim consolidated statements of operations and comprehensive income (loss)

Interest expense:

	Three months ended				Nine months ended
	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015
Revolving credit facility	$	83	$	267	$	373	$	795
Long-term debt		52		—		145		—
Amortization of deferred financing fees		9		7		26		24
Obligations under capital leases		20		26		54		95
Interest expense	$	164	$	300	$	598	$	914

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Note 4 - Debt

9 Months Ended

Oct. 02, 2016

Notes to Financial Statements

Debt Disclosure [Text Block]

4. Debt

(a) Revolving credit facility

The Company borrows money under a Revolving Credit and Security Agreement with PNC Bank, National Association (“PNC”) which governs the PNC Revolving Credit Facility and the PNC Long-Term Debt Facility (collectively the “PNC Facilities”) with a term to January 2, 2018. Advances made under the PNC Revolving Credit Facility bear interest at the U.S. base rate, which should approximate prime rate, plus 0.50%. The applicable interest rate for the PNC Long-Term Debt Facility is U.S. base rate plus 1.00%.  

The maximum amount of funds available under the PNC Revolving Credit Facility is $35,000. 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 the lender. The Company is required to use a “lock-box” arrangement for the PNC Revolving Credit Facility, whereby remittances from customers are swept daily to reduce the borrowings under this facility. The PNC Long-Term Debt Facility of $5,000 matures on January 2, 2018 with quarterly principal payments of $250. Note, a $250 payment was scheduled for October 1, 2016 which was a Saturday, so the payment was processed subsequent to our quarter end on Monday, October 3, 2016.

At October 2, 2016, $8,040 (January 3, 2016 - $10,721) was outstanding under the PNC Revolving Credit Facility and is classified as a current liability based on the requirement to hold a “lock-box” under the terms of the PNC Revolving Credit Facility.

At October 2, 2016, $4,500 (January 3, 2016 – $5,000) was outstanding under the PNC Long-Term Debt Facility.

The PNC Facilities are a joint and several obligations of the Company and its subsidiaries that are borrowers under the facilities and are jointly and severally guaranteed by other subsidiaries of the Company. Repayment under the PNC Facilities is collateralized by the assets of the Company and each of its subsidiaries.

(b) Covenants

The PNC Facilities agreement contains certain financial and non-financial covenants.

The financial covenants require the Company to maintain minimum consolidated fixed charge coverage ratio and limit unfunded capital expenditures (all as defined in the credit agreement governing the PNC Facilities).  The financial covenant relating to a minimum consolidated fixed charge coverage ratio is in effect for the twelve months ended October 2, 2016 and thereafter on a rolling twelve month basis until January 2, 2018.

The Company is in compliance with the financial covenants included in the PNC Facilities as of October 2, 2016.

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Note 5 - Capital Stock

9 Months Ended

Oct. 02, 2016

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

5. Capital stock

Common shares

Issued and outstanding:

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

	Number of shares			$
Balance at January 3, 2016		16,417,276	$	391
Share issuance		25,125		—
Balance at October 2, 2016		16,510,180		391

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 for the fiscal period ended January 3, 2016. Stock options of 155,403 were granted during the nine month period ended October 2, 2016. A summary of stock option activity for the nine month period ended October 2, 2016 is as follows:

	Number of options			Weighted average exercise price		Aggregate intrinsic value		Weighted average remaining contractual term (years)
Outstanding at January 3, 2016		655,114		$	1.98		—		6.5
Options granted		155,403		$	1.34
Expired		(61,757	)	$	3.46
Forfeited		(18,603	)	$	3.14
Outstanding at October 2, 2016		730,157		$	1.76	$	19		6.9
Exercisable at October 2, 2016		365,673		$	1.92	$	—		5.1

During the three month periods ended October 2, 2016 and September 27, 2015, the Company recorded stock-based compensation expense and a corresponding increase in additional paid-in capital of $20 and $45, respectively. During the nine month periods ended October 2, 2016 and September 27, 2015, the Company recorded stock-based compensation expense and a corresponding increase in additional paid-in capital of $62 and $122, respectively.

Restricted Stock Units

 

For more detailed information regarding the Company’s Restricted Stock Units (“RSU”) arrangements, see Note 6 of the consolidated financial statements within the Company’s Form 10-K for the fiscal period ended January 3, 2016. RSU’s of 595,339 were issued during the nine months ended October 2, 2016. A summary of the RSU activity for the nine month period ended October 2, 2016 is as follows: 

	Outstanding RSU			Weighted average stock price		Weighted average remaining contractual term (years)
Outstanding balance at January 3, 2016		479,564		$	1.88		0.7
RSU granted		595,339		$	0.68
RSU forfeited		(20,066	)	$	1.14
RSU vested and issued in common shares		(25,125	)	$	1.99
Outstanding balance at April 3, 2016		1,029,714		$	1.15		1.1

Certain RSUs granted during 2014 and 2016 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 October 2, 2016 and September 27, 2015 related to the restricted stock units was $99 and $81. Stock based compensation recognized during the nine month period ended October 2, 2016 and September 27, 2015 related to the restricted stock units was $281 and $222.

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Note 6 - Income Taxes

9 Months Ended

Oct. 02, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

6. Income taxes

During the three months period ended October 2, 2016 and September 27, 2015, the Company recorded current income tax expenses of $97 and $152, respectively on minimum taxes and taxes on profits in certain foreign jurisdictions. For the three months period ended October 2, 2016 and September 27, 2015, deferred tax recovery of $81 and $27, respectively was recorded on temporary differences related to the Mexican operations. During the nine months period ended October 2, 2016 and September 27, 2015, the Company recorded current income tax expenses of $200 and $481, respectively on minimum taxes and taxes on profits in certain foreign jurisdictions. For the nine months period ended October 2, 2016 and September 27, 2015 deferred tax recoveries of $96 and $86 was recorded on 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 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.

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Note 7 - Earnings (Loss) Per Common Share

9 Months Ended

Oct. 02, 2016

Notes to Financial Statements

Earnings Per Share [Text Block]

7. Earnings (loss) per common share

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

	Three months ended				Nine months ended
	October 2, 2016		Septembe r 27, 2015		October 2, 2016		September 27, 2015
Basic weighted average shares outstanding		16,510,180		16,417,276		16,502,081		16,417,276
Dilutive stock awards (a) (b) (c)		—		—		1,048,074		—
Diluted weighted average shares outstanding		16,510,180		16,417,276		17,550,155		16,417,276

(a)

Dilutive stock awards include outstanding RSU’s and in-the money stock options determined using the treasury stock method

(b)

Dilutive options were determined using the treasury stock method, using an average price of $1.52 per share for three months ended October 2, 2016. As a result of the net loss for the three months ended October 2, 2016, diluted earnings per share was calculated using the basic weighted average shares outstanding as the effect of potential common shares would have been anti-dilutive. Had there been net income for the three months ended October 2, 2016, dilutive stock awards would have been calculated as 1,046,730. For the nine months ended October 2, 2016, dilutive options were determined using the treasury stock method, using an average price of $1.47 per share. Total dilutive stock awards were calculated as 1,048,074.

(c) For the three months and nine months ended September 27, 2015, as a result of the net loss, diluted earnings per share was calculated using the basic weighted average shares outstanding as the effect of potential common shares would have been anti-dilutive. Had there been net income for the three and nine months ended September 27, 2015, there still would be no dilutive stock awards as no outstanding stock options were considered in the money.

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Note 8 - Segmented Information

9 Months Ended

Oct. 02, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

8. 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 revenues minus operating expenses, excluding unrealized foreign exchange gain (loss) on unsettled forward exchange contracts, 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
	October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015
Revenues
Mexico	$	24,857		$	34,753		$	77,321		$	109,515
China		15,134			12,055			41,891			33,547
U.S.		5,009			9,218			15,689			24,804
Total	$	45,000		$	56,026		$	134,901		$	167,866
Intersegment revenue
Mexico	$	(141	)	$	(126	)	$	(396	)	$	(336	)
China		(2,108	)		(2,361	)		(5,952	)		(7,451	)
U.S.		(68	)		(114	)		(335	)		(199	)
Total	$	(2,317	)	$	(2,601	)	$	(6,683	)	$	(7,986	)
Net external revenue
Mexico	$	24,716		$	34,627		$	76,925		$	109,179
China		13,026			9,694			35,939			26,096
U.S.		4,941			9,104			15,354			24,605
Total segment revenue (which also equals consolidated revenue)	$	42,683		$	53,425		$	128,218		$	159,880
Site Contribution
Mexico	$	1,642		$	2,007		$	6,513		$	7,682
China		1,643			804			2,808			1,773
U.S.		(331	)		243			(771	)		728
Total	$	2,954		$	3,054		$	8,550		$	10,183
Corporate allocations		2,789			3,167			8,323			9,338
Unrealized foreign exchange (gain) loss on unsettled forward exchange contracts		4			805			(995	)		334
Interest		164			300			598			914
Restructuring charges		—			—			176			—
Earnings (loss) before income taxes	$	(3	)	$	(1,218	)	$	448		$	(403	)

Additions to property, plant and equipment

The following table contains additions to property, plant and equipment including those acquired through capital leases for the three and nine months ended October 2, 2016 and September 27, 2015:

	Three months ended				Nine months ended
	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015
Mexico	$	256	$	107	$	590	$	503
China		95		150		575		777
U.S.		12		221		303		606
Segment total		363		478		1,468		1,886
Corporate and other		14		30		185		69
Total	$	377	$	508	$	1,653	$	1,955

Property, plant and equipment

(a)

	October 2, 2016		January 3, 2016
Mexico	$	9,220	$	10,674
China		3,157		2,217
U.S.		2,311		3,255
Segment total		14,688		16,146
Corporate and other		241		297
Total	$	14,929	$	16,443

(a) Property, plant and equipment information is based on the principal location of the asset.

Geographic revenues

The following table contains geographic revenues based on the product shipment destination, for the three and nine months ended October 2, 2016 and September 27, 2015:

	Three months ended				Nine months ended
	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015
U.S.	$	29,470	$	41,821	$	83,848	$	128,214
Canada		9,132		7,186		32,832		18,973
Europe		592		1,163		1,497		3,524
China		1,751		584		4,403		2,134
Africa		1,738		2,672		5,638		7,066
Total	$	42,683	$	53,425	$	128,218	$	159,880

Significant customers and concentration of credit risk:

Sales of the Company’s products are concentrated in certain cases among specific customers in the same industry. The Company is subject to concentrations of credit risk in trade receivables. The Company considers concentrations of credit risk in establishing the allowance for doubtful accounts and believes the recorded allowances are adequate.

The Company expects to continue to depend upon a relatively small number of customers for a significant percentage of its revenue. In addition to having a limited number of customers, the Company manufactures a limited number of products for each customer. If the Company loses any of its larger customers or any product line manufactured for one of its larger customers, it could experience a significant reduction in revenue. Also, the insolvency of one or more of its larger customers or the inability of one or more of its larger customers to pay for its orders could decrease revenue. As many costs and operating expenses are relatively fixed, a reduction in net revenue can decrease profit margins and adversely affect the business, financial condition and results of operations.

During the three months ended October 2, 2016, two customers exceeded 10% of total revenues representing 15.6% and 10.2% respectively (September 27, 2015 – two customers represented 16.0% and 11.7%) of total revenue for the third quarter of 2016. During the nine months ended October 2, 2016 two customers individually comprised 15.8% and 15.4% (September 27, 2015 – two customers individually comprised 14.5% and 11.6%) of total revenue for the nine months ended October 2, 2016.

As of October 2, 2016, two customers exceeded 10% of the Company’s accounts receivable representing 12.1% and 10.6% respectively, (January 3, 2016, one customer represented 16.8% of the Company’s accounts receivable).

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Note 9 - Derivative Financial Instruments

9 Months Ended

Oct. 02, 2016

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

9. Derivative financial instruments

The Company enters into forward foreign exchange contracts to reduce its exposure to foreign exchange currency rate fluctuations related to forecasted Canadian dollar and Mexican Peso denominated payroll, rent and utility cash flows for the three remaining months of fiscal 2016 and a portion of the first nine months of fiscal 2017. These contracts are effective economic hedges but do not qualify for hedge accounting under ASC 815 “Derivatives and Hedging”. Accordingly, changes in the fair value of these derivative contracts are recognized into cost of sales in the consolidated statement of operations and comprehensive income (loss). The Company does not enter into forward foreign exchange contracts for trading or speculative purposes.

The following table presents a summary of the outstanding foreign currency forward contracts as at October 2, 2016:

Currency	Buy/Sell	Foreign Currency Amount	Notional Contract Value in USD
Canadian Dollar	Buy	CAD 6,000	$	4,496
Mexican Peso	Buy	MXN 197,070	$	11,160

The unrealized loss recognized in earnings for the three month period as a result of revaluing the outstanding instruments to fair value on October 2, 2016 was $4 (September 27, 2015 – unrealized loss $805), and the unrealized gain for the nine month period ended October 2, 2016 was $995 (September 27, 2015 – unrealized loss $334), which was included in cost of sales in the consolidated statement of operations and comprehensive income (loss). The realized loss on the settled contracts for the three months period ended October 2, 2016 was $619 (September 27, 2015 – realized loss $1,237), and the realized loss for the nine month period ended October 2, 2016 was $2,197 (September 27, 2015 – realized loss $3,119), which is included in cost of sales in the consolidated statement of operations and comprehensive income (loss). Fair value was determined using the market approach with valuation based on market observables (Level 2 quantitative inputs in the hierarchy set forth under ASC 820 “Fair Value Measurements”).

	October 2, 2016		January 3, 2016
Average USD:CAD contract rate		1.33		1.26
Average USD:CAD mark-to-market rate		1.31		1.38
Average USD:PESO contract rate		17.66		15.88
Average USD:PESO mark-to-market rate		19.74		17.47

The derivative asset as at October 2, 2016 was $83 ($Nil as at January 3, 2016) and derivative liability as at October 2, 2016 was $1,175 ($2,087 as at January 3, 2016) which reflected the fair market value of the unsettled forward foreign exchange contracts.

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Note 10 - Restructuring Charges

9 Months Ended

Oct. 02, 2016

Notes to Financial Statements

Restructuring and Related Activities Disclosure [Text Block]

10. Restructuring charges

During the first quarter of 2016, one employee was terminated in the Markham facility which resulted in severance charges of $176 based on the termination payments which will be paid monthly until the first quarter of 2017. No restructuring charges were incurred for the three months ended October 2, 2016.

	Severance
Balance as at January 3, 2016	$	—
Charges		176
Payments		(110	)
Balance as at October 2, 2016	$	66

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Note 11 - Commitments

9 Months Ended

Oct. 02, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

11. Commitments

Purchase obligations not recorded on the balance sheet as at October 2, 2016 consist of open non-cancellable purchase orders for raw materials for $15,753 (September 27, 2015 - $18,538), which are expected to be received within 12 months of the purchase order issue date.

The Company executed two new facility lease agreements located in Fremont, California during the quarter. One location represents a lease term of three years commencing on October 1, 2016 for approximately 46,940 rentable square feet with a base rent of $46 per month with an escalation factor each year thereafter. The second location represents a lease term of five years commencing on August 1, 2016 for approximately 20,828 rentable square feet with a base rent of $23 per month with an escalation factor each year thereafter. The Company plans to transfer current operations in the San Jose, California leased location to these two new facilities by the end of the fourth quarter of 2016. The current San Jose facility lease expires on December 31, 2016.

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Significant Accounting Policies (Policies)

9 Months Ended

Oct. 02, 2016

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

In June 2014, the FASB published ASU 2014-12: Compensation – Stock Compensation (Topic 718). The standard is amended to require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The standard is effective for all entities for years, and interim periods within those years, beginning after December 15, 2015. The adoption of ASU 2014-12 had no impact on our consolidated financial statements.

In April 2015, the FASB published ASU 2015-03: Presentation of Debt Issuance Costs (Topic 835-30). The standard provides guidance about simplifying the presentation of debt issuance costs. Under this ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. Effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015. The adoption of ASU 2015-03 had no impact on our consolidated financial statements as our current debt issuance costs relate to a revolving credit facility.

In April 2015, the FASB published ASU 2015-04: Retirement Benefits (Topic 715). The amendments intend to reduce complexity by providing a practical expedient that permits the entity to measure defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply that practical expedient consistently from year to year. The amendments in this Update are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The adoption of ASU 2015-04 had no impact on our consolidated financial statements.

Recent Accounting Pronouncements

In May 2014, the FASB published ASU 2014-09: Revenue from Contracts with Customers (Topic 606), which supersedes (i) revenue recognition requirements in Topic 605 and most related industry-specific guidance, and (ii) cost guidance included in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and amends existing requirements for recognition of a gain/loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) to be consistent with the new requirements. In August 2015, the FASB published ASU 2015-14 Topic 606 which effectively postponed the effective adoption requirement by one year such that the standard is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2016. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

In August 2014, the FASB published ASU 2014-15 Topics 205-40: Presentation of Financial Statements – Going Concern. The standard provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. Effective for years ending after December 15, 2016 and for years and interim periods thereafter. The impact of adoption of the standard has not yet been determined.

In July 2015, the FASB published ASU 2015-11: Simplifying the Measurement of Inventory (Topic 330). The amendments in this Update more closely align the measurement of inventory in U.S. GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). FASB has amended some of the other guidance in Topic 330 to more clearly articulate the requirements for the measurement and disclosure of inventory. However, the FASB does not intend for those clarifications to result in any changes in practice. Other than the change in the subsequent measurement guidance from the lower of cost or market to the lower of cost and net realizable value for inventory within the scope of this Update, there are no other substantive changes to the guidance on measurement of inventory. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. All other amendments will be effective upon the issuance of this Update. The impact of adoption of the standard has not yet been determined.

In November 2015, the FASB published ASU 2015-17: Income Taxes (Topic 740). The amendment requires that deferred tax assets and liabilities be classified as non-current in a classified statement of financial position. The amendments in this Update are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The impact of adoption of the standard has not yet been determined.

In January 2016, the FASB published ASU 2016-01: Financial Instruments - Overall (Topic 825-10). The amendment addresses certain aspects of recognition, measurement, presentation and disclosure of financial assets and liabilities. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The impact of adoption of the standard has not yet been determined.

In February 2016, the FASB published ASU 2016-02: Leases (Topic 842). The amendment proposes that all lessees should recognize the assets and liabilities that arise from leases. Elections may be available for those leases with terms of 12 months or less. The amendment still retains the distinction between finance leases and operating leases. 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 adoption of the standard has not yet been determined.

In March 2016, the FASB published ASU 2016-09: Compensation – Stock Compensation (Topic 718). The amendment simplifies several aspects of accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and accounting for forfeitures. Some of the areas for simplification apply only to nonpublic entities. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The impact of adoption of the standard has not yet been determined.

In March 2016, the FASB published ASU 2016-08: Revenue from Contracts with Customers (Topic 606). The amendment clarifies the implementation guidance on principal versus agent considerations. The amendments of this update do not change the core principles of the guidance. The amendment of this ASU is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2016. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

In April 2016, the FASB published ASU 2016-10: Revenue from Contracts with Customers (Topic 606), which clarified application of the standard in identifying performance obligations and licensing arrangements. The amendments in this Update affect the guidance in Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The amendment is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2016. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

In May 2016, the FASB published ASU 2016-12: Revenue from Contracts with Customers (Topic 606), which included narrow-scope improvements and practical expedients. Specifically the update addresses application of collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The amendments in this Update affect the guidance in Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The amendment is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2016. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

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 this Update 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. Early adoption is permitted only for those annual reporting periods beginning on or after December 15, 2018. The Company continues to evaluate the impact of this accounting standard. The impact of adoption of the standard has not yet been determined.

In August 2016, the FASB published ASU 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This Accounting Standards Update addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendment is effective for years beginning after December 15, 2017 including interim periods with those years. Early adoption is permitted. The impact of adoption of the standard has not yet been determined.

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Note 3 - Interim Consolidated Financial Statement Details (Tables)

9 Months Ended

Oct. 02, 2016

Notes Tables

Condensed Financial Statements [Table Text Block]

	October 2, 2016		January 3, 2016
Restricted cash	$	537	$	805

	October 2, 2016			January 3, 2016
Trade accounts receivable	$	23,387		$	28,797
Other receivables		539			1,347
Allowance for doubtful accounts		(261	)		(259	)
Accounts receivable—net	$	23,665		$	29,885

	October 2, 2016		January 3, 2016
Raw materials	$	16,787	$	19,385
Work in process		3,503		1,416
Finished goods		1,912		4,400
Parts		789		676
Inventories	$	22,991	$	25,877

	October 2, 2016			January 3, 2016
Cost:
Land	$	1,648		$	1,648
Buildings		9,852			9,852
Machinery and equipment (a)		31,663			30,707
Office furniture and equipment		654			599
Computer hardware and software (b)		3,612			3,447
Leasehold improvements		3,494			3,232
		50,923			49,485
Less accumulated depreciation:
Land		—			—
Buildings		(8,062	)		(7,719	)
Machinery and equipment (a)		(22,113	)		(20,347	)
Office furniture and equipment		(535	)		(496	)
Computer hardware and software (b)		(2,783	)		(2,284	)
Leasehold improvements		(2,501	)		(2,196	)
		(35,994	)		(33,042	)
Property, plant and equipment—net	$	14,929		$	16,443

	October 2, 2016		January 3, 2016
Customer related	$	937	$	1,852
Payroll		2,528		2,649
Professional services		273		367
Restructuring (note 10)		66		—
Vendor related		493		383
Other		483		311
Accrued liabilities	$	4,780	$	5,562

Condensed Income Statement [Table Text Block]

	Three months ended				Nine months ended
	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015
Revolving credit facility	$	83	$	267	$	373	$	795
Long-term debt		52		—		145		—
Amortization of deferred financing fees		9		7		26		24
Obligations under capital leases		20		26		54		95
Interest expense	$	164	$	300	$	598	$	914

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Note 5 - Capital Stock (Tables)

9 Months Ended

Oct. 02, 2016

Notes Tables

Schedule of Common Stock Outstanding Roll Forward [Table Text Block]

	Number of shares			$
Balance at January 3, 2016		16,417,276	$	391
Share issuance		25,125		—
Balance at October 2, 2016		16,510,180		391

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number of options			Weighted average exercise price		Aggregate intrinsic value		Weighted average remaining contractual term (years)
Outstanding at January 3, 2016		655,114		$	1.98		—		6.5
Options granted		155,403		$	1.34
Expired		(61,757	)	$	3.46
Forfeited		(18,603	)	$	3.14
Outstanding at October 2, 2016		730,157		$	1.76	$	19		6.9
Exercisable at October 2, 2016		365,673		$	1.92	$	—		5.1

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

	Outstanding RSU			Weighted average stock price		Weighted average remaining contractual term (years)
Outstanding balance at January 3, 2016		479,564		$	1.88		0.7
RSU granted		595,339		$	0.68
RSU forfeited		(20,066	)	$	1.14
RSU vested and issued in common shares		(25,125	)	$	1.99
Outstanding balance at April 3, 2016		1,029,714		$	1.15		1.1

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Note 7 - Earnings (Loss) Per Common Share (Tables)

9 Months Ended

Oct. 02, 2016

Notes Tables

Schedule of Weighted Average Number of Shares [Table Text Block]

	Three months ended				Nine months ended
	October 2, 2016		Septembe r 27, 2015		October 2, 2016		September 27, 2015
Basic weighted average shares outstanding		16,510,180		16,417,276		16,502,081		16,417,276
Dilutive stock awards (a) (b) (c)		—		—		1,048,074		—
Diluted weighted average shares outstanding		16,510,180		16,417,276		17,550,155		16,417,276

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Note 8 - Segmented Information (Tables)

9 Months Ended

Oct. 02, 2016

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three months ended						Nine months ended
	October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015
Revenues
Mexico	$	24,857		$	34,753		$	77,321		$	109,515
China		15,134			12,055			41,891			33,547
U.S.		5,009			9,218			15,689			24,804
Total	$	45,000		$	56,026		$	134,901		$	167,866
Intersegment revenue
Mexico	$	(141	)	$	(126	)	$	(396	)	$	(336	)
China		(2,108	)		(2,361	)		(5,952	)		(7,451	)
U.S.		(68	)		(114	)		(335	)		(199	)
Total	$	(2,317	)	$	(2,601	)	$	(6,683	)	$	(7,986	)
Net external revenue
Mexico	$	24,716		$	34,627		$	76,925		$	109,179
China		13,026			9,694			35,939			26,096
U.S.		4,941			9,104			15,354			24,605
Total segment revenue (which also equals consolidated revenue)	$	42,683		$	53,425		$	128,218		$	159,880
Site Contribution
Mexico	$	1,642		$	2,007		$	6,513		$	7,682
China		1,643			804			2,808			1,773
U.S.		(331	)		243			(771	)		728
Total	$	2,954		$	3,054		$	8,550		$	10,183
Corporate allocations		2,789			3,167			8,323			9,338
Unrealized foreign exchange (gain) loss on unsettled forward exchange contracts		4			805			(995	)		334
Interest		164			300			598			914
Restructuring charges		—			—			176			—
Earnings (loss) before income taxes	$	(3	)	$	(1,218	)	$	448		$	(403	)

	Three months ended				Nine months ended
	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015
Mexico	$	256	$	107	$	590	$	503
China		95		150		575		777
U.S.		12		221		303		606
Segment total		363		478		1,468		1,886
Corporate and other		14		30		185		69
Total	$	377	$	508	$	1,653	$	1,955

	Three months ended				Nine months ended
	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015
U.S.	$	29,470	$	41,821	$	83,848	$	128,214
Canada		9,132		7,186		32,832		18,973
Europe		592		1,163		1,497		3,524
China		1,751		584		4,403		2,134
Africa		1,738		2,672		5,638		7,066
Total	$	42,683	$	53,425	$	128,218	$	159,880

Schedule of Disclosure on Geographic Areas, Long-Lived Assets in Individual Foreign Countries by Country [Table Text Block]

	October 2, 2016		January 3, 2016
Mexico	$	9,220	$	10,674
China		3,157		2,217
U.S.		2,311		3,255
Segment total		14,688		16,146
Corporate and other		241		297
Total	$	14,929	$	16,443

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Note 9 - Derivative Financial Instruments (Tables)

9 Months Ended

Oct. 02, 2016

Notes Tables

Schedule of Derivative Instruments [Table Text Block]

Currency	Buy/Sell	Foreign Currency Amount	Notional Contract Value in USD
Canadian Dollar	Buy	CAD 6,000	$	4,496
Mexican Peso	Buy	MXN 197,070	$	11,160

Schedule of Derivative Rates at Fair Value [Table Text Block]

	October 2, 2016		January 3, 2016
Average USD:CAD contract rate		1.33		1.26
Average USD:CAD mark-to-market rate		1.31		1.38
Average USD:PESO contract rate		17.66		15.88
Average USD:PESO mark-to-market rate		19.74		17.47

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Note 10 - Restructuring Charges (Tables)

9 Months Ended

Oct. 02, 2016

Notes Tables

Schedule of Restructuring Reserve by Type of Cost [Table Text Block]

	Severance
Balance as at January 3, 2016	$	—
Charges		176
Payments		(110	)
Balance as at October 2, 2016	$	66

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Note 1 - Nature of the Business (Details Textual)	Oct. 02, 2016
Entity Number of Employees	1,330

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Note 3 - Interim Consolidated Financial Statement Details (Details Textual) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Oct. 02, 2016 USD ($)	Sep. 27, 2015 USD ($)	Oct. 02, 2016 USD ($)	Sep. 27, 2015 USD ($)	Jan. 03, 2016 USD ($)
Machinery and Equipment [Member] | Assets Under Capital Lease [Member]
Depreciation	$ 78	$ 92	$ 233	$ 327
Machinery and Equipment [Member]
Capital Leased Assets, Gross	2,193		2,193		$ 2,528
Capital Leases, Lessee Balance Sheet, Assets by Major Class, Accumulated Depreciation	595		595		865
Computer Equipment [Member] | Assets Under Capital Lease [Member]
Depreciation	6	$ 10	26	34
Computer Equipment [Member]
Capital Leased Assets, Gross	83		83		119
Capital Leases, Lessee Balance Sheet, Assets by Major Class, Accumulated Depreciation	$ 77		$ 77		86
Restricted Cash, Contractual Term			1 year
Inventory Write-down			$ 278		$ 673
Number of Major Customers			2
Depreciation			$ 3,066	$ 2,976

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Note 3 - Interim Consolidated Financial Statement Details - Consolidated Balance Sheets (Details) - USD ($) $ in Thousands		Oct. 02, 2016	Jan. 03, 2016
Customer Related [Member]
Cost:
Other accrued liabilities		$ 937	$ 1,852
Vendor Related [Member]
Cost:
Other accrued liabilities		493	383
Other Accrued Liabilities [Member]
Cost:
Other accrued liabilities		483	311
Land [Member]
Cost:
Property, plant and equipment		1,648	1,648
Accumulated depreciation, property, plant and equipment
Building [Member]
Cost:
Property, plant and equipment		9,852	9,852
Accumulated depreciation, property, plant and equipment		(8,062)	(7,719)
Machinery and Equipment [Member]
Cost:
Property, plant and equipment	[1]	31,663	30,707
Accumulated depreciation, property, plant and equipment	[1]	(22,113)	(20,347)
Furniture and Fixtures [Member]
Cost:
Property, plant and equipment		654	599
Accumulated depreciation, property, plant and equipment		(535)	(496)
Computer Equipment [Member]
Cost:
Property, plant and equipment	[2]	3,612	3,447
Accumulated depreciation, property, plant and equipment	[2]	(2,783)	(2,284)
Leasehold Improvements [Member]
Cost:
Property, plant and equipment		3,494	3,232
Accumulated depreciation, property, plant and equipment		(2,501)	(2,196)
Restructuring [Member]
Cost:
Other accrued liabilities		66
Restricted cash		537	805
Trade accounts receivable		23,387	28,797
Other receivables		539	1,347
Allowance for doubtful accounts		(261)	(259)
Accounts receivable—net		23,665	29,885
Raw materials		16,787	19,385
Work in process		3,503	1,416
Finished goods		1,912	4,400
Parts		789	676
Inventories		22,991	25,877
Property, plant and equipment		50,923	49,485
Accumulated depreciation, property, plant and equipment		(35,994)	(33,042)
Property, plant and equipment—net		14,929	16,443
Payroll		2,528	2,649
Professional services		273	367
Accrued liabilities		$ 4,780	$ 5,562

[1] Included within machinery and equipment were assets under capital leases with costs of $2,193 and $2,528 and associated accumulated depreciation of $595 and $865 as of October 2, 2016 and January 3, 2016, respectively. The related depreciation expense for the three months ended October 2, 2016 and September 27, 2015 was $78 and $92, respectively. The related depreciation expense for the nine months ended October 2, 2016 and September 27, 2015 was $233 and $327, respectively.

[2] Included within computer hardware and software are assets under capital leases with costs of $83 and $119 as at October 2, 2016 and January 3, 2016 and associated accumulated depreciation of $77 and $86 as at October 2, 2016 and January 3, 2016, respectively. The related depreciation expense for the three months ended October 2, 2016 and September 27, 2015 was $6 and $10, respectively. The related depreciation expense for the nine months ended October 2, 2016 and September 27, 2015 was $26 and $34, respectively.

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Note 3 - Interim Consolidated Financial Statement Details - Consolidated Statements of Operations and Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2016	Sep. 27, 2015	Oct. 02, 2016	Sep. 27, 2015
Revolving credit facility	$ 83	$ 267	$ 373	$ 795
Long-term debt	52		145
Amortization of deferred financing fees	9	7	26	24
Obligations under capital leases	20	26	54	95
Interest expense	$ 164	$ 300	$ 598	$ 914

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Note 4 - Debt (Details Textual) - USD ($) $ in Thousands		9 Months Ended
	Oct. 03, 2016	Oct. 02, 2016	Sep. 27, 2015	Jan. 03, 2016
Base Rate [Member] | PNC Bank [Member] | Revolving Credit Facility [Member]
Debt Instrument, Basis Spread on Variable Rate		0.50%
Base Rate [Member] | PNC Bank [Member]
Debt Instrument, Basis Spread on Variable Rate		1.00%
PNC Bank [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 35,000
Long-term Line of Credit		8,040		$ 10,721
PNC Bank [Member] | Subsequent Event [Member]
Repayments of Long-term Debt	$ 250
PNC Bank [Member]
Debt Instrument, Face Amount		5,000
Line of Credit Facility, Periodic Payment		250
Long-term Line of Credit		4,500		$ 5,000
Repayments of Long-term Debt		$ 500

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Note 5 - Capital Stock (Details Textual) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Oct. 02, 2016	Apr. 03, 2016	Sep. 27, 2015	Oct. 02, 2016	Sep. 27, 2015
Employee Stock Option [Member]
Allocated Share-based Compensation Expense	$ 20		$ 45	$ 62	$ 122
Restricted Stock Units (RSUs) [Member]
Allocated Share-based Compensation Expense	$ 99		$ 81	$ 281	$ 222
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period				595,339
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		155,403		155,403

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Note 5 - Capital Stock - Common Shares Issued and Outstanding (Details) $ in Thousands	9 Months Ended
	Oct. 02, 2016 USD ($) shares
Exchangeable Shares [Member]
Balance (in shares) | shares	16,417,276
Balance | $	$ 391
Shares issued during period (in shares) | shares	25,125
Shares issued during period, value | $
Balance at October 2, 2016 (in shares) | shares	16,510,180
Balance at October 2, 2016 | $	$ 391

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Note 5 - Capital Stock - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	9 Months Ended	12 Months Ended
	Apr. 03, 2016	Oct. 02, 2016	Jan. 03, 2016
Balance, options outstanding (in shares)	655,114	655,114
Balance, outstanding weighted average exercise price (in dollars per share)	$ 1.98	$ 1.98
Balance, outstanding weighted average remaining contractual term		6 years 328 days	6 years 182 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	155,403	155,403
Options granted (in dollars per share)		$ 1.34
Expired (in shares)		(61,757)
Expired (in dollars per share)		$ 3.46
Forfeited (in shares)		(18,603)
Forfeited (in dollars per share)		$ 3.14
Balance, options outstanding (in shares)		730,157	655,114
Balance, outstanding weighted average exercise price (in dollars per share)		$ 1.76	$ 1.98
Balance, aggregate intrinsic value		$ 19
Exercisable at October 2, 2016 (in shares)		365,673
Exercisable at October 2, 2016 (in dollars per share)		$ 1.92
Balance, exercisable weighted average remaining contractual term		5 years 36 days

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Note 5 - Capital Stock - Restricted Stock Units Activity (Details) - Restricted Stock Units (RSUs) [Member] - $ / shares	9 Months Ended	12 Months Ended
	Oct. 02, 2016	Jan. 03, 2016
Balance, outstanding options (in shares)	479,564
Balance, outstanding weighted average stock price (in dollars per share)	$ 1.88
Balance, outstanding weighted average remaining contractual term	1 year 36 days	255 days
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	595,339
RSU granted (in dollars per share)	$ 0.68
RSU forfeited (in shares)	(20,066)
RSU forfeited (in dollars per share)	$ 1.14
RSU vested and issued in common shares (in shares)	(25,125)
RSU vested and issued in common shares (in dollars per share)	$ 1.99
Balance, outstanding options (in shares)	1,029,714	479,564
Balance, outstanding weighted average stock price (in dollars per share)	$ 1.15	$ 1.88

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Note 6 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2016	Sep. 27, 2015	Oct. 02, 2016	Sep. 27, 2015
Foreign Tax Authority [Member] | Mexican Tax Authority [Member]
Deferred Income Tax Expense (Benefit)	$ (81)	$ (27)	$ (96)	$ (86)
Foreign Tax Authority [Member]
Current Income Tax Expense (Benefit)	97	152	200	481
Current Income Tax Expense (Benefit)	97	152	200	481
Deferred Income Tax Expense (Benefit)	$ (81)	$ (27)	$ (96)	$ (86)

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Note 7 - Earnings (Loss) Per Common Share (Details Textual) - $ / shares		3 Months Ended		9 Months Ended
		Oct. 02, 2016	Sep. 27, 2015	Oct. 02, 2016	Sep. 27, 2015
Treasury Stock Method Dilutive Options Average Share Price Used		$ 1.52		$ 1.47
Weighted Average Number Diluted Shares Outstanding Adjustment If there had Been Net Income		1,046,730
Weighted Average Number Diluted Shares Outstanding Adjustment	[1],[2],[3]			1,048,074
Incremental Common Shares Attributable to Dilutive Effect of Call Options and Warrants			0		0
Options Outstanding Considered in the Money			0		0

[1] Dilutive options were determined using the treasury stock method, using an average price of $1.52 per share for three months ended October 2, 2016. As a result of the net loss for the three months ended October 2, 2016, diluted earnings per share was calculated using the basic weighted average shares outstanding as the effect of potential common shares would have been anti-dilutive. Had there been net income for the three months ended October 2, 2016, dilutive stock awards would have been calculated as 1,046,730. For the nine months ended October 2, 2016, dilutive options were determined using the treasury stock method, using an average price of $1.47 per share. Total dilutive stock awards were calculated as 1,048,074.

[2] Dilutive stock awards include outstanding RSU’s and in-the money stock options determined using the treasury stock method

[3] For the three months and nine months ended September 27, 2015, as a result of the net loss, diluted earnings per share was calculated using the basic weighted average shares outstanding as the effect of potential common shares would have been anti-dilutive. Had there been net income for the three and nine months ended September 27, 2015, there still would be no dilutive stock awards as no outstanding stock options were considered in the money.

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Note 7 - Earnings (Loss) Per Common Share - Common Shares Outstanding for Basic and Diluted Earnings Per Share (Details) - shares		3 Months Ended		9 Months Ended
		Oct. 02, 2016	Sep. 27, 2015	Oct. 02, 2016	Sep. 27, 2015
Basic weighted average shares outstanding (in shares)		16,510,180	16,417,276	16,502,081	16,417,276
Weighted Average Number Diluted Shares Outstanding Adjustment	[1],[2],[3]			1,048,074
Diluted weighted average shares outstanding (in shares)		16,510,180	16,417,276	17,550,155	16,417,276

[1] Dilutive options were determined using the treasury stock method, using an average price of $1.52 per share for three months ended October 2, 2016. As a result of the net loss for the three months ended October 2, 2016, diluted earnings per share was calculated using the basic weighted average shares outstanding as the effect of potential common shares would have been anti-dilutive. Had there been net income for the three months ended October 2, 2016, dilutive stock awards would have been calculated as 1,046,730. For the nine months ended October 2, 2016, dilutive options were determined using the treasury stock method, using an average price of $1.47 per share. Total dilutive stock awards were calculated as 1,048,074.

[2] Dilutive stock awards include outstanding RSU’s and in-the money stock options determined using the treasury stock method

[3] For the three months and nine months ended September 27, 2015, as a result of the net loss, diluted earnings per share was calculated using the basic weighted average shares outstanding as the effect of potential common shares would have been anti-dilutive. Had there been net income for the three and nine months ended September 27, 2015, there still would be no dilutive stock awards as no outstanding stock options were considered in the money.

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Note 8 - Segmented Information (Details Textual)	3 Months Ended		9 Months Ended		12 Months Ended
	Oct. 02, 2016	Sep. 27, 2015	Oct. 02, 2016	Sep. 27, 2015	Jan. 03, 2016
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | Major Customer1 [Member]
Concentration Risk, Percentage	15.60%	16.00%	15.80%	14.50%
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | Major Customer2 [Member]
Concentration Risk, Percentage	10.20%	11.70%	15.40%	11.60%
Customer Concentration Risk [Member] | Sales Revenue, Net [Member]
Number of Major Customers	2	2	2	2
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Major Customer1 [Member]
Concentration Risk, Percentage			12.10%
Customer Concentration Risk [Member] | Accounts Receivable [Member] | Major Customer2 [Member]
Concentration Risk, Percentage			10.60%
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Number of Major Customers			2		1
Concentration Risk, Percentage					16.80%
Number of Major Customers			2

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Note 8 - Segmented Information - Segment Reporting Information, by Segment (Details) - USD ($)	3 Months Ended		9 Months Ended
	Oct. 02, 2016	Sep. 27, 2015	Oct. 02, 2016	Sep. 27, 2015
Reportable Geographical Components [Member] | Mexico Segment [Member]
Revenues	$ 24,857,000	$ 34,753,000	$ 77,321,000	$ 109,515,000
Site Contribution	1,642,000	2,007,000	6,513,000	7,682,000
Additions and Disposals to PP&E	256,000	107,000	590,000	503,000
Reportable Geographical Components [Member] | China Segment [Member]
Revenues	15,134,000	12,055,000	41,891,000	33,547,000
Site Contribution	1,643,000	804,000	2,808,000	1,773,000
Additions and Disposals to PP&E	95,000	150,000	575,000	777,000
Reportable Geographical Components [Member] | U.S. Segment [Member]
Revenues	5,009,000	9,218,000	15,689,000	24,804,000
Site Contribution	(331,000)	243,000	(771,000)	728,000
Additions and Disposals to PP&E	12,000	221,000	303,000	606,000
Reportable Geographical Components [Member]
Revenues	45,000,000	56,026,000	134,901,000	167,866,000
Site Contribution	2,954,000	3,054,000	8,550,000	10,183,000
Additions and Disposals to PP&E	363,000	478,000	1,468,000	1,886,000
Corporate, Non-Segment [Member]
Additions and Disposals to PP&E	14,000	30,000	185,000	69,000
Geography Eliminations [Member] | Mexico Segment [Member]
Revenues	(141,000)	(126,000)	(396,000)	(336,000)
Geography Eliminations [Member] | China Segment [Member]
Revenues	(2,108,000)	(2,361,000)	(5,952,000)	(7,451,000)
Geography Eliminations [Member] | U.S. Segment [Member]
Revenues	(68,000)	(114,000)	(335,000)	(199,000)
Geography Eliminations [Member]
Revenues	(2,317,000)	(2,601,000)	(6,683,000)	(7,986,000)
Mexico Segment [Member]
Revenues	24,716,000	34,627,000	76,925,000	109,179,000
China Segment [Member]
Revenues	13,026,000	9,694,000	35,939,000	26,096,000
U.S. Segment [Member]
Revenues	4,941,000	9,104,000	15,354,000	24,605,000
UNITED STATES
Revenues	29,470,000	41,821,000	83,848,000	128,214,000
CANADA
Revenues	9,132,000	7,186,000	32,832,000	18,973,000
Europe [Member]
Revenues	592,000	1,163,000	1,497,000	3,524,000
CHINA
Revenues	1,751,000	584,000	4,403,000	2,134,000
Africa [Member]
Revenues	1,738,000	2,672,000	5,638,000	7,066,000
Revenues	42,683,000	53,425,000	128,218,000	159,880,000
Site Contribution	3,634,000	3,116,000	11,603,000	12,174,000
Corporate allocations	2,789,000	3,167,000	8,323,000	9,338,000
Unrealized foreign exchange (gain) loss on unsettled forward exchange contracts	4,000	805,000	(995,000)	334,000
Interest expense (note 3)	164,000	300,000	598,000	914,000
Restructuring charges	0		176,000
Earnings (loss) before income taxes	(3,000)	(1,218,000)	448,000	(403,000)
Additions and Disposals to PP&E	$ 377,000	$ 508,000	$ 1,653,000	$ 1,955,000

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Note 8 - Segmented Information - Long-lived Assets in Individual Geographic Areas (Details) - USD ($) $ in Thousands		Oct. 02, 2016	Jan. 03, 2016
MEXICO | Reportable Geographical Components [Member]
Long-lived assets	[1]	$ 9,220	$ 10,674
CHINA | Reportable Geographical Components [Member]
Long-lived assets	[1]	3,157	2,217
UNITED STATES | Reportable Geographical Components [Member]
Long-lived assets	[1]	2,311	3,255
Reportable Geographical Components [Member]
Long-lived assets		14,688	16,146
Corporate, Non-Segment [Member]
Long-lived assets	[1]	241	297
Long-lived assets	[1]	$ 14,929	$ 16,443

[1] Property, plant and equipment information is based on the principal location of the asset.

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Note 9 - Derivative Financial Instruments (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 02, 2016	Sep. 27, 2015	Oct. 02, 2016	Sep. 27, 2015	Jan. 03, 2016
Unrealized Gain (Loss) on Derivatives	$ 4	$ 805	$ 995	$ 334
Gain (Loss) on Sale of Derivatives	619	$ 1,237	2,197	$ 3,119
Derivative Asset, Current	83		83
Derivative Liability, Current	$ 1,175		$ 1,175		$ 2,087

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Note 9 - Derivative Financial Instruments - Outstanding Foreign Currency Forward Contracts (Details) - 9 months ended Oct. 02, 2016 MXN in Thousands, $ in Thousands, CAD in Millions	USD ($)	CAD	MXN
Canada, Dollars
Buy/Sell	Buy
Foreign Currency Amount | CAD		CAD 6
Notional Contract Value in USD	$ 4,496
Buy/Sell	Buy
Foreign Currency Amount | MXN			MXN 197,070
Notional Contract Value in USD	$ 11,160

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Note 9 - Derivative Financial Instruments - Average USD Fair Value Measurements for Contracts Rates (Details)	Oct. 02, 2016	Jan. 03, 2016
Canada, Dollars
Average contract rate	1.33%	1.26%
Average mark-to-market rate	1.31%	1.38%
Average contract rate	17.66%	15.88%
Average mark-to-market rate	19.74%	17.47%

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Note 10 - Restructuring Charges (Details Textual)	3 Months Ended		9 Months Ended
	Oct. 02, 2016 USD ($)	Apr. 03, 2016 USD ($)	Oct. 02, 2016 USD ($)
Employee Severance [Member]
Restructuring and Related Cost, Number of Positions Eliminated		1
Restructuring Charges		$ 176,000	$ 176,000
Restructuring Charges	$ 0		$ 176,000

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Note 10 - Restructuring Charges - Schedule of Restructuring Charges (Details) - USD ($)	3 Months Ended		9 Months Ended
	Oct. 02, 2016	Apr. 03, 2016	Oct. 02, 2016
Employee Severance [Member]
Balance as at January 3, 2016
Restructuring charges (note 10)		$ 176,000	176,000
Payments			(110,000)
Restructuring charges (note 10)	$ 0		176,000
Balance as at October 2, 2016	$ 66,000		$ 66,000

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Note 11 - Commitments (Details Textual) $ in Thousands	3 Months Ended
	Oct. 02, 2016 USD ($) ft²	Sep. 27, 2015 USD ($)
Facilities in Fremont, California [Member]
Operating Lease Agreements	2
Lessee Leasing Arrangements, Operating Leases, Term of Contract	3 years
Area of Real Estate Property | ft²	46,940
Facility One in Fremont, California [Member]
Operating Leases, Base Rate per Month	$ 46
Facility Two in Fremont, California [Member]
Lessee Leasing Arrangements, Operating Leases, Term of Contract	5 years
Area of Real Estate Property | ft²	20,828
Operating Leases, Base Rate per Month	$ 23
Purchase Obligation, Due in Next Twelve Months	$ 15,753	$ 18,538