Mail Stop 03-06
May 23, 2005
Via Facsimile and U.S. Mail
Ms. Jane Todd
Principal Financial Officer
SMTC Corporation
635 Hood Road
Markham, Ontario, Canada
Re: SMTC Corporation
Form 10-K for the year ended December 31, 2004
File No. 000-31051
Dear Ms. Todd:
We have reviewed your filings and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and will make no further review of your
documents. Where indicated, we think you should revise your
documents
in future filings in response to these comments. If you disagree,
we
will consider your explanation as to why our comment is
inapplicable
or a revision is unnecessary. Please be as detailed as necessary
in
your explanation. In some of our comments, we may ask you to
provide
us with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the year ended December 31, 2004
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations - Page 17
Year Ended December 31, 2004 compared to the year ended December
31,
2003 - Page 22
1. In your MD&A, you refer to and compare amounts excluding
various
items. For example, you disclose gross profit excluding the
settlement of inventory claims and other charges. While this type
of
disclosure is helpful in describing same operating results from
period to period, it removes focus from the excluded items and may
be
misleading to investors. Please revise future filings to discuss
changes in your GAAP-based results, identifying those unique or
material transactions or events that contributed to the changes.
Item 9A. Controls and Procedures - Page 48
2. Please supplementally tell us and revise your disclosure
concerning changes in your internal control over financial
reporting
to also indicate whether there was any change in your internal
control over financial reporting that occurred during the most
recent
fiscal quarter that has materially affected or is reasonably
likely
to materially affect your internal control over financial
reporting,
as required by Item 308(c) of Regulation S-K as amended effective
August 13, 2003.
Financial Statements
Notes to Consolidated Financial Statements - Page F-7
Note 2. Significant Accounting Policies - Page F-7
(c) Revenue Recognition - Page F-7
3. Please tell us supplementally and revise future filings to
disclose your accounting policies for manufacturing warranties.
Revise future filings to provide all of the disclosures required
by
SFAS 5 and paragraph 14 of FIN 45.
(k) Stock-based compensation - Page F-9
4. We note you presented a pro-forma adjustment of $128,000 in
stock-
based compensation recovery that you would have recognized in
fiscal
2004 if you had applied the fair value recognition provisions of
SFAS
123. Tell us supplementally and revise this filing to describe
why
you would have recognized additional income rather than expense
for
your outstanding stock options if you had applied SFAS 123.
Note 9. Capital Stock - Page F-24
5. We note the significant number of grants and cancellations
related
to your stock options in each reporting period presented. We also
note your disclosure that on January 8, 2002, the Board of
Directors
gave the holders of options to purchase an aggregate of 1,097,000
shares of common stock in exchange for the opportunity to return
their options to you for cancellation. We further note that on
July
26, 2002, you granted 362,500 options to certain holders of
options
cancelled on January 8, 2002. Please tell us supplementally and
revise future filings to address the following:
a. Describe the circumstances surrounding the material
cancellations
in each of the reporting periods presented. We note your
disclosure
does not address 2003 or 2004.
b. Explain to us how you accounted for these cancellations and
grants
in accordance with SFAS 123, APB 25 and FIN 44.
c. Separately present forfeitures and expirations in your tabular
format.
* * * *
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please file
your cover letter on EDGAR. Please understand that we may have
additional comments after reviewing your responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Tara Harkins, Staff Accountant, at (202)
551-
3639, Kevin Vaughn, Staff Accountant at (202) 551-3643 or me at
(202)
551-3327 if you have questions regarding these comments.
Sincerely,
Michele Gohlke
Branch Chief
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Ms. Jane Todd
SMTC Corporation
May 23, 2005
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