<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended October 31, 1996
Commission File Number 0-23248
SigmaTron International, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant, as Specified in its Charter)
Delaware 36-3918470
- --------------------------------------------------------------------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification
Number)
2201 Landmeier Road, Elk Grove Village, Illinois 60007
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (847) 956-8000
No Change
- --------------------------------------------------------------------------------
(Former Name, Address, or Fiscal Year, if Changed Since Last Reports)
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, and
Yes XX No
-- --
(2) has been subject to such filing requirements for the past 90 days.
Yes XX No
-- --
On December 6, 1996, there were 2,782,289 shares of the Registrant's Common
Stock outstanding.
<PAGE> 2
SigmaTron International, Inc.
Index
PART 1. FINANCIAL INFORMATION: Page No.
--------
Item 1. Financial Statements
Consolidated Balance Sheets--October 31, 1996
and April 30, 1996 3
Consolidated Statements of Income--Three and
Six Months Ended October 31, 1996 and 1995 4
Consolidated Statements of Cash Flows--Six Months
Ended October 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits
<PAGE> 3
SIGMATRON INTERNATIONAL, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 31, April 30,
1996 1996
(UNAUDITED) (Audited)
--------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,500 $ 2,500
Accounts receivable, less allowance for doubtful
accounts of $671,126 at October 31,
1996 and $492,126 at April 30, 1996 20,539,735 11,080,485
Inventories 19,501,846 14,854,050
Equipment lease receivables from affiliate 764,015 655,913
Notes receivable from affiliate 420,000 300,000
Prepaid expenses 311,646 167,686
Other assets 1,542,093 744,164
Deferred incomes taxes 446,871 446,871
----------- -----------
Total current assets 43,528,706 28,251,669
Machinery and equipment, net 8,897,475 7,230,393
Intangible assets, net of amortization of
$166,276 and $154,341 at October 31, 1996 and April
30, 1996, respectively 25,979 37,914
Equipment lease receivables from affiliate, less
current portion 1,696,547 1,920,876
Investment and advances with affiliate 176,310 202,524
Other assets 451,983 671,418
----------- -----------
Total assets $54,777,000 $38,314,794
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - Banks 166,668 166,668
Notes payable - Related parties 106,490 151,860
Trade accounts payable 13,736,876 6,062,695
Trade accounts payable - Related parties 1,178,597 794,310
Accrued expenses 1,485,623 1,443,034
Income tax payable 562,873 66,236
Capital lease obligations 1,038,452 913,566
----------- -----------
Total current liabilities 18,275,579 9,598,369
Notes payable - Banks, less current portion 18,443,260 12,533,171
Notes payable - Related parties, less current portion - 42,596
Capital lease obligations, less current portion 2,555,463 2,720,484
Deferred income taxes 651,635 651,635
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 500,000 shares
authorized, none issued and outstanding - -
Common stock, $.01 par value; 6,000,000 shares
authorized, 2,782,289 and 2,737,500 shares issued and
outstanding at October 31, 1996 and April 30, 1996, respectively 27,823 27,375
Capital in excess of par value 8,512,016 8,384,089
Retained earnings 6,311,224 4,357,075
----------- -----------
Total stockholders' equity 14,851,063 12,768,539
----------- -----------
Total liabilities and stockholders' equity $54,777,000 $38,314,794
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
SIGMATRON INTERNATIONAL, INC.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS Three Months SIX MONTHS Six Months
ENDED Ended ENDED Ended
OCTOBER 31, 1996 October 31, 1995 OCTOBER 31, 1996 October 31, 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales $29,696,006 $16,957,907 $48,176,341 $28,106,953
Cost of products sold 25,185,242 14,374,176 40,810,153 23,837,838
----------- ----------- ----------- -----------
4,510,764 2,583,731 7,366,188 4,269,115
Selling and administrative expenses 1,910,613 1,216,960 3,360,578 1,831,893
----------- ----------- ----------- -----------
Operating income 2,600,151 1,366,771 4,005,610 2,437,222
Equity in net loss of affiliate 22,681 79,860 25,964 212,491
Interest expense - banks and capital lease obligations 490,267 362,362 915,130 682,623
Interest expense - related party 2,873 8,340 6,694 19,993
Interest income - related party (97,110) (103,621) (199,092) (203,003)
----------- ----------- ----------- -----------
Income before income taxes 2,181,440 1,019,830 3,256,914 1,725,118
Income taxes 872,576 407,931 1,302,765 690,047
----------- ----------- ----------- -----------
Net income $ 1,308,864 $611,899 $ 1,954,149 $ 1,035,071
=========== =========== =========== ===========
Net income per common and common equivalent share $0.45 $0.22 $0.68 $0.38
=========== =========== =========== ===========
Weighted average number of common and common
equivalent shares outstanding 2,892,689 2,737,500 2,889,137 2,737,688
=========== =========== =========== ===========
Net income per common share -
assuming full dilution $0.45 $0.67
=========== ===========
Weighted average number of common shares
outstanding - assuming full dilution 2,903,391 2,903,391
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
SIGMATRON INTERNATIONAL, INC.
Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED OCTOBER 31,
1996 1995
----------- -----------
<C> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,954,149 $ 1,035,071
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation 471,810 355,561
Equity in net loss of affiliate 25,964 212,491
Amortization 11,935 13,607
Compensation expense related to stock options 75,000 0
Changes in operating assets and liabilities:
Accounts receivable (9,459,250) (4,062,768)
Notes receivable from affiliates 0 (150,000)
Inventories (4,647,796) (6,124,421)
Prepaid expenses (143,960) (158,605)
Refundable income taxes 0 134,773
Other assets (578,494) (47,835)
Trade accounts payable 7,674,181 6,156,184
Trade accounts payable - related parties 384,287 (165,457)
Accrued expenses 42,589 (297,248)
Income tax payable 496,637 288,274
----------- -----------
Net cash used in operating activities 1,098,808 (2,810,373)
INVESTING ACTIVITIES:
Purchases of machinery and equipment (1,790,179) (719,714)
Proceeds from sale of investment in affiliate 250 0
Proceeds from sale of machinery
and equipment 0 37,513
Advances to affiliate (120,000) (50,000)
Proceeds from affiliate subleases 223,958 123,761
----------- -----------
Net cash used in investing activities (1,685,971) (608,440)
FINANCING ACTIVITIES:
Repayment of term loan and other notes payable (87,966) (263,011)
Net payments under capital lease obligations (496,579) (434,652)
Issuance of common stock 53,375 0
Net proceeds under line of credit 5,910,089 4,116,476
----------- -----------
Net cash provided by financing activities 5,378,919 3,418,813
Change in cash 0 0
Cash at beginning of period 2,500 2,500
----------- -----------
Cash at end of period $2,500 $2,500
=========== ===========
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Acquisition of machinery and equipment
financed under capital leases $348,713 $432,256
=========== ===========
</TABLE>
See accompanying notes.
5
<PAGE> 6
SigmaTron International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
October 31, 1996
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six-month period
ended October 31, 1996 are not necessarily indicative of the results that may
be expected for the year ending April 30, 1997. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Annual Report for the year ended April 30, 1996.
NOTE B -- INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
October 31, April 30,
1996 1996
----------- -----------
<S> <C> <C>
Finished products $15,316,804 $ 556,157
Work-in-process 2,920,105 1,407,996
Raw materials 1,264,937 12,889,897
----------- ------------
$19,501,846 $14,854,050
=========== ============
</TABLE>
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NOTE: To the extent any statements in this Form 10-Q may be deemed to be
forward-looking, such statements should be evaluated in the context of the
risks and uncertainties inherent in the Company's business, including those
risks and uncertainties set forth in the Company's Annual Report and Form 10-K
for the fiscal year ended April 30, 1996.
RESULTS OF OPERATIONS:
Net sales increased 75% from $16,957,907 for the three month period ended
October 31, 1995 to $29,696,006 for the three month period ended October 31,
1996. During the first six months of fiscal 1997 net sales increased 71% to
$48,176,341 from $28,106,953 for the comparable period of the prior year. The
increase in net sales was due primarily to sales to Nighthawk Systems, Inc.
("NSI"), which contributed approximately $16,794,081 in net sales for the six
months ended October 31, 1996. The Company began manufacturing for NSI in
August 1995, and NSI's market is an emerging market which could lead to
volatility in the forecast. The Company anticipates NSI will account for a
significant percentage of the Company's net sales in fiscal 1997. Sales to NSI
are expected to be seasonal due to the nature of the product. The volatility
of NSI orders may cause the Company's revenues and earnings to fluctuate
significantly. Also contributing to the increase were higher sales to existing
customers in the gaming and telecommunication industries.
Gross profit increased during the three month period ended October 31, 1996 to
$4,510,764 or 15.2% of net sales from $2,583,731 or 15.2% for the same period
of the prior fiscal year. Gross profit increased for the six month period
ended October 31, 1996 to $7,366,188 or 15.3% of net sales from $4,269,115 or
15.2% of net sales for the same period in the prior year. The increase in
gross profit is primarily due to the higher sales volume.
Selling and administrative expenses increased from $1,216,960 or 7.2% of net
sales during the three month period ending October 31, 1995 to $1,910,613 or
6.4% of net sales for the same period in the current year. The increase in
selling and administrative expenses is due to an increase in commission expense
related to the higher sales volume. Also contributing to the increase for the
quarter was a bonus accrual for employees and management. For the six month
period ended October 31, 1996 selling and administrative expense increased from
$1,831,893 or 6.5% of net sales to $3,360,578 or 7.0% of net sales for the
comparable period in the current fiscal year. The increase as a percentage of
net sales in fiscal 1997 is primarily the result of reversing a $300,000
payables due to creditors of the predecessor Company in the second quarter of
fiscal 1996. The accrual was reversed based on the expiration of the five-year
statute of limitations.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- - cont'd
Interest expense for bank debt and capital lease obligations for the three
month period ended October 31, 1996 was $490,267 compared to $362,362 for the
same period in the prior year. For the six months ended October 31, 1996
interest expense increased to $915,130 from $682,623 in the same period for the
prior fiscal year. This increase was attributable to a higher outstanding
balance on the line of credit and interest expense associated with increased
capital lease obligations.
As a result of the foregoing, income before taxes increased 114% from
$1,019,830 in the three month period ended October 31, 1995 to $2,181,440 for
the same period in the prior fiscal year. Net income increased 114% from
$611,899 for the three month period ended October 31, 1995 to $1,308,864 for
the three month period ended October 31, 1996. Earnings per share increased
105% to $ .45 for the three month period ended October 31, 1996 compared to $
.22 for the second quarter in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's primary source of liquidity has been cash provided by borrowings
from its secured lender. The Company had working capital of $25,253,127 at
October 31, 1996 and $18,031,939 at October 31, 1995 resulting in a current
ratio of 2.38 and 4.35 for these periods, respectively.
For the six month period ended October 31, 1996, the primary use of cash from
operations was for increases in accounts receivable and inventories, which was
partially offset by the increase in accounts payable. The net cash used for
operations equaled $3,692,948 compared to $2,810,373 for the six months ended
October 31, 1995. The net cash used for investing activities for the same
period was $1,685,971 and $608,440 respectively, which was attributable
primarily to machinery and equipment purchases.
Net cash provided by financing activities totaled $5,378,919 for the six months
ended October 31, 1996 compared to $3,418,813 in the prior year. Net proceeds
under the line of credit increased to $5,910,089 for the six months ended
October 31, 1996 from $4,116,476 for the six months ended October 31, 1995.
To the extent that the Company provides the funds necessary to operate its
Mexican operations, the amount of funds available for use in the Company's
domestic operations may be depleted. The funds, which ordinarily derive from
the Company's cash from operations and borrowings under its revolving credit
facility, equal approximately $1,545,500 for the three month period ended
October 31, 1996 and $2,738,000 for the six month period ended October 31,
1996.
8
<PAGE> 9
SIGMATRON INTERNATIONAL, INC.
PART II - OTHER INFORMATION
October 31, 1996
ITEM 4: Submission of Matters to a Vote of Security Holders
On September 20, 1996, the Company held its 1996 Annual Meeting of
Stockholders. The following persons were elected as directors to hold office
until the 1999 Annual Meeting of Stockholders: Gary R. Fairhead, Franklin D.
Sove and Dilip S. Vyas. The number of shares cast for, withheld and abstained
with respect to each of the nominees were as follows:
<TABLE>
<CAPTION>
Nominee For Against Abstained
------- --------- ------- ---------
<C> <C> <C> <C>
Gary R. Fairhead 2,636,301 7,445 --
Franklin D. Sove 2,636,301 7,445 --
Dilip S. Vyas 2,636,301 7,445 --
</TABLE>
The stockholders also voted to approve the ratification of the selection of
Ernst & Young LLP as independent auditors for the Company for the fiscal year
ending April 30, 1997. 2,633,451 shares were cast for such selection, 6,745
shares were cast against such selection, and 3,550 shares abstained.
ITEM 6 (a) EXHIBITS
10.36 Lease Agreement between the Company and International Financial
Services 96-049 dated April 18, 1996. The Company was granted a
hardship exemption as provided in Rule 202 of Regulation S-T. The
lease exhibit has been filed under the cover of Form SE.
10.37 Lease Agreement between the Company and International Financial
Services 96-076 dated June 6, 1996. The Company was granted a
hardship exemption as provided in Rule 202 of Regulation S-T. The
lease exhibit has been filed under the cover of Form SE.
11.00 Statement RE: Computation of Earnings Per Share.
Item 6 (a) Exhibits 27 - Financial Data Schedule (EDGAR version only)
(b) No report on Form 8-K was filed for the quarter ended October 31,
1996.
9
<PAGE> 10
SIGNATURES:
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGMATRON INTERNATIONAL, INC.
/s/ Gary R. Fairhead 12/10/96
- -------------------------------------- --------------
Gary R. Fairhead Date
President and CEO (Principal Executive
Officer)
/s/ Linda K. Blake 12/10/96
- -------------------------------------- --------------
Linda K. Blake Date
Chief Financial Officer, Secretary and
Treasurer (Principal Financial Officer
and Principal Accounting Officer)
10
<PAGE> 11
SIGNATURES:
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGMATRON INTERNATIONAL, INC.
12/10/96
- -------------------------------------- ---------------
Gary R. Fairhead Date
President and CEO (Principal Executive
Officer)
12/10/96
- -------------------------------------- ---------------
Linda K. Blake Date
Chief Financial Officer, Secretary and
Treasurer (Principal Financial Officer
and Principal Accounting Officer)
10
<PAGE> 1
Exhibit 11 Statement RE: Computation of Earnings Per Share
(000's omitted, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31, October 31, October 31,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 2,782.3 2,737.5 2,777.0 2,737.5
Net effect of dilutive stock options
- based on the treasury stock
method using average market
price 110.4 - 112.1 0.2
-------- -------- -------- --------
Total 2,892.7 2,737.5 2,889.1 2,737.7
======== ======== ======== ========
Net income $1,308.9 $611.9 $1,954.1 $1,035.1
======== ======== ======== ========
Per share amount $0.45 $0.22 $0.68 $0.38
======== ======== ======== ========
Fully dilutive:
Average shares outstanding 2,782.3 2,737.5 2,777.0 2,737.5
Net effect of dilutive stock options
- based on the treasury stock
method using quarter end market
price 121.1 - 121.1 -
-------- -------- -------- --------
Total 2,903.4 2,737.5 2,898.1 2,737.5
======== ======== ======== ========
Net income $1,308.9 $611.9 $1,954.1 $1,035.1
======== ======== ======== ========
Per share amount $0.45 $0.22 $0.67 $0.38
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of 10/31/96 and the Statement of Consolidated
Earnings for the quarter ended 10/31/96 and is qualified in its entirety by
reference to such Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 2500
<SECURITIES> 0
<RECEIVABLES> 21210861
<ALLOWANCES> 671126
<INVENTORY> 19501846
<CURRENT-ASSETS> 43528706
<PP&E> 11510813
<DEPRECIATION> 2613338
<TOTAL-ASSETS> 54777000
<CURRENT-LIABILITIES> 18275579
<BONDS> 0
0
0
<COMMON> 27823
<OTHER-SE> 14851063
<TOTAL-LIABILITY-AND-EQUITY> 54777000
<SALES> 29696006
<TOTAL-REVENUES> 29696006
<CGS> 25185242
<TOTAL-COSTS> 1910613
<OTHER-EXPENSES> 22681
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 396030
<INCOME-PRETAX> 2181440
<INCOME-TAX> 872576
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13088864
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
