<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SIGMATRON INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its Charter)
SIGMATRON INTERNATIONAL, INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
SIGMATRON INTERNATIONAL, INC.
2201 LANDMEIER ROAD
ELK GROVE VILLAGE, IL 60007
August 14, 1998
Notice of Annual Stockholders Meeting:
You are hereby notified that the 1998 Annual Meeting of Stockholders of
SigmaTron International, Inc. (the "Company") will be held at the Holiday Inn
located at 1000 Busse Road, Elk Grove Village, Illinois at 10:00 a.m. local
time, on Friday, September 18, 1998, for the following purposes:
1. To elect two Class II directors to hold office until the 2001 Annual
Meeting.
2. To consider a proposal to ratify the selection of Ernst & Young LLP
as independent auditors of the Company for the fiscal year ending
April 30, 1999.
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on July 24, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Meeting.
You are urged to attend the Meeting in person. Whether or not you expect to
be present in person at the Meeting, please date, sign and return the enclosed
proxy in the envelope provided.
By Order of the Board of Directors
LINDA K. BLAKE
Secretary
<PAGE> 3
SIGMATRON INTERNATIONAL, INC.
2201 LANDMEIER ROAD
ELK GROVE VILLAGE, IL 60007
1998 ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 18, 1998
PROXY STATEMENT
GENERAL
This Proxy Statement and the accompanying proxy are furnished to
stockholders of SigmaTron International, Inc. (the "Company") in connection with
the solicitation of proxies by the Company's Board of Directors for use at the
1998 Annual Meeting of Stockholders (the "Meeting") to be held at the Holiday
Inn located at 1000 Busse Road, Elk Grove Village, Illinois, at 10:00 a.m. local
time, on Friday, September 18, 1998, for the purposes set forth in the
accompanying Notice of Meeting. The Proxy Statement, the form of proxy included
herewith and the Company's Annual Report to Stockholders for the fiscal year
ended April 30, 1998 are being mailed to stockholders on or about August 14,
1998.
Stockholders of record at the close of business on July 24, 1998 are
entitled to notice of and to vote at the Meeting. On such date there were
outstanding 2,881,227 shares of common stock, par value $.01 per share (the
"Common Stock"). The presence, in person or by proxy, of the holders of a
majority of the shares of Common Stock outstanding and entitled to vote at the
Meeting is necessary to constitute a quorum. In deciding all questions, each
holder of Common Stock shall be entitled to one vote, in person or by proxy, for
each share held on the record date.
Votes cast by proxy or in person at the Meeting will be tabulated by the
election inspector appointed for the Meeting and will determine whether or not a
quorum is present. The election inspectors will treat abstentions as shares that
are present and entitled to vote but as not voted for purposes of determining
the approval of any matter submitted to the stockholders for a vote. Abstentions
will have the same effect as negative votes. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
Properly executed proxies will be voted in the manner directed by the
stockholders. If no direction is made, such proxies will be voted FOR the
election of all nominees named under the caption "Election of Directors" as set
forth therein as directors of the Company, and FOR the ratification of the
selection of Ernst & Young LLP as the Company's Independent Auditors. Any proxy
may be revoked by the stockholder at any time prior to the voting thereof by
notice in writing to the Secretary of the Company, either prior to the Meeting
(at the above address) or at the Meeting if the stockholder attends in person. A
later dated proxy will revoke a prior dated proxy.
As of the date of this Proxy Statement, the Board of Directors knows of no
other business which will be presented for consideration at the Meeting. If
other proper matters are presented at the Meeting, however, it is the intention
of the proxy holders named in the enclosed form of proxy to take such actions as
shall be in accordance with their best judgment.
The information contained in this Proxy Statement relating to the
occupations and security holdings of directors and officers of the Company and
their transactions with the Company is based upon information received from each
individual as of July 24, 1998.
<PAGE> 4
HOLDINGS OF DIRECTORS
AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of July 24, 1998 by (i) each director of the
Company, (ii) each executive officer of the Company, (iii) each person
(including any "group" as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934) who is known by the Company to own beneficially more than 5% of the
outstanding Common Stock, and (iv) all directors and executive officers as a
group.
BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES(1) PERCENT
---- --------- -------
<S> <C> <C>
Circuit Systems, Inc.(2).................................... 488,413 15.6%
2350 E. Lunt
Elk Grove Village, IL 60007
Tang Foundation for the Research of
Traditional Chinese Medicine(3)........................... 247,000 7.9
3773 Howard Hughes Pkwy., Ste. 350N
Las Vegas, NV 89109
Tang Family Foundation(3)................................... 179,413 5.7
3773 Howard Hughes Pkwy., Ste. 350N
Las Vegas, NV 89109
Gary R. Fairhead(4)(5)...................................... 157,912 5.0
2201 Landmeier Road
Elk Grove Village, IL 60007
Gregory A. Fairhead(5)...................................... 56,157 1.8
John P. Sheehan(5).......................................... 54,442 1.7
Linda K. Blake(5)........................................... 15,150 *
Nunzio A. Truppa(5)......................................... 2,100 *
Dilip S. Vyas(6)(7)(11)..................................... 15,500 *
John P. Chen(7)(8)(11)...................................... 50,700 1.6
William C. Mitchell(7)(11).................................. 15,700 *
D.S. Patel(2)(9)(11)........................................ 5,000 *
Thomas W. Rieck(4)(11)...................................... 5,000 *
Franklin D. Sove(10)(11).................................... 6,000
Steven A. Rothstein(11)..................................... 5,100 *
All directors and executive officers as a group(12)......... 388,761 12.4%
</TABLE>
- ---------------
* Less than 1 percent
(1) Unless otherwise indicated in the footnotes to this table, the Company
believes the persons named in this table have sole voting and investment
power with respect to all shares of Common Stock reflected in this table.
(2) Circuit Systems, Inc. ("CSI") is a publicly held corporation which
manufactures printed circuit boards. D.S. Patel owns approximately 30% of
the outstanding common stock of CSI. Other officers and directors of the
Company also own shares of CSI common stock.
(3) Both Tang Foundation for the Research of Traditional Chinese Medicine and
Tang Family Foundation are not-for-profit corporations. Each of these
entities, whose combined ownership represents in excess of 5% of the
outstanding Common Stock, is controlled by Cyrus Tang.
(4) Thomas W. Rieck and Gary R. Fairhead serve on the Board of Directors of
CSI.
2
<PAGE> 5
(5) The number of shares includes 46,500, 44,500, 51,000, 14,000 and 2,000 of
currently exercisable stock options for Gary R. Fairhead, Gregory A.
Fairhead, John P. Sheehan, Linda K. Blake and Nunzio A. Truppa,
respectively. The service-based options are included solely for the purpose
of showing total shares owned.
(6) Dilip S. Vyas is a Director and Vice President -- Business Development of
CSI.
(7) Includes 3,500 shares of Common Stock subject to options granted in
September 1994 under the 1994 Directors' Stock Option Plan ("Directors'
Plan"), 3,500 shares granted in September 1995 and 3,500 granted in
September 1996. All options deemed are exercised solely for purposes of
showing total shares owned by such non-employee directors.
(8) John P. Chen is Chief Financial Officer of National Material L.P. The
number of shares includes 35,000 shares from Directors' Warrants granted in
February 1994, deemed exercised solely for purposes of showing total shares
owned by Mr. Chen.
(9) D.S. Patel is the Chairman of the Board of Directors, President and Chief
Executive Officer of CSI and owns approximately 30% of CSI's outstanding
common stock.
(10) Franklin D. Sove is Vice President of Tang Industries, Inc.
(11) Includes 5,000 shares of common stock subject to options granted in
September 1997 under the 1997 Directors' Stock Option Plan ("Directors'
Plan"). All options are deemed exercised solely for purposes of showing
total shares owned by such non-employee directors.
(12) See also footnotes (4)-(11). Excludes shares held by CSI and the Tang
entities.
ELECTION OF DIRECTORS
Pursuant to the Company's Certificate of Incorporation, the Board of
Directors is divided into three classes of directors serving three-year terms.
The terms of Class I directors (Messrs. Mitchell, Rieck and Rothstein) expire in
2000; the term of Class II directors (Messrs. Chen and Patel) expire in 1998;
and the terms of Class III directors (Messrs. Fairhead, Sove and Vyas) expire in
1999. All directors of each class will hold their positions until the annual
meeting of stockholders at which time the terms of the directors in such class
expire, or until their respective successors are elected and qualify.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS AT THE MEETING
Two Class II directors are to be elected by a plurality of the stockholder
votes cast at the Meeting, to serve until the 2001 Annual Meeting of
Stockholders and until their successors shall be elected and shall qualify. The
following persons have been nominated:
<TABLE>
<CAPTION>
DIRECTOR OF
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS COMPANY
NAME AGE AND OTHER PUBLIC DIRECTORSHIPS SINCE
---- --- ---------------------------------------------- -----------
<S> <C> <C> <C>
John P. Chen................ 44 Chief Financial Officer of National Material L.P. 1994
Class II since 1993. Prior thereto President of OSI, an office
furniture manufacturer.
D.S. Patel.................. 57 Chairman of the Board of Directors President and 1994
Class II Chief Executive Officer of CSI since 1987. Director
of Olympic Cascade Financial Corporation since March
1998.
</TABLE>
The Board of Directors knows of no reason why either of the foregoing
nominees will be unavailable to serve, but, in the event of any such
unavailability, the proxies received will be voted for such substitute
3
<PAGE> 6
nominees as the board of Directors may recommend. THE ENCLOSED PROXY CANNOT BE
VOTED FOR A GREATER NUMBER OF PERSONS THAN TWO, THE NUMBER OF NOMINEES NAMED IN
THIS PROXY STATEMENT.
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS EXTEND BEYOND THE MEETING DIRECTOR OF
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS COMPANY
NAME AGE AND OTHER PUBLIC DIRECTORSHIPS SINCE
---- --- ----------------------------------------------- -----------
<S> <C> <C> <C>
Gary R. Fairhead............ 46 President of the Company and Director since February 1994
Class III 1990. Director of CSI.
Franklin D. Sove............ 63 Mr. Sove has been Vice President of Tang Industries, 1994
Class III Inc. since 1996. Prior, Mr. Sove was CEO of National
Material L.P. from September 1996 and Executive Vice
President of Tang Industries, Inc. from May 1989.
Dilip S. Vyas............... 50 Director and Vice President -- Business Development 1994
Class III of CSI since 1987.
William C. Mitchell......... 72 Director of LaSalle Bank N.A. and its predecessor 1994
Class I since 1995; consultant to Lake Shore Bank Corp.,
Inc., 1993, prior thereto Chairman of Lake Shore Bank
Corp. and Director and CEO of Lake Shore National
Bank of Chicago from 1975 to 1993.
Thomas W. Rieck............. 53 Attorney and Partner of Rieck and Crotty, P.C. 1994
Class I Director of CSI.
Steven A. Rothstein......... 47 Chairman of the Board of National Securities 1994
Class I Corporation of Seattle, Washington since 1995.
Chairman and President of Olympic Cascade Financial
Corporation, the parent holding Company of National
Securities Corporation. Prior to 1995, Managing
Director of H.J. Meyers & Co. (1994-1995) and Rodman
& Renshaw (1992-1994) and Oppenheimer & Co. (from
June 1990), companies in the securities broker-dealer
business. Mr. Rothstein was nominated and elected as
a designee of the underwriters in connection with the
Company's February 1994 initial public offering;
Director of New World Coffee, Inc., Vita Food
Products, Inc., American Craft Brewing International,
Inc., Home Security International, Inc. and Gateway
Data Sciences.
</TABLE>
4
<PAGE> 7
EXECUTIVE OFFICERS
The executive officers of the Company are as follow:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gary R. Fairhead(1)(2)................. 46 President and Chief Executive Officer
Linda K. Blake(3)...................... 37 Chief Financial Officer, Vice President -- Finance,
Treasurer and Secretary
Nunzio A. Truppa(4).................... 60 Vice President -- Domestic Operations
Gregory A. Fairhead(1)(5).............. 42 Vice President -- Mexican Operations and Assistant
Secretary
John P. Sheehan(6)..................... 37 Vice President -- Director of Materials and Assistant
Secretary
</TABLE>
- ---------------
(1) Gary R. and Gregory A. Fairhead are brothers.
(2) Gary R. Fairhead has been the President and Director of the Company since
February 1990. Mr. Fairhead has been a Director of CSI since 1995.
(3) Linda K. Blake has been the Company's Vice President of Finance, Treasurer,
Secretary and Chief Financial Officer since February 1994 and was Controller
of the Company from June 1991 to February 1994.
(4) Nunzio A. Truppa has been Vice President -- Domestic Operations for the
Company, or held equivalent management positions with the Company's
predecessor, since January 1987.
(5) Gregory A. Fairhead has been Vice President -- Mexican Operations for the
Company since February 1990 and is Assistant Secretary.
(6) John P. Sheehan has been Vice President -- Director of Materials of the
Company since February, 1990 and is Assistant Secretary.
DIRECTOR COMMITTEES; BOARD MEETINGS
The Board of Directors has established an Audit Committee, a Compensation
Committee, a Nominating Committee, and an Offer Evaluation Committee. Each
committee is composed of at least two independent directors who together
constitute a majority of each committee.
The functions of the Audit Committee are to recommend annually to the Board
of Directors the appointment of the independent public accountants of the
Company, discuss and review the scope and the fees of the prospective annual
audit and review the results thereof with the independent public accountants,
review and approve non-audit services of the independent public accountants,
review compliance with existing major accounting and financial policies of the
Company, review the adequacy of the financial organization of the Company and
review management's procedures and policies relative to the adequacy of the
Company's internal accounting controls. Messrs. Mitchell, Rieck, and Sove are
members of the Audit Committee, of which Mr. Sove is the Chairman.
The functions of the Compensation Committee are to review and approve
annual salaries and bonuses for all executive officers and review, approve and
recommend to the Board of Directors the terms and conditions of all employee
benefit plans or changes thereto and administer the Company's 1993 Stock Option
Plan. Messrs. Mitchell, Rieck and Rothstein are members of the Compensation
Committee, of which Mr. Mitchell is the Chairman.
The functions of the Nominating Committee are to review and recommend to
the Board of Directors a slate of nominees for each election of members to the
Board of Directors, to review and recommend changes to the number,
classification, and term of directors and to receive and review nominations by
Stockholders with regard to the nomination process. The nominating committee
will accept nominees recommended by stockholders. However, the Company's bylaws
establish an advance notice procedure for such nominations.
5
<PAGE> 8
Generally, such notice must be received by the Secretary of the Company not less
than 60 and no more than 90 days prior to a regularly scheduled annual meeting
of stockholders, or within 10 days after receipt of notice of an annual meeting
of stockholders if the date of such meeting has not be publicly disclosed within
70 days prior to the meeting date. Messrs. Mitchell, Rieck and Rothstein are
members of the Nominating Committee.
The Offer Evaluation Committee consists of such members who are appointed
each time the Company receives an offer to purchase its assets or Common Stock.
The functions of the Offer Evaluation Committee are to review and evaluate all
offers to purchase substantially all or a majority of the capital stock or
assets of the Company and make a recommendation to the Board of Directors
concerning the offer itself and whether investment banking assistance should be
employed by the Company.
The Board of Directors held five meetings during the fiscal year ended
April 30, 1998. The Compensation Committee held two meetings and the Audit
Committee held one meeting during fiscal 1998. The Nominating Committee held one
meeting during fiscal 1998 and no Offer Evaluation Committee was constituted in
fiscal 1998.
COMPENSATION OF DIRECTORS
Non-employee directors are paid $1,000 for each Board of Directors, Audit
and Compensation meeting attended up to an amount not to exceed $10,000 per
director per year. Each non-employee director was paid $1,000 per meeting.
Non-employee directors also received options to acquire shares of Common Stock
under the Company's 1994 Directors' Stock Option Plan, which calls for the grant
of options for 3,500 shares per director at each of the 1994, 1995 and 1996
annual stockholders' meetings. The 1997 Directors' Stock Option Plan grants
non-employee directors to receive options to acquire 5,000 shares of Common
Stock at each annual stockholders meeting in 1997, 1998 and 1999. Such options
are exercisable for ten years from the respective date of grant at a price based
on the price of the Common Stock on the respective grant dates.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth a summary of all compensation paid by the
Company for its fiscal years ended April 30, 1998, 1997 and 1996 to the
Company's Chief Executive Officer and each executive officer of the Company
whose total annual salary, bonus and other compensation for such year exceeded
$100,000:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------ COMPENSATION ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION ($) ($) (#) (5) ($) (6)
--------------------------- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Gary R. Fairhead...................... 1998 145,600 2,800(1) -- --
President and Chief Executive Officer 1997 145,600 225,600(2)(4) -- --
1996 145,600 205,600(3)(4) -- --
Gregory A. Fairhead................... 1998 127,017 2,350(1) -- --
Vice President and General 1997 119,950 124,700(2)(4) -- --
Manager-Mexican Operations 1996 109,250 94,000(3)(4) -- --
and Assistant Secretary
John P. Sheehan....................... 1998 93,548 1,731(1) -- --
Vice President-Director of Materials 1997 88,692 93,462(2)(4) -- --
and Assistant Secretary 1996 81,700 77,900(3)(4) -- --
Linda K. Blake........................ 1998 81,075 1,500(1) -- --
Chief Financial Officer, Vice 1997 76,500 63,000(2)(4) -- --
President-Finance, Treasurer 1996 68,700 47,400(3)(4) -- --
and Secretary
Nunzio A. Truppa...................... 1998 105,398 1,950(1) -- 184,841
Vice President-Domestic Operations 1997 101,400 23,900(2)(4) -- 208,278
1996 101,400 -- (3)(4) -- 185,464
</TABLE>
- ---------------
(1) Represents one week bonus paid to all SigmaTron employees (U.S.).
(2) Represents bonus earned in fiscal 1997 and paid in fiscal 1998.
(3) Represents bonus earned in fiscal 1996 and paid in fiscal 1996.
(4) Includes one week bonus paid twice a year to all SigmaTron employees (U.S.).
(5) See chart below for exercisable and unexercisable options in last fiscal
year.
(6) Represents commission paid to Mr. Truppa for sales made in fiscal 1998, 1997
and 1996.
7
<PAGE> 10
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information with respect to each
named executive officer of the Company concerning the exercise of options during
the fiscal year ended April 30, 1998, as well as any unexercised options held as
of the end of such fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTION
SHARES OPTIONS AT FY-END(#)(1) AT FY-END($)(1)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------------------- --------------------
<S> <C> <C> <C> <C>
Gary R. Fairhead........... -- -- 46,500/86,250 51,671/25,835
Gregory A. Fairhead........ -- -- 44,500/78,250 51,671/25,835
John P. Sheehan............ -- -- 51,000/61,500 68,894/17,224
Linda K. Blake............. 6,000 52,140 14,000/50,000 3,626/3,626
Nunzio A. Truppa........... -- -- 2,000/8,000 0/0
</TABLE>
- ---------------
(1) These options are service-based options. A portion of these options vest
over a five-year period beginning in February 1995 and the remaining options
vest over a five-year period beginning in July 1998.
Effective as of July 1, 1997, the Board of Directors authorized the cancellation
of 425,000 option shares under the 1993 Plan, which options were to vest only
upon the attainment of certain earnings per shares levels, and the replacement
of such options with an equal number of service-based options.
8
<PAGE> 11
STOCK PRICE PERFORMANCE GRAPH
The following performance graph compares the percentage change in the
cumulative total stockholder return on the Company's Common Stock during the
period from the Company's Initial Public Offering on February 9, 1994 through
April 30, 1998 with the cumulative total return on (i) a group consisting of the
Company's peer corporations on a line-of-business basis (the "Peer Group") and
(ii) the NASDAQ Composite Index (Total Return). The comparison assumes $100 was
invested on February 9, 1994 in the Company's Common Stock, the Peer Group
(allocated equally among each of the Peer Group members) and the NASDAQ
Composite Index and assumes reinvestment of dividends, if any. The Peer Group
consists of Benchmark Electronics, Inc., DII Group, Inc.(formerly known as
Dovatron International, Inc.), IEC Electronics Corp., Plexus Corp., SCI Systems,
Inc. and Solectron Corp.
Comparison of Five* year cumulative Total Among SigmaTron International,
Inc. the Peer Group and the Nasdaq Composite Index (Total Return)
<TABLE>
<CAPTION>
SIGMATRON
Measurement Period INTERNATIONAL NASDAQ PEER
(Fiscal Year Covered) INC INDEX GROUP
<S> <C> <C> <C>
9 Feb 94 100 100 100
Apr 94 107.14 91.79 83.36
Apr 95 98.21 106.69 88.24
Apr 96 110.71 152.09 144.02
Apr 97 239.28 161.05 188.96
Apr 98 125.88 240.91 279.75
</TABLE>
- ---------------
* Prior to February 9, 1994, the Company's Common Stock was not publicly traded.
Comparative data is provided only for the period from that date through April
30, 1998.
9
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Company's executive compensation policy is to provide compensation and
benefit programs to enable it to attract and retain talented executives. Total
compensation includes base salary, annual cash bonuses, long-term incentives and
employee benefits. Guiding principles include offering competitive base salary
and employee benefit packages compared to similarly capitalized companies with
comparable operating results; annual cash bonuses based on individual
contributions to financial results and strategic planning and long-term stock
based incentives, helping to assure that management's interests are closely
aligned with those shareholders. The Company seeks to reward outstanding
executive performance contributing to superior operating results and enhanced
shareholder value.
The Board of Directors administers the Company's executive compensation
policy through its Compensation Committee and the Compensation Committee's
supervision of the determinations of the Company's senior executive officers on
compensation matters. The base salary of the President and the Chief Executive
Officer and the executive officers of the Company is determined by the Board of
Directors acting on the recommendations of its Compensation Committee. The
President and Chief Executive Officer recommends to the Compensation Committee
the base salaries to be paid to all other executive officers.
Annual cash bonuses are determined by action of the Board of Directors on
recommendations made to it by its Compensation Committee. Stock options may be
granted to key employees of the Company as determined by the Compensation
Committee pursuant to the Company's 1993 Stock Option Plan.
REPORT OF 1998 COMPENSATION OF EXECUTIVE OFFICERS
No bonuses were paid to executive officers because of the Company's
financial results for the first year ended April 30, 1998. The Committee did,
however, grant additional stock options. The Committee is of the opinion that
stock options continue to provide substantial incentive to increase shareholder
value and expects to grant additional options in future years.
REPORT OF 1998 COMPENSATION OF CHIEF EXECUTIVE OFFICER AND PRESIDENT
The Compensation for the Company's President and Chief Executive Officer is
set within the philosophy and policy identified above for all executive
officers. In setting the salary and determining the bonus of the President and
Chief Executive Officer of the Company, the Compensation Committee considered
many factors, and paid particular attention to the Company's most recent
financial results. Underscoring the philosophy of performance-based
compensation, the Committee is of the opinion that there should be no change in
Mr. Fairhead's base salary for the fiscal year beginning May 1, 1998, nor should
he be entitled to a bonus for the fiscal year ended April 30, 1998. The
Committee did, however, grant additional stock options to Mr. Fairhead.
This report is submitted by the members of the Committee:
William C. Mitchell (Chairman)
Thomas W. Rieck
Steven A. Rothstein
Deductibility of Certain Executive Compensation. Section 162(m), added to
the federal Internal Revenue Code by the Omnibus Budget Reconciliation Act of
1993 (the "Act"), denies publicly held corporations a deduction for compensation
in excess of $1 million per year paid or accrued with respect to certain
executives in taxable years beginning on or after January 1, 1994, except to the
extent that such compensation qualifies for an exemption from that limitation.
The deduction limitation has no effect on the Company's ability to deduct
payments made (or deemed made for tax purposes) in fiscal 1998 to the named
executive officers listed in the summary compensation table. The limitation,
however, could affect the ability of the Company and its subsidiaries to deduct
10
<PAGE> 13
compensation paid to such officers in fiscal 1998 and subsequent years. The
Company intends to take appropriate action to comply with Act so that deductions
will be available to it for all compensation paid to its executive officers to
the extent practicable in fiscal 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All members of the Board of Directors participated in its deliberations
concerning executive officers' compensation, except that Gary R. Fairhead did
not participate in votes or deliberations concerning his compensation.
Gary R. Fairhead, the President and Chief Executive Officer of the Company,
is a member of CSI's Board of Directors. CSI is a shareholder of the Company and
Messrs. Vyas and Patel are executive officers of CSI and directors of both CSI
and the Company, and Mr. Rieck is a director of CSI and the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of the copies of such reports furnished to the
Company of written representations that no other reports were required, the
Company believes that during the 1998 fiscal year all filing requirements were
complied with.
CERTAIN TRANSACTIONS
During the year ended April 30, 1998, the Company purchased raw materials
and leased operating and storage space in Elk Grove Village, Illinois from CSI,
which owns beneficially approximately 15.6% of the Company's outstanding Common
Stock. Purchases of raw materials were approximately $6,380,000 for the year
ended April 30, 1998, with a net amount in trade accounts payable related to
these purchases of approximately $915,475 at April 30, 1998. The Company leases
space in Elk Grove Village, Illinois from CSI at a base rental of $33,500 per
month with an additional $7,000 per month for real estate taxes. The lease
requires the Company to pay maintenance and utility expenses. Rent and property
tax expense totaled approximately $486,000 for the year ended April 30, 1998.
The Company's investment in SMTU consists of a 42.5% ownership interest in
SMTU, which was formed on September 15, 1994, in Fremont, California, as a joint
venture to provide surface mount technology assembly services primarily to
electronic original equipment manufacturers. During fiscal year 1995, the
Company invested $49,500 in exchange for a 45% limited partnership interest in
SMTU and $2,500 in SMT Unlimited, Inc. (SMT, Inc.), which is the general partner
of SMTU, in exchange for 50% of its capital stock. During fiscal year 1997, the
Company sold 2.5% of its interest to a key employee of SMTU. One of the limited
partners of SMTU is also an equal shareholder of SMT, Inc., along with the
Company. The Company made advances to SMTU in exchange for subordinated
debentures in the face amount of $100,000 and $50,000 in 1997 and 1996,
respectively (none in 1998). In 1996, the Company also made advances to SMTU in
exchange for promissory notes in the face amount of $300,000. These promissory
notes were converted into subordinated debentures during 1997. Debentures
totaling $650,000 outstanding at April 30, 1998 bear interest at 8%, and are to
be repaid on December 31, 1999. The remaining $400,000 of these debentures bear
interest at 12% and are to be repaid on December 31, 2001. The Company
guarantees lease payments of approximately $1,633,000 for SMTU. The Company has
been indemnified by one of the other limited partners in the amount of $816,500
for the guaranteed lease payments. SMTU pays the Company a $12,500 monthly
administrative fee for administrative services. In January 1998, the Company
entered into a guaranty agreement with SMTU's lender to guaranty the obligation
of SMTU under its revolving line of credit to a maximum of $500,000 plus
interest and related costs associated with the enforcement of the guaranty. The
Company may be released from its guaranty within 120 days of any fiscal year end
if SMTU attains $500,000 of net profit after partnership distributions and
specific cash flow levels as defined in the agreement. The Company has been
indemnified by one of the limited partners for 50% of the obligation under this
guaranty.
During 1996, the Company invested $1,200 in exchange for a 12% limited
partnership interest in Lighting Components, L.P. (LC) and invested $1,300 in
Lighting Components, Inc., which is the general partner of LC, in exchange for
13% of its capital stock. At April 30, 1998, the Company had also made advances
to LC
12
<PAGE> 14
in exchange for subordinated debentures and promissory notes totaling $280,000.
Approximately $60,000 in subordinated debentures are due at various dates
beginning on October 15, 2000 and approximately $220,000 of promissory notes are
due on August 1, 2000. Both the subordinated debentures and promissory notes
bear interest at 12% with interest payments beginning on August 1, 2000. The
initial investment, subordinated debentures, promissory notes, and accrued
interest totaling approximately $335,000 are included in other long-term assets
in the accompanying balance sheet. In addition, the Company also has
miscellaneous and trade receivables from LC recorded in the consolidated balance
sheet at April 30, 1998 totaling approximately $491,000. The Company's
receivables are secured by a security interest in substantially all of LC's
assets. At April 30, 1998, the assets recorded in the Company's balance sheet
were written down by approximately $360,000 to net realizable value leaving
approximately $466,000 of assets in the consolidated balance sheet at April 30,
1998.
At April 30, 1998, 1997 and 1996, the Company had non-interest bearing
receivables of approximately $190,000, $205,000 and $223,000, respectively, for
advances to a company in which the President and Chief Executive Officer of the
Company is an investor.
PROPOSAL TO RATIFY SELECTION OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The firm of Ernst & Young LLP has audited the books and records of the
Company since its inception and the Board of Directors desires to continue the
services of this firm for the current fiscal year ending April 30, 1999.
Accordingly, the Board of Directors will recommend at the Meeting that the
stockholders ratify the appointment of the firm of Ernst & Young LLP to audit
the accounts of the Company for the current fiscal year. Representatives of that
firm are expected to be present at the Meeting with the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP.
MISCELLANEOUS
The Company's 1998 Annual Report to Stockholders is being mailed to
stockholders contemporaneously with this Proxy Statement.
COST OF SOLICITATION
All expenses incurred in the solicitation of proxies will be borne by the
Company. In addition to the use of the mails, proxies may be solicited on behalf
of the Company by directors, officers and employees of the Company or by
telephone or telecopy. The Company will reimburse brokers and others holding
Common Stock as nominees for their expenses in sending proxy material to the
beneficial owners of such Common Stock and obtaining their proxies.
PROPOSALS OF SECURITY HOLDERS
Proposals of security holders intended to be presented at the 1999 Annual
Meeting must be received by the Company for inclusion in the Company's Proxy
Statement and form of proxy relating to that meeting no later than April 16,
1999.
By order of the Board of Directors.
Linda K. Blake
Secretary
Dated: August 14, 1998
12
<PAGE> 15
SIGMATRON INTERNATIONAL, INC.
2201 LANDMEIER ROAD
ELK GROVE VILLAGE, IL 60007
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gary R. Fairhead, Linda K. Blake, Henry J.
Underwood, Jr., and each of them, with full power of substitution, attorneys and
proxies to represent the undersigned at the 1998 Annual Meeting of Stockholders
of SIGMATRON INTERNATIONAL, INC. (the "Company") to be held at the Holiday Inn
located at 1000 Busse Road, Elk Grove Village, Illinois at 10:00 a.m. local
time, on Friday, September 18 1998, or at any adjournment thereof, with all
power which the undersigned would possess if personally present, and to vote all
shares of stock of the Company which the undersigned may be entitled to vote at
said Meeting as follows:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below
(UNLESS NAME OF NOMINEE IS CROSSED OUT).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
John P. Chen D.S. Patel
2. PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION, ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING (which the Board of Directors does not know of prior to August 14,
1998)
Management recommends your vote FOR all proposals.
(Continued and to be Signed on Other Side)
<PAGE> 16
(Continued from Other Side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTORS, AND FOR THE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS, AND
WILL CONFER THE AUTHORITY IN PARAGRAPH 3.
Receipt is hereby acknowledged of the Notice of the Meeting and Proxy
Statement dated August 14, 1998, as well as a copy of the 1998 Annual Report to
Stockholders.
When signing as attorney,
executor, administrator, trustee
or guardian, please give title.
Each joint owner is requested to
sign. If a corporation or
partnership, please sign by an
authorized officer or partner.
Please sign in the same manner as
your certificate(s) is (are)
registered.
Dated , 1998.
----------------------------------
(Signature of Stockholder(s))
Please complete, date, sign and
return this proxy in the envelope
provided.
