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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 July 31, 2000
Commission File Number 0-23248
SigmaTron International, Inc.
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(Exact Name of Registrant, as Specified in its Charter)
Delaware 36-3918470
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
2201 Landmeier Road, Elk Grove Village, Illinois 60007
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(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (847) 956-8000
No Change
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(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 (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 X No
On September 11, 2000 there were 2,881,227 shares of the Registrant's Common
Stock outstanding.
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SigmaTron International, Inc.
Index
PART 1. FINANCIAL INFORMATION: Page No.
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Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets--July 31, 2000
and April 30, 2000 3
Condensed Consolidated Statements of Income--Three
Months Ended July 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows--Three
Months Ended July 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risks 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
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SIGMATRON INTERNATIONAL, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
July 31, April 30,
2000 2000
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<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash $ 2,500 $ 2,500
Accounts receivable, less allowance for doubtful
accounts of $932,459 at July 31, 2000 and
April 30, 2000 10,229,142 10,609,481
Inventories 19,033,642 17,775,199
Prepaid and other assets 623,296 494,848
Income tax receivable 358,659 --
Deferred income taxes 371,868 371,868
Other receivables 639,682 762,277
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Total current assets 31,258,789 30,016,173
Machinery and equipment, net 13,072,392 13,327,430
Due from SMTU:
Investment and advances 1,088,753 859,612
Equipment receivable 2,392,434 3,312,371
Other receivable 801,281 892,709
Other assets 1,423,510 932,597
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Total assets $50,037,159 $49,340,892
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable 8,333,824 6,841,875
Trade accounts payable - Related parties 1,116,648 874,169
Accrued expenses 1,591,627 1,916,815
Income tax payable -- --
Capital lease obligations 1,883,720 1,893,486
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Total current liabilities 12,925,819 11,526,345
Notes payable - Bank, less current portion 14,977,897 14,654,320
Capital lease obligations, less current portion 1,367,979 1,816,073
Deferred income taxes 1,277,015 1,277,015
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Total liabilities 30,548,710 29,273,753
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, 2,881,227 shares issued and outstanding 28,812 28,812
at July 31, 2000 and April 30, 2000
Capital in excess of par value 9,436,554 9,436,554
Retained earnings 10,023,083 10,601,773
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Total stockholders' equity 19,488,449 20,067,139
Total liabilities and stockholders' equity $50,037,159 $49,340,892
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</TABLE>
See accompanying notes.
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SigmaTron International, Inc.
Consolidated Statements Of Income
Unaudited
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
July 31, 2000 July 31, 1999
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<S> <C> <C>
Net sales $17,466,113 $20,185,936
Cost of products sold 16,954,328 18,120,002
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511,785 2,065,934
Selling and administrative expenses 1,324,813 1,358,442
Operating (loss) income (813,028) 707,492
Equity in net (income) loss of SMTU (229,141) (26,632)
Interest expense - Banks and capital lease obligations 426,413 486,378
Interest income - SMTU and LC (113,648) (161,004)
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Income (loss) before income tax expense (896,652) 408,750
Income (benefit) tax expense (317,963) 163,500
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Net income ($578,689) $245,250
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Net (loss) income per common share - Basic ($0.20) $0.09
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Net (loss) income per common share - Assuming dilution ($0.20) $0.09
=========== ===========
</TABLE>
See accompanying notes.
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SigmaTron International, Inc.
Consolidated Statements of Cash Flow
(Unaudited)
THREE MONTHS ENDED JULY 31,
2000 1999
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OPERATING ACTIVITIES:
Net income ($578,689) $245,250
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation 474,362 445,012
Equity in net (income) loss of affiliate (229,141) (26,631)
Gain on insurance reimbursement -- 2,453,235
Changes in operating assets and liabilities:
Accounts receivable 380,339 (3,181,590)
Inventories (1,258,443) (658,577)
Prepaid expenses and other assets 155,940 603,724
Trade accounts payable 1,491,949 (287,311)
Trade accounts payable - related parties 242,479 (520,988)
Accrued expenses (325,188) (119,249)
Income tax payable -- 124,958
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Net cash used in operating activities 353,608 (922,167)
INVESTING ACTIVITIES:
Purchases of machinery and equipment (219,326) (302,746)
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Net cash used in investing activities (219,326) (302,746)
FINANCING ACTIVITIES:
Net payments under capital lease obligations (457,859) (686,998)
Net proceeds under line of credit 323,577 1,766,692
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Net cash provided by financing activities (134,282) 1,079,694
Change in cash 0 (145,219)
Cash at beginning of period 2,500 280,071
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Cash at end of period $2,500 $134,852
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See accompanying notes.
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SigmaTron International, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
July 31, 2000
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed 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 three-month period ended July 31, 2000
are not necessarily indicative of the results that may be expected for the year
ending April 30, 2001. 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, 2000.
NOTE B - INVENTORIES
The components of inventory consist of the following:
July 31, April 30,
2000 2000
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Finished products $ 4,194,688 $ 2,837,452
Work-in-process 1,586,488 1,713,691
Raw materials 13,252,466 13,224,056
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$19,033,642 $17,775,199
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NOTE C - SMT, UNLIMITED L.P.
The Company owns 42.5% of SMT Unlimited L.P. ("SMTU"), an affiliate located in
Fremont, California. At July 31, 2000 the Company has amounts due from SMTU of
approximately $4,282,000. SMTU was profitable for the year ended April 30, 2000
and the quarter ended July 31, 2000.
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NOTE D - LIGHTING COMPONENTS
The Company has an equity interest of 12% in Lighting Components L.P. ("Lighting
Components"). The Company has amounts due from Lighting Components of
approximately $1,789,000 at July 31, 2000. In prior periods the Company had
adjusted the carrying value of the Lighting Components assets on its books
leaving approximately $1,000,000 of assets in the accompanying balance sheet at
July 31, 2000. The Company has a security interest in substantially all of
Lighting Components assets.
Lighting Components distributes a variety of electronic and molded plastic
components for use in the sign and lighting industries. Field trials for
Lighting Components new product have been positive and the level of orders is
increasing, which is critical to a turnaround in its financial performance.
NOTE E - LINE OF CREDIT
In August 1999 the Company entered into a credit arrangement which is comprised
of a revolving loan facility and a term loan. Under the revolving loan facility,
the Company may borrow certain percentages of the Company's accounts receivable
and inventory, up to a maximum of $25.0 million. The revolving loan facility is
collateralized under a loan and security agreement by substantially all of the
domestically located assets and inventory located in Mexico. The agreement
contains certain financial covenants pertaining to the maintenance of tangible
net worth, pre-tax income and other financial covenants. At the July 31, 2000
the Company was in violation of its pre-tax income covenant. The lender waived
the covenant and reset the pre-tax income covenant for future quarters.
Currently management believes the reset covenants are obtainable.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NOTE: To the extent any statements in this press release 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 the Company's
continued dependence on certain significant customers; the continued market
acceptance of products and services offered by the Company and its customers;
the activities of competitors, some of which may have greater financial or other
resources than the Company; the variability of the Company's operating results;
the availability and cost of necessary components; the continued availability
and sufficiency of the Company's credit arrangements; changes in U.S. or Mexican
regulations affecting the Company's business; the continued stability of the
Mexican economic, labor and political conditions and the ability of the Company
to manage its growth and secure financing. These and other factors which may
affect the Company's future business and results of operations are identified
throughout the Company's Annual Report on Form 10-K and risk factors contained
therein and may be detailed from time to time in the Company's filings with the
Securities and Exchange Commission. These statements speak as of the date
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-con't
of this report and the Company undertakes no obligation to update such
statements in light of future events or otherwise.
RESULTS OF OPERATIONS:
Net sales decreased for the three month period ended July 31, 2000 to
$17,466,113 from $20,185,936 for the three month period ended July 31, 1999. The
decrease in sales is attributable to a decline in the Company's customers'
demand for product. The timing and rescheduling of orders has caused the Company
to experience significant quarterly fluctuations in its revenue and earnings,
and the Company expects such fluctuations to continue. Historically, the
Company's highest level of sales are achieved in its second and third quarters.
In the Electronic Manufacturing Services industry the sales level can be
misleading as an indication of the Company's profitability. Sales levels can
fluctuate due to labor only orders compared to turnkey orders. Turnkey orders
require the Company to procure the necessary components for assembly, which
increases the selling price compared to labor only services. A turnkey order may
have a higher selling price but may not be as profitable as a labor only order.
Gross profit decreased during the three month period ended July 31, 2000 to
$511,785 or 2.9% of net sales, compared to $2,065,934 or 10.2% of net sales for
the same period in the prior fiscal year. The decrease in gross profit is the
result of two factors. The Elk Grove Village operation has experienced
manufacturing inefficiencies due to the change from batch processing to
continuous flow manufacturing. The conversion has taken longer than anticipated,
which has resulted in a negative contribution margin for the operation for the
quarter ended July 31, 2000. The Company's other manufacturing locations also
experienced a decline in sales and have generated a modest contribution margin
after overhead expenses. These two factors have negatively impacted the
Company's gross profit for the first quarter of fiscal 2001.
Selling and administrative expenses decreased to $1,324,813 or 7.6% of net sales
for the three month period ended July 31, 2000 compared to $1,358,442 or 6.7% of
net sales in the first quarter of fiscal 2000. The decrease is primarily due to
a decrease in commission expense, which is the result of a decrease in sales for
the quarter ended July 31, 2000.
Interest expense for bank debt and capital lease obligations for the three month
period ended July 31, 2000 was $426,413 compared to $486,378 for the same period
in the prior year. This decrease was attributable to a decrease in interest
expense for capital lease obligations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-con't
As a result of the factors described above, the Company incurred a net loss of
$578,689 for the three month period ended July 31, 2000 compared to net income
of $245,250 for the same period in the prior year. Basic and dilutive earnings
per share for the first fiscal quarter of 2001 were <$.20> compared to $0.09 for
the same period in the prior year.
LIQUIDITY AND CAPITAL RESOURCES:
For the three months ended July 31, 2000 the net cash provided by operations was
$353,608 compared to net cash used in operations of $922,167 for the same period
in the prior year.
Net cash used in investing activities for the three months ended July 31, 2000
was $219,326 compared to $302,746 for the quarter ended July 31, 1999.
Net cash used in financing activities was $134,282 for the three month period
ended July 31, 2000 compared to net cash provided by financing activities of
$1,079,694 in the same period last year.
In August 1999 the Company entered into a credit arrangement which is comprised
of a revolving loan facility and a term loan. Under the revolving loan facility,
the Company may borrow certain percentages of the Company's accounts receivable
and inventory, up to a maximum of $25.0 million. The revolving loan facility is
collateralized under a loan and security agreement by substantially all of the
domestically located assets and inventory located in Mexico. The agreement
contains certain financial covenants pertaining to the maintenance of tangible
net worth, pre-tax income and other financial covenants. At the July 31, 2000
the Company was in violation of its pre-tax income covenant. The lender waived
the covenant and reset the pre-tax income covenant for future quarters.
Currently management believes the reset covenants are obtainable.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS:
Not applicable
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SIGMATRON INTERNATIONAL, INC.
PART II - OTHER INFORMATION
July 31, 2000
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data schedule (EDGAR version only)
(b) No report on Form 8-K was filed during the quarter ended July 31, 2000.
10
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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 9/12/00
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Gary R. Fairhead Date
President and CEO (Principal Executive Officer)
/s/ Linda K. Blake 9/12/00
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Linda K. Blake Date
Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer and Principal
Accounting Officer)
