Sigmatron International Inc. has a market cap of $24.5 million; its shares were traded at around $6.41 with a P/E ratio of 17.8 and P/S ratio of 0.2. SGMA is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Selling and administrative expenses increased to $3,053,186, or 8.0% of net sales for the three month period ended July 31, 2010 compared to $2,576,841, or 9.8% of net sales in the same period in the prior fiscal year. The decrease in selling and administrative expenses as a percent of net sales is the result of the increased revenue levels for the period. The increase in total dollars for the three month period ended July 31, 2010, is primarily due to a restoration of salary reductions previously implemented in response to the downturn in business, bonus expense, travel, professional fees and depreciation expense totaling approximately $537,650. The increase in selling and administrative expenses in total dollars for the three month period ended July 31, 2010 was partially offset by a decrease of approximately $61,300 in amortization expense and other selling and administrative expenses.
Net income from operations increased to $857,989 for the three month period ended July 31, 2010 compared to a net loss from operations of $402,475 for the same period in the prior year. Basic and diluted earnings per share for the first fiscal quarter of 2011 were $0.22, compared to basic and diluted loss per share of $0.11 for the same period in the prior year.
Cash flow provided by operating activities was $2,176,110 for the three months ended July 31, 2009. During the first three months of fiscal year 2010, cash flow provided by operating activities was due to a decrease in inventory and the result of the non-cash effect of depreciation and amortization and an increase in accounts payable. The decrease in inventory of $2,076,542 was the result of our customers decreased demand for product based on their forecasts, which we believe was attributable to the global economic slowdown and financial crisis. Net cash provided by operations was partially offset by a $1,530,562 increase in accounts receivable. The increase in accounts receivable was due to the timing of payments from a significant customer.
The Company has a senior secured credit facility with Wells Fargo Bank, National Association (Wells Fargo), with a credit limit up to $25 million. The term of the credit facility extends for two years, through January 8, 2012, and allows the Company to choose the interest rates at which it may borrow funds. The interest rate can be the prime rate plus one half percent (3.75% at July 31, 2010) or LIBOR plus two and three quarter percent (3.1% at July 31, 2010). The LIBOR rate has a floor of 35%. The credit facility is collateralized by substantially all of the domestically located assets of the Company and requires the Company to be in compliance with several financial covenants. The Company was in compliance with its financial covenants at July 31, 2010. As of July 31, 2010, there was $22,743,099 outstanding balance under the credit facility and approximately $2,250,000 of unused availability. In August 2010, the Company and Wells Fargo increased the Companys senior secured credit facility from $25 million to $30 million.
The Company entered into a mortgage agreement on January 8, 2010, in the amount of $2,500,000 with Wells Fargo to refinance the property that serves as the Companys corporate headquarters and its Illinois manufacturing facility. The note bears interest at a fixed rate of 6.42% per year and is payable in sixty monthly installments. A final payment of approximately $2,000,000 is due on or before January 8, 2015. The outstanding balance as of July 31, 2010 was $2,450,002. At July 31, 2009, there was $2,626,375 outstanding under a mortgage agreement with Bank of America.
extends to January 18, 2012 with monthly payments of $55,872 and a fixed interest rate of 4.29%. At July 31, 2010, the balance outstanding of Wells Fargo leases was $919,946. At July 31, 2009 there was $1,551,316 outstanding balance under capital leases with Bank of America. The Company has other capital leases with balances outstanding in the amount of $309,413 and $643,323 at July 31, 2010 and 2009, respectively.
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