SigmaTron International Inc. Reports Operating Results (10-Q)
Sigmatron International Inc. has a market cap of $20.26 million; its shares were traded at around $5.3 with a P/E ratio of 6.79 and P/S ratio of 0.17.
Highlight of Business Operations:Gross profit increased during the three month period ended January 31, 2011 to $3,415,046 or 9.2% of net sales, compared to $3,379,791 or 11.1% of net sales for the same period in the prior fiscal year. Gross profit as a percent of net sales decreased for the three month period ended January 31, 2011 compared to the prior fiscal year. The decrease is a result of currency exchange losses of $229,459 due to the weakening dollar. The gross profit was also impacted by price concessions to customers. Gross profit increased for the nine month period ended January 31, 2011 to $12,299,220 or 10.9% of net sales, compared to $8,922,940 or 10.2% of net sales for the same period in the prior fiscal year. The increase in gross profit in total dollars and as a percent of net sales for the nine month periods ended January 31, 2011 compared to the prior periods is due to increased revenue levels, the mix of product shipped to various customers and continuing efforts to control operational costs. There can be no assurance that sales levels and gross margins will not decrease in future quarters. Going forward the Company expects continued pressure on its margins as raw material costs continue to increase and the Company has limited or delayed ability to pass along the increases to its customers. The Company will continue to work with our customers and vendors in efforts to reduce cost and to try to minimize the effect on margins.
Selling and administrative expenses increased to $2,691,460 for the three month period ended January 31, 2011 compared to $2,503,571 in the same period in the prior fiscal year; however, the percentage of net sales represented by such expenses dropped to 7.3% of net sales from 8.2% of net sales, during those respective periods. Selling and administrative expenses increased to $8,734,478 for the nine month period ended January 31, 2011 compared to $7,448,821 in the same period in the prior fiscal year; however, the percentage of net sales represented by such expenses dropped to 7.7% of net sales from 8.5% of net sales, during those respective periods. The increase in total dollars of such expenses for the three month and nine month periods ended January 31, 2011, was approximately $447,550 and $1,595,189, respectively, and is primarily due to a restoration of salary reductions previously implemented in response to the downturn in business. Bonus expense, insurance, travel and professional fees also increased for the three and nine month periods ended January 31, 2011. The increase in selling and administrative expenses in total dollars for the three and nine month periods
Net income decreased to $254,818 for the three month period ended January 31, 2011 compared to $415,468 for the same period in the prior year. Net income increased to $1,698,857 for the nine months ended January 31, 2011 compared to $530,291 in the same period last year. Basic and diluted earnings per share for the third fiscal quarter of 2011 were both $0.07 compared to basic and diluted earnings per share of $0.11 for the same period in the prior year. Basic and diluted earnings per share for the nine months ended January 31, 2011 were both $0.44 compared to basic and diluted earnings per share of $0.14 and $0.13, respectively, for the same period in the prior year.
In January 2010, the Company entered into a senior secured credit facility with Wells Fargo Bank (Wells Fargo), with a credit limit up to $25 million. The term of the credit facility initially extended for two years, through January 8, 2012, and allows the Company to choose among interest rates at which it may borrow funds. The interest rate can be the prime rate plus one half percent (3.75% at January 31, 2011) or LIBOR plus two and three quarter percent (3.1% at January 31, 2011), which is paid monthly. 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. In August 2010, the Company and Wells Fargo increased the Companys senior secured credit facility from $25 million to $30 million. On January 31, 2011, the Company and Wells Fargo agreed to extend the term of its credit facility through September 30, 2013 and amend a financial covenant. The Company was in compliance with its financial covenants at January 31, 2011. As of January 31, 2011, there was a $25,897,930 outstanding balance under the credit facility and approximately $4,100,000 of unused availability.
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 January 31, 2011 was $2,400,004. As of January 8, 2010, the Company repaid the prior Bank of America mortgage which equaled $2,565,413, using proceeds from the Wells Fargo mortgage and senior secured credit facility.
On August 20, 2010 and October 26, 2010, the Company entered into two capital leasing transactions to purchase equipment (a lease finance agreement and a sale lease back agreement) with Wells Fargo Equipment Finance, Inc. totaling $1,150,582. The term of the lease finance agreement of $315,252 extends to September 2016 with monthly payments of $4,973 and a fixed interest rate of 4.28%. The term under the sale lease back agreement of $835,330 extends to August 2016 with monthly payments of $13,207 and a fixed interest rate of 4.36%. The net book value at January 31, 2011 for the equipment under the lease finance agreement and sale lease back agreement was $306,495 and $783,416, respectively.
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