2011 Annual Report
Global Footprint
Prototype to High Volume
Low-Tech / Thru-Hole
High-Tech / BGA
DFM / DFT
International Procurement
Supply Chain Solutions
Conformal Coating
Parylene Coating
Clean Room
Rework and Repair
LCD integration
Box Build
Repair Depot
Fulfillment
Corporate offiCes
SigmaTron International, Inc.
2201 Landmeier Road
Elk Grove Village, IL 60007
tel 847.956.8000
fax 847.956.8001
investor relations 800.700.9095
www.sigmatronintl.com
SigmaTron International Inc. | 2011 Annual Report
ABOUT SIGMATRON
WHERE GLoBAL MANUFACTURING MEETS INNoVATIoN AND SERVICE.
GLoBAL PRESENCE
one world, one source, one partner—
SigmaTron. Our growing number of
strategic locations in the USA, Mexico
and Asia strengthen our customers’
supply chain.
FLExIBLE MANUFACTURING
Versatility counts. SigmaTron’s
flexible global locations support
everything from prototype and
short-run to high volume.
Manufacturing transfers
with ease to the best facility
for the job.
INTERNATIoNAL RESoURCES
Led by our international purchasing
office in Taiwan, SigmaTron’s worldwide
procurement network delivers world-class
quality, reduced costs and accelerated
time-to market.
YoUR PRoDUCT. oUR CAPABILITIES.
SigmaTron puts your idea to work. Our
continually expanding in-house capabilities,
together with strong, outside engineering
relationships, let us produce a product
with integrity from concept to reality.
DIVERSE MARKETS
Diverse and growing—that’s our
customer base. Aerospace and Defense;
Appliances; Fitness and Gaming;
Semiconductor, Industrial and Consumer
Electronics; Medical and Life Sciences;
and Telecommunications–each market
relies on SigmaTron.
PERSoNAL SERVICE
Everyone says it. We mean it.
We made a commitment to
customer service on day one.
Our worldwide operations are
structured regionally, with a local
Project Manager for every
account. SigmaTron is the
best of both worlds.
SigmaTron International Inc. | 2011 Annual Report
SigmaTron International Inc. | 2011 Annual Report
Officers
Gary R. Fairhead*
President and
Chief Executive Officer
Linda K. Frauendorfer*
Chief Financial Officer,
Vice President Finance,
Treasurer and Secretary
Gregory A. Fairhead*
Executive Vice President,
and Assistant Secretary
John P. Sheehan*
Vice President,
Director of Supply Chain
and Assistant Secretary
Daniel P. Camp*
Vice President,
Acuna Operations
Board of Directors
John P. Chen 2,3
Chairman of the Board
SigmaTron International, Inc.
Former President,
SKD Automotive Group
Gary R. Fairhead
President and
Chief Executive Officer,
SigmaTron International Inc.
Rajesh B. Upadhyaya*
Executive Vice President,
West Coast Operations
Hom-Ming Chang*
Vice President,
China Operations
Curtis Campbell
Vice President of Sales,
West Coast Operations
Yousef M. Heidari
Vice President,
Engineering
Donald G. Madsen
Vice President,
Customer Service
Union City Operations
Dennis P. McNamara
Vice President,
Engineering
Stephen H. McNulty
Vice President,
Sales
Thomas F. Rovtar
Vice President,
Information Technology
Keith D. Wheaton
Vice President,
Business Development
West Coast Operations
*Executive Officers
Carl A. Zemenick 1,2,3
Former President and CEO,
GF Office Furniture, LTD LP
Thomas W. Rieck 1,2
Partner,
Rieck and Crotty, P.C.
Dilip S. Vyas 1,3
Independent Consultant
1 Member of the
Audit Committee
2 Member of the
Compensation
Committee
3 Member of the
Nominating
Committee
Corporate Information
SEC Counsel
Greenberg Traurig, LLP
77 West Wacker Drive
Chicago, Illinois 60601
Corporate Counsel
Howard & Howard PLLC
200 South Michigan Avenue
Chicago, Illinois 60604
Independent Public
Accountants
BDO USA, LLP
233 North Michigan Avenue
Chicago, Illinois 60601
Form 10-K
If you would like a free copy of
the Form 10-K report filed
with the Securities and
Exchange Commission, please
call Linda K. Frauendorfer at
the SigmaTron corporate office,
1.800.700.9095.
Stock Transfer Agent
and Registrar
American Stock Transfer & Trust
Company
59 Maiden Lane
New York, New York 10038
Stock Information
The Company’s common stock has
been trading on the Nasdaq System
under the symbol SGMA since the
Company’s initial public offering in
February 1994. The Company has
more than 3.8 million shares of
common stock outstanding.
The Company has not paid cash
dividends on its common stock
since completing its February 1994
initial public offering and does not
intend to pay any dividends in the
foreseeable future.
.
.
C
G
s
k
r
o
W
m
a
e
r
D
:
I
G
N
T
N
R
P
I
i
n
e
t
s
u
a
B
n
h
o
J
l
:
Y
H
P
A
R
G
O
T
O
H
P
s
r
a
e
h
s
e
B
h
a
r
a
S
,
y
l
r
e
k
c
A
y
r
a
M
:
I
N
G
S
E
D
/
I
N
O
T
C
E
R
D
T
R
A
I
g
n
i
t
l
u
s
n
o
C
y
l
r
e
k
c
A
:
M
R
I
F
SigmaTron International Inc. | 2011 annual report
A Model of Service
for cuSToMerS whoSe proDucTS are playerS in The global MarkeT,
SigmaTron international is a model of designability, manufacturability
and customer service.
A Model for
DeSignabiliTy
A Model for
ManufacTurabiliTy
A Model for
flexibiliTy
SigmaTron relies on expanding
in-house capabilities and strong
engineering relationships. our
customers rely on SigmaTron.
SigmaTron develops products
for industries that demand
innovation. our plants and
capabilities are at the cutting
edge. our employees are ahead
of the learning curve.
Before SigmaTron produces
creative solutions, we ask essential
questions. The product is well
designed—can it be manufac-
tured efficiently? does SigmaTron
have the testing technologies the
product requires? Will SigmaTron
meet the schedule, through
manufacturing to market?
SigmaTron’s manufacturing
process includes functional
testing, boundary scanning and
other methods of assuring that
products meet industry sector
standards—and ours.
With strategic locations worldwide,
including the USa, asia and mexico,
SigmaTron has the best facility for
the job. our procurement experts
in Taiwan locate high–quality,
cost-efficient materials for the
most complex products.
Product manufacturing takes
your product from prototype to
market. SigmaTron assures value
and usefulness for the lifetime of
a product.
every SigmaTron customer has
a local Project manager who
provides informed and timely
service, including effective
one-on-one communication,
throughout the time-to-market.
SigmaTron gets up to speed
quickly, and if an unexpected
question arises at any point, we
have a prompt, creative solution.
SigmaTron produces the best
possible product in the most
efficient and cost-effective way
possible. The process is seamless,
all the way to fulfillment.
SigmaTron inTernaTional iS a model of Service.
The anSwer iS yeS.
SigmaTron International Inc. | 2011 Annual Report
SigmATRon inTeRnATionAl’S cuSTomeR bASe includes markets
and companies whose products are at the leading edge of innovation
and growth and integral to the health of the economy worldwide.
medical / life ScienceS
has an ever-growing number of
applications; SigmaTron
manufactures advanced clinical
instruments and diagnostic systems.
Telecom
aeroSpace / defenSe
is a new high-stakes market
is
sector
sector for SigmaTron, requiring
equipment
equipment that meets and
exceeds military requirements
exceeds
forfor
for documentation and tracking.
uses
in all its forms uses
uses
forms uses
forms
forms
sophisticated, ever-evolving
technology; customers in this
growing sector look to
SigmaTron for routers and
other essential equipment.
conSumer elecTronicS
Home applianceS
essential to everyday life,
including dishwashers,
ranges, washers and dryers,
do their work using
SigmaTron’s dependable,
high-quality controls.
fiTneSS equipmenT
continues to grow in
popularity; SigmaTron
assembles the controls
for treadmills, exercise
bikes and cross trainers
to meet growing market
demand worldwide.
companies use
companies
companies
companies
companies
companies use
companies
companies
companies
companies
companies use
SigmaTron’s
SigmaTron’s
SigmaTron’s
SigmaTron’s
SigmaTron’s
SigmaTron’s
SigmaTron’s
SigmaTron’s
SigmaTron’s
SigmaTron’s
SigmaTron’s
SigmaTron’s
SigmaTron’s
SigmaTron’s
SigmaTron’s
SigmaTron’s
manufacturing
manufacturing
manufacturing
manufacturing
manufacturing
manufacturing
manufacturing
manufacturing
manufacturing
manufacturing
manufacturing
manufacturing
manufacturing
manufacturing
manufacturing
manufacturing
expertise to
expertise
expertise
expertise
expertise
expertise
expertise
expertise
expertise
expertise
expertise to
expertise
expertise to
expertise
expertise
expertise
produce battery
produce
produce
produce
produce
produce
produce
battery
produce battery
battery
produce battery
produce electric
produce
produce
produce
back-up sump
back-up
back-up
back-up
back-up
back-up
back-up sump
back-up
sump
back-up sump
bicycles and
bicycles
bicycles
pumps and
pumps
pumps
pumps
pumps and
and
pumps and and
battery back-up
battery
battery
battery
electric bicycles.
electric
electric
electric
electric
electric
electric
electric
bicycles.
electric bicycles.
sump pumps.
sump
sump
SemiconducTor equipmenT
requires accuracy and
dependability; SigmaTron
manufactures process
control and yield
management equipment that
meets or exceeds industry
standards.
induSTrial elecTronicS
GaminG equipmenT
have evolved
have
from
from mechanical to
increasingly
increasingly advanced
electronic systems;
electronic
SigmaTron manufactures
SigmaTron
motor controls, power
motor
supplies and other
supplies
sophisticated controls.
sophisticated
comes in increasingly
comes
sophisticated forms;
sophisticated
SigmaTron’s
SigmaTron’s circuit
board assemblies
power slot machines,
lighting displays
and
and other gaming
applications.
SigmaTron International Inc. | 2011 annual report
Comprehensive quality is the mark of sigmatron’s produCts. Five global
locations offer a full range of testing technologies, allowing us to develop creative
customer solutions and follow through with flexible, cost-effective manufacturing.
our worldwide resource procurement
network provides increasingly short-
er time-to-market; creates strategic
partnerships that assure consistency
and cost savings over time; and gives
customers access to new markets
around the world.
sigmatron serves nine major
industry sectors, more than in
any year since the company
went public in 1994.
our expertise ranges from aero-
space and defense to industrial
and household appliances, and
we adhere to the standards of
major certifying organizations.
sigmatron meets the requirements
of the International Organization
for Standardization (ISO) and is
ISO 9001:2008–certified; registered
with the US government to meet
International Traffic in Arms Regula-
tions (ITAR); certified ISO-13485 for
the medical / life sciences industry;
certified AS9100B for the aerospace
industry; and has processes in
place to assure continual systematic
improvements and conformity
to changing statutory and
regulatory requirements.
sigmatron is compliant with all
certifications that support our
commitment to safety and the
environment. Our knowledgeable
global workforce, almost 2,000
strong, drives and maintains our
commitment to quality and service.
SigmaTron International Inc. | 2011 Annual Report
One cuSTOmer. ONe prOjeCT. One wORld.
sigmaTron International has locations and plants around the globe that
encourage productive partnerships.
every customer has a unique vision with unique requirements, and SigmaTron’s
facilities are equipped for flexibility. every project has a SigmaTron manager
who will find exactly the right combination of capabilities and resources. every
one of our employees is dedicated to quality and service.
One prOjecT. One fOcus.
elk Grove Village, Illinois, USA
INTerNATIONAL
prOCUreMeNT
Taiwan
Taipei
Union City, California, USA
LOCATIONS
usA
elk Grove Village,
Illinois
union city,
california
Del rio,
Texas
china
Wujiang-Suzhou
Mexico
Acuna
Tijuana
Taipei, Taiwan
Wujiang-Suzhou, China
Tijuana, Mexico
Del rio, Texas USA
Acuna, Mexico
CerTIFICATIONS
ISO9001: 2008
ISO-13485
AS9100B
ITAr
SigmaTron International Inc. | 2011 Annual Report
ABOUT SIGMATRON
WHERE GLoBAL MANUFACTURING MEETS INNoVATIoN AND SERVICE.
GLoBAL PRESENCE
one world, one source, one partner—
SigmaTron. Our growing number of
strategic locations in the USA, Mexico
and Asia strengthen our customers’
supply chain.
FLExIBLE MANUFACTURING
Versatility counts. SigmaTron’s
flexible global locations support
everything from prototype and
short-run to high volume.
Manufacturing transfers
with ease to the best facility
for the job.
INTERNATIoNAL RESoURCES
Led by our international purchasing
office in Taiwan, SigmaTron’s worldwide
procurement network delivers world-class
quality, reduced costs and accelerated
time-to market.
YoUR PRoDUCT. oUR CAPABILITIES.
SigmaTron puts your idea to work. Our
continually expanding in-house capabilities,
together with strong, outside engineering
relationships, let us produce a product
with integrity from concept to reality.
DIVERSE MARKETS
Diverse and growing—that’s our
customer base. Aerospace and Defense;
Appliances; Fitness and Gaming;
Semiconductor, Industrial and Consumer
Electronics; Medical and Life Sciences;
and Telecommunications–each market
relies on SigmaTron.
PERSoNAL SERVICE
Everyone says it. We mean it.
We made a commitment to
customer service on day one.
Our worldwide operations are
structured regionally, with a local
Project Manager for every
account. SigmaTron is the
best of both worlds.
SigmaTron International Inc. | 2011 Annual Report
SigmaTron International Inc. | 2011 Annual Report
Officers
Gary R. Fairhead*
President and
Chief Executive Officer
Linda K. Frauendorfer*
Chief Financial Officer,
Vice President Finance,
Treasurer and Secretary
Gregory A. Fairhead*
Executive Vice President,
and Assistant Secretary
John P. Sheehan*
Vice President,
Director of Supply Chain
and Assistant Secretary
Daniel P. Camp*
Vice President,
Acuna Operations
Board of Directors
John P. Chen 2,3
Chairman of the Board
SigmaTron International, Inc.
Former President,
SKD Automotive Group
Gary R. Fairhead
President and
Chief Executive Officer,
SigmaTron International Inc.
Rajesh B. Upadhyaya*
Executive Vice President,
West Coast Operations
Hom-Ming Chang*
Vice President,
China Operations
Curtis Campbell
Vice President of Sales,
West Coast Operations
Yousef M. Heidari
Vice President,
Engineering
Donald G. Madsen
Vice President,
Customer Service
Union City Operations
Dennis P. McNamara
Vice President,
Engineering
Stephen H. McNulty
Vice President,
Sales
Thomas F. Rovtar
Vice President,
Information Technology
Keith D. Wheaton
Vice President,
Business Development
West Coast Operations
*Executive Officers
Carl A. Zemenick 1,2,3
Former President and CEO,
GF Office Furniture, LTD LP
Thomas W. Rieck 1,2
Partner,
Rieck and Crotty, P.C.
Dilip S. Vyas 1,3
Independent Consultant
1 Member of the
Audit Committee
2 Member of the
Compensation
Committee
3 Member of the
Nominating
Committee
Corporate Information
SEC Counsel
Greenberg Traurig, LLP
77 West Wacker Drive
Chicago, Illinois 60601
Corporate Counsel
Howard & Howard PLLC
200 South Michigan Avenue
Chicago, Illinois 60604
Independent Public
Accountants
BDO USA, LLP
233 North Michigan Avenue
Chicago, Illinois 60601
Form 10-K
If you would like a free copy of
the Form 10-K report filed
with the Securities and
Exchange Commission, please
call Linda K. Frauendorfer at
the SigmaTron corporate office,
1.800.700.9095.
Stock Transfer Agent
and Registrar
American Stock Transfer & Trust
Company
59 Maiden Lane
New York, New York 10038
Stock Information
The Company’s common stock has
been trading on the Nasdaq System
under the symbol SGMA since the
Company’s initial public offering in
February 1994. The Company has
more than 3.8 million shares of
common stock outstanding.
The Company has not paid cash
dividends on its common stock
since completing its February 1994
initial public offering and does not
intend to pay any dividends in the
foreseeable future.
.
.
C
G
s
k
r
o
W
m
a
e
r
D
:
I
G
N
T
N
R
P
I
i
n
e
t
s
u
a
B
n
h
o
J
l
:
Y
H
P
A
R
G
O
T
O
H
P
s
r
a
e
h
s
e
B
h
a
r
a
S
,
y
l
r
e
k
c
A
y
r
a
M
:
I
N
G
S
E
D
/
I
N
O
T
C
E
R
D
T
R
A
I
g
n
i
t
l
u
s
n
o
C
y
l
r
e
k
c
A
:
M
R
I
F
2011 Annual Report
Global Footprint
Prototype to High Volume
Low-Tech / Thru-Hole
High-Tech / BGA
DFM / DFT
International Procurement
Supply Chain Solutions
Conformal Coating
Parylene Coating
Clean Room
Rework and Repair
LCD integration
Box Build
Repair Depot
Fulfillment
Corporate offiCes
SigmaTron International, Inc.
2201 Landmeier Road
Elk Grove Village, IL 60007
tel 847.956.8000
fax 847.956.8001
investor relations 800.700.9095
www.sigmatronintl.com
To Our Stockholders
For SigmaTron fiscal 2011 was a mirror image of fiscal 2010. At the beginning of fiscal
year 2011, we continued the momentum that began in fiscal 2010 and posted excellent
results for the first two quarters. At the start of the third quarter, our momentum turned
downward and has continued trending downward. Lower revenue, together with
continuing margin pressures from our customers and our supply chain, have negatively
affected our performance for the second half of the year.
When we compare our performance in fiscal 2011 to fiscal 2010, this year’s results are
lower on an EPS basis in spite of significantly higher revenue. However, two major
events skewed these results. In fiscal 2010, an insurance settlement affected our income
Significantly. In fiscal 2011, relocating our plant in Hayward, California to nearby Union
City required a great expense. Adjusting the results of fiscal 2010 and 2011 for each
event shows that continuing operations improved overall in fiscal 2011. Although we are
pleased with these results, our performance during the second half of the year and the
current short-term outlook have dampened our enthusiasm.
That said, and in spite of the slowing economy, we can report significant
accomplishments during fiscal 2011. In January 2011, we were successful in extending
our financing arrangement with Wells Fargo Bank. Our arrangement now extends to
September 2013, giving us access to the working capital we need to continue to grow
the Company. We also relocated our California operation from Hayward to Union City,
and have invested in a team and infrastructure at the new location, giving us an
opportunity to grow our business in more attractive, long-term markets. In fiscal 2011,
we also attracted new customers at each location and continue to work on several
exciting potential new customer relationships in markets that have the potential to further
diversify our customer base.
Following are updates on the activities at our various locations:
Elk Grove Village, Illinois
Our Elk Grove Village plant had a difficult year. Several long-term, domestic customers
made the decision to move their business internal to SigmaTron from our plant in Elk
Grove Village to our facilities in Acuña, Mexico. Although this decision is good news for
SigmaTron as a whole and plays to our footprint, which is one of our strengths, it also
had a negative effect on the Elk Grove Village plant’s year-end results. In response, Elk
Grove Village attracted a significant new customer, and we have begun the process of
finding several others. During the year at Elk Grove Village, we finalized our contract
with our union, which now extends to December 1, 2012. The union has been with
SigmaTron for many years, and we appreciate the excellent working relationship that
has developed. Fiscal 2012 will continue to be challenging, but we are confident that Elk
Grove Village will re-establish itself as a positive contributor to our bottom line.
Acuña, Mexico and Del Rio, Texas
Our largest operation—Acuña, Mexico-remains our most successful. During fiscal 2011,
Acuna continued to grow its revenue, partly from business that transferred from Elk
Grove Village. Last year’s worldwide economic trends have continued to make Mexico
an attractive manufacturing location, particularly for products that supply North American
markets. We believe that our relatively low cost structure, complemented by our long-
term group of core employees, will allow Acuña to continue to grow. Although concerns
about violence in Mexico are very real, Acuña has reported fewer incidents than other
locations in Mexico. We are optimistic that this will continue to be the case.
Suzhou—Wujiang, China
Our operation in Wujiang, China had an interesting fiscal 2011. Several new customers
in Wujiang released new orders producing a dramatic increase in sales to these
customers and the new markets they represent. The challenge in China continues to be
a rapidly growing cost structure, which has created margin pressure for our Wujiang
customers. We expect that this trend will continue for several years at a minimum, and in
an attempt to offset some of the pressure, we are looking for ways to increase our sales
to companies in China, while maintaining the business we currently export from China.
Towards that end, we are looking at setting up a new company in China that would allow
our customers to pay us in Chinese renminbi (RMB). We believe that the ability to accept
payment in RMB will further increase our sales and diversify the markets we serve.
Union City, California
Our greatest change in fiscal 2011 took place in the second quarter in California, when
we relocated our plant from Hayward to Union City. The new facility is superior in terms
of efficiency, particularly in our ability to layout production lines and other manufacturing
processes. We accomplished the relocation in a very short period of time and without
any disruption to our customers. We believe that the new Union City facility will enhance
our efforts to grow our business in the industry sectors of medical and life sciences, and
aerospace and defense industries; recent quoting activity seems to be supporting that
belief.
Tijuana, Mexico
I am pleased to report that our facility in Tijuana made significant progress during fiscal
2011. Revenues increased during the second half of the year, in part because we
transferred business from Union City. Tijuana also has several new opportunities, which
I believe will come to fruition. As I mentioned when discussing Acuña, we believe that
Mexico has the potential to be the manufacturing location of choice for North America,
which bodes well for Tijuana over the long term.
Taipei, Taiwan
As in previous years, our international purchasing office in Taipei remains an important
asset and continues to support all of our manufacturing operations. The cost of raw
materials remains the largest percentage of our sales dollar, and it is critical that we
source raw material competitively, or better yet, that we offer cost savings to our
customers. We have continued to grow this operation modestly, with the goal of
supporting increased customer supply chain requirements.
In summary, the results of fiscal 2011 are satisfactory, but the trend for the second half
of the year is disappointing. Our perspective is that the economy is stable but sluggish
and growing our operations without increasing capital expenditures remains our priority.
Assuming that the economy does improve, we believe that we are attractive vis-a-vis our
competition and well positioned for the future.
Once again I want to thank our employees, our Board of Directors and our professional
firms for their continuing support and dedication. I also thank our customers, both new
and long-term, for their confidence in us. Our supply chain deserves special thanks for
continuing to help us lower our working capital requirements, and we are grateful for the
confidence Wells Fargo has shown by extending our financial arrangement for more
than two years. In particular, we appreciate our Stockholders and their continuing
support in a volatile worldwide economy.
Sincerely,
Gary R. Fairhead
President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ
o
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
For the fiscal year ended April 30, 2011.
Or
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
For the transition period from to .
Commission file number 0-23248
SIGMATRON INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
2201 Landmeier Rd., Elk Grove Village, IL
(Address of principal executive offices)
36-3918470
(I.R.S. Employer
Identification Number)
60007
(Zip Code)
Registrant’s telephone number, including area code: 847-956-8000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock $0.01 par value per share
The NASDAQ Capital Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. o Yes þ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. o Yes þ No
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. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). o Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company þ
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act.) o Yes þ No
The aggregate market value of the voting common equity held by non-affiliates of the registrant as of October 31, 2010
(the last business day of the registrant’s most recently completed second fiscal quarter) was $17,919,601 based on the
closing sale price of $5.58 per share as reported by Nasdaq Capital Market as of such date.
The number of outstanding shares of the registrant’s Common Stock, as of July 19, 2011, was 3,864,274.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections or portions of the definitive proxy statement of SigmaTron International, Inc., for use in connection with
its 2011 annual meeting of stockholders, which the Company intends to file within 120 days of the fiscal year ended
April 30, 2011, are incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS
PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
PROPERTIES
LEGAL PROCEEDINGS
REMOVED AND RESERVED
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
CONTROLS AND PROCEDURES
OTHER INFORMATION
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
SIGNATURES
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
2
3
9
14
14
15
15
15
16
16
25
25
25
25
26
26
26
26
26
26
27
30
Table of Contents
ITEM 1. BUSINESS
CAUTIONARY NOTE:
PART 1
In addition to historical financial information, this discussion of the business of SigmaTron International, Inc., its
wholly-owned subsidiaries Standard Components de Mexico S.A., AbleMex S.A. de C.V., and SigmaTron International
Trading Co., and its wholly-owned foreign enterprise Wujiang SigmaTron Electronics Co., Ltd. (“SigmaTron China”) and
international procurement office SigmaTron Taiwan (collectively the “Company”) and other Items in this Annual Report
on Form 10-K contain forward-looking statements concerning the Company’s business or results of operations. Words
such as “continue,” “anticipate,” “will,” “expect,” “believe,” “plan,” and similar expressions identify forward-looking
statements. These forward-looking statements are based on the current expectations of the Company. Because these
forward-looking statements involve risks and uncertainties, the Company’s plans, actions and actual results could differ
materially. Such statements should be evaluated in the context of the risks and uncertainties inherent in the Company’s
business including, but not necessarily limited to, the Company’s continued dependence on certain significant customers;
the continued market acceptance of products and services offered by the Company and its customers; pricing pressures
from our customers, suppliers and the market; the activities of competitors, some of which have greater financial or other
resources than the Company; the variability of our operating results; the results of long-lived assets impairment testing; the
variability of our customers’ requirements; the availability and cost of necessary components and materials; the ability of
the Company and our customers to keep current with technological changes within our industries; regulatory compliance;
the continued availability and sufficiency of our credit arrangements; changes in U.S., Mexican, Chinese or Taiwanese
regulations affecting the Company’s business; the turmoil in the global economy and financial markets; the stability of the
U.S., Mexican, Chinese and Taiwanese economic, labor and political systems and conditions; currency exchange
fluctuations; the expenses and savings from the relocation of our Hayward, California facility to Union City, California;
and the ability of the Company to manage its growth. 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 as risk
factors 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 of such filings, and the Company undertakes no obligation to update such statements
in light of future events or otherwise unless otherwise required by law.
Overview
The Company is a Delaware corporation, which was organized on November 16, 1993, and commenced operations
when it became the successor to all of the assets and liabilities of SigmaTron L.P., an Illinois limited partnership, through a
reorganization on February 8, 1994.
The Company operates in one business segment as an independent provider of electronic manufacturing services
(“EMS”), which includes printed circuit board assemblies and completely assembled (box-build) electronic products. In
connection with the production of assembled products, the Company also provides services to its customers, including
(1) automatic and manual assembly and testing of products; (2) material sourcing and procurement; (3) design,
manufacturing and test engineering support; (4) warehousing and shipment services; and (5) assistance in obtaining
product approval from governmental and other regulatory bodies. The Company provides these manufacturing services
through an international network of facilities located in the United States, Mexico, China and Taiwan.
The Company provides manufacturing and assembly services ranging from the assembly of individual components to
the assembly and testing of box-build electronic products. The Company has the ability to produce assemblies requiring
mechanical as well as electronic capabilities. The products assembled by the Company are then incorporated into finished
products sold in various industries, particularly appliance,
3
Table of Contents
consumer electronics, gaming, fitness, industrial electronics, life sciences, semiconductor, telecommunications and
automotive.
The Company operates manufacturing facilities in Elk Grove Village, Illinois; Union City, California; Acuna and
Tijuana, Mexico; and Suzhou-Wujiang, China. The Company maintains materials sourcing offices in Elk Grove Village,
Illinois; Union City, California; and Taipei, Taiwan. The Company also has warehouses in Del Rio, Texas.
The Company experienced pricing pressures from both its customer and vendors and its margins continued to be
reduced in fiscal 2011, specifically in the second half of fiscal 2011. The Company unfortunately sees this trend
continuing for the balance of calendar year 2011.
During fiscal 2011 the Company relocated its California operation from Hayward to Union City without disruption in
support for its customers. The new plant layout has increased productivity and assisted in attracting interest from many
new customers including some in the aviation, defense and medical markets. The Company will continue to target these
markets in fiscal 2012. The Company has gained new customers at all locations during fiscal 2011 and in most cases has
started production. Most production launches were later than expected, but show promise and the Company believes they
will assist with increasing revenues and profits in fiscal 2012.
Products and Services
The Company provides a broad range of manufacturing related outsourcing solutions for its customers on both a
turnkey basis (material purchased by the Company) and consignment basis (material provided by the customer). These
solutions incorporate the Company’s knowledge and expertise in the EMS industry to provide its customers with advanced
manufacturing technologies and high quality, responsive and flexible manufacturing services. The Company’s EMS
solutions provide services from product inception through the ultimate delivery of a finished good. Such technologies and
services include the following:
Supply Chain Management. The Company is primarily a turnkey manufacturer and directly sources all, or a substantial
portion, of the components necessary for its product assemblies, rather than receiving the raw materials from its customers
on consignment. Turnkey services involve a greater investment in resources and an increased inventory risk compared to
consignment services. Supply chain management includes the purchasing, management, storage and delivery of raw
components required for the manufacture or assembly of a customer’s product based upon the customer’s orders. The
Company procures components from a select group of vendors which meet its standards for timely delivery, high quality
and cost effectiveness, or as directed by its customers. Raw materials used in the assembly and manufacture of printed
circuit boards and electronic assemblies are generally available from several suppliers, unless restricted by the customer.
The Company does not enter into long-term purchase agreements with the majority of its major or single-source suppliers.
The Company believes short-term purchase orders with its suppliers provide the flexibility needed to source inventory
based on the needs of its customers.
The Company believes that its ability to source and procure competitively priced, quality components is critical to its
ability to effectively compete. In addition to obtaining materials in North America, the Company uses its international
procurement office (“IPO”) in Taiwan and agents to source materials from the Far East. The Company believes its IPO
allows it to more effectively manage its relationships with key suppliers in the Far East by permitting it to respond more
quickly to changes in market dynamics, including fluctuations in price, availability and quality.
Assembly and Manufacturing. The Company’s core business is the assembly of printed circuit board assemblies
through the automated and manual insertion of components onto raw printed circuit boards. The Company offers its
assembly services using both pin-through-hole (“PTH”) and surface mount (“SMT”) interconnect technologies at all of its
manufacturing locations. SMT is an assembly process which allows the placement of a higher density of components
directly on both sides of a printed circuit board. The SMT process is an advancement over the mature PTH technology,
which normally permits electronic components to be attached to only one side of a printed circuit board by inserting the
component into holes drilled through the board. The SMT process allows Original Equipment Manufacturers (“OEMs”)
advanced circuitry, while at the
4
Table of Contents
same time permitting the placement of a greater number of components on a printed circuit board without having to
increase the size of the board. By allowing increasingly complex circuits to be packaged with the components in closer
proximity to each other, SMT greatly enhances circuit processing speed, and, thus, board and system performance.
The Company performs PTH assembly both manually and with automated component insertion and soldering
equipment. Although SMT is a more sophisticated interconnect technology, the Company intends to continue providing
PTH assembly services for its customers as the Company’s customers continue to require both PTH and SMT capabilities.
The Company is also capable of assembling fine pitch and ball grid array (“BGA”) components. BGA is used for more
complex circuit boards required to perform at higher speeds.
Manufacturing and Related Services. The Company offers comprehensive production and testing capabilities across all
business units to standardize processes and procedures. Each of its sites is linked together using the same ERP system and
real-time on-line visibility.
The Company is strategically located to support our customers with their New Product Introduction (“NPI”),
Prototypes to Volume Production. With locations in Elk Grove Village, Illinois; Union City, California; Acuna and
Tijuana, Mexico; Del Rio, Texas; Suzhou-Wujiang, China; and Taipei, Taiwan, the Company is able to support our
customers’ needs with our broad range of services including design for manufacturability (“DFM”), design for testability
(“DFT”), printed circuit board assemblies, test, box-build, and system integration. The Company’s ability to transition
manufacturing to a lower cost region without jeopardizing flexibility and service differentiate it from the competition.
Manufacturing certifications include ISO 9001:2008, medical ISO 13485:2003, Aerospace AS9100B and International
Traffic in Arms Regulations (“ITAR”) certifications.
Product Testing. The Company has the ability to perform both in-circuit and functional testing of its assemblies and
finished products. In-circuit testing verifies that the correct components have been properly inserted and that the electrical
circuits are complete. Functional testing determines if a board or system assembly is performing to customer
specifications. The Company seeks to provide customers with highly sophisticated testing services that are at the forefront
of current test technology.
Warehousing and Distribution. In response to the needs of select customers, the Company has the ability to provide
in-house warehousing, shipping and receiving and customer brokerage services in Del Rio, Texas for goods manufactured
or assembled in Acuna, Mexico. The Company also has the ability to provide custom-tailored delivery schedules and
services to fulfill the just-in-time inventory needs of its customers.
Markets and Customers
The Company’s customers are in the appliance, gaming, industrial electronics, fitness, medical/life sciences,
semiconductor, telecommunications and consumer electronics industries. As of April 30, 2011, the Company had
approximately 100 active customers ranging from Fortune 500 companies to small, privately held enterprises.
5
Table of Contents
The following table shows, for the periods indicated, the percentage of net sales to the principal end-user markets it
serves.
Markets
Appliances
Industrial Electronics
Fitness
Telecommunications
Gaming
Semiconductor Equipment
Typical
OEM Application
Household appliance controls
Motor controls, power supplies, lighting ballasts, scales,
joysticks
Treadmills, exercise bikes, cross trainers
Routers, communication
Slot machines, lighting displays
Process control and yield management equipment for
semiconductor productions
Medical/Life Sciences
Consumer Electronics
Total
Clinical diagnostic systems and instruments
Battery backup sump pumps, electric bikes
Percent of Net Sales
Fiscal
2010
%
47.5
25.9
13.9
4.9
3.2
2.3
1.8
0.5
100%
Fiscal
2011
%
37.3
34.0
16.0
3.2
4.3
2.9
1.5
0.8
100%
For the fiscal year ended April 30, 2011, Spitfire Controls, Inc. and Life Fitness, Inc. accounted for 24.0% and 16.0%,
respectively, of the Company’s net sales. For the fiscal year ended April 30, 2010, Spitfire Controls, Inc. and Life Fitness,
Inc. accounted for 33.4% and 13.9%, respectively, of the Company’s net sales. Although the Company does not have long
term contracts with these two customers, the Company expects that these customers will continue to account for a
significant percentage of the Company’s net sales, although the individual percentages may vary from period to period.
Sales and Marketing
The Company markets its services through 13 independent manufacturers’ representative organizations that together
currently employ approximately 38 sales personnel in the United States and Canada. Independent manufacturers’
representatives organizations receive variable commissions based on orders received by the Company and are assigned
specific accounts, not territories. The members of the Company’s senior management are actively involved in sales and
marketing efforts, and the Company has 6 direct sales employees.
Sales can be a misleading indicator of the Company’s financial performance. Sales levels can vary considerably among
customers and products depending on the type of services (consignment versus turnkey) rendered by the Company and the
demand by customers. Consignment orders require the Company to perform manufacturing services on components and
other materials supplied by a customer, and the Company charges only for its labor, overhead and manufacturing costs,
plus a profit. In the case of turnkey orders, the Company provides, in addition to manufacturing services, the components
and other materials used in assembly. Turnkey contracts, in general, have a higher dollar volume of sales for each given
assembly, owing to inclusion of the cost of components and other materials in net sales and cost of goods sold. Variations
in the number of turnkey orders compared to consignment orders can lead to significant fluctuations in the Company’s
revenue levels. However, the Company does not believe that such variations are a meaningful indicator of the Company’s
gross margins. Consignment orders accounted for less than 5% of the Company’s revenues for each of the fiscal years
ended April 30, 2011 and 2010.
6
Table of Contents
In the past, 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.
Mexico and China Operations
The Company’s wholly-owned subsidiary, Standard Components de Mexico, S.A, a Mexican corporation, is located in
Acuna, Coahuila Mexico, a border town across the Rio Grande River from Del Rio, Texas, and is 155 miles west of San
Antonio. Standard Components de Mexico, S.A. was incorporated and commenced operation in 1968 and had 859
employees at April 30, 2011. The Company’s wholly-owned subsidiary, AbleMex S.A. de C.V., a Mexican corporation, is
located in Tijuana, Baja California Mexico, a border town south of San Diego, California. AbleMex S.A. de C.V. was
incorporated and commenced operations in 2000. The operation had 140 employees at April 30, 2011. The Company
believes that one of the key benefits to having operations in Mexico is its access to cost-effective labor resources while
having geographic proximity to the United States.
The Company’s wholly-owned foreign enterprise, Wujiang SigmaTron Electronics Co., Ltd., is located in Wujiang,
China. Wujiang is located approximately 15 miles south of Suzhou, China and 60 miles west of Shanghai, China. The
Company has entered into an agreement with governmental authorities in the economic development zone of Wujiang,
Jiangsu Province, Peoples Republic of China, pursuant to which the Company became the lessee of a parcel of land of
approximately 100 Chinese acres. The term of the land lease is 50 years. The Company built a manufacturing plant, office
space and dormitories on this site during 2004. The manufacturing plant and office space is approximately 80,000 square
feet, which can be expanded if conditions require. SigmaTron China operates at this site as the Company’s wholly-owned
foreign enterprise. At April 30, 2011, this operation had 272 employees.
The Company provides funds for salaries, wages, overhead and capital expenditure items as necessary to operate its
wholly-owned Mexican and Chinese subsidiaries and the Taiwan procurement branch. The Company provides funding in
U.S. dollars, which are exchanged for Pesos, Renminbi, and New Taiwan dollars as needed. The fluctuation of currencies
from time to time, without an equal or greater increase in inflation, could have a material impact on the financial results of
the Company. The impact of currency fluctuation for the fiscal year ended April 30, 2011 resulted in a foreign currency
loss of approximately $158,000. In fiscal year 2011, the Company’s U.S. operations paid approximately $15,250,000 to its
foreign subsidiaries for services provided.
The consolidated financial statements include the accounts and transactions of the Company, its wholly-owned
subsidiaries, Standard Components de Mexico, S.A. and AbleMex S.A. de C.V., SigmaTron International Trading Co., its
wholly-owned foreign enterprise Wujiang SigmaTron Electronics Co., Ltd. and its procurement branch, SigmaTron
Taiwan. The functional currency of the Mexican subsidiaries, Chinese foreign enterprise and Taiwanese procurement
branch is the U.S. dollar. Intercompany transactions are eliminated in the consolidated financial statements.
Competition
The EMS industry is highly competitive and subject to rapid change. Furthermore, both large and small companies
compete in the industry, and many have significantly greater financial resources, more extensive business experience and
greater marketing and production capabilities than the Company. The significant competitive factors in this industry
include price, quality, service, timeliness, reliability, the ability to source raw components, and manufacturing and
technological capabilities. The Company believes it can competitively address all of these factors.
Consolidation
As a result of consolidation and other transactions involving competitors and other companies in the Company’s
markets, the Company occasionally reviews potential transactions relating to its business, products and technologies. Such
transactions could include mergers, acquisitions, strategic alliances, joint ventures, licensing agreements, co-promotion
agreements, financing arrangements or other types of transactions. In the future, the Company may choose to enter into
these types of or other transactions at any time depending on
7
Table of Contents
available sources of financing, and such transactions could have a material impact on the Company’s business, financial
condition or operations.
Governmental Regulations
The Company’s operations are subject to certain foreign, federal, state and local regulatory requirements relating to,
among others, environmental, waste management, labor and health and safety matters. Management believes that the
Company’s business is operated in material compliance with all such regulations. Effective mid-2006, the Company’s
customers were required to be in compliance with the European Standard of RoHS directive for all of their products that
ship to the European marketplace. The Company has RoHS-dedicated manufacturing capabilities at all of its
manufacturing operations.
Backlog
The Company relies on customers’ forecasted orders and purchase orders (firm orders) from its customers to estimate
backlog. Historically customers rescheduled or cancelled firm orders and consequently there is little or no financial
significance between forecasted orders or firm orders. The Company has eliminated the distinction in its accounting
system between the two types of orders. The Company’s backlog of forecasted and firm orders as of April 30, 2011 and
2010 was approximately $108,300,000 and $99,100,000, respectively. The Company estimates its firm orders at April 30,
2011 and 2010 to be $64,620,000 and $59,000,000, respectively. The Company anticipates a significant portion of the
backlog at April 30, 2011 will ship in fiscal 2012. Because customers may cancel or reschedule deliveries, backlog may
not be a meaningful indicator of future revenue. Variations in the magnitude and duration of contracts, forecasts and
purchase orders received by the Company and delivery requirements generally may result in substantial fluctuations in
backlog from period to period.
Employees
The Company employed approximately 1,780 people as of April 30, 2011, including 134 engaged in engineering or
engineering-related services, 1,372 in manufacturing and 274 in administrative and marketing functions.
The Company has a labor contract with Production Workers Union Local No. 10, AFL-CIO, covering the Company’s
workers in Elk Grove Village, Illinois which expires on November 30, 2012. The Company’s Mexican subsidiary,
Standard Components de Mexico S.A., has a labor contract with Sindicato De Trabajadores de la Industra Electronica,
Similares y Conexos del Estado de Coahuila, C.T.M. covering the Company’s workers in Acuna, Mexico which expires on
January 31, 2012. The Company’s subsidiary located in Tijuana Mexico, has a labor contract with Sindicato Mexico
Moderno De Trabajadores De La, Baja California, C.R.O.C. The contract does not have an expiration date.
Since the time the Company commenced operations, it has not experienced any union-related work stoppages. The
Company believes its relations with both unions and its other employees are good.
8
Table of Contents
Executive Officers of the Registrants
Name
Gary R. Fairhead
Age
59
Linda K. Frauendorfer
Gregory A. Fairhead
John P. Sheehan
Daniel P. Camp
Rajesh B. Upadhyaya
Hom-Ming Chang
50
55
50
62
56
51
Position
President and Chief Executive Officer. Gary R. Fairhead has been the President of
the Company since January 1990. Gary R. Fairhead is the brother of Gregory A.
Fairhead.
Chief Financial Officer, Vice President Finance, Treasurer and Secretary since
February 1994.
Executive Vice President and Assistant Secretary. Gregory A. Fairhead has been
Executive Vice President since February 2000 and Assistant Secretary since 1994.
Mr. Fairhead was Vice President — Acuna Operations for the Company from
February 1990 to February 2000. Gregory A. Fairhead is the brother of Gary R.
Fairhead.
Vice President, Director of Supply Chain and Assistant Secretary since
February 1994.
Vice President, Acuna Operations since 2007. Vice President — China Operations
from 2003 to 2007. General Manager / Vice President of Acuna Operations from
1994 to 2003.
Executive Vice President, West Coast Operations since 2005. Mr. Upadhyaya was
the Vice President of the Fremont Operation from 2001 until 2005.
Vice President, China Operation since 2007. Vice President — Hayward Materials
/ Test / IT from 2005 — 2007. Vice President of Engineering, Fremont Operation
from 2001 to 2005.
ITEM 1A. RISK FACTORS
The following risk factors should be read carefully in connection with evaluating our business and the forward-looking
information contained in this Annual Report on Form 10-K. Any of the following risks could materially adversely affect
our business, operations, industry or financial position or our future financial performance. While the Company believes it
has identified and discussed below the key risk factors affecting its business, there may be additional risks and
uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect its
business, operations, industry, financial position and financial performance in the future.
The Company’s ability to secure and maintain sufficient credit arrangements is key to its continued operations.
There is no assurance that the Company will be able to retain or renew its credit agreements in the future. In the event
the business grows rapidly, the uncertain economic climate continues or the Company considers an acquisition, additional
financing resources could be necessary in the current or future fiscal years. There is no assurance that the Company will be
able to obtain equity or debt financing at acceptable terms, or at all in the future.
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. In August 2010, the Company and Wells Fargo increased the Company’s 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 April 30, 2011.
9
Table of Contents
As of April 30, 2011, there was a $22,000,000 outstanding balance under the credit facility and $8,000,000 of unused
availability.
Adverse changes in the economy or political conditions could negatively impact the Company’s business, results of
operations and financial condition.
The Company’s sales and gross margins depend significantly on market demand for its customers’ products. The
uncertainty in the U.S., and international economic and political environment could result in a decline in demand for our
customers’ products in any industry. Further, any adverse changes in tax rates and laws affecting our customers could
result in decreasing gross margins. Any of these factors could negatively impact the Company’s business, results of
operations and financial condition.
The Company experiences variable operating results.
The Company’s results of operations have varied and may continue to fluctuate significantly from period to period,
including on a quarterly basis. Consequently, results of operations in any period should not be considered indicative of the
results for any future period, and fluctuations in operating results may also result in fluctuations in the price of the
Company’s common stock.
The Company’s quarterly and annual results may vary significantly depending on numerous factors, many of which are
beyond the Company’s control. Some of these factors include:
•
•
•
•
•
•
•
changes in sales mix to customers
changes in availability and rising component cost
volume of customer orders relative to capacity
market demand and acceptance of our customers’ products
price erosion within the EMS marketplace
capital equipment requirements needed to remain technologically competitive
volatility in the U.S., and international economy and financial markets
The Company’s customer base is concentrated.
Sales to the Company’s five largest customers accounted for 62% and 68% of net sales for the fiscal years ended
April 30, 2011 and 2010, respectively. The Company’s two largest customers accounted for 24.0% and 16.0% of net sales
for the fiscal year ended April 30, 2011 compared to 33.4% and 13.9% of net sales for the fiscal year ended April 30,
2010. Significant reduction in sales to any of the Company’s major customers or the loss of a major customer could have a
material impact on the Company’s operations. If the Company cannot replace canceled or reduced orders, sales will
decline, which could have a material impact on the results of operations. There can be no assurance that the Company will
retain any or all of its large customers. This risk may be further complicated by pricing pressures and intense competition
prevalent in our industry.
The Company has a significant amount of trade accounts receivable from some of its customers due to customer
concentration. If any of the Company’s customers have financial difficulties, the Company could encounter delays or
defaults in the payment of amounts owed. This could have a significant adverse impact on the Company’s results of
operations and financial condition.
Most of the Company’s customers do not commit to long-term production schedules, which makes it difficult to
schedule production and achieve maximum efficiency at the Company’s manufacturing facilities and to manage
inventory levels.
The volume and timing of sales to the Company’s customers may vary due to:
•
•
•
•
customers’ attempts to manage their inventory
variation in demand for the Company’s customers’ products
design changes, or
acquisitions of or consolidation among customers
10
Table of Contents
Many of the Company’s customers do not commit to firm production schedules. The Company’s inability to forecast
the level of customer orders with certainty can make it difficult to schedule production and maximize utilization of
manufacturing capacity and manage inventory levels. The Company could be required to increase or decrease staffing and
more closely manage other expenses in order to meet the anticipated demand of its customers. Orders from the Company’s
customers could be cancelled or delivery schedules could be deferred as a result of changes in our customers’ demand,
adversely affecting the Company’s results of operations, and resulting in higher inventory levels.
The Company and its customers may be unable to keep current with the industry’s technological changes.
The market for the Company’s manufacturing services is characterized by rapidly changing technology and continuing
product development. The future success of the Company’s business will depend in large part upon its customers’ ability
to maintain and enhance their technological capabilities, develop and market manufacturing services which meet changing
customer needs and successfully anticipate or respond to technological changes in manufacturing processes on a
cost-effective and timely basis.
Our customers have competitive challenges, including rapid technological changes, pricing pressure and decreasing
demand from their customers, which could adversely affect their business and the Company’s.
Factors affecting the industries that utilize our customers’ products could negatively impact our customers and the
Company. These factors include:
•
•
•
•
•
increase competition among our customers and their competitors
the inability of our customers to develop and market their products
recessionary periods in our customers’ markets
the potential that our customers’ products become obsolete
our customers’ inability to react to rapidly changing technology
Any such factor or a combination of factors could negatively impact our customers’ need for or ability to pay for, our
products, and the Company’s results of operations could be affected.
Customer relationships with start-up companies present more risk.
Customer relationships with start-up companies may present more risk due to the lack of product history. Slow market
acceptance of their products could result in demand fluctuations causing inventory levels to rise. Further, the current
economic environment could make it difficult for such emerging companies to obtain additional funding. This may result
in additional credit risk including, but not limited to the collection of trade account receivables and payment for their
inventory. If the Company does not have adequate allowances recorded, the results of operations may be negatively
affected. A small portion of the Company’s current customer base is with start-up companies.
The Company faces intense industry competition and downward pricing pressures.
The EMS industry is highly fragmented and characterized by intense competition. Many of the Company’s competitors
have greater experience, as well as greater manufacturing, purchasing, marketing and financial resources than the
Company.
Competition from existing or potential new competitors may have a material adverse impact on the Company’s
business, financial condition or results of operations. The introduction of lower priced competitive products, significant
price reductions by the Company’s competitors or significant pricing pressures from its customers could adversely affect
the Company’s business, financial condition, and results of operations.
11
Table of Contents
The Company has foreign operations that may pose additional risks.
A substantial part of the Company’s manufacturing operations is based in Mexico. Therefore, the Company’s business
and results of operations are dependent upon numerous related factors, including the stability of the Mexican economy, the
political climate in Mexico and Mexico’s relations with the United States, prevailing worker wages, the legal authority of
the Company to own and operate its business in Mexico, and the ability to identify, hire, train and retain qualified
personnel and operating management in Mexico.
The Company also has an operation in China. Therefore, the Company’s business and results of operations are
dependent upon numerous related factors, including the stability of the Chinese economy, the political climate in China
and China’s relations with the United States, prevailing worker wages, the legal authority of the Company to own and
operate its business in China, and the ability to identify, hire, train and retain qualified personnel and operating
management in China.
The Company obtains many of its materials and components through its IPO in Taipei, Taiwan and, therefore, the
Company’s access to these materials and components is dependent on the continued viability of its Asian suppliers.
The Company may be unable to manage its growth.
The Company may not effectively manage its growth and successfully integrate the management and operations of its
acquisitions. Acquisitions involve significant financial and operating risks that could have a material adverse effect on the
Company’s results of operations.
Disclosure and internal controls may not detect all errors or fraud.
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, do not believe that the
Company’s disclosure controls and internal controls will prevent all errors and all fraud. Controls can provide only
reasonable assurance that the procedures will meet the control objectives. Controls are limited in their effectiveness by
human error, including faulty judgments in decision-making. Further, controls can be circumvented by collusion of two or
more people or by management override of controls. Because of the limitations of a cost-effective control system, error
and fraud may occur and not be detected.
There is a risk of fluctuation of various currencies integral to the Company’s operations.
The Company purchases some of its material components and funds some of its operations in foreign currencies. From
time to time the currencies fluctuate against the U.S. dollar. Such fluctuations could have a measurable impact on the
Company’s results of operations and performance. The impact of currency fluctuation for the year ended April 30, 2011
resulted in a currency loss of approximately $158,000. These fluctuations are expected to continue and could become
material and have a negative impact on the Company’s results of operations. The Company did not, and is not expected to,
utilize derivatives or hedge foreign currencies to reduce the risk of such fluctuations.
The availability of raw components or an increase in their price may affect the Company’s operations and profits.
The Company relies on numerous third-party suppliers for components used in the Company’s production process.
Certain of these components are available only from single sources or a limited number of suppliers. In addition, a
customer’s specifications may require the Company to obtain components from a single source or a small number of
suppliers. The loss of any such suppliers could have a material impact on the Company’s results of operations. Further, the
Company could operate at a cost disadvantage compared to competitors who have greater direct buying power from
suppliers. In fiscal year 2011, the Company experienced an increase in lead times for various types of components due to
industry-wide shortages of electronic components and the shortage may continue to occur due to increased demand.
Increased demands for components and rising commodity prices have resulted in upward pricing pressure from the
Company’s supply chain, which has affected and could continue to affect our results of operations. The Company does not
enter into long-term purchase agreements with major or single-source suppliers. The Company believes that
12
Table of Contents
short-term purchase orders with its suppliers provides flexibility, given that the Company’s orders are based on the
changing needs of its customers.
The Company depends on management and skilled personnel.
The Company depends significantly on its President and other executive officers. The Company’s employees generally
are not bound by employment agreements and the Company cannot assure that it will retain its executive officers or
skilled personnel. The loss of the services of any of these key employees could have a material impact on the Company’s
business and results of operations. In addition, despite significant competition, continued growth and expansion of the
Company’s EMS business will require that the Company attract, motivate and retain additional skilled and experienced
personnel. The inability to satisfy such requirements could have a negative impact on the Company’s ability to remain
competitive in the future.
Favorable labor relations are important to the Company.
The Company currently has labor union contracts with its employees constituting approximately 56% of its workforce.
Although the Company believes its labor relations are good, any labor disruptions, whether union-related or otherwise,
could significantly impair the Company’s business, substantially increase the Company’s costs or otherwise have a
material impact on the Company’s results of operations.
Failure to comply with environmental regulations could subject the Company to liability.
The Company is subject to a variety of environmental regulations relating to the use, storage, discharge and disposal of
hazardous chemicals used during its manufacturing process. To date, the cost to the Company of such compliance has not
had a material impact on the Company’s business, financial condition or results of operations. However, there can be no
assurance that violations will not occur in the future as a result of human error, equipment failure or other causes. Further,
the Company cannot predict the nature, scope or effect of environmental legislation or regulatory requirements that could
be imposed or how existing or future laws or regulations will be administered or interpreted. Compliance with more
stringent laws or regulations, as well as more vigorous enforcement policies of regulatory agencies, could require
substantial expenditures by the Company and could have a material impact on the Company’s business, financial condition
and results of operations. Any failure by the Company to comply with present or future regulations could subject it to
future liabilities or the suspension of production which could have a material negative impact on the Company’s results of
operations.
The price of the Company’s stock is volatile.
The price of the Company’s common stock historically has experienced significant volatility due to fluctuations in the
Company’s revenue and earnings, other factors relating to the Company’s operations, the market’s changing expectations
for the Company’s growth, overall equity market conditions and other factors unrelated to the Company’s operations. In
addition, the limited float of the Company’s common stock and the limited number of market makers also affect the
volatility of the Company’s common stock. Such fluctuations are expected to continue in the future.
An adverse change in the interest rates for our borrowings could adversely affect our results of operations.
The Company pays interest on outstanding borrowings under its senior secured credit facility and certain other
long-term debt obligations at interest rates that fluctuate. An adverse change in the Company’s interest rates could have a
material adverse effect on its results of operations.
Changes in securities laws and regulations may increase costs.
The Sarbanes-Oxley Act, as well as rules subsequently implemented by the Securities and Exchange Commission and
listing requirements subsequently adopted by Nasdaq in response to Sarbanes-Oxley, have required changes in corporate
governance practices, internal control policies and audit committee practices of public companies. More recently the
Dodd-Frank Wall Street Reform and Consumer Protection Act will require changes to our corporate governance,
compliance practices and securities disclosures. The Company
13
Table of Contents
expects increased costs related to these new regulations, including, but not limited to, legal, financial and accounting costs.
Further the Company anticipates it will be more difficult and more expensive to obtain director and officer liability
insurance. These developments may result in the Company having difficulty in attracting and retaining qualified members
of the board or qualified officers. Further, the costs associated with the compliance with and implementation of procedures
under these laws and related rules could have a material impact on the Company’s results of operations.
Inadequate internal control over financial reporting could result in a reduction in the value of our common stock.
If the Company identifies and reports a material weakness in its internal control over financial reporting, shareholders
and the Company’s lenders could lose confidence in the reliability of the Company’s financial statements. This could have
a material adverse impact on the value of the Company’s stock and the Company’s liquidity.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
At April 30, 2011, the Company had manufacturing facilities located in Elk Grove Village, Illinois; Union City,
California; Acuna and Tijuana, Mexico and Suzhou-Wujiang, China. In addition, the Company provides inventory
management services through its Del Rio, Texas, warehouse facilities and materials procurement services through its Elk
Grove Village, Illinois, Acuna, Mexico, Union City, California, and Taipei, Taiwan offices.
Certain information about the Company’s manufacturing, warehouse and purchasing facilities is set forth below:
Location
Suzhou-Wujiang,
China
Union City, CA
Square
Feet
147,500
117,000
Elk Grove Village, IL
124,300
Acuna, Mexico
115,000
Services Offered
High volume assembly, and testing of PTH and SMT, box-build,
BGA
Assembly and testing of PTH, SMT and BGA, box-build,
prototyping, warehousing
Corporate headquarters, assembly and testing of PTH, SMT and
BGA, box-build, prototyping, warehousing
High volume assembly, and testing of PTH and SMT, box-build
Del Rio, TX
Tijuana, Mexico
Taipei, Taiwan
44,000
67,700
4,685
Warehousing, portion of which is bonded
High volume assembly, and testing of PTH and SMT, box-build
Materials procurement, alternative sourcing assistance and quality
control
Owned/
Leased
*
Leased
Owned
Owned
**
Leased
Leased
Leased
* The Company’s Suzhou-Wujiang, China building is owned by the Company and the land is leased from the Chinese
government for a 50 year term.
** A portion of the facility is leased and the Company has an option to purchase it.
The Union City, California and Tijuana, Mexico properties and a portion of the Del Rio, Texas properties are occupied
pursuant to leases of the premises. The lease agreements for the Del Rio, Texas properties expire December 2015. The
lease agreement for the California property expires March 2021. The
14
Table of Contents
Tijuana, Mexico leases expire June 2012. The Company’s manufacturing facilities located in Acuna, Mexico and Elk
Grove Village, Illinois are owned by the Company, except for a portion of the facility in Acuna, Mexico, which is leased.
The Company has an option to buy the leased portion of the facility in Acuna, Mexico. The property in Elk Grove Village,
Illinois is financed under a separate mortgage loan agreement, the final payment on which is January 2015. The Company
leases the IPO office in Taipei, Taiwan to coordinate Far East purchasing activities. The Company believes its current
facilities are adequate to meet its current needs. In addition, the Company believes it can find alternative facilities to meet
its needs in the future, if required.
ITEM 3. LEGAL PROCEEDINGS
As of April 30, 2011, the Company was not a party to any material legal proceedings.
From time to time the Company is involved in legal proceedings, claims or investigations that are incidental to the
conduct of the Company’s business. In future periods, the Company could be subjected to cash cost or non-cash charges to
earnings if any of these matters are resolved on unfavorable terms. However, although the ultimate outcome of any legal
matter cannot be predicted with certainty, based on present information, including management’s assessment of the merits
of any particular claim, the Company does not expect that these legal proceedings or claims will have any material adverse
impact on its future consolidated financial position or results of operations.
ITEM 4. REMOVED AND RESERVED
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Company’s common stock is traded on the NASDAQ Capital Market System under the symbol SGMA. The
following table sets forth the range of quarterly high and low sales price information for the common stock for the periods
ended April 30, 2011, and 2010.
Common Stock as Reported
by NASDAQ
Period
Fiscal 2011:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Fiscal 2010:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
High
Low
$8.94
7.44
6.90
7.23
$7.44
6.85
3.79
2.44
$5.03
5.34
5.40
4.89
$5.44
3.15
2.05
1.41
15
Table of Contents
As of July 15, 2011, there were approximately 54 holders of record of the Company’s common stock, which does not
include shareholders whose stock is held through securities position listings. The Company estimates there to be
approximately 1,406 beneficial owners of the Company’s common stock.
Dividend Information
The Company has not paid cash dividends on its common stock since completing its February 1994 initial public
offering and does not intend to pay any dividends in the foreseeable future. So long as any indebtedness remains unpaid
under the Company’s revolving loan facility, the Company is prohibited from paying or declaring any dividends on any of
its capital stock, except stock dividends, without the written consent of the lender under the facility.
Equity Compensation Plan Information
For information concerning securities authorized for issuance under our equity compensation plans, see Part III,
Item 12 of this Annual Report, under the caption “Security Ownership of Certain Beneficial Owners and Management and
Related Stockholders Matters” and that information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
As a smaller reporting company, as defined in Rule 10(f)(1) of Regulation S-K under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), we are not required to provide the information required by this item.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In addition to historical financial information, this discussion of the business of SigmaTron International, Inc., its
wholly-owned subsidiaries Standard Components de Mexico S.A., AbleMex S.A. de C.V., and SigmaTron International
Trading Co., and its wholly-owned foreign enterprise Wujiang SigmaTron Electronics Co., Ltd. (“SigmaTron China”) and
international procurement office SigmaTron Taiwan (collectively the “Company”) and other Items in this Annual Report
on Form 10-K contain forward-looking statements concerning the Company’s business or results of operations. Words
such as “continue,” “anticipate,” “will,” “expect,” “believe,” “plan,” and similar expressions identify forward-looking
statements. These forward-looking statements are based on the current expectations of the Company. Because these
forward-looking statements involve risks and uncertainties, the Company’s plans, actions and actual results could differ
materially. Such statements should be evaluated in the context of the risks and uncertainties inherent in the Company’s
business including, but not necessarily limited to, the Company’s continued dependence on certain significant customers;
the continued market acceptance of products and services offered by the Company and its customers; pricing pressures
from our customers, suppliers and the market; the activities of competitors, some of which have greater financial or other
resources than the Company; the variability of our operating results; the results of long-lived assets impairment testing; the
variability of our customers’ requirements; the availability and cost of necessary components and materials; the ability of
the Company and our customers to keep current with technological changes within our industries; regulatory compliance;
the continued availability and sufficiency of our credit arrangements; changes in U.S., Mexican, Chinese or Taiwanese
regulations affecting the Company’s business; the turmoil in the global economy and financial markets; the stability of the
U.S., Mexican, Chinese and Taiwanese economic, labor and political systems and conditions; currency exchange
fluctuations; the expenses and savings from the relocation of our Hayward, California facility to Union City, California;
and the ability of the Company to manage its growth. 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 as risk
factors 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
16
Table of Contents
date of such filings, and the Company undertakes no obligation to update such statements in light of future events or
otherwise unless otherwise required by law.
Overview
The Company operates in one business segment as an independent provider of EMS, which includes printed circuit
board assemblies and completely assembled (box-build) electronic products. In connection with the production of
assembled products, the Company also provides services to its customers, including (1) automatic and manual assembly
and testing of products; (2) material sourcing and procurement; (3) design, manufacturing and test engineering support;
(4) warehousing and shipment services; and (5) assistance in obtaining product approval from governmental and other
regulatory bodies. The Company provides these manufacturing services through an international network of facilities
located in the United States, Mexico, China and Taiwan.
The Company relies on numerous third-party suppliers for components used in the Company’s production process.
Certain of these components are available only from single sources or a limited number of suppliers. In addition, a
customer’s specifications may require the Company to obtain components from a single source or a small number of
suppliers. The loss of any such suppliers could have a material impact on the Company’s results of operations. Further, the
Company could operate at a cost disadvantage compared to competitors who have greater direct buying power from
suppliers. In fiscal year 2011, the Company experienced an increase in lead times for various types of components due to
industry-wide shortages of electronic components and the shortage may continue to occur due to increased demand.
Increased demands for components and rising commodity prices have resulted in upward pricing pressure from the
Company’s supply chain, which has and could continue to affect our results of operations. The Company does not enter
into long-term purchase agreements with major or single-source suppliers. The Company believes that short-term purchase
orders with its suppliers provides flexibility, given that the Company’s orders are based on the needs of its customers,
which constantly change.
Sales can be a misleading indicator of the Company’s financial performance. Sales levels can vary considerably among
customers and products depending on the type of services (consignment and turnkey) rendered by the Company and the
demand by customers. Consignment orders require the Company to perform manufacturing services on components and
other materials supplied by a customer, and the Company charges only for its labor, overhead and manufacturing costs,
plus a profit. In the case of turnkey orders, the Company provides, in addition to manufacturing services, the components
and other materials used in assembly. Turnkey contracts, in general, have a higher dollar volume of sales for each given
assembly, owing to inclusion of the cost of components and other materials in net sales and cost of goods sold. Variations
in the number of turnkey orders compared to consignment orders can lead to significant fluctuations in the Company’s
revenue levels. However, the Company does not believe that such variations are a meaningful indicator of the Company’s
gross margins. Consignment orders accounted for less than 5% of the Company’s revenues for the year ended April 30,
2011.
In the past, the timing and rescheduling of orders have caused the Company to experience significant quarterly
fluctuations in its revenues and earnings, and the Company expects such fluctuations to continue. The uncertainty
associated with the worldwide economy in general and the United States economy specifically makes forecasting difficult.
Short-term customer demands remain volatile. The Company experienced pricing pressures from both its customer and
vendors and its margins continued to be reduced in fiscal 2011, specifically in the second half of fiscal 2011. The
Company unfortunately sees this trend continuing for the balance of calendar year 2011.
During fiscal 2011 the Company relocated its California operation from Hayward to Union City without disruption in
support for its customers. The new plant layout has increased productivity and assisted in attracting interest from many
new customers including some in the aviation, defense and medical markets. The Company will continue to target these
markets in fiscal 2012. The Company has gained new customers at all locations during fiscal 2011 and in most cases has
started production. The production launches were later than expected, but show promise and the Company believes they
will assist with increasing revenues and profits in fiscal 2012.
17
Table of Contents
Critical Accounting Policies:
Management Estimates and Uncertainties — The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during
the reporting period. Significant estimates made in preparing the consolidated financial statements include depreciation
and amortization periods, the allowance for doubtful accounts, reserves for inventory and valuation of long-lived assets.
Actual results could materially differ from these estimates.
Revenue Recognition — Revenues from sales of the Company’s electronic manufacturing services business are
recognized when the finished good product is shipped to the customer. In general, and except for consignment inventory, it
is the Company’s policy to recognize revenue and related costs when the finished goods have been shipped from our
facilities, which is also the same point that title passes under the terms of the purchase order. Consignment finished goods
inventory is shipped from the Company to an independent warehouse for storage or shipped directly to the customer and
stored in a segregated part of the customer’s own facility. Upon the customer’s request for finished goods inventory, the
consignment inventory is shipped to the customer, if the inventory was stored off-site, or transferred from the segregated
part of the customer’s facility for consumption or use by the customer. The Company recognizes revenue upon such
shipment or transfer. The Company does not earn a fee for storing the consignment inventory. The Company from time to
time may ship finished goods from its facilities which is also the same point that title passes under the terms of the
purchase order and invoice the customer at the end of the calendar month. This is done only in special circumstances to
accommodate a specific customer. Further, from time to time customers request the Company hold finished goods after
they have been invoiced to consolidate finished goods for shipping purposes. The Company generally provides a 90 day
warranty for workmanship only and does not have any installation, acceptance or sales incentives, (although the Company
has negotiated longer warranty terms in certain instances). The Company assembles and tests assemblies based on
customers’ specifications. Historically, the amount of returns for workmanship issues has been de minimis under the
Company’s standard or extended warranties.
Inventories — Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out method.
In the event of an inventory write-down, the Company records expense to state the inventory at lower of cost or market.
The Company establishes inventory reserves for valuation, shrinkage, and excess and obsolete inventory. The Company
records provisions for inventory shrinkage based on historical experience to account for unmeasured usage or loss. Actual
results differing from these estimates could significantly affect the Company’s inventories and cost of products sold. The
Company records provisions for excess and obsolete inventories for the difference between the cost of inventory and its
estimated realizable value based on assumptions about future product demand and market conditions. Actual product
demand or market conditions could be different than that projected by management.
Impairment of Long-Lived Assets — The Company reviews long-lived assets, including amortizable intangible assets,
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. An asset is considered impaired if its carrying amount exceeds the future undiscounted net cash flow the asset
is expected to generate. If such asset is considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the asset exceeds its fair market value.
Income Tax — The Company accounts for income taxes in accordance with Accounting Standards Codification
(“ASC”) 740 — “Income Taxes”. Our income tax expense, deferred tax assets and liabilities and reserves for
unrecognized tax benefits reflect management’s best assessment of estimated future taxes to be paid. We are subject to
income taxes in both the U.S. and numerous foreign jurisdictions. Significant judgments and estimates are required in
determining the consolidated income tax expense assessment.
Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue
and expense. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, the
Company considers all available positive and negative evidence,
18
Table of Contents
including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent
financial operations. In projecting future taxable income, the Company begins with historical results adjusted for the
results of discontinue operations and changes in accounting policies, and incorporates assumptions including the amount
of future state, federal and foreign pretax operating income, the reversal of temporary differences, and the implementation
of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of
future taxable income and are consistent with the plans and estimates the Company uses to manage the underlying
businesses. In evaluating the objective evidence that historical results provide, the Company considers three years of
cumulative operating income and/or loss.
Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is
not presently aware of any such changes that would have a material effect on the Company’s results of operations, cash
flows or financial position.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and
regulations in a multitude of jurisdictions across our global operations.
FASB ASC Topic 740, Income Taxes provides that a tax benefit from an uncertain tax position may be recognized
when it is more likely than not that the position will be sustained upon examination, including resolutions of any related
appeals or litigation processes, based on the technical merits. ASC Topic 740 also provides guidance on measurement,
derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
The Company recognizes tax liabilities in accordance with ASC Topic 740 and the Company adjusts these liabilities
when its judgment changes as a result of the evaluation of new information not previously available. Due to the
complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from
our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax
expense in the period in which they are determined.
New Accounting Standards:
In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2009-13 for updated revenue recognition guidance under the provisions of ASC 605-25, “Multiple-Element
Arrangements”. The previous guidance has been retained for criteria to determine when delivered items in a multiple-
deliverable arrangements should be considered separate units of accounting, however the updated guidance removes the
previous separation criterion that objective and reliable evidence of fair value of any undelivered items must exist for the
delivered items to be considered a separate unit or separate units of accounting. This guidance was effective for fiscal
years beginning on or after July 15, 2010. The adoption of this guidance did not have a material effect on the Company’s
consolidated results of operations and financial condition.
In March 2010, the FASB issued ASU 2010-11, “Scope Exception Related to Embedded Credit Derivatives” to address
questions that have been raised in practice about the intended breadth of the embedded credit derivative scope exception in
paragraphs 815-15-15-8 through 815-15-15-9 of ASC 815, “Derivatives and Hedging”. The amended guidance clarifies
that the scope exception applies to contracts that contain an embedded credit derivative that is only in the form of
subordination of one financial instrument to another. This guidance was effective on August 1, 2010 for the Company. The
adoption of this guidance did not have a material impact on the Company’s consolidated results of operations and financial
condition.
In December 2010, the FASB issued authoritative guidance regarding ASC No. 805, “Business Combinations,” on the
disclosure of supplementary pro forma information for business combinations. ASC No. 805 requires a public entity to
disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures
include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition
date for all business combinations that occurred during the year had been as of the beginning of the annual reporting
period. The adoption of this guidance did not have a material impact on the Company’s consolidated results of operations
and financial condition.
19
Table of Contents
In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and IFRS,” which results in common fair value measurement and disclosure
requirements in U.S. GAAP and IFRS. Consequently, the amendments change the wording used to describe many of the
requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. ASU
2011-04 is effective for interim and annual periods beginning after December 15, 2011, which will first be applicable to
the Company’s fiscal quarter beginning February 1, 2012. The adoption of this guidance is not expected to have a material
impact on the Company’s consolidated results of operations and financial condition.
Results of Operations:
FISCAL YEAR ENDED APRIL 30, 2011 COMPARED
TO FISCAL YEAR ENDED APRIL 30, 2010
The following table sets forth the percentage relationships of expense items to net sales for the years indicated:
Net sales
Operating expenses:
Cost of products sold
Selling and administrative expenses
Total operating expenses
Operating income
Fiscal Years
2011
2010
100.0%
100.0%
89.6
7.6
97.2
88.8
8.8
97.6
2.8%
2.4%
Net sales increased 23.9% to $151,728,084 in fiscal year 2011 from $122,476,340 in the prior year. The Company’s
sales increased in fiscal year 2011 in fitness, gaming, medical/life sciences, industrial and consumer electronics and
semiconductor marketplaces as compared to the prior year. The increase in sales dollars for these marketplaces was
partially offset by a decrease in sales dollars in the appliance and telecommunications marketplaces. The increase in net
sales for the fiscal year 2011 is a result of our existing customers’ increased demand for product and the addition of some
new customer programs ramping up compared to the previous fiscal year.
The Company’s sales in a particular industry are driven by the fluctuating forecasts and end-market demand of the
customers within that industry. Sales to customers are subject to variations from period to period depending on customer
order cancellations, the life cycle of customer products and product transition. Sales to the Company’s five largest
customers accounted for 62% and 68% of net sales for fiscal years 2011 and 2010, respectively.
Gross profit increased to $15,787,206 of net sales in fiscal year 2011 compared to $13,757,237 of net sales in the prior
year. The increase in the Company’s gross profit in total dollars is due to increased revenue levels, the mix of product
shipped to various customers and the continuing efforts to control operational costs. Gross profit as a percent of net sales
decreased to 10.4% in fiscal year 2011 compared to 11.2% in the prior fiscal year. The Company has experienced pricing
pressures from both its customer and vendors and its margins continued to be reduced in fiscal 2011, specifically in the
second half of fiscal 2011. The Company unfortunately sees this trend continuing for the balance of calendar year 2011.
Gross profit was negatively affected by foreign currency losses of $157,971 in fiscal year 2011 compared to $276,000 in
the prior year. In fiscal year 2011, the Company incurred relocation expenses of approximately $892,000 which negatively
impacted the gross profit.
Selling and administrative expenses increased in fiscal year 2011 to $11,460,908 compared to $10,826,880 in fiscal
year 2010; however, the percentage of net sales represented by such expenses decreased to 7.6% of net sales in fiscal year
2011 compared to 8.8% of net sales in the prior fiscal year. The decrease in selling and administrative expense as a
percentage of net sales is due to the increased sales volume in fiscal
20
Table of Contents
year 2011 compared to fiscal year 2010. The dollar increase in specific categories of such expenses for fiscal year 2011
was approximately $1,150,820 and is primarily due to a restoration of salary reductions previously implemented in
response to the downturn in business. Insurance, travel and professional fees also increased for fiscal year 2011. These
increases in selling and administrative expenses for fiscal year 2011 were partially offset by a decrease of $516,792 in
amortization expense, bank fees and other selling and administrative expenses, resulting in selling and administrative
expenses increasing by a net amount of $634,028.
In fiscal year 2010, the Company filed an insurance claim due to damage incurred at one of its buildings. The claim
was settled in April 2010 and the Company recorded a gain from this involuntary conversion of $1,233,830 which was
included in other income on the consolidated statement of income for the year ended April 30, 2010. The insurance
proceeds not representing the reimbursement of expenses were classified as an investing cash flow in the statement of cash
flows for the year ended April 30, 2010. The Company did not record any additional proceeds, gains or losses related to
this settlement.
Interest expense increased to $1,154,352 in fiscal year 2011 compared to $821,263 in fiscal year 2010. The interest
expense increased due to increased borrowings under the Company’s banking agreements, capital lease obligations,
deferred financing costs and higher interest rates under the Company’s senior secured credit facility and mortgage. Interest
expense for fiscal year 2012 may increase if interest rates or borrowings, or both, increase during fiscal year 2012.
In fiscal year 2011, income tax expense was $1,203,514 compared to $1,120,786 in income tax expense in fiscal year
2010. The effective tax rate for the years ended April 30, 2011 and 2010 was 37.8% and 33.3%, respectively. The increase
in the effective tax rate for the year ended April 30, 2011 is primarily due to a deemed dividend from one of the
Company’s foreign entities and an increase in state income taxes.
The Company reported net income of $1,978,034 in fiscal year 2011 compared to a net income of $2,244,543 for fiscal
year 2010. Basic and diluted earnings per share were $0.52 and $0.51, respectively, for fiscal year 2011 compared to basic
and diluted earnings per share of $0.59 and $0.58, respectively, for the year ended April 30, 2010.
During the second quarter of the 2011 fiscal year, the Company relocated its Hayward, CA operation to Union City,
CA. The new plant layout has increased productivity and assisted in attracting interest from many new customers
including some in the aviation, defense and medical markets. The Company will continue to target these markets in fiscal
2012. The Company incurred relocation expenses as a result of the move. Relocation expenses of $892,391 were recorded
as a component of cost of products sold, which consists primarily of moving expenses related to equipment, the write-off
of leasehold improvements and the restoration of the Hayward facility. The related after tax amount was $562,206. Net
income adjusted on a non-GAAP basis to exclude relocation expenses for fiscal year 2011 was $2,540,240. The
non-GAAP basic and diluted earnings per share, as adjusted, for fiscal year 2011 was $0.66 and $0.65, respectively. The
Company believes the relocation expense is a onetime event and the non-GAAP disclosure provides meaningful
information regarding the Company’s results of operations.
21
Table of Contents
non-GAAP Reconciliation
Income Reconciliation:
Net income before relocation expenses
Relocation expenses — net of tax effect
Net income
EPS Reconciliation:
Income per common share — assuming dilution before relocation expenses
Net income per common share — assuming dilution of relocation expenses net of tax
Net income per common share — assuming dilution
Twelve Months
Ended
April 30, 2011
$ 2,540,240
562,206
$ 1,978,034
$
$
0.65
($0.14)
0.51
Weighted average number of common equivalent shares outstanding — assuming dilution
3,890,949
Liquidity and Capital Resources:
Operating Activities.
Cash flow used in operating activities was $185,067 for the fiscal year ended April 30, 2011, compared to cash flow
provided by operating activities of $8,061,036 for the prior fiscal year. Cash flow used in operating activities in fiscal year
2011 was primarily the result of an increase in inventories of $7,615,784 due to raw material purchases to support
increased demand for specific customers, increasing inventory levels for other customers delaying shipments and the start
up of new customer programs. Income taxes paid and a decrease in accounts payable also contributed to fiscal year 2011
cash outflows. Net cash used in operations in fiscal year 2011 was partially offset by net income, the non-cash effect of
depreciation and amortization, and a decrease in accounts receivable. The decrease in accounts receivable of $1,374,307
and accounts payable of $241,294 was due to timing of receipts and payments in the ordinary course of business.
Cash flow provided by operating activities was $8,061,036 for the year ended April 30, 2010. Cash flow provided by
operating activities in fiscal year 2010 was primarily the result of net income adjusted for the non-cash effect of
depreciation and amortization and an increase in trade accounts payable of $9,491,228. Trade accounts payable increased
due to increased purchases of raw material. Net cash provided by operations in fiscal year 2010 was partially offset by an
increase in accounts receivable of $8,144,893 due to increased sales volume in the fourth quarter of fiscal 2010 and timing
of cash receipts from a significant customer. The Company’s inventories increased by $1,358,301 due to increased demand
for product in the fourth quarter of fiscal year 2010.
Investing Activities.
In fiscal year 2011, the Company purchased approximately $4,900,000 in machinery and equipment to be used in the
ordinary course of business. Of the total purchases, $835,300 of equipment purchases for fiscal year 2011 is financed
under a sale lease back agreement. In addition, there was approximately $541,500 of equipment financed under a capital
lease agreement. The Company anticipates that it will make additional machinery and equipment purchases in fiscal year
2012 of approximately $3.9 million.
22
Table of Contents
During fiscal year 2010, the Company filed an insurance claim due to damage incurred at one of its buildings. The
claim was settled in April 2010 and the Company recorded a gain from this involuntary conversion of $1,233,830 which
was included in other income on the consolidated statement of income for the year ended April 30, 2010. These insurance
proceeds were classified as an investing cash flow in the statement of cash flows for the year ended April 30, 2010. The
Company did not record any additional proceeds, gains or losses related to this settlement.
In fiscal year 2010, the Company purchased approximately $3,000,000 in machinery and equipment for various
operating facilities. Approximately $440,000 of the purchases was financed through a note payable pursuant to a software
license agreement.
Financing Activities.
Cash provided by financing activities was $5,190,678 for the fiscal year ended April 30, 2011, compared to cash used
in financing activities of $6,444,673 in fiscal year 2010. Cash provided by financing activities in fiscal year 2011 was
primarily the result of increased borrowings of $6,874,942 under the credit facility. The additional working capital was
required to support the increase in inventory. Cash used in financing activities in fiscal year 2010 relates to net payments
made to reduce the balance outstanding under the Company’s banking and lease agreements.
Debt.
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 (effectively, 3.75% at April 30, 2011) or LIBOR plus two and three quarter percent (effectively,
3.1% at April 30, 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 Company’s 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 to amend a financial covenant. The Company was in compliance with
its financial covenants at April 30, 2011 and 2010. As of April 30, 2011, there was a $22,000,000 outstanding balance
under the credit facility and $8,000,000 of unused availability.
Through January 2010, the Company had a revolving credit facility with Bank of America under which the Company
could borrow up to the lesser of: (i) $32 million; or (ii) an amount equal to the sum of 85% of the eligible receivable
borrowing base and the lesser of $16 million or 50% of the eligible inventory borrowing base. The revolving credit facility
was due to expire on September 30, 2010.
Prior to January 2010, the Company had a term loan with Bank of America with an outstanding balance at January 7,
2010 of $1,500,000. The term loan required quarterly principal payments of $250,000 due each quarter through the quarter
ending June 30, 2011 and interest payable monthly throughout the term of the loan. On January 8, 2010, the Company
repaid this debt using proceeds from the credit facility from Wells Fargo.
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 Company’s corporate headquarters and its Illinois manufacturing facility. The
Company repaid the prior Bank of America mortgage, which equaled $2,565,413, as of January 8, 2010, using proceeds
from the Wells Fargo mortgage and senior secured credit facility. The Wells Fargo note bears interest at a fixed rate of
6.42% per year and is amortized over a sixty month period. A final payment of approximately $2,000,000 is due on or
before January 8, 2015. The outstanding balance as of April 30, 2011 was $2,375,005.
On January 19, 2010, the Company entered into a leasing transaction with Wells Fargo Equipment Finance, Inc. to
refinance $1,287,407 of equipment. The term of the lease financing agreement extends to
23
Table of Contents
January 18, 2012 with monthly payments of $55,872 and a fixed interest rate of 4.29%. At April 30, 2011, $493,977 was
outstanding under the lease agreement and the net book value of the equipment was $1,658,621.
On August 20, 2010 and October 26, 2010, the Company entered into two capital leasing transactions (a lease finance
agreement and a sale lease back agreement) with Wells Fargo Equipment Finance, Inc., to purchase equipment 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 of 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%. At April 30, 2011, $750,408 and $290,973 was
outstanding under the lease finance and sale lease back agreements, respectively. The net book value at April 30, 2011 for
the equipment under the lease finance agreement and sale lease back agreement was $299,927 and $766,013, respectively.
On November 29, 2010, the Company entered into a capital lease with Wells Fargo Equipment Finance, Inc., to
purchase equipment totaling $226,216. The term of the lease agreement extends to October 2016 with monthly payments
of $3,627 and a fixed interest rate of 4.99%. The net book value of the equipment under this lease at April 30, 2011 was
$216,082. At April 30, 2011, the balance outstanding under the capital lease agreement was $211,717.
The total amount outstanding at April 30, 2011 for the above four equipment lease transactions was $1,747,075. The
Company has two other capital leases. The total net book value of the equipment under these leases at April 30, 2011 was
$651,726. The outstanding balance at April 30, 2011 and 2010 was $129,368 and $366,781, respectively.
The Company provides funds for salaries, wages, overhead and capital expenditure items as necessary to operate its
wholly-owned Mexican and Chinese subsidiaries and the Taiwan IPO. The Company provides funding in U.S. dollars,
which are exchanged for Pesos, Renminbi, and New Taiwan Dollars as needed. The fluctuation of currencies from time to
time, without an equal or greater increase in inflation, could have a material impact on the financial results of the
Company. The impact of currency fluctuation for the fiscal year ended April 30, 2011, resulted in a foreign currency loss
of approximately $158,000. In fiscal year 2011, the Company’s U.S. operations paid approximately $15,250,000 to its
foreign subsidiaries for services provided. The Company has not provided U.S. deferred taxes for a significant portion of
undistributed earnings of the Company’s subsidiaries, since these earnings have been, and under current plans will
continue to be, permanently reinvested in these subsidiaries. It is not practicable to estimate the amount of additional taxes
that may be payable upon distribution. Should the tax law to repatriate dividends change, the Company may reconsider its
plan.
The Company anticipates its credit facilities, cash flow from operations and leasing resources will be adequate to meet
its working capital requirements and capital expenditures for the next twelve months. There is no assurance that the
Company will be able to retain or renew its credit agreements in the future, or that any retention or renewal will be on the
same terms as currently exist. In the event the business grows rapidly, the current economic climate deteriorates or the
Company considers an acquisition, additional financing resources could be necessary in the current or future fiscal years.
There is no assurance that the Company will be able to obtain equity or debt financing at acceptable terms, or at all, in the
future.
The impact of inflation for the past three fiscal years has been minimal.
Off-balance Sheet Transactions:
The Company has no off-balance sheet transactions.
Contractual Obligations and Commercial Commitments:
As a smaller reporting company, as defined in Rule 10(f)(1) of Regulation S-K under the Exchange Act, we are not
required to provide the information required by this item.
24
Table of Contents
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
As a smaller reporting company, as defined in Rule 10(f)(1) of Regulation S-K under the Exchange Act, we are not
required to provide the information required by this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is included in Item 15(a) of this Report.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls:
Our management, including our President and Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the design and operation of our disclosure controls and procedures (as defined under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), Rules 13a-15(e) an 15(d)-15(e)) as of April 30, 2011. Our
disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our
President and Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and
procedures were effective at the reasonable assurance level as of April 30, 2011.
Internal Controls:
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal controls over financial reporting are designed to
provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for
external purposes in accordance with U.S. GAAP. Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, our management
concluded that our internal control over financial reporting was effective at the reasonable assurance level as of April 30,
2011.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding
internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to
provide only management’s report in this annual report.
There has been no change in our internal control over financial reporting during the quarter ended April 30, 2011, that
has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.
25
Table of Contents
ITEM 9B. OTHER INFORMATION
Not Applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required under this item is incorporated herein by reference to the Company’s definitive proxy
statement, to be filed with the Securities and Exchange Commission not later than 120 days after the close of the
Company’s fiscal year ended April 30, 2011.
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated herein by reference to the Company’s definitive proxy
statement, to be filed with the Securities and Exchange Commission not later than 120 days after the close of the
Company’s fiscal year ended April 30, 2011.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required under this item is incorporated herein by reference to the Company’s definitive proxy
statement, to be filed with the Securities and Exchange Commission not later than 120 days after the close of the
Company’s fiscal year ended April 30, 2011.
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required under this item is incorporated herein by reference to the Company’s definitive proxy
statement, to be filed with the Securities and Exchange Commission not later than 120 days after the close of the
Company’s fiscal year ended April 30, 2011.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required under this item is incorporated herein by reference to the Company’s definitive proxy
statement, to be filed with the Securities and Exchange Commission not later than 120 days after the close of the
Company’s fiscal year ended April 30, 2011.
26
Table of Contents
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1
PART IV
The financial statements are listed in the Index to Financial Statements filed as part of this Annual Report on Form 10-K
beginning on Page F-1.
27
Table of Contents
(a) 2
(a) 3 and (b)
Index to Exhibits
3.1
3.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
Certificate of Incorporation of the Company, incorporated herein by reference to Exhibit 3.1 to Registration
Statement on Form S-1, File No. 33-72100, dated February 9, 1994.
Amended and Restated By-laws of the Company, adopted on September 24, 1999, incorporated herein by
reference to Exhibit 3.2 to the Company’s Form 10-K for the fiscal year ended April 30, 2000.
Form of 1993 Stock Option Plan, incorporated herein by reference to Exhibit 10.4 to the Company’s Registration
Statement on Form S-1, File No. 33-72100.*
Form of Incentive Stock Option Agreement for the Company’s 1993 Stock Option Plan , incorporated herein by
reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1, File No. 33-72100.*
Form of Non-Statutory Stock Option Agreement for the Company’s 1993 stock Option Plan, incorporated herein
by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1, File No. 33-72100.*
2000 Outside Directors’ Stock Option Plan, incorporated herein by reference to Appendix 1 to the Company’s
2000 Proxy Statement filed on August 21, 2000.*
2004 Directors’ Stock Option Plan, incorporated herein by reference to Appendix C to the Company’s 2004
Proxy Statement filed on August 16, 2004.*
2004 Employee Stock Option Plan, incorporated herein by reference to Appendix B to the Company’s 2004
Proxy Statement filed on August 16, 2004. *
Change in Control Plan dated May 30, 2002, incorporated herein by reference to Exhibit 10.15 to the Company’s
Form 10-K for the fiscal year ended April 30, 2005.*
Credit Agreement between SigmaTron International, Inc. and Wells Fargo International Banking and Trade
Solutions (IBTS), dated January 8, 2010, incorporated herein by reference to Exhibit 10.1 to the Company’s
Form 8-K filed on January 14, 2010.
Revolving Line of Credit Note issued by SigmaTron International, Inc. to Wells Fargo International Banking and
Trade Solutions (IBTS), dated January 8, 2010 incorporated herein by reference to Exhibit 10.2 to the
Company’s Form 8-K filed on January 14, 2010.
Promissory Note issued by SigmaTron International, Inc. to Wells Fargo International Banking and Trade
Solutions (IBTS), dated January 8, 2010, incorporated herein by reference to Exhibit 10.3 to the Company’s
Form 8-K filed on January 14, 2010.
Third Amendment to the Credit Agreement between SigmaTron International, Inc. and Wells Fargo Bank,
National Association, dated August 6, 2010, incorporated herein by reference to Exhibit 10.11 to the Company’s
Form 10-Q filed on December 14, 2010.
10.12
SigmaTron International, Inc. Employee and Director Bonus Plan dated November 1, 2010, incorporated herein
by reference to Exhibit 10.1 to the Company’s Form 8-K filed on November 4, 2010.*
10.13
SigmaTron International, Inc. 2011 Officer Bonus Plan dated November 1, 2010, incorporated herein by
reference to Exhibit 10.2 to the Company’s Form 8-K filed on November 4, 2010.*
28
Table of Contents
21.0
Subsidiaries of the Registrant, incorporated herein by reference to the Company’s Form 10-K for the fiscal year
ended April 30, 2007, filed on July 24, 2007.
23.1
Consent of BDO USA, LLP.**
24.0
31.1
31.2
32.1
32.2
Power of Attorney of Directors and Executive Officers (included on the signature page of this Form 10-K for the
fiscal year ended April 30, 2011).**
Certification of Principal Executive Officer of the Company Pursuant to Rule 13a-14(a) under the Exchange Act,
as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
Certification of Principal Financial Officer of the Company Pursuant to Rule 13a-14(a) under the Exchange Act,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
Certification by the Principal Executive Officer of SigmaTron International, Inc. Pursuant to Rule 13a-14(b)
under the Exchange Act and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).**
Certification by the Principal Financial Officer of SigmaTron International, Inc. Pursuant to Rule 13a-14(b)
under the Exchange Act and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).**
* Indicates management contract or compensatory plan.
** Filed herewith
(c) Exhibits
The Company hereby files as exhibits to this Report the exhibits listed in Item 15(a)(3) above, which are attached hereto
or incorporated herein.
29
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
SIGMATRON INTERNATIONAL, INC.
By: /s/ Gary R. Fairhead
Gary R. Fairhead,
President and Chief Executive Officer,
Principal Executive Officer and Director
Dated: July 19, 2011
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned directors and officers of SigmaTron
International, Inc., a Delaware corporation, which is filing an Annual Report on Form 10-K with the Securities and
Exchange Commission under the provisions of the Securities Exchange Act of 1934 as amended, hereby constitute and
appoint Gary R. Fairhead and Linda K. Frauendorfer, and each of them, each of their true and lawful attorneys-in fact and
agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in all capacities, to sign
any or all amendments to the report to be filed with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all intents and purposes as each of them might or
could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities, and on the dates indicated.
Signature
Title
Date
/s/ John P. Chen
John P. Chen
/s/ Gary R. Fairhead
Gary R. Fairhead
/s/ Linda K. Frauendorfer
Linda K. Frauendorfer
/s/ Thomas W. Rieck
Thomas W. Rieck
/s/ Dilip S. Vyas
Dilip S. Vyas
/s/ Carl A. Zemenick
Carl A. Zemenick
Chairman of the Board of Directors
July 19, 2011
President and Chief Executive Officer,
(Principal Executive Officer) and Director
July 19, 2011
Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer and Principal
Accounting Officer)
July 19, 2011
Director
Director
Director
July 19, 2011
July 19, 2011
July 19 2011
30
INDEX TO FINANCIAL STATEMENTS
SigmaTron International, Inc. and Subsidiaries
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial statement schedules are omitted because they are not applicable or required.
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
SigmaTron International, Inc.
Elk Grove, Illinois
We have audited the accompanying consolidated balance sheets of SigmaTron International, Inc. as of April 30, 2011 and
2010 and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of SigmaTron International, Inc. at April 30, 2011 and 2010 and the results of its operations and its cash flows for
the years then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ BDO USA, LLP
Chicago, Illinois
July 19, 2011
F-2
Table of Contents
SigmaTron International, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
April 30,
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of $150,000 at
April 30, 2011 and 2010
Inventories, net
Prepaid expenses and other assets
Refundable income taxes
Deferred income taxes
Other receivables
2011
2010
$ 4,138,102
$ 4,052,572
23,549,065
45,021,840
922,345
427,512
1,499,915
273,943
24,929,972
37,406,056
928,551
—
1,844,188
171,593
Total current assets
75,832,722
69,332,932
PROPERTY, MACHINERY AND EQUIPMENT, NET
26,189,150
25,176,664
OTHER LONG-TERM ASSETS
Customer relationships, net of amortization of $2,570,325 and $2,406,329 at
April 30, 2011 and 2010, respectively
Miscellaneous
199,675
645,864
363,671
822,341
Total other long-term assets
845,539
1,186,012
TOTAL ASSETS
$102,867,411
$95,695,608
The accompanying notes are an integral part of these statements.
F-3
Table of Contents
SigmaTron International, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS — CONTINUED
April 30,
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Trade accounts payable
Bank overdraft
Accrued expenses
Accrued payroll
Income taxes payable
Current portion of long-term debt
Current portion of capital lease obligations
2011
2010
$ 18,830,629
—
1,065,203
3,266,766
—
260,990
832,262
$19,071,923
1,407,572
916,280
3,345,632
1,288,617
260,990
874,116
Total current liabilities
24,255,850
27,165,130
LONG-TERM DEBT, LESS CURRENT PORTION
24,301,841
17,687,889
CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION
1,044,181
569,240
DEFERRED RENT
DEFERRED INCOME TAXES
722,559
—
2,799,403
2,610,142
Total liabilities
53,123,834
48,032,401
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value; 500,000 shares authorized, none issued and
outstanding
—
—
Common stock, $.01 par value; 12,000,000 shares authorized, 3,864,274 and
3,822,556 shares issued and outstanding at April 30, 2011 and 2010,
respectively
Capital in excess of par value
Retained earnings
38,643
19,749,278
29,955,656
38,226
19,647,359
27,977,622
Total stockholders’ equity
49,743,577
47,663,207
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$102,867,411
$95,695,608
The accompanying notes are an integral part of these statements.
F-4
Table of Contents
SigmaTron International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Years ended April 30,
Net sales
Cost of products sold
Gross profit
Selling and administrative expenses
Operating income
Other income
Interest expense
Income before income tax expense
Income tax expense
NET INCOME
Earnings per common share
Basic
Diluted
Weighted-average shares of common stock outstanding
Basic
Diluted
The accompanying notes are an integral part of these statements.
F-5
2011
2010
$151,728,084
$122,476,340
135,940,878
108,719,103
15,787,206
13,757,237
11,460,908
10,826,880
4,326,298
2,930,357
(9,602)
1,154,352
(1,256,235)
821,263
3,181,548
3,365,329
1,203,514
1,120,786
$
1,978,034
$
2,244,543
$
$
0.52
0.51
$
$
0.59
0.58
3,828,638
3,822,556
3,890,949
3,863,505
Table of Contents
SigmaTron International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Years ended April 30, 2011 and 2010
Balance at April 30, 2009
Stock-based compensation
Net income
Balance at April 30, 2010
Stock-based compensation
Exercise of stock options
Net income
Preferred
stock
$ —
—
—
—
—
—
—
Common
stock
$38,226
—
—
38,226
—
417
—
Capital in
excess of par
value
$19,630,580
16,779
—
19,647,359
9,657
92,262
—
Retained
earnings
$25,733,079
—
2,244,543
27,977,622
—
—
1,978,034
Total
stockholders’
equity
$45,401,885
16,779
2,244,543
47,663,207
9,657
92,679
1,978,034
Balance at April 30, 2011
$ —
$38,643
$19,749,278
$29,955,656
$49,743,577
The accompanying notes are an integral part of this statement.
F-6
Table of Contents
SigmaTron International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended April 30,
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash (used in) provided by operating
activities
Depreciation and amortization
Stock-based compensation
Provision for doubtful accounts
Provision for inventory obsolescence
Deferred income tax expense
Amortization of customer relationships
Insurance gain
Loss from disposal or sale of machinery and equipment
Changes in assets and liabilities
Accounts receivable
Inventories
Prepaid expenses and other assets
Refundable income taxes
Trade accounts payable
Deferred rent
Accrued expenses and payroll
Income taxes payable
2011
2010
$ 1,978,034
$ 2,244,543
4,440,426
9,657
6,600
—
533,534
163,996
—
8,637
1,374,307
(7,615,784)
80,333
(427,512)
(241,294)
722,559
70,057
(1,288,617)
4,007,026
16,779
—
182,800
410,730
245,216
(1,233,830)
38,493
(8,144,893)
(1,358,301)
42,115
—
9,491,228
—
1,103,263
1,015,867
Net cash (used in) provided by operating activities
(185,067)
8,061,036
Cash flows from investing activities
Proceeds from insurance
Purchases of machinery and equipment
—
(4,920,081)
1,233,830
(2,578,873)
Net cash used in investing activities
(4,920,081)
(1,345,043)
Cash flows from financing activities
Proceeds from the issuance of common stock
Payments of financing fees
Proceeds under capital lease obligations
Payments under capital lease obligations
Proceeds under sale lease back agreement
Payments under other notes payable
Proceeds under building notes payable
Payments under building notes payable
Payments under term loan
Net proceeds (payments) under lines of credit
Change in bank overdraft
92,679
—
—
(943,711)
835,330
(160,994)
—
(99,996)
—
6,874,942
(1,407,572)
—
(243,073)
1,287,407
(2,286,807)
—
(93,912)
2,500,000
(2,686,437)
(2,000,000)
(3,621,638)
699,787
Net cash provided by (used in) financing activities
5,190,678
(6,444,673)
INCREASE IN CASH
85,530
271,320
Cash and cash equivalents at beginning of year
4,052,572
3,781,252
Cash and cash equivalents at end of year
$ 4,138,102
$ 4,052,572
Supplementary disclosures of cash flow information
Cash paid for interest
Cash paid for income taxes, net of (refunds)
Non Cash Financing Activity:
$ 1,011,517
1,990,756
Financed licensing agreement through a note payable
Purchase of machinery and equipment financed under capital leases
$
—
541,468
$
$
818,453
(548,028)
442,732
—
The accompanying notes are an integral part of these statements.
F-7
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2011 and 2010
NOTE A — DESCRIPTION OF THE BUSINESS
SigmaTron International, Inc. and its subsidiaries (the “Company”) operate in one business segment as an independent
provider of electronic manufacturing services (“EMS”), which includes printed circuit board assemblies and completely
assembled (box-build) electronic products. In connection with the production of assembled products, the Company also
provides services to its customers including (1) automatic and manual assembly and testing of products; (2) material
sourcing and procurement; (3) design, manufacturing and test engineering support; (4) warehousing and shipment
services; and (5) assistance in obtaining product approval from governmental and other regulatory bodies. The Company
provides these manufacturing services through an international network of facilities located in North America, China and
Taiwan. Approximately 10% of the consolidated non-current assets of the Company are located in foreign jurisdictions
outside the United States as of April 30, 2011 and 2010.
NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation Policy
The consolidated financial statements include the accounts and transactions of the Company, its wholly-owned
subsidiaries, Standard Components de Mexico, S.A., and AbleMex S.A. de C.V., SigmaTron International Trading Co., its
wholly-owned foreign enterprise Wujiang SigmaTron Electronics Co. Ltd. (“SigmaTron China”), and its international
procurement office, SigmaTron Taiwan. The functional currency of the Mexican and Chinese subsidiaries and
procurement branch is the U.S. dollar. Intercompany transactions are eliminated in the consolidated financial statements.
The impact of currency fluctuation for the fiscal years ended April 30, 2011 and 2010 resulted in a loss of approximately
$158,000 and $276,000, respectively, and are recorded in other income.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made in
preparing the consolidated financial statements include depreciation and amortization periods, the allowance for doubtful
accounts, reserves for inventory and valuation of long-lived assets. Actual results could materially differ from these
estimates.
F-8
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued
Cash and Cash Equivalents
Cash and cash equivalents include cash and all highly liquid short-term investments maturing within three months of the
purchase date.
Accounts Receivable
The majority of the Company’s accounts receivable are due from companies in the consumer electronics, gaming, fitness,
industrial electronics, life sciences, semiconductor, telecommunications, appliance and automotive industries. Credit is
extended based on evaluation of a customer’s financial condition, and, generally, collateral is not required. Accounts
receivable are due in accordance with agreed upon terms, and are stated at amounts due from customers net of an
allowance for doubtful accounts. Accounts outstanding longer than the contractual payments terms are considered past
due. The Company writes off accounts receivable when they are determined to be uncollectible.
Allowance for Doubtful Accounts
The Company’s allowance for doubtful accounts relates to receivables not expected to be collected from our customers.
This allowance is based on management’s assessment of specific customer balances, considering the age of receivables
and financial stability of the customer and a five year average of prior uncollectible amounts. If there is an adverse change
in the financial condition of the Company’s customers, or if actual defaults are higher than provided for, an addition to the
allowance may be necessary.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out method. In the event of an
inventory write-down, the Company records expense to state the inventory at lower of cost or market. The Company
establishes inventory reserves for valuation, shrinkage, and excess and obsolete inventory. Actual results differing from
these estimates could significantly affect the Company’s inventories and cost of products sold. The Company records
provisions for excess and obsolete inventories for the difference between the cost of inventory and its estimated realizable
value based on assumptions about future product demand and market conditions. Actual product demand or market
conditions could be different than that projected by management.
F-9
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued
Property, Machinery and Equipment
Property, machinery and equipment are valued at cost. The Company provides for depreciation and amortization using the
straight-line method over the estimated useful life of the assets:
Buildings
Machinery and equipment
Office equipment and software
Tools and dies
Leasehold improvements
20 years
5-12 years
3-5 years
12 months
term of lease
Expenses for repairs and maintenance are charged to selling and administrative expenses as incurred.
Deferred Financing Costs
Deferred financing costs consist of costs incurred to obtain the Company’s long-term debt and are amortized using the
straight-line method over the term of the related debt. Deferred financing fees of $90,302 and $202,562, net of
accumulated amortization of $156,808 and $40,511 as of April 30, 2011 and 2010, respectively, are classified in other
long-term assets on the Company’s balance sheet.
Income Taxes
Deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases of
assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are
expected to reverse. Valuation allowances are established when necessary to reduce deferred income tax assets to an
amount more likely than not to be realized. See Note H — Income Taxes, Page F-21.
F-10
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued
Earnings per Share
Basic earnings per share are computed by dividing net income (the numerator) by the weighted-average number of
common shares outstanding (the denominator) for the period. The computation of diluted earnings per share is similar to
the computation of basic earnings per share, except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potentially dilutive common stock equivalents such as stock
options had been exercised. At April 30, 2011 and 2010, there were 395,190 and 400,190 anti-dilutive common stock
equivalents, respectively, which have been excluded from the calculation of diluted earnings per share.
Revenue Recognition
Revenues from sales of the Company’s electronic manufacturing services business are recognized when the finished good
product is shipped to the customer. In general, and except for consignment inventory, it is the Company’s policy to
recognize revenue and related costs when the finished goods have been shipped from our facilities, which is also the same
point that title passes under the terms of the purchase order. Consignment finished goods inventory is shipped from the
Company to an independent warehouse for storage or shipped directly to the customer and stored in a segregated part of
the customer’s own facility. Upon the customer’s request for finished goods inventory, the consignment inventory is
shipped to the customer, if the inventory was stored off-site, or transferred from the segregated part of the customer’s
facility for consumption or use by the customer. The Company recognizes revenue upon such shipment or transfer. The
Company does not earn a fee for storing the consignment inventory. The Company from time to time may ship finished
goods from its facilities which is also the same point that title passes under the terms of the purchase order and invoice the
customer at the end of the calendar month. This is done only in special circumstances to accommodate a specific customer.
Further, from time to time customers request the Company hold finished goods after they have been invoiced to
consolidate finished goods for shipping purposes. The Company generally provides a 90 day warranty for workmanship
only and does not have any installation, acceptance or sales incentives, (although the Company has negotiated longer
warranty terms in certain instances). The Company assembles and tests assemblies based on customers’ specifications.
Historically, the amount of returns for workmanship issues has been de minimis under the Company’s standard or
extended warranties.
F-11
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued
Shipping and Handling Costs
The Company records shipping and handling costs within selling and administrative expenses. Customers are typically
invoiced for shipping costs. Shipping and handling costs were not material to the financial statements for fiscal years 2011
or 2010.
Fair Value of Financial Instruments
The Company’s financial instruments include receivables, debt, accounts payable, and accrued expenses. The fair values
of financial instruments are not materially different from their carrying values, due to the short-term nature of receivables,
accounts payable and accrued expenses and the market interest rates charged on the Company’s long-term debt.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets, including amortizable intangible assets, for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An asset is considered
impaired if its carrying amount exceeds the future undiscounted net cash flow the asset is expected to generate. If such
asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the asset exceeds its fair market value.
F-12
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued
Intangibles Assets
The following are the changes in the carrying amount of customer relationships, net of accumulated amortization:
Balance as of April 30, 2009
Amortization expense 2010
Balance as of April 30, 2010
Amortization expense 2011
Balance as of April 30, 2011
Amortization period
The estimated intangible amortization expenses for future years are as follows:
Years Ending April 30,
2012
2013
2014
The Company’s customer relationships are amortized utilizing accelerated amortization methods.
F-13
$ 608,887
(245,216)
363,671
(163,996)
$ 199,675
8 years
$112,746
75,850
11,079
$199,675
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued
Stock Incentive Plans
Under the Company’s stock option plans, options to acquire shares of common stock have been made available for grant to
certain employees and directors. Each option granted has an exercise price of not less than 100% of the market value of
the common stock on the date of grant. The contractual life of each option is generally 10 years. The vesting of the grants
varies according to the individual options granted. The Company measures the cost of employee services received in
exchange for an equity award based on the grant date fair value and records that cost over the respective vesting period of
the award.
Reclassifications
Certain reclassifications have been made to the previously reported 2010 financial statements to conform to the 2011
presentation.
New Accounting Standards
In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2009-13 for updated revenue recognition guidance under the provisions of ASC 605-25, “Multiple-Element
Arrangements”. The previous guidance has been retained for criteria to determine when delivered items in a multiple-
deliverable arrangements should be considered separate units of accounting, however the updated guidance removes the
previous separation criterion that objective and reliable evidence of fair value of any undelivered items must exist for the
delivered items to be considered a separate unit or separate units of accounting. This guidance was effective for fiscal
years beginning on or after July 15, 2010. The adoption of this guidance is not expected to have a material effect on the
Company’s consolidated results of operations and financial condition.
In March 2010, the FASB issued ASU 2010-11, “Scope Exception Related to Embedded Credit Derivatives” to address
questions that have been raised in practice about the intended breadth of the embedded credit derivative scope exception in
paragraphs 815-15-15-8 through 815-15-15-9 of ASC 815, “Derivatives and Hedging”. The amended guidance clarifies
that the scope exception applies to contracts that contain an embedded credit derivative that is only in the form of
subordination of one financial instrument to another. This guidance was effective on August 1, 2010 for the Company. The
adoption of this guidance did not have a material impact on the Company’s consolidated results of operations and financial
condition.
F-14
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued
New Accounting Standards — Continued
In December 2010, the FASB issued authoritative guidance regarding ASC No. 805, “Business Combinations,” on the
disclosure of supplementary pro forma information for business combinations. ASC No. 805 requires a public entity to
disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures
include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition
date for all business combinations that occurred during the year had been as of the beginning of the annual reporting
period. The adoption of this guidance did not have a material impact on the Company’s consolidated results of operations
and financial condition.
In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards “IFRS,” which results in
common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. Consequently, the amendments
change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing
information about fair value measurements. ASU 2011-04 is effective for interim and annual periods beginning after
December 15, 2011, which will first be applicable to the Company’s fiscal quarter beginning February 1, 2012. The
adoption of this guidance is not expected to have a material impact on the Company’s consolidated results of operations
and financial condition.
NOTE C — ALLOWANCE FOR DOUBTFUL ACCOUNTS
Changes in the Company’s allowance for doubtful accounts are as follows:
Beginning balance
Bad debt expense
Write-offs
2011
2010
$150,000
6,600
(6,600)
$167,788
—
(17,788)
$150,000
$150,000
F-15
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE D — INVENTORIES
Inventories consist of the following at April 30:
Finished products
Work in process
Raw materials
Less obsolescence reserve
Changes in the Company’s inventory obsolescence reserve are as follows:
Beginning balance
Provision for obsolescence
Write-offs
F-16
2011
2010
$10,862,889
2,280,209
33,720,490
$ 8,364,010
1,925,880
29,013,486
46,863,588
39,303,376
1,841,748
1,897,320
$45,021,840
$37,406,056
2011
2010
$1,897,320
—
(55,572)
$1,798,860
182,800
(84,340)
$1,841,748
$1,897,320
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE E — PROPERTY, MACHINERY AND EQUIPMENT, NET
Property, machinery and equipment consist of the following at April 30:
Land and buildings
Machinery and equipment
Office equipment and software
Tools and dies
Leasehold improvements
Equipment under capital leases
2011
2010
$12,335,112
44,364,140
5,046,379
295,095
2,967,879
5,125,379
$12,145,447
41,724,734
4,541,291
295,095
3,345,106
3,748,580
70,133,984
65,800,253
Less accumulated depreciation and amortization, including amortization of assets
under capital leases of $1,533,010 and $1,126,162 at April 30, 2011 and 2010,
respectively
43,944,834
40,623,589
Property, machinery and equipment, net
$26,189,150
$25,176,664
Depreciation and amortization expense was $4,440,426 and $4,007,026 for the years ended April 30, 2011 and 2010,
respectively.
F-17
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE F — LONG-TERM DEBT
Note Payable — Bank
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 (effectively, 3.75% at April 30, 2011) or LIBOR plus two and three quarter percent (effectively, 3.1%
at April 30, 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 Company’s 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 to amend a financial covenant. The Company was in compliance with
its financial covenants at April 30, 2011 and 2010. As of April 30, 2011, there was a $22,000,000 outstanding balance
under the credit facility and $8,000,000 of unused availability.
Through January 2010, the Company had a revolving credit facility with Bank of America under which the Company
could borrow up to the lesser of: (i) $32 million; or (ii) an amount equal to the sum of 85% of the eligible receivable
borrowing base and the lesser of $16 million or 50% of the eligible inventory borrowing base. The revolving credit facility
was due to expire on September 30, 2010.
Prior to January 2010, the Company had a term loan with Bank of America with an outstanding balance at January 7, 2010
of $1,500,000. The term loan required quarterly principal payments of $250,000 due each quarter through the quarter
ending June 30, 2011 and interest payable monthly throughout the term of the loan. On January 8, 2010, the Company
repaid this debt using proceeds from the credit facility from Wells Fargo.
Capital Lease Obligations
On January 19, 2010, the Company entered into a leasing transaction with Wells Fargo Equipment Finance, Inc. to
refinance $1,287,407 of equipment. The term of the lease financing agreement extends to January 18, 2012 with monthly
payments of $55,872 and a fixed interest rate of 4.29%. At April 30, 2011, $493,977 was outstanding under the lease
agreement and the net book value of the equipment was $1,658,621.
F-18
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE F — LONG-TERM DEBT — Continued
Capital Lease Obligations — Continued
On August 20, 2010 and October 26, 2010, the Company entered into two capital leasing transactions (a lease finance
agreement and a sale lease back agreement) with Wells Fargo Equipment Finance, Inc., to purchase equipment 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 of 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%. At April 30, 2011, $750,408 and $290,973 was
outstanding under the lease finance and sale lease back agreements, respectively. The net book value at April 30, 2011 for
the equipment under the lease finance agreement and sale lease back agreement was $299,927 and $766,013, respectively.
On November 29, 2010, the Company entered into a capital lease with Wells Fargo Equipment Finance, Inc., to purchase
equipment totaling $226,216. The term of the lease agreement extends to October 2016 with monthly payments of $3,627
and a fixed interest rate of 4.99%. The net book value of the equipment under this lease at April 30, 2011 was $216,082.
At April 30, 2011, the balance outstanding under the capital lease agreement was $211,717.
The total amount outstanding at April 30, 2011 for the above four equipment lease transactions was $1,747,075. The
Company has two other capital leases. The total net book value of the equipment under these leases at April 30, 2011 was
$651,726. The outstanding balance at April 30, 2011 and 2010 was $129,368 and $366,781, respectively.
Note Payable — Buildings
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 Company’s corporate headquarters and its Illinois manufacturing facility. The
Company repaid the prior Bank of America mortgage, which equaled $2,565,413, as of January 8, 2010, using proceeds
from the Wells Fargo mortgage and senior secured credit facility. The Wells Fargo note bears interest at a fixed rate of
6.42% per year and is amortized over a sixty month period. A final payment of approximately $2,000,000 is due on or
before January 8, 2015. The outstanding balance as of April 30, 2011 was $2,375,005.
Other Debt
In October 2009, the Company entered into a financial licensing agreement for software. The term of the note payable is
for 36 months, with monthly payments of approximately $13,415, and
F-19
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE F — LONG-TERM DEBT — Continued
Other Debt — Continued
no interest is payable under the agreement. The balances outstanding under the note payable at April 30, 2011 and 2010,
were $187,826 and $348,820, respectively.
The aggregate amount of debt maturing (excluding capital lease obligations) in each of the next four fiscal years and
thereafter is as follows:
Fiscal Year
2012
2013
2014
2015
Thereafter
See Note L for future maturities under capital lease obligations.
NOTE G — ACCRUED EXPENSES AND PAYROLL
Accrued expenses and payroll consist of the following at April 30:
Wages
Bonuses
Foreign payroll accruals
Interest payable
Commissions
Professional fees
Other
F-20
$
260,990
126,828
22,099,996
2,075,017
—
$24,562,831
2011
2010
$1,576,169
712,237
978,360
77,369
37,282
158,016
792,536
$1,800,552
675,000
870,080
55,831
45,339
247,287
567,823
$4,331,969
$4,261,912
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE H — INCOME TAXES
The income tax provision for the years ended April 30 consists of the following:
Current
Federal
State
Foreign
Deferred
Federal
State
2011
2010
$ 192,990
77,707
399,283
$ 393,250
67,007
249,799
465,138
68,396
358,076
52,654
$1,203,514
$1,120,786
The differences between the income tax provision and the amounts computed by applying the statutory Federal income tax
rates to income before income tax expense for the years ended April 30 are as follows:
Income tax at federal rate
State income tax, net of federal benefit
Differential in foreign and federal tax rates
Other, net
F-21
2011
2010
$1,081,726
91,829
(51,886)
81,845
$1,144,212
55,108
(124,734)
46,200
$1,203,514
$1,120,786
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE H — INCOME TAXES — Continued
U.S. and foreign income before income tax expense for the years ended April 30 are as follows:
U.S.
Foreign
Total
2011
2010
$1,854,577
1,326,971
$2,263,760
1,101,569
$3,181,548
$3,365,329
Significant temporary differences that result in deferred tax assets and liabilities at April 30, are as follows:
Allowance for doubtful accounts
Inventory obsolescence reserve
Accruals not currently deductible
Inventories
Current deferred tax assets
Prepaid insurance
2011
2010
$
58,499
718,273
384,336
375,125
$
58,499
739,945
732,673
381,834
1,536,233
1,912,951
(36,318)
(68,763)
Current deferred tax liability
(36,318)
(68,763)
Net current deferred tax assets
$1,499,915
$1,844,188
Intangible assets
Machinery and equipment
Other
2011
2010
$
(77,872)
(3,034,692)
313,161
$ (141,830)
(2,517,676)
49,364
Net long-term deferred tax liabilities
$(2,799,403)
$(2,610,142)
F-22
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE H — INCOME TAXES — Continued
We have not provided U.S. deferred taxes for a significant portion of undistributed earnings of the Company’s
subsidiaries, since these earnings have been, and under current plans will continue to be, permanently reinvested in these
subsidiaries. It is not practicable to estimate the amount of additional taxes that may be payable upon distribution. Should
the tax law to repatriate dividends change, the Company may reconsider its plan.
The Company has identified uncertain tax positions taken or expected to be taken in the Company’s tax returns in
accordance with ASC 740, “Accounting for Income Taxes”. The Company has not recognized the benefit for those
positions in its consolidation financial statements. A reconciliation of the beginning and ending amount of unrecognized
tax benefits, excluding interest and penalties, is as follows:
Balance at May 1,
Increases for tax positions related to current year
Increases for tax positions in prior years
Reductions for tax positions due to expiration of statue of limitations
Reduction for tax positions effectively settled
Balance at April 30,
2011
$ 50,038
—
—
(50,038)
—
2010
$ 72,115
—
1,672
(23,749)
—
$
—
$ 50,038
For the fiscal year ended April 30, 2011 and 2010, the amount of consolidated worldwide liability for uncertain tax
positions that impacted the Company’s effective tax rate was $50,038 and $23,749, respectively.
Interest related to tax positions taken in the Company’s tax returns are recorded in income tax expense in the Consolidated
Statements of Income. The Company did not record penalties in the Consolidated Statements of Income.
During the fiscal year ended April 30, 2011, the Company completed an examination with the Internal Revenue Service
related to fiscal years April 30, 2008 and April 30, 2009. The completion of the examination had no impact on the amount
of the unrecognized tax benefits. The settlement of the examination resulted in an increase to tax expense of $6,143 related
to interest on a deficiency notice.
F-23
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE H — INCOME TAXES — Continued
The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. With few exceptions, the
Company is no longer subject to state, local or foreign examinations by tax authorities for fiscal years before 2007. The
Company is no longer subject to U.S. Federal examinations by tax authorities for fiscal years before 2010.
NOTE I — 401(k) RETIREMENT SAVINGS PLAN
The Company sponsors 401(k) retirement savings plans, which are available to all non-union U.S. employees. The
Company may elect to match participant contributions up to $300 annually. The Company contributed $75,392 and
$72,612 to the plans during the fiscal years ended April 30, 2011 and 2010, respectively. The Company paid total expenses
of $10,000 and $9,900 for the fiscal years ended April 30, 2011 and 2010, respectively, relating to costs associated with
the administration of the plans.
NOTE J — OTHER INCOME
In fiscal 2010, the Company filed an insurance claim due to damage incurred at one of its buildings. The claim was settled
in April 2010 and the Company recorded a gain from this involuntary conversion of $1,233,830 which was included in
other income on the consolidated statement of income for the year ended April 30, 2010. The insurance proceeds not
representing the reimbursement of expenses were classified as an investing cash flow in the statement of cash flows for the
year ended April 30, 2010. The Company did not record any additional proceeds, gains or losses related to this settlement.
NOTE K — MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of
uncollateralized accounts receivable. For the fiscal year ended April 30, 2011, two customers accounted for 24.0% and
16.0% of net sales of the Company, respectively, and 42.3% and 6.9% of accounts receivable as of April 30, 2011,
respectively. For the year ended April 30, 2010, two customers accounted for 33.4% and 13.9% of net sales of the
Company, and 49.3% and 4.9% of accounts receivable at April 30, 2010.
F-24
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE L — LEASES
The Company leases certain facilities under various operating leases expiring at various date through April 2017. The
Company also leases various machinery and equipment under capital leases.
Future minimum lease payments under leases with terms of one year or more are as follows at April 30, 2011:
Years ending April 30,
2012
2013
2014
2015
2016
Thereafter
Less amounts representing interest
Less current portion
Capital
leases
Operating
leases
$ 919,267
261,683
261,683
261,682
261,682
86,248
$1,116,322
768,677
668,918
688,498
611,771
3,185,590
2,052,245
$7,039,776
175,802
1,876,443
832,262
$1,044,181
Rent expense incurred under operating leases was approximately $1,569,996 and $1,566,000 for the years ended April 30,
2011 and 2010, respectively.
In September 2010, the Company entered into a lease agreement in Union City, CA, to rent 116,993 square feet of
manufacturing and office space. Under the terms of the lease agreement, the Company receives incentives over the life of
the lease, which extends through March 2021. The amount of the deferred rent expense recorded for the fiscal year ended
April 30, 2011 was $346,487. In addition, the landlord provided the Company tenant incentives of $418,000, which is
being amortized over the life of the lease.
F-25
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE M — STOCK OPTIONS
The Company has stock option plans (“Option Plans”) under which certain employees and non-employee directors may
acquire up to 1,603,500 shares of common stock. Options available for grant under the employee plans total 1,207,500,
with the non-employee director plans allowing for a total of 396,000 options available for grant. At April 30, 2011, the
Company has 55,864 shares available for future issuance to employees under the employee plan and none under the
non-employee director plan. The Option Plans are interpreted and administered by the Compensation Committee of the
Board of Directors. The maximum term of options granted under the Option Plans is generally 10 years. Options granted
under the Option Plans are either incentive stock options or nonqualified options. Options forfeited under the Option Plans
are available for reissuance. Options granted under these plans are granted at an exercise price equal to the fair market
value of a share of the Company’s common stock on the date of grant.
There were no options granted during fiscal year 2011 or 2010.
Option-valuation models require the input of highly subjective assumptions. Because the Company’s stock options have
characteristics significantly different from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management’s opinion, the existing method does not
necessarily provide a reliable single measure of the fair value of the Company’s stock options. When the Company does
grant stock options, it uses the U.S. Treasury yield in effect at the time of the option grant to calculate the risk-free interest
rate and the weighted-average expected life of options calculated using the simplified method, due to limited history. The
expected dividend, volatility and forfeitures rates of options are based on historical experience and expected future results.
F-26
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE M — STOCK OPTIONS — Continued
The table below summarizes option activity through April 30, 2011:
Outstanding at April 30, 2009
Options expired during 2010
Outstanding at April 30, 2010
Options exercised during 2011
Options exercised/expired during 2011
Number of
options
exercisable
at end
of year
496,671
498,910
Weighted-
average
exercise
price
$ 7.89
5.63
7.90
2.20
4.00
Number of
options
503,707
(1,670)
502,037
(41,218)
(1,230)
Outstanding at April 30, 2011
459,589
$ 8.42
458,337
Intrinsic value is calculated as the positive difference between the market price of the Company’s common stock and the
exercise price of the underlying options. During the fiscal years ended April 30, 2011 and 2010, the aggregate intrinsic
value of options exercised was $128,009 and $0, respectively. The aggregate intrinsic value of in the money options
outstanding was $159,529 as of April 30, 2011.
F-27
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE M — STOCK OPTIONS — Continued
Information with respect to stock options outstanding and stock options exercisable at April 30, 2011, follows:
Range of exercise prices
$2.20 – 5.40
9.17 – 11.56
Range of exercise prices
$2.20 – 5.40
9.17 – 11.56
Options outstanding
Weighted-average
remaining
contractual life
2.60 years
4.82 years
Number
outstanding at
April 30, 2011
64,397
395,192
459,589
Weighted-
average
exercise price
2.82
$
9.34
$
8.42
Options exercisable
Number
exercisable at
April 30, 2011
63,147
395,190
Weighted-
average
exercise price
2.77
$
9.18
458,337
$
8.30
The Company recognized approximately $9,700 and $17,000 in stock compensation expense in fiscal years 2011 and
2010, respectively.
As of April 30, 2011, there was approximately $2,400 of unrecognized compensation cost related to the Company’s stock
option plans, which is expected to be recognized during fiscal year 2012.
F-28
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE N — HAYWARD, CA OPERATION MOVE
During the second fiscal quarter of 2011, the Company relocated its Hayward, CA operation to Union City, CA. The
Company incurred relocation expenses as a result of the move. The relocation expenses of $892,391, which are included
in cost of products sold for fiscal year 2011, consists primarily of moving expenses related to equipment, the write-off of
leasehold improvements and the restoration of the Hayward facility. The related after tax amount was $562,206. All
accrued amounts have been paid off as of fiscal year 2011.
NOTE O — SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly financial data for fiscal year 2011:
2011
Net sales
Income before income tax expense
Net income
Earnings per share-Basic
Earnings per share-Diluted
Total shares-Basic
Total shares-Diluted
First
quarter
Second
quarter
Third
quarter
Fourth
quarter
$38,061,373
1,361,670
857,989
0.22
$
$
0.22
3,822,801
3,877,079
F-29
$38,195,193
930,521
586,050
0.15
$
$
0.15
3,823,056
3,881,139
$36,934,982
404,603
254,818
0.07
$
$
0.07
3,823,056
3,886,181
$38,536,536
484,754
279,177
0.08
$
$
0.07
3,846,212
3,916,903
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE O — SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) — Continued
The following is a summary of unaudited quarterly financial data for fiscal year 2010:
2010
Net sales
(Loss) income before income tax expense
Net (loss) income
(Loss) earnings per share- Basic
(Loss) earnings per share-Diluted
Total shares-Basic
Total shares-Diluted
First
quarter
Second
quarter
Third
quarter
Fourth
quarter
$26,330,054
(638,781)
(402,475)
(0.11)
$
$
(0.11)
3,822,556
3,822,556
F-30
$30,564,267
821,021
517,298
0.14
$
$
0.13
3,822,556
3,851,395
$30,599,499
664,360
415,468
0.11
$
$
0.12
3,822,556
3,873,531
$34,982,520
2,518,729
1,714,252
0.45
$
$
0.44
3,822,556
3,883,645
Table of Contents
SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
April 30, 2011 and 2010
NOTE P — LITIGATION
As of April 30, 2011, the Company was not a party to any material legal proceedings.
From time to time the Company is involved in legal proceedings, claims or investigations that are incidental to the conduct
of the Company’s business. In future periods, the Company could be subjected to cash cost or non-cash charges to
earnings if any of these matters are resolved on unfavorable terms. However, although the ultimate outcome of any legal
matter cannot be predicted with certainty, based on present information, including management’s assessment of the merits
of any particular claim, the Company does not expect that these legal proceedings or claims will have any material adverse
impact on its future consolidated financial position or results of operations.
F-31