-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QOz9oa9V/frZAcc3iPWndYw5xCXySloURRZ22/W6Z11ZMeWYYCHJV0q3a+WEETlX lDoay1Z6C036eWDhgSrevg== 0000950137-04-010994.txt : 20041213 0000950137-04-010994.hdr.sgml : 20041213 20041213172245 ACCESSION NUMBER: 0000950137-04-010994 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20041031 FILED AS OF DATE: 20041213 DATE AS OF CHANGE: 20041213 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIGMATRON INTERNATIONAL INC CENTRAL INDEX KEY: 0000915358 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 363918470 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23248 FILM NUMBER: 041199590 BUSINESS ADDRESS: STREET 1: 2201 LANDMEIER RD CITY: ELK GROVE VILLAGE STATE: IL ZIP: 60007 BUSINESS PHONE: 7089568000 MAIL ADDRESS: STREET 1: 2201 LANDMEIER ROAD CITY: ELK GROVE VILLAGE STATE: IL ZIP: 60007 10-Q 1 c90426e10vq.txt QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended October 31, 2004 Commission File Number 0-23248 SIGMATRON INTERNATIONAL, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant, as Specified in its Charter) Delaware 36-3918470 - --------------------------------------------------------------------------------------------------- (State or other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number) 2201 Landmeier Road, Elk Grove Village, Illinois 60007 - --------------------------------------------------------------------------------------------------- (Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code:(847) 956-8000 No Change - ------------------------------------------------------------------------------- (Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report) Indicate, by check mark, whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No | | Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes | | No |X| On December 10, 2004 there were 3,752,054 shares of the registrant's Common Stock outstanding. SigmaTron International, Inc. Index
PART 1. FINANCIAL INFORMATION: Page No. -------- Item 1. Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets - October 31, 2004 and April 30, 2004 3 Condensed Consolidated Statements of Operations - Three and Six Months Ended October 31, 2004 and 2003 4 Condensed Consolidated Statements of Cash Flows - Six Months Ended October 31, 2004 and 2003 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition 9 and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk 13 Item 4. Controls and Procedures 13 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits 15
SIGMATRON INTERNATIONAL, INC. Condensed Consolidated Balance Sheets
OCTOBER 31, April 30, 2004 2004 UNAUDITED Audited ----------- ------------ CURRENT ASSETS: Cash $ 252,997 $ 5,145,814 Restricted cash 100,000 100,000 Accounts receivable, less allowance for doubtful accounts of $120,000 at Octrober 31, 2004 and April 30, 2004 14,366,650 12,651,272 Inventories -- net 20,191,637 14,168,357 Prepaid and other assets 926,806 1,315,127 Refundable taxes -- 275,583 Deferred income taxes 1,912,114 1,902,551 Other receivables 104,146 415,253 ----------- ----------- Total current assets 37,854,350 35,973,957 Property, machinery and equipment, net 25,626,014 25,707,901 Goodwill 719,040 -- Other assets 1,920,444 1,316,814 ----------- ----------- Total assets $66,119,848 $62,998,672 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 8,415,041 $ 7,475,026 Accrued expenses 3,780,817 4,540,744 Income taxes payable 1,551,610 -- Notes payable -- buildings 430,000 430,000 Notes payable -- other 965,000 -- Capital lease obligations 615,472 640,436 ----------- ----------- Total current liabilities 15,757,940 13,086,206 Notes payable -- banks 234,260 1,118,514 Notes payable -- buildings, less current portion 4,307,456 4,536,159 Notes payable -- other 365,000 -- Capital lease obligations, less current portion 612,544 299,536 Subordinated debenture payable -- 1,050,000 Deferred income taxes 1,265,714 1,265,714 ----------- ----------- Total liabilities 22,542,914 21,356,129 MINORITY INTEREST IN AFFILIATE -- 439,787 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 500,000 shares authorized, none issued and outstanding -- -- Common stock, $.01 par value; 6,000,000 shares authorized, 3,752,054 and 3,750,954 shares issued and outstanding at October 31, 2004 and April 30, 2004, respectively 37,521 37,510 Capital in excess of par value 19,062,945 19,056,525 Retained earnings 24,476,468 22,108,721 ----------- ----------- Total stockholders' equity 43,576,934 41,202,756 ----------- ----------- Total liabilities and stockholders' equity $66,119,848 $62,998,672 =========== ===========
See accompanying notes. 3 SIGMATRON INTERNATIONAL, INC. Condensed Consolidated Statements Of Operations Unaudited
THREE MONTHS Three Months SIX MONTHS Six Months ENDED Ended ENDED Ended OCTOBER 31, 2004 October 31, 2003 OCTOBER 31, 2004 October 31, 2004 ----------------- ---------------- ---------------- ---------------- Net sales $27,861,691 $26,526,879 $52,939,858 $51,360,675 Cost of products sold 22,668,658 20,968,331 43,121,127 41,088,186 ----------- ----------- ----------- ----------- Gross profit 5,193,033 5,558,548 9,818,731 10,272,489 Selling and administrative expenses 2,949,772 2,520,746 5,661,847 5,028,669 ----------- ----------- ----------- ----------- Operating income 2,243,261 3,037,802 4,156,884 5,243,820 Interest expense -- Banks and capital lease obligations 53,630 10,037 120,313 52,585 ----------- ----------- ----------- ----------- Income before income tax expense and minority interest of affiliate 2,189,631 3,027,765 4,036,571 5,191,235 Income tax expense 869,800 1,157,760 1,556,091 1,943,122 ----------- ----------- ----------- ----------- Income before minority interest of affiliate 1,319,831 1,870,005 2,480,480 3,248,113 Minority interest in income of affiliate 10,654 57,269 134,334 127,879 ----------- ----------- ----------- ----------- Net income $ 1,309,177 $ 1,812,736 $ 2,346,146 $ 3,120,234 =========== =========== =========== =========== Net income per common share -- Basic $ 0.35 $ 0.54 $ 0.63 $ 0.99 =========== =========== =========== =========== Net income per common share -- Assuming dilution $ 0.34 $ 0.52 $ 0.61 $ 0.92 =========== =========== =========== =========== Weighted average shares of common stock outstanding Basic 3,752,054 3,367,289 3,751,534 3,165,511 =========== =========== =========== =========== Diluted 3,840,442 3,478,249 3,837,379 3,403,659 =========== =========== =========== ===========
See accompanying notes. 4 SIGMATRON INTERNATIONAL, INC. Condensed Consolidated Statements of Cash Flows Unaudited
SIX MONTHS Six Months ENDED Ended 10/31/04 10/31/03 ----------- ----------- OPERATING ACTIVITIES: Net income $ 2,346,146 $ 3,120,234 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,598,183 1,355,483 Changes in operating assets and liabilities: Accounts receivable (1,715,378) 2,113,094 Inventories (6,023,280) 41,642 Prepaid expenses and other assets 59,091 (692,770) Refundable taxes 275,583 (1,469,086) Other receivables 311,107 (145,662) Trade accounts payable 940,015 344,780 Income taxes payable 1,444,555 (1,422,212) Deferred taxes (9,563) -- Accrued expenses (759,927) (1,169,574) ----------- ----------- Net cash (used in) provided by operating activities (1,533,468) 2,075,929 INVESTING ACTIVITIES: Purchases of machinery and equipment (1,210,087) (833,225) Purchase of SMTU interest (1,350,353) -- ----------- ----------- Net cash used in investing activities (2,560,440) (833,225) FINANCING ACTIVITIES: Proceeds from exercise of options 6,431 3,626,857 Tax benefit from options exercised -- 3,368,263 Repurchase of options 19,574 Proceeds (payment) under note payable obligation (228,703) (1,783,314) Proceeds (payments) under capital lease obligations 288,043 (549,360) Payments under line of credit (884,254) (642,746) ----------- ----------- Net cash (used in) provided by financing activities (798,909) 4,019,700 ----------- ----------- Change in cash (4,892,817) 5,262,404 Cash at beginning of period 5,145,814 424,844 ----------- ----------- Cash at end of period $ 252,997 $ 5,687,248 =========== =========== Supplementary disclosures of cash flow information Cash paid for interest $ 202,009 $ 134,855 Cash paid for income taxes, net of (refunds) (265,910) 1,297,317 Non Cash Investing activities: Acquisition of SMTU $ 2,620,353 Cash paid for acquisition ($1,350,353) ----------- Notes issued for acquisition $ 1,270,000 Forgiveness of subordinated debenture 1,050,000 Forgiveness of accrued interest payable 525,000 Reduction of long lived assets from purchase of SMTU 306,236 Goodwill created 719,040
See accompanying notes. 5 SigmaTron International, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) October 31, 2004 NOTE A -- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of SigmaTron International, Inc., its wholly owned subsidiary Standard Components de Mexico S.A., its wholly owned foreign enterprise Wujiang SigmaTron Electronics Co., Ltd., SMT Unlimited L.P. ("SMTU") and its procurement branch SigmaTron Taiwan (collectively, the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The Company adopted the provisions of FASB Interpretation No. 46, ("FIN 46R") Consolidation of Variable Interest Entities as of November 1, 2003 as it relates to its affiliate SMTU and consolidated SMTU from the earliest date reported. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six month period ended October 31, 2004 are not necessarily indicative of the results that may be expected for the year ending April 30, 2005. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended April 30, 2004. NOTE B -- INVENTORIES The components of inventory consist of the following:
October 31, April 30, 2004 2004 ----- ---- Finished products $ 4,195,292 $ 3,400,742 Work-in-process 2,021,349 1,221,160 Raw materials 13,974,996 9,546,455 --------------- -------------- $ 20,191,637 $ 14,168,357 =============== ==============
NOTE C -- PURCHASE OF AFFILIATE On August 2, 2004 the Company acquired the interest of outside investors in its affiliate SMTU and the general partner of SMTU, SMT Unlimited, Inc., thereby bringing the 6 Company's interest in its affiliate SMTU to approximately 80%. On September 2, 2004 the Company acquired the remaining interests in its affiliate SMTU from its managers. The aggregate price paid for all the interests was $2,620,353. This aggregate price was paid with $1,270,000 in notes with terms of up to 2 years and cash in the amount of $1,350,353. The acquisition was treated as a step acquisition and resulted in goodwill of $719,040. On October 1, 2004 SMT Unlimited, Inc. was merged into the Company, and SMTU was liquidated, thereby becoming an operating division of the Company. NOTE D -- STOCK INCENTIVE PLANS The Company maintains various stock incentive plans. The Company accounts for these plans under the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. The Company recognizes compensation cost for restricted shares and restricted stock units to employees. As of October 31, 2004 there are no issued restricted shares or restricted stock units issued. No compensation cost is recognized for stock option grants. All options granted under the Company's plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to stock-based compensation. The following table also provides the amount of stock-based compensation cost included in net earnings as reported.
Three Months Ended Six Months Ended October 31, October 31, October 31, October 31, 2004 2003 2004 2003 ----- ----- ----- ---- Net Income, as reported $ 1,309,177 $ 1,812,736 $ 2,346,146 $ 3,120,234 Deduct: total stock-based employee compensation expense determined under fair based method for awards granted, modified, or settled, net of related tax effects (100,116) (66,632) (200,232) (133,264) ---------- ---------- ---------- ---------- Pro forma net income $1,209,061 $1,746,104 $2,145,914 $2,986,970 ========== ========== ========== ==========
7
Three Months Ended Six Months Ended October 31, October 31, October 31, October 31, 2004 2003 2004 2003 ----- ----- ----- ----- Earnings per share Basic -- as reported $.35 $.54 $.63 $.99 Basic -- pro forma .32 .52 .57 .94 Diluted -- as reported .34 .52 .61 .92 Diluted -- pro forma .32 .50 .56 .88 ==== ==== ==== ====
Options to purchase stock at exercise prices greater than the average fair market value of the Company's stock for periods presented are excluded from the calculation of diluted income because their inclusion would be anti-dilutive. For the three month period ended October 31, 2004, 3,100 options were anti-dilutive and not included in the diluted income per share calculations. CRITICAL ACCOUNTING POLICES Management Estimates and Uncertainties - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 and reserves for inventory. Actual results could materially differ from these estimates. Revenue Recognition - Revenues from sales of product including the Company's electronic manufacturing service business are recognized when the product is shipped. In general it is the Company's policy to recognize revenue and related costs when the order has been shipped from our facilities, which is also usually the same point that title passes under the terms of the purchase order. Periodically inventory is held on consignment and revenue is recognized when the product is consumed by the Company's customer. Based on the Company's history of providing contract manufacturing services, we believe that collectibility is reasonably assured. Inventories - Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out method. 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 projected by management. 8 Impairment of Long-Lived Assets - The Company reviews long-lived assets for impairment, including its investment and assets related to its affiliate SMTU, 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 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, if any, exceeds its fair market value. The Company has adopted SFAS No. 144, which establishes a single accounting model for the impairment or disposal of long-lived assets, including discontinued operations. Impairment of Goodwill - The Company assesses the recoverability of goodwill on an annual basis or whenever adverse events or changes in circumstances or business climate indicate that expected future undiscounted cash flows may be sufficient to support recorded goodwill. If impairment exists, the carry amount of goodwill would be reduced by the estimated shortfall of discounted cash flows. NEW ACCOUNTING STANDARDS Consolidation of variable interest entities -- FIN 46R is an interpretation of Accounting Research Bulletin No. 51 and revises the requirements for consolidation by business enterprises of variable interest entities. FIN 46R applies immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period ending after December 15, 2003, to variable interest entities in which an enterprise holds a variable interest acquired before February 1, 2003. FIN 46R applies to public enterprises as of the beginning of the applicable interim or annual period and to nonpublic enterprises as of the end of the applicable annual period. It may be applied prospectively with a cumulative-effect adjustment as of the date on which it is first applied or by restating previously issued financial statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated. The Company adopted FIN 46R as of November 1, 2003 as it relates to its affiliate SMTU. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NOTE: To the extent any statements in this quarterly statement may be deemed to be forward looking, such statements should be evaluated in the context of the risks and uncertainties inherent in the Company's business, including the Company's continued dependence on certain significant customers; the continued market acceptance of products and services offered by the Company and its customers; the activities of competitors, some of which may have greater financial or other resources than the Company; the variability of the Company's operating results; the availability and cost of necessary components; the Company's ability to manufacture lead-free assemblies by mid-2006; regulatory compliance; the continued availability and sufficiency of the Company's credit arrangements; changes in U.S., Mexican, Chinese or Taiwanese regulations affecting the Company's business; the continued stability of the Mexican and Chinese economic systems, labor and political conditions; currency 9 fluctuations; and the ability of the Company to manage its growth; including its recent expansion into China. These and other factors which may affect the Company's future business and results of operations are identified throughout the Company's Annual Report on Form 10-K and risk factors contained therein and may be detailed from time to time in the Company's filings with the Securities and Exchange Commission. These statements speak as of the date of this report and the Company undertakes no obligation to update such statements in light of future events or otherwise. OVERVIEW: 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 (boxbuild) 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. As services provided by the EMS industry have continued to increase over the past several months lead-time for components have increased. Pricing for components and related commodities has escalated and may continue to increase in the future periods. The impact of these price increases could have a negative effect on the Company's gross margins and operating results. 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, and the Company may be required to operate at a cost disadvantage compared to competitors who have greater direct buying power from suppliers. The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"), as well as new rules subsequently implemented by the Securities and Exchange Commission and new 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. These new rules, regulations, and requirements have significantly increased the company's legal, financial compliance and administrative costs, made many other activities more time consuming and costly and diverted the attention of senior management. These new rules and regulations have also made it more difficult and more expensive for the Company to obtain director and officer liability insurance. These new rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on its audit committee. In addition, if the Company receives a qualified opinion on the adequacy of its internal control over financial 10 reporting shareholders, could lose confidence in the reliability of the Company's financial statements, which could result in a decrease in the value of its stock. As a manufacturing company, the Company includes all fixed manufacturing overhead in cost of products sold. The inclusion of fixed manufacturing overhead in cost of goods sold magnifies the fluctuations in gross profit margin percentages caused by fluctuations in net sales and capital expenditures. Specifically, fluctuations in the mix of consignment and turnkey contracts could have an effect on the cost of goods sold and the resulting gross profit as a percentage of net sales. 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. However, turnkey contracts typically have lower gross margins due to the large material content. Historically, more than 90% of the Company's sales have been from turnkey orders. Sales can be misleading as an indication of the Company's financial performance. Gross profit margins can vary considerably among customers and products depending on the type of services rendered by the Company, specifically the variation of orders for turnkey services versus consignment services. Variations in the number of turnkey orders compared to consignment orders can lead to significant fluctuations in the Company's revenue levels. In the past, the timing and rescheduling of orders has caused the Company to experience significant quarterly fluctuations in its revenues and earnings, and the Company expects such fluctuations to continue. RESULTS OF OPERATIONS: Net sales increased for the three month period ended October 31, 2004 to $27,861,691 from $26,526,879 for the three month period ended October 31, 2003. Net sales for the six months ended October 31, 2004 increased to $52,939,858 from $51,360,675 for the same period in the prior fiscal year. Sales volume increased for the three month period ended October 31, 2004 as compared to the same period in the prior year in the telecommunications marketplace. Sales volume increased for the three month period ended October 31, 2004 in the appliance industry, which was partially offset by price reductions. Sales volume increased in the telecommunications and fitness industries for the six month period ended October 31, 2004 compared to the same period in the prior year. The increase for each of the periods was due primarily to an increase in the number of units sold. Gross profit decreased during the three month period ended October 31, 2004 to $5,193,033 or 18.6% of net sales, compared to $5,558,548 or 21.0% of net sales for the same period in the prior fiscal year. Gross profit decreased for the six month period ended October 31, 2004 to $9,818,731 or 18.5% of net sales, compared to $10,272,489 or 20.0% of net sales for the same period in the prior fiscal year. The decrease in the Company's gross margin for the three and six month periods is the result of pricing pressures within the EMS industry, product life 11 cycle issues and component pricing. The Company's focus remains on expanding its customer base through advertising and potential acquisitions. There can be no assurance that sales levels or gross margins will remain stable in future quarters. Selling and administrative expenses increased to $2,949,772 or 10.6% of net sales for the three month period ended October 31, 2004 compared to $2,520,746 or 9.5% of net sales in the same period last year. Selling and administrative expenses increased to $5,661,847 or 10.7% of net sales for the six month period ended October 31, 2004 compared to $5,028,669 or 9.8% of net sales in the same period last year. The increase is primarily due to an increase in insurance, legal fees and other professional fees for the three and six month period ended October 31, 2004. Interest expense for bank debt and capital lease obligations for the three month period ended October 31, 2004 was $53,630 compared to $10,037 for the same period in the prior year. Interest expense for the six month period ended October 31, 2004 increased to $120,313 from $52,585 compared to the same period in the prior year. This change was attributable to the increase in interest for notes payable for the Company's corporate facility and manufacturing facility in Elk Grove Village and its Mexican manufacturing facility. As a result of the factors described above, net income decreased to $1,309,177 for the three month period ended October 31, 2004 compared to $1,812,736 for the same period in the prior year. Basic and dilutive earnings per share for the second fiscal quarter of 2004 were $0.35 and $0.34, respectively, compared to basic and dilutive earnings per share of $0.54 and 0.52, respectively, for the same period in the prior year. For the six months ended October 31, 2004, the Company recorded net income of $2,346,146 compared to $3,120,234 for the same period in the prior fiscal year. Basic and dilutive earnings per share for the six month period ended October 31, 2004 were $0.63 and $0.61, respectively, compared to basic and dilutive earnings per share of $0.99 and $0.92, respectively, for the same period in the prior year. LIQUIDITY AND CAPITAL RESOURCES: During the first six months of fiscal 2005 cash used in operating activities was $1,533,468. Cash used in operating activities was primarily related to an increase of $6,023,280 in inventories and an increase of $1,715,378 in accounts receivable, which was partially offset by net income of $2,346,146. Working capital at October 31, 2004 totaled $22,096,410 compared to $22,887,751 in the same period in the prior year. At October 31, 2004 the Company had $234,260 in borrowings outstanding under the $13,000,000 revolving credit facility and unused availability was approximately $12,765,000. The maximum borrowing limit under the revolving credit facility is limited to the lesser of (i) $13,000,000 or (ii) an amount equal to the sum of up to 85% of the receivables borrowing base and the lesser of $6,500,000 or up to 50% of the inventory borrowing base. The loan and security agreement is collateralized by substantially all of the assets of the Company and contains certain financial covenants, including specific covenants pertaining to the maintenance of minimum tangible net worth and net income. The agreement also restricts 12 annual lease rentals and capital expenditures and the payment of dividends or distributions of any cash or other property on any of its capital stock, except that common stock dividends may be distributed by stock splits or dividends pro rata to its stockholders. At October 31, 2004 the Company was in compliance with all financial covenants under the credit facility. The Company used approximately $1,350,000 in cash for investing activities in the six months ended October 31, 2004 for the purchase of its affiliate. On August 2, 2004 the Company acquired the interest of outside investors in its affiliate SMTU and the general partner of SMTU, SMT Unlimited, Inc., thereby bringing the Company's interest in its affiliate SMTU to approximately 80%. On September 2, 2004 the Company acquired the remaining interests in its affiliate SMTU from its managers. The aggregate price paid for all the interests was $2.6 million. This aggregate price was paid with $1,270,000 in cash and notes in the amount of $1,330,000 with terms of up to 2 years. The acquisition was treated as a step acquisition and resulted in goodwill of $719,040. On October 1, 2004 SMT Unlimited, Inc. was merged into the Company, and SMTU was liquidated, thereby becoming an operating division of the Company. In fiscal 2005 the Company plans to make additional machinery and equipment purchases primarily to support its operation in Mexico. The Company plans to execute a three to five year capital lease to fund such transactions, which it estimates will be approximately $1,100,000 in the aggregate. The Company anticipates its credit facility, cash flow from operations and leasing resources will be adequate to meet its working capital requirements in fiscal 2005. In the event the business grows rapidly or the Company considers an acquisition, additional financing resources could be necessary. There is no assurance that the Company will be able to obtain equity or debt financing at acceptable terms in the future. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures The Company maintains a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company in the reports filed by the Company under the Securities Exchange Act of 1934, as amended ("Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. The Company carried out an evaluation, under the supervision of the President and Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act as of October 31, 2004. Based on that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of October 31, 2004. 13 (b) Changes in Internal Controls There have been no material changes in the Company's internal controls or other factors that could significantly affect those controls subsequent to the date of their evaluation, including any corrective actions with regard to material weaknesses. PART II OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On September 17, 2004, the Company held its 2004 Annual Meeting of Stockholders. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and Regulation 14A thereunder for the purpose of (i) electing two Class II directors to hold office until the 2007 Annual Meeting of Stockholders, (ii) ratifying the selection of Grant Thornton LLP as independent auditors of the Company, (iii) approving the adoption of the Company's 2004 Employee Stock Option Plan, (iv) approving the adoption of the Company's 2004 Directors' Stock Option Plan, and (v) approving an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of common stock of the Company. Each holder of common stock is entitled to one vote for each share held on the record date. The following persons were elected as directors to hold office until the 2007 Annual Meeting of Stockholders: John P. Chen and Carl Zemenick. The number of shares cast for, withheld and abstained with respect to each of the nominees were as follows:
Nominee For Against Abstained -------- ---- -------- --------- John P. Chen 3,578,059 106,514 0 Carl Zemenick 3,577,449 107,114 0
The following persons are directors of the Company whose current term extends beyond the 2004 Annual Meeting of Stockholders: Thomas W. Rieck, William L. McClelland, Gary R. Fairhead, Franklin D. Sove and Dilip S. Vyas. There was no solicitation in opposition to management's nominees for directors. The stockholders voted to approve the ratification of the selection of Grant Thornton LLP as independent auditors for the Company for the fiscal year ended April 30, 2005. A total of 3,653,092 shares were cast for such ratification, 27,170 shares were opposed and 4,301 shares abstained. The stockholders voted to approve the ratification of the 2004 Employee Option Plan. A total of 1,463,124 share were cast for such ratification, 339,644 shares were opposed and 18,247 shares abstained. 14 The stockholders voted to approve the ratification of the 2004 Directors' Stock Option Plan. A total of 1,465,352 shares were cast for such ratification, 337,882 were opposed and 17,961 shares abstained. The stockholders voted to approve the amendment of the Certificate of Incorporation of the Company to increase the number of Authorized Shares of Common Stock of the Company to 12,000,000. A total of 1,463,124 shares were cast for the amendment, 339,644 were opposed and 18,427 shares abstained. ITEM 6. EXHIBITS (a) Exhibits: Exhibit 3.1 -- Certificate of Incorporation of the Company as amended Effective September 21, 2004. Exhibit 10.1 -- SigmaTron International, Inc. 2004 Employee Stock Option Plan filed as Appendix B to the Company's Definitive Proxy Statement filed on August 16, 2004, and hereby incorporated by reference. Exhibit 10.2 -- SigmaTron International, Inc. 2004 Directors' Stock Option Plan filed as Appendix C to the Company's Definitive Proxy Statement filed on August 16, 2004, and hereby incorporated by reference. Exhibit 10.22 -- SigmaTron International, Inc. Employee Stock Option Plan Nonstatutory Stock Option Agreement. Exhibit 31.1 -- Certification of Principal Executive Officer of SigmaTron International, Inc. Pursuant to Rule 13a-14(a) under the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 31.2 -- Certification of Principal Financial Officer of SigmaTron International, Inc. Pursuant to Rule 13a-14(a) under the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 32.1 -- 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). Exhibit 32.2 -- 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). 15 SIGNATURES: ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SIGMATRON INTERNATIONAL, INC /s/ Gary R. Fairhead 12/13/04 - ------------------------------------------------- --------------------- Gary R. Fairhead Date President and CEO (Principal Executive Officer) /s/ Linda K. Blake 12/13/04 - ------------------------------------------------- --------------------- Linda K. Blake Date Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer)
EX-3.1 2 c90426exv3w1.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.1 PAGE 1 DELAWARE ------------------------- The First State I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "SIGMATRON INTERNATIONAL, INC. ", FILED IN THIS OFFICE ON THE NINETEENTH DAY OF OCTOBER, A.D. 2004, AT 8 O'CLOCK A.M. A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS. [SEAL] /s/ Harriet Smith Windsor ------------------------------------------------------- Harriet Smith Windsor, Secretary of State 2359632 8100 AUTHENTICATION: 3435671 040754462 DATE: 10-26-04 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS DELIVERED 08:00 AM 10/19/2004 FILED 08:00 AM 10/19/2004 SRV 040754462 -- 2359632 FILE CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF SIGMATRON INTERNATIONAL, INC. SigmaTron International, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, as amended, DOES HEREBY CERTIFY: First: That at a duly convened meeting of the Board of Directors pursuant to Section 141 of the General Corporation Law of the State of Delaware, as amended, resolutions were duly adopted by the board of Directors of SigmaTron International, Inc. (the "Corporation") setting forth a proposed amendment to the Certificate of Incorporation of the Corporation, declaring said amendment advisable and directing that the proposed amendment be submitted to the stockholders of the Corporation for consideration and adoption pursuant to Section 242 of the General Corporation Law of the State of Delaware, as amended, said amendment being as follows: RESOLVED, that the Certificate of Incorporation of the Corporation be amended by amending and restating the first sentence of Article Fourth of said Certificate of Incorporation to read as follows: Fourth. The total number of shares of stock of all classes which the Corporation is authorized to issue is Twelve Million Five Hundred Thousand (12,500,000) of which Twelve Million (12,000,000) shares shall be classified as common stock, $0.01 par value per share ("Common Stock"), and Five Hundred Thousand (500,000) shares shall be classified as preferred stock, $0.01 par value per share ("Preferred Stock"). Second: That thereafter, at the duly convened 2004 Annual Meeting of Stockholders of the Corporation, the holders of a majority of the stock of the Corporation entitled to vote at said meeting voted in favor of and adopted said amendment. Third: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware, as amended. Fourth: That the capital of the Corporation will not be affected by or reduced under or by reason of said amendment. IN WITNESS WHEREOF, said SigmaTron International, Inc. has caused this Certificate to be signed by Gary R. Fairhead, its President and Chief Executive Officer, and attested by Linda K. Blake, its Secretary, this 21st day of September, 2004. By: /s/ Gary R. Fairhead -------------------------------------- Gary R. Fairhead, President and Chief Executive Officer Attested: By: /s/ Linda K. Blake - --------------------------- Linda K. Blake, Secretary EX-10.22 3 c90426exv10w22.txt EMPLOYEE STOCK OPTION PLAN EXHIBIT 10.22 7500 0006 SIGMATRON INTERNATIONAL INC. 2004 EMPLOYEE STOCK OPTION PLAN NONSTATUTORY STOCK OPTION AGREEMENT SigmaTron International, Inc. (the "Company"), desiring to afford an opportunity to the Optionee named below to purchase certain shares of the Company's common stock to provide the Optionee with an added incentive as an employee of the Company, hereby grants to the Optionee, pursuant to the terms of the SigmaTron International, Inc. 2004 Employee Stock Option Plan (the "Plan") an option ("Option") to purchase the number of shares specified below, during the term ending at 5 o'clock p.m. (prevailing local time at the Company's principal offices) on the expiration date of this Option specified below, at the Option exercise price specified below, subject to and upon the following terms and conditions: 1. Identifying Provisions. As used in this Option, the following terms shall have the following respective meanings: (a) Optionee: (b) Date of Grant: (c) Number of Shares optioned: (d) Option exercise price per share ("Option Price"): (e) Expiration date: (f) Vesting schedule: This Option shall be exercisable with respect to the following:
On or After This Date Cumulative Percentage of Shares Cumulative Number of Shares - --------------------- ------------------------------- ---------------------------
Subject to Paragraphs 3(d) and 6, in order for this Option to vest, Optionee must be employed by the Company on the date in which the Option is to vest and shall have been so employed continuously (except for excused absences) since the Date of Grant. 1 The number of option shares granted in a fiscal year to each covered employee, as defined in Treasury Regulation ss.1.162-27(c)(2) (a "Covered Employee"), shall not exceed 100,000 shares for any fiscal year in which such person serves as a Covered Employee. 2. Exercise: Payment For and Delivery of Stock. Optionee, or his successors as permitted by the terms of the Plan and this Agreement shall acquire shares pursuant to this Option by delivering to the Company a written notice of exercise, specifying the number of shares which the Optionee desires to exercise under this Option, the date on which Optionee desires to complete the purchase ("Purchase Date") and the form of payment through which the purchase shall be made. If required in order to comply with the Securities Act of 1933, as amended, the notice of exercise shall contain a representation to the effect that the Optionee intends to acquire the shares for investment and not with a view toward distribution. The Compensation Committee of the Board of Directors ("Committee") has determined that Optionee shall pay to the Company the full Option Price of the shares to be acquired hereunder on or before the Purchase Date in either cash or stock, or partly of each, as follows: (a) Cash. Payment in full for shares purchased under an Option may be made in cash (including check, bank draft or money order) on or before the Purchase Date. (b) Stock. Payment may be made in full for shares purchased under an Option, in whole or in part, by tendering to the Company in good form for transfer, shares of the same class of stock as that then subject to the Option and that have been held by the Optionee for at least six months, delivered in lieu of cash concurrently with such exercise, the shares so delivered to be valued on the basis of fair market value on the Purchase Date provided that the Company is not then prohibited from purchasing or acquiring shares of such stock. (c) Cashless Exercise. Optionee may make payment by means of a cashless exercise if the Options are tendered to a third party securities broker approved by the Company in exchange for the number of shares equal to the aggregate difference between the Option Price and the fair market value of the Options so tendered. 3. Restrictions on Exercise. The following additional provisions shall apply to the exercise of this Option: (a) If Optionee's employment is terminated "for cause," then the unvested portion of this Option is immediately canceled and the unexercised, vested portion of this Option shall be exercisable (to the extent then exercisable), by the Optionee or Permitted Transferee (defined in Paragraph 4) at any time prior to the expiration date or within three months after the date of termination of employment, whichever is the shorter period. A termination "for cause" means any termination due to (i) conviction of a felony; (ii) Optionee's refusal, after at least 30 days advance written notice from the Company's Board of Directors, to carry out a direct order of the Board of Directors (other than an order to relocate Optionee more than 25 miles from his place of employment); or (iii) a finding by the Board of Directors that Optionee has defrauded the Company or any affiliate of the Company. 2 (b) If a Optionee's employment is terminated by the Company, but such termination is not "for cause," as defined above, then the unvested portion of this Option is immediately canceled and the vested portion of said Option shall continue in effect after the Optionee's termination of employment under the terms specified herein. This subparagraph shall also apply to a Optionee who voluntarily terminates employment with the Company. (c) While employed by the Company or any of its subsidiaries, or during the twelve (12) months immediately thereafter, if the Optionee, directly or indirectly, as partner, officer, director, stockholder, advisor or employee, or in any other form or capacity, renders any services to or becomes employed by, owns any interest in or be otherwise associated with, any company or entity which sells or solicits the sale of any product or service manufactured or offered for sale by the Company or any subsidiary of the Company within six (6) months prior to the termination of his employment by the Company, or becomes employed by any customer of the Company and uses his efforts to cause said customer to enable it to produce for itself products or services which are the same as, substitute for, or substantially similar to products or services which theretofore it was purchasing from the Company or its subsidiaries ("Disqualifying Event"), then the unvested portion of this Option is immediately canceled and the unexercised, vested portion of this Option shall be exercisable (to the extent then exercisable), by the Optionee or Permitted Transferee at any time prior to the expiration date or within three months after the date of the Disqualifying Event, whichever is the shorter period, provided, however, that the above shall not apply to investments in publicly owned companies in which Optionee owns no more than 1% of the outstanding capital stock. (d) If Optionee's employment is terminated because of the death or permanent disability (as described in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the"Code")) of the Optionee when employed, then all unvested Options immediately vest and the unexercised Options at the time of death shall be exercisable in full (including the portion which, but for this provision, would not be exercisable) by the person or persons entitled to do so under the will of the Optionee, or if the Optionee shall fail to make testamentary disposition of the Option or shall die intestate, by the legal representative of the Optionee or by a Permitted Transferee, at any time prior to the expiration date of such Option. (e) Whether the Optionee has been constructively discharged, and whether the Optionee's employment has terminated "for cause," shall be determined in each case by the Committee, whose determination shall be final and binding. The Company assumes no responsibility and is under no obligation to notify a Permitted Transferee of early termination of this Option on account of termination of the Optionee's employment. 4. Transferability. The Committee shall retain the authority and discretion to permit the Option to be transferable as long as such transfers are made only to a Permitted Transferee; provided that (i) such transfer is a bona fide gift and accordingly, the Optionee receives no value for the transfer, as provided in the instructions to SEC Form S-8, (ii) that the Options transferred continue to be subject to the same terms and conditions that were applicable to the Options 3 immediately prior to the transfer, and (iii) that the Options may not be otherwise or subsequently sold, pledged, assigned or transferred in any manner except by will or the laws of descent or distribution or pursuant to a domestic relations order. "Permitted Transferee" shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of the Optionee (a "Family Member"), any person sharing the Optionee's household (other than as a tenant or employee), or a trust or other entity in which Family Members and the Optionee have more than fifty percent of the beneficial or voting interests. In the event of the Optionee's death, the Option may be exercised only by a person who acquired the right to exercise it by reason of the death of the Optionee. Neither the Optionee, any Permitted Transferee, nor any person who acquires the right to exercise the Option by reason of the death of the Optionee will be deemed to be a holder of any Shares subject to the Option unless and until certificates for those Shares are issued to such person. A Permitted Transferee may not subsequently transfer the Option. The designation of a beneficiary shall not constitute a transfer. 5. Changes in Capital Structure. If the outstanding shares of Common Stock of the Company are increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any reorganization, merger, consolidation, plan of exchange, recapitalization, reclassification, stock split-up, combination of shares or dividend payable in shares, appropriate adjustment may be made by the Committee in its sole discretion, to the end that the Optionee's proportionate interest derived under this Option is maintained as before the occurrence of such event. Nothing stated herein shall require the Committee to make such adjustment. If the Committee makes such adjustment, the Committee may also require that any securities issued in respect of or exchanged for shares issued hereunder that are subject to restrictions be subject to similar restrictions. Notwithstanding the foregoing, the Committee shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Committee. Any such adjustments made by the Committee shall be conclusive. If any such adjustment provided for in this Paragraph 5 requires the approval of shareholders of the Company in order to enable the Company to adjust the Option, then no such adjustment shall be made without the required shareholder approval. 6. Special Acceleration of Vesting in Certain Events. (a) Notwithstanding any other provisions of this Option and subject to the limitations described below, upon the occurrence of any of the following events (each, a "Corporate Transaction"): (i) any consolidation, merger, plan of exchange, or transaction involving the Company ("Merger") in which the Company is not the continuing or surviving corporation or pursuant to which the common stock of the Company would be converted into cash, securities or other property; or 4 (ii) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company or the adoption of any plan or proposal for the liquidation or dissolution of the Company; or (iii) a "person" within the meaning of Section 13(d) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company), becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, in one or more transactions, of shares of common stock of the Company representing 50% or more of the total number of votes that may be cast by all stockholders of the Company voting as a single class, or the first day on which shares of the Company's common stock are purchased pursuant to a tender offer or exchange offer. this Option shall vest and become fully exercisable as to all of the Shares subject to this Option as of the date thirty (30) days prior to the date of the Corporate Transaction. The exercise or vesting of any Option and any Shares acquired upon the exercise thereof that was permissible solely by reason of this Paragraph 6 shall be conditioned upon the consummation of the Corporate Transaction. Any Options that are not exercised as of the date of the Corporate Transaction shall terminate and cease to be outstanding effective as of the date of the Corporate Transaction. (d) Accelerated vesting under this paragraph shall be limited to the maximum number of additional shares such that the acquisition or disposition of such shares which vest in connection with a Corporate Transaction shall not result in an excess parachute payment to Optionee (as defined in Section 280G of the Code), unless the Company authorizes accelerated vesting in excess of such maximum amount. The Company is authorized by Optionee to collect from Optionee any additional income or excise taxes which the Company may incur due to a violation of this provision. 7. Rights in Shares Before Issuance and Delivery. Optionee, his successors or assigns, his executor, administrator or legatee if he be deceased, or Permitted Transferee shall have no rights as a shareholder with respect to any stock covered by this Option until the date of issuance of the stock certificate to him or her for such stock after receipt of the consideration in full set forth herein or as may be approved by the Company. No adjustments shall be made for dividends, whether ordinary or extraordinary, whether in cash, securities, or other property, for distributions in which the record date is prior to the date for which the stock certificate is issued. 8. Requirements of Law and of Stock Exchanges. Nothing herein shall require the Company to issue any stock upon exercise of this Option if the issuance would, in the opinion of counsel for the Company, constitute a violation of the Securities Act of 1933, as amended (the "1933 Act"), applicable state securities laws, or any other applicable rule or regulation then in effect. 9. Disposition of Shares--Restrictions. No stock acquired hereunder may be disposed of within six months from the date of grant. If such stock were disposed of within six 5 months of the date of grant, such disposition may not be exempt from the short swing profit rules of Section 16(b) of the Exchange Act. Nothing in this Agreement shall assure any Option holder that shares issuable under this Option are registered on a Form S-8 of the 1933 Act or on any other Form. In particular, no Permitted Transferee shall have shares registered on a Form S-8 until and unless the federal securities laws allow for such form of registration subsequent to the date of this Agreement. 10. No Right to Continued Employment. This Option shall not confer upon the Optionee any right with respect to continued employment by the Company nor shall it alter, modify, limit or interfere with any right or privilege of the Company under any employment contract, heretofore or hereinafter executed, with the Optionee, including the right to terminate the Optionee's employment at any time for or without cause. The Company assumes no responsibility to notify a Permitted Transferee of a Optionee's termination of employment. 11. Receipt of Plan. The Optionee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all terms and provisions thereof and as the same shall have been amended from time to time in accordance with the terms thereof, provided that no such amendment shall deprive the Optionee, without his consent, of this Option or any of his or her rights hereunder. The Optionee acknowledges and agrees that such provisions are acceptable to him or her for all purposes. The Optionee further acknowledges and agrees that in the event of any conflict herewith, the provisions of the Plan shall govern and control, and this Agreement or the applicable provision hereof shall automatically be deemed modified to conform ab initio. 12. Notices. Any notice to be given to the Company shall be addressed to the Committee in care of the Company at its principal office, and any notice to be given to the Optionee shall be addressed to him or her at the address given beneath his signature hereto or at such other address as the Optionee may hereafter designate in writing to the Company. Any such notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, registered or certified, and deposited, postage and registry or certification fee prepaid, in a post office or branch post office regularly maintained by the United States Postal Service. 13. Miscellaneous. This Agreement and the Plan constitute the entire agreement and understanding between the Company and the Optionee and may not be changed, modified or amended by oral statements to the contrary, but only by written document signed by both parties hereto. The titles to each paragraph herein are for convenience only and are not to be used in the construction or interpretation of this document. This Agreement shall be binding on and inure to the benefit of the parties hereto, and their respective heirs, legatees, successors and assigns. This Agreement shall be construed in accordance with the laws of the State of Illinois. This document constitutes an offer by the Company to enter into an Agreement under the terms and conditions herein set forth. Said offer will expire and terminate without further notice at 5 o'clock p.m. (prevailing local time at the Company's principal office) on __________ unless sooner accepted by the Optionee by delivering a copy of this Agreement, executed by the Optionee, to the Company on or before said time and date. 6 IN WITNESS THEREOF, the Company has granted this Option on the date of grant specified above. ACCEPTED: SIGMATRON INTERNATIONAL, INC., a Delaware corporation Optionee: By: --------------------------- ----------------------------- Address: Gary R. Fairhead --------------------------- Title: President and CEO Date: Date: ------------------------------- --------------------------- By: ----------------------------- Linda K. Blake Title: Chief Financial Officer Date: --------------------------- 7 NOTICE OF EXERCISE OF OPTION UNDER 2004 EMPLOYEE STOCK OPTION PLAN OF SIGMATRON INTERNATIONAL, INC. To: SigmaTron International, Inc. 2201 Landmeier Road Elk Grove Village, IL 60007 From: Optionee Name: --------------------------------------------------------- Optionee Address: ----------------------------------------------------- Dear Sirs: Pursuant to the Stock Option Agreement dated ________ between SigmaTron International, Inc. (the "Company") and the Optionee listed above (the "Option"), Optionee hereby notifies the Company of its intention to exercise the Option to purchase the number of shares of the common stock of the Company (the "Shares") set forth below, effective on (the "Purchase Date"). This Notice is accompanied with the total exercise price in the amount set forth below in the form of cash, check, shares of common stock of the Company, or a combination thereof, or has been satisfied by delivering the Option to a third party securities broker approved by the Company.
- ----------------------------------------------------------------------------------------- Total Vested Shares Number of Shares to Exercise Price Total Exercise Price Available to Exercise be Purchased Hereunder Per Share to be Paid Hereunder - ----------------------------------------------------------------------------------------- $------ $------ $------ - -----------------------------------------------------------------------------------------
Please effect the transfer of the Shares to Optionee. OPTIONEE Signature of Optionee Date: --------------------- 8 EX-31.1 4 c90426exv31w1.txt 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER EXHIBIT 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER OF SIGMATRON INTERNATIONAL, INC. PURSUANT TO RULE 13A-14(a) UNDER THE EXCHANGE ACT, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Gary R. Fairhead, President and Chief Executive Officer of SigmaTron International, Inc., certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of SigmaTron International, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in registrant's internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 13, 2004 /s/ Gary R. Fairhead ---------------------------------------- Gary R. Fairhead President and Chief Executive Officer of SigmaTron International, Inc. EX-31.2 5 c90426exv31w2.txt 302 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER EXHIBIT 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER OF SIGMATRON INTERNATIONAL, INC. PURSUANT TO RULE 13A-14(a) UNDER THE EXCHANGE ACT, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Linda K. Blake, Chief Financial Officer, Secretary and Treasurer of SigmaTron International, Inc., certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of SigmaTron International, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in registrant's internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 13, 2004 /s/ Linda K. Blake ------------------------------------------- Linda K. Blake Chief Financial Officer, Secretary and Treasurer of SigmaTron International, Inc. EX-32.1 6 c90426exv32w1.txt 906 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER EXHIBIT 32.1 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) I, Gary R. Fairhead, am President and Chief Executive Officer of SigmaTron International, Inc. (the "Company"). This certification is being furnished pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the Company's Quarterly Report on Form 10-Q for the quarter ended October 31, 2004 (the "Report"). I hereby certify that to the best of my knowledge: (a) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act (15 U.S.C. 78 m(a) or 78o(d)); and (b) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: December 13, 2004 /s/ Gary R. Fairhead -------------------- Gary R. Fairhead President and Chief Executive Officer of SigmaTron International, Inc. EX-32.2 7 c90426exv32w2.txt 906 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER EXHIBIT 32.2 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) I, Linda K. Blake, am Chief Financial Officer, Secretary and Treasurer of SigmaTron International, Inc. (the "Company"). This certification is being furnished pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the Company's Quarterly Report on Form 10-Q for the quarter ended October 31, 2004 (the "Report"). I hereby certify that to the best of my knowledge: (a) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act (15 U.S.C. 78 m(a) or 78o(d)); and (b) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: December 13, 2004 /s/ Linda K. Blake ------------------ Linda K. Blake Chief Financial Officer, Secretary and Treasurer of SigmaTron International, Inc. -----END PRIVACY-ENHANCED MESSAGE-----