SigmaTron International(SGMA) - 2025 Q1 - Quarterly Report

Financial Performance - Net sales decreased by $13,353,378, or 13.6%, to $84,776,978 for the three months ended July 31, 2024, compared to $98,130,356 for the same period in the prior fiscal year[94] - Cost of products sold decreased by $10,107,352, or 11.4%, to $78,371,784, representing 92.4% of net sales for the three months ended July 31, 2024[96] - Gross profit margin was 7.6% of net sales for the three months ended July 31, 2024, down from 9.8% for the same period in the prior fiscal year[97] - Net loss increased to $3,289,160 for the three months ended July 31, 2024, compared to a net income of $262,099 for the same period in the prior fiscal year[99] - Cash flow provided by operating activities was $2,627,667 for the three months ended July 31, 2024, down from $7,750,014 for the same period in the prior fiscal year[102] Expenses and Costs - Selling and administrative expenses decreased by $218,939, or 3.2%, to $6,623,866, representing 7.8% of net sales for the three months ended July 31, 2024[97] - Interest expense, net, decreased to $2,268,275 for the three months ended July 31, 2024, compared to $2,719,078 for the same period in the prior fiscal year[97] Tax and Compliance - The effective tax rate increased to (32.26)% for the three months ended July 31, 2024, compared to (142.76)% for the same period in the prior fiscal year[98] - The Company was not in compliance with financial covenants as of August 19, 2024, with the Fixed Charge Coverage Ratio below 1.10:1.00 and Total Debt to EBITDA Ratio exceeding 4.25:1.00[113] - The 2024 Amendments modified the Fixed Charge Coverage Ratio minimums to range from 0.70:1.0 for the twelve months ending July 31, 2024, to 1.00:1.0 for the twelve months ending September 30, 2025[116] - The maximum Total Debt to EBITDA Ratio was adjusted to range from 6.50:1.0 for the twelve months ending July 31, 2024, to 3.50:1.0 for the twelve months ending April 30, 2027[116] Debt and Financing - Cash provided by financing activities was $426,104 for the three-month period ended July 31, 2024, compared to cash used of $6,292,323 for the same period in 2023[105] - As of July 31, 2024, the outstanding balance under the revolving loan facility was $30,284,657, with $16,087,627 of unused availability, compared to an outstanding balance of $28,598,719 and $13,443,766 of unused availability at April 30, 2024[108] - The TCW Term Loan outstanding amount as of July 31, 2024, was $37,253,301, down from $37,503,301 at April 30, 2024[109] - The Revolving Commitment was reduced from $70 million to $55 million as of the Third Amendment Effective Date[118] - The Company can borrow up to 10,000,000 Renminbi (approximately $1,400,000) under a credit facility with China Construction Bank, with no outstanding balance as of July 31, 2024[121] - The outstanding balance of the mortgage agreement for the property in Del Rio, Texas, was $353,469 as of July 31, 2024, down from $366,572 at April 30, 2024[123] Foreign Operations and Currency - The Company paid approximately $15,460,000 to its foreign subsidiaries for manufacturing services during the three months of fiscal year 2025[125] - The cumulative amount of unremitted earnings for which U.S. income taxes have not been recorded is $14,036,000 as of July 31, 2024[126] - The Company reported net foreign currency transaction losses of $461,748 for the three-month period ended July 31, 2024, compared to losses of $275,970 for the same period in the prior year[125] Internal Controls and Governance - The Company identified a material weakness in its disclosure controls and procedures related to revenue recognition, which continues to exist as of July 31, 2024[128] - Management remains committed to addressing the material weakness in internal controls, but there is no assurance of success[130] - The Company’s disclosure controls and procedures were deemed ineffective as of July 31, 2024, due to identified control deficiencies[128] Future Outlook - The Company anticipates continuing improvement in supply chain predictability in fiscal 2025[91] - The Company has taken steps to reduce its debt and cost structure, including consolidating operations and reducing headcounts[101] - The Company does not expect ongoing legal proceedings to have a material adverse impact on its future consolidated financial position[132]