SigmaTron International(SGMA) - 2025 Q3 - Quarterly Report

Financial Performance - Net sales decreased by $24,852,025, or 25.9%, to $71,067,863 for the three months ended January 31, 2025, compared to $95,919,888 for the same period in the prior fiscal year [142]. - For the nine months ended January 31, 2025, net sales decreased by $62,177,727, or 21.2%, to $230,564,201 compared to $292,741,928 for the same period in the prior fiscal year [153]. - Gross profit margin was 7.8% of net sales for the three months ended January 31, 2025, down from 10.3% for the same period in the prior fiscal year [144]. - Gross profit margin decreased to 8.2% of net sales for the nine months ended January 31, 2025, down from 10.0% in the prior fiscal year [155]. - Net income increased by $3,284,605 to $3,883,611 for the three months ended January 31, 2025, primarily due to a gain from a sale/leaseback transaction [150]. - Net loss increased to $8,872,218 for the nine months ended January 31, 2025, compared to net income of $889,367 for the same period in the prior fiscal year, a decrease of $9,761,585 [162]. Cost and Expenses - Cost of products sold decreased by $20,478,128, or 23.8%, to $65,514,800, representing 92.2% of net sales for the three months ended January 31, 2025 [143]. - Cost of products sold for the nine months ended January 31, 2025, decreased by $51,774,253, or 19.7%, to $211,701,740, which is 91.8% of net sales [154]. - Selling and administrative expenses decreased by $305,347, or 4.6%, to $6,378,141, which is 9.0% of net sales for the three months ended January 31, 2025 [146]. - Selling and administrative expenses decreased by $767,409, or 3.8%, to $19,372,518, representing 8.4% of net sales for the nine months ended January 31, 2025 [158]. Debt and Financing - As of January 31, 2025, the outstanding balance under the revolving loan facility was $12,792,559, down from $28,598,719 at April 30, 2024 [180]. - The TCW Term Loan outstanding amount was $38,407,418 as of January 31, 2025, compared to $37,503,301 at April 30, 2024 [183]. - Interest expense, net, increased to $3,328,267 for the three months ended January 31, 2025, compared to $2,568,824 for the same period in the prior fiscal year [148]. - Interest expense, net, rose to $10,297,650 for the nine months ended January 31, 2025, compared to $7,996,598 in the prior fiscal year [160]. - Cash used in financing activities was $21,390,793 for the nine months ended January 31, 2025, compared to $12,267,545 in the prior fiscal year [175]. Compliance and Regulatory Issues - The Company received default notices from JPM and TCW due to non-compliance with financial covenants, including a Fixed Charge Coverage Ratio of less than 1.10:1.00 and a Total Debt to EBITDA Ratio greater than 4.50:1.00 [185]. - As of January 31, 2025, the Company classified total debt as current liabilities due to ongoing covenant violations and lender demands for a Replacement Transaction by September 2025 [189]. - The Company received a delinquency notification from Nasdaq for failing to timely file its Form 10-K for the fiscal year ended April 30, 2024, which constituted a default under the Credit Agreements [190]. Transactions and Agreements - The company executed a sale/leaseback transaction for its Elk Grove Village, Illinois headquarters, with a sale price of $9,500,000 and net proceeds of $8,292,098 [173]. - The Company entered into amendments to its Credit Agreements, adjusting the Fixed Charge Coverage Ratio minimums from 0.70:1.0 to 1.00:1.0 and the Total Debt to EBITDA Ratio maximums from 6.50:1.0 to 3.50:1.0 by April 30, 2027 [192]. - The TCW Term Loan principal payment schedule was amended to $250,000 per quarter, with a potential extension of the PIK Period for three additional quarters if certain conditions are met [195]. - The Company recorded a liability of $2,263,000 for warrants issued as part of the Fee Letter, with a fair value of $1,188,546 as of January 31, 2025 [197]. Foreign Operations - The Company reported net foreign currency transaction losses of $981,372 for the nine-month period ended January 31, 2025, compared to losses of $512,885 for the same period in the prior year [208]. - The Company paid approximately $42,390,000 to its foreign subsidiaries for manufacturing services during the nine months of fiscal year 2025 [208]. - The Company has a credit facility with China Construction Bank allowing borrowing up to 10,000,000 Renminbi (approximately $1,400,000) with no outstanding balance as of January 31, 2025 [201]. - The Company entered into a mortgage agreement for $556,000 to finance its warehousing and distribution center, with an outstanding balance of $326,693 as of January 31, 2025 [202]. Future Outlook - The company anticipates continuing improvement in supply chain predictability in fiscal 2025 [139]. - The Company must pursue and close a Replacement Transaction to pay obligations in full no later than September 30, 2025 [165]. - Cash flow provided by operating activities was $13,714,684 for the nine months ended January 31, 2025, down from $16,837,855 in the prior fiscal year [171].