SigmaTron reports Q1 results - revenue and income down
Sep 14, 2005
SigmaTron International, Inc. (NASDAQ:SGMA) reported revenues and earnings for the fiscal quarter ended July 31, 2005.
Revenues decreased to $21.3 million in first quarter fiscal 2006 from $21.5 million in the prior-year period. Net income decreased to $165,067 in the 2006 period compared to $1.0 million in the fiscal 2005 period. Diluted earnings per share for the quarter ended July 31, 2005, were $0.04 compared to $0.27 for the same quarter in fiscal 2005.
Commenting on SigmaTron's first quarter fiscal 2006 results, Gary R. Fairhead, president and chief executive officer, said, "During the first quarter we completed two strategic initiatives, both of which we previously announced. The first was the sale of our Las Vegas operation to Grand Products, which was effective May 30, 2005. It was an asset sale. The net effect of the sale after taking reserves plus the operating loss for the quarter was a loss of $24,731 after taxes. The sale has freed up approximately $4.5 million in working capital to date and avoided future capital expenditures of at least $1.5 million related to future compliance for RoHS, which is a European Union mandate on the restriction of the use of hazardous substances.
"The second initiative was the acquisition of all the outstanding stock of Able Electronics in July 2005. It was a stock purchase acquisition. The Able acquisition will help achieve three of our strategic objectives, namely, the diversification of our markets served, the broadening of our customer base, and the expansion of the range of services offered.
"Our first quarter financial results were driven by several factors. The primary driver was a softening of sales during the summer from our existing customer base. Additional factors were continuing margin pressures from both pricing to customers and increasing costs of manufacturing supplies and components. Finally, Able Electronics had a very soft July, which created an operating loss for it in July.
"During the quarter we saw production levels at our China facility continue to grow," Fairhead continued. "Our Elk Grove Village facility had a very weak quarter, as many of its customers lowered their inventory levels. Our Fremont operation had a good quarter, primarily driven by the resolution of a process problem for a new customer.
"We remain encouraged about the opportunities we believe the Able acquisition will bring us. Able's customer base has been very supportive of the acquisition and has welcomed the benefits the combination will bring them.
"Our plans call for the complete integration of Able into SigmaTron, including the relocation of our Fremont operation into the Hayward facility of Able, to be completed before the end of fiscal 2006. We believe that the integration will provide significant operating synergies for our California operations.
"Going forward we continue to face several challenges," Fairhead concluded. "RoHS compliance as mandated by the European community will create significant issues for our customers, vendors and us. Continuing regulatory pressures are negatively affecting our financial performance. The pricing pressures we face show no sign of abating. However, we remain optimistic that we are well positioned in a growing market because of our international footprint and fully expect our longer-term performance to improve."