Edgar Filing: SIGMATRON INTERNATIONAL INC

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 July 31, 2007

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 (I.R.S. Employer
Incorporation or Organization) 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 a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. Large
accelerated filer [ ] Accelerated filer [ ] Non-accelerated [X].

Indicate by check mark whether the registrant is a shell company (as defined by
Rule 12b-2 of the Exchange Act) Yes [ ] No [X]

On September 13, 2007, there were 3,794,956 shares of the Registrant's Common
Stock outstanding.

SigmaTron International, Inc.

Index

Page No.
--------

PART 1. FINANCIAL INFORMATION:

Item 1. Consolidated Financial Statements

Consolidated Balance Sheets - July 31, 2007 (Unaudited)
and April 30, 2007 3

Consolidated Statements of Operations -
Three Months Ended July 31, 2007 and 2006 4

Consolidated Statements of Cash Flows -
Three Months Ended July 31, 2007 and 2006 5

Notes to Consolidated Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12

Item 3. Quantitative and Qualitative Disclosures About
Market Risk 17

Item 4. Controls and Procedures 17

PART II OTHER INFORMATION:

Item 1. Legal Proceedings 18

Item 1A. Risk Factors 18

Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds 18

Item 3. Defaults Upon Senior Securities 18

Item 4. Submission of Matters to a Vote of Security Holders 18

Item 5. Other Information 18

Item 6. Exhibits 18

SIGMATRON INTERNATIONAL, INC.
Consolidated Balance Sheets

July 31,
2007 April 30,
(Unaudited) 2007
------------ ------------

CURRENT ASSETS:
Cash $ 2,889,526 $ 2,769,653
Accounts receivable, less allowance for doubtful
accounts of $194,800 at July 31, 2007
and $150,000 at April 30, 2007 21,619,962 20,279,874
Inventories, net 40,084,382 40,849,791
Prepaid and other assets 1,155,252 1,289,207
Deferred income taxes 1,252,939 1,251,241
Other receivables 158,499 224,189
------------ ------------
Total current assets 67,160,560 66,663,956

Property, machinery and equipment, net 30,361,709 30,971,107

Other assets 995,113 1,006,126
Intangible assets, net of amortization $1,460,922
and $1,308,228 1,309,078 1,461,772
Goodwill 9,298,945 9,298,945
------------ ------------
Total assets $109,125,405 $109,401,906
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 14,823,420 $ 15,473,660
Accrued expenses 2,182,625 2,613,636
Accrued wages 1,816,924 2,241,287
Income taxes payable 386,772 243,596
Notes payable - bank 1,000,000 1,000,000
Notes payable - building 534,219 528,092
Capital lease obligations 1,723,520 1,690,437
------------ ------------

Total current liabilities 22,467,480 23,790,708

Notes payable - banks 28,013,783 27,219,015
Notes payable- building, less current portion 2,852,486 2,988,372
Capital lease obligations, less current portion 2,681,805 3,125,297
Deferred income taxes 2,691,393 2,537,493
------------ ------------
Total long-term liabilities 36,239,467 35,870,177
------------ ------------
Total liabilities 58,706,947 59,660,885

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, 3,794,956 shares issued and 37,950 37,950
outstanding at July 31, 2007 and April 30, 2007
Capital in excess of par value 19,319,457 19,315,104
Retained earnings 31,061,051 30,387,967
------------ ------------
Total stockholders' equity 50,418,458 49,741,021
------------ ------------
Total liabilities and stockholders' equity $109,125,405 $109,401,906
============ ============

The accompanying notes to financial statements are an integral part of these
statements.

SIGMATRON INTERNATIONAL, INC.
Consolidated Statements Of Operations

Three Months Three Months
Ended Ended
July 31, July 31,
2007 2006
------------ ------------

Net sales $39,843,813 $36,959,865
Cost of products sold 34,627,152 33,101,216
----------- -----------
Gross profit 5,216,661 3,858,649

Selling and administrative expenses 3,217,370 3,017,953
----------- -----------
Operating income 1,999,291 840,696

Other expense (income) -net 10,137 (51,335)
Interest expense 713,058 510,945
----------- -----------
Income from operations before income tax expense 1,276,096 381,086

Income tax expense 449,112 122,416
----------- -----------
Net income $ 826,984 $ 258,670
=========== ===========

Earnings per share - basic $ 0.22 $ 0.07
=========== ===========

Earnings per share - diluted $ 0.21 $ 0.07
=========== ===========

Weighted average shares of common stock outstanding
Basic 3,794,956 3,786,956
=========== ===========

Weighted average shares of common stock outstanding
Diluted 3,889,274 3,866,783
=========== ===========

The accompanying notes to financial statements are an integral part of these
statements.

SigmaTron International, Inc.
Consolidated Statements of Cash Flows

Three Three
Months Ended Months Ended
July 31, July 31,
2007 2006
------------ ------------

OPERATING ACTIVITIES:
Net income $ 826,984 $ 258,670

Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 992,885 975,668
Stock-based compensation 4,353 20,042
Provision for doubtful accounts 44,800 --
Provision for inventory obsolescence (111,910) --
Deferred income taxes (1,698) (7,816)
Amortization of intangibles 152,694 212,946

Changes in operating assets and liabilities, net of acquisition
Accounts receivable (1,384,887) (2,234,182)
Inventories 877,319 (4,199,515)
Prepaid expenses and other assets 210,658 933,514
Trade accounts payable (650,240) 5,642,759
Accrued expenses and wages (855,374) (619,542)
Income taxes payable 143,176 (362,664)
----------- -----------
Net cash provided by operating activities 248,760 619,880

INVESTING ACTIVITIES:
Proceeds from sale of machinery and equipment -- 13,094
Purchases of machinery and equipment (383,487) (665,083)
----------- -----------
Net cash used in investing activities (383,487) (651,989)

FINANCING ACTIVITIES:
Payments under capital lease obligations (410,409) (378,172)
Payments under term loan (250,000) (250,000)
Proceeds under lines of credit 1,044,768 200,468
Payments under building notes payable (129,759) (124,044)
----------- -----------
Net cash provided by (used in) financing activities 254,600 (551,748)

CHANGE IN CASH 119,873 (583,857)
Cash at beginning of period 2,769,653 3,269,925
----------- -----------
CASH AT END OF PERIOD $ 2,889,526 $ 2,686,068
=========== ===========
Supplementary disclosures of cash flow information
Cash paid for interest $ 1,067,196 $ 540,282
Cash paid for income taxes, net of (refunds) 259,785 429,545

The accompanying notes to financial statements are an integral part of these
statements.

SigmaTron International, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

July 31, 2007

NOTE A - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of SigmaTron
International, Inc. ("SigmaTron"), wholly owned subsidiaries Standard Components
de Mexico S.A., and Ablemex, S.A. de C.V., acquired in July 2005, and its
wholly-owned foreign enterprise Wujiang SigmaTron Electronics Co. Ltd.
("SigmaTron China"), and 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.

Accordingly, the consolidated financial statements do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America 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 month period ended July 31, 2007, are not
necessarily indicative of the results that may be expected for the year ending
April 30, 2008. 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, 2007.

NOTE B - INVENTORIES

The components of inventory consist of the following:

July 31, April 30,
2007 2007
----------- -----------

Finished products $18,325,368 $10,359,223
Work-in-process 3,084,922 3,002,970
Raw materials 18,674,092 27,487,598
----------- -----------
$40,084,382 $40,849,791
=========== ===========

NOTE C - STOCK INCENTIVE PLANS

The Company adopted Financial Accounting Standards Board, Share-Based Payment
("SFAS 123 (R)") Accounting for Stock Based Compensation on May 1, 2006, and
implemented the new standard utilizing the modified prospective application
transition method. SFAS 123 (R) requires the Company to measure the cost of
employee services received in exchange for an equity award based on the grant
date fair value. Options for which the requisite service requirement has not
been rendered and that were outstanding as of May 1, 2006 are valued in
accordance with SFAS 123 "Accounting for Stock Based Compensation" and
compensation expense will be recognized over the remaining service period. Stock
based compensation expense for all stock-based awards granted subsequent to May
1, 2006 was based on the grant date fair value estimated in accordance with the
provisions of SFAS No.

123 (R). The Company did not grant any stock options in the first quarter ending
July 31, 2007. The Company recognized approximately $4,400 in stock compensation
expense and a tax benefit of approximately $1,700 in the first quarter of fiscal
2008 for options that vested during the period. In July 2006, the Company
granted 10,000 options and the per share fair value of the options granted was
$6.0125. The Company recognized approximately $20,000 in stock compensation
expense associated with the grant and a tax benefit of approximately $7,800 as
of July 31, 2006.

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 fair value of each option grant is estimated on the grant date using the
Black-Scholes option pricing model with the following assumptions:

Three Months Ended Three Months Ended
July 31, 2007 July 31, 2006
------------------ ------------------

Expected dividend yield 0% .0%
Expected stock price volatility .750 .750
Average risk-free interest rate 4.51% 4.98%
Weighted-average expected life of options 6.5 years 6.5 years

Option-valuation models require the input of highly subjective assumptions.
Because the Company's employee 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 employee stock options. The Company
used the U.S. Treasury yield in effect at the time of the option grant to
calculate the risk-free interest rate. The weighted-average expected life of
options was calculated using the simplified Method. The Company did not grant
any stock options in the first quarter ending July 31, 2007.

The table below summarizes option activity from the beginning of fiscal year
2008 through July 31, 2007:

Number of
Weighted- options
average exercisable
Number of exercise at end
options price of period
--------- --------- -----------

Outstanding at April 30, 2007 531,307 8.00 502,701
Options forfeited (1,000) 9.17
-------
Outstanding at July 31, 2007 530,307 505,805
=======

Information with respect to stock options outstanding and stock options
exercisable at July 31, 2007, follows:

Options outstanding
-----------------------------------------------------
Number Weighted-average Weighted-
outstanding at remaining average
Range of exercise prices July 31, 2007 contractual life exercise price
------------------------ -------------- ------------------- --------------

$2.20 - 5.63 103,515 4.25 years $2.51
9.17 - 12.25 426,792 7.65 years 9.33
-------
530,307
=======

Options exercisable
-------------------------------
Number Weighted-
exercisable at average
Range of exercise prices July 31, 2007 exercise price
------------------------ ------------- --------------

$2.20 - 5.63 103,515 $2.51
9.17 - 12.25 402,290 9.33
-------
505,805
=======

The following table summarizes the activity of the non-vested stock options for
the first quarter ending July 31, 2007.

Weighted-
average
fair value at
Options grant date
------- -------------

Non-vested at April 30, 2007 23,354 9.37
Forfeited (1,000) 9.17
Vested (3,970) 9.17
------
Non-vested at July 31, 2007 18,384 9.43
======

The aggregate intrinsic value is calculated as the difference between the market
price of the Company's common stock as of July 31, 2007 and the exercise price
of the underlying options. During the first quarter ending July 31, 2007 and
2006, there were no options exercised. The aggregate intrinsic value of options
outstanding was $1,452,446 and $677,294 for the first quarter ending July 31,
2007 and 2006, respectively.

As of July 31, 2007 there was approximately $68,500 of unrecognized compensation
cost related to the Company's stock option plans. This compensation cost is
being amortized over a three year vesting period using a straight-line basis.

The following table sets forth the computation of basic and diluted earnings per
share:

Three Months Ended
-----------------------
July 31, July 31,
2007 2006
---------- ----------

Net income $ 826,984 $ 258,670
========== ==========
Weighted-average shares
Basic 3,794,956 3,786,956
Effect of dilutive stock options 94,318 79,827
---------- ----------
Diluted 3,889,274 3,866,783
========== ==========
Basic earnings per share $ 0.22 $ 0.07
Diluted earnings per share $ 0.21 $ 0.07

Options to purchase 530,307 and 533,307 shares of common stock were outstanding
at July 31, 2007 and 2006, respectively.

NOTE D - FIN 48 (INCOME TAXES)

The Company adopted the provisions of FIN 48, on May 1, 2007. As a result of
this adoption, the Company recognized an increase to its unrecognized tax
positions of $153,900, which was recorded as a cumulative effect adjustment to
retained earnings. As a result of implementing FIN 48, the Company had $197,978
of unrecognized tax benefits, of which $197,978, if recognized, would affect the
Company's effective tax rate.

Upon adoption of FIN 48, the Company elected a new accounting policy to classify
interest and penalties related to unrecognized tax benefits as a component of
income tax expense. Interest was computed on the difference between the tax
position recognized in accordance with FIN 48 and the amount previously taken or
expected to be taken in the Company's tax returns. As of the adoption date, the
Company has $25,690 of accrued interest expense, net of taxes related to
unrecognized tax benefits. Penalties, if incurred, would be accounted for as a
component of tax expense.

No statutes have been extended on any of the Company's federal income tax
filings. The statute of limitations on the Company's fiscal year 2004, 2005 and
2006 federal income tax returns will expire on January 15, 2008, 2009 and 2010,
respectively. The IRS concluded an examination of the Company's fiscal 2005
federal income tax returns during the fourth quarter of 2007. This examination
resulted in no changes to the previously reported tax liability.

The Company's state income tax returns for the fiscal years 2003 through 2006
remain subject to examination by various state authorities with the latest
closing period on November 15, 2011. The Company recently concluded an
examination with Texas for the fiscal 2003-2005 tax years. This examination
resulted in no changes to the previously reported tax liability. The Company is
currently

not under examination by any state authority for income tax purposes and no
statutes for state income tax filings have been extended.

The Company's foreign subsidiary, Wujiang SigmaTron Electronics Co., Ltd filed
income tax returns for the 2005 and 2006 tax years which remain subject to
examination by China. The subsidiary is currently not under examination and no
statutes have been extended.

The Company's foreign subsidiary, Standard Components de Mexico S.A., filed
income tax returns for the 2002 through 2006 tax years which remain subject to
examination by Mexico. Standard Components de Mexico S.A. is currently not under
examination and no statutes have been extended.

Additionally, the Company's former foreign subsidiary, AbleMex, S.A. de C.V.
filed income tax returns for the 2002 through 2006 tax years which remain
subject to examination by Mexico. AbleMex S.A. de C.V. is currently not under
examination and no statutes have been extended.

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 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
goodwill. Actual results could materially differ from these estimates.

Revenue Recognition - Revenues from sales of product including the Company's
electronic manufacturing services business are recognized when the product is
shipped to the customer. 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 the same point that title passes under the terms of the purchase
order except for consignment inventory. Consignment 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 inventory, the consignment inventory is shipped to
the customer if the inventory was stored offsite or transferred from the
segregated part of the customer's facility for consumption, or use, by the
customer. The Company recognizes revenue upon such transfer. The Company does
not earn a fee for storing the consignment inventory. The Company generally
provides a ninety (90) day warranty for workmanship only and does not have any
installation, acceptance or sales incentives, although the Company has
negotiated extended 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 minimus under the Company's
standard or extended warranties. Any returns for workmanship issues received
after each period end are accrued in the respective financial statements.

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 that projected by management.

Impairment of Long-Lived Assets - The Company reviews long-lived 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 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.

Goodwill and Other Intangibles - The Company adopted on June 1, 2001, SFAS No.
141 "Business Combinations". Under SFAS No. 141, a purchaser must allocate the
total consideration paid in a business combination to the acquired tangible and
intangible assets based on their fair value. The Company adopted SFAS No. 142,
"Goodwill and Other Intangible Assets" effective January 1, 2002. Goodwill
represents the purchase price in excess of the fair value of assets acquired in
business combinations. Statement of Financial Accounting Standards (SFAS) No.
142, "Goodwill and Other Intangible Assets", requires the Company to assess
goodwill for impairment at least annually in the absence of an indicator of
possible impairment and immediately upon an indicator of possible impairment.
During the fourth quarter of fiscal 2007, the Company completed its annual
assessment of impairment regarding the goodwill recorded. The Company calculates
fair value of the reporting unit utilizing a combination of a discounted cash
flow approach and certain market approaches which considered both the Company's
market capitalization and trading multiples of comparable companies. The
calculations of fair value of the reporting unit involves significant judgment
and different underlying assumptions could result in different calculated fair
values. The goodwill impairment analysis indicated there was no goodwill
impairment for the year ended April 30, 2007 as the fair value of the reporting
unit exceeded the carrying value of the reporting unity by approximately 1%.
However, in the event the Company does not achieve projected performance or
there is a decline in the market price of the Company's stock, we may be
required to record an impairment charge for goodwill in the future, which charge
would reduce net income and earnings per share.

NEW ACCOUNTING STANDARDS:

In February 2006, the FASB issued Statement of Financial Accounting Standard No.
155, "Accounting for Certain Hybrid Instruments" (SFAS 155). FASB 155 allows
financial instruments that have embedded derivatives to be accounted for as a
whole (eliminating the need to bifurcate the derivative from its host) if the
holder elects to account for the whole instrument on a fair value basis. This
statement is effective for all financials instruments acquired or issued after
the beginning of the entity's first fiscal year that begins after September 15,
2006. The adoption of SFAS 155 did not have a material impact on its
consolidated financial statements.

In July 2006, the FASB issued FIN 48, "Accounting for Uncertainty in Income
Taxes" to create a single model to address accounting for uncertainty in tax
positions. FIN 48 clarifies the accounting for income taxes by prescribing a
minimum recognition threshold a tax position is required to meet before being
recognized in the financial statements. FIN 48 also provides guidance and
derecognition, classification, interest and penalties, accounting in interim
periods, disclosures, and transition. FIN 48 is effective for fiscal years
beginning after December 15, 2006. The Company adopted FIN 48 as of May 1, 2007,
as required. During the first quarter ended July 31, 2007, the Company recorded
$153,900 as a result of the impact FIN 48.

In September 2006, FASB issued SFAS No. 157 (SFAS 157), "Fair Value
Measurements". SFAS 157 establishes a common definition for fair value to be
applied to U.S. GAAP guidance requiring use of fair value, establishes a
framework for measuring fair value, and expands disclosure about such fair value
measurements. SFAS 157 is effective for fiscal years beginning after November
15, 2007. The Company is currently assessing the impact of SFAS 157 may have on
its financial statements.

In February 2007, the FASB issued SFAS No. 159 "The Fair Value Options for
Financial Assets and Financial Liabilities (SFAS No. 159). SFAS 159 permits
entities to choose to measure many financial assets and financial liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. The Company is currently assessing the
impact of SFAS 159 may have on financial statements.

ITEM 2. 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., and AbleMex, S.A. de C.V., and its wholly-owned
foreign enterprise Wujiang SigmaTron Electronics Co., Ltd. ("SigmaTron China"),
and its procurement branch SigmaTron Taiwan (collectively the "Company") and
other Items in this Report on Form 10-Q contain forward-looking statements
concerning the Company's business or results of operations. Words such as
"continue," "anticipate," "will," "expects," "believe," "plans," and similar
expressions identify forward-looking statements. These forward-looking
statements are based on the current expectations of SigmaTron (including its
subsidiaries). 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 our 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 may have greater financial or other resources than
the Company; the variability of our operating results; the results of goodwill
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 continued stability of the
U.S., Mexican, Chinese and Taiwanese economic systems, labor and political
conditions; and the ability of the Company to manage its growth, including its
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 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 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.

As the demand for electronic products has continued to increase over the past
several months, the lead-time for many components has increased. Pricing for
some components and related commodities has escalated due to the increased
demand and the transition to RoHS components 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 Company does not enter into
purchase agreements with major or single-source suppliers. The Company believes
that ad-hoc negotiations with its suppliers provides flexibility, given that the
Company's orders are based on the needs of its customers, which constantly
change.

Sarbanes-Oxley, 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. These rules, regulations, and requirements have increased the
Company's legal expenses, financial compliance and administrative costs, made
many other activities more time consuming and costly and diverted the attention
of senior management. These rules and regulations could also make it more
difficult for us to attract and retain qualified members for our board of
directors, particularly to serve on our audit committee. In addition, if the
Company receives a qualified opinion on the adequacy of its internal control
over financial reporting, shareholders could lose confidence in the reliability
of the Company's financial statements, which could have a material adverse
impact on the value of the Company's stock.

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 three months ended July 31, 2007.

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.

RESULTS OF OPERATIONS:

Net Sales

Net sales increased for the three month period ended July 31, 2007 to
$39,843,813 from $36,959,865 for the three month period ended July 31, 2006.
Sales volume increased for the three month period ended July 31, 2007 as
compared to the same period in the prior year in the telecommunications,
fitness, gaming, consumer electronics, industrial and life sciences
marketplaces. The slight increase in revenue is a result of our customers'
demand for product based on their forecast.

Gross Profit

Gross profit increased during the three month period ended July 31, 2007 to
$5,216,661 or 13.1% of net sales, compared to $3,858,649 or 10.4% of net sales
for the same period in the prior fiscal year. The increase in the Company's
gross margin for the three month period is due to the continued progress at the
Tijuana manufacturing operation and product mix. There can be no assurance that
gross margins will not decrease in future quarters. Pricing pressures continue
at all locations.

Selling and Administrative Expenses

Selling and administrative expenses increased to $3,217,370 or 8.1% of net sales
for the three month period ended July 31, 2007 compared to $3,017,953 or 8.2% of
net sales in the same period last year. The increase for the three month period
ended July 31, 2007, is due to an increase in sales commissions, accounting fees
and bonus accruals, as well as an increase in purchasing, accounting and IT
salary expenses primarily caused by an increase in headcount in those areas.

Interest Expense

Interest expense for bank debt and capital lease obligations for the three month
period ended July 31, 2007 was $713,058 compared to $510,945 for the same period
in the prior year. This change was attributable to the Company's significant
increased borrowings under its revolving credit facility and term loan,
increased capital lease obligations and higher interest rates. The additional
working capital was necessary to support the increase in sales volume.

Taxes

The effective tax rate from continuing operations for the three month period
ended July 31, 2007 was 35.2% compared to an effective tax rate of 32.1% in the
same period of the prior fiscal year. The effective tax rate in fiscal 2008 has
increased compared to prior periods due to the tax effects of the Company's
foreign operations.

Net Income

Net income from continuing operations increased to $826,984 for the three month
period ended July 31, 2007 compared to $258,670 for the same period in the prior
year. Basic and diluted earnings per share for the first fiscal quarter of 2008
were $0.22 and $0.21, compared to basic and diluted earnings per share of $0.07,
respectively, for the same period in the prior year.

LIQUIDITY AND CAPITAL RESOURCES:

OPERATING ACTIVITIES.

Cash flow provided by operating activities was $248,760 for the three months
ended July 31, 2007, compared to $619,880 for the same period in the prior year.
During the first three months of fiscal year 2008, cash provided by operations
was due to an increase in net income, the non-cash effect of depreciation and
amortization and a decrease in inventory. Cash provided by operating activities
was partially offset by an increase in accounts receivable and a decrease in
accrued expenses. The slight increase in accounts receivable was due to the
timing of receipts of payments at the end of the first fiscal quarter. The
accrued expense decreased as a result of bonuses paid in the first quarter of
fiscal 2008. The decrease in inventory was the result of timing of customers'
demand for product based on their forecast.

During the first quarter of fiscal year 2007, cash provided by operations was
the result of net income, the non-cash effect of depreciation and amortization
and an increase in trade accounts payable. Cash provided by operating activities
was partially offset by an increase in inventories of approximately $4,200,000
and an increase of approximately $2,235,000 in accounts receivables. The
increase in inventories is primarily attributable to an increase in customer
orders and the addition of RoHS compliant inventory.

INVESTING ACTIVITIES.

During the first quarter of fiscal 2008, the Company purchased approximately
$383,500 in machinery and equipment to be used in the ordinary course of
business. The Company expects to make additional machinery and equipment
purchases of approximately $2,500,000 during the balance of fiscal 2008. During
the first quarter of fiscal 2007 the Company purchased approximately $665,000 in
machinery and equipment to be used in the ordinary course of business.

FINANCING TRANSACTIONS.

On July 31, 2006, the Company amended the credit facility to increase the
revolving credit facility from $22,000,000 to $27,000,000. The Company also has
a term loan which was increased in July 2006 to $4,000,000 from $2,750,000 on
July 31, 2006. Interest payments only are due monthly through June 30, 2007 and
quarterly principal payments of $250,000 are due each quarter beginning with the
quarter ending June 30 2007, through the quarter ending June 30, 2011. Interest
payments continue to be due monthly throughout the term. In October 2006, the
Company amended the credit facility to increase the revolving credit facility
from $27,000,000 to $32,000,000. The increase of $5,000,000 was for a term of
six months and expired on April 30, 2007. In April 2007, the amended revolving
credit facility was renewed in the amount of $32,000,000 and will expire on
September 30, 2009. The amended revolving credit facility is limited to the
lesser of: (i) $32,000,000 or (ii) an amount equal to the sum of 85% of the
receivable borrowing base and the lesser of $16,000,000 or a percentage of the
inventory base. In January and April 2007, the Company's financial covenants
were amended. At July 31, 2007, the Company was in compliance with its financial
covenants, and

$29,013,783 was outstanding under the revolving credit facility and term loan.
There was approximately $2,986,217 of unused credit available as of July 31,
2007.

The loan and security agreement is collateralized by substantially all of the
domestically-located 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 annual lease
rentals and capital expenditures and the payment of dividends.

The Company anticipates its credit facilities, cash flow from operations and
leasing resources will be adequate to meet its working capital requirements in
fiscal year 2008. In the event the business grows rapidly 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 in the future.

The Company provides funds for salaries, wages, overhead and capital expenditure
items as necessary to operate its wholly-owned Mexican Chinese subsidiaries and
the Taiwan procurement branch. The Company provides funding U.S. dollars, which
are exchanged for pesos, RMB, and New Taiwan dollar as needed. The fluctuation
of currencies from time to time, without an equal or greater increase in
inflation, has not had a material impact on the financial results of the
Company. During the first quarter of fiscal year 2008, the Company paid
approximately $4,836,898 to its subsidiaries for services provided.

In May 2002, the Company acquired a plant in Acuna, Mexico through seller
financing. The loan of $1,950,000 is payable in equal monthly installments of
approximately $31,000 over six and a half years at a rate of 7% interest per
annum. Prior to acquiring that plant, the Company rented the facility. At July
31, 2007, approximately $446,705 was outstanding in connection with the
financing of that facility.

Payments made under capital lease and building notes payable was $540,168 and
$502,216 for the first quarter of fiscal 2008 and 2007, respectively.

The Company paid $250,000 under its term loan obligation and borrowed an
additional $1,044,768 under its revolving credit facility during the first
quarter of fiscal 2008. The balance of July 31, 2007 under the term loan
obligation and revolving credit facility was $3,750,000 and $25,263,783,
respectively.

In the first quarter of fiscal 2007 the Company paid $250,000 under its term
loan obligation and borrowed an additional $200,468 under its revolving credit
facility. At July 31, 2006 the company had $2,750,000 and $19,362,368
outstanding under its term loan and revolving credit facility, respectively.

OFF-BALANCE SHEET TRANSACTIONS:

The Company has no off-balance sheet transactions.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS:

Not applicable.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

INTEREST RATE RISK

The Company's exposure to market risk for changes in interest rates is due
primarily to its short-term investments and borrowings under its credit
agreements. The Company's borrowings are at a variable rate and an increase in
interest rates of 1% would have resulted in interest expense increasing by
approximately $73,000 for the three month period ended July 31, 2007. As of July
31, 2007, the Company had no short-term investments and approximately
$29,000,000 of borrowings under its credit agreements. The Company does not use
derivative financial investments. The Company's cash equivalents, if any, are
invested in overnight commercial paper. The Company does not have any
significant cash flow exposure due to rate changes for its cash equivalents,
because these instruments are short-term.

ITEM 4. CONTROLS AND PROCEDURES.

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 in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of July 31, 2007. Our disclosure controls and
procedures 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 (the "Exchange Act") is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms and that such information is accumulated and communicated to our
management, including our President and Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure. Based on this evaluation, our President and Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures were effective as of July 31, 2007.

There has been no change in our internal control over financial reporting during
the quarter ended July 31, 2007 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company is party to routine legal proceedings arising out of the normal
course of business. Although it is not possible to predict with certainty the
outcome of these unresolved legal actions or the range of possible loss, the
Company believes that none of these actions, individually or in the aggregate,
will have a material effect on our financial condition or results of operations.

ITEM 1A. RISK FACTORS.

There were no material changes from our risk factors as presented in the section
entitled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year
ended April 30, 2007 as filed with the SEC on July 24, 2007.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

(a) Exhibits:

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).

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 September 13, 2007
------------------------------------- ----------------------------------------
Gary R. Fairhead Date
President and CEO (Principal
Executive Officer)

/s/ Linda K. Blake September 13, 2007
------------------------------------- ----------------------------------------
Linda K. Blake Date
Chief Financial Officer, Secretary
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)