-----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, FH1krgPyvY8KcnMBiX8V8JIlbomSYHJABYtxA699DIKHfXRBwItpzrLRjTj5OwMx 5xi8d5JxUQLtp0s32nzsvA== 0000732026-98-000001.txt : 19980313 0000732026-98-000001.hdr.sgml : 19980313 ACCESSION NUMBER: 0000732026-98-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971226 FILED AS OF DATE: 19980205 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIO TECH INTERNATIONAL CENTRAL INDEX KEY: 0000732026 STANDARD INDUSTRIAL CLASSIFICATION: 8734 IRS NUMBER: 952086631 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13914 FILM NUMBER: 98522237 BUSINESS ADDRESS: STREET 1: 355 PARKSIDE DR CITY: SAN FERNANDO STATE: CA ZIP: 91340 BUSINESS PHONE: 8183659200 MAIL ADDRESS: STREET 1: 355 PARKSIDE DRIVE CITY: SAN FERNANDO STATE: CA ZIP: 91340 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended December 26, 1997 Commission File Number 0-13914 TRIO-TECH INTERNATIONAL (Exact name of Registrant as specified in its Charter) California 95-2086631 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 355 Parkside Drive, San Fernando, California 91340 (Address of principle executive offices) (Zip Code) Registrant's Telephone Number: 818-365-9200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed with the Commission 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 As of February 2, 1998, the Registrant had outstanding approximately 2,710,371* Shares of Common Stock. * See PART II. OTHER INFORMATION, ITEM 2 in connection with a three-for- two stock split, effective October 7, 1997. This document contains a total of 10 pages.
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TRIO-TECH INTERNATIONAL CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (In Thousands) Dec. 26, Jun. 27, 1997 1997 (a) ASSETS CURRENT ASSETS Cash $ 5,133 $ 868 Cash deposits 3,484 7,104 Accounts receivable - net 3,276 3,646 Notes and other receivables 456 161 Inventories 2,077 1,784 Prepaid expenses and other current assets 650 280 ---------- ------ Total current assets 15,076 13,843 ---------- ------ PROPERTY, EQUIPMENT AND CAPITALIZED LEASES, net 3,866 4,421 OTHER ASSETS 378 264 ----------- ------ TOTAL ASSETS $ 19,320 $18,528 =========== ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 170 $ 150 Accounts payable 2,083 1,121 Accrued expenses 2,926 3,605 Income taxes payable 1,278 1,965 Current portion of long-term debt and capitalized lease 167 198 ---------- ------- Total current liabilities 6,624 7,039 ---------- ------- LONG-TERM DEBT AND CAPITALIZED LEASES, net of current portion 553 723 DEFERRED TAXES 648 776 MINORITY INTEREST 2,379 3,527 ---------- ------- TOTAL LIABILITIES 10,204 12,065 ---------- ------- SHAREHOLDERS' EQUITY: Common stock; authorized, 15,000,000 shares; issued and outstanding, 2,691,271 shares at December 26, 1997, and 1,936,596 shares at June 27, 1997 stated at 8,720 5,075 Retained earnings (accumulated deficit) 58 (334) Cumulative currency translation 338 1,722 ---------- -------- Total shareholders' equity 9,116 6,463 ---------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 19,320 $18,528 ========== ======== (a) DERIVED FROM AUDITED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE FORM 10K FOR THE FISCAL YEAR ENDED JUNE 27, 1997. SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
TRIO-TECH INTERNATIONAL CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (In Thousands, except Earnings per Share Data) SIX MONTHS ENDED THREE MONTHS ENDED -------------------- -------------------- DEC. 26, DEC. 27, DEC. 26, DEC. 27, 1997 1996 1997 1996 --------- --------- -------- ---------- NET SALES $ 9,906 $ 11,035 $ 4,811 $ 5,419 COST OF SALES 6,467 6,814 3,153 3,492 -------- -------- -------- ------- GROSS PROFIT 3,439 4,221 1,658 1,927 -------- -------- -------- ------- OPERATING EXPENSES Selling, general and administrative expenses 2,900 2,778 1,451 1,362 -------- -------- -------- ------- INCOME FROM OPERATIONS 539 1,443 207 565 -------- -------- -------- ------- OTHER INCOME (EXPENSE) Interest expense (58) (62) (34) (27) Other income 179 315 66 189 --------- --------- --------- -------- Total 121 253 32 162 --------- --------- --------- -------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 660 1,696 239 727 INCOME TAXES 257 672 95 251 --------- --------- --------- -------- INCOME BEFORE MINORITY INTEREST 403 1,024 144 476 MINORITY INTEREST (11) (653) 37 (274) --------- --------- --------- -------- NET INCOME $ 392 $ 371 $ 181 $ 202 EARNINGS PER SHARE: Basic $ 0.19 $ 0.19 $ 0.08 $ 0.10 Diluted $ 0.18 $ 0.18 $ 0.08 $ 0.09 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING Basic 2,107 1,937 2,277 2,053 Diluted 2,211 2,049 2,413 2,169 SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
TRIO-TECH INTERNATIONAL CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In Thousands) SIX MONTHS ENDED ------------------ DEC. 26, DEC. 27, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 392 $ 371 Adjustments to reconcile net income to cash provided by operations: Depreciation and amortization 508 709 Loss on disposal of property and equipment 69 Effect of exchange rate changes on operating assets (3,101) 11 Changes in assets and liabilities: Accounts receivable, net 370 734 Notes and other receivables (295) (246) Inventories (293) (349) Prepaid expenses and other current assets (370) (165) Other assets 117 6 Other current liabilities (404) (642) Deferred taxes (128) 3 --------- -------- Total adjustment (3,596) 130 --------- -------- Net cash (used in) provided by operating activities (3,204) 501 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Maturity (purchase) of cash deposits 3,620 (1,925) Capital expenditures, net (1,102) (268) Minority interest (121) 507 Purchase of investment (21) --------- -------- Net cash provided by (used in) investing activities 2,397 (1,707) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on notes payable and lines of credit (220) Borrowings under notes payable 21 77 Proceeds from long-term obligations (196) Repayment of long-term obligations (202) (182) Issuance of common stock 3,395 162 --------- -------- Net cash used in financing activities 3,214 (359) --------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,858 314 NET INCREASE (DECREASE) IN CASH 4,265 (1,251) CASH, BEGINNING OF THE PERIOD 868 2,114 --------- --------- CASH , END OF THE PERIOD $ 5,133 $ 863 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 55 $ 67 Income taxes $ 413 $ 446 SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
TRIO-TECH INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. Basis of Presentation The interim consolidated financial statements as of December 26, 1997, and for the six-months ended December 26, 1997, are unaudited. In the opinion of management, the unaudited consolidated financial statements include all adjustments necessary, consisting of normal recurring accruals, for a fair presentation of such information. Certain reclassifications of prior year amounts have been made to conform to the current year financial statement presentation. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report for fiscal year ended June 27, 1997. The consolidated results of operations for the six-month periods ending December 26, 1997 and December 27, 1996, are not necessarily indicative of the results expected for a full year. Earnings per Share - Earnings per share is based upon the weighted average number of shares outstanding and common stock equivalents (consisting of stock options), excluding those common stock equivalents which would be anti-dilutive. NOTE 2. Inventories The composition of inventories is as follows (in thousands): Dec. 26, June 27, 1997 1997 ----------- -------- Raw materials $ 802 $ 551 Work in process 576 526 Finished goods 699 707 ---------- ------- $ 2,077 $ 1,784 ========== ======= NOTE 3. Shareholders' Equity On September 30, 1997, the Board of Directors approved a three-for-two stock split. The date of distribution of the stock split was October 7, 1997. The earnings per share amounts show, for all periods presented, the effect of the stock split. NOTE 4. Stock Options The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its Plan. Accordingly, no compensation expense has been recognized. Had compensation cost for the Company's Plan been determined based upon the fair value at the grant date for awards under this Plan consistent with the methodology prescribed under Statement of Financial Accounting Standards No. 123, Accounting for Stock Based Compensation, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below: (in thousands) Quarter Ended Dec. 26, 1997 Dec. 27, 1996 ------------- ------------- Net Income (Loss): As Reported $ 181 $ 202 Pro forma ($ 179) ($ 67) Earnings (Loss) per Share: As Reported $ 0.08 $ 0.10 Pro forma ($ 0.07) ($ 0.03) Using the Black Scholes option-pricing model with the assumptions listed below. Quarter Ended Dec. 26, 1997 Dec. 27, 1996 ------------ ------------- Volatility 50.6% 48.0% Expected Life (years) 4.1 1.7 Discount rate 6.3% 6.0% ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1. Economic Conditions in Southeast Asia The Company's operations and balance sheet have been affected by recent economic instability in portions of Southeast Asia, which accounted for approximately 83% of the Company's net sales in the fiscal years ended June 1997 and 1996. A recent currency devaluation in Thailand and continuing currency weaknesses in Thailand, Malaysia and Singapore have required downward accounting adjustments in the U.S. dollar value of net assets located in those countries. Unsettled economic conditions in those countries and elsewhere have had some effect on orders by semi-conductor companies for Trio-Tech's testing services. Although the Company has continued to manage its operations profitably, extended economic instability could adversely affect the Company's financial condition or results of operations. 2. Liquidity and Capital Resources The Company's working capital increased by $1,648,000 to $8,452,000 as of December 26,1997 as compared to June 27, 1997 due to proceeds of $3,351,000 from a private placement of common stock and warrants (see Part II, Item 2), offset by an unrealized currency translation loss of $1,384,000, due to a currency devaluation in Southeast Asia relative to the U.S. Dollar. The Company's subsidiary, TTI Pte, has a secured credit agreement with a bank which provides for a total line of credit of $ 655,000. Borrowings under these lines amounted to $100,000 as of December 26, 1997. The interest rate on borrowings is at the bank's prime rate (7.0% at December 26, 1997) plus 2%. Borrowings under this agreement are collateralized by substantially all of TTI Pte's assets. The Company's subsidiary, TTM, has obtained a line of credit from a bank which provides for borrowings of $76,000. There were no borrowings under the line as of December 26, 1997. The Company's subsidiary, TTBk, has a secured line of credit with a bank which provides for a total line of credit of $78,000. There were no borrowings under the line as of December 26, 1997. The Company's subsidiary, EETC, has a credit agreement with a bank which provides a term loan of $400,000. Borrowings under these lines amounted to $315,000 as of December 26, 1997. Interest is at the bank's prime rate (5.84% at December 27,1996) plus 3.5%. The Company has a revolving line of credit of $150,000 from a bank bearing interest at 1.8% above the bank's reference rate (10.0% at December 26, 1997). Borrowings under the line amounted to $150,000 as of December 26, 1997. 3. Material Changes in Financial Position Total shareholders' equity was $9,116,000 at December 26,1997 as compared to $6,463,000 at June 27, 1997, an increase of 41.0%, resulting from an increase of $3,645,000 in common stock, primarily due to a private placement for $3,351,000 (see Part II, Item 2), offset by an unrealized currency translation loss of $1,384,000, due to a currency devaluation in Southeast Asia relative to the U.S. Dollar. 4. Material Changes in Results of Operations Total Net sales decreased by 11.2% for the quarter ended December 26, 1997 compared to the corresponding quarter in the prior year, and by 10.2% for the six-month period compared to the corresponding period in the prior year. This decline is attributable to a reduction in revenues in Southeast Asia, primarily in Malaysia, brought about by the economic factors discussed in Note 1 above. Although the Company held orders for testing of new types of semiconductors, and expected such testing to begin in late 1997, this work has been rescheduled to the Summer of 1998 because of production delays encountered by the manufacturers of these devices. PART II. OTHER INFORMATION Item 2. Changes in securities. On September 30, 1997, the Company declared a three-for-two stock split of its Common Stock, effective October 7, 1997. The stock split took the form of a 50% stock dividend. Fractional interests resulting from the stock split were rounded down to the nearest whole share, with the balance being paid in cash. In connection therewith, the authorized Common Stock of the Company was increased from 10,000,000 to 15,000,000 shares by means of an amendment to the Company's Articles of Incorporation. On October 31, 1997 and November 4, 1997, the Company completed a $3,800,000 private placement of 699,200 shares of common stock with redeemable warrants to purchase an additional 349,600 shares of common stock. The aggregate underwriting commission was $380,000. Net proceeds of the offering, which was placed through Paragon Capital Corporation, amounted to $3,351,000. The offer and sale of these securities was exempt from registration pursuant to Rule 506 of Regulation D under the Securities Act of 1933. The net proceeds of the private placement was used to expand the Company's Operations in the United States, including those of Universal Systems acquired on November 1, 1997, as well as for working capital and general corporate purposes. Item 6. Exhibits and Reports on Form 8-K (b) Reports on Form 8-K. The Company filed two current Reports on Form 8-K during the quarter ended December 26, 1997. One was dated October 9, 1997 and reported the three-for-two stock split. The other was dated December 3, 1997 and reported the acquisition of KTS, Incorporated. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRIO-TECH INTERNATIONAL Registrant By /s/ A. Charles Wilson --------------------- A. Charles Wilson Chairman Dated: February 4, 1998 EX-11 2 TRIO-TECH INTERNATIONAL EXHIBIT 11.1 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (unaudited) (in thousands, except Earnings per Share Data) SIX MONTHS ENDED THREE MONTHS ENDED ----------------- ------------------ DEC. 26, DEC. 27, DEC. 26, DEC. 27, 1997 1996 1997 1996 -------- -------- -------- -------- Net income $ 392 $ 371 $ 181 $ 202 Basic earnings per share: Weighted average number of common share outstanding 2,107 1,937 2,277 2,053 -------- -------- -------- --------- Basic earnings per share $ 0.19 $ 0.19 $ 0.08 $ 0.10 ======== ======== ======== ========= Diluted earnings per share: Weighted average number of common shares outstanding 2,107 1,937 2,277 2,053 Dilutive effect of stock options and warrants after application of treasury stock method 104 112 136 116 -------- -------- ------- --------- Number of shares used to compute diluted earnings per share 2,211 2,049 2,413 2,169 -------- -------- ------- --------- Diluted earnings per share $ 0.18 $ 0.18 $ 0.08 $ 0.09 ======== ======== ======= ========= Options to purchase 50,000 shares of commons stock at $7.70 per share were outstanding during the quarter ended December 26, 1997 but were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares. The options, which expire in September 30, 2003 were still outstanding as of December 26, 1997. EX-27 3
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