-----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, M+ZF3OVEB7sjc3xzPyHTEAPDumhAf4Eb5hUED6KgfUiLWePipFLtyUXJ5WnNRfCH coam4cn5Z94ff82mZqDsKg== 0000898430-99-004115.txt : 19991109 0000898430-99-004115.hdr.sgml : 19991109 ACCESSION NUMBER: 0000898430-99-004115 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990924 FILED AS OF DATE: 19991108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIO TECH INTERNATIONAL CENTRAL INDEX KEY: 0000732026 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TESTING LABORATORIES [8734] IRS NUMBER: 952086631 STATE OF INCORPORATION: CA FISCAL YEAR END: 0625 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14523 FILM NUMBER: 99742988 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 ============================================================================= UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 24, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 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 [ ] No [X] Number of shares of common stock outstanding as of October 29, 1999 is 2,747,3935 ============================================================================= TRIO-TECH INTERNATIONAL INDEX TO CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION AND SIGNATURES - ------------------------------------------------------------------------------
Page ---- Part I. Financial Information.................................................................................... 3 Item 1. Consolidated Financial Statements...................................................................... 3 Condensed Consolidated Balance Sheets as of September 24, 1999 and June 25, 1999....................... 3 Condensed Consolidated Statements of Income for the Three Months Ended September 24, 1999 and September 25, 1998................................................................................. 4 Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 24, 1999 and September 25, 1998................................................................................ 5 Notes to Condensed Consolidated Financial Statements................................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 8 Item 3. Quantitative and Qualitative Disclosures about Market Risk............................................. 9 Part II. Other Information........................................................................................ 10 Item 1. Legal Proceedings...................................................................................... 10 Item 2. Changes in Securities and Use of Proceeds.............................................................. 10 Item 3. Defaults upon Senior Securities........................................................................ 10 Item 4. Submission of Matters to a Vote of Security Holders.................................................... 10 Item 5. Other Information...................................................................................... 10 Item 6. Exhibits and Reports on Form 8-K....................................................................... 10 Signatures ......................................................................................................... 10
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS - --------------------------------------------------------------------------------
Sept. 24, June 25, ASSETS 1999 1999 (a) -------------- --------------- CURRENT ASSETS: Cash $ 1,470,000 $ 1,593,000 Cash deposits 4,302,000 4,499,000 Trade accounts receivable, less allowance for doubtful accounts of $262,000 on September 24, 1999 and $219,000 on June 25, 1999 5,069,000 4,460,000 Other receivables 484,000 282,000 Inventories 1,951,000 1,799,000 Prepaid expenses and other Current assets 99,000 90,000 -------------- --------------- Total current assets 13,375,000 12,723,000 PROPERTY AND EQUIPMENT, Net 5,319,000 5,538,000 OTHER ASSETS, Net 680,000 671,000 -------------- --------------- TOTAL ASSETS $ 19,374,000 $ 18,932,000 ============== =============== CURRENT LIABILITIES: Lines of credit $ 163,000 $ 364,000 Accounts payable 2,883,000 1,989,000 Accrued expenses 3,097,000 3,005,000 Income taxes payable 83,000 71,000 Current portion of long-term debt and capitalized leases 506,000 505,000 -------------- --------------- Total current liabilities 6,732,000 5,934,000 -------------- --------------- LONG-TERM DEBT AND CAPITALIZED LEASES, Net of current portion 866,000 962,000 -------------- --------------- DEFERRED INCOME TAXES 439,000 582,000 -------------- --------------- MINORITY INTEREST 2,419,000 2,403,000 -------------- --------------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock; authorized, 15,000,000 shares; issued and outstanding, 2,747,335 shares (September 24, 1999) and 2,741,334 shares (June 25, 1999) stated at 8,654,000 8,654,000 Retained earnings 736,000 692,000 Accumulated other comprehensive loss (472,000) (295,000) -------------- --------------- Total shareholders' equity 8,918,000 9,051,000 -------------- --------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 19,374,000 $ 18,932,000 ============== ===============
(a) Derived from audited consolidated financial statements included in the Form 10K for the fiscal year ended June 25, 1999. See notes to condensed consolidated financial statements. See notes to condensed consolidated financial statements. 3 TRIO-TECH INTERNATIONAL AND SUBSIDIARIES ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) - -------------------------------------------------------------------------------
THREE MONTHS ENDED ------------------ Sept. 24, Sept. 25, 1999 1998 -------------- ------------- NET SALES $ 5,556,000 $ 5,186,000 COST OF SALES 4,122,000 3,504,000 -------------- ------------- GROSS PROFIT 1,434,000 1,682,000 OPERATING EXPENSES: General and administrative 872,000 910,000 Selling 438,000 571,000 Research and development costs 50,000 80,000 -------------- ------------- Total 1,360,000 1,561,000 -------------- ------------- INCOME (LOSS) FROM OPERATIONS 74,000 121,000 OTHER INCOME (EXPENSES) Interest expense (21,000) (52,000) Other income 10,000 102,000 -------------- ------------- Total (11,000) 50,000 -------------- ------------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 63,000 171,000 INCOME TAXES 47,000 (80,000) -------------- ------------- INCOME BEFORE MINORITY INTEREST 110,000 91,000 MINORITY INTEREST (66,000) 10,000 -------------- ------------- NET INCOME 44,000 101,000 OTHER COMPREHENSIVE INCOME (LOSS): Foreign currency translation adjustment (177,000) 178,000 -------------- ------------- COMPREHENSIVE INCOME (LOSS) $ (133,000) $ 279,000 ============== ============= EARNINGS PER SHARE: Basic $ 0.02 $ 0.04 ============== ============== Diluted $ 0.02 $ 0.04 ============== ============== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON POTENTIAL SHARES OUTSTANDING Basic 2,742,000 2,754,000 Diluted 2,758,000 2,769,000
See notes to condensed consolidated financial statements. 4 TRIO-TECH INTERNATIONAL AND SUBSIDIARIES ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------
THREE MONTHS ENDED -------------------- Sept. 24, Sept. 25, 1999 1998 -------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 44,000 $ 101,000 Adjustments to reconcile net income to net cash (used in) provided by operations: Depreciation and amortization 364,000 265,000 (Gain)/loss on sale of property and equipment 0 78,000 Deferred income taxes (143,000) 5,000 Minority interest (1,000) (35,000) Changes in assets and liabilities: Accounts receivable (609,000) 189,000 Other receivables (202,000) 53,000 Inventories (152,000) (50,000) Prepaid expenses and other current assets (9,000) (84,000) Other assets (24,000) (1,000) Accounts payable and accrued expenses 998,000 384,000 -------------- ------------- Net cash (used in) provided by operating activities 266,000 905,000 -------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Certificates of deposit 197,000 223,000 Capital expenditures (155,000) (898,000) ------------- ------------- Net cash (used in) provided by investing activities 42,000 (675,000) ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payments on lines of credit (214,000) (481,000) Borrowings under lines of credit 14,000 143,000 Principal payments of long-term obligations and capitalized leases (96,000) (30,000) Repurchase of common stock 0 (39,000) ------------- ------------ Net cash provided by (used in) financing activities (296,000) (407,000) ------------- ------------ EFFECT OF EXCHANGE RATE ON CASH (135,000) 148,000 NET INCREASE/(DECREASE) IN CASH (123,000) (29,000) CASH, BEGINNING OF PERIOD 1,593,000 3,234,000 -------------- -------------- CASH, END OF PERIOD $ 1,470,000 $ 3,205,000 ============== ============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for: Interest 21,000 12,000 Income taxes 30,000 121,000
See notes to condensed consolidated financial statements. 5 TRIO-TECH INTERNATIONAL AND SUBSIDIARIES ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- NOTE 1. Basis of Presentation The interim condensed consolidated financial statements as of September 24, 1999 and as of September 25, 1998, respectively, and for the three-months ended September 24, 1999 and as of September 25, 1998, respectively, are unaudited. In management's opinion, 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 condensed 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 25, 1999. The consolidated results of operations for the three-month periods ending September 24, 1999 and September 25, 1998, are not necessarily indicative of the results expected for a full year. NOTE 2. Inventories The composition of inventories is as follows (in thousands):
Sept. 24, June, 25, 1999 1999 ---------- ---------- Raw materials $ 1,004 $ 839 Work in process 553 383 Finished goods 394 577 ---------- ---------- $ 1,951 $ 1,799 ========== ==========
NOTE 3. Stock Options The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its Stock Option 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:
Quarter Ended Sept. 24, 1999 Sept. 25, 1998 -------------- -------------- Net Income (Loss): (in thousands) As Reported $ 44 $ 101 Pro forma ($ 55) ($ 3) Earnings (Loss) per Share: As Reported $ 0.02 $ 0.04 Pro forma ($ 0.02) ($ 0.00)
The preceding calculation uses the Black Scholes option-pricing model with the assumptions listed below:
Quarter Ended Sept. 24, 1999 Sept. 25, 1998 -------------- -------------- Volatility 42.25% 49.45% Expected Life (years) 2.37 3.74 Discount rate 5.15% 5.36%
6 NOTE 4. Earnings per Share The Company adopted Statement of Financial Accounting Standards No. 128 ("SFAS"), "Earnings per Share". SFAS 128 replaces the presentation of primary and fully diluted earnings per share ("EPS") with a presentation of basic EPS based upon the weighted-average number of common shares and also requires dual presentation of basic and diluted EPS for companies with "complex capital structures". EPS for the current and prior period has been presented in conformity with the provisions of SFAS 128. The following table is a reconciliation of the weighted-average shares used in the computation of basic and diluted EPS for the periods presented herein:
Sept. 24, Sept. 25, 1999 1998 --------------- -------------- Net income used to compute basic and diluted earnings per share $ 44,000 $ 101,000 --------------- -------------- Weighted average number of common shares outstanding - basic 2,742,000 2,754,000 Dilutive effect of stock options and warrants 16,000 15,000 Number of shares used to compute --------------- -------------- diluted earnings per share 2,758,000 2,769,000 =============== ==============
The following options and warrants were outstanding during and as of the quarter ended December 25, 1998September 24, 1999 but were not included in the computation of diluted earnings per share because the exercise price was greater than the average market price of the common shares: Type Shares Price Expiration ---- ------ ----- ---------- Warrants 22,500 $5.67 January 22, 2002 Warrants 30,000 $4.67 January 22, 2002 Options 45,000 $7.70 September 30, 2002 Warrants 15,000 $5.31 September 30, 2002 Options 37,500 $6.67 November 3, 2002 Warrants 349,600 $7.00 November 3, 2000 Warrants 69,920 $5.43 November 3, 2002 Warrants 34,960 $7.00 November 3, 2002 Options 5,000 $6.50 December 7, 2002 Options 45,000 $3.69 July 8, 2003 Options 14,500 $4.34 July 8, 2003 Options 45,000 $4.34 July 12, 2004 7 TRIO-TECH INTERNATIONAL AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------------- Economic Conditions in Southeast Asia The Company's operations, balance sheet and cash flows have been affected by recent economic instability in portions of Southeast Asia, which accounted for approximately 58% of the Company's net sales for the three months ending September 24, 1999 and 71% for the year ended June 1999. A 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 semiconductor companies for Trio-Tech's testing services. Although the Company's Southeast Asian consolidated results of operations have been profitable, extended economic instability could adversely affect the Company's financial condition, results of operations or cash flows. On September 1, 1998, the government of Malaysia announced its limitation in the movement of certain cash balances denominated in Malaysian currency. Forward-Looking Statements The discussions of the Company's business and activities set forth in this report and in other past and future reports and announcements by the Company may contain forward-looking statements and assumptions regarding future activities and results of operations of the Company. In light of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company hereby identifies the following factors which could cause actual results to differ materially from those reflected in any forward-looking statement made by or on behalf of the Company: market acceptance of Company products and services; changing business conditions or technologies in the semiconductor industry, which could affect demand for the Company's products and services; the impact of competition; problems with technology; product development schedules; delivery schedules; changes in military or commercial testing specifications which could affect the market for the Company's products and services; difficulties in profitability integrating acquired businesses, if any, into the Company; risks associated with conducting business internationally and especially in Southeast Asia, including currency fluctuations and devaluations, currency restrictions, local laws and restrictions and possible social, political and economic instability; general and economic conditions; and other economic, financial and regulatory factors beyond the Company's control. Year 2000 Compliance Issue The inability of computers, software and other equipment utilizing microprocessors to recognize and properly process data fields containing a 2-digit year is commonly referred to as the "Year 2000 Compliance" issue. As the year 2000 approaches, such systems may be unable to accurately process certain date-based information. The Company has reviewed all significant internal applications and believes it has implemented modifications necessary to ensure Year 2000 compliance, other than with respect to 55% owned Trio-Tech Malaysia. The Company anticipates that 55% owned Trio-Tech Malaysia will be compliant by December 1999. In addition, the Company is in the on-going process of communicating with others with whom it does significant business, to determine their Year 2000 Compliance readiness and the extent to which the Company is vulnerable to any third party Year 2000 Compliance. However, there can be no guarantee that the systems of other companies on which the Company's systems rely will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems, would not have a material adverse effect on the Company. The total cost to the Company of these Year 2000 Compliance activities has not been and is not anticipated to be material to its financial position or to its results of operations. These costs and the date on which the Company plans to complete the Year 2000 Compliance modification and testing processes are based on management?s best estimates, which were derived utilizing numerous assumptions of future events including the continued availability of certain resources, third party modification plans and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ from those plans. Quarter Ended September 24, 1999 ("2000") Compared to Quarter Ended September - ----------------------------------------------------------------------------- 25, 1998 ("1999") - ---------------- Net sales increased by $370,000 or 7.1% from $5,186,000 in 1999 to $5,556,000 in 2000 due primarily to an upturn in the semiconductor industry. Net sales for the Far East operations decreased $528,000 or 7.8% from $3,752,000 in 1999 to $3,223,000 in 2000 due mainly to lower testing volume in Singapore. 8 Cost of sales increased $618,000 or 17.6% from $3,504,000 in 1999 to $4,122,000 in 2000. As a percentage of sales, it increased 6.6% from 67.6% in 1999 to 74.2% in 2000. This decrease in profitability is primarily due to a shift in relative sales from high margin test services to lower margin distribution sales. Operating expenses decreased by $171,000 or 11.4% from $1,481,000 in 1999 to $1,310,000 in 2000 as a result of a series of implemented cost controls. Research and development expenses decreased by $30,000 to $50,000 in 2000 from $80,000 in 1999 due to the maturity in the development of a range of Artic Temperature Controlled Chucks. Interest expense decreased in 1999 by $31,000 or 59.6%, from $52,000 in 1999 to $21,000 in 2000, due to decreases in lines of credit. Other income has decreased by $92,000 or 90.2% from $102,000 in 1999 to $10,000 in 2000 primarily due sale tax and additional provisions in the doubtful accounts, off-set by interest income earned on certificates of deposit in Malaysia. Liquidity and Capital Resources The Company's working capital decreased by $146,000 to $6,6433,000 as of September 24, 1999 as compared to June 25, 1999 due to capital expenditures, tax payments and repayment of short term borrowings and an unrealized currency translation loss, due to a currency depreciation in Southeast Asia relative to the U.S. Dollar during the quarter. The Company's subsidiary, TTI Pte, has obtained a line of credit from a bank which provides for a line of credit of $2,952,000. There were no borrowings against this line as of September 24, 1999. The interest rate on borrowings is at the bank's prime rate (6.25% at September 24, 1999) plus 1.25%. Borrowings under this agreement are collateralized by substantially all of TTI Pte's assets. The Company's subsidiary, TTKL, has obtained a line of credit from a bank which provides for borrowings of $132,000. Borrowings under the line amounted to $14,000 as of September 24, 1999. The Company's subsidiary, TTBk, has a secured line of credit with a bank which provides for a total line of credit of $50,000. There were no borrowings under the line as of September 24, 1999. The Company's subsidiary, TT Ireland, has a credit agreement with a bank which provides a term loan of $400,000. Borrowings under these lines amounted to $264,000 as of September 24, 1999. Interest is at the bank's prime rate (2.65% at September 24, 1999) 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 (7.75% at September 24, 1999). Borrowings under the line amounted to $150,000 as of December 25, 1998September 24, 1999. Approximately $3,500,000 of cash is held in the Company's 55% owned Malaysian subsidiary. $2,000,000 of this cash is denominated in the currency of Malaysia. In September 1998 the Malaysian government approved a program to limit the movement of certain cash balances denominated in Malaysian currency. Material Changes in Financial Position There have not been any material changes in the financial position since the end of the last Fiscal Year End. Material Changes in Results of Operations The gross profit margin has declined 76.60% for the quarter ended September 24, 1999, as compared to the corresponding quarter in the prior year, and is primarily due to a shift in relative sales from high margin test services to lower margin distribution sales. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ---------------------------------------------------------------------------- Because the Company comes within the definition "a small business issuer" the Quantitative and Qualitative Disclosures about Market Risk is not applicable. 9 PART II. OTHER INFORMATION - ------------------------------------------------------------------------------- Item 1. Legal Proceedings Not applicable Item 2. Changes in Securities and Use of Proceeds Not applicable Item 3. Defaults Upon Senior Securities Not applicable Item 4. Submission of Matters to Vote of Security Holders Not applicable Item 5. Other Information Not applicable Item 6. Exhibits and reports on Form 8-K (a) Exhibits Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K The Registrant filed the following reports on Form 8-K with the Securities and Exchange Commission during the first quarter or quarter of fiscal 2000: None 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 By: /s/ Victor H.M. Ting --------------------------------------- VICTOR H.M. TING Vice President and Chief Financial Officer Dated: November 4, 1999 By: /s/ A. Charles Wilson --------------------------------------- A. Charles Wilson Chairman of the Board of Directors Dated: November 4, 1999 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 0000732026 TRIO-TECH INTERNATIONAL 1,000 3-MOS JUN-30-2000 JUN-25-1999 SEP-24-1999 1,470 4,302 5,815 262 1,951 13,375 10,599 5,280 19,374 6,732 0 0 0 8,654 264 19,374 5,556 5,556 4,122 4,122 1,322 0 21 91 47 44 0 0 0 44 0.02 0.02
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