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 September 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 October 24, 1997, the Registrant had outstanding approximately 1,962,662*
Shares of Common Stock.
* See PART II. OTHER INFORMATION, ITEM 2 in connection with a 3-for-2
stock split, effective October 7, 1997.
This document contains a total of 9 pages.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
TRIO-TECH INTERNATIONAL
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(In Thousands)
Sep. 26, Jun. 27,
1997 1997 (a)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 603 $ 868
Cash deposits 6,545 7,104
Accounts receivable - net 3,259 3,646
Notes and other receivables 690 161
Inventories 1,786 1,784
Prepaid expenses and other current assets 373 280
--------- ---------
Total current assets 13,256 13,843
PROPERTY, EQUIPMENT AND CAPITALIZED LEASES, net 3,870 4,421
OTHER ASSETS 166 264
--------- ---------
TOTAL ASSETS $ 17,292 $ 18,528
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 250 $ 150
Accounts payable 1,250 1,121
Accrued expenses 3,155 3,605
Income taxes payable 2,117 1,965
Current portion of long-term debt and capitalized lease 182 198
-------- ---------
Total current liabilities 6,954 7,039
LONG-TERM DEBT AND CAPITALIZED LEASES,
net of current portion 621 723
DEFERRED TAXES 723 776
MINORITY INTEREST 3,816 3,527
SHAREHOLDERS' EQUITY:
Common stock; authorized, 15,000,000 shares; issued and
outstanding, 1,290,500 shares at September 26, 1997
and 1,291,064 shares at June 27, 1997 stated at 5,075 5,075
Accumulated deficit (123) (334)
Cumulative currency translation 226 1,722
-------- -------
Total shareholders' equity 5,178 6,463
-------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 17,292 $ 18,528
======== ========
<FN>
(a)
(b) 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIO-TECH INTERNATIONAL
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(In Thousands, except Earnings per Share Data)
THREE MONTHS ENDED
------------------
SEP. 26, SEP. 27,
1997 1996
---------- ----------
<S> <C> <C>
NET SALES $ 5,095 $ 5,616
COST OF SALES 3,314 3,322
------------ --------
GROSS PROFIT 1,781 2,294
OPERATING EXPENSES
Selling, general and administrative expenses 1,449 1,416
------------ -------
INCOME FROM OPERATIONS 332 878
OTHER INCOME (EXPENSE)
Interest expense (24) (35)
Other income 113 126
----------- --------
Total 89 91
----------- --------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 421 969
INCOME TAXES 162 421
----------- --------
INCOME BEFORE MINORITY INTEREST 259 548
----------- --------
MINORITY INTEREST (48) (379)
----------- --------
NET INCOME $ 211 $ 169
=========== ========
EARNINGS PER SHARE:
Primary $ 0.16 $ 0.13
Pro forma (see Note 3) $ 0.11 $ 0.09
Fully diluted $ 0.16 $ 0.13
Pro forma (see Note 3) $ 0.11 $ 0.09
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Primary 1,339 1,280
Fully diluted 1,364 1,289
<FN>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIO-TECH INTERNATIONAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In Thousands)
THREE MONTHS ENDED
------------------
SEP. 26, SEP. 27,
1997 1996
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 211 $ 169
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization 294 370
Loss on disposal of property and equipment 37
Effect of exchange rate changes on
operating assets (1,586) (29)
Changes in assets and liabilities:
Accounts receivable, net 387 (125)
Notes and other receivables (529) (224)
Inventories (2) (383)
Prepaid expenses and other current assets (93) (131)
Other assets 87 3
Accounts payable and accrued expenses (169) 402
Deferred taxes (53) (1)
---------- --------
Total adjustment (1,664) (81)
---------- --------
Net cash (used in) provided by operating
activities (1,453) 88
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity (purchase) of cash deposits 559 (1,551)
Capital expenditures, net (484) (17)
Minority interest 30 305
--------- --------
Net cash provided by (used in) investing
activities 105 (1,263)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and lines of credit 100 (104)
Borrowings under notes payable 30
Repayment of long-term obligations (118) (126)
Issuance of common stock 0 6
--------- --------
Net cash used in financing activities (18) (194)
--------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,101 (2)
NET DECREASE IN CASH (265) (1,371)
CASH, BEGINNING OF THE PERIOD 868 2,114
--------- --------
CASH , END OF THE PERIOD $ 603 $ 743
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 24 $ 29
Income taxes $ 0 $ 25
<FN>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
TRIO-TECH INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Basis of Presentation
The interim consolidated financial statements as of September 26, 1997, and for
the three-months ended September 27, 1996, 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 three-month periods ending
September 26, 1997 and September 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.
The following amounts would have been presented had the Company computed
earnings per share under Statement of Financial Accounting Standards No. 128,
Earnings per Share:
[/TABLE]
[CAPTION]
Sept. 26, Sept. 27,
1997 1996
--------- --------
[S] [C] [C]
Basic $ 0.16 $ 0.14
Diluted $ 0.16 $ 0.13
[/TABLE]
NOTE 2. Inventories
The composition of inventories is as follows (in thousands):
<TABLE>
<CAPTION>
Sept. 26, June 27,
1997 1997
--------- ---------
<S> <C> <C>
Raw materials $ 502 $ 551
Work in process 742 526
Finished goods 542 707
---------- ---------
$ 1,786 $ 1,784
</TABLE>
NOTE 3. Shareholders' Equity
In September, 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 pro forma
earnings per share amounts show the effect of the stock split.
<PAGE>
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
Sept. 26, 1997 Sept. 27, 1996
-------------- --------------
Net Income (Loss):
As Reported $ 210 $ 169
Pro forma ($ 313) ($ 257)
Earnings (Loss) per Share:
As Reported $ 0.16 $ 0.13
Pro forma ($ 0.23) ($ 0.20)
Using the Black Scholes option-pricing model with the assumptions listed
below.
Quarter Ended
Sept. 26, 1997 Sept. 27, 1996
-------------- --------------
Volatility 40.5% 45.0%
Expected Life 2.0 1.4
Discount rate 6.1% 5.9%
NOTE 5. Subsequent Event
On October 31, 1997 and November 4, 1997, the Company completed a $3,800,000
private placement consisting of 699,200 shares of common stock together with
redeemable 3 year warrants to purchase 3649,600 shares of additional common
stock. The sale resulted in net proceeds to the Company of $3,351,000.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
1. Liquidity and Capital Resources
Due to the devaluation of currencies in Southeast Asia relative to the U.S.
dollar, the Company's working capital decreased by $502,000 to $6,302,000 during
the quarter ended September 26, 1997 as compared to the fiscal year ended June
27, 1997.
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 September 26, 1997. The interest rate on
borrowings is at the bank's prime rate (6.5% at September 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 September 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 September 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
$327,000 as of September 26, 1997. Interest is at the bank's prime rate (5.84%
at September 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 September 26, 1997).
Borrowings under the line amounted to $150,000 as of September 26, 1997.
2. Material Changes in Financial Position
Total shareholders' equity was $5,178,000 at September 26,1997 as compared to
$6,463,000 at June 27, 1997, a decrease of 19.9%, due to a currency
devaluation in Thailand and weaknesses in currency exchange rates in
Southeast Asia relative to the U.S. dollar.
3. Material Changes in Results of Operations
There were no material changes in the results of operations of the Company
during the three month period ending September 26, 1997.
4.Subsequent Equity Financing
Subsequent to the end of the fiscal quarter ended September 27, 1997, the
Company raised net proceeds of $3,351,000 from a private sale of 699,200
shares of common stock and warrants to purchase 349,600 additional shares of
common stock (see Item 5 of Part II below).
<PAGE>
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. 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. 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. As a result of the
stock split, the number of outstanding shares of Common Stock increased to
approximately 1,962,662.
Item 5. Other Information.
Subsequent to the end of fiscal quarter, on October 31 and November 4, 1997,
the Company completed a $3,800,000 private placement consisting of 699,200
shares of common stock together with redeemable 3 year warrants to purchase
349,600 shares of additional common stock. This private offering was placed
through Paragon Capital Corporation. The net proceeds of the private placement
will be used to expand the Company's U.S. Operations, including those of
Universal Systems following the anticipated acquisition of Universal Systems;
and for working capital and general corporate purposes.
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
A. Charles Wilson
Chairman
Dated: November 10, 1997
<PAGE>
<TABLE>
<CAPTION>
TRIO-TECH INTERNATIONAL
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(unaudited)
(in thousands, except Earnings per Share Data)
THREE MONTHS ENDED
SEP. 26, SEP. 27,
1997 1996
<S> <C> <C>
Net income $ 211 $ 169
Primary earnings per share:
Weighted average number of common shares outstanding 1,291 1,206
Dilutive effect of stock options and warrants after
application of treasury stock method 48 74
------------ -------
Number of shares used to compute primary earnings per share 1,339 1,280
============ =======
Primary earnings per share $ 0.16 $ 0.13
Pro forma (see Note 3) $ 0.11 $ 0.09
Fully diluted earnings per share:
Weighted average number of common shares outstanding 1,291 1,206
Dilutive effect of stock options and warrants after
application of treasury stock method 73 83
------------ -------
Number of shares used to compute fully diluted earnings
per share 1,364 1,289
============ =======
Primary earnings per share $ 0.16 $ 0.13
Pro forma (see Note 3) $ 0.11 $ 0.09
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000732026
<NAME> TRIO-TECH INTERNATIONAL
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-26-1998
<PERIOD-START> JUN-28-1997
<PERIOD-END> SEP-26-1997
<EXCHANGE-RATE> 1
<CASH> 7148
<SECURITIES> 0
<RECEIVABLES> 3949
<ALLOWANCES> 0
<INVENTORY> 1786
<CURRENT-ASSETS> 13256
<PP&E> 15114
<DEPRECIATION> (11244)
<TOTAL-ASSETS> 17292
<CURRENT-LIABILITIES> 6954
<BONDS> 0
0
0
<COMMON> 5075
<OTHER-SE> 103
<TOTAL-LIABILITY-AND-EQUITY> 17292
<SALES> 5095
<TOTAL-REVENUES> 5095
<CGS> 3314
<TOTAL-COSTS> 1384
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> 373
<INCOME-TAX> 162
<INCOME-CONTINUING> 211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 211
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
