<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 10-Q
[X] REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 27, 1998
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
(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[_]
Number of shares of common stock outstanding as of May 1, 1998 is 2,744,396
===============================================================================
<PAGE>
TRIO-TECH INTERNATIONAL
INDEX TO CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION AND SIGNATURE
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. FINANCIAL INFORMATION.................................................................................
Item 1. Consolidated Financial Statements....................................................................
Condensed Consolidated Balance Sheets as of March 27, 1998 and June 27, 1997......................... 3
Condensed Consolidated Statements of Income for the Three and Nine Months Ended March 27, 1998
and March 28,1997.................................................................................. 4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 27, 1998 and
March 28, 1997..................................................................................... 5
Notes to Condensed Consolidated Financial Statements................................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................ 7
PART II. OTHER INFORMATION..................................................................................... 8
Item 1. Legal Proceedings.................................................................................... 8
Changes in Securities................................................................................ 8
Defaults upon Senior Securities...................................................................... 8
Submission of Matters to Vote of Security Holders.................................................... 8
Other Information.................................................................................... 8
Exhibits and Reports on Form 8-K..................................................................... 8
SIGNATURE ..................................................................................................... 8
EXHIBIT 11.1 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS................................................ 9
</TABLE>
2
<PAGE>
TRIO-TECH INTERNATIONAL
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAR. 27, JUN. 27,
1998 1997 (a)
----------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 1,857 $ 868
Cash deposits 6,163 7,104
Accounts receivable - net 3,804 3,646
Notes and other receivables 425 161
Inventories 1,881 1,784
Prepaid expenses and other current assets 269 280
----------- -----------
Total current assets 14,399 13,843
----------- -----------
PROPERTY, EQUIPMENT AND CAPITALIZED LEASES, net 4,842 4,421
OTHER ASSETS 593 264
----------- -----------
TOTAL ASSETS $ 19,834 $ 18,528
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 790 $ 150
Accounts payable 1,896 1,121
Accrued expenses 3,674 3,605
Income taxes payable 1,007 1,965
Current portion of long-term debt 177 198
----------- -----------
Total current liabilities 7,544 7,039
----------- -----------
LONG-TERM DEBT, NET OF CURRENT PORTION 495 723
DEFERRED TAXES 658 776
MINORITY INTEREST 2,239 3,527
----------- -----------
TOTAL LIABILITIES 10,936 12,065
----------- -----------
SHAREHOLDERS' EQUITY:
Common stock; authorized, 15,000,000 shares; issued and
outstanding, 2,744,396 shares at March 27, 1998,
and 1,936,596 shares at June 27, 1997 8,727 5,075
Retained earnings (accumulated deficit) 264 (334)
Cumulative currency translation (93) 1,722
----------- ----------
Total shareholders' equity 8,898 6,463
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 19,834 $ 18,528
=========== ==========
</TABLE>
(a) DERIVED FROM AUDITED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE FORM
10K FOR THE FISCAL YEAR ENDED JUNE 27, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
3
<PAGE>
TRIO-TECH INTERNATIONAL
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
--------------------- ----------------------
MAR. 27, MAR. 28, MAR. 27, MAR. 28,
1998 1997 1998 1997
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
NET SALES $15,464 $16,066 $5,558 $5,031
COST OF SALES 10,114 9,782 3,647 2,968
------- ------- ------ ------
GROSS PROFIT 5,350 6,284 1,911 2,063
------- ------- ------ ------
OPERATING EXPENSES
Selling, general and administrative expenses 4,649 4,305 1,749 1,527
------- ------- ------ ------
INCOME FROM OPERATIONS 701 1,979 162 536
------- ------- ------ ------
OTHER INCOME (EXPENSE)
Interest expense (89) (92) (31) (30)
Other income 276 492 97 177
------- ------- ------ ------
Total 187 400 66 147
------- ------- ------ ------
INCOME BEFORE INCOME TAXES AND 888 2,379 228 683
MINORITY INTEREST
INCOME TAXES 406 900 149 228
------- ------- ------ ------
INCOME BEFORE MINORITY INTEREST 482 1,479 79 455
MINORITY INTEREST 116 (810) 127 (157)
------- ------- ------ ------
NET INCOME $ 598 $ 669 $ 206 $ 298
======= ======= ====== ======
EARNINGS PER SHARE:
Basic $0.25 $0.34 $0.07 $0.15
Diluted $0.25 $0.34 $0.08 $0.15
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic 2,391 1,940 2,753 1,964
Diluted 2,386 1,951 2,742 1,981
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
TRIO-TECH INTERNATIONAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------------
MAR.27, MAR. 28,
1998 1997
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 598 $ 669
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization 803 1,030
Loss on disposal of property and equipment 54
Changes in assets and liabilities:
Accounts receivable, net (158) 547
Notes and other receivables (264) 2
Inventories (97) (595)
Prepaid expenses and other current assets 11 (138)
Other assets (375) 10
Other current liabilities (114) (490)
Deferred taxes (118) (11)
------- -------
Total adjustment (312) 409
------- -------
Net cash (used in) provided by operating activities 286 1,078
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity (purchase) of cash deposits 941 (2,406)
Capital expenditures, net (2,161) (513)
Minority interest (248) 651
Effect of exchange rate (1,872) 406
------- -------
Net cash used in investing activities (3,340) (1,862)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and lines of credit (227)
Borrowings under notes payable 656 104
Repayment of long-term obligations (265) (343)
Issuance of common stock 3,652 185
------- -------
Net cash provided by (used in) financing activities 4,043 (281)
------- -------
NET INCREASE (DECREASE) IN CASH 989 (1,065)
CASH, BEGINNING OF THE PERIOD 868 2,114
------- -------
CASH, END OF THE PERIOD $ 1,857 $ 1,049
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 85 $ 93
Income taxes $ 865 $ 667
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
TRIO-TECH INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The interim consolidated financial statements as of March 27, 1998 and as of
March 28, 1997, respectively, and for the nine-months ended March 27, 1998 and
as of March 28, 1997, 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 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 nine-month periods ending March
27, 1998 and March 28, 1997, 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):
MAR. 27, JUNE 27,
1998 1997
------- -------
Raw materials $ 617 $ 551
Work in process 612 526
Finished goods 652 707
-------- --------
$ 1,881 $ 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
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
MAR. 27, 1998 MAR, 28, 1997
------------- -------------
Net Income (Loss) (in thousands):
As Reported $ 206 $ 298
Pro forma ($ 71) $ 156
Earnings (Loss) per Share:
As Reported $ 0.07 $0.15
Pro forma ($ 0.03) $0.08
Using the Black Scholes option-pricing model with the assumptions listed
below.
QUARTER ENDED
MAR 27, 1998 MAR 28, 1997
------------- ------------
Volatility 49.45% 47.72%
Expected Life (years) 3.83 2.02
Discount rate 5.61% 6.76%
6
<PAGE>
TRIO-TECH INTERNATIONAL
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1. 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 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 semiconductor 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, results of operations or cash flows.
2. LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased by $51,000 to $6,855,000 as of March 27,
1998 as compared to June 27, 1997 due to proceeds of $3,351,000 from a private
placement of common stock and warrants, offset by capital expenditures of
$1,648,000 and an unrealized currency translation loss of $1,815,000, due to a
currency devaluation in Southeast Asia relative to the U.S. Dollar.
The Company's subsidiary, TTI Pte, increased the total line of credit from
$655,000 to $3,125,000. Borrowings under these lines amounted to $634,000 as of
March 27, 1998. The interest rate on borrowings is at the bank's prime rate
(8.25% at March 27, 1998) plus 1.25%. 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 March 27, 1998.
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 March 27, 1998.
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 March 27, 1998. Interest is at the bank's prime rate (5.84% at
March 27, 1998) 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 March 27, 1998).
Borrowings under the line amounted to $150,000 as of March 27, 1998.
3. MATERIAL CHANGES IN FINANCIAL POSITION
Total shareholders' equity was $8,898,000 at March 27, 1998 as compared to
$6,463,000 at June 27, 1997, an increase of 38.0%, resulting from an increase of
$3,652,000 in common stock, primarily due to a private placement for $3,351,000,
offset by an unrealized currency translation loss of $1,815,000 due to a
currency devaluation in Southeast Asia relative to the U.S. Dollar.
4. MATERIAL CHANGES IN RESULTS OF OPERATIONS
Total net sales increased by 10.5% for the quarter ended March 27, 1998, as
compared to the corresponding quarter in the prior year, and decreased by 3.7%
for the nine-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 received 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.
Gross margin has declined 6.6% for the quarter ended March 27, 1998, as compared
to the corresponding quarter in the prior year, and decreased 4.5% for the nine-
month period compared to the corresponding period in the prior year. This
decline is primarily due to a shift in relative sales from high margin test
services to lower margin equipment sales.
7
<PAGE>
TRIO-TECH INTERNATIONAL
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
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 third quarter of
fiscal 1998:
None
SIGNATURE
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/ A. Charles Wilson
---------------------------
A. Charles Wilson
Chairman of the Board of Directors
Dated: May 11, 1998
8
<PAGE>
TRIO-TECH INTERNATIONAL
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
----------------- ------------------
MAR.27, MAR. 28, MAR. 27, MAR. 28,
1998 1997 1998 1997
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 598 $ 669 $ 206 $ 298
------ ------ ------ ------
Basic earnings per share:
Weighted average number of common shares
outstanding 2,391 1,940 2,753 1,964
------ ------ ------ ------
Basic earnings per share $ 0.25 $ 0.34 $ 0.07 $ 0.15
====== ====== ====== ======
Diluted earnings per share:
Weighted average number of common shares
outstanding 2,303 1,841 2,695 1,888
Dilutive effect of stock options and warrants
after application of treasury stock method 83 110 47 93
------ ------ ------ ------
Number of shares used to compute diluted
earnings per share 2,386 1,951 2,742 1,981
------ ------ ------ ------
Diluted earnings per share $ 0.25 $ 0.34 $ 0.08 $ 0.15
====== ====== ====== ======
</TABLE>
The following options and warrants were outstanding during the quarter ended
March 27, 1998 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 $5.34 January 22, 2002
Options 45,000 $7.70 September 30, 2002
Options 50,000 $6.67 November 1, 2002
Warrants 349,600 $7.00 November 3, 2002
Options 5,000 $7.70 December 7, 2002
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000732026
<NAME> TRIO-TECH INTERNATIONAL
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> MAR-27-1998
<CASH> 1,857
<SECURITIES> 6,163
<RECEIVABLES> 3,804
<ALLOWANCES> 0
<INVENTORY> 1,881
<CURRENT-ASSETS> 14,399
<PP&E> 15,296
<DEPRECIATION> 10,454
<TOTAL-ASSETS> 19,834
<CURRENT-LIABILITIES> 7,544
<BONDS> 0
0
0
<COMMON> 8,727
<OTHER-SE> 171
<TOTAL-LIABILITY-AND-EQUITY> 19,834
<SALES> 5,558
<TOTAL-REVENUES> 5,558
<CGS> 3,647
<TOTAL-COSTS> 3,647
<OTHER-EXPENSES> 1,525
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31
<INCOME-PRETAX> 355
<INCOME-TAX> 149
<INCOME-CONTINUING> 206
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 206
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.08
</TABLE>
