<PAGE>
===============================================================================
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 March 31, 2000
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 principal 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 2, 2000 is 2,764,957
================================================================================
<PAGE>
TRIO-TECH INTERNATIONAL
INDEX TO CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION AND SIGNATURE
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information................................................................................... 3
Item 1. Consolidated Financial Statements....................................................................... 3
Condensed Consolidated Balance Sheets as of March 31, 2000 and June 25, 1999............................ 3
Condensed Consolidated Statements of Income for the Nine Months Ended March 31, 2000 and March 26,
1999.................................................................................................... 4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2000 and March 26,
1999.................................................................................................... 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 ........................................................................................................ 11
</TABLE>
2
<PAGE>
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Mar. 31, June 25,
ASSETS 2000 1999 (a)
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,120,000 $ 1,593,000
Cash deposits 5,203,000 4,499,000
Trade accounts receivable, less
allowance for doubtful
accounts of $262,000 in
2000 and $219,000 in 1999 4,962,000 4,460,000
Other receivables 579,000 282,000
Inventories 2,656,000 1,799,000
Prepaid expenses and other
current assets 179,000 90,000
------------ ------------
Total current assets 14,699,000 12,723,000
PROPERTY AND EQUIPMENT, Net 4,550,000 5,538,000
OTHER ASSETS, Net 986,000 671,000
------------ ------------
TOTAL ASSETS $ 20,235,000 $ 18,932,000
============ ============
CURRENT LIABILITIES:
Lines of credit $ 151,000 $ 364,000
Accounts payable 3,171,000 1,989,000
Accrued expenses 2,743,000 3,005,000
Income taxes payable 394,000 71,000
Current portion of long-term debt
and capitalized leases 385,000 505,000
------------ ------------
Total current liabilities 6,844,000 5,934,000
------------ ------------
LONG-TERM DEBT AND
CAPITALIZED LEASES,
Net of current portion 742,000 962,000
------------ ------------
DEFERRED INCOME TAXES 434,000 582,000
------------ ------------
MINORITY INTEREST 2,375,000 2,403,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock; authorized, 15,000,000
shares; issued and outstanding, 2,764,957
shares (March 31, 2000) and 2,741,334
shares (June 25, 1999) stated at 8,698,000 8,654,000
Retained earnings 1,355,000 692,000
Accumulated other comprehensive loss (213,000) (295,000)
------------ ------------
Total shareholders' equity 9,840,000 9,051,000
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 20,235,000 $ 18,932,000
============ ============
</TABLE>
(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.
3
<PAGE>
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
-------------------------------------- -------------------------------------
Mar. 31, Mar. 26, Mar. 31, Mar. 26,
2000 1999 2000 1999
----------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
NET SALES $ 18,269,000 $ 15,120,000 $ 5,925,000 $ 4,950,000
COST OF SALES 13,575,000 10,700,000 4,402,000 3,576,000
-------------- -------------- ------------- -------------
GROSS PROFIT 4,694,000 4,420,000 1,523,000 1,374,000
OPERATING EXPENSES:
General and administrative 2,915,000 2,765,000 957,000 971,000
Selling 1,304,000 1,247,000 414,000 275,000
Research and development costs 136,000 247,000 45,000 90,000
-------------- -------------- ------------- -------------
Total 4,355,000 4,259,000 1,416,000 1,336,000
-------------- -------------- ------------- -------------
INCOME FROM OPERATIONS 338,000 161,000 107,000 38,000
OTHER INCOME (EXPENSES)
Interest expense (91,000) (138,000) (27,000) (40,000)
Other income 619,000 418,000 126,000 104,000
-------------- -------------- ------------- -------------
Total 528,000 280,000 99,000 64,000
-------------- -------------- ------------- -------------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 867,000 441,000 206,000 102,000
INCOME TAXES 129,000 267,000 65,000 83,000
-------------- -------------- ------------- -------------
INCOME BEFORE MINORITY INTEREST 738,000 174,000 141,000 19,000
MINORITY INTEREST 75,000 26,000 27,000 0
-------------- -------------- ------------- -------------
NET INCOME 663,000 148,000 114,000 19,000
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment 82,000 28,000 38,000 (59,000)
-------------- -------------- ------------- -------------
COMPREHENSIVE INCOME (LOSS) $ 745,000 $ 176,000 $ 152,000 $ (40,000)
============== ============== ============= =============
EARNINGS PER SHARE:
Basic $ 0.24 $ 0.05 $ 0.04 $ 0.01
============== ============== ============= =============
Diluted $ 0.23 $ 0.05 $ 0.04 $ 0.01
============== ============== ============= =============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON POTENTIAL SHARES OUTSTANDING
Basic 2,749,000 2,746,000 2,757,000 2,741,000
Diluted 2,856,000 2,758,000 3,049,000 2,752,000
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------------------
Mar. 31, Mar. 26,
2000 1999
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 663,000 $ 148,000
Adjustments to reconcile net income to
net cash (used in) provided by operations:
Depreciation and amortization 1,038,000 851,000
(Gain)/loss on sale of property and equipment (535,000) 109,000
Deferred income taxes (148,000) (10,000)
Minority interest 8,000 (61,00)
Changes in assets and liabilities:
Accounts receivable (502,000) 415,000
Other receivables (297,000) 26,000
Inventories (857,000) (4,000)
Prepaid and other current assets (89,000) (238,000)
Other assets (336,000) (82,000)
Accounts payable, accrued expenses and income taxes 1,242,000 (1,151,000)
-------------- -------------
Net cash (used in) provided by operating activities 187,000 3,000
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Certificates of deposit (704,000) 814,000
Capital expenditures (1,024,000) (1,302,000)
Proceeds from sale of property and equipment 1,555,000 0
-------------- -------------
Net cash (used in) provided by investing activities (173,000) (488,000)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on lines of credit (248,000) (430,000)
Borrowings under lines of credit 35,000 0
Principal payments of long-term obligations
and capitalized leases (340,000) (197,000)
Proceeds from long-term obligations 143,000
Issuance of common stock 44,000
Repurchase of common stock (43,000)
-------------- -------------
Net cash provided by (used in) financing activities (509,000) (527,000)
-------------- -------------
EFFECT OF EXCHANGE RATE ON CASH 22,000 76,000
NET INCREASE/(DECREASE) IN CASH (473,000) (936,000)
CASH, BEGINNING OF PERIOD 1,593,000 3,234,000
-------------- -------------
CASH, END OF PERIOD $ 1,120,000 $ 2,298,000
-------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 82,000 $ 68,000
Income taxes $ 103,000 $ 554,000
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
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 March 31, 2000 and
as of March 26, 1999, respectively, and for the nine-months ended March 31, 2000
and as of March 26, 1999, 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 March
31, 2000 and March 26, 1999, are not necessarily indicative of the results
expected for a full year.
NOTE 2. Inventories
The composition of inventories is as follows (in thousands):
<TABLE>
<CAPTION>
Mar. 31, June 25,
2000 1999
--------- ---------
<S> <C> <C>
Raw materials $1,165 $ 839
Work in process 1,036 383
Finished goods 455 577
-------- --------
$2,656 $1,799
======== ========
</TABLE>
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:
<TABLE>
<CAPTION>
Quarter Ended
Mar. 31, 2000 Mar. 26, 1999
------------- -------------
<S> <C> <C>
Net Income (Loss):
(in thousands)
As Reported $ 114 $ 19
Pro forma ($ 615) ($ 297)
Earnings (Loss) per Share:
As Reported $ 0.04 $ 0.01
Pro forma ($ 0.22) ($ 0.11)
</TABLE>
The preceding calculation uses the Black Scholes option-pricing model with
the assumptions listed below:
<TABLE>
<CAPTION>
Quarter Ended
Mar. 31, 2000 Mar. 26, 1999
------------- --------------
<S> <C> <C>
Volatility 52.47% 41.90%
Expected Life (years) 1.81 3.24
Discount rate 6.32% 5.61%
</TABLE>
6
<PAGE>
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 (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:
<TABLE>
<CAPTION>
Mar. 31, Mar. 26,
2000 1999
----------------- -----------------
<S> <C> <C>
Net income used to compute basic
and diluted earnings per share $ 114,000 $ 19,000
----------------- -----------------
Weighted average number of common
shares outstanding - basic 2,757,000 2,741,000
Dilutive effect of stock options and
warrants 280,000 11,000
Number of shares used to compute ----------------- -----------------
diluted earnings per share 3,037,000 2,752,000
================= =================
</TABLE>
7
<PAGE>
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
past economic instabilities in portions of Southeast Asia, which accounted for
approximately 58% of the Company's net sales for the nine months ending March
31, 2000 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 cash balances in Malaysian.
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 Company completed its Year 2000 compliance program in the quarter ended
December 31, 1999, including its compliance program for 55% owned Trio-Tech
Malaysia. The total costs and expenditures with respect to the Company's Year
2000 compliance program were not material to the Company's financial position or
its results of operations. As of the date of this report, the Company has not
experienced any material Year 2000 problems internally or from any outside
sources.
Quarter Ended March 31, 2000 ("2000") Compared to Quarter Ended March 26, 1999
- -------------------------------------------------------------------------------
("1999")
- -------
Net sales increased by $975,000 or 19.7% from $4,950,000 in 1999, to $5,925,000
in 2000, as a result of the upturn in the semiconductor industry. Net sales for
the Far East operations decreased $53,000 or 1.5% from $3,543,000 in 1999 to
$3,490,000 in 2000 due mainly to lower distribution sales.
Cost of sales increased $826,000 or 23.1% from $3,576,000 in 1999 to $4,402,000
in 2000. As a percentage of sales, it increased 2.0% from 72.2% in 1999 to
74.3% in 2000. This increase is primarily due to a lower optimization of the
testing facilities as testing operations are semi-variable in nature.
Operating expenses increased by $80,000 or 6.0% from $1,336,000 in 1999 to
$1,416,000 in 2000 partially as a result of re-classifying expenses from
International Accounting Standards to Generally Accepted Accounting Policies and
for increased commissions and wages from the increase in sales.
Research and development expenses decreased by $45,000 to $45,000 in 2000 from
$90,000 in 1999 due to the maturity in the development of a range of Artic
Temperature Controlled Chucks.
Interest expense decreased in 1999 by $13,000 or 32.5%, from $40,000 in 1999 to
$27,000 in 2000, due to decreases in lines of credit.
Other income increased by $22,000 or 21.6% from $104,000 in 1999 to $126,000 in
2000 primarily due to interest income on certificates of deposit.
8
<PAGE>
Liquidity and Capital Resources
Net cash generated by operating activities during the nine months ended March
31, 2000 was $187,000 compared to $3,000 generated by operating activities
during the nine months ended March 26, 1999. The cash flow from operating
activities for the nine months ended March 31, 2000 was comprised of an increase
in accounts payable and accrued expenses of $1,242,000, $663,000 from net
income, $1,038,000 of non-cash depreciation and amortization, and a $8,000
increase in Minority interest. These amounts were partially offset by the
expenses on the sale of property and equipment of $535,000, an increase in
accounts receivable of $799,000, an increase in inventories of $857,000, an
increase in prepaid expenses and other current assets of $89,000, an increase in
other assets of $336,000 and a decrease in deferred income tax of $148,000.
Net cash used by investing activities during the nine months ended March 31,
2000 was $173,000 compared to $488,000 used by investing activities during the
nine months ended March 26, 1999. Net cash used in investing activities was
increased by the proceeds from the sale of property and equipment in the amount
of $1,555,000 and was offset by investments in capital expenditures of
$1,024,000, and certificates of deposits of $704,000.
Net cash used in financing activities during the nine months ended March 31,
2000 was $509,000 compared to $527,000 used in financing activities during the
nine months ended March 26, 1999. This includes $588,000 of payments on lines of
credit, long-term obligations and capitalized leases and was partially offset by
cash inflow of $35,000 from additional borrowing under lines of credit and the
proceeds of $44,000 from the exercise of options to purchase common stock
granted under the Employee Stock Option Plan.
The Company's subsidiary, TTI Pte, has a secured credit agreement with a bank
that provides for a total line of credit of $2,623,000. The agreement contains
certain debt covenants relating to net worth. There were $1,461,000 borrowings
under the line at the end of March 31, 2000.The interest rate on borrowings is
at the bank's prime rate (6.25% at March 26, 2000) plus 1.25. This line of
credit does not have an expiration date.
The Company's subsidiary, TTM, has a secured credit agreement with a bank that
provides for a total line of credit of $79,000. At March 31, 2000, there were
$42,000 outstanding. The line of credit bears interest at the bank's reference
rate (8.25% at March 31, 2000) plus 2.5%. This line of credit expires May 2000.
The Company's subsidiary, TTBk, has a line of credit that provides for
borrowings of approximately $51,000. Interest on the line is at the bank's
reference rate (8.5% at March 31, 2000) plus 1.0%. Borrowings against this line
as of March 31, 2000 amounted to $1,000. This line of credit does not have an
expiration date.
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
$227,000 as of March 31, 2000. Interest is at the bank's rate of 7.0% at March
31, 2000.
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 (8.25% at March 31, 2000).
Borrowings under the line amounted to $150,000 as of March 31, 2000. This line
of credit expires May 2000.
Approximately $3,400,000 of cash deposits relate to the Company's 55% owned
Malaysian subsidiary. Under existing Malaysian currency regulations, this
amount is not currently available to finance ordinary operations of the Company
outside of Malaysia.
Material Changes in Financial Position
There have not been any material changes in the financial position since the end
of the last Fiscal Year.
Material Changes in Results of Operations
There have not been any material changes in the results of operations since the
end of the last Fiscal Year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------------------
Because the Company comes within the definition of "a small business issuer"
the Quantitative and Qualitative Disclosures about Market Risk is not
applicable.
9
<PAGE>
TRIO-TECH INTERNATIONAL
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 second quarter of
fiscal 2000:
None
10
<PAGE>
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.
TRIO-TECH INTERNATIONAL
By: /s/ Victor H.M. Ting
-----------------------
VICTOR H.M. TING
Vice President and
Chief Financial Officer
Dated: May 12, 2000
By: /s/ A. Charles Wilson
------------------------
A. Charles Wilson
Chairman of the Board of Directors
Dated: May 12, 2000
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,120
<SECURITIES> 5,203
<RECEIVABLES> 5,803
<ALLOWANCES> 262
<INVENTORY> 2,656
<CURRENT-ASSETS> 14,699
<PP&E> 9,610
<DEPRECIATION> 5,060
<TOTAL-ASSETS> 20,235
<CURRENT-LIABILITIES> 6,844
<BONDS> 0
0
0
<COMMON> 8,698
<OTHER-SE> 1,142
<TOTAL-LIABILITY-AND-EQUITY> 20,235
<SALES> 5,925
<TOTAL-REVENUES> 5,925
<CGS> 4,402
<TOTAL-COSTS> 4,402
<OTHER-EXPENSES> 1,317
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> 179
<INCOME-TAX> 65
<INCOME-CONTINUING> 114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14
<EPS-BASIC> 0.04
<EPS-DILUTED> 0.04
</TABLE>
