<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 September 29, 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 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 October 31, 2000 is
2,896,066.
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TRIO-TECH INTERNATIONAL
INDEX TO CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION AND SIGNATURE
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<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information
Item 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of September 29, 2000 and June 30, 2000......................... 3
Condensed Consolidated Statements of Income and Comprehensive Income (Loss) for the Three Months
Ended September 29, 2000 and September 4, 1999........................................................... 4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 29, 2000 and
September 24, 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
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
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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
Sept. 29, June 30,
ASSETS 2000 2000 (a)
--------------------------- ---------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,390,000 $ 1,956,000
Cash deposits 5,110,000 5,152,000
Trade accounts receivable, less
allowance for doubtful accounts
of $305,000 on September 29, 2000
and $221,000 on June 30, 2000 7,265,000 6,103,000
Other receivables 661,000 845,000
Inventories 3,963,000 2,756,000
Prepaid expenses and other
current assets 840,000 467,000
--------------------------- ---------------------------
Total current assets 19,229,000 17,279,000
PROPERTY AND EQUIPMENT, Net 5,487,000 4,497,000
OTHER ASSETS, Net 632,000 936,000
--------------------------- ---------------------------
TOTAL ASSETS $ 25,348,000 $ 22,712,000
=========================== ===========================
CURRENT LIABILITIES:
Lines of credit $ 309,000 $ 241,000
Accounts payable 5,418,000 4,128,000
Accrued expenses 4,115,000 3,303,000
Income taxes payable 360,000 242,000
Current portion of long-term debt
and capitalized leases 443,000 435,000
--------------------------- ---------------------------
Total current liabilities 10,645,000 8,349,000
--------------------------- ---------------------------
LONG-TERM DEBT AND
CAPITALIZED LEASES,
Net of current portion 756,000 586,000
--------------------------- ---------------------------
DEFERRED INCOME TAXES 715,000 720,000
--------------------------- ---------------------------
MINORITY INTEREST 2,640,000 2,609,000
--------------------------- ---------------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock; authorized,
15,000,000 shares; issued and
outstanding, 2,864,958 shares
(September 29, 2000) and 2,836,618 shares
(June 30, 2000) stated at 9,179,000 9,067,000
Retained earnings 1,910,000 1,726,000
Accumulated other comprehensive loss (497,000) (345,000)
-------------------------- --------------------------
Total shareholders' equity 10,592,000 10,448,000
-------------------------- --------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 25,348,000 $ 22,712,000
============================== ============================
</TABLE>
(a) Derived from audited consolidated financial statements included in the Form
10K for the fiscal year ended June 30, 2000.
See notes to condensed consolidated financial statements.
3
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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
---------------------------------------------------------------------------
THREE MONTHS ENDED
------------------
<TABLE>
<CAPTION>
Sept. 29, Sept. 24,
2000 1999
------------- -------------
<S> <C> <C>
NET SALES $ 9,158,000 $ 5,556,000
COST OF SALES 6,711,000 4,122,000
------------- -------------
GROSS PROFIT 2,447,000 1,434,000
OPERATING EXPENSES:
General and administrative 1,464,000 872,000
Selling 706,000 438,000
Research and development costs 49,000 50,000
------------- -------------
Total 2,219,000 1,360,000
------------- -------------
INCOME FROM OPERATIONS 228,000 74,000
OTHER INCOME (EXPENSE):
Interest expense (30,000) (21,000)
Other income 85,000 10,000
------------- -------------
Total 55,000 (11,000)
------------- -------------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 283,000 63,000
INCOME TAXES (68,000) 47,000
------------- -------------
INCOME BEFORE MINORITY INTEREST 215,000 110,000
MINORITY INTEREST (31,000) (66,000)
-------------- -------------
NET INCOME 184,000 44,000
OTHER COMPREHENSIVE LOSS:
Foreign currency translation adjustment (152,000) (177,000)
------------- -------------
COMPREHENSIVE INCOME (LOSS) $ 32,000 $ (133,000)
============= =============
EARNINGS PER SHARE:
Basic $ 0.06 $ 0.02
============= =============
Diluted $ 0.06 $ 0.02
============= =============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON POTENTIAL SHARES OUTSTANDING
Basic 2,850,000 2,742,000
Diluted 3,037,000 2,758,000
</TABLE>
See notes to condensed consolidated financial statements.
4
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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
THREE MONTHS ENDED
---------------------------
<CAPTION>
Sept. 29, Sept. 24,
2000 1999
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 184,000 $ 44,000
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 353,000 364,000
Gain on sale of property and equipment (17,000)
Deferred income taxes (5,000) (143,000)
Minority interest 32,000 (1,000)
Changes in assets and liabilities:
Accounts receivable (1,162,000) (609,000)
Other receivables 184,000 (202,000)
Inventories (1,207,000) (152,000)
Prepaid expenses and other current assets (373,000) (9,000)
Other assets 280,000 (24,000)
Accounts payable and accrued expenses 2,102,000 986,000
Income taxes payable 118,000 12,000
Current portion of long-term debt 8,000
---------------- -----------------
Net cash provided by operating activities 497,000 266,000
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash deposits 42,000 197,000
Capital expenditures (1,425,000) (155,000)
Proceeds from sale of property and equipment 30,000
--------------- ----------------
Net cash (used in) provided by investing activities (1,353,000) 42,000
--------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on lines of credit (241,000) (214,000)
Borrowings under lines of credit 309,000 14,000
Principal payments of long-term obligations
and capitalized leases (162,000) (96,000)
Proceeds from long-term obligations 332,000
Issuance of common stock 112,000
--------------- ----------------
Net cash provided by (used in) financing activities 350,000 (296,000)
--------------- ----------------
EFFECT OF EXCHANGE RATE ON CASH (60,000) (135,000)
NET DECREASE IN CASH AND CASH DEPOSITS (566,000) (123,000)
CASH AND CASH DEPOSITS, BEGINNING OF PERIOD 1,956,000 1,593,000
--------------- ----------------
CASH AND CASH DEPOSITS, END OF PERIOD $ 1,390,000 $ 1,470,000
=============== ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ 37,000 $ 21,000
Income taxes $ 38,000 $ 30,000
</TABLE>
See notes to condensed consolidated financial statements.
5
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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 of Trio-Tech
International and Subsidiaries (the "Company") as of September 29, 2000, and
for the three-months ended September 29, 2000 and September 24, 1999,
respectively, are unaudited. In management's opinion, the unaudited condensed
consolidated financial statements include all adjustments necessary, consisting
of normal recurring accruals, for a fair presentation of such information.
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 30, 2000.
Certain reclassifications of prior year amounts have been made to conform to the
current year financial statement presentation.
The consolidated results of operations for the three-month periods ending
September 29, 2000 and September 24, 1999 are not necessarily indicative of the
results expected for a full year.
NOTE 2. Inventories
The composition of inventories is as follows:
<TABLE>
<CAPTION>
Sept. 29, June, 30,
2000 2000
------------ ------------
<S> <C> <C>
Raw materials $ 1,546,000 $ 1,251,000
Work in process 2,030,000 1,160,000
Finished goods 387,000 345,000
------------ ------------
$ 3,963,000 $ 2,756,000
============ ============
</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 Plans. 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 (loss)
and earnings (loss) per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
Quarter Ended
Sept. 29, 2000 Sept. 24, 1999
--------------- --------------
<S> <C> <C>
Net Income (Loss):
As Reported $ 184,000 $ 44,000
Pro forma ($ 198,000) ($ 55,000)
Earnings (Loss) per Share:
As Reported $ 0.06 $ 0.02
Pro forma ($ 0.07) ($ 0.02)
</TABLE>
The preceding calculation uses the Black Scholes option-pricing model with
the assumptions listed below:
<TABLE>
<CAPTION>
Quarter Ended
Sept. 29, 2000 Sept. 24, 1999
--------------- --------------
<S> <C> <C>
Volatility 52.61% 42.25%
Expected Life (years) 3.17 2.37
Discount rate 5.85% 5.15%
</TABLE>
6
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NOTE 4. Earnings per Share
The Company adopted Statement of Financial Accounting Standards No. 128
("SFAS"), "Earnings per Share" (EPS). 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>
Sept 29, Sept. 24,
2000 1999
----------------- -----------------
<S> <C> <C>
Net income used to compute basic
and diluted earnings per share $ 184,000 $ 44,000
----------------- -----------------
Weighted average number of common
shares outstanding - basic 2,850,000 2,742,000
Dilutive effect of stock options and 187,000 16,000
warrants
Number of shares used to compute ----------------- -----------------
diluted earnings per share 3,037,000 2,758,000
================= =================
</TABLE>
The following options and warrants were outstanding during and as of the quarter
ended September 29, 2000 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:
<TABLE>
<CAPTION>
Type Shares Price Expiration
---- ------ ----- ----------
<S> <C> <C> <C>
Warrants 36,870 $8.00 May 9, 2005
</TABLE>
7
<PAGE>
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
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.
Quarter Ended September 29, 2000 ("2001") Compared to Quarter Ended September
-----------------------------------------------------------------------------
24, 1999 ("2000")
-----------------
Net sales increased by $3,602,000 or 64.8% from $5,556,000 in 2000 to $9,158,000
in 2001 due primarily to continuing strong performance in the semiconductor
industry. Net sales for the Southeast Asia operations increased $3,125,000 or
97% from $3,223,000 in 2000 to $6,348,000 in 2001 to due mainly to higher
manufacturing and testing volume in Singapore.
Cost of sales increased $2,589,000 or 62.8% from $4,122,000 in 2000 to
$6,711,000 in 2001. As a percentage of sales, it decreased 0.9% from 74.2% in
2000 to 73.3% in 2001. This decrease is primarily due to greater utilization of
testing facilities.
Operating expenses increased by $859,000 or 63.2% from $1,360,000 in 2000 to
$2,219,000 in 2001 to cope with the increase in sales volume.
Interest expense increased by $9,000 or 42.9%, from $21,000 in 2000 to $30,000
in 2001, due to increase in lines of credit and capitalized leases.
Other income has increased by $75,000 from $10,000 in 2000 to $85,000 in 2001
which derived mainly from an unrealised currency transaction gain, due to the
appreciation of U.S. Dollars against Thai Baht.
Liquidity and Capital Resources
Net cash generated by operating activities during the period ended September 29,
2000 was $489,000 compared to $266,000 generated by operating activities during
the period ended September 24, 1999. The positive cash flow from operating
activities in 2001 was comprised of $184,000 from net income, an increase in
accounts payable and accrued expenses of $2,102,000, an increase in income taxes
payable of $118,000, an increase in other receivables of $184,000, an increase
in minority interest of $32,000, an increase in other assets of $280,000 and
$353,000 of non-cash depreciation and amortization. These amounts were
partially offset by positive cash flow comprised of $ 17,000 of gain on sale of
property and equipment, an increase in accounts receivable of $1,162,000, an
increase in inventories of $1,207,000, an increase in deferred income taxes of
$5,000 and prepaid expenses and other current assets of $373,000.
Net cash used by investing activities during 2001 was $1,353,000 compared to
$42,000 provided by investing activities in the 2000 year. The net cash used by
investing activities was a result of an increase in capital expenditures of
$1,425,000, offset by proceeds from sale of property and equipment of $30,000
and a decrease in cash deposits of $42,000.
Net cash provided by financing activities during 2001 was $358,000 compared to
$296,000 used by financing activities in the 2000 year. The cash outflow from
financing activities include $395,000 of payments on lines of credit, long term
obligations and
8
<PAGE>
capitalized leases, which was offset by a cash inflow of $641,000 from
additional borrowing under lines of credit, long term obligations and
capitalized leases, and the issuance of common stock in the Company of $112,000.
The Company's subsidiary, TTI Pte, has a secured credit agreement with a bank
that provides for a total line of credit of $5,749,000. The Company has open
letters-of-credit of $4,430,00 as of September 29, 2000. Interest rate was at
the bank's prime rate (6.25% at September 29, 2000) plus 1.25%. Credit
facilities have increased from $4,052,000 to $5,749,000. However, collateral for
the borrowings has been reduced from substantially all TTI Pte's assets to a
cash collateral of $1,150,000 and a corporate guarantee of $1,437,000. The
agreement contains certain debt covenants including maintaining a minimum net
worth at TTI Pte. This line of credit has no expiration date. The Company was
in compliance with all debt covenants at September 29, 2000.
The Company's subsidiary, TTM, has a secured credit agreement with a bank that
provides for a total line of credit of $40,000. At September 29, 2000, there
were no borrowings outstanding. The line of credit bears interest at the bank's
reference rate (6.8% at September 29, 2000) plus 2.5%. This line of credit has
no expiration date.
The Company's subsidiary, TTBK, has a line of credit that provides for
borrowings of approximately $47,000. Interest on the line is at the bank's
reference rate (8.5% at September 29, 2000) plus 1%. At September 29, 2000,
there were no borrowings outstanding. This line of credit does not have an
expiration date.
The Company's subsidiary, TT Ireland, has a credit agreement that provides for a
mortgage loan of $365,000. Borrowings under the mortgage loan amounted to
$200,000 as of September 29, 2000. Interest is at the bank's prime rate (4.4%
at September 29, 2000) plus 3.2%.
In March 2000, the Company executed a letter of intent to acquire all of the
issued and outstanding capital stock of Thermo Voltek Corp. (doing business as
KeyTek), an indirect, wholly owned subsidiary of Thermo Electron Corporation.
Subsequent to period end, the Company elected not to pursue the acquisition of
KeyTek due to the uncertainty in the global electronics markets.
Approximately $3,000,000 of cash is held in the Company's 55% owned Malaysia
subsidiary. The Malaysian government has a program which limits the movement of
certain cash balances.
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
Net sales has improved 64.8% for the quarter ended September 29, 2000, as
compared to the corresponding quarter in the prior year, primarily due to an
upturn in the semiconductor industry. Net sales for the Southeast Asia
operations have almost doubled. The increase was derived mainly from higher
manufacturing and testing volume in Singapore.
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
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TRIO-TECH INTERNATIONAL
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and Use of Proceeds
On September 18, 2000, the Company announced that, for and with respect
to any two shares of its Common Stock issued after that date upon exercise of
the Company's outstanding $5.00 warrants, which shares are held for at least six
months after the exercise of those warrants, the Company would grant the holder
of those shares a new warrant to purchase one share of its Common Stock. The new
warrants would be exercisable at $8.00 per share, expire two years from the date
of grant and otherwise be on the same terms as the $5.00 warrants.
In response to the foregoing, an aggregate of 19,830 shares of the
Company's Common Stock were issued upon the exercise of the Company's $5.00
warrants after September 18, 2000, and, provided those shares are held for at
least six months from the date of exercise, the Company will issue the holders
thereof new warrants covering an aggregate of 9,915 shares. The remaining $5.00
warrants, covering an aggregate of 233,030 shares of the Company's Common Stock,
expired without exercise at the close of business on November 3, 2000.
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 of fiscal 2001:
None
10
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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: November 7, 2000
By: /s/ A. Charles Wilson
-----------------------
A. Charles Wilson
Chairman of the Board of Directors
Dated: November 7, 2000
11
