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.
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 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
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
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
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
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
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
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
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
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
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