-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HPXwg68B+U45Xx3QVFY788GTq8P6ALluXvLHux48it7QYPDrA80AnPiESoAzKai6 rgUplAfqKNyDHMgSDnlDVQ== 0000898430-99-000419.txt : 19990210 0000898430-99-000419.hdr.sgml : 19990210 ACCESSION NUMBER: 0000898430-99-000419 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981225 FILED AS OF DATE: 19990209 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIO TECH INTERNATIONAL CENTRAL INDEX KEY: 0000732026 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TESTING LABORATORIES [8734] IRS NUMBER: 952086631 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14523 FILM NUMBER: 99525202 BUSINESS ADDRESS: STREET 1: 355 PARKSIDE DR CITY: SAN FERNANDO STATE: CA ZIP: 91340 BUSINESS PHONE: 8183659200 MAIL ADDRESS: STREET 1: 355 PARKSIDE DRIVE CITY: SAN FERNANDO STATE: CA ZIP: 91340 10-Q 1 FORM 10-Q ================================================================================ 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 December 25, 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 February 2, 1999 is 2,745,935 ================================================================================ TRIO-TECH INTERNATIONAL INDEX TO CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION AND SIGNATURE
Page ---- Part I. Financial Information........................................................................................ 3 Item 1. Consolidated Financial Statements........................................................................... 3 Condensed Consolidated Balance Sheets as of December 25, 1998 and June 26, 1998............................. 3 Condensed Consolidated Statements of Income for the Six Months Ended December 25, 1998 and December 26, 1997........................................................................................ 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 25, 1998 and December 26, 1997........................................................................................ 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 Signature ........................................................................................................ 10
2 TRIO-TECH INTERNATIONAL CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (In Thousands)
Dec. 25, Jun. 26, 1998 1998 (a) ------------------ ------------------ ASSETS CURRENT ASSETS Cash $ 3,299 $ 3,234 Cash deposits 3,321 3,947 Accounts receivable - net 3,257 4,124 Notes and other receivables 293 370 Inventories 1,890 2,056 Prepaid expenses and other current assets 457 305 ------- ------- Total current assets 12,517 14,036 ------- ------- PROPERTY, EQUIPMENT AND CAPITALIZED LEASES, net 5,522 4,669 OTHER ASSETS 585 626 ------- ------- TOTAL ASSETS $18,624 $19,331 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 150 $ 631 Accounts payable 2,013 2,126 Accrued expenses 3,613 3,804 Income taxes payable 403 690 Current portion of long-term debt and capitalized leases 265 188 ------- ------- Total current liabilities 6,444 7,439 ------- ------- LONG-TERM DEBT AND CAPITALIZED LEASES, net of current portion 380 426 DEFERRED TAXES 595 581 MINORITY INTEREST 2,268 2,122 ------- ------- TOTAL LIABILITIES 9,687 10,568 ------- ------- SHAREHOLDERS' EQUITY: Common stock; authorized, 15,000,000 shares; issued and outstanding, 2,745,935 shares at December 25, 1998, and 2,755,285 shares at June 26, 1998 8,666 8,708 Retained earnings 627 497 Cumulative currency translation (356) (442) ------- ------- Total shareholders' equity 8,937 8,763 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $18,624 $19,331 ======= =======
(a) Derived from audited consolidated financial statements included in the Form 10K for the fiscal year ended June 26, 1998. See notes to condensed consolidated financial statements. 3 TRIO-TECH INTERNATIONAL CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (In Thousands, except Earnings per Share Data)
SIX MONTHS ENDED THREE MONTHS ENDED --------------------- ---------------------- DEC. 25, DEC. 26, DEC. 25, DEC. 26, 1998 1997 1998 1997 --------- --------- ---------- --------- NET SALES $10,169 $9,906 $4,983 $4,811 COST OF SALES 7,124 6,467 3,619 3,153 ------- ------ ------ ------ GROSS PROFIT 3,045 3,439 1,364 1,658 ------- ------ ------ ------ OPERATING EXPENSES Selling, general and administrative expenses 2,766 2,900 1,285 1,451 ------- ------ ------ ------ INCOME FROM OPERATIONS 279 539 79 207 ------- ------ ------ ------ OTHER INCOME (EXPENSE) Interest expense (97) (58) (45) (34) Other income 158 179 135 66 ------- ------ ------ ------ Total 61 121 90 32 ------- ------ ------ ------ INCOME BEFORE INCOME TAXES AND 340 660 169 239 MINORITY INTEREST INCOME TAXES 184 257 104 95 ------- ------ ------ ------ INCOME BEFORE MINORITY INTEREST 156 403 65 144 MINORITY INTEREST 26 11 36 (37) ------- ------ ------ ------ NET INCOME $ 130 $ 392 $ 29 $ 181 ======= ====== ====== ====== EARNINGS PER SHARE: Basic $0.04 $0.19 $0.01 $0.08 Diluted $0.04 $0.18 $0.01 $0.08 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING Basic 2,748 2,107 2,742 2,277 Diluted 2,761 2,211 2,753 2,413
See notes to condensed consolidated financial statements. 4 TRIO-TECH INTERNATIONAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In Thousands)
SIX MONTHS ENDED ---------------------------------------- DEC.25, DEC. 26, 1998 1997 ------------------- ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 130 $ 392 Adjustments to reconcile net income to Net cash provided by operations: Depreciation and amortization 559 508 Loss on disposal of property and equipment 112 0 Changes in assets and liabilities: Accounts receivable, net 867 370 Notes and other receivables 77 (295) Inventories 166 (293) Prepaid expenses and other current assets (152) (370) Other assets (1) 117 Accounts payable and accrued expenses (591) (404) Deferred income taxes 14 (128) ------- ------- Net cash (used in) provided by operating activities 1,181 (103) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Certificates of deposit 626 3620 Capital expenditures (1,192) (1,102) Minority interest (42) (121) ------- ------- Net cash provided by (used in) investing activities (608) 2,397 ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on lines of credit (481) 0 Borrowings under lines of credit 0 21 Proceeds from long-term obligations and capitalized leases 143 0 Repayment of long-term obligations and capitalized leases (112) (202) Repurchase of common stock (42) 3,395 ------- ------- Net cash provided by (used in) financing activities (492) 3,214 ------- ------- EFFECT OF EXCHANGE RATE ON CASH (16) (1,243) NET INCREASE (DECREASE) IN CASH 65 4,265 CASH, BEGINNING OF THE PERIOD 3,234 868 ------- ------- CASH , END OF THE PERIOD $ 3,299 $ 5,133 ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 35 $ 55 Income taxes $ 356 $ 413
See notes to condensed consolidated financial statements. 5 TRIO-TECH INTERNATIONAL NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. Basis of Presentation The interim condensed consolidated financial statements as of December 25, 1998 and as of December 26, 1997, respectively, and for the six-months ended December 25, 1998 and as of December 26, 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 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 26, 1998. The consolidated results of operations for the six-month periods ending December 25, 1998 and December 26, 1997, are not necessarily indicative of the results expected for a full year. NOTE 2. Inventories The composition of inventories is as follows (in thousands):
Dec. 25 June, 26 1998 1998 -------------- ------------- Raw materials $ 932 $ 905 Work in process 549 696 Finished goods 409 455 ------ ------ $1,890 $2,056 ====== ======
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 Dec. 25, 1998 Dec. 26, 1997 -------------- ------------- Net Income (Loss): (in thousands) As Reported $ 29 $ 181 Pro forma ($ 52) ($ 179) Earnings (Loss) per Share: As Reported $ 0.01 $ 0.08 Pro forma ($ 0.02) ($ 0.07)
6 Using the Black Scholes option-pricing model with the assumptions listed below.
Quarter Ended Dec. 25, 1998 Dec. 26, 1997 -------------- ------------- Volatility 41.78% 50.60% Expected Life (years) 3.50 4.10 Discount rate 5.61 % 6.30%
Note 5. 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 earnings per share ("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:
Dec. 25, Dec. 26, 1998 1997 ----------------- ----------------- Net income used to compute basic and diluted earnings per share $ 130,000 $ 392,000 ---------------- ---------------- Weighted average number of common shares outstanding - basic 2,748,000 2,107,000 Dilutive effect of stock options and warrants 13,000 104,000 ---------------- ---------------- Number of shares used to compute diluted earnings per share 2,761,000 2,211,000 ================ ================
The following options and warrants were outstanding during the quarter ended December 25, 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 $4.67 January 22, 2002 Options 45,000 $7.70 September 30, 2002 Warrants 30,000 $7.70 September 30, 2002 Options 50,000 $6.67 November 1, 2002 Warrants 349,600 $7.00 November 3, 2000 Warrants 69,920 $5.43 November 3, 2002 Warrants 34,960 $7.00 November 3, 2002 Options 5,000 $6.50 December 7, 2002 Options 45,000 $3.69 July 8, 2003 Options 14,500 $4.34 July 8, 2003
7 TRIO-TECH INTERNATIONAL 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 recent economic instability in portions of Southeast Asia, which accounted for approximately 73% of the Company's net sales for the six months ending December 25, 1998and for the year ended June 1998 and 83% for each of the years ending June 1997 and 1996. 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 Companies 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 intention to limit the movement of certain cash balances denominated in Malaysian currency. 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 inability of computers, software and other equipment utilizing microprocessors to recognize and properly process data fields containing a 2- digit year is commonly referred to as the "Year 2000 Compliance" issue. As the year 2000 approaches, such systems may be unable to accurately process certain date-based information. The Company has reviewed all significant internal applications and is in the process of considering and implementing modifications necessary to ensure Year 2000 compliance. In addition, the Company is in the process of communicating with others with whom it does significant business, to determine their Year 2000 Compliance readiness and the extent to which the Company is vulnerable to any third party Year 2000 Compliance. However, there can be no guarantee that the systems of other companies on which the Company's systems rely will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems, would not have a material adverse effect on the Company. The total cost to the Company of these Year 2000 Compliance activities has not been and is not anticipated to be material to its financial position or to its results of operations. These costs and the date on which the Company plans to complete the Year 2000 Compliance modification and testing processes are based on management's best estimates, which were derived utilizing numerous assumptions of future events including the continued availability of certain resources, third party modification plans and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ from those plans. Liquidity and Capital Resources The Company's working capital decreased by $524,000 to $6,073,000 as of December 25, 1998 as compared to June 26, 1998 due to capital expenditures, tax payments and repayment of short term borrowings, offset by net income for the period and an unrealized currency translation gain, due to a currency appreciation in Southeast Asia relative to the U.S. Dollar during the quarter. The Company's subsidiary, TTI Pte, has obtained a line of credit from a bank which provides for a line of credit of $3,125,000. There were no borrowings against this line as of December 25, 1998. The interest rate on borrowings is at the bank's prime rate (6.25% at December 25, 1998) plus 1.25%. Borrowings under this agreement are collateralized by substantially all of TTI Pte's assets. 8 The Company's subsidiary, TTM, has obtained a line of credit from a bank which provides for borrowings of $132,000. There were no borrowings under the line as of December 25, 1998. The Company's subsidiary, TTBk, has a secured line of credit with a bank which provides for a total line of credit of $48,000. There were no borrowings under the line as of December 25, 1998. 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 $312,000 as of December 25, 1998. Interest is at the bank's prime rate (6.7% at December 25, 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 (9.75% at December 25, 1998). Borrowings under the line amounted to $150,000 as of December 25, 1998. Approximately $3,300,000 of cash is held in the Company's 55% owned Malaysian subsidiary. $1,700,000 of this cash is denominated in the currency of Malaysia. In September 1998 the Malaysian government approved a program to limit the movement of certain cash balances denominated in Malaysian currency. 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 The gross profit margin has declined 7.0% for the quarter ended December 25, 1998, as compared to the corresponding quarter in the prior year, and is primarily due to competition as a result of poor economic conditions and a shift in relative sales from high margin test services to lower margin distribution sales. TRIO-TECH INTERNATIONAL QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 9 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 first quarter or second quarter of fiscal 1999: 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: February 8, 1999 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 0000732026 TRIO-TECH INTERNATIONAL 1000 3-MOS JUN-25-1999 JUN-26-1998 DEC-25-1998 3,299 3,321 3,528 271 1,890 12,517 16,199 10,677 18,624 6,444 0 0 0 8,666 271 18,624 4,983 4,983 3,619 3,619 1,186 0 45 133 104 29 0 0 0 29 0.01 0.01
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