TRIO TECH INTERNATIONAL - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2003


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-14523

TRIO-TECH INTERNATIONAL

(Exact name of Registrant as specified in its Charter)


California (State or other jurisdiction of incorporation or organization)		95-2086631 (I.R.S. Employer Identification Number)

14731 Califa Street Van Nuys, California (Address of principle executive offices)		91411 (Zip Code)

Registrant’s Telephone Number: 818-787-7000

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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No þ

Number of shares of common stock outstanding as of February 5, 2004 is 2,932,542.

TABLE OF CONTENTS


	ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
	Item 3. Defaults Upon Senior Securities
	Item 4. Submission of Matters to Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits and reports on Form 8-K
SIGNATURES
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32

TRIO-TECH INTERNATIONAL
INDEX TO CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION AND SIGNATURE


				Page

Part I.		Financial Information
	Item 1.		Consolidated Balance Sheets as of Dec. 31, 2003 (Unaudited) and June 30, 2003		3
			Consolidated Statements of Operations and Comprehensive Income (loss) for the Three and Six Months Ended Dec. 31, 2003 (Unaudited) and Dec. 31, 2002 (Unaudited)		4
			Consolidated Statements of Cash Flows for the Six Months Ended Dec. 31, 2003 (Unaudited) and Dec. 31, 2002 (Unaudited)		5
			Notes to Consolidated Financial Statements (Unaudited)		6
	Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
	Item 3.		Quantitative and Qualitative Disclosures about Market Risk		22
	Item 4.		Controls and Procedures		23
Part II.		Other Information
	Item 1.		Legal Proceedings		24
	Item 2.		Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		24
	Item 3.		Defaults upon Senior Securities		24
	Item 4.		Submission of Matters to a Vote of Security Holders		24
	Item 5.		Other Information		24
	Item 6.		Exhibits and Reports on Form 8-K		24
Signatures					25

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE AMOUNTS)


			(Unaudited)
			Dec 31,			June 30,
			2003			2003

ASSETS
CURRENT ASSETS:
	Cash		$	2,030		$	1,495
	Short term deposits			4,769			4,308
	Investments in marketable securities			—			485
	Trade accounts receivable, less allowance for doubtful accounts of $160 at Dec. 31, 2003 and $157 at Jun. 30, 2003, respectively			3,292			3,643
	Other receivables			359			373
	Inventories, less provision for obsolete stock of $717 at Dec. 31, 2003 and $735 at Jun. 30, 2003, respectively			1,075			1,049
	Prepaid expenses and other current assets			181			140

		Total current assets		11,706			11,493
PROPERTY, PLANT AND EQUIPMENT, Net				5,520			5,210
OTHER ASSETS, Net				7			8

TOTAL ASSETS			$	17,233		$	16,711

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Lines of credit		$	147		$	300
	Accounts payable			1,271			1,080
	Accrued expenses			2,265			2,096
	Income taxes payable			37			56
	Current portion of notes payable			576			632
	Current portion of capitalized leases			234			302

		Total current liabilities		4,530			4,466

NOTES PAYABLE, net of current portion				818			492
CAPITALIZED LEASES, net of current portion				303			344
DEFERRED INCOME TAXES				732			711

TOTAL LIABILITIES				6,383			6,013

COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST				2,115			2,108
SHAREHOLDERS’ EQUITY:
	Common stock; no par value, authorized, 15,000,000 shares; issued and outstanding 2,932,542 shares at Dec. 31, 2003 and 2,927,542 shares at Jun. 30, 2003			9,437			9,423
	Additional paid-in capital			284			284
	Retained earnings (accumulated deficit)			(786	)		(739	)
	Accumulated other comprehensive income-marketable securities			—			45
	Accumulated other comprehensive loss-foreign currency			(200	)		(423	)

		Total shareholders’ equity		8,735			8,590

TOTAL LIABILITIES AND
	SHAREHOLDERS’ EQUITY		$	17,233		$	16,711

See notes to condensed consolidated financial statements.

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE)


			Six Months Ended						Three Months Ended

			Dec. 31,			Dec. 31,			Dec. 31,			Dec. 31,
			2003			2002			2003			2002

NET SALES			$	8,906		$	10,966		$	5,056		$	5,051
COST OF SALES				6,559			7,843			3,634			3,672

GROSS PROFIT				2,347			3,123			1,422			1,379
OPERATING EXPENSES:
	General and administrative			1,953			2,370			970			1,087
	Selling			417			472			212			213
	Research and development			59			55			27			28
	Loss on disposal of property, plant and equipment			4			112			—			—

		Total		2,433			3,009			1,209			1,328

(LOSS) INCOME FROM OPERATIONS				(86	)		114			213			51
OTHER INCOME (EXPENSE)
	Interest expense			(66	)		(97	)		(31	)		(46	)
	Other income			196			164			58			50

		Total		130			67			27			4

INCOME BEFORE INCOME TAXES AND
	MINORITY INTEREST			44			181			240			55
INCOME TAXES				33			50			18			(18	)

INCOME BEFORE MINORITY INTEREST				11			131			222			73
MINORITY INTEREST				(58	)		16			(4	)		18

NET (LOSS) INCOME ATTRIBUTABLE TO
	COMMON SHARES			(47	)		147			218			91

OTHER COMPREHENSIVE INCOME (LOSS):
	Unrealised (loss) gain on investment			(45	)		(24	)		—			(13	)
	Foreign currency translation adjustment			223			(8	)		92			106

COMPREHENSIVE INCOME			$	131		$	115		$	310		$	184

(LOSS) EARNINGS PER SHARE:
	Basic		$	(0.02	)	$	0.05		$	0.07		$	0.03

	Diluted		$	(0.02	)	$	0.05		$	0.07		$	0.03

WEIGHTED AVERAGE NUMBER OF COMMON AND
	POTENTIAL COMMON SHARES OUTSTANDING
		Basic		2,930			2,928			2,933			2,928
		Diluted		2,930			2,928			2,985			2,928

See notes to condensed consolidated financial statements.

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)


				Six Months Ended

				Dec. 31,			Dec. 31,
				2003			2002

CASH FLOWS FROM OPERATING ACTIVITIES:
	Net (loss) income			$	(47	)	$	147
	Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization				582			643
	Bad debt expenses (recovery), net				3			19
	Stock Compensation				—			14
	Loss on sale of property and equipment				4			112
	Gain on disposal of marketable securities				(114	)		(45	)
	Deferred income taxes				21			11
	Minority interest				58			(16	)
	Changes in operating assets and liabilities:
		Accounts receivable, net			348			40
		Other receivables			17			17
		Inventories			(26	)		265
		Prepaid expenses and other current assets			(41	)		(35	)
		Accounts payable and accrued expenses			360			127
		Income taxes payable			(19	)		(12	)

			Net cash provided by operating activities		1,146			1,287

CASH FLOWS FROM INVESTING ACTIVITIES:
	Short term deposits				(461	)		(205	)
	Capital expenditures				(638	)		(668	)
	Purchase of marketable securities				(4	)		(304	)
	Other assets				1			26
	Proceeds from disposal of marketable securities				555			455
	Proceeds from sale of property and equipment				38			—

			Net cash used in investing activities		(509	)		(696	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Net payments and borrowings on lines of credit				(156	)		(617	)
	Net payments and borrowings on debt and capitalized leases				67			(57	)
	Dividends paid to minority interest				(62	)		(71	)
	Issuance of common stock, net				14			—

			Net cash used in financing activities		(137	)		(745	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH					35			(3	)
NET INCREASE (DECREASE) IN CASH					535			(157	)
CASH, BEGINNING OF PERIOD					1,495			1,128

CASH, END OF PERIOD				$	2,030		$	971

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
	Cash paid during the period for:
		Interest		$	64		$	97
		Income taxes		$	52		$	111
NON-CASH INVESTING AND FINANCING ACTIVITIES
-Acquisition of property, plant and equipment under capital finance lease				$	94		$	289
- Capitalization of property, plant and equipment paid in advance				$	—		$	155

See notes to condensed consolidated financial statements.

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

1. ORGANIZATION AND BASIS OF PRESENTATION

Trio-Tech International (“the Company” or “TTI” hereafter) was incorporated in 1958 under the laws of the State of California. TTI provides third-party semiconductor testing and burn-in services primarily through its laboratories in Southeast Asia; in addition, TTI operates test facilities in the United States and Europe. The Company also designs, develops, manufactures and markets a broad range of equipment and systems used in the manufacture and testing of semiconductor devices and electronic components. TTI conducts business in three industry segments: Testing Services, Manufacturing and Distribution. TTI has subsidiaries in the U.S., Singapore, Malaysia, Thailand, China and Ireland as follows:


		Ownership			Location

Express Test Corporation			100	%	Van Nuys, California
Trio-Tech Reliability Services			100	%	Van Nuys, California
KTS Incorporated, dba Universal Systems			100	%	San Jose, California
European Electronic Test Centre			100	%	Dublin, Ireland
Trio-Tech International Pte. Ltd.			100	%	Singapore
Trio-Tech Test Services Pte. Ltd.			100	%	Singapore
Trio-Tech Thailand			100	%	Bangkok, Thailand
Trio-Tech Bangkok			100	%	Bangkok, Thailand
Trio-Tech Malaysia			55	%	Penang, Malaysia
Trio-Tech Kuala Lumpur – 100% owned by
	Trio-Tech Malaysia		55	%	Selangor, Malaysia
Prestal Enterprise Sdn. Bhd.			76	%	Selangor, Malaysia
Trio-Tech (Suzhou) Co. Ltd.

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1.		ORGANIZATION AND BASIS OF PRESENTATION

		Trio-Tech International (“the Company” or “TTI” hereafter) was incorporated in 1958 under the laws of the State of California. TTI provides third-party semiconductor testing and burn-in services primarily through its laboratories in Southeast Asia; in addition, TTI operates test facilities in the United States and Europe. The Company also designs, develops, manufactures and markets a broad range of equipment and systems used in the manufacture and testing of semiconductor devices and electronic components. TTI conducts business in three industry segments: Testing Services, Manufacturing and Distribution. TTI has subsidiaries in the U.S., Singapore, Malaysia, Thailand, China and Ireland as follows: