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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended June 30, 1995 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 No.)
355 Parkside Drive
San Fernando, California 91340
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(818) 365-9200
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
--------------
Title of Class
Securities registered pursuant to Section 12(g) of the Act:
Common stock
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed 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
---- ---
Based on the closing sales price on August 21, 1995, the aggregate market value
of the voting stock held by nonaffiliates of the registrant was $5,019,259. The
number of shares outstanding of the registrant's common stock was 1,181,002 at
August 21, 1995.
Documents incorporated by reference:
1.Notice of 1995 Annual Meeting and Proxy Statement (Part III of Form 10-K).
Indicate by check mark if disclosure of delinquent filers persuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in the definitive proxy statement incorporated
by reference in Part III of this Form 10-K.
-----
The number of pages in this filing is 39. The Exhibit Index begins on page 15.
PART I
ITEM 1 - BUSINESS
- - -----------------
General
- - -------
Trio-Tech International (the Company or the Registrant) was incorporated in
California in 1958. The Company is a designer, producer and marketer of
environmental testing equipment used to test the structural integrity of
semiconductor devices that must meet high-reliability specifications and rate of
turn test equipment for aerospace, geographical, laboratory and other
applications. In addition, the Company owns and operates facilities where a
broad range of structural and electronic tests are performed for manufacturers
and end-users of merchant and high-reliability semiconductor devices. The
Singapore subsidiary also acts as a distributor for certain test equipment made
by other manufacturers.
In 1976, the Company formed Trio-Tech International Pte Ltd (TTIPte), a wholly
owned subsidiary, and it in turn formed Trio-Tech Test Services Pte Ltd
(TTTSPte), its wholly owned subsidiary. They autonomously operate in the
Republic of Singapore, for the purpose of selling testing equipment and
providing testing services to integrated circuit (IC) manufacturers located in
Singapore and elsewhere in the Pacific basin. The Singapore facility benefits
from moderate labor costs, the absence of currency and tariff restrictions, and
the rapid growth of the semiconductor manufacturing industry in Asia and the
Pacific basin, including the expansion of manufacturing activities by American
industries in Singapore and the Pacific Rim.
In August 1984, the Company formed a wholly owned Cayman Islands subsidiary,
European Electronic Test Centre (EETC). In July 1985, EETC commenced operating
a semiconductor testing facility in Dublin, Ireland. The Company obtained a
grant from the Industrial Development Authority (IDA) of the Republic of Ireland
to provide 30% of actual expenditures for building modifications and fixed
assets up to a maximum of $1,279,000. Grant monies received from the IDA of
$120,000 may have to be repaid if certain events occur within one year from June
30, 1995.
In 1985, the Company's Singapore subsidiary entered into a joint-venture
agreement with a group of Malaysian investors to operate a testing facility in
Penang, Malaysia. Under this agreement, the Singapore subsidiary provides the
equipment and management for the Penang facility. The operations of this entity
are included in the consolidated financial statements. In July of l990, the
joint venture opened another testing facility in Kuala Lumpur, Malaysia. This
facility is primarily involved in the testing business. In March 1994, this
facility started a new operation in Batang Kali, Malaysia. This new operation
is set up primarily to handle sub-contract work on optoelectronic assemblies.
On September 1, 1988, the Company acquired the Rotating Test Equipment Product
Line of Genisco Technology Corporation (Genisco).
On November 1, 1990, Trio-Tech acquired Express Test Corporation then of
Mountain View, California. The Company paid cash, notes and stock for Express
Test. Express Test is a manufacturer of pressurized vessels (autoclaves)
designed for humidity stress testing of integrated circuits. Whereas most of
Trio-Tech's integrated circuit testing devices are for hermetically sealed
ceramic devices, Express Test machines are designed to test plastic sealed
devices.
In October 1992, the Company's Singapore subsidiary formed a wholly owned
subsidiary to provide testing services in Bangkok, Thailand. The Singapore
subsidiary provides the equipment and management for this new operation.
In October 1993, the Company's Singapore subsidiary entered into a joint-venture
agreement with a Chinese Company to operate a crude oil chemical processing
business in Wuhan, China. This new business diversification
involves a value added production process in which crude oil is chemically
processed, repackaged and distributed to industrial users. Production in the
facility commenced in August, 1994.
In November 1993, the Company's Singapore subsidiary acquired a 73% equity
interest in Prestal Enterprise Sdn Bhd, an investment holding Company which
owned a 6% indirect share holding in Trio-Tech Malaysia (TTM). The purpose was
to acquire an additional 5% shareholding in TTM.
The following table sets forth the percentage of revenues derived from product
sales and testing services during the last three fiscal years and the breakdown
of revenues derived from customers in the United States, Southeast Asia and
Europe. The amounts represented in Product Sales and Service include revenues
derived from the test equipment distribution business in Singapore. See Note
14, Business Segment, for a more detailed description.
Year Ended
-------------------------------------------
June 30, 1995 June 24, 1994 June 25, 1993
------------- ------------- -------------
(Dollar amounts in thousands)
Product sales and
service:
United States $ 2,574 13% $ 2,223 15% $ 2,245 14%
Southeast Asia 7,287 38 5,320 35 4,950 31
Europe 802 4 572 4 289 2
---------- --- ---------- ----- -------- --
Total $10,663 55% $ 8,115 54% $ 7,484 47%
======== === ======== === ======== ===
Testing services:
United States $ 201 1% $ 203 1% $ 290 2%
Southeast Asia 8,407 43 6,743 44 7,564 48
Europe 217 1 104 1 384 3
---------- --- ---------- --- ---------- --
Total $ 8,825 45% $ 7,050 46% $ 8,238 53%
======== === =============== ======== ===
Background Technology
- - ---------------------
Semiconductors are fundamental building blocks used in electronic equipment and
systems. Integrated circuits (IC) consist of silicon "chips" of semiconductor
material that perform electronic functions, encapsulated in packaging material,
usually plastic or ceramic, having lead wires that connect to a printed circuit
board. Integrated circuits have become increasingly complex, with greater
capacity, versatility and smaller size. The protective packaging, whether
ceramic, plastic or some other material, is intended to hold the device in place
and protect it against corrosion, oxidization, shock, handling, temperature and
other problems that can result in the failure of the device. A minute defect in
the packaging can cause a semiconductor device to fail prematurely. The
Registrant manufactures test equipment for reliability analysis of both ceramic
and plastic encapsulated integrated devices.Hermetically sealed (normally
ceramic) packaging is required by military,aerospace, telecommunications and
other commercial users for semiconductor devices that must have high reliability
and long life. It is also used for hybrid circuits and certain other
specialized devices, and for semiconductor devices that are produced in smaller
quantities. There have been significant advances in the plastics industry,
thereby making plastic sealed devices as reliable as ceramic ones. Plastic is
the material of choice in the commercial integrated circuit markets, because
polymers are less expensive and easier to process than ceramic materials.
Many manufacturers and purchasers of high-reliability integrated circuits follow
government-defined reliability standards, including rigorous military standard
specifications. Military specifications, which are detailed and precise, have
brought about considerable standardization of quality assurance programs in the
semiconductor industry.
Military and commercial specifications include, among other things,
environmental testing, which is aimed at both detecting defective devices and
accelerating failure in potentially defective ones. An additional objective of
environmental testing is to determine and to evaluate statistically the ultimate
reliability and integrity of integrated circuits and to predict their
performance and durability under ordinary or adverse conditions. The devices
are tested before incorporating them into the finished product. The tests vary
according to the use for which the device is intended but usually include visual
inspection, stabilization bake, thermal shock temperature cycling, mechanical
shock, centrifugal force testing, fine and gross leak testing, burn-in testing
and electrical testing.
Products
- - --------
The Registrant designs and manufactures environmental testing equipment for
testing of ceramic and plastic packaged integrated circuits. The Registrant's
products are sold both as separate products and as part of an integrated system
for environmental testing.
Centrifuges
- - -----------
The Registrant manufactures a line of centrifuges that tests the
mechanical integrity of hermetic encased electronic parts. The Registrant's
centrifuges are used to identify mechanical weaknesses of devices by spinning
them at a specified acceleration, creating a pressure of up to 30,000 g's
(900,000 pounds per square inch). This pressure will crack or break packages
having certain defects in the hermetic packages. The Registrant also designs
the fixtures that are inserted into the centrifuge to hold the semiconductors
while they are being tested.
Leak Testers
- - ------------
he Registrant also manufactures systems for leak detection in
hermetically
packaged semiconductor devices. Certain defects may appear in some
tests but not in others, so that thorough testing requires three separate leak
procedures using different equipment. The Registrant manufactures a range of
equipment and systems designed to detect leaks in hermetic packaging by means of
visual scanning for bubble trails emanating from defective devices and
radioactive detection for ultra fine leaks.
Rate of Turn Tables
- - -------------------
This product line includes centrifuges and rate of turn tables that are used in
applications for aerospace, electronics, instrumentation, environmental
laboratory, medical and geographical fields. Among the commercial applications
of these centrifuges are gravity simulation testing of components, assemblies
and systems for aerospace, military hardware (accelerometers, devices, fuses,
etc.), biomedical research, geophysical testing, automotive components, fluid
removal from sensitive components, gas removal from liquids and other
large-scale separation requirements. One prominent example of the product line
is the use of the 1100 Centrifuge at the Pittsburgh Eye and Ear Hospital in
rotational testing of the vestibule of the inner-ear system that causes
dizziness and unsteady eye and body movements when diseased. Typical rate of
turn table application is gyroscope calibration and testing, angular
accelerometers, turn and bank indicators, inertial platforms and direction
sensing equipment.
Burn-in Equipment and Fixtures
- - ------------------------------
Trio-Tech International, Singapore is a leading burn-in system manufacturer in
the Pacific Rim. Burn-in equipment is used to subject all types of integrated
circuits to sustained heat while testing them electrically in order to identify
early product failures ("infant mortalities") as well as to assure long-term
reliability. Burn-in testing approximates, in a compressed time frame, the
electrical and thermal conditions to which the device would be subjected during
its normal life.
The Singapore operation also offers test fixtures for its Cobis burn-in systems
and other brands of burn-in systems. Burn-in boards are used as fixture devices
for the purpose of electrically exercising test devices during high temperature
environmental stressing.
Pressurized Humidity Testing Equipment
- - --------------------------------------
The Registrant manufactures a range of pressurized humidity test equipment and
specialized test fixtures which the company continues to market under the name
of Express Test Corporation. Pressurized humidity test equipment utilizes a
pressurized vessel (autoclave) as the main test chamber in order to force
moisture into the plastic encapsulate and thereby determine the moisture
resistance of the test devices much more rapidly than non pressurized
conventional humidity test systems. Highly accelerated temperature and humidity
stress test systems offer reliability data for high reliability commercial IC
manufacturers and end-users such as computer, automotive and other commercial
customers.
Temperature Test Equipment
- - --------------------------
The Artic Temperature Test Systems are used to control the temperature of
semiconductor wafers and components to allow testing and characterization at hot
and cold temperatures. During the past year, the Registrant developed and
released two new products in this product range. The systems utilize
thermoelectric modules to achieve wide temperature ranges without the need for
special refrigerants and cooling fluids.
Product Development
- - -------------------
Development of the Rate of Turn Tables and large Centrifuges is targeted at new
applications in the automotive industry. The latest centrifuges and rate tables
combine two technologies which facilitates the acceleration test of devices at
hot and cold temperatures. The Registrant has developed and released a new
electrical test system for electronic components. This product is being
developed into a product range which will include failure analysis testers and
test systems for electronic modules.
Testing Services
- - ----------------
The Registrant owns and operates facilities that provide testing services for
ceramic and plastic encased semiconductor devices and other electronic
components to meet the requirements of military, aerospace, industrial and
commercial applications. The Registrant uses its own proprietary equipment for
certain burn-in, centrifugal and leak tests, and commercially available
equipment for the various other environmental tests. The Registrant conducts
its testing operations at its facilities located in San Fernando, California;
the Republic of Singapore; Dublin, Ireland; Penang and Kuala Lumpur, Malaysia;
and Bangkok, Thailand.
The testing services are used by manufacturers and purchasers of semiconductors
and other components who either do not have any testing capabilities or whose
in-house screening facilities are not sufficient to test devices to military or
certain commercial specifications. In addition, the Registrant provides
overflow testing and independent verification for companies that have their own
in-house capabilities. The laboratories perform a variety of tests, including
stabilization bake, thermal shock, temperature cycling, mechanical shock,
constant acceleration, gross and fine leak tests, electrical testing, static and
dynamic burn-in tests, and vibration testing. The laboratories also perform
qualification testing, consisting of intense tests conducted on small samples of
output from manufacturers who must obtain periodic qualification under the terms
of their contracts. The Registrant delivers written certification to customers
reporting on the test results.
Distribution Activities
- - -----------------------
The Company's Singapore subsidiary continues to develop its international
distribution division. This is in addition to its manufacturing and testing
business. This distribution business purchases products from European and
Pacific Rim manufacturers for resale. Specifically, Heraeus-Votsch of West
Germany has been utilizing Trio-Tech International Pte. Ltd. in Singapore as a
distributor of its products for nearly seven years. The Singapore subsidiary
also represents several Japanese and American manufacturers. This segment of
Singapore's business
continues to grow. It affords Trio-Tech additional sales penetration
opportunities in the Pacific Rim for the remainder of the Trio-Tech product
line.
Marketing, Distribution and Service
- - -----------------------------------
The Company markets its products and services worldwide, both directly and
through independent sales representatives. There are approximately 13 of these
representatives that operate within the United States and 10 in various foreign
countries. The Company's marketing efforts in the United States and Europe are
coordinated from its headquarters in San Fernando, and its Far East marketing
efforts are assisted by its subsidiary in Singapore. Its European marketing is
assigned to its subsidiary in Ireland. The Registrant advertises in trade
journals and participates in trade shows.
The Company's products and services are purchased by independent testing
laboratories and by users and manufacturers of high-reliability semiconductor
devices, including Hyundai, TRW Teledyne, Allied Signal, AMD, Motorola, National
Semiconductor, SGS Thomson and Texas Instruments. During the year ended June
30, 1995, the Company had sales of $3,000,000 and $2,431,000 to two different
customers. One customer was responsible for more than 10% of the Company's
consolidated sales for fiscal year 1994.
Backlog
- - -------
The following table sets forth the Company's backlog at the dates indicated:
June 30, 1995 June 24, 1994
------------- -------------
Manufacturing backlog $1,346,000 $1,193,000
Testing service backlog 2,570,000 2,257,000
Distribution backlog 1,286,000 822,000
----------- ------------
$5,202,000 $4,272,000
========== ==========
Based upon past experience, the Company does not anticipate any significant
cancellations. The purchase orders for equipment call for delivery within the
next 12 months. The testing services backlog is scheduled to be performed within
the next year. The Company does not anticipate any difficulties in meeting the
above delivery schedule.
Manufacturing and Supply
- - ------------------------
The Registrant's products are designed by its engineers and are assembled and
tested at its facilities in San Fernando, California, the Republic of Singapore
and the Republic of Ireland. All parts and certain components are purchased
from outside sources for assembly by the Company.
The Registrant uses Fluorinert, a special indicator fluid sold by the 3M
Company, in its gross leak equipment, and Krypton 85, sold by Amersham, in its
Tracer-Flo. The Registrant has not experienced any difficulty in obtaining
Fluorinert or Krypton 85 to date. There can be no assurance that the Registrant
will not experience difficulties or delays in obtaining Fluorinert or Krypton 85
in the future.
Competition
- - -----------
Management believes that the Registrant is one of the leading manufacturers in
the specific areas of fine leak and gross leak testers for ceramic and plastic
packaged semiconductor devices and constant acceleration centrifuges used for
structural testing of such devices. Because of the importance of testing as
part of the manufacturing process for high-reliability semiconductor devices,
management believes that the quality, accuracy and reputation of its products
and services, and to a lesser extent price, are the bases of competition in the
product and service areas
served by the Company. In order for the Company to remain competitive, it must
have the ability to adapt to rapid technological change and to develop new and
improved products.
There are numerous testing laboratories in the areas in which the Registrant
operates that perform a range of testing services similar to those offered by
the Registrant. Since the Registrant has sold and will continue to sell its
leak testing systems and centrifuges to competing laboratories, the Registrant's
competitors can offer the same capabilities in testing. The Registrant also
sells its products and systems to semiconductor manufacturers and
users who might otherwise have used outside testing laboratories, including the
Registrant, to perform environmental testing. Reputation for dependable testing
and prompt performance, to a greater extent than price, appear to be the primary
bases of competition among testing laboratories. The existence of competing
laboratories and the purchase of testing equipment by manufacturers and users
are potential threats to the Company's future revenues and earnings from
testing.
Patents
- - -------
The Registrant holds a U.S. Patent granted in 1987 in relation to its
pressurization humidity testing equipment. The Registrant also holds a U.S.
Patent granted in 1994 on certain aspects of its Artic Temperature Test Systems.
In addition the Registrant has recently filed a new Patent application for
certain aspects of its new Artic Temperature Test products.
Government Regulation
- - ---------------------
The Tracer-Flo process uses Krypton 85, an inert radioactive gas, the supply and
handling of which are subject to regulation by the United States Nuclear
Regulatory Commission (NRC) and the California Department of Health Physics.
The Company must, therefore, train the Tracer-Flo operators, which are licensed
by the State of California, and must maintain records and control its supplies
of Krypton 85. The California agency conducts periodic site inspections, and
the NRC monitors interstate shipments and can inspect the Company's shipping
records. No security clearance is required to handle the gas, which has a low
level of radioactivity.
Employees
- - ---------
As of June 30, 1995, the Company had 33 employees in the United States, 179 in
Singapore, 260 in Malaysia, 73 in Bangkok and 8 in Ireland. Of the employees in
the United States, 8 were engaged primarily in engineering and services, 17 in
manufacturing or testing, 3 in sales, and 5 in general and administrative
positions. None of the Company's employees are represented by a labor union.
However, in Dublin, Ireland, the Union Agreement is still in place without any
members. Management considers its employee relations to be good.
ITEM 2
- - ------
PROPERTIES
- - ----------
The following table sets forth information as to the location and general
character ofthe principal manufacturing and testing facilities of the
Registrant:
Owned (O)
Approx. or Leased (L)
Sq. Ft. Expiration
Location Principal Use Occupied Date
- - -------- ------------- -------- -------------
355 Parkside Dr. Headquarters/ 21,000 (L) Jan. 1996
San Fernando, CA 9l340 Manufacturing/
Testing
Owned (O)
Approx. or Leased (L)
Sq. Ft. Expiration
Location Principal Use Occupied Date
- - -------- ------------- -------- -------------
Sunnyvale, CA 94086 General Test Labs 19,624 (L) Nov. 1996
Abbey Road Testing/Manufac-
Deansgrange Co. turing 18,400 (O) *2
Dublin, Ireland
No. 5, Kian Teck Road Manufacturing 30,000 (L) *1
Jurong Town, Singapore
1004, Toa Payoh North, Testing 6,833 (L) month to
HEX 07-01/07, month
Singapore
512, Chai Chee Lane, Testing 4,600 (L) month to
HEX 01-05, month
Bedok Industrial Estate,
Singapore
Plot 1A, Phase 1 Testing 49,924 (L) Aug. 2030
Bayan Lepas Free
Trade Zone
11900 Penang
Lot No. 6. Lorong Testing 23,000 (L) June 1996
Enggang 37 Ulu Kelang
Ampang Industrial Area.
Ulu Kelang, Selangor,
Kuala Lumpur
327, Chalongkrung Road, Testing 11,300 (O) *3
Lamplathew, Lat Krabang,
Bangkok 10520, Thailand
Lot No. B7, Kawasan MIEL Manufacturing 24,142 (O)*4
Batang Kali, Phase II,
43300 Batang Kali
Selangor Darul Ehsan,
Malaysia
*1 Purchased for S$1 million, equivalent to approximately U.S.$ 447,000 based
on the exchange rate as of June 28,1985. This amount was completely repaid
in fiscal year 1991. However, under Singapore law, this land may not be
purchased outright. Accordingly, the term for this land lease will expire
in December 2030. The Company has acquired the fullest ownership rights
possible under Singapore law which includes an option to renew the lease at
that time.
*2 Purchased for 270,000 Irish Pounds, equivalent to approximately U.S.
$261,000 based on the exchange rate as of June 28, 1985, of which
approximately 30% was recovered by the Company as part of the grant monies
received from the Industrial Development Authority of the Republic of
Ireland. However, these monies may have to be repaid if certain events
occur within one year from June 30, 1995.
*3 Purchased for Thai Baht 13,500,000, equivalent to approximately
U.S.$533,000 based on the exchange rate as of June 25, 1993. The mortgage
agreement commenced in October 1992 and will expire in September 1998.
*4 Purchased for Malaysia Ringgit 1,000,000, equivalent to U.S.$387,000 based
on the exchange rate as at June 24, 1994.
ITEM 3
- - ------
LEGAL PROCEEDINGS
- - -----------------
On August 24, 1995, the Company was served in a civil action brought by HM
Holdings, Inc. against 106 defendants, including the Company. HM has paid
$3,750,000 to the Federal Environmental Protection Agency to settle a proceeding
alleging that HM's predecessor company caused soil and groundwater contamination
of the North Hollywood (California) Superfund Site and may have additional
liabilities. HM alleges that the 106 defendants caused or contributed to the
contamination. This suit may arise in part out of a related suit by Lockheed
Martin Corporation against HM and other defendants, possibly including Trio-Tech
(which has not been served in this related suit), involving the nearby Burbank
Superfund Site, which HM is seeking to settle and to assign its claim against
the 106 defendants to Lockheed Martin. Trio-Tech vacated its Burbank location
in 1987. Trio-tech and its counsel have not yet had the opportunity to
investigate the allegations. Management, based on its present information,
believes that the outcome of this litigation will not materially affect the
Company's consolidated financial position or results of operations.
There are no material proceedings to which any director, officer or affiliate of
the Registrant, any beneficial owner of more than five percent of the
Registrant's common stock or any associate of such person is a party that is
adverse to the Registrant or its properties.
ITEM 4
- - ------
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - ---------------------------------------------------
The Company did not submit any matters to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5
- - ------
MARKET FOR REGISTRANT'S COMMON STOCK
- - ------------------------------------
The Registrant's common stock is traded on the Over-the-Counter Market. The
prices below have been adjusted to take account of a one-for-four reverse stock
split of the common stock in October 1994. The range of bid information as
quoted by the NASDAQ is as follows:
Quarter Ended High Low
------------- ---- ---
September 24, 1993 3 2 1/2
December 24, 1993 3 1/2 3
March 25, 1994 3 1/2 3
June 24, 1994 4 2 1/2
September 30, 1994 2 3/4 2 3/8
December 30, 1994 3 2 3/4
March 31, 1995 3 3/4 2 7/8
June 30, 1995 4 1/4 3 3/4
The Registrant's common stock is held by approximately 347 shareholders of
record as of August 21, 1995. 174,500 shares are held by Cede and Co., a
clearinghouse that holds stock certificates in "street" name for an unknown
number of shareholders.
The Company has not declared any cash dividends on its common stock. It is
anticipated that no dividends will be paid to holders of common stock in the
foreseeable future. Any future determinations as to cash dividends will depend
upon the earnings and financial position of the Company at that time and such
other factors as the Board of Directors may deem appropriate.
ITEM 6
- - ------
SELECTED FINANCIAL DATA
- - -----------------------
Statement of Operations Data:
(In thousands except per share data)
- - ------------------------------------
Year Ended
------------------------------------------------
June 30, June 24, June 25, June 26, June 28,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
NET SALES $19,488 $15,165 $15,722 $14,899 $14,302
COST OF SALES 12,744 9,961 10,634 10,330 10,388
------- ------- ------- ------- -------
GROSS PROFIT 6,744 5,204 5,088 4,569 3,914
-------- ------- ------- ------- -------
OPERATING EXPENSES:
General and administrative 3,674 2,806 2,959 3,130 3,019
Selling 1,523 1,194 1,200 1,454 1,470
-------- ------- ------- ------- -------
Total 5,197 4,000 4,159 4,584 4,489
-------- ------- ------- ------- -------
INCOME (LOSS) FROM
OPERATIONS 1,547 1,204 929 (15) (575)
OTHER INCOME (EXPENSES):
Interest expense (183) (514) (506) (596) (684)
Write-off of investment (109)
Write-off of leasehold
improvements (62) (130)
Other income (expenses) 320 36 146 (126) 447
---------------------------- --------- -----
Total 137 (587) (360) (784) (367)
--------- ---------- ---------- --------- ------
INCOME (LOSS) BEFORE
INCOME TAXES,
DISCONTINUED OPERATIONS,
EXTRAORDINARY ITEM AND
MINORITY INTEREST 1,684 617 569 (799) (942)
INCOME TAXES 443 236 368 221 79
--------- ------- -------- ------- ------
INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS,
EXTRAORDINARY ITEM AND
MINORITY INTEREST 1,241 381 201 (1,020) (1,021)
--------- ------- -------- -------- ---------
DISCONTINUED OPERATIONS 80
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM AND
MINORITY INTEREST 1,241 381 201 (1,020) (941)
EXTRAORDINARY ITEM 1,751
--------- ------ ------- ------- ---------
SELECTED FINANCIAL DATA
- - -----------------------
Statement of Operations Data:
(In thousands except per share data)
- - ---------------------------------------------
Year Ended
------------------------------------------------
June 30, June 24, June 25, June 26, June 28,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
INCOME (LOSS) BEFORE
MINORITY INTEREST 1,241 2,132 201 (1,020) (941)
MINORITY INTEREST (671) (92) (98) 144 70
-------------------- ------ --------- ----
NET INCOME/(LOSS) $ 570 $2,040 $ 103 $ (876) $ (871)
======== ====== ====== ======== ========
Net income/(loss) per share :
Primary:
Continuing operations $ .42 $ .28 $ .13 (1.09) $(1.24)
Discontinued operations .10
Extraordinary items 1.72
-------- ------ -------- --------- ------
Net income/(loss) per
share $ .42 $2.00 $ .13 $(1.09) $(1.14)
===== ===== ===== ======= =======
Fully diluted:
Continuing operations $ .38 $ .28 $ .13 $(1.09) $(1.24)
Discontinued operations .10
Extraordinary items 1.72
-------- ------ -------- ------- -------
Net income/(loss) per
share $ .38 $2.00 $ .13 $(1.09) $(1.14)
===== ===== ===== ======= =======
Weighted average number
of common and common
equivalent shares outstanding:
Primary 1,370 1,017 809 807 766
Fully diluted 1,511 1,017 809 807 766
- - -----------------------
SELECTED FINANCIAL DATA
- - -----------------------
Balance Sheet Data : June 30, June 24, June 25, June 26, June 28,
(in thousands) 1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Current assets $ 6,848 $ 5,525 $ 5,936 $ 6,034 $ 6,742
Current liabilities 5,159 5,014 8,975 9,100 8,429
Working capital 1,689 511 (3,039) (3,066) (1,687)
Total assets 12,646 11,298 12,243 12,108 12,149
Long-term debt and
capitalized leases 597 939 1,161 1,005 1,524
Shareholders' equity 4,419 3,626 532 585 928
The Company has not declared any cash or stock dividends on its common stock in
any of the fiscal years reported above.
ITEM 7
- - ------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- - ---------------------------------------------------------------
RESULTS OF OPERATIONS
- - ---------------------
The following table sets forth, for the periods indicated, the percentages that
certain items in the selected financial data bear to total revenues:
Year Ended June
------------------------
1995 1994 1993
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Cost of sales 65.4 65.7 67.6
Gross profit 34.6 34.3 32.4
Operating expenses 26.7 26.4 26.5
Income from operations 7.9 7.9 5.9
Other income (expenses) .7 (3.9) (2.3)
Extraordinary item 11.6
Net income 2.9 13.5 .7
Year Ended June 30, 1995 ("1995") Compared to Year Ended June 24, 1994 ("1994")
- - -------------------------------------------------------------------------------
Sales increased $4,323,000 or 28.5% to $19,488,000 in 1995 from $15,165,000 in
1994 as a result of improved operations in each of the business segments. Sales
for the Far East operations increased $3,249,000 (26.1%) due primarily to
improved operations in Malaysia as the volume of testing services in that region
increased. Additionally, there was an increase in manufacturing revenues in the
Far East as a result of the sale of additional systems during 1995. The U.S.
operations sales increased $710,000 (34.4%) due to increased sales volume in the
manufacturing segment. Sales for Ireland improved $364,000 (55.6%) as a result
of increases in the volume of testing services performed in the current year.
Cost of sales increased $2,783,000 or 27.9% from $9,961,000 in 1994 to
$12,744,000 in 1995. However, cost of sales as a percentage of sales remained
relatively stable and actually decreased from 65.7% in 1994 to 65.4% in 1995 as
a result of continued cost cutting efforts.
Operating expenses increased $1,197,000 (29.9%) to $5,197,000 in 1995. As
percentage of sales, operating expenses were almost the same at 26.7% in 1995 as
compared to 26.4% in 1994.
Interest expense decreased $331,000 in 1995 as compared to 1994 due to the
significant reduction in average outstanding debt balances during the current
year. During 1994, the Company entered into an agreement with its previous
lender which resulted in reduced bank borrowings.
Other income increased $284,000 primarily due to currency exchange losses
experienced in 1994 which did not reoccur in 1995.
Income taxes increased $207,000 as a direct result of the increase in operations
experienced in the current year. The effective tax rate in 1995 was 26% which
approximates the foreign income tax rate for the Far East operations. The U.S.
operations have net operating losses which are used to offset any income taxes
associated with their taxable income.
Year Ended June 24, 1994 ("1994") Compared to Year Ended June 25, 1993 ("1993")
- - -------------------------------------------------------------------------------
Net sales decreased by approximately $557,000 or 4% in fiscal 1994 compared to
1993. The decrease was primarily due to a $940,000 reduction in sales from the
U.S. operations due to continued economic problems in the U.S. semiconductor
industry. This was partially offset by a $392,000 increase in sales from the
Far East operations. Ireland's sales remained relatively constant during fiscal
year 1994.
Cost of sales as a percentage of net sales decreased to 65.7% in fiscal 1994
compared to 67.6% in fiscal 1993. This decrease was due to increased sales in
the distribution segment which experiences higher margins than manufacturing or
testing. Additionally, the Company continues its efforts to reduce
manufacturing and overhead costs.
Operating expenses decreased approximately $159,000 or 4% and remained
relatively constant as a percentage of sales.
Income before income taxes and extraordinary item as a percentage of sales
increased to 4.1% in fiscal 1994 compared to 3.6% in fiscal 1993. The increase
resulted from improved gross margins in the current year which were partially
offset by a $109,000 write-off of an investment.
Extraordinary income of $1,751,000 was recognized by the Company in fiscal 1994
as a result of the extinguishment of a significant portion of its bank debt.
Liquidity and Capital Resources
- - -------------------------------
The Company's working capital improved significantly from $511,000 as of June
24, 1994 to $1,689,000 as of June 30, 1995. The improvement in working capital
is attributable to the significant increase in sales and profitability during
fiscal year 1995.
The Company has a secured credit agreement with Standard Charter Bank which
provides for a total line of credit of approximately $655,000 which can be used
to finance the company's Far East operations. Borrowings under the line were
$219,000 as of June 30, 1995 and bear interest at the bank's prime rate (7% at
June 30, 1995) plus 3%. In addition, the Company's subsidiary, TTM, has a line
of credit which provides for borrowings of approximately $234,000. At June 30,
1995, there were no borrowings outstanding. Interest on the line is at the
bank's reference rate plus 2%. The company currently has no financing
arrangements to fund operations outside of the Far East region.
Most of the capital expenditures incurred during fiscal 1995 were used to update
and expand the variety of testing services required by the customer base in the
Far East.
Management believes that the Company's operations will be able to be funded over
the next twelve months through operations, existing working capital and its
available lines of credit.
ITEM 8
- - ------
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - -------------------------------------------
The information called for by this item is included in the Company's
consolidated financial statements beginning on page 19 of this Annual Report on
Form 10-K.
ITEM 9
- - ------
DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- - ----------------------------------------------------
No disagreements of a reportable nature have occurred between the Registrant and
its accountants.
PART III
The information required by Part III is hereby incorporated by reference from
the Company's Proxy Statement to be filed with the Securities and Exchange
Commission within 120 days after the end of fiscal 1995.
PART IV
ITEM 14
- - -------
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- - ---------------------------------------------------------------
(a) (1) FINANCIAL STATEMENTS:
The following financial statements, including notes thereto and the
independent auditors' report with respect thereto, are filed as part of
this Annual Report on Form 10-K, starting on page 19 hereof:
1. Independent Auditors' Report
2. Consolidated Balance Sheets
3. Consolidated Statements of Income
4. Consolidated Statements of Shareholders' Equity
5. Consolidated Statements of Cash Flows
6. Notes to Consolidated Financial Statements
(a) (2) FINANCIAL STATEMENT SCHEDULES:
The following schedules are filed as part of this Annual Report on Form
10-K, starting on page 38 hereof:
1. Schedule VIII - Valuation and Qualifying Accounts and Reserves
No other schedules have been included because they are not applicable,
not required, or because information is included in the consolidated
financial statements or notes thereto.
(b) REPORTS ON FORM 8-K:
The Registrant has filed no reports on Form 8-K for the fiscal year
ended June 30, 1995.
(c) EXHIBITS:
Number Description Page Number
- - ------ ----------- -----------
3.1 Articles of Incorporation, as currently in effect.
[Previously filed as Exhibit 3.1 to the Annual
Report on Form 10-K for June 24, 1988.]
-------
3.2 Bylaws, as currently in effect. [Previously filed
as Exhibit 3.2 to the Annual Report on Form 10-K
for June 24, 1988.]
-------
10.1 Trio-Tech Stock Option Plan. [Previously filed
as Exhibit 10.1 to the Registration Statement
on Form S-8 (No. 2-87606).]
-------
10.2 Real Estate Lease, dated September 29, 1987,
between Stierlin Industrial Center and Registrant.
[Previously filed as Exhibit 10.5 to the
Registration Statement on Form S-1 (No. 2-87606).]
-------
10.3 Tenancy of Flatted Factory Unit, dated December 2,
1982, between Jurong Town Corporation and
Registrant. [Previously filed as Exhibit 10.8
to the Registration Statement on Form S-1
(No. 2-87606).]
-------
10.4 Tenancy of Flatted Factory Unit, dated September 10,
1982, between Jurong Town Corporation and
Registrant. [Previously filed as Exhibit 10.9
to the Registration Statement on Form S-1
(No. 2-8766).]
-------
Number Description Page Number
- - ------ ----------- -----------
10.5 Real Estate Lease, dated December 15, 1986,
between San Fernando Associates and Registrant.
[Previously filed as Exhibit 10.17 to the Annual
Report on Form 10-K for June 28, 1987.]
-------
10.6 Deferred Compensation Agreement, dated March 1,
1986, between the Company and A. Charles Wilson.
[Previously filed as Exhibit 10.16 to the Annual
Report on Form 10-K for June 24, 1988.]
-------
10.7 Deferred Compensation Agreement, dated March 1,
1986, between the Company and John C. Guy.
[Previously filed as Exhibit 10.17 to the Annual
Report on Form 10-K for June 24, 1988.]
-------
10.9 Credit Facility Letter dated November 2, 1993,
between Trio-Tech International Pte. Ltd. and
Standard Chartered Bank. --------
11.1 Statement re: Computation of Per Share Earnings --------
22.1 Subsidiaries of the Registrant (100% owned by the
Registrant except as otherwise stated):
Trio-Tech International Pte. Ltd., a Singapore
Corporation
Trio-Tech Test Services Pte. Ltd., a Singapore
Corporation
Trio-Tech Reliability Services, a California
Corporation
Express Test Corporation, A California Corporation
European Electronic Test Center, Ltd., A Cayman
Islands Corporation
Trio-Tech Malaysia, a Malaysia Corporation
(55% owned by the Registrant)
Trio-Tech (KL), a Malaysia Corporation
(50% owned by the Registrant)
Trio-Tech Bangkok, a Thailand Corporation
Prestal Enterprise Sdn Bhd, a Malaysia Corporation
(73% owned by the Registrant)
Pursuant to the requirements of Section 13 or 15(d) 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
Date:
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/A. CHARLES WILSON SEPTEMBER 26, 1995
---------------------------
A. Charles Wilson, Director
Chairman of the Board
/s/S.W. YONG SEPTEMBER 26, 1995
---------------------------
S. W. Yong, Director
President and Chief Executive
Officer
/s/VICTOR H.M. TING SEPTEMBER 26, 1995
----------------------------
Victor H.M. Ting
Vice President, Chief Financial Officer
and Principal Accounting Officer
/s/JOHN C. GUY SEPTEMBER 26, 1995
----------------------------
John C. Guy
Director and Secretary
/s/FRANK S. GAVIN SEPTEMBER 26, 1995
-----------------------------
Frank S. Gavin, Director
/s/WILLIAM L. SLOVER SEPTEMBER 26, 1995
-----------------------------
William L. Slover, Director
/s/RICHARD C. HOROWITZ SEPTEMBER 26, 1995
-----------------------------
Richard C. Horowitz, Director
INDEPENDENT AUDITORS' REPORT
Board of Directors
Trio-Tech International
San Fernando, California:
We have audited the accompanying consolidated balance sheets of Trio-Tech
International and subsidiaries as of June 30, 1995 and June 24, 1994, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended June 30, 1995. Our audits also
included the financial statement schedule listed in the Index at Item 14. These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, such consolidated financial statements
present fairly, in all material respects, the financial position of Trio-Tech
International and subsidiaries as of June 30, 1995 and June 24, 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1995 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
/s/Deloitte & Touche LLP
Woodland Hills, California
August 25, 1995
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- - ---------------------------------------------------------------------
June 30, June 24,
ASSETS Notes 1995 1994
- - ------ ------ ---- ----
CURRENT ASSETS:
Cash $ 674,000 $ 521,000
Certificates of deposit 553,000 287,000
Trade accounts receivable, less
allowance for doubtful
accounts of $10,000 in
1995 and $57,000 in 1994 4,140,000 3,272,000
Notes and other receivable 186,000 292,000
Inventories 2 1,192,000 1,065,000
Prepaid expenses and other
current assets 103,000 88,000
-------------- ----------
Total current assets 6,848,000 5,525,000
PROPERTY, EQUIPMENT AND
CAPITALIZED LEASES, net 3 5,265,000 5,187,000
OTHER ASSETS 4 533,000 586,000
-------------- ---------
TOTAL ASSETS $12,646,000 $11,298,000
=========== ===========
(Continued)
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- - ---------------------------------------------------------------------
June 30, June 24,
LIABILITIES AND SHAREHOLDERS' EQUITY Notes 1995 1994
- - ------------------------------------ ----- ---- ----
CURRENT LIABILITIES:
Notes payable 5 $ 219,000 $ 330,000
Accounts payable 1,643,000 1,574,000
Accrued expenses 6 2,246,000 2,015,000
Income taxes payable 8 592,000 493,000
Current portion of long-term debt
and capitalized leases 7,9 459,000 602,000
------------- -----------
Total current liabilities 5,159,000 5,014,000
------------ -----------
LONG-TERM DEBT AND CAPITALIZED
LEASES, net of current portion 7,9 597,000 939,000
-------------- ------------
DEFERRED TAXES 8 870,000 853,000
-------------- ------------
MINORITY INTEREST 1,601,000 866,000
------------- ------------
COMMITMENTS AND CONTINGENCIES 9,15
SHAREHOLDERS' EQUITY: 10,11,12
Common stock; authorized,
2,500,000 shares; issued and
outstanding, 1,181,002 shares
(1995) and 1,151,562 shares
(1994) stated at 4,822,000 4,753,000
Accumulated deficit (2,142,000) (2,712,000)
Cumulative currency translation 1,739,000 1,585,000
------------- -----------
Total shareholders' equity 4,419,000 3,626,000
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $12,646,000 $11,298,000
=========== ===========
(Concluded)
See notes to consolidated financial statements.
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- - ---------------------------------------------------------------------
Year Ended
----------------------------------
June 30, June 24, June 25,
Notes 1995 1994 1993
------ --------- -------- ---------
NET SALES $19,488,000 $15,165,000 $15,722,000
COST OF SALES 12,744,000 9,961,000 10,634,000
----------- ------------- ------------
GROSS PROFIT 6,744,000 5,204,000 5,088,000
OPERATING EXPENSES:
General and
administrative 3,674,000 2,806,000 2,959,000
Selling 1,523,000 1,194,000 1,200,000
------------ ------------ ----------
Total 5,197,000 4,000,000 4,159,000
------------ ---------- -----------
INCOME FROM OPERATIONS 1,547,000 1,204,000 929,000
OTHER INCOME (EXPENSES):
Interest expense 5,7 (183,000) (514,000) (506,000)
Write-off of investment (109,000)
Other income (expenses) 320,000 36,000 146,000
------------- ---------- ----------
Total 137,000 (587,000) (360,000)
------------- ----------- -----------
INCOME BEFORE
INCOME TAXES,
EXTRAORDINARY ITEM AND
MINORITY INTEREST 1,684,000 617,000 569,000
INCOME TAXES 8 443,000 236,000 368,000
-------------- ------------ --------
INCOME BEFORE
EXTRAORDINARY ITEM AND
MINORITY INTEREST 1,241,000 381,000 201,000
EXTRAORDINARY ITEM 13 1,751,000
------------ ------------- --------
INCOME BEFORE
MINORITY INTEREST 1,241,000 2,132,000 201,000
MINORITY INTEREST (671,000) (92,000) (98,000)
---------------- ------------ -----------
NET INCOME $ 570,000 $ 2,040,000 $ 103,000
================= ============ ===========
(Continued)
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- - -----------------------------------------------------------------
Year Ended
--------------------------------
June 30, June 24, June 25,
Notes 1995 1994 1993
----- ------- -------- --------
INCOME PER SHARE:
PRIMARY:
INCOME BEFORE
EXTRAORDINARY ITEM* $ .42 $ .28 $ .13
EXTRAORDINARY ITEM 1.72
----- ------ ------
NET INCOME PER SHARE $ .42 $2.00 $ .13
======= ====== ======
FULLY DILUTED:
INCOME BEFORE
EXTRAORDINARY ITEM* $ .38 $ .28 $ .13
EXTRAORDINARY ITEM 1.72
------ ------- ------
NET INCOME PER SHARE $ .38 2.00 $ .13
====== ====== ======
WEIGHTED AVERAGE NUMBER
OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
PRIMARY 1,370,000 1,017,000 809,000
FULLY DILUTED 1,511,000 1,017,000 809,000
* Net of applicable minority interest.
See notes to consolidated financial statements.
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
- - -------------------------------------------------------------------------------
Common Stock Cumulative
Number Accumulated Currency
Shares Amount Defecit Translation Total
---------- --------- ----------- ------------ --------
BALANCE,
JUNE 26, 1992 808,150 $3,959,000 $ (4,855,000) $ 1,481,000 $ 585,000
Net Income 103,000 103,000
Exercise of stock
options(Note 10) 1,444 3,000 3,000
Foreign Currency
translation
adjustment (159,000) (159,000)
---------- ---------- ------------ ------------ ---------
BALANCE,
JUNE 25, 1993 809,594 3,962,000 (4,752,000) 1,322,000 532,000
Net Income 2,040,000 2,040,000
Issuance of Common
Stock(Notes 11&12) 328,718 760,000 760,000
Exercise of stock
options(Note 10) 13,250 31,000 31,000
Foreign Currency translation
adjustment 263,000 263,000
---------- ---------- ------------ ------------ ---------
BALANCE,
JUNE 25, 1994 1,151,562 4,753,000 (2,712,000) 1,585,000 3,626,000
Net Income 570,000 570,000
Issuance of Common
Stock 2,065 7,000 7,000
Exercise of stock
options(Note 10) 27,375 62,000 62,000
Foreign Currency
translation
adjustment 154,000 154,000
---------- ---------- ------------ ------------ ---------
BALANCE,
JUNE 30, 1995 1,181,002 $4,822,000 $ (2,142,000) $1,739,000 $4,419,000
========== ========== ============ ========= ==========
See notes to consolidated financial statements.
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
---------------------------------------
June 30, June 24, June 25,
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 570,000 $ 2,040,000 $ 103,000
Adjustments to reconcile net loss to
cash provided by operations:
Depreciation and amoritization 1,644,000 1,601,000 1,118,000
(Gain)/loss on sale of property and
equipment 2,000 (21,000)
Extraordinary income on
extinguishment of debt (1,751,000)
Effect of exchange rate changes on
operating assets 148,000 229,000 (118,000)
Changes in assets and liabilities:
Accounts receivable: net (868,000) (152,000) 235,000
Notes and other receivables 106,000 (113,000) (9,000)
Inventories (127,000) (52,000) 470,000
Prepaid expenses and other
current assets (15,000) (19,000) 56,000
Other assets (23,000) 3,000 73,000
Accounts payable and accrued
expenses 399,000 (207,000) 202,000
Deferred taxes 17,000 12,000 75,000
---------- ------------ -----------
Total adjustments 1,283,000 (470,000) 2,214,000
---------- ------------ -----------
Net cash provided by
operatating activities 1,853,000 1,570,000 2,317,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Certificates of deposit (266,000) 653,000 (414,000)
Capital expenditures, net (1,394,000) (1,006,000) (1,319,000)
Minority interest 696,000 132,000 (65,000)
Proceeds from sale of property
and equipment 218,000 338,000
Purchase of investment (100,000)
---------- ------------ ----------
Net cash provided by (used in)
investing activities (746,000) 17,000 (1,798,000)
(Continued)
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
---------------------------------------
June 30, June 24, June 25,
1995 1994 1993
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and li$e (111,000) $ (2,092,000) $ (724,000)
Borrowings under notes payable 46,000 169,000
Principal payments of long-term
obligations and capitalized leases (508,000) (743,000) (555,000)
Proceeds from long-term obligations
and capitalized leases 23,000
Issuance of common stock 69,000 643,000 3,000
------------- ------------ -----------
Net cash used in financing
activities (527,000) (1,582,000) (167,000)
------------- ------------ -----------
EFFECT OF EXCHANGE RATE ON CASH (427,000) (99,000)
------------- ------------ -----------
NET INCREASE/(DECREASE) IN CASH 153,000 (94,000) 352,000
CASH, BEGINNING OF PERIOD 521,000 615,000 263,000
------------- ----------- -----------
CASH, END OF PERIOD $ 674,000 $ 521,000 $ 615,000
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid during the period for:
Interest $ 162,000 $ 300,000 $ 535,000
Income taxes $ 440,000 $ 181,000 $ 66,000
SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTIONS :
In October 1993, the Company acquired a 73% equity interest in
Prestal Enterprise Sdn Bhd in exchange for
73,873 shares of common stock of the Company totaling $148,000.
Assets acquired $ 61,000
Liabilities Assumed (1,000)
Cost in excess of net
assets acquired 88,000
----------
$ 148,000
(Concluded)
[FN]
See notes to consolidated financial statements.
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995, JUNE 24, 1994 AND JUNE 25, 1993
- - ---------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - Trio-Tech International (the "Company" or
"TTI") is a designer and manufacturer of equipment used to test the
structural integrity of semiconductor devices that must meet
high-reliability specifications. The Company also owns and operates testing
facilities that perform structural and electronic testing of semiconductor
devices and acts as a distributor of electronic testing equipment in
Singapore and other Southeast Asian countries. The consolidated financial
statements include the accounts of the Company and its principal
subsidiaries: Trio-Tech International Pte Ltd (TTI Pte), Trio-Tech Test
Services Pte Ltd (TTTS Pte), Express Test, European Electronic Test Centre
(EETC), Trio-Tech Bangkok (TTBkk), Trio-Tech Malaysia (TTM) (a 55%-owned
joint venture of Trio-Tech International Pte. Ltd) and Prestal Enterprise
Sdn Bhd (PESB) (a 73% owned subsidiary of Trio-Tech International Pte Ltd).
In 1994, the Company entered into a joint venture in the Peoples Republic of
China. The amount of this investment was minimal at June 30, 1995. All
material intercompany transactions, profits and balances have been
eliminated.
Accounting Period - The Company's fiscal reporting period coincides with
the 52-53 week period ending on the last Friday in June.
Inventories - Inventories are stated at the lower of cost, using the
first-in, first-out (FIFO) method, or market.
Property, Equipment and Capitalized Leases - Property, equipment and
capitalized leases are stated at cost, less accumulated depreciation and
amortization. Depreciation and amortization are provided over the estimated
useful lives of the assets or the terms of the leases, whichever is shorter,
using the straight-line method. Estimated useful lives range from 3 to 45
years. Capital grants from the Industrial Development Authority in Ireland
are accounted for when claimed by reducing the cost of the related assets.
The grants are amortized over the depreciable lives of those assets.
Foreign Currency Translation - All assets and liabilities of operations
outside the United States have been translated at the foreign exchange rates
in effect at year-end. Revenues and expenses for the year are translated at
average exchange rates in effect during the year. Unrealized translation
gains and losses are not included in determining net income but are
accumulated and reported as a separate component of shareholders' equity.
Net realized gains and losses resulting from foreign currency transactions
are credited or charged to income.
Other Assets - The excess of cost over net assets acquired is included in
other assets and is being amortized over 5-10 years. The Company reviews
the carrying value of all intangible assets on a regular basis, and if
future cash flows are believed insufficient to recover the remaining
carrying value of an intangible asset, the carrying value is written down in
the period the impairment is identified to its future recoverable value.
Taxes on Income - The Company accounts for its income taxes in accordance
with Statement of Financial Accounting Standards No. 109, " Accounting for
Income Taxes." This Statement requires an asset and liability approach to
financial accounting and reporting for income taxes. Deferred taxes and
liabilities are computed annually for differences between the financial
statement basis and tax basis of assets and liabilities that will result in
taxable or deductible amounts in the future. Such deferred income tax asset
and liability computations are based on enacted tax laws and rates
applicable to periods in which the differences are
expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized.
Research and Development Costs -The Company incurred research and
development costs of $51,000 in 1995, $71,000 in 1994 and $9,000 in 1993,
which were charged to cost of sales as incurred.
Income per Share - Income per share is based upon the weighted average
number of shares outstanding and common stock equivalents (consisting of
stock options), excluding those common stock equivalents which would be
anti-dilutive.
Reclassification - Certain reclassifications have been made to the previous
year's financial statements to conform to current year presentation.
2. INVENTORIES
Inventories consist of the following:
June 30, June 24,
1995 1994
------- --------
Raw materials $ 559,000 $ 541,000
Work in progress 403,000 402,000
Finished goods 230,000 122,000
---------- ----------
$1,192,000 $1,065,000
========== ==========
Included in the inventory balance as of June 30, 1995 and June 24, 1994 are
amounts totaling approximately $137,000 and $116,000, respectively, which
are not expected to be sold within one year.
3. PROPERTY, EQUIPMENT AND CAPITALIZED LEASES
Property, equipment and capitalized leases consist of the following:
June 30, June 24,
1995 1994
------ --------
Building and improvements $ 2,329,000 $ 1,824,000
Leasehold improvements 982,000 797,000
Machinery and equipment 11,122,000 9,578,000
Furniture and fixtures 1,673,000 1,526,000
Equipment under capital leases 1,227,000 1,111,000
------------ -----------
17,333,000 14,836,000
Less:
Accumulated depreciation and
amortization 11,002,000 8,759,000
Accumulated amortization on
equipment under capital leases 1,066,000 890,000
------------ ---------
$ 5,265,000 $ 5,187,000
=========== ===========
4. OTHER ASSETS
Other assets consist of the following:
June 30, June 24,
1995 1994
------- --------
Cost in excess of net assets
acquired, net of accumulated
amortization of $340,000 (1995)
and $264,000 (1994) $301,000 $367,000
Other 232,000 219,000
--------- ---------
Total $533,000 $586,000
======== ========
5. NOTES PAYABLE
The Company's subsidiary, TTI Pte, has a secured credit agreement with a
bank which provides for a total line of credit of $655,000. The agreement
contains certain debt covenants including maintaining a minimum net worth of
$2,400,000 at TTI Pte. Borrowings under the line were $219,000 and $294,000
at the end of fiscal 1995 and 1994, respectively. The interest rate on
borrowings is at the bank's prime rate (7% at June 30, 1995) plus 3%.
Borrowings under this agreement are collateralized by substantially all of
TTI Pte's assets.
The Company's subsidiary, TTM, has a secured credit agreement with a bank
which provides for a total line of credit of $234,000. At June 30, 1995,
there were no borrowings outstanding. The line of credit bears interest at
the bank's reference rate plus 2%.
Included in Notes Payable are past due shareholder notes owed to the former
owners of Express Test of $36,000 at the end of fiscal 1994. The notes were
fully repaid in fiscal 1995.
6. ACCRUED EXPENSES
Accrued expenses consist of the following:
June 30, June 24,
1995 1994
-------- --------
Payroll and related $1,486,000 $1,113,000
Other 760,000 902,000
---------- ----------
Total $2,246,000 $2,015,000
========== ==========
7. LONG-TERM DEBT AND CAPITALIZED LEASES
Long-term debt and capitalized leases consist of the following:
June 30, June 24,
1995 1994
---- ----
Capitalized lease obligations, due in
various installments through 1997, bearing
interest at approximately 8.25%,
collateralized by leased assets (see Note 9) $ 56,000 $ 105,000
Term notes payable, due in monthly
installments through 2000, bearing
interest at 3% above bank reference
rate (7% at June 30, 1995), collateralized
by substantially all of TTI Pte's assets 378,000 564,000
Term notes payable, due in monthly
installments through 1996, bearing
interest at 5.53%. 267,000 308,000
Term loan, due in quarterly installments
through 1995, bearing interest at 11%. 143,000
Mortgage loan, due in monthly
installments through 1997, bearing interest
at 1.5% above bank reference rate (13% at
June 30, 1995), collateralized by land and building
in TTBkk. 315,000 381,000
Note payable to officer and share-
holder, bearing interest
at 10%, due January 1, 1996, unsecured. 40,000 40,000
------------- --------
1,056,000 1,541,000
Less current portion 459,000 602,000
------------ ----------
$ 597,000 $ 939,000
=========== ==========
Maturities of long-term debt as of June 30, 1995 are as follows (exclusive
of capital lease obligations):
Fiscal
Year
----
1996 $ 453,000
1997 325,000
1998 193,000
1999 29,000
------
$1,000,000
==========
8. TAXES ON INCOME
The provision for income taxes consists of the following:
Year Ended
-----------------------------
June 30,June 24, June 25,
1995 1994 1993
---- ---- ----
Current:
Domestic $ 3,000 $ 3,000 $ -
Foreign 457,000 245,000 293,000
---------- --------- ---------
460,000 248,000 293,000
---------- --------- ---------
Deferred:
Domestic
Foreign (17,000) (12,000) 75,000
----------- ---------- ----------
$ 443,000 $236,000 $368,000
========= ======== ========
The pre-tax income (before extraordinary item and minority interest) related
to domestic and foreign operations is as follows:
Year Ended
------------------------------------
June 30, June 24, June 25,
1995 1994 1993
---- ---- ----
Domestic $ 320,000 $220,000 $(83,000)
Foreign 1,364,000 397,000 652,000
----------- ---------- ---------
$1,684,000 $617,000 $569,000
========== ======== ========
The reconciliation between the U.S. federal statutory tax rate and the effective
income tax rate is as follows:
Year Ended
---------------------------
June 30, June 24, June 25,
1995 1994 1993
---- ---- ----
Statutory federal tax rate 35% 35% 34%
Foreign income taxed at lower rates 27% 27% 27%
Unbenefitted losses 4%
Utilization of federal net operating
loss carryforwards (35%) (24%)
Other (1%)
---- --------- --------
Effective rate 26% 38% 65%
=== ==== ===
The Company files income tax returns in several countries. Income in one
country is not offset by losses inanother country. Accordingly, no benefit is
provided for losses in countries except where the loss can be carried back
against income recognized in previous years. Income taxes are provided in
those countries where income is earned. The effect of providing tax against
profits while not providing benefit for losses results in an effective tax
rate which differs from the federal statutory rate.
Deferred income taxes arise from temporary differences in the recognition of
certain revenues and expenses for tax and financial statement purposes. The
components of deferred tax assets (liabilities) are as follows:
June 30, June 24,
1995 1994
-------- --------
Deferred tax assets:
Net operating loss carry forward $1,109,000 $1,138,000
Accrued vacations 36,000 28,000
Reserve for obsolescence 131,000 141,000
Other 4,000 4,000
---------- -----------
Total deferred tax assets 1,280,000 1,311,000
--------- ---------
Deferred tax liabilities:
Depreciation (774,000) (866,000)
Other (123,000) (19,000)
------------ ------------
Total tax liabilities (897,000) (885,000)
------------- ------------
Subtotal 383,000 426,000
Valuation allowance (1,253,000) (1,279,000)
----------- -----------
Net deferred tax liability $(870,000) $(853,000)
========== =========
At June 30, 1995, the Company has net operating loss carryforwards of
approximately $3,262,000 available to offset future U.S. federal taxes,
which primarily expire between 2005 and 2008.
9. COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities and equipment under long-term
agreements expiring at various dates through 2030. Certain of these leases
require the Company to pay real estate taxes and insurance and provide for
escalation of lease costs based on certain indices. Future minimum payments
under capital leases and noncancellable operating leases as of June 30, 1995
are as follows:
Operating Leases
----------------------
Capital Rental Sublease Net Rental
Fiscal Year Leases Commitment Income Commitment
----------- ------ ---------- -------- ----------
1996 $ 47,000 $ 540,000 $364,000 $ 176,000
1997 12,000 253,000 151,000 102,000
1998 86,000 86,000
1999 58,000 58,000
2000 58,000 58,000
Thereafter 1,774,000 1,774,000
-------- ---------- --------- ----------
Total minimum
lease payments 59,000 $2,769,000 $515,000 $2,254,000
========== ======== ==========
Less amount
representing
interest (3,000)
----------
Capital lease
obligations $56,000
=======
Total rental expense on all operating leases, both cancelable and
noncancelable, amounted to $461,000 in 1995, $433,000 in 1994 and $369,000
in 1993. Total rental income under sublease was $124,000 in 1995, $121,000
in 1994 and $182,000 in 1993.
10. SHAREHOLDERS' EQUITY
The Company has a qualified stock option plan (the Plan) under which
officers, directors and employees are
eligible to receive options to purchase shares of the Company's common stock
at a price that is not less than 100 percent of the fair market value at the
date of grant. There are 125,000 shares authorized for grant under the
Plan. Additionally, the Board of Directors issues non-qualified options at
their discretion at a price not less than fair market value at the date of
grant. There are 125,000 shares authorized for grant under the non-
qualified plan. The following table summarizes the stock option activity
for the three years ended June 30, 1995:
Number of Shares Option Price
---------------- ------------
Non-qualified Qualified
------------- ---------
Balance, June 26, 1992 55,000 123,488 $ 2.28 to $3.00
Options granted 15,750 $ 2.28 to $2.44
Options exercised (1,444) $ 2.28
Options expired (27,775) $ 2.28
----------- -------
Balance, June 25, 1993 55,000 110,019 $ 2.28 to $3.00
Options granted 63,000 3,250 $ 2.28 to $2.40
Options exercised (13,250) $ 2.28 to $2.44
Options expired (3,856) $ 2.28 to $2.44
------------ -------
Balance, June 24, 1994 118,000 96,163 $ 2.28 to $3.00
Options granted 16,000 $ 3.25
Options exercised (15,000) (12,375) $ 2.28
Options expired (750) (1,900) $ 2.28
---------- -------
Balance, June 30, 1995 118,250 81,888 $ 2.28 to $3.25
======= ======
Shares exercisable 81,315 77,498
====== ======
11. COMMON STOCK
In December 1993, the Board of Directors approved the private placement of
up to 312,500 shares of restricted common stock. The common stock was
offered to qualified investors (up to 187,500 shares) as well as certain
employees and management of the Company (up to 125,000 shares) at a price of
$2.40 per share. The price represents the fair market value of the stock on
that date. The investors are restricted from selling their shares of
common stock for two years from the date of purchase. In connection with
the private placement, 254,845 shares of common stock were issued raising
$612,000 in capital.
In October 1994, the Board of Directors approved a one-for-four reverse
stock split (the "Reverse Split"). Common stock and stock options have been
retroactively adjusted for the split.
12.RELATED PARTY TRANSACTION
In October 1993, the Company purchased a 73% equity interest in Prestal
Enterprise Sdn Bhd from an Officer and Director of the Company in exchange
for 73,873 shares of common stock of the Company valued at $148,000.
13.EXTRAORDINARY ITEM
In December 1993, the Company entered into a settlement arrangement with a
bank whereby $3,612,000 of debt and accrued interest was satisfied in
exchange for a cash payment of $1,800,000. This transaction resulted in a
gain of $1,751,000 (net of applicable taxes of $61,000) on extinguishment of
debt which is reflected as extraordinary income in fiscal 1994.
14. BUSINESS SEGMENTS
The Company operates principally in three industry segments, the designing
and manufacturing of equipment that tests the structural integrity of
integrated circuits and other products which measure the rate of turn, the
testing service industry that performs structural and electronic tests of
semiconductor devices and the distribution of various products from other
manufacturers in Singapore and Southeast Asia.
The allocation of the cost of equipment, the current year investment in new
equipment and depreciation expense have been made on the basis of the
primary purpose for which the equipment was acquired.
The Company's wholly owned subsidiary, TTI Pte. in Singapore (including TTI
Pte.'s wholly owned subsidiaries TTTS Pte and TTBk, 55% owned joint venture
of Trio-Tech Malaysia, another subsidiary wholly owned by Trio-Tech Malaysia
and 73% owned PESB), operates in the manufacturing, the testing service and
the distribution industry segments.
All intersegment sales are sales from the manufacturing segment to the
testing and distribution segment. Corporate assets mainly consist of cash
and prepaid expenses. Corporate expenses mainly consist of salaries,
insurance, professional expenses and directors' fees.
1995 1994 1993
---- ---- ----
Revenues:
Manufacturing $ 7,202,000 $ 5,127,000 $ 5,845,000
Testing 8,825,000 7,050,000 8,238,000
Distribution 4,879,000 3,948,000 2,318,000
Less intersegment
sales (1,418,000) (960,000) (679,000)
------------ -------- ---------
Total revenues $19,488,000 $15,165,000 $15,722,000
=========== =========== ===========
Operating profit:
Manufacturing $ 35,000 $ 159,000 $ (382,000)
Testing 1,476,000 859,000 687,000
Distribution (86,000) (142,000) 198,000
--------- --------- ---------
Total operating
profit 1,425,000 876,000 503,000
Corporate income (expenses) 22,000 328,000 426,000
---------- ------------ ------------
Total operating profit $ 1,547,000 $ 1,204,000 $ 929,000
============ =========== ===========
Depreciation and
amortization:
Manufacturing $ 194,000 $ 200,000 $ 213,000
Testing 1,417,000 1,350,000 820,000
Distribution 33,000 51,000 85,000
------------ ----------- -----------
Total depreciation
and amortization $ 1,644,000 $ 1,601,000 $ 1,118,000
============ ============ ===========
1995 1994 1993
---- ---- ----
Capital expenditures:
Manufacturing $ 648,000 $ 106,000 $ 266,000
Testing 745,000 880,000 1,312,000
Distribution 1,000 20,000 55,000
------------ ----------- ----------
Total capital
expenditures $ 1,394,000 $ 1,006,000 $1,633,000
============ =========== ===========
Identifiable assets:
Manufacturing $ 3,648,000 $ 3,150,000 $ 3,571,000
Testing 7,649,000 6,893,000 7,351,000
Distribution 1,309,000 1,175,000 1,255,000
Corporate 40,000 80,000 66,000
----------- ----------- -----------
Total assets $12,646,000 $11,298,000 $12,243,000
=========== =========== ===========
Revenues:
United States $ 3,879,000 $ 2,795,000 $ 3,515,000
Southeast Asia 15,714,000 12,445,000 12,052,000
Ireland 1,313,000 885,000 834,000
Less sales between
geographic areas (1,418,000) (960,000) (679,000)
----------- ----------- -----------
$19,488,000 $15,165,000 $15,722,000
=========== =========== ===========
Operating (loss) profit:
United States $ 151,000 $ (110,000) $ (380,000)
Southeast Asia 1,276,000 1,059,000 982,000
Ireland (2,000) (73,000) (99,000)
----------- ----------- -----------
Total operating profit 1,425,000 876,000 503,000
Corporate income (expenses) 122,000 328,000 426,000
------- ------------ ------------
Total operating profit$ 1,547,000 $ 1,204,000 $ 929,000
============ ============ ============
Assets:
United States $ 1,468,000 $ 1,404,000 $ 1,562,000
Southeast Asia 10,368,000 9,301,000 9,934,000
Ireland 810,000 593,000 747,000
------------ ----------- ------------
$12,646,000 $11,298,000 $12,243,000
=========== =========== ===========
The Company exports a portion of its equipment. Export sales by geographic
area are as follows:
Year Ended
-----------------------------------
June 30, June 24, June 25,
1995 1994 1993
---- ------- --------
Southeast Asia $ 976,000 $ 501,000 $ 991,000
Europe 595,000 227,000 60,000
All others 153,000 513,000 160,000
------------ ------------ ------------
$1,724,000 $1,241,000 $1,211,000
========== ========== ==========
The Company had two major customers which accounted for 15% and 12% of the
Company's sales during fiscal year 1995. A single customer accounted for 16%
of sales during fiscal year 1994. Two customers accounted for 15% and 13%
of sales during fiscal 1993. The Company has no significant concentration
of credit risks other than discussed above.
15. SUBSEQUENT EVENTS
On August 24, 1995, the Company was named in a civil action brought against
106 defendants alleging that they may have caused or contributed to soil and
groundwater contamination that required the plaintiff to pay $3,750,000 to
the Federal Environmental Protection Agency to settle. The Company has not
yet had the opportunity to investigate the allegations. In the opinion of
management, based on its present information, this matter should not have a
material impact on the Company's consolidated financial position or results
of operations.
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
SCHEDULE VIII VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- - -----------------------------------------------------------------------
Allowance
for Reserve
Doubtful for
Accounts Inventory
Balance at June 26,1992 85,000 363,000
Additions charged to cost and expense 41,000 114,000
Write offs (60,000) (56,000)
Balance at June 25, 1993 66,000 421,000
Additions charged to cost and expenses 6,000 121,000
Write offs (15,000) (97,000)
Balance at June 24, 1994 57,000 445,000
Additions charged to cost and expenses 4,000 11,000
Recoveries (11,000) (22,000)
Write-offs (40,000) (6,000)
Balance at June 30, 1995 $ 10,000 $428,000
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
YEAR ENDED
JUNE 30, JUNE 24, JUNE 25,
1995 1994 1993
Income (loss) before
extraordinary item (2) $ 570,000 $ 289,000 $ 103,000
Extraordinary item 1,751,000
Net income (loss) (2) $ 570,000 $2,040,000 $ 103,000
Primary earnings per share:
Weighted average number
of common shares outstanding 1,162,000 1,009,000 809,000
Dilutive effect of stock options
and warrants after application
of treasury stock method 208,000 8,000 (1)
Number of shares used to compute
primary earnings per share 1,370,000 1,017,000 809,000
Primary earnings per share:
Income before extraordinary item $0.42 $0.28 $0.13
Extraordinary item 1.72
Net income per share $0.42 $2.00 $0.13
Fully diluted earnings per share:
Weighted average number
of common shares outstanding 1,162,000 1,009,000 809,000
Dilutive effect of stock options
and warrants after application
of treasury stock method 349,000 8,000 (1)
Number of shares used to compute
fully diluted earnings per share 1,511,000 1,017,000 809,000
Fully diluted earnings per share:
Income before extraordinary item $0.38 $0.28 $0.13
Extraordinary item 1.72
Net income per share $0.38 $2.00 $0.13
(1) The earnings per share calculations were made without considering the
effects of the exercise of outstanding stock options,as they are antidilutive.
(2) Net of applicable minority interest.