---




UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





---




FORM 10-Q





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





For the Quarterly Period Ended March 31, 2002





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 (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  ̈





Number of shares of common stock outstanding as of May 1, 2002 is 2,927,596





---



---

TRIO-TECH INTERNATIONAL


INDEX TO CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION AND
SIGNATURE


---




PagePart I.    Financial InformationItem 1.

Condensed Consolidated Financial StatementsCondensed Consolidated Balance Sheets as of Mar. 31, 2002 and June 30, 2001 (Unaudited)

3Condensed Consolidated Statements of Operations for the Three and Nine Months EndedMar. 31, 2002 and Mar. 31, 2001(Unaudited)

4Condensed Consolidated Statements of Cash Flows for the Nine Months Ended Mar. 31, 2002 and Mar. 31, 2001(Unaudited)

5Notes to Condensed Consolidated Financial Statements (Unaudited)

7Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

13Item 3.

Quantitative and Qualitative Disclosures about Market Risk

18Part II.    Other Information

18Item 1.

Legal Proceedings

18Item 2.

Changes in Securities and Use of Proceeds

18Item 3.

Defaults upon Senior Securities

18Item 4.

Submission of Matters to a Vote of Security Holders

18Item 5.

Other Information

18Item 6.

Exhibits and Reports on Form 8-K

18Signatures

19




2




---

TRIOTECH INTERNATIONAL AND SUBSIDIARIES


ITEM 1.    CONSOLIDATED
FINANCIAL STATEMENTS


CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AMOUNTS)


---




Mar. 31, 2002


June 30, 2001 (a)ASSETSCURRENT ASSETS:Cash

$
761


$
1,149Cash deposits


6,180



7,693Short term investments


569



418Trade accounts receivable, less allowance for doubtful accounts of $165 at Mar.31, 2002 and $174 at June 30, 2001



4,086



4,432Other receivables


285



162Inventories


1,911



1,918Prepaid expenses and other current assets


214



147Total current assets


14,006



15,919PROPERTY, PLANT AND EQUIPMENT, Net


6,590



7,534OTHER ASSETS, Net


182



697TOTAL ASSETS

$
20,778


$
24,150LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Lines of credit

$
836


$
Accounts payable


1,835



2,646Accrued expenses


2,464



3,689Income taxes payable


111



168Current portion of long-term debt and capitalized leases


1,043



1,096Total current liabilities


6,289



7,599LONG-TERM DEBT AND CAPITALIZED LEASES, net of current portion


1,247



1,745DEFERRED INCOME TAXES


642



649MINORITY INTEREST


2,485



2,548COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITY:Common stock; no par value, authorized, 15,000,000 shares; issued and outstanding 2,927,596 shares at Mar. 31, 2002 and June. 30,
2001 respectively


9,423



9,423Retained earnings


1,385



2,889Accumulated other comprehensive loss


(693
)


(703
)Total shareholders equity


10,115



11,609TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

$
20,778


$
24,150





|(a) |  | Derived from audited consolidated financial statements included in the Form 10K for the fiscal year ended June 30, 2001
|--- |  | -----------------------------------------------------------------------------------------------------------------------




See notes to condensed consolidated financial statements.




3




---

TRIOTECH INTERNATIONAL AND SUBSIDIARIES


ITEM 1.    CONSOLIDATED
FINANCIAL STATEMENTS


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


---




Nine Months Ended


Three Months EndedMar. 31, 2002


Mar. 31, 2001


Mar. 31, 2002


Mar. 31, 2001NET SALES

$
14,605


$
29,070


$
4,657


$
7,877COST OF SALES


11,361



21,671



3,603



6,159GROSS PROFIT


3,244



7,399



1,054



1,718OPERATING EXPENSES:General and administrative


3,250



4,545



1,009



1,367Selling


906



1,584



308



245Research and development


259



167



93



62Impairment loss(Note 1)


542











Total


4,957



6,296



1,410



1,674(LOSS) INCOME FROM OPERATIONS


(1,713
)


1,103



(356
)


44OTHER INCOME (EXPENSE)Interest expense


(159
)


(253
)


(55
)


(67
)Other income


379



415



95



103Total


220



162



40



36(LOSS) INCOME BEFORE INCOME TAXES AND MINORITY INTEREST


(1,493
)


1,265



(316
)


80INCOME TAXES


(68
)


(244
)






35(LOSS) INCOME BEFORE MINORITY INTEREST


(1,561
)


1,021



(316
)


115MINORITY INTEREST


57



(86
)


4



(2
)NET (LOSS) INCOME


(1,504
)


935



(312
)


113OTHER COMPREHENSIVE (LOSS) INCOME:Foreign currency translation adjustment


10



(364
)


30



(150
)COMPREHENSIVE (LOSS) INCOME

$
(1,494
)

$
571


$
(282
)

$
(37
)(LOSS) EARNINGS PER SHARE:Basic

$
(0.51
)

$
0.32


$
(0.11
)

$
0.04Diluted

$
(0.51
)

$
0.32


$
(0.11
)

$
0.04WEIGHTED AVERAGE NUMBER OF COMMON AND POTENTIAL COMMON SHARES OUTSTANDINGBasic


2,928



2,886



2,928



2,922Diluted


2,928



2,952



2,928



2,928





See notes to condensed consolidated financial statements.




4




---

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES


ITEM 1.    CONSOLIDATED
FINANCIAL STATEMENTS


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)


---




Nine Months EndedMar. 31, 2002


Mar. 31, 2001CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income

$
(1,504
)

$
935Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:Depreciation and amortization


1,283



1,201Impairment loss


542Gain on sale of property and equipment


(14
)


(5
)Deferred income taxes


7



(30
)Minority interest, net


(63
)


(8
)Changes in operating assets and liabilities:Accounts receivable, net


346



796Other receivables


(123
)


106Inventories


7



301Prepaid expenses and other current assets


(67
)


95Accounts payable and accrued expenses


(2,036
)


(964
)Income taxes payable


(57
)


345Net cash (used in) provided by operating activities


(1,679
)


2,772CASH FLOWS FROM INVESTING ACTIVITIES:Cash deposits


1,513



(1,028
)Capital expenditures


(374
)


(4,449
)Short term investments


(150
)


Other assets


(27
)


39Proceeds from sale of property and equipment


47



32Net cash provided by (used in) investing activities


1,009



(5,406
)CASH FLOWS FROM FINANCING ACTIVITIES:Payments on lines of credit


(553
)


(443
)Borrowings under lines of credit


1,389



344Principal payments of debt and capitalized leases


(551
)


(466
)Proceeds from long-term debt






2,627Issuance of common stock






356Net cash provided by financing activities


285



2,418EFFECT OF EXCHANGE RATE CHANGES ON CASH


(3
)


(118
)NET DECREASE IN CASH


(388
)


(334
)CASH, BEGINNING OF PERIOD


1,149



1,956CASH, END OF PERIOD

$
761


$
1,622SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid during the period for:Interest

$
159


$
158Income taxes

$
125


$
158





Continued





See notes to condensed consolidated financial statements.




5




---

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES


ITEM 1.    CONSOLIDATED
FINANCIAL STATEMENTS


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)


---




NON-CASH INVESTING AND FINANCING ACTIVITIES





During the nine months ended March 31, 2002, the Company financed acquisitions of equipment amounting to $278 under capital lease arrangements and $36 under notes payable.





Concluded





See notes to condensed consolidated financial statements.




6




---

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES


ITEM 1.    CONSOLIDATED
FINANCIAL STATEMENTS


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)


---




NOTE 1.    Basis of Presentation





The interim condensed consolidated
financial statements as of March 31, 2002 and for the nine-months ended March 31, 2002 and 2001, respectively, are unaudited. In managements opinion, the unaudited consolidated financial statements reflect all adjustments necessary, consisting
of normal recurring accruals, for a fair statement of the results for the interim periods presented.





The interim condensed
consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Companys Annual Report for fiscal year ended June 30, 2001.





The consolidated results of operations for the three and nine-month periods ending March 31, 2002 are not necessarily indicative of the results expected
for a full year.





Recently Issued Accounting Pronouncements  In July 2001, the Financial Standards Board
issued Statement of Financial Accounting Standards (SFAS), No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 replaces Accounting Principles Board Opinion No.16,
Business Combination, and eliminates pooling-of-interests accounting prospectively. It also provides guidance on purchase accounting related to the recognition of intangible assets and accounting for negative goodwill. SFAS No.142
changes the accounting for goodwill from an amortization method to an impairment-only approach. Under SFAS No. 142, goodwill will be tested annually and whenever events or circumstances occur indicating that goodwill might be impaired. Upon adoption
of SFAS No. 142, amortization of goodwill recorded for business combinations consummated prior to July 1, 2001 will cease, and intangible assets acquired prior to July 1, 2001 that do not meet the criteria for recognition under SFAS No. 141 will be
reclassified to goodwill. Companies are required to adopt SFAS No. 142 for fiscal years beginning after December 15, 2001. In connection with the adoption of SFAS No. 142, companies will be required to perform a transitional goodwill impairment
assessment. The Company has not yet determined the effects, if any, that SFAS No. 142 will have on its consolidated financial position and results of operations.





SFAS No. 144, Impairment or Disposal of Long-Lived Assets, will become effective for the Company on July 1, 2002. SFAS No. 144 addresses financial accounting and reporting
for the impairment or disposal of long-lived assets and provides guidance on implementation issues related to SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and addresses the
accounting for the segment of a business accounted for as a discontinued operation. The Company is currently assessing the impact of the adoption of this statement on its financial position and results of the operations.





Write-Down of Long-Lived Assets





The Company periodically assesses the impairment of long-lived assets, including identifiable intangibles in accordance with the provisions of SFAS No. 121. The Company also periodically assesses the impairment of enterprise level goodwill
in accordance with the provisions of APB Opinion No. 17, Intangible Assets. As part of its review of its second quarter financial results, the Company performed an impairment assessment of goodwill, other identifiable intangible assets
and fixed assets in connection with all of its acquisitions. The impairment assessment was performed to determine whether any impairment existed. The impairment indicators included, but were not limited to, the decline in the Companys stock
price, the net book value of assets, and the overall decline in industry growth rates which have negatively impacted the Companys revenues and forecasted revenue growth rates. Also, current economic indicators suggest that these lower growth
rates may continue for an indefinite period. As a result, the Company recorded a $542 impairment charge to reduce the goodwill by $393, other intangible assets by $80 and fixed assets by $69 associated with all of the Companys acquisitions to
reflect their current estimated fair market value. Fair market value was determined based on the estimated fair value of the equipment and the remaining intangible assets. Prior to the impairment charge, the goodwill and intangible assets related to
the acquisition of Universal Systems consisted of 14.4% of the Companys total goodwill, intangible assets and fixed asset balance and the impairment of the goodwill, intangible assets and fixed assets related to the acquisition of Universal
Systems consisted of 100% of the $542 impairment charge, which is included as part of the manufacturing segment. The estimates and assumptions used under our assessment may change in the short term resulting in the need to further write-down other
long-lived assets.





Although the Company has no present intention of discontinuing operations at Universal Systems, it is
monitoring this situation closely and may in the future determine to discontinue such operations. A decision by the Company to discontinue such operations could result in additional write-downs, the amount of which, while presently undeterminable,
could be up to an additional one million dollars.




7




---




NOTE 2.    Inventories





The composition of inventories is as follows:





Mar. 31, 2002

June 30, 2001Raw materials

$
999

$
1,180Work in progress


357


311Finished goods


555


427$
1,911

$
1,918





NOTE 3.    Stock Options





The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its three Stock
Option Plans. Accordingly, no compensation expense has been recognized. Had compensation cost for the Companys three plans been determined based upon the fair value at the grant date for awards under the plans consistent with the methodology
prescribed under Statement of Financial Accounting Standards No. 123, Accounting for Stock Based Compensation, the Companys net (loss) income and (loss) earnings per share would have been reduced to the pro forma amounts indicated
below:





Nine Months EndedMar. 31, 2002


Mar. 31, 2001Net (Loss) Income:As Reported

$
(1,504
)

$
935Pro forma

$
(1,901
)

$
706Basic (Loss) Earnings per Share:As Reported

$
(0.51
)

$
0.32Pro forma

$
(0.65
)

$
0.24





The preceding calculation uses the Black Scholes option-pricing model with the
assumptions listed below:





Nine Months EndedMar. 31, 2002


Mar. 31, 2001Volatility

60.32
%

53.38
%Risk free interest rate

4.88
%

4.62
%Expected life (years)

2.67


2.75




8




---




Note 4.    Earnings per Share (EPS)





The following table is a reconciliation of the weighted average shares used in the computation of the basic and diluted EPS for the periods presented herein:





Nine Months Ended

Three Months EndedMar. 31, 2002


Mar. 31, 2001

Mar. 31, 2002


Mar. 31, 2001Net (loss) income used to compute basic and diluted (loss) earnings per share

$
(1,504
)

$
935

$
(312
)

$
113Weighted average number of common shares outstandingbasic


2,928



2,886


2,928



2,922Dilutive effect of stock options and warrants






66






6Number of shares used to compute earnings per sharediluted


2,928



2,952


2,928



2,928





The following options and warrants were outstanding during and as of the nine
months ended March 31, 2002 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 and therefore were anti-dilutive:





Mar. 31, 2002Options and Warrants Outstanding

Options and Warrants ExercisableWeighted AverageGrantPrice Range

Number Outstanding

Remaining Contractual Life

Weighted Average Exercise Price

Number Exercisable

Exercise Price$3.00-$3.20

119,500

4.54

3.2000

34,000

3.2000$3.20-$3.70

71,000

1.21

3.6648

68,000

3.6765$3.71-$4.99

14,500

1.27

4.3400

14,500

4.3400$5.00-$5.35

254,880

0.59

5.0000

254,880

5.0000$5.36-$7.00

72,000

3.37

5.4940

54,500

5.4519$7.01-$8.00

46,785

0.59

8.0000

46,785

8.0000578,665

2.60

4.5204

472,665

4.7009




9




---

NOTE 5.    Long-term debt and capitalized leases





Long-term debt and capitalized leases consist of the following:





Mar. 31, 2002

Jun. 30, 2001Machinery loans, due in various installments through 2003 bearing interest at 6.5%, collateralized by equipment

$
823

$
1,186Notes payable, due in various installments through 2005 bearing interest at prime plus 1.5% (Banks prime rate of 5.75% at Mar.
31, 2002), collateralized by equipment


539


601Capitalized lease obligations, due in various installments through 2008 bearing interest at rates ranging from 4.5% to 13%,
collateralized by leased assets


764


878Mortgage loan, due in monthly installments through 2008, bearing interest at prime plus 3.5% and 3% (Banks prime rate of 4.97%
and 5.18% at Mar. 31, 2002), collateralized by building


164


1762,290


2,841Less current portion


1,043


1,096Long-term debt and capitalized leases

$
1,247

$
1,745





NOTE 6.    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.





All intersegment sales are sales from the manufacturing segment to the testing and distribution
segments.




10




---




Business Segment Information:





Nine Months Ended

Three Months EndedMar. 31, 2002


Mar. 31, 2001

Mar.31, 2002


Mar. 31, 2001NET SALESManufacturing

$
3,787


$
15,520

$
1,008


$
3,720Testing Services


6,654



8,358


2,151



2,536Distribution


4,164



5,192


1,498



1,621Corporate and unallocated













Total Company


14,605



29,070


4,657



7,877OPERATING (LOSS) INCOMEManufacturing


(2,232
)


187


(581
)


(223
)Testing Services


696



671


310



161Distribution


(50
)


102


(45
)


119Corporate and unallocated


(127
)


143


(40
)


(13
)Total Company


(1,713
)


1,103


(356
)


44ASSETSManufacturing


4,672



7,282


4,672



7,282Testing Services


15,615



17,113


15,615



17,113Distribution


390



379


390



379Corporate and unallocated


101



217


101



217Total Company


20,778



24,991


20,778



24,991DEPRECIATION AND AMORTIZATIONManufacturing


312



355


99



109Testing Services


895



783


293



316Distribution


74



62


20



26Corporate and unallocated


2



1


1



Total Company


1,283



1,201


413



451CAPITAL EXPENDITURESManufacturing


126



70


19



10Testing Services


226



3,905


60



1,817Distribution


9



470


8



185Corporate and unallocated


13



4






Total Company

$
374


$
4,449

$
87


$
2,012




11




---




Geographic Area Information





Nine Months Ended


Three Months EndedMar. 31, 2002


Mar. 31, 2001


Mar. 31, 2002


Mar. 31, 2001NET SALESUnited States

$
5,906


$
8,484


$
2,052


$
2,615Southeast Asia


7,512



15,229



2,347



3,571Europe


1,222



5,695



260



1,630Eliminations and Other


(35
)


(338
)


(2
)


61Total Company


14,605



29,070



4,657



7,877OPERATING INCOME (LOSS)United States


(1,564
)


45



(344
)


(47
)Southeast Asia


246



1,010



91



140Europe


(266
)


(95
)


(63
)


(36
)Eliminations and Other


(129
)


143



(40
)


(13
)Total Company


(1,713
)


1,103



(356
)


44PROPERTY, PLANT AND EQUIPMENT, NetUnited States


657



803



657



803Southeast Asia


5,585



6,203



5,585



6,203Europe


389



475



389



475Eliminations and Other


(41
)






(41
)


Total Company

$
6,590


$
7,481


$
6,590


$
7,481




12




---

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES


ITEM
2.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


---




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. A forward-looking statement may, in some cases, be identified by use of terminology such as may, will, expects, plans, anticipates, estimates,
potential, believes, can impact, continue and by other comparable terminology or by the negative of any of the foregoing. 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.





Overview





TrioTech designs, develops, manufactures and markets a broad range of equipment and
systems used in the manufacture and testing of semiconductor devices and electronic components. In addition, we operate test facilities in the United States, Europe and Southeast Asia that provide semiconductor-testing services to component
manufacturers and users.





The Company operates in three industry segments: Manufacturing, Testing Services and Distribution.





We manufacture wet processing and cleaning stations used in the manufacture of semiconductor circuits and
temperature controlled chucks that are used to manufacture and test semiconductor wafers and other microelectronic substrates in what is commonly called the front-end, or creation of semiconductor circuits. Additionally, we also
manufacture centrifuges, leak detectors, HAST (Highly Accelerated Stress Test) systems and burn-in systems that are used primarily in the back-end of the semiconductor manufacturing process to test finished semiconductor
devices and electronic components.





We currently operate five test facilities, one in the United States, one in Europe and three
in Southeast Asia. These provide customers a comprehensive range of testing services, such as burn-in and product life testing, for finished or packaged components. During 2000 and 2001 we closed two test facilities due to uncertainties in the
semiconductor industry.





Our business in Southeast Asia has an active distribution operation. This provides marketing and
support to distribute their own manufactured equipment in addition to distributing complimentary products from other manufacturers that are used by the Companys customers and other semiconductor and electronics manufacturers.





Recent events





Corporate
Headquarters change of location





In January of 2002, the Company and its Trio-Tech Systems division moved to a new location.
Our new address is 14731 Califa Street, Van Nuys, California 91411 and new telephone number is (818) 787-7000.





Write-Down of
Long-Lived Assets





The Company periodically assesses the impairment of long-lived assets, including identifiable intangibles
in accordance with the provisions of SFAS No. 121, Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of. The Company also periodically assesses the impairment of enterprise level goodwill in
accordance with the provisions of APB Opinion No. 17, Intangible Assets. As part of its review of its second quarter financial results, the Company performed an impairment assessment of goodwill, other identifiable intangible assets and
fixed assets in connection




13




---

with all of its acquisitions. The impairment assessment was performed to determine whether any impairment existed. The impairment indicators included, but were
not limited to, the decline in the Companys stock price, the net book value of assets, and the overall decline in industry growth rates which have negatively impacted the Companys revenues and forecasted revenue growth rates. Also,
current economic indicators suggest that these lower growth rates may continue for an indefinite period. As a result, the Company recorded a $542 impairment charge to reduce goodwill by $393, other intangible assets by $80 and fixed assets by $69
associated with all of the Companys acquisitions to reflect their current estimated fair market value. Fair market value was determined based on the estimated fair value of the equipment and the remaining intangible assets. Prior to the
impairment charge, the goodwill and intangible assets related to the acquisition of Universal Systems consisted of 14.4% of the Companys total goodwill, intangible assets and fixed asset balance and the impairment of the goodwill, intangible
assets and fixed assets related to the acquisition of Universal System consisted of 100% of the $542 impairment charge, which is included as part of the manufacturing segment. The estimates and assumptions used under our assessment may change in the
short term resulting in the need to further write-down other long-lived assets.





Although the Company has no present intention
of discontinuing operations at Universal Systems, it is monitoring this situation closely and may in the future determine to discontinue such operations. A decision by the Company to discontinue such operations could result in additional
write-downs, the amount of which, while presently undeterminable, could be up to an additional of $1,000.





Results of Operations





Three Months Ended March 31, 2002 (2002) Compared to the Three Months Ended March 31, 2001 (2001)





Sales





Net sales
decreased by $3,220 or 40.9% from $7,877 in 2001 to $4,657 in 2002, as the market situation in the semiconductor industry remains weak. We anticipate that the current fiscal year will continue to have lower sales than fiscal year 2001.





Geographically, net sales into the United States decreased $563 or 21.5% from $2,615 in 2001 to $2,052 in 2002. The decrease was attributable
to decline in demand for burn-in equipment, Artic Temperature Controlled Chucks, wet process benches, autoclaves and HAST equipment. Net sales into Southeast Asia decreased $1,224 or 34.3% from $3,571 in 2001 to $2,347 in 2002 due mainly to lower
manufacturing, and distribution and testing volumes. As a result, there are movements of several large customers in Southeast Asia from one country to another. Net sales into Europe decreased $1,370 or 84% from $1,630 in 2001 to $260 in 2002 due to
a decline in demand for testing services.





The Manufacturing Segment sales, Company-wide, decreased $2,712 or 72.9% from $3,720
in 2001 to $1,008 in 2002 due to a decrease in demand and continuous conservative capital spending by OEMs for the Artic Temperature Controlled Chucks, Wet Process Benches and the COBIS-II Burn-in Board Systems. The Testing Services Segment
sales, Company-wide, decreased $385 or 15.2% from $2,536 in 2001 to $2,151 in 2002 due to the decrease in demand, which is in line with a global down turn in the semiconductor industry. Company-wide, the Distribution
Segment,            , decreased $123 or 7.6% from $1,621 in 2001 to $1,498 in 2002. This segment is dependent on the capital expenditure plans of our customers and the capital spending on
test equipment in the market remains weak.





Cost of Sales





Cost of sales decreased $2,556 or 41.5% from $6,159 in 2001 to $3,603 in 2002. Due to reducing headcount and hours worked per week, as a percentage of sales, cost of sales decreased 0.8%
from 78.2% in 2001 to 77.4% in 2002. The decrease in cost of sales, as a percentage of sales, was due to a change in product and sales mix, with more volume for products with higher margin. This offset the increase in cost as a percentage of sales
in other operations, due to the sharp decline in sales with certain costs remaining fixed.





Operating Expenses





Operating expenses decreased by $264 or 15.8% from $1,674 in 2001 to $1,410 in 2002. This decrease was consistent with the level of sales. As a
percentage of sales, operating expenses increased due to the fact that certain costs remains fixed despite the sudden drop in sales volume.





The Manufacturing Segment loss from operations increased from $223 in 2001 to $581 in 2002 due to eroding margins from the decrease in volumes of the Artic Temperature Controlled Chucks, Semi-Automatic Wet Process
Benches and the COBIS-II Burn-in Board Systems. The Testing Services Segment income from operations increased by $149 from $161 in 2001 to $310 in 2002 due to the change in sales and product mix and the rapid implementation of cost saving measures.
The Distribution Segment income from operations decreased from income of $119 in 2001 to a loss of $45 in 2002 due to a change in sales and




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product mix. Corporate operating loss has increased by $27 from $13 in 2001 to $40 in 2002 due to amount of overhead being charged on lower sales volume.





General and Administrative





General and Administrative (G&A) expenses decreased by $358 or 26.2% from $1,367 in 2001 to $1,009 in 2002 primarily due to implementation of cost cutting measures which reduced the headcount and
related expenses such as payroll and payroll- related costs such as bonuses. As a percentage of sales, G&A increased by 4.3% from 17.4% in 2001 to 21.7% in 2002 due to the fact that certain expenses included in G&A are fixed and thus do not
decrease even though sales decreased.





Selling Expenses





Selling expenses increased by $63 or 25.7% from $245 in 2001 to $308 in 2002 due to amounts paid for commissions. As a percentage of sales, selling expenses increased 3.5% from 3.1% in
2001 to 6.6% in 2002.





Research and Development





Research and Development expenses increased by $31 or 50% from $62 in 2001 to $93 in 2002. This increase is primarily due to the management reclassification of certain costs relating to
Automated Wet Benches which were offset by decreased payroll and payroll-related costs.





Interest Expense





Interest expense decreased by $12 or 17.9%, from $67 in 2001 to $55 in 2002, due to repayment of long-term debt offset with increases in lines of
credit.





Other Income





Other income decreased by $8 or 7.8% from $103 in 2001 to $95 in 2002 due to provision for assets write off, offset with the reversal of provision for reduction in marketable securities and gain on disposal of assets.





Nine Months Ended March 31, 2002 (2002) Compared to the Nine Months Ended March 31, 2001 (2001)





Sales





Net Sales decreased by $14,465 or 49.8%
from $29,070 in 2001 to $14,605 in 2002, due to the global turn down in the semiconductor industry and world economic conditions. We anticipate that the current fiscal year will continue to have lower sales than fiscal year 2001.





Geographically, net sales into United States decreased by $2,578 or 30.4% from $8,484 in 2001 to $5,906 in 2002. The decrease was attributed
to decreases in burn-in board sales; Artic Temperature controlled Chunks and wet process benches. Net sales in Southeast Asia decreased $7,717 or 50.7% from $15,229 in 2001 to $7,512 in 2002 due mainly to lower manufacturing, distribution and
testing volumes. Net sales into Europe decreased by $4,473 or 78.5% from $5,695 in 2001 to $1,222 in 2002 due to decline in demand for testing services, movement of several large customers to Southeast Asia and a decline in demand for Artic
Temperature Controlled Chunks and wet process benches.





The Manufacturing Segment sales, Company-wide, decreased $11,733 or
75.6% from $15,520 in 2001 to $3,787 in 2002 due to a decrease in demand for and a shift to conservative capital spending by OEMs for the Artic Temperature Controlled Chunks, Wet Process Benches and the COBIS-II Burn-in Board Systems. The
Testing Services Segment sales, Company-wide, decreased by $1,704 or 20.4% from $8,358 in 2001 to $6,654 in 2002 due to the global down turn in the semiconductor industry and world economic conditions. The Distribution Segment, Company-wide,
decreased $1,028 or 19.8% from $5,192 in 2001 to $4,164 in 2002 due to a decrease in demand for and a shift to conservative capital spending for test equipment by many of our customers.





Cost of Sales





Cost of sales decreased by $10,310 or 47.6% from $21,671 in
2001 to $11,361 in 2002. Despite reducing headcount and hours worked per week, as a percentage of sales, it increased 3.3% from 74.5% in 2001 to 77.8% in 2002. The increase in cost of sales, as a percentage of sales, was due in part to the fact that
certain costs remain fixed. Such increase was also due to the decline in sales and change in the sales and product mix, which varies depending on the mix of sector and geographic sales.




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Operating Expenses





Operating Expenses decreased by $1,339 or 21.3% from $6,296 in 2001 to $4,957 in 2002. Operating expenses included the impairment charge of $542 to reduce goodwill, intangible assets and fixed assets for the
Companys past acquisitions to reflect their current estimated fair market value. The remaining portion of the decrease is consistent with the level of sales. As a percentage of sales operating expenses increased due to the fact that certain
costs remain fixed despite the drop in sales volume.





The Manufacturing Segment income from operations decreased from income of
$187 in 2001 to a loss of $2,232 in 2002 due to eroding margins from the decrease in volumes of the Artic Temperature Controlled Chunks, Semi-automatic Wet Process Benches and the COSBI-II Burn-in Board Systems. The Manufacturing Segment included
the one-time impairment charge of $542 to reduce goodwill, intangible assets and fixed assets for the Companys past acquisitions to reflect their current estimated fair market value. The Testing Services Segment income from operations
increased by $25 from $671 in 2001 to $696 in 2002 due to rapid implementation of cost saving measures. The Distribution Segment income from operations decreased from income of $102 in 2001 to a loss of $50 in 2002 due to a change in sales and
product mix. Corporate operating income reduced from operating income of $143 in 2001 to an operating loss of $127 in 2002 due to the amount of overhead being charged on lower sales volume.





General and Administration





General and Administration
(G&A) expenses decreased by $1,295 or 28.5% from $4,545 in 2001 to $3,250 in 2002 primarily due to implementation of cost cutting measures which reduced the headcount and related expenses such as payroll and payroll-related costs
such as bonuses. As a percentage of sales, G&A increased by 6.7% from 15.6% in 2001 to 22.3% in 2002 due to the fact that certain expenses included in G&A are fixed and thus do not decrease even though sales decreased.





Selling Expenses





Selling expenses decreased by $678 or 42.8% from $1,584 in 2001 to $906 in 2002 due to reduction in volume-related expenses such as commissions. As a percentage of sales, selling expenses increased 0.6% from 5.4% in 2001 to 6.0% in 2002.





Research and Development





Research and Development increased by $92 or 55.1% from $167 in 2001 to $259 in 2002. This increase is primarily due to the management reclassification of costs relating to Automated Wet Benches offset with decreased
payroll and payroll-related costs.





Interest Expenses





Interest expense decreased by $94 or 37.2% from $253 in 2001 to $159 in 2002, due to the repayment of long-term debts and reclassifications of other income in 2001, offset with increases in lines of credit,
capitalized leases and financing activity for capital expenditures.





Other Income





Other income decreased by $36 or 8.7% from $415 in 2001 to $379 in 2002 due to lower interest rate in fixed deposits, provision for assets write off, offset with the reversal of
provision for reduction in marketable securities and gain on disposal of assets.





Liquidity and Capital Resources





Net cash used in operating activities during 2002 was $1,679 compared to $2,772 provided by operating activities during 2001. The negative cash flow
from operating activities in 2002 was comprised of a decrease in accounts receivables and inventories by $346 and $7, respectively, and non-cash depreciation and amortization and impairment of long-lived assets of $1,283 and $542, respectively, and
decrease in deferred income taxes of $7. These amounts were offset by negative cash flow comprised of a net loss of $1,504, a gain on the sale of property and equipment of $14, a decrease in prepaid expenses and other current assets of $67, a
decrease in accounts payable and accrued expenses of $2,036, a decrease in income taxes payable of $57, a decrease of $63 in minority interest and a decrease in other receivables of $123.




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Net cash provided by investing activities during 2002 was $1,009 compared to $5,406 used in investing activities in the 2001 year. The
net cash provided by investing activities was a result of (1) capital expenditures of $374 which included enhancement of electrical facilities for its HBI Test facilities in Southeast Asia coupled with investment in BIB Test equipment, RVSI Laser
Scanners, Systemation Tape and Reel and further development of its Application Laboratory in Universal Systems (during 2002), the Company financed acquisitions of equipment amounting to $278 under capital lease arrangements and $36 under note
payable), (2) a decrease in cash deposits of $1,513, (3) an increase in other assets of $27 mainly due to an increase in investments on marketable securities (4) proceeds from sale of property and equipment of $47 (5) an increase of $150 in short
term investments.





Net cash provided by financing activities during 2002 was $285 compared to $2,418 provided by financing
activities in 2001. The cash outflow from financing activities include $1,104 of payments on lines of credit, long term obligations and capitalized leases, which was offset by proceeds of $1,389 from additional borrowing under lines of credit and
long term obligation.





Cash deposits and corporate guarantees (the Company guarantees, but subsidiaries are the primary debtor)
collateralize the first line of credit with a bank, aggregating $2,442, and contain certain debt covenants including maintaining a minimum net worth. The Company was in compliance with all debt covenants on March 31, 2002. Borrowings under this line
aggregated $136 as at March 31, 2002, and expire July 2002. Interest rates for this line is at banks prime rate (5.75% at March 31, 2002) plus 1.25%.





The line of $4,342, mainly for accounts receivable financing, contains the debt covenant to maintain a minimum net worth, with which the Company was in compliance on March 31, 2002. The interest rate is at banks
prime rate (5.25% at March 31, 2002) plus 1%.





The Company has various other machinery term loans, capitalized lease obligations
and notes payable used for financing equipment and leasehold improvements with various banks and lending institutions aggregating $2,126. The equipment and improvements financed collateralizes these loans. Interest rates range from 4.5% to 13%.
These term loans expire between March 2002 and January 2008 (see Note 5 to the Condensed Consolidated Financial Statements).





The Company has two credit agreements that provide for mortgage loans totaling $283. Borrowings under the mortgage loans amounted to $104 and $60 as of March 31, 2002. Interest is at the banks prime rate (4.97% and 5.18% at March 31,
2002) plus 3.5% on the first loan and 3% on the second loan. The loans will expire in July 2007 and May 2008, respectively. (See Note 5 to the Condensed Consolidated Financial Statements).





Approximately $999 of cash deposits are held in the Companys 55% owned Malaysian subsidiary. $489 of this cash is denominated in the currency of Malaysia. Of the $489, $209 is
currently available for movement as authorized by the Central Bank of Malaysia. There are additional amounts available as dividends (after making deductions for income tax) pursuant to Malaysian regulations in force from July 1, 2000.





Cash and cash deposits have historically been the Companys primary source of liquidity. The Company has committed lines of credit,
aggregating $7,377 inclusive of accounts receivables financing and lines of credit, totaling $593, which were used to support short-term borrowing and commercial paper comprised of letters of credit, trust receipts, shipping and bankers
guarantees. These lines of credit and their anticipated cyclical increases are sufficient to finance buildups in inventories and other cash requirements. The Company has total capital lease commitments of $765 and rental commitments of $1,389, which
aggregate $589 in 2002, $ 919 in 2003, $425 in 2004 and $221 thereafter.





Material Changes in Financial Position





See heading Write-down of Long-Lived Assets under Recent Events for discussion of Material Changes in Financial Position.





Material Changes in Results of Operations





Due to the global downturn in the economy, net sales for the Company decreased by 40.9% during the three months ended March 31, 2002 as compared to the corresponding period in the prior year.





Although the Company has no present intention of discontinuing operations at Universal Systems, it is monitoring this situation closely and may in the
future determine to discontinue such operations. A decision by the Company to discontinue such operations could result in additional write-downs, the amount of which, while presently undeterminable, could be up to an additional one million dollars




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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


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Interest Rate Risk.    We do not use derivative financial instruments in our investment portfolio. Our investment portfolio is generally comprised of cash deposits. Our policy is to place
these investments in instruments that meet high credit quality standards. These securities are subject to interest rate risk, and could decline in value if interest rates fluctuate. Due to the short duration and conservative nature of our investment
portfolio, we do not expect any material loss with respect to our investment portfolio.





Foreign Currency Exchange Rate
Risk.    Although the majority of our sales, cost of manufacturing and marketing are transacted in U.S. dollars, significant portions of our revenues are denominated in Singapore, Malaysian and other currencies. Consequently,
a portion of our costs, revenues and operating margins may be affected by fluctuations in exchange rates, primarily between the U.S. Dollar and such foreign currencies. We are also affected by fluctuations in exchange rates if there is a mismatch
between our foreign currency denominated assets and liabilities. Foreign currency adjustments resulted in an increase of $10 to shareholders equity for the nine months ended March 31, 2002, a decrease of $364 to shareholders equity for
the nine months ended March 31, 2001 and an increase of $82 to shareholders equity for nine months ended March 31, 2000.





From time to time, we try to partially mitigate the effects of currency fluctuations over the short term by the hedging of foreign currency exposure through U.S. Dollar borrowings and forward foreign exchange rate contracts, as well as
purchasing non-Southeast Asian currency denominated short-term instruments. We also try to reduce our risks by purchasing certain equipment and supplies in U.S. Dollars and seeking payment, when possible, in U.S. Dollars. However, we may not be
successful in our attempts to mitigate our exposure to exchange rate fluctuations. Those fluctuations could have a material adverse effect on the Companys financial results.





TRIO-TECH INTERNATIONAL


PART II.    OTHER INFORMATION


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Item 1.

Legal ProceedingsNot applicableItem 2.

Changes in Securities and Use of ProceedsNot applicableItem 3.

Defaults Upon Senior SecuritiesNot applicableItem 4.

Submission of Matters to Vote of Security HoldersNot applicableItem 5.

Other InformationNot applicableItem 6.

Exhibits and reports on Form 8-K(a)  ExhibitsNone(b)  Reports on Form 8-KThe Registrant filed the following reports on Form 8-K with the Securities and Exchange Commission during the third quarter of fiscal
2002:None




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SIGNATURES


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Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.





TRIO-TECH INTERNATIONALBy:

/s/    VICTOR H. M. TINGVICTOR H. M. TING Vice President and Chief Financial Officer Dated:  May 9, 2002





By:

/s/    A. CHARLES WILSONA. Charles Wilson Chairman of the Board of
Directors Dated:  May 9, 2002




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