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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q  þ
  
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2004 OR  o
  
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Transition Period from  to Commission File Number 1-14523 TRIO-TECH INTERNATIONAL  California
    
    95-2086631(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)14731 Califa StreetVan Nuys, California
    
    91411(Address of principle executive offices)
    
    (Zip Code)
 Registrants Telephone Number, Including Area Code: 818-787-7000 Indicate by check mark whether the registrant (1) has filed all reports
required to be filed with the Commission by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes o No þ Number of shares of common stock outstanding as of November 5, 2004 is 2,964,542.




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TRIO-TECH INTERNATIONAL
INDEX TO CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION AND SIGNATURE  
 PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets as of September 30, 2004 (Unaudited) and June 2004
    
    
    3Consolidated Statements of Operations and Comprehensive Income (loss) for the Three Months Ended September 30, 2004 (Unaudited) and September 30, 2003 (Unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2004 (Unaudited) and September 30, 2003 (Unaudited)
    
    
    5Notes to Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    22Part II. Other InformationItem 1. Legal Proceedings
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults upon Senior Securities
    
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    
    23Item 5. Other Information
    
    
    23Item 6. Exhibits
    
    
    23Signatures
    
    
    24Exhibit 31.1Exhibit 31.2Exhibit 32
  2




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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES 
 ITEM 1. FINANCIAL
STATEMENTS
 
 CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT NUMBER OF SHARES) (Unaudited)Sep. 30,
    
    June 30,2004
    
    2004ASSETSCURRENT ASSETS:Cash
    
    $
    1,434
    
    
    $
    1,357Short-term deposits
    
    
    4,437
    
    
    
    5,649Trade accounts receivable, less allowance for doubtful
accounts of $176 and $165
    
    
    4,469
    
    
    
    3,695Other receivables
    
    
    460
    
    
    
    583Inventories, less provision for obsolete inventory
of $446 and $445
    
    
    1,778
    
    
    
    1,409Prepaid expenses and other current assets
    
    
    166
    
    
    
    105Total current assets
    
    
    12,744
    
    
    
    12,798PROPERTY, PLANT AND EQUIPMENT, Net
    
    
    6,316
    
    
    
    5,202OTHER INTANGIBLE ASSETS, Net
    
    
    458
    
    
    
    TOTAL ASSETS
    
    $
    19,518
    
    
    $
    18,000LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Lines of credit
    
    $
    148
    
    
    $
    146Accounts payable
    
    
    2,734
    
    
    
    2,316Accrued expenses
    
    
    2,832
    
    
    
    2,166Income taxes payable
    
    
    87
    
    
    
    49Current portion of notes payable
    
    
    607
    
    
    
    506Current portion of capitalized leases
    
    
    252
    
    
    
    246Total current liabilities
    
    
    6,660
    
    
    
    5,429NOTES PAYABLE, net of current portion
    
    
    615
    
    
    
    583CAPITALIZED LEASES, net of current portion
    
    
    148
    
    
    
    210DEFERRED INCOME TAXES
    
    
    671
    
    
    
    644TOTAL LIABILITIES
    
    
    8,094
    
    
    
    6,866COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    MINORITY INTEREST
    
    
    2,125
    
    
    
    2,110SHAREHOLDERS EQUITY:Common stock; no par value, 15,000,000 shares authorized;
2,964,542 shares issued and outstanding
    
    
    9,527
    
    
    
    9,527Paid-in capital
    
    
    284
    
    
    
    284Accumulated deficit
    
    
    (282
    )
    
    
    (519
    )Accumulated other comprehensive loss-translation adjustments
    
    
    (230
    )
    
    
    (268
    )Total shareholders equity
    
    
    9,299
    
    
    
    9,024TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
    
    $
    19,518
    
    
    $
    18,000
 See notes to condensed consolidated financial statements. 3




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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(UNAUDITED, IN THOUSANDS, EXCEPT EARNINGS (LOSS) PER SHARE) Three Months EndedSep. 30,
    
    Sep. 30,2004
    
    2003NET SALES- PRODUCT SALES
    
    $
    4,957
    
    
    $
    1,566- SERVICES
    
    
    2,894
    
    
    
    2,2847,851
    
    
    
    3,850COST OF SALES- COST OF GOODS SOLD
    
    
    4,066
    
    
    
    1,342- COSTS OF SERVICE RENDERED
    
    
    1,876
    
    
    
    1,5835,942
    
    
    
    2,925GROSS PROFIT
    
    
    1,909
    
    
    
    925OPERATING EXPENSES:General and administrative
    
    
    1,295
    
    
    
    983Selling
    
    
    269
    
    
    
    205Research and development
    
    
    33
    
    
    
    32Impairment Loss
    
    
    1
    
    
    
    Loss on disposal of property, plant & equipment
    
    
    0
    
    
    
    4Total
    
    
    1,598
    
    
    
    1,224INCOME (LOSS) FROM OPERATIONS
    
    
    311
    
    
    
    (299
    )OTHER INCOME (EXPENSE)Interest expense
    
    
    (35
    )
    
    
    (35
    )Other income
    
    
    85
    
    
    
    138Total
    
    
    50
    
    
    
    103INCOME (LOSS) BEFOREINCOME TAXES AND MINORITY INTEREST
    
    
    361
    
    
    
    (196
    )INCOME TAXES
    
    
    111
    
    
    
    15INCOME (LOSS) BEFORE MINORITY INTEREST
    
    
    250
    
    
    
    (211
    )MINORITY INTEREST
    
    
    (13
    )
    
    
    (54
    )NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
SHARES
    
    
    237
    
    
    
    (265
    )OTHER COMPREHENSIVE (LOSS) INCOME :Unrealized loss on investment
    
    
    
    
    
    
    (45
    )Foreign currency translation adjustment
    
    
    38
    
    
    
    131COMPREHENSIVE INCOME (LOSS)
    
    $
    275
    
    
    $
    (179
    )EARNINGS (LOSS) PER SHARE:Basic
    
    $
    0.08
    
    
    $
    (0.09
    )Diluted
    
    $
    0.08
    
    
    $
    (0.09
    )WEIGHTED AVERAGE NUMBER OF COMMON AND
POTENTIAL COMMON SHARES OUTSTANDINGBasic
    
    
    2,965
    
    
    
    2,928Diluted
    
    
    3,009
    
    
    
    2,928
 See notes to condensed consolidated financial statements. 4




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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS) Three Months EndedSep 30,
    
    Sep 30,2004
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    237
    
    
    $
    (265
    )Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    337
    
    
    
    284Bad debt expense, net
    
    
    11
    
    
    
    4Inventory provision
    
    
    1
    
    
    
    Impairment loss
    
    
    1
    
    
    
    Loss on sale of property and equipment
    
    
    
    
    
    
    4Gain on disposal of marketable securities
    
    
    
    
    
    
    (114
    )Deferred income taxes
    
    
    27
    
    
    
    11Minority interest, net
    
    
    14
    
    
    
    54Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (785
    )
    
    
    531Other receivables
    
    
    (236
    )
    
    
    (3
    )Inventories
    
    
    (370
    )
    
    
    (7
    )Prepaid expenses and other current assets
    
    
    (61
    )
    
    
    (82
    )Accounts payable and accrued expenses
    
    
    1,085
    
    
    
    6Income taxes payable
    
    
    38
    
    
    
    11Net cash provided by operating activities
    
    
    299
    
    
    
    434CASH FLOWS FROM INVESTING ACTIVITIES:Short term deposits
    
    
    1,212
    
    
    
    (283
    )Capital expenditures
    
    
    (1,188
    )
    
    
    (475
    )Purchase of marketable securities
    
    
    
    
    
    
    (4
    )Other assets
    
    
    (482
    )
    
    
    Proceeds from disposal of marketable securities
    
    
    
    
    
    
    555Proceeds from sale of property and equipment
    
    
    168
    
    
    
    38Net cash used in investing activities
    
    
    (290
    )
    
    
    (169
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net payments and borrowings on lines of credit
    
    
    
    
    
    
    (157
    )Principal payments of debt and capitalized leases
    
    
    (208
    )
    
    
    (719
    )Proceeds from long-term debt
    
    
    285
    
    
    
    Net cash provided by (used in) financing activities
    
    
    77
    
    
    
    (876
    )EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
    
    (9
    )
    
    
    43NET INCREASE (DECREASE) IN CASH
    
    
    77
    
    
    
    (568
    )CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    
    
    1,357
    
    
    
    1,495CASH AND CASH EQUIVALENTS, END OF YEAR
    
    $
    1,434
    
    
    $
    927SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid during the year for:Interest
    
    $
    35
    
    
    $
    34Income taxes
    
    $
    57
    
    
    $
    4NON-CASH INVESTING AND FINANCING ACTIVITIES- Acquisition of property, plant and equipment under capital finance lease
    
    $
    
    
    
    $
    70- Capitalization of property, plant and equipment paid in advance
    
    $
    359
    
    
    $
    
 See notes to condensed consolidated financial statements. 5




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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, IN THOUSANDS, EXCEPT PER
SHARE AND NUMBER OF SHARES) 1. ORGANIZATION AND BASIS OF PRESENTATION Trio-Tech International (the Company or TTI hereafter) was
incorporated in 1958 under the laws of the State of California. TTI
provides third-party semiconductor testing and burn-in services primarily
through its laboratories in Southeast Asia; in addition, TTI operates test
facilities in the United States and Europe. The Company also designs,
develops, manufactures and markets a broad range of equipment and systems
used in the manufacture and testing of semiconductor devices and
electronic components. TTI conducts business in three industry segments:
Testing Services, Manufacturing and Distribution. TTI has subsidiaries in
the U.S., Singapore, Malaysia, Thailand, China and Ireland as follows: Ownership
    
    LocationExpress Test Corporation
    
    
    100
    %
    
    Van Nuys, CaliforniaTrio-Tech Reliability Services
    
    
    100
    %
    
    Van Nuys, CaliforniaKTS Incorporated, dba Universal Systems
    
    
    100
    %
    
    Van Nuys, CaliforniaEuropean Electronic Test Centre
    
    
    100
    %
    
    Dublin, IrelandTrio-Tech International Pte. Ltd.
    
    
    100
    %
    
    SingaporeUniversal (Far East) Services Pte. Ltd.
    
    
    100
    %
    
    SingaporeTrio-Tech Thailand
    
    
    100
    %
    
    Bangkok, ThailandTrio-Tech Bangkok
    
    
    100
    %
    
    Bangkok, ThailandTrio-Tech Malaysia
    
    
    55
    %
    
    Penang and Selangor, MalaysiaTrio-Tech Kuala Lumpur  100% owned by
Trio-Tech Malaysia
    
    
    55
    %
    
    Selangor, MalaysiaPrestal Enterprise Sdn. Bhd.
    
    
    76
    %
    
    Selangor, MalaysiaTrio-Tech (Suzhou) Co. Ltd.
    
    
    100
    %
    
    Suzhou, China
  The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. All significant inter-company accounts and
transactions have been eliminated in consolidation. The unaudited
consolidated financial statements are presented in U.S. dollars.
Accordingly, the accompanying financial statements do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for fair presentation have been included. Operating
results for the three months ended September 30, 2004 are not necessarily
indicative of the results that may be expected for the fiscal year ending
June 30, 2005. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Companys
annual report for the fiscal year ended June 30, 2004, as amended by Form
10-KA filed October 29, 2004.Effective July 1, 2004, the Company changed its fiscal report period to
end on the last day of the fiscal quarter. The quarter end dates for
periods ending September 30, 2004 and September 30, 2003 were September
30, 2004 and September 26, 2003 respectively. 6




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2.
    
    INVENTORIESInventories consist of the following: Sep. 30,
    
    June 30,2004
    
    2004(Unaudited)Raw materials
    
    $
    967
    
    
    $
    652Work in progress
    
    
    783
    
    
    
    700Finished goods
    
    
    474
    
    
    
    502Less: provision for obsolete inventory
    
    
    (446
    )
    
    
    (445
    )$
    1,778
    
    
    $
    1,409
  3.
    
    STOCK OPTIONSThe Company has adopted the intrinsic value method of accounting for
employee stock options as permitted by Statement of Financial Accounting
Standards No. 123, Accounting for Stock-based Compensation (SFAS No.
123) and discloses the pro forma effect on net loss and loss per share as
if the fair value based method had been applied. For equity instruments,
including stock options, issued to non-employees, the fair value of the
equity instruments or the fair value of the consideration received,
whichever is more readily determinable is used to determine the value of
services or goods received and the corresponding charge to operations.The following table illustrates the effect on net income (loss) and
earnings (loss) per share as if the Company had applied the fair value
recognition provision of SFAS No. 123 to stock-based employee
compensation. Three Months EndedSep. 30,
    
    Sep. 30,2004
    
    2003(Unaudited)
    
    (Unaudited)Net income (loss) : as reported
    
    $
    237
    
    
    $
    (265
    )Add: stock based employee compensation
included in reported income
    
    
    
    
    
    
    Deduct: total stock based employee
compensation expense determined under fair
value method for all awards
    
    
    (8
    )
    
    
    (50
    )Pro forma net income (loss)
    
    $
    229
    
    
    $
    (315
    )Income (loss) per share  basicAs reported
    
    $
    0.08
    
    
    $
    (0.09
    )Pro forma
    
    $
    0.08
    
    
    $
    (0.11
    )Income (loss) per share  dilutedAs reported
    
    $
    0.08
    
    
    $
    (0.09
    )Pro forma
    
    $
    0.08
    
    
    $
    (0.11
    )
  As required by SFAS 123, the Company provides the following disclosure of
estimated values for these awards. The weighted-average grant-date fair
value of options granted during 2005 and 2004 was estimated to be $4.40
and $2.66 respectively.The fair value of each option grant was estimated on the date of grant
using a Black-Scholes option-pricing model with the following weighted
average assumptions for 2005 and 2004, respectively; risk free interest
rates of 2.53% 7




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and 1.71% to 2.93%, expected lives of 2 years for 2005 and
2004; volatility of 47.40% and 44.67% and no assumed dividends.  4.
    
    EARNINGS PER SHAREThe Company adopted SFAS No. 128, Earnings per Share(EPS). Basic
Earnings per Share is computed by dividing net income available to common
shareholders (numerator) by the weighted average number of common shares
outstanding (denominator) during the period. Diluted EPS gives effect to
all dilutive potential common shares outstanding during a period. In
computing diluted EPS, the average price for the period is used in
determining the number of shares assumed to be purchased from exercise of
stock options and warrants.Stock options to purchase 391,000 shares at prices ranging from $2.25 to
$6.00 per share were outstanding during the three months ending September
30, 2004. The following options were excluded in the computation of
diluted EPS because the exercise price was greater than the average market
price of the common shares and therefore were anti-dilutive: Type
    
    Shares
    
    Price
    
    ExpirationOptions
    
    
    45,500
    
    
    $
    4.40
    
    
    July 1, 2009Options
    
    
    5,000
    
    
    $
    4.25
    
    
    March 29, 2009Options
    
    
    20,000
    
    
    $
    5.63
    
    
    September 18, 2005Options
    
    
    32,000
    
    
    $
    5.37
    
    
    July 10, 2005Options
    
    
    48,000
    
    
    $
    6.00
    
    
    March 27, 2005
  Stock options to purchase 440,500 shares at prices ranging from $2.25 to
$6.69 per share were outstanding during the three months ended September
30, 2003 and were excluded from the computation of diluted EPS because
their effect would have been anti-dilutive.The following table is a reconciliation of the weighted-average shares
used in the computation of basic and diluted EPS for the years presented
herein: Three Months EndedSep. 30,
    
    Sep. 30,2004
    
    2003(Unaudited)
    
    (Unaudited)Net income (loss) used to compute basic
and diluted earnings (loss) per share
    
    $
    237
    
    
    $
    (265
    )Weighted average number of common
shares outstanding  basic
    
    
    2,965
    
    
    
    2,928Dilutive effect of stock options and warrants
    
    
    44
    
    
    
    Number of shares used to compute
earnings per share  diluted
    
    
    3,009
    
    
    
    2,928
  5.
    
    ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTSAccounts receivable are customer obligations due under normal trade terms.
We sell our products and services to manufacturers in the semiconductor
industry. We perform continuing credit evaluations of our customers
financial condition and although we generally do not require collateral,
letters of credit may be required from our customers in certain
circumstances.Senior management reviews accounts receivable on a monthly basis to
determine if any receivables will potentially be uncollectible. We
include any accounts receivable balances that are determined to be
uncollectible in our allowance
for doubtful accounts. After all attempts to collect a receivable have
failed, the receivable is written off against the allowance. Based on the
information available to us, we believe our allowance for doubtful
accounts as of September 30, 2004 is adequate. However, actual write-offs
might exceed the recorded allowance. 8




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Sep. 30,2004
    
    June 30,2004(Unaudited)Beginning
    
    $
    165
    
    
    $
    157Additions charged to expenses
    
    
    13
    
    
    
    18Recovered
    
    
    (2
    )
    
    
    (4
    )Actual write-offs
    
    
    
    
    
    
    (6
    )Ending
    
    $
    176
    
    
    $
    165
  6.
    
    WARRANTY ACCRUAL Sep. 30,2004
    
    June 30,2004(Unaudited)Beginning
    
    $
    162
    
    
    $
    165Additions charged to cost and expenses
    
    
    27
    
    
    
    41Recovered
    
    
    
    
    
    
    Actual write-offs
    
    
    (2
    )
    
    
    (44
    )Ending
    
    $
    187
    
    
    $
    162
  7.
    
    ACQUISITION OF A BUSINESSOn July 1, 2004, the Company acquired certain assets from TS Matrix Bhd.
(the Seller) utilized by the burn-in testing division of Seller, whom is
also one of our competitors, for an aggregate cash purchase price of
approximately $1,218. The company paid approximately $823 of the purchase
price in cash at the beginning of fiscal 2005, and the balance of
approximately $395 is payable in the form of a bank-guaranteed note, which
matures at December 31, 2004. Our objectives to acquire the burn-in
testing division are to service a large electronic device manufacturer
with whom we had been pursuing a business relationship for some time and
increase our market share in testing services. Upon completion of the
acquisition, the customer signed a five-year agreement with the Company to
provide testing services. The value of obtaining this customer
relationship intangible is included in other intangible assets in the
amount of $482. Results of the operations for the burn-in testing business
are included in the Companys income statement effective July 1, 2004.In accordance with the Statement of Financial Accounting Standard (SFAS)
No. 141, Business Combinations, the Company allocated the purchase price
to the tangible assets and intangible assets acquired based on their
estimated fair values. The fair value assigned to intangible assets
acquired was based on estimates and assumptions determined by the
management. Purchase intangibles with finite lives are amortized on a
straight-line basis over their respective useful lives. The total purchase
price was allocated as follows (in thousands): Total purchase price:Cash
    
    $
    823Notes payable
    
    
    395$
    1,218Allocated as follows:Fixed assets
- Plant and machinery
    
    $
    711- Production equipment
    
    
    13- Office equipment
    
    
    5- Leasehold improvement
    
    
    7736Intangible assets  customer relationship
    
    
    482$
    1,218
 9




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The excess purchase price over the fair value of tangible
assets acquired was attributed to the customer relationship obtained
from the above business acquisition and
recorded as other intangible assets. No goodwill is recognized in this
context. The customer relationship intangible will be amortized over its
economic life based on the contract term as stated in the sales agreement
with the customer on a straight-line method over five years.As previously reported in the Form 10-K, the customer relationship
intangible is $493. The difference of $11 ($493 versus the above
$482) was related to equipment given by the Seller
subsequent to the completion date on July 1, 2004.Pro Forma Financial InformationThe unaudited financial information in the table below summarizes the
combined results of the operations of the Company and the new burn-in
testing division in Malaysia for the three months ended September 30, 2003
as if the acquisition had occurred on July 1, 2003. The results from
operations for the three months ended September 30, 2004 included the
business acquisition that was completed at the beginning of the first
quarter of fiscal 2005.The pro forma financial information is presented for informational
purposes only and is not necessarily indicative of the results of
operations that would have been achieved had the acquisition taken place
at the beginning of the three months ended September 30, 2003. The
unaudited pro forma combined statement of operations for the three months
ended September 30, 2003 combines the historical results for the Company
for three months ended September 2003 and the historical results for the
new burn-in testing division for the period preceding the merger on July
1, 2004. The following amounts are in thousands, except per share amounts. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 HistoricalHistorical
    
    Historicalinformation of the
    
    information of the
    
    ProformaCompany
    
    acquired business
    
    Adjustments
    
    ProformaNet sales
    
    $
    3,850
    
    
    $
    476
    
    
    $
    
    
    
    $
    4,326Net (loss) income
    
    
    (265
    )
    
    
    66
    
    
    
    (24
    )(a)
    
    
    (223
    )Basic and diluted loss per share
    
    
    (0.09
    )
    
    
    
    
    
    
    
    
    
    
    (0.08
    )Basic and diluted weighted
average common shares
outstanding
    
    
    2,928
    
    
    
    
    
    
    
    
    
    
    
    2,928
  (a)
    
    Net loss was adjusted for pro forma purposes to recognize the effect
of the amortization of the other intangible assets over its
economic life of five years on a straight-line method, assuming that
the acquisition took place from July 1, 2003.  8.
    
    BUSINESS SEGMENTSThe Company operates principally in three industry segments, the testing
service industry (which performs structural and electronic tests of
semiconductor devices), the designing and manufacturing of equipment (which
equipment tests the structural integrity of integrated circuits and other
products), and the distribution of various products from other
manufacturers in Singapore and Southeast Asia. The following net sales
were based on customer location rather than subsidiary location.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.
All inter-segment sales are sales from the Manufacturing Segment to the
Testing and Distribution Segment. Total inter-segment sales were $29 and
$25 for the three months ended September 30, 2004 and 2003 respectively.
Corporate 10




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##### Table of Contents



assets mainly consist of cash and prepaid expenses. Corporate
expenses mainly consist of salaries, insurance, professional expenses and
directors fees. The following segment information is unaudited and is in thousands: Business Segment Information: Quarter
    
    
    
    
    
    Operating
    
    
    
    
    
    Depr.Ended
    
    Net
    
    Income
    
    
    
    
    
    and
    
    CapitalSep. 30,
    
    Sales
    
    (loss)
    
    Assets
    
    Amort.
    
    ExpendituresManufacturing
    
    FY 2005
    
    $
    3,978
    
    
    $
    92
    
    
    $
    2,349
    
    
    $
    18
    
    
    $
    21FY 2004
    
    
    906
    
    
    
    (281
    )
    
    
    2,508
    
    
    
    22
    
    
    
    55Testing Services
    
    FY 2005
    
    
    2,894
    
    
    
    106
    
    
    
    15,739
    
    
    
    281
    
    
    
    1,359FY 2004
    
    
    2,284
    
    
    
    82
    
    
    
    12,896
    
    
    
    232
    
    
    
    475Distribution
    
    FY 2005
    
    
    979
    
    
    
    3
    
    
    
    1,366
    
    
    
    37
    
    
    
    167FY 2004
    
    
    660
    
    
    
    (38
    )
    
    
    370
    
    
    
    28
    
    
    
    15Corporate
and unallocated
    
    FY 2005
    
    
    
    
    
    
    110
    
    
    
    64
    
    
    
    1
    
    
    
    FY 2004
    
    
    
    
    
    
    (62
    )
    
    
    49
    
    
    
    2
    
    
    
    Total Company
    
    FY 2005
    
    $
    7,851
    
    
    $
    311
    
    
    $
    19,518
    
    
    $
    337
    
    
    $
    1,547FY 2004
    
    $
    3,850
    
    
    $
    (299
    )
    
    $
    15,823
    
    
    $
    284
    
    
    $
    545
 Geographic Area Information: Elimin-Quarter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ationsEnded
    
    United
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    and
    
    TotalSep. 30,
    
    States
    
    Europe
    
    Singapore
    
    Thailand
    
    Malaysia
    
    Other
    
    CompanyNet sales to customers
    
    FY 2005
    
    $
    669
    
    
    
    454
    
    
    
    3,082
    
    
    
    653
    
    
    
    3,022
    
    
    
    (29
    )
    
    
    7,851FY 2004
    
    $
    1,108
    
    
    
    340
    
    
    
    1,822
    
    
    
    549
    
    
    
    55
    
    
    
    (25
    )
    
    
    3,850Operating Income (loss)
    
    FY 2005
    
    $
    (37
    )
    
    
    (31
    )
    
    
    122
    
    
    
    26
    
    
    
    121
    
    
    
    110
    
    
    
    311FY 2004
    
    $
    (129
    )
    
    
    (27
    )
    
    
    (61
    )
    
    
    (18
    )
    
    
    (2
    )
    
    
    (62
    )
    
    
    (299
    )Property,
plant and equipment
    
    FY 2005
    
    $
    3
    
    
    
    365
    
    
    
    3,744
    
    
    
    860
    
    
    
    1,384
    
    
    
    (40
    )
    
    
    6,316FY 2004
    
    $
    90
    
    
    
    425
    
    
    
    3,757
    
    
    
    961
    
    
    
    339
    
    
    
    (40
    )
    
    
    5,532
 11




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##### Table of Contents



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) The discussions of Trio-Tech Internationals (the Company) business and
activities set forth in this Form 10-Q and in other past and future reports and
announcements by the Company may contain forward-looking statements within
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and assumptions
regarding future activities and results of operations of the Company. In light
of the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995, the following factors, among others, 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 and volatility 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 profitably integrating acquired businesses, if
any, into the Company; risks associated with conducting business
internationally and especially in Southeast Asia, including currency
fluctuations and devaluation, currency restrictions, local laws and
restrictions, and possible social, political and economic instability; and
other economic, financial and regulatory factors beyond the Companys control.
See the discussions elsewhere in this Form 10-Q for more information. In some
cases, you can identify forward-looking statements by the use of terminology
such as may, will, expects, plans, anticipates, estimates,
potential, believes, can impact, continue, or the negative thereof or
other comparable terminology. We undertake no obligation to update forward-looking statements to reflect
subsequent events, changed circumstances, or the occurrence of unanticipated
events. Overview Founded in 1958, Trio-Tech International provides third-party semiconductor
testing and burn-in services primarily through its laboratories in Southeast
Asia. The Company operates in three distinct segments: Distribution,
Manufacturing, and Testing. At or from its facilities in California and
Southeast Asia, the Company also designs, manufactures and markets equipment
and systems used in the testing and production of semiconductors, and
distributes semiconductor processing and testing equipment manufactured by
others. (i) Results of operations and business outlook The following table sets forth our revenue components for the three months
ended September 30, 2004 and 2003, respectively. Three Months EndedSep. 30,
    
    Sep. 30,2004
    
    2003Net Sales:Testing
    
    
    36.86
    %
    
    
    59.33
    %Manufacturing
    
    
    50.67
    
    
    
    23.53Distribution
    
    
    12.47
    
    
    
    17.14Total
    
    
    100.00
    %
    
    
    100.00
    %
 Geographically, we operate in the U.S., Singapore, Malaysia, Thailand and
Ireland. Our customers are mainly concentrated in Southeast Asia and they are
either semiconductor chip manufacturers or testing facilities that purchase our
testing equipment. During the three months ended September 30, 2004, the Manufacturing segment
replaced our core business, the Testing segment, with the highest sales for the
quarter. When compared to this same period last year, the Manufacturing
segment more than doubled from 23.53% of net sales to 50.67%, and the Testing
segment decreased from 59.33% of total net sales to 36.86%. The increase in the
Manufacturing segment was due to a sudden surge in sales of burn-in systems and
board volume in Asia. The Manufacturing segment in Singapore was able to turn its backlog at the end
of the fourth quarter of fiscal 2004 into sales, thereby experiencing
exceptionally high sales in the first quarter of fiscal 2005. The Company
expects that business volume for the Singapore Manufacturing operation will
primarily come from Southeast Asia. The backlog in the Singapore Manufacturing
operation as of September 30, 2004 was lower than that at June 30, 2004, as the
demand for burn-in boards varied. Hence, it is anticipated that sales in the
Manufacturing segment will start to slow down in the second quarter of fiscal
2005. Meanwhile, 12




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the U.S. Manufacturing operation will continue to service existing customers
and market the inventory of used and refurbished equipment accordingly. The Testing segment experienced a change in product mix in its Singapore
operation during the first quarter of fiscal 2005. The Singapore Testing
operation provided more burn-in services for chips that were used in newly
design devices, which offset the fall in demand for services of chips used in
other devices. In addition, the newly acquired burn-in division in Malaysia
began to contribute to the Testing segment sales. Sales contributed by this
burn-in division in Malaysia in the first quarter of fiscal 2005 amounted to
approximately $500. The Company allocated the purchase price of the newly acquired burn-in division
in Malaysia to the tangible assets and intangible assets acquired based on
their estimated fair values. The fair value assigned to intangible assets
acquired was based on estimates and assumptions determined by the management.
Purchase intangibles with finite lives are amortized on a straight-line basis
over their respective useful lives. The total purchase price was allocated as
follows (in thousands): Total purchase price:Cash
    
    $
    823Notes payable
    
    
    395$
    1,218Allocated as follows:Fixed assets
    
    $- Plant and machinery
    
    
    711- Production equipment
    
    
    13- Office equipment
    
    
    5- Leasehold improvement
    
    
    7736Intangible assets  customer relationship
    
    
    482$
    1,218
 The excess purchase price
over the fair value of tangible assets acquired was attributed to the customer relationship obtained from
the above business acquisition and recorded as other intangible assets. No goodwill is recognized in this context. The
customer relationship intangible will be amortized over its economic life based
on the contract term as stated in the sales agreement with the customer on a
straight-line method over five years. As previously reported in the Form 10-K, the customer relationship intangible
is $493. The difference of $11 ($493 versus the above $482) was
related to equipment given by the Seller subsequent to the
completion date on July 1, 2004. The Distribution segment turned the backlog it carried over from the fourth
quarter of 2004 into sales in the Singapore operation, thereby experiencing
high sales for the first quarter of 2005. However, sales of low-margin
products remained about the same as the fourth quarter of 2004. This operation
is now looking into new products to boost sales in the Distribution segment.
Although the sales from the Distribution segment for the first quarter of 2005
were higher than the same period last year, such sales, as a percentage of
total net sales, decreased due to the increase in sales in the Manufacturing
segment. The key performance indicator for the Company is based on market demand. Sales
activities such as bookings, queries on products and backlog also formed part
of our performance indicators, as well as customers forecasts and the
financial results of customers and competitors. The Semiconductor Industry
Association (SIA) forecasts an upward trend in the electronic materials cycle
until 2006. Asia makes up 63% of the semiconductor market region, and there is
evidence of an increasing revenue trend for electronic device manufacturers in
Asia, mainly into Taiwan and China. One of the current trends in the semiconductor industry seems to be an
increased demand for computer and consumer electronics products in the Asia
market. Another is the uptrend in the automotive market, which is seeing usage
of electronic components in motor vehicles with greater frequency than in the
past. Unfortunately, current equipment spending is growing slowly in the U.S.
and global economies due to high oil prices and the continued concern with the
ongoing instability in the Middle East. Additionally, the back-end capital
equipment sectors have been affected by the rise in inventories of most of the
semiconductor manufacturers in the U.S. 13




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There are several influencing factors which create uncertainty when forecasting
performance, such as the ever-changing nature of technology. For example, the
life-cycles of certain types of burn-in products are falling quicker than
expected. Additionally, the semiconductor industry is highly competitive.
Operations are given a very short lead time to generate products, as orders are
confirmed at the last minute, not to mention the complications of special
requirements from customers. As a result, the Company has taken action to help
protect it from these uncertainties by, among other things, looking for
business opportunities at trade shows, upgrading and improving its burn-in
technology so as to gain customers confidence and maintain market shares, as
well as looking for alternatives for burn-in, and exploring new markets. The
Company continues to cut costs, especially material costs, and maintain a lean
headcount. The various operations continue to stock pile in order to meet
short notices. Another area the Company is working on is taking more time to
understand and focus on the needs of the customers. (ii) Financial information During the three months ended September 30, 2004, total assets increased by
$1,518 from $18,000 at June 30, 2004 to $19,518. The majority of the increase
was in accounts receivables, inventories, property, plant and equipment and
other assets, but offset with a decrease in short term deposits of $1,212. The increase in accounts receivables from $3,695 at June 30, 2004 to $4,469 at
September 30, 2004 was mainly attributable to the sales in the Singapore
Manufacturing operation. Part of the increase in manufacturing sales derived
from the new customer described above. A slightly extended credit term was
given to this customer to be comparable to the terms the customer is receiving
from our competitors. The sales in Southeast Asia increased by $4,290, from
$3,145 in the first quarter 2004 to $7,435 in this quarter. Inventories increased by $369 from June 30, 2004 to $1,778 at September 30,
2004. This was mainly due to an increase in raw materials and work-in-progress
after provision for stock obsolescence of $303 and $83, respectively, which was
offset with a $17 decrease in finished goods. The bulk of the movements in
inventories were attributed to both the Singapore Manufacturing and
Distribution operations. Property, plant and equipment increased substantially by $1,114 from June 30,
2004 to $6,316 at September 30, 2004 mainly due to the acquisition of fixed
assets by the Testing segment in Southeast Asia. During the first quarter of
fiscal 2005, the additions to property, plant and equipment totaled $1,547, of
which $359 was paid as a deposit before June 30, 2004, but the equipment was
received in the first quarter of fiscal 2005. The majority of the additions
were due to fixed assets located in the newly acquired burn-in division in
Malaysia in the amount of $736, and purchases of new plant and machinery in
Malaysia to meet the new customers requirements. In addition, we combined two
of the facilities in the Singapore Testing operation to improve cost
effectiveness. The Company recognized $482 in other intangible assets for the customer
relationship intangible and it will be amortized over five years. The amortized
expenses incurred were $24 for the three months ended September 30, 2004.
Consequently, the balance of the customer relationship intangible amounted to
$458 at September 30, 2004. The significant drop in short term deposits, which decreased by $1,212 from
$5,649 at September 30, 2003 to $4,437 at September 30, 2004 was mainly due to
the investment in the burn-in division in Malaysia. The total acquisition costs
of the burn-in division amounted to $1,218, of which $824 was paid and funded
internally and the balance is payable by way of a note. In addition, more plant
and machinery, in the amount of $245, were purchased to meet our new customers
requirements and $59 was placed with the landlord as a deposit for the rental
of the factory previously used by the seller of such burn-in division. Total liabilities at September 30, 2004 were $8,094, reflecting a $1,228
increase in total liabilities from $6,866 at June 30, 2004. Accounts payable at
September 30, 2004 increased by $418 since June 30, 2004 due mainly to a rise
in quantity of materials purchased for two of the operations in Southeast Asia
at the end of the first quarter. Accrued expenses increased by $666 mainly due
to the note payable to the seller of the burn-in division of $395. The increase
in other accruals were attributable to the provision for warranty of $23,
utilities of $79, payroll of $45 in Southeast Asia and $124 in accrual
purchases. There was a proceed of $285 for long-term debt in Southeast Asia
during the first quarter of fiscal 2005, but this was offset by a decrease in
notes payable and capitalized leases as a result of net payments of $35 and
$190, respectively. As of September 30, 2004, total liabilities (excluding
minority interest) were 87% of total capital, compared with 76.1% at June 30,
2004. Total liabilities as a percentage of total capital was higher in fiscal
2004 mainly due to higher accounts payable and accrued expenses as mentioned
earlier. 14




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##### Table of Contents



Comparison of First Quarter Ended September 30, 2004 (2005) and September 30,
2003 (2004) Q1 2005
    
    Q1 2004Net Sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of Sales
    
    
    75.7
    %
    
    
    76.0
    %Gross Margin
    
    
    24.3
    %
    
    
    24.0
    %Operating ExpensesGeneral and administrative
    
    
    16.5
    %
    
    
    25.5
    %Selling
    
    
    3.4
    %
    
    
    5.3
    %Research and development
    
    
    0.4
    %
    
    
    0.8
    %Impairment Loss
    
    
    0.0
    %
    
    
    0.0
    %Loss on disposal of PP&E
    
    
    0.0
    %
    
    
    0.2
    %Total Operating Expenses
    
    
    20.3
    %
    
    
    31.8
    %Income from operations
    
    
    4.0
    %
    
    
    -7.8
    %
 Overall Net Sales and Gross Margin Overall sales for Q1 2005 were $7,851, up 103.9% from the overall sales for Q1
2004 of $3,850. The sales increase was primarily attributable to the
Manufacturing segment in Singapore, and additional sales from a new customer in
Southeast Asia. The gross margin remained relatively flat at 24% from Q1 2004
to Q1 2005, though there was a change in product mix. This change of product
mix took place mainly within and between the three segments. Manufacturing Segment The revenue and gross margin for the Manufacturing Segment for the first
quarter of 2005 and 2004 were as follows: (In Thousands, unaudited)
    
    Q1 2005
    
    Q1 2004Revenue
    
    $
    3,978
    
    
    $
    906Gross margin
    
    
    16.0
    %
    
    
    8.8
    %
 The Manufacturing segment experienced an increase in sales of $3,072 from Q1
2004 to Q1 2005, a 339.1% increase. Different regions showed differing demands
for computer and consumer electronics products. Overall, the improvement in
the Manufacturing segment sales was a result of an increase in sales of burn-in
systems and burn-in boards. Burn-in systems sales increased $661 from Q1 2004
to Q1 2005, as no system was sold in the same quarter last year due to poor
sales. The increase in sales was attributable to the fact that some of our
customers in Asia who are electronic device manufacturers increased their
capital equipment in order to meet the increase in production capacity. Sales
of burn-in boards increased by $2,534 from Q1 2004 to Q1 2005, an increase of
683% in quantity sold and 98% in selling price, due to the rise in demand for
electronic components, primarily from customers in Asia. The increase in sales of burn-in boards and systems was offset by a decrease in
sales of Component Centrifuges, Artic Temperature Controlled Chucks and Wet
Process Stations. Component Centrifuge and Wet Process Station sales declined
by $66 and $26 respectively, compared to Q1 2004, as none of this equipment was
sold in Q1 2005. Sales of Artic Temperature Controlled Chucks were 45.6% lower
than those of Q1 2004, with a 66.7% decrease in quantity sold, but a 63.4%
increase in selling price. The reason for the decrease in sales of Component
Centrifuges and Artic Temperature Controlled Chucks was due to very slow growth
of capital equipment spending in the U.S. as a result of higher oil prices and
ongoing instability in the Middle East. The increase of U.S. semiconductor
industry customers inventories also forced them to push back plans to purchase
capital equipment. As for Wet Process Station sales, there were bookings for
this equipment in Q1 2005; however any actual sales will not register until at
least Q2 of 2005. Although the increase in the sales of the Manufacturing segment derived
primarily from sales of burn-in boards, the margin for burn-in boards remained
low due to the increase in material unit costs, despite the doubling of its
average unit selling price. The rise in burn-in systems sales and the increase
in average unit selling price of Artic Temperature Controlled Chucks were
mainly responsible for the Manufacturing segment margin increase of 7.2%. Testing Segment The revenue and gross margin for the Testing Segment for the first quarter of
2005 and 2004 were as follows: 15




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##### Table of Contents



(In Thousands, unaudited)
    
    Q1 2005
    
    Q1 2004Revenue
    
    $
    2,894
    
    
    $
    2,284Gross margin
    
    
    35.2
    %
    
    
    30.7
    %
 The revenue for the Testing segment rose $610 from Q1 2004 to Q1 2005, an
increase of 26.7%. The increased sales mainly derived from the newly acquired
burn-in division in Malaysia, which contributed approximately $500 in sales.
The balance of the $110 sales increase was contributed by the other Testing
operations in Southeast Asia, where burn-in services increased for chips used
in the new type of burn-in device. This was, however, offset by the drop in
demand for services of chips that were used in another type of burn-in device. An improvement in the margin of the Singapore operation also contributed to the
overall increase to the margin of the Testing segment of 4.5%. The improved
margin in the Singapore operation of 8.5% in Q1 2005 over the same period last
year was the result of the new type of burn-in device, replacing the existing
burn-in device, whose average service costs had been previously reduced due to
a change in customers requirements. In addition, the utilities costs as a
percentage of sales dropped from 16.1% in Q1 2004 to 14.3% in Q1 2005 and labor
costs dropped from 24.3% in Q1 2004 to 21.6% in Q1 2005, as a result of
consolidating two of the production facilities in the Singapore Testing
operation. Distribution Segment The revenue and gross margin for the Distribution Segment for the first quarter
of 2005 and 2004 were as follows: (In Thousands, unaudited)
    
    Q1 2005
    
    Q1 2004Revenue
    
    $
    979
    
    
    $
    660Gross margin
    
    
    20.1
    %
    
    
    14.2
    %
 Revenue for the Distribution Segment rose $319 from Q1 2004 to Q1 2005, an
increase of 48.3%. The improvement in sales mainly derived from sales of
Vibration, Chamber and Wafer Fabrication equipment due to the recovery of the
semiconductor industry and electronics market in Asia, as well as greater focus
on the part of our sales team to meet the stringent requirements of customers.
Sales of Vibration, Chamber, and other products rose $332 compared to Q1 2004,
with a 66.7% increase in quantity sold and a 67.9% increase in selling price.
We believe that the increase in sales queries we received in Q1 2005 about
Vibration equipment gives us a healthy indication that the capital equipment
market is becoming more active. On the other hand, sales of low-margin
products decreased from Q1 2004 to Q1 2005 with a drop in sales of $13, a
decline in quantity sold of 20.9%, but a rise in selling price of 7.1%. The improved gross margin of the Distribution segment was a result of the
increase in sales volume and average unit selling price of Vibration, Chamber,
and Wafer Fabrication equipment. This was mainly due to our ability to meet
the stringent requirements of our customers while maintaining a competitive
price in the market. Sales by geographical area By geographical area, net sales into and within the United States region in Q1
2005 decreased by 39.7% when compared to Q1 2004. This was a result of moving
our U.S. Manufacturing operation in San Jose to Singapore, with a focus of
capturing more of the market in Asia. The lost sales from the relocated San
Jose operation contributed to 68.6% of the total reduction in sales within the
U.S., and along with the decline in sales of Component Centrifuges and Artic
Temperature Controlled Chucks, sales within this region dropped sharply.
Equipment spending budgets in the U.S. are expected to remain low due to the
rise in oil prices and instability in the Middle East. Net sales into and within the Southeast Asia region increased 178.9%, mainly
due to the high demand for burn-in boards and burn-in systems in Malaysia and
Singapore. In addition, the recovery of the consumer and electronics markets
in the Asia region boosted the sales for all three segments in this region. Net sales into and within Ireland and other countries increased 33.6% compared
to Q1 2004. This was due to the increase in demand for programming services in
Ireland, as well as greater sales to Japan and Taiwan out of the Singapore
Distribution operation. Operating Expenses The Companys overall operating expenses for first quarter of 2005 and 2004
were as follows: 16




---



##### Table of Contents



(In Thousands, unaudited)
    
    Q1 2005
    
    Q1 2004General and administrative
    
    $
    1,295
    
    
    $
    983Selling
    
    $
    269
    
    
    $
    205Research and development
    
    $
    33
    
    
    $
    32Impairment Loss
    
    $
    1
    
    
    $
    Loss on disposal of PP&E
    
    $
    
    
    
    $
    4$
    1,598
    
    
    $
    1,224
 As a percentage of sales, operating expenses decreased by 11.5% from 31.8% in
Q1 2004 to 20.3% in Q1 2005. A sudden increase in sales was responsible for
this decrease, since some of the general and administrative expenses are
semi-variable and relatively fixed. As a percentage of sales, general and administrative expenses decreased by 9.0%
from 25.5% in Q1 2004 to 16.5% in Q1 2005. The Manufacturing segment was
primarily responsible for this decrease, especially the Manufacturing operation
in Singapore, which managed the significant sales increase with its existing
office headcount while outsourcing some of the projects so as to maintain a
lean overhead. With this strategy, the operation was able to operate with
lower overhead expenses. Salaries, which made up the bulk of the general and
administrative expense, were 28.9% of sales in Q1 2004 and only 2.6% in Q1
2005. General and administrative expenses as a whole increased by $313 for several
reasons. Salaries in Southeast Asia rose $77 to accommodate the new testing
operation in Malaysia and a higher headcount in the Singapore cost center to
support the growing operations in Southeast Asia. Amortization on the customer
relationship intangible of $24 was recognized in Q1 2005 and none in Q1 2004.
There was a provision of bonuses of $76 in Q1 2005 in the Singapore operation
due to better performance. In addition, there was a reversal of provision for
productivity funds of $32 in Q1 2004 due to the cancellation of a Company
employee dinner, whereas in Q1 2005 there was a provision of $68. There was a
higher provision for doubtful debts of $15 in Q1 2005 from the Distribution
operation as one of the customers exceeded its credit term by 90 days. The
Corporate officers spent more time traveling on business, hence travel and
entertainment rose by $24. In addition, there was an increase of $15 in board
fees. The Securities Exchange Commission (SEC) introduced a new regulation
implementing the SOX 404, and an estimated cost of $50 was provided to engage a
consultant to help with these new requirements. There was an increase in audit
fees for the Company, and the newly acquired Testing operation required an
audit for SEC disclosure purposes, thereby incurring higher audit fees totaling
$25. An increase of $15 in legal matters was spent on this new operation as
well. These were all offset with a savings from the operation in San Jose
after it was relocated to Singapore, as salaries decreased by $15 and insurance
decreased by $32. Additionally, miscellaneous expenses dropped by $2. As a percentage of sales, selling expenses decreased by 1.9% from 5.3% in Q1
2004 to 3.4% in Q1 2005. Though the sales in the Singapore Manufacturing
operation increased significantly, traveling and entertainment did not increase
proportionately, as the largest orders came from customers who are all
electronic manufacturers in Asia, thereby traveling was confined to one region. In terms of value, selling expenses increased by $64. Salaries increased $22
due to the increase in headcount to cope with the expansion of the Distribution
operation in Singapore. There was an increase in provision of warranty of $27,
and an increase in commissions of $40, which were in line with the increase in
sales. The Company increased marketing efforts through greater participation
in trade shows and conferences, thus an increase in costs of $13, and an
increase in miscellaneous costs of $4. These were all offset with a savings
from the relocation of the San Jose operation to Singapore, derived mainly from
a decrease in sales personnel salaries of $30 and rental and utilities expenses
of $12. Research and development expenses remained relatively flat in Q1 2005 compared
to Q1 2004. Income (loss) from operations The income (loss) from operations for first quarter of 2005 and 2004 were as
follows: (In Thousands, unaudited)
    
    Q1 2005
    
    Q1 2004Manufacturing Segment
    
    $
    92
    
    
    $
    (281
    )Testing Segment
    
    $
    106
    
    
    $
    82Distribution Segment
    
    $
    3
    
    
    $
    (38
    )Corporate
    
    $
    110
    
    
    $
    (62
    )$
    311
    
    
    $
    (299
    )
 The Company turned the operating loss of $299 in Q1 2004 into an operating
income of $311 in Q1 2005. All of the operations showed improvement in their
results, particularly in the Manufacturing segment. 17




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The Manufacturing segment experienced an increase in operating income of $373
from an operating loss of $281 in Q1 2004 to an operating profit of $92 in Q1
2005. The surge in sales and an improvement of $557 in the gross profit
compared to Q1 2004 as mentioned earlier boosted the results for the
Manufacturing segment. After the transfer of the Universal Systems
Manufacturing operation in San Jose to Singapore, certain fixed costs incurred
in the operation in Q1 2004, such as $45 in salaries, $44 in rental, utilities
and insurance, and $6 in commissions, were not repeated in Q1 2005. The
transferred operation is being operated by the existing Singapore Distribution
personnel. General and administrative expenses for the Manufacturing segment
as a percentage of sales decreased from 24.7% in Q1 2004 to 6.7% in Q1 2005,
while selling expenses as a percentage of sales dropped from 10.9% to 2.0% due
mainly to the threefold rise in sales from Q1 2004. The Manufacturing
operation in Singapore managed the sales increase with its existing office
headcount and outsourced some of its projects in order to maintain a lean
workforce and operate with lower overhead expenses. Corporate also contributed to the improvement in operating income by saving
$171 in Q1 2005 as compared to Q1 2004. The Corporate office reimbursed its
operating expenses by imposing a fee on all subsidiaries on a fixed percentage
of revenue. While the rate remained unchanged, the sudden surge in sales for
all operations in Southeast Asia, especially in the Manufacturing segment,
resulted in collected fees greater than corporates operating expenses. The Testing segment experienced an increase in operating income of $24 from $82
in Q1 2004 to $106 in Q1 2005. The gross profit in the Testing segment improved
by $317 as compared to Q1 2004. The Singapore Testing operation contributed to
this rise in income with its increase in services and a better margin generated
due to the successful implementation of effective cost control measures as
mentioned earlier. 55% of the operating income contributed by the new testing
division in Malaysia will be incremental to the profit of the Company as a
whole. However, the Company expects that this operation will bring in more
sales to the segment next year. Meanwhile, at this initial stage, there were
new costs incurred for legal fees for the acquisition, and statutory fees for
the disclosure to meet SEC requirements. The Distribution segment generated an operating income of $3 in Q1 2005, after
experiencing an increase of $41 from an operating loss of $38 in Q1 2004. This
improvement was primarily due to an increase in gross profit of $103 as a
result of an increase in sales as mentioned earlier. The general and
administrative expenses for the Distribution segment as a percentage of sales
decreased from 7.1% in Q1 2004 to 4.7% in Q1 2005, while the selling expenses
as a percentage of sales remained unchanged. General and administrative
expenses for Vibration equipment and Chambers remained similar to those in Q1
2004, which along with the increase in price, also contributed to the income
from the Distribution segment. Meanwhile, salaries of sales personnel and
commissions increased in line with the increase in sales. Interest Expense The interest expenses for first quarter of 2005 and 2004 were as follows: (In Thousands, unaudited)
    
    Q1 2005
    
    Q1 2004Interest expense
    
    $
    (35
    )
    
    $
    (35
    )
 Interest expense remained relatively flat from Q1 2004 to Q1 2005. There was
more interest on lines of credit but less for capital leases in Q1 2005. Other Income The other income for first quarter of 2005 and 2004 were as follows: (In Thousands, unaudited)
    
    Q1 2005
    
    Q1 2004Other income
    
    $
    85
    
    
    $
    138
 Other income decreased $53 in Q1 2005 compared to Q1 2004. This was due in
part to the gain on marketable securities of $113 in Q1 2004 after the Malaysia
subsidiary disposed of all investments and subsequently exited the market,
while there was no such transaction in Q1 2005. As a result, there was lower
dividend income of $4 generated from the same subsidiary. There was also a
decrease in sundry income of $5. The decrease in other income was offset by
the increase in rental income of $16 due to the subleasing of factories in
Ireland and Malaysia. The decrease was further offset by an exchange gain of
$12 in Q1 2005 due to the appreciation of Singapore dollars against U.S.
dollars towards the end of the quarter, while in Q1 2004 there was an exchange
loss of $38 due to the reverse effect. Income Tax Current income tax expense for the first quarter of 2005 was approximately
$111, an increase of $96, compared to the income tax provision of $15 in the
first quarter of 2004, which was due mainly to higher taxable profits generated
from Southeast Asia in the first 18




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quarter of 2005. Because of the different income tax jurisdictions, the taxable
income generated in foreign countries will not offset the net loss generated in
the U.S. Therefore, we generally incur certain income tax expenses in any
fiscal year. Net Income As a result of all of the factors analyzed above, the net income attributable
to common shares for the quarter ended September 30, 2004 was approximately
$237, which represented an upswing of $502 in net income from a net loss of
approximately $265 attributable to common shares for the quarter ended
September 30, 2003. Consequently, basic earning per share for the quarter
ended September 30, 2004 increased by $0.17 to $0.08 per share in 2005, from a
loss per share of $0.09 in 2004. Diluted income per share for the quarter ended
September 30, 2004 was $0.08 per share, representing an increase of $0.17 per
share from a loss per share of $0.09 in 2004. Liquidity and Capital Resources Though the working capital (defined as current assets minus current
liabilities) of $6,084 as of September 30, 2004 represents a decrease of
$1,285, or 17.4%, compared to working capital of $7,369 as of June 30, 2004, we
still believe our financial condition remains strong. The current ratio
(defined as current assets divided by current liabilities) was 1.91 as of
September 30, 2004 compared to 2.36 as of June 30, 2004. We believe that the
Company has the ability to maintain positive working capital and strong
liquidity in the near future. Management believes the Company has the economic wherewithal to satisfy any
short-term funding for several reasons. We have cash provided by operating
activities of $299 after adjusting for non-cash items and movements in working
capital. Currently, the Singapore operations are financed using short-term
loans and lines of credit, which are sufficient to meet their needs.
Furthermore, the manufacturing operation in San Jose, California, which
consistently showed a loss, was moved to Singapore and is being operated by the
existing Singapore Distribution personnel. We anticipate that the relocation
will ease the need for working capital used to finance that operation. The burn-in testing operation in Malaysia made several major payments in the
first quarter of fiscal 2005, such as the second payment of the acquisition;
renovation of its office; deposit placement with its landlord to use its
facilities and purchase of equipment to meet the new customers requirements.
We anticipate that the short-term funding required in the near future will be
for the purchase of other equipment for new products and renovation of
approximately $181 and $526, respectively, and the note payable to the seller
of this burn-in division of $395, which will mature at December 31, 2004. The
Company still has sufficient short-term deposits to make these payments. In
addition, we will finance the new customer, which was given an extended credit
term as mentioned earlier, by utilizing our lines of credit. The Companys credit rating provides ready and ample access to funds in global
capital markets. At September 30, 2004, the Company had available short-term
lines of credit totaling $5,025 of which $4,877 was unused. However, of this
$4,877, the line of credit of Trio-Tech Singapore of $594 expired in October
2004. The Company anticipates that it will renew its line of credit at a later
date, but there is no assurance that the Company will do so, will be able to do
so or will be able to do so on terms satisfactory to the Company, or on terms
at least as favorable as those of the expired line of credit. Entity with Facility
    
    Type of
    
    Interest
    
    Credit
    
    UnusedTrio-Tech Malaysia
    
    Line of Credit
    
    7.00%
    
    $
    91
    
    
    $
    91Trio-Tech Bangkok
    
    Line of Credit
    
    6.75%
    
    
    96
    
    
    
    96Trio-Tech Singapore
    
    Line of Credit
    
    4.25 to 6.0%
    
    
    4,838
    
    
    
    4,690$
    5,025
    
    
    $
    4,877
 The Company procured a long-term loan of $285 in the first quarter of fiscal
2005 to consolidate facilities in the Singapore Testing operation in order to
improve cost effectiveness. The Company also procured another loan of
approximately $594 upon which the Company has yet to draw. There were no other capital commitments except those that were disclosed as of
September 30, 2004. Net cash provided by operating activities during the three months ended
September 30, 2004 was $299, reflecting a decrease of $135, compared to net
cash of $434 provided by operating activities during the three months ended
September 30, 2003. Cashflow from operating activities decreased mainly due to
an increase in accounts receivable, inventories, and other receivables,
amounted to approximately to $1,391, offset with the increase in accounts
payable and accrued expenses of $1,085 together with other factors of $171,
giving a net decrease of $135. 19




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The increase in accounts receivable of $1,316 was mainly attributable to the
surge in sales for Southeast Asia operations towards the end of the first
quarter of fiscal 2005. Nevertheless, the accounts receivable turnover index
(defined as net sales divided by average ending accounts receivable less bad
debt allowance) has increased from 4.56 times at September 30, 2003 to 7.69
times at September 30, 2004, which indicated an improvement in collection. Inventory increased by $363 at September 30, 2004 as compared to September 30,
2003, as the Singapore Distribution operation, and the Singapore Manufacturing
operation especially, started to stock up inventories to cater to orders that
will be given on short notice. The inventory turnover index (defined as cost of
sales divided by average ending inventory), however, was 14.95 times at
September 30, 2004, up from 11.12 times at September 30, 2003. The increase of
inventories mainly derived from the rise of raw materials and work-in progress
in the Singapore operations towards the end of the three months ended September
30, 2004. Other receivables increased by $233 at September 30, 2004 due to the down
payment of fixed assets made by the operations in Southeast Asia and the rental
deposit placed by the newly acquired burn-in division in Malaysia. Accounts payable and accrued expenses as of September 30, 2004 increased by
$1,079 over September 30, 2003 mainly due to an increase in purchases of
materials, especially in the Singapore operation, to meet orders anticipated in
the second and third quarters. There was an increase in the bookings of our
Singapore Manufacturing and Distribution operations at September 30, 2004 as
compared to those at September 30, 2003. Accrued expenses included the note

payable to the seller of the burn-in division in the principal amount of $395.
There were other factors that contributed to the increase in accrued expenses
as mentioned earlier. The other intangible assets at September 30, 2004 consisted of the balance of
the customer relationship intangible of $482, of which $24 was amortized during
the three months ended September 30, 2004. Net cash used in investing activities during the three months ended September
30, 2004 was $290, reflecting an increase of $121 in Q1 2005 compared to $169
used in investing activities during September 30, 2003. The investment in
short-term deposits at September 30, 2004 decreased by $1,495 from September
30, 2003, as the short-term deposits were reinvested in capital expenditure
with an increase of $713 during September 30, 2004. The increase in capital
expenditure in Q1 2005 included the fixed assets located in the newly acquired
burn-in division in Malaysia and purchases of new plant and machinery in
Malaysia to meet our new customers requirements. In addition, we consolidated
two facilities in the Singapore Testing operation to improve cost
effectiveness. The Company recognized $482 as the customer relationship
intangible in the first quarter of fiscal 2005 and none in the same quarter
last year. In addition, we realized the investment in marketable securities
with proceeds of $555 in the first quarter of fiscal 2004 and there were no
proceeds on disposal of marketable securities in Q1 2005, as we had exited the
market since then. The greater amount of cash used in investments offset the
higher proceeds of $130 from sales of equipment in Q1 2005. Net cash provided by financing activities during the three months ended
September 30, 2004 was $77 compared to $876 used in financing activities in Q1
2004. The swing of $953 was due to lower net repayment on lines of credit,
debt and capitalized leases during the three months ended September 30, 2004 as
most notes payable and capitalized leased were paid off in 2004. In addition,
there was a proceed from long-term debt of $285 during the three months ended
September 30, 2004. Approximately $732 of cash deposits as of September 30, 2004 was held in
the Companys 55% owned Malaysian subsidiary. Of such amount, $463 was
denominated in the currency of Malaysia, of which $143 is currently available
for movement to overseas, as authorized by the Central Bank of Malaysia. There
are additional amounts available for distribution as dividends (after making
deductions for income tax) pursuant to Malaysian regulations. Corporate Guarantee Arrangement The Company provides a corporate guarantee to one of its subsidiaries in
Southeast Asia of approximately $1,241 to secure line-of-credit and term loans
from a bank to finance the operations of such subsidiary. With the strong
financial position of the subsidiary company, the Company believes this
corporate guarantee arrangement will have no material impact on its liquidity
or capital resources. Recently Issued Accounting Pronouncements In January 2003, the FASB issued Financial Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. FIN 46, as amended by FIN 46®,
issued in January 2003, requires an investor with a majority of the variable
interests in a variable interest entity to consolidate the entity and also
requires majority and significant variable interest investors to provide
certain disclosures. A variable interest entity is an entity in which the
equity investors do not have a controlling financial interest or the equity
investment at risk is insufficient to finance the entitys activities without
receiving additional subordinated financial support from other parties. The 20




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provisions of FIN 46(R) are applicable for fiscal years ending after December
15, 2004. The Company does not have any variable interest entities that must
be consolidated. Critical Accounting Estimates & Policies In response to the SECs Release No. 33-8040, Cautionary Advice Regarding
Disclosure About Critical Accounting Policy, the Company identified the most
critical accounting principles upon which its financial status depends. The
Company determined that those critical accounting principles are related to the
use of estimates, inventory valuation, revenue recognition, income tax and
impairment of intangibles and other long-lived assets. The Company states these
accounting policies in the relevant sections in this managements discussion
and analysis, including the Recently Issued Accounting Pronouncements discussed
below. Use of Estimates The Companys financial statements have been prepared in accordance with
accounting principles generally accepted in the United States, which require us
to make estimates and judgments that significantly affect the reported amounts
of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. The Company regularly evaluates these
estimates, including those related to inventory valuation, revenue recognition
and income taxes. These estimates are based on historical experience and on
assumptions that are believed by management to be reasonable under the
circumstances. The most important estimates included in the financial
statements are the allowance for doubtful accounts, provision for inventory
obsolescence, the estimated useful life of long-lived assets, and valuation
allowance for deferred tax assets. Actual results may differ materially from
these estimates, which may impact the carrying values of assets and
liabilities. Inventory Valuation We value our inventories at the lower of cost or market. We write down
inventories for not saleable, excess, or obsolete raw materials,
work-in-process and finished goods by charging such write-downs to cost of
sales. In addition to write downs based on newly introduced parts, statistical
and judgmental assessments are calculated for the remaining inventory based on
salability and obsolescence. Revenue Recognition The Company has three business segments: Manufacturing, Distribution, and
Testing services. Revenues generated from sales of products in the Manufacturing and Distribution
segments are recognized when persuasive evidence of an arrangement exists,
delivery of the products has occurred, customer acceptance has been obtained,
which means the significant risks and rewards of the ownership have been
transferred to the customer, the price is fixed or determinable and
collectibility is reasonably assured. Certain products sold (in the
Manufacturing segment) require installation and training to be performed. Revenue from product sales is also recorded in accordance with the provisions
of Emerging Issues Task Force (EITF) Statement 00-21 Revenue Arrangements with
Multiple Deliverables and Staff Accounting Bulletin (SAB) 104 Revenue
Recognition in Financial Statements which generally requires revenue earned on
product sales involving multiple-elements to be allocated to each element based
on the relative fair values of those elements. Accordingly, the Company
allocates revenue to each element in a multiple-element arrangement based on
the elements respective fair value, with the fair value determined by the
price charged when that element is sold and specifically defined in a quotation
or contract. The Company allocates a portion of the invoice value to products
sold and the remaining portion of invoice value to installation work in
proportion of the fair value of products sold and installation work to be
performed. Training elements are valued based on hourly rates, which the
Company charges for these services when sold apart from product sales. The
fair value determination of products sold and the installation and training
work is also based on our specific historical experience of the relative fair
values of the elements if there is no easily determinable market price to be
considered. In fiscal 2005 and 2004, the installation revenues generated in
connection with product sales were immaterial and included in the product sales
revenue line on the consolidated statement of income. The Company estimates an
allowance for sales returns based on historical experience with product
returns. Revenue derived from testing service is recognized when testing services are
rendered. Income Tax We account for income taxes in accordance with Statement of Financial
Accounting Standards No 109, Accounting for Income Taxes (SFAS No. 109).
SFAS No. 109 requires an entity to recognize deferred tax liabilities and
assets. Deferred tax assets and liabilities are recognized for the future tax
consequence attributable to the difference between the tax bases of assets and
liabilities and their reported amounts in the financial statements. Deferred
tax assets and liabilities are measured using the enacted tax rate expected to
apply to taxable income in the years in which those temporary differences are
expected to 21




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be recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that included the
enactment date. Our foreign subsidiaries are subject to income taxes in the regions where they
operate. Because of the different income tax jurisdictions, net losses
generated in the U.S. cannot be utilized to offset the taxable income generated
in foreign countries. Therefore, we may incur certain income tax expenses in
any fiscal year. For U.S. income tax purposes, no provision has been made for U.S. taxes on
undistributed earnings of overseas subsidiaries with which the Company intends
to continue to reinvest. It is not practicable to estimate the amount of
additional tax that might be payable on the foreign earnings if they were
remitted as dividends, were lent to the Company, or if the Company should sell
its stock in the subsidiary. However, the Company believes that US foreign tax
credits and net operating losses available would substantially eliminate any
additional tax effects. Impairment of Long-Lived Assets Effective July 1, 2002, we adopted the provisions of Statement of Financial
Accounting Standard No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS No. 144). SFAS No. 144 requires that long-lived
assets be reviewed for impairment annually and whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable through the estimated undiscounted cash flows expected to result
from the use and eventual disposition of the assets. Whenever any such
impairment exists, an impairment loss will be recognized for the amount by
which the carrying value exceeds the fair value. Intangible Assets In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires
that all business combinations initiated after June 30, 2001 is accounted for
under the purchase method and addresses the initial recognition and measurement
of goodwill and other intangible assets acquired in a business combination. Other intangible assets represents the allocation of the purchase price over
the fair market value of any non-tangible asset other than the goodwill. The
Company recognized $482 as the customer relationship intangible and amortized
on a straight-line basis for five years over the expected period to be
benefited. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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 and thus subject
us to market risk due to those fluctuations. 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, though no assurances can be
given that material losses will not occur. The interest on our loans, capitalized leases and lines of credit range from
4.19% to 7.25% per annum. As of September 30, 2004, the outstanding aggregate
principal balance on these loans was approximately $1,770. These interest rates
are subject to change and we cannot predict an increase or decrease in rates,
if any. 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 and Euro dollars,
Malaysian ringgit, Thai Baht 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 translation adjustments resulted in an increase of $31 and $131 to
shareholders equity for the three months ended September 30, 2004 and 2003,
respectively. We try to reduce our risk of foreign currency fluctuations 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. 
 ITEM 4. CONTROLS AND PROCEDURES An evaluation was carried out by the Companys Chief Executive Officer and
Chief Financial Officer of the effectiveness of the Companys disclosure
controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the
Securities Exchange 22




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Act of 1934, as amended) as of September 30, 2004, the end of the period
covered by this Form 10-Q. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that these disclosure controls
and procedures were effective. During the period covered by this report, there
have been no changes in the Companys internal control over financial reporting
that have materially affected or are reasonably likely to materially affect the
Companys internal control over financial reporting. 
 PART II. OTHER INFORMATION 
 Item 1. Legal Proceedings Not applicable 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Malaysian and Singapore regulations prohibit the payment of dividends
if the Company does not have sufficient retained earnings and tax credit.
In addition, the payment of dividends can only be made after making
deductions for income tax pursuant to the regulations. Furthermore, the
cash movements from the Companys 55% owned Malaysian subsidiary to
overseas are restricted and must be authorized by the Central Bank of
Malaysia. California law also prohibits the payment of dividends if the
Company does not have sufficient retained earnings or cannot meet certain
asset to liability ratios. 
 Item 3. Defaults Upon Senior Securities Not applicable 
 Item 4. Submission of Matters to Vote of Security Holders Not applicable 
 Item 5. Other Information Not applicable 
 Item 6. Exhibits  31.1
    
    Rule 13a-14(a) Certification of Principal Executive Officer of Registrant31.2
    
    Rule 13a-14(a) Certification of Principal Financial Officer of Registrant32
    
    Section 1350 Certification. 23




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. TRIO-TECH INTERNATIONALBy:
    /s/ Victor H.M. TingVICTOR H.M. TINGVice President and
Chief Financial Officer
(Principal Financial Officer)Dated: November 12, 2004 24