UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 ------------------------------------ - -- OR [ ] 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 0-9010 ---------------------------------------------- ROBINSON NUGENT, INC. - ----------------------------------------------------------------------- (Exact name of registrant as specified in its charter) INDIANA 35-0957603 - ----------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 800 East Eighth Street, New Albany, Indiana 47151-1208 - ----------------------------------------------------------------------- - ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (812) 945-0211 ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: As of October 31, 1996, the registrant had outstanding 4,891,765 common shares without par value. The Index to Exhibits is located at page 13 in the sequential numbering system. Total pages: 14. ROBINSON NUGENT, INC. AND SUBSIDIARIES INDEX Page No. ------- PART I. Financial Information: Item 1. Financial Statements (Unaudited) Consolidated condensed balance sheets at September 30, 1996, September 30, 1995 and June 30, 1996 3 Consolidated condensed statements of income for the three months ended September 30, 1996 and September 30, 1995.......5 Consolidated condensed statements of cash flows for the three months ended September 30, 1996 and September 30,1995..6 Notes to consolidated condensed financial statements..... 7 Item 2. Management's discussion and analysis of financial condition and results of operations ...........8 PART II. Other Information ..........11 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ROBINSON NUGENT, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA) September 30 June 30 ---------------------- ------- ASSETS 1996 1995 1996 ------- ------- ------- Current assets: Cash and cash equivalents $ 1,338 $ 3,792 $ 2,368 Accounts receivable, net 11,542 11,516 10,433 Inventories: Raw materials 1,406 1,718 1,899 Work in process 6,554 6,605 7,021 Finished goods 4,886 3,317 4,526 ------- ------- ------- Total inventories 12,846 11,640 13,446 Other current assets 1,649 1,605 1,532 ------- ------- ------- Total current assets 27,375 28,553 27,779 ------- ------- ------- Property, plant & equipment, net 23,116 25,465 23,618 Other assets 68 986 69 ------- ------- ------- Total assets $50,559 $55,004 $51,466 ======= ======= ======= See accompanying notes to consolidated condensed financial statements. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (CONTINUED) ROBINSON NUGENT, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA) September 30 June 30 -------------------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995 1996 ------- ------- ------- Current liabilities: Current installments of long-term debt $ 466 $ 913 $ 713 Short-term bank borrowings 6,400 1,011 6,400 Accounts payable 4,339 5,955 5,692 Accrued expenses 4,184 4,318 4,557 Income taxes 960 792 89 ------- ------- ------- Total current liabilities 16,349 12,989 17,451 Long-term debt, excluding current installments 2,965 3,762 3,036 Deferred income taxes 1,010 1,057 1,011 ------- ------- ------- Total liabilities 20,324 17,808 21,498 ------- ------- ------- Shareholders' equity: Common shares without par value Authorized shares 15,000,000; issued 6,851,250 shares at September 30, 1995, and June 30, 1996, and 6,850,000 shares at September 30, 1995. 20,950 20,947 20,950 Retained earnings 19,776 22,965 19,521 Equity adjustment from foreign currency translation 2,775 3,532 2,847 Employee stock purchase plan loans and deferred compensation (270) (624) (354) Less treasury shares: 1,959,485 shares at September 30, 1996, and June 30 1996, and 1,459,642 shares at September 30, 1995 (12,996) (9,624) (12,996) ------- ------- ------- Total shareholders' equity 30,235 37,196 29,968 ------- ------- ------- Total liabilities and shareholders' equity $50,559 $55,004 $51,466 ======= ======= ======= See accompanying notes to consolidated condensed financial statements. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (CONTINUED) ROBINSON NUGENT, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) Three Months Ended September 30 -------------------- 1996 1995 ------- ------- Net sales $21,123 $20,500 Cost of sales 16,396 15,239 ------- ------- Gross profit 4,727 5,261 Selling, general and administrative expenses 3,753 3,773 ------- ------- Operating income 974 1,488 ------- ------- Other income (expense): Interest income 30 27 Interest expense (187) (124) Royalty income 30 30 Currency gain (loss) 19 (52) Other expense -- (59) ------- ------- (108) (178) ------- ------- Income before income taxes 866 1,310 Income taxes 464 510 ------- ------- Net income $ 402 $ 800 ======= ======= Net income per common share $ .08 $ .15 ======= ======= Dividends per common share $ .03 $ .03 ======= ======= Weighted average number of common shares outstanding and common share equivalents 4,909 5,448 ======= ======= See accompanying notes to consolidated condensed financial statements. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (CONTINUED) ROBINSON NUGENT, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) Three Months Ended September 30 -------------------- 1996 1995 ------- ------- Cash flows from operating activities: Net income $ 402 $ 800 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,269 1,174 Losses from disposition of capital assets 58 -- (Increase) decrease in receivables (1,109) 693 (Increase) decrease in inventories 600 (362) (Increase) decrease in other current assets (101) 541 Decrease in accounts payable and accrued expenses (1,726) (314) Increase in income taxes 854 624 ------- ------- Net cash provided by operating activities 247 3,156 ------- ------- Cash flows from investing activities: Capital expenditures (870) (2,128) Decrease in other assets 1 42 ------- ------- Net cash used in investing activities (869) (2,086) ------- ------- Cash flows from financing activities: Proceeds from short-term bank borrowings -- 480 Proceeds from long-term debt -- 193 Repayments of long-term debt (290) (216) Cash dividends paid (147) (160) Repayments of employee stock purchase plan loans 51 109 ------- ------- Net cash provided by (used in) financing activities (386) 406 ------- ------- Effect of exchange rate changes on cash (22) (144) ------- ------- Increase (decrease) in cash and cash equivalents (1,030) 1,332 Cash and cash equivalents at beginning of period 2,368 2,460 ------- ------- Cash and cash equivalents at end of period $ 1,338 $ 3,792 ======= ======= See accompanying notes to consolidated condensed financial statements. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (CONTINUED) ROBINSON NUGENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1996 AND 1995, AND JUNE 30, 1996 1. In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments necessary (all of which are normal and recurring) to present fairly the financial position of the Company and its subsidiaries, results of operations, and cash flows in conformity with generally accepted accounting principles. 2. Earnings per common share are based upon the weighted average number of shares outstanding during each period, plus common share equivalents resulting from dilutive stock options. 3. The income tax expense for the three months ended September 30, 1996 differs from expected effective rates due to income taxes on profit in the United States and no income tax benefits from losses in Europe and Asia. 4. Reference is directed to the Company's consolidated financial statements (Form 10-K), including references to the Annual Report, for the year ended June 30, 1996 and management's discussion and analysis included in Part I, Item 2 in this report. PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MATERIAL CHANGES IN RESULTS OF OPERATIONS - ----------------------------------------- Net sales for the quarter ended September 30, 1996 were $21,123,000, up 3 percent over sales of $20,500,000 in the same period a year ago. The sales growth in the quarter occurred in the United States and Asia due primarily to higher sales of cable assemblies and backpanel connectors. Total business in the United States increased 6% compared to the prior year, as higher domestic sales and increased intercompany sales to our Asian subsidiary offset lower direct sales from the United States to our Asian customers. Higher sales in Asia were due primarily to a shift in customer sales from the United States to Asia. Total business in Europe was flat compared to the prior year as lower European trade sales at our Belgium subsidiary were offset by higher intercompany sales to the United States and Asian affiliates. Comparative sales by geographic territory for the respective periods follows: Three Months Ended ($000 omitted) September 30 -------------------- 1996 1995 -------- -------- United States: Domestic $13,388 $12,941 Export: Europe 12 32 Asia 134 745 Rest of world 769 223 ------- ------- Total export sales 915 1,000 ------- ------- Total sales to customers 14,303 13,941 Intercompany 2,059 1,452 ------- ------- Total United States 16,362 15,393 ------- ------- Europe: Domestic 4,989 4,763 Export to Asia 387 709 ------- ------- Total sales to customers 5,376 5,472 Intercompany 981 888 ------- ------- Total Europe 6,357 6,360 ------- ------- Asia: Domestic 1,349 1,087 Rest of world 95 -- ------- ------- Total sales to customers 1,444 1,087 Intercompany 644 751 ------- ------- Total Asia 2,088 1,838 ------- ------- Eliminations (3,684) (3,091) ------- ------- Consolidated $21,123 $20,500 ======= ======= Incoming customer orders for the quarter ended September 30, 1996 amounted to $20.9 million, up 7% from orders of $19.5 million in the same quarter a year ago. The Company ended the quarter with a backlog of unshipped orders of $15.7 million compared to $14.3 million a year ago. Gross profits in the quarter ended September 30, 1996 amounted to $4,727,000 or 22.4 percent of net sales, compared to $5,261,000 or 25.7 percent of net sales in the prior year. Gross profits are net of engineering charges associated with new product development which amounted to $773,000 or 3.7 percent of net sales in the current quarter compared to $809,000 or 3.9 percent of net sales in the prior year. The reduction in gross profits in the quarter compared to the prior year reflects continued competitive price pressures worldwide, an unfavorable product mix, lower margins on the introduction of a smart card product line in Europe, and lower production coupled with higher manufacturing expenses in Asia. Selling, general and administrative expenses of $3,753,000 for the three months ended September 30, 1996 decreased slightly compared to expenses of $3,773,000 in the prior year as higher expenses in the United States for accrued bonuses and increased payroll in Japan were partially offset by lower expenses in Europe reflecting reduced payroll and other related costs. Other income and expense for the three months ended September 30, 1996 reflected a net expense of $108,000 compared to a net expense of $178,000 for the comparable three month period in the prior year. The quarterly change in other income and expense reflected currency gains in the current quarter compared to currency losses in the prior year's quarter; partly offsetting was higher interest expense in the current quarter. Interest expense increased to $187,000 compared to $124,000 in the prior year due to an increased borrowing level. Currency gains in the quarter totaled $19,000 compared to losses of $52,000 in the prior year. The prior year results also include $59,000 of expenses related to the Company's Isocon L.C. joint venture which was terminated in December 1995. The provision for income taxes was provided using the appropriate effective tax rates for each of the tax jurisdictions in which the Company operates. A provision for income tax expense has been accrued for profits generated in the United States, Switzerland and Netherlands, but no tax benefit has been recognized on the pretax losses incurred in Belgium, Japan, Singapore and the Company's operations in Malaysia. The net income in the quarter ended September 30, 1996 amounted to $402,000 or 8 cents per share, compared to $800,000 or 15 cents per share, a year ago. The lower net income in the quarter resulted primarily from lower gross profits compared to the prior year's first quarter. Net income in the United States of $741,000 was partially offset by net losses in Asia, $304,000, and Europe, $35,000. MATERIAL CHANGES IN FINANCIAL CONDITION - --------------------------------------- Net working capital at September 30, 1996 amounted to $11.0 million compared to $15.6 million at September 30, 1995 and $10.3 million at June 30, 1996. The current ratio was 1.7 to 1 compared to 2.2 to 1 in the prior year. The decrease in working capital, compared to the prior year, primarily reflects the use of funds to finance a $3.4 million common share repurchase program (completed in the fourth quarter of 1996), higher inventory levels, up $1.2 million, and higher capital expenditures. The Company's funding requirements were primarily provided by increased short-term borrowings. Short term bank borrowing of $6,400,000 (at September 30, 1996 and June 30, 1996) increased $5,389,000 compared to September 30, 1995. Net inventory increased by $1,206,000 compared to September 30, 1995 and decreased $600,000 compared to June 30, 1996. Cash and cash equivalent balances decreased by $1,030,000 at September 30, 1996 compared to June 30, 1996. There were no significant changes in long-term debt in the quarter ended September 30, 1996. Long-term debt due after one-year represented $3.0 million, or 10 percent of shareholders' equity at September 30, 1996, compared to $3.8 million or 10 percent of shareholders' equity at September 30, 1995. The Company believes working capital and capital expenditure requirements can be met from operations, cash balances, and available lines of credit. PART II. OTHER INFORMATION Item 1. Not applicable. Item 2. Not applicable. Item 3. Not applicable. Item 4. Not applicable. Item 5. Not applicable. Item 6. Exhibits and Reports on Form 8-K. (a) See Index to Exhibits. (b) No reports on Form 8-K were filed during the quarter ended September 30, 1996. 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. ROBINSON NUGENT,INC. ------------------------------------ (Registrant) Date ----------------------- ------------------------------------ Larry W. Burke President and Chief Executive Officer Date ----------------------- ------------------------------------ Anthony J. Accurso Vice President, Treasurer and Chief Financial Officer FORM 10-Q INDEX TO EXHIBITS Number of Sequential Item Numbering Assigned in System Regulation S-K Page Number Item 601 Description of Exhibit of Exhibit - -------------- ------------------------------------- ------------ (2) Not applicable. (4) 4.1 Specimen certificate for Common Shares, without par value. (Incorporated by reference to Exhibit 4 to Form S-1 Registration Statement No. 2-62521.) 4.2 Rights Agreement dated April 21, 1988 between Robinson Nugent, Inc. and Bank One, Indianapolis, N.A. (Incorporated by reference to Exhibit I to Form 8-A Registration Statement dated May 2, 1988.) 4.3 Amendment No. 1 to Rights Agreement dated September 26, 1991 between Robinson Nugent, Inc. and Bank One, Indianapolis, N.A. (Incorporated by reference to Exhibit 4.3 to Form 10-K Report for year ended June 30, 1991.) 4.4 Amendment No. 2 to Rights Agreement dated June 11, 1992. (Incorporated by reference to Exhibit 4.4 to Form 8-K Current Report dated July 6, 1992.) (10) 10.1 Robinson Nugent, Inc. 1983 Tax-Qualified Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10.1 to Form 10-K Report for year ended June 30, 1983.) 10.2 Robinson Nugent, Inc. 1983 Non Tax- Qualified Incentive Stock Option Plan. (Incorporated by reference to Exhibit 10.2 to Form 10-K Report for year ended June 30, 1983.) 10.3 Deferred compensation agreement dated May 10, 1990 between Robinson Nugent, Inc. and Larry W. Burke, President and Chief Executive Officer, and related agreement dated May 10, 1990 between Robinson Nugent, Inc. and PNC Bank, Kentucky, Inc. (formerly Citizens Fidelity Bank and Trust Company of Louisville, Kentucky) as trustee. (Incorporated by reference to Exhibit 19.1 to Form 10-K Report for year ended June 30, 1990.) 10.4 Summary of Robinson Nugent, Inc. Bonus Plan for the fiscal year ended June 30, 1997. (Incorporated by reference to Exhibit 10.7 to Form 10-K Report for year ended June 30, 1996.) 10.5 1993 Robinson Nugent, Inc. Employee and Non-Employee Director Stock Option Plan. (Incorporated by reference to Exhibit 19.1 to Form 10-K Report for year ended June 30, 1993.) 10.6 Summary of the Robinson Nugent, Inc. Employee Stock Purchase Plan (Incorporated by reference to Exhibit 19.2 to Form 10-K Report for year ended June 30, 1993.) (11) Not applicable. (15) Not applicable. (18) Not applicable. (19) Not applicable. (22) Not applicable. (23) Not applicable. (24) Not applicable. (27) Financial Data Schedule (99) Not applicable.