ROBINSON NUGENT, INC. AND SUBSIDIARIES
TEN-YEAR FINANCIAL SUMMARY
IN THOUSANDS, EXCEPT PER SHARE DATA
- --------------------------------------------------------------------------------
Years ended June 30
1996 1995 1994
--------------------------------------------
OPERATING RESULTS:
- -----------------------------------------------------------------------------
Net sales $80,964 80,679 67,557
Cost of sales 65,604 59,329 49,642
--------------------------------------------
Gross profit 15,360 21,350 17,915
Selling, general and
administrative expenses 16,749 15,586 13,727
Provision for restructuring -- -- --
Provision for plant
consolidation -- -- --
--------------------------------------------
Operating income (loss) (1,389) 5,764 4,188
Other income (expense) (305) (170) 841
--------------------------------------------
Income (loss) before income
taxes, extraordinary item
and change in accounting
principle (1,694) 5,594 5,029
Income taxes (benefit) 465 1,855 2,410
Extraordinary item - gain on
fire insurance recovery -- -- --
Cumulative effect of change
in accounting principle -- -- --
--------------------------------------------
Net income (loss) $ (2,159) 3,739 2,619
--------------------------------------------
Return on net sales (2.7%) 4.6% 3.9%
PER SHARE INFORMATION:
- -----------------------------------------------------------------------------
Net income (loss) $ (.40) .69 .49
Cash dividends .12 .12 .12
Weighted average shares
outstanding (in thousands) 5,333 5,383 5,368
Book value at year-end* 6.13 6.79 5.91
BALANCE SHEET:
- -----------------------------------------------------------------------------
Working capital $10,328 15,875 15,014
Property, plant and
equipment - net 23,618 24,609 19,344
Total assets 51,466 54,169 45,377
Long-term debt 3,036 4,143 2,408
Shareholders' equity 29,968 36,480 31,419
OTHER DATA:
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Current ratio to 1.0 1.6 2.3 2.4
Return on shareholders'
average equity (6.0%) 11.0% 8.8%
Capital additions 7,474 5,929 5,793
Depreciation and
amortization 6,135 3,714 3,003
* On the basis of year-end outstanding common shares.
See Note 18 of Notes to Consolidated Financial Statements for Selected Quarterly
Financial Data, including dividend payments on common shares.
4
1993 1992 1991 1990 1989 1988 1987
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OPERATING RESULTS:
- -----------------------------------------------------------------------------------------------------------------------------
Net sales 58,671 50,759 53,061 55,031 53,149 52,730 46,201
Cost of sales 42,986 38,750 41,529 41,802 39,504 37,673 34,467
--------------------------------------------------------------------------------------------
Gross profit 15,685 12,009 11,532 13,229 13,645 15,057 11,734
Selling, general and
administrative expenses 12,039 10,985 11,153 12,724 11,531 10,736 10,563
Provision for restructuring 620 -- -- -- -- -- 2,934
Provision for plant
consolidation -- -- -- -- -- 1,700 --
--------------------------------------------------------------------------------------------
Operating income (loss) 3,026 1,024 379 505 2,114 2,621 (1,763)
Other income (expense) (464) 214 438 (259) 236 593 (596)
--------------------------------------------------------------------------------------------
Income (loss) before income
taxes, extraordinary item
and change in accounting
principle 2,562 1,238 817 246 2,350 3,214 (2,539)
Income taxes (benefit) 900 290 250 (450) 400 800 (800)
Extraordinary item - gain on
fire insurance recovery -- -- -- -- -- 1,379 --
Cumulative effect of change
in accounting principle -- -- -- -- -- 160 --
--------------------------------------------------------------------------------------------
Net income (loss) 1,662 948 567 696 1,950 3,953 (1,739)
--------------------------------------------------------------------------------------------
Return on net sales 2.8% 1.9% 1.1% 1.3% 3.7% 7.5% (3.8%)
PER SHARE INFORMATION:
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) .31 .18 .10 .13 .33 .57 (.25)
Cash dividends .08 .08 .08 .08 .08 .07 .06
Weighted average shares
outstanding (in thousands) 5,331 5,315 5,315 5,296 5,840 6,845 6,856
Book value at year-end* 5.31 5.52 5.17 5.34 4.96 5.27 4.75
BALANCE SHEET:
- -----------------------------------------------------------------------------------------------------------------------------
Working capital 14,780 17,431 16,210 16,595 14,609 22,806 20,146
Property, plant and
equipment - net 15,871 15,506 15,216 16,077 15,843 18,571 17,949
Total assets 40,727 40,520 38,743 40,823 38,170 50,413 45,087
Long-term debt 2,166 3,409 3,234 3,589 3,519 4,273 4,667
Shareholders' equity 28,231 29,346 27,490 28,370 26,179 36,082 32,582
OTHER DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Current ratio to 1.0 2.5 3.4 3.2 3.0 2.9 3.5 3.9
Return on shareholders'
average equity 5.8% 3.3% 2.0% 2.6% 6.3% 11.5% (5.2%)
Capital additions 4,060 2,382 2,488 1,994 1,036 4,512 2,373
Depreciation and
amortization 3,031 2,809 2,897 2,752 3,100 3,393 3,988
5
ROBINSON NUGENT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
- -------------------------------------------------------------------------------
1996 VERSUS 1995
Customer orders for the fiscal year ended June 30, 1996, were $81.6 million,
down $.7 million or 1%, compared to customer orders of $82.3 million in the
prior year. Sales in fiscal 1996 were $81.0 million, slightly ahead of sales
of $80.7 million in the prior year. A pretax loss of $1.7 million in fiscal
1996 compares to a $5.6 million pretax profit in fiscal year 1995. The Company's
net loss for fiscal 1996 was $2.2 million or 40 cents per common share compared
to net income of $3.7 million or 69 cents in the prior fiscal year.
Included in the net loss were special charges of approximately $2.1 million
after tax, or 40 cents per share, recorded in the fourth quarter of 1996.
These charges included the reduction of carrying values on various production
equipment due to shorter product life cycles and increasing competitive
market conditions ($1.2 million after tax), the elimination of goodwill
associated with a European subsidiary ($.6 million after tax), and provisions
for workforce reductions and associated personnel charges ($.3 million after
tax).
The slight increase in worldwide sales reflected higher sales at the
Company's domestic cable assembly operation, the effect of the full year of
sales at Robinson Nugent, Belgium b.v.b.a. (formerly Teckino Manufacturing
b.v.b.a.), and higher sales of the Company's backpanel connector products.
The higher revenue items were offset by world-wide price erosion of memory
module sockets and a lower volume of screw machine products. The worldwide
price erosion in memory module sockets reflects the changing marketplace as
this product migrates from a customer specific to a commodity component.
Customer sales in the United States of $51.7 million increased 8% from the
prior year and represented 64% of consolidated sales in 1996, compared to 60%
in 1995. Higher sales of METPAK-Registered Trademark- 2 connectors, high-density
connectors and cable assemblies were major contributors to the increase revenue.
European sales of $19.6 million in fiscal year 1996 decreased by $.1 million,
and represented 24% of the Company's consolidated sales.
This decrease reflects lower memory module socket sales, which were partially
offset by a full year of sales for Robinson Nugent, Belgium (acquired in
February 1995), and increased sales of PC memory card products. Asia sales
(from the Company's Japan, Malaysia and Singapore operations) of $8.2 million
in fiscal 1996 decreased $2.4 million primarily due to lower socket sales in
Japan and lower cable assembly and connector sales in Malaysia.
Gross profits of $15.4 million in fiscal 1996 decreased $6.0 million or 28.1%
compared to fiscal 1995. The reduced gross profits reflected the lower gross
profits from operations in the United States, Europe and Asia Pacific, higher
research, development and engineering expenses, and an adjustment in the
fourth quarter that reduced the carrying values of various production
equipment. During the fourth quarter the Company determined that shorter
product life cycles and increasing competitive market conditions negatively
affected the carrying values of various production equipment. Therefore, a
charge of $1.8 million pretax ($1.2 million after-tax) was recorded. Gross
profits from operations during fiscal 1996 were also negatively affected by
worldwide price erosion in the industry, lower factory utilization in both
the United States and Europe, and higher costs on some newer products
reflecting start-up phase production techniques. Gross profits were higher in
the backpanel connector line, reflecting higher volume and the effect of
manufacturing cost reduction programs.
Direct costs consisting of materials, direct production labor and related
production expenses were up as a percentage of sales reflecting reduced
pricing and an unfavorable product mix. Fixed costs also increased as a
percent of sales reflecting higher equipment depreciation, increased factory
overheads and lower utilization of the Company's production facilities.
Research, development and engineering expenses, which were included in gross
profit, were $3.7 million for fiscal 1996 compared to $3.1 million for fiscal
1995. Engineering represented 4.5% of sales in 1996, compared to 3.8% in the
prior year, as the Company continues to expand its product development
efforts.
6
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Selling, general and administrative expenses of $16.7 million increased by
$1.2 million or 7.5% in 1996 compared to 1995. The increase in SG&A reflects
a fourth quarter charge of $.6 million relating to the elimination of
goodwill associated with Robinson Nugent, Belgium and higher operating
expenses in Europe and Asia Pacific. Management's decision to eliminate the
goodwill at Robinson Nugent, Belgium was based on the departure of key
personnel and the reduction in revenues of non-connector products. Expenses
in Europe increased primarily due to the inclusion of a full year of expenses
in Robinson Nugent, Belgium. Asia Pacific's increase reflects the additional
expenses associated with the establishment of a regional head-quarters office
in Singapore.
Other income (expense) in fiscal 1996 was a net expense of $.3 million,
compared to a net expense of $.2 million in fiscal 1995. The increase in
1996 reflected higher net interest expense (increased borrowings), lower
royalty income, and expenses relating to the Isocon L.C. joint venture, which
was dissolved during the year. These increased expenses were mitigated by a
foreign currency exchange gain of $.1 million in 1996, compared to a currency
exchange loss of $.3 million in 1995. The currency fluctuations were
primarily related to intercompany receivable and payable positions between
the Company's subsidiaries.
The provisions for income taxes in 1996 and 1995 were provided on the basis
of effective tax rates in the respective countries. The elimination of
goodwill in the 1996 fourth quarter was not currently deductible. The Company
also did not recognize tax benefits resulting from losses at certain foreign
operations. These tax benefits will not be recognized until management is
able to project the probable utilization of all or part of these losses.
1995 VERSUS 1994
Customer orders for the fiscal year ended June 30, 1995, were $82.3 million,
up 18 percent over customer orders of $69.9 million in the prior year.
Sales in fiscal 1995 were $80.7 million, up 19 percent over sales of $67.6
million in the prior year. Pretax profits advanced to $5.6 million in fiscal
1995, an increase of 11 percent over $5.0 million pretax profit in the prior
year. Net income for fiscal 1995 was $3.7 million, or 69 cents per common
share, compared to $2.6 million or 49 cents per common share, in fiscal 1994.
The operating results for 1994 included income in the second quarter of $1.0
million ($.6 million after related income taxes) from an out-of-court
settlement of a lawsuit with a competitor for alleged breach of contract and
the appropriation of trade secrets.
The Company increased sales in all major markets in fiscal 1995. Sales growth
was primarily the result of increased sales of newer products, a strengthened
European operation, continued growth in the computer, network and
communications markets, and the acquisition of Robinson Nugent, Belgium.
Customer sales in the United States increased by 8 percent, or $3.7 million,
and represented 60 percent of consolidated sales in 1995, compared to 66
percent in 1994. The increase in the United States reflects increased sales
of the Company's high-density connector lines, including strong memory module
sockets sales. European sales increased by $7.1 million or 56 percent, and
represented 25 percent of the Company's sales in 1995 compared to 19 percent
in 1994. The increase in European sales reflects the growth in the Company's
Scotland operation, improved European economic conditions and the acquisition
of Robinson Nugent, Belgium. Robinson Nugent, Belgium, an engineering and
manufacturing development company located in Belgium, was acquired in
February 1995. Asia sales, principally to Japan, Malaysia and Singapore,
increased by $1.5 million or 16 percent in fiscal 1995. The sales growth in
Malaysia and Singapore continues to reflect the demand of the Company's U.S.
customers with multinational locations. To broaden the customer base in this
region, the Company has expanded manufacturing operations in Malaysia and
established an administrative, marketing and sales headquarters in Singapore
in the fourth quarter of 1995.
Gross profits of $21.4 million in fiscal 1995 increased by $3.4 million or 19
percent compared to fiscal 1994. Expressed as a percent of sales, gross
profit was at 26.5 percent for both fiscal periods. The higher gross profit
dollars were the result of the higher
7
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sales, improved margins on newer products and favorable manufacturing
efficiencies at the plant level. Included in gross profit were expenditures
for research, development and engineering of $3.1 million in 1995 compared to
$2.5 million in 1994. The increase in engineering of $.6 million or 24
percent reflects the Company's continued commitment to develop new and
improved products. Direct cost consisting of materials, direct production
labor and associated production costs were down slightly as a percent of
sales reflecting improved manufacturing efficiencies and a favorable product
mix. Fixed costs decreased as a percent of sales reflecting the improved
utilization of the Company's productive base.
Selling, general and administrative expenses increased by $1.9 million or 14
percent in 1995 compared to 1994. The increase in expenses reflects the
higher sales related expenses, such as commissions, a full year's expense for
the Company's European headquarters operations and costs associated with the
establishment of the Asia Pacific headquarters in Singapore. Selling, general
and administrative expenses were $15.6 million, or 19.4 percent of net sales
in 1995, and $13.7 million, or 20.3 percent of net sales in 1994.
Other income (expense) in 1995 was a net expense of $.2 million compared to
income of $.8 million in the prior 1994 fiscal year. Other income in 1994
included the out-of-court settlement of $1.0 million previously noted. In
1995 other income (expense) included $.3 million from currency exchange
losses associated with the fluctuations of certain European currencies
primarily in the third quarter of 1995, $.3 million of royalty income, and
net interest expense of $.1 million.
Provisions for income taxes in 1995 and 1994 were provided on the basis of
effective rates in the respective countries. The effective rate of 33 percent
in fiscal 1995 was lower than the 48 percent rate in the prior year. The
decrease in the effective tax rate, when compared to the prior year, reflects
a research and experimental tax credit recorded in 1995, and prior year
results included significantly higher losses without recognition of tax
benefits as compared to a marginal profit in the current year at the
Company's Scotland operations. At such time as management is able to project
the probable utilization of all or part of the net operating loss
carryforward provision, the valuation allowance for the deferred tax asset
will be reversed.
LIQUIDITY AND CAPITAL RESOURCES
Working capital, as of June 30, 1996, was at $10.3 million compared to $15.9
million at June 30, 1995. The Company's current ratio at June 30, 1996 was
1.6 to 1, compared to 2.3 to 1 at June 30, 1995. Cash balances at June 30,
1996, were $2.4 million compared to $2.5 million at year-end June 30, 1995.
The decrease in working capital 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 $2.2 million, and higher
capital expenditures. The Company's funding requirements were primarily
provided by increased short-term borrowings and accounts receivable
collections. The short-term borrowing level averaged $2.2 million over the
year and reached $6.4 million at its highest level at year-end. The Company's
inventory level increased primarily due to lower fourth quarter revenues
resulting from delayed shipments requested by several key customers, a
decline in sales through distributors, and the general slowness of the
European market. Accounts receivable decreased by $1.8 million, reflecting
the reduced fourth quarter sales volume.
The Company's long-term debt as a percentage of stockholders equity was 10.1
percent at year-end 1996, compared to 11.4 percent at year-end 1995.
Capital expenditures, primarily for new mold tools, contact dies and assembly
equipment, were $7.5 million in the fiscal year 1996, compared to $5.9
million in 1995. The capital investments primarily relate to the development
and production of new products, and manufacturing cost reduction programs.
The Company believes future cash requirements for capital expenditures and
working capital can be funded from operations and supplemental midterm debt,
if required. The Company currently has available bank lines of credit of $7.2
million and unused bank lines of credit of $.8 million.
8
ROBINSON NUGENT, INC. AND SUBSIDIARIES
OPERATING RESULTS AS A PERCENTAGE OF NET SALES
- -------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------
Net Sales 100.0% 100.0% 100.0%
Cost of sales 81.0 73.5 73.5
-------------------------------------
Gross profit 19.0 26.5 26.5
Selling, general and
administration expenses 20.7 19.4 20.3
-------------------------------------
Operating income (loss) (1.7) 7.1 6.2
Other income (expense) (0.3) (0.2) 1.2
-------------------------------------
Income (loss) before income taxes (2.0) 6.9 7.4
Income taxes 0.7 2.3 3.5
-------------------------------------
Net income (loss) (2.7%) 4.6% 3.9%
- ------------------------------------------------------------------------
PRICE RANGE AND DIVIDEND INFORMATIOn
- -------------------------------------------------------------------------------
The following table sets forth the high and low closing price of the Company's
common shares, which are traded over the Nasdaq National Market under the
symbol: RNIC, and the cash dividends declared per share in each of the quarters
during the past two fiscal years ended in June 30, 1996.
Price Range Cash Dividends
- -------------------------------------------------------------------------------
FISCAL 1996 High Low
- -------------------------------------------------------------------------------
First quarter ended September 30 $10 7/8 8 1/8 $ .03
Second quarter ended December 31 9 7/8 5 3/8 .03
Third quarter ended March 31 6 3/8 4 1/2 .03
Fourth quarter ended June 30 7 4 3/4 .03
- -------------------------------------------------------------------------------
FISCAL 1995
- -------------------------------------------------------------------------------
First quarter ended September 30 $ 6 7/8 5 3/8 $ .03
Second quarter ended December 31 8 7/8 6 3/8 .03
Third quarter ended March 31 9 3/8 7 5/8 .03
Fourth quarter ended June 30 9 1/2 6 7/8 .03
- -------------------------------------------------------------------------------
As of June 30, 1996, the Company had approximately 750 holders of record of its
common shares.
9
ROBINSON NUGENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
IN THOUSANDS, EXCEPT SHARE DATA
- -------------------------------------------------------------------------------
June 30
ASSETS 1996 1995 1994
- ------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 2,368 2,460 2,991
Receivables, less allowance for doubtful
receivables of $739 in 1996, $651
in 1995 and $697 in 1994 10,433 12,209 10,539
Inventories 13,446 11,278 9,807
Other current assets 1,532 2,418 2,634
--------------------------------
Total current assets 27,779 28,365 25,971
Property, plant and equipment, at cost
less accumulated depreciation and
amortization 23,618 24,609 19,344
Other assets 69 1,195 62
--------------------------------
Total assets $51,466 54,169 45,377
- ------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------
Current liabilities:
Current installments of long-term debt $ 713 924 341
Short-term bank borrowings 6,400 538 800
Accounts payable 5,692 6,131 5,356
Accrued expenses 4,557 4,456 3,689
Income taxes payable 89 441 771
--------------------------------
Total current liabilities 17,451 12,490 10,957
Long-term debt, excluding current
installments 3,036 4,143 2,408
Deferred income taxes 1,011 1,056 593
--------------------------------
Total liabilities 21,498 17,689 13,958
Shareholders' equity:
Common shares without par value
Authorized 15,000,000 shares;
issued 6,851,250 shares in
1996 and 6,850,000 shares in
1995 and 1994 20,950 20,896 20,775
Retained earnings 19,521 22,325 19,299
Equity adjustment from foreign
currency translation 2,847 3,774 2,513
Employee stock purchase plan
loans and deferred compensation (354) (768) (1,094)
Less cost of common shares in treasury;
1,959,485 shares in 1996, 1,479,586
shares in 1995 and 1,532,630 shares
in 1994 (12,996) (9,747) (10,074)
--------------------------------
Total shareholders' equity 29,968 36,480 31,419
--------------------------------
Total liabilities and
shareholders' equity $51,466 54,169 45,377
- ------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
10
ROBINSON NUGENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
IN THOUSANDS, EXCEPT PER SHARE DATA
- -------------------------------------------------------------------------------
Years ended June 30,
1996 1995 1994
- ------------------------------------------------------------------------------
Net sales $80,964 80,679 67,557
Cost of sales 65,604 59,329 49,642
--------------------------------
Gross profit 15,360 21,350 17,915
Selling, general and administrative
expenses 16,749 15,586 13,727
--------------------------------
Operating income (loss) (1,389) 5,764 4,188
Other income (expense):
Interest income 129 134 192
Interest expense (511) (262) (274)
Currency exchange gain (loss) 81 (286) (39)
Settlement of lawsuit -- -- 1,000
Royalty income 118 295 --
Other (122) (51) (38)
--------------------------------
Total other income (expense) (305) (170) 841
--------------------------------
Income (loss) before income taxes (1,694) 5,594 5,029
Income taxes 465 1,855 2,410
--------------------------------
Net income (loss) $ (2,159) 3,739 2,619
- ------------------------------------------------------------------------------
Net income (loss) per common share $ (.40) .69 .49
- ------------------------------------------------------------------------------
11
See accompanying notes to consolidated financial statements.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
IN THOUSANDS, EXCEPT PER SHARE DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Employee
Stock Purchase
Foreign Plan Loans
Common shares Retained currency and Deferred Treasury shares
Years ended June 30, 1996, 1995 and 1994 Shares Amount earnings translation Compensation Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1993 6,850 $ 20,775 17,327 1,584 (1,366) (1,535) $(10,089)
Net income -- -- 2,619 -- -- -- --
Dividends ($.12 per share) -- -- (638) -- -- -- --
Equity adjustments from foreign
currency translation -- -- -- 929 -- -- --
Stock purchase plan loans and
deferred compensation -- -- -- -- (81) -- --
Stock purchase plan repayments -- -- -- -- 95 -- --
Amortization of deferred compensation -- -- -- -- 155 -- --
Stock purchase plan terminations -- -- -- -- 103 -- --
Stock options exercised -- -- (9) -- -- 2 15
-----------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1994 6,850 $ 20,775 19,299 2,513 (1,094) (1,533) $(10,074)
Net income -- -- 3,739 -- -- -- --
Dividends ($.12 per share) -- -- (640) -- -- -- --
Equity adjustments from foreign
currency translation -- -- -- 1,261 -- -- --
Stock purchase plan repayments -- -- -- -- 91 -- --
Amortization of deferred compensation -- -- -- -- 153 -- --
Stock purchase plan terminations,
including the gain on disposition
of stock held by the plan trust -- 48 -- -- 82 -- --
Stock options exercised -- -- (73) -- -- 25 152
Investment in RN Belgium -- 73 -- -- -- 28 175
-----------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1995 6,850 $20,896 22,325 3,774 (768) (1,480) $(9,747)
Net loss -- -- (2,159) -- -- -- --
Dividends ($.12 per share) -- -- (645) -- -- -- --
Equity adjustments from foreign
currency translation -- -- -- (927) -- -- --
Stock purchase plan repayments -- -- -- -- 192 -- --
Amortization of deferred compensation -- -- -- -- 151 -- --
Stock purchase plan terminations,
including the loss on disposition
of stock held by the plan trust -- (5) -- -- 71 -- --
Stock awards 1 7 -- -- -- -- --
Purchase of treasury stock -- -- -- -- -- (499) (3,372)
Stock options exercised -- 3 -- -- -- -- --
Investment in RN Belgium -- 49 -- -- -- 20 123
-----------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1996 6,851 $20,950 19,521 2,847 (354) (1,959) $(12,996)
- ----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
12
ROBINSON NUGENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS
- -------------------------------------------------------------------------------
Years ended June 30
1996 1995 1994
- ------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(2,159) 3,739 2,619
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Elimination of RN Belgium goodwill 636 -- --
Depreciation and amortization 6,135 3,714 3,003
Reduction and disposal of capital assets 1,971 71 81
(Increase) decrease in receivables 1,776 (1,330) (1,214)
Increase in inventories (2,168) (1,136) (1,108)
(Increase) decrease in other current assets 731 350 (626)
Increase (decrease) in accounts payable
and accrued expenses (338) 631 1,048
Decrease in income taxes payable (352) (330) (215)
Decrease in deferred income taxes 110 197 102
Employee stock purchase plan deferred
compensation -- -- (33)
-----------------------------
Net cash provided by operating
activities 6,342 5,906 3,657
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,474) (5,929) (5,793)
Investment in RN Belgium, net of
cash acquired -- (186) --
Increase (decrease) in other assets 41 (26) 57
-----------------------------
Net cash used in investing
activities (7,433) (6,141) (5,736)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term bank borrowings 6,262 738 3,200
Repayment of short-term bank borrowings (389) (1,150) (2,400)
Proceeds from long-term debt 193 -- 2,034
Repayment of long-term debt (723) (201) (2,688)
Cash dividends (645) (640) (638)
Issuance of common shares 5 -- --
Purchase of treasury shares (3,372) -- --
Repayment of employee stock purchase plan loans 192 91 95
Employee stock purchase plan loans -- -- (48)
Proceeds from stock purchase plan terminations 66 130 --
Proceeds from exercised stock options 3 79 6
-----------------------------
Net cash provided by (used in)
financing activities 1,592 (953) (439)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (593) 657 583
Decrease in cash and cash equivalents (92) (531) (1,935)
Cash and cash equivalents at beginning
of year 2,460 2,991 4,926
-----------------------------
Cash and cash equivalents at end of year $ 2,368 2,460 2,991
- ------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES FOR THE YEAR
ENDED JUNE 30, 1995:
Fair value of assets acquired,
other than cash $ 3,660
Liabilities assumed (2,164)
Treasury shares (28,408) issued
to former owners (248)
Payable to former owners of acquired
business (1,062)
------
Cash paid for Teckino 186
------
------
See accompanying notes to consolidated financial statements.
13
ROBINSON NUGENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS, EXCEPT PER SHARE DATA
- -------------------------------------------------------------------------------
NOTE 1 NATURE OF OPERATIONS AND ORGANIZATIONS
Robinson Nugent, Inc. designs, manufactures, and markets electronic connectors,
integrated circuit sockets and cable assemblies. Its products are sold
throughout the world for use by manufacturers of computers, networks and
telecommunications equipment and industrial controls, and a wide variety of
other products to interconnect components of electronic systems.
- -------------------------------------------------------------------------------
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
The assets, liabilities and operations of foreign subsidiaries have been
generally translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52 - "Foreign Current Translation."
STATEMENT OF CASH FLOWS. Cash and cash equivalents are defined as cash in banks
and investment instruments having maturities of ninety one days or less on their
acquisition date.
INVENTORIES. Inventories are stated at the lower of cost (first-in, first-out
method) or market (net realizable value).
PROPERTY, PLANT AND EQUIPMENT. Depreciation is provided by the straight-line
method over the estimated useful lives of buildings, machinery, and equipment
for financial reporting purposes. Depreciation expenses include the amortization
of buildings capitalized under lease obligations in accordance with Statement of
Financial Accounting Standards No. 13 - "Accounting for Leases." Depreciation
expense was $5,901 in 1996, $3,530 in 1995 and $2,848 in 1994.
INCOME TAXES. In 1994, the Company changed its accounting for income taxes to
comply with the requirements of the Statement of Financial Accounting Standards
(SFAS) No. 109 - "Accounting for Income Taxes." The adoption of SFASNo. 109 did
not have a material effect on the consolidated financial position or results of
operations.
No U.S. Federal income taxes have been provided at June 30, 1996 on
approximately $7,206 of accumulated earnings of non-U.S. subsidiaries since the
Company plans to reinvest such amounts for an indefinite future period.
RESEARCH, DEVELOPMENT AND ENGINEERING. Research, development, and engineering
expenditures for the creation and application of new and improved products and
manufacturing processes were approximately $3,700 in 1996, $3,100 in 1995,
$2,500 in 1994. Research, development and engineering costs are charged to
operations as incurred.
GOVERNMENT INCENTIVE GRANTS. The Company received grants for its establishment
of manufacturing operations in Scotland in 1994, consisting of reimbursement of
employee training and hiring costs during start-up of operations and employment
of certain personnel, which aggregated $270. In addition, the Company will
receive a grant related to expected capital expenditures for equipment and
machinery over the period of 1994-97. The Company's policy is to recognize this
capital expenditure grant over the estimated useful life of the equipment and
machinery. The financial statements include grant income of approximately $231
in 1996, $239 in 1995 and $160 in 1994.
DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates. The Company's periodic filings with the Securities and
Exchange Commission include, where applicable, disclosures of estimates,
assumptions, uncertainties and concentrations in products, sources of supply and
markets which could affect the financial statements and future operations of the
Company.
CONCENTRATION OF CREDIT RISK. Financial instruments which potentially subject
the Company to concentrations of credit risk consist principally of cash
investments and trade receivables. The Company has cash investment policies that
limit the amount of credit exposure to any one issuer and restrict placement of
these investments to issuers evaluated as credit worthy. Concentrations of
credit risk with respect of trade receivables are limited due to the large
number of customers comprising the Company's customer base and their dispersion
across many different industries and geographies.
FOREIGN CURRENCY TRANSLATION. The accounts of foreign subsidiaries are measured
using local currency as the functional currency. For these operations, assets
and liabilities are translated into U.S. dollars at period-end exchange rates,
and income and expense accounts are translated at average monthly exchange
rates. Net exchange gains or losses resulting from such translation are excluded
from net income and accumulated in a separate component of shareholders' equity.
Gains and losses from foreign currency transactions are included as a separate
component of other income (expense) in the consolidated statements of
operations.
ACCOUNTING FOR STOCK-BASED COMPENSATION. The Financial Accounting Standards
Board has issued FAS 123, "Accounting for Stock-Based Compensation." FAS 123
encourages, but does not require, companies to recognize compensation expense
for grants of stock, stock options, and other equity instruments to employees
based on new fair value accounting rules. Companies that choose not to adopt the
new accounting rules will continue to apply the existing rules, but will be
required to disclose in the footnotes to the financial statements the pro forma
net income and earnings per share as if the new rules had been adopted. As
permitted by FAS 123, the Company will adopt the new standard in fiscal 1997,
choose to continue the current accounting for stock-based compensation and
disclose in the footnotes to the financial statements the pro forma net income
and earnings per share calculated using the new accounting rules.
14
ROBINSON NUGENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTERNATIONAL OPERATIONS. In connection with its international operations, the
Company is subject to various risks inherent in foreign activities. These risks
may include unstable economic and political conditions, changes in trade
policies and regulations of countries involved, fluctuations in currency
exchange rates and requirements for letters of credit or bank guarantees. Most
of the Company's international operations are in western European countries,
mainly Great Britain, Switzerland, Belgium and the Netherlands and to a lesser
degree in the Asian countries of Japan, Singapore and Malaysia. These countries
have experienced relatively stable political conditions and regulatory
environments. The Company is exposed to risks associated with fluctuations in
exchange rates including the Swiss franc, British pound sterling, Deutsche mark,
Malaysian ringgit and the Netherlands guilder. The Company limits its exposure
to these risks by incurring and paying for its expenses in the same currencies
as those of its revenue. It is the Company's policy not to enter into derivative
financial instruments for speculative purposes. There were no derivative
financial instruments outstanding as of June 30, 1996.
COMMON SHARE DATA. Per common share data for 1996 is based on the weighted
average number of common shares outstanding. Per common share data for 1995 and
1994 are based on weighted average number of common shares outstanding plus
common share equivalents resulting from dilutive stock options (see note 12).
The number of shares used in computing per common share data was 5,333,338 in
1996, 5,382,998 in 1995 and 5,367,892 in 1994.
- --------------------------------------------------------------------------------
NOTE 3 INVENTORIES
Inventories consist of the following: 1996 1995 1994
- ------------------------------------------------------------------------------
Finished goods $ 4,526 2,687 2,729
Work in process 7,021 6,861 5,774
Raw material and supplies 1,899 1,730 1,304
---------------------------------
Total $13,446 11,278 9,807
- ------------------------------------------------------------------------------
A portion of the gold and gold content in inventories is provided under a
consignment agreement with a bank. Under terms of the gold consignment
agreement, the Company has pledged certain inventories with gold content as
collateral. Such inventories were approximately $347 at June 30, 1996.
- --------------------------------------------------------------------------------
NOTE 4 PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment
follows: 1996 1995 1994
- ------------------------------------------------------------------------------
Land $ 836 839 793
Buildings 12,886 13,379 11,663
Machinery and equipment 47,122 45,262 37,725
---------------------------------
60,844 59,480 50,181
Less accumulated depreciation and amortization 37,226 34,871 30,837
---------------------------------
Total $23,618 24,609 19,344
- ------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 5 ACCRUED EXPENSES
A summary of accrued expenses follows: 1996 1995 1994
- --------------------------------------------------------------------------------
Compensation $ 1,394 1,129 1,266
Commissions 719 798 603
Distributor allowances 692 683 601
Pension and retirement plans 25 22 280
State and local taxes 548 347 299
Deferred grant income 300 229 --
Other 879 1,248 640
---------------------------------
Total $ 4,557 4,456 3,689
- ------------------------------------------------------------------------------
15
ROBINSON NUGENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS, EXCEPT PER SHARE DATA
- --------------------------------------------------------------------------------
NOTE 6 SHORT-TERM AND LONG-TERM DEBT
At June 30, 1996, the Company had $7.2 million in available bank lines of
credit of which approximately $.8 million was unused and available for
working capital purposes. The weighted average interest rate on short term
debt was 7.2% for 1996 and is generally payable monthly. The Company's lines
of credit are renewable on an annual basis. Total interest paid on short-term
debt was $252 in 1996, $25 in 1995 and $1 in 1994.
Long-term debt consists of the following:
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
United States' obligations:
8.125% capitalized lease obligations under economic
development first mortgage revenue bonds, payable
monthly through November 1996 $ 38 147 247
Obligation under purchase agreement for the acquisition
of RN Belgium, interest imputed at 8%, payable at various
dates through February 1998 567 1,062 --
Foreign obligations:
6.875% fixed-rate real estate mortgage, payable in annual installments
through 2004, with interest 2,092 2,522 2,175
10.3% fixed-rate real estate mortgage, payable in quarterly
installments through 2000 318 433 --
7.65% fixed-rate real estate mortgage payable in quarterly
installments through 2001 217 289 --
10.0% capitalized lease obligation, payable to bank in
monthly installments through 2002 274 314 327
Other long-term debt 243 300 --
-----------------------------
Total 3,749 5,067 2,749
Less current installments of long-term debt 713 924 341
-----------------------------
Long-term debt $ 3,036 4,143 2,408
- ---------------------------------------------------------------------------------------------------------
The aggregate maturities of long-term debt for the five years ending June 30,
2001, amount to $713 in 1997, $789 in 1998, $448 in 1999, $452 in 2000, $375 in
2001 and $972 thereafter.
Total interest paid under long-term debt agreements was $259 in 1996, $237
in 1995 and $273 in 1994.
Property, plant and equipment with an approximate net book value of $7,207
is pledged as collateral under the various long-term debt agreements.
- --------------------------------------------------------------------------------
NOTE 7 FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of the Company's noncurrent financial liabilities are shown
below. The fair values of current assets and current liabilities are assumed to
be equal to their reported carrying amounts.
1996 1995
- ------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
- ------------------------------------------------------------------------------
Long term debt $ 3,749 3,587 5,067 4,756
- ------------------------------------------------------------------------------
The valuations for long-term debt are determined based on the expected future
payments discounted at risk-adjusted rates. The fair value of short-term debt is
assumed to be equal to carrying value.
- --------------------------------------------------------------------------------
NOTE 8 INCOME TAXES
The Company follows SFAS No. 109 - "Accounting for Income Taxes" which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been recognized in the financial statements
or income tax returns. In estimating future tax consequences, SFAS No. 109
generally considers all expected future events other than enactments of changes
in the tax laws or rates.
16
ROBINSON NUGENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 8 INCOME TAXES (CONTINUED)
The provision (benefit) for income taxes follows:
1996 1995 1994
--------------------------------------------------------------------------
Current:
Federal $ 65 1,173 1,893
State (8) 245 188
Foreign 298 240 227
-------------------------------
Total current 355 1,658 2,308
Deferred:
Federal 216 197 120
State 40 (15) 2
Foreign (146) 15 (20)
-------------------------------
Total deferred 110 197 102
-------------------------------
Total $ 465 1,855 2,410
- -------------------------------------------------------------------------------
The following reconciles income taxes computed at the U.S. Federal statutory
rate to income taxes reported for financial reporting purposes:
1996 1995 1994
- -------------------------------------------------------------------------------
Income tax expense (benefit) at statutory rate $ (576) 1,902 1,710
Non-U.S. tax-exempt (earnings) losses 791 (213) 503
Tax-exempt earnings of FSC 33 (139) (78)
Foreign taxes 175 255 207
State and local taxes, net of U.S. Federal
income tax 21 152 125
Research and experimentation credit -- (165) --
Other 21 63 (57)
-------------------------------
Income taxes as reported $ 465 1,855 2,410
- -------------------------------------------------------------------------------
No U.S. Federal income taxes have been provided at June 30, 1996, on
approximately $7,206 of accumulated earnings of certain foreign subsidiaries
since the Company plans to reinvest such amounts for an indefinite future
period.
The Company made income tax payments of $805 in 1996, $1,805 in 1995 and
$2,580 in 1994.
The net current and non-current components of deferred income taxes recognized
in the balance sheet at June 30 follows:
1996 1995 1994
- -------------------------------------------------------------------------------
Net current assets $ 696 851 879
Net non-current liabilities 1,011 1,056 593
-------------------------------
Net assets (liabilities) $ (315) (205) 286
- -------------------------------------------------------------------------------
The tax effect of the significant temporary differences which comprise the
deferred tax assets and liabilities at June 30 follows:
1996 1995 1994
- ---------------------------------------------------------------------------
Deferred tax assets:
Net operating loss carryforwards $ 900 501 450
Employee compensation and benefits 276 306 327
Inventories and other current assets 275 311 410
State and local income taxes,
net of U.S. Federal income tax benefit 43 68 47
Other accrued expenses 32 90 38
-------------------------------
Total deferred tax assets 1,526 1,276 1,272
Deferred tax liabilities:
Depreciation and amortization (941) (894) (445)
Foreign taxes -- (86) (74)
Deferred tax on DISC earnings -- -- (17)
------------------------------
Total deferred tax liabilities (941) (980) (536)
-------------------------------
Net deferred tax assets before
valuation allowance 585 296 736
Deferred tax assets valuation allowance (900) (501) (450)
------------------------------
Net deferred tax assets
(liabilities) $ (315) (205) 286
- -------------------------------------------------------------------------------
17
ROBINSON NUGENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS, EXCEPT PER SHARE DATA
- --------------------------------------------------------------------------------
NOTE 8 INCOME TAXES (CONTINUED)
At June 30, 1996, certain foreign subsidiaries have accumulated net operating
loss carryforwards of approximately $3,264. Management is unable at this time to
project as being more probable than not future taxable income which will utilize
these loss carryforwards. As a result, a valuation allowance was established in
the amount of $900 in 1996, $501 in 1995 and $450 in 1994. The tax benefit of
these carryforwards will be recognized when management is able to project future
taxable income of these foreign subsidiaries.
The change in the deferred income tax expense represents the effect of
changes in the amounts of temporary differences. The tax effect of changes in
those temporary differences are presented below:
1996 1995 1994
- --------------------------------------------------------------------------------
Depreciation and amortization $ 47 181 6
State and local income taxes, net of U.S. Federal
income tax benefit 25 (21) 5
Accrued expenses 98 (45) 169
Deferred tax on DISC earnings -- (17) (17)
Foreign tax (86) -- --
Minimum tax credit (10) -- --
Inventories and other current assets 36 99 (61)
----------------------------
Total 110 197 102
Basis differential related to the acquisition of
RN Belgium -- 294 --
-----------------------------
Total $ 110 491 102
- --------------------------------------------------------------------------------
NOTE 9 LEASED ASSETS AND LEASE COMMITMENTS
The consolidated financial statements include land and buildings under capital
leases as follows:
1996 1995 1994
- --------------------------------------------------------------------------------
Land and buildings $ 1,807 1,742 1,596
Less accumulated amortization 594 564 489
-----------------------
Net assets under capitalized leases $ 1,213 1,178 1,107
- --------------------------------------------------------------------------------
The Company leases office and plant facilities, automobiles, computer systems,
and certain other equipment under noncancelable operating leases, which expire
at various dates. Taxes, insurance, and maintenance expenses are normally
obligations of the Company. Rental expenses charged to operations under
operating leases amounted to $1,342 in 1996, $1,109 in 1995 and $888 in 1994.
A summary of future minimum lease payments follows:
Year ending June 30
CAPITAL OPERATING
LEASES LEASES
1997 $ 101 1,128
1998 62 902
1999 62 684
2000 62 531
2001 62 424
Later Years 38 581
----------------------
Total minimum lease payments 387 4,250
-----
Less amount representing interest 75
----------
Present value of net minimum lease payments
(included in long-term debt) $ 312
- -------------------------------------------------------------------------
18
ROBINSON NUGENT, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------
NOTE 10 EMPLOYEE BENEFITS
The Company has a defined contribution pension plan and a defined contribution
401(k) plan for eligible employees in the U.S. Annual contributions by the
Company to the defined contribution pension plan are based upon specified
percentages of the annual compensation of participants. Under the terms of the
401(k) plan, employees may contribute a portion of their compensation to the
plan and the Company makes matching contributions up to a specified level. The
contributions charged to expense under the defined contribution plans were $488
in 1996, $433 in 1995 and $401 in 1994.
Personnel in Europe and Asia are provided retirement benefits under various
programs which are regulated by foreign law. Annual contributions are generally
regulated in amount and shared equally by the Company and its employees. The
Company's share of annual contributions to the aforementioned foreign defined
contribution plans was $335 in 1996, $346 in 1995 and $173 in 1994.
- ------------------------------------------------------------------------------
NOTE 11 STOCK OPTION PLANS
In September 1993, a stock option plan for eligible employees and nonemployee
directors was adopted by the Board of Directors and subsequently approved, in
November 1993, by the shareholders of the Company. The new plan replaced plans
that expired in April 1993. Under the terms of the new plan, the Board of
Directors is authorized to grant options in the aggregate of 500,000 common
shares of the Company to eligible employees and a predetermined annual number of
shares to nonemployee directors at prices not less than the market value at the
date of grant. Options are exercisable within the period prescribed by the Board
of Directors at the time of grant, but not later than ten years from the date of
grant. Terms and conditions of the new plan are similar to those of the expired
plans.
At June 30, 1996, the Company had outstanding stock options for 384,747
common shares of the Company. The following is a summary of the option
transactions under the expired plans and the new plan adopted in 1993.
1996 SHARES OPTION PRICE PER SHARE
- ------------------------------------------------------------------------------
Shares under option at beginning of year 291,197 $ 7.16
Granted 102,850 9.08
Expired (1,000) 13.25
Cancelled (7,800) 9.14
Exercised (500) 6.63
-----------
Shares under option at end of year 384,747 7.62
- ------------------------------------------------------------------------------
1995 SHARES OPTION PRICE PER SHARE
- ------------------------------------------------------------------------------
Shares under option at beginning of year 260,147 $ 6.92
Granted 88,600 7.77
Expired (3,500) 13.93
Cancelled (29,414) 8.26
Exercised (24,636) 4.57
-----------
Shares under option at end of year 291,197 7.16
- ------------------------------------------------------------------------------
1994 SHARES OPTION PRICE PER SHARE
- ------------------------------------------------------------------------------
Shares under option at beginning of year 227,647 $ 7.52
Granted 69,000 8.71
Expired (23,500) 16.16
Cancelled (10,500) 11.94
Exercised (2,500) 2.50
-----------
Shares under option at end of year 260,147 6.92
- ------------------------------------------------------------------------------
At June 30, 1996, a total of 242,397 shares at an average option price per share
of $7.00 were exercisable and 252,150 shares were available for future grants.
19
ROBINSON NUGENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS, EXCEPT PER SHARE DATA
- --------------------------------------------------------------------------------
NOTE 12 STOCK PURCHASE PLAN
In 1993, the Company adopted an employee stock purchase plan for key employees
that provided for participants of the plan to purchase common shares of the
Company on the open market through an independent trustee. The plan permitted
the Board of Directors to authorize interest-free loans to the participants for
the purchase of stock. Shares are held in trust as collateral for the loans,
which are payable by the participants of the plan over a period not to exceed
ten years. The plan also provided for participants to receive from the Company a
matching number of common shares of the Company, based upon a vesting schedule
and the participants' level of purchased shares. The plan terminated in 1994
with respect to new participation. The loans ($284 in 1996, $547 in 1995 and
$660 in 1994) and deferred compensation charges ($70 in 1996, $221 in 1995 and
$434 in 1994) associated with the plan are classified as a reduction of
shareholders' equity. The amortization of the deferred compensation charged to
expense was $151 in 1996, $153 in 1995 and $155 in 1994.
- --------------------------------------------------------------------------------
NOTE 13 SHAREHOLDER RIGHTS PLAN
The Company adopted a shareholder rights plan in April 1988 for the purpose of
deterring coercive or unfair takeover tactics and encouraging a potential
acquirer to negotiate with the Board of Directors before attempting to gain
control of the Company. Under the terms of the plan, rights to purchase
additional common shares were distributed as a dividend to shareholders of
record on May 6, 1988, and will be distributed with respect to shares which are
issued after May 6, 1988. The rights are attached to each issued and outstanding
share and expire on April 15, 1998. At issuance, the rights are not exercisable
and are not detachable from common shares. Accordingly, the rights do not
provide any immediate value to shareholders. The Company may redeem the rights
for one cent per right at any time prior to becoming exercisable. The rights
become exercisable ten days after public disclosure that a person acquired 20%
or more, or commenced a tender offer or exchange offer for 30% or more, of the
issued and outstanding common shares, unless such acquisition or tender offer
was approved in advance by the disinterested directors of the Company.
Thereafter, the rights will trade separately from the common shares, and
separate certificates representing the rights will be issued. Each right grants
an eligible holder the right to purchase for $40.00 additional common shares of
the Company, or in the event of certain mergers or business combinations,
additional shares of the survivor's common shares. The number of common shares
to be issued upon exercise of a right is based upon the then current market
value of the common shares, subject to certain adjustments.
- --------------------------------------------------------------------------------
NOTE 14 SETTLEMENT OF LAWSUIT
In December 1993, the Company recognized pretax income of $1,000 ($620 after
related income taxes) from an out-of-court settlement of a lawsuit related to
damage claims against a competitor.
- --------------------------------------------------------------------------------
NOTE 15 ACQUISITION OF ROBINSON NUGENT, BELGIUM B.V.B.A.
On February 21, 1995, the Company acquired 100% of Robinson Nugent, Belgium
b.v.b.a. (formerly Teckino Manufacturing b.v.b.a.), an engineering and
manufacturing development company, for $1,538. The purchase agreement
required a payment of $228 in cash, plus $248 of company stock (28,408 shares
at $8.75 per share) at closing. In addition, the agreement provided for
future payments of cash and company stock at various dates through February
1998 totaling $1,062. On August 18, 1995, the Company paid the former owners
of RN Belgium $177 in cash and $172 in company stock (19,944 shares). In
March 1996, the parties agreed to a $189 reduction in the amount of future
payments, and that all future payments will be made in cash as part of a
severance agreement with the former owner of RN Belgium.
The acquisition has been accounted for by the purchase method of accounting
and the results of operations of RN Belgium have been included in the
accompanying consolidated financial statements since the date of acquisition.
The excess of the purchase price over the fair value of net assets acquired
(goodwill) was $923. This goodwill was included in other assets in 1995.
Amortization expense was $83 in 1996 and $31 in 1995. In March 1996, this
goodwill was reduced by $189 as a result of the future payment reduction noted
above. The remaining balance of this goodwill was determined by management to
have no continuing value and was charged to operations.
On an unaudited pro forma basis, assuming the purchase of RN Belgium
had occurred on July 1, 1993, net sales would have increased approximately
$3,100 in 1995 and $1,800 in 1994, whereas net income and net income per common
share would not have been significantly different from reported amounts.
- --------------------------------------------------------------------------------
NOTE 16 SIGNIFICANT CUSTOMER
No sales to a single customer exceeded 10% of total sales in 1996 or 1994.
During 1995, the Company had sales of approximately $8,900 to a single customer
which was in excess of 10% of total net sales for that year.
20
ROBINSON NUGENT, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 17 BUSINESS SEGMENT AND FOREIGN SALES
The Company operates within the electronic connectors segment of the electronics
industry. Products are sold throughout the world for use by manufacturers of
computers, telecommunications equipment, automobiles, industrial controls,
medical instrumentation, and a wide variety of other products to interconnect
components of electronic systems. The sales and marketing operations outside the
United States are conducted in Japan, Malaysia, Singapore, Great Britain,
Germany, France, Sweden and Italy. During 1996, the Company had manufacturing
operations located in the United States, Switzerland, Scotland, Belgium, and
Malaysia.
SALES 1996 1995 1994
- ---------------------------------------------------------------------------
UNITED STATES
Domestic $51,664 47,724 44,031
Export:
Europe 58 2,176 958
Asia 1,285 4,987 5,931
Rest of World 1,447 1,625 833
-----------------------------------
Total sales to customers 54,454 56,512 51,753
Intercompany 6,813 5,544 2,713
-----------------------------------
Total United States 61,267 62,056 54,466
- ---------------------------------------------------------------------------
EUROPE
Domestic 19,553 17,613 11,711
Export:
Asia 1,752 2,908 2,352
Rest of World -- 20 20
-----------------------------------
Total sales to customers 21,305 20,541 14,083
Intercompany 3,517 3,495 3,234
-----------------------------------
Total Europe 24,822 24,036 17,317
- ---------------------------------------------------------------------------
ASIA
Domestic 5,120 2,711 838
Export to rest of world 85 915 883
-----------------------------------
Total sales to customers 5,205 3,626 1,721
Intercompany 2,448 1,018 441
-----------------------------------
Total Asia 7,653 4,644 2,162
- ----------------------------------------------------------------------------
Eliminations (12,778) (10,057) (6,388)
-----------------------------------
Consolidated $80,964 80,679 67,557
- ---------------------------------------------------------------------------
IDENTIFIABLE ASSETS
- ---------------------------------------------------------------------------
United States $38,984 39,668 33,145
Europe 17,349 21,584 15,443
Asia 4,704 3,562 1,544
Eliminations (9,571) (10,645) (4,755)
-----------------------------------
Consolidated $51,466 54,169 45,377
- ---------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES
- ---------------------------------------------------------------------------
United States $ 384 5,126 6,442
Europe (1,546) 288 (1,743)
Asia (532) 180 330
------------------------------------
Consolidated $(1,694) 5,594 5,029
- ---------------------------------------------------------------------------
Intercompany sales of finished products were generally priced to "share" profits
based upon current market conditions. Items requiring further processing were
priced at cost plus a fixed percentage.
21
ROBINSON NUGENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS, EXCEPT PER SHARE DATA
- --------------------------------------------------------------------------------
NOTE 18 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED
For the year ended June 30, 1996 SEPT. 30, 1995 DEC. 31, 1995 MAR. 31, 1996 JUNE 30, 1996 TOTAL
- ---------------------------------------------------------------------------------------------------------------
Net sales $20,500 20,047 21,178 19,239 80,964
Gross profit $ 5,261 4,272 4,744 1,083 15,360
Net income (loss) $ 800 (56) 332 (3,235) (2,159)
- ---------------------------------------------------------------------------------------------------------------
Net income (loss) per common share $ .15 (.01) .06 (.63) (.40)
- ---------------------------------------------------------------------------------------------------------------
Dividends $ .03 .03 .03 .03 .12
- ---------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
For the year ended June 30, 1995 SEPT. 30, 1994 DEC. 31, 1994 MAR. 31, 1995 JUNE 30, 1995 TOTAL
- ---------------------------------------------------------------------------------------------------------------
Net sales $19,603 18,921 20,434 21,721 80,679
Gross profit $ 5,569 5,269 5,066 5,446 21,350
Net income $ 1,098 937 742 962 3,739
- ---------------------------------------------------------------------------------------------------------------
Net income per common share $ .20 .17 .14 .18 .69
- ---------------------------------------------------------------------------------------------------------------
Dividends $ .03 .03 .03 .03 .12
- ---------------------------------------------------------------------------------------------------------------
Net income (loss) per share amounts are calculated independently for each of the
periods presented. The sum of the quarters may not equal the full year net
income (loss) per share amounts.
Fourth quarter 1996 revenue was down $2.5 million compared
to fourth quarter 1995. This revenue decrease reflected a reduction
of memory module socketrevenues in the United States and sales
at Robinson Nugent, Belgium.
Gross profit decreased due to the lower volume, as well as a $1.8 million
pre-tax charge ($1.2 million after-tax) relative to the reduction of carrying
values of various production equipment due to shorter product life cycles.
In addition to the above factors, net income was also negatively affected
by a $.6 million charge to eliminate goodwill associated with Robinson Nugent,
Belgium (no current tax benefit), and a $.4 pre-tax provision for workforce
reductions and associated personnel charges ($.3 million after tax).
Net income in the fourth quarter of 1995 reflected approximately $400 of
tax benefits resulting from the utilization of foreign net operating loss
carryforwards generated in prior quarters, and from a research and experimental
tax credit in the United States.
22
ROBINSON NUGENT, INC. AND SUBSIDIARIES
REPORT OF MANAGEMENT
- --------------------------------------------------------------------------------
To the Shareholders of Robinson Nugent, Inc.:
The management of Robinson Nugent, Inc., is responsible for the preparation,
presentation, and integrity of the consolidated financial statements and other
information included in this annual report. The consolidated financial
statements have been prepared by the Company in accordance with generally
accepted accounting principles and, as such, include amounts based on
management's best estimates and judgements.
The 1996 consolidated financial statements have been audited by Coopers &
Lybrand L.L.P., independent accountants. Their audit was made in accordance with
generally accepted auditing standards and included such reviews and tests of the
Company's internal accounting controls as they considered necessary.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance at reasonable cost that Company assets are
protected against loss or unauthorized use and that transactions and events are
properly recorded.
The Board of Directors, through its Audit Committee, comprised solely of
directors who are not employees of the Company, meets with management, the
internal audit staff, and the independent accountants to assure that each is
properly discharging its respective responsibilities. The independent
accountants have free access to the Audit Committee, without management present,
to discuss the results of their work and their assessment of the adequacy of
internal accounting controls and the quality of financial reporting.
/s/ Larry W. Burke
Larry W. Burke
President and
Chief Executive Officer
/s/ Anthony J. Accurso
Anthony J. Accurso
Vice President, Treasurer, and
Chief Financial Officer
September 16, 1996
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders of Robinson Nugent, Inc.:
We have audited the accompanying consolidated balance sheets of Robinson Nugent,
Inc. and Subsidiaries, as of June 30 1996, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Robinson
Nugent, Inc. and Subsidiaries as of June 30, 1996, 1995, and 1994, and the
results of their operations and their cash flows for each of the three years
then ended in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Louisville, Kentucky
August 2, 1996
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