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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to ______________
Commission file number 0-9010
ROBINSON NUGENT, INC.
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(Exact name of registrant as specified in its charter)
Indiana 35-0957603
- ------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
organization or incorporation) Identification Number)
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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, Common Share
Without Par Value Purchase Rights
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any Amendment to this
Form 10-K. [ ]
The Index of Exhibits is located at page 23 in the sequential numbering system.
Total pages: 37.
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The aggregate market value of Common Shares held by nonaffiliates of the
registrant, based on the closing price of the Common Shares as of September 16,
1997, was approximately $36,076,767.
As of September 16, 1997, the registrant had outstanding 4,891,765 Common
Shares, without par value.
DOCUMENTS INCORPORATED BY REFERENCE:
PARTS OF FORM 10-K INTO WHICH
IDENTITY OF DOCUMENT DOCUMENT IS INCORPORATED
- ------------------------------------ ------------------------------
1997 Annual Report to Shareholders Parts I and II
Definitive Proxy Statement with respect to Parts II and III
the 1997 Annual Meeting of Shareholders of
registrant.
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PART I
ITEM 1. BUSINESS
GENERAL
Robinson Nugent, Inc. (the "Company"), an Indiana corporation organized in
1955, designs, manufactures and markets electronic devices used to interconnect
components of electronic systems. The Company's principal products are
integrated circuit sockets; connectors used in board-to-board, wire-to-board,
and wire-to-wire applications; and custom molded-on cable assemblies. The
Company also offers application tooling that is used in applying wire and cable
to its connectors.
The Company's products are used in electronic telecommunication equipment
including switching and networking equipment such as servers and routers, modems
and PBX stations; data processing equipment such as mainframe computers,
personal computers, workstations, CAD systems and peripheral equipment such as
printers, disk drives, plotters and point-of-sale terminals; industrial controls
and electronic instruments, both medical and industrial; consumer products;
automotive electronics; and in a variety of other applications.
Major markets are the United States, Europe, Japan, and the Southeast Asian
countries including Singapore and Malaysia. Manufacturing facilities are
located in New Albany, Indiana; Dallas, Texas; Kings Mountain, North Carolina;
Fremont, California; Delemont, Switzerland; Sungai Petani, Malaysia; Inchinnan,
Scotland; and Hamont-Achel, Belgium.
Corporate headquarters are located in New Albany, Indiana, which also is
the site for the Company's corporate engineering, research and development,
preproduction and testing of new products. International headquarters are
located in s-Hertogenbosch, Netherlands; Singapore; and Tokyo, Japan.
RECENT DEVELOPMENTS
In June of 1997, management approved a plan to move all of its electro-
plating and component assembly operations from its plant in Delemont,
Switzerland to its facility in Inchinnan, Scotland, and to sell the facility in
Delemont. Management evaluated the current market value of this building and
determined that the carrying value should be reduced by $250,000 in order to
approximate the estimated net realizable value. This charge reduced net income
in the quarter and the year by $190,000 or 4 cents per share. Employee
severance costs related to this plant closure and the cost to relocate these
operations to Scotland will be expensed in fiscal 1998. The consolidation of
the Company's Swiss operations into Scotland will reduce future manufacturing
costs and operating expenses in Europe. This will place the Company's European
operations in a more competitive position in the future.
PRODUCTS
The Company produces a broad range of sockets that accommodate a variety of
integrated circuit package styles. Sockets are offered for dual-in-line
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package (DIP) and pin grid array (PGA) devices, as well as leaded and
leadless chip carriers.
Dual in-line memory module (DIMM) sockets were introduced in fiscal 1992.
These sockets, which are designed to interconnect dual in-line memory modules,
continue to be among the fastest growing electronic interconnect products in the
world market. During 1996, the industry acceptance of this technology resulted
in a migration of DIMM products from a customer specific to a standardized
component. The enlarged worldwide market volume resulted in increased
competition and rapid price erosion. The Company has redesigned the DIMM
product line to be more competitive at the lower market prices.
Sockets are used in a wide variety of applications within electronic
equipment but are primarily used to interface integrated circuits, such as
microprocessors and memory devices, to an electronic printed circuit board. In
many applications, semiconductor devices are subject to replacement, which
encourages the use of a socket rather than soldering the device directly to the
printed circuit board. The demand for sockets is directly related to the demand
for products which employ integrated circuits.
The worldwide demand for dual in-line package (DIP) sockets is decreasing
due to the maturity of the semiconductor package, while the demand for high-
density and surface-mount sockets is increasing. The growing demand is due to
the development of semiconductor package styles with very large counts of signal
ports and new technologies such as ball grid and land grid array packages and
interstitial pin grid array patterns. The Company's newest socket products are
designed to meet high-density and surface-mount requirements.
The Company provides a broad range of electronic connectors, such as
insulation displacement flat cable connectors (IDC), used in cable-to-cable and
cable-to-board applications. The use of insulation displacement connectors in
electronic hardware increases productivity by eliminating labor involved in
stripping insulation from wires prior to attachment to the leads, and permits
automation of the manufacture of cable assemblies. The range of connectors also
includes several product styles that provide for board-to-board or board-
stacking (parallel-mounting) applications.
The Company manufacturers a line of personal computer memory card sockets
and headers which provide interconnect for faxing, networking and portable
computer expansion capabilities. This line includes type III PC card kits and
other options which enhance the interchangability of this product line within
this industry.
The Company offers several product families in the two-piece style of
connectors. These connectors are used to connect printed circuit boards which
are positioned either at right angles, in-line, or parallel stacked at close
intervals. The products offered include .025 inch square post connectors and
receptacle sockets; DIN series connectors; high-density, high-pin-count
connectors (HDC); half-pitch, high-density (PAK-50) connectors; 2-millimeter-
spaced, high-density connectors (PAK-2); and a new higher pin count 2-
millimeter-spaced connector (METPAK-Registered Trademark-2) used in backplane
applications. In addition, a line of high density 1.0mm, .8mm and .5mm board
stacking interconnects are offered by the Company to address the growing demand
for
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miniaturized connectors in the portable computer and communication equipment
markets.
The DIN series of connectors has many variations in connecting
configurations and pin count. The product is based on a European standard, but
has gained wide acceptance in the U.S. and other markets worldwide. While there
are a large number of producers of DIN connectors in Europe, the Company is one
of a limited number of manufacturers producing the product in the U.S.
The high-pin-count, high-density connector (HDC) includes pin counts
ranging from 60 to 492 in a three- and four-row configuration. This connector
family, along with DIN connectors, is widely used on backplane applications and
frequently requires the terminals to be press-fit to the backplane. This is
accomplished by forming a compliant section in the tails of the connector
contacts that, when pressed into a plated through-hole on a backplane, forms a
reliable gas-tight connection without soldering. The Company has become
recognized as a leader in press-fit backplane connectors and has focused
marketing efforts in promoting its products for this type of application.
The Company's half-pitch (PAK-50) connector family has been accepted as one
of the industry's most reliable .050 inch spaced connectors. The contact design
and compact shape has gained wide acceptance in applications, such as small form
factor computers that require connectors that are highly reliable yet consume
little space.
The design of a low profile, surface-mounted socket, called PAK-2 serves
the requirements of miniature disk drives and PDA (personal digital assistant)
sectors of this industry.
The METPAK-Registered Trademark-2 series of connectors includes four and
five row versions of both standard and inverse configurations. The
METPAK-Registered Trademark-2 is an industry standard connector style used in
board-to-board and board-to-back plane applications and over time will
displace some of the more mature product types such as the DIN series and HDC
connectors. This product line has wide acceptance in new designs, primarily
in the computer workstation, communication and networking markets. The
inverse METPAK-Registered Trademark-2 is a Company patented design which is
gaining acceptance in mid-range computer and communications equipment.
Technology continues to move the industry to an ever-increasing number of
circuits per socket or connector to meet the increasing complexity, capacity and
processing speed of electronic and semiconductor devices. This movement has
caused increased demand for all types of high-density connector products. The
Company is focusing its new product development in socket and connector products
that meet these technology trends.
Customers expect connector manufacturers to provide special tools required
to utilize sockets and connectors. The Company offers a line of insertion and
extraction tools in support of the socket, IDC, input/output (I/O), and two-
piece connector lines.
Cablelink, Incorporated, a wholly-owned subsidiary of the Company, produces
cable assemblies of various types including IDC, fabricated and molded-on cable
assemblies. Cablelink utilizes Robinson Nugent connectors
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whenever possible, but also provides cable assemblies with other
manufacturers' connectors if the customer is specific regarding its
requirements.
In addition to standard products, the Company provides engineering
assistance, product design, and manufacturing of custom and derivative
products. These products may require special production tooling that, in some
cases, is paid for by the customer, shared, or amortized over future orders,
depending upon contractual agreements reached with the customer. In some
cases, the customer supplies the Company with a complete product design, but
more often the design is produced solely by Company engineers. Current
trends in the market indicate a growing demand for custom and derivative
products. There is also an increased demand for the Company's engineers to
be involved in the early development of the customer's product design.
RESEARCH, DEVELOPMENT AND ENGINEERING
The Company's worldwide engineering efforts are directed toward the
development of new products to meet customer needs, the improvement of
manufacturing processes and the adaptation of new materials to all products.
New products include new creations as well as the design of derivative products
to meet both the needs of the general market and customer proprietary custom
designs. Engineering development covers new or improved manufacturing
processes, assembly and inspection equipment, and the adaptation of new plastics
and metals to all products. In recent years, the Company's products have become
more sophisticated and complex in response to developments in semiconductors and
their application. The Company has the engineering capability to analyze
customer designed, high-speed applications and to design connectors that reduce
electrical interference that can result from very high processing speeds of
newer and more powerful microprocessors. In 1995, the Company's European
operation's development capabilities were expanded with the acquisition of
Robinson Nugent (Belgium) B.V.B.A., formerly Teckino Manufacturing B.V.B.A.
Robinson Nugent Belgium's developmental skills in precision miniature connecting
systems and electronic molded parts will enhance Europe's ability to produce
unique designs to fulfill customer requirements.
The Company's expenditures for research, development and engineering were
approximately $3.4 million in 1997, $3.7 million in 1996 and $3.1 in 1995.
Consistent with industry direction, the Company is active in improving
manufacturing processes through automation and also designs and builds its
proprietary assembly equipment. The Company continues to apply advanced
technologies, such as laser and video devices, to automatically inspect products
during the assembly process. All new assembly machines are direct
microcomputer-controlled, which provides greater flexibility in the
manufacturing process. The Company continues to incorporate the latest
technology in its electroplating processes and to replace older injection
molding machines with new machines that utilize the latest programmable
controls.
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SALES AND DISTRIBUTION
The Company sells its products in the United States and international
markets. The primary market is the United States, which produces approximately
two-thirds of the consolidated sales of the Company. Its principal markets
outside the United States are Europe, including the United Kingdom and
Scandinavia, Japan, Singapore, Malaysia, Hong Kong, and the emerging market of
China. The southeast Asian countries continue to grow rapidly, and the Company
has established a marketing and sales headquarters in Singapore. Sales to other
Far East countries provide business opportunities and are expected to grow
moderately. Sales in China have been initiated and have resulted in the Company
doing business in China through its Hong Kong distributor.
Sales outside the United States accounted for 38 percent of total sales in
1997, 36 percent in 1996 and 40 percent in 1995. The Company believes that the
development of global markets is essential to support the customer base. This is
particularly the case in Asia where the market is the fastest growing in the
world and is currently considered the second largest market for electronics and
connector products. The Company does not believe that its international
business presents any unusual risks other than with respect to changes in
currency exchange rates. The following table sets forth the percentage of
Company sales by major geographical location for the periods shown:
YEARS ENDED JUNE 30
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1997 1996 1995
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United States 62% 64% 60%
Europe 26 24 25
Asia 10 10 13
Other 2 2 2
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100% 100% 100%
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No sales to a single customer exceeded 10% of total net sales in 1997 or
1996. During 1995, the Company had sales to a single customer in excess of 10%
of total net sales.
Other financial data relating to domestic and foreign operations are
included in Note (17), Business Segment and Foreign Sales, of Notes to
Consolidated Financial Statements and the Management's Discussion and Analysis
of the Results of Operations and Financial Condition, included herein or
incorporated by reference as a part of this Report.
Principal markets in North America, Europe, and Asia are served by the
Company's direct sales force and a network of distributors serving the
electronics industry. The Company has U.S. regional offices located in the San
Francisco, California and Chicago, Illinois metropolitan areas. Other Company
sales offices are located in Japan, Singapore, England, Germany, Sweden,
Netherlands, France, Spain, and Italy. These offices service customers to whom
the Company sells directly, provide coordination between the plants and
customers, and provide technical training and assistance to distributors and
manufacturers' representatives in their respective territories. Additional
marketing expertise is provided by the product
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marketing specialists located in New Albany, Indiana; Kings Mountain, North
Carolina; London, England; Singapore; and s.Hertogenbosch, Netherlands.
The Company engages independent manufacturers' representative firms in the
United States, Canada and several European and Far East countries, who are
granted exclusive territories and agree not to carry competing products. These
firms are paid on a commission basis on sales made to original equipment
manufacturers and to distributors. All representative relationships are subject
to termination by either party on short notice.
The Company has an international network of distributors who are
responsible for serving their respective customers from an inventory of the
Company's products. Approximately one-third of the Company's worldwide sales are
made through the distributor network. No distributor is required to accept only
the franchise of the Company. All distributor agreements are subject to
termination by either party on short notice.
BACKLOG
The Company's backlog was approximately $14.5 million at June 30, 1997,
$15.9 million at June 30, 1996, and $15.3 million at June 30, 1995. These
amounts represent orders with firm shipment dates acceptable to the customers.
The Company does not manufacture pursuant to long-term contracts, and purchase
orders are generally cancelable subject to payment by the customer for charges
incurred up to the date of cancellation. With just-in-time delivery objectives,
customers have reduced order quantities, but are placing orders more frequently
and expecting shorter lead times from point of order to point of shipment.
COMPETITION
There is active competition in all of the Company's standard product
lines. The Company's competitors include both large corporations having
significantly more resources than the Company and smaller, highly specialized
firms. The Company competes on the basis of customer service, product
performance, quality, and price. Worldwide price erosion continued in a
variety of the Company's product lines, reflecting a migration of some
products to a commodity category, and the leveraging of higher volume
purchases. Management believes that the Company's capabilities in customer
service, new product design and its continued efforts to reduce cost of
products are significant factors in maintaining the Company's competitive
position.
MANUFACTURING
The Company's manufacturing operations include plastic molding, high-speed
precision stamping, electroplating and assembly. The Company designs and builds
the majority of its automated and semi-automated assembly machines for use in-
house and utilizes subcontractors on a limited basis for product assembly where
volume does not warrant the cost of automation.
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RAW MATERIALS AND SUPPLIES
The Company utilizes copper alloys, precious metals, and plastics in the
manufacture of its products. Although some raw materials are available from
only a few suppliers, the Company believes it has adequate sources of supply for
its raw material and component requirements. Raw material prices did not
increase or decrease materially during fiscal year 1997.
Use of gold is significant, but has declined in demand over the past
several years. Plating processes using ROBEX-TM-, a palladium nickel alloy, and
tin have accelerated in demand from customers of the Company. As a result of a
gold consignment agreement with a bank, the Company is not exposed to a
significant market risk of carrying gold inventories. The Company is not
required to procure its gold under this arrangement, and may acquire gold from
other sources. The Company is not obligated beyond one year with any supplier.
HUMAN RESOURCES
As of June 30, 1997, the Company had approximately 773 full-time employees;
434 in the United States, 198 in Europe and 141 in Asia and Japan.
PATENTS AND TRADEMARKS
Management believes that success in the electronic connector industry is
dependent upon engineering and production skills and marketing ability; however,
there is a trend in the industry toward more patent consideration and protection
of proprietary designs and knowledge. The Company has pursued patent
applications more frequently. The Company reviews each new product design for
possible patent application. The Company has been granted several patents over
the past three years and is presently awaiting acceptance on other pending
applications. The Company has obtained registration of its trade and service
marks in the United States and in major foreign markets.
ENVIRONMENT
The Company's manufacturing facilities are subject to several laws and
regulations designed to protect the environment. In the opinion of management,
the Company is complying with those laws and regulations in all material
respects and compliance has not had and is not expected to have a material
effect upon its operations or competitive position.
EXECUTIVE OFFICERS OF THE COMPANY
The current executive officers of the Company are:
SERVED IN PRESENT
NAME AGE POSITIONS HELD CAPACITY SINCE
Larry W. Burke 57 President & Chief 1990
Executive Officer
Robert L. Knabel 39 Vice President, January 1997
Treasurer & Chief
Financial Officer
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David W. Pheteplace 44 Vice President and September 1996
General Manager,
North America
Business Division
W. Michael Coutu 46 Vice President of 1992
Operations,
North America
Business Division
The Bylaws of the Company provide that the officers are to be elected at
each Annual Meeting of the Board of Directors. Under the Indiana Business
Corporation Law, officers may be removed by the Board of Directors at any
time, with or without cause. Mr. Anthony J. Accurso, Vice President,
Treasurer and Chief Financial Officer, resigned as of November 1996.
Mr. Franklin D. Banet, Vice President and Plant Manager, retired as of
January 1997. Mr. William D. Gruhn, Vice President, North America Sales,
left the Company in June 1997.
ITEM 2. PROPERTIES
The Company owns a 36,000-square-foot building used for its executive
offices, engineering department, quality assurance and administrative
operations, and an adjacent 83,000-square-foot manufacturing facility located
on approximately four acres in New Albany, Indiana. Manufacturing operations
at New Albany were terminated on June 30, 1988 as a result of the
consolidation of U.S. manufacturing of connectors and sockets in the
Company's Dallas, Texas facility. A portion of the New Albany manufacturing
facility is utilized by the Company's engineering, research and preproduction
development groups. Manufacturing operations were reinstituted in 1990 on a
limited basis and brokered product is inventoried at the New Albany site. In
addition, the New Albany facility is instrumental in training plant personnel
on new equipment prior to release to the manufacturing facilities in Dallas,
Europe and Malaysia.
The Company owns a 60,000-square-foot manufacturing facility located on
approximately five acres in Dallas, Texas, and a 50,000-square-foot
manufacturing facility located on approximately two acres in Delemont,
Switzerland. In July, 1993, the Company acquired a facility with
approximately 25,000 square feet in Inchinnan, Scotland under a long-term
lease and relocated connector assembly operations from Delemont, Switzerland.
Since then, the Company's Delemont, Switzerland plant has been utilized
primarily for plating with a limited amount of component manufacturing. In
June 1997, management approved a plan to move all of its plating and
component assembly operations from its plant in Delemont to its facility in
Inchinnan, and to sell the facility in Delemont. In February, 1995, the
Company acquired a manufacturing and engineering facility with approximately
14,000 square feet in Hamont-Achel, Belgium as part of the acquisition of
Robinson Nugent Belgium.
The Company's Cablelink operations are located in leased facilities of
approximately 40,000 square feet in Kings Mountain, North Carolina and
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approximately 10,000 square feet in Fremont, California. In June, 1991, a new
manufacturing facility with approximately 21,000 square feet was acquired under
a long-term lease arrangement in Sungai Petani, Malaysia. This facility was
originally leased to establish the Cablelink operation in Asia, and currently,
both cable assemblies and connectors are manufactured there.
ITEM 3. LEGAL PROCEEDINGS.
Other than ordinary routine litigation incidental to the business, there
are no pending legal proceedings to which the Company is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information included under the caption "Price Range and Dividend
Information" of the Company's 1997 Annual Report to Shareholders (the "1997
Report") is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information contained in the columns "1993-1997" in the table under the
caption "Ten-Year Financial Summary" of the 1997 Report is incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE
RESULTS OF OPERATIONS.
The information contained under the caption "Management's Discussion and
Analysis of the Results of Operations and Financial Condition" of the 1997
Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information contained in the "Consolidated Financial Statements of the
Company and Notes thereto" and the report of independent accountants in the 1997
Report is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On April 25, 1997, Robinson Nugent, Inc. (the "Company") advised Coopers &
Lybrand L.L.P. ("Coopers") that the Company was discontinuing Coopers' services
as the Company's independent accountants at the completion of Coopers' report
for the year ending June 30, 1997. The Company has engaged Deloitte & Touche
LLP ("Deloitte") as the Company's independent accountants for the subsequent
year. The decision to discontinue the services of Coopers
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and to engage Deloitte was recommended by the Audit Committee and approved by
the Board of Directors.
Coopers' reports on the financial statements of the Company for the past
two years did not contain any adverse opinion or disclaimer of opinion, nor were
the reports qualified as to uncertainty, audit scope or accounting principles.
There were no disagreements between the Company and Coopers during the past two
years and subsequent interim periods preceding such dismissal on any matter of
accounting principles or practices, financial statement disclosure, or audit
scope or procedure, which disagreement(s), if not resolved to the satisfaction
of Coopers, would have caused it to make a reference to the subject matter of
the disagreement(s) in connection with its reports.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information included under the captions "Nominees," "Business
Experience of Directors," "Family Relationships," and "Compliance with Section
16(a) of the Securities Exchange Act of 1934" in the Company's definitive 1997
Proxy Statement filed pursuant to Rule 14a-6 is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information included under the captions "Compensation of Directors,"
"Compensation Committee Interlocks and Insider Participation," "Executive
Compensation," "Report of the Compensation and Stock Option Committees," and
"Stock Performance Graph" in the Company's definitive 1997 Proxy Statement filed
pursuant to Rule 14a-6 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the captions "Beneficial Ownership of
Common Shares" and "Nominees" in the Company's definitive 1997 Proxy Statement
filed pursuant to Rule 14a-6 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the caption "Certain Transactions" in the
Company's definitive 1997 Proxy Statement filed pursuant to Rule 14a-6 is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) DOCUMENTS FILED AS A PART OF THIS REPORT.
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(1) FINANCIAL STATEMENTS
Reports of Independent Accountants
Consolidated Balance Sheets as of June 30, 1997, 1996, and 1995
Consolidated Statements of Operations for the years ended
June 30, 1997, 1996, and 1995
Consolidated Statements of Shareholders' Equity for the years
ended June 30, 1997, 1996, and 1995
Consolidated Statements of Cash Flows for the years ended
June 30, 1997, 1996, and 1995
Notes to Consolidated Financial Statements
(2) FINANCIAL STATEMENT SCHEDULE
Schedule for the years ended June 30, 1997, 1996, and 1995:
II Valuation and Qualifying Accounts
All other schedules are omitted, as the required information is
inapplicable or the information is presented in the consolidated
financial statements or related notes.
(3) EXHIBITS
3.1 Articles of Incorporation of Robinson
Nugent, Inc. (Incorporated by reference
to Exhibit 3.1 to Form S-1 Registration
Statement No. 2-62521.)
3.2 Articles of Amendment of Articles of
Incorporation of Robinson Nugent, Inc.
filed September 1, 1978 (Incorporated by
reference to Exhibit B(1) to Form 10-K
Report for year ended June 30, 1980.)
3.3 Articles of Amendment of Articles of
Incorporation of Robinson Nugent, Inc.
filed November 14, 1983 (Incorporated by
reference to Exhibit 3.3 to Form 10-K
Report for year ended June 30, 1984.)
3.4 Amended and Restated Bylaws of Robinson
Nugent, Inc. adopted November 7, 1991.
(Incorporated by reference to Exhibit
19.1 to Form 10-K Report for year ended
June 30, 1992).
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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, NA. (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. (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.)
10.1 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 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 the year ended
June 30, 1993.)
10.4 Summary of The Robinson Nugent, Inc.
Employee Stock Purchase Plan.
(Incorporated by reference to Exhibit 19.2
to Form 10-K Report for the year ended
June 30, 1993.)
10.5 Deferred compensation agreement dated
May 10, 1990 between Robinson Nugent,
Inc. and Larry W. Burke, President and
Chief Executive Officer.
(Incorporated by reference to Exhibit
19.1 to Form 10-K Report for year ended
June 30, 1990.)
10.6 Rabbi Trust Agreement dated July 1, 1996
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between Robinson Nugent, Inc. and Dean
Witter Trust Company, related to the
deferred compensation agreement between
Robinson Nugent, Inc. and Larry W. Burke,
President and Chief Executive Officer.
10.7 Summary of Robinson Nugent, Inc. Bonus
Plan for the fiscal year ended June 30,
1998.
13.0 1997 Annual Report to Shareholders of
Robinson Nugent, Inc.
16.0 Letter from Coopers & Lybrand L.L.P. dated
May 1, 1997 (Incorporated by reference to
Exhibit 16.01 to Form 8-K dated May 1, 1997.)
21.0 The subsidiaries of the registrant are:
JURISDICTION
NAME OF ORGANIZATION
---- ---------------
Cablelink, Incorporated Indiana
RNL, Inc. Indiana
Robinson Nugent-Dallas, Inc. Texas
Robinson Nugent Design Services, Inc. Pennsylvania
Robinson Nugent S.a.r.l. France
Robinson Nugent GmbH Germany
Robinson Nugent Ltd. Great Britain
Nihon Robinson Nugent K.K. Japan
Robinson Nugent dba Cablelink Malaysia
(Malaysia) Sdn. Bhd.
Robinson Nugent (Malaysia) Sdn. Bhd. Malaysia
Robinson Nugent S.A. Switzerland
Robinson Nugent (Scotland) Limited Scotland
Robinson Nugent International, Inc. Virgin Islands
Robinson Nugent (Europe) B.V. Netherlands
Robinson Nugent (Belgium) B.V.B.A. Belgium
Robinson Nugent (Asia Pacific)
Pte. Ltd. Singapore
15
<PAGE>
Robinson Nugent Nordic, filial Sweden
till Robinson Nugent (Europe) B.V.
The Netherlands
23.0 Consent of Coopers & Lybrand L.L.P.
Independent Accountants
27.0 Financial Data Schedule.
(b) REPORTS ON FORM 8-K
The Company filed a Form 8-K report during the last quarter of fiscal
1997, relating to a change in the Company's certifying accountant.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ROBINSON NUGENT, INC.
Date: ____________________ By: _______________________________________
Larry W. Burke, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: ___________________ By: /s/ Samuel C. Robinson
_______________________________________
Samuel C. Robinson, Director
Date: ___________________ By: /s/ Larry W. Burke
_______________________________________
Larry W. Burke, Director,
President and Chief Executive Officer
(Principal Executive Officer)
Date: ___________________ By: /s/ Patrick C. Duffy
_______________________________________
Patrick C. Duffy, Director
Date: ___________________ By: /s/ Richard L. Mattox
_______________________________________
Richard L. Mattox, Director
Date: ___________________ By: /s/ Diane T. Maynard
_______________________________________
Diane T. Maynard, Director
Date: ___________________ By: /s/ Jerrol Z. Miles
_______________________________________
Jerrol Z. Miles, Director
17
<PAGE>
Date: ___________________ By: /s/ James W. Robinson
_______________________________________
James W. Robinson, Director
Date: ___________________ By: /s/ Richard W. Strain
_______________________________________
Richard W. Strain, Director
Date: ___________________ By: /s/ Ben M. Streepey
_______________________________________
Ben M. Streepey, Director
Date: ___________________ By: /s/ Donald C. Neel
_______________________________________
Donald C. Neel, Director
Date: ___________________ By: /s/ Robert L. Knabel
_______________________________________
Robert L. Knabel, Vice President,
Treasurer and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
18
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
JUNE 30, 1997, 1996, AND 1995
Financial Statement Schedule for the years ended June 30, 1997, 1996, and
1995 is included herein:
II Valuation and Qualifying Accounts
All other schedules are omitted, as the required information is inapplicable
or the information is presented in the consolidated financial statements or
related notes.
19
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ROBINSON NUGENT, INC. AND SUBSIDIARIES
(In thousands of dollars)
Col. A Col. B Col. C Col. D Col. E
Balance Additions Balance
--------------------------------------
Description at Beginning Charged to Costs Charged to Other Deductions - at End
of Period and Expenses Accounts-Describe Describe of Period
----------- ------------ ---------------- ----------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1997
Deducted from asset accts
Allowance for doubtful
accounts $ 739 $ 32 $ -- $ 207(A) $ 564
Allowance for inventory
obsolescence & valuation 1,613 1,062 -- 1,110(B) 1,565
Total $2,352 $1,094 $ -- $1,317 $2,129
Year ended June 30, 1996
Deducted from asset accts
Allowance for doubtful
accounts $ 651 $ 205 $ -- $ 117(A) $ 739
Allowance for inventory
obsolescence & valuation 1,585 1,071 -- 1,043(B) 1,613
------ ------ ------- ------ ------
Total $2,236 $1,276 $ -- $1,160 $2,352
------ ------ ------- ------ ------
------ ------ ------- ------ ------
Year ended June 30, 1995
Deducted from asset accts
Allowance for doubtful
accounts $ 697 $ 83 $ -- $ 129(A) $ 651
Allowance for inventory
obsolescence & valuation 1,567 643 -- 625(B) 1,585
------ ------ ------- ------ ------
Total $2,264 $ 726 $ -- $ 754 $2,236
------ ------ ------- ------ ------
------ ------ ------- ------ ------
See footnotes on following page.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (cont'd.)
ROBINSON NUGENT, INC. AND SUBSIDIARIES
(In thousands of dollars)
1997 1996 1995
-------- ------- ----------
<S> <C> <C> <C>
(A)Summary of activity in Column D follows:
Reduction of requirements in allowance for doubtful
accounts $ 83 $ 63 $ 85
Uncollectible accounts written off, net of recoveries 98 30 62
Currency Translation - (gains)/losses 26 24 (18)
-------- ------- ----------
$ 207 $ 117 129
-------- ------- ----------
-------- ------- ----------
(B)Summary of activity in Column D follows:
Discontinued and obsolete inventory written off,
net of recoveries $ 655 $ 896 $ 684
Currency translation - (gains)/losses 455 147 (59)
-------- ------- ----------
$ 1,110 $ 1,043 625
-------- ------- ----------
-------- ------- ----------
</TABLE>
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To 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, 1997, 1996 and 1995, the related
consolidated statements of operations, shareholders' equity and cash flows and
the financial statement schedule for each of the three years then ended as
listed in Item 14 of this Form 10-K for the year ended June 30, 1997. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and the financial statement
schedule 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, 1997, 1996 and 1995, 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. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein for the
years ended June 30, 1997, 1996 and 1995.
COOPERS & LYBRAND L.L.P.
Louisville, Kentucky
August 5, 1997
22
<PAGE>
ROBINSON NUGENT, INC.
FORM 10-K FOR FISCAL YEAR
ENDED JUNE 30, 1997
INDEX TO EXHIBITS
NUMBER SEQUENTIAL
ASSIGNED IN NUMBERING SYSTEM
REGULATION S-K PAGE NUMBER
ITEM 601 DESCRIPTION OF EXHIBIT OF EXHIBIT
(3) 3.1 Articles of Incorporation of Robinson
Nugent, Inc. (Incorporated by reference
to Exhibit 3.1 to Form S-1 Registration
Statement No. 2-62521.)
3.2 Articles of Amendment of Articles of
Incorporation of Robinson Nugent, Inc.
filed September 1, 1978 (Incorporated by
reference to Exhibit B(1) to Form 10-K
Report for year ended June 30, 1980.)
3.3 Articles of Amendment of Articles of
Incorporation of Robinson Nugent, Inc.
filed November 14, 1983 (Incorporated by
reference to Exhibit 3.3 to Form 10-K
Report for year ended June 30, 1984.)
3.4 Amended and Restated Bylaws of Robinson
Nugent, Inc. adopted November 7, 1991.
(Incorporated by reference to Exhibit
19.1 to Form 10-K Report for year ended
June 30, 1992).
(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, NA. (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. (Incorporated by
reference to Exhibit 4.3 to Form 10-K
Report for year ended June 30, 1991.)
23
<PAGE>
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.)
(9) No exhibit.
(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 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 the year ended
June 30, 1993.)
10.4 Summary of The Robinson Nugent, Inc.
Employee Stock Purchase Plan.
(Incorporated by reference to Exhibit 19.2
to Form 10-K Report for the year ended
June 30, 1993.)
10.5 Deferred compensation agreement dated
May 10, 1990 between Robinson Nugent,
Inc. and Larry W. Burke, President and
Chief Executive Officer.
(Incorporated by reference to Exhibit
19.1 to Form 10-K Report for year ended
June 30, 1990.)
10.6 Rabbi Trust Agreement dated July 1, 1996 27
between Robinson Nugent, Inc. and Dean
Witter Trust Company, related to the
deferred compensation agreement between
Robinson Nugent, Inc. and Larry W. Burke,
President and Chief Executive Officer.
10.7 Summary of Robinson Nugent, Inc. Bonus 37
Plan for the fiscal year ended June 30,
1998.
24
<PAGE>
(11) No exhibit.
(12) No exhibit.
(13) 1996 Annual Report to Shareholders of 38
Robinson Nugent, Inc.
(16) Letter from Coopers & Lybrand L.L.P. dated
May 1, 1997 (Incorporated by reference to
Exhibit 16.01 to Form 8-K dated May 1, 1997).
(18) No exhibit.
(21) The subsidiaries of the registrant are:
JURISDICTION
NAME OF ORGANIZATION
---- ----------------
Cablelink, Incorporated Indiana
RNL, Inc. Indiana
Robinson Nugent-Dallas, Inc. Texas
Robinson Nugent Design Services, Inc. Pennsylvania
Robinson Nugent S.a.r.l. France
Robinson Nugent GmbH Germany
Robinson Nugent Ltd. Great Britain
Nihon Robinson Nugent K.K. Japan
Robinson Nugent dba Cablelink Malaysia
(Malaysia) Sdn. Bhd.
Robinson Nugent (Malaysia) Sdn. Bhd. Malaysia
Robinson Nugent S.A. Switzerland
Robinson Nugent (Scotland) Limited Scotland
Robinson Nugent International, Inc. Virgin Islands
Robinson Nugent (Europe) B.V. Netherlands
Robinson Nugent (Belgium) B.V.B.A. Belgium
Robinson Nugent (Asia Pacific) Pte. Ltd. Singapore
Robinson Nugent Nordic, filial Sweden
till Robinson Nugent (Europe) B.V.
The Netherlands
25
<PAGE>
(22) No exhibit.
(23) Consent of Coopers & Lybrand L.L.P. 46
Independent Accountants
(24) No exhibit.
(27) Financial Data Schedule.
(28) No exhibit.
26
<PAGE>
EXHIBIT 10.6
RABBI TRUST AGREEMENT
THIS AGREEMENT made this 1st day of July, 1996, by and between ROBINSON
NUGENT, INC. (hereinafter referred to as "Company") and DEAN WITTER TRUST
COMPANY (hereinafter referred to as "Trustee").
WHEREAS, the Company has adopted that certain Deferred Compensation Plan,
as attached and incorporated herein as Exhibit 1 (hereinafter collectively
referred to as "Plan");
WHEREAS, the Company has incurred or expects to incur liabilities under the
terms of the Plan with respect to the individuals participating in the Plan;
WHEREAS, the Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of the Company's creditors in the event of the Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such time as specified in the Plan(s);
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the
Plan(s) as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of the Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan(s)
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
SECTION 1. ESTABLISHMENT OF TRUST
(a) Company hereby deposits with Trustee in trust $1.00,
which shall become the principal of the Trust to be held,
administered and disposed of by Trustee as provided in this
Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which
Company is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Internal
Revenue Code of 1986, as amended, and shall be construed
accordingly.
(d) The principal of the Trust, and any earnings thereon shall
be held separate and apart from other funds of Company and
27
<PAGE>
shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth.
Plan participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in,
any assets of the Trust. Any rights created under the
Plan(s) and this Trust Agreement shall be mere unsecured
contractual rights of Plan participants and their
beneficiaries against the Company. Any assets held by the
Trust will be subject to the claims of the Company's general
creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.
(e) Company, in its sole discretion, may at any time, or from
time to time, make additional deposits of cash or other
property in trust with Trustee to augment the principal to
be held, administered and disposed of by Trustee as provided
in this Trust Agreement. Neither Trustee nor any Plan
participant or beneficiary shall have any right to compel
such additional deposits.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES
(a) Company shall deliver to Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of
each Plan participant (and his or her beneficiaries), that
provides a formula or other instructions acceptable to
Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or
available under Plan(s)), and the time of commencement for
payment of such amounts. Except as otherwise provided
herein, Trustee shall make payments to the Plan participants
and their beneficiaries in accordance with such Payment
Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state or local
taxes that may be required to be withheld with respect to
the payment of benefits pursuant to the terms of the Plan(s)
and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been
reported, withheld and paid by Company.
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plan(s) shall be
determined by Company or such party as it shall designate
under the Plan(s), and any claim for such benefits shall be
considered and reviewed under the procedures set out in the
Plan(s).
(c) Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under
the terms of the Plan(s). Company shall notify Trustee of
its decision to make payment of benefits directly prior to
the time amounts are payable to participants or their
beneficiaries. In addition, if the
28
<PAGE>
principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance
with the terms of the Plan(s), Company shall make the
balance of each payment as it falls due. Trustee shall
notify Company where principal and earnings are not
sufficient.
SECTION 3. TRUSTEE RESONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN COMPANY IS INSOLVENT
(a) Trustee shall cease payment of benefits to Plan participants
and their beneficiaries if the Trustee is properly notified
that the Company's Insolvent or has actual knowledge that
the Company is insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i)
Company is unable to pay its debts as they become due, or
(ii) Company is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of
the Trust shall be subject to claims of general creditors of
Company under federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive Office
[or substitute the title of the highest ranking office
of the Company] of Company shall have the duty to
inform Trustee in writing of Company's Insolvency. If
a person claiming to be a creditor of Company alleges
in writing to Trustee that Company has become
Insolvent, Trustee shall determine whether Company is
Insolvent and, pending such determination, Trustee
shall discontinue payment of benefits to Plan
participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's
Insolvency or has received notice from Company or a
person claiming to be a creditor alleging that Company
is Insolvent, Trustee shall have no duty to inquire
whether Company is Insolvent. Trustee may in all events
rely on such evidence concerning Company's solvency as
may be furnished to Trustee and that provides Trustee
with a reasonable basis for making a determination
concerning Company's solvency.
(3) If an any time Trustee has determined that Company is
Insolvent, the Trustee shall discontinue payments to
Plan participants or their beneficiaries and shall hold
the assets of the Trust for the benefit of Company's
general creditors. Nothing in this Trust Agreement
shall
29
<PAGE>
in any way diminish any rights of Plan
participants or their beneficiaries to pursue their
rights as general creditors of Company with respect to
benefits due under the Plan(s) or otherwise.
(4) Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after Trustee
has determined that Company is not Insolvent (or is no
longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant
to Section 3(b) hereof and subsequently resumes such
payments, the first payment following such discontinuance
shall include the aggregate amount of all payments due to
Plan participants or their beneficiaries under the terms of
the Plan(s) for the period of such discontinuance, less the
aggregate amount of any payments made to Plan participants
or their beneficiaries by Company in lieu of the payments
provided for hereunder during any such period of
discontinuance.
SECTION 4. PAYMENTS TO COMPANY
Except as provided in Section 3 hereof, after the Trust has
become irrevocable, the Company shall have no right or power to
direct Trustee to return to Company or to divert to others any of
the Trust assets before all payment of benefits have been made to
Plan participants and their beneficiaries pursuant to the terms
of the Plan(s).
SECTION 5. INVESTMENT AUTHORITY
(a) Except as provided in Paragraph (b) below, all rights
associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no
event be exercisable by or rest with Plan participants. If
mutual funds are to be used as investments for assets of the
Trust, the Company shall provide a list of funds from which
the Trustee can select for purposes of investment of the
assets of the Trust. However, the participant, if more than
one fund is made available, may request that the Trustee
allocate or reallocate the composition of the funds within
the participant's account. Such request shall be subject to
the approval of the Trustee who shall have absolute
investment authority over the assets of the Trust. If the
Trustee should decline to follow the participant's request,
the Trustee will notify the participant in a timely manner.
(b) Except as provided in the Trustee may invest the assets of
the Trust in property of any character, real or
30
<PAGE>
personal, including, but not limited to the following:
stocks, including shares of open-end investment companies
(mutual funds); bonds; notes; debentures; options;
limited partnership interests; mortgages; real estate or
any interest therein; unit investment trusts; Treasury
Bills, and other U.S. Government obligations; common
trust funds, combined investment trusts, collective trust
funds or commingled funds maintained by a bank or similar
financial organization (whether or not the Trustee
hereunder); savings accounts, time deposits or money
market accounts of a bank or similar financial
organization (whether or not the Trustee hereunder);
annuity contracts; life insurance policies; or in such
other investments as is deemed proper without regard to
investments authorized by statute or rule of law
governing the investment of trust funds.
(c) Trustee is specifically authorized to invest assets of the
Trust in mutual funds for which Dean Witter InterCapital
Inc. ("InterCapital"), an affiliate of Trustee, acts as
investment advisor or investment manager and/or for which
InterCapital and or its affiliates provide services. It is
acknowledged that InterCapital, Trustee and their affiliates
receive compensation in addition to Trustee fees and the
receipt of such additional compensation is specifically
authorized by the Company.
(d) Trustee is also specifically authorized to execute
securities transactions without providing written
confirmation thereof to the Company or any Plan Participant
and to execute securities transactions through any
broker/dealer, including an affiliate of Trustee, at normal
rates of commissions.
(e) Plan Participants may from time to time request certain
investments for the Trust; provided however that such
requests are subject to the exercise of Trustee's
discretion.
(f) In no event may Trustee invest in securities (including
stock or rights to acquire stock) or obligations issued by
Company, other than a de minimis amount held in common
investment vehicles in which Trustee invests. All rights
associated with assets of the Trust shall be exercised by
Trustee or the person designated by the Trustee, and shall
in no event be exercisable by or rest with Plan
participants.
(g) Company shall have the right, at any time, and from time to
time in its sole discretion, to substitute assets of equal
fair market value for any asset held by the Trust.
SECTION 6. DISPOSITION OF INCOME
31
<PAGE>
(a) During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested.
SECTION 7. ACCOUNTING BY TRUSTEE
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between Company and Trustee. Within sixty
(60) days following the close of each calendar year and within
sixty (60) days after the removal or resignation of Trustee,
Trustee shall deliver to Company a written account of its
administration of the Trust during such year or during the period
from the close of the last preceding year to the date of such
removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued
interest paid or receivable being shown separately), and showing
all cash, securities and other property held in the Trust at the
end of such year or as of the date of such removal or
resignation, as the case may be.
SECTION 8. RESPONSIBILITY OF TRUSTEE
(a) Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with
such matters would use in the conduct of an enterprise of a
like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any
action taken pursuant to a direction, request or approval
given by Company which is contemplated by, and in conformity
with, the terms of the Plan(s) or this Trust and is given in
writing by Company. In the event of a dispute between
Company and a party, Trustee may apply to a court of
competent jurisdiction to resolve the dispute.
(b) Trustee may consult with legal counsel (who may also be
counsel for Company generally) with respect to any of its
duties or obligations hereunder.
(c) Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to
assist it in performing any of its duties or obligations
hereunder.
(d) Trustee shall have, without exclusion, all powers conferred
on Trustees by applicable law, unless expressly provided
otherwise herein, provided, however, that if an insurance
policy is held as an asset of the Trust,
32
<PAGE>
Trustee shall have no power to name a beneficiary of the
policy other than the Trust, to assign the policy (as
distinct from conversion of the policy to a different
form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such
policy.
(e) Notwithstanding any powers granted to Trustee pursuant to
this Trust Agreement or to applicable law, Trustee shall not
have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom,
within the meaning of section 301.7701-2 of the Procedure
and Administrative Regulations promulgated pursuant to the
Internal Revenue Code.
(f) Trustee may vote any corporate stock either in person or by
proxy for any purpose; exercise or sell any stock
subscription or conversion right; participate in voting
trusts; to consent to, take any action in connection with,
and receive and retain any securities resulting from any
merger, consolidation, reorganization, liquidation, sale or
other disposition of the assets of any corporation or other
organization the securities of which constitute assets of
the trust fund.
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE
Company shall pay all administrative and Trustee's fees and
expenses. If not so paid, the fees and expenses shall be paid
from the Trust.
SECTION 10. PROTECTION AND INDEMNIFICTION OF TRUSTEE
Trustee shall not be obligated to inquire whether any payee of
funds or any distributee of benefits designated by the Company is
entitled thereto or whether any payment, allocation or
distribution directed or authorized by the Company is proper, or
within the terms of the Plan or Trust, and shall not be
accountable for any payment, allocation or distribution made by
Trustee in good faith on the order or direction of the Company.
Trustee shall not be liable or responsible for any payment made
by it in good faith without actual notice or knowledge of the
changed condition or status of the payee.
Evidence required of anyone under the Plan or Trust Agreement may
be by certificate of affidavit, document or other information
which the person acting in reliance thereon may consider
pertinent, reliable and genuine, and to have been signed, made or
presented by the proper party or parties, except that any action
required to be taken by the Company shall be by resolution of its
Board of Directors. The Company or any other person may be
authorized by resolution of the Company's Board of Directors to
act on behalf of the Company. Trustee shall not recognize or
take notice of any appointment
33
<PAGE>
of any representative of the Company unless and until the
Company shall have notified Trustee in writing of such
appointment and the extent of such representative's authority.
Trustee may assume that such appointment and authority
continue in effect until it receives written notice to the
contrary from the Company. Any action taken or omitted to be
taken by Trustee by authority of any representative of the
Company within the scope of his or her authority shall be as
effective for all purposes hereof as if such action or
nonaction had been authorized by the Company. Trustee, the
Company and any representative of the Company shall each be
fully protected in acting and relying upon any evidence
described in this Section.
Trustee shall have no power, authority or duty with respect to
the determination of the rights or interests of any person in and
to the trust fund or under the Plan nor to examine the
determination of any right or interest thereunder.
The Company shall indemnify and defend the Trustee against any
and all claims, losses, damages, expenses (including attorney's
fees), and liabilities arising from any action or failure to act
in connection with the administration of the Plan or the Trust,
except when the same is judicially determined to be due to the
negligence or willful misconduct of Trustee.
SECTION 11. RESIGNATION AND REMOVAL OF TRUSTEE
(a) Trustee may resign at any time by written notice to Company,
which shall be effective 90 days after receipt of such
notice unless Company and Trustee agree otherwise.
(b) Trustee may be removed by Company upon 90 days notice or
upon shorter notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be
completed within 90 days after receipt of notice of
resignation, removal or transfer, unless Company extends the
time limit.
(d) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the
effective date of resignation or removal under paragraphs
(a) or (b) of this section. If no such appointment has been
made, trustee may apply to a court of competent jurisdiction
for appointment of a successor or for instructions. All
expenses of Trustee in connection with the proceeding shall
be allowed as administrative expenses of the Trust.
SECTION 12. APPOINTMENT OF SUCCESSOR TRUSTEE
34
<PAGE>
(a) If Trustee resigns or is removed in accordance with Section
11(a) or (b) hereof, Company may appoint any third party,
such as a bank trust department or other party that may be
granted corporate trustee powers under state law, as a
successor to replace Trustee upon resignation or removal.
The appointment shall be effective when accepted in writing
by the new Trustee, who shall have all of the rights and
powers of the former Trustee, including ownership rights in
the Trust assets.
The former Trustee shall execute any instrument necessary or
reasonably requested by Company or the successor Trustee to
evidence the transfer.
SECTION 13. AMENDMENT OR TERMINATION OF THE TRUST
(a) This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the
foregoing, no such amendment shall conflict with the terms
of the Plan or shall make the Trust revocable after is has
become irrevocable in accordance with Section 1(b) hereof.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled
to benefits pursuant to the terms of the Plan. Upon
termination of the Trust any assets remaining in the Trust
shall be returned to Company.
(c) Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the
Plan, Company may terminate this Trust prior to the time all
benefit payments under the Plan have been made. All assets
in the Trust at termination shall be returned to Company.
SECTION 13. MISCELLANEOUS
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be
anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable
process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
35
<PAGE>
SECTION 14. EFFECTIVE DATE
The effective date of this Trust Agreement shall be
July 1, 1996.
Robinson Nugent, Inc.
----------------------------
THE COMPANY
BY: Michael W. Schreiweis
------------------------------
ITS: Director of Human Resources
------------------------------
State of Indiana )
) SS
County of Floyd )
The foregoing instrument was acknowledged before me this 2nd
day of July, 1996, by Michael W. Schreiweis.
/s/ Lisa Jo Napier
-----------------------
Notary Public
Lisa Jo Napier
My Commission Expires: April 16, 1999
DEAN WITTER TRUST COMPANY, TRUSTEE
BY: Frederick Whelply
----------------------------
ITS: First Vice President
----------------------------
State of New Jersey )
) SS
County of Hudson )
The foregoing instrument was acknowledged before me this
_____ day of _________, 199___, by ____________________________.
_____________________________
Notary Public
36
<PAGE>
EXHIBIT 10.7
ROBINSON NUGENT, INC.
SUMMARY OF ROBINSON NUGENT, INC.
BONUS PLAN TO EXECUTIVE OFFICERS
The Board of Directors has adopted a bonus plan for executive officers and
key employees for fiscal year 1998. The terms of the plan are the same as the
Company's bonus plan for the prior year, or fiscal year 1997. Executive
officers are eligible for a first tier bonus award provided the consolidated
pretax income of the Company and subsidiaries for fiscal year 1998 exceeds the
reported pretax income for fiscal year 1997. A second tier, or added, bonus
award is payable to executive officers provided the consolidated pretax income
for fiscal year 1998 exceeds the pretax income objectives outlined in the fiscal
year 1998 annual financial plan. The bonus awards under both tiers are
predicated upon a formula whereby bonuses increase in proportion to the level of
pretax income over the prior year and financial plan objectives, respectively.
The maximum bonus award for executive officers approximates 26 percent to 36
percent of base compensation. Bonus awards for first tier financial performance
were made to executive officers up to 10% of base compensation in fiscal 1997.
37
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
TEN YEAR FINANCIAL SUMMARY
IN THOUSANDS EXCEPT PER SHARE DATA
Years ended June 30
1997 1996 1995
-------------------------------
OPERATING RESULTS:
- --------------------------------------------------------------------------------
Net sales $84,840 80,964 80,679
Cost of sales 65,769 65,604 59,329
-------------------------------
Gross profit 19,071 15,360 21,350
Selling, general and administrative expenses 15,598 16,749 15,586
Provision for restructuring -- -- --
Provision for plant consolidation -- -- --
-------------------------------
Operating income, (loss) 3,473 (1,389) 5,764
Other income (expense) 376 (305) (170)
-------------------------------
Income (loss) before income taxes,
extraordinary item and change in
accounting principle 3,849 (1,694) 5,594
Income taxes (benefit) 1,494 465 1,855
Extraordinary item - gain on fire
insurance recovery -- -- --
Cumulative effect of change in
accounting principle -- -- --
-------------------------------
Net income (loss) $ 2,355 (2,159) 3,739
-------------------------------
Return on net sales 2.8% (2.7%) 4.6%
PER SHARE INFORMATION:
- --------------------------------------------------------------------------------
Net income (loss) $ .48 (.40) .69
Cash dividends .12 .12 .12
Weighted average shares outstanding (in thousands) 4,911 5,333 5,383
Book value at year end* 6.37 6.13 6.79
BALANCE SHEET:
- --------------------------------------------------------------------------------
Working capital $16,581 10,328 15,875
Property, plant and equipment - net 21,188 23,618 24,609
Total assets 49,696 51,466 54,169
Long-term debt 5,926 3,036 4,143
Shareholders' equity 31,140 29,968 36,480
OTHER DATA:
- --------------------------------------------------------------------------------
Current ratio to 1.0 2.4 1.6 2.3
Return on shareholders' average equity 7.8% (6.0%) 11.0%
Capital additions 4,202 7,474 5,929
Depreciation and amortization 5,451 6,135 3,714
* 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.
8
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
1994 1993 1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
67,557 58,671 50,759 53,061 55,031 53,149 52,730
49,642 42,986 38,750 41,529 41,802 39,504 37,673
- --------------------------------------------------------------------------------
17,915 15,685 12,009 11,532 13,229 13,645 15,057
13,727 12,039 10,985 11,153 12,724 11,531 10,736
-- 620 -- -- -- -- --
-- -- -- -- -- -- 1,700
- --------------------------------------------------------------------------------
4,188 3,026 1,024 379 505 2,114 2,621
841 (464) 214 438 (259) 236 593
- --------------------------------------------------------------------------------
5,029 2,562 1,238 817 246 2,350 3,214
2,410 900 290 250 (450) 400 800
-- -- -- -- -- -- 1,379
-- -- -- -- -- -- 160
- --------------------------------------------------------------------------------
2,619 1,662 948 567 696 1,950 3,953
- --------------------------------------------------------------------------------
3.9% 2.8% 1.9% 1.1% 1.3% 3.7% 7.5%
- --------------------------------------------------------------------------------
.49 .31 .18 .10 .13 .33 .57
.12 .08 .08 .08 .08 .08 .07
5,368 5,331 5,315 5,315 5,296 5,840 6,845
5.91 5.31 5.52 5.17 5.34 4.96 5.27
- --------------------------------------------------------------------------------
15,014 14,780 17,431 16,210 16,595 14,609 22,806
19,344 15,871 15,506 15,216 16,077 15,843 18,571
45,377 40,727 40,520 38,743 40,823 38,170 50,413
2,408 2,166 3,409 3,234 3,589 3,519 4,273
31,419 28,231 29,346 27,490 28,370 26,179 36,082
- --------------------------------------------------------------------------------
2.4 2.5 3.4 3.2 3.0 2.9 3.5
8.8% 5.8% 3.3% 2.0% 2.6% 6.3% 11.5%
5,793 4,060 2,382 2,488 1,994 1,036 4,512
3,003 3,031 2,809 2,897 2,752 3,100 3,393
- --------------------------------------------------------------------------------
9
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Certain statements in the following discussions regarding the Company's future
product and business plans, financial results, performance and events are
forward-looking statements and are based on current expectations. Actual results
may differ materially due to a number of risks and uncertainties, including the
risks detailed below in "Risk Factors That May Affect Future Results."
- -------------
1997 VS. 1996
Customer orders for the fiscal year ended June 30, 1997 were $83.5 million, up
$1.9 million or 2.4%, compared to customer orders of $81.6 million in the prior
year. Sales in fiscal 1997 were $84.8 million, compared to sales of $81.0
million in the prior year. The Company's net income for fiscal 1997 was $2.4
million or 48 cents per common share compared to net loss of $2.2 million or 40
cents in the prior fiscal year.
The increase in worldwide sales reflected higher sales of smart card
reader connectors and PC memory card products in Europe, and pin grid array
sockets, PC board connectors and backpanel connector products (METPAK-Registered
Trademark-2) in the United States. The higher revenue items were partially
offset by a lower volume of sales of plastic leaded chip carrier sockets and
screw machine products, worldwide. Customer sales in the United States of $52.8
million increased 2% from the prior year and represented 62% of consolidated
sales in 1997, compared to 64% in 1996. European sales of $21.6 million in
fiscal year 1997 increased by $2.0 million, and represented 26% of the Company's
consolidated sales in 1997, compared to 24% in 1996.
Asia sales (from the Company's Japan, Malaysia and Singapore operations) of
$8.2 million in fiscal 1997 were slightly higher than the prior year, due to
higher screw machine sales in Japan and cable assembly and connector sales in
Malaysia.
Gross profits of $19.1 million in fiscal 1997 increased $3.7 million or
24.2% compared to fiscal 1996. The higher gross profits reflected the higher
gross profits from operations in the United States, Europe and Asia Pacific,
lower research, development and engineering expenses, and the effect of
manufacturing cost reduction programs. Prior year gross profits reflect an
adjustment which reduced the carrying values of various production equipment.
During the fourth quarter of 1996 the Company determined that shorter product
life cycles and increasingly 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.
Research, development and engineering expenses, which were included in
gross profit, were $3.4 million for fiscal 1997 compared to $3.7 million for
fiscal 1996. Engineering represented 4.0% of sales in 1997 compared to 4.5% in
the prior year. The Company plans to expand its product development efforts in
the coming fiscal year.
Selling, general and administrative expenses of $15.3 million decreased by
$1.4 million or 8.3% in 1997 compared to 1996. The decrease in SG&A primarily
reflects lower administrative expenses in Europe partially offset by
approximately $.4 million in bonus awards, granted under the incentive bonus
plan for executive officers and key employees. No awards were made under this
program in 1996. The prior year results also include a charge of $.6 million
relating to the elimination of goodwill. Administrative expenses in Asia
remained relatively unchanged, compared to the prior year.
Other income (expense) in fiscal 1997 increased net income by $.4 million,
compared to a net expense of $.3 million in fiscal 1996. The increase in 1997 is
primarily attributable to income from a $.5 million settlement of a patent
infringement charge the Company had filed against a competitor and currency
exchange gains of approximately $.4 million. These currency gains were generated
primarily in Europe, on the strengthening of the Pound Sterling against other
European currencies. The currency gains were primarily related to intercompany
receivable and payable positions between the Company's subsidiaries.
The provisions for income taxes in 1997 and 1996 were provided on the basis
of effective tax rates in the respective countries. The Company did recognize
approximately $85,000 in tax benefits resulting from prior year losses used to
offset current year income at certain foreign operations. However, the Company
still has approximately $.8 million in tax benefits resulting from loss carry-
forwards in foreign countries which will not be recognized until management is
able to project the probable utilization of all or part of these losses.
- -------------
1996 VS. 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 for 1996 were special charges of approximately
$2.1 million after tax, or 40 cents per share, recorded in the fourth quarter of
fiscal 1996. These charges included the reduction of carrying values on various
production equipment due to shorter product life cycles and increasing
competitive market conditions ($1.2 million after tax), the elimination of
goodwill ($.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 worldwide price erosion of dual in-line
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 being a customer-specific design to a
commodity component status.
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 in
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 which 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,
10
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
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.
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 and
higher operating expenses in Europe and Asia Pacific. Management's decision to
eliminate the goodwill was based on the departure of key personnel and the
reduction in revenues of non-connector products at Robinson Nugent (Belgium).
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 headquarters
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.
- -------------
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of June 30, 1997 was at $16.6 million compared to $10.3
million at June 30, 1996. The Company's current ratio at June 30, 1997 was 2.4
to 1 compared to 1.6 to 1 June 30, 1996. Cash balances at June 30, 1997 were
$4.1 million compared to $2.4 million at year-end June 30, 1996. The increase in
working capital primarily reflects the transfer of the Company's short-term bank
borrowings to a new long-term credit facility and income generated by operations
including non-cash depreciation charges.
The Company's long-term debt as a percentage of stockholders equity was
19.1 percent at year-end 1997 compared to 10.1 percent at year-end 1996.
Capital expenditures, primarily for new mold tools, contact dies and
assembly equipment, were $4.2 million in the fiscal year 1997, compared to $7.5
million in 1996. The capital investments primarily relate to the development and
production of new derivatives of existing products, and manufacturing cost
reduction programs.
The Company believes future cash requirements for capital expenditures and
working capital can be funded from operations, supplemented by proceeds from the
existing long-term credit agreement, if required. The Company currently has $5
million in unused and available credit under this agreement at June 30, 1997.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
- -------------
NEW PRODUCTS AND TECHNOLOGICAL CHANGE
The Company's results of operations and competitive strength depend upon
the successful and rapid development of new products and enhancements to
existing products. The market for the Company's products is characterized by
rapid technological advances and changes in customer demand, which necessitate
frequent product introductions and enhancements. These factors can result in
unpredictable product transition and shortened product life cycles, and can
render existing products obsolete or unmarketable. The Company must make
significant investments in research and product development and successfully
introduce competitive new products and enhancements on a timely basis. The
success of new product introductions is dependent on a number of factors,
including the rate at which a new product gains acceptance and the Company's
ability to effectively manage product transitions. The development of new
technology, products, and enhancements is complex and involves uncertainties,
which increases the risk of delays in the introduction of new products and
enhancements. From time to time the Company has encountered delays that have
adversely affected the Company's financial results and competitive position in
the market. There can be no assurances that the Company will not encounter
development or production delays, or that despite intensive testing by the
Company, flaws in design or production will not occur in the future. Design
flaws could result in the Company experiencing a rate of failure in its products
that delays the shipment or sale of its products, triggers substantial repair or
replacement costs, damages the Company's reputation and causes material adverse
effect upon the Company's financial results.
The Company has historically generated its revenue and operating profits
primarily from the sale of products to the computer, network equipment and
communications industries. The Company is focusing resources on expanding
further into these markets. There can be no assurances that the Company will be
successful in expanding these markets.
- -------------
DEPENDENCE ON KEY CUSTOMERS
Many of the Company's products are designed specifically for individual
customers. Future revenue from these products is therefore dependent on the
customer's continued need and acceptance of these products.
- -------------
COMPETITION
The market for the Company's products is intensely competitive and subject
to continuous, rapid technological change, frequent product performance
improvements and price reductions. In the connector marketplace, competition
comes from companies that have substantially greater resources including AMP,
Inc., Molex, Inc., Berg Electronics Corp. and Methode Electronics, Inc., as well
as several other similarly sized companies. The Company expects that the markets
for its products will continue to change as customer buying patterns continue to
migrate to emerging products and technologies. The Company's ability to compete
will depend to a considerable extent on its ability to continuously develop and
introduce new products and enhancements to existing products. Increased
competition may result in price reductions, reduced margins and declining market
share, which may have a material adverse effect on the Company's business and
financial results.
- -------------
INTELLECTUAL PROPERTY
The Company's intellectual property rights are material assets and key to
its business and competitive strength. Robinson Nugent protects its intellectual
property rights through a combination of patents, trademarks, copyrights,
confidentiality procedures, trade secret laws and licensing arrangements. The
Company's policy is to apply for patents, or other appropriate proprietary or
statutory protection, when it develops new or improved technology that is
important to its business. Such protection, however, may not preclude
competitors from developing products similar to the Company's products. In
addition, competitors may attempt to restrict the Company's ability to compete
by advancing various intellectual property legal theories which could, if
enforced by the courts, restrict the Company's ability to develop and
manufacture interoperable products. Also, the laws of certain foreign countries
do not protect the Company's intellectual property rights to the same extent as
the laws of the United States. The Company also relies on certain technology
that is licensed from others. The Company is unable to predict whether its
11
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)
license arrangements can be renewed on terms acceptable to the Company. The
failure to successfully protect its intellectual property rights or obtain
licenses from others as needed could have a material adverse effect on the
Company's business and financial results.
The connector industry is characterized by vigorous pursuit and protection
of intellectual property rights or positions, which in some instances has
resulted in significant litigation that is often protracted and expensive. From
time to time, Robinson Nugent has commenced actions against other companies to
protect or enforce its intellectual property rights. Similarly, from time to
time, the Company has been notified that it may be infringing certain patent or
other intellectual property rights of others. Licenses or royalty agreements are
generally offered in such situations. Litigation by or against the Company may
result in significant expense and divert the efforts of the Company's technical
and management personnel, whether or not such litigation results in any
determination unfavorable to the Company. In the event of an adverse result, the
Company could be required to pay substantial damages; cease the manufacture, use
and sale of infringing products; expend significant resources to develop non-
infringing technology; or discontinue the use of certain processes if it is
unable to enter into royalty arrangements. There can be no assurances that
litigation will not be commenced in the future regarding patents, copyrights,
trademarks or trade secrets or that any license, royalty or other rights can be
obtained on acceptable terms, or at all.
- -------------
INFORMATION SYSTEMS
The Company is currently in the process of replacing its management
information systems, including; order management, manufacturing resource
planning, finance and accounting. While the Company expects that the new
integrated system will increase operational efficiencies, support future growth,
and address the impact of the year 2000 on current systems, the Company's future
operating results and financial condition could be adversely affected by
functional or performance difficulties with the new system during the transition
period. In addition, other information and operational systems have been
assessed, related to the impact of the year 2000. Plans are being developed to
address system modifications required by December 31, 1999.
- -------------
MANUFACTURING RISKS; DEPENDENCE ON SUPPLIERS
The Company uses standard molding compounds and pin sockets for many of its
products and believes that, in most cases, there are a number of alternative,
competent vendors for these components. In addition, the Company designs its own
custom stamped and formed connector contacts. Robinson Nugent enters into
agreements with custom stamping manufacturers to design and build stamping dies
to produce proprietary stamped and formed contacts for the Company. The Company
believes that these stamping operations are currently the only suppliers of
these particular components that meet the Company's specifications and design
requirements. Alternative sources are not readily available. An unanticipated
failure of any sole source supplier to meet the Company's requirements for an
extended period, or an interruption of the Company's ability to secure
comparable components, could have a material adverse effect on its revenue and
results of operations. In the event a sole source supplier was unable or
unwilling to continue to supply components, the Company would have to identify
and qualify other acceptable suppliers. This process could take an extended
period, and no assurance can be given that any additional source would become
available or would be able to satisfy the Company's production requirements on a
timely basis.
- -------------
EARNINGS FLUCTUATIONS
The Company's reported earnings have fluctuated significantly in the past
and may continue to fluctuate significantly in the future from quarter to
quarter due to a variety of factors, including, among others, the effects of (i)
customers' historical tendencies to make purchase decisions in the second half
of the fiscal year, (ii) the timing of the announcement and availability of
products and product enhancements by the Company and its competitors, (iii)
fluctuating foreign currency exchange rates, (iv) changes in the mix of products
sold, (v) variations in customer acceptance periods for the Company's products,
and (vi) global economic conditions.
- -------------
VOLATILITY OF STOCK PRICE
The trading price of the Company's common stock has fluctuated and in the
future may fluctuate substantially in response to anticipated or reported
operating results, industry conditions, new product or product development
announcements by the Company or its competitors, announced acquisitions and
joint ventures by the Company or its competitors, broad market trends unrelated
to the Company's performance, general market and economic conditions,
international currency fluctuations and other events or factors. Further, the
volatility of the stock markets in recent years has caused wide fluctuations in
trading prices of stocks of companies independent of their individual operating
results. In the future, the Company's reported operating results may be below
the expectations of stock market analysts and investors, and in such events,
there could be an immediate and significant adverse effect on the trading price
of the company's common stock.
- -------------
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation", in 1997. SFAS No. 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. As permitted by SFAS No. 123, the
Company chose 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 accountings rules.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", was adopted by the Company in 1997. SFAS
No. 121 standardized the accounting practices for the recognition and
measurement of impairment losses on certain long-lived assets. The adoption of
SFAS No. 121 was not material to the results of operations or financial position
of the Company.
The Financial Accounting Standards Board has issued SFAS No. 128, "Earnings
per Share", SFAS No. 130, "Reporting Comprehensive Income", and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information."
SFAS No. 128 specifies the computation, presentation, and disclosure
requirements for earnings per share. This statement's objective is to simplify
the computation of earnings per share (EPS) and to make the United States
standard for computing earnings per share more compatible with the EPS standards
of other countries. As permitted by SFAS No. 128, the Company will adopt the new
standard in fiscal 1998. The Company does not expect adoption of this standard
will have a material impact on its financial statements.
SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. The Company will adopt
the new standard in fiscal 1999. The Company does not expect adoption of this
standard will have a material impact on its financial statements.
SFAS No. 131 specifies the way that public business enterprises report
information about operating segments in annual financial statements and requires
that enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company will adopt the new standard in fiscal 1999. The Company
does not expect adoption of this standard will have a material impact on its
financial statements.
12
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
OPERATING RESULTS AS A PERCENTAGE OF NET SALES
1997 1996 1995
--------------------------
- ------------------------------------------------------------------------------
Net Sales 100.0% 100.0% 100.0%
Cost of sales 77.5 81.0 73.5
--------------------------
Gross profit 22.5 19.0 26.5
Selling, general and administration expenses 18.4 20.7 19.4
--------------------------
Operating income (loss) 4.1 (1.7) 7.1
Other income (expense) .4 (0.3) (0.2)
--------------------------
Income (loss) before income taxes 4.5 (2.0) 6.9
Income taxes 1.7 0.7 2.3
--------------------------
Net income (loss) 2.8% (2.7%) 4.6%
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, 1997.
Cash
Price Range Dividends
------------------------------
FISCAL 1997 High Low
- ---------------------------------------------------------------------------
First quarter ended September 30 $6 1/8 4 3/8 $ .03
Second quarter ended December 31 5 3/8 4 1/4 .03
Third quarter ended March 31 5 1/4 4 1/4 .03
Fourth quarter ended June 30 6 4 5/8 .03
FISCAL 1996
- ---------------------------------------------------------------------------
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
As of June 30, 1997, the Company had approximately 750 holders of record of its
common shares.
13
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
IN THOUSANDS
June 30
1997 1996 1995
----------------------------
ASSETS
- ------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 4,118 2,368 2,460
Receivables, less allowance for doubtful
receivables of $564 in 1997, $739 in 1996
and $651 in 1995 11,784 10,433 12,209
Inventories 11,100 13,446 11,278
Other current assets 1,371 1,532 2,418
----------------------------
Total current assets 28,373 27,779 28,365
Property, plant and equipment, at cost less
accumulated depreciation and amortization 21,188 23,618 24,609
Other assets 135 69 1,195
----------------------------
Total assets $49,696 51,466 54,169
LIABILITIES AND SHAREHOLDERS EQUITY
- ------------------------------------------------------------------------------
Current liabilities:
Current installments of long-term debt $ 386 713 924
Short-term bank borrowings -- 6,400 538
Accounts payable 4,265 5,450 6,131
Accrued expenses 5,560 4,799 4,456
Income taxes payable 1,581 89 441
----------------------------
Total current liabilities 11,792 17,451 12,490
Long-term debt, excluding current installments 5,926 3,036 4,143
Deferred income taxes 838 1,011 1,056
----------------------------
Total liabilities 18,556 21,498 17,689
Shareholders equity:
Common shares without par value
Authorized 15,000 shares; issued 6,851
shares in 1997 and 1996 and 6,850 shares
in 1995 20,950 20,950 20,896
Retained earnings 21,290 19,521 22,325
Equity adjustment from foreign currency
translation 2,073 2,847 3,774
Employee stock purchase plan loans and
deferred compensation (177) (354) (768)
Less cost of common shares in treasury;
1,959 shares in 1997 and 1996 and 1,480
shares in 1995 (12,996) (12,996) (9,747)
----------------------------
Total shareholders equity 31,140 29,968 36,480
----------------------------
Total liabilities and shareholders'
equity $49,696 51,466 54,169
14 See accompanying notes to consolidated financial statements.
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
IN THOUSANDS EXCEPT PER SHARE DATA
Years ended June 30
1997 1996 1995
----------------------------
- ------------------------------------------------------------------------------
Net sales $84,840 80,964 80,679
Cost of sales 65,769 65,604 59,329
----------------------------
Gross profit 19,071 15,360 21,350
Selling, general and administrative expenses 15,598 16,749 15,586
----------------------------
Operating income (loss) 3,473 (1,389) 5,764
Other income (expense):
Interest income 124 129 134
Interest expense (678) (511) (262)
Currency exchange gain (loss) 393 81 (286)
Settlement of patent infringement claim 500 -- --
Royalty income 37 118 295
Other -- (122) (51)
----------------------------
Total other income (expense) 376 (305) (170)
----------------------------
Income (loss) before income taxes 3,849 (1,694) 5,594
Income taxes 1,494 465 1,855
----------------------------
Net income (loss) $ 2,355 (2,159) 3,739
----------------------------
Net income (loss) per common share $ .48 (.40) .69
15
See accompanying notes to consolidated financial statements.
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
IN THOUSANDS EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
Employee
Stock
Purchase
Foreign Plan Loans
Common shares Retained currency and Deferred Treasury shares
Years ended June 30, 1997, 1996 and 1995 Shares Amount earnings translation Compensation Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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 RNBelgium -- 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 RNBelgium -- 49 -- -- -- 20 123
----------------------------------------------------------------------------
BALANCE AT JUNE 30, 1996 6,851 $20,950 19,521 2,847 (354) (1,959) $(12,996)
Net income -- -- 2,355 -- -- -- --
Dividends ($.12 per share) -- -- (586) -- -- -- --
Equity adjustments from foreign
currency translation -- -- -- (774) -- -- --
Stock purchase plan repayments -- -- -- -- 93 -- --
Amortization of deferred compensation -- -- -- -- 51 -- --
Stock purchase plan terminations -- -- -- -- 33 -- --
----------------------------------------------------------------------------
BALANCE AT JUNE 30, 1997 6,851 $20,950 21,290 2,073 (177) (1,959) $(12,996)
</TABLE>
16 See accompanying notes to consolidated financial statements.
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS
Years ended June 30
1997 1996 1995
- ------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,355 (2,159) 3,739
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Elimination of RNBelgium goodwill -- 636 --
Depreciation and amortization 5,451 6,135 3,714
Reduction and disposal of capital assets 233 1,971 71
(Increase) decrease in receivables (1,351) 1,776 (1,330)
(Increase) decrease in inventories 2,346 (2,168) (1,136)
Decrease in other current assets 67 731 350
Increase (decrease) in accounts payable
and accrued expenses (424) (338) 631
Increase (decrease) in income taxes
payable 1,492 (352) (330)
(Increase) decrease in deferred income
taxes (79) 110 197
----------------------------
Net cash provided by operating
activities 10,090 6,342 5,906
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,202) (7,474) (5,929)
Investment in RNBelgium, net of cash acquired -- -- (186)
Proceeds from the sale of fixed assets 117 -- --
Increase (decrease) in other assets (83) 41 (26)
----------------------------
Net cash used in investing activities (4,168) (7,433) (6,141)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term bank borrowings -- 6,262 738
Repayment of short-term bank borrowings (300) (389) (1,150)
Proceeds from long-term debt -- 193 --
Repayment of long-term debt (3,189) (723) (201)
Cash dividends (586) (645) (640)
Issuance of common shares -- 5 --
Purchase of treasury shares -- (3,372) --
Repayment of employee stock purchase
plan loans 93 192 91
Proceeds from stock purchase plan terminations 33 66 130
Proceeds from exercised stock options -- 3 79
----------------------------
Net cash provided by (used in)
financing activities (3,949) 1,592 (953)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (223) (593) 657
----------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,750 (92) (531)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,368 2,460 2,991
----------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,118 2,368 2,460
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) issued to former owners (248)
Payable to former owners of acquired business (1,062)
--------
Cash paid for Robinson Nugent (Belgium) $ 186
--------
See accompanying notes to consolidated financial statements. 17
<PAGE>
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, 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 Currency 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 $5,383 in 1997, $5,901 in 1996 and $3,530 in 1995.
INCOME TAXES. The Company follows SFAS No. 109 - "Accounting for Income Taxes"
which requires the recognition of deferred tax assets and liabilities for the
expanded future tax consequences of events that have been recognized in the
financial statements or income tax return. 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.
RESEARCH, DEVELOPMENT AND ENGINEERING. Research,
development, and engineering expenditures for the creation and application of
new and improved products and manufacturing processes were approximately $3,400
in 1997, $3,700 in 1996 and $3,100 in 1995. Research, development and
engineering costs are charged to operations as incurred.
GOVERNMENT INCENTIVE GRANTS. The Company has received an incentive grant from
the government in Scotland related to 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 $272
in 1997, $231 in 1996 and $239 in 1995.
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. 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.
NEW ACCOUNTING STANDARDS. The Company has adopted Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation"
in 1997. SFAS No. 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 fair value accounting rules. As permitted by
SFAS No. 123, the Company chose 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.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" was adopted by the Company in 1997. SFAS
No. 121 standardized the accounting practices for the recognition and
measurement of impairment loses on certain long-lived assets. The adoption of
SFAS No. 121 was not material to our results of operations or financial
position.
The Financial Accounting Standards Board has issued SFAS No. 128, "Earnings
per Share", SFAS No. 130 "Reporting Comprehensive Income" and SFAS No. 131
"Disclosures about Segments of an Enterprise and Related Information."
18
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SFAS No. 128 specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS). This Statement's objective is to
simplify the computation of earnings per share and to make the U.S. standard for
computing earnings per share more comparable with EPS standards of other
countries. As permitted by SFAS No. 128, the Company will adopt the new standard
in fiscal 1998. The Company does not expect that the adoption of this standard
will have a material impact on its financial statements.
SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and loses) in
a full set of general-purpose financial statements. The Company will adopt the
new standard in fiscal 1999. The Company does not expect adoption of this
standard will have a material impact on its financial statements.
SFAS No. 131 specifies the way that public business enterprises report
information about operating segments in annual financial statements and requires
enterprises to report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company will adopt the new standard in fiscal 1999. The Company
does not expect adoption of this standard will have a material impact on its
financial statements.
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, 1997.
COMMON SHARE DATA. Per common share data for 1997 and 1995 are based on the
weighted average number of common shares outstanding plus common share
equivalents resulting from dilutive stock options. Per common share data for
1996 is based only on the weighted average number of common shares outstanding.
The number of shares used in computing per common share data was 4,911 in 1997,
5,333 in 1996, and 5,383 in 1995.
RECLASSIFICATIONS. Certain reclassifications of prior year amounts have been
made to conform to current year presentations, with no effect on total assets,
liabilities, shareholders' equity or net income.
NOTE 3 INVENTORIES
1997 1996 1995
Inventories consist of the following:
Finished goods $ 3,873 4,526 2,687
Work in process 5,933 7,021 6,861
Raw material and supplies 1,294 1,899 1,730
----------------------------
Total $11,100 13,446 11,278
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 $350 at June 30, 1997.
NOTE 4 PROPERTY, PLANT AND EQUIPMENT
1997 1996 1995
----------------------------
A summary of property, plant and
equipment follows:
Land $ 808 836 839
Buildings 12,464 12,886 13,379
Machinery and equipment 46,778 47,122 45,262
----------------------------
60,050 60,844 59,480
Less accumulated depreciation and amortization 38,862 37,226 34,871
----------------------------
Total $21,188 23,618 24,609
In June of 1997, management approved a plan to move all electro- plating and
component assembly operations from its plant in Delemont, Switzerland to its
facility in Inchinnan, Scotland, and to sell the facility in Delemont.
Management evaluated the current market value of this building and decided to
reduce its carrying value by $250 in order to approximate the estimated net
realizable value of $2,500.
19
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS EXCEPT PER SHARE DATA
NOTE 5 ACCRUED EXPENSES
1997 1996 1995
----------------------------
A summary of accrued expenses follows:
Compensation $ 1,560 1,394 1,129
Commissions 741 719 798
Distributor allowances 885 692 683
Pension and retirement plans 273 267 22
State and local taxes 510 548 347
Deferred grant income 217 300 229
Other 1,374 879 1,248
----------------------------
Total $ 5,560 4,799 4,456
NOTE 6 LONG-TERM DEBT
1997 1996 1995
----------------------------
Long-term debt consist of the following:
United States' obligation:
Loans under a new long-term credit agreement $4,000 -- --
Obligation under purchase agreement for the
acquisition of RN Belgium, interest imputed
at 8%, paid off in June 1997 -- 567 1,062
Foreign obligations:
6.875% fixed-rate real estate mortgage, payable
in annual installments through 2004, with
interest 1,594 2,092 2,522
10.3% fixed-rate real estate mortgage, payable
in quarterly installments through 2000 214 318 433
7.65% fixed-rate real estate mortgage payable
in quarterly installments through 2001 150 217 289
10.0% capitalized lease obligation, payable to
bank in monthly installments through 2002 237 274 314
Other long-term debt 117 281 447
----------------------------
Total 6,312 3,749 5,067
Less current installments of long-term debt 386 713 924
----------------------------
Long-term debt $5,926 3,036 4,143
In February 1997, the Company replaced its short-term bank line of credit with a
new long-term credit agreement that provides for up to $9 million in revolving
credit loans. The Company had $5 million in unused and available credit under
this agreement at June 30, 1997. The average interest rate on this debt was
6.81% at June 30, 1997. This agreement is unsecured, but includes various
operating and financial covenants including, a minimum current ratio, a maximum
ratio of indebtedness to tangible net worth, a minimum fixed charge coverage
ratio and a maximum funded debt ratio. The agreement terminates in December 1999
and includes a reduction in the total amount of available credit to $8 million
in December 1997 and $7 million in December 1998. This agreement can be extended
by mutual consent of the Company and the bank.
The aggregate maturities of long-term debt for the five years ending June
30, 2002, amount to $386 in 1998, $381 in 1999, $4,385 in 2000, $332 in 2001,
$244 in 2002 and $584 thereafter.
Total interest paid under the long-term debt agreements was $363 in 1997,
$259 in 1996 and $237 in 1995.
Total interest paid under the short-term bank line of credit was $315 in
1997, $252 in 1996 and $25 in 1995.
In addition, the Company has a short-term line of credit available in
Malaysia and Belgium at interest rates of 7.55% and 8.75%, respectively. Total
unused and available credit under these agreements was approximately $450 as of
June 30, 1997.
The weighted average interest rate on short term debt was 7.2% in 1996.
Property, plant and equipment with an approximate net book value of $5,588
is pledged as collateral under the various long-term debt agreements.
20
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
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.
1997 1996 1995
-------------------------------------------------------
CARRYING FAIR Carrying Fair Carrying Fair
AMOUNT VALUE Amount Value Amount Value
-------------------------------------------------------
Long term debt $6,312 6,190 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.
1997 1996 1995
----------------------------
The provision (benefit) for income taxes follows:
Current:
Federal $1,098 65 1,173
State 172 (8) 245
Foreign 303 298 240
----------------------------
Total current 1,573 355 1,658
Deferred:
Federal (44) 216 197
State (2) 40 (15)
Foreign (33) (146) 15
----------------------------
Total deferred (79) 110 197
----------------------------
Total $1,494 465 1,855
The following reconciles income taxes computed at the U.S. Federal statutory
rate to income taxes reported for financial reporting purposes:
1997 1996 1995
----------------------------
Income tax expense (benefit) at statutory rate $1,309 (576) 1,902
Non-U.S. tax-exempt (earnings) losses (146) 791 (213)
Tax-exempt earnings of FSC (89) 33 (139)
Foreign taxes, net of U.S. tax credit 293 175 255
State and local taxes, net of U.S. Federal
income tax 112 21 152
Research and experimentation credit (44) -- (165)
Other 59 21 63
----------------------------
Income taxes as reported $1,494 465 1,855
No U.S. Federal income taxes have been provided at June 30, 1997, on
approximately $7,179 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, net of tax refunds received, of $1
in 1997, $805 in 1996 and $1,805 in 1995.
The net current and non-current components of deferred income taxes recognized
in the balance sheet at June 30 follows:
1997 1996 1995
----------------------------
Net current assets $ 602 696 851
Net non-current liabilities (838) (1,011) (1,056)
Net assets (liabilities) $ (236) (315) (205)
21
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS EXCEPT PER SHARE DATA
NOTE 8 INCOME TAXES (CONTINUED)
The tax effect of the significant temporary differences which comprise the
deferred tax assets and liabilities at June 30 follows:
1997 1996 1995
----------------------------
Deferred tax assets:
Net operating loss carryforwards $ 815 900 501
Employee compensation and benefits 322 276 306
Inventories and other current assets 258 275 311
State and local income taxes,
net of U.S. Federal income tax benefit 23 43 68
Other accrued expenses 42 32 90
----------------------------
Total deferred tax assets 1460 1,526 1,276
Deferred tax liabilities:
Depreciation and amortization (881) (941) (894)
Foreign taxes -- -- (86)
----------------------------
Total deferred tax liabilities (881) (941) (980)
----------------------------
Net deferred tax assets before valuation
allowance 579 585 296
Deferred tax assets valuation allowance (815) (900) (501)
----------------------------
Net deferred tax liabilities $(236) (315) (205)
At June 30, 1997, certain foreign subsidiaries have accumulated net operating
loss carryforwards of approximately $2,850. Management is unable at this time to
project future taxable income which will utilize these loss carryforwards. As a
result, a valuation allowance was established in prior years in the amount of
$900 in 1996 and $501 in 1995. Approximately $85 of this allowance was used in
1997. 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 (benefit) or expense represents the
effect of changes in the amounts of temporary differences. The tax effect of
changes in those temporary differences are presented below:
1997 1996 1995
----------------------------
Depreciation and amortization $ (63) 47 181
State and local income taxes, net of
U.S. Federal income tax benefit 20 25 (21)
Accrued expenses (63) 98 (45)
Deferred tax on DISC earnings - -- (17)
Foreign tax -- (86) --
Minimum tax credit 10 (10) --
Inventories and other current assets 17 36 99
----------------------------
Total (79) 110 197
Basis differential related to the
acquisition of RN Belgium -- -- 294
----------------------------
Total $ (79) 110 491
NOTE 9 LEASED ASSETS AND LEASE COMMITMENTS
The consolidated financial statements include land and buildings under capital
leases as follows:
1997 1996 1995
----------------------------
Land and buildings $ 802 1,807 1,742
Less accumulated amortization 118 594 564
----------------------------
Net assets under capitalized leases $ 684 1,213 1,178
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 $1,312 in 1997, $1,342 in 1996 and $1,109 in 1995.
22
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
NOTE 9 LEASED ASSETS AND LEASE COMMITMENTS (CONTINUED)
A summary of future minimum lease payments follows:
Year ending June 30
--------------------------
CAPITAL OPERATING
LEASES LEASES
----------------------------
1998 $ 65 1,258
1999 64 843
2000 63 632
2001 64 451
2002 41 321
Later Years -- 1,297
----------------------------
Total minimum lease payments 297 4,802
Less amount representing interest 60
--------
Present value of net minimum lease
payments (included in long-term debt) $ 237
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 1997, $488 in 1996, and $433 in 1995.
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 were $380 in 1997, $335 in 1996 and $346 in 1995.
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 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. Fifty percent of the options are exercisable after the first anniversary
date of the grant. One hundred percent of the options are exercisable after the
second anniversary date of the grant. All options expire ten years after the
date of grant. Terms and conditions of the new plan are similar to those of the
expired plans.
The following is a summary of the option transactions under the expired
plans and the plan adopted in 1993.
1997 SHARES WEIGHTED AVERAGE OPTION PRICE PER SHARE
- --------------------------------------------------------------------------------
Shares under option at
beginning of year 385 $ 7.62
Granted 204 5.19
Expired (3) 11.50
Cancelled (86) 7.92
-------------------------------------------------
Shares under option at end
of year 500 6.56
1996 SHARES WEIGHTED AVERAGE OPTION PRICE PER SHARE
- --------------------------------------------------------------------------------
Shares under option at
beginning of year 291 $ 7.16
Granted 103 9.08
Expired (1) 13.25
Cancelled (7) 9.14
Exercised (1) 6.63
-------------------------------------------------
Shares under option at
end of year 385 7.62
23
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS EXCEPT PER SHARE DATA
NOTE 11 STOCK OPTION PLANS (CONTINUED)
1995 SHARES WEIGHTED AVERAGE OPTION PRICE PER SHARE
Shares under option at
beginning of year 260 $ 6.92
Granted 89 7.77
Expired (4) 13.93
Cancelled (29) 8.26
Exercised (25) 4.57
-------------------------------------------------
Shares under option at
end of year 291 7.16
At June 30, 1997, a total of 282 shares at an average option price per share of
$7.34 were exercisable and 130 shares were available for future grants.
The following table summarizes information about stock options outstanding at
June 30, 1997;
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------------------------- ----------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE AVERAGE NUMBER AVERAGE
RANGE OF OUTSTANDING REMAINING EXERCISE EXERCISABLE EXERCISED
EXERCISE PRICES AT 6/30/97 CONTRACTUAL LIFE PRICE AT 6/30/97 PRICE
- ---------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
$4.00 TO 5.875 262 5.49 $ 4.82 80 $ 4.00
$6.00 TO 7.00 56 3.81 6.55 57 6.55
$8.625 TO 9.25 163 7.36 8.84 126 8.78
$10.875 19 0.46 10.88 19 10.88
-------------------------------------------- ----------------------------
$4.00 TO 10.875 500 5.72 6.56 282 7.34
</TABLE>
The weighted average fair value of options granted during 1997 and 1996 were
$1.64 and 3.18, respectively.
The fair value of each stock option granted in 1997 and 1996 is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions: dividend yield of 1.3% to 2.6%; expected
volatility of 32%; a range of risk-free interest rates of 5.91 to 6.74%; and
expected lives of 5 years.
In accordance with APB 25, the Company has not recognized any compensation
cost for the stock option plan. Had compensation cost for the Company's stock
option compensation plans been determined based on the fair value at the grant
dates for awards under those plans consistent with the method of SFAS No. 123,
"Accounting for Stock-Based Compensation," the Company's net income and earnings
per share would have been reduced to the pro forma amounts indicated below:
1997 1996
- ------------------------------------------------------------------------------
Net income (loss) As reported $2,355 (2,159)
Pro forma 2,183 (2,283)
Earnings (loss) per share As reported .48 (.40)
Pro forma .45 (.43)
The effects of applying SFAS No. 123 in this pro forma disclosure are
not indicative of future amounts. SFAS No.123 does not apply to awards made
prior to June 30, 1995.
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 ($158 in 1997, $284 in 1996 and
$547 in 1995) and deferred compensation charges ($19 in 1997, $70 in 1996 and
$221 in 1995) associated with the plan are classified as a reduction of
shareholders' equity. The amortization of the deferred compensation charged to
expense was $51 in 1997, $151 in 1996 and $153 in 1995.
24
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
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 PATENT INFRINGEMENT CLAIM
In April 1997, the Company accepted a lump sum payment and recognized pretax
income of $500 ($315 after related income taxes) from a settlement of a patent
infringement claim 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 RNBelgium $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
would be made in cash as part of a severance agreement with the former owner of
RN Belgium. This liability was paid in June 1997.
The acquisition has been accounted for by the purchase method of accounting
and the results of operations of RNBelgium 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 in 1996.
On an unaudited pro forma basis, assuming the purchase of RNBelgium had
occurred on July 1, 1993, net sales would have increased approximately $3,100 in
1995, 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 1997 or 1996.
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.
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, Spain, Sweden and Italy. During 1997, the Company had
manufacturing operations located in the United States, Switzerland, Scotland,
Belgium, and Malaysia.
25
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IN THOUSANDS EXCEPT PER SHARE DATA
NOTE 17 BUSINESS SEGMENT AND FOREIGN SALES (CONTINUED)
1997 1996 1995
-------------------------------------
SALES
- -------------------------------------------------------------------------------
United States
Domestic $52,849 51,664 47,724
Export:
Europe 57 58 2,176
Asia 194 1,285 4,987
Rest of World 2,128 1,447 1,625
-------------------------------------
Total sales to customers 55,228 54,454 56,512
Intercompany 8,447 6,813 5,544
-------------------------------------
Total United States 63,675 61,267 62,056
Europe
Domestic 21,552 19,553 17,613
Export:
Asia 422 1,752 2,908
Rest of World -- -- 20
-------------------------------------
Total sales to customers 21,974 21,305 20,541
Intercompany 4,293 3,517 3,495
-------------------------------------
Total Europe 26,267 24,822 24,036
Asia
Domestic 7,543 5,120 2,711
Export to rest of world 95 85 915
-------------------------------------
Total sales to customers 7,638 5,205 3,626
Intercompany 2,883 2,448 1,018
-------------------------------------
Total Asia 10,521 7,653 4,644
Eliminations (15,623) (12,778) (10,057)
-------------------------------------
Consolidated $84,840 80,964 80,679
IDENTIFIABLE ASSETS
- -------------------------------------------------------------------------------
United States $39,310 38,984 39,668
Europe 16,891 17,349 21,584
Asia 5,739 4,704 3,562
Eliminations (12,244) (9,571) (10,645)
-------------------------------------
Consolidated $49,696 51,466 54,169
INCOME (LOSS) BEFORE INCOME TAXES
- -------------------------------------------------------------------------------
United States $3,939 384 5,126
Europe 205 (1,546) 288
Asia (295) (532) 180
-------------------------------------
Consolidated $ 3,849 (1,694) 5,594
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.
26
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
NOTE 18 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
For the year ended June 30, 1997 SEPT. 30, 1996 DEC. 31, 1996 MAR. 31, 1997 JUNE 30, 1997 TOTAL
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $21,123 20,100 21,651 21,966 84,840
Gross profit $ 4,727 4,248 5,177 4,919 19,071
Net income $ 402 138 939 876 2,355
- ---------------------------------------------------------------------------------------------------------------------
Net income per common share $ .08 .03 .19 .18 .48
- ---------------------------------------------------------------------------------------------------------------------
Dividends per common share $ .03 .03 .03 .03 .12
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
For the year ended June 30, 1996 SEPT. 30, 1995 DEC. 31, 1995 MAR. 31, 1996 JUNE 30, 1996 TOTAL
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 per common share $ .03 .03 .03 .03 .12
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
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 1997 revenue was up $2,700 compared to fourth quarter
1996. This revenue increase reflected higherrevenues in the United States,
Asia and Europe.
Gross profit increased primarily due to the higher volume, as well as a
prior year $1,800 pre-tax charge ($1,200 after-tax) relative to the reduction of
carrying values of various production equipment due to shorter product life
cycles.
In the fourth quarter results include $500 of pre-tax income to the Company
from a patent infringement settlement and a pre-tax charge of $250 to reduce the
carrying value of the Company's facility in Delemont, Switzerland. In April, the
Company accepted a lump sum payment to end a patent infringement charge it had
filed against a competitor. This $500 settlement compensated the Company for all
past and future royalty claims, and increased net income by $315 or 6 cents per
share in the quarter and the year.
In June of 1997, management approved a plan to move all electro-plating and
component assembly operations from its plant in Delemont, Switzerland to its
facility in Inchinnan, Scotland, and to sell the facility in Delemont.
Management evaluated the current market value of this building and decided to
reduce its carrying value by $250 in order to approximate the estimated net
realizable value and decreased net income by $190 or 4 cents per share in the
quarter and the year. Approximately $150 of employee severance costs related to
this plant closure and approximately $100 of costs to relocate these operations
to Scotland will be expensed in fiscal 1998.
In addition to the above factors, 1996 fourth quarter net income was also
negatively affected by a $600 charge to eliminate goodwill associated with
Robinson Nugent (Belgium) B.V.B.A. (no current tax benefit), and a $400 pre-tax
provision for workforce reductions and associated personnel charges ($300 after
tax).
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, 1997, 1996 and 1995, 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, 1997, 1996, and 1995, 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 5, 1997
27
<PAGE>
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 1997 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, 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/Robert L. Knabel
Robert L. Knabel
Vice President, Treasurer, and
Chief Financial Officer
September 16, 1997
CORPORATE INFORMATION
BOARD OF DIRECTORS
SAMUEL C. ROBINSON BEN M. STREEPEY JERROL Z. MILES
Chairman of the Board, Vice President and Senior Vice President
Robinson Nugent, Inc. General Manager National City Bank,
Lexmark International Kentucky
LARRY W. BURKE RICHARD L. MATTOX JAMES W. ROBINSON
President and Secretary, Robinson Nugent, Inc. Chairman & Treasurer
Chief Executive Officer Mattox & Mattox (Retired)
Robinson Nugent, Inc. Robinson Nugent, Inc.
PATRICK C. DUFFY DIANE T. MAYNARD DONALD C. NEEL
Independent Investor Management Consultant President & Chief
& Business Advisor Executive Officer
Health Network
RICHARD W. STRAIN International
Independent Investor
& Business Advisor
CORPORATE OFFICERS
LARRY W. BURKE W. MICHAEL COUTU RICHARD L. MATTOX
President and Vice President of Operations Secretary
Chief Executive Officer
DAVID W. PHETEPLACE
ROBERT L. KNABEL Vice President and General Manager
Vice President, Treasurer North American Operations
and Chief Financial
Officer
28
<PAGE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
CORPORATE INFORMATION
LEGAL COUNSEL INDEPENDENT ACCOUNTANTS
MATTOX & MATTOX COOPERS & LYBRAND L.L.P.
New Albany, Indiana Louisville, Kentucky
INVESTOR INFORMATION
FORM 10-K
A copy of Robinson Nugent, Inc. Form 10-K Annual Report to the Securities and
Exchange Commission for the year ended June 30, 1997, may be obtained without
charge by any shareholder of the Company by written request to the Treasurer
at the corporate headquarters.
SECURITY ANALYST CONTACT
Larry W. Burke,
President and Chief Executive Officer
(812) 945-0211
TRANSFER AGENT AND REGISTRAR
Harris Trust and Savings Bank
Shareholder Services
P.O. Box A3504
Chicago, Illinois 60690
For change of address, lost dividend checks or lost stock certificates, write
or call the transfer agent and direct your inquiry to:
Corporate Trust Department
(800) 573-4048
MANUFACTURING FACILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
NORTH AMERICA EUROPE ASIA
USA SCOTLAND MALAYSIA
800 East Eighth Street 4 Fountain Avenue Plot 10. 16, Jalan PKNK 1/2,
New Albany, IN 47150 Inchinnan Business Park Sungai Petani Industrial Estate
(812) 945-0211 Inchinnan, Renfrew PA4 9RQ 08000 Sungai Petani
44 141-812-1111 Kedah Darul Aman, Malaysia
2640 Tarna Drive 60 4-4411703
Dallas, TX 75229 SWITZERLAND
(972) 241-1738 6, rue Saint-Georges Plot 10. 15, Jalan PKNK 1/2,
2800 Delemont Sungai Petani Industrial Estate
311 Childers Street 41 66-218235 08000 Sungai Petani
Kings Mountain, NC 28086 Kedah Darul Aman, Malaysia
(704) 739-7473 BELGIUM 60 4-4411703
Heikant 21
41946 Christy Street 3930 Hamont-Achel
Fremont, CA 94538 32 11-663628
(510) 226-1906
SALES OFFICES
NORTH AMERICA UNITED KINGDOM SWEDEN
USA Unit 9A, Intec Two, Wade Road Fagerstagatan 9
800 East Eighth Street Basingstoke, Hampshire, (London) S-16353 Spanga
New Albany, IN 47150 RG24 8NE 46 8-761-8770
(812) 945-0211 44-1256-842626
SPAIN
First BankPlaza, Suite #304, GERMANY Vileta de mar, NDEG. 17-bis
Lake Zurich, IL 60047 Ziegelstrasse 28-1 43007 Tarragona
(847) 438-0606 D-71063 Sindelfingen (Stuttgart) 34 977 236903
49 7031-9508-0
41946 Christy Street ASIA
Fremont, CA 94538 ITALY JAPAN
(510) 226-1900 Via Fidelina, 2 Selon Building, 11-7 Shinsen-cho,
I-20061 Carugate (Milano) Shibuya-ku
EUROPE 39 2 921-50404 Tokyo 150 Japan
FRANCE 81-3-3463-2381
Zac de la Sabli`ere NETHERLANDS
4, rue Maryse Bastie, Pettelaarpark 24 SINGAPORE
F-91430 Igny (Paris) 5216 PS s-Hertogenbosch 268 Orchard Road, #08-07
33 1 69-85-5000 31 73-6928112 Singapore 238856
65 235-9755
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Robinson Nugent, Inc. on Form S-8 (File No. 33-3822) of our report dated August
5, 1997 on our audits of the consolidated financial statements and the financial
statement schedule of Robinson Nugent, Inc. as of June 30, 1997, 1996 and 1995
and for the years ended June 30, 1997, 1996 and 1995, which report is included
in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Louisville, Kentucky
September 26, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ROBINSON NUGENT, INC. 10-K FOR THE PERIOD ENDING JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 4,118
<SECURITIES> 0
<RECEIVABLES> 12,348
<ALLOWANCES> 564
<INVENTORY> 11,100
<CURRENT-ASSETS> 28,373
<PP&E> 60,050
<DEPRECIATION> 38,862
<TOTAL-ASSETS> 49,696
<CURRENT-LIABILITIES> 11,783
<BONDS> 0
20,950
0
<COMMON> 0
<OTHER-SE> 10,190
<TOTAL-LIABILITY-AND-EQUITY> 49,696
<SALES> 84,840
<TOTAL-REVENUES> 84,840
<CGS> 65,769
<TOTAL-COSTS> 65,769
<OTHER-EXPENSES> 15,598
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 678
<INCOME-PRETAX> 3,849
<INCOME-TAX> 1,494
<INCOME-CONTINUING> 2,355
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,355
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
