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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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EX-CHANGE 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
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(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
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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
15, 1998, was approximately $19,000,000.
As of September 15, 1998, the registrant had outstanding 4,891,765
Common Shares, without par value.
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DOCUMENTS INCORPORATED BY REFERENCE:
PARTS OF FORM 10-K INTO WHICH
IDENTITY OF DOCUMENT DOCUMENT IS INCORPORATED
1998 Annual Report to Shareholders Parts I and II
Definitive Proxy Statement with respect to Parts II and III
the 1998 Annual Meeting of Shareholders
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. [ ]
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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; Reynosa, Mexico; 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 fiscal 1998, management approved plans to move the Company's cable
assembly facility in Kings Mountain, North Carolina to Reynosa, Mexico;
reorganize the sales, management and manufacturing organizations in Europe
and North America; and discontinue several product lines. These actions
resulted in restructuring charges of approximately $3.1 million, which were
recorded in 1998. These costs include a liability related to the existing
lease on the Kings Mountain facility, which expires in July 2012, and
severance costs related to the plant closure. Most of the cost to relocate
these operations to Reynosa will be expensed in fiscal 1999. The Company
began manufacturing cable assemblies in the new, leased facility in Reynosa
in September 1998. The move of the Company's cable assembly operations to
Reynosa, and the closure of the Kings Mountain operations are expected to
reduce future manufacturing costs.
In addition to the restructuring costs related to the move of cable
assembly operations in 1998, management also approved and implemented plans
related to the reorganization of the European sales and manufacturing
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organizations, as well as the connector manufacturing operations in North
America. The sales office facilities in France, Italy and Spain have been
closed, and the European customer service operation has been consolidated
into the Company's European headquarters, located in the Netherlands. The
restructuring of the European and North American connector operations have
resulted in workforce reductions, including factory and management personnel,
of approximately 15%.
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
package (DIP) and pin grid array (PGA) devices, as well as plastic leaded and
leadless chip carriers (PLCC).
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
(PCB). In many applications, semiconductor devices have been subject to
replacement, which encouraged the use of a socket rather than soldering the
device directly to the printed circuit board. But, due to the improved
reliability of semiconductor technology, more and more semiconductor chips
are being soldered directly to PCB's. This trend will continue to reduce the
worldwide demand for sockets.
Dual in-line memory module (DIMM) sockets were introduced in fiscal 1992
and were designed to interconnect dual in-line memory modules with electronic
printed circuit boards. During 1996, the industry acceptance of this
technology resulted in a migration of DIMM products from being customer
specific design components, to become a standardized component. The enlarged
worldwide market volume has resulted in increased competition and rapid price
erosion. The Company introduced a lower cost version of this DIMM product
line in an attempt to be more competitive at the lower market prices. During
1998, the Company decided to phase out certain models of the low-cost version
of this product line because increased offshore competition had resulted in
unacceptable profit margins.
In addition to DIMM sockets, the Company offers several other products
that interconnect memory devices to electronic printed circuit boards. These
include small outline dual in-line memory module sockets (SO-DIMM) and PCMCIA
memory card headers, sockets and type III PC card kits.
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 the
labor involved in stripping insulation from wires prior to attachment to the
leads. This technology permits the automated manufacturing 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 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
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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 (RN PAK-50-Registered Trademark-)
connectors; and a higher pin count 2-millimeter-spaced connector
(METPAK-Registered Trademark-2) used in backplane applications. In addition,
a line of high density .8mm (RN PAK 8-TM-) and .5mm (RN PAK 5-TM-) board
stacking interconnects are offered by the Company to address the growing
demand for 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. 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 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 has
gained acceptance in mid-range computer, networking and communications
equipment.
PAK-5-TM- and PAK-8-TM- represent the newest high density, surface mount,
fine pitch board-to-board interconnect systems offered by the Company. As
electronic systems continue to downsize and the need for higher pin counts
continues to increase, electronic interconnect manufacturers are forced to
shrink connector geometry. The PAK-5-TM- series is available with a
"floating" contact, accommodating potential torsional and positional
discrepancies incurred with tolerance build up when stacking connectors. The
PAK-8-TM- series utilizes a hermaphroditic two-point contact construction
that maximizes contact wiping action, minimizes contact resistance and
insures a highly reliable contact interface. This connector series is
available in sizes ranging from 16 position to 100 position product and in
stacking heights ranging from 3mm to 11.5mm. These interconnects offer system
designers the board-to-board
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stacking solutions required for today's miniaturized electronic system
designs.
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
trend 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
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 applications. 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.
The Company's expenditures for research, development and engineering
were approximately $4.0 million in 1998, $3.4 million in 1997, and $3.7
million in 1996.
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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 high-speed precision stamping and electroplating processes,
and has replaced older injection molding machines and material handling
equipment with new machines and equipment that will improve the productivity
of these operations.
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. 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 36 percent of total sales
in 1998, 38 percent in 1997 and 36 percent in 1996. The Company believes
that the development of global markets is essential to support its customer
base. This was particularly the case in Asia, where until recently the market
was considered the fastest growing in the world. It is still currently
considered the second largest market for electronics and connector products.
The Company does not believe that its international business presents any
unusual risks. The recent currency crisis in Asia had an impact on the
company's operating results in the year. While sales in Japan were
unfavorably impacted by the strengthening of the U.S. dollar against the
Japanese yen, operating results in Southeast Asia were affected favorably due
to the fact that most of the Company's sales to customers in Southeast Asia
are transacted in U.S. dollars. These sales were not significantly affected
by the currency crisis. Cost of sales and operating expenses in Southeast
Asia were lower in the period due primarily to the devaluation of the
Malaysian ringgit and the Singapore dollar, compared to the U.S. dollar. The
following table sets forth the percentage of Company sales by major
geographical location for the periods shown:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
----------------------------------
1998 1997 1996
----------------------------------
<S> <C> <C> <C>
United States 64% 62% 64%
Europe 25 26 24
Asia 9 10 10
Other 2 2 2
---- ---- ---
100% 100% 100%
---- ---- ---
---- ---- ---
</TABLE>
No sales to a single customer exceeded 10% of total net sales in 1998,
1997 or 1996.
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Other financial data relating to domestic and foreign operations are
included in Note (16), 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, and Netherlands. These offices service customers to whom the Company
sells directly, provide coordination between the plants and customers, and
technical training and assistance to distributors and manufacturers'
representatives in their respective territories. Additional marketing
expertise is provided by the product marketing specialists located in New
Albany, Indiana; Kings Mountain, North Carolina; Kent, 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. These
firms 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 $10.2 million at June 30, 1998,
$14.5 million at June 30, 1997, and $15.9 million at June 30, 1996. 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
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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.
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 1998.
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, 1998, the Company had approximately 674 full-time
employees; 370 in the United States, 177 in Europe and 127 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 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
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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:
<TABLE>
<CAPTION>
SERVED IN PRESENT
NAME AGE POSITIONS HELD CAPACITY SINCE
- ------------------ --- -------------- -----------------
<S> <C> <C> <C>
Larry W. Burke 58 President & Chief 1990
Executive Officer
Robert L. Knabel 40 Vice President, January 1997
Treasurer & Chief
Financial Officer
W. Michael Coutu 47 Vice President of 1992
Information Technology
Robert A. Rankin 37 Executive Director of 1998
Global Purchasing
</TABLE>
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. David W. Pheteplace, Vice President and
General Manager, North American Business Division, resigned as of April 1998.
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. A limited amount of
manufacturing operations are performed there. Most of the connector finished
goods inventory is held at the New Albany site. A portion of the New Albany
manufacturing facility is utilized by the Company's engineering, research and
preproduction development groups. 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; a manufacturing and engineering
facility with approximately 14,000 square feet in Hamont-Achel, Belgium; a
manufacturing facility with approximately 21,000 square feet in Sungai
Petani, Malaysia; and utilizes a facility with approximately 50,000 square
feet in Inchinnan, Scotland under long-term leases.
The Company also owns a 50,000 square foot manufacturing facility
located on approximately two acres in Delemont, Switzerland. In June 1997,
management approved a plan to move all of its plating and component assembly
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operations from its plant in Delemont to its facility in Inchinnan, and to
sell the facility in Delemont.
The Company's Cablelink operations are currently located in leased
facilities of approximately 40,000 square feet in Kings Mountain, North
Carolina and approximately 10,000 square feet in Fremont, California. In
June, 1998, a new manufacturing facility with approximately 44,000 square
feet was acquired under a long-term lease arrangement in Reynosa, Mexico.
Management began cable assembly operations in Reynosa in September 1998. All
operations in Kings Mountain, North Carolina are expected to terminate by
December 1998. The Company is currently obligated under a long-term lease on
the Kings Mountain facility through July 2012. Management intends to sublet
this facility to minimize the financial impact of this obligation.
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 1998 Annual Report to Shareholders (the "1998
Report") is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information contained in the columns "1994-1998" in the table under
the caption "Ten-Year Financial Summary" of the 1998 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 1998
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 1998
Report is incorporated herein by reference.
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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 engaged
Deloitte & Touche LLP ("Deloitte") as the Company's independent accountants
for the year ended June 30, 1998. The decision to discontinue the services
of Coopers 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 1998 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 1998 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 1998 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 1998 Proxy Statement filed pursuant to Rule 14a-6 is
incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) DOCUMENTS FILED AS A PART OF THIS REPORT.
(1) FINANCIAL STATEMENTS
Reports of Independent Accountants
Consolidated Balance Sheets as of June 30, 1998, 1997, and 1996
Consolidated Statements of Operations for the years ended
June 30, 1998, 1997, and 1996
Consolidated Statements of Shareholders' Equity for the years
ended June 30, 1998, 1997, and 1996
Consolidated Statements of Cash Flows for the years ended
June 30, 1998, 1997, and 1996
Notes to Consolidated Financial Statements
(2) FINANCIAL STATEMENT SCHEDULE
Schedule for the years ended June 30, 1998, 1997, and 1996:
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
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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).
4.1 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.)
4.5 Amendment No. 3 to Rights Agreement dated
February 11, 1998 (Incorporated by reference
to Exhibit 4.5 to Form 10-Q Report for the
period ended December 31, 1998.)
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.)
14
<PAGE>
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 *
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.
(Incorporated by reference to Exhibit 10.6 to
Form 10-K Report for year ended June 30, 1997.)
10.7 Amendment of the 1993 Robinson Nugent, Inc. *
Employee and Non-Employee Director Stock
Option Plan.
10.8 Summary of Robinson Nugent, Inc. Bonus *
Plan for the fiscal year ending June 30,
1999.
13.0 1998 Annual Report to Shareholders of
Robinson Nugent, Inc.
16.0 No exhibit.
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
15
<PAGE>
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
Robinson Nugent S. de R.L. de C.V. Mexico
23.1 Consent of Deloitte & Touche LLP
Independent Auditors
23.2 Consent of PricewaterhouseCoopers LLP
Independent Accountants
27.0 Financial Data Schedule.
* Management contracts or compensatory plans
(b) REPORTS ON FORM 8-K
No exhibit.
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: 10/15/98 By: /s/ Larry W. Burke
------------------ -----------------------------------
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: 10/15/98 By: /s/ Samuel C. Robinson
------------------ -----------------------------------
Samuel C. Robinson, Director
Date: 10/15/98 By: /s/ Larry W. Burke
------------------ -----------------------------------
Larry W. Burke, Director,
President and Chief Executive Officer
(Principal Executive Officer)
Date: 10/15/98 By: /s/ Patrick C. Duffy
------------------ -----------------------------------
Patrick C. Duffy, Director
Date: 10/15/98 By: /s/ Richard L. Mattox
------------------ -----------------------------------
Richard L. Mattox, Director
Date: 10/15/98 By: /s/ Jerrol Z. Miles
------------------ -----------------------------------
Jerrol Z. Miles, Director
Date: 10/15/98 By: /s/ James W. Robinson
------------------ -----------------------------------
James W. Robinson, Director
17
<PAGE>
Date: 10/15/98 By: /s/ Richard W. Strain
------------------ -----------------------------------
Richard W. Strain, Director
Date: 10/15/98 By: /s/ Ben M. Streepey
------------------ -----------------------------------
Ben M. Streepey, Director
Date: 10/15/98 By: /s/ Donald C. Neel
------------------ -----------------------------------
Donald C. Neel, Director
Date: 10/15/98 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, 1998, 1997, AND 1996
Financial Statement Schedule for the years ended June 30, 1998, 1997, and 1996
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>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ROBINSON NUGENT, INC. AND SUBSIDIARIES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
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, 1998
Deducted from asset accts
Allowance for doubtful
accounts $ 564 $ 72 $ -- $ 65(A) $ 571
Allowance for inventory
obsolescence & valuation 1,565 1,212 -- 1,534(B) 1,243
------- ------- ------- ------- -------
Total $ 2,129 $ 1,284 $ -- $ 1,599 $ 1,814
------- ------- ------- ------- -------
------- ------- ------- ------- -------
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
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
See footnotes on following page.
20
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (CONT'D.)
ROBINSON NUGENT, INC. AND SUBSIDIARIES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
(A) Summary of activity in Column D follows:
Reduction of requirements in allowance for doubtful
accounts $ -0- $ 83 $ 63
Uncollectible accounts written off, net of recoveries 52 98 30
Currency Translation - (gains)/losses 13 26 24
------- ------- -------
$ 65 $ 207 $ 117
------- ------- -------
------- ------- -------
(B) Summary of activity in Column D follows:
Discontinued and obsolete inventory written off,
net of recoveries $ 1,919 $ 655 $ 896
Currency translation - (gains)/losses (385) 455 147
------- ------- -------
$ 1,534 $ 1,110 $ 1,043
------- ------- -------
------- ------- -------
</TABLE>
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Robinson Nugent, Inc. New
Albany, Indiana
We have audited the consolidated financial statements of Robinson Nugent Inc.
and Subsidiaries as of June 30, 1998, and for the year ended June 30,1998,
and have issued our report thereon dated July 31, 1998; such financial
statements and report are included in your 1998 Annual Report to Stockholders
and are incorporated herein by reference. Our audit also included the
financial statement schedule of the Company, listed in Item 14. This
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audit.
In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Louisville, Kentucky
July 31, 1998
22
<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 and 1996, the related
consolidated statements of operations, shareholders' equity and cash flows and
the financial statement schedule for each of the two years then ended as
listed in Item 14 of Form 10-K for the year ended June 30, 1997. These
consolidated financial statements and the 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 and 1996, and the results
of their operations and their cash flows for each of the two 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 and 1996.
COOPERS & LYBRAND L.L.P.
Louisville, Kentucky
August 5, 1997
23
<PAGE>
ROBINSON NUGENT, INC.
FORM 10-K FOR FISCAL YEAR
ENDED JUNE 30, 1998
INDEX TO EXHIBITS
--------------------------
<TABLE>
<CAPTION>
NUMBER SEQUENTIAL
ASSIGNED IN NUMBERING SYSTEM
REGULATION S-K PAGE NUMBER
ITEM 601 DESCRIPTION OF EXHIBIT OF EXHIBIT
-------------- ---------------------- ----------------
<S> <C> <C>
(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.)
24
<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.)
4.5 Amendment No. 3 to Rights Agreement
dated February 11, 1998
(Incorporated by reference to
Exhibit 4.5 to Form 10-Q Report
for the period ended December 31,
1998.)
(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 *
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. (Incorporated
by reference to Exhibit 10.6 to
Form 10-K report for year ended
June 30, 1997.)
25
<PAGE>
10.7 Amendment of the 1993 Robinson Nugent, Inc. *
Employee and Non-Employee
Director Stock Option Plan.
10.8 Summary of Robinson Nugent, Inc. Bonus *
Plan for the fiscal year ending June 30,
1999.
(11) No exhibit.
(12) No exhibit.
(13) 1996 Annual Report to Shareholders of
Robinson Nugent, Inc.
(16) No exhibit.
(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
26
<PAGE>
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
Robinson Nugent S. de R.L. de C.V. Mexico
(22) No exhibit.
(23) 23.1 Consent of Deloitte & Touche LLP
Independent Auditors
23.2 Consent of PricewaterhouseCoopers LLP
Independent Accountants
(24) No exhibit.
(27) Financial Data Schedule.
(28) No exhibit.
* Management contracts or compensatory plans
</TABLE>
27
<PAGE>
Exhibit 10.7
AMENDMENT OF THE 1993 ROBINSON NUGENT, INC.
EMPLOYEE AND NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN
This amendment of the 1993 Robinson Nugent, Inc. Employee and Non-Employee
Director Stock Option Plan was adopted by the Board of Directors on July 31,
1997, and approved by the shareholders at the Annual Meeting of Shareholders of
Robinson Nugent, Inc. held on November 6, 1997.
This stock option plan is hereby amended in the following respects:
Amendment to Section 4. SHARES.
The shares subject to the options and other provisions of the Plan
shall be either authorized and unissued common shares or previously
issued common shares acquired by the Company as treasury stock. The
total number of Common Shares with respect to which options may be
granted are hereby increased by an additional 500,000 Common Shares
and shall not exceed in the aggregate 1,000,000 Common Shares except
as such number of Common Shares shall be adjusted in accordance with
the provisions set forth in Section 6(h) of the Stock Option Plan.
Common Shares subject to options returned to the Company shall be
available for future awards under the Stock Option Plan. The Stock
Option Plan is intended to ensure that the Company will continue to
attract and retain key employees and directors who can be expected to
contribute to the Company's growth and success.
28
<PAGE>
Exhibit 10.8
ROBINSON NUGENT, INC.
SUMMARY OF ROBINSON NUGENT, INC.
BONUS PLAN FOR FISCAL YEAR ENDING JUNE 30, 1999
The Board of Directors has adopted a bonus plan for executive officers
and key employees for fiscal year 1999. Under the bonus plan for executive
officers and key employees for fiscal 1999, if consolidated pretax income
exceeds 80% of the amount specified in the 1999 financial plan, an amount
equal to 5% of that excess (up to the plan amount), will be available for the
payment of bonuses; and if pretax income is greater than the plan amount, an
amount equal to 20% of that excess will be added to the bonus pool. The
bonus amount payable to each of the executive officers and key employees will
be determined by the President and Chief Executive Officer of the Company.
30
<PAGE>
TEN-YEAR FINANCIAL SUMMARY
IN THOUSANDS EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Years ended June 30
- -------------------------------------------------------------------------------------------------------------
OPERATING RESULTS: 1998 1997 1996
<S> <C> <C> <C>
Net sales $74,146 84,840 80,964
Cost of sales 62,557 65,769 65,604
- -------------------------------------------------------------------------------------------------------------
Gross profit 11,589 19,071 15,360
- -------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses 14,565 15,598 16,749
Restructuring and unusual charges 5,063 -- --
- -------------------------------------------------------------------------------------------------------------
Operating income (loss) (8,039) 3,473 (1,389)
- -------------------------------------------------------------------------------------------------------------
Other income (expense) (403) 376 (305)
Income (loss) before income tax expense (benefit) (8,442) 3,849 (1,694)
Income tax expense (benefit) (2,261) 1,494 465
- -------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $(6,181) 2,355 (2,159)
- -------------------------------------------------------------------------------------------------------------
Return on net sales (8.3%) 2.8% (2.7%)
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
PER SHARE INFORMATION:
- -------------------------------------------------------------------------------------------------------------
Net income (loss), basic and dilutive $ (1.26) .48 (.40)
Cash dividends .12 .12 .12
Basic weighted average shares outstanding 4,892 4,892 5,333
Dilutive weighted average shares outstanding 4,892 4,911 5,333
Book value at year-end* 4.73 6.37 6.13
- -------------------------------------------------------------------------------------------------------------
BALANCE SHEET:
- -------------------------------------------------------------------------------------------------------------
Working capital $10,740 16,581 10,328
Property, plant and equipment - net 19,424 21,188 23,618
Total assets 42,302 49,696 51,466
Long-term debt 7,607 5,926 3,036
Shareholders' equity 23,128 31,140 29,968
- -------------------------------------------------------------------------------------------------------------
OTHER DATA:
- -------------------------------------------------------------------------------------------------------------
Current ratio to 1.0 1.9 2.4 1.6
Return on shareholders' average equity (22.8%) 7.8% (6.0%)
Capital expenditures 7,818 4,202 7,474
Depreciation and amortization 8,557 5,451 6,135
</TABLE>
*On the basis of year-end outstanding common shares.
See Note 17 of Notes to Consolidated Financial Statements for Selected
Quarterly Financial Data, including dividend payments on common shares.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
4
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales 80,679 67,557 58,671 50,759 53,061 55,031 53,149
Cost of sales 59,329 49,642 42,986 38,750 41,529 41,802 39,504
- ---------------------------------------------------------------------------------------------------------------------------
Gross profit 21,350 17,915 15,685 12,009 11,532 13,229 13,645
- ---------------------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses 15,586 13,727 12,039 10,985 11,153 12,724 11,531
Restructuring and unusual charges -- -- 620 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 5,764 4,188 3,026 1,024 379 505 2,114
- ---------------------------------------------------------------------------------------------------------------------------
Other income (expense) (170) 841 (464) 214 438 (259) 236
Income (loss) before income tax expense (benefit) 5,594 5,029 2,562 1,238 817 246 2,350
Income tax expense (benefit) 1,855 2,410 900 290 250 (450) 400
- ---------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) 3,739 2,619 1,662 948 567 696 1,950
- ---------------------------------------------------------------------------------------------------------------------------
Return on net sales 4.6% 3.9% 2.8% 1.9% 1.1% 1.3% 3.7%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE INFORMATION:
- ---------------------------------------------------------------------------------------------------------------------------
Net income (loss), basic and dilutive .69 .49 .31 .18 .10 .13 .33
Cash dividends .12 .12 .08 .08 .08 .08 .08
Basic weighted average shares outstanding 5,337 5,315 5,315 5,315 5,315 5,315 5,840
Dilutive weighted average shares outstanding 5,383 5,368 5,331 5,315 5,315 5,315 5,840
Book value at year-end* 6.79 5.91 5.31 5.52 5.17 5.34 4.96
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET:
- ---------------------------------------------------------------------------------------------------------------------------
Working capital 15,875 15,014 14,780 17,431 16,210 16,595 14,609
Property, plant and equipment - net 24,609 19,344 15,871 15,506 15,216 16,077 15,843
Total assets 54,169 45,377 40,727 40,520 38,743 40,823 38,170
Long-term debt 4,143 2,408 2,166 3,409 3,234 3,589 3,519
Shareholders' equity 36,480 31,419 28,231 29,346 27,490 28,370 26,179
- ---------------------------------------------------------------------------------------------------------------------------
OTHER DATA:
- ---------------------------------------------------------------------------------------------------------------------------
Current ratio to 1.0 2.3 2.4 2.5 3.4 3.2 3.0 2.9
Return on shareholders' average equity 11.0% 8.8% 5.8% 3.3% 2.0% 2.6% 6.3%
Capital expenditures 5,929 5,793 4,060 2,382 2,488 1,994 1,036
Depreciation and amortization 3,714 3,003 3,031 2,809 2,897 2,752 3,100
</TABLE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
5
<PAGE>
- -------------------------------------------------------------------------------
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."
- -------------------------------------------------------------------------------
1998 vs. 1997. Customer orders for the fiscal year ended June 30, 1998, were
$69.9 million, down $13.6 million or 16.3%, compared to customer orders of
$83.5 million in the prior year. Sales in fiscal 1998 were $74.1 million,
compared to sales of $84.8 million in the prior year. The Company's net loss
for fiscal 1998 was $6.2 million or $1.26 cents per common share, including
restructuring and unusual expenses of $5.1 million ($3.6 million after
taxes), compared to net income of $2.4 million or 48 cents in the prior
fiscal year.
Customer sales in the United States were $48.7 million compared to $55.2
million in the prior year. The Company experienced a decrease in the sales of
older, more mature products, such as pin grid array sockets, surface mount
plastic leaded chip carrier sockets, stamped and screw machine sockets, as
well as older versions of PC board and backpanel connectors. Cable assembly
sales in the United States were also lower than the previous year. These
sales reductions were partially offset by an increase in sales of newer, more
profitable PC board and backpanel connectors used in high-speed routers,
computer workstations, high-end servers and other communication and
networking components.
European customer sales were $18.5 million compared to $22.0 million in the
prior year, a decline of $3.5 million or 16%, measured in U.S. dollars, or
13% when measured in local currencies, such as the pound sterling, Swiss
franc and German mark. This sales decline is due primarily to a reduction in
the sales of screw machine and stamped sockets. Helping to counter part of
this decline, the Company experienced an increase in sales of new designs of
smart card reader connectors and PCMCIA connectors used in electronic memory
applications currently in demand by major communication and satellite
broadcasting companies in Europe. Management expects sales of these types of
products to continue to grow in the future.
Customer sales in Asia, which includes sales generated from our operations in
Japan, Malaysia and Singapore, were $7.0 million compared to $7.6 million in
the prior year. The sales decline in this region is due primarily to lower
sales of screw machine and stamped sockets and certain types of PC board
connectors. This region generated higher sales in pin grid array sockets,
cable-to-board connectors and cable assemblies. The Company expects sales to
improve in this region due to the recent development and introduction of a
new product line consisting of small outline memory module connectors. The
economic conditions in the region and the instability of the Japanese yen,
Malaysian ringgit and other Asian currencies had some impact on the current
year sales of the Company. The strength of the dollar and pound sterling
against these currencies caused products produced in the U.S. and Scotland to
be more expensive than locally produced products.
Gross profits of $11.6 million in fiscal 1998 decreased $7.5 million or 39.3%
compared to fiscal 1997. The lower gross profits reflect the lower sales in
the United States, Europe and Asia Pacific, coupled with higher research,
development and engineering expenses associated with new product development.
Research, development and engineering expenses, which were included in gross
profit, were $4.0 million for fiscal 1998 compared to $3.4 million for fiscal
1997. These expenses represented 5.4% of sales in 1998 compared to 4.0% in
the prior year as the Company increased its investment in the development of
new and improved product offerings.
The Company recorded $5.1 million of restructuring and unusual charges in the
current year. These charges include $3.1 million of restructuring and
reorganization expenses, as well as $2.0 million of unusual charges related
to a reduction in the carrying value of various assets. The $3.1 million of
restructuring charges includes costs related to the closure and move of the
Company's cable assembly facility in North Carolina ($1.6 million), the
reorganization of the sales, management and manufacturing organizations in
Europe and North America ($0.5 million), and the cost to discontinue several
product lines ($1.0 million). While the new cable assembly facility in
Reynosa, Mexico, will start operations in September 1998, the costs
associated with the closure of the North Carolina facility have been
recognized in fiscal 1998. These restructuring plans were implemented to
allow the Company to compete more effectively in a changing, highly
competitive market place.
Unusual charges of $2.0 million reflect a reduction in the carrying value of
various assembly equipment, mold tools and dies. These costs result from an
evaluation of the Company's ability to recover asset costs given existing
market conditions. A major portion of these asset value reductions relate to
the Company's decision to phase out certain products where increased offshore
competition has resulted in unacceptable profit margins. In addition, the
Company has reduced the carrying value of other assets due to present market
demand and the low profitability of these products.
Selling, general and administrative expenses (SG&A) of $14.6 million
decreased by $1.0 million or 6.5% in 1998 compared to 1997. The decrease in
SG&A primarily reflects lower selling expenses in Europe due to the
consolidation and reorganization of several sales offices and the elimination
of bonus expense in 1998. The Company paid approximately $.4 million in bonus
awards in 1997, which were granted under the incentive bonus plan for
executive officers and key employees. No awards were made under this program
in 1998. Administrative expenses in Asia were lower compared to the prior
year, due primarily to changes in currency exchange rates. The U. S. dollar
strengthened relative to the Singapore dollar and the Japanese yen.
Other expenses increased the Company's loss by $0.4 million in fiscal 1998,
compared to other income of $0.4 million in fiscal 1997. The other income in
1997 was primarily attributable to income from a $0.5 million settlement of a
patent infringement charge the Company had filed against a competitor, and
currency exchange gains of approximately $0.4 million. The Company recognized
$0.1 million of currency gain in 1998. The currency gains in the current and
prior years were primarily related to intercompany receivable and payable
positions between the Company's subsidiaries.
The provision for income taxes was provided using the appropriate effective
tax rates for each of the tax jurisdictions in which the Company operates.
The Company recognized a tax benefit of $546 for deferred tax assets related
to the U.S. operations. No tax benefit has been recognized on the pretax
losses incurred in Belgium, Scotland, Malaysia and Japan. The Company
maintains a valuation allowance of approximately $1.5 million for tax
benefits of prior period net operating losses in these tax jurisdictions. At
such time as management is able to project the probable utilization of all or
part of these net operating loss carry-forward provisions, the valuation
allowances for these deferred tax assets will be reversed.
The net loss in fiscal 1998 amounted to $6.2 million or $1.26 per share,
including restructuring and unusual charges of $5.1 million ($3.6 million
after income taxes or 73 cents per share), compared to a net income of $2.4
million or 48 cents per share in the prior year. Operations in the United
States, Europe and Asia incurred net losses, after restructuring unusual
charges and taxes of $3.8 million, $2.4 million and $15,000 respectively.
The recent currency crisis in Asia had an impact on the Company's operating
results in the year. While sales in Japan were unfavorably impacted by the
strengthening of the U. S. dollar against the Japanese yen, operating results
in Southeast Asia were affected favorably due to the fact that most of the
Company's sales to customers in Southeast Asia are transacted in U. S.
dollars. These sales were not significantly affected by the currency crisis.
Cost of sales and operating expenses in Southeast Asia were lower in the
period due primarily to the devaluation of the Malaysian ringgit and the
Singapore dollar, compared to the U. S. dollar.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
6
<PAGE>
- -------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- -------------------------------------------------------------------------------
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 1997 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?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 that 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.
Selling, general and administrative expenses of $15.6 million decreased by
$1.1 million or 7.1% 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, as 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 that 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, 1998, was at
$10.7 million compared to $16.6 million at June 30, 1997. The Company's
current ratio at June 30, 1998, was 1.9 to 1 compared to 2.4 to 1 at June 30,
1997. Cash balances at June 30, 1998, were $0.9 million compared to $4.1
million at year-end June 30, 1997. The Company's long-term debt as a
percentage of stockholders' equity was 32.9% at year-end 1998, compared to
19.1% at year-end 1997.
Capital expenditures were primarily for improvements to, and the expansion
of, our molding, plating and stamping capabilities, as well as expenditures
for new mold tools, contact dies and assembly equipment, and other
expenditures related to the Company's program to replace its management
information systems. Total capital expenditures were $7.8 million in the
fiscal year 1998, compared to $4.2 million in 1997.
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 and a new $1.3 million long-term loan
to be secured by a mortgage on the Company's facility in Dallas, Texas. This
loan will be closed in fiscal 1999. The Company currently has $1.8 million in
unused and available credit under the existing credit agreement at June 30,
1998.
- -------------------------------------------------------------------------------
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 com-
ROBINSON NUGENT, INC. AND SUBSIDIARIES
7
<PAGE>
- -------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
- -------------------------------------------------------------------------------
panies. 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 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 the
management information systems of its operations in the United States, Europe
and Asia including order management, manufacturing resource planning, finance
and accounting. These systems are scheduled to be operational by June 30,
1999 at a total cost of approximately $5.0 million. The implementation
program is on schedule and the Company has incurred costs of approximately
$1.4 million as of June 30, 1998. Software and hardware have been purchased
and installed. Systems are currently being tested in a pilot program. While
the Company expects that the new integrated systems 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. The Company
does not presently have a contingency plan in the event of failure of these
new management information systems, and is uncertain as to the effects of any
such failure on the Company's results of operations, liquidity and financial
condition. The Company intends to create a contingency plan during fiscal
1999. In addition, other information and operational systems have to be
assessed related to the impact of the year 2000. Plans are being developed to
address system modifications required by December 31, 1999. The Company has
considered the potential effect on the Company's business, results of
operations, and financial condition if key suppliers and vendors do not
become year 2000 compliant in a timely manner. Management has taken
reasonable steps to verify the Year 2000 readiness of its suppliers.
- -------------------------------------------------------------------------------
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. 128, "Earnings Per Share" in
1998. 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 U.S.
standard for computing earnings per share more compatible with the EPS
standards of other countries.
The Financial Accounting Standards Board has issued SFAS No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information."
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
ROBINSON NUGENT, INC. AND SUBSIDIARIES
8
<PAGE>
adopt this 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.
- -------------------------------------------------------------------------------
OPERATING RESULTS AS A PERCENTAGE OF NET SALES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0%
Cost of sales 84.4 77.5 81.0
- ----------------------------------------------------------------------------------------------
Gross profit 15.6 22.5 19.0
- ----------------------------------------------------------------------------------------------
Selling, general and administration expenses 19.6 18.4 20.7
- ----------------------------------------------------------------------------------------------
Provision for restructuring and unusual expenses 6.8 -- --
- ----------------------------------------------------------------------------------------------
Operating income (loss) (10.8) 4.1 (1.7)
- ----------------------------------------------------------------------------------------------
Other income (expense) ( .5) .4 (0.3)
- ----------------------------------------------------------------------------------------------
Income (loss) before income tax expense (benefit) (11.3) 4.5 (2.0)
- ----------------------------------------------------------------------------------------------
Income tax expense (benefit) (3.0) 1.7 0.7
- ----------------------------------------------------------------------------------------------
NET INCOME (LOSS) (8.3%) 2.8% (2.7%)
- ----------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
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 three fiscal years ended June 30, 1998.
<TABLE>
<CAPTION>
Cash
Price Range Dividends
High Low
- -------------------------------------------------------------------------------
FISCAL 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
First quarter ended September 30 $ 7 3/4 5 1/32 $ .03
Second quarter ended December 31 6 1/8 3 7/8 .03
Third quarter ended March 31 5 3/4 3 5/8 .03
Fourth quarter ended June 30 6 1/8 3 3/4 .03
- -------------------------------------------------------------------------------
FISCAL 1997
- -------------------------------------------------------------------------------
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 1/4 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 1/4 4 3/4 .03
</TABLE>
As of June 30, 1998, the Company had approximately 750 holders of record of
its common shares.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
9
<PAGE>
- -------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
- -------------------------------------------------------------------------------
IN THOUSANDS
<TABLE>
<CAPTION>
June 30
- ------------------------------------------------------------------------------------------------
ASSETS 1998 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 959 4,118 2,368
Receivables, less allowance for doubtful
receivables of $571 in 1998,
$564 in 1997 and $739 in 1996 9,274 11,784 10,433
Inventories 10,062 11,100 13,446
Other current assets 2,012 1,371 1,532
- ------------------------------------------------------------------------------------------------
Total current assets 22,307 28,373 27,779
- ------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost less accumulated
depreciation and amortization 19,424 21,188 23,618
Other assets 571 135 69
- ------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 42,302 49,696 51,466
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------
Current Liabilities:
Current installments of long-term debt $ 367 386 713
Short-term bank borrowings 570 -- 6,400
Accounts payable 5,147 4,265 5,450
Accrued expenses 5,483 5,560 4,799
Income taxes payable -- 1,581 89
- ------------------------------------------------------------------------------------------------
Total current liabilities 11,567 11,792 17,451
- ------------------------------------------------------------------------------------------------
Long-term debt, excluding current installments 7,607 5,926 3,036
Deferred income taxes -- 838 1,011
- ------------------------------------------------------------------------------------------------
Total liabilities 19,174 18,556 21,498
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Commitments and contingencies -- -- --
- ------------------------------------------------------------------------------------------------
Shareholders' Equity:
Common shares without par value
Authorized 15,000 shares 20,950 20,950 20,950
Retained earnings 14,563 21,290 19,521
Equity adjustment from foreign currency translation 713 2,073 2,847
Employee stock purchase plan loans and
deferred compensation (106) (177) (354)
Less cost of common shares in treasury (12,992) (12,996) (12,996)
- ------------------------------------------------------------------------------------------------
Total shareholders' equity 23,128 31,140 29,968
- ------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 42,302 49,696 51,466
- ------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
10
<PAGE>
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
IN THOUSANDS EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
Years ended June 30
- -------------------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $74,146 84,840 80,964
Cost of sales 62,557 65,769 65,604
- -------------------------------------------------------------------------------------------------
Gross profit 11,589 19,071 15,360
- -------------------------------------------------------------------------------------------------
Selling, general and administrative expenses 14,565 15,598 16,749
Restructuring and unusual expenses 5,063 -- --
- -------------------------------------------------------------------------------------------------
Operating income (loss) (8,039) 3,473 (1,389)
- -------------------------------------------------------------------------------------------------
Other Income (expense):
Interest income 84 124 129
Interest expense (592) (678) (511)
Currency exchange gain 105 393 81
Settlement of patent infringement claim -- 500 --
Royalty income -- 37 118
Other -- -- (122)
- -------------------------------------------------------------------------------------------------
Total other income (expense) (403) 376 (305)
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Income (loss) before income tax expense (benefit) (8,442) 3,849 (1,694)
- -------------------------------------------------------------------------------------------------
Income tax expense (benefit) (2,261) 1,494 465
- -------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $(6,181) 2,355 (2,159)
- -------------------------------------------------------------------------------------------------
Net income (loss) per common share, basic and dilutive $ (1.26) .48 (.40)
- -------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
11
<PAGE>
- -------------------------------------------------------------------------------
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, 1998, 1997 and 1996 Shares Amount earnings translation Compensation Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JULY 1, 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) $(12,996)
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss -- -- (6,181) -- -- -- --
Dividends ($.12 per share) -- -- (587) -- -- -- --
Equity adjustments from foreign
currency translation -- -- -- (1,360) -- -- --
Stock purchase plan repayments -- -- -- -- 60 -- --
Amortization of deferred compensation -- -- -- -- 11 -- --
Stock purchase plan forfeitures -- -- 38 -- -- (7) (38)
Stock options exercised -- -- -- -- -- 5 32
Treasury shares sold -- -- 3 -- -- 2 10
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1998 6,851 $20,950 $14,563 $ 713 $(106) (1,959) $(12,992)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
12
<PAGE>
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
IN THOUSANDS
<TABLE>
<CAPTION>
Years ended June 30
- ------------------------------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(6,181) 2,355 (2,159)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Elimination of RNBelgium goodwill -- -- 636
Depreciation and amortization 8,557 5,451 6,135
Reduction and disposal of property plant and equipment 360 233 1,971
(Increase) decrease in receivables 2,510 (1,351) 1,776
(Increase) decrease in inventories 1,038 2,346 (2,168)
(Increase) decrease in other current assets (498) 67 731
Increase (decrease) in accounts payable and accrued expenses 805 (424) (338)
Increase (decrease) in income taxes payable (1,581) 1,492 (352)
(Increase) decrease in deferred income taxes (1,409) (79) 110
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 3,601 10,090 6,342
- ------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (7,818) (4,202) (7,474)
Proceeds from the sale of property plant and equipment -- 117 --
(Increase) decrease in other assets (47) (83) 41
- ------------------------------------------------------------------------------------------------------
Net cash used in investing activities (7,865) (4,168) (7,433)
- ------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from short-term bank borrowings 570 -- 6,262
Repayment of short-term bank borrowings -- (300) (389)
Proceeds from long-term debt 3,250 -- 193
Repayment of long-term debt (1,426) (3,189) (723)
Cash dividends (587) (586) (645)
Issuance of common shares -- -- 5
Sale of treasury shares 13 -- --
Purchase of treasury shares -- -- (3,372)
Repayment of employee stock purchase plan loans 60 93 192
Proceeds from stock purchase plan terminations -- 33 66
Proceeds from exercised stock options 32 -- 3
- ------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 1,912 (3,949) 1,592
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (807) (223) (593)
- ------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (3,159) 1,750 (92)
Cash and cash equivalents at beginning of year 4,118 2,368 2,460
- ------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 959 4,118 2,368
- ------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
13
<PAGE>
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
Cash and Cash Equivalents. 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, ranging from 30 to 45
years, and machinery and equipment, ranging from 3 to 12 years, for financial
reporting purposes. Depreciation expense includes the amortization of
buildings capitalized under lease obligations in accordance with Statement of
Financial Accounting Standards No. 13 - "Accounting for Leases". Depreciation
expense was $8,507 in 1998, $5,383 in 1997 and $5,901 in 1996.
- -------------------------------------------------------------------------------
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 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 $3,950 in 1998, $3,400 in 1997
and $3,700 in 1996. 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 1995 1998. 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 $254 in 1998, $272 in 1997 and $231 in 1996.
- -------------------------------------------------------------------------------
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 that could affect the financial
statements and future operations of the Company.
- -------------------------------------------------------------------------------
Concentration of Credit Risk. Financial instruments that 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 to 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. 128, "Earnings per Share" in 1998. 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.
The Financial Accounting Standards Board has issued SFAS No. 130 "Reporting
Comprehensive Income" and SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information."
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 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
ROBINSON NUGENT, INC. AND SUBSIDIARIES
14
<PAGE>
- -------------------------------------------------------------------------------
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- -------------------------------------------------------------------------------
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. 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, 1998.
- -------------------------------------------------------------------------------
Common Share Data. Per common share data for 1998, 1997 and 1996 is presented
using basic and dilutive weighted average number of common shares
outstanding.
The following is the reconciliation of the numerators and denominators used
to compute the net income (loss) per common share, basic and dilutive:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator
Income (loss) available to common shareholders $(6,181) 2,355 (2,159)
Denominator
Basic-weighted shares outstanding (in thousands) 4,892 4,892 5,333
Stock options -- 19 --
- -------------------------------------------------------------------------------------------------------------
Dilutive-weighted shares outstanding (in thousands) 4,892 4,911 5,333
- -------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER COMMON SHARE, BASIC AND DILUTIVE $ (1.26) .48 (.40)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NOTE 3 INVENTORIES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Inventories consist of the following:
Finished goods $ 2,970 3,873 4,526
Work in process 5,595 5,933 7,021
Raw material and supplies 1,497 1,294 1,899
- -------------------------------------------------------------------------------------------------------------
Total $10,062 11,100 13,446
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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, 1998.
- -------------------------------------------------------------------------------
NOTE 4 PROPERTY, PLANT AND EQUIPMENT
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A summary of property, plant and equipment follows:
Land $ 732 808 836
Buildings 12,942 12,464 12,886
Machinery and equipment 49,416 46,778 47,122
- -------------------------------------------------------------------------------------------------------------
63,090 60,050 60,844
- -------------------------------------------------------------------------------------------------------------
Less accumulated depreciation and amortization 43,666 38,862 37,226
- -------------------------------------------------------------------------------------------------------------
TOTAL $19,424 21,188 23,618
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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 has evaluated the current market value of this
building and estimates that its net realizable value should be approximately
equal to the net book value of $2,000.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
15
<PAGE>
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
IN THOUSANDS EXCEPT PER SHARE DATA
- -------------------------------------------------------------------------------
NOTE 5 ACCRUED EXPENSES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A summary of accrued expenses follows:
Compensation $ 955 1,560 1,394
Commissions 721 741 719
Distributor allowances 447 885 692
State and local taxes 440 510 548
Pension and retirement plans 52 273 267
Deferred grant income -- 217 300
Provision for closure of North Carolina plant 1,432 -- --
Other 1,436 1,374 879
- ----------------------------------------------------------------------------------------------
Total $5,483 5,560 4,799
- ----------------------------------------------------------------------------------------------
</TABLE>
In May of 1998, management approved a plan to move all of its cable assembly
operations from its plant in Kings Mountain, North Carolina, to a leased
facility in Reynosa, Mexico. The provision for the closure of this facility
includes the present value of the remaining future lease payments on this
building, plus accruals for severance payments and other costs related to
this closure.
- -------------------------------------------------------------------------------
NOTE 6 DEBT
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt consists of the following:
United States' obligation:
Loans under a long-term credit agreement $6,180 4,000 --
Obligation under purchase agreement for the acquisition
of RN Belgium, interest imputed at 8%, paid off in June 1997 -- -- 567
Foreign obligations:
6.875% fixed-rate real estate mortgage, payable in annual installments
through 2004, with interest 1,335 1,594 2,092
7.25% fixed-rate real estate mortgage, payable in quarterly
installments through 2000 142 214 318
7.65% fixed-rate real estate mortgage payable in quarterly
installments through 2001 106 150 217
10.0% capitalized lease obligation, payable to bank in
monthly installments through 2002 123 237 274
Other long-term debt 88 117 281
- ----------------------------------------------------------------------------------------------------------------------------
Total 7,974 6,312 3,749
- ----------------------------------------------------------------------------------------------------------------------------
Less current installments of long-term debt 367 386 713
- ----------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT $7,607 5,926 3,036
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
In September 1998, the Company agreed to amend the long-term credit agreement
with its primary lending institution. This agreement provides for up to $8
million in revolving credit loans and is secured by a lien on inventories and
receivables. The Company had $1.82 million in unused and available credit
under this agreement at June 30, 1998. The average interest rate on this debt
was 7.19%. This agreement 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 funded debt
ratio. The agreement terminates in December 2001, and 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,
2003, amount to $367 in 1999, $349 in 2000, $296 in 2001, $6,408 in 2002,
$195 in 2003 and $359 thereafter.
Total interest paid under the long-term debt agreements was $539 in 1998,
$363 in 1997 and $259 in 1996.
Total interest paid under the short-term bank borrowings was $3 in 1998, $315
in 1997 and $252 in 1996.
In addition, the Company has short-term lines of credit available in Malaysia
and Belgium at interest rates of 13.80% and 8.75%, respectively. Total unused
and available credit under these agreements was approximately $269, as of
June 30, 1998.
The weighted average interest rate on short-term debt was 8.5% in 1998 and
7.2% in 1996. There was no outstanding short-term debt as of June 30, 1997.
Property, plant, equipment and other current assets, with an approximate net
book value of $4,360, is pledged as collateral under the various long-term
debt agreements.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
16
<PAGE>
In April 1998, the Company entered into a short-term financing agreement with
a bank to purchase software associated with the Robinson Nugent Information
System Enhancement Project. The Company has obtained $570 in short-term
borrowings under this agreement as of June 30, 1998. Interest on the
outstanding borrowings, at the bank's prime rate (8.5% at June 30, 1998) is
payable monthly. The Company will pay off this short-term loan and enter into
an operating lease for this software in September, 1998.
- -------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------
Carrying Fair Carrying Fair Carrying Fair
Amount Value Amount Value Amount Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Long-term debt $7,974 7,872 6,312 6,190 3,749 3,587
- -------------------------------------------------------------------------------
</TABLE>
The valuations for long-term debt are determined based on the expected future
payments discounted at risk-adjusted rates.
- -------------------------------------------------------------------------------
NOTE 8 INCOME TAXES
- -------------------------------------------------------------------------------
The provision (benefit) for income taxes follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $(1,132) 1,098 65
State (38) 172 (8)
Foreign 318 303 298
- -------------------------------------------------------------------------------
Total current (852) 1,573 355
- -------------------------------------------------------------------------------
Deferred:
Federal (1,149) (44) 216
State (173) (2) 40
Foreign (87) (33) (146)
- -------------------------------------------------------------------------------
Total deferred (1,409) (79) 110
- -------------------------------------------------------------------------------
TOTAL $(2,261) 1,494 465
- -------------------------------------------------------------------------------
</TABLE>
The following reconciles income taxes computed at the U.S. Federal statutory
rate to income taxes reported for financial reporting purposes:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense (benefit) at statutory rate $(2,870) 1,309 (576)
Non-U.S. tax-exempt (earnings) losses 729 (146) 791
Tax-exempt earnings of FSC -- (89) 33
Foreign taxes, net of U.S. tax credit 197 293 175
State and local taxes, net of U.S. Federal income tax (139) 112 21
Research and experimentation credit (59) (44) --
Other (119) 59 21
- -------------------------------------------------------------------------------------------------------------
Income taxes as reported $(2,261) 1,494 465
- -------------------------------------------------------------------------------------------------------------
</TABLE>
No U.S. Federal income taxes have been provided at June 30, 1998, on
approximately $6,685 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 $770 in
1998, $1 in 1997 and $805 in 1996.
The net current and non-current components of deferred income taxes
recognized in the balance sheet at June 30 follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net current assets $ 745 602 696
Net non-current assets (liabilities) 428 (838) 1,011
- -------------------------------------------------------------------------------
Net assets (liabilities) $ 1,173 (236) (315)
- -------------------------------------------------------------------------------
</TABLE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
17
<PAGE>
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
IN THOUSANDS EXCEPT PER SHARE DATA
- -------------------------------------------------------------------------------
NOTE 8 INCOME TAXES (CONTINUED)
- -------------------------------------------------------------------------------
The tax effect of the significant temporary differences that comprise the
deferred tax assets and liabilities at June 30 follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 1,504 815 900
Employee compensation and benefits 355 322 276
Inventories and other current assets 247 258 275
State and local income taxes,
net of U.S. Federal income tax benefit 141 23 43
Plant closing settlement costs 541 -- --
Other accrued expenses 68 42 32
- -------------------------------------------------------------------------------------------------------------
Total deferred tax assets $ 2,856 1,460 1,526
- -------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation and amortization (179) (881) (941)
- -------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities (179) (881) (941)
- -------------------------------------------------------------------------------------------------------------
Net deferred tax assets before valuation allowance 2,677 579 585
- -------------------------------------------------------------------------------------------------------------
Deferred tax assets valuation allowance (1,504) (815) (900)
- -------------------------------------------------------------------------------------------------------------
NET DEFERRED TAX ASSETS (LIABILITIES) 1,173 (236) (315)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
During the year the Company has recognized a tax benefit of approximately
$546 for deferred tax assets related to the U.S. operations. Management
anticipates future taxable income from U.S. operations will utilize these tax
assets.
At June 30, 1998, certain foreign subsidiaries have accumulated net operating
loss carryforwards of $5,289, which begin to expire in various years through
2013. Management is unable at this time to project future taxable income that
will utilize the deferred benefit of these loss carry-forwards. As a result,
a valuation allowance has been established of $1,504.
The tax benefit of these carryforwards will be recognized when management is
able to project future taxable income of these foreign subsidiaries.
The change in the deferred income tax expense (benefit) represents the effect
of changes in the amounts of temporary differences. The tax effect of changes
in those temporary differences is presented below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation and amortization $ (702) (63) 47
State and local income taxes, net of U.S. Federal income tax benefit (118) 20 25
Employee compensation and benefits (33) -- --
Plant closing settlement costs (541) -- --
Accrued expenses (26) (63) 98
Foreign tax -- -- (86)
Minimum tax credit -- 10 (10)
Inventories and other current assets 11 17 36
- ----------------------------------------------------------------------------------------------------------------------------
Total $(1,409) (79) 110
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NOTE 9 LEASED ASSETS AND LEASE COMMITMENTS
- -------------------------------------------------------------------------------
The consolidated financial statements include land and buildings under a
capital lease as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land and buildings $ 497 802 1,807
Less accumulated amortization 124 118 594
- ----------------------------------------------------------------------------------------
Net assets under a capitalized lease 373 684 1,213
- ----------------------------------------------------------------------------------------
</TABLE>
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 $1,359 in 1998, $1,312 in 1997 and $1,342
in 1996.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
18
<PAGE>
- -------------------------------------------------------------------------------
NOTE 9 LEASED ASSETS AND LEASE COMMITMENTS (CONTINUED)
- -------------------------------------------------------------------------------
A summary of future minimum lease payments follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Year ending June 30
- -------------------------------------------------------------------------------
Capital Operating
lease leases
-----------------------
<S> <C> <C>
1999 $ 36 879
2000 36 684
2001 37 573
2002 37 460
2003 4 425
Later Years _ 247
- -------------------------------------------------------------------------------
Total minimum lease payments 150 3,268
- -------------------------------------------------------------------------------
Less amount representing interest 27
- -------------------------------------------------------------------------------
PRESENT VALUE OF NET MINIMUM LEASE PAYMENTS
(INCLUDED IN LONG-TERM DEBT) $ 123 16
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
NOTE 10 EMPLOYEE BENEFITS
- -------------------------------------------------------------------------------
The Company has a defined contribution pension plan and a defined
contribution 401(k) plan for eligible employees in the United States. 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 $524 in 1998, $488 in 1997 and $488 in 1996.
Personnel in Europe and Asia are provided retirement benefits under various
programs that are regulated by foreign law. Annual contributions are
generally regulated in amount and shared equally by the Company and its
employees. The Company's share of annual contributions to the aforementioned
foreign defined contribution plans was $254 in 1998, $380 in 1997 and $335 in
1996.
- -------------------------------------------------------------------------------
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. In 1998, the Board of Directors authorized an
additional 500 common shares to the pool of shares available for option
grants under the terms of the plan. Fifty percent of the options are
exercisable after the first anniversary of the date of 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 the 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1998 SHARES WEIGHTED AVERAGE OPTION PRICE PER SHARE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Shares under option at beginning of year 500 $ 6.56
Granted 144 6.25
Expired (19) 10.88
Cancelled (43) 7.09
Exercised (5) 6.17
- --------------------------------------------------------------------------------------------
Shares under option at end of year 577 6.30
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------
</TABLE>
ROBINSON NUGENT, INC. AND SUBSIDIARIES
19
<PAGE>
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
IN THOUSANDS EXCEPT PER SHARE DATA
- -------------------------------------------------------------------------------
NOTE 11 STOCK OPTION PLANS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1996 SHARES WEIGHTED AVERAGE OPTION PRICE PER SHARE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
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
- --------------------------------------------------------------------------------------------
</TABLE>
A total of 360, 282, and 242 shares at an average option price per share of
$6.59, $7.34, and $7.00 were exercisable and 532, 130, and 252 shares were
available for future grants at June 30, 1998, 1997 and 1996, respectively.
The following table summarizes information about stock options outstanding at
June 30, 1998:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
- ---------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Number average average Number average
Range of outstanding remaining exercise exercisable exercised
exercise prices at 6/30/98 contractual life price at 6/30/98 price
<S> <C> <C> <C> <C> <C>
$4.00 to 5.875 262 4.76 $ 4.79 165 $ 4.61
$6.00 to 7.375 170 7.22 $ 6.46 50 $ 6.57
$8.625 to 9.25 145 6.35 $ 8.85 145 $ 8.85
- ---------------------------------------------------------------------------------------------------------------------------
$4.00 to 9.25 577 5.89 $ 6.30 360 $ 6.59
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The weighted average fair value of options granted during 1998, 1997, and
1996 were $2.19, $1.64, and $3.18, respectively.
The fair value of each stock option granted in 1998, 1997 and 1996 was
estimated as of the date of the grant using the Black-Scholes option-pricing
model with the following assumptions for 1998, 1997, and 1996, respectively:
dividend yield of 1.6% to 2.8%,1.3% to 2.6%, and 1.3% to 2.6%; volatility
factor of 37%, 32%, and 32%; a range of risk-free interest rates of 5.5% to
6.0%, 5.9% to 6.7%, and 5.9% to 6.7%; and expected lives of 5 years for all
three years.
In accordance with Accounting Principles Board No. 25, the Company has not
recognized any compensation cost for the stock option plan. Had compensation
cost for the Company's stock option 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 (loss) and earnings (loss) per share would have been
reduced (increased) to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) As reported $(6,181) $2,355 $(2,159)
Pro forma (6,471) 2,183 (2,283)
Earnings (loss) per share As reported (1.26) .48 (.40)
Pro forma (1.32) .45 (.43)
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts.
- -------------------------------------------------------------------------------
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 ($98 in 1998, $158 in 1997 and $284 in 1996) and
deferred compensation charges ($8 in 1998, $19 in 1997 and $70 in 1996)
associated with the plan are classified as a reduction of shareholders'
equity. The amortization of the deferred compensation charged to expense was
$11 in 1998, $51 in 1997 and $151 in 1996.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
20
<PAGE>
- -------------------------------------------------------------------------------
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 were to expire on April 15, 1998. The Plan was amended
in January 1998 to extend expiration date to April 15, 2008. 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 SIGNIFICANT CUSTOMER
- -------------------------------------------------------------------------------
No sales to a single customer exceeded 10% of total sales in 1998, 1997 or
1996.
- -------------------------------------------------------------------------------
NOTE 16 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,
Singapore, the Netherlands and Sweden. During 1998, the Company had
manufacturing operations located in the United States, Scotland, Belgium, and
Malaysia.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
21
<PAGE>
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
IN THOUSANDS EXCEPT PER SHARE DATA
- -------------------------------------------------------------------------------
NOTE 16 BUSINESS SEGMENT AND FOREIGN SALES (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Sales 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
United States
Domestic $ 46,955 52,849 51,664
Export:
Europe 78 57 58
Asia 7 194 1,285
Rest of World 1,653 2,128 1,447
- -------------------------------------------------------------------------------
Total sales to customers 48,693 55,228 54,454
- -------------------------------------------------------------------------------
Intercompany 7,342 8,447 6,813
- -------------------------------------------------------------------------------
Total United States 56,035 63,675 61,267
- -------------------------------------------------------------------------------
Europe
Domestic 18,472 21,552 19,553
Export:
Asia - 422 1,752
- -------------------------------------------------------------------------------
Total sales to customers 18,472 21,974 21,305
- -------------------------------------------------------------------------------
Intercompany 3,806 4,293 3,517
- -------------------------------------------------------------------------------
Total Europe 22,278 26,267 24,822
- -------------------------------------------------------------------------------
Asia
Domestic 6,981 7,543 5,120
Export to rest of world -- 95 85
- -------------------------------------------------------------------------------
Total sales to customers 6,981 7,638 5,205
- -------------------------------------------------------------------------------
Intercompany 4,128 2,883 2,448
- -------------------------------------------------------------------------------
Total Asia 11,109 10,521 7,653
- -------------------------------------------------------------------------------
Eliminations (15,276) (15,623) (12,778)
- -------------------------------------------------------------------------------
CONSOLIDATED $ 74,146 84,840 80,964
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
- -------------------------------------------------------------------------------
United States $ 34,274 39,310 38,984
Europe 14,544 16,891 17,349
Asia 3,417 5,739 4,704
Eliminations (11,933) (12,244) (9,571)
- -------------------------------------------------------------------------------
Consolidated $ 42,302 49,696 51,466
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES
- -------------------------------------------------------------------------------
United States $ (6,298) 3,939 384
Europe (2,217) 205 (1,546)
Asia 73 (295) (532)
- -------------------------------------------------------------------------------
Consolidated $ (8,442) 3,849 (1,694)
- -------------------------------------------------------------------------------
</TABLE>
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.
ROBINSON NUGENT, INC. AND SUBSIDIARIES
22
<PAGE>
- -------------------------------------------------------------------------------
NOTE 17 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended
- ----------------------------------------------------------------------------------------------------------------------------
For the year ended June 30, 1998 Sept. 30, 1997 Dec. 31, 1997 Mar. 31, 1998 June 30, 1998 Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $18,543 19,576 19,658 16,369 74,146
Gross profit $ 3,386 3,524 2,929 1,750 11,589
Net loss $ (132) (232) (3,288) (2,529) (6,181)
Net loss per common share, basic and dilutive $ (.03) (.05) (.67) (.52) (1.26)
Dividends per common share $ .03 .03 .03 .03 .12
<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, basic and dilutive $ .08 .03 .19 .18 .48
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 1998 revenue was down $5,600 compared to fourth quarter 1997.
This revenue decrease reflected lower revenues in all the geographic regions
served by the Company. The Company experienced lower sales in older, more
mature, backpanel connectors and stamped or screw machine sockets and
connectors.
Gross profits decreased primarily due to the lower volumes in the United
States, Europe and Asia. Gross profits are net of engineering charges
associated with new product development. Engineering charges amounted to
$1,032 or 6.3% of net sales in the fourth quarter, compared to $993 or 4.5%
of net sales in the prior year, and reflect a 3.9% increase in spending as
the Company increased its investment in the development of new and improved
product offerings.
The Company reported $1,970 of restructuring and unusual charges in the
fourth quarter. These charges include $1,608 of restructuring charges related
to the closure and move of the Company's North American cable assembly
operations. In May of 1998, management approved a plan to move these
operations from its plant in Kings Mountain, North Carolina to a new facility
in Reynosa, Mexico. Assembly operations are expected to begin in Reynosa in
September of 1998. Management anticipates that the closure of the North
Carolina facility will be completed by December of 1998. An additional $280
of these restructuring and unusual charges relate to the cost of workforce
reductions implemented to reduce the Company's cost structure. The remaining
$82 of these charges relate to a reduction in the carrying value of certain
assets. The charges incurred in the fourth quarter were part of a restructuring
program that was initiated in the prior quarter.
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
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 1998, and the related
consolidated statements of operations, shareholders' equity, and cash flows
for the year 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 audit. The
Consolidated Financial Statements of the Company as of and for the years
ended June 30, 1997 and 1996, were audited by other auditors whose report,
dated August 5, 1997, expressed an unqualified opinion on those consolidated
statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1998 consolidated financial statements, present fairly in
all material respects, the financial position of Robinson Nugent, Inc. and
Subsidiaries as of June 30, 1998, and the results of their operations and
their cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Louisville, Kentucky
July 31, 1998
ROBINSON NUGENT, INC. AND SUBSIDIARIES
23
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
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 reports dated
July 31, 1998, appearing in, and incorporated by reference in, this Annual
Report on Form 10-K of Robinson Nugent, Inc. for the year ended June 30, 1998.
DELOITTE & TOUCHE LLP
Louisville, Kentucky
October 12, 1998
31
<PAGE>
Exhibit 23.2
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 and
1996 and for the years ended June 30, 1997 and 1996, which report is included
in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Louisville, Kentucky
October 12, 1998
32
<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, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 959
<SECURITIES> 0
<RECEIVABLES> 9,845
<ALLOWANCES> 571
<INVENTORY> 10,062
<CURRENT-ASSETS> 22,307
<PP&E> 63,090
<DEPRECIATION> 43,666
<TOTAL-ASSETS> 42,302
<CURRENT-LIABILITIES> 11,567
<BONDS> 0
0
0
<COMMON> 20,950
<OTHER-SE> 2,178
<TOTAL-LIABILITY-AND-EQUITY> 42,302
<SALES> 74,146
<TOTAL-REVENUES> 74,146
<CGS> 62,557
<TOTAL-COSTS> 62,557
<OTHER-EXPENSES> 19,628
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 592
<INCOME-PRETAX> (8,442)
<INCOME-TAX> (2,261)
<INCOME-CONTINUING> (6,181)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,181)
<EPS-PRIMARY> (1.26)
<EPS-DILUTED> (1.26)
</TABLE>
