UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ______________ to
_______________
Commission File Number: 0-9010
ROBINSON NUGENT, INC.
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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
incorporation or organization) Identification No.)
800 East Eighth Street, New Albany, Indiana 47151-1208
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (812) 945-0211
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date: As of November 9, 2000, the
registrant had outstanding 5,919,686 common shares without par value.
The Index to Exhibits is located at page 14 in the sequential numbering
system. Total pages: 15.
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ROBINSON NUGENT, INC. AND SUBSIDIARIES
INDEX
Page No.
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PART I. Financial Information:
Item 1. Financial Statements
Consolidated balance sheets at September 30, 2000,
September 30, 1999 and June 30, 2000............................... 3
Consolidated statements of operations and comprehensive
income for the three months ended September 30, 2000
and September 30, 1999............................................. 5
Consolidated statements of cash flows for the
three months ended September 30, 2000 and September 30,1999........ 6
Notes to consolidated financial statements......................... 7
Item 2. Management's discussion and analysis of financial
condition and results of operations................................ 9
PART II. Other Information................................................. 12
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROBINSON NUGENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September 30 June 30
-------------------- -------
2000 1999 2000
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,627 $ 1,147 $ 2,114
Accounts receivable, net 17,295 14,373 17,949
Inventories:
Raw materials 1,103 1,039 1,072
Work in process 7,644 6,490 8,479
Finished goods 9,511 3,858 9,434
------- ------- -------
Total inventories 18,258 11,387 18,985
Other current assets 2,269 1,791 2,378
------- ------- -------
Total current assets 39,449 28,698 41,426
Property, plant & equipment, net 15,965 17,968 15,989
Other assets 147 152 652
------- ------- -------
Total assets $55,561 $46,818 $58,067
======= ======= =======
See accompanying notes to the consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
ROBINSON NUGENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September 30 June 30
-------------------- -------
2000 1999 2000
(Unaudited)
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 410 $ 462 $ 441
Accounts payable 7,880 7,164 9,329
Accrued expenses 5,724 4,771 7,375
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Total current liabilities 14,014 12,397 17,145
Long-term debt, excluding current
installments 11,918 8,667 11,779
Other liabilities 860 985 750
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Total liabilities 26,792 22,049 29,674
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Shareholders' equity:
Common shares without par value
Authorized shares 15,000; issued
7,018 shares at September 30, 2000, 21,752 20,950 21,562
6,851 shares at September 30, 1999, and
6,978 shares at June 30, 2000
Retained earnings 20,470 15,614 19,535
Equity adjustment from foreign
currency translation (945) 990 (134)
Employee stock purchase plan loans
and deferred compensation (9) (65) (22)
Less cost of common shares in treasury;
1,886 shares at September 30, 2000,
1,919 shares at September 30, 1999, and
1,894 shares at June 30, 2000 (12,499) (12,720) (12,548)
------- ------- -------
Total shareholders' equity 28,769 24,769 28,393
------- ------- -------
Total liabilities and shareholders'
equity $55,561 $46,818 $58,067
======= ======= =======
See accompanying notes to the consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
ROBINSON NUGENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended
September 30
2000 1999
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(Unaudited)
<S> <C> <C>
Net sales $23,356 $20,950
Cost of sales 17,002 15,388
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Gross profit 6,354 5,562
Selling, general and
administrative expenses 4,677 3,998
Special and unusual expenses 172 230
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Operating income 1,505 1,334
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Other income (expense):
Interest income 6 14
Interest expense (240) (176)
Currency gain (loss) 59 (75)
Royalty income 4 ---
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(171) (237)
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Income before income taxes 1,334 1,097
Income taxes 455 313
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Net income $ 879 $ 784
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Other comprehensive income:
Foreign currency translation (811) 498
------- -------
Comprehensive income $ 68 $ 1,282
======= =======
Per Share Data:
Basic net income per
common share $ .17 $ .16
======= =======
Weighted average number of
common shares outstanding 5,114 4,931
======= =======
Diluted net income per
common share $ .16 $ 16
======= =======
Adjusted weighted average number of
common shares, assuming dilution 5,485 4,985
======= =======
Dividends per common share $ --- $ ---
======= =======
See accompanying notes to the consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
ROBINSON NUGENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Three Months Ended
September 30
2000 1999
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(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 879 $ 784
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,065 1,120
Disposal of capital assets 34 93
Issuance of shares as compensation 237 27
Changes in assets and liabilities
Receivables 654 (1,549)
Inventories 727 (755)
Other assets 604 861
Accounts payable and accrued expenses (2,990) 179
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Net cash provided by operating activities 1,210 760
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Cash flows from investing activities:
Capital expenditures (1,283) (927)
Proceeds from sale of fixed assets --- 326
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Net cash used in investing activities (1,283) (601)
-------- -------
Cash flows from financing activities:
Proceeds from long-term debt 250 500
Repayments of long-term debt (58) (884)
Repayments of employee stock purchase plan loans 13 9
Proceeds from exercised stock options 58 ---
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Net cash provided by (used in)
financing activities 263 (375)
------- -------
Effect of exchange rate changes on cash (677) 518
------- -------
Increase (decrease) in cash and cash equivalents (487) 302
Cash and cash equivalents at beginning of period 2,114 845
------- -------
Cash and cash equivalents at end of period $ 1,627 $ 1,147
======= =======
See accompanying notes to the consolidated financial statements.
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
ROBINSON NUGENT, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2000, AND 1999, AND JUNE 30, 2000
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary (all of
which are normal and recurring) to present fairly the financial position of
the Company and its subsidiaries, results of operations, and cash flows in
conformity with generally accepted accounting principles. The results of
operations for the interim period are not necessarily an indication of
results to be expected for the entire year.
2. Reference is directed to the Company's consolidated financial statements
(Form 10-K) for the year ended June 30, 2000, and management's discussion
and analysis included in Part I, Item 2 in this report.
3. On October 2, 2000, The Company and Minnesota Mining and Manufacturing
Company (3M) entered into a definitive merger agreement under which 3M will
acquire Robinson Nugent for approximately $115 million, including the
assumption of debt. The merger is structured as a tax-free, stock-for-stock
transaction, in which each outstanding Robinson Nugent common share will be
exchanged for $19 of 3M common stock. If the average closing trading price
of 3M Common Stock is between $82 and $100 per share, as described in the
merger agreement, the exchange ratio outside the collar will be fixed. The
transaction will be accounted for as a purchase.
The transaction has been approved by the boards of directors of both
companies and is subject to approval by the shareholders of Robinson
Nugent, Inc., customary closing conditions, and regulatory reviews. The
transaction is expected to close in late 2000 or in early 2001. Upon
completion of the merger, Robinson Nugent, Inc., will become a wholly owned
subsidiary of 3M.
3M also entered into a voting and stock option agreement with four Robinson
Nugent, Inc., stockholders, owning approximately 31% of the outstanding
Company common shares on a fully diluted basis, under which the
shareholders have agreed to vote their shares in favor of the merger and 3M
has the option in certain circumstances to acquire the shares for cash at
$19 per share.
4. The Company recorded special and unusual expenses of $172,000, before
taxes, in the quarter ending September 30, 2000 and $230,000, before taxes,
in the first quarter of the prior year. These expenses are presented
separately as a component of the operating income in the consolidated
statements of operations. The special and unusual expenses in the current
quarter include personnel costs, professional fees and other costs related
to the negotiations, due diligence and preparations associated with the
definitive merger agreement between 3M and Robinson Nugent. The prior year
expenses are related to personnel costs incurred to design and implement a
new information and enterprise resource planning system for North American
and European operations. This new system was designed and implemented to
satisfy year 2000 requirements, enhance management and control systems,
improve customer service and vendor communications.
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<PAGE>
5. The Financial Accounting Standards Board has issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which
establishes accounting and reporting standards for hedging activities and
for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives). It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. RN adopted the new standard on July 1, 2000. The
effect on the results of operations of adopting this new standard is
insignificant.
The Security and Exchange Commission Staff Accounting Bulletin No. 101
"Revenue Recognition" establishes account and reporting standards for the
recognition of revenues. The Company adopted the new bulletin on July 1,
2000. The effect on the results of operations of adopting this bulletin is
insignificant.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Statements made in this quarterly report with respect to Robinson Nugent's (The
Company) current plans, estimates, strategies and beliefs and other statements
that are not historical facts are forward-looking statements about the future
beliefs in light of the information currently available to it and therefore you
should not place undue reliance on them. The Company cautions you that a number
of important factors could cause actual results to differ materially from those
discussed in the forward-looking statements.
Customer orders for the first quarter ended September 30, 2000, amounted to
$31.6 million, up 16% from orders of $27.2 million in the same quarter of the
prior year. This increase reflected a 35% increase in the United States, a 51%
decrease in Europe and a 228% increase in Asia. In addition, the Company's
backlog of unshipped orders increased in the current quarter to $31.6 million,
an increase of 64% compared to $19.2 million at September 30, 1999. The
Company's backlog in the United States increased 95% due primarily to increased
orders of connectors for applications such as servers, routers, hubs and other
telecommunication equipment. The European backlog decreased 32% due to a
reduction in orders from the Company's largest European customer. The Asian
backlog increased 33% due primarily to the shift of orders from contract
manufacturing customers from North America and Europe to this region. Worldwide
customer orders were $27.1 million in the fourth quarter of the prior year, and
the backlog of unshipped orders at June 30, 2000, was $23.4 million.
Net sales increased 11.4% in the quarter to $23.4 million compared to $21
million in the first quarter of the prior year. Customer sales in the United
States increased 10.4% to $15.9 million compared to $14.4 million in the first
quarter of the prior year. The Company continues to experience higher levels of
incoming orders and sales activity on its more profitable backplane connectors,
and its high-density, surface mount, fine pitch board-to-board interconnect
systems. These types of connectors are used in communication and networking
components utilized to support the infrastructure of the Internet.
European customer sales decreased 11.5% to $4.3 million compared to $4.9 million
in the first quarter of the prior year. This sales decrease is due primarily to
a reduction in sales of connectors to the Company's largest European customer.
The connectors sold to this customer are used primarily in major communication
and digital satellite receiver applications in Europe. The Company expects the
demand for these types of products to improve in the coming quarters.
Customer sales in Asia, which includes sales generated from operations in Japan,
Malaysia and Singapore, were $3.1 million in the quarter compared to $1.6
million in the first quarter of the prior year. This increase is due primarily
to the movement of sales to contract manufacturers in this region. Most of these
sales are not new business for The Company. They are a direct result of the
relocation by customers of various sales programs from North America and Europe
to Asia.
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Comparative sales by geographic territory for the respective periods follows:
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Three Months Ended
($000 omitted) September 30
----------------------
2000 1999
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<S> <C> <C>
United States:
Domestic $14,490 $13,909
Export to rest of world 1,430 532
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Total sales to customers 15,920 14,441
Intercompany 2,766 1,536
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Total United States 18,696 15,977
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Europe:
Domestic sales to customers 4,335 4,894
Intercompany 1,249 1,158
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Total Europe 5,584 6,052
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Asia:
Domestic sales to customers 3,101 1,615
Intercompany 1,754 1,100
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Total Asia 4,855 2,715
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Eliminations (5,779) (3,794)
------- -------
Consolidated $23,356 $20,950
======= =======
</TABLE>
Gross profits in the quarter ended September 30, 2000, amounted to $6.4 million
or 27.2 percent of net sales, compared to $5.6 million or 26.5 percent of net
sales in the prior year. Gross profits are net of engineering charges associated
with new product development, which amounted to $1.2 million or 5.1 percent of
net sales in the current quarter compared to $1.2 million or 5.8 percent of net
sales in the prior year. The increase in gross profits in the quarter compared
to the prior year reflects higher gross margins on sales and improved plant
utilization. Gross profits continue to be favorably impacted by the effect of
manufacturing cost reduction programs.
Selling, general and administrative expenses of $4.7 million for the three
months ended September 30, 2000 increased 18% compared to expenses of $4 million
in the first quarter of the prior year.
The Company recorded special and unusual expenses of $0.2 million before taxes,
in the first quarter of the current and prior year. The current quarter expenses
include personnel costs, professional fees and other costs related to the
negotiations, due diligence and preparations associated with the definitive
merger agreement between 3M and Robinson Nugent. The expenses in the prior year
include personnel costs incurred to design and implement the new information and
enterprise resource planning system in Europe and North America. The
implementation of this system was completed in the prior year.
Other income and expense for the three months ended September 30, 2000, reflect
expenses of $171,000 compared to $237,000 for the comparable three-month period
in the prior year. Other income and expense reflected a currency gain of $59,000
in the current quarter and a currency loss of $75,000 in the first quarter of
the prior year. Interest expense increased from $176,000 in the prior period to
$240,000 in the current period due primarily to an increase in long term debt.
Currency gains in the quarter were generated primarily in Southeast Asia and
Europe.
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<PAGE>
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 maintains a valuation allowance for tax benefits of prior period net
operating losses in several jurisdictions. At such time as management is able to
project the probable utilization of all or part of these net operating loss
carryforward provisions, the valuation allowances for these deferred tax assets
will be reversed.
The net income in the quarter ended September 30, 2000, amounted to $0.9 million
or 16 cents per share, compared to $0.8 million or 16 cents per share in the
first quarter of the prior year. Operations in the United States and Asia
generated net income in the current quarter of $957,000 and $202,000
respectively. Operations in Europe resulted in a $280,000 net loss in the
current quarter.
Financial Condition and Liquidity
Working capital at September 30, 2000, amounted to $25.4 million compared to
$16.3 million at September 30, 1999 and $24.3 million at June 30, 1999. The
current ratio was 2.8 to 1 at September 30, 2000 compared to 2.3 to 1 at
September 30, 1999. The increase in working capital, compared to the prior year,
primarily reflects a $2.8 million increase in accounts receivable and a $6.9
million increase in inventories. Long-term debt excluding current installments
was $11.9 million as of September 30, 2000, and represented 41 percent of
shareholders' equity at September 30, 2000, compared to $8.7 million or 35
percent of shareholders' equity at September 30, 1999.
The Company believes future working capital and capital expenditure requirements
can be met from cash provided by operating activities, existing cash balances,
and borrowings available under the existing credit facilities.
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PART II. OTHER INFORMATION
Item 1. Not applicable.
Item 2. Not applicable.
Item 3. Not applicable.
Item 4. Not applicable.
Item 5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) See Index to Exhibits.
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 2000.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROBINSON NUGENT, INC.
(Registrant)
Date 11/13/00 /s/ Larry W. Burke
------------------- --------------------------------------------
Larry W. Burke
President and Chief Executive Officer
Date 11/13/00 /s/ Robert L. Knabel
------------------- --------------------------------------------
Robert L. Knabel
Vice President, Treasurer and Chief
Financial Officer
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FORM 10-Q
INDEX TO EXHIBITS
Number of Sequential
Item Numbering
Assigned in System
Regulation S-K Page Number
Item 601 Description of Exhibit of Exhibit
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<S> <C> <C> <C>
(2) Not applicable.
(4) 4.1 Specimen certificate for Common Shares,
without par value. (Incorporated by reference
to Exhibit 4 to Form S-1 Registration
Statement No. 2-62521.)
4.2 Rights Agreement dated April 21, 1988 between
Robinson Nugent, Inc. and Bank One,
Indianapolis, N.A. (Incorporated by reference
to Exhibit I to Form 8-A Registration
Statement dated May 2, 1988.)
4.3 Amendment No. 1 to Rights Agreement dated
September 26, 1991 (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 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) 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 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 year
ended June 30, 1993.)
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<PAGE>
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 Trust Agreement dated July 1, 1999 between
Robinson Nugent, Inc. and Strong Retirement
Plan Services, 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, 1999.)
10.7 Summary of the 1993 Robinson Nugent, Inc.
Employee and Non-Employee Director Stock
Option Plan, as amended. (Incorporated by
Reference to Exhibit 10.7 to Form 10-K Report
for year ended June 30, 1998.)
10.8 Summary of Robinson Nugent, Inc. Bonus Plan
for the fiscal year ended June 30, 2001.
(Incorporated by reference to Exhibit 10.8 to
Form 10-K Report for year ended June 30,
2000.)
10.9 Contract for purchase and sale/leaseback
between Robinson Nugent, Inc., and Sam & JB,
LLC dated February 22, 2000. (Incorporated by
reference to Exhibit 10.9 to Form 10-K/A-1 for
the year ended June 30, 2000.)
10.10 Lease between Sam & JB, LLC and Robinson
Nugent, Inc., dated February 22, 2000.
(Incorporated by reference to Exhibit 10.10 to
Form 10-K/A-1 for the year ended June 30,
2000.)
(11) Not applicable.
(15) Not applicable.
(18) Not applicable.
(19) Not applicable.
(22) Not applicable.
(23) Not applicable.
(24) Not applicable.
(27) Financial Data Schedule
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