Robbins & Myers 10Q 2009 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period EndedMay 31, 2009

File Number001-13651

Robbins & Myers, Inc.

(Exact name of registrant as specified in its charter)


Ohio		31-0424220

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

51 Plum Street, Suite 260, Dayton, Ohio		45440
(Address of Principal executive offices)		(Zip Code)

Registrant’s telephone number including area code:(937) 458-6600

None

Former name, former address and former fiscal year if changed since last report

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 þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ

Accelerated filer o

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) YES o NO þ

Common shares, without par value, outstanding as of May 31, 2009: 32,838,100

ROBBINS & MYERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands)


	May, 31,			August 31,
	2009			2008
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	88,546		$	123,405
Accounts receivable		115,887			153,648
Inventories:
Finished products		36,527			32,893
Work in process		44,841			39,327
Raw materials		38,240			37,577

		119,608			109,797
Other current assets		6,684			8,017
Deferred taxes		12,699			13,476

Total Current Assets		343,424			408,343
Goodwill		266,694			278,906
Other Intangible Assets		5,929			6,853
Deferred Taxes		22,070			21,969
Other Assets		10,583			10,931
Property, Plant and Equipment		303,268			297,877
Less accumulated depreciation		(167,920	)		(160,162	)

		135,348			137,715

TOTAL ASSETS	$	784,048		$	864,717


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	53,342		$	86,012
Accrued expenses		80,181			102,876
Current portion of long-term debt		30,252			3,192

Total Current Liabilities		163,775			192,080
Long-Term Debt—Less Current Portion		340			30,435
Deferred Taxes		45,095			44,628
Other Long-Term Liabilities		81,726			82,118
Minority Interest		16,087			15,439
Shareholders’ Equity
Common stock		148,397			183,605
Retained earnings		333,037			294,409
Accumulated other comprehensive (loss) income		(4,409	)		22,003

Total Shareholders’ Equity		477,025			500,017

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	784,048		$	864,717

See Notes to Consolidated Condensed Financial Statements

ROBBINS & MYERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENT
(In thousands, except per share data)
(Unaudited)


	Three Months Ended					Nine Months Ended
	May 31,					May 31,
	2009		2008			2009		2008

Net sales	$	143,375	$	200,946		$	485,171	$	559,414
Cost of sales		93,582		124,122			310,626		353,493

Gross profit		49,793		76,824			174,545		205,921
SG&A expenses		37,398		42,361			114,921		123,115
Other income		0		(5,697	)		0		(6,796	)

Income before interest and income taxes		12,395		40,160			59,624		89,602
Interest expense, net		99		257			242		1,763

Income before income taxes and minority interest		12,296		39,903			59,382		87,839
Income tax expense		1,628		12,749			15,875		29,287
Minority interest		382		659			950		1,782

Net income	$	10,286	$	26,495		$	42,557	$	56,770


Net income per share:
Basic	$	0.31	$	0.77		$	1.28	$	1.65


Diluted	$	0.31	$	0.76		$	1.28	$	1.64


Weighted average common shares outstanding:
Basic		32,829		34,548			33,353		34,469


Diluted		32,845		34,650			33,365		34,582


Dividends per share:
Declared	$	0.0400	$	0.0375		$	0.1175	$	0.1075


Paid	$	0.0400	$	0.0375		$	0.1175	$	0.1075

See Notes to Consolidated Condensed Financial Statements

ROBBINS & MYERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)


	Nine Months Ended
	May 31,
	2009			2008
Operating Activities:
Net income	$	42,557		$	56,770
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation		11,233			10,748
Amortization		911			1,314
Net gain on sale of product lines/facilities		0			(6,796	)
Stock compensation expense		2,661			2,494
Changes in operating assets and liabilities:
Accounts receivable		32,461			13,757
Inventories		(15,711	)		(17,933	)
Accounts payable		(31,470	)		(6,966	)
Accrued expenses		(20,002	)		(5,077	)
Other		2,445			445

Net Cash and Cash Equivalents Provided by Operating Activities		25,085			48,756

Investing Activities:
Capital expenditures, net of nominal disposals		(12,914	)		(12,783	)
Proceeds from sales of product lines/facilities		0			7,193
Acquisition of business, net of cash acquired		0			(5,061	)

Net Cash and Cash Equivalents Used by Investing Activities		(12,914	)		(10,651	)

Financing Activities:
Proceeds from debt borrowings		4,191			10,036
Repayments of long-term debt		(7,226	)		(80,151	)
Net proceeds from issuance of common stock, including stock option tax benefit		1,246			6,935
Share repurchases		(39,114	)		0
Cash dividends paid		(3,929	)		(3,703	)

Net Cash and Cash Equivalents Used by Financing Activities		(44,832	)		(66,883	)
Exchange rate impact on cash		(2,198	)		4,412

Decrease in Cash and Cash Equivalents		(34,859	)		(24,366	)
Cash and Cash Equivalents at Beginning of Period		123,405			116,110

Cash and Cash Equivalents at End of Period	$	88,546		$	91,744

See Notes to Consolidated Condensed Financial Statements

ROBBINS & MYERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
May 31, 2009
(Unaudited)

NOTE 1—Preparation of Financial Statements

In the opinion of management, the accompanying unaudited consolidated condensed financial statements of Robbins & Myers, Inc. and subsidiaries (“Company”, “we”, “our”, “us”) contain all adjustments, consisting of normally recurring items, necessary to present fairly our financial condition as of May 31, 2009, and August 31, 2008, and the results of our operations for the three and nine month periods ended May 31, 2009 and 2008, and cash flows for the nine month periods ended May 31, 2009 and 2008. All intercompany transactions have been eliminated. Certain amounts in the prior period financial statements have been reclassified to conform to the current year presentation.

While we believe that the disclosures are adequately presented, it is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and notes included in our most recent Annual Report on Form 10-K for the fiscal year ended August 31, 2008. A summary of our significant accounting policies is presented therein beginning on page 23. There have been no material changes in the accounting policies followed by us during fiscal year 2009, other than the adoption of Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” and SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of Financial Accounting Standards Board (“FASB”) Statement No. 115”, as discussed in Notes 13 and 14.

NOTE 2 — Statement of Income Information

Unless otherwise noted, the financial impact of the matters mentioned below in this note were included on the “Other income” line of our Consolidated Condensed Income Statement in the period indicated.

In the third quarter of fiscal 2008, we recognized a gain of $5,697,000 related to the sale of two of our Romaco segment product lines sold in fiscal 2006. The gain resulted from the lapsing of substantive financial guarantees in the sale agreement.

In the second quarter of fiscal 2008, we sold a facility related to a previously disposed Romaco segment product line for $3,996,000, with a resulting gain of $1,099,000.

NOTE 3—Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the nine month period ended May 31, 2009, by operating segment, are as follows:


	Process Solutions			Fluid Mgmt.			Romaco
	Segment			Segment			Segment			Total
	(In thousands)
Balance as of September 1, 2008	$	157,870		$	108,703		$	12,333		$	278,906
Translation adjustments		(9,177	)		(2,477	)		(558	)		(12,212	)

Balance as of May 31, 2009	$	148,693		$	106,226		$	11,775		$	266,694

Information regarding our other intangible assets is as follows:


	As of May 31, 2009						As of August 31, 2008
	Carrying		Accumulated				Carrying		Accumulated
	Amount		Amortization		Net		Amount		Amortization		Net
	(In thousands)
Patents and Trademarks	$	11,627	$	8,014	$	3,613	$	11,899	$	7,480	$	4,419
Non-compete Agreements		8,984		7,571		1,413		9,099		7,338		1,761
Financing Costs		9,628		9,124		504		9,679		9,006		673
Other		5,595		5,196		399		5,171		5,171		0

Total	$	35,834	$	29,905	$	5,929	$	35,848	$	28,995	$	6,853

NOTE 4—Net Income per Share


	Three Months Ended				Nine Months Ended
	May 31,				May 31,
	2009		2008		2009		2008
	(In thousands, except per share amounts)
Numerator:
Net income	$	10,286	$	26,495	$	42,557	$	56,770

Denominator:
Basic weighted average shares		32,829		34,548		33,353		34,469
Effect of dilutive options and restricted shares		16		102		12		113

Diluted shares		32,845		34,650		33,365		34,582


Basic net income per share	$	0.31	$	0.77	$	1.28	$	1.65

Diluted net income per share	$	0.31	$	0.76	$	1.28	$	1.64

For the three and nine month periods ended May 31, 2009, 250,000 and 247,000 respectively of stock options outstanding were antidilutive and excluded from the computation of dilutive earnings per share.

On January 9, 2008, we declared a 2-for-1 stock split of our common shares effected in the form of a share distribution. The record date for this stock split was February 4, 2008, and the additional shares were issued on February 28, 2008.

NOTE 5—Product Warranties

Warranty obligations are contingent upon product failure rates, material required for the repairs and service delivery costs. We estimate the warranty accrual based on specific product failures that are known to us plus an additional amount based on the historical relationship of warranty claims to sales.

Changes in our product warranty liability during the period are as follows:


	Nine Months Ended
	May 31, 2009
	(In thousands)
Balance at beginning of the period	$	7,853
Warranty expense		1,291
Deductions/payments		(1,958	)
Translation adjustment impact		(229	)

Balance at end of the period	$	6,957

NOTE 6—Long-Term Debt


	May 31, 2009
	(In thousands)
Senior debt:
Revolving credit loan	$	0
Senior notes		30,000
Other		592

Total debt		30,592
Less current portion		30,252

Long-term debt	$	340

Our Bank Credit Agreement (“Agreement”) provides that we may borrow on a revolving credit basis up to a maximum of $150,000,000 and includes a $100,000,000 expansion feature. All outstanding amounts under the Agreement are due and payable on December 19, 2011. Interest is variable based upon formulas tied to LIBOR or an alternative base rate defined in the Agreement, at our option, and is payable quarterly. Indebtedness under the Agreement and the Senior Notes, discussed below, is unsecured except for the pledge of the stock of our U.S. subsidiaries and two-thirds of the stock of certain non-U.S. subsidiaries. We have $26,744,000 of standby letters of credit outstanding at May 31, 2009. These standby letters of credit are used as security for advance payments received from customers and for future payments to our vendors. Accordingly, under the Agreement we have $123,256,000 of unused borrowing capacity.

We have $30,000,000 of Senior Notes (“Senior Notes”) outstanding with an interest rate of 6.84%, due May 1, 2010.

The Agreement and Senior Notes contain certain restrictive covenants including limitations on indebtedness, asset sales, sales and lease backs, and cash dividends as well as financial covenants relating to interest coverage, leverage and net worth. As of May 31, 2009, we are in compliance with these covenants.

NOTE 7 — Retirement Benefits

Retirement and other postretirement plan costs are as follows:


	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2009			2008			2009			2008
Pension Benefits	(In thousands)						(In thousands)
Service cost	$	419		$	571		$	1,384		$	1,659
Interest cost		2,062			2,212			6,808			6,401
Expected return on plan assets		(1,816	)		(1,963	)		(5,512	)		(5,901	)
Amortization of prior service cost		188			367			564			739
Amortization of unrecognized losses		267			42			572			164
FAS 88 settlement expense		100			0			326			0

Net periodic benefit cost	$	1,220		$	1,229		$	4,142		$	3,062


	Three Months Ended				Nine Months Ended
	May 31,				May 31,
	2009		2008		2009		2008
Other Postretirement Benefits	(In thousands)				(In thousands)
Service cost	$	62	$	77	$	304	$	231
Interest cost		137		319		1,035		957
Amortization of prior service cost		53		141		159		423
Amortization of unrecognized losses		54		40		404		120

Net periodic benefit cost	$	306	$	577	$	1,902	$	1,731

NOTE 8—Income Taxes

The effective tax rate was 13.2% for the third quarter and 26.7% for the year to date period of fiscal 2009. The effective tax rate was lower than the statutory tax rate primarily due to finalizing certain tax estimates in the third quarter of fiscal 2009 with the filing of the Company’s US Federal tax return. Excluding this impact, the effective tax rate was 29.9% for the third quarter of fiscal 2009 and 30.2% for the year to date period of fiscal 2009.

The effective tax rate was 31.9% for the fiscal 2008 third quarter and 33.3% for the year to date period of fiscal 2008. The effective rate was lower than the statutory rate because the aforementioned fiscal third quarter 2008 gain of $5,697,000 was recorded at favorable tax rates.

In June 2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for Uncertainty in Income Taxes",which was effective for fiscal years beginning after December 15, 2006. The Company adopted the provisions of FIN No. 48 on September 1, 2007.

The balance of unrecognized tax benefits including interest and penalties, as of May 31, 2009 and August 31, 2008 was $5.8 million and $6.3 million, respectively, all of which would affect the effective tax rate if recognized in future periods.

We have estimated the reasonably possible expected net change in unrecognized tax benefits through May 31, 2010, based on the anticipated positions taken in the next twelve months, expected settlements or payments of uncertain tax positions and the lapses of the applicable statutes of limitations of unrecognized tax benefits. We do not anticipate a significant change in the balance of unrecognized tax benefits within the next 12 months.

NOTE 9—Comprehensive Income

The Company’s comprehensive income during the three and nine months ended May 31, 2009 was significantly impacted by the volatility of the value of the US Dollar versus other global currencies, most notably the Euro, the British Pound and the Canadian Dollar. The US Dollar strengthened against most major currencies in the first six months of fiscal 2009 but weakened in the third quarter of fiscal 2009. The following table sets forth the reconciliation of net income to comprehensive income:


	Three Months Ended				Nine Months Ended
	May 31,				May 31,
	2009		2008		2009			2008
	(In thousands)				(In thousands)
Net income	$	10,286	$	26,495	$	42,557		$	56,770
Foreign currency translation and other		27,811		297		(26,412	)		13,210

Comprehensive income	$	38,097	$	26,792	$	16,145		$	69,980

NOTE 10—Stock Compensation

We sponsor a long-term incentive stock plan to provide for the granting of stock-based compensation to certain officers and other key employees. Under the plan, the stock option price per share may not be less than the fair market value per share as of the date of grant. Outstanding grants become exercisable over a three-year period, while options for non-employee directors are immediately exercisable. As of May 31, 2009, we had $3,749,000 of compensation expense not yet recognized related to nonvested stock awards. The weighted average period over which this compensation cost will be recognized is thirteen months. Stock options of 24,462 shares and 288,000 shares were exercised in the first nine months of fiscal 2009 and 2008, respectively.

Total stock compensation expense for all stock based awards for the first nine months of fiscal 2009 and 2008 was $2,661,000 ($1,730,000 after tax) and $2,494,000 ($1,621,000 after tax), respectively.

NOTE 11—Business Segments

The following tables present information about our reportable business segments.


	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2009			2008			2009			2008
	(In thousands)						(In thousands)
Unaffiliated customer sales:
Fluid Management	$	59,332		$	83,505		$	213,920		$	232,369
Process Solutions		59,583			80,782			194,923			226,583
Romaco		24,460			36,659			76,328			100,462

Total	$	143,375		$	200,946		$	485,171		$	559,414


Income (Loss) before Interest and Taxes (“EBIT”):
Fluid Management	$	15,359		$	25,230		$	59,552		$	64,648
Process Solutions		4,040			10,184			15,576			25,614
Romaco		(464	)		7,906			(1,465	)		11,557
Corporate and eliminations		(6,540	)		(3,160	)		(14,039	)		(12,217	)

Total	$	12,395		$	40,160		$	59,624		$	89,602

The Romaco segment results for the fiscal 2008 third quarter and year to date periods of fiscal 2008 include product line/facility sale gains of $5,697,000 and $6,796,000, respectively. In addition, the comparability of the segment data is impacted due to changes in the foreign currency exchange rates, especially the strengthening of the US Dollar against all major currencies in fiscal 2009 in relation to the comparable period of the prior year.

NOTE 12— Share Repurchase Program

On October 27, 2008, we announced that our Board of Directors authorized the repurchase of up to 3.0 million of our currently outstanding common shares (the “Program”). Repurchases under the Program have and will generally be made in the open market or in privately negotiated transactions not exceeding prevailing market prices, subject to regulatory considerations and market conditions, and have and will be funded from the Company’s available cash and credit facilities. In the first quarter of fiscal 2009, we acquired approximately 2.0 million of our outstanding common shares for $39.0 million under the Program which were accounted for as treasury shares.

NOTE 13 — New Accounting Pronouncements

In September 2006, the FASB issued FASB Statement No. 157, “Fair Value Measurements” (SFAS No. 157). We adopted SFAS No. 157 on September 1, 2008. See Note 14.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115 (SFAS No. 159)”. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. The fair value option permits a company to choose to measure eligible items at fair value at specified election dates. A company will report unrealized gains and losses on items for which the fair value option has been elected in earnings after adoption. SFAS No. 159 was effective for us on September 1, 2008. We did not elect to measure any eligible items at fair value. Therefore, the adoption of SFAS No. 159 had no impact on the consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) revised the requirements of SFAS No. 141 related to fair value principles, the cost allocation process, and accounting for non-controlling (minority) interests. SFAS No. 141(R) will be effective for us beginning in fiscal 2010.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS No. 160”). SFAS No. 160 amends ARB 51, “Consolidated Financial Statements”, and requires all entities to report noncontrolling (minority) interests in subsidiaries within equity in the consolidated financial statements, but separate from the parent shareholders’ equity. SFAS No. 160 also requires any acquisitions or dispositions of noncontrolling interests that do not result in a change of control to be accounted for as equity transactions. Further, SFAS No. 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS No. 160 will be effective for us beginning in fiscal 2010. We are currently evaluating the effect, if any, the adoption of SFAS No. 160 will have on our consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position FAS 142-3, “Determination of the Useful Life of Intangible Assets” (FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets”. FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. FSP FAS 142-3 will be effective for us beginning in our fiscal year 2010. We are currently evaluating the impact that the adoption of FSP FAS 142-3 will have on our consolidated financial statements.

In May 2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (SFAS No. 162). SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles. SFAS No. 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” We do not anticipate the adoption of SFAS No. 162 will have a material impact on our consolidated financial statements.

In May 2009, the FASB issued FASB Statement No. 165, “Subsequent Events” (SFAS No. 165). SFAS No. 165 is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date—that is, whether that date represents the date the financial statements were issued or were available to be issued. This Statement is effective for interim and annual periods ending after June 15, 2009. SFAS No. 165 will be effective for us beginning the last quarter of fiscal 2009. We do not anticipate the adoption of SFAS No. 165 will have a material impact on our consolidated financial statements.

NOTE 14 — Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. We adopted SFAS No.157 on September 1, 2008 for all financial assets and liabilities recognized or disclosed at fair value in our consolidated financial statements on a recurring basis (at least annually). The adoption of SFAS No. 157 did not have an impact on our consolidated financial statements.

On February 12, 2008, the FASB issued FASB Staff Position (FSP) No. 157-2, which delays the effective date of SFAS No. 157 for nonfinancial assets and liabilities to fiscal years beginning after November 15, 2008. For these non-financial assets and liabilities, SFAS No. 157 is effective for us on September 1, 2009. With this deferral, we have not applied the provisions of SFAS No. 157 to goodwill and intangible assets. We are assessing the impact the adoption of SFAS No. 157 for nonfinancial assets and liabilities will have on our consolidated financial statements.

The following table summarizes the bases used to measure certain financial assets at fair value on a recurring basis as of May 31, 2009 (in thousands):


			Quoted Prices		Significant
			in Active		Other		Significant
			Markets for		Observable		Unobservable
	May 31,		Identical Assets		Inputs		Inputs
	2009		(Level 1)		(Level 2)		(Level 3)

Cash and cash equivalents⁽¹⁾	$	88,546	$	88,546	$	—	$	—


Total assets at fair value	$	88,546	$	88,546	$	—	$	—


(1)		Our cash and cash equivalents primarily consist of cash in banks, commercial paper and overnight investments in highly rated financial institutions.

TABLE OF CONTENTS


	Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
	Part II—Other Information
	Item 1A. Risk Factors
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
	Item 6. Exhibits
SIGNATURES
INDEX TO EXHIBITS
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Overview

We are a leading designer, manufacturer and marketer of engineered, application-critical equipment and systems for global energy, industrial, chemical and pharmaceutical markets. We attribute our success to our close and continuing interaction with customers, our manufacturing, sourcing and application engineering expertise and our ability to serve customers globally. We continually develop initiatives to improve our performance in these key areas. In fiscal 2009, demand for our products slowed due to the worldwide economic downturn, as well as lower oil and natural gas prices in fiscal 2009. In response to the recent uncertain global economic environment, we have implemented and continue to implement plans to reduce the impact on our profitability while continuing to address the long-term strategic direction of our business platforms as discussed below. With approximately 61% of our sales outside the United States, we have been unfavorably impacted by foreign currency translation in fiscal 2009 due to the U.S. Dollar strengthening relative to our other principal operating currencies, namely the British Pound, the Euro and the Canadian Dollar, compared with the comparable period of the prior year. Additionally, the assets and liabilities of our foreign operations are translated at the exchange rates in effect at the balance sheet date, with related gains or losses reported as a separate component of the shareholders’ equity. The devaluation of most foreign currencies against the U.S. Dollar in fiscal 2009 has impacted our financial condition at the end of the third quarter of fiscal 2009. Our business consists of three market focused segments: Fluid Management, Process Solutions and Romaco.

Fluid Management.Energy markets served by our Fluid Management segment began slowing in January 2009. Our primary objective for this segment is to ensure that we continue to capture and increase the opportunities in this market by reaching out to a wider market. We increased our manufacturing capacity through improved asset utilization and measured levels of capital expenditures, and we are delivering valued new product offerings in our niche market sectors. Our Fluid Management business segment designs, manufactures and markets equipment and systems, including hydraulic drilling power sections, down-hole and industrial progressing cavity pumps, wellhead systems, grinders, rod guides, tubing rotators and pipeline closures, used in oil and gas exploration and recovery, specialty chemical, wastewater treatment and a variety of other industrial applications.

Process Solutions.Key end markets served by our Process Solutions segment, chemical and pharmaceutical, have slowed. Our primary objectives in this segment are to improve productivity through integration of operations and process improvements and to increase our presence in Asia. Our Process Solutions business segment designs, manufactures and services glass-lined reactors and storage vessels, standard and customized fluid-agitation equipment and systems and customized fluoropolymer-lined fittings, vessels and accessories, primarily for the pharmaceutical and specialty chemical markets.

Romaco.Our customer base within the key markets, including pharmaceutical, cosmetics and healthcare, served by the Romaco segment, has been expanding in developing areas of the world, although these markets have also slowed in fiscal 2009. We remain focused on simplifying this business, managing its cost structure in order to further improve profit levels, and cost-effectively serving customers in developing global areas. Our Romaco business segment designs, manufactures and markets packaging and secondary processing equipment for the pharmaceutical, healthcare, nutriceutical and cosmetic industries. Packaging applications include dosing, filling and sealing of vials, capsules, tubes, bottles and blisters; tablet counting and packaging for bottles; blister and powder packaging for various products including tablets and powder; customized packaging; as well as secondary processing for sauces and semi solids.

The following tables present the components of our consolidated statement of operations and segment information for the three and nine month periods of fiscal 2009 and 2008.


	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2009			2008			2009			2008
Net Sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		65.3			61.8			64.0			63.2

Gross profit		34.7			38.2			36.0			36.8
SG&A expenses		26.1			21.0			23.7			22.0
Other income		0.0			(2.8	)		0.0			(1.2	)

EBIT		8.6			20.0			12.3			16.0
Interest expense, net		0.1			0.2			0.0			0.3
Income tax expense		1.1			6.3			3.3			5.2
Minority interest		0.2			0.3			0.2			0.3

Net income		7.2	%		13.2	%		8.8	%		10.2	%


	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2009			2008			2009			2008
				(In thousands, except %’s)
Segment
Fluid Management:
Sales	$	59,332		$	83,505		$	213,920		$	232,369
EBIT		15,359			25,230			59,552			64,648
EBIT %		25.9	%		30.2	%		27.8	%		27.8	%

Process Solutions:
Sales	$	59,583		$	80,782		$	194,923		$	226,583
EBIT		4,040			10,184			15,576			25,614
EBIT %		6.8	%		12.6	%		8.0	%		11.3	%

Romaco:
Sales	$	24,460		$	36,659		$	76,328		$	100,462
EBIT		(464	)		7,906			(1,465	)		11,557
EBIT %		(1.9)	%		21.6	%		(1.9)	%		11.5	%

The Company’s operating performance is evaluated using several measures. One of those measures, EBIT, is income before interest and income taxes and is reconciled to net income on our Consolidated Condensed Income Statement. We evaluate performance of our business segments and allocate resources based on EBIT. EBIT is not, however, a measure of performance calculated in accordance with accounting principles generally accepted in the United States and should not be considered as an alternative to net income as a measure of our operating results. EBIT is not a measure of cash available for use by management.

Impact of Other Charges

In the third quarter of fiscal 2008, we recognized a gain of $5.7 million related to the sale of two of our Romaco segment product lines sold in fiscal 2006. The gain resulted from the lapsing of substantive financial guarantees in the sale agreement.

In the second quarter of fiscal 2008, we sold a facility related to a previously disposed Romaco segment product line for $4.0 million, and a resulting gain of $1.1 million.

Three months ended May 31, 2009 and May 31, 2008

Net Sales

Consolidated net sales for the third quarter of fiscal 2009 were $143.4 million, $57.6 million lower than net sales for the third quarter of fiscal 2008. Excluding the impact of currency translation, sales decreased by $42.4 million, or 21.1%.

The Fluid Management segment had sales of $59.3 million in the third quarter of fiscal 2009 compared with $83.5 million in the third quarter of fiscal 2008. Currency translation accounted for $3.4 million of the decrease, and the remaining $20.8 million decrease, 24.9%, was primarily from decreased demand for oilfield equipment products due to lower levels of oil and gas exploration and recovery activity fueled by lower oil and natural gas prices worldwide in fiscal 2009 and lower general industrial activity. Orders for this segment were impacted by the same factors and were $44.6 million in the third quarter of fiscal 2009 compared with $86.9 million in the prior year period, when oil & gas prices were reaching record highs. Excluding the impact of foreign currency translation, orders decreased by 48.0%. Ending backlog at May 31, 2009 is $31.0 million compared with $63.2 million at August 31, 2008.

The Process Solutions segment had sales of $59.6 million in the third quarter of fiscal 2009 compared with $80.8 million in the third quarter of fiscal 2008, a decrease of 26.2%. Excluding the impact of currency translation, sales decreased $13.0 million, or 16.1%, over the prior year period. Adjusting for changes in currency exchange rates, orders decreased by 35.6% from prior year period. This decrease, we believe, is due to the worldwide economic downturn. Ending backlog at May 31, 2009 is $89.4 million compared with $123.5 million at August 31, 2008.

The Romaco segment, which is primarily a European-based business, had sales of $24.5 million in the third quarter of fiscal 2009 compared with $36.7 million in the third quarter of fiscal 2008. Excluding the impact of currency translation, sales decreased $8.6 million or 23.5% from the prior year period. This decrease, we believe, is due to the global recessionary economic conditions. Adjusting for changes in currency exchange rates, orders were consistent with prior year with a decrease of 1.7%. Ending backlog at May 31, 2009 is $48.3 million compared with $51.3 million at August 31, 2008.

Earnings Before Interest and Income Taxes (EBIT)

Consolidated EBIT for the third quarter of fiscal 2009 was $12.4 million, a decrease of $27.8 million from the third quarter of fiscal 2008. Third quarter 2008 results included other income of $5.7 million resulting from the gain on the sale of product lines in a prior period. Excluding the change in the other income, EBIT decreased $22.1 million, primarily due to decreased sales caused by reduced demand as a result of the general worldwide economic downturn, a drop in oil and natural oil gas prices in fiscal 2009, changes in foreign currency gains and losses and severance costs in fiscal 2009.

The Fluid Management segment had EBIT of $15.4 million in the third quarter of fiscal 2009 compared with $25.2 million in the third quarter of fiscal 2008. This decrease in EBIT is primarily due to the lower sales volume described above and severance costs.

The Process Solutions segment had EBIT of $4.0 million in the third quarter of fiscal 2009 compared with $10.2 million in the third quarter of fiscal 2008, a decrease of $6.2 million. The decrease in EBIT is due principally to the sales decrease described above, pricing pressure in certain product lines and severance costs.

The Romaco segment had negative EBIT of $0.5 million in the third quarter of fiscal 2009, a decrease of $8.4 million over the same period of the prior year. Other income, as described in theImpact of Other Chargessection above, contributed $5.7 million of this change. The remaining $2.7 million decrease in profitability was due to decreased sales volume described above.

Corporate costs in the third quarter of fiscal 2009 of $6.5 million were higher than the $3.2 million recorded in the comparable prior year period, principally due to higher medical costs, LIFO expense, legal costs and changes in foreign currency gains and losses.

Interest Expense

Net interest expense was $0.1 million in the third quarter of fiscal 2009 and $0.3 million in the same period of fiscal 2008. The decrease resulted primarily from lower debt levels in fiscal 2009 due to the repayment of $70 million of our Senior Notes on May 1, 2008.

Income Taxes

The effective tax rate was 13.2% for the third quarter of fiscal 2009 compared with 31.9% in the prior year period. The effective tax rate was lower than the prior year primarily due to finalizing certain tax estimates in the third quarter of fiscal 2009 with the filing of the Company’s US Federal tax return. Excluding this impact, the effective tax rate was 29.9% for the third quarter of fiscal 2009.

The Company adopted the provisions of FIN No. 48 on September 1, 2007. The total amount of unrecognized tax benefits as of the date of adoption was $6.3 million all of which would affect the effective tax rate if recognized in future periods. As a result of the implementation of FIN No. 48, the Company recognized a $5.5 million increase in the liability for unrecognized tax benefits accounted for as a decrease to retained earnings (cumulative effect) as of September 1, 2007. The balance of unrecognized tax benefits including interest and penalties, as of May 31, 2009 and August 31, 2008 was $5.8 million and $6.3 million, respectively.

Nine months ended May 31, 2009 and May 31, 2008

Net Sales

Consolidated net sales for the first nine months of fiscal 2009 were $485.2 million, $74.2 million lower than net sales for the same period of fiscal 2008. Excluding the impact of currency translation and an acquisition early in the second quarter of fiscal 2008, sales decreased by $37.3 million, or 6.7%, mainly due to the drop in sales in the third quarter of fiscal 2009 as described above.

The Fluid Management segment had sales of $213.9 million in the first nine months of fiscal 2009 compared with $232.4 million in the same period of fiscal 2008. Currency translation accounted for $11.3 million of the decrease, and the remaining $7.2 million decrease, or 3.1%, was from decreased demand for oilfield equipment products due to lower levels of oil and gas exploration and recovery activity and lower general industrial activity. Orders for this segment were $184.9 million in the first nine months of fiscal 2009 compared with $243.9 million in the same prior year period, when oil and gas prices were reaching historic highs. Ending backlog at May 31, 2009 is $31.0 million compared with $63.2 million at August 31, 2008.

The Process Solutions segment had sales of $194.9 million in the first nine months of fiscal 2009 compared with $226.6 million in the same period of fiscal 2008. Excluding currency translation and acquisition impacts, sales decreased $13.3 million, or 6.0%, from the prior year period. After adjusting for currency translation and an acquisition, orders decreased 23.7%, primarily driven by lower demand in our chemical markets. Ending backlog at May 31, 2009 is $89.4 million compared with $123.5 million at August 31, 2008.

The Romaco segment had sales of $76.3 million in the first nine months of fiscal 2009 compared with $100.5 million in the same period of fiscal 2008, excluding currency translation sales declined $16.8 million or 16.7%. Adjusting for changes in currency exchange rates, orders decreased 25.1% from the same period in the prior year primarily due to the timing of certain orders and the current worldwide economic slowdown. Ending backlog at May 31, 2009 is $48.3 million compared with $51.3 million at August 31, 2008.

Earnings Before Interest and Income Taxes (EBIT)

Consolidated EBIT for the first nine months of fiscal 2009 was $59.6 million, a decrease of $30.0 million from the same period of the prior year. Results for the first nine months of 2008 included other income of $6.8 million from gains on product line/facility sales. After the change in the other income, and currency impact of $3.7 million, EBIT decreased $19.5 million, primarily due to decreased sales described above and pricing pressure in certain product lines.

The Fluid Management segment had EBIT of $59.6 million in the first nine months of fiscal 2009 compared with $64.6 million in the same prior year period. Excluding the impact of currency translation, EBIT decreased $3.0 million. The decrease in EBIT is primarily due to the sales decrease in the third quarter of fiscal 2009 described above.

The Process Solutions segment had EBIT of $15.6 million in the first nine months of fiscal 2009 compared with $25.6 million in the comparable period of fiscal 2008. Excluding the impact of currency translation and an acquisition in the second quarter of fiscal 2008, EBIT decreased $8.6 million due principally to the drop in the sales volume described above, pricing pressure in certain product lines and severance costs.

The Romaco segment had negative EBIT of $1.5 million in the first nine months of fiscal 2009, a decrease of $13.0 million over the same period of the prior year. Other income contributed $6.8 million of this change, as described in theImpact of Other Chargessection above and related to product lines and facility sale gains. The remaining $6.2 million decrease in profitability was primarily due to lower sales volume described above.

Interest Expense

Net interest expense was $0.2 million in the first nine months of fiscal 2009 and $1.8 million in the same period of fiscal 2008. The decrease resulted primarily from lower debt levels due to the repayment of $70 million of our Senior Notes on May 1, 2008.

Income Taxes

The effective tax rate was 26.7% for the first nine months of fiscal 2009 compared with 33.3% in the comparable prior year period. The effective tax rate was lower than the prior year, primarily due to finalizing certain tax estimates in the third quarter of fiscal 2009 with the filing of the Company’s US Federal tax return. Excluding this impact, the effective tax rate was 30.2% for the first nine months of fiscal 2009.

Liquidity and Capital Resources

Operating Activities

In the first nine months of fiscal 2009, our cash flow provided by operations was $25.1 million, $23.7 million lower than in the same period of the prior year. This change was primarily due to lower income in the first nine months of fiscal 2009 compared with the same period in the prior year, as well as the change in the composition of our working capital, with higher cash collections and higher payments to our vendors, compared with the same period last year. We have used cash to build inventory in each period to support future shipments.

We expect our fiscal 2009 operating cash flow to be adequate to fund fiscal year 2009 operating needs, shareholder dividends, planned capital expenditures and any additional share repurchases.

Investing Activities

Our capital expenditures were $12.9 million in the first nine months of fiscal 2009 compared with $12.8 million in the first nine months of fiscal 2008. Our capital expenditures were primarily for capacity expansion in the Fluid Management segment, support for cost reduction initiatives and replacement items. There was no cash generated from product lines/facility sales in fiscal 2009, compared with $7.2 million in the prior year. We made an acquisition in our Process Solutions segment in 2008 for total consideration of $5.1 million.

Financing Activities

On October 27, 2008 we announced that our Board of Directors authorized the repurchase of up to 3.0 million of our currently outstanding common shares. We acquired approximately 2.0 million of our outstanding common shares for $39.0 million under the repurchase program in the first quarter of fiscal 2009.

Credit Agreement

We have $30.0 million of Senior Notes that are due May 1, 2010 and therefore became classified as a current liability at May 31, 2009. We have available cash to repay these Senior Notes, as well as the ability to refinance these Senior Notes on a long-term basis under our Bank Credit Agreement (“Agreement”). Our Agreement provides that we may borrow on a revolving credit basis up to a maximum of $150 million and includes a $100 million expansion feature. All outstanding amounts under the Agreement are due and payable on December 19, 2011. Interest is variable based upon formulas tied to LIBOR or an alternative base rate defined in the Agreement, at our option, and is payable quarterly. Indebtedness under the Agreement and the Senior Notes is unsecured, except for the pledge of the stock of our U.S. subsidiaries and two-thirds of the stock of certain non-U.S. subsidiaries. While no amounts are outstanding under the Agreement at May 31, 2009, we have $26.7

million of standby letters of credit outstanding at May 31, 2009. These standby letters of credit are used as security for advance payments received from customers, and for future payments to our vendors and reduce the amount we may borrow under the Agreement. Accordingly, under the Agreement we have $123.3 million of unused borrowing capacity.

Six banks participate in our revolving credit agreement. We are not dependent on any single bank for our financing needs.

From available cash balances, we repaid $70 million of our Senior Notes on the May 1, 2008 due date.

Following is information regarding our long-term contractual obligations and other commitments outstanding as of May 31, 2009:


	Payments Due by Period
Long-term contractual			One year		Two to		Four to		After five
obligations	Total		or less		three years		five years		years
	(In thousands)
Long-term debt	$	30,592	$	30,252	$	340	$	0	$	0
Operating leases (1)		17,000		6,000		7,000		3,000		1,000

Total contractual cash obligations	$	47,592	$	36,252	$	7,340	$	3,000	$	1,000


(1)		Operating leases are estimated as of May 31, 2009, and consist primarily of building and equipment leases.

The only other commercial commitments outstanding were standby letters of credit of $26.7 million, which are substantially due within one year.

Critical Accounting Policies

In preparing our consolidated financial statements, we follow accounting principles generally accepted in the United States of America, which in many cases require us to make assumptions, estimates and judgments that affect the amounts reported. Many of these policies are straightforward. There are, however, some policies that are critical because they are important in determining the financial condition and results of operations and some may involve management judgments due to the sensitivity of the methods, assumptions and estimates necessary in determining the related income statement, asset and/or liability amounts. These policies are described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Report on Form 10-K for the year ended August 31, 2008. There have been no material changes in the accounting policies followed by us during fiscal year 2009 other than the adoption of Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” and SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115”, as discussed in Notes 13 and 14.

Safe Harbor Statement

In addition to historical information, this report contains forward-looking statements identified by use of words such as “expects,” “anticipates,” “believes,” and similar expressions. These statements reflect management’s current expectations and involve known and unknown risks, uncertainties, contingencies and other factors that could cause actual results, performance or achievements to differ materially from those stated. The most significant of these risks and uncertainties are described in our Form 10-K report filed with the Securities and Exchange Commission and include, but are not limited to: the cyclical nature of some of our markets; a significant decline in capital expenditures in our primary markets; a major decline in oil and natural gas prices; reduced demand due to the general worldwide economic downturn and general credit market crises; increases in competition; changes in the availability and cost of our raw materials; foreign exchange rate fluctuations; work stoppages related to union negotiations; customer order cancellations; business disruptions caused by the implementation of business computer systems; the possibility of product liability suits that could harm our business; events or circumstances which result in an impairment of assets; the potential impact of U.S. and foreign legislation, government regulations, and other governmental action, including those relating to export and import of products and materials, and changes in the interpretation and application of such laws and regulations; the outcome of audit, compliance, administrative or investigatory reviews; and decline in the market value of our pension plans’ investment portfolios affecting our financial condition and results of operations. Except as otherwise required by law, we do not undertake any obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after the date hereof.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In our normal operations, we have market risk exposure to foreign currency exchange rates and interest rates. There has been no significant change in our market risk exposure with respect to these items during the quarter ended May 31, 2009. For additional information see “Qualitative and Quantitative Disclosures About Market Risk” at Item 7A of our Annual Report on Form 10-K for the year ended August 31, 2008.

Item 4. Controls and Procedures

(A) Evaluation of Disclosure Controls and Procedures

Management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (Disclosure Controls) as of May 31, 2009. Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s (SEC) rules and forms. Disclosure Controls are also designed to reasonably assure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our quarterly evaluation of Disclosure Controls includes an evaluation of some components of our internal control over financial reporting, and internal control over financial reporting is also separately evaluated on an annual basis.

Based on this evaluation, management, including our Chief Executive Officer and our Chief Financial Officer has concluded that our disclosure controls and procedures were effective as of May 31, 2009.

(B) Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II—Other Information

Item 1A. Risk Factors

For information regarding factors that could affect the Company’s operations, financial condition and liquidity, see the risk factors discussed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended August 31, 2008.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

A summary of the Company’s repurchases of its common shares during the quarter ended May 31, 2009 is as follows:

ISSUER PURCHASES OF EQUITY SECURITIES


					Total Number of		Maximum Number of
					Shares Purchased as		Shares that May
	Total Number		Average Price		Part of Publicly		Yet Be Purchased
	of Shares		Paid per		Announced Plans or		Under
Period	Purchased^(a)		Share		Programs		the Plans or Programs
March 2009		—		—		—		—
April 2009		1,154	$	16.47		—		—
May 2009		—		—		—		—

Total		1,154				—


(a)		During the third quarter of fiscal 2009, the Company purchased 1,154 of its common shares in connection with its employee benefit plans, including purchases associated with the vesting of restricted stock awards. These purchases were not made pursuant to a publicly announced repurchase plan or program.

Item 6. Exhibits

Exhibits — see INDEX TO EXHIBITS

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.


	ROBBINS & MYERS, INC.
DATE: June 26, 2009	By	/s/ Christopher M. Hix
		Christopher M. Hix
		Vice President and Chief Financial Officer (Principal Financial Officer)


DATE: June 26, 2009	By	/s/ Kevin J. Brown
		Kevin J. Brown
		Corporate Controller (Principal Accounting Officer)

INDEX TO EXHIBITS


(10)	MATERIAL CONTRACTS

		10.1	Severance Agreement and Release of Claims, dated April 6, 2009, between Robbins & Myers, Inc. and Gary L. Brewer was filed as an Exhibit to our Current Report on Form 8-K filed on April 9, 2009	*/(M)

(31)	RULE 13A-14(A) CERTIFICATIONS

		31.1	Rule 13a-14(a) CEO Certification	(F)

		31.2	Rule 13a-14(a) CFO Certification	(F)

(32)	SECTION 1350 CERTIFICATIONS

		32.1	Section 1350 CEO Certification	(F)

		32.2	Section 1350 CFO Certification	(F)


“*”		Indicates that Exhibit is incorporated by reference.

“M”		Indicates management contract or compensatory arrangement.

“F”		Filed herewith.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	8th grade Good

Robbins & Myers Inactive 10-Q2009 Q3 Quarterly report

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