Robbins & Myers 10-Q 2008 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 Ended May 31, 2008                          File Number 0-288

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. YESþ NOo

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 filero	Accelerated filerþ		Non-accelerated filero	Smaller Reporting Companyo
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) YESo NOþ

Common shares, without par value, outstanding as of May 31, 2008: 34,623,455

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

	May, 31,			August 31,
	2008			2007
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	91,744		$	116,110
Accounts receivable		147,221			152,779
Inventories:
Finished products		32,950			26,672
Work in process		52,827			36,187
Raw materials		42,885			36,337
		128,662			99,196
Other current assets		8,101			7,410
Deferred taxes		9,905			11,178
Total Current Assets		385,633			386,673
Goodwill		285,235			271,150
Other Intangible Assets		7,746			7,272
Deferred Taxes		7,953			9,583
Other Assets		11,255			12,196
Property, Plant and Equipment		300,640			280,583
Less accumulated depreciation		(163,824	)		(151,314	)
		136,816			129,269
TOTAL ASSETS	$	834,638		$	816,143
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	78,452		$	78,890
Accrued expenses		115,566			105,394
Current portion of long-term debt		2,478			72,522
Total Current Liabilities		196,496			256,806
Long-Term Debt—Less Current Portion		30,542			30,553
Deferred Taxes		24,818			24,818
Other Long-Term Liabilities		86,166			79,019
Minority Interest		13,926			12,429
Shareholders’ Equity
Common stock		181,066			171,636
Retained earnings		265,080			217,548
Accumulated other comprehensive income		36,544			23,334
Total Shareholders’ Equity		482,690			412,518
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	834,638		$	816,143

See Notes to Consolidated Condensed Financial Statements

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

	Three Months Ended					Nine Months Ended
	May 31,					May 31,
	2008			2007		2008			2007
Net sales	$	200,946		$	171,428	$	559,414		$	488,359
Cost of sales		124,122			110,013		353,493			318,232
Gross profit		76,824			61,415		205,921			170,127
SG&A expenses		42,361			37,994		123,115			114,328
Other (income) expense		(5,697	)		421		(6,796	)		(2,158	)
Income before interest and income taxes		40,160			23,000		89,602			57,957
Interest expense, net		257			1,465		1,763			4,350
Income before income taxes and minority interest		39,903			21,535		87,839			53,607
Income tax expense		12,749			7,952		29,287			20,903
Minority interest		659			335		1,782			911
Net income	$	26,495		$	13,248	$	56,770		$	31,793
Net income per share:
Basic	$	0.77		$	0.39	$	1.65		$	0.94
Diluted	$	0.76		$	0.39	$	1.64		$	0.93
Weighted average common shares outstanding:
Basic		34,548			34,170		34,469			33,986
Diluted		34,650			34,410		34,582			34,206
Dividends per share:
Declared	$	0.0375		$	0.0325	$	0.1075		$	0.0925
Paid	$	0.0375		$	0.0325	$	0.1075		$	0.0925

See Notes to Consolidated Condensed Financial Statements

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

	Nine Months Ended
	May 31,
	2008			2007
Operating Activities:
Net income	$	56,770		$	31,793
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation		10,748			11,042
Amortization		1,314			1,118
Net gain on sale of product lines/facilities		(6,796	)		(3,976	)
Stock compensation expense		2,494			2,315
Changes in operating assets and liabilities:
Accounts receivable		13,757			(17,672	)
Inventories		(17,933	)		(14,306	)
Accounts payable		(6,966	)		(4,122	)
Accrued expenses		(5,077	)		7,769
Other		445			(5,014	)
Net Cash and Cash Equivalents Provided by Operating Activities		48,756			8,947
Investing Activities:
Capital expenditures, net of nominal disposals		(12,783	)		(11,427	)
Proceeds from sales of product lines/facilities		7,193			11,382
Acquisition of business, net of cash acquired		(5,061	)		0
Net Cash and Cash Equivalents Used by Investing Activities		(10,651	)		(45	)
Financing Activities:
Proceeds from debt borrowings		10,036			14,439
Payments of long-term debt		(80,151	)		(16,310	)
Amended credit agreement fees		0			(432	)
Proceeds from exercise of options and sale of common stock		4,100			8,254
Tax benefit from exercise of options		2,835			1,302
Cash dividends paid		(3,703	)		(3,143	)
Net Cash and Cash Equivalents (Used) Provided by Financing Activities		(66,883	)		4,110
Exchange rate impact on cash		4,412			1,082
(Decrease) Increase in Cash and Cash Equivalents		(24,366	)		14,094
Cash and Cash Equivalents at Beginning of Period		116,110			48,365
Cash and Cash Equivalents at End of Period	$	91,744		$	62,459

See Notes to Consolidated Condensed Financial Statements

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ROBBINS & MYERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
May 31, 2008
(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 (“we”, “our”, “us”) contain all adjustments, consisting of normally recurring items, necessary to present fairly our financial condition as of May 31, 2008, and August 31, 2007, and the results of our operations for the three and nine months periods ended May 31, 2008 and 2007 and cash flows for the nine month periods ended May 31, 2008 and 2007. 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, 2007. A summary of our significant accounting policies is presented therein on page 23. There have been no material changes in the accounting policies followed by us during fiscal year 2008, other than the adoption of FASB Interpretation No. 48 (FIN 48),Accounting for Uncertainty in Income Taxes, as discussed in Note 8.

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) expense” line of our Consolidated Condensed Statement of Income in the period indicated.

During the fiscal 2008 and 2007 three and nine month periods, we sold facilities and incurred gains and costs related to a restructuring program announced in fiscal 2005. The restructuring plan was initiated to improve our profitability and included plant closures, sales of excess facilities, personnel reductions, product line sales and other activities. The restructuring program was completed in fiscal 2007. Fiscal 2008 other income relates to product lines previously disposed as part of this restructuring program.

In the third quarter of fiscal 2008, we recognized a gain of $5,697,000, related to the sale of two of our Romaco product lines sold in fiscal 2006. As part of that transaction, funds were paid into an escrow account to serve as collateral for potential claims by the purchaser under the terms of the Asset and Share Purchase Agreement (“Agreement”). The substantive financial guarantees in this Agreement contractually lapsed on March 31, 2008, resulting in the gain and the release of the escrow funds to us.

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

In the second quarter of fiscal 2007 we sold a product line and a sales organization which was part of our Romaco segment. We received minimal proceeds and recorded a loss on the sale of $1,060,000. Third quarter fiscal 2007 and fiscal 2007 year to date restructuring costs in Romaco were $421,000 and $2,878,000, respectively, including the loss from the previously mentioned sale.

In the first quarter of fiscal 2007 we sold a facility within our Process Solutions segment for $6,000,000 and recorded a $5,036,000 gain, which is included in the financial results for the nine month period of fiscal 2007.

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NOTE 3—Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the nine month period ended May 31, 2008, by operating segment, are as follows:

	Process Solutions		Fluid Mgmt.		Romaco
	Segment		Segment		Segment		Total
	(In thousands)
Balance as of September 1, 2007	$	153,189	$	107,568	$	10,393	$	271,150
Acquisition		2,680		0		0		2,680
Translation adjustments and other		7,421		1,424		2,560		11,405
Balance as of May 31, 2008	$	163,290	$	108,992	$	12,953	$	285,235

Information regarding our other intangible assets is as follows:

	As of May 31, 2008						As of August 31, 2007
	Carrying		Accumulated				Carrying		Accumulated
	Amount		Amortization		Net		Amount		Amortization		Net
	(In thousands)
Patents and Trademarks	$	12,258	$	7,361	$	4,897	$	11,378	$	7,093	$	4,285
Non-compete Agreements		9,255		7,253		2,002		8,879		7,009		1,870
Financing Costs		9,762		8,915		847		9,559		8,571		988
Other		5,182		5,182		0		5,201		5,072		129
Total	$	36,457	$	28,711	$	7,746	$	35,017	$	27,745	$	7,272

NOTE 4—Net Income per Share

	Three Months Ended				Nine Months Ended
	May 31,				May 31,
	2008		2007		2008		2007
	(In thousands, except per share amounts)
Numerator:
Basic:
Net income	$	26,495	$	13,248	$	56,770	$	31,793
Denominator:
Basic:
Weighted average shares		34,548		34,170		34,469		33,986
Effect of dilutive securities:
Dilutive options and restricted shares		102		240		113		220
Diluted shares		34,650		34,410		34,582		34,206
Basic net income per share	$	0.77	$	0.39	$	1.65	$	0.94
Diluted net income per share	$	0.76	$	0.39	$	1.64	$	0.93

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. All net income per share information has been adjusted to reflect this stock split.

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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, 2008
	(In thousands)
Balance at beginning of the period	$	7,922
Warranties on current period sales		1,721
Deductions/payments		(1,564	)
Translation adjustment impact		174
Balance at end of the period	$	8,253

NOTE 6—Long-Term Debt

	May 31, 2008
	(In thousands)
Senior debt:
Revolving credit loan	$	0
Senior notes		30,000
Other		3,020
Total debt		33,020
Less current portion		2,478
Long-term debt	$	30,542

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 at least 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 $32,231,000 of standby letters of credit outstanding at May 31, 2008. These standby letters of credit are used as security for advance payments received from customers and future payments to our vendors and reduce the amount we may borrow under our Agreement. Under the Agreement we have $117,769,000 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. Interest is payable semi-annually on May 1 and November 1. On May 1, 2008, $70,000,000 of Senior Notes became due and were fully repaid. Also at that time, our interest rate hedge contractually expired.

The Agreement and Senior Notes contain certain restrictive covenants including limitations on indebtedness, asset sales, sales and lease backs, and cash dividends and financial covenants relating to interest coverage, leverage and net worth. As of May 31, 2008 we were in compliance with these covenants.

Our other debt consisted primarily of unsecured non-U.S. bank lines of credit with interest rates approximating 9.00%.

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NOTE 7 — Retirement Benefits

Retirement and other postretirement plan costs are as follows:

Pension Benefits

	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2008			2007			2008			2007
	(In thousands)						(In thousands)
Service cost	$	571		$	144		$	1,659		$	1,466
Interest cost		2,212			2,516			6,401			6,330
Expected return on plan assets		(1,963	)		(2,094	)		(5,901	)		(5,414	)
Amortization of prior service cost		367			108			739			460
Amortization of unrecognized losses		42			249			164			1,085
Net periodic benefit cost	$	1,229		$	923		$	3,062		$	3,927

Other Postretirement Benefits

	Three Months Ended				Nine Months Ended
	May 31,				May 31,
	2008		2007		2008		2007
	(In thousands)				(In thousands)
Service cost	$	77	$	42	$	231	$	242
Interest cost		319		314		957		1,010
Amortization of prior service cost		141		15		423		125
Amortization of unrecognized losses		40		55		120		449
Net periodic benefit cost	$	577	$	426	$	1,731	$	1,826

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NOTE 8—Income Taxes

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. These rates are lower than the statutory rate because the third quarter fiscal 2008 gain of $5,697,000 was at favorable tax rates and reduced the effective tax rate by 3.4% for the quarter and 1.5% for the year to date period.

The effective tax rate was 36.9% for the fiscal 2007 third quarter and 39.0% for the year to date period of fiscal 2007. The third quarter fiscal 2007 effective rate was lower than the year to date rate due to profitability of operations in certain jurisdictions allowing for the utilization of net operating losses which had full valuation allowances. The year to date rate was higher than the statutory rate primarily due to certain foreign losses where the tax benefit of those losses were not recognized because of uncertainty about our ability to utilize these tax losses against future taxable income.

In June 2006, the FASB issued Interpretation No. 48 (FIN 48),Accounting for Uncertainty in Income Taxes,which is effective for fiscal years beginning after December 15, 2006. This interpretation prescribes a framework for recognizing and measuring income tax benefits for inclusion in the financial statements and also provides guidance on derecognition, classification, interest and penalties. FIN 48 provides that an income tax benefit is recognized in the financial statements when it is more likely than not that the benefit claimed or to be claimed on an income tax return will be sustained upon examination. The amount of income tax benefit recognized is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.

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 $6.4 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. There have been no material changes in the balance of unrecognized tax benefits during the quarter ended May 31, 2008.

To the extent penalties and interest would be assessed on any underpayment of income tax, such amounts have been accrued and classified as a component of income tax expense in the financial statements. This is an accounting policy election made by the Company that is a continuation of the Company’s historical policy and will continue to be consistently applied in the future. As of September 1, 2007, the Company accrued $440,000 of interest and penalties related to unrecognized tax benefits.

The Company does not anticipate a significant change in the balance of unrecognized tax benefits within the next 12 months.

The Company is subject to income tax in numerous jurisdictions where it operates including major operations in the United States, Canada, Germany, Italy, Switzerland, the United Kingdom and the Netherlands. The Company is open to examination in the United States from the tax year ended 2005. The Company’s non-U.S. locations are primarily open to examination from the tax year ended 2001 to present.

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NOTE 9—Comprehensive Income

	Three Months Ended				Nine Months Ended
	May 31,				May 31,
	2008		2007		2008		2007
	(In thousands)				(In thousands)
Net income	$	26,495	$	13,248	$	56,770	$	31,793
Other comprehensive income:
Foreign currency translation		297		11,587		13,210		12,887
Comprehensive income	$	26,792	$	24,835	$	69,980	$	44,680

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. In addition, we sponsor stock option and stock compensation plans for non-employee directors. Under the plans, the stock option price per share may not be less than the fair market value per share as of the date of grant. For officers and other key employees, outstanding grants become exercisable over a three-year period, while options for non-employee directors are immediately exercisable. As of May 31, 2008, we had $5,600,000 of compensation expense not yet recognized related to nonvested stock awards. The weighted average period that this compensation cost will be recognized is sixteen months. Stock options for 288,000 shares and 599,000 shares were exercised in the first nine months of fiscal 2008 and 2007, respectively.

Total stock compensation expense for all stock based awards for the first nine months of fiscal 2008 and 2007 was $2,494,000 ($1,496,000 after tax) and $2,315,000 ($1,389,000 after tax), respectively.

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NOTE 11—Business Segments

The following tables present information about our reportable business segments.

	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2008			2007			2008			2007
	(In thousands)						(In thousands)
Unaffiliated customer sales:
Fluid Management	$	83,505		$	74,418		$	232,369		$	208,236
Process Solutions		80,782			66,442			226,583			194,311
Romaco		36,659			30,568			100,462			85,812
Total	$	200,946		$	171,428		$	559,414		$	488,359
Income (loss) before Interest and Taxes (“EBIT”)
Fluid Management	$	25,230		$	20,585		$	64,648		$	53,010
Process Solutions		10,184			5,261			25,614			21,413
Romaco		7,906			1,163			11,557			(4,109	)
Corporate and eliminations		(3,160	)		(4,009	)		(12,217	)		(12,357	)
Total	$	40,160		$	23,000		$	89,602		$	57,957

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. The third quarter and year to date restructuring costs for fiscal 2007 were $421,000 and $2,878,000 respectively, including the loss from brand dispositions.

The Process Solutions segment results for the year to date period of fiscal 2007 include a facility sale gain of $5,036,000.

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NOTE 12 — New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 provides a common definition of fair value and establishes a framework to make the measurement of fair value in generally accepted accounting principles more consistent and comparable. SFAS No. 157 also requires expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. SFAS No. 157 is effective at the beginning of the Company’s 2009 fiscal year, although early adoption is permitted. We are currently assessing the potential impact of SFAS No. 157 on our consolidated financial statements.

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 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 will be effective for us beginning in fiscal 2009. We are currently evaluating the impact SFAS No. 159 could have on our 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. We are currently evaluating the effect, if any, the adoption of SFAS No. 141(R) will have on our consolidated financial statements.

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.

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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 equipment and systems for critical applications in the global energy, industrial, chemical and pharmaceutical markets. For the first nine months of fiscal 2008, the energy, chemical and pharmaceutical markets have been favorable and have contributed to the improved operating results in each of our segments. With approximately 60% of our sales outside the United States, we have also been favorably impacted by foreign currency translation. We attribute our success primarily to our close and continuing interaction with customers, our manufacturing, sourcing and application engineering expertise and our ability to serve customers globally. We have initiatives to improve our performance in these key areas. Our business consists of three market focused segments: Fluid Management, Process Solutions and Romaco.

Fluid Management.Energy markets served by our Fluid Management segment have been strong. Our primary objective for this segment is to ensure that we continue to capture and increase the opportunities in this growing market. We are increasing 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, are experiencing global growth, particularly in Asia. Our primary objectives 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 served by the Romaco segment, pharmaceutical (especially generics), cosmetics and healthcare, are expanding in developing areas of the world. Profitability in our Romaco segment has been improving as a result of the restructuring program completed in fiscal 2007. 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, as well as customized packaging.

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The following tables present the components of our consolidated statement of operations and segment information for the three and nine month periods of fiscal 2008 and 2007.

	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2008			2007			2008			2007
Net Sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		61.8			64.2			63.2			65.2
Gross profit		38.2			35.8			36.8			34.8
SG&A expenses		21.0			22.2			22.0			23.3
Other (income) expense		(2.8	)		0.2			(1.2	)		(0.4	)
EBIT		20.0			13.4			16.0			11.9
Interest expense, net		0.2			0.9			0.3			0.9
Income tax expense		6.3			4.6			5.2			4.3
Minority interest		0.3			0.2			0.3			0.2
Net income		13.2	%		7.7	%		10.2	%		6.5	%

	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2008			2007			2008			2007
	(In thousands, except %’s)
Segment
Fluid Management:
Sales	$	83,505		$	74,418		$	232,369		$	208,236
EBIT		25,230			20,585			64,648			53,010
EBIT %		30.2	%		27.7	%		27.8	%		25.5	%
Process Solutions:
Sales	$	80,782		$	66,442		$	226,583		$	194,311
EBIT		10,184			5,261			25,614			21,413
EBIT %		12.6	%		7.9	%		11.3	%		11.0	%
Romaco:
Sales	$	36,659		$	30,568		$	100,462		$	85,812
EBIT		7,906			1,163			11,557			(4,109	)
EBIT %		21.6	%		3.8	%		11.5	%		(4.8	)%

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 Statement of Income. 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

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

During the fiscal 2008 and 2007 three and nine month periods, we sold facilities and incurred gains and costs related to a restructuring program announced in fiscal 2005. The restructuring plan was initiated to improve our profitability and included plant closures, sales of excess facilities, personnel reductions, product line sales and other activities. The restructuring program was completed in fiscal 2007. Fiscal 2008 activity relates to product lines previously disposed as part of this restructuring program.

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In the third quarter of fiscal 2008 we recognized a gain of $5.7 million, related to the sale of two of our Romaco product lines sold in fiscal 2006. As part of that transaction, funds were paid into an escrow account to serve as collateral for potential claims by the purchaser under the terms of the Asset and Share Purchase Agreement (“Agreement”). The substantive financial guarantees in this Agreement contractually lapsed on March 31, 2008, resulting in the gain and the release of the escrow funds to us.

In the second quarter of fiscal 2008 we sold a facility related to a previously disposed product line for $4.0 million, with a resulting gain of $1.1 million. The product line had been part of our Romaco segment, and the property was leased to the acquirer of that product line.

In the second quarter of fiscal 2007 we sold a product line and a sales organization which was part of our Romaco segment. We received minimal proceeds and recorded a loss on the sale of $1.1 million. Third quarter fiscal 2007 and fiscal 2007 year to date restructuring costs in Romaco were $0.4 million and $2.9 million, respectively, including the loss from the previously mentioned sale.

In the first quarter of fiscal 2007 we sold a facility within our Process Solutions segment for $6.0 million and recorded a $5.0 million gain, which is included in the financial results for the nine month period of fiscal 2007.

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Three months ended May 31, 2008

Net Sales

Consolidated net sales for the third quarter of fiscal 2008 were $200.9 million, $29.5 million higher than net sales for the third quarter of fiscal 2007. Excluding the impact of currency translation and acquisitions and dispositions, sales increased by $15.5 million, or 9%.

The Fluid Management segment had sales of $83.5 million in the third quarter of fiscal 2008 compared with $74.4 million in the third quarter of fiscal 2007. Currency translation accounted for $2.3 million of the increase, and the remaining $6.8 million increase, 9%, was primarily from increased demand for oilfield equipment products due to high levels of oil and gas exploration and recovery activity. Orders for this segment were $86.9 million in the third quarter of fiscal 2008 compared with $75.1 million in the prior year period. Ending backlog of $54.5 million is 17% higher than in the prior year.

The Process Solutions segment had sales of $80.8 million in the third quarter of fiscal 2008 compared with $66.4 million in the third quarter of fiscal 2007. Excluding the impact of currency translation and acquisitions, sales increased $7.8 million, or 12%, over the prior year period. This increase is largely attributable to a stronger global chemical market and increased Asian region sales. Excluding currency translation and acquisition impacts, orders decreased marginally by 1% to $84.3 million. Ending backlog of $141.7 million is 32% above prior year levels.

The Romaco segment had sales of $36.7 million in the third quarter of fiscal 2008 compared with $30.6 million in the third quarter of fiscal 2007. Excluding the impact of currency translation, sales increased $0.9 million or 3% over the prior year period. Adjusting for changes in currency exchange rates, orders decreased 15% from last year’s third quarter mainly due to the timing of certain large orders. Ending backlog of $71.8 million is $13.3 million higher than prior year levels. The organic increase in sales and backlog reflect favorable conditions in the pharmaceutical packaging market and our increased expansion into developing areas of the world.

Earnings Before Interest and Income Taxes (EBIT)

Consolidated EBIT for the third quarter of fiscal 2008 was $40.2 million, an increase of $17.2 million from the third quarter of fiscal 2007. 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, while third quarter 2007 results included other expense of $0.4 million from restructuring charges in the Romaco segment. After the net change in the other (income) expense, EBIT increased $11.0 million, primarily due to increased sales, better pricing, favorable product mix and exchange rate benefits.

The Fluid Management segment had EBIT of $25.2 million in the third quarter of fiscal 2008 compared with $20.6 million in the third quarter of fiscal 2007. The increase in EBIT is primarily due to the sales increase described above, a favorable product mix and currency benefits.

The Process Solutions segment had EBIT of $10.2 million in the third quarter of fiscal 2008 compared with $5.3 million in the third quarter of fiscal 2007, an increase of $4.9 million. The increase in EBIT is due principally to the sales increase described above, coupled with better pricing.

The Romaco segment had EBIT of $7.9 million in the third quarter of fiscal 2008, an increase of $6.7 million over the third quarter of fiscal 2007. Other income (expense), as described in theImpact of Other Chargessection above, contributed $6.1 million of this change. The remaining $0.6 million increase in profitability was due to benefits from restructuring activities completed in the prior year and the increased sales volume described above.

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Interest Expense

Net interest expense was $0.3 million in the third quarter of fiscal 2008 and $1.5 million in the same period of fiscal 2007. The decrease resulted from higher levels of interest income due to increased cash and cash equivalent balances in fiscal 2008, as well as 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 31.9% for the third quarter of fiscal 2008 compared to 36.9% in the prior year period. The lower effective rate was due to favorable tax rates for the previously mentioned product line sale gain recognized in fiscal 2008, while the prior year rate included additional tax expense related to tax losses in tax jurisdictions for which no benefit was recorded.

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Nine months ended May 31, 2008

Net Sales

Consolidated net sales for the first nine months of fiscal 2008 were $559.4 million, $71.1 million higher than net sales for the same period of fiscal 2007. Excluding the impact of currency translation and acquisitions and dispositions, sales increased by $36.7 million, or 8%.

The Fluid Management segment had sales of $232.4 million in the first nine months of fiscal 2008 compared with $208.2 million in the same period of fiscal 2007. Currency translation accounted for $7.8 million of the increase, and the remaining $16.4 million increase, or 8%, was from increased demand for oilfield equipment products due to high levels of oil and gas exploration and recovery activity. Orders for this segment were $243.9 million in the first nine months of fiscal 2008 compared to $221.5 million in the same prior year period. Ending backlog of $54.5 million is 17% higher than at the end of the prior year third quarter.

The Process Solutions segment had sales of $226.6 million in the first nine months of fiscal 2008 compared with $194.3 million in the same period of fiscal 2007. Excluding the impact of currency translation and acquisitions, sales increased $13.8 million, or 7%, over the prior year period. This increase is largely attributable to a stronger global chemical market and increased Asia region sales. Excluding currency and acquisition impacts, orders increased 9% to $255.7 million, primarily driven by projects in the chemical market and activity in the Asian region. Ending backlog of $141.7 million is 32% above prior year levels.

The Romaco segment had sales of $100.5 million in the first nine months of fiscal 2008 compared with $85.8 million in the same period of fiscal 2007. Excluding the impact of currency translation and disposed product lines, sales increased $6.5 million, or 8%, over the prior year period. Orders increased 10% or $9.1 million over last year’s comparable period after adjusting for currency and disposed product lines. Ending backlog of $71.8 million is $13.3 million higher than prior year levels. The organic increase in sales, orders and backlog reflects favorable conditions in the pharmaceutical packaging market and increased expansion into developing areas of the world.

Earnings Before Interest and Income Taxes (EBIT)

Consolidated EBIT for the first nine months of fiscal 2008 was $89.6 million, an increase of $31.6 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, while fiscal 2007 nine month results included other income of $2.2 million resulting from a $5.0 million property sale gain, partially offset by restructuring costs in the Romaco segment of $2.8 million. After the net change in the other income, EBIT increased $27.0 million, primarily due to increased sales, completed restructuring activities in the Romaco segment and improved pricing.

The Fluid Management segment had EBIT of $64.6 million in the first nine months of fiscal 2008 compared with $53.0 million in the same prior year period. The increase in EBIT is due to the sales increase described above and to favorable product mix and improved pricing.

The Process Solutions segment had EBIT of $25.6 million in the first nine months of fiscal 2008 compared with $21.4 million in the comparable period of fiscal 2007. The prior year period included a $5.0 gain on the sale of a facility. Excluding the impact of this facility gain, nine month EBIT increased $9.2 million. This increase is due principally to the sales volume increase described above, coupled with better pricing.

The Romaco segment had EBIT of $11.6 million in the first nine months of fiscal 2008, an increase of $15.7 million over the same period of the prior year. Other income (expense) contributed $9.7 million of this change, as described in theImpact of Other Chargessection above. The remaining $6.0 million increase in profitability was due to $1.5 million of benefits from restructuring activities completed in the prior year and the increased sales volume described above.

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Interest Expense

Net interest expense was $1.8 million in the first nine months of fiscal 2008 and $4.4 million in the same period of fiscal 2007. The decrease resulted from higher levels of interest income due to increased cash equivalent balances in fiscal 2008, as well as 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 33.3% for the first nine months of fiscal 2008 compared with 39.0% in the comparable prior year period. The lower effective rate was due to the current year rate benefit from the product line sale gain being taxed at favorable rates , while the prior year rate included additional tax expense related to tax losses in tax jurisdictions for which no benefit was recorded.

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Liquidity and Capital Resources

Operating Activities

In the first nine months of fiscal 2008, our cash flow provided by operations was $48.8 million, $39.8 million better than in the same period of the prior year. The significant improvement over the prior year resulted primarily from higher net income and cash generated from accounts receivable due to better cash collections. We have used cash to build inventory in each period to support higher backlogs in each respective period.

We expect our fiscal 2008 operating cash flow to be adequate to fund fiscal year 2008 operating needs, shareholder dividend requirements and planned capital expenditures. Our planned capital expenditures are related to capacity expansion in Fluid Management, information system upgrades, support for new product launches and cost reduction initiatives, and replacement items.

Investing Activities

Our capital expenditures were $12.8 million in the first nine months of fiscal 2008 compared with $11.4 million in the first nine months of fiscal 2007. Our capital expenditures were primarily for information technology systems and capacity expansion in the Fluid Management and Process Solutions segments. Cash generated from facility/product line sales in fiscal 2008 were $7.2 million compared with $11.4 million in the prior year. We made an acquisition in our Process Solutions segment in 2008 for total consideration of $5.1 million.

Credit Agreement

Our Bank Credit Agreement (“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 at least quarterly. Indebtedness under the Agreement 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, 2008, we have $32.2 million of standby letters of credit outstanding at May 31, 2008. Accordingly, under the Agreement we have $117.8 million of unused borrowing capacity. These standby letters of credit are used as security for advance payments received from customers, and future payments to our vendors.

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, 2008:

	Payments Due by Period
					Two to		Four to
Long-term contractual			One year		three		five		After five
obligations	Total		or less		years		years		years
					(In thousands)
Long-term debt	$	33,020	$	2,478	$	30,542	$	0	$	0
Operating leases (1)		10,000		3,000		4,500		2,000		500
Total contractual cash obligations	$	43,020	$	5,478	$	35,042	$	2,000	$	500

(1) Operating leases are estimated as of May 31, 2008, and consist primarily of building and equipment leases.

The only other commercial commitments outstanding were standby letters of credit of $32.2 million, which are substantially due within one year.

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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, 2007. Other than the adoption of FIN No. 48, as discussed in Note 8, there have been no material changes in the accounting policies followed by us during fiscal 2008.

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 include, but are not limited to: a significant decline in capital expenditures in the specialty chemical and pharmaceutical industries; a major decline in oil and natural gas prices; foreign exchange rate fluctuations; work stoppages related to union negotiations; customer order cancellations; business disruptions caused by the implementation of business computer systems; our ability to comply with the financial covenants and other provisions of our financing arrangements; 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 general economic conditions that can affect demand in the process industries. 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.

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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, 2008. 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, 2007.

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, 2008. 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, have concluded that our disclosure controls and procedures were effective as of May 31, 2008.

(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.

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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, 2007.

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

The Company did not repurchase any of its common shares during the quarter ended May 31, 2008.

Item 6. Exhibits

a) Exhibits – see INDEX TO EXHIBITS

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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 30, 2008	BY	/s/ Christopher M. HixChristopher M. Hix
		Vice President and Chief Financial Officer
		(Principal Financial Officer)
DATE: June 30, 2008	BY	/s/ Kevin J. Brown
		Kevin J. Brown
		Corporate Controller
		(Principal Accounting Officer)

24

INDEX TO EXHIBITS

(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)
“F”	Filed herewith

25