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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
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ACT OF 1934
For the Quarterly Period Ended February 28, 1998 Commission File Number 0-288
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ROBBINS & MYERS, INC.
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(Exact name of registrant as specified in its charter)
OHIO 31-0424220
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 KETTERING TOWER, DAYTON, OHIO 45423
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(Address of Principal executive offices) (Zip Code)
Registrant's telephone number including area code (937) 222-2610
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NONE
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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 X NO
COMMON SHARES, WITHOUT PAR VALUE, OUTSTANDING AS OF FEBRUARY 28, 1998:
11,049,612
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ROBBINS & MYERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands)
February 28, August 31,
1998 1997
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(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 12,067 $ 10,304
Accounts receivable 77,494 60,668
Inventories:
Finished products 21,274 13,607
Work in process 14,520 17,708
Raw materials 26,225 19,174
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62,019 50,489
Other current assets 10,159 8,867
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Total Current Assets 161,739 130,328
Goodwill 199,091 125,231
Other Intangible Assets 19,977 19,744
Other Assets 4,824 4,282
Property, Plant and Equipment 175,173 142,956
Less accumulated depreciation 57,642 50,187
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117,531 92,769
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$ 503,162 $ 372,354
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 25,319 $ 28,254
Accrued expenses 49,607 50,384
Current portion long-term debt 3,821 4,085
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Total Current Liabilities 78,747 82,723
Long-Term Debt 227,375 111,998
Other Long-Term Liabilities 53,544 53,158
Shareholders' Equity:
Common stock 32,527 29,809
Retained earnings 108,697 93,735
Equity adjustment for foreign currency translation 2,603 1,262
Equity adjustment to recognize minimum pension liability (331) (331)
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143,496 124,475
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$ 503,162 $ 372,354
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See Notes to Consolidated Condensed Financial Statements
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ROBBINS & MYERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENT
(In thousands, except per share data)
(Unaudited)
Three Months Six Months
Ended Ended
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February 28, February 28,
1998 1997 1998 1997
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Net sales $108,372 $93,208 $212,530 $187,030
Cost of sales 68,797 61,000 134,477 122,674
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Gross profit 39,575 32,208 78,053 64,356
Operating expenses 24,407 21,912 48,733 43,155
Other (income) expense (516) (588) (988) (940)
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Operating income 15,684 10,884 30,308 22,141
Interest expense 3,664 1,458 5,882 2,988
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Income before income taxes 12,020 9,426 24,426 19,153
Income taxes 4,086 3,111 8,304 6,321
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Net income $7,934 $6,315 $16,122 $12,832
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Income per share:
Basic $0.72 $0.59 $1.47 $1.20
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Diluted $0.61 $0.51 $1.24 $1.05
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Dividends per share:
Declared $0.05500 $0.05000 $0.10500 $0.09375
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Paid $0.05500 $0.05000 $0.10500 $0.09375
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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)
Six Months Ended
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February 28, February 28,
1998 1997
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Operating Activities:
Net income $ 16,122 $ 12,832
Adjustment required to reconcile net income
to net cash and cash equivalents provided (used) by operating activities:
Depreciation 7,426 5,456
Amortization 3,732 2,077
Other 727 (23)
Changes in operating assets and liabilities:
Accounts receivable (4,274) (7,275)
Inventories 933 2,821
Accounts payable (4,989) (4,544)
Accrued expenses (7,512) (2,853)
Other (419) (649)
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Net Cash and Cash Equivalents Provided by Operating Activities 11,746 7,842
Investing Activities:
Acquisition of Flow Control Equipment, Inc. and Technoglass S.p.A (111,844) 0
Acquisition of Process Supply, Inc., Spectrum Products, Inc and Greerco 0 (7,800)
Capital expenditures, net of nominal disposals (9,088) (9,016)
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Net Cash and Cash Equivalents (Used) by Investing Activities (120,932) (16,816)
Financing Activities:
Proceeds from debt borrowings 142,171 103,074
Payments of long-term debt (29,558) (85,900)
Proceeds from sale of common stock 1,613 1,185
Purchase of treasury shares (784) (3,660)
Dividends paid (1,160) (1,022)
Other (1,333) (1,923)
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Net Cash and Cash Equivalents Provided by Financing Activities 110,949 11,754
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Increase in Cash and Cash Equivalents 1,763 2,780
Cash and Cash Equivalents at Beginning of Period 10,304 7,121
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Cash and Cash Equivalents at End of Period $ 12,067 $ 9,901
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See Notes to Consolidated Condensed Financial Statements
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ROBBINS & MYERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
February 28, 1998
(Unaudited)
NOTE A--PREPARATION OF FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements of Robbins & Myers, Inc. and subsidiaries ("Company")
contain all adjustments, consisting of normally recurring items, necessary to
present fairly the financial condition of the Company and its subsidiaries as of
February 28, 1998, and August 31, 1997, and the results of their operations for
the three month and six month periods ended February 28, 1998 and 1997 and cash
flows for the six month periods ended February 28, 1998 and 1997. All
intercompany transactions have been eliminated.
NOTE B--NET INCOME PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share. Statement 128
replaced the previously reported primary and fully diluted net income per share
with basic and diluted net income per share. Unlike primary net income per
share, basic net income per share excludes any dilutive effects of options,
warrants, and convertible securities. Diluted net income per share is similar to
the previously reported fully diluted net income per share. All net income per
share amounts for all periods have been presented, and where necessary, restated
to conform to the Statement 128 requirements.
The following table sets forth the computation of basic and diluted net income
per share:
Three Months Ended Six Months Ended
February 28, February 28,
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1998 1997 1998 1997
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Numerator: (In thousands, except per share amounts)
Basic:
Net income $7,934 $6,315 $16,122 $12,832
Effect of dilutive securities:
Convertible debt interest 635 635 1,270 1,128
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Income attributable
to diluted shares $8,569 $6,950 $17,392 $13,960
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Denominator:
Basic:
Weighted average shares 11,025 10,691 10,995 10,688
Effect of dilutive securities:
Convertible debt 2,385 2,385 2,385 2,084
Dilutive options
and restricted shares 575 562 596 570
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Diluted 13,985 13,638 13,976 13,342
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Basic income per share $0.72 $0.59 $1.47 $1.20
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Diluted income per share $0.61 $0.51 $1.24 $1.05
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NOTE C--NOTE C LONG-TERM DEBT
At February 28, 1998, the Company's debt consisted of the following:
(In thousands)
Senior debt:
Bank credit agreement $149,065
Other 11,213
Senior subordinated debt 5,918
6 1/2% Convertible Subordinated Notes 65,000
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Total debt 231,196
Less current portion 3,821
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$227,375
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In connection with the purchase of Flow Control Equipment, Inc. ("FCE") (see
Business Acquisitions Note), the Company entered into an Amended and Restated
Credit Agreement, dated November 25, 1997 ("Bank Credit Agreement"). The Bank
Credit Agreement provides, among other things, that the Company may borrow on a
revolving credit basis up to a maximum of $200,000,000. All outstanding amounts
under the agreement are due and payable on November 25, 2002. Interest is
variable based upon formulas tied to LIBOR or prime, at the Company's option,
and is payable at least quarterly. Except for guarantees by the Company's U.S.
subsidiaries, the pledge of the stock of the Company's U.S. subsidiaries and the
pledge of stock of certain non-U.S. subsidiaries, indebtedness under the Bank
Credit Agreement is unsecured. Certain restrictive covenants exist including
limitations on cash dividends and capital expenditures and minimum requirements
for interest coverage and leverage ratios.
The senior subordinated debt and note payable are at market interest rates. The
senior subordinated debt is due in various installments through January 31, 2000
and the note payable is due in five annual installments beginning on February 3,
2002.
The Company has $65,000,000 of 6 1/2% Convertible Subordinated Notes Due 2003
("Notes"). The Notes are not common stock equivalents and do not impact basic
net income per share.
NOTE D--INCOME TAXES
The estimated annual effective tax rates were 34.0% and 33.0% for fiscal 1998
and fiscal 1997, respectively. The increase in the effective tax rate results
from recent acquisitions with operations in countries with higher effective tax
rates.
NOTE E--ACQUISITIONS
On December 5, 1997, the Company acquired all of the outstanding capital stock
of Technoglass S.p.A. ("Technoglass"). Technoglass, with annual sales of
approximately $10,000,000, supplies glass-lined reactor vessels and equipment
and is located near Venice, Italy.
On December 19, 1997, the Company acquired all of the outstanding capital stock
of Flow Control Equipment Inc. ("FCE") for $108,500,000 in cash (or
approximately $105,000,000 after application of available FCE cash) at closing.
FCE, with annual sales of approximately $60,000,000, supplies a broad line of
products for use in artificial lift applications in the oil and gas exploration
and production markets, including rod guides, wellhead equipment and valves. FCE
also supplies closures and valves for gas transmission and distribution
applications.
Following are the unaudited summary pro-forma consolidated results of operations
of the Company assuming the acquisition of FCE had occurred at the beginning of
each respective period. In preparing the pro-forma data adjustments have been
made to the historical financial information. These are primarily amortization
and depreciation relating to the purchase price allocation, interest cost
related to financing the transaction and adjustments to the corporate cost
allocations from FCE's parent.
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Six months ended February 28,
1998 1997
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(In thousands, except per share amounts)
Net Sales $ 231,182 $ 213,865
Net income 16,866 11,749
Basic income per share 1.53 1.10
Diluted income per share 1.30 0.97
NOTE F--NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
Reporting Comprehensive Income, and Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information, and in February 1998,
Employers' Disclosures about Pensions and Other Postretirement Benefits. These
statements will not be required to be adopted by the Company until its fiscal
year 1999. The Company has not yet determined the impact of these statements on
the financial statements of the Company; however, they involve financial
statement disclosures and will not effect the reported balance sheet, income
statement or cash flow of the Company.
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Part I--Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The following table presents the components of the Company's income statement as
a percent of net sales for the quarter and year to date periods of fiscal 1998
and 1997, respectively.
Three Months Ended Six Months Ended
February 28 February 28,
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1998 1997 1998 1997
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Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 63.5 65.4 63.3 65.6
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Gross profit 36.5 34.6 36.7 34.4
Operating expenses 22.5 23.5 22.9 23.1
Other (income) expense (0.5) (0.6) (0.5) (0.5)
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Operating income 14.5 11.7 14.3 11.8
Interest expense 3.4 1.6 2.8 1.6
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Income before income taxes 11.1 10.1 11.5 10.2
Income taxes 3.8 3.3 3.9 3.4
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Net income 7.3% 6.8% 7.6% 6.8%
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The Company purchased Process Supply, Inc., Spectrum Products, Inc.,
and the high shear mixer business of Greerco Corp. in February 1997, Industrie
Tycon, S.p.A., in May 1997, Technoglass, S.p.A. and Flow Control Equipment, Inc.
in December 1997 ("Acquired Businesses"). The operations of the Acquired
Businesses are included only for the periods from the respective dates of their
acquisition, which impacts the comparisons between fiscal 1998 and 1997.
Net sales for the second quarter of fiscal 1998 were $108.4 million
compared to $93.2 million, an increase of 16.3% over the same period of the
prior year. Year to date sales of $212.5 million were 13.6% higher than the
prior year. These increases were primarily from the Acquired Businesses and the
Company's oilfield products and industrial pump products. Company backlog at the
end of the second quarter of 1998 remains healthy at $109.0 million.
The gross profit percentage increased by 1.9% and 2.3% for the quarter
and year to date, respectively. These increases are due to the Acquired
Businesses having higher gross profit percentages than base businesses and
favorable product mix in the Company's oilfield products, glass-lined reactor
systems and industrial mixing equipment.
Operating expenses as a percent of sales have decreased by 1.0% and
0.2% for the quarter and year to date, respectively. The Acquired Businesses
operating expenses as a percent of sales were similar to the Company's; however,
corporate costs have remained constant while the total sales volume has
increased. In addition, the prior year included the start-up costs of the Moyno
Oilfield Products unit's new manufacturing plant in Houston, Texas and the
establishment of direct marketing efforts to the Canadian oilfield services
industry.
Interest expense increased to $3.7 million in the second quarter of
fiscal 1998 from $1.5 million in the second quarter of fiscal 1997. Year to date
interest expense also increased to $5.9 million in fiscal 1998 from $3.0 million
in the prior year. This was due to higher average debt levels related to the
acquisition costs of the Acquired Businesses, as the effective interest has not
changed materially.
The effective tax rate has increased from 33.0% in fiscal 1997 to
34.0% in fiscal 1998. This increase was due to recent acquisitions outside the
United States, where effective tax rates are higher than the United States.
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PART I--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--CON'T
Net income increased to $7.9 million, $.61 per share, fully diluted, in
the second quarter of fiscal 1998 from $6.3 million, $.51 per share, fully
diluted, in the second quarter of fiscal 1997. Year to date net income increased
to $16.1 million, $1.24 per share, fully diluted, from $12.8 million, $1.05 per
share, fully diluted. These increases are attributable to the operating income
contributed by the Acquired Businesses, additional volume in the higher margin
oilfield products platform and improved margins in the glass-lined reactor
system and industrial mixing equipment product platforms, reduced by higher
interest expense from additional borrowings for the Acquired Businesses and a
slightly higher effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
Cash uses in the first six months of fiscal 1998 were $113.0 million
for the acquisitions of Technoglass and FCE and $8.8 million for capital
expenditures. Cash uses were primarily funded by borrowings under the Company's
senior debt agreement and funds provided by operations.
Cash uses in the first six months of fiscal 1997 were $7.8 million for
acquisitions, $3.7 million for the purchase of treasury stock, which was used
for a portion of the cost of the acquisitions, and $9.0 million for capital
expenditures. Cash uses were primarily funded by borrowings against the
Company's Bank Credit Agreement and funds provided by operations.
The Company expects operating cash flow to be adequate for the
remainder of fiscal year 1998's operating needs, scheduled debt service and
shareholder dividend requirements. The major cash requirement for the remainder
of fiscal 1998 is planned capital expenditures of approximately $15.0 million.
Capital expenditures are related to additional production capacity, cost
reductions and replacement items.
The Company's significant foreign operations have the local currency as
their functional currency. The non-U.S. operations primarily buy and sell within
the same country which mitigates the impact of currency fluctuations on
operations. To the extent that significant transactions are completed in a
different currency, the Company hedges its risk to future currency fluctuations
through foreign currency forward contracts with major financial institutions.
Currency translation rate changes had an immaterial impact on fiscal 1998 and
1997.
At February 28, 1998, the Company had approximately $20.0 million
available under its Bank Credit Agreement which management believes is adequate
to meet its immediate needs. Management is pursuing additional debt financing
arrangements which, if effected, may increase the Company's borrowing capacity.
The year 2000 issue relates to the inability of some computerized
applications to properly recognize and process date sensitive information using
the year 2000. The Company has completed an assessment of its exposure to the
year 2000 issue. As a result of this assessment the Company has developed action
plans to address its exposure. Implementation and testing of the action plans
will take place throughout calendar years 1998 and 1999. Much of the issue has
been and will continue to be addressed through the Company's ongoing efforts to
implement integrated business systems at its operations. The Company does not
anticipate year 2000 costs will significantly impact its operations, capital
commitments or interrupt its ongoing operations.
In addition to historical information, this Form 10-Q contains various
forward-looking statements and performance trends which are subject to certain
risks and uncertainties that could cause actual results to differ materially
from these statements and trends. Such factors include, but are not limited to,
a significant decline in capital expenditure levels in the Company's served
markets, a major decline in oil and gas prices, foreign exchange rate
fluctuations, continued availability of acceptable acquisition candidates and
general economic conditions that can affect the demand in the process
industries.
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PART II--OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The annual meeting of Shareholders of Robbins &
Myers, Inc. (The "Company") was held on December 10,
1997.
b) The Company's Board of Directors is divided into two
classes, with one class of directors elected at each
annual meeting of shareholders. At the Annual Meeting
on December 10, 1997, the following persons were
elected directors of the Company for a term of office
expiring at the annual meeting of shareholders to be
held in 1999: Robert J. Kegerreis, Ph.D., Maynard H.
Murch IV,
John N. Taylor, Jr., and William D. Manning, Jr. The
other directors whose terms of office continued after
the Annual Meeting are Daniel W. Duval,
Thomas P. Loftis and Jerome F. Tatar.
c) At the Annual Meeting on December 10, 1997, three
items were voted on by shareholders, namely:
1) The election of directors in which,
as noted above, Messrs. Kegerreis,
Manning, Murch and Taylor were
elected:
Votes For Votes Withheld
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Robert J. Kegerreis, Ph.D. 9,865,646 67,577
William D. Manning, Jr. 9,870,493 62,730
Maynard H. Murch, IV 9,873,843 59,380
John N. Taylor, Jr. 9,870,293 62,930
2) Amendment to the Company's Articles
of Incorporation to increase the
number of authorized common shares
from 25,000,000 to 40,000,000 was
approved with 9,373,997 cast for
approval, 517,968 cast against
approval and 41,258 abstentions;
3) Appointment of Ernst & Young LLP as
independent auditors of the Company
for the fiscal year ending August
31, 1998 was approved with 9,910,992
cast for approval, 15,881 against
approval and 6,350 abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) See Index to Exhibits
b) Reports on Form 8-K. During the quarter ended
February 28, 1998, the Company filed one report on
Form 8-K dated December 19, 1997, to announce the
acquisition of Flow Control Equipment, Inc. This Form
8-K was subsequently amended by Form 8-K/A to include
the required audited historical and pro forma
financial statements.
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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.
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DATE: APRIL 10, 1998 BY /S/ STEPHEN R. LEY
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STEPHEN R. LEY
VICE PRESIDENT, FINANCE AND
CHIEF FINANCIAL OFFICER
DATE: APRIL 10, 1998 BY /S/ KEVIN J. BROWN
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KEVIN J. BROWN
CORPORATE CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
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INDEX TO EXHIBITS
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(3)(I) ARTICLES OF INCORPORATION:
3.1 Amended Articles of Incorporation *
(27) FINANCIAL DATA SCHEDULE
27.1 Financial Data Schedule-6 months ended 2/28/98 *
27.2 Financial Data Schedule (Restated)-6 months ended 2/28/97 *
27.2 Financial Data Schedule (Restated)-3 months ended 11/30/97 *
27.2 Financial Data Schedule (Restated)-3 months ended 11/30/96 *
"*" Filed herewith
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