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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
- - ACT OF 1934
For the Quarterly Period Ended MAY 31, 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
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COMMON SHARES, WITHOUT PAR VALUE, OUTSTANDING AS OF MAY 31, 1998: 11,070,035
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ROBBINS & MYERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands) May 31, August 31,
1998 1997
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(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 8,430 $ 10,304
Accounts receivable 76,075 60,668
Inventories:
Finished products 21,597 13,607
Work in process 14,104 17,708
Raw materials 27,313 19,174
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63,014 50,489
Other current assets 9,784 8,867
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Total Current Assets 157,303 130,328
Goodwill 199,677 125,231
Other Intangible Assets 19,679 19,744
Other Assets 4,785 4,282
Property, Plant and Equipment 180,541 142,956
Less accumulated depreciation 61,837 50,187
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118,704 92,769
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$ 500,148 $ 372,354
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 25,365 $ 28,254
Accrued expenses 53,402 50,384
Current portion long-term debt 3,426 4,085
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Total Current Liabilities 82,193 82,723
Long-Term Debt 214,003 111,998
Other Long-Term Liabilities 53,393 53,158
Shareholders' Equity:
Common stock 33,055 29,809
Retained earnings 116,183 93,735
Equity adjustment for foreign currency translation 1,652 1,262
Equity adjustment to recognize minimum pension liability (331) (331)
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150,559 124,475
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$ 500,148 $ 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 Nine Months
Ended Ended
May 31, May 31,
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1998 1997 1998 1997
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Net sales $ 112,708 $ 97,588 $ 325,238 $ 284,618
Cost of sales 71,506 60,916 205,983 183,759
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Gross profit 41,202 36,672 119,255 100,859
Operating expenses 24,922 22,699 73,655 65,747
Other (income) expense (30) 392 (1,018) (576)
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Operating income 16,310 13,581 46,618 35,688
Interest expense 4,039 1,798 9,921 4,752
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Income before income taxes 12,271 11,783 36,697 30,936
Income taxes 4,173 3,888 12,477 10,209
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Net income $ 8,098 $ 7,895 $ 24,220 $ 20,727
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Income per share:
Basic $ 0.73 $ 0.72 $ 2.20 $ 1.93
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Diluted $ 0.63 $ 0.62 $ 1.88 $ 1.67
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Dividends per share:
Declared $ 0.055 $ 0.050 $ 0.160 $ 0.14375
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Paid $ 0.055 $ 0.050 $ 0.160 $ 0.14375
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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) Nine Months Ended
(Unaudited) -----------------------
May 31, May 31,
1998 1997
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Operating Activities:
Net income $ 24,220 $ 20,727
Adjustment required to reconcile net income
to net cash and cash equivalents provided (used) by operating activities:
Depreciation 11,566 8,217
Amortization 5,846 3,557
Changes in operating assets and liabilities:
Accounts receivable (3,355) (10,005)
Inventories (812) 1,497
Accounts payable (4,943) (2,977)
Accrued expenses (3,656) (1,151)
Other 968 (1,641)
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Net Cash and Cash Equivalents Provided by Operating Activities 29,834 18,224
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 (34,900)
Capital expenditures, net of nominal disposals (14,401) (14,408)
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Net Cash and Cash Equivalents (Used) by Investing Activities (126,245) (49,308)
Financing Activities:
Proceeds from debt borrowings 240,617 155,467
Payments of long-term debt (144,771) (114,331)
Proceeds from sale of common stock 2,054 1,995
Purchase of treasury shares (856) (3,660)
Dividends paid (1,772) (1,577)
Other (735) 0
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Net Cash and Cash Equivalents Provided by Financing Activities 94,537 35,971
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(Decrease) Increase in Cash and Cash Equivalents (1,874) 4,887
Cash and Cash Equivalents at Beginning of Period 10,304 7,121
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Cash and Cash Equivalents at End of Period $ 8,430 $ 12,008
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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
May 31, 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
May 31, 1998, and August 31, 1997, and the results of their operations for the
three month and nine month periods ended May 31, 1998 and 1997 and cash flows
for the nine month periods ended May 31, 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 Nine Months Ended
May 31, May 31,
1998 1997 1998 1997
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Numerator: (In thousands, except per share amounts)
Basic:
Net income $ 8,098 $ 7,895 $ 24,220 $ 20,727
Effect of dilutive securities:
Convertible debt interest 635 635 1,905 1,763
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Income attributable
to diluted shares $ 8,733 $ 8,530 $ 26,125 $ 22,490
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Denominator:
Basic:
Weighted average shares 11,064 10,910 11,018 10,762
Effect of dilutive securities:
Convertible debt 2,385 2,385 2,385 2,184
Dilutive options
and restricted shares 451 565 493 578
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Diluted 13,900 13,860 13,896 13,524
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Basic income per share $ 0.73 $ 0.72 $ 2.20 $ 1.93
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Diluted income per share $ 0.63 $ 0.62 $ 1.88 $ 1.67
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NOTE C--LONG-TERM DEBT
At May 31, 1998, the Company's debt consisted of the following:
(In thousands)
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Senior debt:
Bank credit agreement $37,488
Notes 100,000
Other 9,017
Senior subordinated debt 5,924
6 1/2% Convertible notes 65,000
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Total debt 217,429
Less current portion 3,426
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$214,003
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In connection with the purchase of Flow Control Equipment, Inc. ("FCE") (see
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.
On May 19, 1998 the Company issued $100,000,000 of Senior Notes ("Senior
Notes"). The Senior Notes were issued in two series, Series A in the principal
amount of $70,000,000 has an interest rate of 6.755% and are due May 1, 2008 and
Series B in the principal amount of $30,000,000 has an interest rate 6.835% and
are due May 1, 2010.
The other senior debt and the senior subordinated debt are at market interest
rates and are due in various installments through 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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Nine months ended May 31,
1998 1997
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(In thousands, except per share amounts)
Net sales $343,890 $326,075
Net income $24,964 $19,899
Basic income per share $2.32 $1.85
Diluted income per share $1.93 $1.60
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 Nine Months Ended
May 31, May 31,
1998 1997 1998 1997
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Net sales 100.0 100.0 100.0 100.0
Cost of sales 63.4 62.4 63.3 64.4
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Gross profit 36.6 37.6 36.7 35.4
Operating expenses 22.1 23.3 22.6 23.1
Other (income) expense - .4 (.2) (.2)
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Operating income 14.5 13.9 14.3 12.5
Interest expense 3.6 1.8 3.1 1.6
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Income before income taxes 10.9 12.1 11.2 10.9
Income taxes 3.7 4.0 3.8 3.6
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Net income 7.2 8.1 7.4 7.3
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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, and 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 third quarter of fiscal 1998 were $112.7 million
compared to $97.6 million, an increase of 15.5% over the same period of the
prior year. Year to date sales of $325.2 million were 14.3% higher than the
prior year. These increases were primarily attributable to the Acquired
Businesses. Excluding the effects of the Acquired Businesses, sales have been
relatively consistent with the prior year with increases in glass-lined reactor
products and industrial pump products being offset by declines in oilfield
products and industrial mixer products. Company backlog at the end of the third
quarter of 1998 is $100.0 million, down $9.0 million from the previous quarter
as orders have been slow for oilfield products and industrial mixer products.
Glass-lined reactor products and industrial pump products are expected
to show continued growth over the near term, while oilfield products are
expected to continue to be impacted by the energy sector slow down, caused by
lower crude oil prices. Industrial mixing products have been adversely impacted
by softness in major project related activity, partially caused by the impact of
the economic uncertainty in Asia. The Company expects these conditions to
correct themselves and improve in fiscal year 1999.
The gross profit percentage decreased by 1.0% for the third quarter
reflecting the decrease in oilfield products' sales, as these products have
higher gross margins than the Company's other product platforms. On a year to
date basis the gross profit percentage has increased 1.3% primarily related to
the contribution of the acquired businesses and a lesser impact from oilfield
products on a year to date basis.
Operating expenses as a percent of sales decreased by 1.2% and 0.5% 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, fixed
corporate costs have remained constant while the total sales volume has
increased and variable compensation costs have been adjusted downward to reflect
current operating results.
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PART I--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-- CON'T
Interest expense increased to $4.0 million in the third quarter of
fiscal 1998 from $1.8 million in the third quarter of fiscal 1997. Year to date
interest expense increased to $9.9 million in fiscal 1998 from $4.8 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 rate has
remained constant over the periods.
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.
Net income increased to $8.1 million, $.63 per share, fully diluted, in
the third quarter of fiscal 1998 from $7.9 million, $.62 per share, fully
diluted, in the third quarter of fiscal 1997. Year to date net income increased
to $24.2 million, $1.88 per share, fully diluted, from $20.7 million, $1.67 per
share, fully diluted.
These increases have been realized despite slow economic conditions in
two of the Company's product platforms and a slightly higher effective tax rate.
The improvements under such conditions are attributable to the accretive effect
of the Acquired Businesses, a balance of diverse profitable product platforms, a
strong aftermarket presence and a market leadership position.
LIQUIDITY AND CAPITAL RESOURCES
Cash uses in the first nine months of fiscal 1998 were $111.8 million
for the acquisitions of Technoglass and FCE and $14.4 million for capital
expenditures. Cash uses were primarily funded by borrowings under the Company's
Bank Credit Agreement and funds provided by operations.
Cash uses in the first nine months of fiscal 1997 were $34.9 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 $14.4 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 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 $10.0 million.
Capital expenditures are related to additional production capacity, cost
reductions and replacement items and are expected to be significantly lower in
future periods.
The Company and its U.S. defined benefit pension plan Master Trust
started a twelve month program in July 1998 to purchase up to 5% of the
Company's outstanding shares, or about 550,000 shares. The total cost would be
$16.5 million at $30 per share. The Company expects operating cash flows in
fiscal 1999, supplemented with borrowings under the Bank Credit Agreement and
purchases by the Company's U.S. defined benefit pension plan Master Trust to
fund the stock repurchase program. The repurchased shares will be available for
use in connection with employee benefit plans and acquisitions.
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.
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PART I--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-- CON'T
On May 19, 1998, the Company issued $100,000,000 of Senior Notes. The
proceeds were used to repay borrowings under the Bank Credit Agreement, which
has increased the Company's borrowing capacity under the Bank Credit Agreement.
At May 31, 1998, the Company had approximately $150.0 million available under
its Bank Credit Agreement which management believes is adequate to meet its
immediate needs.
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 6. EXHIBITS AND REPORTS ON FORM 8-K
a) See Index to Exhibits
b) Reports on Form 8-K. During the quarter ended May 31,
1998, the Company filed one report on Form 8-K dated
May 19, 1998, to announce the issuance of
$100,000,000 of Senior Notes.
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SIGNATURES
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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: JULY 15, 1998 BY /S/ STEPHEN R. LEY
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STEPHEN R. LEY
VICE PRESIDENT, FINANCE AND
CHIEF FINANCIAL OFFICER
DATE: JULY 15, 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
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITYHOLDERS
10.1 Forms of $100 Million Senior Note Agreement dated May 1, 1998
*
(27) FINANCIAL DATA SCHEDULE
27.1 Financial Data Schedule-9 months ended 5/31/98 *
27.2 Financial Data Schedule (Restated)-9 months ended 5/31/97 *
"*" Filed herewith
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