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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
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For the Quarterly Period Ended NOVEMBER 30, 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 NOVEMBER 30, 1998:10,906,514
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ROBBINS & MYERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
($ in thousands)
November 30, August 31,
1998 1998
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(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 9,881 $ 6,822
Accounts receivable 73,464 72,266
Inventories:
Finished products 20,926 22,785
Work in process 15,110 14,883
Raw materials 26,544 24,226
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62,580 61,894
Other current assets 2,467 4,669
Deferred taxes 9,758 6,966
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Total Current Assets 158,150 152,617
Goodwill, net 201,846 202,153
Other Intangible Assets, net 19,331 18,959
Other Assets 11,406 4,958
Property, Plant and Equipment 189,133 186,330
Less accumulated depreciation 67,943 64,009
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121,190 122,321
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$511,923 $501,008
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 28,267 $ 31,051
Accrued expenses 51,175 52,603
Current portion of long-term debt 3,113 4,139
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Total Current Liabilities 82,555 87,793
Long-term Debt--Less Current Portion 217,131 202,103
Deferred Taxes 2,909 2,878
Other Long-Term Liabilities 59,278 57,471
Shareholders' Equity:
Common stock 27,886 30,863
Retained earnings 126,023 122,580
Accumulated other comprehensive income (3,859) (2,680)
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150,050 150,763
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$511,923 $501,008
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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 Ended
November 30,
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1998 1997
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Net sales $ 98,266 $104,158
Cost of sales 64,764 65,680
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Gross profit 33,502 38,478
Operating expenses 24,250 24,326
Other (income) (423) (472)
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Operating income 9,675 14,624
Interest expense 3,540 2,218
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Income before income taxes 6,135 12,406
Income taxes 2,086 4,218
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Net income $ 4,049 $ 8,188
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Net income per share:
Basic $0.37 $0.75
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Diluted $0.34 $0.63
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Dividends per share:
Declared $0.055 $0.050
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Paid $0.055 $0.050
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See Notes to Consolidated Condensed Financial Statements
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ROBBINS & MYERS, INC AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
November 30,
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1998 1997
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Operating Activities:
Net income $ 4,049 $ 8,188
Adjustment required to reconcile net income to net cash and
cash equivalents provided by operating activities:
Depreciation 4,423 3,459
Amortization 1,859 1,893
Changes in operating assets and liabilities:
Accounts receivable (965) (8,281)
Inventories (509) 1,201
Accounts payable (3,037) (3,897)
Accrued expenses and other (2,534) (1,314)
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Net Cash and Cash Equivalents Provided by Operating Activities 3,286 1,249
Investing Activities:
Capital expenditures, net of nominal disposals (3,248) (3,581)
Loan to Universal Process Equipment (6,429) 0
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Net Cash and Cash Equivalents Used by Investing Activities (9,677) (3,581)
Financing Activities:
Proceeds from debt borrowings 16,400 0
Payments of long-term debt (3,285) (1,323)
Proceeds from sale of common stock 378 486
Purchase of common stock (3,437) 0
Dividends paid (606) (552)
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Net Cash and Cash Equivalents Provided (Used) by Financing Activities 9,450 (1,389)
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Increase (Decrease) in Cash and Cash Equivalents 3,059 (3,721)
Cash and Cash Equivalents at Beginning of Period 6,822 10,304
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Cash and Cash Equivalents at End of Period $ 9,881 $ 6,583
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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
November 30, 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
November 30, 1998, and August 31, 1998, and the results of their operations and
cash flows for the three month periods ended November 30, 1998, and November 30,
1997. All intercompany transactions have been eliminated.
NOTE B--NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income
per share:
Three Months Ended
November 30,
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1998 1997
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(In thousands)
Numerator:
Basic:
Net income $4,049 $8,188
Effect of dilutive securities:
Convertible debt interest 635 635
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Income attributable to diluted shares $4,684 $8,823
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Denominator:
Basic:
Weighted average shares 10,935 10,966
Effect of dilutive securities:
Convertible debt 2,385 2,385
Dilutive options and restricted shares 273 593
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Diluted shares 13,593 13,944
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Basic net income per share $0.37 $0.75
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Diluted net income per share $0.34 $0.63
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NOTE C--NOTE C LONG-TERM DEBT
At November 30, 1998, the Company=s debt consisted of the following:
(In thousands)
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Senior debt:
Revolving credit loan $ 42,372
Senior notes 100,000
Other 6,698
6.50% Convertible Subordinated Notes 65,000
Other subordinated debt 6,174
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Total debt 220,244
Less current portion 3,113
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$217,131
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The Company's 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. At November 30, 1998, the
interest rate for all amounts outstanding ranged from 5.64% to 5.93%. 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 the 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 $100,000,000 Senior Notes were issued in two series, Series A in the
principal amount of $70,000,000 has an interest rate of 6.76% and are due May
1, 2008 and Series B in the principal amount of $30,000,000 has an interest rate
6.84% and are due May 1, 2010.
The Company has $65,000,000 of 6.50% Convertible Subordinated Notes Due 2003
("Subordinated Notes"). The Subordinated Notes are due on September 1, 2003, and
bear interest at 6.50%, payable semi-annually on March 1 and September 1 and are
convertible into common stock at a rate of $27.25 per share. Holders may convert
at any time until maturity and the Company may call for redemption at any time
on or after September 1, 1999, at a price ranging from 103.25% in 1999 to 100%
in 2001 and thereafter. The Subordinated Notes are subordinated to all other
indebtedness of the Company.
NOTE D--INCOME TAXES
The estimated annual effective tax rates were 34% for both the first quarter of
fiscal 1999 and fiscal 1998, respectively.
NOTE E--ACQUISITIONS
On December 5, 1997, the Company acquired all of the outstanding capital stock
of Technoglass S.r.L. ("Technoglass") for $8,058,000 in cash and notes.
Technoglass supplies glass-lined storage and reactor vessels and related
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. (AFCE@) for $109,300,000 in cash (or
approximately $106,030,000 after application of available FCE cash) at closing.
FCE 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 for the three months ended November 30, 1997, assuming the
acquisition of FCE had occurred at the beginning of fiscal year 1998. 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
former parent.
(In thousands, except per share amounts)
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Net sales $119,152
Net income 8,712
Basic income per share $0.79
Diluted income per share $0.67
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NOTE F--OTHER ASSETS
On September 15, 1998, the Company loaned $6,429,000 to Universal Process
Equipment, Inc. ("UPE"), the Company's partner in its Universal Glasteel
Equipment joint venture ("UGE"). The funds are being used by UPE to pursue
potential additional joint ventures between UPE and the Company.
NOTE G--COMPREHENSIVE INCOME
As of September 1, 1998, the Company adopted Financial Accounting Standard No.
130, Reporting Comprehensive Income. This Statement establishes guidelines for
reporting comprehensive income and its components; however, the adoption of this
Statement has no impact on the Company's net income or shareholders' equity. The
Statement requires that the Company's equity adjustments for foreign currency
translation and its minimum pension liability to be reported in comprehensive
income. Prior year amounts have been reclassified to conform with the Statement.
The components of comprehensive income are as follows:
Three Months Ended
November 30,
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1998 1997
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(In thousands)
Net income $4,049 $8,188
Other comprehensive income:
Foreign currency translation (1,179) (3,041)
Recognition of minimum pension liability 0 0
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Comprehensive income $2,870 $5,147
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NOTE H--NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information and in
February 1998 Statement No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits. These statements will not be required to be adopted by
the Company until the end of fiscal year 1999. The Company has not yet
determined the impact of these statements on the financial statements 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 first quarter of fiscal 1999 and
1998.
Three Months Ended
November 30,
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1998 1997
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Net Sales 100.0 % 100.0 %
Cost of sales 65.9 63.1
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Gross profit 34.1 36.9
Operating expenses 24.7 23.3
Other (income) expense (0.4) (0.4)
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Operating income 9.8 14.0
Interest expense 3.6 2.1
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Income before income taxes 6.2 11.9
Income taxes 2.1 4.0
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Net income 4.1 % 7.9 %
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First quarter of fiscal 1999 and 1998
The Company purchased Technoglass S.r.L. and Flow Control Equipment,
Inc. in December 1997("Acquired Businesses"). The operations of the Acquired
Businesses are not included in the first quarter of 1998 and are fully included
in the first quarter of 1999.
Net sales for the first quarter of fiscal 1999 were $98.3 million
compared to $104.2 million, a decrease of $5.9 million or 5.7% over the same
period of the prior year. The decrease in pro-forma sales, assuming the Acquired
Businesses were acquired at the beginning of fiscal 1998, was $23.4 million or
19.2%. This decrease in sales was primarily driven by weak market conditions in
the Company's Energy Systems product platform as major oil service companies
have severely restricted capital expenditures due to depressed oil prices. Sales
were also down in the Company's Reactor Systems and Industrial Mixer product
platforms due to delays or reductions in large capital expenditure projects in
the pharmaceutical and specialty chemical markets. Backlog at November 30, 1998
is $ 99.0 million, $3.0 million higher than at August 31, 1998.
The gross margin percentage decreased from 36.9% to 34.1%. This
decrease is due to the lower sales volumes, especially in the higher margin
products in the Energy System product platform. Operating expenses increased as
a percentage of sales from 23.3% to 24.7%. This increase was primarily due to
the sales reduction and the fixed nature of many of these expenses. In addition,
one-time severance costs accounted for approximately 0.4% of sales in the first
quarter of fiscal 1999 as the Company reacted to the drop in sales volume. These
costs were split equally between cost of sales and operating expenses. The
Company is continuing its ongoing evaluation of how to best position its Energy
Systems business assuming no immediate recovery in current oil prices.
Interest expense increased from $2.2 million in the first quarter of
fiscal 1998 to $3.5 million in the first quarter of fiscal 1999. This was due to
higher average debt levels related to the acquisition costs of the Acquired
Businesses.
The effective tax rate is 34.0% for both periods.
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The decreases in net income and diluted net income per share are
primarily driven by the sales decline, increased interest cost, and one-time
severance costs.
LIQUIDITY AND CAPITAL RESOURCES
Cash uses in the first three months of fiscal 1999 were $6.4 million
for a loan to UPE, the Company's partner in the UGE joint venture, $3.4 million
to purchase treasury stock under the Company's stock buy back program and $3.2
million for capital expenditures. Cash generated from operations of $3.3
million and net debt borrowings of $13.1 million funded these cash uses. The
funds from the loan to UPE are being used by UPE to pursue potential additional
joint ventures between the UPE and the Company.
Cash uses in the first three months of fiscal 1998 were $4.1 million
for capital expenditures and dividends and were primarily funded from operations
and a reduction in cash balances. In addition, the Company was able to reduce
its line of credit borrowings by $1.3 million.
The Company expects operating cash flow to be adequate for the
remainder of fiscal 1999 operating needs, scheduled debt service and
shareholder dividend requirements. The major cash requirement for the remainder
of fiscal 1999 is planned capital expenditures of approximately $13.0 million.
Capital expenditures are related to additional production capacity, cost
reductions and replacement items.
In addition, the Company and its U.S. defined benefit pension plan
Master Trust ("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.
As of November 30, 1998, the Company has purchased 251,000 shares for $6.2
million and the Master Trust has purchased 152,000 shares for $4.0 million. The
repurchased shares will be available for use in connection with employee benefit
plans and acquisitions.
The Company expects operating cash flows in fiscal 1999, supplemented
with borrowings under the Bank Credit Agreement, to fund capital expenditures
and the Company portion of the stock repurchase program.
MARKET RISK
In its normal operations the Company has market risk exposure to
foreign currency exchange rates and interest rates. There has been no
significant change in the Company's exposure to these risks, which has been
previously disclosed.
YEAR 2000
Certain software and hardware systems are time sensitive. Older time
sensitive systems often use a two digit dating convention ("00" rather than
"2000") that could result in system failure and disruption of operations as the
Year 2000 approaches. This is referred to as the Year 2000 issue. The Year 2000
issue will impact the Company, its suppliers, customers and other third parties
that transact business with the Company.
The Company is continuing to implement its plan to address the Year
2000 issue, as previously disclosed. The estimated costs for resolving Year 2000
issues were approximately $1.6 million for fiscal 1998 and an estimated $1.8
million for fiscal 1999. Most of these costs are to replace existing software
and hardware systems. Estimates of Year 2000 costs are based on numerous
assumptions; and actual costs could be greater than estimates. Specific factors
that might cause such differences include, but are not limited to, the
continuing availability of personnel trained in this area and the ability to
timely identify and correct all relevant software and hardware systems.
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The Company believes it is diligently addressing the Year 2000 issues
and that it will satisfactorily resolve significant Year 2000 issues. The
Company anticipates completing substantially all of its Year 2000 projects
during fiscal 1999, with major completion milestones being targeted for the
second and fourth quarters of fiscal 1999. In the event the Company falls short
of these milestones, additional internal resources will be focused on completing
these projects or implementing contingency plans.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Report 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, uncertainties surrounding the Year 2000 issues and the new Euro
currency, continued availability of acceptable acquisition candidates and
general economic conditions that can affect the demand in the process
industries. Any forward-looking statements are made based on known events and
circumstances at the time. The Company undertakes no obligation to update or
publicly revise these forward-looking statements to reflect events or
circumstances that arise after the date of this report.
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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 November 30,
1998, the Company did not file any reports on Form 8-K.
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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: JANUARY 13, 1999 BY /S/ STEPHEN R. LEY
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STEPHEN R. LEY
VICE PRESIDENT, FINANCE & CFO
(PRINCIPAL FINANCIAL OFFICER)
DATE: JANUARY 13, 1999 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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(27) FINANCIAL DATA SCHEDULE *
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"*" Filed herewith
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