10-Q 1 e10-q.txt ROBBINS & MYERS, INC. 10-Q 1 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 ACT OF 1934 For the Quarterly Period Ended MAY 31, 2000 Commission File Number 0-288 ------------- ----- ROBBINS & MYERS, INC. ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) OHIO 31-0424220 ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1400 KETTERING TOWER, DAYTON, OHIO 45423 -------------------------------------------------------------------------------- (Address of Principal executive offices) (Zip Code) Registrant's telephone number including area code (937) 222-2610 ------------------------ NONE -------------------------------------------------------------------------------- Former name, former address and former fiscal year if changed since last report INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ] COMMON SHARES, WITHOUT PAR VALUE, OUTSTANDING AS OF MAY 31, 2000:10,944,753 ---------- 1 2 ROBBINS & MYERS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET (In thousands)
May 31, August 31, 2000 1999 ---------------- ----------------- ASSETS (Unaudited) Current Assets: Cash and cash equivalents $10,975 $8,901 Accounts receivable 74,324 74,900 Inventories: Finished products 18,571 16,921 Work in process 14,777 11,193 Raw materials 28,701 25,633 ---------------- ----------------- 62,049 53,747 Other current assets 7,160 12,824 Deferred taxes 5,369 5,470 ---------------- ----------------- Total Current Assets 159,877 155,842 Goodwill and Other Intangible Assets 206,394 214,100 Deferred Taxes 6,622 - Other Assets 7,938 6,641 Property, Plant and Equipment 204,822 196,820 Less accumulated depreciation 90,265 79,551 ---------------- ----------------- 114,557 117,269 ---------------- ----------------- $495,388 $493,852 ================ ================= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $29,097 $27,949 Accrued expenses 51,912 54,935 Current portion of long-term debt 548 121 ---------------- ----------------- Total Current Liabilities 81,557 83,005 Long-term Debt--less current portion 184,557 191,151 Other Long-term Liabilities 61,067 58,518 Minority Interest 7,517 6,952 Shareholders' Equity: Common stock 27,555 27,468 Retained earnings 142,080 132,015 Accumulated other comprehensive (loss) (8,945) (5,257) ---------------- ----------------- 160,690 154,226 ---------------- ----------------- $495,388 $493,852 ================ =================
See Notes to Consolidated Condensed Financial Statements 2 3 ROBBINS & MYERS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED INCOME STATEMENT (In thousands, except per share data) (Unaudited)
Three Months Ended Nine Months Ended May 31, May 31, ------------------------------ ------------------------------ 2000 1999 2000 1999 ------------ ------------- ------------- ------------ Net sales $104,303 $103,829 $293,568 $296,971 Cost of sales 67,218 68,979 191,227 196,936 ------------ ------------- ------------- ------------ Gross profit 37,085 34,850 102,341 100,035 Operating expenses 22,661 22,440 65,890 66,143 ------------ ------------- ------------- ------------ 14,424 12,410 36,451 33,892 Amortization expense 2,045 1,984 6,006 5,874 Other 102 143 395 4,289 ------------- ------------- ------------ ------------ 12,277 10,283 30,050 23,729 Interest expense 3,478 3,175 10,034 10,329 ------------ ------------- ------------- ------------ Income before income tax and minority interest 8,799 7,108 20,016 13,400 Income tax expense 3,168 2,417 7,212 4,557 Minority interest 257 275 933 680 ------------ ------------- ------------- ------------ Net income $5,374 $4,416 $11,871 $8,163 ============ ============= ============= ============ Net income per share: Basic $0.49 $0.40 $1.08 $0.75 ============ ============= ============= ============ Diluted $0.45 $0.37 $1.02 $0.74 ============ ============= ============= ============ Dividends per share: Declared $0.055 $0.055 $0.165 $0.165 ============ ============= ============= ============ Paid $0.055 $0.055 $0.165 $0.165 ============ ============= ============= ============
See Notes to Consolidated Condensed Financial Statements 3 4 ROBBINS & MYERS, INC AND SUBSIDIARIES CONSOLIDATED CONDENSED CASH FLOW STATEMENT (In thousands) (Unaudited)
Nine Months Ended May 31, -------------------------------------- 2000 1999 ----------------- ----------------- Operating Activities: Net income $11,871 $8,163 Adjustment required to reconcile net income to net cash and Cash equivalents provided by operating activities: Depreciation 12,806 12,990 Amortization 6,006 5,874 Changes in operating assets and liabilities: Accounts receivable (2,186) 235 Inventories (10,260) 4,901 Accounts payable 2,271 (4,683) Accrued expenses (2,308) (1,156) Other 3,446 871 ----------------- ----------------- Net Cash and Cash Equivalents Provided by Operating Activities 21,646 27,195 Investing Activities: Capital expenditures, net of nominal disposals (13,577) (7,775) Loan to Universal Process Equipment - (6,429) ----------------- ----------------- Net Cash and Cash Equivalents Used by Investing Activities (13,577) (14,204) Financing Activities: Proceeds from revolving credit loan 10,230 18,886 Payments of revolving credit loan (9,105) (23,453) Proceeds from sale of common stock 855 1,061 Purchase of common stock and convertible subordinated notes (6,169) (3,988) Dividends paid (1,806) (1,811) ----------------- ----------------- Net Cash and Cash Equivalents Used by Financing Activities (5,995) (9,305) ----------------- ----------------- Increase in Cash and Cash Equivalents 2,074 3,686 Cash and Cash Equivalents at Beginning of Period 8,901 6,822 ----------------- ----------------- Cash and Cash Equivalents at End of Period $10,975 $10,508 ================= =================
See Notes to Consolidated Condensed Financial Statements 4 5 ROBBINS & MYERS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS May 31, 2000 (Unaudited) NOTE 1--PREPARATION OF FINANCIAL STATEMENTS In the opinion of management, the accompanying unaudited consolidated condensed financial statements of Robbins & Myers, Inc. and subsidiaries ("Company") 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, 2000, and August 31, 1999, the results of their operations for the three and nine month periods ended May 31, 2000, and May 31, 1999, and their cash flows for the nine month periods ended May 31, 2000, and May 31, 1999. All intercompany transactions have been eliminated. NOTE 2--NET INCOME PER SHARE 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, May 31, May 31, ----------- ------------ ----------- ----------- 2000 1999 2000 1999 ----------- ------------ ----------- ----------- (In thousands, except per share amounts) Numerator: Basic: Net income $5,374 $4,416 $11,871 $8,163 Effect of dilutive securities: Convertible debt interest 610 635 1,859 1,905 ----------- ------------ ----------- ----------- Income attributable to diluted shares $5,984 $5,051 $13,730 $10,068 =========== ============ =========== =========== Denominator: Basic: Weighted average shares 10,948 10,938 10,944 10,929 Effect of dilutive securities: Convertible debt 2,297 2,385 2,332 2,385 Dilutive options and restricted shares 179 198 170 223 ----------- ------------ ----------- ----------- Diluted shares 13,424 13,521 13,446 13,537 =========== ============ =========== =========== Basic net income per share $0.49 $0.40 $1.08 $0.75 =========== ============ =========== =========== Diluted net income per share $0.45 $0.37 $1.02 $0.74 =========== ============ =========== =========== NOTE 3--OTHER EXPENSE Other expense is as follows: Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, ----------- ------------ ----------- ----------- 2000 1999 2000 1999 ----------- ------------ ----------- ----------- (In thousands) Plant closure and relocation costs $102 $267 $395 $4,467 Other termination costs - - - 400 Equity income - (124) - (578) ----------- ------------ ----------- ----------- $102 $143 $395 $4,289 =========== ============ =========== ===========
In February 1999, the Company recorded a charge of $4,200,000 for the closure and relocation of the Company's Fairfield, California, manufacturing operation. The $4,200,000 charge was composed of $1,800,000 for asset write-downs and holding costs of land, buildings, and equipment to be sold, and $2,400,000 for environmental, employee and other costs. The facility manufactured power sections and 5 6 NOTE 3--OTHER EXPENSE (CONTINUED) down-hole pumps. Production was transferred to the Company's manufacturing facility near Houston, Texas, which manufactures similar products. The closure and relocation consolidated all power section and down-hole pump manufacturing into one facility. The transfer of manufacturing is complete, and the Fairfield facility and certain machinery are being sold. It is expected that the sale of the facility will be completed by December 31, 2000. The assets to be sold have been written down to their estimated net realizable value upon sale. As of May 31, 2000 approximately $1,700,000 has been spent against the $2,400,000 accrued for environmental, employee and other costs. The remaining accrual is primarily for environmental costs and other costs. Employee costs have been paid. There have been no changes made to the original estimates. The fiscal year 2000 and third quarter fiscal 1999 costs are for employee transfers, equipment relocation and training of new employees at the Texas facility. The Company also recorded other one-time termination costs of $400,000 in the second quarter of fiscal 1999, unrelated to the closure of the Fairfield facility. As of May 31, 2000, these one-time termination costs have been paid. NOTE 4--LONG-TERM DEBT At May 31, 2000, the Company's debt consisted of the following: (In thousands) ---------------- Senior debt: Revolving credit loan $ 19,736 Senior Notes 100,000 Other 5,646 6.50% Convertible Subordinated Notes 59,723 ---------------- Total debt 185,105 Less current portion 548 ---------------- $184,557 ================ The Company's Bank Credit Agreement ("Agreement") provides, among other things, that the Company may borrow on a revolving credit basis up to a maximum of $150,000,000. 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 May 31, 2000, the weighted average interest rate for all amounts outstanding was 4.54%. Indebtedness under the Agreement is unsecured, 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. 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. Interest is payable semi-annually on May 1 and November 1. The above agreements have certain restrictive covenants including limitations on cash dividends, treasury stock purchases and capital expenditures and minimum requirements for interest coverage and leverage ratios. The Company has $59,723,000 of 6.50% Convertible Subordinated Notes ("Subordinated Notes"). The Subordinated Notes are due on September 1, 2003, interest is 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 the current price of 103.25% to 100% in fiscal 2003 and thereafter. The Subordinated Notes are subordinated to all other indebtedness of the Company. 6 7 NOTE 5--INCOME TAXES The estimated annual effective tax rates were 36% for both the periods of fiscal 2000 and 34% for both the periods of fiscal 1999. NOTE 6--COMPREHENSIVE INCOME The components of comprehensive income are as follows:
Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, ----------- ------------ ----------- ----------- 2000 1999 2000 1999 ----------- ------------ ----------- ----------- (In thousands) Net income $5,374 $4,416 $11,871 $8,163 Other comprehensive income: Foreign currency translation (2,445) 1,102 (3,688) (245) ----------- ------------ ----------- ----------- Comprehensive income $2,929 $5,518 $8,183 $7,918 =========== ============ =========== ===========
NOTE 7--BUSINESS SEGMENTS Sales and Income before Interest and Taxes ("IBIT") by operating segment is presented in the following table. There has been no change in the presentation basis or measurement of segment information from the prior year end. Intersegment sales are immaterial and there is no material change in segment assets since the prior year end.
Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, ----------- ------------ ----------- ----------- 2000 1999 2000 1999 ----------- ------------ ----------- ----------- (In thousands) Unaffiliated customer sales: Process systems $80,305 $88,693 $231,533 $249,708 Energy systems 23,998 15,136 62,035 47,263 ----------- ------------ ----------- ----------- Total $104,303 $103,829 $293,568 $296,971 =========== ============ =========== =========== IBIT: Process Systems $9,495 $11,877 $26,531 $30,738 Energy Systems 4,707 1,173 9,884 (329) Corporate and eliminations (1,925) (2,767) (6,365) (6,680) ----------- ------------ ----------- ----------- Total $12,277 $10,283 $30,050 $23,729 =========== ============ =========== ===========
NOTE 8--NEW ACCOUNTING STANDARD The Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement is not required to be adopted by the Company until its fiscal year 2001. The Company has not yet determined the impact of this statement on the financial statements of the Company. 7 8 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 and certain supplementary data as a percent of net sales for the three month and nine month periods of fiscal 2000 and 1999.
Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, ------------ ------------ ------------ ---------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ Net Sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales 64.4 66.4 65.1 66.3 ------------ ------------ ------------ ------------ Gross profit 35.6 33.6 34.9 33.7 Operating expenses 21.7 21.6 22.5 22.3 ------------ ------------ ------------ ------------ IBIT before amortization and other 13.9 12.0 12.4 11.4 Amortization 2.0 2.0 2.1 2.0 Other .1 .1 .1 1.4 ------------ ------------ ------------ ------------ IBIT 11.8 % 9.9 % 10.2 % 8.0 % ============ ============ ============ ============ Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, ------------ ------------ ------------ ------------ 2000 1999 2000 1999 ------------ ------------ ------------ ------------ (in thousands) Segment Process systems: Sales $80,305 $88,693 $231,533 $249,708 IBIT before amortization and other 10,821 13,129 30,439 34,204 % 13.5 % 14.8 % 13.1 % 13.7 % IBIT 9,495 11,877 26,531 30,738 % 11.8 % 13.4 % 11.5 % 12.3 % Energy Systems: Sales $23,998 $15,136 $62,035 $47,263 IBIT before amortization and other 5,334 1,956 11,818 5,661 % 22.2 % 12.9 % 19.1 % 12.0 % IBIT 4,707 1,173 9,884 (329) % 19.6 % 7.7 % 15.9 % (.7) %
The Company acquired a controlling interest in Universal Glasteel Equipment ("UGE") in December 1998, Chemineer de Mexico in June 1999 and GMM Pfaudler Limited ("GMM") in July 1999 ("Acquired Businesses"). The Company owned minority portions of UGE and GMM in fiscal 1999 and their results were recorded on the equity method. The Acquired Businesses are consolidated in fiscal 2000 and only consolidated from the date of acquisition in fiscal 1999. The Acquired Businesses are all in the Company's Process Systems segment. Net sales for the third quarter of fiscal 2000 were $104.3 million compared to $103.8 million, an increase of $.5 million or .5% from the same period of the prior year. Year to date sales of $293.6 million decreased $3.4 million or 1.1% from the same period of the prior year. The decreases in pro-forma sales from the same period of the prior year, assuming the Acquired Businesses were acquired at the beginning of fiscal 1999, were $2.8 million or 2.6% for the quarter and $14.6 million or 4.7% year to date. 8 9 The Process Systems segment had sales of $80.3 million in the third quarter of fiscal 2000 compared to $88.7 million in fiscal 1999. Third quarter pro-forma sales decreased $11.7 million, or 12.7%. Year to date sales of $231.5 million decreased $18.2 million or 7.3% from the same period of the prior year. On a pro forma basis, the Process Systems segment year to date sales decreased by $29.2 million, an 11.1% decrease. The weakening of the Euro against the US dollar had a negative translation effect on sales for the third quarter of $2.5 million and the year of $7.0 million. The decline in sales is also attributed to low levels of profitability and capital spending in the chemical industry. Finally, the weak Euro has caused selling price pressures in our UK operations which have continental European competitors. Incoming orders in this segment improved in the first nine months of fiscal 2000 to $247.3 million compared to $240.8 million in the first nine months of fiscal 1999. The improved orders are attributable to continued strength in the pharmaceutical market and some improvement in the wastewater treatment and specialty chemical markets. Backlog in this segment increased to $86 million at the end of the third quarter of fiscal 2000 from $71 million at August 31, 1999. The Energy Systems segment had sales of $24.0 million in the third quarter of fiscal 2000 compared to $15.1 million in fiscal 1999, an increase of 58.5%. The increase in year to date sales is $14.8 million, or 31.3%. These increases reflect the impact of higher crude oil prices. This increase in oil prices has spurred an increase in exploration and production activities. Incoming orders in this segment improved to $65.9 million in the first nine months of fiscal 2000, compared to $47.3 million in the first nine months of fiscal 1999. Backlog increased to $7 million at the end of the third quarter of fiscal 2000 from $3 million at August 31, 1999. The gross margin percentage increased from 33.6% to 35.6% for the quarter and from 33.7% to 34.9% year to date from the prior year periods. These increases are due to the higher sales volumes in the Energy Systems segment, which has higher margin products, and cost savings from the closure of the Company's Fairfield facility. Operating expenses in the third quarter were 21.7% compared to 21.6% in the third quarter of fiscal 1999. Year to date operating expenses have been reduced; however, the decrease in sales has caused operating expenses as a percent of sales to increase slightly to 22.5% from 22.3%. The IBIT before amortization and other as a percentage of net sales in the Process Systems segment was 13.5% for the third quarter of fiscal 2000 compared to 14.8% in the third quarter of fiscal 1999 on a sales decline of $8.4 million. In addition, the negative translation effect of the weak Euro to the US dollar decreased IBIT before amortization and other $.4 million. The year to date IBIT before amortization and other in the Process Systems segment decreased slightly from 13.7% in fiscal 1999 to 13.1% in fiscal 2000 on a sales decline of $18.2 million. The negative translation effect of the weak Euro to the US dollar reduced year to date IBIT before amortization and other by $.8 million. In the Energy Systems segment, the IBIT before amortization and other increased from 12.9% in the third quarter of fiscal 1999 to 22.2% in the third quarter of fiscal 2000. The year to date increase in IBIT before amortization and other is from 12.0% in fiscal 1999 to 19.1% in fiscal 2000. These increases are due to increased sales volumes and the cost savings from the closure of the Company's Fairfield facility. Other expense decreased $3.9 million year to date from the prior year due to $4.9 million of plant closure and other termination costs primarily related to the closure and transfer of operations of the Fairfield, CA, manufacturing plant. Other expense in 1999 was also presented net of equity income of $.1 million and $.6 million for the third quarter and year to date, respectively. The equity income related to UGE and GMM, which are now consolidated. Interest expense is slightly higher for the quarter due to increasing interest rates, but slightly lower on a year to date basis as cash flow from operations has been used to reduce average debt levels from the prior year. The effective tax rate is 36.0% for third quarter and year to date fiscal 2000 compared to 34% for third quarter and year to date fiscal 1999. The increase is from a higher proportion of taxable income in higher tax rate countries and some tax carryforward benefits utilized outside the U.S in fiscal 1999. 9 10 LIQUIDITY AND CAPITAL RESOURCES Cash uses in the first nine months of fiscal 2000 were $13.6 million for capital expenditures, and $6.2 million to purchase Company stock and Convertible Subordinated Notes under the fiscal 2000 share buyback program. Cash generated from operations of $21.6 million and net revolving credit loan borrowings of $1.1 million funded these cash uses. Cash uses in the first nine months of fiscal 1999 were $6.4 million for a loan to UPE, the Company's partner in the UGE joint venture, $4.0 million to purchase treasury stock under the Company's stock buy back program and $7.8 million for capital expenditures. Cash generated from operations of $27.2 million funded these cash uses and also was used to reduce debt by $4.6 million. The Company expects operating cash flow to be adequate for the remainder of fiscal year 2000 operating needs, scheduled debt service, shareholder dividends and other requirements. The major cash requirement for the remainder of fiscal 2000 is planned capital expenditures of approximately $7 million. Capital expenditures are related to additional production capacity, cost reductions and replacement items. The Company started a twelve month program in October 1999 to purchase up to 3%, or about 350,000 shares or share equivalents in Convertible Subordinated Notes. As of May 31, 2000, the Company has purchased 69,700 shares for $1.3 million and $5.3 million face value of Convertible Subordinated Notes (193,651 equivalent shares) for $4.9 million. 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 The Company successfully implemented its plan to address the Year 2000 issue, as previously disclosed. The costs for resolving Year 2000 issues were approximately $1.6 million for fiscal 1998, and $1.8 million for fiscal 1999. Most of these costs were to replace existing software and hardware systems. Costs incurred in fiscal 2000 have been minimal. As of the date of this report the Company has tested all of its critical systems and suppliers and has not had any problems at any of its units. 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 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. 10 11 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, 2000, the Company filed no reports on Form 8-K. 11 12 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: JULY 10, 2000 BY /S/ KEVIN J. BROWN ----------------------- ----------------------------------- KEVIN J. BROWN VICE PRESIDENT & CFO (PRINCIPAL FINANCIAL OFFICER) DATE: JULY 10, 2000 BY /S/ THOMAS J. SCHOCKMAN ----------------------- ----------------------------------- THOMAS J. SCHOCKMAN CORPORATE CONTROLLER (PRINCIPAL ACCOUNTING OFFICER) 12 13 INDEX TO EXHIBITS ----------------- (27) FINANCIAL DATA SCHEDULE 27.1 Financial Data Schedule--May 31, 2000 * * Filed herewith 13