-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FjFb9ziv8Cqc06Z0JligQMs/MRINXO40VvU80aZ6akzxvldibWbcc+8RbOGK+KRx IPCyjDgiMLQUMYNm7nz9Ow== 0000950152-97-008246.txt : 19971125 0000950152-97-008246.hdr.sgml : 19971125 ACCESSION NUMBER: 0000950152-97-008246 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971124 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROBBINS & MYERS INC CENTRAL INDEX KEY: 0000084290 STANDARD INDUSTRIAL CLASSIFICATION: PUMPS & PUMPING EQUIPMENT [3561] IRS NUMBER: 310424220 STATE OF INCORPORATION: OH FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-00288 FILM NUMBER: 97727115 BUSINESS ADDRESS: STREET 1: 1400 KETTERING TWR CITY: DAYTON STATE: OH ZIP: 45423 BUSINESS PHONE: 9472222610 MAIL ADDRESS: STREET 1: 1400 KETTERING TOWER CITY: DAYTON STATE: OH ZIP: 45423 10-K 1 ROBBINS & MYERS, INC. 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20459 FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Commission Ended August 31, 1997 File Number 0-288 - --------------------- ----------------- ROBBINS & MYERS, INC. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) OHIO 31-0424220 - --------------------------- --------------------------- (State of incorporation) (I.R.S. employer identification number) 1400 Kettering Tower, Dayton, Ohio 45423 - ---------------------------------- ------------------- Registrant's telephone number, including area code: (937) 222-2610 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered - --------------------------- ------------------------ NONE NONE Securities registered pursuant to Section 12(g) of the Act: (1) Common Shares, without par value (2) 6 1/2% Convertible Subordinated Notes, Due 2003 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 requirement for at least the past 90 days. Yes [x] No [ ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] 1 2 At the close of business on October 22, 1997 Number of Common Shares, without par value, outstanding..........................10,954,183 Aggregate market value of Common Shares, without par value, held by non-affiliates of the Company..............$273,385,124 DOCUMENT INCORPORATED BY REFERENCE ---------------------------------- Robbins & Myers, Inc., Proxy Statement, dated November 10, 1997, for its Annual Meeting of Shareholders on December 10, 1997, definitive copies of the foregoing have been filed with the Commission. Only such portions of the Proxy Statement as are specifically incorporated by reference under Part III of this Report shall be deemed filed as part of this Report. 2 3 ITEM 1. BUSINESS. - ------- --------- BACKGROUND Robbins & Myers, Inc., an Ohio corporation (the "Company"), designs, manufactures and markets on a global basis high-performance, specialized fluids management products for selected industrial and commercial markets. The Company's four product platforms are glass-lined reactor and storage vessels (38.8% of fiscal 1997 sales), progressing cavity products (30.3%), mixing and turbine agitation equipment (22.1%), and related products, such as engineered systems, fluoropolymer products and valves (8.8%). These percentages for fiscal 1997 were substantially the same as in fiscal 1996. The Company has achieved a leading market share in each of its primary product platforms: the Company believes that it is first worldwide in glass-lined storage and reactor vessels, first in North America in progressing cavity products, and second worldwide in mixing and turbine agitation equipment. The Company also believes that its principal brand names - Pfaudler(R), Moyno(R) and Chemineer(R) - are well-known in the marketplace and are associated with quality products and extensive customer support, including product application engineering, state-of-the-art customer test facilities and strong aftermarket service and support. Since June 1994 the Company has completed nine acquisitions and established three joint venture companies as part of a strategy to leverage its fluids management expertise and its operating capabilities into a portfolio of highly-engineered, fluids management products and services. The most significant of these acquisitions occurred in June 1994 when the Company acquired its Pfaudler(R), Chemineer(R) and Edlon(R) business units. These acquisitions more than tripled the sales of the Company and provided leading worldwide positions in two core product platforms. The Company markets its products globally to energy, industrial and technology companies where the pumping, mixing, treatment, chemical processing, measurement and containment of gases, fluids and particulates are important elements in their production processes. The diverse industries with fluid management needs served by the Company's products are specialty chemicals, pharmaceuticals, oil and gas recovery, wastewater treatment, food and beverage, pulp and paper and waste water treatment. The Company seeks to balance its mix of products and services and maintain overall stability in its operating results principally through increased levels of higher margin aftermarket sales, increased international presence with manufacturing facilities in twelve countries and end market diversification. In fiscal 1997, aftermarket sales to the Company's customers, as well as customers of its competitors, accounted for approximately 34.0% of total sales and international sales accounted for approximately 47.1% of total sales. The Company seeks to continue to grow by (i) capitalizing on the inherent growth of its end markets, particularly high-growth markets such as oil and gas recovery, specialty chemicals, pharmaceuticals, and food additives and supplements, which collectively account for over 75% of the Company's sales; (ii) exploiting acquisition opportunities for industry consolidation within existing markets, specifically the highly fragmented positive displacement pump and industrial mixer industries; (iii) expanding geographically, both internally and through acquisitions, into high-growth emerging markets and market sectors such as the Asia-Pacific Rim, South America 3 4 and Western Canada oilfields; and (iv) establishing new product lines through acquisitions of related fluids management businesses such as valves, seals, filters and grinders. The Company operates in one industry segment--fluids management. Information concerning the Company's net sales, operating income and identifiable assets by geographic area and export sales for the years ended August 31, 1997, 1996 and 1995 is set forth in the "Information by Geographic Area" note to the Consolidated Financial Statements included at Item 8 and is incorporated herein by reference. ACQUISITIONS The Company purchased Process Supply, Inc., Spectrum Products, Inc., and the high shear mixer business of Greerco in February 1997 and Industrie Tycon, S.p.A., the largest of the acquisitions, in May 1997. The total cost of the acquisitions was $48.3 million in cash, Company stock, notes and debt assumed. These businesses accounted for $12.6 million of sales and $3.1 million of operating income in 1997. Since June 1994 the Company has completed nine acquisitions and established three joint venture companies as it continues to expand its capabilities to serve the fluids management needs of its customers on a global basis. On November 20, 1997, the Company entered into a definitive agreement to purchase the stock of Flow Control Equipment Inc. (FCE), from J.M. Huber Corporation. The transaction is anticipated to close in late December, 1997. The net purchase price is approximately $104 million in cash, subject to adjustment at closing. FCE, with annual sales of approximately $60 million, supplies a broad line of products for use in artificial lift applications in the oil and gas recovery market including rod guides, wellhead equipment and valves. FCE also sells closures and valves for gas transmission and distribution applications. MARKETS SERVED The Company markets its fluids management products and services to the process industries - industries in which the pumping, mixing, treatment, chemical reaction, measurement and containment of fluids and particulates are important elements in their manufacturing or production processes. The principal sectors of the process industries served by the Company are oil and gas recovery, pharmaceuticals, specialty chemicals, food and beverage, pulp and paper, and wastewater treatment. The companies included in these sectors of the process industries tend to be large, often with global operations. Capital expenditures for equipment in each sector are driven by a variety of factors, such as market growth rates, new product introduction, globalization and cost control. Economic cycles tend to differ among sectors, and the Company believes that general economic downturns have less of an impact on capital expenditures in the pharmaceuticals, oil and gas recovery, and food and beverage industries. Oil and Gas Recovery. The Company's sales to the oil and gas recovery market include (i) progressing cavity down-hole pumps used in lifting oil to the surface and dewatering of gas wells; (ii) Tri-Phaze pumps used for transferring multiphase fluids (solids, liquids and gases) from oil wells to central processing stations (iii) progressing cavity power sections used to drive the drilling element in directional drilling operations; and (iv) aftermarket products and services such as replacement power sections, relining of down-hole pump stators and replacement of rotors. The Company believes its growth prospects primarily are driven by the trend in the 4 5 industry to adopt the latest oil and gas recovery technologies, including 3-D seismic analysis which, in conjunction with directional drilling methods and versatile down-hole pumps, facilitates recovery of oil and gas from difficult to reach formations. In addition, changing geopolitics have resulted in more countries opening their borders to privatization in the exploration and development of their oil and gas properties. In response to increased demand within the oil and gas recovery market and to maintain its technological advantages, the Company opened a new manufacturing facility and technology center near Houston, Texas dedicated to the production of down-hole pumps and power drilling sections. In 1997, the Company also established a direct sales and distribution system in Western Canada for down-hole pumps, Tri-Phaze pumps and related services. Pharmaceuticals. The Company's products perform critical functions in the production of pharmaceuticals by providing temperature, agitation and pressure-controlled environments for complex chemical reactions which require exact formulations, repeatability and high levels of purity. In addition, the Company's products are reconditioned on a regular basis because of the severe operating conditions to which the Company's products are exposed and the need to maintain a pure processing environment. The Company believes that it will benefit from the long-term trend of high levels of capital expenditure within the pharmaceuticals industry. This trend is driven by the significant industry growth rates from globalization of manufacturing facilities to service emerging markets, development of innovative drugs which often require new process facilities or retrofit of existing facilities and expiration of patents on certain drugs which will result in greater production of generic equivalents. Specialty Chemicals. Substantially all of the Company's products sold to the chemical industry consist of specialized equipment and aftermarket products and services for use in the batch processing of specialty chemicals rather than for use in the continuous processing of commodity chemicals. Unlike commodity chemicals, such as basic petrochemicals and inorganic commodities, specialty chemicals are downstream products, such as intermediate products directed to the pharmaceuticals industry, which are more highly processed and refined. The Company believes that, because producers of specialty chemicals are value-added, strategic suppliers to their customers, pricing pressure and volatility are less severe than in other segments of the chemical industry. Other Markets. The Company's industrial mixer and pump products also serve the food and beverage, pulp and paper and wastewater treatment industries. Long-term growth in these markets should approximate the growth in general economic activity, with certain segments such as food additives and supplements and international markets growing faster than the overall domestic market. 5 6 PRODUCTS Glass-Lined Storage and Reactor Vessels. The Company's Pfaudler and Tycon units manufacture and sell glass-lined reactor and storage vessels and related equipment for use in the pharmaceuticals and specialty chemicals industries. Reactor vessels perform critical functions in the production process by providing a temperature, agitation and pressure controlled environment for often complex chemical reactions. The units fabricate steel vessels and bond glass to the interior of vessels to form a fused composite, which provides a vessel in which materials can be processed or stored in an inert, nonsticking, corrosion-resistant, pressure-controlled environment. Reactor vessels range in capacities from one to 15,000 gallons, are generally custom-ordered and designed and can be equipped with various accessories, such as agitators, instrumentation and baffles. Storage vessels have capacities of up to 25,000 gallons. Aftermarket products and services consist of reconditioning and reglassing reactor vessels, replacement of vessel parts and accessories and field service. PRODUCTS PRIMARY MARKETS SERVED - ---------------------------------------------------- --------------------------- Glasteel(R) Reactor and Storage Vessels Pharmaceuticals Glasteel(R) pH Measurement Systems Specialty Chemicals Cryo-Lock(R) Mixing Systems Pfaudler(R) Mixer Drives Pfaudler(R) Conical Dryers and Blenders Tycon(R) Reactor and Storage Vessels Pfaudler(R) vessels are marketed worldwide under the trade name Glasteel(R) to end-users. Tycon(R) vessels are also marketed worldwide to end users. The industry is dominated by two major suppliers. Robbins & Myers believes that it is currently the largest supplier of vessels, with DeDietrich, a French manufacturer, being the next largest supplier. Progressing Cavity Products. Progressing cavity technology is used in down-hole pumps, Tri-Phaze pumps and power sections for the oil and gas recovery industry, as well as in other process industries, such as specialty chemicals, food and beverage, pulp and paper, and wastewater treatment. A progressing cavity pump consists of a high-strength, single or multiple helix steel rod (called the rotor) which rotates inside an elastomer-lined steel tube (called the stator). The rotor generates positive displacement in the stator to deliver uniform fluid flow at rates proportional to the rotational speed of the rotor. For the oil and gas recovery industry, the Company manufactures and sells down-hole pumps, Tri-Phaze pumps and power sections. The ability of progressing cavity technology to be used in severe pumping applications and also as a hydraulic motor has enabled the Company to become a leader in the development of pumping and directional drilling products. Moyno(R) down-hole pumps are used primarily to pump heavy crude oil to the surface and for dewatering gas wells. Tri-Phaze pumps are used to transfer multiphaze fluids (solids, liquids and gases) through a pipeline to central processing stations. Moyno(R) down-hole power sections utilize progressing cavity technology to drive the drilling element in oil and gas drilling. 6 7 For other process industries, the Company markets a wide range of progressing cavity pumps under the brand names Moyno(R) and R&M(R). Progressing cavity pumps are versatile, as they can be positioned at any angle and can deliver flow in either direction without modification or accessories. These pumps are able to handle fluids ranging from high pressure water and shear-sensitive materials to heavy, viscous, abrasive, solid-laden slurries and sludges. Aftermarket products and services consist of replacement power sections, relining of the elastomer component of down-hole pump stators and replacement of rotors. PRODUCTS PRIMARY MARKETS SERVED - ----------------------------------------------------- ------------------------- Moyno(R) Down-Hole Pumps Oil and Gas Recovery R&M(R) Tri-Phaze Pumps Food and Beverage Moyno(R) Power Sections for Down-Hole Motors Pulp and Paper R&M(R) Progressing Cavity Pumps Wastewater Treatment Moyno(R) Progressing Cavity Pumps Speciality Chemicals While the Company believes it is the world leader in the manufacture of progressing cavity pumps, the market is highly competitive and includes many different types of similar equipment and a significant number of competitors, none of which is dominant. The Company is recognized for its high levels of product quality and attention to customer requirements. Mixing and Turbine Agitation Equipment. The Company's industrial mixers and turbine agitation equipment are used in a variety of applications, ranging from simple storage tank agitation to critical applications in polymerization and fermentation processes. Industrial mixers are sold under the Chemineer(R), Valchem(R), Prochem(R), Kenics(R) and Greerco(R) brand names. Chemineer(R) products include a line of high-quality turbine agitators. These gear-driven agitators are available in various sizes, a wide selection of mounting methods, and drive ranges from one to 1,000 horsepower. The Chemineer(R) line also includes top-entry turbine agitators with drive ranges from one-half to five horsepower, designed for less demanding applications, and a line of portable gear-driven and direct drive mixers, which can be clamp mounted to tanks to handle batch mixing needs. The principal markets for Chemineer(R) products are the specialty chemicals, pharmaceuticals, food and beverage, and wastewater treatment industries. Prochem(R) industrial mixers are principally belt-driven, side-entry mixers used primarily in the pulp and paper, mining and mineral processing industries. Kenics(R) mixers are continuous mixing and processing devices, with no moving parts, which are used in specialized static mixing and heat transfer applications. Greerco(R) mixers are high-shear mixers used primarily for paint, cosmetics, plastics and adhesive applications, as well as for specialty chemicals and pharmaceuticals. Aftermarket products and services consist of replacement parts, such as impellers and gear boxes, as well as field service. 7 8 PRODUCTS PRIMARY MARKETS SERVED - ---------------------------------------------------- -------------------------- Chemineer(R) Top-and Side Entry Mixers Specialty Chemicals Chemineer(R) Portable Mixers Wastewater Treatment Valchem(R) Portable Mixers Food and Beverage Kenics(R) Static Mixers & Heat Exchangers Pharmaceuticals Prochem(R) Top-and Side-Entry Mixers Pulp and Paper Prochem(R) Specialty Mixers Greerco(R) High Shear Mixers The mixer and agitation equipment industry is highly competitive. Three companies account for a significant portion of domestic sales, but compete with the numerous smaller companies. The Company believes that Lightnin, a unit of General Signal Corporation, has the largest share of the global market, with the Company being number two in market share. The Company believes that its application engineering know-how, diverse products, product quality and customer support allow it to compete effectively in the market place. Related Products. The Company also manufactures and markets to the process industries several products which complement its principal products. These related products include engineered systems, fluoropolymer products and valves. The Company's engineered systems group designs and sells fluid heating/cooling systems used with reactor vessels to control fluid temperature in the manufacture and processing of pharmaceuticals and speciality chemicals. The engineered systems group also designs and sells fluid separators, known as wiped film evaporators. The Company maintains a computer-controlled pilot plant test facility for use by engineers from the Company and its customers to determine and evaluate operating parameters in the production and processing of pharmaceuticals, speciality chemicals and other products. The Company's Edlon/PSI unit manufactures and markets fluoropolymer roll covers and liners for process equipment, isostatically molded liners for pipe and flowmeters and vessel and piping accessories. Edlon/PSI's products are used principally in the specialty chemicals, pharmaceuticals and electronics industries to provide corrosion-resistant environments and in the paper industry for release properties. PRODUCTS PRIMARY MARKETS SERVED - ----------------------------------------------------- ------------------------- Pfaudler(R) Engineered Systems Pharmaceuticals Pfaudler(R) Wiped Film Evaporators Specialty Chemicals Edlon/PSI Custom Linings & Coatings Electronics Edlon/PSI Roll Covering Products Pulp and Paper Edlon/PSI Fluoropolymer Products Wastewater Treatment RKL(R) Pinch Valves RKL(R) Pressure Sensors 8 9 SALES AND MARKETING The marketing and sale of Company products generally involves outside sales efforts supported by numerous internal sales personnel, application engineers and, in many cases, the joint utilization of the Company's test and development facilities by Company and customer engineers. Distributors and manufacturers' representatives are supported by Company-maintained regional offices and educational and training programs. The specialized nature of the Company's products requires multiple methods of distribution, depending upon product line and end-use application. Pfaudler(R) and Tycon(R) glass-lined reactor and storage vessels and accessories are sold directly to end-users by a Company-employed direct sales force of approximately 30 persons, approximately 20 of whom are based outside the United States, and manufacturers' representatives. Pfaudler(R) and Tycon(R) are particularly focused on continuing to develop preferred supplier relationships with major pharmaceutical and specialty chemical companies as they continue to expand their production operations in emerging markets. Chemineer(R) industrial mixers and agitation equipment are sold directly through regional sales offices and through a network of approximately 125 domestic and 30 international manufacturers' representatives. The Company maintains regional sales offices for such equipment in Dayton, Ohio, Houston, Texas, Toronto, Canada, Singapore, Taiwan and China. Moyno(R) progressing cavity pumps (other than for oil and gas recovery applications) are sold worldwide through approximately 55 domestic and 30 international distributors and 40 domestic and 15 international manufacturers' representatives. The Company maintains 11 regional sales offices for this equipment. Sales efforts for Moyno(R) down-hole pumps and R&M(R) Tri-Phaze pumps are directed by Company product managers who work closely with the Company's principal domestic distributor, which maintains approximately 90 outlets capable of handling pump sales. In 1997, the Company established a direct sales and distribution system in the Western Canada oilfield region. Additional distributor relationships have been established for these products in South America, the former Soviet Union, and the Pacific Rim. Moyno(R) power sections for use in down-hole drilling are sold by a direct sales force to motor manufacturers and oilfield service companies. GENERAL At August 31, 1997, and 1996 the Company's order backlog was $110.0 million. Within the next twelve months, the Company expects to ship over 99% of the current backlog. Sales of the Company's products are not subject to material seasonal fluctuations. Basic manufacturing raw materials are purchased from various domestic and foreign vendors. The supply of raw materials and components has been adequate and available without significant delivery delays. No events are known or anticipated that would change the sources and availability of raw materials. The Company owns a number of patents relating to the design and manufacture of its products. While the Company considers these patents important to its operations, it believes that the successful manufacture and sale of its products depend more upon technological know-how 9 10 and manufacturing skills. The Company is committed to maintaining high quality manufacturing standards and has completed ISO certification at several facilities. During 1997, the Company spent approximately $2.0 million on research and development activities compared to $2.6 million and $2.4 million in 1996 and 1995, respectively. Compliance with federal, state and local laws regulating the discharge of materials into the environment is not anticipated to have any material effect upon the capital expenditures, earnings or competitive position of the Company. At August 31, 1997, the Company had approximately 3,000 employees, which includes approximately 200 at majority-owned joint ventures. Approximately 1,000 of these employees were covered by collective bargaining agreements at various locations. In fiscal year 1998 the Company has one labor contract expiring related to approximately 200 employees at the Company's Chemineer facility in Dayton, Ohio. The Company considers labor relations at each of its locations to be good. 10 11 ITEM 2. PROPERTIES FACILITIES The Company's executive offices are located in Dayton, Ohio. The executives offices are leased and occupy approximately 10,000 square feet. Set forth below is certain information relating to the Company's principal operating facilities.
SQUARE PRODUCT MANUFACTURED OR LOCATION FOOTAGE OTHER USE OF FACILITY - ----------------------------------------------------------------------------------------------------------------------- NORTH AND SOUTH AMERICA: Rochester, New York 500,000 Glass-lined vessels Springfield, Ohio 272,800 Progressing cavity pumps and pinch valves Dayton, Ohio 160,000 (1) Turbine agitators and mixers Conroe, Texas 110,000 (2) Down-hole pumps and power sections Mexico City, Mexico 110,000 Glass-lined vessels Taubate, Brazil 100,000 Glass-lined vessels Fairfield, California 60,000 Down-hole pumps and power sections Avondale, Pennsylvania 50,000 Fluoropolymer products North Andover, Massachusetts 30,000 (1) Static mixers and heat exchangers Sao Jose Dos Campos, Brazil 30,000 Air handlers Rochester, New York 10,000 (1) Parts and field service for glass-lined vessels Charleston, West Virginia 75,000 Fluoropolymer products EUROPE: Schwetzingen, Germany 400,000 Glass-lined vessels Leven, Scotland 240,000 Glass-lined vessels, and fluoropolymer products Bilston, England 50,000 Parts and reglassing for glass-lined vessels Derby, England 20,000 (1) Turbine agitators and mixers Petit-Rechain, Belgium 15,000 Power sections Kearsley, England 14,000 Parts and field service for glass-lined vessels Bolton, England 14,000 Gaskets for glass-lined vessels Southampton, England 10,000 (1) Assembly operation for progressing cavity pumps San Dona di Piave, Italy 90,000 Glass-lined vessels ASIA: Gujurat, India 350,000 (3) Glass-lined vessels Suzhou, China 150,000 (4) Glass-lined vessels Singapore 5,000 (1) Assembly operation for progressing cavity pumps (1) Leased facility. (2) New facility opened in 1997. (3) Facility of a 40%-owned affiliate. (4) Facility of a 60%-owned subsidiary.
At August 31, 1997, utilization of plants was approximately 95%. 11 12 ITEM 3. LEGAL PROCEEDINGS - ------- ----------------- The Company is presently not a party to any material legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- --------------------------------------------------- None. 12 13 EXECUTIVE OFFICERS OF THE REGISTRANT Maynard H. Murch IV, age 53, has been Chairman of the Board of the Company since July, 1979 and a director of the Company since 1977. Mr. Murch is also President and Chief Executive Officer of Maynard H. Murch Co., Inc. (investments), which is managing general partner of M.H.M. & Co., Ltd. (investments). Mr. Murch is also Vice President (since June, 1976) of Parker/Hunter Incorporated (dealer in securities), a successor firm to Murch and Co., Inc., a securities firm which Mr. Murch had been associated with since 1968. Daniel W. Duval, age 61, has been President and Chief Executive Officer of the Company and a director of the Company since December 3, 1986. Prior to joining the Company, he was President and Chief Operating Officer of Midland-Ross Corporation (a manufacturer of electrical, electronic and aerospace products and thermal systems) having held various positions with that company since 1960. Gerald L. Connelly, age 56, is Executive Vice President and Chief Operating Officer of the Company, having been elected to that position on May 1, 1996. He is also President of Pfaudler, Inc. He was President of the Process Industries Group of Eagle Industries, Inc. from 1993 until joining the Company. Previously, he served as President of Pulsafeeder, Inc. (metering pumps) for ten years. George M. Walker, age 60, is Vice President and Chief Financial Officer of the Company, having been elected to that position in 1972. From 1968 to 1972, he held various positions with the Company in the areas of finance and accounting, including the position of Controller. Prior to 1968, he was employed by the accounting firm of Ernst & Young LLP for eight years. Stephen R. Ley, age 41, is Treasurer of the Company, having been elected to that position on December 11, 1996. Since joining the Company in 1994, he held the positions of Director, Financial Planning and Accounting at Corporate and Vice President, Finance and Chief Financial Officer at Pfaudler, Inc. From 1987 to 1994 he held various positions with Eagle Industries in the areas of finance and accounting. Prior to joining Eagle Industries, he was employed by the accounting firm of Arthur Andersen LLP for nine years. Kevin J. Brown, age 39, is Corporate Controller of the Company, having been elected to that position on December 12, 1995 after joining the Company on October 10, 1995. Prior to joining the Company, he was employed by the accounting firm of Ernst & Young LLP for fifteen years. Joseph M. Rigot, age 54, is Secretary and General Counsel of the Company, having been elected to that position in 1990. He has been a partner with the law firm of Thompson Hine & Flory L.L.P. Dayton, Ohio, for more than five years. The term of office of all executive officers of the Company is until the next Annual Meeting of Directors (December 10, 1997) or until their respective successors are elected. 13 14 PART II ------- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED - ------- ----------------------------------------------------- STOCKHOLDER MATTERS ------------------- (A) The Company's common shares are traded on the NASDAQ/National Market System under the symbol ROBN. The prices presented in the following table are the high and low sales prices for the common shares for the periods presented as reported in the National Market System.
Dividends High Low Paid ----------- --------------- ---------------- Fiscal 1997 - --------------- 1st Quarter $25.000 $20.000 $.04375 2nd Quarter 29.500 22.250 .0500 3rd Quarter 34.750 24.250 .0500 4th Quarter 36.750 32.000 .0500 Fiscal 1996 - --------------- 1st Quarter $17.500 $13.625 $.03750 2nd Quarter 16.500 13.625 .04375 3rd Quarter 23.500 14.750 .04375 4th Quarter 26.500 21.000 .04375
(B) As of October 22, 1997, the Company had approximately 625 shareholders of record. Based on requests from brokers and other nominees, the Company estimates there are approximately an additional 2,100 shareholders. (C) Dividends paid on common shares are presented in the table in Item 5(a). The Company's credit agreements include certain covenants which restrict the Company's payment of dividends. The amount of cash dividends the Company may pay in each fiscal year is restricted to the greater of $2,500,000 or 20% of the Company's net income for the immediately preceding fiscal year. Under this formula, cash dividends in 1998 are limited to approximately $5.8 million. 14 15 ITEM 6. SELECTED FINANCIAL DATA - ------- -----------------------
FIVE YEAR FINANCIAL HIGHLIGHTS Robbins & Myers, Inc. and Subsidiaries (In thousands, except per share, shareholder and employee data) 1997 (1) 1996 1995 (1) 1994 (1) 1993 ----------- ----------- ----------- ---------- ---------- Operating Results Net sales $ 385,663 $ 350,964 $ 302,952 $ 121,647 $ 85,057 Gross profit 138,781 119,030 101,304 44,981 32,761 Operating expenses 89,772 80,272 74,234 28,733 22,171 Operating income 49,521 39,455 26,320 12,102 8,400 Income before special items 28,866 20,338 11,825 6,355 6,178 Special items, net of tax (2) 0 (813) 1,332 0 (8,018) --------- --------- --------- --------- -------- Net income (loss) $ 28,866 $ 19,525 $ 13,157 $ 6,355 ($ 1,840) ========= ========= ========= ========= ======== Depreciation and amortization $ 15,963 $ 13,877 $ 12,401 $ 4,594 $ 2,798 Capital expenditures 22,071 16,453 10,133 6,798 2,579 Cash flow from operating activities 35,246 32,060 33,017 14,601 7,533 Ending backlog 110,078 109,921 107,423 73,944 20,248 Financial Condition Total assets $ 372,354 $ 300,340 $ 270,407 $ 258,130 $ 84,636 Total debt 116,083 73,533 67,901 83,790 971 Shareholders' equity 124,475 91,437 69,939 57,039 52,342 Total capitalization 240,558 164,970 137,840 140,829 53,313 Performance Statistics Percent of net sales Gross profit 36.0% 33.9% 33.4% 37.0% 38.5% Operating expenses 23.3 22.9 24.5 23.6 26.1 Operating income 12.8 11.2 8.7 9.9 9.9 Income before special items 7.5 5.8 3.9 5.2 7.3 Net income 7.5 5.6 4.3 5.2 (2.2) Debt as a % of total capitalization 48.3 44.6 49.3 59.5 1.8 Return on shareholders' equity (3) 26.7 25.2 18.6 11.6 11.4 Price/earnings ratio at August 31 14.4:1 12.5:1 11.3:1 15.5:1 NA Per Share Data (4) Income (loss) per share, fully diluted: Before special items $ 2.26 $ 1.83 $ 1.09 $ 0.61 $ 0.59 Special items, net of tax (2) 0 (0.07) 0.12 0 (0.76) --------- --------- --------- --------- -------- Net income (loss) per share $ 2.26 $ 1.76 $ 1.21 $ 0.61 ($ 0.17) ========= ========= ========= ========= ======== Shareholders' equity (book value) $ 11.38 $ 8.63 $ 6.72 $ 5.55 $ 5.14 Dividends declared 0.1938 0.1688 0.1500 0.1438 0.1188 Market price of common stock: High $ 36 3/4 $ 26 1/2 $ 14 3/8 $ 10 3/8 $ 10 3/4 Low 20 13 5/8 8 1/4 7 3/4 6 1/2 Close 32 5/8 22 13 23/32 9 3/8 9 3/8 Other Data Weighted average common shares outstanding, fully diluted (4) 13,798 11,107 10,874 10,504 10,514 Number of shareholders (5) 2,723 1,632 1,520 1,098 1,295 Number of employees 2,947 2,459 2,337 2,226 615 Notes to Five-Year Financial Highlights (1) 1997 reflects the acquisitions of Process Supply Inc., Spectrum Products, Inc., Greerco and Industrie Tycon, S.p.A., and 1995 reflects the acquisition of Pharaoh and Cannon as discussed in the Business Acquisitions note, and 1994 reflects the acquisition of Pfaudler, Chemineer and Edlon. (2) Special items are: 1996 and 1995 extinguishment of debt and 1993 cumulative effects of accounting changes. (3) Calculated using Income Before Special Items using average shareholder's equity. (4) 1997 reflects an additional 2,385,000 shares related to the convertible note issuance and 1995, 1994 and 1993 are adjusted to reflect 2 for 1 stock split effective July 31, 1996. (5) As of September 2 , 1997, the Company had 626 shareholders of record. Based on requests from brokers and other nominees, the Company estimates there are an additional 2,097 shareholders.
15 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL - ------- ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- OVERVIEW The Company purchased Process Supply, Inc., Spectrum Products, Inc., and the high shear mixer business of Greerco in February 1997 and Industrie Tycon, S.p.A., the largest of the acquisitions, in May 1997. The total cost of the acquisitions was $48.3 million in cash, Company stock, notes and debt assumed. These businesses accounted for $12.6 million of sales and $3.1 million of operating income in 1997. Since June 1994 the Company has completed nine acquisitions and established three joint venture companies as it continues to expand its capabilities to serve the fluids management needs of its customers on a global basis. Sales to non-U.S. customers ranged from 41.2% to 47.1% of total Company sales for fiscal 1997, 1996 and 1995. Profitability of the non-U.S. business units of the Company was less than the U.S. business units. Operating income as a percent of net sales for the non-U.S. business units increased to 11.8% for fiscal 1997 from 10.1% for fiscal 1996 and from 7.7% for fiscal 1995. The improvement was primarily the result of ongoing cost reduction programs. Changes in exchange rates for fiscal 1997, 1996 and 1995 did not significantly impact sales and income levels of the Company. The Company's significant non-U.S. operations have their local currency as their functional currency and primarily buy and sell using the same currency. For significant transactions that are in another currency, the Company hedges the risk of future currency fluctuations through foreign currency forward contracts with major financial institutions. The Company seeks to balance its mix of products and services and maintain overall stability in its operating results principally through increased levels of aftermarket sales, increased non-U.S. sales and end market diversification. Aftermarket sales accounted for 34.0% of total Company sales for fiscal 1997 and 35.0% for fiscal 1996. The Company's primary markets are specialty chemicals, pharmaceuticals, oil and gas recovery, wastewater treatment, food and pulp and paper. RESULTS OF OPERATIONS The following table presents the components of the Company's statement of income as a percent of net sales for fiscal 1997, 1996 and 1995. 16 17
Year Ended August 31, 1997 1996 1995 -------- --------- --------- Net sales 100.0% 100.0% 100.0% Cost of sales 64.0 66.1 66.6 ----- ----- ----- Gross profit 36.0 33.9 33.4 Operating expenses 23.3 22.9 24.5 Other (income) expense (0.1) (0.2) 0.2 ----- ----- ----- Operating income 12.8 11.2 8.7 Interest expense 1.6 2.0 2.4 ----- ----- ----- Income before income taxes and special items 11.2 9.2 6.3 Income taxes 3.7 3.4 2.4 ----- ----- ----- Income before special items 7.5 5.8 3.9 Special items, net of tax 0.0 (0.2) 0.4 ----- ----- ----- Net income 7.5% 5.6% 4.3% ===== ===== =====
FISCAL 1997 COMPARED TO FISCAL 1996---Net sales of $385.7 million for fiscal 1997 were $34.7 million, or 9.9% higher than for fiscal 1996. This increase was due to strong demand for the Company's mixing, glass-lined vessels and oilfield products and $12.6 million attributed to 1997 acquisitions. Net income of $28.9 million was 47.8% higher than for fiscal 1996. Fully-diluted income per share rose 28.4% to $2.26 compared to $1.76 for 1996. Incoming business continues to be steady and the Company's backlog of $110.1 million at August 31, 1997 is at the same level as the end of the prior year. The gross margin percent increased from 33.9% for fiscal 1996 to 36.0% for fiscal 1997 due to higher sales volume, cost containment and positive contribution from the 1997 acquisitions. These benefits were particularly evident in the Company's European businesses where operating margins increased to 12.2% in fiscal 1997 from 7.9% in fiscal 1996. Operating expenses as a percent of net sales increased slightly from 22.9% for fiscal 1996 to 23.3% for fiscal 1997 due to the establishment of a direct sales force to serve oilfield customers in Canada, start-up costs associated with Moyno Oilfield Products' new manufacturing plant in Houston, Texas and Pfaudler's joint venture in China. Other (income) expense for fiscal 1997 includes income from joint ventures of $2.3 million, or 0.6% of net sales for fiscal 1997, and $2.0 million, or 0.6% of net sales for fiscal 1996. Interest expense decreased to $6.4 million for fiscal 1997 from $7.1 million for fiscal 1996. Interest expense has been favorably impacted by lower interest rates of approximately 1% associated with the $65.0 million of convertible subordinated notes issued in September and the new senior debt agreement entered into in November of the first quarter of fiscal 1997. This is partially offset by higher average debt balances related to the 1997 acquisitions. The effective income tax rate was 33.0% for fiscal 1997 compared to 37.0% for fiscal 1996. The effective income tax rate for fiscal 1997 reflects the benefit of realization of non-U.S. 17 18 loss carryforwards and a greater proportion of income before taxes being generated in countries outside the U.S. where the effective tax rate is lower than the U.S. rate. Net deferred income tax assets of $6.4 million at August 31, 1997 primarily relate to U.S. operations. Future pretax income at fiscal 1997 levels would be sufficient to realize these assets. FISCAL 1996 COMPARED TO FISCAL 1995--Net sales of $351.0 million for fiscal 1996 were 15.8% higher than for fiscal 1995 due primarily to strong market demand for the Company's mixing, glass-lined vessels and oilfield products. Net income of $19.5 million was 48.4% higher than for fiscal 1995. Earnings per share of $1.76, fully diluted, were 45.5% higher than for fiscal 1995. Company backlog was $110.0 million at August 31, 1996, $2.6 million higher than at August 31, 1995. The gross profit percent increased from 33.4% for fiscal 1995 to 33.9% for fiscal 1996 due to higher sales volume and cost reduction programs implemented by the Company. Operating expenses as a percent of net sales decreased from 24.5% for fiscal 1995 to 22.9% for fiscal 1996 due to higher sales volume, the fixed nature of certain of these expenses and cost reduction programs implemented during the year. Profitability for fiscal 1996 was also increased from fiscal 1995 due to continued improvements in the Company's non-U.S. businesses. These improvements were due to cost reduction programs, including the consolidation of Prochem production into the Chemineer facility. Other (income) expense for fiscal 1995 included a one-time write-off of the Company's investment in Hazleton Environmental of $1.6 million, or 0.5% of net sales. The Company has no further ongoing exposure to future losses related to this investment. This category also includes income from joint ventures of $2.0 million, or 0.6% of net sales for fiscal 1996, and $1.6 million, or 0.5% of net sales for fiscal 1995. One of the joint ventures, Universal Glasteel Equipment, commenced operations on March 1, 1995. Activities related to restructuring charges provided for in fiscal 1994, principally in connection with the acquisitions, were substantially completed during fiscal 1996. Actual payments were consistent with original estimates in total and by component. Interest expense decreased to $7.1 million for fiscal 1996 from $7.3 million for fiscal 1995 due to slightly lower average borrowings and interest rates for fiscal 1996. The effective income tax rate was 37.0% for fiscal 1996 compared to 37.9% for fiscal 1995. The effective income tax rate for fiscal 1995 reflects the nondeductibility of a portion of the write-off of the investment in Hazleton Environmental. Net deferred income tax assets of $7.3 million at August 31, 1996 primarily relate to U.S. operations. Future pretax income at fiscal 1996 levels would be sufficient to realize these assets. The Company realized an extraordinary loss for fiscal 1996 of $0.8 million from the early extinguishment of $25.0 million of subordinated debt with a book value of $23.6 million. The Company realized an extraordinary gain for fiscal 1995 of $1.3 million related to the early extinguishment of $25.0 million of subordinated debt with a book value of $22.3 million. 18 19 LIQUIDITY AND CAPITAL RESOURCES The Company anticipates capital expenditures of $24.8 million for fiscal 1998. The Company expects cash flow from operating activities to be adequate for operating needs, including scheduled debt service, planned capital expenditures and shareholder dividend requirements for fiscal 1998. There are no significant restrictions on the Company's ability to transfer funds from its non-U.S. subsidiaries to the Company. In fiscal 1997, cash flow from operating activities of $35.2 million and net debt borrowings of $31.5 million generated $66.7 million of cash. In addition to an increase in cash balances of $3.2 million, significant cash uses for the year were $36.4 million for acquisitions, $3.7 million for the purchase of treasury stock used for a portion of the cost of the acquisitions, capital expenditures of $22.1 million and dividend payments of $2.1 million. In fiscal 1996, cash flow from operating activities was $32.1 million. This cash flow, supplemented by a $3.1 million reduction in available cash, was used for capital expenditures of $16.5 million, to retire 3.8 million outstanding stock appreciation rights for $18.9 million and to pay dividend of $1.8 million. On November 26, 1996, the Company entered into a $150.0 million bank credit agreement. The terms of this facility are generally more favorable than the prior facility. At August 31, 1997, the Company had approximately $98.7 million available under the facility which management believes is adequate to meet its needs, including potential acquisitions. Additionally, on September 23, 1996, the Company strengthened the balance sheet with the successful issuance of convertible notes. Net proceeds from the sale of $65.0 million of 6.5% Convertible Subordinated Notes due 2003 ("Notes") were used to repay $63.0 million of its bank indebtedness. Assuming the Notes had been converted at August 31, 1997, the Company's debt-to-total capital ratio would be lowered to 20 percent from 48 percent. If the Notes had been outstanding for all of fiscal 1996, the Company's fully diluted earnings per share would have been reduced from $1.76 to $1.66. In addition to historical information, this Annual Report contains various forward-looking statements and performance trends which are subject to certain risks and uncertainties that could cause actual results to differ materially from these statements and trends. Such factors include, but are not limited to, a significant decline in capital expenditure levels in the Company's served markets, a major decline in oil and gas prices, foreign exchange rate fluctuations, continued availability of acceptable acquisition candidates and general economic conditions that can affect the demand in the process industries. 19 20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ------- ------------------------------------------- CONSOLIDATED BALANCE SHEET Robbins & Myers, Inc. and Subsidiaries ($ in thousands)
August 31, 1997 1996 ------------ ------------- ASSETS Current Assets: Cash and cash equivalents $10,304 $7,121 Accounts receivable, less allowances 60,668 51,158 Inventories 50,489 48,417 Other current assets 2,491 2,184 Deferred taxes 6,376 5,180 ------------ ------------- Total Current Assets 130,328 114,060 Goodwill 125,231 95,101 Other Intangible Assets 19,744 13,068 Deferred Taxes 0 2,101 Other Assets 4,282 3,896 Net Property, Plant and Equipment 92,769 72,114 ------------ ------------- $372,354 $300,340 ============ ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $28,254 $25,478 Accrued expenses 50,384 49,614 Current portion long-term debt 4,085 1,348 ------------ ------------- Total Current Liabilities 82,723 76,440 Long-Term Debt - Less Current Portion 111,998 72,185 Other Long-Term Liabilities 53,158 60,278 Shareholders' Equity: Common stock-without par value: Authorized shares-25,000,000 Issued shares- 11,079,489 (10,868,002 in 1996) 32,020 26,617 Treasury shares- 141,938 (270,610 in 1996) (2,211) (2,481) Retained earnings 93,735 66,996 Equity adjustment for foreign currency translation 1,262 655 Equity adjustment to recognize minimum pension liability (331) (350) ------------ ------------- 124,475 91,437 ------------ ------------- $372,354 $300,340 ============ =============
See Notes to Consolidated Financial Statements 20 21 CONSOLIDATED INCOME STATEMENT Robbins & Myers, Inc. and Subsidiaries ($ in thousands, except per share data)
Years ended August 31, 1997 1996 1995 --------- --------- --------- Net sales $ 385,663 $ 350,964 $ 302,952 Cost of sales 246,882 231,934 201,648 --------- --------- --------- Gross profit 138,781 119,030 101,304 Operating expenses 89,772 80,272 74,234 Other (income) expense (512) (697) 750 --------- --------- --------- Operating income 49,521 39,455 26,320 Interest expense 6,437 7,076 7,287 --------- --------- --------- Income before income taxes and extraordinary items 43,084 32,379 19,033 Income taxes 14,218 12,041 7,208 --------- --------- --------- Income before extraordinary items 28,866 20,338 11,825 Extraordinary items, net of income taxes: (Loss) gain on extinguishment of debt 0 (813) 1,332 --------- --------- --------- Net income $ 28,866 $ 19,525 $ 13,157 ========= ========= ========= Net income per share: Primary: Before extraordinary items $ 2.52 $ 1.84 $ 1.09 Extraordinary items, net of taxes 0 (0.07) 0.13 --------- --------- --------- Total $ 2.52 $ 1.77 $ 1.22 ========= ========= ========= Fully diluted: Before extraordinary items $ 2.26 $ 1.83 $ 1.09 Extraordinary items, net of taxes 0 (0.07) 0.12 --------- --------- --------- Total $ 2.26 $ 1.76 $ 1.21 ========= ========= =========
See Notes to Consolidated Financial Statements 21 22 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Robbins & Myers, Inc. and Subsidiaries ($ in thousands, except per share data)
Foreign Minimum Common Treasury Retained Currency Pension Shares Shares Earnings Translation Liability Total ---------- ---------- ----------- ------------- ----------- --------- Balance at September 1, 1994 $21,688 ($2,115) $37,656 $211 ($401) $57,039 Net income 13,157 13,157 Cash dividends declared, $0.15 per share (1,559) (1,559) Stock options exercised, 92,200 shares 290 290 Proceeds from sale of 26,110 shares to employee benefit plans 73 195 268 Performance stock awards 603 603 Cost of 3,710 shares purchased (52) (52) Change in foreign currency translation 566 566 Change in minimum pension liability (373) (373) ---------- ---------- ----------- ------------- ----------- --------- Balance at August 31, 1995 22,654 (1,972) 49,254 777 (774) 69,939 Net income 19,525 19,525 Cash dividends declared, $0.17 per share (1,783) (1,783) Stock options exercised, 113,066 shares 410 410 Proceeds from sale of 40,344 shares to employee benefit plans 295 370 665 Performance stock awards 1,050 1,050 Retirement of SAR's for common stock 1,700 1,700 Cost of 39,344 shares purchased (879) (879) Tax benefits of stock options exercised 508 508 Change in foreign currency translation (122) (122) Change in minimum pension liability 424 424 ---------- ---------- ----------- ------------- ----------- --------- Balance at August 31, 1996 26,617 (2,481) 66,996 655 (350) 91,437 Net income 28,866 28,866 Cash dividends declared, $0.19 per share (2,127) (2,127) Stock options exercised, 91,750 shares 641 641 Proceeds from sale of 40,293 shares to employee benefit plans 446 627 1,073 Value of 238,000 shares used for purchase of Process Supply, Inc. 2,751 3,706 6,457 Performance stock awards 1,300 1,300 Cost of 149,621 shares purchased (4,063) (4,063) Tax benefits of stock options exercised 265 265 Change in foreign currency translation 607 607 Change in minimum pension liability 19 19 ---------- ---------- ----------- ------------- ----------- --------- Balance at August 31, 1997 $32,020 ($2,211) $93,735 $1,262 ($331) $124,475 ========== ========== =========== ============= =========== =========
See Notes to Consolidated Financial Statements 22 23 STATEMENT OF CONSOLIDATED CASH FLOWS Robbins & Myers, Inc. and Subsidiaries ($ in thousands)
Years Ended August 31, 1997 1996 1995 --------- --------- --------- OPERATING ACTIVITIES: Net income $ 28,866 $ 19,525 $ 13,157 Adjustment required to reconcile net income to net cash and cash equivalents provided by operating activities: Depreciation 10,793 9,382 8,549 Amortization 5,170 4,495 3,852 Deferred taxes 889 (220) (800) Equity income from unconsolidated investments (1,855) (400) (944) Loss (gain) from extinguishment of debt 0 1,355 (2,183) Performance stock awards 1,300 1,050 603 Changes in operating assets and liabilities - excluding the effects of the purchases of Process Supply, Spectrum Products, Greerco and Tycon in 1997 and Pharaoh and Cannon in 1995 Accounts receivable, less allowances (6,610) (1,804) (7,204) Inventories 1,446 (5,302) (1,571) Other current assets 551 308 2,236 Other assets 145 868 659 Accounts payable (2,350) 3,036 5,273 Accrued expenses (528) 424 9,605 Other long-term liabilities (2,571) (657) 1,785 --------- --------- --------- Net cash and cash equivalents provided by operating activities 35,246 32,060 33,017 INVESTING ACTIVITIES: Capital expenditures, net of nominal disposals (22,071) (16,453) (10,133) Purchase of Process Supply, Spectrum Products, Greerco and Tycon (36,422) 0 0 Purchase of Pharaoh and Cannon 0 0 (12,898) --------- --------- --------- Net cash and cash equivalents used for investing activities (58,493) (16,453) (23,031) FINANCING ACTIVITIES: Proceeds from debt borrowings 148,939 92,565 67,375 Payments of long-term debt (117,461) (90,781) (82,205) Retirement of SAR's and other acquisition costs (837) (19,401) 0 Proceeds from sale of common stock 1,979 1,583 534 Purchase of common stock (4,063) (879) 0 Dividends paid (2,127) (1,783) (1,559) --------- --------- --------- Net cash and cash equivalents provided (used) by financing activities 26,430 (18,696) (15,855) --------- --------- --------- Increase (decrease) in cash and cash equivalents 3,183 (3,089) (5,869) Cash and cash equivalents at beginning of year 7,121 10,210 16,079 --------- --------- --------- Cash and cash equivalents at end of year $ 10,304 $ 7,121 $ 10,210 ========= ========= =========
See Notes to Consolidated Financial Statements 23 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Robbins & Myers, Inc. and Subsidiaries SUMMARY OF ACCOUNTING POLICIES CONSOLIDATION The consolidated financial statements include accounts of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated upon consolidation. All of the Company's operations are conducted in the fluids management industry. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. ACCOUNTS RECEIVABLE Accounts receivable are stated net of allowances for doubtful accounts totaling $1,097,000 and $1,195,000 at August 31, 1997 and 1996, respectively. Accounts receivable relate primarily to customers located in North America and Western Europe and are concentrated in the specialty chemical, pharmaceutical and oil and gas industries. To reduce credit risk, the Company performs credit investigations prior to accepting an order and, when necessary, requires letters of credit to insure payment. INVENTORIES Domestic inventories are stated at the lower of cost or market determined by the last-in, first-out (LIFO) method. At August 31, 1997 and 1996, the difference between estimated current replacement cost and the stated LIFO value was approximately $5,959,000 and $5,947,000, respectively. Non-U.S. inventories are reported on the first-in, first-out (FIFO) method and amounted to $30,380,000 and $25,052,000 at August 31, 1997 and 1996, respectively. At August 31, inventories consisted of the following:
1997 1996 ------- ------- (In thousands) Finished products $13,607 $12,424 Work in process 17,708 18,249 Raw materials 19,174 17,744 ------- ------- $50,489 $48,417 ======= =======
GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill is the excess of the purchase price paid over the value of net assets of businesses acquired. Amortization expense is calculated on a straight-line basis over twenty to forty years. The carrying value of goodwill is reviewed quarterly if the facts and circumstances suggest that it may be permanently impaired. If the review indicates that goodwill will not be recoverable, as determined by the undiscounted cash flow method, the asset will be reduced to its estimated recoverable value. 24 25 At August 31, other intangible assets consisted of the following:
1997 1996 ---------- --------- (In thousands) Patents $ 1,414 $ 939 Non-compete agreements 6,984 4,546 Financing costs 2,661 152 Acquisition costs 4,360 3,937 Pension intangible 2,288 3,494 Other 2,037 0 ------- ------- $19,744 $13,068 ======= =======
Accumulated amortization of goodwill and other intangible assets totaled $12,894,000 and $7,503,000 at August 31, 1997 and 1996, respectively. Amortization is calculated on the straight-line basis using the following lives: Patents 14 to 17 years Non-compete agreements 3 to 5 years Financing costs 5 years Acquisition costs 20 to 40 years
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Depreciation expense is recorded over the estimated useful life of the asset on the straight-line method using the following lives: Land improvements 20 years Buildings 40 years Machinery & equipment 3 to 15 years
The Company's normal policy is to charge repairs and improvements made to capital assets to expense as incurred. In limited circumstances, major building repairs are capitalized and amortized over the estimated life of the new asset and any remaining value of the old asset is written off. Repairs to machinery and equipment must result in an addition to the useful life of the asset before the costs are capitalized. At August 31, property, plant and equipment consisted of the following:
1997 1996 -------- -------- (In thousands) Land and improvements $ 11,471 $ 10,699 Buildings 37,275 24,095 Machinery & equipment 94,210 77,867 -------- -------- 142,956 112,661 Less accumulated depreciation 50,187 40,547 -------- -------- $ 92,769 $ 72,114 ======== ========
25 26 EQUITY INVESTMENTS The Company owns 40% of Gujarat Machinery Manufacturers, Ltd. ("GMM"). GMM is located in India and manufactures and markets glass-lined reactor and storage vessels, parts and services, primarily for the Indian market. In addition, the Company owns 50% of Universal Glasteel Equipment ("UGE") located in Robbinsville, New Jersey. UGE is a supplier of used and reconditioned glass-lined storage and reactor vessels. The Company uses the equity method of accounting for these investments. The net investments at August 31, 1997 and 1996 are $3,144,000 and $2,836,000, respectively, and are included in other assets in the Consolidated Balance Sheet. FOREIGN CURRENCY ACCOUNTING Gains and losses resulting from the settlement of a transaction in a currency different from that used to record the transaction are charged or credited to operations when incurred. Adjustments resulting from the translation of non-U.S. financial statements into U.S. dollars are recognized as a separate component of shareholders' equity for all foreign units except those located in Brazil and Mexico. The U.S. dollar is the functional currency for the Brazilian and Mexican units. As a result, translation gains and losses for these operations are reflected in net income. PRODUCT WARRANTY Provision for product warranty is recognized as a liability at the time of sale based on the historical relationship of warranty expense to sales. Actual payments of warranty claims are charged against the liability as incurred. The liability is reviewed quarterly and adjusted as necessary. RESEARCH AND DEVELOPMENT Research and development expenditures are expensed as incurred and amounted to approximately $2,001,000, $2,602,000 and $2,403,000 for the years ended August 31, 1997, 1996 and 1995, respectively. INCOME TAXES Income taxes are provided for all items included in the Consolidated Income Statement regardless of the period when such items are reported for income tax purposes. Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company's policy is to provide U.S. income taxes on current non-U.S. income which the Company remits to the U.S. The Company does not provide U.S. income taxes on the remaining undistributed non-U.S. income, as it is the Company's intention to maintain its investments in these operations. NET INCOME PER SHARE All net income per share amounts are based on the weighted average number of shares outstanding during the year plus the dilutive effect of common stock equivalents. The stock appreciation rights granted in connection with the 1994 acquisitions of Pfaudler, Chemineer and Edlon have been excluded from the calculation of net income per share. See the Common Stock note for additional information. STATEMENT OF CONSOLIDATED CASH FLOWS Cash and cash equivalents consist of working cash balances and temporary investments having an original maturity of 90 days or less. In 1997 the Company recorded the following non-cash investing and financing transactions: 26 27 $2,050,000 increase in other intangible assets and long-term debt related to the underwriter's discount on the issuance of the convertible notes, $2,952,000 increase in goodwill and long-term debt related to earn-out provisions of the Pharoah acquisition (see Business Acquisitions note) and an increase in tangible and intangible assets of $9,957,000, long-term debt of $3,500,000 and common stock of $6,457,000 related to the acquisition of Process Supply, Inc. (see Business Acquisitions note). In 1996 the Company recorded the following non-cash investing and financing transactions: $2,000,000 increase in goodwill and decrease in deferred taxes related to purchase entry adjustments, $1,700,000 increase in goodwill and common stock related to the retirement of certain of the stock appreciation rights with the issuance of stock (see Common Stock and Business Acquisitions notes) and $1,625,000 increase in goodwill and long-term debt related to earn-out provisions of the Pharaoh acquisition (see Business Acquisitions note). FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the Company in estimating the fair value of financial instruments: Cash and cash equivalents - The amounts reported approximate market value. Equity investments - The amounts reported approximate market value. Long-term debt - The amounts reported are consistent with the terms, interest rates and maturities currently available to the Company for similar debt instruments. Interest swap agreements - The amounts reported are consistent with values at which they could be settled, based upon dealer estimates. Foreign exchange contracts - The amounts reported are estimated using quoted market prices for similar instruments. CLASSES OF PRODUCTS The Company is an international manufacturer and marketer of high performance, specialized fluid management products and systems for the process industries. Sales by product platform were as follows:
Years ended August 31, 1997 1996 1995 -------- -------- -------- (In thousands) Glass-lined storage and reactor vessels $149,688 $137,398 $119,323 Progressing cavity pumps and related products 116,762 106,372 91,976 Mixing and turbine agitation equipment 85,090 77,969 68,342 Other 34,123 29,225 23,311 -------- -------- -------- $385,663 $350,964 $302,952 ======== ======== ========
27 28 \ BUSINESS ACQUISITIONS On February 3, 1997, the Company acquired Process Supply, Inc., a manufacturer of flouropolymer products and accessories for glass-lined equipment, and Spectrum Products, Inc., an affiliated sales company, and on January 31, 1997, the high shear industrial mixer business of Greerco Corp. These businesses were purchased for a total of $18,557,000. The purchase price consisted of common stock valued at $6,457,000, obligations directly payable to the seller of $3,500,000, long-term debt assumed of $800,000 and cash borrowed under the Company's existing senior debt agreement of $7,800,000. The common stock was issued from treasury shares. On May 2, 1997, the Company acquired Industrie Tycon, S.p.A., ("Tycon") a manufacturer of glass-lined storage and reactor vessels and related parts and accessories. Tycon was purchased for $27,100,000 in cash, which was borrowed under the Company's existing senior debt agreement and assumed debt of $2,600,000. On March 1, 1995, the Company acquired Cannon and Pharaoh for cash and subordinated notes totaling $12,898,000. Cannon, located in Bilston, England, sells new and reconditioned glass-lined reactor vessels. Pharaoh, located in Rochester, New York, is a supplier of replacement parts and services for glass-lined process equipment. At the same time, the Company entered into a partnership with a major supplier of used process equipment to supply used and reconditioned glass-lined vessels worldwide. During 1997, a contingent earn-out payment of $2,952,000 was earned and recorded as an increase to long-term debt and goodwill. A contingent earn-out payment of $1,625,000 was earned in 1996. The operating results of the acquired businesses have been included in consolidated operating results since the dates of each acquisition. ACCRUED EXPENSES At August 31, accrued expenses consisted of the following:
1997 1996 ------- ------- (In thousands) Salaries, wages, payroll taxes and withholdings $11,657 $ 9,799 Customer advances 8,597 12,426 Pension benefits 5,557 2,670 Warranty costs 3,301 3,642 Federal income taxes 3,266 5,190 All other items 18,006 15,887 ------- ------- $50,384 $49,614 ======= =======
28 29 LONG-TERM DEBT On September 23, 1996, the Company completed the sale of $65,000,000 of 6 1/2% Convertible Subordinated Notes Due 2003 ("Notes"). The net proceeds of approximately $63,000,000 (after underwriters' discount and expenses) from this sale were used to repay term and revolving credit loans under the Company's senior debt agreements bearing interest at approximately 8.0%. The Notes are due on September 1, 2003, and bear interest at 6 1/2%, 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 after September 1, 1999, at a price ranging from 103.25% in 1999 to 100% in 2001 and thereafter. The Notes are subordinated to all other current indebtedness of the Company. The Notes are not common stock equivalents and do not impact primary net income per share. If the Notes had been issued at the beginning of 1996, pro-forma net income per share for 1996, on a fully diluted basis, would have been $1.66 compared to $1.76. Assuming the Notes had been issued at August 31, 1996, long-term debt at August 31, 1997 and 1996 would be as follows:
1997 1996 -------- -------- (in thousands) Senior debt: Revolving credit loan $ 34,650 $ 3,250 Senior subordinated debt: Face amount, less discount of $65 7,319 5,283 Note payable 3,500 0 6 1/2% Convertible Subordinated Notes 65,000 65,000 Other 5,614 0 -------- -------- Total debt 116,083 73,533 Less current portion 4,085 1,348 -------- -------- $111,998 $ 72,185 ======== ========
On November 26, 1996 the Company entered into a $150,000,000 senior revolving credit agreement ("Agreement"), replacing the previous senior term loan and revolving credit agreement. Facility A of the Agreement is for $100,000,000 and any amounts outstanding will be due in November 2001. Facility B of the Agreement is for $50,000,000 and any borrowings are due within one year of borrowing, but the due date may be extended with the approval of the lending institutions. At August 31, 1997 all outstanding amounts are under Facility A of the agreement. Interest is variable based upon prime or formulas tied to LIBOR, at the Company's option, and is payable at least quarterly. At August 31, 1997, the interest rate for all amounts outstanding ranged from 6.21% to 6.28%. Except for the pledge of the stock of the Company's U.S. subsidiaries and the stock of certain of its non-U.S. subsidiaries, indebtedness under the Agreement is unsecured. Indebtedness under the Agreement is senior to the Company's other long-term agreements. Certain restrictive covenants exist including limitations on cash dividends and capital expenditures and minimum requirements for interest coverage and leverage ratios. The amount of cash dividends the Company may pay in each fiscal year is restricted to the 29 30 greater of $2,500,000 or 20% of the Company's consolidated net income for the immediately preceding fiscal year. The Company has senior subordinated debt with a face amount of $7,384,000 which has been discounted at normal market rates yielding a discount of $65,000 at August 31, 1997. The subordinated debt is payable in annual installments through January 31, 2000. On February 3, 1997, the Company issued a note for $3,500,000 in consideration of a non-competition agreement signed as part of the acquisition of Process Supply, Inc. The debt is payable in five annual installments beginning on February 3, 2002, together with accrued interest compounded annually at the prime rate. During the fourth quarter of 1996, $25,000,000 of senior subordinated debt with a book value of $23,300,000 was retired and the Company recorded an extraordinary loss of $1,355,000 ($813,000 after taxes or $.07 per share). During the third quarter of 1995, the Company recorded an extraordinary gain of $2,183,000 ($1,332,000 after taxes or $.13 per share) in connection with the early retirement of another $25,000,000 of senior subordinated debt with a book value of $22,300,000. Aggregate principal payments of long-term debt, for the five years subsequent to August 31, 1997, are as follows: (In thousands) ------------- 1998 $ 4,085 1999 3,175 2000 3,170 2001 163 2002 35,529 2003 and thereafter 69,961 ------------- Total $116,083 =============
Interest paid on all outstanding debt amounted to $5,032,000 in 1997, $7,083,000 in 1996 and $6,753,000 in 1995. RETIREMENT PLANS The Company sponsors three defined contribution plans covering most salaried employees and certain U.S. hourly employees. Contributions are made to the plans based on a percentage of eligible amounts contributed by participating employees. The Company also has several defined benefit plans covering all U.S. employees and certain non-U.S. employees. Plans covering salaried employees provide benefits based on years of service and employees' compensation. Plans covering hourly employees generally provide benefits of stated amounts for each year of service. The Company's funding policy is consistent with the funding requirements of applicable federal regulations. At August 31, 1997 and 1996 pension assets were invested in short and long-term interest bearing obligations and equity securities, including 100,000 shares of the Company's common stock in 1997 and 238,000 shares in 1996. Retirement plan costs for the above plans include the following components: 30 31
1997 1996 1995 ------- ------- ------- Defined benefit plans: (In thousands) Service cost - benefits earned during the period $ 2,652 $ 2,292 $ 2,134 Interest cost on projected benefit obligation 3,947 3,692 3,460 Actual return on assets (9,193) (6,560) (5,242) Net amortization and deferral 5,571 3,198 2,167 ------- ------- ------- Total 2,977 2,622 2,519 Defined contribution plans 1,426 1,180 477 ------- ------- ------- $ 4,403 $ 3,802 $ 2,996 ======= ======= =======
The funded status of U.S. defined benefit plans at August 31, 1997 and 1996 was as follows:
Assets Exceed Accumulated Accumulated Benefits Benefits Exceed Assets 1997 1997 ------------- ------------- Actuarial present value of: (In thousands) Vested benefit obligation $ 14,743 $ 37,637 Accumulated benefit obligation 15,413 40,391 Projected benefit obligation 19,171 40,391 Plan assets at fair market value 19,039 35,274 -------- -------- Plan assets less than projected benefit obligation (132) (5,117) Unrecognized net gain (422) (2,677) Unrecognized prior service cost 960 3,038 Unrecognized net (asset) obligation year end (311) 250 Adjustment to recognize minimum liability 0 (2,619) -------- -------- Net pension asset (liability) recognized in the Consolidated Balance Sheet $ 95 ($ 7,125) ======== ========
31 32
Assets Exceed Accumulated Accumulated Benefits Benefits Exceed Assets 1996 1996 ------------- ------------- Actuarial present value of: (In thousands) Vested benefit obligation $ 15,157 $ 34,320 Accumulated benefit obligation 15,787 37,433 Projected benefit obligation 19,383 37,433 Plan assets at fair market value 18,299 29,882 -------- -------- Plan assets less than projected benefit obligation (1,084) (7,551) Unrecognized net loss (gain) 700 (348) Unrecognized prior service cost 1,064 3,514 Unrecognized net (asset) obligation year end (370) 333 Adjustment to recognize minimum liability 0 (3,845) -------- -------- Net pension asset (liability) recognized in the Consolidated Balance Sheet $ 310 ($ 7,897) ======== ========
The projected benefit obligation was determined using a discount rate of 7% and weighted average pay increases of 6 3/4% in 1997 and 1996. The assumed long-term rate of return on plan assets is 9% in 1997 and 9 1/2 % in 1996 and 1995. The following tables describe the amount recognized in the consolidated financial statements relating to Pfaudler's unfunded German pension plan as of the actuarial valuation dates at August 31, 1997 and August 31, 1996. Net pension cost for this plan includes the following components:
1997 1996 ------------- ------------- (In thousands) Service cost $498 $558 Interest cost 2,026 2,269 ------------- ------------- Net pension cost $2,524 $2,827 ============= =============
32 33 The status of this plan at the actuarial valuation dates of August 31, 1997 and 1996 was as follows:
1997 1996 -------- -------- (In thousands) Actuarial present value of: Vested benefit obligation $ 26,208 $ 28,610 Accumulated benefit obligation 26,801 29,021 Projected benefit obligation 28,908 32,062 Plan assets at fair market value* 0 0 -------- -------- Plan assets less than projected benefit obligation (28,908) (32,062) Unrecognized net actuarial loss (gain) 681 (1,496) -------- -------- Pension liability recognized in the Consolidated Balance Sheet ($28,227) ($33,558) ======== ======== *Funding of pension obligations is not permitted in Germany
The projected benefit obligation for this plan was determined using a discount rate of 6 1/4% in 1997 and 7 1/4% in 1996 and weighted average pay increases of 3% in 1997 and 4% in 1996. Pension payments are paid from funds generated by operations and were $1,591,000 in 1997 and $1,698,000 in 1996. The Company also sponsors several other non-U.S. defined benefit plans primarily in the U.K., which are immaterial in the aggregate. OTHER POSTRETIREMENT BENEFITS In addition to pension benefits, the Company provides health care and life insurance benefits for certain of its retired U.S. employees. The Company's policy is to fund the cost of these benefits as claims are paid. The Company's accumulated postretirement benefit obligation includes the following components at August 31:
1997 1996 -------- -------- (In thousands) Retirees $ 16,304 $ 14,173 Active employees 3,641 3,918 Unrecognized net (loss) gain (2,672) 200 Unrecognized prior service cost (630) (1,286) -------- -------- $ 16,643 $ 17,005 ======== ========
33 34 Net periodic postretirement benefit cost includes the following components:
1997 1996 1995 ------ ------ ------ (In thousands) Interest cost $1,361 $1,228 $1,237 Service cost 146 138 93 Net amortization 490 463 10 ------ ------ ------ $1,997 $1,829 $1,340 ====== ====== ======
The rate of increase in per capita health care costs is assumed to be 6% in 1998 and thereafter. The rate of increase in health care costs has a significant effect on the amounts reported. Each one percentage point change in the rate of increase would change the accumulated postretirement benefit obligation at August 31, 1997, by approximately $1,209,000 and increase net periodic postretirement benefit cost by approximately $72,000. The discount rate used in determining the accumulated postretirement benefit obligation was 7% in 1997 and 1996. OTHER LONG-TERM LIABILITIES The following items are included in other long-term liabilities at August 31:
1997 1996 ------- ------- (In thousands) German pension liability $27,117 $32,328 Other postretirement benefits 16,124 15,005 U.S. pension liability 3,234 5,988 Casualty insurance reserves 3,628 4,358 All other items 3,055 2,599 ------- ------- $53,158 $60,278 ======= =======
34 35 INCOME TAXES Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax position at August 31, are as follows:
1997 1996 ------- ------- (In thousands) Deferred tax benefits: Postretirement benefit obligations $ 6,642 $ 6,802 Capital loss carryforward 332 1,231 Non-U.S. tax benefit carryforward and nondeductible charges 4,741 3,810 Inventory allowances 1,839 1,760 Warranty reserve 563 1,916 Insurance reserve 1,451 1,529 Pension benefits 450 1,282 Other items - net 2,439 636 ------- ------- 18,457 18,966 Less valuation allowance 4,000 4,031 ------- ------- 14,457 14,935 Deferred tax liabilities: Tax depreciation in excess of book depreciation 4,385 3,519 Goodwill and purchased asset basis differences 2,816 3,146 Other items - net 880 989 ------- ------- 8,081 7,654 ------- ------- Net deferred tax benefit $ 6,376 $ 7,281 ======= =======
Included in the 1997 valuation allowance for deferred tax benefits is $1,621,000 relating to non- U.S. tax loss carryforwards ($2,900,000 in 1996). 35 36 The provision for federal, foreign, and state income taxes charged to operations is as follows:
1997 1996 1995 -------- -------- -------- Current: (In thousands) U.S. federal $ 7,128 $ 8,222 $ 5,021 Non-U.S 4,730 2,092 2,007 U.S. state 1,518 1,362 980 -------- -------- -------- 13,376 11,676 8,008 Deferred: U.S. federal 1,039 (644) 366 Non-U.S (345) 1,101 (1,218) U.S. state 148 (92) 52 -------- -------- -------- 842 365 (800) -------- -------- -------- $ 14,218 $ 12,041 $ 7,208 ======== ======== ========
A summary of the differences between the effective income tax rate attributable to operations and the statutory rate is as follows:
1997 1996 1995 ---------- --------- -------- U.S. statutory rate 35.0% 35.0% 35.0% U.S. state income taxes, net of U.S. federal tax benefit 3.5 3.5 3.5 Benefit of realization of non-U.S. loss carryforwards (4.1) 0.0 0.0 Other items - net (1.4) (1.5) (.6) ---- ---- ---- 33.0% 37.0% 37.9% ==== ==== ====
Income taxes paid in 1997, 1996 and 1995 were $14,820,000, $9,743,000 and $3,007,000, respectively. The Company also has a Belgian tax loss carryforward of approximately $1,646,000 and a German tax loss carryforward of approximately $1,540,000 for corporation tax purposes and $4,862,000 for trade tax purposes. For financial reporting purposes, a valuation allowance was deducted for the deferred tax benefit related to the German tax loss carryforward. The Belgian and German carryforwards have no expiration period. At August 31, 1997, the Company has a capital loss carryforward of $830,000 for income tax purposes that expires on August 31, 1999. The carryforward was primarily generated from the disposal of the Motion Control Group in 1991. For financial reporting purposes, a valuation allowance was deducted for the full amount of the deferred tax benefit related to this carryforward. 36 37 COMMON STOCK The Company sponsors a long-term incentive stock plan to provide for the granting of stock based compensation to officers and other key employees. In addition, the Company sponsors stock option and stock compensation plans for non-employee directors. Under the plans, the stock option price per share may not be less than the fair market value as of the date of grant and the options for officers and other key employees become exercisable on a vesting schedule determined by the Compensation Committee of the Board of Directors, while options for non-employee directors are immediately vested. For officers and other key employees outstanding grants become exercisable over a three or four year period. Proceeds from the sale of stock issued under option arrangements are credited to common stock. The Company makes no charges or credits against earnings with respect to options. Summaries of amounts issued under the stock option plans are presented in the following tables.
Stock Option Activity: Weighted- Average Stock Option Price Options Per Share ------------- -------------- Outstanding at August 31, 1994 832,400 $ 6.19 Options granted 153,500 13.33 Options exercised (92,200) 3.15 Options canceled (86,600) 3.23 -------- ------ Outstanding at August 31, 1995 807,100 8.21 Options granted 93,000 21.55 Options exercised (113,066) 3.62 Options canceled (7,334) 9.76 -------- ------ Outstanding at August 31, 1996 779,700 10.45 Options granted 180,000 34.53 Options exercised (91,750) 6.99 Options canceled (9,150) 12.20 -------- ------ Outstanding at August 31, 1997 858,800 $15.85 ======== ======
37 38
Exercisable Stock Options at Year-End: 1995 501,200 1996 532,566 1997 568,745 Shares Available for Grant at Year-End: 1995 882,500 1996 1,829,434 1997 1,669,500
The following tables summarize information about stock options outstanding at August 31, 1997. Components of Outstanding Stock Options:
Weighted- Range of Average Weighted- Exercise Number Contract Life in Average Price Outstanding Years Exercise Price - -------------------------- ------------------- ------------------- ------------------ $2.57 - $10.50 451,800 4.78 $7.96 11.75 - 35.50 407,000 8.98 24.85 - -------------------------- ------------------- ------------------- ------------------ $2.57 - $35.50 858,800 6.73 $15.85 ========================== =================== =================== ================== Components of Exercisable Stock Options: Range of Weighted- Exercise Number Average Price Exercisable Exercise Price - -------------------------- ------------------- ------------------- $2.57 - $10.50 450,467 $7.95 11.75 - 35.50 118,278 15.54 - -------------------------- ------------------- ------------------- $2.57 - $35.50 568,745 $9.53 ========================== =================== ===================
Also, under the long-term incentive stock plan, selected participants receive performance units which convert into a variable number of restricted shares based on a three year measurement of how favorably the total return on Company shares compares to the total shareholder return of the Russell 2000 Company Group ("Group"). The restricted shares earned range from 75% to 200% of the performance units awarded. The 75% threshold is earned when the Company's return is at the 50th percentile of total shareholder return of the Group and 200% is earned when the Company's return is at the 80th percentile or greater. No restricted shares are earned if the Company's return is less than the median return of the Group. Restricted shares earned under the 38 39 program are issued to the participants at the end of the three year measurement period and are subject to forfeit if the participant leaves the employment of the Company within the following two years. For the three year performance period ended August 31, 1996, 146,000 restricted shares had been earned under the program. In 1997, 47,200 performance units were awarded for the three year performance period ending August 31, 1999. The weighted average fair value of the 1997 performance units at the date of grant was $22.00. The Company has computed the fair value of restricted shares earned for the performance period ended August 31, 1996 and has estimated the fair value of the restricted shares that will be earned for the performance period ending August 31, 1999 and is recognizing the cost over the respective restriction periods. Total compensation expense recognized in the income statement for all stock based awards was $1,360,000, $1,050,000 and $562,000 for the years ended August 31, 1997, 1996 and 1995, respectively. For purposes of pro-forma disclosure as required by Statement of Financial Accounting Standard No. 123, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro-forma information is as follows:
1997 1996 --------------- -------------- (In thousands, except per share data) Pro-forma net income $ 28,676 $ 19,483 Pro-forma net income per share Primary 2.50 1.76 Fully diluted 2.25 1.75 1996 pro-forma fully diluted for convertible notes 1.65
The effects of providing pro-forma disclosure are not indicative of the value of future options until the new rules are applied to all outstanding nonvested awards. Pro-forma information regarding net income and net income per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its stock options granted subsequent to August 31, 1995 under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes model with the following weighted-average assumptions for 1997 and 1996. The risk free interest rate was 6.35%, the dividend yield was .75%, the expected volatility of the Company's common stock was 31.6% and the weighted average expected life of the option was 6.90 years. During 1997 and 1996, options were granted which had a weighted average fair value on date of grant of $14.93 and $9.20, respectively. Option valuation models, such as the Black-Scholes model, were developed for use in estimating the fair value of traded options which have no vesting restrictions and are freely transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, existing models do not provide a reliable single measure of the fair value of its stock options. 39 40 During 1996, the 4,000,000 stock appreciation rights (SAR's) issued in connection with the 1994 acquisition of Pfaudler, Chemineer and Edlon were retired for $18,888,000 in cash and 37,000 shares of common stock valued at $1,700,000. LEASES Future minimum payments, by year and in the aggregate, under non-cancellable operating leases with initial or remaining terms of one year or more consisted of the following at August 31, 1997:
(In thousands) 1998 $1,949 1999 1,594 2000 1,106 2001 725 2002 535 Thereafter 0 ------------------ $5,909 ==================
Rental expense for all operating leases in 1997 was approximately $2,447,000 ($2,380,000 in 1996 and $2,352,000 in 1995). OTHER (INCOME) EXPENSE The following items are included in "Other (income) expense":
1997 1996 1995 ------------ ------------ ------------- (In thousands) Income from equity investments ($1,855) ($1,488) ($ 944) Royalty income (488) (573) (712) Write-off of investment in Hazleton Environmental 0 0 1,612 All other items 1,831 1,364 794 ------- ------- ------- ($ 512) ($ 697) $ 750 ======= ======= =======
40 41 NEW ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standard Board issued Statement No. 128, Earnings Per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute income per share and to restate all prior periods. Under the new requirements primary income per share will be replaced with basic income per share. Basic income per share excludes the dilutive effect of stock options. Under the provisions of the new standard, basic income per share, before extraordinary items, would be $2.67, $1.94 and $1.14 for the years ended August 31, 1997, 1996 and 1995, respectively. Also, under the new requirements fully diluted income per share is replaced with diluted income per share. There is no material difference between diluted income per share and the fully diluted income per share reported for the periods presented. 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. 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. SUBSEQUENT EVENT On November 20, 1997 the Company entered into a definitive agreement to purchase the stock of Flow Control Equipment Inc., from J.M. Huber Corporation. The net purchase price is approximately $104,000,000 in cash, subject to adjustment at closing. Financing will be through the Company's current credit facility. The transaction is subject to regulatory clearance under the Hart-Scott-Rodino Act and the parties anticipate a late December closing. 41 42 INFORMATION BY GEOGRAPHIC AREA
Years Ended August 31, 1997 1996 1995 --------- --------- --------- Net Sales: (In thousands) U.S. domestic $ 203,912 $ 206,439 $ 165,135 U.S. export 53,748 34,726 31,218 --------- --------- --------- Total U.S. 257,660 241,165 196,353 Europe 107,484 92,558 80,844 Other non-U.S 20,519 17,241 25,755(2) --------- --------- --------- $ 385,663 $ 350,964 $ 302,952 ========= ========= ========= Operating Income: U.S $ 52,342 $ 41,383 $ 29,519 Europe 13,133 7,274 4,818 Other non-U.S 1,956 3,784 3,377 --------- --------- --------- 67,431 52,441 37,714 Amortization of intangible assets (4,937) (3,504) (2,707) Corporate expenses (12,973) (9,482) (8,687)(1) --------- --------- --------- $ 49,521 $ 39,455 $ 26,320 ========= ========= ========= Income Before Income Taxes: U.S $ 27,681 $ 21,321 $ 10,838 Europe 13,432 7,274 4,818 Other non-U.S 1,971 3,784 3,377 --------- --------- --------- Total $ 43,084 $ 32,379 $ 19,033 ========= ========= ========= Assets: U.S $ 271,157 $ 233,477 $ 193,852 Europe 91,854 54,187 56,063 Other non-U.S 9,343 12,676 20,492(2) --------- --------- --------- $ 372,354 $ 300,340 $ 270,407 ========= ========= ========= (1) Includes $1,612,000 write-off of investment in Hazleton Environmental. (2) Includes $8,044,000 in sales and $10,498,000 in assets of Prochem which were transferred to the U.S. for 1996 due to the consolidation of Prochem production into the Chemineer facility.
42 43 QUARTERLY DATA (UNAUDITED) Robbins & Myers, Inc.
1997 Quarters ---------------------------------------------------------------- 1st 2nd 3rd 4th Total ------------ ----------- ----------- -------------- --------- (In thousands, except per share data) Net sales $93,822 $93,208 $97,588 $101,045 $385,663 Gross profit 32,148 32,208 36,672 37,753 138,781 Operating expense 21,243 21,912 22,699 23,918 89,772 Operating income 11,257 10,884 13,581 13,799 49,521 Income before income taxes 9,727 9,426 11,783 12,148 43,084 Net income 6,517 6,315 7,895 8,139 28,866 Net income per share: Primary $0.58 $0.56 $0.69 $0.69 $2.52 Fully diluted 0.53 0.51 0.61 0.61 2.26 Weighted average common shares: Primary 11,236 11,206 11,428 11,843 11,476 Fully diluted 13,151 13,655 13,907 14,276 13,798 1996 Quarters ---------------------------------------------------------------- 1st 2nd 3rd 4th Total ------------ ----------- ----------- -------------- --------- (In thousands, except per share data) Net sales $81,212 $84,179 $89,881 $95,692 $350,964 Gross profit 27,103 27,766 30,068 34,093 119,030 Operating expense 19,136 19,545 19,499 22,092 80,272 Operating income 8,334 8,611 10,838 11,672 39,455 Income before income taxes and extraordinary items 6,664 6,712 9,103 9,900 32,379 Income before extraordinary item 4,098 4,329 5,735 6,176 20,338 Net income 4,098 4,329 5,735 5,363(1) 19,525(1) Net income per share, before extraordinary item: Primary $0.37 $0.40 $0.52 $0.55 $1.84 Fully diluted 0.37 0.39 0.52 0.55 1.83 Pro-forma fully diluted for convertible notes 0.36 0.38 0.48 0.51 1.73 Net income per share: Primary $0.37 $0.40 $0.52 $0.48(1) $1.77(1) Fully diluted 0.37 0.39 0.52 0.48(1) 1.76(1) Pro-forma fully diluted for convertible notes 0.36 0.38 0.48 0.44(1) 1.66(1) Weighted average common shares: Primary 10,948 10,930 11,026 11,151 11,046 Fully diluted 10,972 10,956 11,092 11,151 11,107 Pro-forma fully diluted for convertible notes 13,357 13,341 13,477 13,536 13,492 (1) Fourth quarter includes an after-tax loss of $813,000 ($.07 per share) for early extinguishment of debt.
43 44 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING - ------- ----------------------------------------------------------- AND FINANCIAL DISCLOSURE ------------------------ None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - -------- -------------------------------------------------- The information required by this Item 10 is incorporated herein by reference to the Company's Proxy Statement for its Annual Meeting of Shareholders on December 10, 1997, except for certain information concerning the executive officers of the Company which is set forth in Part I of this Report. ITEM 11. EXECUTIVE COMPENSATION - -------- ---------------------- The information required by this Item 11 is set forth in the Company's Proxy Statement for its Annual Meeting of Shareholders on December 10, 1997 and is incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -------- -------------------------------------------------------------- The information required by this Item 12 is incorporated herein by reference to the Company's Proxy Statement for its Annual Meeting of Shareholders on December 10, 1997. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ---------------------------------------------- The information required by this Item 13 is incorporated herein by reference to the Company's Proxy Statement for its Annual Meeting of Shareholders on December 10, 1997. PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON - -------- ------------------------------------------------------- FORM 8-K -------- (a) (1) FINANCIAL STATEMENTS The following consolidated financial statements of Robbins & Myers, Inc. and its subsidiaries are at Item 8 hereof. Consolidated Balance Sheet - August 31, 1997 and 1996. Consolidated Income Statement - Years ended August 31, 1997, 1996, and 1995. Consolidated Statement of Shareholders' Equity - Years ended August 31, 1997, 1996, and 1995. Statement of Consolidated Cash Flows - Years ended August 31, 1997, 1996, and 1995 Notes to Consolidated Financial Statements. 44 45 (a) (2) FINANCIAL STATEMENT SCHEDULE Schedule II - Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto. Separate financial statements of the Company have been omitted since it is primarily an operating Company and long-term debt held by subsidiaries of the Company is less than five percent of consolidated total assets. (a) (3) EXHIBITS. See INDEX to EXHIBITS. (b) REPORTS ON FORM 8-K. During the quarter ended August 31, 1997, the Company did not file any reports on Form 8-K. 45 46 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Robbins & Myers, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 24th day of November, 1997. ROBBINS & MYERS, INC. BY /s/ Daniel W. Duval ----------------------------------- Daniel W. Duval President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of Robbins & Myers, Inc. and in the capacities and on the date indicated:
- ----------------------------------------------------- ------------------------------ ----------------------------- NAME TITLE DATE - ----------------------------------------------------- ------------------------------ ----------------------------- /s/ Daniel W. Duval Director, President and November 24, 1997 - ----------------------------------- Chief-Executive Officer Daniel W. Duval /s/ George M. Walker Vice President - CFO November 24, 1997 - ----------------------------------- (Principal-Financial George M. Walker Officer) /s/ Kevin J. Brown - ----------------------------------- Corporate-Controller November 24, 1997 Kevin J. Brown (Principal Accounting Officer) *Maynard H. Murch, IV Chairman Of Board November 24, 1997 *Robert J. Kegerreis Director November 24, 1997 *Thomas P. Loftis Director November 24, 1997 *William D. Manning, Jr. Director November 24, 1997 *Jerome F. Tatar Director November 24, 1997 *The undersigned, by signing his name hereto, executes this Report on Form 10-K for the year ended August 31, 1997 pursuant to powers of attorney executed by the above-named persons and filed with the Securities and Exchange Commission.
/s/ Daniel W. Duval -------------------------------------- Daniel W. Duval Their Attorney-in-fact 46 47 Report of Independent Auditors Shareholders and Board of Directors Robbins & Myers, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheet of Robbins & Myers, Inc. and Subsidiaries as of August 31, 1997 and 1996, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended August 31, 1997. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Robbins & Myers, Inc. and Subsidiaries at August 31, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended August 31, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, presents fairly, in all material respects, the information set forth therein. /s/ Ernst & Young LLP Dayton, Ohio September 30, 1997, except for the Subsequent Event footnote, as to which the date is November 20, 1997 47 48 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- ------------------------------------------------------------------------------------------------------------------------------------ COL. A COL. B COL. C COL. D COL. E ----------------------------------- ADDITIONS - ---------------------------------------------- -------------------- ----------------- ----------------- ------------ -------------- (1) (2) DESCRIPTION Balance at Beginning Charged to Costs Charged to Other Deductions - Balance at End of Period and Expenses Accounts-Describe Describe of Period - ------------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 1997: Allowances and reserves deducted from assets: Uncollectable accounts receivable $1,195 $ 311 $ 108(8) $ 517(1) $1,097 Inventory obsolescence 5,677 1,958 1,092(8) 1,631(2) 7,096 Other reserves: Warranty claims 3,642 2,909 0 3,250(3) 3,301 Restructuring liabilities 1,624 0 0 817(6) 807 Casualty insurance reserves 4,358 2,889 0 3,619(7) 3,628 Year Ended August 31, 1996: Allowances and reserves deducted from assets: Uncollectable accounts receivable $1,260 $ 275 0 $ 340(1) $1,195 Inventory obsolescence 5,639 1,282 0 1,244(2) 5,677 Restructuring reserve for property, plant & equipment held for sale 1,307 0 0 1,307(6) 0 Other reserves: Warranty claims 3,040 3,166 0 2,564(3) 3,642 Restructuring liabilities 3,712 0 0 2,088(5),(6) 1,624 Casualty insurance reserves 5,612 2,718 0 3,972(7) 4,358 Year Ended August 31, 1995 Allowances and reserves deducted from assets: Uncollectable accounts receivable $ 952 $ 535 0 $ 227(1) $1,260 Inventory obsolescence 3,948 1,259 982(4) 550(2) 5,639 Restructuring reserve for property, plant & equipment held for sale 1,250 0 57(5) 0 1,307 Other reserves: Warranty claims 2,139 2,522 461(5) 2,082(3) 3,040 Restructuring liabilities 5,541 0 300(4) 2,129(5),(6) 3,712 Casualty insurance reserves 3,900 2,767 1,803(4) 2,858(7) 5,612 Note (1) Represents accounts receivable written off against the reserve. Note (2) Inventory items scrapped and written off against the reserve. Note (3) Warranty cost incurred applied against the reserve. Note (4) Amount due to acquisition of Chemineer, Edlon, Pfaudler. Note (5) Transferred from restructure reserve. Note (6) Spending against restructing reserve. Note (7) Spending against casualty reserve. Note (8) Amount due to acquisition of Tycon.
48 49
INDEX TO EXHIBITS (3) ARTICLES OF INCORPORATION AND BY-LAWS: 3.1 Amended Articles of Incorporation of Robbins & Myers, Inc. were filed as Exhibit 3.1 to the Company's Report on Form 10-Q for the quarter ended February 28, 1995... * 3.2 Code of Regulations of Robbins & Myers, Inc. was filed as Exhibit 3.2 to the Company's Report on Form 10-Q for the quarter ended February 28, 1995... * (4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES: 4.1 Indenture relating to $65,000,000 Convertible Subordinated Notes due 2003, with Star Bank, N.A. , as Trustee, dated September 1, 1996 was filed as Exhibit 4.1 to the Company's Annual Report on Form 10-K dated August 31, 1996... * 4.2 $150,000,000 Credit Agreement dated November 26, 1996 among Robbins & Myers, Inc., Bank One, Dayton, NA as Administrative Agent, NationsBank, N.A. As Documentation and Syndication Agent, and the Lenders named therein was filed as Exhibit 4.2 to the Company's Annual Report on Form 10-K dated August 31, 1996... * 4.3 Pledge and Security Agreement between Robbins & Myers, Inc. and Bank One, Dayton, N.A., dated November 26, 1996 was filed as Exhibit 4.3 to the Company's Annual Report on Form 10-K dated August 31, 1996... * (10) MATERIAL CONTRACTS: 10.1 Robbins & Myers, Inc. Pension Plan (As Amended and Restated Effective as of October 1, 1989) was filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K for year ended August 31, 1990... * 10.2 First Amendment to Supplement One to the Robbins & Myers, Inc. Pension Plan dated October 22, 1990 was filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended August 31, 1990... *
49 50 10.3 Amendments to the Robbins & Myers, Inc. Pension Plan dated March 5, 1991, December 16, 1992, and two additional amendments both dated September 30, 1993 were filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended August 31, 1993... * 10.4 Salary Continuation Agreement between Robbins & Myers, Inc. and Daniel W. Duval dated May 8, 1987 was filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended August 31, 1993... * 10.5 Robbins & Myers, Inc. Employee Savings Plan was filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended August 31, 1990... * 10.6 First Amendment, dated April 30, 1991, and Second Amendment, dated May 28, 1992, to Robbins & Myers, Inc. Employee Savings Plan was filed as Exhibit 10.7 to the Company's Report on Form 10-K for the year ended August 31, 1993... * 10.7 Robbins & Myers, Inc. 1984 Stock Option Plan was filed as Exhibit 10.7 to the Company's Report on Form 10-K for the year ended August 31, 1996... * 10.8 Robbins & Myers, Inc. Supplemental Pension Program adopted May 29, 1987 was filed as Exhibit 10.9 to the Company's Report on Form 10-K for the year ended August 31, 1993... * 10.9 Form of Indemnification Agreement between Robbins & Myers, Inc., and each director of the Company was filed as Exhibit 10.11 to the Company's Report on Form 10-K for the year ended August 31, 1993... * 10.10 Robbins & Myers, Inc. 1994 Directors Stock Compensation Plan was filed as Exhibit 10.13 to the Company's Report on Form 10-K for the year ended August 31, 1994... * 10.11 Robbins & Myers, Inc. 1994 Long-Term Incentive Stock Plan as amended was filed as Exhibit 10.11 to the Company's Report on Form 10-K for the year ended August 31, 1996... * 10.12 Robbins & Myers, Inc. 1995 Stock Option Plan for
50 51 Non-Employee Directors was filed as Exhibit 10.12 to the Company's Report on Form 10-K for the year ended August 31, 1996... * 10.13 Robbins & Myers, Inc. Senior Executive Annual Cash Bonus Plan was filed as Exhibit 10.13 to the Company's Report on Form 10-K for the year ended August 31, 1996... * (11) STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS: 11.1 Computation of Per Share Earnings... +
51 52 (21) SUBSIDIARIES OF THE REGISTRANT: Robbins & Myers, Inc. has the following subsidiaries all of which (i) do business under the name under which they are organized and (ii) are included in the consolidated financial statements of the Company. The names of such subsidiaries are set forth below.
Jurisdiction Percentage of Name of Subsidiary in which Incorporated Ownership - ------------------------------------------------------------------------------------------------------------------ Chemineer, Asia, Ptd. Ltd. Singapore 51 Chemineer, Inc. Delaware 100 Chemineer Limited England 100 Edlon, Inc. Delaware 100 Glasteel Parts and Services, Inc. Delaware 100 Pfaudler Equipamentos Industrias Ltda. Brazil 100 Pfaudler, Inc. Delaware 100 Pfaudler S.A. de C.V. Mexico 100 Pfaudler-Werke GMBH Germany 100 Robbins & Myers Canada, Ltd. Dominion of Canada 100 Robbins & Myers International Sales Company, Inc. Ohio 100 Robbins & Myers, Limited England 100 Robbins & Myers NRO Ltd. Dominion of Canada 100 Robbins & Myers U.K. Limited England 100 Suzhou Pfaudler Co., Ltd. China 60 IndustrieTycon, S.p.A. Italy 100
(23) CONSENTS OF EXPERTS AND COUNSEL 23.1 Consent of Ernst & Young LLP 52 53
(24) POWER OF ATTORNEY 24.1 Powers of Attorney of any person who signed this Report on Form 10-K on behalf of another pursuant to a Power of attorney... + (27) 27.1 Financial Data Schedule(submitted for SEC's information) + "+" Indicates Exhibit is being filed with this Report. "*" Indicates that Exhibit is incorporated by reference in this Report from a previous filing with the Commission.
53 EX-11.1 2 EXHIBIT 11.1 1
ROBBINS & MYERS, INC. EXHIBIT 11.1 - STATEMENT RE: COMPUTATON OF PER SHARE EARNINGS (Amounts in thousands, except per share data) Year Ended August 31, 1997 1996 1995 -------- -------- -------- PRIMARY Average shares outstanding 10,942 10,474 10,336 Net efffect of dilutive stock options - based on the treasury stock method using average market price 534 572 450 -------- -------- -------- TOTAL 11,476 11,046 10,786 ======== ======== ======== Income Before Extraordinary Gain and Cumulative Effect of Accounting Changes $ 28,866 $ 20,338 $ 11,825 Extraordinary (Loss) Gain from Early Extinguishment of Debt, Net of Income Taxes 0 (813) 1,332 -------- -------- -------- NET INCOME (LOSS) $ 28,866 $ 19,525 $ 13,157 ======== ======== ======== PER SHARE AMOUNTS: Income Before Extraordinary Gain and Cumulative Effect of Accounting Changes $ 2.52 $ 1.84 $ 1.09 Extraordinary Gain from Early Extinguishment of Debt, Net of Income Taxes 0 (0.07) 0.13 -------- -------- -------- NET INCOME (LOSS) $ 2.52 $ 1.77 $ 1.22 ======== ======== ======== FULLY DILUTED Average shares outstanding 10,942 10,474 10,336 Net effect of dilutive stock options - based on the treasury stock method using the year-end market price, if higher than average market price 622 633 538 Additional shares assumed for debt conversion 2,234 0 0 -------- -------- -------- TOTAL 13,798 11,107 10,874 ======== ======== ======== Income Before Extraordinary Gain and Cumulative Effect of Accounting Changes 28,866 $ 20,338 $ 11,825 Extraordinary Gain from Early Extinguishment of Debt, Net of Income Taxes 0 (813) 1,332 After tax interest add-back for convertible debt from issuance 2,375 0 0 -------- -------- -------- NET INCOME (LOSS) $ 31,241 $ 19,525 $ 13,157 ======== ======== ======== PER SHARE AMOUNTS: Income Before Extraordinary Gain and Cumulative Effect of Accounting Changes $ 2.26 $ 1.83 $ 1.09 Extraordinary Gain from Early Extinguishment of Debt, Net of Income Taxes (0.07) 0.12 -------- -------- -------- NET INCOME (LOSS) $ 2.26 $ 1.76 $ 1.21 ======== ======== ========
Note: Share and per share amounts restated for 2 for 1 stock split effective July 31,1996. EX-23.1 3 EXHIBIT 23.1 1 Exhibit 23.1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements (Form S-8's) pertaining to the 1979 Stock Option Plan (No. 2-66181, Post-Effective Amendment No. 3, dated December 1, 1982), the 1984 Stock Option Plan (No. 2-98841, Post Effective Amendment No. 1, dated November 23, 1988), the Employee Savings Plan (No. 33-32103, dated December 7, 1989 and No. 33-49466, dated July 9, 1992), Stock Option Plan for Non-Employee Directors (No. 33-43625, dated November 1, 1991), 1994 Directors' Stock Compensation Plan (No. 33-84032, dated September 13, 1994), and the Robbins & Myers, Inc. Savings Plan for Salaried Employees of Chemineer, Edlon, and Pfaudler (No. 33-61893, dated August 17, 1995), the Robbins & Myers, Inc. 1994 Long-term Incentive Plan (No. 333-00291, dated January 19, 1996), the Robbins & Myers, Inc. 1995 Stock Option Plan for Non-employee Directors (No. 333-00293, dated January 19, 1996) and the Investor Stock Purchase Plan (No. 333-31235, dated July 14, 1997) of our report dated September 30, 1997, except for the Subsequent Event footnote, as to which the date is November 21, 1997, with respect to the consolidated financial statements and schedule of Robbins & Myers, Inc. and Subsidiaries, included in this Annual Report (Form 10-K) for the year ended August 31, 1997. /s/ Ernst & Young LLP Dayton, Ohio November 21, 1997 EX-24.1 4 EXHIBIT 24.1 1 Exhibit 24.1 ROBBINS & MYERS, INC. --------------------- LIMITED POWER OF ATTORNEY ------------------------- WHEREAS, Robbins & Myers, Inc. (the "Company") intends to file with the Securities and Exchange Commission its Annual Report on Form 10-K for the year ended August 31, 1997: NOW, THEREFORE, each of the undersigned in his capacity as a director of the Company hereby appoints Daniel W. Duval his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to execute in his name, place and stead, the Company's Annual Report on Form 10-K for the year ended August 31, 1997, (including any amendment to such report) and any and all other instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission. Said attorney shall have full power and authority to do and perform in the name and on behalf of the undersigned, in the aforesaid capacity, every act whatsoever necessary or desirable to be done, as fully to all intents and purposes as the undersigned might or could do in person. The undersigned hereby ratifies and approves the act of said attorney. IN WITNESS WHEREOF, the undersigned has executed this instrument this 24th day of November, 1997. /s/ Maynard H. Murch, IV --------------------------------------- Maynard H. Murch, IV /s/ Robert J. Kegerreis --------------------------------------- Robert J. Kegerreis /s/ Thomas P. Loftis --------------------------------------- Thomas P. Loftis /s/ William D. Manning, Jr. --------------------------------------- William D. Manning, Jr. /s/ Jerome F. Tatar --------------------------------------- Jerome F. Tatar EX-27 5 EXHIBIT 27
5 1,000 YEAR AUG-31-1997 SEP-01-1997 AUG-31-1997 10,304 0 61,765 1,097 50,489 130,328 142,956 50,187 372,354 82,723 111,998 0 0 29,809 94,666 372,354 385,663 385,663 246,882 246,882 88,949 331 6,437 43,084 14,218 28,866 0 0 0 28,866 2.52 2.26
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