<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
SQUARE PRODUCT MANUFACTURED OR
LOCATION FOOTAGE OTHER USE OF FACILITY
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
<FN>
(1) Leased facility.
(2) New facility opened in 1997.
(3) Facility of a 40%-owned affiliate.
(4) Facility of a 60%-owned subsidiary.
</TABLE>
At August 31, 1997, utilization of plants was approximately 95%.
11
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
Dividends
High Low Paid
----------- --------------- ----------------
Fiscal 1997
- ---------------
<S> <C> <C> <C>
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
</TABLE>
(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
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C>
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
<FN>
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.
</TABLE>
15
<PAGE> 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
<PAGE> 17
<TABLE>
<CAPTION>
Year Ended August 31,
1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
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%
===== ===== =====
</TABLE>
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
<PAGE> 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
<PAGE> 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 $1.66.
In addition to historical information, this Annual Report contains
various forward-looking statements and performance trends which are subject to
certain risks and uncertainties that could cause actual results to differ
materially from these statements and trends. Such factors include, but are not
limited to, a significant decline in capital expenditure levels in the Company's
served markets, a major decline in oil and gas prices, foreign exchange rate
fluctuations, continued availability of acceptable acquisition candidates and
general economic conditions that can affect the demand in the process
industries.
19
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
CONSOLIDATED BALANCE SHEET
Robbins & Myers, Inc. and Subsidiaries
($ in thousands)
<TABLE>
<CAPTION>
August 31,
1997 1996
------------ -------------
<S> <C> <C>
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 $300,340
============ =============
</TABLE>
See Notes to Consolidated Financial Statements
20
<PAGE> 21
CONSOLIDATED INCOME STATEMENT
Robbins & Myers, Inc. and Subsidiaries
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Years ended August 31,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
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
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
21
<PAGE> 22
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Robbins & Myers, Inc. and Subsidiaries
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Foreign Minimum
Common Treasury Retained Currency Pension
Shares Shares Earnings Translation Liability Total
---------- ---------- ----------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
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) $124,475
========== ========== =========== ============= =========== =========
</TABLE>
See Notes to Consolidated Financial Statements
22
<PAGE> 23
STATEMENT OF CONSOLIDATED CASH FLOWS
Robbins & Myers, Inc. and Subsidiaries
($ in thousands)
<TABLE>
<CAPTION>
Years Ended August 31,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
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
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
23
<PAGE> 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:
<TABLE>
<CAPTION>
1997 1996
------- -------
(In thousands)
<S> <C> <C>
Finished products $13,607 $12,424
Work in process 17,708 18,249
Raw materials 19,174 17,744
------- -------
$50,489 $48,417
======= =======
</TABLE>
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
<PAGE> 25
At August 31, other intangible assets consisted of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
(In thousands)
<S> <C> <C>
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
======= =======
</TABLE>
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:
<TABLE>
<S> <C>
Patents 14 to 17 years
Non-compete agreements 3 to 5 years
Financing costs 5 years
Acquisition costs 20 to 40 years
</TABLE>
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:
<TABLE>
<S> <C>
Land improvements 20 years
Buildings 40 years
Machinery & equipment 3 to 15 years
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(In thousands)
<S> <C> <C>
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
======== ========
</TABLE>
25
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
Years ended August 31,
1997 1996 1995
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
27
<PAGE> 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:
<TABLE>
<CAPTION>
1997 1996
------- -------
(In thousands)
<S> <C> <C>
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
======= =======
</TABLE>
28
<PAGE> 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:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
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
======== ========
</TABLE>
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
<PAGE> 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:
<TABLE>
(In thousands)
-------------
<S> <C>
1998 $ 4,085
1999 3,175
2000 3,170
2001 163
2002 35,529
2003 and thereafter 69,961
-------------
Total $116,083
=============
</TABLE>
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
<PAGE> 31
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
The funded status of U.S. defined benefit plans at August 31, 1997 and 1996 was
as follows:
<TABLE>
<CAPTION>
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1997 1997
------------- -------------
Actuarial present value of: (In thousands)
<S> <C> <C>
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)
======== ========
</TABLE>
31
<PAGE> 32
<TABLE>
<CAPTION>
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1996 1996
------------- -------------
Actuarial present value of: (In thousands)
<S> <C> <C>
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)
======== ========
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
(In thousands)
<S> <C> <C>
Service cost $498 $558
Interest cost 2,026 2,269
------------- -------------
Net pension cost $2,524 $2,827
============= =============
</TABLE>
32
<PAGE> 33
The status of this plan at the actuarial valuation dates of August 31, 1997 and
1996 was as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(In thousands)
<S> <C> <C>
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)
======== ========
<FN>
*Funding of pension obligations is not permitted in Germany
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(In thousands)
<S> <C> <C>
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
======== ========
</TABLE>
33
<PAGE> 34
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Interest cost $1,361 $1,228 $1,237
Service cost 146 138 93
Net amortization 490 463 10
------ ------ ------
$1,997 $1,829 $1,340
====== ====== ======
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996
------- -------
(In thousands)
<S> <C> <C>
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
======= =======
</TABLE>
34
<PAGE> 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:
<TABLE>
<CAPTION>
1997 1996
------- -------
(In thousands)
<S> <C> <C>
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
======= =======
</TABLE>
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
<PAGE> 36
The provision for federal, foreign, and state income taxes charged to operations
is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
Current: (In thousands)
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
A summary of the differences between the effective income tax rate attributable
to operations and the statutory rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- --------
<S> <C> <C> <C>
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%
==== ==== ====
</TABLE>
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
<PAGE> 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.
<TABLE>
<CAPTION>
Stock Option Activity:
Weighted-
Average
Stock Option Price
Options Per Share
------------- --------------
<S> <C> <C>
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
======== ======
</TABLE>
37
<PAGE> 38
<TABLE>
<CAPTION>
Exercisable Stock Options at Year-End:
<S> <C>
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
</TABLE>
The following tables summarize information about stock options outstanding at
August 31, 1997.
Components of Outstanding Stock Options:
<TABLE>
<CAPTION>
Weighted-
Range of Average Weighted-
Exercise Number Contract Life in Average
Price Outstanding Years Exercise Price
- -------------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C>
$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
========================== =================== ===================
</TABLE>
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
<PAGE> 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:
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
(In thousands, except per share data)
<S> <C> <C>
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
</TABLE>
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
<PAGE> 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:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1998 $1,949
1999 1,594
2000 1,106
2001 725
2002 535
Thereafter 0
------------------
$5,909
==================
</TABLE>
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":
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ -------------
(In thousands)
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
40
<PAGE> 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
<PAGE> 42
INFORMATION BY GEOGRAPHIC AREA
<TABLE>
<CAPTION>
Years Ended August 31,
1997 1996 1995
--------- --------- ---------
Net Sales: (In thousands)
<S> <C> <C> <C>
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
========= ========= =========
<FN>
(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.
</TABLE>
42
<PAGE> 43
QUARTERLY DATA (UNAUDITED)
Robbins & Myers, Inc.
<TABLE>
<CAPTION>
1997 Quarters
----------------------------------------------------------------
1st 2nd 3rd 4th Total
------------ ----------- ----------- -------------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
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
<FN>
(1) Fourth quarter includes an after-tax loss of $813,000 ($.07 per share)
for early extinguishment of debt.
</TABLE>
43
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
- ----------------------------------------------------- ------------------------------ -----------------------------
NAME TITLE DATE
- ----------------------------------------------------- ------------------------------ -----------------------------
<S> <C> <C>
/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
<FN>
*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.
</TABLE>
/s/ Daniel W. Duval
--------------------------------------
Daniel W. Duval
Their Attorney-in-fact
46
<PAGE> 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
<PAGE> 48
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
<FN>
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.
</TABLE>
48
<PAGE> 49
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
(3) ARTICLES OF INCORPORATION AND BY-LAWS:
<S> <C> <C>
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... *
</TABLE>
49
<PAGE> 50
<TABLE>
<S> <C> <C>
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
</TABLE>
50
<PAGE> 51
<TABLE>
<S> <C> <C>
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... +
</TABLE>
51
<PAGE> 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.
<TABLE>
<CAPTION>
Jurisdiction Percentage of
Name of Subsidiary in which Incorporated Ownership
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>
(23) CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Ernst & Young LLP
52
<PAGE> 53
<TABLE>
<CAPTION>
(24) POWER OF ATTORNEY
<S> <C> <C>
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) +
<FN>
"+" 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.
</TABLE>
53
<PAGE> 1
<TABLE>
<CAPTION>
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
-------- -------- --------
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
Note: Share and per share amounts restated for 2 for 1 stock split effective
July 31,1996.
<PAGE> 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
<PAGE> 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
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 10,304
<SECURITIES> 0
<RECEIVABLES> 61,765
<ALLOWANCES> 1,097
<INVENTORY> 50,489
<CURRENT-ASSETS> 130,328
<PP&E> 142,956
<DEPRECIATION> 50,187
<TOTAL-ASSETS> 372,354
<CURRENT-LIABILITIES> 82,723
<BONDS> 111,998
0
0
<COMMON> 29,809
<OTHER-SE> 94,666
<TOTAL-LIABILITY-AND-EQUITY> 372,354
<SALES> 385,663
<TOTAL-REVENUES> 385,663
<CGS> 246,882
<TOTAL-COSTS> 246,882
<OTHER-EXPENSES> 88,949
<LOSS-PROVISION> 331
<INTEREST-EXPENSE> 6,437
<INCOME-PRETAX> 43,084
<INCOME-TAX> 14,218
<INCOME-CONTINUING> 28,866
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,866
<EPS-PRIMARY> 2.52
<EPS-DILUTED> 2.26
</TABLE>
