<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - ACT OF 1934
For the Quarterly Period Ended NOVEMBER 30, 1999 Commission File Number 0-288
----------------- -----
ROBBINS & MYERS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 31-0424220
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 KETTERING TOWER, DAYTON, OHIO 45423
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(Address of Principal executive offices) (Zip Code)
Registrant's telephone number including area code (937) 222-2610
-----------------------------
NONE
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
----- -----
COMMON SHARES, WITHOUT PAR VALUE, OUTSTANDING AS OF NOVEMBER 30, 1999:10,931,237
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1
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ROBBINS & MYERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
($ in thousands)
November 30, August 31,
1999 1999
--------- ---------
ASSETS (Unaudited)
Current Assets
Cash and cash equivalents $ 8,372 $ 8,901
Accounts receivable 77,426 74,900
Inventories:
Finished products 16,287 16,921
Work in process 12,554 11,193
Raw materials 26,731 25,633
--------- ---------
55,572 53,747
Other current assets 11,337 12,824
Deferred taxes 5,433 5,470
--------- ---------
Total Current Assets 158,140 155,842
Goodwill and Other Intangible Assets 212,841 214,100
Other Assets 7,886 6,641
Property, Plant and Equipment 197,336 196,820
Less accumulated depreciation 83,410 79,551
--------- ---------
113,926 117,269
--------- ---------
$ 492,793 $ 493,852
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 25,745 $ 27,949
Accrued expenses 50,630 54,935
Current portion of long-term debt 618 121
--------- ---------
Total Current Liabilities 76,993 83,005
Long-term Debt--Less Current Portion 193,823 191,151
Deferred Taxes 50 24
Other Long-Term Liabilities 58,778 58,494
Minority Interest 7,392 6,952
Shareholders' Equity:
Common stock 27,418 27,468
Retained earnings 134,479 132,015
Accumulated other comprehensive loss (6,140) (5,257)
--------- ---------
155,757 154,226
--------- ---------
$ 492,793 $ 493,852
========= =========
See Notes to Consolidated Condensed Financial Statements
2
<PAGE> 3
ROBBINS & MYERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENT
(In thousands except per share data)
(Unaudited)
Three Months Ended
November 30,
----------------------
1999 1998
-------- --------
Net sales $ 93,499 $ 98,266
Cost of sales 62,047 64,764
-------- --------
Gross profit 31,452 33,502
Operating expenses 20,844 22,318
-------- --------
10,608 11,184
Amortization expense 1,982 1,860
Other 161 (351)
-------- --------
8,465 9,675
Interest expense 3,247 3,540
-------- --------
Income before income taxes and minority interest 5,218 6,135
Income tax expense 1,879 2,086
Minority interest 273 0
-------- --------
Net income $ 3,066 $ 4,049
======== ========
Net income per share:
Basic $ 0.28 $ 0.37
======== ========
Diluted $ 0.27 $ 0.34
======== ========
Dividends per share:
Declared $ 0.055 $ 0.055
======== ========
Paid $ 0.055 $ 0.055
======== ========
See Notes to Consolidated Condensed Financial Statements
3
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ROBBINS & MYERS, INC AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
Operating Activities:
Net income $ 3,066 $ 4,049
Adjustment required to reconcile net income to net cash and
cash equivalents used by operating activities:
Depreciation 4,518 4,423
Amortization 1,982 1,859
Changes in operating assets and liabilities:
Accounts receivable (3,102) (965)
Inventories (2,134) (509)
Accounts payable (1,965) (3,037)
Accrued expenses (4,173) (5,172)
Other 371 (3,791)
-------- --------
Net Cash and Cash Equivalents Used by Operating Activities (1,437) (3,143)
Investing Activities:
Capital expenditures, net of nominal disposals (1,832) (3,248)
Financing Activities:
Proceeds from debt borrowings 6,514 16,400
Payments of long-term debt (2,559) (3,285)
Proceeds from sale of common stock 279 378
Purchase of common stock (891) (3,437)
Dividends paid (603) (606)
-------- --------
Net Cash and Cash Equivalents Provided by Financing Activities 2,740 9,450
-------- --------
(Decrease) Increase in Cash and Cash Equivalents (529) 3,059
Cash and Cash Equivalents at Beginning of Period 8,901 6,822
-------- --------
Cash and Cash Equivalents at End of Period $ 8,372 $ 9,881
======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
4
<PAGE> 5
ROBBINS & MYERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
November 30, 1999
(Unaudited)
NOTE 1--PREPARATION OF FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements of Robbins & Myers, Inc. and subsidiaries ("Company")
contain all adjustments, consisting of normally recurring items, necessary to
present fairly the financial condition of the Company and its subsidiaries as of
November 30, 1999, and August 31, 1999, and the results of their operations and
cash flows for the three month periods ended November 30, 1999, and November 30,
1998. All intercompany transactions have been eliminated. Certain amounts in the
prior period financial statements have been reclassified to conform to the
current year presentation.
NOTE 2--NET INCOME PER SHARE
Three Months Ended
November 30,
--------------------
1999 1998
------- -------
(In thousands)
Numerator:
Basic:
Net income $ 3,066 $ 4,049
Effect of dilutive securities:
Convertible debt interest 629 635
------- -------
Income attributable to diluted shares $ 3,695 $ 4,684
======= =======
Denominator:
Basic:
Weighted average shares 10,945 10,935
Effect of dilutive securities:
Convertible debt 2,367 2,385
Dilutive options and restricted shares 207 273
------- -------
Diluted shares 13,519 13,593
======= =======
Basic net income per share $ 0.28 $ 0.37
======= =======
Diluted net income per share $ 0.27 $ 0.34
======= =======
5
<PAGE> 6
NOTE 3--NOTE C LONG-TERM DEBT
November 30,1999
---------------------
(In thousands)
Senior debt:
Revolving credit loan $ 25,378
Senior notes 100,000
Other 5,213
6.50% Convertible Subordinated Notes 63,850
--------
Total debt 194,441
Less current portion 618
--------
$193,823
========
The Company's Bank Credit Agreement provides, among other things, that the
Company may borrow on a revolving credit basis up to a maximum of $200,000,000.
All outstanding amounts under the agreement are due and payable on November 25,
2002. Interest is variable based upon formulas tied to LIBOR or prime, at the
Company's option, and is payable at least quarterly. At November 30, 1999, the
weighted average interest rate for all amounts outstanding was 4.11%.
Indebtedness under the Bank Credit Agreement is unsecured, except for guarantees
by the Company's U.S. subsidiaries, the pledge of the stock of the Company's
U.S. subsidiaries and the pledge of the stock of certain non-U.S. subsidiaries.
The $100,000,000 Senior Notes were issued in two series. Series A in the
principal amount of $70,000,000 has an interest rate of 6.76% and are due May 1,
2008 and Series B in the principal amount of $30,000,000 has an interest rate
6.84% and are due May 1, 2010. Interest is payable semi-annually on May 1 and
November 1.
The above agreements have certain restrictive covenants including limitations on
cash dividends, treasury stock purchases and capital expenditures and minimum
requirements for interest coverage and leverage ratios.
The Company has $63,850,000 of 6.50% Convertible Subordinated Notes Due 2003
("Subordinated Notes"). The Subordinated Notes are due on September 1, 2003, and
bear interest at 6.50%, payable semi-annually on March 1 and September 1 and are
convertible into common stock at a rate of $27.25 per share. Holders may convert
at any time until maturity and the Company may call for redemption at any time
on or after September 1, 1999, at a price ranging from 103.25% in 1999 to 100%
in 2001 and thereafter. The Subordinated Notes are subordinated to all other
indebtedness of the Company.
NOTE 4--INCOME TAXES
The estimated annual effective tax rates were 36% and 34% for the first quarter
of fiscal 2000 and fiscal 1999, respectively.
NOTE 5--COMPREHENSIVE INCOME
Three Months Ended
November 30,
----------------------
1999 1998
------- -------
(In thousands)
Net income $ 3,066 $ 4,049
Other comprehensive income:
Foreign currency translation (883) (1,179)
Recognition of minimum pension liability 0 0
------- -------
Comprehensive income $ 2,183 $ 2,870
======= =======
6
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NOTE 6--BUSINESS SEGMENTS
Sales and Income before Interest and Taxes ("IBIT") by operating segment is
presented in the following table. There has been no change in the presentation
basis or measurement of segment information from the prior year end.
Intersegment sales are immaterial and there is no material change in segment
assets since the prior year end.
Three Months Ended
November 30,
---------------------------
1999 1998
-------- --------
(In thousands)
Unaffiliated customer sales:
Process systems $ 75,878 $ 81,320
Energy systems 17,621 16,946
-------- --------
Total $ 93,499 $ 98,266
======== ========
IBIT:
Process systems $ 8,811 $ 10,103
Energy systems 2,151 1,785
Corporate and eliminations (2,497) (2,213)
-------- --------
Total $ 8,465 $ 9,675
======== ========
NOTE 7--PLANT CLOSURE
In the second quarter of fiscal 1999, the Company recorded a charge of
$4,200,000 for the closure and relocation of its Fairfield, CA, manufacturing
operations. Included in the $4,200,000 charge were asset write downs of
$1,400,000 for assets to be disposed of and accrued expenses of $2,800,000. As
of August 31, 1999 and November 30, 1999, the remaining balance of accrued
expenses was $2,500,000 and $2,400,000 respectively.
NOTE 8--NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board issued Statement No. 133, Accounting
for Derivative Instruments and Hedging Activities. This statement is not
required to be adopted by the Company until its fiscal year 2001. The Company
has not yet determined the impact of this statement on the financial statements
of the Company.
7
<PAGE> 8
PART I--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following tables present the components of the Company's
consolidated income statement and segment information for the first quarter of
fiscal 2000 and 1999.
Three Months Ended
November 30,
------------------------
Consolidated: 1999 1998
------- -------
Net Sales 100.0% 100.0%
Cost of sales 66.4 65.9
------- -------
Gross profit 33.6 34.1
Operating expenses 22.3 22.7
------- -------
IBIT before amortization and other 11.3 11.4
Amortization 2.1 1.9
Other .1 (.3)
------- -------
IBIT 9.1% 9.8%
======= =======
Three Months Ended
November 30,
------------------------
Segment: 1999 1998
------- -------
Process systems:
Sales $75,878 $81,320
IBIT before amortization and other 10,125 11,037
% 13.3% 13.6%
IBIT 8,811 10,103
% 11.6% 12.4%
Energy systems:
Sales $17,621 $16,946
IBIT before amortization and other 2,803 2,277
% 15.9% 13.4%
IBIT 2,151 1,785
% 12.2% 10.5%
First quarter of fiscal 2000 and 1999
The Company acquired a controlling interest in Universal Glasteel
Equipment ("UGE") in December 1998, Chemineer de Mexico in June 1999 and GMM
Pfaudler Limited ("GMM") in July 1999 ("Acquired Businesses"). The Company owned
minor portions of UGE and GMM in the first quarter of fiscal 1999 and their
results were recorded on the equity method. The Acquired Businesses are
consolidated in the first quarter of fiscal 2000. The Acquired Businesses are
all in the Company's Process Systems segment.
Net sales for the first quarter of fiscal 2000 were $93.5 million
compared to $98.3 million in the prior year, a decrease of $4.8 million or 4.9%
over the same period of the prior year. The decrease in pro forma sales,
assuming the Acquired Businesses were acquired at the beginning of fiscal 1999,
was $9.4 million or 9.2%.
8
<PAGE> 9
The Process Systems segment had sales of $75.9 million in the first
quarter of fiscal 2000 compared to $81.3 million in fiscal 1999. On a pro forma
basis, the Process Systems segment sales decreased by $10.0 million, an 11.6%
decrease. This decrease was primarily driven by weak market demand in the
specialty chemical market. Capital spending in this market was low as operating
rates and profitability levels have been weak. Incoming orders in this segment
improved in the first quarter of fiscal 2000 to $87 million. This follows three
successive quarters of orders in the $75 to $80 million range. The improved
orders are attributable to continued strength in the pharmacuetical market and
some improvement in the wastewater treatment and specialty chemical markets.
Backlog in this segment increased to $82 million at the end of the first quarter
of fiscal 2000 from $71 million at August 31, 1999.
The Energy Systems segment had sales of $17.6 million in the first
quarter of fiscal 2000 compared to $16.9 million in fiscal 1999, an increase of
4.1%. This increase reflects some improvement resulting from the increase in
crude oil prices throughout most of calendar year 1999. This increase in oil
prices has spurred an increase in exploration and production activities over the
last half of calendar year 1999, although this activity is still well below what
is was in early calendar year 1998. Incoming orders in this segment improved to
$20 million in the first fiscal quarter of fiscal 2000, following four
successive quarters of orders in the $15 to $18 million range. Backlog increased
to $6 million at the end of the first quarter of fiscal 2000 from $3 million at
August 31, 1999.
The gross margin percentage decreased from 34.1% to 33.6%. This
decrease is due to the lower sales volumes in the Process Systems segment and a
shift in mix to slightly lower margin products within the Energy Systems
segment.
Operating expenses decreased by $1.5 million and from 22.7% to 22.3% as
a percentage of sales. These decreases are due to the savings from reduced
employment levels and severance actions taken in the Process Systems segment in
fiscal 1999 as well as cost savings from the Fairfield, CA, plant closure and
administrative consolidation in the Energy Systems segment.
As a result of the cost saving actions, IBIT before amortization and
other as a percentage of sales in the Process Systems segment declined only
slightly from 13.6% in fiscal 1999 to 13.3 % in fiscal 2000 on a sales decline
of 6.7%, or $5.4 million. In the Energy Systems segment IBIT before amortization
and other increased from 13.4% in the prior year to 15.9% in fiscal 2000.
Amortization expense increased in fiscal 2000 from $1.9 million to $2.0
million. This increase is from the amortization of intangible assets recorded in
the acquisition of the Acquired Businesses.
In fiscal 2000 other expense is from ongoing costs to close and
transfer the operations of the Fairfield, CA, manufacturing plant. In fiscal
1999 the other income is equity income from UGE and GMM which were acquired and
are now consolidated.
Interest expense decreased from $3.5 million in the first quarter of
fiscal 1999 to $3.2 million in the first quarter of fiscal 2000. This was due to
lower average debt levels.
The effective tax rate is 36.0% in fiscal 2000 compared to 34.0% in
fiscal 1999. The increase is from a higher proportion of taxable income in
higher tax rate countries and some tax carryforward benefits now being fully
utilized outside the U.S.
The decreases in net income and diluted net income per share are
primarily driven by the margin on the lower sales levels and a higher tax cost,
offset by some cost savings.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
Cash uses in the first three months of fiscal 2000 were $5.5 million in
semi-annual interest payments due on the Company's Senior Notes and Convertible
Subordinated Notes (included in accrued expenses), $1.9 million to purchase
Company stock and Convertible Subordinated Notes under the fiscal 2000 share
buyback program and $1.8 million for capital expenditures. Cash generated from
operations, exclusive of accrued interest payments, and net borrowings under the
Company's revolving credit loan funded these cash uses.
Cash uses in the first three months of fiscal 1999 were $6.4 million
for a loan to UPE, the Company's partner in the UGE joint venture (included in
other operating activities), $5.5 million in semi-annual interest payments due
on the Company's Senior Notes and Convertible Subordinated Notes (included in
accrued expenses), $3.4 million to purchase Company stock under the Company's
1998 stock buy back program and $3.2 million for capital expenditures. Cash
generated from operations, exclusive of the UPE loan and accrued interest
payments, and net debt borrowings of $13.1 million funded these cash uses.
The Company expects operating cash flow to be adequate for the
remainder of fiscal year 2000 operating needs, scheduled debt service and
shareholder dividend requirements. The major cash requirement for the remainder
of fiscal 2000 is planned capital expenditures of approximately $18.0 million.
Capital expenditures are related to additional production capacity, cost
reductions and replacement items.
In addition, the Company started a twelve month program in October 1999
to purchase up to 3% or about 350,000 shares or share equivalents in Convertible
Subordinated Notes. As of November 30, 1999, the Company has purchased 56,600
shares for $.9 million and $1.15 million face value of Convertible Subordinated
Notes (42,200 equivalent shares) for $1.0 million.
MARKET RISK
In its normal operations the Company has market risk exposure to
foreign currency exchange rates and interest rates. There has been no
significant change in the Company's exposure to these risks, which has been
previously disclosed.
YEAR 2000
The Company successfully implemented its plan to address the Year 2000
issue, as previously disclosed. The costs for resolving Year 2000 issues were
approximately $1.6 million for fiscal 1998, and $1.8 million for fiscal 1999.
Most of these costs were to replace existing software and hardware systems.
Costs incurred in fiscal 2000 have been minimal. As of the date of this report
the Company has tested all of its critical systems and suppliers and has not had
any problems at any of its units.
10
<PAGE> 11
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Report contains various
forward-looking statements. All statements which address operating performance,
events or developments that we expect or anticipate will occur in the future,
including statements related to growth, operating margin performance, earnings
per share or statements expressing general opinions about future operating
results, are forward-looking statements.
These forward-looking statements and performance trends are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those statements and trends. Such factors include, but are not
limited to, a significant decline in capital expenditure levels in the Company's
served markets, a major decline in oil and gas prices, foreign exchange rate
fluctuations, uncertainties surrounding the Year 2000 and the new Euro currency,
continued availability of acceptable acquisition candidates and general economic
conditions that affect demand in the process industries. Any forward-looking
statements are made based on known events and circumstances at the time. The
Company undertakes no obligation to update or publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date of this report.
11
<PAGE> 12
PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) See Index to Exhibits
b) Reports on Form 8-K. During the quarter ended November 30,
1999, the Company did not file any reports on Form 8-K.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROBBINS & MYERS, INC.
-------------------------------------
DATE: JANUARY 13, 2000 BY /S/ KEVIN J. BROWN
---------------------- ----------------------------------
KEVIN J. BROWN
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
13
<PAGE> 14
INDEX TO EXHIBITS
-----------------
(27) FINANCIAL DATA SCHEDULE *
- ------------
A* = Filed herewith
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 8,372
<SECURITIES> 0
<RECEIVABLES> 78,926
<ALLOWANCES> (1,500)
<INVENTORY> 55,572
<CURRENT-ASSETS> 158,140
<PP&E> 197,336
<DEPRECIATION> (83,410)
<TOTAL-ASSETS> 492,793
<CURRENT-LIABILITIES> 76,993
<BONDS> 193,823
0
0
<COMMON> 27,418
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 492,793
<SALES> 93,499
<TOTAL-REVENUES> 93,499
<CGS> 62,047
<TOTAL-COSTS> 62,047
<OTHER-EXPENSES> 20,844
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,247
<INCOME-PRETAX> 5,218
<INCOME-TAX> 1,879
<INCOME-CONTINUING> 3,066
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,066
<EPS-BASIC> 0.28
<EPS-DILUTED> 0.27
</TABLE>
