Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Robbins & Myers, Inc. 10-K405 48 218K
2: EX-4.2 Instrument Defining the Rights of Security Holders 104 442K
3: EX-4.3 Instrument Defining the Rights of Security Holders 34 124K
6: EX-10.10 Material Contract 15 58K
7: EX-10.12 Material Contract 5 21K
4: EX-10.3.1 Material Contract 15 34K
5: EX-10.5 Material Contract 58 190K
8: EX-11.1 Statement re: Computation of Earnings Per Share 2± 10K
9: EX-23.1 Consent of Experts or Counsel 1 9K
10: EX-24.1 Power of Attorney 1 9K
11: EX-27.1 Financial Data Schedule (Pre-XBRL) 1 7K
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, 1996 File Number 0-288
ROBBINS & MYERS, INC.
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(Exact name of Registrant as specified in its charter)
OHIO 31-0424220
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(State of incorporation) (I.R.S. employer
identification number)
1400 Kettering Tower, Dayton, Ohio 45423
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Registrant's telephone number, including area code:
(937) 222-2610
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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:
Common Shares, without par value
--------------------------------
(Title of Class)
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. [x]
1
At the close of business on October 22, 1996:
Number of Common Shares, without
par value, outstanding....................... 10,726,032
Aggregate market value of Common
Shares, without par value, held
by non-affiliates of the Company............. $161,639,753
DOCUMENT INCORPORATED BY REFERENCE
Robbins & Myers, Inc., Proxy Statement, dated November 13, 1996, for
its Annual Meeting of Shareholders on December 11, 1996, 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
ITEM 1. BUSINESS.
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BACKGROUND
Robbins & Myers, Inc., an Ohio corporation (the "Company"), designs,
manufactures and markets on a global basis high-performance, specialized fluids
management products for the process industries. The Company's four product lines
are glass-lined reactor and storage vessels (38% of fiscal 1996 sales),
progressing cavity products (30%), mixing and turbine agitation equipment (22%),
and related products, such as engineered systems, fluoropolymer products, and
valves (10%). These percentages for fiscal 1996 were substantially the same as
in fiscal 1995.
The Company has achieved leading market shares in each of its main
product lines: 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 February 1992, the Company has completed eight acquisitions as
part of a strategy to leverage its fluid management expertise, its leadership in
progressing cavity technology, 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 lines.
The Company markets it products to the process industries - industries
in which the pumping, mixing, treatment, chemical processing, measurement and
containment of fluids and particulates are important elements in their
production processes. The principal sectors of the process industries served by
the Company are specialty chemicals, pharmaceuticals, oil and gas recovery,
wastewater treatment, food and beverage and pulp and paper.
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 ten countries and end market
diversification. In fiscal 1996, aftermarket sales to the Company's customers,
as well as customers of its competitors, accounted for approximately 35% of
total sales and international sales accounted for approximately 41% 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, pharmaceuticals, and food additives and supplements, which
collectively account for over 40% 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 such as Asia-Pacific Rim and
South America; and (iv) establishing new product lines through acquisitions of
related fluids management businesses such as valves, filters and grinders.
3
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, 1996, 1995 and 1994 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 has achieved substantial sales growth over the past several
years. The sales growth from 1992 through 1996 primarily was driven by eight
acquisitions completed since February 1992 at an aggregate purchase price of
approximately $160.0 million:
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Fiscal Prchase
Year Principal Price
Acquired Business Products (millions)
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1992 Prochem Mixing Equipment, Inc. Large industrial mixers $ 8.0
1993 JWI Mixer Line Portable industrial mixers 2.2
1994 Chemineer, Inc. Large industrial mixers 78.4
1994 Pfaudler, Inc. Glass-lined vessels 50.3
1994 Edlon, Inc. Fluoropolymer coatings 5.5
1995 Pharaoh Corporation Glass-lined vessel parts and 2.1
aftermarket services
1995 Cannon Process Equipment Co., Ltd Glass-lined vessels 5.4
1995 Universal Glasteel Equipment Reconditioned glass-lined 7.0
reactor and storage vessels
MARKETS SERVED
The Company markets its fluids management products and services to the
process industries - industries in which the pumping, mixing, treatment,
chemical processing, 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.
4
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) progressing cavity power sections used
to drive the drilling element in directional drilling operations; and (iii)
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 industry to adopt the
latest oil and gas 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 currently is
developing a facility in Houston, Texas dedicated to the production of down-hole
pumps and power drilling sections. Production activities at this facility are
scheduled to begin in fiscal 1997.
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 and development of innovative drugs which often require new process
facilities or retrofit of existing facilities.
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.
PRODUCTS
Glass-Lines Storage and Reactor Vessels. The Company's Pfaudler unit
manufactures and sells 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.
5
The Pfaudler unit fabricates steel vessels and bonds glass to the
interior of vessels to form a fused composite, referred to as Glasteel(R), 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
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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
Pfaudler vessels are marketed worldwide under the tradename Glasteel(R)
to end-users. The industry is dominated by two major suppliers. Pfaudler
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 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 helix steel rod (called the rotor) which
rotates in a double-helix, 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 and power sections used to drive the drilling element in
the drilling of wells. 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. Moyno(R) down-hole power
sections utilize progressing cavity technology to drive the drilling element in
oil and gas drilling.
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.
6
PRODUCTS PRIMARY MARKETS SERVED
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Moyno(R) Down-Hole Pumps Oil and Gas Recovery
Moyno(R) Power Sections for Down-Hole Motors Food and Beverage
R&M(R) Positive Displacement Pumps Pulp and Paper
Moyno(R) Progressing Cavity Pumps Wastewater Treatment
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) and Kenics(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.
Aftermarket products and services consist of replacement parts, such as
impellers and gear boxes, as well as field service.
PRODUCTS PRIMARY MARKETS SERVED
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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
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
7
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(R) 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's(R) products are used
principally in the specialty chemicals industry to provide corrosion-resistant
environments and in the paper industry for release applications.
PRODUCTS PRIMARY MARKETS SERVED
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Pfaudler(R)Engineered Systems Pharmaceuticals
Pfaudler(R)Wiped Film Evaporators Specialty Chemicals
Edlon(R)Custom Linings & Coatings Electronics
Edlon(R)Roll Covering Products Pulp and Paper
Edlon(R)Fluoropolymer Products Wastewater Treatment
RKL(R)Pinch Valves
RKL(R)Pressure Sensors
SALES AND MARKETING
The marketing and sales function in each of the Company's businesses
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) 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) is particularly focused
on continuing to develop preferred supplier relationships with major
pharmaceuticals companies as they continue to expand their production operations
in emerging markets.
8
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 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. Outside the U.S., down-hole pumps are directly sold by the Company.
Additional distributor relationships are currently being 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, 1996, the Company's order backlog was $110.0 million
compared to $107.4 million at the beginning of the year. 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 and manufacturing skills. The
Company is committed to maintaining high quality manufacturing standards and has
completed ISO certification at several facilities.
During 1996, the Company spent approximately $2.6 million on research
and development activities compared to $2.4 million and $1.4 million in 1995 and
1994, 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, 1996, the Company had approximately 2,460 employees.
Approximately 910 employees were covered by collective bargaining agreements at
various locations. In February 1996, the Company entered into a new three-year
contract covering approximately 250 employees represented by the International
Union of United Automobile, Aerospace and Agricultural Implement Workers of
American (UAW) at the Company's Springfield, Ohio facility. The Company
considers labor relations at each of its locations to be good.
9
ITEM 2. PROPERTIES
FACILITIES
The Company's executive offices are located in Dayton, Ohio. The
executives offices are leased and occupy approximately 15,000 square feet. Set
forth below is certain information relating to the Company's principal operating
facilities.
[Enlarge/Download Table]
SQUARE PRODUCT MANUFACTURED OR
LOCATION FOOTAGE OTHER USE OF FACILITY
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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
Houston, 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
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 Progressing cavity products
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
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 scheduled to commence operations in January 1997.
(3) Facility of a 40%-owned affiliate.
(4) Facility of a 60%-owned subsidiary.
At August 31, 1996, utilization of plants was approximately 95%.
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ITEM 3. LEGAL PROCEEDINGS
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The Company is presently not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Maynard H. Murch IV, age 52, 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 60, 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 54, 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 the Process Industries Group and 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 59, 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.
Howard O. Royer, age 58, is Treasurer of the Company, having been
elected to that position on June 28, 1995. He had previously been employed by
the Company from 1975 to 1985, serving as Treasurer at the time of his
departure. Prior to rejoining the Company, he was employed by Nissan Motor
Manufacturing Corp., USA, most recently holding the position of Vice President,
Finance and Information Systems.
Kevin J. Brown, age 38, 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 53, 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 11, 1996) or until their
respective successors are elected.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
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STOCKHOLDER MATTERS
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(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.
[Download Table]
Dividends
High Low Paid
---------------------------------------------
Fiscal 1996
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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
Fiscal 1995
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1st Quarter $10.250 $8.375 $.03750
2nd Quarter 11.375 8.250 .03750
3rd Quarter 14.250 10.375 .03750
4th Quarter 14.375 12.500 .03750
(B) As of October 22, 1996, the Company had 650 shareholders of record.
Based on requests from brokers and other nominees, the Company estimates there
are an additional 980 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. At August 31, 1996, $7,381,000 of retained
earnings was available for the payment of future dividends. With the new debt
agreement signed November 26, 1996, retained earnings available for the payment
of future dividends was reduced to approximately $3,905,000.
13
[Enlarge/Download Table]
ITEM 6. SELECTED FINANCIAL DATA
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FIVE YEAR FINANCIAL HIGHLIGHTS
Robbins & Myers, Inc. and Subsidiaries
(in thousands except per share, shareholder and employee data) 1996 1995 (1) 1994 (1) 1993 1992
Operating Results
Net sales $350,964 $302,952 $121,647 $85,057 $75,588
Gross profit 119,030 101,304 44,981 32,761 30,080
Operating expenses 80,272 74,234 28,733 22,171 19,365
Operating income 39,455 26,320 12,102 8,400 8,512
Income before special items 20,338 11,825 6,355 6,178 7,873
Special items, net of tax (2) (813) 1,332 0 (8,018) 0
----------- ----------- ----------- ---------- ---------
Net income (loss) $19,525 $13,157 $6,355 $(1,840) $7,873
=========== =========== =========== ========== =========
Depreciation and amortization $13,877 $12,401 $4,594 $2,798 $2,442
Capital expenditures 16,453 10,133 6,798 2,579 4,749
Cash flow from operating activities 32,060 33,017 14,601 7,533 6,487
Ending backlog 109,921 107,423 73,944 20,248 12,210
Financial Condition
Total assets $300,340 $270,407 $258,130 $84,636 $74,318
Total debt 73,533 67,901 83,790 971 939
Shareholders' equity 91,437 69,939 57,039 52,342 56,310
Total capitalization 164,970 137,840 140,829 53,313 57,249
Performance Statistics
Percent of net sales
Gross profit 33.9% 33.4% 37.0% 38.5% 39.8%
Operating expenses 22.9 24.5 23.6 26.1 25.6
Operating income 11.2 8.7 9.9 9.9 11.3
Income before special items 5.8 3.9 5.2 7.3 10.4
Net income 5.6 4.3 5.2 (2.2) 10.4
Debt as a % of total capitalization 44.6 49.3 59.5 1.8 1.6
Return on shareholders' equity (3) 25.2 18.6 11.6 11.4 14.9
Price/earnings ratio at August 31 12.5:1 11.3:1 15.5:1 NA 10.3:1
Per Share Data (4)
Income (loss) per share, fully diluted:
Before special items $1.83 $1.09 $0.61 $0.59 $0.75
Special items, net of tax (2) (0.07) 0.12 0.00 (0.76) 0.00
----------- ----------- ----------- ---------- ---------
Net income (loss) per share $1.76 $1.21 $0.61 ($0.17) $0.75
=========== =========== =========== ========== =========
Shareholders' equity (book value) $8.63 $6.72 $5.55 $5.14 $5.53
Dividends declared 0.1688 0.1500 0.1438 0.1188 0.0938
Market price of common stock
High $26 1/2 $14 3/8 $10 3/8 $10 3/4 $10 3/4
Low 13 5/8 8 1/4 7 3/4 6 1/2 7 1/4
Close 22 13 23/32 9 3/8 9 3/8 7 3/4
Other Data
Weighted average common shares outstanding, fully diluted (4) 11,107 10,874 10,504 10,514 10,498
Number of shareholders (5) 1,632 1,520 1,098 1,295 1,370
Number of employees 2,459 2,337 2,226 615 622
<FN>
Notes to Five-Year Financial Highlights
(1) 1995 reflects the acquisition of Pharaoh and Cannon and 1994 reflects the
acquisition of Pfaudler, Chemineer and Edlon as discussed in the Business
Acquisitions note.
(2) Special items are: 1996 and 1995 extinguishment of debt and 1993 cumulative effects of accounting changes.
(3) Calculated using Income Before Special Items.
(4) Prior year information adjusted to reflect 2 for 1 stock split effective July 31, 1996.
(5) As of October 22, 1996, the Company had 650 shareholders of record. Based on requests from brokers and other nominees,
the Company estimates there are an additional 980 shareholders.
14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
OVERVIEW
Since June 1994, the Company has completed six acquisitions that have
significantly changed its business and financial profile. As a result of the
acquisitions, the Company accomplished critical elements of its strategy to
expand its capabilities to serve the fluids management needs of its customers on
a global basis. The results of the most significant of the acquired companies,
Pfaudler, Chemineer and Edlon, are included in the Company's results for all of
fiscal 1996 and 1995 and two months of fiscal 1994, which significantly impact
comparisons between fiscal 1995 and fiscal 1994.
Sales to non-U.S. customers ranged from 40.0% to 45.0% of total Company
sales for fiscal 1996, 1995 and 1994. Profitability of the non-U.S. business
units of the Company was less than the U.S. business units. Operating income
(loss) as a percent of net sales for the non-U.S. business units increased to
10.1% for fiscal 1996 from 7.7% for fiscal 1995 and from (2.8)% for fiscal 1994.
The improvements were primarily the result of ongoing cost reduction programs.
Changes in exchange rates for fiscal 1996, 1995 and 1994 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 35.0% of total Company sales
for fiscal 1996 and 38.0% for fiscal 1995. Sales into the specialty chemicals,
pharmaceuticals, oil and gas recovery, wastewater treatment and pulp and paper
markets are each at least 5.0% of total Company sales.
15
Results Of Operations
The following table presents the components of the Company's statement of income
as a percent of net sales for fiscal 1996, 1995 and 1994.
[Download Table]
Year Ended August 31,
1996 1995 1994
------------ ---------- ----------
Net sales 100.0% 100.0% 100.0%
Cost of sales 66.1 66.6 63.0
------------ ---------- ----------
Gross profit 33.9 33.4 37.0
Operating expenses 22.9 24.5 23.6
Other (income) expense (0.2) 0.2 3.5
------------ ---------- ----------
Operating income 11.2 8.7 9.9
Interest expense 2.0 2.4 1.2
------------ ---------- ----------
Income before income taxes and
special items 9.2 6.3 8.7
Income taxes 3.4 2.4 3.5
------------ ---------- ----------
Income before special items 5.8 3.9 5.2
Special items, net of tax (0.2) 0.4 0.0
------------ ---------- ----------
Net income 5.6% 4.3% 5.2%
============ ========== ==========
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.
16
Activities related to restructuring charges provided for 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. 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.
FISCAL 1995 COMPARED TO FISCAL 1994--Net sales of $303.0 million for
fiscal 1995 were 150.4% higher than for fiscal 1994 due to the full year effect
of the acquired companies. Net income of $13.2 million was 107.0% higher than
for fiscal 1994. Earnings per share of $1.21, fully diluted, were 98.4% higher
than for fiscal 1994. The Company's businesses existing before the acquisitions
also experienced growth with net sales reaching $102.5 million, an increase of
11.0% over fiscal 1994, due mostly to strong market demand for the Company's
oilfield products.
The gross profit percent decreased from 37.0% for fiscal 1994 to 33.4%
for fiscal 1995 as the acquired companies had lower gross profit percents than
the existing businesses.
Operating expenses as a percent of net sales increased from 23.6% for
fiscal 1994 to 24.5% for fiscal 1995 as the acquired companies had higher
operating expenses as a percent of sales than the existing businesses.
Profitability for fiscal 1995 was further impacted from fiscal 1994 as
the Company's non-U.S. businesses were less profitable than its U.S.
businesses. For fiscal 1995, the European businesses were affected primarily by
the German operation which accounted for 52% of European sales but was only
nominally profitable. A program for changing the way the Company conducts
business in Germany and the related cost structure was commenced during that
year. The lower rate of profitability for the other non-U.S. businesses was due
in part to their being start-up operations.
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. Other (income) expense for fiscal 1994 included a restructure charge
of $2.6 million, or 2.1% of net sales, related to the consolidation of Prochem
production into the Chemineer facility.
Interest expense increased to $7.3 million in fiscal 1995 from $1.5
million for fiscal 1994 due to borrowings to purchase the acquired companies on
June 30, 1994.
The effective income tax rate was 37.9% for fiscal 1995 compared to
40.3% for fiscal 1994. The lower rate for fiscal 1995 reflects lower income tax
rates for certain of the non-U.S. operations which contributed a greater percent
of pretax income for fiscal 1995.
17
In May 1995, the Company repurchased $25.0 million of subordinated debt
issued as a part of the consideration for the acquired companies. The
transaction generated an extraordinary gain of $1.3 million, or 0.4% of net
sales.
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates capital expenditures of $24.0 million for
fiscal 1997. Included in this amount is approximately $5.0 million which will be
spent for a new Moyno Oilfield facility and related equipment in Houston, Texas.
The Company expects cash flow from operating activities to be adequate for
operating needs, including scheduled debt service, capital expenditures plans
and shareholder dividend requirements for fiscal 1997. There are no significant
restrictions on the Company's ability to transfer funds from its non-U.S.
subsidiaries to the Company.
Cash flow from operating activities was $32.1 million for fiscal 1996.
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 $18.8 million and to pay dividends of
$1.8 million.
Cash flow from operating activities was $33.0 million for fiscal 1995.
This cash flow, supplemented by a $5.9 million reduction in available cash, was
used primarily for capital expenditures of $10.1 million, acquisitions of $12.9
million, net debt payments of $15.0 million and dividends of $1.5 million.
The Company had $15.0 million available under its current bank credit
facility at August 31, 1996. The Company repaid $63.0 million of its bank
indebtedness in September 1996 with the net proceeds from the sale of $65.0
million of 6.5% Convertible Subordinated Notes due 2003 ("Notes"). After such
repayment, $44.0 million was available under its current bank credit facility.
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.
The Company has entered into negotiations with respect to a replacement
bank credit facility. The new agreement would provide for $150.0 million of
borrowings with certain terms more favorable than the current agreement. The
primary purpose of the facility is to finance the Company's acquisition growth
program.
On November 26, 1996, an agreement was entered into on the new $150.0
million bank credit agreement. The terms of the new facility are generally
more favorable than the prior facility.
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
------- -------------------------------------------
[Enlarge/Download Table]
CONSOLIDATED BALANCE SHEET
Robbins & Myers, Inc. and Subsidiaries
($ in thousands)
August 31,
1996 1995
------------ -------------
ASSETS
Current Assets
Cash and cash equivalents $7,121 $10,210
Accounts receivable, less allowances 51,158 49,415
Inventories 48,417 43,176
Other current assets 2,184 2,492
Deferred taxes 5,180 4,539
------------ -------------
Total Current Assets 114,060 109,832
Goodwill 95,101 73,497
Other Intangible Assets 13,068 13,573
Deferred Taxes 2,101 4,522
Other Assets 3,896 4,378
Net Property, Plant and Equipment 72,114 64,605
------------ -------------
$300,340 $270,407
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $25,478 $22,442
Accrued expenses 49,614 49,190
Current portion long-term debt 1,348 6,067
------------ -------------
Total Current Liabilities 76,440 77,699
Long-Term Debt - Less Current Portion 72,185 61,834
Other Long-Term Liabilities 60,278 60,935
Shareholders' Equity
Common stock-without par value:
Authorized shares-25,000,000
Issued shares-10,868,002 (10,676,698 in 1995) 26,617 22,654
Treasury shares-270,610 (271,610 in 1995) (2,481) (1,972)
Retained earnings 66,996 49,254
Equity adjustment for foreign currency translation 655 777
Equity adjustment to recognize minimum pension liability (350) (774)
------------ ------------
91,437 69,939
------------ ------------
$300,340 $270,407
============ ============
See Notes to Consolidated Financial Statements
19
CONSOLIDATED INCOME STATEMENT
Robbins & Myers, Inc. and Subsidiaries
($ in thousands, except per share data)
[Enlarge/Download Table]
Years ended August 31,
1996 1995 1994
------------- ------------- --------------
Net sales $350,964 $302,952 $121,647
Cost of sales 231,934 201,648 76,666
------------- ------------- --------------
Gross profit 119,030 101,304 44,981
Operating expenses 80,272 74,234 28,733
Other (income) expense (697) 750 4,146
------------- ------------- --------------
Operating income 39,455 26,320 12,102
Interest expense 7,076 7,287 1,457
------------- ------------- --------------
Income before income taxes and
extraordinary items 32,379 19,033 10,645
Income taxes 12,041 7,208 4,290
------------- ------------- --------------
Income before extraordinary items 20,338 11,825 6,355
Extraordinary items, net of income taxes:
(Loss) gain on extinguishment of debt (813) 1,332 0
------------- ------------- --------------
Net income $19,525 $13,157 $6,355
============= ============= ==============
Income per share:
Primary:
Before extraordinary items $1.84 $1.09 $0.61
Extraordinary items, net of taxes (0.07) 0.13 0.00
------------- ------------- --------------
Total $1.77 $1.22 $0.61
============= ============= ==============
Fully diluted:
Before extraordinary items $1.83 $1.09 $0.61
Extraordinary items, net of taxes (0.07) 0.12 0.00
------------- ------------- --------------
Total $1.76 $1.21 $0.61
============= ============= ==============
See Notes to Consolidated Financial Statements
20
[Enlarge/Download Table]
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Robbins & Myers, Inc. and Subsidiaries
($ in thousands, except per share data)
Foreign Minimum
Common Treasury Retained Currency Pension
Shares Shares Earnings Translation Liability Total
---------- ----------- ----------- ------------ ------------ -----------
Balance at September 1, 1993 $21,298 ($1,810) $32,776 $292 ($214) $52,342
Net income 6,355 6,355
Cash dividends declared, $0.14 per share (1,475) (1,475)
Stock options exercised, 110,400 shares 298 298
Proceeds from sale of 24,976 shares
to employee benefit plans 61 176 237
Performance stock awards 31 31
Cost of 52,004 shares purchased (481) (481)
Change in foreign currency translation (81) (81)
Change in minimum pension liability (187) (187)
---------- ----------- ----------- ------------ ------------ -----------
Balance at August 31, 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) $91,437
========== =========== =========== ============ ============ ===========
See Notes to Consolidated Financial Statements
21
STATEMENT OF CONSOLIDATED CASH FLOWS
Robbins & Myers, Inc. and Subsidiaries
($ in thousands)
[Enlarge/Download Table]
Years Ended August 31,
1996 1995 1994
----------- ----------- -----------
OPERATING ACTIVITIES:
Net income $19,525 $13,157 $6,355
Adjustment required to reconcile net income to net cash
and cash equivalents provided by operating activities:
Depreciation 9,382 8,549 3,761
Amortization 4,495 3,852 833
Deferred taxes (220) (800) (523)
Equity income from unconsolidated investments (400) (944) (80)
Loss (gain) on extinguishment of debt 1,355 (2,183) 0
Performance stock awards 1,050 603 0
Changes in operating assets and liabilities - excluding the effects of the
purchase of Pharaoh and Cannon and Pfaudler, Chemineer, and Edlon
Accounts receivable, less allowances (1,804) (7,204) 89
Inventories (5,302) (1,571) 2,435
Other current assets 308 2,236 (1,436)
Other assets 868 659 1,729
Accounts payable 3,036 5,273 (128)
Accrued expenses 424 9,605 549
Other long-term liabilities (657) 1,785 1,017
----------- ----------- -----------
Net cash and cash equivalents provided by operating activities 32,060 33,017 14,601
INVESTING ACTIVITIES:
Capital expenditures, net of nominal disposal (16,453) (10,133) (6,798)
Purchase of marketable securities 0 0 (29,796)
Proceeds from sale of marketable securities 0 0 52,860
Purchase of Pfaudler, Chemineer and Edlon 0 0 (96,725)
Purchase of Pharaoh and Cannon 0 (12,898) 0
Other 0 0 (700)
----------- ----------- -----------
Net cash and cash equivalents used for investing activities (16,453) (23,031) (81,159)
FINANCING ACTIVITIES:
Proceeds from debt borrowings 92,565 67,375 113,805
Payments of long-term debt (90,781) (82,205) (31,200)
Retirement of SAR's and other acquisition costs (19,401) 0 0
Proceeds from sale of common stock 1,583 534 580
Purchase of common stock (879) 0 (495)
Dividends paid (1,783) (1,559) (1,475)
----------- ----------- -----------
Net cash and cash equivalents (used) provided by financing activities (18,696) (15,855) 81,215
----------- ----------- -----------
(Decrease) increase in cash and cash equivalents (3,089) (5,869) 14,657
Cash and cash equivalents at beginning of year 10,210 16,079 1,422
----------- ----------- -----------
Cash and cash equivalents at end of year $7,121 $10,210 $16,079
=========== =========== ===========
See Notes to Consolidated Financial Statements
22
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
wholly-owned 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 general 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 estimated.
Accounts Receivable
Accounts receivable are stated net of allowances for doubtful accounts totaling
$1,195,000 and $1,260,000 at August 31, 1996 and 1995, respectively. Accounts
receivable relate primarily to customers located in North America and Western
Europe and are concentrated in the 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, 1996 and 1995, the difference
between estimated current replacement cost and the stated LIFO value was
approximately $5,947,000 and $7,436,000 respectively.
Non-U.S. inventories are reported on the first-in, first-out (FIFO) method
and amounted to $25,052,000 and $23,226,000 at August 31, 1996 and 1995,
respectively.
At August 31, inventories consisted of the following:
[Download Table]
1996 1995
-------------- --------------
(In thousands)
Finished products $12,424 $13,743
Work in process 18,249 15,149
Raw materials 17,744 14,284
-------------- --------------
$48,417 $43,176
============== ==============
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 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.
23
At August 31, other intangible assets consisted of the following:
[Download Table]
1996 1995
--------------- --------------
(In thousands)
Patents $939 $1,019
Non-compete agreements 4,546 5,401
Financing costs 152 396
Acquisition costs 3,937 3,515
Pension intangible 3,494 3,242
--------------- --------------
$13,068 $13,573
=============== ==============
Accumulated amortization of goodwill and other intangible assets totaled
$7,503,000 and $3,904,000 at August 31, 1996 and 1995, respectively.
Amortization is calculated on the straight-line basis using the following lives:
Patents 14 to 17 years
Non-compete agreements 3 to 5 years
Financing costs 5 years
Acquisition costs 40 years
Property, Plant And Equipment
Property, plant and equipment are stated at cost. Depreciation expense is
recorded over the estimated useful life of the asset on the straight-line method
using the following lives:
Land improvements 20 years
Buildings 40 years
Machinery & equipment 3 to 15 years
The Company's normal policy is to charge repairs and improvements made to
capital assets to expense as incurred. In limited circumstances, major building
repairs are capitalized and amortized over the estimated life of the new asset
and any remaining value of the old asset is written off. Repairs to machinery
and equipment must result in an addition to the useful life of the asset before
the costs are capitalized.
At August 31, property, plant and equipment consisted of the following:
[Download Table]
1996 1995
---------------- --------------
(In thousands)
Land and improvements $10,699 $9,732
Buildings 24,095 20,182
Machinery & equipment 77,867 69,255
---------------- --------------
112,661 99,169
Less accumulated depreciation 40,547 34,564
---------------- --------------
$72,114 $64,605
================ ==============
24
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, 1996 and 1995 of $2,836,000 and
$2,980,000, respectively, 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 foreign
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 $2,602,000, $2,403,000 and $1,363,000 for the years ended August
31, 1996, 1995 and 1994, 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.
Income Per Share
All 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 prior
year acquisitions of Pfaudler, Chemineer and Edlon have been excluded from the
calculation of 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 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
25
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:
Current portion long-term debt - The amounts reported approximate the
market value of similar instruments.
Equity investments and current portion 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.
BUSINESS ACQUISITIONS
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 1996, a contingent earn-out
payment of $1,625,000 was earned and recorded as an increase to long-term debt
and goodwill. At August 31, 1996, there remains approximately $3,000,000 that
may be due under the earn-out provisions of the purchase contract.
On June 30, 1994, the Company completed the acquisition of the Pfaudler,
Chemineer and Edlon business units for approximately $117,045,000. The funds
used for the acquisition were provided by a combination of cash on hand, bank
debt of $52,000,000 and subordinated notes of $43,576,000, net of discount,
issued to the seller. In addition to the cash and subordinated notes, the
seller also received certain stock appreciation rights ("SAR's") as further
described in the Common Stock note. In 1996, these SAR's were exercised for a
total of $20,588,000, primarily paid in cash with proceeds from the Company's
long-term revolving credit agreement. These transactions resulted in goodwill
of $71,225,000 in 1994 and an additional $22,588,000 in 1996 upon the exercise
of the SAR's and purchase accounting adjustments. Pfaudler is the foremost
worldwide manufacturer of glass-lined chemical reactor and storage vessels.
Chemineer is a leading producer of industrial mixing and agitation equipment
and Edlon designs and fabricates engineered Teflon(R) products and coatings.
This acquisition was accounted for under the purchase method and, accordingly,
the purchase price was allocated to the assets acquired and liabilities assumed
based on their fair values on the dates of the respective transactions.
The operating results of the acquired businesses have been included in
consolidated operating results since the dates of each acquisition. The
following unaudited pro-forma summary presents the results of operations of the
Company combined with the results of Pfaudler, Chemineer and Edlon as if the
acquisition of the business units had occurred by the beginning of 1994. In
preparing the pro-forma data, certain adjustments have been made to historical
operating results,
26
including increased interest expense resulting from the new debt structure,
amortization of intangible assets and the related income tax effects. The
pro-forma data excludes business restructure provisions recorded at Pfaudler of
$8,100,000 in 1994. This summary does not necessarily reflect the results of
operations as they would have been had the acquisitions occurred by the
beginning of 1994, nor is it necessarily indicative of future operating results.
[Enlarge/Download Table]
1994
------------------
(In thousands, except per share data)
Net sales $261,090
Income before extraordinary items 4,388
Income per share before extraordinary items:
Primary and fully diluted $.42
ACCRUED EXPENSES
At August 31, accrued expenses consisted of the following:
[Download Table]
1996 1995
----------- -----------
(In thousands)
Customer advances $12,426 $9,531
Salaries, wages, payroll taxes and withholdings 9,799 9,158
Federal income taxes 5,190 4,197
Warranty costs 3,642 3,040
Pension benefits 2,670 2,373
Business restructure costs 1,624 3,712
Medical and workers' compensation benefits 1,211 3,351
All other items 13,052 13,828
----------- -----------
$49,614 $49,190
=========== ===========
LONG-TERM DEBT AND SUBSEQUENT EVENT
Effective 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 8.0%. The Notes are not common stock
equivalents and will not impact primary income per share. However, on a fully
diluted basis, pro-forma net income per share for 1996 would have been $1.66,
assuming the Notes were outstanding for the entire year, compared to the $1.76
reported.
The Notes are due on September 1, 2003, and bear interest at 6 1/2%, payable
semi-annually on March 1, and September 1, commencing on March 1, 1997. The
notes 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 conversion
at any time after September 1, 1999, at a redemption price ranging from 103.25%
in 1999 to 100% in 2001. The Notes are subordinated to all other current
indebtedness of the Company.
27
Assuming the Notes had been issued at August 31, 1996, long-term debt would be
as follows:
[Download Table]
(In thousands)
Senior debt $ 3,250
Senior subordinated debt:
Face amount, less discount of $156 5,283
6 1/2% Convertible Subordinated Notes 65,000
--------------
Total debt 73,533
Less current portion 1,348
--------------
$72,185
==============
At August 31, 1996, the Company had senior debt outstanding under an agreement
with two Ohio banks. The agreement consists of a term loan and a revolving
credit arrangement. Any amounts outstanding under the term loan portion of the
agreement are payable in quarterly installments through 2001, beginning in
September 1997. During 1996, the Company amended the agreement and increased the
amount the Company can borrow to $100,000,000. After the proceeds from the Notes
were used to repay senior debt, $44,000,000 was available for additional
borrowings. The agreement does not require compensating balances; however, a
nominal commitment fee is paid on the unused portion. The interest rate is
variable based upon Prime or a formula tied to LIBOR rates. At August 31, 1996,
the interest rate for the amounts indicated above was 6.97%. The agreement is
secured by all domestic assets except land and buildings and includes certain
restrictive covenants which include, among other things, minimum requirements
for tangible net worth, working capital, additional debt, debt service coverage
and payment of cash dividends. At August 31, 1996, $7,381,000 of retained
earnings is available for future dividends.
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.
The Company has additional subordinated debt with a face amount of $5,447,000
which has been discounted at normal market rates yielding a discount of $156,000
at August 31, 1996. The debt is payable in annual installments on February 28 of
each year through 1999.
Aggregate principal payments of long-term debt, assuming the Notes had been
issued at August 31, 1996, for the five years subsequent to August 31, 1996, are
as follows:
28
[Download Table]
(In thousands)
1997 $ 1,348
1998 4,884
1999 2,301
2000 0
2001 0
Thereafter 65,000
--------------
Total $73,533
==============
Interest paid on all outstanding debt amounted to $7,083,000 in 1996, $6,753,000
in 1995 and $1,457,000 in 1994.
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, 1996 and 1995
pension assets were invested in short and long-term interest bearing obligations
and equity securities, including 238,000 shares of the Company's common stock.
Retirement plan costs for the above plans include the following components:
[Enlarge/Download Table]
1996 1995 1994
------------------ ------------- ---------------
Defined benefit plans: (In thousands)
Service cost - benefits earned during
the period $2,292 $2,134 $1,128
Interest cost on projected benefit
obligation 3,692 3,460 2,875
Actual return on assets (6,560) (5,242) (1,167)
Net amortization and deferral 3,198 2,167 (1,865)
------------------ ------------- ---------------
Total 2,622 2,519 971
Defined contribution plans 1,180 477 327
------------------ ------------- ---------------
$3,802 $2,996 $ 1,298
================== ============= ===============
The increase in 1995 costs over the previous year is due primarily to the
inclusion in 1995 of a full year's expense for Pfaudler, Chemineer and Edlon
compared with two months in 1994.
29
The funded status of U.S. defined benefit plans at August 31, 1996 and 1995 was
as follows:
[Enlarge/Download Table]
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1996 1996
------------------------ --------------------
Actuarial present value of: (In thousands)
Vested benefit obligation $15,157 $34,320
Accumulated benefit obligation 15,787 37,433
Projected benefit obligation 19,383 37,433
Plan assets at fair market value 18,299 29,882
------------------------ --------------------
Plan assets less than projected
benefit obligation (1,084) (7,551)
Unrecognized net loss (gain) 700 (348)
Unrecognized prior service cost 1,064 3,514
Unrecognized net (asset) obligation year end (370) 333
Adjustment to recognize minimum liability 0 (3,845)
------------------------ --------------------
Net pension asset (liability) recognized in the
Consolidated Balance Sheet $310 ($7,897)
======================== ====================
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1995 1995
------------------------ --------------------
Actuarial present value of: (In thousands)
Vested benefit obligation $15,207 $31,109
Accumulated benefit obligation 15,849 33,824
Projected benefit obligation 19,177 33,830
Plan assets at fair market value 16,456 25,589
------------------------ --------------------
Plan assets less than projected
benefit obligation (2,721) (8,241)
Unrecognized net loss 2,273 65
Unrecognized prior service cost 1,169 2,826
Unrecognized net (asset) obligation year end (432) 416
Adjustment to recognize minimum liability 0 (4,016)
------------------------ --------------------
Net pension asset (liability) recognized in the
Consolidated Balance Sheet $ 289 ($8,950)
======================== ====================
30
The projected benefit obligation was determined using a discount rate of 7% and
weighted average pay increases of 6 3/4% in 1996 and 1995. The assumed long-term
rate of return on plan assets is 9 1/2% in 1996 and 1995 and 10% in 1994.
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, 1996 and August 31, 1995.
Net pension cost for this plan includes the following components:
[Download Table]
1996 1995
------------- -------------
(In thousands)
Service cost $558 $550
Interest cost 2,269 2,231
------------- -------------
Net pension cost $2,827 $2,781
============= =============
The status of this plan at the actuarial valuation dates of August 31, 1996 and
1995 was as follows:
[Enlarge/Download Table]
1996 1995
----------------- -------------
(In thousands)
Actuarial present value of:
Vested benefit obligation $28,610 $28,231
Accumulated benefit obligation 29,021 28,636
Projected benefit obligation 32,062 31,746
Plan assets at fair market value* 0 0
----------------- --------------
Plan assets less than projected benefit
obligation (32,062) (31,746)
Unrecognized net actuarial gain (1,496) ( 966)
----------------- --------------
Pension liability recognized in the
Consolidated Balance Sheet ($33,558) ($32,712)
================= ==============
<FN>
*Funding of pension obligations is not permitted in Germany
The projected benefit obligation for this plan was determined using a discount
rate of 7 1/4% and weighted average pay increases of 4%. Pension payments are
paid from funds generated by operations and were $1,698,000 in 1996 and
$1,602,000 in 1995.
The Company also sponsors several other non-U.S. defined benefit plans primarily
in the U.K., which are immaterial in the aggregate.
31
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:
[Enlarge/Download Table]
1996 1995
------------- --------------
(In thousands)
Retirees $14,173 $13,988
Active employees 3,918 3,680
Unrecognized net loss 200 0
Unrecognized prior service cost (1,286) 0
------------- --------------
$17,005 $17,668
============= ==============
Net periodic postretirement benefit cost includes the following components:
1996 1995 1994
------------- ----------- --------------
(In thousands)
Interest cost $1,228 $1,237 $1,100
Service cost 138 93 87
Net amortization 463 10 0
------------- ----------- --------------
$1,829 $1,340 $1,187
============= =========== ==============
The rate of increase in per capita health care costs is assumed to be 7% in
1997, decreasing to 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, 1996, by approximately $470,000 and increase
net periodic postretirement benefit cost by approximately $35,000.
The discount rate used in determining the accumulated postretirement benefit
obligation was 7% in 1996 and 1995.
OTHER LONG-TERM LIABILITIES
The following items are included in other long-term liabilities at August 31:
[Download Table]
1996 1995
------------ --------------
(In thousands)
German pension liability 32,328 $31,478
Other postretirement benefits 15,005 15,276
U.S. pension liability 5,988 7,347
Casualty insurance reserves 4,358 5,612
All other items 2,599 1,222
------------ --------------
$60,278 $60,935
============ ==============
32
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 are as follows:
[Enlarge/Download Table]
1996 1995
---------------- -------------
(In thousands)
Deferred tax benefits:
Postretirement benefit obligations $6,802 $6,863
Capital loss carryforward 1,231 1,231
Non-U.S. tax loss carryforward and
restructuring charges 3,810 2,822
Warranty reserve 1,916 1,216
Pension benefits 1,282 1,627
Other items - net 3,925 3,532
---------------- ------------
18,966 17,291
Less valuation allowance 4,031 2,853
---------------- ------------
14,935 14,438
Deferred tax liabilities:
Tax depreciation in excess of book depreciation 3,519 2,725
Goodwill and purchased asset basis differences 3,146 2,480
Other items - net 989 172
---------------- ------------
7,654 5,377
---------------- ------------
Net deferred tax benefit $7,281 $9,061
================ =============
Included in the 1996 valuation allowance for deferred tax benefits is $2,900,000
relating to non- U.S. tax loss carryforwards ($1,622,000 in 1995).
The provision for U.S., non-U.S. and U.S. state income taxes charged to
operations is as follows:
33
[Download Table]
1996 1995 1994
-------------- ------------ ------------
Current: (In thousands)
U.S. federal $8,222 $5,021 $4,100
Non-U.S. 2,092 2,007 337
U.S. state 1,362 980 598
-------------- ------------ ------------
11,676 8,008 5,035
Deferred:
U.S. federal (644) 366 (40)
Non-U.S. 1,101 (1,218) (700)
U.S. state (92) 52 (5)
-------------- ------------ ------------
365 (800) (745)
-------------- ------------ ------------
$12,041 $7,208 $4,290
============== ============ ============
A summary of the differences between the effective income tax rate attributable
to operations and the statutory rate is as follows:
[Download Table]
1996 1995 1994
------------------ ------------- ---------------
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 3.7
Other items - net (1.5) (.6) 1.6
------------------ ------------- ---------------
37.0% 37.9% 40.3%
================== ============= ===============
Income taxes paid in 1996, 1995 and 1994 were $9,743,000, $3,007,000 and
$3,299,000, respectively. The Company also has a Belgian tax loss carryforward
of approximately $3,300,000, a Canadian tax loss carryforward of approximately
$3,000,000 and a German tax loss carryforward of approximately $3,450,000 for
corporation tax purposes and $7,560,000 for trade tax purposes. For financial
reporting purposes, a valuation allowance was deducted for a portion of the
deferred tax benefit related to the German and Canadian tax loss carryforwards.
The Canadian carryforward, if unused, will expire in future years beginning in
1998. The Belgium and German carryforwards have no expiration period.
At August 31, 1996, the Company has a capital loss carryforward of $3,077,000
for income tax purposes that expires in the years ending August 31, 1997 through
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.
COMMON STOCK
The Company's stock option plans provide for the granting of options to
directors, officers and other key employees. Under the plans, the option price
per share may not be less than the fair market value as of the date of grant and
the options become exercisable on a vesting schedule determined by the
Compensation Committee of the Board of Directors. Most currently outstanding
grants become exercisable over a three or four year period. Proceeds from the
sale of
34
stock issued under option arrangements are credited to common stock. The Company
makes no charges or credits against earnings with respect to options.
At August 31, 1996 and 1995, 1,829,434 and 882,500 shares, respectively, were
reserved for future grants.
[Download Table]
1996 1995
------------- ---------------
Options granted 93,000 153,500
Options expired 7,334 86,600
Options exercised: option price $1.94-$13.50 113,066 92,200
Options outstanding: option price $2.57-$22.38 779,700 807,100
Options which became exercisable:
option price $7.75-$13.50 144,432 103,160
Options exercisable: option price $2.57- $13.50 532,566 501,200
The Company also sponsors a long-term incentive stock plan for senior
executives. Under the program, participants earn performance 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. No
performance shares are earned unless the total return on Company shares is at
least equal to the median return for companies included in the Russell 2000.
Performance shares earned under the 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 next two years.
At August 31, 1996, 146,000 units had been awarded under the program. The
Company has computed the total value of shares earned under the program and is
recognizing the cost ratably over a five year period. The amounts charged to
expense for this program were $1,000,000 and $562,000 for the years ended August
31, 1996 and 1995, respectively.
During 1996, the 4,000,000 SAR's issued in connection with the 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.
At the June 26, 1996 Board of Directors' meeting, the Board approved a 2-for-1
stock split for shareholders of record on July 12, 1996, effected in the form of
a share distribution on July 31, 1996. All share and per share information has
been adjusted to reflect the effect of this stock split for all periods
presented.
35
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, 1996:
[Download Table]
(In thousands)
1997 $1,732
1998 1,335
1999 1,230
2000 807
2001 627
2001 201
---------------------
Thereafter $5,932
=====================
Rental expense for all operating leases in 1996 was approximately $2,380,000
($2,352,000 in 1995 and $904,000 in 1994).
OTHER DEDUCTIONS
The following items are included in "Other items-net":
[Enlarge/Download Table]
1996 1995 1994
---------------- -------------- -------------
(In thousands)
Income from equity investments ($1,488) ($944) ($80)
Royalty income (573) (712) (46)
Write-off of investment in
Hazleton Environmental 0 1,612 0
Provision for business restructure 0 0 2,551
All other items 1,364 794 1,721
---------------- -------------- -------------
($697) $750 $4,146
================ ============== =============
ACCOUNTING FOR STOCK BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock-Based Compensation." The Statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans. Companies may elect to account for such plans under the fair
value method or continue the previous accounting and disclose pro-forma net
income and income per share as if the fair value method was applied. The
statement is to be applied on a prospective basis beginning in the Company's
fiscal year 1997.
The Company has not as yet determined the potential financial statement impact
of the Standard, nor has it decided how it will initially adopt the Standard.
36
INFORMATION BY GEOGRAPHIC AREA
[Enlarge/Download Table]
Years Ended August 31,
1996 1995 1994
----------------- -------------- ---------------
Net Sales (In thousands)
U.S. domestic $206,439 $165,135 $73,380
U.S. export 34,726 31,218 18,926
----------------- -------------- ---------------
Total U.S. 241,165 196,353 92,306
Europe 92,558 80,844 16,824
Other non-U.S. 17,241 25,755 (3) 12,517
----------------- -------------- ---------------
$350,964 $302,952 $121,647
================= ============== ===============
Operating Income
U.S. $41,383 $29,519 $17,718
Europe 7,274 4,818 877
Other non-U.S. 3,784 3,377 (1,696)(2)
----------------- -------------- ---------------
52,441 37,714 16,899
Amortization of intangible assets (3,504) (2,707) (121)
Corporate expenses (9,482) (8,687) (1) (4,676)
----------------- -------------- ---------------
$39,455 $26,320 $12,102
================= ============== ===============
Income Before Income Taxes
U.S. $21,321 $10,838 $11,464
Europe 7,274 4,818 877
Other non-U.S. 3,784 3,377 (1,696)
----------------- -------------- ---------------
Total $32,379 $19,033 $10,645
================= ============== ===============
Assets
U.S. $233,477 $193,852 $185,706
Europe 54,187 56,063 50,694
Other non-U.S. 12,676 20,492 (3) 21,730
----------------- -------------- ---------------
$300,340 $270,407 $258,130
================= ============== ===============
<FN>
(1) Includes $1,612,000 write-off of investment in Hazleton Environmental.
(2) Includes provision for business restructure of $1,929,000.
(3) 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.
37
QUARTERLY DATA
Robbins & Myers, Inc
[Enlarge/Download Table]
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
Income before income taxes 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)
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 1.66
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
38
QUARTERLY DATA
Robbins & Myers, Inc.
[Enlarge/Download Table]
1995 Quarters
1st 2nd 3rd 4th Total
----------- ----------- ----------- ----------- ------------
(In thousands except per share data)
Net sales $68,628 $70,873 $79,973 $83,478 $302,952
Gross profit 23,042 24,145 26,180 27,937 101,304
Operating expense 16,987 17,351 19,037 20,859 74,234
Income before income taxes 4,332 5,044 4,317(2) 5,340 19,033(2)
Income before extraordinary item 2,915 3,087 2,256(2) 3,567 11,825(2)
Net income 2,915 3,087 3,588(2)(3) 3,567 13,157(2)(3)
Income per share, before extraordinary
item:
Primary $0.28 $0.29 $0.21(2) $0.33 $1.09(2)
Fully diluted 0.28 0.29 0.21(2) 0.33 1.09(2)
Net income per share:
Primary $0.28 $0.29 $0.34(2)(3) $0.33 $1.22(2)(3)
Fully diluted 0.28 0.29 0.34(2)(3) 0.33 1.21(2)(3)
Weighted average common shares:
Primary 10,548 10,572 10,710 10,876 10,786
Fully diluted 10,552 10,612 10,732 10,906 10,874
<FN>
(1) Fourth quarter includes an after-tax loss of $ 813,000 ($.07 per share) for early extinguishment of debt.
(2) Third quarter includes a pre-tax write-off of $1,612,000 for investment in Hazleton Environmental.
(3) Third quarter includes an after tax gain of $1,332,000 ($.13 per share) for early extinguishment of debt.
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 11, 1996, except for certain information concerning the
executive officers of the Company which is set forth in Part I of this Report.
39
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 11, 1996 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 11, 1996.
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 11, 1996.
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, 1996 and 1995.
Consolidated Income Statement -
Years ended August 31, 1996, 1995, and 1994.
Consolidated Statement of Shareholders' Equity -
Years ended August 31, 1996, 1995, and 1994.
Statementof Consolidated Cash Flows -
Years ended August 31, 1996, 1995, and 1994
Notes to Consolidated Financial Statements.
(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.
40
(a) (3) EXHIBITS. See INDEX to EXHIBITS.
(b) REPORTS ON FORM 8-K. During the quarter ended August 31,
1996, the Company did not file any reports on Form 8-K.
41
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 27nd
day of November, 1996.
ROBBINS & MYERS, INC.
BY /s/ Daniel W. Duval
----------------------------------
Daniel W. Duval
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of Robbins
& Myers, Inc. and in the capacities and on the date indicated:
NAME TITLE DATE
------------------------------------------------------------------------------
/S/ Daniel W. Duval Director, President and November 27, 1996
-------------------- Chief-Executive Officer
Daniel W. Duval
/S/ George M. Walker Vice President - CFO November 27, 1996
--------------------- (Principal-Financial
George M. Walker Officer)
/S/ Kevin J. Brown Corporate Controller November 27, 1996
--------------------- (Principal-Accounting
Kevin J. Brown Officer)
*Maynard H. Murch,IV Chairman Of Board November 27, 1996
*Robert J. Kegerreis Director November 27, 1996
*Thomas P. Loftis Director November 27, 1996
*William D. Manning, Jr. Director November 27, 1996
*Jerome F. Tatar Director November 27, 1996
*John N. Taylor, Jr. Director November 27, 1996
*The undersigned, by signing his name hereto, executes this Report on
Form 10-K for the year ended August 31, 1996 pursuant to powers of attorney
executed by the above-named persons and filed with the Securities and Exchange
Commission.
/S/ Daniel W. Duval
----------------------------
Daniel W. Duval
Their Attorney-in-fact
42
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, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended August 31, 1996. 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 audits 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, 1996 and 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended August 31, 1996, 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.
Dayton, Ohio
October 1, 1996 /s/ Ernst & Young LLP
43
[Enlarge/Download Table]
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
(1) (2)
DESCRIPTION Balance at Beginning Charged to Costs Charged to Other Deductions - Balance at End
of Period and Expenses Accounts-Describe Describe of Period
Year Ended August 31, 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 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
Year Ended August 31, 1994
Allowances and reserves deducted from assets:
Uncollectable accounts receivable $425 $230 $464 (4) $167 (1) $952
Inventory obsolescence 775 574 2,956 (4) 357 (2) 3,948
Restructuring reserve for property, plant &
equipment held for sale 0 1,000 250 (4) 0 1,250
Other reserves:
Warranty claims 267 1,088 1,357 (4) 573 (3) 2,139
Restructuring liabilities 950 1,551 4,925 (4) 1,885 (6) 5,541
Casualty insurance reserves 915 1,609 2,586 (4) 1,210 (4) 3,900
<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 reserves.
44
INDEX TO EXHIBITS
(3) ARTICLES OF INCORPORATION AND BY-LAWS:
3.1 Amended Articles of Incorporation of Robbins
& Myers, Inc. were filed as Exhibit 3.1 to
the Company's Report on Form 10-Q for the
quarter ended February 28, 1995...
3.2 Code of Regulations of Robbins & Myers, Inc.
was filed as Exhibit 3.2 to the Company's
Report on Form 10-Q for the quarter ended
February 28, 1995... *
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY
HOLDERS, INCLUDING INDENTURES:
4.1 Indenture relating to $65,000,000 Convertible
Subordinated Notes due 2003, with
Star Bank, N.A., as Trustee, dated September 1, 1996,
was filed as Exhibit 4.3 to the Company's Registration
Statement on Form S-3 (No. 333-10619)... *
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 +
4.3 Pledge and Security Agreement between Robbins & Myers, Inc.
and Bank One, Dayton, N.A., as Administrative Agent,
dated November 26, 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... *
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... *
10.3.1 Fifth Amendment and Sixth Amendment dated September 24, 1994,
Seventh Amendment dated December 23, 1994, Eighth Amendment
effective September 30, 1994, and Ninth Amendment dated
June 12, 1996 to the Robbins & Myers, Inc. Pension Plan... +
45
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... +
10.6 Robbins & Myers, Inc. 1984 Stock Option
Plan was filed as Exhibit 10.8 to the Company's Report
on Form 10-K for the year ended August 31, 1992... *
10.7 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... *
10.8 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... *
10.9 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... *
10.10 Robbins & Myers, Inc. 1994 Long-Term Incentive
Stock Plan as amended. +
10.11 Robbins & Myers, Inc. 1995 Stock Option Plan for
Non-Employee Directors was filed as Exhibit 4.1
to the Company's Registration Statement on
Form S-8 (No. 333-00293)... *
10.12 Robbins & Myers, Inc. Senior Executive Annual Cash
Bonus Plan +
(11) STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS:
11.1 Computation of Per Share Earnings... +
46
(21) SUBSIDIARIES OF THE REGISTRANT:
Robbins & Myers, Inc. has the following subsidiaries all of
which (i) do business under the name under which they are
organized and (ii) are included in the consolidated financial
statements of the Company. The names of such subsidiaries are
set forth below.
Jurisdiction in Percentage of
Name of Subsidiary which Incorporated Ownership
--------------------------------------------------------------------------------
Chemineer, Asia, Ptd. Ltd. Singapore 51
Chemineer, Inc. Delaware 100
Chemineer Limited England 100
Edlon, Inc. Delaware 100
Glasteel Parts and Services, Inc. Delaware 100
Pfaudler Equipamentos
Industrias Ltda. Brazil 100
Pfaudler, Inc. Delaware 100
Pfaudler S.A. de C.V. Mexico 100
Pfaudler-Werke GMBH Germany 100
Robbins & Myers Canada, Ltd. Dominion of Canada 100
Robbins & Myers International
Sales Company, Inc. Ohio 100
Robbins & Myers, Limited England 100
Robbins & Myers NRO Ltd. Dominion of Canada 100
Robbins & Myers U.K. Limited England 100
Suzhou Pfaudler Co., Ltd. China 60
(23) CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Ernst & Young LLP +
(24) POWER OF ATTORNEY
24.1 Powers of Attorney of any person who
signed this Report on Form 10-K on
47
behalf of another pursuant to a
Power of attorney... +
(27) 27.1 Financial Data Schedule(submitted for SEC's
information) +
"+" Indicates Exhibit is being filed with this Report.
"*" Indicates that Exhibit is incorporated by reference in this Report from a
previous filing with the Commission.
48
Dates Referenced Herein and Documents Incorporated by Reference
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