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 10-K 405 44 222K
2: EX-4.1 Robbins & Myers EX-4.1 21 72K
3: EX-4.4 Robbins & Myers EX-4.4 7 28K
4: EX-4.7 Robbins & Myers EX-4.7 22 70K
5: EX-11.1 Robbins & Myers EX-11.1 2± 11K
6: EX-23.1 Robbins & Myers EX-23.1 1 8K
7: EX-24.1 Robbins & Myers EX-24.1 6 18K
8: EX-27 Robbins & Myers EX-27 1 7K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Commission
Ended August 31, 1995 File Number 0-288
--------------------- -----------------
ROBBINS & MYERS, INC.
----------------------------------------------------------------------------
(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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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:
(513) 222-2610
Securities registered pursuant to section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
NONE NONE
Securities registered pursuant to section 12(g) of the Act:
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 requirements 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].
(Cover Page continues on next page)
1
At the close of business on October 24, 1995:
Number of Common Shares, without
par value, outstanding...........................5,222,571
Aggregate market value of Common
Shares, without par value, held
by non-affiliates of the Company..............$122,152,494
DOCUMENT INCORPORATED BY REFERENCE
----------------------------------
1) Robbins & Myers, Inc. Proxy Statement, dated November 14, 1995,
for its Annual Meeting of Shareholders on December 13, 1995,
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.
INDEX TO EXHIBITS at page 23 of this Report.
2
ITEM 1. BUSINESS.
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BACKGROUND
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Robbins & Myers, Inc., an Ohio corporation (the "Company"), commenced
business operations in 1878. After a series of divestitures, which culminated
in August 1991 with the sale of its electric motor business, the Company's sole
remaining business was the manufacture and sale of Moyno(R) progressing cavity
products for industrial, municipal wastewater treatment, and oilfield
applications.
In 1991, the Company stated that its long-term strategy was to
capitalize on its domestic market leading position in progressing cavity pump
technology, its manufacturing strengths, and expertise in fluids management to
develop, through acquisitions and internal growth, a portfolio of
highly-engineered fluids management equipment and products. As markets and
competition have become increasingly global, a key element of the Company's
strategy is to compete worldwide with fluids management products, having strong
market positions and recognized brand names, that offer significant
opportunities for increasing domestic and international sales to the Company's
principal markets.
In February 1992, the Company purchased its Prochem mixer product line
and in February 1993 purchased a portable mixer product line. Those
acquisitions provided the initial base for the development of the Company's
mixer business.
On June 30, 1994, the Company acquired its Pfaudler, Inc., Chemineer,
Inc. and Edlon, Inc. business units for $117,045,000 in cash and subordinated
notes of the Company and 2.0 million stock appreciation rights. The Company
purchased and retired 1.85 million of these stock appreciation rights for $18.0
million in cash on October 24, 1995. The June 30, 1994 acquisitions were
accounted for as purchases and, accordingly, the results of the acquired
companies are included in the Company's results of operations since July 1,
1994. See "Business Acquisition" note of the Notes to Consolidated Financial
Statements included at Item 8 of this report ("Notes to Consolidated Financial
Statements").
On March 1, 1995, the Company purchased Pharoah Corp. and Cannon
Process Equipment Limited for cash and subordinated notes totaling $12,898,000
and entered into a partnership with Universal Process Equipment(UPE). These
transactions were key elements of the Company's initiative in 1995 to expand
its parts and field service business.
BUSINESS
--------
The Company is principally engaged in the design, manufacture, and
marketing of fluids management equipment for the process industries. Its four
product classifications are: (i) progressing cavity products; (ii) mixing and
turbine agitation equipment; (iii) glass-lined storage and reactor vessels, and
(iv) related products (engineered systems, fluoropolymer linings and valves).
These products are used for applications in industries that must move, control,
process and store fluids in specialized environments. The Company's primary
markets are the chemical, pharmaceutical, oil and gas recovery, wastewater
treatment, pulp and paper, food and beverage and mining industries. The
Company believes its design and
3
engineering capabilities, its worldwide knowledge of the process industries,
its distributed manufacturing capabilities, its application know-how, and its
parts and field service capabilities allow it to compete effectively both
domestically and internationally in the fluids management industry.
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, 1995, 1994, and 1993 is included in the Information by Geographic
Area note to the Consolidated Financial Statements included at Item 8, and is
incorporated herein by reference.
International sales represented approximately 45% of
consolidated sales in fiscal 1995. The sales of the Company's four principal
product classifications for fiscal 1995 as a percentage of consolidated sales
were as follows: progressing cavity products - 30%; mixing and turbine
agitation equipment - 22%; glass-lined storage and reactor vessels - 38%; and
related products (engineered systems, fluoropolymer linings, and valves) - 10%.
PROGRESSING CAVITY PRODUCTS
The Company is the worldwide leader in the manufacture and sale
of progressing cavity products. The principal elements of a progressing cavity
product, e.g. a pump, consist of a high-strength steel rod...called the
rotor...which is motor driven to rotate in a elastomer-lined steel
tube...called the stator. The rotating element generates positive displacement
in the stator to deliver uniform fluid flow, at rates proportional to the
rotational speed of the rotor. Progressing cavity technology is used in pump
products sold to industrial markets and pumps and power elements for the oil
and gas markets.
INDUSTRIAL MARKETS
For industrial markets, the Company markets a wide range of
progressing cavity pumps under the brand names Moyno(R) and R&M(R). Its
principal customers in this market are involved in municipal wastewater
treatment, pulp and paper production, and food and beverage processing.
Related products sold for industrial uses include sensors, grinders, and
accessories and replacement parts for its pump products. Progressing cavity
products for industrial markets are principally manufactured at the Company's
Springfield, Ohio facilities.
Progressing cavity pumps are versatile and well-suited for
demanding applications. They can be positioned at any angle and can deliver
flow in either direction, without modification or accessories. They handle
high pressure water and shear sensitive materials to heavy, viscous abrasive,
solid-laden slurries and sludges. In many demanding applications, they are
regarded as the pump of choice.
The marketing and sale of industrial products is directed from the
Company's Springfield, Ohio offices. Distribution is managed through several
regional and district offices in North America and foreign sales offices and
product distribution centers located in Singapore, Chandlers Ford, England and
Vilvoorde, Belgium. Products are sold directly to wastewater treatment
customers and through
4
independent distributors for most other applications. In addition to new
product sales, the sale of replacement parts for the industrial pump market is
a significant source of business.
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.
OIL AND GAS MARKETS
The Company's principal products for the oil and gas market are
down-hole pumps and power elements used to drive the drilling element in the
drilling of wells. The capability of the progressing cavity technology to be
applied at various angles and to reverse fluid flow has enabled the Company to
become a leader in the development of pumping and directional drilling products
for the oil and gas recovery and drilling industries.
Moyno(R) down-hole pumps are primarily used to pump crude oil to
the surface and for dewatering gas wells. Moyno(R) pumps are available in a
variety of models for various flow rates, pumping depths, and well conditions.
The Company's down-hole pumps are noted for long run life and depth of pumping
range.
Moyno(R) down-hole power elements utilize progressing cavity
technology to drive the drilling element in oil and gas well drilling. The
Company manufactures over 30 models which operate at various speeds and torques
to meet specific down-hole, directional, drilling requirements.
Oilfield products are manufactured at facilities in Fairfield,
California and Petit-Rechain, Belgium. Down-hole pumps are principally sold in
North America through a sales alliance with the Highland Division of Energy
Ventures, Inc. Moyno(R) motor elements are sold worldwide on a direct basis to
manufacturers of drilling equipment and major oilfield service companies.
Competition is increasing in down-hole pumps as more progressing
cavity pump manufacturers enter the market. Competitive pressure is intense
for the Moyno(R) motor elements due to backward integration of former customers
and recent mergers and acquisitions among suppliers of oilfield services. The
Company intends to remain a leading supplier in this industry by continuing to
maintain very high product quality and extensive customer support. In
addition, the Company continues its efforts in materials research aimed at both
improving product life and extending product applications.
5
MIXING AND TURBINE AGITATION EQUIPMENT
The Company is one of the leading manufacturers of mixing and
turbine agitation equipment on a worldwide basis and is a technological leader
in providing solutions to customer mixing problems in the fluids management
industry. The uses of the Company's mixer and turbine agitation equipment
range from simple storage tank agitation to critical applications in
polymerization and fermentation processes. Mixer products are sold under the
Chemineer(R), Prochem(R), Kenics(R) and Valchem(R) brand names.
Chemineer products include its line of high-quality HT Turbine
Agitators. These gear-driven agitators are available in various sizes, with a
wide selection of mounting methods, and drive ranges from 1 to 1,000
horsepower. The Chemineer line also includes top-entry CT Turbine Agitators,
with drive ranges from 1/2 to 5 horsepower, designed for less demanding
applications, and a line of portable, gear-driven mixers which can be clamp
mounted to tanks to handle batch mixing needs. The principal markets for
Chemineer products are the chemical, pharmaceutical, petrochemical, food
processing and wastewater treatment industries.
Prochem products are principally belt-driven mixers used
principally in the pulp and paper, mining, and mineral processing industries.
Kenics mixers are continuous mixing and processing devices, with no moving
parts, which are used in specialized static mixing and heat transfer
applications.
Mixing and turbine agitation equipment is manufactured at
facilities in the United States and England, and through a licensee in Mexico.
These products are marketed worldwide to a diverse customer base, with products
being sold primarily through manufacturers representatives. The Company also
maintains direct sales offices in Houston, Texas and England. The Company
established a research and development facility to focus on the development of
new products and on applied research. It has also introduced computer
technology to perform on-site customized application engineering. Replacement
parts and service account for a significant portion of revenues.
The mixer and agitation equipment industry is highly competitive.
Three companies account for a significant portion of domestic sales, but
compete with the numerous smaller companies. The Company believes that
Lightnin, a unit of General Signal Corporation, has the largest share of the
global market, with the Company being number two in market share. The Company
believes that its application engineering know-how, diverse products, product
quality, and customer support allow it to compete effectively in the market
place.
GLASS-LINED STORAGE AND REACTOR VESSELS
The Company is the worldwide leader in the manufacture and sale of
glass-lined storage and reactor vessels and related equipment for use in the
chemical and pharmaceutical industries.
The Company's Pfaudler unit bonds glass to the interior of steel
vessels to form a fused composite, referred to as Glasteel(R), which provides a
vessel in
6
which materials can be processed or stored in an inert, nonsticking,
corrosion-resistant environment. Reactor vessels range in capacities from 1 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 up to 25,000 gallons.
Pfaudler vessels are manufactured at plants in the United States,
Scotland, England, Germany, Mexico, and Brazil and in India by a 40%-owned
joint venture company. Pfaudler's international manufacturing capability
allows it to respond quickly to market demands for both sales and service.
Replacement parts, relining of glass vessels, and field service
represent a significant portion of revenues. This portion of the Pfaudler
business was strengthened in 1995 by the acquisition of Pharoah Corp. and
Cannon Process Equipment Limited and the formation of a partnership with
Universal Process Equipment Corporation. This partnership is engaged in the
sale of reconditioned and used vessels.
Pfaudler vessels are marketed worldwide under the tradename
Glasteel(R) to end-users through its direct sales force. 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.
RELATED PRODUCTS
The Company also manufactures and markets to the process
industries several products which compliment its principal products. These
related products include engineered systems, fluoropolymer linings 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 manufacturing and processing of pharmaceuticals and specialty chemicals.
These systems are often skid-mounted, functional systems comprised of heat
exchangers, circulation pumps, piping, control valves, transmitters, heaters,
refrigeration units, or cooling towers, depending on project requirements. The
Company's engineered systems group also designs and sells fluid separators,
known as wiped film evaporators. The Company maintains a computer-driven and
controlled pilot plant test facility for use by Company and customer engineers
to determine and evaluate operating parameters in the production and processing
of pharmaceuticals, chemicals, and other products.
The Company's Edlon unit manufactures and markets fluoropolymer
roll covers and liners for process equipment, isostatically molded liners for
pipe and flowmeters, and vessel and piping accessories. Its products are
principally used in the chemical industry to provide corrosion-resistant
environments and in the paper industry for release applications. Its products
are manufactured at facilities in Avondale, Pennsylvania and Scotland.
The Company also manufactures pinch valves. Pinch valves are
comprised of a molded rubber sleeve valve, ranging in diameter from one to 24
inches, and a pincher, enclosed in a casting. The pincher literally pinches
shut the sleeve valve to provide quick shut-off. These valves are used in
general industrial
7
applications, usually involving harsh fluids where immediate shut-off of flow
is required.
GENERAL
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At August 31, 1995, the Company's order backlog was $106.7 million
compared to $73.9 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. The
Company owns a number of trademarks registered in various countries, including
Moyno(R), R&M(R), RKL(R), Chemineer(R), Prochem(R), Valchem(R), Kenics(R),
Pfaudler(R), Glasteel(R), Cryo-Lock(R), and Edlon(R) which it considers
important to the successful marketing of its products.
During 1995, the Company spent approximately $2.4 million on
research and development activities compared to $1.4 million and $1.3 million
in 1994 and 1993, 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, 1995, the Company had approximately 2,340 employees.
Approximately 870 employees were covered by collective bargaining agreements at
various locations. In September 1995, the Company entered into a new
three-year contract covering approximately 230 employees represented by the
United Steelworkers of America at the Company's Pfaudler facility in Rochester,
New York. The agreement covering approximately 260 employees at its
Springfield, Ohio facility expires on January 31, 1996. The Company considers
labor relations at each of its locations to be good.
ITEM 2. PROPERTIES
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The following table sets forth certain information concerning the
Company's principal facilities.
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Floor Products
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Space Owned/ Manufactured
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Location Sq. Ft. Leased or Use of Facility
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DOMESTIC:
Dayton, Ohio 11,500 Leased (1) Executive Offices
Fairfield, California 60,000 Owned Progressing cavity pumps and power
sections
Springfield, Ohio 272,800 Owned Progressing cavity pumps, grinders,
sensors and pinch valves
Dayton, Ohio 160,000 Leased (2) Turbine agitators and static mixers
North Andover, Massachusetts 30,000 Leased (3) Static mixers and heat exchangers
Avondale, Pennsylvania 50,000 Owned Roll covers and liners for process
equipment
Rochester, New York 500,000 Owned Glass-lined vessels
Rochester, New York 10,000 Owned Parts and field service for glass-lined
vessels
FOREIGN:
Chandlers Ford, England 10,000 Leased (4) Distribution center for progressing cavity
pumps and related products
Petit-Rechain, Belgium 15,000 Owned Progressing Cavity Pumps and power
sections
Singapore 5,000 Leased (5) Distribution center for progressing cavity
pumps and related products
Brampton, Ontario 41,500 Leased (6) Side entry agitators and portable mixers
Derby, England 20,000 Leased (7) Turbine agitators and static mixers
Bilston, England 50,000 Owned Parts and field service for glass-lined
vessels
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Kearsley, England 14,000 Owned Parts and field service for glass-lined
vessels
Levin, Scotland 240,000 Owned Glass-lined vessels
Mexico City, Mexico 110,000 Owned Glass-lined vessels
Sao Jose Dos Campos, Brazil 30,000 Leased (8) Blower wheels
Schwetzingen, Germany 400,000 Owned Glass-lined vessels
Taubate, Brazil 100,000 Owned Glass-lined vessels
(1) Leased for term expiring November 30, 1997, with options to renew.
(2) Leased for a term expiring December 31, 1999, with options to
renew.
(3) Leased for a term expiring October 31, 1995, with an option to
extend for three additional years.
(4) Leased for a term expiring January 31, 1997
(5) Leased for a term expiring May 31, 1997.
(6) Leased for a term expiring September 30, 1998, with an option to
renew for an additional five year term.
(7) Leased for a term expiring December 31, 2001.
(8) Leased on an annual basis and renewable for successive one year
terms ending December 31 of each year.
In addition, the Company owns a 40,000 square-foot manufacturing
plant in Lumberton, New Jersey which has been vacated and listed for sale. The
Company believes its facilities are in satisfactory condition and generally
adequate for its business requirements. At August 31, 1995, utilization of
plants was at an approximate 90% level.
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.
EXECUTIVE OFFICERS OF THE REGISTRANT
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Maynard H. Murch IV, age 51, 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 59, is President and Chief Executive Officer
of the Company and a director of the Company. He was elected to his position
on December 3, 1986. Prior to joining the Company, he was President and Chief
Operating Officer of Midland-Ross Corporation (a manufacturer of electrical,
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electronic and aerospace products and thermal systems) having held various
positions with that company since 1960.
Gerald L. Connelly, age 53, is Vice President of the Company,
having been elected to that position on June 30, 1994. 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 58, 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 57, 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
Corp., USA, most recently holding the position of Vice President, Finance and
Information Systems.
Joseph M. Rigot, age 52, 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 and Flory, 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 13, 1995) or until their
respective successors are elected.
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PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
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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.
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Dividends
High Low Paid
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1995
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1st Quarter $20.20 $16.75 $.075
2nd Quarter 22.75 16.50 .075
3rd Quarter 28.50 20.75 .075
4th Quarter 28.75 25.00 .075
1994
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1st Quarter 20.75 15.50 .0625
2nd Quarter 19.00 15.50 .075
3rd Quarter 20.50 17.00 .075
4th Quarter 20.25 18.00 .075
(b) As of October 10, 1995, the Company had 636 shareholders of
record. Based on requests from brokers and other nominees, the Company
estimates there are an additional 884 shareholders, or 1520 beneficial owners
of its shares.
(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, 1995, $5,789,000 of
retained earnings were available for the payment of future dividends.
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ITEM 6. SELECTED FINANCIAL DATA
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Robbins & Myers, Inc. and Subsidiaries
(in thousands except per share data) 1995 (3) 1994 (3) 1993 1992(3) 1991
============================================================================================================================
Summary of Operations
From Continuing Operations
Net Sales $302,952 $121,647 $ 85,057 $ 75,588 $ 78,662
Cost of Sales 201,648 76,666 52,296 45,508 49,415
Income Before Income Taxes 19,033 10,645 9,746 9,832 9,711
Income Taxes 7,208 4,290 3,561 1,959 1,041
============================================================
Income Before Extraordinary Gain, Cumulative Effect
of Accounting Changes and Discontinued Operations 11,825 6,355 6,178 7,873 8,670
Extraordinary Gain from Early Extinguishment
of Debt 1,332 0 0 0 0
Cumulative Effect of Accounting Changes 0 0 (8,018) 0 0
Loss from Discontinued Operations 0 0 0 0 (3,658)
============================================================
Net Income (Loss) 13,157 6,355 (1,840) 7,873 5,012
Income (Loss) Per Share:
Fully Diluted:
Before Extraordinary Gain, Cumulative Effect
of Accounting Changes and Discontinued
Operations 2.17 1.21 1.17 1.50 1.67
Extraordinary Gain from Early Extinguishment
of Debt 0.25 0 0 0 0
From Cumulative Effect of Accounting Changes 0 0 (1.52) 0 0
From Discontinued Operations 0 0 0 0 (0.71)
============================================================
Total 2.42 1.21 (0.35) 1.50 0.96
Other Financial Statistics
Total Assets 270,407 258,130 84,636 74,318 69,258
Depreciation and Amortization 12,401 4,594 2,798 2,442 1,972
Long-Term Debt 61,834 80,290 0 906 879
Shareholders' Equity 69,939 57,039 52,342 56,310 49,232
============================================================
Current Ratio 1.4:1 1.8:1 3.2:1 3.9:1 3.5:1
Total Debt as a % of Total Debt and Equity 49.3% 59.5% 1.8% 1.6% 2.2%
Return on Shareholders' Equity(2) 18.6% 11.6% 11.4% 14.9% 18.5%
Price/Earnings Ratio at August 31 11.2:1 15.5:1 NA 10.3:1 16.3:1
==============================================================
Shareholders' Equity Per Common Share $13.44 $11.09 $10.27 $11.06 $9.77
Dividends Declared Per Common Share 0.30 0.2875 0.2375 0.1875 0.1375
==============================================================
Weighted Average Number of Common Shares
Outstanding, Fully Diluted 5,437 5,252 5,257 5,249 5,221
Number of Shareholders(1) 1,520 1,098 1,295 1,370 1,404
Number of Employees 2,337 2,226 615 622 593
============================================================
Market Price of Common Stock
High $28 3/4 $20 3/4 $21 1/2 $21 1/2 $17 1/2
Low 16 1/2 15 1/2 13 14 1/2 8 1/4
Close 27 7/16 18 3/4 18 3/4 15 1/2 16 1/4
Notes to Five-Year Financial Highlights
(1) As of October 10, 1995 the Company had 636 shareholders of record. Based
on requests from brokers and other nominees, the company estimates there
are an additional 884 shareholders, or 1,520 beneficial owners of its
shares.
(2) Calculated using Income Before Extraordinary Gain, Cumulative Effect of
Accounting Changes and Discontinued operations.
(3) 1995 reflects the acquisition of Pharaoh and Cannon, 1994 reflects the
acquisition of Pfaudler, Chomineer and Edlon and 1992 includes the
acquisition of Prochem.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
IMPACT OF ACQUISITIONS
The purchase of Pfaudler, Chemineer and Edlon (the "acquired
companies") in June of 1994, significantly changed the business and financial
profile of the Company. As a result of the acquisitions, critical elements of
the Company's strategy to serve the fluids management needs of the process
industries, to offer a portfolio of products with brand-name recognition, and
to have a strong presence in global markets, were achieved.
The acquisitions allowed total sales and assets of the Company to
approximately triple and increased its international sales to 45% of
consolidated sales. The results of the acquired companies are included for 12
months in fiscal 1995 and for two months in the prior year, which significantly
impacts year-to-year comparisons.
RESULTS OF OPERATIONS
Fiscal 1995 - Sales reached $303.0 million and net income rose to
$13.2 million or $2.42 per share, assuming full dilution. This compares to
sales of $121.6 million and net income of $6.4 million or $1.21 per share for
1994. The increase in both sales and net income is due primarily to the
acquired companies. However, it should be noted that the Company's traditional
businesses also enjoyed a good year with sales reaching $102.5 million, an 11%
increase. Operating income, which excludes corporate, interest and amortization
expense, reached $19.4 million, a 10% increase. While the Company's increase in
profitability was driven primarily by the acquisitions, there are other
important factors.
As can be seen in the Information by Geographic Area note to the
consolidated financial statements, the rate of profitability as measured by
operating income to sales relationships, has declined for domestic operations
in both 1994 and 1995. This is due to the rate for the acquired businesses
being lower than that enjoyed by the Company's historic businesses. Some
improvement is expected for the future, but the rate is not expected to reach
that of 1993.
Profitability is further impacted by the fact that the foreign
businesses are currently less profitable than domestic businesses. For 1995,
the European businesses are impacted primarily by the German operation which
accounts for 52% of the sales but is only nominally profitable. An important
program for changing how we conduct business in Germany and the related cost
structure is underway and significant progress is expected in 1996. The Company
feels that the European businesses have an operating profit potential of 10%
which could be attained in three to five years. The rate of profitability for
the other foreign businesses is due in part to their being start-up operations.
Their long term profit potential is consistent with that of domestic operations
but is dependent upon higher sales associated with market growth. All foreign
business units have planned profit improvement for 1996.
Operating income also includes a pre-tax write off of $1.6 million
representing the value of the Company's remaining investment in Hazleton
Environmental. The partnership was liquidated in 1995 which terminated the
Company's relationship with the venture.
14
Finally, during the year, the Company negotiated the repurchase of
$25 million of subordinated debt issued as a part of the consideration for the
acquired companies. The transaction generated an after-tax extraordinary gain
of $1.3 million and is so reflected in the results for the year.
The Company expects operating results for 1996 to improve as the
result of higher sales and continued improvement in cost structure. Prospects
for higher sales are enhanced by record year end backlogs for all businesses.
Order patterns from the chemical and pharmaceutical markets have been
particularly strong.
While improved results are expected to begin with the first
quarter, growth in shipments of reactor vessels could be delayed by some
production capacity constraints. In addition, the final consolidation of the
Prochem industrial mixer line into Chemineer is scheduled to be completed
during the first half of the fiscal year which could have a temporary
disruptive effect.
Finally, the debt incurred to finance the retirement of the SARs,
discussed in the Subsequent Event note to the consolidated financial
statements, will impact interest expense for the year. However, expense is not
expected to exceed that for 1995.
Fiscal 1994 - As discussed in the 1994 report, the acquisitions
and related restructure transactions had a significant impact on 1994 operating
results. Aided by the inclusion of the acquired businesses for July and August,
sales increased to $121.6 million or 43% and net income to $6.4 million or 3%
greater than income before cumulative effect of accounting changes earned for
1993. For the period owned, the acquired businesses accounted for $29.3 million
in sales and provided sufficient income before tax to cover the additional
interest and amortization expense incurred as result of the transaction.
The Company's traditional businesses enjoyed a good year in 1994.
Sales increased 8.5% and net income, before considering the restructure
provision for the year, increased 28%. Improved sales were seen for products to
the oilfield and industrial mixer markets. In addition, improved operating
results were seen in Europe related to the restructuring process that took
place there during the year. Recent orders improved for all traditional
products with year end backlogs having increased 5% over those of the prior
year.
As shown in the Business Acquisition note to the consolidated
financial statements, the Pfaudler business unit had been in the process of
restructuring their operations prior to being acquired by Robbins & Myers. The
provisions were primarily for employee termination costs and related to the
Rochester, N.Y., Mexican and German operations. The actions in Rochester, N. Y.
and the curtailment of new product manufacturing operations in Mexico were
completed as planned in 1995 and the reorganization of the German facility is
continuing and is expected to be substantially completed in fiscal year 1996.
This reorganization of the German facility is the first phase of a longer term
profitability improvement plan designed to bring operating profits at the
European locations to 10% by 1998 to 2000. The Company does not expect to
incur any further restructuring charges with respect to the profitability
improvement plan as it is implemented.
15
In addition to the restructure process taking place at Pfaudler,
the acquisition of the Chemineer industrial mixer business offered the
opportunity to integrate Chemineer with the Company's Prochem mixer operation.
This action is expected to be completed by the end of the second quarter of
fiscal year 1996.
Unrelated to the acquisitions, the Company also planned to
consolidate the RKL valve business into its Springfield, Ohio facility. This
plan was completed in 1995 as originally expected.
Activity in the restructuring reserves is detailed in the Business
Restructure note to the consolidated financial statements
FISCAL 1993 - For the year, the Company experienced sales of $85.1
million and a net loss of $1.8 million. However, results for the year before
the cumulative effect of accounting changes was income of $6.2 million. These
results on a per share basis were a loss of $.35 and income of $1.18
respectively. There were a number of factors contributing to the year's
performance.
First, oilfield market strength returned and the Company enjoyed
record sales to this segment. In addition, the acquisition of the Prochem
industrial mixer line as of February 28, 1992, resulted in a full year of sales
for 1993. Offsetting these increases was a sales decline for other industrial
products due to a general served market weakness early in the year.
Customer orders for all products improved during the second half
of the fiscal year resulting in the order backlog increasing from $12.2 million
to $20.2 million at the end of the year.
Net income for the year was also impacted by several factors other
than changes in sales. First, due to normal integration problems, we did not
receive the operating income contribution from the new industrial mixer line
that we expected. Second, a decision was made in the fourth quarter to
restructure European operations by discontinuing Belgium manufacturing. This
resulted in a special charge of approximately $1 million being recorded in that
quarter. This plan was implemented as originally expected during 1994.
Reported results were also impacted by a Company decision during
the fourth quarter to adopt Financial Accounting Standards (FAS) 106 and 109
effective as of September 1, 1992. FAS 106 requires the recording of the
cumulative effect of post-retirement benefits granted to employees and FAS 109
defines new accounting rules for income taxes. The cumulative effect of these
accounting changes, net of appropriate income taxes, was a charge of $8.8
million being recorded for the year.
In conjunction with the modifications made in employee
postretirement health care benefits, the Company also increased employee
pension benefits which had an annual cost of approximately $.7 million. This
cost was also recorded as if it had been made on September 1, 1992, consistent
with the effective date for recording the adjustment for postretirement health
care benefits.
LIQUIDITY AND CAPITAL RESOURCES
Given the high levels of debt at the end of fiscal 1994, the
Company placed a strong emphasis on debt reduction for 1995. While the effort
was
16
successful, funding of programs with long term importance was continued. The
best evidence of this is the $12.9 million investment to purchase Pharaoh Corp.
and Cannon Process Equipment, Ltd. which will enhance the service component of
the reactor vessel business. The purchase is further discussed in the Business
Acquisitions note to consolidated financial statements. In addition, $10.7
million was spent for capital expenditures as the Company continued to
modernize production capability. The result of the debt reduction emphasis was
a decrease of $15.9 million in total debt by year end. These uses of cash were
financed by strong cash flow from operations of $32.4 million and the reduction
of cash balances during the year.
Cash and cash equivalents decreased $5.9 million for the year. The
decline is primarily the result of a continuing foreign cash management
program. It is the Company's general intention to repatriate cash from foreign
business units in excess of operating requirements and no significant
restrictions are known which would preclude accomplishing this objective. This
program is expected to result in an additional cash reduction of $3-$5 million
during 1996. The rates used to record income tax expense have been adjusted to
provide for taxes associated with the plan.
Excluding the impact of the SAR retirement transaction, the
Company expects operating cash flow to be adequate for the year's needs,
including scheduled debt service and shareholder dividend requirements. A
major requirement for the year will be approximately $16 million for capital
expenditures compared to expected depreciation of $10 million. Major items
include $3 million for oilfield products capacity requirements, $1.9 million
for the cost reduction programs, primarily for the industrial mixer product
line, and approximately $9.5 million for replacement items. While there is some
expected cost reduction associated with these replacement expenditures, they
are a part of the continuing program to upgrade production capability. The
largest replacement item is $1.5 million for a new furnace at the German
reactor vessel production facility. Of the total capital expenditure plan for
the year, commitments for approximately $6.2 million are outstanding at the end
of fiscal 1995.
In addition to capital expenditures, working capital is planned to
require cash of approximately $7 million for the year. This requirement is
caused primarily by customer advances, salaries, wages and payroll taxes and
restructure costs as shown in the Accrued Expenses note to consolidated
financial statements, declining to more normal levels by the end of fiscal
1996.
The Company's significant foreign operations have the local
currency as their functional currency. The foreign operations primarily buy
and sell within the same country; therefore, mitigating the impact of currency
fluctuations on operations. To the extent that significant transactions are
completed in a different currency, the Company hedges its risk to future
currency fluctuations through foreign currency forward contracts with major
financial institutions.
Finally, as described in the Subsequent Event note to the
consolidated financial statements, 1.85 million of the outstanding SARs have
been repurchased for $9.75 per SAR. The resulting $18 million requirement was
satisfied by amounts borrowed from existing senior lenders. This transaction
resulted in an $18 million increase to goodwill which will be amortized over 39
years. The remaining
17
SARs can be exercised through 2002 and it is expected that any required payment
will be financed from cash generated from operations.
The Company is investigating a capital structure change during
1996 which could include the possibility of new long-term debt and the issuance
of common stock. But, at August 31, 1995, the Company has $46.2 million
available under its current bank credit agreements which management believes is
adequate to meet its needs.
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
------ -------------------------------------------
[Enlarge/Download Table]
CONSOLIDATED BALANCE SHEET
Robbins & Myers, Inc. and Subsidiaries August 31, August 31,
(in thousands except share data) 1995 1994
--------------------------------------------------------------------------------------------------------
Assets
(C>
Current Assets
Cash and cash equivalents $10,210 $16,079
Accounts receivable, less allowances 49,415 41,388
Inventories 43,176 39,926
Other current assets 2,492 2,828
Deferred taxes 4,539 3,632
----------------------
Total Current Assets 109,832 103,853
Goodwill 73,497 68,210
Other Intangible Assets 13,573 9,267
Deferred Taxes 4,522 7,802
Other Assets 4,378 6,836
Property, Plant and Equipment, Net 64,605 62,162
----------------------
$270,407 $258,130
Liabilities and Shareholders' Equity ----------------------
Current Liabilities
Accounts payable $22,442 $16,164
Accrued expenses 49,190 38,842
Current portion long-term debt 6,067 3,500
----------------------
Total Current Liabilities 77,699 58,506
Long-Term Debt-Less Current Portion 61,834 80,290
Other Long-Term Liabilities 60,935 62,295
Shareholders' Equity
Common stock-without par value:
Authorized shares-25,000,000
Outstanding shares-5,202,544 in 1995 and 5,142,817 in 1994 after deducting
shares in treasury of 135,805 in 1995 and 147,005 in 1994, at stated amount 20,682 19,573
Retained earnings 49,254 37,656
Equity adjustment for foreign currency translation 777 211
Equity adjustment to recognize minimum pension liability (774) (401)
----------------------
69,939 57,039
----------------------
$270,407 $258,130
See Notes to Consolidated Financial Statements ----------------------
19
[Enlarge/Download Table]
STATEMENT OF CONSOLIDATED OPERATIONS
AND RETAINED EARNINGS
Robbins & Myers, Inc. and Subsidiaries Years Ended August 31,
(in thousands except per share data) 1995 1994 1993
-------------------------------------------------------------------------------------------------------
Net Sales $302,952 $121,647 $85,057
Less:
Cost of sales 201,648 76,666 52,296
Engineering and development, selling and administrative expenses 74,234 28,733 22,171
Interest expense 7,287 1,457 116
Other deductions:
Provision for business restructure 0 2,551 950
Other items -- net 750 1,595 1,240
--------------------------------
19,033 10,645 8,284
Investment Income 0 0 1,462
--------------------------------
Income Before Income Taxes 19,033 10,645 9,746
Income Taxes 7,208 4,290 3,568
Income Before Extraordinary Gain and Cumulative
Effect of Accounting Changes 11,825 6,355 6,178
Extraordinary Gain from Early Extinguishment of
Debt, Net of Income Taxes 1,332 0 0
Cumulative Effect of Accounting Changes, Net of Income Taxes 0 0 (8,018)
--------------------------------
Net Income (Loss) 13,157 6,355 (1,840)
Retained Earnings at Beginning of Year 37,656 32,776 35,826
Deduct Dividends Declared on Common Stock (1,559) (1,475) (1,210)
--------------------------------
Retained Earnings at End of Year $49,254 $37,656 $32,776
Income (Loss) Per Share --------------------------------
Primary:
Income Before Extraordinary Gain and Cumulative
Effect of Accounting Changes $2.19 $1.21 $1.18
Extraordinary Gain from Early Extinguishment of
Debt, Net of Income Taxes .25 0 0
Cumulative Effect of Accounting Changes, Net of Income Taxes 0 0 (1.53)
--------------------------------
$2.44 $1.21 $(.35)
Assuming Full Dilution: --------------------------------
Income Before Extraordinary Gain and Cumulative
Effect of Accounting Changes $2.17 $1.21 $1.17
Extraordinary Gain from Early Extinguishment of
Debt, Net of Income Taxes .25 0 0
Cumulative Effect of Accounting Changes, Net of Income Taxes 0 0 (1.52)
--------------------------------
$2.42 $1.21 $(.35)
--------------------------------
See Notes to Consolidated Financial Statements
20
[Enlarge/Download Table]
STATEMENT OF CONSOLIDATED CASH FLOWS
Robbins & Myers, Inc. and Subsidiaries Years Ended August 31,
(in thousands) 1995 1994 1993
------------------------------------------------------------------------------------------------------
Operating Activities
Net Income (Loss) $13,157 $ 6,355 ($1,840)
Equity Adjustment for Foreign Currency Translation 566 (81) (1,069)
Adjustments Required to Reconcile Net Income (Loss) to Net
Cash and Cash Equivalents Provided by Operating Activities:
Depreciation 8,549 3,761 2,637
Amortization 3,852 833 161
Deferred taxes (800) (523) 742
Gain on Extinguishment of Debt (2,183) 0 0
Cumulative Effect of Accounting Changes 0 0 8,018
Changes in operating assets and liabilities -- excluding the effects of
the purchase of Pharaoh Corp. and Cannon Process Equipment, Ltd.,
Pfaudler, Chemineer, Edlon and the JWI Mixer Line:
Accounts receivable, less allowances (7,487) 129 (2,020)
Inventories (1,854) 2,476 2,029
Other current assets 2,236 (1,436) 233
Intangible assets (1,795) 462 (2,032)
Other assets 1,510 1,187 189
Accounts payable 5,273 (128) 863
Accrued expenses 8,425 (2,468) (942)
Federal income taxes payable 1,180 3,017 0
Other long-term liabilities 1,813 1,017 564
----------------------------------
Net Cash and Cash Equivalents Provided by Operating Activities 32,442 14,601 7,533
Investing Activities
Capital Expenditures, Net of Nominal Disposals (10,133) (6,798) (2,579)
Purchase of Marketable Securities 0 (29,796) (32,533)
Proceeds From Sale of Marketable Securities 0 52,860 31,566
Purchase of JWI Mixer Line 0 0 (2,188)
Purchase of Pfaudler, Chemineer and Edlon business units 0 (96,725) 0
Purchase of Pharaoh Corp. and Cannon Process Equipment, Ltd. (12,898) 0 0
Investment in Hazelton Environmental 0 (700) (1,081)
----------------------------------
Net Cash and Cash Equivalents Used by Investing Activities (23,031) (81,159) (6,815)
Financing Activities
Proceeds from Revolving Line of Credit 62,406 22,229 17,800
Proceeds from Subordinated Debt 4,969 43,576 0
Proceeds from Term Loan 0 48,000 0
Payment of Term Loan (3,500) (8,000) 0
Payment of Subordinated Debt (20,000) 0 0
Payment of Revolving Line of Credit and Long-Term Liabilities (58,705) (23,200) (17,769)
Proceeds from Sale of Common Stock 1,109 580 338
Purchase of Common Stock 0 (495) (452)
Dividends Paid (1,559) (1,475) (1,210)
----------------------------------
Net Cash and Cash Equivalents (Used) Provided by Financing Activities (15,280) 81,215 (1,293)
----------------------------------
(Decrease) Increase in Cash and Cash Equivalents (5,869) 14,657 (575)
Cash and Cash Equivalents at Beginning of Year 16,079 1,422 1,997
----------------------------------
Cash and Cash Equivalents at End of Year $10,210 $16,079 $1,422
See Notes to Consolidated Financial Statements
21
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.
INCOME TAXES
Income taxes are provided for all items included in the Statement of
Consolidated Operations and Retained Earnings 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.
PROPERTY, PLANT AND EQUIPMENT, NET
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, Net" consisted of the
following:
(in thousands) 1995 1994
---------------------------------------------------------------------------
Land and improvements $ 9,732 $ 9,366
Buildings 20,182 21,658
Machinery & equipment 69,255 58,876
---------------------
99,169 89,900
Less accumulated depreciation 34,564 27,738
---------------------
$64,605 $62,162
---------------------
INVENTORIES
Domestic inventories are stated at the lower of cost or market
determined by the last-in, first-out (LIFO) method. At August 31,
1995 and 1994, the difference between estimated current replacement
cost and the stated LIFO value was approximately $7,436,000 and
$7,312,000, respectively.
Foreign inventories are reported on the first-in, first-out (FIFO)
method and amounted to $23,226,000 and $21,995,000 at August 31,
1995 and 1994, respectively.
At August 31, "Inventories" consisted of the following:
(in thousands) 1995 1994
-------------------------------------------------------------------------------
Finished products $13,743 $12,491
Work in process 15,149 13,913
Raw materials 14,284 13,522
---------------------
$43,176 $39,926
---------------------
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. Accumulated amortization of goodwill and other intangible assets
totaled $3,904,000 and $1,176,000 at August 31, 1995 and 1994, respectively.
At August 31, "Other Intangible Assets" consisted of the following:
(in thousands) 1995 1994
------------------------------------------------------------------------------
Patents $ 1,019 $ 1,098
Non-compete agreements 5,401 1,028
Financing costs 396 393
Acquisition costs 3,515 3,040
Pension intangible 3,242 3,708
---------------------
$13,573 $ 9,267
---------------------
22
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
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.
RESEARCH AND DEVELOPMENT
Research and development expenditures are expensed as incurred and
amounted to approximately $2,403,000, $1,363,000 and $1,260,000 for
the years ended August 31, 1995, 1994 and 1993, respectively.
ACCOUNTS RECEIVABLE
Accounts receivable are stated net of allowances for doubtful
accounts totaling $1,260,000 and $952,000 at August 31, 1995 and
1994, 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 advance payments and letters of credit to insure payment.
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.
CHANGES IN ACCOUNTING POLICIES
In 1993, the company adopted Statement of Financial Accounting
Standards No. 106, "Employers Accounting for Postretirement Benefits
Other Than Pensions" and No. 109, "Accounting for Income Taxes."
Statement No. 106 generally requires the accrual of the expected
costs of postretirement benefits by the date the employees become
eligible for benefits. Previously, the expense for these benefits
was recognized as claims were paid. A charge of $8,812,000, net of
income taxes of $5,239,000, was recognized as the cumulative effect
for the adoption of Statement No. 106.
Statement No. 109 replaces Statement No. 96 and the company will
continue using the liability method of computing deferred income
taxes. A credit of $794,000 was recognized as the cumulative effect
for the adoption of
Statement No. 109.
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 the
investments, totaling approximately $2,980,000, which are included
in "Other Assets" in the Consolidated Balance Sheet.
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 and equity investments. -- The amounts
reported approximate the market value of similar instruments.
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.
23
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. The
U.S. dollar is the functional currency for the Brazilian units. As a
result, translation gains and losses for these operations are
reflected in net income.
RECOGNITION OF REVENUE
Revenue is primarily recognized as products are shipped to customers
except for infrequent long-term contracts for which revenue is
recognized under the percentage of completion method. At August 31,
1995, 1994 and 1993 there were no such contracts in process.
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.
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 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, 1995 and 1994, 441,250 and 1,400,000 shares,
respectively, were reserved for future grants.
1995 1994
------------------------------------------------------------------------------
Options granted 76,750 83,000
Options expired 43,300 2,400
Options exercised: option price $5.13 - $17.00 46,100 55,200
Options outstanding: option price $3.88 - $27.00 403,550 416,200
Options which became exercisable:
option price $16.25 - $20.25 51,580 42,950
Options exercisable: option price $3.88 - $20.25 250,600 245,120
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, 1995, 36,500 units had been awarded under the
program. The company has estimated the total value of shares that
could be earned under the program and has chosen to recognize the
cost ratably over a five year period. The amount charged to expense
for this program is $562,000 as of August 31, 1995.
During 1994, in connection with the acquisition of Pfaudler,
Chemineer and Edlon, the company issued to the seller stock
appreciation rights on 2,000,000 shares of its common stock. The
stock appreciation rights entitle the holder to receive a payment equal
to the increase in market value of the company's common stock above $23
per share to a maximum market value of $40 per share. The stock
appreciation rights are exercisable by the holder during the period
January 1, 1995 through June 30, 2000. At the company's option, payment
may be made in cash or common stock of the company. It is the company's
intention to make any payment for stock appreciation rights in cash
and therefore the payment will result in additional goodwill at
the time of the transaction. See Subsequent Event note for
additional information.
24
The net change in common shares outstanding during 1995, 1994 and
1993 were increases of 59,727, 44,570 and 4,997 shares,
respectively. Activity for all years was limited to employee
transactions.
RETIREMENT PLANS
The company sponsors three defined contribution plans covering most
salaried employees and certain domestic hourly employees. Company
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
domestic employees and certain foreign 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, 1995 and 1994
pension assets were invested in short and long-term interest bearing
obligations and equity securities, including 119,000 shares of the
company's common stock.
During 1995, the company adjusted its minimum pension liability to
$4,016,000 from $4,109,000 in the prior year. This liability is
required for defined benefit plans whose accumulated benefits exceed
assets. The transaction, which had no effect on income, was recorded
by adjusting an intangible asset to the amount of $3,242,000 from
$3,708,000 in 1994 and adjusting equity by $373,000 for a total
equity adjustment of $774,000 at August 31, 1995.
Retirement plan costs for the above plans include the following
components:
(in thousands) 1995 1994 1993
------------------------------------------------------------------------------
Defined benefit plans:
Service cost -- benefits earned
during the period $2,134 $1,128 $ 854
Interest cost on projected
benefit obligation 3,460 2,875 2,594
Actual return on assets (5,242) (1,167) (5,617)
Net amortization and deferral 2,167 (1,865) 3,098
-------------------------------
Total 2,519 971 929
Defined contribution plans 477 327 222
-------------------------------
$2,996 $1,298 $1,151
-------------------------------
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.
The funded status of domestic defined benefit plans at August 31,
1995 and 1994 was as follows:
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
(in thousands) 1995 1995
-------------------------------------------------------------------------------
Actuarial present value of:
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
at August 31 (432) 416
Adjustment to recognize minimum liability 0 (4,016)
---------------------
Net pension asset (liability) recognized
in the Consolidated Balance Sheet $ 289 $(8,950)
---------------------
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
(in thousands) 1994 1994
------------------------------------------------------------------------------
Actuarial present value of:
Vested benefit obligation $13,819 $30,687
Accumulated benefit obligation 14,353 30,862
Projected benefit obligation 17,504 31,915
Plan assets at fair market value 15,942 24,133
Plan assets less than projected ---------------------
benefit obligation (1,562) (7,782)
Unrecognized net loss 1,091 401
Unrecognized prior service cost 1,528 3,208
Unrecognized net (asset)
obligation at August 31 (492) 500
Adjustment to recognize minimum liability 0 (4,109)
---------------------
Net pension asset (liability) recognized
in the Consolidated Balance Sheet $ 565 $(7,782)
---------------------
The projected benefit obligation was determined using a discount
rate of 7% in 1995 (7 1/2% in 1994) and weighted average pay
increases of 6 3/4%. The assumed long-term rate of retutn on plan
assets is 9 1/2% in 1995, 10% in 1994 and
25
10 1/2% in 1993. The effect of the change in the discount rate on
the above plans is an increase in the projected benefit obligation
of approximately $3,011,000.
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, 1995 and June 30, 1994.
Net pension cost for this plan includes the following components:
(in thousands) 1995 1994
-------------------------------------------------------------------
Service cost $ 550 $ 79
Interest cost 2,231 315
---------------------
Net pension cost $2,781 $394
=====================
The increase in pension cost during 1995 is primarily the result of the
inclusion of twelve months expense in 1995 and two months in 1994. The status
of this plan at the actuarial valuation dates of August 31, 1995 and June 30,
1994 was as follows:
(in thousands) 1995 1994
-------------------------------------------------------------------
Actuarial present value of:
Accumulated benefit obligation $28,636 $26,052
Vested benefit obligation 28,231 25,699
Projected benefit obligation 31,746 29,014
Plan assets at fair market value* 0 0
----------------------
Plan assets less than projected
benefit obligation (31,746) (29,014)
Unrecognized net actuarial gain (966) 0
----------------------
Pension liability recognized in the
Consolidated Balance Sheet $(32,712) $(29,014)
======================
*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 as Germany does not permit
funding of pension obligations.
OTHER POSTRETIREMENT BENEFITS
In addition to pension benefits, the company provides
health care and life insurance benefits for certain of its
retired domestic 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:
(in thousands) 1995 1994
-------------------------------------------------------------------
Retirees $13,988 $13,255
Active employees 3,680 4,313
----------------------
$17,668 $17,568
======================
Net periodic postretirement benefit cost includes the following
components:
(in thousands) 1995 1994 1993
-------------------------------------------------------------------
Interest Cost $1,237 $1,100 $957
Service Cost 93 87 29
--------------------------------
$1,330 $1,187 $986
================================
The rate of increase in per capita health care costs is assumed to be
8% in 1996, decreasing 1% per year to 6% in 1998. 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, 1995, by approximately $541,000
and change net periodic postretirement benefit cost by approximately $39,000.
The discount rate used in determining the accumulated postretirement benefit
obligation was 7% in 1995 and 7 1/2% in 1994. The change resulted in an increase
in the accumulated postretirement benefit obligation of approximately $638,000.
INVESTMENT INCOME
The following items are included in "Investment Income":
(in thousands) 1995 1994 1993
---------------------------------------------------------------------------
Interest income $0 $ 474 $ 477
Dividend income 0 403 733
Realized (losses) gains-net 0 (778) 340
Unrealized gains-net 0 0 67
Investment expenses 0 (99) (155)
-----------------------------------------
$0 $ 0 $1,462
-----------------------------------------
FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK
At August 31, 1994, the company had a foreign currency forward contract which
matured on March 1, 1995. The
26
objective of the contract was to reduce the exposure to foreign currency
exchange risk associated with an intercompany loan from the company's
German subsidiary which came due on the same date. The contract, which called
for the purchase of Deutsche marks, had a value of approximately $16,500,000 at
August 31, 1994.
[Download Table]
OTHER DEDUCTIONS
The following items are included in "Other items--net":
(in thousands) 1995 1994 1993
---------------------------------------------------------------
Costs associated with the business
units sold in previous periods $ 982 $1,036 $1,034
Write-off of investment in
Hazleton Environmental 1,612 0 0
Income from equity investments (944) (80) 0
Royalty income (712) (46) 0
All other items (188) 685 206
--------------------------
$ 750 $1,595 $1,240
==========================
INCOME TAXES
Deferred income taxes reflect the net effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the company's deferred tax
position at August 31, are as follows:
[Download Table]
(in thousands) 1995 1994
---------------------------------------------------------------
Deferred tax benefits:
Other postretirement benefits obligation $ 6,863 $ 7,035
Capital loss carryforward 1,231 1,231
Foreign tax loss carryforward and
restructuring charges 2,822 3,489
Pension benefits 1,627 1,738
Other items -- net 4,748 4,445
----------------
17,291 17,938
Less valuation allowance 2,853 4,020
----------------
14,438 13,918
Deferred tax liabilities:
Tax depreciation in excess of book
depreciation 2,725 1,768
Discount on subordinated debt 971 2,484
Other items--net 1,681 1,405
----------------
5,377 5,657
----------------
Net deferred tax benefit $ 9,061 $ 8,261
================
Included in the valuation allowance for deferred tax benefits
is $1,622,000 relating to foreign tax loss carryforwards.
The provision for federal, foreign and state income taxes charged
to operations is as follows:
[Download Table]
(in thousands) 1995 1994 1993
---------------------------------------------------------------
Current:
Federal $5,021 $4,100 $1,812
Foreign 2,007 337 (113)
State 980 598 459
----------------------------------
8,008 5,035 2,158
Deferred:
Federal 366 (40) 1,328
Foreign (1,218) (700) 0
State 52 (5) 82
----------------------------------
(800) (745) 1,410
----------------------------------
$7,208 $4,290 $3,568
==================================
A summary of the differences between the effective income tax rate
attributable to operations and the statutory rate is
as follows:
[Download Table]
1995 1994 1993
---------------------------------------------------------------
Statutory rate 35.0% 35.0% 34.0%
State income taxes net of
federal tax benefit 3.5 3.7 3.1
Other items--net (.6) 1.6 (.5)
--------------------------
37.9% 40.3% 36.6%
==========================
Income taxes paid in 1995, 1994 and 1993 were $3,007,000,
$3,299,000 and $2,808,000, respectively.
The company also has a Canadian tax loss carryforward of
approximately $900,000 and a German tax loss carryforward of
$2,600,000 for corporation tax purposes and $6,700,000 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 tax loss carryforwards. The Canadian carryforward, if
unused, will expire in future years beginning in 1998. The German
carryforward has no expiration period.
At August 31, 1995, 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.
27
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.
It is the company's policy to provide income taxes on undistributed
foreign earnings which the company intends to remit to the United
States. The provision for income tax on those earnings was $220,000
in 1995. No income taxes were recorded for this purpose in 1994 or
1993. The amount of undistributed retained earnings is $3,339,000
and $977,000 at August 31, 1995 and 1994.
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, 1995:
[Download Table]
(in thousands)
--------------------------------------------------------
1996 $2,042
1997 1,610
1998 1,219
1999 1,034
2000 531
Thereafter 209
------
$6,645
======
Rental expense for all operating leases in 1995 was approximately
$2,352,000 ($904,000 in 1994 and
$841,000 in 1993).
ACCRUED EXPENSES
At August 31, "Accrued Expenses" consisted of the following:
[Download Table]
(in thousands) 1995 1994
-------------------------------------------------------------------
Customer advances $ 9,531 $ 6,222
Salaries, wages, payroll taxes and withholdings 9,158 6,031
Federal income taxes 4,197 3,017
Business restructure costs 3,712 5,541
Warranty costs 3,040 2,139
Pension benefits 2,373 1,392
Medical benefits 2,257 2,260
Workers' compensation benefits 1,094 1,333
All other items 13,828 10,907
-----------------
$49,190 $38,842
=================
LONG-TERM DEBT
Long-term debt at August 31 is as follows:
[Download Table]
(in thousands) 1995 1994
--------------------------------------------------------
Senior debt
Term loan $36,500 $40,000
Revolving credit loan 3,800 0
Subordinated debt
Face amount 30,495 50,000
Discount (2,894) (6,210)
--------------------
Total debt 67,901 83,790
Less current portion 6,067 3,500
--------------------
$61,834 $80,290
====================
At August 31, 1995, 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. The term loan portion of
the agreement is payable in quarterly installments through 2001.
During 1995, the company amended the revolving credit portion of the
agreement and increased the amount the company can borrow by $15
million to $50 million. The revolving credit agreement does not
require compensating balances; however, a nominal commitment fee is
paid on the unused portion.
The interest rate on both the term loan and any outstanding balance
under the revolving credit portion of the agreement is variable
based upon Prime or a formula tied to LIBOR rates. At August 31,
1995, the interest rate for all amounts outstanding ranged from
7 1/2% to 8 1/3% (6 1/3% to 8 1/3% at August 31, 1994). During 1994, the
company entered into interest rate swap agreements to manage its
exposure to fluctuations in short-term interest rates. These
arrangements total $25 million, expire in 1997 and allow the company
to pay an effective interest rate of approximately 8 1/3%. The
counter party to the transaction is one of the loan originating
banks and the company continually monitors its financial position
and credit rating to guard against credit risk.
The senior debt 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, 1995, $5,789,000 of retained
28
earnings is available for future dividends. See Subsequent
Event note.
At August 31, 1994, subordinated debt consisted of $50 million principal
amount. During the third quarter of 1995, the company recorded an extraordinary
gain of $2,183,000 ($1,332,000 after taxes or $.25 per share) in connection
with the early retirement of $25 million of the subordinated debt. The
remaining principal amount of $25 million bears interest at 5 1/2% but has been
discounted to reflect a rate of 9 1/4% which approximated the market interest
rate on debt instruments with similar features at the time the debt was
incurred. The debt becomes due on June 30, 1998, and the agreement includes
certain restrictive covenants which are generally consistent with, but less
restrictive than, those of the senior debt. Subject to covenant compliance, the
company may extend the maturity of the notes until June 30, 2001, by paying an
interest rate consistent with the market rate paid on similar instruments as of
the date of the maturity extension. The debt is unsecured. It is the company's
current intention to avail itself of the renewal option as of June 30, 1998.
During 1995, the company incurred additional subordinated debt in the amount of
$5,495,000. This debt bears interest at 8% but has been discounted to reflect a
rate of 11% which approximated the market interest rate on debt instruments
with similar features at the time the debt was incurred. The debt is payable in
annual installments on February 28 of each year through 1999. The debt is
secured by all domestic assets of the company.
Aggregate principal payments for the debt for the five years
subsequent to August 31, 1995 are as follows:
[Download Table]
Senior Subordinated
(in thousands) Debt Debt
-------------------------------------------------------
1996 $ 4,500 $ 1,567
1997 6,000 1,461
1998 6,500 1,642
1999 6,500 825
2000 6,500 0
2001 and thereafter 10,300 25,000
--------------------
$40,300 $30,495
====================
Interest paid on all outstanding debt amounted to $6,753,000
in 1995, $1,457,000 in 1994 and $124,000 in 1993.
OTHER LONG-TERM LIABILITIES
The following items are included in "Other Long-Term Liabilities" at
August 31:
[Download Table]
(in thousands) 1995 1994
-------------------------------------------------------
German pension liability $31,478 $29,014
Other postretirement benefits 15,276 15,237
U.S. pension liability 7,347 8,321
Casualty insurance reserves 5,612 3,900
All other items 1,222 5,823
-------------------
$60,935 $62,295
===================
BUSINESS ACQUISITIONS
On March 1, 1995, the company acquired Cannon Process Equipment Limited and
Pharaoh Corporation 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. The new business units will be combined with similar activities of
Pfaudler.
On June 30, 1994, the company completed the acquisition of the Pfaudler,
Chemineer and Edlon business units for approximately $117,045,000. Pfaudler is
the foremost worldwide manufacturer of glass-lined steel 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. 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 cash and
subordinated notes, the seller also received certain stock appreciation rights
as further described in the Common Stock note.
The acquisitions were 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. These transactions resulted in Goodwill of $71,225,000.
The operating results of the acquired businesses have
been included in consolidated operating results since the
29
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 at the beginning of 1993. In
preparing the pro forma data, certain adjustments have been made to
historic operating results, 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 and $1,318,000 in 1994 and 1993, respectively. This
summary does not necessarily reflect the results of operations as
they would have been had the acquisitions occurred at the beginning
of 1993, nor is it necessarily indicative of future operating
results.
[Download Table]
(in thousands except per share data) 1994 1993
-----------------------------------------------------------------
Net Sales $261,090 $255,307
Income Before Extraordinary Gain and
Cumulative Effect of Accounting Changes 4,388 4,911
Income Per Share Before Extraordinary Gain and
Cumulative Effect of Accounting Changes
Primary $.83 $.94
Fully Diluted .83 .93
BUSINESS RESTRUCTURE
The following is a summary of the company's restructuring activities
for the current and prior year.
[Download Table]
Employee Facility
Severance Related Other
(in thousands) Costs Costs Costs Total
-----------------------------------------------------------------
Balance August 31, 1993 $ 746 $ 105 $ 99 $ 950
Additional provision charged
against operations 1,266 1,245 40 2,551
Additional provision recorded
by adjusting purchase entry 1,750 250 700 2,700
Balances assumed from
former owner 2,786 0 (311) 2,475
Payments (1,681) (105) (99) (1,885)
Non-cash asset reductions 0 (1,250) 0 (1,250)
----------------------------------
Balance August 31, 1994 4,867 245 429 5,541
Additional provision recorded
by adjusting purchase entry 300 0 0 300
Payments (1,659) (121) (1) (1,781)
Other activity* (215) (44) (89) (348)
----------------------------------
Balance August 31, 1995 $ 3,293 $ 80 $ 339 $3,712
==================================
*Primarily the result of foreign currency translation
During 1995 the company continued the implementation of an
extensive restructuring program at Pfaudler which was in process at
the time of the acquisition in fiscal 1994. Included in the program
is a major reorganization of the German facility, which includes
employee termination costs. In addition, Pfaudler has completed the
curtailment of new product manufacturing in Mexico.
The consolidation of the company's industrial mixer production,
announced last year, is in process and will be completed during the
first half of fiscal 1996. The program involves closing the existing
Prochem manufacturing facility in Brampton, Ontario and relocating
all business activities to the Chemineer facility in Dayton, Ohio.
The move has been delayed approximately six months from the original
timetable due to an ongoing systems implementation project at
Chemineer and the need to complete a building addition
to accommodate additional production.
Finally, the move of the RKL valve production from a facility in
Lumberton, New Jersey to the company's pump manufacturing plant in
Springfield, Ohio was completed during fiscal 1995 as originally
planned.
At August 31, 1995, the company believes the above reserve is
adequate to complete the various programs currently in process. The
company continually monitors charges against the reserve and has
made adjustments as required.
SUBSEQUENT EVENT
On October 10, 1995, 1,850,000 of the stock appreciation rights which were
issued in connection with the acquisition of Pfaudler, Chemineer and Edlon (see
Common Stock note) were retired for $9.75 per right. This resulted in a total
payment of $18,037,500. The payment was made October 24, 1995. The payment was
financed through the company's long-term revolving credit agreement. The
company's covenants with its lenders have been amended as a result of this
transaction and the company is in compliance with the modified covenants.
30
INFORMATION BY GEOGRAPHIC AREA
[Download Table]
Years Ended August 31,
(in thousands) 1995 1994 1993
-----------------------------------------------------------------------------
Net Sales
U.S. domestic $165,135 $ 73,380 $56,376
U.S. export 31,218 18,926 17,100
------------------------------------
Total U.S. 196,353 92,306 73,476
Europe 80,844 16,824 3,603
Other foreign 25,755 12,517 7,978
------------------------------------
Total Net Sales $302,952 $121,647 $85,057
====================================
Operating Income
U.S. $ 29,519 $ 17,718 $15,554
Europe 4,818 877 (1,156)(3)
Other foreign 3,377 (1,696)(2) (2,024)
------------------------------------
Total operating income 37,714 16,899 12,374
Investment income 0 0 1,462
Interest expense (7,287) (1,457) (116)
Amortization of intangible assets (2,707) (121) 0
Corporate expenses (8,687)(1) (4,676) (3,974)
------------------------------------
Income Before Income Taxes $ 19,033 $ 10,645 $ 9,746
====================================
Income Before Income Taxes
U.S. $ 10,838 $ 11,464 $12,926
Europe 4,818 877 (1,156)
Other foreign 3,377 (1,696) (2,024)
------------------------------------
Total $ 19,033 $ 10,645 $ 9,746
====================================
Assets
U.S. $193,852 $185,706 $71,105
Europe 56,063 50,694 4,579
Other foreign 20,492 21,730 8,952
------------------------------------
Total Assets $270,407 $258,130 $84,636
====================================
<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 provision for business restructure of $950,000.
MARKET PRICE AND DIVIDEND DATA
Per Share of Common Stock
[Download Table]
MARKET PRICE
1995 --------------------------- DIVIDENDS
QUARTER ENDED HIGH LOW CLOSE PAID
------------------------------------------------------------
November 30 $20 1/5 $16 3/4 $17 2/5 7 1/2 cents
February 28 22 3/4 16 1/2 20 3/4 7 1/2
May 31 28 1/2 20 3/4 26 1/2 7 1/2
August 31 28 3/4 25 27 7/16 7 1/2
------
30 cents
======
Market Price
1994 --------------------------- Dividends
Quarter Ended High Low Close Paid
------------------------------------------------------------
November 30 $20 3/4 $15 1/2 $15 1/2 6 1/4 cents
February 28 19 15 1/2 18 3/4 7 1/2
May 31 20 1/2 17 20 1/4 7 1/2
August 31 20 1/4 18 18 3/4 7 1/2
------
28 3/4 cents
======
31
======================
QUARTERLY DATA
(Unaudited)
[Download Table]
Robbins & Myers, Inc. and Subsidiaries
(in thousands except per share data) 1995 1994
---------------------------------------------------------------------------------
Net Sales
Quarter Ended
November 30 $ 68,628 $ 21,895
February 28 70,873 22,567
May 31 79,973 25,018
August 31 83,478 52,167
-----------------------
Total $302,952 $121,647
=======================
Gross Profit
Quarter Ended
November 30 $ 23,042 $ 8,120
February 28 24,145 8,888
May 31 26,180 10,350
August 31 27,937 17,623
-----------------------
Total $101,304 $ 44,981
=======================
Income Before Income Taxes
Quarter Ended
November 30 $ 4,332 $ 3,096
February 28 5,044 3,392
May 31 4,317(1) 3,838
August 31 5,340 319(3)
-----------------------
Total $ 19,033 $ 10,645
=======================
[Enlarge/Download Table]
1995 1995 1994
Before
Extraordinary
Gain TOTAL Total
----------------------------------------
Net Income
Quarter Ended
November 30 $ 2,915 $ 2,915 $1,907
February 28 3,087 3,087 2,136
May 31 2,256(1) 3,588(2) 2,211
August 31 3,567 3,567 101(3)
-------------------------------
Total $11,825 $13,157 $6,355
===============================
Income Per Share
Primary
Quarter Ended
November 30 $.55 $.55 $.36
February 28 .58 .58 .41
May 31 .42(1) .67(2) .42
August 31 .66 .66 .02(3)
Assuming Full Dilution
Quarter Ended
November 30 $.55 $.55 $.36
February 28 .58 .58 .41
May 31 .42(1) .67(2) .42
August 31 .65 .65 .02(3)
<FN>
(1) Includes a pre-tax write-off of $1,612,000 for investment in Hazleton Environmental.
(2) Includes an after tax gain of $1,332,000 for early extinguishment of debt.
(3) Includes a pre-tax provision for business restructure totaling $2,551,000.
32
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 13, 1995, except for certain information concerning
the executive officers of the Company which is set forth in Part I of this
Report.
ITEM 11. EXECUTIVE COMPENSATION
------- ----------------------
The information required by this Item 11 is set forth in the
Company's Proxy Statement for its Annual Meeting of Shareholders on December
13, 1995 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 13, 1995.
33
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 13, 1995.
34
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, 1995 and 1994.
Statement of Consolidated Operations and Retained Earnings -
Years ended August 31, 1995, 1994, and 1993.
Statement of Consolidated Cash Flows -
Years ended August 31, 1995, 1994, and 1993.
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 of the subsidiary
held by other than the Company is less than five percent of consolidated total
assets.
(a) (3) EXHIBITS. See INDEX to EXHIBITS.
(b) REPORTS ON FORM 8-K. During the quarter ended August 31,
1995, the Company did not file any reports on Form 8-K.
35
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
27th day of November, 1995.
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 dates indicated:
----------------------------------------------------------------------------
NAME TITLE DATE
----------------------------------------------------------------------------
/s/ Daniel W. Duval
----------------------------- Director, President and November 27, 1995
Daniel W. Duval Chief Executive Officer
/s/ George M. Walker
----------------------------- Vice President-CFO November 27, 1995
George M. Walker (Principal Financial
and Accounting Officer)
----------------------------------
*Maynard H. Murch, IV Chairman of Board November 27, 1995
*Robert J. Kegerreis Director November 27, 1995
*Thomas P. Loftis Director November 27, 1995
36
*William D. Manning, Jr. Director November 27, 1995
*John N. Taylor, Jr. Director November 27, 1995
*Jerome F. Tatar Director November 27, 1995
*The undersigned, by signing his name hereto, executes this
Report on Form 10-K for the year ended August 31, 1995 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
37
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, 1995 and 1994, and the related
statements of consolidated operations and retained earnings, and cash flows for
each of the three years in the period ended August 31, 1995. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Robbins & Myers, Inc. and Subsidiaries at August 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended August 31, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in the Summary of Accounting Policies note to the Consolidated
Financial Statements, in 1993 the Company changed its method of accounting for
postretirement benefits other than pensions and accounting for income taxes.
/s/ Ernst & Young LLP
Dayton, Ohio
October 3, 1995,
Except for subsequent event note, as to which the date is
October 24,1995
38
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
[Enlarge/Download Table]
COL. A COL. B COL. C COL. D COL. E
------------------------------------------------ ---------- -------------------------- ---------- ----------
ADDITIONS
--------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other Accounts Deductions at End
DESCRIPTION of Period Expenses - Describe - Describe of Period
------------------------------------------------ ---------- ---------- -------------- ---------- ---------
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
Restructing 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
Year Ended August 31, 1993:
Allowances and reserves deducted from assets:
Uncollectable accounts receivable $448 $144 $167 (1) $425
Inventory obsolescence 720 338 283 (2) 775
Restructing reserve for property, plant
equipment held for sale 0 0 0 0 0
Other reserves:
Warranty claims 442 435 610 (3) 267
Restructuring liabilities 0 950 0 0 950
Casualty insurance reserves 934 1,375 0 1,394 (7) 915
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.
39
INDEX TO EXHIBITS
-----------------
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(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 Purchase and Loan Agreement dated May 25,
1989, relating to the issuance of 100,000
Common Shares of the Company... +
4.2 SAR and Registration Rights Agreement between
Robbins & Myers, Inc. and Eagle Industrial
Products Corporation, dated June 30, 1994,
was filed as Exhibit 4.1 to the Company's
Report on Form 8-K, dated July 14, 1994... *
4.3 Indenture relating to $50,000,000 Senior
Subordinated Extendible Reset Notes of Robbins
& Myers, Inc., with PNC Bank, Ohio, National
Association, Trustee, dated June 30,1994, was
filed as Exhibit 4.2 to the Company's Report
on Form 8-K, dated July 14, 1994... *
4.4 First Supplemental Indenture, dated April 10, 1995,
and Second Supplemental Indenture, dated
October 24, 1995, relating to the $50,000,000
Senior Subordinated Extendible Reset Notes of
Robbins & Myers, Inc.... +
4.5 Registration Rights Agreement, dated June 30,
1994, relating to registration of $50,000,000
Senior Subordinated Extendible Reset Notes
of Robbins & Myers, Inc., was filed as Exhibit
4.3 to the Company's Report on Form 8-K,
dated July 14, 1994... *
40
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4.6 Credit Agreement, effective June 30, 1994,
among Robbins & Myers, Inc. and certain of
its subsidiaries, as Borrowers, Bank One,
Dayton, NA, as Agent, and Bank One, Dayton,
NA and National City Bank, Columbus, as
Lenders, was filed as Exhibit 4.4 to the
Company's Report on Form 8-K, dated
July 14, 1994... *
4.7 Amendment No. 1, dated January 12, 1995,
Amendment No. 2 and No. 3 dated February 28,
1995, Amendment No.4, dated April 10, 1995,
and Amendment No. 5, dated October 24, 1995
to the Credit Agreement with Bank One,
Dayton NA, as agent... +
(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... *
10.4 Salary Continuation Agreement between
Robbins & Myers, Inc. and Daniel W. Duval
dated May 8, 1987 was filed as Exhibit 10.5 to
the Company's Annual Report on Form 10-K for
the year ended August 31, 1993... *
10.5 Robbins & Myers, Inc. Employee Savings
Plan was filed as Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the year ended
August 31, 1990... *
10.6 First Amendment, dated April 30, 1991, and
Second Amendment, dated May 28, 1992, to
Robbins & Myers, Inc. Employee Savings Plan
was filed as Exhibit 10.7 to the Company's
41
[Download Table]
Report on Form 10-K for the year ended
August 31, 1993... *
10.7 Robbins & Myers, Inc. 1984 Stock Option
Plan was filed as Exhibit 10.8 to the Company's
Report on Form 10-K for the year ended
August 31, 1992... *
10.8 Robbins & Myers, Inc. Supplemental Pension
Program adopted May 29, 1987 was filed as
Exhibit 10.9 to the Company's Report on
Form 10-K for the year ended August 31, 1993... *
10.9 Robbins & Myers, Inc. Stock Option Plan for
Non-Employee Directors was filed as Exhibit 10.11
to the Company's Report on Form 10-K for the year
ended August 31, 1992... *
10.10 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... *
10.11 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... *
10.12 Robbins & Myers, Inc. 1994 Long-Term Incentive
Stock Plan was filed as Exhibit 10.14 to the
Company's Report on Form 10-K for the year
ended August 31, 1994... *
10.13 Executive Employment Agreement between
Robbins & Myers, Inc. and Gerald L. Connelly,
effective June 30, 1994, was filed as Exhibit
10.15 to the Company's Report on Form 10-K for
the year ended August 31, 1994... *
10.14 Amended and Restated Stock Purchase Agreement
among Robbins & Myers, Inc., as buyer, and
Eagle Industrial Products Corporation and
O.D.E. Manufacturing, Inc., as sellers,
dated June 29, 1994, was filed as Exhibit 2.1
to the Company's Report on Form 8-K, dated
July 14, 1994... *
42
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(11) STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS:
11.1 Computation of Per Share Earnings... +
(21) SUBSIDIARIES OF THE REGISTRANT:
Robbins & Myers, Inc. has the following subsidiaries all of
which (i) are wholly-owned; (ii) do business under the name
under which they are organized; and (iii) are included in the
consolidated financial statements of the Company. The names
of such subsidiaries are set forth below.
[Download Table]
JURISDICTION
NAME OF SUBSIDIARY IN WHICH INCORPORATED
---------------------------- ---------------------
Chemineer, Inc. Delaware
Chemineer Limited England
Edlon, Inc. Delaware
Glasteel Parts and Services, Inc. Delaware
Pfaudler, Inc. Delaware
Robbins & Myers Canada, Ltd. Dominion of Canada
Robbins & Myers, Limited England
Robbins & Myers International
Sales Company, Inc. Ohio
Robbins & Myers NRO Ltd. Dominion of Canada
Pfaudler Equipamentos
Industrias Ltda. Brazil
Pfaudler-Werke GMBH Germany
Robbins & Myers
U.K. Limited England
Pfaudler S.A. de C.V. Mexico
R & M Environmental Strategies, Inc. Ohio
(23) CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Ernst & Young LLP +
43
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(24) POWER OF ATTORNEY
24.1 Powers of Attorney of any person who
signed this Report on Form 10-K on
behalf of another pursuent 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.
44
Dates Referenced Herein and Documents Incorporated by Reference
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