Attached files
file | filename |
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EX-23.1 - EX-23.1 - ROBBINS & MYERS, INC. | l40956exv23w1.htm |
EX-10.3 - EX-10.3 - ROBBINS & MYERS, INC. | l40956exv10w3.htm |
EX-21.1 - EX-21.1 - ROBBINS & MYERS, INC. | l40956exv21w1.htm |
EX-32.1 - EX-32.1 - ROBBINS & MYERS, INC. | l40956exv32w1.htm |
EX-32.2 - EX-32.2 - ROBBINS & MYERS, INC. | l40956exv32w2.htm |
EX-24.1 - EX-24.1 - ROBBINS & MYERS, INC. | l40956exv24w1.htm |
EX-31.1 - EX-31.1 - ROBBINS & MYERS, INC. | l40956exv31w1.htm |
EX-31.2 - EX-31.2 - ROBBINS & MYERS, INC. | l40956exv31w2.htm |
EX-10.1 - EX-10.1 - ROBBINS & MYERS, INC. | l40956exv10w1.htm |
EX-10.2 - EX-10.2 - ROBBINS & MYERS, INC. | l40956exv10w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended August 31, 2010
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to ___________
Commission File Number 001-13651
ROBBINS & MYERS, INC.
Ohio | 31-0424220 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation) | Identification No.) | |
51 Plum St., Suite 260, Dayton, OH | 45440 | |
(Address of principal executive offices) | (Zip Code) |
(937) 458-6600
Registrants telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on | ||
Title of each class | which registered | |
Common Shares, without par value | New York |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(§229.405 of this chapter) is not contained herein, and will not be contained, to the best
of registrants 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. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o No þ
Aggregate market value of Common Shares, without par
value, held by non-affiliates of the Company at February 28, 2010
(the last business day of the Companys second fiscal quarter),
based on the closing sales price on the New York Stock Exchange
on February 26, 2010 |
$ | 651,071,375 | ||
Number of Common Shares, without par value, outstanding
at September 30, 2010 |
32,962,195 |
DOCUMENT INCORPORATED BY REFERENCE
Portions
of Robbins & Myers, Inc. definitive Proxy Statement for its
2011 Annual Meeting of Shareholders
(the date of which has not yet been finally determined) are incorporated by
reference in Part III of this Report or will be contained in an
amendment to this Form 10-K.
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.
TABLE OF CONTENTS
Table of Contents
ITEM 1. BUSINESS
Important Information Regarding Forward-Looking Statements
Portions of this Form 10-K include forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, as amended. This includes, in particular, Item
7-Managements Discussion and Analysis of Financial Condition and Results of Operations of this
Form 10-K as well as other portions of this Form 10-K. The words believe, expect, anticipate,
project, and similar expressions, among others, generally identify forward-looking statements,
which speak only as of the date the statements were made. Forward-looking statements are subject to
risks, uncertainties and other factors that could cause actual results to differ materially from
those projected, anticipated or implied in the forward-looking statements. The most significant of
these risks, uncertainties and other factors are described in this Form 10-K (included in Item
1A-Risk Factors). Except to the limited extent required by applicable law, the Company undertakes
no obligation to update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
OVERVIEW
Robbins & Myers, Inc. is an Ohio corporation. As used in this report, the terms Company, we,
our, or us mean Robbins & Myers, Inc. and its subsidiaries unless the context indicates another
meaning. We are a leading supplier of engineered equipment and systems for critical applications in
global energy, industrial, chemical and pharmaceutical markets. Our success is based on close and
continuing interaction with our customers, application expertise, innovation, customer support and
a competitive cost structure. Our fiscal 2010 sales were approximately $585 million.
Beginning with the first quarter of fiscal 2010, we realigned our business segment reporting
structure as a result of organizational, management and operational changes implemented in the
first quarter of fiscal 2010. Our Chemineer brand is now included in our Fluid Management segment,
instead of the Process Solutions segment where it was previously reported. Previously reported
results have been reclassified to reflect this reporting structure.
On October 6, 2010, the Company, Triple Merger I, Inc., a Delaware corporation and
wholly-owned subsidiary of the Company, Triple Merger II, Inc., a Delaware corporation and wholly
owned subsidiary of the Company, and T-3 Energy Services, Inc., a Delaware corporation (T-3),
entered into an Agreement and Plan of Merger (the Merger Agreement). Under the terms of the
transaction, which has been unanimously approved by the Boards of Directors of both the Company and
T-3, T-3 stockholders will receive 0.894 common shares of the Company, without par value, plus
$7.95 in cash, without interest, for each share of common stock of T-3, par value $0.001 per share,
they own. Consummation of the transaction is subject to customary closing conditions, including
among others, obtaining certain regulatory approvals and approval of the Companys shareholders and
the stockholders of T-3.
Information concerning our sales, income before interest and income taxes (EBIT), identifiable
assets by segment and sales and tangible assets by geographic area for the years ended August 31,
2010, 2009 and 2008 is set forth in Note 13 to the Consolidated Financial Statements included at
Item 8 and is incorporated herein by reference.
Fluid Management Segment
Our Fluid Management business segment designs, manufactures and markets equipment and systems used
in oil and gas exploration, recovery and transportation, specialty chemical, wastewater treatment
and a variety of other industrial applications. Primary brands include Moyno®, Yale®, New Era®,
Chemineer®, TARBY® and Hercules®. Our products and systems include hydraulic drilling power
sections; down-hole and industrial
progressing cavity pumps and related products such as grinders for applications involving the flow
of viscous, abrasive and solid-laden slurries and sludge; standard
and customized fluid-agitation equipment and systems; and a broad line of ancillary equipment for the energy sector, such as rod guides, rod and tubing rotators, wellhead systems, pipeline closure products and
valves.
Sales, Marketing and Distribution. We sell our rotors and stators for hydraulic drilling power
sections through a direct sales force. We sell our tubing wear prevention products, down-hole pump
systems, wellhead equipment, closure products and industrial pumps through major distributors as
well as our direct sales force and service centers in key oilfield locations worldwide. Industrial
mixers and agitation equipment products are primarily sold through manufacturers representatives.
Backlog at August 31, 2010 was $58.1 million, compared with $35.1 million at August 31, 2009.
Aftermarket Sales. Aftermarket sales consist principally of selling replacement components for our
pumps, as well as the relining of stators and the refurbishment of rotors for the energy market.
Our aftermarket business for the Chemineer® line primarily consists of selling replacement parts.
Aftermarket sales represented approximately 28% of the sales in this segment in fiscal 2010.
However, replacement items, such as power section rotors and stators, down-hole pump rotors and rod
guides are components of larger systems that wear out after regular usage. These are often sold as
complete products and are not identifiable by us as aftermarket sales.
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Table of Contents
Markets and Competition. We believe we are the leading independent manufacturer of rotors and
stators for hydraulic drilling power sections in the markets we serve. We are also a leading manufacturer of rod
guides, wellhead components, pipeline closure products and down-hole progressing cavity pumps
worldwide. While the oil and gas exploration and recovery equipment marketplace is highly
fragmented, we believe that with our leading brands and products we are effectively positioned to
serve customers with an attractive range of products and services. The mixing equipment industry
in which our Chemineer® brand participates is highly competitive and fragmented. We believe we are
one of the market leaders in North America. We also have a large installed base and a significant
market share in progressing cavity pumps in the U.S. and Canada, but a smaller presence in Europe
and Asia. In addition, there are several other types of positive displacement pumps, including
gear, lobe and diaphragm pumps that compete with progressing cavity pumps in certain applications.
Process Solutions Segment
Our Process Solutions business segment designs, manufactures and services glass-lined reactors and
storage vessels. We also provide
alloy steel vessels, heat exchangers, other
fluid
systems, wiped film evaporators and packaged process systems. In addition, we also provide
customized fluoropolymer-lined fittings, vessels and accessories. The primary markets served by
this segment are the pharmaceutical and specialty chemical markets. Primary brands are Pfaudler®,
Tycon-Technoglass®, and Edlon®.
Sales,
Marketing and Distribution. We primarily manufacture, market, sell and
service glass-lined reactors,
storage vessels and thermal and other fluid processing systems through our direct sales and service force, as
well as manufacturers representatives in certain geographic markets. Backlog at August 31, 2010
was $78.7 million compared with $59.7 million at August 31, 2009.
Aftermarket Sales. Aftermarket products and services, which include field service, replacement
parts, accessories and reconditioning of glass-lined vessels, are an important part of our
glass-lined reactor product line. Our aftermarket capabilities and presence allow us to service our
large installed base of Pfaudler® glass-lined vessels and to meet the needs of our customers who
outsource various maintenance and service functions. We also service competitors equipment in the
U.S. and in Europe. In addition, we refurbish and sell used, glass-lined vessels. Aftermarket
sales represented approximately 37% of this segments sales in fiscal 2010.
Markets and Competition. We believe we have the number one worldwide market position in sales value
for quality glass-lined reactors and storage vessels, competing principally with smaller European
companies. Competition in Europe has increased over the past two years due to a significant decline
in customer orders resulting in increasing pricing pressure. There are also Asian suppliers who compete in local markets based on a lower
quality specification. Our Edlon® brand primarily competes by
offering highly engineered products
and products made for special needs, and tend to compete with other
niche suppliers.
Romaco Segment
Our Romaco business segment designs, manufactures and markets packaging and secondary processing
equipment for the pharmaceutical, healthcare, nutraceutical, food and cosmetic industries.
Packaging applications include blister and strip packaging for
various products including tablets, effervescent tablets and
capsules; filling of both liquid and powder into vials and bottles, capsule
and tube filling; tablet counting and packaging for bottles; customized packaging for
drug delivery devices; as well as secondary processing for liquids and semi solids. Primary brands
are Noack®, Siebler®, FrymaKoruma®, Macofar® and Promatic®.
Sales, Marketing and Distribution. We sell Romaco products worldwide through an extensive network
of manufacturers representatives and third party distributors which we supplement with our direct
sales and service centers in certain strategic markets. Backlog at August 31, 2010 was $38.3
million compared with $40.1 million at August 31, 2009. The 2009 backlog included a $9 million
order from fiscal 2006 that was cancelled in the second quarter of fiscal 2010.
Aftermarket Sales. Aftermarket sales of our Romaco business were approximately 36% of this
segments fiscal 2010 sales, consisting largely of replacement parts for the installed base of
equipment.
Markets and Competition. We believe Romaco operates in an industry with many competitors, none of
which is dominant. Given the fragmented nature of the industry, we believe there are opportunities
to expand our market share through technical innovation, increased product applications and
additional sales channel development.
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Table of Contents
Other Consolidated Information
BACKLOG
Our total order backlog was $175.1 million at August 31, 2010 compared with $135.0 million at
August 31, 2009. We expect to ship substantially all of our backlog during the next 12 months.
CUSTOMERS
No customer represented more than 5% of consolidated sales in fiscal 2010, 2009 or 2008.
RAW MATERIALS
Raw materials are purchased from a broad supplier base that is often located in the same regions as
our facilities. Over the last three years the prices of raw materials, especially steel, have been
volatile. Our supply of steel and other raw materials and components has been adequate and
available without significant delivery delays. No events are known or anticipated that would change
the availability of raw materials. No one vendor provides more than 5% of our supplied materials.
GENERAL
We own a number of patents relating to the design and manufacture of our products. While we
consider these patents important to our operations, we believe that the successful manufacture and
sale of our products depend more upon application expertise and manufacturing skills. We are
committed to maintaining high quality manufacturing standards and have completed ISO certification
at many of our facilities.
During fiscal 2010, we spent approximately $7.0 million on research and development activities
compared with $6.7 million in fiscal 2009 and $6.5 million in fiscal 2008. These amounts do not
include significant engineering development costs incurred in conjunction with fulfilling custom
customer orders and executing customer projects.
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 Companys capital expenditures,
earnings or competitive position.
At August 31, 2010, we had 2,965 employees, which included approximately 400 employees at
majority-owned joint ventures. Approximately 255 of our U.S. employees were covered by collective
bargaining agreements at various locations. In addition, approximately 810 of our non-U.S.
employees were covered by government-mandated agreements in their respective countries. The
Company considers labor relations at each of its locations to be generally good.
CERTIFICATIONS
Peter C. Wallace, our President and Chief Executive Officer, certified to the New York Stock
Exchange (NYSE) on February 16, 2010 that, as of that date, he was not aware of any violation by the
Company of the NYSEs Corporate Governance Listing Standards. We have filed with the Securities and
Exchange Commission (SEC) the certifications of Mr. Wallace and Christopher M. Hix, our Chief
Financial Officer, that are required by Section 302 of the Sarbanes-Oxley Act of 2002 relating to
the financial statements and disclosures contained in our Annual Report on Form 10-K for the year
ended August 31, 2010.
AVAILABLE INFORMATION
We make available free of charge on or through our web site, at www.robn.com, our annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those
reports as soon as reasonably practicable after such materials are
electronically filed with or furnished to the
SEC. Additionally, the public may read and copy any materials we file with or furnish to the SEC at the SECs
Public Reference Room at 100 F. Street, NE., Washington, D.C., 20549. Information regarding
operation of the Public Reference Room is available by calling the SEC at 1-800-SEC-0330.
Information that we file with the SEC is also available at the SECs web site at www.sec.gov.
We also post on our web site the following corporate governance documents: Corporate Governance
Guidelines, Code of Business Conduct and the Charters of our Audit, Compensation, and Nominating
and Governance Committees. Written copies of the foregoing documents may also be requested from
our Corporate Secretary, Robbins & Myers, Inc., 51 Plum Street, Suite 260, Dayton, Ohio 45440.
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Table of Contents
ITEM 1A. RISK FACTORS
If any of the events contemplated by the following risks actually occurs, then our business,
financial condition or results of operations could be materially adversely affected. We caution
the reader that these risk factors may not be exhaustive. We operate in a continually changing
business environment, and new risk factors emerge from time to time. We can neither predict these
new risk factors, nor can we assess the impact, if any, of these new risk factors on our businesses
or the extent to which any factor, or combination of factors, may cause actual results to differ
materially from those projected in any forward-looking statements.
Some of our end-markets are cyclical, which may cause fluctuations in our sales and operating
results.
We have experienced, and expect to continue to experience, fluctuations in operating results due to
business cycles. We sell our products principally to energy, chemical, industrial and
pharmaceutical markets. While we serve a variety of markets to minimize our dependency on any one,
a significant downturn in any of these markets could cause a material adverse impact on our sales
and operating results. In addition, there is a risk that if our future operating results
significantly decline, it could impair our ability to realize our deferred tax assets.
Our businesses are adversely affected by economic downturns.
In 2008, general worldwide economic conditions significantly deteriorated. While these conditions
improved in fiscal 2010, the improvement has not been uniform and these business conditions could
prolong or worsen. Furthermore, our backlog may not be converted to revenue due to customer order
cancellations.
We cannot predict the timing or duration of any economic slowdown or the timing or strength of a
subsequent recovery, worldwide, or in the specific end markets we serve. If our markets
significantly deteriorate due to these economic effects, our business, financial condition and
results of operations will likely be materially and adversely affected. Additionally, our stock
price could decrease if investors have concerns that our business, financial condition and results
of operations will be negatively impacted by the worldwide economic downturn.
In addition, our defined benefit employee plans invest in fixed income and equity securities to
fund employee obligations under those plans. The performance of the financial markets and interest
rates impact our funding obligations under our defined benefit pension plans. Significant changes
in market interest rates, decreases in the fair value of our plan assets and investment losses on
plan assets may increase our future funding obligations and adversely impact our results of
operations and cash flows over the long-term.
Our restructuring activities could affect our business and financial results.
In response to the 2008 worldwide economic downturn, and to improve operational efficiency, we
initiated programs to streamline operations and reduce expenses, including measures such as
reductions in workforce, discretionary spending and capital expenditures. We expect these
comprehensive initiatives to generate significant savings that we can invest in our growth
initiatives and long-term value enhancing strategy. Our failure to generate significant cost
savings and margin improvement from these initiatives could adversely affect our profitability and
weaken our competitive position. Because we cannot always immediately adapt our production
capacity and related cost structures to changing market conditions, our manufacturing capacity may
at times exceed or fall short of our production requirements, which could result in the loss of
customers, loss of market share and otherwise adversely affect our business and financial results.
Approximately 59% of our sales are to customers outside the United States, and we are subject to
economic and political and currency fluctuation risks or devaluation associated with international
operations.
Approximately 59% of our fiscal 2010 sales were to customers outside the U.S., and we maintain
primary operations in 15 countries. Conducting business outside the U.S. is subject to risks,
including currency exchange rate fluctuations and the possibility of hyper-inflationary conditions;
changes in regional, political or economic
conditions including trade protection measures, such as tariffs or import/export restrictions;
subsidies or increased access to capital for firms who are currently, or may emerge, as competitors
in countries in which we have operations; partial or total expropriation; unexpected changes in
regulatory requirements; and international
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Table of Contents
sentiment towards the U.S. One or more of these factors
could have a material adverse effect on our international operations. Furthermore, unexpected and
dramatic devaluations of currencies in developing or emerging markets, such as the recent
devaluation of the Venezuelan bolivar, could negatively affect the value of our earnings from, and
of the assets located in, those markets.
Regulatory and legal developments including changes to United States taxation rules, health
care reform and recent governmental climate change initiatives could negatively affect our
financial performance.
Our operations and the markets we compete in are subject to numerous federal, state, local and
foreign governmental laws and regulations. Existing laws and regulations may be revised or
reinterpreted and new laws and regulations, including taxation rules, health care reform and recent
governmental climate change initiatives, may be adopted or become applicable to us or our customers. These regulations are complex, change frequently and have tended to become more stringent over time and may
increase our costs and reduce profitability. We cannot predict the form any such new laws or
regulations will take or the impact these laws and regulations will have on our business or
operations. However, significant changes in governmental laws and regulations could adversely
affect our future results of operations.
We must comply with a variety of import and export laws and regulations, and the cost of compliance
as well as the consequences of failure to properly comply with such laws could adversely affect our
business.
We are subject to a variety of laws regarding our international operations, including regulations
issued by the U.S. Department of Commerce Bureau of Industry and Security and various foreign
governmental agencies. We cannot predict the nature, scope or effect of future regulatory
requirements to which our international manufacturing operations and trading practices might be
subject or the manner in which existing laws might be administered or interpreted. Future
regulations could limit the countries in which certain of our products may be manufactured or sold
or could restrict our access to, and increase the cost of obtaining, products from foreign sources.
In addition, actual or alleged violations of import-export laws could result in enforcement actions
and substantial financial penalties.
Competition in our markets could cause our sales to decrease.
We face significant competition from a variety of competitors in our markets. In some markets, our
competitors have greater resources than we do. In addition, new competitors could enter our
markets. Competitive pressures, including product quality, performance, price and service
capabilities, and new technologies could adversely affect our competitive position, involving a
loss of market share or decrease in prices, either of which could have a material adverse effect on
our sales and operating results.
The nature of our products creates the possibility of product liability lawsuits, which could harm
our business.
As a manufacturer of equipment and systems for use in various markets, we face an inherent risk of
exposure to product liability claims. Although we maintain strict quality controls and procedures,
we cannot be certain that our products will be completely free from defect. In addition, in
certain cases, we rely on third-party manufacturers for components of our products. Although we
have liability insurance coverage, we cannot be certain that this insurance coverage will continue
to be available to us at a reasonable cost or will be adequate to cover any such liabilities. We
generally seek to obtain contractual indemnification from our third-party suppliers, which is
typically limited by its terms. In the event we do not have adequate insurance or contractual
indemnification, product liabilities could have a material adverse effect on our business,
financial condition or results of operations. Even if a product liability claim is without merit,
it could harm our business.
Our results of operations could vary based on the availability and cost of our raw materials.
The prices of our raw materials may increase. The costs of raw materials used by us are affected by
fluctuations in the price of metals such as steel.
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Table of Contents
Our ability to obtain parts and raw materials from our suppliers is uncertain. We are engaged in a
continuous, company-wide effort to concentrate our purchases of parts and raw materials on fewer
suppliers, and to obtain parts from low-cost countries where possible. As this effort progresses,
we are exposed to an increased risk of disruptions to our supply chain, which could have a
significant effect on our operating results.
Our results of operations could vary as a result of the methods, estimates and judgments we use in
applying our accounting policies or due to changes in accounting standards.
The methods, estimates and judgments we use in applying our accounting policies could have a
significant impact on our results of operations (see Critical Accounting Policies and Estimates
in Part II, Item 7 of this Form 10-K). Such methods, estimates and judgments are, by their nature,
subject to substantial risks, uncertainties and assumptions, and factors may arise over time that
lead us to change our methods, estimates and judgments. Changes in those methods, estimates and
judgments could significantly affect our results of operations. Additionally, changes in accounting
standards, including new interpretations and application of accounting standards, may change our
reported financial condition, results of operations or cash flow.
Any impairment in the value of our intangible assets, including goodwill, would negatively affect
our operating results and total capitalization.
Our total assets reflect substantial intangible assets, primarily goodwill. The goodwill results
from our acquisitions, representing the excess of cost over the fair value of the net assets we
have acquired. We assess at least annually whether there has been any impairment in the value of
our intangible assets. If future operating performance at one or more of our business units were to
fall significantly below current levels, if competing or alternative technologies emerge, if market
conditions for businesses acquired decline, if significant and prolonged negative industry or
economic trends continue, if our stock price and market capitalization declines, or if future cash
flow estimates decline, we could incur, under current applicable accounting rules, a non-cash
charge to operating earnings for goodwill impairment. Any determination requiring the write-off of
a significant portion of unamortized intangible assets would negatively affect our results of
operations and total capitalization, the effect of which could be material.
Work stoppages, union and works council campaigns, labor disputes and other matters associated with
our labor force could adversely impact our results of operations and cause us to incur incremental
costs.
We have a number of U.S. collective bargaining units and various non-U.S. collective labor
arrangements. We are subject to potential work stoppages, union and works council campaigns and
potential labor disputes, any of which could adversely impact our productivity and results of
operations.
The Companys growth and results of operations may be adversely affected if the Company is
unsuccessful in its capital allocation and acquisition program or unable to successfully divest
non-core assets and businesses.
The Company expects to continue its strategy of seeking to acquire value creating add-on businesses
that broaden its existing companies and their global reach as well as, in the right circumstances,
strategically pursuing larger, stand-alone businesses that have the potential to either complement
its existing companies or allow the Company to pursue a new platform. However, there can be no
assurance that the Company will find suitable businesses to purchase or that the associated price
would be acceptable. If the Company is unsuccessful in its acquisition efforts, then its ability to
grow could be adversely affected. In addition, a completed acquisition, such as the potential acquisition of T-3 Energy Services, Inc.,
may underperform relative to
expectations, be unable to achieve synergies originally anticipated, or require the payment of
additional expenses for assumed liabilities. Further, failure to allocate capital appropriately
could also result in over exposure in certain markets and geographies. These factors could
potentially have an adverse impact on the Companys operating profits and cash flows. The inability
to dispose of non-core assets and businesses on satisfactory terms and conditions and within the
expected time frame could also have an adverse affect on our results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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ITEM 2. PROPERTIES
Our executive offices are leased in Beavercreek Township, near Dayton, Ohio. Set forth below is
certain information relating to our principal operating facilities. We consider our properties, as
well as the related machinery and equipment, to be suitable for their intended purposes.
Square Footage | ||||||||||||||||
Sales/ | (in thousands) | |||||||||||||||
Manufacturing | Service | Owned | Leased | |||||||||||||
Function and size by segment: |
||||||||||||||||
Fluid Management |
13 | 16 | 1,008 | 153 | ||||||||||||
Process Solutions |
12 | | 1,667 | 149 | ||||||||||||
Romaco |
5 | 1 | 221 | 80 |
North America | South America | Europe | Asia/Australia | |||||||||||||
Geographical locations by segment: |
||||||||||||||||
Fluid Management |
23 | 3 | 1 | 2 | ||||||||||||
Process Solutions |
3 | 1 | 5 | 3 | ||||||||||||
Romaco |
1 | | 5 | |
ITEM 3. LEGAL PROCEEDINGS
There are claims, suits and complaints arising in the ordinary course of business filed or pending
against us. Although we cannot predict the outcome of such claims, suits and complaints with
certainty, we do not believe that the disposition of these matters will have a material adverse
effect on our financial position, results of operations or cash flows.
ITEM 4. [REMOVED AND RESERVED]
Executive Officers of the Registrant
Peter C. Wallace, age 56, has been President and Chief Executive Officer of the Company since July
12, 2004. From October 2001 to July 2004, Mr. Wallace was President and CEO of IMI Norgren Group
(sophisticated motion and fluid control systems for original equipment manufacturers). He was
employed by Rexnord Corporation (power transmission and conveying components) for 25 years serving
as President and Group Chief Executive from 1998 until October 2001 and holding a variety of senior
sales, marketing, and international positions prior thereto.
Christopher M. Hix, age 48, has been our Vice President and Chief Financial Officer since August
2006. He held various corporate finance and business development positions with Roper Industries
(diversified industrial products) from 2001 to July 2006, the most recent being Vice President,
Business Development and Assistant Secretary. He was Chief Financial Officer and Vice President of
Customer Support for Somero Enterprises, Inc. from 1999 to 2001. From 1991 to 1999 he was with
Roper Industries serving in various senior business unit financial and operational leadership
positions.
Saeid Rahimian, age 52, has been a Corporate Vice President and President, Fluid Management, since
September 2005. He was Group Vice President and President of our R&M Energy Systems and Reactor
Systems businesses from May 2004 to September 2005. He has also been President of our R&M Energy
Systems business from 1998 to May 2004. Prior to 1998 he held various positions within Robbins &
Myers, Inc.
Jeffrey L. Halsey, age 58, has been our Vice President, Human Resources since July 2007. He held
various Human Resources positions with ABB Ltd. from 1989 through 2006, most recently as Group
Senior Vice President, Human Resources for ABB Inc. Prior to 1989 he was Vice President, Employee
Relations for Pullman, Inc.
7
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Kevin J. Brown, age 52, has been our Corporate Controller and Chief Accounting Officer since
October 2006. He was our Vice President of Corporate Services, Investor Relations & Compliance
from August 2006 to October 2006 and he was our Vice President and Chief Financial Officer from
January 2000 to August 2006. Previously, he was our Controller and Chief Accounting Officer since
December 1995. Prior to joining us, he was employed by the accounting firm of Ernst & Young LLP for
15 years.
Michael J. McAdams, age 61, has been our Treasurer since October 2005, and was Assistant Treasurer
from September 2004 to September 2005. From 1999 to 2003, he was Treasurer of Evenflo Company,
Inc. He was Treasurer of Advanced Silicon Materials, Inc. from 1996 to 1999. He was also employed
by Armco, Inc. for 15 years, holding various finance positions, including the position of Assistant
Treasurer.
Linn S. Harson, age 45, has been our Secretary and General Counsel since January 2009. She has been
with the law firm of Thompson Hine LLP since 1996, and a partner in the same firm since January
2005.
The term of office of our executive officers is until our 2011 Annual Meeting of Directors
(the date of which has not yet been finally determined)
or until their respective successors are elected.
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PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
(A) Our common shares trade on the New York Stock Exchange under the symbol RBN. The prices
presented in the following table are the high and low closing prices for the common shares for the
periods presented.
Dividends | ||||||||||||
Declared and | ||||||||||||
Fiscal 2010 | High | Low | Paid per Share | |||||||||
1st Quarter ended Nov. 30, 2009 |
$ | 25.76 | $ | 22.33 | $ | 0.0400 | ||||||
2nd Quarter ended Feb. 28, 2010 |
26.45 | 22.22 | 0.0425 | |||||||||
3rd Quarter ended May 31, 2010 |
27.60 | 20.95 | 0.0425 | |||||||||
4th Quarter ended Aug. 31, 2010 |
25.00 | 20.56 | 0.0425 |
Fiscal 2009 | ||||||||||||
1st Quarter ended Nov. 30, 2008 |
$ | 43.19 | $ | 16.53 | $ | 0.0375 | ||||||
2nd Quarter ended Feb. 28, 2009 |
20.02 | 15.71 | 0.0400 | |||||||||
3rd Quarter ended May 31, 2009 |
22.19 | 13.45 | 0.0400 | |||||||||
4th Quarter ended Aug. 31, 2009 |
23.76 | 17.49 | 0.0400 |
(B) As of September 30, 2010, we had 333 shareholders of record.
(C) Dividends paid on common shares are presented in the table in Item 5(A). Our credit agreement
includes certain covenants which restrict our payment of dividends above $10,000,000 plus a carry
over amount from the prior year, which is 50% of the amount that such dividends were under
$10,000,000.
(D) In fiscal 2010 there were no sales of unregistered securities.
(E) A summary of the Companys repurchases of its common shares during the quarter ended August 31,
2010 is as follows:
ISSUER PURCHASES OF EQUITY SECURITIES
Total Number of | Maximum | |||||||||||||||
Shares | Number of | |||||||||||||||
Purchased as | Shares that May | |||||||||||||||
Average | Part of Publicly | Yet Be | ||||||||||||||
Total Number | Price | Announced | Purchased Under | |||||||||||||
of Shares | Paid per | Plans or | the Plans or | |||||||||||||
Period | Purchased(1) | Share | Programs | Programs(2) | ||||||||||||
June 1-30, 2010 |
0 | $ | | 0 | 992,463 | |||||||||||
July 1-31, 2010 |
0 | | 0 | 992,463 | ||||||||||||
August 1-31, 2010 |
31,531 | 23.66 | 0 | 992,463 | ||||||||||||
Total |
31,531 | 0 | ||||||||||||||
(1) | During the fourth quarter of 2010, the Company purchased 31,531 of its common shares in connection with its employee benefit plans, including purchases associated with the vesting of restricted stock awards. These purchases were not made pursuant to a publicly announced repurchase plan or program. | |
(2) | On October 27, 2008, our Board of Directors approved the repurchase of up to 3.0 million of our outstanding common shares (the Program). In the first quarter of fiscal 2009, we repurchased an aggregate of 2,007,537 of our outstanding common shares pursuant to the Program. In connection with the Program, the Company entered into a Rule 10b5-1 securities repurchase plan which was effective November 17, 2008 through January 7, 2009. The Program will expire when we have repurchased all the authorized shares under the Program, unless terminated earlier by a Board resolution. No shares were repurchased under the program in fiscal 2010. |
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ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data (1)
Robbins & Myers, Inc. and Subsidiaries
(In thousands, except per share and employee data)
Robbins & Myers, Inc. and Subsidiaries
(In thousands, except per share and employee data)
The following selected financial data should be read in conjunction with Item 7 Managements Discussion and Analysis of
Financial Condition and Results of Operations and our Consolidated Financial Statements included In Item 8 Financial
Statements and Supplementary Data. Per share information for fiscal 2006 and 2007 has been adjusted to reflect our
2008 stock split.
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Operating Results |
||||||||||||||||||||
Orders |
$ | 641,320 | $ | 554,349 | $ | 812,998 | $ | 719,848 | $ | 688,822 | ||||||||||
Ending backlog |
175,074 | 134,977 | 237,980 | 193,821 | 174,447 | |||||||||||||||
Sales |
584,694 | 640,358 | 787,168 | 695,393 | 625,389 | |||||||||||||||
EBIT (2,3) |
50,878 | 74,368 | 130,664 | 94,282 | 7,508 | |||||||||||||||
Net income (loss) -Robbins & Myers, Inc. (2,3) |
33,197 | 55,364 | 87,402 | 50,705 | (19,587 | ) | ||||||||||||||
Net income (loss) per share, diluted (2,3) |
$ | 1.01 | $ | 1.66 | $ | 2.52 | $ | 1.48 | $ | (0.66 | ) | |||||||||
Financial Condition |
||||||||||||||||||||
Total assets |
$ | 817,021 | $ | 796,854 | $ | 864,717 | $ | 816,143 | $ | 712,047 | ||||||||||
Total cash |
149,213 | 108,169 | 123,405 | 116,110 | 48,365 | |||||||||||||||
Total long-term debt (excluding portion due within one year) |
93 | 265 | 30,435 | 30,553 | 104,787 | |||||||||||||||
Total equity (4) |
491,024 | 483,111 | 515,456 | 424,947 | 351,115 | |||||||||||||||
Other Data |
||||||||||||||||||||
Cash flow from operating activities |
$ | 88,483 | $ | 51,860 | $ | 89,560 | $ | 65,113 | $ | 40,581 | ||||||||||
Capital expenditures, net |
10,611 | 17,694 | 22,114 | 16,536 | 13,660 | |||||||||||||||
Amortization |
601 | 1,107 | 1,279 | 1,631 | 2,343 | |||||||||||||||
Depreciation |
15,029 | 15,119 | 14,970 | 14,993 | 16,235 | |||||||||||||||
Dividends declared per share |
$ | 0.1675 | $ | 0.1575 | $ | 0.1450 | $ | 0.1250 | $ | 0.1100 | ||||||||||
Number of employees |
2,965 | 3,027 | 3,357 | 3,233 | 3,271 |
10
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Notes to Selected Financial Data
(1) We purchased the remaining 24 percent noncontrolling
interest in our Process Solutions Group Chinese subsidiary on June 9, 2009. We acquired Mavag on January 10, 2008
(by our 51 percent owned consolidated joint venture in India). We sold
our Zanchetta product line on March 31, 2007 and our Hapa and Laetus product lines on March 31,
2006, all of which impact the comparability of the Selected Financial Data.
(2) A summary of the Companys special items including inventory write-downs charged to cost of
sales, and their impact on the diluted earnings per share is as follows:
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Pre-tax impact of special items expense (income): |
||||||||||||||||||||
Cost of sales-restructuring inventory writedowns-
Process Solutions and Romaco segments |
$ | | $ | | $ | | $ | | $ | 1,127 | ||||||||||
Other restructuring costs including severance |
2,764 | | | 1,818 | 8,472 | |||||||||||||||
Net product line/facility sale gains |
| | (7,631 | ) | (5,279 | ) | (10,258 | ) | ||||||||||||
Goodwill impairment-Romaco segment |
| | | | 39,174 | |||||||||||||||
Total special items |
$ | 2,764 | $ | | $ | (7,631 | ) | $ | (3,461 | ) | $ | 38,515 | ||||||||
(Decrease) increase on net income due to special items |
$ | (2,764 | ) | $ | | $ | 6,265 | $ | 3,461 | $ | (36,941 | ) | ||||||||
(Decrease) increase on diluted earnings per share
due to special items |
$ | (0.08 | ) | $ | | $ | 0.18 | $ | 0.06 | $ | (1.29 | ) |
(3) The Companys operating performance is evaluated using several measures. One of those
measures, EBIT, is income before interest and income taxes and is reconciled to net income on our
Consolidated Statement of Income. We evaluate performance of our business segments and allocate
resources based on EBIT. EBIT is not, however, a measure of performance calculated in accordance
with U.S. generally accepted accounting principles and should not be considered as an alternative
to net income as a measure of our operating results. EBIT is not a measure of cash available for
use by management.
(4) In the first quarter of fiscal 2010, the Company adopted and retrospectively applied a new
accounting standard related to a noncontrolling interest in a subsidiary. The standard requires a
noncontrolling interest in a subsidiary to be classified as a separate component of total equity.
11
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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
We are a leading designer, manufacturer and marketer of
highly engineered, application-critical equipment and systems for the energy, industrial, chemical
and pharmaceutical markets worldwide. We attribute our success to our close and continuing
interaction with customers, our manufacturing, sourcing and application engineering expertise and
our ability to serve customers globally. We attempt to continually develop initiatives to improve
our performance in these key areas. In late calendar year 2008 through mid calendar year 2009,
demand for most of our products slowed due to lower oil and natural gas prices as well as the
worldwide economic downturn, which affected our operating results. We responded to these
challenging business conditions by cutting costs, initiating restructuring programs to reduce
manufacturing capacity while increasing utilization, standardizing product offerings to allow
greater utilization of our lower cost manufacturing facilities, leveraging functional resources,
and further integrating our business activities. We expect to continue our restructuring efforts
into fiscal 2011 to improve our competitiveness and long-term profitability.
In addition, we are continuing our focus on emerging markets where economic growth remains well
above the global average, and we are committed to increasing margins through productivity
initiatives, improved sales, product management and aftermarket capabilities, commercializing new
products, increased utilization of global work force, reductions in discretionary spending and
close management of fixed costs. We operate in a highly competitive business environment in most
markets, and our long-term growth will depend in particular on our ability to expand our business
(including through geographical and product line expansion), identify, consummate and integrate
appropriate acquisitions to create shareholder value, develop innovative new products with
attractive gross profit margins and continue to improve operating efficiency and organizational
effectiveness. We are cautiously optimistic that worldwide economic recovery and recent market
trends will continue to gain strength in fiscal 2011, following four quarters of sequential growth
in consolidated orders and an increase in consolidated backlog throughout fiscal 2010.
Our Company has a Venezuelan subsidiary with net sales, operating income and total assets
representing approximately one percent of our consolidated financial statement amounts in fiscal
2010 and 2009. In early January 2010, the Venezuelan government devalued its currency. We expect
our subsidiary to operate under a rate of 4.30 bolivars to the U.S. dollar, as compared with the
previous rate of 2.15, and our fiscal 2010 year-end financial statements reflect this new rate. In
addition, the financial statements of our Venezuelan subsidiary were consolidated and reported
under highly inflationary accounting rules beginning in the second quarter of fiscal 2010 resulting in an
income statement exchange loss of $2.2 million during the year.
With approximately 59% of our sales outside the United States, we were also impacted by foreign
currency translation in fiscal 2010 due to the U.S. dollar strengthening relative to our other
principal operating currencies. The impact on net income was immaterial for fiscal 2010.
Additionally, the assets and liabilities of our foreign operations are translated at the exchange
rates in effect at the balance sheet date, with related gains or losses reported as a separate
component of our shareholders equity, except for Venezuela as discussed above. The devaluation of
most foreign currencies against the U.S. dollar impacted our financial condition at the end of
fiscal 2010 as compared with fiscal 2009.
On October 6, 2010, we announced an agreement to acquire T-3 Energy Services, Inc. (T-3), a
provider of oilfield and pipeline products and services, in a transaction valued at approximately
$422 million as of the date of the announcement, net of cash assumed. Under the terms of the agreement, for each share of T-3 common
stock, T-3 stockholders will receive 0.894 of our common shares plus $7.95 in cash without interest.
Accordingly, T-3 stockholders are estimated to receive an aggregate of approximately 12 million of
our common shares and $106 million in cash, which we expect to pay from our available cash
balances. Upon closing of the transaction, we expect T-3 stockholders to own approximately
27% of our outstanding common shares. The proposed agreement (See
Note 14 Subsequent Events) is
expected to be completed in late calendar year 2010 or early calendar year 2011 subject to
customary closing conditions, shareholder approvals and regulatory reviews and will operate under
our Fluid Management segment.
Our business consists of three market-focused segments: Fluid Management, Process Solutions and
Romaco. Beginning with the first quarter of fiscal 2010, we realigned our business segment
reporting structure as a result of organizational, management and operational changes implemented
in the first quarter of fiscal 2010. Our Chemineer brand is now included in our Fluid Management
segment, instead of the Process Solutions segment
where it was previously reported. Certain amounts presented in the prior period financial
statements have been reclassified to conform to our current year presentation and to reflect this
segment realignment.
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Fluid Management. Order levels from customers served by our Fluid Management segment have
recovered from fiscal 2009 and are showing a strong upward trend. Demand for our energy products
remains robust and industrial demand is improving. Our primary objectives for this segment are to
expand our geographic reach, improve our selling and product management capabilities, commercialize
new products in our niche market sectors, develop new customer relationships and capture synergies
within the segment. Our Fluid Management business segment designs, manufactures and markets
equipment and systems, including hydraulic drilling power sections; standard and customized
fluid-agitation equipment and systems; down-hole and industrial progressing cavity pumps, wellhead
systems, grinders, rod guides, tubing rotators, pipeline closure products and valves. These
products are used in oil and gas exploration and recovery, specialty chemical, wastewater treatment
and a variety of other industrial applications.
Process Solutions. Order levels in our Process Solutions segment have improved sequentially each
quarter of fiscal 2010. However, pricing has not fully recovered, especially in European chemical
markets. Our primary objectives are to increase the capabilities of our low cost locations,
standardize our products, integrate our global operations and increase our focus on aftermarket
opportunities. Our Process Solutions business segment designs, manufactures and services
glass-lined reactors and storage vessels, customized equipment and systems and customized
fluoropolymer-lined fittings, vessels and accessories, primarily for the pharmaceutical and
specialty chemical markets.
Romaco. Order levels in our Romaco segment have also trended higher in fiscal 2010 compared with
fiscal 2009. The primary target markets for Romaco include pharmaceutical, healthcare, food and
cosmetics. Our primary objectives are to maintain our simplified business model, increase our
market presence for certain applications, further develop our global distribution capabilities and
increase our focus on aftermarket opportunities. Our Romaco business segment designs, manufactures
and markets packaging and secondary processing equipment for the pharmaceutical, healthcare,
nutraceutical, food and cosmetic industries. Packaging applications include blister and strip packaging for various products including tablets, effervescent tablets
and capsules; filling of both liquid
and powder into vials and bottles, capsule and tube filling; tablet counting and packaging for
bottles; customized packaging for drug delivery devices; as well as secondary processing for
liquids and semi solids.
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Results of Operations
The following tables present components of our Consolidated
Statement of Income and segment information.
Consolidated | 2010 | 2009 | 2008 | |||||||||
Sales |
100.0 | % | 100.0 | % | 100.0 | % | ||||||
Cost of sales |
66.3 | 64.9 | 63.1 | |||||||||
Gross profit |
33.7 | 35.1 | 36.9 | |||||||||
SG&A expenses |
24.5 | 23.5 | 21.2 | |||||||||
Other expense (income) |
0.5 | | (0.9 | ) | ||||||||
EBIT |
8.7 | % | 11.6 | % | 16.6 | % | ||||||
By Segment | 2010 | 2009 | 2008 | |||||||||
(In millions, except percents) | ||||||||||||
Fluid Management: |
||||||||||||
Sales |
$ | 308.5 | $ | 327.9 | $ | 389.5 | ||||||
EBIT |
75.3 | 80.0 | 97.3 | |||||||||
EBIT % |
24.4 | % | 24.4 | % | 25.0 | % | ||||||
Process Solutions: |
||||||||||||
Sales |
$ | 169.7 | $ | 199.4 | $ | 246.9 | ||||||
EBIT |
(8.7 | ) | 8.6 | 31.6 | ||||||||
EBIT % |
(5.1 | )% | 4.3 | % | 12.8 | % | ||||||
Romaco: |
||||||||||||
Sales |
$ | 106.5 | $ | 113.0 | $ | 150.7 | ||||||
EBIT |
4.0 | 2.3 | 20.6 | |||||||||
EBIT % |
3.7 | % | 2.0 | % | 13.7 | % | ||||||
Consolidated: |
||||||||||||
Sales |
$ | 584.7 | $ | 640.4 | $ | 787.2 | ||||||
EBIT |
50.9 | 74.4 | 130.7 | |||||||||
EBIT % |
8.7 | % | 11.6 | % | 16.6 | % |
The comparability of the operating results has been impacted by restructuring costs in fiscal 2010,
as well as product line/facility sale gains in fiscal 2008. See Note 4, Statement of Income
Information, in Notes to Consolidated Financial Statements for further discussion. In addition,
the comparability of the segment data is impacted by changes in foreign currency exchange rates,
due to the translation of non-U.S. dollar denominated subsidiary results into U.S. dollars.
The Companys operating performance is evaluated using several measures. One of those measures,
EBIT, is income before interest and income taxes and is reconciled to net income on our
Consolidated Statement of Income. We evaluate performance of our business segments and allocate
resources based on EBIT. EBIT is not, however, a measure of performance calculated in accordance
with U.S. generally accepted accounting principles and should not be considered as an alternative
to net income as a measure of our operating results. EBIT is not a measure of cash available for
use by management.
Fiscal Year Ended August 31, 2010 Compared with Fiscal Year Ended August 31, 2009
Net Sales
Consolidated sales for fiscal 2010 were $584.7 million compared with $640.4 million in fiscal
2009, a decrease of $55.7 million, or 9%. Excluding the impact of currency translation, sales
decreased by $66.4 million, or 10% due to lower sales in all three of our segments in the first six
months of fiscal 2010. Sales in the second half of fiscal 2010 were higher than the comparable
period of the prior year.
The Fluid Management segment had sales of $308.5 million in fiscal 2010 compared with $327.9
million in fiscal 2009, a decrease of $19.4 million, or 6%. Excluding the impact of foreign
currency translation, sales declined by $24.0 million, or 7%.
The year over year
sales decrease was primarily due to lower customer demand early in fiscal
14
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2010 resulting from reduced levels of oil and gas exploration and recovery activity in that period.
There was higher activity in the second half of fiscal 2010 over the
same period in the prior year which was
driven by higher oil prices worldwide, a higher level of demand for horizontal drilling rigs used
in North American shale formations and higher general industrial activity. Orders for this segment
were impacted by the same factors and were $332.6 million in fiscal 2010 compared with $274.7
million in fiscal 2009. Excluding the impact of foreign currency, orders grew $52.6 million in
fiscal 2010 over fiscal 2009. Ending backlog of $58.1 million was 66% higher than at the end of the
prior year.
The Process Solutions segment had sales of $169.7 million in fiscal 2010 compared with
$199.4 million in fiscal 2009, a decrease of $29.7 million, or 15%. Excluding the impact of currency
translation, sales decreased by $34.4 million, or 17% from 2009 results which benefited from
significant backlog at the beginning of the fiscal year. Orders in fiscal 2010, however, continued
to improve from the latter half of fiscal 2009 to $189.3 million reflecting improved market
conditions. Excluding foreign currency impact, orders increased by $8.9 million, or 5% over prior
year. Demand in our Western chemical markets remained weak, while demand in our Asian market was
favorable. Ending backlog of $78.7 million was 32% higher than at the end of prior year.
The Romaco segment, which is a European-based business, had sales of $106.5 million in fiscal 2010
compared with $113.0 million in fiscal 2009, a decrease of $6.5 million, or 6%. After adjusting
for currency translation, sales decreased $8.1 million, or 7% from the prior year. Orders were
$119.4 million in fiscal 2010 compared with $103.0 million in fiscal 2009. Excluding currency
impact, orders increased $11.0 million, or 11%, from the prior year. We believe this order increase
is an outcome of the global economic recovery combined with our increased focus on market
opportunities and product innovation. Ending backlog of $38.3 million was 5% lower than prior year
levels.
Earnings Before Interest and Income Taxes (EBIT)
Consolidated EBIT for fiscal 2010 was $50.9
million compared with $74.4 million in fiscal 2009, a decrease of $23.5 million. Results for fiscal
2010 included other expense of $2.8 million related to restructuring costs in our Process Solutions
segment. Excluding the impacts of other expense and currency, consolidated EBIT decreased $22.2
million mainly due to lower sales volume described above in all of our segments, a $2.2 million
highly inflationary currency loss related to our Venezuelan operations, European pricing pressures
in our Process Solutions segment and higher corporate costs related to strategic and legal matters.
Consistent with the sales variances described above, the unfavorable variances related primarily to
the first six months of the fiscal year.
The Fluid Management segment EBIT for fiscal 2010 was $75.3 million, compared with $80.0 million in
fiscal 2009. Excluding the currency rate impact, EBIT decreased
$5.4 million or 7% due primarily to
the sales decrease described above and the Venezuelan highly inflationary currency loss, offset by
an insurance recovery of $0.8 million, an asset sale gain of $0.6 million and favorable product
mix.
The
Process Solutions segment had an EBIT loss of $8.7 million in fiscal 2010, compared
with EBIT of $8.6 million in fiscal 2009, a decrease of $17.3 million. Excluding the impact of
currency translation, EBIT declined $18.0 million. This decrease is due principally to lower sales,
restructuring costs of $2.8 million and European pricing pressures in fiscal 2010.
The Romaco segment EBIT was $4.0 million for fiscal 2010, an increase of $1.7 million compared with
fiscal 2009. Currency translation did not materially impact EBIT in this segment. The increase in EBIT,
despite lower sales in fiscal 2010 compared with fiscal 2009, resulted from operational
streamlining, personnel reductions and other cost-cutting measures.
Corporate costs were $3.2 million higher in fiscal 2010 over the prior year mainly due to costs
associated with strategic and legal matters.
Interest Expense
Net interest expense was $0.2 million in fiscal 2010 and $0.4 million in
fiscal 2009. The reduction in net interest expense resulted primarily from lower debt levels in
fiscal 2010 due to the $30.0 million repayment of all remaining Senior Notes on May 3, 2010.
15
Table of Contents
Income Taxes
Our effective tax rate was 32.6% in fiscal 2010 and 23.5% in fiscal 2009. The current
year tax rate is slightly lower than the U.S federal statutory rate mainly due to
a one-time tax planning gain and the closure of tax audits, somewhat offset by non-U.S.
valuation allowances. The lower fiscal 2009 tax rate resulted from
a non-recurring tax planning gain
and finalizing earlier tax estimates that year.
Net Income
Our net income in fiscal 2010 was $33.2 million compared with $55.4 million in fiscal
2009. The decrease in net income is a result of lower sales, pricing pressures in certain product
lines, higher costs related to restructuring, legal and strategic matters and a higher tax rate,
partly offset by cost reduction initiatives.
Fiscal Year Ended August 31, 2009 Compared with Fiscal Year Ended August 31, 2008
Net Sales
Consolidated sales for fiscal 2009 were $640.4 million compared
with $787.2 million in fiscal 2008, a decrease of $146.8 million or 19%. Excluding the impact of
currency translation and an acquisition early in the second quarter of fiscal 2008, sales decreased
by $97.5 million or 13%, primarily in the second half of fiscal 2009.
The Fluid Management segment had sales of $327.9 million in fiscal 2009 compared with $389.5
million in fiscal 2008, a decrease of $61.6 million, or 16%. Currency translation accounted for
$12.7 million of the decrease, and the remaining $48.9 million decrease, or 13%, resulted from
lower demand for energy equipment products and lower demand in general industrial markets. Orders
for this segment were impacted by the same factors and were $274.7 million in fiscal 2009 compared
with $419.2 million in fiscal 2008. Ending backlog of $35.1 million was 62% lower than at the end
of the prior year.
The Process Solutions segment had sales of $199.4 million in fiscal 2009
compared with $246.9 million in fiscal 2008, a decrease $47.5 million, or 19%. Excluding the
impact of currency translation, sales declined by $21.9 million. We believe this decrease was
largely attributable to the worldwide economic downturn. Orders were $176.6 million in fiscal 2009
compared with $248.5 million in fiscal 2008. The drop in orders in fiscal 2009 over prior year was
primarily driven by lower demand in our chemical markets. Ending backlog of $59.7 million was 37%
lower than prior year levels.
The Romaco segment had sales of $113.0 million in fiscal 2009 compared with $150.7 million in
fiscal 2008, a decrease of $37.7 million, or 25%. After adjusting for currency translation, sales
decreased $27.9 million, or 19% from the prior year. Orders decreased $30.9 million, or 21%, from
the prior year after adjusting for currency exchange rates. We believe the decrease in demand was
primarily due to the worldwide economic slowdown. Ending backlog of $40.1 million was 22%
lower than prior year levels.
Earnings Before Interest and Income Taxes (EBIT)
Consolidated EBIT for
fiscal 2009 was $74.4 million compared with $130.7 million in fiscal 2008, a decrease of $56.3
million. Results for fiscal 2008 included other income of $7.6 million from gains on product
line/facility sales. Excluding the impact of other income, and a currency impact of $2.9 million,
consolidated EBIT decreased $45.8 million mainly due to decreased sales volume described above,
pricing pressures in certain product lines, and higher general operating expenses related to
severance, employee benefit plans and legal costs, partly offset by cost reduction initiatives
completed during the year.
The Fluid Management segment EBIT for fiscal 2009 was $80.0 million,
compared with $97.3 million in fiscal 2008. The decrease of $17.3 million, or $15.2 million
excluding currency translation, resulted primarily from the sales decrease in the second half of
fiscal 2009 as described above and pricing pressures in certain product lines.
The Process Solutions
segment EBIT was $8.6 million for fiscal 2009, compared with $31.6 million for fiscal 2008, a
decrease of $23.0 million. Process Solutions had a gain on the sale of a facility in fiscal 2008
of $0.8 million. Excluding the impact of the facility sale gain, and a currency effect of $1.6
million, fiscal 2009 EBIT decreased by $20.6 million principally due to the lower sales volume
described above, coupled with pricing pressures in certain product lines and severance costs.
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The Romaco segment EBIT was $2.3 million for fiscal 2009, a decrease of $18.3 million compared with
fiscal
2008. In fiscal 2008, other income included a $5.7 million gain
from Romaco product lines
divestiture in fiscal 2006 and a $1.1 million gain on a facility sale related to a previously disposed
product line. The remaining $11.5 million in lower earnings was due to decreased sales
volume described above.
Interest Expense
Net interest expense was $0.4 million in fiscal 2009 and
$2.0 million in fiscal 2008. The reduction in net interest expense resulted from lower debt levels
in fiscal 2009 due to the repayment of $70.0 million of Senior Notes on May 1, 2008.
Income Taxes
Our effective tax rate was 23.5% in fiscal 2009 and 30.4% in fiscal 2008. The lower tax
rate resulted from the implementation of certain tax strategies and finalizing earlier tax
estimates. The effective tax rate in fiscal 2008 was lower than the statutory tax rate primarily
due to profitable operations in Italy and Germany, which resulted in the release of deferred tax
asset valuation allowances of $4.9 million as well as increased taxable income in countries outside
the United States, where statutory rates are lower.
Net Income
Our net income in fiscal 2009 was $55.4 million compared with $87.4 million in fiscal
2008. The decrease in net income was a result of lower sales, pricing pressures in certain product
lines, severance costs related to our restructuring efforts across all our business platforms,
benefit from product line/ asset sales in fiscal 2008, higher medical and legal costs, partly
offset by cost reduction initiatives, lower interest expense and a lower normalized effective tax
rate in fiscal 2009, as discussed above.
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Liquidity and Capital Resources
Operating Activities
In fiscal 2010, our cash flow from
operating activities was $88.5 million compared with $51.9 million in fiscal 2009, an increase of
$36.6 million. This increase from prior year, despite lower net income, resulted from a net reduction in working
capital, which contributed $41.7 million to fiscal 2010 cash
flow.
We expect our available cash, fiscal 2011 operating cash flow and
availability under our
credit agreement to be adequate to fund fiscal year 2011 operating needs, shareholder dividends,
capital expenditures, and additional share repurchases, if any.
Investing Activities
In 2010, the Company continued to generate substantial cash from operating
activities, which resulted in a strong year end financial position, with resources available for reinvestment in
existing businesses and acquisitions. Our capital expenditures were $10.6 million in fiscal 2010, a
decrease from $17.7 million in fiscal 2009. Our 2010 capital expenditures were primarily for cost
reduction, sales growth initiatives and replacement items. Capital expenditures in fiscal 2011 are
expected to be $15 million or higher.
In fiscal 2010, we received $2.5 million related to the sale of certain of our assets at two of our
business units. In the fourth quarter of fiscal 2009, we purchased the remaining 24 percent
noncontrolling interest in our Process Solutions Group Chinese subsidiary for $2.3 million, which
we funded from available cash balances. We made an acquisition in our Process Solutions segment in
2008 for a total consideration of $5.1 million. In fiscal 2008 we received proceeds of $8.5 million
related to the sale of two of our Romaco product lines sold in fiscal 2006 and the sale of two
facilities.
Financing Activities
From available cash balances, we repaid
the remaining $30.0 million of Senior Notes on the
May 3, 2010 maturity date.
Proceeds from the sale of common stock were $1.1 million in fiscal 2010 and $2.4 million in fiscal
2009 and were primarily related to the exercise of stock options and employee benefit plan sales.
Dividends paid during fiscal 2010 were $5.5 million, compared with $5.2 million in fiscal 2009. The
quarterly dividend rate per common share was increased in January 2010 from $0.0400 to $0.0425.
On October 27, 2008, we announced that our Board of Directors authorized the repurchase of up to
3.0 million of our currently outstanding common shares. We acquired approximately 2.0 million of
our outstanding common shares for $39.1 million under the repurchase program in the first quarter
of fiscal 2009. There were no such share repurchases in fiscal 2010.
Credit Agreement
Our Bank Credit Agreement (Agreement) provides that we may borrow on a revolving
credit basis up to a maximum of $150.0 million and includes a $100.0 million expansion feature.
All outstanding amounts under the Agreement are due and payable on December 19, 2011. Interest is
variable based upon formulas tied to LIBOR or an alternative base rate defined in the Agreement, at
our option, and is payable quarterly. Indebtedness under the Agreement is unsecured except for the
pledge of the stock of our U.S. subsidiaries and approximately two-thirds of the stock of certain
non-U.S. subsidiaries. At August 31, 2010 we had no borrowings under the Agreement. We had $28.2
million of standby letters of credit outstanding at August 31, 2010. These standby letters of
credit are primarily used as security for advance payments received from customers and for our
performance under customer contracts. Under the Agreement, we have $121.8 million of unused
borrowing capacity.
Six banks participate in our revolving credit agreement. We are not dependent on any single bank
for our financing needs.
From
available cash balances, we repaid the remaining $30.0 million of Senior Notes on the May 3, 2010 maturity date.
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Critical Accounting Policies and Estimates
This Managements Discussion and Analysis is
based on our Consolidated Financial Statements and the related notes. The more critical accounting
policies used in the preparation of our Consolidated Financial Statements are discussed
below.
Revenue Recognition
We recognize revenue at the time of title passage to our customer which is
generally upon shipment of the product. We recognize revenue for certain longer-term contracts
based on the percentage of completion method. The percentage of completion method requires
estimates of total expected contract revenue and costs. We follow this method because we can make
reasonably dependable estimates of the revenue and cost applicable to various stages of the
contract. Revisions in profit estimates are reflected in the period in which the facts that gave
rise to the revision become known.
Use of Estimates
The preparation of financial statements in
conformity with U.S. generally accepted accounting principles requires us to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and the
related notes. Significant estimates made by us include the allowance for doubtful accounts,
inventory valuation, deferred tax asset valuation allowance, warranty, litigation, product
liability, tax contingencies, stock option valuation, goodwill valuation and retirement benefit
obligations.
Our estimate for uncollectible accounts receivable is based upon an analysis of our
prior collection experience, specific customer creditworthiness, current economic trends within the
industries we serve, specific customers ability to pay us and the length of time that the
receivables are past due.
Inventory valuation reserves are determined based on our assessment of
the demand for our products and the on-hand quantities of inventory in relation to historical
usage. The inventory to which this reserve relates is still on-hand and will be sold or disposed of
in the future. The expected selling price of this inventory approximates its net book value;
therefore, there is no significant impact on gross margin when it is sold.
We have recorded
valuation allowances to reflect the estimated amount of deferred tax assets that may not be
realized based upon our analysis of the realization of tax benefits associated with the deferred
tax assets. Future taxable income, reversals of temporary differences, available carryback periods,
the results of tax strategies and changes in tax laws could impact these estimates.
Warranty
obligations are contingent upon product failure rates, material required for the repairs and
service and delivery costs. We estimate the warranty accrual based on specific product failures
that are known to us plus an additional amount based on the historical relationship of warranty
claims to sales. We record litigation and product liability reserves based upon a case-by-case
analysis of the facts, circumstances and estimated costs.
These estimates form the basis for making
judgments about the carrying value of our assets and liabilities and are based on the best
available information at the time we prepare our consolidated financial statements. These estimates
are subject to change as conditions within and beyond our control change, including but not limited
to economic conditions, the availability of additional information and actual experience rates
different from those used in our estimates. Accordingly, actual results may differ from these
estimates.
Goodwill and Other Intangible Assets
Goodwill is tested on an annual basis, or more frequently as impairment indicators arise.
Impairment tests, which involve the use of estimates related to the fair market values of the
business operations with which goodwill is associated at our reporting unit level, were performed
at year-end for fiscal 2010 (our annual impairment test date) using both a market participant
approach, as well as a discounted cash flow methodology (income approach). The market participant
approach determines the value of a reporting unit by deriving market multiples for reporting units
based on assumptions potential market participants would use in establishing a bid price for the
unit. This approach therefore assumes strategic initiatives will result in improvements in
operational performance in the event of purchase, and includes the application of a discount rate
based on market participant assumptions with respect to capital structure and access to capital
markets. The income approach uses a reporting units projection of estimated operating results and
cash flows that is discounted using a weighted-average cost of
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capital that reflects current and
future market conditions. The projection uses managements best estimates of economic and market
conditions over the projected period, including growth rates in sales, costs, estimates of future
expected changes in operating margins and cash expenditures. Other significant estimates and
assumptions include terminal value growth rates, future estimates of capital expenditures and
changes in future working capital requirements. Our final estimate of fair value of reporting units
is developed by a combination of the fair values determined through both the market participant and
income approaches. The process of evaluating the potential impairment of goodwill is subjective and
requires significant judgment at many points during the analysis. Although our market participant
assumptions and cash flow forecasts are based on assumptions that are consistent with the market
environment and plans and estimates we are using to manage the underlying businesses, there is
significant judgment in applying these assumptions to our valuations. The impairment testing
performed by the Company at August 31, 2010 indicated that the estimated fair value of each
reporting unit exceeded its corresponding carrying amount, and, as such, no impairment existed.
Our definite-lived intangible assets are amortized on a straight line basis, with estimated useful
lives ranging from 3 to 17 years. These assets are evaluated periodically and when events or
circumstances indicate a possible inability to recover their carrying amount. When events and
circumstances indicate that the carrying values of these definite-lived intangible assets may not
be recoverable, management assesses the recoverability of the carrying value by preparing estimates
of sales volume and the resulting gross profit and cash flows. If the sum of the expected
undiscounted future cash flows is less than the carrying amount, we recognize an impairment loss
for the amount by which the carrying amount exceeds the fair value. We use a variety of
methodologies to determine the fair values of these assets including discounted cash flow models,
which are consistent with the assumptions we believe hypothetical marketplace participants would
use.
Losses, if any, resulting from impairment tests for goodwill and definite-lived intangible assets
would be reflected in income before interest and income taxes in our Consolidated Statement of
Income.
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 net income
when incurred. Adjustments resulting from the translation of non-U.S. dollar functional currency denominated financial statements into
U.S. dollars are recognized in accumulated other comprehensive income or loss in the Consolidated
Balance Sheet (except Venezuela, which was reported under highly inflationary accounting rules
since our second quarter of fiscal 2010, with all gains and losses from remeasurement reflected in
our Consolidated Statement of Income).
We use permanently invested intercompany loans as a source of
capital to reduce the exposure to foreign currency fluctuations in our foreign subsidiaries. These
loans are treated as analogous to equity for accounting purposes. Therefore, we record foreign
exchange gains or losses on these intercompany loans in accumulated other comprehensive income or
loss.
Pensions
We maintain defined benefit and defined contribution pension plans that provide
retirement benefits to substantially all U.S. employees and certain non-U.S. employees. Pension
expense for fiscal 2010 and beyond is dependent on a number of factors including returns on plan
assets and changes in plan discount rates and
therefore cannot be predicted with certainty. The following paragraphs discuss the significant
factors that affect the amount of recorded pension expense.
A significant factor in determining the
amount of expense recorded for a funded pension plan is the expected long-term rate of return on
plan assets. We develop the long-term rate of return assumption based on the current mix of equity
and debt securities included in plan assets and on the historical returns on those types of
investments, judgmentally adjusted to reflect current expectations of future returns. At August 31,
2010, the weighted average expected rate of return on plan assets was 6.4%.
In addition to the
expected rate of return on plan assets, recorded pension expense includes the effects of service
cost the actuarial cost of benefits earned during a period and interest on the plans
liabilities to participants. These amounts are determined actuarially based on current discount
rates and assumptions regarding matters such as future salary increases and mortality. Differences
in actual experience in relation to these assumptions are generally not recognized immediately but
rather are deferred together with asset-related gains or losses. When cumulative asset-related and
liability-related gains or losses exceed the greater of 10% of total liabilities or the calculated
value of plan assets, the excess is amortized and included in pension income or expense. At
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August
31, 2010, the weighted average discount rate used to value plan liabilities was 4.4%. We determine
our discount rate based on an actuarial yield curve applied to the payments we expect to make out
of our retirement plans.
The Company reviews its actuarial assumptions on an annual basis and makes
modifications based on current rates and trends when appropriate. Additional changes in the key
assumptions discussed above would affect the amount of pension expense currently expected to be
recorded for years subsequent to fiscal 2010. Specifically, a one-half percent decrease in the rate
of return on assets assumption would have the effect of increasing pension expense by approximately
$0.5 million. A comparable increase in this assumption would have the opposite effect. In addition,
a one-half percent increase in the discount rate would decrease pension expense by $0.4 million,
and a comparable decrease in the discount rate would have the opposite effect.
New Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board
(FASB) issued and, in April 2009, amended a new business combination standard codified within
Accounting Standards Codification (ASC) 805, which changed the accounting for business
acquisitions. Accounting for business combinations under this standard requires the acquiring
entity in a business combination to recognize all (and only) the assets acquired and liabilities
assumed in the transaction and establishes the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed in a business combination. This standard
was effective for us on September 1, 2009. The standard had no immediate impact on our consolidated
financial statements but could affect our financial position and results of operations depending on
future acquisitions.
In December 2007, the FASB issued a new standard which established the accounting for and reporting
of noncontrolling interests (NCIs) in partially owned consolidated subsidiaries and the loss of
control of subsidiaries. This standard requires all entities to report NCIs (previously reported as
minority interests) in subsidiaries within equity in the consolidated financial statements, but
separate from the parent shareholders equity. This standard also requires any acquisitions or
dispositions of NCIs that do not result in a change of control to be accounted for as equity
transactions. Further, it requires that a parent recognize a gain or loss in net income when a
subsidiary is deconsolidated. The standard was effective for us on September 1, 2009. Provisions of
this standard were applied to all NCIs prospectively, except for the presentation and disclosure
requirements, which were applied retrospectively to all periods presented. As a result, upon
adoption, we retroactively reclassified the Minority Interest balance reported in the liabilities
section of the Consolidated Balance Sheet to a new component of equity with respect to NCIs in
consolidated subsidiaries. The adoption of this standard also impacted certain captions identifying
net income including NCI and net income attributable to Robbins & Myers, Inc. Additional
disclosures required by this standard are also included in the Consolidated Equity Statement. The
adoption of this standard did not have a material impact on our consolidated financial statements.
In April 2008, the FASB issued an accounting standard which amended the list of factors that should
be considered in developing renewal or extension assumptions used to determine the useful life of
recognized intangible assets under ASC 350, Intangibles-Goodwill and Other. The new standard
applies to intangible assets that are acquired individually or with a group of other assets as well
as intangible assets acquired in business combinations and asset acquisitions. Under this standard,
entities estimating the useful life of a recognized intangible asset must consider the historical
experience in renewing or extending similar arrangements, or, in the absence of historical
experience, must consider assumptions that market participants would use about renewal or
extension. This standard was effective for the Company on September 1, 2009 and required certain
additional disclosures (included in Note 6 to our Consolidated Financial Statements) and application to useful life estimates prospectively
for intangible assets acquired after August 31, 2009. The adoption of this standard did not have a
material impact on our consolidated financial statements.
In December 2008, the FASB issued an accounting standard which provides additional guidance on
employers disclosures about the plan assets of defined benefit pension or other postretirement
plans. The disclosures required by the standard include a description of how investment allocation
decisions are made, major categories of plan assets, and concentrations of risk within plan assets.
Additionally, this standard requires disclosures similar to those required for fair value
measurements and disclosures under ASC 820 with respect to fair value of plan assets, such as the
inputs and valuation techniques used to measure fair value and information with respect to
classification of plan assets in hierarchy of the source of information used to determine their
value (see Note 8 to our Consolidated Financial Statements). The disclosures under this standard are required for annual periods ending
after December 15, 2009. The adoption of this standard did not have a material impact on our
consolidated financial statements.
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In January 2010, the FASB issued Accounting Standard Update (ASU) No. 2010-06, Improving
Disclosures about Fair Value Measurements, that amends existing disclosure requirements under ASC
820, by adding required disclosures about items transferring into and out of levels 1 and 2 in the
fair value hierarchy; adding separate disclosures about purchase, sales, issuances, and settlements
relative to level 3 measurements; and clarifying, among other things, the existing fair value
disclosures about the level of disaggregation. This ASU was effective for us in the fourth quarter
of fiscal 2010, except for the requirement to provide level 3 activity of purchases, sales,
issuances, and settlements on a gross basis, which is effective beginning our fiscal 2012. The
adoption of this standard that was applicable for fiscal 2010 did not have a material impact on our
consolidated financial statements. We do not expect the remaining adoption of this standard in
fiscal 2012 for level 3 activity disclosure to have a material impact on our consolidated financial
statements.
In February 2010, the FASB issued ASU No. 2010-09, Amendments to Certain Recognition and
Disclosure Requirements, which amends ASC 855, Subsequent Events. This ASU, which was effective
immediately, removes the requirement for an SEC filer to disclose a date through which subsequent
events have been evaluated. We adopted this standard in the second quarter of fiscal 2010. The
adoption of this standard did not have a material impact on our consolidated financial statements.
In May 2010, the FASB issued ASU No. 2010-19, Foreign Currency Issues: Multiple Foreign Currency
Exchange Rates. The ASU was an announcement made by the staff of the U.S. Securities and Exchange
Commission and provided the staffs view on certain foreign currency issues related to investments
in Venezuela. The ASU was effective as of the announcement date of March 18, 2010. The adoption of
this standard did not have a material impact on our consolidated financial statements.
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Contractual Obligations
Following is information regarding our long-term contractual obligations and other commitments
outstanding as of August 31, 2010:
Payments Due by Period | ||||||||||||||||||||
Two to | ||||||||||||||||||||
Long-term contractual | One year | three | Four to | After five | ||||||||||||||||
obligations | Total | or less | years | five years | years | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Debt obligations |
$ | 285 | $ | 192 | $ | 93 | $ | | $ | | ||||||||||
Operating leases (1) |
15,505 | 4,614 | 5,983 | 3,415 | 1,493 | |||||||||||||||
Total contractual cash
obligations |
$ | 15,790 | $ | 4,806 | $ | 6,076 | $ | 3,415 | $ | 1,493 | ||||||||||
(1) | Operating leases consist primarily of building and equipment leases. |
Unrecognized tax benefits in the amount of $4,241,000, including interest and penalties, have been
excluded from the table because we are unable to make a reasonably reliable estimate of the timing
of future payments. The only other commercial commitments outstanding were standby letters of
credit of $28,176,000. Of this outstanding amount $23,999,000 is due within a year and $4,177,000
is due within two to three years.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We maintain
operations in the U.S. and foreign countries. We have market risk exposure to foreign exchange
rates in the normal course of our business operations. Our significant non-U.S. operations have
their local currencies as their functional currency and primarily buy and sell using that same
currency. The Company also operates in Venezuela, whose currency in 2010 became highly inflationary, as defined by U.S. generally accepted accounting principles,
causing us to utilize the U.S. dollar as the functional currency. Sales, operating income and total
assets in Venezuela represent less than 1% of our consolidated financial statement amounts. We
continue to monitor these situations and take appropriate actions when needed. We manage our
exposure to net assets and cash flows in currencies other than U.S. dollars by minimizing our
non-U.S. dollar net asset positions. Under certain conditions, we may enter into hedging
transactions, primarily currency swaps, under established policies and guidelines that enable us to
mitigate the potential adverse impact of foreign exchange rate risk. We do not engage in trading or
other speculative activities with these transactions as established policies require that these
hedging transactions relate to specific currency exposures. We currently do not have any such
hedging transactions in place.
Our main foreign exchange rate exposures relate to assets,
liabilities and cash flows denominated in British pounds, euros, Swiss francs and Canadian dollars
and the general economic exposure that fluctuations in these currencies could have on the U.S.
dollar value of future non-U.S. cash flows. To illustrate the potential impact of changes in
foreign currency exchange rates on us for fiscal 2010, the net unhedged exposures in each currency
were remeasured assuming a 10% decrease in foreign exchange rates compared with the U.S. dollar.
Using this method, our EBIT for fiscal 2010 would have decreased by $0.4 million and our cash flow
from operations for fiscal 2010 would have decreased by $3.2 million. This calculation assumed that
each exchange rate would change in the same direction relative to the U.S. dollar. In addition to
the direct effects of changes in exchange rates, these changes may also affect the volume of sales
or the foreign currency sales prices as competitors products become more or less attractive. Our
sensitivity analysis of the effects of changes in foreign currency exchange rates does not include
any effects of potential changes in sales levels or local currency prices.
At August 31, 2010, our
total debt of $0.3 million had a weighted average variable interest rate of 7.4%. The estimated
fair value of our debt at August 31, 2010 approximates its carrying value due to the short period
until maturity or the variable rate nature of the instruments. The following table presents the
aggregate maturities and related weighted average interest rates of our debt obligations at August
31, 2010 by maturity dates:
Non-U.S. Dollar | ||||||||
Variable Rate | ||||||||
Maturity Date | Amount | Rate | ||||||
(In thousands, except percents) | ||||||||
2011 |
$ | 192 | 10.00 | % | ||||
2012 |
93 | 2.00 | ||||||
2013 |
| | ||||||
2014 |
| | ||||||
2015 |
| | ||||||
Thereafter |
| | ||||||
Total |
$ | 285 | 7.39 | % | ||||
Fair value |
$ | 285 | ||||||
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of
Robbins & Myers, Inc. and Subsidiaries
Robbins & Myers, Inc. and Subsidiaries
We have audited Robbins & Myers, Inc. and Subsidiaries internal control over financial reporting
as of August 31, 2010, based on criteria established in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).
Robbins & Myers, Inc. and Subsidiaries management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the companys internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Robbins & Myers, Inc. and Subsidiaries maintained, in all material respects,
effective internal control over financial reporting as of August 31, 2010, based on the COSO
criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Robbins & Myers, Inc. and Subsidiaries
as of August 31, 2010 and 2009, and the related consolidated statements of income,
equity, and cash flows for each of the three years in the period ended August 31, 2010 and our
report dated October 26, 2010 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Dayton, Ohio
October 26, 2010
Dayton, Ohio
October 26, 2010
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of
Robbins & Myers, Inc. and Subsidiaries
Robbins & Myers, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Robbins & Myers, Inc. and
Subsidiaries as of August 31, 2010 and 2009, and the related consolidated statements of income,
equity, and cash flows for each of the three years in the period ended August 31, 2010. Our audits
also included the financial statement schedule listed in Item 15(a). These financial statements and
schedule are the responsibility of the Companys 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 the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Robbins & Myers, Inc. and Subsidiaries at August
31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each
of the three years in the period ended August 31, 2010, in conformity with U.S. generally accepted
accounting principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as whole, presents fairly in all
material respects the information set forth therein.
As
described in Note 9 to the Consolidated Financial Statements, in 2008 the Company adopted new
Financial Accounting Standards Board (FASB) authoritative guidance on accounting for uncertainty in
income taxes. Also, as described in Note 1 to the Consolidated Financial Statements, in 2010, the
Company adopted new FASB authoritative guidance on accounting for and reporting of noncontrolling
interests.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Robbins & Myers, Inc. and Subsidiaries internal control over financial
reporting as of August 31, 2010, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated October 26, 2010 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Dayton, Ohio
October 26, 2010
Dayton, Ohio
October 26, 2010
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CONSOLIDATED BALANCE SHEET
Robbins & Myers, Inc. and Subsidiaries
(In thousands, except share data)
Robbins & Myers, Inc. and Subsidiaries
(In thousands, except share data)
August 31, | ||||||||
2010 | 2009 | |||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 149,213 | $ | 108,169 | ||||
Accounts receivable |
115,387 | 114,191 | ||||||
Inventories |
97,939 | 105,772 | ||||||
Other current assets |
7,589 | 11,573 | ||||||
Deferred taxes |
14,164 | 12,519 | ||||||
Total Current Assets |
384,292 | 352,224 | ||||||
Goodwill |
260,332 | 267,687 | ||||||
Other Intangible Assets |
3,774 | 5,789 | ||||||
Deferred Taxes |
33,932 | 26,477 | ||||||
Other Assets |
10,091 | 9,490 | ||||||
Property, Plant and Equipment |
124,600 | 135,187 | ||||||
$ | 817,021 | $ | 796,854 | |||||
LIABILITIES AND EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | 66,562 | $ | 55,918 | ||||
Accrued expenses |
86,872 | 66,141 | ||||||
Deferred taxes |
3,473 | 1,918 | ||||||
Current portion of long-term debt |
192 | 30,194 | ||||||
Total Current Liabilities |
157,099 | 154,171 | ||||||
Long-Term Debt, Less Current Portion |
93 | 265 | ||||||
Deferred Taxes |
42,568 | 44,194 | ||||||
Other Long-Term Liabilities |
126,237 | 115,113 | ||||||
Robbins & Myers, Inc. Shareholders Equity: |
||||||||
Common stock-without par value: |
||||||||
Authorized shares-80,000,000 |
||||||||
Issued shares-35,004,612 in 2010 (34,884,158 in 2009) |
192,749 | 190,097 | ||||||
Treasury shares-2,045,748 in 2010 (2,046,039 in 2009) |
(39,564 | ) | (39,753 | ) | ||||
Retained earnings |
372,198 | 344,530 | ||||||
Accumulated other comprehensive (loss) income: |
||||||||
Foreign currency translation |
(4,052 | ) | 10,138 | |||||
Pension liability |
(45,267 | ) | (36,061 | ) | ||||
Total |
(49,319 | ) | (25,923 | ) | ||||
Total Robbins & Myers, Inc. Shareholders Equity |
476,064 | 468,951 | ||||||
Noncontrolling Interest |
14,960 | 14,160 | ||||||
Total Equity |
491,024 | 483,111 | ||||||
$ | 817,021 | $ | 796,854 | |||||
See Notes to Consolidated Financial Statements
27
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CONSOLIDATED EQUITY STATEMENT
Robbins & Myers Inc. and Subsidiaries
(In thousands, except share and per share data)
Robbins & Myers Inc. and Subsidiaries
(In thousands, except share and per share data)
Robbins & Myers, Inc. Shareholders Equity | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
Other | ||||||||||||||||||||||||
Comprehensive | ||||||||||||||||||||||||
Common | Treasury | Retained | Income | Noncontrolling | ||||||||||||||||||||
Shares | Shares | Earnings | (Loss) | Interest | Total | |||||||||||||||||||
Balance at September 1, 2007 |
$ | 172,319 | $ | (683 | ) | $ | 217,548 | $ | 23,334 | $ | 12,429 | $ | 424,947 | |||||||||||
Net income |
87,402 | 2,132 | 89,534 | |||||||||||||||||||||
Change in foreign currency translation |
(3,079 | ) | (242 | ) | (3,321 | ) | ||||||||||||||||||
Change in minimum pension liability, net of tax |
1,748 | 1,748 | ||||||||||||||||||||||
Comprehensive income |
1,890 | 87,961 | ||||||||||||||||||||||
GAAP adoption-tax contingencies |
(5,538 | ) | (5,538 | ) | ||||||||||||||||||||
Dividends and other-net |
1,120 | 1,120 | ||||||||||||||||||||||
Restricted stock grants-net, 64,546 shares (0 from Treasury) |
||||||||||||||||||||||||
Restricted stock expense |
666 | 666 | ||||||||||||||||||||||
Cash dividend declared, $0.1450 per share |
(5,003 | ) | (5,003 | ) | ||||||||||||||||||||
Treasury stock purchases, 29,236 shares |
(1,264 | ) | (1,264 | ) | ||||||||||||||||||||
Stock option expense |
745 | 745 | ||||||||||||||||||||||
Performance stock award expense |
1,979 | 1,979 | ||||||||||||||||||||||
Proceeds from employee benefit plan share sales, 34,700 shares |
1,278 | 1,278 | ||||||||||||||||||||||
Stock options exercised, 388,198 shares |
4,249 | 4,249 | ||||||||||||||||||||||
Tax impact of vested restricted stock and stock options exercised |
4,316 | 4,316 | ||||||||||||||||||||||
Balance at August 31, 2008 |
185,552 | (1,947 | ) | 294,409 | 22,003 | 15,439 | 515,456 | |||||||||||||||||
Net income |
55,364 | 1,210 | 56,574 | |||||||||||||||||||||
Change in foreign currency translation |
(26,807 | ) | (859 | ) | (27,666 | ) | ||||||||||||||||||
Change in minimum pension liability, net of tax |
(21,119 | ) | (21,119 | ) | ||||||||||||||||||||
Comprehensive income |
351 | 7,789 | ||||||||||||||||||||||
Dividends and other-net |
(1,630 | ) | (1,630 | ) | ||||||||||||||||||||
Restricted stock grants-net, 38,816 shares (15,022 from Treasury) |
||||||||||||||||||||||||
Restricted stock expense |
734 | 734 | ||||||||||||||||||||||
Cash dividend declared, $0.1575 per share |
(5,243 | ) | (5,243 | ) | ||||||||||||||||||||
Treasury stock purchases-share buyback program, 2,007,537 shares |
(39,114 | ) | (39,114 | ) | ||||||||||||||||||||
Treasury stock purchases-other, 34,920 shares |
(546 | ) | (546 | ) | ||||||||||||||||||||
Vesting of restricted stock issued from Treasury stock, 55,266 shares |
(1,854 | ) | 1,854 | | ||||||||||||||||||||
Stock option expense |
1,008 | 1,008 | ||||||||||||||||||||||
Performance stock award expense |
1,719 | 1,719 | ||||||||||||||||||||||
Proceeds from employee benefit plan share sales, 62,948 shares |
1,234 | 1,234 | ||||||||||||||||||||||
Stock options exercised, 34,462 shares |
373 | 373 | ||||||||||||||||||||||
Tax impact of vested restricted stock and stock options exercised |
1,331 | 1,331 | ||||||||||||||||||||||
Balance at August 31, 2009 |
190,097 | (39,753 | ) | 344,530 | (25,923 | ) | 14,160 | 483,111 | ||||||||||||||||
Net income |
33,197 | 950 | 34,147 | |||||||||||||||||||||
Change in foreign currency translation |
(14,190 | ) | 538 | (13,652 | ) | |||||||||||||||||||
Change in minimum pension liability, net of tax |
(9,206 | ) | (9,206 | ) | ||||||||||||||||||||
Comprehensive income |
1,488 | 11,289 | ||||||||||||||||||||||
Dividends and other-net |
(688 | ) | (688 | ) | ||||||||||||||||||||
Restricted stock grants-net, 110,890 shares (37,961 from Treasury) |
||||||||||||||||||||||||
Restricted stock expense |
760 | 760 | ||||||||||||||||||||||
Cash dividend declared, $0.1675 per share |
(5,529 | ) | (5,529 | ) | ||||||||||||||||||||
Treasury stock purchases-other, 37,670 shares |
(886 | ) | (886 | ) | ||||||||||||||||||||
Vesting of restricted stock issued from Treasury stock, 37,961 shares |
(1,075 | ) | 1,075 | | ||||||||||||||||||||
Stock option expense |
1,051 | 1,051 | ||||||||||||||||||||||
Performance stock award expense |
1,224 | 1,224 | ||||||||||||||||||||||
Proceeds from employee benefit plan share sales, 43,191 shares |
1,036 | 1,036 | ||||||||||||||||||||||
Stock options exercised, 4,334 shares |
50 | 50 | ||||||||||||||||||||||
Tax impact of vested restricted stock and stock options exercised |
(394 | ) | (394 | ) | ||||||||||||||||||||
Balance at August 31, 2010 |
$ | 192,749 | $ | (39,564 | ) | $ | 372,198 | $ | (49,319 | ) | $ | 14,960 | $ | 491,024 | ||||||||||
See Notes to Consolidated Financial Statements
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CONSOLIDATED STATEMENT OF INCOME
Robbins & Myers, Inc. and Subsidiaries
(In thousands, except per share data)
Robbins & Myers, Inc. and Subsidiaries
(In thousands, except per share data)
Years ended August 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Sales |
$ | 584,694 | $ | 640,358 | $ | 787,168 | ||||||
Cost of sales |
387,746 | 415,861 | 496,906 | |||||||||
Gross profit |
196,948 | 224,497 | 290,262 | |||||||||
Selling, general and administrative expenses |
143,306 | 150,129 | 167,229 | |||||||||
Other expense (income) |
2,764 | | (7,631 | ) | ||||||||
Income before interest and income taxes |
50,878 | 74,368 | 130,664 | |||||||||
Interest expense, net |
195 | 382 | 2,031 | |||||||||
Income before income taxes |
50,683 | 73,986 | 128,633 | |||||||||
Income tax expense |
16,536 | 17,412 | 39,099 | |||||||||
Net income including noncontrolling interest |
34,147 | 56,574 | 89,534 | |||||||||
Less: Net income attributable to noncontrolling interest |
950 | 1,210 | 2,132 | |||||||||
Net income attributable to Robbins & Myers, Inc. |
$ | 33,197 | $ | 55,364 | $ | 87,402 | ||||||
Net income per share: |
||||||||||||
Basic |
$ | 1.01 | $ | 1.67 | $ | 2.53 | ||||||
Diluted |
$ | 1.01 | $ | 1.66 | $ | 2.52 | ||||||
Weighted average common shares outstanding: |
||||||||||||
Basic |
32,924 | 33,227 | 34,524 | |||||||||
Diluted |
33,004 | 33,261 | 34,718 | |||||||||
See Notes to Consolidated Financial Statements
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CONSOLIDATED CASH FLOW STATEMENT
Robbins & Myers, Inc. and Subsidiaries
(In thousands)
Robbins & Myers, Inc. and Subsidiaries
(In thousands)
Years Ended August 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
OPERATING ACTIVITIES |
||||||||||||
Net income including noncontrolling interest |
$ | 34,147 | $ | 56,574 | $ | 89,534 | ||||||
Adjustments to reconcile net income to net cash
and cash equivalents provided by operating activities: |
||||||||||||
Depreciation |
15,029 | 15,119 | 14,970 | |||||||||
Amortization |
601 | 1,107 | 1,279 | |||||||||
Deferred taxes |
(5,003 | ) | 4,417 | 6,201 | ||||||||
Stock compensation |
3,035 | 3,461 | 3,390 | |||||||||
Net gain on sale of business/facilities/assets |
(1,022 | ) | | (7,631 | ) | |||||||
Changes in operating assets and liabilities: |
||||||||||||
Accounts receivable |
(5,176 | ) | 34,457 | (1,067 | ) | |||||||
Inventories |
3,893 | (3,651 | ) | (7,261 | ) | |||||||
Other assets |
3,484 | (4,056 | ) | (560 | ) | |||||||
Accounts payable |
13,144 | (28,394 | ) | 3,682 | ||||||||
Accrued expenses and other liabilities |
26,351 | (27,174 | ) | (12,977 | ) | |||||||
Net cash and cash equivalents provided by operating activities |
88,483 | 51,860 | 89,560 | |||||||||
INVESTING ACTIVITIES |
||||||||||||
Capital expenditures, net of nominal disposals |
(10,611 | ) | (17,694 | ) | (22,114 | ) | ||||||
Proceeds from sale of business/facilities/assets |
2,464 | | 8,484 | |||||||||
Acquisitions |
| (2,325 | ) | (5,061 | ) | |||||||
Net cash and cash equivalents used by investing activities |
(8,147 | ) | (20,019 | ) | (18,691 | ) | ||||||
FINANCING ACTIVITIES |
||||||||||||
Proceeds from debt borrowings |
8,022 | 6,653 | 12,003 | |||||||||
Payments of long-term debt |
(38,196 | ) | (9,821 | ) | (81,451 | ) | ||||||
Share buyback program |
| (39,114 | ) | | ||||||||
Net proceeds from issuance of common stock,
including stock option tax impact |
692 | 2,938 | 9,843 | |||||||||
Treasury stock purchases |
(886 | ) | (546 | ) | (1,264 | ) | ||||||
Dividends paid |
(5,529 | ) | (5,243 | ) | (5,003 | ) | ||||||
Net cash and cash equivalents used by financing activities |
(35,897 | ) | (45,133 | ) | (65,872 | ) | ||||||
Effect of exchange rate changes on cash |
(3,395 | ) | (1,944 | ) | 2,298 | |||||||
Increase (decrease) in cash and cash equivalents |
41,044 | (15,236 | ) | 7,295 | ||||||||
Cash and cash equivalents at beginning of year |
108,169 | 123,405 | 116,110 | |||||||||
Cash and cash equivalents at end of year |
$ | 149,213 | $ | 108,169 | $ | 123,405 | ||||||
See Notes to Consolidated Financial Statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Robbins & Myers, Inc. and Subsidiaries
Robbins & Myers, Inc. and Subsidiaries
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of Robbins & Myers, Inc. (Company,
we, our, or us) and all of its subsidiaries in which a controlling interest is maintained.
Controlling interest is determined by majority ownership interest and the absence of substantive
third-party participation rights. For those consolidated subsidiaries where our ownership is less
than 100%, the other shareholders interests are shown as Noncontrolling Interest. All significant
intercompany accounts and transactions have been eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires us to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could differ from those
estimates.
Accounts Receivable
Accounts receivable relate primarily to customers located in North America, Western Europe and
Asia, and are concentrated in the pharmaceutical, chemical, industrial and energy markets. To
reduce credit risk, we perform credit investigations prior to accepting an order and, when
necessary, require letters of credit to ensure payment.
Our estimate for uncollectible accounts receivable is based upon an analysis of our prior
collection experience, specific customer creditworthiness, current economic trends within the
industries we serve, specific customers ability to pay us and the length of time that the
receivables are past due.
Inventories
Inventories are stated at the lower of cost or market determined by the last-in, first-out (LIFO)
method in the U.S. and the first-in, first-out (FIFO) method outside the U.S. Inventory valuation
reserves are determined based on our assessment of the market demand for our products and the
on-hand quantities of inventory in relation to historical usage.
Goodwill and Other Intangible Assets
Goodwill is the excess of the purchase price paid over the value of net assets of businesses
acquired. Goodwill is not amortized, but is tested for impairment on an annual basis, or more
frequently as impairment indicators arise, using a fair market value approach, at the reporting
unit level. We recognize an impairment charge for any amount by which the carrying amount of
goodwill exceeds its fair value. Impairment tests are performed each year based on August 31
financial information. Other definite-lived intangible assets are
evaluated periodically and when events
or circumstances indicate a possible inability to recover their carrying amount. Losses, if any,
resulting from impairment tests are reflected in income before interest and income taxes in our
Consolidated Statement of Income.
Amortization of other definite-lived intangible assets is calculated on the straight-line basis
using the following lives:
Patents and trademarks
|
14 to 17 years | |
Non-compete agreements
|
3 to 5 years | |
Financing costs
|
3 to 5 years |
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation expense is recorded over the
estimated useful life of the asset on the straight-line method using the following lives:
Buildings
|
45 years | |
Machinery and equipment
|
3 to 15 years |
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Our normal policy is to expense repairs and improvements made to capital assets as incurred. In
limited circumstances, betterments 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.
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 net income when incurred. Adjustments
resulting from the translation of non-U.S. dollar functional currency denominated financial statements into U.S. dollars are recognized in
accumulated other comprehensive income or loss in the Consolidated Balance Sheet (except Venezuela,
which was reported under highly inflationary accounting rules since our second quarter of fiscal
2010, with all gains and losses from remeasurement reflected in our Consolidated Statement of
Income).
Product Warranties
Warranty obligations are contingent upon product failure rates, material required for the repairs
and service delivery costs. We estimate the warranty accrual based on specific product failures
that are known to us plus an additional amount based on the historical relationship of warranty
claims to sales.
Changes in our product warranty liability during the year are as follows:
2010 | 2009 | |||||||
(In thousands) | ||||||||
Balance at beginning of the fiscal year |
$ | 7,221 | $ | 7,853 | ||||
Warranty expense |
2,468 | 2,750 | ||||||
Deductions |
(3,354 | ) | (3,287 | ) | ||||
Impact of
exchange rate changes |
(43 | ) | (95 | ) | ||||
Balance at end of the fiscal year |
$ | 6,292 | $ | 7,221 | ||||
Consolidated Statement of Income
Research and development costs are expensed as incurred and recorded in selling, general and
administrative expenses. Research and development costs in fiscal 2010, 2009 and 2008 were
$6,958,000, $6,743,000 and $6,469,000, respectively. These amounts do not include significant
engineering development costs incurred in conjunction with fulfilling custom customer orders and
executing customer projects. Shipping and handling costs are included in cost of sales. Advertising
costs are expensed as incurred.
Revenue Recognition
We recognize revenue at the time of title passage to our customer which is generally upon shipment
of the product. We recognize revenue for certain longer-term contracts based on the percentage of
completion method. The percentage of completion method requires estimates of total expected
contract revenue and costs. We follow this method since we can make reasonably dependable estimates
of the revenue and cost applicable to various stages of the contract. Revisions in profit estimates
are reflected in the period in which the facts that gave rise to the revision become known.
Income Taxes
Income taxes are provided for all items included in the Consolidated Statement of Income 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. We record valuation
allowances to reflect the estimated amount of deferred tax assets that may not be realized based
upon our analysis of the realization of tax benefits associated with the deferred tax assets.
Future taxable income, reversals of temporary differences, available carryback periods, the results
of tax strategies and changes in tax laws could impact these estimates.
Generally, our policy is to provide U.S. income taxes on non-U.S. income when remitted to the U.S.
We have not provided deferred taxes on the undistributed earnings of international subsidiaries
because the earnings are deemed permanently reinvested. Accordingly, the Accounting Principles
Board Opinion No. 23, Accounting for Income Taxes, (now known as ASC 740-30) exception will apply
to the international subsidiaries accumulated earnings and profits, which aggregated $51,984,000
and $67,044,000 at August 31, 2010 and 2009, respectively.
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Significant judgment is required in determining the provision for income taxes, unrecognized tax
benefits, and the related accruals and deferred tax assets and liabilities. In the ordinary course
of business, there are transactions
and calculations where the ultimate tax outcome is uncertain. Additionally, our tax returns are
subject to audit by various tax authorities in numerous jurisdictions. Although we believe that our
estimates are reasonable, actual results could differ from these estimates resulting in a final tax
outcome that may be materially different from that which is reflected in our consolidated financial
statements.
Consolidated Cash Flow Statement
Cash and cash equivalents consist of cash balances and temporary investments having an original
maturity of 90 days or less.
Fair Value of Financial Instruments
The following methods and assumptions were used by us in estimating the fair value of financial
instruments:
Cash and cash equivalents The amounts reported approximate fair value.
Long-term debt The fair value of our debt was $285,000 and $30,839,000 at August 31, 2010 and
2009, respectively. These amounts are based on the terms, interest rates and maturities
currently available to us for similar debt instruments.
Accounts receivable, accounts payable, and accrued expenses The amounts reported approximate
fair value.
Common Stock Plans
We sponsor a long-term incentive stock plan to provide for the granting of stock-based compensation
to certain officers and other key employees. Under the plan, the stock option price per share may
not be less than the fair market value per share as of the date of grant. Outstanding grants
generally become exercisable over a three-year period.
The fair
value of each stock option grant in fiscal years 2010, 2009 and 2008
was estimated on the
date of grant using a Black-Scholes-Merton option pricing model with the following weighted average
assumptions.
2010 | 2009 | 2008 | ||||||||||
Expected volatility of common stock |
45.60 | % | 38.90 | % | 35.86 | % | ||||||
Risk free interest rate |
3.25 | 2.00 | 4.00 | |||||||||
Dividend yield |
0.70 | 0.90 | 0.50 | |||||||||
Expected life of option |
7.0 | Yrs. | 7.0 | Yrs. | 7.0 | Yrs. | ||||||
Fair value at grant date |
$ | 10.66 | $ | 8.43 | $ | 12.70 |
Assumptions utilized in the model are evaluated when awards are granted. The expected volatility of
our common shares is estimated based upon the historical volatility of
our common share price. The
risk-free interest rate is based on the U.S. Treasury security yields at the time of the grant for
a security with a maturity term equal to or approximating the expected term of the underlying
award. The dividend yield is determined by using a blend of historical dividend yield information
and expected future trends. The expected life of the option grants represents the period of time
options are expected to be outstanding and is based on the contractual term of the grant, vesting
schedule and past exercise behavior. We have elected to recognize compensation cost on a
straight-line basis over the requisite service period for the entire award.
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Table of Contents
New Accounting Pronouncements
In December 2007, the FASB issued and, in April 2009, amended a new business combination standard
codified within Accounting Standards Codification (ASC) 805, which changed the accounting for
business acquisitions. Accounting for business combinations under this standard requires the
acquiring entity in a business combination to recognize all (and only) the assets acquired and
liabilities assumed in the transaction and establishes the acquisition-date fair value as the
measurement objective for all assets acquired and liabilities assumed in a business combination.
This standard was effective for us on September 1, 2009. The standard had no immediate impact on
our consolidated financial statements but could affect our financial position and results of
operations depending on future acquisitions.
In December 2007, the FASB issued a new standard which established the accounting for and reporting
of noncontrolling interests (NCIs) in partially owned consolidated subsidiaries and the loss of
control of subsidiaries. This standard requires all entities to report NCIs (previously reported as
minority interests) in subsidiaries within equity in the consolidated financial statements, but
separate from the parent shareholders equity. This standard also requires any acquisitions or
dispositions of NCIs that do not result in a change of control to be accounted for as equity
transactions. Further, it requires that a parent recognize a gain or loss in net income when a
subsidiary is deconsolidated. The standard was effective for us on September 1, 2009. Provisions of
this standard were applied to all NCIs prospectively, except for the presentation and disclosure
requirements, which were applied retrospectively to all periods presented. As a result, upon
adoption, we retroactively reclassified the Minority Interest balance reported in the liabilities
section of the Consolidated Balance Sheet to a new component of equity with respect to NCIs in
consolidated subsidiaries. The adoption of this standard also impacted certain captions identifying
net income including NCI and net income attributable to Robbins & Myers, Inc. Additional
disclosures required by this standard are also included in the Consolidated Equity Statement. The
adoption of this standard did not have a material impact on our consolidated financial statements.
In April 2008, the FASB issued an accounting standard which amended the list of factors that should
be considered in developing renewal or extension assumptions used to determine the useful life of
recognized intangible assets under ASC 350, Intangibles-Goodwill and Other. The new standard
applies to intangible assets that are acquired individually or with a group of other assets as well
as intangible assets acquired in business combinations and asset acquisitions. Under this standard,
entities estimating the useful life of a recognized intangible asset must consider the historical
experience in renewing or extending similar arrangements, or, in the absence of historical
experience, must consider assumptions that market participants would use about renewal or
extension. This standard was effective for the Company on September 1, 2009 and required certain
additional disclosures (included in Note 6 to our Consolidated Financial Statements) and application to useful life estimates prospectively
for intangible assets acquired after August 31, 2009. The adoption of this standard did not have a
material impact on our consolidated financial statements.
In December 2008, the FASB issued an accounting standard which provides additional guidance on
employers disclosures about the plan assets of defined benefit pension or other postretirement
plans. The disclosures required by the standard include a description of how investment allocation
decisions are made, major categories of plan assets, and concentrations of risk within plan assets.
Additionally, this standard requires disclosures similar to those required for fair value
measurements and disclosures under ASC 820 with respect to fair value of plan assets, such as the
inputs and valuation techniques used to measure fair value and information with respect to
classification of plan assets in hierarchy of the source of information used to determine their
value (see Note 8 to our Consolidated Financial Statements). The disclosures under this standard are required for annual periods ending
after December 15, 2009. The adoption of this standard did not have a material impact on our
consolidated financial statements.
In January 2010, the FASB issued Accounting Standard Update (ASU) No. 2010-06, Improving
Disclosures about Fair Value Measurements, that amends existing disclosure requirements under ASC
820, by adding required disclosures about items transferring into and out of levels 1 and 2 in the
fair value hierarchy; adding separate disclosures about purchase, sales, issuances, and settlements
relative to level 3 measurements; and clarifying, among other things, the existing fair value
disclosures about the level of disaggregation. This ASU was effective for us in the fourth quarter
of fiscal 2010, except for the requirement to provide level 3 activity of purchases, sales,
issuances, and settlements on a gross basis, which is effective beginning our fiscal 2012. The
adoption of this standard that was applicable for fiscal 2010 did not have a material impact on our
consolidated financial statements. We do not expect the remaining adoption of this standard in
fiscal 2012 for level 3 activity disclosure to have a material impact on our consolidated financial
statements.
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Table of Contents
In February 2010, the FASB issued ASU No. 2010-09, Amendments to Certain Recognition and
Disclosure Requirements, which amends ASC 855, Subsequent Events. This ASU which, was effective
immediately, removes the requirement for an SEC filer to disclose a date through which subsequent
events have been evaluated. We adopted this standard in the second quarter of fiscal 2010. The
adoption of this standard did not have a material impact on our consolidated financial statements.
In May 2010, the FASB issued ASU No. 2010-19, Foreign Currency Issues: Multiple Foreign Currency
Exchange Rates. The ASU was an announcement made by the staff of the U.S. Securities and Exchange
Commission and provided the staffs view on certain foreign currency issues related to investments
in Venezuela. The ASU was effective as of the announcement date of March 18, 2010. The adoption of
this standard did not have a material impact on our consolidated financial statements.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. Such
reclassifications did not have a material impact on our consolidated net income or financial
position.
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Table of Contents
NOTE 2 BALANCE SHEET INFORMATION
2010 | 2009 | |||||||
(In thousands) | ||||||||
Accounts receivable |
||||||||
Allowances for doubtful accounts |
$ | 5,549 | $ | 7,470 | ||||
Inventories |
||||||||
FIFO: |
||||||||
Finished products |
$ | 36,844 | $ | 36,644 | ||||
Work in process |
41,011 | 42,134 | ||||||
Raw materials |
33,214 | 38,551 | ||||||
111,069 | 117,329 | |||||||
LIFO reserve, U.S. inventories |
(13,130 | ) | (11,557 | ) | ||||
$ | 97,939 | $ | 105,772 | |||||
Non-U.S. inventories at FIFO |
$ | 71,455 | $ | 78,403 | ||||
Property, plant and equipment |
||||||||
Land |
$ | 15,308 | $ | 16,916 | ||||
Buildings |
99,451 | 103,728 | ||||||
Machinery and equipment |
188,182 | 182,804 | ||||||
302,941 | 303,448 | |||||||
Less accumulated depreciation |
(178,341 | ) | (168,261 | ) | ||||
$ | 124,600 | $ | 135,187 | |||||
Accrued expenses |
||||||||
Salaries, wages and payroll taxes |
$ | 21,522 | $ | 13,344 | ||||
Customer advances |
21,026 | 16,825 | ||||||
Pension benefits |
2,774 | 3,068 | ||||||
U.S. other postretirement benefits |
1,645 | 1,555 | ||||||
Warranty costs |
6,292 | 7,221 | ||||||
Accrued restructuring |
2,721 | | ||||||
Income taxes |
12,250 | 3,375 | ||||||
Commissions |
3,820 | 3,609 | ||||||
Other |
14,822 | 17,144 | ||||||
$ | 86,872 | $ | 66,141 | |||||
Other long-term liabilities |
||||||||
German pension liability |
$ | 41,500 | $ | 43,755 | ||||
U.S. pension liability |
39,645 | 31,215 | ||||||
U.S. other postretirement benefits |
25,548 | 22,153 | ||||||
U.K. pension liability |
4,497 | 3,912 | ||||||
Switzerland pension liability |
3,082 | | ||||||
Other |
11,965 | 14,078 | ||||||
$ | 126,237 | $ | 115,113 | |||||
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NOTE 3 FAIR VALUE MEASUREMENTS
In September 2006, the FASB issued an accounting standard, codified in ASC 820, Fair Value
Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair
value in accordance with generally accepted accounting principles, and expands disclosures about
fair value measurements. We adopted this standard on September 1, 2008 for all financial assets and
liabilities recognized or disclosed at fair value in our consolidated financial statements on a
recurring basis (at least annually).
In February 2008, the FASB deferred the effective date for certain non-financial assets and
liabilities, except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually) to fiscal years beginning after November 15,
2008. The Company adopted the remaining provisions of this fair value measurement standard related
to non-financial assets and liabilities, including goodwill and intangibles, prospectively on
September 1, 2009.
The following table summarizes the bases used to measure certain financial assets at fair value on
a recurring basis as of August 31, 2010 (in thousands):
Quoted Prices | Significant | |||||||||||||||
in Active | Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||
August 31, | Identical Assets | Inputs | Inputs | |||||||||||||
2010 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Cash and cash equivalents (1) |
$ | 149,213 | $ | 149,213 | $ | | $ | | ||||||||
Total assets at fair value |
$ | 149,213 | $ | 149,213 | $ | | $ | | ||||||||
(1) | Our cash and cash equivalents primarily consist of cash in banks, commercial paper and overnight investments in highly rated financial institutions. |
Non-Financial Assets and Liabilities at Fair value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the
assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair
value adjustments in certain circumstances (e.g., when there is evidence of impairment). At August
31, 2010, no fair value adjustments or fair value measurements were required for non-financial
assets or liabilities.
Fair Value of Financial Instruments
The Companys financial instruments include cash and cash equivalents, accounts receivable,
accounts payable, accrued expenses and debt. The fair values of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses approximate their carrying values because of the
short-term nature of these instruments. The fair value of debt instruments equal their carrying
value due to the short period until maturity or the variable rate nature of the instruments.
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NOTE 4 STATEMENT OF INCOME INFORMATION
Unless otherwise noted, the costs and gains mentioned below in this note were included on the
Other expense (income) line of our Consolidated Statement of Income in the period indicated.
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Process Solutions segment restructuring costs |
$ | 2,764 | $ | | $ | | ||||||
Gain on disposition of product lines/facilities |
| | (7,631 | ) | ||||||||
Other expense (income) |
$ | 2,764 | $ | | $ | (7,631 | ) | |||||
In fiscal 2010, we incurred $2,764,000 in restructuring costs
related to employee termination benefits at our German facility in our Process Solutions segment.
These costs were accrued at the end of fiscal 2010, with payments to be made in our fiscal 2011.
In fiscal 2008, we sold a facility in each of our
Process Solutions and Romaco segments. Cash proceeds from these asset sales totaled $2,787,000.
The net gain recognized in fiscal 2008 as a result of these facility sales was $1,934,000, which included $835,000
in our Process Solutions segment and $1,099,000 in our Romaco segment.
In addition, in fiscal 2008, we
received cash and recorded a pre-tax gain of $5,697,000 related to the sale of two of
our Romaco product lines-Hapa and Laetus-sold in fiscal 2006. As part of that transaction,
funds were placed in escrow as collateral for potential claims by the purchaser. The financial
guarantees associated with these escrowed funds lapsed on March 31, 2008, resulting in the release of the escrowed funds and the gain.
Minimum lease payments
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, 2010:
(In thousands) | ||||
2011 |
$ | 4,614 | ||
2012 |
3,362 | |||
2013 |
2,621 | |||
2014 |
1,959 | |||
2015 |
1,456 | |||
Thereafter |
1,493 | |||
$ | 15,505 | |||
Rental expense for all operating leases in 2010, 2009 and 2008 was approximately $6,172,000,
$6,610,000 and $7,398,000, respectively. Operating leases consist primarily of building and
equipment leases.
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NOTE 5 CASH FLOW STATEMENT INFORMATION
In fiscal 2010, we recorded the following
non-cash investing and financing transactions: $4,246,000 increase in deferred tax assets, $13,452,000 increase in other long-term liabilities,
and $9,206,000 increase related to the minimum liability of our employee benefit plans.
In fiscal 2009, we recorded the following
non-cash investing and financing transactions: $11,453,000 increase in deferred tax assets, $32,572,000
increase in other long-term liabilities, and $21,119,000 increase related to the minimum liability of our employee benefit plans.
In fiscal 2008, we recorded the following non-cash investing and financing transactions: $158,000
decrease in deferred tax assets, $1,550,000 increase in property, plant and equipment, $5,182,000
decrease in other long-term liabilities, $5,538,000 decrease in retained earnings for the adoption
of a FASB authoritative guidance on accounting for uncertainty in income taxes and $1,748,000
decrease related to the minimum liability of our employee benefit plans.
Supplemental cash flow information consisted of the following:
2010 | 2009 | 2008 | ||||||||||
(in thousands) | ||||||||||||
Interest paid |
$ | 2,089 | $ | 2,133 | $ | 8,141 | ||||||
Income taxes paid, net of refunds |
10,577 | 27,082 | 30,838 |
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NOTE 6GOODWILL AND OTHER INTANGIBLE ASSETS
The Company made certain changes to its business segments effective in the first quarter of fiscal
2010. This resulted in a $45.0 million reclassification of goodwill from the Process Solutions
segment to the Fluid Management segment. Changes in the carrying amount of goodwill by operating
segment are as follows:
Process | Fluid | |||||||||||||||
Solutions | Management | Romaco | ||||||||||||||
Segment | Segment | Segment | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Balance as of September 1, 2008 |
$ | 157,870 | $ | 108,703 | $ | 12,333 | $ | 278,906 | ||||||||
Goodwill addition due to business
acquisition |
333 | | | 333 | ||||||||||||
Translation adjustments |
(8,625 | ) | (2,514 | ) | (413 | ) | (11,552 | ) | ||||||||
Balance as of August 31, 2009 |
149,578 | 106,189 | 11,920 | 267,687 | ||||||||||||
Goodwill reclassification |
(45,000 | ) | 45,000 | | | |||||||||||
Translation adjustments |
(4,300 | ) | (1,726 | ) | (1,329 | ) | (7,355 | ) | ||||||||
Balance as of August 31, 2010 |
$ | 100,278 | $ | 149,463 | $ | 10,591 | $ | 260,332 | ||||||||
Information regarding our other intangible assets is as follows:
2010 | 2009 | |||||||||||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||||||||||
Amount | Amortization | Net | Amount | Amortization | Net | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Patents and trademarks |
$ | 9,434 | $ | 7,465 | $ | 1,969 | $ | 11,661 | $ | 8,138 | $ | 3,523 | ||||||||||||
Non-compete agreements |
8,680 | 7,359 | 1,321 | 8,998 | 7,622 | 1,376 | ||||||||||||||||||
Financing costs |
9,536 | 9,052 | 484 | 9,631 | 9,145 | 486 | ||||||||||||||||||
Other |
5,120 | 5,120 | | 5,601 | 5,197 | 404 | ||||||||||||||||||
$ | 32,770 | $ | 28,996 | $ | 3,774 | $ | 35,891 | $ | 30,102 | $ | 5,789 | |||||||||||||
The amortization expense for fiscal 2010 and fiscal 2009 was $601,000 and $1,107,000 respectively.
We estimate that the amortization expense will be approximately $600,000 for each of the next five
years beginning fiscal 2011. The expected amortization expense is an estimate. Actual amounts of
amortization expense may differ from the estimated amounts due to changes in foreign currency
exchange rates, impairment of intangible assets, intangible asset acquisitions, accelerated
amortization of intangible assets and other events.
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NOTE 7 LONG-TERM DEBT
2010 | 2009 | |||||||
(in thousands) | ||||||||
Senior debt: |
||||||||
Senior notes |
$ | | $ | 30,000 | ||||
Other |
285 | 459 | ||||||
Total debt |
285 | 30,459 | ||||||
Less current portion |
(192 | ) | (30,194 | ) | ||||
Long-term debt |
$ | 93 | $ | 265 | ||||
Our Bank Credit Agreement (Agreement) provides that we may borrow on a revolving credit basis up
to a maximum of $150,000,000 and includes a $100,000,000 expansion feature. All outstanding
amounts under the Agreement are due and payable on December 19, 2011. Interest is variable based
upon formulas tied to LIBOR or an alternative base rate defined in the Agreement, at our option,
and is payable quarterly. Indebtedness under the Agreement is unsecured except for the pledge of
the stock of our U.S. subsidiaries and approximately two-thirds of the stock of certain non-U.S.
subsidiaries. While no amounts are outstanding under the Agreement at August 31, 2010, we have
$28,176,000 of standby letters of credit outstanding at August 31, 2010. These standby letters of
credit are used as security for advance payments received from customers and future payments to our
vendors. Accordingly, under the Agreement we have $121,824,000 of unused borrowing capacity.
The Agreement contains certain restrictive covenants including limitations on indebtedness, asset
sales, sales and lease backs, and cash dividends as well as financial covenants relating to
interest coverage, leverage and net worth. As of August 31, 2010, we are in compliance with these
covenants.
From
available cash balances, we repaid the remaining $30,000,000 of Senior Notes on the May 3, 2010 maturity date.
Our other debt consisted primarily of unsecured non-U.S. bank lines of credit with interest rates
approximating 7.39%.
Aggregate principal payments of long-term debt, for the five years subsequent to August 31, 2010,
are as follows:
(In thousands) | ||||
2011 |
$ | 192 | ||
2012 |
93 | |||
2013 |
| |||
2014 |
| |||
2015 |
| |||
2016 and thereafter |
| |||
Total |
$ | 285 | ||
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NOTE 8 RETIREMENT BENEFITS
We sponsor two defined contribution plans covering most U.S. salaried employees and certain U.S.
hourly employees. Contributions are made to the plans based on a percentage of eligible amounts
contributed by participating employees. We also sponsor several defined benefit plans covering
certain employees. Benefits are based on years of service and employees compensation or stated
amounts for each year of service. Our funding policy is consistent with the funding requirements of
applicable regulations.
In addition to pension benefits, we provide health care and life insurance benefits for certain of
our retired U.S. employees. Our policy is to fund the cost of these benefits as claims are paid.
Pension and other post-retirement plan costs are as follows:
Pension Benefits | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Service cost |
$ | 2,570 | $ | 2,251 | $ | 2,082 | ||||||
Interest cost |
9,368 | 10,062 | 9,714 | |||||||||
Expected return on plan assets |
(6,523 | ) | (8,044 | ) | (8,352 | ) | ||||||
Settlement/curtailment cost |
988 | 600 | 461 | |||||||||
Amortization of prior service cost |
723 | 754 | 759 | |||||||||
Amortization of transition asset |
(33 | ) | (31 | ) | (21 | ) | ||||||
Recognized net actuarial losses |
3,210 | 743 | 214 | |||||||||
Net periodic benefit cost |
$ | 10,303 | $ | 6,335 | $ | 4,857 | ||||||
Defined contribution cost |
$ | 2,620 | $ | 3,040 | $ | 3,056 | ||||||
Other Benefits | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Service cost |
$ | 431 | $ | 405 | $ | 392 | ||||||
Interest cost |
1,328 | 1,379 | 1,389 | |||||||||
Net amortization |
814 | 501 | 716 | |||||||||
Net periodic benefit cost |
$ | 2,573 | $ | 2,285 | $ | 2,497 | ||||||
The estimated net actuarial loss and prior service cost for our defined benefit pension plans that
will be amortized from accumulated other comprehensive loss into net periodic pension cost during
fiscal 2011 are $4,058,000 and $600,000, respectively.
The estimated net actuarial loss and prior service cost for our other post-retirement benefit plans
that will be amortized from accumulated other comprehensive loss into net periodic pension cost
during fiscal 2011 are $845,000 and $213,000, respectively.
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The benefit obligation, funded status and amounts recorded in the Consolidated Balance Sheet at
August 31, are as follows:
Pension Benefits | Other Benefits | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In thousands) | ||||||||||||||||
Change in benefit obligation: |
||||||||||||||||
Beginning of year |
$ | 185,697 | $ | 175,720 | $ | 23,708 | $ | 21,780 | ||||||||
Service cost |
2,693 | 2,483 | 431 | 405 | ||||||||||||
Interest cost |
9,332 | 10,389 | 1,328 | 1,379 | ||||||||||||
Participant contributions |
758 | 776 | | | ||||||||||||
Currency exchange rate impact |
(5,751 | ) | (4,173 | ) | | | ||||||||||
Actuarial losses |
18,246 | 14,171 | 3,220 | 2,138 | ||||||||||||
Benefit payments |
(11,393 | ) | (13,669 | ) | (1,494 | ) | (1,994 | ) | ||||||||
End of year |
$ | 199,582 | $ | 185,697 | $ | 27,193 | $ | 23,708 | ||||||||
Change in plan assets: |
||||||||||||||||
Beginning of year |
$ | 103,747 | $ | 125,416 | $ | | $ | | ||||||||
Currency exchange rate impact |
(359 | ) | (3,059 | ) | | | ||||||||||
Actual return |
9,124 | (9,898 | ) | | | |||||||||||
Company contributions |
6,207 | 4,181 | 1,494 | 1,994 | ||||||||||||
Participant contributions |
758 | 776 | | | ||||||||||||
Benefit payments |
(11,393 | ) | (13,669 | ) | (1,494 | ) | (1,994 | ) | ||||||||
End of year |
$ | 108,084 | $ | 103,747 | $ | | $ | | ||||||||
Funded status |
$ | (91,498 | ) | $ | (81,950 | ) | $ | (27,193 | ) | $ | (23,708 | ) | ||||
Accrued benefit cost |
$ | (91,498 | ) | $ | (81,950 | ) | $ | (27,193 | ) | $ | (23,708 | ) | ||||
Recorded as follows: |
||||||||||||||||
Accrued expenses |
$ | (2,774 | ) | $ | (3,068 | ) | $ | (1,645 | ) | $ | (1,555 | ) | ||||
Other long-term liabilities |
(88,724 | ) | (78,882 | ) | (25,548 | ) | (22,153 | ) | ||||||||
(91,498 | ) | (81,950 | ) | (27,193 | ) | (23,708 | ) | |||||||||
Accumulated other comprehensive loss |
59,456 | 48,416 | 10,830 | 8,424 | ||||||||||||
$ | (32,042 | ) | $ | (33,534 | ) | $ | (16,363 | ) | $ | (15,284 | ) | |||||
Deferred taxes on accumulated other comprehensive loss |
$ | (20,904 | ) | $ | (17,578 | ) | $ | (4,115 | ) | $ | (3,201 | ) | ||||
Accumulated other comprehensive loss at August 31: |
||||||||||||||||
Net actuarial losses |
$ | 58,028 | $ | 45,796 | $ | 10,007 | $ | 7,388 | ||||||||
Prior service cost |
1,428 | 2,620 | 823 | 1,036 | ||||||||||||
Deferred taxes |
(20,904 | ) | (17,578 | ) | (4,115 | ) | (3,201 | ) | ||||||||
Net accumulated other comprehensive loss at August 31 |
$ | 38,552 | $ | 30,838 | $ | 6,715 | $ | 5,223 | ||||||||
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Pension plans with accumulated (ABO) and projected (PBO) benefit obligations in excess of plan
assets:
2010 | 2009 | |||||||
(In thousands) | ||||||||
Accumulated benefit obligation |
$ | 196,618 | $ | 182,948 | ||||
Projected benefit obligation |
199,582 | 185,697 | ||||||
Plan assets |
108,084 | 103,747 |
In 2010 and 2009, $41,071,000 and $43,829,000, respectively, of the unfunded ABO and $44,036,000
and $46,579,000, respectively, of the unfunded PBO related to our pension plan for a German
operation. Funding of pension obligations is not required in Germany.
The weighted allocations of pension plan assets at August 31, 2010 and 2009 are shown in the
following table.
2010 | 2009 | |||||||
Equity securities |
63 | % | 65 | % | ||||
Debt securities |
35 | 34 | ||||||
Cash and cash equivalents |
2 | 1 | ||||||
100 | % | 100 | % | |||||
At August 31, 2010, our target allocation percentages for plan assets were approximately 65% equity
securities and 35% debt securities. The targets may be adjusted periodically to reflect current
market conditions and trends as well as inflation levels, interest rates and the trend thereof, and
economic and monetary policy. The objective underlying this allocation is to achieve a long-term
rate of return of 5.75% above inflation and to manage the plan assets so that they are sufficient
to meet the plans future obligations while maintaining adequate liquidity to meet current benefit
payments and operating expenses. The actual amount for which these obligations will be settled
depends on future events, including life expectancy of plan participants and salary inflation.
Equity securities can include, but are not limited to, broadly diversified international and
domestic equities. At August 31, 2010 and 2009, pension assets
included 160,000 shares of our common shares. Debt securities include, but are not limited to,
international and domestic direct bond investments. The assets are managed by professional
investment firms and performance is evaluated against specific benchmarks.
We will use a weighted average long-term rate of return of approximately 6.40% in fiscal 2011.
Expected rates of return are developed based on the target allocation of debt and equity securities
and on the historical returns on these types of investments judgmentally adjusted to reflect
current expectations based on historical experience of the plans investment managers. In
evaluating future returns on equity securities, the existing portfolio is stratified to separately
consider large and small capitalization investments as well as international and other types of
securities.
We expect to make future benefits payments from our benefit plans as follows:
Other | ||||||||
Pension Benefits | Benefits | |||||||
(In thousands) | ||||||||
2011 |
$ | 12,000 | $ | 1,600 | ||||
2012 |
12,000 | 1,700 | ||||||
2013 |
12,000 | 1,800 | ||||||
2014 |
11,900 | 1,900 | ||||||
2015 |
11,700 | 1,900 | ||||||
2016-2020 |
57,700 | 10,300 |
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The Company intends to make such contributions as are required to maintain the plan assets on a
sound actuarial basis, in such amounts and at such times as determined by the Company in accordance
with the funding policy established by management and consistent with plans objectives. The
Company anticipates contributing $13,800,000 to its pension benefit plans in fiscal 2011.
The actuarial weighted average assumptions used to determine plan liabilities at August 31, are as
follows:
Pension Benefits | Other Benefits | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Weighted average assumptions: |
||||||||||||||||
Discount rate |
4.40 | % | 5.40 | % | 4.50 | % | 5.75 | % | ||||||||
Expected return on plan assets |
6.40 | 6.60 | N/A | N/A | ||||||||||||
Rate of compensation increase |
2.50 | 2.60 | N/A | N/A | ||||||||||||
Health care cost increase |
N/A | N/A | 8.0 5.0 | % | 8.5 5.0 | % | ||||||||||
Health care cost grading period |
N/A | N/A | 6 years | 7 years |
The actuarial weighted average assumptions used to determine plan costs are as follows (measurement
date September 1):
Pension Benefits | Other Benefits | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Discount rate |
5.40 | % | 6.30 | % | 5.75 | % | 6.90 | % | ||||||||
Expected return on plan assets |
6.60 | 7.70 | N/A | N/A | ||||||||||||
Rate of compensation increase |
2.60 | 3.00 | N/A | N/A | ||||||||||||
Health care cost increase |
N/A | N/A | 8.5 5.0 | % | 9.0 5.0 | % | ||||||||||
Health care cost grading period |
N/A | N/A | 7 years | 8 years |
The assumed health care trend rate has a significant effect on the amounts reported for health care
benefits. A one-percentage point change in assumed health care rate would have the following
effects:
Increase | Decrease | |||||||
(In thousands) | ||||||||
Service and interest cost |
$ | 180 | $ | (166 | ) | |||
Postretirement benefit obligation |
1,139 | (995 | ) |
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Pursuant to the adoption of a new FASB accounting standard in fiscal 2010, the Company is
required to categorize pension plan assets based on the following fair value hierarchy:
| Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets in active markets. | ||
| Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset through corroboration with observable market data. | ||
| Level 3: Unobservable inputs that reflect the reporting entitys own assumptions. |
The following table summarizes the bases used to measure financial assets of the pension plans at
their fair market value on a recurring basis as of August 31, 2010:
Quoted Prices In | Significant | |||||||||||||||
Active Markets | Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
August 31, | Assets | Inputs | Inputs | |||||||||||||
2010 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
(in thousands) | ||||||||||||||||
Cash |
$ | 2,168 | $ | 2,168 | $ | | $ | | ||||||||
U.S. Government and
U.S. Agency Obligations (1) |
7,132 | 7,132 | | | ||||||||||||
Common Stocks (1) |
5,222 | 5,222 | | | ||||||||||||
Foreign Stocks (1) |
6,540 | 6,540 | | | ||||||||||||
Common Trust Funds and
Mutual Funds (1) |
48,350 | 48,350 | | | ||||||||||||
Corporate Obligations (2) |
11,616 | | 11,616 | | ||||||||||||
Receivables against Banks
and Insurance Companies (1) |
26,456 | 26,456 | | | ||||||||||||
Foreign Obligations (2) |
549 | | 549 | | ||||||||||||
Other (2) |
51 | | 51 | | ||||||||||||
Total |
$ | 108,084 | $ | 95,868 | $ | 12,216 | $ | | ||||||||
(1) | U.S. Government and U.S. Agency Obligations, Common and Foreign Stocks, Receivables against Banks and Insurance Companies and Common Trust and Mutual Funds are valued at the closing price reported on the active market on which the individual securities are traded. | |
(2) | Corporate and Foreign Obligations and Other assets are estimated using recent transactions, broker quotations and/or bond spread information. |
46
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NOTE 9 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.
2010 | 2009 | |||||||
(In thousands) | ||||||||
Deferred tax assets and liabilities |
||||||||
Assets: |
||||||||
Postretirement obligations |
$ | 29,707 | $ | 23,255 | ||||
Net operating loss carryforwards |
19,508 | 17,720 | ||||||
Tax credit carryforward |
10,023 | 8,489 | ||||||
Other accruals |
7,397 | 5,774 | ||||||
Inventory allowances |
4,852 | 3,963 | ||||||
Warranty reserve |
1,991 | 2,024 | ||||||
Customer advance payments and prepaid expenses |
| 858 | ||||||
Research and development costs |
1,282 | 1,624 | ||||||
Goodwill and purchase assets basis differences |
261 | 1,028 | ||||||
Other items |
6,590 | 4,115 | ||||||
81,611 | 68,850 | |||||||
Less valuation allowances |
14,869 | 15,302 | ||||||
66,742 | 53,548 | |||||||
Liabilities: |
||||||||
Other accruals |
3,473 | 1,918 | ||||||
Fixed asset basis differences |
10,173 | 9,704 | ||||||
Goodwill and purchased asset basis differences |
49,159 | 47,595 | ||||||
Other items |
1,882 | 1,447 | ||||||
64,687 | 60,664 | |||||||
Net deferred tax asset (liability) |
$ | 2,055 | $ | (7,116 | ) | |||
The tax credit carryforwards, which primarily relate to foreign tax credits, begin to expire in
fiscal 2016. The primary components of the net operating loss carryforwards exist in Germany
($27,981,000 for income tax and $22,080,000 for trade tax), Italy ($5,986,000) and the Netherlands
($12,911,000). There are no expiration dates on the net operating loss carryforwards in Germany.
The net operating loss carryforwards in Italy and the Netherlands begin to expire in fiscal 2011.
These expiration dates, as well as our ability to generate future taxable income to utilize these
carryforwards, have been considered in determining our valuation allowances.
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Expense
2010 | 2009 | 2008 | ||||||||||
(in thousands) | ||||||||||||
Current: |
||||||||||||
U.S. federal |
$ | 16,671 | $ | 8,634 | $ | 16,243 | ||||||
Non-U.S. |
4,893 | 6,634 | 14,803 | |||||||||
U.S. state |
1,364 | 325 | 1,110 | |||||||||
22,928 | 15,593 | 32,156 | ||||||||||
Deferred: |
||||||||||||
U.S. federal |
(3,487 | ) | 4,531 | 15,282 | ||||||||
Non-U.S. |
(2,643 | ) | (3,100 | ) | (9,649 | ) | ||||||
U.S. state |
(262 | ) | 388 | 1,310 | ||||||||
(6,392 | ) | 1,819 | 6,943 | |||||||||
$ | 16,536 | $ | 17,412 | $ | 39,099 | |||||||
Tax expense included in noncontrolling interest |
$ | 554 | $ | 641 | $ | 916 | ||||||
Non-U.S. pretax (loss) income |
$ | (1,605 | ) | $ | 16,420 | $ | 64,735 | |||||
The following is a reconciliation of the effective income tax rate with the U.S. federal statutory
income tax rate:
2010 | 2009 | 2008 | ||||||||||
Federal statutory income tax rate |
35.0 | % | 35.0 | % | 35.0 | % | ||||||
Impact of state taxes |
1.9 | 0.4 | 0.6 | |||||||||
Impact of change in valuation allowances on non-U.S. losses |
6.0 | 1.1 | (3.8 | ) | ||||||||
Impact on U.S. taxes from repatriation of foreign earnings |
(8.6 | ) | (7.1 | ) | 0.6 | |||||||
Extraterritorial income deduction/Section 199 |
(2.2 | ) | (1.5 | ) | (0.6 | ) | ||||||
Impact from permanent items |
1.0 | (0.4 | ) | 0.6 | ||||||||
Non-U.S. tax lower than U.S. tax rates |
| (0.8 | ) | (1.8 | ) | |||||||
Tax contingencies |
(1.5 | ) | (0.2 | ) | 0.3 | |||||||
Revaluation of deferred tax accounts |
| | 0.2 | |||||||||
Other items net |
1.0 | (3.0 | ) | (0.7 | ) | |||||||
Effective income tax rate |
32.6 | % | 23.5 | % | 30.4 | % | ||||||
The impact of change in valuation allowances on non-U.S. losses primarily relate to certain of our
entities in Germany, Italy and Venezuela.
The Company adopted the provisions of a FASB authoritative guidance on accounting for uncertainty
in income taxes on September 1, 2007. This resulted in the Company recognizing a $5,538,000
increase in the liability for unrecognized tax benefits, including interest and penalties, which
was accounted for as a decrease to retained earnings (cumulative effect) as of September 1, 2007.
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A reconciliation of the change in unrecognized tax benefits, excluding interest and penalties, is
as follows:
2010 | 2009 | |||||||
(in thousands) | ||||||||
Balance at beginning of the year |
$ | 5,277 | $ | 5,381 | ||||
Increases for prior year tax positions |
| 73 | ||||||
Increases for current year tax positions |
344 | 792 | ||||||
Decreases related to settlements |
(1,636 | ) | | |||||
Decreases related to statute lapses |
(507 | ) | (530 | ) | ||||
Increases/(decreases) related to exchange rate changes |
93 | (439 | ) | |||||
Balance at end of the year |
$ | 3,571 | $ | 5,277 | ||||
All of the balance of unrecognized tax benefits at August 31, 2010 of $4,241,000, including
interest and penalties, would, if recognized, affect the effective tax rate. The balance of
unrecognized tax benefits at August 31, 2009 was $6,156,000, including interest and penalties.
To the extent penalties and interest would be assessed on any underpayment of income tax, such
amounts have been accrued and classified as a component of income tax expense in the financial
statements. Accrued interest and penalties are included in the related tax liability in the
Consolidated Balance Sheet. The Company made no payments of interest and penalties in fiscal 2010,
and as of August 31, 2010, has recognized a liability for interest and penalties of $0.7 million.
The Company had recognized a liability for interest and penalties of $0.9 million at August 31,
2009.
The Company does not anticipate a significant change in the balance of unrecognized tax benefits
within the next 12 months.
The Company is subject to income tax in numerous jurisdictions where it operates including
in the United States, Canada, Germany, Italy, Switzerland, the United Kingdom and the
Netherlands. The Company is open to examination in the United States from the tax year ended 2009
to present. The Companys non-U.S. locations are open to examination as far back as tax year ended
2004 to present.
NOTE 10 COMMON STOCK
We sponsor a long-term incentive stock plan to provide for the granting of stock-based compensation
to certain officers and other key employees. Under the plan, the stock option price per share
cannot be less than the fair market value per share as of the date of grant. Outstanding grants
become exercisable over a three-year period. Option awards generally have 10-year contractual
terms. Proceeds from the sale of stock issued under option arrangements are credited to common
stock. In addition, we sponsor a stock compensation plan for non-employee directors.
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Summaries of amounts issued under the stock option plans are presented in the following tables. All
data reflects our 2-for-1 stock split which was effective February 28, 2008. The 2-for-1 stock
split was in the form of share distribution.
Stock option activity
Weighted- | ||||||||
Stock | Average Option | |||||||
Options | Price Per Share | |||||||
Outstanding at September 1, 2007 |
737,800 | $ | 11.84 | |||||
Granted |
111,822 | 12.70 | ||||||
Exercised |
(388,198 | ) | 11.26 | |||||
Outstanding at August 31, 2008 |
461,424 | 16.52 | ||||||
Granted |
153,187 | 21.35 | ||||||
Exercised |
(34,462 | ) | 11.67 | |||||
Canceled |
(27,807 | ) | 24.27 | |||||
Outstanding at August 31, 2009 |
552,342 | 17.77 | ||||||
Granted |
150,140 | 22.33 | ||||||
Exercised |
(4,334 | ) | 11.48 | |||||
Canceled |
(33,356 | ) | 23.75 | |||||
Outstanding at August 31, 2010 |
664,792 | $ | 18.54 | |||||
Exercisable stock options at year-end |
||||
2008 |
252,805 | |||
2009 |
318,157 | |||
2010 |
387,157 | |||
Shares available for grant at year-end |
||||
2008 |
1,740,362 | |||
2009 |
1,543,323 | |||
2010 |
1,287,369 |
Components of outstanding stock options at August 31, 2010
Weighted- | ||||||||||||||||
Average | Weighted- | Intrinsic | ||||||||||||||
Number | Contract Life in | Average | Value | |||||||||||||
Range of Exercise Price | Outstanding | Years | Exercise Price | (In thousands) | ||||||||||||
$ 7.69 10.89 |
155,000 | 4.39 | $ | 10.61 | $ | 2,023 | ||||||||||
11.50 31.02 |
509,792 | 6.87 | 20.95 | 1,382 | ||||||||||||
$ 7.69 31.02 |
664,792 | 6.29 | $ | 18.54 | $ | 3,405 | ||||||||||
Components of exercisable stock options at August 31, 2010
Weighted- | ||||||||||||||||
Average | Weighted- | Intrinsic | ||||||||||||||
Number | Contract Life in | Average | Value | |||||||||||||
Range of Exercise Price | Exercisable | Years | Exercise Price | (In thousands) | ||||||||||||
$ 7.69 10.89 |
155,000 | 4.39 | $ | 10.61 | $ | 2,023 | ||||||||||
11.50 29.73 |
232,157 | 4.94 | 18.46 | 1,207 | ||||||||||||
$ 7.69 29.73 |
387,157 | 4.72 | $ | 15.32 | $ | 3,230 | ||||||||||
The total intrinsic value of options exercised during fiscal 2010, 2009, and 2008 was $52,800,
$398,000 and $12,649,000, respectively.
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Under our
2008, 2009 and 2010 long-term incentive stock plans,
each a subplan under our 2004 Stock Incentive Plan As Amended, selected participants were
granted target performance share awards. The ultimate performance shares earned under the plans
range from 0% to 200% of the target award based on earnings per share and return on net assets. No
performance share awards were earned under our 2009 long-term incentive plan. The performance
shares are earned at the end of one year, but are only issued as common shares to the participant
if the participant continues in our employment for two more years. Under our previous long-term
incentive stock plan, selected participants received awards which converted into a variable number
of restricted shares based on absolute measures based on earnings per share and return on net
assets. The restricted shares earned ranged from 50% to 200% of the target award. Restricted shares
earned were issued to the participants at the end of the three-year measurement period and were
subject to forfeiture if the participant left our employment within the following one to two years.
For the performance period ended August 31, 2010, a value of $927,000 performance shares were
earned ($1,501,000 and $1,745,000 in fiscal 2009 and fiscal 2008, respectively).
As of August 31, 2010 we had $2,709,000 of compensation expense not yet recognized related to
nonvested stock awards. The weighted-average period that this compensation cost will be recognized
is 1.8 years.
Total after tax compensation expense included in net income for all stock based awards was
$1,882,000, $2,146,000 and $2,100,000 for fiscal years 2010, 2009 and 2008, respectively.
NOTE 11 SHARE REPURCHASE PROGRAM
On October 27, 2008, we announced that our Board of Directors authorized the repurchase of up to
3.0 million of our currently outstanding common shares (the Program). Repurchases under the
Program have and will generally be made in the open market or in privately negotiated transactions
not exceeding prevailing market prices, subject to regulatory considerations and market conditions,
and have and will be funded from the Companys available cash and credit facilities. In the first
quarter of fiscal 2009, we acquired approximately 2.0 million of our outstanding common shares for
$39.1 million under the Program, which were accounted for as treasury shares.
NOTE 12 NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income per share:
2010 | 2009 | 2008 | ||||||||||
(In thousands, except per share data) | ||||||||||||
Numerator: |
||||||||||||
Net income attributable to Robbins & Myers, Inc. |
$ | 33,197 | $ | 55,364 | $ | 87,402 | ||||||
Denominator: |
||||||||||||
Basic weighted average shares |
32,924 | 33,227 | 34,524 | |||||||||
Effect of dilutive options and restricted shares/units |
80 | 34 | 194 | |||||||||
Diluted shares |
33,004 | 33,261 | 34,718 | |||||||||
Net income per share: |
||||||||||||
Basic |
$ | 1.01 | $ | 1.67 | $ | 2.53 | ||||||
Diluted |
$ | 1.01 | $ | 1.66 | $ | 2.52 |
At August 31, 2010 and 2009, 227,000 and 245,500, respectively, of stock options outstanding were
anti-dilutive and excluded from the computation of dilutive earnings per share. There were no
anti-dilutive stock options at August 31, 2008.
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NOTE 13 BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION
Fluid Management. Our Fluid Management business segment designs, manufactures and markets equipment
and systems used in oil and gas exploration, recovery and transportation, specialty chemical,
wastewater treatment and a variety of other industrial applications. Primary brands include Moyno®,
Yale®, New Era®, Chemineer®, TARBY® and Hercules®. Our products and systems include hydraulic
drilling power sections; down-hole
and industrial progressing cavity pumps and related products such as grinders for applications
involving the flow of viscous, abrasive and solid-laden slurries and
sludge; standard and customized fluid-agitation equipment and systems; and a broad line of
ancillary equipment for the energy sector, such as rod guides, rod and tubing rotators, wellhead systems, pipeline
closure products and valves.
Process Solutions. Our Process Solutions business segment designs, manufactures and services
glass-lined reactors and storage vessels. We also provide
alloy steel vessels, heat exchangers, other fluid systems,
wiped film evaporators and packaged process systems. In
addition, we also provide customized fluoropolymer-lined fittings, vessels and accessories. The
primary markets served by this segment are the pharmaceutical and specialty chemical markets.
Primary brands are Pfaudler®, Tycon-Technoglass®, and Edlon®.
Romaco. Our Romaco business segment designs, manufactures and markets packaging and secondary
processing equipment for the pharmaceutical, healthcare, nutraceutical, food and cosmetic
industries. Packaging applications include blister and strip
packaging for various products including tablets, effervescent tablets and capsules; filling of both liquid and powder into vials and
bottles, capsule and tube filling; tablet counting and packaging for bottles; customized
packaging for drug delivery devices; as well as secondary processing for liquids and semi solids.
Primary brands are Noack®, Siebler®, FrymaKoruma®, Macofar® and Promatic®.
We evaluate performance and allocate resources based on income before interest and income taxes
(EBIT). Identifiable assets by business segment include all assets directly identified with those
operations. Corporate assets consist mostly of cash and intangible assets. The accounting policies
of the reportable segments are the same as those described in the summary of significant accounting
policies except that we account for U.S. inventory on a FIFO basis at the segment level compared
with a LIFO basis at the consolidated level.
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The following tables present information about our reportable business segments. Effective in the
first quarter of fiscal 2010, the Company realigned its business segment reporting structure as a
result of organizational, management and operational changes. Our Chemineer brand is now included
in our Fluid Management segment, instead of the Process Solutions segment where it was previously
reported. The financial information presented herein reflects the impact of this change for all
periods presented. Inter-segment sales were not material and were eliminated at the consolidated
level.
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Unaffiliated Customer Sales: |
||||||||||||
Fluid Management |
$ | 308,452 | $ | 327,935 | $ | 389,525 | ||||||
Process Solutions |
169,741 | 199,410 | 246,947 | |||||||||
Romaco |
106,501 | 113,013 | 150,696 | |||||||||
Total |
$ | 584,694 | $ | 640,358 | $ | 787,168 | ||||||
Depreciation and Amortization: |
||||||||||||
Fluid Management |
$ | 7,988 | $ | 8,275 | $ | 8,005 | ||||||
Process Solutions |
5,049 | 5,481 | 5,741 | |||||||||
Romaco |
2,289 | 2,013 | 1,869 | |||||||||
Corporate and Eliminations |
304 | 457 | 634 | |||||||||
Total |
$ | 15,630 | $ | 16,226 | $ | 16,249 | ||||||
Income Before Interest and Income Taxes (EBIT): |
||||||||||||
Fluid Management |
$ | 75,329 | $ | 79,988 | $ | 97,254 | ||||||
Process Solutions |
(8,737 | )(1) | 8,569 | 31,635 | (2) | |||||||
Romaco |
3,960 | 2,292 | 20,603 | (3) | ||||||||
Corporate and Eliminations |
(19,674 | ) | (16,481 | ) | (18,828 | ) | ||||||
Total |
$ | 50,878 | $ | 74,368 | $ | 130,664 | ||||||
Identifiable Assets: |
||||||||||||
Fluid Management |
$ | 323,053 | $ | 327,491 | $ | 353,407 | ||||||
Process Solutions |
242,942 | 269,146 | 290,469 | |||||||||
Romaco |
81,631 | 98,335 | 111,610 | |||||||||
Corporate and Eliminations |
169,395 | 101,882 | 109,231 | |||||||||
Total |
$ | 817,021 | $ | 796,854 | $ | 864,717 | ||||||
Capital Expenditures: |
||||||||||||
Fluid Management |
$ | 5,741 | $ | 12,225 | $ | 15,179 | ||||||
Process Solutions |
2,713 | 3,104 | 7,705 | |||||||||
Romaco |
2,094 | 2,790 | 1,505 | |||||||||
Corporate and Eliminations |
63 | (425 | ) | (2,275 | ) | |||||||
Total |
$ | 10,611 | $ | 17,694 | $ | 22,114 | ||||||
(1) | Includes costs of $2,764,000 related to restructuring activities. | |
(2) | Includes gain of $835,000 related to the disposition of facilities. | |
(3) | Includes gain of $6,796,000 on product line and facility dispositions. |
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Information about our operations in different geographical regions is presented below. Our primary
operations are in North America, Europe and Asia. Sales are attributed to countries based on the
location of the customer.
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Sales: |
||||||||||||
United States |
$ | 240,240 | $ | 241,354 | $ | 304,100 | ||||||
Europe |
135,076 | 171,457 | 215,133 | |||||||||
Other North America |
62,827 | 59,715 | 81,738 | |||||||||
Asia |
93,856 | 107,836 | 111,108 | |||||||||
South America |
28,440 | 28,402 | 36,207 | |||||||||
Other |
24,255 | 31,594 | 38,882 | |||||||||
$ | 584,694 | $ | 640,358 | $ | 787,168 | |||||||
Tangible Assets: |
||||||||||||
United States |
$ | 121,829 | $ | 128,091 | $ | 145,789 | ||||||
Europe |
148,782 | 171,905 | 186,100 | |||||||||
Other North America |
30,070 | 25,179 | 27,915 | |||||||||
South America |
21,682 | 20,429 | 21,461 | |||||||||
Asia and Australia |
56,533 | 63,053 | 75,907 | |||||||||
Corporate |
174,019 | 114,721 | 121,786 | |||||||||
$ | 552,915 | $ | 523,378 | $ | 578,958 | |||||||
NOTE 14 SUBSEQUENT EVENTS
On
October 6, 2010, Robbins & Myers, Inc. (R&M), Triple Merger I, Inc., a Delaware corporation and
a wholly-owned subsidiary of R&M (Merger Sub I), Triple Merger II, Inc., a Delaware corporation
and a wholly-owned subsidiary of R&M (Merger Sub II), and T-3 Energy Services, Inc., a Delaware
corporation (T-3), (NASDAQ: TTES), entered into an Agreement and Plan of Merger (the Merger
Agreement). The Merger Agreement provides that, upon the terms and subject to the conditions set
forth in the Merger Agreement, Merger Sub I will merge with and into T-3, with T-3 surviving as a
wholly-owned subsidiary of R&M (the Merger). The Merger Agreement and the Merger have been
unanimously approved by the Boards of Directors of both R&M and T-3.
T-3, located in Houston, Texas, provides oilfield and pipeline products and services and will
operate under our Fluid Management segment.
Under the Merger Agreement, T-3 stockholders will receive 0.894 common shares of R&M, without par
value, plus $7.95 in cash, without interest, for each share of common stock of T-3, par value
$0.001 per share, in a transaction valued at approximately $422 million as of the date of the announcement.
Accordingly, T-3 stockholders are estimated to receive an aggregate of approximately 12 million of
our common shares and $106 million in cash. Upon completion of the Merger Agreement, we expect T-3
stockholders to own approximately 27% of our outstanding common shares.
The exchange ratio is fixed and will not be adjusted in the event of any change in the price of R&M
common shares or T-3 common stock between the date of the Merger Agreement and the closing. Because
the exchange ratio is fixed, the value of the consideration paid for each share of T-3 common stock
will vary based upon any changes in the market value of common shares of R&M. Changes in the market
value of shares of T-3 common stock will have no effect upon the value of the consideration paid
for each share of T-3 common stock.
Completion of the Merger is conditioned upon: (1) approval by R&M shareholders and T-3
stockholders; (2) the absence of any law or order prohibiting the closing; (3) regulatory
approvals, including expiration or early termination of the applicable waiting period under the
Hart-Scott Rodino Antitrust Improvements Act of 1976; (4) subject to certain exceptions, the
accuracy of representations and warranties and the performance of covenants; (5) the effectiveness
of a registration statement on Form S-4 that will be filed by R&M for the issuance of its common
shares in the Merger and the authorization of the listing of those shares on the NYSE; (6) the
delivery of customary opinions from counsel to Robbins & Myers and T-3 that the Merger will qualify
as a tax-free reorganization for U.S. federal income tax purposes; and (7) other closing conditions
set forth in the Merger Agreement.
Annual revenues of T-3 for the years ended December 31, 2009 and 2008 were approximately $218
million and $285 million, respectively. Total assets of T-3 for the years ended December 31, 2009
and 2008 were approximately $280 million and $287 million, respectively.
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NOTE 15 QUARTERLY DATA (UNAUDITED)
Earnings per share for each quarter and the year are calculated individually and may not add
up to the total for the year.
2010 Quarters | ||||||||||||||||||||
1st | 2nd | 3rd | 4th | Total | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Sales |
$ | 129,413 | $ | 129,919 | $ | 146,965 | $ | 178,397 | $ | 584,694 | ||||||||||
Gross profit |
43,034 | 41,930 | 51,378 | 60,606 | 196,948 | |||||||||||||||
EBIT |
9,736 | 6,546 | 13,078 | 21,518 | (1) | 50,878 | (1) | |||||||||||||
Income before income taxes and
noncontrolling interest |
9,593 | 6,385 | 12,976 | 21,729 | (1) | 50,683 | (1) | |||||||||||||
Net income attributable to Robbins & Myers, Inc. |
6,030 | 4,193 | 8,162 | 14,812 | (1) | 33,197 | (1) | |||||||||||||
Net income per share: |
||||||||||||||||||||
Basic |
$ | 0.18 | $ | 0.13 | $ | 0.25 | $ | 0.45 | (1) | $ | 1.01 | (1) | ||||||||
Diluted |
0.18 | 0.13 | 0.25 | 0.45 | (1) | 1.01 | (1) | |||||||||||||
Weighted average common shares: |
||||||||||||||||||||
Basic |
32,872 | 32,927 | 32,941 | 32,953 | 32,924 | |||||||||||||||
Diluted |
32,911 | 32,966 | 33,016 | 33,045 | 33,004 |
2009 Quarters | ||||||||||||||||||||
1st | 2nd | 3rd | 4th | Total | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Sales |
$ | 177,971 | $ | 163,825 | $ | 143,375 | $ | 155,187 | $ | 640,358 | ||||||||||
Gross profit |
67,976 | 56,776 | 49,793 | 49,952 | 224,497 | |||||||||||||||
EBIT |
26,394 | 20,835 | 12,395 | 14,744 | 74,368 | |||||||||||||||
Income before income taxes and
noncontrolling interest |
26,341 | 20,745 | 12,296 | 14,604 | 73,986 | |||||||||||||||
Net income attributable to Robbins & Myers, Inc. |
17,208 | 15,063 | 10,286 | 12,807 | 55,364 | |||||||||||||||
Net income per share: |
||||||||||||||||||||
Basic |
$ | 0.50 | $ | 0.46 | $ | 0.31 | $ | 0.39 | $ | 1.67 | ||||||||||
Diluted |
0.50 | 0.46 | 0.31 | 0.39 | 1.66 | |||||||||||||||
Weighted average common shares: |
||||||||||||||||||||
Basic |
34,429 | 32,802 | 32,829 | 32,853 | 33,227 | |||||||||||||||
Diluted |
34,465 | 32,804 | 32,845 | 32,941 | 33,261 |
(1) | Includes restructuring charges of $2,764,000 ($2,764,000 after tax, and $0.08 per share) related to severance costs at our German facility in our Process Solutions segment. |
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Table of Contents
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO),
conducted an evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures (Disclosure Controls) as of August 31, 2010. Based upon this evaluation,
our CEO and CFO have concluded that the design and operation of our disclosure controls and
procedures were effective as of August 31, 2010.
Disclosure Controls are controls and procedures designed to reasonably assure that information
required to be disclosed in our reports filed under the Exchange Act, such as this Form 10-K, is
recorded, processed, summarized and reported within the time periods specified in the U.S.
Securities and Exchange Commissions (SEC) rules and forms. Disclosure Controls are also designed
to reasonably assure that such information is accumulated and communicated to our management,
including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Our quarterly evaluation of Disclosure Controls includes an evaluation of some components of our
internal control over financial reporting, and internal control over financial reporting is also
separately evaluated on an annual basis for purposes of providing the management report which is
set forth below.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting to provide reasonable assurance regarding the reliability of our financial
reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. Internal control over financial reporting includes those
policies and procedures that:
| Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; | ||
| Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and | ||
| Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements. |
Management assessed our internal control over financial reporting as of August 31, 2010, the end of
our fiscal year. Management based its assessment on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Managements assessment included evaluation of such elements as the design and
operating effectiveness of key financial reporting controls, process documentation, accounting
policies, and our overall control environment. Based on our evaluation, our management concluded
that our internal control over financial reporting was effective as of August 31, 2010. Our
independent registered public accounting firm, Ernst & Young LLP, independently assessed the
effectiveness of the Companys internal control over financial reporting. Ernst & Young LLP has
issued an attestation report, which is included at Part II, Item 8 of this Form 10-K.
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Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the fiscal
quarter ended August 31, 2010 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
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PART III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information Concerning Directors and Executive Officers
The information required by this item relating to directors and executive officers of the Company,
the Companys Audit Committee and Section 16(a) Compliance is incorporated herein by reference to
that part of the information under Election of Directors, Security Ownership and Section 16
Beneficial Ownership Reporting Compliance in the Companys
Proxy Statement for its 2011 Annual Meeting
of Shareholders
(the date of which has not yet been finally determined), or will be contained in an amendment to this Form 10-K. Certain information concerning executive
officers of the Company appears under Executive Officers of the Registrant at Part I of this
Report.
Code of Ethics
The Company has a Code of Business Conduct (the Code) that applies to all employees, executive
officers and directors of the Company. A copy of the Code is posted on the Companys website. The
Code also serves as a code of ethics for the Companys chief executive officer, principal financial
officer, principal accounting officer, controller, or any person performing similar functions (the
Senior Officers). Any waiver of any provision of the Code granted to a Senior Officer may only be
granted by the full Board of Directors or its Audit Committee. If a waiver is granted, information
concerning the waiver will be posted on the Companys website www.robn.com for a period of 12
months.
Audit Committee Financial Expert
The Companys Board of Directors has determined that at least two persons serving on its Audit
Committee are audit committee financial experts as defined under Item 407(d)(5) of Regulation
S-K. Dale L. Medford and Andrew G. Lampereur, members of the Audit Committee, are audit committee
financial experts and are independent as that term is defined by the
NYSE listing standards.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated herein by reference to the Proxy Statement
for our 2011 Annual Meeting of
Shareholders (the date of which has not yet been finally
determined), or will be contained in an amendment to this Form 10-K.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding our equity compensation plans as of
August 31, 2010:
(c) | ||||||||||||
Number of | ||||||||||||
Common Shares | ||||||||||||
Remaining | ||||||||||||
(b) | Available for | |||||||||||
(a) | Weighted- | Future Issuance | ||||||||||
Number of Common | Average | Under Equity | ||||||||||
Shares to | Exercise Price of | Compensation | ||||||||||
be issued Upon | Outstanding | Plans (excluding | ||||||||||
Exercise of | Options, | securities | ||||||||||
Outstanding Options, | Warrants, and | reflected in | ||||||||||
Plan Category | Warrants, and Rights | Rights | column (a)) | |||||||||
Equity compensation plans
approved by
shareholders(1,2) |
664,792 | $ | 18.54 | 1,287,369 | ||||||||
Equity compensation plans
not approved by shareholders |
| | | |||||||||
Total |
664,792 | $ | 18.54 | 1,287,369 | ||||||||
(1) | Includes outstanding options under (i) our 1994 Long-Term Incentive Stock Plan, 1995 Stock Option Plan for Non-Employee Directors, and 1999 Long-Term Incentive Plan, all of which have terminated as to future awards, and (ii) our 2004 Stock Incentive Plan As Amended. | |
(2) | All shares listed in Column (c) are available for future awards under our 2004 Stock Incentive Plan As Amended. Awards may be comprised of options, restricted shares, restricted units, performance shares, share awards or share unit awards upon such terms as the Compensation Committee of the Board determines at the time of grant that are consistent with the express terms of the plan. |
The other information required by this Item 12 is incorporated herein by reference to the Proxy
Statement for our 2011 Annual Meeting of Shareholders (the date of
which has not yet been finally determined), or will be contained in an amendment to this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this Item 13 is incorporated herein by reference to the Proxy Statement
for our 2011 Annual Meeting of Shareholders (the date of which has not yet
been finally determined), or will be contained in an amendment to this Form 10-K.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item 14 is incorporated herein by reference to the Proxy Statement
for our 2011 Annual Meeting of Shareholders (the date of which has not yet
been finally determined), or will be contained in an amendment to
this Form 10-K.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) | FINANCIAL STATEMENTS | ||
The following consolidated financial statements of Robbins & Myers, Inc. and its subsidiaries are at Item 8 hereof. |
27 | ||||
28 | ||||
29 | ||||
30 | ||||
31 |
(a) (2) | FINANCIAL STATEMENT SCHEDULE |
Schedule II Valuation and Qualifying Accounts |
62 |
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.
(a) (3) | EXHIBITS. | ||
See INDEX to EXHIBITS. |
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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 26th day of October, 2010.
ROBBINS & MYERS, INC. |
||||
BY | /s/ Peter C. Wallace | |||
Peter C. Wallace | ||||
President and Chief Executive Officer | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed
below by the following persons on behalf of Robbins & Myers, Inc. and in the capacities and on the
date indicated:
NAME | TITLE | DATE | ||
/s/ Peter C. Wallace
|
Director, President and Chief Executive Officer | October 26, 2010 | ||
/s/ Christopher M. Hix
|
Vice President and Chief
Financial Officer (Principal Financial Officer) |
October 26, 2010 | ||
/s/ Kevin J. Brown
|
Corporate Controller (Principal Accounting Officer) |
October 26, 2010 | ||
*Thomas P. Loftis
|
Chairman Of Board | October 26, 2010 | ||
*Richard J. Giromini
|
Director | October 26, 2010 | ||
*Stephen F. Kirk
|
Director | October 26, 2010 | ||
*Andrew G. Lampereur
|
Director | October 26, 2010 | ||
*Dale L. Medford
|
Director | October 26, 2010 | ||
*Albert J. Neupaver
|
Director | October 26, 2010 |
* | The undersigned, by signing his name hereto, executes this Report on Form 10-K for the year ended August 31, 2010 pursuant to powers of attorney executed by the above-named persons and filed with the Securities and Exchange Commission. |
/s/ Peter C. Wallace | ||||
Peter C. Wallace | ||||
Their Attorney-in-fact | ||||
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SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
Additions | ||||||||||||||||||||
Balance at | Charged to Costs | Other - | Deductions- | Balance at | ||||||||||||||||
Description | Beginning of Period | and Expenses | Describe (8) | Describe | End of Period | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Year Ended August 31, 2010 |
||||||||||||||||||||
Allowances and reserves deducted from assets: |
||||||||||||||||||||
Uncollectible and reserves deducted from assets |
$ | 7,470 | $ | 659 | $ | (414 | ) | $ | 2,166 | (2) | $ | 5,549 | ||||||||
Inventory obsolescence |
18,325 | 1,894 | (549 | ) | 1,017 | (3) | 18,653 | |||||||||||||
Deferred tax asset valuation allowance |
15,302 | 3,185 | (443 | ) | 3,175 | (4) | 14,869 | |||||||||||||
Other reserves: |
||||||||||||||||||||
Warranty claims |
7,221 | 2,468 | (43 | ) | 3,354 | (5) | 6,292 | |||||||||||||
Current & L-T insurance reserves |
1,520 | 901 | | 993 | (6) | 1,428 | ||||||||||||||
Restructuring reserves |
| 2,721 | | | 2,721 | |||||||||||||||
Year Ended August 31, 2009 |
||||||||||||||||||||
Allowances and reserves deducted from assets: |
||||||||||||||||||||
Uncollectible and reserves deducted from assets |
$ | 7,695 | $ | 1,196 | $ | (299 | ) | $ | 1,122 | (2) | $ | 7,470 | ||||||||
Inventory obsolescence |
15,309 | 6,312 | (534 | ) | 2,762 | (3) | 18,325 | |||||||||||||
Deferred tax asset valuation allowance |
14,720 | 1,477 | (233 | ) | 662 | (4) | 15,302 | |||||||||||||
Other reserves: |
||||||||||||||||||||
Warranty claims |
7,853 | 2,750 | (95 | ) | 3,287 | (5) | 7,221 | |||||||||||||
Current & L-T insurance reserves |
1,311 | 1,254 | | 1,045 | (6) | 1,520 | ||||||||||||||
Year Ended August 31, 2008 |
||||||||||||||||||||
Allowances and reserves deducted from assets: |
||||||||||||||||||||
Uncollectible and reserves deducted from assets |
$ | 6,189 | $ | 1,790 | $ | 333 | (1) | $ | 617 | (2) | $ | 7,695 | ||||||||
Inventory obsolescence |
14,137 | 1,791 | 430 | 1,049 | (3) | 15,309 | ||||||||||||||
Deferred tax asset valuation allowance |
19,140 | 969 | 469 | 5,858 | (4) | 14,720 | ||||||||||||||
Other reserves: |
||||||||||||||||||||
Warranty claims |
7,922 | 1,851 | 53 | 1,973 | (5) | 7,853 | ||||||||||||||
Current & L-T insurance reserves |
1,663 | 801 | | 1,153 | (6) | 1,311 | ||||||||||||||
Restructuring reserves |
258 | | | 258 | (7) | |
(1) | Includes impact from acquisition of Mavag (by our 51 percent owned consolidated joint venture in India) in fiscal 2008 of $250,000. | |
(2) | Represents accounts receivable written off against the reserve. | |
(3) | Inventory items scrapped and written off against the reserve. | |
(4) | Impact of valuation allowance release including expiration of related net operating losses and changes in tax rates. | |
(5) | Warranty cost incurred applied against the reserve. | |
(6) | Spending against casualty reserve. | |
(7) | Spending against restructuring reserve. | |
(8) | Includes impact of exchange rates, and for fiscal 2008, allowance for doubtful accounts of acquired business. |
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INDEX TO EXHIBITS
(2) | PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION |
2.1
|
Agreement and Plan of Merger, dated as of October 6, 2010, by and among Robbins & Myers, Inc., Triple Merger I, Inc., Triple Merger II, Inc., and T-3 Energy Services, Inc., filed as Exhibit 2.1 to our Current Report on Form 8-K filed on October 6, 2010 | */** | ||
(3) | ARTICLES OF INCORPORATION AND BY-LAWS: |
3.1
|
Amended Articles of Incorporation of Robbins & Myers, Inc was filed as Exhibit 3.1 to our Quarterly Report on Form 10-Q for the Quarter ended February 29, 2008 | ** | ||
3.2
|
Code of Regulations of Robbins & Myers, Inc. was filed as Exhibit 3.1 to our Quarterly Report on Form 10-Q for the Quarter ended February 28, 2007 | ** |
(4) | INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES: |
4.1
|
Fifth Amended and Restated Credit Agreement dated December 19, 2006 among Robbins & Myers, Inc., Robbins & Myers Finance Europe B.V., the Lenders named in the amended agreement and JP Morgan Chase Bank, N.A. as Administrative Agent and Issuing Bank was filed as Exhibit 4.1 to our Current Report on Form 8-K filed on December 22, 2006 | ** | ||
4.2
|
Amended and Restated Pledge and Security Agreement between Robbins & Myers, Inc. and Bank One, Dayton, N.A., dated May 15, 1998, was filed as Exhibit 4.2 to our Report on Form 10-K for the year ended August 31, 2003 | ** | ||
4.3
|
Registration Agreement, dated August 7, 2008, between Robbins & Myers, Inc. and M.H.M & Co., Ltd. was filed as Exhibit 4.3 to our Registration Statement on Form S-3ASR (File No. 333-152874), as amended by Post-Effective Amendment No. 1 filed on October 30, 2009 | ** |
(10) | MATERIAL CONTRACTS: |
10.1
|
Robbins & Myers, Inc. Cash Balance Pension Plan (As Amended and Restated Effective as of October 1, 2010) | F/M | ||
10.2
|
Robbins & Myers, Inc. Retirement Savings Plan (January 1, 2010 Restatement) | F/M | ||
10.3
|
First Amendment to Robbins & Myers, Inc. Retirement Savings Plan (January 1, 2010 Restatement) | F/M | ||
10.4
|
Robbins & Myers, Inc. Executive Supplemental Retirement Plan as amended through October 5, 2007 was filed as Exhibit 10.4 to our Annual Report on Form 10-K for the year ended August 31, 2007 | **/M | ||
10.5
|
Robbins & Myers, Inc. Executive Supplemental Pension Plan as amended through October 5, 2007 was filed as Exhibit 10.5 to our Annual Report on Form 10-K for the year ended August 31, 2007 | **/M | ||
10.6
|
Form of Indemnification Agreement between Robbins & Myers, Inc., and each director was filed as Exhibit 10.5 to our Annual Report on Form 10-K for the year ended August 31, 2001 | **/M | ||
10.7
|
Robbins & Myers, Inc. 1994 Directors Stock Compensation Plan was filed as Exhibit 10.6 to our Annual Report on Form 10-K for the year ended August 31, 2001 | **/M |
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10.8
|
Robbins & Myers, Inc. 1994 Long-Term Incentive Stock Plan as amended was filed as Exhibit 10.10 to our Report on Form 10-K for the year ended August 31, 1996 | **/M | ||
10.9
|
Robbins & Myers, Inc. 1995 Stock Option Plan for Non-Employee Directors was filed as Exhibit 4.3 to our Registration Statement on Form S-8 (File No. 333-00293) | **/M | ||
10.10
|
Robbins & Myers, Inc. Senior Executive Annual Cash Bonus Plan as amended through January 9, 2008 was filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the Quarter ended February 29, 2008 | **/M | ||
10.11
|
Robbins & Myers, Inc. 1999 Long-Term Incentive Stock Plan was filed as Exhibit 4.3 to our Registration Statement on Form S-8 (File No. 333-35856) | **/M |
10.12
|
Robbins & Myers, Inc. 2004 Stock Incentive Plan As Amended (as amended through October 5, 2010), filed as Exhibit 10.1 to our Current Report on Form 8-K filed on October 12, 2010 | **/M | ||
10.13
|
Letter Agreement between Robbins & Myers, Inc. and Christopher M. Hix, dated July 17, 2006 was filed as Exhibit 10.1 to our Current Report on Form 8-K filed on July 21, 2006 | **/M | ||
10.14
|
Employment Agreement between Robbins & Myers, Inc. and Peter C. Wallace as amended through October 6, 2009 | **/M | ||
10.15
|
Form of Executive Officer Change of Control Agreement as amended through October 5, 2007 entered into with each of Kevin J. Brown, Jeffrey L. Halsey, Christopher M. Hix, and Saeid Rahimian was filed as Exhibit 10.15 to our Annual Report on Form 10-K for the year ended August 31, 2007 | **/M | ||
10.16
|
2006 Executive Supplemental Retirement Plan, effective August 31, 2006, and as amended through October 5, 2007 was filed as Exhibit 10.16 to our Annual Report on Form 10-K for the year ended August 31, 2007 | **/M | ||
10.17
|
Asset and Share Purchase Agreement, dated February 28, 2006, among Robbins & Myers, Inc., Romaco International B.V., and Romaco Pharmatechnik GmbH and Coesia, S.p.A. was filed as Exhibit 10.1 to our Current Report on Form 8-K filed on March 3, 2006 | ** | ||
10.18
|
Severance Agreement and Release of Claims, dated April 6, 2009, between Robbins & Myers, Inc. and Gary L. Brewer, was filed as Exhibit 10.1 to our Current Report on Form 8-K filed on April 9, 2009 | **/M | ||
10.19
|
Form of Restricted Share Unit Award Agreement under Robbins & Myers, Inc. 2004 Stock Incentive Plan As Amended, approved by the Compensation Committee of the Board of Directors of Robbins & Myers, Inc. on October 5, 2010, filed as Exhibit 10.2 to our Current Report on Form 8-K filed on October 12, 2010 | **/M | ||
10.20
|
Form of Option Award Agreement under the Robbins & Myers, Inc. 2004 Stock Incentive Plan As Amended, approved by the Compensation Committee of the Board of Directors of Robbins & Myers, Inc. on October 5, 2010, filed as Exhibit 10.3 to our Current Report on Form 8-K filed on October 12, 2010 | **/M |
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10.21
|
Form of Performance Share Unit Award Agreement for Peter C. Wallace under the Robbins & Myers, Inc. 2004 Stock Incentive Plan As Amended, approved by the Compensation Committee of the Board of Directors of Robbins & Myers, Inc. on October 5, 2010, filed as Exhibit 10.4 to our Current Report on Form 8-K filed on October 12, 2010 | **/M | ||
10.22
|
Form of Performance Share Award Agreement under the Robbins & Myers, Inc. 2004 Stock Incentive Plan As Amended, approved by the Compensation Committee of the Board of Directors of Robbins & Myers, Inc. on October 5, 2010, filed as Exhibit 10.5 to our Current Report on Form 8-K filed on October 12, 2010 | **/M | ||
10.23
|
Form of Compensation Clawback Policy Acknowledgement and Agreement, approved by the Board of Directors of Robbins & Myers, Inc. on October 5, 2010, filed as Exhibit 10.6 to our Current Report on Form 8-K filed on October 12, 2010 | **/M | ||
10.24
|
Voting Agreement, dated October 6, 2010, by and among M.H.M. & Co., Ltd., Robbins & Myers, Inc., and T-3 Energy Services, Inc., filed as Exhibit 10.1 to our Current Report on Form 8-K filed on October 6, 2010 | ** | ||
10.25
|
Waiver, dated as of October 6, 2010, by and among Robbins & Myers, Inc., Robbins & Myers Finance Europe B.V., the Lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, filed as Exhibit 10.2 to our Current Report on Form 8-K filed on October 6, 2010 | ** |
(21) | SUBSIDIARIES OF THE REGISTRANT |
21.1
|
Subsidiaries of Robbins & Myers, Inc. | F |
(23) | CONSENTS OF EXPERTS AND COUNSEL |
23.1
|
Consent of Ernst & Young LLP | F |
(24) | POWER OF ATTORNEY |
24.1
|
Powers of Attorney of any person who signed this Report on Form 10-K on behalf of another pursuant to a Power of Attorney | F |
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(31) | RULE 13A14(A) CERTIFICATIONS |
31.1
|
Rule 13a-14(a) CEO Certification | F | ||
31.2
|
Rule 13a-14(a) CFO Certification | F |
(32) | SECTION 1350 CERTIFICATIONS |
32.1
|
Section 1350 CEO Certification | F | ||
32.2
|
Section 1350 CFO Certification | F |
F | Indicates Exhibit is being filed with this Report. | |
* | The Agreement and Plan of Merger filed as Exhibit 2.1 to our Current Report on 8-K filed on October 6, 2010 omits the disclosure letters to the Merger Agreement. Robbins & Myers agrees to furnish supplementally a copy of these documents to the Securities and Exchange Commission upon request. | |
** | Indicates that Exhibit is incorporated by reference in this Report from a previous filing with the Commission. Unless otherwise indicated, all incorporated items are incorporated from SEC File No. 000-288 and 001-13651. | |
M | Indicates management contract or compensatory arrangement. |
66