Attached files
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EX-31.2 - EX-31.2 - ROBBINS & MYERS, INC. | l41518exv31w2.htm |
EX-32.1 - EX-32.1 - ROBBINS & MYERS, INC. | l41518exv32w1.htm |
EX-31.1 - EX-31.1 - ROBBINS & MYERS, INC. | l41518exv31w1.htm |
EX-32.2 - EX-32.2 - ROBBINS & MYERS, INC. | l41518exv32w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended November 30, 2010
or
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 001-13651
Robbins & Myers, Inc.
(Exact name of registrant as specified in its charter)
Ohio
|
31-0424220 | |
(State or other jurisdiction of
|
(I.R.S. Employer | |
incorporation or organization)
|
Identification No.) | |
51 Plum Street, Suite 260, Dayton, Ohio
|
45440 | |
(Address of principal executive offices)
|
(Zip Code) | |
(937) 458-6600 |
||
(Registrants telephone number, including area code) | ||
None |
||
(Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES þ NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, 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 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 | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). YES o NO þ
Common shares, without par value, outstanding as of November 30, 2010: 32,985,562
TABLE OF CONTENTS
Table of Contents
Part IFinancial Information
Item 1. Financial Statements
ROBBINS & MYERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands)
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands)
November 30, | August 31, | |||||||
2010 | 2010 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 144,209 | $ | 149,213 | ||||
Accounts receivable |
123,687 | 115,387 | ||||||
Inventories: |
||||||||
Finished products |
37,003 | 32,488 | ||||||
Work in process |
41,340 | 36,163 | ||||||
Raw materials |
34,110 | 29,288 | ||||||
112,453 | 97,939 | |||||||
Other current assets |
7,521 | 7,589 | ||||||
Deferred taxes |
14,290 | 14,164 | ||||||
Total Current Assets |
402,160 | 384,292 | ||||||
Goodwill |
265,651 | 260,332 | ||||||
Other Intangible Assets |
3,765 | 3,774 | ||||||
Deferred Taxes |
34,589 | 33,932 | ||||||
Other Assets |
9,568 | 10,091 | ||||||
Property, Plant and Equipment |
310,058 | 302,941 | ||||||
Less accumulated depreciation |
(183,282 | ) | (178,341 | ) | ||||
126,776 | 124,600 | |||||||
TOTAL ASSETS |
$ | 842,509 | $ | 817,021 | ||||
LIABILITIES AND EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | 66,249 | $ | 66,562 | ||||
Accrued expenses |
91,829 | 90,345 | ||||||
Current portion of long-term debt |
140 | 192 | ||||||
Total Current Liabilities |
158,218 | 157,099 | ||||||
Long-Term DebtLess Current Portion |
98 | 93 | ||||||
Deferred Taxes |
42,738 | 42,568 | ||||||
Other Long-Term Liabilities |
131,583 | 126,237 | ||||||
Robbins & Myers, Inc. Shareholders Equity: |
||||||||
Common stock |
154,184 | 153,185 | ||||||
Retained earnings |
385,489 | 372,198 | ||||||
Accumulated other comprehensive loss |
(45,364 | ) | (49,319 | ) | ||||
Total Robbins & Myers, Inc. Shareholders Equity |
494,309 | 476,064 | ||||||
Noncontrolling Interest |
15,563 | 14,960 | ||||||
Total Equity |
509,872 | 491,024 | ||||||
TOTAL LIABILITIES AND EQUITY |
$ | 842,509 | $ | 817,021 | ||||
See Notes to Consolidated Condensed Financial Statements
2
Table of Contents
ROBBINS & MYERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENT
(In thousands, except per share data)
(Unaudited)
CONSOLIDATED CONDENSED INCOME STATEMENT
(In thousands, except per share data)
(Unaudited)
Three Months Ended | ||||||||
November 30, | ||||||||
2010 | 2009 | |||||||
Net sales |
$ | 163,949 | $ | 129,413 | ||||
Cost of sales |
101,778 | 86,379 | ||||||
Gross profit |
62,171 | 43,034 | ||||||
Selling, general and administrative expenses |
37,975 | 33,298 | ||||||
Income before interest and income taxes (EBIT) |
24,196 | 9,736 | ||||||
Interest (income) expense, net |
(25 | ) | 143 | |||||
Income before income taxes |
24,221 | 9,593 | ||||||
Income tax expense |
9,129 | 3,367 | ||||||
Net income including noncontrolling interest |
15,092 | 6,226 | ||||||
Less: Net income attributable to noncontrolling interest |
396 | 196 | ||||||
Net income attributable to Robbins & Myers, Inc. |
$ | 14,696 | $ | 6,030 | ||||
Net income per share: |
||||||||
Basic |
$ | 0.45 | $ | 0.18 | ||||
Diluted |
$ | 0.44 | $ | 0.18 | ||||
Weighted average common shares outstanding: |
||||||||
Basic |
32,971 | 32,872 | ||||||
Diluted |
33,087 | 32,911 | ||||||
Dividends per share: |
||||||||
Declared |
$ | 0.0425 | $ | 0.0400 | ||||
Paid |
$ | 0.0425 | $ | 0.0400 | ||||
See Notes to Consolidated Condensed Financial Statements
3
Table of Contents
ROBBINS & MYERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended | ||||||||
November 30, | ||||||||
2010 | 2009 | |||||||
Operating Activities: |
||||||||
Net income including noncontrolling interest |
$ | 15,092 | $ | 6,226 | ||||
Adjustments to reconcile net income to net cash and
cash equivalents (used) provided by operating activities: |
||||||||
Depreciation |
3,756 | 3,972 | ||||||
Amortization |
135 | 222 | ||||||
Stock compensation expense |
678 | 835 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(6,300 | ) | 5,149 | |||||
Inventories |
(12,534 | ) | (887 | ) | ||||
Accounts payable |
(3,313 | ) | (10,874 | ) | ||||
Accrued expenses |
(2,338 | ) | 2,486 | |||||
Other |
2,314 | 4,161 | ||||||
Net Cash and Cash Equivalents (Used) Provided by Operating Activities |
(2,510 | ) | 11,290 | |||||
Investing Activities: |
||||||||
Capital expenditures, net of nominal disposals |
(3,100 | ) | (2,182 | ) | ||||
Net Cash and Cash Equivalents Used by Investing Activities |
(3,100 | ) | (2,182 | ) | ||||
Financing Activities: |
||||||||
Proceeds from debt borrowings |
2,628 | 2,857 | ||||||
Repayments of long-term debt |
(2,675 | ) | (1,571 | ) | ||||
Net proceeds from issuance of common stock, including stock
option tax benefits |
323 | 111 | ||||||
Dividends paid |
(1,405 | ) | (1,314 | ) | ||||
Net Cash and Cash Equivalents (Used) Provided by Financing Activities |
(1,129 | ) | 83 | |||||
Exchange Rate Impact on Cash |
1,735 | 1,750 | ||||||
(Decrease) Increase in Cash and Cash Equivalents |
(5,004 | ) | 10,941 | |||||
Cash and Cash Equivalents at Beginning of Period |
149,213 | 108,169 | ||||||
Cash and Cash Equivalents at End of Period |
$ | 144,209 | $ | 119,110 | ||||
See Notes to Consolidated Condensed Financial Statements
4
Table of Contents
ROBBINS & MYERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
November 30, 2010
(Unaudited)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
November 30, 2010
(Unaudited)
NOTE 1Preparation of Financial Statements
In the opinion of management, the accompanying unaudited consolidated condensed financial
statements of Robbins & Myers, Inc. and subsidiaries (Company, R&M, we, our or us)
contain all adjustments, consisting of normally recurring items, necessary to present fairly our
financial condition as of November 30, 2010 and August 31, 2010, and the results of our operations
and cash flows for the three month periods ended November 30, 2010 and 2009. Results of operations
for any interim period are not necessarily indicative of results for the full year. All
intercompany transactions have been eliminated.
While we believe that the disclosures are adequately presented, it is suggested that these
consolidated condensed financial statements be read in conjunction with the consolidated financial
statements and notes included in our most recent Annual Report on Form 10-K for the fiscal year
ended August 31, 2010 filed with the Securities and Exchange Commission. There have been no
material changes in the accounting policies followed by us during fiscal year 2011 (fiscal 2011)
from fiscal year 2010 (fiscal 2010). Certain amounts presented in the prior period financial
statements have been reclassified to conform to our current year presentation. These
reclassifications had no material impact on our financial position, earnings, or cash flows.
NOTE 2Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill for the three month period ended November 30, 2010, by
reportable segment, are as follows:
Process | Fluid | |||||||||||||||
Solutions | Mgmt. | Romaco | ||||||||||||||
Segment | Segment | Segment | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Balance as of September 1, 2010 |
$ | 100,278 | $ | 149,463 | $ | 10,591 | $ | 260,332 | ||||||||
Translation adjustment impact |
3,607 | 1,162 | 550 | 5,319 | ||||||||||||
Balance as of November 30, 2010 |
$ | 103,885 | $ | 150,625 | $ | 11,141 | $ | 265,651 | ||||||||
5
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Information regarding our other intangible assets is as follows:
As of November 30, 2010 | As of August 31, 2010 | |||||||||||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||||||||||
Amount | Amortization | Net | Amount | Amortization | Net | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Patents and
Trademarks |
$ | 9,556 | $ | 7,591 | $ | 1,965 | $ | 9,434 | $ | 7,465 | $ | 1,969 | ||||||||||||
Non-compete
Agreements |
8,779 | 7,461 | 1,318 | 8,680 | 7,359 | 1,321 | ||||||||||||||||||
Financing Costs |
9,618 | 9,136 | 482 | 9,536 | 9,052 | 484 | ||||||||||||||||||
Other |
5,158 | 5,158 | | 5,120 | 5,120 | | ||||||||||||||||||
Total |
$ | 33,111 | $ | 29,346 | $ | 3,765 | $ | 32,770 | $ | 28,996 | $ | 3,774 | ||||||||||||
The amortization expense for the three months ended November 30, 2010 was $135,000. We estimate
that the amortization expense will be approximately $400,000 for the remainder of fiscal 2011 and
$500,000 for each of the next five years beginning fiscal 2012. 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.
NOTE 3Net Income per Share
Three Months Ended | ||||||||
November 30, | ||||||||
2010 | 2009 | |||||||
(In thousands, except per | ||||||||
share amounts) | ||||||||
Numerator: |
||||||||
Net income attributable to Robbins & Myers, Inc. |
$ | 14,696 | $ | 6,030 | ||||
Denominator: |
||||||||
Basic weighted average shares |
32,971 | 32,872 | ||||||
Effect of
dilutive options and restricted shares/units |
116 | 39 | ||||||
Diluted weighted average shares |
33,087 | 32,911 | ||||||
Basic net income per share |
$ | 0.45 | $ | 0.18 | ||||
Diluted net income per share |
$ | 0.44 | $ | 0.18 | ||||
As of November 30, 2010 and 2009; 161,000 and 230,000, respectively, of stock options outstanding
were antidilutive and excluded from the computation of diluted net income per share.
6
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NOTE 4Product 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 period are as follows:
Three Months Ended | ||||
November 30, 2010 | ||||
(In thousands) | ||||
Balance at beginning of the period |
$ | 6,292 | ||
Warranty expense |
522 | |||
Deductions / payments |
(694 | ) | ||
Translation adjustment impact |
28 | |||
Balance at end of the period |
$ | 6,148 | ||
NOTE 5Long-Term Debt
November 30, 2010 | ||||
(In thousands) | ||||
Senior debt: |
||||
Revolving credit loan |
$ | | ||
Other |
238 | |||
Total debt |
238 | |||
Less current portion |
140 | |||
Long-term debt |
$ | 98 | ||
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 November 30, 2010, we have
$33,811,000 of standby letters of credit outstanding at November 30, 2010. These standby letters of
credit are used as security for advance payments received from customers and for future payments to
our vendors. Accordingly, under the Agreement we have $116,189,000 of unused borrowing capacity.
The Agreement contains certain restrictive covenants including limitations on indebtedness,
acquisitions, asset sales, sales and lease backs, and cash dividends as well as financial covenants
relating to interest coverage, leverage and net worth. As of November 30, 2010, we are in
compliance with these covenants.
On October 6, 2010, we obtained the required waiver from the parties to the Agreement regarding any
event of default that may occur under the Agreement arising solely as a result of the approval of
the merger with T-3 Energy Services, Inc. by either the Board of Directors or the shareholders of
R&M.
7
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NOTE 6Retirement Benefits
Pension and other postretirement plan costs are as follows:
Pension Benefits
Three Months Ended | ||||||||
November 30, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Service cost |
$ | 564 | $ | 531 | ||||
Interest cost |
2,206 | 2,470 | ||||||
Expected return on plan assets |
(1,745 | ) | (1,692 | ) | ||||
Amortization of transition asset |
(9 | ) | (9 | ) | ||||
Amortization of prior service cost |
59 | 182 | ||||||
Amortization of unrecognized losses |
1,015 | 797 | ||||||
Settlement/curtailment expense |
1,418 | 161 | ||||||
Net periodic benefit cost |
$ | 3,508 | $ | 2,440 | ||||
We entered into a new labor agreement in one of our U.S. facilities in the first quarter of fiscal
2011. As a result, we incurred curtailment expense of approximately $1,200,000 in the first quarter
of fiscal 2011. Curtailment of the pension plan is expected to reduce pension costs in future
years.
Other Postretirement Benefits
Three Months Ended | ||||||||
November 30, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Service cost |
$ | 140 | $ | 155 | ||||
Interest cost |
332 | 345 | ||||||
Amortization of prior service cost |
53 | 53 | ||||||
Amortization of unrecognized losses |
150 | 72 | ||||||
Net periodic benefit cost |
$ | 675 | $ | 625 | ||||
NOTE 7Income Taxes
In determining our quarterly provision for income taxes, we use an estimated annual effective tax
rate, which is based on various factors, including expected annual income, statutory tax rates, tax
planning opportunities in the various jurisdictions in which we operate, permanent items, state tax
rates and our ability to utilize various tax credits and net operating loss carryforwards.
Subsequent recognition, derecognition and measurement of a tax position taken in a previous period
are separately recognized in the quarter in which they occur and can be a source of variability in
effective tax rates from quarter to quarter.
The effective tax rate was 37.7% for the first quarter of fiscal 2011 and 35.1% for the first
quarter of fiscal 2010. The first quarter fiscal 2011 rate was higher than the U.S. federal
statutory income tax rate and the prior year rate due to net operating losses in certain tax
jurisdictions for which no tax benefit was recorded.
The balance of unrecognized tax benefits, including interest and penalties, as of November 30, 2010
and August 31, 2010 was $4.4 million and $4.2 million, respectively, all of which would affect the
effective tax rate if recognized in future periods.
8
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NOTE 8Comprehensive Income
Three Months Ended | ||||||||
November 30, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Net income including noncontrolling interest |
$ | 15,092 | $ | 6,226 | ||||
Other comprehensive income: |
||||||||
Foreign currency translation |
4,201 | 9,509 | ||||||
Comprehensive income |
19,293 | 15,735 | ||||||
Comprehensive income attributable to noncontrolling interest |
(642 | ) | (540 | ) | ||||
Comprehensive income attributable to Robbins & Myers, Inc. |
$ | 18,651 | $ | 15,195 | ||||
NOTE 9Stock Compensation
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. In addition, we sponsor a long-term
incentive plan for selected participants who earn performance share awards on varying target levels
of earnings per share and return on net assets. As of November 30, 2010 we had $5,234,000 of
compensation expense not yet recognized related to nonvested stock awards. The weighted average
period over which this compensation cost will be recognized is 2.3 years. There were 5,334 stock
options exercised in the first quarter of fiscal 2011, and no stock options were exercised in the
first quarter of fiscal 2010.
Total stock compensation expense for all stock based awards for the first quarter of fiscal 2011
and fiscal 2010 was $678,000 ($441,000 after tax) and $835,000 ($543,000 after tax), respectively.
9
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NOTE 10Business Segments
The following tables present information about our reportable business segments. Our business
segments are reported on the same basis used internally for evaluating performance and for
allocating resources. Our three reporting segments are Fluid Management, Process Solutions and
Romaco. Inter-segment sales were not material and were eliminated at the consolidated level.
Three Months Ended | ||||||||
November 30, | ||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Unaffiliated Customer Sales: |
||||||||
Fluid Management |
$ | 91,336 | $ | 68,188 | ||||
Process Solutions |
49,434 | 43,533 | ||||||
Romaco |
23,179 | 17,692 | ||||||
Total |
$ | 163,949 | $ | 129,413 | ||||
Income Before Interest and Income Taxes (EBIT): |
||||||||
Fluid Management |
$ | 28,165 | $ | 16,734 | ||||
Process Solutions |
1,119 | (1,651 | ) | |||||
Romaco |
92 | (758 | ) | |||||
Corporate and Eliminations |
(5,180 | ) | (4,589 | ) | ||||
Total |
$ | 24,196 | $ | 9,736 | ||||
Nov. 30, | Aug. 31, | |||||||
2010 | 2010 | |||||||
(In thousands) | ||||||||
Identifiable Assets: |
||||||||
Fluid Management |
$ | 331,064 | $ | 323,053 | ||||
Process Solutions |
258,050 | 242,942 | ||||||
Romaco |
93,163 | 81,631 | ||||||
Corporate and Eliminations |
160,232 | 169,395 | ||||||
Total |
$ | 842,509 | $ | 817,021 | ||||
10
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NOTE 11Share 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). Prior to fiscal 2010, we
acquired approximately 2.0 million shares, leaving approximately 1.0 million shares available to be
repurchased under this 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. There were no shares repurchased under the Program
in fiscal 2010 or in the three month period ended November 30, 2010.
NOTE 12New 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 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 in 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 December 2010, the FASB issued ASU No. 2010-29, Disclosure of Supplementary Pro Forma
Information for Business Combinations, that addresses diversity in practice about the
interpretation of the pro forma revenue and earnings disclosure requirements for business
combinations. The amendments in this standard specify that if a public entity presents comparative
financial statements, the entity should disclose revenue and earnings of the combined entity as
though the business combination(s) that occurred during the current year had occurred as of the
beginning of the comparable prior reporting period only. This standard also expands the
supplemental pro forma disclosures under ASC 805 to include a description of the nature and amount
of material, nonrecurring pro forma adjustments directly attributable to the business combination
included in the reported pro forma revenue and earnings. The amendments in this ASU are effective
prospectively for business combinations for which the acquisition date is on or after the beginning
of the first annual reporting period beginning on or after December 15, 2010, with early adoption
permitted. This standard will be effective for us beginning in our fiscal 2012, depending on future
acquisitions. We do not expect the pro forma disclosure requirements under this standard to have a
material impact on our consolidated financial statements.
11
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NOTE 13Fair 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 nonfinancial 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 nonfinancial 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 November 30, 2010 (in thousands):
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Fair Value at | Identical | Observable | Unobservable | |||||||||||||
November 30, | Assets | Inputs | Inputs | |||||||||||||
2010 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Cash and cash equivalents (1) |
$ | 144,209 | $ | 144,209 | $ | | $ | | ||||||||
Total assets at fair value |
$ | 144,209 | $ | 144,209 | $ | | $ | | ||||||||
(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
November 30, 2010, no fair value adjustments or fair value measurements were required for
nonfinancial 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, accrued expenses and short-term debt approximate their carrying
values because of the short-term nature of these instruments. The fair value of long-term debt
equals its carrying value as it is predominantly at a variable rate.
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NOTE 14Pending Merger
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), 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 (NASDAQ: TTES) designs, manufactures, repairs and services products used in the drilling and
completion of new oil and gas wells, the workover of existing wells, and the production and
transportation of oil and gas. Its products are used in both onshore and offshore applications
throughout the world. Upon completion of the proposed merger, we expect T-3 to initially 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.
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.
At the special meeting of R&M shareholders, scheduled on January 7, 2011, R&M shareholders will be
asked to vote on the issuance of R&M common shares to T-3 stockholders in the Merger and approval
of the Merger and the other transactions contemplated by the Merger Agreement. At the special
meeting of T-3 stockholders, also scheduled on January 7, 2011, T-3 stockholders will be asked to
vote on the approval of the Merger and adoption of the Merger Agreement.
The issuance of R&M common shares to T-3 stockholders and the Merger and the other transactions
contemplated by the Merger Agreement will be approved if the votes cast in favor of the proposal
represent two-thirds or more of all R&M common shares entitled to vote on the proposal. Adoption of
the Merger Agreement requires the affirmative vote of holders of a majority of the outstanding
shares of T-3 common stock entitled to vote on the proposal. Completion of the Merger is
conditioned on approval by R&M shareholders and T-3 stockholders.
The Merger Agreement may be terminated at any time prior to the effective time of the Merger, even
after the receipt of the requisite shareholder approvals, by mutual written consent of R&M and T-3,
or by either R&M or T-3 in certain circumstances, including: (1) the Merger is not completed by May
15, 2011, (2) certain legal restraints preventing completion of the merger are in effect and have
become final and nonappealable, (3) R&M shareholders fail to approve the merger proposals, (4) T-3
stockholders fail to approve the merger proposals, or (5) the other party breaches the Merger
Agreement in a way that would entitle the party seeking to terminate the agreement not to complete
the merger (provided the terminating party is not also in breach of the Merger Agreement), subject
to the right of the breaching party to cure the breach if it is curable.
Upon termination of the Merger Agreement, under certain circumstances, R&M will be required to pay
T-3 a termination fee of $24 million, or T-3 will be required to pay R&M a termination fee of $12
million.
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 as of December 31, 2009 and 2008 were
approximately $280 million and $287 million, respectively.
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Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
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.
World-wide economic conditions deteriorated in our fiscal year 2009, to which we responded 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 and streamlining efforts into fiscal 2011,
along with our renewed focus on organic growth and acquisitions to improve our competitiveness,
financial results and long-term profitability.
Our Company-wide focuses for fiscal 2011 are to successfully integrate our proposed acquisition of
T-3 Energy Services, Inc. (T-3); further improve our cost structure and our competitive
advantage; develop sales, marketing and product management capabilities to increase sales and
margins; drive performance with strategy deployment and commercialize new products in order to
achieve our agenda of profitable growth, improved operating efficiency and organizational
effectiveness.
While differences exist among the Companys businesses and geographical locations, on an overall
basis, demand for the Companys products increased in the first three months of fiscal 2011 as
compared with the comparable period of fiscal 2010, resulting in aggregate year-over-year sales
growth and improved margins. We are cautiously optimistic that the worldwide economic recovery and
recent market trends will continue to gain strength and provide positive momentum in fiscal 2011,
following five quarters of sequential growth in consolidated orders and an increase in consolidated
backlog throughout fiscal 2010 and into fiscal 2011.
With approximately 59% of our sales outside the United States, we were also marginally impacted by
foreign currency translation in the first quarter of fiscal 2011 due to the U.S. dollar slightly
weakening relative to our other principal operating currencies. The impact on net income, sales and
orders due to foreign exchange changes was immaterial for the first quarter of fiscal 2011.
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 which is reported following highly
inflationary accounting rules under U.S. generally accepted accounting principles (GAAP). The
marginal strengthening of most foreign currencies against the U.S. dollar in the first quarter of
fiscal 2011 did not materially impact our financial condition at the end of the quarter as compared
with end of fiscal 2010.
On October 6, 2010, we announced an agreement to acquire 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 merger 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 resources. Upon closing of the transaction, we expect T-3 stockholders to own approximately
27% of our outstanding common shares.
We currently expect to complete the merger (See Note 14Pending Merger) in early calendar year
2011, subject to receipt of required shareholder approvals on January 7, 2011, and the
satisfaction or waiver of the conditions to the merger described in the merger agreement. Upon
completion of the merger, we expect T-3 to initially operate under our Fluid Management segment.
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Our business consists of three market-focused segments: Fluid Management, Process Solutions and
Romaco.
Fluid Management. Order levels from customers served by our Fluid Management segment continued to
show a strong upward trend in the first quarter of fiscal 2011. Demand for our energy products
remains robust and industrial demand is improving. Our primary objectives for this segment are to
increase our manufacturing capacity to meet current demand, expand our geographic reach, improve
our selling and product management capabilities, commercialize new products in our niche market
sectors, develop new customer relationships and successfully integrate T-3. 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 improved sequentially each
quarter of fiscal 2010, and first quarter fiscal 2011 orders were much higher than the comparable
period in the prior year. However, pricing has not fully recovered, especially in European chemical
capital goods end markets. Our primary objectives are to increase the capabilities of our low cost
locations, standardize our products to increase operating flexibility and lower costs, 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 also trended higher in fiscal 2010 and continued to
show strength in the first quarter of fiscal 2011. The primary target markets for Romaco include
pharmaceutical, healthcare, food and cosmetics. Our primary objectives are to focus on engineering
solutions while implementing supply chain management for base components and modules, 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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The following tables present the components of our Consolidated Condensed Income Statement and
segment information for the first quarter of fiscal 2011 and 2010.
Three Months Ended | ||||||||
November 30, | ||||||||
2010 | 2009 | |||||||
Net sales |
100.0 | % | 100.0 | % | ||||
Cost of sales |
62.1 | 66.7 | ||||||
Gross profit |
37.9 | 33.3 | ||||||
Selling, general and administrative expenses |
23.1 | 25.8 | ||||||
EBIT |
14.8 | % | 7.5 | % | ||||
Three Months Ended | ||||||||
November 30, | ||||||||
2010 | 2009 | |||||||
(In thousands, except percents) | ||||||||
Segment |
||||||||
Fluid Management: |
||||||||
Sales |
$ | 91,336 | $ | 68,188 | ||||
EBIT |
28,165 | 16,734 | ||||||
EBIT % |
30.8 | % | 24.5 | % | ||||
Process Solutions: |
||||||||
Sales |
$ | 49,434 | $ | 43,533 | ||||
EBIT |
1,119 | (1,651 | ) | |||||
EBIT % |
2.3 | % | (3.8 | )% | ||||
Romaco: |
||||||||
Sales |
$ | 23,179 | $ | 17,692 | ||||
EBIT |
92 | (758 | ) | |||||
EBIT % |
0.4 | % | (4.3 | )% |
The comparability of the segment data is impacted by changes in foreign currency exchange rates due
to translation of the non-U.S. dollar denominated subsidiary results into U.S. dollars.
EBIT (Income before interest and income taxes) is a non-GAAP measure. The Company uses this measure
to evaluate its performance and believes this measure is helpful to investors in assessing its
performance. A reconciliation of this measure to net income is included in our Consolidated
Condensed Income Statement. EBIT is not a measure of cash available for use by the Company.
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Net Sales
Consolidated net sales for the first quarter of fiscal 2011 were $163.9 million, or $34.5 million
higher than consolidated net sales for the first quarter of fiscal 2010.
The Fluid Management segment had sales of $91.3 million in the first quarter of fiscal 2011
compared with $68.2 million in the first quarter of fiscal 2010. The increase was primarily due to
higher customer demand in the first quarter of fiscal 2011 over the comparable period in the prior
year, resulting from higher oil prices worldwide, an increased demand for horizontal drilling rigs
used in North American shale formations and higher general industrial and specialty chemical
activity. Orders for this segment were impacted by the same factors and were $102.2 million in the
first quarter of fiscal 2011 compared with $68.1 million in the first quarter of fiscal 2010.
Ending backlog at November 30, 2010 of $68.3 million was 18% higher than at the end of the prior
year.
The Process Solutions segment had sales of $49.4 million in the first quarter of fiscal 2011,
compared with $43.5 million in the first quarter of fiscal 2010, an increase of 14%. Segment
orders improved from the first quarter of fiscal 2010 levels to $54.0 million in the first quarter
of fiscal 2011, reflecting improved market conditions in certain end markets we serve, an increase
of $12.1 million, or 29% from the prior year period. Demand in
our European chemical capital goods end markets remained weak, while demand in our other markets was favorable. Ending backlog at November
30, 2010 of $85.2 million was 8% higher than at the end of the prior year.
The Romaco segment, which is primarily a European-based business, had sales of $23.2 million in the
first quarter of fiscal 2011 compared with $17.7 million in the comparable period of the prior
year. Excluding the impact of currency translation, sales increased by $6.2 million or 35%.
Orders for the first quarter of fiscal 2011 were $33.5 million compared with $27.1 million in the
comparable period in the prior year. Adjusting for changes in currency exchange rates, orders
increased 27%, or $7.2 million, from the same period in the prior year. We believe this increase is
an outcome of the global economic recovery combined with our increased focus on market
opportunities and product innovation. Ending backlog at November 30, 2010 of $50.0 million was 31%
higher than at the end of the prior year.
Earnings Before Interest and Income Taxes (EBIT)
Consolidated EBIT for the first quarter of fiscal 2011 was $24.2 million, an increase of $14.5
million from the first quarter of fiscal 2010, primarily due to increased sales volume described
above in all our segments along with an improved product mix, especially in our Fluid Management
segment.
The Fluid Management segment had EBIT of $28.2 million in the first quarter of fiscal 2011 as
compared with $16.7 million in the first quarter of fiscal 2010, an increase of $11.4 million, or
68%. This increase in fiscal 2011 is primarily due to the higher sales volume described above and a
favorable product mix.
The Process Solutions segment had EBIT of $1.1 million in the first quarter of fiscal 2011, and an
EBIT loss of $1.7 million in the first quarter of fiscal 2010, an increase of $2.8 million, mainly
due to higher sales activity in fiscal 2011.
The Romaco segment had EBIT of $0.1 million in the first quarter of fiscal 2011 and an EBIT loss of
$0.8 million in the first quarter of fiscal 2010. The marginal improvement in EBIT in the first
quarter of fiscal 2011 over the comparable period in the prior year resulted from higher sales
volume in fiscal 2011.
Corporate costs were $0.6 million higher in the first quarter of fiscal 2011 compared with the same
period in fiscal 2010 primarily due to T-3 transaction costs and higher costs associated with
employee benefits related to improved performance in fiscal 2011.
Income Taxes
The
effective tax rate was 37.7% for the first quarter of fiscal 2011 and
35.1% for the first
quarter of fiscal 2010. The first quarter fiscal 2011 rate was higher than the U.S. federal
statutory income tax rate and the prior year rate due to net operating losses in certain tax
jurisdictions for which no tax benefit was recorded.
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Liquidity and Capital Resources
Operating Activities
In the first quarter of fiscal 2011, our cash outflow from operating activities was $2.5 million,
compared with a cash inflow of $11.3 million in the same period of the prior year. This decrease
occurred, despite higher net income, as a result of changes in our working capital, primarily due
to higher inventory to support our increased backlog in fiscal 2011 and higher accounts receivable
consistent with increased sales in fiscal 2011 relative to the prior year.
We expect our available cash, fiscal 2011 operating cash flow and amounts available under our
credit agreement to be adequate to fund fiscal 2011 operating needs, shareholder dividends, capital
expenditures, additional share repurchases, if any, and the potential acquisition of T-3.
Investing Activities
Our financial condition remains strong at the end of the first quarter of fiscal 2011, with
resources available for reinvestment in existing businesses and strategic acquisitions. Our capital
expenditures were $3.1 million in the first quarter of fiscal 2011 compared with $2.2 million in
the first quarter of fiscal 2010. Our capital expenditures in fiscal 2011 were primarily due to our
cost reduction and sales growth initiatives.
Financing Activities
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. Prior to fiscal 2010, we acquired
approximately 2.0 million of our outstanding common shares for $39.1 million under the repurchase
program. There were no shares repurchased under the program in fiscal 2010 or in the three month
period ended November 30, 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 and the Senior Notes 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
November 30, 2010, we have $33.8 million of standby letters of credit outstanding at November 30,
2010. These standby letters of credit are used as security for advance payments received from
customers, and for future payments to our vendors and reduce the amount we may borrow under the
Agreement. Accordingly, under the Agreement we have $116.2 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.
The Agreement contains certain restrictive covenants including limitations on indebtedness,
acquisitions, asset sales, sales and lease backs, and cash dividends as well as financial covenants
relating to interest coverage, leverage and net worth. As of November 30, 2010, we are in
compliance with these covenants.
On October 6, 2010, we obtained the required waiver from the parties to the Agreement regarding any
event of default that may occur under the Agreement arising solely as a result of the approval of
the merger with T-3 by either the Board of Directors or the shareholders of R&M.
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Following is information regarding our long-term contractual obligations and other commitments
outstanding as of November 30, 2010:
Payments Due by Period | ||||||||||||||||||||
Two to | Four to | |||||||||||||||||||
Long-term contractual | One year | three | five | After five | ||||||||||||||||
obligations | Total | or less | years | years | years | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Long-term debt |
$ | 238 | $ | 140 | $ | 98 | $ | | $ | | ||||||||||
Operating leases (1) |
15,000 | 5,000 | 6,000 | 3,000 | 1,000 | |||||||||||||||
Total contractual cash
obligations |
$ | 15,238 | $ | 5,140 | $ | 6,098 | $ | 3,000 | $ | 1,000 | ||||||||||
(1) | Operating leases are estimated as of November 30, 2010 and consist primarily of building and equipment leases. |
Unrecognized tax benefits, including interest and penalties, in the amount of $4.4 million as of
November 30, 2010, have been excluded from the table because we are unable to make a reasonably
reliable estimate of the timing of the future payments. The only other commercial commitments
outstanding were standby letters of credit of $33.8 million, which are substantially due within one
year.
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Critical Accounting Policies
In preparing our consolidated financial statements, we follow accounting principles generally
accepted in the United States of America, which in many cases require us to make assumptions,
estimates and judgments that affect the amounts reported. Many of these policies are
straightforward. There are, however, some policies that are critical because they are important in
determining the financial condition and results of operations and some may involve management
judgments due to the sensitivity of the methods, assumptions and estimates necessary in determining
the related income statement, asset and/or liability amounts. These policies are described under
Managements Discussion and Analysis of Financial Condition and Results of Operations in our
Report on Form 10-K for the year ended August 31, 2010. There have been no material changes in the
accounting policies followed by us during fiscal 2011.
Safe Harbor Statement
In addition to historical information, this report contains forward-looking statements
identified by use of words such as expects, anticipates, believes, and similar expressions.
These statements reflect managements current expectations and involve known and unknown risks,
uncertainties, contingencies and other factors that could cause actual results, performance or
achievements to differ materially from those stated. The most significant of these risks and
uncertainties are described in our Annual Report on Form 10-K for the year ended August 31, 2010,
the joint proxy statement/prospectus filed with the Securities and Exchange Commission (SEC) on
November 29, 2010, and other reports filed from time to time with the SEC and include, but are not
limited to: the failure of the shareholders of R&M or the stockholders of T-3 to approve the
merger; potential uncertainties regarding market acceptance of the combined company; competitive
responses to the proposed merger; costs and difficulties related to integration of T-3s businesses
and operations; the inability to or delay in obtaining cost savings and synergies from the merger;
inability to retain key personnel; changes in the demand for or price of oil and/or natural gas; a
significant decline in capital expenditures within the markets served by the Company; the ability
to realize the benefits of restructuring programs; increases in competition; changes in the
availability and cost of raw materials; foreign exchange rate fluctuations as well as economic or
political instability in international markets and performance in hyperinflationary environments,
such as Venezuela; work stoppages related to union negotiations; customer order cancellations; the
possibility of product liability lawsuits that could harm our businesses; events or circumstances
which result in an impairment of, or valuation against, assets; the potential impact of U.S. and
foreign legislation, government regulations, and other governmental action, including those
relating to export and import of products and materials, and changes in the interpretation and
application of such laws and regulations; the outcome of audit, compliance, administrative or
investigatory reviews; proposed changes in U.S. tax law which could impact our future tax expense
and cash flow and decline in the market value of our pension plans investment portfolios. Except
as otherwise required by law, we do not undertake any obligation to publicly update or revise these
forward-looking statements to reflect events or circumstances after the date hereof.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
In our normal operations we have market risk exposure to foreign currency exchange rates and
interest rates. There has been no significant change in our market risk exposure with respect to
these items during the quarter ended November 30, 2010. For additional information see
Qualitative and Quantitative Disclosures About Market Risk at Item 7A of our Annual Report on
Form 10-K for the year ended August 31, 2010.
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Item 4. Controls and Procedures
(A) 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 November 30, 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-Q, 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 the 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.
Based on this evaluation, management, including our Chief Executive Officer and our Chief Financial
Officer, has concluded that our disclosure controls and procedures were effective as of November
30, 2010.
(B) Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the
fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
Part IIOther Information
Item 1A. Risk Factors
For information regarding factors that could affect the Companys operations, financial
condition and liquidity, see the risk factors discussed in Item 1A of our Annual Report on Form
10-K for the fiscal year ended August 31, 2010. There has been no material change in the risk
factors set forth in our Annual Report on Form 10-K for the year ended August 31, 2010, other than
those set forth below.
Risks Related to Our Pending Merger with T-3 Energy Services, Inc. (T-3)
The exchange ratio is fixed and will not be adjusted in the event of any change in either R&Ms or
T-3s stock price.
Upon closing of the merger, each share of T-3 common stock will be converted into the right to
receive 0.894 common shares of R&M, plus $7.95 in cash, without interest. This exchange ratio is
fixed in the Merger Agreement and will not be adjusted for changes in the market price of either
R&M common shares or T-3 common stock.
The price of R&M common shares at the closing of the merger may vary from the price on the date the
Merger Agreement was executed and on the date of the special meetings of R&M and T-3. As a result,
the market value represented by the exchange ratio will also vary. This market value will determine
goodwill to be recorded in the transaction that could be subject to future goodwill impairment
testing. Any goodwill impairment will impact our future operating results.
Failure to complete the merger with T-3 or a significant delay in the completion of the merger
could negatively impact our share price and our future business and financial results.
Completion of the merger is subject to a number of conditions beyond our control that may
prevent, delay or otherwise materially adversely affect its completion, including approvals of our
shareholders and the stockholders of T-3. If the merger is delayed or is not completed, our ongoing
business may be adversely affected. Additionally, if the merger is not completed, we may be
required to pay to T-3 a termination fee of $24 million under certain circumstances. Each party
will also have to pay certain costs relating to the merger, such as legal, accounting, financial
advisor, filing, printing and mailing fees. Any of the foregoing, or other risks arising in
connection with the failure of the merger, including the diversion of management
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attention from pursuing other opportunities during the pendency of the merger, may have an adverse
effect on our business, financial results and share price.
The pendency of the merger with T-3 could adversely affect our business and operations and the
business and operations of T-3.
In connection with the pending merger, each company will face additional uncertainties and
restrictions on the manner in which it operates its business, including, among other things, that:
| Some customers of R&M and T-3 may delay or defer decisions, which could negatively impact revenues, earnings and cash flows of R&M and T-3, regardless of whether the merger is completed; | ||
| Current and prospective employees of R&M and T-3 may experience uncertainty about their future roles with R&M following the merger, which may materially and adversely affect the ability of each of R&M and T-3 to attract and retain key personnel; | ||
| The operations of R&M and T-3, respectively, will be restricted by the terms of the Merger Agreement, which may cause either party to forego otherwise beneficial business opportunities; and | ||
| The attention of management and other company resources of R&M and T-3 may be focused on the merger instead of on pursuing other opportunities beneficial to the R&M shareholders or the T-3 stockholders, as applicable. |
If lawsuits are filed against us and T-3 challenging the merger and an adverse ruling is received,
the merger may not be completed.
One of the conditions to the closing of the merger is that no judgment, injunction (whether
preliminary, temporary or permanent) or other legal restraint or prohibition shall be in effect
that prevents the completion of the merger. As such, if litigation is filed and an injunction
prohibiting the defendants from completing the merger is obtained, then such injunction may prevent
the merger from becoming effective, or from becoming effective within the expected time frame.
The failure to integrate successfully the business of T-3 in the expected time frame would
adversely affect the combined companys future results post-merger.
The success of the merger will depend, in large part, on the ability of the combined company to
realize the anticipated benefits, including cost savings, from combining our business with T-3s
business. To realize these anticipated benefits, our business and T-3s business must be
successfully integrated. This integration will be complex and time-consuming. The failure to
integrate successfully and to manage successfully the challenges presented by the integration
process may result in the combined company not achieving the anticipated benefits of the merger,
which could have a negative impact on the shareholders of the combined company following the
merger. Potential difficulties that may be encountered in the integration process include the
following:
| The inability to successfully integrate the businesses of R&M and T-3 in a manner that permits the combined company to achieve the cost savings anticipated to result from the merger; | ||
| Lost sales and customers as a result of customers of either of the two companies deciding not to do business with the combined company; | ||
| Complexities associated with managing the larger, more complex, combined business; | ||
| Integrating personnel from the two companies while maintaining focus on providing consistent, high quality products; | ||
| Potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the merger; and | ||
| Performance shortfalls at one or both of the companies as a result of the diversion of managements attention caused by completing the merger and integrating the companies operations. |
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Our
future results will suffer if we do not effectively manage our expanded operations following
the merger.
Following the merger, the size of our business will increase dramatically. Our future success
depends, in part, upon our ability to manage this expanded business, which will pose substantial
challenges for management, including challenges related to the management and monitoring of new
operations and associated increased costs and complexity. We cannot assure you that we will be
successful or that we will realize the expected operating efficiencies, cost savings, revenue
enhancements and other benefits currently anticipated from the merger.
We expect to incur substantial expenses related to the merger and the integration of T-3.
We expect to incur substantial expenses in connection with the merger and the integration of
T-3. There are a large number of processes, policies, procedures, operations, technologies and
systems that must be integrated, including purchasing, accounting and finance, sales, billing,
payroll, manufacturing, marketing and benefits. While we have assumed that a certain level of
expenses would be incurred, there are many factors beyond our control that could affect the total
amount or the timing of the integration expenses. Moreover, many of the expenses that will be
incurred are, by their nature, difficult to estimate accurately. These expenses could, particularly
in the near term, exceed the savings that we expect to achieve from the elimination of duplicative
expenses and the realization of economies of scale and cost savings. These integration expenses
likely will result in us taking significant charges against earnings following the completion of
the merger, and the amount and timing of such charges are uncertain at present.
Our ability to finance the ongoing cash needs of the combined company is not guaranteed.
We plan to fund the merger transaction expenses and the cash needs of the combined company
with available cash of the combined company and proceeds (if any) that we obtain from bank
borrowings or capital markets issuances. If these sources of cash are unavailable, unattractive or
inadequate, we may be forced to raise funds in alternative manners, which may be more costly or
unavailable. Completion of the merger is not conditioned on completing any financing transactions.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
A summary of the Companys repurchases of its common shares during the quarter ended November
30, 2010 is as follows:
ISSUER PURCHASES OF EQUITY SECURITIES
Total Number of | ||||||||||||||||
Shares Purchased | Maximum Number of | |||||||||||||||
Average | as | Shares that May | ||||||||||||||
Total Number | Price | Part of Publicly | Yet Be Purchased | |||||||||||||
of Shares | Paid per | Announced Plans or | Under the Plans or | |||||||||||||
Period | Purchased (a) | Share | Programs (b) | Programs (b) | ||||||||||||
September 1-30, 2010 |
| $ | | | 992,463 | |||||||||||
October 1-31, 2010 |
4,251 | 27.24 | | 992,463 | ||||||||||||
November 1-30, 2010 |
| | | 992,463 | ||||||||||||
Total |
4,251 | | ||||||||||||||
(a) | During the first quarter of fiscal 2011, the Company purchased 4,251 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. | |
(b) | On October 27, 2008, our Board of Directors approved the repurchase of up to 3,000,000 of our outstanding common shares (the Program). In fiscal year 2009, we repurchased an aggregate of 2,007,537 of our outstanding common shares pursuant to the Program. The Program will expire when we have repurchased all the authorized shares under the Program, unless terminated earlier by a Board resolution. |
Item 6. Exhibits
a) | Exhibits see INDEX TO EXHIBITS |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
ROBBINS & MYERS, INC.
(Registrant)
|
||||
DATE: January 7, 2011 | BY | /s/ Christopher M. Hix | ||
Christopher M. Hix | ||||
Vice President and Chief Financial Officer (Principal Financial Officer) | ||||
DATE: January 7, 2011 | BY | /s/ Kevin J. Brown | ||
Kevin J. Brown | ||||
Corporate Controller (Principal Accounting Officer) |
||||
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INDEX TO EXHIBITS
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION |
||||
2.1 Agreement and Plan of Merger, dated October 6, 2010, by and
among Robbins & Myers, Inc., Triple Merger I, Inc., Triple
Merger II, Inc. and T-3 Energy Services, Inc., included as
Annex A to the joint proxy statement/prospectus, filed as
Exhibit 2.1 to our Registration Statement on Form S-4/A (File
No. 333-170502) filed on November 29, 2010 |
* | |||
2.2 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 |
* | |||
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES |
||||
4.1 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 |
* | |||
(31) RULE 13A-14(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 | Filed herewith | |
* | Indicates the Exhibit is incorporated by reference from a previous filing with the Commission. Unless otherwise indicated, all incorporated items are incorporated from SEC File No. 001-13651. |
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