Attached files
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EX-31.2 - EX-31.2 - ROBBINS & MYERS, INC. | l42359exv31w2.htm |
EX-32.2 - EX-32.2 - ROBBINS & MYERS, INC. | l42359exv32w2.htm |
EX-32.1 - EX-32.1 - ROBBINS & MYERS, INC. | l42359exv32w1.htm |
EX-31.1 - EX-31.1 - ROBBINS & MYERS, INC. | l42359exv31w1.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 May 31, 2011
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 incorporation or organization) |
(I.R.S. Employer 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 (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
Exchange Act). YES o NO þ
Common shares, without par value, outstanding as of May 31, 2011: 45,692,734
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)
May 31, | August 31, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 172,066 | $ | 149,213 | ||||
Accounts receivable |
157,093 | 93,466 | ||||||
Inventories: |
||||||||
Finished products |
75,438 | 31,681 | ||||||
Work in process |
49,014 | 30,563 | ||||||
Raw materials |
33,408 | 22,472 | ||||||
157,860 | 84,716 | |||||||
Other current assets |
13,110 | 5,983 | ||||||
Deferred taxes |
16,993 | 13,683 | ||||||
Assets of discontinued operations |
| 79,247 | ||||||
Total Current Assets |
517,122 | 426,308 | ||||||
Goodwill |
602,100 | 249,741 | ||||||
Other Intangible Assets |
199,846 | 3,774 | ||||||
Deferred Taxes |
24,224 | 31,002 | ||||||
Other Assets |
12,799 | 9,715 | ||||||
Property, Plant and Equipment |
389,712 | 283,511 | ||||||
Less accumulated depreciation |
(232,997 | ) | (187,030 | ) | ||||
156,715 | 96,481 | |||||||
TOTAL ASSETS |
$ | 1,512,806 | $ | 817,021 | ||||
LIABILITIES AND EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | 77,296 | $ | 45,888 | ||||
Accrued expenses |
85,957 | 71,905 | ||||||
Current portion of long-term debt |
1,173 | 133 | ||||||
Liabilities of discontinued operations |
| 46,815 | ||||||
Total Current Liabilities |
164,426 | 164,741 | ||||||
Long-Term DebtLess Current Portion |
24 | 93 | ||||||
Deferred Taxes |
105,253 | 40,615 | ||||||
Other Long-Term Liabilities |
119,623 | 120,548 | ||||||
Robbins & Myers, Inc. Shareholders Equity: |
||||||||
Common stock |
696,404 | 153,185 | ||||||
Retained earnings |
465,293 | 372,198 | ||||||
Accumulated other comprehensive loss |
(54,616 | ) | (49,319 | ) | ||||
Total Robbins & Myers, Inc. Shareholders Equity |
1,107,081 | 476,064 | ||||||
Noncontrolling Interest |
16,399 | 14,960 | ||||||
Total Equity |
1,123,480 | 491,024 | ||||||
TOTAL LIABILITIES AND EQUITY |
$ | 1,512,806 | $ | 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 | Nine Months Ended | |||||||||||||||
May 31, | May 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net sales |
$ | 237,058 | $ | 119,711 | $ | 561,642 | $ | 338,269 | ||||||||
Cost of sales |
150,984 | 78,717 | 356,887 | 227,666 | ||||||||||||
Gross profit |
86,074 | 40,994 | 204,755 | 110,603 | ||||||||||||
Selling, general and administrative expenses |
44,564 | 29,273 | 109,679 | 82,182 | ||||||||||||
Other expense |
2,828 | | 16,140 | | ||||||||||||
Income before interest and income taxes (EBIT) |
38,682 | 11,721 | 78,936 | 28,421 | ||||||||||||
Interest expense, net |
56 | 102 | 39 | 406 | ||||||||||||
Income from continuing operations before income taxes |
38,626 | 11,619 | 78,897 | 28,015 | ||||||||||||
Income tax expense |
19,431 | 4,729 | 33,150 | 10,729 | ||||||||||||
Net income from continuing operations including
noncontrolling interest |
19,195 | 6,890 | 45,747 | 17,286 | ||||||||||||
Income from discontinued operations, net of
income taxes |
52,035 | 1,436 | 53,637 | 1,719 | ||||||||||||
Net income including noncontrolling interest |
71,230 | 8,326 | 99,384 | 19,005 | ||||||||||||
Less: Net income attributable to noncontrolling
interest |
275 | 164 | 796 | 620 | ||||||||||||
Net income attributable to Robbins & Myers, Inc. |
$ | 70,955 | $ | 8,162 | $ | 98,588 | $ | 18,385 | ||||||||
Net income per share from continuing operations: |
||||||||||||||||
Basic |
$ | 0.41 | $ | 0.20 | $ | 1.14 | $ | 0.51 | ||||||||
Diluted |
$ | 0.41 | $ | 0.20 | $ | 1.13 | $ | 0.51 | ||||||||
Net income per share: |
||||||||||||||||
Basic |
$ | 1.56 | $ | 0.25 | $ | 2.50 | $ | 0.56 | ||||||||
Diluted |
$ | 1.54 | $ | 0.25 | $ | 2.48 | $ | 0.56 | ||||||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic |
45,616 | 32,941 | 39,449 | 32,913 | ||||||||||||
Diluted |
45,965 | 33,016 | 39,812 | 32,973 | ||||||||||||
Dividends per share: |
||||||||||||||||
Declared |
$ | 0.0450 | $ | 0.0425 | $ | 0.1325 | $ | 0.1250 | ||||||||
Paid |
$ | 0.0450 | $ | 0.0425 | $ | 0.1325 | $ | 0.1250 | ||||||||
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)
Nine Months Ended | ||||||||
May 31, | ||||||||
2011 | 2010 | |||||||
Operating Activities: |
||||||||
Net income including noncontrolling interest |
$ | 99,384 | $ | 19,005 | ||||
Adjustments
to reconcile net income to net cash and cash equivalents provided by operating activities: |
||||||||
Depreciation |
12,845 | 11,646 | ||||||
Amortization |
12,545 | 485 | ||||||
Gain on disposal of businesses |
(53,357 | ) | | |||||
Gain on asset sales |
| (547 | ) | |||||
Stock compensation expense |
3,740 | 2,200 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(24,001 | ) | 4,954 | |||||
Inventories |
(21,653 | ) | (1,070 | ) | ||||
Accounts payable |
(7,335 | ) | (877 | ) | ||||
Accrued expenses |
(453 | ) | 18,532 | |||||
Other |
3,993 | 2,786 | ||||||
Net Cash and Cash Equivalents Provided by Operating Activities |
25,708 | 57,114 | ||||||
Investing Activities: |
||||||||
Business acquisition, net of cash acquired |
(90,410 | ) | | |||||
Proceeds from sale of businesses, net of transaction costs |
89,247 | | ||||||
Capital expenditures, net of nominal disposals |
(14,223 | ) | (6,706 | ) | ||||
Proceeds from asset sales |
| 1,094 | ||||||
Net Cash and Cash Equivalents Used by Investing Activities |
(15,386 | ) | (5,612 | ) | ||||
Financing Activities: |
||||||||
Proceeds from debt borrowings |
6,376 | 5,648 | ||||||
Repayments of long-term debt |
(9,473 | ) | (35,305 | ) | ||||
Net proceeds from issuance of common stock, including stock option tax impact |
22,905 | 639 | ||||||
Cash dividends paid |
(5,493 | ) | (4,115 | ) | ||||
Net Cash and Cash Equivalents Provided (Used) by Financing Activities |
14,315 | (33,133 | ) | |||||
Exchange Rate Impact on Cash |
(1,784 | ) | (3,841 | ) | ||||
Increase in Cash and Cash Equivalents |
22,853 | 14,528 | ||||||
Cash and Cash Equivalents at Beginning of Period |
149,213 | 108,169 | ||||||
Cash and Cash Equivalents at End of Period |
$ | 172,066 | $ | 122,697 | ||||
See Notes to Consolidated Condensed Financial Statements
4
Table of Contents
ROBBINS & MYERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
May 31, 2011
(Unaudited)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
May 31, 2011
(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 May 31, 2011, and August 31, 2010, and the results of our operations for
the three and nine month periods ended May 31, 2011 and 2010, and cash flows for the nine month
periods ended May 31, 2011 and 2010. The results of operations for any interim period are not
necessarily indicative of results for the full year. All intercompany transactions have been
eliminated.
On January 10, 2011 (the acquisition date), we completed our acquisition of T-3 Energy Services,
Inc. (T-3), by means of a merger, such that T-3 became a wholly-owned subsidiary of Robbins &
Myers, Inc. The operating results of T-3 are included in our consolidated condensed financial
statements only since the acquisition date within our Fluid Management Group. See Note 2. The
merger was accounted for under the acquisition method of accounting in accordance with Accounting
Standards Codification (ASC) 805, Business Combinations. Accordingly, we made an initial
allocation of the purchase price at the acquisition date based upon our understanding of the fair
value of the acquired assets and assumed liabilities obtained during our due diligence process and
through other sources. As we obtain additional information about these assets and liabilities,
including through tangible and intangible asset appraisals and by learning more about T-3s
business and processes, we will refine the provisional estimates of fair value and the purchase
price allocation. Only items identified as of the acquisition date will be considered for
subsequent adjustment. Adjustments will be made prior to the completion of the measurement period
(up to one year from acquisition date) as required. Additionally, as required by ASC 805, all
integration-related costs, including professional fees and severance, are expensed as incurred.
During the third quarter of fiscal 2011, we entered into an agreement to divest our Romaco
businesses (Romaco segment). On April 29, 2011, we completed the sale of all the shares and equity
interest in our Romaco businesses. The results of our Romaco segment are reported as discontinued
operations for all periods presented.
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/A for the fiscal year
ended August 31, 2010 filed with the Securities and Exchange Commission (SEC), the joint proxy
statement/prospectus filed with the SEC on November 29, 2010, as well as our Quarterly Reports on
Form 10-Q and other reports filed from time to time with the SEC. 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.
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
2011 and 2010. In early January 2010, the Venezuelan government devalued its currency. Our
subsidiary operated 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 reflected 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 $0.6 million in the nine month period ended May
31, 2010. There has been no material impact due to the Venezuelan currency devaluation on our
fiscal 2011 consolidated financial statements.
5
Table of Contents
NOTE 2Acquisition
On January 10, 2011, we acquired 100% of the outstanding common stock and voting interest of T-3.
T-3 designs, manufactures, repairs and services products used in the drilling, completion and
production 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. We believe the acquisition will significantly expand and complement our
energy business within our Fluid Management Group and create a stronger strategic platform with
better scale to support our future growth.
The purchase price for acquiring all of the outstanding common stock of T-3 was approximately
$618.4 million, which consisted of approximately $106.3 million in cash paid, $492.1 million as the
fair value of R&M common shares issued and $20.0 million as the fair value of R&M options and
warrants issued to replace T-3 grants for pre-merger services and warrants, based on the weighted
average Black-Scholes valuation of $20.41 per R&M share. The fair value of R&M common shares issued
of $41.18 per common share was based on the closing price of R&M shares on the New York Stock
Exchange (NYSE) on January 7, 2011 (opening price on January 10, 2011). We funded the cash
portion of the purchase price from our available cash on hand. Transaction expenses were funded
with available cash of the Company. We issued approximately 12.0 million shares as part of the
purchase price to T-3 stockholders. T-3 had annual revenues of approximately $206.7 million
(unaudited) for its last completed fiscal year ended December 31, 2010.
The following table summarizes the estimated fair values of the assets acquired and liabilities
assumed at the acquisition date. We are in the process of finalizing third party valuations of
certain non-monetary tangible assets, intangible assets and contingencies; thus the provisional
measurements of non-monetary tangible assets, intangible assets, contingencies, goodwill and
deferred income tax assets are subject to change.
At January 10, 2011 (in thousands):
Cash |
$ | 15,863 | ||
Accounts receivable |
41,618 | |||
Inventories |
59,960 | |||
Other current assets |
13,541 | |||
Property, plant and equipment, net |
54,392 | |||
Other long-term assets |
6,044 | |||
Intangible assets |
204,220 | |||
Total identifiable assets acquired excluding goodwill |
395,638 | |||
Current liabilities |
44,341 | |||
Long-term liabilities |
74,684 | |||
Total liabilities assumed |
119,025 | |||
Net identifiable assets acquired excluding goodwill |
276,613 | |||
Goodwill |
341,783 | |||
Net assets acquired |
$ | 618,396 | ||
The preliminary purchase price allocations resulted in the recognition of $341.8 million in
goodwill (approximately $25.0 million of which is deductible for tax purposes) and $204.2 million
of definite-lived intangible assets with no residual value, including $146.4 million of customer
relationships, $18.9 million of trademarks and trade names, $31.7 million of technology and $7.2
million of backlog. The amounts assigned to customer relationships, trademarks and trade names,
technology and backlog are amortized over the estimated useful life of 10-20 years, 7 years, 15
years and up to 1 year, respectively. The weighted average life over which these acquired
intangibles will be amortized is approximately 18 years. The purchase price allocation for the
acquisition reflects various preliminary fair value estimates and analyses, which are subject to
change within the measurement period as valuations are finalized. Measurement period adjustments
that we determine to be material will be applied retrospectively to the period of acquisition in
our consolidated financial statements and,
6
Table of Contents
depending on the nature of the adjustments, other periods subsequent to the period of acquisition
could also be affected. There were no purchase price adjustments in the third quarter of fiscal
2011.
Net customer sales and EBIT of T-3 included in our operating results from the acquisition date were
$102.2 million and $0.5 million, respectively. During the three month period ended May 31, 2011,
the Company incurred merger-related costs of $2.8 million for amortization of intangible assets
related to customer backlog at the time of acquisition (included in Other expense line in our
consolidated condensed income statement) and $5.4 million related to the inventory write-up values
in cost of sales (included in the Cost of sales line in our consolidated condensed income
statement). No further costs relating to backlog or the write-up of inventory will be incurred. For
the nine month period ended May 31, 2011, we incurred merger-related costs of $16.1 million related
to professional fees, severance, backlog amortization and accelerated stock-based compensation
expense (see Note 11), (included in the Other expense line in our consolidated condensed income
statement) and $9.5 million of expense related to the inventory write-up values (included in the
Cost of sales line in our consolidated condensed income statement).
The unaudited pro forma information for the periods set forth below gives effect to the acquisition
as if it had occurred at the beginning of each respective fiscal year. These amounts have been
calculated after applying our accounting policies and adjusting the results of T-3 to reflect the
additional cost of sales, depreciation and amortization that would have been charged assuming the
fair value adjustments to inventory, property, plant and equipment and intangible assets had been
applied as at the beginning of each respective year, together with the consequential tax effects,
as applicable. The pro forma information is presented for informational purposes only and is not
necessarily indicative of the results of operations that actually would have been achieved had the
acquisition been consummated as of that time or that may result in the future:
Three Months Ended | Nine Months Ended | |||||||||||||||
May 31, | May 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Net sales from continuing operations: |
||||||||||||||||
As reported |
$ | 237,058 | $ | 119,711 | $ | 561,642 | $ | 338,269 | ||||||||
Pro forma |
237,058 | 169,037 | 641,112 | 481,314 | ||||||||||||
Net income attributable to Robbins
& Myers, Inc. from continuing
operations: |
||||||||||||||||
As reported |
$ | 18,920 | $ | 6,726 | $ | 44,951 | $ | 16,666 | ||||||||
Pro forma |
24,266 | 8,982 | 49,957 | 4,848 | ||||||||||||
Basic net income per share from
continuing operations: |
||||||||||||||||
As reported |
$ | 0.41 | $ | 0.20 | $ | 1.14 | $ | 0.51 | ||||||||
Pro forma |
0.53 | 0.20 | 1.11 | 0.11 | ||||||||||||
Diluted net income per share from
continuing operations: |
||||||||||||||||
As reported |
$ | 0.41 | $ | 0.20 | $ | 1.13 | $ | 0.51 | ||||||||
Pro forma |
0.53 | 0.20 | 1.10 | 0.11 |
Each nine month pro forma period reflects the expense due to the inventory write-up values and
amortization of backlog of $16.7 million ($10.8 million after tax and $0.24 per share) which had
lives of three months or less. Therefore, these assets were fully amortized in the first three
months of each respective year.
7
Table of Contents
NOTE 3Discontinued Operations
During the third quarter of fiscal 2011, we entered into an agreement to divest our Romaco
businesses (Romaco segment) which design, manufacture and market packaging and secondary processing
equipment for the pharmaceutical, healthcare, nutraceutical, food and cosmetic industries. This
divestiture was part of the Companys portfolio management process and operating strategy to
simplify the business and improve profit profile, and to focus on growing the Company around core
competencies. On April 29, 2011, we completed the sale of all the shares and equity interest in our
Romaco businesses for a consideration of approximately 64 million (approximately $95 million at
the time of closing), which included 61 million in cash and 3 million of liabilities assumed,
subject to post-closing adjustments. For the three and nine month periods ended May 31, 2011,
income from discontinued operations, net of income taxes, was approximately $52.0 million and $53.6
million, respectively. The gain on disposal included the realization of amounts in accumulated
other comprehensive income of $13.8 million. For tax purposes, the gain on disposal of the Romaco
segment was minimal. The results of operations for our Romaco segment are reported as discontinued
operations for all periods presented and are summarized as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
May 31, | May 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | ||||||||||||||||
Net sales |
$ | 17,683 | $ | 27,254 | $ | 71,966 | $ | 68,028 | ||||||||
Net income per share from
discontinued
operations: |
||||||||||||||||
Basic |
$ | 1.15 | $ | 0.05 | $ | 1.36 | $ | 0.05 | ||||||||
Diluted |
$ | 1.13 | $ | 0.05 | $ | 1.35 | $ | 0.05 | ||||||||
(Loss) income from operations
of divested
businesses |
$ | (1,664 | ) | $ | 1,357 | $ | 537 | $ | 939 | |||||||
Gain on disposal of businesses |
53,357 | | 53,357 | | ||||||||||||
Income tax (benefit) expense |
(342 | ) | (79 | ) | 257 | (780 | ) | |||||||||
Income from discontinued
operations, net of
income taxes |
$ | 52,035 | $ | 1,436 | $ | 53,637 | $ | 1,719 | ||||||||
Details related to the assets (excluding cash) and liabilities of the Companys discontinued
operations at August 31, 2010 are as follows (in thousands):
Accounts receivable |
$ | 21,921 | ||
Inventories |
13,223 | |||
Other current assets |
2,087 | |||
Property, plant and equipment, net |
28,119 | |||
Other long-term assets |
3,306 | |||
Goodwill |
10,591 | |||
Total assets of discontinued operations (excluding cash) |
$ | 79,247 | ||
Accounts payable |
$ | 20,674 | ||
Other current liabilities |
18,499 | |||
Long-term liabilities |
7,642 | |||
Total liabilities of discontinued operations |
$ | 46,815 | ||
8
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NOTE 4Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill of our continuing operations for the nine month period
ended May 31, 2011, by reportable segment, are as follows:
Process | Fluid | |||||||||||
Solutions | Management | |||||||||||
Segment | Segment | Total | ||||||||||
(In thousands) | ||||||||||||
Balance as of September 1, 2010 |
$ | 100,278 | $ | 149,463 | $ | 249,741 | ||||||
Goodwill related to T-3 acquisition |
| 341,783 | 341,783 | |||||||||
Translation
adjustment impact and other |
9,026 | 1,550 | 10,576 | |||||||||
Balance as of May 31, 2011 |
$ | 109,304 | $ | 492,796 | $ | 602,100 | ||||||
Goodwill arises from the excess of the purchase price for acquired businesses over the fair value
of net identifiable assets acquired. Pursuant to ASC 805, we may record goodwill adjustments for
the T-3 acquisition due to refinement in purchase price allocation within the measurement period.
There were no goodwill related purchase price adjustments in the third quarter of fiscal 2011.
Information regarding our other intangible assets is as follows:
As of May 31, 2011 | As of August 31, 2010 | |||||||||||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||||||||||
Amount | Amortization | Net | Amount | Amortization | Net | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Customer
Relationships |
$ | 146,400 | $ | 2,965 | $ | 143,435 | $ | | $ | | $ | | ||||||||||||
Technology |
31,700 | 836 | 30,864 | | | | ||||||||||||||||||
Patents,
Trademarks and
Trade names |
31,582 | 8,770 | 22,812 | 9,434 | 7,465 | 1,969 | ||||||||||||||||||
Non-compete
Agreements |
8,772 | 7,450 | 1,322 | 8,680 | 7,359 | 1,321 | ||||||||||||||||||
Financing
Costs |
9,609 | 9,105 | 504 | 9,536 | 9,052 | 484 | ||||||||||||||||||
Other |
13,522 | 12,613 | 909 | 5,120 | 5,120 | | ||||||||||||||||||
Total |
$ | 241,585 | $ | 41,739 | $ | 199,846 | $ | 32,770 | $ | 28,996 | $ | 3,774 | ||||||||||||
During the first nine months of fiscal 2011, the Company recorded approximately $204.2 million
of purchased intangible assets related to the T-3 acquisition based on its preliminary purchase
price allocations. The amortization expense for the three and nine month periods ended May 31, 2011
was $6.0 million and $12.5 million, respectively. We estimate that the amortization expense will be
approximately $3.2 million for the remainder of fiscal 2011 and $12.9 million 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
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additions and their fair value adjustments in the measurement period, accelerated
amortization of intangible assets, acquisition and divestiture activities and other factors.
NOTE 5Net Income per Share
The reconciliations between basic and diluted net income per share from continuing operations are
as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
May 31, | May 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||
Numerator: |
||||||||||||||||
Net income from continuing
operations attributable to
Robbins & Myers, Inc. |
$ | 18,920 | $ | 6,726 | $ | 44,951 | $ | 16,666 | ||||||||
Denominator: |
||||||||||||||||
Basic weighted average shares |
45,616 | 32,941 | 39,449 | 32,913 | ||||||||||||
Effect of dilutive options and
restricted shares/units |
349 | 75 | 363 | 60 | ||||||||||||
Diluted weighted average shares |
45,965 | 33,016 | 39,812 | 32,973 | ||||||||||||
Basic net income per share from continuing operations |
$ | 0.41 | $ | 0.20 | $ | 1.14 | $ | 0.51 | ||||||||
Diluted net income per share from continuing operations |
$ | 0.41 | $ | 0.20 | $ | 1.13 | $ | 0.51 | ||||||||
Anti-dilutive options (excluded from diluted net
income per share computations) |
45 | 231 | 207 | 231 | ||||||||||||
In connection with the acquisition of T-3 on January 10, 2011, we issued approximately 12.0 million
shares to T-3 stockholders as part of the purchase price consideration, which have been included in
our computation of basic and diluted net income per share from continuing operations for the three
and nine month periods ended May 31, 2011. In addition, as part of the merger consideration, we
issued approximately 1.0 million options to replace T-3 grants for pre-merger services which have
also been included in the computation above. The net income of T-3 from the acquisition date that
is included in our consolidated condensed financial statements for the three and nine month periods
ended May 31, 2011 was approximately $3.3 million and $0.3 million, respectively, which included
pre-tax expense of $8.2 million ($5.3 million after tax) and $19.7 million ($12.8 million after
tax), respectively, related to amortization of intangible assets for opening customer backlog,
expense due to inventory write-up values and severance costs.
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NOTE 6Product Warranties
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:
Nine Months Ended | ||||
May 31, 2011 | ||||
(In thousands) | ||||
Balance at beginning of the period |
$ | 6,292 | ||
Warranty expense |
2,031 | |||
Deductions/payments |
(2,494 | ) | ||
Warranty accrual related to T-3 acquisition |
370 | |||
Warranty accrual of divested businesses |
(563 | ) | ||
Translation adjustment impact |
106 | |||
Balance at end of the period |
$ | 5,742 | ||
NOTE 7Long-Term Debt
May 31, 2011 | ||||
(In thousands) | ||||
Debt: |
||||
Revolving credit loan |
$ | | ||
Other |
1,197 | |||
Total debt |
1,197 | |||
Less current portion |
1,173 | |||
Long-term debt |
$ | 24 | ||
On March 31, 2011, we entered into a new Bank Credit Agreement (the Agreement). The Agreement
replaces our previous Bank Credit Agreement which would have expired in December 2011.
The Agreement provides that we may borrow, for the five-year term of the Agreement, on a revolving
credit basis up to a maximum of $150.0 million at any one time. In addition, under the terms of the
Agreement, we are entitled, on up to six occasions prior to the maturity of the loan, subject to
the satisfaction of certain conditions, to increase the aggregate commitments under the Agreement
in the aggregate principal amount of up to $150.0 million. All outstanding amounts under the
Agreement are due and payable on March 16, 2016. Interest is variable based upon formulas tied to a
Eurocurrency rate or an alternative base rate defined in the Agreement, at our option. Borrowings,
which may also be used for general corporate purposes, are unsecured, but are guaranteed by certain
of our subsidiaries. While no amounts are outstanding under the Agreement at May 31, 2011, we have
$33.3 million of standby letters of credit outstanding at May 31, 2011. 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 $116.7 million of unused borrowing
capacity.
The Agreement contains customary representations and warranties, default provisions and affirmative
and negative covenants, including limitations on indebtedness, liens, asset sales, mergers and
other fundamental changes involving the Company, permitted investments, sales and lease backs, cash
dividends and share repurchases, and financial covenants relating to interest coverage and
leverage. As of May 31, 2011, we are in compliance with these covenants.
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NOTE 8Retirement Benefits
Pension and other postretirement plan costs are as follows:
Pension Benefits
Three Months Ended | Nine Months Ended | |||||||||||||||
May 31, | May 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Service cost |
$ | 406 | $ | 353 | $ | 1,125 | $ | 1,152 | ||||||||
Interest cost |
2,018 | 1,935 | 5,978 | 6,434 | ||||||||||||
Expected return on plan assets |
(1,563 | ) | (1,487 | ) | (4,674 | ) | (4,497 | ) | ||||||||
Amortization of prior service cost |
59 | 184 | 177 | 549 | ||||||||||||
Amortization of unrecognized losses |
1,016 | 700 | 3,045 | 2,296 | ||||||||||||
Settlement/curtailment expense |
215 | 161 | 1,848 | 483 | ||||||||||||
Net periodic benefit cost |
$ | 2,151 | $ | 1,846 | $ | 7,499 | $ | 6,417 | ||||||||
We entered into a new labor agreement at one of our U.S. facilities in the first quarter of fiscal
2011. As a result, we incurred curtailment expense of approximately $1.2 million 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 | Nine Months Ended | |||||||||||||||
May 31, | May 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Service cost |
$ | 140 | $ | 13 | $ | 420 | $ | 323 | ||||||||
Interest cost |
332 | 306 | 996 | 996 | ||||||||||||
Amortization of prior service cost |
53 | 54 | 159 | 160 | ||||||||||||
Amortization of unrecognized losses |
150 | 307 | 450 | 451 | ||||||||||||
Net periodic benefit cost |
$ | 675 | $ | 680 | $ | 2,025 | $ | 1,930 | ||||||||
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NOTE 9Income 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 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 for our continuing operations was 50.3% for the third quarter and 42.0% for
the nine month year to date period of fiscal 2011. The effective tax rate for the three month and
nine month period ended May 31, 2011 was higher than the U.S. federal statutory tax rate, primarily
due the recording of an additional valuation allowance of $7.0 million for deferred tax assets for
certain of our foreign locations, primarily driven by the disposition of our Romaco segment.
Excluding this impact, the effective tax rate for the same periods was 32.2% and 33.1%,
respectively.
The effective tax rate for our continuing operations was 40.7% for the third quarter of fiscal 2010
and 38.3% for the nine month year to date period of fiscal 2010. These rates were higher than the
U.S. federal statutory tax rate primarily due to finalizing certain tax estimates in the third
quarter of fiscal 2010.
The balance of unrecognized tax benefits, including interest and penalties, as of May 31, 2011 and
August 31, 2010 was $5.5 million and $4.2 million, respectively, all of which would affect the
effective tax rate if recognized in future periods. The balance of unrecognized tax benefits at May
31, 2011 includes $0.9 million in the T-3 opening balance sheet.
NOTE 10Comprehensive Income (Loss)
The following table sets forth the reconciliation of net income to comprehensive income (loss):
Three Months Ended | Nine Months Ended | |||||||||||||||
May 31, | May 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Net income including noncontrolling interest |
$ | 71,230 | $ | 8,326 | $ | 99,384 | $ | 19,005 | ||||||||
Other comprehensive (loss) income: |
||||||||||||||||
Foreign currency translation |
(2,849 | ) | (13,892 | ) | 7,104 | (19,437 | ) | |||||||||
Foreign currency realized
gain from
divested businesses |
(16,237 | ) | | (16,237 | ) | | ||||||||||
Minimum pension liability
adjustment, net of
tax |
791 | | 2,374 | (675 | ) | |||||||||||
Minimum pension liability
realized loss for
divested businesses, net of
tax |
2,415 | | 2,415 | | ||||||||||||
Comprehensive income (loss) |
55,350 | (5,566 | ) | 95,040 | (1,107 | ) | ||||||||||
Less: Comprehensive income attributable to
noncontrolling interest |
(593 | ) | (581 | ) | (1,749 | ) | (1,073 | ) | ||||||||
Comprehensive income (loss) attributable to
Robbins & Myers, Inc. |
$ | 54,757 | $ | (6,147 | ) | $ | 93,291 | $ | (2,180 | ) | ||||||
The net income of T-3 from the acquisition date that is included in our consolidated condensed
financial statements for the three and nine month periods ended May 31, 2011 was approximately $3.3
million and $0.3 million, respectively, which included pre-tax expense of $8.2 million ($5.3
million after tax) and $19.7 million ($12.8 million after tax), respectively, related to
amortization of intangible assets for opening customer backlog,
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expense due to inventory write-up values and severance costs.
Additionally, the total net income from operations of our divested Romaco businesses and net gain
on sale of the Romaco businesses, net of income taxes, included in our consolidated condensed
financial statements for the three and nine month periods ended May 31, 2011 were $52.0 million and
$53.6 million, respectively.
NOTE 11Stock 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. As part of the merger consideration, we
issued approximately 1.0 million fully vested stock options to replace T-3 grants for pre-merger
services, in the second quarter of fiscal 2011. In addition, we sponsor a long-term incentive plan
for selected participants who receive share based grants and also earn performance share based
awards on varying target levels, based on earnings per share and return on net assets. As of May
31, 2011, we had $4.3 million of compensation expense not yet recognized related to nonvested stock
awards. The weighted average period over which this compensation cost will be recognized is 2.7
years. There were 732,875 stock options exercised in the first nine months of fiscal 2011 and
24,462 shares were exercised in the same period of the prior year.
Total stock compensation expense for all stock based awards for the first nine months of fiscal
2011 and 2010 was $3.7 million ($2.4 million after tax) and $2.2 million ($1.4 million after tax),
respectively. The year to date fiscal 2011 stock compensation expense includes approximately $2.0
million of expense which resulted from accelerated vesting of certain stock awards upon the
acquisition of T-3 in the second quarter of fiscal 2011, pursuant to the terms of those awards.
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NOTE 12Business Segments
The following tables present information about our reportable business segments. With the sale of
our Romaco segment, our two reporting segments are Fluid Management and Process Solutions. The
results of T-3s operations have been included in our consolidated condensed financial statements
since the acquisition date of January 10, 2011 within our Fluid Management Group. The customer
sales of T-3 for the three month and nine month periods ended May 31, 2011 included in our
operating results from the acquisition date were $66.7 million and $102.2 million, respectively.
The EBIT of T-3 for the three month and nine month periods ended May 31, 2011 included in our
operating results from the acquisition date were $5.1 million and $0.5 million, respectively.
Identifiable assets of T-3 as of May 31, 2011, as a result of the acquisition, were $704.8 million,
including goodwill of $341.8 million. Inter-segment sales were not material and were eliminated at
the consolidated level.
Three Months Ended | Nine Months Ended | |||||||||||||||
May 31, | May 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Unaffiliated Customer Sales: |
||||||||||||||||
Fluid Management |
$ | 180,506 | $ | 79,813 | $ | 406,628 | $ | 214,971 | ||||||||
Process Solutions |
56,552 | 39,898 | 155,014 | 123,298 | ||||||||||||
Total |
$ | 237,058 | $ | 119,711 | $ | 561,642 | $ | 338,269 | ||||||||
Income Before Interest and Income Taxes (EBIT): | ||||||||||||||||
Fluid Management |
$ | 42,909 | (1) | $ | 20,104 | $ | 97,870 | (2) | $ | 50,471 | ||||||
Process Solutions |
1,525 | (1,895 | ) | 3,150 | (6,084 | ) | ||||||||||
Corporate and
Eliminations |
(5,752 | ) | (6,488 | ) | (22,084) | (3) | (15,966 | ) | ||||||||
Total |
$ | 38,682 | $ | 11,721 | $ | 78,936 | $ | 28,421 | ||||||||
May 31, | August 31, | |||||||
2011 | 2010 | |||||||
(In thousands) | ||||||||
Identifiable Assets: |
||||||||
Fluid Management |
$ | 1,051,996 | $ | 323,053 | ||||
Process Solutions |
276,092 | 242,942 | ||||||
Corporate and Eliminations |
184,718 | 169,395 | ||||||
Discontinued operations |
| 81,631 | ||||||
Total |
$ | 1,512,806 | $ | 817,021 | ||||
(1) | Includes costs of $2.8 million related to T-3 backlog amortization costs and $5.4 million of expense related to inventory write-up values recorded in cost of sales. | |
(2) | Includes costs of $3.0 million due to merger-related severance costs, $7.2 million related to T-3 backlog amortization costs and $9.5 million of expense due to inventory write-up values recorded in cost of sales. | |
(3) | Includes costs of $5.9 million due to merger-related professional fees and accelerated stock compensation expense. |
Comparability of segment data for our continuing operations is impacted by the changes in foreign
currency exchange rates due to translation of our non-U.S. dollar denominated subsidiary results
into U.S. dollars, acquisition of T-3 (included in our Fluid Management Group) on January 10, 2011,
as well as general economic conditions in the end markets we serve.
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NOTE 13Share 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 nine month period ended May 31, 2011.
NOTE 14New Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board (FASB) issued and, in April 2009,
amended a new business combination standard codified within 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 and
requires the acquirer to disclose the information needed to evaluate and understand the nature and
effect of the business combination. Certain provisions of this standard prescribe, among other
things, the determination of acquisition date fair value of consideration paid in a business
combination and the exclusion of transaction and acquisition related costs from acquisition
accounting. This standard was effective for us on September 1, 2009. Provisions of this standard
were applied to the Companys business acquisition of T-3 completed in fiscal 2011. See Note 2.
In October 2009, the FASB issued Accounting Standard Update (ASU) No. 2009-13,
Multiple-Deliverable Revenue Arrangements- a consensus of the FASB Emerging Issues Task Force,
that amends existing guidance on revenue recognition for arrangements with multiple deliverables.
This standard will allow companies to allocate consideration received for qualified separate
deliverables using estimated selling price for both delivered and undelivered items when
vendor-specific objective evidence or third-party evidence is unavailable. Additional disclosures
discussing the nature of multiple element arrangements, the types of deliverables under the
arrangements, the general timing of their delivery, and significant factors and estimates used to
determine estimated selling prices are required. The adoption of this standard did not have a
material impact on our consolidated financial statements.
In January 2010, the FASB issued 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.
In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement
and Disclosure Requirements in U.S.GAAP and IFRSs that amends the wording used to describe many of
the
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requirements in U.S.GAAP for measuring fair value and disclosing information about fair value
measurements. The amendments in this ASU achieve the objectives of developing common fair value
measurement and disclosure requirements in U.S. GAAP and IFRSs and improving their
understandability. Some of the requirements clarify the FASBs intent about the application of
existing fair value measurement requirements while other amendments change a particular principle
or requirement for measuring fair value or for disclosing information about fair value
measurements. The amendments in this ASU are effective prospectively for interim and annual periods
beginning after December 15, 2011, with no early adoption permitted. This standard will be
effective for us beginning in our third quarter of fiscal 2012. We do not expect the adoption of
this standard to have a material impact on our consolidated financial statements.
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income that improves
the comparability, consistency, and transparency of financial reporting and increases the
prominence of items reported in other comprehensive income by eliminating the option to present
components of other comprehensive income as part of the statement of changes in stockholders
equity. The amendments in this standard require that all nonowner changes in stockholders equity
be presented either in a single continuous statement of comprehensive income or in two separate but
consecutive statements. Under either method, adjustments must be displayed for items that are
reclassified from other comprehensive income (OCI) to net income, in both net income and OCI. The
standard does not change the current option for presenting components of OCI gross or net of the
effect of income taxes, provided that such tax effects are presented in the statement in which OCI
is presented or disclosed in the notes to the financial statements. Additionally, the standard does
not affect the calculation or reporting of earnings per share. For public entities, the amendments
in this ASU are effective for fiscal years, and interim periods within those years, beginning after
December 15, 2011 and are to be applied retrospectively, with early adoption permitted. This
standard will be effective for us beginning in our third quarter of fiscal 2012. We do not expect
the adoption of this standard to have a material impact on our consolidated financial statements.
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NOTE 15Fair Value Measurements
Accounting standards define fair value based on an exit price model, establish a framework for
measuring fair value where the Companys assets and liabilities are required to be carried at fair
values and provide for certain disclosures related to the valuation methods used within a valuation
hierarchy as established within the accounting standards. This hierarchy prioritizes the inputs
into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets
for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or similar assets in markets that are
not active, inputs other than quoted prices that are observable for the asset or liability,
including interest rates, yield curves and credit risks, or inputs that are derived principally
from or corroborated by observable market data through correlation. Level 3 inputs are unobservable
inputs based on managements own assumptions used to measure assets and liabilities at fair value.
A financial asset or liabilitys classification within the hierarchy is determined based on the
lowest level input that is significant to the fair value measurement.
A summary of certain financial assets that are carried at fair value measured on a
recurring basis as of May 31, 2011 and August 31, 2010 is as follows (in thousands):
Quoted Prices | Significant | |||||||
in Active | Other | Significant | ||||||
Markets for | Observable | Unobservable | ||||||
Identical Assets | Inputs | Inputs | ||||||
(Level 1) | (Level 2) | (Level 3) | ||||||
May 31, 2011: |
||||||||
Cash and cash equivalents (1)
|
$ | 172,066 | | | ||||
August 31, 2010: |
||||||||
Cash and cash equivalents (1)
|
$ | 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 May 31,
2011, 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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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.
With our acquisition of T-3 Energy Services, Inc. (T-3) on January 10, 2011 (the acquisition
date), we are expanding and complementing our energy business in our Fluid Management Group, and
creating a stronger strategic platform with better scale to support our future growth. 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 focus our
continuous improvement efforts around 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 in certain businesses and pursue our organic and strategic growth
initiatives to improve our competitiveness, financial results, long-term profitability and
shareholder value.
Our fiscal 2011 Company-wide focus areas include successfully integrating T-3 and obtaining related
cost savings and synergies; further improving our customer pricing, cost structure and our
competitive advantage; developing sales, marketing and product management capabilities to increase
sales and margins; and driving performance with strategy deployment and new product
commercialization 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 nine 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 continued worldwide economic
recovery and recent market trends, primarily in our emerging markets and for certain product lines,
especially serving oil and gas markets, will continue to gain strength and provide positive
momentum in the remainder of fiscal 2011.
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
2011 and 2010. In early January 2010, the Venezuelan government devalued its currency. Our
subsidiary operated 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 reflected this new rate. In
addition, the financial statements of our Venezuelan subsidiary were consolidated and reported
under highly inflationary accounting rules under U.S. generally accepted accounting principles
(GAAP) beginning in the second quarter of fiscal 2010, resulting in an income statement exchange
loss of $0.6 million in the nine month period ended May 31, 2010. The fiscal 2010 devaluation did
not have a material impact on our consolidated financial statements in the three and nine month
periods ended May 31, 2011.
With approximately 45% of our sales from continuing operations outside the United States, we can be
affected by changes in currency exchange rates between the U.S. dollar and the currencies in
non-U.S. countries in which we operate. The impact on net income, sales and orders due to foreign
exchange changes was not material for the first three quarters of fiscal 2011 compared with the
same period of prior year. 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. GAAP, as mentioned above. The
marginal strengthening of most foreign currencies against the U.S. dollar in fiscal 2011 did not
materially impact our financial condition at the end of the third quarter of fiscal 2011 as
compared with the end of fiscal 2010.
As mentioned above, on January 10, 2011, we acquired 100% of the outstanding common stock and
voting interest of T-3 for a purchase price of approximately $618.4 million, which consisted of
approximately $106.3
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million in cash paid, $492.1 million as the fair value of R&M common shares issued and $20.0
million as the fair value of R&M options and warrants issued to replace T-3 grants for pre-merger
services and warrants. The operating results of T-3 are included in our consolidated condensed
financial statements only since the acquisition date within our Fluid Management Group. T-3
designs, manufactures, repairs and services products used in the drilling, completion and
production 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. We expect to achieve significant synergies and cost reductions by eliminating
redundant processes and facilities. We caution readers that while pre- and post-acquisition
comparisons as well as quantified amounts themselves may provide indications of general trends,
actual cost savings and operating results due to the merger may differ from previous management
estimates.
During the third quarter of fiscal 2011, we entered into an agreement to divest our Romaco
businesses (Romaco segment) which design, manufacture and market packaging and secondary processing
equipment for the pharmaceutical, healthcare, nutraceutical, food and cosmetic industries. This
divestiture was part of the Companys portfolio management process and operating strategy to
simplify the business and improve profit profile, and to focus on growing the Company around core
competencies. The results of operations for our Romaco segment are reported as discontinued
operations for all periods presented. On April 29, 2011, we completed the sale of all the shares
and equity interest in our Romaco businesses for a consideration of approximately 64 million
(approximately $95 million at the time of closing), which included 61 million in cash and 3
million of liabilities assumed, subject to post-closing adjustments. For the three and nine month
periods ended May 31, 2011, income from discontinued operations, net of income taxes, was
approximately $52.0 million and $53.6 million, respectively. The gain on disposal included the
realization of amounts in accumulated other comprehensive income of $13.8 million. For tax
purposes, the gain on disposal of the Romaco segment was minimal. (See Note 3).
With the sale of our Romaco segment, our business consists of two market focused segments: Fluid
Management, which includes T-3, and Process Solutions.
Fluid Management. Order levels from customers served by our Fluid Management segment continued to
show strong year-over-year improvements in the first three quarters 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 and obtain
related cost savings and synergies. Our Fluid Management business segment, which includes T-3,
designs, manufactures, markets and services equipment and systems, including hydraulic drilling
power sections, blow-out preventers, (BOPs), BOP control systems, elastomer products, drilling,
production and well service chokes, manifolds, high pressure premium gate valves, standard and
customized fluid-agitation equipment and systems, down-hole and industrial progressing cavity
pumps, a full range of 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. Our Process Solutions segment orders improved each quarter of fiscal 2011 over
the respective period of fiscal 2010, and third quarter fiscal 2011 orders were the highest
quarterly orders since fiscal 2008. However, pricing has not fully recovered, especially for
European chemical market capital goods. Our primary objectives are to reduce operating costs in
developed regions, increase the capability of production in low cost areas and developing markets
and increase aftermarket opportunities. Our Process Solutions business segment designs,
manufactures and services glass-lined reactors and storage vessels, customized equipment, systems
and fluoropolymer-lined fittings, vessels and accessories, primarily for the pharmaceutical and
specialty chemical markets.
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The following tables present the components of our consolidated income statement and segment
information for our continuing operations for the three and nine month periods of fiscal 2011 and
2010.
Three Months Ended | Nine Months Ended | |||||||||||||||
May 31, | May 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net sales |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of sales |
63.7 | 65.8 | 63.5 | 67.3 | ||||||||||||
Gross profit |
36.3 | 34.2 | 36.5 | 32.7 | ||||||||||||
Selling, general and administrative expenses |
18.8 | 24.4 | 19.5 | 24.3 | ||||||||||||
Other expense |
1.2 | | 2.9 | | ||||||||||||
EBIT (1,2) |
16.3 | % | 9.8 | % | 14.1 | % | 8.4 | % | ||||||||
(1) | Includes costs for the three month period ended May 31, 2011 of $2.8 million (1.2% of net sales for the three month period ended May 31, 2011) related to T-3 backlog amortization, which are included in Other expense, and $5.4 million (2.3% of net sales for the three month period ended May 31, 2011) of expense related to inventory write-up values recorded in Cost of sales. | |
(2) | Includes costs for the nine month period ended May 31, 2011 of $16.1 million (2.9% of net sales for the nine month period ended May 31, 2011) due to merger-related severance costs, professional fees, stock compensation expense and backlog amortization, which are included in Other expense, and $9.5 million (2.8% of net sales for the nine month period ended May 31, 2011) of expense due to inventory write-up values recorded in Cost of sales. |
Three Months Ended | Nine Months Ended | |||||||||||||||
May 31, | May 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands, except percents) | ||||||||||||||||
Segment |
||||||||||||||||
Fluid Management: |
||||||||||||||||
Sales |
$ | 180,506 | $ | 79,813 | $ | 406,628 | $ | 214,971 | ||||||||
EBIT (1,2) |
42,909 | 20,104 | 97,870 | 50,471 | ||||||||||||
EBIT % |
23.8 | % | 25.2 | % | 24.1 | % | 23.5 | % | ||||||||
Process Solutions: |
||||||||||||||||
Sales |
$ | 56,552 | $ | 39,898 | $ | 155,014 | $ | 123,298 | ||||||||
EBIT |
1,525 | (1,895 | ) | 3,150 | (6,084 | ) | ||||||||||
EBIT % |
2.7 | % | (4.7 | )% | 2.0 | % | (4.9 | )% |
(1) | Includes costs for the three month period ended May 31, 2011 of $2.8 million related to T-3 backlog amortization costs and $5.4 million of expense due to inventory write-up values recorded in Cost of sales. | |
(2) | Includes costs for the nine month period ended May 31, 2011 of $3.0 million due to merger-related severance costs, $7.2 million related to T-3 backlog amortization costs and $9.5 million of expense due to inventory write-up values recorded in Cost of sales. |
Comparability of segment data for our continuing operations is impacted by the changes in foreign
currency exchange rates due to translation of our non-U.S. dollar denominated subsidiary results
into U.S. dollars, acquisition of T-3 (included in our Fluid Management Group) on January 10, 2011,
as well as general economic conditions in the end markets we serve.
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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Three months ended May 31, 2011 and May 31, 2010
Net Sales
Consolidated net sales from continuing operations for the third quarter of fiscal 2011 were $237.1
million, $117.3 million higher than net sales from continuing operations for the third quarter of
fiscal 2010. Excluding the impact of currency translation and the T-3 acquisition impact, net
sales increased by $46.6 million, or 39%.
The Fluid Management segment, which includes T-3 results since January 10, 2011, had sales of
$180.5 million in the third quarter of fiscal 2011 compared with $79.8 million in the third quarter
of fiscal 2010, an increase of $100.7 million. Excluding currency translation and acquisition
impacts, sales increased $32.4 million, or 41%. This increase was primarily due to higher customer
demand for oil and gas products resulting from higher oil prices worldwide and increased
expenditure for drilling activity in North American shale formations. Sales also benefited from
higher industrial demand in North America. Orders for this segment were also impacted by the same
factors and at $204.0 million, were 30% higher than the comparable period in the prior year,
excluding currency and acquisition impacts. Ending backlog at May 31, 2011, including T-3 backlog
of $90.4 million, is $155.1 million compared with $58.1 million at August 31, 2010.
The Process Solutions segment had sales of $56.6 million in the third quarter of fiscal 2011
compared with $39.9 million in the third quarter of fiscal 2010, an increase of 42%. Excluding the
impact of currency translation, sales increased $14.2 million, or 36%, over the prior year period.
Orders for this segment were $58.7 million in the third quarter of fiscal 2011 compared with $47.3
million in the prior year period. Adjusting for changes in currency exchange rates, orders
increased by $8.7 million, or 18% from the prior year period. Sales and orders reflected improved
market conditions in certain end markets outside Europe. Ending backlog at May 31, 2011 is $92.8
million compared with $78.7 million at August 31, 2010.
Earnings Before Interest and Income Taxes (EBIT)
Consolidated EBIT from continuing operations for the third quarter of fiscal 2011 was $38.7
million, an increase of $27.0 million from the third quarter of fiscal 2010. Excluding the impacts
of currency translation and acquisition, EBIT for the three month period increased by $21.5
million. This increase in EBIT resulted due to increased sales volume described above in both
segments, along with an improved product mix, especially in our Fluid Management segment.
The Fluid Management segment had EBIT of $42.9 million in the third quarter of fiscal 2011 compared
with $20.1 million in the third quarter of fiscal 2010. Third quarter fiscal 2011 EBIT includes
$8.2 million of final amortization for customer backlog and inventory write-up values relating to
the T-3 acquisition. Excluding the marginal currency and acquisition impacts, EBIT increased $17.2
million, or 86%, mainly due to higher sales volume and a favorable product mix compared with the
third quarter of fiscal 2010.
The Process Solutions segment had EBIT of $1.5 million in the third quarter of fiscal 2011 compared
with a loss of $1.9 million in the third quarter of fiscal 2010, an increase of $3.4 million. The
increase in EBIT is due principally to the sales increase in fiscal 2011.
Income Taxes
The effective tax rate for continuing operations was 50.3% for the third quarter of fiscal 2011
compared with 40.7% in the prior year period. The effective tax rate for the three month period
ended May 31, 2011 was higher than the U.S. federal statutory tax rate primarily due to the
recording of an additional valuation allowance of $7.0 million for certain deferred tax assets in
our Process Solutions segment, primarily driven by the disposition of our Romaco segment. Excluding
this impact, the effective tax rate for the three month period ended May 31, 2011 was 32.2%.
The effective tax rate for the third quarter of fiscal 2010 was higher than the U.S. federal
statutory tax rate primarily due to finalizing certain tax estimates in that period.
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Nine months ended May 31, 2011 and May 31, 2010
Net Sales
Consolidated net sales from continuing operations for the first nine months of fiscal 2011 were
$561.6 million, or $223.4 million higher than the same period of fiscal 2010. Excluding the impact
of currency translation and the T-3 acquisition, net sales increased by $116.1 million, or 34%, due
to higher sales in both of our segments in fiscal 2011.
The Fluid Management segment had sales of $406.6 million in the first nine months of fiscal 2011
compared with $215.0 million in the same period of fiscal 2010. Excluding the impacts of foreign
currency translation and T-3 acquisition, sales in the first nine months of fiscal 2011 increased
$86.2 million, or 40%. The increase was primarily in our energy markets, due to strong growth in
unconventional drilling, both horizontal and directional rigs, as exploration and production
companies invested to capture oil and gas from shale formations in North America. Orders for this
segment were $449.7 million in the first nine months of fiscal 2011 compared with $233.0 million in
the same period in fiscal 2010. Excluding currency and acquisition impacts, orders in the first
nine months of fiscal 2011 grew $74.8 million, or 32%, due to the strong market conditions. Ending
backlog at May 31, 2011, including T-3 backlog of $90.4 million, is $155.1 million compared with
$58.1 million at August 31, 2010.
The Process Solutions segment had sales of $155.0 million in the first nine months of fiscal 2011
compared with $123.3 million in the same period of fiscal 2010, an increase of $31.7 million, or
26%. Excluding currency impact, sales in the first nine months of fiscal 2011 increased $29.8
million, or 24%, from the prior year period reflecting improved market conditions in certain end
markets outside Europe. Segment orders in the first nine months of fiscal 2011 continued to improve
from the comparable period of prior year to $164.6 million. Excluding currency impact, orders
increased $28.2 million, or 21%, in the first nine months of fiscal 2011 from the same period in
the prior year due to improved demand in certain end markets outside Europe. Ending backlog at May
31, 2011 is $92.8 million compared with $78.7 million at August 31, 2010.
Earnings Before Interest and Income Taxes (EBIT)
Consolidated EBIT from continuing operations for the first nine months of fiscal 2011 was $78.9
million, an increase of $50.5 million from the same period of the prior year. Excluding the
impacts of currency translation and acquisition, EBIT for the nine month period of fiscal 2011
increased by $48.8 million. This increase in EBIT, despite higher costs associated with the T-3
acquisition of $25.6 million, was mainly attributable to the higher sales volume described above in
all our business platforms and a strong sales mix in our Fluid Management segment.
The Fluid Management segment had EBIT of $97.9 million in the first nine months of fiscal 2011
compared with $50.5 million in the same prior year period. Excluding currency and acquisition
impacts, EBIT for the first nine months of fiscal 2011 increased by $45.8 million, or 91%, due
principally to the sales increase and a favorable product mix as described above.
The Process Solutions segment had EBIT of $3.2 million in the first nine months of fiscal 2011
compared with a loss of $6.1 million in the comparable period of fiscal 2010. The foreign currency
impact on EBIT for the nine month period of fiscal 2011 over the comparable period of prior year
was immaterial. This increase in EBIT resulted from higher sales volume in fiscal 2011.
Corporate costs were $6.1 million higher in the first nine months of fiscal 2011 compared with the
same period in fiscal 2010, primarily due to $5.9 million of costs associated with professional
fees and accelerated stock compensation expense related to the T-3 merger transaction.
Income Taxes
The effective tax rate for continuing operations was 42.0% for the first nine months of fiscal 2011
compared with 38.3% in the comparable prior year period. The current year effective tax rate is
higher than the U.S. statutory tax rate, primarily due to the recording of an additional valuation
allowance of $7.0 million for certain
deferred tax assets in our Process Solutions segment, primarily driven by the disposition of our
Romaco segment. Excluding this impact, the effective tax rate for the nine month period ended May
31, 2011 was 33.1%.
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The effective tax rate for the nine month period ended May 31, 2010 was higher than the U.S.
federal statutory tax rate primarily due to finalizing certain tax estimates in the third quarter
of fiscal 2010.
Liquidity and Capital Resources
Operating Activities
In the first nine months of fiscal 2011, our cash inflow from operating activities was $25.7
million, compared with $57.1 million in the same period of the prior year. This decrease occurred
primarily because of higher working capital to support our sales and profit growth, payments for
restructuring costs accrued in fiscal 2010, payments for U.S. pension plans, and payments related
to accruals in the opening balance sheet of T-3. Our cash flows from operating activities can
fluctuate significantly from period to period due to working capital needs, the timing of payments
for items such as income taxes, restructuring activities, pension funding and other items.
Investing Activities
Our cash outflows relating to investing activities for the first nine months of fiscal 2011 of
$15.4 million included $90.4 million of cash used for the T-3 acquisition, net of cash acquired;
cash proceeds from sale of our Romaco businesses of $89.2 million and $14.2 million of capital
expenditures. In the first nine months of fiscal 2010, our net cash outflows from investing
activities of $5.6 million consisted of capital expenditures of approximately $6.7 million and
asset sale proceeds of $1.1 million. For full fiscal 2011, the Company expects capital spending to
approximate $20.0 million or higher, depending on business conditions and the timing of certain
capital projects.
Financing Activities
Our cash inflows from financing activities for the first nine months of fiscal 2011 were $14.3
million. Proceeds from the sale of common stock were $22.9 million in the first nine months of
fiscal 2011 and were primarily due to exercise of stock options and related tax benefits.
Our cash outflows relating to financing activities for the first nine months of fiscal 2010 were
$33.1 million primarily due to the repayment of our $30.0 million of Senior Notes on the May 3,
2010 due date from available cash balances.
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 shares repurchased under the program in fiscal 2010 or in the nine
month period ended May 31, 2011.
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, and additional share repurchases, if any.
Credit Agreement
On March 31, 2011, we entered into a new Bank Credit Agreement (the Agreement). The Agreement
replaces our previous Bank Credit Agreement which would have expired in December 2011.
The Agreement provides that we may borrow, for the five-year term of the Agreement, on a revolving
credit basis up to a maximum of $150.0 million at any one time. In addition, under the terms of the
Agreement, we are entitled, on up to six occasions prior to the maturity of the loan, subject to
the satisfaction of certain conditions, to increase the aggregate commitments under the Agreement
in the aggregate principal amount of up to $150.0 million. All outstanding amounts under the
Agreement are due and payable on March 16, 2016. Interest is
variable based upon formulas tied to a Eurocurrency rate or an alternative base rate defined in the
Agreement, at our option. Borrowings, which may also be used for general corporate purposes, are
unsecured, but are guaranteed by certain of our subsidiaries. While no amounts are outstanding
under the Agreement at May 31, 2011, we have $33.3 million of standby letters of credit outstanding
at May 31, 2011. These standby letters of
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credit are used as security for advance payments received
from customers and for future payments to our vendors. Accordingly, under the Agreement, we have
$116.7 million of unused borrowing capacity.
The Agreement contains customary representations and warranties, default provisions and affirmative
and negative covenants, including limitations on indebtedness, liens, asset sales, mergers and
other fundamental changes involving the Company, permitted investments, sales and lease backs, cash
dividends and share repurchases, and financial covenants relating to interest coverage and
leverage. As of May 31, 2011, we are in compliance with these covenants.
From available cash balances, we repaid the remaining $30.0 million of Senior Notes on the May 3,
2010 maturity date.
Following is information regarding our long-term contractual obligations and other commitments
outstanding as of May 31, 2011:
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 |
$ | 1,197 | $ | 1,173 | $ | 24 | $ | | $ | | ||||||||||
Operating leases (1) |
19,000 | 6,000 | 8,000 | 4,000 | 1,000 | |||||||||||||||
Total contractual cash
obligations |
$ | 20,197 | $ | 7,173 | $ | 8,024 | $ | 4,000 | $ | 1,000 | ||||||||||
(1) | Operating leases are estimated as of May 31, 2011, and consist primarily of building and equipment leases. |
Unrecognized tax benefits, including interest and penalties, in the amount of $5.5 million at May
31, 2011, 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 at
May 31, 2011 were standby letters of credit of $33.3 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/A for the year ended August 31, 2010. There have been no material changes in
the accounting policies followed by us during fiscal year 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, effects and timing
to differ materially from the results predicted or implied by those statements. The most
significant of these risks and uncertainties are described in our Annual Report on Form 10-K/A for
the year ended August 31, 2010, the joint proxy statement/prospectus filed with the Securities and
Exchange Commission (SEC) on November 29, 2010, our Quarterly Report on Form 10-Q and other
reports filed from time to time with the SEC and include, but are not limited to: the sale of the
Romaco businesses (including its benefits and effects); costs and difficulties related to the
integration of T-3; the inability to or delay in obtaining cost savings and synergies from the T-3
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.
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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 May 31, 2011. For additional information see Qualitative and
Quantitative Disclosures About Market Risk at Item 7A of our Annual Report on Form 10-K/A for the
year ended August 31, 2010.
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 May 31, 2011. 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 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 May 31,
2011.
(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.
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Part IIOther Information
Item 1. Legal Proceedings
For information required by this Item, refer to Item 1 of our Quarterly Report on Form 10-Q
for the quarter ended February 28, 2011 filed with the SEC.
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/A for the fiscal year ended August 31, 2010 and the Quarterly Report on Form 10-Q for the
quarter ended November 30, 2010 filed with the SEC.
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 May 31,
2011 is as follows:
UNREGISTERED SALES OF EQUITY SECURITIES
On May 25, 2011, the Company issued 4,599 unregistered common shares upon the exercise of a warrant
that was converted in connection with the acquisition of T-3. The R&M common shares that were
issued upon the exercise of the warrant are not registered and are restricted.
ISSUER PURCHASES OF EQUITY SECURITIES
Total Number of | Maximum Number of | |||||||||||||||
Shares Purchased as | Shares that May | |||||||||||||||
Total Number | Average 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) | ||||||||||||
March 1-31, 2011 |
| | | 992,463 | ||||||||||||
April 1-30, 2011 |
| | | 992,463 | ||||||||||||
May 1-31, 2011 |
| | | 992,463 | ||||||||||||
Total |
| | ||||||||||||||
(a) | The Company did not purchase any of its common shares during the quarter ended May 31, 2011. | |
(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: June 22, 2011 | BY | /s/ Christopher M. Hix | ||
Christopher M. Hix Vice President and Chief Financial Officer (Principal Financial Officer) |
||||
DATE: June 22, 2011 | BY | /s/ Kevin J. Brown | ||
Kevin J. Brown Corporate Controller (Principal Accounting Officer) |
||||
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INDEX TO EXHIBITS
(10) | MATERIAL CONTRACTS | |||||||
10.1 | Credit Agreement, dated March 31, 2011, among Robbins & Myers, Inc., the Subsidiary Borrower party thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent was filed as Exhibit 10.1 to our Current Report on Form 8-K filed on April 5, 2011 | * | ||||||
(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 | Indicates Exhibit is being filed with this Report. | |
* | Indicates that Exhibit is incorporated by reference in this Report from a previous filing with the Commission. |
30