Robbins & Myers, Inc. 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20459

FORM 10-K


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 2005


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number 0-288

ROBBINS & MYERS, INC.

(Exact name of Registrant as specified in its charter)


Ohio		31-0424220

(State or other jurisdiction of incorporation)		(I.R.S. employer identification number)


1400 Kettering Tower, Dayton, Ohio		45423

(Address of principal executive offices)		(Zip Code)

(937) 222-2610

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


		Name of each exchange on
Title of each class		which registered

(1) Common Shares, without par value		New York

(2) 8.00 % Convertible Subordinated Notes, Due 2008		New York

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirement for at least the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No 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

Introductory Note — Restatement

In this Annual Report on Form 10-K, Robbins & Myers, Inc. has restated its Consolidated Financial Statements for fiscal years ended August 31, 2004 and 2003, previously reported quarterly financial data for each of the quarters within fiscal 2005 and 2004 and selected financial data for fiscal years 2002 and 2001 (the Restatement). The determination to restate these financial statements and selected financial data was made by our management in consultation with the Audit Committee on November 10, 2005, as a result of errors in tax expense related to (i) the improper accounting for the tax benefits created from the utilization of operating loss carryforwards that existed prior to the acquisition of Romaco in 2001 and (ii) the understatement of future tax benefits primarily from intercompany transactions impacting several taxing jurisdictions. Our Audit Committee discussed these matters with our independent registered public accounting firm. These errors were largely identified through the operation of our internal controls over financial reporting. The determination to restate these Consolidated Financial Statements was made as a result of our assessment that these tax items would be considered material to the Consolidated Financial Statements for the full fiscal year and previously reported quarters of fiscal 2005. The Restatement increased our fiscal 2004 net income by $1.9 million, or $0.13 per diluted share, and increased our fiscal 2003 net income by $0.3 million, or $0.02 per diluted share.

The Restatement has an immaterial effect on our Consolidated Balance Sheets at the end of each of the restated periods and has no effect on revenues, income before income taxes, or cash flow from operating, investing or financing activities. The following tables set forth the effects of the Restatement on our previously reported Consolidated Statement of Operations for fiscal 2004 and 2003 and the affected quarters of fiscal 2005 and fiscal 2004 (in thousands, except per share amounts):


	Twelve Months Ended
	August 31,
	2004		2003
Decrease in income tax expense from adjustments	$	1,878	$	255

Net income as previously reported		9,770		14,368


Net income as restated	$	11,648	$	14,623


Net income per share as previously reported:
Basic	$	0.67	$	1.00

Diluted	$	0.67	$	1.00


Net income per share as restated:
Basic	$	0.80	$	1.02

Diluted	$	0.80	$	1.02


	Fiscal 2005
	First			Second			Third
	Quarter			Quarter			Quarter
Decrease (Increase) in income tax expense from adjustments	$	1,674		$	(1,004	)	$	(1,891	)

Net (loss) income as previously reported		(2,545	)		1,055			2,114


Net (loss) income as restated	$	(871	)	$	51		$	223


Net (loss) income per share as previously reported:
Basic	$	(0.18	)	$	0.07		$	0.14

Diluted	$	(0.18	)	$	0.07		$	0.14


Net (loss) income per share as restated:
Basic	$	0.06		$	0.00		$	0.02

Diluted	$	0.06		$	0.00		$	0.02


	Fiscal 2004
									Year
									Ended
	First		Second		Third		Fourth		August 31,
	Quarter		Quarter		Quarter		Quarter		2004
Decrease in income tax expense from adjustments	$	411	$	120	$	695	$	652	$	1,878

Net income as previously reported		2,139		320		3,814		3,497		9,770


Net income as restated	$	2,550	$	440	$	4,509	$	4,149	$	11,648


Net income per share as previously reported:
Basic	$	0.15	$	0.02	$	0.26	$	0.24	$	0.67

Diluted	$	0.15	$	0.02	$	0.26	$	0.24	$	0.67


Net income per share as restated:
Basic	$	0.18	$	0.03	$	0.31	$	0.29	$	0.80

Diluted	$	0.18	$	0.03	$	0.31	$	0.28	$	0.80

ITEM 1. BUSINESS

OVERVIEW

Robbins & Myers, Inc. is an Ohio corporation. As used in this report, the terms “Company,” “we,” “our,” or “us” mean Robbins & Myers, Inc. and its subsidiaries unless the context indicates another meaning. We are a leading designer, manufacturer and marketer of highly-engineered, application-critical equipment and systems for the pharmaceutical, energy and industrial markets worldwide. Our principal brand names — Pfaudler®, Moyno®, Chemineer®, Laetus®, FrymaKoruma®, Siebler®, Hapa® and Hercules® — hold the number one or two market share position in the niche markets they serve. 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. Our fiscal 2005 sales were approximately $605 million, and no one customer accounted for more than 5% of these sales.

Our business consists of three market-focused segments: Pharmaceutical, Energy and Industrial.

Pharmaceutical. Our Pharmaceutical business segment includes our Reactor Systems and Romaco product lines and is focused primarily on the pharmaceutical and healthcare industries. Our Reactor Systems product line designs, manufacturers and markets primary processing equipment and engineered systems and we believe has the leading worldwide position in glass-lined reactors and storage vessels. Our Romaco product line designs, manufacturers and markets secondary processing, dosing, filling, printing and security equipment. Several of our Romaco brands hold the number one or two worldwide position in the niche markets they serve. Major customers of our pharmaceutical segment include Bayer, GlaxoSmithKline, Merck, Novartis and Pfizer.

Energy. Our Energy business segment designs, manufactures and markets equipment and systems used in oil and gas exploration and recovery. Our equipment and systems include hydraulic drilling power sections, down-hole pumps and a broad line of ancillary equipment, such as rod guides, rod and tubing rotators, wellhead systems, pipeline closure products and valves. These products and systems are used at the wellhead and in subsurface drilling and production. Several of our energy products, including hydraulic drilling power sections and down-hole pumps, hold the number one or two worldwide position in their respective markets. Major customers of our energy segment include Schlumberger and Chevron Texaco.

Industrial. Our Industrial business segment is comprised of our Moyno, Tarby, Chemineer and Edlon product lines, which design, manufacture and market products that are used in specialty chemical, wastewater treatment and a variety of other industrial applications. Our Moyno and Tarby businesses manufacture pumps that utilize progressing cavity technology to provide fluids-handling solutions for a wide range of applications involving the flow of viscous, abrasive and solid-laden slurries and sludges. Our Chemineer business manufactures high-quality standard and customized fluid-agitation equipment and systems. Our Edlon business manufactures customized fluoropolymer-lined fittings, vessels and accessories. Our industrial segment has a highly diversified customer base and sells its products to over 3,500 customers worldwide.

Information concerning our sales, income before interest and income taxes (“EBIT”), identifiable assets by segment, and sales and identifiable assets by geographic area for the years ended August 31, 2005, 2004 and 2003 is set forth in Note 13 to the Consolidated Financial Statements included at Item 8 and is incorporated herein by reference.

Pharmaceutical Business Segment

Our Pharmaceutical business segment, which includes our Reactor Systems and Romaco product lines, primarily serves the pharmaceutical, healthcare, nutriceutical and fine chemicals markets. We believe that long term our Pharmaceutical business segment will benefit from high levels of capital expenditures within these industries. We expect the need for new and enhanced processing equipment will be driven by numerous factors, including the accelerating pace of the drug discovery process, the cost advantages of pharmaceuticals over alternative forms of treatment, the aging of the population, the increasing availability of generic drugs due to the expiration of patents, the impact of increasing direct-to-consumer advertising by pharmaceutical manufacturers, the growing demand for nutriceutical products and escalating healthcare expenditures in emerging markets.

Reactor Systems

Our Reactor Systems product line, which includes our Pfaudler and TyconTechnoglass brands, designs, manufactures and markets glass-lined reactor and storage vessels, engineered systems, mixing systems and accessories, including instrumentation and piping. This equipment is principally used in the primary processing of pharmaceuticals and fine chemicals. A reactor system performs critical functions in batch processing by providing a pressure- and temperature-controlled agitation environment for the often complex chemical reactions necessary to process pharmaceuticals and fine chemicals.

To produce a reactor, we fabricate a specialized steel vessel, which may include an outer jacket for a heating and cooling system, and line the vessel with glass by bonding the glass to the inside steel surface. Application-specific glasses are bonded with the inner steel surface of the vessel to provide an inert and corrosion-resistant surface.

Our Reactor Systems business sells reactor vessels with capacities up to 15,000 gallons, which are generally both custom ordered and designed, and are often equipped with accessories, such as drives, glass-lined agitators, baffles and in vessel instrumentation. We also sell these vessels as part of an engineered system. Using our application engineering expertise and our understanding of our customers’ requirements, we are able to engineer and produce a complete modular system comprised of heating and cooling systems and reactor overheads, which may be installed at the customer’s facility or delivered to the customer as a skid-mounted system. Additionally, we manufacture and sell glass-lined storage vessels with capacities up to 30,000 gallons, primarily to the same customers that use glass-lined reactor systems.

Sales, Marketing and Distribution. We primarily market and sell Pfaudler and TyconTechnoglass equipment and systems through our direct sales force, which includes approximately 10 direct sales employees in the U.S. and 20 outside the U.S.(excluding China and India), who are supported by numerous other personnel including our application engineers. We also have approximately 30 manufacturers’ representatives in the marketing of reactor systems equipment. We are focused on continuing to develop preferred supplier relationships with major pharmaceutical companies and chemical manufacturers as they continue to expand their production operations in emerging markets and seek to limit the number of suppliers that service their needs worldwide.

Aftermarket Sales. Aftermarket products and services, which include field service, replacement parts, accessories and reconditioning of glass-lined vessels, are an important part of our Reactor Systems product line. Glass-lined vessels require regular maintenance and care because they are subjected to harsh operating conditions, and there is often a need to maintain a high-purity processing environment. Our aftermarket capabilities take advantage of our large installed base of Pfaudler glass-lined vessels and meet the needs of our customers, who are increasingly inclined to outsource various maintenance and service functions.

We service our own and competitors’ equipment from our various facilities and have two units dedicated to serving the aftermarket — Glasteel Parts and Service (GPS) and Chemical Reactor Services (CRS). GPS and CRS are the leading providers of aftermarket services for glass-lined equipment in the U.S. and in Europe, respectively. Through our joint venture, Universal Glasteel Equipment, we refurbish and sell used, glass-lined vessels.

Markets and Competition. We believe we have the number one worldwide market position for quality glass-lined reactors and storage vessels, representing a global market share in excess of 50%. Our Pfaudler brand has the leading market share in glass-lined reactors and vessels, as well as the largest installed base in most of the countries in which Pfaudler operates, including Germany, Mexico, Brazil, India, UK and the U.S. Our TyconTechnoglass brand has the leading market share in Italy and significant project business globally. Our Pfaudler and TyconTechnoglass brands compete principally with DeDeitrich, a French company, in all world markets except Japan, China and India.

Romaco

Romaco designs, manufactures and markets secondary processing, dosing, filling, printing and security equipment used by the pharmaceutical, healthcare, nutraceuticals and cosmetics industries. The principal brand names in our Romaco business are Laetus, FrymaKoruma, Hapa and Siebler.

Romaco equipment and systems are used in:

•		secondary processing of pharmaceuticals and cosmetic liquids, solids, creams and powders;

•		dosing, filling and sealing of vials, capsules, tubes, bottles and blisters, as well as customized packaging; and

•		high quality and high security on demand printing lines and robust, reliable packaging inspection systems.

Romaco’s expertise extends from secondary processing through the final packaging of pharmaceuticals, nutriceuticals and cosmetics. For example, Romaco provides modular processing, dosing and filling systems, which can include equipment for the in-line labeling of drugs and the printing of dispensing packages. Romaco’s application engineers work closely with customers to design specific equipment and systems to meet their requirements.

Sales, Marketing and Distribution. We distribute Romaco products through our distribution network, which currently includes 16 sales and service centers around the world. In the geographic areas served by these centers, we sell directly to end users through our own sales force. We use manufacturers’ representatives to cover territories that are not effectively covered by our direct sales network.

Aftermarket Sales. Aftermarket sales of our Romaco business were approximately $51 million in fiscal 2005, or 30% of Romaco’s total sales. Included in these aftermarket sales are certain proprietary consumables, such as inks and labels.

Markets and Competition. Romaco has a large installed base of equipment in Europe, where it has its greatest market share, a strong presence in Latin America and a smaller presence in the U.S. and Asia. We believe there are opportunities in the U.S. and Asia to effectively introduce Romaco products to customers to grow these markets. We believe Romaco is one of the top five worldwide manufacturers of the type of pharmaceutical equipment it provides; however, the market is fragmented with many competitors, none of which is dominant. Given the fragmented nature of the industry, we believe there are strategic opportunities to expand our market share through technological innovation and flexible response to new market requirements and product applications.

Energy Business Segment

Our energy business designs, manufactures and markets a variety of specialized equipment and systems used in oil and gas exploration and recovery. Our equipment and systems are used at the wellhead and in subsurface drilling and production and include:

•		down hole hydraulic drilling power sections and progressing cavity pumps, which we market under our Moyno brand name;

•		tubing wear prevention equipment, such as rod guides and rod and tubing rotators marketed under New Era and Rodec;

•		a broad line of ancillary equipment used at the wellhead, marketed under Hercules; and

•		pipeline closure products and valves, which we market under Yale, Sentry, and Hercules brand names.

Down hole hydraulic drilling power sections are used to drive the drill bit in horizontal and directional drilling applications, often drilling multiple wells from a single location. Down-hole pumps are used primarily to lift crude oil to the surface where there is insufficient natural formation pressure and for dewatering (coal bed methane) gas wells. The largest oil and natural gas recovery markets that benefit from using our progressing cavity down-hole pumps are in Canada, the U.S., Venezuela, Indonesia and Kazakhstan. Rod guides are placed on down-hole sucker rods which are used in conjunction with artificial lift systems. Rod guides can protect the rods and the production tubing from damage during operation and could enhance the flow of fluid to the surface. Tubing rotator products are an effective way of evenly distributing production tubing wear. Wellhead products are used at the wellhead to control wellhead pressure and the flow of oil, gas and other material from the well. Pipeline closure products are used in oil and gas pipelines to allow access to a pipeline at selected intervals for inspection and cleaning. Principal brands of our energy segment include Moyno, Yale, Sentry, New Era and Hercules.

Sales, Marketing and Distribution. We sell our hydraulic drilling power sections directly to oilfield service companies and OEM’s through our global sales team coordinated out of our office near Houston, Texas. We sell our tubing wear prevention products and certain wellhead equipment in the U.S. and Canada through major national distributors as well as our service centers in key oilfield locations. We currently operate eight service centers in the U.S. and five service centers in Alberta, Canada. We sell down-hole pumps in the U.S. and Canada direct and through two major national distributors. In Venezuela, Kazakhstan and Indonesia we sell our down-hole pumps direct through our service centers; and in the Middle East we work with several agents and distributors. We sell wellhead and closure products through distributors and manufacturer representatives.

Aftermarket Sales. Aftermarket sales in our energy business consist principally of the relining of stators and the refurbishment of rotors. However, replacement items, such as power sections and down-hole pump rotors and rod guides, which wear out after regular usage, are complete products and are not identifiable by us as aftermarket sales.

Markets and Competition. Our energy business is the leading independent manufacturer of hydraulic drilling power sections worldwide. We are also the leading manufacturer of rod guides, wellhead components and pipeline closure products and the second leading manufacturer of down-hole progressing cavity pumps. While the oil and gas exploration and recovery equipment marketplace is highly fragmented, we believe that, with our leading brands and products, we are effectively positioned as a full-line supplier with the capability to provide customers with complete system sourcing.

Oil and gas service companies use the most advanced technologies available in the exploration and recovery of oil and gas. Accordingly, new product innovation and manufacturing technologies are critical to our business. We continually develop new elastomer compounds for use in our power sections and down-hole pumps that allow drilling and recovery operations to be conducted in deeper formations and under more adverse conditions. We are also focused on innovations that reduce downtime in drilling and production activities for end-users of our equipment who incur high costs for any downtime. In addition, we regularly introduce new wellhead equipment, pipeline (closure) products and rod guide designs and materials to improve the reliability and efficiency of these product offerings.

Industrial Business Segment

Our industrial business segment is comprised of our Moyno, Tarby, Chemineer and Edlon product lines, which design, manufacture and market products that are used in specialty chemical, wastewater treatment and a variety of other industrial applications. Our industrial businesses have strong brand names and market share and maintain strict operating discipline.

Moyno and Tarby

Our Moyno and Tarby product lines design, manufacture and market progressing cavity pumps and related products such as grinders for use in the wastewater treatment, specialty chemical, food and beverage, pulp and paper and general industrial markets. Prices range from several hundred dollars for small pumps to several thousands for large pumps, such as those used in wastewater treatment applications.

Progressing cavity technology utilizes a motor-driven, high-strength, single or multi-helix rotor within an elastomer-lined stator. The spaces between the helixes create continual cavities, which enable the fluid to move from the suction end to the discharge end. The continuous seal creates positive displacement and an even flow regardless of the speed of the application. Progressing cavity pumps are versatile as they can be positioned at any angle and can deliver flow in either direction without modification or accessories. Since progressing cavity pumps have no valves, they are able to efficiently handle fluids ranging from high-pressure water and shear-sensitive materials to heavy, viscous, abrasive and solid-laden slurries and sludge in municipal wastewater treatment operations.

Sales, Marketing and Distribution. We sell our pumps through approximately 35 U.S. and 30 non-U.S. distributors and approximately 25 U.S. and 15 non-U.S. manufacturers’ representatives. These networks are managed by five regional sales offices in the U.S. and offices in the U.K., Mexico, China and Singapore.

Markets and Competition. Moyno has a large installed base and a dominant market share in progressing cavity pumps in the U.S. and Canada but a smaller presence in Europe and Asia. While we believe Moyno is the North

American leader in the manufacture of progressing cavity pumps, the worldwide market is highly competitive and includes several competitors, none of which is dominant. In addition, there are several other types of positive displacement pumps, including gear, lobe and air-operated diaphragm pumps that compete with progressing cavity pumps in certain applications.

Chemineer

Chemineer manufactures industrial mixers that range in price from hundreds of dollars for small portable mixers to over $1 million for large, customized mixers. These products include top-entry, side-entry, gear-driven, belt-driven, high-shear and static mixers, which are marketed under the Chemineer, Greerco, Kenics and Prochem brand names for various industrial applications, ranging from simple storage tank agitation to critical applications in polymerization and fermentation processes.

Chemineer’s high-quality gear-driven agitators are available in various sizes, a wide selection of mounting methods and drives of up to 1,000 horsepower. Chemineer competes in the small-mixer market with DT small mixers, a line of fixed mounted mixers with drive ranges from one-half to five horsepower for less demanding applications, and the Chemineer XPress portable mixers, a line of portable gear-driven and direct-drive mixers, which can be clamp mounted to handle small-batch mixing needs.

Our belt-driven, side-entry mixers are used primarily in the pulp and paper and mineral processing industries. Our static mixers are continuous mixing and processing devices with no moving parts, and are used in specialized mixing and heat transfer applications. Our high-shear mixers are used primarily for paint, cosmetics, plastics and adhesive applications.

Sales, Marketing and Distribution. Chemineer sells industrial mixers through regional sales offices and through a network of approximately 30 U.S. and 30 non-U.S. manufacturers’ representatives. Our Chemineer business maintains regional sales offices in Mexico, Canada, the U.K., Singapore, Taiwan, China and Korea.

Markets and Competition. The mixer equipment industry is highly competitive. We believe that Lightnin’, a unit of SPX Corporation, holds more than 50% of the world market share, and that we hold the number two market position worldwide. In addition, there are numerous smaller manufacturers with whom we compete. We believe that Chemineer’s application engineering expertise, diverse products, product quality and customer support capabilities allow us to compete effectively in the marketplace.

Edlon

Edlon manufactures and markets, fluoropolymer coated and lined vessels for process equipment, fluoropolymer roll covers for paper machines and glass-lined reactor systems accessories. Edlon’s products are used principally in the specialty chemical, pharmaceutical and semiconductor markets to provide corrosion protection and high-purity fluid assurance and in the paper industry for release applications. Edlon has introduced newly designed storage tanks for de-ionized water and ultra-pure chemicals and expanded the range of products it sells to chip producers and wafer manufacturers in the semiconductor industry.

Sales, Marketing and Distribution. We sell our Edlon products in the U.S. primarily through our direct sales force and sales representatives. Outside the U.S., we sell our Edlon products through sales representatives, except in the U.K. where we sell our products through our direct sales force.

Markets and Competition. Edlon primarily competes by offering highly engineered products and products made for special needs, which are not readily supplied by competitors. Edlon is able to compete effectively based on its extensive knowledge and application expertise with fluoropolymers.

BACKLOG

Our order backlog was $116.5 million at August 31, 2005 compared with $114.3 million at August 31, 2004. We expect to ship substantially all of our backlog during the next 12 months.

CUSTOMERS

Sales are not concentrated with any customer, as no customer represented more than 5% of sales in fiscal 2005, 2004 or 2003.

RAW MATERIALS

Raw materials are purchased from various vendors that generally are located in the same country as our facility using the raw materials. Because of high global demand for steel, the costs have increased significantly in 2005. However, the supply of steel and other raw materials and components has been adequate and available without significant delivery delays. No events are known or anticipated that would change the availability of raw materials. No one supplier provides more than 5% of our raw materials.

GENERAL

We own a number of patents relating to the design and manufacture of our products. While we consider these patents important to our operations, we believe that the successful manufacture and sale of our products depend more upon technological know-how and manufacturing skills. We are committed to maintaining high quality manufacturing standards and have completed ISO certification at several facilities.

During fiscal 2005, we spent approximately $8.7 million on research and development activities compared with $6.7 million in fiscal 2004 and $6.4 million in fiscal 2003.

Compliance with federal, state and local laws regulating the discharge of materials into the environment is not anticipated to have any material effect upon our capital expenditures, earnings or competitive position.

At August 31, 2005, we had 3,585 employees, which included approximately 540 at majority-owned joint ventures. Approximately 615 of these employees were covered by collective bargaining agreements at various locations. The labor agreement with the employees of Chemineer’s principal manufacturing facility extends to March of 2007. The labor agreement with the employees of Pfaudler’s facility in Rochester, New York extends to September 2007. The labor agreement with the employees of Moyno’s principal manufacturing facility extends to February 2007. The Company considers labor relations at each of its locations to be good.

CERTIFICATIONS

Peter C. Wallace, our President and Chief Executive Officer, certified to the New York Stock Exchange on November 18, 2005 that, as of that date, he was not aware of any violation by the Company of the NYSE’s Corporate Governance Listing Standards. We have filed with the SEC the certifications of Mr. Wallace and Kevin J. Brown, our Chief Financial Officer, that are required by Section 302 of the Sarbanes-Oxley Act of 2002 relating to the financial statements and disclosures contained in our Annual Report on Form 10-K for the year ended August 31, 2005.

AVAILABLE INFORMATION

We make available free of charge on or through our web site, at www.robbinsmyers.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such materials are electronically filed with the Securities and Exchange Commission (“SEC”). Additionally, the public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C., 20549. Information regarding operation of the Public Reference Room is available by calling the SEC at 1-800-SEC-0300. Information that we file with the SEC is also available at the SEC’s web site at www.sec.gov.

We also post on our web site the following corporate governance documents: Corporate Governance Guidelines, Code of Business Conduct, and the Charters of our Audit, Compensation, and Nominating and Governance Committees. Copies of the foregoing documents are also available in print to any shareholder who requests it by writing our Corporate Secretary, Robbins & Myers, Inc., 1400 Kettering Tower, Dayton, Ohio 45423.

ITEM 2. PROPERTIES

Facilities

Our executive offices are located in Dayton, Ohio. The executive offices are leased and occupy approximately 10,000 square feet. Set forth below is certain information relating to our principal operating facilities.


	Square		Products Manufactured or
Location	Footage		Other Use of Facility

North and South America:
Rochester, New York	500,000		Reactor Systems
Springfield, Ohio	275,000		Industrial Pump Products
Dayton, Ohio	160,000		Industrial Mixers
Borger, Texas	115,000		Wellhead products for Energy Systems
Willis, Texas	110,000		Down-hole pumps and power sections for Energy Systems
Mexico City, Mexico	110,000		Reactor Systems, Industrial Pumps and Industrial Mixers
Taubate, Brazil	100,000		Reactor Systems
Tomball, Texas	75,000		Valves and closures for Energy Systems
Charleston, West Virginia	63,000		Corrosion Resistant Products
Avondale, Pennsylvania	50,000		Corrosion-Resistant Products
North Andover, Massachusetts	30,000	(1)	Industrial Mixers
San Jose Dos Campos, Brazil	30,000		Reactor Systems
Edmonton, Alberta, Canada	25,000 to	(2)	Energy Systems, including two service centers
2 plants	30,000 each	(1)
Pequannock, New Jersey	62,000	(1)	Index equipment
Maracaibo, Venezuela	10,000		Energy Systems and rod guide products
El Tigre, Venezuela	10,000		Energy Systems pump and rod guide products

Europe:
Schwetzingen, Germany	400,000		Reactor Systems
Leven, Scotland	240,000		Reactor Systems and Corrosion-Resistant Products
San Donà di Piave, Italy	90,000		Reactor Systems
Derby, England	20,000	(1)	Industrial Mixers
Petit-Rechain, Belgium	15,000		Power sections for Energy Systems
Bolton, England	24,000		Reactor Systems
Southampton, England	10,000	(1)	Industrial Pump Products
Campbridgeshire, England	8,500		Distribution Center-Romaco Products
D’Agen, France	15,000	(1)	Manufacture of Pharma Modules
Alsbach — Hahnlein, Germany	21,000		Laetus equipment
Remschingen, Germany	61,000	(1)	Siebler equipment
Karlsruhe, Germany	47,000		Noack equipment
Neuenburg, Germany	70,000		Frymakoruma equipment
Bologna, Italy	44,000	(1)	Macofar equipment
Bologna, Italy	11,000	(1)	Promatic equipment
Lucca, Italy	52,000		Zanchetta equipment
Volketswil, Switzerland	50,000	(1)	HAPA equipment
Rheinfelden, Switzerland	115,000		Frymakoruma equipment


	Square		Products Manufactured or
Location	Footage		Other Use of Facility

Australia:
Tingalpa, Brisbane	24,000	(1)	Bosspak equipment

Asia:
Dalian, China	50,000	(5)	Industrial Pump products
Gujurat, India	350,000	(3)	Reactor Systems
Suzhou, China	150,000	(4)	Reactor Systems
Suzhou, China	167,000		Reactor Systems and other R&M products
Singapore	5,000	(1)	Industrial Pump products


(1)		Leased facility.

(2)		R&M Energy Systems also operates an additional 13 (8 U.S., 5 Canada) Service Centers, primarily in leased facilities between 5,000 and 10,000 square feet each. These locations are in the oil producing regions of the U.S. and Canada and manufacture rod guides and distribute other of the Company’s Energy Systems products. Locations are: Bakersfield, California (2), Oklahoma City, Oklahoma, Odessa, Texas, Casper, Wyoming, Williston, North Dakota, Wooster, Ohio, Trinidad, Colorado and in Alberta, Canada — Brooks, Elk Point, Provost, Hardisty and Lloydminster.

(3)		Facility of a 51% owned subsidiary.

(4)		Facility of a 76% owned subsidiary.

(5)		Facility of a 60% owned subsidiary.

Executive Officers of the Registrant

Peter C. Wallace, age 51, has been President and Chief Executive Officer of the Company since July 12, 2004. From October 2001 to July 2004, Mr. Wallace was President and CEO of IMI Norgren Group (sophisticated motion and fluid control systems for original equipment manufacturers). He was employed by Rexnord Corporation (power transmission and conveying components) for 25 years serving as President and Group Chief Executive from 1998 until October 2001 and holding a variety of senior sales, marketing, and international positions prior thereto.

Kevin J. Brown, age 47, has been our Vice President and Chief Financial Officer since January 2000. Previously, he was our Controller and Chief Accounting Officer since December 1995. Prior to joining us, he was employed by the accounting firm of Ernst & Young LLP for 15 years.

Saeid Rahimian, age 47, has been a President, Fluid Management, since September 2005. He was Group Vice President and President of our Reactor Systems business from May 2004 to September 2005. He has also been President of our R&M Energy Systems business since 1998.

John R. Beatty, age 53, has been our Vice President, Human Resources since March 2004. From 1996 to 2004, he was Vice President, Human Resources for DT Industries, Inc., and prior to 1996, he was Director of Human Resources for Rockwell Software Inc., a subsidiary of Rockwell Inc.

Thomas J. Schockman, age 41, has been our Corporate Controller and Chief Accounting Officer since March 2000. Prior to joining us, he was employed as Controller at Spinnaker Coating, Inc. for three years and, prior to that, with the accounting firm of Ernst & Young LLP for ten years.

Joseph M. Rigot, age 62, has been our Secretary and General Counsel since 1990. He has been a partner with the law firm of Thompson Hine LLP, Dayton, Ohio for over 15 years.

The term of office of our executive officers is until the next Annual Meeting of Directors (January 11, 2006) or until their respective successors are elected.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(A) Our common shares trade on the New York Stock Exchange under the symbol RBN. The prices presented in the following table are the high and low closing prices for the common shares for the periods presented.


					Dividends
	High		Low		Paid
Fiscal 2005
1st Quarter	$	24.42	$	18.98	$	0.055
2nd Quarter		24.47		21.69		0.055
3rd Quarter		24.00		21.13		0.055
4th Quarter		24.40		21.14		0.055

Fiscal 2004
1st Quarter	$	23.38	$	20.49	$	0.055
2nd Quarter		22.45		18.70		0.055
3rd Quarter		22.95		19.55		0.055
4th Quarter		22.55		17.32		0.055

(B) As of October 15, 2005, we had 403 shareholders of record.

(C) Dividends paid on common shares are presented in the table in Item 5(A). Our credit agreement includes certain covenants which restrict our payment of dividends. The amount of cash dividends plus stock repurchases we may incur in each fiscal year is restricted to the greater of $3,500,000 or 50% of our net income for the immediately preceding fiscal year, plus a portion of any unused amounts from the preceding fiscal year. For purposes of this test, stock repurchases related to stock option exercises or in connection with withholding taxes due under any stock plan in which employees or directors participate are not included. Under this formula, such cash dividends and treasury stock purchases in fiscal 2006 are limited to $3,500,000.

(D) The Company had no repurchases of its common shares during the quarter ended August 31, 2005.

ITEM 6. SELECTED FINANCIAL DATA

Selected Financial Data (1)
Robbins & Myers, Inc. and Subsidiaries
(In thousands, except percents, per share, shareholder and employee data)

The following information has been restated to reflect adjustments that are further addressed in the “Introductory Note -

Restatement” in the forepart of this Form 10-K and in Note 2 “Restatement of Financial Statements” to our Consolidated Financial Statements included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Form 10-K

The following selected financial data should be read in conjunction with Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our restated Consolidated Financial Statements included in Item 8 “Financial Statements and Supplementary Data.”


	2005			2004			2003			2002			2001
Operating Results
Orders	$	607,210		$	586,948		$	546,357		$	508,943		$	427,275
Ending backlog		116,491			114,267			111,375			125,665			143,522
Sales		604,773			585,758			560,775			526,373			425,902
Gross profit (2)		193,465			193,004			188,816			173,764			140,734
EBIT (2,3,4)		21,451			30,317			38,709			40,947			43,236
Net (loss) income (2,3)		(262	)		11,648			14,623			14,630			19,803

Financial Condition
Total assets	$	740,335		$	736,078		$	705,491		$	680,705		$	660,913
Total debt		175,408			181,702			193,603			208,446			258,894
Shareholders’ equity		300,845			305,398			286,916			261,273			198,555
Total capitalization		476,253			487,100			480,519			469,719			457,449
Performance Statistics
Percent of sales:
Gross profit (2)		32.0	%		32.9	%		33.7	%		33.0	%		33.0	%
EBIT (2,3,4)		3.5			5.2			6.9			7.8			10.2
Debt as a % of total capitalization		36.8			37.3			40.3			44.4			56.6
EBIT return on average net assets (8)		4.4			6.2			8.0			8.9			12.4
Net (loss) income return on avg. equity		(0.1	)		3.9			5.3			6.7			11.2
Per Share Data
Net (loss) income per share, diluted (2,3)	$	(0.02	)	$	0.80		$	1.02		$	1.15		$	1.64
Dividends declared		0.22			0.22			0.22			0.22			0.22
Market price of common stock:
High	$	24.47		$	23.38		$	22.77		$	29.28		$	29.25
Low		18.98			17.32			13.29			18.91			21.56
Close		21.93			19.10			22.73			18.91			28.38
P/E ratio at August 31, diluted		—			23.88			22.28			16.44			17.30
Other Data
Cash flow from operations	$	26,815		$	26,353		$	45,636		$	44,540		$	30,984
Capital expenditures, net		20,263			9,884			7,869			15,112			20,200

Free cash flow (5)		6,552			16,469			37,767			29,428			10,784

Amortization (3)	$	2,519		$	2,738		$	2,189		$	2,015		$	8,187
Depreciation		17,874			18,639			20,093			20,028			16,161
Enterprise value (6)		497,077			459,168			521,483			479,483			591,650
Shares outstanding at year end		14,668			14,527			14,425			14,333			11,726
Average diluted shares (7)		16,423			16,285			16,492			14,688			13,465
Shareholders of record		404			430			503			486			530
Number of employees		3,585			3,824			3,904			3,921			4,334

Notes to Selected Financial Data

	1.		Fiscal 2003 reflected the acquisition of Tarby on November 15, 2002. Fiscal 2001 reflected the acquisition of Romaco on August 31, 2001. The August 31, 2001 Consolidated Balance Sheet data included Romaco, but the fiscal 2001 Consolidated Statement of Operations data did not include Romaco.

	2.		Fiscal 2005 includes costs of $7,902,000 related to the restructuring of our Pharmaceutical segment, including inventory write-downs of $1,130,000 that are included in gross profit. Fiscal 2005 also includes a loss of $2,114,000 related to asset dispositions in our Industrial segment. See Note 5 of Notes to Consolidated Financial Statements. Fiscal 2004 included charges of $1,378,000 related to the retirement of our former President & CEO and severance costs of $761,000 related to the consolidation of our Reactor Systems business in Italy. Fiscal 2001 included charges of $2,492,000 related to our global reorganization program, including inventory write-downs of $1,000,000 that are included in gross profit. These special items decreased fiscal 2005 net income by $6,310,000 ($0.44 per diluted share), decreased fiscal 2004 net income by $1,390,000 ($.10 per diluted share) and decreased fiscal 2001 net income by $1,670,000 ($0.12 per diluted share).

	3.		In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 established accounting and reporting standards for intangible assets and goodwill. It required that goodwill and certain intangible assets no longer be amortized to earnings, but instead be reviewed periodically for impairment. We adopted this pronouncement as of the beginning of fiscal 2002. Had the new pronouncement been adopted at the beginning of fiscal 2001, goodwill amortization of $5,420,000 would not have been recorded in fiscal 2001 and net income per diluted share in fiscal 2001 would have been $1.88.

	4.		EBIT represents income before interest and income taxes and is reconciled to net income on our Consolidated Statement of Operations. EBIT is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States and should not be considered as an alternative to net income as a measure of our operating results. EBIT is not a measure of cash available for use by management. We evaluate performance of our business segments and allocate resources based on EBIT.

	5.		Free Cash Flow represents net cash and cash equivalents provided by operating activities, less capital expenditures. Free Cash Flow is used as a measure of cash generated for acquisitions and financing activities. Free Cash Flow is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States, and should not be considered an alternative to cash flow as a measure of our liquidity.

	6.		Enterprise value represents market capitalization of shares outstanding at year end plus total debt.

	7.		Fiscal 2005 and 2004 reflected an additional 1,778,000 shares, fiscal 2003 reflected an additional 2,090,000 shares and fiscal 2002 and fiscal 2001 reflected an additional 2,190,000 shares related to the convertible notes outstanding.

	8.		EBIT return on average net assets is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States and should not be considered as an alternative to net income return on average equity. EBIT return on average net assets is computed as EBIT divided by the summation of total assets less accounts payable, accrued liabilities, deferred tax liabilities, other long-term liabilities and minority interest. This measure is used to evaluate the return on the assets employed by our business segments.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Restatement of Financial Statements

We have restated our Consolidated Financial Statements for fiscal 2004 and 2003, and the previously reported quarters of fiscal 2005 and fiscal 2004 with respect to errors related to (i) the improper accounting for the tax benefits created from the utilization of operating loss carryforwards that existed prior to the acquisition of Romaco in 2001 and (ii) the understatement of future tax benefits primarily from intercompany transactions impacting several taxing jurisdictions. The determination to restate these Consolidated Financial Statements was made as a result of our assessment that these tax items would be considered material to the Consolidated Financial Statements for the full fiscal year and previously reported quarters of fiscal 2005. The tax adjustments associated with the above corrections increased our fiscal 2004 net income by $1.9 million, or $0.13 per diluted share, and increased our fiscal 2003 net income by $0.3 million, or $0.02 per diluted share.

Further information on the nature and impact of these adjustments to fiscal year 2004 and 2003 as well as the impact to our quarterly financial information for fiscal 2005 and 2004 is provided at Note 2, “Restatement of Financial Statements,” to our Consolidated Financial Statements. The impact of the restatement on the results of operations for fiscal years 2004 and 2003 is shown in the table below (in thousands, except per share amounts):


	Twelve Months Ended
	August 31,
	2004		2003
Decrease in income tax expense from adjustments	$	1,878	$	255

Net income as previously reported		9,770		14,368


Net income as restated	$	11,648	$	14,623


Net income per share as previously reported:
Basic	$	0.67	$	1.00

Diluted	$	0.67	$	1.00


Net income per share as restated:
Basic	$	0.80	$	1.02

Diluted	$	0.80	$	1.02

Overview

We are a leading designer, manufacturer and marketer of highly engineered, application-critical equipment and systems for the pharmaceutical, energy and industrial markets worldwide. In our estimation our principal brand names — Pfaudler®, Moyno®, Chemineer®, Laetus®, FrymaKoruma®, Siebler®, Hapa® and Hercules® — hold the number one or two market share position in the niche markets they serve. We operate with three market focused business segments: Pharmaceutical, Energy and Industrial.

Pharmaceutical Our Pharmaceutical business segment includes our Reactor Systems and Romaco product lines and is focused primarily on the pharmaceutical and healthcare industries. Our Reactor Systems product line designs, manufacturers and markets primary processing equipment and engineered systems and we believe has the leading worldwide position in glass-lined reactors and storage vessels. Our Romaco product line designs, manufacturers and markets secondary processing, dosing, filling, printing and security equipment. Several of our Romaco brands hold the number one or two worldwide position in the niche markets they serve. Major customers of our pharmaceutical segment include Bayer, GlaxoSmithKline, Merck, Novartis and Pfizer.

Energy Our Energy business segment designs, manufactures and markets equipment and systems used in oil and gas exploration and recovery. Our equipment and systems include hydraulic drilling power sections, down-

hole pumps and a broad line of ancillary equipment, such as rod guides, rod and tubing rotators, wellhead systems, pipeline closure products and valves. These products and systems are used at the wellhead and in subsurface drilling and production. Several of our energy products, including hydraulic drilling power sections and down-hole pumps, hold the number one or two worldwide position in their respective markets. Major customers of our energy segment include Schlumberger, Chevron Texaco and National Oilwell.

Industrial Our Industrial business segment is comprised of our Moyno, Tarby, Chemineer and Edlon product lines, which design, manufacture and market products that are used in specialty chemical, wastewater treatment and a variety of other industrial applications. Our Moyno and Tarby products are pumps that utilize progressing cavity technology to provide fluids-handling solutions for a wide range of applications involving the flow of viscous, abrasive and solid-laden slurries and sludges. Our Chemineer products are high-quality standard and customized fluid-agitation equipment and systems. Our Edlon products are customized fluoropolymer-lined fittings, vessels and accessories. Our industrial segment has a highly diversified customer base and sells its products to over 3,500 customers worldwide.

Romaco

On May 19, 2005, we announced that we were involved in preliminary discussions with other parties that may or may not lead to a disposition of all or major components of our Romaco product line in the Pharmaceutical sector and had hired an investment banker to assist us in those discussions. The discussions are continuing with a number of parties. No agreement has been reached with any party relating to the purchase of our Romaco business units and there can be no assurance that any such agreement can be concluded.

Safe Harbor Statement

In addition to historical information, this Form 10-K contains forward-looking statements, identified by use of words such as “expects,” “anticipates,” “estimates,” and similar expressions. These statements reflect the Company’s expectations at the time this Form 10-K was filed. Actual events and results may differ materially from those described in the forward-looking statements. Among the factors that could cause material differences are a significant decline in capital expenditures in the specialty chemical and pharmaceutical industries, a major decline in oil and natural gas prices, foreign exchange rate fluctuations, the impacts of Sarbanes-Oxley section 404 procedures, availability of raw materials, acquisitions and divestitures, work stoppages related to union negotiations, customer order cancellations, the ability of the Company to comply with the financial covenants and other provisions of its financing arrangements, or ability of the Company to realize the benefits of its restructuring program in its Pharmaceutical segment, involving the receipt of cash proceeds from the sale of excess facilities, and general economic conditions that can affect demand in the process industries. The Company undertakes no obligation to update or revise any forward-looking statement.

Results of Operations

The following tables present components of our Consolidated Statement of Operations and segment information.


Consolidated	2005			2004			2003
Sales		100.0	%		100.0	%		100.0	%
Cost of sales		68.0			67.1			66.3

Gross profit		32.0			32.9			33.7
SG&A expenses		26.6			26.9			26.4
Amortization		0.4			0.5			0.4
Other		1.5			0.3			0.0

EBIT		3.5	%		5.2	%		6.9	%


By Segment	2005			2004			2003
	(In thousands, except percents)
Pharmaceutical:
Sales	$	337,347		$	343,047		$	342,415
EBIT		(2,099	)		10,317			21,401
EBIT %		(0.6	)%		3.0	%		6.3	%

Energy:
Sales	$	137,038		$	115,884		$	95,487
EBIT		33,224			27,424			20,941
EBIT %		24.2	%		23.7	%		21.9	%

Industrial:
Sales	$	130,388		$	126,827		$	122,873
EBIT		5,440			8,349			8,791
EBIT %		4.2	%		6.6	%		7.2	%

Total:
Sales	$	604,773		$	585,758		$	560,775
EBIT		21,451			30,317			38,709
EBIT %		3.5	%		5.2	%		6.9	%

During fiscal 2005, we initiated a restructuring program for our Pharmaceutical segment. The restructuring plan was initiated to improve the profitability of the Pharmaceutical segment in light of the current worldwide economic conditions that were affecting this segment. The restructuring plan included the following:

	•		Plant closures (one of two Reactor Systems facilities in Italy, a Reactor Systems facility in Mexico and the Unipac facility of Romaco in Italy).

	•		Headcount reductions to support the Reactor Systems product line reorganization and to bring the personnel costs in line with the current level of business.

	•		Headcount reductions at Romaco with the Unipac integration into the Macofar facility and removal of duplicate administrative costs at other locations.

The status of the restructuring activities is as follows:

	•		The Unipac facility and the Reactor Systems facility in Italy have been sold. The Mexico facility will be closed soon and we have negotiated a contract for the sale of the facility.

	•		Headcount has been reduced by 242.

As a result of the restructuring activities, we recorded costs totaling approximately $7.9 million in the Pharmaceutical segment. The net costs in fiscal 2005 were comprised of the following:

	•		$5.7 million of termination benefits related to the aforementioned headcount reductions.

	•		$1.1 million to write-down inventory and $0.4 million to write-off identifiable intangibles related to discontinued product lines. The inventory charge is included in cost of sales.

	•		$0.3 million to write-down to estimated net realizable value the facilities that we exited and prepare the facilities for sale.

	•		$0.4 million to write down equipment to net realizable value, relocate equipment, relocate employees and other costs.

The total cash outlays in connection with the restructuring plan were $6.3 million. The sale of the Reactor Systems facility in Italy generated cash of $4.5 million in the third quarter, and the sale of the Unipac facility generated cash of $1.6 million in the second quarter. The Mexico facility that will be closed is owned by us and will be sold. We expect the facility sale to generate approximately $6.0 million of additional pretax cash proceeds, which exceeds the recorded book value of this facility by approximately $5.9 million. We have negotiated a contract for the sale of the Mexico facility but are unable to predict the final transaction date due to ongoing due diligence procedures by the purchaser.

Other Asset Dispositions

During fiscal 2005, we also sold the inventory and equipment related to our lined-pipe and fitting product line to Crane, Co. In addition, we sold an underutilized facility of our Industrial Segment. The cash proceeds received from these asset sales was $9.7 million. The loss recognized in 2005 as a result of these asset sales was $2.1 million and is reflected in our Industrial segment. The loss is primarily a result of the write-down of the land and building in Charleston, West Virginia to net realizable value. The facility in Charleston, West Virginia is where the lined-pipe and fitting product line was manufactured. Based on the results of a third-party appraisal, we expect the facility sale to generate approximately $1.0 million of pretax cash proceeds. The facility is in excellent condition and is believed to be readily marketable, but we are unable to predict the specific timing of the sale of the facility.

Fiscal Year Ended August 31, 2005 Compared with Fiscal Year Ended August 31, 2004

Net Sales

Sales for the fiscal year ended August 31, 2005 were $604.8 million compared with $585.8 million in fiscal 2004. The impact of exchange rates, the translation of sales from non-U.S. operations into U.S. dollars, caused an increase in sales of $16.6 million, resulting in a sales increase of $2.4 million on a constant dollar basis.

The Pharmaceutical segment had sales of $337.3 million in fiscal 2005 compared with $343.0 million in fiscal 2004. The impact of exchange rates increased sales by $13.0 million resulting in a decrease of $18.7 million on a constant dollar basis. Consolidation within the Pharmaceutical industry and weak economic conditions in Europe have caused excess production capacity in the Pharmaceutical industry. The purchase of capital equipment by these pharmaceutical companies has declined and new projects are being delayed, which has negatively impacted sales of our products.

The Energy segment had sales of $137.0 million in fiscal 2005 compared with $115.9 million in fiscal 2004, an increase of $21.1 million, or 18.2%. Sales in this segment continue to increase due to the high prices for oil and natural gas which results in increased investment in drilling and exploration equipment.

The Industrial segment had sales of $130.4 million in fiscal 2005 compared with $126.8 million in fiscal 2004, an increase of $3.6 million, or 2.8%. Our sales to the chemical processing market have improved during fiscal 2005 as this market shows signs of recovery. However, offsetting this is lower sales into the municipal wastewater treatment market caused by fewer projects.

Earnings Before Interest and Income Taxes (EBIT)

The Company’s operating performance is evaluated using several measures. One of those measures, EBIT is income before interest and income taxes and is reconciled to net income on our Consolidated Statement of Operations. We evaluate performance of our business segments and allocate resources based on EBIT. EBIT is not; however, a measure of performance calculated in accordance with accounting principles generally accepted in the United States and should not be considered as an alternative to net income as a measure of our operating results. EBIT is not a measure of cash available for use by management.

Consolidated EBIT for fiscal 2005 was $21.5 million compared with $30.3 million in fiscal 2004. Included in the current year’s EBIT are costs associated with the restructuring of our Pharmaceutical segment of $7.9 million and costs associated with asset dispositions in our Industrial segment of $2.1 million.

The Pharmaceutical segment had EBIT of negative $2.1 million in fiscal 2005 compared with positive $10.3 million in fiscal 2004. The aforementioned $18.7 million decline in constant dollar sales caused a $6.5 million reduction in EBIT. In addition, aggressive pricing in Europe and underutilization of our production facilities have caused a reduction in EBIT of $8.8 million, and restructuring costs were $7.1 million higher in fiscal 2005. Offsetting these items are realized cost savings of $10.0 million as a result of the restructuring programs.

The Industrial segment had EBIT of $5.4 million in fiscal 2005 compared with $8.3 million in fiscal 2004. The fiscal 2005 EBIT includes losses on asset dispositions and asset write downs of $2.1 million that was discussed previously. The remaining decline in EBIT is a result of lower aftermarket business and higher medical and pension costs in fiscal 2005.

The Energy segment had EBIT of $33.2 million in fiscal 2005 compared with $27.4 million in the fiscal 2004, an increase of $5.8 million. The Energy segment EBIT increase was due to the sales volume increase mentioned above.

EBIT was further impacted by costs of approximately $4.0 million related to the initial documentation and testing requirements of Sarbanes Oxley section 404 compliance. These costs are included in selling, general and administrative expenses.

Interest expense

Interest expense was $14.4 million in fiscal 2005 and fiscal 2004. We had lower average debt levels in fiscal 2005, but this was offset by slightly higher interest rates during fiscal 2005.

Income taxes

Our effective tax rate in fiscal 2005 was 83.2% compared with 23.2% in fiscal 2004. The substantial increase in our effective tax rate is a result of our inability to record tax benefits on losses incurred in certain non-U.S. tax jurisdictions, primarily Germany and Italy, due to uncertainty about whether or not we will be able to generate sufficient future income to utilize these benefits. If our operations in these countries become profitable, our effective tax rate will decrease as we recognize the benefits of loss carryforwards.

Net loss

Our net loss in fiscal 2005 was $0.3 million compared with net income in fiscal 2004 of $11.6 million. The overall reduction in net income is a result of the $10.0 million of restructuring and other charges related to asset dispositions, reduction in selling prices within our Pharmaceutical segment, and higher effective tax rate caused by our inability to record tax benefits on losses incurred in certain non-U.S. tax jurisdictions.

Fiscal Year Ended August 31, 2004 Compared with Fiscal Year Ended August 31, 2003

Net Sales

Sales for the fiscal year ended August 31, 2004 were $585.8 million compared with $560.8 million in fiscal 2003. Foreign currency translation caused an increase in sales of $36.9 million resulting in a sales decline of $11.9 million on a constant dollar basis. The decline in sales is a result of lower sales in our Pharmaceutical segment offset by strengthening sales in our Energy and Industrial segments.

The Pharmaceutical segment had sales of $343.0 million in fiscal 2004 compared with $342.4 million in the same period of fiscal 2003. The impact of exchange rates increased sales by $33.4 million resulting in a sales decline of $32.8 million on a constant dollar basis. The decline in sales volumes is a result of continued weak economic conditions in Europe, which represents approximately 75% of this segment’s sales volume. Our sales were negatively affected by reduced capital spending by pharmaceutical companies due to general weakness in the capital goods markets in Europe and the business consolidations within the pharmaceutical industry. The consolidation of pharmaceutical companies has resulted in excess capacity as product lines are rationalized among facilities. The excess capacity as a result of the consolidations is viewed as a short-term issue because normal wear and tear on equipment will eventually lead to replacement and the consumption of pharmaceutical products is expected to continue to grow.

The Energy segment had sales of $115.9 million in fiscal 2004 compared with $95.5 million in the same period of fiscal 2003, an increase of $20.4 million, or 21.4%. The impact of exchange rates increased sales by $3.1 million resulting in a sales increase of $17.3 million on a constant dollar basis. Higher oil and natural gas prices and accelerated global demand are being reflected in higher rig count and capital equipment spending in this industry.

The Industrial segment had sales of $126.8 million in fiscal 2004 compared with $122.9 million in fiscal 2003, an increase of $3.9 million, or 3.2%. This modest increase in sales is attributed to some improvement in the U.S. industrial economy offset by lower spending for wastewater treatment projects by local municipalities.

Earnings Before Interest and Income Taxes (EBIT)

EBIT in fiscal 2004 was $30.3 million compared with $38.7 million in fiscal 2003. In fiscal 2004, we recorded costs of $1.4 million related to the retirement of our former President and CEO and $0.8 million for severance costs related to the closure of a Reactor Systems facility in Italy. The sales volume decline in constant dollars of $11.9 had a negative impact on EBIT of $4.1 million. The remaining decline in EBIT is a result of price pressures in our Pharmaceutical segment ($1.0 million), higher health care costs ($1.0 million) and a shift in sales mix as aftermarket sales in our Industrial segment were a lower percentage of 2004 sales relative to fiscal 2003.

The Pharmaceutical segment had EBIT of $10.3 million in fiscal 2004 compared with $21.4 million in fiscal 2003, a decline of $11.1 million. The severance costs of $0.8 million related to the closure of a Reactor Systems’ facility in Italy were reflected in this segment. The sales decline of $32.8 million on a constant dollar basis reduced EBIT by $10.5 million, while price pressures in Europe negatively impacted EBIT by another $1.0 million. These items were partially offset by our efforts to reduce both material and overhead costs in response to the lower sales volumes.

The Energy segment had EBIT of $27.4 million in fiscal 2004 compared with $20.9 million in fiscal 2003, an increase of $6.5 million, or 31.1%. The higher sales volumes caused EBIT to increase by $7.0 million. This was partially offset by new product development costs and costs to establish operations in new markets such as Kazakhstan and Indonesia.

The Industrial segment had EBIT of $8.3 million in fiscal 2004 compared with $8.8 million in fiscal 2003, a decrease of $0.5 million. The aforementioned $3.9 million increase in sales volumes only increased EBIT by $0.5 million because of a change in sales mix as the aftermarket business was a smaller percentage of fiscal 2004 sales. In addition, higher health care costs of approximately $1.0 million negatively impacted EBIT in this segment.

Liquidity and Capital Resources

Operating Activities

In fiscal 2005, our cash flow from operations was $26.8 million compared with $26.4 million in fiscal 2004. Cash flow from operations is consistent with fiscal 2004 despite the restructuring costs recorded in fiscal 2005, as we were able to generate cash from working capital reductions in fiscal 2005.

We expect our fiscal 2006 operating cash flow to be adequate to fund the fiscal year 2006 operating needs, scheduled debt service, shareholder dividend requirements and planned capital expenditures of approximately $20.0 million. Our planned capital expenditures are related to additional production capacity, cost reductions and replacement items.

Investing Activities

Our capital expenditures were $20.3 million in fiscal 2005, up from $9.9 million in fiscal 2004. The majority of our capital expenditures were for replacement of equipment. We spent $5.0 million in fiscal 2005 for a new production facility in China. This facility will be used primarily by our Reactor Systems group, but will also be utilized to produce other Robbins & Myers, Inc. products. The remaining capital expenditures were for additional equipment to increase our capacity and new product development activities of our Energy segment, and replacement equipment at our other business units.

As we previously mentioned, during fiscal 2005 we sold three facilities and the machinery and inventory related to the lined-pipe product line. The sale of these facilities and product line generated cash proceeds of $15.8 million.

Financing Activities

We paid $0.3 million to amend and extend our credit agreement in November 2004 and dividends paid during fiscal 2005 were $3.2 million. Proceeds from the sale of common stock were $2.5 million in fiscal 2005

Credit Agreement

Our Bank Credit Agreement (“Agreement”) provides that we may borrow on a revolving credit basis up to a maximum of $100.0 million. All outstanding amounts under the Agreement are due and payable on October 7, 2006. Interest is variable based upon formulas tied to LIBOR or prime, at our option, and is payable at least quarterly. At August 31, 2005, there were no amounts borrowed under the Agreement. Indebtedness under the Agreement is unsecured, except for guarantees by our U.S. subsidiaries, the pledge of the stock of our U.S. subsidiaries and the pledge of the stock of certain non-U.S. subsidiaries. Under this Agreement and other lines of credit, we have $100.0 million of unused borrowing capacity. However, due to our financial covenants and outstanding standby letters of credit, we could incur additional indebtedness of $22.1 million. We have $21.8 million of standby letters of credit outstanding at August 31, 2005. These standby letters of credit are used as security for advance payments received from customers and future payments to our vendors. While there were no borrowings under the Agreement as of August 31, 2005, the Company is actively negotiating an extension or replacement of the current facility to allow for the ability to borrow funds as necessary as well as to be able to continue to issue letters of credit.

Critical Accounting Policies and Estimates

This “Management’s Discussion and Analysis” is based on our Consolidated Financial Statements and the related notes. The more critical accounting policies used in the preparation of our Consolidated Financial Statements are discussed below.

Revenue Recognition

We recognize revenue at the time of title passage to our customer. In instances where we have equipment installation obligations, the revenue related to the installation service is deferred until installation is complete. We recognize revenue for certain longer-term contracts based on the percentage of completion method. The percentage of completion method requires estimates of total expected contract revenue and costs. We follow this method since we can make reasonably dependable estimates of the revenue and cost applicable to various

stages of the contract. Revisions in profit estimates are reflected in the period in which the facts that gave rise to the revision become known.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the related notes. Significant estimates made by us include the allowance for doubtful accounts, inventory valuation, deferred tax asset valuation allowance, warranty accruals, litigation, product liability, environmental accruals and retirement benefit obligations.

Our estimate for uncollectible accounts receivable is based upon an analysis of our prior collection experience, specific customer creditworthiness and current economic trends within the industries we serve. In circumstances where we are aware of a specific customer’s inability to meet its financial obligation to us (e.g., bankruptcy filings or substantial downgrading of credit ratings), we record a specific reserve to reduce the receivable to the amount we reasonably believe will be collected. For all other customers, we recognize reserves for bad debts based on the length of time that the receivables are past due.

Inventory valuation reserves are determined based on our assessment of the market conditions for our products and the on hand quantities of inventory in relation to historical usage. As of August 31, 2005 we have inventory valuation reserves of $21.4 million. The inventory upon which this reserve relates to is still on hand and will be sold or disposed of in the future. The expected selling price of this inventory approximates its net book value, therefore there is no significant impact on gross margin when it is sold.

We have recorded valuation allowances to reflect the estimated amount of deferred tax assets that may not be realized based upon our analysis of estimated future taxable income and establishment of tax strategies. Future taxable income, reversals of temporary differences, available carryback periods, the results of tax strategies and changes in tax laws could impact these estimates.

Warranty obligations are contingent upon product failure rates, material required for the repairs and service delivery costs. We estimate the warranty accrual based on specific product failures that are known to us plus an additional amount based on the historical relationship of warranty claims to sales. We record litigation, product liability and environmental reserves based upon a case-by-case analysis of the facts, circumstances and estimated costs.

These estimates form the basis for making judgments about the carrying value of our assets and liabilities and are based on the best available information at the time we prepare our financial statements. These estimates are subject to change as conditions within and beyond our control change, including but not limited to economic conditions, the availability of additional information and actual experience rates different from those used in our estimates. Accordingly, actual results may differ from these estimates.

Goodwill

Goodwill is tested on an annual basis, or more frequently as impairment indicators arise. Impairment tests, which involve the use of estimates related to the fair market values of the business operations with which goodwill is associated, are performed in our first quarter. The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment at many points during the analysis. In estimating the fair value of the businesses for the purposes of our annual or periodic analyses, we make estimates and judgments about the future cash flows of these businesses. Although our cash flow forecasts are based on assumptions that are consistent with the plans and estimates we are using to manage the underlying businesses, there is significant judgment in determining the cash flows attributable to these businesses over their estimated remaining useful lives. Losses, if any, resulting from impairment tests will be reflected in operating income in our Consolidated Statement of Operations.

Foreign Currency Accounting

non-U.S. financial statements into U.S. dollars are recognized in accumulated other comprehensive income or loss for all non-U.S. units.

We use permanently invested intercompany loans as a source of capital to reduce the exposure to foreign currency fluctuations in our foreign subsidiaries. These loans are treated as analogous to equity for accounting purposes. Therefore, we record foreign exchange gains or losses on these intercompany loans in accumulated other comprehensive income or loss.

Pensions

We maintain defined benefit and defined contribution pension plans that provide retirement benefits to substantially all U.S. employees and certain non-U.S. employees. Pension expense for fiscal 2006 and beyond is dependent on a number of factors including returns on plan assets and changes in the plan’s discount rate and therefore, cannot be predicted with certainty at this time. The following paragraphs discuss the significant factors that affect the amount of recorded pension expense.

A significant factor in determining the amount of expense recorded for the funded pension plan is the expected long-term rate of return on plan assets. We develop the long-term rate of return assumption based on the current mix of equity and debt securities included in the plan’s assets and on the historical returns on those types of investments, judgmentally adjusted to reflect current expectations of future returns.

In addition to the expected rate of return on plan assets, recorded pension expense includes the effects of service cost — the actuarial cost of benefits earned during a period — and interest on the plan’s liabilities to participants. These amounts are determined actuarially based on current discount rates and assumptions regarding matters such as future salary increases and mortality. Differences in actual experience in relation to these assumptions are generally not recognized immediately but rather are deferred together with asset-related gains or losses. When cumulative asset-related and liability-related gains or losses exceed the greater of 10% of total liabilities or the calculated value of plan assets, the excess is amortized and included in pension income or expense. At August 31, 2005, the discount rate used to value the liabilities of the principal U.S. plan was 5.25%. We determine our discount rate based on the Moody’s Aa Corporate Bond Index and an actuarial yield curve applied to the payments we expect to make out of our retirement plans.

Additional changes in the key assumptions discussed above would affect the amount of pension expense currently expected to be recorded for years subsequent to 2005. Specifically, a one-half percent decrease in the rate of return on assets assumption would have the effect of increasing pension expense by approximately $0.5 million. A comparable increase in this assumption would have the opposite effect. In addition, a one-half percent increase or decrease in the discount rate would decrease or increase expense by approximately $0.4 million.

New Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123 (revised), “Share-Based Payment” (“SFAS 123(R)”). This standard replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” and supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS 123(R) requires all companies to recognize compensation expense for all share-based payments, including stock options, at fair value. We are required to adopt SFAS 123(R) beginning in the first quarter of fiscal year 2006. We are currently evaluating the effect that SFAS 123(R) will have on our Consolidated Balance Sheet and our Consolidated Statement of Operations and Cash Flows. See Note 1 of “Notes to Consolidated Financial Statements” for the pro forma impact on net income and income per share from calculating stock-related compensation costs under the fair value alternative of SFAS No. 123. However, the calculation of compensation cost for share-based payment transactions after the effective dated of SFAS No. 123(R) may be different from the calculation of compensation cost under SFAS No. 123, but such differences have not yet been quantified.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We maintain operations in the U.S. and over 20 foreign countries. We have market risk exposure to foreign exchange rates in the normal course of our business operations. Our significant non-U.S. operations have their local currencies as their functional currency and primarily buy and sell using that same currency. We manage our exposure to net assets and cash flows in currencies other than U.S. dollars by minimizing our non-U.S. dollar net asset positions. We also enter into hedging transactions, primarily currency swaps, under established policies and guidelines that enable us to mitigate the potential adverse impact of foreign exchange rate risk. We do not engage in trading or other speculative activities with these transactions as established policies require that these hedging transactions relate to specific currency exposures.

Our main foreign exchange rate exposures relate to assets, liabilities and cash flows denominated in British pounds, euros, Swiss francs and Canadian dollars and the general economic exposure that fluctuations in these currencies could have on the U.S. dollar value of future non-U.S. cash flows. To illustrate the potential impact of changes in foreign currency exchange rates on us for fiscal 2005, the net unhedged exposures in each currency were remeasured assuming a 10% decrease in foreign exchange rates compared with the U.S. dollar. Using this method, our EBIT and cash flow from operations for fiscal 2005 would have decreased by $1.8 million and $2.4 million, respectively. This calculation assumed that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, these changes may also affect the volume of sales or the foreign currency sales prices as competitors’ products become more or less attractive. Our sensitivity analysis of the effects of changes in foreign currency exchange rates does not include any effects of potential changes in sales levels or local currency prices.

We also have market risk exposure to interest rates. At August 31, 2005, we had $175.4 million in interest-bearing debt obligations subject to market risk exposure due to changes in interest rates. To manage our exposure to changes in interest rates, we attempt to maintain a balance between fixed and variable rate debt. We expect this balance in the debt profile to moderate our financing cost over time. We are limited in our ability to refinance our fixed rate debt. However, we have the ability to change the characteristics of our fixed rate debt to variable rate debt through interest rate swaps to achieve our objective of balance. We have entered into an interest rate swap agreement that effectively modifies a portion of our fixed rate debt to floating rate debt. This agreement involves the receipt of fixed rate amounts in exchange for floating rate interest payments over the life of the agreement without an exchange of underlying principal amounts. The mark-to-market values of both the fair value hedging instrument and the underlying debt obligation were equal and recorded as offsetting gains and losses in current period earnings. The fair value hedge qualifies for treatment under the short-cut method of measuring effectiveness. As a result, there was no impact on earnings due to hedge ineffectiveness. The interest rate swap agreement totals $30.0 million, expires in 2008 and allows us to receive an effective interest rate of 6.76% and pay an interest rate based on LIBOR.

At August 31, 2005, $137.3 million of our outstanding debt was at fixed rates with a weighted average interest rate of 7.6% and $38.1 million was at variable rates with a weighted average interest rate of 6.0%. The estimated fair value of our debt at August 31, 2005 was approximately $173.2 million. The following table presents the aggregate maturities and related weighted average interest rates of our debt obligations at August 31, 2005 by maturity dates:


	U.S. Dollar					U.S. Dollar					Non-U.S Dollar					Non-U.S. Dollar
	Fixed Rate					Variable Rate					Fixed Rate					Variable Rate
Maturity Date	Amount		Rate			Amount		Rate			Amount		Rate			Amount		Rate
	(In thousands, except percents)
2006	$	0		0.00		$	700		6.50		$	4,419		6.30		$	3,497		3.39
2007		0		0.00			0		0.00			22,393		9.95			2,181		4.32
2008		80,000		7.38			30,000		6.50			168		3.32			427		3.75
2009		0		0.00			0		0.00			134		2.00			427		3.75
2010		30,000		6.84			0		0.00			208		2.00			427		3.75
Thereafter		0		0.00			0		0.00			0		0.00			427		3.75

Total	$	110,000		7.23	%	$	30,700		6.50	%	$	27,322		9.22	%	$	7,386		3.75	%

Fair value	$	107,800				$	30,700				$	27,322				$	7,386

Following is information regarding our long-term contractual obligations and other commitments outstanding as of August 31, 2005:


	Payments Due by Period
					Two to
Long-term contractual			One year		three		Four to		After five
obligations	Total		or less		years		five years		years
	(In thousands)
Debt obligations	$	175,408	$	8,616	$	135,169	$	31,196	$	427
Capital lease obligations		0		0		0		0		0
Operating leases (1)		19,035		5,182		7,681		4,683		1,489
Unconditional purchase obligations		0		0		0		0		0

Total contractual cash obligations	$	194,443	$	13,798	$	142,850	$	35,879	$	1,916


(1)		Operating leases consist primarily of building and equipment leases.


	Amount of Commitment Expiration Per Period
					Two to
Other commercial			One year		three		Four to		After five
commitments	Total		or less		years		five years		years
	(In thousands)
Lines of credit	$	0	$	0	$	0	$	0	$	0
Standby letters of credit		21,800		21,800		0		0		0
Guarantees		0		0		0		0		0
Standby repurchase obligations		0		0		0		0		0
Other commercial commitments		212		212		0		0		0

Total commercial commitments	$	22,012	$	22,012	$	0	$	0	$	0

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of
Robbins & Myers, Inc. and Subsidiaries

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Robbins & Myers, Inc. and Subsidiaries (the Company) did not maintain effective internal control over financial reporting as of August 31, 2005, because of the effect of the material weaknesses identified in management’s assessment related to accounting for income taxes and the financial statement close process, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weaknesses have been identified and included in management’s assessment.

Accounting for Income Taxes

Management identified a material weakness in internal control over financial reporting relative to accounting for income taxes. Specifically, as of August 31, 2005, the Company’s processes and procedures did not include adequate management oversight and review of the Company’s income tax accounting practices. More specifically, there was insufficient and inadequate review of complex transactions, including the expertise to make certain that such transactions are recorded properly, and insufficient and inadequate processes to assure financial statement income tax accounts are properly reconciled and supported. This material weakness contributed to the restatement of the Company’s consolidated financial statements for 2004 and 2003, for each of the quarters in the years ended August 31, 2004 and for the first, second and third quarters for 2005. Management has determined that the ineffective controls with respect to the preparation of the income tax provision, which were identified during the course of our audit, result in there being a more than remote likelihood that a material misstatement in the Company’s annual or interim financial statements will not be prevented or detected.

Financial Statement Close Process

Management identified a material weakness in internal control over financial reporting relative to the Company’s financial statement close process. There was inadequate review and approval of financial information generated to prepare the consolidated financial statements. Management has determined that the insufficiency of controls in the financial statement close process, which resulted in errors and the potential for errors as indicated by the number of audit adjustments required to be recorded, results in there being a more than remote likelihood that a material misstatement in the Company’s annual or interim financial statements will not be prevented or detected.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2005 consolidated financial statements, and this report does not affect our report dated November 18, 2005 on those consolidated financial statements.

In our opinion, management’s assessment that the Company did not maintain effective internal control over financial reporting as of August 31, 2005, is fairly stated, in all material respects, based on the COSO control criteria. Also, in our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of August 31, 2005, based on the COSO control criteria.

/s/ Ernst & Young LLP
Dayton, Ohio
November 18, 2005

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Robbins & Myers, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Robbins & Myers, Inc. and Subsidiaries as of August 31, 2005 and 2004, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended August 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Robbins & Myers, Inc. and Subsidiaries at August 31, 2005 and 2004 and the consolidated results of their operations and their cash flows for each of the three years in the period ended August 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Robbins & Myers, Inc. and Subsidiaries’ internal control over financial reporting as of August, 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 18, 2005 expressed an unqualified opinion on management’s assessment and an adverse opinion on the effectiveness of internal control over financial reporting thereon.

As discussed in Note 2 of the consolidated financial statements, Robbins & Myers, Inc. and Subsidiaries has restated its consolidated financial statements for fiscal 2004 and 2003.

/s/ Ernst & Young LLP
Dayton, Ohio
November 18, 2005

CONSOLIDATED BALANCE SHEET
Robbins & Myers, Inc. and Subsidiaries
(In thousands, except share data)


	August 31,
	2005			2004
				(restated)
ASSETS
Current Assets:
Cash and cash equivalents	$	23,043		$	8,640
Accounts receivable		128,676			130,571
Inventories		102,652			107,478
Other current assets		7,121			8,033
Deferred taxes		10,216			9,590

Total Current Assets		271,708			264,312
Goodwill		309,281			306,220
Other Intangible Assets		14,927			15,769
Other Assets		13,807			10,070
Property, Plant and Equipment		130,612			139,707

	$	740,335		$	736,078

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	67,183		$	61,540
Accrued expenses		97,090			92,958
Current portion of long-term debt		8,616			8,333

Total Current Liabilities		172,889			162,831
Long-Term Debt — Less Current Portion		166,792			173,369
Deferred Taxes		3,721			4,329
Other Long-Term Liabilities		86,149			80,925
Minority Interest		9,939			9,226

Shareholders’ Equity:
Common stock-without par value:
Authorized shares-40,000,000
Issued shares-14,668,487 in 2005 (14,526,860 in 2004)		110,291			106,985
Treasury shares-308 in 2005 and 2004		(10	)		(10	)
Retained earnings		193,968			197,443
Accumulated other comprehensive (loss) income:
Foreign currency translation		17,824			17,149
Fair value of interest rate swap		(943	)		(627	)
Minimum pension liability		(20,285	)		(15,542	)

Total		(3,404	)		980

		300,845			305,398

	$	740,335		$	736,078

See Notes to Consolidated Financial Statements

CONSOLIDATED SHAREHOLDERS’ EQUITY STATEMENT
Robbins & Myers Inc. and Subsidiaries
(In thousands, except share and per share data)


									Accumulated
									Other
									Comprehensive
	Common		Treasury			Retained			Income
	Shares		Shares			Earnings			(Loss)			Total
						(restated)						(restated)
Balance at September 1, 2002 (restated)	$	103,952	$	(29	)	$	177,407		$	(20,057	)	$	261,273
Net income (restated)							14,623						14,623
Change in foreign currency translation										14,576			14,576
Change in fair value of interest rate swap										(1,125	)		(1,125	)
Change in minimum pension liability										(332	)		(332	)

Comprehensive income													27,742
Cash dividend declared, $0.22 per share							(3,150	)					(3,150	)
Stock options exercised, 36,000 shares		357											357
Proceeds from share sales, 55,876 shares		519		19									538
Tax benefit of stock option exercised		156											156


Balance at August 31, 2003		104,984		(10	)		188,880			(6,938	)		286,916
Net income (restated)							11,648						11,648
Change in foreign currency translation										11,974			11,974
Change in fair value of interest rate swap										498			498
Change in minimum pension liability										(4,554	)		(4,554	)

Comprehensive income													19,566
Cash dividend declared, $0.22 per share							(3,085	)					(3,085	)
Stock options exercised, 51,000 shares		618											618
Proceeds from share sales, 50,178 shares		895											895
Stock compensation		312											312
Tax benefit of stock option exercised		176											176


Balance at August 31, 2004		106,985		(10	)		197,443			980			305,398
Net loss							(262	)					(262	)
Change in foreign currency translation										675			675
Change in fair value of interest rate swap										(316	)		(316	)
Change in minimum pension liability										(4,743	)		(4,743	)

Comprehensive loss													(4,646	)
Cash dividend declared, $0.22 per share							(3,213	)					(3,213	)
Stock options exercised, 73,000 shares		1,440											1,440
Proceeds from share sales, 47,705 shares		1,052											1,052
Stock compensation, 20,922 shares		452											452
Performance stock award expense		250											250
Tax benefit of stock option exercised		112											112


Balance at August 31, 2005	$	110,291	$	(10	)	$	193,968		$	(3,404	)	$	300,845

See Notes to Consolidated Financial Statements

CONSOLIDATED CASH FLOW STATEMENT
Robbins & Myers, Inc. and Subsidiaries
(In thousands)


	Years Ended August 31,
	2005			2004			2003
OPERATING ACTIVITIES				(restated)			(restated)
Net (loss) income	$	(262	)	$	11,648		$	14,623
Adjustments to reconcile net (loss) income to net cash and cash equivalents provided by operating activities:
Depreciation		17,874			18,639			20,093
Amortization		2,519			2,738			2,189
Deferred taxes		1,234			(2,750	)		3,612
Stock compensation		702			312			0
Loss on sale of business/facilities		1,974			0			0
Changes in operating assets and liabilities — excluding the effect of acquisitions:
Accounts receivable		3,380			(3,524	)		3,392
Inventories		1,819			(6,018	)		2,807
Other assets		(3,948	)		(2,967	)		(1,537	)
Accounts payable		4,978			8,755			4,815
Accrued expenses and other liabilities		(3,455	)		(480	)		(4,358	)

Net cash and cash equivalents provided by operating activities		26,815			26,353			45,636

INVESTING ACTIVITIES
Capital expenditures, net of nominal disposals		(20,263	)		(9,884	)		(7,869	)
Proceeds from sale of business/facilities		15,798			0			0
Purchase of Tarby		0			0			(13,146	)

Net cash and cash equivalents used by investing activities		(4,465	)		(9,884	)		(21,015	)

FINANCING ACTIVITIES
Proceeds from debt borrowings		104,876			82,658			72,485
Payments of long-term debt		(111,840	)		(100,184	)		(93,038	)
Amended credit agreement fees		(262	)		(1,078	)		0
Proceeds from sale of common stock		2,492			1,513			895
Dividend paid		(3,213	)		(3,085	)		(3,150	)

Net cash and cash equivalents used by financing activities		(7,947	)		(20,176	)		(22,808	)

Increase (decrease) in cash and cash equivalents		14,403			(3,707	)		1,813
Cash and cash equivalents at beginning of year		8,640			12,347			10,534

Cash and cash equivalents at end of year	$	23,043		$	8,640		$	12,347

See Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Robbins & Myers, Inc. and Subsidiaries

NOTE 1 — SUMMARY OF ACCOUNTING POLICIES

Consolidation

The consolidated financial statements include the accounts of Robbins & Myers, Inc. (“we,” “us,” “our”) and all of its subsidiaries in which a controlling interest is maintained. Controlling interest is determined by majority ownership interest and the absence of substantive third-party participation rights. For these consolidated subsidiaries where our ownership is less than 100%, the other shareholders’ interest are shown as Minority Interest. All significant intercompany accounts and transactions have been eliminated upon consolidation. All of our operations are conducted in producing and selling original and used equipment and aftermarket parts in the pharmaceutical and healthcare, general industrial and oil and gas exploration and recovery industries.

Use of Estimates

Accounts Receivable

Accounts receivable relate primarily to customers located in North America and Western Europe and are concentrated in the pharmaceutical, specialty chemical and oil and gas markets. To reduce credit risk, we perform credit investigations prior to accepting an order and, when necessary, require letters of credit to insure payment.

Inventories

Inventories are stated at the lower of cost or market determined by the last-in, first-out (“LIFO”) method in the U.S. and the first-in, first-out (“FIFO”) method outside the U.S. Inventory valuation reserves are determined based on our assessment of the market conditions for our products and the on hand quantities of inventory in relation to historical usage.

Goodwill and Other Intangible Assets

Goodwill is the excess of the purchase price paid over the value of net assets of businesses acquired. Goodwill is not amortized, but is tested for impairment on an annual basis, or more frequently as impairment indicators arise using a fair market value approach, at the reporting unit level. A reporting unit is the operating segment level. We recognize an impairment charge for any amount by which the carrying amount of an operating segment’s goodwill exceeds its fair value. Impairment tests are performed in our first quarter. Losses, if any, resulting from impairment tests will be reflected in operating income in our Consolidated Statement of Operations.

Amortization of other intangible assets is calculated on the straight-line basis using the following lives:


	Patents and trademarks		14 to 17 years
	Non-compete agreements		3 to 5 years
	Financing costs		3 to 5 years

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation expense is recorded over the estimated useful life of the asset on the straight-line method using the following lives:


	Land improvements		20 years
	Buildings		45 years
	Machinery and equipment		3 to 15 years

Our normal policy is to expense repairs and improvements made to capital assets as incurred. In limited circumstances, betterments are capitalized and amortized over the estimated life of the new asset and any remaining value of the old asset is written off. Repairs to machinery and equipment must result in an addition to the useful life of the asset before the costs are capitalized.

Foreign Currency Accounting

Gains and losses resulting from the settlement of a transaction in a currency different from that used to record the transaction are charged or credited to net income when incurred. Adjustments resulting from the translation of non-U.S. financial statements into U.S. dollars are recognized in accumulated other comprehensive income or loss for all non-U.S. units.

Product Warranties

Changes in our product warranty liability during the year are as follows:


	2005			2004
	(In thousands)
Balance at beginning of the fiscal year	$	8,330		$	9,310
Warranties issued		3,348			1,613
Settlements made		(2,502	)		(2,593	)

Balance at end of the fiscal year	$	9,176		$	8,330

Consolidated Statement of Operations

Research and development costs are expensed as incurred. Research and development costs in fiscal 2005, 2004 and 2003 were $8,667,000, $6,688,000 and $6,426,000, respectively. Shipping and handling costs are included in cost of sales. Advertising costs are expensed as incurred.

Revenue Recognition

Income Taxes

Income taxes are provided for all items included in the Consolidated Statement of Operations regardless of the period when such items are reported for income tax purposes. Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We have recorded valuation allowances to reflect the estimated amount of deferred tax assets that may not be realized based upon our analysis of estimated future taxable income and establishment of tax strategies. Future taxable income, reversals of temporary differences, available carryback periods, the results of tax strategies and changes in tax laws could impact these estimates.

Our policy is to provide U.S. income taxes on non-U.S. income when remitted to the U.S. We do not provide U.S. income taxes on the remaining undistributed non-U.S. income, which aggregated $45,193,000 and $53,700,000 at August 31, 2005 and 2004, respectively, as it is our intention to maintain our investments in these operations.

Consolidated Cash Flow Statement

Cash and cash equivalents consist of cash balances and temporary investments having an original maturity of 90 days or less.

Fair Value of Financial Instruments

The following methods and assumptions were used by us in estimating the fair value of financial instruments:

Cash and cash equivalents — The amounts reported approximate market value.

Long-term debt — The market value of our debt is $173,202,000 at August 31, 2005 and $182,002,000 at August 31, 2004. These amounts are based on the terms, interest rates and maturities currently available to us for similar debt instruments.

Foreign exchange contracts — The amounts reported are estimated using quoted market prices for similar instruments.

Common Stock Plans

Common stock plans involving the issuance of stock options are accounted for using the intrinsic method in accordance with APB Opinion No. 25 (“APB No. 25”) “Accounting for Stock Issued to Employees and Related Interpretations.” Common stock plans involving the issuance of a variable number of shares based on performance are accounted for as compensatory plans. The following table illustrates the effect on net income and earnings per share as if the fair value based method had been applied to all outstanding and unvested awards in each period.


	2005			2004		2003
				(restated)		(restated)
Net (loss) income, as reported	$	(262	)	$	11,648	$	14,623
Deduct: Total Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		1,005			1,089		1,156

Pro forma net (loss) income	$	(1,267	)	$	10,559	$	13,467


(Loss) Income per share:
Basic — as reported	$	(0.02	)	$	0.80	$	1.02

Basic — pro forma	$	(0.09	)	$	0.73	$	0.94

Diluted — as reported	$	(0.02	)	$	0.80	$	1.02

Diluted — pro forma	$	(0.09	)	$	0.73	$	0.94

Pro forma information regarding net (loss) income and net (loss) income per share is required by SFAS No. 148, and has been determined as if we had accounted for stock options granted subsequent to August 31, 1995 under the fair value method of FASB Statement No. 123. The fair value for these options was estimated at the date of grant using a Black-Scholes model with the following weighted-average assumptions (there were no options issued in fiscal 2005):


	2004			2003
Expected volatility of common stock		32.50	%		33.60	%
Risk free interest rate		4.70			4.60
Dividend yield		.75			.75
Expected life of option		6.90	yrs		6.90	yrs
Fair value at grant date	$	8.85		$	7.80

Option valuation models, such as the Black-Scholes model, were developed for use in estimating the fair value of traded options which have no vesting restrictions and are freely transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because our options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in our opinion, existing models do not provide a reliable single measure of the fair value of our stock options.

Derivatives and Hedging Activities

We account for derivative instruments in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivatives and Hedging Activities,” as amended. This standard requires the recognition

of all derivatives on the balance sheet at fair value and recognition of the resulting gains or losses as adjustments to earnings or other comprehensive income. We formally document all relationships between hedging instruments and hedged items, as well as our risk management objective and strategy for undertaking various hedge transactions. Our hedging activities are transacted only with a highly-rated institution, reducing the exposure to credit risk in the event of nonperformance. We use derivatives for fair value hedging purposes. For derivative instruments that hedge the exposure to changes in the fair value of certain fixed rate debt, designated as fair value hedges, the effective portion of the net gain or loss on the derivative instrument, as well as the offsetting gain or loss on the fixed rate debt attributable to the hedged risk, are recorded in current period earnings. We use swap agreements to convert a portion of fixed rate debt to a floating rate basis, thus hedging for changes in the fair value of the fixed rate debt being hedged. We have determined that this interest rate swap, designated as a fair value hedge, qualifies for treatment under the short-cut method of measuring effectiveness. Under the provisions of SFAS No. 133, this hedge is determined to be perfectly effective and there is no requirement to periodically evaluate effectiveness.

Reclassifications

Certain prior year amounts are reclassified to conform with the current year presentation.

NOTE 2 — RESTATEMENT OF FINANCIAL STATEMENTS

We have restated our historical fiscal 2004 and 2003 Consolidated Financial Statements for the cumulative impact of errors in income tax expense. The income tax errors related to (i) the improper accounting for the tax benefits created from the utilization of operating loss carryforwards that existed prior to the acquisition of Romaco in 2001 and (ii) the understatement of future tax benefits primarily from intercompany transactions impacting several taxing jurisdictions. The determination to restate these Consolidated Financial Statements was made as a result of our assessment that these tax items would be considered material to the Consolidated Financial Statements for the full fiscal year and previously reported quarters of fiscal 2005. The tax adjustments associated with the above corrections increased our fiscal 2004 net income by $1,878,000, or $0.13 per diluted share, and increased our fiscal 2003 net income by $255,000, or $0.02 per diluted share.

The following tables present the effects of the Restatement on the Consolidated Statement of Operations for fiscal 2004 and 2003 and the previously reported quarters for fiscal 2005 and 2004 (in thousands, except per share amounts):


	Twelve Months Ended August 31,
	2004		2003
Decrease in income tax expense from restatement adjustments	$	1,878	$	255

Net income as previously reported		9,770		14,368


Net income as restated	$	11,648	$	14,623


Net income per share as previously reported:
Basic	$	0.67	$	1.00

Diluted	$	0.67	$	1.00


Net income per share as restated:
Basic	$	0.80	$	1.02

Diluted	$	0.80	$	1.02


		Fiscal 2005
		First				Second				Third
		Quarter				Quarter				Quarter
Decrease (Increase) in income tax expense from adjustments		$	1,674		(	$	1,004	)	(	$	1,891	)

Net (loss) income as previously reported			(2,545	)			1,055				2,114


Net (loss) income as restated	(	$	871	)		$	51			$	223


Net (loss) income per share as previously reported:
Basic	(	$	0.18	)		$	0.07			$	0.14

Diluted	(	$	0.18	)		$	0.07			$	0.14


Net (loss) income per share as restated:
Basic		$	0.06			$	0.00			$	0.02

Diluted		$	0.06			$	0.00			$	0.02


	Fiscal 2004
									Year
									Ended
	First		Second		Third		Fourth		August 31,
	Quarter		Quarter		Quarter		Quarter		2004
Decrease in income tax expense from adjustments	$	411	$	120	$	695	$	652	$	1,878

Net income as previously reported		2,139		320		3,814		3,497		9,770


Net income as restated	$	2,550	$	440	$	4,509	$	4,149	$	11,648


Net income per share as previously reported:
Basic	$	0.15	$	0.02	$	0.26	$	0.24	$	0.67

Diluted	$	0.15	$	0.02	$	0.26	$	0.24	$	0.67


Net income per share as restated:
Basic	$	0.18	$	0.03	$	0.31	$	0.29	$	0.80

Diluted	$	0.18	$	0.03	$	0.31	$	0.28	$	0.80

The following table presents the effects of the Restatement on the Consolidated Balance Sheet for fiscal 2004 (in thousands):


	As
	Previously					As
	Reported*		Adjustments			Restated
Other current assets		7,394		639			8,033
Deferred taxes — current		7,901		1,689			9,590
Total current assets		261,984		2,328			264,312
Goodwill		307,566		(1,346	)		306,220
Other assets — noncurrent		8,216		1,854			10,070
Total assets		733,242		2,836			736,078
Accrued expenses		93,035		(77	)		92,958
Total current liabilities		162,908		(77	)		162,831
Retained earnings		194,530		2,913			197,443
Total equity		302,485		2,913			305,398
Total liabilities and equity		733,242		2,836			736,078


*		The amounts presented as originally reported have been changed from prior year to reflect reclassifications made to conform with the 2005 presentation. These reclassifications are not related to the Restatement.

NOTE 3 — NEW ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS No. 123 (revised), “Share-Based Payment” (“SFAS 123(R)”). This standard replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” and supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS 123(R) requires all companies to recognize compensation expense for all share-based payments, including stock options, at fair value. Robbins & Myers, Inc. will be required to adopt SFAS 123(R) beginning in the first quarter of fiscal year 2006. We are currently evaluating the effect that SFAS 123(R) will have on our consolidated balance sheet and our consolidated statements of income and cash flows. See Note 1 of “Notes to Consolidated Financial Statements” for the pro forma impact on net income and income per share from calculating stock-related compensation costs under the fair value alternative of SFAS No. 123. However, the calculation of compensation cost for share-based payment transactions after the effective date of SFAS No. 123(R) may be different from the calculation of compensation cost under SFAS No. 123, but such differences have not yet been quantified.

NOTE 4 — BALANCE SHEET INFORMATION


	2005			2004
	(In thousands)
Accounts receivable
Allowances for doubtful accounts	$	4,632		$	4,018


Inventories
FIFO:
Finished products	$	38,363		$	29,958
Work in process		32,602			37,072
Raw materials		39,847			47,521

		110,812			114,551
LIFO reserve, U.S. inventories		(8,160	)		(7,073	)

	$	102,652		$	107,478

Non-U.S. inventories at FIFO	$	70,866		$	73,960


Property, plant and equipment
Land and improvements	$	17,610		$	18,528
Buildings		89,064			90,439
Machinery and equipment		167,765			169,537

		274,439			278,504
Less accumulated depreciation		143,827			138,797

	$	130,612		$	139,707


Accrued expenses				(restated)
Salaries, wages and payroll taxes	$	24,297		$	21,919
Customer advances		15,843			18,894
Pension benefits		6,763			6,956
U.S. and other postretirement benefits		2,000			2,000
Warranty costs		9,176			8,330
Accrued interest		4,403			4,222
Income taxes		5,332			4,543
Commissions		5,066			3,640
Other		24,210			22,454

	$	97,090		$	92,958


Other long-term liabilities
German pension liability	$	37,597		$	34,142
U.S. other postretirement benefits		11,962			11,634
U.S. pension liability		23,930			21,189
Other		12,660			13,960

	$	86,149		$	80,925

NOTE 5 — CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION


	2005		2004		2003
	(In thousands)
Pharmaceutical segment restructuring costs	$	7,902	$	761	$	0
Industrial segment asset disposition losses		2,114		0		0
CEO retirement costs		0		1,378		0

	$	10,016	$	2,139	$	0

During fiscal 2005 we initiated a restructuring program for our Pharmaceutical segment. The restructuring plan was initiated to improve the profitability of the Pharmaceutical segment in light of the current worldwide economic conditions that were affecting this segment. The restructuring plan included the following:

	•		Plant closures (one of two Reactor Systems facilities in Italy, a Reactor Systems facility in Mexico and the Unipac facility of Romaco in Italy).

	•		Headcount reductions to support the Reactor Systems business reorganization and to bring the personnel costs in line with the current level of business.

	•		Headcount reductions at Romaco with the Unipac integration into the Macofar facility and removal of duplicate administrative costs at other locations.

The status of the restructuring activities is as follows:

	•		The Unipac facility and the Reactor Systems facility in Italy have been sold. The Mexico facility will be closed soon and we have negotiated a contract for the sale of the facility.

	•		The Reactor Systems headcount has been reduced by 134.

	•		The Romaco headcount has been reduced by 108.

As a result of the restructuring activities, we recorded costs totaling approximately $7,902,000 in the Pharmaceutical segment. The net costs in fiscal 2005 were comprised of the following:

	•		$5,677,000 of termination benefits related to the aforementioned headcount reductions.

	•		$1,130,000 to write-down inventory and $355,000 to write-off intangibles related to discontinued product lines. The inventory charge is included in cost of sales.

	•		$332,000 to write-down to estimated net realizable value the facilities that we exited and prepare the facilities for sale.

	•		$408,000 to write down equipment to net realizable value, relocate equipment, relocate employees and other costs.

Following is a progression of the liability for termination benefits recorded in fiscal 2005:


	(In thousands)
Liability recorded	$	5,677
Payments made		(4,603	)
Change in estimate		0


Liability at August 31, 2005	$	1,074

The total cash outlays in fiscal 2005 in connection with the restructuring plan were $6,326,000. The sale of the Reactor Systems facility in Italy generated cash of $4,480,000 in the third quarter, and the sale of the Unipac facility generated cash of $1,586,000 in the second quarter. The Mexico facility that will be closed is owned by us and will be sold. We expect that facility sale to generate approximately $5,500,000 to $6,000,000 of additional pretax cash proceeds, which exceeds the recorded book value of this facility by approximately $5,400,000 to $5,900,000. We have negotiated a contract for the sale of the Mexico facility but are unable to predict the final transaction date due to ongoing due diligence procedures by the purchaser.

During fiscal 2005, we sold the inventory and equipment related to our lined-pipe and fittings product line of Edlon to Crane, Inc. In addition, we sold another underutilized facility of our Industrial segment. The cash proceeds received from these asset sales was $9,732,000. The loss recognized in 2005 as a result of these asset sales was $2,114,000 and is reflected in our Industrial segment. The loss is primarily a result of the write-down of the land and building in Charleston, West Virginia to net realizable value. The facility in Charleston, West Virginia is where the lined-pipe and fittings product line was located. Based on the results of a third-party appraisal, we expect the facility sale to generate approximately $1,000,000 of pretax cash proceeds. The facility is in good condition and is believed to be readily marketable, but we are unable to predict the specific timing of the sale of the facility.

In fiscal 2004, we recorded $1,378,000 of costs associated with the retirement of our former President and CEO. The components of the charge were as follows:


	(In thousands)
Liability for retirement payments	$	603
FAS 88 expense for previously unrecognized losses		153
Impact of stock option modifications		312
Liability for new CEO search fees		310


Total	$	1,378

There have been no changes to the estimates made. The liability for the new CEO search fees has been paid as of August 31, 2004. The liability for retirement payments as of August 31, 2004 was $213,000 and was paid during fiscal 2005.

In the fourth quarter of fiscal 2004 we recorded $761,000 of severance cost for approximately 20 people related to the closure of one of the Reactor Systems facilities in Italy. Actual severance payments made in our fourth quarter were $94,000; therefore, the liability for severance payments as of August 31, 2004 was $667,000. The remaining severance payments were made in fiscal 2005.

Minimum lease payments

Future minimum payments, by year and in the aggregate, under non-cancellable operating leases with initial or remaining terms of one year or more consisted of the following at August 31, 2005:


	(In thousands)
2006	$	5,182
2007		4,331
2008		3,350
2009		2,733
2010		1,950
Thereafter		1,489

	$	19,035

Rental expense for all operating leases in 2005, 2004 and 2003 was approximately $5,799,000, $4,721,000 and $5,704,000, respectively.

NOTE 6 — CASH FLOW STATEMENT INFORMATION

In fiscal 2005, we recorded the following non-cash investing and financing transactions: $3,948,000 increase in deferred tax assets, $8,691,000 increase in long-term liabilities, $505,000 increase in pension intangible asset and $4,743,000 increase in the minimum pension liability related to our pension plans; and $112,000 increase in common stock and decrease in income tax payable related to the tax benefits of stock options exercised.

In fiscal 2004, we recorded the following non-cash investing and financing transactions: $2,450,000 increase in deferred tax assets, $7,842,000 increase in long-term liabilities, $838,000 increase in pension intangible asset and $4,554,000 increase in the minimum pension liability related to our pension plans; and $176,000 increase in common stock and decrease in income tax payable related to the tax benefits of stock options exercised.

In fiscal 2003, we recorded the following non-cash investing and financing transactions: exchange of $40,000,000 of existing 6.50% convertible subordinated notes for $40,000,000 of 8.00% convertible subordinated notes; $632,000 increase in deferred tax assets, $1,723,000 increase in long-term liabilities, $759,000 increase in pension intangible asset and $332,000 increase in the minimum pension liability related to our pension plans; and $156,000 increase in common stock and decrease in income tax payable related to the tax benefits of stock options exercised.

Supplemental cash flow information consisted of the following:


	2005		2004		2003
	(in thousands)
Interest paid	$	14,252	$	14,205	$	15,696
Taxes paid — net of refunds		7,811		8,345		4,110

NOTE 7 — GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill, by operating segment, are as follows:


Segment (in thousands)	Pharmaceutical			Energy		Industrial		Total
	(restated)
Balance as of September 1, 2003	$	173,693		$	69,528	$	52,083	$	295,304
Goodwill acquired during the period		(1,346	)		0		202		(1,144	)
Translation adjustments and other		11,350			710		0		12,060


Balance as of August 31, 2004		183,697			70,238		52,285		306,220
Goodwill acquired during the period		0			0		49		49
Translation adjustments and other		1,527			1,438		47		3,012


Balance as of August 31, 2005	$	185,224		$	71,676	$	52,381	$	309,281

In fiscal 2004, we were able to utilize certain net operating loss (NOL) carryforwards that existed at the purchase date of Romaco. No value was allocated to these NOL carryforwards in the opening balance sheet of Romaco, therefore the utilization of these NOL carryforwards is recorded as a reduction to goodwill. The reduction of goodwill was $1,346,000 in fiscal 2004.

NOTE 8 — LONG-TERM DEBT


	2005		2004
	(in thousands)
Senior debt:
Revolving credit loan	$	0	$	5,052
Senior notes		100,000		100,000
Other		13,219		11,652
8.00% convertible subordinated notes		40,000		40,000
10.00% subordinated notes		22,189		24,998

Total debt		175,408		181,702
Less current portion		8,616		8,333

Long-term debt	$	166,792	$	173,369

Our Bank Credit Agreement (“Agreement”) provides that we may borrow on a revolving credit basis up to a maximum of $100,000,000. All outstanding amounts under the Agreement are due and payable on October 7, 2006. Interest is variable based upon formulas tied to LIBOR or prime, at our option, and is payable at least quarterly. Indebtedness under the Agreement is unsecured, except for guarantees by our U.S. subsidiaries, the pledge of the stock of our U.S. subsidiaries and the pledge of the stock of certain non-U.S. subsidiaries. Under this Agreement and other lines of credit, we have $100,000,000 of unused borrowing capacity. However, due to our financial covenants and outstanding standby letters of credit, we could only incur additional indebtedness of $22,100,000 at August 31, 2005. We have $21,800,000 of standby letters of credit outstanding at August 31, 2005. These standby letters of credit are used as security for advance payments received from customers and future payments to our vendors.

We have $100,000,000 of Senior Notes (“Senior Notes”) issued in two series. Series A in the principal amount of $70,000,000 has an interest rate of 6.76% and is due May 1, 2008, and Series B in the principal amount of $30,000,000 has an interest rate of 6.84% and is due May 1, 2010. Interest is payable semi-annually on May 1 and November 1.

The above agreements have certain restrictive covenants including limitations on cash dividends, treasury stock purchases and capital expenditures and thresholds for interest coverage and leverage ratios. The amount of cash dividends and treasury stock purchases, other than in relation to stock option exercises, we may incur in each fiscal year is restricted to the greater of $3,500,000 or 50% of our consolidated net income for the immediately preceding fiscal year, plus a portion of any unused amounts from the preceding fiscal year.

We have $22,188,788 of 10.00% Subordinated Notes (“Subordinated Notes”) denominated in euro with the former owner of Romaco. The Subordinated Notes are due in 2007 and interest is payable quarterly.

We have $40,000,000 of 8.00% Convertible Subordinated Notes Due 2008 (“8.00% Convertible Subordinated Notes”). The 8.00% Convertible Subordinated Notes are due on January 31, 2008, bear interest at 8.00%, payable semi-annually on March 1 and September 1 and are convertible into common stock at a rate of $22.50 per share. Holders may convert at any time until maturity. The 8.00% Convertible Subordinated Notes are currently redeemable at our option at a redemption price equal to 100% of the principal amount.

Our other debt primarily consists of unsecured non-U.S. bank lines of credit with interest rates ranging from 4.00% to 8.00%.

We have entered into an interest rate swap agreement. The interest rate swap agreement utilized by us effectively modifies our exposure to interest rate risk by converting our fixed rate debt to floating rate debt. This agreement involves the receipt of fixed rate amounts in exchange for floating rate interest payments over the life of the agreement without an exchange of underlying principal amounts. The mark-to-market values of both the fair value hedging instrument and the underlying debt obligation were equal and

recorded as offsetting gains and losses in current period earnings. The fair value hedge qualifies for treatment under the short-cut method of measuring effectiveness. As a result, there is no impact on earnings due to hedge ineffectiveness. The interest rate swap agreement totals $30,000,000, expires in 2008 and allows us to receive an interest rate of 6.76% and pay an interest rate based on LIBOR.

Aggregate principal payments of long-term debt, for the five years subsequent to August 31, 2005, are as follows:


	(In thousands)
2006	$	8,616
2007		24,574
2008		110,595
2009		561
2010		30,635
2011 and thereafter		427

Total	$	175,408

NOTE 9 — RETIREMENT BENEFITS

We sponsor two defined contribution plans covering most U.S. salaried employees and certain U.S. hourly employees. Contributions are made to the plans based on a percentage of eligible amounts contributed by participating employees. We also sponsor several defined benefit plans covering all U.S. employees and certain non-U.S. employees. Benefits are based on years of service and employees’ compensation or stated amounts for each year of service. Our funding policy is consistent with the funding requirements of applicable regulations. At August 31, 2005 and 2004, pension investments included 207,400 and 311,700 shares respectively, of our common stock.

In addition to pension benefits, we provide health care and life insurance benefits for certain of our retired U.S. employees. Our policy is to fund the cost of these benefits as claims are paid.

Retirement and other post-retirement plan costs are as follows:


	Pension Benefits
	2005			2004			2003
	(In thousands)
Service costs	$	4,116		$	3,825		$	3,905
Interest cost		8,402			8,341			8,250
Expected return on plan assets		(6,648	)		(6,535	)		(6,244	)
Amortization of prior service cost		755			388			752
Amortization of transition obligation		(186	)		(186	)		(173	)
Recognized net actuarial losses		1,770			1,266			815

Net periodic benefit cost	$	8,209		$	7,099		$	7,305

Defined contribution cost	$	1,181		$	1,120		$	1,057


	Other Benefits
	2005		2004		2003
	(In thousands)
Service cost	$	352	$	310	$	249
Interest cost		1,484		1,546		1,713
Net amortization		979		813		702

Net periodic benefit cost	$	2,815	$	2,669	$	2,664


Number of Common Shares, without par value, outstanding at October 15, 2005		14,673,718

Aggregate market value of Common Shares, without par value, held by non-affiliates of the Company at February 28, 2005 (the last business day of the Company’s second fiscal quarter)	$	275,780,328


	Introductory Note — Restatement
	ITEM 1. BUSINESS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	ITEM 9A. CONTROLS AND PROCEDURES
	ITEM 9B. OTHER INFORMATION
PART III
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
	ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
SIGNATURES
INDEX TO EXHIBITS
Exhibit 21.1 Subsidiaries of the Registrant
Exhibit 23.1 Consent
Exhibit 24.1 Limited Power of Attorney
Exhibit 31.1 Certification
Exhibit 31.2 Certification
Exhibit 32.1 Certification
Exhibit 32.2 Certification


	2005						2004
	Carrying		Accumulated				Carrying		Accumulated
	Amount		Amortization		Net		Amount		Amortization		Net
	(In thousands)
Patents and trademarks	$	9,678	$	6,027	$	3,651	$	8,921	$	5,492	$	3,429
Non-compete agreements		8,800		5,739		3,061		8,750		5,327		3,423
Financing costs		8,855		6,495		2,360		8,592		5,629		2,963
Pension intangible		5,148		0		5,148		4,643		0		4,643
Other		5,939		5,232		707		6,131		4,820		1,311

	$	38,420	$	23,493	$	14,927	$	37,037	$	21,268	$	15,769