<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1998
[ ] 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 1-12273
ROPER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0263969
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
160 BEN BURTON ROAD
BOGART, GEORGIA 30622
(Address of principal executive offices) (Zip Code)
(706) 369-7170
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the Registrant's common stock as of August
19, 1998 was 31,282,892.
<PAGE>
ROPER INDUSTRIES, INC.
REPORT ON FORM 10-Q FOR THE QUARTER ENDED JULY 31, 1998
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statements of Earnings 1
Condensed Consolidated Balance Sheets 2
Condensed Consolidated Statements of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
ii
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
-------------------------------- --------------------------------
1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $97,412 $88,523 $283,506 $210,650
Cost of sales 49,113 43,740 141,325 99,461
- ----------------------------------------------------------------------------------------------------------------------------
Gross profit 48,299 44,783 142,181 111,189
SG&A expenses 30,297 25,428 88,768 65,594
- ----------------------------------------------------------------------------------------------------------------------------
Operating profit 18,002 19,355 53,413 45,595
Interest expense 2,107 1,706 5,669 4,217
Other income 115 106 670 553
- ----------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 16,010 17,755 48,414 41,931
Income taxes 5,450 6,125 16,500 14,325
- ----------------------------------------------------------------------------------------------------------------------------
Net earnings $10,560 $11,630 $ 31,914 $ 27,606
============================================================================================================================
Net earnings per common and common
equivalent share:
Basic $ 0.34 $ 0.38 $ 1.03 $ 0.91
Diluted $ 0.33 $ 0.37 $ 1.00 $ 0.88
============================================================================================================================
Weighted average common and common
equivalent shares outstanding:
Basic 31,248 30,680 31,121 30,477
Diluted 32,042 31,491 31,963 31,197
============================================================================================================================
Cash dividends per common share $ 0.060 $ 0.045 $ 0.180 $ 0.135
============================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
ASSETS 1998 1997
- -------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,374 $ 649
Accounts receivable 84,986 78,752
Inventories 55,577 50,199
Other current assets 3,720 2,290
- -------------------------------------------------------------------------------------------------
Total current assets 148,657 131,890
- -------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT:
Cost 67,918 63,002
Accumulated depreciation and amortization (36,159) (31,607)
- -------------------------------------------------------------------------------------------------
Property, plant and equipment, net 31,759 31,395
- -------------------------------------------------------------------------------------------------
OTHER ASSETS:
Intangible assets, net 198,673 154,255
Other assets 14,938 11,780
- -------------------------------------------------------------------------------------------------
Total other assets 213,611 166,035
- -------------------------------------------------------------------------------------------------
TOTAL ASSETS $394,027 $329,320
=================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 16,411 $ 15,654
Accrued liabilities 29,493 25,231
Income taxes payable - 1,564
Current portion of long-term debt 4,901 2,487
- -------------------------------------------------------------------------------------------------
Total current liabilities 50,805 44,936
- -------------------------------------------------------------------------------------------------
NONCURRENT LIABILITIES:
Long-term debt 126,268 99,638
Other noncurrent liabilities 8,199 6,877
- -------------------------------------------------------------------------------------------------
Total noncurrent liabilities 134,467 106,515
- -------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock 313 309
Additional paid-in capital 66,870 61,950
Cumulative translation adjustments (1,279) (937)
Retained earnings 142,851 116,547
- -------------------------------------------------------------------------------------------------
Total stockholders' equity 208,755 177,869
- -------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $394,027 $329,320
=================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JULY 31,
--------------------------------
1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 31,914 $ 27,606
Depreciation and amortization 10,612 8,041
Other, net 1,370 (10,796)
- --------------------------------------------------------------------------------------------------
Net cash provided by operating activities 43,896 24,851
- --------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (62,607) (50,700)
Capital expenditures (3,893) (2,696)
- --------------------------------------------------------------------------------------------------
Net cash used in investing activities (66,500) (53,396)
- --------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from long-term debt 49,508 48,532
Principal payments on long-term debt (19,965) (16,948)
Dividends paid on common stock (5,610) (4,123)
Other, net 2,590 1,361
- --------------------------------------------------------------------------------------------------
Net cash provided by financing activities 26,523 28,822
- --------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (194) (120)
- --------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 3,725 157
Cash and cash equivalents, beginning of period 649 423
- --------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 4,374 $ 580
==================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
ROPER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements for the three-month
and nine-month periods ended July 31, 1998 and 1997 are unaudited. In the
opinion of management, the accompanying unaudited consolidated financial
statements reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the financial position, results of
operations and cash flows of Roper Industries, Inc. ("Roper") and its
subsidiaries for all periods presented.
Roper management has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities to prepare these financial statements in accordance with generally
accepted accounting principles. Actual results could differ from those
estimates.
The results of operations are not necessarily indicative of the results to be
expected for the full fiscal year. It is recommended that these unaudited
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
1997 Annual Report on Form 10-K as filed with the Securities and Exchange
Commission.
NOTE 2. ACQUISITIONS
Effective December 1, 1997, the Company acquired the outstanding common stock of
EG&G Flow Technology, Inc. for total cash costs of $10.0 million. The new
subsidiary was subsequently renamed FTI Flow Technology, Inc. ("Flow
Technology"). Flow Technology, based in Phoenix, Arizona, manufactures and
markets turbine flow meters, calibrators and emissions measurement equipment for
aerospace, automotive and industrial markets. Flow Technology is a member of
Roper's Fluid Handling segment.
On February 27, 1998, a newly formed Roper subsidiary acquired the assets of
Acton Research Corporation ("Acton") for total cash costs of $9.3 million and
approximately 75,000 restricted shares of Roper common stock. Acton, based in
Acton, Massachusetts, manufactures and markets spectrometers, monochromators and
optical components and coatings for various high-end analytical applications.
Acton is a member of Roper's Analytical Instrumentation segment.
On March 31, 1998, Roper acquired the outstanding common stock of Photometrics,
Ltd. ("Photometrics") for total cash costs of $36.4 million. Photometrics,
based in Tucson, Arizona, is a leading manufacturer and marketer of extremely
sensitive cooled CCD cameras and detectors for primary and applied research
markets. Subsequent to this acquisition, Princeton Instruments, Inc. was
renamed Roper Scientific, Inc. ("Roper Scientific") and Photometrics was merged
into Roper Scientific. Roper Scientific manages its Arizona- and New Jersey-
based operations as separate divisions and is a member of Roper's Analytical
Instrumentation segment.
On May 31, 1998, a Roper subsidiary, Metrix Instrument Co., L.P., acquired the
assets of PMC/Beta Limited Partnership ("PMC/Beta") for total cash costs of $6.5
million. PMC/Beta, based in Natick, Massachusetts, manufactures and markets
vibration monitoring equipment. PMC/Beta is a member of Roper's Industrial
Controls segment.
All of the acquisitions completed thus far during fiscal 1998 have been
accounted for as purchases. The total acquisition costs (payments to sellers
and direct costs incurred by Roper) have been allocated to the net assets
acquired based upon their fair values. The excess of the acquisition costs over
the fair values of the net assets acquired for each business is being amortized
4
<PAGE>
using the straight-line method over lives ranging from 15 to 25 years. Only the
operating results of these companies subsequent to their being acquired are
included in Roper's consolidated results.
NOTE 3. LONG-TERM DEBT
Effective March 1998, Roper entered into a five-year agreement with a bank to
essentially convert $50 million of its variable-rate debt to fixed-rate debt at
an interest rate of 5.93%. Effective May 1998, Roper entered into a similar
five-year agreement with a bank to essentially convert an additional $25 million
of its variable-rate debt to fixed-rate debt at an interest rate of 5.99%. Both
of these agreements were subsequently amended to lower the interest rate to
5.65% and 5.74%, respectively, in exchange for granting the bank an option to
extend the agreements for an additional five-year period. At July 31, 1998, the
accumulated difference between the variable-rate interest and the fixed-rate
interest was not significant.
NOTE 4. BASIC AND DILUTED EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Effective at the start of fiscal 1998, Roper adopted the provisions of Statement
of Financial Accounting Standards No. 128 - Earnings per Share. This Statement
introduced basic and diluted calculations that superseded primary and fully
diluted calculations. Prior period data has been restated to be consistent with
current data.
Basic earnings per share of common stock is calculated by dividing net earnings
by the weighted average number of shares of Roper common stock outstanding
during the period. Diluted earnings per common equivalent share include common
stock equivalents in the determination of average shares outstanding. Roper's
common stock equivalents consist of stock options.
NOTE 5. SUPPLEMENTAL CASH FLOW INFORMATION
A summary of supplemental cash flow information for the nine months ended July
31, 1998 and 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C>
Cash paid during the period for:
Interest $ 4,371 $ 5,790
===========================================================================
Income taxes $21,788 $ 15,175
===========================================================================
Net assets of businesses acquired:
Fair value of assets, including goodwill $70,051 $ 77,801
Liabilities assumed (5,508) (18,741)
Common stock issued (1,936) (8,360)
- ---------------------------------------------------------------------------
Cash paid, net of cash acquired $62,607 $ 50,700
===========================================================================
</TABLE>
5
<PAGE>
NOTE 6. INVENTORIES
Inventories are summarized below (in thousands):
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies $28,310 $25,729
Work in process 16,855 13,715
Finished products 12,107 12,398
Less LIFO reserve (1,695) (1,643)
- ----------------------------------------------------------------------------------------
Total $55,577 $50,199
========================================================================================
</TABLE>
NOTE 7. INDUSTRY SEGMENTS
Sales and operating profit by industry segment are set forth in the following
table (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
-----------------------------------------------------------------
1998 1997 CHANGE 1998 1997 CHANGE
- ----------------------------------------------------------------------------------------------------------------
NET SALES:
<S> <C> <C> <C> <C> <C> <C>
Industrial Controls $42,286 $41,502 1.9% $127,355 $ 84,799 50.2%
Fluid Handling 25,361 23,263 9.0% 76,636 70,271 9.1%
Analytical Instrumentation 29,765 23,758 25.3% 79,515 55,580 43.1%
- ----------------------------------------------------------------------------------------------------------------
Total $97,412 $88,523 10.0% $283,506 $210,650 34.6%
================================================================================================================
GROSS PROFIT:
Industrial Controls $20,244 $20,588 -1.7% $ 62,839 $ 46,149 36.2%
Fluid Handling 11,673 10,705 9.0% 34,597 32,276 7.2%
Analytical Instrumentation 16,382 13,490 21.4% 44,745 32,764 36.6%
- ----------------------------------------------------------------------------------------------------------------
Total $48,299 $44,783 7.9% $142,181 $111,189 27.9%
================================================================================================================
OPERATING PROFIT (a):
Industrial Controls $ 8,163 $ 9,856 -17.2% $ 26,508 $ 18,245 45.3%
Fluid Handling 6,396 6,287 1.7% 18,431 19,310 -4.6%
Analytical Instrumentation 4,392 4,700 -6.6% 12,808 12,114 5.7%
- ----------------------------------------------------------------------------------------------------------------
Total $18,951 $20,843 -9.1% $ 57,747 $ 49,669 16.3%
================================================================================================================
</TABLE>
(a) Operating profit is before any allocation for corporate general and
administrative expenses. Corporate general and administrative expenses were
$949 and $1,488 for the three months ended July 31, 1998 and 1997,
respectively. These expenses were $ 4,334 and $4,074 for the nine months
ended July 31, 1998 and 1997, respectively.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations included in Roper's
Annual Report on Form 10-K for the year ended October 31, 1997 and Note 7 to
Roper's Condensed Consolidated Financial Statements included elsewhere in this
Report.
RESULTS OF OPERATIONS
GENERAL
The following table presents certain information relating to the operations of
Roper expressed as a percentage of net sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
-------------------------- -------------------------
1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 50.4% 49.4% 49.8% 47.2%
- -------------------------------------------------------------------------------------------------------------------------------
Gross profit 49.6% 50.6% 50.2% 52.8%
SG&A expenses 31.1% 28.7% 31.3% 31.2%
- -------------------------------------------------------------------------------------------------------------------------------
Operating profit 18.5% 21.9% 18.9% 21.6%
Interest expense 2.2% 1.9% 2.0% 2.0%
Other income 0.1% 0.1% 0.2% 0.3%
- -------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 16.4% 20.1% 17.1% 19.9%
Income taxes 5.6% 7.0% 5.8% 6.8%
- -------------------------------------------------------------------------------------------------------------------------------
Net earnings 10.8% 13.1% 11.3% 13.1%
===============================================================================================================================
</TABLE>
The profit margins for each segment are listed below as a percentage of net
sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
---------------------------- ------------------------
1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross profit:
Industrial Controls 47.9% 49.6% 49.3% 54.4%
Fluid Handling 46.0% 46.0% 45.1% 45.9%
Analytical Instrumentation 55.0% 56.8% 56.3% 58.9%
- -------------------------------------------------------------------------------------------------------------------------
Operating profit (a):
Industrial Controls 19.3% 23.7% 20.8% 21.5%
Fluid Handling 25.2% 27.0% 24.1% 27.5%
Analytical Instrumentation 14.8% 19.8% 16.1% 21.8%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Before allocation of corporate general and administrative expenses
7
<PAGE>
THREE MONTHS ENDED JULY 31, 1998 COMPARED TO 1997
Roper's total sales increased 10% for the three months ended July 31, 1998
compared to the three months ended July 31, 1997. Core (excluding Gazprom)
sales increased 8% in 1998 compared to 1997. Total Industrial Controls sales
increased 2%, mostly due to increased sales to Gazprom and the April 1998
acquisition of PMC/BETA. Sales to Gazprom (reported as part of Industrial
Controls) were $9.8 million during the quarter ended July 31, 1998 compared to
$7.1 million during the third quarter of fiscal 1997. Compressor Controls sales
other than to Gazprom decreased 28% due mostly to customer-driven project delays
related to the effects of low energy prices on energy and chemical processing
projects. Fluid Handling sales increased 9% due mostly to the December 1997
acquisition of Flow Technology and a 19% increase at Fluid Metering. The Fluid
Metering increase was due primarily to accelerated shipments for several of its
major OEM programs. These increases more than offset a 30% decrease at
Integrated Designs (which continues to experience adverse business conditions in
the semiconductor equipment industry) and an 11% decline at Roper Pump
(attributed to economic downturns in Asia affecting demand for power generation
equipment and low oil prices affecting demand for mud motors). Analytical
Instrumentation sales increased 25% due mostly to the recent acquisitions of
Photometrics (March 1998), Acton (February 1998) and Industrial Data Systems
(October 1997). The effects of these acquisitions more than offset a 22%
decline at Uson resulting from weakness in the automotive industry and a 14%
decline at ISL. The primary reason for the decline at ISL was due to
significant non-recurring shipments made in the third quarter of fiscal 1997.
Princeton (acquired in May 1997) and Photometrics, Roper's two digital imaging
companies, were merged to form Roper Scientific. Princeton and Photometrics
operate as separate divisions.
Total gross profit increased 8% for the three months ended July 31, 1998
compared to the three months ended July 31, 1997. Gross profit margins for
Roper and each of its three segments were similar in 1998 compared to 1997. The
slight decline in margins for Industrial Controls was due to lower margins at
Compressor Controls caused by a higher volume of low margin sales in the third
quarter of fiscal 1998 and the underabsorption of near-term fixed costs on a
lower level of high margin sales. Although Fluid Handling gross margins were
the same in the third quarter of fiscal 1998 as the third quarter of fiscal
1997, Flow Technology had relatively high margins compared to the other
companies in this segment that offset a volume-related decline at Integrated
Designs. The slight decline in Analytical Instrumentation margins was due
primarily to Acton, which had relatively low margins compared to the other
companies in this segment.
Selling, general and administrative ("SG&A") expenses increased 19% for the
three months ended July 31, 1998 compared to the three months ended July 31,
1997 mostly due to companies acquired since the beginning of the third quarter
of fiscal 1997. As a percentage of sales, SG&A expenses were 31% and 29% for the
three months ended July 31, 1998 and 1997, respectively. As a percentage of
sales, SG&A expenses increased in Industrial Controls due mostly to Petrotech
and Compressor Controls. Petrotech's increased costs were from improved staffing
in several areas and certain temporary costs to implement a new information
system. During the third quarter of fiscal 1998, Compressor Controls' commission
structure payable on sales to Gazprom was modified retroactively to the
beginning of the fiscal year that had the effect of increasing the commission
expense as a percentage of sales. Fluid Handling expenses increased as a
percentage of sales due to Flow Technology (average for Roper, but high for this
segment) and Integrated Designs (costs stayed about the same whereas sales
dropped significantly). Analytical Instrumentation expenses increased as a
percentage of sales throughout the segment. The largest changes compared to the
third quarter of last year were at ISL and Uson where large decreases in sales
were not matched with corresponding decreases in expenses.
Interest expense increased $401,000 for the three months ended July 31, 1998
compared to the three months ended July 31, 1997 principally due to higher debt
levels resulting from the acquisitions of seven businesses since the beginning
of the third quarter of fiscal 1997.
Roper's effective income tax rate was 34.0% for the three months ended July 31,
1998 compared to 34.5% for the three months ended July 31, 1997. Roper's income
tax policy throughout a fiscal year is to adjust its quarterly provision based
on its most current estimate of its effective income tax rate for the entire
year. At this time during each of the past two years, the effective income tax
rate estimate for the entire year was about 34%.
8
<PAGE>
Sales order bookings were $110.2 million during the three months ended July 31,
1998 compared to $80.6 million for the third quarter of fiscal 1997. The seven
businesses acquired during the twelve months ended July 31, 1998 account for
most of the increase. Compressor Controls also had significantly higher
bookings during the third quarter of fiscal 1998 compared to the third quarter
of fiscal 1997. On a pro forma basis (same periods in fiscal 1997 as in fiscal
1998), bookings are up 11% with the increase at Compressor Controls representing
the largest change between periods. Industrial Controls bookings increased 67%
($56.9 million vs. $34.0 million) and pro forma bookings increased 39%.
Compressor Controls bookings are up 96% due mostly to Gazprom, which placed only
a nominal amount of orders in the third quarter of fiscal 1997. Actual and pro
forma bookings at Petrotech are up 105% (three months in fiscal 1998 vs. two
months in fiscal 1997) and 31% (due to the largest single order in Petrotech's
history booked in the third quarter of fiscal 1998), respectively. Fluid
Handling actual and pro forma bookings decreased 20% ($20.6 million vs. $25.9
million) and 29%, respectively. Actual bookings benefited from the acquisition
of Flow Technology. Fluid Handling bookings were adversely affected by declines
at Fluid Metering and Integrated Designs of 57% and 72%, respectively. Fluid
Metering bookings were skewed by large blanket orders that occurred irregularly
(second quarter in fiscal 1998 and third quarter in fiscal 1997). The decline
in Integrated Designs bookings reflected depressed conditions in the
semiconductor equipment industry. Analytical Instrumentation actual and pro
forma bookings increased 58% ($32.7 million vs. $20.7 million) and 13%,
respectively. Actual bookings benefited from the acquisitions of Acton,
Industrial Data Systems, Photometrics and Princeton. Pro forma bookings reflect
strength at Roper Scientific.
Sales order backlog was $103.5 million at July 31, 1998 (Industrial Controls -
$57.2 million, Fluid Handling - $14.1 million and Analytical Instrumentation -
$32.2 million) compared to $86.2 million at July 31, 1997 ($47.3 million, $17.4
million and $21.4 million for Industrial Controls, Fluid Handling and Analytical
Instrumentation, respectively). Pro forma backlog was up 6% at July 31, 1998
compared to July 31, 1997. Pro forma changes greater than $1 million were at
Compressor Controls (down 11%), Petrotech (up 93%), Fluid Metering (down 56%),
Integrated Designs (down 66%), Roper Pump (down 23%) and Roper Scientific (up
20%). Backlog changes are generally consistent with the factors affecting each
of these businesses discussed previously.
NINE MONTHS ENDED JULY 31, 1998 COMPARED TO 1997
Roper's total sales increased 35% for the nine months ended July 31, 1998
compared to the nine months ended July 31, 1997. Core sales increased 28%
comparing these same periods in fiscal 1998 to fiscal 1997. Most of the overall
increase was due to the effects of businesses acquired since the beginning of
fiscal 1997, particularly Petrotech and Princeton. Sales to Gazprom more than
doubled to $31.4 million compared to $13.5 million in the first nine months of
fiscal 1997. Industrial Controls sales increased 50% due mostly to Petrotech
(fiscal 1998 includes nine months vs. only two months in fiscal 1997) and
Compressor Controls sales to Gazprom (fiscal 1997 sales were relatively small
pending Gazprom's efforts to secure a suitable financing arrangement). Fluid
Handling sales increased 9% due mostly to Flow Technology (fiscal 1998 includes
eight months vs. none in fiscal 1997). Analytical Instrumentation sales
increased 43% due mostly to the acquisitions of several companies since the
beginning of fiscal 1997, particularly the Roper Scientific businesses.
Offsetting the acquisition-related gains were declines at Gatan (down 11% due to
poor market conditions in Asia and Europe) and Uson (excluding Industrial Data
Systems, down 15% due to weakness in the automotive market).
Total gross profit increased 28% for the nine months ended July 31, 1998
compared to the nine months ended July 31, 1997. Gross profit margins declined
in each of Roper's three segments between the first nine months of fiscal 1998
and the first nine months of fiscal 1997. For Roper as a whole and the
Industrial Controls segment, the declines were mostly due to Petrotech, which
historically experiences lower margins than Roper's other businesses. Excluding
Petrotech, Roper gross profit for the nine months ended July 31, 1998 and 1997
was 53.7% and 54.3%, respectively, and Industrial Controls gross profit for
these same periods was 58.6% and 58.8%, respectively. This slight decline in
margins for Industrial Controls was due to lower margins at Compressor Controls,
particularly in the third quarter of fiscal 1998 as discussed above. Within
9
<PAGE>
Fluid Handling, Flow Technology had relatively high margins compared to the
other companies in this segment that offset small declines at each of the other
companies in the segment. The slight decline in Analytical Instrumentation
gross profit margin was due to the larger acquisitions since the beginning of
fiscal 1997 that have lower margins than the segment's existing businesses.
Excluding the recently acquired businesses, overall gross margins for the
Analytical Instrumentation companies were slightly higher for the first nine
months of fiscal 1998 compared to the first nine months of fiscal 1997.
SG&A expenses increased 35% for the nine months ended July 31, 1998 compared to
the nine months ended July 31, 1997 mostly due to companies acquired since the
beginning of fiscal 1997. As a percentage of sales, SG&A expenses were 31% for
the nine months ended July 31 of both fiscal 1998 and fiscal 1997. As a
percentage of sales, SG&A expenses decreased in Industrial Controls due mostly
to Compressor Controls (relatively fixed infrastructure costs to support sales
to Russia with relatively low sales in the first quarter of fiscal 1997). Fluid
Handling expenses increased as a percentage of sales due mostly to Flow
Technology (average for Roper, but high for this segment). Analytical
Instrumentation expenses increased slightly as a percentage of sales throughout
most of the segment. The largest percentage change compared to the first nine
months of last year was at Uson where a large decrease in sales was not matched
with a corresponding decrease in expenses.
Interest expense increased $1.5 million for the nine months ended July 31, 1998
compared to the nine months ended July 31, 1997 principally due to higher debt
levels resulting from the acquisitions of seven businesses since the beginning
of fiscal 1997.
Roper's effective tax rate was 34.1% for the nine months ended July 31, 1998
compared to 34.2% for the nine months ended July 31, 1997. Roper's income tax
policy throughout a fiscal year is to adjust its quarterly provision based on
its most current estimate of its effective income tax rate for the entire year.
At this time during each of the past two years, the effective income tax rate
estimate for the entire year was about 34%.
Sales order bookings were $299.3 million during the nine months ended July 31,
1998 compared to $218.5 million for first nine months of fiscal 1997. The seven
businesses acquired during the twelve months ended July 31, 1998 account for
most of the increase. Compressor Controls also had significantly higher
bookings during this period due to higher Gazprom bookings, especially during
the third quarter of fiscal 1998 compared to the third quarter of fiscal 1997.
On a pro forma basis, bookings are up 8% with the increase at Petrotech
representing the largest change between periods. Industrial Controls bookings
increased 49% ($144.3 million vs. $97.0 million) and pro forma bookings
increased 24%. Compressor Controls bookings are up 18% due primarily to Gazprom
orders being up 60%. Actual and pro forma bookings at Petrotech are up 334% and
60%, respectively, due to securing several large engineering and procurement
contracts. Fluid Handling actual bookings increased 4% ($72.6 million vs. $69.6
million) whereas pro forma bookings decreased 6%. Actual bookings benefited
from the acquisition of Flow Technology whereas pro forma bookings were
adversely affected primarily by declines at Fluid Metering and Integrated
Designs of 11% and 31%, respectively. The decline in Integrated Designs
bookings reflected depressed conditions in the semiconductor equipment industry.
Analytical Instrumentation actual bookings increased 59% ($82.4 million vs.
$51.9 million) and pro forma bookings were flat. Actual bookings benefited from
the acquisitions of Acton, Industrial Data Systems and the Roper Scientific
businesses. Pro forma bookings reflect strength at Roper Scientific and slight
declines at the other businesses within the segment.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Working capital was $97.9 million at July 31, 1998 compared to $87.0 million at
October 31, 1997. Total debt was $131.2 million at July 31, 1998 compared to
$102.1 million at October 31, 1997. The debt to total capitalization ratio was
38.9% at July 31, 1998 compared to 36.5% at October 31, 1997.
10
<PAGE>
Since October 31, 1997, Roper's cash costs for acquisitions were $10.0 million
for Flow Technology, $8.9 million for Acton, $36.3 million for Photometrics and
$6.5 million for PMC/BETA. The acquisition of Acton also included the issuance
about 75,000 shares of Roper common stock.
The assets and liabilities of these companies at their respective acquisition
dates also account for many of the changes in Roper's consolidated assets and
liabilities between October 31, 1997 and July 31, 1998.
<TABLE>
<CAPTION>
Acquired Other
10/31/97 Companies Activity 07/31/98
--------- --------- -------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Accounts receivable $ 78,752 $ 6,851 $ (617) $ 84,986
Inventories 50,199 7,465 (2,087) 55,577
Property and equipment 31,395 1,263 (899) 31,759
Intangible assets 154,830 50,832 (6,989) 198,673
Accounts payable (15,654) (2,497) 1,740 (16,411)
Accrued liabilities (25,231) (3,011) (1,251) (29,493)
Other assets and liabilities, net 5,629 3,640 1,190 10,459
</TABLE>
Included in accounts receivable at July 31, 1998 is $3.7 million due from a
customer in the CIS region (not Gazprom) for which Roper is evaluating its
alternatives to pursue collection. The underlying sales that generated this
balance occurred nearly two years ago. Until Roper more fully evaluates its
alternatives, a valuation has not been deemed warranted.
Roper believes that internally generated cash flows and the remaining unused
credit under its $200 million credit facility with NationsBank will be adequate
to finance normal operating and further acquisition requirements. Although
Roper maintains an active acquisition program, any further acquisitions will be
dependent on numerous factors and it is not feasible to reasonably estimate if
or when any such acquisitions will occur and what the impact will be on Roper's
activities, financial condition and results of operations. Roper has been
notified by Leach Holding Corporation ("Leach") that it has terminated their
negotiations with Roper pursuant to a previously announced letter of intent for
the acquisition of Leach by Roper due to market conditions affecting the value
of Roper common stock to be issued in exchange for the outstanding shares of
Leach common stock.
Subsequent to July 31, 1998, Roper's Board of Directors authorized the purchase
of up to 5% of Roper's outstanding common stock over a twelve-month period.
These purchases can be made either on the open market or through privately
negotiated transactions. These purchases will be funded by Roper's operating
cash flows or borrowings under its existing NationsBank credit facility.
Roper anticipates that all of its businesses will generate positive cash flows,
and that these cash flows will permit the reduction of outstanding debt at a
pace consistent with that which Roper recently has experienced. However, the
rate at which Roper can reduce its debt for the remainder of fiscal 1998 and
beyond (and reduce the associated interest expense) will be affected by, among
other things, the financing and operating requirements of any new acquisitions,
the financial performance of its existing businesses, the level of common stock
purchases under the buy-back program, the receipt, timing and shipments of new
orders from Gazprom and the timing of payments from large CIS-region customers
and cannot be predicted with certainty.
Capital expenditures were $3.9 million for the nine months ended July 31, 1998.
For the year ending October 31, 1998, total capital expenditures are estimated
to be similar to the $5.0 million that was spent in fiscal 1997.
11
<PAGE>
OUTLOOK
Integrated Designs continues to experience poor market conditions in the
semiconductor equipment industry and improved market conditions are not expected
until at least the latter part of calendar 1999. Economic uncertainties in Asia
continue to adversely affect several Roper businesses, especially Integrated
Designs, Roper Pump and Gatan. Roper believes this region still possesses solid
long-term growth potential. However, there is no certainty when or to what
degree this potential growth might be realized.
Gazprom has recently established an internal financing mechanism for its
turbomachinery controls purchases from Compressor Controls. Gazprom's funding
is currently through a European bank wholly owned by Gazprom to more easily
facilitate the payment terms Roper has requested and more consistently achieve
scheduled shipment dates. Gazprom's gas supply contracts with Eastern Europe
are believed to a major source of hard currency for Gazprom to meet its hard
currency obligations, including those to Compressor Controls. These gas supply
arrangements are also believed to somewhat protect Gazprom from economic
instability affecting Russia and other CIS-region countries. This financing
arrangement is expected to be available to Gazprom over the coming years for
additional turbomachinery controls purchases under its supply agreement with
Compressor Controls. However, Compressor Controls' business with Gazprom will
continue to be subject not only to Gazprom maintaining satisfactory financing
arrangements, but political and other uncertainties in Russia and the region
which could adversely affect the timing and amount of future shipments, and
cannot be assured.
The Financial Accounting Standards Board has recently issued Statement of
Financial Accounting Standards ("SFAS") 130 - Reporting Comprehensive Income,
SFAS 131 - Disclosures about Segments of an Enterprise and Related Information,
SFAS 132 - Employers' Disclosures about Pensions and Other Postretirement
Benefits and SFAS 133 - Accounting for Derivative Instruments and Hedging
Activities that will be applicable to Roper in either fiscal 1999 or fiscal
2000. Once adopted, none of these standards is expected to significantly affect
Roper's financial statements or disclosures.
Roper has conducted a review throughout its operations to assess potential
problems associated with processing dates beyond December 31, 1999. The
majority of Roper's business systems are believed to be Year 2000 compliant, but
some of the business systems will need to be modified or replaced to address
this issue. All of Roper's products that are date sensitive are believed to
have already been modified to address this issue. The costs of system and
product modifications incurred thus far and estimated to be incurred in the
future has not been, and is not expected to be, material to Roper's financial
condition or results of operations.
FORWARD LOOKING INFORMATION
The information provided elsewhere in this report, in other Roper filings with
the Securities and Exchange Commission, and in other press releases and public
disclosures contains forward-looking statements about Roper's businesses and
prospects as to which there are numerous risks and uncertainties which generally
are beyond Roper's control. Some of these risks include the level and timing of
future business with Gazprom, the timing of payments from large CIS-region
customers the economic recovery of certain industries and geographic regions and
the future operating results of the newly acquired businesses. There is no
assurance that these and other risks and uncertainties will not have an adverse
impact on Roper's future operations, financial condition or financial results.
12
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
**3.1 Amended and Restated Certificate of Incorporation, including Form
of Certificate of Designation, Preferences and Rights of Series A
Preferred Stock.
***3.2 Amended and Restated By-Laws.
****4.01 Rights Agreement between Roper Industries, Inc. and SunTrust
Bank, Atlanta, Inc. as Rights Agent, dated as of January 8, 1996,
including Certificate of Designation, Preferences and Rights of
Series A Preferred Stock (Exhibit A), Form of Rights Certificate
(Exhibit B) and Summary of Rights (Exhibit C).
***4.02 Third Amended and Restated Credit Agreement dated May 15, 1997 by
and between Roper Industries, Inc., and NationsBank N.A. (South)
and the lender parties thereto.
4.03 Amendment Agreement No. 1 to Amended and Restated Credit
Agreement.
4.04 Amendment Agreement No. 2 to Amended and Restated Credit
Agreement.
*****10.01 Lease of Milwaukee, Oregon facility.
**10.02 1991 Stock Option Plan, as amended. +
******10.03 Non-employee Director Stock Option Plan. +
*****10.04 Form of Indemnification Agreement. +
**10.05 Consulting Agreement (G.L. Ohrstrom & Co.). +
**10.06 Consulting Agreement (E.D. Kenna). +
*******10.11 Labor Agreement.
27 Financial Data Schedule.
b. Reports on Form 8-K
None.
- --------------------------------------------------------------------------------
* Not used.
** Incorporated herein by reference to Exhibit s 3.1, 10.2, 10.5 and 10.6
to the Roper Industries, Inc. Annual Report on Form 10-K filed January
21, 1998.
*** Incorporated herein by reference to Exhibits 3 and 4 to the Roper
Industries, Inc. Current Report on Form 8-K filed June 2, 1997.
**** Incorporated herein by reference to Exhibit 4.02 to the Roper
Industries, Inc. Current Report on Form 8-K filed January 18, 1996.
***** Incorporated herein by reference to Exhibits 10.8 and 10.10 to the
Roper Industries, Inc. Registration Statement (No. 33-44665) on Form
S-1 filed December 20, 1991.
****** Incorporated herein by reference to Exhibit 10.3 to the Roper
Industries, Inc. Annual Report on Form 10-K filed January 28, 1994.
******* Incorporated herein by reference to Exhibit 10.3 to the Roper
Industries, Inc. Annual Report on Form 10-K filed January 25, 1996.
+ Management contract or compensatory plan or agreement.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Derrick N. Key President and August 21, 1998
- --------------------- Chief Executive Officer
Derrick N. Key
/s/ Martin S. Headley Vice President and August 21, 1998
- --------------------- Chief Financial Officer
Martin S. Headley
/s/ Kevin G. McHugh Controller August 21, 1998
- ---------------------
Kevin G. McHugh
14
<PAGE>
EXHIBIT INDEX
TO REPORT ON FORM 10-Q
Number Exhibit
- ------ -------
3.1 Amended and Restated Certificate of Incorporation, including Form of
Certificate of Designation, Preferences and Rights of Series A
Preferred Stock incorporated herein by reference to Exhibit 3.1 to the
Roper Industries, Inc. Annual Report on Form 10-K filed January 21,
1998.
3.2 Amended and Restated By-Laws incorporated herein by reference to
Exhibit 3 to the Roper Industries, Inc. Current Report on Form 8-K
filed June 2, 1997.
4.01 Rights Agreement between Roper Industries, Inc. and SunTrust Bank,
Atlanta, Inc. as Rights Agent, dated as of January 8, 1996, including
Certificate of Designation, Preferences and Rights of Series A
Preferred Stock (Exhibit A), Form of Rights Certificate (Exhibit B)
and Summary of Rights (Exhibit C) incorporate herein by reference to
Exhibit 4.02 to the Roper Industries, Inc. Current Report on Form 8-K
filed January 18, 1996.
4.02 Third Amended and Restated Credit Agreement dated May 15, 1997 by and
between Roper Industries, Inc., and NationsBank N.A. (South) and the
lender parties thereto incorporated herein by reference to Exhibit 4
to the Roper Industries, Inc. Current Report on Form 8-K filed June 2,
1997.
4.03 Amendment Agreement No. 1 to Amended and Restated Credit Agreement.
4.04 Amendment Agreement No. 2 to Amended and Restated Credit Agreement.
10.01 Lease of Milwaukee, Oregon facility incorporated herein by reference
to Exhibit 10.8 to the Roper Industries, Inc. Registration Statement
(No. 33-44665) on Form S-1 filed December 20, 1991.
10.02 1991 Stock Option Plan, as amended, incorporated herein by reference
to Exhibit 10.2 to the Roper Industries, Inc. Annual Report on
Form 10-K filed January 21, 1998.
10.03 Non-employee Director Stock Option Plan incorporated herein by
reference to Exhibit 10.3 to the Roper Industries, Inc. Annual Report
on Form 10-K filed January 28, 1994.
10.04 Form of Indemnification Agreement incorporated herein by reference to
Exhibit 10.10 to the Roper Industries, Inc. Registration Statement
(No. 33-44665) on Form S-1 filed December 20, 1991.
10.05 Consulting Agreement (G.L. Ohrstrom & Co.) incorporated herein by
reference to Exhibit 10.5 to the Roper Industries, Inc. Annual Report
on Form 10-K filed January 21, 1998.
10.06 Consulting Agreement (E.D. Kenna) incorporated herein by reference to
Exhibit 10.6 to the Roper Industries, Inc. Annual Report on Form 10-K
filed January 21, 1998.
10.11 Labor Agreement incorporated herein by reference to Exhibit 10.3 to
the Roper Industries, Inc. Annual Report on Form 10-K filed January
25, 1996.
27 Financial Data Schedule.
a
<PAGE>
EXHIBIT
AMENDMENT AGREEMENT NO.
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT AGREEMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Agreement") is made and entered into as of this ___ day of __________,
1998, by and among ROPER INDUSTRIES, INC., a Delaware corporation (the
"Borrower"), the Lenders signatory hereto (the "Lenders") and NATIONSBANK,
NATIONAL ASSOCIATION, a national banking association and successor to
NationsBank, National Association (South), as Agent (the "Agent") for the
Lenders party to the Credit Agreement described below.
W I T N E S S E T H:
--------------------
WHEREAS, the Borrower, the Agent and the Lenders have entered into an
Amended and Restated Credit Agreement dated May 15, 1997 (the "Credit
Agreement") pursuant to which the Lenders have agreed to make available to the
Borrower a revolving credit facility of up to $200,000,000; and
WHEREAS, as a condition to the making of loans the Lenders have required
that each Subsidiary of Borrower execute a Guaranty Agreement whereby it
guarantees payment of the Obligations arising under the Credit Agreement; and
WHEREAS, the Borrower has requested and the Agent and the Lenders party
hereto have agreed, subject to the terms and conditions of this Agreement, to
amend certain provisions of the Credit Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions herein set forth, it is hereby agreed as follows:
1. Definitions. The term "Agreement" as used herein and in the Loan
-----------
Documents shall mean the Agreement as hereby amended and as from time to time
further amended or modified. Unless the context otherwise requires, all
capitalized terms used herein without definition shall have the respective
meanings provided therefor in the Agreement.
2. Amendment. Subject to the conditions set forth herein, Section 9.5 of
---------
the Agreement is amended, effective as of the date hereof, by (i) deleting the
phrase "of the Borrower" beginning in the first line, (ii) inserting the word
"and" at the end of clause (f) and (iii) adding a new clause (g) thereto, which
clause shall read as follows:
"(g) Indebtedness of up to $5,000,000 arising under letters of credit
or, without duplication, payment guarantees."
<PAGE>
3. Guarantors. Each of the Guarantors has joined into the execution of
----------
this Agreement for the purpose of consenting to the amendment contained herein
and reaffirming its guaranty of the Obligations.
4. Borrower's Representations and Warranties. The Borrower hereby
-----------------------------------------
represents, warrants and certifies that:
(a) The representations and warranties made by it in Article VI of the
Credit Agreement are true on and as of the date hereof before and after
giving effect to this Agreement except that the financial statements
referred to in Section 7.6(a) shall be those most recently furnished to
each Lender pursuant to Section 8.1(a) and (b) of the Credit Agreement;
(b) The Borrower has the power and authority to execute and perform
this Agreement and has taken all action required for the lawful execution,
delivery and performance thereof.
(c) There has been no material adverse change in the condition,
financial or otherwise, of the Borrower and its Subsidiaries since the date
of the most recent financial reports of the Borrower received by each
Lender under Section 8.1 of the Credit Agreement, other than changes in the
ordinary course of business, none of which has been a material adverse
change;
(d) The business and properties of the Borrower and its Subsidiaries
are not, and since the date of the most recent financial report of the
Borrower and its Subsidiaries received by the Agent under Section 8.1 of
the Credit Agreement have not been, adversely affected in any substantial
way as the result of any fire, explosion, earthquake, accident, strike,
lockout, combination of workmen, flood, embargo, riot, activities of armed
forces, war or acts of God or the public enemy, or cancellation or loss of
any major contracts; and
(e) No event has occurred and no condition exists which, upon the
consummation of the transaction contemplated hereby, constituted a Default
or an Event of Default on the part of the Borrower under the Credit
Agreement or the Notes either immediately or with the lapse of time or the
giving of notice, or both.
5. Entire Agreement. This Agreement sets forth the entire understanding
----------------
and agreement of the parties hereto in relation to the subject matter hereof and
supersedes any prior negotiations and agreements among the parties relative to
such subject matter. None of the terms or conditions of this Agreement may be
changed, modified, waived or canceled orally or otherwise, except by writing,
signed by all the parties hereto, specifying such change, modification, waiver
or cancellation of such terms or conditions, or of any proceeding or succeeding
breach thereof.
2
<PAGE>
6. Full Force and Effect of Agreement. Except as hereby specifically
----------------------------------
amended, modified or supplemented, the Credit Agreement and all of the other
Loan Documents are hereby confirmed and ratified in all respects and shall
remain in full force and effect according to their respective terms.
7. Counterparts. This Agreement may be executed in any number of
------------
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
[Signature pages follow.]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all as of the day and year
first above written.
BORROWER:
ROPER INDUSTRIES, INC.
WITNESS:
_____________________ By:
Name:_____________________________________
_____________________ Title:______________________________________
4
<PAGE>
GUARANTORS:
AMOT CONTROLS CORPORATION
AMOT/METRIX INVESTMENT COMPANY
AMOT SALES CORPORATION
COMPRESSOR CONTROLS CORPORATION (an Iowa
corporation)
COMPRESSOR CONTROLS CORPORATION (a Delaware
corporation) d/b/a Compressor Controls Corporation
- CIS/EE in Iowa
CORNELL PUMP COMPANY
CORNELL PUMP MANUFACTURING CORPORATION
FLUID METERING, INC.
GATAN INTERNATIONAL, INC.
GATAN, INC.
GATAN SERVICE CORPORATION
ISL INTERNATIONAL, INC.
ISL NORTH AMERICA, INC.
MOLECULAR IMAGING CORPORATION
PREX CORPORATION
ROPER ACQUISITION, INC.
ROPER HOLDINGS, INC.
ROPER INDUSTRIAL PRODUCTS INVESTMENT CO.
ROPER INTERNATIONAL, INC.
ROPER INTERNATIONAL PRODUCTS, LTD.
ROPER PUMP COMPANY
USON CORPORATION
PETROTECH, INC.
PRINCETON INSTRUMENTS, INC.
WITNESS:
_____________________ By: ________________________________________
Name:_______________________________________
_____________________ Title:______________________________________
5
<PAGE>
INTEGRATED DESIGNS L.P.
By Compressor Controls Corporation,
an Iowa corporation and its sole general
partner
WITNESS:
___________________________ By:______________________________________
Name:____________________________________
___________________________ Title:___________________________________
METRIX INSTRUMENT CO., L.P.
By AMOT Sales Corporation, its sole general
partner
WITNESS:
___________________________ By:______________________________________
Name:____________________________________
___________________________ Title:___________________________________
PREX L.P.
By Compressor Controls Corporation, an Iowa
corporation and its sole general partner
WITNESS:
___________________________ By:______________________________________
Name:____________________________________
___________________________ Title:_____________________________________
USON L.P.
By Compressor Controls Corporation,
an Iowa corporation and its sole general
partner
WITNESS:
___________________________ By:_______________________________________
Name:_____________________________________
___________________________ Title:____________________________________
6
<PAGE>
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION, as
Agent for the Lenders
By:______________________________________
Name:____________________________________
Title:___________________________________
LENDERS:
NATIONSBANK, NATIONAL ASSOCIATION
By:______________________________________
Name:____________________________________
Title:___________________________________
7
<PAGE>
NBD BANK
By:______________________________________
Name:____________________________________
Title:___________________________________
8
<PAGE>
SUNTRUST BANK, ATLANTA
By:______________________________________
Name:____________________________________
Title:___________________________________
9
<PAGE>
ABN AMRO BANK NV
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
10
<PAGE>
SCOTIABANC INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
11
<PAGE>
CREDIT LYONNAIS ATLANTA AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
12
<PAGE>
WACHOVIA BANK OF GEORGIA, N.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
13
<PAGE>
ROBERT FLEMING & CO. LIMITED
By:______________________________________
Name:____________________________________
Title:___________________________________
14
<PAGE>
THE SUMITOMO BANK, LIMITED
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
15
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, LTD.
By:______________________________________
Name:____________________________________
Title:___________________________________
16
<PAGE>
THE SANWA BANK, LIMITED, ATLANTA
AGENCY
By:______________________________________
Name:____________________________________
Title:___________________________________
17
<PAGE>
EXHIBIT ______
AMENDMENT AGREEMENT NO. 2
TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT AGREEMENT NO. 2 TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is made and entered into as of this 15th day of June, 1998,
by and among ROPER INDUSTRIES, INC., a Delaware corporation (the "Borrower"),
the Lenders signatory hereto (the "Lenders") and NATIONSBANK, NATIONAL
ASSOCIATION, a national banking association and successor to NationsBank,
National Association (South), as Agent (the "Agent") for the Lenders party to
the Credit Agreement described below.
W I T N E S S E T H:
--------------------
WHEREAS, the Borrower, the Agent and the Lenders have entered into an
Amended and Restated Credit Agreement dated May 15, 1997, as amended, (the
"Agreement"),pursuant to which the Lenders have agreed to make available to the
Borrower a revolving credit facility of up to $200,000,000; and
WHEREAS, as a condition to the making of loans the Lenders have required
that each Subsidiary of Borrower execute a Guaranty Agreement whereby it
guarantees payment of the Obligations arising under the Agreement; and
WHEREAS, the Borrower has requested and the Agent and the Lenders party
hereto have agreed, subject to the terms and conditions of this Amendment, to
amend certain provisions of the Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions herein set forth, it is hereby agreed as follows:
1. Definitions. The term "Agreement" as used herein and in the Loan
-----------
Documents shall mean the Agreement as hereby amended and as from time to time
further amended or modified. Unless the context otherwise requires, all
capitalized terms used herein without definition shall have the respective
meanings provided therefor in the Agreement.
2. Amendment to Credit Agreement. Subject to the conditions set forth
-----------------------------
herein, the Agreement is amended, effective as of the date hereof, as follows:
(a) Section 9.2 of the Agreement is amended by deleting from clause
-----------
(iii) the phrase "shall not exceed 50,000,000 in the aggregate for any
Fiscal Year," and inserting the phrase "shall not exceed 30% of
Consolidated Net Worth for any Fiscal Year," and by deleting from clause
(iv) the phrase Aif the Cost of the Acquisition exceeds $25,000,000," and
inserting the phrase "if the Cost of the Acquisition exceeds 15% of
Consolidated Net Worth,"
<PAGE>
(b) Section 9.3 of the Agreement is amended in its entirety to read as
-----------
follows:
"9.3 Capital Expenditures". Make or become committed to make
---------------------
Capital Expenditures in an amount which in the aggregate exceeds 30% of the
Consoldiated EBITDA for the most recently completed Fiscal Year as reported
in the most recent year-end financial reports delivered to the Agent
pursuant to Section 8.1 (on a noncumulative basis, with the effect that
-----------
amounts not expended in any Fiscal Year may not be carried forward to a
subsequent period);"
(c) Section 9.5 of the Agreement is amended by deleting clauses (f)
-----------
and (g) in their entirety and inserting a new clause (f) in lieu thereof,
which clause shall read in its entirety as follows:
"(f) additional Indebtedness for Money Borrowed not otherwise
covered by clauses (a) through (e) above, which in the aggregate shall
not exceed 15% of Consolidated Total Assets at any time;"
(d) Section 9.6 of the Agreement is amended by deleting the phrase
-----------
"not to exceed $1,500,000 in any Fiscal Year" and inserting the phrase "not
to exceed 5% of Consolidated Total Assets in any Fiscal Year;"
3. Guarantors. Each of the Guarantors has joined into the execution of
----------
this Amendment for the purpose of consenting to the amendments contained herein
and reaffirming its guaranty of the Obligations.
4. Borrower's Representations and Warranties. The Borrower hereby
-----------------------------------------
represents, warrants and certifies that:
(a) The representations and warranties made by it in Article VII of
the Agreement are true on and as of the date hereof before and after giving
effect to this Amendment except that the financial statements referred to
in Section 7.6(a) shall be those most recently furnished to each Lender
--------------
pursuant to Section 8.1(a) and (b) of the Agreement;
----------------------
(b) The Borrower has the power and authority to execute and perform
this Amendment and has taken all action required for the lawful execution,
delivery and performance thereof.
(c) There has been no material adverse change in the condition,
financial or otherwise, of the Borrower and its Subsidiaries since the date
of the most recent financial reports of the Borrower received by each
Lender under Section 8.1 of the Agreement, other than changes in the
-----------
ordinary course of business, none of which has been a material adverse
change;
2
<PAGE>
(d) The business and properties of the Borrower and its Subsidiaries
are not, and since the date of the most recent financial report of the
Borrower and its Subsidiaries received by the Agent under Section 8.1 of
-----------
the Agreement have not been, adversely affected in any substantial way as
the result of any fire, explosion, earthquake, accident, strike, lockout,
combination of workmen, flood, embargo, riot, activities of armed forces,
war or acts of God or the public enemy, or cancellation or loss of any
major contracts; and
(e) No event has occurred and no condition exists which, upon the
consummation of the transaction contemplated hereby, constitutes a Default
or an Event of Default on the part of the Borrower under the Agreement or
the Notes either immediately or with the lapse of time or the giving of
notice, or both.
5. Conditions to Effectiveness. This Amendment shall not be effective
---------------------------
until the Agent has received to its satisfaction each of the following:
(a) receipt of twelve (12) counterparts of this Amendment Agreement
executed by the Borrower, the Guarantors, the Agent and the Required
Lenders.
(b) evidence that each Subsidiary and Material Foreign Subsidiary has
delivered the documentation described in Section 8.19 of the Agreement; and
------------
(c) such other documents, instruments and certificates as reasonably
requested by the Agent.
6. Entire Agreement. This Amendment sets forth the entire understanding
----------------
and agreement of the parties hereto in relation to the subject matter hereof and
supersedes any prior negotiations and agreements among the parties relative to
such subject matter. None of the terms or conditions of this Amendment may be
changed, modified, waived or canceled orally or otherwise, except by writing,
signed by all the parties hereto, specifying such change, modification, waiver
or cancellation of such terms or conditions, or of any proceeding or succeeding
breach thereof.
7. Full Force and Effect of Agreement. Except as hereby specifically
----------------------------------
amended, modified or supplemented, the Agreement and all of the other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms.
8. Counterparts. This Amendment may be executed in any number of
------------
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
[Signature pages follow.]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers, all as of the day and year
first above written.
BORROWER:
ROPER INDUSTRIES, INC.
WITNESS:
/s/ Melanie Cochran By: /s/ Matrin S. Headley
- ------------------------ ---------------------
Name: Martin S. Headley
________________________ Title: Vice President and CFO
4
<PAGE>
GUARANTORS:
AMOT CONTROLS CORPORATION
AMOT/METRIX INVESTMENT COMPANY
AMOT SALES CORPORATION
COMPRESSOR CONTROLS CORPORATION (an Iowa
corporation)
COMPRESSOR CONTROLS CORPORATION (a Delaware
corporation) d/b/a Compressor Controls Corporation
- CIS/EE in Iowa
CORNELL PUMP COMPANY
CORNELL PUMP MANUFACTURING CORPORATION
FLUID METERING, INC.
GATAN INTERNATIONAL, INC.
GATAN, INC.
GATAN SERVICE CORPORATION
ISL INTERNATIONAL, INC.
ISL NORTH AMERICA, INC.
MOLECULAR IMAGING CORPORATION
PREX CORPORATION
ROPER ACQUISITION, INC.
ROPER HOLDINGS, INC.
ROPER INDUSTRIAL PRODUCTS INVESTMENT CO.
ROPER INTERNATIONAL, INC.
ROPER INTERNATIONAL PRODUCTS, LTD.
ROPER PUMP COMPANY
USON CORPORATION
PETROTECH, INC.
PRINCETON INSTRUMENTS, INC.
FTI FLOW TECHNOLOGY, INC.
ACTON RESEARCH CORPORATION
PHOTOMETRICS, LTD.
WITNESS:
/s/ Melanie Cochran By: /s/ Martin S. Headley
- -------------------------- ---------------------
Name: Martin S. Headley
__________________________ Title: Vice President and CFO
5
<PAGE>
INTEGRATED DESIGNS L.P.
By Compressor Controls Corporation,
an Iowa corporation and its sole general
partner
WITNESS:
/s/ Melanie Cochran By: /s/ Martin S. Headley
- --------------------------- ------------------------------------------
Name: Martin S. Headley
- --------------------------- Title: Vice President & Assistant Secretary
METRIX INSTRUMENT CO., L.P.
By AMOT Sales Corporation, its sole general
partner
WITNESS:
/s/ Melanie Cochran By: /s/ Martin S. Headley
- --------------------------- ----------------------------------------
Name: Martin S. Headley
___________________________ Title: Vice President & Assistant Secretary
PREX L.P.
By Compressor Controls Corporation, an Iowa
corporation and its sole general partner
WITNESS:
/s/ Melanie Cochran By: /s/ Martin S. Headley
- --------------------------- ---------------------------------------
Name: Martin S. Headley
___________________________ Title: Vice President & Assistant Secretary
USON L.P.
By Compressor Controls Corporation,
an Iowa corporation and its sole general
partner
WITNESS:
/s/ Melanie Cochran By: /s/ Martin S. Headley
- --------------------------- ----------------------------------------
Name: Martin S. Headley
___________________________ Title: Vice President & Assistant Secretary
6
<PAGE>
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION, as Agent for
the Lenders
By: /s/ Greg McCrery
-------------------------------------
Name: Greg McCrery
Title Vice President
LENDERS:
NATIONSBANK, NATIONAL ASSOCIATION
By: /s/ Greg McCrery
-------------------------------------
Name: Greg McCrery
Title: Vice President
7
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Molly Morawski
-------------------------------------
Name: Molly Morawski
Title: Corporate Finance Officer
8
<PAGE>
SUNTRUST BANK, ATLANTA
By: /s/ R. Michael Dunlap
-------------------------------------
Name: R. Michael Dunlap
Title: Vice President
By: /s/ Jonathan H. James
-------------------------------------
Name: Jonathan H. James
Title: B.O.
9
<PAGE>
ABN AMRO BANK NV
By: /s/ Larry K. Kelley
-------------------------------------
Name: Larry K. Kelley
Title: Group Vice President
By: /s/ Linda K. Davis
-------------------------------------
Name: Linda K. Davis
Title: Vice President
10
<PAGE>
SCOTIABANC INC.
By: /s/ P.M. Brown
--------------
Name: P.M. Brown
Title: Relationship Manager
11
<PAGE>
CREDIT LYONNAIS ATLANTA AGENCY
By: ________________________________
Name: ______________________________
Title: _____________________________
12
<PAGE>
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ William R. McCamey
------------------------------------
Name: William R. McCamey
Title: Vice President
13
<PAGE>
ROBERT FLEMING & CO. LIMITED
By: /s/ MJC Watts
------------------------------------
Name: MJC Watts
Title: Authorized Signatory
14
<PAGE>
THE SUMITOMO BANK, LIMITED
By: /s/ J.H. Broadley
-----------------------------------
Name: J.H. Broadley
Title: Vice President N.Y. Office
By: /s/ Brian M. Smith
-----------------------------------
Name: Brian M. Smith
Title: Senior Vice President &
Regional Manager (East)
15
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, LTD.
By: /s/ Brandon A. Meyerson
-----------------------------------
Name: Brandon A. Meyerson
Title: Assistant Vice President
16
<PAGE>
THE SANWA BANK, LIMITED, acting through its
New York Branch on behalf of its Atlanta
Agency
By: /s/ P. Bartlett Wu
-----------------------------------
Name: P. Bartlett Wu
Title: Vice President
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JUL-31-1998
<CASH> 4,374
<SECURITIES> 0
<RECEIVABLES> 84,986
<ALLOWANCES> 0
<INVENTORY> 55,577
<CURRENT-ASSETS> 148,657
<PP&E> 67,918
<DEPRECIATION> 36,159
<TOTAL-ASSETS> 394,027
<CURRENT-LIABILITIES> 50,805
<BONDS> 0
313
0
<COMMON> 0
<OTHER-SE> 208,442
<TOTAL-LIABILITY-AND-EQUITY> 394,027
<SALES> 283,506
<TOTAL-REVENUES> 283,506
<CGS> 141,325
<TOTAL-COSTS> 141,325
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,669
<INCOME-PRETAX> 48,414
<INCOME-TAX> 16,500
<INCOME-CONTINUING> 31,914
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,914
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.00
</TABLE>
