<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, 1999.
[ ] 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
26, 1999 was 30,305,787.
<PAGE>
ROPER INDUSTRIES, INC.
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JULY 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statements of Earnings 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows 5
Condensed Consolidated Statements of Changes in Stockholders' Equity 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 18
</TABLE>
2
<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,
------------------ ------------------
1999 1998 1999 1998
--------- ------- -------- --------
<S> <C> <C> <C> <C>
Net sales $104,095 $97,412 $293,625 $283,506
Cost of sales 49,837 49,113 142,836 141,325
-------- ------- -------- --------
Gross profit 54,258 48,299 150,789 142,181
Selling, general and administrative expenses 33,074 30,297 95,966 88,768
-------- ------- -------- --------
Operating profit 21,184 18,002 54,823 53,413
Interest expense 1,790 2,107 5,386 5,669
Other income 212 115 473 670
-------- ------- -------- --------
Earnings before income taxes 19,606 16,010 49,910 48,414
Income taxes 6,810 5,450 17,235 16,500
-------- ------- -------- --------
Net earnings $ 12,796 $10,560 $ 32,675 $ 31,914
======== ======= ======== ========
Net earnings per common and common
equivalent share:
Basic $ 0.42 $ 0.34 $ 1.08 $ 1.03
Diluted 0.41 0.33 1.06 1.00
Weighted average common and common
equivalent shares outstanding:
Basic 30,239 31,248 30,261 31,121
Diluted 31,132 32,042 30,897 31,963
Dividends declared per common share $ 0.065 $ 0.06 $ 0.195 $ 0.18
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
July 31, October 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 3,502 $ 9,350
Accounts receivable, net 77,309 76,999
Inventories 58,924 51,444
Other current assets 6,480 2,059
---------- -----------
Total current assets 146,215 139,852
Property, plant and equipment, net 34,119 31,905
Intangible assets, net 223,801 197,179
Other assets 12,048 12,597
---------- -----------
Total assets $ 416,183 $ 381,533
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable $ 17,415 $ 21,051
Accrued liabilities 35,989 29,915
Income taxes payable 2,409 863
Current portion of long-term debt 4,292 5,749
---------- -----------
Total current liabilities 60,105 57,578
Long-term debt 125,888 120,307
Other liabilities 10,324 6,615
---------- -----------
Total liabilities 196,317 184,500
---------- -----------
Common stock 315 313
Additional paid-in capital 69,718 67,145
Retained earnings 175,208 148,435
Accumulated other comprehensive earnings (1,871) (906)
Treasury stock (23,504) (17,954)
---------- -----------
Total stockholders' equity 219,866 197,033
---------- -----------
Total liabilities and stockholders' equity $ 416,183 $ 381,533
========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
July 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 32,675 $ 31,914
Depreciation 4,801 4,622
Amortization 7,060 5,990
Other, net (2,607) 1,370
-------- --------
Net cash provided by operating activities 41,929 43,896
-------- --------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (38,453) (62,607)
Capital expenditures (3,755) (3,893)
Other, net (116) -
-------- --------
Net cash used in investing activities (42,324) (66,500)
-------- --------
Cash flows from financing activities:
Debt borrowings 35,898 49,508
Debt payments (32,134) (19,965)
Dividends (5,902) (5,610)
Treasury stock purchases (5,550) -
Other, net 2,575 2,590
-------- --------
Net cash provided by (used in) financing activities (5,113) 26,523
-------- --------
Effect of foreign currency exchange rate changes on cash (340) (194)
-------- --------
Net increase (decrease) in cash and cash equivalents (5,848) 3,725
Cash and cash equivalents, beginning of period 9,350 649
-------- --------
Cash and cash equivalents, end of period $ 3,502 $ 4,374
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders'
Equity (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Additional other
Common paid-in Retained comprehensive Treasury Comprehensive
stock capital earnings earnings stock Total earnings
------ ---------- --------- -------------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at October 31, 1997 $ 309 $ 61,950 $116,547 $ (937) $ - $177,869 $ -
Net earnings - - 31,914 - - 31,914 31,914
Common stock issued for an acquisition 1 1,935 - - - 1,936 -
Exercise of stock options 3 2,985 - - - 2,988 -
Other comprehensive earnings:
Currency translation adjustments - - - (342) - (342) (342)
Dividends declared - - (5,610) - - (5,610) -
------ ---------- -------- ------------- -------- -------- -------------
Balances at July 31, 1998 $ 313 $ 66,870 $142,851 $ (1,279) $ - $208,755 $ 31,572
====== ========== ======== ============= ======== ======== =============
Balances at October 31, 1998 $ 313 $ 67,145 $148,435 $ (906) $(17,954) $197,033 $ -
Net earnings - - 32,675 - - 32,675 32,675
Exercise of stock options 2 2,573 - - - 2,575 -
Other comprehensive earnings:
Currency translation adjustments - - - (965) - (965) (965)
Dividends declared - - (5,902) - - (5,902) -
Treasury stock purchases - - - - (5,550) (5,550) -
------ ---------- -------- ------------- -------- -------- -------------
Balances at July 31, 1999 $ 315 $ 69,718 $175,208 $ (1,871) $(23,504) $219,866 $ 31,710
====== ========== ======== ============= ======== ======== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
Roper Industries, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
1. Basis of Presentation
The accompanying condensed consolidated financial statements for the three-month
and nine-month periods ended July 31, 1999 and 1998 are unaudited. In the
opinion of management, the accompanying unaudited condensed 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. (the "Company")
and its subsidiaries for all periods presented.
Effective November 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130 - Reporting Comprehensive Income.
Comprehensive income includes net earnings and all other non-owner sources of
changes in a company's net assets. The difference between net earnings and
comprehensive earnings for the Company was currency translation adjustments.
Income taxes have not been provided on currency translation adjustments because
the net assets invested in the Company's non-U.S. subsidiaries are considered to
be permanently invested. Periods prior to November 1, 1998 were restated to
reflect the adoption of SFAS 130.
Management of the Company 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 condensed consolidated
financial statements in conformity 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 in the future or for the full fiscal year. It is recommended that
these unaudited condensed consolidated financial statements be read in
conjunction with the Company's consolidated financial statements and the notes
thereto included in its 1998 Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
2. Earnings Per Common and Common Equivalent Share
Basic earnings per common share are calculated by dividing net earnings by the
weighted average number of common shares outstanding during the period. Diluted
earnings per common and common equivalent share include the dilutive effect of
common stock equivalents outstanding during the period. Common stock equivalents
consisted of stock options.
3. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Nine months ended
July 31,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Cash paid during the period for (in 000s):
Interest $ 5,531 $ 4,371
Income taxes $ 16,544 $ 21,788
Acquisitions of businesses:
Fair value of assets, including goodwill $ 47,166 $ 70,051
Liabilities assumed (8,713) (5,508)
Common stock issued - (1,936)
-------------- --------------
Total acquisition costs, net of cash acquired $ 38,453 $ 62,607
============== ==============
</TABLE>
7
<PAGE>
4. Acquisitions
On June 21, 1999, the Company acquired three related companies from Varlen
Corporation that comprised its petroleum analyzers segment. The acquired
companies (collectively referred to hereinafter as "Petroleum Analyzer
Corporation") are based in the United States and Europe and they manufacture,
market and distribute instrumentation products for petroleum analysis in the
laboratory and process markets. The total purchase price was $38.5 million cash
(net of cash acquired), but is subject to adjustment based on the working
capital acquired compared to specified amounts at each of the acquired
companies. The claim for the purchase price adjustment has yet to be presented
to Varlen Corporation.
The acquisition of Petroleum Analyzer Corporation has been accounted for as a
purchase and its financial results were included in the Company's consolidated
results from the effective date of the acquisition. The excess of the purchase
price over the fair value of the net assets acquired is being amortized
straight-line over 25 years.
5. Fair Value of Financial Instruments
At July 31, 1999, the estimated fair value of the Company's interest rate swap
agreements for a notional amount of $75 million was an unrecorded liability of
$1.8 million, compared to $2.6 million at October 31, 1998. Most of the
decrease was due to an increase in LIBOR to 5.3% at July 31, 1999 compared to
5.2% at October 31, 1998.
6. Inventories
Inventories are summarized below (in thousands):
<TABLE>
<CAPTION>
July 31, October 31,
1999 1998
------------ ------------
<S> <C> <C>
Raw materials and supplies $ 28,400 $ 27,462
Work in process 13,433 10,700
Finished products 18,780 14,885
LIFO reserve (1,689) (1,603)
------------ ------------
$ 58,924 $ 51,444
============ ============
</TABLE>
8
<PAGE>
7. Industry Segments
Sales and operating profit by industry segment are set forth in the following
table (dollars in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
----------------------------------- ------------------------------------
1999 1998 Change 1999 1998 Change
-------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Analytical Instrumentation $ 41,117 $29,765 38.1% $101,632 $ 79,515 27.8%
Fluid Handling 25,976 25,361 2.4 72,576 76,636 (5.3)
Industrial Controls 37,002 42,286 (12.5) 119,417 127,355 (6.2)
-------- ------- ------- -------- -------- -------
Total $104,095 $97,412 6.9% $293,625 $283,506 3.6%
======== ======= ======= ======== ======== =======
Gross profit:
Analytical Instrumentation $ 23,010 $16,382 40.5% $ 57,253 44,745 28.0%
Fluid Handling 12,892 11,673 10.4 34,743 34,597 0.4
Industrial Controls 18,356 20,244 (9.3) 58,793 62,839 (6.4)
-------- ------- ------- -------- -------- -------
Total $ 54,258 $48,299 12.3% $150,789 $142,181 6.1%
======== ======= ======= ======== ======== =======
Operating profit*:
Analytical Instrumentation $ 8,693 $ 4,392 97.9% $ 18,113 $ 12,808 41.4%
Fluid Handling 7,546 6,396 18.0 19,636 18,431 6.5
Industrial Controls 6,931 8,163 (15.1) 22,145 26,508 (16.5)
-------- ------- ------- -------- -------- -------
Total $ 23,170 $18,951 22.3% $ 59,894 $ 57,747 3.7%
======== ======= ======= ======== ======== =======
</TABLE>
* Operating profit is before unallocated corporate general and administrative
expenses. Unallocated corporate general and administrative expenses were
$1,986 and $949 for the three months ended July 31, 1999 and 1998,
respectively. These expenses were $5,071 and $4,334 for the nine months ended
July 31, 1999 and 1998, respectively.
9
<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 the
Company's Annual Report on Form 10-K for the year ended October 31, 1998 as
filed with the Securities and Exchange Commission and Note 7 to the Company's
condensed consolidated financial statements included elsewhere in this report.
Results of operations
The following table sets forth certain information relating to the operations of
the Company expressed as a percentage of net sales:
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
----------------------- ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Gross profit:
Analytical Instrumentation 56.0 % 55.0 % 56.3 % 56.3 %
Fluid Handling 49.6 46.0 47.9 45.1
Industrial Controls 49.6 47.9 49.2 49.3
--------- ---------- ---------- ---------
52.1 % 49.6 % 51.4 % 50.2 %
========= ========== ========== =========
Operating profit:
Analytical Instrumentation 21.1 % 14.8 % 17.8 % 16.1 %
Fluid Handling 29.0 25.2 27.1 24.1
Industrial Controls 18.7 19.3 18.5 20.8
Unallocated corporate expenses (1.9) (1.0) (1.7) (1.5)
--------- ---------- ---------- ---------
20.3 18.5 18.7 18.9
Interest expense (1.7) (2.2) (1.8) (2.0)
Other income 0.2 0.1 0.1 0.2
--------- ---------- ---------- ---------
Earnings before income taxes 18.8 16.4 17.0 17.1
Income taxes 6.5 5.6 5.9 5.8
--------- ---------- ---------- ---------
Net earnings 12.3 % 10.8 % 11.1 % 11.3 %
========= ========== ========== =========
</TABLE>
Three months ended July 31, 1999 compared to 1998
On June 21, 1999, the Company acquired three related companies collectively
referred to as Petroleum Analyzer Corporation. See Note 4 to the Company's
condensed consolidated financial statements included elsewhere in this report.
Net sales increased $6.7 million, or 7%, during the three months ended July 31,
1999 compared to the three months ended July 31, 1998. On a pro forma basis
assuming prior year results included Petroleum Analyzer Corporation for one
month, sales increased 3%. The increase in sales was fueled by strength in the
Company's digital imaging businesses (sales up 27%) and its centrifugal pump
business (sales up 42%). Sales were adversely affected by continued weakness in
oil & gas and semiconductor equipment end-user markets that caused sales
declines in the companies selling primarily to these markets of 14% and 16%,
respectively. The increase in Analytical Instrumentation sales (up 38% actual
and up 24% pro forma) reflected the strength in the segment's digital imaging
and leak-testing equipment businesses that overcame weakness in its oil refinery
laboratory equipment business. The increase in Fluid Handling sales (up 2%)
reflected the strength of the centrifugal pump business overcoming weakness in
the segment's semiconductor equipment and emission testing businesses. The
decrease in Industrial Controls sales (down 13%) reflected the weakness in oil &
gas markets. Although energy prices have
10
<PAGE>
recovered from lower levels earlier this year, capital spending appears slowed
partly due to major consolidations within the industry.
The Company's gross profit percentage increased about 2.5 points as each of the
Company's segments improved their margins compared to last year. All of the
Company's businesses have aggressively kept costs under control and the margins
for the centrifugal pump business increased significantly due to better leverage
of production costs against increased sales and a sales mix favoring larger
products with higher margins.
Selling, general and administrative ("SG&A") expenses increased $2.8 million, or
9%, during the three months ended July 31, 1999 compared to the three months
ended July 31, 1998. As a percentage of sales for these three-month periods,
SG&A expenses were 32% and 31% in fiscal 1999 and fiscal 1998, respectively.
The increased percentage of sales was attributed to the growth in the Analytical
Instrumentation segment whose percentage is typically higher than the Company's
other segments due to higher research and development, other engineering and
amortization costs. Analytical Instrumentation SG&A costs increased 19%
compared to increased sales of 38%. Fluid Handling SG&A costs increased 1%
compared to increased sales of 2%. Industrial Controls SG&A costs decreased 5%
compared to decreased sales of 13%. The Industrial Controls segment has been
adversely affected by poor market conditions in its oil & gas markets and the
Company now pays certain transaction costs that used to be paid by Gazprom (a
large Russian energy company). Unallocated corporate general and administrative
expenses increased $1.0 million due to higher costs in fiscal 1999 related to an
incentive compensation plan reflecting the increased market price of the
Company's common stock and lower costs in fiscal 1998 related to the Company's
broader-based incentive compensation plan based on operating results throughout
the Company.
Income taxes were 34.7% of pretax earnings for the three months ended July 31,
1999 compared to 34.0% during the three months ended July 31, 1998. The
increased effective income tax rate in fiscal 1999 reflected the Company's
expectations that tax benefits related to sales exported from the U.S. may be
reduced resulting from the difficulties faced by some of the Company's
businesses selling to oil & gas markets.
Outstanding shares were less in fiscal 1999 than the prior year due to 1.2
million shares that were repurchased by the Company during the fourth quarter of
fiscal 1998 through the second quarter of fiscal 1999 under a buy-back program
that was terminated in May 1999.
Other components of comprehensive earnings represented the change in cumulative
translation adjustments related to the net assets of non-U.S. subsidiaries whose
functional currency was not the U.S. dollar. The net change during each of the
three months ended July 31, 1999 and 1998 was mostly related to the Company's
subsidiaries in France, England and Japan. The Company's exposure to foreign
currency exchange rate fluctuations continues to be concentrated in Europe and
Japan and the Company believes these exposures are not significant to its
overall operations or net assets.
The following table summarizes bookings and backlog information (dollars in
thousands):
<TABLE>
<CAPTION>
Bookings Backlog
-------------------------- --------------------------
Three months ended
July 31, July 31,
-------------------------- --------------------------
1999 1998 Change 1999 1998 Change
------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Analytical Instrumentation $37,728 $ 32,719 +15.3% $35,823 $ 32,135 +11.5%
Fluid Handling 23,063 20,616 +11.9 16,223 14,130 +14.8
Industrial Controls 32,137 56,829 -43.4 38,340 57,222 -33.0
------- -------- ------- ------- -------- -------
$92,928 $110,164 -15.6% $90,386 $103,487 -12.7%
======= ======== -====== ======= ======== =======
</TABLE>
11
<PAGE>
Bookings and backlog growth within the Analytical Instrumentation segment was
mostly due to the acquisition of Petroleum Analyzer Corporation. Excluding this
company's bookings and backlog from fiscal 1999, bookings were up 3% and backlog
was down 2%. Increased bookings and backlog within Fluid Handling reflected
improved semiconductor equipment business (compared to much worse industry
conditions in the latter part of fiscal 1998 and early part of fiscal 1999) and
the timing of orders for its medical equipment business in fiscal 1998. This
business had relatively low orders in the third quarter last year offset by
higher bookings in the fourth quarter. The decrease in bookings and backlog for
Industrial Controls reflected weakness in the oil & gas markets and an unusually
large bookings volume in the third quarter of last year due in part to the
largest single order ever received by one of this segment's companies. Although
energy prices have increased since the beginning of the year, industry
conditions are such that the Company doesn't expect significant improvement in
its related businesses until fiscal 2000.
Nine months ended July 31, 1999 compared to 1998
Net sales increased $10.1 million, or 4%, during the nine months ended July 31,
1999 compared to the nine months ended July 31, 1998. On a pro forma basis
assuming prior year acquisitions occurred at the beginning of fiscal 1998 and
Petroleum Analyzer Corporation was included in fiscal 1998 results for the month
of July, sales decreased 3%. Actual sales increased mostly due to the prior
year acquisitions of Flow Technology, Acton Research, Photometrics and PMC/Beta
and the current year acquisition of Petroleum Analyzer Corporation. Pro forma
sales declined related to companies selling primarily to oil & gas and
semiconductor equipment markets of 9% and 47%, respectively. Increases in
Analytical Instrumentation sales (up 28% actual) reflected the acquisitions of
Acton Research, Photometrics and Petroleum Analyzer Corporation and (up 6% pro
forma) strength in its digital imaging businesses. The decline in Fluid
Handling sales (down 5% actual and down 6% pro forma) reflected a 47% decline in
its semiconductor equipment business partially offset by a 26% increase in its
centrifugal pump business. The decline in Industrial Controls sales (down 6%
actual and down 8% pro forma) reflected the weakness in oil & gas markets caused
by historically low prices for oil and natural gas earlier in the year. The
Company expects weak capital spending by the energy industry to continue into
fiscal 2000.
The Company's overall gross profit percentage increased 1.2 points due to a
Fluid Handling improvement of 2.7 points (every company in the segment
improved). Analytical Instrumentation and Industrial Controls were consistent
with the prior year period. All of the Company's businesses have aggressively
kept costs under control in the face of some difficult market conditions.
SG&A expenses increased $7.2 million, or 8%, during the nine months ended July
31, 1999 compared to the nine months ended July 31, 1998. As a percentage of
sales for these nine-month periods, SG&A expenses were 33% and 31% in fiscal
1999 and fiscal 1998, respectively. The increased percentage of sales was
attributed to the growth in the Analytical Instrumentation segment whose SG&A
costs as a percentage of sales is typically higher than the Company's other
segments due to higher R&D, other engineering and amortization costs.
Analytical Instrumentation SG&A costs increased 23% compared to increased sales
of 28%. Fluid Handling SG&A costs decreased 7% compared to decreased sales of
5%. Industrial Controls SG&A costs increased 1% compared to decreased sales of
6%. The Industrial Controls segment has been adversely affected by poor market
conditions in its oil & gas markets and the Company now pays certain transaction
costs that used to be paid by Gazprom.
Income taxes were 34.5% of pretax earnings for the nine months ended July 31,
1999 compared to 34.1% during the nine months ended July 31, 1998. The
increased effective income tax rate in fiscal 1999 reflected the Company's
expectations that tax benefits related to sales exported from the U.S. may be
reduced resulting from the difficulties faced by some of the Company's
businesses selling to oil & gas markets.
Outstanding shares were less in fiscal 1999 than the prior year period due to
the shares repurchased by the Company during the fourth quarter of fiscal 1998
through the second quarter of fiscal 1999 as previously discussed.
12
<PAGE>
Other components of comprehensive earnings represented the change in cumulative
translation adjustments related to the net assets of non-U.S. subsidiaries whose
functional currency was not the U.S. dollar. The net change during each of the
nine months ended July 31, 1999 and 1998 was mostly related to the Company's
subsidiaries in France, England and Japan. The Company's exposure to foreign
currency exchange rate fluctuations continues to be concentrated in Europe and
Japan and the Company believes these exposures are not significant to its
overall operations or net assets.
The following table summarizes bookings for the nine months ended July 31, 1999
and 1998 (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 Change
-------- -------- ------
<S> <C> <C> <C>
Analytical Instrumentation $104,839 $ 82,445 +27.2%
Fluid Handling 76,418 72,564 +5.3
Industrial Controls 119,114 144,337 -17.5
-------- -------- ------
$300,371 $299,346 + 0.3%
======== ======== ======
</TABLE>
Bookings growth within the Analytical Instrumentation segment reflected the
acquisitions of Acton Research, Photometrics and Petroleum Analyzer Corporation.
On a pro forma basis, bookings increased 6% reflecting strength in the segment's
digital imaging businesses (pro forma bookings up 9%). Increased bookings
within Fluid Handling reflected the strength in the centrifugal pump business
(bookings up 34%) that offset a 26% decline in semiconductor equipment business.
The decrease in bookings for Industrial Controls reflected poor business
conditions in the oil & gas markets, which affects this segment much more than
the Company's other segments. Although oil and gas prices have recovered
somewhat from historical lows earlier in fiscal 1999, the reduced spending by
many energy industry customers in response to low prices and consolidations
within the industry is not expected to recover until fiscal 2000.
Financial Condition, Liquidity and Capital Resources
Working capital increased to $86.1 million at July 31,1999 compared to $82.3
million at October 31, 1998. Working capital acquired with the acquisition of
Petroleum Analyzer Corporation was $4.8 million.
Total debt was $130.2 million at July 31, 1999 (37% of total capital) compared
to $126.1 million (39% of total capital) at October 31, 1998. Excluding the
effects of any future acquisitions, the Company expects debt levels to be
reduced over the remainder of fiscal 1999 resulting in further strengthening of
its capital structure. Despite the cash acquisition of Petroleum Analyzer
Corporation, the Company's capital structure was less leveraged at July 31, 1999
compared to October 31, 1998 and total debt only increased slightly during this
nine-month period. At July 31, 1999, the Company had $88.3 million of credit
available under its primary debt agreement, which the Company considered
sufficient for any reasonable short-term needs.
At July 31, 1999, the estimated fair value of the Company's interest rate swap
agreements for a notional amount of $75 million was an unrecorded liability of
$1.8 million compared to $2.6 million at October 31, 1998. Most of the decrease
was due to an increase in LIBOR to 5.3% at July 31, 1999 compared to 5.2% at
October 31, 1998. The interest rate swap agreements expire in 2003 and the
other party to the agreements has an option to extend each of the agreements
until 2008. The current value attributed to these agreements assumes the
options will be exercised.
In May 1999, the Company's Board of Directors terminated an open-market stock
buy-back program it authorized in August 1998 under which the Company was
authorized to repurchase up to 5% of its outstanding common stock. Pursuant to
the buy-back program the Company purchased 1.2 million shares of its common
stock for $23.5 million. Total purchases were about 80% of the eligible number
of shares.
Capital expenditures in fiscal 1999 are expected to be marginally higher than
fiscal 1998.
13
<PAGE>
The Company continues to expect fiscal 1999 to be its seventh consecutive year
of record sales and earnings and increases are also expected in fiscal 2000.
The Company's energy-related and, to a lesser extent, semiconductor markets
continue to show poor fundamentals, although the semiconductor industry began
showing some signs of strengthening, and achievement of expected results may be
dependent on these markets showing some, or continuing to show, signs of
recovery.
The Company expects to continue an active acquisition program and recently
announced a signed letter of intent to acquire a company for its Analytical
Instrumentation segment that is expected to close in the Company's fourth
quarter of fiscal 1999. However, completion of this or any other future
acquisitions will be dependent upon numerous factors and it is not feasible to
reasonably estimate when any such acquisitions will actually occur, what the
financing requirements will be or what the impact will be on the Company's
operations, earnings, or other financial results or financial condition.
Year 2000 Issues
Many data processing applications identify a year using its last two digits and
assume the first two digits are 19. After December 31, 1999 when the first two
digits of a year become 20, there is uncertainty regarding how these
applications will interpret the current date and the inability to interpret the
date correctly might disrupt the effectiveness of the data processing
applications. Such disruptions might adversely affect normal business
operations. These issues are commonly known as "Y2K" issues.
The Company believes it has taken reasonable steps to instigate a process that
should ensure that its operations are not going to be materially affected by Y2K
issues that could impair the functionality of its products or processes. The
Company has identified some products and processes that need to be modified and
such changes are planned to be implemented well in advance of January 1, 2000.
In general, the Company has very few products that are date sensitive and most
of these products do not rely on the date for their performance.
Some of the Company's subsidiaries are or had been using data information
systems that would not properly address Y2K issues. Some of the changes
necessary to address these issues have already been made and remaining changes
are planned to be implemented before January 1, 2000. Total prior and future
implementation costs, including capital expenditures, are expected to be less
than $3 million, most of which has already been incurred.
The Company does not utilize any material interdependent computer systems,
either between its subsidiaries or between the Company and its suppliers or
customers.
The Company believes that its most reasonably likely worst-case scenario with
Y2K issues involves a disruption at a direct vendor or one of the vendor's
vendors that reduces the availability of components to the Company's products.
No individual product accounts for a significant amount of the Company's
revenues and the Company believes it could find alternative sources for such
components that might become unavailable from historical sources. Each of the
Company's subsidiaries has been undergoing a process of contacting their vendors
to assess their preparedness for Y2K issues. It's also possible that Y2K issues
affecting the Company's customers could cause them to delay or cancel their
orders for the Company's products. The Company is continuing to assess
potential material disruption from Y2K issues that might disrupt our customers
businesses. Due to the diversity of the Company's customer base, the Company
does not believe that any disruption of its business by a single customer due to
its problems with Y2K issues would materially affect its business as a whole.
The Company cautions that it's not possible to know the full impacts of what
might happen when the events triggering Y2K issues actually occur and the impact
on the Company could be significantly worse than the worst-case scenario the
Company believes reasonably likely to occur.
14
<PAGE>
Recently Issued Accounting Standards
The Financial Accounting Standards Board has issued, among others, Statement of
Financial Accounting Standards ("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 the
Company by the end of fiscal 1999 (SFAS 131 and SFAS 132) or fiscal 2001 (SFAS
133, as amended by SFAS 137 to defer its effective date by one year). Once
adopted, SFAS 133 will require that the Company's interest rate swap agreements
be reflected in its financial statements. This change along with any other
changes resulting from adopting these standards is not expected to significantly
affect the Company's financial position, results of operations or other
disclosures.
Forward-Looking Information
The information provided in this report, in other Company filings with the
Securities and Exchange Commission, and in other press releases and public
disclosures contains forward-looking statements about the Company's businesses
and prospects as to which there are numerous risks and uncertainties which
generally are beyond the Company's control. Some of these risks include, but
are not limited to, completion of and the anticipated operating results of new
acquisitions, the level and the timing of future business with Gazprom, the
effects of Y2K issues on the Company, its customers or its suppliers, market
conditions failing to improve or showing further deterioration in several of the
Company's key end-user markets, changing interest rates and changing foreign
currency exchange rates. There is no assurance that these and other risks and
uncertainties will not have an adverse impact on the Company's future
operations, earnings, or other financial results or financial condition.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to foreign currency risks and interest rate risks
pertaining to its business activities conducted outside the United States and
interest rate swap agreements, respectively.
Foreign currency risks include transactions denominated in a currency other than
the functional currency of a business (direct exposure is to earnings) or assets
and liabilities of the Company's non-U.S. subsidiaries whose functional currency
is not the U.S. dollar (direct exposure is to net assets). The Company and its
subsidiaries generally do not enter into transactions denominated in a currency
other than their functional currency. Net assets of non-U.S. subsidiaries are
located primarily in Europe and Japan and the exchange rate exposures of these
assets are mitigated by local currency borrowings. The Company expects that the
effects of changing exchange rates will not be material to the Company's
financial position.
The Company entered into interest rate swap agreements with a total notional
value of $75 million to reduce the risk of changing interest rates associated
with borrowings under its primary debt agreement. Individual borrowings under
this agreement are at fixed rates, but with generally short terms of 30-90 days.
The effect of the swap agreements converts the essentially variable debt
agreement borrowings to fixed rate borrowings. Market interest rates lower than
the swap agreement rates represents a potential liability to the Company. At
July 31, 1999, market rates were about 5.3% and the average swap agreement rate
was 5.7%. The value attributed to these agreements was an unrecorded liability
of $1.8 million. Each 0.1% interest rate movement affects this value by about
$570,000.
At July 31, 1999, the Company's total debt was $130 million. To the extent that
actual borrowings exceed the notional amount of the interest rate swap
agreements, the Company's total interest expense will fluctuate as a function of
market interest rates.
15
<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
/(a)/3.1 Amended and Restated Certificate of Incorporation, including
Form of Certificate of Designation, Preferences and Rights
of Series A Preferred Stock
/(b)/3.2 Amended and Restated By-Laws
/(c)/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)
/(b)/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
/(d)/4.03 Amendment Agreement No. 1 to Amended and Restated Credit
Agreement
/(d)/4.04 Amendment Agreement No. 2 to Amended and Restated Credit
Agreement
/(e)/4.05 Amendment Agreement No. 3 to Amended and Restated Credit
Agreement
/(f)/10.01 Lease of Milwaukee, Oregon facility
/(a)/10.02 1991 Stock Option Plan, as amended+
/(e)/10.03 Non-employee Director Stock Option Plan, as amended+
10.04 Form of Amended and Restated Indemnification Agreement+
/(a)/10.05 Consulting Agreement (G.L. Ohrstrom & Co., Inc.)+
/(g)/10.06 Amendment to G.L. Ohrstrom & Co., Inc. Consulting Agreement+
/(h)/10.11 Labor Agreement
27 Financial Data Schedule
__________________________
/(a)/ Incorporated herein by reference to Exhibits 3.1, 10.2 and 10.5 to the
Roper Industries, Inc. Annual Report on Form 10-K filed January 21,
1998.
/(b)/ Incorporated herein by reference to Exhibits 3 and 4 to the Roper
Industries, Inc. Current Report on Form 8-K filed June 2, 1997.
/(c)/ Incorporated herein by reference to Exhibit 4.02 to the Roper
Industries, Inc. Current Report on Form 8-K filed January 18, 1996.
/(d)/ Incorporated herein by reference to Exhibits 4.03 and 4.04 to the Roper
Industries, Inc. Quarterly Report on Form 10-Q filed August 21, 1998.
/(e)/ Incorporated herein by reference to Exhibits 4.05 and 10.03 to the
Roper Industries, Inc. Annual Report on Form 10-K filed January 20,
1999.
/(f)/ 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.
/(g)/ Incorporated herein by reference to exhibit 10.06 to the Roper
Industries, Inc. Quarterly Report on Form 10-Q filed June 11, 1999.
/(h)/ Incorporated herein by reference to Exhibit 10.3 to the Roper
Industries, Inc. Annual Report on Form 10-K filed January 25, 1996.
16
<PAGE>
+ Management contract or compensatory plan or arrangement.
b. Reports on Form 8-K
None.
17
<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 Chief Executive Officer and August 31, 1999
- ------------------
Derrick N. Key President
/s/ Martin S. Headley Vice President and August 31, 1999
- ---------------------
Martin S. Headley Chief Financial Officer
/s/ Kevin G. McHugh Controller August 31, 1999
- -------------------
Kevin G. McHugh
18
<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), incorporated 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, incorporated herein by reference to Exhibit 4.03 to the
Roper Industries, Inc. Quarterly Report on Form 10-Q filed August
21, 1998.
4.04 Amendment Agreement No. 2 to Amended and Restated Credit
Agreement, incorporated herein by reference to Exhibit 4.03 to the
Roper Industries, Inc. Quarterly Report on Form 10-Q filed August
21, 1998.
4.05 Amendment Agreement No. 3 to Amended and Restated Credit
Agreement, incorporated herein by reference to Exhibit 4.05 to the
Roper Industries, Inc. Annual Report on Form 10-K filed January
20, 1999.
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 10.02 to the Roper Industries, Inc. Annual
Report on Form 10-K filed January 21, 1998.+
10.03 Non-employee Director Stock Option Plan, as amended, incorporated
herein by reference to Exhibit 10.03 to the Roper Industries, Inc.
Annual Report on Form 10-K filed January 20, 1999.+
10.04 Form of Amended and Restated Indemnification Agreement.+
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 Amendment to G.L. Ohrstrom & Co., Inc. Consulting Agreement
incorporated herein by reference to Exhibit 10.06 to the Roper
Industries, Inc. Quarterly Report on Form 10-Q filed June 11,
1999.+
19
<PAGE>
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
+ Management contract or compensatory plan or arrangement.
20
<PAGE>
EXHIBIT 10.04
AMENDED AND RESTATED
INDEMNITY AGREEMENT
-------------------
This Agreement, made by and among Roper Industries, Inc., a Delaware
corporation (the "Company"), and [ ],the undersigned
[officer/director] of the Company (referred to herein individually as an
"Indemnitee").
RECITALS
A. The Company and the Indemnitee recognize that the present state of the
law is too uncertain to provide the directors and officers with adequate and
reliable advance knowledge or guidance with respect to the legal risks and
potential liabilities to which they may become personally exposed as a result of
performing their duties for the Company;
B. The Company believes that the interest of the Company's stockholders
would be best served by contracts with its officers and directors to indemnify
them to the fullest extent permitted by law (as in effect on the date hereof or,
to the extent any amendment may expand such permitted indemnification, as
hereafter in effect) against personal liability for actions taken in the
performance of their duties to the Company;
C. The Board of Directors of the Company has concluded that, to retain
and attract talented and experienced individuals to serve as directors and
officers of the Company and to encourage such individuals to take the business
risks necessary for the success of the Company, it is necessary for the Company
to indemnify contractually its directors and officers and to assume for itself
liability for such expenses and damages in connection with claims against such
directors and officers, in connection with their service to the Company, and has
further concluded that the failure to provide such contractual indemnification
could result in great harm to the Company and its stockholders;
D. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director of the Company, free from undue concern for the
risks and potential liabilities associated with such services to the Company;
and
E. The Company and its directors and officers entered into an
indemnification agreement effective as of December 18, 1991 (the "1991
Agreement"), a form of which is attached hereto, which the Board of Directors
and those continuing directors and officers party to the 1991 Agreement have
concluded in their respective best interests should be amended and restated to
reflect developments in applicable law;
F. The Indemnitee is willing to serve, or continued to serve, the
Company, provided, and on the expressed condition, that he is furnished with the
indemnification provided for in this Agreement.
<PAGE>
AGREEMENT
NOW, THEREFORE, the Company and Indemnitee agree as follows:
1. Grant of Indemnification. Subject only to the exclusions set forth in
------------------------
Section 2 hereof, the Company hereby agrees to hold harmless and indemnify
Indemnitee:
(a) Against any and all expenses (including attorneys' fees and
disbursements), judgments, fines (including excise taxes assessed with
respect to any Employee Benefit Plan) and amounts paid in settlement
actually and reasonably incurred by the Indemnitee in connection with any
Proceeding (as hereinafter defined) to which the Indemnitee is, was or at
any time becomes a party, or is threatened to be made a party, or in which
the Indemnitee becomes involved, by reason of the fact that the Indemnitee
is, was or at any time becomes a director, officer, employee or agent of
the Company, or is or was serving or at any time serves at the request of
the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise; and
(b) Otherwise to the fullest extent permitted under the provisions of
Section 145 of the General Corporation Law of the State of Delaware or any
provision of the Company's certificate of incorporation or bylaws;
provided, however, that the Company shall not be obligated, under this
Section 1, to pay any expenses, judgments, fines or amounts paid in
settlement, or any other expenses:
(i) if such payment is prohibited by applicable law, or
(ii) in connection with any Proceeding initiated by the
Indemnitee without authorization from the Company, except for (a) a
Proceeding initiated by Indemnitee to enforce Indemnitee's rights to
indemnification or advancement of expenses hereunder (b) an appeal by
Indemnitee from a Proceeding that was not initiated by Indemnitee, and
(c) a Proceeding initiated by Indemnitee, in his or her capacity as a
director of the Company, to contest the legality of any actions that
resulted (or allegedly resulted) in the removal or failure to elect
such Indemnitee and a majority of the incumbent directors (or their
nominees as directors).
(c) For purposes of this Agreement, a "Proceeding" shall mean any,
threatened, pending or completed investigation, action, suit, arbitration
or other proceeding (including any appeals therefrom), whether civil,
criminal, administrative or investigative in nature, whether before a court
or arbitrator, or before or involving a governmental, administrative or
private entity (including but not limited to an investigation, action,
suit, arbitration or other proceeding initiated by or on behalf of the
Company, an affiliate of the Company, or the Board of Directors or other
fiduciaries of any thereof).
<PAGE>
2. Exclusions. The Company shall not be liable under this Agreement to
----------
make any payment in connection with any Proceeding against the Indemnitee;
(a) (i) in connection with any Proceeding against the Indemnitee
for which payment is actually made to or on behalf of the Indemnitee
under a valid and collectible insurance policy, except in respect to
any deductible amount or excess liability beyond the amount of payment
under such insurance;
(ii) for which payment is actually made to the Indemnitee by
the Company with respect to indemnification of the Indemnitee by the
Company otherwise than pursuant to this Agreement;
(iii) for an accounting of profits made by the Indemnitee from
the Indemnitee's purchase or sale of securities of the Company within
the meaning of Section 16(b) of the Securities Exchange Act of 1934
and amendments thereto or similar provisions of any state statutory
law or common law; or
(b) which payment is not permitted by applicable law.
3. Notice. The Indemnitee shall give to the Company notice in
------
writing as soon as practicable of any Proceeding for which indemnity will or
could be sought under this Agreement; provided, however, that any delay in so
-------- -------
notifying the Company shall not constitute a waiver by Indemnitee of Indemnitees
rights hereunder. Notice to the Company shall be directed to the Company's main
offices, 160 Ben Burton Road, Bogart, Georgia 30622, Attention: Board of
Directors (or such other address as the Company shall designate in writing to
the Indemnitee); notice shall be deemed received if sent by prepaid mail
properly addressed, the date of such notice being the date postmarked.
4. Expenses and Conduct of Proceedinqs.
-----------------------------------
(a) Unless prohibited by applicable law, the Company shall promptly
pay in advance of the final disposition of any Proceeding all expenses
(including attorneys' fees and disbursements) incurred by the Indemnitee in
connection with such Proceeding; provided, however, that if applicable law
-------- -------
shall require an undertaking by or on behalf of the Indemnitee to repay
such expenses if it shall ultimately be determined that Indemnitee is not
entitled to be indemnified by the Company, then any such undertaking shall
be unsecured and shall be accepted without reference to financial ability
to make repayment.
(b) With respect to any Proceeding as to which the Indemnitee
notifies the Company hereunder of the commencement thereof:
(i) The Company will be entitled to participate therein at its
own expense; and
(ii) Except as otherwise provided below, to the extent that it
may wish, the Company jointly with any other indemnifying party
similarly notified will be
<PAGE>
entitled to assume the legal representation thereof, with counsel
satisfactory to the Indemnitee. After notice from the Company to the
Indemnitee of its election so to assume legal representation, the
Company will not be liable to the Indemnitee under this Agreement for
any legal or other expenses subsequently incurred by the Indemnitee in
connection with legal representation other than reasonable costs of
investigation or as otherwise provided below. The Indemnitee shall
have the right to employ counsel in such action, suit or proceeding
but the fees and expenses of such counsel incurred after notice from
the Company of its assumption of legal representation shall be at the
expense of the Indemnitee unless (A) the employment of counsel by the
Indemnitee has been authorized by the Company, (B) the Indemnitee
shall have reasonably concluded that there may be a conflict of
interest between the Company and the Indemnitee in the conduct of such
action or (C) the Company shall not in fact have employed counsel to
assume legal representation in such Proceeding within a reasonable
period of time after notice of the claim is given to the Company by
the Indemnitee, in which case the fees and expenses of counsel shall
be at the expense of the Company. The Company shall not be entitled
to assume the conduct of any Proceeding brought by or on behalf of the
Company or as to which the Indemnitee shall have made the conclusion
in (B) above.
(c) The Company shall not be liable to indemnify the Indemnitee under
this Agreement for any amounts paid in settlement of any Proceeding
affected without its written consent. The Company shall not settle any
Proceeding in any manner which would impose any penalty or limitation on
the Indemnitee without the Indemnitee's written consent. Neither the
Company nor the Indemnitee will unreasonably withhold their consent to any
proposed settlement.
5. Determination of Entitlement to Indemnification. No determination of
-----------------------------------------------
the Indemnitee's entitlement to indemnification in the specific case shall be
made unless required by applicable law; provided however, that if and only if a
--------
determination of the Indemnitee entitlement to indemnification in the specific
case is required by applicable law, then any such determination shall be made in
the following manner:
(a) If the Indemnitee shall so request, or if the Board of Directors
shall so resolve by a majority vote of directors who are not parties to the
subject Proceeding, even though less than a quorum, such determination
shall be made by Independent Counsel (as hereinafter defined) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee.
(i) The Independent Counsel shall be selected by a majority vote
of the Board of Directors from a list of at least two separate
Independent Counsel provided by Indemnitee. Within seven (7) days
after receipt of such list, the Company shall either advise Indemnitee
of the Independent Counsel so selected or deliver a written objection
to such list of Independent Counsel. Such objection may be asserted
only on the ground that the Independent Counsel identified in the
<PAGE>
list do not meet the requirements of "Independent Counsel" as defined
herein, and the objection shall set forth with particularity the
factual basis of such assertion. The Indemnitee may then give the
Company a list identifying two alternative separate Independent
Counsel, and the procedure for selecting or objecting to such
Independent Counsel set forth above shall again be followed.
(ii) For purposes of this Agreement, "Independent Counsel",
shall mean a law firm, or a member of a law firm, that is experienced
in matters of corporation law and neither currently is, nor in the
past five (5) years has been, retained to represent (A) the Company,
any affiliate of the Company, or Indemnitee in any matter material to
either such party, or (B) any other party to the Proceeding giving
rise to a claim for indemnification hereunder. Notwithstanding the
foregoing, the term "Independent Counsel" shall not include any person
who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either
the Company or Indemnitee in an action to determine Indemnitee's
rights under this Agreement.
(iii) The Company shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent Counsel
in connection with action pursuant to this Agreement, and the Company
shall pay all reasonable fees and expenses incident to the selection
procedure described herein. Upon the commencement of any judicial
proceeding or arbitration pursuant to Section 6 of this Agreement,
Independent Counsel shall be discharged and relieved of any further
responsibility in such capacity (subject to the applicable standards
of professional conduct then prevailing.)
(b) Absent a request by Indemnitee or a resolution by the Board of
Directors pursuant to Section 5(a) of this Agreement for a determination by
Independent Counsel, any determination required by law may be made (i) by
the Board of Directors acting by a majority vote of the directors who are
not parties to the subject Proceeding, even though less than a quorum, or
(ii) by a committee of such directors designated by majority vote of such
directors, even though less than a quorum, or (iii) by the stockholders of
the Company.
(c) The Indemnitee shall cooperate with the person, persons, or
entity making such determination with respect to Indemnitee's entitlement
to indemnification, including providing to such person, persons or entity
upon reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is
reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys, fees and
disbursements) incurred by Indemnitee in so cooperating with the person,
persons or entity making such determination shall be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnities and agrees to hold
Indemnitee harmless therefrom.
<PAGE>
(d) If the person, persons or entity empowered or selected under
Section 5(a) or 5(b) of this Agreement to determine whether Indemnitee is
entitled to indemnification shall not have made a determination within
ninety (90) days after receipt by the Company of the request therefor, the
requisite determination of entitlement to indemnification shall be deemed
to have been made and Indemnitee shall be entitled to such indemnification,
absent a prohibition of such indemnification by applicable law.
6. Remedies of Indemnitee.
----------------------
(a) In the event that:
(i) a determination is made pursuant to Section 5 of this
Agreement that Indemnitee is not entitled to indemnification under
this Agreement;
(ii) advancement of expenses is not timely made pursuant to
Section 4 of this agreement;
(iii) the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 5(a) of this
Agreement and such determination shall not have been made and
delivered in a written opinion within ninety (90) days after receipt
by the Company of the request for indemnification, or
(iv) payment of indemnification is not made pursuant to Section
1 of this Agreement within ninety (90) days after receipt by the
Company of a written request therefor, or
(v) payment of indemnification is not made within ten (10)
days after a determination has been made that Indemnitee is entitled
to indemnification or such determination is deemed to have been made
pursuant to Section 5 of this Agreement,
Indemnitee shall be entitled to an adjudication in any court of competent
jurisdiction of his entitlement to such indemnification or advancement of
expenses. Alternatively, Indemnitee, at his option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the rules of
the American Arbitration Association. The Company shall not oppose
Indemnitee's right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant
to Section 5 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant
to this Section 6 shall be conducted in all respects as a de novo trial, or
-- ----
arbitration, on the merits and Indemnitee shall not be prejudiced by reason
of that adverse determination. In any judicial proceeding or arbitration
commenced pursuant to this Section 6, the Company shall have the burden of
<PAGE>
proving that Indemnitee is not entitled to indemnification or advancement
of expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been
made pursuant to Section 5 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 6.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 6 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such
arbitrator that the Company is bound by all the provisions of this
Agreement.
(e) To the extent permitted by then applicable law, in the event that
Indemnitee, pursuant to this Section 6, seeks a judicial adjudication of or
an award in arbitration to enforce his rights under, or to recover damages
for breach of, this Agreement, if successful in whole or part, Indemnitee
shall be entitled to recover from the Company, and shall be indemnified by
the Company against, any and all expenses (including attorneys' fees and
disbursements) actually and reasonably incurred by him in such judicial
adjudication or arbitration.
7. Presumptions and Effect of Proceedings. The termination of any
--------------------------------------
Proceeding or of any claim, issue or matter therein, by judgment, order,
settlement or conviction, or upon a plea of nolo contendre or its equivalent,
--------------
shall not of itself create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company, or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Indemnitee shall be deemed to have been found liable in respect of any claim,
issue or matter only after Indemnitee shall have been so adjudged by a court of
competent jurisdiction after exhaustion of all appeals therefrom.
8. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to bring
suit to enforce such rights.
9. Counterparts. This Agreement may be executed in counterparts, all of
------------
which taken together shall constitute one instrument.
10. Non-exclusivity. Nothing herein shall be deemed to diminish or
---------------
otherwise restrict the Indemnitee's right to indemnification under any provision
of the Certificate of incorporation or By-Laws of the Company.
<PAGE>
11. Governance Law. This Agreement shall be governed by and construed in
--------------
accordance with Delaware law. To the extent permitted by applicable law, the
parties hereby waive any provisions of law which render any provision of this
Agreement unenforceable in any respect.
12. Severability. The provisions of this Agreement are severable, and if
------------
any clause or provision hereof shall be held invalid or unenforceable in whole
or in part, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, and shall not in any manner affect such
clause or provision to the extent that such clause or provision is valid or
enforceable, and shall not in any manner affect any other clause or provision of
this Agreement.
13. Successors and Assigns. This Agreement shall be binding upon all
----------------------
successors and assigns of the Company (including any transferee of all or
substantially all of its assets and any successor by merger or operation of law)
and shall inure to the benefit of the heirs, personal representatives and estate
of each Indemnitee.
14. Continuation of Obligations. All agreements and obligations of the
---------------------------
Company contained herein shall be effective with respect to the Indemnitee as of
the date that Indemnitee first became a director, officer, employee or agent of
the Company (or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise), as if entered into by and
between the Company and such Indemnitee on that date, and shall continue in
effect thereafter so long as the Indemnitee shall be subject to any possible
Proceeding by reason of the fact that the Indemnitee was a director or officer
of the Company or serving in any other capacity referred to herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and signed as of the 13th day of August, 1999.
ROPER INDUSTRIES, INC.:
Dated: August 20, 1999 By:____________________________________
Derrick N. Key, President,
INDEMNITEE:
Dated: August 20, 1999 By:____________________________________
[ ], Director
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<PAGE>
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<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JUL-31-1999
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<SECURITIES> 0
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0
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