<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 April 30, 2000.
[_] 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 June 9,
2000 was 30,502,236.
<PAGE>
ROPER INDUSTRIES, INC.
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2000
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 14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
</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 Six months ended
April 30, April 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $122,775 $100,452 $232,228 $189,530
Cost of sales 57,879 47,565 110,000 92,999
-------- -------- -------- --------
Gross profit 64,896 52,887 122,228 96,531
Selling, general and administrative expenses 41,420 32,744 81,512 62,892
-------- -------- -------- --------
Income from operations 23,476 20,143 40,716 33,639
Interest expense 2,818 1,761 5,396 3,596
Other income 306 47 536 261
-------- -------- -------- --------
Earnings before income taxes 20,964 18,429 35,856 30,304
Income taxes 7,338 6,390 12,550 10,425
-------- -------- -------- --------
Net earnings $ 13,626 $ 12,039 $ 23,306 $ 19,879
======== ======== ======== ========
Net earnings per common and common
equivalent share:
Basic $ 0.45 $ 0.40 $ 0.77 $ 0.66
Diluted 0.44 0.39 0.75 0.65
Weighted average common and common
equivalent shares outstanding:
Basic 30,436 30,220 30,380 30,271
Diluted 31,160 30,744 31,187 30,765
Dividends declared per common share $ 0.07 $ 0.065 $ 0.14 $ 0.13
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
April 30, October 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 21,115 $ 13,490
Accounts receivable, net 97,980 89,154
Inventories 71,303 56,401
Other current assets 4,117 2,774
-------- --------
Total current assets 194,515 161,819
Property, plant and equipment, net 41,217 34,797
Intangible assets, net 260,908 215,020
Other assets 9,919 8,527
-------- --------
Total assets $506,559 $420,163
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable $ 20,585 $ 18,457
Accrued liabilities 33,118 31,444
Income taxes payable 3,349 1,485
Notes payable and current portion of long-term debt 32,071 20,857
-------- --------
Total current liabilities 89,123 72,243
Long-term debt 159,584 109,659
Other liabilities 7,084 6,293
-------- --------
Total liabilities 255,791 188,195
-------- --------
Common stock 317 316
Additional paid-in capital 73,614 71,084
Retained earnings 206,958 187,911
Accumulated other comprehensive earnings (5,028) (2,172)
Treasury stock (25,093) (25,171)
-------- --------
Total stockholders' equity 250,768 231,968
-------- --------
Total liabilities and stockholders' equity $506,559 $420,163
======== ========
</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>
Six months ended
April 30,
----------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 23,306 $ 19,879
Depreciation 4,005 3,165
Amortization 6,098 4,620
Other, net (10,087) (4,474)
-------- --------
Net cash provided by operating activities 23,322 23,190
-------- --------
Cash flows from investing activities:
Acquisitions of business, net of cash acquired (71,313) -
Capital expenditures (8,678) (2,395)
Other, net (2) (95)
-------- --------
Net cash used in investing activities (79,993) (2,490)
-------- --------
Cash flows from financing activities:
Debt borrowings 68,834 5,722
Debt payments (5,207) (21,601)
Dividends (4,259) (3,946)
Treasury stock purchases - (5,550)
Other, net 2,609 1,204
-------- --------
Net cash provided by (used in) financing activities 61,977 (24,171)
-------- --------
Effect of foreign currency exchange rate changes on cash (681) (69)
-------- --------
Net increase (decrease) in cash and cash equivalents 7,625 (3,540)
Cash and cash equivalents, beginning of period 13,490 9,350
-------- --------
Cash and cash equivalents, end of period $ 21,115 $ 5,810
======== ========
</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, 1998 $ 313 $ 67,145 $ 148,435 $ (906) $ (17,954) $ 197,033 $ -
Net earnings - - 19,879 - - 19,879 19,879
Exercise of stock options 1 1,203 - - - 1,204 -
Other comprehensive earnings:
Currency translation
adjustments - - - (1,224) - (1,224) (1,224)
Dividends declared - - (3,946 - - (3,946) -
Treasury stock purchases - - - - (5,550) (5,550) -
------ ---------- ---------- ------------- ---------- --------- -------------
Balances at April 30, 1999 $ 314 $ 68,348 $ 164,368 $ (2,130) $ (23,504) $ 207,396 $ 18,655
====== ========== ========== ============= ========== ========= =============
Balances at October 31, 1999 $ 316 $ 71,084 $ 187,911 $ (2,172) $ (25,171) $ 231,968 $ -
Net earnings - - 23,306 - - 23,306 23,306
Proceeds from stock
ownership plans 1 2,530 - - 78 2,609 -
Other comprehensive earnings:
Currency translation
adjustments - - - (2,856) - (2,856) (2,856)
Dividends declared - - (4,259) - - (4,259) -
------ ---------- ---------- ------------- ---------- --------- -------------
Balances at April 30, 2000 $ 317 $ 73,614 $ 206,958 $ (5,028) $ (25,093) $ 250,768 $ 20,450
====== ========== ========== ============= ========== ========= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
Roper Industries, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
April 30, 2000
1. Basis of Presentation
The accompanying condensed consolidated financial statements for the three-month
and six-month periods ended April 30, 2000 and 1999 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.
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 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 1999 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 is 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 includes the dilutive effect of
common stock equivalents outstanding during the period. Common stock equivalents
consisted of stock options.
3. Supplemental Cash Flow Information
Cash payments for the six months ended April 30, 2000 and 1999 included interest
of $3,240,000 and $2,996,000, respectively, and income taxes of $10,631,000 and
$7,783,000, respectively.
4. Concentration of Credit Risk
At April 30, 2000, the Company had $7.0 million of trade receivables due from
RAO Gazprom ("Gazprom") compared to $8.4 million at October 31, 1999. Gazprom
is a large Russian natural gas company and one of the largest such companies in
the world. Most of the Company's receivables from Gazprom at April 30, 2000
were April 2000 shipments secured by letters of credit.
5. Fair Value of Financial Instruments
At April 30, 2000, the estimated fair value of the Company's interest rate swap
agreements was an unrecorded asset of $1,833,000, compared to $1,150,000 at
October 31, 1999. Most of the increase was due to an increase in LIBOR to 6.6%
at April 30, 2000 compared to 6.2% at October 31, 1999. Subsequent to April 30,
2000, the Company sold its interests in the interest rate swap agreements for
approximately $1.8 million. This amount will be amortized as a credit against
interest expense over the unexpired terms of the interest rate swap agreements,
which will be into 2003.
7
<PAGE>
6. Inventories
Inventories are summarized below (in thousands):
April 30, October 31,
2000 1999
--------- -----------
Raw materials and supplies $ 36,930 $ 27,811
Work in process 15,554 14,556
Finished products 20,509 15,724
LIFO reserve (1,690) (1,690)
--------- -----------
$ 71,303 $ 56,401
========= ===========
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 Six months ended
April 30, April 30,
------------------------------ ------------------------------
2000 1999 Change 2000 1999 Change
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Analytical Instrumentation $ 57,316 $ 33,276 +72.2% $107,720 $ 60,515 +78.0%
Fluid Handling 29,104 27,181 +7.1 52,638 46,600 +13.0
Industrial Controls 36,355 39,995 -9.1 71,870 82,415 -12.8
-------- -------- ------- -------- -------- -------
Total $122,775 $100,452 +22.2% $232,228 $189,530 +22.5%
======== ======== ======= ======== ======== =======
Gross profit:
Analytical Instrumentation $ 32,715 $ 19,530 +67.5% $ 60,504 34,243 +76.7%
Fluid Handling 13,956 13,067 +6.8 25,693 21,851 +17.6
Industrial Controls 18,225 20,290 -10.2 36,031 40,437 -10.9
-------- -------- ------- -------- -------- -------
Total $ 64,896 $ 52,887 +22.7% $122,228 $ 96,531 +26.6%
======== ======== ======= ======== ======== =======
Operating profit*:
Analytical Instrumentation $ 11,945 $ 6,624 +80.3% $ 19,555 $ 9,420 +107.6%
Fluid Handling 7,292 7,734 -5.7 13,589 12,090 +12.4
Industrial Controls 6,026 7,554 -20.2 11,165 15,214 -26.6
-------- -------- ------- -------- -------- -------
Total $ 25,263 $ 21,912 +15.3 $ 44,309 $ 36,724 +20.7%
======== ======== ======= ======== ======== =======
</TABLE>
* Operating profit is before unallocated corporate general and administrative
expenses. Unallocated corporate general and administrative expenses were
$1,787 and $1,769 for the three months ended April 30, 2000 and 1999,
respectively. These expenses were $3,593 and $3,085 for the six months
ended April 30, 2000 and 1999, respectively.
8. Acquisitions
In November 1999, the Company acquired Redlake Imaging Corporation ("Redlake").
Redlake, based in Morgan Hill, California, supplies high-speed digital video
cameras primarily to the industrial, academic research and military testing
markets. Redlake is reported as part of the Company's Analytical
Instrumentation segment.
In November 1999, the Company acquired the motion analysis systems division
("MASD") of Eastman Kodak Company. MASD, based in San Diego, California,
supplies high-speed, digital video cameras for applications in the automotive,
industrial and military markets. MASD also manufactures and distributes high-
resolution digital cameras for the machine vision and image conversion markets.
MASD is reported as part of the Company's Analytical Instrumentation segment.
8
<PAGE>
In February 2000, the Company acquired Flowdata, Inc. ("Flowdata"). Flowdata,
previously based near Dallas, Texas and subsequently combined with the Company's
Flow Technology unit in Phoenix, Arizona, manufactures positive displacement
flow meters and flow metering systems for industrial applications. Flowdata is
reported as part of the Company's Fluid Handling segment.
In February 2000, the Company acquired Cybor Corporation ("Cybor"). Cybor,
based in San Jose, California, manufactures pumps, controls, cabinets and
accessories for the semiconductor industry. Cybor is reported as part of the
Company's Fluid Handling segment.
In May 2000, the Company acquired Abel Holding Corporation ("Abel"). Abel,
whose principal operating facility is in Buchen, Germany, supplies specialty
positive displacement pumps for a variety of applications primarily involving
abrasive or corrosive fluids or those with a high solids content. Abel will be
reported as part of the Company's Fluid Handling segment.
The combined purchase price for all of the above acquisitions thus far during
fiscal 2000 was approximately $100 million. All of these acquisitions are being
accounted for using the purchase method of accounting. Consequently, the
operating results of these businesses are included in the Company's consolidated
operating results beginning from their respective acquisition date. The excess
of the purchase price over the fair value of net assets acquired is being
amortized straight-line over lives ranging from 20 to 30 years.
9. Long-term Borrowings
On May 18, 2000, the Company entered into two new credit agreements and
simultaneously cancelled its then-existing U.S. and German revolving credit
facilities.
One of the new agreements is with a group of banks and provides for a total
credit facility of $275 million, consisting primarily of revolving loans, swing
line loans and letters of credit. Up to $75 million of this amount may be
denominated in designated non-U.S. currencies. Interest on outstanding
borrowings will be influenced by the nature and currency of the borrowings. The
Company expects the majority of borrowings will be in U.S. dollars with interest
at EURIBOR plus a margin. The margin is influenced by certain financial ratios
of the Company and can range from 0.625% to 1.125%. This agreement provides that
the Company will maintain certain financial ratios addressing coverage of fixed
charges, total debt, consolidated net worth and capital expenditures. Other fees
and provisions of this agreement are believed to be customary. This agreement
matures on May 18, 2005.
The other new agreement is with a group of insurance companies and provides for
$40 million of 7.58% term notes due May 18, 2007 and $85 million of 7.68% term
notes due May 18, 2010. The financial covenants associated with this agreement
are similar, but slightly less restrictive, than the $275 million facility.
Both of the above borrowing agreements are secured by guarantees from the
Company's U.S. subsidiaries and the pledge of stock of certain of its non-U.S.
subsidiaries.
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, 1999 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 Six months ended
April 30, April 30,
-------------------- -------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Gross profit:
Analytical Instrumentation 57.1% 58.7% 56.2% 56.6%
Fluid Handling 48.0 48.1 48.8 46.9
Industrial Controls 50.1 50.7 50.1 49.1
------ ------ ------ ------
52.9 % 52.6 % 52.6 % 50.9 %
====== ====== ====== ======
Operating profit:
Analytical Instrumentation 20.8% 19.9% 18.2% 15.6%
Fluid Handling 25.1 28.5 25.8 25.9
Industrial Controls 16.6 18.9 15.5 18.5
Unallocated corporate expenses (1.5) (1.8) (1.5) (1.6)
------ ------ ------ ------
19.1 20.1 17.5 17.8
Interest expense (2.3) (1.8) (2.3) (1.9)
Other income 0.3 - 0.2 0.1
------ ------ ------ ------
Earnings before income taxes 17.1 18.3 15.4 16.0
Income taxes 6.0 6.3 5.4 5.5
------ ------ ------ ------
Net earnings 11.1 % 12.0 % 10.0 % 10.5 %
====== ====== ====== ======
</TABLE>
Three months ended April 30, 2000 compared to 1999
Net sales increased $22.3 million, or 22%, during the three months ended April
30, 2000 compared to the three months ended April 30, 1999. Most of this
increase resulted from the contributions of companies acquired since April 30,
1999: the instruments division of Varlen Corporation (June 1999), Redlake
Imaging Corporation (November 1999), the motion analysis systems division of
Eastman Kodak Company (November 1999), Flowdata, Inc. (February 2000) and Cybor
Corporation (February 2000). On a pro forma basis as if these businesses had
been included in the Company's results for same length of time in fiscal 1999 as
in fiscal 2000, net sales were down 1%. Flowdata and Cybor are reported as part
of the Company's Fluid Handling segment. The other recent acquisitions are
reported as part of the Company's Analytical Instrumentation segment.
Analytical Instrumentation sales (up 72% actual and up 5% pro forma) reflected
the acquisitions mentioned above and strength in the segment's motion analysis
businesses (pro forma sales, including Redlake, were up 23%). Fluid Handling
sales (up 7% actual and flat pro forma) reflected the acquisitions mentioned
above, continued strength in the segments semiconductor equipment businesses
(pro forma sales, including Cybor, were up 83%), centrifugal pump sales were
down 21% resulting from weak municipal wastewater markets and the segment's
medical diagnostics pump business' sales were down 34% due to a continuing FDA
compliance problem at a major customer that was unrelated to the Company's
products. Industrial Controls sales (down 9% actual and pro forma) reflected
continued weak oil & gas markets.
10
<PAGE>
The Company's overall gross profit percentage increased slightly for the three
months ended April 30, 2000 compared to April 30, 1999 primarily due to
increased high-margin sales within the Analytical Instrumentation segment that
more than offset the leverage-related decline in margins for the Industrial
Controls segment.
Selling, general and administrative ("SG&A") expenses increased $8.7 million, or
26%, during the three months ended April 30, 2000 compared to the three months
ended April 30, 1999. As a percentage of sales for these three-month periods,
SG&A expenses were 34% and 33% in fiscal 2000 and fiscal 1999, respectively.
The increased percentage of sales was attributed to the growth in the Analytical
Instrumentation segment, whose SG&A expenses are typically higher as a
percentage of sales than the Company's other segments due to higher research and
development, other engineering and amortization costs. Analytical
Instrumentation costs increased 61% compared to increased sales of 72%. Fluid
Handling costs increased 25% compared to increased sales of 7% as a result of
the acquisitions during the quarter of Cybor and Flowdata where cost reduction
actions are underway. Industrial Controls costs decreased 4% compared to
decreased sales of 9%.
Interest expense increased $1.1 million, or 60%, for the three months ended
April 30, 2000 compared to the three months ended April 30, 1999 due primarily
to higher debt levels in fiscal 2000 that resulted from debt incurred over the
past year to fund acquisitions during this period.
Income taxes were 35.0% of pretax earnings for the three months ended April 30,
2000 compared to 34.7% during the three months ended April 30, 1999. The
increased effective income tax rate in fiscal 2000 reflected some of the
Company's recent acquisitions that are located in higher-tax jurisdictions and
goodwill that will not be deductible for income tax purposes.
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 April 30, 2000 and 1999 was mostly related to the Company's
subsidiaries in Europe and Japan. The Company's exposure to foreign currency
exchange rate fluctuations continues to be concentrated in Europe and Japan and
the Company believes that these exposures are not significant to its operations
or net assets.
The following table summarizes bookings and backlog information (dollars in
thousands):
<TABLE>
<CAPTION>
Bookings Backlog
---------------------------- ----------------------------
Three months ended
April 30, April 30,
---------------------------- ----------------------------
2000 1999 Change 2000 1999 Change
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Analytical Instrumentation $ 53,403 $ 33,570 +59.1% $ 41,499 $ 35,152 +18.1%
Fluid Handling 32,172 30,048 +7.1 19,822 19,244 +3.0
Industrial Controls 40,851 52,223 -21.8 30,975 43,382 -28.6
-------- -------- -------- -------- -------- --------
$126,426 $115,841 +9.1% $ 92,296 $ 97,778 -5.6%
======== ======== ======== ======== ======== ========
</TABLE>
Bookings growth for the Company as a whole and for the Analytical
Instrumentation and Fluid Handling segments for the three months ended April 30,
2000 compared to three months ended April 30, 1999 was largely due to the
effects of recent acquisitions. On a pro forma basis, Analytical
Instrumentation bookings were down 3%, Fluid Handling bookings were down 1% and
total bookings were down 10%. Industrial Controls bookings comparisons were
adversely affected by unusually large orders in fiscal 1999. However, this
segment's April 2000 bookings were greater than the prior year and the Company
is hopeful that this is indicative of improved energy markets for the remainder
of fiscal 2000.
Six months ended April 30, 2000 compared to 1999
Net sales increased $42.7 million, or 23%, during the six months ended April 30,
2000 compared to the six months ended April 30, 1999. Most of this increase was
due to the incremental sales of businesses acquired since April 30, 1999. On a
pro forma basis as if these businesses had been included in the Company's
results for same length of time in fiscal 1999 as in fiscal 2000, sales for the
Company as a
11
<PAGE>
whole were down 2%, Analytical Instrumentation sales were up 1%, Fluid Handling
sales were up 8% and Industrial Controls sales were down 13% as a result of weak
oil & gas capital equipment demand.
Gross profit percentages were considered relatively consistent for the six
months ended April 30, 2000 compared to the six months ended April 30, 1999.
The 1.9 point improvement in Fluid Handling was mostly due to increased volume
with the segment's higher-margin semiconductor equipment businesses (including
the Cybor acquisition) and the Company's 1.7 point improvement was mostly due to
increased acquisition-related volume in the higher-margin Analytical
Instrumentation segment.
SG&A expenses increased $18.6 million, or 30%, during the six months ended April
30, 2000 compared to the six months ended April 30, 1999. As a percentage of
sales for these six-month periods, SG&A expenses were 35% and 33% in fiscal 2000
and fiscal 1999, respectively. The increased percentage of sales was attributed
to the growth in the Analytical Instrumentation segment, whose SG&A expenses are
typically higher as a percentage of sales than the Company's other segments due
to higher research and development, other engineering and amortization costs.
Analytical Instrumentation costs increased 65% compared to increased sales of
78%. Fluid Handling costs increased 24% compared to increased sales of 13% as a
result of the acquisitions during the second quarter of Cybor and Flowdata where
cost reduction actions are underway. Industrial Controls costs decreased 1%
compared to decreased sales of 13%.
Interest expense increased $1.8 million, or 50%, for the six months ended April
30, 2000 compared to the six months ended April 30, 1999 due primarily to higher
debt levels in fiscal 2000 that resulted from debt incurred over the past year
to fund acquisitions during this period.
Income taxes were 35.0% of pretax earnings for the six months ended April 30,
2000 compared to 34.4% during the six months ended April 30, 1999. The
increased effective income tax rate in fiscal 2000 reflected some of the
Company's recent acquisitions that are located in higher-tax jurisdictions and
goodwill that will not be deductible for income tax purposes.
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
six months ended April 30, 2000 and 1999 was mostly related to the Company's
subsidiaries in Europe and Japan. The Company's exposure to foreign currency
exchange rate fluctuations continues to be concentrated in Europe and Japan and
the Company believes that these exposures are not significant to its operations
or net assets.
The following table summarizes bookings for the six months ended April 30, 2000
and 1999 (dollars in thousands):
2000 1999 Change
-------- -------- --------
Analytical Instrumentation $109,614 $ 67,111 +63.3%
Fluid Handling 57,684 53,355 +8.1
Industrial Controls 73,894 86,977 -15.0
-------- -------- --------
$241,192 $207,443 +16.3%
======== ======== ========
Actual bookings growth within the Analytical Instrumentation and Fluid Handling
segments was primarily due to recent acquisitions. Compared to prior year pro
forma results, Analytical Instrumentation bookings were down 2% and Fluid
Handling bookings were up 3%. The decrease in bookings for Industrial Controls
reflected unusually large activity in the second quarter of fiscal 1999 and
continued weakness in this segment's energy markets. April bookings for this
segment compared favorably to April 1999 and the Company is hopeful this is
indicative of improved energy markets for the remainder of fiscal 2000.
Financial Condition, Liquidity and Capital Resources
Working capital increased to $105.4 million at April 30, 2000 compared to $89.6
million at October 31, 1999. Most of the increase in working capital was due to
the Company's liquidity needs for the anticipated
12
<PAGE>
acquisition of Abel Holding Company that was pending at April 30, 2000. This
acquisition was completed in May.
Total debt was $191.7 million (43% of total capital) at April 30, 2000 compared
to $130.5 million (36% of total capital) at October 31, 1999. The increase in
debt and debt-to-capital ratio was the result of the financing requirements for
all of the fiscal 2000 acquisitions (including the May 2000 acquisition, which
was largely funded at April 30), which were acquired for cash. Excluding the
effects of any future acquisitions, the Company expects debt levels to be
reduced over the remainder of fiscal 2000 resulting in a strengthening of its
capital structure.
In May 2000, the Company replaced its $200 million U.S. and $30 million German
revolving credit agreements with new credit agreements. The new agreements
include a 5-year, $275 million, multi-currency revolving credit facility and
$125 million of term notes ($40 million at 7.58% due in 7 years and $85 million
at 7.68% due in 10 years). Borrowings under the new revolving credit facility
accrue interest at either the prime rate or as a function of LIBOR plus a margin
that is dependant upon certain financial ratios of the Company. Protective
covenants under the new credit agreements are generally comparable to the former
U.S. revolving credit facility.
As mentioned above, the Company completed the acquisition of Abel Holding
Company ("Abel") for cash of $23.0 million and the assumption of $2.1 million of
debt in May 2000. Abel has manufacturing facilities in Buchen, Germany and is an
international supplier of specialty positive displacement for a variety of
applications primarily involving abrasive or corrosive fluids or those with high
solids content. Abel will be reported in the Company's Fluid Handling segment.
The Company expects cash flows from its existing businesses to exceed normal
operating requirements, including capital expenditures, thereby enabling the
Company to reduce its outstanding debt. Capital expenditures during the second
half of fiscal 2000 are expected to be less than the first half of the year.
The Company expects to continue an active acquisition program. In addition to
the Abel acquisition, the Company previously announced the signing of four
letters of intent with acquisition candidates representing total consideration
of approximately $150 million. Although these acquisitions are expected to
close before October 31, 2000, each is still subject to, among other things,
satisfactory completion of due diligence procedures, the execution of a
definitive agreement and possibly regulatory approvals. The completion of any
of these acquisitions is not assured. If completed, there can be no assurance
what the financial impact will be on the Company's operations.
The Company continues to expect fiscal 2000 to be its eighth consecutive year of
record sales and earnings.
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 the
level and the timing of future business with Gazprom (a large Russian energy
company and the Company's largest individual customer), market conditions
failing to improve in some of the Company's key end-user markets (especially
energy markets), acquisition activities, 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.
13
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to interest rate risks on its outstanding variable-rate
borrowings. It is exposed to foreign exchange risks pertaining to its
transactions denominated in currencies other than the U.S. dollar. The Company
is also exposed to equity market risks pertaining to the traded price of its
common stock.
The Company's interest expense related to its variable-rate borrowings will be
directly affected by changes in interest rates. Assuming the new term notes
were in effect at April 30, 2000, the Company's variable-rate borrowings would
have been about $66 million. Therefore, an increase or decrease in interest
rates of 10 basis points would increase or decrease the Company's annual
interest expense by approximately $66,000.
The Company and its subsidiaries generally do not enter into significant
transactions denominated in currencies other than the U.S. dollar or their
functional currency. Non-U.S. dollar balances and transactions at April 30,
2000 and for the six months then ended were principally denominated in Western
European or Japanese currencies. At October 31, 1999 and for the year then
ended, 10-15% of Roper's consolidated net assets and sales were denominated in
these currencies. Roper expects that these currencies will remain relatively
stable. Therefore, foreign exchange risks are not expected to have a material
effect on the Company's financial statements.
Equity markets are influenced by many factors and changes in the Company's stock
price may be influenced by factors other than its historical earnings and by
factors not within the Company's control. The volatility of the Company's
common stock prices preceding an option grant is directly related to the
valuation of that grant for purposes of determining pro forma earnings
disclosures. The Company's stock prices following an option grant directly
influence the dilutive effect of these options for earnings per share
calculations. The sensitivity of these issues to a change in the Company's
stock price are not readily determinable, but a change in its stock price by
$1.00 is not believed to have a material effect on the Company's financial
statements or disclosures.
14
<PAGE>
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 2000 Annual Meeting of Shareholders on March 17, 2000. Of
the 28,987,359 shares eligible to vote at the meeting, 19,411,684 were present
either in person or by proxy. Of the shares present, 3,287,029 shares were
claimed to be entitled to five votes per share based on certain holding period
requirements. The following proposals were submitted to shareholders at the
2000 Annual Meeting of Shareholders.
Proposal 1: Election of Three (3) Directors
Each of the directors elected at the 2000 Annual Meeting of Shareholders was for
a term expiring at the 2003 Annual Meeting of Shareholders. Continuing directors
whose terms expire at either the 2001 Annual Meeting of Shareholders or the 2002
Annual Meeting of Shareholders are as follows: W. Lawrence Banks (2001),
Luitpold von Braun (2001), John F. Fort III (2001), Donald G. Calder (2002),
Derrick N. Key (2002) and Christopher Wright (2002).
Proposal 2: Approval of the Roper Industries, Inc. Employee Stock Purchase Plan
Under the terms of the Employee Stock Purchase Plan, eligible employees of the
Company and designated subsidiaries will be granted options to purchase shares
of Roper Industries, Inc. common stock. The Employee Stock Purchase Plan would
reserve 500,000 shares of Roper Industries, Inc. common stock for issuance under
this Plan.
Proposal 3: Approval of the Roper Industries, Inc. 2000 Stock Incentive Plan
The 2000 Stock Incentive Plan is intended to provide the Company with a
successor to its 1991 Stock Option Plan, which is expected to exhaust its
capacity to issue equity-based incentive compensation securities prior to its
expiration in December 2001. The 2000 Stock Incentive Plan would reserve
1,000,000 shares of Roper Industries, Inc. common stock for issuance under this
Plan.
Following are the election results for each of the proposals.
Number of Votes
----------------------------------
For Against Abstain
---------- --------- ---------
Proposal 1
Wilbur J. Prezzano 32,430,513 129,287 0
Georg Graf Schall-Riaucour 32,528,213 31,587 0
Eriberto R. Scocimara 32,487,913 71,887 0
Proposal 2 32,076,344 142,844 340,612
Proposal 3 24,134,459 8,047,619 377,722
15
<PAGE>
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
/(a)/10.01 1991 Stock Option Plan, as amended +
/(e)/10.02 Non-employee Director Stock Option Plan, as amended +
/(f)/10.03 Form of Amended and Restated Indemnification Agreement +
10.04 Employee Stock Purchase Plan +
10.05 2000 Stock Incentive Plan +
27 Financial Data Schedule
_______________________
/(a)/ Incorporated herein by reference to Exhibits 3.1 and 10.02 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 Exhibit 10.04 to the Roper
Industries, Inc. Quarterly Report on Form 10-Q filed August 31,
1999.
+ Management contract or compensatory plan or arrangement.
b. Reports on Form 8-K
None
16
<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 June 12, 2000
--------------------------
Derrick N. Key and President
/s/ Martin S. Headley Vice President and June 12, 2000
--------------------------
Martin S. Headley Chief Financial Officer
/s/ Kevin G. McHugh Controller June 12, 2000
--------------------------
Kevin G. McHugh
17
<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 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. +
10.02 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. +
10.03 Form of Amended and Restated Indemnification Agreement,
incorporated herein by reference to Exhibit 10.04 to the Roper
Industries, Inc. Quarterly Report on Form 10-Q filed August 31,
1999. +
10.04 Employee Stock Purchase Plan. +
10.05 2000 Stock Incentive Plan. +
27 Financial Data Schedule
+ Management contract or compensatory plan or arrangement.
18
