<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, 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
September 11, 2000 was 30,549,163.
<PAGE>
ROPER INDUSTRIES, INC.
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JULY 31, 2000
TABLE OF CONTENTS
Page
----
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 and Comprehensive Earnings 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
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,
----------------- ------------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
-------- -------- -------- --------
Net sales $124,583 $104,095 $356,811 $293,625
Cost of sales 60,609 49,837 170,609 142,836
-------- -------- -------- --------
Gross profit 63,974 54,258 186,202 150,789
Selling, general and administrative expenses 43,205 33,074 124,717 95,966
-------- -------- -------- --------
Operating profit 20,769 21,184 61,485 54,823
Interest expense 3,769 1,790 9,165 5,386
Other income 127 212 663 473
-------- -------- -------- --------
Earnings before income taxes 17,127 19,606 52,983 49,910
Income taxes 6,025 6,810 18,575 17,235
-------- -------- -------- --------
Net earnings $ 11,102 $ 12,796 $ 34,408 $ 32,675
======== ======== ======== ========
Net earnings per common and common
equivalent share:
Basic $ 0.36 $ 0.42 $ 1.13 $ 1.08
Diluted 0.36 0.41 1.10 1.06
Weighted average common and common
equivalent shares outstanding:
Basic 30,502 30,239 30,422 30,261
Diluted 31,188 31,132 31,185 30,897
Dividends declared per common share $ 0.07 $ 0.065 $ 0.21 $ 0.195
</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,
2000 1999
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 7,241 $ 13,490
Accounts receivable, net 103,391 89,154
Inventories 79,508 56,401
Other current assets 4,520 2,774
-------- --------
Total current assets 194,660 161,819
Property, plant and equipment, net 44,057 34,797
Intangible assets, net 284,805 215,020
Other assets 11,025 8,527
-------- --------
Total assets $534,547 $420,163
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable $ 24,204 $ 18,457
Accrued liabilities 40,794 31,444
Income taxes payable 772 1,485
Current portion of long-term debt 5,757 20,857
-------- --------
Total current liabilities 71,527 72,243
Long-term debt 194,159 109,659
Other liabilities 8,291 6,293
-------- --------
Total liabilities 273,977 188,195
-------- --------
Common stock 318 316
Additional paid-in capital 74,125 71,084
Retained earnings 215,924 187,911
Accumulated other comprehensive earnings (4,768) (2,172)
Treasury stock (25,029) (25,171)
-------- --------
Total stockholders' equity 260,570 231,968
-------- --------
Total liabilities and stockholders' equity $534,547 $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>
Nine months ended
July 31,
--------------------
2000 1999
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 34,408 $ 32,675
Depreciation 6,336 4,801
Amortization 9,574 7,060
Other, net (6,392) (2,607)
--------- --------
Net cash provided by operating activities 43,926 41,929
--------- --------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (103,690) (38,453)
Capital expenditures (10,856) (3,755)
Other, net (1,219) (116)
--------- --------
Net cash used in investing activities (115,765) (42,324)
--------- --------
Cash flows from financing activities:
Debt borrowings 76,521 35,898
Debt payments (7,027) (32,134)
Dividends (6,395) (5,902)
Treasury stock purchases - (5,550)
Other, net 3,185 2,575
--------- --------
Net cash provided by (used in) financing activities 66,284 (5,113)
--------- --------
Effect of foreign currency exchange rate changes on cash (694) (340)
--------- --------
Net decrease in cash and cash equivalents (6,249) (5,848)
Cash and cash equivalents, beginning of period 13,490 9,350
--------- --------
Cash and cash equivalents, end of period $ 7,241 $ 3,502
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders' Equity and
Comprehensive Earnings (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 - - 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
==== ======= ======== ======= ======== ======== =======
Balances at October 31, 1999 $316 $71,084 $187,911 $(2,172) $(25,171) $231,968 $
Net earnings - - 34,408 - - 34,408 34,408
Proceeds from stock ownership plans 2 3,041 - - 142 3,185 -
Other comprehensive earnings:
Currency translation adjustments - - - (2,596) - (2,596) (2,596)
Dividends declared - - (6,395) - - (6,395) -
---- ------- -------- ------- -------- -------- -------
Balances at July 31, 2000 $318 $74,125 $215,924 $(4,768) $(25,029) $260,570 $31,812
==== ======= ======== ======= ======== ======== =======
</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, 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 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.
<TABLE>
<CAPTION>
3. Supplemental Cash Flow Information
Nine months ended
July 31,
----------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Cash paid during the period for (in 000s):
Interest $ 7,019 $ 5,531
Income taxes $ 20,143 $16,544
Acquisitions of businesses:
Fair value of assets, including goodwill $117,917 $47,166
Liabilities assumed (14,227) (8,713)
---------- ---------
Total acquisition costs, net of cash acquired $103,690 $38,453
========== =========
</TABLE>
4. 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.
7
<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 AHC, Inc. ("Abel"). Abel, whose principal
manufacturing 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 is reported as part
of the Company's Fluid Handling segment.
In June 2000, the Company acquired certain assets in the U.K. from Oxford
Instruments PLC related to a product line that has been combined with the
Company's Gatan unit. Gatan is reported as a part of the Company's Analytical
Instrumentation segment.
In June 2000, the Company acquired certain assets in Europe and the Middle East
from a unit of Honeywell International, Inc. ("Honeywell") in conjunction with
the Company's repurchase of the right to distribute and service its Compressor
Controls unit's products in this territory. This agreement also includes
certain noncompete provisions of Honeywell. Compressor Controls is reported as
part of the Company's Industrial Controls segment.
In August 2000, the Company acquired Antek Instruments, Inc. and its affiliates
("Antek") which manufacture equipment that tests for, among other things,
nitrogen and sulfur content in various compounds. Antek's primary facilities are
located in Houston and near Austin, Texas. Antek will be reported as part of the
Company's Analytical Instrumentation segment.
In September 2000, the Company acquired Hansen Technologies Corporation
("Hansen") which manufactures or distributes shut-off and control valves, auto-
purgers and hermetic pumps to the commercial refrigeration industry. Hansen,
whose primary facility is located near Chicago, Illinois, will be reported as
part of the Company's Industrial Controls segment.
The combined purchase price for all of the above fiscal 2000 acquisitions was
approximately $164 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. Initial purchase price allocations
for the above acquisitions were preliminary and are subject to adjustment.
However, the Company believes that any such adjustments would not be material
for any of the above acquisitions.
5. Fair Value of Financial Instruments
At July 31, 2000, the estimated fair value of the Company's $125 million of
fixed-rate term notes was approximately $119.6 million. The unrecognized gain
of $5.4 million is not reflected in the Company's financial statements.
At July 31, 2000, the Company was party to an interest rate swap agreement for a
notional amount of $25 million that expires on May 1, 2003. Under this
agreement, the Company receives a fixed rate of 7.68% and the Company pays 3-
month LIBOR (6.89375% at July 31, 2000) plus 0.38%. Since the rate received by
the Company is greater than the current rate payable by the Company, this
agreement represents an unrecorded asset to the Company with an estimated value
at July 31, 2000 of approximately $312,000.
8
<PAGE>
6. Inventories
Inventories are summarized below (in thousands):
July 31, October 31,
2000 1999
-------- -----------
Raw materials and supplies $43,177 $27,811
Work in process 14,405 14,556
Finished products 23,616 15,724
LIFO reserve (1,690) (1,690)
------- -------
$79,508 $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 Nine months ended
July 31, July 31,
-------------------------- --------------------------
2000 1999 Change 2000 1999 Change
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Analytical Instrumentation $ 51,339 $ 41,117 +24.9% $159,059 $101,632 +56.5%
Fluid Handling 34,163 25,976 +31.5 86,801 72,576 +19.6
Industrial Controls 39,081 37,002 +5.6 110,951 119,417 -7.1
-------- -------- ----- -------- -------- -----
Total $124,583 $104,095 +19.7% $356,811 $293,625 +21.5%
======== ======== ===== ======== ======== =====
Gross profit:
Analytical Instrumentation $ 27,522 $ 23,010 +19.6% $ 88,026 57,253 +53.7%
Fluid Handling 16,510 12,892 +28.1 42,203 34,743 +21.5
Industrial Controls 19,942 18,356 +8.6 55,973 58,793 -4.8
-------- -------- ----- -------- -------- -----
Total $ 63,974 $ 54,258 +17.9% $186,202 $150,789 +23.5%
======== ======== ===== ======== ======== =====
Operating profit*:
Analytical Instrumentation $ 6,255 $ 8,693 -18.0% $ 25,810 $ 18,113 +42.5%
Fluid Handling 7,692 7,546 +1.9 21,281 19,636 +8.4
Industrial Controls 7,828 6,931 +12.9 18,993 22,145 -14.2
-------- -------- ----- -------- -------- -----
Total $ 21,775 $ 23,170 -6.0% $ 66,084 $ 59,894 +10.3%
======== ======== ===== ======== ======== =====
</TABLE>
* Operating profit is before unallocated corporate general and administrative
expenses. Unallocated corporate general and administrative expenses were
$1,006 and $1,986 for the three months ended July 31, 2000 and 1999,
respectively. These expenses were $4,599 and $5,071 for the nine months ended
July 31, 2000 and 1999, respectively.
8. 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
9
<PAGE>
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 a percentage of the stock of
certain of its non-U.S. subsidiaries.
10
<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 Nine months ended
July 31, July 31,
------------------- ---------------------
2000 1999 2000 1999
------ ------- ------- --------
<S> <C> <C> <C> <C>
Gross profit:
Analytical Instrumentation 53.6% 56.0% 55.3% 56.3%
Fluid Handling 48.3 49.6 48.6 47.9
Industrial Controls 51.0 49.6 50.4 49.2
---- ---- ----- -----
51.4% 52.1% 52.2% 51.4%
==== ==== ===== =====
Operating profit:
Analytical Instrumentation 12.2% 21.1% 16.2% 17.8%
Fluid Handling 22.5 29.0 24.5 27.1
Industrial Controls 20.0 18.7 17.1 18.5
Unallocated corporate expenses (0.8) (1.9) (1.3) (1.7)
---- ---- ----- -----
16.6 20.3 17.2 18.7
Interest expense (3.0) (1.7) (2.6) (1.8)
Other income 0.1 0.2 0.2 0.1
---- ---- ----- -----
Earnings before income taxes 13.7 18.8 14.8 17.0
Income taxes 4.8 6.5 5.2 5.9
---- ---- ----- -----
Net earnings 8.9% 12.3% 9.6% 11.1%
==== ==== ===== =====
</TABLE>
Three months ended July 31, 2000 compared to 1999
Net sales increased $20.5 million, or 20%, during the three months ended July
31, 2000 compared to the three months ended July 31, 1999. Most of this increase
resulted from the contributions of companies acquired since April 30, 1999. The
largest of these acquisitions were 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), Cybor Corporation (February 2000) and Abel (May 2000). On
a pro forma basis as if the acquired 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 2%. Flowdata, Cybor and Abel are reported as part of the
Company's Fluid Handling segment. All of the other named acquisitions are
reported as part of the Company's Analytical Instrumentation segment.
Analytical Instrumentation reported sales were up 25% due to the incremental
sales of recently acquired businesses more than offsetting weaker operating
results in fiscal 2000. On a pro forma basis, each of the Analytical
Instrumentation's primary product groupings (digital imaging, petroleum testing
and leak testing) experienced a sales decline of about 10%. Fluid Handling
sales (up 32% actual and up 4% pro forma) reflected the acquisitions mentioned
above and continued strength in the segment's semiconductor equipment businesses
(pro forma sales, including Cybor, were up 72%). These were partially offset by
a
11
<PAGE>
27% decline in centrifugal pump sales from weak municipal wastewater markets
and a 12% decline in the segment's medical diagnostics pump business due to a
continuing FDA compliance problem at a major customer that was unrelated to the
Company's products. Industrial Controls sales were up 6% and pro forma sales
were up 4%. This is the first quarter of fiscal 2000 this segment has
experienced higher sales compared to fiscal 1999. This comparison for the
segment's turbomachinery controls business benefited from an especially weak
third quarter of fiscal 1999 and an 18% increase in sales to Gazprom (a large
Russian energy company) during the third quarter of fiscal 2000.
Gross profit percentages decreased in the Analytical Instrumentation segment
primarily due to the incremental business from MASD in fiscal 2000 which was at
lower margins than the segment's other businesses. Gross profit percentages
decreased in the Fluid Handling segment due to continued low volumes in its
centrifugal pump business combined with the higher costs associated with this
business moving into a larger facility earlier in fiscal 2000. Gross profit
percentages increased in the Industrial Controls segment primarily from the
higher volume of higher-margin business in its turbomachinery controls business
in the third quarter of fiscal 2000.
Selling, general and administrative ("SG&A") expenses increased $10.1 million,
or 31%, during the three months ended July 31, 2000 compared to the three months
ended July 31, 1999. SG&A expenses as a percentage of sales is presented in the
following table for the three months ended July 31, 2000 and July 31, 1999:
<TABLE>
2000 1999
---- ----
<S> <C> <C>
Analytical Instrumentation 41% 35%
Fluid Handling 26% 21%
Industrial Controls 31% 31%
Total 35% 32%
</TABLE>
Increased costs relative to sales at Analytical Instrumentation were due to
adverse leverage of reduced sales, mostly with the digital imaging businesses,
and higher levels of costs in the recently acquired high resolution digital
imaging businesses. Increased costs relative to sales at Fluid Handling were
due to higher costs at recent acquisitions (primarily Abel and Flowdata) that
are expected to improve in the future and a revised warranty estimate for an
isolated prior year event at another of this segment's businesses. The overall
increase for the Company also reflected the increased size of the Analytical
Instrumentation segment, whose SG&A costs are typically higher than that of the
Company's other business segments.
Interest expense increased $2.0 million, or 111%, for the three months ended
July 31, 2000 compared to the three months ended July 31, 1999 due primarily to
higher debt levels in fiscal 2000. During the 12 months ended July 31,2000, the
Company incurred over $100 million of additional borrowings to fund its
acquisitions.
Income taxes were 35.2% of pretax earnings for the three months ended July 31,
2000 compared to 34.7% during the three months ended July 31, 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 July 31, 2000 and 1999 was mostly related to the Company's
subsidiaries in Europe and Japan.
12
<PAGE>
The following table summarizes net sales orders received ("bookings") and
backlog information (dollars in thousands):
<TABLE>
<CAPTION>
Bookings Backlog
--------------------------- ----------------------------
Three months ended
July 31, July 31,
--------------------------- ----------------------------
2000 1999 Change 2000 1999 Change
-------- ------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Analytical Instrumentation $ 62,636 $37,728 +66.0% $ 50,859 $35,823 +42.0%
Fluid Handling 36,281 23,063 +57.3 26,148 16,223 +61.2
Industrial Controls 39,756 32,137 +23.7 30,972 38,340 -19.2
-------- ------- ----- -------- ------- ------
$138,673 $92,928 +49.2% $107,979 $90,386 +19.5%
======== ======= ===== ======== ======= ======
</TABLE>
The growth in Analytical Instrumentation bookings during the three months ended
July 31, 2000 compared to the three months ended July 31, 1999 was significantly
affected by recent acquisitions. On a pro forma basis, this segment's bookings
increased 12%. The pro forma increase was mostly due to strength in this
segment's digital imaging and petroleum testing businesses. Fluid Handling
bookings increased 22% on a pro forma basis. This segment's increase was
primarily caused by its semiconductor-related business more than doubling and
its progressive cavity pump business being up over 30% due to improved oil & gas
markets. Industrial Controls bookings increased 22% on a pro forma basis. This
segment's increase was primarily caused by the third quarter of fiscal 1999
being an exceptionally poor bookings period that resulted from this segment's
engineering services business' very large order in the second quarter of fiscal
1999. This large order reduced capacity for additional work in the third
quarter.
Backlog at July 31, 2000 was 2% higher than pro forma backlog at July 31, 1999.
On a pro forma basis, Analytical Instrumentation backlog was up 10%, Fluid
Handling was up 23% and Industrial Controls was down 19%.
Nine months ended July 31, 2000 compared to 1999
Net sales increased $63.2 million, or 22%, during the nine months ended July 31,
2000 compared to the nine months ended July 31, 1999. Most of this increase
resulted from the contributions of companies acquired during fiscal 2000 and
fiscal 1999. The largest of these acquisitions were discussed previously. On a
pro forma basis as if the acquired businesses had been included in the Company's
results for the same length of time in fiscal 1999 as in fiscal 2000, net sales
were down 2%.
Analytical Instrumentation reported sales were up 57% due to the incremental
sales of recently acquired businesses more than offsetting weaker operating
results in fiscal 2000. On a pro forma basis, this segment's sales were down
2%. Most of this decline was in petroleum testing equipment. Fluid Handling
sales (up 20% actual and up 6% pro forma) reflected the acquisitions mentioned
above and continued strength in the segment's semiconductor equipment businesses
(pro forma sales, including Cybor, were up 104%) and an improved progressive
cavity pump business (sales up 11%), Partially offsetting these gains were a
22% decline in the segment's centrifugal pump business and a 17% decline in its
medical diagnostics business due to factors consistent with those discussed
previously for the three month periods. Industrial Controls sales were down 7%
(actual and pro forma). Although this comparison is negative, the third quarter
was the first quarter of fiscal 2000 this segment experienced higher sales
compared to fiscal 1999.
All of the gross profit percentage fluctuations between fiscal 2000 and fiscal
1999 were considered to be relatively small. The gross profit percentage
decreased in the Analytical Instrumentation segment primarily due to the
incremental business from MASD in fiscal 2000 which was at lower margins than
the segment's other businesses. The gross profit percentage increased in the
Fluid Handling segment due primarily to higher volume high-margin sales
13
<PAGE>
related to its semiconductor business. The gross profit percentage increased in
the Industrial Controls segment primarily from decreased revenues related to
lower-margin engineering services business.
SG&A expenses increased $28.8 million, or 30%, during the nine months ended July
31, 2000 compared to the nine months ended July 31, 1999. SG&A expenses as a
percentage of sales is presented in the following table for the nine months
ended July 31, 2000 and July 31, 1999:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Analytical Instrumentation 39% 39%
Fluid Handling 24% 21%
Industrial Controls 33% 31%
Total 35% 33%
</TABLE>
Fluid Handling costs increased as a percentage of sales primarily due to
relatively high cost structures during integration at recent acquisitions (that
is expected to improve in the future) and adverse leverage related to the
segment's centrifugal pump business. Industrial Controls costs increased
relative to sales primarily due to adverse leverage from reduced sales at the
segment's engineered services business that has been adversely affected by
energy market conditions.
Interest expense increased $3.8 million, or 70%, for the nine months ended July
31, 2000 compared to the nine months ended July 31, 1999 due primarily to higher
debt levels in fiscal 2000. During the 12 months ended July 31,2000, the
Company incurred over $100 million of additional borrowings to fund its
acquisitions.
Income taxes were 35.1% of pretax earnings for the nine months ended July 31,
2000 compared to 34.5% during the nine months ended July 31, 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
nine months ended July 31, 2000 and 1999 was mostly related to the Company's
subsidiaries in Europe and Japan.
The following table summarizes bookings for the nine months ended July 31, 2000
and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
2000 1999 Change
-------- -------- ------
<S> <C> <C> <C>
Analytical Instrumentation $172,250 $104,839 +64.3%
Fluid Handling 93,965 76,418 +23.0
Industrial Controls 113,650 119,114 -4.6
-------- -------- -----
$379,865 $300,371 +26.5%
======== ======== =====
</TABLE>
Fiscal 2000 bookings compared to pro forma fiscal 1999 bookings were up 2% for
the Company. Analytical Instrumentation bookings were up 3% compared to pro
forma prior year, Fluid Handling bookings were up 10% and Industrial Controls
bookings were down 5%. Analytical Instrumentation businesses generally had
increased bookings (4-6%) compared to prior year pro forma bookings except for
its petroleum testing business (down 3%). Fluid Handling bookings increasing
compared to prior year pro forma bookings reflected its strong semiconductor
business (up 114%) and improved progressive cavity pump business (up 18%) that
more than offset declines in its other large industrial pump businesses (down
28%). Industrial Controls reported decreased bookings compared to prior year
pro forma bookings that reflected weakness in its engineering services business
(down 23% due to soft
14
<PAGE>
energy industry conditions) that more than offset improved conditions in its
valve, controls and sensors businesses (up 10%).
Financial Condition, Liquidity and Capital Resources
Working capital increased to $123.2 million at July 31, 2000 compared to $89.6
million at October 31,1999. This increase arose principally from approximately
$20 million of working capital that was acquired through business acquisitions
during the first nine months of fiscal 2000 and approximately $16 million of
short-term borrowings outstanding at October 31, 1999 under the German Credit
Facility which was refinanced into long-term borrowings pursuant to the May 2000
credit agreements.
Total debt was $199.9 million (43% of total capital) at July 31, 2000 compared
to total debt of $130.5 million (36% of total capital) at October 31, 1999.
Increased debt levels and financial leverage at July 31, 2000 compared to
October 31, 1999 resulted from the Company's acquisitions completed during the
nine months ended July 31, 2000. All of these acquisitions were paid for with
cash. Absent additional acquisitions, the Company expects cash flows during the
fourth quarter of fiscal 2000 to enable debt levels to be reduced. The Company
also has sufficient available capacity under its $275 million multi-currency
revolving credit agreement to satisfy any reasonable short-term operating cash
flow needs.
Subsequent to July 31, 2000, the Company acquired Antek Instruments, Inc. and
affiliates ("Antek") and Hansen Technologies Corporation ("Hansen") for a net
purchase price of approximately $60 million in cash. Financing was provided by
the Company's existing credit facilities. These acquisitions further increased
the Company's financial leverage. Had these acquisitions occurred at July 31,
2000, total debt would have been 50% of total capital.
The Company experienced record acquisition activity thus far in fiscal 2000 and
it expects to continue an active acquisition program. Future acquisitions may
be dependent upon available capacity under its current credit agreements. Any
future acquisitions will be dependent upon satisfactory resolution of numerous
contingencies, that may include completion of due diligence procedures,
negotiation of a purchase agreement, obtaining regulatory approvals or obtaining
shareholder approval. The completion of any future acquisitions is not assured.
There can also be no assurance what the financial impact of future acquisitions
will be on the Company.
The Company also previously announced that it has negotiated an extension to its
long-term supply agreement with RAO Gazprom, the Russian natural gas utility.
Gazprom has agreed to extend the preceding agreement with the Company's
Compressor Controls unit under which it has supplied Gazprom with turbomachinery
controls equipment for the past five years. The addendum to the agreement calls
for an additional $150 million of purchases over and above the original
agreement and extends the term through December 2007.
Recently Issued Accounting Standards
The Financial Accounting Standards Board has issued several pronouncements, the
most recent being Statement of Financial Accounting Standards No. 139 in June
2000, whose effective dates are not yet applicable to the Company. None of the
standards yet to be adopted by the Company are expected to have a material
impact on the Company's financial results or 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, achieving the anticipated integration and operating results of
recent acquisitions, uncertainty as to the timing and amounts of funding
15
<PAGE>
provided by foreign governmental bodies for research projects, compliance with
unanticipated customer requests to accelerate or delay shipment of major
projects, uncertainty about the continuation as anticipated of the level and the
timing of future business with Gazprom and other customers in international
economies with limited hard currency availability, unexpected volatility in the
cyclicality of the various end-user markets served by the Company, and interest
and foreign currency exchange rate fluctuations greater than anticipated. 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.
16
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to interest rate risks on its outstanding borrowings. It
is exposed to foreign currency risks pertaining to its transactions denominated
in currencies other than the U.S. dollar. It is also exposed to equity market
risks pertaining to the trading of its common stock.
The Company's interest expense related to its variable-rate borrowings will be
directly affected by changes in interest rates. Except for the $125 million of
term notes outstanding at July 31, 2000, most of the other outstanding debt was
variable-rate debt. Therefore, an increase or decrease in interest rates of 10
basis points would increase or decrease the Company's annual interest expense by
approximately $75,000. Changes in interest rates affect the fair market value
of the Company's fixed-rate debt. At July 31, 2000 interest rates were higher
than when the fixed-rate debt was issued in May 2000. Therefore, the fair
market value of this debt was estimated to be $5.4 million less than the book
value reported at July 31, 2000. An increase or decrease in interest rates of
10 basis points would decrease or increase the fair market value of the term
notes by about $740,000. The Company also is party to an interest rate swap
agreement whereby the Company receives a fixed interest rate and pays a variable
interest rate on the notional amount of $25 million. On July 31, 2000, the
fixed rate receivable by the Company was greater than the variable rate payable
by the Company and the Company has estimated that the spread represented
approximately $312,000 of value to the Company. An increase in the variable
rate payable by the Company of 10 basis points would reduce the fair value by
approximately $77,000.
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 July 31, 2000
and for the nine 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 the Company's consolidated net assets and sales were
denominated in these currencies. The Company 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 stock price also affects the exercise price for the Company's
employee stock purchase plan and some compensation plans. 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.
17
<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
3.2 Amended and Restated By-Laws
(b)4.01 Rights Agreement between Roper Industries, Inc. and SunTrust
Bank, Atlanta, Inc. as Rights Agent, dated as of January 8, 1996,
including Certificate of Designation, Preferences and Rights of
Series A Preferred Stock (Exhibit A), Form of Rights Certificate
(Exhibit B) and Summary of Rights (Exhibit C)
4.02 Credit Agreement Dated as of May 18, 2000
4.03 Note Purchase Agreement Dated as of May 18, 2000
(a)10.01 1991 Stock Option Plan, as amended +
(c)10.02 Non-employee Director Stock Option Plan, as amended +
(d)10.03 Form of Amended and Restated Indemnification Agreement +
(e)10.04 Employee Stock Purchase Plan +
(e)10.05 2000 Stock Incentive Plan +
10.06 Roper Industries, Inc. Non-Qualified Retirement Plan +
27 Financial Data Schedule
b. Reports on Form 8-K
None.
_________________________
(a) Incorporated herein by reference to Exhibits 3.1 and 10.2 to the Roper
Industries, Inc. Annual Report on Form 10-K filed January 21, 1998.
(b) Incorporated herein by reference to Exhibit 4.02 to the Roper Industries,
Inc. Current Report on Form 8-K filed January 18, 1996.
(c) Incorporated herein by reference to Exhibit 10.03 to the Roper
Industries, Inc. Annual Report on Form 10-K filed January 20, 1999.
(d) Incorporated herein by reference to Exhibit 10.04 to the Roper
Industries, Inc. Quarterly Report on Form 10-Q filed August 31, 1999.
(e) Incorporated herein by reference to Exhibits 10.04 and 10.05 to the Roper
Industries, Inc. Quarterly Report on Form 10-Q filed June 12, 2000.
+ Management contract or compensatory plan or arrangement.
18
<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 September 13, 2000
----------------------- President
Derrick N. Key
/s/ Martin S. Headley Vice President and September 13, 2000
----------------------- Chief Financial Officer
Martin S. Headley
/s/ Kevin G. McHugh Controller September 13, 2000
-----------------------
Kevin G. McHugh
19
<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.
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(a) Credit Agreement Dated as of May 18, 2000.
4.03(b) Note Purchase Agreement Dated May 18, 2000.
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, incorporated herein by reference to
Exhibit 10.04 to the Roper Industries, Inc. Quarterly Report on Form
10-Q filed June 12, 2000. +
10.05 2000 Stock Incentive Plan, incorporated herein by reference
to Exhibit 10.05 to the Roper Industries, Inc. Quarterly Report on
Form 10-Q filed June 12, 2000. +
10.06 Roper Industries, Inc. Non-Qualified Retirement Plan. +
27 Financial Data Schedule
+ Management contract or compensatory plan or arrangement.
20
<PAGE>
(a) The following exhibits and schedules to this agreement have been
omitted and will be furnished supplementally upon request.
Exhibits
--------
EXHIBIT A Revolving Loan Commitments (Definitions)
EXHIBIT A-1 Eurocurrency Payment Offices (Definitions)
EXHIBIT B Form of Borrowing/Election Notice (Section 2.2 and
Section 2.7 and Section 2.9)
EXHIBIT C Form of Request for Letter of Credit (Section 3.4)
EXHIBIT D Form of Assignment Agreement (Definitions and Section
13.3)
EXHIBIT E Form of Borrowers' US Counsel's Opinion and Form of
Borrowers' Foreign Counsel's Opinion (Section 5.1)
EXHIBIT F List of Closing Documents (Section 5.1)
EXHIBIT G Form of Officer's Certificate (Sections 5.2 and 7.1(A)
(iii))
EXHIBIT H Form of Compliance Certificate (Sections 5.2 and 7.1(A)
(iii))
EXHIBIT I-1 Form of Parent Guaranty (Definitions)
EXHIBIT I-2 Form of Subsidiary Guaranty (Definitions)
EXHIBIT J Form of Alternate Currency Addendum (Definitions)
EXHIBIT K Form of Revolving Loan Note (If Requested)
EXHIBIT L Form of Pledge Agreement (Definitions)
EXHIBIT M Form of Assumption Letter (Definitions)
EXHIBIT N Form of Sharing Agreement (Definitions)
Schedules
---------
Schedule 1.1.1 Permitted Existing Indebtedness (Definitions)
Schedule 1.1.2 Permitted Existing Investments (Definitions)
Schedule 1.1.3 Permitted Existing Liens (Definitions)
Schedule 1.1.4 Permitted Existing Contingent Obligations
(Definitions)
Schedule 6.3 Conflicts; Governmental Consents (Section 6.3)
Schedule 6.8 Subsidiaries (Schedule 6.8)
Schedule 6.9 ERISA (Section 6.9)
Schedule 6.17 Environmental Matters (Section 6.17)
(b) The following exhibits and schedules to this agreement have been
omitted and will be furnished supplementally upon request.
Exhibits
--------
EXHIBIT 1A Form of 7.58% Senior Guaranteed Secured Note,
Series A, due May 18, 2007
EXHIBIT 1B Form of 7.68% Senior Guaranteed Secured Note,
Series B, due May 18, 2010
EXHIBIT 4.4(a) Form of Opinion of Special Counsel to the Company
EXHIBIT 4.4(b) Form of Opinion of Special Counsel to the Purchasers
Schedules
---------
SCHEDULE A Information Relating To Purchasers
SCHEDULE B Defined Terms
SCHEDULE 5.4 Subsidiaries of the Company and Ownership of
Subsidiary Stock
SCHEDULE 5.5 Financial Statements
SCHEDULE 5.15 Existing Indebtedness
21
