Record Third Calendar Quarter Results for Roper Industries

27.10.2003

Diluted EPS from continuing operations increase 27%; continued organic sales growth contributes to 8% gain in net sales.

Roper Industries, Inc. announced record results for its third quarter of calendar 2003, ended September 30, 2003. Diluted earnings per share (DEPS) from continuing operations for the third quarter rose 27% to $0.62 from $0.49 in the third quarter of 2002. Net DEPS including discontinued operations were $0.56 in the 2003 third quarter compared with $0.48 in the year-ago quarter, or up 17%. In September, Roper announced that it changed its fiscal year-end to December 31 to more closely align its reporting periods with its customers.

Net sales rose 8% in the third quarter to $172 million from $159 million in the third quarter of 2002. Excluding acquisitions made in 2002 (see Table 1) and net sales to Gazprom, Roper’s net sales in the fiscal 2003 third quarter increased 9% (see Table 2 for a reconciliation of net sales).

“We are pleased to report another quarter of organic growth, excluding Gazprom, a trend which began earlier this year and clearly reflects the positive results delivered by our market-focused structure,” said Brian Jellison, President and Chief Executive Officer. “Over the course of this year, our business segments have made significant strides in implementing initiatives designed to drive improved sales and profitability.” Operating margins expanded substantially with the Company reporting operating margins of 18.9% in the third quarter, or 19.5% before restructuring charges of approximately $1 million, compared with 17.2% in the prior year.

Mr. Jellison continued, “With this strong operational foundation, Roper is positioned to deliver further growth through our existing businesses and the successful execution of our strategic investment program. In this regard, we are excited about our announcement earlier this week that we have entered into a definitive agreement to acquire Neptune Technology Group Holdings Inc., which includes four businesses with excellent growth and cash generation potential.”

Roper reported cash flow from operating activities of $21 million in its third quarter and a net debt-to-net capital ratio of 38.3%, compared to 45.2% at the beginning of the calendar year (see Table 3 for a computation of net debt-to-net capital).

The Company commented that it still expects full year DEPS from continuing operations of $2.00 or more, which is an increase over the prior year, even after $6 to $6.5 million of expected 2003 restructuring costs and despite almost $30 million lower net sales to Gazprom in the current year.

Results by Segment

Energy Systems & Controls segment third quarter net sales of $42 million were 25% higher than sales in the prior year period, principally as a result of the 2002 acquisition of Zetec and higher net sales for oil & gas applications, partially offset by a 51% reduction in net sales to Gazprom. Operating profit increased 50% to over $10 million due to the full quarter contribution in 2003 from Zetec and higher net sales for oil & gas applications. Operating margins increased from 21% to 25%. Net orders of $38 million in the quarter were 2% lower than the prior year quarter due principally to a 31% decline in net orders from Gazprom. Excluding Gazprom, orders increased 17%.

The Industrial Technology segment reported net sales of $43 million in the third quarter, 4% lower than in the year-ago period primarily as a result of the timing of water/wastewater projects. Third quarter net orders improved 8% over the prior year to $40 million. Operating profit of $9 million was lower than the prior year mostly due to restructuring costs and lower net sales in this year’s third quarter. Third quarter operating margins were 22%; excluding restructuring charges, operating margins were 23%.

The Instrumentation segment posted $45 million of net sales, a 1% increase from the prior year period, and reported a 6% increase in operating profit. Benefits from the 2002 acquisition of Qualitek and foreign exchange rate changes more than offset lower sales into semiconductor, telecom and refining markets. Third quarter operating profit increased 57% sequentially from the second quarter due to the completion of restructuring activities.

Scientific & Industrial Imaging segment net sales rose 17% in the third quarter from the prior year to $43 million due to strong shipments for electron microscopy applications, the 2002 acquisition of QImaging and increased motion imaging sales. Net orders increased 4% in the third quarter. Operating profits increased 78% versus the prior year to over $8 million. Operating profit margins increased from 12% to 19% on higher net sales; excluding restructuring costs, operating profit margins increased to 20%.

Acquisitions

  • Qualitek, Instrumentation Segment, July 2002
  • Zetec, Energy Systems & Controls Segment, August 2002
  • QImaging, Scientific & Industrial Imaging Segment, August 2002
  • Duncan Technologies, Scientific & Industrial Imaging Segment, August 2002
  • Definitive Imaging, Scientific & Industrial Imaging Segment, September 2002

Reconciliation of Net Sales (Millions)

Q3 2003Q3 2002
Net sales excluding 2002 acquisitions and excluding net sales to Gazprom$147$135+9%
Add: Net sales from 2002 acquisitions189
Add: Net sales to Gazprom715-51%
Equals: Net sales as reported $172$159+8%

Computation of Net Debt-to-Net Capital (Millions)

September 30, 2003 December 31, 2002
Total debt$288$329
Less: Cash(14)(15)
Equals: Net debt 274314
Add: Shareholders’ equity 442381
Equals: Net capital $716 $695
Net debt divided by Net capital38.3% 45.2%

About Roper Industries

Roper Industries is a diversified industrial growth company providing engineered products and solutions for global niche markets. Additional information about Roper Industries, including a glossary for terms used by the Company and registration for Company’s press releases via email, is available on the Company’s website, www.roperind.com.

The information provided in this press release contains forward looking statements within the meaning of the federal securities laws. These forward looking statements include, among others, statements regarding our proposed acquisition of Neptune Technology Group Holdings Inc. (the acquisition), the terms of our financing plan, and the impact of our acquisition of the acquisition on our future results of operations and cash flows. These statements reflect management’s current beliefs and are not guarantees of performance.

They involve risks and uncertainties, which could cause actual results to differ materially from those contained in any forward looking statement. Such risks and uncertainties include our ability to complete the acquisition, secure financing on favorable terms, integrate the acquisition and realize expected synergies.

We also face other general risks, including reductions in our business with Gazprom, our ability to realize cost savings from our restructuring initiatives, unfavorable changes in foreign exchange rates, difficulties associated with exports, risks associated with our international operations, difficulties in making and integrating acquisitions, increased product liability and insurance costs, increased warranty exposure, future competition, changes in the supply of, or price for, parts and components, environmental compliance costs and liabilities, risks and cost associated with asbestos related litigation and potential write-offs of our substantial intangible assets.

Other important risk factors are discussed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2002, and may be discussed in subsequent filings with the SEC. You should not place undue reliance on any forward looking statements. These statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

We refer to certain non-GAAP financial measures in this presentation. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found within this press release.

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