Roper Industries Announces Second Quarter 2003 Results
Record second quarter cash flow; strong sequential improvements; considerable progress made on restructuring activities
Duluth, Georgia, May 28, 2003 ... Roper Industries, Inc. (NYSE: ROP) announced diluted earnings per share (DEPS) from continuing operations for its second fiscal quarter ended April 30, 2003 of $0.47, and net DEPS (including discontinued operations) of $0.45. This is less than prior year DEPS from continuing operations of $0.54, due largely to $8 million lower net sales to Gazprom, the large Russian natural gas company, and restructuring activities costing over $2 million during the quarter.
The Company reported second quarter net sales of $166 million, 10% higher than net sales of $151 million in the second quarter of the previous year. Excluding acquisitions made in 2002, net sales declined 1% (see Table 1 for a list of acquired companies), but increased 5% excluding the Company's net sales to Gazprom (see Table 2 for a reconciliation of net sales).
"We were pleased to see the 20% sequential improvement in our net sales from the first quarter," said Mr. Brian Jellison, President and Chief Executive Officer. "At the same time, our business units continue to make substantial progress improving operations and working capital." Roper's second quarter cash flow from operating activities grew 10% from the prior year's quarter to a record $23 million, including substantial improvements in net working capital performance. The Company announced that it has reduced its net debt-to-capital ratio from 46% at the beginning of the year to 42% at quarter end.
As previously announced this year, the Company launched restructuring activities designed to generate as much as $15 million in annualized cost savings. Mr. Jellison commented, "Our new, strengthened segment leadership has accelerated the pace of our restructuring efforts, and we are now expecting to complete all of the planned activity prior to the end of this fiscal year." The Company reported progress on several key initiatives:
-Largely completed the integration of its Acton Research and Integrated Design business units.
-Made considerable progress on the integration of Qualitek into the Uson business unit, which will be completed in the third quarter.
-Began integrating the production operations of its Redlake business unit into other Company facilities, scheduled to be substantially completed in the third quarter.
-Opened a new production facility in China.
-Announced that the production operations of its Dynamco business unit will be moved into a new operation in Mexico in the third quarter.
"These actions will help to lower manufacturing costs and enhance margins," stated Mr. Jellison. "Overall, we anticipate a rapid payback for our restructuring initiatives, with the benefits becoming particularly evident in 2004."
The Company earlier received indication of Gazprom's intention to release $36 million of total orders in calendar 2003; however, based on recent information, it does not expect to convert the total amount into net sales in the current fiscal year. The Company now expects fiscal 2003 net sales to Gazprom of $25 to $30 million, or $10 million less than previous expectations. Accordingly, the Company now forecasts DEPS from continuing operations to be in the range of $2.00 to $2.11 for the 2003 fiscal year, compared to previous expectations of $2.11 to $2.26. DEPS from continuing operations for the second half of fiscal 2003 is expected to be $1.24 to $1.35, with expected DEPS in the third quarter of $0.50 to $0.55 and exceeding $0.70 in the fourth quarter.
Mr. Jellison commented, "Given the decrease in net sales to Gazprom this year of up to $31 million, generally soft market conditions, and full year restructuring investments of at least $6 million, our cash generation and earnings performance remains strong. We see continued earnings improvement throughout fiscal 2003, and this momentum will carry forward throughout fiscal 2004. With the benefits of our restructuring in front of us and a strong acquisition pipeline, we see substantial opportunities ahead."
The Company announced that its Board of Directors approved a cash dividend of $0.0875 per common share payable on July 31, 2003, to shareholders of record on July 17, 2003.
Results by Segment
Energy Systems & Controls segment second quarter net sales of $38 million were 27% higher than the prior year period, principally as a result of the 2002 acquisition of Zetec and higher net sales for non-Gazprom oil & gas applications, somewhat offset by a 48% reduction in net sales to Gazprom. Net orders of $40 million in the quarter were 23% higher than the prior year quarter. Operating profit improved 4% to $7 million.
Industrial Technology segment net sales were $41 million in the second quarter, or 1% higher than in the year-ago period. Quarterly net orders improved 5% to $42 million. Second quarter operating profit decreased 11% to $9 million primarily as a result of higher European sourcing and production costs due to adverse currency exchange rates and the start-up of a new production facility in China.
Instrumentation segment second quarter net sales increased 2% from the prior year period to $44 million, with the fall-off in net sales at the Company's Logitech business unit more than offset by the 2002 acquisition of Qualitek and favorable currency benefits. Net orders increased 2% with acquisition contributions and currency benefits making up for lower activity in refining, semiconductor and telecom markets. Second quarter 2003 operating profit decreased $3 million compared with the same period last year as a result of $1.9 million of restructuring charges, higher European sourcing and production costs due to currency exchange rate changes, and lower margins from the Qualitek acquisition prior to completing its full integration into Uson.
Scientific & Industrial Imaging segment second quarter net sales of $44 million were 14% higher than in the year-ago quarter due to the strong backlog for electron microscopy applications, initial shipments of the new motion imaging products and the inclusion of results from 2002 acquisitions. Net orders declined 11% as a result of reduced Japanese government spending, reduced economic activity in Asia relating to the outbreak of severe acute respiratory syndrome, declining industrial camera orders, and the uneven timing of large project orders. Second quarter operating profits declined nearly 6% versus the second quarter of 2002, including the impact of restructuring costs. However, segment performance has nearly doubled compared with the first quarter of 2003, with operating profits increasing $5 million.
Source: Roper Technologies, Inc