SARASOTA, Fla., Oct. 23 /PRNewswire-FirstCall/ -- Roper Industries, Inc. reported results for its third quarter ended September 30, 2008.
Reported net earnings were $75 million, up from $65 million in the prior year. Results for the quarter include a previously disclosed $2 million non-cash, after-tax charge for the early termination of the Company's secured credit facility, which was replaced in July with a new senior unsecured credit facility. Excluding this charge, reported net earnings were $77 million and diluted earnings per share (DEPS) were $0.82, consistent with the Company's guidance and up from $0.70 in the prior year. Reported DEPS including the charge were $0.80.
Net sales in the quarter were $593 million, an increase of 11% compared to the 2007 third quarter. Backlog increased 16% from the prior year to $617 million, reflecting the benefit from acquisitions and continued internal growth. Net orders increased 9% to $581 million. Operating margin expanded 100 basis points to 22.3% in the quarter. Operating cash flow in the third quarter increased to $138 million, representing 184% of net earnings. Year to date operating cash flow increased 35% to $306 million.
"We are very pleased by Roper's operating performance and strategic accomplishments in the third quarter," said Brian Jellison, Roper's Chairman, President and CEO. "For the third consecutive quarter, we have increased revenue by 10%, excluding the impact of foreign exchange. Despite difficult prior year comparables and interruptions from Hurricane Ike to our Houston based Energy segment businesses we were able to generate 4% organic growth in these difficult markets. We expect this combination of organic growth and sales generated by this year's acquisitions will continue to provide revenue growth in the fourth quarter. During the quarter our businesses generated record cash flow and margins continued to expand, reflecting our disciplined cost management. Although we remain focused on the macroeconomic challenges and expected weakness in the global economy, we remain optimistic that we can continue to balance growth through our organic initiatives and proven acquisition process."
Acquisitions
During the quarter, Roper acquired Technolog, the leading UK provider of specialty electronic products and services for the water, gas and electricity markets, further expanding the reach of its RF segment in the global utilities market. The Company also acquired Horizon Software International, the leading provider of comprehensive software solutions for meal planning and cashless transactions for the K-12 education market, adding to its growing CBORD business acquired in February, 2008.
Balance Sheet Strengthened
"As a result of the strength of our businesses and consistent cash flow generation, we were able to strategically restructure our debt during the quarter. We negotiated an unsecured credit facility, were upgraded to investment grade and successfully completed a public debt offering," continued Mr. Jellison.
On August 4, 2008, Roper completed the public offering of $500 million of 6.625% Notes due 2013. The net proceeds from the offering were used to repay a portion of the $750 million revolving credit line established July 7, 2008, under Roper's new senior unsecured credit facility.
"Roper's ability to complete this offering in one of the most difficult credit markets we have seen reflects the considerable strength of our businesses and our balance sheet. We are very pleased to have achieved an investment grade rating and have ample financial resources to continue executing our business model despite the highly volatile environment," Mr. Jellison said. The Company ended the third quarter with $156 million cash on hand and over $435 million of undrawn capacity in its revolving credit facility.
Debt Extinguishment Charge
As previously announced, third quarter results include a $2 million non-cash after-tax charge for early termination of the Company's amended and restated secured credit facility, dated December 13, 2004, reflecting this facility's remaining unamortized fees.
Guidance
Roper is increasing full year operating cash flow guidance from $390 million to $410 million. In light of a higher interest rate environment and a more uncertain global economy, the Company is establishing fourth quarter DEPS guidance of $0.83 - $0.86. The Company expects full year DEPS of $3.13 - $3.16 (previously $3.16 - $3.22). The Company's guidance excludes future acquisitions and the debt extinguishment charges in the third quarter, while including the dilutive effect of the senior subordinated convertibles notes based on the stock price through October 17, 2008. Including the debt extinguishment charges described above, the Company expects full year DEPS of $3.11 - $3.14, with no effect on full year cash flow or fourth quarter DEPS guidance.
Conference call to be held at 10:00 (ET) Tomorrow
A conference call to discuss these results has been scheduled for 10:00 AM ET on Friday, October 24, 2008. The call can be accessed via webcast or by dialing +1 (800) 239-9838 or +1 (913) 312-1264, using confirmation code 2049770. Webcast information and conference call materials will be made available in the "Investor" section of Roper's website (http://www.roperind.com/) prior to the start of the call. Telephonic replays will be available for up to two weeks by calling +1 (719) 457-0820 and using access code 2049770.
Reconciliation to Non-GAAP Measures Table 1: Sales Growth Q1 Q2 Q3 2008 2008 2008 Organic Growth 7% 4% 4% Acquisitions / Divestitures 4% 6% 6% Rounding (1%) - - Sub-Total: Growth Excluding FX 10% 10% 10% Foreign Currency (FX) 3% 2% 1% Total Sales Growth 13% 12% 11% Table 2: Net Earnings (Millions) Q3 Q3 % 2007 2008 Change Reported Net Earnings $65 $75 15% Non-Cash Debt Extinguishment Charge - 2 nm Adjusted Net Earnings 65 77 19% Table 3: Diluted Earnings Per Share (DEPS) Q3 2008 Reported Net Earnings $0.80 Non-Cash Debt Extinguishment Charge $0.02 Adjusted Net Earnings $0.82 About Roper Industries
Roper Industries is a market-driven, diversified growth company with trailing twelve month revenues of $2.3 billion, and is a component of the Fortune 1000, S&P Midcap 400 and the Russell 1000 Indexes. Roper provides engineered products and solutions for global niche markets, including water, energy, radio frequency and research/medical applications. Additional information about Roper Industries is available on the Company's website at http://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 operating results, the success of our internal operating plans, and the prospects for newly acquired businesses to be integrated and contribute to future growth and profit expectations. Forward looking statements may be indicated by words or phrases such as "anticipate," "estimate," "plans," "expects," "projects," "should," "will," "believes" or "intends" and similar words and phrases. These statements reflect management's current beliefs and are not guarantees of future performance. They involve risks and uncertainties that could cause actual results to differ materially from those contained in any forward looking statement. Such risks and uncertainties include our ability to integrate our acquisitions and realize expected synergies. We also face other general risks, including our ability to realize cost savings from our operating initiatives, unfavorable changes in foreign exchange rates, difficulties associated with exports, risks associated with our international operations, difficulties in making and integrating acquisitions, risks associated with newly acquired businesses, 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, and risks associated with obtaining governmental approvals and maintaining regulatory compliance for new and existing products. Important risks may be discussed in current and 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.
Roper Industries, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (unaudited) (Amounts in thousands) September 30, December 31, ASSETS 2008 2007 CURRENT ASSETS: Cash and cash equivalents $156,272 $308,768 Accounts receivable 396,815 359,808 Inventories 196,089 174,138 Deferred taxes 33,714 27,800 Unbilled receivable 69,251 60,218 Other current assets 29,462 20,405 Total current assets 881,603 951,137 PROPERTY, PLANT AND EQUIPMENT, NET 115,762 107,513 OTHER ASSETS: Goodwill 2,164,632 1,706,083 Other intangible assets, net 827,649 613,505 Deferred taxes 33,762 23,854 Other assets 50,023 51,092 Total other assets 3,076,066 2,394,534 TOTAL ASSETS $4,073,431 $3,453,184 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $128,335 $115,809 Accrued liabilities 260,862 194,055 Income taxes payable 32,297 24,121 Deferred taxes - 2,442 Current portion of long-term debt 232,676 331,103 Total current liabilities 654,170 667,530 NONCURRENT LIABILITIES: Long-term debt 1,113,674 727,489 Deferred taxes 252,814 221,411 Other liabilities 42,681 46,948 Total liabilities 2,063,339 1,663,378 STOCKHOLDERS' EQUITY: Common stock 919 910 Additional paid-in capital 790,668 757,318 Retained earnings 1,139,863 944,886 Accumulated other comprehensive earnings 100,431 108,732 Treasury stock (21,789) (22,040) Total stockholders' equity 2,010,092 1,789,806 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,073,431 $3,453,184 Roper Industries, Inc. and Subsidiaries Condensed Consolidated Statements of Earnings (unaudited) (Amounts in thousands, except per share data) Three months ended Nine months ended September 30, September 30, 2008 2007 2008 2007 Net sales $593,100 $532,902 $1,730,509 $1,541,965 Cost of sales 284,340 261,123 840,029 769,643 Gross profit 308,760 271,779 890,480 772,322 Selling, general and administrative expenses 176,461 158,041 523,374 457,777 Income from operations 132,299 113,738 367,106 314,545 Interest expense 14,322 13,119 36,833 39,957 Other expense 2,836 404 1,695 1,884 Earnings from continuing operations before income taxes 115,141 100,215 328,578 272,704 Income taxes 39,942 35,075 114,124 94,901 Net Earnings $75,199 $65,140 $214,454 $177,803 Earnings per share: Basic $0.84 $0.74 $2.40 $2.01 Diluted $0.80 $0.70 $2.28 $1.91 Weighted average common and common equivalent shares outstanding: Basic 89,629 88,575 89,381 88,286 Diluted 94,251 93,559 94,026 92,934 Roper Industries, Inc. and Subsidiaries Selected Segment Financial Data (unaudited) (Amounts in thousands and percents of net sales) Three months ended September 30, 2008 2007 Amount % Amount % Net sales: Industrial Technology $169,065 $161,828 Energy Systems & Controls 137,535 131,033 Scientific & Industrial Imaging 94,610 91,331 RF Technology 191,890 148,710 Total $593,100 $532,902 Gross profit: Industrial Technology $82,215 48.6% $78,394 48.4% Energy Systems & Controls 75,172 54.7% 70,907 54.1% Scientific & Industrial Imaging 51,457 54.4% 50,242 55.0% RF Technology 99,916 52.1% 72,236 48.6% Total $308,760 52.1% $271,779 51.0% Operating profit*: Industrial Technology $43,767 25.9% $42,065 26.0% Energy Systems & Controls 32,541 23.7% 31,858 24.3% Scientific & Industrial Imaging 18,746 19.8% 16,385 17.9% RF Technology 50,191 26.2% 34,997 23.5% Total $145,245 24.5% $125,305 23.5% Net Orders: Industrial Technology $163,442 $153,236 Energy Systems & Controls 134,970 145,855 Scientific & Industrial Imaging 102,933 95,339 RF Technology 179,274 138,513 Total $580,619 $532,943 Nine months ended September 30, 2008 2007 Amount % Amount % Net sales: Industrial Technology $525,929 $477,667 Energy Systems & Controls 410,638 361,044 Scientific & Industrial Imaging 282,206 277,042 RF Technology 511,736 426,212 Total $1,730,509 $1,541,965 Gross profit: Industrial Technology $253,719 48.2% $228,407 47.8% Energy Systems & Controls 223,720 54.5% 191,159 52.9% Scientific & Industrial Imaging 154,135 54.6% 152,629 55.1% RF Technology 258,906 50.6% 200,127 47.0% Total $890,480 51.5% $772,322 50.1% Operating profit*: Industrial Technology $136,627 26.0% $120,721 25.3% Energy Systems & Controls 96,359 23.5% 81,579 22.6% Scientific & Industrial Imaging 54,091 19.2% 53,453 19.3% RF Technology 119,902 23.4% 90,669 21.3% Total $406,979 23.5% $346,422 22.5% Net Orders: Industrial Technology $514,326 $479,100 Energy Systems & Controls 402,553 376,611 Scientific & Industrial Imaging 289,606 277,918 RF Technology 538,624 425,121 Total $1,745,109 $1,558,750
* Operating profit is before unallocated corporate general and administrative expenses. These expenses were $12,946 and $11,567 for the three months ended September 30, 2008 and 2007, respectively, and $39,873 and $31,877 for the nine months ended September 30, 2008 and 2007, respectively.
Roper Industries, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (unaudited) (Amounts in thousands) Nine months ended September 30, 2008 2007 Net earnings $214,454 $177,803 Depreciation 24,775 23,560 Amortization 50,588 46,643 Other, net 15,722 (21,035) Cash provided by operating activities 305,539 226,971 Business acquisitions, net of cash acquired (701,935) (106,287) Capital expenditures (20,787) (19,591) Other, net (4,084) (3,596) Cash used by investing activities (726,806) (129,474) Debt borrowings (payments), net 274,527 (50,666) Dividends (19,393) (17,182) Other, net 16,215 20,806 Cash provided by (used by) financing activities 271,349 (47,042) Effect of exchange rate changes on cash (2,578) 5,998 Net increase (decrease) in cash and equivalents (152,496) 56,453 Cash and equivalents, beginning of period 308,768 69,478 Cash and equivalents, end of period $156,272 $125,931
