Form 10Q


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, 2001.

[  ] 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
incorporation or organization)
(I.R.S. Employer 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 May 31, 2001 was approximately 30,870,000.




ROPER INDUSTRIES, INC.

REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2001

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  10  
  
Item 3.  Quantitative and Qualitative Disclosures About Market Risk  15  
 
  
PART II.  OTHER INFORMATION     
  
Item 4.  Submission of Matters to a Vote of Security Holders  16  
  
Item 6.  Exhibits and Reports on Form 8-K  17  
  
   Signatures  18  



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)


Three months ended
April 30,

Six months ended
April 30,

2001
2000
2001
2000
Net sales   $146,830   $122,775   $284,494   $232,228  
Cost of sales  71,172   57,879   139,095   110,000  

Gross profit  75,658   64,896   145,399   122,228  
Selling, general and administrative expenses  51,533   41,420   99,410   81,512  

Income from operations  24,125   23,476   45,989   40,716  
Interest expense  3,594   2,818   7,693   5,396  
Other income  731   306   1,198   536  

Earnings before income taxes  21,262   20,964   39,494   35,856  
Income taxes  7,400   7,338   13,872   12,550  

Net earnings  $  13,862   $  13,626   $  25,622   $  23,306  

  
Net earnings per common share: 
   Basic  $      0.45   $      0.45   $      0.83   $      0.77  
   Diluted  0.44   0.44   0.82   0.75  
 
Weighted average common shares outstanding: 
   Basic  30,693   30,436   30,716   30,380  
   Diluted  31,472   31,160   31,424   31,187  
 
Dividends declared per common share  $    0.075   $    0.070   $    0.150   $    0.140  


See accompanying notes to condensed consolidated financial statements.



3




Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(In thousands)


April 30,
2001

October 31,
2000

ASSETS:      
 
Cash and cash equivalents  $   11,477   $   11,372  
Accounts receivable, net  104,159   115,191  
Inventories  88,801   83,627  
Other current assets  5,030   3,765  

   Total current assets  209,467   213,955  
 
Property, plant and equipment, net  47,501   48,907  
Intangible assets, net  318,160   323,195  
Other assets  10,350   10,845  

   Total assets  $ 585,478   $ 596,902  

  
LIABILITIES AND STOCKHOLDERS’ EQUITY: 
  
Accounts payable  $   27,054   $   26,486  
Accrued liabilities  47,716   48,299  
Income taxes payable  4,392   3,001  
Notes payable and current portion of long-term debt  7,936   6,706  

   Total current liabilities  87,098   84,492  
  
Long-term debt  194,164   234,603  
Other liabilities  7,888   7,616  

   Total liabilities  289,150   326,711  

  
Common stock  320   319  
Additional paid-in capital  78,173   75,117  
Retained earnings  249,671   228,652  
Accumulated other comprehensive earnings  (6,940 ) (8,913 )
Treasury stock  (24,896 ) (24,984 )

   Total stockholders’ equity  296,328   270,191  

  
   Total liabilities and stockholders’ equity  $ 585,478   $ 596,902  



See accompanying notes to condensed consolidated financial statements.



4




Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)


Six months ended
April 30,

2001
2000
Cash flows from operating activities:      
   Net earnings  $ 25,622   $ 23,306  
   Depreciation  4,848   4,005  
   Amortization  8,234   6,098  
   Other, net  7,738   (7,087 )

     Net cash provided by operating activities  46,442   26,322  

  
Cash flows from investing activities: 
   Acquisitions of business, net of cash acquired  (831 ) (71,313 )
   Capital expenditures  (3,198 ) (8,678 )
   Other, net  (114 ) (2 )

  
     Net cash used in investing activities  (4,143 ) (79,993 )

  
Cash flows from financing activities: 
   Debt borrowings    68,834  
   Debt payments  (40,727 ) (5,207 )
   Dividends  (4,603 ) (4,259 )
   Other, net  3,145   2,609  

  
     Net cash provided by (used in) financing activities  (42,185 ) 61,977  

  
Effect of foreign currency exchange rate changes on cash  (9 ) (681 )

  
Net increase (decrease) in cash and cash equivalents  105   7,625  
  
Cash and cash equivalents, beginning of period  11,372   13,490  

  
Cash and cash equivalents, end of period  $ 11,477   $ 21,115  



See accompanying notes to condensed consolidated financial statements.



5




Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Earnings (unaudited)
(In thousands)


Common
stock

Additional
paid-in
capital

Retained
earnings

Accumu-
lated
other
compre-
hensive
earnings

Treasury
stock

Total
Compre-
hensive
earnings

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  

  
  
Balances at October 31, 2000  $319   $75,117   $ 228,652   $(8,913 ) $(24,984 ) $ 270,191  
Net earnings      25,622       25,622   $ 25,622  
Proceeds from stock ownership plans  1   3,056       88   3,145    
Other comprehensive earnings: 
  Currency translation adjustments        1,973     1,973   1,973  
Dividends declared      (4,603 )     (4,603 )  

  
Balances at April 30, 2001  $320   $78,173   $ 249,671   $(6,940 ) $(24,896 ) $ 296,328   $ 27,595  



See accompanying notes to condensed consolidated financial statements.



6




Roper Industries, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
April 30, 2001


1.   Basis of Presentation

The accompanying condensed consolidated financial statements for the three-month and six-month periods ended April 30, 2001 and 2000 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. (“Roper”) and its subsidiaries for all periods presented.

Roper’s 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 for the periods ended April 30, 2001 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 Roper’s consolidated financial statements and the notes thereto included in its 2000 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

2.   Earnings Per Share

Basic earnings per share was calculated by dividing net earnings (there were no adjustments necessary to determine earnings available to common shares) by the weighted average number of common shares outstanding during the period. Diluted earnings per share included 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, 2001 and 2000 included interest of $8,387,000 and $3,240,000, respectively, and income taxes of $12,452,000 and $10,631,000, respectively.

4.  Fair Value of Financial Instruments

At April 30, 2001, the estimated fair value of Roper’s $125 million fixed-rate, long-term notes was $131.5 million, representing an unrecorded decrease in Roper’s net assets of $6.5 million. This compared to a similar unrecorded increase in net assets of $2.4 million at October 31, 2000. The change from October 31, 2000 was the result of decreased interest rates at April 30, 2001 compared to October 31, 2000.

The fair values of all other financial instruments at April 30, 2001 were considered to approximate the carrying values of the underlying assets and liabilities.



7




5.  Inventories

Inventories are summarized below (in thousands):


April 30,
2001

October 31,
2000

Raw materials and supplies   $ 48,123   $ 44,493  
Work in process  17,547   16,704  
Finished products  24,697   24,187  
LIFO reserve  (1,566 ) (1,757 )

   $ 88,801   $ 83,627  


6.  Industry Segments

Sales and operating profit by industry segment are set forth in the following table (dollars in thousands):


Three months ended
April 30,

Six months ended
April 30,

2001
2000
Change
2001
2000
Change
Net sales:              
   Analytical Instrumentation  $  62,677   $  57,316   9.4 % $121,404   $107,720   12.7 %
   Fluid Handling  33,612   29,104   15.5   66,742   52,638   26.8  
   Industrial Controls  50,541   36,355   39.0   96,348   71,870   34.1  

  
     Total  $146,830   $122,775   19.6 % $284,494   $232,228   22.5 %

  
Gross profit: 
   Analytical Instrumentation  $  35,139   $  32,715   7.4 % $  67,576   $  60,504   11.7 %
   Fluid Handling  16,031   13,956   14.9   32,085   25,693   24.9  
   Industrial Controls  24,488   18,225   34.4   45,738   36,031   26.9  

  
     Total  $  75,658   $  64,896   16.6 % $145,399   $122,228   19.0 %

  
Operating profit*: 
   Analytical Instrumentation  $  12,221   $  11,945   2.3 % $  21,552   $  19,555   10.2 %
   Fluid Handling  7,575   7,292   3.9   15,188   13,589   11.8  
   Industrial Controls  9,443   6,026   56.7   16,701   11,165   49.6  

  
     Total  $  29,239   $  25,263   15.7 % $  53,441   $  44,309   20.6 %


* Operating profit is before restructuring charges recorded during, and only during, the three months ended April 30, 2001 and unallocated corporate general and administrative expenses. Restructuring charges were $50, $279 and $2,230 in Analytical Instrumentation, Fluid Handling and Industrial Controls segments, respectively. Unallocated corporate general and administrative expenses were $2,555 and $1,787 for the three months ended April 30, 2001 and 2000, respectively. These expenses were $4,893 and $3,593 for the six months ended April 30, 2001 and 2000, respectively.


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7.  Restructuring Activities

During the three months ended April 30, 2001, Roper recorded $2,559,000 of expenses, reported as part of selling, general and administrative expenses, related to activities to close or sell certain activities at its Petrotech unit and to consolidate certain other facilities. These expenses included approximately $950,000 of personnel costs and $1,100,000 of asset impairment. All significant restructuring activities are expected to be completed by the end of Roper’s 2001 fiscal year.

These Petrotech activities represented approximately 2% of Roper’s total net sales for each of the three months and six months ended April 30, 2001 and a slightly higher percentage of total net sales for each of the three months and six months ended April 30, 2000. The operating profit of these operations represented an immaterial portion of Roper’s total operating profit for all periods presented.

The total workforce reduction pursuant to these restructuring activities is approximately 150 people, or about 6% of Roper’s total employees. As of April 30, 2001, approximately 80 people of the workforce reduction had occurred, and approximately $675,000 of the related costs had been paid. Approximately $850,000 of the total restructuring costs had yet to be paid as of April 30, 2001.



9




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 Roper’s Annual Report on Form 10-K for the year ended October 31, 2000 as filed with the Securities and Exchange Commission and Note 6 to Roper’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:


Three months ended
April 30,

Six months ended
April 30,

2001
2000
2001
2000
Gross profit:          
  Analytical Instrumentation  56.1 % 57.1 % 55.7 % 56.2 %
  Fluid Handling  47.7   48.0   48.1   48.8  
  Industrial Controls  48.5   50.1   47.5   50.1  

   51.5 % 52.9 % 51.1 % 52.6 %

  
Operating profit: 
  Analytical Instrumentation  19.5 % 20.8 % 17.8 % 18.2 %
  Fluid Handling  22.5   25.1   22.8   25.8  
  Industrial Controls  18.7   16.6   17.3   15.5  
  Restructuring charges  (1.7 )   (0.9 )  
  Unallocated corporate expenses  (1.7 ) (1.5 ) (1.7 ) (1.5 )

   16.4   19.1   16.2   17.5  
Interest expense  (2.4 ) (2.3 ) (2.7 ) (2.3 )
Other income  0.5   0.3   0.4   0.2  

Earnings before income taxes  14.5   17.1   13.9   15.4  
Income taxes  5.1   6.0   4.9   5.4  

Net earnings  9.4 % 11.1 % 9.0 % 10.0 %


  Three months ended April 30, 2001 compared to 2000

Net sales increased $24.1 million, or 20%, during the three months ended April 30, 2001 compared to the three months ended April 30, 2000. Most of this increase resulted from the contributions of companies acquired since April 30, 2000: Abel Pump (May 2000), Antek Instruments (August 2000) and Hansen Technologies (September 2000). On a pro forma basis, as if prior year results had included all acquired companies and both periods exclude certain exited operations, net sales increased 6%. Most of this increase resulted from additional shipments to RAO Gazprom (“Gazprom”), the large Russian natural gas company, and increased sales of certain digital imaging products.

Analytical Instrumentation’s net sales (up 9% actual and up 3% pro forma) reflected the acquisition of Antek Instruments and an increase in its digital imaging business. Fluid Handling’s net sales (up 15% actual and flat pro forma) reflected the acquisition of Abel Pump. Whereas this segment’s semiconductor-related business declined sharply (down 18%), this decline was offset by increased sales at its large industrial pump businesses and increased sales of flow metering products. Industrial Controls’ net sales (up 39% actual and up 16% pro forma) reflected the acquisition of Hansen Technologies and the increased sales to Gazprom.

Roper’s overall gross profit percentage decreased slightly for the three months ended April 30, 2001 compared to April 30, 2000 primarily due to lower margins from sales at Hansen Technologies and adverse leverage from lower sales in digital imaging’s camera businesses. Gross profit margins also decreased for each of Roper’s three business segments. The primary factors affecting the segments are described previously.



10




Selling, general and administrative (“SG&A”) expenses increased $10.1 million, or 24%, during the three months ended April 30, 2001 compared to the three months ended April 30, 2000. Included in SG&A expenses for the three months April 30, 2001 was $2.6 million related to several initiatives to exit certain lines of business at Roper’s Petrotech unit and to consolidate certain other facilities. Excluding the $2.6 million, SG&A expenses were 33% of net sales for the three months ended April 30, 2001 compared to 34% for the three months ended April 30, 2000. Fluid Handling’s SG&A expenses as a percentage of net sales increased to 25% in 2001 compared to 23% in 2000 due to adverse leverage associated with the decrease in the semiconductor business. Industrial Controls’ SG&A expenses decreased to 30% from 34% due to a lower cost structure at Hansen Technologies than at the segment’s other businesses.

Interest expense increased $0.8 million, or 28%, for the three months ended April 30, 2001 compared to the three months ended April 30, 2000. Average borrowing levels were about 20% higher in 2001 from financing recent acquisitions, and borrowings outstanding during fiscal 2001 included $125 million of long-term notes that originated in May 2000 that were at higher interest rates than previously outstanding short-term borrowings.

Income taxes were 35% of pretax earnings for the three months ended April 30, 2001 and the three months ended April 30, 2000.

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, 2001 and 2000 was mostly related to Roper’s subsidiaries in Europe and Japan.


Net sales orders
Three months ended April 30,

2001
2000
Pro forma
Actual
Pro forma
Actual
(In thousands)
 
Analytical Instrumentation   $  63,284   $  63,284   $  56,732   $  53,403  
Fluid Handling  31,246   31,246   36,630   32,172  
Industrial Controls  40,647   40,962   47,343   40,851  

   $135,177   $135,492   $140,705   $126,426  


Pro forma net sales orders growth of 12% for the Analytical Instrumentation segment for the three months ended April 30, 2001 compared to three months ended April 30, 2000 was largely due to strength throughout the digital imaging businesses, whose net sales orders were up 22%. This segment’s leak testing business experienced decreased net sales orders of 22%. The 15% decrease in pro forma net sales orders for the Fluid Handling segment was caused by a 53% decrease in net sales orders at the segment’s semiconductor business. Industrial Controls’ pro forma net sales orders decreased by 14% and was spread throughout its oil & gas-related businesses.


Sales order backlog
April 30,

2001
2000
Pro forma
Actual
Pro forma
Actual
(In thousands)
 
Analytical Instrumentation   $  61,015   $  61,015   $42,991   $41,499  
Fluid Handling  23,721   23,721   23,632   19,822  
Industrial Controls  27,636   28,036   29,803   30,975  

   $112,372   $112,772   $96,426   $92,296  



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Pro forma sales order backlog for the Analytical Instrumentation segment increased 42% at April 30, 2001 compared to April 30, 2000. Digital imaging sales order backlog was up 59% and leak testing sales order backlog was down 41%. Pro forma sales order backlog for the Fluid Handling segment was essentially flat with last year. Within this segment, the biggest changes were a 13% increase at industrial pump businesses and a 28% decrease for the flow metering business across several of its primary end-user markets. Pro forma sales order backlog for the Industiral Controls segment was down 7% and reflected lower oil & gas activity.


Six months ended April 30, 2001 compared to 2000

Net sales increased $52.3 million, or 23%, during the six months ended April 30, 2001 compared to the six months ended April 30, 2000. Most of this increase resulted from the contributions of companies acquired since the beginning of fiscal 2000. The most influential acquisitions affecting this comparison were Abel Pump (May 2000), Antek Instruments (August 2000) and Hansen Technologies (September 2000). On a pro forma basis, as if prior year results had included all acquired companies and both periods exclude certain exited operations, net sales increased 7%. Most of this increase resulted from additional shipments to Gazprom and increased sales of certain digital imaging products.

Analytical Instrumentation’s net sales (up 13% actual and up 6% pro forma) reflected the acquisition of Antek Instruments and a net increase in its digital imaging business. Fluid Handling’s net sales (up 27% actual and up 4% pro forma) reflected the acquisition of Abel Pump and increased sales of water/wastewater pumps. Industrial Controls’ net sales (up 34% actual and up 11% pro forma) reflected the acquisition of Hansen Technologies and the increased sales to Gazprom.

Roper’s overall gross profit percentage decreased slightly for the six months ended April 30, 2001 compared to April 30, 2000 primarily due to lower margins from sales at Hansen Technologies and adverse leverage from lower sales in digital imaging’s camera businesses. Gross profit margins also decreased for each of Roper’s three business segments. The primary factors affecting the segments are described previously.

SG&A expenses increased $17.9 million, or 22%, during the six months ended April 30, 2001 compared to the six months ended April 30, 2000. Included in SG&A expenses for the six months April 30, 2001 was $2.6 million related to several initiatives to exit certain lines of business at Roper’s Petrotech unit and to consolidate certain of Roper’s other facilities. Excluding the $2.6 million, SG&A expenses were 34% of net sales for the six months ended April 30, 2001 compared to 35% for the six months ended April 30, 2000. Fluid Handling’s SG&A expenses as a percentage of net sales increased to 25% in 2001 compared to 23% in 2000 due to a higher cost structure at Abel Pump than the segment’s other businesses and adverse leverage associated with the decrease in the semiconductor business. Industrial Controls’ SG&A expenses decreased to 30% from 35% due to a lower cost structure at Hansen Technologies than the segment’s other businesses.

Interest expense increased $2.3 million, or 43%, for the six months ended April 30, 2001 compared to the six months ended April 30, 2000. Average borrowing levels were about 30% higher in 2001, and borrowings outstanding during fiscal 2001 included $125 million of long-term notes that originated in May 2000 that were at higher interest rates than previously outstanding short-term borrowings.

Income taxes were 35% of pretax earnings for the six months ended April 30, 2001 and the six months ended April 30, 2000.

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, 2001 and 2000 was mostly related to Roper’s subsidiaries in Europe and Japan.



12




Net sales orders
Six months ended April 30,

2001
2000
Pro forma
Actual
Pro forma
Actual
(In thousands)
 
Analytical Instrumentation   $130,170   $130,170   $118,151   $109,614  
Fluid Handling  64,516   64,516   70,517   57,684  
Industrial Controls  94,411   95,392   87,502   73,894  

   $289,097   $290,078   $276,170   $241,192  


Pro forma net sales orders growth of 10% for the Analytical Instrumentation segment for the six months ended April 30, 2001 compared to six months ended April 30, 2000 was largely due to strength throughout the digital imaging businesses, whose net sales orders were up 18%. This segment’s leak testing business experienced decreased net sales orders of 15%. The 9% decrease in pro forma net sales orders for the Fluid Handling segment was caused by a 23% decrease in net sales orders at the segment’s semiconductor business. Industrial Controls’ pro forma net sales orders increased by 8% due to increased orders from Gazprom.

Financial Condition, Liquidity and Capital Resources

Working capital was $122.4 million at April 30, 2001 compared to $129.5 million at October 31, 2000. Most of the decrease in working capital was due to reduced accounts receivable from Gazprom that resulted from a timing difference in shipments.

Total debt was $202.1 million (41% of total capital) at April 30, 2001 compared to $241.3 million (47% of total capital) at October 31, 2000. The decrease in debt during fiscal 2001 resulted from Roper’s operating cash flows. Excluding the effects of any future acquisitions, Roper expects debt levels to be reduced over the remainder of fiscal 2001, resulting in a further strengthening of its capital structure.

Roper’s principal credit facilities are a $275 million credit facility and $125 million of long-term notes. At April 30, 2001, Roper had over $200 million of additional borrowing availability under its $275 million credit facility. None of these agreements matures prior to 2005. Roper expects that its borrowing availability will be sufficient to fund any reasonable normal operating requirements and additional business acquisitions.

Roper expects to continue an active acquisition program. During May 2001, it acquired a manufacturer of high quality pneumatic valves, solenoids, relays and related products located near Dallas, Texas for approximately $7 million. Roper has also announced the signing of a definitive agreement to purchase the operating assets of an image processing software company for approximately $17 million. This transaction is expected to be completed in early July. The completion of this and any additional acquisitions is not assured, and if completed, there can be no assurance what the financial impact will be on Roper’s operations.

Roper continues to expect fiscal 2001 to be its ninth consecutive year of record sales and earnings.

Recently Released Accounting Pronouncements

The Financial Accounting Standards Board has announced its intent to issue revised rules for the accounting for business combinations and the accounting for the excess of a purchase price over the fair value of the net assets of an acquired business (“goodwill”). The revised rules are expected to be issued around June 30, 2001. Goodwill is a significant asset of Roper’s. Once issued, the new rules are expected to provide that goodwill will no longer be amortized. Instead, goodwill will be reviewed periodically for impairment. Goodwill associated with acquisitions initiated after June 30, 2001 will be subject to the new rules. Roper would be required to adopt the impairment approach to its existing goodwill no later than the beginning of Roper’s fiscal 2003. Roper expects that it will adopt this new standard with respect to existing goodwill at the beginning of its fiscal 2002.



13




Forward-Looking Information

The information provided in this report, in other Roper filings with the Securities and Exchange Commission, and in press releases and other public disclosures contains forward-looking statements about Roper’s businesses and prospects as to which there are numerous risks and uncertainties which generally are beyond Roper’s control. Some of these risks include the level and the timing of future business with Gazprom and other Eastern European customers and their ability to obtain financing, changes in interest and foreign exchange rates, the duration and depth of weak market conditions currently being experienced in the semiconductor markets, potential oil & gas industry reaction to possible U.S. governmental actions regarding exploration in Alaska and certain offshore areas, regional electricity shortages and high gasoline prices, the success of Roper’s cost reduction efforts and the future operating results of newly-acquired companies. There is no assurance that these and other risks and uncertainties will not have an adverse impact on Roper’s future operations, financial condition or financial results.



14




Item 3.   Quantitative and Qualitative Disclosures About Market Risk

Roper is exposed to interest rate risks on its outstanding variable-rate borrowings and the effects of changing interest rates on the fair value of its fixed-rate borrowings. Roper is exposed to foreign exchange risks pertaining to its business denominated in currencies other than the U.S. dollar. Roper is also exposed to equity market risks pertaining to the traded price of its common stock.

Roper’s outstanding variable-rate borrowings were approximately $77 million at April 30, 2001. Based on this level of debt, an increase or decrease in short-term interest rates of 10 basis points would increase or decrease annualized interest expense by approximately $77,000. During the first five months of calendar 2001, short-term interest rates in the U.S. have declined substantially and these declines have influenced longer-term rates. At April 30, 2001, interest rates were lower than the fixed interest rates on Roper’s $125 million of long-term borrowings. This resulted in the fair value of these borrowings exceeding the face amount of the borrowings. Roper determined the fair value of its fixed-rate borrowings to be approximately $131.5 million using discounted cash flows. An increase or decrease in interest rates by 10 basis points would decrease or increase this fair value amount by approximately $800,000.

Roper and its subsidiary companies 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, 2001 and for the six months then ended were principally denominated in Western European or Japanese currencies. For the six months ended April 30, 2001, approximately 20% of Roper’s net sales and income from operations were denominated in non-U.S. currencies. The U.S. dollar has generally been stronger against these currencies than during the six months ended April 30, 2000. These exchange rate changes have adversely affected Roper’s current year results compared to prior year results by less than 3%. Roper expects that these currencies will remain relatively stable. Therefore, foreign exchange risks are not expected to have a material effect on Roper’s future financial results.

Equity markets are influenced by many factors and changes in Roper’s stock price may be influenced by factors other than its historical earnings and by factors not within Roper’s control. The volatility of Roper’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. Roper’s stock prices following an option grant directly influence the dilutive effect of these options for earnings per share calculations. Certain compensation arrangements are also directly related to changes in Roper’s stock price. The sensitivity of these issues to a change in Roper’s stock price is not readily determinable, but a change in its stock price by $1.00 per share is not believed to have a material effect on Roper’s financial statements or disclosures.



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Part II.  OTHER INFORMATION

Item 4.   Submission of Matters to a Vote of Security Holders

Roper held its 2001 Annual Meeting of Shareholders on March 16, 2001. Of the 30,642,378 shares eligible to vote at the meeting, 25,963,256 were present either in person or by proxy. Of the shares present, 1,583,290 shares were claimed to be entitled to five votes per share based on certain holding period requirements. The following proposal was submitted to shareholders at the 2001 Annual Meeting of Shareholders.

Proposal 1: Election of Three (3) Directors

Each of the directors identified below elected at the 2001 Annual Meeting of Shareholders was elected for a term expiring at the 2004 Annual Meeting of Shareholders. Continuing directors whose terms expire at either the 2002 Annual Meeting of Shareholders or the 2003 Annual Meeting of Shareholders are as follows: Donald G. Calder (2002), Derrick N. Key (2002) and Christopher Wright (2002), Wilbur J. Prezzano (2003), Georg Graf Schall-Riaucour (2003), Eriberto R. Scocimara (2003).

Following are the election results for the proposal.


Number of votes
For
Against
Withheld
Proposal 1:        
     W. Lawrence Banks  25,818,516   144,740   0  
     Luitpold von Braun  21,955,503   4,007,753   0  
     John F. Fort III  25,439,516   523,740   0  


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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 Credit agreement dated as of May 18, 2000

  (b)4.03 Note Purchase Agreement dated as of May 18, 2000


(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 3.2, 4.02, 4.03 and 10.06 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed September 13, 2000.

(c) Incorporated herein by reference to Exhibit 4.02 to the Roper Industries, Inc. Current Report on Form 8-K filed January 18, 1996.

b. Reports on Form 8-K

None


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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
——————————
Derrick N. Key
Chief Executive Officer and President June 5, 2001

/s/ Martin S. Headley
——————————
Martin S. Headley
Vice President and Chief Financial Officer June 5, 2001

/s/ Kevin G. McHugh
——————————
Kevin G. McHugh
Controller June 5, 2001


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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 3.2 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed September 13, 2000.

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 Credit Agreement dated as of May 18, 2000, incorporated herein by reference to Exhibit 4.02 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed September 13, 2000.

4.03 Note Purchase Agreement dated as of May 18, 2000, incorporated herein by reference to Exhibit 4.03 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed September 13, 2000.


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