01—Abstract
Summary
Summary of the 10-K filed March 16, 2005. Cited figures are marked; the original filing is the authoritative source.
Roper Industries, Inc. reported net sales of $969.8 milliona for the year ended December 31, 2004, up from $657.4 million in 2003, an increase of 47.5%, driven by acquisitions (NTGH, R/D Tech power generation, and TransCore) and strong internal growth.
Net earnings rose to $93.9 millionb, or $2.48 per diluted share, compared with $45.2 million, or $1.41 per diluted share, in 2003. Income from operations was $171.3 million, and the gross profit percentage declined to 50.0% from 52.7%, which the company attributed largely to lower-margin NTGH sales and third-party sourced products. The company's largest development was the December 13, 2004 acquisition of TransCore Holdings, Inc., a provider of RFID and satellite-based communication technologies, for approximately $597 million net of cash acquired and outstanding debt.
It was financed with a public offering of 5,000,000 common shares (gross proceeds of about $300.5 millionc) and a new $1.055 billion senior secured credit facility. Total debt rose to $891.9 million at year-end from $651.1 million, and stockholders' equity increased to $1.11 billion from $655.8 million. Management expects a tax rate of approximately 32.5% in 2005, higher than 2004's 29.8%, due mainly to TransCore's higher effective rate.
The company is organized into five market-focused segments: Instrumentation, Industrial Technology, Energy Systems and Controls, Scientific and Industrial Imaging, and the newly created RF Technology segment. Backlog of firm unfilled orders reached $336.0 milliond at year-end, compared with $148.6 million a year earlier, primarily due to the inclusion of TransCore's backlog. The filing also notes asbestos-related lawsuits naming subsidiaries, which management says cannot yet be assessed for potential liability.
02—Key points
Key Highlights
- Net sales of $969.8 million in 2004, up 47.5% from $657.4 million in 2003
- Net earnings of $93.9 million, or $2.48 per diluted share, versus $45.2 million, or $1.41 per diluted share, in 2003
- TransCore acquisition completed December 13, 2004 for approximately $597 million net of cash acquired and debt, establishing the new RF Technology segment
- Public offering of 5,000,000 common shares raised gross proceeds of approximately $300.5 million, with a $1.055 billion senior secured credit facility entered into alongside it
- Total debt rose to $891.9 million at December 31, 2004 from $651.1 million, representing 44.4% of total capital
- Gross profit percentage fell to 50.0% from 52.7%, with NTGH's lower margins and third-party sourced products cited as drivers
- Backlog increased to $336.0 million from $148.6 million, mainly reflecting TransCore's firm orders
- Quarterly dividend raised to $0.10625 per share from $0.09625, an increase of 10%
03—Questions
Frequently Asked Questions
What drove the large increase in Roper's 2004 revenue?
Net sales rose 47.5% to $969.8 million, reflecting a full year of the NTGH acquisition (completed December 29, 2003), six months of sales from the R/D Tech power generation business acquired June 7, 2004, two weeks of TransCore sales, and strong internal growth.
How was the TransCore acquisition financed?
TransCore was acquired for cash, funded by proceeds from a public offering of 5,000,000 common shares (about $300.5 million gross), borrowings under a new $1.055 billion senior secured credit facility consisting of a $655 million term loan and a $400 million revolving loan, and the repayment of the company's previous $625 million credit agreement.
Why did gross margins decline in 2004?
Gross profit as a percentage of sales fell to 50.0% from 52.7%. The company said Industrial Technology margins were lower because NTGH gross margins are below the segment average, and Instrumentation margins were affected by increased sales of lower-margin third-party sourced products.
What does the company expect for 2005?
Management expects its tax rate to rise to approximately 32.5% due mainly to TransCore's higher effective rate, expects research and development spending to rise because of TransCore, and anticipates a significant increase in percentage-of-completion revenue from TransCore's longer-term toll and traffic projects. It also expects to reduce debt at a high rate, though the pace will depend on acquisitions and operating performance.
What legal risks does the filing disclose?
Roper is a defendant in various product liability and employment lawsuits that management does not believe will have a material adverse effect. The company and some subsidiaries are also named in asbestos-related personal injury and wrongful death actions, which the filing describes as vague and at an early stage, so potential liability cannot yet be determined.
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