Roper Industries, Inc.

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Roper Industries, Inc.

160 Ben Burton Road
Bogart, Georgia 30622
Telephone: (706) 369-7170
Fax: (706) 353-6496
Web site:

Public Company
Incorporated: 1981
Employees: 2,950 (2001)
Sales: $587 million (2001)
Stock Exchanges: NASDAQ
Ticker Symbol: ROP
NAIC: 333911 Pump and Pumping Equipment Manufacturing; 334514 Totalizing Fluid Meter and Counting Device Manufacturing; 421810 Construction and Mining (except Oil Well) Machinery and Equipment Wholesalers; 334516 Analytical Laboratory Instrument Manufacturing

A leader in the fluid handling, industrial controls, and analytical instrumentation industries, Roper Industries, Inc. manufactures and distributes highly engineered, application-specific products for a broad range of industries, including the oil and gas, chemical and petrochemical processing, research, medical, semiconductor, and power generation industries. In the early 2000s, Roper Industries operated in three business segments: industrial controls, which manufactured microprocessor-based turbomachinery control systems, pressure sensors, and thermo-static valves; fluid handling, which manufactured rotary gear pumps, air-operated diaphragm pumps, and centrifugal pumps; and analytical instrumentation which manufactured digital imaging, fluid properties test, industrial leak test, materials analysis, microscopy preparation and handling, and spectroscopy products. With slightly more than half of its sales derived from overseas, the company recorded resolute growth during the early 2000s by expanding internationally through several key acquisitions.

Stoves and Pumps: Early History

Roper Industries historical roots reach back to its founder, George D. Roper, and the company he started in 1919, the Geo. D. Roper Corporation. Founded in Rockford, Illinois, as a manufacturer of gas stoves and gear pumps, Geo. D. Roper Corp. became best known for its production stoves, developing into a flourishing concern that eventually manufactured electric and gas kitchen ranges, power gardening tools, and a host of other home-related goods. The companys smaller business segment, the manufacture of pumps, which constituted the origins of Roper Industries, remained overshadowed by the association of the Roper name with kitchen appliances, existing for decades as a barely known enterprise, while the appliance segment garnered the bulk of Geo. D. Roper Corp.s total sales and, consequently, nearly all of its publicity.

For much of the first half of the 20th century, the two businessesgear pumps and kitchen stovesoperated together within the same corporate structure, but in the late 1950s the two segments were split into two different companies that 30 years later existed as Roper Corporation a large kitchen appliance manufacturer with more than $700 million in annual sales; and Roper Industries, a manufacturer of an assortment of pumps and controls with an annual sales volume roughly 25 times smaller than Roper Corporation.

The Postwar Years: Two Distinct Companies Emerge

The two distinct business segments embarked on their separate paths of development when the Florence Stove Company, founded in the early 1870s as a maker of wood-burning stoves, set its acquisitive sights on the Geo. D. Roper Corp. In 1957, Florence Stove sold its manufacturing facility in Florence, Massachusetts, and transferred production to Illinois, then purchased the inventories of finished products, receivables, and all capital stock of Geo. D. Roper Corp. The entire new operation took the name Geo. D. Roper Corp. in 1958. Meanwhile, Geo. D. Roper Corp.s pump manufacturing operations were moved to Georgia, as the newly assembled corporation flourished under the beneficent corporate umbrella of retailing giant Sears, Roebuck & Co.

Sears not only was Geo. D. Roper Corp.s largest customer but also owned nearly half of the Illinois-based appliance manufacturer. This relationship between Sears and Geo D. Roper Corp. was strengthened when Geo D. Roper Corp. merged with a wholly owned Sears subsidiary, Newark Ohio Co., in 1964. Newark Ohio, which manufactured electric ranges, lawn mowers, and other products for Sears, sold nearly all of its products to its parent company prior to the merger, while Geo D. Roper Corp. derived 55 percent of its annual revenue from sales to Sears before the merger. Once combined, the merged entity relied on its relationship with Sears to generate more than three-quarters of total sales, ranking as Sears largest supplier of gas and electric ranges, rotary mowers, and a major supplier of drapery hardware.

When Geo. D. Roper and Newark Ohio merged, the Geo. D. Roper Corporation corporate title was retained for several years until Roper Corporation was adopted as the companys new name in April 1968, by which time the gas stove manufacturing business originally founded by George Roper was rapidly approaching the $200-million-a-year sales mark. Over the ensuing two decades, Roper Corporation broadened its product line and grew as Sears grew, developing into a more than $500 million company by the mid-1980s, when Roper Corp. implemented a major restructuring program. Nonessential businesses, such as the companys involvement in luggage and window blind production, were spun off; manufacturing facilities were relocated from the Midwest to Georgia and South Carolina; and 60 percent of its shares were bought back from Sears, making Roper Corporation a more cost-efficient maker of electric kitchen ranges than other major producers. The changes effected during the mid-1980s also made Roper Corporation a much more attractive acquisition target, and in 1988 a bidding war between Whirlpool Corporation and the General Electric Company was touched off, as the two giant appliance makers battled for the rights to acquire one of the few U.S. electric appliance manufacturers still in existence. In the end, General Electric emerged the victor, and acquired Roper Corporations manufacturing capacity for stoves and lawn equipment, the core of its more than $700 million business at the time.

1980s and Beyond: New Leadership and Expansion at Roper Industries

As Roper Corporation slowly disappeared from the business press spotlight, existing in relative anonymity deep within the sundry organizational layers comprising behemoth General Electric, the other half of the former Geo. D. Roper Corporationthe pump manufacturing facilities that were relocated to Georgia in the late 1950swas beginning to etch a new identity for the Roper name as Roper Industries Inc. During Roper Corporations rise as a major supplier to Sears, the Georgia-based pump worksRoper Pump Companyoperated as a public company until 1981, when a leveraged buyout transferred ownership of the company to private hands. The following year, the person chiefly responsible for Roper Industries growing stature during the 1980s and 1990s arrived, marking the beginning of a new era in the companys history that would punctuate its decades of quiet existence with resolute, international growth.

This pivotal figure in the companys ascension was British-born Derrick N. Key, who was named vice president of Roper Industries in June 1982. A former consultant for Johnson & Johnson, Key put his experience in marketing consumer products to work at Roper Industries, and introduced a management system that had achieved considerable success at numerous consumer products companies, but rarely had been used at manufacturing companies like Roper Industries. Keys importation of the product manager system, which was adopted by Roper Industries following Keys arrival, pushed the decision-making process down the companys management ladder, ceding substantial control to company managers. Within Roper Industries, each major product was assigned its own manager, who was then put in charge of overseeing the full development of the product, wielding control over production, sales, and advertising.

As the success engendered by the implementation of the product manager system grew, Key moved up Roper Industries corporate ladder, becoming president of Roper Industries primary revenue-generating engine, Roper Pump Company, in November 1985. Less than four years later, in February 1989, Key was named president of Roper Industries, assuming the companys presidential post at a time when annual sales hovered around $35 million and earnings stood at $2 million. Under Keys direction, these modest financial totals would rise strongly, propelled by an aggressive acquisition and expansion program orchestrated by Key that would position Roper Industries as a considerably larger international competitor in the specialty controls industry. In the first five years of Keys leadership, annual sales more than quadrupled, while earnings recorded a more prodigious gain, increasing tenfold, as Roper Industries began to attract the attention long-accorded to Roper Corporations appliance business.

The first pivotal move in Roper Industries bid to become a larger, more globally oriented competitor was executed a year after Keys promotion to president, when the company acquired Amot Controls Corporation and its U.K. and Switzerland subsidiaries in July 1990 for approximately $28 million. Amot Controls, which manufactured valves, switches, and sensors for the oil and gas, power generation, and transportation industries, represented an important addition to Roper Industries, giving the company one of the primary pillars supporting its existence during the 1990s. After its first full year as a Roper Industries company, Amot Controls helped push company wide annual sales to $75 million, or more than twice as much as Roper Industries generated two years earlier, setting the tone for the rapid growth to follow during the early 1990s.

Company Perspectives:

Our goal is to increase Ropers value to its shareholders by achieving consistent and sustainable growth in earnings per share. We do this by maximizing cashflow, and by using the cash effectively to fund acquisitions and internal growth. Strong operating margins and sound working capital management are the source of our strong and growing cashflow, and are thus the cornerstone of our strategy.

Another important acquisition, one that would play a leading role in Roper Industries most publicized event in its history, was completed two years after the purchase of Amot Controls. In September 1992, Roper Industries acquired Compressor Controls Corporation, the worlds leading turbocompressor control manufacturer, for an estimated $35 million. Together, Amot Controls and Compressor Controls composed Roper Industries industrial controls business segment, the smaller of the companys two business segments in 1992, but the segment that would provide the bulk of the companys growth between 1992 and the mid-1990s.

After an 11-year hiatus, Roper Industries once again became a publicly owned company in 1992, giving it the necessary capital to continue its acquisition and expansion campaign, which became increasingly international in focus following the purchase of Compressor Controls. Relying on the global connections it had realized through its two international acquisitions, Roper Industries made the headlines in the business press the year after its public offering by striking a deal with the massive Russian natural gas conglomerate, Gazprom, to supply computerized control systems for Russias enormous pipeline system. The agreement between Compressor Controls and Gazprom led to a seven-year contract worth $350 million, the announcement of which drew enough praise from certain sectors of the financial community to push Roper Industries stock from a low of $5.75 a share to $78 a share before splitting two-for-one.

Although Roper Industries Russian deal represented a potential boon to the companys business, it also represented a possible tinderbox, given the economic and political instability pervading Russia during the early and mid-1990s and the confounding vagaries of Russian bureaucracy. When shipments to Gazprom began in April 1993, however, expectations were high and largely substantiated by the years end. By the end of 1993, in an abbreviated year as far as the companys contract with Gazprom was concerned, Roper Industries shipped $42 million worth of high-technology, high-speed controls to Gazprom, but in 1994, the difficulties inherent in doing business in Russia led to lackluster financial results. Installation delays and problems with financing in Russia hindered Roper Industries Gazprom-related activities during the year, reducing the amount of the companys shipments to $35 million for the year.

The Gazprom deal continued to cause the company problems into the late 1990s. Starting in 1993, Roper worked with the U.S. Export-Import Bank (Ex-Im) to secure financing for shipments to Gazprom. In 1996, however, the company was forced to stop shipments because of congressional threats to block the financing. Senator Alfonse DAmato of New York led the fight to suspend Ex-Ims dealings with Gazprom, citing Gazproms dealings with Iran and the United States increased sanctions on that country. As a result, Roper canceled a $12 million shipment to Gazprom in October 1997. That year, difficulties with the Russian gas conglomerate caused Ropers stock to fall by 24 percent. By December 1997, president Derrick Key announced that Gazprom would need to secure substantial funds by the middle of 1998, otherwise Roper would reduce its business or abandon the deal altogether. Gazprom then began efforts to arrange European bank financing to support the balance of its deal with Roper.

In January 1998, Roper announced a $12.3 million shipment to Gazprom (financed by Gazproms general credit facilities). In May 1998, Gazprom had secured financing through a wholly owned European bank for its future business. This financing arrangement was expected to be available over the next five years for $128 million of additional turbomachinery controls purchases. By the time the companys 1998 annual report was released, Derrick Key was confident enough to pronounce that Roper had finally achieve[d] the consistency of the Gazprom business that we have long striven for. In 2000, Gazprom extended its deal with Roper, committing to an additional $150 million of purchases over and above the original agreement and extended the term through the end of 2007.

Key Dates:

Geo. D. Roper Corporation is founded.
The company is acquired by Florence Stove Company, and the combined new operation is renamed Geo. D. Roper Corporation.
Geo. D. Roper Corporations pump manufacturing is moved to Georgia, and is renamed Roper Pump Company.
The company merges with New Ohio Co., a Sears subsidiary.
Geo. D. Roper Corporation is renamed Roper Corporation.
Roper Pump Company reorganizes as Roper Industries.
Derrick Key becomes president of Roper Industries.
The company acquires Amot Controls Corporation, a manufacturer of valves, switches, and sensors.
Roper Industries becomes a public company.
The company strikes a control systems deal with Russian natural gas conglomerate Gazprom.
The company acquires Integrated Designs Inc. (IDI), a semiconductor manufacturer.
Derrick Key is named chairman of Roper Industries.
The company acquires Metrix Instrument Company, a manufacturer of equipment for the rotating machine industry.
The company acquires Gatan International, a manufacturer of electron microscopy control systems.
The company acquires Petrotech, a turnkey control systems company.
The company acquires Acton Research, a maker of spectrographic systems and specialty optics, and Abel Pump, a manufacturer of water, industrial, marine, and mining pumps.
The company acquires Hansen Technologies, a manufacturer of valves and controls for refrigeration systems.
The company acquires Struers Holdings A/S, a producer of materialographic sample preparation equipment.

Into a New Century: Growth in the 1990s and Beyond

Elsewhere in the family of Roper Industries companies, more consistently positive results were being achieved during the 1990s. In September 1993, Roper Industries acquired Integrated Designs Inc. (IDI) for $12 million, adding IDIs semiconductor-manufacturing equipment capabilities and its high profitability to the companys fluid handling business segment. The following year, as the company contended with the difficulties associated with Gazprom, it continued to focus on building other facets of its business by looking for industrial equipment companies to acquire, seeking to strengthen its involvement in the production of highly engineered, high-margin products. Roper Industries found such a company in August 1994 when it acquired Instrumentation Scientifique de Laboratoire, S.A. (ISL) for approximately $10.5 million. Headquartered in Verson, France with sales and service offices in the United States, the United Kingdom, Brazil, and Russia, ISL was one of the leading competitors in the world for oil refinery laboratory testing equipment. This acquisition bolstered Roper Industries position in an industryoil and refined petroleum productsit already served and it increased the companys international presence.

By the end of 1994, Roper Industries was deriving more than half its annual sales from outside the United States, largely through the foreign business developed by Key, who had been named chief executive officer in 1991, then finally chairman of Roper Industries in December 1994. Annual sales, which had reached $75 million in 1991, had climbed to $147 million by the end of 1994, thanks primarily to the development of the companys industrial controls segment, made up entirely of companies acquired since 1990. ISL, Compressor Controls Corporation, and Amot Controls Corporation composed Roper Industries industrial controls segment, with Richmond, California-based Amot U.S. and Bury St. Edmunds, England-based Amot U.K. functioning as the two operating companies of Amot Controls Corporation. Combined, these companies generated $91 million of Roper Industries 1994 total sales, with the companys fluid handling business segment, comprising Roger Pump Company, Cornell Pump Company and IDI, accounting for the balance.

As Roper Industries entered the mid-1990s, the company began mapping plans for the future, which included the strengthening of its U.S. businesses to offset any further problems with its contract to supply compressor controls to Russia. Toward this objective, the company announced the completion of its acquisition of Houston, Texas-based Metrix Instrument Company in October 1995. A manufacturer of vibration detection and analysis equipment for the rotating machinery industry, Metrix Instrument was incorporated into Roper Industries burgeoning industrial controls segment. Roper continued to grow the segment through the 1990s with such acquisitions in 1997 as Petrotech, a turnkey control systems company, and in 2000 Hansen Technologies, a manufacturer of valves and controls for refrigeration systems. In 2001, Ropers industrial controls segment netted sales of $197 million.

In 1997 the company began expanding into the area of analytical instrumentation by making a series of acquisitions through the late 1990s and into the early 21th century. These acquisitions included Gatan International (a manufacturer of electron microscopy control systems) in 1996, Acton Research (a maker of high-end spectrographic systems and specialty optics) in 1998, and Struers Holdings A/S (a producer of materialographic sample preparation equipment) in 2001. In the first quarter of 2002, Ropers analytical instrumentation segment had grown to net sales of $82 million.

The company carried over its strategy of acquiring small companies into its fluid handling segment, adding such companies as Abel Pump (a manufacturer of water, industrial, marine, and mining pumps) in 1998. In 2001, sales in the fluid handling segment netted the company $125 million.

The company was not immune from the economic downturn of the early 2000s, but Roper entered the early years of the 21th century optimistically and reported a strong start to the year 2002. The first quarter of that year saw a 9 percent increase in sales and a 240 basis point improvement in gross margins, and Roper remained confident in its ability to continue growing. Roper is making good progress on the objectives we outlined for 2002, said president and CEO Brian Jellison in the companys first quarter report. Despite the challenging first quarter economic environment, we are confident that our disciplined financial and operational processes will assure another record year for Roper Industries in 2002.

Principal Subsidiaries

ABEL Pump; Acton Research; Amot Controls Corp.; Antek Instruments; Compressor Controls Corp.; Cornell Pump Co.; Dynamco; Flow Technology; Fluid Metering, Inc.; Gatan; Hansen Technologies; Integrated Designs Inc.; Media Cybernetics; Metrix Instrument Co.; Petroleum Analyzer Company; Petrotech; Redlake/MASD; Roper Pump Co.; Roper Scientific.

Principal Operating Units

Analytical Instrumentation; Fluid Handling; Industrial Controls.

Principal Competitors

Agilent Technologies; Halliburton; SPX.

Further Reading

Bottom-Fishing for Stocks during Volatile Markets, On Wall Street, June 1, 1997,

Byrne, Harlan S., Russian Roulette, Barrons, July 31, 1995, p. 21.

Christy, John H., Cheap and Unsexy, Forbes, March 24, 1997, p. 188. Coleman, Zach, Iran Sanctions Jeopardizing GA. Manufacturer,

Roper Industries Fears Loss of Big Russian Customer, Atlanta Business Chronicle, November 14, 1997, p. A8.

Du Bois, Peter C., Made-to-Order Profits: Companies Which Supply Sears Are Sharing in the Giant Retailers Prosperity, Barrons, July 22, 1963, p. 3.

, On the Front Burner, Barrons, August 14, 1961, p. 11.

Eichenwald, Kurt, G.E. in Deal to Acquire Roper, New York Times, April 1, 1988, p. Dl.

EQT Sells Struers, European Venture Capital Journal, October 2001, p. 16.

George D. RoperSpecial Situation, June 5, 1963, p. 9.

Glassman, James K., No Excuse for Not Retiring Rich, Washington Post, May 16, 1999, p. HI.

Gordon, Mitchell, Roper Recovery, Barrons, October 20, 1986, p. 60.

Gottschalk, Arthur, Russian Deal Blessing and Curse for Roper, Journal of Commerce, June 21, 1994, p. B5.

How Georgia Stocks Fared: Roper Industries Downgraded after Russian Deal Stalls, The Atlanta Constitution, October 31, 1997, p. G4.

Husted, Bill, With Georgias Roper Industries, Only Thing Flashy Is Profit Line, Knight-Ridder/Tribune Business News, June 19, 1994, p. 6.

In Brief, Washington Post, July 4, 2001, p. E5.

Joyner, Tammy, Business Press: The Best Little Businesses in Georgia, The Atlanta Journal and Constitution, October 30, 1997, p. E9.

Karp, Richard, The Home-Run Hitters, Institutional Investor, March 1989, p. 73.

Kempner, Matt, Roper Acquisition Canceled, Earnings Outlook Reduced, The Atlanta Journal and Constitution, August 19, 1998, p. D12.

Lacroix, Edmond H., Roper Corp., Wall Street Transcript, November 4, 1968, pp. 14, 800.

Leach Cancels Deal with Roper, The Oil Daily, August 20, 1998,

Machan, Dyan, Alchemist, Forbes, November 4, 1996, p. 182.

Matta, Mathew L., NationsBanks Ropes in Roper Industries, Bank Loan Report, June 9, 1997, p. 13.

Music, Kimberley, U.S. Equipment Firm Pulls Plug on Gazprom Deal, The Oil Daily, November 3, 1997, pp. 1-2.

Net at Geo. D. Roper Cooking on All Burners, Barrons, March 21, 1968, p. 23.

OHanlon, John, Derrick N. Key Chairman, President and Chief Executive Officer Roper Industries, Inc. Interview, Wall Street Corporate Reporter, March 29, 2001,

Phadungchai, Naruth, Roper Industries Borrows $300M, Bank Loan Report, March 27, 2000,

Poole, Shelia, Roper Earnings up 16 Percent, Gazprom Business in Doubt, The Atlanta Journall and Constitution, December 13, 1997, p. D1.

Quinn, Matthew C., Roper Urges Russian Company to Find New Financing for Deal, The Atlanta Journal and Constitution, December 18, 1997, p. F5.

Rattle, Barbara, Salt Lake Leak, Testing Company Sold to Georgia Firm for $4.8 Million, The Enterprise, December 1, 1997, p. 3.

Roper Acquisition Brings Access to Aerospace Industry, The Atlanta Constitution, July 29, 1998, p. D12.

Roper Completes Varlen Deal, The Oil Daily, June 23, 1999,

Roper Corp. Discloses It Is Talking Merger with Unit of Sears, Wall Street Journal, April 13, 1964, p. 20.

Roper Corp. to Make Gas Ranges for Whirlpool, Wall Street Journal, March 14, 1962, p. 31.

Roper Declines up to 23% after Warning Earnings Down, The Atlanta Journal and Constitution, July 1, 2000, p. F6.

Roper Industries, Inc. Announces Acquisition of Metrix Instrument Company and a Fifty Percent Increase in Dividend Rates, PR Newswire, October 2, 1995, p. 10.

Roper Industries, Inc. Announces Record First Quarter Financial Results, PR Newswire, February 18, 1998,

Roper Industries, Inc. Announces Record Sales and Earnings for The Fiscal Year Ended October 31, 1998, PR Newswire, December 7, 1998,

Roper Industries, Inc. Announces the Signing of a Definitive Purchase Agreement for the Acquisition of Photometries, Ltd., PR Newswire, March 30, 1998,

Roper Industries, Inc. Announces the Signing of a Letter of Intent for Its Largest Acquisition to Date, PR Newswire, July 28, 1998,

Roper Industries, Inc. Announces Third Quarter Financial Results, PR Newswire, August 17, 1998,

Roper Shares Decline as Company Tells of Acquisition, Warns of Profit Shortfall, The Atlanta Constitution, July 31, 2001, p. D5.

Roper: Turncoat in a Takeover War, Business Week, April 11, 1988, p. 68.

Sears Unit and Roper Agree on Merger Plan, Wall Street Journal, April 20, 1994, p. 32.

Solomon, Goody L., Nation of Magic Chefs?, Barrons, March 8. 1965, p. 11.

Stephens, Flo P., Varlen Instruments, Inc., Hydrocarbon Processing, November 1999, p. F1 16.

Walker, Tom, How Georgia Stocks Fared: Ropers Prediction for Earnings Boosts Stock: Equipment Maker Expects to Beat Analysts Estimates, The Atlanta Journal and Constitution, January 31, 1998, p. E04.

Whirlpool Moves into the Kitchen, Business Week. March 14, 1988. p. 44.

Jeffrey L. Covellupdate: Lisa Whipple