Roper Industries Inc.

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Roper Industries Inc.

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

Public Company
Incorporated: 1981
Employees: 961
Sales: $147.6 million (1994)
Stock Exchanges: NASDAQ
SICs: 3561 Pumps & Pumping Equipment; 3824 Fluid Meters & Counting Devices; 3563 Air & Gas Compressors; 3714 Motor Vehicle Parts & Accessories

A rising competitor in the fluid handling and industrial controls industry, 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, and power generation industries. During the mid-1990s, Roper Industries operated in two business segments: industrial controls, which manufactured microprocessor-based turbomachinery control systems, pressure sensors, and thermostatic valves; and fluid handling, which manufactured rotary gear pumps, air-operated diaphragm pumps, and centrifugal pumps. With slightly more than half of its sales derived from overseas, the company recorded resolute growth during the early 1990s 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 little 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, the pump manufacturing operations belonging to Geo. D. Roper Corp. 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 a year concern by the mid-1980s, when the company 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-a-year 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 Georgiabased 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, introducing 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 ten-fold, 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.

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 potential 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 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.

Elsewhere in the family of Roper Industries companies, more promising results were being achieved. 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, bolstering Roper Industries position in an industryoil and refined petroleum productsit already served and increasing its 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 sales total, 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 hoping to resolve the difficulties hobbling its business activities with GAZPROM, 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 expected to be incorporated into Roper Industries burgeoning industrial controls segment as the company prepared to meet the challenges of the late 1990s, supported in large part by newly acquired companies, but with historical roots stretching back to 1919 and the formative efforts of George D. Roper.

Principal Subsidiaries

Amot Controls Corp.; Compressor Controls Corp.; Cornell Pump Co.; Roper Pump Co.; ISL Holdings, S.A.

Principal Operating Units

Fluid Handling; Industrial Controls

Further Reading

Byrne, Harlan S., Russian Roulette, Barrons,July 31, 1995, p. 21. Du Bois, Peter C, On the Front Burner, Barrons,August 14, 1961, p. 11.

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

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

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

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. 5B.

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

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

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

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

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

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.

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

Jeffrey L. Covell