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Roper Industries (ROP)

Q1 2011 Earnings Call

April 26, 2011 8:00 am ET


B. Jellison - Chairman of the Board, Chief Executive Officer, President and Member of Executive Committee

John Humphrey - Chief Financial Officer and Vice President


Richard Eastman - Robert W. Baird & Co. Incorporated

Terry Darling - Goldman Sachs Group Inc.

Alexander Blanton - Ingalls & Snyder

Wendy Caplan - SunTrust Robinson Humphrey, Inc.

Matt Summerville - KeyBanc Capital Markets Inc.

Jeffrey Sprague - Citigroup

D. Mark Douglass - Longbow Research LLC

Deane Dray - Citigroup Inc

Christopher Glynn - Oppenheimer & Co. Inc.



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Good day, everyone, and welcome to today's Roper Quarter and Year Financial Results Conference Call. Today's call is being recorded. I will now turn the call over to Mr. John Humphrey, Chief Financial Officer. Please go ahead.

John Humphrey

Thank you, Melanie, and thank you all for joining us this morning as we discussed the record results for our first quarter 2011. Joining me this morning is Brian Jellison, Chairman, President and Chief Executive Officer; and Paul Soni, Vice President and Controller.

Earlier this morning, we issued a press release announcing our financial results. The press release also includes a replay information for today's call. In addition, we've prepared slides to accompany today's call, which are available through the webcast and also available on our website at

Now if you'll please turn to Slide 2. We begin with our Safe Harbor statement. During the course of today's call, we will be making forward-looking statements, which are subject to the risks and uncertainties as described on this page and as detailed in our SEC filings. You should listen to today's call in the context of that information.

And now if you'll please turn to Slide 3. I'll turn the call over to Brian Jellison, Chairman, President and Chief Executive Officer. After his prepared remarks, we'll take questions from our participants. Brian?

B. Jellison

Thank you, John, and good morning, everyone. We'll take you first through the Q1 financial results in detail, and then we'll look at the segment performance and the outlook for Q2 and the rest of the year. I'll talk about raising our guidance and then sort of summarize the quarter and take your questions.

First slide here is the financial results. You can see we achieved a record, all-time record for Q1, in orders and sales backlog, net earnings, EBITDA and pretty much every other measurement you can imagine. The thing that was particularly gratifying was our book-to-bill ratio was 109%. Generally, we're at the sort of 97% to 103%, so to be at 109% is very encouraging for the remainder of the year.

Organic growth was really quite spectacular, we thought with 20% order growth. And all 4 of the segments had double-digit order growth and revenue growth, which you can see organically was 16%.

Gross margins increased to 54.3%, so any fear of input costs creating any difficulty at Roper was not well founded. EBITDA margins are up 310 basis points to 27.4%. Remember with us that's mostly EBITA. There's not much depreciation here.

Our balance sheet was enhanced as we continued to pay down our revolver, and we ended the quarter with an all-time record backlog of $851 million in revenue, which is 43% higher than the backlog at the end of the first quarter last year, up $257 million. Now we certainly, when we established our guidance for Q1, thought we would have a strong start, but this is even better than our best expectations.

Next slide. Our income statement. Here you could see the bookings at $702 million, up 24% in total and 20% organically. Net sales of $645 million, up 21% in total and 16% organically. Our gross profit went from 52.3% at first quarter of last year to 54.3% here, an increase of 200 basis points.

Our operating income was up 41%, that went from 18.8% last year to 22% this year, so that's really quite outstanding leverage. In fact, we'll talk a little bit more about our leverage on the variable contribution here for the revenue.

Our interest expense was basically flat. The tax rate was also quite similar to the prior year and that produced net earnings, up 49% to $89 million from $59.7 million last year and a diluted earnings per share number of $0.91 versus the $0.62 GAAP number from the prior year.

On the next slide. On the asset velocity, while the absolute amount -- the dollar amount of inventory receivable was up a little bit, as a function of the revenue it continues to decline. You'll see in the first quarter our inventory was 7.7% of revenue, down from 8.2%. In the prior year, our receivables were down to 16%, a pickup of 50 basis points from the 16.5% the prior year. And our payables and accruals or liabilities there actually increased to 16.1% from 15.8%. So when we total it, at the end of last year, we were 8.9% of sales, and this year it's down 130 basis points to 7.6% of revenues. So year-over-year, we see continued improvement in our asset velocity.

Next slide. We ended the quarter with a really strong balance sheet. Cash was $261 million. We paid down the revolver, so there's quite a bit of the revolver left. When you take the revolver and the cash together, we wind up with $813 million of available liquidity. And of course, we'll have very strong cash in Q2 and throughout the rest of the year.

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