Roper Industries (NYSE:ROP) makes devices to control and monitor energy usage, radio frequency identification (RFID) devices used in toll and traffic systems across North America, and industrial testing and metering equipment for materials analysis and flow measurement. In 2007, the company had sales of $2.1 billion, a net income of $250 million and a net profit margin of 11.9%.
Over the last two years, Roper Industries grew its sales orders by 18.4% and reinvested its free cash flows in acquisitions. From January 2006 to March 2008, the company acquired eleven businesses under its four business segments for a total of $813 million.
In February 2008, Roper Industries paid $367 million to acquire CBORD, a leading supplier of card and integrated security systems in Australia, Europe and North America. The acquisition of CBORD gives the company's RF Technology segment access to approximately 2,500 institutional clients in the health care and higher education markets.
When acquiring companies, Roper Industries targets businesses like CBORD that operate in stable, high growth markets and have a stable customer base. As a result, 80% of Roper's revenues were recurring in 2007 and it retained 95% of its customers in the same year.
As mentioned above, the company uses its free cash flows to fuel an acquisitive growth strategy. In 2006 and 2007, Ropers Industries acquired ten companies under its four business segments, increasing sales orders by 18.4% (8.7% due to business acquisitions and 9.7% due to internal growth). 
In 2007, Roper Industries had sales of $2.1 billion, up 23.6% from $1.7 billion in 2006. Its net income was $250 million with a net profit margin of 11.9%. The company attributed this increase in sales to strong internal growth, full-year sales from companies acquired in 2006 (AC Controls, Dynisco, Intellitrans, Lumenera and Sinmed) and partial-year sales from companies acquired in 2007 (Black Diamond, DJ Instruments, Dynamic Instruments, JLT and Roda Deaco).
In 2006, Roper Industries’ sales were up 17.0% from $1.5 billion in 2005. Its net income was $193 million with a profit margin of 11.4%. Again, this increase in sales was attributed to strong internal growth, full-year sales from companies acquired in 2005 (CIVCO, Inovonics and MEDTEC) and partial-year sales from companies acquired in 2006 (AC Controls, Dynisco, Intellitrans, Lumenera and Sinmed).
Roper Industries' four business segments are Industrial Technology, Energy Systems and Controls, Scientific and Industrial Imaging and RF Technology. In each of the company's four business segments, no customer was responsible for more than 10% of sales in the segment for 2007.
In 2007, sales to customers outside the United States amounted to $858,574 or 40.8% of total sales. These sales were made to customers in Canada (5.5%), Europe (18.0%), Asia (9.4%), Middle East (4.0%) and the Rest of the World (3.9%).
Many of the company's subsidiaries and acquisitions operate in stable, high growth markets and have a stable customer base. As a result, Roper Industries currently has 80% of its revenues recurring in nature and retains 95% of its customers annually. CBORD, which was acquired by Roper Industries on 21 February 2008, is a clear example of this. Prior to being acquired, CBORD made card and integrated security systems for over 750 higher education institutions and 1,700 major health care licensees, corporate campuses, supermarkets, theme parks and dining chains in the United States, Canada, Europe, South Africa, New Zealand and Australia.
In 2006 and 2007, Roper Industries grew sales orders by 18.4% (8.7% due to business acquisitions and 9.7% due to internal growth). Almost half of this growth was achieved organically by focusing on high growth markets such as industrial technology, RF applications and medical imaging. In the case of RF applications, the market for such devices is expected to reach $5.3 billion in 2008, up 7.3% from $4.9 billion in 2007. In the case of medical imaging, a global population explosion, increased aging, a rise in chronic illnesses and better awareness of medical operations will grow the market to $11.4 billion in 2012, up 48.1% from $7.7 billion in 2007.
In 2007 alone, Roper Industries acquired Black Diamond for $6 million, DJ Instruments for $8 million, Dynamic Instruments for $31 million, JLT for $12 million and Roda Deaco for $45 million. On account of this acquisition spree, more than two thirds of the company's balance sheet is tied up in intangible assets such as goodwill. As of 31 December 2007, the company’s goodwill amounted to $1.7 billion as compared to $1.8 billion in stockholders’ equity, $1.7 billion in total liabilities and $3.5 billion in total assets. Given that the company's intangible assets are valued at an amount that is high relative to its total assets, the company risks a major hit to its balance sheet if intangible assets are written down.
Although several of the company's subsidiaries and acquisitions have transactions and balances denominated in currencies other than the dollar, Roper Industries does not currently hedge against foreign exchange rate risks. In 2007, sales to customers outside the United States amounted to $858,574 or 40.8% of total sales. These sales were made to customers in Canada (5.5%), Europe (18.0%), Asia (9.4%), Middle East (4.0%) and the Rest of the World (3.9%). As such, unfavorable changes in the exchange rates between the dollar and the currencies of these countries could significantly impact the company's sales and net income.
Most of Roper Industries' competitors are more specialized, focusing on only one or two of the company's four business segments. The most significant of these competitors is General Electric which operates in six different business segments, three of which (Infrastructure, Industrial and Healthcare) overlap closely with the company's core business segments.
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