10-K 1 d10k.txt ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended October 31, 2001 or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-12273 ROPER INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) ---------------- Delaware 51-0263969 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ---------------- 160 Ben Burton Road Bogart, Georgia 30622 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (706) 369-7170 ---------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of Each Exchange Title of Each Class On Which Registered ------------------- ------------------- Common Stock, $.01 Par Value New York Stock Exchange Preferred Stock Purchase Rights with respect to Common Stock, $.01 Par Value New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None ---------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [_] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ((S) 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] Aggregate market value of the voting stock held by non-affiliates of the Registrant, computed by reference to the closing price of such stock, as of December 31, 2001: $1,537,903,274. Number of shares of Registrant's Common Stock outstanding as of December 31, 2001: 31,068,753. ---------------- DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Proxy Statement to be furnished to Shareholders in connection with its Annual Meeting of Shareholders to be held on March 15, 2002, are incorporated by reference into Part III of this Form 10-K. PART I ITEM 1. BUSINESS Roper Industries, Inc. ("Roper") designs, manufactures and distributes specialty industrial controls, fluid handling and analytical instrumentation products worldwide, serving selected segments of a broad range of markets. The principal markets include oil & gas, research, medical, semiconductor, refrigeration, automotive, water and wastewater, power generation, agricultural irrigation industries and general industrial. Roper pursues consistent and sustainable growth in sales and earnings by operating and acquiring businesses that manufacture and sell high value-added, highly engineered industrial products that are capable of achieving and maintaining high margins. This strategy continually emphasizes (i) increasing market share and market expansion, (ii) new product development, (iii) improving productivity and reducing costs and (iv) acquisition of similar businesses. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - (i) Year Ended October 31, 2001 Compared to Year Ended October 31, 2000 and (ii) - - Year Ended October 31, 2000 Compared to Year Ended October 31, 1999." Market Share, Market Expansion and Product Development. Roper competes in many narrowly defined niche markets. Its position in these markets is typically as the market leader or as a competitive alternate to the market leader. In those markets where Roper is regionally dominant it seeks to sustain growth through geographic expansion of its marketing efforts and the development of new products for associated markets. Roper continued its growth in fiscal 2001 principally through internal growth of many of its core businesses and by new business acquisitions. In the Industrial Controls segment, Dynamco was acquired in May 2001. Roper acquired three new Analytical Instrumentation companies during the year. Media Cybernetics was acquired in July 2001. Struers and Logitech were acquired in September 2001. These new business acquisitions were financed principally from borrowings and represented a combined investment of approximately $170.2 million. Roper's debt under its primary credit facilities was $323.5 million at October 31, 2001 and $232.6 million at October 31, 2000. Total debt was 50% and 47% of total capitalization at October 31, 2001 and 2000, respectively. Total debt at year-end was 2.5x and 2.2x the preceding year's EBITDA (earnings before interest, taxes, depreciation and amortization) for fiscal 2001 and 2000, respectively. Roper believes it is well positioned for additional new business and other business acquisitions. International Sales. Sales outside the United States continue to play an important part in Roper's overall operating results, including such sales of U.S.-based businesses. In fiscal 2001, 2000 and 1999, Roper's net sales outside the U.S. were 52%, 51% and 51%, respectively, of total net sales. 1 Information regarding international operations is set forth in Note 12 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K ("Annual Report"). Research and Development. Roper conducts applied research and development to improve the quality and performance of its products, to develop new products and to enter new markets. Research and development performed by Roper often includes extensive field testing of its products. Roper expensed $26.3 million (4.5% of net sales), $22.6 million (4.5% of net sales), and $16.7 million (4.1% of net sales) in the years ended October 31, 2001, 2000 and 1999, respectively, on research and development activities. ANALYTICAL INSTRUMENTATION The Analytical Instrumentation segment offers several lines of digital imaging, fluid properties test, industrial leak test, materials analysis, microscopy preparation and handling, and spectroscopy products that are manufactured and distributed by nine U.S.-based, and four European-based, operating companies. Selected financial information for the Analytical Instrumentation segment is set forth in Note 12 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report. This segment's principal product groups consist of (i) digital imaging products, (ii) industrial leak test products, (iii) fluid properties test products and (iv) materials analysis products, (v) microscopy specimen preparation/handling products and (vi) spectroscopy products. Digital Imaging Products. Roper manufactures and sells extremely sensitive, high-performance charge-coupled device camera, detectors and related software for a variety of scientific and industrial uses, which use high resolution and/or high speed digital video, including transmission electron microscopy and spectroscopy applications. These products are principally sold for use within academic, government research, semiconductor, automotive, ballistic and biological and material science end-user markets. They are frequently incorporated into OEM products. Roper manufactures and sells specimen preparation and handling equipment for use with electron and other microscopes. The handling products are incorporated into OEM equipment and also sold as a retrofit for microscopes currently in use within the academic, government research, electronics, biological and material science end-user markets. Roper manufactures and sells spectrometers, monochrometers and optical components and coatings for various high-end analytical applications. These products are often incorporated into OEM equipment for use within the research and material science end-user markets. Industrial Leak Test Products. Roper manufactures and sells products and systems to determine leaks and completeness of assemblies and sub-assemblies in the automotive, medical and consumer products industries. Fluid Properties Test Products. Roper manufactures and sells automated and manual test equipment to determine certain physical properties, such as sulfur and nitrogen content, flash point, viscosity, freeze point and distillation of liquids and gasses for the petroleum and other fluid product industries. 2 Materials Analysis Products. Roper manufactures and sells the various equipment necessary to extract and shape certain materials for production and to extract, shape and prepare materials samples for testing. The class of products within the Analytical Instrumentation segment that accounted for at least 10% of Roper's consolidated net sales in any of the periods presented below were as follows (in thousands): Year ended October 31, ------------------------------------- 2001 2000 1999 ----------- ----------- ---------- Digital imaging products $ 134,294 $ 135,406 $ 89,739 Fluid properties test products 63,022 51,499 27,300 The following chart shows the breakdown of Analytical Instrumentation segment sales by market for fiscal 2001: [GRAPHIC] General Industrial 6% Semiconductor 6% Research 41% Automotive 13% Oil & Gas 21% Medical 4% Other 9% Backlog. The Analytical Instrumentation companies have lead times of up to several months on many of their product sales, although standard products are often shipped within four weeks of receipt of order. Blanket purchase orders are placed by certain OEMs and end-users, with continuing requirements for fulfillment over specified periods of time. The segment's backlog of firm unfilled orders, including blanket purchase orders, totaled $62.6 million at October 31, 2001 compared to $54.6 million as of October 31, 2000. The increase was attributed to the fiscal 2001 acquisitions offset by an approximate 16% reduction in digital imaging product backlog as lead times were worked down. Distribution and Sales. Distribution and sales are achieved through a combination of manufacturer's representatives, agents, distributors and direct sales offices in both the U.S. and various leading industrial nations. 3 Customers. Each of the companies in the Analytical Instrumentation segment sells to a variety of customers worldwide, with certain major OEMs in the automotive, medical diagnostics and microscopy industries having operations globally. None of its customers accounted for as much as 10% of its sales. INDUSTRIAL CONTROLS The Industrial Controls segment's products include a wide variety of machinery and other industrial valves, controls, control systems and measurement and monitoring instruments which are manufactured and distributed by six U.S.-based, and one European-based, operating companies. Selected financial information for the Industrial Controls segment is set forth in Note 12 of the Notes to the Consolidated Financial Statements included elsewhere in this Annual Report. This segment's principal sales and services consist of: (i) rotating machinery control systems (ii) industrial valves and controls and (iii) vibration instrumentation. Rotating Machinery Control Systems. Roper manufactures control systems and panels, and provides related engineering and commissioning services, for applications involving compressors, turbines, and engines in the oil & gas, pipeline, power generation and marine engine markets. Industrial Valves and Controls. Roper manufactures a variety of valves, sensors, switches and control products used on engines, compressors, turbines and other powered equipment for the oil & gas, pipeline, power generation, refrigeration, marine engine and general industrial markets. Most of these products are designed for use in hazardous environments. Vibration Instrumentation. Roper manufactures industrial vibration sensors, switches and transmitters for use in the broad industrial controls market. Their applications typically involve turbomachinery, engines, compressors, fans and/or pumps. Those classes of products within the Industrial Controls segment that accounted for at least 10% of Roper's consolidated net sales in any of the periods presented below were as follows (in thousands): Year ended October 31, --------------------------------------- 2001 2000 1999 ---------- ---------- ----------- Rotating machinery control systems $ 109,325 $ 91,409 $ 78,979 Industrial valves and controls 63,235 27,996 25,123 4 The following chart shows the breakdown of sales by market for fiscal 2001 for the Industrial Controls segment: [GRAPHIC] Oil & Gas - Pipeline 38% Power Generation 10% Marine 3% Refrigeration 14% General Industrial 6% Oil & Gas - Other 24% Other 5% Backlog. The majority of this segment's business consists of large engineered oil & gas development and transmission projects with lead times of three to nine months. Standard products generally ship within two weeks of receipt of order, while shipment of orders for specialty products varies according to the complexity of the product and availability of the required components. Roper enters into blanket purchase orders for the manufacture of products for certain original equipment manufacturers ("OEMs") and end-users over periods of time specified by such customers. The segment's backlog of firm unfilled orders, including blanket purchase orders, totaled $31.2 million at October 31, 2001 compared to $29.2 million as of October 31, 2000. The increase in backlog is primarily attributed to the balance of a special $20 million order received from RAO Gazprom ("Gazprom"), a large Russian natural gas company, in the fourth quarter of fiscal 2001. Distribution and Sales. Distribution and sales occur through direct sales offices, manufacturer's representatives and industrial machinery distributors. Customers. Each of the Industrial Controls business units sells to a variety of customers worldwide. Gazprom was the biggest single customer in this segment for the year, contributing approximately 25% of its sales in fiscal 2001. Gazprom has previously indicated its interest to continue purchases of control systems through 2007. However, continuation of this business at expected levels will continue to be subject to numerous commercial and political risks beyond Roper's control and cannot be assured. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Forward Looking Information". 5 FLUID HANDLING The Fluid Handling segment's products include general and specialty pumps and a range of flow measurement and metering products which are manufactured and distributed by five U.S.-based, and one European-based, operating units. Selected financial information for the Fluid Handling segment is set forth in Note 12 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report. This segment's principal products consist of (i) industrial pumps, (ii) integrated dispense systems used primarily in the semiconductor industry and (iii) flow measurement and metering products. Industrial Pumps. Roper manufactures a variety of general industrial pumps including (i) rotary gear pumps which operate on the principle of two gears intermeshing and are primarily used for pumping particle-free viscous liquids such as oil and certain fluid products, and specialty rotary gear pumps such as lubricating oil pumps for diesel engines and fuel distribution devices, (ii) progressing cavity pumps whose pumping elements consist of a steel rotor within an elastomeric stator and which are used primarily for handling viscous liquids with suspended solids and abrasive materials, such as Roper's "mud motor" used in the oil & gas industry for directional drilling, (iii) centrifugal pumps which are used for pumping water and other low-viscosity liquids in agricultural, industrial and municipal applications, (iv) membrane and piston pumps which transport high solids content slurries used in a variety of industries including municipal, mining, ceramics, and food, (v) high-pressure piston pumps used in marine, food, and municipal applications, and (vi) piston-type metering pumps able to handle most types of chemicals and fluids within low-flow applications and used principally in the medical diagnostics, chemical processing, food processing and agricultural industries. Integrated Dispense Systems. Roper's microprocessor-based integrated dispense systems are used principally in the semiconductor industry to dispense chemicals in a precise and repeatable fashion during the wafer fabrication process. These highly reliable dispense units either incorporate no mechanical displacement, utilizing the application of electronically regulated pressure, or utilize positive displacement technology. Cabinet based systems manage the distributions of bulk chemicals used in wafer fabrication to equipment such as the dispense systems mentioned above. Flow Measurement and Metering Products. Roper manufactures turbine and positive displacement flow meters, emissions measurement equipment and flow meter calibration products for the aerospace, automotive, power generation and other industrial applications. Those classes of products within the Fluid Handling segment that accounted for at least 10% of Roper's consolidated net sales in any of the periods presented below were as follows (in thousands): Year ended October 31, ----------------------------------------- 2001 2000 1999 ------------ ----------- ------------ Industrial pumps $ 84,398 $ 78,955 $ 76,193 6 The following chart shows the breakdown of Fluid Handling segment sales by market for fiscal 2001: [GRAPHIC] General Industrial 21% Other 9% Semiconductor 17% Medical 6% Power Generation 6% Oil & Gas 7% Refrigeration 7% Irrigation 6% Aerospace 3% Transportation 4% Water and Wastewater 14% Backlog. The Fluid Handling companies' sales also reflect a combination of standard products and specifically engineered, application-specific products. Standard products are typically shipped within two weeks of receipt of order. Application-specific products typically ship within six-to-twelve weeks following receipt of order, although larger project orders and blanket purchase orders for certain OEMs may extend for longer periods. This segment's backlog of firm unfilled orders, including blanket purchase orders, totaled $21.7 million at October 31, 2001 compared to $26.1 million as of October 31, 2000. The decrease was attributed primarily to significantly reduced demand for semiconductor equipment products as that market contracted severely during fiscal 2001. Distribution and Sales. Distribution and sales occur through direct sales personnel, manufacturer's representatives and stocking and non-stocking distributors. Customers. Some of the Fluid Handling segment's companies have sales to one or a few customers that represent a significant portion of that company's sales and the relative importance of such a concentrated customer base for these companies is expected to continue. However, no customer was responsible for as much as 10% of the segment's fiscal 2001 net sales. MATERIALS AND SUPPLIERS Most materials and supplies used by Roper are believed to be readily available from numerous sources and suppliers throughout the world which are believed adequate for their needs. Some high-performance components for digital imaging products can be in short supply and Roper continuously investigates and identifies alternative sources where possible. Roper believes this condition equally affects its competitors and, thus far, it has not had a significant adverse effect on sales. 7 ENVIRONMENTAL MATTERS AND OTHER GOVERNMENTAL REGULATION Roper is subject to environmental laws and regulations concerning emissions to the air, discharges to waterways and the generation, handling, storage, transportation, treatment and disposal of waste materials. These laws and regulations are constantly changing and it is impossible to predict with accuracy the effect they may have on Roper in the future. It is Roper's policy to comply with all applicable environmental, health and safety laws and regulations. Roper is subject to various U.S. and foreign federal, state and local laws affecting its businesses, as well as a variety of regulations relating to such matters as working conditions and product safety. A variety of state laws regulate Roper's contractual relationships with its distributors and manufacturers' representatives, some of which impose substantive standards on these relationships. COMPETITION Roper has significant competition from a limited number of companies in each of its markets. No single competitor competes with Roper over a significant number of product lines. Roper's products compete primarily on the basis of performance, innovation, price, and established customer service capabilities with existing customers. PATENTS AND TRADEMARKS Roper owns the rights under a number of patents and trademarks relating to certain of its products and businesses. While it believes that none of its companies is substantially dependent on any single, or group, of patents, trademarks or other items of intellectual property rights, the product development and market activities of Compressor Controls, Gatan, Integrated Designs, Redlake MASD and Roper Scientific, in particular, have been planned and conducted in conjunction with important and continuing patent strategies. Compressor Controls has been granted a series of U.S. and associated foreign patents and a significant portion of its fiscal 2001 sales was of equipment that incorporated innovations that are the subject of several such patents that will not begin to expire until 2004. Integrated Designs was granted a U.S. patent in 1994 related to methods and apparatus claims embodied in its integrated dispense systems that accounted for the majority of its fiscal 2001 sales. The U.S. patent will expire in 2011. EMPLOYEES As of October 31, 2001, Roper had approximately 2,950 total employees, of whom approximately 2,000 were located in the United States. 8 ITEM 2. PROPERTIES Roper's corporate offices, consisting of 9,500 square feet of leased space, are located near Athens, Georgia. Roper has established sales and service locations around the world to support its operating units. The principal operating company properties are on the table that follows.

Square footage --------------------- Location Property Owned Leased Industry segment ---------------------- ------------ ------- --------- -------------------------- Phoenix, AZ Office / Mfg. - 45,900 Fluid Handling Tucson, AZ Office / Mfg. - 37,300 Analytical Instrumentation Pleasanton, CA Office - 19,400 Analytical Instrumentation Richmond, CA Office / Mfg. 67,400 - Industrial Controls San Diego, CA Office / Mfg. - 43,000 Analytical Instrumentation Rodovre, Denmark Office / Mfg. - 114,000 Analytical Instrumentation Verson, France Office / Mfg. - 22,500 Industrial Controls Commerce, GA Office / Mfg. 203,800 - Fluid Handling Buchen, Germany Office / Mfg. 191,500 - Fluid Handling Lauda, Germany Office / Mfg. 37,900 - Analytical Instrumentation Des Moines, IA Office / Mfg. - 88,000 Industrial Controls Belle Chasse, LA Office / Mfg. - 33,200 Industrial Controls Burr Ridge, IL Office / Mfg. 55,000 - Industrial Controls Acton, MA Office / Mfg. - 32,700 Analytical Instrumentation Silver Spring, MD Office - 11,800 Analytical Instrumentation Trenton, NJ Office / Mfg. 40,000 - Analytical Instrumentation Syosset, NY Office / Mfg. - 27,500 Fluid Handling Portland, OR Office / Mfg. - 128,000 Fluid Handling Warrendale, PA Mfg. - 76,300 Analytical Instrumentation Carrollton, TX Office / Mfg. - 22,000 Fluid Handling Houston, TX Office / Mfg. 12,600 - Industrial Controls Houston, TX Office / Mfg. - 35,000 Analytical Instrumentation Houston, TX Office / Mfg. - 27,500 Analytical Instrumentation Marble Falls, TX Office / Mfg 10,000 - Analytical Instrumentation McKinney, TX Office / Mfg. - 25,000 Industrial Controls San Antonio, TX Office / Mfg. - 42,200 Analytical Instrumentation Bury St. Edmunds, U.K. Office / Mfg. 90,000 - Industrial Controls Glasgow, U.K. Office / Mfg. 27,700 - Analytical Instrumentation

Roper considers each of the above facilities to be in good operating condition and adequate for its present use and believes that it has sufficient plant capacity to meet its current and anticipated operating requirements. 9 ITEM 3. LEGAL PROCEEDINGS Roper is a defendant in various lawsuits involving product liability, employment practices and other matters, none of which Roper believes, if adversely determined, would have a material adverse effect on its consolidated financial position or results of operations. The majority of such claims are subject to insurance coverage. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS No matter was submitted to a vote of Roper's security-holders during the fourth quarter of fiscal 2001. 10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Roper's single class of common stock issued and outstanding trades on the New York Stock Exchange ("NYSE") under the symbol "ROP". Following is the range of high and low sales prices for Roper's common stock as reported by the NYSE during each of its fiscal 2001 and 2000 quarters. The last sales price reported by the NYSE on December 31, 2001, was $49.50. High Low ----------- ----------- 2001 4th Quarter $ 45.00 $ 31.00 3rd Quarter 45.80 34.99 2nd Quarter 43.00 33.65 1st Quarter 38.50 29.94 2000 4th Quarter 35.75 26.19 3rd Quarter 36.19 24.00 2nd Quarter 37.38 25.81 1st Quarter 38.56 30.00 Based on information available to Roper and its transfer agent, Roper believes that as of December 31, 2001 there were 215 record holders of its common stock. Dividends. Roper has declared a cash dividend in each fiscal quarter since its February 1992 initial public offering and has also increased its dividend rate annually since the initial public offering. In November 2001, Roper's Board of Directors increased the quarterly dividend rate to $0.0825 per share, an increase of 10% from the prior rate. However, the timing, declaration and payment of future dividends will be at the sole discretion of Roper's Board of Directors and will depend upon Roper's profitability, financial condition, capital needs, future prospects and other factors deemed relevant by the Board of Directors. Therefore, there can be no assurance as to the amount, if any, of cash dividends that will be declared in the future. Recent Sales of Unregistered Securities. None 11 ITEM 6. SELECTED FINANCIAL INFORMATION The consolidated selected financial data presented below has been derived from Roper's audited consolidated financial statements and should be read in conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and with Roper's Consolidated Financial Statements and related notes thereto included elsewhere in this Annual Report.

Year ended October 31, ------------------------------------------------------------------ 2001/(1)/ 2000/(2)/ 1999/(3)/ 1998/(4)/ 1997/(5)/ ----------- -------------------------- -------------------------- (in thousands, except per share data) Operations data: Net sales $ 586,506 $ 503,813 $ 407,256 $ 389,170 $ 298,236 Gross profit 308,970 258,824 210,503 190,953 153,389 Income from operations 98,428 88,196 77,955 66,092 60,870 Net earnings applicable to common shares 55,839 49,278 47,346 39,316 36,350 Per share data: Net earnings applicable to common shares: Basic $ 1.82 $ 1.62 $ 1.56 $ 1.27 $ 1.19 Diluted 1.77 1.58 1.53 1.24 1.16 Dividends 0.30 0.28 0.26 0.24 0.20 Balance sheet data: Working capital $ 129,173 $ 129,463 $ 89,576 $ 82,274 $ 86,954 Total assets 762,122 596,902 420,163 381,533 329,320 Long-term debt, less current portion 323,830 234,603 109,659 120,307 99,638 Stockholders' equity 323,506 270,191 231,968 197,033 177,869

(1) Includes results of Struers and Logitech from September 2001 and several smaller businesses acquired throughout fiscal 2001. (2) Includes results of MASD from November 1999, Abel Pump from May 2000, Antek Instruments from August 2000, Hansen Technologies from September 2000 and several smaller businesses acquired throughout fiscal 2000. (3) Includes results of Petroleum Analyzer companies acquired in June 1999. (4) Includes results of Photometrics from April 1998 and several smaller businesses acquired throughout fiscal 1998. (5) Includes results of Princeton Instruments and Petrotech from May 1997. 12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with Roper's Consolidated Financial Statements and selected financial data included elsewhere in this Annual Report. Results of Operations General The following tables set forth selected information for the years indicated. Amounts are dollars in thousands and percentages are of net sales. Year ended October 31, ----------------------- 2001 2000 1999 ----- ----- ----- Net sales 100.0% 100.0% 100.0% Cost of sales 47.3 48.6 48.3 ----- ----- ----- Gross profit 52.7 51.4 51.7 Selling, general and administrative expenses 35.9 33.9 32.6 ----- ----- ----- Income from operations 16.8 17.5 19.1 Interest expense 2.7 2.7 1.8 Other income 0.6 0.3 0.4 ----- ----- ----- Earnings before income taxes 14.7 15.1 17.7 Income taxes 5.2 5.3 6.1 ----- ----- ----- Net earnings 9.5% 9.8% 11.6% ===== ===== =====

Year ended October 31, ------------------------------------------------- 2001 2000 1999 --------------- --------------- --------------- $ % $ % $ % ------- ------ ------- ------ ------- ------ Industrial Controls:/(1)/ Net sales 196,738 159,262 160,090 Gross profit 100,574 51.1 78,523 49.3 78,957 49.3 Operating profit/(2)/ 40,066 20.4 28,460 17.9 29,973 18.7 Fluid Handling:/(3)/ Net sales 125,399 121,387 98,298 Gross profit 60,709 48.4 58,899 48.5 47,662 48.5 Operating profit/(2)/ 27,402 21.9 29,600 24.4 27,386 27.9 Analytical Instrumentation:/(4)/ Net sales 264,369 223,164 148,868 Gross profit 147,687 55.9 121,402 54.4 83,884 56.3 Operating profit/(2)/ 43,207 16.3 36,509 16.4 27,713 18.6

/(1)/ Includes results of Hansen Technologies from September 2000 and several smaller businesses acquired during the years presented. /(2)/ Operating profit excludes restructuring charges and unallocated corporate administrative costs. Restructuring charges were incurred only in fiscal 2001 and were $2,230, $279 and $50 in Industrial Controls, Fluid Handling and Analytical Instrumentation, respectively. Unallocated corporate administrative costs were $9,688, $6,373 and $7,117 for the years ended October 31, 2001, 2000 and 1999, respectively. /(3)/ Includes results of Abel Pump from May 2000 and several smaller businesses acquired during the years presented. /(4)/ Includes results of Photometrics from April 1998, the fiscal 1999 Petroleum Analyzer acquisitions from June 1999, MASD from November 1999, Antek Instruments from August 2000, Struers and Logitech from September 2001 and several smaller businesses acquired during the years presented. 13 Year Ended October 31, 2001 Compared to Year Ended October 31, 2000 Net sales for fiscal 2001 were $586.5 million, a 16% increase compared to fiscal 2000. Excluding sales to RAO Gazprom ("Gazprom", a large Russian natural gas company), net sales increased 14% in fiscal 2001 compared to fiscal 2000. Fiscal 2001 pro forma net sales (adjusted to remove exited operations) increased 5% compared to pro forma net sales during fiscal 2000 (also adjusted to include the results of companies acquired during fiscal 2001 for the same length of time as included in fiscal 2001's results). In the Analytical Instrumentation segment, actual net sales increased 18% and pro forma net sales increased 5%. The increase in actual net sales resulted mostly from the contribution of companies acquired during fiscal 2001 and 2000. The increase in pro forma net sales resulted mostly from strong digital imaging demand from research markets. Weakness in the automobile industry adversely affected sales of Roper's high-speed digital camera products and its industrial leak test products. In the Fluid Handling segment, actual net sales increased 3% and pro forma net sales decreased 7%. Actual net sales increased primarily as the result of companies acquired over the past two years. Pro forma net sales decreased primarily as the result of depressed business conditions in the semiconductor industry. This segment's pro forma net sales to this industry decreased 33% in fiscal 2001 compared to fiscal 2000. Roper expects these sales to be lower still in fiscal 2002. Net sales in fiscal 2001 for this segment's businesses not serving the semiconductor industry increased 2% compared to pro forma net sales in fiscal 2000. In the Industrial Controls segment, actual net sales increased 24% and pro forma net sales increased 13%. Actual net sales increased primarily as a result of companies acquired since the beginning of fiscal 2000, increased shipments to Gazprom and higher revenues from customers in energy markets. These increases were partially offset by lower revenues at Petrotech that resulted from restructuring activities that occurred during fiscal 2001. Pro forma net sales increased primarily as a result of additional sales to Gazprom. Sales to Gazprom were $49.3 million during fiscal 2001, or an increase of 45% compared to fiscal 2000. Roper's overall gross profit percentage increased to 52.7% in fiscal 2001 compared to 51.4% in fiscal 2000. Several factors were the largest contributors to the change. The largest factor was the growth in the Analytical Instrumentation segment, Roper's highest gross margin segment. Other large factors contributing to increased margins were improved leverage on the additional sales to Gazprom and the benefits from exiting certain low margin businesses at Petrotech during 2001. Adversely affecting margins were the increased sales from Roper's lower margin refrigeration valves business that was acquired in September 2000. Analytical Instrumentation's gross margin increased to 55.9% in fiscal 2001 compared to 54.4% in fiscal 2000. Most of this improvement resulted from favorable leverage related to increased digital imaging sales and the incremental sales at Struers and Logitech that were at relatively high margins. Fluid Handling's gross margin decreased to 48.4% in fiscal 2001 compared to 48.5% in fiscal 2000. This decrease was caused mostly by lower sales of its high margin semiconductor-related products. Industrial Controls' gross margin increased to 51.1% in fiscal 2001 compared to 49.3% in fiscal 14 2000. This increase was caused primarily by the favorable effects of increased sales to Gazprom and lower sales from exited businesses, and was partially offset by increased sales of lower-margin refrigeration valve products. Selling, general and administrative ("SG&A") expenses as a percentage of net sales in fiscal 2001 and fiscal 2000 are presented in the following table. 2001 2000 ------------------ ------------------ Total Adjusted* Total Adjusted* ------- -------- ------- --------- Analytical Instrumentation 39.5% 36.2% 38.0% 34.5% Fluid Handling 26.8 24.5 24.1 22.3 Industrial Controls 31.9 28.5 31.4 29.8 Corporate 1.7 1.7 1.3 1.3 ------ ------ ------ ------ Total 35.9% 32.8% 33.9% 31.3% * Excludes goodwill amortization (2001 and 2000) and restructuring charges (2001). The increase in SG&A costs as a percentage of net sales in fiscal 2001 compared to fiscal 2000 for the Fluid Handling segment was caused by the adverse leverage that resulted from the quick and deep cyclical decline in the segment's semiconductor-related business. Other changes in the relationships between SG&A costs and net sales were not considered significant. Interest expense was $15.9 million in fiscal 2001 compared to $13.5 million in fiscal 2000. Interest expense was higher in fiscal 2001 mostly due to the borrowings associated with the acquisitions that occurred since the beginning of fiscal 2000. All of these acquisitions, representing total costs of over $330 million during these two fiscal years, were paid for with cash provided by Roper's then-existing credit facilities. Short-term interest rates started to decline dramatically early in calendar 2001. Roper's effective interest rate was approximately 6.5% during fiscal 2001 compared to approximately 6.9% during fiscal 2000. The provision for income taxes was 35.4% of pretax earnings in fiscal 2001 compared to 35.1% in fiscal 2000. This change was not considered significant. Roper's other components of comprehensive earnings in fiscal 2001 were currency translation adjustments resulting from net assets denominated in currencies other than the U.S. dollar. These net assets were primarily denominated in euros (or euro-equivalent currencies), British pounds, Danish krone or Japanese yen. During fiscal 2001, the U.S. dollar weakened against the euro, was relatively stable against the pound and strengthened against the yen and krone (after the acquisition of Danish assets in September). During fiscal 2001, Roper's consolidated net assets increased $1.2 million due to foreign currency translation adjustments. 15

Net sales orders Year ended October 31, -------------------------------------------------- 2001 2000 Pro forma ------------------------ ------------------------ Pro forma Actual Pro forma Actual change ---------- ----------- ------------- ----------- ----------- (in thousands) Analytical Instrumentation $ 260,927 $ 260,927 $ 273,105 $ 239,903 -4 % Fluid Handling 121,231 121,231 142,858 128,925 -15 Industrial Controls 195,073 200,681 170,267 160,136 +15 ----------- ----------- ------------- ----------- ----------- $ 577,231 $ 582,839 $ 586,230 $ 528,964 -2 % =========== =========== ============= =========== ===========

The decrease in Analytical Instrumentation's pro forma net sales orders in fiscal 2001 compared to fiscal 2000 was broad-based. Net sales orders for each major product group declined from 2% - 9%. This segment's businesses were adversely affected by poor market conditions in the automotive and semiconductor industries. The decrease in pro forma net sales orders for the Fluid Handling segment was caused largely by a decline in semiconductor-related orders. The increase in pro forma net sales orders for the Industrial Controls segment was caused primarily by additional orders from Gazprom.

Sales order backlog October 31, -------------------------------------------------- 2001 2000 Pro forma ------------------------ ------------------------ Pro forma Actual Pro forma Actual Change ---------- ----------- ------------- ----------- ----------- (in thousands) Analytical Instrumentation $ 62,609 $ 62,609 $ 68,092 $ 54,550 -8 % Fluid Handling 21,678 21,678 26,073 26,073 -17 Industrial Controls 31,217 31,217 25,166 29,246 +24 ----------- ----------- ------------- ----------- ----------- $ 115,504 $ 115,504 $ 119,331 $ 109,869 -3 % =========== =========== ============= =========== ===========

Changes in sales order backlog were consistent with changes in net sales orders. Year Ended October 31, 2000 Compared to Year Ended October 31, 1999 Net sales for fiscal 2000 of $503.8 million were up 24% compared to the prior year. Excluding net sales to Gazprom, net sales increased 26% in fiscal 2000 compared to fiscal 1999. Net sales for fiscal 2000 were 1% less than pro forma net sales for fiscal 1999. Net sales for the Analytical Instrumentation segment increased 50%, mostly the result of business acquisitions (Petroleum Analyzer, MASD, Antek Instruments and other smaller businesses). This segment's net sales were 2% less than the prior year's pro forma net sales largely from lower comparative sales in fluid properties test equipment markets. Net sales for the Fluid Handling segment increased 23%, mostly the result of business acquisitions (Abel Pump and other smaller businesses) and a very strong fiscal 2000 for this segment's 16 semiconductor-related business. This segment's net sales were 6% higher than pro forma net sales for fiscal 1999. Fluid Handling's historical semiconductor business increased its net sales in fiscal 2000 by 81% (partly from favorable comparisons to reported net sales in the first half of fiscal 1999) and its acquired business increased its net sales by 51% compared to the same period in the prior year. Fiscal 2000 net sales for this segment's centrifugal pump business decreased 19% compared to the prior year due to weak agricultural and water/wastewater markets. Agricultural markets were adversely impacted by widespread drought conditions and low commodity prices in the United States. Roper believes the municipal water and wastewater markets were adversely affected by resources diverted to minimize Y2K exposures early in fiscal 2000, and its centrifugal pump business had increased exposure to these markets as it developed larger pumps to pursue more lucrative projects. Fluid Handling's piston metering pumps business' net sales were also down 15% compared to fiscal 1999 as this company's largest customer reduced its purchases until it resolves an FDA compliance problem unrelated to this company's products. Net sales for the Industrial Controls segment decreased less than 1% in fiscal 2000 compared to fiscal 1999 and fiscal 2000 net sales were 3% less than pro forma fiscal 1999 net sales. The timing of this segment's primary fiscal 2000 acquisition (Hansen Technologies in September 2000) was such that it did not significantly affect fiscal 2000 results. This segment was significantly influenced by conditions in the exploration and production sectors of the oil & gas industry. Roper believes several large oil & gas business combinations early in the year delayed capital spending programs, and spending had yet to recover from the effects of relatively low oil and natural gas prices throughout much of fiscal 1999. Throughout fiscal 2000, net sales each quarter (excluding sales to Gazprom) improved in comparison to the same quarter of fiscal 1999. Whereas these first quarter net sales were down 22% compared to the prior year, fourth quarter net sales (also excluding Hansen Technologies) were up 13%. Net sales to Gazprom of $33.9 million in fiscal 2000 were comparable to fiscal 1999 net sales of $35.0 million. The gross profit percentage for the Analytical Instrumentation segment decreased to 54.4% in fiscal 2000 compared to 56.3% in fiscal 1999. This decrease arose mostly from the inclusion of MASD for most of fiscal 2000. If MASD's results were excluded from the segment's results in fiscal 2000, the segment's gross profit percentage was 55.9%. SG&A expenses as a percentage of net sales in fiscal 2000 and fiscal 1999 are presented in the following table.

2000 1999 --------------------------- -------------------------- Total Adjusted* Total Adjusted* ----------- ------------ ----------- ------------ Analytical Instrumentation 38.0 % 34.5 % 37.7 % 34.1 % Fluid Handling 24.1 22.3 20.6 19.0 Industrial Controls 31.4 29.8 30.6 29.3 Corporate 1.3 1.3 1.7 1.7 ----------- ----------- ----------- ----------- Total 33.9 % 31.3 % 32.5 % 30.3 % =========== =========== =========== ===========

* Excludes goodwill amortization. SG&A expenses increased as a percentage of net sales for Roper as a whole because of the increased costs in the Fluid Handling segment and the increased size of the Analytical 17 Instrumentation segment with its relatively high level of SG&A expenses compared to Roper's other business segments. SG&A expenses for the Fluid Handling segment increased as a percentage of net sales mostly due to relatively high cost structures of recent acquisitions, particularly Abel Pump and Flowdata. Another significant reason for this segment's increased SG&A expenses as a percentage of net sales was the adverse leverage associated with the decline in the segment's centrifugal pump business combined with the added costs of this business moving into a larger facility early in fiscal 2000. Other changes in the relationships between SG&A costs and net sales were not considered significant. Interest expense was $13.5 million in fiscal 2000 compared to $7.3 million in fiscal 1999. Interest expense was higher in fiscal 2000 due primarily to the borrowings associated with the numerous acquisitions that occurred during fiscal 1999 and especially during fiscal 2000. All of these acquisitions, representing total costs of approximately $200 million during these two fiscal years, were paid for with cash provided by Roper's then-existing credit facilities. The provision for income taxes was 35.1% of pretax earnings in fiscal 2000 compared to 34.5% in fiscal 1999. The increase in the effective income tax rate was due to several of the recent acquisitions located in relatively high income tax rate jurisdictions and the amortization of some goodwill associated with these acquisitions was not deductible for income tax purposes. Roper's other components of comprehensive earnings in fiscal 2000 were currency translation adjustments resulting from net assets denominated in currencies other than the U.S. dollar. These net assets were primarily denominated in euros, British pounds or Japanese yen. The U.S. dollar strengthened against each of these currencies during fiscal 2000, but especially against the euro and particularly during Roper's fourth quarter of fiscal 2000. During fiscal 2000, Roper's consolidated net assets decreased $6.7 million ($4.1 million in the fourth quarter) due to foreign currency translation adjustments. Roper's goodwill denominated in non-U.S. currencies also decreased by $6.7 million due to currency translation adjustments. 18 The following table summarizes Roper's net sales orders and sales order backlog information (in thousands). The pro forma amounts include comparable time periods for those companies acquired during fiscal 2000.

Net sales orders Sales order backlog Year ended October 31, October 31, ------------------------------------- -------------------------------------- 2000 1999 2000 1999 ----------- ------------------------ ----------- ------------------------- Actual Pro forma Actual Actual Pro forma Actual ----------- ----------- ----------- ----------- ----------- ----------- Analytical Instrumentation $ 239,903 $ 228,000 $ 148,478 $ 54,550 $ 41,693 $ 30,000 Fluid Handling 128,925 117,125 100,600 26,073 19,103 14,375 Industrial Controls 160,136 157,596 150,604 29,246 30,405 29,286 ----------- ----------- ----------- ----------- ----------- ----------- $ 528,964 $ 502,721 $ 399,682 $ 109,869 $ 91,201 $ 73,661 =========== =========== =========== =========== =========== ===========

The increase in Analytical Instrumentation's net sales orders in fiscal 2000 compared to fiscal 1999 pro forma net sales orders was mostly due to an 8% increase in the segment's digital imaging businesses and a 20% increase in its spectroscopy business (which was influenced by the strong semiconductor industry). The increase in Fluid Handling's net sales orders in fiscal 2000 compared to fiscal 1999 pro forma net sales orders was mostly due to continued strength in the segment's semiconductor-related businesses, whose net sales orders increased 68%. Financial Condition, Liquidity and Capital Resources Total current assets exceeded total current liabilities by $129.2 million at October 31, 2001 compared to $129.5 million at October 31, 2000. Total debt was $326.8 million at October 31, 2001 (50% of total capital) compared to $241.3 million at October 31, 2000 (47% of total capital). Roper's increased debt and increased financial leverage at October 31, 2001 compared to that a year ago was due to the additional borrowings incurred to fund fiscal 2001 business acquisitions. Roper's principal $275 million credit facility with a group of banks provides most of its daily external financing requirements, consisting of revolving loans, swing line loans and letters of credit. At October 31, 2001, utilization of this facility included $86.5 million of U.S. denominated borrowings, the equivalent of $91.6 million of non-U.S. denominated borrowings and $2.9 million of outstanding letters of credit. Total unused availability under this facility was $94.0 million at October 31, 2001. This facility matures May 2005. Roper also has a number of smaller facilities in various non-U.S. locations to support the businesses in these locations. Roper's outstanding indebtedness at October 31, 2001 also included $125 million of term notes. One set of notes totaling $40 million matures May 2007. The other set of notes totaling $85 million matures May 2010. Neither set of notes requires sinking fund payments. Roper may prepay either set of notes by paying the holders thereof the discounted present value of all remaining scheduled payments using a discount rate equal to a risk-free rate plus a margin. 19 Although the excess of current assets over current liabilities at October 31, 2001 and 2000 were similar, Roper acquired approximately $30 million of net current assets through business acquisitions during fiscal 2001. Reductions in net current assets were attributed to improved management of accounts receivable, inventories and payables. Capital expenditures were $7.5 million during fiscal 2001 compared to the $15.2 million incurred during fiscal 2000. In November 2001, Roper's Board of Directors increased the quarterly cash dividend paid on its outstanding common stock to $0.0825 per share from $0.075 per share, an increase of 10%. This represents the ninth consecutive year in which the quarterly dividend has been increased since Roper's 1992 initial public offering. Roper's Board of Directors has declared a dividend payable on January 31, 2002. Payment of any additional dividends requires further action by the Board of Directors. Roper believes that internally generated cash flows and the remaining availability under its various credit facilities will be adequate to finance normal operating requirements and further acquisition activities. Although Roper maintains an active acquisition program, any further acquisitions will be dependent on numerous factors and it is not feasible to reasonably estimate if or when any such acquisitions will occur and what the impact will be on Roper's activities, financial condition and results of operations. Roper may also explore alternatives to increase its access to additional capital resources. Roper anticipates that its recently acquired companies as well as its other companies will generate positive cash flows from operating activities, and that these cash flows will permit the reduction of currently outstanding debt at a pace consistent with that which Roper historically has experienced. However, the rate at which Roper can reduce its debt during fiscal 2002 (and reduce the associated interest expense) will be affected by, among other things, the financing and operating requirements of any new acquisitions and the financial performance of its existing companies and cannot be predicted with certainty. Recently Issued Accounting Standards The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") 141 - "Business Combinations" that applies to all business combinations completed subsequent to June 30, 2001. SFAS 141 requires use of the purchase method for accounting for a business combination. Other provisions of SFAS 141 must be adopted concurrently with the adoption of SFAS 142. Roper does not expect the full adoption of SFAS 141 to significantly affect its accounting for any business combinations completed prior to June 30, 2001. The FASB issued SFAS 142 - "Goodwill and Other Intangible Assets" that Roper intends to adopt effective November 1, 2001 (otherwise, adoption would be required on November 1, 2002). Once adopted, this standard provides that goodwill will no longer be subject to amortization. Instead, 20 goodwill will be subjected to a periodic analysis to evaluate possible impairment. Any such impairment would be recognized as an expense immediately. The FASB issued SFAS 143 - "Accounting for Asset Retirement Obligations" that Roper is required to adopt by November 1, 2002. Roper does not currently have, nor is it expected to have, any material asset retirement obligations subject to this new standard. The FASB issued SFAS 144 - "Accounting for the Impairment or Disposal of Long-Lived Assets" that Roper is required to adopt by November 1, 2002. This new standard does not apply to goodwill. Roper does not expect the adoption of this standard to result in an impairment charge. Outlook Fiscal 2002 is expected to be another record year for sales and earnings. Fiscal 2002 is expected to benefit from the full-year contributions from the businesses acquired during fiscal 2001, especially Struers and Logitech. Fiscal 2002 earnings would also benefit from the adoption of SFAS 142. Goodwill amortization was $15.7 million during fiscal 2001. The conditions in the semiconductor industry are currently poor and Roper expects its product sales into this industry to be lower in fiscal 2002 than they were in 2001 on a pro forma basis. Roper does not expect this industry to show any significant signs of improvement before at least the second half of 2002. The terrorist attacks in the United States on September 11, 2001 and the aftereffects related thereto still cast a significant cloud of uncertainty over the near-term health of the economy in the United States and elsewhere. The U.S. economy was also showing signs of weakening prior to the September 11 attacks. It is impossible to isolate each of these factor's effects on current economic conditions. It is also impossible to predict with any reasonable degree of certainty what or when any additional events may occur that also will similarly disrupt the economy. Roper expects to continue an active acquisition program. However, completion of future acquisitions and their impact on Roper's results or financial condition cannot be accurately predicted. Forward Looking Information The information provided elsewhere in this Annual Report, in Roper's filings with the Securities and Exchange Commission, in press releases and in other public disclosures contains forward-looking statements about Roper's businesses and prospects. These forward-looking statements generally can be identified by use of statements that include phrases such as "believe," "expect," "anticipate," "intend," "plan," "foresee," "likely," "will" or other similar words or phrases. Similarly, statements that describe Roper's objectives, plans or goals are or may be forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which generally are beyond Roper's control and which may cause Roper's actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements. Some of these risks include the level and the timing of future business with Gazprom and other Eastern European 21 customers and their ability to obtain financing, changes in interest and currency exchange rates, market conditions including the duration and extent of the current economic recession, the continued success of Roper's cost reduction efforts, the future operating results of newly-acquired companies and consequences stemming from the September 11 terrorist activities. There is no assurance that these and other risks and uncertainties will not have an adverse impact on Roper's future operations, financial condition, or financial results. Roper does not undertake any obligation to update any forward-looking statements. 22 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Roper is exposed to interest rate risks on its outstanding borrowings. It is exposed to foreign currency exchange risks on its transactions denominated in currencies other than the U.S. dollar. It is also exposed to equity market risks pertaining to the traded price of its common stock. At October 31, 2001, Roper had a combination of fixed-rate borrowings (primarily $125 million of term notes) and relatively variable-rate borrowings (primarily borrowings under the $275 million credit facility). Although each borrowing under the $275 million credit facility has a fixed rate, the terms of these individual borrowings are generally only 1-3 months. At October 31, 2001, interest rates were lower than the fixed rates on the term notes. This resulted in the estimated fair values of the term notes being greater than the face amounts of the notes. Roper estimated this difference to be $11.7 million and it represented an unrecorded decrease in Roper's net assets at October 31, 2001. If interest rates had been 0.1% higher, the difference between the fair values of the term notes and their face values would have decreased to $10.9 million. At October 31, 2001, Roper's outstanding variable-rate borrowings under the $275 million credit facility were $178.1 million. An increase in interest rates of 0.1% would increase Roper's annualized interest costs by $178,000. Several Roper companies have transactions and balances denominated in currencies other than the U.S. dollar. Most of these transactions or balances are denominated in euros (or equivalent currencies), British pounds, Danish krone or Japanese yen. Sales by companies whose functional currency was not the U.S. dollar were 23% of Roper's total sales. The U.S. dollar was mixed against these currencies during fiscal 2001. Comparing currency exchange rates at October 31, 2001 to October 31, 2000, the dollar weakened 7% against the euro, was flat against the pound and strengthened 11% against yen. The dollar strengthened 1% against the krone over the last two months of fiscal 2001. These exchange rate changes had an immaterial impact on sales and earnings during fiscal 2001. Excluding the effects of any future acquisitions, the percentage of non-U.S. dollar denominated sales is expected to be higher in fiscal in 2002. The changes of these currencies relative to the U.S. dollar during fiscal 2001 also resulted in an increase in net assets of $1.2 million that was reported as a component of comprehensive earnings. This change is believed to have a minimal impact on expected future cash flows. The traded price of Roper's common stock influences the valuation of stock option grants and the effects these grants have on pro forma earnings disclosed in Roper's financial statements. The stock prices also influence the computation of the dilutive effect of outstanding stock options to determine diluted earnings per share. Certain cash compensation arrangements are also directly related to Roper's stock price. The stock price also affects Roper's employees' perceptions of various Roper programs that involve its common stock. 23 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data required by this item begin at page F-1 hereof. 24 CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index

Page Consolidated Financial Statements: Report of Independent Public Accountants ................................................................. F-2 Consolidated Balance Sheets as of October 31, 2001 and 2000 .............................................. F-3 Consolidated Statements of Earnings for the Years ended October 31, 2001, 2000 and 1999 .................. F-4 Consolidated Statements of Stockholders' Equity and Comprehensive Earnings for the Years ended October 31, 2001, 2000 and 1999 ............................................................ F-5 Consolidated Statements of Cash Flows for the Years ended October 31, 2001, 2000 and 1999 ................ F-6 Notes to Consolidated Financial Statements ............................................................... F-7 Supplementary Data: Schedule II - Consolidated Valuation and Qualifying Accounts for the Years ended October 31, 2001, 2000 and 1999 ........................................................................ S-1

F-1 Report of Independent Public Accountants To the Shareholders of Roper Industries, Inc.: We have audited the accompanying consolidated balance sheets of Roper Industries, Inc. (a Delaware corporation) and subsidiaries as of October 31, 2001 and 2000, and the related consolidated statements of earnings, stockholders' equity and comprehensive earnings and cash flows for the years then ended. These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Roper Industries, Inc. and subsidiaries as of October 31, 2001 and 2000, and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement schedule listed in Item 14 (II) of this Annual Report on Form 10-K is presented for the purpose of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Atlanta, Georgia December 6, 2001 F-2 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets October 31, 2001 and 2000 (in thousands, except per share data)

2001 2000 ------------- ------------- Assets Cash and cash equivalents $ 16,190 $ 11,372 Accounts receivable, net 121,271 115,191 Inventories 90,347 83,627 Other current assets 5,245 3,765 ------------- ------------- Total current assets 233,053 213,955 Property, plant and equipment, net 51,887 48,907 Intangible assets, net 453,017 323,195 Other noncurrent assets 24,165 10,845 ------------- ------------- Total assets $ 762,122 $ 596,902 ============= ============= Liabilities and Stockholders' Equity Accounts payable $ 34,233 $ 26,486 Accrued liabilities 61,020 48,299 Income taxes payable 5,617 3,001 Current portion of long-term debt 3,010 6,706 ------------- ------------- Total current liabilities 103,880 84,492 Long-term debt 323,830 234,603 Other noncurrent liabilities 10,906 7,616 ------------- ------------- Total liabilities 438,616 326,711 ------------- ------------- Stockholders' equity: Preferred stock, $0.01 par value per share; 1,000 shares authorized; none outstanding - - Common stock, $0.01 par value per share; 80,000 shares authorized; 32,131 shares issued and 30,879 outstanding at October 31, 2001 and 31,859 shares issued and 30,599 outstanding at October 31, 2000 321 319 Additional paid-in capital 80,510 75,117 Retained earnings 275,259 228,652 Accumulated other comprehensive earnings (7,757) (8,913) Treasury stock, 1,252 shares October 31, 2001 and 1,260 shares at October 31, 2000 (24,827) (24,984) ------------- ------------- Total stockholders' equity 323,506 270,191 ------------- ------------- Total liabilities and stockholders' equity $ 762,122 $ 596,902 ============= =============

See accompanying notes to consolidated financial statements. F-3 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statements of Earnings Years ended October 31, 2001, 2000 and 1999 (in thousands, except per share data)

2001 2000 1999 ----------- ----------- ----------- Net sales $ 586,506 $ 503,813 $ 407,256 Cost of sales 277,536 244,989 196,753 ----------- ----------- ----------- Gross profit 308,970 258,824 210,503 Selling, general and administrative expenses 210,542 170,628 132,548 ----------- ----------- ----------- Income from operations 98,428 88,196 77,955 Interest expense 15,917 13,483 7,254 Other income, net 3,928 1,218 1,583 ----------- ----------- ----------- Earnings before income taxes 86,439 75,931 72,284 Income taxes 30,600 26,653 24,938 ----------- ----------- ----------- Net earnings $ 55,839 $ 49,278 $ 47,346 =========== =========== =========== Net earnings per share: Basic $ 1.82 $ 1.62 $ 1.56 =========== =========== =========== Diluted $ 1.77 $ 1.58 $ 1.53 =========== =========== =========== Weighted average common shares outstanding: Basic 30,758 30,457 30,268 =========== =========== =========== Diluted 31,493 31,182 30,992 =========== =========== ===========

See accompanying notes to consolidated financial statements. F-4 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity and Comprehensive Earnings Years ended October 31, 2001, 2000 and 1999 (in thousands, except per share data)

Accumulated Additional other Total Common stock paid-in Retained comprehensive Treasury stockholders' ----------------------- Shares Amount capital earnings earnings stock equity ----------- ----------- ----------- ---------- --------------- ---------- ------------- Balances at October 31, 1998 30,343 $ 313 $ 67,145 $ 148,435 $ (906) $ (17,954) $ 197,033 Net earnings - - - 47,346 - - 47,346 Common shares issued for acquisitions (45) - - - - (1,667) (1,667) Exercise of stock options, net 244 3 3,939 - - - 3,942 Currency translation adjustments - - - - (1,266) - (1,266) Cash dividends ($0.26 per share) - - - (7,870) - - (7,870) Treasury stock purchases (260) - - - - (5,550) (5,550) ----------- --------- --------- --------- --------------- ---------- ------------- Balances at October 31, 1999 30,282 316 71,084 187,911 (2,172) (25,171) 231,968 Net earnings - - - 49,278 - - 49,278 Exercise of stock options, net 308 3 3,949 - - - 3,952 Currency translation adjustments - - - - (6,741) - (6,741) Cash dividends ($0.28 per share) - - - (8,537) - - (8,537) Treasury stock sold 9 - 84 - - 187 271 ----------- --------- --------- --------- --------------- ---------- ------------- Balances at October 31, 2000 30,599 319 75,117 228,652 (8,913) (24,984) 270,191 Net earnings - - - 55,839 - - 55,839 Exercise of stock options, net 272 2 5,293 - - - 5,295 Currency translation adjustments - - - - 1,156 - 1,156 Cash dividends ($0.30 per share) - - - (9,232) - - (9,232) Treasury stock sold 8 - 100 - - 157 257 ----------- --------- --------- --------- --------------- ---------- ------------- Balances at October 31, 2001 30,879 $ 321 $ 80,510 $ 275,259 $ (7,757) $ (24,827) $ 323,506 =========== ========= ========= ========= =============== ========== =============

Compre- hensive earnings ------------ Balances at October 31, 1998 Net earnings $ 47,346 Common shares issued for acquisitions - Exercise of stock options, net - Currency translation adjustments (1,266) Cash dividends ($0.26 per share) - Treasury stock purchases - ------------ Balances at October 31, 1999 $ 46,080 ============ Net earnings $ 49,278 Exercise of stock options, net - Currency translation adjustments (6,741) Cash dividends ($0.28 per share) - Treasury stock sold - ------------ Balances at October 31, 2000 $ 42,537 ============ Net earnings $ 55,839 Exercise of stock options, net - Currency translation adjustments 1,156 Cash dividends ($0.30 per share) - Treasury stock sold - ------------ Balances at October 31, 2001 $ 56,995 ============

See accompanying notes to consolidated financial statements. F-5 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended October 31, 2001, 2000 and 1999 (in thousands)

2001 2000 1999 ----------- ----------- ----------- Cash flows from operating activities: Net earnings $ 55,839 $ 49,278 $ 47,346 Adjustments to reconcile net earnings to net cash flows from operating activities: Depreciation and amortization of property, plant and equipment 9,993 8,623 6,620 Amortization of intangible assets 17,462 13,675 9,346 Changes in operating assets and liabilities, net of acquired businesses: Accounts receivable 10,412 (13,863) (10,621) Inventories 7,418 (4,357) 3,778 Accounts payable and accrued liabilities 5,790 14,001 (7,557) Income taxes payable 1,725 786 4,112 Long-term financing (8,451) - - Other, net 2,254 (504) (198) ----------- ------------ ----------- Net cash provided by operating activities 102,442 67,639 52,826 ----------- ----------- ----------- Cash flows from investing activities: Acquisitions of businesses, net of cash acquired (170,180) (161,546) (36,343) Capital expenditures (7,455) (15,150) (5,148) Other, net 906 (1,531) 167 ----------- ------------ ----------- Net cash used in investing activities (176,729) (178,227) (41,324) ----------- ----------- ----------- Cash flows from financing activities: Proceeds from notes payable and long-term debt 146,125 321,941 45,926 Principal payments on notes payable and long-term debt (62,815) (208,012) (41,867) Cash dividends to stockholders (9,232) (8,537) (7,870) Treasury stock sales (purchases) 257 271 (5,550) Proceeds from stock option exercises, net 4,531 3,952 3,942 Other, net - - (1,667) ----------- ----------- ----------- Net cash provided by (used in) financing activities 78,866 109,615 (7,086) ----------- ----------- ------------ Effect of exchange rate changes on cash 239 (1,145) (276) ----------- ------------ ----------- Net increase (decrease) in cash and cash equivalents 4,818 (2,118) 4,140 Cash and cash equivalents, beginning of year 11,372 13,490 9,350 ----------- ----------- ----------- Cash and cash equivalents, end of year $ 16,190 $ 11,372 $ 13,490 =========== =========== =========== Supplemental disclosures: Cash paid for: Interest $ 16,102 $ 9,018 $ 7,471 =========== =========== =========== Income taxes, net of refunds received $ 28,875 $ 25,867 $ 20,826 =========== =========== =========== Noncash investing activities: Net assets of businesses acquired: Fair value of assets, including goodwill $ 184,158 $ 177,230 $ 42,770 Liabilities assumed (13,978) (15,684) (6,427) ----------- ----------- ----------- Cash paid, net of cash acquired $ 170,180 $ 161,546 $ 36,343 =========== =========== ===========

See accompanying notes to consolidated financial statements. F-6 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000 and 1999 (1) Summary of Accounting Policies ------------------------------ Basis of Presentation - These financial statements present consolidated --------------------- information for Roper Industries, Inc. and its subsidiaries ("Roper"). All significant intercompany accounts and transactions have been eliminated. Nature of the Business - Roper designs, manufactures and distributes ---------------------- specialty industrial controls, fluid handling and analytical instrumentation products worldwide, serving selected segments of a broad range of industrial markets. Accounts Receivable - Accounts receivable were stated net of an allowance ------------------- for doubtful accounts of $4,344,000 and $4,294,000 at October 31, 2001 and 2000, respectively. Outstanding accounts receivable balances are reviewed periodically, and allowances are provided at such time that management believes reasonable doubt exists that such balances will be collected within a reasonable period of time. Cash and Cash Equivalents - Roper considers highly liquid financial ------------------------- instruments with remaining maturities at acquisition of three months or less to be cash equivalents. At October 31, 2001 and 2000, Roper had no cash equivalents. Earnings per Share - Basic earnings per share were calculated using net ------------------ earnings and the weighted average number of shares of common stock outstanding during the respective period. Diluted earnings per share were calculated using net earnings and the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the respective period. Common stock equivalents consisted of stock options, and the effects of common stock equivalents were determined using the treasury stock method. For the years ended October 31, 2001, 2000 and 1999, there were 107,000, 9,000 and zero stock options outstanding at October 31, 2001, 2000 and 1999, respectively, that were not included in the determination of diluted earnings per share because doing so would have been antidilutive. Estimates - The preparation of financial statements in conformity with --------- accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Fair Value of Financial Instruments - Roper's long-term debt at October ----------------------------------- 31, 2001 included $125 million of fixed-rate term notes. Roper has determined that current comparable interest rates at October 31, 2001 were lower than the stated rates of the term notes by approximately 1 1/2 - 2 percentage points. A discounted cash flow analysis of anticipated cash flows using October 31, 2001 interest rates indicated that the fair values of the term notes were greater than the face amounts of the term notes by $11.7 million at October 31, 2001. This liability is not reflected in Roper's basic financial statements. At October 31, 2000, Roper had a similar unrecorded asset of $2.4 million. The change compared to October 31, 2000 was caused primarily from lower interest rates at October 31, 2001 compared to October 31, 2000. Most of Roper's other borrowings at October 31, 2001 were at various interest rates that adjust relatively frequently under its $275 million credit facility. The fair value for each of these borrowings at October 31, 2001 was estimated to be the face value of these borrowings. In May 2000, Roper entered into a 3-year interest rate swap agreement for a notional amount of $25 million. Under this agreement, Roper received a fixed interest rate of 7.68% and paid a variable rate of 3-month LIBOR plus a margin. In November 2000, Roper entered into another agreement that effectively terminated this swap agreement for an insignificant gain. In February 1998 and April 1998, Roper entered into five-year interest rate swap agreements for notional amounts of $50 million and $25 million, respectively. In both agreements, Roper paid a fixed interest rate, F-7 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000 and 1999 and the other party paid a variable interest rate. In May 2000, Roper effectively terminated these agreements and received $1.8 million. This gain is being amortized over the original term of the agreements. The fair values for all of Roper's other financial instruments at October 31, 2001 approximated their carrying values. Foreign Currency Translation - Assets and liabilities of subsidiaries whose ---------------------------- functional currency was not the U.S. dollar were translated at the exchange rate in effect at the balance sheet date, and revenues and expenses were translated at average exchange rates for the period in which those entities were included in Roper's financial results. Translation adjustments are reflected as a component of other comprehensive earnings. Impairment of Long-Lived Assets - Roper periodically reviews its long-lived ------------------------------- assets (mostly property, plant and equipment, identified intangible assets and goodwill) for events or changes in circumstances that may indicate that the carrying amount of these assets has been impaired. Impairment, especially with respect to goodwill, is evaluated by comparing the estimated undiscounted future cash flows of the related business to the carrying amount of the goodwill. Roper's review did not warrant recognition of any impairment during any of the three years ended October 31, 2001. Income Taxes - Roper is a U.S.-based multinational company and the ------------ calculation of its worldwide provision for income taxes requires analysis of many factors, including income tax structures that vary from country to country and the United States' treatment of non-U.S. earnings. United States income taxes, net of foreign taxes, have been provided on the undistributed earnings of non-U.S. subsidiaries, except in those instances where such earnings are currently expected to be permanently reinvested. If such permanently reinvested earnings were to be distributed or otherwise subject to U.S. income taxes, foreign tax credits would reduce the amount of income taxes otherwise due in the United States. Determination of the amount of unrecognized deferred income taxes related to these permanently reinvested earnings is not practical. Certain assets and liabilities have different bases for financial reporting and income tax purposes. Deferred income taxes have been provided for these differences. Intangible Assets - Intangible assets consisted principally of goodwill, ----------------- which is amortized on a straight-line basis over periods ranging from 5 to 40 years for acquisitions completed prior to June 30, 2001. Goodwill associated with subsequent acquisitions is not subject to amortization. The accumulated amortization for intangible assets was $63.1 million and $45.5 million at October 31, 2001 and 2000, respectively. Roper accounts for goodwill in a purchase business combination as the excess of the cost over the fair value of net assets acquired. Identified intangible assets, other than goodwill, acquired through a business acquisition completed subsequent to June 30, 2001 may also not be subject to amortization. Other intangible assets not arising from acquisitions are recorded at cost and amortized over their expected useful lives. Inventories - Inventories are valued at the lower of cost or market. Cost ----------- is determined using either the first-in, first-out method or the last-in, first-out method ("LIFO"). Inventories valued at LIFO cost comprised 10% and 11% of consolidated inventories at October 31, 2001 and 2000, respectively. Any LIFO decrements recorded during any of the three years ended October 31, 2001 were immaterial to Roper's consolidated financial statements for that year. Other Comprehensive Earnings - Comprehensive earnings includes net earnings ---------------------------- and all other non-owner sources of changes in a company's net assets. The differences between net earnings and comprehensive earnings for Roper during fiscal 2001, 2000 and 1999 were currency translation adjustments. Income taxes have not been provided on currency translation adjustments. F-8 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000 and 1999 Property, Plant and Equipment and Depreciation and Amortization - Property, --------------------------------------------------------------- plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided for using principally the straight-line method over the estimated useful lives of the assets as follows: Buildings 20-30 years Machinery 8-12 years Other equipment 3-5 years Recently Released Accounting Pronouncements - The Financial Accounting ------------------------------------------- Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") 141 - "Business Combinations" that applies to all business combinations completed subsequent to June 30, 2001. SFAS 141 requires use of the purchase method for accounting for a business combination. Other provisions of SFAS 141 must be adopted concurrently with the adoption of SFAS 142. Roper does not expect the full adoption of SFAS 141 to significantly affect its accounting for any business combinations completed prior to June 30, 2001. The FASB issued SFAS 142 - "Goodwill and Other Intangible Assets" that Roper intends to adopt effective November 1, 2001 (otherwise, adoption would be required on November 1, 2002). Once adopted, this standard provides that goodwill will no longer be subject to amortization. Instead, goodwill will be subjected to a periodic analysis to evaluate possible impairment. Any such impairment would be recognized as an expense immediately. The FASB issued SFAS 143 - "Accounting for Asset Retirement Obligations" that Roper is required to adopt by November 1, 2002. Roper does not currently have, nor is it expected to have, any material asset retirement obligations subject to this new standard. The FASB issued SFAS 144 - "Accounting for the Impairment or Disposal of Long-Lived Assets" that Roper is required to adopt by November 1, 2002. This new standard does not apply to goodwill. Roper does not expect the adoption of this standard to result in an impairment charge. Research and Development - Research and development costs include salaries ------------------------ and benefits, rents, supplies, and other costs related to various products under development. Research and development costs are expensed in the period incurred and totaled $26.3 million, $22.6 million and $16.7 million for the years ended October 31, 2001, 2000 and 1999, respectively. Revenue Recognition - Revenue is generally recognized as products are ------------------- shipped or services are rendered. Some sales contracts contain customer acceptance provisions. When the customer's specifications are known and Roper can demonstrate compliance with these requirements, it recognizes revenue upon delivery of the product, which may precede formal acceptance by the customer. In isolated cases whereby relevant criteria have been satisfied, Roper may recognize revenue even though delivery has not occurred. Revenues under certain relatively long-term and relatively large-value construction projects are recognized under the percentage-of-completion method using the ratio of costs incurred to total estimated costs as the measure of performance. Estimated losses on any projects are recognized as soon as such losses become known. Stock Options - Roper accounts for stock-based compensation under the ------------- provisions of Accounting Principles Board Opinion 25 - "Accounting for Stock Issued to Employees." Stock-based compensation is measured at its fair value at the grant date in accordance with an option-pricing model. SFAS 123 - "Accounting for Stock-Based Compensation," provides that the related expense may be recorded in the basic financial statements or the pro forma effect on earnings may be disclosed in the financial statements. Roper provides the pro forma disclosures. Non-employee directors of Roper are eligible to receive stock options for its common stock. These stock options are accounted for the same as stock options granted to employees. Roper has never issued stock options other than those issued to employees or its non-employee directors. F-9 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000 and 1999 (2) Business Acquisitions --------------------- Roper has acquired various businesses as part of its on-going acquisition program. The acquisition program pursues opportunities within Roper's existing business segments that Roper management believes will enhance the value of Roper common stock to its shareholders. Over the past three years, Roper completed three business acquisitions in fiscal 2001, nine during fiscal 2000 and one in fiscal 1999. The purchase price for each of these acquisitions was negotiated with unaffiliated third parties, Roper acquired 100% of the ownership interests of the acquired business, and each of these acquisitions was accounted for using the purchase method of accounting. The assets and liabilities of the acquired businesses were recorded at their estimated fair values, and the results of operations were included in Roper's results of operations beginning from the date acquired. Some allocations of fair value associated with recent acquisitions included estimates and were preliminary as of October 31, 2001. Subsequent to October 31, 2001, Roper and the sellers of the Struers and Logitech businesses agreed on a purchase price adjustment related to the level of working capital on hand at the closing date requiring Roper to pay an additional DKK 55.7 million (approximately $7 million). This amount is not reflected in the table that follows and will be reported as an acquisition cost during fiscal 2002. It is customary that Roper and sellers of businesses acquired by Roper have unresolved issues regarding the final determination of the purchase price at the closing date of an acquisition. Acquisition costs include amounts paid to sellers, amounts incurred for due diligence and other direct external costs associated with the acquisition. Acquisitions whose costs were greater than 5% of Roper's total assets at the beginning of the fiscal year during which the acquisition occurred are listed in the table that follows (acquisition costs in thousands). All acquisitions listed in the following table were paid for with cash.

Date Acquisition Goodwill acquired costs Business segment period ----------- ----------- ---------------------------- --------- Struers and Logitech Sept. 2001 $143,268 Analytical Instrumentation NA Hansen Technologies Sept. 2000 36,395 Industrial Controls 25 years Antek Instruments Aug. 2000 22,017 Analytical Instrumentation 30 years Abel Pump May 2000 22,948 Fluid Handling 30 years MASD Nov. 1999 49,332 Analytical Instrumentation 25 years Petroleum Analyzer June 1999 36,439 Analytical Instrumentation 25 years

Struers develops, manufactures and markets materials analysis preparation equipment and consumables used in quality inspection, failure analysis and research of solid materials. Logitech develops, manufactures and markets high-precision material-shaping equipment used primarily in the production of advanced materials for the semiconductor and opto-electronics markets. Struers is headquartered near Copenhagen, Denmark and Logitech is headquartered near Glasgow, Scotland. Both companies also share sales and service locations in the U.S., France, Germany and Japan. F-10 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000 and 1999 The following information summarizes the allocation of fair values assigned to the assets and liabilities of Struers and Logitech at the acquisition date (in thousands). Current assets, excluding cash $ 30,482 Property and equipment 3,839 Intangible assets, including goodwill 120,062 Other noncurrent assets 840 Current liabilities (10,953) Noncurrent liabilities (1,002) --------- Total acqusition costs, excluding cash acquired $ 143,268 ========= None of the goodwill allocated to Struers and Logitech ($99.4 million) is expected to be deductible for income tax purposes. Other intangible assets, subject to amortization, included its existing customer base ($13.5 million amortized over 10 years), unpatented technology ($1.6 million amortized over 10 years) and sales order backlog ($0.4 million amortized over 4 months). Other intangible assets, not subject to amortization, were trade names ($5.2 million). Hansen Technologies distributes manufactured and outsourced shut-off and control valves, auto-purgers and hermetic pumps for the commercial refrigeration industry. Hansen Technologies' principal facility is located near Chicago, Illinois. Antek Instruments manufactures and supplies spectrometers primarily used to detect sulfur, nitrogen and other chemical compounds in petroleum, food and beverage processing and other industries. Antek Instruments' principal facilities are located in Houston and near Austin, Texas. Abel Pump manufactures and supplies specialty positive displacement pumps for a variety of industrial applications, primarily involving abrasive or corrosive fluids or those with high solids content. Abel Pump's principal facility is located near Hamburg, Germany. MASD designs, manufactures and markets high-speed digital cameras used in automotive, industrial, military and research markets. MASD also manufactures and markets high-resolution digital cameras for the machine vision and image conversion markets. MASD's principal facility is located in San Diego, California. This business was subsequently merged with a complementary business and currently operates as Redlake MASD. Petroleum Analyzer manufactures, markets and distributes instrumentation products for petroleum analysis in the laboratory and process markets. The acquired business has principal facilities in San Antonio, Texas and near Frankfurt, Germany. This business was merged into a pre-existing complementary business. Using applicable rules, the following unaudited pro forma summary presents Roper's consolidated results of operations as if the Struers and Logitech and total acquisitions during fiscal 2001 and 2000 had occurred at the beginning of fiscal 1999 (in thousands, except per share data). Goodwill associated with acquisitions completed subsequent to June 30, 2001 has not been amortized for purposes of this pro forma presentation to be consistent with current practice. Also, actual results may have been different had the acquisitions occurred at an earlier date and this pro forma information provides no assurance as to future results. F-11 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000 and 1999

Year ended October 31, ------------------------------------------------------------------- 2001 2000 ------------------------------- --------------------------------- Struers and Struers and Logitech Total Logitech Total ------------ ------------ ------------ ----------- Net sales $ 653,753 $ 662,515 $ 578,276 $ 646,193 ============ ============ ============ =========== Net earnings $ 60,952 $ 61,681 $ 50,980 $ 51,982 ============ ============ ============ =========== Net earnings per share: Basic $ 1.98 $ 2.01 $ 1.67 $ 1.71 ============ ============ ============ =========== Diluted $ 1.94 $ 1.96 $ 1.63 $ 1.67 ============ ============ ============ ===========

(3) Inventories ----------- The components of inventories at October 31 were as follows (in thousands):

2001 2000 -------- -------- Raw materials and supplies $ 47,339 $ 44,493 Work in process 13,047 16,704 Finished products 31,284 24,187 LIFO reserve (1,323) (1,757) -------- -------- $ 90,347 $ 83,627 ======== ========

(4) Property, Plant and Equipment ----------------------------- The components of property, plant and equipment at October 31 were as follows (in thousands):

2001 2000 --------- --------- Land $ 2,944 $ 2,277 Buildings 24,996 21,263 Machinery, tooling and other equipment 83,541 78,289 --------- --------- 111,481 101,829 Accumulated depreciation and amortization (59,594) (52,922) --------- --------- $ 51,887 $ 48,907 ========= =========

(5) Accrued Liabilities ------------------- Accrued liabilities at October 31 were as follows (in thousands):

2001 2000 --------- --------- Wages and other compensation $ 27,152 $ 17,929 Commissions 8,376 6,889 Interest 5,704 6,074 Other 19,788 17,407 --------- --------- $ 61,020 $ 48,299 ========= =========

F-12 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000 and 1999 (6) Income Taxes ------------ Earnings before income taxes for the years ended October 31 consisted of the following components (in thousands):

2001 2000 1999 ----------- ----------- ----------- United States $ 64,879 $ 61,074 $ 59,972 Other 21,560 14,857 12,312 ----------- ----------- ----------- $ 86,439 $ 75,931 $ 72,284 =========== =========== ===========

Components of income tax expense for the years ended October 31 were as follows (in thousands):

2001 2000 1999 ----------- ----------- ----------- Current: Federal $ 21,709 $ 19,587 $ 16,317 State 1,189 945 1,102 Foreign 6,909 5,559 5,449 Deferred expense (benefit) 793 562 2,070 ----------- ----------- ----------- $ 30,600 $ 26,653 $ 24,938 =========== =========== ===========

Reconciliations between the federal statutory income tax rate and the effective income tax rate for the years ended October 31 were as follows:

2001 2000 1999 ----------- ----------- ----------- Federal statutory rate 35.0% 35.0% 35.0% Exempt income of Foreign Sales Corporation (4.3) (3.7) (3.7) Goodwill amortization 2.6 2.3 2.3 Other, net 2.1 1.5 0.9 ----------- ----------- ----------- 35.4% 35.1% 34.5% =========== =========== ===========

Components of deferred tax assets and liabilities at October 31 were as follows (in thousands):

2001 2000 ----------- ----------- Deferred tax assets: Reserves and accrued expenses $ 7,735 $ 4,964 Inventories 3,617 1,315 Postretirement medical benefits 631 545 Foreign taxes 575 - Research and development - 800 ----------- ----------- Total deferred tax assets 12,558 7,624 ----------- ----------- Deferred tax liabilities: Amortizable intangible assets 2,629 365 Plant and equipment 1,599 1,738 Former IC-DISC recapture 577 724 ----------- ----------- Total deferred tax liabilities 4,805 2,827 ----------- ----------- Net deferred tax asset $ 7,753 $ 4,797 =========== ===========

Roper has not recognized a valuation allowance since management has determined that it is more likely than not that the results of future operations will generate sufficient taxable income to realize all deferred tax assets. F-13 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000 and 1999 (7) Long-Term Debt --------------- Total debt at October 31 consisted of the following (table amounts in thousands):

2001 2000 ----------- ----------- $275 million credit facility $ 178,114 $ 107,581 7.58% Senior Guaranteed Secured Notes 40,000 40,000 7.68% Senior Guaranteed Secured Notes 85,000 85,000 Supplier financing agreement 20,307 - Other 3,419 8,728 ----------- ----------- Total debt 326,840 241,309 Less current portion 3,010 6,706 ----------- ----------- Long-term debt $ 323,830 $ 234,603 =========== ===========

In May 2000, Roper entered into two new credit agreements and simultaneously canceled its then-existing $200 million U.S. revolving credit facility and its $30 million German revolving credit facility. One of the new agreements was with a group of banks and provided for a $275 million credit facility consisting primarily of revolving loans, swing line loans and letters of credit. Interest on outstanding borrowings is influenced by the type and currency of the borrowings. Interest on outstanding borrowings under this facility is a base rate plus a margin. The margin is influenced by certain financial ratios of Roper and can range from 0.625% to 1.125%. This facility also provides that Roper will maintain certain financial ratios addressing, among other things, coverage of fixed charges, total debt under other agreements, consolidated net worth and capital expenditures. Other costs and provisions of this facility are believed to be customary. Repayment of Roper's obligations under this facility is guaranteed by its domestic subsidiaries and the pledge of some of the stock of some of Roper's foreign subsidiaries. This agreement matures on May 18, 2005. At October 31, 2001, utilization of the $275 million facility included $86.5 million of U.S. denominated borrowings, $91.6 million of borrowings denominated in euros and $2.9 million of outstanding letters of credit. The weighted average interest rate on outstanding borrowings at October 31, 2001 under this facility was 4.2%. The other new May 2000 agreement was with a group of insurance companies that provided for $40 million of term notes due May 18, 2007 and $85 million of term notes due May 18, 2010. The guarantees, pledges and financial covenants associated with this agreement were similar, but slightly less restrictive, than those in the $275 million credit facility. In September 2001, Roper entered into an unsecured financing agreement with a non-U.S. bank to facilitate Roper's supply agreement with RAO Gezprom, a large Russian natural gas company. This agreement matures during 2003 and bears interest that approximates a market rate. Future maturities of long-term debt during each of the next five years ending October 31 and thereafter were as follows (in thousands): 2002 $ 3,010 2003 20,517 2004 109 2005 178,204 2006 - Thereafter 125,000 ----------- $ 326,840 =========== F-14 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000 and 1999 (8) Retirement and Other Benefit Plans ---------------------------------- Roper maintains two defined contribution retirement plans under the provisions of Section 401(k) of the Internal Revenue Code covering substantially all domestic employees not subject to collective bargaining agreements. Roper partially matches employee contributions. Its costs related to these two plans were $4,126,000, $3,956,000 and $3,269,000 in fiscal 2001, 2000 and 1999, respectively. Roper also maintains various defined benefit retirement plans covering employees of non-U.S. subsidiaries and a plan that supplements certain employees for the contribution ceiling applicable to the Section 401(k) plans. The costs and accumulated benefit obligations associated with each of these plans were not material. Pursuant to the fiscal 1999 Petroleum Analyzer acquisition, Roper agreed to assume a defined benefit pension plan covering certain U.S. employees subject to a collective bargaining agreement. Upon obtaining necessary regulatory approvals, Roper intends to terminate this plan. Total plan assets at October 31, 2001 were not material and the anticipated costs associated with terminating this plan were not expected to be material. In November 1999, Roper's Board of Directors (the "Board") approved an employee stock purchase plan covering eligible employees whereby they may designate up to 10% of eligible earnings to purchase Roper's common stock at a 10% discount to the average closing price of its common stock at the beginning and end of a quarterly period. The common stock sold to the employees may be either treasury stock, stock purchased on the open market, or newly issued shares authorized by the Board on a periodic basis. During the years ended October 31, 2001 and 2000, participants of the employee stock purchase plan purchased 8,000 and 9,000 shares, respectively, of Roper's common stock for total consideration of $257,000 and $271,000, respectively. All of these shares were purchased from Roper's treasury shares. (9) Common Stock Transactions ------------------------- Roper's restated Certificate of Incorporation provides that each outstanding share of Roper's common stock entitles the holder thereof to five votes per share, except that holders of outstanding shares with respect to which there has been a change in beneficial ownership during the four years immediately preceding the applicable record date will be entitled to one vote per share. Roper has a Shareholder Rights Plan whereby one Preferred Stock Purchase Right (a "Right") accompanies each outstanding share of common stock. Such Rights only become exercisable, or transferable apart from the common stock, ten business days after a person or group acquires various specified levels of beneficial ownership, with or without the Board's consent. Each Right may be exercised to acquire one one-thousandth of a newly issued share of Roper's Series A Preferred Stock, at an exercise price of $170, subject to adjustment. Alternatively, upon the occurrence of certain specified events, the Rights allow holders to purchase Roper's common stock having a market value at such time of twice the Right's exercise price. The Rights may be redeemed by Roper at a redemption price of $0.01 per Right at any time until the tenth business day following public announcement that a 20% position has been acquired or ten business days after commencement of a tender or exchange offer. The Rights expire on January 8, 2006. Roper periodically enters into agreements with the management of newly-acquired companies for the issuance of Roper's common stock based on the achievement of specified goals. A similar agreement was made with a corporate executive. At October 31, 2001, 20,000 shares of common stock were reserved for future issuance under such agreements. F-15 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000 and 1999 (10) Stock Options ------------- Roper has two stock incentive plans (the "1991 Plan" and the "2000 Plan") which authorize the issuance of up to 4,500,000 shares of common stock to certain directors, key employees, and consultants of Roper as incentive and/or nonqualified stock options, stock appreciation rights or equivalent instruments. Stock options under both plans may be granted at prices not less than 100% of market value of the underlying stock at the date of grant. All stock options granted under these plans generally vest annually and ratably over a five-year period from the date of the grant. Stock options expire ten years from the date of grant. The 1991 Plan provided that options must be granted by December 17, 2001. The 2000 Plan has no expiration date. Roper also has a stock option plan for non-employee directors (the "Non-employee Director Plan"). The Non-employee Director Plan provides for each non-employee director appointed or elected to the Board initial options to purchase 4,000 shares of Roper's common stock and thereafter options to purchase an additional 4,000 shares each year under terms and conditions similar to the above-mentioned stock option plans, except that following their grant, all options become fully vested at the time of the Annual Meeting of Shareholders following the grant date and are exercisable ratably over five years following the date of grant. A summary of stock option transactions under these plans and information about stock options outstanding at October 31, 2001 are shown below:

Outstanding options Exercisable options --------------------------- -------------------------- Average Average exercise exercise Number price Number price ---------- ----------- ----------- ----------- October 31, 1998 2,087,000 $ 17.24 1,109,000 $ 13.08 Granted 350,000 18.71 Exercised (251,000) 13.66 Canceled (69,000) 22.22 ----------- October 31, 1999 2,117,000 17.67 1,226,000 14.67 Granted 365,000 33.18 Exercised (320,000) 13.68 Canceled (79,000) 25.76 ----------- October 31, 2000 2,083,000 20.69 1,199,000 16.45 Granted 515,000 34.85 Exercised (292,000) 18.34 Canceled (75,000) 25.39 ----------- October 31, 2001 2,231,000 $ 24.11 1,171,000 $ 17.91 ===========

F-16 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000 and 1999

Outstanding options Exercisable options ---------------------------------------- ------------------------ Average Average Average exercise remaining exercise Exercise price Number price life (yrs) Number price ---------------- ----------- --------- ----------- ----------- -------- $ 3.75- 10.00 165,000 $ 6.75 1.1 165,000 $ 6.75 10.01- 15.00 165,000 11.81 3.0 165,000 11.81 15.01- 20.00 606,000 17.39 4.4 461,000 17.25 20.01- 25.00 220,000 22.74 5.1 186,000 22.75 25.01- 30.00 232,000 27.35 6.1 121,000 27.45 30.01- 35.00 653,000 32.82 8.5 69,000 33.00 35.01- 41.82 190,000 39.09 9.5 4,000 35.84 ----------- -------- -------- --------- -------- $ 3.75- 41.82 2,231,000 $ 24.11 5.9 1,171,000 $ 17.91 =========== ======== ======== ========= ========

For pro forma disclosure purposes, the following fair values and the primary assumptions used to determine these fair values were used. All stock options granted during each of the years ended October 31, 2001, 2000 and 1999 were at exercise prices equal to the market price of Roper's common stock when granted. Fair values were determined using the Black-Scholes model.

2001 2000 1999 ----------- ----------- ----------- Weighted average fair value per share ($) 16.86 15.37 8.95 Risk-free interest rate (%) 5.00 - 6.00 6.75 5.75 Average expected option life (years) 7.00 7.00 7.00 Expected volatility (%) 31 - 45 35 - 49 35 - 41 Expected dividend yield (%) 0.75 1.00 0.75

Had Roper recognized compensation expense during fiscal 2001, 2000 and 1999 for the fair value of stock options granted in accordance with the provisions of SFAS 123, pro forma earnings and pro forma earnings per share would have been as presented below.

2001 2000 1999 ----------- ----------- ----------- Net earnings, as reported (in thousands) $ 55,839 $ 49,278 $ 47,346 Net earnings, pro forma (in thousands) 50,859 45,385 44,177 Net earnings per share, as reported: Basic 1.82 1.62 1.56 Diluted 1.77 1.58 1.53 Net earnings per share, pro forma: Basic 1.65 1.49 1.46 Diluted 1.61 1.46 1.43

The disclosed pro forma effects on earnings do not include the effects of stock options granted prior to fiscal 1996 (affecting fiscal 2000 and fiscal 1999) since the provisions of SFAS 123 are not applicable to stock options for this purpose. The pro forma effects of applying SFAS 123 to fiscal 2001, 2000 and 1999 may not be representative of the pro forma effects in future years. Based on the vesting schedule of Roper's stock option grants, the pro forma effects on earnings are most pronounced in the early years following each grant. The timing and magnitude of any future grants is at the discretion of Roper's Board and cannot be assured. F-17 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001,2000, and 1999 (11) Contingencies ------------- Roper, in the ordinary course of business, is the subject of, or a party to, various pending or threatened legal actions, including those pertaining to product liability and employment practices. It is vigorously contesting all lawsuits that, in general, are based upon claims of the kind that have been customary over the past several years. Based upon Roper's past experience with resolution of its product liability and employment practices claims and the limits of the primary, excess, and umbrella liability insurance coverages that are available with respect to pending claims, management believes that adequate provision has been made to cover any potential liability not covered by insurance, and that the ultimate liability, if any, arising from these actions should not have a material adverse effect on the consolidated financial position or results of operations of Roper. Included in other noncurrent assets at October 31, 2001 are estimated insurable settlements receivable from insurance companies of $1.7 million. Roper's future minimum lease commitments total $37.1 million at October 31, 2001. These commitments include $9.5 million in fiscal 2002, $6.7 million in fiscal 2003, $4.8 million in fiscal 2004, $3.2 million in fiscal 2005 and $2.6 million in fiscal 2006. (12) Segment and Geographic Area Information --------------------------------------- Roper's operations are grouped into three business segments based on similarities between products and services: Industrial Controls, Fluid Handling and Analytical Instrumentation. The Industrial Controls segment's products include industrial valve, control and measurement products; microprocessor-based rotating machinery control systems, panels and associated technical services; and vibration monitoring instruments. Products included within the Fluid Handling segment are rotary gear, progressing cavity, membrane, positive displacement, centrifugal and piston-type metering pumps; flow measurement and metering products; and precision integrated chemical dispensing systems. The Analytical Instrumentation segment's products include fluid properties test products, materials analysis products, industrial leak test products, digital imaging products, spectroscopy products and specimen preparation and handling equipment used in the operation of transmission electron and other microscopes. Roper's management structure and internal reporting are also aligned consistent with these three segments. There were no material transactions between Roper's business segments during any of the three years ended October 31, 2001. Sales between geographic areas are primarily of finished products and are accounted for at prices intended to represent third-party prices. Operating profit by business segment and by geographic area is defined as sales less operating costs and expenses. These costs and expenses do not include unallocated corporate administrative expenses. Items below income from operations on Roper's statement of earnings are not allocated to business segments. Assets were allocated to that segment or geographic area where the assets were primarily used. Corporate assets were principally comprised of cash, recoverable insurance claims, deferred compensation assets, unamortized deferred financing costs and property and equipment. F-18 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001,2000, and 1999 Selected financial information by business segment for the years ended October 31 follows (in thousands):

Industrial Fluid Analytical Controls Handling Inst. Corporate Total ----------- ----------- ----------- ------------- ----------- 2001 Net sales $ 196,738 $ 125,399 $ 264,369 $ - $ 586,506 Operating profit 37,836 27,123 43,157 (9,688) 98,428 Total assets: Operating assets 78,807 50,714 148,389 - 277,910 Intangible assets, net 74,085 65,887 311,924 1,121 453,017 Other 5,135 (1,262) 15,111 12,211 31,195 ----------- Total 762,122 Capital expenditures 2,233 1,804 3,307 111 7,455 Goodwill amortization 4,347 2,616 8,745 - 15,708 Depreciation and other amortization 2,663 3,248 5,467 369 11,747 2000 Net sales $ 159,262 $ 121,387 $ 223,164 $ - $ 503,813 Operating profit 28,460 29,600 36,509 (6,373) 88,196 Total assets: Operating assets 77,772 57,590 117,174 - 252,536 Intangible assets, net 70,965 66,884 184,065 1,281 323,195 Other 3,695 (2,090) 7,312 12,254 21,171 ----------- Total 596,902 Capital expenditures 3,936 6,380 4,773 61 15,150 Goodwill amortization 2,672 2,209 7,969 - 12,850 Depreciation and other amortization 2,423 2,712 4,019 294 9,448 1999 Net sales $ 160,090 $ 98,298 $ 148,868 $ - $ 407,256 Operating profit 29,973 27,386 27,713 (7,117) 77,955 Total assets: Operating assets 55,704 37,245 88,405 - 181,354 Intangible assets, net 44,314 41,055 129,612 39 215,020 Other 3,411 (1,981) 6,408 15,951 23,789 ----------- Total 420,163 Capital expenditures 1,935 1,702 1,425 86 5,148 Goodwill amortization 2,021 1,595 5,338 - 8,954 Depreciation and other amortization 2,377 1,879 2,457 299 7,012

F-19 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000 and 1999 Summarized data for Roper's U.S. and foreign operations (principally in Europe and Japan) for the years ended October 31 were as follows (in thousands): Corporate adjustments United and elimi- States Non-U.S. nations Total --------- ----------- ----------- -------- 2001 Sales to unaffiliated customers $ 451,189 $ 135,317 $ - $586,506 Sales between geographic areas 41,752 9,394 (51,146) - --------- ----------- ----------- -------- Net sales $ 492,941 $ 144,711 $ (51,146) $586,506 ========= =========== =========== ======== Long-lived assets $ 367,537 $ 154,230 $ 7,302 $529,069 ========= =========== =========== ======== 2000 Sales to unaffiliated customers $ 370,351 $ 133,462 $ - $503,813 Sales between geographic areas 29,435 6,958 (36,393) - --------- ----------- ----------- -------- Net sales $ 399,786 $ 140,420 $ (36,393) $503,813 ========= =========== =========== ======== Long-lived assets $ 327,311 $ 49,251 $ 6,385 $382,947 ========= =========== =========== ======== 1999 Sales to unaffiliated customers $ 345,376 $ 61,880 $ - $407,256 Sales between geographic areas 20,282 4,760 (25,042) - --------- ----------- ----------- -------- Net sales $ 365,658 $ 66,640 $ (25,042) $407,256 ========= =========== =========== ======== Long-lived assets $ 229,898 $ 27,795 $ 651 $258,344 ========= =========== =========== ======== Export sales from the United States during the years ended October 31, 2001, 2000 and 1999 were $238 million, $195 million and $163 million, respectively. In the year ended October 31, 2001 these exports were shipped primarily to Europe, excluding Russia (33%), Russia (25%), Japan (14%), elsewhere in Asia and the Far East (11%), Latin America (7%) and other (10%). F-20 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000 and 1999 Sales to customers outside the United States accounted for a significant portion of Roper's revenues. Sales are attributed to geographic areas based upon the location where the product is ultimately shipped. Foreign countries that accounted for at least 10% of Roper's net sales in any of the past three years have been individually identified in the following table (in thousands). Other countries have been grouped by region.

Industrial Fluid Analytical Controls Handling Inst. Total ---------- -------- ---------- -------- 2001 Europe, excluding Russia $ 34,233 $ 18,444 $ 71,920 $124,597 Japan 910 4,044 32,299 37,253 Asia and Far East, excluding Japan 7,372 2,890 28,131 38,393 Russia 58,389 - 1,389 59,778 Latin America 6,923 1,361 10,419 18,703 Rest of the world 11,222 6,993 10,364 28,579 ---------- -------- ---------- -------- Total $ 119,049 $ 33,732 $ 154,522 $307,303 ========== ======== ========== ======== 2000 Europe, excluding Russia $ 31,506 $ 10,811 $ 56,187 $ 98,504 Japan 822 7,767 27,783 36,372 Asia and Far East, excluding Japan 8,304 2,686 19,204 30,194 Russia 39,980 - 992 40,972 Latin America 8,436 881 9,085 18,402 Rest of the world 16,382 8,064 10,361 34,807 ---------- -------- ---------- -------- Total $ 105,430 $ 30,209 $ 123,612 $259,251 ========== ======== ========== ======== 1999 Europe, excluding Russia $ 26,219 $ 5,009 $ 39,586 $ 70,814 Japan 298 1,617 22,621 24,536 Asia and Far East, excluding Japan 9,044 1,663 7,122 17,829 Russia 36,715 16 232 36,963 Latin America 16,959 2,875 4,974 24,808 Rest of the world 20,113 7,461 4,178 31,752 ---------- -------- ---------- -------- Total $ 109,348 $ 18,641 $ 78,713 $206,702 ========== ======== ========== ========

(13) Restructuring Activities ------------------------ During the three months ended April 30, 2001, Roper recorded $2,559,000 of expenses, reported as part of selling, general and administrative expenses, related to activities to close certain activities at its Petrotech unit and to consolidate certain other facilities. These expenses included approximately $950,000 of personnel costs and $1,100,000 of asset impairment. All significant restructuring activities were completed by October 31, 2001. The exited Petrotech activities represented 1% of Roper's total net sales during fiscal 2001 and 4% of net sales during fiscal 2000. The operating profit of these activities was immaterial to Roper during each of fiscal 2001 and fiscal 2000. The total workforce reduction pursuant to these restructuring activities was approximately 150 people, or about 6% of Roper's total workforce at that time. F-21 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements October 31, 2001, 2000, and 1999 (14) Quarterly Financial Data (unaudited) ------------------------------------

First Second Third Fourth quarter quarter quarter quarter ----------- ----------- ----------- ----------- (in thousands, except per share data) 2001 Net sales $ 137,664 $ 146,830 $ 137,969 $ 164,043 Gross profit 69,741 75,658 73,819 89,752 Income from operations 21,864 24,125 23,304 29,135 Net earnings 11,760 13,862 13,133 17,084 Earnings per common share: Basic* 0.38 0.45 0.43 0.55 Diluted 0.38 0.44 0.41 0.54 2000 Net sales $ 109,453 $ 122,775 $ 124,583 $ 147,002 Gross profit 57,332 64,896 63,974 72,622 Income from operations 17,240 23,476 20,769 26,711 Net earnings 9,680 13,626 11,102 14,870 Earnings per common share: Basic 0.32 0.45 0.36 0.49 Diluted* 0.31 0.44 0.36 0.48

* The sum of the four quarters does not agree with the total for the year due to rounding. F-22 ROPER INDUSTRIES, INC. AND SUBSIDIARIES Schedule II - Consolidated Valuation and Qualifying Accounts for the Years ended October 31, 2000, 1999 and 1998

Additions Balance at charged to Balance at beginning costs and end of year expenses Deductions Other of year ----------- ----------- ------------- ------- ---------- (in thousands) Allowance for doubtful accounts: Year ended October 31, 2001 $ 4,294 $ 822 $ (1,513) $ 741 $ 4,344 Year ended October 31, 2000 3,760 1,805 (1,543) 272 4,294 Year ended October 31, 1999 6,915 1,618 (5,072) 299 3,760 Reserve for inventory obsolescence: Year ended October 31, 2001 10,704 5,103 (4,044) 3,723 15,486 Year ended October 31, 2000 6,769 2,636 (1,644) 2,943 10,704 Year ended October 31, 1999 4,081 2,257 (1,519) 1,950 6,769

Deductions from the allowance for doubtful accounts represented the net write-off of uncollectible accounts receivable. Deductions from the inventory obsolescence reserve represented the disposal of obsolete items. Other included the allowance for doubtful accounts and reserve for inventory obsolescence of acquired businesses at the dates of acquisition, the effects of foreign currency translation adjustments for those companies whose functional currency was not the U.S. dollar, reclassifications and other. During the fourth quarter of fiscal 1998, economic uncertainties in Russia and the region deteriorated and a severe devaluation of the region's currencies occurred. This created additional doubt concerning the collectibility of certain accounts receivable from customers in this region. In response to these events, Roper provided $3.8 million to fully reserve these receivables, except those from RAO Gazprom, a large Russian natural gas company. These fully-reserved accounts were written off during fiscal 1999. S-1 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. NOT APPLICABLE 25 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Reference is made to the information to be included under the captions "BOARD OF DIRECTORS AND EXECUTIVE OFFICERS -- Proposal 1: Election of Three (3) Directors" and "-- Executive Officers", and "VOTING SECURITIES -- Compliance with Section 16 (a) of the Securities and Exchange Act of 1934" in Roper's definitive Proxy Statement which relates to the 2002 Annual Meeting of Shareholders of Roper to be held on March 15, 2002 (the "Proxy Statement"), to be filed within 120 days after the close of Roper's 2001 fiscal year, which information is incorporated herein by this reference. ITEM 11. EXECUTIVE COMPENSATION Reference is made to the information to be included under the captions "BOARD OF DIRECTORS AND EXECUTIVE OFFICERS -- Meetings of the Board and Board Committees; Compensation of Directors", "-- Compensation Committee Interlocks and Insider Participation in Compensation Decisions" and "Executive Compensation" contained ---------------------- in the Proxy Statement, which information is incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Reference is made to the information included under the captions "VOTING SECURITIES" in the Proxy Statement, which information is incorporated herein by this reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not Applicable 26 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) The Consolidated Financial Statements listed in Item 8 of Part II are filed as a part of this Annual Report. (a)(2) The following consolidated financial statement schedule on page S-1 is filed in response to this Item. All other schedules are omitted or the required information is either inapplicable or is presented in the consolidated financial statements or related notes: II. Consolidated Valuation and Qualifying Accounts for the Years ended October 31, 2001, 2000 and 1999. (b) Reports on Form 8-K ------------------- Roper did not file any Current Reports on Form 8-K during the fourth quarter of fiscal 2001. (c) Exhibits -------- The following exhibits are separately filed with this Annual Report. Exhibit No. Description of Exhibit ---------- ---------------------- 2.1 Asset Purchase Agreement (Media Cybernetics LP) /(a)/2.2 Share Sale and Purchase Agreement (Struers A/S & Logitech Limited) /(b)/3.1 Amended and Restated Certificate of Incorporation, including Form of Certificate of Designation, Preferences and Rights of Series A Preferred Stock /(c)/3.2 Amended and Restated By-Laws /(d)/4.01 Rights Agreement between Roper Industries, Inc. and SunTrust Bank, Atlanta, Inc. as Rights Agent, dated as of January 8, 1996, including Certificate of Designation, Preferences and Rights of Series A Preferred Stock (Exhibit A), Form of Rights Certificate (Exhibit B) and Summary of Rights (Exhibit C) /(c)/4.02 Credit Agreement Dated as of May 18, 2000 /(c)/4.03 Note Purchase Agreement Dated as of May 18, 2000 /(b)/10.01 1991 Stock Option Plan, as amended + /(e)/10.02 Non-employee Director Stock Option Plan, as amended + 27 /(f)/10.03 Form of Amended and Restated Indemnification Agreement + /(g)/10.04 Employee Stock Purchase Plan + /(g)/10.05 2000 Stock Incentive Plan + /(c)/10.06 Roper Industries, Inc. Non-Qualified Retirement Plan + 10.07 Brian D. Jellison Employment Agreement dated as of November 6, 2001 + 10.08 Hadj A. Amari offer letter dated September 11, 2000 + 10.09 C. Thomas O'Grady offer letter dated February 19, 2001 + 21 List of Subsidiaries 23.1 Consent of Independent Public Accountants ___________________________ /(a)/Incorporated herein by reference to Exhibits 99.1 to the Roper Industries, Inc. Current Report on Form 8-K filed December 13, 2001 (File No. 1-12273). /(b)/Incorporated herein by reference to Exhibits 3.1 and 10.2 to the Roper Industries, Inc. Annual Report on Form 10-K filed January 21, 1998 (File No. 1-12273). /(c)/Incorporated herein by reference to Exhibits 3.2, 4.02, 4.03 and 10.06 to the Roper Industries, Inc. Form 10-Q filed September 13, 2000 (File No. 1-12273). /(d)/Incorporated herein by reference to Exhibit 4.02 to the Roper Industries, Inc. Current Report on Form 8-K filed January 18, 1996 (File No. 0-19818). /(e)/Incorporated herein by reference to Exhibit 10.03 to the Roper Industries, Inc. Annual Report on Form 10-K filed January 20, 1999 (File No. 1-12273). /(f)/Incorporated herein by reference to Exhibit 10.04 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed August 31, 1999 (File No. 1-12273). /(g)/Incorporated herein by reference to Exhibits 10.04 and 10.05 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed June 12, 2000 (File No. 1-12273). + Management contract or compensatory plan or arrangement. 28 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Roper has duly caused this Report to be signed on its behalf by the undersigned, therewith duly authorized. ROPER INDUSTRIES, INC. (Registrant) By /S/ DERRICK N. KEY January 18, 2002 --------------------------------------- Derrick N. Key, Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of Roper and in the capacities and on the dates indicated. /s/ DERRICK N. KEY Chairman of the Board January 18, 2002 ------------------------------------------ Derrick N. Key /s/ BRIAN D. JELLISON President and Chief Executive January 18, 2002 ------------------------------------------ Officer Brian D. Jellison /s/ MARTIN S. HEADLEY Vice President and Chief January 18, 2002 ------------------------------------------ Financial Officer Martin S. Headley /s/ KEVIN G. McHUGH Controller January 18, 2002 ------------------------------------------ Kevin G. McHugh /s/ W. LAWRENCE BANKS Director January 18, 2002 ------------------------------------------ W. Lawrence Banks /s/ LUITPOLD VON BRAUN Director January 18, 2002 ------------------------------------------ Luitpold von Braun /s/ DONALD G. CALDER Director January 18, 2002 ------------------------------------------ Donald G. Calder /s/ JOHN F. FORT, III Director January 18, 2002 ------------------------------------------ John F. Fort, III /s/ WILBUR J. PREZZANO Director January 18, 2002 ------------------------------------------ Wilbur J. Prezzano /s/ GEORG GRAF SCHALL-RIAUCOUR Director January 18, 2002 ------------------------------------------ Georg Graf Schall-Riaucour /s/ ERIBERTO R. SCOCIMARA Director January 18, 2002 ------------------------------------------ Eriberto R. Scocimara /s/ CHRISTOPHER WRIGHT Director January 18, 2002 ------------------------------------------ Christopher Wright 29 EXHIBIT INDEX Number Exhibit (a)2.1 Asset Purchase Agreement (Media Cybernetics LP) 2.2 Share Sale and Purchase Agreement (Struers A/S & Logitech Limited) incorporated herein by reference to Exhibits 99.1 to the Roper Industries, Inc. Current Report on Form 8-K filed December 13, 2001 (File No. 1-12273). 3.1 Amended and Restated Certificate of Incorporation, including Form of Certificate of Designation, Preferences and Rights of Series A Preferred Stock incorporated herein by reference to Exhibit 3.1 to the Roper Industries, Inc. Annual Report on Form 10-K filed January 21, 1998 (File No. 1-12273). 3.2 Amended and Restated By-Laws incorporated herein by reference to Exhibit 3.2 to the Roper Industries, Inc. Form 10-Q filed September 13, 2000 (File No. 1-12273). 4.01 Rights Agreement between Roper Industries, Inc. and SunTrust Bank, Atlanta, Inc. as Rights Agent, dated as of January 8, 1996, including Certificate of Designation, Preferences and Rights of Series A Preferred Stock (Exhibit A), Form of Rights Certificate (Exhibit B) and Summary of Rights (Exhibit C), incorporated herein by reference to Exhibit 4.02 to the Roper Industries, Inc. Current Report on Form 8-K filed January 18, 1996 (File No. 0-19818). 4.02 Credit Agreement Dated as of May 18, 2000, incorporated herein by reference to Exhibit 4.02 to the Roper Industries, Inc. Form 10-Q filed September 13, 2000 (File No. 1-12273). 4.03 Note Purchase Agreement Dated as of May 18, 2000, incorporated herein by reference to Exhibit 4.03 to the Roper Industries, Inc. Form 10-Q filed September 13, 2000 (File No. 1-12273). 10.01 1991 Stock Option Plan, as amended incorporated herein by reference to Exhibit 10.2 to the Roper Industries, Inc. Annual Report on Form 10-K filed January 21, 1998 (File No. 1-12273). 10.02 Non-employee Director Stock Option Plan, as amended incorporated herein by reference to Exhibit 10.03 to the Roper Industries, Inc. Annual Report on Form 10-K filed January 20, 1999 (File No. 1-12273). 10.03 Form of Amended and Restated Indemnification Agreement incorporated herein by reference to Exhibit 10.04 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed August 31, 1999 (File No. 1-12273). 10.04 Employee Stock Purchase Plan incorporated herein by reference to Exhibits 10.04 and 10.05 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed June 12, 2000 (File No. 1-12273). 10.05 2000 Stock Incentive Plan herein by reference to Exhibits 10.04 and 10.05 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed June 12, 2000 (File No. 1-12273). 10.06 Roper Industries, Inc. Non-Qualified Retirement Plan incorporated herein by reference to Exhibit 10.06 to the Roper Industries, Inc. Form 10-Q filed September 13, 2000 (File No. 1-12273). 10.07 Brian D. Jellison Employment Agreement dated as of November 6, 2001. 10.08 Hadj A. Amari offer letter dated September 11, 2000. 10.09 C. Thomas O'Grady offer letter dated February 19, 2001. 21 List of Subsidiaries 23.1 Consent of Independent Public Accountants _____________________ (a) The following schedules or similar attachments to this exhibit has been omitted and will be furnished supplementally upon request. Disclosure Schedules Section 3(a) - Organization of the Company Section 3(c) - Noncontravention Section 3(f) - Financial Statements Section 3(g) - Events Subsequent to December 31, 2000 Section 3(h) - Undisclosed Liabilities Section 3(i) - Legal Compliance Section 3(j) - Tax Matters Section 3(k) - Real Property Section 3(l) - Intellectual Property Section 3(m) - Software Section 3(q) - Contracts Section 3(s) - Powers of Attorney Section 3(t) - Insurance Section 3(v) - Product Warranty Section 3(x) - Employees Section 3(y) - Employee Benefits Section 3(cc) - Disclosure Exhibits: Exhibit A - Allocation of Asset Purchase Consideration Exhibit B - Escrow Agreement Exhibit C - Third Party Consents Exhibit D - Noncompetition and Assignment of Inventions Agreement Exhibit E - Release Agreement Exhibit F - Employment Agreement Exhibit G - Form of Opinion of Counsel to Company and General Partner Exhibit H - Form of Opinion of Counsel to Parent and Buyer Exhibit I - Employee Profit Sharing Agreement Exhibit J - Estimated Adjustment Schedule