Roper Industries, Inc. (ROP) announced that adjusted earnings (excluding acquisition related inventory charge of 3 cents) for the first quarter were 65 cents per share, in line with the Zacks Consensus Estimate of 65 cents. Earnings were up 10.2% year over year from 59 cents.

The company reported higher sales, increased order growth, impressive cash flow and consistent focus on working capital management and improved margins.

The Verathon acquisition added double-digit sales growth and performed very well in its first full quarter as part of Roper’s Scientific and Industrial Imaging segment, the company said. Moreover, Roper Industries acquired the Heartscape product line and expects to complete additional acquisitions during the year.

Gross margins increased to 52.3% in the quarter from 49.7% in the year-ago period, reflecting strong execution and a higher margin business mix. Margins improved in three of the four segments, leading to overall higher margins for the company.

The gross profit margin for the Industrial Technology segment improved to 49.9% from 48% in the year-ago period. The Scientific & Industrial Imaging margin improved to 59.5% from 54.4% in the year-ago period, while RF Technology improved to 49.7% from 47.4%. This was partially offset by the Energy Systems & Controls segment margin of 50.6%, which fell from 51.9% reported last year.

Adjusted operating income of $104.6 million (excluding restructuring expenses and acquisition-related inventory charge) was up 15.5% from the previous year on improved sales. Although, the selling and administrative costs increased 8.8% year over year, the adjusted operating margin came in at 19.6% in the quarter, an improvement of 170 basis points year over year.

Revenue

First quarter revenues of $534.4 million were up 5.7% year over year, of which 7% of the growth came from Acquisitions/Divestitures and 2% from favorable foreign currency gain. However, this was partially offset by a negative organic growth rate of 3%.

By segment, Scientific & Industrial Imaging and Industrial Technology segments performed well in the quarter as sales increased 54.8% and 3.6%, respectively. However, this was partially offset by segment sales at RF Technology and Energy Systems & Controls, which fell 11.3% and 0.9%, respectively.

Revenues increased primarily due to better-than-expected customer orders, which increased 20% over the prior-year quarter of $471.6 million to a record $567.2 million. Of this 20% growth, 8% came from Acquisitions/Divestitures, 2% from favorable foreign currency gain and 10% from organic growth. Roper Industries witnessed an increase in orders for each of its four segments.

Balance Sheet & Cash Flow

Roper Industries ended the quarter with $191.3 million in cash and equivalents and $1.12 billion in long-term debt (including the current portion). Operating cash flow was a record $95.1 million in the quarter, an increase of 88% over the prior-year quarter. During the quarter, EBITDA increased to $130 million, or 24.3% of sales. Free Cash Flow of $89 million was 17% of sales and 148% of net earnings.

Guidance Raised

As a result of its strong first quarter performance and improving order trends, Roper Industries lifted its full year 2010 earnings per share guidance to $2.95 – $3.10 from the previously expected $2.83 – $3.03. The company also raised its guidance for operating cash flow and now expects to generate between $400 – $425 million, up from $375 – $400 million previously expected.

Roper Industries expects second quarter EPS between 71 cents and 75 cents. The current Zacks Consensus Estimate calls for 73 cents in EPS for the second quarter, in line with the company’s guidance.

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