Our growth strategy includes acquisitions. We may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully.
Our future growth is likely to depend to some degree on our ability to acquire and successfully integrate new businesses. We intend to seek additional acquisition opportunities, both to expand into new markets and to enhance our position in existing markets. There are no assurances, however, that we will be able to successfully identify suitable candidates, negotiate appropriate terms, obtain financing on acceptable terms, complete proposed acquisitions, successfully integrate acquired businesses or expand into new markets. Once acquired, operations may not achieve anticipated levels of revenues, profitability or profitability.cash flows.
Acquisitions involve risks, including difficulties in the integration of the operations, technologies, services and products of the acquired companies and the diversion of management'smanagement’s attention from other business concerns. Although our management will endeavor to evaluate the risks inherent in any particular transaction, there are no assurances that we will properly ascertain all such risks. In addition, prior acquisitions have resulted, and future acquisitions could result, in the incurrence of substantial additional indebtedness and other expenses. Future acquisitions may also result in potentially dilutive issuances of equity securities. Difficulties encountered with acquisitions may have a material adverse effect on our business, financial condition and results of operations.
Product liability, insurance risks and increased insurance costs could harm our operating results.
Our operating results could be adversely affected by a reduction of business with our large customers.
In some of our businesses, we derive a significant amount of revenue from large customers. The loss or reduction of any significant contracts with any of these customers could reduce our revenues and cash flows. Additionally, many of our customers are government entities. In many situations, government entities can unilaterally terminate or modify our existing contracts without cause and without penalty to the government agency.
We face intense competition. If we do not compete effectively, our business may suffer.
The availability and prices of raw materials, parts and components are subject to curtailment or change due to, among other things, suppliers' allocations to other purchasers, interruptions in production by suppliers, changes in exchange rates and prevailing price levels. Some high-performance components for digital imaging products may be in short supply and/or suppliers may have occasional difficulty manufacturing these components to meet our specifications. In addition, some of our products are provided by sole source suppliers. Any change in the supply of, or price for, these parts and components, as well as any increases in commodity prices, particularly copper, could affect our business, financial condition and results of operations.
Environmental compliance costs and liabilities could increase our expenses and adversely affect our financial condition.
Our operations and properties are subject to laws and regulations relating to environmental protection, including air emissions, water discharges, waste management and workplace safety. These laws and regulations can result in the imposition of substantial fines and sanctions for violations and could, in certain instances, require the installation of pollution control equipment or operational changes to limit pollution emissions and/or decrease the likelihood of accidental hazardous substance releases. We must conform our operations and properties to these laws and adapt to regulatory requirements in the countries in which we operate as these requirements change.
We use and generate hazardous substances and wastes in some of our operations and, as a result, could be subject to potentially material liabilities relating to the investigation and clean-up of contaminated properties and to claims alleging personal injury. We have experienced, and expect to continue to experience, costs relating to compliance with environmental laws and regulations. In connection with our acquisitions, we may assume significant environmental liabilities, some of which we may not be aware of at the time of acquisition. In addition, new laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements could require us to incur costs or become
the basis for new or increased liabilities that could have a material adverse effect on our business, financial condition and results of operations.
Some of the industries in which we operate are cyclical, and, accordingly, our business is subject to changes in the economy.
Some of the business areas in which we operate are subject to specific industry and general economic cycles. Certain businesses are subject to industry cycles, including but not limited to, the industrial and energy markets. Accordingly, a downturn in these or other markets in which we participate could materially adversely affect us. If demand changes and we fail to respond accordingly, our results of operations could be materially adversely affected. The business cycles of our different operations may occur contemporaneously. Consequently, the effect of an economic downturn may have a magnified negative effect on material portions of our business.
Our goodwill and intangible assets are a significant amount of our total assets, and any write-off of our intangible assets would negatively affect our results of operations.
Our total assets reflect substantial intangible assets, primarily goodwill. At December 31, 2017,2021, goodwill totaled $8.8 billion$14,094.5 compared to $6.9 billion$11,563.8 of stockholders'stockholders’ equity, and represented 62%59% of our total assets of $14.3 billion.$23,713.9. The goodwill results from our acquisitions, representing the excess of costpurchase price over the fair value of the net identifiable assets we have acquired. We assess at least annually whether there has been an impairment in the value of our goodwill and indefinite economic life intangible assets. If future operating performance at one or more of our business units were to fall significantly below current levels, if competing or alternative technologies emerge, if interest rates rise or if business valuations decline, we could incur a non-cash charge to operating earnings.income. Any determination requiring the write-off of a significant portion of goodwill or unamortized intangible assets would negatively affect our results of operations, the effect of which could be material.
We depend on our ability to develop new products, and any failure to develop or market new products could adversely affect our business.
The future success of our business will depend, in part, on our ability to design and manufacture new competitive products and to enhance existing products so that we maintain our margin profile. This product development may require substantial internal investment. There can be no assurance that unforeseen problems will not occur with respect to the development, performance or market acceptance of new technologies or products or that we will otherwise be able to successfully develop and market new products. Failure of our products to gain market acceptance or our failure to successfully develop and market new products could reduce our margins, which would have an adverse effect on our business, financial condition and results of operations.
We rely on information and technology for many of our business operations which could fail and cause disruption to our business operations.
Our business operations are dependent upon information technology networks and systems to securely transmit, process and store electronic information and to communicate among our locations around the world and with clients and vendors. A shutdown of, or inability to access, one or more of our facilities, a power outage or a failure of one or more of our information technology, telecommunications or other systems could significantly impair our ability to perform such functions on a timely basis. Computer viruses, cyber-attacks,We rely on third-party cloud platforms, such as Amazon Web Services, Google Cloud Platform, and Microsoft Azure to host enterprise and customer systems, and any disruptions of these services could impact our business operations and our ability to service customers. Cyber-attacks, configuration or human error and/or other external hazards and human error could result in the misappropriation of assets or sensitive information, corruption of data or operational disruption. If sustained or repeated, suchFor example, in 2020, Vertafore determined that as a business interruption, system failure,result of human error, three data files containing Texas driver’s license data were inadvertently stored in an unsecured external storage service denial or data loss and damage couldthat appears to have been accessed without authorization. As a result, Vertafore was named as a defendant in a deteriorationnumber of putative class actions regarding the incident.
Global cybersecurity threats and attacks to networks, systems and endpoints can range from uncoordinated individual attempts to gain unauthorized access to IT systems to sophisticated and targeted measures known as advanced persistent threats, directed at the Company, its businesses, its customers and/or its third-party service providers, including, but not limited to, cloud providers and providers of network management services. These may include such things as unauthorized access, phishing attacks, account takeovers, denial of service, introduction of malware or ransomware and other disruptive problems caused by threat actors. Moreover, as more of our abilityemployees work remotely due to perform necessary business functions.the COVID-19 pandemic or otherwise, our employees are increasingly targeted by phishing attacks and endpoints may be more susceptible to threat exposures.
A breachOur customers are increasingly requiring cybersecurity protections and mandating cybersecurity standards in the security of our software could harm our reputation, result in a loss of currentproducts and potential customers,services, and subject us to material claims, which could materially harm our operating results and financial condition.
If our security measures are breached, an unauthorized party may obtain access to our data or our users' or customers' data. In addition, cyber-attacks and similar acts could lead to interruptions and delays in customer processing or a loss or breach of customers' data. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unableincur additional costs to anticipate these techniques orcomply with such demands. While we have experienced, and expect to implement adequate preventative measures. The risk thatcontinue to experience, these types of events could seriously harm our business is likelythreats and incidents, none of them to increase as we expanddate have been material to the number of web-based productsCompany. We seek to deploy measures to deter, prevent, detect, respond to and services we offer,mitigate these threats, including identity and operate in more countries.
Regulatory authorities around the world have adopted and are considering further adoptions of legislative and regulatory proposals concerning data protection. In addition the interpretation and application of consumer andaccess controls, data protection, lawsvulnerability assessments, product software designs which we believe are less susceptible to cyber-attacks, continuous
monitoring of our networks, endpoints and systems and maintenance of backup and recovery capabilities. Despite these efforts, we can make no assurance that we will be able to detect, prevent, timely and adequately address, or mitigate the negative effects of cyberattacks or other security compromises, and such cybersecurity incidents, depending on their nature and scope, could potentially result in the United States, Europemisappropriation, destruction, corruption or unavailability of critical data and elsewhere are often uncertainconfidential or proprietary information (our own or that of third parties) and the disruption of business operations. The potential consequences of a material cybersecurity incident include financial loss, reputational damage, damage to our IT systems, litigation with third parties, theft of intellectual property, fines, diminution in flux. It is possible that these laws may be interpretedthe value of our investment in research and applied in a manner
that is inconsistent with our data practices. If so, in additiondevelopment, and increased cybersecurity protection and remediation costs due to the possibilityincreasing sophistication and proliferation of fines, thisthreats, which in turn could result in an order requiring that we changeadversely affect our data practices, which could have an adverse effect on our businesscompetitiveness and results of operations.
Any security breaches for which we are, or are perceived to be, responsible, in whole or in part, could subject us to legal claims or legal proceedings, including regulatory investigations, which could harm our reputation and result in significant litigation costs and damage awards or settlement amounts. Any imposition of liability, particularly liability that is not covered by insurance or is in excess of insurance coverage, could materially harm our operating results and financial condition. Security
Changes in the supply of, or price for, raw materials, parts and components used in our products could affect our business.
The availability and prices of raw materials, parts and components are subject to curtailment or change due to, among other things, suppliers’ allocations to other purchasers, interruptions in production by suppliers, supply chain delays and disruptions, changes in exchange rates and prevailing price levels. For example, we expect to continue to be impacted by supply chain challenges, including increased material costs, component shortages and transportation disruptions and delays, all of which could escalate in the future. In addition, some of our products are provided by sole source suppliers. Any change in the supply of, or price for, these parts and components, as well as any increases in commodity prices, particularly copper, could affect our business, financial condition and results of operations.
Risks Related to Government Regulations
Regulation of privacy and data security may adversely affect sales of our products and services and result in increased compliance costs.
There has been, and likely will continue to be, increased regulation with respect to the collection, use and handling of an individual’s personal and financial information. Regulatory authorities around the world have passed or are considering legislative and regulatory proposals concerning data protection, privacy and data security. In the United States, Virginia and Colorado passed new comprehensive privacy legislation, and joined California (which further enhanced its existing privacy laws) in directly regulating the collection, use and sharing of personal information. These statutes create civil penalties for violations, and in the case of California, creates a private right of action for data breaches, alsothat increases the risk of data breach litigation. Absent a pre-emptive Federal privacy law, as more states pass privacy legislation, there is a strong possibility that we will be forced to comply with a patchwork of inconsistent privacy regulations. Globally, personal information collected within the European Union and United Kingdom remains subject to the 2018 General Data Protection Regulation (GDPR), which is a UK and European Union-wide legal framework that governs data collection, use, and sharing of an individual’s personal data and creates a range of consumer privacy rights. GDPR provides significant penalties for non-compliance (up to 4% of global revenue) and EU data protection authorities have already issued significant fines. Similarly, in November 2021, China promulgated the Personal Information Protection Law (PIPL) which regulates the processing of personal information of individuals within China. If a company breaches PIPL it can be assessed fines of up 5% of its annual revenue. The interpretation and application of consumer and data protection laws and industry standards in the United States, Europe, China and elsewhere can be uncertain and currently is in flux. Cloud-based solutions may be subject to further regulation, including data localization requirements and other restrictions concerning international transfer of data. The operational and cost impact of these cannot be fully known at this time. In addition to the possibility of fines, application of these existing laws in a manner inconsistent with our data and privacy practices could cause us to lose currentresult in an order requiring that we change our data and potential customers,privacy practices, which could have an adverse effect on our business and results of operations. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business. Moreover,Also, any new law or regulation imposing greater fees or taxes or restriction on the collection, use or transfer of information or data internationally or over the Internet, could result in a decline in the use of our products and services and adversely affect sales and our results of operations. Finally, as we might be requiredincreasingly become a provider of technology solutions, our customers and regulators will expect that we can demonstrate compliance with current data privacy and security regulations as well as our privacy policies and data handling practices, and our inability to expend significant financialdo so may adversely impact sales of our solutions and other resourcesservices to protect further against security breaches or to rectify problems caused by any security breach.certain customers. This isparticularly true for customers in highly-regulated industries, such as the healthcare industry and government contractors, and could result in regulatory actions, fines, legal proceedings and negatively impact our brand, reputation and our business.
General Risk Factors
Any business disruptions due to political instability, armed hostilities, incidents of terrorism, incidents of directed cyber-attacks, public health crisis, extreme weather events or other natural disasters could adversely impact our financial performance.
If terrorist activity, armed conflict, directed cyber-attacks, political instability, public health crisis, such as an epidemic or pandemic related to the COVID-19, or extreme weather events or other natural disasters occur in the U.S. or other locations, such events may negatively impact our operations, cause general economic conditions to deteriorate or cause demand for our products to decline. A prolonged economic slowdown or recession could reduce the demand for our products, and therefore, negatively affect our future sales and profits. Any of these events could have a significant impact on our business, financial condition or results of operations.
The potential insolvency or financial distress of third parties could adversely impact our business and results of operations.
We are exposed to the risk that third parties to various arrangements who owe us money or goods and services, or who purchase goods and services from us, will not be able to perform their obligations or continue to place orders due to insolvency or financial distress. In addition, the global COVID-19 pandemic has created heightened risk that third parties may be unable to perform their obligations or suffer financial distress due to the global economic impact of the pandemic and the regulatory measures that have been enacted by governments to contain the spread of the virus, however, we are unable predict the impact that COVID-19 will have on any of our customers, suppliers, vendors, and other business partners, and each of their financial conditions or their ability to perform their obligations. If third parties fail to perform their obligations under arrangements with us, we may be forced to replace the underlying commitment at current or above market prices or on other terms that are less favorable to us. In such events, we may incur losses, or our results of operations, financial condition or liquidity could otherwise be adversely affected.
Changes to our executive leadership team and any future loss of members of such team, and the resulting management transitions, could harm our operating results.
We have experienced significant changes to our executive leadership team in the past and may do so in the future. Leadership transitions and changes can be inherently difficult to manage and may cause uncertainty or disruption to our business or may increase the likelihood of turnover in key leadership positions. If we cannot effectively manage leadership transitions and changes, it could make it more difficult to successfully operate our business.
Legal proceedings in which we are, or may be, a party may adversely affect us.
We are currently, and may in the future, become subject to legal proceedings and commercial or contractual disputes. These are typically claims that arise in the normal course of business including, without limitation, commercial or contractual disputes with our suppliers or customers, intellectual property matters, third party liability, including product liability claims, and employment claims. We are and may in the future become subject to litigation regarding data or privacy incidents, as more fully described above in “We rely on information and technology for many of our business operations which could fail and cause disruption to our business operations”.
A downgrade in the ratings of our debt could restrict our ability to access the debt capital markets and increase our interest costs.
Unfavorable changes in the ratings that rating agencies assign to our debt may ultimately negatively impact our access to the debt capital markets and increase the costs we incur to borrow funds. If ratings for our debt fall below investment grade, our access to the debt capital markets may be impacted and the price we pay to issue debt could increase. Additionally, our credit agreement includes an increase in interest rates if the ratings for our debt are downgraded. Further, an increase in the level of our indebtedness may increase our vulnerability to adverse general economic and industry conditions and may affect our ability to obtain additional financing.
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ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES
Our corporate offices, consisting of 29,000 square feet of leased space, are located at 6901 Professional Parkway, East, Sarasota, Florida. We have 128 principal locations aroundAs of December 31, 2021, we owned approximately 0.8 million square feet, and leased approximately 3.7 million square feet. Of the world to support our operations, of which 49 are manufacturing, assembly and testing facilities, andtotal 4.5 million square feet, 68% is concentrated in the remaining 79 locations provide sales, programming, service and administrative support functions.United States. We consider our facilities to be in good operating condition and adequate for their present use and believe we have sufficient capacity to meet our anticipated operating requirements.
The following table summarizes the size, location and usage of our principal properties as of December 31, 2017 (amounts in thousands of square feet).
|
| | | | |
| | Office | Office & Manufacturing |
Segment | Region | Leased | Leased | Owned |
| | | | |
RF Technology | | | | |
| U.S. | 1,163 | 108 | — |
| Canada | 30 | — | — |
| Europe | 82 | — | 16 |
| Asia-Pacific | 116 | — | — |
Medical & Scientific Imaging | | | | |
| U.S. | 325 | 275 | 120 |
| Canada | — | 140 | — |
| Europe | 68 | 28 | — |
| Asia-Pacific | 21 | — | — |
| Mexico | — | 43 | — |
Industrial Technology | | | | |
| U.S. | 18 | 260 | 478 |
| Canada | 36 | — | — |
| Europe | 13 | 136 | 43 |
| Asia-Pacific | 21 | — | — |
| Mexico | — | 60 | — |
Energy Systems & Controls | | | | |
| U.S. | — | 322 | — |
| Canada | — | 56 | — |
| Europe | 29 | 20 | 128 |
| Asia-Pacific | — | 28 | 33 |
ITEM 3. LEGAL PROCEEDINGS
Information pertaining to legal proceedings can be found in Note 1213 to the Consolidated Financial Statements included in this Annual Report, and is incorporated by reference herein.
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ITEM 4. | ITEM 4. MINE SAFETY DISCLOSURES |
None
Not Applicable
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the following list of executive officers of the Company as of February 22, 2022 is included as an unnumbered Item in Part I of this report in lieu of being included in the Company’s Proxy Statement relating to the 2022 Annual Meeting of Shareholders.
L. Neil Hunn, 49, has served as President and Chief Executive Officer since August 2018. He previously served as Executive Vice President and Chief Operating Officer from 2017 to 2018. Mr. Hunn also served as Group Vice President of Roper’s medical segment from 2011 to 2018 and helped drive significant growth in the Company’s medical technology and application software businesses. In addition to his operating responsibilities at Roper, Mr. Hunn led the execution of the majority of the company’s capital deployment since joining Roper. Prior to joining Roper, Mr. Hunn served 10 years as Executive Vice President and Chief Financial Officer at MedAssets, an Atlanta-based SaaS company, and as President of its revenue cycle technology businesses. He successfully led MedAssets’ initial public offering and the execution of several M&A transactions. Mr. Hunn also held roles at CMGI, an incubator of Internet businesses, and Parthenon Group, a strategy consulting firm.
Robert C. Crisci, 46, has served as Executive Vice President and Chief Financial Officer since 2018 and as Vice President and Chief Financial Officer from 2017 to 2018. Mr. Crisci joined Roper in 2013 as Vice President, Finance and Investor Relations and led the Company’s financial planning and analysis and investor relations activities. Prior to joining Roper, he served in various roles across investment banking, consulting and finance. His prior experience includes positions at Morgan Keegan, VRA Partners, Devon Value Advisers and Deloitte.
John K. Stipancich, 53, has served as Executive Vice President, General Counsel and Corporate Secretary since 2018 and as Vice President, General Counsel and Corporate Secretary from 2016 to 2018. Prior to joining Roper, Mr. Stipancich was with Newell Brands, Inc., a consumer products company, from 2004 to 2016. At Newell Brands he served as Executive Vice President and Chief Financial Officer from February 2015 to May 2016. Prior thereto, he served in a number of leadership roles at Newell Brands including General Counsel and Corporate Secretary, and Executive Leader of its operations in Europe, the Middle East and Africa. Prior to his twelve years at Newell Brands, Mr. Stipancich served as Executive Vice President, General Counsel and Corporate Secretary for Evenflo Company and Assistant General Counsel for Borden, both KKR portfolio companies at the time. He started his legal career in the Cleveland office of the international law firm of Squire Patton Boggs.
Jason P. Conley, 46, has served as Vice President and Chief Accounting Officer since 2021 and as Vice President and Controller from 2017 to 2021. Prior thereto, he served as the Chief Financial Officer at Managed Healthcare Associates, a Roper subsidiary, from 2013 to 2017. He also led the financial planning and investor relations activities for Roper from 2006 to 2013. Before Roper, Mr. Conley served in various finance and accounting leadership roles at Honeywell International and Deloitte.
PART II
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ITEM 5. | MARKET FOR REGISTRANT'S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock trades on the NYSE under the symbol "ROP"“ROP”. The table below sets forth the range of high and low sales prices for our common stock as reported by the NYSE as well as cash dividends declared during each of our 2017 and 2016 quarters.
|
| | | | | | | | | | | | |
| | High | | Low | | Cash Dividends Declared |
2017 | 4th Quarter | $ | 267.83 |
| | $ | 243.45 |
| | $ | 0.4125 |
|
| 3rd Quarter | 247.54 |
| | 226.81 |
| | 0.35 |
|
| 2nd Quarter | 235.50 |
| | 204.62 |
| | 0.35 |
|
| 1st Quarter | 214.44 |
| | 183.74 |
| | 0.35 |
|
| | | | | | |
2016 | 4th Quarter | $ | 188.04 |
| | $ | 167.91 |
| | $ | 0.35 |
|
| 3rd Quarter | 182.84 |
| | 163.33 |
| | 0.30 |
|
| 2nd Quarter | 184.66 |
| | 164.77 |
| | 0.30 |
|
| 1st Quarter | 187.56 |
| | 158.89 |
| | 0.30 |
|
Based on information available to us and our transfer agent, we believe that as of February 16, 2018 there were 136approximately 200 record holders of our common stock.stock as of February 11, 2022.
Dividends – We have declared a cash dividend in each quarter since our February 1992 initial public offering and we have annually increased our dividend rate since our initial public offering. In December 2017,November 2021, our Board of Directors increased the quarterly dividend paid January 23, 201824, 2022 to $0.4125$0.62 per share from $0.35$0.5625 per share, an increase of 18%10%. This is the twenty-fifthtwenty-ninth consecutive year in which Roperthe Company has increased its dividend. The timing, declaration and payment of future dividends will be at the sole discretion of our Board of Directors and will depend upon our profitability, financial condition, capital needs, future prospects and other factors deemed relevant by our Board of Directors.
Recent Sales of Unregistered Securities - In 2017, there were no sales of unregistered securities.
Performance Graph - This performance graph shall not be deemed "filed"“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or under the Exchange Act.
The following graph compares, for the five year period ended December 31, 2017,2021, the cumulative total stockholder return for our common stock, the Standard and Poor'sPoor’s 500 Stock Index (the "S“S&P 500"500”) and the Standard and Poor'sPoor’s 500 Industrials Index (the "S“S&P 500 Industrials"Industrials”). Measurement points are the last trading day of each of our fiscal years ended December 31, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2017.2021. The graph assumes that $100 was invested on December 31, 20122016 in our common stock, the S&P 500 and the S&P 500 Industrials and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 12/31/2016 | | 12/31/2017 | | 12/31/2018 | | 12/31/2019 | | 12/31/2020 | | 12/31/2021 |
Roper Technologies, Inc. | $ | 100.00 | | | $ | 142.38 | | | $ | 147.39 | | | $ | 197.01 | | | $ | 241.12 | | | $ | 276.51 | |
S&P 500 | 100.00 | | | 121.83 | | | 116.49 | | | 153.17 | | | 181.35 | | | 233.41 | |
S&P 500 Industrials | 100.00 | | | 121.03 | | | 104.95 | | | 135.77 | | | 150.79 | | | 182.63 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| 12/31/2012 | | 12/31/2013 | | 12/31/2014 | | 12/31/2015 | | 12/31/2016 | | 12/31/2017 |
Roper Technologies, Inc. | $ | 100.00 |
| | $ | 124.89 |
| | $ | 141.61 |
| | $ | 172.94 |
| | $ | 167.96 |
| | $ | 239.15 |
|
S&P 500 | 100.00 |
| | 132.39 |
| | 150.51 |
| | 152.59 |
| | 170.84 |
| | 208.14 |
|
S&P 500 Industrials | 100.00 |
| | 140.68 |
| | 154.50 |
| | 150.59 |
| | 178.99 |
| | 216.64 |
|
The information set forth in Item 12 under the heading "Securities“Securities Authorized for Issuance under Equity Compensation Plans"Plans” is incorporated herein by reference.
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ITEM 6. | SELECTED FINANCIAL DATA |
You should read the table below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and related notes included in this Annual Report (amounts in thousands, except per share data).ITEM 6. [RESERVED]
|
| | | | | | | | | | | | | | | | | | | |
| As of and for the Years ended December 31, |
| 2017 (1) | | 2016 (2) | | 2015 (3) | | 2014 (4) | | 2013 (5) |
Operations data: | | | | | | | | | |
Net revenues | $ | 4,607,471 |
| | $ | 3,789,925 |
| | $ | 3,582,395 |
| | $ | 3,549,494 |
| | $ | 3,238,128 |
|
Gross profit | 2,864,796 |
| | 2,332,410 |
| | 2,164,646 |
| | 2,101,899 |
| | 1,882,928 |
|
Income from operations | 1,210,244 |
| | 1,054,563 |
| | 1,027,918 |
| | 999,473 |
| | 842,361 |
|
Net earnings (6) | 971,772 |
| | 658,645 |
| | 696,067 |
| | 646,033 |
| | 538,293 |
|
| | | | | | | | | |
Per share data: | | | |
| | |
| | |
| | |
|
Basic earnings per share | $ | 9.51 |
| | $ | 6.50 |
| | $ | 6.92 |
| | $ | 6.47 |
| | $ | 5.43 |
|
Diluted earnings per share | $ | 9.39 |
| | $ | 6.43 |
| | $ | 6.85 |
| | $ | 6.40 |
| | $ | 5.37 |
|
| | | | | | | | | |
Dividends declared per share | $ | 1.4625 |
| | $ | 1.2500 |
| | $ | 1.0500 |
| | $ | 0.8500 |
| | $ | 0.6950 |
|
| | | | | | | | | |
Balance sheet data: | | | |
| | |
| | |
| | |
|
Working capital (7) | $ | (270,007 | ) | | $ | 331,229 |
| | $ | 897,919 |
| | $ | 884,158 |
| | $ | 730,246 |
|
Total assets (8) | 14,316,413 |
| | 14,324,927 |
| | 10,168,365 |
| | 8,400,185 |
| | 8,169,120 |
|
Long-term debt, net of current portion (8) | 4,354,611 |
| | 5,808,561 |
| | 3,264,417 |
| | 2,190,282 |
| | 2,437,975 |
|
Stockholders' equity | 6,863,564 |
| | 5,788,865 |
| | 5,298,947 |
| | 4,755,360 |
| | 4,213,050 |
|
| |
(1)
| Includes results from the acquisitions of Phase Technology from June 21, 2017, Handshake Software, Inc. from August 4, 2017, Workbook Software A/S from September 15, 2017 and Onvia, Inc. from November 17, 2017. |
| |
(2)
| Includes results from the acquisitions of CliniSys Group Ltd. from January 7, 2016, PCI Medical Inc. from March 17, 2016, GeneInsight Inc. from April 1, 2016, iSqFt Holdings Inc. (d/b/a ConstructConnect) from October 31, 2016, UNIConnect LC from November 10, 2016 and Deltek, Inc. from December 28, 2016. |
| |
(3)
| Includes results from the acquisitions of Strata Decision Technologies LLC from January 21, 2015, SoftWriters Inc. from February 9, 2015, Data Innovations LLC from March 4, 2015, On Center Software LLC from July 20, 2015, RF IDeas Inc. from September 1, 2015, Atlantic Health Partners LLC from September 4, 2015, Aderant Holdings Inc. from October 21, 2015, Atlas Database Software Corp. from October 26, 2015, Black Diamond Advanced Technologies through March 20, 2015 and Abel Pumps through October 2, 2015. |
| |
(4)
| Includes results from the acquisitions of Foodlink Holdings Inc. from July 2, 2014, Innovative Product Achievements LLC from August 5, 2014, Strategic Healthcare Programs Holdings LLC from August 14, 2014. |
| |
(5)
| Includes results from the acquisitions of Managed Health Care Associates Inc. from May 1, 2013 and Advanced Sensors Ltd. from October 4, 2013. |
| |
(6)
| The Tax Cuts and Jobs Act of 2017 (“the Tax Act”) was signed into U.S. law on December 22, 2017, which was prior to the end of the Company’s 2017 reporting period and resulted in a one-time net income tax benefit of $215.4 million. |
| |
(7)
| At December 31, 2017, there were $799 million of senior notes, net of debt issuance costs, due October 1, 2018, and at December 31, 2016, there were $399 million of senior notes, net of debt issuance costs, due November 15, 2017, thus requiring classification as short-term debt, included in working capital. |
| |
(8)
| Total assets and Long-term debt, net of current portion for 2013 and 2014 have been adjusted due to the retrospective adoption of an accounting standard update which requires that our senior notes be shown net of debt issuance costs. The adjustment amounts were $12,749 and $15,861 for the years ended December 31, 2014 and 2013, respectively. |
| |
ITEM 7. | MANAGEMENT'SITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
You should read the following discussion
All currency amounts are in conjunction with "Selected Financial Data" and our Consolidated Financial Statements and related notes included in this Annual Report.millions unless specified
Overview
We are a diversified technology company. We operate businesses that design and develop software (both license and software-as-a-service)SaaS) and engineered products and solutions for a variety of niche end markets.
We pursue consistent and sustainable growth in earnings and cash flow by emphasizing continuous improvement in the operating performance of our existing businesses and by acquiring other carefully selected businesses that offer high value-added software, services, engineered products and solutions that we believe are capable of achieving growth and maintaining high margins. We compete in many niche markets and believe we are the market leader or a competitive alternative to the market leader in most of these markets.
Discontinued Operations
During 2021, Roper signed definitive agreements to divest its TransCore, Zetec and CIVCO Radiotherapy businesses. Our acquisitions have represented both additionsRoper has completed the divestitures of Zetec and CIVCO Radiotherapy, in the first quarter of 2022 and fourth quarter of 2021, respectively, and expects the TransCore transaction to existingclose in the first quarter of 2022, subject to customary closing conditions, including regulatory approvals. The financial results for these businesses and new strategic platforms.are reported as discontinued operations for all periods presented. Information regarding discontinued operations is included in Note 3 of the Notes to Consolidated Financial Statements.
Application of Critical Accounting Policies
Our Consolidated Financial Statements are prepared in conformity with generally accepted accounting principles in the United States ("GAAP"(“GAAP”). A discussion of our significant accounting policies can also be found in the notesNotes to our Consolidated Financial Statements for the year ended December 31, 20172021 included in this Annual Report.
GAAP offers acceptable alternative methods for accounting for certain issues affecting our financial results, such as determining inventory cost, depreciating long-lived assets and recognizing revenue. We have not changed the application of acceptable accounting methods or the significant estimates affecting the application of these principles in the last three years in a manner that had a material effect on our financial statements.Consolidated Financial Statements.
The preparation of financial statements in accordance with GAAP requires the use of estimates, assumptions, judgments and interpretations that can affect the reported amounts of assets, liabilities, revenues and expenses, the disclosure of contingent assets and liabilities and other supplemental disclosures.
The development of accounting estimates is the responsibility of our management. Our management discusses those areas that require significant judgments with the Audit Committee of our Board of Directors. The Audit Committee has reviewed all financial disclosures in our annual filings with the SEC. Although we believe the positions we have taken with regard to uncertainties are reasonable, others might reach different conclusions and our positions can change over time as more information becomes available. If an accounting estimate changes, its effects are accounted for prospectively or through a cumulative catch up adjustment.
Our most significant accounting uncertainties are encountered in the areas of accounts receivable collectibility, inventory valuation, future warranty obligations, revenue recognition, (percentage-of-completion), income taxes, valuation of other intangible assets and goodwill and indefinite-lived impairment analyses. These issues affect each of our business segments andEstimates are evaluated using a combination of historical experience, current conditions and relatively short-term forecasting.
Accounts receivable collectibility is based on the economic circumstances of customers and credits givenconsidered to customers after shipment of products, including in certain cases credits for returned products. Accounts receivable are regularly reviewed to determine customers who have not paid within agreed upon terms, whether these amounts are consistent with past experiences, what historical experience has been with amounts deemed uncollectible and the impact that economic conditions might have on collection efforts in general and with specific customers. The returns and other sales credit allowance is an estimate of customer returns, exchanges, discounts or other forms of anticipated concessions and is treated as a reduction in revenue. The returns and other sales credits histories are analyzed to determine likely future rates for such credits. At December 31, 2017, our allowance for doubtful accounts receivable was $10.3 million and our allowance for sales returns and sales credits was $2.4 million, for a total of $12.7 million, or 1.9% of total gross accounts receivable, as compared to a total of $14.5 million, or 2.3% of total gross accounts receivable, at December 31, 2016. This percentage is influenced by the risk profilebe significant if they meet both of the underlying receivables,following criteria: (1) the estimate requires assumptions about matters that are uncertain at the time the estimate is made, and the timing of write-offs of accounts deemed uncollectible.
We regularly compare inventory quantities on hand against anticipated future usage, which we determine as a function of historical usage or forecasts related to specific items in order to evaluate obsolescence and excessive quantities. When we use historical usage, this information is also qualitatively compared to business trends to evaluate the reasonableness of using historical information as an estimate of future usage. At December 31, 2017, inventory reserves for excess and obsolete inventory were $38.1 million, or 15.7% of gross inventory cost, as compared to $37.2 million, or 17.0% of gross inventory cost, at December 31,
2016. The inventory reserve as a percent of gross inventory cost will continue to fluctuate based upon specific identification of reserves needed based upon(2) changes in our business as well as the physical disposal of obsolete inventory.estimate are reasonably likely to have a material financial impact from period-to-period.
Most of our product-based revenues are covered by warranty provisions that generally provide for the repair or replacement of qualifying defective items for a specified period after the time of sale, typically 12 to 24 months. Future warranty obligations are evaluated using, among other factors, historical cost experience, product evolution and customer feedback. Our expense for warranty obligations was less than 1% of net revenues for each of the years ended December 31, 2017, 2016 and 2015.
Revenues related to the use of the percentage-of-completion method of accounting are dependent on total costs incurred compared with total estimated costs for a project. During the years ended December 31, 2017, 2016 and 2015 we recognized revenue of $249 million, $241 million and $253 million, respectively, using this method. Percentage-of-completion is used primarily for major turn-key, longer term toll and traffic and energy projects and installations of large software application projects. At December 31, 2017, $253 million of revenue related to unfinished percentage-of-completion contracts had yet to be recognized.
Income taxes can be affected by estimates of whether and within which jurisdictions future earnings will occur and if, how and when cash is repatriated to the U.S., combined with other aspects of an overall income tax strategy. Additionally, taxing jurisdictions could retroactively disagree with our tax treatment of certain items, and some historical transactions have income tax effects going forward. Accounting rules require these future effects to be evaluated using current laws, rules and regulations, each of which can change at any time and in an unpredictable manner. If there is a material change in the actual effective tax rates, the time period within which the underlying temporary differences become taxable or deductible, or if the
tax law changes are unfavorable, then we could be required to recognize valuation allowances against deferred tax balances, resulting in an increase to income tax expense and the effective tax rate.
During 2017,2021, our effective income tax rate was 6.1%22.7%, as compared to the 20162020 rate of 30.0%21.5%. The decreaseincrease was due primarily to the recognition of a $215 million net income tax benefitnon-recurring item related to the Tax Act as well as increased excessa UK tax benefits related to equity compensationrate change, which had a $21.7 unfavorable impact in 2017 as compared to 2016.2021. We expect the effective tax rate for 20182022 to be betweenapproximately 21% and 23%to 22%.
We account for goodwill in a purchase business combination as the excess of the costpurchase price over the estimated fair value of the net identifiable assets acquired. Goodwill, which is not amortized, is tested for impairment on an annual basis in conjunction with our annual forecast process during the fourth quarter (or an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value).
When testing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If we elect to perform a qualitative assessment and determine that an impairment is more likely than not, we are then required to perform the quantitative impairment test; otherwise, no further analysis is required. Under the qualitative assessment, we consider various qualitative factors, including macroeconomic conditions, relevant industry and market trends, cost factors, overall financial performance, other entity-specific events and events affecting the reporting unit that could indicate a potential change in the fair value of our reporting unit or the composition of its carrying values. We also consider the specific future outlook for the reporting unit.
We also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. The quantitative assessment utilizes both an equal weighted income approach (discounted cash flows) and a market approach consisting(consisting of a comparable company earnings multiples methodologymethodology) to estimate the fair value of a reporting unit. To determine the reasonableness of the estimated fair values, we review the assumptions to ensure that neither the income approach nor the market approach provides significantly different valuations. If the estimated fair value exceeds the carrying value, no further work is required and no impairment loss is recognized. If the carrying value exceeds the estimated fair value, a non-cash impairment loss is recognized in the amount of that excess.
Key assumptions used in the income and market approaches are updated when the analysis is performed for each reporting unit. VariousThe assumptions that have the most significant effect on the fair value calculations are utilized including forecastedthe projected revenue growth rates, future operating results, strategic plans, economic projections, anticipated future cash flows, the weighted-average cost of capital, comparable transactions, market datamargins, discount rates, terminal values and earnings multiples. While we use reasonable and timely information to prepare our cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly and could result in future non-cash impairment charges related to recorded goodwill balances.
Recently acquired reporting units generally represent a higher inherent risk of impairment, which typically decreases as the businesses are integrated into our enterprise. Negative industry or economic trends, disruptions to our business, actual results significantly below projections, unexpected significant changes or planned changes in the use of the assets, divestitures and market capitalization declines may have a negative effect on the fair value of our reporting units.
We have 33Roper has 34 reporting units with individual goodwill amounts ranging from zero to $2.3 billion.$3,245.3. In 2017, we2021, the Company performed ourits annual impairment test in the fourth quarter for all reporting units. WeThe Company conducted ourits analysis qualitatively and assessed whether it was more likely than not that the respective fair value of these reporting units was less than the carrying amount. WeThe Company determined that
impairment of goodwill was not likely in 31any of ourits reporting units and thus we werewas not required to perform a quantitative analysisassessment for these reporting units. For the remaining two reporting units the Company performed its quantitative analysis and concluded that the fair value of each of these two reporting units was substantially in excess of its carrying value, with no impairment indicated as of October 1, 2017.2021.
Business combinations can also result in other intangible assets being recognized. Amortization of intangible assets, if applicable, occurs over their estimated useful lives. Trade names that are determined to have an indefinite useful economic life are not amortized, but separately tested for impairment during the fourth quarter of the fiscal year or on an interim basis if an event occurs that indicates the fair value is more likely than not below the carrying value. We first qualitatively assess whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of the indefinite-lived trade name is less than its carrying amount. If necessary, we conduct a quantitative reviewassessment using the relief-from-royalty method, which we believe to be an acceptable methodology due to its common use by valuation specialists in determining the fair value of intangible assets. This methodology assumes that, in lieu of ownership, a third-party would be willing to pay a royalty in order to exploit the related benefits of these assets. The assumptions that have the most significant effect on the fair value of each trade name is determined by applying acalculations are the royalty rate to a projection of net revenues discounted using a risk-adjusted rate of capital.rates, projected revenue growth rates, discount rates and terminal values. Each royalty rate is determined based on the profitability of the trade name to which it relates and observed market royalty rates. Revenue growth rates are determined after considering current and future economic conditions, recent sales trends, discussions with customers, planned timing of new product launches or other variables. Trade names resulting from recent acquisitions generally represent the highest risk of
impairment, which typically decreases as the businesses are integrated into our enterprise and positioned for improved future sales growth.
During the fourth quarter of 2021, the Company determined the use of the Sunquest trade name would be discontinued given the strategic action to merge the Sunquest business into our CliniSys business, both of which are reported in our Application Software reportable segment. Considering the planned merger and updated market comparisons, the royalty rate utilized in the quantitative impairment assessment of the trade name was 0.5% as compared to a royalty rate of 3.5% used in the prior year. The royalty rate reduction was the significant assumption that resulted in a non-cash impairment charge of $94.4 recognized as a component of “Impairment of intangible assets” within the Consolidated Statements of Earnings.
The assessment of fair value for impairment purposes requires significant judgments to be made by management. Although our forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management uses to operate the underlying businesses, there is significant judgment in determining the expected results attributable to the businesses and/or reporting units. Changes in estimates or the application of alternative assumptions could produce significantly different results. No impairment resulted
The most significant identifiable intangible assets with definite useful economic lives recognized from our acquisitions are customer relationships. The fair value for customer relationships is determined as of the acquisition date using the excess earnings method. Under this methodology the fair value is determined based on the estimated future after-tax cash flows arising from the annual reviews performed in 2017.acquired customer relationships over their estimated lives after considering customer attrition and contributory asset charges. The assumptions that have the most significant effect on the fair value calculations are the customer attrition rates, projected customer revenue growth rates, margins, contributory asset charges and discount rates. When testing customer relationship intangible assets for potential impairment, management considers historical customer attrition rates and projected revenues and profitability related to customers that existed at acquisition. In evaluating the amortizable life for customer relationship intangible assets, management considers historical customer attrition patterns.
We evaluate whether there has been an impairment of identifiable intangible assets with definite useful economic lives, or of the remaining life of such assets, when certain indicators of impairment are present. In the event that facts and circumstances indicate that the cost or remaining period of amortization of any asset may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future gross, undiscounted cash flows associated with the asset would be compared to the asset'sasset’s carrying amount to determine if a write-down to fair value or a revision in the remaining amortization period is required.
During the fourth quarter of 2021, Sunquest also recognized a non-cash impairment charge of $5.1 representing the unamortized balance related primarily to a software intangible asset that will be discontinued in 2022. This impairment charge is included as a component of “Impairment of intangible assets” within the Consolidated Statements of Earnings.
Results of Operations
All currency amounts are in millions unless specified, percentages are net of revenues
Percentages may not sum due to rounding.
The following table sets forth selected information for the years indicated. Dollar amounts are in thousands
| | | | | | | | | | | | | | | | | |
| Years ended December 31, |
| 2021 | | 2020 | | 2019 |
Net revenues: | | | | | |
Application Software (1) | $ | 2,380.6 | | | $ | 1,799.9 | | | $ | 1,588.0 | |
Network Software & Systems (2) | 1,338.4 | | | 1,173.7 | | | 1,004.2 | |
Measurement & Analytical Solutions (3) | 1,559.6 | | | 1,425.6 | | | 1,544.3 | |
Process Technologies | 499.2 | | | 455.0 | | | 591.2 | |
Total | $ | 5,777.8 | | | $ | 4,854.2 | | | $ | 4,727.7 | |
| | | | | |
Gross margin: | | | | | |
Application Software | 69.3 | % | | 68.3 | % | | 67.0 | % |
Network Software & Systems | 82.2 | | | 81.3 | | | 83.0 | |
Measurement & Analytical Solutions | 57.4 | | | 59.3 | | | 58.6 | |
Process Technologies | 54.4 | | | 53.4 | | | 57.1 | |
Total | 67.8 | % | | 67.4 | % | | 66.4 | % |
| | | | | |
Segment operating margin: | | | | | |
Application Software | 26.7 | % | | 26.0 | % | | 25.5 | % |
Network Software & Systems | 38.2 | | | 35.3 | | | 38.7 | |
Measurement & Analytical Solutions | 30.9 | | | 32.5 | | | 31.8 | |
Process Technologies | 30.6 | | | 25.4 | | | 35.8 | |
Total | 30.9 | % | | 30.1 | % | | 31.7 | % |
| | | | | |
Corporate administrative expenses | (3.5) | % | | (3.9) | % | | (3.6) | % |
Loss from impairment | (1.7) | | | — | | | — | |
Income from operations | 25.6 | | | 26.2 | | | 28.1 | |
Interest expense, net | (4.1) | | | (4.5) | | | (3.9) | |
Other income (expense), net | 0.4 | | | (0.1) | | | (0.1) | |
Gain on disposal of businesses | — | | | — | | | 19.5 | |
Earnings before income taxes | 22.0 | | | 21.7 | | | 43.5 | |
Income taxes | (5.0) | | | (4.7) | | | (8.8) | |
| | | | | |
Net earnings from continuing operations | 17.0 | % | | 17.0 | % | | 34.7 | % |
(1)Includes results from the acquisitions of ComputerEase from August 19, 2019, Bellefield from December 18, 2019, Vertafore from September 3, 2020, EPSi from October 15, 2020 and percentages areAmerican Legal Net from December 30, 2021.
(2)Includes results from the acquisitions of net revenues. Percentages may not foot due to rounding.Foundry from April 18, 2019, iPipeline from August 22, 2019, FMIC from June 9, 2020, Team TSI from June 15, 2020, IFS from September 15, 2020, WELIS from September 18, 2020 and Construction Journal from December 21, 2021.
(3)Includes the results from the Imaging businesses through February 5, 2019 and Gatan through October 29, 2019.
|
| | | | | | | | | | | |
| Years ended December 31, |
| 2017 | | 2016 | | 2015 |
Net revenues: | | | | | |
RF Technology (1) | $ | 1,862,126 |
| | $ | 1,210,264 |
| | $ | 1,033,951 |
|
Medical & Scientific Imaging (2) | 1,410,349 |
| | 1,362,813 |
| | 1,215,318 |
|
Industrial Technology (3) | 783,707 |
| | 706,625 |
| | 745,381 |
|
Energy Systems & Controls (4) | 551,289 |
| | 510,223 |
| | 587,745 |
|
Total | $ | 4,607,471 |
| | $ | 3,789,925 |
| | $ | 3,582,395 |
|
| | | | | |
Gross margin: | |
| | |
| | |
|
RF Technology | 61.1 | % | | 56.7 | % | | 53.4 | % |
Medical & Scientific Imaging | 72.0 |
| | 73.2 |
| | 74.0 |
|
Industrial Technology | 50.6 |
| | 50.6 |
| | 49.8 |
|
Energy Systems & Controls | 57.4 |
| | 57.1 |
| | 58.1 |
|
Total | 62.2 | % | | 61.5 | % | | 60.4 | % |
| | | | | |
Segment operating margin: | |
| | |
| | |
|
RF Technology | 25.7 | % | | 30.8 | % | | 30.2 | % |
Medical & Scientific Imaging | 34.5 |
| | 35.0 |
| | 36.4 |
|
Industrial Technology | 30.0 |
| | 28.7 |
| | 28.8 |
|
Energy Systems & Controls | 27.4 |
| | 25.4 |
| | 27.6 |
|
Total | 29.3 | % | | 31.2 | % | | 31.6 | % |
| | | | | |
Corporate administrative expenses | (3.1 | )% | | (3.4 | )% | | (2.9 | )% |
Income from continuing operations | 26.3 |
| | 27.8 |
| | 28.7 |
|
Interest expense, net | (3.9 | ) | | (2.9 | ) | | (2.4 | ) |
Other income/(expense) | 0.1 |
| | (0.1 | ) | | 1.6 |
|
Income from continuing operations before taxes | 22.5 |
| | 24.8 |
| | 28.0 |
|
Income taxes | (1.4 | ) | | (7.4 | ) | | (8.5 | ) |
| | | | | |
Net earnings | 21.1 | % | | 17.4 | % | | 19.4 | % |
| |
(1) | Includes results from the acquisitions of Foodlink Holdings Inc. from July 2, 2014, On Center Software LLC from July 20, 2015, RF Ideas Inc. from September 1, 2015, Aderant Holdings Inc. from October 21, 2015, Black Diamond Advanced Technologies through March 20, 2015, ConstructConnect from October 31, 2016, Deltek, Inc. from December 28, 2016, Handshake Software, Inc. from August 4, 2017, Workbook Software A/S from September 15, 2017 and Onvia, Inc. from November 17, 2017. |
| |
(2) | Includes results from the acquisitions of Strata Decision Technologies LLC from January 21, 2015, SoftWriters Inc. from February 9, 2015, Data Innovations LLC from March 4, 2015, Atlantic Health Partners LLC from September 4, 2015, Atlas Database Software Corp. from October 26, 2015, CliniSys from January 7, 2016, PCI Medical from March 17, 2016, GeneInsight from April 1, 2016 and UNIConnect from November 10, 2016. |
| |
(3) | Includes results from Abel Pumps through October 2, 2015. |
| |
(4) | Includes results from the acquisition of Phase Technology from June 21, 2017. |
Year Ended December 31, 20172021 Compared to Year Ended December 31, 20162020
Net revenues for the year ended December 31, 20172021 were $4.61 billion$5,777.8 as compared to $3.79 billion$4,854.2 for the year ended December 31, 2016,2020, an increase of 21.6%19.0%. The increase wascomponents of revenue growth for the result of contributions from acquisitions of 16.3%, organic growth of 5.3% and no impact from foreign exchange.year ended December 31, 2021 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Application Software | | Network Software & Systems | | Measurement & Analytical Solutions | | Process Technologies | | Roper |
Total Revenue Growth | 32.3 | % | | 14.0 | % | | 9.4 | % | | 9.7 | % | | 19.0 | % |
Less Impact of: | | | | | | | | | |
Acquisitions/Divestitures | 23.1 | | | 1.9 | | | — | | | — | | | 9.0 | |
Foreign Exchange | 1.0 | | | 0.9 | | | 1.2 | | | 1.4 | | | 1.1 | |
Organic Revenue Growth | 8.2 | % | | 11.2 | % | | 8.2 | % | | 8.3 | % | | 8.9 | % |
In our RF TechnologyApplication Software segment, net revenues for the year ended December 31, 2017 increased by $651.9 million or 54% over the year ended December 31, 2016. Acquisitions accounted for 51% and organic revenues increased by 3%. The increase in organic revenues was due primarily2021 were $2,380.6 as compared to growth in our software businesses. Gross margin was 61.1%$1,799.9 for the year ended December 31, 2017 as compared2020. The growth of 8.2% in organic revenues was broad-based across the segment led by our businesses serving the government contracting, healthcare and legal markets. Gross margin increased to 56.7%69.3% for the year ended December 31, 2016,2021 as compared to 68.3% for the year ended December 31, 2020 due primarily to an increased percentagethe acquisition of revenues from our software businesses, which have aVertafore and operating leverage on higher gross margin.organic revenues. Selling, general and administrative ("(“SG&A"&A”) expenses as a percentage of revenues in the year ended December 31, 20172021 increased to 35.3%42.6%, as compared to 25.9%42.2% in the year ended December 31, 2016,2020, due primarily to an increased percentage of revenues from our software businesses, which have a higher SG&A structure, including amortization of acquired intangibles.intangibles from the Vertafore and EPSi acquisitions, partially offset by operating leverage on higher organic revenues. The resulting operating margin was 25.7%26.7% in 2017the year ended December 31, 2021 as compared to 30.8%26.0% in 2016.the year ended December 31, 2020.
Our MedicalIn our Network Software & Scientific ImagingSystems segment, reported a $47.5 million or 3% increase in net revenues were $1,338.4 for the year ended December 31, 2017 over the year ended December 31, 2016, all of which was attributable2021 as compared to organic growth. The growth in organic revenues was due primarily to increased sales in our medical products businesses, led by NDI, and our alternate site healthcare businesses. Gross margin decreased to 72.0%$1,173.7 for the year ended December 31, 2017 from 73.2%2020. The growth of 11.2% in organic revenues was broad-based across the segment led by our network software businesses serving the spot freight, post-acute care and construction markets. Gross margin increased to 82.2% for the year ended December 31, 2016,2021 from 81.3% for the year ended December 31, 2020, due primarily to an unfavorable sales mix at both our software and medical products businesses.revenue mix. SG&A expenses as a percentage of net revenues decreased to 37.5%43.9% in the year ended December 31, 2017,2021, as compared to 46.0% in the year ended December 31, 2020, due primarily to operating leverage on higher organic sales. The resulting operating margin was 38.2% in the year ended December 31, 2016, due primarily2021 as compared to operating leverage on higher sales. The resulting operating margin was 34.5%35.3% in the year ended December 31, 2017 as compared to 35.0% in the year ended December 31, 2016.2020.
NetIn our Measurement & Analytical Solutions segment, net revenues for our Industrial Technology segment increased by $77.1 million or 11%were $1,559.6 for the year ended December 31, 2017 from2021 as compared to $1,425.6 the year ended December 31, 2016, all2020. The growth of which was attributable to organic growth. The growth8.2% in organic revenues was broad-based due primarily toled by our fluid handling,industrial, water meter technology, and materials testing businesses.medical products businesses excluding Verathon, which declined due to unprecedented demand for their products used in the treatment of COVID-19 during 2020. Gross margin was consistent at 50.6% for the years ended December 31, 2017 and 2016. SG&A expenses as a percentage of net revenues were 20.6% in the year ended December 31, 2017, as compared to 21.9% in the year ended December 31, 2016, due primarily to operating leverage on higher sales volume. The resulting operating margin was 30.0% in the year ended December 31, 2017 as compared to 28.7% in the year ended December 31, 2016.
In our Energy Systems & Controls segment, net revenues for the year ended December 31, 2017 increased by $41.1 million or 8% from the year ended December 31, 2016. Organic sales increased by 7% and the benefit from foreign exchange and acquisitions totaled 1%. The growth in organic revenues was due primarily to increased sales in pressure sensors and valves businesses serving energy markets as well as businesses serving industrial end markets. Gross margin increaseddecreased to 57.4% in the year ended December 31, 20172021, as compared to 57.1%59.3% in the year ended December 31, 20162020, due primarily to revenue mix, reduced operating leverage associated with Verathon’s normalized 2021 revenues and costs associated with navigating the widespread supply chain challenges. SG&A expenses as a percentage of net revenues decreased to 30.0%26.5% in the year ended December 31, 2017,2021, as compared to 31.7%26.8% in the year ended December 31, 2016, both2020 due to revenue mix. The resulting operating margin was 30.9% in the year ended December 31, 2021 as compared to 32.5% in the year ended December 31, 2020.
In our Process Technologies segment, net revenues were $499.2 for the year ended December 31, 2021 as compared to $455.0 for the year ended December 31, 2020. The growth of which were8.3% in organic revenues was due to broad-based across the segment as energy and industrial markets continue to recover from the reduction in demand caused by the pandemic. Gross margin increased to 54.4% in the year ended December 31, 2021 as compared to 53.4% in the year ended December 31, 2020, due primarily to increased operating leverage on higher sales volume.organic revenues partially offset by costs associated with navigating the widespread supply chain challenges. SG&A expenses as a percentage of net revenues decreased to 23.7% in the year ended December 31, 2021, as compared to 28.0% in the year ended December 31, 2020, due primarily to $13.6 of restructuring charges for structural cost reduction actions taken at certain of our businesses during the second quarter of 2020 and operating leverage on higher organic revenues. As a result, operating margin was 27.4%30.6% in the year ended December 31, 20172021 as compared to 25.4% in the year ended December 31, 2016.2020.
Corporate expenses increased by $14.3 million$15.6 to $141.8 million,$203.3, or 3.1%3.5% of revenues, in 20172021 as compared to $127.5 million,$187.7, or 3.4%3.9% of revenues, in 2016.2020. The dollar increase was due primarily to increased incentivehigher compensation related expenses, partially offset by lower acquisition related expenses.
Impairment of intangible assets was $99.5 for the year ended December 31, 2021, due to the strategic action to merge the Sunquest business into our CliniSys business resulting in impairment of a trade name and professional services.other amortizable intangible assets.
Interest expense, net, increased $69.0 million,$15.6, or 61.9%7.1%, for the year ended December 31, 20172021 as compared to the year ended December 31, 2016.2020. The increase was due primarily to higher weighted average debt balances, to fund acquisitions atpartially offset by lower weighted average interest rates and $7.2 in interest expense for the end of 2016.origination fee on our bridge financing associated with the Vertafore acquisition in 2020.
Other income, net, of $5.0 million$24.9 for the year ended December 31, 20172021 was composed primarily of a $9.4 million gain on sale of a product line in our Energy Systems & Controls segment, offset in part by a $1.8 million charge on a minority investment and foreign exchange losses at our non-U.S. based companies.of $27.1. Other expense, net of $1.5 million$3.6 for the year ended December 31, 20162020, was composed primarily of foreign exchange losses at our non-U.S. based companies, offset in part by royalty income. subsidiaries.
During 2017,2021, our effective income tax rate was 6.1%22.7% as compared to our 20162020 rate of 30.0%21.5%. The decreaseincrease was due primarily to the recognition of a $215 million net income tax benefitnon-recurring item related to the Tax Act as well as increased excessa UK tax benefits relatedrate change, which had a $21.7 unfavorable impact in 2021.
Order backlog is equal to equity compensation in 2017 as compared to 2016.
The following table summarizes order backlog information at December 31, 2017 and 2016 (dollar amounts in thousands). We include in backlog only orders that areour remaining performance obligations expected to be recognized within the next 12 months as revenue within twelve months. discussed in Note 1 of the Notes to Consolidated Financial Statements. Backlog increased 24.2% to $2,560.8 at December 31, 2021 as compared to $2,061.8 at December 31, 2020, with the increase driven primarily by organic growth.
| | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | Change |
Application Software | $ | 1,541.9 | | | $ | 1,366.9 | | | 12.8 | % |
Network Software & Systems | 468.1 | | | 363.5 | | | 28.8 | |
Measurement & Analytical Solutions | 400.6 | | | 224.0 | | | 78.8 | |
Process Technologies | 150.2 | | | 107.4 | | | 39.9 | |
Total | $ | 2,560.8 | | | $ | 2,061.8 | | | 24.2 | % |
|
| | | | | | | | | | |
| 2017 | | 2016 | | change |
RF Technology | $ | 991,382 |
| | $ | 991,212 |
| | — | % |
Medical & Scientific Imaging | 467,836 |
| | 423,616 |
| | 10.4 |
|
Industrial Technology | 110,841 |
| | 65,259 |
| | 69.8 |
|
Energy Systems & Controls | 102,293 |
| | 92,309 |
| | 10.8 |
|
Total | $ | 1,672,352 |
| | $ | 1,572,396 |
| | 6.4 | % |
Year Ended December 31, 20162020 Compared to Year Ended December 31, 20152019
Net revenues for the year ended December 31, 20162020 were $3.79 billion$4,854.2 as compared to $3.58 billion$4,727.7 for the year ended December 31, 2015,2019, an increase of 5.8%2.7%. The increase wascomponents of revenue growth for the result of contributions from acquisitions of 6.8%, negative organic growth of 0.3% and a negative foreign exchange impact of 0.7%.year ended December 31, 2020 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Application Software | | Network Software & Systems | | Measurement & Analytical Solutions | | Process Technologies | | Roper |
Total Revenue Growth | 13.3 | % | | 16.9 | % | | (7.7) | % | | (23.1) | % | | 2.7 | % |
Less Impact of: | | | | | | | | | |
Acquisitions/Divestitures | 12.6 | | | 15.2 | | | (9.9) | | | — | | | 4.4 | |
Foreign Exchange | 0.1 | | | 0.1 | | | 0.2 | | | — | | | 0.1 | |
| | | | | | | | | |
Organic Revenue Growth | 0.6 | % | | 1.6 | % | | 2.0 | % | | (23.1) | % | | (1.8) | % |
In our RF TechnologyApplication Software segment, net revenues for the year ended December 31, 2016 increased by $176 million or 17% over2020 were $1,799.9 as compared to $1,588.0 for the year ended December 31, 2015. Acquisitions net2019. The growth of the divestiture of the Black Diamond Advanced Technology business added 15%, organic revenues increased by 3%, and the negative foreign exchange impact was 1%. The increase0.6% in organic revenues was primarily due to businesses serving healthcare and government contracting markets. Gross margin increased to 68.3% for the year ended December 31, 2020 as compared to 67.0% for the year ended December 31, 2019 due primarily to increased sales in our software businesses, offset in part by the completion of large service contracts in our tolloperating leverage on higher organic revenues and traffic businesses in 2015. Gross margin was 56.7% in 2016 as compared to 53.4% in the prior year due to product mix in our toll and traffic businesses as well as an increased percentage of revenues at our software businesses which have a higher gross margin.revenue mix. SG&A expenses as a percentage of net revenues in the year ended December 31, 20162020 increased to 25.9%42.2%, as compared to 23.3%41.5% in the prior year ended December 31, 2019, due primarily to an increased percentagehigher amortization of net revenues at our software businesses which have a higher SG&A structure. Operatingacquired intangibles from the acquisitions completed in 2020. The resulting operating margin was 30.8%26.0% in 2016the year ended December 31, 2020 as compared to 30.2%25.5% in 2015.the year ended December 31, 2019.
In our Network Software & Scientific ImagingSystems segment, reported a $147 million or 12% increase in net revenues were $1,173.7 for the year ended December 31, 2016 over2020 as compared to $1,004.2 for the year ended December 31, 2015. Acquisitions contributed 9%, organic revenues increased 4% and the negative foreign exchange impact was 1%.2019. The increasegrowth of 1.6% in organic revenues was due to increased sales insubscription growth at our medicalSaaS businesses led by NDI and Verathon.our business serving the spot freight market in the United States. Gross margin decreased to 73.2% in81.3% for the year ended December 31, 20162020 from 74.0% in83.0% for the year ended December 31, 2015,2019, due primarily to productrevenue mix. SG&A expenses as a percentage of net revenues increased to 38.2%46.0% in the year ended December 31, 20162020, as compared to 37.7%44.2% in the year ended December 31, 2015,2019, due primarily to a higher SG&A structureamortization of acquired intangibles from the acquisitions completed in our medical businesses. Operating2019. The resulting operating margin was 35.0%35.3% in the year ended December 31, 20162020 as compared to 36.4%38.7% in the year ended December 31, 2015.2019.
NetIn our Measurement & Analytical Solutions segment, net revenues for our Industrial Technology segment decreased by $39 million or 5.2%were $1,425.6 for the year ended December 31, 2016 from2020 as compared to $1,544.3 the year ended December 31, 2015.2019. The divestituregrowth of the Abel Pumps business in 2015 accounted for a negative 3.1%, organic revenues decreased by 1.5% and the negative foreign exchange impact was 0.6%. The decrease2.0% in organic revenues was due primarily to decreased salesaccelerated adoption of Verathon’s video-assisted intubation products that aid in those fluid handling businesses that serve oil and gas markets,reducing COVID transmission to healthcare workers, partially offset in part by increased salesdeclines in our water metering business.meter technology business, due to restricted access to indoor meters located in the Northeast United States and Canada, and industrial business declines. Gross margin increased to 50.6% for the year ended December 31, 2016 as compared to 49.8%59.3% in the year ended December 31, 20152020, as compared to 58.6% in the year ended December 31, 2019, due primarily to productrevenue mix. SG&A expenses as a percentage of net revenues were 21.9%, as compared to 21.0%remained flat at 26.8% in both the prior year, due primarily to negative leverage on lower sales volume.years ended December 31, 2020 and December 31, 2019. The resulting operating margin was 28.7%32.5% in the year ended December 31, 20162020 as compared to 28.8%31.8% in the year ended December 31, 2015.2019.
In our Energy Systems & ControlsProcess Technologies segment, net revenues were $455.0 for the year ended December 31, 2016 decreased by $78 million or 13% from2020 as compared to $591.2 for the year ended December 31, 2015. Organic2019. The decrease of 23.1% in organic revenues decreased by 12%was due to decreased sales inbroad-based revenue declines across the segment led by lower demand at our businesses serving upstream oil and gas products, including safety systems and valves,end markets resulting from lower energy prices and the negative foreign exchange impact was 1%.COVID-19 pandemic. Gross margin decreased to 53.4% in the year ended December 31, 2020 as compared to 57.1% in the year ended December 31, 2016 as compared2019, due primarily to 58.1% in the year ended December 31, 2015 andlower revenues. SG&A expenses as a percentage of net revenues increased to 31.7%28.0% in the year ended December 31, 2020, as compared to 30.5%21.3% in the prior year bothended December 31, 2019, due primarily to $13.6 of which were due to negativerestructuring charges for structural cost reduction actions taken at certain of our businesses and lower operating leverage on lower sales volume. Operatingorganic revenue declines. As a result, operating margin was 25.4% in the year ended December 31, 20162020 as compared to 27.6%35.8% in the year ended December 31, 2015.2019.
Corporate expenses increased by $24.7 million$18.7 to $127.5 million,$187.7, or 3.4%3.9% of net revenues, in 20162020 as compared to $102.8 million,$169.0, or 2.9%3.6% of net revenues, in 2015.2019. The dollar increase was due primarily to increased equityhigher stock compensation costs as a result of both an increase in the number of shares granted in the current yearexpense and increases in our common stock price and increased costs related to acquisitions.professional services.
Interest expense, net, increased $27.3 million,$32.3, or 32.5%17.3%, for the year ended December 31, 20162020 as compared to the year ended December 31, 2015.2019. The increase was due primarily to (i) higher weighted average debt balances, to fund current year acquisitions as well as higherpartially offset by lower weighted average interest rates, throughout 2016.and (ii) $7.2 in interest expense for the origination fee on our bridge financing associated with the Vertafore acquisition in 2020.
Other expense, net, of $1.5 million$3.6 and $5.4 for the year ended December 31, 20162020 and December 31, 2019, respectively, was composed primarily of foreign exchange losses at our non-U.S. based companies, offsetsubsidiaries.
Gain on disposal of businesses, resulted in part by royalty income. Other incomea pretax gain of $58.7 million$920.7 for the year ended December 31, 2015 was composed primarily2019. The Company recognized $119.6 on the sale of the $70.9 million gain fromImaging businesses, which closed February 5, 2019, and $801.1 on the divestituresale of Abel Pumps (see Note 2 of the Notes to Consolidated Financial Statements included in this Annual Report), offset in part by a $9.5 million impairment charge on a minority investment. Gatan, which closed October 29, 2019.
During 2016,2020, our effective income tax rate was 30.0%, which was 60 basis points lower than the 201521.5% as compared to our 2019 rate of 30.6%20.3%. The decreaseincrease was due primarily to the following non-recurring items in 2019, (i) recognition of $15.3 milliona discrete tax benefit of $41.0 in connection with a foreign restructuring plan allowing the future realization of net operating losses, and (ii) the reversal of the deferred tax liability associated with the excess of Gatan's book basis over tax benefitsbasis in the current year in accordance with an ASU related to stock compensation adoptedshares of $10.0 in the firstthird quarter of 2016 (see2019, partially offset by the higher income tax rate incurred on the Imaging and Gatan gains during 2019.
Order backlog is equal to our remaining performance obligations expected to be recognized within the next 12 months as discussed in Note 1 of the Notes to Consolidated Financial Statements included in this Annual Report), as well as the non-recurrence of the 2015 taxable gain on the divestiture of Abel Pumps which was partially offset by discrete tax benefits from settlements of tax matters in 2015.
The following table summarizes order backlog informationStatements. Backlog increased 40.3% to $2,061.8 at December 31, 20162020 as compared to $1,469.7 at December 31, 2019, acquisitions contributed approximately 33% and 2015 (dollar amounts in thousands)organic growth was 7%. We include in backlog only orders that are expected to be recognized as revenue within twelve months.
|
| | | | | | | | | | |
| 2016 | | 2015 | | change |
RF Technology | $ | 991,212 |
| | $ | 538,877 |
| | 83.9 | % |
Medical & Scientific Imaging | 423,616 |
| | 373,213 |
| | 13.5 | % |
Industrial Technology | 65,259 |
| | 68,002 |
| | (4.0 | )% |
Energy Systems & Controls | 92,309 |
| | 90,365 |
| | 2.2 | % |
Total | $ | 1,572,396 |
| | $ | 1,070,457 |
| | 46.9 | % |
| | | | | | | | | | | | | | | | | |
| 2020 | | 2019 | | Change |
Application Software | $ | 1,366.9 | | | $ | 834.6 | | | 63.8 | % |
Network Software & Systems | 363.5 | | | 346.7 | | | 4.8 | % |
Measurement & Analytical Solutions | 224.0 | | | 184.9 | | | 21.1 | % |
Process Technologies | 107.4 | | | 103.5 | | | 3.8 | % |
Total | $ | 2,061.8 | | | $ | 1,469.7 | | | 40.3 | % |
Financial Condition, Liquidity and Capital Resources
All currency amounts are in millions unless specified
Selected cash flows for the years ended December 31, 2017, 20162021 and 20152020 are as follows (in millions):follows. A detailed discussion of fiscal 2020 year-over-year changes can be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
| | | 2017 | | 2016 | | 2015 | | 2021 | | 2020 | |
Cash provided by/(used in): | | | | | | Cash provided by/(used in): | | | | |
Operating activities | $ | 1,234 |
| | $ | 964 |
| | $ | 929 |
| Operating activities | $ | 2,011.9 | | | $ | 1,525.1 | | |
Investing activities | (210 | ) | | (3,753 | ) | | (1,698 | ) | Investing activities | (142.9) | | | (6,073.9) | | |
Financing activities | (1,170 | ) | | 2,805 |
| | 996 |
| Financing activities | (1,813.5) | | | 4,136.9 | | |
Operating activities - The increasegrowth in cash provided by operating activities in 2017 and in 20162021 as compared to 2020 was primarily due to increased earningshigher net income net of non-cash expenses and higher deferred revenue balances due to an increased percentagethe non-recurrence of revenue from software and other subscription based products. The increase$201.9 of cash taxes paid on the disposal of Gatan in 2020. These increases were partially offset by lower cash provided by operating activities in 2016 was offset in part by income tax payments in the first quarter of 2016 relatedworking capital as compared to the gain on the sale of the Abel Pumps business in the fourth quarter of 2015. prior year.
Investing activities - Cash used in investing activities during 2017, 2016 and 20152021 was primarily for business acquisitions. Cash received from investing activities in 2015 was primarilyacquisitions partially offset by proceeds from the sale of the Abel Pumps business.CIVCO Radiotherapy. Cash used in investing activities during 2020 was primarily for business acquisitions, most notably Vertafore and EPSi.
Financing activities - Cash used in/provided by financing activities in all periods presented was primarily debt repayments/borrowings as well as dividends paid to stockholders. Cash used in financing activities during 20172021 was primarily from the pay-downdue to net repayments of revolving debt borrowings$1,150.0 on our unsecured credit facility, $500.0 of $660 millionrepayments for our senior notes and the repayment of $400 million of senior notes.dividend payments. Cash provided by financing activities during 20162020 was primarily from the issuance of $1.2 billion$3,300.0 of senior notes and revolving debt$1,620.0 of net borrowings on the revolver, partially offset by $600.0 of repayments for acquisitions.senior notes and to a lesser extent dividend payments.
Cash and cash equivalents increased as a result of the effects of foreign currency exchange rate changes during the year ended December 31, 2017 by $59 million as compared to decreases during the years ended December 31, 2016 and 2015 of $38 million and $59 million, respectively. The increase for the year ended December 31, 2017 was due primarily to the strengthening of functional currencies of our European subsidiaries against the U.S. dollar, while the decreases for the years ended December 31, 2016 and 2015 were due primarily to the weakening of functional currencies of our European subsidiaries against the U.S. dollar.
Net working capital (current(total current assets, excluding cash and current assets held for sale, less total current liabilities, excluding debt)debt and current liabilities held for sale) was a negative $140 million$882.5 at December 31, 20172021 compared to negative $25 million$704.4 at December 31, 2016,2020, due primarily to increased deferred revenues. Thisbalances of deferred revenue increase is due to a higher percentage of revenue from software and subscription-based services along with the impact of fair value purchase accounting resulting from 2016 acquisitions.income taxes payable partially offset by increased accounts receivable. Consistent negative net working capital demonstrates Roper’s focus on asset-light business models.
Total debt excluding unamortized debt issuance costs was $5.2 billion$7,970.3 at December 31, 2017 (43.0%2021 (40.8% of total capital) compared to $6.2 billion$9,620.5 at December 31, 2016 (51.8%2020 (47.9% of total capital). Our total debt decreased debt at December 31, 20172021 compared to December 31, 2016 was2020, due primarily to the pay-down$1,150.0 of revolving debt borrowings of $660 millionrepayments and the repaymentredemption of $400 million$500.0 of outstanding 2.80% senior unsecured notes.
On September 23, 2016, we2, 2020, the Company entered into a five-yearthree-year unsecured credit facility (the "2016 Facility") with JPMorgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank, N.A. and a syndicateBank of lenders,America, N.A., as syndication agents, and MUFG Bank, Ltd., Mizuho Bank, Ltd., PNC Bank, National Association, Truist Bank and TD Bank, N.A., as co-documentation agents, which replaced ourits previous $2,500.0 unsecured credit facility, dated as of July 27, 2012,September 23, 2016, as amended as of October 28, 2015 (the "2012 Facility").amended. The 2016 Facilityfacility comprises a five year $2.5 billionthree-year $3,000.0 revolving credit facility, which includes availability of up to $150 million$150.0 for letters of credit. WeThe Company may also, subject to compliance with specified conditions, request additional term loans or additional revolving credit commitments in an aggregate amount not to exceed $500 million. $500.0.
The 2016 Facility contains various affirmative and negative covenants which, among other things, limit our ability to incur new debt, enter into certain mergers and acquisitions, sell assets and grant liens, make restricted payments (includingCredit Agreement requires the payment of dividends on our common stock) and capital expenditures, or change our line of business. We also are subject to financial covenants which require us to limit our consolidated total leverage ratio andCompany to maintain a consolidated interest coverage ratio. The most restrictive covenant isTotal Debt to Total Capital Ratio (as defined in the consolidated total leverage ratio which is limitedCredit Agreement) of 0.65 to 3.51.00 or less. Borrowings under the Credit Agreement are prepayable at Roper’s option at any time in whole or in part without premium or penalty.
We were in compliance with all debt covenants related to 1.
On December 2, 2016, we amendedour credit facility throughout the 2016 Facility to allow the consolidated total leverage ratio be increased, no more than twice during the term of the 2016 Facility, to 4.0 to 1 for a consecutive four quarter fiscal period per increase (or, for any portion of such four quarter fiscal period in which the maximum would be 4.25 to 1 pursuant to the 2016 facility amendment, 4.25 to 1). In conjunction with the Deltek acquistion (see Note 2 of the Notes to Consolidated Financial Statements included in this Annual Report), we increased the maximum consolidated total leverage ratio covenant to 4.25 to 1 through June 30, 2017 and 4.00 to 1 throughyears ended December 31, 2017.2021 and 2020.
At December 31, 2017,2021, we had $3.9 billion$7,500.0 of senior unsecured notes and $1.3 billion$470.0 of outstanding revolver borrowings. In addition, we had $3.1 million of other debt in the form of capital leases and several smaller facilities that allow for borrowings or the issuance of letters of credit in foreign locations to support our non-U.S. businesses. We had $75.9 million$84.9 of outstanding letters of credit at December 31, 2017,2021, of which $33.1 million$28.2 was covered by our lending group, thereby reducing our revolving credit capacity commensurately.
We may redeem some or all of theseour senior unsecured notes at any time or from time to time, at 100% of their principal amount, plus a make-whole premium based on a spread to U.S. Treasury securities.
We were in compliance with all debt covenants related to our credit facility throughout the years ended December 31, 2017 and 2016.
See Note 89 of the Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding our credit facility and senior notes.
Cash and cash equivalents at our foreign subsidiaries at December 31, 20172021 totaled $592 million. The Tax Act included a one-time deemed mandatory repatriation tax on all undistributed foreign earnings, resulting in a charge of $110.7 million$310.8 as ofcompared to $259.1 at December 31, 2017.2020, an increase of 20.0%. The Company will elect to pay the liability over 8 years. In addition, the introduction of a modified territorial taxation system resulted in a one-time estimated charge of $28.7 millionincrease was due primarily due to cash generated from foreign operations, partially offset by the Company’s change in its indefinite reinvestment assertion on foreign earnings. The Company now intendsrepatriation of $329.3 during the year. We intend to distributerepatriate substantially all historical earnings subject to the deemed repatriation tax and has provided for deferred taxes related to the future state and foreign tax cost to repatriate. See Note 7 of the Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding income taxes.earnings.
Capital expenditures of $48.8 million, $37.3 million$32.9, $28.3 and $36.3 million$43.0 were incurred during 2017, 20162021, 2020 and 2015,2019, respectively. Capitalized software expenditures of $10.8 million, $2.8 million$29.7, $17.7 and $2.4 million$10.2 were incurred during 2017, 20162021, 2020 and 2015,2019, respectively. The increasesCapital expenditures and capitalized software expenditures were relatively consistent in 20172021 as compared to 2016 was due primarily to our 2016 acquisitions.2020 and 2019. In the future, we expect the aggregate of capital expenditures and capitalized software expenditures as a percentage of annual net revenues to be between 1.0% and 1.5%.
Contractual Cash Obligations and Other Commercial Commitments and Contingencies
All currency amounts are in millions
The following tables quantify our contractual cash obligations and commercial commitments at December 31, 2017 (in thousands).2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Payments Due in Fiscal Year |
Contractual Cash Obligations 1 | Total | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter |
Total debt | $ | 7,970.3 | | | $ | 800.2 | | | $ | 1,170.1 | | | $ | 500.0 | | | $ | 1,000.0 | | | $ | 700.0 | | | $ | 3,800.0 | |
Senior note interest | 1,044.1 | | | 193.0 | | | 176.0 | | | 150.5 | | | 138.7 | | | 120.2 | | | 265.7 | |
Purchase obligations 2 | 794.2 | | | 467.4 | | | 100.4 | | | 75.9 | | | 64.2 | | | 70.6 | | | 15.7 | |
Total | $ | 9,808.6 | | | $ | 1,460.6 | | | $ | 1,446.5 | | | $ | 726.4 | | | $ | 1,202.9 | | | $ | 890.8 | | | $ | 4,081.4 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Payments Due in Fiscal Year |
Contractual Cash Obligations 1 | Total | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter |
Total debt | $ | 5,170,009 |
| | $ | 800,009 |
| | $ | 500,000 |
| | $ | 600,000 |
| | $ | 1,770,000 |
| | $ | 500,000 |
| | $ | 1,000,000 |
|
Senior note interest | 579,657 |
| | 129,325 |
| | 106,608 |
| | 85,025 |
| | 67,269 |
| | 51,822 |
| | 139,608 |
|
Capital leases | 3,140 |
| | 1,494 |
| | 1,061 |
| | 529 |
| | 47 |
| | 9 |
| | — |
|
Operating leases | 272,285 |
| | 61,109 |
| | 49,563 |
| | 42,109 |
| | 35,473 |
| | 26,014 |
| | 58,017 |
|
Total | $ | 6,025,091 |
| | $ | 991,937 |
| | $ | 657,232 |
| | $ | 727,663 |
| | $ | 1,872,789 |
| | $ | 577,845 |
| | $ | 1,197,625 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Amounts Expiring in Fiscal Year |
Other Commercial Commitments | Total Amount Committed | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter |
Standby letters of credit and bank guarantees | $ | 75,898 |
| | $ | 28,614 |
| | $ | 1,921 |
| | $ | 723 |
| | $ | 34,006 |
| | $ | 10,351 |
| | $ | 283 |
|
1 We have excluded the liability for uncertain tax positions and certain other income tax liabilities resulting fromas we are not able to reasonably estimate the Tax Act considered "provisional."timing of the payments. See Note 7 of the Notes to Consolidated Financial Statements included in this Annual Report.
2 Represents minimum fixed price purchase commitments that are legally binding across Roper.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Amounts Expiring in Fiscal Year |
Other Commercial Commitments | Total Amount Committed | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter |
Standby letters of credit and bank guarantees | $ | 84.9 | | | $ | 65.5 | | | $ | 8.8 | | | $ | 9.7 | | | $ | 0.2 | | | $ | 0.1 | | | $ | 0.6 | |
As of December 31, 2017,2021, we had $573.4 million$659.7 of outstanding surety bonds.bonds of which $634.2 are directly associated with our Transcore business. Certain contracts, primarily those involving public sector customers, require us to provide a surety bond as a guarantee of itsour performance of contractual obligations.
We believe that internally generated cash flows and the remaining availability under our credit facility will be adequate to finance normal operating requirements. Although we maintain an active acquisition program, any future 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 our activities,business, financial condition and results of operations. WeSuch acquisitions may also explore alternativesbe financed by the use of existing credit lines, future cash flows from operations, future divestitures, the proceeds from the issuance of new debt or equity securities or any combination of these methods, the terms and availability of which will be subject to attract additional capital resources.market and economic conditions generally.
We anticipate that our businesses will generate positive cash flows from operating activities, and that these cash flows will permit the reduction of currently outstanding debt in accordance with the repayment schedule. However, the rate at which we can reduce our debt during 20182022 (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 our existing companies.companies and the financial markets generally. None of these factors can be predicted with certainty.
Off-Balance Sheet Arrangements
At December 31, 2017 and 2016, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Recently Issued Accounting Standards
See Note 1 of the Notes to Consolidated Financial Statements included in this Annual Report for information regarding the effect of new accounting pronouncements on our consolidated financial statements.Consolidated Financial Statements.
| |
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to interest rate risks on our outstanding revolving credit borrowings, and to foreign currency exchange risks on our transactions denominated in currencies other than the U.S. dollar. We are also exposed to equity market risks pertaining to the traded price of our common stock.
At December 31, 2017,2021, we had $3.9 billion$7,500.0 of fixed rate borrowings with interest rates ranging from 2.05%0.45% to 6.25%4.20%. At December 31, 2017,2021, the prevailing market rates for our long-term notes were between 0.05%2.6% lower and 0.7% higher and 3.85% lower than the fixed rates on our debt instruments. Our credit facility contains a $2.5 billion$3,000.0 variable-rate revolver with $1.27 billion$470.0 of outstanding borrowings at December 31, 2017.2021.
Several of our businesses have transactions and balances denominated in currencies other than the U.S. dollar. Most of these transactions or balances are denominated in euros, Canadian dollars, British pounds or Danish kroner. Net revenues recognized by companies whose functional currency was not the U.S. dollar were 17% of our total revenues in 20172021 and 68%77% of these revenues were recognized by companies with a European functional currency. If these currency exchange rates had been 10% different throughout 20172021 compared to currency exchange rates actually experienced, the impact on our net earnings would have been approximately 1%.
The trading price of our common stock influences the valuation of stock award grants and the effects these grants have on our results of operations. The stock price also influences the computation of potentially dilutive common stock to determine diluted earnings per share. The stock price also affects our employees'employees’ perceptions of programs that involve our common stock. We believe the quantification of the effects of these changing prices on our future earnings and cash flows is not readily determinable.
| |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
| | | | |
| Page |
Consolidated Financial Statements: | |
| |
| |
| |
| |
| |
| |
| |
| |
Supplementary Data: | |
| |
Report of Independent Registered Public Accounting Firm
To theBoard of Directors and Stockholders of Roper Technologies, Inc.:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Roper Technologies, Inc. and its subsidiaries (the "Company"“Company”) as of December 31, 2017,2021 and 2016,2020, and the related consolidated statements of earnings, of comprehensive income, of stockholders'stockholders’ equity, and of cash flows for each of the three years in the period ended December 31, 2017,2021 including the related notes and financial statement schedule listed in the accompanying index(collectively (collectively referred to as the “consolidated financial statements”).We also have audited the Company's internal control over financial reporting as of December 31, 2017,2021, based on criteria established in Internal Control - Integrated Framework(2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20172021 and 2016, 2020, and the results oftheir its operations and theirits cash flows for each of the three years in the period endedDecember 31, 20172021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2021, based on criteria established in Internal Control - Integrated Framework(2013)issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management'sManagement’s Report on Internal Control over Financial Reporting.Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As described in Management’s Report on Internal Control over Financial Reporting, management has excluded the seven acquisitions completed in 20172021 from its assessment of internal control over financial reporting as of December 31, 20172021 because they were acquired by the Company in purchase business combinations during 2017.2021. We have also excluded the seven acquisitions completed in 20172021 from our audit of internal control over financial reporting. These acquisitionsThe acquired entities are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting collectively represent less than 1% and less than 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2017.2021.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Indefinite-Lived Trade Name Intangible Asset Quantitative Impairment Assessment - Sunquest
As described in Notes 1 and 6 to the consolidated financial statements, the Company’s consolidated indefinite-lived intangible assets balance was $648.6 million as of December 31, 2021, which was comprised entirely of trade names. Trade names that are determined to have indefinite useful economic lives are not amortized, but separately tested for impairment during the fourth quarter of the fiscal year or on an interim basis if an event occurs that indicates the fair value is more likely than not below the carrying value. Management first qualitatively assesses whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of an indefinite-lived trade name is less than its carrying amount. If necessary, management conducts a quantitative review using the relief-from-royalty method. The assumptions that have the most significant effect on the fair value calculations are the royalty rates, projected revenue growth rates, discount rates, and terminal values. Each royalty rate is determined based on the profitability of the trade name to which it relates and observed market royalty rates. During the fourth quarter of 2021, management determined the use of the Sunquest trade name would be discontinued and performed a quantitative impairment assessment and recognized a non-cash impairment charge of $94.4 million.
The principal considerations for our determination that performing procedures relating to the Sunquest indefinite-lived trade name intangible asset quantitative impairment assessment is a critical audit matter are (i) the significant judgment by management when determining the fair value of the indefinite-lived trade name intangible asset; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to the royalty rate, discount rate, and terminal value; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s Sunquest indefinite-lived trade name intangible asset quantitative impairment assessment, including controls over the valuation of Sunquest’s indefinite-lived trade name intangible asset. These procedures also included, among others (i) testing management’s process for determining the fair value; (ii) evaluating the appropriateness of the relief-from-royalty method; (iii) testing the completeness and accuracy of the underlying data used in the method; and (iv) evaluating the reasonableness of the significant assumptions used by management related to the royalty rate, discount rate, and terminal value. Evaluating management’s significant assumption related to the terminal value involved evaluating whether the significant assumption used by management was reasonable considering (i) the current and past performance of the asset group comprised of Sunquest’s indefinite-lived trade name intangible asset; (ii) the consistency with external market and industry data; and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the relief-from-royalty method and (ii) the reasonableness of the royalty rate and the discount rate significant assumptions.
/S/s/ PricewaterhouseCoopers LLP
Certified Public Accountants
Tampa, Florida
February 23, 201822, 2022
We have served as the Company’s auditor since 2002.
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2017 and 2016
(in thousands,millions, except per share data) |
| | | | | | | |
| 2017 | | 2016 |
Assets | | | |
Cash and cash equivalents | $ | 671,327 |
| | $ | 757,200 |
|
Accounts receivable, net | 641,662 |
| | 619,854 |
|
Inventories, net | 204,933 |
| | 181,952 |
|
Income taxes receivable | 24,365 |
| | 31,679 |
|
Unbilled receivables | 143,634 |
| | 129,965 |
|
Other current assets | 73,481 |
| | 55,851 |
|
Total current assets | 1,759,402 |
| | 1,776,501 |
|
| | | |
Property, plant and equipment, net | 142,535 |
| | 141,318 |
|
Goodwill | 8,820,313 |
| | 8,647,142 |
|
Other intangible assets, net | 3,475,218 |
| | 3,655,843 |
|
Deferred taxes | 30,726 |
| | 30,620 |
|
Other assets | 88,219 |
| | 73,503 |
|
Total assets | $ | 14,316,413 |
| | $ | 14,324,927 |
|
| | | |
Liabilities and Stockholders' Equity | |
| | |
|
Accounts payable | $ | 171,073 |
| | $ | 152,067 |
|
Accrued compensation | 198,020 |
| | 161,730 |
|
Deferred revenue | 566,447 |
| | 488,399 |
|
Other accrued liabilities | 266,574 |
| | 219,339 |
|
Income taxes payable | 26,351 |
| | 22,762 |
|
Current portion of long-term debt, net | 800,944 |
| | 400,975 |
|
Total current liabilities | 2,029,409 |
| | 1,445,272 |
|
| | | |
Long-term debt, net of current portion | 4,354,611 |
| | 5,808,561 |
|
Deferred taxes | 829,657 |
| | 1,178,205 |
|
Other liabilities | 239,172 |
| | 104,024 |
|
Total liabilities | 7,452,849 |
| | 8,536,062 |
|
| | | |
Commitments and contingencies (Note 12) |
|
| |
|
|
| | | |
Stockholders' equity: | |
| | |
|
Preferred stock, $0.01 par value per share; 1,000 shares authorized; none outstanding | — |
| | — |
|
Common stock, $0.01 par value per share; 350,000 shares authorized; 104,379 shares issued and 102,493 outstanding at December 31, 2017 and 103,578 shares issued and 101,672 outstanding at December 31, 2016 | 1,044 |
| | 1,036 |
|
Additional paid-in capital | 1,602,869 |
| | 1,489,067 |
|
Retained earnings | 5,464,571 |
| | 4,642,402 |
|
Accumulated other comprehensive loss | (186,214 | ) | | (324,739 | ) |
Treasury stock, 1,886 shares at December 31, 2017 and 1,906 shares at December 31, 2016 | (18,706 | ) | | (18,901 | ) |
Total stockholders' equity | 6,863,564 |
| | 5,788,865 |
|
Total liabilities and stockholders' equity | $ | 14,316,413 |
| | $ | 14,324,927 |
|
| | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 |
Assets | | | |
Cash and cash equivalents | $ | 351.5 | | | $ | 308.3 | |
Accounts receivable, net | 839.4 | | | 745.7 | |
Inventories, net | 176.1 | | | 165.1 | |
Income taxes receivable | 27.7 | | | 21.9 | |
Unbilled receivables | 95.3 | | | 72.8 | |
Other current assets | 142.5 | | | 114.3 | |
Current assets held for sale | 788.6 | | | 324.2 | |
Total current assets | 2,421.1 | | | 1,752.3 | |
| | | |
Property, plant and equipment, net | 102.8 | | | 127.3 | |
Goodwill | 14,094.5 | | | 13,966.0 | |
Other intangible assets, net | 6,588.5 | | | 7,168.2 | |
Deferred taxes | 101.1 | | | 103.2 | |
Other assets | 405.9 | | | 386.2 | |
Assets held for sale | — | | | 521.6 | |
Total assets | $ | 23,713.9 | | | $ | 24,024.8 | |
| | | |
Liabilities and Stockholders’ Equity | | | |
Accounts payable | $ | 150.8 | | | $ | 127.1 | |
Accrued compensation | 309.8 | | | 262.6 | |
Deferred revenue | 1,130.2 | | | 990.2 | |
Other accrued liabilities | 440.7 | | | 418.6 | |
Income taxes payable | 132.0 | | | 25.7 | |
Current portion of long-term debt, net | 799.2 | | | 499.4 | |
Current liabilities held for sale | 159.1 | | | 120.8 | |
Total current liabilities | 3,121.8 | | | 2,444.4 | |
| | | |
Long-term debt, net of current portion | 7,122.6 | | | 9,061.4 | |
Deferred taxes | 1,479.5 | | | 1,531.5 | |
Other liabilities | 426.2 | | | 443.6 | |
Liabilities held for sale | — | | | 64.1 | |
Total liabilities | 12,150.1 | | | 13,545.0 | |
| | | |
Commitments and contingencies (Note 13) | 0 | | 0 |
| | | |
Stockholders’ equity: | | | |
Preferred stock, $0.01 par value per share; 1.0 shares authorized; none outstanding | — | | | — | |
Common stock, $0.01 par value per share; 350.0 shares authorized; 107.3 shares issued and 105.5 outstanding at December 31, 2021 and 106.7 shares issued and 104.9 outstanding at December 31, 2020 | 1.1 | | | 1.1 | |
Additional paid-in capital | 2,307.8 | | | 2,097.5 | |
Retained earnings | 9,455.6 | | | 8,546.2 | |
Accumulated other comprehensive loss | (183.1) | | | (147.0) | |
Treasury stock, 1.8 shares at December 31, 2021 and 1.8 shares at December 31, 2020 | (17.6) | | | (18.0) | |
Total stockholders' equity | 11,563.8 | | | 10,479.8 | |
Total liabilities and stockholders' equity | $ | 23,713.9 | | | $ | 24,024.8 | |
See accompanying notes to consolidated financial statements.
Consolidated Financial Statements.
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended December 31, 2017, 2016 and 2015
(Dollar and share amounts in thousands,millions, except per share data)
| | | Years ended December 31, | | Year ended December 31, |
| 2017 | | 2016 | | 2015 | | 2021 | | 2020 | | 2019 |
Net revenues | $ | 4,607,471 |
| | $ | 3,789,925 |
| | $ | 3,582,395 |
| Net revenues | $ | 5,777.8 | | | $ | 4,854.2 | | | $ | 4,727.7 | |
Cost of sales | 1,742,675 |
| | 1,457,515 |
| | 1,417,749 |
| Cost of sales | 1,860.4 | | | 1,583.4 | | | 1,587.6 | |
Gross profit | 2,864,796 |
| | 2,332,410 |
| | 2,164,646 |
| Gross profit | 3,917.4 | | | 3,270.8 | | | 3,140.1 | |
| Selling, general and administrative expenses | 1,654,552 |
| | 1,277,847 |
| | 1,136,728 |
| Selling, general and administrative expenses | 2,337.7 | | | 1,997.3 | | | 1,811.8 | |
Impairment of intangible assets | | Impairment of intangible assets | 99.5 | | | — | | | — | |
Income from operations | 1,210,244 |
| | 1,054,563 |
| | 1,027,918 |
| Income from operations | 1,480.2 | | | 1,273.5 | | | 1,328.3 | |
| Interest expense, net | 180,566 |
| | 111,559 |
| | 84,225 |
| Interest expense, net | 234.1 | | | 218.5 | | | 186.2 | |
Loss on extinguishment of debt | — |
| | 871 |
| | — |
| |
Other income/(expense), net | 5,045 |
| | (1,481 | ) | | 58,652 |
| |
| Other income (expense), net | | Other income (expense), net | 24.9 | | | (3.6) | | | (5.4) | |
Gain on disposal of businesses | | Gain on disposal of businesses | — | | | — | | | 920.7 | |
| Earnings before income taxes | 1,034,723 |
| | 940,652 |
| | 1,002,345 |
| Earnings before income taxes | 1,271.0 | | | 1,051.4 | | | 2,057.4 | |
| Income taxes | 62,951 |
| | 282,007 |
| | 306,278 |
| Income taxes | 288.4 | | | 225.9 | | | 417.4 | |
| Net earnings from continuing operations | | Net earnings from continuing operations | 982.6 | | | 825.5 | | | 1,640.0 | |
| Earnings from discontinued operations, net of tax | | Earnings from discontinued operations, net of tax | 114.1 | | | 124.2 | | | 127.9 | |
Gain on disposition of discontinued operations, net of tax | | Gain on disposition of discontinued operations, net of tax | 55.9 | | | — | | | — | |
Net earnings from discontinued operations | | Net earnings from discontinued operations | 170.0 | | | 124.2 | | 127.9 |
| | | | | | | | | | | |
Net earnings | $ | 971,772 |
| | $ | 658,645 |
| | $ | 696,067 |
| Net earnings | $ | 1,152.6 | | | $ | 949.7 | | | $ | 1,767.9 | |
| | | | | | | | | | | |
Earnings per share: | |
| | |
| | |
| |
Net earnings per share from continuing operations: | | Net earnings per share from continuing operations: | | | | | |
Basic | | Basic | $ | 9.33 | | | $ | 7.89 | | | $ | 15.79 | |
Diluted | | Diluted | $ | 9.23 | | | $ | 7.81 | | | $ | 15.60 | |
| Net earnings per share from discontinued operations: | | Net earnings per share from discontinued operations: | |
Basic | | Basic | $ | 1.62 | | | $ | 1.19 | | | $ | 1.23 | |
Diluted | | Diluted | $ | 1.59 | | | $ | 1.17 | | | $ | 1.22 | |
| Net earnings per share: | | Net earnings per share: | |
Basic | $ | 9.51 |
| | $ | 6.50 |
| | $ | 6.92 |
| Basic | $ | 10.95 | | | $ | 9.08 | | | $ | 17.02 | |
Diluted | $ | 9.39 |
| | $ | 6.43 |
| | $ | 6.85 |
| Diluted | $ | 10.82 | | | $ | 8.98 | | | $ | 16.82 | |
| | | | | | |
Weighted-average common shares outstanding: | |
| | |
| | |
| Weighted-average common shares outstanding: | | | | | |
Basic | 102,168 |
| | 101,291 |
| | 100,616 |
| Basic | 105.3 | | | 104.6 | | | 103.9 | |
Diluted | 103,522 |
| | 102,464 |
| | 101,597 |
| Diluted | 106.5 | | | 105.7 | | | 105.1 | |
See accompanying notes to consolidated financial statements.
Consolidated Financial Statements.
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2017, 2016 and 2015
(in thousands)
|
| | | | | | | | | | | |
| Years ended December 31, |
| 2017 | | 2016 | | 2015 |
Net earnings | $ | 971,772 |
| | $ | 658,645 |
| | $ | 696,067 |
|
| | | | | |
Other comprehensive income, net of tax: | |
| | |
| | |
|
Foreign currency translation adjustments | 138,525 |
| | (111,960 | ) | | (139,789 | ) |
Unrecognized pension gain | — |
| | — |
| | (1,063 | ) |
| | | | | |
Total other comprehensive income/(loss), net of tax | 138,525 |
| | (111,960 | ) | | (140,852 | ) |
| | | | | |
Comprehensive income | $ | 1,110,297 |
| | $ | 546,685 |
| | $ | 555,215 |
|
millions) | | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Net earnings | $ | 1,152.6 | | | $ | 949.7 | | | $ | 1,767.9 | |
| | | | | |
Other comprehensive income (loss), net of tax: | | | | | |
Foreign currency translation adjustments | (36.1) | | | 65.8 | | | 30.5 | |
| | | | | |
| | | | | |
Total other comprehensive income (loss), net of tax | (36.1) | | | 65.8 | | | 30.5 | |
| | | | | |
Comprehensive income | $ | 1,116.5 | | | $ | 1,015.5 | | | $ | 1,798.4 | |
See accompanying notes to consolidated financial statements.
Consolidated Financial Statements.
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'STOCKHOLDERS’ EQUITY
Years ended December 31, 2017, 2016 and 2015
(in thousands,millions, except per share data) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | | | | | | | | | |
| Shares | | Amount | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive earnings | | Treasury stock | | Total stockholders' equity |
Balances at December 31, 2014 | 100,126 |
| | $ | 1,021 |
| | $ | 1,325,338 |
| | $ | 3,520,201 |
| | $ | (71,927 | ) | | $ | (19,273 | ) | | $ | 4,755,360 |
|
Net earnings | — |
| | — |
| | — |
| | 696,067 |
| | — |
| | — |
| | 696,067 |
|
Stock option exercises | 402 |
| | 4 |
| | 33,002 |
| | — |
| | — |
| | — |
| | 33,006 |
|
Treasury stock sold | 18 |
| | — |
| | 2,710 |
| | — |
| | — |
| | 179 |
| | 2,889 |
|
Currency translation adjustments, net of $6,658 tax | — |
| | — |
| | — |
| | — |
| | (139,789 | ) | | — |
| | (139,789 | ) |
Stock based compensation | — |
| | — |
| | 61,766 |
| | — |
| | — |
| | — |
| | 61,766 |
|
Restricted stock activity | 324 |
| | 3 |
| | (14,697 | ) | | — |
| | — |
| | — |
| | (14,694 | ) |
Stock option tax benefit, net of shortfalls | — |
| | — |
| | 22,175 |
| | — |
| | — |
| | — |
| | 22,175 |
|
Conversion of senior subordinated convertible notes | — |
| | — |
| | (11,032 | ) | | — |
| | — |
| | — |
| | (11,032 | ) |
Post-retirement benefit plan adjustments | — |
| | — |
| | — |
| | — |
| | (1,063 | ) | | — |
| | (1,063 | ) |
Dividends declared ($1.05 per share) | — |
| | — |
| | — |
| | (105,738 | ) | | — |
| | — |
| | (105,738 | ) |
Balances at December 31, 2015 | 100,870 |
| | $ | 1,028 |
| | $ | 1,419,262 |
| | $ | 4,110,530 |
| | $ | (212,779 | ) | | $ | (19,094 | ) | | $ | 5,298,947 |
|
Net earnings | — |
| | — |
| | — |
| | 658,645 |
| | — |
| | — |
| | 658,645 |
|
Stock option exercises | 372 |
| | 4 |
| | 27,970 |
| | — |
| | — |
| | — |
| | 27,974 |
|
Treasury stock sold | 19 |
| | — |
| | 3,147 |
| | — |
| | — |
| | 193 |
| | 3,340 |
|
Currency translation adjustments, net of $2,570 tax | — |
| | — |
| | — |
| | — |
| | (111,960 | ) | | — |
| | (111,960 | ) |
Stock based compensation | — |
| | — |
| | 77,860 |
| | — |
| | — |
| | — |
| | 77,860 |
|
Restricted stock activity | 411 |
| | 4 |
| | (17,980 | ) | | — |
| | — |
| | — |
| | (17,976 | ) |
Stock option tax benefit, net of shortfalls | — |
| | — |
| | (8,081 | ) | | — |
| | — |
| | — |
| | (8,081 | ) |
Conversion of senior subordinated convertible notes | — |
| | — |
| | (13,111 | ) | | — |
| | — |
| | — |
| | (13,111 | ) |
Dividends declared ($1.25 per share) | — |
| | — |
| | — |
| | (126,773 | ) | | — |
| | — |
| | (126,773 | ) |
Balances at December 31, 2016 | 101,672 |
| | $ | 1,036 |
| | $ | 1,489,067 |
| | $ | 4,642,402 |
| | $ | (324,739 | ) | | $ | (18,901 | ) | | $ | 5,788,865 |
|
Net earnings | — |
| | — |
| | — |
| | 971,772 |
| | — |
| | — |
| | 971,772 |
|
Stock option exercises | 645 |
| | 6 |
| | 61,317 |
| | — |
| | — |
| | — |
| | 61,323 |
|
Treasury stock sold | 20 |
| | — |
| | 4,003 |
| | — |
| | — |
| | 195 |
| | 4,198 |
|
Currency translation adjustments, net of $4,899 tax | — |
| | — |
| | — |
| | — |
| | 138,525 |
| | — |
| | 138,525 |
|
Stock based compensation | — |
| | — |
| | 81,324 |
| | — |
| | — |
| | — |
| | 81,324 |
|
Restricted stock activity | 156 |
| | 2 |
| | (32,842 | ) | | — |
| | — |
| | — |
| | (32,840 | ) |
Dividends declared ($1.4625 per share) | — |
| | — |
| | — |
| | (149,603 | ) | | — |
| | — |
| | (149,603 | ) |
Balances at December 31, 2017 | 102,493 |
| | $ | 1,044 |
| | $ | 1,602,869 |
| | $ | 5,464,571 |
| | $ | (186,214 | ) | | $ | (18,706 | ) | | $ | 6,863,564 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | | | | | | | | | |
| Shares | | Amount | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive loss | | Treasury stock | | Total stockholders’ equity |
Balances at December 31, 2018 | 103.4 | | | $ | 1.1 | | | $ | 1,751.5 | | | $ | 6,247.7 | | | $ | (243.3) | | | $ | (18.5) | | | $ | 7,738.5 | |
Net earnings | — | | | — | | | — | | | 1,767.9 | | | — | | | — | | | 1,767.9 | |
Stock option exercises | 0.5 | | | — | | | 64.9 | | | — | | | — | | | — | | | 64.9 | |
Treasury stock sold | — | | | — | | | 6.6 | | | — | | | — | | | 0.2 | | | 6.8 | |
Currency translation adjustments, including tax benefit of $3.8 | — | | | — | | | — | | | — | | | 30.5 | | | — | | | 30.5 | |
Stock based compensation | — | | | — | | | 110.9 | | | — | | | — | | | — | | | 110.9 | |
Restricted stock activity | 0.2 | | | — | | | (30.0) | | | — | | | — | | | — | | | (30.0) | |
Dividends declared ($1.90 per share) | — | | | — | | | — | | | (197.6) | | | — | | | — | | | (197.6) | |
Balances at December 31, 2019 | 104.1 | | | $ | 1.1 | | | $ | 1,903.9 | | | $ | 7,818.0 | | | $ | (212.8) | | | $ | (18.3) | | | $ | 9,491.9 | |
Adoption of ASC 326 | — | | | — | | | — | | | (1.7) | | | — | | | — | | | (1.7) | |
Net earnings | — | | | — | | | — | | | 949.7 | | | — | | | — | | | 949.7 | |
Stock option exercises | 0.7 | | | — | | | 105.5 | | | — | | | — | | | — | | | 105.5 | |
Treasury stock sold | — | | | — | | | 10.2 | | | — | | | — | | | 0.3 | | | 10.5 | |
Currency translation adjustments, including tax provision of $14.6 | — | | | — | | | — | | | — | | | 65.8 | | | — | | | 65.8 | |
Stock based compensation | — | | | — | | | 119.0 | | | — | | | — | | | — | | | 119.0 | |
Restricted stock activity | 0.1 | | | — | | | (41.1) | | | — | | | — | | | — | | | (41.1) | |
Dividends declared ($2.10 per share) | — | | | — | | | — | | | (219.8) | | | — | | | — | | | (219.8) | |
Balances at December 31, 2020 | 104.9 | | | $ | 1.1 | | | $ | 2,097.5 | | | $ | 8,546.2 | | | $ | (147.0) | | | $ | (18.0) | | | $ | 10,479.8 | |
Net earnings | — | | | — | | | — | | | 1,152.6 | | | — | | | — | | | 1,152.6 | |
Stock option exercises | 0.5 | | | — | | | 104.7 | | | — | | | — | | | — | | | 104.7 | |
Cash settlement of share-based awards in connection with disposition of discontinued operations | — | | | — | | | (6.7) | | | — | | | — | | | — | | | (6.7) | |
Treasury stock sold | — | | | — | | | 14.7 | | | — | | | — | | | 0.4 | | | 15.1 | |
Currency translation adjustments, including tax benefit of $6.2 | — | | | — | | | — | | | — | | | (36.1) | | | — | | | (36.1) | |
Stock based compensation | — | | | — | | | 138.0 | | | — | | | — | | | — | | | 138.0 | |
Restricted stock activity | 0.1 | | | — | | | (40.4) | | | — | | | — | | | — | | | (40.4) | |
Dividends declared ($2.31 per share) | — | | | — | | | — | | | (243.2) | | | — | | | — | | | (243.2) | |
Balances at December 31, 2021 | 105.5 | | | $ | 1.1 | | | $ | 2,307.8 | | | $ | 9,455.6 | | | $ | (183.1) | | | $ | (17.6) | | | $ | 11,563.8 | |
See accompanying notes to consolidated financial statements.
Consolidated Financial Statements.
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2017, 2016 and 2015(in millions)
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Cash flows from operating activities: | | | | | |
Net earnings from continuing operations | $ | 982.6 | | | $ | 825.5 | | | $ | 1,640.0 | |
Adjustments to reconcile net earnings from continuing operations to cash flows from operating activities: | | | | | |
Depreciation and amortization of property, plant and equipment | 49.7 | | | 46.7 | | | 43.1 | |
Amortization of intangible assets | 584.4 | | | 466.2 | | | 365.7 | |
Amortization of deferred financing costs | 13.5 | | | 10.9 | | | 7.3 | |
Non-cash stock compensation | 136.1 | | | 117.0 | | | 101.2 | |
Impairment of intangible assets | 99.5 | | | — | | | — | |
| | | | | |
Gain on disposal of assets and businesses, net of associated income tax | (21.6) | | | — | | | (687.3) | |
Income tax provision, excluding tax associated with gain on disposal of businesses and assets | 282.9 | | | 225.9 | | | 184.0 | |
Changes in operating assets and liabilities, net of acquired businesses: | | | | | |
Accounts receivable | (100.2) | | | 55.0 | | | (30.7) | |
Unbilled receivables | (19.4) | | | 0.2 | | | 6.3 | |
Inventories | (13.9) | | | 0.1 | | | (14.1) | |
Accounts payable and accrued liabilities | 66.3 | | | 93.1 | | | (7.0) | |
Deferred revenue | 164.5 | | | 60.3 | | | 114.2 | |
Cash tax paid for gain on disposal of businesses | — | | | (201.9) | | | (39.4) | |
Cash income taxes paid, excluding tax associated with gain on disposal of businesses | (320.7) | | | (311.6) | | | (328.3) | |
Other, net | (37.5) | | | (19.4) | | | (23.8) | |
Cash provided by operating activities from continuing operations | 1,866.2 | | | 1,368.0 | | | 1,331.2 | |
Cash provided by operating activities from discontinued operations | 145.7 | | | 157.1 | | | 130.6 | |
Cash provided by operating activities | 2,011.9 | | | 1,525.1 | | | 1,461.8 | |
| | | | | |
Cash flows from (used in) investing activities: | | | | | |
Acquisitions of businesses, net of cash acquired | (217.0) | | | (6,018.1) | | | (2,387.3) | |
Capital expenditures | (32.9) | | | (28.3) | | | (43.0) | |
Capitalized software expenditures | (29.7) | | | (17.7) | | | (10.2) | |
Proceeds from (used in) disposal of businesses | — | | | (4.3) | | | 1,156.8 | |
Proceeds from sale of assets | 27.1 | | | — | | | — | |
Other, net | (0.7) | | | (2.6) | | | (2.3) | |
Cash used in investing activities from continuing operations | (253.2) | | | (6,071.0) | | | (1,286.0) | |
Proceeds from disposition of discontinued operations | 115.6 | | | — | | | — | |
Cash used in investing activities from discontinued operations | (5.3) | | | (2.9) | | | (10.0) | |
Cash used in investing activities | (142.9) | | | (6,073.9) | | | (1,296.0) | |
| | | | | |
Cash flows from (used in) financing activities: | | | | | |
Proceeds from senior notes | — | | | 3,300.0 | | | 1,200.0 | |
Payment of senior notes | (500.0) | | | (600.0) | | | — | |
Borrowings (payments) under revolving line of credit, net | (1,150.0) | | | 1,620.0 | | | (865.0) | |
| | | | | |
Debt issuance costs | — | | | (42.0) | | | (12.1) | |
| | | | | |
Cash dividends to stockholders | (236.4) | | | (214.1) | | | (191.7) | |
Treasury stock sales | 15.1 | | | 10.5 | | | 6.8 | |
Proceeds from stock based compensation, net | 64.3 | | | 64.4 | | | 34.9 | |
| | | | | |
Other, net | (0.1) | | | (0.2) | | | (0.6) | |
Cash provided by (used in) financing activities from continuing operations | (1,807.1) | | | 4,138.6 | | | 172.3 | |
Cash provided by (used in) financing activities from discontinued operations | (6.4) | | | (1.7) | | | 4.7 | |
Cash provided by (used in) financing activities | (1,813.5) | | | 4,136.9 | | | 177.0 | |
(Continued) |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(in thousands)millions)
|
| | | | | | | | | | | |
| Years ended December 31, |
| 2017 | | 2016 | | 2015 |
Cash flows from operating activities: | | | | | |
Net earnings | $ | 971,772 |
| | $ | 658,645 |
| | $ | 696,067 |
|
Adjustments to reconcile net earnings to cash flows from operating activities: | |
| | |
| | |
|
Depreciation and amortization of property, plant and equipment | 49,513 |
| | 37,299 |
| | 38,185 |
|
Amortization of intangible assets | 295,452 |
| | 203,154 |
| | 166,076 |
|
Amortization of deferred financing costs | 7,227 |
| | 5,612 |
| | 4,136 |
|
Non-cash stock compensation | 83,075 |
| | 78,827 |
| | 61,766 |
|
Gain on disposal of a business | — |
| | — |
| | (70,860 | ) |
Gain on sale of assets | (9,393 | ) | | — |
| | — |
|
Changes in operating assets and liabilities, net of acquired businesses: | |
| | |
| | |
|
Accounts receivable | (6,673 | ) | | (20,734 | ) | | 52,597 |
|
Unbilled receivables | (13,493 | ) | | (1,202 | ) | | (21,844 | ) |
Inventories | (15,363 | ) | | 6,353 |
| | (1,150 | ) |
Accounts payable and accrued liabilities | 73,333 |
| | 20,176 |
| | (8,392 | ) |
Deferred revenue | 74,881 |
| | 25,190 |
| | 8,239 |
|
Income taxes | (256,971 | ) | | (47,589 | ) | | 3,069 |
|
Other, net | (18,878 | ) | | (1,946 | ) | | 936 |
|
Cash provided by operating activities | 1,234,482 |
| | 963,785 |
| | 928,825 |
|
Cash flows from investing activities: | |
| | |
| | |
|
Acquisitions of businesses, net of cash acquired | (153,736 | ) | | (3,721,758 | ) | | (1,762,883 | ) |
Capital expenditures | (48,752 | ) | | (37,305 | ) | | (36,260 | ) |
Capitalized software expenditures | (10,784 | ) | | (2,801 | ) | | (2,439 | ) |
Proceeds from disposal of a business | — |
| | — |
| | 105,624 |
|
Proceeds from sale of assets | 10,628 |
| | 870 |
| | 1,126 |
|
Other, net | (6,932 | ) | | 8,138 |
| | (3,500 | ) |
Cash used in investing activities | (209,576 | ) | | (3,752,856 | ) | | (1,698,332 | ) |
Cash flows from financing activities: | |
| | |
| | |
|
Proceeds from senior notes | — |
| | 1,200,000 |
| | 900,000 |
|
Payment of senior notes | (400,000 | ) | | — |
| | — |
|
Borrowings/(payments) under revolving line of credit, net | (660,000 | ) | | 1,750,000 |
| | 180,000 |
|
Principal payments on convertible notes | — |
| | (4,284 | ) | | (4,006 | ) |
Debt issuance costs | — |
| | (17,266 | ) | | (8,044 | ) |
Cash dividends to stockholders | (142,753 | ) | | (121,130 | ) | | (100,334 | ) |
Treasury stock sales | 4,198 |
| | 3,340 |
| | 2,889 |
|
Stock award tax excess windfall benefit | — |
| | — |
| | 22,228 |
|
Proceeds from stock based compensation, net | 28,487 |
| | 9,998 |
| | 18,312 |
|
Redemption premium on convertible debt | — |
| | (14,166 | ) | | (13,126 | ) |
Other | 51 |
| | (1,229 | ) | | (1,677 | ) |
Cash provided by/(used in) financing activities | (1,170,017 | ) | | 2,805,263 |
| | 996,242 |
|
Effect of exchange rate changes on cash | 59,238 |
| | (37,503 | ) | | (58,654 | ) |
Net increase/(decrease) in cash and cash equivalents | (85,873 | ) | | (21,311 | ) | | 168,081 |
|
Cash and cash equivalents, beginning of year | 757,200 |
| | 778,511 |
| | 610,430 |
|
Cash and cash equivalents, end of year | $ | 671,327 |
| | $ | 757,200 |
| | $ | 778,511 |
|
Supplemental disclosures: | |
| | |
| | |
|
Cash paid for: | |
| | |
| | |
|
Interest | $ | 175,021 |
| | $ | 104,928 |
| | $ | 79,225 |
|
Income taxes, net of refunds received | $ | 320,235 |
| | $ | 329,596 |
| | $ | 280,801 |
|
Noncash investing activities: | |
| | |
| | |
|
Net assets of businesses acquired: | |
| | |
| | |
|
Fair value of assets, including goodwill | $ | 177,276 |
| | $ | 4,433,085 |
| | $ | 1,876,984 |
|
Liabilities assumed | (23,540 | ) | | (711,327 | ) | | (114,101 | ) |
Cash paid, net of cash acquired | $ | 153,736 |
| | $ | 3,721,758 |
| | $ | 1,762,883 |
|
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Effect of exchange rate changes on cash | (12.3) | | | 10.5 | | | 2.5 | |
| | | | | |
Net increase (decrease) in cash and cash equivalents | 43.2 | | | (401.4) | | | 345.3 | |
| | | | | |
Cash and cash equivalents, beginning of year | 308.3 | | | 709.7 | | | 364.4 | |
| | | | | |
Cash and cash equivalents, end of year | $ | 351.5 | | | $ | 308.3 | | | $ | 709.7 | |
| | | | | |
Supplemental disclosures: | | | | | |
Cash paid for: | | | | | |
Interest | 222.2 | | | $ | 197.7 | | | $ | 171.5 | |
Noncash investing activities: | | | | | |
Net assets of businesses acquired: | | | | | |
Fair value of assets, including goodwill | $ | 249.8 | | | $ | 6,715.4 | | | $ | 2,472.4 | |
Liabilities assumed | (32.8) | | | (697.3) | | | (85.1) | |
Cash paid, net of cash acquired | $ | 217.0 | | | $ | 6,018.1 | | | $ | 2,387.3 | |
See accompanying notes to consolidated financial statements.
Consolidated Financial Statements.
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 2017, 20162021, 2020 and 20152019
(Dollar and share amounts in millions unless specified, except per share data)
(1) Summary of Accounting Policies
Basis of Presentation - These financial statements present consolidated information for Roper Technologies, Inc. and its subsidiaries ("(“Roper,"” the "Company," "we," "our"“Company,” “we,” “our” or "us"“us”). All significant intercompany accounts and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to current period presentation.
Nature of the Business - Roper is a diversified technology company. The Company operates businesses that design and develop software (both license and software-as-a-service)SaaS) and engineered products and solutions for a variety of niche end markets.
Discontinued Operations - During 2021, the Company signed definitive agreements to divest its TransCore, Zetec and CIVCO Radiotherapy businesses, which are presented as discontinued operations for all periods presented. Unless otherwise noted, discussion within these Notes to Consolidated Financial Statements relate to continuing operations. Refer to Note 3 for additional information on discontinued operations.
Recent Accounting Pronouncements - The Financial Accounting Standards Board ("FASB"(“FASB”) establishes changes to accounting principles under GAAP in the form of accounting standards updates ("ASUs"(“ASUs”) to the FASB'sFASB’s Accounting Standards Codification.Codification (“ASC”). The Company considers the applicability and impact of all ASUs. Any ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company'sCompany’s results of operations, financial position or cash flows.
Recently Adopted Accounting Pronouncements
In January 2017,October 2021, the FASB issued an update simplifyingto improve the testaccounting for goodwill impairment. This update, effective onacquired revenue contracts with customers in a prospective basis for goodwill impairment tests performed in fiscal years beginning after December 15, 2019, eliminates Step 2 from the goodwill impairment test. Under the amendmentsbusiness combination by promoting consistency in the update,recognition of an entity should perform its goodwill impairment testacquired contract liability and the subsequent revenue recognized by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. Early adoption is permitted for interim or annual impairment tests performed on testing dates after January 1, 2017. The Company elected to early adopt this standard for it's annual goodwill impairment testing during the fourth quarter of 2017.acquirer. The update did not have an impact on the Company's results of operations, financial position or cash flows.
In July 2015, the FASB issued an update providing guidance to simplify the measurement of inventory. This update,is effective for fiscal years beginning after December 15, 2016, requires that inventory2022, including interim periods within those fiscal years, with early adoption permitted. The Company early-adopted this update in the scopefourth quarter of the update be measured at the lower of cost and net realizable value. The2021. This update did not have a material impact on the Company's results of operations, financial position or cash flows.
In March 2016,acquisitions completed in 2021 and the FASB issued an update on stock compensation. The ASU simplifies several aspects of the accounting for employee share-based payment awards, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This standard is effective for annual reporting periods beginning after December 15, 2016. The Company elected to early adopt this standard on a prospective basis in the quarter ended March 31, 2016. Thefuture impact of adoption, if any, will depend on the early adoption resulted inacquisitions made by the following:Company.
The Company recorded tax benefitsadopted ASC Topic 326, Financial Instruments - Credit Losses (“ASC 326”), as of $15.3 million within income tax expense for the year ended December 31, 2016 related to the excess tax benefit on share-based awards. Prior to adoption this amount would have been recorded as a reduction of additional paid-in capital. This change adds volatility to the Company's effective tax rate.
The Company no longer reclassifies the excess tax benefit from operating activities to financing activities in the statement of cash flows. The Company elected to apply this change in presentation prospectively and thus prior periods have not been adjusted.
The Company elected not to change its policy on accounting for forfeitures and continued to estimate the total number of awards for which the requisite service period will not be rendered.
The Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of its diluted earnings per share since adoption. This resulted in an increase in diluted weighted average common shares outstanding of 278,829 shares for the year ended December 31, 2016.
In March 2016, the FASB issued an update amending the equity method of accounting, eliminating the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for the equity method as a result of an increase in the level of ownership or degree of influence. The amendments in the update, to be applied prospectively, are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The
Company elected to early adopt on a prospective basis effective January 1, 2016. The update did not have a material impact on its results of operations, financial condition or cash flows.
In September 2015, the FASB issued an update providing guidance to simplify the accounting for measurement period adjustments. This update, effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years, requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The Company adopted the update effective January 1, 2016. The update did not have a material impact on its results of operations, financial condition or cash flows.
In April 2015, the FASB issued an update providing guidance to determine whether the fee paid by an entity for a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the software license element of the arrangement should be accounted for consistently with the acquisition of other software licenses. A cloud computing arrangement that does not include a software license should be accounted for as a service contract. The update is effective for annual periods beginning after December 15, 2015, and may be adopted prospectively or retrospectively. The Company adopted the update prospectively effective January 1, 2016. The update did not have a material impact on its results of operations, financial condition or cash flows.
In June 2014, the FASB issued an update to the accounting for stock compensation. This update, effective for fiscal years beginning after December 15, 2015, modifies the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The Company adopted the update prospectively effective January 1, 2016. The update did not have a material impact on its results of operations, financial condition or cash flows.
Recently Released Accounting Pronouncements
In August 2016, the FASB issued an update clarifying the classification of certain cash receipts and cash payments in the statement of cash flows. This update, effective for annual reporting periods after December 15, 2017, including interim periods within those annual periods, addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The Company does not expect the update to have a material impact on its results of operations, financial condition or cash flows.
In February 2016, the FASB issued an update on lease accounting. The update, effective for annual reporting periods after December 15, 2018, including interim periods within those annual periods, provides amendments to current lease accounting. These amendments include the recognition of lease assets and lease liabilities on the balance sheet and disclosing other key information about leasing arrangements. The Company is evaluating the impact of the update on its results of operations, financial condition and cash flows.
In May 2014, the FASB issued updates on accounting and disclosures for revenue from contracts with customers. These updates, effective for annual reporting periods after December 15, 2017, create a single, comprehensive revenue recognition model for all contracts with customers. The model is based on changes in contract assets (rights to receive consideration) and liabilities (obligations to provide a good or service). Revenue will be recognized based on the satisfaction of performance obligations, which occurs when control of a good or service transfers to a customer and enhanced disclosures will be required regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Either a retrospective or cumulative effect transition method is permitted. The Company has elected to adopt2020 using the modified retrospective transition method. The Company has completed its assessmentWe recorded a noncash cumulative effect decrease to identify differences between the existing standard and new standardretained earnings of $1.7, net of income taxes, on its customer contracts. Based on this assessment, the impact of the new standard is due primarily to the acceleration of recognition of revenues and associated costs for certain of our software license contracts. Under existing guidance, these contracts are recognized ratably over the contractual term of post-contract support services in the event vendor-specific objective evidence is unavailable. The new standard requires recognition at once upon the transfer of control of the software license. The opening consolidated balance sheet adjustment as of January 1, 2018 under the modified retrospective transition method will be less than 1% of the Company's 2017 annual revenues, prior to the effects of income taxes. The Company believes it is following an appropriate timeline to allow for proper recognition, presentation and disclosure upon adoption effective the beginning of fiscal year 2018.2020.
Accounts Receivable - Accounts receivable are stated net of an allowance for doubtful accounts and sales allowances of $12.7 million and $14.5 million at December 31, 2017 and 2016, respectively. Outstanding accounts receivable balances are reviewed periodically, and allowances are provided at such time that management believes it is probable that an account receivable isSignificant Accounting Policies
uncollectible. The returns and other sales credit allowance is an estimate of customer returns, exchanges, discounts or other forms of anticipated concessions and is treated as a reduction in revenue.
Cash and Cash Equivalents - Roper considers highly liquid financial instruments with remaining maturities at acquisition of three months or less to be cash equivalents. Roper had no cash equivalents at both December 31, 20172021 and December 31, 2016.2020.
Contingencies - Management continually assesses the probability of any adverse judgments or outcomes to its potential contingencies. Disclosure of the contingency is made if there is at least a reasonable possibility that a loss or an additional loss may have been incurred. In the assessment of contingencies as of December 31, 2017,2021, management concluded that there were no matters for which there was a reasonable possibility of a material loss.
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 year. Diluted earnings per share were calculated using net earnings and the weighted-average number of shares of common stock and potential common stock associated with stock options outstanding during the respective year. Potentially dilutive common stock consisted of stock options and the premium over the conversion price on Roper's senior subordinated convertible notes based upon the trading price of the Company's common stock. Effective January 1, 2016, Roper adopted the provisions of an accounting standards update on a prospective basis which increased the number of potentially dilutive stock options as there is no longer a tax benefit in the calculation of dilutive stock options. See the caption "Recent Accounting Pronouncements" elsewhere in this Note for additional information regarding the ASU.
The effects of potential common stock were determined using the treasury stock method (in thousands):method:
| | | Years ended December 31, | | Year ended December 31, |
| 2017 | | 2016 | | 2015 | | 2021 | | 2020 | | 2019 |
Basic weighted-average shares outstanding | 102,168 |
| | 101,291 |
| | 100,616 |
| Basic weighted-average shares outstanding | 105.3 | | | 104.6 | | | 103.9 | |
Effect of potential common stock: | |
| | |
| | |
| Effect of potential common stock: | | | | | |
Common stock awards | 1,354 |
| | 1,126 |
| | 887 |
| Common stock awards | 1.2 | | | 1.1 | | | 1.2 | |
Senior subordinated convertible notes | — |
| | 47 |
| | 94 |
| |
Diluted weighted-average shares outstanding | 103,522 |
| | 102,464 |
| | 101,597 |
| Diluted weighted-average shares outstanding | 106.5 | | | 105.7 | | | 105.1 | |
As of and for the years ended December 31, 2017, 20162021, 2020 and 2015,2019, there were 477,898, 1,144,3500.521, 0.208 and 618,2200.627 outstanding stock options, 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 generally accepted accounting principles in the United States ("GAAP")GAAP 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.
Foreign Currency Translation and Transactions - Assets and liabilities of subsidiaries whose functional currency is 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'sRoper’s financial results. Translation adjustments are reflected as a component of other comprehensive income. Foreign currency transaction gains and losses are recorded in the consolidated statementConsolidated Statements of earnings as other income/Earnings within “Other income (expense)., net.” Foreign currency transaction losses were $1.4, million, $2.9 million$4.5 and $0.7 million$3.5 for the years ended December 31, 2017, 20162021, 2020 and 2015.2019, respectively.
Goodwill and Other Intangibles - Roper accounts for goodwill in a purchase business combination as the excess of the cost over the estimated fair value of net assets acquired. Business combinations can also result in other intangible assets being recognized. Amortization of intangible assets, if applicable, occurs over their estimated useful lives. Goodwill, which is not amortized, is tested for impairment on an annual basis (or an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value). When testing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If the Company elects to perform a qualitative assessment and determines that an impairment is more likely than not, then performance of the quantitative impairment test is required. The quantitative process utilizes both an income approach (discounted cash flows) and a market approach consisting(consisting of a comparable public company earnings multiples methodologymethodology) to estimate the fair value of a reporting unit. To determine the reasonableness of the estimated fair values, the Company reviews the assumptions to ensure that neither the income approach nor the market approach provides significantly different valuations. If the estimated fair value exceeds the carrying value, no further work is required and no impairment loss is recognized. If the carrying value exceeds the estimated fair value, a non-cash impairment loss is recognized in the amount of that excess.
When performing the quantitative assessment, key assumptions used in the income and market methodologies are updated when the analysis is performed for each reporting unit. Various assumptions are utilized including forecasted operating results, strategic plans, economic projections, anticipated future cash flows, the weighted-average cost of capital, comparable transactions, market data and earnings multiples. The assumptions that have the most significant effect on the fair value calculations are the anticipatedprojected revenue growth rates, future cash flows,operating margins, discount rates, terminal values and the earnings multiples. While the Company uses reasonable and timely information to prepare its discounted cash flow and discount rate assumptions,analysis, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded goodwill balances.
Roper has 3334 reporting units with individual goodwill amounts ranging from zero to $2.3 billion.$3,245.3. In 2017,2021, the Company performed its annual impairment test in the fourth quarter for all reporting units. The Company conducted its analysis qualitatively and assessed whether it was more likely than not that the respective fair value of these reporting units was less than the carrying amount. The Company determined that impairment of goodwill was not likely in 31any of its reporting units and thus was not required to perform a quantitative analysis for these reporting units. For the remaining two reporting units, the Company performed its quantitative analysis and concluded that the fair value of each of these two reporting units was substantially in excess of its carrying value, with no impairment indicated as of October 1, 2017.
Recently acquired reporting units generally represent a higher inherent risk of impairment, which typically decreases as the businesses are integrated into the enterprise. Negative industry or economic trends, disruptions to its business, actual results significantly below expected results, unexpected significant changes or planned changes in the use of the assets, divestitures and market capitalization declines may have a negative effect on the fair value of Roper'sRoper’s reporting units.
The following events or circumstances, although not comprehensive, would be considered to determine whether interim testing of goodwill would be required:
•a significant adverse change in legal factors or in the business climate;
•an adverse action or assessment by a regulator;
•unanticipated competition;
•a loss of key personnel;
•a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of;
•the testing for recoverability under the Impairment or Disposal of Long-Lived Assets of a significant asset group within a reporting unit; and
•recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit.
Business combinations can also result in other intangible assets being recognized. Amortization of intangible assets, if applicable, occurs over their estimated useful lives. Trade names that are determined to have an indefinite useful economic lifelives are not amortized, but separately tested for impairment during the fourth quarter of the fiscal year or on an interim basis if an event occurs that indicates the fair value is more likely than not below the carrying value. Roper first qualitatively assesses whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of an indefinite-lived trade name is less than its carrying amount. If necessary, Roper conducts a quantitative review using the relief-from-royalty method. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these assets. TheTo the extent the Company determines a fair value, of each trade name is determined by applyingthe inputs used represent a Level 3 fair value measurement in the FASB fair value hierarchy given that the inputs are unobservable. The assumptions that have the most significant effect on the fair value calculations are the royalty rate to a projection of net revenues discounted using a risk adjusted rate of capital.rates, projected revenue growth rates, discount rates and terminal values. Each royalty rate is determined based on the profitability of the trade name to which it relates and observed market royalty rates. Revenue growth rates are determined after considering current and future economic conditions, recent sales trends, discussions with customers, planned timing of new product launches or other variables. Trade names resulting from recent acquisitions generally represent the highest risk of impairment, which typically decreases as the businesses are integrated into Roper's enterprise.Roper.
During the fourth quarter of 2021, the Company determined the use of the Sunquest trade name would be discontinued given the strategic action to merge the Sunquest business into our CliniSys business, both of which are reported in our Application Software reportable segment. Considering the planned merger and updated market comparisons, the royalty rate utilized in the quantitative impairment assessment of the trade name was 0.5% as compared to a royalty rate of 3.5% used in the prior year. The royalty rate reduction was the significant assumption that resulted in a non-cash impairment charge of $94.4 recognized as a component of “Impairment of intangible assets” within the Consolidated Statements of Earnings.
The assessment of fair value for impairment purposes requires significant judgments to be made by management. Although forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management uses to operate the underlying businesses, there is significant judgment in determining the expected results attributable to the reporting units.estimating future operating results. Changes in estimates or the application of alternative assumptions could produce significantly different results. No impairment resulted
The most significant identifiable intangible assets with definite useful economic lives recognized from our acquisitions are customer relationships. The fair value for customer relationships is determined as of the acquisition date using the excess earnings method. Under this methodology the fair value is determined based on the estimated future after-tax cash flows arising from the annualacquired customer relationships over their estimated lives after considering customer attrition and contributory asset charges. The assumptions that have the most significant effect on the fair value calculations are the customer attrition rates, projected customer revenue growth rates, margins, contributory asset charges and discount rates. When testing performed in 2017.customer relationship intangible assets for potential impairment, management considers historical customer attrition rates and projected revenues and profitability related to customers that existed at acquisition. In evaluating the amortizable life for customer relationship intangible assets, management considers historical customer attrition patterns.
Roper evaluates whether there has been an impairment of identifiable intangible assets with definite useful economic lives, or of the remaining life of such assets, when certain indicators of impairment are present. In the event that facts and circumstances indicate that the cost or remaining period of amortization of any asset may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future gross, undiscounted cash flows associated with the asset would be
compared to the asset'sasset’s carrying amount to determine if a write-down to fair value or a revision in the remaining amortization period is required.
During the fourth quarter of 2021, Sunquest also recognized a non-cash impairment charge of $5.1 representing the unamortized balance related primarily to a software intangible asset that will be discontinued in 2022. This impairment charge is included as a component of “Impairment of intangible assets” within the Consolidated Statements of Earnings.
Impairment of Long-Lived Assets - The Company determines whether there has been an impairment of long-lived assets, excluding goodwill and identifiableother intangible assets, that are determined to have indefinite useful economic lives, when certain indicators of impairment are present. In the event that facts and circumstances indicate that the cost or life of any long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future gross, undiscounted cash flows associated with the asset would be compared to the asset'sasset’s carrying amount to determine if a write-down to fair value or revision to remaining life is required. Future adverse changes in market conditions or poor operating results of underlying long-lived assets could result in losses or an inability to recover the carrying value of the long-lived assets that may not be reflected in the assets'assets’ current carrying value, thereby possibly requiring an impairment charge or acceleration of depreciation or amortization expense in the future.
Income Taxes - The Company recognizes in the consolidated financial statementsConsolidated Financial Statements only those tax positions determined to be "more“more likely than not"not” of being sustained upon examination based on the technical merits of the positions. Interest and penalties related to unrecognized tax benefits are classified as a component of income tax expense.
The Company records a valuation allowance to reduce its deferred tax assets if, based on the weight of available evidence, both positive and negative, for each respective tax jurisdiction, it is more likely than not that some portion or all of such deferred tax assets will not be realized. Available evidence which is considered in determining the amount of valuation allowance required includes, but is not limited to, the Company’s estimate of future taxable income and any applicable tax-planning strategies.
Certain assets and liabilities have different basesbasis for financial reporting and income tax purposes. Deferred income taxes have been provided for these differences at the enacted tax rates expected to be paid. See Note 78 for information regarding income taxes.
Interest Rate Risk - The Company manages interest rate risk by maintaining a combination of fixed- and variable-rate debt, which may include interest rate swaps to convert fixed-rate debt to variable-rate debt, or to convert variable-rate debt to fixed-rate debt. Interest rate swaps are recorded at fair value in the balance sheet as an asset or liability, and the changes in fair values of both the swap and the hedged item are recorded as interest expense in current earnings. There were no interest rate swaps outstanding at December 31, 2017 or December 31, 2016.
Inventories - Inventories are valued at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method. The Company writes down its inventory for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions.
Other Comprehensive Income - Comprehensive income includes net earnings and all other non-owner sources of changes in a company's net assets.
Product Warranties - The Company sells certain of its products to customers with a product warranty that allows customers to return a defective product during a specified warranty period following the purchase in exchange for a replacement product, repair at no cost to the customer or the issuance of a credit to the customer. The Company accrues its estimated exposure to warranty claims based upon current and historical product sales data, warranty costs incurred and any other related information known to the Company.
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 and software | 3-5 years |
Research, Development and DevelopmentEngineering - Research, development and development ("engineering (“R,&D"D&E”) costs include salaries and benefits, rents, supplies, and other costs related to products under development. Research and development or improvements to existing products. R,D&E costs are expensed in the periodas incurred and are included within selling, general and administrative expenses. R,D&E expenses totaled $281.1 million, $195.4 million$528.4, $423.6 and $164.2 million$379.7 for the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively.
Revenue Recognition- The reported results reflect the application of ASC 606 guidance. The amount of revenue recognized reflects the consideration which the Company recognizesexpects to be entitled to receive in exchange for these products and/or services. To achieve this principle, the Company applies the following five steps:
•identify the contract with the customer;
•identify the performance obligations in the contract;
•determine the transaction price;
•allocate the transaction price to performance obligations in the contract; and
•recognize revenue when or as the Company satisfies a performance obligation.
Disaggregated Revenue - We disaggregate our revenues into two categories: (i) software and related services; and (ii) engineered products and related services. Software and related services revenues are primarily derived from our Application Software and Network Software & Systems reportable segments. Engineered products and related services revenues are derived from all of our reportable segments except Application Software and comprise substantially all of the following criteriarevenues generated in our Measurement & Analytical Solutions and Process Technologies reportable segments. See details in the table below.
| | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, |
| | 2021 | | 2020 | | 2019 |
Software and related services | | $ | 3,604.3 | | | $ | 2,871.1 | | | $ | 2,477.7 | |
Engineered products and related services | | 2,173.5 | | | 1,983.1 | | | 2,250.0 | |
Net revenues | | $ | 5,777.8 | | | $ | 4,854.2 | | | $ | 4,727.7 | |
Software and related services
SaaS - SaaS subscriptions and associated support are met:
persuasive evidence of an arrangement exists;
delivery has occurred or services have been rendered;
generally accounted for as a single performance obligation and recognized ratably over the seller's price to the buyer is fixed or determinable; and
collectibility is reasonably assured.
contractual term. In addition, SaaS arrangements may include implementation services which are accounted for as a separate performance obligation and recognized over time, using the Company recognizesinput method. Payment is generally required within 30 days of the commencement of the SaaS subscription period, which is primarily offered to customers over a one-year timeframe.
Licensed Software - Performance obligations in our customer contracts may include:
–Perpetual or time-based (“term”) software licenses
–Post contract support (“PCS”)
–Implementation/installation services
Software licenses may be combined with implementation/installation services as a single performance obligation if the implementation/installation significantly modifies or customizes the functionality of the software license.
We recognize revenue over time or at a point in time depending on our evaluation of when the customer obtains control over the promised products or services. Revenues from software implementation projects are generally recognized over time using the saleinput method, utilizing the ratio of costs or labor hours incurred to total estimated costs or labor, as the measure of performance. For software arrangements that include multiple performance obligations, we allocate revenue to each performance obligation based on estimates of the price that we would charge the customer for each promised product or service if it were sold on a standalone basis.
Payment for software licenses is generally required within 30 to 60 days of the transfer of control. Payment for PCS is generally required within 30 to 60 days of the commencement of the service period, which is primarily offered to customers over a one-year timeframe. Payment terms do not contain a significant financing component. Payment for implementation/installation services that are recognized over time are typically commensurate with milestones defined in the contract, or billable hours incurred.
Engineered products and related services
Revenue from product sales is recognized when title and risk of loss passcontrol transfers to the customer, which is generally when the product is shipped. The Company recognizes revenue from services when such
Non-project-based installation and repair services are rendered or, if applicable,performed by certain of our businesses for which revenue is recognized upon customer acceptance. Revenues under certain relatively long-term and relatively large-value construction and software projectscompletion.
Payment terms are generally 30 to 60 days from the transfer of control. Payment terms do not contain a significant financing component.
Preventative maintenance service revenues are recognized under the percentage-of-completion methodover time using the ratioinput method. If we determine our efforts or inputs are expended evenly throughout the performance period, we generally recognize revenue on a straight-line basis. Payment for preventative maintenance services are typically commensurate with milestones defined in the contract.
We offer customers return rights and other credits subject to certain restrictions. We estimate variable consideration generally based on historical experience to arrive at the transaction price, or the amount to which we ultimately expect to be entitled from the customer.
Accounts receivable, net- Accounts receivable, net includes amounts billed and currently due from customers. The amounts due are stated at their net estimated realizable value. Accounts receivable are stated net of costs incurredan allowance for doubtful accounts and sales allowances of $19.7 and $28.1 at December 31, 2021 and 2020, respectively. We make estimates of expected allowance for doubtful accounts based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, changes to total estimated costscustomer creditworthiness and other factors that may affect our ability to collect from customers.
Unbilled receivables-Our unbilled receivablesinclude unbilled amounts typically resulting from sales under project-based contracts when the input method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer, and right to payment is not solely due to the passage of time. Amounts may not exceed their net realizable value.
Deferred revenues -We record deferred revenues when cash payments are received or due in advance of our performance. Our deferred revenues relate primarily to software and related services. In most cases, we recognize these deferred revenues ratably over time as the measureSaaS or PCS performance obligation is satisfied. The non-current portion of performance.deferred revenue is included in “Other liabilities” in our Consolidated Balance Sheets.
Our unbilled receivables and deferred revenues are reported in a net position on a contract-by-contract basis at the end of each reporting period. The net balances are classified as current or non-current based on expected timing of revenue recognition and billable milestones.
Deferred commissions -Our incremental direct costs of obtaining a contract, which consist of sales commissions primarily for our software sales, are deferred and amortized on a straight-line basis over the period of contract performance or a longer period, depending on facts and circumstances. We classify deferred commissions as current or non-current based on the timing of when we expect to recognize the expense. The current and non-current portions of deferred commissions are included in “Other current assets” and “Other assets,” respectively, in our Consolidated Balance Sheets. At December 31, 2021 and 2020, the current portion of deferred commissions was $32.5 and $25.0, respectively, and the non-current portion of deferred commissions was $24.2 and $17.5, respectively. The Company recognized revenues$27.2, $30.1 and $30.1 of $249 million, $241 million and $253 millionexpense related to deferred commissions for the years ended December 31, 2017, 20162021, 2020 and 2015, respectively, using this method. Estimated losses2019, respectively.
Remaining performance obligations -Remaining performance obligations represents the transaction price of firm orders for which work has not been performed and excludes unexercised contract options. As of December 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $3,790.4. We expect to recognize revenue on any projects areapproximately 68% of our remaining performance obligations over the next 12 months, with the remainder to be recognized as soon as such losses become known.thereafter.
Capitalized Software - The Company accounts for capitalized software under applicable accounting guidance which, among other provisions, requires capitalization of certain internal-use software costs once certain criteria are met. Overhead, general and administrative and training costs are not capitalized. Capitalized software balances, net of accumulated amortization, were $14.0 million$65.9 and $4.4 million$43.1 at December 31, 20172021 and 2016, respectively.2020, respectively, which are included in “Other Assets” our Consolidated Balance Sheets.
Stock-Based Compensation - The Company recognizes expense for the grant date fair value of its employee stock awards on a straight-line basis (or, in the case of performance-based awards, on a graded basis) over the employee'semployee’s requisite service period (generally the vesting period of the award). The fair value of option awards is estimated using the Black-Scholes option valuation model.
(2) Business Acquisitions and DivestituresDispositions
Acquisitions
2021 Acquisitions - Roper completed four7 business acquisitions in the year ended December 31, 2017,2021 with an aggregate purchase price of $152 million,$225.9, net of cash acquired.acquired and debt assumed. The results of operations of the acquired businesses did not have a material impact on Roper's consolidatedare included in Roper’s Consolidated Financial Statements since the date of each acquisition. Pro forma results of operations.
Acquisitionoperations and the revenue and net income subsequent to the acquisition date for the acquisitions completed during fiscal 2021 have not been presented because the effects of Phase Technology - On June 21, 2017, Roper acquired the assets of Phase Technology, a business engagedacquisitions, individually and in the design, manufacture, marketingaggregate, were not material to our financial results.
During the first three quarters of 2021, Roper completed 4 acquisitions which are being integrated into our Deltek business and sales of test instruments. Phase Technology is reported in the Energy Systems & Controls segment.
Theits results of the following acquisitions are reported in the RF Technology segment:Application Software reportable segment.
AcquisitionOn November 18, 2021, Roper acquired substantially all of Handshakethe assets of Agency Zoom, LLC (“Agency Zoom”), a provider of sales, marketing and service automation software solutions for insurance agencies. Agency Zoom is integrating into our Vertafore business and its results are reported in the Application Software Inc. - reportable segment.
On August 4, 2017,December 21, 2021, Roper acquired a majority of the assets of The Construction Journal, LTD. (“Construction Journal”), a provider of selling, marketing, and licensing software solutions for the commercial construction industry. Construction Journal is integrating into our ConstructConnect business and its results are reported in the Network Software and Systems reportable segment.
On December 30, 2021, Roper acquired 100% of the shares of Handshake Software,American LegalNet, Inc. (“ALN”), a provider of search products, portalscourt forms, eFiling, calendaring and servicesdocketing software solutions. ALN is integrating into our Aderant business and its results are reported in the Application Software reportable segment.
The Company recorded $138.8 in goodwill and $104.9 of other identifiable intangibles in connection with these 7 acquisitions. The amortizable intangible assets include customer relationships of $94.6 (12.9 year weighted average useful life) and technology of $10.3 (5.3 year weighted average useful life).
Subsequent to the year ended December 31, 2021, on January 3, 2022, Roper acquired 100% of the membership interests of Horizon Lab Systems, LLC (“HLS”) for legal professionals.a purchase price of $49.7, net of cash acquired and debt assumed. HLS is a leading provider of laboratory information management systems in the toxicology, environmental, public health and agricultural markets. HLS is integrating into our CliniSys business and its results will be reported in the Application Software reportable segment beginning in the first quarter of 2022.
Acquisition2020 Acquisitions - Roper completed 6 business acquisitions in the year ended December 31, 2020. The results of Workbook Software A/S - On September 15, 2017,operations of the acquired businesses are included in Roper’s Consolidated Financial Statements since the date of each acquisition. Pro forma results of operations and the revenue and net income subsequent to the acquisition date for the acquisitions completed during fiscal 2020 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to our financial results.
The largest of the 2020 acquisitions was Vertafore, Inc. (“Vertafore”), a leading provider of SaaS solutions for the property and casualty insurance industry. Roper acquired 100% of the shares of WorkbookProject Viking Holdings, Inc. (the parent company of Vertafore) on September 3, 2020, for a purchase price of $5,398.6. The purchase price comprises an enterprise value of $5,335.0 and the settlement of certain liabilities, net of cash acquired. Additionally, the purchase price contemplated approximately $120 of federal tax attributes that were substantially utilized by the end of 2021. The results of Vertafore are reported in the Application Software A/S, a provider of software solutions for customer relationship management, project management and finance/accounting.reportable segment.
Acquisition of Onvia, Inc. - On November 17, 2017, Roper acquired 100% of the outstanding shares of Onvia, Inc. ("Onvia") common stock for $9.00 per share in an all-cash tender offer. Onvia provides enterprise, mid-market and small business customers with sales lead generation technologies into federal, state and local government markets.
The Company recorded $83 million$3,229.1 in goodwill and $85 million$2,660.0 of other identifiable intangibles in connection with the acquisitions; however, purchase price allocations are preliminary pending final tax-related adjustments. The amortizable intangible assets include primarily customer relationships of $68 million (15 year weighted average useful life) and technology of $13 million (6 year weighted average useful life).
Sale of Product Line - On May 15, 2017, Roper completed the sale of a product line in our Energy Systems & Controls segment for $10.4 million. The pretax gain on the sale was $9.4 million, which is reported in Other income/(expense), net in the consolidated statements of earnings.
2016 Acquisitions – During the year ended December 31, 2016, Roper completed six business combinations. Roper acquired the businesses in order to both expand and complement its existing technologies. The results of operations of the acquired companies have been included in Roper's consolidated results since the date of eachVertafore acquisition.
The largest of the 2016 acquisitions was Deltek Inc., a global provider of enterprise software and information solutions for government contractors, professional services firms and other project-based businesses. Roper acquired 100% of the shares of Project Diamond Holdings Corp. (the parent company of Deltek) on December 27, 2016, in a $2.8 billion all-cash transaction. Deltek is reported in the RF Technology segment.
The following table (in thousands) summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.
|
| | | |
Accounts receivable | $ | 94,506 |
|
Other current assets | 37,558 |
|
Identifiable intangibles | 972,000 |
|
Goodwill | 2,234,549 |
|
Other assets | 43,098 |
|
Total assets acquired | 3,381,711 |
|
Deferred revenue | 166,393 |
|
Other current liabilities | 57,433 |
|
Long-term deferred tax liability | 349,810 |
|
Other liabilities | 7,935 |
|
Net assets acquired | $ | 2,800,140 |
|
The majority of the goodwill is not expected to be deductible for tax purposes. Of the $972 million$2,660.0 of acquired intangible assets, acquired, $145 million was assigned to trade names that are not subject to amortization and $62 million was assigned to in process research and development. The remaining $765 million of acquired intangible assets have a weighted-average useful life of 12 years. The intangible assets that make up that amount include customer relationships of $625 million (13 year weighted-average useful life) and unpatented technology of $140 million (6 year weighted-average useful life).
The Company expensed transaction costs of $4.3 million related to the Deltek acquisition as corporate general and adminstrative expenses, as incurred.
Roper's results for the year ended December 31, 2016 included results from Deltek between December 28, 2016 and December 31, 2016. In that period, Deltek contributed $7.9 million in revenue and $0.8 million of earnings to Roper's results. The following unaudited pro forma summary presents consolidated information as if the acquisition of Deltek had occurred on January 1, 2015 (amounts in millions, except per share data):
|
| | | | | | | |
| Pro forma Year ended December 31, |
| 2016 | | 2015 |
Net revenues | $ | 4,268,052 |
| | $ | 4,012,030 |
|
Net income | 656,404 |
| | 647,089 |
|
Earnings per share, basic | 6.48 |
| | 6.43 |
|
Earnings per share, diluted | 6.41 |
| | 6.37 |
|
Pro forma earnings were adjusted by $47.4 million for the year ended December 31, 2016 for non-recurring acquisition and other costs. Adjustments were also made for recurring changes in amortization, interest expense and taxes related to the acquisition.
During the year ended December 31, 2016, Roper completed five other acquisitions which were immaterial. The aggregate purchase price of these acquisitions totaled $920 million of cash. The Company recorded $372 million in other identifiable intangibles and $642 million in goodwill in connection with these acquisitions. Supplemental pro forma information has not been provided as the acquisitions did not have a material impact on Roper's consolidated results of operations individually or in aggregate.
The results of the following acquisitions are reported in the Medical & Scientific Imaging segment:
| |
– | Clinisys - On January 7, 2016, Roper acquired 100% of the shares of CliniSys Group Ltd. ("CliniSys"), a provider of clinical laboratory software headquartered in the United Kingdom. |
| |
– | PCI Medical - On March 17, 2016, Roper acquired the assets of PCI Medical Inc., a provider of medical probe and scope disinfection products. |
| |
– | GeneInsight - On April 1, 2016, the Company acquired 100% of the shares of GeneInsight Inc., a provider of software for managing the analysis, interpretation and reporting of genetic tests. |
| |
– | UNIConnect - On November 10, 2016, Roper acquired the assets of UNIConnect LC, a provider of process management software for molecular laboratories. |
ConstructConnect - On October 31, 2016, Roper acquired 100% of the shares of iSqFt Holdings Inc. (d/b/a ConstructConnect), a provider of cloud-based data, collaboration, and workflow automation solutions to the commercial construction industry. ConstructConnect is reported in the RF Technology segment.
The Company expensed transaction costs of $4.2 million related to the acquisitions as corporate general and adminstrative expenses, as incurred.
The majority of the goodwill recorded for these five companies is not expected to be deductible for tax purposes. Of the $372 million of intangible assets acquired, $34 million$120.0 was assigned to trade names that are not subject to amortization. The remaining $338 million$2,540.0 of acquired intangible assets have a weighted-average useful life of 12 years. The intangible assets that make up that amount include customer relationships of $242 million (14$2,230.0 (17 year weighted-average useful life), and unpatented technology of $66 million (6$310.0 (8 year weighted-average useful life) and software of $30 million (9 year weighted-average useful life).
2015 Acquisitions – Net assets acquired also includes $489 of deferred tax liabilities, which are due primarily to $638 of deferred tax liabilities associated with acquired intangible assets, partially offset primarily by approximately $120 of federal tax attributes.
During the year ended December 31, 2015,2020, Roper completed eight5 other acquisitions with an aggregate purchase price of $612.8, net of cash acquired and debt assumed.
Acquisition of Freight Market Intelligence Consortium - On June 9, 2020, Roper acquired substantially all of the assets of Freight Market Intelligence Consortium (“FMIC”), a leading provider of subscription-based freight transaction benchmarking and analysis service. FMIC was integrated into our DAT business combinations.and its results are reported in the Network Software & Systems reportable segment.
Acquisition of Team TSI Corporation - On June 15, 2020, Roper acquired substantially all of the assets of Team TSI Corporation (“Team TSI”), a leading provider of subscription-based data analytics serving long term health care facilities. Team TSI was integrated into our SHP business and its results are reported in the Network Software & Systems reportable segment.
Acquisition of Impact Financial Systems - On September 15, 2020, Roper acquired substantially all of the assets of Impact Financial Systems (“IFS”), a leading provider of service request automation solutions for client onboarding, transaction automation, maintenance and advisor transitions. IFS was integrated into our iPipeline business and its results are reported in the Network Software & Systems reportable segment.
Acquisition of WELIS - On September 18, 2020, Roper acquired all of the membership interests of WELIS, a premier provider of life insurance illustration systems to carriers in the US. WELIS was integrated into our iPipeline business and its results are reported in the Network Software & Systems reportable segment.
Acquisition of EPSi - On October 15, 2020, Roper acquired substantially all of the assets of EPSi, a leading provider of financial decision support and planning tools for hospitals and health systems. EPSi was integrated into our Strata business and its results are reported in the Application Software reportable segment.
The Company recorded $303.9 in goodwill and $313.0 of other identifiable intangibles in connection with these 5 acquisitions. The amortizable intangible assets include customer relationships of $283.7 (16 year weighted average useful life) and technology of $29.3 (5 year weighted average useful life).
2019 Acquisitions - Roper completed 4 business acquisitions in the year ended December 31, 2019, with an aggregate purchase price of $2,387.6, net of cash acquired. The results of operations of the acquired companies have beenbusinesses are included in Roper's consolidated resultsRoper’s Consolidated Financial Statements since the date of each acquisition. Supplemental proPro forma information has not been provided as the acquisitions did not have a material impact on Roper's consolidated results of operations and the revenue and net income subsequent to the acquisition date for the acquisitions completed during fiscal 2019 have not been presented because the effects of the acquisitions, individually orand in aggregate.the aggregate, were not material to our financial results.
Acquisition of Foundry - On April 18, 2019, Roper acquired 100% of the shares of Foundry, a leading provider of software technologies used to deliver visual effects and 3D content for the entertainment, digital design, and visualization industries. The results of the following acquisitionsFoundry are reported in the MedicalNetwork Software & Scientific Imaging segment:Systems reportable segment.
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– | Strata - On January 21, 2015, Roper acquired 100% of the shares of Strata Decision Technologies LLC ("Strata"), a provider of planning and budget software for health care providers.
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– | Softwriters - On February 9, 2015, Roper acquired 100% of the shares of Softwriters Inc., a provider of long-term care pharmacy operating software.
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– | Data Innovations - On March 4, 2015, Roper acquired 100% of the shares of Data Innovations LLC, a provider of clinical and blood laboratory middleware.
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– | AHP - On September 4, 2015, Roper acquired the assets of Atlantic Health Partners LLC ("AHP"), a group purchasing organization specializing in vaccines for the physician marketplace.
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– | Atlas - On October 26, 2015, Roper acquired 100% of the shares of Atlas Database Software Corp. ("Atlas"), a provider of clinical process integration to private and public health sectors.
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The resultsAcquisition of ComputerEase - On August 19, 2019, Roper acquired substantially all of the following acquisitionsassets of ComputerEase Software, a leading provider of integrated accounting, project management and field-to-office solutions for commercial construction firms. ComputerEase was integrated into our Deltek business and its results are reported in the RF Technology segment:Application Software reportable segment.
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– | On Center - On July 20, 2015, Roper acquired 100% of the shares of On Center Software LLC ("On Center"), a provider of construction automation technology.
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– | RF IDeas - On September 1, 2015, Roper acquired 100% of the shares of RF IDeas, Inc., a provider of proprietary identification card technology solutions.
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– | Aderant - On October 21, 2015, Roper acquired 100% of the shares of Aderant Holdings, Inc. ("Aderant"), a provider of comprehensiveAcquisition of iPipeline - On August 22, 2019, Roper acquired 100% of the shares of iPipeline Holdings, Inc., a leading provider of cloud-based software solutions for law and other professional services firms. |
The aggregate purchase price for the 2015 acquisitionslife insurance and financial services industries. The results of iPipeline are reported in the Network Software & Systems reportable segment.
Acquisition of Bellefield - On December 18, 2019, Roper acquired substantially all of the assets of Bellefield Systems which provides SaaS solutions targeting the front office of law firms, specifically focused on professional service automation, compliance and timekeeping. Bellefield was $1.8 billion, paidintegrated into our Aderant business and its results are reported in cash. Roper purchased the businesses to expand upon existing software, supply chain and medical platforms.Application Software reportable segment.
The Company expensed transaction costs of $5.9 million related to the acquisitions as corporate general and administrative expenses, as incurred.
The Company recorded $1.2 billion$1,447.0 in goodwill and $731 million in$1,181.9 of other identifiable intangibles in connection with the acquisitions. The majority of the goodwill recorded is not expected to be deductible for tax purposes. Of the $731 million ofThe amortizable intangible assets acquired, $51 million was assigned to trade names that are not subject to amortization. The remaining $680 million of acquired intangible assets have a weighted-average useful life of 17 years. The intangible assets that make up that amount include customer relationships of $541 million (19$1,020.0 (15.8 year weighted-average useful life), unpatented technology of $100 million (8 year weighted-averageweighted average useful life) and softwaretechnology of $39 million (6$109.3 (6.8 year weighted-averageweighted average useful life).
Divestiture of Abel -
Dispositions
On October 2, 2015,March 17, 2021, Roper completed the sale of Abel Pumps ("Abel")a minority investment in Sedaru, Inc. for $106 million (€95 million), net of cash divested.$27.1 in cash. The sale resulted in a pretax gain on the divestiture was $70.9 million,of $27.1, which is reported as Other income/within “Other income (expense), net onnet” in the consolidated statementConsolidated Statements of earnings. The gain resulted inEarnings. In addition, we recognized income tax expense of $46 million as well as$5.5 in connection with the sale, which is included within “Income taxes” in the Consolidated Statements of Earnings.
On October 29, 2019, the Company closed on its sale of Gatan to AMETEK for approximately $925.0 in cash. The sale resulted in a future tax benefitpretax gain of $11 million.
$801.1, which is reported within “Gain on disposal of businesses” in the Consolidated Statements of Earnings. The year to date pretax incomeresults of Abel was $5.9 million for the period ended October 2, 2015. Abel wasGatan are reported in the Industrial TechnologyMeasurement & Analytical Solutions segment through such date. In addition, we recognized income tax expense of $201.2 in connection with the sale, which is included within “Income taxes” in the Consolidated Statements of Earnings.
On February 5, 2019, the Company closed on its sale of the Imaging businesses to Teledyne for approximately $225.0 in cash. The results of the Imaging businesses are reported in the Measurement & Analytical Solutions segment through such date. The sale resulted in a pretax gain of $119.6, which is reported within “Gain on disposal of businesses” in the Consolidated Statements of Earnings. In addition, we recognized income tax expense of $32.2 in connection with the sale, which is included within “Income taxes” in the Consolidated Statements of Earnings.
(3) Discontinued Operations
During the year ended December 31, 2021, the Company signed definitive agreements to divest its TransCore, Zetec and CIVCO Radiotherapy businesses as described below.
•On November 1, 2021, Roper closed on the sale of the CIVCO Radiotherapy business to an affiliate of Blue Wolf Capital Partners LLC, for approximately $120.0 in cash. The sale resulted in a pretax gain of $77.2 and income tax expense of $21.3, which are reported within “Gain on disposition of discontinued operations, net of tax” in the Consolidated Statements of Earnings. CIVCO Radiotherapy was previously included in the Measurement & Analytical Solutions reportable segment.
•On January 5, 2022, Roper closed on the sale of the Zetec business to Eddyfi NDT Inc. for approximately $350.0 in cash. The Company is currently calculating the gain and associated tax expense on the sale, which will be disclosed within the Company’s first quarter 2022 Quarterly Report on Form 10-Q. Zetec was previously included in the Process Technologies reportable segment. (3) Inventories
•On October 1, 2021, Roper signed a definitive agreement to divest its TransCore business to an affiliate of Singapore Technologies Engineering Ltd., for approximately $2,680.0 in cash. The transaction, which is expected to close in the first quarter of 2022, is subject to customary closing conditions, including regulatory approvals. TransCore was previously included in the Network Software & Systems reportable segment.
We concluded these disposal activities, in the aggregate, represented a strategic shift that will have a major effect on our operations and financial results. These divestitures significantly enhance our mix of high-margin, recurring revenue businesses and notably reduce our working capital requirements. Accordingly, the financial results of the TransCore, Zetec and CIVCO Radiotherapy businesses are presented in the Consolidated Financial Statements as discontinued operations for all periods presented, as applicable. Current and non-current assets and liabilities of these businesses are presented in the Consolidated Balance Sheet as assets and liabilities of discontinued operations classified as held for sale for both periods presented.
The following tables summarize the major classes of assets and liabilities related to the discontinued operations of the TransCore, Zetec and CIVCO Radiotherapy businesses, as applicable, as reported in the Consolidated Balance Sheets at December 31:
| | | | | | | | | | | |
| 2021 (1) | | 2020 |
Accounts receivable, net | $ | 74.7 | | | $ | 117.3 | |
Inventories, net | 47.8 | | | 33.3 | |
Unbilled receivables | 158.2 | | | 168.9 | |
Goodwill | 405.5 | | | — | |
Other intangible assets, net | 31.0 | | | — | |
Other current assets | 71.4 | | | 4.7 | |
Current assets held for sale | 788.6 | | | 324.2 | |
| | | |
Goodwill | — | | | 429.2 | |
Other intangible assets, net | — | | | 38.7 | |
Other assets | — | | | 53.7 | |
Assets held for sale | $ | — | | | $ | 521.6 | |
| | | |
Accounts payable | $ | 40.3 | | | $ | 50.7 | |
Accrued compensation | 27.0 | | | 23.5 | |
Deferred taxes | 29.5 | | | — | |
Other current liabilities | 62.3 | | | 46.6 | |
Current liabilities held for sale | 159.1 | | | 120.8 | |
| | | |
Deferred taxes | — | | | 31.0 | |
Other liabilities | — | | | 33.1 | |
Liabilities held for sale | $ | — | | | $ | 64.1 | |
(1) All assets and liabilities held for sale were classified as current as it was probable that the sale of TransCore and Zetec would be completed within one year from the balance sheet date.
The following table summarizes the major classes of revenue and expenses constituting net earnings from discontinued operations attributable to the TransCore, Zetec and CIVCO Radiotherapy businesses:
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Net revenues | $ | 638.0 | | | $ | 672.9 | | | $ | 639.1 | |
Cost of sales | 372.9 | | 400.7 | | 352.1 |
Gross profit | 265.1 | | 272.2 | | 287.0 |
| | | | | |
Selling, general and administrative expenses(1) | 124.0 | | 114.6 | | 116.9 |
Income from operations | 141.1 | | 157.6 | | 170.1 |
| | | | | |
Other income (expense), net | 1.5 | | 0.3 | | (0.1) |
| | | | | |
Earnings before income taxes (2) | 142.6 | | 157.9 | | 170.0 |
| | | | | |
Income taxes | 28.5 | | 33.7 | | 42.1 |
| | | | | |
Earnings from discontinued operations, net of tax | 114.1 | | 124.2 | | 127.9 |
| | | | | |
Gain on disposition of discontinued operations, net of tax | 55.9 | | — | | — |
| | | | | |
Net earnings from discontinued operations | $ | 170.0 | | | $ | 124.2 | | | $ | 127.9 | |
| | | | | |
| | | | | |
| | | | | |
(1) Includes stock-based compensation expense of $5.4, $4.8 and $3.4 for the years ended December 31, 2021, 2020, and 2019, respectively. Stock-based compensation for discontinued operations was previously reported as a component of unallocated corporate general and administrative expenses. In connection with the sale of CIVCO Radiotherapy, we recognized expense of $0.9 associated with accelerated vesting of share-based awards. These charges were recorded as a component of “Gain on disposition of discontinued operations, net of tax” within the Consolidated Statements of Earnings.
(2) Includes depreciation and amortization of $5.2, $7.9 and $7.2 for the years ended December 31, 2021, 2020, and 2019, respectively.
(4) Inventories
The components of inventories at December 31 were as follows (in thousands):follows:
| | | | | | | | | | | |
| 2021 | | 2020 |
Raw materials and supplies | $ | 112.7 | | | $ | 104.0 | |
Work in process | 30.2 | | | 22.9 | |
Finished products | 69.3 | | | 74.4 | |
Inventory reserves | (36.1) | | | (36.2) | |
| $ | 176.1 | | | $ | 165.1 | |
|
| | | | | | | |
| 2017 | | 2016 |
Raw materials and supplies | $ | 132,949 |
| | $ | 113,632 |
|
Work in process | 27,649 |
| | 24,290 |
|
Finished products | 82,445 |
| | 81,263 |
|
Inventory reserves | (38,110 | ) | | (37,233 | ) |
| $ | 204,933 |
| | $ | 181,952 |
|
(4) (5) Property, Plant and Equipment
The components of property, plant and equipment at December 31 were as follows (in thousands):follows:
| | | | | | | | | | | |
| 2021 | | 2020 |
Land | $ | 2.2 | | | $ | 2.2 | |
Buildings | 77.5 | | | 80.2 | |
Machinery and other equipment | 164.4 | | | 176.1 | |
Computer equipment | 117.5 | | | 110.9 | |
Software | 77.4 | | | 75.7 | |
| 439.0 | | | 445.1 | |
Accumulated depreciation | (336.2) | | | (317.8) | |
| $ | 102.8 | | | $ | 127.3 | |
|
| | | | | | | |
| 2017 | | 2016 |
Land | $ | 2,471 |
| | $ | 2,404 |
|
Buildings | 90,683 |
| | 88,201 |
|
Machinery and other equipment | 226,320 |
| | 221,325 |
|
Computer equipment | 77,508 |
| | 70,110 |
|
Software | 62,387 |
| | 54,451 |
|
| 459,369 |
| | 436,491 |
|
Accumulated depreciation | (316,834 | ) | | (295,173 | ) |
| $ | 142,535 |
| | $ | 141,318 |
|
Depreciation and amortization expense related to property, plant and equipment was $49,513, $37,299$49.7, $46.7 and $38,185$43.1 for the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively.
(5) (6) Goodwill and Other Intangible Assets
The carrying value of goodwill by segment was as follows (in thousands):follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Application Software | | Network Software & Systems | | Measurement &Analytical Solutions | | Process Technologies | | Total |
Balances at December 31, 2019 | $ | 5,389.4 | | | $ | 3,596.6 | | | $ | 1,155.5 | | | $ | 245.8 | | | $ | 10,387.3 | |
Goodwill acquired | 3,399.0 | | | 134.0 | | | — | | | — | | | 3,533.0 | |
Currency translation adjustments | 14.5 | | | 16.6 | | | 11.8 | | | 4.4 | | | 47.3 | |
Reclassifications and other | (0.6) | | | (1.0) | | | — | | | — | | | (1.6) | |
Balances at December 31, 2020 | $ | 8,802.3 | | | $ | 3,746.2 | | | $ | 1,167.3 | | | $ | 250.2 | | | $ | 13,966.0 | |
Goodwill acquired | 85.9 | | | 52.9 | | | — | | | — | | | 138.8 | |
Currency translation adjustments | (5.8) | | | (3.0) | | | (6.7) | | | (2.6) | | | (18.1) | |
Reclassifications and other | 6.9 | | | 0.9 | | | — | | | — | | | 7.8 | |
Balances at December 31, 2021 | $ | 8,889.3 | | | $ | 3,797.0 | | | $ | 1,160.6 | | | $ | 247.6 | | | $ | 14,094.5 | |
|
| | | | | | | | | | | | | | | | | | | |
| RF Technology | | Medical & Scientific Imaging | | Industrial Technology | | Energy Systems & Controls | | Total |
Balances at December 31, 2015 | $ | 1,993,299 |
| | $ | 3,039,197 |
| | $ | 374,033 |
| | $ | 418,197 |
| | $ | 5,824,726 |
|
Goodwill acquired | 2,710,223 |
| | 166,768 |
| | — |
| | — |
| | 2,876,991 |
|
Currency translation adjustments | (15,118 | ) | | (19,100 | ) | | (10,055 | ) | | (7,774 | ) | | (52,047 | ) |
Reclassifications and other | (734 | ) | | (1,794 | ) | | — |
| | — |
| | (2,528 | ) |
Balances at December 31, 2016 | $ | 4,687,670 |
| | $ | 3,185,071 |
| | $ | 363,978 |
| | $ | 410,423 |
| | $ | 8,647,142 |
|
Goodwill acquired | 63,490 |
| | — |
| | — |
| | 19,169 |
| | 82,659 |
|
Currency translation adjustments | 19,337 |
| | 17,582 |
| | 13,540 |
| | 8,395 |
| | 58,854 |
|
Reclassifications and other | 28,394 |
| | 3,264 |
| | — |
| | — |
| | 31,658 |
|
Balances at December 31, 2017 | $ | 4,798,891 |
| | $ | 3,205,917 |
| | $ | 377,518 |
| | $ | 437,987 |
| | $ | 8,820,313 |
|
Reclassifications and other during the year ended December 31, 20172021 were due primarily to purchase accounting and tax adjustments for 2016 acquisitions.acquisitions completed in 2020. See Note 2 for information regarding acquisitions.
Other intangible assets were comprised of (in thousands):of:
| | | | | | | | | | | | | | | | | |
| Cost | | Accum. amort. | | Net book value |
Assets subject to amortization: | | | | | |
Customer related intangibles | $ | 7,473.7 | | | $ | (1,688.2) | | | $ | 5,785.5 | |
Unpatented technology | 942.8 | | | (363.9) | | | 578.9 | |
Software | 172.4 | | | (127.4) | | | 45.0 | |
Patents and other protective rights | 12.0 | | | (6.0) | | | 6.0 | |
Trade names | 7.3 | | | (5.6) | | | 1.7 | |
Assets not subject to amortization: | | | | | |
Trade names | 751.1 | | | — | | | 751.1 | |
Balances at December 31, 2020 | $ | 9,359.3 | | | $ | (2,191.1) | | | $ | 7,168.2 | |
| | | | | |
Assets subject to amortization: | | | | | |
Customer related intangibles | $ | 7,532.0 | | | $ | (2,108.0) | | | $ | 5,424.0 | |
Unpatented technology | 906.4 | | | (431.8) | | | 474.6 | |
Software | 149.5 | | | (122.4) | | | 27.1 | |
Patents and other protective rights | 9.6 | | | (2.1) | | | 7.5 | |
Trade names | 12.8 | | | (6.1) | | | 6.7 | |
Assets not subject to amortization: | | | | | |
Trade names | 648.6 | | | — | | | 648.6 | |
Balances at December 31, 2021 | $ | 9,258.9 | | | $ | (2,670.4) | | | $ | 6,588.5 | |
|
| | | | | | | | | | | |
| Cost | | Accum. amort. | | Net book value |
Assets subject to amortization: | | | | | |
Customer related intangibles | $ | 3,272,081 |
| | $ | (712,718 | ) | | $ | 2,559,363 |
|
Unpatented technology | 462,152 |
| | (144,025 | ) | | 318,127 |
|
Software | 184,761 |
| | (56,882 | ) | | 127,879 |
|
Patents and other protective rights | 24,656 |
| | (20,399 | ) | | 4,257 |
|
Trade names | 6,591 |
| | (653 | ) | | 5,938 |
|
| |
| | |
| | |
|
Assets not subject to amortization: | |
| | |
| | |
|
Trade names | 578,279 |
| | — |
| | 578,279 |
|
In process research and development | 62,000 |
| | — |
| | 62,000 |
|
Balances at December 31, 2016 | $ | 4,590,520 |
| | $ | (934,677 | ) | | $ | 3,655,843 |
|
| | | | | |
Assets subject to amortization: | |
| | |
| | |
|
Customer related intangibles | $ | 3,355,232 |
| | $ | (913,680 | ) | | $ | 2,441,552 |
|
Unpatented technology | 544,046 |
| | (207,678 | ) | | 336,368 |
|
Software | 184,703 |
| | (84,825 | ) | | 99,878 |
|
Patents and other protective rights | 26,090 |
| | (22,729 | ) | | 3,361 |
|
Trade names | 6,635 |
| | (1,731 | ) | | 4,904 |
|
Assets not subject to amortization: | |
| | |
| | |
|
Trade names | 587,737 |
| | — |
| | 587,737 |
|
In process research and development | 1,418 |
| | — |
| | 1,418 |
|
Balances at December 31, 2017 | $ | 4,705,861 |
| | $ | (1,230,643 | ) | | $ | 3,475,218 |
|
Amortization expense of other intangible assets was $294 million, $201 million,$577.5, $461.5, and $164 million$363.5 during the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively. Amortization expense is expected to be $294 million$579 in 2018, $282 million2022, $565 in 2019, $276 million2023, $521 in 2020, $264 million2024, $493 in 20212025 and $260 million$461 in 2022.2026.
(6) (7) Accrued Liabilities
Accrued liabilities at December 31 were as follows (in thousands):follows:
| | | | | | | | | | | |
| 2021 | | 2020 |
Interest | $ | 42.6 | | | $ | 44.1 | |
Customer deposits | 56.9 | | | 48.6 | |
Accrued dividend | 66.8 | | | 60.0 | |
Rebates | 63.0 | | | 51.5 | |
Operating lease liability | 51.4 | | | 56.8 | |
Sales and other taxes payable | 25.4 | | | 33.4 | |
Other | 134.6 | | | 124.2 | |
| $ | 440.7 | | | $ | 418.6 | |
|
| | | | | | | |
| 2017 | | 2016 |
Interest | $ | 20,060 |
| | $ | 21,742 |
|
Customer deposits | 29,236 |
| | 16,707 |
|
Commissions | 8,341 |
| | 9,144 |
|
Warranty | 10,587 |
| | 10,548 |
|
Accrued dividend | 42,921 |
| | 36,077 |
|
Rebates | 29,996 |
| | 19,414 |
|
Billings in excess of cost | 23,284 |
| | 12,381 |
|
Other | 102,149 |
| | 93,326 |
|
| $ | 266,574 |
| | $ | 219,339 |
|
(7) (8) Income Taxes
Earnings before income taxes for the years ended December 31, 2017, 20162021, 2020 and 20152019 consisted of the following components (in thousands):components:
| | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | 2019 |
United States | $ | 915.3 | | | $ | 752.7 | | | $ | 1,741.2 | |
Other | 355.7 | | | 298.7 | | | 316.2 | |
| $ | 1,271.0 | | | $ | 1,051.4 | | | $ | 2,057.4 | |
|
| | | | | | | | | | | |
| 2017 | | 2016 | | 2015 |
United States | $ | 783,654 |
| | $ | 721,000 |
| | $ | 710,614 |
|
Other | 251,069 |
| | 219,652 |
| | 291,731 |
|
| $ | 1,034,723 |
| | $ | 940,652 |
| | $ | 1,002,345 |
|
Components of income tax expense for the years ended December 31, 2017, 20162021, 2020 and 20152019 were as follows (in thousands):follows:
| | | 2017 | | 2016 | | 2015 | | 2021 | | 2020 | | 2019 |
Current: | | | | | | Current: | | | | | |
Federal | $ | 316,031 |
| | $ | 239,217 |
| | $ | 229,224 |
| Federal | $ | 130.6 | | | $ | 157.5 | | | $ | 366.5 | |
State | 29,768 |
| | 21,779 |
| | 22,041 |
| State | 56.8 | | | 50.0 | | | 72.0 | |
Foreign | 89,894 |
| | 54,937 |
| | 71,507 |
| Foreign | 94.5 | | | 75.3 | | | 77.9 | |
Deferred: | |
| | |
| | |
| Deferred: | | | | | |
Federal | (358,300 | ) | | (26,760 | ) | | 6,710 |
| Federal | 28.0 | | | (56.7) | | | (47.1) | |
State | (3,670 | ) | | 189 |
| | (16,844 | ) | State | (26.6) | | | (5.2) | | | (2.2) | |
Foreign | (10,772 | ) | | (7,355 | ) | | (6,360 | ) | Foreign | 5.1 | | | 5.0 | | | (49.7) | |
| $ | 62,951 |
| | $ | 282,007 |
| | $ | 306,278 |
| | $ | 288.4 | | | $ | 225.9 | | | $ | 417.4 | |
Reconciliations between the statutory federal income tax rate and the effective income tax rate for the years ended December 31, 2017, 20162021, 2020 and 20152019 were as follows: