UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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| | | | |
x☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017.
March 31, 2023. |
| | | | |
o ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number 1-12273
ROPER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
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| | | | | | | | | | |
Delaware | | 51-0263969 |
(State or other jurisdiction of incorporation or organization) | | 51-0263969
(I.R.S. Employer Identification No.) |
| | | |
6901 Professional Pkwy. East,Parkway, Suite 200 | | |
Sarasota, | Florida | | 34240 |
(Address of principal executive offices) | |
34240
(Zip Code) |
(941) 556-2601
(Registrant'sRegistrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: | | | | | | | | | | | | | | |
Title of Each Class | | Trading Symbol(s) | | Name of Each Exchange On Which Registered |
Common Stock, $0.01 Par Value | | ROP | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ☒ Yes o☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
þ☒ Yes o☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company"company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
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☒ | Large accelerated filer | ☐ | Accelerated filer |
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☐ | Non-accelerated filer | ☐ | Smaller reporting company |
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| |
þ Large accelerated filer ☐ | o Accelerated filer
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| |
o Non-accelerated filer (Do not check if a smaller reporting company)
| o Smaller reporting company
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| |
| oEmerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark ifwhether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o☐ Yes þ☒ No
The number of shares outstanding of the Registrant'sregistrant’s common stock as of October 27, 2017April 28, 2023 was 102,362,184.106,592,234.
ROPER TECHNOLOGIES, INC.
REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017MARCH 31, 2023
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings (unaudited)
(in thousands,millions, except per share data)
| | | | | | | | | | | | | | | | | |
| | | Three months ended March 31, |
| | | | | 2023 | | 2022 |
Net revenues | | | | | $ | 1,469.7 | | | $ | 1,279.8 | |
Cost of sales | | | | | 451.1 | | | 382.6 | |
Gross profit | | | | | 1,018.6 | | | 897.2 | |
| | | | | | | |
Selling, general and administrative expenses | | | | | 617.6 | | | 541.3 | |
Income from operations | | | | | 401.0 | | | 355.9 | |
| | | | | | | |
Interest expense, net | | | | | 37.4 | | | 52.6 | |
Equity investment activity, net | | | | | (1.2) | | | — | |
Other expense, net | | | | | (2.3) | | | (2.1) | |
| | | | | | | |
| | | | | | | |
Earnings before income taxes | | | | | 360.1 | | | 301.2 | |
| | | | | | | |
Income taxes | | | | | 75.8 | | | 64.8 | |
| | | | | | | |
Net earnings from continuing operations | | | | | 284.3 | | | 236.4 | |
| | | | | | | |
Earnings (loss) from discontinued operations, net of tax | | | | | (1.2) | | | 66.8 | |
Gain on disposition of discontinued operations, net of tax | | | | | — | | | 1,717.3 | |
Net earnings (loss) from discontinued operations | | | | | (1.2) | | | 1,784.1 | |
| | | | | | | |
Net earnings | | | | | $ | 283.1 | | | $ | 2,020.5 | |
| | | | | | | |
Net earnings per share from continuing operations: | | | | | | | |
Basic | | | | | $ | 2.67 | | | $ | 2.24 | |
Diluted | | | | | $ | 2.66 | | | $ | 2.22 | |
| | | | | | | |
Net earnings (loss) per share from discontinued operations: | | | | | | | |
Basic | | | | | $ | (0.01) | | | $ | 16.89 | |
Diluted | | | | | $ | (0.01) | | | $ | 16.72 | |
| | | | | | | |
Net earnings per share: | | | | | | | |
Basic | | | | | $ | 2.66 | | | $ | 19.13 | |
Diluted | | | | | $ | 2.65 | | | $ | 18.94 | |
| | | | | | | |
Weighted average common shares outstanding: | | | | | | | |
Basic | | | | | 106.3 | | | 105.6 | |
Diluted | | | | | 107.0 | | | 106.7 | |
|
| | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net revenues | $ | 1,159,912 |
| | $ | 945,144 |
| | $ | 3,380,888 |
| | $ | 2,779,125 |
|
Cost of sales | 433,492 |
| | 366,651 |
| | 1,281,204 |
| | 1,073,593 |
|
Gross profit | 726,420 |
| | 578,493 |
| | 2,099,684 |
| | 1,705,532 |
|
| | | | | | | |
Selling, general and administrative expenses | 415,673 |
| | 311,103 |
| | 1,236,423 |
| | 940,073 |
|
Income from operations | 310,747 |
| | 267,390 |
| | 863,261 |
| | 765,459 |
|
| | | | | | | |
Interest expense, net | 45,523 |
| | 26,800 |
| | 137,201 |
| | 81,076 |
|
Other income/(expense), net | (659 | ) | | (534 | ) | | 5,263 |
| | (1,997 | ) |
| | | | | | | |
Earnings before income taxes | 264,565 |
| | 240,056 |
| | 731,323 |
| | 682,386 |
|
| | | | | | | |
Income taxes | 74,292 |
| | 72,977 |
| | 203,423 |
| | 205,822 |
|
| | | | | | | |
Net earnings | $ | 190,273 |
| | $ | 167,079 |
| | $ | 527,900 |
| | $ | 476,564 |
|
| | | | | | | |
Net earnings per share: | | | | | | | |
Basic | $ | 1.86 |
| | $ | 1.65 |
| | $ | 5.17 |
| | $ | 4.71 |
|
Diluted | $ | 1.84 |
| | $ | 1.63 |
| | $ | 5.11 |
| | $ | 4.65 |
|
| | | | | | | |
Weighted average common shares outstanding: | | | | | | | |
Basic | 102,303 |
| | 101,372 |
| | 102,091 |
| | 101,231 |
|
Diluted | 103,680 |
| | 102,522 |
| | 103,397 |
| | 102,424 |
|
| | | | | | | |
Dividends declared per common share | $ | 0.35 |
| | $ | 0.30 |
| | $ | 1.05 |
| | $ | 0.90 |
|
See accompanying notes to condensed consolidated financial statements.Condensed Consolidated Financial Statements.
Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (unaudited)
(in thousands)millions)
| | | Three months ended September 30, | | Nine months ended September 30, | | | | Three months ended March 31, |
| 2017 | | 2016 | | 2017 | | 2016 | | | | 2023 | | 2022 |
Net earnings | $ | 190,273 |
| | $ | 167,079 |
| | $ | 527,900 |
| | $ | 476,564 |
| Net earnings | | | $ | 283.1 | | | $ | 2,020.5 | |
| | | | | | | | | | |
Other comprehensive income/(loss), net of tax: | | | | | | | | |
Other comprehensive income (loss), net of tax: | | Other comprehensive income (loss), net of tax: | | |
Foreign currency translation adjustments | 67,535 |
| | 9,054 |
| | 147,462 |
| | (35,673 | ) | Foreign currency translation adjustments | | | 24.1 | | | (22.9) | |
Total other comprehensive income/(loss), net of tax | 67,535 |
| | 9,054 |
| | 147,462 |
| | (35,673 | ) | |
Total other comprehensive income (loss), net of tax | | Total other comprehensive income (loss), net of tax | | | 24.1 | | | (22.9) | |
| | | | | | | | | | |
Comprehensive income | $ | 257,808 |
| | $ | 176,133 |
| | $ | 675,362 |
| | $ | 440,891 |
| Comprehensive income | | | $ | 307.2 | | | $ | 1,997.6 | |
See accompanying notes to condensed consolidated financial statements.Condensed Consolidated Financial Statements.
Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(in thousands)millions)
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
ASSETS: | | | |
| | | |
Cash and cash equivalents | $ | 1,181.6 | | | $ | 792.8 | |
Accounts receivable, net | 629.1 | | | 724.5 | |
Inventories, net | 115.0 | | | 111.3 | |
Income taxes receivable | 25.5 | | | 61.0 | |
Unbilled receivables | 100.9 | | | 91.5 | |
Other current assets | 180.1 | | | 151.3 | |
| | | |
Total current assets | 2,232.2 | | | 1,932.4 | |
| | | |
Property, plant and equipment, net | 86.3 | | | 85.3 | |
Goodwill | 15,962.8 | | | 15,946.1 | |
Other intangible assets, net | 7,871.7 | | | 8,030.7 | |
Deferred taxes | 59.3 | | | 55.9 | |
Equity investment | 535.0 | | | 535.0 | |
Other assets | 387.5 | | | 395.4 | |
| | | |
Total assets | $ | 27,134.8 | | | $ | 26,980.8 | |
| | | |
LIABILITIES AND STOCKHOLDERS' EQUITY: | | | |
| | | |
Accounts payable | $ | 134.0 | | | $ | 122.6 | |
Accrued compensation | 154.2 | | | 228.8 | |
Deferred revenue | 1,303.8 | | | 1,370.7 | |
Other accrued liabilities | 413.4 | | | 454.6 | |
Income taxes payable | 70.5 | | | 16.6 | |
Current portion of long-term debt, net | 699.5 | | | 699.2 | |
| | | |
Total current liabilities | 2,775.4 | | | 2,892.5 | |
| | | |
Long-term debt, net of current portion | 5,964.4 | | | 5,962.5 | |
Deferred taxes | 1,652.9 | | | 1,676.8 | |
Other liabilities | 409.4 | | | 411.2 | |
| | | |
Total liabilities | 10,802.1 | | | 10,943.0 | |
| | | |
Commitments and contingencies (Note 9) | | | |
| | | |
Common stock | 1.1 | | | 1.1 | |
Additional paid-in capital | 2,570.4 | | | 2,510.2 | |
Retained earnings | 13,941.2 | | | 13,730.7 | |
Accumulated other comprehensive loss | (162.9) | | | (187.0) | |
Treasury stock | (17.1) | | | (17.2) | |
Total stockholders' equity | 16,332.7 | | | 16,037.8 | |
| | | |
Total liabilities and stockholders' equity | $ | 27,134.8 | | | $ | 26,980.8 | |
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
ASSETS: | | | |
| | | |
Cash and cash equivalents | $ | 605,616 |
| | $ | 757,200 |
|
Accounts receivable, net | 603,874 |
| | 619,854 |
|
Inventories, net | 209,306 |
| | 181,952 |
|
Unbilled receivables | 157,852 |
| | 129,965 |
|
Other current assets | 115,408 |
| | 87,530 |
|
Total current assets | 1,692,056 |
| | 1,776,501 |
|
| | | |
Property, plant and equipment, net | 141,279 |
| | 141,318 |
|
Goodwill | 8,793,956 |
| | 8,647,142 |
|
Other intangible assets, net | 3,502,687 |
| | 3,655,843 |
|
Deferred taxes | 32,459 |
| | 30,620 |
|
Other assets | 84,236 |
| | 73,503 |
|
| | | |
Total assets | $ | 14,246,673 |
| | $ | 14,324,927 |
|
| | | |
LIABILITIES AND STOCKHOLDERS' EQUITY: | | | |
| | | |
Accounts payable | $ | 163,719 |
| | $ | 152,067 |
|
Accrued compensation | 168,931 |
| | 161,730 |
|
Deferred revenue | 534,562 |
| | 488,399 |
|
Other accrued liabilities | 261,457 |
| | 219,339 |
|
Income taxes payable | 46,575 |
| | 22,762 |
|
Current portion of long-term debt, net | 401,534 |
| | 400,975 |
|
Total current liabilities | 1,576,778 |
| | 1,445,272 |
|
| | | |
Long-term debt, net of current portion | 4,932,721 |
| | 5,808,561 |
|
Deferred taxes | 1,163,371 |
| | 1,178,205 |
|
Other liabilities | 114,819 |
| | 104,024 |
|
Total liabilities | 7,787,689 |
| | 8,536,062 |
|
| | | |
Commitments and contingencies (Note 9) |
|
| |
|
|
| | | |
Common stock | 1,043 |
| | 1,036 |
|
Additional paid-in capital | 1,591,039 |
| | 1,489,067 |
|
Retained earnings | 5,062,926 |
| | 4,642,402 |
|
Accumulated other comprehensive loss | (177,277 | ) | | (324,739 | ) |
Treasury stock | (18,747 | ) | | (18,901 | ) |
Total stockholders' equity | 6,458,984 |
| | 5,788,865 |
|
| | | |
Total liabilities and stockholders' equity | $ | 14,246,673 |
| | $ | 14,324,927 |
|
See accompanying notes to condensed consolidated financial statements.Condensed Consolidated Financial Statements.
Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
millions) | | | | | | | | | | | |
| Three months ended March 31, |
| 2023 | | 2022 |
Cash flows from operating activities: | | | |
Net earnings from continuing operations | $ | 284.3 | | | $ | 236.4 | |
Adjustments to reconcile net earnings from continuing operations to cash flows from operating activities: | | | |
Depreciation and amortization of property, plant and equipment | 8.6 | | | 9.6 | |
Amortization of intangible assets | 175.1 | | | 145.7 | |
Amortization of deferred financing costs | 2.6 | | | 3.1 | |
Non-cash stock compensation | 29.6 | | | 33.0 | |
| | | |
| | | |
Income tax provision, excluding tax associated with gain on sale of assets | 75.8 | | 64.8 |
Changes in operating assets and liabilities, net of acquired businesses: | | | |
Accounts receivable | 98.0 | | | 85.6 | |
Unbilled receivables | (8.7) | | | (10.4) | |
Inventories | (3.8) | | | (13.0) | |
Accounts payable | 11.2 | | | 10.1 | |
Other accrued liabilities | (103.7) | | | (106.6) | |
Deferred revenue | (61.4) | | | 28.4 | |
| | | |
Cash income taxes paid | (16.0) | | | (22.3) | |
Other, net | (26.7) | | | (23.1) | |
Cash provided by operating activities from continuing operations | 464.9 | | | 441.3 | |
Cash provided by (used in) operating activities from discontinued operations | (1.2) | | | 34.0 | |
Cash provided by operating activities | 463.7 | | | 475.3 | |
| | | |
Cash flows from (used in) investing activities: | | | |
Acquisitions of businesses, net of cash acquired | (1.1) | | | (53.2) | |
Capital expenditures | (9.8) | | | (5.4) | |
Capitalized software expenditures | (9.9) | | | (7.5) | |
| | | |
| | | |
Other, net | (2.8) | | | — | |
Cash used in investing activities from continuing operations | (23.6) | | | (66.1) | |
Proceeds from (used in) disposition of discontinued operations | (3.2) | | | 3,006.2 | |
Cash used in investing activities from discontinued operations | — | | | (1.9) | |
Cash provided by (used in) investing activities | (26.8) | | | 2,938.2 | |
| | | |
Cash flows from (used in) financing activities: | | | |
| | | |
| | | |
Borrowings (payments) under revolving line of credit, net | — | | | (470.0) | |
| | | |
| | | |
Cash dividends to stockholders | (72.3) | | | (65.3) | |
Proceeds from stock-based compensation, net | 15.1 | | | 21.0 | |
Treasury stock sales | 4.7 | | | 5.5 | |
| | | |
| | | |
Cash flows used in financing activities from continuing operations | (52.5) | | | (508.8) | |
Cash flows used in financing activities from discontinued operations | — | | | (11.4) | |
Cash flows used in financing activities | (52.5) | | | (520.2) | |
(Continued) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
| | | | | | | |
| Nine months ended September 30, |
| 2017 | | 2016 |
Cash flows from operating activities: | | | |
Net earnings | $ | 527,900 |
| | $ | 476,564 |
|
Adjustments to reconcile net earnings to cash flows from operating activities: | | | |
Depreciation and amortization of property, plant and equipment | 36,776 |
| | 27,954 |
|
Amortization of intangible assets | 221,518 |
| | 149,149 |
|
Amortization of deferred financing costs | 5,463 |
| | 4,080 |
|
Non-cash stock compensation | 67,598 |
| | 60,480 |
|
Gain on sale of assets | (9,393 | ) | | — |
|
Changes in operating assets and liabilities, net of acquired businesses: | | | |
Accounts receivable | 30,074 |
| | (1,660 | ) |
Unbilled receivables | (27,186 | ) | | 3,684 |
|
Inventories | (19,577 | ) | | (5,916 | ) |
Accounts payable and accrued liabilities | 48,276 |
| | 17,273 |
|
Deferred revenue | 50,554 |
| | 19,692 |
|
Income taxes | (48,370 | ) | | (52,728 | ) |
Other, net | (17,900 | ) | | (5,199 | ) |
Cash provided by operating activities | 865,733 |
| | 693,373 |
|
| | | |
Cash flows from investing activities: | | | |
Acquisitions of businesses, net of cash acquired | (88,070 | ) | | (277,587 | ) |
Capital expenditures | (35,898 | ) | | (26,933 | ) |
Capitalized software expenditures | (8,043 | ) | | (1,528 | ) |
Proceeds from sale of assets | 10,614 |
| | 866 |
|
Other, net | (6,932 | ) | | 1,564 |
|
Cash used in investing activities | (128,329 | ) | | (303,618 | ) |
| | | |
Cash flows from financing activities: | | | |
Payments under revolving line of credit, net | (880,000 | ) | | (180,000 | ) |
Principal payments on convertible notes | — |
| | (4,010 | ) |
Cash premiums paid on convertible note conversions | — |
| | (13,308 | ) |
Cash dividends to stockholders | (106,480 | ) | | (90,632 | ) |
Proceeds from stock-based compensation, net | 32,932 |
| | 13,895 |
|
Treasury stock sales | 3,194 |
| | 2,576 |
|
Other | 179 |
| | (7,816 | ) |
Cash used in financing activities | (950,175 | ) | | (279,295 | ) |
| | | |
Effect of foreign currency exchange rate changes on cash | 61,187 |
| | (6,701 | ) |
| | | |
Net (decrease)/increase in cash and cash equivalents | (151,584 | ) | | 103,759 |
|
| | | |
Cash and cash equivalents, beginning of period | 757,200 |
| | 778,511 |
|
| | | |
Cash and cash equivalents, end of period | $ | 605,616 |
| | $ | 882,270 |
|
See accompanying notes to condensed consolidated financial statements.
Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated StatementStatements of Changes in Stockholders' EquityCash Flows (unaudited) - Continued
(in thousands)millions)
| | | | | | | | | | | |
| Three months ended March 31, |
| 2023 | | 2022 |
| | | |
Effect of foreign currency exchange rate changes on cash | 4.4 | | | (7.3) | |
| | | |
Net increase in cash and cash equivalents | 388.8 | | | 2,886.0 | |
| | | |
Cash and cash equivalents, beginning of period | 792.8 | | | 351.5 | |
| | | |
Cash and cash equivalents, end of period | $ | 1,181.6 | | | $ | 3,237.5 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive loss | | Treasury stock | | Total |
Balances at December 31, 2016 | $ | 1,036 |
| | $ | 1,489,067 |
| | $ | 4,642,402 |
| | $ | (324,739 | ) | | $ | (18,901 | ) | | $ | 5,788,865 |
|
| | | | | | | | | | | |
Net earnings | — |
| | — |
| | 527,900 |
| | — |
| | — |
| | 527,900 |
|
Stock option exercises | 4 |
| | 40,397 |
| | — |
| | — |
| | — |
| | 40,401 |
|
Treasury stock sold | — |
| | 3,040 |
| | — |
| | — |
| | 154 |
| | 3,194 |
|
Currency translation adjustments | — |
| | — |
| | — |
| | 147,462 |
| | — |
| | 147,462 |
|
Stock based compensation | — |
| | 66,010 |
| | — |
| | — |
| | — |
| | 66,010 |
|
Restricted stock activity | 3 |
| | (7,475 | ) | | — |
| | — |
| | — |
| | (7,472 | ) |
Dividends declared | — |
| | — |
| | (107,376 | ) | | — |
| | — |
| | (107,376 | ) |
Balances at September 30, 2017 | $ | 1,043 |
| | $ | 1,591,039 |
| | $ | 5,062,926 |
| | $ | (177,277 | ) | | $ | (18,747 | ) | | $ | 6,458,984 |
|
See accompanying notes to condensed consolidated financial statements.Condensed Consolidated Financial Statements.
Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
(in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive loss | | Treasury stock | | Total stockholders’ equity |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Balances at December 31, 2022 | $ | 1.1 | | | $ | 2,510.2 | | | $ | 13,730.7 | | | $ | (187.0) | | | $ | (17.2) | | | $ | 16,037.8 | |
| | | | | | | | | | | |
Net earnings | — | | | — | | | 283.1 | | | — | | | — | | | 283.1 | |
Stock option exercises | — | | | 33.7 | | | — | | | — | | | — | | | 33.7 | |
| | | | | | | | | | | |
Treasury stock sold | — | | | 4.6 | | | — | | | — | | | 0.1 | | | 4.7 | |
Currency translation adjustments | — | | | — | | | — | | | 24.1 | | | — | | | 24.1 | |
Stock-based compensation | — | | | 31.4 | | | — | | | — | | | — | | | 31.4 | |
Restricted stock activity | — | | | (9.5) | | | — | | | — | | | — | | | (9.5) | |
Dividends declared ($0.6825 per share) | — | | | — | | | (72.6) | | | — | | | — | | | (72.6) | |
Balances at March 31, 2023 | $ | 1.1 | | | $ | 2,570.4 | | | $ | 13,941.2 | | | $ | (162.9) | | | $ | (17.1) | | | $ | 16,332.7 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Balances at December 31, 2021 | $ | 1.1 | | | $ | 2,307.8 | | | $ | 9,455.6 | | | $ | (183.1) | | | $ | (17.6) | | | $ | 11,563.8 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net earnings | — | | | — | | | 2,020.5 | | | — | | | — | | | 2,020.5 | |
Stock option exercises | — | | | 38.7 | | | — | | | — | | | — | | | 38.7 | |
Cash settlement of share-based awards in connection with disposition of discontinued operations | — | | | (11.1) | | | — | | | — | | | — | | | (11.1) | |
Treasury stock sold | — | | | 5.4 | | | — | | | — | | | 0.1 | | | 5.5 | |
Currency translation adjustments | — | | | — | | | — | | | (22.9) | | | — | | | (22.9) | |
Stock-based compensation | — | | | 40.8 | | | — | | | — | | | — | | | 40.8 | |
Restricted stock activity | — | | | (17.7) | | | — | | | — | | | — | | | (17.7) | |
Dividends declared ($0.62 per share) | — | | | — | | | (65.7) | | | — | | | — | | | (65.7) | |
Balances at March 31, 2022 | $ | 1.1 | | | $ | 2,363.9 | | | $ | 11,410.4 | | | $ | (206.0) | | | $ | (17.5) | | | $ | 13,551.9 | |
See accompanying notes to Condensed Consolidated Financial Statements.
Roper Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
September 30, 2017All currency and share amounts are in millions, except per share data
1. Basis of Presentation
The accompanying condensed consolidated financial statementsCondensed Consolidated Financial Statements for the three and nine months ended September 30, 2017March 31, 2023 and 20162022 are unaudited. In the opinion of management, the accompanying unaudited condensed consolidated financial statementsCondensed Consolidated Financial Statements reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the financial position, results of operations, comprehensive income and cash flows of Roper Technologies, Inc. and its subsidiaries ("Roper"(“Roper,” the “Company,” “we,” “our” or the "Company"“us”) for all periods presented. The December 31, 20162022 financial position data included herein was derived from the audited consolidated financial statements included in the Company's 2016Company’s 2022 Annual Report on Form 10-K ("(“Annual Report"Report”) filed on February 27, 20172023 with the Securities and Exchange Commission ("SEC"(“SEC”) but does not include all disclosures required by U.S. generally accepted accounting principles ("GAAP"(“GAAP”).
Roper'sRoper’s management has made estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statementsCondensed Consolidated Financial Statements in conformity with GAAP. Actual results could differ from those estimates.
The results of operations for the three and nine months ended September 30, 2017March 31, 2023 are not necessarily indicative of the results to be expected for the full year. You should read these unaudited condensed consolidated financial statementsCondensed Consolidated Financial Statements in conjunction with Roper'sRoper’s audited consolidated financial statements and the notes thereto included in its Annual Report. Certain prior period amounts have been reclassified to conform to current period presentation.
Roper has completed the divestitures of TransCore, Zetec, CIVCO Radiotherapy (“2021 Divestitures”), and the majority stake in its industrial businesses (“Indicor”). The financial results for these businesses are reported as discontinued operations for all periods presented. Unless otherwise noted, discussion within these notes to the Condensed Consolidated Financial Statements relates to continuing operations. Refer to Note 4 for additional information on discontinued operations.
2. 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's Accounting Standards Codification.Codification (“ASC”). The Company considers the applicability and impact of all ASUs. Any recent 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 July 2015, the FASB issued an update providing guidance to simplify the measurement of inventory. This update, effective for fiscal years beginning after December 15, 2016, requires that inventory within the scope of the update be measured at the lower of cost and net realizable value. The update did not have a material impact on the Company's results of operations, financial condition or cash flows.
Recently Released Accounting Pronouncements
In January 2017, the FASB issued an update simplifying the test for goodwill impairment. This update, effective on 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 amendments in the update, an entity should perform its goodwill impairment test 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 goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the update to have a material impact on its results of operations, financial condition or cash flows.
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. This 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. Early adoption is permitted. 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 adopt using the modified retrospective transition method. The Company has substantially completed its assessment to identify differences between the existing standard and new standard on its customer contracts. Based on this assessment, the Company expects 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 Company estimates the opening 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 FASB has issued, and may issue in the future, interpretive guidance which may cause the evaluation to change. 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.
3. Earnings Per ShareWeighted Average Shares Outstanding
Basic earnings per share were calculated using net earnings and the weighted average number of shares of common stock outstanding during the respective period. Diluted earnings per share were calculated using net earnings and the weighted average number of shares of common stock and potential common stock outstanding during the respective period. 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 Roper'sRoper’s common stock. The effects of potential common stock were determined using the treasury stock method.
Weighted average shares outstanding are shown below (in thousands):below:
| | | Three months ended September 30, | | Nine months ended September 30, | | | | Three months ended March 31, |
| 2017 | | 2016 | | 2017 | | 2016 | | | | 2023 | | 2022 |
Basic shares outstanding | 102,303 |
| | 101,372 |
| | 102,091 |
| | 101,231 |
| Basic shares outstanding | | | 106.3 | | | 105.6 | |
Effect of potential common stock: | | | | | | | | Effect of potential common stock: | | |
Common stock awards | 1,377 |
| | 1,112 |
| | 1,306 |
| | 1,131 |
| Common stock awards | | | 0.7 | | | 1.1 | |
Senior subordinated convertible notes | — |
| | 38 |
| | — |
| | 62 |
| |
Diluted shares outstanding | 103,680 |
| | 102,522 |
| | 103,397 |
| | 102,424 |
| Diluted shares outstanding | | | 107.0 | | | 106.7 | |
For the three and nine months ended September 30, 2017,March 31, 2023, there were 475,098 and 487,2981.150 outstanding stock options, respectively, that were not included in the determination of diluted earnings per share because doing so would have been antidilutive, as compared to 1,063,100 and 1,066,1000.840 outstanding stock options that would have been antidilutive in the respective 2016 periods.2022 period.
4. Business Acquisitions and DivestituresDiscontinued Operations
Roper completed three business acquisitions in the nine months ended September 30, 2017, with an aggregate purchase price of $87 million. The results of operations of the acquired businesses did not have a material impact on Roper's consolidated results of operations.
Acquisition of Phase Technology - On June 21, 2017, Roper acquired the assets of Phase Technology, a business engaged in the design, manufacture, marketing and sales of test instruments. Phase Technology is reported in the Energy Systems & Controls segment.
Acquisition of HandshakeSoftware, Inc. - On August 4, 2017, Roper acquired 100% of the shares of Handshake Software, Inc., a provider of search products, portals and services for legal professionals. Handshake Software is reported in the RF Technology segment.
Acquisition of Workbook Software A/S - On September 15, 2017, Roper acquired 100% of the shares of Workbook Software A/S, a provider of software solutions for customer relationship management, project management and finance/accounting. Workbook Software is reported in the RF Technology segment.
The Company recorded $58 million in goodwillconcluded that the 2021 Divestitures and $36 million 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 customer relationships of $24 million (15 year weighted average useful life) and technology of $8 million (7 year weighted average useful life).
On October 4, 2017, three wholly owned subsidiaries of Roper entered into an agreement to acquire all of the outstanding shares of Onvia, Inc. ("Onvia") common stock for $9.00 per share in an all-cash tender offer for a total transaction value of approximately $70 million. Onvia provides enterprise, mid-market and small business customers with sales lead generation technologies into federal, state and local government markets. The acquisition will be funded with cash on hand and Roper expects the transaction to close in the fourth quarter of 2017.
Sale of Product Line - On May 15, 2017, Roper completed the sale of a product linemajority 51% stake in Indicor each represented a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the financial results related to these transactions are presented in the Condensed Consolidated Financial Statements as discontinued operations for all periods presented.
The following transactions closed in the first quarter of 2022:
•On March 17, 2022, Roper closed on the divestiture of our Energy Systems & Controls segmentTransCore business to an affiliate of Singapore Technologies Engineering Ltd., for $10.4 million.approximately $2,680.0 in cash. The sale resulted in a pretax gain of $2,073.7 and income tax expense of $550.5, which are reported within “Gain on disposition of discontinued operations, net of tax” in the Condensed Consolidated Statements of Earnings. TransCore was previously included in the historical Network Software & Systems reportable segment.
•On January 5, 2022, Roper closed on the divestiture of our Zetec business to Eddyfi NDT Inc. for approximately $350.0 in cash. The sale was $9.4 million,resulted in a pretax gain of $255.3 and income tax expense of $60.9, which isare reported in Other income/(expense),within “Gain on disposition of discontinued operations, net of tax” in the condensed consolidated statementsCondensed Consolidated Statements of earnings.Earnings. Zetec was previously included in the historical Process Technologies reportable segment.
The following table summarizes the major classes of revenue and expenses constituting net income from discontinued operations attributable to the TransCore and Zetec businesses:
| | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2022 |
Net revenues | | | | | | $ | 100.4 | |
Cost of sales | | | | | | 71.2 | |
Gross profit | | | | | | 29.2 | |
| | | | | | |
Selling, general and administrative expenses (1) | | | | | | 19.9 | |
Income from operations | | | | | | 9.3 | |
| | | | | | |
Other income, net | | | | | | 0.1 | |
| | | | | | |
Earnings before income taxes | | | | | | 9.4 | |
| | | | | | |
Income taxes | | | | | | (6.2) | |
| | | | | | |
Earnings from discontinued operations, net of tax | | | | | | 15.6 | |
| | | | | | |
Gain on disposition of discontinued operations, net of tax (2) | | | | | | 1,717.3 | |
| | | | | | |
Net earnings from discontinued operations | | | | | | $ | 1,732.9 | |
(1) Includes stock-based compensation expense of $0.9. Stock-based compensation for discontinued operations was previously reported as a component of unallocated corporate general and administrative expenses.
(2) Includes expense of $4.5 associated with accelerated vesting of share-based awards.
Indicor - On November 22, 2022, Roper completed the divestiture of a majority 51% stake in Indicor to Clayton, Dubilier & Rice, LLC (“CD&R”). In connection with the transaction, Roper retained an initial 49% minority equity interest in Indicor (described further in Note 8).
The following table summarizes the major classes of revenue and expenses constituting net income from discontinued operations attributable to Indicor:
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 (1) |
Net revenues | | | | | $ | — | | | $ | 246.8 | |
Cost of sales | | | | | — | | | 113.9 | |
Gross profit | | | | | — | | | 132.9 | |
| | | | | | | |
Selling, general and administrative expenses | | | | | 1.2 | | | 67.7 | |
Income from operations | | | | | (1.2) | | | 65.2 | |
| | | | | | | |
Other income, net | | | | | — | | | 0.2 | |
| | | | | | | |
Earnings (loss) before income taxes | | | | | (1.2) | | | 65.4 | |
| | | | | | | |
Income taxes | | | | | — | | | 14.2 | |
| | | | | | | |
Earnings (loss) from discontinued operations, net of tax | | | | | $ | (1.2) | | | $ | 51.2 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
(1) Includes depreciation and amortization expense of $3.9 and stock-based compensation expense of $2.9. Stock-based compensation was previously reported as a component of unallocated corporate general and administrative expenses.
5. Stock Based Compensation
The Roper Technologies, Inc. 20162021 Incentive Plan ("2016 Plan") is a stock-based compensation plan used to grant incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights or equivalent instruments to Roper'sRoper’s employees, officers, directors and directors. The 2016 Plan replaces the Roper Technologies, Inc. Amended and Restated 2006 Incentive Plan ("2006 Plan"), and no additional grants will be made from the 2006 Plan.consultants.
The following table provides information regarding the Company'sCompany’s stock-based compensation expense (in thousands):expense:
| | | Three months ended September 30, | | Nine months ended September 30, | | | | Three Months Ended March 31, |
| 2017 | | 2016 | | 2017 | | 2016 | | | | 2023 | | 2022 |
Stock-based compensation | $ | 23,734 |
| | $ | 21,388 |
| | $ | 67,598 |
| | $ | 60,480 |
| Stock-based compensation | | | $ | 30.2 | | | $ | 33.0 | |
Tax effect recognized in net income | 8,307 |
| | 7,486 |
| | 23,659 |
| | 21,168 |
| |
Tax effect recognized in net earnings from continuing operations | | Tax effect recognized in net earnings from continuing operations | | | 5.2 | | | 7.0 | |
Stock Options - In the ninethree months ended September 30, 2017, 592,798March 31, 2023, 0.353 options were granted with a weighted average fair value of $40.67$128.89 per option. During the same period in 2016, 633,0002022, 0.365 options were granted with a weighted average fair value of $34.45$115.83 per option. All options were issued at grant date fair value, which is defined by both the 2016 Plan and the 2006 Plan aswith an exercise price equal to the closing price of Roper'sRoper’s common stock on the date of grant.grant, as required by the Company’s stock-based compensation plans.
Roper records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model. Historical data is used to estimate the expected price volatility, the expected dividend yield, the expected option life and the expected forfeiture rate. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option.
The following weighted average assumptions were used to estimate the fair value of options granted during current and prior year periods using the Black-Scholes option-pricing model:
| | | Nine months ended September 30, | | Three months ended March 31, |
| 2017 | | 2016 | | 2023 | | 2022 |
Risk-free interest rate (%) | 2.03 | | 1.38 | Risk-free interest rate (%) | 3.73 | | | 2.05 | |
Expected option life (years) | 5.26 | | 5.20 | Expected option life (years) | 5.65 | | 5.63 |
Expected volatility (%) | 18.76 | | 21.63 | Expected volatility (%) | 26.02 | | | 24.52 | |
Expected dividend yield (%) | 0.67 | | 0.70 | Expected dividend yield (%) | 0.64 | | | 0.54 | |
Cash received from option exercises for the ninethree months ended September 30, 2017March 31, 2023 and 20162022 was $40.4 million$24.6 and $15.9 million,$38.7, respectively.
Restricted Stock AwardsGrants - During both the ninethree months ended September 30, 2017, 389,117 restricted stock awards wereMarch 31, 2023 and 2022, the Company granted 0.219 shares with a weighted average grant date fair value of $203.02$428.20 and $455.84 per restricted share. During the same period in 2016, 395,980 restricted stock awards were granted with a weighted average grant date fair value of $169.03 per restricted share.share, respectively. All grants were issued at grant date fair value.
During the ninethree months ended September 30, 2017, 138,140March 31, 2023, 0.082 restricted awardsshares vested with a weighted average grant date fair value of $143.29$376.74 per restricted share and a weighted average vest date fair value of $215.77$435.75 per restricted share.
Employee Stock Purchase Plan - Roper'sRoper’s employee stock purchase plan (“ESPP”) allows employees in the U.S. and Canada to designate up to 10% of eligible earnings to purchase Roper'sRoper’s common stock at a 5%10% discount toon the averagelower of the closing price of the stock aton the beginningfirst and endlast day of aeach quarterly offering period. Common stock sold to employees pursuant to the stock purchase planESPP may be either treasury stock, stock purchased on the open market, or newly issued shares.
During the ninethree months ended September 30, 2017March 31, 2023 and 2016,2022, participants in the employee stock purchase planESPP purchased 15,5110.012 and 15,0760.013 shares respectively, of Roper'sRoper’s common stock for total consideration of $3.19 million$4.7 and $2.58 million,$5.5, respectively. All shares were purchased from Roper'sRoper’s treasury shares.
6. Inventories
The components of inventory were as follows (in thousands):follows:
| | | September 30, 2017 | | December 31, 2016 | | March 31, 2023 | | December 31, 2022 |
Raw materials and supplies | $ | 131,817 |
| | $ | 113,632 |
| Raw materials and supplies | $ | 63.0 | | | $ | 60.6 | |
Work in process | 29,172 |
| | 24,290 |
| Work in process | 26.9 | | | 24.9 | |
Finished products | 87,561 |
| | 81,263 |
| Finished products | 32.1 | | | 31.3 | |
Inventory reserves | (39,244 | ) | | (37,233 | ) | Inventory reserves | (7.0) | | | (5.5) | |
| $ | 209,306 |
| | $ | 181,952 |
| |
Inventories, net | | Inventories, net | $ | 115.0 | | | $ | 111.3 | |
7. Goodwill and Other Intangible Assets
The carrying value of goodwill by segment was as follows (in thousands):follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Application Software | | Network Software | | Technology Enabled Products | | | | Total |
Balances at December 31, 2022 | $ | 11,417.5 | | | $ | 3,598.3 | | | $ | 930.3 | | | | | $ | 15,946.1 | |
| | | | | | | | | |
| | | | | | | | | |
Other | 0.1 | | | — | | | — | | | | | 0.1 | |
Currency translation adjustments | 5.9 | | | 10.9 | | | (0.2) | | | | | 16.6 | |
Balances at March 31, 2023 | $ | 11,423.5 | | | $ | 3,609.2 | | | $ | 930.1 | | | | | $ | 15,962.8 | |
|
| | | | | | | | | | | | | | | | | | | |
| RF Technology | | Medical & Scientific Imaging | | Industrial Technology | | Energy Systems & Controls | | Total |
Balances at December 31, 2016 | $ | 4,687,670 |
| | $ | 3,185,071 |
| | $ | 363,978 |
| | $ | 410,423 |
| | $ | 8,647,142 |
|
Additions | 38,349 |
| | — |
| | — |
| | 19,169 |
| | 57,518 |
|
Other | 22,385 |
| | 3,264 |
| | — |
| | — |
| | 25,649 |
|
Currency translation adjustments | 20,528 |
| | 19,922 |
| | 13,656 |
| | 9,541 |
| | 63,647 |
|
Balances at September 30, 2017 | $ | 4,768,932 |
| | $ | 3,208,257 |
| | $ | 377,634 |
| | $ | 439,133 |
| | $ | 8,793,956 |
|
Other relates primarily to tax purchase accounting and working capital adjustments for 2016 acquisitions.acquisitions completed in 2022.
Other intangible assets were comprised of (in thousands):of:
| | | Cost | | Accumulated amortization | | Net book value | | Cost | | Accumulated amortization | | Net book value |
Assets subject to amortization: | | | | | | Assets subject to amortization: | | | | | |
Customer related intangibles | $ | 3,272,081 |
| | $ | (712,718 | ) | | $ | 2,559,363 |
| Customer related intangibles | $ | 9,300.7 | | | $ | (2,437.7) | | | $ | 6,863.0 | |
Unpatented technology | 462,152 |
| | (144,025 | ) | | 318,127 |
| Unpatented technology | 954.6 | | | (506.9) | | | 447.7 | |
Software | 184,761 |
| | (56,882 | ) | | 127,879 |
| Software | 149.0 | | | (134.0) | | | 15.0 | |
Patents and other protective rights | 24,656 |
| | (20,399 | ) | | 4,257 |
| Patents and other protective rights | 10.3 | | | (1.2) | | | 9.1 | |
Trade names | 6,591 |
| | (653 | ) | | 5,938 |
| Trade names | 9.7 | | | (3.1) | | | 6.6 | |
Assets not subject to amortization: | | | | | | Assets not subject to amortization: | |
Trade names | 578,279 |
| | — |
| | 578,279 |
| Trade names | 689.3 | | | — | | | 689.3 | |
In process research and development | 62,000 |
| | — |
| | 62,000 |
| |
Balances at December 31, 2016 | $ | 4,590,520 |
| | $ | (934,677 | ) | | $ | 3,655,843 |
| |
| Balances at December 31, 2022 | | Balances at December 31, 2022 | $ | 11,113.6 | | | $ | (3,082.9) | | | $ | 8,030.7 | |
| Assets subject to amortization: | | | | | | Assets subject to amortization: | |
Customer related intangibles | $ | 3,313,342 |
| | $ | (863,741 | ) | | $ | 2,449,601 |
| Customer related intangibles | $ | 9,310.5 | | | $ | (2,576.2) | | | $ | 6,734.3 | |
Unpatented technology | 539,892 |
| | (193,223 | ) | | 346,669 |
| Unpatented technology | 959.3 | | | (539.4) | | | 419.9 | |
Software | 185,305 |
| | (77,894 | ) | | 107,411 |
| Software | 149.1 | | | (136.8) | | | 12.3 | |
Patents and other protective rights | 26,034 |
| | (22,007 | ) | | 4,027 |
| Patents and other protective rights | 10.3 | | | (1.2) | | | 9.1 | |
Trade names | 6,638 |
| | (1,466 | ) | | 5,172 |
| Trade names | 9.7 | | | (3.8) | | | 5.9 | |
Assets not subject to amortization: | | | | | | Assets not subject to amortization: | |
Trade names | 588,349 |
| | — |
| | 588,349 |
| Trade names | 690.2 | | | — | | | 690.2 | |
In process research and development | 1,458 |
| | — |
| | 1,458 |
| |
Balances at September 30, 2017 | $ | 4,661,018 |
| | $ | (1,158,331 | ) | | $ | 3,502,687 |
| |
| Balances at March 31, 2023 | | Balances at March 31, 2023 | $ | 11,129.1 | | | $ | (3,257.4) | | | $ | 7,871.7 | |
Amortization expense of other intangible assets was $220,683$170.4 and $147,773$143.3 during the ninethree months ended September 30, 2017March 31, 2023 and 2016,2022, respectively.
An evaluation of the carrying value of goodwill and indefinite-lived intangibles is required to be performed on an annual basis and on 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. There have been no events or changes in circumstances which indicate an interim impairment review is required in 2017.2023. The Company will perform the annual analysis during the fourth quarter of 2017.2023.
8. Fair Value
Financial assets and liabilities are valued using market prices on active markets (Level 1), less active markets (Level 2) and little or no market activity (Level 3). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. Level 3 instrument valuations typically reflect management’s estimate of Financial Instrumentsassumptions that market participants would use in pricing the asset or liability.
Roper's
Debt -Roper’s debt at September 30, 2017 included $4.3 billion$6,700 of fixed-rate senior notes with the following fair values (in millions):values:
|
| | | |
$400 million 1.850% senior notes due 2017 | $ | 400 |
|
$800 million 2.050% senior notes due 2018 | 802 |
|
$500 million 6.250% senior notes due 2019 | 539 |
|
$600 million 3.000% senior notes due 2020 | 612 |
|
$500 million 2.800% senior notes due 2021 | 504 |
|
$500 million 3.125% senior notes due 2022 | 513 |
|
$300 million 3.850% senior notes due 2025 | 311 |
|
$700 million 3.800% senior notes due 2026 | 723 |
|
| | | | | | | | | | | | | | | | | | | | |
Fixed-rate senior notes | | Fair Value |
Principal Amount | | Interest rate | | Year of maturity | | As of March 31, 2023 |
$700 | | 3.650% | | 2023 | | $ | 695 | |
$500 | | 2.350% | | 2024 | | $ | 482 | |
$300 | | 3.850% | | 2025 | | $ | 295 | |
$700 | | 1.000% | | 2025 | | $ | 641 | |
$700 | | 3.800% | | 2026 | | $ | 679 | |
$700 | | 1.400% | | 2027 | | $ | 609 | |
$800 | | 4.200% | | 2028 | | $ | 788 | |
$700 | | 2.950% | | 2029 | | $ | 629 | |
$600 | | 2.000% | | 2030 | | $ | 497 | |
$1,000 | | 1.750% | | 2031 | | $ | 803 | |
The fair values of the senior notes are based on the trading prices of theeach series of notes, which the Company has determined to be Level 2 in the FASB fair value hierarchy.
Indicor Investment - Following the sale of a majority stake in its industrial businesses to CD&R, Roper now holds a minority 48.6% equity interest in Indicor. We elected to apply the fair value option as we believe this is the most reasonable method to value the equity investment. The fair value of Roper’s equity investment in Indicor is updated on a quarterly basis and its impact is reported as "Equity investment activity, net." There was no change in fair value between December 31, 2022 and March 31, 2023.
The assessment of fair value for the equity investment requires significant judgments to be made by management. Although our assumptions are considered reasonable and are consistent, there is significant judgment applied. Changes in estimates or the application of alternative assumptions could produce significantly different results. The fair value of the investment reflects management’s estimate of assumptions that market participants would use in pricing the equity interest, which the Company has determined to be Level 3 in the FASB fair value hierarchy.
On April 26, 2023, Indicor announced its planned divestiture of its Compressor Controls business unit to Honeywell International Inc. for approximately $670. This transaction will be contemplated in our assessment of the fair value of our equity investment in the second quarter.
9. Contingencies
Roper, in the ordinary course of business, is the subject of, or a party to various pending or threatened legal actions, including product liability, intellectual property, antitrust, data privacy and employment practices that, in general, are based upon claims of the kind that have been customarya nature consistent with those over the past several years and which the Company is vigorously defending.years. After analyzing the Company'sCompany’s contingent liabilities on a gross
basis and, based upon past experience with resolution of its product liability and employment practicessuch legal claims and the availability and limits of the primary, excess, and umbrella liability insurance coverages that are available with respect to pending claims, management believes that adequate provision has been made to cover any potential liability not covered by insurance, and that the ultimate liability, if any, arising from these actions should not have a material adverse effect on Roper'sRoper’s consolidated financial position, results of operations or cash flows. However, no assurances can be given in this regard.
Roper or its subsidiariesRoper’s subsidiary, Vertafore, Inc., had been named in three putative class actions, all of which are now dismissed: two in the U.S. District Court for the Southern District of Texas (Allen, et al. v. Vertafore, Inc., Case 4:20-cv-4139, filed December 4, 2020) and Masciotra, et al. v. Vertafore, Inc. (originally filed on December 8, 2020 as Case 1:20-cv-03603 in the U.S. District Court for the District of Colorado and subsequently transferred)), and one in the U.S. District Court for the Northern District of Texas (Mulvey, et al. v. Vertafore, Inc., Case 3:21-cv-00213-E, filed January 31, 2021). In July 2021, the court granted Vertafore’s motion to dismiss the Allen Case, with the dismissal affirmed by the U.S. Fifth Circuit Court of Appeals, effectively concluding the litigation. In July 2021, the plaintiff in the Masciotra case voluntarily dismissed his action without prejudice. In February 2023, the court granted Vertafore’s motion to dismiss the Mulvey case, and Plaintiff failed to appeal the dismissal effectively concluding the matter. Both the Allen and Mulvey cases purported to represent approximately 27.7 million individuals who held Texas driver’s licenses prior to February 2019. In November 2020, Vertafore announced that as a result of
human error, three data files were inadvertently stored in an unsecured external storage service that appears to have been named defendants along with numerous industrial companies in asbestos-related litigation claims in certain U.S. states. No significant resources have been required by Roper to respond to theseaccessed without authorization. The files, which included driver information for licenses issued before February 2019, contained Texas driver license numbers, as well as names, dates of birth, addresses and vehicle registration histories. The files did not contain any Social Security numbers or financial account information. These cases and Roper believes it has valid defenses to such claims and, if required, intends to defend them vigorously. Givensought recovery under the stateDriver’s Privacy Protection Act, 18 U.S.C. § 2721. As set forth above, all of these claims, it is not possible to determinematters have now been dismissed.
Roper’s subsidiary, Verathon, Inc. (“Verathon”), was a defendant in a patent infringement action pending in the potential liability, if any.
Roper's consolidated financial statements include accruals for potential product liability and warranty claims based on its claims experience. Such costs are accrued at the time revenue is recognized. A summary of the warranty accrual activityUnited States District Court for the nine months ended September 30, 2017 is presented below (in thousands):Western District of Washington (Berall v. Verathon, Inc., Case No. 2:2021mc00043). The plaintiff claimed that video laryngoscopes and certain accessories sold by Verathon and other manufacturers from approximately 2004 through 2016 infringed U.S. Patent 5,827,178 (the “178 Patent”). Verathon and the plaintiff agreed to settle the matter for $45.0 which was fully concluded and cash settled in the first quarter of 2023.
|
| | | |
Balances at December 31, 2016 | $ | 10,548 |
|
Additions charged to costs and expenses | 9,418 |
|
Deductions | (8,941 | ) |
Other | 149 |
|
Balances at September 30, 2017 | $ | 11,174 |
|
10. Business Segments
Revenues and operating profit by industry segment are set forth in theThe following table (dollars in thousands):presents selected financial information by reportable segment:
|
| | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, | | | | Nine months ended September 30, | | |
| 2017 | | 2016 | | Change | | 2017 | | 2016 | | Change |
Revenues | | | | | | | | | | | |
RF Technology | $ | 480,572 |
| | $ | 303,565 |
| | 58.3 | % | | $ | 1,370,688 |
| | $ | 872,536 |
| | 57.1 | % |
Medical & Scientific Imaging | 343,639 |
| | 338,027 |
| | 1.7 | % | | 1,042,638 |
| | 1,010,826 |
| | 3.1 | % |
Industrial Technology | 200,442 |
| | 178,317 |
| | 12.4 | % | | 576,713 |
| | 528,179 |
| | 9.2 | % |
Energy Systems & Controls | 135,259 |
| | 125,235 |
| | 8.0 | % | | 390,849 |
| | 367,584 |
| | 6.3 | % |
Total | $ | 1,159,912 |
| | $ | 945,144 |
| | 22.7 | % | | $ | 3,380,888 |
| | $ | 2,779,125 |
| | 21.7 | % |
Gross profit: | | | | | | | | | | | |
RF Technology | $ | 298,883 |
| | $ | 169,123 |
| | 76.7 | % | | $ | 830,096 |
| | $ | 492,493 |
| | 68.5 | % |
Medical & Scientific Imaging | 247,138 |
| | 247,432 |
| | (0.1 | )% | | 753,096 |
| | 740,725 |
| | 1.7 | % |
Industrial Technology | 102,092 |
| | 90,950 |
| | 12.3 | % | | 293,410 |
| | 266,679 |
| | 10.0 | % |
Energy Systems & Controls | 78,307 |
| | 70,988 |
| | 10.3 | % | | 223,082 |
| | 205,635 |
| | 8.5 | % |
Total | $ | 726,420 |
| | $ | 578,493 |
| | 25.6 | % | | $ | 2,099,684 |
| | $ | 1,705,532 |
| | 23.1 | % |
Operating profit*: | | | | | | | | | | | |
RF Technology | $ | 134,148 |
| | $ | 94,785 |
| | 41.5 | % | | $ | 342,690 |
| | $ | 272,905 |
| | 25.6 | % |
Medical & Scientific Imaging | 115,506 |
| | 118,979 |
| | (2.9 | )% | | 356,614 |
| | 347,706 |
| | 2.6 | % |
Industrial Technology | 62,255 |
| | 52,800 |
| | 17.9 | % | | 174,117 |
| | 150,850 |
| | 15.4 | % |
Energy Systems & Controls | 36,351 |
| | 31,777 |
| | 14.4 | % | | 99,454 |
| | 83,728 |
| | 18.8 | % |
Total | $ | 348,260 |
| | $ | 298,341 |
| | 16.7 | % | | $ | 972,875 |
| | $ | 855,189 |
| | 13.8 | % |
Long-lived assets: | | | | | | | | | | | |
RF Technology | $ | 81,863 |
| | $ | 30,984 |
| | 164.2 | % | | | | | | |
Medical & Scientific Imaging | 43,858 |
| | 38,793 |
| | 13.1 | % | | | | | | |
Industrial Technology | 32,198 |
| | 35,584 |
| | (9.5 | )% | | | | | | |
Energy Systems & Controls | 9,461 |
| | 10,720 |
| | (11.7 | )% | | | | | | |
Total | $ | 167,380 |
| | $ | 116,081 |
| | 44.2 | % | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, | | | | | | |
| 2023 | | 2022 | | Change % | | | | | | |
Net revenues: | | | | | | | | | | | |
Application Software | $ | 761.4 | | | $ | 628.2 | | | 21.2 | % | | | | | | |
Network Software | 354.5 | | | 338.5 | | | 4.7 | % | | | | | | |
Technology Enabled Products | 353.8 | | | 313.1 | | | 13.0 | % | | | | | | |
| | | | | | | | | | | |
Total | $ | 1,469.7 | | | $ | 1,279.8 | | | 14.8 | % | | | | | | |
Gross profit: | | | | | | | | | | | |
Application Software | $ | 520.5 | | | $ | 435.4 | | | 19.5 | % | | | | | | |
Network Software | 299.4 | | | 284.9 | | | 5.1 | % | | | | | | |
Technology Enabled Products | 198.7 | | | 176.9 | | | 12.3 | % | | | | | | |
| | | | | | | | | | | |
Total | $ | 1,018.6 | | | $ | 897.2 | | | 13.5 | % | | | | | | |
Operating profit*: | | | | | | | | | | | |
Application Software | $ | 193.2 | | | $ | 172.3 | | | 12.1 | % | | | | | | |
Network Software | 147.5 | | | 136.8 | | | 7.8 | % | | | | | | |
Technology Enabled Products | 115.5 | | | 99.7 | | | 15.8 | % | | | | | | |
| | | | | | | | | | | |
Total | $ | 456.2 | | | $ | 408.8 | | | 11.6 | % | | | | | | |
Long-lived assets: | | | | | | | | | | | |
Application Software | $ | 153.3 | | | $ | 135.8 | | | 12.9 | % | | | | | | |
Network Software | 30.7 | | | 26.2 | | | 17.2 | % | | | | | | |
Technology Enabled Products | 29.2 | | | 27.0 | | | 8.1 | % | | | | | | |
| | | | | | | | | | | |
Total | $ | 213.2 | | | $ | 189.0 | | | 12.8 | % | | | | | | |
*Segment operating profit is before unallocated corporate general and administrative and enterprise-wide stock-based compensation expenses. These expenses were $37,513$55.2 and $30,951$52.9 for the three months ended September 30, 2017March 31, 2023 and 2016, respectively,2022, respectively.
11. Revenues from Contracts
Disaggregated Revenue - We disaggregate our revenues by reportable segment into four categories: (i) recurring revenue comprised of Software-as-a-Service (“SaaS”) licenses and $109,614software maintenance; (ii) reoccurring revenue comprised of transactional and $89,730volume-based fees related to software licenses; (iii) non-recurring revenue comprised of term and perpetual software licenses, professional services associated with software products and hardware sold with our software licenses; and (iv) product revenue. See details in the table below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended March 31, 2023 | | | Three months ended March 31, 2022 |
| | Application Software | | Network Software | | Technology Enabled Products | | Total | | | Application Software | | Network Software | | Technology Enabled Products | | Total |
Revenue Stream | | | | | | | | | | | | | | | | | |
Software related | | | | | | | | | | | | | | | | | |
Recurring | | $ | 580.6 | | | $ | 255.9 | | | $ | 3.8 | | | $ | 840.3 | | | | $ | 461.5 | | | $ | 237.2 | | | $ | 2.6 | | | $ | 701.3 | |
Reoccurring | | 35.4 | | | 64.2 | | | — | | | 99.6 | | | | 31.7 | | | 60.5 | | | — | | | 92.2 | |
Non-recurring | | 145.4 | | | 34.4 | | | 0.4 | | | 180.2 | | | | 135.0 | | | 40.8 | | | 0.3 | | | 176.1 | |
Total Software Revenues | | 761.4 | | | 354.5 | | | 4.2 | | | 1,120.1 | | | | 628.2 | | | 338.5 | | | 2.9 | | | 969.6 | |
| | | | | | | | | | | | | | | | | |
Product Revenue | | — | | | — | | | 349.6 | | | 349.6 | | | | — | | | — | | | 310.2 | | | 310.2 | |
Total Revenue | | $ | 761.4 | | | $ | 354.5 | | | $ | 353.8 | | | $ | 1,469.7 | | | | $ | 628.2 | | | $ | 338.5 | | | $ | 313.1 | | | $ | 1,279.8 | |
Remaining performance obligations - Remaining performance obligations represent the transaction price of firm orders for which work has not been performed and excludes unexercised contract options. As of March 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $4,203.0. We expect to recognize revenue of $2,872.5, or approximately 68% of our remaining performance obligations over the next 12 months (“Backlog”), with the remainder to be recognized thereafter.
Contract balances | | | | | | | | | | | | | | | | | |
Balance Sheet Account | March 31, 2023 | | December 31, 2022 | | Change |
Unbilled receivables | $ | 100.9 | | | $ | 91.5 | | | $ | 9.4 | |
Deferred revenue - current | (1,303.8) | | | (1,370.7) | | | 66.9 | |
Deferred revenue - non-current (1) | (121.4) | | | (111.5) | | | (9.9) | |
Net contract assets/(liabilities) | $ | (1,324.3) | | | $ | (1,390.7) | | | $ | 66.4 | |
(1)The non-current portion of deferred revenue is included in “Other liabilities” in our Condensed Consolidated Balance Sheets.
The change in our net contract assets/(liabilities) from December 31, 2022 to March 31, 2023 was due primarily to the timing of payments and invoicing relating to SaaS and post contract support (“PCS”) contracts, driven largely by the renewal cycle of our Frontline business which primarily occurs in the third quarter.
The Company records deferred revenue when cash payments are received or due in advance of the Company’s performance relating primarily to SaaS and PCS renewals. Revenue recognized from the deferred revenue balance on December 31, 2022 and 2021 was $589.9 and $489.3 for the ninethree months ended September 30, 2017March 31, 2023 and 2016,2022, respectively. In order to determine revenues recognized in the period, we allocate revenue to the individual deferred revenue balance outstanding at the beginning of the year until the revenue exceeds that balance.
The current and non-current portions of deferred commissions are included in “Other current assets” and “Other assets,” respectively, in our Condensed Consolidated Balance Sheets. At March 31, 2023 and December 31, 2022, we had $64.5 and $64.8 of total deferred commissions, respectively.
| |
ITEM 2. | MANAGMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Formform 10-K for the year ended December 31, 2016 ("2022 (“Annual Report"Report”) as filed on February 27, 20172023 with the U.S. Securities and Exchange Commission ("SEC"(“SEC”) and the Notes to Condensed Consolidated Financial Statements included elsewhere in this report.
Information About Forward-Looking Statements
This report includes "forward-looking statements"“forward-looking statements” within the meaning of the federal securities laws. In addition, we, or our executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents we file with the SEC or in connection with oral statements made to the press, potential investors or others. All statements that are not historical facts are "forward-looking“forward-looking statements."” Forward-looking statements may be indicated by words or phrases such as "anticipate," "estimate," "plans," "expects," "projects," "should," "will," "believes"“anticipate,” “estimate,” “plans,” “expects,” “projects,” “should,” “will,” “believes” or "intends"“intends” and similar words and phrases. These statements reflect management'smanagement’s current beliefs and are not guarantees of future performance. They involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in any forward-looking statement. Such risks and uncertainties include any ongoing impacts of the COVID-19 pandemic on our business, operations, financial results and liquidity, which will depend on numerous evolving factors that we cannot accurately predict or assess, including: any negative impact on global and regional markets, economies and economic activity, our customers, suppliers, and business partners, and how quickly and whether economies and demand for our products and services recover.
Examples of forward-looking statements in this report include but are not limited to statements regarding operating results, the success of our internal operating plans, our expectations regarding our ability to generate cash and reduce debt and associated interest expense, profit and cash flow expectations, the prospects for newly acquired businesses to be integrated and contribute to future growth and our expectations regarding growth through acquisitions. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the cost, timing and success of product upgrades and new product introductions, raw materialsmaterial costs, expected pricing levels, expected outcomes of pending litigation, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include but are not limited to:
•general economic conditions;
•difficulty making acquisitions and successfully integrating acquired businesses;
•any unforeseen liabilities associated with future acquisitions;
limitations on our business imposed by our indebtedness;•failure to effectively mitigate cybersecurity threats, including any litigation arising therefrom;
unfavorable changes in foreign exchange rates;•failure to comply with new data privacy laws and regulations, including any litigation arising therefrom;
difficulties associated with exports;
•risks and costs associated with our international sales and operations;
•rising interest rates;
•limitations on our business imposed by our indebtedness;
•product liability, litigation, and insurance risks;
increased warranty exposure;
•future competition;
•the cyclical nature of some of our markets;
•reduction of business with large customers;
•risks associated with government contracts;
•changes in the supply of, or price for, labor, energy, raw materials, parts and components;components, including as a result of impacts from the current inflationary environment, supply chain constraints or additional or ongoing impacts of the COVID-19 pandemic;
environmental compliance costs and liabilities;
risks and costs associated with asbestos-related litigation;
•potential write-offs of our substantial goodwill and other intangible assets;
•our ability to successfully develop new products;
•failure to protect our intellectual property;
•unfavorable changes in foreign exchange rates;
•difficulties associated with exports/imports and risks of changes to tariff rates;
•increased warranty exposure;
•environmental compliance costs and liabilities;
•the effect of, or change in, government regulations (including tax);
•economic disruption caused by armed conflicts (such as the war in Ukraine), terrorist attacks, including cybersecurity threats, health crises (such as the COVID-19 pandemic) or other unforeseen geopolitical events; and
•the factors discussed in other reports filedwe file with the SEC.SEC from time to time.
We believe these forward-looking statements are reasonable; however, youYou should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update any of these statements in light of new information or future events.
Overview
Roper Technologies, Inc. ("Roper," "we," "us" or "our") is a diversified technology company. Roper has a proven, long-term, successful track record of compounding cash flow and shareholder value. We operate market leading businesses that design and develop vertical software (both license and software-as-a-service) and engineeredtechnology enabled products and solutions for a variety of defensible niche end markets, including healthcare, transportation, commercial construction, food, energy, water, education and academic research.markets.
We pursue consistent and sustainable growth in revenue, earnings and cash flow by emphasizingenabling continuous improvement in the operating performance of our existing businesses and by acquiring other businesses that offer high value-added software, services, engineeredtechnology-enabled products and solutions andthat we believe are capable of achieving growth and maintaining high margins. We compete
Discontinued Operations
Roper has completed the divestitures of TransCore, Zetec, CIVCO Radiotherapy (“2021 Divestitures”), and the majority stake in many niche markets and believe weits industrial businesses (“Indicor” or “Indicor Transaction”). The financial results for these businesses are the market leader or a competitive alternativereported as discontinued operations for all periods presented. Unless otherwise noted, discussion within these notes to the market leader in most of these markets.Condensed Consolidated Financial Statements relates to continuing operations. Refer to Note 4 for additional information on discontinued operations.
Critical Accounting Policies
There were no material changes during the ninethree months ended September 30, 2017March 31, 2023 to the items that we disclosed as our critical accounting policies and estimates in "Item“Item 7. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” in our Annual Report.
Recently Issued Accounting Standards
Information regarding new accounting pronouncements is included in Note 2 of the Notes to Condensed Consolidated Financial Statements.
Results of Continuing Operations
All currency amounts are in millions, percentages are of net revenues
General
Percentages may not sum due to rounding.
The following table sets forth selected information for the periods indicated. Dollar amounts are in thousands and percentages are the particular line item shown as a percentage of net sales. Percentages may not foot due to rounding.
| | | | | | | | | | | | | | | | | |
| | | Three months ended March 31, |
| | | | | 2023 | | 2022 |
Net revenues: | | | | | | | |
Application Software | | | | | $ | 761.4 | | | $ | 628.2 | |
Network Software | | | | | 354.5 | | | 338.5 | |
Technology Enabled Products | | | | | 353.8 | | | 313.1 | |
| | | | | | | |
Total | | | | | $ | 1,469.7 | | | $ | 1,279.8 | |
Gross margin: | | | | | | | |
Application Software | | | | | 68.4 | % | | 69.3 | % |
Network Software | | | | | 84.5 | | | 84.2 | |
Technology Enabled Products | | | | | 56.2 | | | 56.5 | |
| | | | | | | |
Total | | | | | 69.3 | | | 70.1 | |
Selling, general and administrative expenses: | | | | | | | |
Application Software | | | | | 43.0 | % | | 41.9 | % |
Network Software | | | | | 42.8 | | | 43.8 | |
Technology Enabled Products | | | | | 23.5 | | | 24.7 | |
| | | | | | | |
Total | | | | | 38.3 | | | 38.2 | |
Segment operating margin: | | | | | | | |
Application Software | | | | | 25.4 | % | | 27.4 | % |
Network Software | | | | | 41.6 | | | 40.4 | |
Technology Enabled Products | | | | | 32.6 | | | 31.8 | |
| | | | | | | |
Total | | | | | 31.0 | | | 31.9 | |
Corporate administrative expenses | | | | | (3.8) | | | (4.1) | |
Income from operations | | | | | 27.3 | | | 27.8 | |
Interest expense, net | | | | | (2.5) | | | (4.1) | |
Equity investment activity, net | | | | | (0.1) | | | — | |
Other expense, net | | | | | (0.2) | | | (0.2) | |
Earnings before income taxes | | | | | 24.5 | | | 23.5 | |
Income taxes | | | | | (5.2) | | | (5.1) | |
Net earnings from continuing operations | | | | | 19.3 | % | | 18.5 | % |
| | | | | | | |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net revenues: | | | | | | | |
RF Technology | $ | 480,572 |
| | $ | 303,565 |
| | $ | 1,370,688 |
| | $ | 872,536 |
|
Medical & Scientific Imaging | 343,639 |
| | 338,027 |
| | 1,042,638 |
| | 1,010,826 |
|
Industrial Technology | 200,442 |
| | 178,317 |
| | 576,713 |
| | 528,179 |
|
Energy Systems & Controls | 135,259 |
| | 125,235 |
| | 390,849 |
| | 367,584 |
|
Total | $ | 1,159,912 |
| | $ | 945,144 |
| | $ | 3,380,888 |
| | $ | 2,779,125 |
|
Gross margin: | | | | | | | |
RF Technology | 62.2 | % | | 55.7 | % | | 60.6 | % | | 56.4 | % |
Medical & Scientific Imaging | 71.9 |
| | 73.2 |
| | 72.2 |
| | 73.3 |
|
Industrial Technology | 50.9 |
| | 51.0 |
| | 50.9 |
| | 50.5 |
|
Energy Systems & Controls | 57.9 |
| | 56.7 |
| | 57.1 |
| | 55.9 |
|
Total | 62.6 |
| | 61.2 |
| | 62.1 |
| | 61.4 |
|
Selling, general & administrative expenses: | | | | | | | |
RF Technology | 34.3 | % | | 24.5 | % | | 35.6 | % | | 25.2 | % |
Medical & Scientific Imaging | 38.3 |
| | 38.0 |
| | 38.0 |
| | 38.9 |
|
Industrial Technology | 19.9 |
| | 21.4 |
| | 20.7 |
| | 21.9 |
|
Energy Systems & Controls | 31.0 |
| | 31.3 |
| | 31.6 |
| | 33.2 |
|
Total | 32.6 |
| | 29.6 |
| | 33.3 |
| | 30.6 |
|
Segment operating margin: | | | | | | | |
RF Technology | 27.9 | % | | 31.2 | % | | 25.0 | % | | 31.3 | % |
Medical & Scientific Imaging | 33.6 |
| | 35.2 |
| | 34.2 |
| | 34.4 |
|
Industrial Technology | 31.1 |
| | 29.6 |
| | 30.2 |
| | 28.6 |
|
Energy Systems & Controls | 26.9 |
| | 25.4 |
| | 25.4 |
| | 22.8 |
|
Total | 30.0 |
| | 31.6 |
| | 28.8 |
| | 30.8 |
|
Corporate administrative expenses | (3.2 | ) | | (3.3 | ) | | (3.2 | ) | | (3.2 | ) |
| 26.8 |
| | 28.3 |
| | 25.5 |
| | 27.5 |
|
Interest expense, net | (3.9 | ) | | (2.8 | ) | | (4.1 | ) | | (2.9 | ) |
Other income/(expense), net | (0.1 | ) | | (0.1 | ) | | 0.2 |
| | (0.1 | ) |
Earnings before income taxes | 22.8 |
| | 25.4 |
| | 21.6 |
| | 24.6 |
|
Income taxes | (6.4 | ) | | (7.7 | ) | | (6.0 | ) | | (7.4 | ) |
Net earnings | 16.4 | % | | 17.7 | % | | 15.6 | % | | 17.1 | % |
Three months ended September 30, 2017March 31, 2023 compared to three months ended September 30, 2016March 31, 2022
Net revenues for the three months ended September 30, 2017March 31, 2023 increased by 23%14.8% as compared to the three months ended September 30, 2016.March 31, 2022. The increase wascomponents of revenue growth for the result of a net effect of 17% from acquisitions and divestitures, organic growth of 5% and foreign exchange benefit of 1%.three months ended March 31, 2023 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Application Software | | Network Software | | Technology Enabled Products | | | | Roper |
Total Revenue Growth | 21.2 | % | | 4.7 | % | | 13.0 | % | | | | 14.8 | % |
Less Impact of: | | | | | | | | | |
Acquisitions/Divestitures | 16.2 | | | — | | | — | | | | | 8.0 | |
Foreign Exchange | (0.9) | | | (1.3) | | | (0.7) | | | | | (1.1) | |
Organic Revenue Growth | 5.9 | % | | 6.0 | % | | 13.7 | % | | | | 7.9 | % |
| | | | | | | | | |
In our RF TechnologyApplication Software segment, revenues were $481 million$761.4 in the third quarter of 2017three months ended March 31, 2023 as compared to $304 million$628.2 in the third quarterthree months ended March 31, 2022. The growth of 2016, an increase of 58%. Acquisitions accounted for 54% and organic revenue increased by 5%. The increase5.9% in organic revenues was broad-based across the segment led by our businesses serving government contracting, higher education, legal and property and casualty insurance markets. Gross margin decreased to 68.4% in the three months ended March 31, 2023 as compared to 69.3% in the three months ended March 31, 2022 due primarily to headcount to support growth, and a higher mix of SaaS and professional service revenue across a number of businesses. SG&A expenses increased as a percentage of revenue to 43.0% in the three months ended March 31, 2023 as compared to 41.9% in the three months ended March 31, 2022 due primarily to higher amortization of acquired intangibles from the Frontline acquisition. The resulting operating margin was 25.4% in the three months ended March 31, 2023 as compared to 27.4% in the three months ended March 31, 2022.
In our Network Software segment, revenues were $354.5 in the three months ended March 31, 2023 as compared to $338.5 in the three months ended March 31, 2022. The growth of 6.0% in organic revenues was led by our network software businesses serving the freight match, life insurance and increased revenues from tolling projects.alternate site healthcare markets. Gross margin increased to 62.2%84.5% in the third quarter of 2017three months ended March 31, 2023 as compared to 55.7%84.2% in the third quarter of 2016three months ended March 31, 2022 due to an increased percentage of revenues at our software businesses which haveoperating leverage on higher gross margins. Selling, general and administrative ("organic revenues. SG&A")&A expenses
decreased as a percentage of revenues at 42.8% in the third quarter of 2017 increased to 34.3%three months ended March 31, 2023 as compared to 24.5%43.8% in the third quarter of 2016three months ended March 31, 2022 due to recently acquired software businessesoperating leverage on higher organic revenues combined with a higher SG&A expense structure, which includes amortization of acquired intangibles. The resulting operating margin was 27.9% in the third quarter of 2017 as compared to 31.2% in the third quarter of 2016.
Our Medical & Scientific Imaging segment revenues increased by 2% to $344 million in the third quarter of 2017 as compared to $338 million in the third quarter of 2016. Organic revenues increased by 1% due to growth in our alternate site healthcare businesses and several of our medical products businesses, partially offset by declines in our scientific imaging businesses. Gross margin decreased to 71.9% in the third quarter of 2017 as compared to 73.2% in the third quarter of 2016, due primarily to unfavorable sales mix at both our software and medical products businesses. SG&A expenses as a percentage of revenues increased to 38.3% in the third quarter of 2017 as compared to 38.0% in the third quarter of 2016 due primarily to increased software development and selling expenses at our software businesses.revenue mix. As a result, operating margin was 33.6%41.6% in the third quarter of 2017three months ended March 31, 2023 as compared to 35.2%40.4% in the third quarter of 2016.three months ended March 31, 2022.
Our IndustrialIn our Technology Enabled Products segment, revenues increased by 12% to $200 millionwere $353.8 in the third quarter of 2017three months ended March 31, 2023 as compared to $178 million$313.1 in the third quarterthree months ended March 31, 2022. The growth of 2016. Organic13.7% in organic revenues increasedwas led by 12%our water meter technology and medical products businesses. Gross margin decreased to 56.2% in the foreign exchange benefit was 1%. The increasethree months ended March 31, 2023 as compared to 56.5% in revenues wasthe three months ended March 31, 2022 due primarily to our fluid handling and water meter technology businesses. Gross margin was effectively consistent at 50.9% in the third quarter of 2017 as compared to 51.0% in the third quarter of 2016 due to a consistent sales mix.revenue mix partially offset by operating leverage on higher organic sales. SG&A expenses as a percentage of revenues decreased to 19.9%23.5% in the third quarter of 2017three months ended March 31, 2023 as compared to 21.4%24.7% in the third quarter of 2016three months ended March 31, 2022 due primarily to operating leverage on higher organic revenues. The resulting operating margin was 31.1%32.6% in the third quarter of 2017three months ended March 31, 2023 as compared to 29.6%31.8% in the third quarter of 2016.three months ended March 31, 2022.
Our Energy Systems & Controls segment revenues increased by 8% to $135 million in the third quarter of 2017 compared to $125 million in the third quarter of 2016. Organic revenues increased by 6%, acquisitions contributed 1% and the foreign exchange benefit was 1%. The increase in organic revenues was due primarily to growth in our pressure sensors and valves businesses serving energy markets as well as businesses serving industrial end markets. Gross margin increased to 57.9% in the third quarter of 2017 as compared to 56.7% in the third quarter of 2016 and SG&A expenses as a percentage of revenues decreased to 31.0% in the third quarter of 2017 as compared to 31.3% in the third quarter of 2016, both of which were due to operating leverage on higher revenues. As a result, operating margin was 26.9% in the third quarter of 2017 as compared to 25.4% in the third quarter of 2016.
Corporate expenses increased to $37.5 million,$55.2, or 3.2%3.8% of revenues, in the third quarter of 2017three months ended March 31, 2023 as compared to $31.0 million,$52.9, or 3.3%4.1% of revenues, in the third quarter of 2016.three months ended March 31, 2022. The dollar increase was due primarily to increased incentive and equityhigher professional services expense partially offset by lower compensation and increased professional services.expense.
Net interest expense was $45.5 milliondecreased to $37.4 for the third quarter of 2017three months ended March 31, 2023 as compared to $26.8 million$52.6 for the third quarter of 2016three months ended March 31, 2022 due to higher interest income earned on our cash and cash equivalents and lower weighted average debt balances inbalances.
Equity investment activity, net was $1.2 for the current quarter.three months ended March 31, 2023 due to non-cash stock compensation runoff expenses for Indicor employees which will not recur.
Other expense, net, of $0.7 million$2.3 for the third quarter of 2017three months ended March 31, 2023 was composed primarily of foreign exchange losses at our non-U.S. based subsidiaries. Other expense, net, of $0.5 million$2.1 for the third quarterthree months ended March 31, 2022 was composed primarily of 2016 was due primarilya one-time charge associated with a transaction to transfer the remainder of our exposure related to asbestos claims within the Indicor parameter to a non-cash charge of $0.9 million related to the early termination of our prior credit facilitythird party, partially offset by foreign exchange gains at our non-U.S. based subsidiaries.
Income taxes as a percent of pretax earnings were 28.1% in21.0% for the third quarter of 2017three months ended March 31, 2023 as compared to 30.4% in21.5% for the third quarter of 2016.three months ended March 31, 2022. The rate was favorablyprimarily impacted primarily due toby an increase in research and development (R&D) tax credit utilization and a discrete tax benefit from foreign-derived intangible income.
Backlog is equal to our remaining performance obligations expected to be recognized within the settlementnext 12 months as discussed in Note 11 of tax matters in the current quarter.
Order backlog was $1.59 billionNotes to Condensed Consolidated Financial Statements. Backlog increased 17% to $2,872.5 at September 30, 2017March 31, 2023 as compared to $1.12 billion$2,455.6 at September 30, 2016, an increase of 42%. Acquisitions accounted for 33%March 31, 2022. Organic growth in backlog was 13% and internal growthacquisitions contributed 10%.
|
| | | | | | | |
| Order backlog as of |
| September 30, |
| 2017 | | 2016 |
| (in thousands) |
RF Technology | $ | 956,264 |
| | $ | 563,716 |
|
Medical & Scientific Imaging | 441,508 |
| | 396,620 |
|
Industrial Technology | 98,541 |
| | 69,020 |
|
Energy Systems & Controls | 96,481 |
| | 90,699 |
|
Total | $ | 1,592,794 |
| | $ | 1,120,055 |
|
Nine months ended September 30, 2017 compared to nine months ended September 30, 2016
Net revenues for the nine months ended September 30, 2017 increased5% which was partially offset by 22% as compared to the nine months ended September 30, 2016. The increase was the result of a net effect of 17% from acquisitions and divestitures, organic growth of 6% and a negative foreign exchange impact of less than 1%.
In our RF Technology segment, revenues were $1,371 million in the nine months ended September 30, 2017 as compared to $873 million in the nine months ended September 30, 2016, an increase of 57%. Acquisitions accounted for 52% and organic revenues increased by 5%. The growth in organic revenues was due primarily to increased sales from tolling projects as well as growth in our software businesses. Gross margin increased to 60.6% in the nine months ended September 30, 2017 as compared to 56.4% in the nine months ended September 30, 2016 due to increased percentage of revenues at our software businesses, which have a higher gross margin. SG&A expenses as a percentage of revenues in the nine months ended September 30, 2017 increased to 35.6% as compared to 25.2% in the prior year due primarily to an increased percentage of revenues at our software businesses, which have a higher SG&A expense structure, including amortization of acquired intangibles. The resulting operating margin was 25.0% in the nine months ended September 30, 2017 as compared to 31.3% in the nine months ended September 30, 2016. | | | | | | | | | | | |
| Backlog as of |
| March 31, |
| 2023 | | 2022 |
Application Software | $ | 1,706.3 | | | $ | 1,567.5 | |
Network Software | 523.1 | | | 450.4 | |
Technology Enabled Products | 643.1 | | | 437.7 | |
Total | $ | 2,872.5 | | | $ | 2,455.6 | |
Our Medical & Scientific Imaging segment revenues increased by 3% to $1,043 million in the nine months ended September 30, 2017 as compared to $1,011 million in the nine months ended September 30, 2016, all of which was attributable to organic growth. The growth in organic revenues was due primarily to increased sales in our medical businesses, led byNorthern Digital, and our alternate site healthcare businesses. Gross margin decreased to 72.2% in the nine months ended September 30, 2017 as compared to 73.3% in the nine months ended September 30, 2016 due primarily to an unfavorable sales mix at both our software and medical products businesses. SG&A expenses as a percentage of revenues decreased to 38.0% in the nine months ended September 30, 2017 as compared to 38.9% for the nine months ended September 30, 2016 due primarily to operating leverage on higher revenues. As a result, operating margin was 34.2% in the nine months ended September 30, 2017 as compared to 34.4% in the nine months ended September 30, 2016.
Our Industrial Technology segment revenues increased by 9% to $577 million in the nine months ended September 30, 2017 as compared to $528 million in the nine months ended September 30, 2016, all of which was attributable to organic growth. The growth in organic revenues was due primarily to our fluid handling, water meter technology and materials testing businesses. Gross margin increased to 50.9% in the nine months ended September 30, 2017 as compared to 50.5% in the nine months ended September 30, 2016 and SG&A expenses as a percentage of revenues decreased to 20.7% in the nine months ended September 30, 2017 as compared to 21.9% in the nine months ended September 30, 2016, both of which were due to operating leverage on higher revenues. The resulting operating margin was 30.2% in the nine months ended September 30, 2017 as compared to 28.6% in the nine months ended September 30, 2016.
Our Energy Systems & Controls segment revenues increased by 6% to $391 million in the nine months ended September 30, 2017 as compared to $368 million in the nine months ended September 30, 2016. Organic revenues increased by 7% and the negative foreign exchange impact was 1%. The growth in organic revenues was due primarily to increased sales in our pressure sensors and valves businesses serving energy markets as well as businesses serving industrial end markets. Gross margin increased to 57.1% in the nine months ended September 30, 2017 as compared to 55.9% in the nine months ended September 30, 2016 and SG&A expenses as a percentage of revenues decreased to 31.6% in the nine months ended September 30, 2017 as compared to 33.2% in the nine months ended September 30, 2016, both of which were due to operating leverage on higher revenues. As a result, operating margin was 25.4% in the nine months ended September 30, 2017 as compared to 22.8% in the nine months ended September 30, 2016.
Corporate expenses increased to $109.6 million in the nine months ended September 30, 2017 as compared to $89.7 million in the nine months ended September 30, 2016, which were consistent as a percentage of revenues at 3.2%. The dollar increase was due primarily to increased incentive and equity compensation and increased professional services.
Net interest expense was $137.2 million for the nine months ended September 30, 2017 as compared to $81.1 million for the nine months ended September 30, 2016 due to higher weighted average debt balances in the current year.
Other income, net, of $5.3 million for the nine months ended September 30, 2017 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 foreign exchange losses at our non-U.S. subsidiaries. Other expense, net, was $2.0 million for the nine months ended September 30, 2016 due primarily to foreign exchange losses at our non-U.S. subsidiaries and to a non-cash charge of $0.9 million related to the early termination of our prior credit facility.
Income taxes as a percent of pretax earnings decreased to 27.8% in the nine months ended September 30, 2017 as compared to 30.2% in the nine months ended September 30, 2016 due primarily to discrete tax benefits from settlements of tax matters and an increase in excess tax benefits related to equity compensation in the current year.We expect the effective tax rate for 2017 to be between 28% and 29%.
Financial Condition, Liquidity and Capital Resources
All currency amounts are in millions
Selected cash flows for the three and nine months ended September 30, 2017March 31, 2023 and 20162022 were as follows (in millions):follows:
|
| | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
Cash provided by/(used in): | 2017 | | 2016 | | 2017 | | 2016 |
Operating activities | $ | 315.6 |
| | $ | 316.5 |
| | $ | 865.7 |
| | $ | 693.4 |
|
Investing activities | (66.3 | ) | | (10.4 | ) | | (128.3 | ) | | (303.6 | ) |
Financing activities | (331.8 | ) | | (47.3 | ) | | (950.2 | ) | | (279.3 | ) |
| | | | | | | | | | | |
| Three months ended March 31, |
Cash provided by (used in): | 2023 | | 2022 |
Continuing operations: | | | |
Cash provided by operating activities | $ | 464.9 | | | $ | 441.3 | |
Cash used in investing activities | (23.6) | | | (66.1) | |
Cash used in financing activities | (52.5) | | | (508.8) | |
Cash provided by (used in) discontinued operations | (4.4) | | | 3,026.9 | |
Operating activities - Net cash provided by operating activities decreasedfrom continuing operations increased by 0.3%5% to $316 million$464.9 in the third quarter of 2017three months ended March 31, 2023 as compared to $317 million$441.3 in the third quarter of 2016 due primarily to increases in accounts receivable, unbilled receivables and higher income tax payments, largely offset by higher net income net of non-cash charges, higher deferred revenue balances and the timing of interest payments. Net cash provided by operating activities increased by 24.9% to $866 million in the ninethree months ended September 30, 2017 as compared to $693 million in the nine months ended September 30, 2016March 31, 2022, due primarily to higher net income from continuing operations net of non-cash charges, higher deferred revenue balancesexpenses. These cash inflows were partially offset by less cash provided by working capital primarily due to an increased percentagethe timing of revenue from software and other subscription based products and improved collections on accounts receivable, offset in part by higher unbilled receivablesSaaS renewals primarily associated with our project-based businesses, higher prepaid asset balancesFrontline and increased inventories.cash payment of $45.0 million related to the settlement of the Berall v. Verathon patent litigation matter.
Investing activities - Cash used in investing activities was primarily for business acquisitions and capital expendituresfrom continuing operations during the three and nine months ended September 30, 2017March 31, 2023 is primarily due to capitalized software expenditures and 2016.capital expenditures. Cash received fromused in investing activities from continuing operations during the ninethree months ended September 30, 2017March 31, 2022 was due primarily proceeds from the sale of a product line in our Energy Systems & Controls segment.to business acquisitions.
Financing activities - Cash used in financing activities was primarily for debt principal repayments and dividends during the three and nine months ended September 30, 2017 and 2016. Net debt repayments on the unsecured credit facility were $880 million in the nine months ended September 30, 2017 as compared to net debt repayments of $180 million in the nine months ended September 30, 2016.
Effect of foreign currency exchange rate changes on cash - Cash and cash equivalents increased during the three and nine months ended September 30, 2017 by $24.7 million and $61.2 million, respectively, due primarily to the strengthening of functional currencies of our European and Canadian subsidiaries against the U.S. dollar, as compared to an increase and a decrease during the three and nine months ended September 30, 2016 of $1.1 million and $6.7 million, respectively. The increasefrom continuing operations for the three months ended September 30, 2016March 31, 2023 was primarily due primarily to the strengthening of the Euro against the U.S. dollar, while the decreasedividend payments. Cash used in financing activities for the ninethree months ended September 30, 2016March 31, 2022 was primarily due to repayments on our unsecured credit facility and dividend payments.
Discontinued operations - Cash provided by discontinued operations during the three months ended March 31, 2022 was primarily due to proceeds received from the weakeningsale of the British Pound against the U.S. dollar, offset in part by the strengthening of the EuroTransCore and Canadian dollar against the U.S. dollar.Zetec.
Total debt at September 30, 2017 consisted of the following (amounts in thousands):following:
| | | | | |
| As of March 31, 2023 |
Fixed-rate senior notes | $ | 6,700.0 | |
Unsecured credit facility | — | |
Deferred finance costs | (36.4) | |
Other | 0.3 | |
Total debt, net of deferred finance costs | 6,663.9 | |
Less current portion | 699.5 | |
Long-term debt, net of deferred finance costs | $ | 5,964.4 | |
|
| | | |
$400 million 1.850% senior notes due 2017 | $ | 400,000 |
|
$800 million 2.050% senior notes due 2018 | 800,000 |
|
$500 million 6.250% senior notes due 2019 | 500,000 |
|
$600 million 3.000% senior notes due 2020 | 600,000 |
|
$500 million 2.800% senior notes due 2021 | 500,000 |
|
$500 million 3.125% senior notes due 2022 | 500,000 |
|
$300 million 3.850% senior notes due 2025 | 300,000 |
|
$700 million 3.800% senior notes due 2026 | 700,000 |
|
Unsecured credit facility | 1,050,000 |
|
Deferred finance costs | (19,023 | ) |
Other | 3,278 |
|
Total debt, net of deferred finance costs | 5,334,255 |
|
Less current portion | 401,534 |
|
Long-term debt, net of deferred finance costs | $ | 4,932,721 |
|
The interest rate on borrowings under our $2.5 billionthe $3,500.0 unsecured credit facility is calculated based upon various recognized indices plus a margin as defined in the credit agreement.facility. At September 30, 2017, there were $1,050 millionMarch 31, 2023, we had no outstanding borrowings under theour unsecured credit facility. At September 30, 2017, we had $3.3 million of other debt in the form of capital leasesfacility and several smaller facilities that allow for borrowings or the issuance of letters of credit in various foreign locations to support our non-U.S. businesses and $76 million$19.1 of outstanding letters of credit.
Cash and short-term investments at our foreign subsidiaries at September 30, 2017 totaled $572 million. Repatriation of these funds under current regulatoryMarch 31, 2023 increased to $277.9 as compared to $234.0 at December 31, 2022 due primarily to the cash generated at our foreign subsidiaries during the three months ended March 31, 2023. We intend to repatriate substantially all historical and tax law for use in domestic operations could expose us to additional taxes. We generally consider this cash to be permanently reinvested. future earnings.
We expect existing cash and cash equivalents,balances, together with cash generated by our U.S. operations and amounts available under our unsecured credit facility, as well as our expected ability to access the capital markets, will be sufficient to fund our operating requirements in the U.S. for the foreseeable future.
We were in compliance with all debt covenants related to our unsecured credit facility throughout the ninethree months ended September 30, 2017.March 31, 2023.
Net working capital (total current assets, excluding cash less total current liabilities, excluding debt) was negative $89 million$1,025.3 at September 30, 2017March 31, 2023 as compared to negative $25 million$1,053.7 at December 31, 2016, reflecting a decrease2022 primarily driven by payments for accrued compensation, reduction in working capitaldeferred revenue due primarily to increased deferred revenuesthe timing of Frontline renewals, and other accrued liabilities,the cash payment related to the settlement of the Berall v. Verathon patent litigation matter which were offset in part primarily by collections on accounts receivable and an increase in unbilled receivables and inventories.income taxes payable. Total debt, net of deferred finance costs was $5.33 billion$6,663.9 at September 30, 2017March 31, 2023 as compared to $6.21 billion$6,661.7 at December 31, 2016 due primarily to the use of operating cash flows to pay down outstanding debt under our unsecured credit facility.2022. Our leverage on a continuing operations basis is shown in the following table (in thousands):table:
| | | | | | | | March 31, 2023 | | December 31, 2022 |
| September 30, 2017 | | December 31, 2016 | |
Total debt | $ | 5,334,255 |
| | $ | 6,209,536 |
| |
Total debt, net of deferred finance costs | | Total debt, net of deferred finance costs | $ | 6,663.9 | | | $ | 6,661.7 | |
Cash | (605,616 | ) | | (757,200 | ) | Cash | (1,181.6) | | | (792.8) | |
Net debt | 4,728,639 |
| | 5,452,336 |
| Net debt | 5,482.3 | | | 5,868.9 | |
Stockholders' equity | 6,458,984 |
| | 5,788,865 |
| |
Stockholders’ equity | | Stockholders’ equity | 16,332.7 | | | 16,037.8 | |
Total net capital | $ | 11,187,623 |
| | $ | 11,241,201 |
| Total net capital | $ | 21,815.0 | | | $ | 21,906.7 | |
| | | | | | | |
Net debt / total net capital | 42.3 | % | | 48.5 | % | Net debt / total net capital | 25.1 | % | | 26.8 | % |
Capital expenditures were $36 million$9.8 for the ninethree months ended September 30, 2017March 31, 2023 as compared to $27 million$5.4 for the ninethree months ended September 30, 2016.March 31, 2022. Capitalized software expenditures were $9.9 for the three months ended March 31, 2023 as compared to $7.5 for the three months ended March 31, 2022. We expect the aggregate of capital expenditures and capitalized software expenditures for the balance of the year to be comparable to prior years as a percentage of revenues.
There have been no significant changes to our contractual obligations from those disclosed in our Annual Report.
Off-Balance Sheet Arrangements
At September 30, 2017,March 31, 2023, 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.
Outlook
Current geopolitical and economic uncertainties, including the current inflationary environment, supply chain disruptions and labor shortages, could adversely affect our business prospects. AAn armed conflict (such as the ongoing war in Ukraine), significant terrorist attack, or other global conflict, or new or ongoing public health crisis (such as the COVID-19 pandemic) could cause changes in world economies that would adversely affect us. It is impossible to isolate each of these factor'spotential factor’s future effects on current economic conditions.conditions or any of our businesses. It is also impossible to predict with any reasonable degree of certainty what or when any additional events may occur that also would similarly disrupt the economy.economy and have an adverse impact on our businesses.
We maintain an active acquisition program; however, 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 business, financial condition and results of operations. Such acquisitions may be financed by the use of existing credit lines,agreements, future cash flows from operations, future divestitures, the proceeds from the issuance of new debt or equity securities or any combination of these methods.methods, the terms and availability of which will be subject to market and economic conditions generally.
We anticipate that our recently acquired companies as well as our other companiesbusinesses will generate positive cash flows from operating activities, and that these cash flows will permit the reduction of borrowings under our unsecured credit facility.currently outstanding debt in accordance with the repayment schedule. However, the rate at which we can reduce our debt during 2017 (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 impact of the aforementioned geopolitical and economic uncertainties and the financial markets generally. None of these factors can be predicted with certainty.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Item 7A -“Item 7A. Quantitative and Qualitative Disclosures about Market Risk"Risk” in our Annual Report. There were no material changes during the ninethree months ended September 30, 2017.March 31, 2023.
ITEM 4. CONTROLS AND PROCEDURES
As required by SEC rules, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q ("(“Evaluation Date"Date”). This evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer. Based on this evaluation as of the Evaluation Date, these officers have concluded that the design and operation of our disclosure controls and procedures are effective.
Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC'sSEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
There were no changes to our internal controls during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information pertaining to legal proceedings can be found in Note 9 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q and is incorporated by reference herein.
ITEM 1A. RISK FACTORS
For informationInformation regarding factors that could affect our business, financial condition and results of operations, see the risk factors discussioncan be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Information About Forward-Looking Statements,” in Part 1 - Item 2 of this Form 10-Q and in Part 1 - Item 1A of our 2022 Annual Report. See also "Information About Forward-Looking Statements" included in Part I, Item 2 of this Quarterly Report on Form 10-Q.10-K. There have been no material changes during the three months ended March 31, 2023 to our risk factors previously disclosed in the 2022 Annual Report on Form 10-K.
ItemITEM 6.Exhibits
| | | | | | | | | | | |
| | | |
31.1 |
| | Rule 13a-14(a)/15d-14(a), Certification of the Chief Executive Officer, filed herewith. |
| | |
31.2 |
| | Rule 13a-14(a)/15d-14(a), Certification of the Chief Financial Officer, filed herewith. |
| | |
32.1 |
| | Section 1350 Certification of the Chief Executive and Chief Financial Officers, furnished herewith. |
| | |
101.INS |
| | XBRL Instance Document, filed herewith. |
| | |
101.SCH |
| | XBRL Taxonomy Extension Schema Document, filed herewith. |
| | |
101.CAL |
| | XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith. |
| | |
101.DEF |
| | XBRL Taxonomy Extension Definition Linkbase Document, filed herewith. |
| | |
101.LAB |
| | XBRL Taxonomy Extension Label Linkbase Document, filed herewith. |
| | |
101.PRE |
| | XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith. |
EXHIBIT INDEX
TO REPORT ON FORM 10-Q
|
| | | |
Number | | Exhibit |
| | |
31.1 |
| | | |
| | | |
31.2 |
| | | |
| | | |
32.1 |
| | | |
| | | |
101.INS |
| | XBRL Instance Document, filed herewith.Document. | |
| | | |
101.SCH |
| | XBRL Taxonomy Extension Schema Document, filed herewith.Document. | |
| | | |
101.CAL |
| | XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith.Document. | |
| | | |
101.DEF |
| | XBRL Taxonomy Extension Definition Linkbase Document, filed herewith.Document. | |
| | | |
101.LAB |
| | XBRL Taxonomy Extension Label Linkbase Document, filed herewith.Document. | |
| | | |
101.PRE |
| | XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith.Document. | |
| | | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |
Signatures
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Roper Technologies, Inc.
|
| | | | | | | | | | |
/s/ Brian D. JellisonS/ L. Neil Hunn | | Chairman of the Board, President | November 6, 2017 |
Brian D. Jellison | | and Chief Executive Officer | May 3, 2023 |
L. Neil Hunn | | (Principal Executive Officer) | |
|
| | | | | | | | | | |
/S/ Jason P. Conley | | | |
/s/ Robert Crisci | | Executive Vice President and Chief Financial Officer | November 6, 2017May 3, 2023 |
Robert CrisciJason P. Conley | | (Principal Financial Officer) | |
|
| | | | | | | | | | |
/s/ Jason ConleyS/ Brandon Cross | | Vice President and Corporate Controller | November 6, 2017May 3, 2023 |
Jason ConleyBrandon Cross | | (Principal Accounting Officer) | |