On October 25, 2012, Roper Industries, Inc. (the "Company") issued a press release containing information about the Company's results of operations for the quarter ended September 30, 2012. A copy of the press release is furnished as Exhibit 99.1.

 

In the press release, the Company uses several non-GAAP financial measures: non-GAAP Revenue, non-GAAP Operating Margin, non-GAAP Diluted Earnings per Share and Free Cash Flow.

Business combination accounting rules require Roper to account for the fair value of deferred revenue assumed in connection with the Sunquest Information Systems, Inc. ("Sunquest") acquisition.  The fair value is based on the assumed cost of having a third-party provide the relevant support services rather than the contracted amount under the contracts.  Because the fair value is less than the contracted amount, Roper's GAAP revenues for the one year period subsequent to the acquisition will not reflect the full amount of revenue that would have otherwise been recorded by Sunquest had they remained an independent company. The non-GAAP Revenue measure is intended to reflect the full amount that Sunquest would have recognized as revenue, absent the fair value adjustment. The non-GAAP Operating Margin reflects this fair value adjustment as well as the exclusion of expenses related to the Sunquest acquisition. The non-GAAP Diluted Earnings per Share also excludes a debt extinguishment charge incurred in refinancing the existing credit facility, which is recorded as other expense.  The Company believes these non-GAAP measures are useful to investors as a measure of the ongoing performance of its business giving effect to the Sunquest transaction.

Free Cash Flow is defined as "Cash Provided by Operating Activities" ("Operating Cash Flow") as stated in Roper's Consolidated Statements of Cash Flows, reduced by capital expenditures.  The Company believes that Free Cash Flow is useful to investors as a basis for comparing its performance with other companies. Roper's measure of Free Cash Flow may not be comparable to similar measures used by other companies.

Record Third Quarter Orders, Revenue, EBITDA, Net Earnings and Operating Cash Flow

Sunquest Results Included from August 22, 2012

Sarasota, Florida, October 25, 2012 ... Roper Industries, Inc. (NYSE: ROP), a diversified growth company, reported financial results for the third quarter ended September 30, 2012.

Roper reports results, including revenue, operating margin, net income and diluted earnings per share, on a GAAP and non-GAAP basis.  The non-GAAP measures are reconciled to the corresponding GAAP measures at the end of this release.

Third quarter GAAP diluted earnings per share were $1.17.  Non-GAAP diluted earnings per share were $1.24, which were at the higher end of the company's guidance range.  GAAP revenue was a record $748 million.  Non-GAAP revenue, which excludes a fair value adjustment to acquired deferred revenue, was $751 million.  GAAP operating margin increased 100 basis points to 24.5%, while non-GAAP operating margin was 25.7%, a 220 basis point increase over the prior year.  Operating cash flow in the quarter was a record $205 million, an increase of 23% over the comparable period in the prior year.

"Our businesses continued to perform exceptionally well in the quarter," said Brian Jellison, Roper's Chairman, President and CEO.  "Strong operating performance led to substantial margin expansion in all four of our segments.  We achieved record free cash flow of $197 million, representing 26% of revenue.  In addition, gross margin increased to 56% in the quarter.  Despite the uncertain economic outlook, we remain confident our high-quality, asset-light businesses will continue to perform well."

Mr. Jellison continued, "During the quarter, we completed the acquisition of Sunquest Information Systems, adding to our growing medical and software businesses.  Sunquest, with leading software solutions used by over 1,700 hospitals worldwide, adds substantial recurring revenue with long term customer relationships and high retention rates.  We are excited about the continued growth opportunities in these areas."

As a result of the third quarter results and outlook for the remainder of the year, the company is establishing fourth quarter non-GAAP diluted earnings per share guidance of $1.43 - $1.49.  The company's full year non-GAAP diluted earnings per share guidance is $4.91 - $4.97. 

 

The company's guidance is provided on a non-GAAP basis, and excludes future acquisitions, the fair value adjustment to acquired deferred revenue resulting from the Sunquest acquisition, transaction related expenses for Sunquest, and the third quarter debt extinguishment charge.

Use of Non-GAAP Financial Information

The company supplements its consolidated financial statements presented on a GAAP basis with certain non-GAAP financial information to provide investors with greater insight, increase transparency and allow for a more comprehensive understanding of the information used by management in its financial and operational decision-making.  Reconciliation of non-GAAP measures to their most directly comparable GAAP measures are included in the accompanying financial schedules or tables.  The non-GAAP financial measures disclosed by the company should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP, and the financial results prepared in accordance with GAAP and reconciliations from these results should be carefully evaluated.

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Table 1:  Q3 Revenue Growth

 

 

 

 

 

 

 

 

 

 

 

 

Table 2:  Free Cash Flow

 

 

 

 

 

A conference call to discuss these results has been scheduled for 8:30 AM ET on Thursday, October 25, 2012.  The call can be accessed via webcast or by dialing +1 888-230-6285 (US/Canada) or +1 913-312-0680, using confirmation code 6548072.  Webcast information and conference call materials will be made available in the Investors section of Roper's website (www.roperind.com) prior to the start of the call.  Telephonic replays will be available for up to two weeks by calling +1 719-457-0820 and using the access code 6548072.

Roper Industries is a diversified growth company and is a constituent of the S&P 500, Fortune 1000, and the Russell 1000 indices. Roper provides engineered products and solutions for global niche markets, including water, energy, transportation, medical, education, and SaaS-based information networks. Additional information about Roper is available on the company's website at www.roperind.com.

The information provided in this press release contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, among others, statements regarding operating results, the success of our internal operating plans, and the prospects for newly acquired businesses to be integrated and contribute to future growth, profit and cash flow expectations.  Forward-looking statements may be indicated by words or phrases such as "anticipate," "estimate," "plans," "expects," "projects," "should," "will," "believes" or "intends" and similar words and phrases.  These statements reflect management'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 contained in any forward-looking statement. Such risks and uncertainties include our ability to integrate acquisitions and realize expected synergies.  We also face other general risks, including our ability to realize cost savings from our operating initiatives, general economic conditions, unfavorable changes in foreign exchange rates, difficulties associated with exports, risks associated with our international operations, difficulties in making and integrating acquisitions, risks associated with newly acquired businesses, increased product liability and insurance costs, increased warranty exposure, future competition, changes in the supply of, or price for, parts and components, environmental compliance costs and liabilities, risks and cost associated with asbestos related litigation and potential write-offs of our substantial intangible assets, and risks associated with obtaining governmental approvals and maintaining regulatory compliance for new and existing products.  Important risks may be discussed in current and subsequent filings with the SEC.  You should not place undue reliance on any forward-looking statements.  These statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

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