Item 2.02. Results of Operations and Financial Condition.

 

On January 28, 2013, Roper Industries, Inc. (the "Company") issued a press release containing information about the Company's results of operations for the year and quarter ended December 31, 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, EBITDA 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.

EBITDA as shown in the press release is defined as net earnings plus (a) interest expense, (b) income taxes and (c) depreciation and amortization. The Company believes EBITDA is an important indicator of operational performance of the Company's business because it provides a link between profitability and operating cash flow. EBITDA as calculated by the Company is not necessarily comparable to similarly titled measures reported by other companies. In addition, EBITDA: (a) does not represent net income or cash flows from operations as defined by GAAP; (b) is not necessarily indicative of cash available to fund the Company's cash flow needs; and (c) should not be considered as an alternative to net earnings, operating income, cash flows from operating activities or the Company's other financial information determined under GAAP. The Company believes that the line on the Company's consolidated statement of operations entitled net earnings is the most directly comparable GAAP measure to EBITDA.

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.

 

Sarasota, Florida, January 28, 2013 ... Roper Industries, Inc. (NYSE: ROP), a diversified growth company, reported financial results for the fourth quarter and full year ended December 31, 2012.

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

Fourth quarter GAAP diluted earnings per share were $1.44 and non-GAAP diluted earnings per share were $1.48.  GAAP revenue increased 10% to $810 million and non-GAAP revenue, which excludes a fair value adjustment to acquired deferred revenue, was $816 million.  GAAP operating margin increased 250 basis points to 27.8%, while non-GAAP operating margin was 28.3%, a 300 basis point increase over the prior year.  Operating cash flow in the quarter was $212 million.

"Our businesses performed exceptionally well in the fourth quarter, as we established records for revenue, orders, gross margin, operating profit, net earnings and cash flow," said Brian Jellison, Roper's Chairman, President and CEO.  "EBITDA reached $275 million, or 33.7% of revenue, reflecting the contribution of Sunquest and strong operating leverage on organic growth."

"Full year performance across the enterprise was outstanding throughout the year with record levels of revenue, income and cash flow," said Mr. Jellison.  "Operating margin expansion was consistent and broad-based, as margins expanded in each of our segments in every quarter of 2012, a reflection of the strength of our business leaders and our disciplined operating model.  Gross margin expanded to 56% for the year.  Our consistent focus on high margin businesses, differentiated technology and nimble execution continues to deliver exceptional results."

GAAP diluted earnings per share for the year were $4.86 and non-GAAP diluted earnings per share were $4.96.  GAAP revenue was $3.0 billion, up 7% over the prior year.  GAAP operating margin increased 170 basis points to 25.3%, while non-GAAP operating margin was 25.7%, a 210 basis point increase over the prior year.  Operating cash flow was a record $678 million.  Free cash flow increased 14% to $639 million and represented 21% of GAAP revenue.

"We invested over $1.4 billion in acquisitions during 2012, adding Sunquest as a new growth platform, as well as attractive bolt-on businesses to our existing platforms," said Mr. Jellison.  "We successfully issued $900 million in senior notes during the fourth quarter and ended the year with a strong balance sheet, including over $1.5 billion in cash and available liquidity.  We continue to have an attractive pipeline of opportunities and are well positioned as we enter 2013."

Roper expects 2013 full year non-GAAP diluted earnings per share (DEPS) between $5.60 - $5.82 with expected first quarter non-GAAP DEPS between $1.19 and $1.23.

The company's guidance is provided on a non-GAAP basis, which excludes the fair value adjustment to acquired deferred revenue resulting from the Sunquest acquisition.  The company's guidance excludes future acquisitions.

 

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.

---

 

Table 1:  Q4 Revenue Growth Detail

 

 

 

 

 

 

 

 

 

 

 

 

Table 2:  Free Cash Flow Reconciliation

 

 

 

 

 

 

 

 

 

 

Table 3:  EBITDA Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

 

A conference call to discuss these results has been scheduled for 8:30 AM ET on Monday, January 28, 2013.  The call can be accessed via webcast or by dialing +1 888-438-5524 (US/Canada) or +1 719-457-2645, using confirmation code 6945605.  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 6945605.

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.

# # #

 

 

---

Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(Amounts in thousands)
		December 31,				December 31,
ASSETS		2012				2011
CURRENT ASSETS:
Cash and cash equivalents		$	370,590			$	338,101
Accounts receivable			526,408				439,134
Inventories			190,867				204,758
Unbilled receivable			72,193				63,829
Deferred taxes			45,788				38,004
Other current assets			43,492				31,647
Total current assets			1,249,338				1,115,473
PROPERTY, PLANT AND EQUIPMENT, NET			110,397				108,775
OTHER ASSETS:
Goodwill			3,868,857				2,866,426
Other intangible assets, net			1,698,867				1,094,142
Deferred taxes			74,848				63,006
Other assets			68,797				71,595
Total other assets			5,711,369				4,095,169
TOTAL ASSETS		$	7,071,104			$	5,319,417
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable		$	138,340			$	141,943
Accrued liabilities			424,987				322,904
Income taxes payable			-				8,895
Deferred taxes			3,868				10,548
Current portion of long-term debt			513,928				69,906
Total current liabilities			1,081,123				554,196
NONCURRENT LIABILITIES:
Long-term debt			1,508,194				1,015,110
Deferred taxes			707,278				482,603
Other liabilities			86,783				72,412
Total liabilities			3,383,378				2,124,321
STOCKHOLDERS' EQUITY:
Common stock			1,006				987
Additional paid-in capital			1,158,001				1,117,093
Retained earnings			2,489,858				2,063,110
Accumulated other comprehensive earnings			58,537				33,800
Treasury stock			(19,676	)			(19,894	)
Total stockholders' equity			3,687,726				3,195,096
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	7,071,104			$	5,319,417

 

 

 

---

 

Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings (unaudited)
(Amounts in thousands, except per share data)
		Three months ended								Twelve months ended
		December 31,								December 31,
		2012				2011				2012				2011
Net sales		$	809,910			$	739,204			$	2,993,489			$	2,797,089
Cost of sales			343,549				333,355				1,321,772				1,281,525
Gross profit			466,361				405,849				1,671,717				1,515,564
Selling, general and administrative expenses			241,119				218,495				914,130				855,025
Income from operations			225,242				187,354				757,587				660,539
Interest expense			20,509				15,383				67,525				63,648
Loss on extinguishment of debt			-				-				(1,043	)			-
Other income/(expense)			106				(548	)			(2,338	)			8,096
Earnings from continuing operations before
income taxes			204,839				171,423				686,681				604,987
Income taxes			61,309				49,747				203,321				177,740
Net Earnings		$	143,530			$	121,676			$	483,360			$	427,247
Earnings per share:
Basic		$	1.46			$	1.26			$	4.95			$	4.45
Diluted		$	1.44			$	1.23			$	4.86			$	4.34
Weighted average common and common
equivalent shares outstanding:
Basic			98,422				96,455				97,702				95,959
Diluted			99,576				98,662				99,558				98,386

 

 

 

---

 

Roper Industries, Inc. and Subsidiaries
Selected Segment Financial Data (unaudited)
(Amounts in thousands and percents of net sales)
		Three months ended December 31,																Twelve months ended December 31,
		2012								2011								2012								2011
		Amount				%				Amount				%				Amount				%				Amount				%
Net sales:
Industrial Technology		$	197,152							$	198,661							$	795,240							$	737,356
Energy Systems & Controls			184,608								172,034								646,116								597,802
Medical & Scientific Imaging			217,628								157,782								703,835								610,617
RF Technology			210,522								210,727								848,298								851,314
Total		$	809,910							$	739,204							$	2,993,489							$	2,797,089
Gross profit:
Industrial Technology(1)		$	106,178				53.9	%		$	97,947				49.3	%		$	410,180				51.6	%		$	366,967				49.8	%
Energy Systems & Controls			109,291				59.2	%			99,356				57.8	%			363,616				56.3	%			331,746				55.5	%
Medical & Scientific Imaging(2)			139,084				63.9	%			100,947				64.0	%			453,495				64.4	%			386,242				63.3	%
RF Technology			111,808				53.1	%			107,599				51.1	%			444,426				52.4	%			430,609				50.6	%
Total		$	466,361				57.6	%		$	405,849				54.9	%		$	1,671,717				55.8	%		$	1,515,564				54.2	%
Operating profit*:
Industrial Technology(1)		$	64,480				32.7	%		$	58,032				29.2	%		$	244,691				30.8	%		$	208,188				28.2	%
Energy Systems & Controls			61,075				33.1	%			52,537				30.5	%			179,824				27.8	%			157,960				26.4	%
Medical & Scientific Imaging(2)			62,015				28.5	%			39,377				25.0	%			187,246				26.6	%			148,376				24.3	%
RF Technology			56,819				27.0	%			52,464				24.9	%			223,335				26.3	%			202,877				23.8	%
Total		$	244,389				30.2	%		$	202,410				27.4	%		$	835,096				27.9	%		$	717,401				25.6	%
Net Orders:
Industrial Technology		$	185,285							$	184,051							$	783,362							$	767,020
Energy Systems & Controls			175,596								171,905								634,051								608,538
Medical & Scientific Imaging			208,784								153,335								703,034								612,787
RF Technology			209,399								185,390								871,225								834,903
Total		$	779,064							$	694,681							$	2,991,672							$	2,823,248
* Operating profit is before unallocated corporate general and administrative expenses. These expenses were $19,147 and $15,056 for the three months ended December 31, 2012 and 2011, respectively, and $77,509 and $56,862 for the twelve months ended December 31, 2012 and 2011, respectively.
(1) Includes a favorable fourth quarter 2012 accounts payable correction of $5.5 million.
(2) Includes a fourth quarter 2012 charge for inventory and tooling for a medical product line of $4.0 million.

 

 

---

 

Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(Amounts in thousands)
		Twelve months ended
		December 31,
		2012				2011
Net earnings		$	483,360			$	427,247
Non-cash items:
Depreciation			37,888				36,780
Amortization			116,860				103,363
Stock-based compensation expense			40,773				31,730
Income taxes			(15,988	)			14,526
Changes in assets and liabilities:
Receivables			(21,577	)			(21,574	)
Inventory			18,361				(23,033	)
Accounts payable			(8,480	)			1,903
Accrued liabilities			17,689				22,444
Other, net			8,966				8,232
Cash provided by operating activities			677,852				601,618
Business acquisitions, net of cash acquired			(1,467,772	)			(233,594	)
Capital expenditures			(38,405	)			(40,702	)
Other, net			632				(1,453	)
Cash used by investing activities			(1,505,545	)			(275,749	)
Principal debt borrowings			900,000				-
Principal debt payments			(57,304	)			(26,457	)
Revolver borrowings (payments), net			100,000				(230,000	)
Debt issuance costs			(12,213	)			-
Dividends			(69,903	)			(42,090	)
Excess tax benefit from share-based payment			30,747				12,664
Proceeds from stock-based compensation, net			37,679				28,167
Redemption premium on convertible debt			(76,641	)			-
Other, net			1,505				1,037
Cash provided by (used in) financing activities			853,870				(256,679	)
Effect of exchange rate changes on cash			6,312				(1,483	)
Net increase in cash and equivalents			32,489				67,707
Cash and equivalents, beginning of period			338,101				270,394
Cash and equivalents, end of period		$	370,590			$	338,101

 

 

 

ROPER INDUSTRIES INC.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS - RECONCILIATION OF GAAP TO NON-GAAP
(Amounts in thousands, except per share data)
						Adjustments
		2012 Fully Year Reported				Fair Value Adjustment to Acquired Deferred Revenue				Sunquest Acquisition-Related Expenses				Debt Extinguishment Charge				2012 Fully Year Adjusted
Net Sales		$	2,993,489			$	9,082			$	-			$	-			$	3,002,571
Cost of Sales			1,321,772				-				-				-				1,321,772
Gross Profit			1,671,717				9,082				-				-				1,680,799
Selling, general and administrative expenses			836,621				-				-				-				836,621
Segment income from operations			835,096				9,082				-				-				844,178
Corporate general and administrative expenses			77,509				-				(6,308	)			-				71,201
Income from operations			757,587				9,082				6,308				-				772,977
Interest Expense			67,525				-				-				-				67,525
Other income (expense)			(3,381	)			-				-				1,043				(2,338	)
Earnings from continuing operations before income taxes			686,681				9,082				6,308				1,043				703,114
IncomeTaxes (1)			203,321				3,179				2,208				365				209,073
Tax Rate			29.6	%			35.0	%			35.0	%			35.0	%			29.7	%
Net Earnings		$	483,360			$	5,903			$	4,100			$	678			$	494,041
Weighted average common shares outstanding			99,558																99,558
Diluted earnings per share		$	4.86															$	4.96
(1) For the three adjustments, the company used a 35% tax rate, as these adjustments are all US-based items, and 35% is the statutory tax rate in the United States