Notes to Consolidated Financial Statements
Years ended December 31, 2020, 2019 and 2018
(Dollar and share amounts in millions unless specified, except per share data)
(1) Summary of Accounting Policies
Basis of Presentation - These financial statements present consolidated information for Roper Technologies, Inc. and its subsidiaries (“Roper,” the “Company,” “we,” “our” or “us”). All significant intercompany accounts and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to current period presentation.
Nature of the Business - Roper is a diversified technology company. The Company operates businesses that design and develop software (both license and SaaS) and engineered products and solutions for a variety of niche end markets.
Recent Accounting Pronouncements - The Financial Accounting Standards Board (“FASB”) establishes changes to accounting principles under GAAP in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs. Any ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s results of operations, financial position or cash flows.
Recently Adopted Accounting Pronouncements
The Company adopted ASC Topic 326, Financial Instruments - Credit Losses (“ASC 326”), as of January 1, 2020 using the modified retrospective transition method. This ASU amends the impairment model to utilize an expected loss methodology in place of the incurred loss methodology for financial instruments, including trade receivables, and unbilled receivables. We recorded a noncash cumulative effect decrease to retained earnings of $1.7, net of income taxes, on our opening consolidated balance sheet as of January 1, 2020.
In February 2016, the FASB issued ASC 842, which included the recognition of right-of-use (“ROU”) lease assets and lease liabilities on the balance sheet and the disclosure of other key information about leasing arrangements. The Company adopted ASC 842, as of January 1, 2019 using the cumulative effect transition method for leases in existence as of the date of adoption, resulting in the recognition of operating lease ROU assets and total operating lease liabilities of $274.0 and $282.7, respectively, as of January 1, 2019. The difference between the operating lease ROU assets and total operating lease liabilities is the reclassification of previously recognized deferred rent liabilities against operating lease ROU assets. The adoption of ASC 842 did not result in an adjustment to retained earnings and it did not impact our net deferred tax assets or liabilities.
In May 2014, the FASB issued ASC 606, which created a single, comprehensive revenue recognition model for all contracts with customers. The Company adopted ASC 606 as of January 1, 2018 using the modified retrospective transition method resulting in a $14.3 increase to beginning retained earnings.
See the Company’s accounting policies below for details.
Cash and Cash Equivalents - Roper considers highly liquid financial instruments with remaining maturities at acquisition of three months or less to be cash equivalents. Roper had $0.0 and $370.1 cash equivalents at December 31, 2020 and 2019, respectively.
Contingencies - Management continually assesses the probability of any adverse judgments or outcomes to its potential contingencies. Disclosure of the contingency is made if there is at least a reasonable possibility that a loss or an additional loss may have been incurred. In the assessment of contingencies as of December 31, 2020, management concluded that there were no matters for which there was a reasonable possibility of a material loss.
Earnings per Share - Basic earnings per share were calculated using net earnings and the weighted-average number of shares of common stock outstanding during the respective year. Diluted earnings per share were calculated using net earnings and the weighted-average number of shares of common stock and potential common stock associated with stock options outstanding during the respective year. The effects of potential common stock were determined using the treasury stock method:
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Years ended December 31,
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2020
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2019
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2018
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Basic weighted-average shares outstanding
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104.6
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103.9
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103.2
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Effect of potential common stock:
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Common stock awards
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1.1
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1.2
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1.2
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Diluted weighted-average shares outstanding
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105.7
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105.1
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104.4
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As of and for the years ended December 31, 2020, 2019 and 2018, there were 0.208, 0.627 and 0.724 outstanding stock options, respectively, that were not included in the determination of diluted earnings per share because doing so would have been antidilutive.
Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Foreign Currency Translation and Transactions - Assets and liabilities of subsidiaries whose functional currency is not the U.S. dollar were translated at the exchange rate in effect at the balance sheet date, and revenues and expenses were translated at average exchange rates for the period in which those entities were included in Roper’s financial results. Translation adjustments are reflected as a component of other comprehensive income. Foreign currency transaction gains and losses are recorded in the Consolidated Statements of Earnings within “Other income/(expense), net.” Foreign currency transaction gains/(losses) were $(4.3), $(3.7) and $0.2 for the years ended December 31, 2020, 2019 and 2018, respectively.
Goodwill and Other Intangibles - Roper accounts for goodwill in a purchase business combination as the excess of the cost over the estimated fair value of net assets acquired. Business combinations can also result in other intangible assets being recognized. Amortization of intangible assets, if applicable, occurs over their estimated useful lives. Goodwill, which is not amortized, is tested for impairment on an annual basis (or an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value). When testing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If the Company elects to perform a qualitative assessment and determines that an impairment is more likely than not, then performance of the quantitative impairment test is required. The quantitative process utilizes both an income approach (discounted cash flows) and a market approach (consisting of a comparable public company earnings multiples methodology) to estimate the fair value of a reporting unit. To determine the reasonableness of the estimated fair values, the Company reviews the assumptions to ensure that neither the income approach nor the market approach provides significantly different valuations. If the estimated fair value exceeds the carrying value, no further work is required and no impairment loss is recognized. If the carrying value exceeds the estimated fair value, a non-cash impairment loss is recognized in the amount of that excess.
When performing the quantitative assessment, key assumptions used in the income and market methodologies are updated when the analysis is performed for each reporting unit. The assumptions that have the most significant effect on the fair value calculations are the projected revenue growth rates, future operating margins, discount rates, terminal values and earnings multiples. While the Company uses reasonable and timely information to prepare its discounted cash flow analysis, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded goodwill balances.
Roper has 36 reporting units with individual goodwill amounts ranging from zero to $3,228.7. In 2020, the Company performed its annual impairment test in the fourth quarter for all reporting units. The Company conducted its analysis qualitatively and assessed whether it was more likely than not that the respective fair value of these reporting units was less than the carrying amount. The Company determined that impairment of goodwill was not likely in 35 of its reporting units and thus was not required to perform a quantitative analysis for these reporting units. For the remaining reporting unit, the Company performed its quantitative analysis and concluded that the fair value of the reporting unit was substantially in excess of its carrying value, with no impairment indicated as of October 1, 2020.
Recently acquired reporting units generally represent a higher inherent risk of impairment, which typically decreases as the businesses are integrated into the enterprise. Negative industry or economic trends, disruptions to its business, actual results significantly below expected results, unexpected significant changes or planned changes in the use of the assets, divestitures and market capitalization declines may have a negative effect on the fair value of Roper’s reporting units.
The following events or circumstances, although not comprehensive, would be considered to determine whether interim testing of goodwill would be required:
•a significant adverse change in legal factors or in the business climate;
•an adverse action or assessment by a regulator;
•unanticipated competition;
•a loss of key personnel;
•a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of;
•the testing for recoverability of a significant asset group within a reporting unit; and
•recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit.
Business combinations can also result in other intangible assets being recognized. Amortization of intangible assets, if applicable, occurs over their estimated useful lives. Trade names that are determined to have indefinite useful economic lives are not amortized, but separately tested for impairment during the fourth quarter of the fiscal year or on an interim basis if an event occurs that indicates the fair value is more likely than not below the carrying value. Roper first qualitatively assesses whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of an indefinite-lived trade name is less than its carrying amount. If necessary, Roper conducts a quantitative review using the relief-from-royalty method. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these assets. The assumptions that have the most significant effect on the fair value calculations are the royalty rates, projected revenue growth rates, discount rates and terminal values. Each royalty rate is determined based on the profitability of the trade name to which it relates and observed market royalty rates. Revenue growth rates are determined after considering current and future economic conditions, recent sales trends, discussions with customers, planned timing of new product launches or other variables. Trade names resulting from recent acquisitions generally represent the highest risk of impairment, which typically decreases as the businesses are integrated into Roper. The Company performed a quantitative analysis over the fair values of two of its trade names and concluded that the fair value exceeded its carrying value, with no impairment indicated as of October 1, 2020.
The assessment of fair value for impairment purposes requires significant judgments to be made by management. Although forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management uses to operate the underlying businesses, there is significant judgment in estimating future operating results. Changes in estimates or the application of alternative assumptions could produce significantly different results. No impairment resulted from the annual testing performed in 2020.
The most significant identifiable intangible assets with definite useful economic lives recognized from our acquisitions are customer relationships. The fair value for customer relationships is determined as of the acquisition date using the excess earnings method. Under this methodology the fair value is determined based on the estimated future after-tax cash flows arising from the acquired customer relationships over their estimated lives after considering customer attrition and contributory asset charges. The assumptions that have the most significant effect on the fair value calculations are the customer attrition rates, projected customer revenue growth rates, margins, contributory asset charges and discount rates. When testing customer relationship intangible assets for potential impairment, management considers historical customer attrition rates and projected revenues and profitability related to customers that existed at acquisition. In evaluating the amortizable life for customer relationship intangible assets, management considers historical customer attrition patterns.
Roper evaluates whether there has been an impairment of identifiable intangible assets with definite useful economic lives, or of the remaining life of such assets, when certain indicators of impairment are present. In the event that facts and circumstances indicate that the cost or remaining period of amortization of any asset may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future gross, undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down to fair value or a revision in the remaining amortization period is required.
Impairment of Long-Lived Assets - The Company determines whether there has been an impairment of long-lived assets, excluding goodwill and other intangible assets, when certain indicators of impairment are present. In the event that facts and circumstances indicate that the cost or life of any long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future gross, undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down to fair value or revision to remaining life is required. Future adverse changes in market conditions or poor operating results of underlying long-lived assets could result in losses or
an inability to recover the carrying value of the long-lived assets that may not be reflected in the assets’ current carrying value, thereby possibly requiring an impairment charge or acceleration of depreciation or amortization expense in the future.
Income Taxes - The Company recognizes in the Consolidated Financial Statements only those tax positions determined to be “more likely than not” of being sustained upon examination based on the technical merits of the positions. Interest and penalties related to unrecognized tax benefits are classified as a component of income tax expense.
The Company records a valuation allowance to reduce its deferred tax assets if, based on the weight of available evidence, both positive and negative, for each respective tax jurisdiction, it is more likely than not that some portion or all of such deferred tax assets will not be realized. Available evidence which is considered in determining the amount of valuation allowance required includes, but is not limited to, the Company’s estimate of future taxable income and any applicable tax-planning strategies.
Certain assets and liabilities have different bases for financial reporting and income tax purposes. Deferred income taxes have been provided for these differences at the enacted tax rates expected to be paid. See Note 7 for information regarding income taxes.
Inventories - Inventories are valued at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method. The Company writes down its inventory for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions.
Product Warranties - The Company sells certain of its products to customers with a product warranty that allows customers to return a defective product during a specified warranty period following the purchase in exchange for a replacement product, repair at no cost to the customer or the issuance of a credit to the customer. The Company accrues its estimated exposure to warranty claims based upon current and historical product sales data, warranty costs incurred and any other related information known to the Company.
Property, Plant and Equipment and Depreciation and Amortization - Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided for using principally the straight-line method over the estimated useful lives of the assets as follows:
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Buildings
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20-30 years
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Machinery
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8-12 years
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Other equipment
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3-5 years
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Research, Development and Engineering - Research, development and engineering (“R,D&E”) costs include salaries and benefits, rents, supplies, and other costs related to products under development or improvements to existing products. R,D&E costs are expensed as incurred and are included within selling, general and administrative expenses. R,D&E expenses totaled $446.1, $403.5 and $376.9 for the years ended December 31, 2020, 2019 and 2018, respectively.
Revenue Recognition - The Company adopted ASC 606 as of January 1, 2018 using the modified retrospective method for all contracts not substantially completed as of the date of adoption. The reported results for 2018 and thereafter reflect the application of ASC 606 guidance. The adoption of ASC 606 represents a change in accounting principle that is intended to more closely align revenue recognition with the transfer of control of the Company’s products and services to the customer. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for these products and/or services. To achieve this principle, the Company applies the following five steps:
•identify the contract with the customer;
•identify the performance obligations in the contract;
•determine the transaction price;
•allocate the transaction price to performance obligations in the contract; and
•recognize revenue when or as the Company satisfies a performance obligation.
Disaggregated Revenue - We disaggregate our revenues into two categories: (i) software and related services; and (ii) engineered products and related services. Software and related services revenues are primarily derived from our Application Software and Network Software & Systems reportable segments. Engineered products and related services revenues are derived from all of our reportable segments except Application Software and comprise substantially all of the revenues generated in our Measurement & Analytical Solutions and Process Technologies reportable segments. See details in the table below.
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Year ended December 31,
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2020
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2019
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2018
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Software and related services
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$
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2,871.1
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$
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2,477.7
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$
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2,165.9
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Engineered products and related services
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2,656.0
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2,889.1
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3,025.3
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Net revenues
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$
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5,527.1
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$
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5,366.8
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$
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5,191.2
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Software and related services
SaaS - SaaS subscriptions and ongoing related support are generally accounted for as a single performance obligation and recognized ratably over the contractual term. In addition, SaaS arrangements may include implementation services which are accounted for as a separate performance obligation and recognized over time, using the input method. Payment is generally required within 30 days of the commencement of the SaaS subscription period, which is primarily offered to customers over a one-year timeframe.
Licensed Software - Performance obligations in our customer contracts may include:
–Perpetual or time-based (“term”) software licenses
–Post contract support (“PCS”)
–Implementation/installation services
Software licenses may be combined with implementation/installation services as a single performance obligation if the implementation/installation significantly modifies or customizes the functionality of the software license.
We recognize revenue over time or at a point in time depending on our evaluation of when the customer obtains control over the promised products or services. For software arrangements that include multiple performance obligations, we allocate revenue to each performance obligation based on estimates of the price that we would charge the customer for each promised product or service if it were sold on a standalone basis.
Payment for software licenses is generally required within 30 to 60 days of the transfer of control. Payment for PCS is generally required within 30 to 60 days of the commencement of the service period, which is primarily offered to customers over a one-year timeframe. Payment terms do not contain a significant financing component. Payment for implementation/installation services that are recognized over time are typically commensurate with milestones defined in the contract, or billable hours incurred.
Engineered products and related services
Revenue from product sales is recognized when control transfers to the customer, which is generally when the product is shipped.
Non-project-based installation and repair services are performed by certain of our businesses for which revenue is recognized upon completion.
Payment terms are generally 30 to 60 days from the transfer of control. Payment terms do not contain a significant financing component.
Preventative maintenance service revenues are recognized over time using the input method. If we determine our efforts or inputs are expended evenly throughout the performance period, we generally recognize revenue on a straight-line basis. Payment for preventative maintenance services are typically commensurate with milestones defined in the contract.
We offer customers return rights and other credits subject to certain restrictions. We estimate variable consideration generally based on historical experience to arrive at the transaction price, or the amount to which we ultimately expect to be entitled from the customer.
Revenues from our project-based businesses, including toll and traffic systems and control systems, are generally recognized over time using the input method, primarily utilizing the ratio of costs incurred to total estimated costs, as the measure of performance. For these projects, payment is typically commensurate with certain performance milestones defined in the contract. Retention and down payments are also customary in these contracts. Estimated losses on any projects are recognized
as soon as such losses become probable and reasonably estimable. The impact on revenues due to changes in estimates was immaterial for the year ended December 31, 2020. The Company recognized revenues of $345.0, $247.8 and $245.9 for the years ended December 31, 2020, 2019 and 2018, respectively, using this method.
Accounts receivable, net - Accounts receivable, net includes amounts billed and currently due from customers. The amounts due are stated at their net estimated realizable value. Accounts receivable are stated net of an allowance for doubtful accounts and sales allowances of $29.1 and $20.3 at December 31, 2020 and 2019, respectively. We make estimates of expected allowance for doubtful accounts based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, changes to customer creditworthiness and other factors that may affect our ability to collect from customers.
Unbilled receivables - Our unbilled receivables include unbilled amounts typically resulting from sales under project-based contracts when the input method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer, and right to payment is not solely due to the passage of time. Amounts may not exceed their net realizable value.
Deferred revenues - We record deferred revenues when cash payments are received or due in advance of our performance. Our deferred revenues relate primarily to software and related services. In most cases, we recognize these deferred revenues ratably over time as the SaaS or PCS performance obligation is satisfied. The non-current portion of deferred revenue is included in “Other liabilities” in our Consolidated Balance Sheets.
Our unbilled receivables and deferred revenues are reported in a net position on a contract-by-contract basis at the end of each reporting period. The net balances are classified as current or non-current based on expected timing of revenue recognition and billable milestones.
Deferred commissions - Our incremental direct costs of obtaining a contract, which consist of sales commissions primarily for our software sales, are deferred and amortized on a straight-line basis over the period of contract performance or a longer period, depending on facts and circumstances. We classify deferred commissions as current or non-current based on the timing of when we expect to recognize the expense. The current and non-current portions of deferred commissions are included in “Other current assets” and “Other assets,” respectively, in our Consolidated Balance Sheets. At December 31, 2020 and 2019, we had $42.5 and $31.4 of deferred commissions, respectively. We recognized $30.1 of expense related to deferred commissions in the year ended December 31, 2020 and 2019, respectively.
Remaining performance obligations - Remaining performance obligations represents the transaction price of firm orders for which work has not been performed and excludes unexercised contract options. As of December 31, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $4,298.0. We expect to recognize revenue on approximately 59% of our remaining performance obligations over the next 12 months, with the remainder to be recognized thereafter.
Capitalized Software - The Company accounts for capitalized software under applicable accounting guidance which, among other provisions, requires capitalization of certain internal-use software costs once certain criteria are met. Overhead, general and administrative and training costs are not capitalized. Capitalized software balances, net of accumulated amortization, were $43.1 and $30.0 at December 31, 2020 and 2019, respectively.
Stock-Based Compensation - The Company recognizes expense for the grant date fair value of its employee stock awards on a straight-line basis (or, in the case of performance-based awards, on a graded basis) over the employee’s requisite service period (generally the vesting period of the award). The fair value of option awards is estimated using the Black-Scholes option valuation model.
(2) Business Acquisitions and Dispositions
Roper completed six business acquisitions in the year ended December 31, 2020. The results of operations of the acquired businesses are included in Roper’s Consolidated Financial Statements since the date of each acquisition. Pro forma results of operations and the revenue and net income subsequent to the acquisition date for the acquisitions completed during fiscal 2020 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to our financial results.
The largest of the 2020 acquisitions was Vertafore, Inc. (“Vertafore”), a leading provider of SaaS solutions for the property and casualty insurance industry. Roper acquired 100% of the shares of Project Viking Holdings, Inc. (the parent company of Vertafore) on September 3, 2020, for a purchase price of $5,398.6. The purchase price comprises an enterprise value of
$5,335.0 and the settlement of certain liabilities, net of cash acquired. Additionally, the purchase price contemplates approximately $120 of federal tax attributes that will be substantially utilized by the end of 2021. The results of Vertafore are reported in the Application Software reportable segment.
The Company recorded $3,229.1 in goodwill and $2,660.0 of other identifiable intangibles in connection with the Vertafore acquisition. The majority of the goodwill is not expected to be deductible for tax purposes. Of the $2,660.0 of acquired intangible assets, $120.0 was assigned to trade names that are not subject to amortization. The remaining $2,540.0 of acquired intangible assets include customer relationships of $2,230.0 (17 year useful life) and unpatented technology of $310.0 (8 year useful life).
Net assets acquired also includes $489 of deferred tax liabilities, which are due primarily to $638 of deferred tax liabilities associated with acquired intangible assets, partially offset primarily by approximately $120 of federal tax attributes that will be substantially utilized by the end of 2021.
During the year ended December 31, 2020, Roper completed five other acquisitions with an aggregate purchase price of $612.8, net of cash acquired and debt assumed.
On June 9, 2020, Roper acquired substantially all of the assets of Freight Market Intelligence Consortium (“FMIC”), a leading provider of subscription-based freight transaction benchmarking and analysis service. FMIC is integrating into our DAT business and its results are reported in the Network Software & Systems reportable segment.
On June 15, 2020, Roper acquired substantially all of the assets of Team TSI Corporation (“Team TSI”), a leading provider of subscription-based data analytics serving long term health care facilities. Team TSI is integrating into our SHP business and its results are reported in the Network Software & Systems reportable segment.
On September 15, 2020, Roper acquired substantially all of the assets of Impact Financial Systems (“IFS”), a leading provider of service request automation solutions for client onboarding, transaction automation, maintenance and advisor transitions. IFS is integrating into our iPipeline business and its results are reported in the Network Software & Systems reportable segment.
On September 18, 2020, Roper acquired all of the membership interests of WELIS, a premier provider of life insurance illustration systems to carriers in the US. WELIS is integrating into our iPipeline business and its results are reported in the Network Software & Systems reportable segment.
On October 15, 2020, Roper acquired substantially all of the assets of EPSi, a leading provider of financial decision support and planning tools for hospitals and health systems. EPSi is integrating into our Strata business and its results are reported in the Application Software reportable segment.
The Company recorded $303.9 in goodwill and $313.0 of other identifiable intangibles in connection with these five acquisitions. The amortizable intangible assets include customer relationships of $283.7 (16 year weighted average useful life) and technology of $29.3 (5 year weighted average useful life).
2019 Acquisitions - Roper completed four business acquisitions in the year ended December 31, 2019, with an aggregate purchase price of $2,387.6, net of cash acquired. The results of operations of the acquired businesses are included in Roper’s Consolidated Financial Statements since the date of each acquisition. Pro forma results of operations and the revenue and net income subsequent to the acquisition date for the acquisitions completed during fiscal 2019 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to our financial results.
Acquisition of Foundry - On April 18, 2019, Roper acquired 100% of the shares of Foundry, a leading provider of software technologies used to deliver visual effects and 3D content for the entertainment, digital design, and visualization industries. The results of Foundry are reported in the Network Software & Systems reportable segment.
Acquisition of ComputerEase - On August 19, 2019, Roper acquired substantially all of the assets of ComputerEase Software, a leading provider of integrated accounting, project management and field-to-office solutions for commercial construction firms. ComputerEase is integrated into our Deltek business and its results are reported in the Application Software reportable segment.
Acquisition of iPipeline - On August 22, 2019, Roper acquired 100% of the shares of iPipeline Holdings, Inc., a leading provider of cloud-based software solutions for the life insurance and financial services industries. The results of iPipeline are reported in the Network Software & Systems reportable segment.
Acquisition of Bellefield - On December 18, 2019, Roper acquired substantially all of the assets of Bellefield Systems which provides SaaS solutions targeting the front office of law firms, specifically focused on professional service automation, compliance and timekeeping. Bellefield is integrated into our Aderant business and its results are reported in the Application Software reportable segment.
The Company recorded $1,447.0 in goodwill and $1,181.9 of other identifiable intangibles in connection with the acquisitions. The majority of the goodwill is not expected to be deductible for tax purposes. The amortizable intangible assets include customer relationships of $1,020.0 (15.8 year weighted average useful life) and technology of $109.3 (6.8 year weighted average useful life).
Dispositions
The Company closed on its sale of Gatan to AMETEK on October 29, 2019 for approximately $925.0 in cash. The sale resulted in a pretax gain of $801.1, which is reported within “Gain on disposal of businesses” in the Consolidated Statements of Earnings. In addition, we recognized income tax expense of $201.2 in connection with the sale, which is included within “Income taxes” in the Consolidated Statements of Earnings.
The Company closed on its sale of the Imaging businesses to Teledyne on February 5, 2019 for approximately $225.0 in cash. The results of the Imaging businesses are reported in the Measurement & Analytical Solutions segment through such date. The sale resulted in a pretax gain of $119.6, which is reported within “Gain on disposal of businesses” in the Consolidated Statements of Earnings. In addition, we recognized income tax expense of $32.2 in connection with the sale, which is included within “Income taxes” in the Consolidated Statements of Earnings.
2018 Acquisitions - Roper completed seven business acquisitions in the year ended December 31, 2018, with an aggregate purchase price of $1,279.0, net of cash acquired. The results of operations of the acquired businesses are included in Roper’s consolidated results of operations since the date of each acquisition. Pro forma results of operations and the revenue and net income subsequent to the acquisition date for the acquisitions completed during fiscal 2018 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to our financial results.
Roper completed three business acquisitions which provide software solutions that support the development of cost estimates in the construction industry: Quote Software, PlanSwift Software, and Smartbid. These three businesses are integrated into our ContructConnect business and its results are reported in the Network Software & Systems reportable segment.
Acquisition of PowerPlan - On June 4, 2018, Roper acquired 100% of the shares of PowerPlan, a provider of financial and compliance management software and solutions to large complex companies in asset-intensive industries, for a purchase price of $1,111.4, net of cash acquired. The results of PowerPlan are reported in the Application Software reportable segment.
Acquisition of ConceptShare - On June 7, 2018, Roper acquired 100% of the shares of ConceptShare, a provider of cloud-based software for marketing agencies, marketing departments and other creative teams to streamline the review and approval of online work and content. ConceptShare is integrated into our Deltek business and its results are reported in the Application Software reportable segment.
Acquisition of BillBlast - On July 10, 2018, Roper acquired 100% of the shares of BillBlast, a provider of software and ancillary services for the automation of invoicing and reporting for law firms. BillBlast is integrated into our Aderant business and its results are reported in the Application Software reportable segment.
Acquisition of Avitru - On December 31, 2018, Roper acquired 100% of the shares of Avitru, a provider of software that supports the design, development and/or delivery of construction specification solutions and related services. Avitru is integrated into our Deltek business and its results are reported in the Application Software reportable segment.
The Company recorded $717.5 in goodwill and $711.3 of other identifiable intangibles in connection with the acquisitions. The majority of the goodwill is not expected to be deductible for tax purposes. The amortizable intangible assets include customer relationships of $635.1 (19 year weighted average useful life) and technology of $48.6 (7 year weighted average useful life).
(3) Inventories
The components of inventories at December 31 were as follows:
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2020
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2019
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Raw materials and supplies
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$
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128.4
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$
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125.1
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Work in process
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28.2
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30.9
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Finished products
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82.2
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76.0
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|
|
Inventory reserves
|
(40.4)
|
|
|
(33.4)
|
|
|
|
$
|
198.4
|
|
|
$
|
198.6
|
|
(4) Property, Plant and Equipment
The components of property, plant and equipment at December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Land
|
$
|
2.3
|
|
|
$
|
2.2
|
|
|
Buildings
|
87.1
|
|
|
84.7
|
|
|
Machinery and other equipment
|
223.3
|
|
|
218.1
|
|
|
Computer equipment
|
117.8
|
|
|
96.4
|
|
|
Software
|
80.9
|
|
|
73.3
|
|
|
|
511.4
|
|
|
474.7
|
|
|
Accumulated depreciation
|
(370.8)
|
|
|
(334.8)
|
|
|
|
$
|
140.6
|
|
|
$
|
139.9
|
|
Depreciation and amortization expense related to property, plant and equipment was $53.4, $49.2 and $49.5 for the years ended December 31, 2020, 2019 and 2018, respectively.
(5) Goodwill and Other Intangible Assets
The carrying value of goodwill by segment was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Application Software
|
|
Network Software & Systems
|
|
Measurement &Analytical Solutions
|
|
Process Technologies
|
|
Total
|
|
Balances at December 31, 2018
|
$
|
5,236.1
|
|
|
$
|
2,623.7
|
|
|
$
|
1,174.7
|
|
|
$
|
312.3
|
|
|
$
|
9,346.8
|
|
|
Goodwill acquired
|
143.4
|
|
|
1,303.6
|
|
|
—
|
|
|
—
|
|
|
1,447.0
|
|
|
Currency translation adjustments
|
8.3
|
|
|
8.8
|
|
|
3.3
|
|
|
2.2
|
|
|
22.6
|
|
|
Reclassifications and other
|
1.6
|
|
|
(2.6)
|
|
|
—
|
|
|
—
|
|
|
(1.0)
|
|
|
Balances at December 31, 2019
|
$
|
5,389.4
|
|
|
$
|
3,933.5
|
|
|
$
|
1,178.0
|
|
|
$
|
314.5
|
|
|
$
|
10,815.4
|
|
|
Goodwill acquired
|
3,399.0
|
|
|
134.0
|
|
|
—
|
|
|
—
|
|
|
3,533.0
|
|
|
Currency translation adjustments
|
14.5
|
|
|
16.6
|
|
|
12.8
|
|
|
4.5
|
|
|
48.4
|
|
|
Reclassifications and other
|
(0.6)
|
|
|
(1.0)
|
|
|
—
|
|
|
—
|
|
|
(1.6)
|
|
|
Balances at December 31, 2020
|
$
|
8,802.3
|
|
|
$
|
4,083.1
|
|
|
$
|
1,190.8
|
|
|
$
|
319.0
|
|
|
$
|
14,395.2
|
|
Reclassifications and other during the year ended December 31, 2020 were due primarily to tax adjustments for acquisitions in 2020 and 2019. See Note 2 for information regarding acquisitions.
Other intangible assets were comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
Accum. amort.
|
|
Net book value
|
|
Assets subject to amortization:
|
|
|
|
|
|
|
Customer related intangibles
|
$
|
4,955.4
|
|
|
$
|
(1,349.4)
|
|
|
$
|
3,606.0
|
|
|
Unpatented technology
|
613.0
|
|
|
(279.6)
|
|
|
333.4
|
|
|
Software
|
172.2
|
|
|
(111.5)
|
|
|
60.7
|
|
|
Patents and other protective rights
|
12.0
|
|
|
(8.0)
|
|
|
4.0
|
|
|
Trade names
|
7.9
|
|
|
(4.1)
|
|
|
3.8
|
|
|
Assets not subject to amortization:
|
|
|
|
|
|
|
Trade names
|
659.8
|
|
|
—
|
|
|
659.8
|
|
|
Balances at December 31, 2019
|
$
|
6,420.3
|
|
|
$
|
(1,752.6)
|
|
|
$
|
4,667.7
|
|
|
|
|
|
|
|
|
|
Assets subject to amortization:
|
|
|
|
|
|
|
Customer related intangibles
|
$
|
7,494.7
|
|
|
$
|
(1,703.8)
|
|
|
$
|
5,790.9
|
|
|
Unpatented technology
|
942.8
|
|
|
(363.9)
|
|
|
578.9
|
|
|
Software
|
172.4
|
|
|
(127.4)
|
|
|
45.0
|
|
|
Patents and other protective rights
|
13.0
|
|
|
(6.7)
|
|
|
6.3
|
|
|
Trade names
|
7.3
|
|
|
(5.6)
|
|
|
1.7
|
|
|
Assets not subject to amortization:
|
|
|
|
|
|
|
Trade names
|
784.1
|
|
|
—
|
|
|
784.1
|
|
|
Balances at December 31, 2020
|
$
|
9,414.3
|
|
|
$
|
(2,207.4)
|
|
|
$
|
7,206.9
|
|
Amortization expense of other intangible assets was $462.7, $364.7, and $316.5 during the years ended December 31, 2020, 2019 and 2018, respectively. Amortization expense is expected to be $580 in 2021, $564 in 2022, $555 in 2023, $514 in 2024 and $485 in 2025.
(6) Accrued Liabilities
Accrued liabilities at December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Interest
|
$
|
44.3
|
|
|
$
|
34.4
|
|
|
Customer deposits
|
50.1
|
|
|
22.4
|
|
|
Accrued dividend
|
60.0
|
|
|
54.3
|
|
|
Rebates
|
51.8
|
|
|
47.1
|
|
|
Billings in excess of revenues
|
17.5
|
|
|
9.0
|
|
|
Operating lease liability
|
65.1
|
|
|
56.8
|
|
|
Other
|
168.2
|
|
|
122.2
|
|
|
|
$
|
457.0
|
|
|
$
|
346.2
|
|
(7) Income Taxes
Earnings before income taxes for the years ended December 31, 2020, 2019 and 2018 consisted of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
United States
|
$
|
902.4
|
|
|
$
|
1,902.2
|
|
|
$
|
924.2
|
|
|
Other
|
306.9
|
|
|
325.2
|
|
|
274.2
|
|
|
|
$
|
1,209.3
|
|
|
$
|
2,227.4
|
|
|
$
|
1,198.4
|
|
Components of income tax expense for the years ended December 31, 2020, 2019 and 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Current:
|
|
|
|
|
|
|
Federal
|
$
|
180.8
|
|
|
$
|
391.6
|
|
|
$
|
155.4
|
|
|
State
|
59.0
|
|
|
78.3
|
|
|
56.2
|
|
|
Foreign
|
77.4
|
|
|
79.8
|
|
|
105.1
|
|
|
Deferred:
|
|
|
|
|
|
|
Federal
|
(54.3)
|
|
|
(43.1)
|
|
|
(24.2)
|
|
|
State
|
(7.6)
|
|
|
2.6
|
|
|
(25.8)
|
|
|
Foreign
|
4.3
|
|
|
(49.7)
|
|
|
(12.7)
|
|
|
|
$
|
259.6
|
|
|
$
|
459.5
|
|
|
$
|
254.0
|
|
Reconciliations between the statutory federal income tax rate and the effective income tax rate for the years ended December 31, 2020, 2019 and 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Federal statutory rate
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
|
Foreign operations, net
|
1.0
|
|
|
0.2
|
|
|
1.6
|
|
|
R&D tax credits
|
(1.4)
|
|
|
(0.6)
|
|
|
(0.9)
|
|
|
State taxes, net of federal benefit
|
3.1
|
|
|
1.6
|
|
|
2.4
|
|
|
Stock-based compensation
|
(3.0)
|
|
|
(1.3)
|
|
|
(3.1)
|
|
|
Tax Cuts and Jobs Act of 2017 - measurement period adjustments
|
—
|
|
|
—
|
|
|
(1.2)
|
|
|
Divestitures
|
—
|
|
|
1.8
|
|
|
—
|
|
|
Foreign entity restructuring
|
—
|
|
|
(1.8)
|
|
|
—
|
|
|
Other, net
|
0.8
|
|
|
(0.3)
|
|
|
1.4
|
|
|
|
21.5
|
%
|
|
20.6
|
%
|
|
21.2
|
%
|
The deferred income tax balance sheet accounts arise from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes.
Components of the deferred tax assets and liabilities at December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Deferred tax assets:
|
|
|
|
|
Reserves and accrued expenses
|
$
|
187.6
|
|
|
$
|
169.6
|
|
|
Net operating loss carryforwards
|
154.6
|
|
|
111.2
|
|
|
R&D credits
|
26.3
|
|
|
4.1
|
|
|
Interest expense limitation carryforwards
|
63.0
|
|
|
9.9
|
|
|
Valuation allowance
|
(38.0)
|
|
|
(36.3)
|
|
|
Lease liability
|
65.0
|
|
|
64.0
|
|
|
Total deferred tax assets
|
$
|
458.5
|
|
|
$
|
322.5
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Reserves and accrued expenses
|
$
|
23.8
|
|
|
$
|
15.5
|
|
|
Amortizable intangible assets
|
1,803.3
|
|
|
1,229.9
|
|
|
Plant and equipment
|
8.8
|
|
|
10.8
|
|
|
Accrued tax on unremitted foreign earnings
|
18.6
|
|
|
17.1
|
|
|
ROU asset
|
62.5
|
|
|
61.7
|
|
|
Total deferred tax liabilities
|
$
|
1,917.0
|
|
|
$
|
1,335.0
|
|
As of December 31, 2020, the Company has approximately $51.5 of tax-effected U.S. federal net operating loss carryforwards. Some of these net operating loss carryforwards have an indefinite carryforward period, and those that do not will begin to expire in 2022 if not utilized. The majority of the U.S. federal net operating loss carryforwards are subject to limitation under the Internal Revenue Code of 1986, as amended (“IRC”) Section 382; however, the Company expects to utilize such losses in their entirety prior to expiration. The U.S. federal net operating loss carryforwards increased from 2019 to 2020 primarily due to the acquisition of Vertafore. The Company has approximately $45.7 of tax-effected state net operating loss carryforwards (without regard to federal benefit of state). Some of these net operating loss carryforwards have an indefinite carryforward period, and those that do not will begin to expire in 2021 if not utilized. The state net operating loss carryforwards are primarily related to Florida, but the Company has smaller net operating losses in various other states. The Company has approximately $66.9 of tax-effected foreign net operating loss carryforwards. Some of these net operating loss carryforwards have an indefinite carryforward period, and those that do not will begin to expire in 2021 if not utilized. The foreign net operating loss carryforwards increased from 2019 to 2020 primarily due to current year losses. The Company has $27.9 of U.S. federal and state research and development tax credit carryforwards (without regard to federal benefit of state). Some of these research and development credit carryforwards have an indefinite carryforward period, and those that do not will begin to expire in 2021 if not utilized. The research and development tax credit carryforwards increased from 2019 to 2020 primarily due to the acquisition of Vertafore. Additionally, as of December 31, 2020, the Company has $63.0 of IRC Section 163(j) interest expense limitation carryforwards which have an indefinite carryforward period. The interest expense limitation carryforward increased from 2019 to 2020 primarily due to the acquisition of Vertafore.
As of December 31, 2020, the Company determined that a total valuation allowance of $38.0 was necessary to reduce U.S. federal and state deferred tax assets by $17.3 and foreign deferred tax assets by $20.7, where it was more likely than not that all of such deferred tax assets will not be realized. As of December 31, 2020, the Company believes it is more likely than not that the remaining net deferred tax assets will be realized based on the Company’s estimates of future taxable income and any applicable tax-planning strategies within various tax jurisdictions.
The Company recognizes in the Consolidated Financial Statements only those tax positions determined to be “more likely than not” of being sustained upon examination based on the technical merits of the positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Beginning balance
|
$
|
69.8
|
|
|
$
|
63.6
|
|
|
$
|
52.2
|
|
|
Additions for tax positions of prior periods
|
6.0
|
|
|
2.9
|
|
|
2.4
|
|
|
Additions for tax positions of the current period
|
3.5
|
|
|
4.2
|
|
|
6.9
|
|
|
Additions due to acquisitions
|
6.2
|
|
|
1.9
|
|
|
4.4
|
|
|
Reductions for tax positions of prior periods
|
(3.6)
|
|
|
(0.3)
|
|
|
(0.4)
|
|
|
Reductions attributable to lapses of applicable statute of limitations
|
(6.3)
|
|
|
(2.5)
|
|
|
(1.9)
|
|
|
Ending balance
|
$
|
75.6
|
|
|
$
|
69.8
|
|
|
$
|
63.6
|
|
The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $74.1. Interest and penalties related to unrecognized tax benefits were $0.9 in 2020 and are classified as a component of income tax expense. Accrued interest and penalties were $9.6 at December 31, 2020 and $8.7 at December 31, 2019. During the next twelve months, it is reasonably possible that the unrecognized tax benefits may decrease by a net $5.0, mainly due to anticipated statute of limitations lapses in various jurisdictions.
The Company and its subsidiaries are subject to examinations for U.S. federal income tax as well as income tax in various state, city and foreign jurisdictions. The Company’s federal income tax returns for 2017 through the current period remain open to examination and the relevant state, city and foreign statutes vary. The Company does not expect the assessment of any significant additional tax in excess of amounts reserved.
The Company intends to distribute all historical unremitted foreign earnings up to the amount of excess foreign cash, as well as all future foreign earnings that can be repatriated without incremental U.S. federal tax cost. Any remaining outside basis differences relating to the Company’s investment in foreign subsidiaries are not expected to be material and will be indefinitely reinvested.
(8) Long-Term Debt
On September 2, 2020, the Company entered into a new three-year unsecured credit facility (the “Credit Agreement”) among Roper, the financial institutions from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Wells
Fargo Bank, N.A. and Bank of America, N.A., as syndication agents, and MUFG Bank, Ltd., Mizuho Bank, Ltd., PNC Bank, National Association, Truist Bank and TD Bank, N.A., as co-documentation agents, which replaced its existing $2,500.0 unsecured credit facility, dated as of September 23, 2016, as amended. The new facility comprises a three-year $3,000.0 revolving credit facility, which includes availability of up to $150.0 for letters of credit. Loans under the facility will be available in dollars, and letters of credit will be available in dollars and other agreed-upon currencies. The Company may also, subject to compliance with specified conditions, request additional term loans or revolving credit commitments in an aggregate amount not to exceed $500.0.
The Company will have the right to add foreign subsidiaries as borrowers under the Credit Agreement, subject to the satisfaction of specified conditions. The Company will guarantee the payment and performance by the foreign subsidiary borrowers of their obligations under the Credit Agreement. The Company’s obligations under the Credit Agreement are not guaranteed by any of its subsidiaries. However, the Company has the right, subject to the satisfaction of certain conditions set forth in the Credit Agreement, to cause any of its wholly-owned domestic subsidiaries to become guarantors.
Borrowings under the term loan and revolving credit facilities (if any) will bear interest, at the Company’s option, at a rate based on either:
•The highest of (1) the interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A., as its prime rate in effect at its principal office in New York City, (2) the NYFRB Rate (as defined in the Credit Agreement) plus 0.50% and (3) the Eurocurrency Rate (as defined in the Credit Agreement, and which in no case shall be less than zero) for a deposit in Dollars with a maturity of one month plus 1%, in each case plus a per annum spread depending on the Company’s senior unsecured long-term debt rating. Based on the Company’s current rating, the spread would be 0.125%; or
•The Eurocurrency Rate (as defined in the Credit Agreement, and which in no case shall be less than zero) plus a per annum spread depending on the Company’s senior unsecured long-term debt rating. Based on the Company’s current rating, the spread would be 1.125%.
Outstanding letters of credit issued under the Credit Agreement will be charged a quarterly fee depending on the Company’s senior unsecured long-term debt rating. Based on the Company’s current rating, the quarterly fee would be payable at a rate of 1.125% per annum, plus a fronting fee of 0.125% per annum on the undrawn and unexpired amount of all letters of credit.
Additionally, the Company will pay a quarterly facility fee on the used and unused portions of the revolving credit facility depending on the Company’s senior unsecured long-term debt rating. Based on the Company’s current rating, the quarterly fee would accrue at a rate of 0.125% per annum.
Amounts outstanding under the Credit Agreement may be accelerated upon the occurrence of customary events of default. The Credit Agreement requires the Company to maintain a Total Debt to Total Capital Ratio (as defined in the Credit Agreement) of 0.65 to 1.00 or less. Borrowings under the Credit Agreement are prepayable at Roper’s option at any time in whole or in part without premium or penalty.
At December 31, 2020, there were $1,620.0 of outstanding borrowings under the 2020 Facility. The Company was in compliance with its debt covenants throughout the years ended December 31, 2020 and 2019.
On June 22, 2020, the Company completed a public offering of $600.0 aggregate principal amount of 2.00% senior unsecured notes due June 30, 2030 (“2030 Notes”). The 2030 Notes bear interest at a fixed rate and are payable semi-annually in arrears on June 30 and December 30 of each year, beginning December 30, 2020. The net proceeds from the sale of the 2030 Notes were used for general corporate purposes, including acquisitions.
On September 1, 2020, the Company completed a public offering of $300.0 aggregate principal amount of 0.45% senior unsecured notes due August 15, 2022 (“2022 Notes”), $700.0 aggregate principal amount of 1.00% senior unsecured notes due September 15, 2025 (“2025 Notes”), $700.0 aggregate principal amount of 1.40% senior unsecured notes due September 15, 2027 (“2027 Notes”) and $1,000.0 aggregate principal amount of 1.75% senior unsecured notes due February 15, 2031 (“2031 Notes” and, together with the 2022 Notes, 2025 Notes, and 2027 Notes, the “Notes”). The 2022 Notes and 2031 Notes bear interest at a fixed rate and are payable semi-annually in arrears on February 15 and August 15 of each year, beginning February 15, 2021 and the 2025 Notes and 2027 Notes bear interest at a fixed rate and are payable semi-annually in arrears on March 15 and September 15 of each year, beginning March 15, 2021. The net proceeds from the sale of the Notes, together with cash on hand and borrowings under the Credit Agreement, were used to fund the purchase price of the acquisition of Vertafore, Inc. and related costs.
On August 26, 2019, the Company completed a public offering of $500.0 aggregate principal amount of 2.35% senior unsecured notes due September 15, 2024 and $700.0 aggregate principal amount of 2.95% senior unsecured notes due September 15, 2029. The notes bear interest at a fixed rate and are payable semi-annually in arrears on March 15 and September 15 of each year, beginning March 15, 2020. The net proceeds were used to fund a portion of the purchase of iPipeline Holdings, Inc.
On August 28, 2018, the Company completed a public offering of $700.0 aggregate principal amount of 3.65% senior unsecured notes due September 15, 2023 and $800.0 aggregate principal amount of 4.20% senior unsecured notes due September 15, 2028 (the “2018 Offering”). The notes bear interest at a fixed rate and are payable semi-annually in arrears on March 15 and September 15 of each year, beginning March 15, 2019.
On December 19, 2016, the Company completed a public offering of $500.0 aggregate principal amount of 2.80% senior unsecured notes due December 15, 2021 and $700.0 aggregate principal amount of 3.80% senior unsecured notes due December 15, 2026. The notes bear interest at a fixed rate and are payable semi-annually in arrears on June 15 and December 15 of each year, beginning June 15, 2017.
On December 7, 2015, the Company completed a public offering of $600.0 aggregate principal amount of 3.00% senior unsecured notes due December 15, 2020 and $300.0 aggregate principal amount of 3.85% senior unsecured notes due December 15, 2025. The notes bear interest at a fixed rate and are payable semi-annually in arrears on June 15 and December 15 of each year, beginning June 15, 2016.
On November 21, 2012, the Company completed a public offering of $500.0 aggregate principal amount of 3.125% senior unsecured notes due November 15, 2022. The notes bear interest at a fixed rate and are payable semi-annually in arrears on May 15 and November 15 of each year, beginning May 15, 2013.
In September 2009, the Company completed a public offering of $500.0 aggregate principal amount of 6.25% senior unsecured notes due September 1, 2019 (the “2019 Notes”). During 2018 a portion of the net proceeds of the 2018 Offering were used to redeem all of the $500.0 of outstanding 2019 Notes. The Company incurred a debt extinguishment charge in connection with the redemption of the 2019 Notes of $15.9, which represents the make-whole premium and unamortized deferred financing costs.
Roper may redeem some or all of these notes at any time or from time to time, at 100% of their principal amount, plus a make-whole premium based on a spread to U.S. Treasury securities.
On November 15, 2020, $600.0 of 3.000% senior unsecured notes were redeemed using revolver borrowings from the Credit Agreement.
The Company’s senior notes are unsecured senior obligations of the Company and rank equally in right of payment with all of Roper’s existing and future unsecured and unsubordinated indebtedness. The notes are effectively subordinated to any of its existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness. The notes are not guaranteed by any of Roper’s subsidiaries and are effectively subordinated to all existing and future indebtedness and other liabilities of Roper’s subsidiaries.
Total debt at December 31 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Unsecured credit facility
|
$
|
1,620.0
|
|
|
$
|
—
|
|
|
$600 3.000% senior notes due 2020
|
—
|
|
|
600.0
|
|
|
$500 2.800% senior notes due 2021
|
500.0
|
|
|
500.0
|
|
|
$500 3.125% senior notes due 2022
|
500.0
|
|
|
500.0
|
|
|
$300 0.450% senior notes due 2022
|
300.0
|
|
|
—
|
|
|
$700 3.650% senior notes due 2023
|
700.0
|
|
|
700.0
|
|
|
$500 2.350% senior notes due 2024
|
500.0
|
|
|
500.0
|
|
|
$300 3.850% senior notes due 2025
|
300.0
|
|
|
300.0
|
|
|
$700 1.000% senior notes due 2025
|
700.0
|
|
|
—
|
|
|
$700 3.800% senior notes due 2026
|
700.0
|
|
|
700.0
|
|
|
$700 1.400% senior notes due 2027
|
700.0
|
|
|
—
|
|
|
$800 4.200% senior notes due 2028
|
800.0
|
|
|
800.0
|
|
|
$700 2.950% senior notes due 2029
|
700.0
|
|
|
700.0
|
|
|
$600 2.000% senior notes due 2030
|
600.0
|
|
|
—
|
|
|
$1,000 1.750% senior notes due 2031
|
1,000.0
|
|
|
—
|
|
|
Other
|
6.2
|
|
|
7.7
|
|
|
Less unamortized debt issuance costs
|
(59.7)
|
|
|
(32.4)
|
|
|
Total debt
|
9,566.5
|
|
|
5,275.3
|
|
|
Less current portion
|
502.0
|
|
|
602.2
|
|
|
Long-term debt
|
$
|
9,064.5
|
|
|
$
|
4,673.1
|
|
The interest rate on the borrowings under the unsecured credit facility is calculated based upon various recognized indices plus a margin as defined in the Credit Agreement. At December 31, 2020, Roper’s fixed debt consisted of $8,000.0 of senior notes, $6.2 of other debt in the form of finance leases, several smaller facilities that allow for borrowings or the issuance of letters of credit in foreign locations to support Roper’s non-U.S. businesses and $67.1 of outstanding letters of credit at December 31, 2020.
Future maturities of total debt during each of the next five years ending December 31 and thereafter were as follows:
|
|
|
|
|
|
|
|
2021
|
$
|
502.8
|
|
|
2022
|
801.7
|
|
|
2023
|
2,321.7
|
|
|
2024
|
500.0
|
|
|
2025
|
1,000.0
|
|
|
Thereafter
|
4,500.0
|
|
|
Total
|
$
|
9,626.2
|
|
(9) Fair Value
Roper’s debt at December 31, 2020 included $8,000 of fixed-rate senior notes with the following fair values:
|
|
|
|
|
|
|
|
$500 2.800% senior notes due 2021
|
511
|
|
|
$500 3.125% senior notes due 2022
|
523
|
|
|
$300 0.450% senior notes due 2022
|
301
|
|
|
$700 3.650% senior notes due 2023
|
759
|
|
|
$500 2.350% senior notes due 2024
|
533
|
|
|
$300 3.850% senior notes due 2025
|
340
|
|
|
$700 1.000% senior notes due 2025
|
709
|
|
|
$700 3.800% senior notes due 2026
|
810
|
|
|
$700 1.400% senior notes due 2027
|
710
|
|
|
$800 4.200% senior notes due 2028
|
956
|
|
|
$700 2.950% senior notes due 2029
|
771
|
|
|
$600 2.000% senior notes due 2030
|
616
|
|
|
$1,000 1.750% senior notes due 2031
|
996
|
|
The fair values of the senior notes are based on the trading prices of the notes, which the Company has determined to be Level 2 in the FASB fair value hierarchy.
(10) Retirement and Other Benefit Plans
Roper maintains four defined contribution retirement plans under the provisions of Section 401(k) of the IRC covering substantially all U.S. employees. Roper partially matches employee contributions. Costs related to all such plans were $33.8, $36.9 and $31.2 for 2020, 2019 and 2018, respectively.
Roper also maintains various defined benefit retirement plans covering employees of non-U.S. and certain U.S. subsidiaries and a plan that supplements certain employees for the contribution ceiling applicable to the Section 401(k) plans. The costs and accumulated benefit obligations associated with each of these plans were not material.
(11) Stock-Based Compensation
The Roper Technologies, Inc. 2016 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’s employees, officers and directors. At December 31, 2020, 3.254 shares were available to grant under the 2016 Plan.
Under the Roper Technologies, Inc., Employee Stock Purchase Plan (“ESPP”), previously allowed employees in the U.S. and Canada to designate up to 10% of eligible earnings to purchase Roper’s common stock at a 5% discount to the average closing price of the stock at the beginning and end of a quarterly offering period. Common stock sold to employees pursuant to the stock purchase plan may be either treasury stock, stock purchased on the open market, or newly issued shares.
We amended the Roper stock purchase plan effective July 1, 2020, which allows employees in the U.S. and Canada to designate up to 10% of eligible earnings to purchase Roper’s common stock at a 10% discount on the lower of the closing price of the stock on the first and last day of each quarterly offering period. Common stock sold to employees pursuant to the stock purchase plan may be either treasury stock, stock purchased on the open market, or newly issued shares.
Stock based compensation expense for the years ended December 31, 2020, 2019 and 2018 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Stock based compensation
|
$
|
121.7
|
|
|
$
|
104.5
|
|
|
$
|
133.8
|
|
|
Tax benefit recognized in net earnings
|
25.5
|
|
|
22.0
|
|
|
28.1
|
|
|
|
|
|
|
|
|
During 2019, in connection with the sale of Gatan we recognized $9.6 associated with accelerated vestings, which was recognized within “Gain on disposal of businesses” within the Consolidated Statements of Earnings. In 2018, this expense included $29.4 associated with accelerated vesting due to the passing of our former executive chairman.
Stock Options – Stock options are typically granted at prices not less than 100% of market value of the underlying stock at the date of grant. Stock options typically vest over a weighted average period of 3 years from the grant date and expire 10 years after the grant date. The Company recorded $41.4, $32.0, and $23.2 of compensation expense relating to outstanding options during 2020, 2019 and 2018, respectively, as a component of general and administrative expenses at Corporate.
The Company estimates the fair value of its option awards using the Black-Scholes option valuation model. The stock volatility for each grant is measured using the weighted-average of historical daily price changes of the Company’s common stock over the most recent period equal to the expected life of the grant. The expected term of options granted is derived from historical data to estimate option exercises and employee forfeitures, and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The weighted-average fair value of options granted in 2020, 2019 and 2018 were calculated using the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Weighted-average fair value ($)
|
63.22
|
|
|
68.05
|
|
|
57.75
|
|
|
Risk-free interest rate (%)
|
0.81
|
|
|
2.37
|
|
|
2.65
|
|
|
Average expected option life (years)
|
5.64
|
|
5.42
|
|
5.32
|
|
Expected volatility (%)
|
20.39
|
|
|
19.22
|
|
|
18.05
|
|
|
Expected dividend yield (%)
|
0.62
|
|
|
0.58
|
|
|
0.59
|
|
The following table summarizes the Company’s activities with respect to its share-based compensation plans for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares
|
|
Weighted-average
exercise price
per share
|
|
Weighted-average
contractual term
|
|
Aggregate intrinsic
value
|
|
Outstanding at December 31, 2018
|
3.205
|
|
|
$
|
180.69
|
|
|
|
|
|
|
Granted
|
0.764
|
|
|
320.65
|
|
|
|
|
|
|
Exercised
|
(0.527)
|
|
|
122.94
|
|
|
|
|
|
|
Canceled
|
(0.093)
|
|
|
273.64
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
3.349
|
|
|
219.40
|
|
|
6.66
|
|
$
|
452.8
|
|
|
Granted
|
0.762
|
|
|
333.45
|
|
|
|
|
|
|
Exercised
|
(0.670)
|
|
|
157.85
|
|
|
|
|
|
|
Canceled
|
(0.075)
|
|
|
304.56
|
|
|
|
|
|
|
Outstanding at December 31, 2020
|
3.366
|
|
|
255.32
|
|
|
6.79
|
|
$
|
591.7
|
|
|
Exercisable at December 31, 2020
|
1.431
|
|
|
$
|
178.23
|
|
|
4.75
|
|
$
|
361.9
|
|
The following table summarizes information for stock options outstanding at December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding options
|
|
Exercisable options
|
|
Exercise price
|
|
Number
|
|
Average
exercise
price
|
|
Average remaining
life (years)
|
|
Number
|
|
Average
exercise
price
|
|
$73.56 - $146.02
|
|
0.397
|
|
|
$
|
123.73
|
|
|
2.3
|
|
0.397
|
|
|
$
|
123.73
|
|
|
$146.03 - $170.66
|
|
0.398
|
|
|
166.28
|
|
|
4.7
|
|
0.398
|
|
|
166.28
|
|
|
$170.67 - $212.18
|
|
0.469
|
|
|
196.34
|
|
|
5.9
|
|
0.415
|
|
|
194.53
|
|
|
$212.19 - $279.31
|
|
0.316
|
|
|
264.83
|
|
|
7.3
|
|
0.121
|
|
|
254.54
|
|
|
$279.32 -$279.44
|
|
0.406
|
|
|
279.39
|
|
|
7.2
|
|
0.075
|
|
|
279.39
|
|
|
$279.45 - $321.52
|
|
0.080
|
|
|
291.04
|
|
|
8.0
|
|
0.025
|
|
|
290.10
|
|
|
$321.53 - $323.36
|
|
0.588
|
|
|
323.09
|
|
|
9.2
|
|
—
|
|
|
—
|
|
|
$323.37 - $327.91
|
|
0.487
|
|
|
326.33
|
|
|
8.2
|
|
—
|
|
|
—
|
|
|
$327.92 - $432.45
|
|
0.225
|
|
|
368.13
|
|
|
8.9
|
|
—
|
|
|
—
|
|
|
$73.56 - $432.45
|
|
3.366
|
|
|
$
|
255.32
|
|
|
6.8
|
|
1.431
|
|
|
$
|
178.23
|
|
At December 31, 2020, there was $61.9 of total unrecognized compensation expense related to nonvested options granted under the Company’s share-based compensation plans. That cost is expected to be recognized over a weighted-average period of 1.7 years. The total intrinsic value of options exercised in 2020, 2019 and 2018 was $155.4, $109.4 and $124.6, respectively. Cash received from option exercises under all plans in 2020 and 2019 was $105.5 and $64.9, respectively.
Restricted Stock Grants - During 2020 and 2019, the Company granted 0.285 and 0.321 shares, respectively, of restricted stock to certain employee and director participants under its share-based compensation plans. Restricted stock grants generally vest over a period of 1 to 4 years. The Company recorded $79.4, $72.5 and $109.7 of compensation expense related to outstanding shares of restricted stock held by employees and directors during 2020, 2019 and 2018, respectively. In 2018, this expense included $29.4 associated with accelerated vesting due to the passing of our former executive chairman. A summary of the Company’s nonvested shares activity for 2020 and 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
shares
|
|
Weighted-average
grant date
fair value
|
|
Nonvested at December 31, 2018
|
0.739
|
|
|
$
|
225.93
|
|
|
Granted
|
0.321
|
|
|
318.75
|
|
|
Vested
|
(0.290)
|
|
|
209.05
|
|
|
Forfeited
|
(0.061)
|
|
|
225.23
|
|
|
Nonvested at December 31, 2019
|
0.709
|
|
|
$
|
275.00
|
|
|
Granted
|
0.285
|
|
|
358.07
|
|
|
Vested
|
(0.308)
|
|
|
254.02
|
|
|
Forfeited
|
(0.085)
|
|
|
309.28
|
|
|
Nonvested at December 31, 2020
|
0.601
|
|
|
$
|
320.36
|
|
At December 31, 2020, there was $89.8 of total unrecognized compensation expense related to nonvested awards granted to both employees and directors under the Company’s share-based compensation plans. That cost is expected to be recognized over a weighted-average period of 1.7 years. Unrecognized compensation expense related to nonvested shares of restricted stock grants is recorded as a reduction to additional paid-in capital in stockholder’s equity at December 31, 2020.
Employee Stock Purchase Plan - During 2020, 2019 and 2018, participants of the ESPP purchased 0.031, 0.021 and 0.020 shares, respectively, of Roper’s common stock for total consideration of $10.5, $6.8, and $5.4, respectively. All of these shares were purchased from Roper’s treasury shares.
(12) Contingencies
Roper, in the ordinary course of business, is party to various pending or threatened legal actions, including product liability, intellectual property, data privacy and employment practices that, in general, are of a nature consistent with those over the past several years. After analyzing the Company’s contingent liabilities on a gross basis and, based upon past experience with resolution of such legal claims and the availability and limits of the primary, excess, and umbrella liability insurance coverages 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’s consolidated financial position, results of operations or cash flows.
Roper’s subsidiary, Vertafore, Inc., has been named in three putative class actions, one in the U.S. District Court for the Southern District of Texas (Allen, et al. v. Vertafore, Inc., Case 4:20-cv-4139), one in the U.S. District Court for the District of Colorado (Masciotra, et al. v. Vertafore, Inc., Case 1:20-cv-03603), 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). All three cases purport 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 accessed 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. The cases each seek recovery under the Driver’s Privacy Protection Act, 18 U.S.C. § 2721. Vertafore is vigorously defending the matters. In addition, the Texas Attorney General is investigating the data event.
Roper or its subsidiaries 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 these cases and Roper believes it has valid defenses to such claims and, if required, intends to defend them vigorously. Given the state of these claims, it is not possible to determine the potential liability, if any.
As of December 31, 2020, Roper had $67.1 of letters of credit issued to guarantee its performance under certain services contracts or to support certain insurance programs and $716.9 of outstanding surety bonds. Certain contracts, primarily those involving public sector customers, require Roper to provide a surety bond as a guarantee of its performance of contractual obligations.
(13) Segment and Geographic Area Information
Our operations are reported in four segments based upon business models and capital deployment strategy and objectives. The segments are: Application Software, Network Software & Systems, Measurement & Analytical Solutions and Process Technologies. The four reportable segments (and businesses within each; including changes due to acquisitions and divestitures) are as follows:
–Application Software - Aderant, CBORD, CliniSys, Data Innovations, Deltek, Horizon, IntelliTrans, PowerPlan, Strata, Sunquest, Vertafore
–Network Software & Systems - ConstructConnect, DAT, Foundry, Inovonics, iPipeline, iTradeNetwork, Link Logistics, MHA, RF IDeas, SHP, SoftWriters, TransCore
–Measurement & Analytical Solutions (1) - Alpha, CIVCO Medical Solutions, CIVCO Radiotherapy, Dynisco, FMI, Hansen, Hardy, IPA, Logitech, Neptune, Northern Digital, Struers, Technolog, Uson, Verathon
–Process Technologies - AMOT, CCC, Cornell, FTI, Metrix, PAC, Roper Pump, Viatran, Zetec
(1) The Measurement & Analytical Solutions segment includes the results of the divestitures completed in 2019 through the transaction date for (i) the Imaging businesses, sold to Teledyne on February 5, 2019 and (ii) Gatan sold to AMETEK on October 29, 2019.
There were no material transactions between Roper’s reportable segments during 2020, 2019 and 2018. Sales between geographic areas are primarily of finished products and are accounted for at prices intended to represent third-party prices. Operating profit by reportable segment and by geographic area is defined as net revenues less operating costs and expenses. These costs and expenses do not include unallocated corporate administrative expenses. Items below income from operations on Roper’s Consolidated Statements of Earnings are not allocated to reportable segments.
Operating assets are those assets used primarily in the operations of each reportable segment or geographic area. Corporate assets are principally comprised of cash and cash equivalents, deferred tax assets, recoverable insurance claims, deferred compensation assets and property and equipment.
Selected financial information by reportable segment for 2020, 2019 and 2018 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Application Software
|
|
Network Software & Systems
|
|
Measurement &Analytical Solutions
|
|
Process Technologies
|
|
Corporate
|
|
Total
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
1,799.9
|
|
|
$
|
1,738.6
|
|
|
$
|
1,469.9
|
|
|
$
|
518.7
|
|
|
$
|
—
|
|
|
$
|
5,527.1
|
|
|
Operating profit
|
468.7
|
|
|
549.8
|
|
|
473.5
|
|
|
131.6
|
|
|
(192.5)
|
|
|
1,431.1
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating assets
|
526.6
|
|
|
520.2
|
|
|
340.4
|
|
|
171.5
|
|
|
3.9
|
|
|
1,562.6
|
|
|
Intangible assets, net
|
13,844.6
|
|
|
5,987.0
|
|
|
1,414.4
|
|
|
356.1
|
|
|
—
|
|
|
21,602.1
|
|
|
Other
|
173.1
|
|
|
65.1
|
|
|
108.2
|
|
|
71.6
|
|
|
442.1
|
|
|
860.1
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
24,024.8
|
|
|
Capital expenditures
|
12.9
|
|
|
8.9
|
|
|
8.0
|
|
|
1.2
|
|
|
0.2
|
|
|
31.2
|
|
|
Capitalized software expenditures
|
16.3
|
|
|
1.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17.7
|
|
|
Depreciation and other amortization
|
296.9
|
|
|
178.5
|
|
|
34.7
|
|
|
10.4
|
|
|
0.3
|
|
|
520.8
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
1,588.0
|
|
|
$
|
1,529.5
|
|
|
$
|
1,596.4
|
|
|
$
|
652.9
|
|
|
$
|
—
|
|
|
$
|
5,366.8
|
|
|
Operating profit
|
405.4
|
|
|
538.5
|
|
|
501.1
|
|
|
225.8
|
|
|
(172.4)
|
|
|
1,498.4
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating assets
|
382.2
|
|
|
472.0
|
|
|
347.0
|
|
|
205.7
|
|
|
4.4
|
|
|
1,411.3
|
|
|
Intangible assets, net
|
7,833.6
|
|
|
5,871.8
|
|
|
1,420.0
|
|
|
357.7
|
|
|
—
|
|
|
15,483.1
|
|
|
Other
|
168.5
|
|
|
62.5
|
|
|
120.4
|
|
|
69.0
|
|
|
794.1
|
|
|
1,214.5
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
18,108.9
|
|
|
Capital expenditures
|
17.4
|
|
|
15.1
|
|
|
17.3
|
|
|
2.7
|
|
|
0.2
|
|
|
52.7
|
|
|
Capitalized software expenditures
|
9.7
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10.2
|
|
|
Depreciation and other amortization
|
230.2
|
|
|
132.9
|
|
|
40.3
|
|
|
12.0
|
|
|
0.6
|
|
|
416.0
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
1,452.7
|
|
|
$
|
1,345.2
|
|
|
$
|
1,705.6
|
|
|
$
|
687.7
|
|
|
$
|
—
|
|
|
$
|
5,191.2
|
|
|
Operating profit
|
358.0
|
|
|
484.4
|
|
|
523.9
|
|
|
233.6
|
|
|
(203.5)
|
|
|
1,396.4
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating assets
|
392.6
|
|
|
338.3
|
|
|
336.2
|
|
|
196.4
|
|
|
6.1
|
|
|
1,269.6
|
|
|
Intangible assets, net
|
7,799.9
|
|
|
3,582.0
|
|
|
1,444.5
|
|
|
362.5
|
|
|
—
|
|
|
13,188.9
|
|
|
Other 1
|
163.6
|
|
|
38.4
|
|
|
391.2
|
|
|
94.5
|
|
|
103.3
|
|
|
791.0
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
15,249.5
|
|
|
Capital expenditures
|
19.0
|
|
|
8.3
|
|
|
15.4
|
|
|
6.3
|
|
|
0.1
|
|
|
49.1
|
|
|
Capitalized software expenditures
|
9.1
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.5
|
|
|
Depreciation and other amortization
|
212.8
|
|
|
98.1
|
|
|
42.6
|
|
|
12.7
|
|
|
0.8
|
|
|
367.0
|
|
1 Includes Operating assets of $91.8 and Intangible assets, net of $159.4 associated with the Gatan business and Imaging businesses classified as held for sale on December 31, 2018.
Summarized data for Roper’s U.S. and foreign operations (principally in Canada, Europe and Asia) for 2020, 2019 and 2018, based upon the country of origin of the Roper entity making the sale, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
Non-U.S.
|
|
Eliminations
|
|
Total
|
|
2020
|
|
|
|
|
|
|
|
|
Sales to unaffiliated customers
|
$
|
4,496.8
|
|
|
$
|
1,030.3
|
|
|
$
|
—
|
|
|
$
|
5,527.1
|
|
|
Sales between geographic areas
|
125.0
|
|
|
162.8
|
|
|
(287.8)
|
|
|
—
|
|
|
Net revenues
|
$
|
4,621.8
|
|
|
$
|
1,193.1
|
|
|
$
|
(287.8)
|
|
|
$
|
5,527.1
|
|
|
Long-lived assets
|
$
|
191.0
|
|
|
$
|
33.0
|
|
|
$
|
—
|
|
|
$
|
224.0
|
|
|
2019
|
|
|
|
|
|
|
|
|
Sales to unaffiliated customers
|
$
|
4,342.6
|
|
|
$
|
1,024.2
|
|
|
$
|
—
|
|
|
$
|
5,366.8
|
|
|
Sales between geographic areas
|
124.9
|
|
|
139.3
|
|
|
(264.2)
|
|
|
—
|
|
|
Net revenues
|
$
|
4,467.5
|
|
|
$
|
1,163.5
|
|
|
$
|
(264.2)
|
|
|
$
|
5,366.8
|
|
|
Long-lived assets
|
$
|
164.6
|
|
|
$
|
33.2
|
|
|
$
|
—
|
|
|
$
|
197.8
|
|
|
2018
|
|
|
|
|
|
|
|
|
Sales to unaffiliated customers
|
$
|
4,176.2
|
|
|
$
|
1,015.0
|
|
|
$
|
—
|
|
|
$
|
5,191.2
|
|
|
Sales between geographic areas
|
143.9
|
|
|
137.0
|
|
|
(280.9)
|
|
|
—
|
|
|
Net revenues
|
$
|
4,320.1
|
|
|
$
|
1,152.0
|
|
|
$
|
(280.9)
|
|
|
$
|
5,191.2
|
|
|
Long-lived assets 1
|
$
|
145.2
|
|
|
$
|
30.0
|
|
|
$
|
—
|
|
|
$
|
175.2
|
|
1 Excludes Long-lived assets of $7.6 associated with the Gatan business and Imaging businesses classified as held for sale on December 31, 2018.
Export sales from the U.S. during the years ended December 31, 2020, 2019 and 2018 were $401.8, $531.8 and $578.0, respectively. In the year ended December 31, 2020, these exports were shipped primarily to Asia (26%), Canada (25%), Europe (18%), Middle East (18%) and other (13%).
Sales to customers outside the U.S. accounted for a significant portion of Roper’s revenues. Sales are attributed to geographic areas based upon the location where the product is ultimately shipped. Roper’s net revenues for the years ended December 31, 2020, 2019 and 2018 are shown below by region, except for Canada, which is presented separately:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Application Software
|
|
Network Software & Systems
|
|
Measurement &Analytical Solutions
|
|
Process Technologies
|
|
Total
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
Canada
|
$
|
43.4
|
|
|
$
|
76.2
|
|
|
$
|
71.9
|
|
|
$
|
24.8
|
|
|
$
|
216.3
|
|
|
Europe
|
205.5
|
|
|
61.3
|
|
|
257.0
|
|
|
101.8
|
|
|
625.6
|
|
|
Asia
|
3.3
|
|
|
19.6
|
|
|
124.1
|
|
|
90.8
|
|
|
237.8
|
|
|
Middle East
|
6.6
|
|
|
39.8
|
|
|
18.5
|
|
|
35.8
|
|
|
100.7
|
|
|
Rest of the world
|
31.1
|
|
|
11.6
|
|
|
43.1
|
|
|
38.4
|
|
|
124.2
|
|
|
Total
|
$
|
289.9
|
|
|
$
|
208.5
|
|
|
$
|
514.6
|
|
|
$
|
291.6
|
|
|
$
|
1,304.6
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Canada
|
$
|
41.0
|
|
|
$
|
71.1
|
|
|
$
|
81.4
|
|
|
$
|
28.9
|
|
|
$
|
222.4
|
|
|
Europe
|
188.8
|
|
|
36.7
|
|
|
307.2
|
|
|
113.8
|
|
|
646.5
|
|
|
Asia
|
3.5
|
|
|
18.8
|
|
|
185.0
|
|
|
108.0
|
|
|
315.3
|
|
|
Middle East
|
8.6
|
|
|
37.5
|
|
|
13.1
|
|
|
44.4
|
|
|
103.6
|
|
|
Rest of the world
|
25.8
|
|
|
9.5
|
|
|
45.3
|
|
|
55.2
|
|
|
135.8
|
|
|
Total
|
$
|
267.7
|
|
|
$
|
173.6
|
|
|
$
|
632.0
|
|
|
$
|
350.3
|
|
|
$
|
1,423.6
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Canada
|
$
|
38.5
|
|
|
$
|
58.5
|
|
|
$
|
79.3
|
|
|
$
|
35.0
|
|
|
$
|
211.3
|
|
|
Europe
|
188.6
|
|
|
12.2
|
|
|
361.7
|
|
|
117.5
|
|
|
680.0
|
|
|
Asia
|
3.2
|
|
|
11.0
|
|
|
220.3
|
|
|
115.4
|
|
|
349.9
|
|
|
Middle East
|
4.7
|
|
|
48.6
|
|
|
14.4
|
|
|
34.4
|
|
|
102.1
|
|
|
Rest of the world
|
29.5
|
|
|
7.8
|
|
|
42.5
|
|
|
55.0
|
|
|
134.8
|
|
|
Total
|
$
|
264.5
|
|
|
$
|
138.1
|
|
|
$
|
718.2
|
|
|
$
|
357.3
|
|
|
$
|
1,478.1
|
|
(14) Concentration of Risk
Financial instruments which potentially subject the Company to credit risk consist primarily of cash and cash equivalents, trade receivables and unbilled receivables.
The Company maintains cash and cash equivalents with various major financial institutions around the world. The Company limits the amount of credit exposure with any one financial institution and believes that no significant concentration of credit risk exists with respect to cash and cash equivalent balances.
Trade and unbilled receivables subject the Company to the potential for credit risk with customers. To reduce credit risk, the Company performs ongoing evaluations of its customers’ financial condition.
(15) Contract Balances
Contract balances at December 31 are set forth in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Account
|
2020
|
|
2019
|
|
Change
|
|
Unbilled receivables
|
$
|
241.7
|
|
|
$
|
183.5
|
|
|
$
|
58.2
|
|
|
Contract liabilities - current (1)
|
(1,012.0)
|
|
|
(840.8)
|
|
|
(171.2)
|
|
|
Deferred revenue - non-current
|
(43.1)
|
|
|
(33.2)
|
|
|
(9.9)
|
|
|
Net contract assets/(liabilities)
|
$
|
(813.4)
|
|
|
$
|
(690.5)
|
|
|
$
|
(122.9)
|
|
(1) Consists of “Deferred revenue,” and billings in-excess of revenues (“BIE”). BIE are reported in “Other accrued liabilities” in our Consolidated Balance Sheets.
The change in our net contract assets/(liabilities) from December 31, 2019 to December 31, 2020 was due primarily to the increase in our contract liabilities associated with the timing of payments and invoicing relating to SaaS and PCS renewals and the net contract liabilities associated with the acquisitions completed during the year ended December 31, 2020, of $78.2, partially offset by the increase in unbilled receivables associated with timing of invoicing in our project-based businesses, most notably our Transcore business.
Revenue recognized during the year ended December 31, 2020 and 2019 that was included in the contract liability balance on December 31, 2019 and 2018 was $804.4 and $674.2, respectively. In order to determine revenues recognized in the period from contract liabilities, we allocate revenue to the individual deferred revenue or BIE balance outstanding at the beginning of the year until the revenue exceeds that balance.
Impairment losses recognized on our accounts receivable and unbilled receivables were immaterial in the year ended December 31, 2020.
(16) Leases
The Company’s operating leases are primarily for real property in support of our business operations. Although many of our leases contain renewal options, we generally are not reasonably certain to exercise these options at the commencement date. Accordingly, renewal options are generally not included in the lease term for determining the ROU asset and lease liability at commencement. Variable lease payments generally depend on an inflation-based index and such payments are not included in the original estimate of the lease liability. These variable lease payments are not material.
For the years ended December 31, 2020, 2019 and 2018, the Company recognized $68.5, $65.9 and $66.9 in operating lease expense, respectively.
The following table presents the supplemental cash flow information related to the Company’s operating leases for the year ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Operating cash flows used for operating leases
|
$
|
70.1
|
|
|
$
|
66.7
|
|
|
Right-of-use assets obtained in exchange for operating lease obligations
|
66.1
|
|
|
60.4
|
|
The following table presents the lease balances within the Consolidated Balance Sheet related to the Company’s operating leases as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Assets and Liabilities
|
|
Balance Sheet Account
|
|
2020
|
|
2019
|
|
ASSETS:
|
|
|
|
|
|
|
|
Operating lease ROU assets
|
|
Other assets
|
|
$
|
265.0
|
|
|
$
|
266.9
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
Current operating lease liabilities
|
|
Other accrued liabilities
|
|
$
|
65.1
|
|
|
$
|
56.8
|
|
|
Operating lease liabilities
|
|
Other liabilities
|
|
219.2
|
|
|
220.0
|
|
|
Total operating lease liabilities
|
|
|
|
$
|
284.3
|
|
|
$
|
276.8
|
|
Future minimum lease payments under non-cancellable leases were as follows:
|
|
|
|
|
|
|
|
2021
|
$
|
71.7
|
|
|
2022
|
56.0
|
|
|
2023
|
46.8
|
|
|
2024
|
37.0
|
|
|
2025
|
29.9
|
|
|
Thereafter
|
68.2
|
|
|
Total operating lease payments
|
309.6
|
|
|
Less: Imputed interest
|
25.3
|
|
|
Total operating lease liabilities
|
$
|
284.3
|
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term - operating leases (years)
|
6
|
|
Weighted average discount rate (%)
|
2.9
|
|
(17) Quarterly Financial Data (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
1,350.7
|
|
|
$
|
1,305.0
|
|
|
$
|
1,366.1
|
|
|
$
|
1,505.3
|
|
|
Gross profit
|
856.8
|
|
|
843.7
|
|
|
875.9
|
|
|
966.6
|
|
|
Income from operations
|
349.2
|
|
|
333.6
|
|
|
367.6
|
|
|
380.7
|
|
|
Net earnings
|
240.3
|
|
|
219.2
|
|
|
234.4
|
|
|
255.8
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
2.30
|
|
|
$
|
2.10
|
|
|
$
|
2.24
|
|
|
$
|
2.44
|
|
|
Diluted
|
$
|
2.28
|
|
|
$
|
2.08
|
|
|
$
|
2.21
|
|
|
$
|
2.41
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
1,287.2
|
|
|
$
|
1,330.3
|
|
|
$
|
1,354.5
|
|
|
$
|
1,394.8
|
|
|
Gross profit
|
810.6
|
|
|
850.0
|
|
|
873.6
|
|
|
892.9
|
|
|
Income from operations
|
346.4
|
|
|
368.4
|
|
|
385.2
|
|
|
398.4
|
|
|
Net earnings
|
369.6
|
|
|
249.7
|
|
|
277.5
|
|
|
871.1
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
3.57
|
|
|
$
|
2.40
|
|
|
$
|
2.67
|
|
|
$
|
8.37
|
|
|
Diluted
|
$
|
3.53
|
|
|
$
|
2.38
|
|
|
$
|
2.64
|
|
|
$
|
8.28
|
|
The sum of the four quarters may not agree with the total for the year due to rounding.