Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All currency amounts are in millions unless specified

A detailed discussion of the fiscal 2020 year-over-year changes can be found below and a detailed discussion of fiscal 2019 year-over-year changes can be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Overview

We are a diversified technology company. We operate businesses that design and develop software (both license and SaaS) and engineered products and solutions for a variety of niche end markets.

We pursue consistent and sustainable growth in earnings and cash flow by emphasizing continuous improvement in the operating performance of our existing businesses and by acquiring other carefully selected businesses. Our acquisitions have represented both new strategic platforms and additions to existing businesses.

Application of Critical Accounting Policies

Our Consolidated Financial Statements are prepared in conformity with generally accepted accounting principles in the United States (“GAAP”). A discussion of our significant accounting policies can also be found in the notes to our Consolidated Financial Statements for the year ended December 31, 2020 included in this Annual Report.

GAAP offers acceptable alternative methods for accounting for certain issues affecting our financial results, such as determining inventory cost, depreciating long-lived assets and recognizing revenue. We have not changed the application of acceptable accounting methods or the significant estimates affecting the application of these principles in the last three years in a manner that had a material effect on our Consolidated Financial Statements.

The preparation of financial statements in accordance with GAAP requires the use of estimates, assumptions, judgments and interpretations that can affect the reported amounts of assets, liabilities, revenues and expenses, the disclosure of contingent assets and liabilities and other supplemental disclosures.

The development of accounting estimates is the responsibility of our management. Our management discusses those areas that require significant judgments with the Audit Committee of our Board of Directors. The Audit Committee has reviewed all financial disclosures in our annual filings with the SEC. Although we believe the positions we have taken with regard to uncertainties are reasonable, others might reach different conclusions and our positions can change over time as more information becomes available. If an accounting estimate changes, its effects are accounted for prospectively or through a cumulative catch up adjustment.

Our most significant accounting uncertainties are encountered in the areas of accounts receivable collectibility, inventory valuation, future warranty obligations, revenue recognition, income taxes, valuation of other intangible assets and goodwill and indefinite-lived impairment analyses. Estimates are considered to be significant if they meet both of the following criteria: (1) the estimate requires assumptions about matters that are uncertain at the time the estimate is made, and (2) changes in the estimate are reasonably likely from period-to-period.

Accounts receivable collectibility is based on the economic circumstances of customers and credits given after the customer obtains control over the promised products or services, including in certain cases credits for returned products. Allowance for doubtful accounts is estimated 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. The returns and other sales credit allowance is an estimate of customer returns, exchanges, discounts or other forms of anticipated concessions based on an analysis of historical credit memos and is treated as a reduction in revenue. At December 31, 2020, our allowance for doubtful accounts receivable was $25.3 and our allowance for sales returns and sales credits was $3.8, for a total of $29.1, or 3.3% of total gross accounts receivable, as compared to a total of $20.3, or 2.5% of total gross accounts receivable, at December 31, 2019. This percentage is influenced by the risk profile of the underlying receivables, and the timing of write-offs of accounts deemed uncollectible.

We regularly compare inventory quantities on hand against anticipated future usage, which we determine as a function of historical usage or forecasts related to specific items in order to evaluate obsolescence and excessive quantities. When we use

historical usage, this information is also qualitatively compared to business trends to evaluate the reasonableness of using historical information as an estimate of future usage. At December 31, 2020, inventory reserves for excess and obsolete inventory were $40.4, or 16.9% of gross inventory cost, as compared to $33.4, or 14.4% of gross inventory cost, at December 31, 2019. The inventory reserve as a percent of gross inventory cost is influenced by specific identification of reserves needed based upon changes in our business as well as the physical disposal of obsolete inventory.

Most of our product-based revenues are covered by warranty provisions that generally provide for the repair or replacement of qualifying defective items for a specified period after the time of sale, typically 12 to 24 months. Future warranty obligations are evaluated using, among other factors, historical cost experience, product evolution and customer feedback. Our expense for warranty obligations was less than 1% of net revenues for each of the years ended December 31, 2020, 2019 and 2018.

Revenues from our project-based businesses, including toll and traffic systems, control systems and installations of large software application projects, 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. 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. There was $363.9 and $401.6 of revenue related to unfinished percentage-of-completion contracts had yet to be recognized at December 31, 2020, and 2019, respectively. The decrease was due primarily to revenue recognized at our TransCore business related to the contract for the New York Central Business District Tolling Program during 2020.

Income taxes can be affected by estimates of whether and within which jurisdictions future earnings will occur and if, how and when cash is repatriated to the U.S., combined with other aspects of an overall income tax strategy. Additionally, taxing jurisdictions could retroactively disagree with our tax treatment of certain items, and some historical transactions have income tax effects going forward. Accounting rules require these future effects to be evaluated using current laws, rules and regulations, each of which can change at any time and in an unpredictable manner. During 2020, our effective income tax rate was 21.5%, as compared to the 2019 rate of 20.6%. The increase was due primarily to the following non-recurring items in 2019, (i) recognition of a discrete tax benefit of $41.0 in connection with a foreign restructuring plan allowing the future realization of net operating losses, and (ii) the reversal of the deferred tax liability associated with the excess of Gatan's book basis over tax basis in the shares of $10.0 in the third quarter of 2019, partially offset by the higher income tax rate incurred on the Imaging and Gatan gains during 2019. We expect the effective tax rate for 2021 to be approximately 21% to 22%.

We account for goodwill in a purchase business combination as the excess purchase price over the fair value of the net identifiable assets acquired. Goodwill, which is not amortized, is tested for impairment on an annual basis in conjunction with our annual forecast process during the fourth quarter (or an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value).

When testing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If we elect to perform a qualitative assessment and determine that an impairment is more likely than not, we are then required to perform the quantitative impairment test; otherwise, no further analysis is required. Under the qualitative assessment, we consider various qualitative factors, including macroeconomic conditions, relevant industry and market trends, cost factors, overall financial performance, other entity-specific events and events affecting the reporting unit that could indicate a potential change in the fair value of our reporting unit or the composition of its carrying values. We also consider the specific future outlook for the reporting unit.

We also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. The quantitative assessment utilizes both an income approach (discounted cash flows) and a market approach (consisting of a comparable company earnings multiples methodology) to estimate the fair value of a reporting unit. To determine the reasonableness of the estimated fair values, we review the assumptions to ensure that neither the income approach nor the market approach provides significantly different valuations. If the estimated fair value exceeds the carrying value, no further work is required and no impairment loss is recognized. If the carrying value exceeds the estimated fair value, a non-cash impairment loss is recognized in the amount of that excess.

Key assumptions used in the income and market approaches are updated when the analysis is performed for each reporting unit. 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 we use reasonable and timely information to prepare our cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly and could result in future non-cash impairment charges related to recorded goodwill balances.

Recently acquired reporting units generally represent a higher inherent risk of impairment, which typically decreases as the businesses are integrated into our enterprise. Negative industry or economic trends, disruptions to our business, actual results significantly below projections, unexpected significant changes or planned changes in the use of the assets, divestitures and market capitalization declines may have a negative effect on the fair value of our reporting units.

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 assessment for these reporting units. For the remaining reporting unit, the Company performed its quantitative assessment 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.

Trade names that are determined to have an indefinite useful economic life are not amortized, but separately tested for impairment during the fourth quarter of the fiscal year or on an interim basis if an event occurs that indicates the fair value is more likely than not below the carrying value. We first qualitatively assess whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of the indefinite-lived trade name is less than its carrying amount. If necessary, we conduct a quantitative assessment using the relief-from-royalty method, which we believe to be an acceptable methodology due to its common use by valuation specialists in determining the fair value of intangible assets. This methodology assumes that, in lieu of ownership, a third-party would be willing to pay a royalty in order to exploit the related benefits of these assets. The assumptions that have the most significant effect on the fair value 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 our enterprise and positioned for future sales growth.

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. Of those trade names subjected to our quantitative analysis, one, associated with our lab software business, had a fair value approximately 20% in excess of its carrying value, as compared to 2019 when the fair value approximated its carrying value. The primary driver of the increase in the fair value from 2019 to 2020 was a decrease in the discount rate, primarily due to a reduced risk-free interest rate. A 100 basis point increase in the discount rate would result in a $2.8 impairment and a 100 basis point decrease in the terminal growth rate would result in a fair value that approximates its carrying value.

The assessment of fair value for impairment purposes requires significant judgments to be made by management. Although our forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management uses to operate the underlying businesses, there is significant judgment in determining the expected results attributable to the businesses and/or reporting units. Changes in estimates or the application of alternative assumptions could produce significantly different results. No impairment resulted from the annual reviews 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.

We evaluate whether there has been an impairment of identifiable intangible assets with definite useful economic lives, or of the remaining life of such assets, when certain indicators of impairment are present. In the event that facts and circumstances indicate that the cost or remaining period of amortization of any asset may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future gross, undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down to fair value or a revision in the remaining amortization period is required.

Results of Operations

All currency amounts are in millions unless specified, percentages are net of revenues

Percentages may not sum due to rounding.

The following table sets forth selected information for the years indicated.

			Years ended December 31,
			2020						2019
Net revenues:
Application Software (1)			$	1,799.9					$	1,588.0
Network Software & Systems (2)			1,738.6						1,529.5
Measurement & Analytical Solutions (3)			1,469.9						1,596.4
Process Technologies			518.7						652.9
Total			$	5,527.1					$	5,366.8
Gross margin:
Application Software			68.3		%				67.0		%
Network Software & Systems			67.1						69.2
Measurement & Analytical Solutions			59.2						58.5
Process Technologies			53.5						56.9
Total			64.1		%				63.9		%
Segment operating margin:
Application Software			26.0		%				25.5		%
Network Software & Systems			31.6						35.2
Measurement & Analytical Solutions			32.2						31.4
Process Technologies			25.4						34.6
Total			29.4		%				31.1		%
Corporate administrative expenses			(3.5)		%				(3.2)		%
Income from operations			25.9						27.9
Interest expense, net			(4.0)						(3.5)
Other income/(expense)			(0.1)						(0.1)
Gain on disposal of businesses			—						17.2
Earnings before income taxes			21.9						41.5
Income taxes			(4.7)						(8.6)
Net earnings			17.2		%				32.9		%

(1)Includes results from the acquisitions of ComputerEase from August 19, 2019, Bellefield from December 18, 2019, Vertafore from September 3, 2020, and EPSi from October 15, 2020.

(2)Includes results from the acquisitions of Foundry from April 18, 2019, iPipeline from August 22, 2019, FMIC from June 9, 2020, Team TSI from June 15, 2020, IFS from September 15, 2020 and WELIS from September 18, 2020.

(3)Includes the results from the Imaging businesses through February 5, 2019 and Gatan through October 29, 2019.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Net revenues for the year ended December 31, 2020 were $5,527.1 as compared to $5,366.8 for the year ended December 31, 2019, an increase of 3.0%. The increase was the result of net acquisition/divestiture contribution of 3.9% and a foreign exchange benefit of 0.1%, partially offset by an organic decline of 1.0%.

In our Application Software segment, net revenues for the year ended December 31, 2020 increased by $211.9 or 13% over the year ended December 31, 2019. Organic revenues increased by 1% and acquisitions accounted for 13% of our growth. The growth in organic revenues was primarily due to businesses serving healthcare and government contracting markets. Gross margin increased to 68.3% for the year ended December 31, 2020 as compared to 67.0% for the year ended December 31, 2019 due primarily to operating leverage on higher organic revenues and revenue mix. Selling, general and administrative (“SG&A”) expenses as a percentage of revenues in the year ended December 31, 2020 increased to 42.2%, as compared to 41.5% in the year ended December 31, 2019, due primarily to higher amortization of acquired intangibles from the acquisitions completed in 2020. The resulting operating margin was 26.0% in the year ended December 31, 2020 as compared to 25.5% in the year ended December 31, 2019.

Our Network Software & Systems segment reported a $209.1 or 14% increase in net revenues for the year ended December 31, 2020 over the year ended December 31, 2019. Organic revenues increased by 4% and acquisitions accounted for 10% of our growth. The growth in organic revenues was led by our higher project activity at our toll and traffic business and subscription growth at our SaaS businesses. Gross margin decreased to 67.1% for the year ended December 31, 2020 from 69.2% for the year ended December 31, 2019, due primarily to revenue mix. SG&A expenses as a percentage of net revenues increased to 35.5% in the year ended December 31, 2020, as compared to 34.0% in the year ended December 31, 2019, due primarily to higher amortization of acquired intangibles from the acquisitions completed in 2019. The resulting operating margin was 31.6% in the year ended December 31, 2020 as compared to 35.2% in the year ended December 31, 2019.

Net revenues for our Measurement & Analytical Solutions segment decreased by $126.5 or 8% for the year ended December 31, 2020 as compared to the year ended December 31, 2019. Organic revenues increased 1%, more than offset by a decrease in revenue of 9% attributable to the disposal of Gatan and the Imaging businesses. The growth in organic revenues was due to accelerated adoption of Verathon’s video-assisted intubation products that aid in reducing COVID transmission to healthcare workers, partially offset by declines in our water meter technology business, due to restricted access to indoor meters located in the Northeast United States and Canada, and industrial business declines. Gross margin increased to 59.2% in the year ended December 31, 2020, as compared to 58.5% in the year ended December 31, 2019, due primarily to revenue mix. SG&A expenses as a percentage of net revenues remained relatively flat at 27.0% in the year ended December 31, 2020, as compared to 27.1% in the year ended December 31, 2019. The resulting operating margin was 32.2% in the year ended December 31, 2020 as compared to 31.4% in the year ended December 31, 2019.

In our Process Technologies segment, net revenues for the year ended December 31, 2020 decreased by $134.2 or 21% as compared to the year ended December 31, 2019, all of which was organic. The decrease in organic revenues was due to broad-based revenue declines across the segment led by lower demand at our businesses serving upstream oil and gas end markets resulting from lower energy prices and the COVID-19 pandemic. Gross margin decreased to 53.5% in the year ended December 31, 2020 as compared to 56.9% in the year ended December 31, 2019, due primarily to lower revenues. SG&A expenses as a percentage of net revenues increased to 28.1% in the year ended December 31, 2020, as compared to 22.3% in the year ended December 31, 2019, due primarily to $13.6 of restructuring charges for structural cost reduction actions taken at certain of our businesses and lower operating leverage on organic revenue declines. As a result, operating margin was 25.4% in the year ended December 31, 2020 as compared to 34.6% in the year ended December 31, 2019.

Corporate expenses increased by $20.1 to $192.5, or 3.5% of revenues, in 2020 as compared to $172.4, or 3.2% of revenues, in 2019. The dollar increase was due primarily to higher stock compensation expense and professional services.

Interest expense, net, increased $32.3, or 17.3%, for the year ended December 31, 2020 as compared to the year ended December 31, 2019. The increase was due to (i) higher weighted average debt balances, partially offset by lower weighted average interest rates, and (ii) $7.2 in interest expense for the origination fee on our bridge financing associated with the Vertafore acquisition.

Other expense, net, of $2.9 and $5.1 for the year ended December 31, 2020 and December 31, 2019, respectively, was composed primarily of foreign exchange losses at our non-U.S. based subsidiaries, partially offset by royalty income.

Gain on disposal of businesses, resulted in a pretax gain of $920.7 for the year ended December 31, 2019. The Company recognized $119.6 on the sale of the Imaging businesses, which closed February 5, 2019, and $801.1 on the sale of Gatan, which closed October 29, 2019.

During 2020, our effective income tax rate was 21.5% as compared to our 2019 rate of 20.6%. The increase was due primarily to the following non-recurring items in 2019, (i) recognition of a discrete tax benefit of $41.0 in connection with a foreign restructuring plan allowing the future realization of net operating losses, and (ii) the reversal of the deferred tax liability associated with the excess of Gatan's book basis over tax basis in the shares of $10.0 in the third quarter of 2019, partially offset by the higher income tax rate incurred on the Imaging and Gatan gains during 2019.

Order backlog is equal to our remaining performance obligations expected to be recognized within the next 12 months as discussed in Note 1 of the Notes to Consolidated Financial Statements. Backlog increased 27% to $2,516.1 at December 31, 2020 as compared to $1,985.4 at December 31, 2019, organic growth was 3% and acquisitions contributed 24%.

			2020						2019						change
Application Software			$	1,366.9					$	834.6					63.8		%
Network Software & Systems			802.9						848.5						(5.4)
Measurement & Analytical Solutions			228.8						188.5						21.4
Process Technologies			117.5						113.8						3.3
Total			$	2,516.1					$	1,985.4					26.7		%

Financial Condition, Liquidity and Capital Resources

All currency amounts are in millions unless specified

Selected cash flows for the years ended December 31, 2020, and 2019 are as follows:

			2020						2019
Cash provided by/(used in):
Operating activities			$	1,525.1					$	1,461.8
Investing activities			(6,073.9)						(1,296.0)
Financing activities			4,136.9						177.0

Operating activities - The growth in cash provided by operating activities in 2020 and in 2019 was primarily due to improvement in working capital, lower cash taxes paid excluding the tax associated with gain on disposal of businesses, and $43.7 of employer social security payroll taxes deferred during the year ended December 31, 2020, that are payable in installments in 2021 and 2022 under the U.S. Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, partially offset by higher cash taxes paid of $201.9 on the disposal of Gatan paid in 2020 as compared to $39.4 of cash taxes paid on the disposal of the Imaging businesses in 2019.

Investing activities - Cash used in investing activities during 2020 was primarily for business acquisitions, most notably Vertafore and EPSI. Cash used in investing activities during 2019 was primarily for business acquisitions, most notably iPipeline and Foundry, partially offset by proceeds from the disposal of the Gatan business and the Imaging businesses.

Financing activities - Cash provided by financing activities during 2020 was primarily from the issuance of $3,300.0 of senior notes and $1,620.0 of net borrowings on the revolver, partially offset by $600.0 of repayments for senior notes and to a lesser extent dividend payments. Cash provided by financing activities during 2019 was primarily from the issuance of $1,200.0 of senior notes partially offset by $865.0 of revolving debt repayments and to a lesser extent dividend payments.

Net working capital (current assets, excluding cash, less total current liabilities, excluding debt) was negative $498.4 at December 31, 2020 compared to negative $505.4 at December 31, 2019, due primarily to lower income taxes payable and increased accounts receivable, partially offset by increased deferred revenue and other accrued liabilities. The decrease in income taxes payable is due primarily to the $201.9 income tax cash payment associated with the divestiture of Gatan. The deferred revenue increase is due to a higher percentage of revenue from software and subscription-based services. Consistent negative net working capital demonstrates Roper’s continued evolution and focus on asset-light business models.

Total debt excluding unamortized debt issuance costs was $9,626.2 at December 31, 2020 (47.9% of total capital) compared to $5,307.7 at December 31, 2019 (35.9% of total capital). Our increased total debt at December 31, 2020 compared to December 31, 2019 was due primarily to the issuance of $3,300.0 senior unsecured notes and $1,620.0 of revolving debt borrowings, partially offset by the redemption of $600.0 of outstanding 3.00% senior unsecured notes. The net proceeds were used primarily to fund the purchase price of the acquisition of Vertafore.

On September 2, 2020, the Company entered into a new three-year unsecured credit facility 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 currencies to be agreed. 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 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.

We were in compliance with all debt covenants related to our credit facility throughout the years ended December 31, 2020 and 2019.

At December 31, 2020, we had $8,000.0 of senior unsecured notes and $1,620.0 of outstanding revolver borrowings. In addition, we had $6.2 of other debt in the form of finance leases and several smaller facilities that allow for borrowings or the issuance of letters of credit in foreign locations to support our non-U.S. businesses. We had $67.1 of outstanding letters of credit at December 31, 2020, of which $29.0 was covered by our lending group, thereby reducing our revolving credit capacity commensurately.

We may redeem some or all of our senior unsecured notes at any time or from time to time, at 100% of their principal amount, plus a make-whole premium based on a spread to U.S. Treasury securities.

See Note 8 of the Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding our credit facility and senior notes.

Cash and cash equivalents at our foreign subsidiaries at December 31, 2020 totaled $259.1 as compared to $291.8 at December 31, 2019, a decrease of 11.2%. The decrease was due primarily to the repatriation of $373.4 during the year, partially offset by cash generated from foreign operations. We intend to repatriate substantially all historical and future earnings.

Capital expenditures of $31.2, $52.7 and $49.1 were incurred during 2020, 2019 and 2018, respectively. Capitalized software expenditures of $17.7, $10.2 and $9.5 were incurred during 2020, 2019 and 2018, respectively. Capital expenditures and capitalized software expenditures were relatively consistent in 2020 as compared to 2019 and 2018. In the future, we expect the aggregate of capital expenditures and capitalized software expenditures as a percentage of annual net revenues to be between 1.0% and 1.5%.

Contractual Cash Obligations and Other Commercial Commitments and Contingencies

All currency amounts are in millions

The following tables quantify our contractual cash obligations and commercial commitments at December 31, 2020.

									Payments Due in Fiscal Year
Contractual Cash Obligations 1			Total						2021						2022						2023						2024						2025						Thereafter
Total debt			$	9,626.2					$	502.8					$	801.7					$	2,321.7					$	500.0					$	1,000.0					$	4,500.0
Senior note interest			1,251.0						207.0						193.0						176.0						150.5						138.7						385.8
Operating leases			309.6						71.7						56.0						46.8						37.0						29.9						68.2
Total			$	11,186.8					$	781.5					$	1,050.7					$	2,544.5					$	687.5					$	1,168.6					$	4,954.0

									Amounts Expiring in Fiscal Year
Other Commercial Commitments			Total Amount Committed						2021						2022						2023						2024						2025						Thereafter
Standby letters of credit and bank guarantees			$	67.1					$	23.5					$	42.4					$	0.5					$	0.1					$	0.4					$	0.2

1 We have excluded the liability for uncertain tax positions and certain other tax liabilities as we are not able to reasonably estimate the timing of the payments. See Note 7 of the Notes to Consolidated Financial Statements included in this Annual Report.

As of December 31, 2020, we had $716.9 of outstanding surety bonds. Certain contracts, primarily those involving public sector customers, require us to provide a surety bond as a guarantee of our performance of contractual obligations.

We believe that internally generated cash flows and the remaining availability under our credit facility will be adequate to finance normal operating requirements. Although we maintain an active acquisition program we are committed to reducing debt. Future acquisitions will be dependent on numerous factors and it is not feasible to reasonably estimate if or when any such acquisitions will occur and what the impact will be on our business, financial condition and results of operations. Such acquisitions may be financed by the use of existing credit lines, future cash flows from operations, future divestitures, the proceeds from the issuance of new debt or equity securities or any combination of these methods, the terms and availability of which will be subject to market and economic conditions generally.

We anticipate that our businesses will generate positive cash flows from operating activities, and that these cash flows will permit the reduction of currently outstanding debt in accordance with the repayment schedule. However, the rate at which we can reduce our debt during 2021 (and reduce the associated interest expense) will be affected by, among other things, the financing and operating requirements of any new acquisitions, the financial performance of our existing companies and the impact of the COVID-19 pandemic on our business prospects and the financial markets generally. None of these factors can be predicted with certainty.

Off-Balance Sheet Arrangements

At December 31, 2020 and 2019, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Recently Issued Accounting Standards

See Note 1 of the Notes to Consolidated Financial Statements included in this Annual Report for information regarding the effect of new accounting pronouncements on our Consolidated Financial Statements.