filings.toolsItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Roper Technologies, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Roper Technologies, Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of earnings, of comprehensive income, of stockholders’ equity, and of cash flows for each of the three years in the period ended December 31, 2021 including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As described in Management’s Report on Internal Control over Financial Reporting, management has excluded the seven acquisitions completed in 2021 from its assessment of internal control over financial reporting as of December 31, 2021 because they were acquired by the Company in purchase business combinations during 2021. We have also excluded the seven acquisitions completed in 2021 from our audit of internal control over financial reporting. The acquired entities are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting collectively represent less than 1% and less than 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Indefinite-Lived Trade Name Intangible Asset Quantitative Impairment Assessment - Sunquest
As described in Notes 1 and 6 to the consolidated financial statements, the Company’s consolidated indefinite-lived intangible assets balance was $648.6 million as of December 31, 2021, which was comprised entirely of trade names. 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. Management 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, management conducts a quantitative review using the relief-from-royalty method. 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. During the fourth quarter of 2021, management determined the use of the Sunquest trade name would be discontinued and performed a quantitative impairment assessment and recognized a non-cash impairment charge of $94.4 million.
The principal considerations for our determination that performing procedures relating to the Sunquest indefinite-lived trade name intangible asset quantitative impairment assessment is a critical audit matter are (i) the significant judgment by management when determining the fair value of the indefinite-lived trade name intangible asset; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to the royalty rate, discount rate, and terminal value; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s Sunquest indefinite-lived trade name intangible asset quantitative impairment assessment, including controls over the valuation of Sunquest’s indefinite-lived trade name intangible asset. These procedures also included, among others (i) testing management’s process for determining the fair value; (ii) evaluating the appropriateness of the relief-from-royalty method; (iii) testing the completeness and accuracy of the underlying data used in the method; and (iv) evaluating the reasonableness of the significant assumptions used by management related to the royalty rate, discount rate, and terminal value. Evaluating management’s significant assumption related to the terminal value involved evaluating whether the significant assumption used by management was reasonable considering (i) the current and past performance of the asset group comprised of Sunquest’s indefinite-lived trade name intangible asset; (ii) the consistency with external market and industry data; and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the relief-from-royalty method and (ii) the reasonableness of the royalty rate and the discount rate significant assumptions.
/s/ PricewaterhouseCoopers LLP
Tampa, Florida
February 22, 2022
We have served as the Company’s auditor since 2002.
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
| As of December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | 351.5 | $ | 308.3 | |||||||
| Accounts receivable, net | 839.4 | 745.7 | |||||||||
| Inventories, net | 176.1 | 165.1 | |||||||||
| Income taxes receivable | 27.7 | 21.9 | |||||||||
| Unbilled receivables | 95.3 | 72.8 | |||||||||
| Other current assets | 142.5 | 114.3 | |||||||||
| Current assets held for sale | 788.6 | 324.2 | |||||||||
| Total current assets | 2,421.1 | 1,752.3 | |||||||||
| Property, plant and equipment, net | 102.8 | 127.3 | |||||||||
| Goodwill | 14,094.5 | 13,966.0 | |||||||||
| Other intangible assets, net | 6,588.5 | 7,168.2 | |||||||||
| Deferred taxes | 101.1 | 103.2 | |||||||||
| Other assets | 405.9 | 386.2 | |||||||||
| Assets held for sale | — | 521.6 | |||||||||
| Total assets | $ | 23,713.9 | $ | 24,024.8 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Accounts payable | $ | 150.8 | $ | 127.1 | |||||||
| Accrued compensation | 309.8 | 262.6 | |||||||||
| Deferred revenue | 1,130.2 | 990.2 | |||||||||
| Other accrued liabilities | 440.7 | 418.6 | |||||||||
| Income taxes payable | 132.0 | 25.7 | |||||||||
| Current portion of long-term debt, net | 799.2 | 499.4 | |||||||||
| Current liabilities held for sale | 159.1 | 120.8 | |||||||||
| Total current liabilities | 3,121.8 | 2,444.4 | |||||||||
| Long-term debt, net of current portion | 7,122.6 | 9,061.4 | |||||||||
| Deferred taxes | 1,479.5 | 1,531.5 | |||||||||
| Other liabilities | 426.2 | 443.6 | |||||||||
| Liabilities held for sale | — | 64.1 | |||||||||
| Total liabilities | 12,150.1 | 13,545.0 | |||||||||
| Commitments and contingencies (Note 13) | |||||||||||
| Stockholders’ equity: | |||||||||||
| Preferred stock, $0.01 par value per share; 1.0 shares authorized; none outstanding | — | — | |||||||||
| Common stock, $0.01 par value per share; 350.0 shares authorized; 107.3 shares issued and 105.5 outstanding at December 31, 2021 and 106.7 shares issued and 104.9 outstanding at December 31, 2020 | 1.1 | 1.1 | |||||||||
| Additional paid-in capital | 2,307.8 | 2,097.5 | |||||||||
| Retained earnings | 9,455.6 | 8,546.2 | |||||||||
| Accumulated other comprehensive loss | (183.1) | (147.0) | |||||||||
| Treasury stock, 1.8 shares at December 31, 2021 and 1.8 shares at December 31, 2020 | (17.6) | (18.0) | |||||||||
| Total stockholders' equity | 11,563.8 | 10,479.8 | |||||||||
| Total liabilities and stockholders' equity | $ | 23,713.9 | $ | 24,024.8 |
See accompanying notes to Consolidated Financial Statements.
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollar and share amounts in millions, except per share data)
| Year ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Net revenues | $ | 5,777.8 | $ | 4,854.2 | $ | 4,727.7 | |||||||||||
| Cost of sales | 1,860.4 | 1,583.4 | 1,587.6 | ||||||||||||||
| Gross profit | 3,917.4 | 3,270.8 | 3,140.1 | ||||||||||||||
| Selling, general and administrative expenses | 2,337.7 | 1,997.3 | 1,811.8 | ||||||||||||||
| Impairment of intangible assets | 99.5 | — | — | ||||||||||||||
| Income from operations | 1,480.2 | 1,273.5 | 1,328.3 | ||||||||||||||
| Interest expense, net | 234.1 | 218.5 | 186.2 | ||||||||||||||
| Other income (expense), net | 24.9 | (3.6) | (5.4) | ||||||||||||||
| Gain on disposal of businesses | — | — | 920.7 | ||||||||||||||
| Earnings before income taxes | 1,271.0 | 1,051.4 | 2,057.4 | ||||||||||||||
| Income taxes | 288.4 | 225.9 | 417.4 | ||||||||||||||
| Net earnings from continuing operations | 982.6 | 825.5 | 1,640.0 | ||||||||||||||
| Earnings from discontinued operations, net of tax | 114.1 | 124.2 | 127.9 | ||||||||||||||
| Gain on disposition of discontinued operations, net of tax | 55.9 | — | — | ||||||||||||||
| Net earnings from discontinued operations | 170.0 | 124.2 | 127.9 | ||||||||||||||
| Net earnings | $ | 1,152.6 | $ | 949.7 | $ | 1,767.9 | |||||||||||
| Net earnings per share from continuing operations: | |||||||||||||||||
| Basic | $ | 9.33 | $ | 7.89 | $ | 15.79 | |||||||||||
| Diluted | $ | 9.23 | $ | 7.81 | $ | 15.60 | |||||||||||
| Net earnings per share from discontinued operations: | |||||||||||||||||
| Basic | $ | 1.62 | $ | 1.19 | $ | 1.23 | |||||||||||
| Diluted | $ | 1.59 | $ | 1.17 | $ | 1.22 | |||||||||||
| Net earnings per share: | |||||||||||||||||
| Basic | $ | 10.95 | $ | 9.08 | $ | 17.02 | |||||||||||
| Diluted | $ | 10.82 | $ | 8.98 | $ | 16.82 | |||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||
| Basic | 105.3 | 104.6 | 103.9 | ||||||||||||||
| Diluted | 106.5 | 105.7 | 105.1 |
See accompanying notes to Consolidated Financial Statements.
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
| Year ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Net earnings | $ | 1,152.6 | $ | 949.7 | $ | 1,767.9 | |||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||
| Foreign currency translation adjustments | (36.1) | 65.8 | 30.5 | ||||||||||||||
| Total other comprehensive income (loss), net of tax | (36.1) | 65.8 | 30.5 | ||||||||||||||
| Comprehensive income | $ | 1,116.5 | $ | 1,015.5 | $ | 1,798.4 |
See accompanying notes to Consolidated Financial Statements.
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions, except per share data)
| Common Stock | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Treasury stock | Total stockholders’ equity | |||||||||||||||||||||||||||||||||||
| Balances at December 31, 2018 | 103.4 | $ | 1.1 | $ | 1,751.5 | $ | 6,247.7 | $ | (243.3) | $ | (18.5) | $ | 7,738.5 | ||||||||||||||||||||||||||||
| Net earnings | — | — | — | 1,767.9 | — | — | 1,767.9 | ||||||||||||||||||||||||||||||||||
| Stock option exercises | 0.5 | — | 64.9 | — | — | — | 64.9 | ||||||||||||||||||||||||||||||||||
| Treasury stock sold | — | — | 6.6 | — | — | 0.2 | 6.8 | ||||||||||||||||||||||||||||||||||
| Currency translation adjustments, including tax benefit of $3.8 | — | — | — | — | 30.5 | — | 30.5 | ||||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | 110.9 | — | — | — | 110.9 | ||||||||||||||||||||||||||||||||||
| Restricted stock activity | 0.2 | — | (30.0) | — | — | — | (30.0) | ||||||||||||||||||||||||||||||||||
| Dividends declared ($1.90 per share) | — | — | — | (197.6) | — | — | (197.6) | ||||||||||||||||||||||||||||||||||
| Balances at December 31, 2019 | 104.1 | $ | 1.1 | $ | 1,903.9 | $ | 7,818.0 | $ | (212.8) | $ | (18.3) | $ | 9,491.9 | ||||||||||||||||||||||||||||
| Adoption of ASC 326 | — | — | — | (1.7) | — | — | (1.7) | ||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | 949.7 | — | — | 949.7 | ||||||||||||||||||||||||||||||||||
| Stock option exercises | 0.7 | — | 105.5 | — | — | — | 105.5 | ||||||||||||||||||||||||||||||||||
| Treasury stock sold | — | — | 10.2 | — | — | 0.3 | 10.5 | ||||||||||||||||||||||||||||||||||
| Currency translation adjustments, including tax provision of $14.6 | — | — | — | — | 65.8 | — | 65.8 | ||||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | 119.0 | — | — | — | 119.0 | ||||||||||||||||||||||||||||||||||
| Restricted stock activity | 0.1 | — | (41.1) | — | — | — | (41.1) | ||||||||||||||||||||||||||||||||||
| Dividends declared ($2.10 per share) | — | — | — | (219.8) | — | — | (219.8) | ||||||||||||||||||||||||||||||||||
| Balances at December 31, 2020 | 104.9 | $ | 1.1 | $ | 2,097.5 | $ | 8,546.2 | $ | (147.0) | $ | (18.0) | $ | 10,479.8 | ||||||||||||||||||||||||||||
| Net earnings | — | — | — | 1,152.6 | — | — | 1,152.6 | ||||||||||||||||||||||||||||||||||
| Stock option exercises | 0.5 | — | 104.7 | — | — | — | 104.7 | ||||||||||||||||||||||||||||||||||
| Cash settlement of share-based awards in connection with disposition of discontinued operations | — | — | (6.7) | — | — | — | (6.7) | ||||||||||||||||||||||||||||||||||
| Treasury stock sold | — | — | 14.7 | — | — | 0.4 | 15.1 | ||||||||||||||||||||||||||||||||||
| Currency translation adjustments, including tax benefit of $6.2 | — | — | — | — | (36.1) | — | (36.1) | ||||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | 138.0 | — | — | — | 138.0 | ||||||||||||||||||||||||||||||||||
| Restricted stock activity | 0.1 | — | (40.4) | — | — | — | (40.4) | ||||||||||||||||||||||||||||||||||
| Dividends declared ($2.31 per share) | — | — | — | (243.2) | — | — | (243.2) | ||||||||||||||||||||||||||||||||||
| Balances at December 31, 2021 | 105.5 | $ | 1.1 | $ | 2,307.8 | $ | 9,455.6 | $ | (183.1) | $ | (17.6) | $ | 11,563.8 |
See accompanying notes to Consolidated Financial Statements.
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| Year ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net earnings from continuing operations | $ | 982.6 | $ | 825.5 | $ | 1,640.0 | |||||||||||
| Adjustments to reconcile net earnings from continuing operations to cash flows from operating activities: | |||||||||||||||||
| Depreciation and amortization of property, plant and equipment | 49.7 | 46.7 | 43.1 | ||||||||||||||
| Amortization of intangible assets | 584.4 | 466.2 | 365.7 | ||||||||||||||
| Amortization of deferred financing costs | 13.5 | 10.9 | 7.3 | ||||||||||||||
| Non-cash stock compensation | 136.1 | 117.0 | 101.2 | ||||||||||||||
| Impairment of intangible assets | 99.5 | — | — | ||||||||||||||
| Gain on disposal of assets and businesses, net of associated income tax | (21.6) | — | (687.3) | ||||||||||||||
| Income tax provision, excluding tax associated with gain on disposal of businesses and assets | 282.9 | 225.9 | 184.0 | ||||||||||||||
| Changes in operating assets and liabilities, net of acquired businesses: | |||||||||||||||||
| Accounts receivable | (100.2) | 55.0 | (30.7) | ||||||||||||||
| Unbilled receivables | (19.4) | 0.2 | 6.3 | ||||||||||||||
| Inventories | (13.9) | 0.1 | (14.1) | ||||||||||||||
| Accounts payable and accrued liabilities | 66.3 | 93.1 | (7.0) | ||||||||||||||
| Deferred revenue | 164.5 | 60.3 | 114.2 | ||||||||||||||
| Cash tax paid for gain on disposal of businesses | — | (201.9) | (39.4) | ||||||||||||||
| Cash income taxes paid, excluding tax associated with gain on disposal of businesses | (320.7) | (311.6) | (328.3) | ||||||||||||||
| Other, net | (37.5) | (19.4) | (23.8) | ||||||||||||||
| Cash provided by operating activities from continuing operations | 1,866.2 | 1,368.0 | 1,331.2 | ||||||||||||||
| Cash provided by operating activities from discontinued operations | 145.7 | 157.1 | 130.6 | ||||||||||||||
| Cash provided by operating activities | 2,011.9 | 1,525.1 | 1,461.8 | ||||||||||||||
| Cash flows from (used in) investing activities: | |||||||||||||||||
| Acquisitions of businesses, net of cash acquired | (217.0) | (6,018.1) | (2,387.3) | ||||||||||||||
| Capital expenditures | (32.9) | (28.3) | (43.0) | ||||||||||||||
| Capitalized software expenditures | (29.7) | (17.7) | (10.2) | ||||||||||||||
| Proceeds from (used in) disposal of businesses | — | (4.3) | 1,156.8 | ||||||||||||||
| Proceeds from sale of assets | 27.1 | — | — | ||||||||||||||
| Other, net | (0.7) | (2.6) | (2.3) | ||||||||||||||
| Cash used in investing activities from continuing operations | (253.2) | (6,071.0) | (1,286.0) | ||||||||||||||
| Proceeds from disposition of discontinued operations | 115.6 | — | — | ||||||||||||||
| Cash used in investing activities from discontinued operations | (5.3) | (2.9) | (10.0) | ||||||||||||||
| Cash used in investing activities | (142.9) | (6,073.9) | (1,296.0) | ||||||||||||||
| Cash flows from (used in) financing activities: | |||||||||||||||||
| Proceeds from senior notes | — | 3,300.0 | 1,200.0 | ||||||||||||||
| Payment of senior notes | (500.0) | (600.0) | — | ||||||||||||||
| Borrowings (payments) under revolving line of credit, net | (1,150.0) | 1,620.0 | (865.0) | ||||||||||||||
| Debt issuance costs | — | (42.0) | (12.1) | ||||||||||||||
| Cash dividends to stockholders | (236.4) | (214.1) | (191.7) | ||||||||||||||
| Treasury stock sales | 15.1 | 10.5 | 6.8 | ||||||||||||||
| Proceeds from stock based compensation, net | 64.3 | 64.4 | 34.9 | ||||||||||||||
| Other, net | (0.1) | (0.2) | (0.6) | ||||||||||||||
| Cash provided by (used in) financing activities from continuing operations | (1,807.1) | 4,138.6 | 172.3 | ||||||||||||||
| Cash provided by (used in) financing activities from discontinued operations | (6.4) | (1.7) | 4.7 | ||||||||||||||
| Cash provided by (used in) financing activities | (1,813.5) | 4,136.9 | 177.0 | ||||||||||||||
| (Continued) | |||||||||||||||||
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(in millions)
| Year ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Effect of exchange rate changes on cash | (12.3) | 10.5 | 2.5 | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 43.2 | (401.4) | 345.3 | ||||||||||||||
| Cash and cash equivalents, beginning of year | 308.3 | 709.7 | 364.4 | ||||||||||||||
| Cash and cash equivalents, end of year | $ | 351.5 | $ | 308.3 | $ | 709.7 | |||||||||||
| Supplemental disclosures: | |||||||||||||||||
| Cash paid for: | |||||||||||||||||
| Interest | 222.2 | $ | 197.7 | $ | 171.5 | ||||||||||||
| Noncash investing activities: | |||||||||||||||||
| Net assets of businesses acquired: | |||||||||||||||||
| Fair value of assets, including goodwill | $ | 249.8 | $ | 6,715.4 | $ | 2,472.4 | |||||||||||
| Liabilities assumed | (32.8) | (697.3) | (85.1) | ||||||||||||||
| Cash paid, net of cash acquired | $ | 217.0 | $ | 6,018.1 | $ | 2,387.3 |
See accompanying notes to Consolidated Financial Statements.
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 2021, 2020 and 2019
(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.
Discontinued Operations - During 2021, the Company signed definitive agreements to divest its TransCore, Zetec and CIVCO Radiotherapy businesses, which are presented as discontinued operations for all periods presented. Unless otherwise noted, discussion within these Notes to Consolidated Financial Statements relate to continuing operations. Refer to Note 3 for additional information on discontinued operations.
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
In October 2021, the FASB issued an update to improve the accounting for acquired revenue contracts with customers in a business combination by promoting consistency in the recognition of an acquired contract liability and the subsequent revenue recognized by the acquirer. The update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company early-adopted this update in the fourth quarter of 2021. This update did not have a material impact on the acquisitions completed in 2021 and the future impact of adoption, if any, will depend on the acquisitions made by the Company.
The Company adopted ASC Topic 326, Financial Instruments - Credit Losses (“ASC 326”), as of January 1, 2020 using the modified retrospective transition method. 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.
Significant Accounting Policies
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 no cash equivalents at both December 31, 2021 and 2020.
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, 2021, 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:
| Year ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Basic weighted-average shares outstanding | 105.3 | 104.6 | 103.9 | ||||||||||||||
| Effect of potential common stock: | |||||||||||||||||
| Common stock awards | 1.2 | 1.1 | 1.2 | ||||||||||||||
| Diluted weighted-average shares outstanding | 106.5 | 105.7 | 105.1 |
As of and for the years ended December 31, 2021, 2020 and 2019, there were 0.521, 0.208 and 0.627 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 losses were $1.4, $4.5 and $3.5 for the years ended December 31, 2021, 2020 and 2019, 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 34 reporting units with individual goodwill amounts ranging from zero to $3,245.3. In 2021, 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 any of its reporting units and thus was not required to perform a quantitative analysis for these reporting units.
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:
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a significant adverse change in legal factors or in the business climate;
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an adverse action or assessment by a regulator;
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unanticipated competition;
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a loss of key personnel;
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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;
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the testing for recoverability of a significant asset group within a reporting unit; and
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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. To the extent the Company determines a fair value, the inputs used represent a Level 3 fair value measurement in the FASB fair value hierarchy given that the inputs are unobservable. 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.
During the fourth quarter of 2021, the Company determined the use of the Sunquest trade name would be discontinued given the strategic action to merge the Sunquest business into our CliniSys business, both of which are reported in our Application Software reportable segment. Considering the planned merger and updated market comparisons, the royalty rate utilized in the quantitative impairment assessment of the trade name was 0.5% as compared to a royalty rate of 3.5% used in the prior year. The royalty rate reduction was the significant assumption that resulted in a non-cash impairment charge of $94.4 recognized as a component of “Impairment of intangible assets” within the Consolidated Statements of Earnings.
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.
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.
During the fourth quarter of 2021, Sunquest also recognized a non-cash impairment charge of $5.1 representing the unamortized balance related primarily to a software intangible asset that will be discontinued in 2022. This impairment charge is included as a component of “Impairment of intangible assets” within the Consolidated Statements of Earnings.
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 basis 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 8 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:
| Buildings | 20-30 years | ||||
| Machinery | 8-12 years | ||||
| Other equipment and software | 3-5 years |
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 $528.4, $423.6 and $379.7 for the years ended December 31, 2021, 2020 and 2019, respectively.
Revenue Recognition - The reported results reflect the application of ASC 606 guidance. 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:
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identify the contract with the customer;
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identify the performance obligations in the contract;
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determine the transaction price;
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allocate the transaction price to performance obligations in the contract; and
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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.
| Year ended December 31, | ||||||||||||||||||||
| 2021 | 2020 | 2019 | ||||||||||||||||||
| Software and related services | $ | 3,604.3 | $ | 2,871.1 | $ | 2,477.7 | ||||||||||||||
| Engineered products and related services | 2,173.5 | 1,983.1 | 2,250.0 | |||||||||||||||||
| Net revenues | $ | 5,777.8 | $ | 4,854.2 | $ | 4,727.7 |
Software and related services
SaaS - SaaS subscriptions and associated 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. Revenues from software implementation projects are generally recognized over time using the input method, utilizing the ratio of costs or labor hours incurred to total estimated costs or labor, as the measure of performance. 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.
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 $19.7 and $28.1 at December 31, 2021 and 2020, 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, 2021 and 2020, the current portion of deferred commissions was $32.5 and $25.0, respectively, and the non-current portion of deferred commissions was $24.2 and $17.5, respectively. The Company recognized $27.2, $30.1 and $30.1 of expense related to deferred commissions for the years ended December 31, 2021, 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, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $3,790.4. We expect to recognize revenue on approximately 68% 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 $65.9 and $43.1 at December 31, 2021 and 2020, respectively, which are included in “Other Assets” our Consolidated Balance Sheets.
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
Acquisitions
2021 Acquisitions - Roper completed seven business acquisitions in the year ended December 31, 2021 with an aggregate purchase price of $225.9, net of cash acquired and debt assumed. 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 2021 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to our financial results.
During the first three quarters of 2021, Roper completed four acquisitions which are being integrated into our Deltek business and its results are reported in the Application Software reportable segment.
On November 18, 2021, Roper acquired substantially all of the assets of Agency Zoom, LLC (“Agency Zoom”), a provider of sales, marketing and service automation software solutions for insurance agencies. Agency Zoom is integrating into our Vertafore business and its results are reported in the Application Software reportable segment.
On December 21, 2021, Roper acquired a majority of the assets of The Construction Journal, LTD. (“Construction Journal”), a provider of selling, marketing, and licensing software solutions for the commercial construction industry. Construction Journal is integrating into our ConstructConnect business and its results are reported in the Network Software and Systems reportable segment.
On December 30, 2021, Roper acquired 100% of the shares of American LegalNet, Inc. (“ALN”), a provider of court forms, eFiling, calendaring and docketing software solutions. ALN is integrating into our Aderant business and its results are reported in the Application Software reportable segment.
The Company recorded $138.8 in goodwill and $104.9 of other identifiable intangibles in connection with these seven acquisitions. The amortizable intangible assets include customer relationships of $94.6 (12.9 year weighted average useful life) and technology of $10.3 (5.3 year weighted average useful life).
Subsequent to the year ended December 31, 2021, on January 3, 2022, Roper acquired 100% of the membership interests of Horizon Lab Systems, LLC (“HLS”) for a purchase price of $49.7, net of cash acquired and debt assumed. HLS is a leading provider of laboratory information management systems in the toxicology, environmental, public health and agricultural markets. HLS is integrating into our CliniSys business and its results will be reported in the Application Software reportable segment beginning in the first quarter of 2022.
2020 Acquisitions - 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 contemplated approximately $120 of federal tax attributes that were 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.
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.
Acquisition of Freight Market Intelligence Consortium - 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 was integrated into our DAT business and its results are reported in the Network Software & Systems reportable segment.
Acquisition of Team TSI Corporation - 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 was integrated into our SHP business and its results are reported in the Network Software & Systems reportable segment.
Acquisition of Impact Financial Systems - 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 was integrated into our iPipeline business and its results are reported in the Network Software & Systems reportable segment.
Acquisition of WELIS - 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 was integrated into our iPipeline business and its results are reported in the Network Software & Systems reportable segment.
Acquisition of EPSi - 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 was integrated 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 was 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 was 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
On March 17, 2021, Roper completed the sale of a minority investment in Sedaru, Inc. for $27.1 in cash. The sale resulted in a pretax gain of $27.1, which is reported within “Other income (expense), net” in the Consolidated Statements of Earnings. In addition, we recognized income tax expense of $5.5 in connection with the sale, which is included within “Income taxes” in the Consolidated Statements of Earnings.
On October 29, 2019, the Company closed on its sale of Gatan to AMETEK 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. The results of Gatan are reported in the Measurement & Analytical Solutions segment through such date. 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.
On February 5, 2019, the Company closed on its sale of the Imaging businesses to Teledyne 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.
(3) Discontinued Operations
During the year ended December 31, 2021, the Company signed definitive agreements to divest its TransCore, Zetec and CIVCO Radiotherapy businesses as described below.
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On November 1, 2021, Roper closed on the sale of the CIVCO Radiotherapy business to an affiliate of Blue Wolf Capital Partners LLC, for approximately $120.0 in cash. The sale resulted in a pretax gain of $77.2 and income tax expense of $21.3, which are reported within “Gain on disposition of discontinued operations, net of tax” in the Consolidated Statements of Earnings. CIVCO Radiotherapy was previously included in the Measurement & Analytical Solutions reportable segment.
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On January 5, 2022, Roper closed on the sale of the Zetec business to Eddyfi NDT Inc. for approximately $350.0 in cash. The Company is currently calculating the gain and associated tax expense on the sale, which will be disclosed within the Company’s first quarter 2022 Quarterly Report on Form 10-Q. Zetec was previously included in the Process Technologies reportable segment.
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On October 1, 2021, Roper signed a definitive agreement to divest its TransCore business to an affiliate of Singapore Technologies Engineering Ltd., for approximately $2,680.0 in cash. The transaction, which is expected to close in the first quarter of 2022, is subject to customary closing conditions, including regulatory approvals. TransCore was previously included in the Network Software & Systems reportable segment.
We concluded these disposal activities, in the aggregate, represented a strategic shift that will have a major effect on our operations and financial results. These divestitures significantly enhance our mix of high-margin, recurring revenue businesses and notably reduce our working capital requirements. Accordingly, the financial results of the TransCore, Zetec and CIVCO Radiotherapy businesses are presented in the Consolidated Financial Statements as discontinued operations for all periods presented, as applicable. Current and non-current assets and liabilities of these businesses are presented in the Consolidated Balance Sheet as assets and liabilities of discontinued operations classified as held for sale for both periods presented.
The following tables summarize the major classes of assets and liabilities related to the discontinued operations of the TransCore, Zetec and CIVCO Radiotherapy businesses, as applicable, as reported in the Consolidated Balance Sheets at December 31:
| 2021 (1) | 2020 | ||||||||||
| Accounts receivable, net | $ | 74.7 | $ | 117.3 | |||||||
| Inventories, net | 47.8 | 33.3 | |||||||||
| Unbilled receivables | 158.2 | 168.9 | |||||||||
| Goodwill | 405.5 | — | |||||||||
| Other intangible assets, net | 31.0 | — | |||||||||
| Other current assets | 71.4 | 4.7 | |||||||||
| Current assets held for sale | 788.6 | 324.2 | |||||||||
| Goodwill | — | 429.2 | |||||||||
| Other intangible assets, net | — | 38.7 | |||||||||
| Other assets | — | 53.7 | |||||||||
| Assets held for sale | $ | — | $ | 521.6 | |||||||
| Accounts payable | $ | 40.3 | $ | 50.7 | |||||||
| Accrued compensation | 27.0 | 23.5 | |||||||||
| Deferred taxes | 29.5 | — | |||||||||
| Other current liabilities | 62.3 | 46.6 | |||||||||
| Current liabilities held for sale | 159.1 | 120.8 | |||||||||
| Deferred taxes | — | 31.0 | |||||||||
| Other liabilities | — | 33.1 | |||||||||
| Liabilities held for sale | $ | — | $ | 64.1 |
(1) All assets and liabilities held for sale were classified as current as it was probable that the sale of TransCore and Zetec would be completed within one year from the balance sheet date.
The following table summarizes the major classes of revenue and expenses constituting net earnings from discontinued operations attributable to the TransCore, Zetec and CIVCO Radiotherapy businesses:
| Year ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Net revenues | $ | 638.0 | $ | 672.9 | $ | 639.1 | |||||||||||
| Cost of sales | 372.9 | 400.7 | 352.1 | ||||||||||||||
| Gross profit | 265.1 | 272.2 | 287.0 | ||||||||||||||
| Selling, general and administrative expenses(1) | 124.0 | 114.6 | 116.9 | ||||||||||||||
| Income from operations | 141.1 | 157.6 | 170.1 | ||||||||||||||
| Other income (expense), net | 1.5 | 0.3 | (0.1) | ||||||||||||||
| Earnings before income taxes (2) | 142.6 | 157.9 | 170.0 | ||||||||||||||
| Income taxes | 28.5 | 33.7 | 42.1 | ||||||||||||||
| Earnings from discontinued operations, net of tax | 114.1 | 124.2 | 127.9 | ||||||||||||||
| Gain on disposition of discontinued operations, net of tax | 55.9 | — | — | ||||||||||||||
| Net earnings from discontinued operations | $ | 170.0 | $ | 124.2 | $ | 127.9 | |||||||||||
(1) Includes stock-based compensation expense of $5.4, $4.8 and $3.4 for the years ended December 31, 2021, 2020, and 2019, respectively. Stock-based compensation for discontinued operations was previously reported as a component of unallocated corporate general and administrative expenses. In connection with the sale of CIVCO Radiotherapy, we recognized expense of $0.9 associated with accelerated vesting of share-based awards. These charges were recorded as a component of “Gain on disposition of discontinued operations, net of tax” within the Consolidated Statements of Earnings.
(2) Includes depreciation and amortization of $5.2, $7.9 and $7.2 for the years ended December 31, 2021, 2020, and 2019, respectively.
(4) Inventories
The components of inventories at December 31 were as follows:
| 2021 | 2020 | ||||||||||
| Raw materials and supplies | $ | 112.7 | $ | 104.0 | |||||||
| Work in process | 30.2 | 22.9 | |||||||||
| Finished products | 69.3 | 74.4 | |||||||||
| Inventory reserves | (36.1) | (36.2) | |||||||||
| $ | 176.1 | $ | 165.1 |
(5) Property, Plant and Equipment
The components of property, plant and equipment at December 31 were as follows:
| 2021 | 2020 | ||||||||||
| Land | $ | 2.2 | $ | 2.2 | |||||||
| Buildings | 77.5 | 80.2 | |||||||||
| Machinery and other equipment | 164.4 | 176.1 | |||||||||
| Computer equipment | 117.5 | 110.9 | |||||||||
| Software | 77.4 | 75.7 | |||||||||
| 439.0 | 445.1 | ||||||||||
| Accumulated depreciation | (336.2) | (317.8) | |||||||||
| $ | 102.8 | $ | 127.3 |
Depreciation and amortization expense related to property, plant and equipment was $49.7, $46.7 and $43.1 for the years ended December 31, 2021, 2020 and 2019, respectively.
(6) 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, 2019 | $ | 5,389.4 | $ | 3,596.6 | $ | 1,155.5 | $ | 245.8 | $ | 10,387.3 | |||||||||||||||||||
| Goodwill acquired | 3,399.0 | 134.0 | — | — | 3,533.0 | ||||||||||||||||||||||||
| Currency translation adjustments | 14.5 | 16.6 | 11.8 | 4.4 | 47.3 | ||||||||||||||||||||||||
| Reclassifications and other | (0.6) | (1.0) | — | — | (1.6) | ||||||||||||||||||||||||
| Balances at December 31, 2020 | $ | 8,802.3 | $ | 3,746.2 | $ | 1,167.3 | $ | 250.2 | $ | 13,966.0 | |||||||||||||||||||
| Goodwill acquired | 85.9 | 52.9 | — | — | 138.8 | ||||||||||||||||||||||||
| Currency translation adjustments | (5.8) | (3.0) | (6.7) | (2.6) | (18.1) | ||||||||||||||||||||||||
| Reclassifications and other | 6.9 | 0.9 | — | — | 7.8 | ||||||||||||||||||||||||
| Balances at December 31, 2021 | $ | 8,889.3 | $ | 3,797.0 | $ | 1,160.6 | $ | 247.6 | $ | 14,094.5 |
Reclassifications and other during the year ended December 31, 2021 were due primarily to purchase accounting and tax adjustments for acquisitions completed in 2020. 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 | $ | 7,473.7 | $ | (1,688.2) | $ | 5,785.5 | |||||||||||
| Unpatented technology | 942.8 | (363.9) | 578.9 | ||||||||||||||
| Software | 172.4 | (127.4) | 45.0 | ||||||||||||||
| Patents and other protective rights | 12.0 | (6.0) | 6.0 | ||||||||||||||
| Trade names | 7.3 | (5.6) | 1.7 | ||||||||||||||
| Assets not subject to amortization: | |||||||||||||||||
| Trade names | 751.1 | — | 751.1 | ||||||||||||||
| Balances at December 31, 2020 | $ | 9,359.3 | $ | (2,191.1) | $ | 7,168.2 | |||||||||||
| Assets subject to amortization: | |||||||||||||||||
| Customer related intangibles | $ | 7,532.0 | $ | (2,108.0) | $ | 5,424.0 | |||||||||||
| Unpatented technology | 906.4 | (431.8) | 474.6 | ||||||||||||||
| Software | 149.5 | (122.4) | 27.1 | ||||||||||||||
| Patents and other protective rights | 9.6 | (2.1) | 7.5 | ||||||||||||||
| Trade names | 12.8 | (6.1) | 6.7 | ||||||||||||||
| Assets not subject to amortization: | |||||||||||||||||
| Trade names | 648.6 | — | 648.6 | ||||||||||||||
| Balances at December 31, 2021 | $ | 9,258.9 | $ | (2,670.4) | $ | 6,588.5 |
Amortization expense of other intangible assets was $577.5, $461.5, and $363.5 during the years ended December 31, 2021, 2020 and 2019, respectively. Amortization expense is expected to be $579 in 2022, $565 in 2023, $521 in 2024, $493 in 2025 and $461 in 2026.
(7) Accrued Liabilities
Accrued liabilities at December 31 were as follows:
| 2021 | 2020 | ||||||||||
| Interest | $ | 42.6 | $ | 44.1 | |||||||
| Customer deposits | 56.9 | 48.6 | |||||||||
| Accrued dividend | 66.8 | 60.0 | |||||||||
| Rebates | 63.0 | 51.5 | |||||||||
| Operating lease liability | 51.4 | 56.8 | |||||||||
| Sales and other taxes payable | 25.4 | 33.4 | |||||||||
| Other | 134.6 | 124.2 | |||||||||
| $ | 440.7 | $ | 418.6 |
(8) Income Taxes
Earnings before income taxes for the years ended December 31, 2021, 2020 and 2019 consisted of the following components:
| 2021 | 2020 | 2019 | |||||||||||||||
| United States | $ | 915.3 | $ | 752.7 | $ | 1,741.2 | |||||||||||
| Other | 355.7 | 298.7 | 316.2 | ||||||||||||||
| $ | 1,271.0 | $ | 1,051.4 | $ | 2,057.4 |
Components of income tax expense for the years ended December 31, 2021, 2020 and 2019 were as follows:
| 2021 | 2020 | 2019 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 130.6 | $ | 157.5 | $ | 366.5 | |||||||||||
| State | 56.8 | 50.0 | 72.0 | ||||||||||||||
| Foreign | 94.5 | 75.3 | 77.9 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 28.0 | (56.7) | (47.1) | ||||||||||||||
| State | (26.6) | (5.2) | (2.2) | ||||||||||||||
| Foreign | 5.1 | 5.0 | (49.7) | ||||||||||||||
| $ | 288.4 | $ | 225.9 | $ | 417.4 |
Reconciliations between the statutory federal income tax rate and the effective income tax rate for the years ended December 31, 2021, 2020 and 2019 were as follows:
| 2021 | 2020 | 2019 | |||||||||||||||
| Federal statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| Foreign operations, net | 2.6 | 1.7 | (0.1) | ||||||||||||||
| R&D tax credits | (1.8) | (1.4) | (0.5) | ||||||||||||||
| State taxes, net of federal benefit | 2.7 | 2.9 | 1.4 | ||||||||||||||
| Stock-based compensation | (2.3) | (3.3) | (1.3) | ||||||||||||||
| Impact of UK tax rate change | 1.7 | — | — | ||||||||||||||
| Divestitures | — | — | 2.0 | ||||||||||||||
| Legal entity restructuring | (1.2) | — | (2.0) | ||||||||||||||
| Other, net | — | 0.6 | (0.2) | ||||||||||||||
| 22.7 | % | 21.5 | % | 20.3 | % |
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:
| 2021 | 2020 | ||||||||||
| Deferred tax assets: | |||||||||||
| Reserves and accrued expenses | $ | 195.8 | $ | 175.0 | |||||||
| Net operating loss carryforwards | 101.5 | 153.6 | |||||||||
| R&D credits | 12.5 | 26.2 | |||||||||
| Interest expense limitation carryforwards | 10.9 | 63.0 | |||||||||
| Outside basis differences on assets held for sale | 57.5 | — | |||||||||
| Lease liability | 52.6 | 56.3 | |||||||||
| Valuation allowance | (44.4) | (37.7) | |||||||||
| Total deferred tax assets | $ | 386.4 | $ | 436.4 | |||||||
| Deferred tax liabilities: | |||||||||||
| Reserves and accrued expenses | $ | 16.1 | $ | 21.5 | |||||||
| Amortizable intangible assets | 1,670.2 | 1,762.8 | |||||||||
| Plant and equipment | 3.8 | 7.4 | |||||||||
| Accrued tax on unremitted foreign earnings | 24.7 | 18.6 | |||||||||
| ROU asset | 50.0 | 54.4 | |||||||||
| Total deferred tax liabilities | $ | 1,764.8 | $ | 1,864.7 |
As of December 31, 2021, the Company has approximately $11.1 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 decreased from 2020 to 2021 primarily due to current year utilization. The Company has approximately $39.2 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 2022 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 $59.5 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 2022 if not utilized. The foreign net operating loss carryforwards decreased from 2020 to 2021 primarily due to current year utilization. The Company has $14.8 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 2022 if not utilized. The research and development tax credit carryforwards decreased from 2020 to 2021 primarily due to current year utilization. Additionally, as of December 31, 2021, the Company has $10.9 of IRC Section 163(j) interest expense limitation carryforwards which have an indefinite carryforward period. The interest expense limitation carryforward decreased from 2020 to 2021 primarily due to current year utilization.
As of December 31, 2021, the Company determined that a total valuation allowance of $44.4 was necessary to reduce U.S. federal and state deferred tax assets by $25.3 and foreign deferred tax assets by $19.1, where it was more likely than not that all of such deferred tax assets will not be realized. As of December 31, 2021, 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:
| 2021 | 2020 | 2019 | |||||||||||||||
| Beginning balance | $ | 75.6 | $ | 69.8 | $ | 63.6 | |||||||||||
| Additions for tax positions of prior periods | 2.2 | 6.0 | 2.9 | ||||||||||||||
| Additions for tax positions of the current period | 3.3 | 3.5 | 4.2 | ||||||||||||||
| Additions due to acquisitions | 1.0 | 6.2 | 1.9 | ||||||||||||||
| Reductions for tax positions of prior periods | (0.6) | (3.6) | (0.3) | ||||||||||||||
| Reductions attributable to lapses of applicable statute of limitations | (4.6) | (6.3) | (2.5) | ||||||||||||||
| Reductions attributable to settlements with taxing authorities | (27.5) | — | — | ||||||||||||||
| Ending balance | $ | 49.4 | $ | 75.6 | $ | 69.8 |
The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $48.1. Interest and penalties related to unrecognized tax benefits were $4.5 in 2021 and are classified as a component of income tax expense. Accrued interest and penalties were $5.0 at December 31, 2021 and $9.6 at December 31, 2020. During the next twelve months, it is reasonably possible that the unrecognized tax benefits may decrease by a net $3.0, 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 2018 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.
(9) Long-Term Debt
On September 2, 2020, the Company entered into a three-year unsecured credit facility (the “Credit Agreement”) with, 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 previous $2,500.0 unsecured credit facility, dated as of September 23, 2016, as amended. The Credit Agreement comprises a three-year $3,000.0 revolving credit facility, which includes availability of up to $150.0 for letters of credit. 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.
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, 2021 and 2020, there were $470.0 and $1,620.0 of outstanding borrowings under the Credit Agreement, respectively. The Company was in compliance with its debt covenants throughout the years ended December 31, 2021 and 2020.
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.
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, 2021, $500.0 of 2.800% senior notes due 2021 were redeemed predominantly using cash flows generated from operations.
On November 15, 2020, $600.0 of 3.000% senior notes due 2020 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:
| 2021 | 2020 | ||||||||||
| Unsecured credit facility | $ | 470.0 | $ | 1,620.0 | |||||||
| $500 2.800% senior notes due 2021 | — | 500.0 | |||||||||
| $500 3.125% senior notes due 2022 | 500.0 | 500.0 | |||||||||
| $300 0.450% senior notes due 2022 | 300.0 | 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 | 700.0 | |||||||||
| $700 3.800% senior notes due 2026 | 700.0 | 700.0 | |||||||||
| $700 1.400% senior notes due 2027 | 700.0 | 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 | 600.0 | |||||||||
| $1,000 1.750% senior notes due 2031 | 1,000.0 | 1,000.0 | |||||||||
| Other | 0.3 | 0.5 | |||||||||
| Less unamortized debt issuance costs | (48.5) | (59.7) | |||||||||
| Total debt | 7,921.8 | 9,560.8 | |||||||||
| Less current portion | (799.2) | (499.4) | |||||||||
| Long-term debt | $ | 7,122.6 | $ | 9,061.4 |
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, 2021, Roper had $84.9 of outstanding letters of credit.
Future maturities of total debt during each of the next five years ending December 31 and thereafter are as follows:
| 2022 | $ | 800.2 | |||
| 2023 | 1,170.1 | ||||
| 2024 | 500.0 | ||||
| 2025 | 1,000.0 | ||||
| 2026 | 700.0 | ||||
| Thereafter | 3,800.0 | ||||
| Total | $ | 7,970.3 |
(10) Fair Value
Roper’s debt at December 31, 2021 included $7,500 of fixed-rate senior notes with the following fair values:
| $500 3.125% senior notes due 2022 | 507 | ||||
| $300 0.450% senior notes due 2022 | 300 | ||||
| $700 3.650% senior notes due 2023 | 730 | ||||
| $500 2.350% senior notes due 2024 | 514 | ||||
| $300 3.850% senior notes due 2025 | 323 | ||||
| $700 1.000% senior notes due 2025 | 684 | ||||
| $700 3.800% senior notes due 2026 | 768 | ||||
| $700 1.400% senior notes due 2027 | 680 | ||||
| $800 4.200% senior notes due 2028 | 899 | ||||
| $700 2.950% senior notes due 2029 | 727 | ||||
| $600 2.000% senior notes due 2030 | 578 | ||||
| $1,000 1.750% senior notes due 2031 | 941 |
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.
(11) 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 $36.4, $30.0 and $33.4 for 2021, 2020 and 2019, 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.
(12) Stock-Based Compensation
The Roper Technologies, Inc. 2021 Incentive Plan (“2021 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, directors and consultants. The 2021 Plan was approved by shareholders at the Annual Meeting of Shareholders on June 14, 2021. The 2021 Plan replaces the Roper Technologies, Inc. Amended and Restated 2016 Incentive Plan (“2016 Plan”), and no additional grants will be made from the 2016 Plan. At December 31, 2021, 9.275 shares were available to grant under the 2021 Plan
Under the Roper Technologies, Inc., Employee Stock Purchase Plan (“ESPP”), employees in the U.S. and Canada are allowed 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, 2021, 2020 and 2019 included as a component of “Selling, general and administrative expenses” was as follows:
| 2021 | 2020 | 2019 | |||||||||||||||
| Stock based compensation | $ | 136.1 | $ | 117.0 | $ | 101.2 | |||||||||||
| Tax benefit recognized in net earnings | 28.6 | 24.6 | 21.3 | ||||||||||||||
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.
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 $45.0, $38.6, and $29.9 of compensation expense relating to outstanding options during 2021, 2020 and 2019, respectively, as a component of general and administrative expenses at Corporate.
The Company estimates the fair value of its option awards using the Black-Scholes option valuation model. The stock volatility for each grant is measured using the weighted-average of historical daily price changes of the Company’s common stock over the most recent period equal to the expected life of the grant. The expected term of options granted is derived from historical data to estimate option exercises and employee forfeitures, and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The weighted-average fair value of options granted in 2021, 2020 and 2019 were calculated using the following weighted-average assumptions:
| 2021 | 2020 | 2019 | |||||||||||||||
| Weighted-average fair value ($) | 95.17 | 63.22 | 68.05 | ||||||||||||||
| Risk-free interest rate (%) | 0.94 | 0.81 | 2.37 | ||||||||||||||
| Average expected option life (years) | 5.61 | 5.64 | 5.42 | ||||||||||||||
| Expected volatility (%) | 25.14 | 20.39 | 19.22 | ||||||||||||||
| Expected dividend yield (%) | 0.56 | 0.62 | 0.58 |
The following table summarizes the Company’s activities with respect to its share-based compensation plans for the years ended December 31, 2021 and 2020:
| Number of shares | Weighted-average exercise price per share | Weighted-average contractual term | Aggregate intrinsic value | ||||||||||||||||||||
| Outstanding at December 31, 2019 | 3.349 | $ | 219.40 | ||||||||||||||||||||
| 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 | ||||||||||||||||||
| Granted | 0.516 | 405.20 | |||||||||||||||||||||
| Exercised | (0.537) | 195.07 | |||||||||||||||||||||
| Canceled | (0.122) | 312.97 | |||||||||||||||||||||
| Outstanding at December 31, 2021 | 3.223 | 287.15 | 6.61 | $ | 659.9 | ||||||||||||||||||
| Exercisable at December 31, 2021 | 1.480 | $ | 219.68 | 4.90 | $ | 402.8 |
The following table summarizes information for stock options outstanding at December 31, 2021:
| Outstanding options | Exercisable options | |||||||||||||||||||||||||||||||
| Exercise price | Number | Average exercise price | Average remaining life (years) | Number | Average exercise price | |||||||||||||||||||||||||||
| $93.62 - $166.19 | 0.359 | $ | 141.69 | 2.4 | 0.359 | $ | 141.69 | |||||||||||||||||||||||||
| $166.20 - $208.79 | 0.353 | 177.69 | 4.5 | 0.353 | 177.69 | |||||||||||||||||||||||||||
| $208.80 - $275.58 | 0.338 | 236.24 | 5.9 | 0.247 | 223.79 | |||||||||||||||||||||||||||
| $275.59 - $279.44 | 0.447 | 278.40 | 6.2 | 0.264 | 277.77 | |||||||||||||||||||||||||||
| $279.45 -$323.36 | 0.617 | 319.40 | 8.1 | 0.046 | 287.89 | |||||||||||||||||||||||||||
| $323.37 - $327.91 | 0.397 | 326.32 | 7.2 | 0.176 | 326.32 | |||||||||||||||||||||||||||
| $327.92 - $398.19 | 0.204 | 366.45 | 7.9 | 0.035 | 351.25 | |||||||||||||||||||||||||||
| $398.20 - $407.21 | 0.403 | 401.27 | 9.2 | — | — | |||||||||||||||||||||||||||
| $407.22 - $491.86 | 0.105 | 422.59 | 9.1 | — | — | |||||||||||||||||||||||||||
| $93.62 - $491.86 | 3.223 | $ | 287.15 | 6.6 | 1.480 | $ | 219.68 |
At December 31, 2021, there was $56.5 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 2021, 2020 and 2019 was $138.2, $155.4 and $109.4, respectively. Cash received from option exercises under all plans in 2021 and 2020 was $104.7 and $105.5, respectively.
Restricted Stock Grants – During 2021 and 2020, the Company granted 0.228 and 0.285 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 $91.1, $77.5 and $71.2 of compensation expense related to outstanding shares of restricted stock held by employees and directors during 2021, 2020 and 2019, respectively. A summary of the Company’s nonvested shares activity for 2021 and 2020 is as follows:
| Number of shares | Weighted-average grant date fair value | ||||||||||
| 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 | ||||||||
| Granted | 0.228 | 409.36 | |||||||||
| Vested | (0.294) | 308.79 | |||||||||
| Forfeited | (0.037) | 350.53 | |||||||||
| Nonvested at December 31, 2021 | 0.498 | $ | 365.79 |
At December 31, 2021, there was $83.0 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 1.6 years.
Employee Stock Purchase Plan – During 2021, 2020 and 2019, participants of the ESPP purchased 0.040, 0.031 and 0.021 shares, respectively, of Roper’s common stock for total consideration of $15.1, $10.5, and $6.8, respectively. All of these shares were purchased from Roper’s treasury shares.
(13) 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. However, no assurances can be given in this regard.
Roper’s subsidiary, Vertafore, Inc., was named in three putative class actions, two in the U.S. District Court for the Southern District of Texas (Allen, et al. v. Vertafore, Inc., Case 4:20-cv-4139, filed December 4, 2020) and Masciotra, et al. v. Vertafore, Inc. (originally filed on December 8, 2020 as Case 1:20-cv-03603 in the U.S. District Court for the District of Colorado and subsequently transferred), and one in the U.S. District Court for the Northern District of Texas (Mulvey, et al. v. Vertafore, Inc., Case 3:21-cv-00213-E, filed January 31, 2021). In July 2021, the court granted Vertafore’s motion to dismiss the Allen Case. Plaintiff has appealed the dismissal to the U.S. Fifth Circuit Court of Appeals. In July 2021, the plaintiff in the Masciotra case voluntarily dismissed his action without prejudice. The Allen case and the Mulvey case each 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. These cases seek recovery under the Driver’s Privacy Protection Act, 18 U.S.C. § 2721. Vertafore is vigorously defending the cases. In addition, Roper was advised that the Texas Attorney General is investigating the data event.
Roper’s subsidiary, Verathon, Inc. (“Verathon”), is defending a patent infringement action pending in the United States District Court for the Western District of Washington (Berall v. Verathon, Inc., Case No. 2:2021mc00043). Plaintiff claims that video laryngoscopes and certain accessories sold by Verathon from approximately 2006 through 2016 infringe U.S. Patent 5,827,178 (the “‘178 Patent”). The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, and pre- and post-judgment interest. Verathon contends that the products at issue do not infringe the ‘178 Patent and that the ‘178 Patent is invalid. Verathon is vigorously defending the matter.
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, 2021, Roper had $84.9 of letters of credit issued to guarantee its performance under certain services contracts or to support certain insurance programs and $659.7 of outstanding surety bonds of which $634.2 are directly associated with our Transcore business. Certain contracts, primarily those involving public sector customers, require Roper to provide a surety bond as a guarantee of its performance of contractual obligations.
(14) 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
–Measurement & Analytical Solutions (1) - Alpha, CIVCO Medical Solutions, Dynisco, FMI, Hansen, Hardy, IPA, Logitech, Neptune, Northern Digital, Struers, Technolog, Uson, Verathon
–Process Technologies- AMOT, CCC, Cornell, FTI, Metrix, PAC, Roper Pump, Viatran
(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 2021, 2020 and 2019. 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 or non-cash impairments. 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 2021, 2020 and 2019 follows:
| Application Software | Network Software & Systems | Measurement &Analytical Solutions | Process Technologies | Corporate | Total | ||||||||||||||||||||||||||||||
| 2021 | |||||||||||||||||||||||||||||||||||
| Net revenues | $ | 2,380.6 | $ | 1,338.4 | $ | 1,559.6 | $ | 499.2 | $ | — | $ | 5,777.8 | |||||||||||||||||||||||
| Operating profit 1 | 635.9 | 511.6 | 482.6 | 152.9 | (203.3) | 1,579.7 | |||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Operating assets | 577.6 | 243.9 | 346.9 | 172.3 | 15.4 | 1,356.1 | |||||||||||||||||||||||||||||
| Intangible assets, net | 13,498.4 | 5,551.2 | 1,356.7 | 276.7 | — | 20,683.0 | |||||||||||||||||||||||||||||
| Other | 205.7 | 50.4 | 100.9 | 81.9 | 447.3 | 886.2 | |||||||||||||||||||||||||||||
| Total 2 | 22,925.3 | ||||||||||||||||||||||||||||||||||
| Capital expenditures | 18.0 | 6.0 | 6.4 | 1.4 | 1.1 | 32.9 | |||||||||||||||||||||||||||||
| Capitalized software expenditures | 26.3 | 3.4 | — | — | — | 29.7 | |||||||||||||||||||||||||||||
| Depreciation and other amortization | 421.0 | 171.8 | 33.3 | 7.7 | 0.3 | 634.1 | |||||||||||||||||||||||||||||
| 2020 | |||||||||||||||||||||||||||||||||||
| Net revenues | $ | 1,799.9 | $ | 1,173.7 | $ | 1,425.6 | $ | 455.0 | $ | — | $ | 4,854.2 | |||||||||||||||||||||||
| Operating profit | 468.7 | 413.9 | 463.3 | 115.3 | (187.7) | 1,273.5 | |||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Operating assets | 526.6 | 217.3 | 328.6 | 148.9 | 3.9 | 1,225.3 | |||||||||||||||||||||||||||||
| Intangible assets, net | 13,844.6 | 5,621.6 | 1,383.9 | 284.1 | — | 21,134.2 | |||||||||||||||||||||||||||||
| Other | 173.1 | 48.4 | 107.6 | 67.3 | 423.1 | 819.5 | |||||||||||||||||||||||||||||
| Total 2 | 23,179.0 | ||||||||||||||||||||||||||||||||||
| Capital expenditures | 12.9 | 6.2 | 7.9 | 1.1 | 0.2 | 28.3 | |||||||||||||||||||||||||||||
| Capitalized software expenditures | 16.3 | 1.4 | — | — | — | 17.7 | |||||||||||||||||||||||||||||
| Depreciation and other amortization | 296.9 | 171.9 | 34.1 | 9.6 | 0.4 | 512.9 | |||||||||||||||||||||||||||||
| 2019 | |||||||||||||||||||||||||||||||||||
| Net revenues | $ | 1,588.0 | $ | 1,004.2 | $ | 1,544.3 | $ | 591.2 | $ | — | $ | 4,727.7 | |||||||||||||||||||||||
| Operating profit | 405.4 | 389.1 | 491.4 | 211.4 | (169.0) | 1,328.3 | |||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Operating assets | 382.2 | 206.0 | 332.9 | 181.4 | 4.3 | 1,106.8 | |||||||||||||||||||||||||||||
| Intangible assets, net | 7,833.6 | 5,505.5 | 1,390.5 | 285.6 | — | 15,015.2 | |||||||||||||||||||||||||||||
| Other | 168.5 | 48.7 | 117.9 | 65.5 | 773.8 | 1,174.4 | |||||||||||||||||||||||||||||
| Total 2 | 17,296.4 | ||||||||||||||||||||||||||||||||||
| Capital expenditures | 17.4 | 6.1 | 17.1 | 2.2 | 0.2 | 43.0 | |||||||||||||||||||||||||||||
| Capitalized software expenditures | 9.7 | 0.5 | — | — | — | 10.2 | |||||||||||||||||||||||||||||
| Depreciation and other amortization | 230.2 | 127.1 | 39.7 | 11.2 | 0.6 | 408.8 |
1 Operating profit excludes $99.5 of non-cash impairment charges.
2 Total excludes assets held for sale of $788.6, $845.8 and $812.5 associated with the TransCore, Zetec and CIVCO Radiotherapy businesses, as applicable, on December 31, 2021, 2020 and 2019, respectively.
Summarized data for Roper’s U.S. and foreign operations (principally in Canada, Europe and Asia) for 2021, 2020 and 2019, based upon the country of origin of the Roper entity making the sale, was as follows:
| United States | Non-U.S. | Eliminations | Total | ||||||||||||||||||||
| 2021 | |||||||||||||||||||||||
| Sales to unaffiliated customers | $ | 4,630.8 | $ | 1,147.0 | $ | — | $ | 5,777.8 | |||||||||||||||
| Sales between geographic areas | 122.7 | 126.4 | (249.1) | — | |||||||||||||||||||
| Net revenues | $ | 4,753.5 | $ | 1,273.4 | $ | (249.1) | $ | 5,777.8 | |||||||||||||||
| Long-lived assets | $ | 178.5 | $ | 29.9 | $ | — | $ | 208.4 | |||||||||||||||
| 2020 | |||||||||||||||||||||||
| Sales to unaffiliated customers | $ | 3,848.5 | $ | 1,005.7 | $ | — | $ | 4,854.2 | |||||||||||||||
| Sales between geographic areas | 122.8 | 162.1 | (284.9) | — | |||||||||||||||||||
| Net revenues | $ | 3,971.3 | $ | 1,167.8 | $ | (284.9) | $ | 4,854.2 | |||||||||||||||
| Long-lived assets | $ | 171.6 | $ | 32.7 | $ | — | $ | 204.3 | |||||||||||||||
| 2019 | |||||||||||||||||||||||
| Sales to unaffiliated customers | $ | 3,730.6 | $ | 997.1 | $ | — | $ | 4,727.7 | |||||||||||||||
| Sales between geographic areas | 123.0 | 139.0 | (262.0) | — | |||||||||||||||||||
| Net revenues | $ | 3,853.6 | $ | 1,136.1 | $ | (262.0) | $ | 4,727.7 | |||||||||||||||
| Long-lived assets | $ | 141.9 | $ | 32.8 | $ | — | $ | 174.7 |
Export sales from the U.S. during the years ended December 31, 2021, 2020 and 2019 were $336.2, $311.6 and $444.7, respectively. In the year ended December 31, 2021, these exports were shipped primarily to Asia (28%), Canada (28%), Europe (21%) and other (23%).
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, 2021, 2020 and 2019 are shown below by region, except for Canada, which is presented separately:
| Application Software | Network Software & Systems | Measurement &Analytical Solutions | Process Technologies | Total | |||||||||||||||||||||||||
| 2021 | |||||||||||||||||||||||||||||
| Canada | $ | 51.2 | $ | 86.7 | $ | 69.5 | $ | 16.8 | $ | 224.2 | |||||||||||||||||||
| Europe | 248.2 | 71.1 | 284.9 | 84.4 | 688.6 | ||||||||||||||||||||||||
| Asia | 3.7 | 13.6 | 135.1 | 85.2 | 237.6 | ||||||||||||||||||||||||
| Rest of the world | 37.1 | 10.5 | 56.4 | 87.8 | 191.8 | ||||||||||||||||||||||||
| Total | $ | 340.2 | $ | 181.9 | $ | 545.9 | $ | 274.2 | $ | 1,342.2 | |||||||||||||||||||
| 2020 | |||||||||||||||||||||||||||||
| Canada | $ | 43.4 | $ | 75.6 | $ | 71.1 | $ | 17.2 | $ | 207.3 | |||||||||||||||||||
| Europe | 205.5 | 60.2 | 250.7 | 87.2 | 603.6 | ||||||||||||||||||||||||
| Asia | 3.3 | 13.1 | 116.0 | 74.0 | 206.4 | ||||||||||||||||||||||||
| Rest of the world | 37.7 | 10.9 | 58.9 | 71.8 | 179.3 | ||||||||||||||||||||||||
| Total | $ | 289.9 | $ | 159.8 | $ | 496.7 | $ | 250.2 | $ | 1,196.6 | |||||||||||||||||||
| 2019 | |||||||||||||||||||||||||||||
| Canada | $ | 41.0 | $ | 70.1 | $ | 80.7 | $ | 22.2 | $ | 214.0 | |||||||||||||||||||
| Europe | 188.8 | 35.7 | 299.7 | 101.1 | 625.3 | ||||||||||||||||||||||||
| Asia | 3.5 | 12.4 | 177.6 | 87.1 | 280.6 | ||||||||||||||||||||||||
| Rest of the world | 34.4 | 8.2 | 55.4 | 97.8 | 195.8 | ||||||||||||||||||||||||
| Total | $ | 267.7 | $ | 126.4 | $ | 613.4 | $ | 308.2 | $ | 1,315.7 |
(15) 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.
(16) Contract Balances
Contract balances at December 31 are set forth in the following table:
| Balance Sheet Account | 2021 | 2020 | Change | ||||||||||||||
| Unbilled receivables | $ | 95.3 | $ | 72.8 | $ | 22.5 | |||||||||||
| Contract liabilities - current (1) | (1,130.2) | (990.3) | (139.9) | ||||||||||||||
| Deferred revenue - non-current | (75.3) | (42.7) | (32.6) | ||||||||||||||
| Net contract assets/(liabilities) | $ | (1,110.2) | $ | (960.2) | $ | (150.0) |
(1) Consists primarily of “Deferred revenue.”
The change in our net contract assets/(liabilities) from December 31, 2020 to December 31, 2021 was due primarily to the timing of payments and invoicing relating to Software-as-a-Service (“SaaS”) and post contract support (“PCS”) renewals, partially offset by the increase in unbilled receivables due to the timing of invoicing related to software milestone billings associated with multi-year term license renewals and software implementations.
Revenue recognized during the year ended December 31, 2021 and 2020 that was included in the contract liability balance on December 31, 2020 and 2019 was $951.3 and $794.3, 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 each of years ended December 31, 2021, 2020 and 2019, respectively.
(17) 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, 2021, 2020 and 2019, the Company recognized $64.6, $58.0 and $56.6 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:
| 2021 | 2020 | ||||||||||
| Operating cash flows used for operating leases | $ | 64.4 | $ | 59.7 | |||||||
| Right-of-use assets obtained in exchange for operating lease obligations | 41.6 | 58.1 |
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 | 2021 | 2020 | |||||||||||||||||
| ASSETS: | ||||||||||||||||||||
| Operating lease ROU assets | Other assets | $ | 221.0 | $ | 232.6 | |||||||||||||||
| LIABILITIES: | ||||||||||||||||||||
| Current operating lease liabilities | Other accrued liabilities | 51.4 | 56.8 | |||||||||||||||||
| Operating lease liabilities | Other liabilities | 180.9 | 192.8 | |||||||||||||||||
| Total operating lease liabilities | $ | 232.3 | $ | 249.6 |
Future minimum lease payments under non-cancellable leases were as follows:
| 2022 | $ | 56.4 | |||
| 2023 | 45.1 | ||||
| 2024 | 38.9 | ||||
| 2025 | 32.8 | ||||
| 2026 | 25.2 | ||||
| Thereafter | 52.7 | ||||
| Total operating lease payments | 251.1 | ||||
| Less: Imputed interest | 18.8 | ||||
| Total operating lease liabilities | $ | 232.3 |
| Weighted average remaining lease term - operating leases (years) | 6 | ||||
| Weighted average discount rate (%) | 2.7 |
(18) Quarterly Financial Data (unaudited)
As described in Note 3, Roper signed definitive agreements to divest the TransCore, Zetec and CIVCO Radiotherapy businesses. Roper has completed the divestitures of Zetec and CIVCO Radiotherapy, in the first quarter of 2022 and fourth quarter of 2021, respectively, and expects the TransCore transaction to close in the first quarter of 2022. Accordingly, the unaudited interim financial information below has been adjusted to incorporate the presentation of discontinued operations.
| First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||||||||||
| 2021 | |||||||||||||||||||||||
| Net revenues | $ | 1,376.1 | $ | 1,426.6 | $ | 1,462.8 | $ | 1,512.3 | |||||||||||||||
| Gross profit | 936.0 | 967.3 | 996.1 | 1,018.0 | |||||||||||||||||||
| Income from operations | 374.6 | 381.5 | 403.5 | 320.6 | |||||||||||||||||||
| Net earnings from continuing operations | 269.9 | 253.0 | 259.8 | 199.9 | |||||||||||||||||||
| Net earnings from discontinued operations | 19.1 | 33.3 | 29.7 | 87.9 | |||||||||||||||||||
| Net earnings | 289.0 | 286.3 | 289.5 | 287.8 | |||||||||||||||||||
| Net earnings per share from continuing operations: | |||||||||||||||||||||||
| Basic | $ | 2.57 | $ | 2.40 | $ | 2.47 | $ | 1.90 | |||||||||||||||
| Diluted | $ | 2.55 | $ | 2.38 | $ | 2.43 | $ | 1.87 | |||||||||||||||
| Net earnings per share from discontinued operations: | |||||||||||||||||||||||
| Basic | $ | 0.18 | $ | 0.32 | $ | 0.28 | $ | 0.83 | |||||||||||||||
| Diluted | $ | 0.18 | $ | 0.31 | $ | 0.28 | $ | 0.83 | |||||||||||||||
| Net earnings per share: | |||||||||||||||||||||||
| Basic | $ | 2.75 | $ | 2.72 | $ | 2.75 | $ | 2.73 | |||||||||||||||
| Diluted | $ | 2.73 | $ | 2.69 | $ | 2.71 | $ | 2.70 | |||||||||||||||
| 2020 | |||||||||||||||||||||||
| Net revenues | $ | 1,182.6 | $ | 1,137.8 | $ | 1,198.2 | $ | 1,335.6 | |||||||||||||||
| Gross profit | 787.5 | 772.5 | 809.9 | 900.9 | |||||||||||||||||||
| Income from operations | 308.4 | 291.6 | 330.5 | 343.0 | |||||||||||||||||||
| Net earnings from continuing operations | 209.5 | 184.0 | 207.0 | 225.0 | |||||||||||||||||||
| Net earnings from discontinued operations | 30.8 | 35.2 | 27.4 | 30.8 | |||||||||||||||||||
| Net earnings | 240.3 | 219.2 | 234.4 | 255.8 | |||||||||||||||||||
| Net earnings per share from continuing operations: | |||||||||||||||||||||||
| Basic | $ | 2.01 | $ | 1.76 | $ | 1.98 | $ | 2.15 | |||||||||||||||
| Diluted | $ | 1.99 | $ | 1.74 | $ | 1.95 | $ | 2.12 | |||||||||||||||
| Net earnings per share from discontinued operations: | |||||||||||||||||||||||
| Basic | $ | 0.29 | $ | 0.34 | $ | 0.26 | $ | 0.29 | |||||||||||||||
| Diluted | $ | 0.29 | $ | 0.34 | $ | 0.26 | $ | 0.29 | |||||||||||||||
| Net earnings per share: | |||||||||||||||||||||||
| Basic | $ | 2.30 | $ | 2.10 | $ | 2.24 | $ | 2.44 | |||||||||||||||
| Diluted | $ | 2.28 | $ | 2.08 | $ | 2.21 | $ | 2.41 |
The sum of the four quarters may not agree with the total for the year due to rounding.
ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES
Schedule II – Consolidated Valuation and Qualifying Accounts
Years ended December 31, 2021, 2020 and 2019
(in millions)
| Balance at beginning of year | Additions charged to costs and expenses | Deductions | Other | Balance at end of year | |||||||||||||||||||||||||
| Allowance for doubtful accounts and sales allowances | |||||||||||||||||||||||||||||
| 2021 | $ | 28.1 | $ | 1.5 | $ | (10.3) | $ | 0.4 | $ | 19.7 | |||||||||||||||||||
| 2020 | 19.2 | 11.7 | (10.2) | 7.4 | 28.1 | ||||||||||||||||||||||||
| 2019 | 20.3 | 8.2 | (7.8) | (1.5) | 19.2 | ||||||||||||||||||||||||
| Reserve for inventory obsolescence | |||||||||||||||||||||||||||||
| 2021 | $ | 36.2 | $ | 3.8 | $ | (2.8) | $ | (1.1) | $ | 36.1 | |||||||||||||||||||
| 2020 | 28.5 | 9.0 | (2.6) | 1.3 | 36.2 | ||||||||||||||||||||||||
| 2019 | 25.7 | 5.6 | (2.7) | (0.1) | 28.5 |
Deductions from the allowance for doubtful accounts represented the net write-off of uncollectible accounts receivable. Deductions from the inventory obsolescence reserve represented the disposal of obsolete items.
Other included the allowance for doubtful accounts and reserve for inventory obsolescence of acquired businesses, the effects of foreign currency translation adjustments for those companies whose functional currency was not the U.S. dollar, reclassifications as held for sale and other.
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