Roper Industries Announces Record Second Quarter Results

SARASOTA, Fla., July 29, 2013 /PRNewswire/ -- Roper Industries, Inc. (NYSE: ROP) reported financial results for the second quarter ended June 30, 2013.

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

Second quarter GAAP diluted earnings per share were $1.11 and adjusted diluted earnings per share were $1.31.  GAAP revenue increased 8% to $784 million and adjusted revenue increased 11% to $805 million.  Orders increased to $835 million and represented a book-to-bill ratio of 1.04. 

GAAP gross margin reached 56.8% and adjusted gross margin increased to 57.9%, a 300 basis point gain over the prior year.  Operating cash flow in the quarter was $140 million, a 17% increase over the prior year.  Free cash flow increased 19% to $129 million.

"We are pleased with our second quarter results and see positive momentum in our businesses," said Brian Jellison, Roper's Chairman, President and CEO.  "We delivered organic growth consistent with our expectations while securing significant orders for second half delivery, supporting our ability to achieve improving organic growth throughout the year.  Backlog increased 17% to a record $1.03 billion.  Our significant expansion in gross margin was broad-based, with increases in all four segments."

"We completed the acquisition of Managed Health Care Associates, Inc. (MHA) on May 1, 2013 and its early performance reinforces our confidence about its future," continued Mr. Jellison. "We also successfully issued $800 million of senior notes in the quarter, further strengthening our balance sheet. We maintain substantial capacity for future acquisitions and have an attractive pipeline of opportunities."

Special Charge

Second quarter GAAP results include a pretax charge of $9.1 million, or $0.06 per diluted share, in the Industrial Technology segment.  The company determined that a vendor-supplied component in a refrigeration-system valve did not meet our quality standards.  The company decided to exchange affected product, and has recorded this charge to reflect the estimated program cost, while it engages in an ongoing discussion with the vendor. 

2013 Outlook and Guidance

The company is updating its full year adjusted diluted earnings per share guidance to be between $5.72 - $5.86 compared to $5.76 - $5.94 previously.  "We expect total sales growth in the second half of the year to be 12% - 14%," said Mr. Jellison.  "Contributions from acquisitions continue to be on-track and due to changes in certain niche businesses, we expect second half organic growth between 6% - 8%, compared to our prior expectation of 7% - 9%." The company expects full year operating cash flow to exceed $800 million, consistent with the company's previous guidance. 

The company's guidance for full year adjusted diluted earnings per share includes the recognition of acquired revenue which will be excluded under GAAP's purchase accounting rules, and also excludes certain items as detailed later in this press release under the heading "Use of Non-GAAP Financial Measures."  The company's guidance excludes the impact of any future acquisitions.  

Conference Call to be Held at 8:30 AM (ET) Today

A conference call to discuss these results has been scheduled for 8:30 AM ET on Monday, July 29, 2013.  The call can be accessed via webcast or by dialing +1 888-428-9490 (US/Canada) or +1 719-325-2472, using confirmation code 6227963.  Webcast information and conference call materials will be made available in the Investors section of Roper's website (www.roperind.com) prior to the start of the call.  Telephonic replays will be available for up to two weeks by calling +1 719-457-0820 and using the access code 6227963.

Use of Non-GAAP Financial Information

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

Table 1: Second Quarter Revenue Growth



GAAP

Adjusted

Acquisitions / Divestitures

8%

11%

Organic

1%

1%

Foreign Currency

-

-

Rounding

(1%)

(1%)

Total Revenue Growth

8%

11%




 

Table 2: Gross Margin Reconciliation



Q2 2013


Q2 2012


% Change

GAAP Revenue

$784.0


$724.9


+8%

Add:  Purchase Accounting Adjustment for Acquired Revenue

20.9


0.0


n.a.

Adjusted Revenue (B)

$804.9


$724.9


+11%







GAAP Gross Profit

$445.5


$397.6


+12%

Add:  Purchase Accounting Adjustment for Acquired Revenue

20.9


0.0


n.a.

Adjusted Gross Profit (A)

$466.4


$397.6


+17%













Adjusted Gross Margin (A)/(B)

57.9%


54.9%


+300 bps

 

Table 3: Second Quarter Adjusted Diluted Earnings Per Share



Q2 2013

GAAP Diluted Earnings Per Share

$1.11

Add: Purchase Accounting Adjustment for Acquired Revenue (Sunquest, MHA)

0.14

Add: Special Charge for Vendor-Supplied Component Quality Issue

0.06

Adjusted Diluted Earnings Per Share

$1.31

 

Table 4: Free Cash Flow



Q2 2013


Q2 2012

Operating Cash Flow

$139.7


$119.3

Less:  Capital Expenditures

(10.6)


(10.5)

Free Cash Flow

$129.1


$108.8

 

Table 5: Full Year 2013 Adjusted Diluted Earnings Per Share Guidance





Low End


High End


GAAP Diluted Earnings Per Share Guidance

$5.41


$5.57


Add:  Purchase Accounting Adjustment for Acquired Revenue

$0.22


$0.22


Add: Second Quarter Charge for Vendor-Supplied Component Quality Issue

$0.06


$0.06


Add:  Estimated Second Half Impact from Vendor-Supplied Component Quality Issue

$0.03


$0.01


Adjusted Diluted Earnings Per Share Guidance

$5.72


$5.86







Previous Adjusted Diluted Earnings Per Share Guidance

$5.76


$5.94


About Roper Industries

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

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

 

Roper Industries, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

(Amounts in thousands)










June 30,


December 31,

ASSETS

2013


2012





CURRENT ASSETS:




  Cash and cash equivalents

$      374,571


$         370,590

  Accounts receivable, net

547,572


526,408

  Inventories, net

197,458


190,867

  Unbilled receivable

84,319


72,193

  Deferred taxes

58,582


41,992

  Other current assets

65,633


43,492

    Total current assets

1,328,135


1,245,542





PROPERTY, PLANT AND EQUIPMENT, NET

115,677


110,397





OTHER ASSETS:




  Goodwill

4,521,774


3,868,857

  Other intangible assets, net

2,084,677


1,698,867

  Deferred taxes

86,579


78,644

  Other assets

76,900


68,797

    Total other assets

6,769,930


5,715,165





TOTAL ASSETS

$   8,213,742


$      7,071,104









LIABILITIES AND STOCKHOLDERS' EQUITY








CURRENT LIABILITIES:




  Accounts payable

$      139,296


$         138,340

  Accrued compensation

83,862


110,724

  Deferred revenue

209,249


185,912

  Other accrued liabilities

171,050


128,351

  Deferred taxes

10,595


3,868

  Current portion of long-term debt

512,799


519,015

    Total current liabilities

1,126,851


1,086,210





NONCURRENT LIABILITIES:




  Long-term debt

2,245,424


1,503,107

  Deferred taxes

856,551


707,278

  Other liabilities

95,368


86,783

    Total liabilities

4,324,194


3,383,378





STOCKHOLDERS' EQUITY:




  Common stock

1,012


1,006

  Additional paid-in capital

1,198,269


1,158,001

  Retained earnings

2,693,421


2,489,858

  Accumulated other comprehensive earnings

16,416


58,537

  Treasury stock

(19,570)


(19,676)

    Total stockholders' equity

3,889,548


3,687,726





TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$   8,213,742


$      7,071,104





 

Roper Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings (unaudited)

(Amounts in thousands, except per share data)























Three months ended


Six months ended



June 30,


June 30,



2013


2012


2013


2012










Net sales


$784,010


$724,872


$1,521,145


$1,435,938

Cost of sales


338,503


327,264


654,062


647,137










Gross profit


445,507


397,608


867,083


788,801










Selling, general and administrative expenses


265,761


218,824


502,160


439,713










Income from operations


179,746


178,784


364,923


349,088










Interest expense


22,361


15,077


43,219


30,560

Other income/(expense)


2,536


(574)


44


(1,064)










Earnings from continuing operations before









   income taxes


159,921


163,133


321,748


317,464










Income taxes


48,568


48,320


85,481


94,342










Net Earnings


$111,353


$114,813


$   236,267


$   223,122














































Earnings per share:









  Basic


$     1.12


$     1.18


$        2.39


$        2.29

  Diluted


$     1.11


$     1.15


$        2.36


$        2.24










Weighted average common and common









  equivalent shares outstanding:









    Basic


99,089


97,460


98,983


97,249

    Diluted


100,162


99,619


100,071


99,500










 

Roper Industries, Inc. and Subsidiaries

Selected Segment Financial Data (unaudited)

(Amounts in thousands and percents of net sales)





































Three months ended June 30,


Six months ended June 30,



2013


2012


2013


2012



Amount


%


Amount


%


Amount


%


Amount


%

Net sales:

















  Industrial Technology


$  197,543




$  203,944




$   379,782




$   399,080



  Energy Systems & Controls


155,331




154,737




300,973




303,339



  Medical & Scientific Imaging


207,957




150,921




408,401




313,732



  RF Technology


223,179




215,270




431,989




419,787



    Total


$  784,010




$  724,872




$1,521,145




$1,435,938





































Gross profit:

















  Industrial Technology


$  101,844


51.6%


$  102,770


50.4%


$   195,155


51.4%


$   201,433


50.5%

  Energy Systems & Controls


87,421


56.3%


86,135


55.7%


168,327


55.9%


166,543


54.9%

  Medical & Scientific Imaging


138,416


66.6%


96,212


63.7%


273,285


66.9%


202,398


64.5%

  RF Technology


117,826


52.8%


112,491


52.3%


230,316


53.3%


218,427


52.0%

    Total


$  445,507


56.8%


$  397,608


54.9%


$   867,083


57.0%


$   788,801


54.9%



































Operating profit*:

















  Industrial Technology


$    50,580


25.6%


$    62,076


30.4%


$   103,525


27.3%


$   119,583


30.0%

  Energy Systems & Controls


41,634


26.8%


40,202


26.0%


77,356


25.7%


75,859


25.0%

  Medical & Scientific Imaging


47,537


22.9%


35,679


23.6%


107,465


26.3%


79,041


25.2%

  RF Technology


60,729


27.2%


58,161


27.0%


117,359


27.2%


108,514


25.8%

    Total


$  200,480


25.6%


$  196,118


27.1%


$   405,705


26.7%


$   382,997


26.7%



































Net Orders:

















  Industrial Technology


$  204,506




$  202,120




$   384,313




$   406,122



  Energy Systems & Controls


159,955




157,775




317,492




311,151



  Medical & Scientific Imaging


210,233




148,386




426,353




316,722



  RF Technology


241,817




255,195




481,935




458,867



    Total


$  816,511




$  763,476




$1,610,093




$1,492,862






















































  *  Operating profit is before unallocated corporate general and administrative expenses.  These expenses 

       were $20,734 and $17,334 for the three months ended June 30, 2013 and 2012, respectively and

       $40,782 and $33,909 for the six months ended June 30, 2013 and 2012, respectively.


















 

Roper Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

(Amounts in thousands)













Six months ended



June 30,



2013


2012






Net earnings


$    236,267


$    223,122

Non-cash items:





Depreciation


18,742


18,950

Amortization


71,794


52,289

Stock-based compensation expense


26,284


19,704

Income taxes


(17,925)


(18,615)

Changes in assets and liabilities:





Receivables


(1,847)


(12,565)

Inventory


(10,362)


(5,452)

Accounts payable


1,012


(1,827)

Accrued liabilities


(10,103)


(18,544)

Other, net


(2,855)


3,721

  Cash provided by operating activities


311,007


260,783






Business acquisitions, net of cash acquired


(1,007,513)


(36,872)

Capital expenditures


(21,889)


(20,532)

Other, net


1,314


544

  Cash used by investing activities


(1,028,088)


(56,860)






Principal debt borrowings


800,000


-

Principal debt payments


(1,671)


(13,215)

Revolver payments, net


(58,000)


-

Debt issuance costs


(7,517)


-

Dividends


(16,338)


(26,673)

Excess tax benefit from share-based payment


5,654


11,070

Proceeds from stock-based compensation, net


10,998


9,165

Premium on convertible debt conversions


(4,040)


-

Other, net


1,826


16

  Cash provided by/(used by) financing activities


730,912


(19,637)






Effect of exchange rate changes on cash


(9,850)


(3,489)






Net increase in cash and equivalents


3,981


180,797

Cash and equivalents, beginning of period


370,590


338,101






Cash and equivalents, end of period


$374,571


$518,898






 

ROPER INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENT OF EARNINGS -  RECONCILIATION OF GAAP TO NON-GAAP

(Amounts in thousands, except per share data)

















Adjustments








Sunquest Fair Value


MHA Purchase


Special Charge


2013




2013


Adjustment


Accounting


Related to


2nd Quarter




2nd Quarter


to Acquired


Adjustment


Vendor-Supplied


Adjusted 




GAAP


Deferred Revenue


To Revenue


Component


Non-GAAP


Net Orders


$             816,511


$                                 -


$          18,540


$                         -


$            835,051














Net Sales


$             784,010


$                        2,380


$          18,540


$                         -


$            804,930


Cost of Sales


338,503


-


-




338,503


Gross Profit


445,507


2,380


18,540




466,427


Selling, general and administrative expenses


245,027


-


-


(9,100)


235,927


Segment income from operations


200,480


2,380


18,540


9,100


230,500


Corporate general and administrative expenses


20,734


-


-


-


20,734


Income from operations


179,746


2,380


18,540


9,100


209,766


Interest Expense


22,361


-


-


-


22,361


Other income (expense)


2,536


-


-


-


2,536


Earnings from continuing operations before income taxes


159,921


2,380


18,540


9,100


189,941


Income Taxes (1)


48,568


833


6,489


3,185


59,075


  Tax Rate


30.4%


35.0%


35.0%


35.0%


31.1%














Net Earnings


$             111,353


$                        1,547


$          12,051


$                5,915


$            130,866














Weighted average common shares outstanding


100,162








100,162














Diluted earnings per share


$                    1.11








$                   1.31


























(1) For the adjustment, the company used a 35% tax rate, as these adjustments are US-based items and 35% is the statutory tax rate in the United States



 

SOURCE Roper Industries, Inc.



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