01—Abstract
Summary
Summary of the 10-K filed March 2, 2009. Cited figures are marked; the original filing is the authoritative source.
Roper Industries, Inc. reported net sales of $2.31 billiona for 2008, up from $2.10 billion in 2007, with net earnings of $286.5 million, or $3.06 per diluted share, compared with $250.0 million, or $2.68 per diluted share, in 2007.
The filing attributes the sales increase to acquired companies and internal growth, with internal growth of 3.4% including a 1% foreign currency impact. Gross profit was 51.5% of net sales versus 50.4% in 2007. Growth was led by the RF Technology segment, where net sales rose $130.0 millionb, or 23.0%, to $695.0 million, and whose backlog grew to $365.7 million from $271.3 million.
Six acquisitions were completed in 2008, most notably CBORD Holdings Corp. for $375 millionc of cash. The balance sheet became more leveraged. Total debt was approximately $1.27 billion at December 31, 2008, including a $500 million 6.625% senior notes issuance and a new $1.1 billion unsecured credit facility that replaced the prior $1.355 billion secured facility.
Goodwill rose to $2.12 billiond, which the filing notes was 53% of total assets of $3.97 billion. Cash provided by operating activities was $434.4 million, while acquisitions used $704.8 million of cash net of cash acquired, so cash and cash equivalents fell to $178.1 million from $308.8 million.
The filing also reports a dividend increase: the quarterly dividend paid January 31, 2009 rose to $0.0825 per share from $0.0725, and the Company stated it had not hedged foreign currency risk. Investors should weigh the strong earnings and order growth against higher indebtedness, the large goodwill balance, and the filing's disclosure that asbestos-related claims cannot currently be quantified.
02—Key points
Key Highlights
- Net sales rose to $2.31 billion in 2008 from $2.10 billion in 2007, driven by acquisitions and internal growth of 3.4%.
- Net earnings increased to $286.5 million ($3.06 diluted EPS) from $250.0 million ($2.68 diluted EPS) in 2007.
- RF Technology segment net sales grew 23.0% to $695.0 million, and segment backlog increased to $365.7 million from $271.3 million.
- Total debt was approximately $1.27 billion at December 31, 2008, following a $500 million 6.625% senior notes offering and a new $1.1 billion unsecured credit facility.
- Goodwill of $2.12 billion represented 53% of total assets of $3.97 billion, creating potential exposure to future impairment charges.
- Six acquisitions in 2008 used $704.8 million of cash, including CBORD Holdings Corp. for $375 million; cash and equivalents declined to $178.1 million.
- The quarterly dividend was raised to $0.0825 per share from $0.0725, and the Company does not hedge foreign currency risk.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, Roper Technologies kept $0.12.
- Revenue$2.31B100.0%
- Cost of revenue−$1.12B48.5%
- Gross profit$1.19B51.5%
- Operating costs−$702.1M30.4%
- Operating income$486.2M21.1%
- Interest, other & tax−$204.3M8.9%
- Net income$281.9M12.2%
04—Financials
Financial Highlights
Figures from 10-KFY2008filed March 2, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $2.31B$2.10B | +9.7% |
| Cost of Revenue | $1.12B$1.04B | +7.1% |
| Gross Profit | $1.19B$1.06B | +12.3% |
| R&D Expenses | $87.40M— | — |
| SG&A Expenses | $702.13M$620.04M | +13.2% |
| Operating Income | $486.16M$438.35M | +10.9% |
| Interest Expense | $60.82M$58.85M | +3.3% |
| Net Income | $281.87M$245.71M | +14.7% |
| EPS (Basic) | $3.15$2.78 | +13.3% |
| EPS (Diluted) | $3.01$2.64 | +14.0% |
| Shares Outstanding (Basic) | 89.47M88.39M | +1.2% |
| Shares Outstanding (Diluted) | 93.70M93.23M | +0.5% |
05—Questions
Frequently Asked Questions
How did Roper's profitability trend in 2008?
Gross profit rose to 51.5% of net sales from 50.4% in 2007, and net earnings grew to $286.5 million from $250.0 million. Diluted EPS increased to $3.06 from $2.68. The filing attributes the margin gain in part to favorable mix in the RF Technology segment, whose gross margin rose to 50.8% from 46.8%.
How much debt does Roper carry, and how did it change?
Total debt was approximately $1.27 billion at December 31, 2008, compared with $1.06 billion at year-end 2007. The increase reflected the $500 million senior notes issued in August 2008 and borrowings used for acquisitions. The weighted average rate on the variable-rate facility borrowings was 1.90%.
What risks does the filing highlight for investors?
The filing highlights indebtedness limits on operations, foreign exchange exposure (about 24% of 2008 net sales came from companies with non-U.S. dollar functional currencies), and the risk of goodwill write-offs given goodwill of $2.12 billion. It also notes asbestos-related lawsuits, for which the Company states it is not possible to determine potential liability.
What did Roper do with its dividend and capital in 2008?
Dividends declared rose to $0.30 per share in 2008 from $0.27 in 2007. In November 2008 the Board increased the quarterly dividend to $0.0825 per share, payable January 31, 2009. Cash dividends paid in 2008 totaled $25.9 million.
06—Continue