01—Abstract
Summary
Summary of the 10-K filed February 21, 2014. Cited figures are marked; the original filing is the authoritative source.
Roper Industries, Inc. reported net sales of $3.24 billiona for 2013, up from $2.99 billion in 2012, with the increase driven by acquisitions contributing 7% and organic growth of 1%.
Income from operations rose to $842.4 millionb from $757.6 million, and net earnings reached $538.3 million, or $5.37 per diluted share, compared with $483.4 million, or $4.86 per diluted share, in 2012. Gross margin improved to 58.1% from 55.8%. Growth was led by the Medical and Scientific Imaging segment, whose net sales rose $198 million, or 28%, largely on the $1.0 billion acquisition of Managed Health Care Associates (MHA) in May 2013.
Backlog grew to $1.05 billionc at December 31, 2013 from $947.2 million a year earlier, and total net orders rose 11.9%. The balance sheet expanded materially with acquisitions. Total assets were $8.18 billion and total debt was $2.46 billion, with $2.45 billion classified as long-term, against $4.21 billion of stockholders' equity.
Goodwill totaled $4.55 billiond, representing 56% of total assets, and the filing notes that a write-off of goodwill or intangibles would affect results and total capitalization. Operating cash flow was $802.6 million, and cash used in investing activities was $1.12 billion, primarily for business acquisitions. The company issued $800 million of 2.050% senior notes due 2018 in June 2013 and repaid $500 million of notes that matured in August 2013.
Management stated that its internal controls were effective as of December 31, 2013 and that PricewaterhouseCoopers LLP issued an unqualified opinion. The filing also notes that the quarterly dividend was increased to $0.20 per share from $0.165, payable January 24, 2014, and that one RF Technology reporting unit's fair value was less than 5% above its carrying value at year-end, a point investors may wish to monitor.
02—Key points
Key Highlights
- Net sales rose to $3.24 billion in 2013 from $2.99 billion in 2012, an increase of 8%, with acquisitions contributing 7% and organic growth 1%.
- Net earnings were $538.3 million, or $5.37 per diluted share, up from $483.4 million, or $4.86 per diluted share, in 2012.
- Medical and Scientific Imaging net sales increased 28% to $902.3 million, driven by acquisitions including MHA for $1.0 billion in cash.
- Total debt was $2.46 billion at year-end, and the company issued $800 million of 2.050% senior notes due 2018 to pay down revolver borrowings.
- Goodwill of $4.55 billion represented 56% of total assets of $8.18 billion, and the filing flags that one RF Technology reporting unit's fair value was less than 5% above its carrying value.
- Total net orders rose 11.9% to $3.35 billion and year-end backlog reached $1.05 billion, up 11.4%.
- The quarterly dividend was raised to $0.20 per share from $0.165, payable January 24, 2014.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Roper Technologies kept $0.17.
- Revenue$3.24B100.0%
- Cost of revenue−$1.36B41.9%
- Gross profit$1.88B58.1%
- Operating costs−$1.04B32.1%
- Operating income$842.4M26.0%
- Interest, other & tax−$304.1M9.4%
- Net income$538.3M16.6%
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 21, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $3.24B$2.99B | +8.2% |
| Cost of Revenue | $1.36B$1.32B | +2.5% |
| Gross Profit | $1.88B$1.67B | +12.6% |
| R&D Expenses | $145.70M$125.90M | +15.7% |
| SG&A Expenses | $1.04B$914.13M | +13.8% |
| Operating Income | $842.36M$757.59M | +11.2% |
| Interest Expense | $88.04M$67.53M | +30.4% |
| Net Income | $538.29M$483.36M | +11.4% |
| EPS (Basic) | $5.43$4.95 | +9.7% |
| EPS (Diluted) | $5.37$4.86 | +10.5% |
| Shares Outstanding (Basic) | 99.12M97.70M | +1.5% |
| Shares Outstanding (Diluted) | 100.21M99.56M | +0.7% |
05—Questions
Frequently Asked Questions
How did Roper's revenue and profitability change in 2013?
Net sales grew 8% to $3.24 billion, with acquisitions contributing 7% and organic growth 1%. Income from operations increased to $842.4 million from $757.6 million, and diluted earnings per share rose to $5.37 from $4.86. Gross margin expanded to 58.1% from 55.8%.
What drove growth in the Medical and Scientific Imaging segment?
Segment net sales increased $198 million, or 28%, to $902.3 million. Acquisitions added $208 million in sales, while organic sales decreased 1% due to lower camera sales. Operating margin rose to 29.7% from 26.6%, largely due to higher-margin medical products. The Managed Health Care Associates acquisition on May 1, 2013 was a key contributor.
How leveraged is the company and how is its debt structured?
Total debt was $2.46 billion at December 31, 2013, or 36.9% of total capital, up from $2.0 billion at 35.4% a year earlier. The debt consists mainly of senior notes, with $250 million outstanding on the $1.5 billion revolving credit facility. The most restrictive covenant is a consolidated total leverage ratio limited to 3.5, and the company stated it was in compliance throughout the year.
What are the main risks related to the company's balance sheet?
Goodwill of $4.55 billion is 56% of total assets and exceeds stockholders' equity of $4.21 billion. The filing states that a write-off of a significant portion of goodwill or intangibles would negatively affect results and total capitalization. It also notes that one RF Technology reporting unit's fair value was less than 5% above its carrying value at year-end, and that a trade name in the same segment could become impaired if sales growth assumptions were not met.
What is the dividend outlook for shareholders?
In December 2013, the Board increased the quarterly dividend to $0.20 per share from $0.165, payable January 24, 2014. Dividends declared totaled $0.695 per share in 2013, up from $0.5775 in 2012. The filing states that the company has increased its dividend annually since its 1992 initial public offering, though future dividends remain at the Board's discretion.
06—Continue