ROPER TECHNOLOGIES INC - FORM 8-K/A - EX-99.2 - PRO FORMA FINANCIAL STATEMENTS. - October 31, 2012

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8-K/A - ROPER TECHNOLOGIES INCcover8k.htm
EX-99.1 - AUDITED FINANCIAL STATEMENTS OF SUNQUEST INFORMATION SYSTEMS, INC. - ROPER TECHNOLOGIES INCex_99-1.htm
EX-23 - CONSENT OF ERNST & YOUNG - ROPER TECHNOLOGIES INCex_23-1.htm
Exhibit 99.2
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements have been prepared to give effect to the acquisition by Roper Industries, Inc. (the "Company" or "Roper") of Sunquest Holdings, Inc. ("Sunquest") using the acquisition method of accounting with the assumptions and adjustments described in the accompanying notes to the unaudited pro forma combined financial statements. These unaudited pro forma combined financial statements were prepared as if the acquisition described above had been completed as of January 1, 2011 for statements of operations purposes and as of June 30, 2012 for balance sheet purposes.
The unaudited pro forma combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the financial position or results of operations that would have actually been reported had the acquisition occurred on January 1, 2011 for statements of operation purposes and as of June 30, 2012 for balance sheet purposes, nor is it necessarily indicative of the future financial position or results of operations. The unaudited pro forma combined financial statements include adjustments to reflect the allocation of the purchase price to the acquired assets and assumed liabilities of Sunquest. Final purchase accounting adjustments may differ materially.
These unaudited pro forma combined financial statements are based upon the respective historical consolidated financial statements of Roper and Sunquest and, in respect of Roper's financial data, should be read in conjunction with the historical consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" of Roper included in its Annual Report on Form 10-K for the period ended December 31, 2011 and its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 filed with the Securities and Exchange Commission. The historical consolidated financial statements of Sunquest have been extracted from the historical consolidated financial statements and related notes of Sunquest included in Exhibit 99.1 to the Current Report on Form 8-K of which this Exhibit 99.2 constitutes a part.
 
 
UNAUDITED PRO FORMA COMBINED
BALANCE SHEET
AS OF JUNE 30, 2012
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Historical
 
Proforma
 
 
Roper
 
Sunquest
 
Adjustments
 
 
Combined
 
 
As of June 30, 2012
As of May 31, 2012
  Note 3
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 $       518,898
 
 $         39,005
 
 $      (343,640)
  (a)
 
 $       214,263
Accounts receivable, net
 
          439,184
 
            59,992
 
                      -
 
 
          499,176
Inventories, net
 
          209,626
 
                      -
 
                      -
 
 
          209,626
Deferred taxes
 
            40,335
 
              4,860
 
             (4,841)
  (b)
 
            40,354
Unbilled receivables
 
            74,011
 
              2,759
 
                      -
 
 
            76,770
Other current assets
 
            43,323
 
              3,368
 
                      -
 
 
            46,691
Total current assets
 
       1,325,377
 
          109,984
 
         (348,481)
 
 
       1,086,880
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
 
          108,089
 
              2,874
 
                      -
 
 
          110,963
Goodwill
 
       2,873,361
 
          533,049
 
          452,656
  (c)
 
       3,859,066
Other intangible assets, net
 
       1,065,124
 
          630,924
 
            38,076
  (d)
 
       1,734,124
Deferred taxes
 
            61,419
 
                      -
 
                 960
  (b)
 
            62,379
Other assets
 
            68,811
 
            20,294
 
           (20,294)
  (e)
 
            68,811
Total assets
 
 $    5,502,181
 
 $    1,297,125
 
 $       122,917
 
 
 $    6,922,223
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
Accounts payable
 
 $       139,379
 
 $           2,269
 
 $         40,185
  (f)
 
 $       181,833
Accrued liabilities
 
          306,945
 
          103,137
 
           (40,650)
  (g)
 
          369,432
Deferred taxes
 
              8,862
 
                      -
 
             (4,531)
  (b)
 
              4,331
Current portion of long-term debt
 
            57,424
 
              3,850
 
             (3,850)
  (h)
 
            57,424
Total current liabilities
 
          512,610
 
          109,256
 
             (8,846)
 
 
          613,020
 
 
 
 
 
 
 
 
 
 
Long-term debt, net of current portion
 
       1,011,817
 
          622,300
 
          488,065
  (h)
 
       2,122,182
Deferred taxes
 
          483,652
 
          243,257
 
              3,345
  (b)
 
          730,254
Other liabilities
 
            80,091
 
              2,850
 
                      -
 
 
            82,941
Total liabilities
 
       2,088,170
 
          977,663
 
          482,564
 
 
       3,548,397
 
 
 
 
 
 
 
 
 
 
Common Stock
 
                 996
 
                      -
 
 
 
 
                 996
Additional paid-in capital
 
       1,153,620
 
          331,346
 
         (331,346)
  (i)
 
       1,153,620
Retained earnings (deficit)
2,259,422
 
           (12,149)
 
           (28,036)
  (f)(i)
       2,219,237
Accumulated other comprehensive earnings
 
            19,753
 
                 265
 
                (265)
  (i)
 
            19,753
Treasury stock
 
           (19,780)
 
                      -
 
                      -
 
 
           (19,780)
Total stockholders' equity
 
       3,414,011
 
          319,462
 
         (359,647)
 
 
       3,373,826
Total liabilities and stockholders' equity
 
 $    5,502,181
 
 $    1,297,125
 
 $       122,917
 
 
 $    6,922,223
 
 
The accompanying notes are an integral part of these unaudited pro forma combined financial statements.
 
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2012
(In thousands, except per share data)
 
  
Historical
    
Pro Forma
  
 
  
Roper
    
Sunquest
   
Adjustments
    
Combined
  
 
  
Six Months Ended
June 30, 2012
    
Six Months Ended
May 31, 2012
    
Note 3
  
Net sales
  
$
1,435,938
    
$
105,324
    
$
-
    
$
1,541,262
  
Cost of sales
    
647,137
      
49,577
      
(11,642
)
 (j)    
685,072
  
Gross profit
    
788,801
      
55,747
      
11,642
      
856,190
  
Selling, general and administrative expenses
    
439,713
      
28,158
      
(5,156
)
 (k)    
462,715
  
Income from operations
    
349,088
      
27,589
      
16,798
      
393,475
  
Interest expense, net
    
30,560
      
24,547
      
(17,452
)
 (l)    
37,655
  
Other expense, net
    
(1,064
)
    
(200
)
    
-
      
(1,264
)
Earnings before income taxes
    
317,464
      
2,842
      
34,250
      
354,556
  
Income tax expense (benefit)
    
94,342
      
(4,170
)
    
19,744
   (m)    
109,916
  
Net earnings
  
$
223,122
    
$
7,012
    
$
14,506
    
$
244,640
  
 
                                
Earnings per share:
                                
Basic
  
$
2.29
                    
$
2.52
  
Diluted
  
$
2.24
                    
$
2.46
  
Weighted-average common shares outstanding:
                                
Basic
    
97,249
                      
97,249
  
Diluted
    
99,500
                      
99,500
  
 
 
The accompanying notes are an integral part of these unaudited pro forma combined financial statements.
 
 
 
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands, except per share data)
 
 
  
Historical
    
Pro Forma
  
 
  
Roper
    
Sunquest
   
Adjustments
  
 
  
Combined
  
 
  
Year Ended December 31, 2011
    
Twelve Months Ended February 29, 2012
    
Note 3
  
 
  
 
Net sales
  
$
2,797,089
    
$
183,536
    
$
-
  
 
  
$
2,980,625
  
Cost of sales
    
1,281,525
      
99,700
    
(25,503
)
(j)
    
1,355,722
  
Gross profit
    
1,515,564
      
83,836
      
25,503
  
 
    
1,624,903
  
Selling, general and administrative expenses
    
855,025
      
56,388
      
(9,250
)
(k)
    
902,163
  
Income from operations
    
660,539
      
27,448
      
34,753
  
 
    
722,740
  
Interest expense, net
    
63,648
      
49,205
      
(35,015
)
(l)
    
77,838
  
Other income (expense), net
    
8,096
      
(258
)
    
-
  
 
    
7,838
  
Earnings before income taxes
    
604,987
      
(22,015
)
    
69,768
  
 
    
652,740
  
Income tax expense (benefit)
    
177,740
      
(10,435
)
    
30,087
  
(m)
    
197,392
  
Net earnings (loss)
  
$
427,247
    
$
(11,580
)
  
$
39,681
  
 
  
$
455,348
  
 
                        
 
        
Earnings per share:
                        
 
        
Basic
  
$
4.45
                  
   
  
$
4.75
  
Diluted
  
$
4.34
                  
   
  
$
4.63
  
Weighted-average common shares outstanding:
                        
 
        
Basic
    
95,959
                  
 
    
95,959
  
Diluted
    
98,386
                  
 
    
98,386
  
  
 
 
The accompanying notes are an integral part of these unaudited pro forma combined financial statements.
 
 
 
 
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS (In thousands)
The unaudited pro forma combined financial statements included herein have been prepared pursuant to the rules and regulations of the SEC.
1. BASIS OF PRO FORMA PRESENTATION
On August 22, 2012, Roper Industries, Inc. (the "Company" or "Roper") completed its acquisition (the "Sunquest Acquisition") of 100% of the outstanding shares of Sunquest Holdings, Inc. ("Sunquest") for cash. The Sunquest Acquisition will be accounted for using the acquisition method of accounting in accordance with the accounting standard for business combinations.
The preparation of pro forma financial information is governed by Article 11 of Regulation S-X, which requires a recasting of Sunquest's fiscal year end (May 31st) or interim period to a date that is within 93 days of the Company's fiscal year end or period-end presented.
The unaudited pro forma combined balance sheet as of June 30, 2012 was prepared by combining the historical unaudited balance sheet data as of June 30, 2012 for Roper and the historical audited balance sheet data as of May 31, 2012 for Sunquest, as if the Sunquest Acquisition had been consummated on June 30, 2012.
The unaudited pro forma combined statement of operations for the six months ended June 30, 2012 was prepared by combining the unaudited results of operations for the six months ended June 30, 2012 for Roper and the unaudited results of operations for the six months ended May 31, 2012 for Sunquest, as if the Sunquest Acquisition had been consummated on January 1, 2011.  
The unaudited pro forma combined statement of operations for the year ended December 31, 2011 was prepared by combining the audited results of operations for the year ended December 31, 2011 for Roper and the unaudited results of operations for the year ended February 29, 2012 for Sunquest, as if the Sunquest Acquisition had been consummated on January 1, 2011.

For Sunquest, results of operations for the months ended December 2011, January 2012 and February 2012, are included in both their statement of operations for the year ended February 29, 2012 and the six months ended May 31, 2012.
 
Sunquest historically classified certain amounts differently than Roper in their consolidated balance sheet. The following schedule summarizes the necessary adjustments to conform the historical Sunquest balance sheet as of May 31, 2012 to Roper's basis of presentation:

1)
To separate accounts receivable into accounts receivable and unbilled receivables:
 
As presented historically by Sunquest
  
 
Accounts receivable, net
  
$
62,751
  
 
        
Conformed to Roper's presentation
        
Accounts receivable, net
  
$
59,992
  
Unbilled receivables
    
2,759
  
 
  
$
62,751
  
 
 
2)
To separate accounts payable and accrued expenses, and deferred revenue into accounts payable and accrued liabilities:
 
As presented historically by Sunquest
  
 
Accounts payable and accrued expenses
  
$
14,415
  
Deferred revenue
    
90,991
  
 
  
$
105,406
  
Conformed to Roper's presentation
        
Accounts payable
  
$
2,269
  
Accrued liabilities
    
103,137
  
 
  
$
105,406
  
 
 
2. PURCHASE PRICE—SUNQUEST
 
Sunquest, whose operations will be reported in the Medical and Scientific Imaging segment of Roper, is a global market leader in laboratory diagnostic information systems. Sunquest's principal facilities are located in Tucson, Arizona. The aggregate gross purchase price was $1,415,000, net of cash acquired.

Roper acquired Sunquest due to growth prospects in Sunquest's end markets of health care. In addition, Sunquest has excellent customer retention and strong recurring revenues. Roper also believes opportunities may exist to realize complementary channels within our Medical and Scientific Imaging segment with Sunquest's product offerings.

The allocation of the purchase price resulted in $669,000 of identifiable intangible assets, and $985,705 of goodwill. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.
 
 
 
Current assets
  
$
67,098
  
Property, plant, and equipment
    
2,874
  
Goodwill and intangible assets
    
1,654,705
  
Total assets acquired
    
1,724,677
  
Current liabilities
    
(60,225
)
Long term liabilities
    
(249,452
)
Total purchase price
  
$
1,415,000
  
 
 
Of the $669,000 of acquired intangible assets, $460,000 was assigned to customer relationships with an estimated useful life of 20 years, $111,000 was assigned to software with an estimated useful life of 12 years, and $98,000 was assigned to the Sunquest trade name with an indefinite life.

The majority of the $985,705 of goodwill is not expected to be deductible for tax purposes.
3. PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma combined financial statements have been prepared as if the transactions described above were completed on June 30, 2012 for balance sheet purposes and as of January 1, 2011 for statement of operations purposes. The unaudited pro forma combined balance sheet and statements of operations give effect to the following pro forma adjustments:
 
(a)              Represents cash utilized in the acquisition of Sunquest.
 
(b)              Represents changes in deferred taxes as a result of the Sunquest Acquisition, due primarily to the intangibles acquired and the transaction costs incurred.
                                                                                                                                                                                
(c)              Represents goodwill of $985,705 created in the Sunquest Acquisition, offset by the $533,049 write-off of the existing goodwill on Sunquest's balance sheet.
                                                                                                                                                                                
(d)              Represents intangible assets of $669,000 created in the Sunquest Acquisition, offset by the $630,924 write-off of the existing intangibles on Sunquest's balance sheet. Intangibles are as follows:
                                        
Value attributed to new intangible asset—customer relationships
  
$
460,000
  
Value attributed to new intangible asset—software
  
$
111,000
  
Value attributed to new intangible asset—Sunquest trade name
  
$
98,000
  
 
  
$
669,000
  
(e)              Represents the write-off of Sunquest's deferred financing costs that were associated with Sunquest's long-term debt.
                                                                                                                                                                                
                                                                                                                                                                                
(f)              Represents transaction costs associated with the Sunquest Acquisition incurred after the balance sheet dates presented. Such amount is also represented as a reduction in retained earnings.
                                                                                                                                                                                
(g)              Represents the following adjustments to accrued liabilities:
                
Decrease in income taxes payable, primarily due to application of "next day" rule to transaction costs
  
$
(25,876
)
Decrease in acquired deferred revenue
    
(14,774
)
 
  
$
(40,650
)
 
(h)              Represents the net effect of new borrowing by Roper of  $1,110,365 and repayment of Sunquest's outstanding debt of $626,150.
                                                                                                                                                                                
(i)              Represents elimination of Sunquest's historical stockholder's equity.                                                                                                                                                                    
                                                                                                                                                                                
(j)              Represents decreased amortization, calculated on a straightline basis, from newly acquired intangibles.
                                                                                                                                                                                
(k)              Represents the removal of Roper and Sunquest transaction costs related to the Sunquest Acquisition incurred in the presented historical results. Such costs were $2,328 and $3,799 for the six months ended June 30, 2012 and the year ended December 31, 2011, respectively. In addition, non-recurring fees incurred by Sunquest (rating fees, finance costs, and stock compensation) that would not have been part of Sunquest operations under Roper have been removed. Such fees were $2,828 and $5,451 for the six months ended June 30, 2012 and the year ended December 31, 2011, respectively.
                                                                                                                                                                                
(l)              Represents the net interest expense effect of the repayment of Sunquest's outstanding loans and additional borrowings by Roper. Interest expense is calculated at the Company's current revolver rate of 1.29%. The rate associated with the revolver is a floating rate. An increase or decrease in the revolver rate by 1/8 percent would result in a $1,774 change in annual interest expense.
                                                                                                                                                                                
(m)              Represents the change to income tax expense based on a full consideration of Sunquest's integration into Roper's existing tax structure, rather than utilization of a generic standard tax rate. The combined entities tax rate would be 30.2% for the year ended December 31, 2011 and 31.0% for the 6 months ended June 30, 2012.
 
 
 
 
 
 

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