EX-99.2 7 dex992.htm PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL INFORMATION Pro Forma Unaudited Consolidated Financial Information

Exhibit 99.2

 

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

 

We derived the following unaudited pro forma consolidated financial data by the application of pro forma adjustments to our historical financial statements, the historical financial statements of TransCore and our pro forma consolidated statement of operations for the year ended December 31, 2003 reflecting our acquisition of Neptune Technology Group Holdings, Inc., or NTGH. The pro forma consolidated statement of operations for the year ended December 31, 2003 assumes that the NTGH acquisition and the related transactions occurred on January 1, 2003. In addition, the following pro forma consolidated statements of operations for the year ended December 31, 2003 and the nine months ended September 30, 2004 reflect the following events as if each had occurred on January 1, 2003, and the unaudited pro forma balance sheet as of September 30, 2004 reflects the following events as if each had occurred on September 30, 2004:

 

  Ÿ   the acquisition of TransCore;

 

  Ÿ   the issuance of 5,000,000 shares of our common stock for $60.10 per share;

 

  Ÿ   the incurrence of approximately $655.0 million of borrowings under our new senior secured credit facility; and

 

  Ÿ   the repayment of all amounts outstanding under our existing credit facility, which aggregated $384.6 million at September 30, 2004.

 

The foregoing are referred to as the “Transactions.”

 

The pro forma consolidated statement of operations for the year ended December 31, 2003 utilizes the pro forma consolidated statement of operations for Roper for the year ended December 31, 2003 filed as Exhibit 99.1 to our Current Report on Form 8-K dated October 25, 2004 (which, in turn, reflects the application of pro forma adjustments to our audited consolidated statement of operations for the year ended December 31, 2003 and the unaudited historical financial statements of NTGH for the year ended December 31, 2003) and the audited consolidated statements of operations of TransCore for the year ended January 31, 2004. The pro forma consolidated statement of operations for the nine months ended September 30, 2004 utilizes the unaudited consolidated statement of operations for Roper for the nine months ended September 30, 2004 and the unaudited consolidated statement of operations of TransCore for the nine months ended October 31, 2004. The pro forma consolidated balance sheet as of September 30, 2004 utilizes the unaudited balance sheet of Roper as of September 30, 2004 and the unaudited balance sheet of TransCore as of October 31, 2004.

 

The unaudited pro forma consolidated financial data has been prepared giving effect to the TransCore acquisition, which will be accounted for in accordance with SFAS No. 141, “Business Combinations.” The total purchase price will be allocated to the net assets of TransCore based upon estimates of fair value. The pro forma adjustments are based on a preliminary assessment of the value of TransCore’s tangible and intangible assets by management. Management will utilize a formal valuation analysis by an outside appraisal firm in determining the final purchase price allocation. Accordingly, the final purchase price allocation may include an adjustment to the amounts recorded for the value of property and equipment, identifiable intangible assets and goodwill, as well as changes in cash consideration based on changes in cash, indebtedness and working capital on the closing date. A final valuation is in process and will be completed after the completion of the acquisition.

 

The adjustments to the unaudited pro forma consolidated statement of operations are based upon available information and certain assumptions that we believe are reasonable and exclude the following non-recurring charges that will be incurred in connection with the Transactions: (1) amortization of estimated inventory fair value step-up of approximately $4.4 million from the acquisition expected to impact 2005 cost of sales; and (2) the write-off of approximately $5.4 million of debt extinguishment costs, net of tax, related to the repayment of all amounts outstanding under our existing credit facility. The pro forma consolidated financial information should be read in conjunction with the historical financial statements of Roper and TransCore and the related notes thereto included in the Company’s filings with the Securities and Exchange Commission. The pro forma financial information is presented for informational purposes only and does not purport to represent what our actual results of operations or financial position would have been had the TransCore acquisition and related Transactions described above been consummated at the date indicated, nor is it necessarily indicative of our future results of operations or financial condition.

 

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ROPER INDUSTRIES, INC. AND SUBSIDIARIES

 

PRO FORMA CONSOLIDATED BALANCE SHEET

September 30, 2004

 

     Historical
Roper
    Historical
TransCore
    Adjustments
for the
Transactions
     Pro Forma
    

(unaudited)

(in thousands)

Cash and cash equivalents

    $ 102,416    $ 6,766    $ (60,629 )(1)   $ 48,553

Accounts receivable, net

      169,592      61,757      —         231,349

Inventories

      109,316      16,450      4,436  (2)     130,202

Cost and estimated earnings in excess of billings on uncompleted contracts

      —        26,337      —         26,337

Deferred taxes

      20,671      1,908      —         22,579

Other current assets

      9,019      1,749      —         10,768
    
  
  
 

Total current assets

      411,014      114,967      (56,193 )     469,788

Property, plant and equipment, net

      74,189      24,501      —         98,690

Goodwill

      739,418      209,167      172,349  (2)     1,120,934

Other intangible assets, net

      297,015      37,215      155,785  (2)     490,015

Deferred taxes

      10,828      6,224      —         17,052

Other noncurrent assets

      40,674      7,289      10,431  (3)     54,194
                     (4,200 )(4)      
    
  
  
 

Total assets

    $ 1,573,138    $ 399,363    $ 278,172     $ 2,250,673
    
  
  
 

Accounts payable

    $ 46,165    $ 17,493    $ —       $ 63,658

Accrued liabilities

      80,012      18,484      2,000  (2)     100,496

Retention and stock related plans

      —        8,978      (8,978 )(5)     —  

Advanced billings

      —        9,849      —         9,849

Billings in excess of costs and estimated earnings on uncompleted contracts

      —        6,363      —         6,363

Deferred taxes

      1,640      —        —         1,640

Current portion of long-term debt

      20,951      3,896      8,854  (6)     33,701
    
  
  
 

Total current liabilities

      148,768      65,063      1,876       215,707

Long-term debt

      594,746      201,470      56,171  (6)     852,387

Deferred taxes

      55,426      —        54,525  (2)     109,951

Redeemable preferred stock

      —        53,279      (53,279 )(7)     —  

Other noncurrent liabilities

      18,692      403      298  (7)     19,393
    
  
  
 

Total liabilities

      817,632      320,215      59,591       1,197,438

Total stockholders’ equity

      755,506      79,148      297,729  (8)     1,053,235
                     (79,148 )(7)      
    
  
  
 

Total liabilities and stockholders’ equity

    $ 1,573,138    $ 399,363    $ 278,172     $ 2,250,673
    
  
  
 

 

See accompanying notes to the unaudited Pro Forma Consolidated Balance Sheet

 

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ROPER INDUSTRIES, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

(In thousands)

 

(1)   Represents $53,863 of our cash-on-hand used to fund the TransCore acquisition as well as $6,766 of existing cash that will remain with the sellers.

 

(2)   Under purchase accounting, the estimated acquisition consideration will be allocated to TransCore’s assets and liabilities based on their fair values. The consideration remaining will be allocated to identifiable intangibles with a finite life and amortized over that life, as well as to goodwill and identifiable intangibles with an indefinite life, which will be evaluated on an annual basis to determine impairment and adjusted accordingly. The pro forma adjustments were based on management’s preliminary assessment of value of TransCore’s tangible and intangible assets. The final purchase price allocation is in process and may include an adjustment of the total consideration payable in the Transactions, as well as in the amount recorded for any changes in value of property and equipment, identifiable intangible assets and goodwill determined by management after completion of the Transactions.

 

Allocation of acquisition consideration:

         

Consideration paid for the TransCore acquisition

    $ 600,000  

Estimated acquisition expenses

      11,552  
    

Total acquisition consideration

    $ 611,552  

Less: Net Book Value of assets acquired

      (335,507 )
    

Excess purchase price to be allocated

    $ 276,045  
    

Preliminary allocations:

         

Inventory step-up

    $ 4,436  

Deferred tax liability related to incremental intangible assets acquired

      (54,525 )

Restructuring and other incremental liabilities

      (2,000 )

Incremental identifiable intangible assets

      155,785  

Incremental goodwill

      172,349  
    
     $ 276,045  
    

 

Amortization of intangible assets, if applicable, will occur over their estimated useful lives, which we estimate will range from three to twelve years. The major categories of TransCore intangible assets are estimated as follows, subject to adjustment in connection with the final purchase price allocation:

 

Assets subject to amortization:

       

Customer relationships

    $ 106,000

Technology

      33,000

Backlog

      14,000

Assets not subject to amortization:

       

Trade names

    $ 40,000
    
     $ 193,000
    

 

(3)   Estimated debt issuance cost of $10,431 related to our new senior secured credit facility, and related expenses, which will be amortized over the life of the credit facility.

 

(4)   Reflects the elimination of capitalized financing fees related to TransCore’s debt that was not assumed in the Transactions.

 

(5)   Reflects the elimination of retention and stock related plans which were not assumed in connection with the TransCore acquisition.

 

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(6)   Reflects the increase in our outstanding indebtedness following the Transactions and the elimination of TransCore’s existing indebtedness that was not assumed in connection with the Transactions.

 

(7)   Reflects the elimination of TransCore’s historical share capital, retained earnings, redeemable preferred stock and other equity accounts pursuant to the application of purchase accounting.

 

(8)   Reflects the issuance of 5,000,000 shares in the common stock offering for $60.10 per share and the application of the proceeds from the offering, net of underwriting discounts and expenses.

 

4

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

 

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended December 31, 2003

 

     Pro Forma
Roper/
NTGH(1)(2)
     Historical
TransCore(2)
     Adjustments
for the
Transactions
     Pro Forma
  
    

(unaudited)

(in thousands)

  

Net sales

    $ 855,834     $ 338,137     $ —       $ 1,193,971  

Cost of sales

      424,113       189,253       —         613,366  
    
 
 
 

Gross profit

      431,721       148,884       —         580,605  

Selling, general and administrative expenses

      284,806       105,936       10,450  (3)     401,192  

Retention and stock related plans expense

      —         1,015 (4)     —         1,015  
    
 
 
 

Operating profit

      146,915       41,933       (10,450 )     178,398  

Interest expense

      26,251       25,308       (18,916 )(5)     32,643  

Loss on extinguishment of debt

      9,329       11,126 (4)     —         20,455  

Other income/(expense)

      (3,735 )     1,066       —         (2,669 )
    
 
 
 

Earnings from continuing operations before income taxes

      107,600       6,565       8,466       122,631  

Income taxes

      33,320       2,950       2,963  (6)     39,233  
    
 
 
 

Net earnings from continuing operations

    $ 74,280     $ 3,615     $ 5,503     $ 83,398  
    
 
 
 

Net earnings per share from continuing operations

                                 

Basic

    $ 2.04                     $ 2.01  

Diluted

      2.02                       1.99  

Average shares outstanding

                                 

Basic

      36,439               5,000  (7)     41,439  

Diluted

      36,856               5,000  (7)     41,856  

 

 

 

See accompanying notes to the unaudited Pro Forma Consolidated Statement of Operations

 

5

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

 

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

Nine Months Ended September 30, 2004

 

     Historical
Roper(2)
    Historical
TransCore(2)
     Adjustments
for the
Transactions
     Pro Forma
    

(unaudited)

(in thousands)

Net sales

    $ 693,215    $ 269,905     $ —       $ 963,120

Cost of sales

      348,191      148,256       —         496,447
    
  
 
 

Gross profit

      345,024      121,649       —         466,673

Selling, general and administrative expenses

      225,924      85,605       7,775  (3)     319,304

Retention and stock related plans expense

      —        9,658 (4)     —         9,658
    
  
 
 

Operating profit

      119,100      26,386       (7,775 )     137,711

Interest expense

      21,066      12,141       (9,552 )(5)     23,655

Other income

      18      942       —         960
    
  
 
 

Earnings from continuing operations before income taxes

      98,052      15,187       1,777       115,016

Income taxes

      28,986      9,025       622 (6)     38,633
    
  
 
 

Net earnings from continuing operations

    $ 69,066    $ 6,162     $ 1,155     $ 76,383
    
  
 
 

Net earnings per share from continuing operations

                              

Basic

    $ 1.87                    $ 1.82

Diluted

      1.84                      1.80

Average shares outstanding

                              

Basic

      36,870              5,000  (7)     41,870

Diluted

      37,474              5,000  (7)     42,474

 

 

See accompanying notes to the unaudited Pro Forma Consolidated Statement of Operations

 

6

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

 

(1)   Reflects the application of pro forma adjustments to our audited consolidated statement of operations for the year ended December 31, 2003 and the unaudited historical financial statements of NTGH for the year ended December 31, 2003 as if we acquired NTGH on January 1, 2003. Roper and NTGH operated as separate businesses from January 1, 2003 through December 29, 2003.

 

(2)   Because of differing fiscal year-ends for Roper and TransCore, the pro forma consolidated statement of operations for the fiscal year ended December 31, 2003 utilizes the audited consolidated statement of operations statement of TransCore for the fiscal year ended January 31, 2004. The pro forma consolidated statement of operations for the fiscal nine months ended September 30, 2004 utilizes the unaudited consolidated statement of operations of TransCore for the nine months ended October 31, 2004.

 

(3)   Reflects the adjustment to the historical amortization expense of TransCore for the additional intangible amortization of identifiable finite-lived intangible assets.

 

(4)   During the year ended December 31, 2003, TransCore recorded a loss on early extinguishment of debt of $11,126. This loss was associated with financing arrangements typical of ownership by a private equity group. This loss is required to be presented in the pro forma statements of operations under Article 11 of Regulation S-X. This amount is not applicable for Roper because TransCore is now a part of Roper following the TransCore acquisition. In addition, during TransCore’s year ended January 31, 2004 and the nine months ended October 31, 2004, TransCore recorded pretax expenses relating to its retention and stock related plans of $1,015 and $9,658, respectively. During TransCore’s nine months ended October 31, 2004, $3,552 of this expense related to preferred stock held by TransCore employees becoming convertible based on the value of TransCore’s common stock. All outstanding stock appreciation rights and preferred stock was redeemed in connection with the TransCore acquisition. Therefore, these expenses will not be applicable for us in future periods. The table below reflects the pro forma earnings from continuing operations before income taxes adjusted to exclude the loss on extinguishment of debt and the stock appreciation and rights plans expense (dollars in thousands):

 

    

Year Ended

December 31, 2003

    Nine Months Ended
September 30, 2004

Pro forma earnings from continuing operations before income taxes

    $ 122,631    $ 115,016

Loss on extinguishment of debt

      11,126      —  

Retention and stock related plans expense

      1,015      9,658
    
  

Adjusted earnings from continuing operations before income taxes

    $ 134,772    $ 124,674
    
  

 

(5)   Reflects the net change in interest expense to give effect to (a) borrowings under our new $1,055.0 million senior secured credit facility, (b) the amortization of $10.4 million of debt issuance costs over five years, and (c) the elimination of interest expense for both Roper and TransCore under their current financing structures. For every  1/8% change in the interest rates on the debt, the effect on pro forma interest expense of the combined entities is approximately $0.7 million per year.

 

(6)   Tax effects of the pro forma adjustments have been calculated based on the applicable statutory rate of 35%.

 

(7)   Reflects the issuance of 5,000,000 shares of common stock in the common stock offering for gross proceeds of $300.5 million.

 

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