ROPER TECHNOLOGIES, INC. You should read the following discussion in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year endedDecember 31, 2019 ("Annual Report") as filed onFebruary 28, 2020 with theU.S. Securities and Exchange Commission ("SEC") and the Notes to Condensed Consolidated Financial Statements included elsewhere in this report.
Information About Forward-Looking Statements
This report includes "forward-looking statements" within the meaning of the federal securities laws. In addition, we, or our executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents we file with theSEC or in connection with oral statements made to the press, potential investors or others. All statements that are not historical facts are "forward-looking statements." 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 expressed or implied in any forward-looking statement. Such risks and uncertainties include the effects of the COVID-19 pandemic on our business, operations, financial results and liquidity, including the duration and magnitude of such effects, which will depend on numerous evolving factors that we cannot accurately predict or assess, including: the duration and scope of the pandemic generally and in the geographical markets that we serve; the negative impact on global and regional markets, economies and economic activity; actions governments, businesses and individuals take in response to the pandemic; the effects of the pandemic, including all of the foregoing, on our customers, suppliers, and business partners, and how quickly economies and demand for our products and services recover following the pandemic. Additional examples of forward-looking statements in this report include but are not limited to statements regarding operating results, the success of our operating plans, our expectations regarding our ability to generate cash and reduce debt and associated interest expense, profit and cash flow expectations, the prospects for newly acquired businesses to be integrated and contribute to future growth and our expectations regarding growth through acquisitions. Important assumptions relating to the forward-looking statements include, among others, demand for our products, the cost, timing and success of product upgrades and new product introductions, raw material costs, expected pricing levels, expected outcomes of pending litigation, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include but are not limited to: •general economic conditions; •difficulty making acquisitions and successfully integrating acquired businesses; •any unforeseen liabilities associated with future acquisitions; •limitations on our business imposed by our indebtedness; •unfavorable changes in foreign exchange rates; •failure to effectively mitigate cybersecurity threats; •failure to comply with new data privacy laws and regulations; •difficulties associated with exports/imports and risks of changes to tariff rates; •risks and costs associated with our international sales and operations; •rising interest rates; •product liability and insurance risks; •increased warranty exposure; •future competition; •the cyclical nature of some of our markets; •reduction of business with large customers; •risks associated with government contracts; •changes in the supply of, or price for, raw materials, parts and components; •environmental compliance costs and liabilities; •risks and costs associated with asbestos-related litigation; •potential write-offs of our goodwill and other intangible assets; •our ability to successfully develop new products; •failure to protect our intellectual property; •the effect of, or change in, government regulations (including tax); 16 -------------------------------------------------------------------------------- Table of Contents •economic disruption caused by terrorist attacks, health crises (such as the COVID-19 pandemic) or other unforeseen events; and •the factors discussed in other reports filed with theSEC from time to time. We believe these forward-looking statements are reasonable. However, you should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update any of them in light of new information or future events.
Overview
Roper Technologies, Inc. ("Roper," "we," "us" or "our") is a diversified technology company. We operate businesses that design and develop software (both license and SaaS) and engineered products and solutions for a variety of niche end markets. We pursue consistent and sustainable growth in earnings and cash flow by emphasizing continuous improvement in the operating performance of our existing businesses and by acquiring other businesses that offer high value-added software, services, engineered products and solutions that we believe are capable of achieving growth and maintaining high margins. We compete in many niche markets and believe we are the market leader or a competitive alternative to the market leader in most of these markets.
Critical Accounting Policies
There were no material changes during the nine months endedSeptember 30, 2020 to the items that we disclosed as our critical accounting policies and estimates in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report.
Recently Issued Accounting Standards
Information regarding new accounting pronouncements is included in Note 2 of the Notes to Condensed Consolidated Financial Statements.
Impact of COVID-19 on our Business
A novel strain of coronavirus (COVID-19) was first identified in
Our top priority during this pandemic is the health and safety of our employees. The leadership teams at our businesses continue to be proactive in instituting safety measures that protect our employees, while maintaining operational capabilities required to meet our customers' needs. All our businesses with manufacturing facilities have been deemed essential businesses and remain operational, supplying our customers with critical products. Additionally, all of our businesses have been operational in their work-from-home environments with limited disruption. The spread of COVID-19 has caused us to modify our business practices, and we may take further actions as required by governmental and other regulatory authorities or as we determine to protect the safety or best interests of our employees, customers, suppliers and business partners. Some changes in business practices include, but are not limited to: restricting employee travel, developing social distancing plans for our employees, expanding the number of our associateswho work from home, and cancelling physical participation in meetings, events and conferences.
We operate a diverse portfolio of businesses, and, as a result, our businesses are navigating through a diverse set of challenges. Some of the impacts our businesses are experiencing from COVID-19 include, but are not limited to:
•The ability of our businesses to visit current and potential customers in order
to solicit new business and/or provide necessary on-site installation,
implementation and training services has been impacted by the pandemic, which
has, in some cases, limited our ability to obtain new business and effectively
service existing business;
•While government restrictions on non-emergency hospital procedures resulted in
decreased (1) demand in our businesses that provide medical products used in
non-emergency procedures and (2) revenue related to pharmaceutical utilization
in post-acute healthcare settings, several of our businesses are on the front
lines of battling COVID-19 and, as a result, have benefited from the heightened
demand for their products/services, which may decline when the impact of
COVID-19 subsides;
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•The unprecedented slowdown and/or shut down of global economy sectors and the
related uncertain timeline to reopen and recover, particularly in areas
experiencing a more severe outbreak of the virus, has created a weak demand
environment for our businesses serving industrial and energy markets; and
•Some of our customers, including those in the medical field, may seek to delay
payments to us while they are addressing the numerous challenges presented by
COVID-19; to date, such delays have not impacted the timing of our cash flow and
our financial performance in a significant manner.
COVID-19 continues to present significant uncertainty in the future economic
outlook of our businesses. While our expectations for our operating results in
2020 have been lowered to reflect the new economic environment, our businesses
are taking pragmatic cost countermeasures to manage profitability while
continuing strategic investments for long term growth.
Largely as a result of the acquisition of Vertafore , we ended the quarter with
$302 of cash on-hand and $1,160 drawn on our $3,000 revolving line of credit.
Also in connection with the acquisition of Vertafore , on September 1, 2020 , we
issued and sold an aggregate of $2,700 of Senior Notes, including $300 aggregate
principal amount of 0.450% Senior Notes due 2022, $700 aggregate principal
amount of 1.000% Senior Notes due 2025, $700 aggregate principal amount of
1.400% Senior Notes due 2027, and $1,000 aggregate principal amount of 1.750%
Senior Notes due 2031. We expect our operating cash flow generation capability
to continue due to our high levels of recurring revenue, high profitability, low
capital expenditure requirements, and low working capital requirements. We
believe that existing cash balances, together with funds generated from
operations and amounts available under our credit facility, will be sufficient
to finance our operations and meet our foreseeable cash requirements, including
quarterly cash dividends and a limited number of potential cash-funded
acquisitions through at least the next twelve months.
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Results of Operations
All currency amounts are in millions, percentages are of net revenues
General
Percentages may not sum due to rounding.
The following table sets forth selected information for the periods indicated.
Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Net revenues:
Application Software $ 447.9 $ 405.4 $ 1,251.4 $ 1,177.2
Network Software & Systems 430.2 391.2 1,290.4 1,103.7
Measurement & Analytical Solutions 367.9 398.3 1,097.0 1,208.5
Process Technologies 120.1 159.6 383.0 482.6
Total $ 1,366.1 $ 1,354.5 $ 4,021.8 $ 3,972.0
Gross margin:
Application Software 68.7 % 67.9 % 68.1 % 67.2 %
Network Software & Systems 66.7 69.5 67.0 69.2
Measurement & Analytical Solutions 59.4 58.9 59.7 58.4
Process Technologies 52.3 57.4 53.5 56.6
Total 64.1 64.5 64.1 63.8
Selling, general and administrative
expenses:
Application Software 40.6 % 40.8 % 41.2 % 41.8 %
Network Software & Systems 35.5 34.4 35.8 33.7
Measurement & Analytical Solutions 26.1 27.0 26.9 27.4
Process Technologies 26.1 22.7 29.6 22.8
Total 33.8 32.8 34.4 32.8
Segment operating margin:
Application Software 28.0 % 27.2 % 26.9 % 25.5 %
Network Software & Systems 31.2 35.1 31.3 35.5
Measurement & Analytical Solutions 33.3 31.9 32.8 31.1
Process Technologies 26.2 34.8 23.9 33.7
Total 30.3 31.8 29.6 31.0
Corporate administrative expenses (3.4) (3.3) (3.5) (3.3)
Income from operations 26.9 28.4 26.1 27.7
Interest expense, net (4.6) (3.6) (3.9) (3.5)
Other income (expense), net (0.2) 0.1 (0.1) (0.1)
Gain on disposal of business - - - 3.0
Earnings before income taxes 22.2 24.9 22.2 27.2
Income taxes (5.0) (4.5) (4.9) (4.6)
Net earnings 17.2 % 20.5 % 17.3 % 22.6 %
Three months ended
Net revenues for the three months ended
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In our Application Software segment, revenues were $447.9 in the third quarter
of 2020 as compared to $405.4 in the third quarter of 2019, an increase of 10%.
Acquisitions contributed 11% and foreign exchange contributed 1%, partially
offset by a decline in organic revenues of 1%. The decrease in organic revenues
was due primarily to our businesses serving the education and government
contracting markets, partially offset by growth in our businesses serving the
healthcare markets. Gross margin increased to 68.7% in the third quarter of 2020
as compared to 67.9% in the third quarter of 2019 due primarily to revenue mix.
Selling, general and administrative ("SG&A") expenses as a percentage of
revenues decreased to 40.6% in the third quarter of 2020 as compared to 40.8% in
the third quarter of 2019 due primarily to revenue mix, partially offset by
higher amortization of acquired intangibles from the Vertafore acquisition. The
resulting operating margin was 28.0% in the third quarter of 2020 as compared to
27.2% in the third quarter of 2019.
In our Network Software & Systems segment, revenues were $430.2 in the third
quarter of 2020 as compared to $391.2 in the third quarter of 2019, an increase
of 10%. Organic revenues increased 2% and acquisitions accounted for 8% of our
growth. The growth in organic revenues was led by higher project activity at our
toll and traffic business and subscription growth at our SaaS businesses,
partially offset by lower levels of activity in businesses serving access
management, long-term care, and food end markets. Gross margin decreased to
66.7% in the third quarter of 2020 as compared to 69.5% in the third quarter of
2019 due primarily to revenue mix. SG&A expenses as a percentage of revenues
increased to 35.5% in the third quarter of 2020 as compared to 34.4% in the
third quarter of 2019 due primarily to higher amortization of acquired
intangibles from the acquisitions completed in 2019 and revenue mix. As a
result, operating margin was 31.2% in the third quarter of 2020 as compared to
35.1% in the third quarter of 2019.
Our Measurement & Analytical Solutions segment revenues decreased by 8% to
$367.9 in the third quarter of 2020 as compared to $398.3 in the third quarter
of 2019. Organic revenues increased 2% and foreign exchange contributed 1%,
which was more than offset by a decline of 11% attributable to the disposal of
Gatan, Inc. ("Gatan") on October 29, 2019 . The growth in organic revenues was
due to our medical products businesses used in the treatment of COVID-19,
partially offset by declines in our water meter technology business and
industrial businesses along with our medical businesses with products used in
non-emergency hospital procedures. Gross margin increased to 59.4% in the third
quarter of 2020 as compared to 58.9% in the third quarter of 2019 due primarily
to revenue mix. SG&A expenses as a percentage of revenues increased to 26.1% in
the third quarter of 2020 as compared to 27.0% in the third quarter of 2019 due
primarily to higher operating leverage on organic revenue growth. The resulting
operating margin was 33.3% in the third quarter of 2020 as compared to 31.9% in
the third quarter of 2019.
Our Process Technologies segment revenues decreased by 25% to $120.1 in the
third quarter of 2020 as compared to $159.6 in the third quarter of 2019, all of
which was organic. The decrease in organic revenues was due to broad-based
revenue declines across the segment led by lower demand at our businesses
serving upstream oil and gas end markets. Gross margin decreased to 52.3% in the
third quarter of 2020 as compared to 57.4% in the third quarter of 2019 due
primarily to lower revenues across the businesses. SG&A expenses as a percentage
of revenues increased to 26.1% in the third quarter of 2020 as compared to 22.7%
in the third quarter of 2019 due primarily to lower operating leverage on
organic revenue declines. As a result, operating margin was 26.2% in the third
quarter of 2020 as compared to 34.8% in the third quarter of 2019.
Corporate expenses increased to $46.3 , or 3.4% of revenues, in the third quarter
of 2020 as compared to $44.9 , or 3.3% of revenues, in the third quarter of 2019.
The increase was due primarily to higher stock compensation expense partially
offset by lower acquisition related expenses.
Net interest expense was $62.3 for the third quarter of 2020 as compared to
$48.8 for the third quarter of 2019 due to (i) $7.2 in interest expense for the
origination fee on our bridge financing associated with the Vertafore
acquisition, and (ii) higher weighted average debt balances, partially offset by
lower weighted average interest rates.
Other expense, net, of $2.2 for the third quarter of 2020 was composed primarily
of foreign exchange losses at our non-U.S. based subsidiaries. Other income,
net, of $1.5 for the third quarter of 2019 was composed primarily of foreign
exchange gains at our non-U.S. based subsidiaries
Income taxes as a percent of pretax earnings were 22.7% in the third quarter of
2020 as compared to 17.9% in the third quarter of 2019. The third quarter 2020
rate was unfavorably impacted primarily by a UK tax rate change of $8.9 , coupled
with the favorable impact of the reversal of the deferred tax liability
associated with the excess of Gatan's book basis over tax basis in the shares of
$10.0 in the third quarter of 2019.
Backlog is equal to our remaining performance obligations expected to be
recognized within the next 12 months as discussed in Note 12 of the Notes to
Condensed Consolidated Financial Statements. Backlog increased 21% to $2,249.8
at September 30 ,
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2020 as compared to $1,865.7 at September 30, 2019 , organic growth was 12% and
acquisitions contributed 16%, partially offset by a 7% decline related to the
disposal of the Gatan business.
Backlog as of
September 30,
2020 2019
Application Software $ 1,131.9 $ 796.5
Network Software & Systems 797.7 657.5
Measurement & Analytical Solutions 213.8 292.9
Process Technologies 106.4 118.8
Total $ 2,249.8 $ 1,865.7 Nine months ended
Net revenues for the nine months endedSeptember 30, 2020 increased by 1.3% as compared to the nine months endedSeptember 30, 2019 . The increase was the result of net acquisition/divestiture contribution of 2.0%, partially offset by an organic decline of 0.6% and negative foreign exchange impact of 0.1%. In our Application Software segment, revenues were$1,251.4 in the nine months endedSeptember 30, 2020 as compared to$1,177.2 in the nine months endedSeptember 30, 2019 , an increase of 6%. Organic revenues increased 1% and acquisitions accounted for 5% of our growth. The growth in organic revenues was primarily due to businesses serving healthcare and government contracting markets. Gross margin increased to 68.1% in the nine months endedSeptember 30, 2020 as compared to 67.2% in the nine months endedSeptember 30, 2019 due primarily to operating leverage on higher organic revenues. SG&A expenses decreased as a percentage of revenue to 41.2% in the nine months endedSeptember 30, 2020 as compared to 41.8% in the nine months endedSeptember 30, 2019 due primarily to operating leverage on higher organic revenues, partially offset by higher amortization of acquired intangibles from theVertafore acquisition. The resulting operating margin was 26.9% in the nine months endedSeptember 30, 2020 as compared to 25.5% in the nine months endedSeptember 30, 2019 . In ourNetwork Software & Systems segment, revenues increased by 17% to$1,290.4 in the nine months endedSeptember 30, 2020 as compared to$1,103.7 in the nine months endedSeptember 30, 2019 . Organic revenues increased 4% and acquisitions accounted for 13%. The growth in organic revenues was led by our higher project activity at our toll and traffic business and subscription growth at our SaaS businesses. Gross margin decreased to 67.0% in the nine months endedSeptember 30, 2020 as compared to 69.2% in the nine months endedSeptember 30, 2019 due primarily to revenue mix. SG&A expenses increased as a percentage of revenues at 35.8% in the nine months endedSeptember 30, 2020 as compared to 33.7% in the nine months endedSeptember 30, 2019 due primarily to higher amortization of acquired intangibles from the acquisitions completed in 2019. As a result, operating margin was 31.3% in the nine months endedSeptember 30, 2020 as compared to 35.5% in the nine months endedSeptember 30, 2019 . Our Measurement and Analytical segment revenues decreased by 9% to$1,097.0 in the nine months endedSeptember 30, 2020 as compared to$1,208.5 in the nine months endedSeptember 30, 2019 . Organic revenues increased 2%, more than offset by a decrease in revenue of 11% attributable to the disposal of theGatan business and the imaging businesses disposed onFebruary 5, 2019 . The growth in organic revenues was due to our medical products businesses used in the treatment of COVID-19, partially offset by our water meter technology and industrial business declines. Gross margin increased to 59.7% in the nine months endedSeptember 30, 2020 as compared to 58.4% in the nine months endedSeptember 30, 2019 due primarily to revenue mix. SG&A expenses as a percentage of revenues decreased to 26.9% in the nine months endedSeptember 30, 2020 as compared to 27.4% in the nine months endedSeptember 30, 2019 due primarily to higher operating leverage on organic revenue growth. The resulting operating margin was 32.8% in the nine months endedSeptember 30, 2020 as compared to 31.1% in the nine months endedSeptember 30, 2019 . Our Process Technologies segment revenues decreased by 21% to$383.0 in the nine months endedSeptember 30, 2020 as compared to$482.6 in the nine months endedSeptember 30, 2019 . Organic revenues decreased by 20%. The decrease in organic revenues was due to broad-based revenue declines across the segment led by lower demand at our businesses serving upstream oil and gas end markets. Gross margin decreased to 53.5% in the nine months endedSeptember 30, 2020 as compared to 56.6% in the nine months endedSeptember 30, 2019 due primarily to lower revenues. SG&A expenses as a percentage of revenues increased to 29.6% in the nine months endedSeptember 30, 2020 as compared to 22.8% in the nine months endedSeptember 30, 2019 due primarily to$13.6 of restructuring charges for structural cost reduction actions taken at certain of our businesses and lower operating leverage on organic revenue declines. As a result, operating margin was 23.9% in the nine months endedSeptember 30, 2020 as compared to 33.7% in the nine months endedSeptember 30, 2019 . 21
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Corporate expenses increased to$141.0 , or 3.5% of revenues, in the nine months endedSeptember 30, 2020 as compared to$130.1 , or 3.3% of revenues, in the nine months endedSeptember 30, 2019 . The dollar increase was due primarily to higher stock compensation expense and professional services. Net interest expense was$155.2 for the nine months endedSeptember 30, 2020 as compared to$137.6 for the nine months endedSeptember 30, 2019 due to (i) higher weighted average debt balances, partially offset by lower weighted average interest rates, and (ii)$7.2 in interest expense for the origination fee on our bridge financing associated with theVertafore acquisition. Other expense, net, of$3.4 and$2.6 for the nine months endedSeptember 30, 2020 and 2019, respectively, was composed primarily of foreign exchange losses at our non-U.S. based subsidiaries.
Gain on disposal of business, of
Income taxes as a percent of pretax earnings increased to 22.2% in the nine months endedSeptember 30, 2020 as compared to 16.9% in the nine months endedSeptember 30, 2019 . The increase is due primarily to the recognition of a discrete tax benefit of$41.0 in connection with a foreign restructuring plan allowing the future realization of net operating losses during the nine months endedSeptember 30, 2019 .
Financial Condition, Liquidity and Capital Resources All currency amounts are in millions
Selected cash flows for the nine months endedSeptember 30, 2020 and 2019 were as follows: Nine months ended September 30, Cash provided by/(used in): 2020 2019 Operating activities $ 950.9$ 995.6 Investing activities (5,693.0) (2,183.8) Financing activities 4,336.4 1,152.1 Operating activities - Net cash provided by operating activities decreased by 4.5% to$950.9 in the nine months endedSeptember 30, 2020 as compared to$995.6 in the nine months endedSeptember 30, 2019 due primarily to cash taxes paid of$201.9 on the disposal ofGatan in the first nine months of 2020 as compared to$39.4 of cash taxes paid on the disposal of the Imaging businesses in the first nine months of 2019, partially offset by improvement in working capital and to a lesser extent by$26.8 of employer social security payroll taxes deferred during the nine months endedSeptember 30, 2020 , that are payable in installments in 2021 and 2022 under theU.S. Coronavirus Aid, Relief, and Economic Security ("CARES") Act. We also expect to defer approximately$15 during the remainder of 2020 to be paid equally in the fourth quarters of 2021 and 2022. Investing activities - Cash used in investing activities during the nine months endedSeptember 30, 2020 was primarily for the acquisition ofVertafore . Cash used in investing activities during the nine months endedSeptember 30, 2019 was primarily for the acquisitions of iPipeline and Foundry, partially offset by proceeds from the disposal of the Imaging businesses. Financing activities - Cash from financing activities for the nine months endedSeptember 30, 2020 was primarily due to net proceeds from the issuance of the$3,300.0 in aggregate principle amount of senior unsecured notes, and net borrowings under our unsecured credit facility. Cash from financing activities during the nine months endedSeptember 30, 2019 was primarily due to net repayments on our unsecured credit facility and dividend payments, partially offset by net proceeds from stock option exercises. Effect of foreign currency exchange rate changes on cash - Cash and cash equivalents decreased during the nine months endedSeptember 30, 2020 by$1.9 due primarily to the strengthening of theU.S. dollar against the functional currencies of ourUnited Kingdom and Canadian subsidiaries. Cash and cash equivalents decreased during the nine months endedSeptember 30, 2019 by$5.3 due primarily to the strengthening of theU.S. dollar against the functional currencies of our European subsidiaries. 22
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Total debt at
$600 3.000% senior notes due 2020$ 600.0 $500 2.800% senior notes due 2021 500.0$500 3.125% senior notes due 2022 500.0$300 0.450% senior notes due 2022 300.0$700 3.650% senior notes due 2023 700.0$500 2.350% senior notes due 2024 500.0$300 3.850% senior notes due 2025 300.0$700 1.000% senior notes due 2025 700.0$700 3.800% senior notes due 2026 700.0$700 1.400% senior notes due 2027 700.0$800 4.200% senior notes due 2028 800.0$700 2.950% senior notes due 2029 700.0$600 2.000% senior notes due 2030 600.0$1,000 1.750% senior notes due 2031 1,000.0 Unsecured credit facility 1,160.0 Deferred finance costs (62.7) Other 6.7
Total debt, net of deferred finance costs 9,704.0 Less current portion
602.8
Long-term debt, net of deferred finance costs
The interest rate on borrowings under our$3,000.0 unsecured credit facility is calculated based upon various recognized indices plus a margin as defined in the credit facility. AtSeptember 30, 2020 , there were$1,160.0 outstanding borrowings under our unsecured credit facility. AtSeptember 30, 2020 , we had$6.7 of other debt in the form of short term borrowings, finance leases and several smaller facilities that allow for borrowings in various foreign locations to support our non-U.S. businesses and$69.5 of outstanding letters of credit.
Cash at our foreign subsidiaries at
We expect existing cash balances, together with cash generated by our operations and amounts available under our credit facility, will be sufficient to fund our operating requirements for the foreseeable future.
We were in compliance with all debt covenants related to our unsecured credit
facility throughout the nine months ended
Net working capital (total current assets, excluding cash, less total current liabilities, excluding debt) was negative$333.0 atSeptember 30, 2020 as compared to negative$505.4 atDecember 31, 2019 , reflecting a increase in working capital due primarily to a decrease in income taxes payable. Consistent negative net working capital demonstrates Roper's continued evolution and focus on asset-light business models. Total debt was$9,704.0 atSeptember 30, 2020 as compared to$5,275.3 atDecember 31, 2019 , due primarily to the issuance of$3,300.0 of aggregate principle senior unsecured notes and net borrowings under our revolving line of credit to finance the acquisition ofVertafore . Our leverage is shown in the following table: 23
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September 30, December 31,
2020 2019
Total debt $ 9,704.0 $ 5,275.3
Cash (302.1) (709.7)
Net debt 9,401.9 4,565.6
Stockholders' equity 10,160.9 9,491.9
Total net capital $ 19,562.8 $ 14,057.5
Net debt / total net capital 48.1 % 32.5 %
Capital expenditures were $23.0 for the nine months ended September 30, 2020 as
compared to $42.2 for the nine months ended September 30, 2019 . Capitalized
software expenditures were $9.8 for the nine months ended September 30, 2020 as
compared to $7.7 for the nine months ended September 30, 2019 . We expect the
aggregate of capital expenditures and capitalized software expenditures for the
balance of the year to be comparable to prior years as a percentage of revenues.
On September 2, 2020 , the Company entered into a new three-year unsecured credit
facility among Roper, the financial institutions from time to time party
thereto, JPMorgan Chase Bank, N.A ., as administrative agent, Wells Fargo Bank,
N.A . and Bank of America, N.A ., as syndication agents, and MUFG Bank, Ltd. ,
Mizuho Bank, Ltd. , PNC Bank, National Association , Truist Bank and TD Bank,
N.A ., as co-documentation agents, which replaced its existing $2.50 billion
unsecured credit facility, dated as of September 23, 2016 , as amended. The new
facility comprises a three-year $3.00 billion revolving credit facility, which
includes availability of up to $150.0 for letters of credit. Loans under the
facility will be available in dollars, and letters of credit will be available
in dollars and other currencies to be agreed. The Company may also, subject to
compliance with specified conditions, request additional term loans or revolving
credit commitments in an aggregate amount not to exceed $500.0 .
On October 9, 2020 , the Company elected to exercise its optional redemption
rights to redeem all of its outstanding 3.000% Notes due 2020 (the "2020 Notes")
in the original aggregate principal amount of $600.0 , and Wells Fargo Bank,
National Association , as trustee under the indenture governing the 2020 Notes,
issued redemption notices to registered holders of the 2020 Notes. The date
fixed for the redemption of the 2020 Notes is November 15, 2020 . The 2020 Notes
will be redeemed at 100% of the aggregate principal amount of the 2020 Notes,
plus accrued and unpaid interest thereon to, but not including, the redemption
date in accordance with the terms and conditions set forth in the indenture.
Off-Balance Sheet Arrangements
AtSeptember 30, 2020 , we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Outlook
Current geopolitical and economic uncertainties could adversely affect our
business prospects. The COVID-19 pandemic has had, and will continue to have, an
adverse impact on our business. A significant terrorist attack, other global
conflict, or public health crisis could cause changes in world economies that
would adversely affect us. It is impossible to isolate each of these potential
factor's future effects on current economic conditions or any of our businesses.
It is also impossible to predict with any reasonable degree of certainty what or
when any additional events may occur that also would similarly disrupt the
economy and have an adverse impact on our businesses.
Although we maintain an active acquisition program we are currently focused on
reducing debt. Future acquisitions will be dependent on numerous factors and it
is not feasible to reasonably estimate if or when any such acquisitions will
occur and what the impact will be on our business, financial condition and
results of operations. Such acquisitions may be financed by the use of existing
credit lines, future cash flows from operations, future divestitures, the
proceeds from the issuance of new debt or equity securities or any combination
of these methods, the terms and availability of which will be subject to market
and economic conditions generally.
We anticipate that our businesses will generate positive cash flows from
operating activities, and that these cash flows will permit the reduction of
currently outstanding debt in accordance with the repayment schedule. However,
the rate at which we can reduce our debt during 2020 (and reduce the associated
interest expense) will be affected by, among other things, the
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financing and operating requirements of any new acquisitions, the financial
performance of our existing companies and the impact of the COVID-19 pandemic on
our business prospects and the financial markets generally. None of these
factors can be predicted with certainty.
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