Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Page
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP)	28
Consolidated Balance Sheets as of December 31, 2012 and 2011	29
Consolidated Statements of Earnings for the Years ended December 31, 2012, 2011 and 2010	30
Consolidated Statements of Comprehensive Income for the Years ended December 31, 2012, 2011 and 2010	31
Consolidated Statements of Stockholders' Equity for the Years ended December 31, 2012, 2011 and 2010	32
Consolidated Statements of Cash Flows for the Years ended December 31, 2012, 2011 and 2010	33
Notes to Consolidated Financial Statements	34
Supplementary Data:
Schedule II - Consolidated Valuation and Qualifying Accounts for the Years ended December 31, 2012, 2011 and 2010	53

Report of Independent Registered Public Accounting Firm

To the Stockholders of Roper Industries, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, of stockholders' equity and comprehensive earnings and of cash flows, present fairly, in all material respects, the financial position of Roper Industries, Inc. and its subsidiaries at December 31,2012 and December 31, 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management's Report on Internal Control over Financial Reporting, management has excluded acquisitions completed during 2012 from its assessment of internal control over financial reporting as of December 31, 2012 because they were acquired by the Company in purchase business combinations during 2012. We have also excluded acquisitions completed during 2012 from our audit of internal control over financial reporting. These acquisitions are wholly-owned subsidiaries whose total assets and total revenues represent 2.1% and 1.1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2012.

/s/PricewaterhouseCoopers LLP

Tampa, Florida

February 25, 2013

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2012 and 2011

(in thousands, except per share data)

	2012			2011
Assets
Cash and cash equivalents	$	370,590		$	338,101
Accounts receivable, net		526,408			439,134
Inventories, net		190,867			204,758
Deferred taxes		41,992			38,004
Unbilled receivables		72,193			63,829
Other current assets		43,492			31,647
Total current assets		1,245,542			1,115,473

Property, plant and equipment, net		110,397			108,775
Goodwill		3,868,857			2,866,426
Other intangible assets, net		1,698,867			1,094,142
Deferred taxes		78,644			63,006
Other assets		68,797			71,595
Total assets	$	7,071,104		$	5,319,417

Liabilities and Stockholders' Equity
Accounts payable	$	138,340		$	141,943
Accrued compensation		110,724			105,958
Deferred revenue		185,912			94,761
Other accrued liabilities		128,351			122,185
Income taxes payable		-			8,895
Deferred taxes		3,868			10,548
Current portion of long-term debt, net		519,015			69,906
Total current liabilities		1,086,210			554,196

Long-term debt, net of current portion		1,503,107			1,015,110
Deferred taxes		707,278			482,603
Other liabilities		86,783			72,412
Total liabilities		3,383,378			2,124,321

Commitments and contingencies (Note 13)

Stockholders' equity:
Preferred stock, $0.01 par value per share; 1,000 shares authorized; none outstanding		-			-
Common stock, $0.01 par value per share; 350,000 shares authorized; 100,588 shares issued and 98,604 outstanding at December 31, 2012 and 98,684 shares issued and 96,678 outstanding at December 31, 2011		1,006			987
Additional paid-in capital		1,158,001			1,117,093
Retained earnings		2,489,858			2,063,110
Accumulated other comprehensive earnings		58,537			33,800
Treasury stock, 1,984 shares at December 31, 2012 and 2,006 shares at December 31, 2011		(19,676	)		(19,894	)
Total stockholders' equity		3,687,726			3,195,096
Total liabilities and stockholders' equity	$	7,071,104		$	5,319,417

See accompanying notes to consolidated financial statements.

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

Years ended December 31, 2012, 2011 and 2010

(Dollar and share amounts in thousands, except per share data)

	Years ended December 31,
	2012			2011		2010
Net sales	$	2,993,489		$	2,797,089	$	2,386,112
Cost of sales		1,321,772			1,281,525		1,110,986
Gross profit		1,671,717			1,515,564		1,275,126
Selling, general and administrative expenses		914,130			855,025		760,832
Income from operations		757,587			660,539		514,294
Interest expense, net		67,525			63,648		66,533
Loss on extinguishment of debt		1,043			-		-
Other income/(expense), net		(2,338	)		8,096		633
Earnings before income taxes		686,681			604,987		448,394
Income taxes		203,321			177,740		125,814

Net earnings	$	483,360		$	427,247	$	322,580

Earnings per share:
Basic	$	4.95		$	4.45	$	3.42
Diluted	$	4.86		$	4.34	$	3.34

Weighted-average common shares outstanding:
Basic		97,702			95,959		94,242
Diluted		99,558			98,386		96,653

See accompanying notes to consolidated financial statements.

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2012, 2011 and 2010

(in thousands)

	Years ended December 31,
	2012		2011			2010
Net earnings	$	483,360	$	427,247		$	322,580

Other comprehensive income, net of tax:
Foreign currency translation adjustments		23,633		(10,178	)		(19,967	)
Unrecognized pension gain		1,104		-			-

Total other comprehensive income/(loss), net of tax		24,737		(10,178	)		(19,967	)

Comprehensive income		508,097		417,069			302,613

See accompanying notes to consolidated financial statements.

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Years ended December 31, 2012, 2011 and 2010

(in thousands, except per share data)

	Common Stock				Additional paid-in capital			Retained earnings			Accumulated other comprehensive earnings			Treasury stock			Total stockholders' equity
	Shares		Amount
Balances at December 31, 2009		93,618	$	958	$	982,321		$	1,395,586		$	63,945		$	(21,320	)	$	2,421,490
Net earnings		-		-		-			322,580			-			-			322,580
Stock option exercises		864		8		29,039			-			-			-			29,047
Stock issued for Lumenera contingent consideration		86		-		4,740			-			-			851			5,591
Treasury stock sold		29		-		1,405			-			-			292			1,697
Currency translation adjustments, net of $153 tax		-		-		-			-			(19,967	)		-			(19,967	)
Stock based compensation		-		-		23,980			-			-			-			23,980
Restricted stock activity		165		2		(4,547	)		-			-			-			(4,545	)
Stock option tax benefit, net of shortfalls		-		-		7,282			-			-			-			7,282
Conversion of senior subordinated convertible notes		326		3		1,066			-			-			-			1,069
Dividends declared ($0.40 per share)		-		-		-			(37,317	)		-			-			(37,317	)
Balances at December 31, 2010		95,088	$	971	$	1,045,286		$	1,680,849		$	43,978		$	(20,177	)	$	2,750,907
Net earnings		-		-		-			427,247			-			-			427,247
Stock option exercises		838		8		28,159			-			-			-			28,167
Treasury stock sold		29		-		1,821			-			-			283			2,104
Currency translation adjustments, net of $866 tax		-		-		-			-			(10,178	)		-			(10,178	)
Stock based compensation		-		-		30,906			-			-			-			30,906
Restricted stock activity		268		3		(6,008	)		-			-			-			(6,005	)
Stock option tax benefit, net of shortfalls		-		-		12,684			-			-			-			12,684
Conversion of senior subordinated convertible notes		456		5		4,245			-			-			-			4,250
Dividends declared ($0.47 per share)		-		-		-			(44,986	)		-			-			(44,986	)
Balances at December 31, 2011		96,679	$	987	$	1,117,093		$	2,063,110		$	33,800		$	(19,894	)	$	3,195,096
Net earnings		-		-		-			483,360			-			-			483,360
Stock option exercises		1,389		14		56,086			-			-			-			56,100
Treasury stock sold		22		-		1,977			-			-			218			2,195
Currency translation adjustments, net of $907 tax		-		-		-			-			23,633			-			23,633
Stock based compensation		-		-		39,808			-			-			-			39,808
Restricted stock activity		187		2		(18,424	)		-			-			-			(18,422	)
Stock option tax benefit, net of shortfalls		-		-		30,840			-			-			-			30,840
Conversion of senior subordinated convertible notes		327		3		(69,379	)		-			-			-			(69,376	)
Deferred pension gain		-		-		-			-			1,104			-			1,104
Dividends declared ($0.58 per share)		-		-		-			(56,612	)		-			-			(56,612	)
Balances at December 31, 2012		98,604	$	1,006	$	1,158,001		$	2,489,858		$	58,537		$	(19,676	)	$	3,687,726

See accompanying notes to consolidated financial statements.

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2012, 2011 and 2010

(in thousands)

	Years ended December 31,
	2012			2011			2010
Cash flows from operating activities:
Net earnings	$	483,360		$	427,247		$	322,580
Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization of property, plant and equipment		37,888			36,780			36,728
Amortization of intangible assets		116,860			103,363			86,293
Amortization of deferred financing costs		2,399			2,362			2,362
Non-cash stock compensation		40,773			31,730			25,150
Changes in operating assets and liabilities, net of acquired businesses:
Accounts receivable		(16,455	)		(33,333	)		(9,697	)
Inventories		18,361			(23,033	)		(5,687	)
Unbilled receivables		(5,122	)		11,759			(16,115	)
Accounts payable and accrued liabilities		9,209			24,347			52,540
Income taxes		(15,988	)		14,526			10,123
Other, net		6,567			5,870			(4,737	)
Cash provided by operating activities		677,852			601,618			499,540

Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		(1,467,772	)		(233,594	)		(536,413	)
Capital expenditures		(38,405	)		(40,702	)		(28,591	)
Proceeds from sale of assets		1,315			1,990			6,068
Other, net		(683	)		(3,443	)		(4,338	)
Cash used in investing activities		(1,505,545	)		(275,749	)		(563,274	)

Cash flows from financing activities:
Proceeds from senior notes		900,000			-			-
Borrowings/(payments) under revolving line of credit, net		100,000			(230,000	)		190,000
Principal payments on convertible notes		(57,304	)		(26,457	)		(23,411	)
Debt issuance costs		(12,213	)		-			-
Cash dividends to stockholders		(69,903	)		(42,090	)		(35,706	)
Treasury stock sales		2,195			2,104			1,697
Stock award tax excess windfall benefit		30,747			12,664			6,364
Proceeds from stock based compensation, net		37,679			28,167			29,047
Redemption premium on convertible debt		(76,641	)		-			-
Other		(690	)		(1,067	)		(382	)
Cash provided by/(used in) financing activities		853,870			(256,679	)		167,609
Effect of exchange rate changes on cash		6,312			(1,483	)		(1,189	)

Net increase in cash and cash equivalents		32,489			67,707			102,686
Cash and cash equivalents, beginning of year		338,101			270,394			167,708

Cash and cash equivalents, end of year	$	370,590		$	338,101		$	270,394

Supplemental disclosures:
Cash paid for:
Interest	$	67,804		$	62,840		$	64,831
Income taxes, net of refunds received	$	188,560		$	150,550		$	109,327

Noncash investing activities:
Net assets of businesses acquired:
Fair value of assets, including goodwill	$	1,824,453		$	256,589		$	687,017
Liabilities assumed		(356,681	)		(22,995	)		(150,604	)
Cash paid, net of cash acquired	$	1,467,772		$	233,594		$	536,413

See accompanying notes to consolidated financial statements.

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years ended December 31, 2012, 2011 and 2010

(1)	Summary of Accounting Policies

Basis of Presentation - These financial statements present consolidated information for Roper Industries, Inc. and its subsidiaries ("Roper" or the "Company"). All significant intercompany accounts and transactions have been eliminated.

Nature of the Business - Roper is a diversified growth company that designs, manufactures and distributes energy systems and controls, medical and scientific imaging products and software, industrial technology products and radio frequency products, services and application software. Roper markets these products and services to a broad range of markets, including radio frequency applications, medical, water, energy, research, education, software-as-a-service ("SaaS")-based information networks, security and other niche markets.

Accounts Receivable - Accounts receivable were stated net of an allowance for doubtful accounts and sales allowances of $16.0 million and $10.6 million at December 31, 2012 and 2011, respectively. Outstanding accounts receivable balances are reviewed periodically, and allowances are provided at such time that management believes it is probable that an account receivable is uncollectible. The returns and other sales credit allowance is an estimate of customer returns, exchanges, discounts or other forms of anticipated concessions and is treated as a reduction in revenue.

Cash and Cash Equivalents - Roper considers highly liquid financial instruments with remaining maturities at acquisition of three months or less to be cash equivalents. Roper had no cash equivalents at December 31, 2012 and $136 million at December 31, 2011.

Contingencies - Management continually assesses the probability of any adverse judgments or outcomes to its potential contingencies. Disclosure of the contingency is made if there is at least a reasonable possibility that a loss or an additional loss may have been incurred. In the assessment of contingencies as of December 31, 2012, management concluded that no accrual was necessary and that there were no matters for which there was a reasonable possibility of a material loss.

Earnings per Share - Basic earnings per share were calculated using net earnings and the weighted-average number of shares of common stock outstanding during the respective year. Diluted earnings per share were calculated using net earnings and the weighted-average number of shares of common stock and potential common stock outstanding during the respective year. Potentially dilutive common stock consisted of stock options and the premium over the conversion price on Roper's senior subordinated convertible notes based upon the trading price of the Company's common stock. The effects of potential common stock were determined using the treasury stock method (in thousands):

	Years ended December 31,
	2012	2011	2010
Basic weighted-average shares outstanding	97,702	95,959	94,242
Effect of potential common stock:
Common stock awards	1,040	1,213	1,009
Senior subordinated convertible notes	816	1,214	1,402
Diluted weighted-average shares outstanding	99,558	98,386	96,653

As of and for the years ended December 31, 2012, 2011 and 2010, there were 547,591, 760,000 and 1,143,350 outstanding stock options, respectively, that were not included in the determination of diluted earnings per share because doing so would have been antidilutive.

Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Foreign Currency Translation and Transactions - Assets and liabilities of subsidiaries whose functional currency is not the U.S. dollar were translated at the exchange rate in effect at the balance sheet date, and revenues and expenses were translated at average exchange rates for the period in which those entities were included in Roper's financial results. Translation adjustments are reflected as a component of other comprehensive income. Foreign currency transaction gains and losses are recorded in the income statement as other income/(expense). The gain or loss included in pre-tax income was a net loss of $2.8 million for the year ended December 31, 2012, a net gain of $6.9 million for the year ended December 31, 2011 and a net loss of $0.9 million for the year ended December 31, 2010.

Goodwill and Other Intangibles - Roper accounts for goodwill in a purchase business combination as the excess of the cost over the fair value of net assets acquired. Business combinations can also result in other intangible assets being recognized. Amortization of intangible assets, if applicable, occurs over their estimated useful lives. Goodwill, which is not amortized, is tested for impairment on an annual basis (or an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value) using a two-step process. The first step of the process utilizes both an income approach (discounted cash flows) and a market approach consisting of a comparable public company earnings multiples methodology to estimate the fair value of a reporting unit. To determine the reasonableness of the estimated fair values, the Company reviews the assumptions to ensure that neither the income approach nor the market approach provides significantly different valuations. If the estimated fair value exceeds the carrying value, no further work is required and no impairment loss is recognized. If the carrying value exceeds the estimated fair value, the goodwill of the reporting unit is potentially impaired and then the second step would be completed in order to measure the impairment loss by calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets (including unrecognized intangible assets) of the reporting unit from the fair value of the reporting unit. If the implied fair value of goodwill is less than the carrying value of goodwill, a non-cash impairment loss would be recognized.

Key assumptions used in the income and market methodologies are updated when the analysis is performed for each reporting unit. Various assumptions are utilized including forecasted operating results, strategic plans, economic projections, anticipated future cash flows, the weighted-average cost of capital, comparable transactions, market data and earnings multiples. The assumptions that have the most significant effect on the fair value calculations are the anticipated future cash flows, discount rates, and the earnings multiples. While the Company uses reasonable and timely information to prepare its cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded goodwill balances.

Total goodwill includes 27 reporting units with individual amounts ranging from zero to $992 million. The Company concluded that the fair value of each of its reporting units was significantly in excess of its carrying value, with no impairment indicated as of December 31, 2012. However, negative industry or economic trends, disruptions to its business, actual results significantly below expected results, unexpected significant changes or planned changes in the use of the assets, divestitures and market capitalization declines may have a negative effect on the fair value of Roper's reporting units.

The following events or circumstances would be considered to determine whether interim testing of goodwill would be required:

·	a significant adverse change in legal factors or in the business climate;

·	an adverse action or assessment by a regulator;

·	unanticipated competition;

·	a loss of key personnel;

·	a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of;

·	the testing for recoverability under the Impairment or Disposal of Long-Lived Assets of a significant asset group within a reporting unit; and

·	recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit.

Business combinations can also result in other intangible assets being recognized. Amortization of intangible assets, if applicable, occurs over their estimated useful lives. Trade names are determined to have an indefinite useful economic life and are not amortized, but separately tested for impairment during the fourth quarter of the fiscal year or on an interim basis if an event occurs that indicates the fair value is more likely than not below the carrying value. Roper conducts these reviews for all of its reporting units using the relief-from-royalty method, which management believes to be an acceptable methodology due to its common use by valuations specialists in determining the fair value of intangible assets. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these assets. The fair value of each trade name is determined by applying a royalty rate to a projection of net sales discounted using a risk adjusted rate of capital. Each royalty rate is determined based on the profitability of the reporting unit to which it relates and observed market royalty rates. Sales growth rates are determined after considering current and future economic conditions, recent sales trends, discussions with customers, planned timing of new product launches or other variables.

The assessment of fair value for impairment purposes requires significant judgments to be made by management. Although forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management is using to operate the underlying businesses, there is significant judgment in determining the expected results attributable to the reporting units. Changes in estimates or the application of alternative assumptions could produce significantly different results. No impairment resulted from the annual reviews performed in 2012.

Roper evaluates whether there has been an impairment of identifiable intangible assets with definite useful economic lives, or of the remaining life of such assets, when certain indicators of impairment are present. In the event that facts and circumstances indicate that the cost or remaining period of amortization of any asset may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future gross, undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write-down to fair value or a revision in the remaining amortization period is required.

Impairment of Long-Lived Assets - The Company determines whether there has been an impairment of long-lived assets, excluding goodwill and identifiable intangible assets that are determined to have indefinite useful economic lives, when certain indicators of impairment are present. In the event that facts and circumstances indicate that the cost or life of any long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future gross, undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write-down to fair value or revision to remaining life is required. Future adverse changes in market conditions or poor operating results of underlying long-lived assets could result in losses or an inability to recover the carrying value of the long-lived assets that may not be reflected in the assets' current carrying value, thereby possibly requiring an impairment charge or acceleration of depreciation or amortization expense in the future.

Income Taxes - Roper is a U.S.-based multinational company and the calculation of its worldwide provision for income taxes requires analysis of many factors, including income tax systems that vary from country to country, and the United States' treatment of non-U.S. earnings. The Company provides U.S. income taxes for unremitted earnings of foreign subsidiaries that are not considered permanently reinvested overseas. As of December 31, 2012, the approximate amount of earnings of foreign subsidiaries that the Company considers permanently reinvested and for which deferred taxes have not been provided was approximately $1.05 billion. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the U.S. federal income tax liability that would be payable if such earnings were not reinvested indefinitely.

Although it is the Company's intention to permanently reinvest these earnings indefinitely there are certain events that would cause these earnings to become taxable. These events include, but are not limited to, changes in U.S. tax laws, dividends paid between foreign subsidiaries in the absence of Section 954(c)(6) of the Internal Revenue Code ("IRC"), foreign subsidiary guarantees of U.S. parent debt and the liquidation of foreign subsidiaries or actual distributions by foreign subsidiaries into a U.S. affiliate.

Certain assets and liabilities have different bases for financial reporting and income tax purposes. Deferred income taxes have been provided for these differences at the tax rates expected to be paid.

Interest Rate Risk - The Company manages interest rate risk by maintaining a combination of fixed- and variable-rate debt, which may include interest rate swaps to convert fixed-rate debt to variable-rate debt, or to convert variable-rate debt to fixed-rate debt. Interest rate swaps are recorded at fair value in the balance sheet as an asset or liability, and the changes in fair values of both the swap and the hedged item are recorded as interest expense in current earnings.

Inventories - Inventories are valued at the lower of cost or market. Cost is determined using the first-in, first-out method. The Company writes down its inventory for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.

Other Comprehensive Income - Comprehensive income includes net earnings and all other non-owner sources of changes in a company's net assets.

Product Warranties - The Company sells certain of its products to customers with a product warranty that allows customers to return a defective product during a specified warranty period following the purchase in exchange for a replacement product, repair at no cost to the customer or the issuance of a credit to the customer. The Company accrues its estimated exposure to warranty claims based upon current and historical product sales data, warranty costs incurred and any other related information known to the Company.

Property, Plant and Equipment and Depreciation and Amortization - Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided for using principally the straight-line method over the estimated useful lives of the assets as follows:

Buildings	20-30 years
Machinery	8-12 years
Other equipment	3-5 years

Recently Released Accounting Pronouncements - In July 2012, the Financial Accounting Standards Board ("FASB") issued an amendment to accounting rules related to the testing of indefinite-lived intangibles. The new accounting rules permit an entity to first assess qualitative factors to determine if it is more likely than not that an indefinite-lived asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test prescribed under current accounting rules. The guidance is effective for annual and interim tests performed for fiscal years beginning after September 15, 2012. The Company does not expect these rules to have a material effect on its results of operations, financial position or cash flows.

In May 2011, the FASB issued an amendment to accounting and disclosures related to fair value measurement. This amendment results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Standards. Roper adopted this guidance on January 1, 2012. The guidance did not have a material impact on the Company's results of operations, financial position or cash flows.

In June 2011, the FASB issued an amendment to the disclosure of comprehensive income. This amendment requires the presentation of total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Roper adopted this guidance on January 1, 2012. The guidance did not have an impact on the Company's results of operations, financial position or cash flows as it is disclosure only in nature.

In September 2011, the FASB issued new accounting rules related to testing goodwill for impairment. The new accounting rules permit an entity to first assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the two-step goodwill impairment test prescribed under current accounting rules. Otherwise, the two-step goodwill impairment test is not required. Roper adopted this guidance on January 1, 2012. The guidance did not have a material effect on its results of operations, financial position or cash flows.

Research and Development - Research and development ("R&D") costs include salaries and benefits, rents, supplies, and other costs related to products under development. Research and development costs are expensed in the period incurred and totaled $125.9 million, $121.7 million and $102.4 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Revenue Recognition - The Company recognizes revenue when all of the following criteria are met:

·	persuasive evidence of an arrangement exists;

·	delivery has occurred or services have been rendered;

·	the seller's price to the buyer is fixed or determinable; and

·	collectibility is reasonably assured.

In addition, the Company recognizes revenue from the sale of product when title and risk of loss pass to the customer, which is generally when product is shipped. The Company recognizes revenue from services when such services are rendered or, if applicable, upon customer acceptance. Revenues under certain relatively long-term and relatively large-value construction projects are recognized under the percentage-of-completion method using the ratio of costs incurred to total estimated costs as the measure of performance. The Company recognized revenues of $145.5 million, $151.5 million and $131.0 million for the years ended December 31, 2012, 2011 and 2010, respectively, using this method. Estimated losses on any projects are recognized as soon as such losses become known.

Capitalized Software - The Company accounts for capitalized software under applicable accounting guidance which, among other provisions, requires capitalization of certain internal-use software costs once certain criteria are met. Overhead, general and administrative and training costs are not capitalized. Capitalized software was $10.9 million and $14.1 million at December 31, 2012 and 2011, respectively.

Stock-Based Compensation - The Company recognizes expense for the grant date fair value of its employee stock option awards on a straight-line basis over the employee's requisite service period (generally the vesting period of the award). The fair value of its option awards is estimated using the Black-Scholes option valuation model and recognizes the expense of all share-based awards. The Company presents the cash flows resulting from the tax benefits arising from tax deductions in excess of the compensation cost recognized for stock award exercises (excess tax benefits) as financing cash flows.

(2)	Business Acquisitions

2012 Acquisitions – During the year ended December 31, 2012, Roper completed six business combinations. The results of operations of the acquired companies have been included in Roper's consolidated results since the date of each acquisition.

The largest of the 2012 acquisitions was Sunquest Information Systems, Inc. ("Sunquest"), a leading provider of diagnostic and laboratory software solutions to healthcare providers. Roper acquired 100% of the shares of Sunquest on August 22, 2012, in a $1.416 billion all-cash transaction. The Company acquired Sunquest in order to complement and expand its medical platform. Sunquest is reported in the Medical & Scientific Imaging segment.

The Company expensed transaction costs of $6.5 million related to the acquisition as corporate general and administrative expenses, as incurred.

The following table (in thousands) summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition. The allocation of the purchase price is considered preliminary pending final intangible asset valuations and tax adjustments.

Current assets	$	96,883
Identifiable intangibles		669,000
Goodwill		992,164
Other assets		2,694
Total assets acquired		1,760,741
Deferred revenue		(83,065	)
Other current liabilities		(18,762	)
Long-term deferred tax liability		(242,934	)
Net assets acquired	$	1,415,980

The majority of the goodwill is not expected to be deductible for tax purposes. Of the $669 million of acquired intangible assets acquired, $98 million was assigned to trade names that are not subject to amortization. The remaining $571 million of acquired intangible assets have a weighted-average useful life of 18 years. The intangible assets that make up that amount include customer relationships of $460 million (20 year weighted-average useful life) and software of $111 million (12 year weighted-average useful life).

Roper's results for the year ended December 31, 2012 included results from Sunquest between August 22, 2012 and December 31, 2012. In that period, Sunquest contributed $69.4 million in revenue and $8.8 million of earnings (inclusive of deal-related costs) to Roper's results. The following unaudited pro forma summary presents consolidated information as if the acquisition of Sunquest had occurred on January 1, 2011 (amounts in thousands, except per share data):

	Pro forma
	Year ended December 31,
	2012		2011
Sales	$	3,130,407	$	2,967,415
Net income		521,141		454,059
Earnings per share, basic		5.33		4.73
Earnings per share, diluted		5.23		4.62

Pro forma earnings for the years ended December 31, 2012 and 2011 were adjusted by $50.7 million and $9.2 million, respectively, for non-recurring acquisition and other costs. Adjustments were also made to pro forma earnings for the years ended December 31, 2012 and 2011 for recurring changes in amortization, interest expense and taxes related to the acquisition.

During the year ended December 31, 2012, Roper completed five other acquisitions which were immaterial. The aggregate purchase price of these acquisitions totaled $62 million of cash. The Company recorded $43 million in other identifiable intangibles and $16 million in goodwill in connection with these acquisitions. The Company expensed transaction costs of $1 million related to these acquisitions as corporate general and administrative expenses, as incurred. Supplemental pro forma information has not been provided as the acquisitions did not have a material impact on Roper's consolidated results of operations individually or in aggregate.

The majority of the goodwill is not expected to be deductible for tax purposes. Of the $43 million of acquired intangible assets acquired, $1 million was assigned to trade names that are not subject to amortization. The remaining $42 million of acquired intangible assets have a weighted-average useful life of 7 years. The intangible assets that make up that amount include customer relationships of $17 million (7 year weighted-average useful life), protective rights and patents of $16 million (7 year weighted-average useful life) and unpatented technology of $8 million (8 year weighted-average useful life),

2011 Acquisitions - During the year ended December 31, 2011, Roper completed three business combinations. The results of operations of the acquired companies have been included in Roper's consolidated results since the date of each acquisition. Supplemental pro forma information has not been provided as the acquisitions did not have a material impact on Roper's consolidated results of operations individually or in aggregate.

The aggregate purchase price of 2011 acquisitions totaled $234 million of cash. The Company recorded $91 million in other identifiable intangibles and $149 million in goodwill in connection with these acquisitions. The majority of the goodwill is not expected to be deductible for tax purposes. The Company expensed transaction costs of $2.2 million related to these acquisitions, as incurred.

On June 3, 2011, Roper acquired 100% of the shares of NDI Holding Corp. ("Northern Digital"), a provider of 3-D measurement technology for medical applications in computer-assisted surgery and computer-assisted therapy. Roper acquired Northern Digital as an addition to its medical platform, and it is reported in the Medical and Scientific Imaging segment.

On September 26, 2011, Roper acquired 100% of the shares of United Controls Group, Inc. ("UCG"), a manufacturer of control systems in the oil and gas industry. UCG was acquired as an addition to our existing process control systems businesses, and is reported in the Energy Systems and Controls segment.

On December 1, 2011, Roper acquired 100% of the shares of Trinity Integrated Systems Ltd. ("Trinity"), a specialist provider of requirements capture, safety lifecycle management and engineering software tools, and safety and control system solutions to the oil and gas, industrial process and control markets. Trinity was acquired as an addition to our existing process control systems businesses, and is reported in the Energy Systems and Controls segment.

Of the $91 million of acquired intangible assets acquired in 2011, $3 million was assigned to trade names that are not subject to amortization. The remaining $88 million of acquired intangible assets have a weighted-average useful life of approximately 11 years. The intangible assets that make up that amount include customer relationships of $70 million (12 year weighted-average useful life), and unpatented technology of $18 million (8 year weighted-average useful life).

2010 Acquisitions - During the year ended December 31, 2010, Roper completed two business combinations. The results of operations of the acquired companies have been included in Roper's consolidated results since the date of each acquisition. Supplemental pro forma information has not been provided as the acquisitions did not have a material impact on Roper's consolidated results of operations individually or in aggregate.

The aggregate purchase price of 2010 acquisitions totaled $538 million of cash. The Company recorded $320 million in other identifiable intangibles and $327 million in goodwill, $97 million of which was recorded due to a deferred tax liability related to intangible assets, in connection with these acquisitions. The majority of the goodwill is not expected to be deductible for tax purposes. The Company expensed transaction costs of $2.1 million related to these acquisitions.

iTrade Acquisition - The largest of the 2010 acquisitions was the purchase of all outstanding shares of iTradeNetwork, Inc. on July 27, 2010. iTrade, whose operations are reported in the RF Technology segment, is a global provider of software as a service ("SaaS")-based trading network and business intelligence solutions primarily to the perishable food market. iTrade's principal facilities are located in Pleasanton, California. The aggregate gross purchase price was $523 million of cash.

The Company acquired iTrade in order to complement and expand existing software services at other Roper businesses. The following table (in thousands) summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

	July 27, 2010
Current assets	$	14,174
Other assets		2,998
Intangible assets		313,600
Goodwill		317,897
Total assets acquired		648,669
Current liabilities		(15,301	)
Other liabilities		(110,767	)
Net assets acquired	$	522,601

On February 22, 2010, Roper purchased the assets of Heartscape, Inc, including a technology with the capability to improve the speed and accuracy of detecting heart attacks. The operations of Heartscape are reported in the Medical & Scientific Imaging segment.

Of the $320 million of acquired intangible assets acquired in 2010, $35 million was assigned to trade names that are not subject to amortization. The remaining $285 million of acquired intangible assets have a weighted-average useful life of approximately 14 years. The intangible assets that make up that amount include customer relationships of $234 million (15 year weighted-average useful life) and unpatented technology of $51 million (8 year weighted-average useful life).

(3)	Inventories

The components of inventories at December 31 were as follows (in thousands):

	2012			2011
Raw materials and supplies	$	121,573		$	119,550
Work in process		29,725			31,085
Finished products		81,536			89,334
Inventory reserves		(41,967	)		(35,211	)
	$	190,867		$	204,758

(4)	Property, Plant and Equipment

The components of property, plant and equipment at December 31 were as follows (in thousands):

	2012			2011
Land	$	4,308		$	4,228
Buildings		74,609			69,871
Machinery and other equipment		291,004			264,216
		369,921			338,315
Accumulated depreciation		(259,524	)		(229,540	)
	$	110,397		$	108,775

Depreciation expense was $37,888, $36,780 and $36,728 for the years ended December 31, 2012, 2011 and 2010, respectively.

(5)	Goodwill

	Industrial Technology			Energy Systems and Controls			Medical and Scientific Imaging			RF Technology			Total
	(in thousands)
Balances at December 31, 2010	$	420,002		$	380,595		$	637,991		$	1,289,192		$	2,727,780
Goodwill acquired		-			13,663			135,379			-			149,042
Currency translation adjustments		(949	)		(291	)		(5,142	)		1,258			(5,124	)
Reclassifications and other		-			-			-			(5,272	)		(5,272	)
Balances at December 31, 2011	$	419,053		$	393,967		$	768,228		$	1,285,178		$	2,866,426
Goodwill acquired		-			8,670			999,030			-			1,007,700
Currency translation adjustments		2,702			1,420			5,144			3,395			12,661
Reclassifications and other		-			-			-			(17,930	)		(17,930	)
Balances at December 31, 2012	$	421,755			404,057			1,772,402			1,270,643			3,868,857

Goodwill acquired during the year ended December 31, 2012 was due primarily to the acquisition of Sunquest. The reclassifications and other are due primarily to an immaterial correction of tax adjustments for iTrade, acquired in 2010. This adjustment only impacts goodwill and had no impact on debt covenants.

(6)	Other intangible assets, net

	Cost		Accum. amort.			Net book value
	(in thousands)
Assets subject to amortization:
Customer related intangibles	$	1,022,134	$	(302,156	)	$	719,978
Unpatented technology		193,915		(72,358	)		121,557
Software		49,395		(35,833	)		13,562
Patents and other protective rights		25,398		(17,699	)		7,699
Trade secrets		1,500		(1,361	)		139
Assets not subject to amortization:
Trade names		231,207		-			231,207
Balances at December 31, 2011	$	1,523,549	$	(429,407	)	$	1,094,142


Assets subject to amortization:
Customer related intangibles	$	1,509,339	$	(379,535	)	$	1,129,804
Unpatented technology		198,609		(97,487	)		101,122
Software		160,520		(44,256	)		116,264
Patents and other protective rights		40,399		(20,312	)		20,087
Trade secrets		1,500		(1,500	)		-
Assets not subject to amortization:
Trade names		331,590		-			331,590
Balances at December 31, 2012	$	2,241,957	$	(543,090	)	$	1,698,867

Amortization expense of other intangible assets was $113 million, $98 million, and $84 million during the years ended December 31, 2012, 2011 and 2010, respectively. Amortization expense is expected to be $136 million in 2013, $127 million in 2014, $113 million in 2015, $111 million in 2016 and $101 million in 2017.

(7)	Accrued Liabilities

Accrued liabilities at December 31 were as follows (in thousands):

	2012		2011
Interest		29,537		26,744
Customer deposits		18,738		20,095
Commissions		14,372		12,132
Warranty		9,755		8,147
Billings in excess of cost		7,912		6,351
Accrued dividend		-		13,297
Other		48,037		35,422
	$	128,351	$	122,185

(8)	Income Taxes

Earnings before income taxes for the years ended December 31, 2012, 2011 and 2010 consisted of the following components (in thousands):

	2012		2011		2010
United States	$	430,573	$	359,800	$	270,281
Other		256,108		245,187		178,113
	$	686,681	$	604,987	$	448,394

Components of income tax expense for the years ended December 31, 2012, 2011 and 2010 were as follows (in thousands):

	2012			2011			2010
Current:
Federal	$	136,860		$	123,310		$	93,594
State		9,972			14,903			8,185
Foreign		48,403			41,437			32,706
Deferred:
Federal		15,789			1,846			(23,107	)
Foreign		(7,703	)		(3,756	)		14,436
	$	203,321		$	177,740		$	125,814

Reconciliations between the statutory federal income tax rate and the effective income tax rate for the years ended December 31, 2012, 2011 and 2010 were as follows:


Federal statutory rate	35.0	%	35.0	%	35.0	%
Foreign rate differential	(3.9	)	(3.7	)	(4.3	)
R&D tax credits	-		(0.7	)	(0.6	)
State taxes, net of federal benefit	1.7		1.7		1.6
Foreign tax credit	(2.4	)	-		(2.4	)
Other, net	(0.8	)	(2.9	)	(1.2	)
	29.6	%	29.4	%	28.1	%

The deferred income tax balance sheet accounts arise from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes.

Components of the deferred tax assets and liabilities at December 31 were as follows (in thousands):

	2012		2011
Deferred tax assets:
Reserves and accrued expenses	$	63,703	$	72,150
Inventories		9,171		7,104
Net operating loss carryforwards		21,161		20,642
R&D credits		6,331		1,114
Foreign tax credits		20,270		-
Valuation allowance		-		-
Total deferred tax assets	$	120,636	$	101,010
Deferred tax liabilities:
Reserves and accrued expenses	$	10,766	$	33,861
Amortizable intangible assets		691,536		456,613
Plant and equipment		8,844		2,677
Total deferred tax liabilities	$	711,146	$	493,151

At December 31, 2012, Roper has approximately $34.3 million of U.S. federal net operating loss carryforwards. If not utilized, these carryforwards will expire in years 2023 through 2032. The net operating loss carryforward increased between 2011 and 2012 primarily because of losses incurred by a U.S. entity that is not a member of the Company's consolidated tax group and whose losses are therefore not available for offset against the taxable income of other members of the group. Also, due to a recent acquisition, the consolidated group has acquired a net operating loss subject to an IRC Section 382 limitation; however, the Company expects to utilize the entire net operating loss prior to expiration. The majority of the state net operating loss carryforward is related to Florida and, if not utilized, will expire in years 2027 through 2030. The Company has smaller net operating losses in various other states. Additionally, Roper has foreign tax credit carryforwards and R&D credit carryforwards. Roper has not recognized a valuation allowance on these attributes since management has determined that it is more likely than not that the results of future operations will generate sufficient taxable income to realize these deferred tax assets.

The Company provides income taxes for unremitted earnings of foreign subsidiaries that are not considered permanently reinvested overseas. As of December 31, 2012, the approximate amount of earnings of foreign subsidiaries that the Company considers permanently reinvested and for which deferred taxes have not been provided was approximately $1.05 billion. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the U.S. federal income tax liability that would be payable if such earnings were not reinvested indefinitely.

Although it is the Company's intention to permanently reinvest these earnings indefinitely there are certain events that would cause these earnings to become taxable. These events include, but are not limited to, change in U.S. tax laws, dividends paid between foreign subsidiaries in the absence of Section 954(c)(6) of the IRC, foreign subsidiary guarantees of U.S. parent debt and the liquidation of foreign subsidiaries or actual distributions by foreign subsidiaries into a U.S. affiliate.

The Company recognizes in the consolidated financial statements only those tax positions determined to be "more likely than not" of being sustained upon examination based on the technical merits of the positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	2012			2011			2010
Beginning balance	$	19,556		$	24,765		$	22,922
Additions for tax positions of prior periods		1,371			470			203
Additions for tax positions of the current period		1,541			2,572			3,169
Additions due to acquisitions		9,116			-			3,546
Reductions for tax positions of prior periods		(197	)		(558	)		(565	)
Reductions for tax positions of the current period
Settlements with taxing authorities					(4,043	)		-
Lapse of applicable statute of limitations		(6,522	)		(3,650	)		(4,510	)
Ending balance	$	24,865		$	19,556		$	24,765

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $21.6 million. Interest and penalties related to unrecognized tax benefits are classified as a component of income tax expense and totaled $1.5 million in 2012. Accrued interest and penalties were $5.0 million at December 31, 2012 and $3.5 million at December 31, 2011. During the next twelve months, the unrecognized tax benefits are expected to decrease by a net $0.6 million, due mainly to a lapse in the applicable statute of limitations.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state, city and foreign jurisdictions. The Company's federal income tax returns for 2009 through the current period remain subject to examination and the relevant state, city and foreign statutes vary. There are no current tax examinations in progress where the Company expects the assessment of any significant additional tax in excess of amounts reserved.

(9)	Long-Term Debt

On July 27, 2012, Roper entered into a new $1.5 billion unsecured credit facility (the "2012 Facility") with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders, which replaced its existing unsecured credit facility dated as of July 7, 2008 (the "2008 Facility"). The 2012 Facility is composed of a five year $1.5 billion revolving credit facility. Roper may also, subject to compliance with specified conditions, request term loans or additional revolving credit commitments in an aggregate amount not to exceed $350 million. At December 31, 2012, there were $100 million of outstanding borrowings under the 2012 Facility. Roper recorded a $1.0 million non-cash debt extinguishment charge in the third quarter of 2012 related to the early termination of the 2008 Facility. This charge reflects the unamortized fees associated with the 2008 Facility and was reported as other expense.

On November 21, 2012, Roper completed a public offering of $400 million aggregate principal amount of 1.850% senior unsecured notes due November 15, 2017 and $500 million aggregate principal amount of 3.125% senior unsecured notes due November 15, 2022. The notes bear interest at a fixed rate of 1.850% and 3.125% per year, respectively, payable semi-annually in arrears on May 15 and November 15 of each year, beginning May 15, 2013.

Roper may redeem some or all of the notes at any time or from time to time, at 100% of their principal amount plus a make-whole premium based on a spread to U.S. Treasury securities as described in the indenture relating to the notes.

The notes are unsecured senior obligations of the Company and rank senior in right of payment with all of its existing and future unsecured and unsubordinated indebtedness and rank equally in right of payment with all of its existing and future unsecured senior indebtedness. The notes are effectively subordinated to any of Roper's existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness. The notes are not guaranteed by any of Roper's subsidiaries and are effectively subordinated to all existing and future indebtedness and other liabilities of its subsidiaries.

In September 2009, the Company completed a public offering of $500 million aggregate principal amount of 6.25% senior unsecured notes due September 2019. The notes bear interest at a fixed rate of 6.25% per year, payable semi-annually in arrears on March 1 and September 1 of each year, beginning March 1, 2010.

Roper may redeem some of all of these notes at any time or from time to time, at 100% of their principal amount, plus a make-whole premium based on a spread to U.S. Treasury securities.

The notes are unsecured senior obligations of the Company and rank equally in right of payment with all of Roper's existing and future unsecured and unsubordinated indebtedness. The notes are effectively subordinated to any of its existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness. The notes are not guaranteed by any of Roper's subsidiaries and are effectively subordinated to all existing and future indebtedness and other liabilities of Roper's subsidiaries.

On August 6, 2008, Roper issued $500 million aggregate principal amount of 6.625% senior notes due August 15, 2013. The notes bear interest at a fixed rate of 6.625% per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning February 15, 2009. The interest payable on the notes is subject to adjustment if either Moody's Investors Service or Standard & Poor's Ratings Services downgrades the rating assigned to the notes.

The notes are unsecured senior obligations of the Company and rank equally in right of payment with all of the Company's existing and future unsecured and unsubordinated indebtedness. The notes are effectively subordinated to any of the Company's existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness. The notes are not guaranteed by any of the Company's subsidiaries and are effectively subordinated to all existing and future indebtedness and other liabilities of the Company's subsidiaries.

Other debt includes $12 million of senior subordinated convertible notes due 2034.

Total debt at December 31 consisted of the following (in thousands):

	2012		2011
$1.50 billion revolving credit facility	$	100,000	$	-
2013 Notes*		505,087		511,652
2017 Notes		400,000		-
2019 Notes		500,000		500,000
2022 Notes		500,000		-
Senior Subordinated Convertible Notes		11,594		67,250
Other		5,441		6,114
Total debt		2,022,122		1,085,016
Less current portion		519,015		69,906
Long-term debt	$	1,503,107	$	1,015,110

*Shown net of fair value swap adjustment of $5,087 at December 31, 2012 and $11,652 at December 31, 2011.

The 2012 Facility and Roper's $1.9 billion senior notes and senior subordinated convertible notes provide substantially all of Roper's daily external financing requirements. The interest rate on the borrowings under the 2012 Facility is calculated based upon various recognized indices plus a margin as defined in the credit agreement. At December 31, 2012, Roper's debt consisted of $1.9 billion of senior notes, $100 million of outstanding revolver borrowings and $12 million in senior subordinated convertible notes. In addition, the Company had $5.4 million of other debt in the form of capital leases, several smaller facilities that allow for borrowings or the issuance of letters of credit in foreign locations to support Roper's non-U.S. businesses and $43 million of outstanding letters of credit at December 31, 2012.

In December 2003, the Company issued through a public offering $230 million of 3.75% subordinated convertible notes due in 2034 at an original issue discount of 60.498% (the "Convertible Notes"). The Convertible Notes are subordinated in right of payment and collateral to all of Roper's existing and future senior debt. Cash interest on the notes was paid semi-annually until January 15, 2009, after which interest is recognized at the effective rate of 3.75% and represents accrual of original issue discount, and only contingent cash interest may be paid. Contingent cash interest may be paid during any six month period if the average trading price of a note for a five trading day measurement period preceding the applicable six month period equals 120% or more of the sum of the issue price, accrued original issue discount and accrued cash interest, if any, for such note. The contingent cash interest payable per note in respect of any six month period will equal the annual rate of 0.25%. In accordance with this criterion, contingent interest has been paid for each six month period since January 15, 2009. Holders receive cash up to the value of the accreted principal amount of the notes converted and, at the Company's option, any remainder of the conversion value may be paid in cash or shares of common stock. Holders may require Roper to purchase all or a portion of their notes on January 15, 2014 at a price of $475.66 per note, on January 15, 2019 at a price of $572.76 per note, on January 15, 2024 at a price of $689.68 per note, and on January 15, 2029 at a price of $830.47 per note, in each case plus accrued cash interest, if any, and accrued contingent cash interest, if any. The Company may only pay the purchase price of such notes in cash and not in common stock. In addition, if Roper experiences a change in control, each holder may require Roper to purchase for cash all or a portion of such holder's notes at a price equal to the sum of the issue price plus accrued original issue discount for non-tax purposes, accrued cash interest, if any, and accrued contingent cash interest, if any, to the date of purchase.

The Convertible Notes are classified as short-term debt as the notes became convertible on October 1, 2005 based upon the Company's common stock trading above the trigger price for at least 20 trading days during the 30 consecutive trading-day periods ending on September 30, 2005.

At December 31, 2012, the conversion price on the outstanding notes was $457.66. If converted at December 31, 2012, the value would have exceeded the $12 million principal amount of the notes by $23 million and could have resulted in the issuance of 211,962 shares of the Company's common stock.

The 2012 Facility contains affirmative and negative covenants which, among other things, limit Roper's ability to incur new debt, prepay subordinated debt, make certain investments and acquisitions, sell assets and grant liens, make restricted payments (including the payment of dividends on our common stock) and capital expenditures, or change its line of business. Roper is also subject to financial covenants which require the Company to limit its consolidated total leverage ratio and to maintain a consolidated interest coverage ratio. The most restrictive covenant is the consolidated total leverage ratio which is limited to 3.5.

The Company was in compliance with its debt covenants throughout the years ended December 31, 2012 and 2011.

Future maturities of long-term debt during each of the next five years ending December 31 and thereafter were as follows (in thousands):

2013	$	519,015
2014		1,404
2015		975
2016		533
2017		500,195
Thereafter		1,000,000
	$	2,022,122

(10)	Fair Value

Roper's debt at December 31, 2012 included $1.9 billion of fixed-rate senior notes with the following fair values (in millions):

$500 million senior notes due 2013		$	518
$400 million senior notes due 2017			399
$500 million senior notes due 2019			605
$500 million senior notes due 2022			509

The fair values of the senior notes are based on the trading prices of the notes, which the Company has determined to be Level 2 in the FASB fair value hierarchy. Short-term debt included $12 million of fixed-rate convertible notes which were at fair value due to the short-term nature of the notes. Most of Roper's other borrowings at December 31, 2012 were at various interest rates that adjust relatively frequently under its credit facility. The fair value for each of these borrowings at December 31, 2012 was estimated to be the face value of these borrowings.

In October 2009, Roper entered into interest rate swap agreements with an aggregate notional amount of $500 million. The swaps are designated as fair value hedges and effectively changed the Company's $500 million senior notes due 2013 with a fixed interest rate of 6.625% to a variable-rate obligation at a weighted-average spread of 4.377% plus LIBOR. The Company has determined the swaps to be Level 2 in the FASB fair value hierarchy. To account for the fair value hedge, the swap is recorded at fair value in the balance sheet as an asset or liability, and the changes in fair values of both the interest rate swap and the hedged senior notes due 2013 are recorded as interest expense. The fair value of the swap was an asset balance of $5.8 million and $11.6 million at December 31, 2012 and 2011, respectively. The corresponding change in the fair value of the notes being hedged was an increase of $5.1 million and $11.7 million at December 31, 2012 and 2011, respectively. The impact on earnings was immaterial in the years ended December 31, 2012, 2011 and 2010.

(11)	Retirement and Other Benefit Plans

Roper maintains eleven defined contribution retirement plans under the provisions of Section 401(k) of the IRC covering substantially all U.S. employees not subject to collective bargaining agreements. Roper partially matches employee contributions. Costs related to these plans were $16.4 million, $15.2 million and $14.0 million for 2012, 2011 and 2010, respectively.

Roper also maintains various defined benefit retirement plans covering employees of non-U.S. and certain U.S. subsidiaries and a plan that supplements certain employees for the contribution ceiling applicable to the Section 401(k) plans. The costs and accumulated benefit obligations associated with each of these plans were not material.

(12)	Stock-Based Compensation

The Roper Industries, Inc. Amended and Restated 2006 Incentive Plan ("2006 Plan") is a stock-based compensation plan used to grant incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights or equivalent instruments to the Company's employees, officers, directors and consultants. The 2006 Plan replaced the Amended and Restated 2000 Incentive Plan ("2000 Plan"), and no additional grants will be made from the 2000 Plan. The number of shares reserved for issuance under the 2006 Plan is 14,000,000, plus the 17,000 remaining shares that were available to grant under the 2000 Plan at June 28, 2006, plus any shares underlying outstanding awards under the 2000 Plan that terminate or expire unexercised, or are cancelled, forfeited or lapse for any reason subsequent to June 28, 2006. At December 31, 2012, 6,941,775 shares were available to grant.

Under the Roper Industries, Inc., Employee Stock Purchase Plan ("ESPP"), all employees in the U.S. and Canada are eligible to designate up to 10% of eligible earnings to purchase Roper's common stock at a 5% discount to the average closing price of its common stock at the beginning and end of a quarterly offering period. The common stock sold to the employees may be either treasury stock, stock purchased on the open market, or newly issued shares.

Stock based compensation expense for the years ended December 31, 2012, 2011 and 2010 was as follows (in millions):

	2012		2011		2010
Stock based compensation	$	40.8	$	31.7	$	25.2
Tax benefit recognized in net income		14.3		11.1		8.8
Windfall tax benefit, net		30.8		12.7		7.3

Stock Options – Stock options are typically granted at prices not less than 100% of market value of the underlying stock at the date of grant. Stock options typically vest over a period of up to three to five years from the grant date and generally expire seven to ten years after the grant date. The Company recorded $14.8 million, $12.2 million, and $9.0 million of compensation expense relating to outstanding options during 2012, 2011 and 2010, respectively, as a component of corporate and certain segment general and administrative expenses.

The Company estimates the fair value of its option awards using the Black-Scholes option valuation model that uses the assumptions noted in the following table. The stock volatility for each grant is measured using the weighted-average of historical daily price changes of the Company's common stock over the most recent period equal to the expected life of the grant. The expected term of options granted is derived from historical data to estimate option exercises and employee terminations, and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The weighted-average fair value of options granted in 2012, 2011 and 2010 were calculated using the following weighted-average assumptions:


Weighted-average fair value ($)	30.25	24.45	17.00
Risk-free interest rate (%)	0.77	1.91	2.32
Average expected option life (years)	5.24	5.34	5.38
Expected volatility (%)	36.51	35.27	34.55
Expected dividend yield (%)	0.58	0.60	0.72

The following table summarizes the Company's activities with respect to its stock option plans for the year ended December 31, 2012:

			Weighted-average exercise price per share			Aggregate intrinsic value
Outstanding at January 1, 2012	3,822,662		$	50.44

Granted	538,100			95.27
Exercised	(1,389,069	)		40.46
Canceled	(53,498	)		70.01
Outstanding at December 31, 2012	2,918,195			63.15	6.52	$	141,029,378
Exercisable at December 31, 2012	1,616,022		$	51.44	5.18	$	97,030,148

The following table summarizes information for stock options outstanding at December 31, 2012:

		Outstanding options						Exercisable options
Exercise price		Number		Average exercise price		Average remaining life (years)		Number		Average exercise price
$	11.22 - 22.45		6,850	$	21.49		0.6		6,850	$	21.49
	22.46 - 33.67		177,412		23.57		1.2		177,412		23.57
	33.68 - 44.89		205,022		41.86		5.9		205,022		41.86
	44.90 - 56.12		1,306,472		53.55		5.4		1,023,369		53.78
	56.13 - 67.34		26,167		63.96		6.9		15,167		64.45
	67.35 - 78.56		601,581		72.85		8.2		149,577		73.18
	78.57 - 89.78		68,091		84.22		8.2		38,625		84.21
	89.79 - 101.01		474,100		94.25		9.1		-		-
	101.02 - 112.23		52,500		104.85		9.7		-		-
$	11.22 - 112.23		2,918,195	$	63.15		6.5		1,616,022	$	51.44

At December 31, 2012, there was $19.1 million of total unrecognized compensation expense related to nonvested options granted under the Company's share-based payment plans. That cost is expected to be recognized over a weighted-average period of 1.8 years. The total intrinsic value of options exercised in 2012, 2011 and 2010 was $86.0 million, $41.2 million and $27.5 million, respectively. Cash received from option exercises under all plans in 2012 and 2011 was $56.1 million and $28.2 million, respectively.

Restricted Stock Grants - During 2012 and 2011, the Company granted 374,307 and 352,330 shares, respectively, of restricted stock to certain employee and director participants under the 2006 Plan. Restricted stock grants generally vest over a period of 1 to 3 years. The weighted-average fair value of the shares granted in 2012 was $95.78 per share. The Company recorded $25.9 million, $19.5 million and $16.2 million of compensation expense related to outstanding shares of restricted stock held by employees and directors during 2012, 2011 and 2010, respectively. A summary of the Company's nonvested shares activity for 2012 is as follows:

			Weighted-average fair value
Nonvested at January 1, 2012	753,811		$	61.15
Granted	374,307			95.78
Vested	(551,051	)		64.59
Forfeited	(5,162	)		70.56
Nonvested at December 31, 2012	571,905		$	80.96

At December 31, 2012, there was $31.6 million of total unrecognized compensation expense related to nonvested awards granted to both employees and directors under the Company's share-based payment plans. That cost is expected to be recognized over a weighted-average period of 2.0 years. There were 551,051 and 264,848 shares that vested during 2012 and 2011, respectively. Unrecognized compensation expense related to nonvested shares of restricted stock grants is recorded as a reduction to additional paid-in capital in stockholder's equity at December 31, 2012.

Employee Stock Purchase Plan - During 2012, 2011 and 2010, participants of the ESPP purchased 22,863, 27,756 and 29,439 shares, respectively, of Roper's common stock for total consideration of $2.2 million, $2.1 million, and $1.7 million, respectively. All of these shares were purchased from Roper's treasury shares. The Company had no compensation expense relating to the stock purchase plan during 2012, 2011 and 2010.

(13)	Contingencies

Roper, in the ordinary course of business, is the subject of, or a party to, various pending or threatened legal actions, including product liability and employment practices. It is vigorously contesting all lawsuits that, in general, are based upon claims of the kind that have been customary over the past several years. After analyzing the Company's contingent liabilities on a gross basis and, based upon past experience with resolution of its product liability and employment practices claims and the limits of the primary, excess, and umbrella liability insurance coverages that are available with respect to pending claims, management believes that adequate provision has been made to cover any potential liability not covered by insurance, and that the ultimate liability, if any, arising from these actions should not have a material adverse effect on the consolidated financial position, results of operations or cash flows of Roper.

Over recent years there has been a significant increase in certain U.S. states in asbestos-related litigation claims against numerous industrial companies. Roper or its subsidiaries have been named defendants in some such cases. No significant resources have been required by Roper to respond to these cases and Roper believes it has valid defenses to such claims and, if required, intends to defend them vigorously. Given the state of these claims it is not possible to determine the potential liability, if any.

Roper's rent expense was $26.8 million, $29.7 million and $29.1 million for 2012, 2011 and 2010, respectively. Roper's future minimum property lease commitments are as follows (in millions):

2013	$	23.4
2014		17.4
2015		14.3
2016		12.5
2017		7.4
Thereafter		3.0
Total	$	78.0

A summary of the Company's warranty accrual activity is presented below (in thousands):

	2012			2011			2010
Balance, beginning of year	$	8,147		$	7,038		$	7,341
Additions charged to costs and expenses		11,845			8,846			5,671
Deductions		(10,287	)		(7,716	)		(5,895	)
Other		50			(21	)		(79	)
Balance, end of year	$	9,755		$	8,147		$	7,038

Other included warranty balances at acquired businesses at the dates of acquisition, the effects of foreign currency translation adjustments, reclassifications and other.

At December 31, 2012 the Company had outstanding surety bonds of $402 million.

(14)	Segment and Geographic Area Information

Roper's operations are reported in four segments around common customers, markets, sales channels, technologies and common cost opportunities. The segments are: Industrial Technology, Energy Systems and Controls, Medical & Scientific Imaging, and RF Technology. Products included within the Industrial Technology segment are water and fluid handling pumps, flow measurement and metering equipment, industrial valves and controls, and equipment and consumables for materials analysis and industrial leak testing. The Energy Systems and Controls segment's products include control systems, equipment and consumables for fluid properties testing, vibration sensors and other non-destructive inspection and measurement products and services. The Medical and Scientific Imaging segment offers medical products and software, high performance digital imaging products and software and handheld and vehicle mounted computers. The RF Technology segment includes products and systems related to comprehensive toll and traffic systems and processing, security and access control, campus card systems, software-as-a-service applications in the freight matching and food industries and utility metering and remote monitoring applications. Roper's management structure and internal reporting are aligned consistently with these four segments.

There were no material transactions between Roper's business segments during 2012, 2011 and 2010. Sales between geographic areas are primarily of finished products and are accounted for at prices intended to represent third-party prices. Operating profit by business segment and by geographic area is defined as net sales less operating costs and expenses. These costs and expenses do not include unallocated corporate administrative expenses. Items below income from operations on Roper's statement of earnings are not allocated to business segments.

Identifiable assets are those assets used primarily in the operations of each business segment or geographic area. Corporate assets are principally comprised of cash and cash equivalents, deferred tax assets, recoverable insurance claims, deferred compensation assets, unamortized deferred financing costs and property and equipment.

Selected financial information by business segment for 2012, 2011 and 2010 follows (in thousands):

	Industrial Technology		Energy Systems and Controls		Medical and Scientific Imaging		RF Technology		Corporate			Total
2012
Net sales	$	795,240	$	646,116	$	703,835	$	848,298	$	-		$	2,993,489
Operating profit		244,691		179,824		187,246		223,335		(77,509	)		757,587
Assets:
Operating assets		225,620		199,016		232,527		251,721		24,731			933,615
Intangible assets, net		590,175		555,667		2,631,085		1,790,797		-			5,567,724
Other		100,102		80,230		114,834		51,044		223,555			569,765
Total													7,071,104
Capital expenditures		14,030		5,532		8,253		9,765		825			38,405
Depreciation and other amortization		21,754		19,671		50,309		62,629		385			154,748
2011
Net sales	$	737,356	$	597,802	$	610,617	$	851,314	$	-		$	2,797,089
Operating profit		208,188		157,960		148,376		202,877		(56,862	)		660,539
Assets:
Operating assets		219,180		194,527		176,893		237,719		19,824			848,143
Intangible assets, net		597,769		535,606		971,584		1,855,609		-			3,960,568
Other		32,054		64,753		49,599		31,911		332,389			510,706
Total													5,319,417
Capital expenditures		11,153		6,889		12,498		9,634		528			40,702
Depreciation and other amortization		23,119		18,177		34,224		64,329		294			140,143
2010
Net sales	$	607,564	$	503,897	$	548,718	$	725,933	$	-		$	2,386,112
Operating profit		162,009		120,427		130,558		150,711		(49,411	)		514,294
Assets:
Operating assets		179,458		166,554		170,955		256,016		17,517			790,500
Intangible assets, net		610,542		518,849		791,611		1,911,291		-			3,832,293
Other		54,822		62,637		59,375		40,913		228,984			446,731
Total													5,069,524
Capital expenditures		8,849		3,466		7,269		8,976		31			28,591
Depreciation and other amortization		23,660		18,472		27,991		52,709		189			123,021

Summarized data for Roper's U.S. and foreign operations (principally in Canada, Europe and Asia) for 2012, 2011 and 2010, based upon the country of origin of the Roper entity making the sale, was as follows (in thousands):

	United States		Non-U.S.		Eliminations			Total
2012
Sales to unaffiliated customers	$	2,174,443	$	819,046	$	-		$	2,993,489
Sales between geographic areas		140,864		111,813		(252,677	)		-
Net sales	$	2,315,307	$	930,859	$	(252,677	)	$	2,993,489
Long-lived assets	$	125,015	$	35,702	$	-		$	160,717
2011
Sales to unaffiliated customers	$	1,985,756	$	811,333	$	-		$	2,797,089
Sales between geographic areas		153,121		229,583		(382,704	)		-
Net sales	$	2,138,877	$	1,040,916	$	(382,704	)	$	2,797,089
Long-lived assets	$	135,399	$	35,729	$	-		$	171,128
2010
Sales to unaffiliated customers	$	1,758,797	$	627,315	$	-		$	2,386,112
Sales between geographic areas		125,202		174,265		(299,467	)		-
Net sales	$	1,883,999	$	801,580	$	(299,467	)	$	2,386,112
Long-lived assets	$	104,147	$	29,834	$	-		$	133,981

Export sales from the U.S. during the years ended December 31, 2012, 2011 and 2010 were $459 million, $410 million and $358 million, respectively. In the year ended December 31, 2012, these exports were shipped primarily to Asia (35%), Europe (21%), Canada (16%), Middle East (13%), South America (6%) and other (9%).

Sales to customers outside the U.S. accounted for a significant portion of Roper's revenues. Sales are attributed to geographic areas based upon the location where the product is ultimately shipped. Roper's net sales for the years ended December 31, 2012, 2011 and 2010 are shown below by region, except for Canada, which is presented separately as it is the only country in which Roper has had greater than 5% of total sales for any of the three years presented (in thousands):

	Industrial Technology		Energy Systems and Controls		Medical and Scientific Imaging		RF Technology		Total
2012
Canada	$	94,035	$	39,836	$	21,308	$	47,371	$	202,550
Europe		104,105		148,360		161,075		64,492		478,032
Asia		75,113		121,997		111,642		6,465		315,217
Middle East		3,846		47,866		4,613		30,125		86,450
Rest of the world		34,091		68,275		20,500		9,293		132,161
Total	$	311,190	$	426,334	$	319,140	$	157,746	$	1,214,410
2011
Canada	$	64,864	$	39,547	$	21,127	$	40,636	$	166,174
Europe		110,656		148,767		162,725		88,741		510,889
Asia		67,093		118,565		86,807		8,833		281,298
Middle East		3,964		44,792		5,062		28,406		82,224
Rest of the world		33,721		63,064		17,194		9,790		123,769
Total	$	280,298	$	414,735	$	292,915	$	176,406	$	1,164,354

2010
Canada	$	44,678	$	27,360	$	15,306	$	35,270	$	122,614
Europe		91,815		135,019		126,116		64,605		417,555
Asia		49,232		100,094		79,343		5,389		234,058
Middle East		2,805		34,912		5,853		22,387		65,957
Rest of the world		22,328		55,280		15,169		10,542		103,319
Total	$	210,858	$	352,665	$	241,787	$	138,193	$	943,503

(15)	Concentration of Risk

Financial instruments which potentially subject the Company to credit risk consist primarily of cash, cash equivalents and trade receivables.

The Company maintains cash and cash equivalents with various major financial institutions. Cash equivalents include investments in commercial paper of companies with high credit ratings, investments in money market securities and securities backed by the U.S. Government. At times such amounts may exceed the F.D.I.C. limits. The Company limits the amount of credit exposure with any one financial institution and believes that no significant concentration of credit risk exists with respect to cash investments.

Trade receivables subject the Company to the potential for credit risk with customers. To reduce credit risk, the Company performs ongoing evaluations of its customers' financial condition.

(16)	Quarterly Financial Data (unaudited)

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands, except per share data)
2012
Net sales	$	711,066	$	724,872	$	747,641	$	809,910
Gross profit		391,193		397,608		416,555		466,361
Income from operations		170,304		178,784		183,257		225,242
Net earnings		108,309		114,813		116,708		143,530

Earnings from continuing operations per common share:
Basic		1.12		1.18		1.19		1.46
Diluted		1.09		1.15		1.17		1.44

2011
Net sales	$	645,309	$	699,871	$	712,705	$	739,204
Gross profit		350,096		377,063		382,556		405,849
Income from operations		142,000		163,970		167,215		187,354
Net earnings		88,979		106,311		110,281		121,676

Earnings from continuing operations per common share:
Basic		0.93		1.11		1.15		1.26
Diluted		0.91		1.08		1.12		1.23

The sum of the four quarters may not agree with the total for the year due to rounding.

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

Schedule II – Consolidated Valuation and Qualifying Accounts

Years ended December 31, 2012, 2011 and 2010

	Balance at beginning of year	Additions charged to costs and expenses	Deductions	Other	Balance at end of year
	(in thousands)
Allowance for doubtful accounts and sales allowances
2012	$ 10,636	$ 4,573	$ (2,403)	$ 3,170	$ 15,976
2011	10,349	2,816	(2,842)	313	10,636
2010	11,187	1,558	(2,900)	504	10,349
Reserve for inventory obsolescence
2012	$ 35,224	$ 14,736	$ (8,253)	$ 260	$ 41,967
2011	32,516	11,407	(8,848)	149	35,224
2010	29,037	12,905	(9,125)	(301)	32,516

Deductions from the allowance for doubtful accounts represented the net write-off of uncollectible accounts receivable. Deductions from the inventory obsolescence reserve represented the disposal of obsolete items.

Other included the allowance for doubtful accounts and reserve for inventory obsolescence of acquired businesses at the dates of acquisition, the effects of foreign currency translation adjustments for those companies whose functional currency was not the U.S. dollar, reclassifications and other.

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