Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Page
Consolidated Financial Statements:
Report of Independent Registered Certified Public Accounting Firm (PricewaterhouseCoopers LLP)	25
Consolidated Balance Sheets as of December 31, 2014 and 2013	26
Consolidated Statements of Earnings for the Years ended December 31, 2014, 2013 and 2012	27
Consolidated Statements of Comprehensive Income for the Years ended December 31, 2014, 2013 and 2012	28
Consolidated Statements of Stockholders' Equity for the Years ended December 31, 2014, 2013 and 2012	29
Consolidated Statements of Cash Flows for the Years ended December 31, 2014, 2013 and 2012	30
Notes to Consolidated Financial Statements	31

Supplementary Data:
Schedule II - Consolidated Valuation and Qualifying Accounts for the Years ended December 31, 2014, 2013 and 2012	47

Report of Independent Registered Certified 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 comprehensive income, of stockholders' equity, and of cash flows, present fairly, in all material respects, the financial position of Roper Industries, Inc. and its subsidiaries at December 31, 2014 and December 31, 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 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, 2014, based on criteria established in Internal Control - Integrated Framework 2013 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 2014 from its assessment of internal control over financial reporting as of December 31, 2014 because they were acquired by the Company in purchase business combinations during 2014. We have also excluded acquisitions completed during 2014 from our audit of internal control over financial reporting. These acquisitions are wholly-owned subsidiaries whose total assets and total revenues represent 0.27%, and 0.67%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2014.

/s/ PricewaterhouseCoopers LLP

February 20, 2015

Tampa, Florida

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2014 and 2013

(in thousands, except per share data)

	2014			2013
Assets
Cash and cash equivalents	$	610,430		$	459,720
Accounts receivable, net		511,538			519,075
Inventories, net		193,766			204,923
Deferred taxes		54,199			64,464
Unbilled receivables		96,409			86,945
Other current assets		45,763			38,210
Total current assets		1,512,105			1,373,337

Property, plant and equipment, net		110,876			117,310
Goodwill		4,710,691			4,549,998
Other intangible assets, net		1,978,729			2,039,136
Deferred taxes		27,496			28,773
Other assets		73,037			76,427
Total assets	$	8,412,934		$	8,184,981

Liabilities and Stockholders' Equity
Accounts payable	$	143,847		$	150,313
Accrued compensation		117,374			107,953
Deferred revenue		190,953			209,332
Other accrued liabilities		160,738			153,712
Income taxes payable		-			4,275
Deferred taxes		3,943			6,490
Current portion of long-term debt, net		11,092			11,016
Total current liabilities		627,947			643,091

Long-term debt, net of current portion		2,203,031			2,453,836
Deferred taxes		735,826			783,805
Other liabilities		90,770			91,199
Total liabilities		3,657,574			3,971,931

Commitments and contingencies (Note 12)

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; 102,069 shares issued and 100,126 outstanding at December 31, 2014 and 101,276 shares issued and 99,312 outstanding at December 31, 2013		1,021			1,013
Additional paid-in capital		1,325,338			1,229,233
Retained earnings		3,520,201			2,959,196
Accumulated other comprehensive earnings		(71,927	)		43,083
Treasury stock, 1,943 shares at December 31, 2014 and 1,964 shares at December 31, 2013		(19,273	)		(19,475	)
Total stockholders' equity		4,755,360			4,213,050
Total liabilities and stockholders' equity	$	8,412,934		$	8,184,981

See accompanying notes to consolidated financial statements.

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

Years ended December 31, 2014, 2013 and 2012

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

	Years ended December 31,
	2014		2013			2012
Net sales	$	3,549,494	$	3,238,128		$	2,993,489
Cost of sales		1,447,595		1,355,200			1,321,772
Gross profit		2,101,899		1,882,928			1,671,717
Selling, general and administrative expenses		1,102,426		1,040,567			914,130
Income from operations		999,473		842,361			757,587
Interest expense, net		78,637		88,039			67,525
Loss on extinguishment of debt		-		-			1,043
Other income/(expense), net		620		(192	)		(2,338	)
Earnings before income taxes		921,456		754,130			686,681
Income taxes		275,423		215,837			203,321

Net earnings	$	646,033	$	538,293		$	483,360

Earnings per share:
Basic	$	6.47	$	5.43		$	4.95
Diluted	$	6.40	$	5.37		$	4.86

Weighted-average common shares outstanding:
Basic		99,916		99,123			97,702
Diluted		100,884		100,209			99,558

See accompanying notes to consolidated financial statements.

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2014, 2013 and 2012

(in thousands)

	Years ended December 31,
	2014			2013			2012
Net earnings	$	646,033		$	538,293		$	483,360

Other comprehensive income, net of tax:
Foreign currency translation adjustments		(115,010	)		(15,454	)		23,633
Unrecognized pension gain		-			-			1,104

Total other comprehensive income/(loss), net of tax		(115,010	)		(15,454	)		24,737

Comprehensive income	$	531,023		$	522,839		$	508,097

See accompanying notes to consolidated financial statements.

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Years ended December 31, 2014, 2013 and 2012

(in thousands, except per share data)

	Common Stock										Accumulated other						Total
	Shares		Amount		Additional paid-in capital			Retained earnings			comprehensive earnings			Treasury stock			stockholders' equity
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
Net earnings		-		-		-			538,293			-			-			538,293
Stock option exercises		434		4		23,995			-			-			-			23,999
Treasury stock sold		20		-		2,248			-			-			201			2,449
Currency translation adjustments, net of $2,406 tax		-		-		-			-			(15,454	)		-			(15,454	)
Stock based compensation		-		-		53,417			-			-			-			53,417
Restricted stock activity		254		3		(16,046	)		-			-			-			(16,043	)
Stock option tax benefit, net of shortfalls		-		-		16,000			-			-			-			16,000
Conversion of senior subordinated convertible notes		-		-		(8,382	)		-			-			-			(8,382	)
Dividends declared ($0.70 per share)		-		-		-			(68,955	)		-			-			(68,955	)
Balances at December 31, 2013		99,312	$	1,013	$	1,229,233		$	2,959,196		$	43,083		$	(19,475	)	$	4,213,050
Net earnings		-		-		-			646,033			-			-			646,033
Stock option exercises		581		6		32,517			-			-			-			32,523
Treasury stock sold		20		-		2,549			-			-			202			2,751
Currency translation adjustments, net of $3,916 tax		-		-		-			-			(115,010	)		-			(115,010	)
Stock based compensation		-		-		63,025			-			-			-			63,025
Restricted stock activity		213		2		(22,064	)		-			-			-			(22,062	)
Stock option tax benefit, net of shortfalls		-		-		21,481			-			-			-			21,481
Conversion of senior subordinated convertible notes		-		-		(1,403	)		-			-			-			(1,403	)
Dividends declared ($0.85 per share)		-		-		-			(85,028	)		-			-			(85,028	)
Balances at December 31, 2014		100,126	$	1,021	$	1,325,338		$	3,520,201		$	(71,927	)	$	(19,273	)	$	4,755,360

See accompanying notes to consolidated financial statements.

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2014, 2013 and 2012

(in thousands)

	Years ended December 31,
	2014			2013			2012
Cash flows from operating activities:
Net earnings	$	646,033		$	538,293		$	483,360
Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization of property, plant and equipment		40,890			37,756			37,888
Amortization of intangible assets		156,394			151,434			116,860
Amortization of deferred financing costs		4,003			3,918			2,399
Non-cash stock compensation		63,027			53,133			40,773
Changes in operating assets and liabilities, net of acquired businesses:
Accounts receivable		(404	)		32,800			(16,455	)
Unbilled receivables		(10,305	)		(14,754	)		(5,122	)
Inventories		6,349			(12,687	)		18,361
Accounts payable and accrued liabilities		(20,455	)		23,305			9,209
Income taxes		(46,619	)		(6,427	)		(15,988	)
Other, net		1,528			(4,218	)		6,567
Cash provided by operating activities		840,441			802,553			677,852
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		(305,379	)		(1,074,413	)		(1,467,772	)
Capital expenditures		(37,644	)		(42,528	)		(38,405	)
Proceeds from sale of assets		1,506			2,174			1,315
Other, net		(6,588	)		(1,096	)		(683	)
Cash used in investing activities		(348,105	)		(1,115,863	)		(1,505,545	)
Cash flows from financing activities:
Proceeds from senior notes		-			800,000			900,000
Payment of senior notes		-			(500,000	)		-
Borrowings/(payments) under revolving line of credit, net		(250,000	)		150,000			100,000
Principal payments on convertible notes		(561	)		(3,702	)		(57,304	)
Debt issuance costs		-			(7,717	)		(12,213	)
Cash dividends to stockholders		(79,859	)		(49,092	)		(69,903	)
Treasury stock sales		2,751			2,449			2,195
Stock award tax excess windfall benefit		21,081			11,709			30,747
Proceeds from stock based compensation, net		10,463			7,944			37,679
Redemption premium on convertible debt		(1,518	)		(9,124	)		(76,641	)
Other		(461	)		1,166			(690	)
Cash provided by/(used in) financing activities		(298,104	)		403,633			853,870
Effect of exchange rate changes on cash		(43,522	)		(1,193	)		6,312

Net increase in cash and cash equivalents		150,710			89,130			32,489
Cash and cash equivalents, beginning of year		459,720			370,590			338,101

Cash and cash equivalents, end of year	$	610,430		$	459,720		$	370,590

Supplemental disclosures:
Cash paid for:
Interest	$	74,446		$	94,648		$	67,804
Income taxes, net of refunds received	$	300,969		$	210,540		$	188,560
Noncash investing activities:
Net assets of businesses acquired:
Fair value of assets, including goodwill	$	324,717		$	1,275,827		$	1,824,453
Liabilities assumed		(19,338	)		(201,414	)		(356,681	)
Cash paid, net of cash acquired	$	305,379		$	1,074,413		$	1,467,772

See accompanying notes to consolidated financial statements.

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years ended December 31, 2014, 2013 and 2012

(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 technology company. The Company operates businesses that design and develop software (both license and software-as-a-service) and engineered products and solutions for a variety of niche end markets; including healthcare, transportation, food, energy, water, education and academic research.

Accounts Receivable - Accounts receivable are stated net of an allowance for doubtful accounts and sales allowances of $13.7 million and $15.0 million at December 31, 2014 and 2013, 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 $40 million in cash equivalents at December 31, 2014 and none at December 31, 2013.

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, 2014, 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,
	2014		2013		2012
Basic weighted-average shares outstanding		99,916		99,123		97,702
Effect of potential common stock:
Common stock awards		816		891		1,040
Senior subordinated convertible notes		152		195		816
Diluted weighted-average shares outstanding		100,884		100,209		99,558

As of and for the years ended December 31, 2014, 2013 and 2012, there were 764,333, 614,850 and 547,591 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 generally accepted accounting principles in the United States ("GAAP") 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 gain of $0.2 million for the year ended December 31, 2014, a net loss of $3.9 million for the year ended December 31, 2013 and a net loss of $2.8 million for the year ended December 31, 2012.

Goodwill and Other Intangibles - Roper accounts for goodwill in a purchase business combination as the excess of the cost over the estimated 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.

The Company has 29 reporting units with individual goodwill amounts ranging from zero to $994 million. The Company concluded that the fair value of each of its reporting units was in excess of its carrying value, with no impairment indicated as of December 31, 2014. 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, although not comprehensive, 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 that are determined to have an indefinite useful economic life 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 2014.

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, 2014, the amount of earnings of foreign subsidiaries that the Company considers permanently reinvested and for which deferred taxes have not been provided was approximately $1.1 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 of 1986, as amended ("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. Interest and penalties related to unrecognized tax benefits are classified as a component of income tax expense.

The Company records a valuation allowance to reduce its deferred tax assets if, based on the weight of available evidence, both positive and negative, for each respective tax jurisdictions, it is more likely than not that some portion or all of such deferred tax assets will not be realized. Available evidence which is considered in determining the amount of valuation allowance required includes, but is not limited to, the Company's estimate of future taxable income and any applicable tax-planning strategies.

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. There were no interest rate swaps outstanding at December 31, 2014.

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 - The Financial Accounting Standards Board ("FASB") establishes changes to accounting principles under GAAP in the form of accounting standards updates ("ASUs") to the FASB's Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. Any ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company's results of operations, financial position or cash flows.

In June 2014, the FASB issued updates to the accounting for stock compensation. These updates, effective for fiscal years beginning after December 15, 2015, modify the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The Company does not expect these updates to have an impact on its results of operations, financial condition or cash flows.

In May 2014, the FASB issued updates on accounting and disclosures for revenue from contracts with customers. These updates, effective for annual reporting periods after December 15, 2016, create a single, comprehensive revenue recognition model for all contracts with customers. The model is based on changes in contract assets (rights to receive consideration) and liabilities (obligations to provide a good or service). Revenue will be recognized based on the satisfaction of performance obligations, which occurs when control of a good or service transfers to a customer. The Company is evaluating the impact of these updates on its results of operations, financial condition and 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 $147.9 million, $145.7 million and $125.9 million for the years ended December 31, 2014, 2013 and 2012, 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 and software 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 $266 million, $205 million and $146 million for the years ended December 31, 2014, 2013 and 2012, 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 $4.7 million and $8.0 million at December 31, 2014 and 2013, respectively.

Stock-Based Compensation - The Company recognizes expense for the grant date fair value of its employee stock awards on a straight-line basis (or, in the case of performance-based awards, on a graded basis) over the employee's requisite service period (generally the vesting period of the award). The fair value of option awards is estimated using the Black-Scholes option valuation model. 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

2014 Acquisitions – During the year ended December 31, 2014, 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.

Roper acquired 100% of the shares of Foodlink Holdings, Inc. ("Foodlink"), Innovative Product Achievements, LLC ("IPA") and Strategic Healthcare Programs Holdings, LLC ("SHP") on July 2, August 5, and August 14, 2014, respectively. The aggregate purchase price was $303 million, paid in cash. Roper purchased the businesses to expand upon existing supply chain and medical platforms. SHP and IPA are reported in the Medical & Scientific Imaging segment, and Foodlink is reported in the RF Technology segment.

The Company expensed transaction costs of $2.8 million related to the acquisitions as corporate general and administrative expenses, as incurred.

The Company recorded $208 million in goodwill and $99 million in other identifiable intangibles in connection with the acquisitions; however, purchase price allocations are preliminary pending final intangibles valuations and tax-related adjustments. The majority of the goodwill recorded is not expected to be deductible for tax purposes. Of the $99 million of intangible assets acquired, $7 million was assigned to trade names that are not subject to amortization. The remaining $92 million of acquired intangible assets have a weighted-average useful life of 17 years. The intangible assets that make up that amount include customer relationships of $82 million (19 year weighted-average useful life), unpatented technology of $7 million (6 year weighted-average useful life), software of $2 million (4 year weighted-average useful life) and backlog of $1 million (1 year weighted-average useful life).

2013 Acquisitions – During the year ended December 31, 2013, 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.

On May 1, 2013, Roper acquired 100% of the shares of Managed Health Care Associates, Inc. ("MHA"), in a $1.0 billion all-cash transaction. MHA is a leading provider of services and technologies to support the diverse and complex needs of alternate site health care providers who deliver services outside of an acute care hospital setting. The acquisition of MHA complements and expands the Company's medical software and services platform. MHA is reported in the Medical & Scientific Imaging segment.

The following table (in thousands) summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

Current assets	$	59,813
Identifiable intangibles		465,500
Goodwill		678,183
Other assets		5,798
Total assets acquired		1,209,294
Current liabilities		(24,717	)
Long-term deferred tax liability		(162,503	)
Other liabilities		(6,524	)
Net assets acquired	$	1,015,550

The fair value of current assets acquired also includes an adjustment of $35.0 million for administrative fees related to customer purchases that occurred prior to the acquisition date but not reported to MHA until after the acquisition date. In the ordinary course, these administrative fees are recorded as revenue when reported; however, GAAP accounting for business acquisitions requires the Company to estimate the amount of purchases occurring prior to the acquisition date and record the fair value of the administrative fees to be received from those purchases as an accounts receivable at the date of acquisition. The Company also recorded a fair value liability of $8.6 million included in current liabilities related to corresponding revenue-share obligation owed to customers that generated the administrative fees. Both of these fair value adjustments were fully amortized as of September 30, 2013.

On October 4, 2013, the Company paid $54 million in cash to acquire 100% of the shares of Advanced Sensors, Ltd. ("Advanced Sensors"), a company which manufactures and supports oil-in-water analyzers for the oil and gas industries, in order to expand the Company's product line. Advanced Sensors is reported in the Energy Systems and Controls segment. The Company recorded $28 million in goodwill and $28 million of other identifiable intangibles in connection with the acquisition.

The majority of the goodwill related to the 2013 acquisitions is not expected to be deductible for tax purposes. Of the $493 million of intangible assets acquired in 2013, $28 million was assigned to trade names that are not subject to amortization. The remaining $465 million of acquired intangible assets have a weighted-average useful life of approximately 19 years. The intangible assets that make up that amount include customer relationships of $451 million (20 year weighted-average useful life), technology of $12 million (7 year weighted-average useful life), and $2 million of protective rights in the form of non-compete agreements (5 year weighted-average useful life).

The Company expensed transaction costs of $3.3 million related to the acquisitions as corporate general and administrative expenses, as incurred.

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 $1.4 billion all-cash transaction. The Company acquired Sunquest to complement and expand its medical platform. Sunquest is reported in the Medical & Scientific Imaging segment.

The Company expensed transaction costs of $6.7 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.

Current assets	$	96,883
Identifiable intangibles		669,000
Goodwill		993,780
Other assets		2,694
Total assets acquired		1,762,357
Deferred revenue		(83,065	)
Other current liabilities		(18,762	)
Long-term deferred tax liability		(244,550	)
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
Sales		$	3,130,407
Net income			521,141
Earnings per share, basic			5.33
Earnings per share, diluted			5.23

Pro forma earnings for the year ended December 31, 2012 were adjusted by $50.7 million for non-recurring acquisition and other costs. Adjustments were also made 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 recorded for these five companies is not expected to be deductible for tax purposes. Of the $43 million of 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).

(3)	Inventories

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

	2014			2013
Raw materials and supplies	$	124,103		$	127,525
Work in process		29,358			30,498
Finished products		79,184			90,352
Inventory reserves		(38,879	)		(43,452	)
	$	193,766		$	204,923

(4)	Property, Plant and Equipment

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

	2014			2013
Land	$	4,130		$	4,384
Buildings		80,775			79,219
Machinery and other equipment		320,697			310,738
		405,602			394,341
Accumulated depreciation		(294,726	)		(277,031	)
	$	110,876		$	117,310

Depreciation and amortization expense was $40,890, $37,756 and $37,888 for the years ended December 31, 2014, 2013 and 2012, respectively.

(5)	Goodwill and Other Intangible Assets

The carrying value of goodwill by segment was as follows (in thousands):

	Industrial Technology			Energy Systems and Controls			Medical and Scientific Imaging			RF Technology			Total
Balances at December 31, 2012	$	421,755		$	404,057		$	1,772,402		$	1,270,643		$	3,868,857
Goodwill acquired		-			27,944			680,732			-			708,676
Currency translation adjustments		3,746			198			(13,345	)		(76	)		(9,477	)
Reclassifications and other		-			2,498			(4,283	)		(16,273	)		(18,058	)
Balances at December 31, 2013	$	425,501		$	434,697		$	2,435,506		$	1,254,294		$	4,549,998
Goodwill acquired		-			-			174,347			33,596			207,943
Currency translation adjustments		(16,537	)		(8,002	)		(18,847	)		(7,102	)		(50,488	)
Reclassifications and other		-			(112	)		3,350			-			3,238
Balances at December 31, 2014	$	408,964		$	426,583		$	2,594,356		$	1,280,788		$	4,710,691

Reclassifications and other during the years ended December 31, 2014 and 2013 were due primarily to immaterial out of period corrections of tax adjustments for Sunquest and TransCore, respectively, that were not material in the current or prior periods. See Note 2 for information regarding acquisitions.

Other intangible assets were comprised of (in thousands):

	Cost		Accum. amort.			Net book value
Assets subject to amortization:
Customer related intangibles	$	1,936,336	$	(464,018	)	$	1,472,318
Unpatented technology		216,044		(120,091	)		95,953
Software		160,618		(58,084	)		102,534
Patents and other protective rights		31,394		(21,922	)		9,472
Trade names		656		(16	)		640
Assets not subject to amortization:
Trade names		358,219		-			358,219
Balances at December 31, 2013	$	2,703,267	$	(664,131	)	$	2,039,136

Assets subject to amortization:
Customer related intangibles	$	1,975,334	$	(543,594	)	$	1,431,740
Unpatented technology		217,260		(134,702	)		82,558
Software		156,449		(62,882	)		93,567
Patents and other protective rights		26,463		(18,325	)		8,138
Backlog		1,100		(443	)		657
Trade names		622		(72	)		550
Assets not subject to amortization:
Trade names		361,519		-			361,519
Balances at December 31, 2014	$	2,738,747	$	(760,018	)	$	1,978,729

Amortization expense of other intangible assets was $153 million, $147 million, and $113 million during the years ended December 31, 2014, 2013 and 2012, respectively. Amortization expense is expected to be $147 million in 2015, $143 million in 2016, $132 million in 2017, $125 million in 2018 and $119 million in 2019.

(6)	Accrued Liabilities

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

	2014		2013
Interest	$	18,275	$	18,285
Customer deposits		16,392		21,438
Commissions		12,025		12,030
Warranty		9,537		14,336
Accrued dividend		25,032		19,863
Rebates		12,968		14,104
Billings in excess of cost		14,135		5,016
Other		52,374		48,640
	$	160,738	$	153,712

(7)	Income Taxes

Earnings before income taxes for the years ended December 31, 2014, 2013 and 2012 consisted of the following components (in thousands):

	2014		2013		2012
United States	$	665,219	$	517,432	$	430,573
Other		256,237		236,698		256,108
	$	921,456	$	754,130	$	686,681

Components of income tax expense for the years ended December 31, 2014, 2013 and 2012 were as follows (in thousands):

	2014			2013			2012
Current:
Federal	$	218,302		$	166,430		$	136,860
State		37,155			12,577			9,972
Foreign		56,107			40,451			48,403
Deferred:
Domestic		(30,664	)		(1,965	)		15,789
Foreign		(5,477	)		(1,656	)		(7,703	)
	$	275,423		$	215,837		$	203,321

Reconciliations between the statutory federal income tax rate and the effective income tax rate for the years ended December 31, 2014, 2013 and 2012 were as follows:


Federal statutory rate	35.0	%	35.0	%	35.0	%
Foreign rate differential	(3.9	)	(4.1	)	(3.9	)
R&D tax credits	(0.4	)	(0.5	)	-
State taxes, net of federal benefit	2.0		1.9		1.7
Foreign tax credit	-		-		(2.4	)
Section 199 deduction	(1.6	)	(1.8	)	(1.3	)
Other, net	(1.2	)	(1.9	)	0.5
	29.9	%	28.6	%	29.6	%

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):

	2014			2013
Deferred tax assets:
Reserves and accrued expenses	$	130,508		$	119,955
Inventories		10,186			10,315
Net operating loss carryforwards		41,480			35,286
R&D credits		7,145			3,134
Foreign tax credits		-			425
Valuation allowance		(16,169	)		(5,917	)
Total deferred tax assets	$	173,150		$	163,198
Deferred tax liabilities:
Reserves and accrued expenses	$	27,981		$	20,995
Amortizable intangible assets		798,502			826,838
Plant and equipment		4,741			12,423
Total deferred tax liabilities	$	831,224		$	860,256

At December 31, 2014, the Company had approximately $14.1 million of tax-effected U.S. federal net operating loss carryforwards that if not utilized will expire in years 2023 through 2034. The U.S. federal net operating loss carryforwards increased from 2013 to 2014 primarily due to losses incurred by a U.S. entity that is not a member of the Company's consolidated tax group and therefore not available for offset against the taxable income of other members of the group. In a recent acquisition, the consolidated group obtained U.S. federal net operating losses subject to an IRC Section 382 limitation; however, the Company expects to utilize the losses in their entirety prior to expiration. The Company has approximately $20.8 million of tax-effected state net operating loss carryforwards that if not utilized will expire in years 2021 through 2034. The state net operating loss carryforwards are primarily related to Florida, Georgia and New Jersey, but the Company has smaller net operating losses in various other states. The Company has approximately $6.6 million of tax-effected foreign net operating loss carryforwards that if not utilized will begin to expire in 2015, while some do not have a definite expiration. Additionally, the Company has $7.1 million of U.S. federal and state research and development tax credit carryforwards that will expire in years 2019 through 2034.

As of December 31, 2014, the Company determined that a total valuation allowance of $16.2 million was necessary to reduce U.S. deferred tax assets by $11.9 million and foreign deferred tax assets by $4.3 million, where it was more likely than not that some portion or all of such deferred tax assets will not be realized. As of December 31, 2014, based on the Company's estimates of future taxable income and any applicable tax-planning strategies within various tax jurisdictions, the Company believes that it is more likely than not that the remaining net deferred tax assets will be realized.

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):

	2014			2013			2012
Beginning balance	$	26,924		$	24,865		$	19,556
Additions for tax positions of prior periods		6,532			3,055			1,371
Additions for tax positions of the current period		5,571			1,639			1,541
Additions due to acquisitions		-			5,026			9,116
Reductions for tax positions of prior periods		(1,008	)		(3,675	)		(197	)
Reductions for tax positions of the current period
Settlements with taxing authorities		(518	)		-			-
Lapse of applicable statute of limitations		(8,934	)		(3,986	)		(6,522	)
Ending balance	$	28,567		$	26,924		$	24,865

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $27.0 million. Interest and penalties related to unrecognized tax benefits are classified as a component of income tax expense and totaled $0.6 million in 2014. Accrued interest and penalties were $5.2 million at December 31, 2014 and $4.5 million at December 31, 2013. During the next twelve months, the unrecognized tax benefits are expected to increase by a net $9.2 million, due mainly to anticipated settlements with various state taxing authorities.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income taxes of multiple state, city and foreign jurisdictions. The Company's federal income tax returns for 2010 through the current period remain subject to examination and the relevant state, city and foreign statutes vary. At December 31, 2014, the Internal Revenue Service has been and is continuing to examine the Company's income tax returns for the years 2010 through 2012. The Company does not expect the assessment of any significant additional tax in excess of amounts reserved.

(8)	Long-Term Debt

On July 27, 2012, Roper entered into a $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 prior 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, 2014, there were no 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.

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, 2014 and 2013.

On June 6, 2013, the Company completed a public offering of $800 million aggregate principal amount of 2.050% senior unsecured notes due October 1, 2018. The notes bear interest at a fixed rate of 2.050% per year, payable semi-annually in arrears on April 1 and October 1 of each year, beginning October 1, 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.

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.

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 or 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 Company's senior 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.

Other debt includes $8 million of senior subordinated convertible notes due 2034.

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

	2014		2013
$1.5 billion revolving credit facility	$	-	$	250,000
2017 Notes		400,000		400,000
2018 Notes		800,000		800,000
2019 Notes		500,000		500,000
2022 Notes		500,000		500,000
Senior Subordinated Convertible Notes		8,003		8,270
Other		6,120		6,582
Total debt		2,214,123		2,464,852
Less current portion		11,092		11,016
Long-term debt	$	2,203,031	$	2,453,836

The 2012 Facility and Roper's $2.2 billion senior 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, 2014, Roper's debt consisted of $2.2 billion of senior notes and $8 million in senior subordinated convertible notes. In addition, the Company had $6.1 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 $49 million of outstanding letters of credit at December 31, 2014.

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, 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, 2014, the conversion price on the outstanding notes was $488.37. If converted at December 31, 2014, the value would have exceeded the $8 million principal amount of the notes by $25 million and could have resulted in the issuance of 155,980 shares of the Company's common stock.

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

2015	$	11,092
2016		2,332
2017		400,630
2018		800,066
2019		500,003
Thereafter		500,000
	$	2,214,123

(9)	Fair Value

Roper's debt at December 31, 2014 included $2.2 billion of fixed-rate senior notes with the following fair values (in millions):

$400 million senior notes due 2017		$	401
$800 million senior notes due 2018			800
$500 million senior notes due 2019			578
$500 million senior notes due 2022			492

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 $8 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, 2014 were at various interest rates that adjust relatively frequently under its credit facility. The fair value for each of these borrowings at December 31, 2014 was estimated to be the face value of these borrowings.

(10)	Retirement and Other Benefit Plans

Roper maintains four 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 The number of plans was reduced from eleven in the prior year due to consolidation of existing plans. Roper partially matches employee contributions. Costs related to these plans were $19.5 million, $16.5 million and $16.4 million for 2014, 2013 and 2012, 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.

(11)	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 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, 2014, 4,494,756 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. 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, 2014, 2013 and 2012 was as follows (in millions):

	2014		2013		2012
Stock based compensation	$	63.0	$	53.4	$	40.8
Tax benefit recognized in net income		22.1		18.7		14.3
Windfall tax benefit, net		21.5		16.0		30.8

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 three to five years from the grant date and expire ten years after the grant date. The Company recorded $16.6 million, $16.9 million, and $14.8 million of compensation expense relating to outstanding options during 2014, 2013 and 2012, respectively, as a component of general and administrative expenses, primarily at corporate.

The Company estimates the fair value of its option awards using the Black-Scholes option valuation model. 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 forfeitures, 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 2014, 2013 and 2012 were calculated using the following weighted-average assumptions:


Weighted-average fair value ($)	34.95	37.08	30.25
Risk-free interest rate (%)	1.63	0.86	0.77
Average expected option life (years)	5.22	5.19	5.24
Expected volatility (%)	27.01	36.09	36.51
Expected dividend yield (%)	0.58	0.56	0.58

The following table summarizes the Company's activities with respect to its stock option plans for the years ended December 31, 2014 and 2013:

			Weighted-average exercise price per share
Outstanding at January 1, 2013	2,918,195		$	63.15
Granted	601,350			117.78
Exercised	(424,945	)		56.48
Canceled	(106,164	)		98.74
Outstanding at December 31, 2013	2,988,436			74.00	6.22	$	193,279,214
Granted	650,000			137.05
Exercised	(587,661	)		55.98
Canceled	(69,664	)		116.29
Outstanding at December 31, 2014	2,981,111			90.48	6.37	$	196,378,239
Exercisable at December 31, 2014	1,811,238		$	68.02	4.91	$	159,978,254

The following table summarizes information for stock options outstanding at December 31, 2014:

		Outstanding options						Exercisable options
Exercise price		Number		Average exercise price		Average remaining life (years)		Number		Average exercise price
$	31.66 - 47.49		110,598	$	41.82		4.2		110,598	$	41.82
	47.50 - 63.32		911,913		54.10		3.3		911,913		54.10
	63.33 - 79.15		379,830		72.62		6.1		379,830		72.62
	79.16 - 94.98		325,632		92.70		7.0		216,610		92.24
	94.99 - 110.81		89,049		97.99		7.5		51,717		98.07
	110.82- 126.64		512,589		117.12		8.2		124,727		116.27
	126.65 - 142.47		573,000		135.14		9.2		15,843		133.77
	142.48 - 158.30		78,500		150.38		9.7		-		-
$	31.66 - 158.30		2,981,111	$	90.48		6.4		1,811,238	$	68.02

At December 31, 2014, there was $27.6 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 1.9 years. The total intrinsic value of options exercised in 2014, 2013 and 2012 was $50.3 million, $28.8 million and $86.0 million, respectively. Cash received from option exercises under all plans in 2014 and 2013 was $32.5 million and $24.0 million, respectively.

Restricted Stock Grants - During 2014 and 2013, the Company granted 375,060 and 399,540 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 Company recorded $46.4 million, $36.5 million and $25.9 million of compensation expense related to outstanding shares of restricted stock held by employees and directors during 2014, 2013 and 2012, respectively. A summary of the Company's nonvested shares activity for 2014 and 2013 is as follows:

			Weighted-average grant date fair value
Nonvested at December 31, 2012	571,905		$	80.96
Granted	399,540			117.74
Vested	(373,946	)		126.80
Forfeited	(23,649	)		124.48
Nonvested at December 31, 2013	573,850		$	103.44
Granted	375,060			142.30
Vested	(378,994	)		153.16
Forfeited	(27,361	)		106.60
Nonvested at December 31, 2014	542,555		$	130.29

At December 31, 2014, there was $43.4 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 2.2 years. 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, 2014.

Employee Stock Purchase Plan - During 2014, 2013 and 2012, participants of the ESPP purchased 20,368, 20,211 and 22,863 shares, respectively, of Roper's common stock for total consideration of $2.8 million, $2.4 million, and $2.2 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 2014, 2013 and 2012.

(12) 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. 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.

Roper or its subsidiaries have been named defendants along with numerous industrial companies in asbestos-related litigation claims in certain U.S. states. 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 $38.4 million, $39.8 million and $26.8 million for 2014, 2013 and 2012, respectively. Roper's future minimum property lease commitments are as follows (in millions):

2015	$	35.0
2016		28.5
2017		19.3
2018		10.8
2019		5.6
Thereafter		10.7
Total	$	109.9

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

	2014			2013			2012
Balance, beginning of year	$	14,336		$	9,755		$	8,147
Additions charged to costs and expenses*		13,396			20,387			11,845
Deductions		(18,078	)		(15,697	)		(10,287	)
Other		(117	)		(109	)		50
Balance, end of year	$	9,537		$	14,336		$	9,755

During the second quarter of 2013, the Company identified a vendor-supplied component within a refrigeration system valve that did not meet its quality standards, and $9.1 million was expensed to cover the estimated cost of replacing the faulty components for customers.

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

As of December 31, 2014, Roper had $49 million of letters of credit issued to guarantee its performance under certain services contracts or to support certain insurance programs and $428 million of outstanding surety bonds. Certain contracts, primarily those involving public sector customers, require Roper to provide a surety bond as a guarantee of its performance of contractual obligations.

(13)	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, materials analysis equipment and consumables 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 2014, 2013 and 2012. 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 2014, 2013 and 2012 follows (in thousands):

	Industrial Technology		Energy Systems and Controls		Medical and Scientific Imaging		RF Technology		Corporate			Total
2014
Net sales	$	827,145	$	691,813	$	1,080,309	$	950,227	$	-		$	3,549,494
Operating profit		247,596		203,021		375,867		271,177		(98,188	)		999,473
Assets:
Operating assets		220,115		219,284		232,380		270,458		7,002			949,239
Intangible assets, net		557,593		568,670		3,842,180		1,720,977		-			6,689,420
Other		120,681		223,831		147,529		65,636		216,598			774,275
Total													8,412,934
Capital expenditures		10,713		4,634		11,430		10,521		346			37,644
Depreciation and other amortization		21,135		23,281		93,683		58,702		483			197,284
2013
Net sales	$	779,564	$	651,920	$	902,281	$	904,363	$	-		$	3,238,128
Operating profit		223,053		183,679		268,172		253,532		(86,075	)		842,361
Assets:
Operating assets		232,505		214,926		237,681		266,026		15,325			966,463
Intangible assets, net		583,822		597,250		3,682,465		1,725,597		-			6,589,134
Other		75,215		167,879		152,211		62,576		171,503			629,384
Total													8,184,981
Capital expenditures		17,043		4,952		10,231		10,190		112			42,528
Depreciation and other amortization		21,551		21,353		85,177		60,590		519			189,190
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

Summarized data for Roper's U.S. and foreign operations (principally in Canada, Europe and Asia) for 2014, 2013 and 2012, 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
2014
Sales to unaffiliated customers	$	2,661,470	$	888,024	$	-		$	3,549,494
Sales between geographic areas		159,049		119,175		(278,224	)		-
Net sales	$	2,820,519	$	1,007,199	$	(278,224	)	$	3,549,494
Long-lived assets	$	134,855	$	30,781	$	-		$	165,636
2013
Sales to unaffiliated customers	$	2,400,592	$	837,536	$	-		$	3,238,128
Sales between geographic areas		141,529		121,431		(262,960	)		-
Net sales	$	2,542,121	$	958,967	$	(262,960	)	$	3,238,128
Long-lived assets	$	135,157	$	36,266	$	-		$	171,423
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

Export sales from the U.S. during the years ended December 31, 2014, 2013 and 2012 were $477 million, $479 million and $459 million, respectively. In the year ended December 31, 2014, these exports were shipped primarily to Asia (36%), Europe (18%), Canada (16%), Middle East (13%), South America (6%), South Pacific (5%) and other (6%).

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, 2014, 2013 and 2012 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
2014
Canada	$	106,598	$	31,831	$	24,997	$	45,811	$	209,237
Europe		121,909		157,391		185,263		54,330		518,893
Asia		61,552		143,524		107,695		7,555		320,326
Middle East		3,824		42,988		9,997		34,241		91,050
Rest of the world		26,134		78,186		28,722		9,333		142,375
Total	$	320,017	$	453,920	$	356,674	$	151,270	$	1,281,881

2013
Canada	$	109,361	$	34,260	$	25,502	$	45,954	$	215,077
Europe		108,644		153,807		168,394		62,825		493,670
Asia		65,622		136,934		103,931		8,134		314,621
Middle East		3,865		32,444		9,361		44,341		90,011
Rest of the world		26,716		82,956		17,856		11,865		139,393
Total	$	314,208	$	440,401	$	325,044	$	173,119	$	1,252,772

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	$	319,138	$	157,746	$	1,214,410

(14)	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.

(15)	Quarterly Financial Data (unaudited)

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands, except per share data)
2014
Net sales	$	834,052	$	885,175	$	884,122	$	946,145
Gross profit		488,936		523,182		524,040		565,741
Income from operations		223,400		246,666		245,658		283,749
Net earnings		147,226		157,361		155,510		185,936

Earnings from continuing operations per common share:
Basic		1.48		1.58		1.55		1.86
Diluted		1.46		1.56		1.54		1.84

2013
Net sales	$	737,135	$	784,010	$	827,810	$	889,173
Gross profit		421,576		445,507		482,625		533,220
Income from operations		185,177		179,746		219,349		258,089
Net earnings		124,914		111,353		136,323		165,703

Earnings from continuing operations per common share:
Basic		1.26		1.12		1.37		1.67
Diluted		1.25		1.11		1.36		1.65

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

(16)	Subsequent Event

In the period following December 31, 2014 but before the filing date of this Annual Report, Roper acquired Strata Decision Technology LLC, a provider of planning and budget software for health care providers and Softwriters Inc., a provider of long-term care pharmacy operating software.

The aggregate purchase price for these acquisitions was $360 million, paid in cash. Roper purchased the companies to expand upon existing medical platforms. Purchase accounting has not been completed as of the filing date, and no supplemental pro forma data has been provided as the acquisitions are immaterial both individually and in aggregate.

ROPER INDUSTRIES, INC. AND SUBSIDIARIES

Schedule II – Consolidated Valuation and Qualifying Accounts

Years ended December 31, 2014, 2013 and 2012

	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
2014	$	14,992	$	2,357	$	(3,355	)	$	(300	)	$	13,694
2013		15,976		1,350		(2,992	)		658			14,992
2012		10,636		4,573		(2,403	)		3,170			15,976
Reserve for inventory obsolescence
2014	$	43,452	$	8,621	$	(11,833	)	$	(1,361	)	$	38,879
2013		41,967		11,360		(9,696	)		(179	)		43,452
2012		35,224		14,736		(8,253	)		260			41,967

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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