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)31
Consolidated Balance Sheets as of December 31, 2016 and 201532
Consolidated Statements of Earnings for the Years ended December 31, 2016 , 2015 and 201433
Consolidated Statements of Comprehensive Income for the Years ended December 31, 2016 , 2015 and 201434
Consolidated Statements of Stockholders' Equity for the Years ended December 31, 2016 , 2015 and 201435
Consolidated Statements of Cash Flows for the Years ended December 31, 2016 , 2015 and 201436
Notes to Consolidated Financial Statements38
Supplementary Data:
Schedule II - Consolidated Valuation and Qualifying Accounts for the Years ended December 31, 2016 , 2015 and 201461

Report of Independent Registered Certified Public Accounting Firm

To the Stockholders of Roper Technologies, 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 Technologies, Inc. and its subsidiaries (the "Company") at December 31, 2016 and December 31, 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 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, 2016, 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 2016 from its assessment of internal control over financial reporting as of December 31, 2016 because they were acquired by the Company in purchase business combinations during 2016. We have also excluded acquisitions completed during 2016 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 2.6%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2016.

/s/ PricewaterhouseCoopers LLP

Tampa, Florida

February 27, 2017

ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2016 and 2015

(in thousands, except per share data)

20162015
Assets
Cash and cash equivalents$757,200$778,511
Accounts receivable, net619,854488,271
Inventories, net181,952189,868
Income taxes receivable31,679-
Unbilled receivables129,965122,042
Other current assets55,85139,355
Total current assets1,776,5011,618,047
Property, plant and equipment, net141,318105,510
Goodwill8,647,1425,824,726
Other intangible assets, net3,655,8432,528,996
Deferred taxes30,62031,532
Other assets73,50359,554
Total assets$14,324,927$10,168,365
Liabilities and Stockholders' Equity
Accounts payable$152,067$139,737
Accrued compensation161,730119,511
Deferred revenue488,399267,030
Other accrued liabilities219,339168,513
Income taxes payable22,76218,532
Current portion of long-term debt, net400,9756,805
Total current liabilities1,445,272720,128
Long-term debt, net of current portion5,808,5613,264,417
Deferred taxes1,178,205810,856
Other liabilities104,02474,017
Total liabilities8,536,0624,869,418
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; 103,578 shares issued and 101,672 outstanding at December 31, 2016 and 102,795 shares issued and 100,870 outstanding at December 31, 20151,0361,028
Additional paid-in capital1,489,0671,419,262
Retained earnings4,642,4024,110,530
Accumulated other comprehensive earnings(324,739)(212,779)
Treasury stock, 1,906 shares at December 31, 2016 and 1,925 shares at December 31, 2015(18,901)(19,094)
Total stockholders' equity5,788,8655,298,947
Total liabilities and stockholders' equity$14,324,927$10,168,365

See accompanying notes to consolidated financial statements.

ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

Years ended December 31, 2016, 2015 and 2014

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

Years ended December 31,
201620152014
Net sales$3,789,925$3,582,395$3,549,494
Cost of sales1,457,5151,417,7491,447,595
Gross profit2,332,4102,164,6462,101,899
Selling, general and administrative expenses1,277,8471,136,7281,102,426
Income from operations1,054,5631,027,918999,473
Interest expense, net111,55984,22578,637
Loss on extinguishment of debt871--
Other income/(expense), net(1,481)58,652620
Earnings before income taxes940,6521,002,345921,456
Income taxes282,007306,278275,423
Net earnings$658,645$696,067$646,033
Earnings per share:
Basic$6.50$6.92$6.47
Diluted$6.43$6.85$6.40
Weighted-average common shares outstanding:
Basic101,291100,61699,916
Diluted102,464101,597100,884

See accompanying notes to consolidated financial statements.

ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2016, 2015 and 2014

(in thousands)

Years ended December 31,
201620152014
Net earnings$658,645$696,067$646,033
Other comprehensive income, net of tax:
Foreign currency translation adjustments(111,960)(139,789)(115,010)
Unrecognized pension gain-(1,063)-
Total other comprehensive loss, net of tax(111,960)(140,852)(115,010)
Comprehensive income$546,685$555,215$531,023

See accompanying notes to consolidated financial statements.

ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Years ended December 31, 2016, 2015 and 2014

(in thousands, except per share data)

Common StockAccumulated
SharesAmountAdditional paid-in capitalRetained earningsother comprehensive earningsTreasury stockTotal stockholders' equity
Balances at December 31, 201399,312$1,013$1,229,233$2,959,196$43,083$(19,475)$4,213,050
Net earnings---646,033--646,033
Stock option exercises581632,517---32,523
Treasury stock sold20-2,549--2022,751
Currency translation adjustments, net of $3,916 tax----(115,010)-(115,010)
Stock based compensation--63,025---63,025
Restricted stock activity2132(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, 2014100,126$1,021$1,325,338$3,520,201$(71,927)$(19,273)$4,755,360
Net earnings---696,067--696,067
Stock option exercises402433,002---33,006
Treasury stock sold18-2,710--1792,889
Currency translation adjustments, net of $6,658 tax----(139,789)-(139,789)
Stock based compensation--61,766---61,766
Restricted stock activity3243(14,697)---(14,694)
Stock option tax benefit, net of shortfalls--22,175---22,175
Conversion of senior subordinated convertible notes--(11,032)---(11,032)
Post-retirement benefit plan adjustments----(1,063)-(1,063)
Dividends declared ($1.05 per share)---(105,738)--(105,738)
Balances at December 31, 2015100,870$1,028$1,419,262$4,110,530$(212,779)$(19,094)$5,298,947
Net earnings---658,645--658,645
Stock option exercises372427,970---27,974
Treasury stock sold19-3,147--1933,340
Currency translation adjustments, net of $2,570 tax----(111,960)-(111,960)
Stock based compensation--77,860---77,860
Restricted stock activity4114(17,980)---(17,976)
Stock option tax benefit, net of shortfalls--(8,081)---(8,081)
Conversion of senior subordinated convertible notes--(13,111)---(13,111)
Dividends declared ($1.25 per share)---(126,773)--(126,773)
Balances at December 31, 2016101,672$1,036$1,489,067$4,642,402$(324,739)$(18,901)$5,788,865

See accompanying notes to consolidated financial statements.

ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2016, 2015 and 2014

(in thousands)

Years ended December 31,
201620152014
Cash flows from operating activities:
Net earnings$658,645$696,067$646,033
Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization of property, plant and equipment37,29938,18540,890
Amortization of intangible assets203,154166,076156,394
Amortization of deferred financing costs5,6124,1364,003
Non-cash stock compensation78,82761,76663,027
Gain on disposal of a business-(70,860)-
Changes in operating assets and liabilities, net of acquired businesses:
Accounts receivable(20,734)52,597(404)
Unbilled receivables(1,202)(21,844)(10,305)
Inventories6,353(1,150)6,349
Accounts payable and accrued liabilities20,176(8,392)7,747
Deferred revenue25,1908,239(28,202)
Income taxes(47,589)3,069(46,619)
Other, net(1,946)9361,528
Cash provided by operating activities963,785928,825840,441
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired(3,721,758)(1,762,883)(305,379)
Capital expenditures(37,305)(36,260)(37,644)
Capitalized software expenditures(2,801)(2,439)(2,588)
Proceeds from disposal of a business-105,624-
Proceeds from sale of assets8701,1261,506
Other, net8,138(3,500)(4,000)
Cash used in investing activities(3,752,856)(1,698,332)(348,105)
Cash flows from financing activities:
Proceeds from senior notes1,200,000900,000-
Borrowings/(payments) under revolving line of credit, net1,750,000180,000(250,000)
Principal payments on convertible notes(4,284)(4,006)(561)
Debt issuance costs(17,266)(8,044)-
Cash dividends to stockholders(121,130)(100,334)(79,859)
Treasury stock sales3,3402,8892,751
Stock award tax excess windfall benefit-22,22821,081
Proceeds from stock based compensation, net9,99818,31210,463
Redemption premium on convertible debt(14,166)(13,126)(1,518)
Other(1,229)(1,677)(461)
Cash provided by/(used in) financing activities2,805,263996,242(298,104)
Effect of exchange rate changes on cash(37,503)(58,654)(43,522)
Net increase/(decrease) in cash and cash equivalents(21,311)168,081150,710
Cash and cash equivalents, beginning of year778,511610,430459,720
Cash and cash equivalents, end of year$757,200$778,511$610,430
Supplemental disclosures:
Cash paid for:
Interest$104,928$79,225$74,446
Income taxes, net of refunds received$329,596$280,801$300,969
Noncash investing activities:
Net assets of businesses acquired:
Fair value of assets, including goodwill$4,433,085$1,876,984$324,717
Liabilities assumed(711,327)(114,101)(19,338)
Cash paid, net of cash acquired$3,721,758$1,762,883$305,379

See accompanying notes to consolidated financial statements.

ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years ended December 31, 2016 , 2015 and 2014

(1)Summary of Accounting Policies

Basis of Presentation - These financial statements present consolidated information for Roper Technologies, 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, commercial construction, food, energy, water, education and academic research.

Recent Accounting Pronouncements - The Financial Accounting Standards Board ("FASB") establishes changes to accounting principles under GAAP in the form of accounting standards updates (ASU's") 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.

Recently Adopted Accounting Pronouncements

In March 2016, the FASB issued an update on stock compensation. The ASU simplifies several aspects of the accounting for employee share-based payment awards, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This standard is effective for annual reporting periods beginning after December 15, 2016. The Company elected to early adopt this standard on a prospective basis in the quarter ended March 31, 2016. The impact of the early adoption resulted in the following:

·The Company recorded tax benefits of $15.3 million within income tax expense for the year ended December 31, 2016 related to the excess tax benefit on share-based awards. Prior to adoption this amount would have been recorded as a reduction of additional paid-in capital. This change adds volatility to the Company's effective tax rate.
·The Company no longer reclassifies the excess tax benefit from operating activities to financing activities in the statement of cash flows. The Company elected to apply this change in presentation prospectively and thus prior periods have not been adjusted.
·The Company elected not to change its policy on accounting for forfeitures and continued to estimate the total number of awards for which the requisite service period will not be rendered.
·The Company excluded the excess tax benefits from the assumed proceeds available to repurchase shares in the computation of its diluted earnings per share since adoption. This resulted in an increase in diluted weighted average common shares outstanding of 278,829 shares for the year ended December 31, 2016.

In March 2016, the FASB issued an update amending the equity method of accounting, eliminating the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for the equity method as a result of an increase in the level of ownership or degree of influence. The amendments in the update, to be applied prospectively, are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted. The Company elected to early adopt on a prospective basis effective January 1, 2016. The update did not have a material impact on its results of operations, financial condition or cash flows.

In September 2015, the FASB issued an update providing guidance to simplify the accounting for measurement period adjustments. This update, effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years, requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The Company adopted the update effective January 1, 2016. The update did not have a material impact on its results of operations, financial condition or cash flows.

In April 2015, the FASB issued an update providing guidance to determine whether the fee paid by an entity for a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the software license element of the arrangement should be accounted for consistently with the acquisition of other software licenses. A cloud computing arrangement that does not include a software license should be accounted for as a service contract. The update is effective for annual periods beginning after December 15, 2015, and may be adopted prospectively or retrospectively. The Company adopted the update prospectively effective January 1, 2016. The update did not have a material impact on its results of operations, financial condition or cash flows.

In June 2014, the FASB issued an update to the accounting for stock compensation. This update, effective for fiscal years beginning after December 15, 2015, modifies 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 adopted the update prospectively effective January 1, 2016. The update did not have a material impact on its results of operations, financial condition or cash flows.

Recently Released Accounting Pronouncements

In January 2017, the FASB issued an update simplifying the test for goodwill impairment. This update, effective on a prospective basis for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019, eliminates Step 2 from the goodwill impairment test. Under the amendments in the update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is evaluating the impact of the update on its results of operations, financial condition or cash flows.

In August 2016, the FASB issued an update clarifying the classification of certain cash receipts and cash payments in the statement of cash flows. This update, effective for annual reporting periods after December 15, 2017, including interim periods within those annual periods, addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The Company does not expect the update to have a material impact on its results of operations, financial condition or cash flows.

In February 2016, the FASB issued an update on lease accounting. The update, effective for annual reporting periods after December 15, 2018, including interim periods within those annual periods, provides amendments to current lease accounting. These amendments include the recognition of lease assets and lease liabilities on the balance sheet and disclosing other key information about leasing arrangements. The Company is evaluating the impact of the update on its results of operations, financial condition and cash flows.

In July 2015, the FASB issued an update providing guidance to simplify the measurement of inventory. This update, effective for fiscal years beginning after December 15, 2016, requires that inventory within the scope of the update be measured at the lower of cost and net realizable value. The Company does not expect the update to have a material 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, 2017, 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 and enhanced disclosures will be required regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Either a retrospective or cumulative effect transition method is permitted; the Company has not yet made an election regarding the transition method to be adopted.

The Company is still finalizing its analysis to quantify the adoption impact of the provisions of the new standard, but does not currently expect it to have a material impact on its results of operations, financial condition or cash flows. Based on the evaluation of current contracts and revenue streams, most will be recorded consistently under both the current and new standard. The FASB has issued, and may issue in the future, interpretive guidance which may cause the evaluation to change. The Company believes it is following an appropriate timeline to allow for proper recognition, presentation and disclosure upon adoption effective the beginning of fiscal year 2018.

Accounts Receivable - Accounts receivable are stated net of an allowance for doubtful accounts and sales allowances of $14.5 million and $12.4 million at December 31, 2016 and 2015, 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, 2016 and December 31, 2015.

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, 2016, 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. Effective January 1, 2016, Roper adopted the provisions of an accounting standards update on a prospective basis which increased the number of potentially dilutive stock options as there is no longer a tax benefit in the calculation of dilutive stock options. See the caption "Recent Accounting Pronouncements" elsewhere in this Note for additional information regarding the ASU. The effects of potential common stock were determined using the treasury stock method (in thousands):

Years ended December 31,
201620152014
Basic weighted-average shares outstanding101,291100,61699,916
Effect of potential common stock:
Common stock awards1,126887816
Senior subordinated convertible notes4794152
Diluted weighted-average shares outstanding102,464101,597100,884

As of and for the years ended December 31, 2016, 2015 and 2014, there were 1,144,350, 618,220 and 764,333 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 consolidated statement of earnings as other income/(expense). The gain or loss included in pre-tax income was a net loss of $2.9 million for the year ended December 31, 2016, a net loss of $0.7 million for the year ended December 31, 2015 and a net gain of $0.2 million for the year ended December 31, 2014.

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). When testing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If the Company elects to perform a qualitative assessment and determines that an impairment is more likely than not, then performance of the two-step quantitative impairment test is required. The first step of the quantitative 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 quantitative 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 is recognized.

When performing the quantitative assessment, 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.

Roper has 33 reporting units with individual goodwill amounts ranging from zero to $2.2 billion. In 2016, the Company performed its annual impairment test in the fourth quarter for all reporting units, excluding those acquired during the fourth quarter of 2016. The Company conducted its analysis qualitatively and assessed whether it was more likely than not that the respective fair value of these reporting units was less than the carrying amount. The Company determined that impairment of goodwill was not likely in 28 of its reporting units and thus was not required to perform a quantitative analysis for these reporting units. For the remaining five reporting units, the Company performed its quantitative analysis and concluded that the fair value of each of these five reporting units was substantially in excess of its carrying value, with no impairment indicated as of December 31, 2016. Recently acquired reporting units generally represent the highest risk of impairment, which typically decreases as the businesses are integrated into the enterprise. 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 first qualitatively assesses whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying amount. If necessary, Roper conducts a quantitative review 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. Reporting units resulting from recent acquisitions generally represent the highest risk of impairment, which typically decreases as the businesses are integrated into Roper's enterprise and positioned for improved future sales growth.

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 uses 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 2016.

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, 2016, the amount of earnings of foreign subsidiaries that the Company considers permanently reinvested and for which deferred taxes have not been provided was approximately $1.37 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 early adopted the provisions of an ASU related to stock compensation on a prospective basis in the first quarter of 2016. The ASU simplifies several aspects of the accounting for employee share-based payment awards, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. No prior periods were adjusted. See the caption "Recent Accounting Pronouncements" elsewhere in this Note for additional information regarding the ASU.

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 jurisdiction, 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, 2016.

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:

Buildings20-30 years
Machinery8-12 years
Other equipment3-5 years

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 $195.4 million, $164.2 million and $147.9 million for the years ended December 31, 2016, 2015 and 2014, 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 $241 million, $253 million and $266 million for the years ended December 31, 2016, 2015 and 2014, 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 balances, net of accumulated amortization, were $4.4 million and $4.6 million at December 31, 2016 and 2015, 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. Due to the adoption of an ASU in 2016, 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) are no longer classified as financing cash flows. Prior periods were not adjusted, as the ASU was adopted on a prospective basis. See the the caption "Recent Accounting Prononcements" elsewhere in this Note for additional information regarding the ASU.

(2)Business Acquisitions and Divestitures

2016 Acquisitions – During the year ended December 31, 2016, Roper completed six business combinations. Roper acquired the businesses in order to both expand and complement its existing technologies. The results of operations of the acquired companies have been included in Roper's consolidated results since the date of each acquisition. Purchase price allocations are preliminary pending final intangibles valuations and tax-related adjustments.

The largest of the 2016 acquisitions was Deltek Inc., a global provider of enterprise software and information solutions for government contractors, professional services firms and other project-based businesses. Roper acquired 100% of the shares of Project Diamond Holdings Corp. (the parent company of Deltek) on December 27, 2016, in a $2.8 billion all-cash transaction. Deltek is reported in the RF Technology segment.

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

Accounts receivable$94,506
Other current assets37,558
Identifiable intangibles972,000
Goodwill2,234,549
Other assets43,098
Total assets acquired3,381,711
Deferred revenue166,393
Other current liabilities57,433
Long-term deferred tax liability349,810
Other liabilities7,935
Net assets acquired$2,800,140

The majority of the goodwill is not expected to be deductible for tax purposes. Of the $972 million of acquired intangible assets acquired, $145 million was assigned to trade names that are not subject to amortization and $62 million was assigned to in process research and development. The remaining $765 million of acquired intangible assets have a weighted-average useful life of 12 years. The intangible assets that make up that amount include customer relationships of $625 million (13 year weighted-average useful life) and unpatented technology of $140 million (6 year weighted-average useful life).

The Company expensed transaction costs of $4.3 million related to the Deltek acquisition as corporate general and adminstrative expenses, as incurred.

Roper's results for the year ended December 31, 2016 included results from Deltek between December 28, 2016 and December 31, 2016. In that period, Deltek contributed $7.9 million in revenue and $0.8 million of earnings to Roper's results. The following unaudited pro forma summary presents consolidated information as if the acquisition of Deltek had occurred on January 1, 2015 (amounts in millions, except per share data):

Pro forma
Year ended December 31,
20162015
Sales$4,268,052$4,012,030
Net income656,404647,089
Earnings per share, basic6.486.43
Earnings per share, diluted6.416.37

Pro forma earnings were adjusted by $47.4 million and $37.2 million for the years ended December 31, 2016 and 2015, respectively, 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, 2016, Roper completed five other acquisitions which were immaterial. The aggregate purchase price of these acquisitions totaled $920 million of cash. The Company recorded $372 million in other identifiable intangibles and $642 million in goodwill in connection with these acquisitions. 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 results of the following acquisitions are reported in the Medical & Scientific Imaging segment:

·Clinisys - On January 7, 2016, Roper acquired 100% of the shares of CliniSys Group Ltd. ("CliniSys"), a provider of clinical laboratory software headquartered in the United Kingdom.
·PCI Medical - On March 17, 2016, Roper acquired the assets of PCI Medical Inc., a provider of medical probe and scope disinfection products.
·GeneInsight - On April 1, 2016, the Company acquired 100% of the shares of GeneInsight Inc., a provider of software for managing the analysis, interpretation and reporting of genetic tests.
·UNIConnect - On November 10, 2016, Roper acquired the assets of UNIConnect LC, a provider of process management software for molecular laboratories.

ConstructConnect - On October 31, 2016, Roper acquired 100% of the shares of iSqFt Holdings Inc. (d/b/a ConstructConnect), a provider of cloud-based data, collaboration, and workflow automation solutions to the commercial construction industry. ConstructConnect is reported in the RF Technology segment.

The Company expensed transaction costs of $4.2 million related to the acquisitions as corporate general and adminstrative expenses, as incurred.

The majority of the goodwill recorded for these five companies is not expected to be deductible for tax purposes. Of the $372 million of intangible assets acquired, $34 million was assigned to trade names that are not subject to amortization. The remaining $338 million of acquired intangible assets have a weighted-average useful life of 12 years. The intangible assets that make up that amount include customer relationships of $242 million (14 year weighted-average useful life), unpatented technology of $66 million (6 year weighted-average useful life) and software of $30 million (9 year weighted-average useful life).

2015 Acquisitions – During the year ended December 31, 2015, Roper completed eight 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 results of the following acquisitions are reported in the Medical & Scientific Imaging segment:

·Strata - On January 21, 2015, Roper acquired 100% of the shares of Strata Decision Technologies LLC ("Strata"), a provider of planning and budget software for health care providers.
·Softwriters - On February 9, 2015, Roper acquired 100% of the shares of Softwriters Inc., a provider of long-term care pharmacy operating software.
·Data Innovations - On March 4, 2015, Roper acquired 100% of the shares of Data Innovations LLC, a provider of clinical and blood laboratory middleware.
·AHP - On September 4, 2015, Roper acquired the assets of Atlantic Health Partners LLC ("AHP"), a group purchasing organization specializing in vaccines for the physician marketplace.
·Atlas - On October 26, 2015, Roper acquired 100% of the shares of Atlas Database Software Corp. ("Atlas"), a provider of clinical process integration to private and public health sectors.

The results of the following acquisitions are reported in the RF Technology segment:

·On Center - On July 20, 2015, Roper acquired 100% of the shares of On Center Software LLC ("On Center"), a provider of construction automation technology.
·RF IDeas - On September 1, 2015, Roper acquired 100% of the shares of RF IDeas, Inc., a provider of proprietary identification card technology solutions.
·Aderant - On October 21, 2015, Roper acquired 100% of the shares of Aderant Holdings, Inc. ("Aderant"), a provider of comprehensive software solutions for law and other professional services firms.

The aggregate purchase price for the 2015 acquisitions was $1.8 billion, paid in cash. Roper purchased the businesses to expand upon existing software, supply chain and medical platforms.

The Company expensed transaction costs of $5.9 million related to the acquisitions as corporate general and administrative expenses, as incurred.

The Company recorded $1.2 billion in goodwill and $731 million in other identifiable intangibles in connection with the acquisitions. The majority of the goodwill recorded is not expected to be deductible for tax purposes. Of the $731 million of intangible assets acquired, $51 million was assigned to trade names that are not subject to amortization. The remaining $680 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 $541 million (19 year weighted-average useful life), unpatented technology of $100 million (8 year weighted-average useful life) and software of $39 million (6 year weighted-average useful life).

Divestiture of Abel - On October 2, 2015, Roper completed the sale of Abel Pumps ("Abel") for $106 million (€95 million), net of cash divested. The pretax gain on the divestiture was $70.9 million, which is reported as Other income/(expense), net on the consolidated statement of earnings. The gain resulted in tax expense of $46 million as well as a future tax benefit of $11 million.

The year to date pretax income of Abel was $5.9 million for the period ended October 2, 2015, and $10.3 million and $9.2 million for the years ended December 31, 2014 and 2013, respectively. Abel was reported in the Industrial Technology segment.

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. 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).

(3)Inventories

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

20162015
Raw materials and supplies$113,632$120,811
Work in process24,29022,979
Finished products81,26380,118
Inventory reserves(37,233)(34,040)
$181,952$189,868
(4)Property, Plant and Equipment

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

20162015
Land$2,404$2,488
Buildings88,20179,182
Machinery and other equipment221,325223,561
Computer equipment70,11057,338
Software54,45138,517
436,491401,086
Accumulated depreciation(295,173)(295,576)
$141,318$105,510

Depreciation and amortization expense related to property, plant and equipment was $37,299, $38,185 and $40,890 for the years ended December 31, 2016, 2015 and 2014, respectively.

(5)Goodwill and Other Intangible Assets

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

Medical & Scientific ImagingRF TechnologyIndustrial TechnologyEnergy Systems & ControlsTotal
Balances at December 31, 2014$2,594,356$1,280,788$408,964$426,583$4,710,691
Goodwill acquired476,106720,345--1,196,451
Goodwill written off related to divestiture of business--(20,524)-(20,524)
Currency translation adjustments(31,556)(7,667)(14,407)(8,386)(62,016)
Reclassifications and other291(167)--124
Balances at December 31, 2015$3,039,197$1,993,299$374,033$418,197$5,824,726
Goodwill acquired166,7682,710,223--2,876,991
Currency translation adjustments(19,100)(15,118)(10,055)(7,774)(52,047)
Reclassifications and other(1,794)(734)--(2,528)
Balances at December 31, 2016$3,185,071$4,687,670$363,978$410,423$8,647,142

Reclassifications and other during the year ended December 31, 2016 were due primarily to tax adjustments for 2015 acquisitions, and during the year ended December 31, 2015 were due primarily to tax and intangible adjustments for 2014 acquisitions. See Note 2 for information regarding acquisitions and divestitures.

Other intangible assets were comprised of (in thousands):

CostAccum. amort.Net book value
Assets subject to amortization:
Customer related intangibles$2,448,509$(602,615)$1,845,894
Unpatented technology270,170(117,405)152,765
Software161,201(44,298)116,903
Patents and other protective rights24,160(18,659)5,501
Backlog700(700)-
Trade names595(122)473
Assets not subject to amortization:
Trade names407,460-407,460
Balances at December 31, 2015$3,312,795$(783,799)$2,528,996
Assets subject to amortization:
Customer related intangibles$3,272,081$(712,718)$2,559,363
Unpatented technology462,152(144,025)318,127
Software184,761(56,882)127,879
Patents and other protective rights24,656(20,399)4,257
Trade names6,591(653)5,938
Assets not subject to amortization:
Trade names578,279-578,279
In process research and development62,000-62,000
Balances at December 31, 2016$4,590,520$(934,677)$3,655,843

Amortization expense of other intangible assets was $201 million, $164 million, and $153 million during the years ended December 31, 2016, 2015 and 2014, respectively. Amortization expense is expected to be $289 million in 2017, $283 million in 2018, $277 million in 2019, $268 million in 2020 and $256 million in 2021.

(6)Accrued Liabilities

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

20162015
Interest$21,742$19,776
Customer deposits16,70715,094
Commissions9,14412,079
Warranty10,54810,183
Accrued dividend36,07730,436
Rebates19,41416,511
Billings in excess of cost12,3815,464
Other93,32658,970
$219,339$168,513
(7)Income Taxes

Earnings before income taxes for the years ended December 31, 2016, 2015 and 2014 consisted of the following components (in thousands):

201620152014
United States$721,000$710,614$665,219
Other219,652291,731256,237
$940,652$1,002,345$921,456

Components of income tax expense for the years ended December 31, 2016, 2015 and 2014 were as follows (in thousands):

201620152014
Current:
Federal$239,217$229,224$218,302
State21,77922,04137,155
Foreign54,93771,50756,107
Deferred:
Federal(26,760)6,710(27,357)
State189(16,844)(3,307)
Foreign(7,355)(6,360)(5,477)
$282,007$306,278$275,423

Reconciliations between the statutory federal income tax rate and the effective income tax rate for the years ended December 31, 2016, 2015 and 2014 were as follows:

201620152014
Federal statutory rate35.0%35.0%35.0%
Foreign rate differential(3.2)(3.3)(3.9)
R&D tax credits(0.7)(0.5)(0.4)
State taxes, net of federal benefit1.92.02.0
Section 199 deduction(1.5)(1.3)(1.6)
Other, net(1.5)(1.3)(1.2)
30.0%30.6%29.9%

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):

20162015
Deferred tax assets:
Reserves and accrued expenses$186,120$146,014
Inventories8,9679,309
Net operating loss carryforwards87,01045,616
R&D credits7,9338,504
Foreign tax credits9,2037,940
Valuation allowance(26,009)(19,338)
Total deferred tax assets$273,224$198,045
Deferred tax liabilities:
Reserves and accrued expenses$13,915$11,222
Amortizable intangible assets1,400,792962,143
Plant and equipment6,1024,004
Total deferred tax liabilities$1,420,809$977,369

At December 31, 2016, the Company had approximately $51.5 million of tax-effected U.S. federal net operating loss carryforwards that if not utilized will expire in years 2023 through 2036. The U.S. federal net operating loss carryforwards increased from 2015 to 2016 primarily due to additional net operating losses obtained through recent acquisitions. In recent acquisitions, 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 $18.4 million of tax-effected state net operating loss carryforwards (without regard to federal benefit of state) that if not utilized will expire in years 2017 through 2036. The state net operating loss carryforwards are primarily related to Florida and New Jersey, but the Company has smaller net operating losses in various other states. The Company has approximately $23.4 million of tax-effected foreign net operating loss carryforwards that if not utilized will begin to expire in 2017. Additionally, the Company has $10.9 million of U.S. federal and state research and development tax credit carryforwards (without regard to federal benefit of state) that will expire in years 2019 through 2036 and $9.1 million of U.S. federal foreign tax credits that, if not utilized, will expire in 2026.

As of December 31, 2016, the Company determined that a total valuation allowance of $26.0 million was necessary to reduce U.S. deferred tax assets by $8.7 million and foreign deferred tax assets by $17.3 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, 2016, 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):

201620152014
Beginning balance$26,140$28,567$26,924
Additions for tax positions of prior periods3,4503,5256,532
Additions for tax positions of the current period9,0123,2995,571
Additions due to acquisitions5,0496,177-
Reductions for tax positions of prior periods(1,165)(12,206)(1,008)
Reductions for tax positions of the current period
Settlements with taxing authorities(568)(142)(518)
Lapse of applicable statute of limitations(3,240)(3,080)(8,934)
Ending balance$38,678$26,140$28,567

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $36.8 million. Interest and penalties related to unrecognized tax benefits are classified as a component of income tax expense and totaled a benefit of $0.4 million in 2016. Accrued interest and penalties were $3.8 million at December 31, 2016 and $3.4 million at December 31, 2015. During the next twelve months, the unrecognized tax benefits are expected to decrease by a net $6.8 million, due mainly to anticipated statute of limitations lapses in various jurisdictions.

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 2013 through the current period remain subject to examination and the relevant state, city and foreign statutes vary. At December 31, 2016, the Internal Revenue Service has been and is continuing to examine the Company's income tax returns for the years 2013 and 2014. The Company does not expect the assessment of any significant additional tax in excess of amounts reserved.

As of December 31, 2016, the amount of earnings of foreign subsidiaries that the Company considers permanently reinvested and for which deferred taxes have not been provided was approximately $1.37 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.

(8)Long-Term Debt

On September 23, 2016, Roper entered into a new five-year $2.5 billion unsecured credit facility (the "2016 Facility") with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders, which replaced its previous $1.85 billion unsecured credit facility dated as of July 27, 2012, as amended as of October 28, 2015 (the "2012 Facility"). The 2016 Facility comprises a five year $2.50 billion revolving credit facility, which includes availability of up to $150 million for letters of credit. Roper may also, subject to compliance with specified conditions, request term loans or additional revolving credit commitments in an aggregate amount not to exceed $500 million. At December 31, 2016, there were $1.93 billion of outstanding borrowings under the 2016 Facility. The Company incurred a debt extinguishment charge of $0.9 million which represented the unamortized fees associated with the 2012 Facility.

The 2016 Facility contains affirmative and negative covenants which, among other things, limit Roper's ability to incur new debt, enter into certain mergers 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 to 1.

On December 2, 2016, Roper amended the 2016 facility to allow the consolidated total leverage ratio be increased, no more than twice during the term of the 2016 facility, to 4.0 to 1 for a consecutive four quarter fiscal period per increase (or, for any portion of such four quarter fiscal period in which the maximum would be 4.25 to 1 pursuant to the 2016 facility amendment, 4.25 to 1). In conjunction with the Deltek acquistion (see Note 2), the Company increased the maximum consolidated total leverage ratio covenant to 4.25 to 1 through June 30, 2017 and 4.00 to 1 through December 31, 2017.

The Company was in compliance with its debt covenants throughout the years ended December 31, 2016 and 2015.

On December 19, 2016, the Company completed a public offering of $500 million aggregate principal amount of 2.80% senior unsecured notes due December 15, 2021 and $700 million aggregate principal amount of 3.80% senior unsecured notes due December 15, 2026. The notes bear interest at a fixed rate of 2.80% and 3.80% per year, respectively, payable semi-annually in arrears on June 15 and December 15 of each year, beginning June 15, 2017.

On December 7, 2015, the Company completed a public offering of $600 million aggregate principal amount of 3.00% senior unsecured notes due December 15, 2020 and $300 million aggregate principal amount of 3.85% senior unsecured notes due December 15, 2025. The notes bear interest at a fixed rate of 3.00% and 3.85% per year, respectively, payable semi-annually in arrears on June 15 and December 15 of each year, beginning June 15, 2016.

On June 6, 2013, the Company completed a public offering of $800 million aggregate principal amount of 2.05% senior unsecured notes due October 1, 2018. The notes bear interest at a fixed rate of 2.05% per year, payable semi-annually in arrears on April 1 and October 1 of each year, beginning October 1, 2013.

On November 21, 2012, Roper completed a public offering of $400 million aggregate principal amount of 1.85% 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 1.85% 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 1, 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.

In December 2003, the Company issued through a public offering $230 million of 3.75% subordinated convertible notes due 2034 (the "Convertible Notes"). During the year ended December 31, 2016, the balance of the Convertible Notes were converted for $18.5 million in cash.

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

20162015
2016 Facility$1,930,000$-
2012 Facility-180,000
$400 million 1.850% senior notes due 2017400,000400,000
$800 million 2.050% senior notes due 2018800,000800,000
$500 million 6.250% senior notes due 2019500,000500,000
$600 million 3.000% senior notes due 2020600,000600,000
$500 million 2.800% senior notes due 2021500,000-
$500 million 3.125% senior notes due 2022500,000500,000
$300 million 3.850% senior notes due 2025300,000300,000
$700 million 3.800% senior notes due 2026700,000-
Senior subordinated convertible notes-4,179
Other2,9894,435
Less unamortized debt issuance costs(23,453)(17,392)
Total debt6,209,5363,271,222
Less current portion, net of issuance costs400,9756,805
Long-term debt$5,808,561$3,264,417

The 2016 Facility and Roper's $4.3 billion senior notes provide substantially all of Roper's daily external financing requirements. The interest rate on the borrowings under the 2016 Facility is calculated based upon various recognized indices plus a margin as defined in the credit agreement. At December 31, 2016, Roper's debt consisted of $4.3 billion of senior notes, $3.0 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 $74 million of outstanding letters of credit at December 31, 2016.

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

2017$401,595
2018800,840
2019500,407
2020600,147
2021500,000
Thereafter3,430,000
Total$6,232,989
(9)Fair Value

Roper's debt at December 31, 2016 included $4.3 billion of fixed-rate senior notes with the following fair values (in millions):

$400 million 1.850% senior notes due 2017$401
$800 million 2.050% senior notes due 2018803
$500 million 6.250% senior notes due 2019551
$600 million 3.000% senior notes due 2020605
$500 million 2.800% senior notes due 2021497
$500 million 3.125% senior notes due 2022497
$300 million 3.850% senior notes due 2025303
$700 million 3.800% senior notes due 2026702

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. Most of Roper's other borrowings at December 31, 2016 were at various interest rates that adjust relatively frequently under its credit facility. The fair value for these borrowings at December 31, 2016 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. Roper partially matches employee contributions. Costs related all such plans were $23.7 million, $20.4 million and $19.5 million for 2016, 2015 and 2014, 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 Technologies, Inc. 2016 Incentive Plan ("2016 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 Roper's employees, officers and directors. The 2016 Plan was approved by shareholders at the Annual Meeting of Shareholders on May 27, 2016. The 2016 Plan replaces the Roper Technologies, Inc. Amended and Restated 2006 Incentive Plan ("2006 Plan"), and no additional grants will be made from the 2006 Plan. The number of shares reserved for issuance under the 2016 Plan is 7,924,932, plus 2,073,894 remaining shares that were available to grant under the 2006 Plan at May 27, 2016, plus any shares underlying outstanding awards under the 2006 Plan that terminate or expire unexercised, or are cancelled, forfeited or lapse for any reason subsequent to May 27, 2016. At December 31, 2016, 9,190,273 shares were available to grant.

Under the Roper Technologies, 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, 2016, 2015 and 2014 was as follows (in millions):

201620152014
Stock based compensation$78.8$61.8$63.0
Tax benefit recognized in net income27.621.622.1
Windfall tax benefit, net-22.221.5

Windfall tax benefits are no longer calculated due to the adoption of the ASU related to stock compensation (see Note 1), as all tax benefits are recognized in net income.

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 $20.1 million, $15.3 million, and $16.6 million of compensation expense relating to outstanding options during 2016, 2015 and 2014, 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 2016, 2015 and 2014 were calculated using the following weighted-average assumptions:

201620152014
Weighted-average fair value ($)34.5733.9834.95
Risk-free interest rate (%)1.441.531.63
Average expected option life (years)5.205.105.22
Expected volatility (%)21.3522.1727.01
Expected dividend yield (%)0.700.620.58

The following table summarizes the Company's activities with respect to its share-based compensation plans for the years ended December 31, 2016 and 2015:

Number of sharesWeighted-average exercise price per shareWeighted-average contractual termAggregate intrinsic value
Outstanding at January 1, 20152,981,111$90.48
Granted628,155162.77
Exercised(400,050)82.50
Canceled(91,600)142.36
Outstanding at December 31, 20153,117,616104.546.08$265,782,636
Granted743,250172.23
Exercised(371,853)75.23
Canceled(69,416)159.97
Outstanding at December 31, 20163,419,597121.316.15$211,369,740
Exercisable at December 31, 20161,954,306$89.374.28$183,136,309

The following table summarizes information for stock options outstanding at December 31, 2016:

Outstanding optionsExercisable options
Exercise priceNumberAverage exercise priceAverage remaining life (years)NumberAverage exercise price
$38.46 - 57.68689,289$53.281.5689,289$53.28
57.69 - 76.91259,46072.554.2259,46072.55
76.92 - 96.14249,28193.345.0249,28193.34
96.15 - 115.37283,069114.996.0283,069114.99
115.38 - 134.60503,778130.727.0368,456129.96
134.61- 153.82259,370144.197.775,334141.95
153.83 - 173.05916,725167.808.825,334157.81
173.06 - 192.28258,625179.429.54,083175.47
$38.46 - 192.283,419,597$121.316.21,954,306$89.37

At December 31, 2016, there was $29.8 million of total unrecognized compensation expense related to nonvested options granted under the Company's share-based compensation plans. That cost is expected to be recognized over a weighted-average period of 2.1 years. The total intrinsic value of options exercised in 2016, 2015 and 2014 was $38.9 million, $36.9 million and $50.3 million, respectively. Cash received from option exercises under all plans in 2016 and 2015 was $28.0 million and $33.0 million, respectively.

Restricted Stock Grants - During 2016 and 2015, the Company granted 555,730 and 437,035 shares, respectively, of restricted stock to certain employee and director participants under its share-based compensation plans. Restricted stock grants generally vest over a period of 1 to 3 years. The Company recorded $57.8 million, $46.5 million and $46.4 million of compensation expense related to outstanding shares of restricted stock held by employees and directors during 2016, 2015 and 2014, respectively. A summary of the Company's nonvested shares activity for 2016 and 2015 is as follows:

Number of sharesWeighted-average grant date fair value
Nonvested at December 31, 2014542,555$130.29
Granted437,035159.32
Vested(243,423)183.10
Forfeited(26,892)148.82
Nonvested at December 31, 2015709,275$146.64
Granted555,730172.67
Vested(287,233)141.27
Forfeited(25,100)139.56
Nonvested at December 31, 2016952,672$164.62

At December 31, 2016, there was $92.9 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 2.6 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, 2016.

Employee Stock Purchase Plan - During 2016, 2015 and 2014, participants of the ESPP purchased 19,448, 18,132 and 20,368 shares, respectively, of Roper's common stock for total consideration of $3.3 million, $2.9 million, and $2.8 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 2016, 2015 and 2014.

(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 that, in general, are based upon claims of the kind that have been customary over the past several years and which the Company is vigorously defending. 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 Roper's consolidated financial position, results of operations or cash flows.

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 $44.9 million, $40.2 million and $38.4 million for 2016, 2015 and 2014, respectively. Roper's future minimum property lease commitments are as follows (in millions):

2017$53.8
201841.0
201932.4
202028.7
202124.9
Thereafter51.6
Total$232.4

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

201620152014
Balance, beginning of year$10,183$9,537$14,336
Additions charged to costs and expenses15,95014,28413,396
Deductions(15,513)(13,059)(18,078)
Other(72)(579)(117)
Balance, end of year$10,548$10,183$9,537

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, 2016, Roper had $74 million of letters of credit issued to guarantee its performance under certain services contracts or to support certain insurance programs and $521 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: Medical & Scientific Imaging, RF Technology, Industrial Technology and Energy Systems & Controls. The Medical & Scientific Imaging segment offers medical products and software, high performance digital imaging products and software. The RF Technology segment includes products and systems related to comprehensive toll and traffic systems and processing, security and access control, campus card systems, card readers, software-as-a-service applications in the freight matching, commercial construction and food industries, comprehensive business software for legal and construction firms and utility metering and remote monitoring applications. 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 & 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. 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 2016, 2015 and 2014. 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 and property and equipment.

Selected financial information by business segment for 2016, 2015 and 2014 follows (in thousands):

Medical & Scientific ImagingRF TechnologyIndustrial TechnologyEnergy Systems & ControlsCorporateTotal
2016
Net sales$1,362,813$1,210,264$706,625$510,223$-$3,789,925
Operating profit477,548372,467202,451129,602(127,505)1,054,563
Assets:
Operating assets282,437487,936182,430164,34911,7881,128,940
Intangible assets, net4,660,2986,634,964493,924513,799-12,302,985
Other154,838156,41388,130134,976358,645893,002
Total14,324,927
Capital expenditures16,09811,5366,5902,21886337,305
Depreciation and other amortization119,24882,65318,57319,701278240,453
2015
Net sales$1,215,318$1,033,951$745,381$587,745$-$3,582,395
Operating profit441,931312,112214,538162,128(102,791)1,027,918
Assets:
Operating assets265,520293,004182,544194,8989,080945,046
Intangible assets, net4,451,0282,848,911513,155540,628-8,353,722
Other121,461117,59667,832113,014449,694869,597
Total10,168,365
Capital expenditures12,64210,7589,1793,27640536,260
Depreciation and other amortization105,92856,87719,91221,254290204,261
2014
Net sales$1,080,309$950,227$827,145$691,813$-$3,549,494
Operating profit375,867271,177247,596203,021(98,188)999,473
Assets:
Operating assets232,380270,458220,115219,2847,002949,239
Intangible assets, net3,842,1801,720,977557,593568,670-6,689,420
Other*147,52965,636120,681223,831203,849761,526
Total*8,400,185
Capital expenditures11,43010,52110,7134,63434637,644
Depreciation and other amortization93,68358,70221,13523,281483197,284

*Other assets as of December 31, 2014 have been adjusted by $12,749 due to the adoption of a recent ASU regarding presentation of debt issuance costs (see Note 1).

Summarized data for Roper's U.S. and foreign operations (principally in Canada, Europe and Asia) for 2016, 2015 and 2014, based upon the country of origin of the Roper entity making the sale, was as follows (in thousands):

United StatesNon-U.S.EliminationsTotal
2016
Sales to unaffiliated customers$2,978,496$811,429$-$3,789,925
Sales between geographic areas137,276109,370(246,646)-
Net sales$3,115,772$920,799$(246,646)$3,789,925
Long-lived assets$145,996$21,020$-$167,016
2015
Sales to unaffiliated customers$2,829,752$752,643$-$3,582,395
Sales between geographic areas135,363119,006(254,369)-
Net sales$2,965,115$871,649$(254,369)$3,582,395
Long-lived assets$133,522$21,960$-$155,482
2014
Sales to unaffiliated customers$2,661,470$888,024$-$3,549,494
Sales between geographic areas159,049119,175(278,224)-
Net sales$2,820,519$1,007,199$(278,224)$3,549,494
Long-lived assets$134,855$30,781$-$165,636

Export sales from the U.S. during the years ended December 31, 2016, 2015 and 2014 were $460 million, $481 million and $477 million, respectively. In the year ended December 31, 2016, these exports were shipped primarily to Asia (37%), Europe (19%), Canada (16%), Middle East (16%) and other (12%).

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, 2016, 2015 and 2014 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):

Medical & Scientific ImagingRF TechnologyIndustrial TechnologyEnergy Systems & ControlsTotal
2016
Canada$21,993$52,703$60,551$22,360$157,607
Europe228,05871,67389,229119,032507,992
Asia111,84311,98852,087126,769302,687
Middle East10,10750,6052,99737,491101,200
Rest of the world21,54917,06720,67546,202105,493
Total$393,550$204,036$225,539$351,854$1,174,979
2015
Canada$23,737$45,506$65,826$23,883$158,952
Europe167,69857,58197,938129,021452,238
Asia112,73210,01960,817132,088315,656
Middle East15,87754,1654,22050,227124,489
Rest of the world20,41710,76124,47155,074110,723
Total$340,461$178,032$253,272$390,293$1,162,058
2014
Canada$24,997$45,811$106,598$31,831$209,237
Europe185,26354,330121,909157,391518,893
Asia107,6957,55561,552143,524320,326
Middle East9,99734,2413,82442,98891,050
Rest of the world28,7229,33326,13478,186142,375
Total$356,674$151,270$320,017$453,920$1,281,881
(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 around the world. 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. 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 QuarterSecond QuarterThird QuarterFourth Quarter
(in thousands, except per share data)
2016
Net sales$902,423$931,558$945,144$1,010,800
Gross profit559,519567,520578,493626,878
Income from operations244,991253,078267,390289,104
Net earnings151,416158,069167,079182,081
Earnings from continuing operations per common share:
Basic1.501.561.651.79
Diluted1.481.541.631.78
2015
Net sales$865,281$889,541$883,933$943,640
Gross profit518,161533,911533,483579,091
Income from operations246,896251,974250,371278,677
Net earnings155,773171,280160,417208,597
Earnings from continuing operations per common share:
Basic1.551.701.592.07
Diluted1.541.691.582.05

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

ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES

Schedule II – Consolidated Valuation and Qualifying Accounts

Years ended December 31, 2016, 2015 and 2014

Balance at beginning of yearAdditions charged to costs and expensesDeductionsOtherBalance at end of year
(in thousands)
Allowance for doubtful accounts and sales allowances
2016$12,404$1,791$(2,794)$3,088$14,489
201513,6941,536(4,128)1,30212,404
201414,9922,357(3,355)(300)13,694
Reserve for inventory obsolescence
2016$34,040$10,071$(6,540)$(338)$37,233
201538,8798,616(9,049)(4,406)34,040
201443,4528,621(11,833)(1,361)38,879

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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