Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Page
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP)	28
Consolidated Balance Sheets as of December 31, 2019 and 2018	32
Consolidated Statements of Earnings for the Years ended December 31, 2019, 2018 and 2017	33
Consolidated Statements of Comprehensive Income for the Years ended December 31, 2019 , 2018 and 2017	34
Consolidated Statements of Stockholders’ Equity for the Years ended December 31, 2019, 2018 and 2017	35
Consolidated Statements of Cash Flows for the Years ended December 31, 2019, 2018 and 2017	36
Notes to Consolidated Financial Statements	37
Supplementary Data:
Schedule II - Consolidated Valuation and Qualifying Accounts for the Years ended December 31, 2019, 2018 and 2017	61

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Roper Technologies, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Roper Technologies, Inc. and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of earnings, of comprehensive income, of stockholders’ equity, and of cash flows for each of the three years in the period ended December 31, 2019, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018**,** and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, 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 the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded the four acquisitions completed in 2019 from its assessment of internal control over financial reporting as of December 31, 2019 because they were acquired by the Company in purchase business combinations during 2019. We have also excluded the four acquisitions completed in 2019 from our audit of internal control over financial reporting. The acquired entities are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting collectively represent less than 1% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2019.

Definition and Limitations of Internal Control over Financial Reporting

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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Quantitative Goodwill Impairment Assessment

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s consolidated goodwill balance was $10,815.4 million as of December 31, 2019. 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). The Company conducted its analysis qualitatively and assessed whether it was more likely than not that the respective fair value of the reporting units was less than the carrying amount. The Company determined that impairment of goodwill was not likely in 33 of its reporting units and thus was not required to perform a quantitative analysis for these reporting units. For the remaining two reporting units, the Company performed its quantitative analysis. 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. 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.

The principal considerations for our determination that performing procedures relating to the quantitative goodwill impairment assessment is a critical audit matter are there was significant judgment by management when developing the fair value measurement of the reporting units. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate management’s discounted cash flows and key assumptions, including anticipated future cash flows, discount rates and earnings multiples. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Company’s reporting units. These procedures also included, among others, testing management’s process for developing the fair value estimate, evaluating the appropriateness of the income and market based approaches, testing the completeness, accuracy and relevance of underlying data used in the approaches, and evaluating significant assumptions used by management, including anticipated future cash flows. Evaluating management’s assumption related to anticipated future cash flows involved evaluating whether the assumption used by management was reasonable considering the past performance of the reporting unit and considered whether the assumption was consistent with evidence obtained in other areas of the audit. Evaluating the market based approach involved evaluating the Company’s peer companies and the consistency of assumptions used as compared to the income approach. Professionals with specialized skill and knowledge were used to assist in evaluating the Company’s income and market based approaches and reasonableness of certain assumptions, including the weighted-average cost of capital and earnings multiples.

Quantitative Indefinite-Lived Trade Name Intangible Assets Impairment Assessment

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s consolidated indefinite-lived intangible assets balance was $659.8 million as of December 31, 2019, which was comprised entirely of trade names. 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. The Company 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 the indefinite-lived trade name is less than its carrying amount. If necessary, the Company conducts a quantitative assessment using the relief-from-royalty method. 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 revenues discounted using a risk adjusted rate of capital. Each royalty rate is determined based on the profitability of the trade name to which it relates and observed market royalty rates. Revenue growth rates are determined after considering current and future economic conditions, recent sales trends, discussions with customers, planned timing of new product launches or other variables.

The principal considerations for our determination that performing procedures relating to the quantitative indefinite-lived trade name intangible assets impairment assessment is a critical audit matter are there was significant judgment by management when developing the fair value measurement of the indefinite-lived trade name intangible assets. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to assess the significant assumptions relating to the quantitative indefinite-lived trade name impairment assessment, such as royalty rates, revenue growth rates, and risk-adjusted rate of capital. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s indefinite-lived trade name intangible assets impairment test, including controls over the valuation of the Company’s indefinite-lived trade name intangible assets. These procedures also included, among others, testing management’s process for developing the fair value estimate, testing the completeness, accuracy and relevance of underlying data used, and evaluating the significant assumptions and method used by management, including royalty rates, revenue growth rates, and risk-adjusted rate of capital. Evaluating management’s assumptions related to revenue growth rates involved evaluating whether the assumptions used were reasonable considering the past performance of the asset group comprised of the indefinite-lived trade name and considering whether they were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the Company’s relief-from-royalty method and reasonableness of certain significant assumptions, including the royalty rates and risk-adjusted rate of capital.

Valuation of Amortizable Customer Relationships Intangible Assets Acquired

As described in Notes 1 and 2 to the consolidated financial statements, the Company completed four acquisitions in the year ended December 31, 2019, with an aggregate purchase price of $2,387.6 million, net of cash acquired. The amortizable intangible assets include customer relationships of $1,020.0 million. The fair value for customer relationships is determined as of the acquisition date using the excess earnings method. Under this methodology, the fair value is determined based on the estimated future after-tax cash flows arising from the acquired customer relationships over their estimated lives after considering customer attrition and contributory asset charges.

The principal considerations for our determination that performing procedures relating to valuation of amortizable customer relationships intangible assets acquired is a critical audit matter are there was significant judgment by management when developing the fair value measurement of the amortizable customer relationships intangible assets. This in turn led to high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate management’s significant assumptions relating to the amortizable customer relationships intangible assets, such as the estimated future after-tax cash flows, including the customer attrition rate. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s valuation of amortizable customer relationships intangible assets acquired. These procedures also included, among others, testing management’s process by evaluating the reasonableness of the valuation reports of intangible assets acquired, testing the completeness, accuracy and relevance of underlying data used, and reading the purchase agreements. Evaluating management’s assumptions related to estimated future after-tax cash flows involved evaluating whether the assumptions used, including the customer attrition rate, were reasonable considering the past and post-acquisition performance of the business, and considering whether they were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of significant assumptions with respect to management’s cash flow projections, including the customer attrition rate.

/S/ PricewaterhouseCoopers LLP

Tampa, Florida

February 28, 2020

We have served as the Company’s auditor since 2002.

ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2019 and 2018

(in millions, except per share data)

	2019				2018
Assets
Cash and cash equivalents	$	709.7			$	364.4
Accounts receivable, net	791.6				700.8
Inventories, net	198.6				190.8
Income taxes receivable	18.5				21.7
Unbilled receivables	183.5				169.4
Other current assets	97.6				80.0
Current assets held for sale	—				83.6
Total current assets	1,999.5				1,610.7
Property, plant and equipment, net	139.9				128.7
Goodwill	10,815.4				9,346.8
Other intangible assets, net	4,667.7				3,842.1
Deferred taxes	95.6				52.2
Other assets	390.8				101.1
Assets held for sale	—				167.9
Total assets	$	18,108.9			$	15,249.5
Liabilities and Stockholders’ Equity
Accounts payable	$	162.0			$	165.3
Accrued compensation	240.1				248.3
Deferred revenue	831.8				677.9
Other accrued liabilities	346.2				258.0
Income taxes payable	215.1				58.3
Current portion of long-term debt, net	602.2				1.5
Current liabilities held for sale	—				38.9
Total current liabilities	2,397.4				1,448.2
Long-term debt, net of current portion	4,673.1				4,940.2
Deferred taxes	1,108.1				931.1
Other liabilities	438.4				191.5
Total liabilities	8,617.0				7,511.0
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.01 par value per share; 1.0 shares authorized; none outstanding	—				—
Common stock, $0.01 par value per share; 350.0 shares authorized; 105.9 shares issued and 104.1 outstanding at December 31, 2019 and 105.2 shares issued and 103.4 outstanding at December 31, 2018	1.1				1.1
Additional paid-in capital	1,903.9				1,751.5
Retained earnings	7,818.0				6,247.7
Accumulated other comprehensive loss	(212.8		)		(243.3		)
Treasury stock, 1.8 shares at December 31, 2019 and 1.9 shares at December 31, 2018	(18.3		)		(18.5		)
Total stockholders’ equity	9,491.9				7,738.5
Total liabilities and stockholders’ equity	$	18,108.9			$	15,249.5

See accompanying notes to Consolidated Financial Statements.

ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

Years ended December 31, 2019, 2018 and 2017

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

	Years ended December 31,
	2019				2018				2017
Net revenues	$	5,366.8			$	5,191.2			$	4,607.5
Cost of sales	1,939.7				1,911.7				1,742.7
Gross profit	3,427.1				3,279.5				2,864.8
Selling, general and administrative expenses	1,928.7				1,883.1				1,654.6
Income from operations	1,498.4				1,396.4				1,210.2
Interest expense, net	186.6				182.1				180.6
Loss on extinguishment of debt	—				15.9				—
Other income/(expense), net	(5.1		)		—				5.1
Gain on disposal of businesses	920.7				—				—
Earnings before income taxes	2,227.4				1,198.4				1,034.7
Income taxes	459.5				254.0				62.9
Net earnings	$	1,767.9			$	944.4			$	971.8
Earnings per share:
Basic	$	17.02			$	9.15			$	9.51
Diluted	$	16.82			$	9.05			$	9.39
Weighted-average common shares outstanding:
Basic	103.9				103.2				102.2
Diluted	105.1				104.4				103.5

See accompanying notes to Consolidated Financial Statements.

ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2019, 2018 and 2017

(in millions)

	Years ended December 31,
	2019				2018				2017
Net earnings	$	1,767.9			$	944.4			$	971.8
Other comprehensive income, net of tax:
Foreign currency translation adjustments	30.5				(57.1		)		138.5
Total other comprehensive income/(loss), net of tax	30.5				(57.1		)		138.5
Comprehensive income	$	1,798.4			$	887.3			$	1,110.3

See accompanying notes to Consolidated Financial Statements.

ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years ended December 31, 2019, 2018 and 2017

(in millions, except per share data)

	Common Stock
	Shares			Amount				Additional paid-in capital				Retained earnings				Accumulated other comprehensive earnings				Treasury stock				Total stockholders’ equity
Balances at December 31, 2016	101.7			$	1.0			$	1,489.1			$	4,642.4			$	(324.7	)		$	(18.9	)		$	5,788.9
Net earnings	—			—				—				971.8				—				—				971.8
Stock option exercises	0.6			—				61.3				—				—				—				61.3
Treasury stock sold	—			—				4.0				—				—				0.2				4.2
Currency translation adjustments, including tax provision of $4.9	—			—				—				—				138.5				—				138.5
Stock based compensation	—			—				81.3				—				—				—				81.3
Restricted stock activity	0.2			—				(32.8		)		—				—				—				(32.8		)
Dividends declared ($1.4625 per share)	—			—				—				(149.6		)		—				—				(149.6		)
Balances at December 31, 2017	102.5			$	1.0			$	1,602.9			$	5,464.6			$	(186.2	)		$	(18.7	)		$	6,863.6
Adoption of ASC 606	—			—				—				14.3				—				—				14.3
Net earnings	—			—				—				944.4				—				—				944.4
Stock option exercises	0.6			0.1				58.7				—				—				—				58.8
Treasury stock sold	—			—				5.2				—				—				0.2				5.4
Currency translation adjustments, including tax benefit of $7.2	—			—				—				—				(57.1		)		—				(57.1		)
Stock based compensation	—			—				132.9				—				—				—				132.9
Restricted stock activity	0.3			—				(48.2		)		—				—				—				(48.2		)
Dividends declared ($1.70 per share)	—			—				—				(175.6		)		—				—				(175.6		)
Balances at December 31, 2018	103.4			$	1.1			$	1,751.5			$	6,247.7			$	(243.3	)		$	(18.5	)		$	7,738.5
Net earnings	—			—				—				1,767.9				—				—				1,767.9
Stock option exercises	0.5			—				64.9				—				—				—				64.9
Treasury stock sold	—			—				6.6				—				—				0.2				6.8
Currency translation adjustments, including tax benefit of $3.8	—			—				—				—				30.5				—				30.5
Stock based compensation	—			—				110.9				—				—				—				110.9
Restricted stock activity	0.2			—				(30.0		)		—				—				—				(30.0		)
Dividends declared ($1.90 per share)	—			—				—				(197.6		)		—				—				(197.6		)
Balances at December 31, 2019	104.1			$	1.1			$	1,903.9			$	7,818.0			$	(212.8	)		$	(18.3	)		$	9,491.9

See accompanying notes to Consolidated Financial Statements.

ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2019, 2018 and 2017

(in millions)

	Years ended December 31,
	2019				2018				2017
Cash flows from operating activities:
Net earnings	$	1,767.9			$	944.4			$	971.8
Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization of property, plant and equipment	49.2				49.5				49.5
Amortization of intangible assets	366.8				317.5				295.5
Amortization of deferred financing costs	7.3				6.3				7.2
Non-cash stock compensation	104.5				133.8				83.1
Loss on debt extinguishment	—				15.9				—
Gain on sale of assets	—				—				(9.4		)
Gain on disposal of businesses, net of associated income tax	(687.3		)		—				—
Changes in operating assets and liabilities, net of acquired businesses:
Accounts receivable	(46.7		)		(83.5		)		(6.7		)
Unbilled receivables	(12.0		)		(14.0		)		(13.5		)
Inventories	(17.3		)		(21.8		)		(15.3		)
Accounts payable and accrued liabilities	(12.2		)		68.8				73.3
Deferred revenue	108.8				86.6				74.9
Income taxes	(105.4		)		(67.6		)		(257.0		)
Cash tax paid for gain on disposal of business	(39.4		)		—				—
Other, net	(22.4		)		(5.8		)		(18.9		)
Cash provided by operating activities	1,461.8				1,430.1				1,234.5
Cash flows used in investing activities:
Acquisitions of businesses, net of cash acquired	(2,387.3		)		(1,275.8		)		(153.7		)
Capital expenditures	(52.7		)		(49.1		)		(48.8		)
Capitalized software expenditures	(10.2		)		(9.5		)		(10.8		)
Proceeds from disposal of businesses	1,156.8				—				—
Proceeds from sale of assets	—				—				10.6
Other, net	(2.6		)		(0.7		)		(6.9		)
Cash used in investing activities	(1,296.0		)		(1,335.1		)		(209.6		)
Cash flows from (used in) financing activities:
Proceeds from senior notes	1,200.0				1,500.0				—
Payment of senior notes	—				(1,300.0		)		(400.0		)
Borrowings/(payments) under revolving line of credit, net	(865.0		)		(405.0		)		(660.0		)
Debt issuance costs	(12.1		)		(13.9		)		—
Redemption premium for debt extinguishment	—				(15.5		)		—
Cash dividends to stockholders	(191.7		)		(170.1		)		(142.8		)
Treasury stock sales	6.8				5.4				4.2
Proceeds from stock based compensation, net	34.9				10.6				28.5
Other, net	4.1				0.4				0.1
Cash provided by (used in) financing activities	177.0				(388.1		)		(1,170.0		)
Effect of exchange rate changes on cash	2.5				(13.8		)		59.2
Net increase (decrease) in cash and cash equivalents	345.3				(306.9		)		(85.9		)
Cash and cash equivalents, beginning of year	364.4				671.3				757.2
Cash and cash equivalents, end of year	$	709.7			$	364.4			$	671.3
Supplemental disclosures:
Cash paid for:
Interest	$	171.7			$	169.0			$	175.0
Income taxes, net of refunds received	$	370.9			$	321.6			$	320.2
Noncash investing activities:
Net assets of businesses acquired:
Fair value of assets, including goodwill	$	2,472.4			$	1,505.1			$	177.3
Liabilities assumed	(85.1		)		(229.3		)		(23.6		)
Cash paid, net of cash acquired	$	2,387.3			$	1,275.8			$	153.7

See accompanying notes to Consolidated Financial Statements.

ROPER TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years ended December 31, 2019, 2018 and 2017

(Dollar and share amounts in millions unless specified, except per share data)

(1) Summary of Accounting Policies

Basis of Presentation - These financial statements present consolidated information for Roper Technologies, Inc. and its subsidiaries (“Roper,” the “Company,” “we,” “our” or “us”). 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 SaaS) and engineered products and solutions for a variety of niche end markets.

Changes in Segment Reporting Structure

During the first quarter of 2019, we implemented a realignment of our reportable segment structure. The new reportable segments continue to provide a transparent view into Roper’s operations and capital deployment strategy and objectives. The Company’s new reporting segment structure reinforces Roper’s diversified, niche market strategy by reporting based upon business models instead of end markets. The four new reportable segments (and businesses within each; including changes due to acquisitions and divestitures since the realignment) are as follows:

–	Application Software - Aderant, CBORD, CliniSys, Data Innovations, Deltek, Horizon, IntelliTrans, PowerPlan, Strata, Sunquest

–	Network Software & Systems - ConstructConnect, DAT, Foundry, Inovonics, iPipeline, iTradeNetwork, Link Logistics, MHA, RF IDeas, SHP, SoftWriters, TransCore

–	Measurement & Analytical Solutions (1) - Alpha, CIVCO Medical Solutions, CIVCO Radiotherapy, Dynisco, FMI, Hansen, Hardy, IPA, Logitech, Neptune, Northern Digital, Struers, Technolog, Uson, Verathon

–	Process Technologies - AMOT, CCC, Cornell, FTI, Metrix, PAC, Roper Pump, Viatran, Zetec

(1) The Measurement & Analytical Solutions segment includes the results of the divestitures completed in 2019 through the transaction date for (i) Imaging businesses, sold to Teledyne on February 5, 2019 and (ii) Gatan, sold to AMETEK on October 29, 2019.

The Company’s strategy, organizational structure, and day-to-day operations of our businesses remain unchanged. All prior periods have been recast to reflect the changes noted above.

Recent Accounting Pronouncements - The Financial Accounting Standards Board (“FASB”) establishes changes to accounting principles under GAAP in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). 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 February 2016, the FASB issued ASC 842, which included the recognition of right-of-use (“ROU”) lease assets and lease liabilities on the balance sheet and the disclosure of other key information about leasing arrangements. The Company adopted ASC 842, as of January 1, 2019 using the cumulative effect transition method for leases in existence as of the date of adoption.

The reported results for 2019 reflect the application of ASC 842 guidance while the reported results for 2018 were prepared under the previous guidance of ASC 840, Leases (“ASC 840”). The adoption of ASC 842 represents a change in accounting principle that recognizes ROU assets and lease liabilities arising from all leases based on the present value of future minimum lease payments over the lease term. Consistent with ASC 840, lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company’s adoption of ASC 842 had no impact on our Consolidated Statements of Earnings or our Consolidated Statement of Cash Flows.

We elected the package of practical expedients permitted under the transition guidance within ASC 842, which allowed us to: (i) carry forward the historical lease classification, (ii) not reassess whether any existing contract contains a lease, and (iii) not reassess initial direct costs for existing leases.

Operating leases are classified as non-current operating lease ROU assets and current and non-current operating lease liabilities on our Consolidated Balance Sheet. Finance leases are not material.

Adoption of ASC 842 resulted in the recognition of operating lease ROU assets and total operating lease liabilities of $274.0 and $282.7, respectively, as of January 1, 2019. The difference between the operating lease ROU assets and total operating lease liabilities is the reclassification of previously recognized deferred rent liabilities against operating lease ROU assets. The adoption of ASC 842 did not result in an adjustment to retained earnings and it did not impact our net deferred tax assets or liabilities.

The Company’s operating leases are primarily for real property in support of our business operations. Although many of our leases contain renewal options, we generally are not reasonably certain to exercise these options at the commencement date. Accordingly, renewal options are generally not included in the lease term for determining the ROU asset and lease liability at commencement.

Variable lease payments generally depend on an inflation-based index and such payments are not included in the original estimate of the lease liability. These variable lease payments are not material.

Discount rates are determined based on Roper’s incremental borrowing rate as our leases generally do not provide an implicit rate.

In May 2014, the FASB issued ASC 606, which created a single, comprehensive revenue recognition model for all contracts with customers. The Company adopted ASC 606 as of January 1, 2018 using the modified retrospective transition method resulting in a $14.3 increase to beginning retained earnings.

See the Company’s accounting policies below for details.

Recently Released Accounting Pronouncements

In June 2016, the FASB issued an update which amends the measurement of credit losses on financial instruments by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. The Company will adopt this update as of January 1, 2020. The Company has completed its assessment to identify differences between the existing standard and new standard and determined this update is not material to our results of operations and financial condition.

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 $370.1 and $0.0 cash equivalents at December 31, 2019 and December 31, 2018, respectively.

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, 2019, management concluded 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 associated with stock options outstanding during the respective year. The effects of potential common stock were determined using the treasury stock method:

	Years ended December 31,
	2019			2018			2017
Basic weighted-average shares outstanding	103.9			103.2			102.2
Effect of potential common stock:
Common stock awards	1.2			1.2			1.3
Diluted weighted-average shares outstanding	105.1			104.4			103.5

As of and for the years ended December 31, 2019, 2018 and 2017, there were 0.627, 0.724 and 0.478 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 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 Statements of Earnings within “Other income/(expense), net.” Foreign currency transaction gains/(losses) were $(3.7), $0.2 and $(1.4) for the years ended December 31, 2019, 2018 and 2017.

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 quantitative impairment test is required. 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, a non-cash impairment loss is recognized in the amount of that excess.

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 35 reporting units with individual goodwill amounts ranging from zero to $2.5 billion. In 2019, the Company performed its annual impairment test in the fourth quarter for all reporting units. 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 33 of its reporting units and thus was not required to perform a quantitative analysis for these reporting units. For the remaining two reporting units, the Company performed its quantitative analysis and concluded that the fair value of each of these two reporting units was substantially in excess of its carrying value, with no impairment indicated as of October 1, 2019.

Recently acquired reporting units generally represent a higher inherent 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 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 an indefinite-lived trade name is less than its carrying amount. If necessary, Roper conducts a quantitative review using the relief-from-royalty method. 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 revenues discounted using a risk adjusted rate of capital. Each royalty rate is determined based on the profitability of the trade name to which it relates and observed market royalty rates. Revenue 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. Trade names resulting from recent acquisitions generally represent the highest risk of impairment, which typically decreases as the businesses are integrated into Roper. The Company performed a quantitative analysis over the fair values of two of its trade names and concluded that the fair value exceeded its carrying value, with no impairment indicated as of October 1, 2019.

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 testing performed in 2019.

The most significant identifiable intangible assets with definite useful economic lives recognized from our acquisitions are customer relationships. The fair value for customer relationships is determined as of the acquisition date using the excess earnings method. Under this methodology the fair value is determined based on the estimated future after-tax cash flows arising from the acquired customer relationships over their estimated lives after considering customer attrition and contributory asset charges. When testing customer relationship intangible assets for potential impairment, management considers historical customer attrition rates and projected revenues and profitability related to customers that existed at acquisition. In evaluating the amortizable life for customer relationship intangible assets, management considers historical customer attrition patterns.

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 - 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 enacted tax rates expected to be paid. See Note 7 for information regarding income taxes.

Interest Rate Risk - The Company manages interest rate risk by targeting a combination of fixed-rate 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, 2019 or December 31, 2018.

Inventories - Inventories are valued at the lower of cost and net realizable value. 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 net realizable value based upon assumptions about future demand and market conditions.

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

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

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

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

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 $339.1, $316.8 and $281.1 for the years ended December 31, 2019, 2018 and 2017, respectively.

Revenue Recognition - The Company adopted ASC 606 as of January 1, 2018 using the modified retrospective method for all contracts not substantially completed as of the date of adoption. The reported results for 2018 and thereafter reflect the application of ASC 606 guidance, while the reported results for 2017 were prepared under the guidance of ASC Topic 605, Revenue Recognition. The adoption of ASC 606 represents a change in accounting principle that is intended to more closely align revenue recognition with the transfer of control of the Company’s products and services to the customer. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for these products and/or services. To achieve this principle, the Company applies the following five steps:

•	identify the contract with the customer;

•	identify the performance obligations in the contract;

•	determine the transaction price;

•	allocate the transaction price to performance obligations in the contract; and

•	recognize revenue when or as the Company satisfies a performance obligation.

Disaggregated Revenue - We disaggregate our revenues into two categories: (i) software and related services; and (ii) engineered products and related services. Software and related services revenues are primarily derived from our Application Software and Network Software & Systems reportable segments. Engineered products and related services revenues are derived from all of our reportable segments except Application Software and comprise substantially all of the revenues generated in our Measurement & Analytical Solutions and Process Technologies reportable segments. See details in the table below.

		Year ended December 31,
		2019				2018
Software and related services		$	2,477.7			$	2,165.9
Engineered products and related services		2,889.1				3,025.3
Net revenues		$	5,366.8			$	5,191.2

Software and related services

SaaS - SaaS subscriptions and ongoing related support are generally accounted for as a single performance obligation and recognized ratably over the contractual term. In addition, SaaS arrangements may include implementation services which are accounted for as a separate performance obligation and recognized over time, using the input method. Payment is generally required within 30 days of the commencement of the SaaS subscription period, which is primarily offered to customers over a one-year timeframe.

Licensed Software - Performance obligations in our customer contracts may include:

–	Perpetual or time-based (“term”) software licenses

–	Post contract support (“PCS”)

–	Implementation/installation services

Software licenses may be combined with implementation/installation services as a single performance obligation if the implementation/installation significantly modifies or customizes the functionality of the software license.

We recognize revenue over time or at a point in time depending on our evaluation of when the customer obtains control over the promised products or services. For software arrangements that include multiple performance obligations, we allocate revenue to each performance obligation based on estimates of the price that we would charge the customer for each promised product or service if it were sold on a standalone basis.

Payment for software licenses is generally required within 30 to 60 days of the transfer of control. Payment for PCS is generally required within 30 to 60 days of the commencement of the service period, which is primarily offered to customers over a one-year timeframe. Payment terms do not contain a significant financing component. Payment for implementation/installation services that are recognized over time are typically commensurate with milestones defined in the contract, or billable hours incurred.

Engineered products and related services

Revenue from product sales is recognized when control transfers to the customer, which is generally when the product is shipped.

Non-project-based installation and repair services are performed by certain of our businesses for which revenue is recognized upon completion.

Payment terms are generally 30 to 60 days from the transfer of control. Payment terms do not contain a significant financing component.

Preventative maintenance service revenues are recognized over time using the input method. If we determine our efforts or inputs are expended evenly throughout the performance period, we generally recognize revenue on a straight-line basis. Payment for preventative maintenance services are typically commensurate with milestones defined in the contract.

We offer customers return rights and other credits subject to certain restrictions. We estimate variable consideration generally based on historical experience to arrive at the transaction price, or the amount to which we ultimately expect to be entitled from the customer.

Revenues from our project-based businesses, including toll and traffic systems and control systems, are generally recognized over time using the input method, primarily utilizing the ratio of costs incurred to total estimated costs, as the measure of performance. For these projects, payment is typically commensurate with certain performance milestones defined in the contract. Retention and down payments are also customary in these contracts. Estimated losses on any projects are recognized as soon as such losses become probable and reasonably estimable. The impact on revenues due to changes in estimates was immaterial for the year ended December 31, 2019. The Company recognized revenues of $247.8, $245.9 and $249.3 for the years ended December 31, 2019, 2018 and 2017, respectively, using this method.

Accounts receivable, net - Accounts receivable, net includes amounts billed and currently due from customers. The amounts due are stated at their net estimated realizable value. Accounts receivable are stated net of an allowance for doubtful accounts and sales allowances of $20.3 and $23.1 at December 31, 2019 and 2018, 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.

Unbilled receivables - Our unbilled receivables include unbilled amounts typically resulting from sales under project-based contracts when the input method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer, and right to payment is not solely due to the passage of time. Amounts may not exceed their net realizable value.

Deferred revenues - We record deferred revenues when cash payments are received or due in advance of our performance. Our deferred revenues relate primarily to software and related services. In most cases, we recognize these deferred revenues ratably over time as the SaaS or PCS performance obligation is satisfied. The non-current portion of deferred revenue is included in “Other liabilities” in our Consolidated Balance Sheets.

Our unbilled receivables and deferred revenues are reported in a net position on a contract-by-contract basis at the end of each reporting period. We classify these balances as current or non-current based on the timing of when we expect to recognize revenue.

Deferred commissions - Our incremental direct costs of obtaining a contract, which consist of sales commissions primarily for our software sales, are deferred and amortized on a straight-line basis over the period of contract performance or a longer period, depending on facts and circumstances. We classify deferred commissions as current or non-current based on the timing of when we expect to recognize the expense. The current and non-current portions of deferred commissions are included in “Other current assets” and “Other assets,” respectively, in our Consolidated Balance Sheets. At December 31, 2019 and December 31, 2018, we had $31.4 and $28.0 of deferred commissions, respectively. We recognized $30.1 of expense related to deferred commissions in the year ended December 31, 2019.

Remaining performance obligations - Remaining performance obligations represents the transaction price of firm orders for which work has not been performed and excludes unexercised contract options. As of December 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was $3,553.5. We expect to recognize revenue on approximately 56% of our remaining performance obligations over the next 12 months, with the remainder to be recognized thereafter.

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 $30.0 and $22.0 at December 31, 2019 and 2018, 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.

(2) Business Acquisitions and Assets and Liabilities Held for Sale

Roper completed four business acquisitions in the year ended December 31, 2019, with an aggregate purchase price of $2,387.6, net of cash acquired. The results of operations of the acquired businesses are included in Roper’s Consolidated Financial Statements 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.

Acquisition of Foundry - On April 18, 2019, Roper acquired 100% of the shares of Foundry, a leading provider of software technologies used to deliver visual effects and 3D content for the entertainment, digital design, and visualization industries. The results of Foundry are reported in the Network Software & Systems reportable segment.

Acquisition of ComputerEase - On August 19, 2019, Roper acquired substantially all of the assets of ComputerEase Software, a leading provider of integrated accounting, project management and field-to-office solutions for commercial construction firms. ComputerEase is integrating into our Deltek business and its results are reported in the Application Software reportable segment.

Acquisition of iPipeline - On August 22, 2019, Roper acquired 100% of the shares of iPipeline Holdings, Inc., a leading provider of cloud-based software solutions for the life insurance and financial services industries. The results of iPipeline are reported in the Network Software & Systems reportable segment.

Acquisition of Bellefield - On December 18, 2019, Roper acquired substantially all of the assets of Bellefield Systems which provides SaaS solutions targeting the front office of law firms, specifically focused on professional service automation, compliance and timekeeping. Bellefield is integrating into our Aderant business and its results are reported in the Application Software reportable segment.

The Company recorded $1,447.0 in goodwill and $1,181.9 of other identifiable intangibles in connection with the acquisitions; however, purchase price allocations are preliminary pending final tax-related adjustments. The majority of the goodwill is not expected to be deductible for tax purposes. The amortizable intangible assets include customer relationships of $1,020.0 (15.8 year weighted average useful life) and technology of $109.3 (6.8 year weighted average useful life).

Assets and Liabilities Held for Sale

During the second quarter of 2018, Roper and Thermo Fisher Scientific, Inc. (“Thermo Fisher”) entered into a definitive agreement under which Thermo Fisher would acquire 100% of the shares of Gatan, a wholly owned subsidiary of Roper, for approximately $925.0 in cash. On June 10, 2019, Roper and Thermo Fisher announced a mutual termination of this agreement due to the challenges in obtaining regulatory approval in the United Kingdom.

The Company closed on its sale of Gatan to AMETEK on October 29, 2019 for approximately $925.0 in cash. The sale resulted in a pretax gain of $801.1, which is reported within “Gain on disposal of businesses” in the Consolidated Statements of Earnings. In addition, we recognized income tax expense of $201.2 in connection with the sale, which is included within “Income taxes” in the Consolidated Statements of Earnings.

The Company closed on its sale of the Imaging businesses to Teledyne on February 5, 2019 for approximately $225.0 in cash. The results of the Imaging businesses are reported in the Measurement & Analytical Solutions segment through such date. The sale resulted in a pretax gain of $119.6, which is reported within “Gain on disposal of businesses” in the Consolidated Statements of Earnings. In addition, we recognized income tax expense of $32.2 in connection with the sale, which is included within “Income taxes” in the Consolidated Statements of Earnings.

The assets and liabilities of the Imaging businesses and Gatan were classified as held for sale on Roper’s Consolidated Balance Sheet at December 31, 2018.

2018 Acquisitions - Roper completed seven business acquisitions in the year ended December 31, 2018, with an aggregate purchase price of $1,279.0, net of cash acquired. The results of operations of the acquired businesses are included in Roper’s consolidated results of operations 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 completed three business acquisitions which provide software solutions that support the development of cost estimates in the construction industry: Quote Software, PlanSwift Software, and Smartbid. These three businesses are integrated into our ContructConnect business and its results are reported in the Network Software & Systems reportable segment.

Acquisition of PowerPlan - On June 4, 2018, Roper acquired 100% of the shares of PowerPlan, a provider of financial and compliance management software and solutions to large complex companies in asset-intensive industries, for a purchase price of $1,111.4, net of cash acquired. The results of PowerPlan are reported in the Application Software reportable segment.

Acquisition of ConceptShare - On June 7, 2018, Roper acquired 100% of the shares of ConceptShare, a provider of cloud-based software for marketing agencies, marketing departments and other creative teams to streamline the review and approval of online work and content. ConceptShare is integrated into our Deltek business and its results are reported in the Application Software reportable segment.

Acquisition of BillBlast - On July 10, 2018, Roper acquired 100% of the shares of BillBlast, a provider of software and ancillary services for the automation of invoicing and reporting for law firms. BillBlast is integrated into our Aderant business and its results are reported in the Application Software reportable segment.

Acquisition of Avitru - On December 31, 2018, Roper acquired 100% of the shares of Avitru, a provider of software that supports the design, development and/or delivery of construction specification solutions and related services. Avitru is integrated into our Deltek business and its results are reported in the Application Software reportable segment.

The Company recorded $717.5 in goodwill and $711.3 of other identifiable intangibles in connection with the acquisitions. The majority of the goodwill is not expected to be deductible for tax purposes. The amortizable intangible assets include customer relationships of $635.1 (19 year weighted average useful life) and technology of $48.6 (7 year weighted average useful life).

2017 Acquisitions – During the year ended December 31, 2017, Roper completed four business acquisitions, with an aggregate purchase price of $152.0, net of cash acquired. The results of operations of the acquired businesses did not have a material impact on Roper’s consolidated results of operations.

Acquisition of Phase Technology - On June 21, 2017, Roper acquired the assets of Phase Technology, a business engaged in the design, manufacture, marketing and sales of test instruments. Phase Technology is integrated into our PAC business and their results are reported in the Process Technologies reportable segment.

Acquisition of Handshake Software, Inc. - On August 4, 2017, Roper acquired 100% of the shares of Handshake Software, Inc., a provider of search products, portals and services for legal professionals. Handshake Software Inc. is integrated into our Aderant business and its results are reported in the Application Software reportable segment.

The results of the following acquisitions are integrated into our Deltek business and their results are reported in the Application Software reportable segment:

Acquisition of Workbook Software A/S - On September 15, 2017, Roper acquired 100% of the shares of Workbook Software A/S, a provider of software solutions for customer relationship management, project management and finance/accounting.

Acquisition of Onvia, Inc. - On November 17, 2017, Roper acquired 100% of the outstanding shares of Onvia, Inc. (“Onvia”) common stock for $9.00 per share in an all-cash tender offer. Onvia provides enterprise, mid-market and small business customers with sales lead generation technologies into federal, state and local government markets.

The Company recorded $82.7 in goodwill and $85.0 of other identifiable intangibles in connection with the acquisitions. The amortizable intangible assets include primarily customer relationships of $68.0 (15 year weighted average useful life) and technology of $13.0 (6 year weighted average useful life).

Sale of Product Line - On May 15, 2017, Roper completed the sale of a product line in our Process Technologies segment for $10.4. The pretax gain on the sale was $9.4, which is reported within “Other income/(expense), net” in the Consolidated Statements of Earnings.

(3) Inventories

The components of inventories at December 31 were as follows:

	2019				2018
Raw materials and supplies	$	125.1			$	120.3
Work in process	30.9				26.2
Finished products	76.0				74.6
Inventory reserves	(33.4		)		(30.3		)
	$	198.6			$	190.8

(4) Property, Plant and Equipment

The components of property, plant and equipment at December 31 were as follows:

	2019				2018
Land	$	2.2			$	2.2
Buildings	84.7				76.7
Machinery and other equipment	218.1				218.0
Computer equipment	96.4				79.4
Software	73.3				64.4
	474.7				440.7
Accumulated depreciation	(334.8		)		(312.0		)
	$	139.9			$	128.7

Depreciation and amortization expense related to property, plant and equipment was $49.2, $49.5 and $49.5 for the years ended December 31, 2019, 2018 and 2017, respectively.

(5) Goodwill and Other Intangible Assets

The carrying value of goodwill by segment was as follows:

	Application Software				Network Software & Systems				Measurement &Analytical Solutions				Process Technologies				Total
Balances at December 31, 2017	$	4,565.4			$	2,591.3			$	1,345.4			$	318.2			$	8,820.3
Goodwill acquired	684.4				33.1				—				—				717.5
Goodwill related to assets held for sale	—				—				(156.2		)		—				(156.2		)
Currency translation adjustments	(17.0		)		(2.3		)		(14.5		)		(5.9		)		(39.7		)
Reclassifications and other	3.3				1.6				—				—				4.9
Balances at December 31, 2018	$	5,236.1			$	2,623.7			$	1,174.7			$	312.3			$	9,346.8
Goodwill acquired	143.4				1,303.6				—				—				1,447.0
Currency translation adjustments	8.3				8.8				3.3				2.2				22.6
Reclassifications and other	1.6				(2.6		)		—				—				(1.0		)
Balances at December 31, 2019	$	5,389.4			$	3,933.5			$	1,178.0			$	314.5			$	10,815.4

Reclassifications and other during the year ended December 31, 2019 were due primarily to tax adjustments for acquisitions in 2019 and 2018. See Note 2 for information regarding acquisitions.

Other intangible assets were comprised of:

	Cost				Accum. amort.				Net book value
Assets subject to amortization:
Customer related intangibles	$	3,926.8			$	(1,083.6	)		$	2,843.2
Unpatented technology	504.0				(199.5		)		304.5
Software	172.0				(93.2		)		78.8
Patents and other protective rights	9.7				(7.5		)		2.2
Trade names	7.3				(2.8		)		4.5
Assets not subject to amortization:
Trade names	608.9				—				608.9
Balances at December 31, 2018	$	5,228.7			$	(1,386.6	)		$	3,842.1
Assets subject to amortization:
Customer related intangibles	$	4,955.4			$	(1,349.4	)		$	3,606.0
Unpatented technology	613.0				(279.6		)		333.4
Software	172.2				(111.5		)		60.7
Patents and other protective rights	12.0				(8.0		)		4.0
Trade names	7.9				(4.1		)		3.8
Assets not subject to amortization:
Trade names	659.8				—				659.8
Balances at December 31, 2019	$	6,420.3			$	(1,752.6	)		$	4,667.7

Amortization expense of other intangible assets was $364.7, $316.5, and $294.3 during the years ended December 31, 2019, 2018 and 2017, respectively. Amortization expense is expected to be $400 in 2020, $383 in 2021, $379 in 2022, $347 in 2023 and $321 in 2024.

(6) Accrued Liabilities

Accrued liabilities at December 31 were as follows:

	2019				2018
Interest	$	34.4			$	26.9
Customer deposits	22.4				22.3
Commissions	6.6				7.7
Warranty	10.0				9.3
Accrued dividend	54.3				48.5
Rebates	47.1				29.1
Billings in excess of revenues	9.0				13.9
Operating lease liability	56.8				—
Other	105.6				100.3
	$	346.2			$	258.0

(7) Income Taxes

Earnings before income taxes for the years ended December 31, 2019, 2018 and 2017 consisted of the following components:

	2019				2018				2017
United States	$	1,902.2			$	924.2			$	783.6
Other	325.2				274.2				251.1
	$	2,227.4			$	1,198.4			$	1,034.7

Components of income tax expense for the years ended December 31, 2019, 2018 and 2017 were as follows:

	2019				2018				2017
Current:
Federal	$	391.6			$	155.4			$	316.0
State	78.3				56.2				29.8
Foreign	79.8				105.1				89.9
Deferred:
Federal	(43.1		)		(24.2		)		(358.3		)
State	2.6				(25.8		)		(3.7		)
Foreign	(49.7		)		(12.7		)		(10.8		)
	$	459.5			$	254.0			$	62.9

Reconciliations between the statutory federal income tax rate and the effective income tax rate for the years ended December 31, 2019, 2018 and 2017 were as follows:

	2019			2018			2017
Federal statutory rate	21.0	%		21.0	%		35.0	%
Foreign rate differential	(0.1	)		0.3			(2.6	)
R&D tax credits	(0.6	)		(0.9	)		(0.8	)
State taxes, net of federal benefit	1.6			2.4			1.9
Section 199 deduction	—			—			(1.3	)
Stock-based compensation	(1.3	)		(3.1	)		(3.9	)
Tax Cuts and Jobs Act of 2017 - enactment date and measurement period adjustments	—			(1.2	)		(20.8	)
Global intangible low taxed income (GILTI) inclusion	0.2			1.1			—
Foreign-derived intangible income (FDII) deduction	(0.5	)		(1.2	)		—
Tax on planned remittances of foreign earnings	0.3			1.3			—
Divestitures	1.8			—			—
Foreign entity restructuring	(1.8	)		—			—
Other, net	—			1.5			(1.4	)
	20.6	%		21.2	%		6.1	%

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

Components of the deferred tax assets and liabilities at December 31 were as follows:

	2019				2018
Deferred tax assets:
Reserves and accrued expenses	$	175.2			$	156.5
Inventories	4.3				4.5
Net operating loss carryforwards	111.2				67.9
R&D credits	4.1				6.1
Valuation allowance	(36.3		)		(26.4		)
Outside basis difference on investments held for sale	—				2.7
Lease liability 1	64.0				—
Total deferred tax assets	$	322.5			$	211.3
Deferred tax liabilities:
Reserves and accrued expenses	$	15.5			$	14.3
Amortizable intangible assets	1,229.9				1,043.0
Plant and equipment	10.8				6.6
Accrued tax on unremitted foreign earnings	17.1				16.3
Outside basis difference on investments held for sale	—				10.0
ROU asset 1	61.7				—
Total deferred tax liabilities	$	1,335.0			$	1,090.2

1 Upon adoption of ASC 842, deferred taxes associated with previously recognized deferred rent liabilities were reclassified into deferred taxes for ROU asset and lease liability.

As of December 31, 2019, the Company had approximately $19.0 of tax-effected U.S. federal net operating loss carryforwards. Some of these net operating loss carryforwards have an indefinite carryforward period, and those that do not will begin to expire in 2021 if not utilized. The majority of the U.S. federal net operating loss carryforwards are subject to limitation under the Internal Revenue Code of 1986, as amended (“IRC”) Section 382; however, the Company expects to utilize such losses in their entirety prior to expiration. The U.S. federal net operating loss carryforwards decreased from 2018 to 2019 primarily due to current year utilization. The Company has approximately $33.7 of tax-effected state net operating loss carryforwards (without regard to federal benefit of state). Some of these net operating loss carryforwards have an indefinite carryforward period, and those that do not will begin to expire in 2020 if not utilized. 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 $65.6 of tax-effected foreign net operating loss carryforwards. Some of these net operating loss carryforwards have an indefinite carryforward period, and those that do not will begin to expire in 2020 if not utilized. The foreign net operating loss carryforwards increased from 2018 to 2019 primarily due to the recognition of a discrete tax benefit of $41.0 in connection with a foreign restructuring plan allowing the future realization of net operating losses. Additionally, the Company has $5.0 of U.S. federal and state research and development tax credit carryforwards (without regard to federal benefit of state). Some of these research and development credit carryforwards have an indefinite carryforward period, and those that do not will begin to expire in 2020 if not utilized.

As of December 31, 2019, the Company determined that a total valuation allowance of $36.3 was necessary to reduce U.S. federal and state deferred tax assets by $15.4 and foreign deferred tax assets by $20.9, where it was more likely than not that all of such deferred tax assets will not be realized. As of December 31, 2019, the Company believes it is more likely than not that the remaining net deferred tax assets will be realized based on the Company’s estimates of future taxable income and any applicable tax-planning strategies within various tax jurisdictions.

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:

	2019				2018				2017
Beginning balance	$	63.6			$	52.2			$	38.7
Additions for tax positions of prior periods	2.9				2.4				24.8
Additions for tax positions of the current period	4.2				6.9				4.2
Additions due to acquisitions	1.9				4.4				—
Reductions for tax positions of prior periods	(0.3		)		(0.4		)		(11.2		)
Reductions attributable to settlements with taxing authorities	—				—				(1.5		)
Reductions attributable to lapses of applicable statute of limitations	(2.5		)		(1.9		)		(2.8		)
Ending balance	$	69.8			$	63.6			$	52.2

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $68.2. Interest and penalties related to unrecognized tax benefits were $1.8 in 2019 and are classified as a component of income tax expense. Accrued interest and penalties were $8.7 at December 31, 2019 and $6.9 at December 31, 2018. During the next twelve months, it is reasonably possible that the unrecognized tax benefits may decrease by a net $6.3, mainly due to anticipated statute of limitations lapses in various jurisdictions.

The Company and its subsidiaries are subject to examinations for U.S. federal income tax as well as income tax in various state, city and foreign jurisdictions. The Company’s federal income tax returns for 2016 through the current period remain open to examination and the relevant state, city and foreign statutes vary. The Company does not expect the assessment of any significant additional tax in excess of amounts reserved.

The Tax Act was signed into U.S. law on December 22, 2017. The Tax Act contains provisions which impact the Company’s income taxes including a reduction in the U.S. federal corporate income tax rate from 35% to 21%, a one-time deemed mandatory repatriation tax imposed on all undistributed foreign earnings, and the introduction of a modified territorial taxation system.

The SEC released Staff Accounting Bulletin No. 118 (“SAB 118”) on December 22, 2017 to provide guidance where the accounting under ASC 740, Income Taxes, is incomplete for certain income tax effects of the Tax Act upon issuance of financial statements for the reporting period in which the Tax Act was enacted. SAB 118 provides that if a company could determine a reasonable estimate, that estimate should be reported as a provisional amount and adjusted during a measurement period. If a company is unable to determine a reasonable estimate, no related provisional amounts would be recorded until a reasonable estimate can be determined, within the measurement period. The measurement period extends until all necessary information has been obtained, prepared, and analyzed, but no longer than 12-months from the date of enactment of the Tax Act.

The Company intends to distribute all historical unremitted foreign earnings up to the amount of excess foreign cash, as well as all future foreign earnings that can be repatriated without incremental U.S. federal tax cost. Any remaining outside basis differences relating to the Company’s investments in foreign subsidiaries are no longer expected to be material and will be indefinitely reinvested.

(8) Long-Term Debt

On September 23, 2016, Roper entered into a five-year $2.5 billion unsecured credit facility, as amended December 2, 2016, (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 $2.5 billion revolving credit facility, which includes availability of up to $150.0 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 $500.0. At December 31, 2019, there were $0.0 of outstanding borrowings under the 2016 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 3.50 to 1.

The 2016 Facility provides that the consolidated total leverage ratio may be increased, no more than twice during the term of the 2016 Facility, to 4.00 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). In conjunction with the Deltek acquisition in December of 2016, we 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, 2019 and 2018.

On August 26, 2019, the Company completed a public offering of $500.0 aggregate principal amount of 2.35% senior unsecured notes due September 15, 2024 and $700.0 aggregate principal amount of 2.95% senior unsecured notes due September 15, 2029 (the “2019 Offering”). The notes bear interest at a fixed rate and are payable semi-annually in arrears on March 15 and September 15 of each year, beginning March 15, 2020. The net proceeds were used to fund a portion of the purchase of iPipeline Holdings, Inc.

On August 28, 2018, the Company completed a public offering of $700.0 aggregate principal amount of 3.65% senior unsecured notes due September 15, 2023 and $800.0 aggregate principal amount of 4.20% senior unsecured notes due September 15, 2028 (the “2018 Offering”). The notes bear interest at a fixed rate and are payable semi-annually in arrears on March 15 and September 15 of each year, beginning March 15, 2019.

On December 19, 2016, the Company completed a public offering of $500.0 aggregate principal amount of 2.80% senior unsecured notes due December 15, 2021 and $700.0 aggregate principal amount of 3.80% senior unsecured notes due December 15, 2026. The notes bear interest at a fixed rate and are 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 $600.0 aggregate principal amount of 3.00% senior unsecured notes due December 15, 2020 and $300.0 aggregate principal amount of 3.85% senior unsecured notes due December 15, 2025. The notes bear interest at a fixed rate and are payable semi-annually in arrears on June 15 and December 15 of each year, beginning June 15, 2016.

On November 21, 2012, the Company completed a public offering of $500.0 aggregate principal amount of 3.125% senior unsecured notes due November 15, 2022. The notes bear interest at a fixed rate and are 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 $500.0 aggregate principal amount of 6.25% senior unsecured notes due September 1, 2019 (the “2019 Notes”). During 2018 a portion of the net proceeds of the 2018 Offering were used to redeem all of the $500.0 of outstanding 2019 Notes. The Company incurred a debt extinguishment charge in connection with the redemption of the 2019 Notes of $15.9, which represents the make-whole premium and unamortized deferred financing costs.

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.

Total debt at December 31 consisted of the following:

	2019				2018
2016 Facility	$	—			$	865.0
$600 3.000% senior notes due 2020	600.0				600.0
$500 2.800% senior notes due 2021	500.0				500.0
$500 3.125% senior notes due 2022	500.0				500.0
$700 3.650% senior notes due 2023	700.0				700.0
$500 2.350% senior notes due 2024	500.0				—
$300 3.850% senior notes due 2025	300.0				300.0
$700 3.800% senior notes due 2026	700.0				700.0
$800 4.200% senior notes due 2028	800.0				800.0
$700 2.950% senior notes due 2029	700.0				—
Other	7.7				3.0
Less unamortized debt issuance costs	(32.4		)		(26.3		)
Total debt	5,275.3				4,941.7
Less current portion	602.2				1.5
Long-term debt	$	4,673.1			$	4,940.2

The 2016 Facility and Roper’s $5.3 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, 2019, Roper’s fixed debt consisted of $5.3 billion of senior notes, $7.7 of other debt in the form of finance 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 $74.0 of outstanding letters of credit at December 31, 2019.

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

2020	$	603.1
2021	502.3
2022	502.3
2023	700.0
2024	500.0
Thereafter	2,500.0
Total	$	5,307.7

(9) Fair Value

Roper’s debt at December 31, 2019 included $5,300 of fixed-rate senior notes with the following fair values:

$600 3.000% senior notes due 2020	605
$500 2.800% senior notes due 2021	507
$500 3.125% senior notes due 2022	514
$700 3.650% senior notes due 2023	735
$500 2.350% senior notes due 2024	502
$300 3.850% senior notes due 2025	324
$700 3.800% senior notes due 2026	754
$800 4.200% senior notes due 2028	880
$700 2.950% senior notes due 2029	710

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.

(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. Roper partially matches employee contributions. Costs related to all such plans were $36.9, $31.2 and $27.6 for 2019, 2018 and 2017, 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. At December 31, 2019, 4.544 shares were available to grant under the 2016 Plan.

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, 2019, 2018 and 2017 was as follows:

	2019				2018				2017
Stock based compensation	$	104.5			$	133.8			$	83.1
Tax benefit recognized in net earnings	22.0				28.1				29.1

During 2019, in connection with the sale of Gatan we recognized $9.6 associated with accelerated vestings, which was recognized within “Gain on disposal of businesses” within the Consolidated Statements of Earnings. In 2018, this expense included $29.4 associated with accelerated vesting due to the passing of our former executive chairman.

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 3 to 5 years from the grant date and expire 10 years after the grant date. The Company recorded $32.0, $23.2, and $18.3 of compensation expense relating to outstanding options during 2019, 2018 and 2017, respectively, as a component of general and administrative expenses 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 2019, 2018 and 2017 were calculated using the following weighted-average assumptions:

	2019			2018			2017
Weighted-average fair value ($)	68.05			57.75			40.87
Risk-free interest rate (%)	2.37			2.65			2.03
Average expected option life (years)	5.42			5.32			5.26
Expected volatility (%)	19.22			18.05			18.74
Expected dividend yield (%)	0.58			0.59			0.67

The following table summarizes the Company’s activities with respect to its share-based compensation plans for the years ended December 31, 2019 and 2018:

	Number of shares			Weighted-average exercise price per share				Weighted-average contractual term		Aggregate intrinsic value
Outstanding at December 31, 2017	3.196			$	140.68
Granted	0.723			279.10
Exercised	(0.650	)		90.43
Canceled	(0.064	)		211.57
Outstanding at December 31, 2018	3.205			180.69				6.58		$	284.0
Granted	0.764			320.65
Exercised	(0.527	)		122.94
Canceled	(0.093	)		273.64
Outstanding at December 31, 2019	3.349			219.14				6.66		$	452.8
Exercisable at December 31, 2019	1.611			$	150.31			4.74		$	328.6

The following table summarizes information for stock options outstanding at December 31, 2019:

		Outstanding options									Exercisable options
Exercise price		Number			Average exercise price				Average remaining life (years)		Number			Average exercise price
$51.11 - $125.17		0.370			$	95.34			2.0		0.370			$	95.34
$125.18 - $154.16		0.371			137.31				4.1		0.371			137.31
$154.17 - $170.58		0.269			164.82				5.2		0.269			164.82
$170.59 - $183.97		0.393			173.20				6.4		0.362			172.75
$183.98 - $212.18		0.439			202.41				7.1		0.198			199.20
$212.19 - $279.31		0.357			261.80				8.3		0.039			233.39
$279.32 - $279.44		0.460			279.39				8.2		0.002			279.39
$279.45 - $327.91		0.597			321.33				9.1		—			—
$327.92 - $366.76		0.093			351.80				9.5		—			—
$51.11 - $366.76		3.349			$	219.14			6.7		1.611			$	150.31

At December 31, 2019, there was $59.9 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 2019, 2018 and 2017 was $109.4, $124.6 and $90.6, respectively. Cash received from option exercises under all plans in 2019 and 2018 was $64.9 and $58.8, respectively.

Restricted Stock Grants - During 2019 and 2018, the Company granted 0.321 and 0.410 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 4 years. The Company recorded $72.5, $109.7 and $63.0 of compensation expense related to outstanding shares of restricted stock held by employees and directors during 2019, 2018 and 2017, respectively. In 2018, this expense included $29.4 associated with accelerated vesting due to the passing of our former executive chairman. A summary of the Company’s nonvested shares activity for 2019 and 2018 is as follows:

	Number of shares			Weighted-average grant date fair value
Nonvested at December 31, 2017	0.859			$	187.01
Granted	0.410			278.29
Vested	(0.492	)		204.24
Forfeited	(0.038	)		191.51
Nonvested at December 31, 2018	0.739			$	225.93
Granted	0.321			318.75
Vested	(0.290	)		209.05
Forfeited	(0.061	)		225.23
Nonvested at December 31, 2019	0.709			$	275.00

At December 31, 2019, there was $77.9 of total unrecognized compensation expense related to nonvested awards granted to both employees and directors under the Company’s share-based compensation plans. That cost is expected to be recognized over a weighted-average period of 1.8 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, 2019.

Employee Stock Purchase Plan - During 2019, 2018 and 2017, participants of the ESPP purchased 0.021, 0.020 and 0.020 shares, respectively, of Roper’s common stock for total consideration of $6.8, $5.4, and $4.2, respectively. All of these shares were purchased from Roper’s treasury shares.

(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. In April 2018, a stockholder derivative complaint was filed in Sarasota County, Florida against the Company, nominally, and its directors and former chairman & chief executive officer (“CEO”), alleging the directors breached their fiduciary duties and were unjustly enriched by the compensation earned by the nonexecutive directors and the CEO in 2015 and 2016. The matter was settled in June 2019, and the settlement was approved by the court in September. Under the terms of the settlement, the Company agreed to, among other things, expand future disclosures regarding its compensation practices, submit a new director compensation plan to shareholders for approval in 2020, and pay plaintiff’s attorneys’ fees and expenses.

As of December 31, 2019, Roper had $74.0 of letters of credit issued to guarantee its performance under certain services contracts or to support certain insurance programs and $732.7 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

During the first quarter of 2019, we implemented a realignment of our reportable segment structure. The new reportable segments continue to provide a transparent view into Roper’s operations and capital deployment strategy and objectives. The Company’s new reporting segment structure reinforces Roper’s diversified, niche market strategy by reporting based upon business models instead of end markets. The four new reportable segments (and businesses within each; including changes due to acquisitions and divestitures since the realignment) are as follows:

–	Application Software - Aderant, CBORD, CliniSys, Data Innovations, Deltek, Horizon, IntelliTrans, PowerPlan, Strata, Sunquest

–	Network Software & Systems - ConstructConnect, DAT, Foundry, Inovonics, iPipeline, iTradeNetwork, Link Logistics, MHA, RF IDeas, SHP, SoftWriters, TransCore

–	Measurement & Analytical Solutions (1) - Alpha, CIVCO Medical Solutions, CIVCO Radiotherapy, Dynisco, FMI, Hansen, Hardy, IPA, Logitech, Neptune, Northern Digital, Struers, Technolog, Uson, Verathon

–	Process Technologies - AMOT, CCC, Cornell, FTI, Metrix, PAC, Roper Pump, Viatran, Zetec

(1) The Measurement & Analytical Solutions segment includes the results of the divestitures completed in 2019 through the transaction date for (i) the Imaging businesses, sold to Teledyne on February 5, 2019 and (ii) Gatan sold to AMETEK on October 29, 2019.

There were no material transactions between Roper’s business segments during 2019, 2018 and 2017. 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 revenues less operating costs and expenses. These costs and expenses do not include unallocated corporate administrative expenses. Items below income from operations on Roper’s Consolidated Statements of Earnings are not allocated to business segments.

Operating 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 2019, 2018 and 2017 follows:

	Application Software				Network Software & Systems				Measurement &Analytical Solutions				Process Technologies				Corporate				Total
2019
Net revenues	$	1,588.0			$	1,529.5			$	1,596.4			$	652.9			$	—			$	5,366.8
Operating profit	405.4				538.5				501.1				225.8				(172.4		)		1,498.4
Assets:
Operating assets	382.2				472.0				347.0				205.7				4.4				1,411.3
Intangible assets, net	7,833.6				5,871.8				1,420.0				357.7				—				15,483.1
Other	168.5				62.5				120.4				69.0				794.1				1,214.5
Total																					18,108.9
Capital expenditures	17.4				15.1				17.3				2.7				0.2				52.7
Capitalized software expenditures	9.7				0.5				—				—				—				10.2
Depreciation and other amortization	230.2				132.9				40.3				12.0				0.6				416.0
2018
Net revenues	$	1,452.7			$	1,345.2			$	1,705.6			$	687.7			$	—			$	5,191.2
Operating profit	358.0				484.4				523.9				233.6				(203.5		)		1,396.4
Assets:
Operating assets	392.6				338.3				336.2				196.4				6.1				1,269.6
Intangible assets, net	7,799.9				3,582.0				1,444.5				362.5				—				13,188.9
Other 1	163.6				38.4				391.2				94.5				103.3				791.0
Total																					15,249.5
Capital expenditures	19.0				8.3				15.4				6.3				0.1				49.1
Capitalized software expenditures	9.1				0.4				—				—				—				9.5
Depreciation and other amortization	212.8				98.1				42.6				12.7				0.8				367.0
2017
Net revenues	$	1,222.2			$	1,254.1			$	1,531.3			$	599.9			$	—			$	4,607.5
Operating profit	279.0				438.7				446.0				188.3				(141.8		)		1,210.2
Assets:
Operating assets	288.1				318.3				402.7				189.7				7.4				1,206.2
Intangible assets, net	6,668.1				3,598.7				1,649.7				379.0				—				12,295.5
Other	180.4				45.6				184.8				185.1				218.8				814.7
Total																					14,316.4
Capital expenditures	17.9				13.3				13.5				3.1				1.0				48.8
Capitalized software expenditures	9.9				0.8				0.1				—				—				10.8
Depreciation and other amortization	183.5				99.9				47.5				13.5				0.6				345.0

1 Includes Operating assets of $91.8 and Intangible assets, net of $159.4 associated with the Gatan business and Imaging businesses classified as held for sale. See Note 2 of the Notes to Consolidated Financial Statements included in this Annual Report.

Summarized data for Roper’s U.S. and foreign operations (principally in Canada, Europe and Asia) for 2019, 2018 and 2017, based upon the country of origin of the Roper entity making the sale, was as follows:

	United States				Non-U.S.				Eliminations				Total
2019
Sales to unaffiliated customers	$	4,342.6			$	1,024.2			$	—			$	5,366.8
Sales between geographic areas	124.9				139.3				(264.2		)		—
Net revenues	$	4,467.5			$	1,163.5			$	(264.2	)		$	5,366.8
Long-lived assets	$	164.6			$	33.2			$	—			$	197.8
2018
Sales to unaffiliated customers	$	4,176.2			$	1,015.0			$	—			$	5,191.2
Sales between geographic areas	143.9				137.0				(280.9		)		—
Net revenues	$	4,320.1			$	1,152.0			$	(280.9	)		$	5,191.2
Long-lived assets 1	$	145.2			$	30.0			$	—			$	175.2
2017
Sales to unaffiliated customers	$	3,679.1			$	928.4			$	—			$	4,607.5
Sales between geographic areas	133.2				187.7				(320.9		)		—
Net revenues	$	3,812.3			$	1,116.1			$	(320.9	)		$	4,607.5
Long-lived assets	$	144.0			$	31.4			$	—			$	175.4

1 Excludes Long-lived assets of $7.6 associated with the Gatan business and Imaging businesses classified as held for sale. See Note 2 of the Notes to Consolidated Financial Statements included in this Annual Report.

Export sales from the U.S. during the years ended December 31, 2019, 2018 and 2017 were $531.8, $578.0 and $512.5, respectively. In the year ended December 31, 2019, these exports were shipped primarily to Asia (33%), Europe (24%), Canada (18%), Middle East (13%) 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 revenues for the years ended December 31, 2019, 2018 and 2017 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 4% of total revenues for any of the three years presented:

	Application Software				Network Software & Systems				Measurement &Analytical Solutions				Process Technologies				Total
2019
Canada	$	41.0			$	71.1			$	81.4			$	28.9			$	222.4
Europe	188.8				36.7				307.2				113.8				646.5
Asia	3.5				18.8				185.0				108.0				315.3
Middle East	8.6				37.5				13.1				44.4				103.6
Rest of the world	25.8				9.5				45.3				55.2				135.8
Total	$	267.7			$	173.6			$	632.0			$	350.3			$	1,423.6
2018
Canada	$	38.5			$	58.5			$	79.3			$	35.0			$	211.3
Europe	188.6				12.2				361.7				117.5				680.0
Asia	3.2				11.0				220.3				115.4				349.9
Middle East	4.7				48.6				14.4				34.4				102.1
Rest of the world	29.5				7.8				42.5				55.0				134.8
Total	$	264.5			$	138.1			$	718.2			$	357.3			$	1,478.1
2017
Canada	$	26.6			$	52.9			$	72.9			$	34.7			$	187.1
Europe	176.5				11.0				310.6				98.1				596.2
Asia	2.4				7.3				205.9				109.8				325.4
Middle East	4.8				58.8				13.4				35.5				112.5
Rest of the world	23.2				6.1				42.0				48.7				120.0
Total	$	233.5			$	136.1			$	644.8			$	326.8			$	1,341.2

(14) Concentration of Risk

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

The Company maintains cash and cash equivalents with various major financial institutions around the world. 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 and cash equivalent balances.

Trade and unbilled 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) Contract Balances

Contract balances at December 31 are set forth in the following table:

Balance Sheet Account	2019				2018				Change
Unbilled receivables	$	183.5			$	169.4			$	14.1
Contract liabilities - current (1)	(840.8		)		(714.1		)		(126.7		)
Deferred revenue - non-current	(33.2		)		(29.8		)		(3.4		)
Net contract assets/(liabilities)	$	(690.5	)		$	(574.5	)		$	(116.0	)

(1) Consists of “Deferred revenue,” and billings in-excess of revenues (“BIE”). BIE are reported in “Other accrued liabilities” in our Consolidated Balance Sheets.

The change in our net contract assets/(liabilities) from December 31, 2018 to December 31, 2019 was due primarily to the timing of payments and invoicing relating to SaaS and PCS renewals, partially offset by revenues recognized in the year ended December 31, 2019 of $674.2, related to our contract liability balances at December 31, 2018. In addition, the impact of the 2019 business acquisitions increased net contract liabilities by $96.2.

In order to determine revenues recognized in the period from contract liabilities, we allocate revenue to the individual deferred revenue or BIE balance outstanding at the beginning of the year until the revenue exceeds that balance.

Impairment losses recognized on our accounts receivable and unbilled receivables were immaterial in the year ended December 31, 2019.

(16) Leases

The Company’s operating leases are primarily for real property in support of our business operations. Although many of our leases contain renewal options, we generally are not reasonably certain to exercise these options at the commencement date. Accordingly, renewal options are generally not included in the lease term for determining the ROU asset and lease liability at commencement. Variable lease payments generally depend on an inflation-based index and such payments are not included in the original estimate of the lease liability. These variable lease payments are not material.

For the years ended December 31, 2019, 2018 and 2017, the Company recognized $65.9, $66.9 and $64.6 in operating lease expense, respectively.

The following table presents the supplemental cash flow information related to the Company’s operating leases for the year ended December 31, 2019:

Operating cash flows used for operating leases	$	66.7
Right-of-use assets obtained in exchange for operating lease obligations	60.4

The following table presents the lease balances within the Consolidated Balance Sheet related to the Company’s operating leases as of December 31, 2019:

Lease Assets and Liabilities		Balance Sheet Account
ASSETS:
Operating lease ROU assets		Other assets		$	266.9
LIABILITIES:
Current operating lease liabilities		Other accrued liabilities		$	56.8
Operating lease liabilities		Other liabilities		220.0
Total operating lease liabilities				$	276.8

Future minimum lease payments under non-cancellable leases were as follows:

2020	$	63.7
2021	55.9
2022	42.8
2023	35.3
2024	29.9
Thereafter	77.5
Total operating lease payments	305.1
Less: Imputed interest	28.3
Total operating lease liabilities	$	276.8

Weighted average remaining lease term - operating leases (years)	7
Weighted average discount rate (%)	3.0

(17) Quarterly Financial Data (unaudited)

	First Quarter				Second Quarter				Third Quarter				Fourth Quarter
2019
Net revenues	$	1,287.2			$	1,330.3			$	1,354.5			$	1,394.8
Gross profit	810.6				850.0				873.6				892.9
Income from operations	346.4				368.4				385.2				398.4
Net earnings	369.6				249.7				277.5				871.1
Earnings per share:
Basic	$	3.57			$	2.40			$	2.67			$	8.37
Diluted	$	3.53			$	2.38			$	2.64			$	8.28
2018
Net revenues	$	1,202.5			$	1,293.7			$	1,318.7			$	1,376.3
Gross profit	750.5				815.9				840.0				873.1
Income from operations	300.2				354.3				377.5				364.4
Net earnings	211.3				228.4				247.6				257.1
Earnings per share:
Basic	$	2.05			$	2.21			$	2.39			$	2.49
Diluted	$	2.03			$	2.19			$	2.37			$	2.46

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, 2019, 2018 and 2017

	Balance at beginning of year				Additions charged to costs and expenses				Deductions				Other				Balance at end of year
	(in millions)
Allowance for doubtful accounts and sales allowances
2019	$	23.1			$	8.4			$	(7.9	)		$	(3.3	)		$	20.3
2018	12.7				11.9				(7.3		)		5.8				23.1
2017	14.5				4.3				(5.9		)		(0.2		)		12.7
Reserve for inventory obsolescence
2019	$	30.3			$	6.3			$	(3.2	)		$	—			$	33.4
2018	38.1				6.7				(4.5		)		(10.0		)		30.3
2017	37.2				5.3				(6.3		)		1.9				38.1

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, the effects of foreign currency translation adjustments for those companies whose functional currency was not the U.S. dollar, reclassifications as held for sale and other.