Over the past several years, Roper has become a diversified technology company that leverages the power of innovation through a consistent and sustainable business strategy. From software information networks and medical technologies to water, energy and transportation, we provide engineered solutions that create global leadership positions across a diverse set of niche markets. We believe cash is the best measure of performance. NET INCOME FREE CASH FLOW Over the past decade, we have generated $4.1 billion of free cash flow and delivered free cash flow conversion of 139%. Our performance continues to accelerate, with $2.8 billion of free cash flow provided in the past five years. ($ in millions) $800 $700 $600 $500 $400 $300 $200 $100 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ROPER COMPARED TO S&P 500 CUMULATIVE TOTAL SHAREHOLDER RETURN [$100 INVESTED AT IPO] $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 S&P 500 IPO 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Roper has applied the principle that Simple Ideas and Nimble Execution produce Powerful Results. We have a powerful and highly-scalable culture that enables the leaders of our businesses to apply intricate knowledge of their fields, while adhering to our proven cash flow disciplines. Our goal is simple: To create shareholder value. Dear Shareholders, We are very pleased to report another record year of performance. ► New highs for orders, backlog, revenue, net earnings and cash flow ► Operating cash flow topped $800 million ► Gross margin rose to 58.1% ► EBITDA margin expanded to 31.9% ► Annual shareholder return of 24.9%, eclipsing 20% for the 8th time in the last 10 years ► Acquired MHA, continuing Roper’s evolution in diversified technology – with emphasis on network and application software and medical opportunities 10 years ago, our 2003 annual report started with this message, “Our goal is simple: To create shareholder value.” Over the past decade, our compounded annual shareholder return has been 19.6%. To create shareholder value, we generate free cash flow, invest in growing our businesses, and leverage excess cash to acquire great companies that will, in turn, generate more free cash flow in the future. That is the Roper model … Simple, Powerful, and Sustainable. In 2013, our asset-light, high-return businesses generated $803 million of operating cash flow and $760 million of free cash flow. Our free cash flow conversion on our net income was 141%. The chart on the inside front cover illustrates our consistency in delivering free cash flow. Since we penned those words in our 2003 annual report, our free cash flow conversion has been 139%. This cash performance is no accident; it is the result of Roper’s philosophy and strategic focus. At Roper, we truly believe cash is the best measure of performance. This consistent focus on cash is prevalent at all levels of our organization. Our businesses have grown and improved their margin performance as demonstrated on the chart (opposite). Our Energy Systems & Controls and Industrial Technology segments have improved EBITDA margin by 620 Bps and 370 Bps respectively over the past four years. This improvement is the ENERGY SYSTEMS & CONTROLS INDUSTRIAL TECHNOLOGY RF MEDICAL & TECHNOLOGY SCIENTIFIC IMAGING ► Control Software ► Data Collection / ► SaaS Solutions ► Software ► Sensors ► Instrumentation Metering Technology ► Fluid Handling ► Instrumentation ► Software ► Health Care Services ► Electronic Tolling ► RF Products and Products ► Life Sciences $652 $441 $780 $718 $536 $355 $904 $902 2009 2013 2009 2013 2009 2013 2009 2013 31.5% 25.3% 31.4% 27.7% 34.7% 27.5% 39.2% 25.6% 2009 2013 2009 2013 2009 2013 2009 2013 + 620 Bps + 370 Bps + 720 Bps + 1,360 Bps E U N E V E R ) s n o i l l i m n i $ ( % A D T I B E n i g r a M A D T I B E t n e m e v o r p m I result of strong operational performance without the benefit of any large acquisitions. In our two largest segments, RF Technology and Medical, the margin improvement is even more substantial. These segments also benefited from great business execution and have been aided by several acquisitions of companies with powerful operating and financial characteristics. Roper’s governance processes include tools and metrics that drive improved performance and accelerate growth. We’re proud of our business presidents — experts in their fields who run their own operations. We provide the tools that allow them to be proactive; to foster nimble execution and individual decision making as they continue to grow the businesses. We invest in the long-term success of our companies, while stimulating progress and driving cash returns. We have continued to improve our market-leading positions, consistently growing revenue and free cash flow. “Our sustained long-term performance is the result of Great Businesses, Sound Governance Processes, and Disciplined M&A.” Since 2009, we have deployed $3.7 billion to acquire great new companies, with emphasis on network and application software and medical technology. These acquisitions have fueled our continuing evolution as a diversified MHA is a prime example of the technology company. Last year, we leveraged our cash flow by deploying type of business Roper seeks over $1 billion in acquisitions. to acquire: ► Asset-light, niche-market business model ► Recurring revenue with multiyear contracts ► Strong network effect ► 95% or better customer retention rate ► Technology and service driven ► Multiple growth drivers ► Negative working capital We are excited to have Managed Health Care Associates, Inc. (MHA) as the newest member of the Roper family. MHA has a great leadership team and is the leading services and technology company to the expanding alternate site health care market. It offers a growing portfolio of services and solutions to support the diverse and complex needs of those caring for patients outside of the hospital — such as in nursing homes, home infusion, and complex rehab facilities. By delivering innovative and targeted health care services and solutions, MHA helps members increase operational efficiency and improve financial performance. MHA helps take cost out of the healthcare system, while providing unparalleled value to its members in dynamic and growing markets. MHA demonstrates our ability to find our niche again and again. ► Minimal CapEx requirements It is an exciting time to be part of Roper. In 2014, we expect continued ► Talented and committed management team growth in earnings and cash flow. Consistent with our goal of creating shareholder value, we will continue to demonstrate the long-standing premise that has underpinned our past success – Simple Ideas and Nimble Execution produce Powerful Results. Best Regards, Brian Jellison Chairman and Chief Executive Officer UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________ FORM 10-K þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___ Commission File Number 1-12273 ROPER INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) _____________ Delaware (State or other jurisdiction of incorporation or organization) _____________ 51-0263969 (I.R.S. Employer Identification No.) 6901 Professional Parkway East, Suite 200 Sarasota, Florida 34240 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (941) 556-2601 _____________ SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Title of Each Class Common Stock, $0.01 Par Value Name of Each Exchange On Which Registered New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes ¨ No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ¨ Yes þ No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§223.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes ¨ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act). þ Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company Indicate by check mark if the registrant is a shell company (as defined in Rule 12-b2 of the Act). ¨ Yes þ No Based on the closing sale price on the New York Stock Exchange on June 28, 2013, the aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant was: $12,365,836,908. Number of shares of registrant’s Common Stock outstanding as of February 14, 2014: 99,547,874. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s Proxy Statement to be furnished to Stockholders in connection with its Annual Meeting of Stockholders to be held on May 21, 2014, are incorporated by reference into Part III of this Annual Report on Form 10-K. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 1 TABLE OF CONTENTS ROPER INDUSTRIES, INC. FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013 PART I Item 1. Business .......................................................................................................................................................................... 4 Item 1A. Risk Factors .................................................................................................................................................................... 8 Item 1B. Unresolved Staff Comments ......................................................................................................................................... 11 Item 2. Properties ...................................................................................................................................................................... 12 Item 3. Legal Proceedings ......................................................................................................................................................... 12 Item 4. Mine Safety Disclosures ............................................................................................................................................... 12 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities .... 13 Item 6. Selected Financial Data ................................................................................................................................................ 15 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ........................................ 15 Item 7A. Quantitative and Qualitative Disclosures about Market Risk ....................................................................................... 26 Item 8. Financial Statements and Supplementary Data ............................................................................................................ 27 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ....................................... 54 Item 9A. Controls and Procedures ............................................................................................................................................... 54 Item 9B. Other Information ....................................................................................................................................................... 54 PART III Item 10. Directors, Executive Officers and Corporate Governance ............................................................................................ 55 Item 11. Executive Compensation .............................................................................................................................................. 55 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .................... 55 Item 13. Certain Relationships and Related Transactions and Director Independence .............................................................. 55 Item 14. Principal Accountant Fees and Services ........................................................................................................................ 55 PART IV Item 15. Exhibits and Financial Statement Schedules ................................................................................................................ 56 Signatures .................................................................................................................................................................... 58 2 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT INFORMATION ABOUT FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K (“Annual Report”) includes and incorporates by reference “forward-looking statements” within the meaning of the federal securities laws. In addition, we, or our executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents we file with the U.S. Securities and Exchange Commission (“SEC”) or in connection with oral statements made to the press, potential investors or others. All statements that are not historical facts are “forward-looking statements.” Forward-looking statements may be indicated by words or phrases such as “anticipate,” “estimate,” “plans,” “expects,” “projects,” “should,” “will,” “believes” or “intends” and similar words and phrases. These statements reflect management’s current beliefs and are not guarantees of future performance. They involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in any forward-looking statement. Examples of forward-looking statements in this report include but are not limited to statements regarding operating results, the success of our internal operating plans, our expectations regarding our ability to generate operating cash flows and reduce debt and associated interest expense, profit and cash flow expectations, the prospects for newly acquired businesses to be integrated and contribute to future growth and our expectations regarding growth through acquisitions. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the cost, timing and success of product upgrades and new product introductions, raw materials costs, expected pricing levels, expected outcomes of pending litigation, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, but are not limited to: • general economic conditions; • difficulty making acquisitions and successfully integrating acquired businesses; • any unforeseen liabilities associated with future acquisitions; • limitations on our business imposed by our indebtedness; • unfavorable changes in foreign exchange rates; • difficulties associated with exports; • risks and costs associated with our international sales and operations; • increased directors’ and officers’ liability and other insurance costs; • risk of rising interest rates; • product liability and insurance risks; • increased warranty exposure; • future competition; • the cyclical nature of some of our markets; • reduction of business with large customers; • risks associated with government contracts; • changes in the supply of, or price for, raw materials, parts and components; • environmental compliance costs and liabilities; • risks and costs associated with asbestos-related litigation; • potential write-offs of our substantial goodwill and other intangible assets; • our ability to successfully develop new products; • failure to protect our intellectual property; • the effect of, or change in, government regulations (including tax); • economic disruption caused by terrorist attacks, health crises or other unforeseen events; and • the factors discussed in Item 1A to this Annual Report under the heading “Risk Factors.” We believe these forward-looking statements are reasonable. However, you should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update any of them in light of new information or future events. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 3 PART I ITEM 1 | BUSINESS OUR BUSINESS Roper Industries, Inc. (“Roper” or the “Company”) was incorporated on December 17, 1981 under the laws of the State of Delaware. We are a diversified growth company that designs, manufactures and distributes medical and scientific imaging products and software, radio frequency (“RF”) products, services and application software, industrial technology products and energy systems and controls products and solutions. We market these products and services to a broad range of markets including RF applications, medical, water, energy, research, education, software-as-a-service (“SaaS”)-based information networks, security and other niche markets. We pursue consistent and sustainable growth in sales, earnings and cash flow by emphasizing continuous improvement in the operating performance of our existing businesses and by acquiring other carefully selected businesses that offer high value-added services, engineered products and solutions and are capable of achieving growth in sales, earnings and cash flow. We compete in many niche markets and believe we are the market leader or a competitive alternative to the market leader in the majority of these markets. MARKET SHARE, MARKET EXPANSION, AND PRODUCT DEVELOPMENT Leadership with Engineered Content for Niche Markets - We maintain a leading position in many of our markets. We believe our market positions are attributable to the technical sophistication of our products and software, the applications expertise used to create our advanced products and systems, and our distribution and service capabilities. Our operating units grow their businesses through new product development and development of new applications and services to satisfy customer needs. In addition, our operating units grow our customer base by expanding our distribution, selling other products through our existing channels and entering adjacent markets. Diversified End Markets and Geographic Reach - We have a global presence, with sales of products to customers outside the U.S. totaling $1.3 billion in 2013. Information regarding our international operations is set forth in Note 13 of the notes to Consolidated Financial Statements included in this Annual Report. Research and Development - We conduct applied research and development to improve the quality and performance of our products and to develop new technologies and products. Our research and development spending was $145.7 million in 2013 as compared to $125.9 and $121.7 million in 2012 and 2011, respectively. Research and development expense as a percentage of sales increased to 4.5% in 2013 from 4.2% in 2012. The percentage has increased as the mix of our businesses shifts to higher technology, medical and software platforms. OUR BUSINESS SEGMENTS Our operations are reported in four segments based upon common customers, markets, sales channels, technologies and common cost opportunities. The segments are: Medical and Scientific Imaging, RF Technology, Industrial Technology and Energy Systems and Controls. Financial information about our business segments is presented in Note 13 of the notes to Consolidated Financial Statements. Medical and Scientific Imaging Our Medical and Scientific Imaging segment principally offers products and software in medical applications, and high performance digital imaging products. These products and solutions are provided through nine reporting units. For 2013, this segment had net sales of $902.3 million, representing 27.9% of our total net sales. Medical Products and Software - We manufacture and sell patient positioning devices and related software for use in radiation oncology, 3-D measurement technology in computer-assisted surgery and supply diagnostic and therapeutic disposable products used in ultrasound imaging for minimally invasive medical procedures. We design and manufacture a non-invasive instrument for portable ultrasound bladder volume measurement and a video laryngoscope designed to enable rapid intubation even in the most difficult settings. We also provide diagnostic and laboratory software solutions to healthcare providers and services and technologies to support the diverse and complex needs of alternate site health care providers who deliver services outside of an acute care hospital setting. 4 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT Digital Imaging Products and Software - We manufacture and sell extremely sensitive, high-performance electron filters, charged couple device (“CCD”) and complementary metal oxide semiconductor (“CMOS”) cameras, detectors and related software for a variety of scientific and industrial uses, which require high resolution and/or high speed digital video, including electron microscopy and spectroscopy applications. We principally sell these products for use within academic, government research, semiconductor, security and other end-user markets such as biological and material science. They are frequently incorporated into products by original equipment manufacturers (“OEMs”). Our Medical and Scientific Imaging segment companies have lead times of up to several months on many of their product sales, although standard products are often shipped within two weeks of receipt of order. Blanket purchase orders are placed by certain OEM and end-users, with continuing requirements for fulfillment over specified periods of time. RF Technology Our RF Technology segment provides radio frequency identification (“RFID”) communication technology and software solutions that are used primarily in toll and traffic systems and processing, security and access control, campus card systems, software-as- a-service in the freight matching and food industries and metering and remote monitoring applications. These products and solutions are provided through six reporting units. This segment had sales of $904.4 million for the year ended December 31, 2013, representing 27.9% of our total net sales. Toll and Traffic Systems - We manufacture and sell toll tags and monitoring systems as well as provide transaction and violation processing services for toll and traffic systems to both governmental and private sector entities. In addition, we provide intelligent traffic systems that assist customers in improving traffic flow and infrastructure utilization. Card Systems/Integrated Security Solutions - We provide card systems and integrated security solutions primarily to education and health care markets. We also provide an integrated nutrition management solution used by food service customers. Software-as-a-Service - We maintain electronic marketplaces that match 1) available capacity of trucking units with the available loads of freight to be moved from location to location throughout North America and 2) food suppliers, distributors and vendors, primarily in the perishable food sector. Metering and Remote Monitoring - We manufacture and sell meter reading, data logging and pressure control products for use in water, gas and electricity applications. We also provide network monitoring, leakage reduction and pressure control services in water and gas distribution networks. The RF Technology segment companies’ sales reflect a combination of standard products, large engineered projects, and multi-year operations and maintenance contracts. Standard products generally ship within two weeks of receipt of order, and large engineered projects may have lead times of several months. As such, backlog may fluctuate depending upon the timing of large project awards. Industrial Technology Our Industrial Technology segment produces fluid handling pumps, equipment and consumables for materials analysis, leak testing equipment, flow measurement and metering equipment and water meter and automatic meter reading (“AMR”) products and systems. These products and solutions are provided through seven reporting units. For 2013, this segment had net sales of $779.6 million, representing 24.1% of our total net sales. Fluid Handling Pumps - We manufacture and sell a wide variety of pumps. These pumps vary significantly in complexity and in pumping method employed, which allows for the movement and application of a diverse range of low and high viscosity liquids, high solids content slurries and chemicals. Our pumps are used in end markets such as oil and gas, agricultural, water and wastewater, chemical and general industrial. Materials Analysis Equipment and Consumables - We manufacture and sell equipment and supply consumables necessary to prepare materials samples for testing and analysis. These products are used mostly within the material science, steel, automotive, electronics, mining and research end-user markets. Flow Measurement Equipment - We manufacture and distribute turbine and positive displacement flow meters, emissions measurement equipment and flow meter calibration products for aerospace, automotive, power generation and other industrial applications. Water Meter and AMR Products and Systems - We manufacture and distribute water meter products serving the residential, commercial and industrial water management markets, and several lines of automatic meter reading products and systems serving these markets. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 5 The Industrial Technology segment companies’ sales reflect a combination of standard products and specially engineered, application-specific products. Standard products are typically shipped within two weeks of receipt of order. Application-specific products typically ship within 6 to 12 weeks following receipt of order. However, larger project orders and blanket purchase orders for certain OEMs may extend shipment for longer periods. Energy Systems and Controls Our Energy Systems and Controls segment principally produces control systems, fluid properties testing equipment, industrial valves and controls, vibration sensors and controls and non-destructive inspection and measurement products and solutions, which are provided through six reporting units. For 2013, this segment had net sales of $651.9 million, representing 20.1% of our total net sales. Control Systems - We manufacture control systems and provide related engineering and commissioning services for turbomachinery applications, predominately in energy markets. Fluid Properties Testing Equipment - We manufacture and sell test equipment to determine physical and elemental properties, such as sulfur and nitrogen content, flash point, viscosity, freeze point and distillation range of liquids and gases primarily for the petroleum industry. Industrial Valves and Controls - We manufacture and distribute valves, sensors, switches and control products used on engines, compressors, turbines and other powered equipment for the oil and gas, pipeline, power generation, marine engine and general industrial markets. Many of these products are designed for use in hazardous environments. Sensors and Controls - We manufacture sensors and control equipment including pressure sensors, temperature sensors, measurement instruments and control software for global rubber, plastics and process industries. Non-destructive Inspection and Measurement Instrumentation - We manufacture non-destructive inspection and measurement solutions including measurement probes, robotics, vibration sensors, switches and transmitters. These solutions are applied principally in nuclear energy markets. Many of these products are designed for use in hazardous environments. The Energy Systems and Controls segment companies’ sales reflect a combination of standard products and large engineered projects. Standard products generally ship within two weeks of receipt of order, and large engineered projects may have lead times of several months. As such, backlog may fluctuate depending upon the timing of large project awards. MATERIALS AND SUPPLIERS We believe most materials and supplies we use are readily available from numerous sources and suppliers throughout the world. However, some components and sub-assemblies are currently available from a limited number of suppliers. Some high-performance components for digital imaging products can be in short supply and/or suppliers have occasional difficulty manufacturing such components to our specifications. We regularly investigate and identify alternative sources where possible, and we believe these conditions equally affect our competitors. Supply shortages have not had a material adverse effect on our sales although delays in shipments have occurred following such supply interruptions. BACKLOG Our policy is to include only firm unfilled orders shippable within twelve months in backlog. Backlog was $1.1 billion at December 31, 2013, and $0.9 billion at December 31, 2012. DISTRIBUTION AND SALES Distribution and sales occur through direct sales offices, manufacturers’ representatives and distributors. In addition, our Medical and Scientific Imaging segment also sells through value added resellers (“VARs”) and OEMs. ENVIRONMENTAL MATTERS AND OTHER GOVERNMENTAL REGULATION Our operations and properties are subject to laws and regulations relating to environmental protection, including those governing air emissions, water discharges, waste management and workplace safety. We use, generate and dispose of hazardous substances and waste in our operations and could be subject to material liabilities relating to the investigation and clean-up of contaminated 6 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT properties and related claims. We are required to conform our operations and properties to these laws and adapt to regulatory requirements in all countries as these requirements change. In connection with our acquisitions, we may assume significant environmental liabilities, some of which we may not be aware of, or may not be quantifiable, at the time of acquisition. In addition, new laws and regulations, the discovery of previously unknown contamination or the imposition of new requirements could increase our costs or subject us to new or increased liabilities. CUSTOMERS No customer accounted for 10% or more of net sales for 2013 for any of our segments or for our company as a whole. COMPETITION Generally, our products and solutions face significant competition, usually from a limited number of competitors. We believe that we are a leader in most of our markets, and no single company competes with us over a significant number of product lines. Competitors might be large or small in size, often depending on the size of the niche market we serve. We compete primarily on product quality, performance, innovation, technology, price, applications expertise, distribution channel access and customer service capabilities. PATENTS AND TRADEMARKS In addition to trade secrets, unpatented know-how, and other intellectual property rights, we own or license the rights under a number of patents, trademarks and copyrights relating to certain of our products and businesses. We also employ various methods, including confidentiality and non-disclosure agreements with individuals and companies we do business with, employees, distributors, representatives and customers to protect our trade secrets and know-how. We believe our operating units are not substantially dependent on any single patent, trademark, copyright, or other item of intellectual property or group of patents, trademarks or copyrights. EMPLOYEES As of December 31, 2013, we had 9,913 employees, with 6,959 located in the United States. We have 205 employees who are subject to collective bargaining agreements. We have not experienced any work stoppages and consider our relations with our employees to be good. AVAILABLE INFORMATION All reports we file electronically with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and our annual proxy statements, as well as any amendments to those reports, are accessible at no cost on our website at www.roperind.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. These filings are also accessible on the SEC’s website at www.sec.gov. You may also read and copy any material we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our Corporate Governance Guidelines; the charters of our Audit Committee, Compensation Committee, and Nominating and Governance Committee; and our Code of Business Conduct and Ethics are also available on our website. Any amendment to the Code of Business Conduct and Ethics and any waiver applicable to our directors, executive officers or senior financial officers will be posted on our website within the time period required by the SEC and the New York Stock Exchange (the “NYSE”). The information posted on our website is not incorporated into this Annual Report. We have included the Chief Executive Officer and the Chief Financial Officer certifications regarding our public disclosure required by Section 302 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1 and 31.2 of this report. Additionally, we filed with the NYSE the Chief Executive Officer certification regarding our compliance with the NYSE’s Corporate Governance Listing Standards (the “Listing Standards”) pursuant to Section 303A.12(a) of the Listing Standards. We filed the certification with the NYSE on June 24, 2013 and our Chief Executive Officer indicated that he was not aware of any violations of the Listing Standards by us. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 7 ITEM 1A | RISK FACTORS RISKS RELATING TO OUR BUSINESS Our indebtedness may affect our business and may restrict our operating flexibility. As of December 31, 2013, we had $2.46 billion in total consolidated indebtedness. In addition, we had $1.2 billion undrawn availability under our senior unsecured credit facility, as well as the ability to request additional term loans or revolving credit commitments under our credit facility not to exceed $350 million in aggregate. Our total consolidated debt could increase using this additional borrowing capacity. Subject to restrictions contained in our credit facility, we may incur additional indebtedness in the future, including indebtedness incurred to finance acquisitions. Our level of indebtedness and the debt servicing costs associated with that indebtedness could have important effects on our operations and business strategy. For example, our indebtedness could: • place us at a competitive disadvantage relative to our competitors, some of which have lower debt service obligations and greater financial resources; • limit our ability to borrow additional funds; • limit our ability to complete future acquisitions; • limit our ability to pay dividends; • limit our ability to make capital expenditures; and • increase our vulnerability to general adverse economic and industry conditions. Our ability to make scheduled principal payments of, to pay interest on, or to refinance our indebtedness and to satisfy our other debt obligations will depend upon our future operating performance, which may be affected by factors beyond our control. In addition, there can be no assurance that future borrowings or equity financing will be available to us on favorable terms for the payment or refinancing of our indebtedness. If we are unable to service our indebtedness, our business, financial condition and results of operations would be materially adversely affected. Our credit facility contains covenants requiring us to achieve certain financial and operating results and maintain compliance with specified financial ratios. Our ability to meet the financial covenants or requirements in our credit facility may be affected by events beyond our control, and we may not be able to satisfy such covenants and requirements. A breach of these covenants or our inability to comply with the financial ratios, tests or other restrictions contained in our facility could result in an event of default under this facility. Upon the occurrence of an event of default under our credit facility, and the expiration of any grace periods, the lenders could elect to declare all amounts outstanding under the facility, together with accrued interest, to be immediately due and payable. If this were to occur, our assets may not be sufficient to fully repay the amounts due under this facility or our other indebtedness. Unfavorable changes in foreign exchange rates may significantly harm our business. Several of our operating companies have transactions and balances denominated in currencies other than the U.S. dollar. Most of these transactions and balances are denominated in euros, Canadian dollars, British pounds or Danish krone. Sales by our operating companies whose functional currency is not the U.S. dollar represented 24% of our total net sales for the year ended December 31, 2013 compared to 25% for the year ended December 31, 2012. Unfavorable changes in exchange rates between the U.S. dollar and those currencies could significantly reduce our reported sales and earnings. We export a significant portion of our products. Difficulties associated with the export of our products could harm our business. Sales to customers outside the U.S. by our businesses located in the U.S. account for a significant portion of our net sales. These sales accounted for 15% of our net sales for each of the years ended December 31, 2013 and December 31, 2012. We are subject to risks that could limit our ability to export our products or otherwise reduce the demand for these products in our foreign markets. Such risks include, without limitation, the following: • unfavorable changes in or noncompliance with U.S. and other jurisdictions’ export requirements; • restrictions on the export of technology and related products; • unfavorable changes in or noncompliance with U.S. and other jurisdictions’ export policies to certain countries; • unfavorable changes in the import policies of our foreign markets; and • a general economic downturn in our foreign markets. 8 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT The occurrence of any of these events could reduce the foreign demand for our products or could limit our ability to export our products and, therefore, could have a material negative effect on our future sales and earnings. Economic, political and other risks associated with our international operations could adversely affect our business. As of and for the year ended December 31, 2013, 26% of our net sales and 21% of our long-lived assets, excluding goodwill and intangibles, were attributable to operations outside the U.S. We expect our international operations to contribute materially to our business for the foreseeable future. Our international operations are subject to varying degrees of risk inherent in doing business outside the U.S. including, without limitation, the following: • adverse changes in a specific country’s or region’s political or economic conditions, particularly in emerging markets; • trade protection measures and import or export requirements; • subsidies or increased access to capital for firms that are currently, or may emerge as, competitors in countries in which we have operations; • partial or total expropriation; • potentially negative consequences from changes in tax laws; • difficulty in staffing and managing widespread operations; • differing labor regulations; • differing protection of intellectual property; and • unexpected changes in regulatory requirements. The occurrence of any of these events could materially harm our business. Our growth strategy includes acquisitions. We may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully. Our future growth is likely to depend to some degree on our ability to acquire and successfully integrate new businesses. We intend to seek additional acquisition opportunities, both to expand into new markets and to enhance our position in existing markets. There are no assurances, however, that we will be able to successfully identify suitable candidates, negotiate appropriate terms, obtain financing on acceptable terms, complete proposed acquisitions, successfully integrate acquired businesses or expand into new markets. Once acquired, operations may not achieve anticipated levels of revenues or profitability. Acquisitions involve risks, including difficulties in the integration of the operations, technologies, services and products of the acquired companies and the diversion of management’s attention from other business concerns. Although our management will endeavor to evaluate the risks inherent in any particular transaction, there are no assurances that we will properly ascertain all such risks. In addition, prior acquisitions have resulted, and future acquisitions could result, in the incurrence of substantial additional indebtedness and other expenses. Future acquisitions may also result in potentially dilutive issuances of equity securities. Difficulties encountered with acquisitions may have a material adverse effect on our business, financial condition and results of operations. Product liability, insurance risks and increased insurance costs could harm our operating results. Our business exposes us to product liability risks in the design, manufacturing and distribution of our products. In addition, certain of our products are used in hazardous environments. We currently have product liability insurance; however, we may not be able to maintain our insurance at a reasonable cost or in sufficient amounts to protect us against losses. We also maintain other insurance policies, including directors’ and officers’ liability insurance. We believe we have adequately accrued estimated losses, principally related to deductible amounts under our insurance policies, with respect to all product liability and other claims, based upon our past experience and available facts. However, a successful product liability or other claim or series of claims brought against us could have a material adverse effect on our business, financial condition and results of operations. In addition, a significant increase in our insurance costs could have an adverse impact on our operating results. Our operating results could be adversely affected by a reduction of business with our large customers. In some of our businesses, we derive a significant amount of revenue from large customers. The loss or reduction of any significant contracts with any of these customers could materially reduce our revenue and cash flows. Additionally, many of our customers are government entities. In many situations, government entities can unilaterally terminate or modify our existing contracts without cause and without penalty to the government agency. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 9 We face intense competition. If we do not compete effectively, our business may suffer. We face intense competition from numerous competitors. Our products compete primarily on the basis of product quality, performance, innovation, technology, price, applications expertise, system and service flexibility and established customer service capabilities. We may not be able to compete effectively on all of these fronts or with all of our competitors. In addition, new competitors may emerge, and product lines may be threatened by new technologies or market trends that reduce the value of these product lines. To remain competitive, we must develop new products, respond to new technologies and enhance our existing products in a timely manner. We anticipate that we may have to adjust prices to stay competitive. Changes in the supply of, or price for, raw materials, parts and components used in our products could affect our business. The availability and prices of raw materials, parts and components are subject to curtailment or change due to, among other things, suppliers’ allocations to other purchasers, interruptions in production by suppliers, changes in exchange rates and prevailing price levels. Some high-performance components for digital imaging products may be in short supply and/or suppliers may have occasional difficulty manufacturing these components to meet our specifications. In addition, some of our products are provided by sole source suppliers. Any change in the supply of, or price for, these parts and components, as well as any increases in commodity prices, particularly copper, could affect our business, financial condition and results of operations. Environmental compliance costs and liabilities could increase our expenses and adversely affect our financial condition. Our operations and properties are subject to laws and regulations relating to environmental protection, including air emissions, water discharges, waste management and workplace safety. These laws and regulations can result in the imposition of substantial fines and sanctions for violations and could require the installation of pollution control equipment or operational changes to limit pollution emissions and/or decrease the likelihood of accidental hazardous substance releases. We must conform our operations and properties to these laws and adapt to regulatory requirements in the countries in which we operate as these requirements change. We use and generate hazardous substances and wastes in our operations and, as a result, could be subject to potentially material liabilities relating to the investigation and clean-up of contaminated properties and to claims alleging personal injury. We have experienced, and expect to continue to experience, costs relating to compliance with environmental laws and regulations. In connection with our acquisitions, we may assume significant environmental liabilities, some of which we may not be aware of at the time of acquisition. In addition, new laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements could require us to incur costs or become the basis for new or increased liabilities that could have a material adverse effect on our business, financial condition and results of operations. Some of the industries in which we operate are cyclical, and, accordingly, our business is subject to changes in the economy. Some of the business areas in which we operate are subject to specific industry and general economic cycles. Certain businesses are subject to industry cycles, including but not limited to, the industrial and energy markets. Accordingly, a downturn in these or other markets in which we participate could materially adversely affect us. If demand changes and we fail to respond accordingly, our results of operations could be materially adversely affected. The business cycles of our different operations may occur contemporaneously. Consequently, the effect of an economic downturn may have a magnified negative effect on our business. Our goodwill and intangible assets are valued at an amount that is high relative to our total assets, and a write-off of our intangible assets would negatively affect our results of operations and total capitalization. Our total assets reflect substantial intangible assets, primarily goodwill. At December 31, 2013, goodwill totaled $4.55 billion compared to $4.21 billion of stockholders’ equity, and represented 56% of our total assets of $8.18 billion. The goodwill results from our acquisitions, representing the excess of cost over the fair value of the net assets we have acquired. We assess at least annually whether there has been an impairment in the value of our goodwill and indefinite economic life intangible assets. If future operating performance at one or more of our business units were to fall significantly below current levels, if competing or alternative technologies emerge, if interest rates rise or if business valuations decline, we could incur a non-cash charge to operating earnings. Any determination requiring the write-off of a significant portion of goodwill or unamortized intangible assets would negatively affect our results of operations and total capitalization, the effect of which could be material. 10 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT We depend on our ability to develop new products, and any failure to develop or market new products could adversely affect our business. The future success of our business will depend, in part, on our ability to design and manufacture new competitive products and to enhance existing products so that our products can be sold with high margins. This product development may require substantial internal investment. There can be no assurance that unforeseen problems will not occur with respect to the development, performance or market acceptance of new technologies or products or that we will otherwise be able to successfully develop and market new products. Failure of our products to gain market acceptance or our failure to successfully develop and market new products could reduce our margins, which would have an adverse effect on our business, financial condition and results of operations. Our technology is important to our success and our failure to protect this technology could put us at a competitive disadvantage. Many of our products rely on proprietary technology; therefore we believe that the development and protection of intellectual property rights through patents, copyrights, trade secrets, trademarks, confidentiality agreements and other contractual provisions are important to the future success of our business. Despite our efforts to protect proprietary rights, unauthorized parties or competitors may copy or otherwise obtain and use our products or technology. Actions to enforce these rights may result in substantial costs and diversion of resources and we make no assurances that any such actions will be successful. We rely on information and technology for many of our business operations which could fail and cause disruption to our business operations. Our business operations are dependent upon information technology networks and systems to securely transmit, process and store electronic information and to communicate among our locations around the world and with clients and vendors. A shutdown of, or inability to access, one or more of our facilities, a power outage or a failure of one or more of our information technology, telecommunications or other systems could significantly impair our ability to perform such functions on a timely basis. Computer viruses, cyberattacks, other external hazards and human error could result in the misappropriation of assets or sensitive information, corruption of data or operational disruption. If sustained or repeated, such a business interruption, system failure, service denial or data loss and damage could result in a deterioration of our ability to write and process business, provide customer service or perform other necessary business functions. Any business disruptions due to political instability, armed hostilities, incidents of terrorism or natural disasters could adversely impact our financial performance. If terrorist activity, armed conflict, political instability or natural disasters occur in the U.S. or other locations, such events may negatively impact our operations, cause general economic conditions to deteriorate or cause demand for our products to decline. A prolonged economic slowdown or recession could reduce the demand for our products, and therefore, negatively affect our future sales and profits. Any of these events could have a significant impact on our business, financial condition or results of operations. ITEM 1B | UNRESOLVED STAFF COMMENTS None 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 11 ITEM 2 | PROPERTIES Our corporate offices, consisting of 24,000 square feet of leased space, are located at 6901 Professional Parkway East, Sarasota, Florida. We have established 112 principal locations around the world to support our operations, of which 51 are manufacturing, assembly and testing facilities, and the remaining 61 locations provide sales, service and administrative support functions. We consider our facilities to be in good operating condition and adequate for their present use and believe we have sufficient capacity to meet our anticipated operating requirements. The following table summarizes the size, location and usage of our principal properties as of December 31, 2013. Segment Industrial Technology Energy Systems & Controls Medical & Scientific Imaging RF Technology Region US Canada Europe Asia Mexico US Canada Europe Asia US Canada Europe Asia US Canada Europe Office Leased Office & Manufacturing Leased Owned (amounts in thousands of square feet) 57 36 92 23 - 51 - 43 14 224 - 25 27 622 11 9 264 - 94 - 60 353 56 20 61 234 108 28 - 94 - 7 478 - 167 - - - - 128 33 127 - - - - - 16 ITEM 3 | LEGAL PROCEEDINGS Information pertaining to legal proceedings can be found in Note 12 to the Consolidated Financial Statements included in this Annual Report, and is incorporated by reference herein. ITEM 4 | MINE SAFETY DISCLOSURES None 12 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT PART II ITEM 5 | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades on the NYSE under the symbol “ROP”. The table below sets forth the range of high and low sales prices for our common stock as reported by the NYSE as well as cash dividends declared during each of our 2013 and 2012 quarters. 2013 2012 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter High Low Cash Dividends Declared $138.68 $123.57 $0.200 135.01 126.33 127.31 123.15 118.12 114.14 0.165 0.165 0.165 $113.14 $106.31 $0.1650 111.08 102.99 100.71 93.73 95.24 88.02 0.1375 0.1375 0.1375 Based on information available to us and our transfer agent, we believe that as of February 14, 2014 there were 172 record holders of our common stock. Dividends – We have declared a cash dividend in each quarter since our February 1992 initial public offering and we have annually increased our dividend rate since our initial public offering. In December 2013, our Board of Directors increased the quarterly dividend paid January 24, 2014 to $0.20 per share from $0.165 per share, an increase of 21%. The timing, declaration and payment of future dividends will be at the sole discretion of our Board of Directors and will depend upon our profitability, financial condition, capital needs, future prospects and other factors deemed relevant by our Board of Directors. Recent Sales of Unregistered Securities – In 2013, there were no sales of unregistered securities. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 13 Performance Graph – This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act. The following graph compares, for the five year period ended December 31, 2013, the cumulative total stockholder return for our common stock, the Standard and Poor’s 500 Stock Index (the “S&P 500”) and the Standard and Poor’s 500 Industrials Index (the “S&P 500 Industrials”). Measurement points are the last trading day of each of our fiscal years ended December 31, 2008, 2009, 2010, 2011, 2012 and 2013. The graph assumes that $100 was invested on December 31, 2008 in our common stock, the S&P 500 and the S&P 500 Industrials and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance. Roper Industries, Inc. S&P 500 S&P 500 Industrials 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 100.00 100.00 100.00 121.54 126.46 120.93 178.54 145.51 153.26 204.06 148.59 152.35 263.76 172.37 175.73 329.40 228.19 247.22 350.00 300.00 250.00 200.00 150.00 100.00 50.00 0.00 12/08 12/09 12/10 12/11 12/12 12/13 Roper Industries, Inc. S&P 500 S&P 500 Industrials The information set forth in Item 12 under the heading “Securities Authorized for Issuance under Equity Compensation Plans” is incorporated herein by reference. 14 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT ITEM 6 | SELECTED FINANCIAL DATA You should read the table below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and related notes included in this Annual Report (amounts in thousands, except per share data). 2013(1) As of and for the Years ended December 31, 2010(4) 2011(3) 2012(2) 2009(5) Operations data: Net sales Gross profit Income from operations Net earnings Per share data: Basic earnings per share Diluted earnings per share $3,238,128 $2,993,489 $2,797,089 $2,386,112 $2,049,668 1,882,928 1,671,717 1,515,564 1,275,126 1,043,138 842,361 538,293 757,587 483,360 660,539 427,247 514,294 322,580 395,396 239,481 $ $ 5.43 5.37 $ 4.95 4.86 $ 4.45 4.34 $ 3.42 3.34 2.64 2.58 Dividends declared 0.6950 0.5775 0.4675 0.3950 0.3425 Balance sheet data: Working capital (6) Total assets Long-term debt, less current portion Stockholders’ equity $ 730,246 $ 159,332 $ 561,277 $ 458,446 $ 392,734 8,184,981 2,453,836 4,213,050 7,071,104 1,503,107 3,687,726 5,319,417 1,015,110 3,195,096 5,069,524 1,247,703 2,750,907 4,327,736 1,040,962 2,421,490 (1) Includes results from the acquisitions of Managed Health Care Associates, Inc. from May 1, 2013 and Advanced Sensors, Ltd. from October 4, 2013. (2) Includes results from the acquisition of Sunquest Information Systems, Inc. from August 22, 2012. (3) Includes results from the acquisitions of NDI Holding Corp. from June 3, 2011, United Controls Group, Inc. from September 26, 2011 and Trinity Integrated Systems Ltd. from December 1, 2011. (4) Includes results from the acquisitions of Heartscape, Inc. from February 22, 2010 and iTradeNetwork, Inc. from July 27, 2010. (5) Includes results from the acquisitions of United Toll Systems, LLC from October 30, 2009 and Verathon, Inc. from December 3, 2009. (6) At December 31, 2012, there were $500 million of senior notes outstanding that matured on August 15, 2013, thus requiring a classification as short-term debt, included in working capital. ITEM 7 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion in conjunction with “Selected Financial Data” and our Consolidated Financial Statements and related notes included in this Annual Report. OVERVIEW We are a diversified growth company that designs, manufactures and distributes medical and scientific imaging products and software, radio frequency (“RF”) products, services and application software, industrial technology products and energy systems and controls products and solutions. We market these products and services to a broad range of markets including RF applications, medical, water, energy, research, education, software-as-a-service (“SaaS”)-based information networks, security and other niche markets. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 15 We pursue consistent and sustainable growth in earnings and cash flow by emphasizing continuous improvement in the operating performance of our existing businesses and by acquiring other carefully selected businesses. Our acquisitions have represented both bolt-ons and new strategic platforms. On May 1, 2013, we purchased the shares of Managed Health Care Associates, Inc. (“MHA”), a leading provider of services and technologies to support the diverse and complex needs of alternate site health care providers who deliver services outside of an acute care hospital setting. The acquisition of MHA complements and expands our medical software and services platform. On October 4, 2013, we acquired the shares of Advanced Sensors, Ltd. (“Advanced Sensors”), which manufactures oil-in-water analyzers for the oil and gas industries. APPLICATION OF CRITICAL ACCOUNTING POLICIES Our Consolidated Financial Statements are prepared in conformity with generally accepted accounting principles in the United States (“GAAP”). A discussion of our significant accounting policies can also be found in the notes to our Consolidated Financial Statements for the year ended December 31, 2013 included in this Annual Report. GAAP offers acceptable alternative methods for accounting for certain issues affecting our financial results, such as determining inventory cost, depreciating long-lived assets and recognizing revenue. We have not changed the application of acceptable accounting methods or the significant estimates affecting the application of these principles in the last three years in a manner that had a material effect on our financial statements. The preparation of financial statements in accordance with GAAP requires the use of estimates, assumptions, judgments and interpretations that can affect the reported amounts of assets, liabilities, revenues and expenses, the disclosure of contingent assets and liabilities and other supplemental disclosures. The development of accounting estimates is the responsibility of our management. Our management discusses those areas that require significant judgments with the audit committee of our Board of Directors. The audit committee has reviewed all financial disclosures in our annual filings with the SEC. Although we believe the positions we have taken with regard to uncertainties are reasonable, others might reach different conclusions and our positions can change over time as more information becomes available. If an accounting estimate changes, its effects are accounted for prospectively or through a cumulative catch up adjustment. Our most significant accounting uncertainties are encountered in the areas of accounts receivable collectibility, inventory valuation, future warranty obligations, revenue recognition (percentage-of-completion), income taxes and goodwill and indefinite-lived asset analyses. These issues affect each of our business segments and are evaluated using a combination of historical experience, current conditions and relatively short-term forecasting. Accounts receivable collectibility is based on the economic circumstances of customers and credits given to customers after shipment of products, including in certain cases credits for returned products. Accounts receivable are regularly reviewed to determine customers who have not paid within agreed upon terms, whether these amounts are consistent with past experiences, what historical experience has been with amounts deemed uncollectible and the impact that economic conditions might have on collection efforts in general and with specific customers. The returns and other sales credit allowance is an estimate of customer returns, exchanges, discounts or other forms of anticipated concessions and is treated as a reduction in revenue. The returns and other sales credits histories are analyzed to determine likely future rates for such credits. At December 31, 2013, our allowance for doubtful accounts receivable was $11.4 million and our allowance for sales returns and sales credits was $3.6 million, for a total of $15.0 million, or 2.8% of total gross accounts receivable. This percentage is influenced by the risk profile of the underlying receivables, and the timing of write-offs of accounts deemed uncollectible. The total allowance at December 31, 2013 was $1.0 million lower than at December 31, 2012. The allowance will continue to fluctuate as a percentage of sales based on specific identification of allowances needed due to changes in our business, the write-off of uncollectible receivables, and the addition of reserve balances at acquired businesses. We regularly compare inventory quantities on hand against anticipated future usage, which we determine as a function of historical usage or forecasts related to specific items in order to evaluate obsolescence and excessive quantities. When we use historical usage, this information is also qualitatively compared to business trends to evaluate the reasonableness of using historical information as an estimate of future usage. At December 31, 2013, inventory reserves for excess and obsolete inventory were $43.5 million, or 17.5% of gross inventory cost, as compared to $42.0 million, or 18.0% of gross inventory cost, at December 31, 2012. The inventory reserve as a percent of gross inventory cost will continue to fluctuate based upon specific identification of reserves needed based upon changes in our business as well as the physical disposal of obsolete inventory. 16 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT Most of our sales are covered by warranty provisions that generally provide for the repair or replacement of qualifying defective items for a specified period after the time of sale, typically 12 months. Future warranty obligations are evaluated using, among other factors, historical cost experience, product evolution and customer feedback. Our expense for warranty obligations was less than 1% of net sales for each of the years ended December 31, 2013, 2012, and 2011. Revenues related to the use of the percentage-of-completion method of accounting are dependent on total costs incurred compared with total estimated costs for a project. During the year ended December 31, 2013, we recognized revenue of $205.0 million using this method, primarily for major turn-key, longer term toll and traffic and energy projects and installations of large software application products. We recognized $145.5 million and $151.5 million of revenue using this method during the years ended December 31, 2012 and December 31, 2011, respectively. At December 31, 2013, $222.1 million of revenue related to unfinished percentage-of-completion contracts had yet to be recognized. Contracts accounted for under this method are generally not significantly different in profitability from revenues accounted for under other methods. Income taxes can be affected by estimates of whether and within which jurisdictions future earnings will occur and if, how and when cash is repatriated to the U.S., combined with other aspects of an overall income tax strategy. Additionally, taxing jurisdictions could retroactively disagree with our tax treatment of certain items, and some historical transactions have income tax effects going forward. Accounting rules require these future effects to be evaluated using current laws, rules and regulations, each of which can change at any time and in an unpredictable manner. During 2013, our effective income tax rate was 28.6%, which was slightly lower than the 2012 rate of 29.6% due in part to the enactment of the American Taxpayer Relief Act of 2012 (“ATRA”) on January 2, 2013 which retroactively reinstated and extended certain tax provisions to January 1, 2012. As a result, our income tax provision for the first quarter of 2013 included discrete tax benefits totaling $6 million. We expect the effective tax rate to increase in 2014 due to a continued increase in revenues and resulting pretax income in higher tax jurisdictions as well as the non-recurrence of the $6 million tax benefit taken in 2013. We account for goodwill in a purchase business combination as the excess of the cost over the estimated fair value of net assets acquired. Goodwill, which is not amortized, is tested for impairment on an annual basis (or an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value) using a two-step process. The first step utilizes both an income approach (discounted cash flows) and a market approach consisting of a comparable company earnings multiples methodology to estimate the fair value of a reporting unit. To determine the reasonableness of the estimated fair values, we review the assumptions to ensure that neither the income approach nor the market approach provides significantly different valuations. If the estimated fair value exceeds the carrying value, no further work is required and no impairment loss is recognized. If the carrying value exceeds the estimated fair value, the goodwill of the reporting unit is potentially impaired and then the second step would be completed to measure the impairment loss by calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets (including unrecognized intangible assets) of the reporting unit from the fair value of the reporting unit. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss would be recognized. Key assumptions used in the income and market approaches 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. While we use reasonable and timely information to prepare our cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly and could result in future non-cash impairment charges related to recorded goodwill balances. We have 28 reporting units with individual goodwill amounts ranging from zero to $988 million. We concluded that the fair value of each of our reporting units was in excess of its carrying value, with no impairment indicated as of December 31, 2013. However, the fair value of one of our reporting units in the RF Technology segment was less than 5% above its carrying value at December 31, 2013 using the discounted cash flow methodology. The decrease from the prior year’s results was due to lower growth assumptions in the current year’s testing. The weighted average cost of capital utilized in 2013 was consistent with the prior year’s testing. We believe the market value of this unit to be significantly in excess of its carrying value based upon observed market data. Negative industry or economic trends, disruptions to our business, actual results significantly below projections, 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 our reporting units. 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. We conduct these reviews for all of our 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 17 reporting units using the relief-from-royalty method, which we believe to be an acceptable methodology due to its common use by valuations specialists in determining the fair value of intangible assets. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these assets. The fair value of each trade name is determined by applying a royalty rate to a projection of net sales discounted using a risk adjusted rate of capital. Each royalty rate is determined based on the profitability of the reporting unit to which it relates and observed market royalty rates. Sales growth rates are determined after considering current and future economic conditions, recent sales trends, discussions with customers, planned timing of new product launches or other variables. Reporting units resulting from recent acquisitions generally represent the highest risk of impairment, which typically decreases as the businesses are integrated into our enterprise and positioned for improved future sales growth. The assessment of fair value for impairment purposes requires significant judgments to be made by management. Although our forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management is using to operate the underlying businesses, there is significant judgment in determining the expected results attributable to the reporting units. Changes in estimates or the application of alternative assumptions could produce significantly different results. No impairment resulted from the annual reviews performed in 2013; however, the fair value of the trade names of one of our reporting units in the RF Technology segment could have fallen below the carrying value at December 31, 2013, had the assumed sales growth been less than that used in the assessment. We do not believe that impairment is probable; however, it is possible that the trade name could become impaired in the future, at which point we would be required to record a non-cash impairment charge to reduce the carrying level of the trade name at the reporting unit. We evaluate 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. 18 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT RESULTS OF OPERATIONS The following table sets forth selected information for the years indicated. Dollar amounts are in thousands and percentages are of net sales. Amounts may not foot due to rounding. Net sales Industrial Technology Energy Systems and Controls(1) Medical and Scientific Imaging(2) RF Technology Total Gross profit: Industrial Technology Energy Systems and Controls Medical and Scientific Imaging RF Technology Total Operating profit: Industrial Technology Energy Systems and Controls Medical and Scientific Imaging RF Technology Total Corporate administrative expenses Income from continuing operations Interest expense, net Other income/(expense) Income from continuing operations before taxes Income taxes Net earnings Years ended December 31, 2013 2012 2011 $ 779,564 $ 795,240 $ 737,356 651,920 902,281 904,363 646,116 703,835 848,298 597,802 610,617 851,314 $ 3,238,128 $ 2,993,489 $ 2,797,089 51.1% 57.4 69.3 53.7 58.1 28.6% 28.2 29.7 28.0 28.7 (2.7)% 26.0 (2.7) - 23.3 (6.7) 16.6% 51.6% 56.3 64.4 52.4 55.8 30.8% 27.8 26.6 26.3 27.9 (2.6)% 25.3 (2.3) (0.1) 22.9 (6.8) 16.1% 49.8% 55.5 63.3 50.6 54.2 28.2% 26.4 24.3 23.8 25.6 (2.0)% 23.6 (2.3) 0.3 21.6 (6.4) 15.3% (1) Includes results from the acquisition of United Controls Group, Inc. from September 26, 2011 and Advanced Sensors from October 4, 2013. (2) Includes results from the acquisitions of NDI Holding Corp. from June 3, 2011, Sunquest Information Systems, Inc. from August 22, 2012 and MHA from May 1, 2013. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 19 YEAR ENDED DECEMBER 31, 2013 COMPARED TO YEAR ENDED DECEMBER 31, 2012 Net sales for the year ended December 31, 2013 were $3.24 billion as compared to sales of $2.99 billion for the year ended December 31, 2012, an increase of 8%. The increase was the result of contributions from acquisitions of 7% and organic sales growth of 1%. Our Medical and Scientific Imaging segment reported a $198 million or 28% increase in net sales for the year ended December 31, 2013 over the year ended December 31, 2012. Acquisitions added $208 million in sales, while organic sales decreased 1% due to a $20 million decrease in camera sales which was offset in part by increased sales in our medical businesses of $15 million. Gross margin increased to 69.3% in the year ended December 31, 2013 from 64.4% in the year ended December 31, 2012, due primarily to additional sales from medical products which have a higher gross margin. Selling, general and administrative (“SG&A”) expenses as a percentage of net sales increased to 39.5% in the year ended December 31, 2013 as compared to 37.8% in the year ended December 31, 2012 due to higher SG&A expense structures at our medical businesses as well as SG&A expenses at MHA in which the corresponding revenues were not recognizable under GAAP (See Note 2 of the notes to Consolidated Financial Statements included in this Annual Report). Operating margin was 29.7% in the year ended December 31, 2013 as compared to 26.6% in the year ended December 31, 2012. In our RF Technology segment, net sales for the year ended December 31, 2013 increased by $56 million or 7% over the year ended December 31, 2012. The increase was due primarily to growth in our toll and traffic, university card systems and security solutions businesses. Gross margin was 53.7% in 2013 as compared to 52.4% in the prior year due to operating leverage on higher sales volume. SG&A expenses as a percentage of sales in the year ended December 31, 2013 were 25.6%, a decrease from 26.1% in the prior year due to operating leverage on higher sales volume. Operating profit margin was 28.0% in 2013 as compared to 26.3% in 2012. Net sales for our Industrial Technology segment decreased by $16 million or 2% for the year ended December 31, 2013 over the year ended December 31, 2012. The decrease was due primarily to the loss of a customer at our water metering business and lower sales at our materials testing business. Gross margin was 51.1% for the year ended December 31, 2013 as compared to 51.6% in the year ended December 31, 2012 due to negative operating leverage on lower sales volume as well as the inclusion in 2012 of a one-time $5.5 million reduction to cost of goods sold at one of our businesses. SG&A expenses as a percentage of net sales were 22.5%, as compared to 20.8% in the prior year, due primarily to a $9.1 million pretax charge for warranty expense at one of our subsidiaries, Hansen Technologies, to provide its customers with replacements for refrigeration valves that included a vendor- supplied component that did not meet Roper quality standards. The resulting operating profit margin was 28.6% in the year ended December 31, 2013 as compared to 30.8% in the year ended December 31, 2012. In our Energy Systems and Controls segment, net sales for the year ended December 31, 2013 increased by $6 million or 1% over the year ended December 31, 2012, due primarily to acquisitions. Organic sales were impacted by lower sales of non-destructive testing systems for nuclear plants and pressure sensors for industrial applications, offset by increased demand for control systems for oil and gas applications. Gross margin was 57.4% in the year ended December 31, 2013, compared to 56.3% in the year ended December 31, 2012, due to product mix. SG&A expenses as a percentage of net sales were 29.2% as compared to 28.4% in the prior year due to product mix. Operating profit margin was 28.2% in the year ended December 31, 2013 as compared to 27.8% in the year ended December 31, 2012. Corporate expenses increased by $8.6 million to $86.1 million, or 2.7% of sales, in 2013 as compared to $77.5 million, or 2.6% of sales, in 2012. The increase was due to higher equity compensation (primarily as a result of higher stock prices), offset in part by a decrease in acquisition-related expenses. Interest expense increased $20.5 million, or 30.4%, for the year ended December 31, 2013 compared to the year ended December 31, 2012. The increase is due primarily to higher average debt balances offset in part by lower average interest rates throughout 2013. Other expense of $0.2 million for the year ended December 31, 2013 was composed of foreign exchange losses at our non-U.S. based companies, offset in part by proceeds from a legal settlement. Other expense for the year ended December 31, 2012 was $2.3 million, primarily due to foreign exchange losses at our non-U.S. based companies. During 2013, our effective income tax rate was 28.6% versus 29.6% in 2012. The reduction was due to $6 million in discrete tax benefits related to the enactment of the American Taxpayer Relief Act of 2012 (“ATRA”), as well as a $6 million benefit from the correction of an out of period adjustment of tax balances which were immaterial to any covered period, offset in part by increased revenues and resulting pretax income in higher tax jurisdictions, primarily the United States. We expect the effective tax rate to increase in 2014 due to a continued increase in revenues and resulting pretax income in higher tax jurisdictions as well as the non- recurrence of the $6 million tax benefit taken in 2013. 20 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT At December 31, 2013, the functional currencies of most of our European subsidiaries were stronger and our Canadian and United Kingdom subsidiaries were weaker against the U.S. dollar compared to currency exchange rates at December 31, 2012. The net result of these changes led to a pre-tax decrease in the foreign exchange component of comprehensive earnings of $17.9 million in the year ended December 31, 2013. Approximately $9.5 million of this amount related to goodwill and is not expected to directly affect our projected future cash flows. For the entire year of 2013, operating profit decreased by less than 1% due to fluctuations in non-U.S. currencies. The following table summarizes our net order information for the years ended December 31, 2013 and 2012 (dollar amounts in thousands). Industrial Technology Energy Systems and Controls Medical and Scientific Imaging RF Technology Total 2013 2012 Change $ 772,337 $ 783,362 673,569 958,830 943,757 634,051 703,034 871,225 $3,348,493 $2,991,672 (1.4)% 6.2 36.4 8.3 11.9% The increase in orders was due to internal growth of 4%, as well as orders from acquisitions which added 8%. Our Energy Systems and Controls and RF Technology segments experienced strong internal growth throughout 2013. Our Medical and Scientific Imaging segment experienced internal growth of 3%, as well as orders from recent acquisitions. The following table summarizes order backlog information at December 31, 2013 and 2012 (dollar amounts in thousands). We include in backlog only orders that are expected to be recognized as revenue within twelve months. Industrial Technology Energy Systems and Controls Medical and Scientific Imaging RF Technology Total 2013 2012 Change $ 121,943 $ 131,621 131,799 290,435 510,553 109,885 234,526 471,185 $1,054,730 $ 947,217 (7.4)% 19.9 23.8 8.4 11.4% YEAR ENDED DECEMBER 31, 2012 COMPARED TO YEAR ENDED DECEMBER 31, 2011 Net sales for the year ended December 31, 2012 were $2.99 billion as compared to sales of $2.80 billion for the year ended December 31, 2011, an increase of 7%. The increase was the result of organic sales growth of 4%, contributions from acquisitions of 4% and an unfavorable effect from foreign exchange of 1%. Our Medical and Scientific Imaging segment reported a $93 million or 15% increase in net sales for the year ended December 31, 2012 over the year ended December 31, 2011. Acquisitions added $94 million in sales, while organic sales increased 1% due to increased sales in our medical and electron microscopy businesses, offset by declines in sales of scientific imaging products. The impact from foreign exchange was a negative 1%. Gross margin increased to 64.4% in the year ended December 31, 2012 from 63.3% in the year ended December 31, 2011, due primarily to additional sales from medical products which have a higher gross margin. Selling, general and administrative expenses (“SG&A”) as a percentage of net sales decreased to 37.8% in the year ended December 31, 2012 as compared to 39.0% in the year ended December 31, 2011 due to investments in new products in the medical businesses in 2011 that did not recur in 2012. Operating margin was 26.6% in the year ended December 31, 2012 as compared to 24.3% in the year ended December 31, 2011. In our Energy Systems and Controls segment, net sales for the year ended December 31, 2012 increased by $48 million or 8% over the year ended December 31, 2011. Organic sales increased 7% while acquisitions added $19 million, or 3%. The increase in organic sales was primarily due to increased demand in industrial process and nuclear plant inspection end markets. The impact from foreign exchange was a negative 2%. Gross margin was 56.3% in the year ended December 31, 2012, compared to 55.5% in the year ended December 31, 2011, due to operating leverage from higher sales volume. SG&A expenses as a percentage of net sales were 28.4% as compared to 29.1% in the prior year due to operating leverage from higher sales volume. Operating margin was 27.8% in the year ended December 31, 2012 as compared to 26.4% in the year ended December 31, 2011. Net sales for our Industrial Technology segment increased by $58 million or 8% for the year ended December 31, 2012 over the year ended December 31, 2011. The increase was due to broad-based growth in nearly all businesses in the segment, with 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 21 particular strength in our materials testing business and fluid handling businesses, offset in part by a negative 2% impact from foreign exchange. Gross margin was 51.6% for the year ended December 31, 2012 as compared to 49.8% in the year ended December 31, 2011 due to operating leverage on higher sales volume as well as a $5.5 million one-time reduction to cost of goods sold at one of our businesses. This reduction is due to the cumulative effect of an accounting system error which caused the cost of goods sold to be overstated for several years by quarterly and annually immaterial amounts. SG&A expenses as a percentage of net sales were 20.8%, as compared to 21.5% in the prior year, due primarily to operating leverage on higher sales volume. The resulting operating profit margin was 30.8% in the year ended December 31, 2012 as compared to 28.2% in the year ended December 31, 2011. In our RF Technology segment, net sales for the year ended December 31, 2012 decreased by $3 million over the year ended December 31, 2011. Organic sales were flat as growth in toll and traffic systems was offset by a large installation project in gas network monitoring during 2011 that has since been completed. Gross margin was 52.4% in 2012 as compared to 50.6% in the prior year due to product mix. SG&A expenses as a percentage of sales in the year ended December 31, 2012 were 26.1%, a decrease from 26.8% in the prior year due to lower spending, particularly in selling expense related to toll projects. Operating profit margin was 26.3% in 2012 as compared to 23.8% in 2011. Corporate expenses increased by $20.6 million to $77.5 million, or 2.6% of sales, in 2012 as compared to $56.9 million, or 2.0% of sales, in 2011. The increase was due to $6.5 million of acquisition expense related to the Sunquest acquisition, higher equity compensation (as a result of higher stock prices) and other compensation related costs. Interest expense increased $3.9 million, or 6.1%, for the year ended December 31, 2012 compared to the year ended December 31, 2011. The increase is due primarily to higher average debt balances offset in part by lower average interest rates throughout 2012. Other expense for the year ended December 31, 2012 was $2.3 million, primarily due to foreign exchange losses at our non-U.S. based companies. Other income for the year ended December 31, 2011 was $8.1 million, which was primarily due to a currency remeasurement gain on an intercompany note. During 2012, our effective income tax rate was 29.6% versus 29.4% in 2011. This increase was due to a decrease in R&D credits. At December 31, 2012, the functional currencies of our Canadian and most of our European subsidiaries were stronger against the U.S. dollar compared to currency exchange rates at December 31, 2011. The net result of these changes led to a pre-tax increase in the foreign exchange component of comprehensive earnings of $24.5 million in the year ended December 31, 2012. Approximately $12.7 million of this amount related to goodwill and is not expected to directly affect our projected future cash flows. For the entire year of 2012, operating profit decreased by 1.3% due to fluctuations in non-U.S. currencies. The following table summarizes our net order information for the years ended December 31, 2012 and 2011 (dollar amounts in thousands). Industrial Technology Energy Systems and Controls Medical and Scientific Imaging RF Technology Total 2012 2011 $ 783,362 $ 767,020 634,051 703,034 871,225 608,538 612,787 834,903 $2,991,672 $2,823,248 Change 2.1% 4.2 14.7 4.4 6.0% The increase in orders was due to internal growth of 2%, as well as orders from acquisitions which added $124 million. Our Industrial Technology, Energy Systems and Controls and RF Technology segments experienced strong internal growth throughout 2012. Our Medical and Scientific Imaging segment experienced negative internal growth, offset by bookings from recent acquisitions. The following table summarizes order backlog information at December 31, 2012 and 2011 (dollar amounts in thousands). We include in backlog only orders that are expected to be recognized as revenue within twelve months. Industrial Technology Energy Systems and Controls Medical and Scientific Imaging RF Technology Total 22 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT 2012 2011 $ 131,621 $ 141,836 109,885 234,526 471,185 120,497 118,609 447,355 $ 947,217 $ 828,297 Change (7.2)% (8.8) 97.7 5.3 14.4% FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Selected cash flows for the years ended December 31, 2013, 2012, and 2011 are as follows (in millions): Cash provided by/(used in): Operating activities Investing activities Financing activities 2013 2012 2011 $ 802.6 $ 677.9 $ 601.6 (1,115.9) 403.6 (1,505.6) 853.9 (275.7) (256.7) Operating activities - The increase in cash provided by operating activities in 2013 was primarily due to increased earnings net of intangible amortization related to acquisitions and improved receivables collection. Investing activities - Cash used in investing activities during 2013, 2012, and 2011 was primarily for business acquisitions. Financing activities - Cash used in financing activities in all periods presented was primarily debt repayments as well as dividends paid to stockholders. Cash provided by financing activities during all periods presented was primarily debt borrowings for acquisitions partially offset by debt payments made using cash from operations. Net working capital (current assets, excluding cash, less total current liabilities, excluding debt) was $282 million at December 31, 2013 compared to $308 million at December 31, 2012. We acquired net working capital of $12 million through business acquisitions during 2013. Total debt was $2.5 billion at December 31, 2013 (36.9% of total capital) compared to $2.0 billion at December 31, 2012 (35.4% of total capital). Our increased debt at December 31, 2013 compared to December 31, 2012 was due to debt borrowings for acquisitions, partially offset by debt payments made using cash from operations. At December 31, 2013, we had $250 million of outstanding borrowings under our $1.5 billion revolving credit facility, $400 million of senior notes due 2017, $800 million of senior notes due 2018, $500 million of senior notes due 2019, $500 million of senior notes due 2022 and $8 million of senior subordinated convertible notes due 2034. In addition, we had $6.5 million of other debt in the form of capital leases and several smaller facilities that allow for borrowings or the issuance of letters of credit in foreign locations to support our non-U.S. businesses. We had $41.0 million of outstanding letters of credit at December 31, 2013, of which $36.0 million was covered by our lending group, thereby reducing our remaining revolving credit capacity commensurately. On June 6, 2013, we completed a public offering of $800 million aggregate principal amount of 2.050% senior unsecured notes due October 1, 2018. The notes were issued at 99.791% of their principal amount. The terms of the notes are described below under the heading “Description of Certain Indebtedness-Senior Notes due 2018.” The net proceeds were used to pay a portion of the outstanding revolver balance under our revolving credit facility. On August 15, 2013, our $500 million of senior notes due 2013 matured, and were repaid using borrowings from our revolving credit facility. Cash and short-term investments at our foreign subsidiaries at December 31, 2013 totaled $386 million. Repatriation of these funds under current regulatory and tax law for use in domestic operations would expose us to additional taxes. We consider this cash to be permanently reinvested. We expect existing cash and cash equivalents, cash generated by our U.S. operations, our unsecured credit facility, as well as our expected ability to access the capital markets, will be sufficient to fund operating requirements in the U.S. for the foreseeable future. We were in compliance with all debt covenants related to our credit facilities throughout the year ended December 31, 2013. Capital expenditures of $42.5 million, $38.4 million and $40.7 million were incurred during 2013, 2012, and 2011, respectively. In the future, we expect capital expenditures as a percentage of sales to be between 1.0% and 1.5% of annual net sales. DESCRIPTION OF CERTAIN INDEBTEDNESS Senior Unsecured Credit Facility - On July 27, 2012, we entered into a new unsecured credit facility (the “2012 Facility”), composed of a five-year $1.5 billion revolving credit facility, with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders. We may also, subject to compliance with specified conditions, request term loans or additional revolving credit commitments in an aggregate amount not to exceed $350 million. The 2012 Facility replaced our previous unsecured credit facility 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 23 dated as of July 7, 2008 (the “2008 Facility”). Due to the early termination of the 2008 Facility, we recorded a $1.0 million non- cash debt extinguishment charge, reported as other expense, in the third quarter of 2012 reflecting the unamortized fees associated with the 2008 Facility. At December 31, 2013, there were $250 million of outstanding borrowings under the 2012 Facility. The 2012 Facility contains various affirmative and negative covenants which, among other things, limit our ability to incur new debt, prepay subordinated debt, make certain investments and acquisitions, sell assets and grant liens, make restricted payments (including the payment of dividends on our common stock) and capital expenditures, or change our line of business. We also are subject to financial covenants which require us to limit our consolidated total leverage ratio and to maintain a consolidated interest coverage ratio. The most restrictive covenant is the consolidated total leverage ratio which is limited to 3.5. Senior Notes – Our senior notes are unsecured senior obligations of the Company and rank senior in right of payment with all of our existing and future subordinated indebtedness and rank equally in right of payment with all of our existing and future unsecured senior indebtedness. The notes are effectively subordinated to any of our 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 our subsidiaries and are effectively subordinated to all existing and future indebtedness and other liabilities of our subsidiaries. Senior Notes due 2018 – On June 6, 2013, we completed a public offering of $800 million aggregate principal amount of 2.050% senior unsecured notes due October 1, 2018. The notes were issued at 99.791% of their principal amount. Net proceeds of $793.5 million were used to pay off a portion of the outstanding revolver balance under the 2012 Facility. The notes bear interest at a fixed rate of 2.050% per year, payable semi-annually in arrears on April 1 and October 1 of each year, beginning October 1, 2013. We may redeem some of all of these notes at any time or from time to time, at 100% of their principal amount, plus a make-whole premium based on a spread to U.S. Treasury securities. Senior Notes due 2017 - In November 2012, we completed a public offering of $400 million aggregate principal amount of 1.850% senior unsecured notes due November 2017. Net proceeds of $397.2 million were used to pay off a portion of the outstanding revolver balance under the 2012 Facility. The notes bear interest at a fixed rate of 1.850% per year, payable semi-annually in arrears on May 15 and November 15 of each year, beginning May 15, 2013. We may redeem some of all of these notes at any time or from time to time, at 100% of their principal amount, plus a make-whole premium based on a spread to U.S. Treasury securities. Senior Notes due 2022 - In November 2012, we completed a public offering of $500 million aggregate principal amount of 3.125% senior unsecured notes due November 2022. Net proceeds of $496.4 million were used to pay off a portion of the outstanding revolver balance under the 2012 Facility. The notes bear interest at a fixed rate of 3.125% per year, payable semi-annually in arrears on May 15 and November 15 of each year, beginning May 15, 2013. We may redeem some of all of these notes at any time or from time to time, at 100% of their principal amount, plus a make-whole premium based on a spread to U.S. Treasury securities. Senior Notes due 2019 - In September 2009, we completed a public offering of $500 million aggregate principal amount of 6.25% senior unsecured notes due September 2019. Net proceeds of $496 million were used to pay off our $350 million term loan originally due July 2010 and the outstanding revolver balance under the 2008 Facility. The notes bear interest at a fixed rate of 6.25% per year, payable semi-annually in arrears on March 1 and September 1 of each year, beginning March 1, 2010. We may redeem some of all of these notes at any time or from time to time, at 100% of their principal amount, plus a make-whole premium based on a spread to U.S. Treasury securities. Senior Notes due 2013 - On August 15, 2013, our $500 million of senior notes due 2013 matured, and were repaid using revolver borrowings from the 2012 Facility. On August 15, 2013 an aggregate notional amount of $500 million in interest rate swaps we had entered into during 2009 expired. The swaps had been designated as fair value hedges which had effectively changed our $500 million senior notes due 2013 to a variable-rate obligation at a weighted average spread of 4.377% plus the 3 month London Interbank Offered Rate (“LIBOR”). 24 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT Senior Subordinated Convertible Notes - In December 2003, we issued $230 million of senior subordinated convertible notes at an original issue discount of 60.498%, resulting in an effective yield of 3.75% per year to maturity. Interest on the notes was payable semi-annually, beginning July 15, 2004, until January 15, 2009, after which cash interest is not paid on the notes prior to maturity unless contingent cash interest becomes payable. As of January 15, 2009, interest is recognized at the effective rate of 3.75% and represents accrual of original issue discount, excluding any contingent cash interest that may become payable. We will pay contingent cash interest to the holders of the notes during any six month period commencing after January 15, 2009 if the average trading price of a note for a five trading day measurement period preceding the applicable six month period equals 120% or more of the sum of the issue price, accrued original issue discount and accrued cash interest, if any, for such note. The contingent cash interest payable per note in respect of any six month period will equal the annual rate of 0.25%. In accordance with this criterion, contingent interest has been paid for each six month period since January 15, 2009. The notes are unsecured senior subordinated obligations, rank junior to our existing and future senior secured indebtedness and rank equally with our existing and future senior subordinated indebtedness. As originally issued, each $1,000 principal amount of the notes will be convertible at the option of the holder into 12.422 shares of our common stock (giving effect to the 2-for-1 stock split effective August 26, 2005 and subject to further adjustment), if (i) the sale price of our common stock reaches, or the trading price of the notes falls below, specified thresholds, (ii) if the notes are called for redemption or (iii) if specified corporate transactions have occurred. Upon conversion, we would have the right to deliver, in lieu of common stock, cash or a combination of cash and common stock. On November 19, 2004, we began a consent solicitation to amend the notes such that we would pay the same conversion value upon conversion of the notes, but would change how the conversion value is paid. In lieu of receiving exclusively shares of common stock or cash upon conversion, noteholders would receive cash up to the value of the accreted principal amount of the notes converted and, at our option, any remainder of the conversion value would be paid in cash or shares of common stock. The consent solicitation was successfully completed on December 6, 2004 and the amended conversion provisions were adopted. As of September 30, 2005, the senior subordinated convertible notes were reclassified from long-term to short-term debt as the notes became convertible on October 1, 2005 based upon our common stock trading above the trigger price for at least 20 trading days during the 30 consecutive trading-day period ending on September 30, 2005. Holders may require us to purchase all or a portion of their notes on January 15, 2014, January 15, 2019, January 15, 2024, and January 15, 2029, at stated prices plus accrued cash interest, if any, including contingent cash interest, if any. We may only pay the purchase price of such notes in cash and not in common stock. We may redeem for cash all or a portion of the notes at any time at redemption prices equal to the sum of the issue price plus accrued original issue discount and accrued cash interest, if any, including contingent cash interest, if any, on such notes to the applicable redemption date. We include in our diluted weighted-average common share calculation an increase in shares based upon the difference between our average closing stock price for the period and the conversion price of $31.80, plus accretion. This is calculated using the treasury stock method. CONTRACTUAL CASH OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS AND CONTINGENCIES The following tables quantify our contractual cash obligations and commercial commitments at December 31, 2013 (in thousands). Contractual Cash Obligations1 Total 2014 2015 2016 2017 2018 Thereafter Payments Due in Fiscal Year Long-term debt Senior note interest Capital leases Operating leases Total $ 2,458,321 $ 8,321 $ - $ - $ 650,000 $ 800,000 $ 1,000,000 417,547 6,531 124,910 70,675 2,695 38,978 70,675 2,262 32,092 70,675 1,234 25,008 69,750 335 16,452 54,392 5 7,520 81,380 - 4,860 $ 3,007,309 $ 120,669 $ 105,029 $ 96,917 $ 736,537 $ 861,917 $ 1,086,240 Other Commercial Commitments Standby letters of credit and bank guarantees Total Amount Committed Amounts Expiring in Fiscal Year 2014 2015 2016 2017 2018 Thereafter $ 40,980 $ 30,279 $ 5,813 $ 932 $ 419 $ 114 $ 3,423 1. We have excluded $26.9 million related to the liability for uncertain tax positions from the tables as the current portion is not material, and we are not able to reasonably estimate the timing of the long-term portion of the liability. See Note 7 of the notes to Consolidated Financial Statements. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 25 At December 31, 2013, we had outstanding surety bonds of $410 million. At December 31, 2013 and 2012, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We believe that internally generated cash flows and the remaining availability under our credit facilities will be adequate to finance normal operating requirements and future acquisition activities. Although we maintain an active acquisition program, any future acquisitions will be dependent on numerous factors and it is not feasible to reasonably estimate if or when any such acquisitions will occur and what the impact will be on our activities, financial condition and results of operations. We may also explore alternatives to attract additional capital resources. We anticipate that our businesses will generate positive cash flows from operating activities, and that these cash flows will permit the reduction of currently outstanding debt in accordance with the repayment schedule. However, the rate at which we can reduce our debt during 2014 (and reduce the associated interest expense) will be affected by, among other things, the financing and operating requirements of any new acquisitions and the financial performance of our existing companies. None of these factors can be predicted with certainty. RECENTLY ISSUED ACCOUNTING STANDARDS See Note 1 of our notes to Consolidated Financial Statements for information regarding the effect of new accounting pronouncements on our financial statements. ITEM 7A | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to interest rate risks on our outstanding revolving credit borrowings, and to foreign currency exchange risks on our transactions denominated in currencies other than the U.S. dollar. We are also exposed to equity market risks pertaining to the traded price of our common stock. At December 31, 2013, we had a combination of fixed and floating rate borrowings. Our credit facility contains a $1.5 billion variable-rate revolver with outstanding borrowings of $250 million at December 31, 2013. Our $400 million senior notes due 2017, $800 million senior notes due 2018, $500 million senior notes due 2019 and $500 million senior notes due 2022 have fixed interest rates of 1.850%, 2.050%, 3.125% and 6.250%, respectively, and our $8 million senior unsecured convertible notes have a fixed interest rate of 3.75%. At December 31, 2013, the prevailing market rates for our long-term notes were between 1.5% higher and 1.6% lower than the fixed rates on our debt instruments. At December 31, 2013, our outstanding variable-rate borrowings were $250 million of outstanding revolver borrowings; an increase in interest rates of 1% would increase our annualized interest costs by $2.5 million. Several of our businesses have transactions and balances denominated in currencies other than the U.S. dollar. Most of these transactions or balances are denominated in euros, Canadian dollars, British pounds or Danish krone. Sales by companies whose functional currency was not the U.S. dollar were 24% of our total sales in 2013 and 61% of these sales were by companies with a European functional currency. The U.S. dollar was stronger against most of our non-U.S. subsidiary currencies throughout most of 2013 as compared to 2012, which resulted in a decrease in sales of less than 1.0% due to foreign currency exchange. If these currency exchange rates had been 10% different throughout 2013 compared to currency exchange rates actually experienced, the impact on our net earnings would have been approximately 2.1%. The changes in these currency exchange rates relative to the U.S. dollar at December 31, 2013 compared to currency exchange rates at December 31, 2012 resulted in a pre-tax decrease in net assets of $17.9 million that was reported as a component of comprehensive earnings, $9.5 million of which was attributed to goodwill. Goodwill changes from currency exchange rate changes do not directly affect our reported earnings or cash flows. The trading price of our common stock influences the valuation of stock award grants and the effects these grants have on our results of operations. The stock price also influences the computation of potentially dilutive common stock which includes both stock awards and the premium over the conversion price on senior subordinated convertible notes to determine diluted earnings per share. The stock price also affects our employees’ perceptions of programs that involve our common stock. We believe the quantification of the effects of these changing prices on our future earnings and cash flows is not readily determinable. 26 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT 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, 2013 and 2012 ...................................................................................................29 Consolidated Statements of Earnings for the Years ended December 31, 2013, 2012 and 2011 .....................................................30 Consolidated Statements of Comprehensive Income for the Years ended December 31, 2013, 2012 and 2011 .............................30 Consolidated Statements of Stockholders’ Equity for the Years ended December 31, 2013, 2012 and 2011 ..................................31 Consolidated Statements of Cash Flows for the Years ended December 31, 2013, 2012 and 2011 ................................................32 Notes to Consolidated Financial Statements ..................................................................................................................................33 Supplementary Data Schedule II - Consolidated Valuation and Qualifying Accounts for the Years ended December 31, 2013, 2012 and 2011 ............53 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 27 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Stockholders of Roper Industries, Inc.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, of stockholders’ equity and comprehensive earnings and of cash flows, present fairly, in all material respects, the financial position of Roper Industries, Inc. and its subsidiaries at December 31, 2013 and December 31, 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework 1992 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. As described in Management’s Report on Internal Control over Financial Reporting, management has excluded acquisitions completed during 2013 from its assessment of internal control over financial reporting as of December 31, 2013 because they were acquired by the Company in purchase business combinations during 2013. We have also excluded acquisitions completed during 2013 from our audit of internal control over financial reporting. These acquisitions are wholly-owned subsidiaries whose total assets and total revenues represent 1.3%, and 2.3%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2013. /s/ PricewaterhouseCoopers LLP Tampa, Florida February 21, 2014 28 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2013 and 2012 (in thousands, except per share data) Assets Cash and cash equivalents Accounts receivable, net Inventories, net Deferred taxes Unbilled receivables Other current assets Total current assets Property, plant and equipment, net Goodwill Other intangible assets, net Deferred taxes Other assets Total assets Liabilities and Stockholders’ Equity Accounts payable Accrued compensation Deferred revenue Other accrued liabilities Income taxes payable Deferred taxes Current portion of long-term debt, net Total current liabilities Long-term debt, net of current portion Deferred taxes Other liabilities Total liabilities Commitments and contingencies (Note 12) Stockholders’ equity: Preferred stock, $0.01 par value per share; 1,000 shares authorized; none outstanding Common stock, $0.01 par value per share; 350,000 shares authorized; 101,276 shares issued and 99,312 outstanding at December 31, 2013 and 100,588 shares issued and 98,604 outstanding at December 31, 2012 Additional paid-in capital Retained earnings Accumulated other comprehensive earnings Treasury stock, 1,964 shares at December 31, 2013 and 1,984 shares at December 31, 2012 Total stockholders’ equity Total liabilities and stockholders’ equity See accompanying notes to consolidated financial statements. 2013 2012 $ 459,720 $ 370,590 519,075 204,923 64,464 86,945 38,210 1,373,337 117,310 4,549,998 2,039,136 28,773 76,427 526,408 190,867 41,992 72,193 43,492 1,245,542 110,397 3,868,857 1,698,867 78,644 68,797 $8,184,981 $7,071,104 $ 150,313 $ 138,340 107,953 209,332 153,712 4,275 6,490 11,016 643,091 2,453,836 783,805 91,199 3,971,931 110,724 185,912 128,351 - 3,868 519,015 1,086,210 1,503,107 707,278 86,783 3,383,378 - - 1,013 1,229,233 2,959,196 43,083 (19,475) 4,213,050 $8,184,981 1,006 1,158,001 2,489,858 58,537 (19,676) 3,687,726 $7,071,104 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 29 ROPER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Years ended December 31, 2013, 2012 and 2011 (Dollar and share amounts in thousands, except per share data) Net sales Cost of sales Gross profit Selling, general and administrative expenses Income from operations Interest expense, net Loss on extinguishment of debt Other income/(expense), net Earnings before income taxes Income taxes Net earnings Earnings per share: Basic Diluted Weighted-average common shares outstanding: Basic Diluted See accompanying notes to consolidated financial statements. Years ended December 31, 2013 2012 2011 $3,238,128 $2,993,489 $2,797,089 1,355,200 1,882,928 1,040,567 842,361 88,039 - (192) 754,130 215,837 1,321,772 1,671,717 914,130 757,587 67,525 1,043 (2,338) 686,681 203,321 1,281,525 1,515,564 855,025 660,539 63,648 - 8,096 604,987 177,740 $ 538,293 $ 483,360 $ 427,247 $ $ 5.43 5.37 $ $ 4.95 4.86 $ $ 4.45 4.34 99,123 100,209 97,702 99,558 95,959 98,386 ROPER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years ended December 31, 2013, 2012 and 2011 (in thousands) Net earnings Other comprehensive income, net of tax: Foreign currency translation adjustments Unrecognized pension gain Total other comprehensive income/(loss), net of tax Years ended December 31, 2013 2012 2011 $ 538,293 $ 483,360 $ 427,247 (15,454) - (15,454) 23,633 1,104 24,737 (10,178) - (10,178) Comprehensive income $ 522,839 $ 508,097 $ 417,069 See accompanying notes to consolidated financial statements. 30 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Years ended December 31, 2013, 2012 and 2011 (in thousands, 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, 2010 95,088 $ 971 $ 1,045,286 $ 1,680,849 $ 43,978 $ (20,177) $ 2,750,907 Net earnings Stock option exercises Treasury stock sold Currency translation adjustments, net of $866 tax Stock based compensation Restricted stock activity Stock option tax benefit, net of shortfalls Conversion of senior subordinated convertible notes Dividends declared ($0.47 per share) - 838 29 - - 268 - 456 - - 8 - - - 3 - 5 - - 427,247 28,159 1,821 - 30,906 (6,008) 12,684 4,245 - - - - - - - - (44,986) - - - (10,178) - - - - - - - 283 - - - - - - 427,247 28,167 2,104 (10,178) 30,906 (6,005) 12,684 4,250 (44,986) Balances at December 31, 2011 96,679 $ 987 $ 1,117,093 $ 2,063,110 $ 33,800 $ (19,894) $ 3,195,096 Net earnings Stock option exercises Treasury stock sold Currency translation adjustments, net of $907 tax Stock based compensation Restricted stock activity Stock option tax benefit, net of shortfalls Conversion of senior subordinated convertible notes Deferred pension gain Dividends declared ($0.58 per share) - 1,389 22 - - 187 - 327 - - - 14 - - - 2 - 3 - - - 483,360 56,086 1,977 - 39,808 (18,424) 30,840 (69,379) - - - - - - - - - - (56,612) - - - 23,633 - - - - 1,104 - - - 218 - - - - - - - 483,360 56,100 2,195 23,633 39,808 (18,422) 30,840 (69,376) 1,104 (56,612) Balances at December 31, 2012 98,604 $ 1,006 $ 1,158,001 $ 2,489,858 $ 58,537 $ (19,676) $ 3,687,726 Net earnings Stock option exercises Treasury stock sold Currency translation adjustments, net of $2,406 tax Stock based compensation Restricted stock activity Stock option tax benefit, net of shortfalls Conversion of senior subordinated convertible notes Dividends declared ($0.70 per share) - 434 20 - - 254 - - - - 4 - - - 3 - - - - 538,293 23,995 2,248 - 53,417 (16,046) 16,000 (8,382) - - - - - - - - (68,955) - - - - - 201 (15,454) - - - - - - - - - - - 538,293 23,999 2,449 (15,454) 53,417 (16,043) 16,000 (8,382) (68,955) Balances at December 31, 2013 99,312 $ 1,013 $ 1,229,233 $ 2,959,196 $ 43,083 $ (19,475) $ 4,213,050 See accompanying notes to consolidated financial statements. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 31 ROPER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2013, 2012 and 2011 (in thousands) Cash flows from operating activities: Net earnings Adjustments to reconcile net earnings to cash flows from operating activities: Depreciation and amortization of property, plant and equipment Amortization of intangible assets Amortization of deferred financing costs Non-cash stock compensation Changes in operating assets and liabilities, net of acquired businesses: Accounts receivable Inventories Unbilled receivables Accounts payable and accrued liabilities Income taxes Other, net Cash provided by operating activities Cash flows from investing activities: Acquisitions of businesses, net of cash acquired Capital expenditures Proceeds from sale of assets Other, net Cash used in investing activities Cash flows from financing activities: Proceeds from senior notes Payment of senior notes Borrowings/(payments) under revolving line of credit, net Principal payments on convertible notes Debt issuance costs Cash dividends to stockholders Treasury stock sales Stock award tax excess windfall benefit Proceeds from stock based compensation, net Redemption premium on convertible debt Other Cash provided by/(used in) financing activities Effect of exchange rate changes on cash Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Supplemental disclosures: Cash paid for: Interest Income taxes, net of refunds received Non-cash investing activities: Net assets of businesses acquired: Fair value of assets, including goodwill Liabilities assumed Cash paid, net of cash acquired See accompanying notes to consolidated financial statements. 32 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT Years ended December 31, 2013 2012 2011 $ 538,293 $ 483,360 $ 427,247 37,756 151,434 3,918 53,133 32,800 (12,687) (14,754) 23,305 (6,427) (4,218) 802,553 37,888 116,860 2,399 40,773 (16,455) 18,361 (5,122) 9,209 (15,988) 6,567 677,852 (1,074,413) (42,528) 2,174 (1,096) (1,115,863) (1,467,772) (38,405) 1,315 (683) (1,505,545) 800,000 (500,000) 150,000 (3,702) (7,717) (49,092) 2,449 11,709 7,944 (9,124) 1,166 403,633 (1,193) 89,130 370,590 459,720 94,648 210,540 $ $ $ $ $ $ 900,000 - 100,000 (57,304) (12,213) (69,903) 2,195 30,747 37,679 (76,641) (690) 853,870 6,312 32,489 338,101 370,590 67,804 188,560 $ 1,275,827 (201,414) $ 1,074,413 $ 1,824,453 (356,681) $ 1,467,772 36,780 103,363 2,362 31,730 (33,333) (23,033) 11,759 24,347 14,526 5,870 601,618 (233,594) (40,702) 1,990 (3,443) (275,749) - - (230,000) (26,457) - (42,090) 2,104 12,664 28,167 - (1,067) (256,679) (1,483) 67,707 270,394 338,101 62,840 150,550 256,589 (22,995) 233,594 $ $ $ $ $ ROPER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2013, 2012 and 2011 (1) SUMMARY OF ACCOUNTING POLICIES Basis of Presentation - These financial statements present consolidated information for Roper Industries, Inc. and its subsidiaries (“Roper” or the “Company”). All significant intercompany accounts and transactions have been eliminated. Nature of the Business - Roper is a diversified growth company that designs, manufactures and distributes medical and scientific imaging products and software, radio frequency (“RF”) products, services and application software, industrial technology products and energy systems and controls products and solutions. Roper markets these products and services to a broad range of markets, including radio frequency applications, medical, water, energy, research, education, software-as-a-service (“SaaS”)-based information networks, security and other niche markets. Accounts Receivable - Accounts receivable are stated net of an allowance for doubtful accounts and sales allowances of $15.0 million and $16.0 million at December 31, 2013 and 2012, respectively. Outstanding accounts receivable balances are reviewed periodically, and allowances are provided at such time that management believes it is probable that an account receivable is uncollectible. The returns and other sales credit allowance is an estimate of customer returns, exchanges, discounts or other forms of anticipated concessions and is treated as a reduction in revenue. Cash and Cash Equivalents - Roper considers highly liquid financial instruments with remaining maturities at acquisition of three months or less to be cash equivalents. Roper had no cash equivalents at December 31, 2013 and 2012. 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, 2013, management concluded that no accrual was necessary and that there were no matters for which there was a reasonable possibility of a material loss. Earnings per Share - Basic earnings per share were calculated using net earnings and the weighted-average number of shares of common stock outstanding during the respective year. Diluted earnings per share were calculated using net earnings and the weighted-average number of shares of common stock and potential common stock outstanding during the respective year. Potentially dilutive common stock consisted of stock options and the premium over the conversion price on Roper’s senior subordinated convertible notes based upon the trading price of the Company’s common stock. The effects of potential common stock were determined using the treasury stock method (in thousands): Basic weighted-average shares outstanding Effect of potential common stock: Common stock awards Senior subordinated convertible notes Diluted weighted-average shares outstanding Years ended December 31, 2013 99,123 891 195 100,209 2012 97,702 1,040 816 99,558 2011 95,959 1,213 1,214 98,386 As of and for the years ended December 31, 2013, 2012 and 2011, there were 614,850, 547,591 and 760,000 outstanding stock options, respectively, that were not included in the determination of diluted earnings per share because doing so would have been antidilutive. Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Foreign Currency Translation and Transactions - Assets and liabilities of subsidiaries whose functional currency is not the U.S. dollar were translated at the exchange rate in effect at the balance sheet date, and revenues and expenses were translated at average exchange rates for the period in which those entities were included in Roper’s financial results. Translation adjustments are reflected as a component of other comprehensive income. Foreign currency transaction gains and losses are recorded in the income 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 33 statement as other income/(expense). The gain or loss included in pre-tax income was a net loss of $3.9 million for the year ended December 31, 2013, a net loss of $2.8 million for the year ended December 31, 2012 and a net gain of $6.9 million for the year ended December 31, 2011. Goodwill and Other Intangibles - Roper accounts for goodwill in a purchase business combination as the excess of the cost over the estimated fair value of net assets acquired. Business combinations can also result in other intangible assets being recognized. Amortization of intangible assets, if applicable, occurs over their estimated useful lives. Goodwill, which is not amortized, is tested for impairment on an annual basis (or an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value) using a two-step process. The first step of the process utilizes both an income approach (discounted cash flows) and a market approach consisting of a comparable public company earnings multiples methodology to estimate the fair value of a reporting unit. To determine the reasonableness of the estimated fair values, the Company reviews the assumptions to ensure that neither the income approach nor the market approach provides significantly different valuations. If the estimated fair value exceeds the carrying value, no further work is required and no impairment loss is recognized. If the carrying value exceeds the estimated fair value, the goodwill of the reporting unit is potentially impaired and then the second step would be completed in order to measure the impairment loss by calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets (including unrecognized intangible assets) of the reporting unit from the fair value of the reporting unit. If the implied fair value of goodwill is less than the carrying value of goodwill, a non-cash impairment loss would be recognized. Key assumptions used in the income and market methodologies are updated when the analysis is performed for each reporting unit. Various assumptions are utilized including forecasted operating results, strategic plans, economic projections, anticipated future cash flows, the weighted-average cost of capital, comparable transactions, market data and earnings multiples. The assumptions that have the most significant effect on the fair value calculations are the anticipated future cash flows, discount rates, and the earnings multiples. While the Company uses reasonable and timely information to prepare its cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in future impairment charges related to recorded goodwill balances. The Company has 28 reporting units with individual goodwill amounts ranging from zero to $988 million. The Company concluded that the fair value of each of its reporting units was in excess of its carrying value, with no impairment indicated as of December 31, 2013. However, the fair value of one of the reporting units in the RF Technology segment was less than 5% above the carrying value at December 31, 2013 using the discounted cash flow methodology. The Company believes the market value of this unit to be significantly in excess of its carrying value based upon observed market data. Negative industry or economic trends, disruptions to its business, actual results significantly below expected results, unexpected significant changes or planned changes in the use of the assets, divestitures and market capitalization declines may have a negative effect on the fair value of Roper’s reporting units. The following events or circumstances would be considered to determine whether interim testing of goodwill would be required: • a significant adverse change in legal factors or in the business climate; • an adverse action or assessment by a regulator; • unanticipated competition; • a loss of key personnel; • a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of; • the testing for recoverability under the Impairment or Disposal of Long-Lived Assets of a significant asset group within a reporting unit; and • recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit. Business combinations can also result in other intangible assets being recognized. Amortization of intangible assets, if applicable, occurs over their estimated useful lives. Trade names that are determined to have an indefinite useful economic life are not amortized, but separately tested for impairment during the fourth quarter of the fiscal year or on an interim basis if an event occurs that indicates the fair value is more likely than not below the carrying value. Roper conducts these reviews for all of its reporting units using the relief-from-royalty method, which management believes to be an acceptable methodology due to its common use by valuations specialists in determining the fair value of intangible assets. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these assets. The fair value of each trade name is determined by applying a royalty rate to a projection of net sales discounted using a risk adjusted rate of capital. 34 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT Each royalty rate is determined based on the profitability of the reporting unit to which it relates and observed market royalty rates. Sales growth rates are determined after considering current and future economic conditions, recent sales trends, discussions with customers, planned timing of new product launches or other variables. The assessment of fair value for impairment purposes requires significant judgments to be made by management. Although forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management is using to operate the underlying businesses, there is significant judgment in determining the expected results attributable to the reporting units. Changes in estimates or the application of alternative assumptions could produce significantly different results. No impairment resulted from the annual reviews performed in 2013. Roper evaluates whether there has been an impairment of identifiable intangible assets with definite useful economic lives, or of the remaining life of such assets, when certain indicators of impairment are present. In the event that facts and circumstances indicate that the cost or remaining period of amortization of any asset may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future gross, undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down to fair value or a revision in the remaining amortization period is required. Impairment of Long-Lived Assets - The Company determines whether there has been an impairment of long-lived assets, excluding goodwill and identifiable intangible assets that are determined to have indefinite useful economic lives, when certain indicators of impairment are present. In the event that facts and circumstances indicate that the cost or life of any long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future gross, undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down to fair value or revision to remaining life is required. Future adverse changes in market conditions or poor operating results of underlying long- lived assets could result in losses or an inability to recover the carrying value of the long-lived assets that may not be reflected in the assets’ current carrying value, thereby possibly requiring an impairment charge or acceleration of depreciation or amortization expense in the future. Income Taxes - Roper is a U.S.-based multinational company and the calculation of its worldwide provision for income taxes requires analysis of many factors, including income tax systems that vary from country to country, and the United States’ treatment of non-U.S. earnings. The Company provides U.S. income taxes for unremitted earnings of foreign subsidiaries that are not considered permanently reinvested overseas. As of December 31, 2013, the amount of earnings of foreign subsidiaries that the Company considers permanently reinvested and for which deferred taxes have not been provided was approximately $939 million. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the U.S. federal income tax liability that would be payable if such earnings were not reinvested indefinitely. Although it is the Company’s intention to permanently reinvest these earnings indefinitely there are certain events that would cause these earnings to become taxable. These events include, but are not limited to, changes in U.S. tax laws, dividends paid between foreign subsidiaries in the absence of Section 954(c)(6) of the Internal Revenue Code (“IRC”), foreign subsidiary guarantees of U.S. parent debt and the liquidation of foreign subsidiaries or actual distributions by foreign subsidiaries into a U.S. affiliate. The Company recognizes in the consolidated financial statements only those tax positions determined to be “more likely than not” of being sustained upon examination based on the technical merits of the positions. Interest and penalties related to unrecognized tax benefits are classified as a component of income tax expense. The Company records a valuation allowance to reduce its deferred tax assets if, based on the weight of available evidence, both positive and negative, for each respective tax jurisdictions, it is more likely than not that some portion or all of such deferred tax assets will not be realized. Available evidence which is considered in determining the amount of valuation allowance required includes, but is not limited to, the Company’s estimate of future taxable income and any applicable tax-planning strategies. Certain assets and liabilities have different bases for financial reporting and income tax purposes. Deferred income taxes have been provided for these differences at the tax rates expected to be paid. Interest Rate Risk - The Company manages interest rate risk by maintaining a combination of fixed- and variable-rate debt, which may include interest rate swaps to convert fixed-rate debt to variable-rate debt, or to convert variable-rate debt to fixed-rate debt. Interest rate swaps are recorded at fair value in the balance sheet as an asset or liability, and the changes in fair values of both the swap and the hedged item are recorded as interest expense in current earnings. There were no interest rate swaps outstanding at December 31, 2013. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 35 Inventories - Inventories are valued at the lower of cost or market. Cost is determined using the first-in, first-out method. The Company writes down its inventory for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. Other Comprehensive Income - Comprehensive income includes net earnings and all other non-owner sources of changes in a company’s net assets. Product Warranties - The Company sells certain of its products to customers with a product warranty that allows customers to return a defective product during a specified warranty period following the purchase in exchange for a replacement product, repair at no cost to the customer or the issuance of a credit to the customer. The Company accrues its estimated exposure to warranty claims based upon current and historical product sales data, warranty costs incurred and any other related information known to the Company. Property, Plant and Equipment and Depreciation and Amortization - Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided for using principally the straight-line method over the estimated useful lives of the assets as follows: Buildings Machinery Other equipment 20-30 years 8-12 years 3-5 years Recently Released Accounting Pronouncements - The Financial Accounting Standards Board (“FASB”) establishes changes to accounting principles under GAAP in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. Any ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s results of operations, financial position or cash flows. In July 2012, the FASB issued an amendment to accounting rules related to the testing of indefinite-lived intangibles. The new accounting rules permit an entity to first assess qualitative factors to determine if it is more likely than not that an indefinite-lived asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test prescribed under current accounting rules. Roper adopted this guidance on January 1, 2013. The guidance did not have an impact on the Company’s results of operations, financial position or cash flows. Research and Development - Research and development (“R&D”) costs include salaries and benefits, rents, supplies, and other costs related to products under development. Research and development costs are expensed in the period incurred and totaled $145.7 million, $125.9 million and $121.7 million for the years ended December 31, 2013, 2012 and 2011, respectively. Revenue Recognition - The Company recognizes revenue when all of the following criteria are met: • persuasive evidence of an arrangement exists; • delivery has occurred or services have been rendered; • the seller’s price to the buyer is fixed or determinable; and • collectibility is reasonably assured. In addition, the Company recognizes revenue from the sale of product when title and risk of loss pass to the customer, which is generally when product is shipped. The Company recognizes revenue from services when such services are rendered or, if applicable, upon customer acceptance. Revenues under certain relatively long-term and relatively large-value construction projects are recognized under the percentage-of-completion method using the ratio of costs incurred to total estimated costs as the measure of performance. The Company recognized revenues of $205.0 million, $145.5 million and $151.5 million for the years ended December 31, 2013, 2012 and 2011, respectively, using this method. Estimated losses on any projects are recognized as soon as such losses become known. Capitalized Software - The Company accounts for capitalized software under applicable accounting guidance which, among other provisions, requires capitalization of certain internal-use software costs once certain criteria are met. Overhead, general and administrative and training costs are not capitalized. Capitalized software was $8.0 million and $10.9 million at December 31, 2013 and 2012, respectively. 36 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT Stock-Based Compensation - The Company recognizes expense for the grant date fair value of its employee stock awards on a straight-line basis (or, in the case of performance-based awards, on a graded basis) over the employee’s requisite service period (generally the vesting period of the award). The fair value of option awards is estimated using the Black-Scholes option valuation model. The Company presents the cash flows resulting from the tax benefits arising from tax deductions in excess of the compensation cost recognized for stock award exercises (excess tax benefits) as financing cash flows. (2) BUSINESS ACQUISITIONS 2013 Acquisitions – During the year ended December 31, 2013, Roper completed two business combinations. The results of operations of the acquired companies have been included in Roper’s consolidated results since the date of each acquisition. Supplemental pro forma information has not been provided as the acquisitions did not have a material impact on Roper’s consolidated results of operations individually or in aggregate. On May 1, 2013, Roper acquired 100% of the shares of Managed Health Care Associates, Inc. (“MHA”), in a $1.0 billion all-cash transaction. MHA is a leading provider of services and technologies to support the diverse and complex needs of alternate site health care providers who deliver services outside of an acute care hospital setting. The acquisition of MHA complements and expands the Company’s medical software and services platform. MHA is reported in the Medical & Scientific Imaging segment. The following table (in thousands) summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition. The allocation of the purchase price is considered preliminary pending tax-related adjustments. Current assets Identifiable intangibles Goodwill Other assets Total assets acquired Current liabilities Long-term deferred tax liability Other liabilities Net assets acquired $ 59,813 465,500 680,732 5,798 1,211,843 (24,717) (165,052) (6,524) $1,015,550 The fair value of current assets acquired also includes an adjustment of $35.0 million for administrative fees related to customer purchases that occurred prior to the acquisition date but not reported to MHA until after the acquisition date. In the ordinary course, these administrative fees are recorded as revenue when reported; however, GAAP accounting for business acquisitions requires the Company to estimate the amount of purchases occurring prior to the acquisition date and record the fair value of the administrative fees to be received from those purchases as an accounts receivable at the date of acquisition. The Company also recorded a fair value liability of $8.6 million included in current liabilities related to corresponding revenue-share obligation owed to customers that generated the administrative fees. Both of these fair value adjustments were fully amortized as of September 30, 2013. On October 4, 2013, the Company paid $54 million in cash to acquire 100% of the shares of Advanced Sensors, Ltd. (“Advanced Sensors”), a company which manufactures and supports oil-in-water analyzers for the oil and gas industries, in order to expand the Company’s product line. Advanced Sensors is reported in the Energy Systems and Controls segment. The allocation of the purchase price is considered preliminary pending final intangible asset valuations and tax-related adjustments. The Company recorded $28 million in goodwill and $28 million of other identifiable intangibles in connection with the acquisition. The majority of the goodwill related to the 2013 acquisitions is not expected to be deductible for tax purposes. Of the $493 million of intangible assets acquired in 2013, $28 million was assigned to trade names that are not subject to amortization. The remaining $465 million of acquired intangible assets have a weighted-average useful life of approximately 19 years. The intangible assets that make up that amount include customer relationships of $451 million (20 year weighted-average useful life), technology of $12 million (7 year weighted-average useful life), and $2 million of protective rights in the form of non-compete agreements (5 year weighted-average useful life). 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 37 The Company expensed transaction costs of $3.3 million related to the acquisitions as corporate general and administrative expenses, as incurred. 2012 Acquisitions – During the year ended December 31, 2012, Roper completed six business combinations. The results of operations of the acquired companies have been included in Roper’s consolidated results since the date of each acquisition. The largest of the 2012 acquisitions was Sunquest Information Systems, Inc. (“Sunquest”), a leading provider of diagnostic and laboratory software solutions to healthcare providers. Roper acquired 100% of the shares of Sunquest on August 22, 2012, in a $1.416 billion all-cash transaction. The Company acquired Sunquest in order to complement and expand its medical platform. Sunquest is reported in the Medical & Scientific Imaging segment. The Company expensed transaction costs of $6.7 million related to the acquisition as corporate general and administrative expenses, as incurred. The following table (in thousands) summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition. Current assets Identifiable intangibles Goodwill Other assets Total assets acquired Deferred revenue Other current liabilities Long-term deferred tax liability Net assets acquired $ 96,883 669,000 987,881 2,694 1,756,458 (83,065) (18,762) (238,651) $1,415,980 The majority of the goodwill is not expected to be deductible for tax purposes. Of the $669 million of acquired intangible assets acquired, $98 million was assigned to trade names that are not subject to amortization. The remaining $571 million of acquired intangible assets have a weighted-average useful life of 18 years. The intangible assets that make up that amount include customer relationships of $460 million (20 year weighted-average useful life) and software of $111 million (12 year weighted-average useful life). Roper’s results for the year ended December 31, 2012 included results from Sunquest between August 22, 2012 and December 31, 2012. In that period, Sunquest contributed $69.4 million in revenue and $8.8 million of earnings (inclusive of deal-related costs) to Roper’s results. The following unaudited pro forma summary presents consolidated information as if the acquisition of Sunquest had occurred on January 1, 2011 (amounts in thousands, except per share data): Sales Net income Earnings per share, basic Earnings per share, diluted Pro forma Year ended December 31, 2012 2011 $3,130,407 $2,967,415 521,141 454,059 5.33 5.23 4.73 4.62 Pro forma earnings for the years ended December 31, 2012 and 2011 were adjusted by $50.7 million and $9.2 million, respectively, for non-recurring acquisition and other costs. Adjustments were also made to pro forma earnings for the years ended December 31, 2012 and 2011 for recurring changes in amortization, interest expense and taxes related to the acquisition. 38 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT During the year ended December 31, 2012, Roper completed five other acquisitions which were immaterial. The aggregate purchase price of these acquisitions totaled $62 million of cash. The Company recorded $43 million in other identifiable intangibles and $16 million in goodwill in connection with these acquisitions. The Company expensed transaction costs of $1 million related to these acquisitions as corporate general and administrative expenses, as incurred. Supplemental pro forma information has not been provided as the acquisitions did not have a material impact on Roper’s consolidated results of operations individually or in aggregate. The majority of the goodwill recorded for these five companies is not expected to be deductible for tax purposes. Of the $43 million of intangible assets acquired, $1 million was assigned to trade names that are not subject to amortization. The remaining $42 million of acquired intangible assets have a weighted-average useful life of 7 years. The intangible assets that make up that amount include customer relationships of $17 million (7 year weighted-average useful life), protective rights and patents of $16 million (7 year weighted-average useful life) and unpatented technology of $8 million (8 year weighted-average useful life). 2011 Acquisitions - During the year ended December 31, 2011, Roper completed three business combinations. The results of operations of the acquired companies have been included in Roper’s consolidated results since the date of each acquisition. Supplemental pro forma information has not been provided as the acquisitions did not have a material impact on Roper’s consolidated results of operations individually or in aggregate. The aggregate purchase price of 2011 acquisitions totaled $234 million of cash. The Company recorded $91 million in other identifiable intangibles and $149 million in goodwill in connection with these acquisitions. The majority of the goodwill is not expected to be deductible for tax purposes. The Company expensed transaction costs of $2.2 million related to these acquisitions, as incurred. On June 3, 2011, Roper acquired 100% of the shares of NDI Holding Corp. (“Northern Digital”), a provider of 3-D measurement technology for medical applications in computer-assisted surgery and computer-assisted therapy. Roper acquired Northern Digital as an addition to its medical platform, and it is reported in the Medical and Scientific Imaging segment. On September 26, 2011, Roper acquired 100% of the shares of United Controls Group, Inc. (“UCG”), a manufacturer of control systems in the oil and gas industry. UCG was acquired as an addition to our existing process control systems businesses, and is reported in the Energy Systems and Controls segment. On December 1, 2011, Roper acquired 100% of the shares of Trinity Integrated Systems Ltd. (“Trinity”), a specialist provider of requirements capture, safety lifecycle management and engineering software tools, and safety and control system solutions to the oil and gas, industrial process and control markets. Trinity was acquired as an addition to our existing process control systems businesses, and is reported in the Energy Systems and Controls segment. Of the $91 million of intangible assets acquired in 2011, $3 million was assigned to trade names that are not subject to amortization. The remaining $88 million of acquired intangible assets have a weighted-average useful life of approximately 11 years. The intangible assets that make up that amount include customer relationships of $70 million (12 year weighted-average useful life), and unpatented technology of $18 million (8 year weighted-average useful life). (3) INVENTORIES The components of inventories at December 31 were as follows (in thousands): Raw materials and supplies Work in process Finished products Inventory reserves 2013 2012 $127,525 $121,573 30,498 90,352 (43,452) $204,923 29,725 81,536 (41,967) $190,867 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 39 (4) PROPERTY, PLANT AND EQUIPMENT The components of property, plant and equipment at December 31 were as follows (in thousands): Land Buildings Machinery and other equipment Accumulated depreciation $ 2013 4,384 79,219 310,738 394,341 $ 2012 4,308 74,609 291,004 369,921 (277,031) (259,524) $ 117,310 $ 110,397 Depreciation and amortization expense was $37,756, $37,888 and $36,780 for the years ended December 31, 2013, 2012 and 2011, respectively. (5) GOODWILL AND OTHER INTANGIBLE ASSETS The carrying value of goodwill by segment was as follows (in thousands): Industrial Technology Energy Systems and Controls Medical and Scientific Imaging RF Technology Total Balances at December 31, 2011 $419,053 $393,967 $ 768,228 $1,285,178 $2,866,426 Goodwill acquired Currency translation adjustments Reclassifications and other - 2,702 - 8,670 1,420 - 999,030 5,144 - - 1,007,700 3,395 (17,930) 12,661 (17,930) Balances at December 31, 2012 $421,755 $404,057 $1,772,402 $1,270,643 $3,868,857 Goodwill acquired Currency translation adjustments Reclassifications and other - 3,746 - 27,944 198 2,498 680,732 (13,345) (4,283) - (76) (16,273) 708,676 (9,477) (18,058) Balances at December 31, 2013 $425,501 $434,697 $2,435,506 $1,254,294 $4,549,998 Goodwill acquired during the years ended December 31, 2013 and 2012 was due primarily to the acquisitions of MHA and Sunquest, respectively. The reclassifications and other during the years ended December 31, 2013 and 2012 are due primarily to immaterial out of period corrections of tax adjustments for TransCore and iTrade, respectively, that were not material in the current or prior periods. 40 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT Other intangible assets were comprised of (in thousands): Assets subject to amortization: Customer related intangibles Unpatented technology Software Patents and other protective rights Trade secrets Assets not subject to amortization: Trade names Balances at December 31, 2012 Assets subject to amortization: Customer related intangibles Unpatented technology Software Patents and other protective rights Trade names Assets not subject to amortization: Trade names Balances at December 31, 2013 Cost Accum. amort. Net book value $1,509,339 $ (379,535) $1,129,804 198,609 160,520 40,399 1,500 331,590 (97,487) (44,256) (20,312) (1,500) 101,122 116,264 20,087 - - 331,590 $2,241,957 $ (543,090) $1,698,867 $1,936,336 $ (464,018) $1,472,318 216,044 160,618 31,394 656 358,219 (120,091) (58,084) (21,922) (16) 95,953 102,534 9,472 640 - 358,219 $2,703,267 $ (664,131) $2,039,136 Amortization expense of other intangible assets was $147 million, $113 million, and $98 million during the years ended December 31, 2013, 2012 and 2011, respectively. Amortization expense is expected to be $150 million in 2014, $137 million in 2015, $134 million in 2016, $123 million in 2017 and $116 million in 2018. (6) ACCRUED LIABILITIES Accrued liabilities at December 31 were as follows (in thousands): Interest Customer deposits Commissions Warranty Accrued dividend Rebates Billings in excess of cost Other 2013 2012 $ 18,285 $ 29,537 21,438 12,030 14,336 19,863 14,104 5,016 48,640 18,738 14,372 9,755 - - 7,912 48,037 $ 153,712 $ 128,351 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 41 (7) INCOME TAXES Earnings before income taxes for the years ended December 31, 2013, 2012 and 2011 consisted of the following components (in thousands): United States Other 2013 $517,432 236,698 $754,130 2012 $430,573 256,108 $686,681 2011 $359,800 245,187 $604,987 Components of income tax expense for the years ended December 31, 2013, 2012 and 2011 were as follows (in thousands): Current: Federal State Foreign Deferred: Federal Foreign 2013 2012 2011 $166,430 12,577 40,451 (1,965) (1,656) $215,837 $136,860 9,972 48,403 15,789 (7,703) $203,321 $123,310 14,903 41,437 1,846 (3,756) $177,740 Reconciliations between the statutory federal income tax rate and the effective income tax rate for the years ended December 31, 2013, 2012 and 2011 were as follows: Federal statutory rate Foreign rate differential R&D tax credits State taxes, net of federal benefit Foreign tax credit Section 199 deduction Other, net 2013 35.0% (4.1) (0.5) 1.9 - (1.8) (1.9) 28.6% 2012 35.0% (3.9) - 1.7 (2.4) (1.3) 0.5 29.6% 2011 35.0% (3.7) (0.7) 1.7 - (1.3 ) (1.6) 29.4% The deferred income tax balance sheet accounts arise from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. Components of the deferred tax assets and liabilities at December 31 were as follows (in thousands): Deferred tax assets: Reserves and accrued expenses Inventories Net operating loss carryforwards R&D credits Foreign tax credits Valuation allowance Total deferred tax assets Deferred tax liabilities: Reserves and accrued expenses Amortizable intangible assets Plant and equipment Total deferred tax liabilities 42 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT 2013 2012 $119,955 10,315 35,286 3,134 425 (5,917) $163,198 $ 20,995 826,838 12,423 $860,256 $ 63,703 9,171 21,161 6,331 20,270 - $120,636 $ 10,766 691,536 8,844 $711,146 At December 31, 2013, the Company had approximately $35.3 million of U.S. federal net operating loss carryforwards. If not utilized, these carryforwards will expire in years 2023 through 2033. The net operating loss carryforward increased between 2012 and 2013 primarily due to losses incurred by a U.S. entity that is not a member of the Company’s consolidated tax group and therefore not available for offset against the taxable income of other members of the group. In a recent acquisition, the consolidated group obtained federal net operating losses subject to an IRC Section 382 limitation; however, the Company expects to utilize the losses in their entirety prior to expiration. The Company’s state net operating loss carryforwards are primarily related to Florida and New Jersey and will expire in years 2027 through 2030 if not utilized. The New Jersey net operating loss was acquired as part of a recent acquisition. The Company has smaller net operating losses in various other states. Additionally, the Company has a foreign tax credit carryforward and a R&D tax credit carryforward. As of December 31, 2013, the Company determined that a total valuation allowance of $5.9 million was necessary to reduce U.S. deferred tax assets by $2.6 million and foreign deferred tax assets by $3.3 million, where it was more likely than not that some portion or all of such deferred tax assets will not be realized. As of December 31, 2013, based on the Company’s estimates of future taxable income and any applicable tax-planning strategies within various tax jurisdictions, the Company believes that it is more likely than not that the remaining net deferred tax assets will be realized. The Company recognizes in the consolidated financial statements only those tax positions determined to be “more likely than not” of being sustained upon examination based on the technical merits of the positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): Beginning balance Additions for tax positions of prior periods Additions for tax positions of the current period Additions due to acquisitions Reductions for tax positions of prior periods Reductions for tax positions of the current period Settlements with taxing authorities Lapse of applicable statute of limitations Ending balance 2013 $24,865 3,055 1,639 5,026 (3,675) - (3,986) $26,924 2012 $ 19,556 1,371 1,541 9,116 (197) - (6,522) $ 24,865 2011 $24,765 470 2,572 - (558) (4,043) (3,650) $19,556 The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $25.5 million. Interest and penalties related to unrecognized tax benefits are classified as a component of income tax expense and totaled $(0.5) million in 2013. Accrued interest and penalties were $4.5 million at December 31, 2013 and $5.0 million at December 31, 2012. During the next twelve months, the unrecognized tax benefits are expected to increase by a net $1.2 million, due mainly to identified uncertain tax positions. The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state, city and foreign jurisdictions. The Company’s federal income tax returns for 2010 through the current period remain subject to examination and the relevant state, city and foreign statutes vary. At December 31, 2013, the Internal Revenue Service has been and is continuing to examine the Company’s income tax returns for the years 2010 and 2011. The Company does not expect the assessment of any significant additional tax in excess of amounts reserved. (8) LONG-TERM DEBT On July 27, 2012, Roper entered into a $1.5 billion unsecured credit facility (the “2012 Facility”) with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders, which replaced its prior unsecured credit facility dated as of July 7, 2008 (the “2008 Facility”). The 2012 Facility is composed of a five year $1.5 billion revolving credit facility. Roper may also, subject to compliance with specified conditions, request term loans or additional revolving credit commitments in an aggregate amount not to exceed $350 million. At December 31, 2013, there were $250 million of outstanding borrowings under the 2012 Facility. Roper recorded a $1.0 million non-cash debt extinguishment charge in the third quarter of 2012 related to the early termination of the 2008 Facility. This charge reflects the unamortized fees associated with the 2008 Facility and was reported as other expense. The 2012 Facility contains affirmative and negative covenants which, among other things, limit Roper’s ability to incur new debt, prepay subordinated debt, make certain investments and acquisitions, sell assets and grant liens, make restricted payments (including the payment of dividends on our common stock) and capital expenditures, or change its line of business. Roper is 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 43 also subject to financial covenants which require the Company to limit its consolidated total leverage ratio and to maintain a consolidated interest coverage ratio. The most restrictive covenant is the consolidated total leverage ratio which is limited to 3.5. The Company was in compliance with its debt covenants throughout the years ended December 31, 2013 and 2012. On June 6, 2013, the Company completed a public offering of $800 million aggregate principal amount of 2.050% senior unsecured notes due October 1, 2018. The notes were issued at 99.791% of their principal amount. Net proceeds of $793.5 million were used to pay off a portion of the outstanding revolver balance under the 2012 Facility. The notes bear interest at a fixed rate of 2.050% per year, payable semi-annually in arrears on April 1 and October 1 of each year, beginning October 1, 2013. Roper may redeem some or all of the notes at any time or from time to time, at 100% of their principal amount plus a make-whole premium based on a spread to U.S. Treasury securities as described in the indenture relating to the notes. On November 21, 2012, Roper completed a public offering of $400 million aggregate principal amount of 1.850% senior unsecured notes due November 15, 2017 and $500 million aggregate principal amount of 3.125% senior unsecured notes due November 15, 2022. The notes bear interest at a fixed rate of 1.850% and 3.125% per year, respectively, payable semi-annually in arrears on May 15 and November 15 of each year, beginning May 15, 2013. Roper may redeem some or all of the notes at any time or from time to time, at 100% of their principal amount plus a make-whole premium based on a spread to U.S. Treasury securities as described in the indenture relating to the notes. In September 2009, the Company completed a public offering of $500 million aggregate principal amount of 6.25% senior unsecured notes due September 2019. The notes bear interest at a fixed rate of 6.25% per year, payable semi-annually in arrears on March 1 and September 1 of each year, beginning March 1, 2010. Roper may redeem some of all of these notes at any time or from time to time, at 100% of their principal amount, plus a make- whole premium based on a spread to U.S. Treasury securities. The 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. On August 15, 2013, $500 million of senior notes due 2013 matured, and were repaid using revolver borrowings from the 2012 Facility. Other debt includes $8 million of senior subordinated convertible notes due 2034. Total debt at December 31 consisted of the following (in thousands): $1.50 billion revolving credit facility 2013 Notes* 2017 Notes 2018 Notes 2019 Notes 2022 Notes Senior Subordinated Convertible Notes Other Total debt Less current portion Long-term debt *Shown net of fair value swap adjustment of $5,087. 44 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT 2013 2012 $ 250,000 $ 100,000 - 400,000 800,000 500,000 500,000 8,270 6,582 2,464,852 11,016 505,087 400,000 - 500,000 500,000 11,594 5,441 2,022,122 519,015 $2,453,836 $1,503,107 The 2012 Facility and Roper’s $2.2 billion senior notes and senior subordinated convertible notes provide substantially all of Roper’s daily external financing requirements. The interest rate on the borrowings under the 2012 Facility is calculated based upon various recognized indices plus a margin as defined in the credit agreement. At December 31, 2013, Roper’s debt consisted of $2.2 billion of senior notes, $250 million of outstanding revolver borrowings and $8 million in senior subordinated convertible notes. In addition, the Company had $6.5 million of other debt in the form of capital leases, several smaller facilities that allow for borrowings or the issuance of letters of credit in foreign locations to support Roper’s non-U.S. businesses and $41 million of outstanding letters of credit at December 31, 2013. In December 2003, the Company issued through a public offering $230 million of 3.75% subordinated convertible notes due in 2034 at an original issue discount of 60.498% (the “Convertible Notes”). The Convertible Notes are subordinated in right of payment and collateral to all of Roper’s existing and future senior debt. Cash interest on the notes was paid semi-annually until January 15, 2009, after which interest is recognized at the effective rate of 3.75% and represents accrual of original issue discount, and only contingent cash interest may be paid. Contingent cash interest may be paid during any six month period if the average trading price of a note for a five trading day measurement period preceding the applicable six month period equals 120% or more of the sum of the issue price, accrued original issue discount and accrued cash interest, if any, for such note. The contingent cash interest payable per note in respect of any six month period will equal the annual rate of 0.25%. In accordance with this criterion, contingent interest has been paid for each six month period since January 15, 2009. Holders receive cash up to the value of the accreted principal amount of the notes converted and, at the Company’s option, any remainder of the conversion value may be paid in cash or shares of common stock. Holders may require Roper to purchase all or a portion of their notes on January 15, 2014 at a price of $475.66 per note, on January 15, 2019 at a price of $572.76 per note, on January 15, 2024 at a price of $689.68 per note, and on January 15, 2029 at a price of $830.47 per note, in each case plus accrued cash interest, if any, and accrued contingent cash interest, if any. The Company may only pay the purchase price of such notes in cash and not in common stock. In addition, if Roper experiences a change in control, each holder may require Roper to purchase for cash all or a portion of such holder’s notes at a price equal to the sum of the issue price plus accrued original issue discount for non-tax purposes, accrued cash interest, if any, and accrued contingent cash interest, if any, to the date of purchase. The Convertible Notes are classified as short-term debt as the notes became convertible on October 1, 2005 based upon the Company’s common stock trading above the trigger price for at least 20 trading days during the 30 consecutive trading-day periods ending on September 30, 2005. At December 31, 2013, the conversion price on the outstanding notes was $474.98. If converted at December 31, 2013, the value would have exceeded the $8 million principal amount of the notes by $22 million and could have resulted in the issuance of 160,974 shares of the Company’s common stock. Future maturities of long-term debt during each of the next five years ending December 31 and thereafter were as follows (in thousands): 2014 2015 2016 2017 2018 Thereafter (9) FAIR VALUE $ 11,016 2,262 1,234 650,335 800,005 1,000,000 $2,464,852 Roper’s debt at December 31, 2013 included $2.2 billion of fixed-rate senior notes with the following fair values (in millions): $400 million senior notes due 2017 $800 million senior notes due 2018 $500 million senior notes due 2019 $500 million senior notes due 2022 $398 787 581 462 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 45 The fair values of the senior notes are based on the trading prices of the notes, which the Company has determined to be Level 2 in the FASB fair value hierarchy. Short-term debt included $8 million of fixed-rate convertible notes which were at fair value due to the short-term nature of the notes. Most of Roper’s other borrowings at December 31, 2013 were at various interest rates that adjust relatively frequently under its credit facility. The fair value for each of these borrowings at December 31, 2013 was estimated to be the face value of these borrowings. On August 15, 2013, an aggregate notional amount of $500 million of interest rate swaps expired. The swaps were designated as fair value hedges and effectively changed the Company’s $500 million senior notes due 2013 with a fixed interest rate of 6.625% to a variable-rate obligation at a weighted-average spread of 4.377% plus LIBOR. The Company had determined the swaps to be Level 2 in the FASB fair value hierarchy. To account for the fair value hedge, the swap was recorded at fair value in the balance sheet as an asset or liability, and the changes in fair values of both the interest rate swap and the hedged senior notes due 2013 were recorded as interest expense. The fair value of the swap was an asset balance of $5.8 million and the corresponding change in the fair value of the notes being hedged was an increase of $5.1 million at December 31, 2012. The impact on earnings was immaterial in the years ended December 31, 2013, 2012 and 2011. (10) RETIREMENT AND OTHER BENEFIT PLANS Roper maintains eleven defined contribution retirement plans under the provisions of Section 401(k) of the IRC covering substantially all U.S. employees not subject to collective bargaining agreements. Roper partially matches employee contributions. Costs related to these plans were $16.5 million, $16.4 million and $15.2 million for 2013, 2012 and 2011, respectively. Roper also maintains various defined benefit retirement plans covering employees of non-U.S. and certain U.S. subsidiaries and a plan that supplements certain employees for the contribution ceiling applicable to the Section 401(k) plans. The costs and accumulated benefit obligations associated with each of these plans were not material. (11) STOCK-BASED COMPENSATION The Roper Industries, Inc. Amended and Restated 2006 Incentive Plan (“2006 Plan”) is a stock-based compensation plan used to grant incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights or equivalent instruments to the Company’s employees, officers, directors and consultants. The 2006 Plan replaced the Amended and Restated 2000 Incentive Plan (“2000 Plan”), and no additional grants will be made from the 2000 Plan. The number of shares reserved for issuance under the 2006 Plan is 14,000,000, plus the 17,000 remaining shares that were available to grant under the 2000 Plan at June 28, 2006, plus any shares underlying outstanding awards under the 2000 Plan that terminate or expire unexercised, or are cancelled, forfeited or lapse for any reason subsequent to June 28, 2006. At December 31, 2013, 5,714,062 shares were available to grant. Under the Roper Industries, Inc., Employee Stock Purchase Plan (“ESPP”), all employees in the U.S. and Canada are eligible to designate up to 10% of eligible earnings to purchase Roper’s common stock at a 5% discount to the average closing price of its common stock at the beginning and end of a quarterly offering period. Common stock sold to the employees may be either treasury stock, stock purchased on the open market, or newly issued shares. Stock based compensation expense for the years ended December 31, 2013, 2012 and 2011 was as follows (in millions): Stock based compensation Tax benefit recognized in net income Windfall tax benefit, net 2013 $53.4 18.7 16.0 2012 $40.8 14.3 30.8 2011 $31.7 11.1 12.7 Stock Options – Stock options are typically granted at prices not less than 100% of market value of the underlying stock at the date of grant. Stock options typically vest over a period of up to three to five years from the grant date and generally expire seven to ten years after the grant date. The Company recorded $16.9 million, $14.8 million, and $12.2 million of compensation expense relating to outstanding options during 2013, 2012 and 2011, respectively, as a component of corporate and certain segment general and administrative expenses. The Company estimates the fair value of its option awards using the Black-Scholes option valuation model that uses the assumptions noted in the following table. The stock volatility for each grant is measured using the weighted-average of historical daily price changes of the Company’s common stock over the most recent period equal to the expected life of the grant. The expected term of options granted is derived from historical data to estimate option exercises and employee terminations, and 46 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The weighted-average fair value of options granted in 2013, 2012 and 2011 were calculated using the following weighted-average assumptions: Weighted-average fair value ($) Risk-free interest rate (%) Average expected option life (years) Expected volatility (%) Expected dividend yield (%) 2013 37.08 0.86 5.19 36.09 0.56 2012 30.25 0.77 5.24 36.51 0.58 2011 24.45 1.91 5.34 35.27 0.60 The following table summarizes the Company’s activities with respect to its stock option plans for the years ended December 31, 2013 and 2012: Outstanding at January 1, 2012 Granted Exercised Canceled Outstanding at December 31, 2012 Granted Exercised Canceled Outstanding at December 31, 2013 Exercisable at December 31, 2013 Number of shares 3,822,662 538,100 (1,389,069) (53,498) 2,918,195 601,350 (424,945) (106,164) 2,988,436 1,859,725 Weighted-average exercise price per share $ 50.44 Weighted-average contractual term Aggregate intrinsic value 95.27 40.46 70.01 63.15 117.78 56.48 98.74 74.00 $ 56.99 6.52 $141,029,378 6.22 4.84 $193,279,214 $151,929,651 The following table summarizes information for stock options outstanding at December 31, 2013: Outstanding options Exercisable options Exercise price $ 14.09 - 28.17 28.17 - 42.26 42.27 - 56.34 56.35 - 70.43 70.44 - 84.52 84.53 - 98.60 98.61 - 112.69 112.70 - 126.77 126.78 - 140.86 $ 14.09 - 140.86 Number 157,638 126,574 1,113,058 96,800 453,392 419,924 48,700 547,350 25,000 Average exercise price $ 23.70 41.81 53.79 67.88 74.63 94.00 103.41 117.03 131.54 2,988,436 $ 74.00 Average remaining life (years) 0.2 5.2 4.4 7.5 7.1 8.1 8.6 9.2 9.6 6.2 Number 157,638 126.574 1,113,058 45,300 278,034 130,085 9,036 - - Average exercise price $ 23.70 41.81 53.79 66.71 75.21 93.91 103.64 - - 1,859,725 $ 56.99 At December 31, 2013, there was $23.7 million of total unrecognized compensation expense related to nonvested options granted under the Company’s share-based payment plans. That cost is expected to be recognized over a weighted-average period of 2.0 years. The total intrinsic value of options exercised in 2013, 2012 and 2011 was $28.8 million, $86.0 million and $41.2 million, respectively. Cash received from option exercises under all plans in 2013 and 2012 was $24.0 million and $56.1 million, respectively. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 47 Restricted Stock Grants - During 2013 and 2012, the Company granted 399,540 and 374,307 shares, respectively, of restricted stock to certain employee and director participants under the 2006 Plan. Restricted stock grants generally vest over a period of 1 to 3 years. The Company recorded $36.5 million, $25.9 million and $19.5 million of compensation expense related to outstanding shares of restricted stock held by employees and directors during 2013, 2012 and 2011, respectively. A summary of the Company’s nonvested shares activity for 2013 and 2012 is as follows: Nonvested at December 31, 2011 Granted Vested Forfeited Nonvested at December 31, 2012 Granted Vested Forfeited Nonvested at December 31, 2013 Number of Shares 753,811 374,307 (551,051) (5,162) 571,905 399,540 (373,946) (23,649) 573,850 Weighted-Average Fair Value $ 61.15 95.78 64.59 70.56 $ 80.96 117.74 126.80 124.48 $103.44 At December 31, 2013, there was $38.9 million of total unrecognized compensation expense related to nonvested awards granted to both employees and directors under the Company’s share-based payment plans. That cost is expected to be recognized over a weighted-average period of 2.0 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, 2013. Employee Stock Purchase Plan - During 2013, 2012 and 2011, participants of the ESPP purchased 20,211, 22,863 and 27,756 shares, respectively, of Roper’s common stock for total consideration of $2.4 million, $2.2 million, and $2.1 million, respectively. All of these shares were purchased from Roper’s treasury shares. The Company had no compensation expense relating to the stock purchase plan during 2013, 2012 and 2011. (12) CONTINGENCIES Roper, in the ordinary course of business, is the subject of, or a party to, various pending or threatened legal actions, including product liability and employment practices. It is vigorously contesting all lawsuits that, in general, are based upon claims of the kind that have been customary over the past several years. After analyzing the Company’s contingent liabilities on a gross basis and, based upon past experience with resolution of its product liability and employment practices claims and the limits of the primary, excess, and umbrella liability insurance coverages that are available with respect to pending claims, management believes that adequate provision has been made to cover any potential liability not covered by insurance, and that the ultimate liability, if any, arising from these actions should not have a material adverse effect on the consolidated financial position, results of operations or cash flows of Roper. Over recent years there has been a significant increase in certain U.S. states in asbestos-related litigation claims against numerous industrial companies. Roper or its subsidiaries have been named defendants in some such cases. No significant resources have been required by Roper to respond to these cases and Roper believes it has valid defenses to such claims and, if required, intends to defend them vigorously. Given the state of these claims it is not possible to determine the potential liability, if any. Roper’s rent expense was $39.8 million, $26.8 million and $29.7 million for 2013, 2012 and 2011, respectively. Roper’s future minimum property lease commitments are as follows (in millions): 2014 2015 2016 2017 2018 Thereafter Total 48 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT $ 33.6 28.5 23.0 15.8 7.3 4.8 $112.70 A summary of the Company’s warranty accrual activity is presented below (in thousands): Balance, beginning of year Additions charged to costs and expenses* Deductions Other Balance, end of year 2013 2012 $ 9,755 $ 8,147 $ 20,387 (15,697) (109) 11,845 (10,287) 50 2011 7,038 8,846 (7,716) (21) $ 14,336 $ 9,755 $ 8,147 * During the second quarter of 2013, the Company identified a vendor-supplied component within a refrigeration system valve that did not meet its quality standards, and $9.1 million was expensed to cover the estimated cost of replacing the faulty components for customers. Other included warranty balances at acquired businesses at the dates of acquisition, the effects of foreign currency translation adjustments, reclassifications and other. At December 31, 2013 the Company had outstanding surety bonds of $410 million. (13) SEGMENT AND GEOGRAPHIC AREA INFORMATION Roper’s operations are reported in four segments around common customers, markets, sales channels, technologies and common cost opportunities. The segments are: Industrial Technology, Energy Systems and Controls, Medical & Scientific Imaging, and RF Technology. Products included within the Industrial Technology segment are water and fluid handling pumps, flow measurement and metering equipment, industrial valves and controls, and equipment and consumables for materials analysis and industrial leak testing. The Energy Systems and Controls segment’s products include control systems, equipment and consumables for fluid properties testing, vibration sensors and other non-destructive inspection and measurement products and services. The Medical and Scientific Imaging segment offers medical products and software, high performance digital imaging products and software and handheld and vehicle mounted computers. The RF Technology segment includes products and systems related to comprehensive toll and traffic systems and processing, security and access control, campus card systems, software-as-a-service applications in the freight matching and food industries and utility metering and remote monitoring applications. Roper’s management structure and internal reporting are aligned consistently with these four segments. There were no material transactions between Roper’s business segments during 2013, 2012 and 2011. Sales between geographic areas are primarily of finished products and are accounted for at prices intended to represent third-party prices. Operating profit by business segment and by geographic area is defined as net sales less operating costs and expenses. These costs and expenses do not include unallocated corporate administrative expenses. Items below income from operations on Roper’s statement of earnings are not allocated to business segments. Identifiable assets are those assets used primarily in the operations of each business segment or geographic area. Corporate assets are principally comprised of cash and cash equivalents, deferred tax assets, recoverable insurance claims, deferred compensation assets, unamortized deferred financing costs and property and equipment. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 49 Selected financial information by business segment for 2013, 2012 and 2011 follows (in thousands): 2013 Net sales Operating profit Assets: Operating assets Intangible assets, net Other Total Capital expenditures Depreciation and other amortization 2012 Net sales Operating profit Assets: Operating assets Intangible assets, net Other Total Capital expenditures Depreciation and other amortization 2011 Net sales Operating profit Assets: Operating assets Intangible assets, net Other Total Capital expenditures Depreciation and other amortization Industrial Technology Energy Systems and Controls Medical and Scientific Imaging RF Technology Corporate Total $ 779,564 $ 651,920 $ 902,281 $ 904,363 $ - $ 3,238,128 223,053 183,679 268,172 253,532 (86,075) 842,361 232,505 583,822 75,215 17,043 21,551 214,926 597,250 167,879 4,952 21,353 237,681 266,026 15,325 966,463 3,682,465 1,725,597 - 6,589,134 152,211 62,576 171,503 629,384 10,231 85,177 10,190 60,590 8,184,981 42,528 189,190 112 519 $ 795,240 $ 646,116 $ 703,835 $ 848,298 $ - $ 2,993,489 244,691 179,824 187,246 223,335 (77,509) 757,587 225,620 590,175 100,102 14,030 21,754 199,016 555,667 80,230 5,532 19,671 232,527 251,721 24,731 933,615 2,631,085 1,790,797 - 5,567,724 114,834 51,044 223,555 569,765 8,253 50,309 9,765 62,629 7,071,104 38,405 154,748 825 385 $ 737,356 $ 597,802 $ 610,617 $ 851,314 $ - $ 2,797,089 208,188 157,960 148,376 202,877 (56,862) 660,539 219,180 597,769 32,054 11,153 23,119 194,527 535,606 64,753 176,893 971,584 49,599 237,719 1,855,609 19,824 848,143 - 3,960,568 31,911 332,389 510,706 6,889 18,177 12,498 34,224 9,634 64,329 5,319,417 40,702 140,143 528 294 50 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT Summarized data for Roper’s U.S. and foreign operations (principally in Canada, Europe and Asia) for 2013, 2012 and 2011, based upon the country of origin of the Roper entity making the sale, was as follows (in thousands): Non-U.S. Eliminations Total 2013 Sales to unaffiliated customers Sales between geographic areas Net sales Long-lived assets 2012 Sales to unaffiliated customers Sales between geographic areas Net sales Long-lived assets 2011 Sales to unaffiliated customers Sales between geographic areas Net sales Long-lived assets United States $ 2,400,592 141,529 $ 2,542,121 $ 135,157 $ 837,536 121,431 $ 958,967 $ 36,266 $ 2,174,443 $ 819,046 140,864 $ 2,315,307 $ 125,015 111,813 $ 930,859 $ 35,702 $ 1,985,756 $ 811,333 153,121 $ 2,138,877 $ 135,399 229,583 $ 1,040,916 $ 35,729 $ - (262,960) $ (262,960) $ $ - - (252,677) $ (252,677) $ $ - - (382,704) $ (382,704) $ - $ 3,238,128 - $ 3,238,128 $ 171,423 $ 2,993,489 - $ 2,993,489 $ 160,717 $ 2,797,089 - $ 2,797,089 $ 171,128 Export sales from the U.S. during the years ended December 31, 2013, 2012 and 2011 were $479 million, $459 million and $410 million, respectively. In the year ended December 31, 2013, these exports were shipped primarily to Asia (35%), Europe (19%), Canada (16%), Middle East (13%), South America (7%), South Pacific (5%) and other (5%). Sales to customers outside the U.S. accounted for a significant portion of Roper’s revenues. Sales are attributed to geographic areas based upon the location where the product is ultimately shipped. Roper’s net sales for the years ended December 31, 2013, 2012 and 2011 are shown below by region, except for Canada, which is presented separately as it is the only country in which Roper has had greater than 5% of total sales for any of the three years presented (in thousands): 2013 Canada Europe Asia Middle East Rest of the world Total 2012 Canada Europe Asia Middle East Rest of the world Total 2011 Canada Europe Asia Middle East Rest of the world Total Industrial Technology Energy Systems and Controls Medical and Scientific Imaging $ 109,361 108,644 65,622 3,865 26,716 $ 314,208 $ 94,035 104,105 75,113 3,846 34,091 $ 311,190 $ 64,864 110,656 67,093 3,964 33,721 $ 280,298 $ 34,260 153,807 136,934 32,444 82,956 $ 440,401 $ 39,836 148,360 121,997 47,866 68,275 $ 426,334 $ 39,547 148,767 118,565 44,792 63,064 $ 414,735 $ 25,502 168,394 103,931 9,361 17,856 $ 325,044 $ 21,308 161,075 111,642 4,613 20,500 $ 319,140 $ 21,127 162,725 86,807 5,062 17,194 $ 292,915 RF Technology $ 45,954 62,825 8,134 44,341 11,865 $ 173,119 $ 47,371 64,492 6,465 30,125 9,293 $ 157,746 $ 40,636 88,741 8,833 28,406 9,790 $ 176,406 Total $ 215,077 493,670 314,621 90,011 139,393 $ 1,252,772 $ 202,550 478,032 315,217 86,450 132,161 $ 1,214,410 $ 166,174 510,889 281,298 82,224 123,769 $ 1,164,354 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 51 (14) CONCENTRATION OF RISK Financial instruments which potentially subject the Company to credit risk consist primarily of cash, cash equivalents and trade receivables. The Company maintains cash and cash equivalents with various major financial institutions. Cash equivalents include investments in commercial paper of companies with high credit ratings, investments in money market securities and securities backed by the U.S. Government. At times such amounts may exceed the F.D.I.C. limits. The Company limits the amount of credit exposure with any one financial institution and believes that no significant concentration of credit risk exists with respect to cash investments. Trade receivables subject the Company to the potential for credit risk with customers. To reduce credit risk, the Company performs ongoing evaluations of its customers’ financial condition. (15) QUARTERLY FINANCIAL DATA (UNAUDITED) (in thousands, except per share data) First Quarter Second Quarter Third Quarter Fourth Quarter 2013 Net sales Gross profit Income from operations Net earnings Earnings from continuing operations per common share: Basic Diluted 2012 Net sales Gross profit Income from operations Net earnings Earnings from continuing operations per common share: Basic Diluted $737,135 $784,010 $827,810 $889,173 421,576 185,177 124,914 1.26 1.25 445,507 179,746 111,353 1.12 1.11 482,625 219,349 136,323 1.37 1.36 533,220 258,089 165,703 1.67 1.65 $711,066 $724,872 $747,641 $809,910 391,193 170,304 108,309 1.12 1.09 397,608 178,784 114,813 1.18 1.15 416,555 183,257 116,708 1.19 1.17 466,361 225,242 143,530 1.46 1.44 The sum of the four quarters may not agree with the total for the year due to rounding. 52 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE II – CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 2013, 2012 and 2011 (in thousands) Balance at beginning of year Allowance for doubtful accounts and sales allowances 2013 2012 2011 Reserve for inventory obsolescence 2013 2012 2011 $15,976 10,636 10,349 $41,967 35,224 32,516 Additions charged to costs and expenses $ 1,350 4,573 2,816 $11,360 14,736 11,407 Deductions Other Balance at end of year $(2,992) (2,403) (2,842) $ 658 3,170 313 $14,992 15,976 10,636 $(9,696) $ (179) $43,452 (8,253) (8,848) 260 149 41,967 35,224 Deductions from the allowance for doubtful accounts represented the net write-off of uncollectible accounts receivable. Deductions from the inventory obsolescence reserve represented the disposal of obsolete items. Other included the allowance for doubtful accounts and reserve for inventory obsolescence of acquired businesses at the dates of acquisition, the effects of foreign currency translation adjustments for those companies whose functional currency was not the U.S. dollar, reclassifications and other. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 53 ITEM 9 | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no changes in accountants or disagreements with accountants on accounting and financial disclosures. ITEM 9A | CONTROLS AND PROCEDURES MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequate control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f ) and 15d-15(f ). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control- Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2013. Our internal control over financial reporting as of December 31, 2013 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein. Our management excluded acquisitions completed during 2013 from its assessment of internal control over financial reporting as of December 31, 2013. These acquisitions are wholly-owned subsidiaries whose excluded aggregate assets represent 1.3%, and whose aggregate total revenues represent 2.3%, of the related consolidated financial statement amounts as of and for the year ended December 31, 2013. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES As required by SEC rules, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer. Based on this evaluation, we have concluded that our disclosure controls and procedures are effective as of December 31, 2013. Disclosure controls and procedures are our controls and other procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There was no change in our internal control over financial reporting that occurred during the fourth quarter of 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B | OTHER INFORMATION There were no disclosures of any information required to be filed on Form 8-K during the fourth quarter of 2013 that were not filed. 54 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT PART III Except as otherwise indicated, the following information required by the Instructions to Form 10-K is incorporated herein by reference from the sections of the Roper Proxy Statement for the annual meeting of shareholders to be held on May 21, 2014 (“2014 Proxy Statement”), as specified below: ITEM 10 | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE We incorporate the information required by this item by reference to our 2014 Proxy Statement. ITEM 11 | EXECUTIVE COMPENSATION We incorporate the information required by this item by reference to our 2014 Proxy Statement. ITEM 12 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Other than the information set forth below, we incorporate the information required by this item by reference to our 2014 Proxy Statement. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table provides information as of December 31, 2013 regarding compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance. (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (b) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) 3,562,286 - 3,562,286 $78.75 - $78.75 5,714,062 - 5,714,062 Plan Category Equity Compensation Plans Approved by Shareholders (1) Equity Compensation Plans Not Approved by Shareholders Total (1) Consists of the Amended and Restated 2000 Stock Incentive Plan (no additional equity awards may be granted under this plan) and the Amended and Restated 2006 Incentive Plan. ITEM 13 | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE We incorporate the information required by this item by reference to our 2014 Proxy Statement. ITEM 14 | PRINCIPAL ACCOUNTANT FEES AND SERVICES We incorporate the information required by this item by reference to our 2014 Proxy Statement. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 55 PART IV ITEM 15 | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as a part of this Annual Report. (1) Consolidated Financial Statements: The following consolidated financial statements are included in Part II, Item 8 of this report. Consolidated Balance Sheets as of December 31, 2013 and 2012 Consolidated Statements of Earnings for the years ended December 31, 2013, 2012 and 2011 Consolidated Statements of Stockholders’ Equity and Comprehensive Earnings for the years ended December 31, 2013, 2012 and 2011 Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011 Notes to Consolidated Financial Statements (2) Consolidated Valuation and Qualifying Accounts for the years ended December 31, 2013, 2012 and 2011 (b) Exhibits Exhibit No. Description of Exhibit (a)2.1 Stock Purchase Agreement, dated as of July 28, 2012 among Sunquest Holdings, Inc., the selling shareholders named therein and Roper Industries, Inc. (b)3.1 Amended and Restated Certificate of Incorporation. (c)3.2 Amended and Restated By-Laws. (d)3.3 Certificate of Amendment, amending Restated Certificate of Incorporation. (e)3.4 Certificate Eliminating References to Roper Industries, Inc.’s Series A Preferred Stock from the Certificate of Incorporation of Roper Industries, Inc. dated November 16, 2006. (f )3.5 Certificate of Amendment, amending Restated Certificate of Incorporation. (g)4.2 Indenture between Roper Industries, Inc. and SunTrust Bank, dated as of November 28, 2003. 4.3 Form of Debt Securities (included in Exhibit 4.2). (h)4.4 First Supplemental Indenture between Roper Industries, Inc. and SunTrust Bank, dated as of December 29, 2003. (i)4.5 Second Supplemental Indenture between Roper Industries, Inc. and SunTrust Bank, dated as of December 7, 2004. (j)4.6 Indenture between Roper Industries, Inc. and Wells Fargo Bank, dated as of August 4, 2008. (k)4.7 Form of Note. (l)4.8 Form of 2.05% Senior Notes due 2018. (m)4.9 Form of 6.25% Senior Notes due 2019. (n)4.10 Form of 1.850% Senior Notes due 2017. 4.11 Form of 3.125% Senior Notes due 2022. (included in Exhibit 4.10). (o)10.01 Form of Amended and Restated Indemnification Agreement. † (p)10.02 Employee Stock Purchase Plan, as amended and restated. † (q)10.03 2000 Stock Incentive Plan, as amended. † (r)10.04 Non-Qualified Retirement Plan, as amended. † (s)10.05 Brian D. Jellison Employment Agreement, dated as of December 29, 2008. † (t)10.06 Credit Agreement, dated as of July 27, 2012, among Roper Industries, Inc., as parent borrower, the foreign subsidiary borrowers of Roper Industries, Inc. from time to time parties thereto, the several lenders from time to time parties thereto, Bank of Tokyo-Mitsubishi UFJ Ltd., Barclays Bank PLC, Mizuho Corporate Bank, Ltd. and SunTrust Bank, as documentation agents, Wells Fargo Bank, N.A. and Bank of America Securities, N.A., as syndication agents, and JPMorgan Chase Bank, N.A., as administrative agent. (u)10.07 Form of Executive Officer Restricted Stock Award Agreement. † (u)10.08 Brian D. Jellison Restricted Stock Unit Award Agreement. † (v)10.09 Offer letter for John Humphrey, dated March 31, 2006. † (w)10.10 Amended and Restated 2006 Incentive Plan. † (x)10.11 Form of Restricted Stock Agreement for Non-Employee Directors. † 56 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT Exhibit No. Description of Exhibit (x)10.12 Form of Restricted Stock Agreement for Employees. † (x)10.13 Form of Incentive Stock Option Agreement. † (x)10.14 Form of Non-Statutory Stock Option Agreement. † (y)10.15 Director Compensation Plan, as amended. † (z)10.16 David B. Liner offer letter dated July 21, 2005. † (z)10.17 Amendment to John Humphrey offer letter. † (z)10.18 Amendment to David B. Liner offer letter. † 21.1 List of Subsidiaries, filed herewith. 23.1 Consent of Independent Registered Public Accountants, filed herewith. 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer, filed herewith. 31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer, filed herewith. 32.1 Section 1350 Certification of Chief Executive and Chief Financial Officers, filed herewith. 101.INS XBRL Instance Document, furnished herewith. 101.SCH XBRL Taxonomy Extension Schema Document, furnished herewith. 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document, furnished herewith. 101.DEF XBRL Taxonomy Extension Definition Linkbase Document, furnished herewith. 101.LAB XBRL Taxonomy Extension Label Linkbase Document, furnished herewith. 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document, furnished herewith. (a) (b) (c) (d) (e) (f ) (g) (h) (i) (j) (k) (l) Incorporated herein by reference to Exhibit 2.1 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed November 5, 2012 (file no. 1-12273). Incorporated herein by reference to Exhibit 3.1 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed March 17, 2003 (file no. 1-12273), as amended by the Certificate Eliminating References to the Company’s Series A Preferred Stock from the Certificate of Incorporation of Roper In- dustries, Inc. dated November 16, 2006, incorporated herein by reference to Exhibit 3.1 to the Roper Industries, Inc. Current Report on Form 8-K filed November 17, 2006 (file no. 1-12273). Incorporated herein by reference to Exhibit 3.1 to the Roper Industries, Inc. Current Report on Form 8-K filed April 24, 2012 (file no. 1-12273). Incorporated herein by reference to Exhibit 3.1 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed August 9, 2006 (file no. 1-12273) Incorporated herein by reference to Exhibit 3.1 to the Roper Industries, Inc. Current Report on Form 8-K filed November 17, 2006 (file no. 1-12273). Incorporated herein by reference to Exhibit 3.1 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed on August 9, 2007 (file no. 1-12273). Incorporated herein by reference to Exhibit 4.2 to the Roper Industries, Inc. Pre-Effective Amendment No. 1 to the Registration Statement on Form S-3 filed November 28, 2003 (file no. 333-110491). Incorporated herein by reference to Exhibit 4.1 to the Roper Industries, Inc. Current Report on Form 8-K filed January 13, 2004 (file no. 1-12273). Incorporated herein by reference to Exhibit 4.1 to the Roper Industries, Inc. Current Report on Form 8-K filed December 7, 2004 (file no. 1-12273). Incorporated herein by reference to Exhibit 4.2 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed on November 7, 2008 (file no. 1-12273). Incorporated herein by reference to Exhibit 4.2 to the Registration Statement on Form S-3 filed July 29, 2008 (file no. 333-152590). Incorporated herein by reference to Exhibit 4.1 to the Roper Industries, Inc. Current Report on Form 8-K filed June 6, 2013 (file no. 1-12273). (m) Incorporated herein by reference to Exhibit 4.1 to the Roper Industries, Inc. Current Report on Form 8-K filed September 2, 2009 (file no. 1-12273). (n) (o) (p) (q) (r) (s) (t) (u) (v) (w) (x) (y) (z) † Incorporated herein by reference to Exhibit 4.1 to the Roper Industries, Inc. Current Report on Form 8-K filed November 21, 2012 (file no. 1-12273). Incorporated herein by reference to Exhibit 10.04 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed August 31, 1999 (file no. 1-12273). Incorporated herein by reference to Exhibit 10.1 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed November 5, 2010 (file no. 1-12273). Incorporated herein by reference to Exhibit 10.05 to the Roper Industries, Inc. Annual Report on Form 10-K filed March 2, 2009 (file no. 1-12273). Incorporated herein by reference to Exhibit 10.06 to the Roper Industries, Inc. Annual Report on Form 10-K filed March 2, 2009 (file no. 1-12273). Incorporated herein by reference to Exhibit 10.07 to the Roper Industries, Inc. Annual Report on Form 10-K filed March 2, 2009 (file no. 1-12273). Incorporated herein by reference to Exhibit 10.1 to the Roper Industries, Inc. Current Report on Form 8-K filed August 2, 2012 (file no. 1-12273). Incorporated herein by reference to Exhibits 99.1 and 99.2 to the Roper Industries, Inc. Current Report on Form 8-K filed December 30, 2004 (file no. 1-12273). Incorporated herein by reference to Exhibit 10.1 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed August 9, 2006 (file no. 1-12273). Incorporated herein by reference to Appendix A to the Roper Industries, Inc. Definitive Proxy Statement on Schedule 14A filed April 30, 2012 (file no. 1-12273). Incorporated herein by reference to Exhibits 10.2, 10.3, 10.4 and 10.5 to the Roper Industries, Inc. Current Report on Form 8-K filed De- cember 6, 2006 (file no. 1-12273). Incorporated herein by reference to Exhibit 10.01 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed May 7, 2009 (file no. 1-12273). Incorporated herein by reference to Exhibits 10.20, 10.21 and 10.23 to the Roper Industries, Inc. Annual Report on Form 10-K filed March 2, 2009 (file no. 1-12273). Management contract or compensatory plan or arrangement. 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 57 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Roper has duly caused this Report to be signed on its behalf by the undersigned, therewith duly authorized. ROPER INDUSTRIES, INC. (Registrant) By: /S/ BRIAN D. JELLISON February 21, 2014 Brian D. Jellison, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of Roper and in the capacities and on the dates indicated. /S/ BRIAN D. JELLISON Brian D. Jellison /S/ JOHN HUMPHREY John Humphrey /S/ PAUL J. SONI Paul J. Soni President, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) February 21, 2014 Executive Vice President, Chief Financial Officer (Principal Financial Officer) February 21, 2014 Vice President and Controller (Principal Accounting Officer) /S/ DAVID W. DEVONSHIRE David W. Devonshire Director February 21, 2014 February 21, 2014 /S/ JOHN F. FORT, III John F. Fort, III /S/ ROBERT D. JOHNSON Director February 21, 2014 Robert D. Johnson Director February 21, 2014 /S/ ROBERT E. KNOWLING Robert E. Knowling Director /S/ WILBUR J. PREZZANO Wilbur J. Prezzano Director /S/ RICHARD F. WALLMAN Richard F. Wallman Director /S/ CHRISTOPHER WRIGHT Christopher Wright Director 58 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT February 21, 2014 February 21, 2014 February 21, 2014 February 21, 2014 EXHIBIT 21.1 Name of Subsidiary 3089554 Nova Scotia ULC Abel Equipos, S.A. Abel GmbH & Co. KG Abel Pumpen GmbH Abel Pumps, L.P. AC Analytical Controls B.V. AC Analytical Controls Holding B.V. AC Analytical Controls Services B.V. Acton Research Corporation Advanced Sensors Limited Alpha Holdings of Delaware I LLC Alpha Holdings of Delaware II LLC Alpha Technologies B.V. Alpha Technologies GmbH Alpha Technologies Japan LLC Alpha Technologies Services LLC Alpha Technologies U.K. Alpha Technologies, s.r.o. Alpha UK Holdings LLC Amot Controls Corporation Amot Controls GmbH Amot/Metrix Investment Company, Inc. Amphire Solutions, Inc. Jurisdiction of Incorporation/Organization Canada Spain Germany Germany Delaware Netherlands Netherlands Netherlands Delaware Ireland Delaware Delaware Netherlands Germany Delaware Delaware United Kingdom Czech Republic Delaware Delaware Germany Delaware Delaware Amtech Systems (Hong Kong) Limited Hong Kong Amtech Systems, LLC Amtech World Corporation Ascension Technology Corporation Black Diamond Advanced Technology, LLC Cambridge Viscosity, Inc. CBORD Holdings Corp. Civco Holding, Inc. Civco Medical Instruments Co., Inc. CIVCO Medical Solutions B.V. Compressor Controls (Beijing) Corporation Ltd. Compressor Controls Corporation Delaware Delaware Delaware Delaware Delaware Delaware Delaware Iowa Netherlands China Iowa Compressor Controls Corporation B.V. Netherlands 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 59 Name of Subsidiary Jurisdiction of Incorporation/Organization Compressor Controls Corporation Middle East Compressor Controls Corporation S.r.l. Compressor Controls Mauritius Ltd. Compressor Controls Pty Ltd. Cornell Pump Company Cornell Pump Europe GmbH DAP Technologies Corp. DAP Technologies Limited DAP Technologies LTD DAT Solutions, LLC. DCMH Group Holdings, Inc. DCMH Group Holdings, LLC DCMH Holdings, Inc. Dynamic Instruments, Inc. Dynisco (UK) Limited Dynisco Enterprises GmbH Dynisco Enterprises, LLC Dynisco Europe GmbH Dynisco Holding GmbH Delaware Italy Mauritius Australia Delaware Germany Delaware United Kingdom Canada Delaware Delaware Delaware Delaware California United Kingdom Germany Delaware Germany Germany Dynisco Hong Kong Holdings, Limited Hong Kong Dynisco Instruments LLC Dynisco Instruments S.a.r.l. Dynisco LLC Dynisco Parent, Inc. Dynisco S.r.l. Dynisco Shanghai Sensor and Instrument Co., Ltd. Dynisco Spol, SRO Dynisco –Viatran (M) Sdn Bhd Dynisco Viatran LLC Dynisco-Viatran Instruments Sdn Bhd Fluid Metering, Inc. FMS Purchasing & Services, Inc. FTI Flow Technology, Inc. Gatan GmbH Gatan Inc. Gatan Service Corporation Getloaded Corporation 60 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT Delaware France Delaware Delaware Italy China Czech Republic Malaysia Delaware Malaysia Delaware Florida Delaware Germany Pennsylvania Pennsylvania Delaware Name of Subsidiary Jurisdiction of Incorporation/Organization Hansen Technologies Corporation Hansen Technologies Europe GmbH Harbour Holding Corp. Hardy Process Solutions Horizon Software International, LLC Inovonics Corporation Instill Corporation Integrated Designs, L.P. Intellitrans Canada Ltd. IntelliTrans Limited Intellitrans Sweden AB Intellitrans, LLC ISL Finance SAS ISL Holding, SNC ISL S.A.S. IT Canada Holdings, LLC iTradenetwork Limited iTradeNetwork, Inc. K/S Roper Finance Law 1059 Limited Link Logistics Holding LLC Logitech Limited Lumenera Corporation Managed Health Care Associates, Inc. Marumoto Struers K.K. Med Group I, Inc. MED Group Parent, Inc. Med Holdings, LLC Med Operating, LLC Media Cybernetics, Inc. Medical Equipment Distributors II, L.P. Medical Equipment Distributors, Inc. MEDTEC, Inc. Metrix Instrument Co., L.P. MHA Long Term Care Network, Inc. Navigator Group Purchasing, Inc. NDI Europe GmbH Illinois Germany Delaware California Georgia Colorado Delaware Delaware Canada United Kingdom Sweden Delaware France France France Delaware United Kingdom Delaware Denmark United Kingdom Delaware United Kingdom Canada Delaware Japan Delaware Delaware Delaware Delaware Delaware Texas Delaware Iowa Delaware Delaware Tennessee Germany 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 61 Name of Subsidiary Jurisdiction of Incorporation/Organization Neptune Technology Group (Canada) Limited Neptune Technology Group Inc. Canada Delaware Neptune Technology Group Mexico S.de R.L. de C.V. Mexico Neptune Technology Group Mexico Services S. de R.L. de C.V. Mexico Neptune Technology Group Services Inc. Nippon Roper K.K. Northern Digital Inc. Off-Campus Advantage, LLC PAC Denmark ApS PAC GmbH PAC Instruments Asia PTE. Ltd. Petroleum Analyzer Company L.P. Quantitative Imaging Corporation Rebate Tracking Group, LLC Redlake MASD, LLC RI Marketing India Private Limited RMT, Inc. Roda Deaco Valve Inc. Roper Brasil Comercio E Promocao De Productos E Servicos LTDA Roper Canada Holdings, Inc. Roper Canada Partners, Inc. Roper Capital Deutschland GmbH Roper Engineering s.r.o. Roper Europe GmbH Roper Funding Deutschland GmbH & Co. KG Roper Georgia, Inc. Roper Germany GmbH Roper Germany GmbH & Co. KG Roper Holdings Limited Roper Holdings, Inc. Roper Industrial Products Investment Company Roper Industries B.V. Roper Industries Denmark ApS Roper Industries Deutschland GmbH Roper Industries L.P. 62 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT Delaware Japan Canada Delaware Netherlands Germany Singapore Delaware Canada Florida Delaware India Arizona Canada Brazil Canada Canada Germany Czech Republic Germany Germany Delaware Germany Germany United Kingdom Delaware Iowa Netherlands Denmark Germany Canada Name of Subsidiary Roper Industries Limited Roper Industries Manufacturing (Shanghai) Co., Ltd. Roper Industries Mauritius Ltd. Roper Industries UK Limited Roper International Holding, Inc. Roper LLC Roper Luxembourg Finance S.a.r.l. Roper Luxembourg Holdings S.a.r.l. Roper Luxembourg S.a.r.l. Roper Marketing India Private Limited Roper NT LLC Roper Pump Company Roper Scientific B.V. Roper Scientific GmbH Roper Scientific SAS Roper Scientific, Inc. Roper Scot LP Roper Southeast Asia LLC Roper Technologies, Inc. Roper UK Investments Limited Roper UK, Ltd. Roper-Mex, L.P. Ropintassco 1, LLC Ropintassco 2, LLC Ropintassco 3, LLC Ropintassco 4, LLC Ropintassco 5, LLC Ropintassco 6, LLC Ropintassco 7, LLC Ropintassco Holdings, L.P. Shanghai Roper Industries Trading Co., Ltd. Sinmed Holding International B.V. Star Purchasing Services, LLC Struers (Shanghai) International Trading Ltd. Struers A/S Jurisdiction of Incorporation/Organization United Kingdom China Mauritius United Kingdom Delaware Russian Federation Luxembourg Luxembourg Luxembourg India Delaware Delaware Netherlands Germany France Delaware United Kingdom Delaware Delaware United Kingdom United Kingdom Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware China Netherlands Wisconsin China Denmark 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 63 Name of Subsidiary Jurisdiction of Incorporation/Organization Struers GmbH Struers Inc. Struers Limited Struers Limited Struers SAS Student Advantage, LLC Sunquest Europe Limited Sunquest Holdings, Inc. Germany Delaware United Kingdom Canada France Delaware United Kingdom Delaware Sunquest Information Systems (Europe) Limited United Kingdom Sunquest Information Systems (India) Private Limited India Sunquest Information Systems (International) Limited United Kingdom Sunquest Information Systems Canada, Inc. Sunquest Information Systems, Inc. Technolog Group Limited Technolog Holdings Ltd. Technolog Limited Technolog SARL The CBORD Group, Inc. Canada Pennsylvania United Kingdom United Kingdom United Kingdom France Delaware The Tidewater Healthcare Shared Services Group, Inc. Pennsylvania TLP Holdings, LLC Transcore Atlantic, Inc. Transcore CNUS, Inc. Transcore Holdings, Inc. TransCore ITS Australia Pty Ltd. Transcore ITS, LLC Transcore Link Logistics Corporation Transcore Nova Scotia Corporation Transcore Partners, LLC Transcore Quebec Corporation Inc. Delaware Delaware Delaware Delaware Australia Delaware Canada Canada Delaware Canada TransCore Transportation Solutions India Private Limited India TransCore Transportation Systems Mauritius Private Limited Mauritius Transcore, LP Trinity Integrated Systems Limited UHF Purchasing Services, LLC Delaware United Kingdom Delaware 64 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT Name of Subsidiary United Controls Group, Inc. Uson L.P. Uson Limited Utilitec Limited Utilitec Services Limited Utility Data Services Limited Verathon Holdings (Delaware) Inc Verathon Inc Verathon Medical (Austrailia) Pty Limited Verathon Medical (Canada) ULC Verathon Medical (Europe) B.V. Verathon Medical (France) SARL Verathon Medical (Hong Kong) Limited Verathon Medical ( Japan) K.K. Verathon Medical (UK) Ltd. Verathon Medical Inc. Viastar Services, LP Viatran Corporation Walter Herzog GmbH Zetec (Shanghai) Co., Ltd. Zetec France Zetec Korea, Inc. Zetec Rental LLC Zetec Services, Inc. Zetec, Inc. Jurisdiction of Incorporation/Organization Ohio Delaware United Kingdom United Kingdom United Kingdom United Kingdom Delaware Washington Australia Canada Netherlands France Hong Kong Japan United Kingdom Washington Texas New York Germany China France Delaware Delaware Delaware Washington 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 65 EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (Nos. 333-152590 and 333- 184954) and Form S-8 (Nos. 33-71094, 333-35666, 333-35672, 333-35648, 333-105919, 333-135700, 333-36897, 333-105920 and 333-182779) of Roper Industries, Inc. of our report dated February 21, 2014 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10K. /s/PricewaterhouseCoopers LLP Tampa, Florida February 21, 2014 EXHIBIT 31.1 I, Brian D. Jellison, certify that: 1. I have reviewed this Annual Report on Form 10-K of Roper Industries, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f ) and 15d-15(f )) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: February 21, 2014 /s/ Brian D. Jellison Brian D. Jellison Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) 66 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT EXHIBIT 31.2 I, John Humphrey, certify that: 1. I have reviewed this Annual Report on Form 10-K of Roper Industries, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f ) and 15d-15(f )) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: February 21, 2014 /s/ John Humphrey John Humphrey Executive Vice President, Chief Financial Officer (Principal Financial Officer) 2013 ANNUAL REPORT ROPER INDUSTRIES, INC. 67 EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Roper Industries, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Brian D. Jellison, Chief Executive Officer of the Company, and John Humphrey, Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: February 21, 2014 /s/ Brian D. Jellison Brian D. Jellison Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) /s/ John Humphrey John Humphrey Executive Vice President, Chief Financial Officer (Principal Financial Officer) This certificate is being made for the exclusive purpose of compliance of the Company with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be disclosed, distributed or used by any person or for any reason other than specifically required by law. 68 ROPER INDUSTRIES, INC. 2013 ANNUAL REPORT BOARD OF DIRECTORS Left to right: John F. Fort III, Robert E. Knowling, Jr., David W. Devonshire, Robert D. Johnson, Brian D. Jellison, Christopher Wright, Wilbur J. Prezzano, Richard Wallman SHAREHOLDER INFORMATION Ticker Symbol: ROP Roper’s common stock is listed on the New York Stock Exchange with options trading conducted on the Chicago Board Options Exchange. ANNUAL REPORT ON FORM 10-K Any shareholder wishing a copy of Roper’s 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission may obtain one without charge by contacting: Investor Relations Roper Industries, Inc. 6901 Professional Parkway East, Suite 200 Sarasota, Florida 34240 +1 (941) 556-2601 Investor-relations@roperind.com TRANSFER AGENT American Stock Transfer & Trust Company 59 Maiden Lane New York, New York 10038 +1 (800) 937-5449 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLC