ROPER TECHNOLOGIES INC - Quarter Report: 2010 September (Form 10-Q)

cy10q3_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010.

[ ]

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 Pkwy. East, Suite 200 Sarasota, Florida (Address of principal executive offices)	34240 (Zip Code)
(941) 556-2601 (Registrant’s telephone number, including area code)

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 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 (§232.405 of this chapter) 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

þ Large accelerated filer	¨ Accelerated filer
¨ Non-accelerated filer (do not check if smaller reporting company)	¨ 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

The number of shares outstanding of the registrant’s common stock as of October 29, 2010 was approximately 94,670,518.

ROPER INDUSTRIES, INC.

REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED September 30, 2010

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Statements of Earnings	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	23
Item 5.	Exhibits	23
	Signatures	24

PART I.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Roper Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings (unaudited)

(in thousands, except per share data)

	Three months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009

Net sales	$	605,088	$	485,676	$	1,706,633	$	1,496,030
Cost of sales		283,339		240,156		803,372		744,304
Gross profit		321,749		245,520		903,261		751,726

Selling, general and administrative expenses		193,516		153,648		555,125		477,098
Income from operations		128,233		91,872		348,136		274,628

Interest expense		17,134		14,437		49,608		41,708
Other income		2,631		105		1,421		2,917

Earnings before income taxes		113,730		77,540		299,949		235,837

Income taxes		29,467		21,130		84,680		68,280

Net earnings	$	84,263	$	56,410	$	215,269	$	167,557


Net earnings per share:
Basic	$	0.89	$	0.62	$	2.29	$	1.85
Diluted		0.87		0.61		2.23		1.81

Weighted average common shares outstanding:
Basic		94,312		90,877		94,046		90,526
Diluted		96,671		92,908		96,374		92,635

Dividends declared per common share	$	0.0950	$	0.0825	$	0.2850	$	0.2475

See accompanying notes to condensed consolidated financial statements.

Roper Industries, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

(in thousands)

	September 30, 2010			December 31, 2009
ASSETS:

Cash and cash equivalents	$	250,813		$	167,708
Accounts receivable, net		378,323			381,658
Inventories, net		180,929			178,795
Deferred taxes		28,941			27,306
Unbilled receivables		76,928			57,153
Other current assets		41,708			58,125
Total current assets		957,642			870,745

Property, plant and equipment, net		105,878			109,493
Goodwill		2,727,249			2,388,432
Other intangible assets, net		1,128,435			868,900
Deferred taxes		60,828			33,123
Other assets		76,095			57,043

Total assets	$	5,056,127		$	4,327,736

LIABILITIES AND STOCKHOLDERS’ EQUITY:

Accounts payable	$	134,316		$	110,103
Accrued liabilities		269,309			253,441
Income taxes payable		-			-
Deferred taxes		9,933			1,671
Current portion of long-term debt, net		95,788			112,796
Total current liabilities		509,346			478,011

Long-term debt, net of current portion		1,380,742			1,040,962
Deferred taxes		466,356			328,299
Other liabilities		63,308			58,974
Total liabilities		2,419,752			1,906,246

Commitments and contingencies

Common stock		967			958
Additional paid-in capital		1,019,993			982,321
Retained earnings		1,583,997			1,395,586
Accumulated other comprehensive earnings		52,514			63,945
Treasury stock		(21,096	)		(21,320	)
Total stockholders’ equity		2,636,375			2,421,490

Total liabilities and stockholders’ equity	$	5,056,127		$	4,327,736

See accompanying notes to condensed consolidated financial statements.

Roper Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)

	Nine months ended September 30,
	2010			2009
Cash flows from operating activities:
Net earnings	$	215,269		$	167,557
Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization of property, plant and equipment		27,271			25,828
Amortization of intangible assets		61,430			51,280
Amortization of deferred financing costs		1,772			1,580
Non-cash stock compensation		19,384			20,821
Changes in operating assets and liabilities, net of acquired businesses:
Accounts receivable		4,277			53,303
Unbilled receivables		(17,395	)		824
Inventories		(7,277	)		14,496
Accounts payable and accrued liabilities		33,110			(64,729	)
Income taxes payable		10,943			(24,146	)
Other, net		(4,366	)		1,035
Cash provided by operating activities		344,418			247,849

Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		(536,413	)		(1,248	)
Capital expenditures		(20,391	)		(18,708	)
Proceeds from sale of assets		4,773			10,589
Other, net		(2,958	)		(3,606	)
Cash used in investing activities		(554,989	)		(12,973	)

Cash flows from financing activities:
Payments/(borrowings) under revolving line of credit, net		318,000			(179,000	)
Principal payments on convertible notes		(20,123	)		(116,186	)
Proceeds from senior notes		-			500,000
Payment of senior unsecured term loan		-			(350,000	)
Debt issuance costs		-			(4,310	)
Cash dividends to stockholders		(26,722	)		(22,343	)
Proceeds from stock option exercises		16,955			4,845
Stock award tax excess windfall benefit		4,287			1,055
Treasury stock sales		1,236			1,296
Other		(314	)		(1,900	)
Cash provided by/(used in) financing activities		293,319			(166,543	)

Effect of foreign currency exchange rate changes on cash		357			9,622

Net increase in cash and cash equivalents		83,105			77,955

Cash and cash equivalents, beginning of period		167,708			178,069

Cash and cash equivalents, end of period	$	250,813		$	256,024

See accompanying notes to condensed consolidated financial statements.

Roper Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

(in thousands)

	Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive earnings			Treasury stock			Total
Balances at December 31, 2009	$	958	$	982,321		$	1,395,586		$	63,945		$	(21,320	)	$	2,421,490

Net earnings		-		-			215,269			-			-			215,269
Stock option exercises		5		16,950			-			-			-			16,955
Treasury stock sold		-		1,012			-			-			224			1,236
Currency translation adjustments, net of $467 tax		-		-			-			(11,431	)		-			(11,431	)
Stock based compensation		-		18,266			-			-			-			18,266
Restricted stock grants		1		(3,723	)		-			-			-			(3,722	)
Stock option tax benefit, net of shortfalls		-		4,241			-			-			-			4,241
Conversion of senior subordinated convertible notes		3		926			-			-			-			929
Dividends declared		-		-			(26,858	)		-			-			(26,858	)

Balances at September 30, 2010	$	967	$	1,019,993		$	1,583,997		$	52,514		$	(21,096	)	$	2,636,375

See accompanying notes to condensed consolidated financial statements.

Roper Industries, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

September 30, 2010

1.	Basis of Presentation

The accompanying condensed consolidated financial statements for the three and nine month periods ended September 30, 2010 and 2009 are unaudited. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the financial position, results of operations and cash flows of Roper Industries, Inc. and its subsidiaries (“Roper” or the “Company”) for all periods presented.

Roper’s management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Actual results could differ from those estimates.

For the third quarter 2010, the Company recorded certain balance sheet classification adjustments to the September 30, 2010 consolidated balance sheet. The impact of these adjustments reduced other current assets by $10.3 million, reduced short term deferred tax assets by $0.8 million, increased long term deferred tax assets by $22.4 million, increased short term deferred tax liabilities by $8.4 million and increased long term deferred tax liabilities by $3.4 million. The impact of these adjustments is not material to the September 30, 2010 or December 31, 2009 consolidated balance sheets and, although the adjustments apply to prior periods, the impact is immaterial to current or any prior period results of operations or cash flows.

The results of operations for the three and nine month periods ended September 30, 2010 are not necessarily indicative of the results to be expected for the full year. You should read these unaudited condensed consolidated financial statements in conjunction with Roper’s consolidated financial statements and the notes thereto included in its 2009 Annual Report on Form 10-K (“Annual Report”) filed on February 26, 2010 with the Securities and Exchange Commission (“SEC”).

2.	Recent Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board issued amendments to the accounting and disclosure rules for revenue recognition. These amendments, effective for fiscal years beginning on or after September 15, 2010 (early adoption is permitted), modify the criteria for recognizing revenue in multiple element arrangements and the scope of what constitutes a non-software deliverable. The Company is currently assessing the impact of these amendments on its results of operations, financial condition and cash flows.

3.	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 period. 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 period. 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 Roper’s common stock. The effects of potential common stock were determined using the treasury stock method. Weighted average shares outstanding are as shown below (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009
Basic shares outstanding		94,312		90,877		94,046		90,526
Effect of potential common stock:
Common stock awards		975		867		945		831
Senior subordinated convertible notes		1,384		1,164		1,383		1,278
Diluted shares outstanding		96,671		92,908		96,374		92,635

For the three and nine month periods ended September 30, 2010 there were 1,140,000 and 1,576,000 outstanding stock options, respectively, that were not included in the determination of diluted earnings per share because doing so would have been antidilutive; this compares to 2,128,000 and 2,234,000 outstanding stock options, respectively, that would have been antidilutive for the three and nine month periods ended September 30, 2009.

4.	Business Acquisitions

On July 27, 2010, Roper acquired iTradeNetwork, Inc. (“iTrade”), a global provider of software as a service (“SaaS”)-based trading network and business intelligence solutions to the food industry, in order to complement and expand existing software services at other Roper businesses. iTrade’s results are reported in the RF Technology segment. The aggregate gross purchase price was $525 million of cash. The allocation of the purchase price resulted in $314 million of identifiable intangible assets and $341 million of goodwill, of which $115 million was recorded due to a deferred tax liability related to intangible assets.

On February 22, 2010, Roper purchased the assets of Heartscape, Inc., including a technology with the capability to improve the speed and accuracy of detecting heart attacks.

The Company recorded $1.5 million in transaction costs related to 2010 acquisitions, which were expensed as incurred. Supplemental pro forma information and other disclosures have not been provided as the acquisitions did not have a material impact on Roper’s consolidated results of operations individually or in aggregate.

5.	Stock Based Compensation

The Roper Industries, Inc. Amended and Restated 2006 Incentive Plan is a stock based compensation plan used to grant incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights or equivalent instruments to Roper’s employees, officers, directors and consultants.

Roper’s stock purchase plan allows employees in the U.S. and Canada to designate up to 10% of eligible earnings to purchase Roper’s common stock at a 5% discount to the average closing price of the stock at the beginning and end of a quarterly offering period. The common stock sold to the employees may be either treasury stock, stock purchased on the open market, or newly issued shares.

The following table provides information regarding Roper’s stock based compensation expense (in millions):

	Three months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009
Stock based compensation	$	6.3	$	6.7	$	19.4	$	20.8
Tax effect recognized in net income		2.2		2.4		6.8		7.3
Windfall tax benefit/(shortfall), net		1.4		0.6		4.2		0.2

Stock Options - In the nine month period ended September 30, 2010, 590,000 options were granted with a weighted average fair value per share of $16.93. During the same period in 2009, 505,000 options were granted with a weighted average fair value per share of $12.40. All options were issued at grant date fair value.

Roper records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model. Historical data, among other factors, is used to estimate the expected price volatility, the expected dividend yield, the expected option life and the expected forfeiture rate. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. The following weighted average assumptions were used to estimate the fair value of options granted during current and prior year periods using the Black-Scholes option-pricing model:

	Nine months ended September 30,
	2010	2009
Fair value per share ($)	16.93	12.40
Risk-free interest rate (%)	2.34	1.74
Expected option life (years)	5.38	5.37
Expected volatility (%)	34.54	32.10
Expected dividend yield (%)	0.72	0.79

Cash received from option exercises for the nine months ended September 30, 2010 and 2009 was approximately $17.0 million and $4.8 million, respectively.

Restricted Stock Awards - During the nine months ended September 30, 2010, 253,000 restricted stock awards were granted with a weighted average fair value per share of $52.65. During the same period in 2009, 182,000 awards were granted with a weighted average fair value per share of $41.66. All grants were issued at grant date fair value.

During the nine months ended September 30, 2010, 244,000 restricted awards vested with a weighted average grant date fair value per share of $49.49, at a weighted average vest date fair value per share of $56.53.

Employee Stock Purchase Plan - During the nine month periods ended September 30, 2010 and 2009, participants in the employee stock purchase plan purchased 23,000 and 30,000 shares, respectively, of Roper’s common stock for total consideration of $1.2 million and $1.3 million, respectively. All shares were purchased from Roper’s treasury shares.

6.	Comprehensive Earnings

Comprehensive earnings include net earnings and all other non-owner sources of changes in net assets and were as follows (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2010		2009		2010			2009
Net income	$	84,263	$	56,410	$	215,269		$	167,557
Currency translation adjustments		36,837		16,752		(11,431	)		41,912
Comprehensive earnings	$	121,100	$	73,162	$	203,838		$	209,469

7.	Inventories

	September 30, 2010			December 31, 2009
	(in thousands)
Raw materials and supplies	$	114,592		$	111,546
Work in process		31,640			24,557
Finished products		68,866			71,729
Inventory reserves		(34,169	)		(29,037	)
	$	180,929		$	178,795

Goodwill

	Industrial Technology			Energy Systems & Controls			Scientific & Industrial Imaging			RF Technology			Total
	(in thousands)
Balances at December 31, 2009	$	431,073		$	383,207		$	623,786		$	950,366		$	2,388,432
Additions		-			-			8,593			341,243			349,836
Other		-			(58	)		(809	)		240			(627	)
Currency translation adjustments		(7,677	)		(1,994	)		(151	)		(570	)		(10,392	)
Balances at September 30, 2010	$	423,396		$	381,155		$	631,419		$	1,291,279		$	2,727,249

9.	Other intangible assets, net

	Cost		Accumulated amortization			Net book value
	(in thousands)
Assets subject to amortization:
Customer related intangibles	$	752,913	$	(181,307	)	$	571,606
Unpatented technology		101,578		(33,532	)		68,046
Software		53,408		(30,739	)		22,669
Patents and other protective rights		32,762		(20,187	)		12,575
Backlog		1,920		(1,920	)		-
Trade secrets		2,773		(1,224	)		1,549
Assets not subject to amortization:
Trade names		192,455		-			192,455
Balances at December 31, 2009	$	1,137,809	$	(268,909	)	$	868,900
Assets subject to amortization:
Customer related intangibles	$	984,086	$	(222,397	)	$	761,689
Unpatented technology		152,445		(45,967	)		106,478
Software		53,387		(34,368	)		19,019
Patents and other protective rights		32,773		(22,333	)		10,440
Backlog		1,902		(1,902	)		-
Trade secrets		1,604		(247	)		1,357
Assets not subject to amortization:
Trade names		229,452		-			229,452
Balances at September 30, 2010	$	1,455,649	$	(327,214	)	$	1,128,435

Amortization expense of other intangible assets was $59,546 and $49,313 during the nine months ended September 30, 2010 and 2009, respectively.

10.

Debt

Roper’s 3.75% senior subordinated convertible notes due 2034 became convertible on January 15, 2009. During the nine month period ended September 30, 2010, 48,026 notes were converted for $20.1 million in cash and 272,000 shares of common stock at a weighted average share price of $61.09. No gain or loss was recorded upon these conversions. In addition, a related $0.9 million deferred tax liability associated with excess deductions recorded for tax purposes was relieved to additional paid in capital upon the conversions.

On September 30, 2010, the conversion of 479 notes was pending, with settlement dates of October 5 and 6, 2010. The conversion resulted in the payment of $0.2 million in cash and the issuance of 3,000 shares of common stock at a weighted average share price of $65.30.

At September 30, 2010, the conversion price on the outstanding notes was $420.88. If converted at September 30, 2010, the value would exceed the $93 million principal amount of the notes by approximately $88 million and would result in the issuance of 1,349,000 shares of Roper’s common stock.

11.	Fair Value of Financial Instruments

Roper’s long-term debt at September 30, 2010 included $500 million of fixed-rate senior notes due 2019, with a fair value of approximately $579 million, and $500 million of fixed-rate senior notes due 2013, with a fair value of approximately $565 million, based on the trading prices of the notes. Short-term debt included $93 million of fixed-rate convertible notes which were at fair value due to the short term nature of the debt.

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. At September 30, 2010 an aggregate notional amount of $500 million in interest rate swaps designated as fair value hedges effectively changed Roper’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 the London Interbank Offered Rate (“LIBOR”).

The swaps are recorded at fair value in the balance sheet as an asset or liability, and the changes in fair value of both the interest rate swap and the hedged senior notes due 2013 are recorded as interest expense. At September 30, 2010 the fair value of the swap was an asset balance of $19.04 million and was reported in other assets. There was a corresponding increase of $19.09 million in the notes being hedged, which was reported as long term debt. The impact on earnings for the nine months ended September 30, 2010 was immaterial. The Company has determined the swaps to be Level 2 in the FASB fair value hierarchy, and uses inputs other than quoted prices that are observable for the asset or liability, including interest rates, yield curves and credit risks in order to value the instruments.

12.	Contingencies

Roper, in the ordinary course of business, is the subject of, or a party to, various pending or threatened legal actions, including those pertaining to 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 Roper’s consolidated financial position, results of operations or cash flows.

Over recent years there has been an 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 the Company 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 financial statements include accruals for potential product liability and warranty claims based on its claims experience. Such costs are accrued at the time revenue is recognized. A summary of the warranty accrual activity for the nine months ended September 30, 2010 is presented below (in thousands).

Balance at December 31, 2009	$	7,341
Additions charged to costs and expenses		4,546
Deductions		(4,412	)
Other		(42	)
Balance at September 30, 2010	$	7,433

13.	Business Segments

Sales and operating profit by industry segment are set forth in the following table (dollars in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2010		2009		Change		2010		2009		Change
Net sales:
Industrial Technology	$	161,205	$	130,538	23.5	%	$	442,007	$	397,730	11.1	%
Energy Systems & Controls		123,458		102,988	19.9			348,523		314,997	10.6
Scientific & Industrial Imaging		134,434		78,934	70.3			393,192		238,914	64.6
RF Technology		185,991		173,216	7.4			522,911		544,389	(3.9	)
Total	$	605,088	$	485,676	24.6	%	$	1,706,633	$	1,496,030	14.1	%
Gross profit:
Industrial Technology	$	82,383	$	62,060	32.7	%	$	223,825	$	190,501	17.5	%
Energy Systems & Controls		65,590		52,464	25.0			183,884		164,123	12.0
Scientific & Industrial Imaging		82,610		44,169	87.0			238,427		132,385	80.1
RF Technology		91,166		86,827	5.0			257,125		264,717	(2.9	)
Total	$	321,749	$	245,520	31.0	%	$	903,261	$	751,726	20.2	%
Operating profit*:
Industrial Technology	$	44,954	$	30,547	47.2	%	$	115,462	$	91,614	26.0	%
Energy Systems & Controls		28,611		19,214	48.9			76,606		59,926	27.8
Scientific & Industrial Imaging		31,193		14,818	110.5			88,323		43,300	104.0
RF Technology		37,155		38,918	(4.5	)		104,060		115,724	(10.1	)
Total	$	141,913	$	103,497	37.1	%	$	384,451	$	310,564	23.8	%
Long-lived assets:
Industrial Technology	$	40,754	$	44,522	(8.5	)%
Energy Systems & Controls		18,731		23,191	(19.2	)
Scientific & Industrial Imaging		35,458		25,805	37.4
RF Technology		34,319		32,406	5.9
Total	$	129,262	$	125,924	2.7	%

*Segment operating profit is calculated as income from operations before unallocated corporate general and administrative expenses. These expenses were $13,680 and $11,625 for the three months ended September 30, 2010 and 2009, respectively, and $36,315 and $35,936 for the nine months ended September 30, 2010 and 2009, respectively.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report includes “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 SEC or in oral statements made to the press, potential investors or others. All statements that are not historical facts are “forward-looking statements.” The words “estimate,” “project,” “intend,” “expect,” “should,” “will,” “plan,” “believe,” “anticipate,” and similar expressions identify forward-looking statements. These forward-looking statements include statements regarding our expected financial position, business, financing plans, business strategy, business prospects, revenues, working capital, liquidity, capital needs, interest costs and income, in each case relating to our company as a whole, as well as statements regarding acquisitions, potential acquisitions and the benefits of acquisitions.

Forward-looking statements are estimates and projections reflecting our best judgment and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Examples of forward-looking statements in this report include but are not limited to our expectations regarding our ability to generate operating cash flows and reduce debt and associated interest expense 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, the timing and cost of expected capital expenditures, expected outcomes of pending litigation, competitive conditions, general economic conditions and expected synergies relating to acquisitions, joint ventures and alliances. 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:

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, parts and components;

environmental compliance costs and liabilities;

risks and costs associated with asbestos-related litigation;

potential write-offs of our substantial intangible assets;

our ability to successfully develop new products;

failure to protect our intellectual property;

economic disruption caused by terrorist attacks, health crises or other unforeseen events; and

the factors discussed in other reports filed with the SEC.

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 these statements in light of new information or future events.

Overview

Roper Industries, Inc. (“Roper,” “we” or “us”) is a diversified growth company that designs, manufactures and distributes energy systems and controls, scientific and industrial imaging products and software, industrial technology products and radio frequency (“RF”) products and services. We market these products and services to selected segments of a broad range of markets, including RF applications, medical, water, energy, research, education, security and other niche markets.

We pursue consistent and sustainable growth in sales and earnings by emphasizing continuous improvement in the operating performance of our existing businesses and by acquiring other carefully selected businesses that offer high value-added, engineered products and solutions and are capable of achieving growth and maintaining high margins. Our acquisitions have represented both financial bolt-ons and new strategic platforms. We strive for high cash and earnings returns from our investments.

Application of Critical Accounting Policies

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). A discussion of our significant accounting policies can be found in the notes to our consolidated financial statements for the year ended December 31, 2009 included in our 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 reviews all financial disclosures to be included in our 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 and utilization, future warranty obligations, revenue recognition (percentage of completion), income taxes and goodwill and indefinite-lived asset analyses. These issues, except for income taxes (which are not allocated to our business segments), affect each of our business segments. These issues are evaluated primarily 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 current and near-term forecast 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 credit histories are analyzed to determine likely future rates for such credits. At September 30, 2010, our allowance for doubtful accounts receivable, sales returns and sales credits was $10.6 million, or 2.7% of total gross accounts receivable as compared to 2.8% at December 31, 2009.

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. Business trends can change rapidly and these events can affect the evaluation of inventory balances. At September 30, 2010, inventory reserves for excess and obsolete inventory were $34.2 million, or 15.9% of gross inventory cost, as compared to 14.0% of gross inventory cost at December 31, 2009.

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. At September 30, 2010, the accrual for future warranty obligations was $7.4 million or 0.3% of annualized third quarter sales and is consistent with prior quarters.

Revenues related to the use of the percentage-of-completion method of accounting are dependent on a comparison of total costs incurred to date to total estimated costs for a project. During the nine months ended September 30, 2010, we recognized $88.8 million of net sales using this method. In addition, approximately $166.2 million of net sales related to unfinished percentage-of-completion contracts had yet to be recognized at September 30, 2010. 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 United States, 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. Our third quarter effective income tax rate was 25.9%, which was lower than the prior year rate of 27.3%, due primarily to tax planning strategies.

The evaluation of the carrying value of goodwill and indefinite-lived intangibles is required to be performed annually. We perform this analysis during our fourth quarter.

Results of Operations

General

The following tables set forth selected information for the periods indicated. Dollar amounts are in thousands and percentages are the particular line item shown as a percentage of net sales. Percentages may not foot due to rounding.

	Three months ended September 30,						Nine months ended September 30,
	2010			2009			2010			2009
Net sales
Industrial Technology	$	161,205		$	130,538		$	442,007		$	397,730
Energy Systems & Controls		123,458			102,988			348,523			314,997
Scientific & Industrial Imaging		134,434			78,934			393,192			238,914
RF Technology		185,991			173,216			522,911			544,389
Total	$	605,088		$	485,676		$	1,706,633		$	1,496,030
Gross profit:
Industrial Technology		51.1	%		47.5	%		50.6	%		47.9	%
Energy Systems & Controls		53.1			50.9			52.8			52.1
Scientific & Industrial Imaging		61.5			56.0			60.6			55.4
RF Technology		49.0			50.1			49.2			48.6
Total		53.2			50.6			52.9			50.2
Selling, general & administrative expenses:
Industrial Technology		23.2	%		24.1	%		24.5	%		24.9	%
Energy Systems & Controls		30.0			32.3			30.8			33.1
Scientific & Industrial Imaging		38.2			37.2			38.2			37.3
RF Technology		29.0			27.7			29.3			27.4
Total		29.7			29.2			30.4			29.5
Segment operating profit:
Industrial Technology		27.9	%		23.4	%		26.1	%		23.0	%
Energy Systems & Controls		23.2			18.7			22.0			19.0
Scientific & Industrial Imaging		23.2			18.8			22.5			18.1
RF Technology		20.0			22.5			19.9			21.3
Total		23.5			21.3			22.5			20.8
Corporate administrative expenses		(2.3	)		(2.4	)		(2.1	)		(2.4	)
		21.2			18.9			20.4			18.4
Interest expense		(2.8	)		(3.0	)		(2.9	)		(2.8	)
Other income		0.4			-			0.1			0.2
Earnings before income taxes		18.8			16.0			17.6			15.8
Income taxes		(4.9	)		(4.4	)		(5.0	)		(4.6	)
Net earnings		13.9	%		11.6	%		12.6	%		11.2	%

Three months ended September 30, 2010 compared to three months ended September 30, 2009

Net sales for the quarter ended September 30, 2010 were $605.1 million as compared to $485.7 million in the prior year quarter, an increase of 24.6%. The current year quarter results included $57.8 million, or a 11.9% increase, in sales from acquisitions completed in 2009 and 2010 . We experienced a 13.7% increase in organic growth, and a 1.0% negative impact from foreign currency exchange.

In our Industrial Technology segment, net sales were up 23.5% to $161.2 million in the third quarter of 2010 as compared to $130.5 million in the third quarter of 2009. The increase was due to broad based sales growth in all operating companies in this segment, led by significant sales growth in our Neptune water meter business as well as new products gaining market share in directional drilling markets. Gross margins increased to 51.1% for the third quarter of 2010 as compared to 47.5% in the third quarter of 2009 due to operating leverage from higher sales volume. Selling, general and administrative (“SG&A”) expenses as a percentage of net sales decreased from 24.1% in the prior year quarter to 23.2% in the current year quarter. The resulting operating profit margins were 27.9% in the third quarter of 2010 as compared to 23.4% in the third quarter of 2009.

Net sales in our Energy Systems & Controls segment increased by 19.9% to $123.5 million during the third quarter of 2010 compared to $103.0 million in the third quarter of 2009. The increase in sales was due to growth in all businesses in the segment, particularly in our sensor and diesel engine protection products. Gross margins increased to 53.1% in the third quarter of 2010 compared to 50.9% in the third quarter of 2009 due to operating leverage on higher sales volume. SG&A expenses as a percentage of net sales were 30.0% compared to 32.3% in the prior year quarter due to operating leverage from higher sales volume and lower cost levels resulting from the prior year restructuring activities. As a result, operating margins were 23.2% in the third quarter of 2010 as compared to 18.7% in the third quarter of 2009.

Our Scientific & Industrial Imaging segment net sales increased by 70.3% to $134.4 million in the third quarter of 2010 compared to $78.9 million in the third quarter of 2009. Acquisitions completed in 2009 added 53.9%, with 16.4% resulting from internal growth, primarily from strong sales in medical consumables and dosage delivery products. Gross margins increased to 61.5% in the third quarter of 2010 from 56.0% in the third quarter of 2009 due primarily to operating leverage on higher sales volume and higher gross margin contributions from 2009 acquisitions. SG&A as a percentage of net sales was 38.2% in the third quarter of 2010 as compared to 37.2% in the third quarter of 2009 due to higher SG&A expense structures at the 2009 acquisitions offset partially by operating leverage on higher sales volume. As a result, operating margins were 23.2% in the third quarter of 2010 as compared to 18.8% in the third quarter of 2009.

In our RF Technology segment, net sales were $186.0 million in the third quarter of 2010 as compared to $173.2 million in the third quarter of 2009, an increase of 7.4%. Acquisitions completed in 2009 and 2010 contributed 8.8%, offset partially by a 1.4% decrease in internal growth due to lower tolling project activity in the current year. Gross margins decreased slightly from 50.1% in the prior year quarter to 49.0% in the current year quarter. SG&A as a percentage of sales in the third quarter of 2010 was 29.0% up from 27.7% in the prior year due to higher cost structures at recent acquisitions. As a result, operating profit margins in the current year quarter were 20.0% as compared to 22.5% in 2009.

Corporate expenses were $13.7 million, or 2.3% of sales, in the third quarter of 2010 as compared to $11.6 million, or 2.4% of sales, in the third quarter of 2009. The dollar increase is due primarily to acquisition related spending and increased incentive based compensation related to higher income levels in the current year.

Interest expense of $17.1 million for the third quarter of 2010 was $2.7 million higher than the third quarter of 2009 due to higher outstanding debt balances in the current year quarter.

Other income in the third quarter of 2010 was $2.6 million, due primarily to foreign exchange gains at our non-U.S. based companies. This compares to other income of $0.1 million in the third quarter of 2009.

Income taxes were 25.9% of pretax earnings in the current quarter, lower than the prior year rate of 27.3% due primarily to tax planning strategies.

At September 30, 2010, the functional currencies of our European subsidiaries were weaker, and Canadian dollar stronger, against the U.S. dollar compared to currency exchange rates at September 30, 2009 and December 31, 2009. The currency changes resulted in an increase of $37.2 million in the foreign exchange component of comprehensive earnings for the current year quarter. Approximately $21.2 million of the total adjustment is related to goodwill and does not directly affect our expected future cash flows. Operating results in the third quarter of 2010 decreased slightly due to the fluctuation of other currencies against the U.S. dollar as compared to a year ago. This difference, translated into U.S. dollars, was less than 2% of our income from operations.

Net orders were $653.9 million for the quarter, 31.1% higher than the third quarter 2009 net order intake of $498.9 million. Orders increased across all of our segments as the economic recovery strengthened throughout the third quarter of 2010. Acquisitions made in 2009 and 2010 contributed 12.5% to the current quarter orders. Overall, our order backlog at September 30, 2010 was up 39.0% as compared to September 30, 2009.

	Net orders booked for the three months ended September 30,				Order backlog as of September 30
	2010		2009		2010		2009
Industrial Technology	$	169,887	$	125,776	$	98,463	$	53,446
Energy Systems & Controls		135,224		104,593		98,848		68,515
Scientific & Industrial Imaging		152,499		84,329		99,387		75,780
RF Technology		196,265		184,243		473,751		356,477
	$	653,875	$	498,941	$	770,449	$	554,218

Nine months ended September 30, 2010 compared to nine months ended September 30, 2009

Net sales for the nine months ended September 30, 2010 were $1.7 billion as compared to $1.5 billion in the prior year nine month period, an increase of 14.1%. The increase is comprised of a 5.6% increase in internal sales and an increase of 8.5% from acquisitions.

In our Industrial Technology segment, net sales increased by 11.1% to $442.0 million in the first nine months of 2010 as compared to $397.7 million in the first nine months of 2009. The increase was due primarily to sales growth in our Neptune water meter business, as well as increased sales in our materials testing businesses as customer manufacturing facilities which had experienced slowdowns or temporary shutdowns in 2009 came back on line or increased production. Gross margins increased to 50.6% for the first nine months of 2010 as compared to 47.9% in the first nine months of 2009 due to operating leverage from higher sales volume. SG&A expenses as a percentage of net sales were 24.5%, down from 24.9% in the prior year nine month period, due to operating leverage from higher sales volume. The resulting operating profit margins were 26.1% in the first nine months of 2010 as compared to 23.0% in the first nine months of 2009.

Net sales in our Energy Systems & Controls segment increased by 10.6% to $348.5 million during the first nine months of 2010 compared to $315.0 million in the first nine months of 2009. The increase in sales was due to a rebound in industrial process end markets as well as increased sales in diesel engine protection products. Gross margins were 52.8% in the first nine months of 2010, relatively unchanged from 52.1% in the first nine months of 2009. SG&A expenses as a percentage of net sales were 30.8% as compared to 33.1% in the prior year nine month period due to lower cost levels resulting from the prior year restructuring activities. Operating margins were 22.0% in the first nine months of 2010 as compared to 19.0% in first nine months of 2009.

In our Scientific & Industrial Imaging segment net sales increased 64.6% to $393.2 million in the first nine months of 2010 as compared to $238.9 million in the first nine months of 2009. Acquisitions completed in 2009 added 48.5%, with 14.6% resulting from organic growth, primarily from increased sales in our electron microscopy and camera businesses, as well as a positive 1.5% impact from foreign currency. Gross margins increased to 60.6% in the first nine months of 2010 from 55.4% in the first nine months of 2009, due primarily to operating leverage on higher sales volume and higher gross margin contributions from 2009 acquisitions. SG&A as a percentage of net sales increased to 38.2% in the nine month period ended September 30, 2010 as compared to 37.3% in the prior year period due to higher SG&A expense structures at the 2009 acquisitions offset partially by operating leverage on higher sales volume. Operating margins were 22.5% in the first nine months of 2010 as compared to 18.1% in the first nine months of 2009.

In our RF Technology segment, net sales were $522.9 million compared to $544.4 million in the first nine months of 2009, a decrease of 3.9%. Sales from acquisitions added 2.2% in the current year, which were more than offset by lower violation and traffic volumes and lower project activity in the current year. Gross margins were slightly higher at 49.2% in the current year as compared to 48.6% in the prior year, due to product mix in our transportation businesses. SG&A as a percentage of sales in the first nine months of 2010 was 29.3%, an increase from 27.4% in the prior year due to higher cost structures at recent acquisitions. Operating profit margins were 19.9% in 2010 as compared to 21.3% in 2009.

Corporate expenses increased by $0.4 million to $36.3 million, or 2.1% of sales, in the first nine months of 2010 as compared to $35.9 million, or 2.4% of sales, in the first nine months of 2009.

Interest expense of $49.6 million for the first nine months of 2010 was $7.9 million higher as compared to $41.7 million in the first nine months of 2009. The increase in interest expense is due to the higher fixed rate of our senior notes due 2013, issued in September 2009, that were outstanding throughout 2010 as compared to the variable rate borrowings under the credit facility that were outstanding throughout most of the first nine months of 2009.

Other income in the first nine months of 2010 was $1.4 million, due primarily to foreign exchange gains at our non-U.S. based companies. Other income was $2.9 million in the first nine months of 2009 due primarily to a pre-tax gain related to the sale of certain assets of our satellite communications business, offset partially by foreign exchange losses at our non-U.S. based companies.

Income taxes were 28.2% of pretax earnings in the first nine months of 2010, lower than the rate of 29.0% in the first nine months of 2009, due primarily to tax planning strategies.

Financial Condition, Liquidity and Capital Resources

Selected cash flows for the three and nine month periods ended September 30, 2010 and 2009 were as follows (in millions):

	Three months ended September 30,						Nine months ended September 30,
	2010			2009			2010			2009
Cash provided by/(used in):
Operating activities	$	139.1		$	87.0		$	344.4		$	247.8
Investing activities		(528.4	)		(7.4	)		(555.0	)		(13.0	)
Financing activities		341.9			(48.7	)		293.3			(166.5	)

Operating activities - Net cash provided by operating activities in the third quarter of 2010 increased by $52.1 million or 59.9% over the prior year third quarter. In the nine month period ending September 30, 2010, operating cash flow increased by $96.6 million, or 39.0% over the prior year nine month period. The increases in both the three and nine month periods were due to higher net income, working capital management and the timing of tax payments.

Investing activities - Cash used in investing activities during the third quarter of 2010 was for primarily business acquisitions. Cash used in investing activities during the third quarter of 2009 was primarily for capital expenditures. Cash used in investing activities in the nine months ended September 30, 2010 was for business acquisitions and capital expenditures. Cash used in investing activities in the nine months ended September 30, 2009 was for capital expenditures, offset partially by proceeds from the sale of assets.

Financing activities - Cash provided by financing activities in both the three month and nine month periods ended September 30, 2010 was from borrowings related to business acquisitions and stock option proceeds, offset partially by dividend payments. Cash used in financing activities in both the three month and nine month periods ended September 30, 2009 was for principal debt payments and dividends.

Total debt at September 30, 2010 consisted of the following (amounts in thousands):

Senior Notes due 2013*	$	519,086
Senior Notes due 2019		500,000
Senior Subordinated Convertible Notes		93,404
$750 million revolving credit facility		358,000
Other		6,040
Total debt		1,476,530
Less current portion		95,788
Long-term debt	$	1,380,742

*Inclusive of fair value swap adjustment of $19.1 million.

Our principal unsecured credit facility, $500 million senior notes due 2013, $500 million senior notes due 2019 and senior subordinated convertible notes provide substantially all of our daily external financing requirements. The interest rate on the borrowings under the credit facility is calculated based upon various recognized indices plus a margin as defined in the credit agreement. At September 30, 2010, outstanding borrowings under the facility were $358.0 million. At September 30, 2010, we had $6.0 million of other debt in the form of capital leases, several smaller facilities that allow for borrowings or the issuance of letters of credit in various foreign locations to support our non-U.S. businesses and $53 million of outstanding letters of credit. We expect that our available borrowing capacity combined with cash flows from existing business will be sufficient to fund normal operating requirements.

We were in compliance with all debt covenants related to our credit facilities throughout the nine months ended September 30, 2010.

Net working capital (total current assets, excluding cash, less total current liabilities, excluding debt) was $293.3 million at September 30, 2010 compared to $337.8 million at December 31, 2009, reflecting decreases in working capital due primarily to accounts payable management, increased deferred revenue and increased accrued compensation. Total debt increased to $1.48 billion at September 30, 2010 compared to $1.15 billion at December 31, 2009 due to borrowings related to business acquisitions partially offset by the use of operating cash flows to reduce outstanding debt. Our leverage is shown in the following table:

	September 30, 2010			December 31, 2009
Total Debt	$	1,476,530		$	1,153,758
Cash and Cash Equivalents		(250,813	)		(167,708	)
Net Debt		1,225,717			986,050
Stockholders’ Equity		2,636,375			2,421,490
Total Net Capital	$	3,862,092		$	3,407,540

Net Debt / Total Net Capital		31.7%			28.9%

At September 30, 2010, 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.

Capital expenditures of $20.4 million and $18.7 million were incurred during the nine months ended September 30, 2010 and 2009, respectively. We expect capital expenditures for the balance of the year to be comparable to prior years as a percentage of sales.

Recently Issued Accounting Standards

Information regarding new accounting pronouncements is included in Note 2 of the Notes to Condensed Consolidated Financial Statements.

Outlook

Current geopolitical uncertainties could adversely affect our business prospects. A significant terrorist attack or other global conflict could cause changes in world economies that would adversely affect us. It is impossible to isolate each of these factor’s effects on current economic conditions. It is also impossible to predict with any reasonable degree of certainty what or when any additional events may occur that also will similarly disrupt the economy.

We maintain an active acquisition program; however, 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 business, financial condition and results of operations. Such acquisitions may be financed by the use of existing credit lines, future cash flows from operations, the proceeds from the issuance of new debt or equity securities or some combination of these methods.

We anticipate that our recently acquired companies as well as our other companies will generate positive cash flows from operating activities, and that these cash flows will permit the reduction of currently outstanding debt at a pace consistent with that which has historically been experienced. However, the rate at which we can reduce our debt during 2010 (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; and none of these factors can be predicted with certainty.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to interest rate risks on our outstanding 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.

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. At September 30, 2010 an aggregate notional amount of $500 million in interest rate swaps effectively converted our $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. Variable rate debt also included $358 million in outstanding borrowings under the unsecured credit facility. An increase in interest rates of 1% would increase our annualized pre-tax interest costs by approximately $8.6 million.

At September 30, 2010, we had $593 million of fixed rate borrowings. Our $500 million senior notes due 2019 have a fixed interest rate of 6.25%, and our senior unsecured convertible notes due 2034 have a fixed interest rate of 3.75%. At September 30, 2010, the prevailing market rates for long term notes similarly rated to our $500 million senior notes due 2013 and $500 million senior notes due 2019 were 1.0% to 0.7% lower, respectively, than the fixed rates on our senior notes.

Several of our companies 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 23.7% of our total third quarter sales and 62.9% of these sales were by companies with a European functional currency. The U.S. dollar strengthened against most European currencies and weakened against the Canadian dollar during the third quarter of 2010 versus the third quarter of 2009. The difference between the current quarter operating results translated into U.S. dollars at exchange rates experienced during the third quarter of 2010 versus exchange rates experienced during the third quarter of 2009 was not material and resulted in decreased operating profits of less than 2%. If these currency exchange rates had been 10% different throughout the third quarter of 2010 compared to currency exchange rates actually experienced, the impact on our net earnings would have been approximately $2.5 million.

The U.S. dollar was stronger against most European currencies and weaker against the Canadian dollar at September 30, 2010 versus December 31, 2009. The changes in these currency exchange rates resulted in a decrease in net assets of $11.9 million that was reported as a component of comprehensive earnings, $10.4 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 option grants and the effects these grants have on net income. 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 our senior subordinated convertible notes to determine diluted earnings per share. The stock price also affects our employees’ perceptions of various 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.

ITEM 4. CONTROLS AND PROCEDURES

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 quarterly report (“Evaluation Date”). 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 as of the Evaluation Date, these officers have concluded that the design and operation of our disclosure controls and procedures are effective.

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 Securities Exchange Act of 1934, as amended (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.

There were no changes to our internal controls during the period covered by this quarterly report that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Part II. OTHER INFORMATION

Item 1A. Risk Factors

For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussion in Item 1A of Roper’s Annual Report for the fiscal year ended December 31, 2009 as filed on February 26, 2010 with the SEC. See also the information about forward-looking statements included in the introduction to our Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of this Quarterly Report on Form 10-Q.

Item 5. Exhibits

10.1		Employee Stock Purchase Plan, as amended and restated, filed herewith.

31.1		Rule 13a-14(a)/15d-14(a), Certification of the Chief Executive Officer, filed herewith.

31.2		Rule 13a-14(a)/15d-14(a), Certification of the Chief Financial Officer, filed herewith.

32.1		Section 1350 Certification of the 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.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Roper Industries, Inc.

/s/ Brian D. Jellison	Chairman of the Board, President,	November 5, 2010
Brian D. Jellison	and Chief Executive Officer
	(Principal Executive Officer)

/s/ John Humphrey		Chief Financial Officer and Vice President	November 5, 2010
John Humphrey		(Principal Financial Officer)

/s/ Paul J. Soni		Vice President and Controller	November 5, 2010
Paul J. Soni		(Principal Accounting Officer)

EXHIBIT INDEX

TO REPORT ON FORM 10-Q

Number Exhibit

10.1		Employee Stock Purchase Plan, as amended and restated, filed herewith.

31.1		Rule 13a-14(a)/15d-14(a), Certification of the Chief Executive Officer, filed herewith.

31.2		Rule 13a-14(a)/15d-14(a), Certification of the Chief Financial Officer, filed herewith.

32.1		Section 1350 Certification of the 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.