Edgar Filing: ROPER INDUSTRIES INC

q1-2011_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 March 31, 2011.

[ ]

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 April 29, 2011 was 95,897,213.

ROPER INDUSTRIES, INC.

REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2011

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited):
	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	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	20
Item 6.	Exhibits	20
	Signatures	21

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 March 31,
	2011		2010

Net sales	$	645,309	$	534,441
Cost of sales		295,213		254,876
Gross profit		350,096		279,565

Selling, general and administrative expenses		208,096		178,849
Income from operations		142,000		100,716

Interest expense		16,696		16,181
Other income		711		447

Earnings before income taxes		126,015		84,982

Income taxes		37,036		25,257

Net earnings	$	88,979	$	59,725

Earnings per share:
Basic	$	0.93	$	0.64
Diluted		0.91		0.62

Weighted average common shares outstanding:
Basic		95,374		93,810
Diluted		98,153		96,036

Dividends declared per common share	$	0.110	$	0.095

See accompanying notes to condensed consolidated financial statements.

Roper Industries, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

(in thousands)

	March 31, 2011			December 31, 2010
ASSETS:

Cash and cash equivalents	$	261,447		$	270,394
Accounts receivable, net		413,371			403,337
Inventories, net		198,788			178,559
Deferred taxes		33,834			32,894
Unbilled receivables		79,072			75,620
Other current assets		43,128			37,287
Total current assets		1,029,640			998,091

Property, plant and equipment, net		103,639			103,487
Goodwill		2,748,510			2,727,780
Other intangible assets, net		1,083,482			1,104,513
Deferred taxes		55,629			57,850
Other assets		75,994			77,803

Total assets	$	5,096,894		$	5,069,524

LIABILITIES AND STOCKHOLDERS’ EQUITY:

Accounts payable	$	147,015		$	137,778
Accrued liabilities		268,036			298,080
Deferred taxes		10,664			10,445
Current portion of long-term debt, net		81,826			93,342
Total current liabilities		507,541			539,645

Long-term debt, net of current portion		1,159,961			1,247,703
Deferred taxes		474,185			465,001
Other liabilities		73,078			66,268
Total liabilities		2,214,765			2,318,617

Commitments and contingencies

Common stock		977			971
Additional paid-in capital		1,060,785			1,045,286
Retained earnings		1,759,282			1,680,849
Accumulated other comprehensive earnings		81,188			43,978
Treasury stock		(20,103	)		(20,177	)
Total stockholders’ equity		2,882,129			2,750,907

Total liabilities and stockholders’ equity	$	5,096,894		$	5,069,524

See accompanying notes to condensed consolidated financial statements.

Roper Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)

	Three months ended March 31,
	2011			2010
Cash flows from operating activities:
Net earnings	$	88,979		$	59,725
Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization of property, plant and equipment		9,256			9,409
Amortization of intangible assets		25,054			19,095
Amortization of deferred financing costs		591			590
Non-cash stock compensation		8,112			7,008
Changes in operating assets and liabilities, net of acquired businesses:
Accounts receivable		(15,171	)		9,758
Unbilled receivables		(3,010	)		(6,977	)
Inventories		(16,359	)		(2,344	)
Accounts payable and accrued liabilities		(16,612	)		(11,861	)
Income taxes payable		3,424			11,353
Other, net		2,320			(670	)
Cash provided by operating activities		86,584			95,086

Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		-			(15,000	)
Capital expenditures		(8,813	)		(6,485	)
Proceeds from sale of assets		826			3,840
Other, net		(1,024	)		(999	)
Cash used in investing activities		(9,011	)		(18,644	)

Cash flows from financing activities:
Payments under revolving line of credit, net		(85,000	)		(40,000	)
Principal payments on convertible notes		(11,968	)		(2,999	)
Cash dividends to stockholders		(10,458	)		(8,878	)
Proceeds from stock option exercises		8,607			2,443
Stock award tax excess windfall benefit		2,855			1,021
Treasury stock sales		579			408
Other		(697	)		(42	)
Cash used in financing activities		(96,082	)		(48,047	)

Effect of foreign currency exchange rate changes on cash		9,562			(4,818	)

Net increase/(decrease) in cash and cash equivalents		(8,947	)		23,577

Cash and cash equivalents, beginning of period		270,394			167,708

Cash and cash equivalents, end of period	$	261,447		$	191,285

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, 2010	$	971	$	1,045,286		$	1,680,849		$	43,978	$	(20,177	)	$	2,750,907

Net earnings		-		-			88,979			-		-			88,979
Stock option exercises		2		8,605			-			-		-			8,607
Treasury stock sold		-		505			-			-		74			579
Currency translation adjustments, net of $1,695 tax		-		-			-			37,210		-			37,210
Stock based compensation		-		7,649			-			-		-			7,649
Restricted stock grants		2		(4,883	)		-			-		-			(4,881	)
Stock option tax benefit, net of shortfalls		-		2,791			-			-		-			2,791
Conversion of senior subordinated convertible notes		2		832			-			-		-			834
Dividends declared		-		-			(10,546	)		-		-			(10,546	)

Balances at March 31, 2011	$	977	$	1,060,785		$	1,759,282		$	81,188	$	(20,103	)	$	2,882,129

See accompanying notes to condensed consolidated financial statements

Roper Industries, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

March 31, 2011

1.	Basis of Presentation

The accompanying condensed consolidated financial statements for the three month periods ended March 31, 2011 and 2010 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.

The results of operations for the three month period ended March 31, 2011 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 2010 Annual Report on Form 10-K (“Annual Report”) filed on February 25, 2011 with the Securities and Exchange Commission (“SEC”).

2.	Recent Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board ("FASB") issued amendments to the accounting and disclosure for revenue recognition. These amendments, effective for fiscal years beginning on or after June 15, 2010, modify the criteria for recognizing revenue in multiple element arrangements and the scope of what constitutes a non-software deliverable. The Company implemented the amendments on January 1, 2011, and the impact on its results of operations, financial condition and cash flows was immaterial.

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 March 31,
	2011	2010
Basic shares outstanding	95,374	93,810
Effect of potential common stock
Common stock awards	1,305	915
Senior subordinated convertible notes	1,474	1,311
Diluted shares outstanding	98,153	96,036

As of March 31, 2011 there were 662,000 outstanding stock options that were not included in the determination of diluted earnings per share because doing so would have been antidilutive, as compared to 1,398,000 outstanding stock options that would have been antidilutive on March 31, 2010.

4.	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 our stock based compensation expense (in millions):

	Three months ended March 31,
	2011		2010
Stock based compensation	$	8.1	$	7.0
Tax effect recognized in net income		2.8		2.5
Windfall tax benefit, net		2.8		1.0

Stock Options - In the quarter ended March 31, 2011, 652,000 options were granted with a weighted average fair value of $24.86 per option. During the same period in 2010, 570,850 options were granted with a weighted average fair value of $16.81 per option. All options were issued at grant date fair value, which is defined by the Plan as the closing price of Roper stock on the date of grant.

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 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 quarters using the Black-Scholes option-pricing model:

	Three months ended March 31,
	2011	2010
Fair value per share ($)	24.86	16.81
Risk-free interest rate (%)	2.07	2.38
Expected option life (years)	5.33	5.38
Expected volatility (%)	35.17	34.53
Expected dividend yield (%)	0.59	0.72

Cash received from option exercises for the three months ended March 31, 2011 and 2010 was $8.6 million and $2.4 million, respectively.

Restricted Stock Awards - During the quarter ended March 31, 2011, 282,580 restricted stock awards were granted with a weighted average fair value of $74.12 per restricted share. During the same period in 2010, 205,956 awards were granted with a weighted average fair value of $51.11 per restricted share. All grants were issued at grant date fair value.

During the quarter ended March 31, 2011, 195,374 restricted awards vested with a weighted average grant date fair value of $51.27, at a weighted average vest date fair value of $76.01.

Employee Stock Purchase Plan - During the three month periods ended March 31, 2011 and 2010, participants of the employee stock purchase plan purchased 7,460 and 7,785 shares, respectively, of Roper’s common stock for total consideration of $0.58 million and $0.41 million, respectively. All shares were purchased from Roper’s treasury shares.

5.	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 March 31,
	2011		2010
Net income	$	88,979	$	59,725
Currency translation adjustments		37,210		(31,251	)
Comprehensive earnings	$	126,189	$	28,474

6.	Inventories

	March 31, 2011			December 31, 2010
	(in thousands)
Raw materials and supplies	$	120,265		$	113,415
Work in process		35,553			26,358
Finished products		77,582			71,302
Inventory reserves		(34,612	)		(32,516	)
	$	198,788		$	178,559

Goodwill

	Industrial Technology		Energy Systems & Controls		Medical & Scientific Imaging		RF Technology		Total
	(in thousands)
Balances at December 31, 2010	$	420,002	$	380,595	$	637,991	$	1,289,192	$	2,727,780
Currency translation adjustments		9,584		3,464		3,431		4,251		20,730
Balances at March 31, 2011	$	429,586	$	384,059	$	641,422	$	1,293,443	$	2,748,510

8.	Other intangible assets, net

	Cost		Accumulated amortization			Net book value
	(in thousands)
Assets subject to amortization:
Customer related intangibles	$	960,013	$	(235,885	)	$	724,128
Unpatented technology		175,819		(54,376	)		121,443
Software		49,095		(30,182	)		18,913
Patents and other protective rights		25,505		(15,292	)		10,213
Trade secrets		1,604		(1,174	)		430
Assets not subject to amortization:
Trade names		229,386		-			229,386
Balances at December 31, 2010	$	1,441,422	$	(336,909	)	$	1,104,513

Assets subject to amortization:
Customer related intangibles	$	957,525	$	(252,794	)	$	704,731
Unpatented technology		181,298		(59,902	)		121,396
Software		49,098		(32,482	)		16,616
Patents and other protective rights		26,128		(16,296	)		9,832
Trade secrets		1,604		(1,271	)		333
Assets not subject to amortization:
Trade names		230,574		-			230,574
Balances at March 31, 2011	$	1,446,227	$	(362,745	)	$	1,083,482

Amortization expense of other intangible assets was $24,151 and $18,511 during the three months ended March 31, 2011 and 2010, respectively.

Debt

Roper’s 3.75% senior subordinated convertible notes due 2034 became convertible on January 15, 2009. During the three month period ended March 31, 2011, 27,992 notes were converted for $12.0 million in cash and 208,000 shares of common stock at a weighted average share price of $83.72. No gain or loss was recorded upon these conversions. In addition, a related $0.8 million deferred tax liability associated with excess deductions recorded for tax purposes was relieved to additional paid-in capital upon the conversions.

On March 31, 2011, the conversion of 13,453 notes was pending, with a settlement date of April 5, 2011. The conversion resulted in the payment of $5.8 million in cash and the issuance of 102,000 shares of common stock at a weighted average share price of $85.80.

At March 31, 2011, the conversion price on the outstanding notes was $428.75. If converted at March 31, 2011 the value would exceed the $80 million principal amount of the notes by approximately $112 million and would result in the issuance of 1,303,946 shares of Roper’s common stock.

10.	Fair Value of Financial Instruments

Roper’s long-term debt at March 31, 2011 included $500 million of fixed-rate senior notes due 2019, with a fair value of approximately $552 million, and $500 million of fixed-rate senior notes due 2013, with a fair value of approximately $550 million, based on the trading prices of the notes. Short-term debt included $80 million of fixed-rate convertible notes which were at fair value due to the ability of note holders to exercise the conversion option of the notes.

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 March 31, 2011 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 3 month 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 March 31, 2011 the fair value of the swap was an asset balance of $11.6 million and was reported in other assets. There was a corresponding increase of $11.7 million in the notes being hedged, which was reported as long-term debt. The impact on earnings for the three months ended March 31, 2011 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.

11.	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 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 three months ended March 31, 2011 is presented below (in thousands).

Balance at December 31, 2010	$	7,038
Additions charged to costs and expenses		2,538
Deductions		(2,115	)
Other		110
Balance at March 31, 2011	$	7,571

12.	Business Segments

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

	Three months ended March 31,
	2011		2010		Change
Net sales:
Industrial Technology	$	169,982	$	135,312	25.6	%
Energy Systems & Controls		129,633		105,678	22.7
Medical & Scientific Imaging		145,287		130,244	11.5
RF Technology		200,407		163,207	22.8
Total	$	645,309	$	534,441	20.7	%
Gross profit:
Industrial Technology	$	85,714	$	67,512	27.0	%
Energy Systems & Controls		70,146		53,491	31.1
Medical & Scientific Imaging		91,254		77,510	17.7
RF Technology		102,982		81,052	27.1
Total	$	350,096	$	279,565	25.2	%
Operating profit*:
Industrial Technology	$	46,189	$	31,766	45.4	%
Energy Systems & Controls		29,044		18,923	53.5
Medical & Scientific Imaging		35,037		29,334	19.4
RF Technology		44,950		32,201	39.6
Total	$	155,220	$	112,224	38.3	%
Long-lived assets
Industrial Technology	$	41,361	$	41,812	(1.1	)%
Energy Systems & Controls		18,256		20,816	(12.3	)
Medical & Scientific Imaging		43,084		36,084	19.4
RF Technology		31,331		30,412	3.0
Total	$	134,032	$	129,124	3.8	%

* Operating profit is before unallocated corporate general and administrative expenses of $13,220 and $11,508 for the three months ended March 31, 2011 and 2010, respectively.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with Management’s Discussion and Analysis of Financial Conditions and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2010 as filed on February 25, 2011 with the SEC and the notes to our Condensed Consolidated Financial Statements included elsewhere in this report.

Information About Forward-Looking Statements

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 connection with oral statements made to the press, potential investors or others. All statements that are not historical facts are “forward-looking statements.” The words “estimate,” “plan,” “project,” “intend,” “expect,” “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, raw materials, 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, medical and scientific 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, software-as-a-service ("SaaS")-based information networks, security and other niche markets.

We pursue consistent and sustainable growth in 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, 2010 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 March 31, 2011, our allowance for doubtful accounts receivable, sales returns and sales credits was $10.6 million and was 2.5% of total gross accounts receivable at March 31, 2011 and December 31, 2010. The allowance will fluctuate as a percentage of sales based on specific identification of allowances needed due to changes in our business as well as the write off of uncollectible receivables.

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 March 31, 2011, inventory reserves for excess and obsolete inventory were $34.6 million, or 14.8% of gross inventory cost, as compared to $32.5 million, or 15.4% of gross inventory cost, at December 31, 2010. 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.

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 March 31, 2011, the accrual for future warranty obligations was $7.6 million or 0.3% of annualized first 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 first quarter of 2011, we recognized $29.1 million of net sales using this method. In addition, approximately $158.1 million of net sales related to unfinished percentage-of-completion contracts had yet to be recognized at March 31, 2011. 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 first quarter effective income tax rate was 29.4% and was relatively unchanged from the prior year rate of 29.7%.

The evaluation of the carrying value of goodwill and indefinite-lived intangibles is required to be performed on an annual basis and on 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. We perform the annual 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 March 31,
	2011			2010
Net sales
Industrial Technology	$	169,982		$	135,312
Energy Systems & Controls		129,633			105,678
Medical & Scientific Imaging		145,287			130,244
RF Technology		200,407			163,207
Total	$	645,309		$	534,441
Gross profit:
Industrial Technology		50.4	%		49.9	%
Energy Systems & Controls		54.1			50.6
Medical & Scientific Imaging		62.8			59.5
RF Technology		51.4			49.7
Total		54.3			52.3
Selling, general & administrative expenses:
Industrial Technology		23.3	%		26.4	%
Energy Systems & Controls		31.7			32.7
Medical & Scientific Imaging		38.7			37.0
RF Technology		29.0			29.9
Total		30.2			31.3
Segment operating profit:
Industrial Technology		27.2	%		23.5	%
Energy Systems & Controls		22.4			17.9
Medical & Scientific Imaging		24.1			22.5
RF Technology		22.4			19.7
Total		24.1			21.0
Corporate administrative expenses		(2.0	)		(2.2	)
		22.0			18.8
Interest expense		(2.6	)		(3.0	)
Other income		0.1			0.1
Earnings before income taxes		19.5			15.9
Income taxes		(5.7	)		(4.7	)
Net earnings		13.8	%		11.2	%

Three months ended March 31, 2011 compared to three months ended March 31, 2010

Net sales for the quarter ended March 31, 2011 were $645.3 million as compared to $534.4 million in the prior year quarter, an increase of 21%. The increase was the result of internal growth of 17% and a 4% increase in sales from 2010 acquisitions.

In our Industrial Technology segment, net sales were up 26% to $170.0 million in the first quarter of 2011 as compared to $135.3 million in the first quarter of 2010. The increase was due to broad-based strength across all businesses and end markets within this segment. Gross margins increased to 50.4% for the first quarter of 2011 as compared to 49.9% in the first quarter of 2010 due to operating leverage from higher sales volume. Selling, general and administrative (“SG&A”) expenses as a percentage of net sales decreased to 23.3% in the current year quarter from 26.4% in the prior year quarter due to operating leverage on higher sales volume. The resulting operating profit margins were 27.2% in the first quarter of 2011 as compared to 23.5% in the first quarter of 2010.

Net sales in our Energy Systems & Controls segment increased by 23% to $129.6 million during the first quarter of 2011 compared to $105.7 million in the first quarter of 2010 due to increased sales in all businesses within the segment. Gross margins increased to 54.1% in the first quarter of 2011 compared to 50.6% in the first quarter of 2010 due to operating leverage on higher sales volume. SG&A expenses as a percentage of net sales were 31.7% compared to 32.7% in the prior year quarter due to operating leverage on higher sales volume. As a result, operating margins were 22.4% in the first quarter of 2011 as compared to 17.9% in the first quarter of 2010.

Our Medical & Scientific Imaging segment net sales increased by 12% to $145.3 million in the first quarter of 2011 as compared to $130.2 million in the first quarter of 2010 due to increased sales in the medical and electron microscopy businesses. Gross margins increased to 62.8% in the first quarter of 2011 from 59.5% in the first quarter of 2010 due primarily to the inclusion of a $3.9 million inventory step-up charge in the first quarter of 2010. SG&A as a percentage of net sales was 38.7% in the first quarter of 2011 as compared to 37.0% in the first quarter of 2010 due to investments in new products, primarily in the medical businesses. As a result, operating margins were 24.1% in the first quarter of 2011 as compared to 22.5% in the first quarter of 2010.

In our RF Technology segment, net sales were $200.4 million in the first quarter of 2011 as compared to $163.2 million in the first quarter of 2010, an increase of 23%. The increase included internal growth of 11% as well as an increase of 12% from acquisitions. Gross margins increased to 51.4% as compared to 49.7% in the prior year quarter due to a more favorable mix in tolling and traffic management products and services. SG&A as a percentage of sales in the first quarter of 2011 decreased slightly to 29.0% as compared to 29.9% in the prior year due to operating leverage on higher sales volume. As a result, operating profit margins were 22.4% as compared to 19.7% in 2010.

Corporate expenses were $13.2 million, or 2.0% of sales, in the first quarter of 2011 as compared to $11.5 million, or 2.2% of sales, in the first quarter of 2010. The dollar increase is due to higher equity compensation costs and higher salaries and wages.

Interest expense of $16.7 million for the first quarter of 2011 was $0.5 million higher than the first quarter of 2010 due to higher average outstanding debt balances, offset in part by lower average interest rates.

Income taxes were 29.4% of pretax earnings in the current quarter and were relatively unchanged from the prior year rate of 29.7%.

At March 31, 2011, the functional currencies of most of our European subsidiaries were weaker and the Canadian dollar was stronger against the U.S. dollar compared to currency exchange rates at December 31, 2010. The currency changes resulted in an increase of $38.9 million in the foreign exchange component of comprehensive earnings for the current year quarter. Approximately $20.7 million of the total adjustment is related to goodwill and does not directly affect our expected future cash flows. During the quarter ended March 31, 2011, the functional currencies of most of our European subsidiaries were weaker and the Canadian dollar was stronger against the U.S. dollar as compared to the quarter ended March 31, 2010. The difference between the operating profits for these companies for the first quarter of 2011 compared to the prior year quarter, translated into U.S. dollars, was approximately 1%.

Net orders were $702.3 million for the quarter, 24% higher than the first quarter 2010 net order intake of $567.2 million. Orders increased across all of our segments as the economic recovery continued throughout the first quarter of 2011. Acquisitions made in 2010 contributed 4% to the current quarter orders. Overall, our order backlog at March 31, 2011 was up 43% as compared to March 31, 2010.

	Net orders booked for the three months ended March 31,				Order backlog as of March 31,
	2011		2010		2011		2010
Industrial Technology	$	200,742	$	154,093	$	148,127	$	70,005
Energy Systems & Controls		134,205		115,300		110,689		79,020
Medical & Scientific Imaging		150,265		131,110		110,305		73,731
RF Technology		217,087		166,743		482,067		371,106
	$	702,299	$	567,246	$	851,188	$	593,862

Financial Condition, Liquidity and Capital Resources

Selected cash flows for the three months ended March 31, 2011 and 2010 were as follows (in millions):

	Three months ended March 31,
	2011			2010
Cash provided by/(used in):
Operating activities	$	86.6		$	95.1
Investing activities		(9.0	)		(18.6	)
Financing activities		(96.1	)		(48.0	)

Operating activities - Net cash provided by operating activities decreased by 8.9% to $86.6 million in the first quarter of 2011 as compared to $95.1 million in the first quarter of 2010 due to higher inventory and receivables balances related to the timing of sales and orders in the current quarter, partially offset by higher net earnings.

Investing activities - Cash used in investing activities during the first quarter of 2011 was primarily capital expenditures, and primarily business acquisitions and capital expenditures in the first quarter of 2010.

Financing activities - Cash used in financing activities in the current and prior year quarters was primarily for debt principal repayments and dividends. Net debt payments were $97.0 million in the three months ended March 31, 2011 as compared to $43.0 million in the three months ended March 31, 2010.

Total debt at March 31, 2011 consisted of the following (amounts in thousands):

Senior Notes due 2013*	$	511,697
Senior Notes due 2019		500,000
Senior Subordinated Convertible Notes		79,809
Revolving Facility		145,000
Other		5,281
Total debt		1,241,788
Less current portion		81,826
Long-term debt	$	1,159,961

*Shown including fair value swap adjustment of $11,697.

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 March 31, 2011, there was $145 million of outstanding borrowings under the facility. At March 31, 2011, we had $5.3 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 $56 million of outstanding letters of credit.

The cash and short-term investments at our foreign subsidiaries at March 31, 2011 totaled $247 million. Repatriation of these funds for use in domestic operations would expose us to a potential additional tax impact. We consider this cash to be permanently reinvested and have no plans to repatriate these funds. We expect that our available additional borrowing capacity combined with the cash flows expected to be generated from existing business will be sufficient to fund operating requirements in the U.S.

We were in compliance with all debt covenants related to our credit facilities throughout the quarter ended March 31, 2011.

Net working capital (total current assets, excluding cash, less total current liabilities, excluding debt) was $342.5 million at March 31, 2011 compared to $281.4 million at December 31, 2010, reflecting increases in working capital due primarily to higher inventory and receivables balances related to the timing of sales and orders. Total debt decreased to $1.24 billion at March 31, 2011 compared to $1.34 billion at December 31, 2010 due to the use of operating cash flows to reduce outstanding debt. Our leverage is shown in the following table:

	March 31, 2011			December 31, 2010
Total Debt	$	1,241,787		$	1,341,045
Cash		(261,447	)		(270,394	)
Net Debt		980,340			1,070,651
Stockholders’ Equity		2,882,129			2,750,907
Total Net Capital	$	3,862,469		$	3,821,558

Net Debt / Total Net Capital		25.4	%		28.0	%

At March 31, 2011, 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 $8.8 million and $6.5 million were incurred during the first quarters of 2011 and 2010, 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. However, the rate at which we can reduce our debt during 2011 (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 March 31, 2011 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 3 month LIBOR.

At March 31, 2011, we had $580 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 March 31, 2011, 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 0.6% to 0.2% lower, respectively, than the fixed rates on our senior notes. At March 31, 2011, we had $145 million of outstanding variable rate borrowings under the unsecured credit facility as well as the $500 million in interest rate swaps. An increase in interest rates of 1% would increase our annualized pretax interest costs by approximately $6.5 million.

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 26% of our total first quarter sales and 65% of these sales were by companies with European functional currencies. The U.S. dollar strengthened against most European currencies and weakened against the Canadian dollar during the first quarter of 2011 versus the first quarter of 2010. If these currency exchange rates had been 10% different throughout the first quarter of 2011 compared to currency exchange rates actually experienced, the impact on our net earnings would have been approximately $3.2 million.

The U.S. dollar was stronger against most European currencies and weaker against the Canadian dollar at March 31, 2011 versus December 31, 2010. The changes in these currency exchange rates resulted in an increase in net assets of $38.9 million that was reported as a component of comprehensive earnings, $20.7 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

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 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.

Our disclosure controls and procedures are 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, 2010 as filed on February 25, 2011 with the SEC. See also, “Information about Forward-Looking Statements” included in Part I, Item 2 of this Quarterly Report on Form 10-Q.

Item 6. Exhibits

3.1		Roper Industries, Inc., By-Laws, Amended and Restated as of March 16, 2011, incorporated herein by reference to exhibit 3.2 to the Roper Industries, Inc. Current Report on Form 8-K filed March 22, 2011.

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,	May 5, 2011
Brian D. Jellison	and Chief Executive Officer
	(Principal Executive Officer)

/s/ John Humphrey		Chief Financial Officer and Vice President	May 5, 2011
John Humphrey		(Principal Financial Officer)

/s/ Paul J. Soni		Vice President and Controller	May 5, 2011
Paul J. Soni		(Principal Accounting Officer)

EXHIBIT INDEX

TO REPORT ON FORM 10-Q

Number Exhibit

3.1		Roper Industries, Inc., By-Laws, Amended and Restated as of March 16, 2011, incorporated herein by reference to exhibit 3.2 to the Roper Industries, Inc. Current Report on Form 8-K filed March 22, 2011.

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.