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, 2008 as filed on March 2, 2009 with the SEC, as supplemented by our Current Report on Form 8-K filed on May 15, 2009 to retrospectively adopt accounting guidance related to the treatment of certain convertible debt instruments, 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 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, water, energy, research and medical, 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 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, 2008 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 discusses critical estimates with our external auditors and 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.

Our most significant accounting uncertainties are encountered in the areas of accounts receivable collectibility, inventory valuation and utilization, future warranty obligations, revenue recognition (percent 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 return and other sales credit histories are analyzed to determine likely future rates for such credits. At September 30, 2009, our allowance for doubtful accounts receivable, sales returns and sales credits was $11.5 million, or 3.4% of total gross accounts receivable as compared to 3.2% at December 31, 2008.

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, 2009, inventory reserves for excess and obsolete inventory were $29.1 million, or 14.3% of gross inventory cost, as compared to $30.1 million, or 13.9% of gross inventory cost at December 31, 2008.

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, 2009, the accrual for future warranty obligations was $7.3 million or 0.4% 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 first nine months of 2009, we recognized $111.7 million of net sales using this method. In addition, approximately $143.1 million of net sales related to unfinished percentage-of-completion contracts had yet to be recognized at September 30, 2009. Contracts accounted for under this method are generally not significantly different in profitability from revenues accounted for under other methods.

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.

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 27.3%, which was lower than the prior year third quarter rate of 34.7%, due primarily to the release of reserves related to uncertain tax provisions and certain foreign tax planning initiatives.

Results of Operations

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. Results of operations for the three and nine month periods ended September 30, 2008 have been adjusted to reflect the retrospective adoption of accounting guidance related to the treatment of certain convertible debt instruments - see Note 2 of the notes to the Condensed Consolidated Financial Statements.

                                                Three months ended             Nine months ended
                                                   September 30,                 September 30,
                                                2009          2008           2009            2008
Net sales
Industrial Technology                         $ 130,538     $ 169,065     $   397,730     $   525,929
Energy Systems & Controls                       102,988       137,535         314,997         410,638
Scientific & Industrial Imaging                  78,934        94,610         238,914         282,206
RF Technology                                   173,216       191,890         544,389         511,736
Total                                         $ 485,676     $ 593,100     $ 1,496,030     $ 1,730,509
Gross profit:
Industrial Technology                              47.5 %        48.6 %          47.9 %          48.2 %
Energy Systems & Controls                          50.9          54.7            52.1            54.5
Scientific & Industrial Imaging                    56.0          54.4            55.4            54.6
RF Technology                                      50.1          52.1            48.6            50.6
Total                                              50.6          52.1            50.2            51.5
Selling, general & administrative expenses:
Industrial Technology                              24.1 %        22.7 %          24.9 %          22.3 %
Energy Systems & Controls                          32.3          31.0            33.1            31.0
Scientific & Industrial Imaging                    37.2          34.6            37.3            35.5
RF Technology                                      27.7          25.9            27.4            27.2
Total                                              29.2          27.6            29.5            27.9
Segment operating profit:
Industrial Technology                              23.4 %        25.9 %          23.0 %          26.0 %
Energy Systems & Controls                          18.7          23.7            19.0            23.5
Scientific & Industrial Imaging                    18.8          19.8            18.1            19.2
RF Technology                                      22.5          26.2            21.3            23.4
Total                                              21.3          24.5            20.8            23.5

Corporate administrative expenses                  (2.4 )        (2.2 )          (2.4 )          (2.3 )
                                                   18.9          22.3            18.4            21.2
Interest expense                                   (3.0 )        (2.7 )          (2.8 )          (2.4 )
Other expense                                         -          (0.5 )           0.2            (0.1 )
Earnings before income taxes                       16.0          19.1            15.8            18.7
Income taxes                                       (4.4 )        (6.6 )          (4.6 )          (6.5 )
Net earnings                                       11.6 %        12.5 %          11.2 %          12.2 %

Three months ended September 30, 2009 compared to three months ended September 30, 2008

Net sales for the quarter ended September 30, 2009 were $485.7 million as compared to $593.1 million in the prior year quarter, a decrease of 18%. Our third quarter 2009 results included a net $11.8 million, or a 2% increase, in sales from 2008 acquisitions and 2009 divestitures. We experienced a 19% decline in organic sales and a negative 1% impact from foreign currency.

In our Industrial Technology segment, net sales were down 22.8% to $130.5 million in the third quarter of 2009 as compared to $169.1 million in the third quarter of 2008. The decrease was broad-based across all of our companies in this segment due primarily to the weak global economy. Gross margins were 47.5% for the third quarter of 2009 as compared to 48.6% in the third quarter of 2008. The decrease was the result of negative operating leverage on lower sales volume and $0.5 million in severance and related costs in the current year quarter. SG&A expenses as a percentage of net sales were 24.1%, up from 22.7% in the prior year quarter due to negative operating leverage from lower sales and the inclusion of approximately $0.4 million in severance and related costs. The resulting operating profit margins were 23.4% in the third quarter of 2009 as compared to 25.9% in the third quarter of 2008.

Net sales in our Energy Systems & Controls segment decreased by 25.1% to $103.0 million during the third quarter of 2009 compared to $137.5 million in the third quarter of 2008. The decrease was broad-based across all of our Energy Systems & Controls businesses, due to the weak global economy and its impact on our end markets, and included a negative 2.1% impact from foreign currency. Gross margins were 50.9% in the third quarter of 2009 compared to 54.7% in the third quarter of 2008 due to negative operating leverage on lower sales volume and $0.8 million in severance and related costs in the current year quarter. SG&A expenses as a percentage of net sales increased to 32.3% as compared to 31.0% in the prior year quarter due in part to $0.5 million of severance and related costs in the current year quarter. Operating margins were 18.7% in the third quarter of 2009 as compared to 23.7% in the third quarter of 2008.

Net sales in our Scientific & Industrial Imaging segment decreased by 16.6% to $78.9 million during the third quarter of 2009 compared to $94.6 million in the third quarter of 2008. The decrease was due to lower shipments to research and imaging markets and relatively flat sales in our medical business over the prior year period. Gross margins increased to 56.0% in the third quarter of 2009 from 54.4% in the third quarter of 2008 due to favorable product mix and lower costs. SG&A as a percentage of net sales increased to 37.2% in the third quarter of 2009 as compared to 34.6% in the third quarter of 2008 due to negative operating leverage from lower sales. As a result, operating margins were 18.8% in the third quarter of 2009 as compared to 19.8% in the third quarter of 2008.

In our RF Technology segment, net sales decreased 9.7% to $173.2 million compared to $191.9 million in the third quarter of 2008. Acquisitions accounted for $11.8 million in increased sales for 2009. Organic sales were down 16.7% due primarily to lower hardware and tag sales and the completion of transportation projects. Gross margins were 50.1% as compared to 52.1% in the prior year quarter, due to negative operating leverage from lower sales, and an unfavorable product mix due to higher service revenue and lower hardware shipments in transportation end markets. SG&A as a percentage of sales in the third quarter of 2009 increased to 27.7%, compared to 25.9% in the prior year third quarter. Operating profit margins decreased to 22.5% in 2009 as compared to 26.2% in 2008.

Corporate expenses decreased by 10.2% to $11.6 million in the third quarter of 2009 as compared to $12.9 million in the third quarter of 2008, and increased slightly as a percentage of sales over the prior year quarter.

Interest expense of $14.4 million for the third quarter of 2009 was $1.7 million lower as compared to $16.1 million in the third quarter of 2008. The decrease was due to lower average debt balances throughout the third quarter of 2009 and $1.8 million in amortization of debt discount in the third quarter of 2008 that was fully amortized in the first quarter of 2009, offset partially by higher interest rates over the prior year related to the addition of our fixed rate 6.25% senior notes due 2019 in the current quarter, as well as a reduction in interest income due to lower interest rates on cash balances in the current year quarter.

Other income was $0.1 million in the third quarter of 2009 as compared to other expense of $2.8 million in the prior year period, due primarily to debt extinguishment charges of $3.1 million in the prior year quarter compared to $0.4 million in 2009.

Income taxes were 27.3% of pretax earnings in the current quarter as compared to 34.7% in the third quarter of 2008, due primarily to the release of reserves related to uncertain tax provisions and certain foreign tax planning initiatives.

At September 30, 2009, the functional currencies of our European and Canadian subsidiaries were weaker against the dollar as compared to September 30, 2008 and stronger as compared to December 31, 2008. The currency changes resulted in an increase of $18.6 million in the foreign exchange component of comprehensive earnings for the quarter. Approximately $10 million of the total adjustment is related to goodwill and is not expected to affect our expected future cash flows. Operating income in the third quarter of 2009 decreased by less than 1% due to the strengthening of the U.S. dollar as compared to a year ago.

Net orders were $498.9 million for the quarter, 14.1% lower than the third quarter 2008 net order intake of $580.6 million. Approximately $22 million of the change from the prior year quarter order intake was due to the net of 2008 acquisitions and 2009 divestitures. We experienced lower orders in many of our businesses in the third quarter of 2009 due to the worldwide economic downturn and its effects on our end markets. In addition, we experienced delays in a large transportation project which was subsequently awarded in October 2009. Overall, our order backlog at September 30, 2009 was down 10.2% as compared to September 30, 2008.

                                             Net orders booked for the
                                                 three months ended               Order backlog as of
                                                   September 30,                     September 30
                                               2009               2008           2009             2008
Industrial Technology                      $     125,776       $  163,442     $   53,446       $   81,169
Energy Systems & Controls                        104,593          134,970         68,515           86,148
Scientific & Industrial Imaging                   84,329          102,933         75,780           81,859
RF Technology                                    184,243          179,274        356,477          368,298
                                           $     498,941       $  580,619     $  554,218       $  617,474

Nine months ended September 30, 2009 compared to nine months ended September 30, 2008

Net sales for the nine months ended September 30, 2009 were $1.5 billion as compared to $1.7 billion in the prior year nine month period, a decrease of 13.5%. The decrease is comprised of a negative 2.3% impact from foreign currency, an increase of 4.0% from acquisitions and a decline of 15.3% in organic sales, due primarily to weak global economic conditions.

In order to mitigate the effects of the weakened global economy on our financial results, we committed to certain severance and related cost-control actions during the nine month period ending September 30, 2009. The cost of these actions during the first nine months of 2009 totaled $10 million, $4 million of which was recorded as cost of goods sold and the remaining $6 million as SG&A expense. As of September 30, 2009, $7 million in cash payments have been made, with the remaining $3 million reported as accrued liabilities. We expect that the remainder of the severance and related cost-control actions and related payments will be substantially completed within the next twelve months. The impact of these costs on our business segments is included in our segment discussions.

In our Industrial Technology segment, net sales were down 24.4% to $397.7 million in the first nine months of 2009 as compared to $525.9 million in the first nine months of 2008. The decrease was due to a generally weak economy, fewer projects for automatic meter reading ("AMR") deployment at Neptune and the slowdown or temporary shutdowns of many customer manufacturing facilities which impacted our materials testing business, offset in part by delivery of several large projects in our reciprocating pump business. Gross margins were 47.9% for the first nine months of 2009 as compared to 48.2% for the first nine months of 2008 due to the non-recurrence of a warranty charge at Neptune in the prior year offset by negative operating leverage from lower sales volume and $1.4 million in expenses for severance and related cost-control actions. SG&A expenses as a percentage of net sales were 24.9%, up from 22.3% in the prior year nine month period due to negative operating leverage from lower sales and approximately $2.9 million in expense for severance and related cost-control actions in the current year. The resulting operating profit margins were 23.0% in the first nine months of 2009 as compared to 26.0% in the first nine months of 2008.

Net sales in our Energy Systems & Controls segment decreased by 23.3% to $315.0 million during the first nine months of 2009 compared to $410.6 million in the first nine months of 2008. The decrease in sales was due to broad-based weakness across the segment which led to reduced demand for our instruments and sensors sold into these markets and a negative 4.0% impact from foreign currency. Gross margins were 52.1% in the first nine months of 2009 compared to 54.5% in the first nine months of 2008 due to negative operating leverage on lower sales volume, and $1.5 million of expenses related to severance and related cost-control actions. SG&A expenses as a percentage of net sales were 33.1% as compared to 31.0% in the prior year nine month period due to negative operating leverage from lower sales volume and $2.3 million of expense for severance and related cost-control actions. Operating margins were 19.0% in the first nine months of 2009 as compared to 23.5% in first nine months of 2008.

In our Scientific & Industrial Imaging segment net sales decreased 15.3% to $238.9 million in the first nine months of 2009 as compared to $282.2 million in the first nine months of 2008 due to lower shipments to research and imaging markets as well as a negative 3.1% foreign exchange impact. Gross margins increased to 55.4% in the first nine months of 2009 from 54.6% in the first nine months of 2008 due to favorable product mix and lower costs. SG&A as a percentage of net sales increased to 37.3% in the nine month period ended September 30, 2009 as compared to 35.5% in the prior year period due to negative operating leverage on lower sales. Operating margins were 18.1% in the first nine months of 2009 compared to 19.2% in the first nine months of 2008, and were reduced by $1.5 million of expense in the current year due to severance and related cost-control actions.

In our RF Technology segment, net sales were $544.4 million compared to $511.7 million in the first nine months of 2008, an increase of 6.4%. Acquisitions, net of divestitures, accounted for approximately 13% of the increase, offset by a 6% decline in organic sales and a negative 1% foreign exchange impact. Gross margins were 48.6% as compared to 50.6% in the prior year nine month period due to product mix in our transportation businesses. SG&A as a percentage of sales in the first nine months of 2009 was 27.4%, relatively flat from 27.2% in the prior year. Operating profit margins were 21.3% in 2009 as compared to 23.4% in 2008, and was reduced by $0.8 million of expense in the current year due to severance and related cost-control actions.

Corporate expenses decreased by $3.9 million to $35.9 million in the first nine months of 2009 as compared to $39.9 million in the first nine months of 2008, due primarily to lower equity compensation costs in the current year and . . .