Roper (ROP) 10-Q 2005 Q2 Quarterly report

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 June 30, 2005.

[   ]	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	51-0263969
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2160 Satellite Blvd., Suite 200 Duluth, Georgia	30097
(Address of principal executive offices)	(Zip Code)

(770) 495-5100
(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. Yes X  No      

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X  No      

The number of shares outstanding of the Registrant’s common stock as of August 5, 2005 was approximately 42,792,432.

ROPER INDUSTRIES, INC.

REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005

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 Statement 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 4	Submission of Matters to Vote of Security Holders		23
Item 6	Exhibits		24
	Signatures		25

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 June 30,				Six months ended June 30,
	2005		2004		2005		2004
Net sales	$	361,564	$	232,434	$	695,401	$	453,074
Cost of sales		181,622		116,419		352,835		227,621
Gross profit		179,942		116,015		342,566		225,453
Selling, general and administrative expenses		117,550		75,307		228,310		151,773
Income from operations		62,392		40,708		114,256		73,680
Interest expense		10,957		6,836		21,334		13,739
Other income		231		12		243		35
Earnings before income taxes		51,666		33,884		93,165		59,976
Income taxes		16,104		10,334		29,592		12,292
Net earnings	$	35,562	$	23,550	$	63,573	$	41,684
Net earnings per share:
Basic	$	0.83	$	0.64	$	1.49	$	1.13
Diluted		0.82		0.63		1.47		1.12
Weighted average common shares outstanding:
Basic		42,716		36,863		42,626		36,784
Diluted		43,464		37,468		43,347		37,375
Dividends declared per common share	$	0.10625	$	0.09625	$	0.21250	$	0.19250

See accompanying notes to condensed consolidated financial statements.

Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)

	June 30, 2005			December 31, 2004
	(unaudited)			(audited)
ASSETS:
Cash and cash equivalents	$	68,399		$	129,419
Accounts receivable, net		249,062			242,014
Inventories, net		138,363			132,282
Deferred taxes		20,662			20,485
Other current assets		50,711			31,960
Total current assets		527,197			556,160
Property, plant and equipment, net		100,000			97,949
Goodwill		1,270,483			1,144,035
Other intangible assets, net		485,514			487,173
Deferred taxes		20,991			34,205
Other noncurrent assets		45,466			46,882
Total assets	$	2,449,651		$	2,366,404
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable	$	62,709		$	65,801
Accrued liabilities		141,339			145,880
Deferred taxes		4,112			5,342
Current portion of long-term debt		35,980			36,527
Total current liabilities		244,140			253,550
Long-term debt		883,259			855,364
Deferred taxes		141,617			125,984
Other liabilities		19,156			17,420
Total liabilities		1,288,172			1,252,318
Commitments and contingencies
Common stock		440			436
Additional paid-in capital		669,136			650,917
Unearned compensation on restricted stock		(9,235	)		(5,544	)
Retained earnings		469,690			415,188
Accumulated other comprehensive earnings		54,395			76,249
Treasury stock		(22,947	)		(23,160	)
Total stockholders' equity		1,161,479			1,114,086
Total liabilities and stockholders' equity	$	2,449,651		$	2,366,404

See accompanying notes to condensed consolidated financial statements.

Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)

	Six months ended June 30,
	2005			2004
Cash flows from operating activities:
Net earnings	$	63,573		$	41,684
Depreciation		13,684			8,845
Amortization		21,008			10,766
Other, net		3,118			4,646
Cash provided by operating activities		101,383			65,941
Cash flows from investing activities:
Business acquisitions, net of cash acquired		(177,375	)		(51,511	)
Capital expenditures		(10,500	)		(5,125	)
Other, net		(1,600	)		(1,307	)
Cash used in investing activities		(189,475	)		(57,943	)
Cash flows from financing activities:
Term note borrowings/(payments), net		(16,351	)		(9,978	)
Other borrowings/(payments), net		49,244			(20,774	)
Issuance of common stock		--			28,873
Dividends		(9,032	)		(7,104	)
Other, net		8,785			6,183
Cash provided/(used) by financing activities		32,646			(2,800	)
Effect of foreign currency exchange rate changes on cash		(5,574	)		(699	)
Net increase/(decrease) in cash and cash equivalents		(61,020	)		4,499
Cash and cash equivalents, beginning of period		129,419			70,234
Cash and cash equivalents, end of period	$	68,399		$	74,733

See accompanying notes to condensed consolidated financial statements.

Roper Industries, Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Stockholders’ Equity (unaudited)
(in thousands)

	Common stock		Additional paid-in capital		Unearned compensation on restricted stock earnings			Retained earnings			Accumulated other comprehensive earnings			Treasury stock			Total
Balances at December 31, 2004	$	436	$	650,917	$	(5,544	)	$	415,188		$	76,249		$	(23,160	)	$	1,114,086
Net earnings		--		--		--			63,573			--			--			63,573
Stock option transactions		3		8,155		--			--			--			--			8,158
Treasury stock sold		--		416		--			--			--			213			629
Currency translation adjustments		--		--		--			--			(21,854	)		--			(21,854	)
Restricted stock grants		1		5,768		(3,691	)		--			--			--			2,078
Issuance of common stock		--		2,249		--			--			--			--			2,249
Stock option tax benefit		--		1,631		--			--			--			--			1,631
Dividends declared		--		--		--			(9,071	)		--			--			(9,071	)
Balances at June 30, 2005	$	440	$	669,136	$	(9,235	)	$	469,690		$	54,395		$	(22,947	)	$	1,161,479

See accompanying notes to condensed consolidated financial statements.

Roper Industries, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
June 30, 2005

1. Basis of Presentation

The accompanying condensed consolidated financial statements for the three-month and six-month periods ended June 30, 2005 and 2004 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 and six-month periods ended June 30, 2005 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 2004 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

2. Earnings Per Share

Basic earnings per share are calculated by dividing net earnings (there were no adjustments necessary to determine earnings available to common shares) by the weighted average number of common shares outstanding during the period. Diluted earnings per share include the dilutive effect of common stock equivalents outstanding during the period. Common stock equivalents consisted of stock options and restricted stock grants.

The FASB issued SFAS No. 148 – “Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement No. 123” which provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends certain disclosure requirements of Statement 123. Currently, Roper has chosen not to adopt the accounting provisions of SFAS 123; however, as permitted by SFAS 123, the Company continues to apply intrinsic value accounting for its stock option plans under Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees.” Roper’s pro forma net earnings and pro forma earnings per share based upon the fair value at the grant dates for awards under the Company’s plans are disclosed below.

If the Company had elected to recognize compensation expense based upon the fair value at the grant dates for awards under these plans, the Company’s pro forma net income and income per share would have been approximately as presented below.

	Three Months Ended June 30,				Six Months Ended June 30,
	2005		2004		2005		2004
Net earnings, as reported (in thousands)	$	35,562	$	23,550	$	63,573	$	41,684
Add: Total additional stock based
compensation included in net income		1,252		709		2,078		768
Deduct: Total additional stock based
compensation cost, net of tax		3,911		3,481		5,973		5,867
Net earnings Pro forma (in thousands)	$	32,903	$	20,778	$	59,678	$	36,585
Net Earnings per share, as reported:
Basic	$	0.83	$	0.64	$	1.49	$	1.13
Diluted		0.82		0.63		1.47		1.12
Net Earnings per share, Pro forma:
Basic	$	0.77	$	0.56	$	1.40	$	0.99
Diluted		0.76		0.55		1.38		0.98

3. Comprehensive Earnings

Comprehensive earnings include net earnings and all other non-owner sources of changes in net assets. Comprehensive earnings (in thousands) for the three months ended June 30, 2005 and 2004 were $26,087 and $23,056, respectively, and $41,719 and $38,350 for the six months ended June 30, 2005 and 2004 respectively. The differences between net earnings and comprehensive earnings were currency translation adjustments.

4. Acquisitions

On February 28, 2005, the Company acquired all the outstanding shares of Inovonics Wireless Corporation (“Inovonics”), a leading provider of 900 MHz radio frequency (RF) products for security applications. These operations of Inovonics are included in the RF Technology segment. The aggregate purchase price of the acquisition was approximately $45 million.

On June 17, 2005, the Company acquired all the outstanding shares of CIVCO Holdings, Inc. (“CIVCO”), a maker of diagnostic ultrasound products. These operations of CIVCO are included in the Scientific & Industrial Imaging segment. The aggregate purchase price of the acquisition was approximately $120 million. A preliminary allocation of the purchase price resulted in approximately $40 million allocated to identifiable intangibles, and $82 million to goodwill. A final purchase price allocation will be completed by year end.

5. Inventories

	June 30, 2005			December 31, 2004
	(in thousands)
Raw materials and supplies	$	85,210		$	84,231
Work in process		26,636			24,853
Finished products		54,797			50,125
Inventory reserves		(28,280	)		(26,927	)
	$	138,363		$	132,282

6. Goodwill

	Instrumentation			Industrial Technology			Energy Systems & Controls			Scientific & Industrial Imaging			RF Technology			Total
	(in thousands)
Balances at December 31, 2004	$	237,407		$	286,959		$	109,511		$	126,793		$	383,365		$	1,144,035
Additions		--			10			--			87,728			57,200			144,938
Currency translation adjustments		(14,125	)		(2,566	)		(613	)		(729	)		(457	)		(18,490	)
Balances at June 30, 2005	$	223,282		$	284,403		$	108,898		$	213,792		$	440,108		$	1,270,483

7. Other intangible assets, net

	Cost		Accumulated amortization			Net book value
	(in thousands)
Assets subject to amortization:
Existing customer base	$	338,389	$	(17,362	)	$	321,027
Unpatented technology		2,115		(702	)		1,413
Software		53,268		(6,409	)		46,859
Patents and other protective rights		15,222		(5,308	)		9,914
Trade secrets		6,202		(1,480	)		4,722
Sales order backlog		14,034		(612	)		13,422
Assets not subject to amortization:
Trade names		89,817		--			89,817
Balances at December 31, 2004	$	519,047	$	(31,874	)	$	487,173
Assets subject to amortization:
Existing customer base	$	336,686	$	(25,652	)	$	311,034
Unpatented technology		12,745		(1,433	)		11,312
Software		61,929		(10,092	)		51,837
Patents and other protective rights		21,859		(7,334	)		14,525
Trade secrets		6,202		(1,958	)		4,244
Sales order backlog		14,506		(2,429	)		12,077
Assets not subject to amortization:
Trade names		80,485		--			80,485
Balances at June 30, 2005	$	534,412	$	(48,898	)	$	485,514

Amortization expense of other intangible assets was $19,407 and $8,510 during the six months ended June 30, 2005 and 2004, respectively.

8. 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. 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, and that the ultimate liability, if any, arising from these actions should not have a material adverse effect on the consolidated financial position, results of operations or cash flows of Roper.

Over recent years there has been a significant increase in certain U.S. states in asbestos-related litigation claims against numerous industrial companies. Roper or its subsidiaries have been named defendants in some such cases. No significant resources have been required by Roper to respond to these cases and Roper believes it has valid defenses to such claims and, if required, intends to defend them vigorously. Given the state of these claims it is not possible to determine the potential liability, if any.

The Company’s financial statements include accruals for potential product liability and warranty claims based on the Company’s claims experience. Such costs are accrued at the time revenue is recognized. A summary of the Company’s warranty accrual activity for the six months ended June 30, 2005 is presented below (in thousands).

Balance at December 31, 2004	$	6,361
Additions charged to costs and expenses		3,206
Deductions		(2,754	)
Other		96
Balance at June 30, 2005	$	6,909

9. Industry Segments

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

	Three months ended June 30,							Six months ended June 30,
	2005		2004		Change			2005		2004		Change
Net sales:
Instrumentation	$	56,114	$	49,702		12.9	%	$	110,620	$	98,827		11.9	%
Industrial Technology		110,787		100,961		9.7			213,274		194,079		9.9
Energy Systems & Controls		45,418		36,261		25.3			85,733		68,338		25.5
Scientific & Industrial Imaging		50,722		45,510		11.5			94,980		91,830		3.4
RF Technology		98,523		--		--			190,794		--		--
Total	$	361,564	$	232,434		55.6	%	$	695,401	$	453,074		53.5	%
Gross profit:
Instrumentation	$	32,546	$	28,529		14.1	%	$	64,151	$	57,760		11.1	%
Industrial Technology		49,042		43,027		14.0			93,955		80,512		16.7
Energy Systems & Controls		24,821		18,973		30.8			45,058		36,591		23.1
Scientific & Industrial Imaging		28,315		25,486		11.1			53,017		50,590		4.8
RF Technology		45,218		--		--			86,385		--		--
Total	$	179,942	$	116,015		55.1	%	$	342,566	$	225,453		51.9	%
Operating profit*:
Instrumentation	$	11,370	$	8,435		34.8	%	$	22,144	$	17,830		24.2	%
Industrial Technology		25,632		21,684		18.2			46,966		37,411		25.5
Energy Systems & Controls		10,841		6,848		58.3			18,794		11,649		61.3
Scientific & Industrial Imaging		8,357		7,385		13.2			15,174		14,380		5.5
RF Technology		12,573		--		--			23,746		--		--
Total	$	68,773	$	44,352		55.1	%	$	126,824	$	81,270		56.1	%

        * Segment operating profit is calculated as operating profit before unallocated corporate general and administrative expenses. Such expenses were $6,381 and $3,644 for the three months ended June 30, 2005 and 2004, respectively, and $12,568 and $7,590 for the six months ended June 30, 2005 and 2004, respectively.

10. Recently Released Accounting Pronouncements

In November 2004, the FASB issued FAS 151, “Inventory Costs-An Amendment of ARB No. 43” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and material waste. The standard requires that abnormal amounts of these items be recognized as current period charges. FAS 151 is effective for fiscal years beginning after June 15, 2005. The implementation of this standard is not expected to have a material impact on the Company’s Financial Statements.

In December, 2004, the FASB issued FAS 123(R), “Share-Based Payment” (revised 2004) which was originally effective for interim or annual reporting periods beginning after June 15, 2005. The effective date for this standard has been delayed until annual reporting periods beginning after December 31, 2005. This standard requires unvested equity awards outstanding at the effective date to continue to be measured and charged to expense over the remaining requisite service (vesting) period as required by FAS 123. The Company expects to implement this standard effective January 1, 2006 and is currently evaluating the impact of this statement.

The FASB issued FSP 109-1 and 109-2 related to the American Jobs Creation Act of 2004. FSP 109-1 provides guidance related to the accounting for special tax deductions on “qualified production activities income”. FSP 109-2 provides companies with additional time to complete assessment of repatriation plans related to the one time deduction on certain repatriated foreign earnings as provided in the American Jobs Creation Act of 2004. The FSPs were effective upon issuance on December 21, 2004. The Act creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85 percent dividend received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations and we are currently assessing to what extent the Company might repatriate foreign earnings that have not yet been remitted to the U. S. Based on our analysis to date, it is reasonably possible that the Company may repatriate some amount between $0 and $100 million. A repatriation of foreign earnings under the Act could result in the recognition of a tax benefit that could be as high as $4.0 million or could result in the recognition of additional tax expense that could be as high as $4.0 million. The Company expects to be in a position to finalize our assessment during the third quarter of 2005.

11. Senior Subordinated Convertible Notes

In December 2003, the Company issued through a public offering $230 million of 3.75% subordinated convertible notes due 2034 at an original issue discount of 60.498% (the “Convertible Notes”). The Convertible Notes are subordinated in right of payment and collateral to all of our existing and future senior debt. Interest on the notes is payable semiannually, beginning July 15, 2004, until January 15, 2009. After that date, Roper will not pay cash interest on the notes prior to maturity unless contingent cash interest becomes payable. Instead, after January 15, 2009, interest will be recognized at the effective rate of 3.75% and will represent accrual of original issue discount, excluding any contingent cash interest that may become payable. Roper will pay contingent cash interest to the holders of the notes during any six month period commencing after January 15, 2009 if the average trading price of a note for a five trading day measurement period preceding the applicable six month period equals 120% or more of the sum of the issue price, accrued original issue discount and accrued cash interest, if any, for such note. The contingent cash interest payable per note in respect of any six month period will equal the annual rate of 0.25%. As originally issued, holders could convert their notes into 6.211 shares of our common stock, subject to adjustment, only (1) if the sale price of our common stock reaches, or the trading price of the notes falls below, specified thresholds, (2) if the notes are called for redemption, or (3) if specified corporate transactions have occurred. Upon conversion, the Company would have the right to deliver, in lieu of our common stock, cash or common stock or a combination of cash and common stock. On November 19, 2004, the Company began a consent solicitation to amend the notes such that the Company would pay the same conversion value upon conversion of the Notes, but would change how the conversion value is paid. In lieu of receiving exclusively shares of common stock or cash upon conversion, noteholders would receive cash up to the value of the accreted principal amount of the Notes converted and, at the Company’s option, any remainder of the conversion value would be paid in cash or shares of common stock. The consent solicitation was successfully completed on December 6, 2004 and the amended conversion provisions were adopted. Holders may require us to purchase all or a portion of their notes on January 15, 2009 at a price of $395.02 per note, on January 15, 2014 at a price of $475.66 per note, on January 15, 2019 at a price of $572.76 per note, on January 15, 2024 at a price of $689.68 per note, and on January 15, 2029 at a price of $830.47 per note, in each case plus accrued cash interest, if any, and accrued contingent cash interest, if any. We may only pay the purchase price of such notes in cash. In addition, if the Company experiences a change in control, each holder may require us to purchase for cash all or a portion of such holder’s notes at a price equal to the sum of the issue price plus accrued original issue discount for non-tax purposes, accrued cash interest, if any, and accrued contingent cash interest, if any, to the date of purchase.

12. Subsequent Events

On July 27, 2005, the Company declared a two-for-one split of its common stock. The split will be effected in the form of a 100% stock dividend paid on August 26, 2005 to shareholders of record at the end of business on August 12, 2005. The Company’s pro forma income per share (unaudited) effected for the two-for-one stock split is presented below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2005		2004		2005		2004
Net earnings, as reported (in thousands)	$	35,562	$	23,550	$	63,573	$	41,684
Weighted average common shares
outstanding, as reported
Basic		42,716		36,863		42,626		36,784
Diluted		43,464		37,468		43,347		37,375
Weighted average common shares
outstanding, pro forma
Basic		85,431		73,725		85,253		73,568
Diluted		86,927		74,937		86,695		74,750
Net Earnings per share, as reported:
Basic	$	0.83	$	0.64	$	1.49	$	1.13
Diluted		0.82		0.63		1.47		1.12
Net Earnings per share, pro forma:
Basic	$	0.42	$	0.32	$	0.75	$	0.57
Diluted		0.41		0.31		0.73		0.56

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, 2004 as filed with the Securities and Exchange Commission (“SEC”) and the notes to our Condensed Consolidated Financial Statements included elsewhere in this report.

Overview

Roper Industries, Inc. (“Roper”, “we” or “us”) is a diversified industrial growth company that provides engineered products and solutions for global niche markets, including water, energy, radio frequency and research/medical applications. Roper operations are aligned into five market-focused segments to capture value-creating opportunities around common customer, market orientation, sales channels and common cost opportunities. The five segments are: Instrumentation, Industrial Technology, Energy Systems & Controls, Scientific & Industrial Imaging, and RF Technology.

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 acquisition investments. During the first six months of 2005, our results of operations benefited from the 2004 acquisitions of the Power Generation business of R/D Tech on June 7, 2004, TransCore Holdings, Inc. (“TransCore”) effective on December 13, 2004, and the 2005 acquisitions of Inovonics Wireless Corporation (“Inovonics”) on February 28, 2005 and CIVCO Holdings, Inc. (“CIVCO”) on June 17, 2005.

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, 2004 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, recognizing revenues and issuing stock options to employees. 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. As appropriate, 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 utilization, future warranty obligations, revenue recognition (percent of completion), income taxes, identifiable intangible asset analysis and goodwill analysis. 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 histories are analyzed to determine likely future rates for such credits. At June 30, 2005, our allowance for doubtful accounts receivable, sales returns and sales credits was $8.6 million, or 3.4% of total gross accounts receivable of $256.5 million. The amount of the reserve as a percent of sales increased by 0.3% over the past quarter.

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 June 30, 2005, inventory reserves for excess and obsolete inventory were $26.6 million, or 16.0% of gross first-in, first-out inventory cost.

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 June 30, 2005, the accrual for future warranty obligations was $6.9 million or 0.5% of annualized second quarter sales.

Net sales recognized under the percentage-of-completion method of accounting are estimated and dependent on a comparison of total costs incurred to date to total estimated costs for a project. During the second quarter of 2005, we recognized $21.1 million of net sales using this method. In addition, approximately $58.6 million of net sales related to unfinished percentage-of-completion contracts had yet to be recognized as of June 30, 2005. Net sales accounted for under this method are generally not significantly different in profitability compared with net sales for similar products and services accounted for under other methods.

Income taxes can be affected by estimates of whether, and within which jurisdictions, future earnings will occur and 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 second quarter effective income tax rate was 31.2%, which is 70 basis points higher than the 30.5% rate experienced in the prior year second quarter. This increase is mainly attributed to the current domestic concentration of our recent TransCore acquisition, which decreases the relative percentage of our business in lower tax jurisdictions, offset by a $1.0 million tax refund credited in the current quarter that related to our 2003 tax return.

The evaluation of the carrying value of goodwill and indefinite-lived intangibles is required to be performed at least 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 June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Net sales
Instrumentation	$	56,114		$	49,702		$	110,620		$	98,827
Industrial Technology		110,787			100,961			213,274			194,079
Energy Systems & Controls		45,418			36,261			85,733			68,338
Scientific & Industrial Imaging		50,722			45,510			94,980			91,830
RF Technology		98,523			--			190,794			--
Total	$	361,564		$	232,434		$	695,401		$	453,074
Gross profit:
Instrumentation		58.0	%		57.4	%		58.0	%		58.4	%
Industrial Technology		44.3			42.6			44.1			41.5
Energy Systems & Controls		54.7			52.3			52.6			53.5
Scientific & Industrial Imaging		55.8			56.0			55.8			55.1
RF Technology		45.9			--			45.3			--
Total		49.8			49.9			49.3			49.8
Selling, general & administrative expenses:
Instrumentation		37.7	%		40.4	%		38.0	%		40.4	%
Industrial Technology		21.1			21.1			22.0			22.2
Energy Systems & Controls		30.8			33.4			30.6			36.5
Scientific & Industrial Imaging		39.3			39.8			39.8			39.4
RF Technology		33.1			--			32.8			--
Total		30.7			30.8			31.0			31.8
Segment operating profit:
Instrumentation		20.3	%		17.0	%		20.0	%		18.0	%
Industrial Technology		23.1			21.5			22.0			19.3
Energy Systems & Controls		23.9			18.9			21.9			17.0
Scientific & Industrial Imaging		16.5			16.2			16.0			15.7
RF Technology		12.8			--			12.4			--
Total		19.0			19.1			18.2			17.9
Corporate administrative expenses		(1.8	)		(1.6	)		(1.8	)		(1.7	)
Earnings from operations		17.3			17.5			16.4			16.3
Interest expense		(3.0	)		(2.9	)		(3.1	)		(3.0	)
Other income / (expense)		0.1			--			--			--
Earnings before income taxes		14.3			14.6			13.4			13.2
Income taxes		(4.5	)		(4.4	)		(4.3	)		(4.0	)
Net earnings		9.8			10.1			9.1			9.2

Three months ended June 30, 2005 compared to three months ended June 30, 2004

Net sales for the quarter ended June 30, 2005were $361.6 million as compared to $232.4 million in the prior-year quarter, a 55.6% increase. Approximately $104.5 million of this increase was due to acquisitions, primarily TransCore, which was acquired on December 13, 2004; however, all of our segments showed improvement over the prior year quarter resulting in positive internal sales growth of approximately $26 million.

In our Instrumentation segment, net sales were up $6.4 million or 12.9% as compared to the prior year quarter due to continued strong sales into petroleum and materials testing markets. Gross margins were 58.0% in the current quarter compared to 57.4% in the second quarter of 2004. SG&A expenses as a percentage of net sales decreased to 37.7% in the current quarter, compared to 40.4% in the prior year quarter due to the operating leverage from the higher sales levels. Overall, the segment reported operating profit margins of 20.3% as compared to 17.0% in the prior-year quarter.

In our Industrial Technology segment, net sales were up $9.8 million or 9.7% as compared to the prior year quarter due to solid gains across virtually all operating units in this segment. In addition, we made solid progress on growth initiatives and operational improvements. Gross margins were higher at 44.3% for the second quarter of 2005 as compared to 42.6% in the second quarter of 2004. The increase was primarily due to favorable leverage of fixed costs on higher sales levels in our refrigeration and water meter operating units. SG&A expenses as a percentage of net sales were unchanged from the prior year quarter at 21.1%. The resulting operating profit margins were 23.1% in the second quarter of 2005 as compared to 21.5% in the second quarter of 2004.

Net sales in our Energy Systems & Controls segment increased by 25.3% to $45.4 million during the second quarter of 2005 compared to $36.3 million in the second quarter of 2004 due to the acquisition of the power generation business of R/D Tech and internal growth. Gross margins increased to 54.7% in the second quarter of 2005 compared to 52.3% in the second quarter of 2004 due to a strong performance in our energy systems business. SG&A expenses as a percentage of net sales were down to 30.8% compared to 33.4 % in the prior year quarter due to the growing percentage of power generation business in the segment which carries a lower SG&A expense level. As a result, operating margins were 23.9% in the second quarter of 2005 as compared to 18.9% in second quarter of 2004.

In our Scientific & Industrial Imaging segment, net sales were up $5.2 million or 11.5% as compared to the prior year quarter. We experienced growth in microscopy, spectroscopy and handheld applications, partially offset by a decline in industrial camera sales. In addition, this segment included two weeks of performance from the CIVCO acquisition. Gross margins decreased slightly from 56.0% in the second quarter of 2004 to 55.8% in the second quarter of 2005 due to $0.3 million of inventory step up charges related to the CIVCO acquisition that negatively impacted gross margins. SG&A as a percentage of net sales was 39.3% in the second quarter of 2005 as compared to 39.8% in the second quarter of 2004. Overall, the segment reported operating profit margins of 16.5% as compared to 16.2% in the prior year quarter.

In our recently established RF Technology segment, net sales were $98.5 million which included sales from TransCore and Inovonics for the entire quarter. Gross margins were 45.9% and were reduced by $1.4 million of inventory step-up charges. SG&A as a percentage of sales was 33.1%, with a resulting operating profit margin of 12.8%.

Corporate expenses were $6.4 million in the second quarter of 2005 as compared to $3.6 million in the second quarter of 2004. The increase over prior year was driven by significantly higher costs related to the Sarbanes-Oxley Act, higher professional service fees and higher variable compensation costs.

Interest expense of $11.0 million for the second quarter of 2005 was $4.1 million higher as compared to the second quarter of 2004. This increase is due to the higher debt levels associated with the TransCore acquisition completed in December 2004, and the CIVCO acquisition completed in June 2005 and higher LIBOR interest rates on the variable rate portion of our outstanding debt.

Income taxes were 31.2% of pretax earnings in the current quarter as compared to 30.5% in the second quarter of 2004. This increase was expected as the Company had a lower percentage of its revenue in low tax jurisdictions after the TransCore acquisition, offset by a $1.0 million tax refund credited in the current quarter that related to our fiscal 2003 tax return. We expect a tax rate of approximately 33.6% for the remaining quarters of 2005.

At June 30, 2005, the functional currencies of our European subsidiaries were slightly stronger against the U.S. dollar compared to currency exchange rates at June 30, 2004, but weaker against the dollar since December 31, 2004. The currency changes resulted in a decrease of $9.5 million in the foreign exchange component of comprehensive earnings for the quarter. Approximately $9.3 million of the total adjustment is related to goodwill and is not expected to directly affect our expected future cash flows. Operating results in the second quarter of 2005 benefited slightly from the weakening of the US dollar as compared to a year ago, primarily against the Euro. The difference between the operating results for these companies for the three months ended June 30, 2005, translated into U.S. dollars was less than 1%.

Net orders, booked from continuing operations, were $363.6 million for the quarter, 63.0% higher than the second quarter 2004 net order intake of $223.0 million. Approximately $106.6 million of the order increase was due to acquisitions, primarily TransCore, effective on December 13, 2004. We also had strong bookings in our other segments. Overall, our order backlog at June 30, 2005 was up 138.0% as compared to June 30, 2004. The increase is primarily due to the TransCore acquisition which is reported in the RF Technology segment, although all segments had an increase over the prior year quarter.

	Net orders booked for the three months ended June 30,				Order backlog as of June 30,
	2005		2004		2005		2004
Instrumentation	$	56,225	$	49,132	$	17,850	$	16,104
Industrial Technology		111,865		96,615		56,190		54,386
Energy Systems & Controls		37,373		31,851		31,863		31,290
Scientific & Industrial Imaging		56,382		45,429		44,845		38,265
RF Technology		101,799		--		182,271		--
	$	363,644	$	223,027	$	333,019	$	140,045

Six months ended June 30, 2005 compared to six months ended June 30, 2004

Net sales for the six month period ended June 30, 2005were $695.4 million as compared to $453.1 million in the prior-year six month period, a 53.5% increase. Approximately $201 million of this increase was due to acquisitions, primarily TransCore, which was acquired on December 13, 2004, however, all of our segments showed improvement over the prior year six month period.

In our Instrumentation segment, net sales were up $11.8 million or 11.9% as compared to the prior year six month period due to continued strong sales into petroleum and materials testing markets. Gross margins were 58.0% in the first six months of 2005 compared to 58.4% in the first six months of 2004. SG&A expenses as a percentage of net sales decreased to 38.0% in the current six month period, compared to 40.4% in the prior year six month period due to the operating leverage from the higher sales levels. Overall, the segment reported operating profit margins of 20.0% as compared to 18.0% in the prior-year period.

In our Industrial Technology segment, net sales were up 9.9% to $213.3 million in the first six months of 2005 as compared to $194.1 million in the first six months of 2004 due to solid gains across virtually all operating units in this segment. In addition, we made solid progress on growth initiatives and operational improvements. Gross margins were higher at 44.1% for the first six months of 2005 as compared to 41.5% in the first six months of 2004. The increase was partially due to $1.5 million of inventory step-up costs at Neptune in the first quarter of 2004, which negatively impacted gross margins. In addition, we are experiencing favorable leverage of fixed costs on higher sales levels in several of our operating units. SG&A expenses as a percentage of net sales were 22.0%, down slightly from 22.2% in the prior year. The resulting operating profit margins were 22.0% in the first six months of 2005 as compared to 19.3% in the first six months of 2004.

Net sales in our Energy Systems & Controls segment increased by 25.5% to $85.7 million during the six month period ended June 30, 2005 compared to $68.3 million in the six month period ended June 30, 2004 due to the acquisition of the power generation business of R/D Tech and internal growth. Gross margins decreased to 52.6% in the first six months of 2005 compared to 53.5% in the first six months of 2004 due to strong sales in the prior year first quarter in the power generation inspection business from a very strong spring outage season. SG&A expenses as a percentage of net sales were down to 30.6% compared to the prior year six month period at 36.5% due to the growing percentage of power generation business in the segment which carries a lower SG&A expense level. As a result, operating margins were 21.9% in the first six months of 2005 as compared to 17.0% in first six months of 2004.

Our Scientific & Industrial Imaging segment net sales increased by 3.4% in the first six months of 2005 as compared to the prior year period. We experienced growth in microscopy, spectroscopy and handheld applications, partially offset by a decline in industrial camera sales. Gross margins improved from 55.1% in the first six months of 2004 to 55.8% in the first six months of 2005 due to a favorable mix of product sales. SG&A as a percentage of net sales was 39.8% in the first six months of 2005 as compared to 39.4% in the first six months of 2004. Overall, the segment reported operating profit margins of 16.0% as compared to 15.7% in the prior year six month period.

In our recently established RF Technology segment, net sales were $190.8 million which included sales from TransCore for the entire six month period and sales from Inovonics which contributed for four months. Gross margins were 45.3% which were reduced somewhat from inventory step-up charges of $4.7 million for the six month period. These charges will not recur in the second half of the year. SG&A as a percentage of sales was 32.8%, with a resulting operating profit margin of 12.4%.

Corporate expenses were $12.6 million in the first six months of 2005 as compared to $7.6 million in the first six months of 2004. The increase over prior year was driven by significantly higher costs related to the Sarbanes-Oxley Act, higher professional service fees and higher variable compensation costs.

Interest expense of $21.3 million for the six month period ended June 30, 2005 was $7.6 million higher as compared to the six month period ended June 30, 2004. This increase is due to the higher debt levels associated with the TransCore acquisition completed in December 2004, and the CIVCO acquisition completed in June 2005 and increasing LIBOR rates on the variable rate portion of our outstanding debt.

Income taxes were accrued at 32.8% of pretax earnings in the period ended June 30, 2005 as compared to 30.5% in the prior period ended June 30, 2004. However, the current year expense was offset by a $1.0 million tax refund credited in the second quarter which reduced the effective rate to 31.8%. This increase was expected as the Company has a lower percentage of its revenue in low tax jurisdictions after the TransCore acquisition. We expect a tax rate of approximately 33.6% for the remaining quarters of 2005.

Financial Condition, Liquidity and Capital Resources

Net cash provided by operating activities was $62.8 million in the second quarter of 2005 as compared to $40.4 million in the second quarter of 2004, a 55.5% increase. This increase is primarily due to the higher income levels from the year-ago quarter and higher depreciation and amortization expense resulting from acquisitions. Cash used in investing activities during the current and prior year quarter related primarily to business acquisitions. Cash provided by financing activities during the current year quarter was primarily related to debt borrowings for the CIVCO acquisition. Cash used in financing activities during the current year quarter was for paydowns on our revolving credit line, scheduled payments on our term debt and dividend payments. Prior year quarter financing activities were primarily dividend and debt payments.

Year to date net cash provided by operating activities was $101.4 million in the six month period ended June 30, 2005 as compared to $65.9 million in the six month period ended June 30, 2004, a 53.7% increase. This increase is primarily due to the higher income levels from the year-ago prior period and higher amortization expense resulting from acquisitions. Cash used in investing activities during the current and prior year six month periods related primarily to business acquisitions. Cash provided by financing activities during the current year six month period was primarily related to debt borrowings for the CIVCO acquisition. Cash used in financing activities during the current six month period was for paydowns on our revolving credit line, scheduled payments on our term debt and dividend payments. The prior year six month financing activities were primarily dividend and debt payments. $66.4 million of debt was repaid over the six months ended June 30, 2005 as compared with $30.8 million in the prior-year period. In the current year, principal payments of $16.4 million were made on the Company’s $655.0 million term loan in accordance with the terms of the credit facility.

Net working capital (total current assets, excluding cash, less total current liabilities, excluding debt) was $250.6 million at June 30, 2005 compared to $209.7 million at December 31, 2004, reflecting increases in working capital due to first and second quarter acquisitions, offset by decreases in certain accrued liabilities that existed at year end related to the TransCore acquisition. Total debt was $919.2 million at June 30, 2005 compared to $891.9 million at December 31, 2004. The leverage of the Company is shown in the following table:

	June 30, 2005			December 31, 2004
Total Debt	$	919,239		$	891,891
Cash		(68,399	)		(129,419	)
Net Debt		850,840			762,472
Stockholders' Equity		1,161,479			1,114,086
Total Net Capital	$	2,012,319		$	1,876,558
Net Debt / Total Net Capital		42.3%			40.6%

Our debt consists of a $1.055 billion senior secured credit facility with a group of participating financial institutions and banks, and $230 million of senior subordinated convertible notes. The credit facility consists of a $655 million amortizing term loan with a five year maturity and a $400 million revolving loan with a five year maturity. Our senior subordinated convertible notes are due in 2034. At June 30, 2005, our debt consisted of the $230 million in senior subordinated convertible notes, $634.4 million of term loans and $50.0 million of revolving debt under the credit facility. The Company also had $47.1 million of outstanding letters of credit at June 30, 2005. 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 normal operating requirements and finance some additional acquisitions. We also have 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. In total, these smaller facilities do not represent a significant source of credit for us.

The Company was in compliance with all debt covenants related to our credit facilities throughout the quarter ended June 30, 2005.

At June 30, 2005, 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 $5.4 million and $2.6 million were incurred during the second quarters of 2005 and 2004 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

In November 2004, the FASB issued FAS 151, “Inventory Costs-An Amendment of ARB No. 43” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and material waste. The standard requires that abnormal amounts of these items be recognized as current period charges. FAS 151 is effective for fiscal years beginning after June 15, 2005. The implementation of this standard is not expected to have a material impact on the Company’s Financial Statements.

In December, 2004, the FASB issued FAS 123(R), “Share-Based Payment” (revised 2004) which was originally effective for interim or annual reporting periods beginning after June 15, 2005. The effective date for this standard has been delayed until annual reporting periods beginning after December 31, 2005. This standard requires unvested equity awards outstanding at the effective date to continue to be measured and charged to expense over the remaining requisite service (vesting) period as required by FAS 123. The Company expects to implement this standard effective January 1, 2006 and is currently evaluating the impact of this statement.

The FASB issued FSP 109-1 and 109-2 related to the American Jobs Creation Act of 2004. FSP 109-1 provides guidance related to the accounting for special tax deductions on “qualified production activities income”. FSP 109-2 provides companies with additional time to complete assessment of repatriation plans related to the one time deduction on certain repatriated foreign earnings as provided in the American Jobs Creation Act of 2004. The FSPs were effective upon issuance on December 21, 2004. The Act creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85 percent dividend received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations and we are currently assessing to what extent we might repatriate foreign earnings that have not yet been remitted to the U. S. Based on our analysis to date, it is reasonably possible that we may repatriate some amount between $0 and $100 million. A repatriation of foreign earnings under the Act could result in the recognition of a tax benefit that could be as high as $4.0 million or could result in the recognition of additional tax expense that could be as high as $4.0 million. We expect to be in a position to finalize our assessment during the third quarter of 2005.

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 2005 (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.

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:

• 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 technology;
• trade tariffs that may be applied due to the U.S. government’s delay in complying with certain WTO directives;
• terrorist attacks;
• future health crises; 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to interest rate risks on our outstanding borrowings, and we are exposed to foreign currency exchange risks on our transactions denominated in currencies other than the U.S. dollar. We are also exposed to equity market risks pertaining to the traded price of our common stock.

At June 30, 2005 we had a combination of fixed-rate borrowings (primarily our $230 million senior subordinated convertible notes and $350 million of our term loan with accompanying interest rate swaps) and variable rate borrowings under the $1.055 billion credit facility. Our $655 million 5-year term note under this credit facility was variable at a spread over LIBOR. Any borrowings under the $400 million revolving credit facility have a fixed rate, but the terms of these individual borrowings are generally only one to three months. To reduce the financial risk of future rate increases, the Company entered into fixed rate swap agreements, including a $100 million agreement expiring January 6, 2006, and a $250 million agreement expiring March 13, 2008. At June 30, 2005, there was no material difference between prevailing market rates and the fixed rate on our debt instruments.

At June 30, 2005, Roper’s outstanding variable-rate borrowings under the $1.055 billion credit facility were $334.4 million. An increase in interest rates of 1% would increase our annualized interest costs by approximately $3.3 million.

Several Roper companies have transactions and balances denominated in currencies other than the U.S. dollar. Most of these transactions or balances are denominated in Euros, British pounds, Danish krone, Canadian dollars or Japanese yen. Sales by companies whose functional currency was not the U.S. dollar were 24.8% of our total second quarter sales and 84.2% of these sales were by companies with a European functional currency. The U.S. dollar strengthened against these European currencies during the second quarter of 2005 versus December 2004 and was relatively stable compared to other currencies. The difference between the current quarter operating results for these companies translated into U.S. dollars at exchange rates experienced during second-quarter 2005 versus exchange rates experienced during second-quarter 2004 was not material and resulted in increased operating profits of less than 1%. If these currency exchange rates had been 10% different throughout the second quarter of 2005 compared to currency exchange rates actually experienced, the impact on our expected net earnings would have been approximately $1.4 million.

The changes in these currency exchange rates relative to the U.S. dollar during the second quarter of 2005 compared to currency exchange rates at December 31, 2004 resulted in a decrease in net assets of $9.5 million that was reported as a component of comprehensive earnings, $9.3 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 Roper’s common stock influences the valuation of stock option grants and the effects these grants have on pro forma earnings disclosed in our financial statements. The stock price also influences the computation of the dilutive effect of outstanding stock options 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 Securities and Exchange Commission 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. 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, these officers have concluded that the design and operation of our disclosure controls and procedures are effective. 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.

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 Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company 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.

Part II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

Roper held its 2005 Annual Meeting of Shareholders on June 6, 2005 in Duluth, Georgia. Of the 42,546,714 shares of common stock outstanding as of record date of April 15, 2005, 35,996,482 shares, or 84.6% of the Company’s capital stock, were present or represented by proxy at the meeting, constituting a quorum. Of the shares present, 2,333,217 shares were asserted to be entitled to five votes per share based upon certain beneficial ownership holding period requirements. The results of the matters submitted to the stockholders were as follows:

Proposal 1: Election of three (3) Directors

Each of the directors identified below elected at the 2005 Annual Meeting of Shareholders was elected for a term expiring at the 2008 Annual Meeting of Shareholders. Continuing directors whose terms expire at either the 2006 Annual Meeting of Shareholders or the 2007 Annual Meeting of Shareholders are as follows: Wilbur J. Prezzano (2006), Georg Graf Schall-Riaucour (2006), Eriberto R. Scocimara (2006), Brian D. Jellison (2007), W. Lawrence Banks (2007), David W. Devonshire (2007), and John F. Fort (2007).

	Number of Votes
	For		Against		Withheld
Donald G. Calder		43,485,331		-		1,844,019
Derrick N. Key		43,704,726		-		1,624,624
Christopher Wright		43,253,757		-		2,075,593

Proposal 2: Approval of an Amendment to the Certificate of Incorporation to increase the number of authorized shares of Common Stock, par value $0.01 per share, from 80,000,000 shares to 160,000,000.

For	42,456,448
Against	2,810,011
Abstain	62,891

Item 6. Exhibits

(a)3.1	Restated Certificate of Incorporation, including Form of Certificate of Designation, Preferences and Rights of Series A Preferred Stock
(b)3.2	Amended and Restated By-Laws
3.3	Certificate of Amendment of Restated Certificate of Incorporation, filed herewith.
(c)4.1	Rights Agreement between Roper Industries, Inc. and SunTrust Bank, Atlanta, Inc. as Rights Agent, dated as of January 8, 1996, including Certificate of Designation, Preferences and Rights of Series A Preferred Stock (Exhibit A), Form of Rights Certificate (Exhibit B) and Summary of Rights (Exhibit C)
(d)4.2	Form of Indenture for Debt Securities.
4.3	Form of Debt Securities (included in Exhibit 4.4).
(e)4.4	First Supplemental Indenture between Roper Industries, Inc. and SunTrust Bank, dated as of December 29, 2003.
31.1	Rule 13a-14(a)/15d-14(a), Certification of Chief Executive Officer, filed herewith.
31.2	Rule 13a-14(a)/15d-14(a), Certification of Chief Financial Officer, filed herewith.
32.1	Section 1350 Certification of Chief Executive Officer, filed herewith.
32.2	Section 1350 Certification of Chief Financial Officer, filed herewith.

^(a) Incorporated herein by reference to Exhibit 3.1 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed March 17, 2003.

^(b) Incorporated herein by reference to Exhibit 3.2 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed September 13, 2000.

^(c) Incorporated herein by reference to Exhibit 4.02 to the Roper Industries, Inc. Current Report on Form 8-K filed January 18, 1996 (File No. 0-19818).

^(d) Incorporated herein by reference to Exhibit 4.2 to the Roper Industries, Inc. Pre-Effective Amendment No. 1 to the Registration Statement on Form S-3 filed November 28, 2003 (File No. 333-110491).

^(e) Incorporated herein by reference to Exhibit 4.1 to the Roper Industries, Inc. Current Report on Form 8-K filed January 13, 2004.

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.

Signature	Title	Date
/s/ Brian D. Jellison	Chairman of the Board, President,	August 8, 2005
Brian D. Jellison	and Chief Executive Officer
/s/ Michael W. Towe	Chief Financial Officer and Vice President	August 8, 2005
Michael W. Towe

EXHIBIT INDEX TO REPORT ON FORM 10-Q

Number Exhibit

3.1 Restated Certificate of Incorporation, including Form of Certificate of Designation, Preferences and Rights of Series A Preferred Stock, incorporated herein by reference to Exhibit 3.1 to the Roper Industries, Inc. Quarterly Report on Form 10-K filed March 17, 2003.

3.2 Amended and Restated By-Laws, incorporated herein by reference to Exhibit 3.2 to the Roper Industries, Inc. Quarterly Report on Form 10-Q filed September 13, 2000.

3.3 Certificate of Amendment of Restated Certificate of Incorporation, filed herewith.

4.1 Rights Agreement between Roper Industries, Inc. and SunTrust Bank, Atlanta, Inc. as Rights Agent, dated as of January 8, 1996, including Certificate of Designation, Preferences and Rights of Series A Preferred Stock (Exhibit A), Form of Rights Certificate (Exhibit B) and Summary of Rights (Exhibit C), incorporated herein by reference to Exhibit 4.02 to the Roper Industries, Inc. Current Report on Form 8-K filed January 18, 1996 (File No. 0-19818).

4.2 Form of Indenture for Debt Securities incorporated herein by reference to Exhibit 4.2 to the Roper Industries, Inc. Pre-Effective Amendment No. 1 to the Registration Statement on Form S-3 filed November 28, 2003 (File No. 333-110491).

4.3 Form of Debt Securities (included in Exhibit 4.4).

4.4 First Supplemental Indenture between Roper Industries, Inc. and SunTrust Bank, dated December 29, 2003 incorporated herein by reference to Exhibit 4.1 to the Roper Industries, Inc. Current Report on Form 8-K filed on January 13, 2004.

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

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

32.2 Section 1350 Certification of Chief Executive Officer, filed herewith.

32.2 Section 1350 Certification of Chief Financial Officer, filed herewith.