Fair Value

9 Months Ended

Sep. 30, 2023

Financial assets and liabilities are valued using market prices on active markets (Level 1), less active markets (Level 2), and little or no market activity (Level 3). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. Level 3 instrument valuations typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Debt – Roper’s debt included $6,000 of fixed-rate senior notes with the following fair values:


Fixed-rate senior notes			Fair value
Principal amount	Interest rate	Year of maturity	As of September 30, 2023
$500	2.350%	2024	$484
$300	3.850%	2025	$289
$700	1.000%	2025	$640
$700	3.800%	2026	$663
$700	1.400%	2027	$599
$800	4.200%	2028	$752
$700	2.950%	2029	$607
$600	2.000%	2030	$474
$1,000	1.750%	2031	$759

The fair values of the senior notes are based on the trading prices of each series of notes, which the Company has determined to be Level 2 in the FASB fair value hierarchy.

On September 15, 2023, $700.0 of 3.650% senior notes due 2023 were repaid at maturity using borrowings under our unsecured credit facility.

Indicor Investment – Following the sale of a majority stake in its industrial businesses to CD&R, Roper now holds a minority 47.7% equity interest in Indicor. We elected to apply the fair value option as we believe this is the most reasonable method to value the equity investment. The fair value of Roper’s equity investment in Indicor is updated on a quarterly basis and its impact is reported as a component of “Equity investment activity, net.”

We initially valued our investment using the implied equity value associated with the sale price of the majority equity interest in Indicor to CD&R. During the second quarter of 2023, we revised our valuation methodology to utilize the market multiple approach consisting of comparable guideline public companies revenue and earnings multiples to estimate the fair value of the investment. Our valuation methodology was updated given the passage of time since the transaction date and in consideration of observable market data, including Indicor’s divestiture of its Compressor Controls business unit (“CCC”) to Honeywell International Inc. (“Honeywell”) for approximately $670 which closed on June 30, 2023.

The assessment of fair value for the equity investment requires significant judgments to be made by management. Although our assumptions are considered reasonable and are consistent, there is significant judgment applied. Changes in estimates or the application of alternative assumptions could produce significantly different results. The fair value of the investment reflects management’s estimate of assumptions that market participants would use in pricing the equity interest, which the Company has determined to be Level 3 in the FASB fair value hierarchy.

The following table provides a reconciliation of the fair value for our equity investment in Indicor measured using Level 3 inputs:


	Three months ended September 30, 2023		Nine months ended September 30, 2023
Balance at beginning of period	$	591.3	$	535.0
Change in fair value	20.1		76.4
Balance at end of period	$	611.4	$	611.4

The Company received dividend distributions of $13.2 and $25.3 from Indicor during the three and nine months ended September 30, 2023, respectively, which are reported within “Equity investment activity, net.” These dividends were intended to offset certain cash taxes associated with the Company’s ownership stake, including $16.4 of cash taxes paid associated with the Company’s portion of Indicor’s gain on the sale of CCC to Honeywell, and are contemplated in the determination of the fair value related to the equity investment in Indicor.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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