Advanced/PHP deletes spaces, newlines and inserts text: $output = \\015\\012

This can be seen by simply editing the "example_basic_multiples", which looks like this:

<?php
$output = '';\\015\\012foreach (element_children($element) as $key) {\\015\\012  $output .= '<div>' . $element[$key]['#item']['value'] . " " . l(t("<sup>Custom Formatter Example</sup>"), 'admin/settings/formatters', array('html' => TRUE)) . '</div>';\\015\\012}\\015\\012return $output;
?>

I need to type in some pretty large code, spaces and newlines should be preserved.
Also the \\015\\012 should not ever appear, but it does and it causes php execution errors.