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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
 
(Mark one)
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the quarterly period ended June 30, 2002
 
OR
 
¨
 
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 0-21918
 
FLIR Systems, Inc.
(Exact name of Registrant as specified in its charter)
 
Oregon
  
93-0708501
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
16505 S.W. 72nd Avenue, Portland, Oregon
  
97224
(Address of principal executive offices)
  
(Zip Code)
 
(503) 684-3731
(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    ¨.
 
At July 31, 2002, there were 16,866,528 shares of the Registrant’s common stock, $0.01, par value, outstanding.
 

Table of Contents
 
INDEX
 
PART I.    FINANCIAL INFORMATION
 
Item 1.
   
Financial Statements
     
    
 
   
1
    
 
   
2
    
 
   
3
    
 
   
4
Item 2.
   
 
   
9
 
 
PART II.    OTHER INFORMATION
 
Item 1.
     
13
Item 4.
   
 
  
14
Item 6.
   
 
  
14
    
 
  
15

Table of Contents
 
PART 1.    FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
FLIR SYSTEMS, INC.
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
    
Three Months Ended
June 30,
     
Six Months Ended
June 30,
  
    
2002
     
2001
     
2002
     
2001
  
Revenue
   
$
63,595
 
   
$
51,395
 
   
$
121,693
 
   
$
101,867
 
Cost of goods sold
   
 
30,777
 
   
 
22,700
 
   
 
57,576
 
   
 
45,881
 
    
  
  
  
Gross profit
   
 
32,818
 
   
 
28,695
 
   
 
64,117
 
   
 
55,986
 
 
Operating expenses:
                                    
Research and development
   
 
6,460
 
   
 
6,635
 
   
 
13,549
 
   
 
12,740
 
Selling, general and administrative
   
 
14,762
 
   
 
13,490
 
   
 
28,581
 
   
 
26,852
 
    
  
  
  
Total operating expenses
   
 
21,222
 
   
 
20,125
 
   
 
42,130
 
   
 
39,592
 
 
Earnings from operations
   
 
11,596
 
   
 
8,570
 
   
 
21,987
 
   
 
16,394
 
 
Interest expense
   
 
825
 
   
 
2,004
 
   
 
1,143
 
   
 
5,458
 
Other income, net
   
 
(473
)
   
 
(50
)
   
 
(597
)
   
 
(238
)
    
  
  
  
 
Earnings before income taxes
   
 
11,244
 
   
 
6,616
 
   
 
21,441
 
   
 
11,174
 
 
Income tax provision
   
 
1,687
 
   
 
992
 
   
 
3,216
 
   
 
1,676
 
    
  
  
  
 
Net earnings
   
$
9,557
 
   
$
5,624
 
   
$
18,225
 
   
$
9,498
 
    
  
  
  
 
Net earnings per share:
                                    
Basic
   
$
0.57
 
   
$
0.38
 
   
$
1.09
 
   
$
0.65
 
    
  
  
  
Diluted
   
$
0.54
 
   
$
0.36
 
   
$
1.02
 
   
$
0.63
 
    
  
  
  
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.

1

Table of Contents
 
FLIR SYSTEMS, INC.
 
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
 
    
June 30,
2002
     
December 31,
2001
  
    
(Unaudited)
         
ASSETS
              
Current assets:
                  
Cash and cash equivalents
   
$
11,006
 
   
$
15,514
 
Accounts receivable, net
   
 
55,486
 
   
 
57,965
 
Inventories
   
 
50,642
 
   
 
46,560
 
Prepaid expenses and other current assets
   
 
13,988
 
   
 
11,548
 
Deferred income taxes
   
 
8,834
 
   
 
8,834
 
    
  
Total current assets
   
 
139,956
 
   
 
140,421
 
Property and equipment, net
   
 
13,698
 
   
 
10,806
 
Deferred income taxes, net
   
 
15,087
 
   
 
15,087
 
Intangible assets, net
   
 
16,803
 
   
 
16,811
 
Other assets
   
 
2,757
 
   
 
1,913
 
    
  
    
$
188,301
 
   
$
185,038
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
              
Current liabilities:
                  
Notes payable
   
$
3,685
 
   
$
23,370
 
Accounts payable
   
 
14,525
 
   
 
18,428
 
Deferred revenue
   
 
4,895
 
   
 
5,314
 
Accrued payroll and other liabilities
   
 
27,456
 
   
 
22,538
 
Accrued income taxes
   
 
1,544
 
   
 
747
 
Current portion of capital lease obligations
   
 
126
 
   
 
584
 
    
  
Total current liabilities
   
 
52,231
 
   
 
70,981
 
 
Pension and other long-term liabilities
   
 
7,702
 
   
 
9,209
 
 
Commitments and contingencies
                  
 
Shareholders’ equity:
                  
Preferred stock, $0.01 par value, 10,000 shares authorized; no shares issued at June 30, 2002, and December 31, 2001
   
 
—  
 
   
 
—  
 
Common stock, $0.01 par value, 30,000 shares authorized, 16,864 and 16,555 shares issued at June 30, 2002, and December 31, 2001, respectively
   
 
168
 
   
 
165
 
Additional paid-in capital
   
 
199,038
 
   
 
194,338
 
Accumulated deficit
   
 
(66,639
)
   
 
(84,864
)
Accumulated other comprehensive loss
   
 
(4,199
)
   
 
(4,791
)
    
  
Total shareholders’ equity
   
 
128,368
 
   
 
104,848
 
    
  
    
$
188,301
 
   
$
185,038
 
    
  
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.

2

Table of Contents
 
FLIR SYSTEMS, INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
    
Six Months Ended
June 30,
  
    
2002
     
2001
  
Cash flows from operating activities:
                  
Net earnings
   
$
18,225
 
   
$
9,498
 
Income charges not affecting cash:
                  
Depreciation and amortization
   
 
2,993
 
   
 
3,942
 
Disposals and write-offs of property and equipment
   
 
33
 
   
 
336
 
Fair value adjustment on interest swaps
   
 
(281
)
   
 
510
 
Deferred income taxes
   
 
—  
 
   
 
—  
 
Other non-cash items
   
 
152
 
   
 
—  
 
Changes in operating assets and liabilities:
                  
Decrease (increase) in accounts receivable
   
 
3,565
 
   
 
(743
)
(Increase) decrease in inventories
   
 
(2,806
)
   
 
8,822
 
Increase in prepaid expenses and other current assets
   
 
(2,101
)
   
 
(246
)
Increase in other assets
   
 
(1,198
)
   
 
(89
)
Decrease in accounts payable
   
 
(4,555
)
   
 
(7,270
)
(Decrease) increase in deferred revenue
   
 
(471
)
   
 
1,607
 
Increase in accrued payroll and other liabilities
   
 
3,471
 
   
 
3,731
 
Increase (decrease) in accrued income taxes
   
 
429
 
   
 
(1,091
)
(Decrease) increase in pension and other long-term liabilities
   
 
(1,826
)
   
 
126
 
    
  
Cash provided by operating activities
   
 
15,630
 
   
 
19,133
 
    
  
Cash flows from investing activities:
                  
Additions to property and equipment
   
 
(4,690
)
   
 
(3,424
)
    
  
Cash used by investing activities
   
 
(4,690
)
   
 
(3,424
)
    
  
Cash flows from financing activities:
                  
Repayment of credit agreement
   
 
(19,900
)
   
 
(20,500
)
Net increase (decrease) increase in international credit line
   
 
215
 
   
 
(78
)
Repayment of capital leases
   
 
(459
)
   
 
(644
)
Proceeds from exercise of stock options
   
 
4,072
 
   
 
1,720
 
Stock issued pursuant to employee stock purchase plan
   
 
456
 
   
 
313
 
    
  
Cash used by financing activities
   
 
(15,616
)
   
 
(19,189
)
    
  
Effect of exchange rate changes on cash
   
 
168
 
   
 
(277