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, 2003 |
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 ¨.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
At July 31, 2003, there were 33,114,902 shares of the Registrant’s common stock, $0.01, par value, outstanding.
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. |
Financial Statements | |||
| 1 | ||||
| Consolidated Balance Sheets—June 30, 2003 (unaudited) and December 31, 2002 | 2 | |||
| 3 | ||||
| Notes to the Consolidated Financial Statements (unaudited) | 4 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 | ||
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk | 14 | ||
| Item 4. |
Controls and Procedures | 14 | ||
| PART II. OTHER INFORMATION | ||||
| Item 1. |
Legal Proceedings | 15 | ||
| Item 2. |
Changes in Securities | 15 | ||
| Item 4. |
Submission of Matters to a Vote of Shareholders | 16 | ||
| Item 6. |
Exhibits and Current Reports on Form 8-K | 17 | ||
| Signature | 18 | |||
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, |
|||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||
| Revenue |
$ | 75,162 | $ | 63,595 | $ | 144,333 | $ | 121,693 | ||||||
| Cost of goods sold |
36,041 | 30,777 | 69,169 | 57,576 | ||||||||||
| Gross profit |
39,121 | 32,818 | 75,164 | 64,117 | ||||||||||
| Operating expenses: |
||||||||||||||
| Research and development |
7,785 | 6,460 | 15,383 | 13,549 | ||||||||||
| Selling, general and administrative |
15,834 | 14,762 | 30,552 | 28,581 | ||||||||||
| Total operating expenses |
23,619 | 21,222 | 45,935 | 42,130 | ||||||||||
| Earnings from operations |
15,502 | 11,596 | 29,229 | 21,987 | ||||||||||
| Interest expense |
445 | 825 | 622 | 1,143 | ||||||||||
| Other expenses (income), net |
557 | (473 | ) | 450 | (597 | ) | ||||||||
| Earnings before income taxes |
14,500 | 11,244 | 28,157 | 21,441 | ||||||||||
| Income tax provision |
4,785 | 1,687 | 9,292 | 3,216 | ||||||||||
| Net earnings |
$ | 9,715 | $ | 9,557 | $ | 18,865 | $ | 18,225 | ||||||
| Net earnings per share: |
||||||||||||||
| Basic |
$ | 0.28 | $ | 0.28 | $ | 0.55 | $ | 0.54 | ||||||
| Diluted |
$ | 0.27 | $ | 0.27 | $ | 0.52 | $ | 0.51 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
1
FLIR SYSTEMS, INC.
(In thousands, except par value)
| June 30, 2003 |
December 31, 2002 |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 204,207 | $ | 46,606 | ||||
| Accounts receivable, net |
65,857 | 55,798 | ||||||
| Inventories, net |
55,272 | 50,141 | ||||||
| Prepaid expenses and other current assets |
18,501 | 12,673 | ||||||
| Deferred income taxes, net |
8,887 | 8,887 | ||||||
| Total current assets |
352,724 | 174,105 | ||||||
| Property and equipment, net |
12,027 | 12,678 | ||||||
| Deferred income taxes, net |
25,977 | 25,977 | ||||||
| Intangible assets, net |
16,589 | 16,647 | ||||||
| Other assets |
5,904 | 4,415 | ||||||
| $ | 413,221 | $ | 233,822 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 18,817 | $ | 16,465 | ||||
| Deferred revenue |
4,989 | 4,770 | ||||||
| Accrued payroll and related liabilities |
9,207 | 11,030 | ||||||
| Accrued product warranties |
3,566 | 3,432 | ||||||
| Advance payments from customers |
11,570 | 8,030 | ||||||
| Other current liabilities |
6,918 | 6,341 | ||||||
| Accrued income taxes |
945 | 2,558 | ||||||
| Total current liabilities |
56,012 | 52,626 | ||||||
| Long-term debt |
203,965 | — | ||||||
| Pension and other long-term liabilities |
9,974 | 8,869 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ equity: |
||||||||
| Preferred stock, $0.01 par value, 10,000 shares authorized; no shares issued at June 30, 2003, and December 31, 2002 |
— | — | ||||||
| Common stock, $0.01 par value, 100,000 shares authorized, 33,202 and 34,599 shares issued at June 30, 2003, and December 31, 2002, respectively, and additional paid-in capital |
167,571 | 218,052 | ||||||
| Accumulated deficit |
(24,440 | ) | (43,305 | ) | ||||
| Accumulated other comprehensive loss |
139 | (2,420 | ) | |||||
| Total shareholders’ equity |
143,270 | 172,327 | ||||||
| $ | 413,221 | $ | 233,822 | |||||
The accompanying notes are an integral part of these consolidated financial statements.
2
FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six Months Ended June 30, |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net earnings |
$ | 18,865 | $ | 18,225 | ||||
| Earnings charges not affecting cash: |
||||||||
| Depreciation and amortization |
2,898 | 2,993 | ||||||
| Disposals and write-offs of property and equipment |
27 | 33 | ||||||
| Fair value adjustment on interest swap agreements |
— | (281 | ) | |||||
| Income tax benefit of stock options |
3,488 | — | ||||||
| Other non-cash items |
— | 152 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| (Increase) decrease in accounts receivable |
(8,291 | ) | 3,565 | |||||
| Increase in inventories |
(3,682 | ) | (2,806 | ) | ||||
| Increase in prepaid expenses and other current assets |
(5,104 | ) | (2,101 | ) | ||||
| Increase in other assets |
(247 | ) | (1,198 | ) | ||||
| Increase (decrease) in accounts payable |
1,941 | (4,555 | ) | |||||
| Increase (decrease) in deferred revenue |
124 | (471 | ) | |||||
| Increase in accrued payroll and other liabilities |
1,103 | 3,471 | ||||||
| (Decrease) increase in accrued income taxes |
(1,741 | ) | 429 | |||||
| Increase (decrease) in pension and other long-term liabilities |
869 | (1,826 | ) | |||||
| Cash provided by operating activities |
10,250 | 15,630 | ||||||
| Cash flows from investing activities: |
||||||||
| Additions to property and equipment |
(1,420 | ) | (4,690 | ) | ||||
| Proceeds on sale of property and equipment |
12 | — | ||||||
| Investment in insurance contract |
(1,601 | ) | — | |||||
| Cash used by investing activities |
(3,009 | ) | (4,690 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Repayment of credit agreement |
— | (19,900 | ) | |||||
| Proceeds from issuance of convertible notes, net of issuance costs |
203,894 | — | ||||||
| Net increase in international credit line |
— | 215 | ||||||
| Repayment of capital leases |
— | (459 | ) | |||||
| Repurchase of common stock |
(59,116 | ) | — | |||||
| Proceeds from exercise of stock options |
4,596 | 4,072 | ||||||
| Stock issued pursuant to employee stock purchase plan |
551 | 456 | ||||||
| Cash provided (used) by financing activities |
149,925 | (15,616 | ) | |||||
| Effect of exchange rate changes on cash |
435 | 168 | ||||||
| Net increase (decrease) in cash and cash equivalents |
157,601 | (4,508 | ) | |||||
| Cash and cash equivalents, beginning of period |
46,606 | 15,514 | ||||||
| Cash and cash equivalents, end of period |
$ | 204,207 | $ | 11,006 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
FLIR SYSTEMS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Note 1. | Basis of Presentation |