ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2017. |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Oregon | 93-0708501 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
27700 SW Parkway Avenue, Wilsonville, Oregon | 97070 | |
(Address of principal executive offices) | (Zip code) |
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock, $0.01 par value | NASDAQ Global Select Market |
Large accelerated filer x | Accelerated filer ¨ |
Non-accelerated filer ¨ | Smaller reporting company ¨ |
PART I | ||
Item 1 | ||
Item 1A | ||
Item 1B | ||
Item 2 | ||
Item 3 | ||
Item 4 | ||
PART II | ||
Item 5 | ||
Item 6 | ||
Item 7 | ||
Item 7A | ||
Item 8 | ||
Item 9 | ||
Item 9A | ||
Item 9B | ||
PART III | ||
Item 10 | ||
Item 11 | ||
Item 12 | ||
Item 13 | ||
Item 14 | ||
PART IV | ||
Item 15 | ||
Item 16 | ||
ITEM 1. | BUSINESS |
ITEM 1A. | RISK FACTORS |
• | the imposition of and changes to governmental licensing restrictions and controls impacting our technology and products; |
• | restrictions and prohibitions on the export of technology and products, including recent changes in regulation prohibiting the sale of certain of our products to certain end users without a license; |
• | international trade restrictions; |
• | difficulty in collecting receivables and governmental restrictions with respect to currency; |
• | inadequate protection of intellectual property; |
• | labor union activities; |
• | changes in tariffs and taxes; |
• | restrictions on repatriation of earnings; |
• | restriction on the importation and exportation of goods and services; |
• | risks, costs, impacts and obligations associated with the United States Foreign Corrupt Practices Act ("FCPA"), and other anti-bribery and anti-corruption laws applicable to us, and laws applicable to global trade and United States exports and costs and penalties from violations of such laws and related regulations, including the costs associated with required remedial and other increased compliance activity; |
• | difficulties in staffing and managing international operations; and |
• | political and economic instability. |
• | the timing, number and size of orders from, and shipments to, our customers, as well as the relative mix of those orders; |
• | variations in the volume of orders for a particular product or product line in a particular fiscal quarter; |
• | the size and timing of new contract awards; |
• | the timing of the release of government funds for procurement of our products; and |
• | the timing of orders and shipments within a given fiscal quarter. |
• | the seasonal pattern of contracting by the United States government and certain foreign governments; |
• | the desire of customers to take delivery of equipment prior to fiscal year ends due to funding considerations; and |
• | the tendency of commercial enterprises to utilize fully annual capital budgets prior to expiration. |
• | the jurisdictions in which profits are determined to be earned and taxed; |
• | the resolution of issues arising from tax audits with various tax authorities; |
• | changes in the valuation of our deferred tax assets and liabilities; |
• | adjustments to estimated taxes upon finalization of various tax returns; |
• | increases in expenses not deductible for tax purposes; |
• | changes in available tax credits; |
• | changes in share-based compensation expense; |
• | changes in tax laws or the interpretation of such tax laws and changes in generally accepted accounting principles; |
• | changes in foreign tax rates or agreed upon foreign taxable base; and/or |
• | the repatriation of earnings from outside the United States for which we have not previously provided for United States taxes. |
Location | Owned | Leased | |||
(Square feet in Thousands) | |||||
Wilsonville (Portland), Oregon | 154 | — | |||
North Billerica (Boston), Massachusetts | 133 | — | |||
Täby (Stockholm), Sweden | 205 | — | |||
Elkridge (Baltimore), Maryland | — | 109 | |||
Nashua, New Hampshire | 140 | — | |||
Tallinn, Estonia | 46 | — | |||
Markham (Toronto), Ontario, Canada | — | 27 | |||
Goleta (Santa Barbara), California | 169 | — | |||
Fareham (Portsmouth), United Kingdom | 63 | — | |||
Stillwater, Oklahoma | — | 28 | |||
Meer (Antwerp), Belgium | — | 12 | |||
Richmond (Vancouver) British Columbia, Canada | — | 52 | |||
Other | 130 | 490 | |||
Total | 1,040 | 718 |
ITEM 3. | LEGAL PROCEEDINGS |
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
2017 | 2016 | ||||||||||||||
High | Low | High | Low | ||||||||||||
First Quarter | $ | 37.05 | $ | 34.15 | $ | 33.78 | $ | 27.60 | |||||||
Second Quarter | 38.94 | 34.66 | 33.92 | 29.08 | |||||||||||
Third Quarter | 40.66 | 34.10 | 33.23 | 30.41 | |||||||||||
Fourth Quarter | 47.81 | 41.00 | 36.77 | 28.97 |
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |||||||||||||||||||
FLIR Systems, Inc. | $ | 100.00 | $ | 136.62 | $ | 148.47 | $ | 130.84 | $ | 171.27 | $ | 224.04 | ||||||||||||
S&P 500 Index | 100.00 | 132.39 | 150.51 | 152.59 | 170.84 | 208.14 | ||||||||||||||||||
S&P 500 Electronic Equipment Instruments & Components Index | 100.00 | 142.00 | 174.74 | 162.86 | 202.55 | 274.24 |
Year Ended December 31, | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||
Statement of Income Data: | ||||||||||||||||||||||
Revenue | $ | 1,800,434 | $ | 1,662,167 | $ | 1,557,067 | $ | 1,530,654 | $ | 1,496,372 | ||||||||||||
Cost of goods sold | 941,658 | 895,046 | 803,506 | 780,281 | 759,362 | |||||||||||||||||
Gross profit | 858,776 | 767,121 | 753,561 | 750,373 | 737,010 | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||||
Research and development | 170,735 | 147,537 | 132,892 | 142,751 | 147,696 | |||||||||||||||||
Selling, general and administrative | 373,867 | 322,435 | 313,544 | 331,995 | 322,739 | |||||||||||||||||
Restructuring expenses | 625 | 1,431 | 1,361 | 16,383 | 25,832 | |||||||||||||||||
Loss on net assets held for sale | 23,588 | — | — | — | — | |||||||||||||||||
Total operating expenses | 568,815 | 471,403 | 447,797 | 491,129 | 496,267 | |||||||||||||||||
Earnings from operations | 289,961 | 295,718 | 305,764 | 259,244 | 240,743 | |||||||||||||||||
Interest expense | 16,804 | 18,071 | 14,086 | 14,593 | 14,091 | |||||||||||||||||
Interest income | (1,764 | ) | (1,402 | ) | (1,167 | ) | (1,405 | ) | (1,058 | ) | ||||||||||||
Other (income) expense, net | (4,144 | ) | 3,092 | (12,601 | ) | (3) | (3,473 | ) | (1,276 | ) | ||||||||||||
Earnings before income taxes | 279,065 | 275,957 | 305,446 | 249,529 | 228,986 | |||||||||||||||||
Income tax provision | 171,842 | (1) | 109,331 | (2) | 63,760 | 49,268 | 51,971 | |||||||||||||||
Net earnings | $ | 107,223 | $ | 166,626 | $ | 241,686 | $ | 200,261 | $ | 177,015 | ||||||||||||
Net earnings per share: | ||||||||||||||||||||||
Basic earnings per share | $ | 0.78 | $ | 1.22 | $ | 1.73 | $ | 1.42 | $ | 1.24 | ||||||||||||
Diluted earnings per share | $ | 0.77 | $ | 1.20 | $ | 1.72 | $ | 1.39 | $ | 1.22 | ||||||||||||
(1) The 2017 tax provision includes tax expense of $94.4 million resulting from the effects of new US tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act") signed into law on December 22, 2017 and our subsequent decision to end permanent reinvestment of all previously unremitted foreign earnings. See Note 14, "Income Taxes," of the Notes to the Consolidated Financial Statements for additional information. | ||||||||||||||||||||||
(2) The 2016 tax provision includes a discrete tax charge for certain tax legislation in Belgium of $39.6 million. See Note 14, "Income Taxes," of the Notes to the Consolidated Financial Statements for additional information. | ||||||||||||||||||||||
(3) Other income in 2015 includes the gain of $20.2 million on the sale of a cost-basis investment in a private technology company. | ||||||||||||||||||||||
December 31, | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||
Working capital | $ | 992,286 | $ | 802,945 | $ | 702,169 | $ | 990,771 | $ | 1,033,216 | ||||||||||||
Total assets | 2,810,026 | 2,619,706 | 2,406,400 | 2,349,311 | 2,343,359 | |||||||||||||||||
Short-term debt | 11 | 15,025 | 264,707 | 15,041 | 15,064 | |||||||||||||||||
Long-term debt, excluding current portion | 420,684 | 501,921 | 93,750 | 357,986 | 372,528 | |||||||||||||||||
Total shareholders’ equity | 1,834,558 | 1,678,326 | 1,649,515 | 1,609,773 | 1,613,380 | |||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||
Cash dividends declared per common share | $ | 0.60 | $ | 0.48 | $ | 0.44 | $ | 0.40 | $ | 0.36 |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Year Ended December 31,(1) | ||||||||
2017 | 2016 | 2015 | ||||||
Revenue | 100.0 | % | 100.0 | % | 100.0 | % | ||
Cost of goods sold | 52.3 | 53.8 | 51.6 | |||||
Gross margin | 47.7 | 46.2 | 48.4 | |||||
Operating expenses: | ||||||||
Research and development | 9.5 | 8.9 | 8.5 | |||||
Selling, general and administrative | 20.8 | 19.4 | 20.1 | |||||
Restructuring expenses | — | 0.1 | 0.1 | |||||
Loss on net assets held for sale | 1.3 | — | — | |||||
Total operating expenses | 31.6 | 28.4 | 28.8 | |||||
Earnings from operations | 16.1 | 17.8 | 19.6 | |||||
Interest expense | 0.9 | 1.1 | 0.9 | |||||
Interest income | (0.1 | ) | (0.1 | ) | (0.1 | ) | ||
Other (income) expense, net | (0.2 | ) | 0.2 | (0.8 | ) | |||
Earnings before income taxes | 15.5 | 16.6 | 19.6 | |||||
Income tax provision | 9.5 | 6.6 | 4.1 | |||||
Net earnings | 6.0 | % | 10.0 | % | 15.5 | % |
(1) | Totals may not recompute due to rounding. |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Revenue | $ | 545.8 | $ | 532.5 | $ | 503.0 | |||||
Earnings from operations | 152.0 | 151.5 | 149.6 | ||||||||
Operating margin | 27.8 | % | 28.5 | % | 29.7 | % | |||||
Backlog | 354 | 328 | 309 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Revenue | $ | 357.8 | $ | 336.1 | $ | 347.5 | |||||
Earnings from operations | 106.9 | 98.8 | 115.1 | ||||||||
Operating margin | 29.9 | % | 29.4 | % | 33.1 | % | |||||
Backlog | 30 | 27 | 27 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Revenue | $ | 231.5 | $ | 240.0 | $ | 226.6 | |||||
Earnings from operations | 13.8 | 15.9 | 29.4 | ||||||||
Operating margin | 5.9 | % | 6.6 | % | 13.0 | % | |||||
Backlog | 23 | 21 | 16 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Revenue | $ | 347.2 | $ | 243.7 | $ | 186.7 | |||||
Earnings from operations | 103.3 | 66.1 | 43.7 | ||||||||
Operating margin | 29.8 | % | 27.1 | % | 23.4 | % | |||||
Backlog | 169 | 143 | 140 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Revenue | $ | 189.7 | $ | 185.7 | $ | 177.9 | |||||
Earnings from operations | 23.0 | 18.6 | 17.4 | ||||||||
Operating margin | 12.1 | % | 10.0 | % | 9.8 | % | |||||
Backlog | 17 | 16 | 28 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Revenue | $ | 128.5 | $ | 124.1 | $ | 115.3 | |||||
Earnings from operations | 36.1 | 35.3 | 30.3 | ||||||||
Operating margin | 28.1 | % | 28.4 | % | 26.2 | % | |||||
Backlog | 59 | 57 | 82 |
Payments Due by Period | |||||||||||||||||||
Total | Less than 1 Year | 1 – 3 Years | 3 – 5 Years | More than 5 Years | |||||||||||||||
Long-term debt, including interest | $ | 471,485 | $ | 13,281 | $ | 26,563 | $ | 431,641 | $ | — | |||||||||
Operating leases | 30,898 | 9,877 | 11,743 | 7,181 | 2,097 | ||||||||||||||
Licensing rights | 550 | 550 | — | — | — | ||||||||||||||
Post-retirement obligations | 9,615 | 6,387 | 868 | 826 | 1,534 | ||||||||||||||
Belgium tax assessment | 44,740 | 44,740 | — | — | — | ||||||||||||||
Other obligations | 216 | 216 | — | — | — | ||||||||||||||
$ | 557,504 | $ | 75,051 | $ | 39,174 | $ | 439,648 | $ | 3,631 |
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Statement | Page |
FLIR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) | |||||||||||
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Revenue | $ | 1,800,434 | $ | 1,662,167 | $ | 1,557,067 | |||||
Cost of goods sold | 941,658 | 895,046 | 803,506 | ||||||||
Gross profit | 858,776 | 767,121 | 753,561 | ||||||||
Operating expenses: | |||||||||||
Research and development | 170,735 | 147,537 | 132,892 | ||||||||
Selling, general and administrative | 373,867 | 322,435 | 313,544 | ||||||||
Restructuring expenses | 625 | 1,431 | 1,361 | ||||||||
Loss on net assets held for sale | 23,588 | — | — | ||||||||
Total operating expenses | 568,815 | 471,403 | 447,797 | ||||||||
Earnings from operations | 289,961 | 295,718 | 305,764 | ||||||||
Interest expense | 16,804 | 18,071 | 14,086 | ||||||||
Interest income | (1,764 | ) | (1,402 | ) | (1,167 | ) | |||||
Other (income) expense, net | (4,144 | ) | 3,092 | (12,601 | ) | ||||||
Earnings before income taxes | 279,065 | 275,957 | 305,446 | ||||||||
Income tax provision | 171,842 | 109,331 | 63,760 | ||||||||
Net earnings | $ | 107,223 | $ | 166,626 | $ | 241,686 | |||||
Net earnings per share: | |||||||||||
Basic earnings per share | $ | 0.78 | $ | 1.22 | $ | 1.73 | |||||
Diluted earnings per share | $ | 0.77 | $ | 1.20 | $ | 1.72 |
FLIR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) | |||||||||||
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Net earnings | $ | 107,223 | $ | 166,626 | $ | 241,686 | |||||
Other comprehensive income (loss), net of tax: | |||||||||||
Change in minimum liability for pension plans, net of tax effects of $238, $48 and $477, respectively | 1,271 | 102 | 661 | ||||||||
Fair value adjustment on interest rate swap contracts | 187 | (16 | ) | (602 | ) | ||||||
Realized gain on interest rate swap contracts reclassified to earnings | (494 | ) | — | — | |||||||
Unrealized gain on available-for-sale investments | (4 | ) | — | — | |||||||
Foreign currency translation adjustments | 51,631 | (40,911 | ) | (61,776 | ) | ||||||
Total other comprehensive income (loss) | 52,591 | (40,825 | ) | (61,717 | ) | ||||||
Comprehensive income | $ | 159,814 | $ | 125,801 | $ | 179,969 |
FLIR SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except for par value) | |||||||
December 31, | |||||||
2017 | 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 519,090 | $ | 361,349 | |||
Accounts receivable, net | 346,687 | 352,020 | |||||
Inventories | 372,183 | 371,371 | |||||
Assets held for sale, net | 67,344 | — | |||||
Prepaid expenses and other current assets | 81,915 | 79,917 | |||||
Total current assets | 1,387,219 | 1,164,657 | |||||
Property and equipment, net | 263,996 | 271,785 | |||||
Deferred income taxes, net | 21,001 | 45,243 | |||||
Goodwill | 909,811 | 801,406 | |||||
Intangible assets, net | 168,130 | 168,460 | |||||
Other assets | 59,869 | 168,155 | |||||
Total assets | $ | 2,810,026 | $ | 2,619,706 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 106,389 | $ | 114,225 | |||
Deferred revenue | 25,614 | 34,420 | |||||
Accrued payroll and related liabilities | 71,310 | 52,874 | |||||
Accrued product warranties | 15,024 | 17,476 | |||||
Advance payments from customers | 20,672 | 26,019 | |||||
Accrued expenses | 37,089 | 34,022 | |||||
Accrued income taxes | 64,136 | 51,017 | |||||
Liabilities held for sale | 39,544 | — | |||||
Other current liabilities | 15,155 | 16,659 | |||||
Current portion, long-term debt | — | 15,000 | |||||
Total current liabilities | 394,933 | 361,712 | |||||
Long-term debt | 420,684 | 501,921 | |||||
Deferred income taxes | 12,496 | 2,331 | |||||
Accrued income taxes | 87,483 | 9,643 | |||||
Pension and other long-term liabilities | 59,872 | 65,773 | |||||
Commitments and contingencies (Notes 12 and 13) | |||||||
Shareholders’ equity: | |||||||
Preferred stock, $0.01 par value, 10,000 shares authorized; no shares issued at December 31, 2017 or 2016 | — | — | |||||
Common stock, $0.01 par value, 500,000 shares authorized, 138,869 and 136,334 shares issued at December 31, 2017 and 2016, respectively, and additional paid-in capital | 91,162 | 12,139 | |||||
Retained earnings | 1,856,756 | 1,832,138 | |||||
Accumulated other comprehensive loss | (113,360 | ) | (165,951 | ) | |||
Total shareholders’ equity | 1,834,558 | 1,678,326 | |||||
Total liabilities and shareholders' equity | $ | 2,810,026 | $ | 2,619,706 |
FLIR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (in thousands) | |||||||||||||||||||
Common Stock and Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Earnings (Loss) | Total Shareholders' Equity | ||||||||||||||||
Shares | Amount | ||||||||||||||||||
Balance, December 31, 2014 | 139,579 | $ | 1,396 | $ | 1,671,786 | $ | (63,409 | ) | $ | 1,609,773 | |||||||||
Net earnings for the year | — | — | 241,686 | — | 241,686 | ||||||||||||||
Income tax benefit of common stock options exercised | — | 1,611 | — | — | 1,611 | ||||||||||||||
Repurchase of common stock | (4,169 | ) | (44,387 | ) | (78,806 | ) | — | (123,193 | ) | ||||||||||
Common stock issued pursuant to stock-based compensation plans, net | 1,940 | 17,071 | — | — | 17,071 | ||||||||||||||
Stock-based compensation | — | 25,683 | — | — | 25,683 | ||||||||||||||
Dividends paid | — | — | (61,399 | ) | — | (61,399 | ) | ||||||||||||
Other comprehensive loss | — | — | — | (61,717 | ) | (61,717 | ) | ||||||||||||
Balance, December 31, 2015 | 137,350 | 1,374 | 1,773,267 | (125,126 | ) | 1,649,515 | |||||||||||||
Net earnings for the year | — | — | 166,626 | — | 166,626 | ||||||||||||||
Income tax benefit of common stock options exercised | — | 1,329 | — | — | 1,329 | ||||||||||||||
Repurchase of common stock | (2,132 | ) | (24,222 | ) | (41,835 | ) | — | (66,057 | ) | ||||||||||
Common stock issued pursuant to stock-based compensation plans, net | 1,116 | 5,985 | — | — | 5,985 | ||||||||||||||
Stock-based compensation | — | 27,673 | — | — | 27,673 | ||||||||||||||
Dividends paid | — | — | (65,920 | ) | — | (65,920 | ) | ||||||||||||
Other comprehensive loss | — | — | — | (40,825 | ) | (40,825 | ) | ||||||||||||
Balance, December 31, 2016 | 136,334 | 12,139 | 1,832,138 | (165,951 | ) | 1,678,326 | |||||||||||||
Net earnings for the year | — | — | 107,223 | — | 107,223 | ||||||||||||||
Common stock issued pursuant to stock-based compensation plans, net | 2,535 | 47,510 | — | — | 47,510 | ||||||||||||||
Stock-based compensation | — | 31,513 | — | — | 31,513 | ||||||||||||||
Dividends paid | — | — | (82,605 | ) | — | (82,605 | ) | ||||||||||||
Other comprehensive income | — | — | — | 52,591 | 52,591 | ||||||||||||||
Balance, December 31, 2017 | 138,869 | $ | 91,162 | $ | 1,856,756 | $ | (113,360 | ) | $ | 1,834,558 |
FLIR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) | |||||||||||
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
CASH PROVIDED BY OPERATING ACTIVITIES: | |||||||||||
Net earnings | $ | 107,223 | $ | 166,626 | $ | 241,686 | |||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 71,010 | 57,513 | 49,534 | ||||||||
Stock-based compensation arrangements | 31,018 | 27,797 | 25,748 | ||||||||
Gain on sale of assets, net | — | — | (19,166 | ) | |||||||
Loss on net assets held for sale | 23,588 | — | — | ||||||||
Deferred income taxes | 25,968 | 5,613 | 2,863 | ||||||||
Other, net | (31,256 | ) | 11,992 | 7,722 | |||||||
Increase (decrease) in cash, net of acquisitions, resulting from changes in: | |||||||||||
Accounts receivable | (7,758 | ) | (10,704 | ) | 28,258 | ||||||
Inventories | (32,961 | ) | 51,170 | (74,816 | ) | ||||||
Prepaid expenses | 1,217 | (7,706 | ) | 1,858 | |||||||
Other assets | 12,027 | (10,750 | ) | (4,333 | ) | ||||||
Accounts payable | 21,558 | (33,465 | ) | 38,660 | |||||||
Deferred revenue | (9,220 | ) | 2,928 | 3,503 | |||||||
Accrued payroll and other liabilities | 17,076 | (10,147 | ) | (10,704 | ) | ||||||
Accrued income taxes | 84,352 | 66,302 | (1,076 | ) | |||||||
Pension and other long-term liabilities | (5,590 | ) | 2,582 | 3,688 | |||||||
Net cash provided by operating activities | 308,252 | 319,751 | 293,425 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Additions to property and equipment | (42,109 | ) | (35,940 | ) | (68,234 | ) | |||||
Business acquisitions, net of cash acquired | — | (419,203 | ) | (92,260 | ) | ||||||
Proceeds from sale of assets | 3,686 | 7,331 | 25,649 | ||||||||
Net cash used by investing activities | (38,423 | ) | (447,812 | ) | (134,845 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Net proceeds of long-term debt, including current portion | — | 524,560 | — | ||||||||
Repayment of long-term debt | (97,500 | ) | (367,435 | ) | (15,000 | ) | |||||
Repurchase of common stock | — | (66,057 | ) | (123,193 | ) | ||||||
Dividends paid | (82,605 | ) | (65,920 | ) | (61,399 | ) | |||||
Proceeds from shares issued pursuant to stock-based compensation plans | 58,241 | 11,966 | 22,499 | ||||||||
Tax paid for net share exercises and issuance of vested restricted stock units | (10,731 | ) | (5,991 | ) | (7,032 | ) | |||||
Other financing activities | (17 | ) | 13 | (24 | ) | ||||||
Net cash (used) provided by financing activities | (132,612 | ) | 31,136 | (184,149 | ) | ||||||
Effect of exchange rate changes on cash | 20,524 | (14,511 | ) | (33,020 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | 157,741 | (111,436 | ) | (58,589 | ) | ||||||
Cash and cash equivalents, beginning of year | 361,349 | 472,785 | 531,374 | ||||||||
Cash and cash equivalents, end of year | $ | 519,090 | $ | 361,349 | $ | 472,785 |
Note 1. | Nature of Business and Significant Accounting Policies |
Note 1. | Nature of Business and Significant Accounting Policies - (Continued) |
Note 1. | Nature of Business and Significant Accounting Policies - (Continued) |
Note 1. | Nature of Business and Significant Accounting Policies - (Continued) |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Numerator for earnings per share: | |||||||||||
Net earnings for basic and diluted earnings per share | $ | 107,223 | $ | 166,626 | $ | 241,686 | |||||
Denominator for earnings per share: | |||||||||||
Weighted average number of common shares outstanding | 137,456 | 137,138 | 139,353 | ||||||||
Assumed exercise of stock options and vesting of restricted stock awards, net of shares assumed reacquired under the treasury stock method | 2,190 | 1,359 | 1,421 | ||||||||
Diluted shares outstanding | 139,646 | 138,497 | 140,774 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Cash paid for: | |||||||||||
Interest | $ | 15,394 | $ | 15,815 | $ | 13,039 | |||||
Taxes | $ | 72,340 | $ | 32,465 | $ | 68,534 |
Note 1. | Nature of Business and Significant Accounting Policies - (Continued) |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Cost of goods sold | $ | 2,665 | $ | 3,103 | $ | 3,001 | |||||
Research and development | 5,068 | 4,815 | 4,694 | ||||||||
Selling, general and administrative | 23,285 | 19,879 | 18,053 | ||||||||
Stock-based compensation expense before income taxes | $ | 31,018 | $ | 27,797 | $ | 25,748 |
December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Capitalized in inventory | $ | 1,062 | $ | 567 | $ | 691 |
2017 | 2016 | 2015 | ||||||
Stock option awards: | ||||||||
Risk-free interest rate | 1.8 | % | 0.9 | % | 0.2 | % | ||
Expected dividend yield | 1.6 | % | 1.6 | % | 1.4 | % | ||
Expected term | 6.0 years | 4.3 years | 4.1 years | |||||
Expected volatility | 26.6 | % | 25.6 | % | 26.6 | % | ||
Performance-based restricted stock awards: | ||||||||
Expected dividend yield | 1.6 | % | 1.6 | % | — | |||
Discount for illiquidity | — | 9.9 | % | — | ||||
Market-based restricted stock awards: | ||||||||
Risk-free interest rate | — | 0.9 | % | 0.9 | % | |||
Expected dividend yield | — | 1.6 | % | 1.4 | % | |||
Expected term | — | 4.0 years | 4.0 years | |||||
Expected volatility | — | 25.8 | % | 27.5 | % | |||
Expected volatility of S&P 500 | — | 25.0 | % | 23.4 | % | |||
Discount for illiquidity | — | 9.9 | % | 10.9 | % | |||
Employee stock purchase plan: | ||||||||
Risk-free interest rate | 1.0 | % | 0.5 | % | 0.4 | % | ||
Expected dividend yield | 1.6 | % | 1.5 | % | 1.5 | % | ||
Expected term | 6 months | 6 months | 6 months | |||||
Expected volatility | 20.9 | % | 27.0 | % | 21.5 | % | ||
Discount for illiquidity | 10.5 | % | 10.5 | % | — |
Note 1. | Nature of Business and Significant Accounting Policies - (Continued) |
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Stock option awards: | |||||||||||
Weighted average grant date fair value per share | $ | 8.55 | $ | 5.68 | $ | 5.60 | |||||
Total fair value of awards granted | $ | 2,824 | $ | 4,716 | $ | 4,170 | |||||
Total fair value of awards vested | $ | 4,203 | $ | 4,407 | $ | 4,290 | |||||
Total intrinsic value of options exercised | $ | 20,631 | $ | 6,170 | $ | 15,585 | |||||
Restricted stock unit awards: | |||||||||||
Weighted average grant date fair value per share | $ | 35.90 | $ | 28.86 | $ | 29.12 | |||||
Total fair value of awards granted | $ | 37,906 | $ | 28,603 | $ | 27,150 | |||||
Total fair value of awards vested | $ | 27,489 | $ | 21,130 | $ | 24,458 | |||||
Employee stock purchase plan: | |||||||||||
Weighted average grant date fair value per share | $ | 7.66 | $ | 6.33 | $ | 5.83 | |||||
Total fair value of shares estimated to be issued | $ | 1,087 | $ | 923 | $ | 951 |
Note 1. | Nature of Business and Significant Accounting Policies - (Continued) |
Pension Plans Items | Interest Rate Swap Contracts | Available-For-Sale Items | Foreign Currency Items | Total | ||||||||||||||||
Balance, December 31, 2016 | $ | (1,615 | ) | $ | 307 | $ | — | $ | (164,643 | ) | $ | (165,951 | ) | |||||||
Other comprehensive income (loss) before reclassifications, net of tax | 1,286 | 187 | (4 | ) | 51,631 | 53,100 | ||||||||||||||
Amounts reclassified from accumulated other comprehensive earnings (loss), net of tax | (15 | ) | (494 | ) | — | — | (509 | ) | ||||||||||||
Net current period other comprehensive income (loss), net of tax | 1,271 | (307 | ) | (4 | ) | 51,631 | 52,591 | |||||||||||||
Balance, December 31, 2017 | $ | (344 | ) | $ | — | $ | (4 | ) | $ | (113,012 | ) | $ | (113,360 | ) |
Note 1. | Nature of Business and Significant Accounting Policies - (Continued) |
Note 1. | Nature of Business and Significant Accounting Policies - (Continued) |
Note 1. | Nature of Business and Significant Accounting Policies - (Continued) |
Note 2. | Fair Value of Financial Instruments |
Level 1 – quoted prices in active markets for identical securities as of the reporting date; |
Level 2 – other significant directly or indirectly observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds, credit risk and observable market prices for identical instruments that are traded in less active markets; and |
Level 3 – significant inputs that are generally less observable than objective sources, including our own assumptions in determining fair value. |
Year Ended December 31, | |||||||
2017 | 2016 | ||||||
Swedish kroner | $ | 59,373 | $ | 48,555 | |||
European euro | 34,800 | 156,352 | |||||
British pound sterling | 34,317 | 33,862 | |||||
Brazilian real | 7,794 | 2,747 | |||||
Canadian dollar | 7,426 | 15,645 | |||||
Japanese yen | 3,362 | 3,251 | |||||
Australian dollar | 2,817 | 1,653 | |||||
Other | 3,095 | — | |||||
$ | 152,984 | $ | 262,065 |
December 31, 2017 | December 31, 2016 | ||||||||||||||
Prepaid Expenses and Other Current Assets | Other Current Liabilities | Prepaid Expenses and Other Current Assets | Other Current Liabilities | ||||||||||||
Foreign exchange contracts | $ | 1,760 | $ | 579 | $ | 2,369 | $ | 75 |
Note 4. | Accounts Receivable |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Allowance for doubtful accounts, beginning of year | $ | 6,457 | $ | 6,853 | $ | 8,014 | |||||
Charges to costs and expenses | 2,303 | 1,460 | 807 | ||||||||
Write-offs of uncollectible accounts, net of recoveries | (1,505 | ) | (1,661 | ) | (1,568 | ) | |||||
Currency translation adjustments | 375 | (195 | ) | (400 | ) | ||||||
Allowance for doubtful accounts, end of year | $ | 7,630 | $ | 6,457 | $ | 6,853 |
Note 5. | Inventories |
December 31, | |||||||
2017 | 2016 | ||||||
Raw material and subassemblies | $ | 210,615 | $ | 200,640 | |||
Work-in-progress | 47,400 | 43,430 | |||||
Finished goods | 114,168 | 127,301 | |||||
$ | 372,183 | $ | 371,371 |
Estimated Useful Life | December 31, | ||||||||
2017 | 2016 | ||||||||
Land | — | $ | 22,765 | $ | 22,326 | ||||
Buildings | 30 years | 167,645 | 162,701 | ||||||
Machinery and equipment | 3 to 7 years | 275,688 | 258,023 | ||||||
Office equipment and other | 3 to 10 years | 104,064 | 103,798 | ||||||
570,162 | 546,848 | ||||||||
Less accumulated depreciation | (306,166 | ) | (275,063 | ) | |||||
$ | 263,996 | $ | 271,785 |
Note 7. | Goodwill |
Balance, December 31, 2015 | $ | 596,316 | ||
Goodwill from acquisitions | 220,795 | |||
Currency translation adjustments | (15,705 | ) | ||
Balance, December 31, 2016 | 801,406 | |||
Goodwill from acquisitions | 96,431 | |||
Classification as asset held for sale | (13,090 | ) | ||
Currency translation adjustments | 25,064 | |||
Balance, December 31, 2017 | $ | 909,811 |
Weighted Average Estimated Useful Life | December 31, | ||||||||
2017 | 2016 | ||||||||
Product technology | 10 years | $ | 123,474 | $ | 98,895 | ||||
Customer relationships | 11 years | 73,382 | 87,013 | ||||||
Trademarks and trade name portfolios | 13 years | 9,606 | 8,160 | ||||||
Trade name portfolio not subject to amortization | indefinite | 32,076 | 37,494 | ||||||
In-process research and development | 7 years | 5,602 | 4,700 | ||||||
Other | 3 years | 1,929 | 1,827 | ||||||
Acquired identifiable intangibles | 246,069 | 238,089 | |||||||
Less accumulated amortization | (80,841 | ) | (73,535 | ) | |||||
Net acquired identifiable intangibles | 165,228 | 164,554 | |||||||
Patents | 7 years | 6,112 | 6,083 | ||||||
Less accumulated amortization | (3,399 | ) | (2,531 | ) | |||||
Net patents | 2,713 | 3,552 | |||||||
Acquired in-place leases and other | 7 years | 456 | 2,074 | ||||||
Less accumulated amortization | (267 | ) | (1,720 | ) | |||||
Net acquired in-place leases and other | 189 | 354 | |||||||
$ | 168,130 | $ | 168,460 |
2018 | $ | 23,949 | |
2019 | 23,028 | ||
2020 | 20,132 | ||
2021 | 18,456 | ||
2022 | 18,119 |
Note 9. | Credit Agreement |
Note 10. | Accrued Product Warranties |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Accrued product warranties, beginning of year | $ | 20,845 | $ | 16,514 | $ | 16,175 | |||||
Amounts paid for warranty services | (16,764 | ) | (19,592 | ) | (12,821 | ) | |||||
Warranty provisions for products sold | 14,422 | 22,928 | 13,074 | ||||||||
Business acquisition | — | 1,215 | 395 | ||||||||
Currency translation adjustments and other | (451 | ) | (220 | ) | (309 | ) | |||||
Accrued product warranties, end of year | $ | 18,052 | $ | 20,845 | $ | 16,514 | |||||
Current accrued product warranties, end of year | $ | 15,024 | $ | 17,476 | $ | 13,406 | |||||
Long-term accrued product warranties, end of year | $ | 3,028 | $ | 3,369 | $ | 3,108 |
December 31, | |||||||
2017 | 2016 | ||||||
Unsecured notes | $ | 425,000 | $ | 425,000 | |||
Credit Agreement | — | 97,500 | |||||
Unamortized discounts and issuance costs of unsecured notes | (4,316 | ) | (5,579 | ) | |||
$ | 420,684 | $ | 516,921 | ||||
Current portion, long-term debt | $ | — | $ | 15,000 | |||
Long-term debt | $ | 420,684 | $ | 501,921 |
Note 12. | Commitments |
Net Operating Leases | Other Contractual Obligations | ||||||
2018 | $ | 9,862 | $ | 766 | |||
2019 | 6,660 | — | |||||
2020 | 5,082 | — | |||||
2021 | 4,275 | — | |||||
2022 | 2,906 | — | |||||
Thereafter | 2,097 | — | |||||
Total minimum payments | $ | 30,882 | $ | 766 |
Note 13. | Contingencies |
Note 13. | Contingencies - (Continued) |
Note 13. | Contingencies - (Continued) |
Note 14. | Income Taxes |
Note 14. | Income Taxes - (Continued) |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
United States | $ | 143,924 | $ | 124,500 | $ | 146,940 | |||||
Foreign | 135,141 | 151,457 | 158,506 | ||||||||
$ | 279,065 | $ | 275,957 | $ | 305,446 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Current tax expense: | |||||||||||
Federal | $ | 112,673 | $ | 36,771 | $ | 35,029 | |||||
State | 5,035 | 5,785 | 6,074 | ||||||||
Foreign | 19,689 | 64,109 | 19,884 | ||||||||
137,397 | 106,665 | 60,987 | |||||||||
Deferred tax expense (benefit): | |||||||||||
Federal | 34,857 | 1,404 | 10,752 | ||||||||
State | 473 | 267 | 1,052 | ||||||||
Foreign | (885 | ) | 995 | (9,031 | ) | ||||||
34,445 | 2,666 | 2,773 | |||||||||
Total income tax provision | $ | 171,842 | $ | 109,331 | $ | 63,760 |
December 31, | |||||||
2017 | 2016 | ||||||
Deferred tax assets, non-current | 21,001 | 45,243 | |||||
Deferred tax liabilities, non-current | (12,496 | ) | (2,331 | ) | |||
Net deferred tax assets | $ | 8,505 | $ | 42,912 |
Note 14. | Income Taxes - (Continued) |
December 31, | |||||||
2017 | 2016 | ||||||
Deferred tax assets: | |||||||
Accrued liabilities and allowances | $ | 20,425 | $ | 28,909 | |||
Tax credit and loss carry-forwards | 30,979 | 25,522 | |||||
Stock-based compensation | 11,715 | 17,204 | |||||
Inventory basis differences | 8,555 | 11,337 | |||||
Deferred revenue | 2,732 | 4,758 | |||||
Other assets | 2,527 | 917 | |||||
Gross deferred tax assets | 76,933 | 88,647 | |||||
Valuation allowance | (3,392 | ) | (2,924 | ) | |||
Total deferred tax assets, net | 73,541 | 85,723 | |||||
Deferred tax liabilities: | |||||||
Intangible assets | (29,117 | ) | (33,564 | ) | |||
Property and equipment | (16,499 | ) | (7,212 | ) | |||
Unremitted earnings of foreign subsidiaries | (15,100 | ) | — | ||||
Other liabilities | (4,320 | ) | (2,035 | ) | |||
Total deferred tax liabilities | (65,036 | ) | (42,811 | ) | |||
Net deferred tax assets | $ | 8,505 | $ | 42,912 |
Year Ended December 31, | ||||||||
2017 | 2016 | 2015 | ||||||
Statutory federal tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||
(Decrease) increase in rates resulting from: | ||||||||
Foreign rate differential | (10.7 | ) | (11.3 | ) | (7.8 | ) | ||
Foreign, federal and state income tax credits | (2.0 | ) | (1.2 | ) | (2.1 | ) | ||
State taxes | 1.8 | 2.3 | 2.4 | |||||
European Union state aid recovery | 0.1 | 14.4 | — | |||||
Valuation allowance release | — | — | (6.4 | ) | ||||
Tax rate change on deferred items | 5.1 | — | — | |||||
United States transition tax | 23.8 | — | — | |||||
Unremitted earnings of foreign subsidiaries | 5.4 | — | — | |||||
Other | 3.1 | 0.4 | (0.2 | ) | ||||
Effective tax rate | 61.6 | % | 39.6 | % | 20.9 | % |
Note 14. | Income Taxes - (Continued) |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Balance, beginning of year | $ | 51,851 | $ | 14,967 | $ | 15,401 | |||||
Increases related to current year tax positions | 17,264 | 40,840 | 1,446 | ||||||||
Increases related to prior year tax positions | 5,781 | 1,066 | 299 | ||||||||
Increases (decreases) related to prior year tax positions | (759 | ) | (610 | ) | (724 | ) | |||||
Lapse of statute of limitations | (1,260 | ) | (4,070 | ) | (1,455 | ) | |||||
Settlements | (986 | ) | (342 | ) | — | ||||||
Change due to currency translation | 5,384 | — | — | ||||||||
Balance, end of year | $ | 77,275 | $ | 51,851 | $ | 14,967 |
Note 14. | Income Taxes - (Continued) |
Tax Years: | |
United States Federal | 2014 - 2016 |
State of California | 2013 - 2016 |
State of Massachusetts | 2014 - 2016 |
State of Oregon | 2014 - 2016 |
Sweden | 2012 - 2016 |
United Kingdom | 2013 - 2016 |
Belgium | 2011 - 2016 |
Note 15. | Stock-based Compensation |
Shares (in thousands) | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value (in thousands) | |||||||||
Outstanding at December 31, 2016 | 5,109 | $ | 28.88 | 5.6 | ||||||||
Granted | 330 | 36.72 | ||||||||||
Exercised | (2,101 | ) | 28.76 | |||||||||
Forfeited | (126 | ) | 31.09 | |||||||||
Outstanding at December 31, 2017 | 3,212 | $ | 29.66 | 5.4 | $ | 54,493 | ||||||
Exercisable at December 31, 2017 | 2,527 | $ | 28.95 | 4.6 | $ | 44,663 | ||||||
Vested and expected to vest at December 31, 2017 | 3,178 | $ | 29.63 | 5.4 | $ | 54,001 |
Note 15. | Stock-based Compensation - (Continued) |
Shares (in thousands) | Weighted Average Grant Date Fair Value | |||||
Outstanding at December 31, 2016 | 1,930 | $ | 30.92 | |||
Granted | 1,057 | 35.89 | ||||
Vested and distributed | (748 | ) | 36.62 | |||
Forfeited | (226 | ) | 30.41 | |||
Outstanding at December 31, 2017 | 2,013 | $ | 31.86 |
Note 16. | Other Employee Benefit Plans |
Note 16. | Other Employee Benefit Plans - (Continued) |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Net earnings (loss) | $ | 1,286 | $ | 78 | $ | 500 | |||||
Prior service cost | (15 | ) | 24 | 161 | |||||||
$ | 1,271 | $ | 102 | $ | 661 |
December 31, | |||||||
2017 | 2016 | ||||||
Net loss | $ | (344 | ) | $ | (1,630 | ) | |
Prior service cost | — | 15 | |||||
$ | (344 | ) | $ | (1,615 | ) |
Year Ended December 31, | |||||||
2017 | 2016 | ||||||
Change in benefit obligation: | |||||||
Benefit obligation at January 1 | $ | 11,419 | $ | 11,426 | |||
Interest costs | 386 | 397 | |||||
Actuarial (gain) loss | (1,720 | ) | 177 | ||||
Benefits paid | (310 | ) | (312 | ) | |||
Foreign currency changes | 374 | (269 | ) | ||||
Benefit obligation at December 31 | $ | 10,149 | $ | 11,419 | |||
Fair value of plan assets at December 31 | $ | — | $ | — | |||
Unfunded status at December 31 | $ | 10,149 | $ | 11,419 | |||
Amounts recognized in the Consolidated Balance Sheets: | |||||||
Current liabilities | $ | 6,262 | $ | 292 | |||
Non-current liabilities | $ | 3,887 | $ | 11,127 |
Note 16. | Other Employee Benefit Plans - (Continued) |
Year Ended December 31, | |||||
2017 | 2016 | ||||
Net periodic benefit cost: | |||||
SERP: | |||||
Discount rate | 4.00 | % | 4.00 | % | |
Rate of increase in compensation levels | 3.00 | % | 3.00 | % | |
Defined benefit pension plan for employees outside the United States: | |||||
Discount rate | 2.00 | % | 2.00 | % | |
Funded status and projected benefit obligation: | |||||
SERP: | |||||
Discount rate | 2.75 | % | 4.00 | % | |
Rate of increase in compensation levels | — | % | 3.00 | % | |
Defined benefit pension plan for employees outside the United States: | |||||
Discount rate | 1.75 | % | 2.00 | % |
2018 | $ | 6,262 | |
2019 | 312 | ||
2020 | 306 | ||
2021 | 296 | ||
2022 | 280 | ||
Five years thereafter | 1,316 | ||
$ | 8,772 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Service costs | $ | — | $ | — | $ | 156 | |||||
Interest costs | 386 | 397 | 353 | ||||||||
Net amortization and deferral | 235 | 260 | 513 | ||||||||
Net periodic pension costs | $ | 621 | $ | 657 | $ | 1,022 |
Note 16. | Other Employee Benefit Plans - (Continued) |
Year Ending December 31, 2018 | |||
Net loss | $ | 52 |
Note 17. | Operating Segments and Related Information - (Continued) |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Revenue—External Customers: | |||||||||||
Surveillance | $ | 545,755 | $ | 532,476 | $ | 503,045 | |||||
Instruments | 357,834 | 336,141 | 347,476 | ||||||||
Security | 231,456 | 240,010 | 226,575 | ||||||||
OEM & Emerging Markets | 347,160 | 243,678 | 186,722 | ||||||||
Maritime | 189,694 | 185,726 | 177,948 | ||||||||
Detection | 128,535 | 124,136 | 115,301 | ||||||||
$ | 1,800,434 | $ | 1,662,167 | $ | 1,557,067 | ||||||
Revenue—Intersegments: | |||||||||||
Surveillance | $ | 14,074 | $ | 18,835 | $ | 10,761 | |||||
Instruments | 4,686 | 4,343 | 9,951 | ||||||||
Security | 15,845 | 13,838 | 12,033 | ||||||||
OEM & Emerging Markets | 42,985 | 33,442 | 33,059 | ||||||||
Maritime | 2,440 | 3,450 | 2,108 | ||||||||
Detection | 145 | 31 | — | ||||||||
Eliminations | (80,175 | ) | (73,939 | ) | (67,912 | ) | |||||
$ | — | $ | — | $ | — | ||||||
Segment operating income: | |||||||||||
Surveillance | $ | 151,983 | $ | 151,516 | $ | 149,560 | |||||
Instruments | 106,887 | 98,775 | 115,115 | ||||||||
Security | 13,760 | 15,885 | 29,366 | ||||||||
OEM & Emerging Markets | 103,334 | 66,141 | 43,660 | ||||||||
Maritime | 23,019 | 18,564 | 17,383 | ||||||||
Detection | 36,146 | 35,276 | 30,262 | ||||||||
$ | 435,129 | $ | 386,157 | $ | 385,346 |
Note 17. | Operating Segments and Related Information - (Continued) |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Consolidated segment operating income | $ | 435,129 | $ | 386,157 | $ | 385,346 | |||||
Unallocated corporate expenses | (87,184 | ) | (65,012 | ) | (61,946 | ) | |||||
Amortization of purchased intangible assets | (27,391 | ) | (18,266 | ) | (16,275 | ) | |||||
Amortization of acquisition-related inventory step-up | (1,992 | ) | (3,230 | ) | — | ||||||
Restructuring charges | (625 | ) | (1,431 | ) | (1,361 | ) | |||||
Loss on net assets held for sale | (23,588 | ) | — | — | |||||||
SkyWatch product quality accrual | (4,388 | ) | (2,500 | ) | — | ||||||
Consolidated earnings from operations | 289,961 | 295,718 | 305,764 | ||||||||
Interest and non-operating expense, net | (10,896 | ) | (19,761 | ) | (318 | ) | |||||
Consolidated earnings before income taxes | $ | 279,065 | $ | 275,957 | $ | 305,446 |
December 31, | |||||||
2017 | 2016 | ||||||
Segment assets (accounts receivable, net and inventories): | |||||||
Surveillance | $ | 296,891 | $ | 283,324 | |||
Instruments | 139,367 | 114,681 | |||||
Security | 34,735 | 93,174 | |||||
OEM & Emerging Markets | 149,346 | 144,862 | |||||
Maritime | 66,689 | 61,494 | |||||
Detection | 31,842 | 25,856 | |||||
$ | 718,870 | $ | 723,391 |
December 31, | |||||||
2017 | 2016 | ||||||
Segment goodwill: | |||||||
Surveillance | $ | 253,341 | $ | 152,383 | |||
Instruments | 155,937 | 147,595 | |||||
Security | 92,719 | 102,983 | |||||
OEM & Emerging Markets | 256,745 | 252,647 | |||||
Maritime | 103,048 | 97,860 | |||||
Detection | 48,021 | 47,938 | |||||
$ | 909,811 | $ | 801,406 |
Note 17. | Operating Segments and Related Information - (Continued) |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
United States | $ | 956,438 | $ | 903,582 | $ | 830,485 | |||||
Europe | 375,474 | 338,805 | 338,886 | ||||||||
Asia | 227,047 | 195,913 | 175,616 | ||||||||
Middle East/Africa | 127,796 | 130,890 | 125,848 | ||||||||
Canada/Latin America | 113,679 | 92,977 | 86,232 | ||||||||
$ | 1,800,434 | $ | 1,662,167 | $ | 1,557,067 |
December 31, | |||||||
2017 | 2016 | ||||||
United States | $ | 797,816 | $ | 676,007 | |||
Europe | 343,208 | 673,767 | |||||
Other foreign | 260,782 | 60,032 | |||||
$ | 1,401,806 | $ | 1,409,806 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
United States government | $ | 466,304 | $ | 416,341 | $ | 321,420 |
Note 18. | Business Acquisitions and Divestitures |
Cash acquired | $ | 5,015 | |
Other tangible assets and liabilities, net | 4,025 | ||
Net deferred taxes | 582 | ||
Identifiable intangible assets | 27,380 | ||
Goodwill | 60,494 | ||
Total purchase price | $ | 97,496 |
Note 18. | Business Acquisitions and Divestitures - (Continued) |
Estimated Useful Life | Amount | ||||
Developed technology | 7.5 years | $ | 21,500 | ||
Customer relationships | 10.0 years | 3,800 | |||
In-process research and development | n/a | 1,700 | |||
Other | 1.0 year | 380 | |||
$ | 27,380 |
Cash acquired | $ | 2,804 | |
Other tangible assets and liabilities, net | 1,925 | ||
Net deferred taxes | (1,855 | ) | |
Identifiable intangible assets | 7,600 | ||
Goodwill | 32,994 | ||
Total purchase price | $ | 43,468 |
Note 18. | Business Acquisitions and Divestitures - (Continued) |
Estimated Useful Life | Amount | ||||
Customer relationships | 4.0 years | 5,200 | |||
Trade name | 3.0 years | 1,000 | |||
Trade Secrets | 6.0 years | 1,400 | |||
$ | 7,600 |
Cash acquired | $ | 2,994 | |
Other tangible assets and liabilities, net | 35,127 | ||
Net deferred taxes | (2,438 | ) | |
Identifiable intangible assets | 39,800 | ||
Goodwill | 183,678 | ||
Total purchase price | $ | 259,161 |
Note 18. | Business Acquisitions and Divestitures - (Continued) |
Estimated Useful Life | Amount | ||||
Developed technology | 10.0 years | $ | 23,100 | ||
Customer relationships | 7.0 years | 13,200 | |||
Backlog | 1.0 year | 2,300 | |||
Non-Competition Agreements | 5.0 years | 1,000 | |||
Other | n/a | 200 | |||
$ | 39,800 |
Cash acquired | $ | 11,706 | |
Other tangible assets and liabilities, net | (900 | ) | |
Net deferred taxes | (4,250 | ) | |
Identifiable intangible assets | 31,400 | ||
Goodwill | 96,431 | ||
Total purchase price | $ | 134,387 |
Note 18. | Business Acquisitions and Divestitures - (Continued) |
Estimated Useful Life | Amount | ||||
Developed technology | 8 years | $ | 23,400 | ||
Customer relationships | 7 years | 3,500 | |||
Patents | 8 years | 3,100 | |||
Trade name | 8 years | 1,400 | |||
$ | 31,400 |
Accounts receivable, net | $ | 20,414 | |
Inventories | 43,050 | ||
Other current assets | 1,031 | ||
Property and equipment, net | 4,888 | ||
Intangible assets, net | 8,359 | ||
Goodwill | 13,090 | ||
Loss on assets | (23,488 | ) | |
Assets held for sale, net | $ | 67,344 | |
Accounts payable and accrued expenses | $ | 39,544 | |
Liabilities held for sale | $ | 39,544 |
Note 18. | Business Acquisitions and Divestitures - (Continued) |
Note 19. | Shareholders’ Equity |
Note 20. | Restructuring Costs |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Surveillance | $ | — | $ | 107 | $ | 226 | |||||
Instruments | 23 | 492 | 1,170 | ||||||||
Security | — | — | — | ||||||||
OEM & Emerging | — | 65 | (22 | ) | |||||||
Detection | — | — | (13 | ) | |||||||
$ | 23 | $ | 664 | $ | 1,361 |
Year Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Restructuring expenses | $ | 23 | $ | 664 | $ | 1,361 | |||||
$ | 23 | $ | 664 | $ | 1,361 |
Note 20. | Restructuring Costs - (Continued) |
Severance | Facilities Exit, Lease Terminations & Other | Total | |||||||||
Balance, December 31, 2014 | $ | 10,941 | $ | 1,485 | $ | 12,426 | |||||
2015 restructuring costs | 924 | 437 | 1,361 | ||||||||
Utilization | (8,409 | ) | (1,601 | ) | (10,010 | ) | |||||
Balance, December 31, 2015 | $ | 3,456 | $ | 321 | $ | 3,777 | |||||
2016 restructuring expenses | 642 | 22 | 664 | ||||||||
Utilization | (2,257 | ) | (343 | ) | (2,600 | ) | |||||
Balance, December 31, 2016 | $ | 1,841 | $ | — | $ | 1,841 | |||||
2017 restructuring expenses | 23 | — | 23 | ||||||||
Utilization | (133 | ) | — | (133 | ) | ||||||
Balance, December 31, 2017 | $ | 1,731 | $ | — | $ | 1,731 |
Note 21. | Subsequent Events |
QUARTERLY FINANCIAL DATA (UNAUDITED) FLIR SYSTEMS, INC. (In thousands, except per share data) | |||||||||||||||
Q1 | Q2 | Q3 | Q4 | ||||||||||||
2017 | |||||||||||||||
Revenue | $ | 406,814 | $ | 434,124 | $ | 464,712 | $ | 494,784 | |||||||
Gross profit | 191,321 | 206,732 | 222,891 | 237,832 | |||||||||||
Net earnings (loss)(1) | 42,571 | 51,413 | 63,529 | (50,290 | ) | ||||||||||
Earnings per share: | |||||||||||||||
Basic earnings (loss) per share | $ | 0.31 | $ | 0.38 | $ | 0.46 | $ | (0.36 | ) | ||||||
Diluted earnings (loss) per share | $ | 0.31 | $ | 0.37 | $ | 0.46 | $ | (0.36 | ) | ||||||
2016 | |||||||||||||||
Revenue | $ | 379,472 | $ | 402,729 | $ | 405,228 | $ | 474,738 | |||||||
Gross profit | 177,690 | 183,322 | 191,376 | 214,733 | |||||||||||
Net earnings(2) | 1,125 | 45,368 | 58,633 | 61,500 | |||||||||||
Earnings per share: | |||||||||||||||
Basic earnings per share | $ | 0.01 | $ | 0.33 | $ | 0.43 | $ | 0.45 | |||||||
Diluted earnings per share | $ | 0.01 | $ | 0.33 | $ | 0.43 | $ | 0.45 |
(1) | Net earnings for the fourth quarter of 2017 includes a discrete tax charge of $94.4 million associated with U.S. Tax Cuts and Jobs Act enacted in December 2017 and a loss on net assets held for sale of $23.6 million. |
(2) | Net earnings for the first quarter of 2016 includes a discrete tax charge for certain tax legislation in Belgium of $39.6 million. |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
ITEM 9B. | OTHER INFORMATION |
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
Number | Description |
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32.2 | |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
(1) | This exhibit constitutes a management contract or compensatory plan or arrangement. |
FLIR SYSTEMS, INC. | |||
(Registrant) | |||
By: | /s/ CAROL P. LOWE | ||
Carol P. Lowe Executive Vice President and Chief Financial Officer |
Signature | Title | |
/S/ JAMES J. CANNON | President, Chief Executive Officer and Director | |
James J. Cannon | ||
/S/ CAROL P. LOWE | Executive Vice President and Chief Financial Officer | |
Carol P. Lowe | (Principal Financial Officer) | |
/S/ BRIAN E. HARDING | Vice President and Corporate Controller | |
Brian E. Harding | (Principal Accounting Officer) | |
/S/ EARL R. LEWIS | Chairman of the Board of Directors | |
Earl R. Lewis | ||
/S/ JOHN D. CARTER | Director | |
John D. Carter | ||
/S/ WILLIAM W. CROUCH | Director | |
William W. Crouch | ||
/S/ CATHERINE A. HALLIGAN | Director | |
Catherine A. Halligan | ||
/S/ ANGUS L. MACDONALD | Director | |
Angus L. Macdonald | ||
/S/ MICHAEL T. SMITH | Director | |
Michael T. Smith | ||
/S/ CATHY A. STAUFFER | Director | |
Cathy A. Stauffer | ||
/s/ ROBERT S. TYRER | Director | |
Robert S. Tyrer | ||
/S/ JOHN W. WOOD, JR. | Director | |
John W. Wood, Jr. | ||
/S/ STEVEN E. WYNNE | Director | |
Steven E. Wynne |
• | FLIR Commercial Systems, Inc., a California, USA Corporation |
• | FLIR Detection, Inc., a Delaware, USA Corporation |
• | FLIR Government Systems, Inc., a Delaware, USA Corporation |
• | FLIR Surveillance, Inc., a Delaware, USA Corporation |
• | FLIR Systems AB, a Sweden Corporation |
• | FLIR Systems BV, a Netherlands Corporation |
• | FLIR Systems Holding AB, a Sweden Corporation |
• | FLIR Systems Trading Belgium BVBA, a Belgium Corporation |
• | FSI Holdings CV, a Netherlands Corporation |
• | Raymarine UK Ltd., a United Kingdom Corporation |
• | RIHL Ltd., a United Kingdom Corporation |
1. | I have reviewed this annual report on Form 10-K of FLIR Systems, Inc.; |
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control of financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date February 23, 2018 | /S/ JAMES J. CANNON | |
James J. Cannon | ||
President and Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K of FLIR Systems, Inc.; |
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control of financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date February 23, 2018 | /S/ CAROL P. LOWE | |
Carol P. Lowe | ||
Executive Vice President and Chief Financial Officer |
Date February 23, 2018 | /S/ JAMES J. CANNON | |
James J. Cannon | ||
President and Chief Executive Officer |
Date February 23, 2018 | /S/ CAROL P. LOWE | |
Carol P. Lowe | ||
Chief Financial Officer |
U+P#_P $U?V!
M_C1\
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Feb. 17, 2018 |
Jun. 30, 2017 |
|
Document And Entity Information [Abstract] | |||
Entity Registrant Name | FLIR SYSTEMS INC | ||
Entity Central Index Key | 0000354908 | ||
Trading Symbol | FLIR | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Document Fiscal Year Focus | 2017 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 138,919,705 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 4,711,497,291 |
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Income Statement [Abstract] | |||
Revenue | $ 1,800,434 | $ 1,662,167 | $ 1,557,067 |
Cost of goods sold | 941,658 | 895,046 | 803,506 |
Gross profit | 858,776 | 767,121 | 753,561 |
Operating expenses: | |||
Research and development | (170,735) | (147,537) | (132,892) |
Selling, general and administrative | (373,867) | (322,435) | (313,544) |
Restructuring expenses | (625) | (1,431) | (1,361) |
Loss on net assets held for sale | 23,588 | 0 | 0 |
Total operating expenses | 568,815 | 471,403 | 447,797 |
Earnings from operations | 289,961 | 295,718 | 305,764 |
Interest expense | 16,804 | 18,071 | 14,086 |
Interest income | (1,764) | (1,402) | (1,167) |
Other (income) expense, net | (4,144) | 3,092 | (12,601) |
Earnings before income taxes | 279,065 | 275,957 | 305,446 |
Income tax provision | 171,842 | 109,331 | 63,760 |
Net earnings | $ 107,223 | $ 166,626 | $ 241,686 |
Net earnings per share: | |||
Basic earnings per share (in dollars per share) | $ 0.78 | $ 1.22 | $ 1.73 |
Diluted earnings per share (in dollars per share) | $ 0.77 | $ 1.20 | $ 1.72 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Statement of Comprehensive Income [Abstract] | |||
Net earnings | $ 107,223 | $ 166,626 | $ 241,686 |
Other comprehensive income (loss), net of tax: | |||
Change in minimum liability for pension plans, net of tax effects of $238, $48 and $477, respectively | 1,271 | 102 | 661 |
Fair value adjustment on interest rate swap contracts | 187 | (16) | (602) |
Realized gain reclassified to earnings | (494) | ||
Gain/Loss on held-for-sale securities | (4) | ||
Foreign currency translation adjustments | 51,631 | (40,911) | (61,776) |
Total other comprehensive income (loss) | 52,591 | (40,825) | (61,717) |
Comprehensive income | $ 159,814 | $ 125,801 | $ 179,969 |
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Statement of Comprehensive Income [Abstract] | |||
Other Comprehensive (Income) Loss, Pension and Other Postretirement Benefit Plans, Tax | $ 477 | $ 48 | $ 238 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000 | 10,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 500,000 | 500,000 |
Common stock, shares issued | 138,869 | 136,334 |
Nature of Business and Significant Accounting Policies |
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Nature of Business and Significant Accounting Policies | Nature of Business and Significant Accounting Policies FLIR Systems, Inc. (the "Company") is a world leader in sensor systems that enhance perception and awareness. The Company was founded in 1978 and has since become a premier designer, manufacturer, and marketer of thermal imaging and other sensing products and systems. The Company’s advanced sensors and integrated sensor systems enable the gathering and analysis of critical information through a wide variety of applications in commercial, industrial, and government markets worldwide. The Company’s goal is to both enable its customers to benefit from the valuable information produced by advanced sensing technologies and to deliver sustained superior financial performance for its shareholders. The Company creates value for its customers by providing advanced surveillance and tactical defense capabilities, improving personal and public safety and security, facilitating air, ground, and maritime navigation, enhancing enjoyment of the outdoors, providing infrastructure inefficiency information, conveying pre-emptive structural deficiency data, displaying process irregularities, and enabling commercial business opportunities through its continual support and development of new thermal imaging data and analytics applications. The Company’s business model meets the needs of a multitude of customers—it sells off-the-shelf products to a wide variety of markets in an efficient, timely, and affordable manner as well as offers a variety of system configurations to suit specific customer requirements. Centered on the design of products for low cost manufacturing and high volume distribution, the Company’s commercial operating model has been developed over time and provides it with a unique ability to adapt to market changes and meet its customers’ needs. Principles of consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions were eliminated. Reclassification The Company made certain reclassifications to the prior years' financial statements to conform them to the presentation as of and for the year ended December 31, 2017. These reclassifications had no effect on consolidated financial position, net earnings, shareholders' equity, or net cash flows for any of the periods presented. Foreign currency translation The assets and liabilities of the Company’s subsidiaries outside the United States are translated into United States dollars at current exchange rates in effect at the balance sheet date. Revenues and expenses are translated at monthly average exchange rates. Resulting translation adjustments are reflected in accumulated other comprehensive earnings (loss) within shareholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in currencies other than the functional currency are reflected as other (income) expense, net, in the Consolidated Statements of Income as incurred. The cumulative translation adjustment included in accumulated other comprehensive earnings (loss) is a loss of $113.0 million and $164.6 million at December 31, 2017 and 2016, respectively. Transaction gains and losses included in other (income) expense, net, are net losses of $0.2 million, $2.2 million, and $2.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. Revenue recognition Revenue is recognized when persuasive evidence of an arrangement exists, upon delivery of the product to the customer at a fixed or determinable price with a reasonable assurance of collection, passage of title and risk of loss to the customer as indicated by the contractual terms and fulfillment of all significant obligations.
Revenue recognition - (Continued) The Company designs, markets and sells products primarily as commercial, off-the-shelf products. Certain customers request different system configurations, based on standard options or accessories that the Company offers. In general, revenue arrangements do not involve acceptance provisions based upon customer specified acceptance criteria. In those limited circumstances when customer specified acceptance criteria exist, revenue is deferred until customer acceptance if the Company cannot demonstrate the system meets those specifications prior to shipment. For any contracts with multiple elements (i.e., training, installation, additional parts, etc.) the Company allocates revenue among the deliverables primarily based upon objective and reliable evidence of fair value of each element in the arrangement. If objective and reliable evidence of fair value of any element is not available, the Company uses an estimated selling price for purposes of allocating the total arrangement consideration among the elements. Credit is not extended to customers and revenue is not recognized until the Company has determined that collectability is reasonably assured. The Company’s products are sold with warranty provisions that require it to remedy deficiencies in quality or performance of the Company’s products over a specified period of time, generally twelve to twenty-four months, at no cost to its customers. Warranty liabilities are established at the time that revenue is recognized at levels that represent the Company’s estimate of the costs that will be incurred to fulfill those warranty requirements. Provisions for estimated losses on sales or related receivables are recorded when identified. Revenue includes certain shipping and handling costs and is stated net of representative commissions and sales taxes. Service revenue is deferred and recognized over the contract period, as is the case for extended warranty contracts, or recognized as services are provided. Cost of goods sold Cost of goods sold includes materials, labor and overhead costs incurred in the manufacturing of products and services sold in the period as well as warranty costs. Material costs include raw materials, purchased components and sub-assemblies, outside processing and inbound freight costs. Labor and overhead costs consist of direct and indirect manufacturing costs, including wages and fringe benefits, operating supplies, depreciation, occupancy costs, and purchasing, receiving and inspection costs. Research and development Expenditures for research and development activities are expensed as incurred. Cash equivalents and restricted cash The Company considers short-term investments that are highly liquid, readily convertible into cash and have maturities of less than three months when purchased to be cash equivalents. Cash equivalents at December 31, 2017 and 2016 were $140.7 million and $8.3 million, respectively, which were primarily investments in money market funds and overnight deposits. Restricted cash includes cash that is subject to a legal or contractual restriction by a third party and restricted as to withdrawal or use, including restrictions that require the funds to be used for a specified purpose and restrictions that limit the purpose for which the funds can be used. The Company did not have any restricted cash balances at December 31, 2017 and 2016, respectively. Accounts receivable and allowance for doubtful accounts Accounts receivable are stated at the amounts the Company expects to collect. Credit limits are established through a process of reviewing the financial history and stability of each customer. The Company regularly evaluates the collectability of its trade receivables balances based on a combination of factors. If it is determined that a customer will be unable to fully meet its financial obligation, the Company records a specific allowance to reduce the related receivable to the amount expected to be recovered. In addition, the Company also records an allowance for all other customers based on certain other factors including the length of time the receivables are past due and historical collection experience with individual customers. Inventories Inventories are stated at the lower of cost or market and include materials, labor, and manufacturing overhead. Cost is determined based on a currently adjusted standard cost basis that approximates actual manufacturing cost on a first-in, first-out basis.
Inventories - (Continued) Inventory write-downs are recorded when conditions exist to indicate that inventories are likely to be in excess of anticipated demand or are obsolete based upon the Company’s assumptions about future demand for its products and market conditions. The Company regularly evaluates its ability to realize the value of inventories based on a combination of factors including the following: historical usage rates, forecasted sales or usage, product end of life dates, estimated current and future market values and new product introductions. When recorded, write-downs reduce the carrying value of the Company’s inventories to their net realizable value and create a new cost-basis in the inventories. Write-downs are reflected in cost of goods sold in the Consolidated Statements of Income. Demonstration units The Company’s products which are being used as demonstration units are stated at the lower of cost or market and are included in prepaid expenses and other current assets in the Consolidated Balance Sheets. Demonstration units are available for sale and the Company periodically evaluates them as to marketability and realizable values. The carrying value of demonstration units was $37.6 million and $36.9 million at December 31, 2017 and 2016, respectively. Property and equipment Property and equipment are stated at cost and are depreciated using a straight-line methodology over their estimated useful lives. Repairs and maintenance are charged to expense as incurred. Goodwill Goodwill is reviewed during the third quarter of each year, or more frequently if warranted, for impairment to determine if events or changes in business conditions indicate that the carrying value may not be recoverable. The Company did not recognize any impairment charges on goodwill during the years ended December 31, 2017, 2016 and 2015. See Note 7, "Goodwill," for additional information. Intangible assets Intangible assets are amortized using a straight-line methodology over their estimated useful lives. Intangible assets with indefinite useful lives are evaluated annually for impairment, or more frequently if required. The Company did not recognize any impairment charges on intangible assets with indefinite lives during the years ended December 31, 2017, 2016 and 2015. Impairment of long-lived assets Long-lived asset groups are reviewed for impairment when circumstances indicate that the carrying amounts may not be recoverable. Impairment exists when the carrying value is greater than the expected undiscounted future cash flows expected to be provided by the asset group. If impairment exists, the asset group is written down to its fair value. The Company did not recognize any impairment charges on long-lived assets during the years ended December 31, 2017, 2016 and 2015. Advertising costs Advertising costs, which are included in selling, general and administrative expenses, are expensed as incurred. Advertising costs for the years ended December 31, 2017, 2016 and 2015 were $19.2 million, $19.3 million and $18.7 million, respectively. Cost-basis investments The Company has private company investments, which consist of investments for which the Company does not have the ability to exercise significant influence, and are accounted for under the cost method. The investments are carried at cost and adjusted only when the Company believes that events have occurred that are likely to have a significant other-than-temporary adverse effect on the estimated fair value of the investments. If no such events have occurred, the fair value of the investments is not calculated as it is not required. The carrying value of those investments were $3.1 million and $3.2 million at December 31, 2017 and 2016, respectively. The investments are included in other assets in the Consolidated Balance Sheets.
Contingencies The Company is subject to the possibility of loss contingencies arising in the normal course of business. An estimated loss is accrued when the Company determines that it is probable that an asset has been impaired or a liability has been incurred and the amount can be reasonably estimated. The Company regularly evaluates current available information to determine whether such accruals and disclosures should be adjusted. Earnings per share Basic earnings per share is based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the weighted shares outstanding are increased to include additional shares from the assumed exercise of stock options, if dilutive, and the assumed issuance of shares upon vesting of restricted stock awards. The following table sets forth the reconciliation of the numerator and denominator utilized in the computation of basic and diluted earnings per share (in thousands):
The effect of stock-based compensation awards for the years ended December 31, 2017, 2016 and 2015 that aggregated 39,000, 233,000 and 354,000 shares, respectively, have been excluded for purposes of diluted earnings per share since the effect of their inclusion would have been anti-dilutive. Supplemental cash flow disclosure (in thousands)
Stock-based compensation The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards and shares expected to be issued under the Company's employee stock purchase plan. Nonvested stock awards (referred to as restricted stock unit awards) are valued based on the fair market value of the Company's stock, discounted for expected dividends, on the date of grant. Restricted stock units containing performance-based vesting criteria are valued on the date of grant based on the fair value of the Company's stock, discounted for expected dividends and an estimate for illiquidity. The fair value of market-based restricted stock units is determined on the date of grant using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation and a discount for illiquidity. The estimated discount for illiquidity is relevant for share based awards that require the plan participant to hold the shares for a specified period of time after the award vests and is estimated using the protective put method. The Company recognizes the compensation expense for all stock-based compensation awards on a straight-line basis over the requisite service period of each award.
Stock-based compensation - (Continued) The following table sets forth the stock-based compensation expense recognized in the Consolidated Statements of Income for the years ended December 31, 2017, 2016 and 2015 (in thousands):
Stock-based compensation expense capitalized in the Consolidated Balance Sheets as of December 31, 2017, 2016 and 2015 is as follows (in thousands):
As of December 31, 2017, the Company had approximately $42.0 million of total unrecognized stock-based compensation costs, net of estimated forfeitures, to be recognized over a weighted average period of 2.09 years. The fair value of the stock-based awards granted in the years ended December 31, 2017, 2016 and 2015 was estimated with the following weighted-average assumptions:
Stock-based compensation - (Continued) The Company uses the United States Treasury (constant maturity) interest rate on the date of grant as the risk-free interest rate and uses historical volatility as the expected volatility. The Company’s determination of expected term is based on an analysis of historical and expected exercise patterns. In 2017, 2016 and 2015, all stock options granted were time-based options. The Company uses an estimated forfeiture rate of 5 percent of the stock-compensation expense of non-executive employees based on an analysis of historical and expected forfeitures. During the years ended December 31, 2017, 2016 and 2015, the Company granted approximately 773,000, 865,000 and 804,000 time-vested restricted stock units, respectively. The fair value of time-vested restricted stock units is fixed and determined on the date of grant based upon the Company's stock price on the date of grant. The weighted average fair values of the time-vested restricted stock units granted during the years ended December 31, 2017, 2016 and 2015 were $36.20, $29.48 and $26.30 per share, respectively. During the year ended December 31, 2016 and 2015, the Company granted approximately 64,000 and 128,000 market-based restricted stock units, respectively. These units may be earned based upon the Company's total shareholder return compared to the total shareholder return over a three year period of the component company at the 60th percentile level in the S&P 500 Index. Shares vested under the market-based restricted stock unit awards must be held by the participant for a period of one year from the vest date. The fair value of the market-based restricted stock units granted during the year ended December 31, 2016 and 2015 was $22.89 and $25.55 per share, respectively. During the years ended December 31, 2017 and 2016, the Company granted approximately 283,000 and 62,000 performance-based restricted stock units, respectively. These units are earned based upon the Company's return on invested capital over a three year period. The fair value of the performance-based restricted units granted during the years ended December 31, 2017 and 2016 was $35.08 and $26.41 per share, respectively. The total fair value of the restricted stock unit awards granted during the year ended December 31, 2017 in the table below of $37.9 million includes $9.9 million of grant date fair value associated with the performance-based restricted stock units. The total fair value of the restricted stock unit awards granted during the year ended December 31, 2016 in the table below of $28.6 million includes $1.5 million of grant date fair value associated with the market-based restricted stock units and $1.6 million of grant date fair value associated with the performance-based restricted stock units. The weighted-average fair value of stock-based compensation awards granted and vested, and the intrinsic value of options exercised during the period were (in thousands, except per share amounts):
The total amount of cash received from the exercise of stock options in the years ended December 31, 2017, 2016 and 2015 was $53.5 million, $7.7 million and $20.8 million, respectively, and the related tax benefits realized from the exercise of the stock options in the years ended December 31, 2017, 2016 and 2015 was $3.0 million, $1.3 million and $3.9 million, respectively.
Concentration of risk Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of accounts receivable. Concentration of credit risk with respect to accounts receivable is limited because a relatively large number of geographically diverse customers make up the Company’s customer base, thus diversifying the trade credit risk. The Company controls credit risk through credit approvals, credit limits and monitoring procedures. The Company performs credit evaluations for all new customers and requires letters of credit, bank guarantees and advanced payments, if deemed necessary. A substantial portion of the Company’s revenue is derived from sales to United States and foreign government agencies (see Note 17, "Operating Segments and Related Information"). The Company also purchases certain key components from sole or limited source suppliers. The Company maintains cash deposits with major banks that from time to time may exceed federally insured limits. The Company periodically assesses the financial condition of the institutions and instruments in which it invests and adjusts its investment balances to mitigate the risk of principal loss. Use of estimates The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates and judgments made by management of the Company include matters such as collectability of accounts receivable, realizability of inventories, recoverability of deferred tax assets, impairment tests of goodwill, intangible assets and other long-lived assets, recognition and measurement of loss contingencies and adequacy of warranty accruals. Actual results could differ from those estimates. The Company believes that the estimates used are reasonable. Accumulated other comprehensive earnings (loss) Accumulated other comprehensive earnings (loss) includes cumulative translation adjustments, fair value adjustments on interest rate swap contracts, unrealized gains and losses on available-for-sale securities and changes in minimum liability for pension plans. Foreign currency translation adjustments included in comprehensive income were not tax affected as investments in international affiliates are deemed to be indefinite in duration. The following table sets forth the changes in the balances of each component of accumulated other comprehensive earnings (loss) for the year ended December 31, 2017:
The amounts reclassified from accumulated other comprehensive earnings (loss) for interest rate swap contracts have been recorded to interest expense in the Company's Consolidated Statement of Income for the year ended December 31, 2017.
Recent accounting pronouncements Effective January 1, 2017, the Company adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"). The standard update simplifies several aspects of the accounting for employee share-based payment transactions, including accounting for income taxes, forfeitures, and statutory withholding requirements, as well as classification in the Consolidated Statements of Cash Flows. As a result of the adoption, on a prospective basis, the Company recognized $4.5 million of excess tax benefits from stock-based compensation as a discrete item in income tax provision for the year ended December 31, 2017. Historically, this amount was recorded as additional paid-in capital. Upon adoption, the Company elected to apply the change retrospectively to the Consolidated Statement of Cash Flows which resulted in a reclassification of excess tax benefits from stock-based compensation of $1.5 million and $8.2 million from cash flows from financing activities to cash flows from operating activities for the year ended December 31, 2016 and 2015, respectively. Additionally, $6.0 million and $9.4 million paid in cash to satisfy withholding requirements for net settlement of restricted stock unit shares vested and stock options exercised has been reclassified from cash flows from operating activities to cash flows from financing activities to conform to the presentation required by the new standard in the Consolidated Statement of Cash Flows for the year ended December 31, 2016 and 2015, respectively. ASU 2016-09 also requires excess tax benefits and deficiencies to be excluded from the assumed future proceeds in the calculation of diluted shares. This change resulted in an increase in diluted weighted average shares outstanding of 492,000 shares for the year ended December 31, 2017. The Company elected not to change its policy on accounting for forfeitures and will continue to estimate a requisite forfeiture rate. Additional amendments to the accounting for income taxes and minimum statutory withholding requirements had no impact on the Company's results of operations. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09" or "Topic 606"), which establishes new guidance under which companies will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also provides for additional disclosure requirements. Subsequently, the FASB has issued several amendments to the new standard to clarify the implementation. ASU 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017 and may be applied retrospectively or on a modified retrospective transition basis. The Company currently intends to adopt ASU 2016-09 on January 1, 2018 using the modified retrospective approach. The Company has substantially completed its review of the accounting systems and processes required from adopting the new standard, including the application of the modified retrospective method for adoption. Additionally, the Company has completed the assessment phase and documentation of new policies and evaluation of it internal controls framework and is currently in the process of gathering data for the new disclosure requirements. The Company does not expect a significant change in its control environment due to the adoption of the new standard. Upon adoption, the Company does not expect a material impact to the opening balance sheet as of January 1, 2018 related to the modified retrospective effect. Although the impact of the new standard will greatly increase the amount of required disclosures the Company expects revenue recognition for the broad portfolio of its products and services offerings to remain largely unchanged. However, the guidance is expected to change the timing of revenue recognition in certain area, including accounting for complex and highly customized systems integrations when there is no alternative use for assets produced and termination for convenience clauses entitle the Company to receive cost plus a reasonable margin in the event of early termination. Such contracts represent a minor subset of the Company's total portfolio, however, such arrangements may represent a significant amount of revenue in a given period. Such contracts and other aspects of the new standard expected to impact the Company are described in further detail below: •Integration, engineering services and highly customized products: Topic 606 requires revenue recognition when (or as) the Company satisfies a performance obligation by transferring control of a promised good or service to a customer. If the Company's performance does not create an asset with an alternative use and termination for convenience clauses provide an enforceable right to payment for performance completed to date (including fees representing a reasonable profit), revenue would be recognized over time as the performance obligation is satisfied, rather than the point in time when final delivery or acceptance occurs. Though not expected to impact the vast majority of the Company's contracts with customers, over-time revenue recognition may be required on certain contracts which would have been recognized at a point in time under current standards.
Recent accounting pronouncements - (Continued) •Contract acquisition costs: Topic 606 requires the deferral and amortization of "incremental" costs incurred to obtain a contract. The primary contract acquisition cost for the Company are sales commissions. While the majority of the Company's sales commissions are not earned upon contract acquisition, all commissions are currently expensed when earned. The change required by Topic 606 may result in the creation of an asset on the opening balance sheet at January 1, 2018. The impact is not expected to be material as the Company has limited agreements providing for commissions earned upon contract acquisition and also because it intends to elect the practical expedient to omit recognition of contract acquisition assets if the amortization period of the asset that otherwise would be recognized is one year or less. •Variable consideration: Some of the Company's contracts with customers include notification or acceptance provisions that preclude revenue recognition because of the requirement for amounts to be fixed or determinable under the current standards. Topic 606 requires the Company to estimate and account for variable consideration using either the probability-weighted expected amount or the most likely amount and estimate the transaction price to recognize when or as control is transferred to the customer. Though not applicable to the vast majority of the Company's contracts, revenue for certain customer contracts may be recognized earlier than it would be under current standards as transaction prices are estimated upon transfer of control rather than at the point when the price is considered fixed or determinable. •Allocation of transaction price: Similar to current standards, Topic 606 requires an allocation of arrangement consideration between deliverables within a transaction. Current GAAP restricts the allocation of revenue that is contingent on future deliverables to current deliverables, however Topic 606 removes this restriction. Though expected to be rare, this change could result in the Company recognizing a portion of a contract earlier during the performance period, even if payment is contingent upon future deliverables. The Company will continue to assess the impact of the adoption as it completes its processes and internal controls necessary to gather information required for the new disclosures beginning in the first quarter ending March 31, 2018. As discussed above, the adoption of the new standard is not expected to have a material impact on the opening balance sheet as of January 1, 2018. However, this expectation is based on many variables, which are subject to change. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The amendments in this update require the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a twelve month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. ASU 2016-02 requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented in the consolidated financial statements. ASU 2016-09 is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted, and the Company currently intends to adopt ASU 2016-02 on January 1, 2019. The Company is assessing the impact ASU 2016-02 will have on its consolidated financial statements and expects that the primary impact upon adoption will be the recognition, on a discounted basis, of its minimum commitments under noncancelable operating leases on its consolidated balance sheets resulting in the recording of right of use assets and lease obligations. The Company's current minimum commitments under noncancelable operating leases are disclosed in Note 12. In October 2016, the FASB issued Accounting Standards Update No. 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory” ("ASU 2016-16"). The amendments in this update eliminate the exception of recognizing, at the time of transfer, current and deferred income taxes for intra-entity asset transfers other than inventory. ASU 2016-16 is effective for interim and annual reporting periods beginning after December 15, 2017 and should be applied on a modified retrospective transition basis. The Company is currently planning to adopt ASU 2016-16 on January 1, 2018. As of December 31, 2017, the Company has a remaining deferred tax benefit of $7.0 million recorded in prepaid expenses and other current assets, which represents the tax benefit that was deferred in accordance with the current GAAP. Upon adoption, the Company will recognize this amount through a cumulative-effect adjustment to retained earnings.
Recent accounting pronouncements - (Continued) In November 2016, the FASB issued Accounting Standards Update No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" ("ASU 2016-18"). This update clarifies guidance on the classification and presentation of restricted cash in the statement of cash flows. The amendment requires restricted cash be included in an entity's cash and cash-equivalent balances in the statement of cash flows and also requires an entity to disclose information about the nature of the restrictions. Further, a reconciliation between the statement of financial position and the statement of cash flows must be disclosed when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash, and restricted cash equivalents. ASU 2016-18 should be applied on a retrospective basis and is effective for interim and annual reporting periods beginning after December 15, 2017. The Company currently intends to adopt ASU 2016-18 on January 1, 2018, and does not expect the adoption to have a material impact on its consolidated financial statements. In January 2017, the FASB issued Accounting Standards Update No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business" ("ASU 2017-01"). The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for interim and annual reporting periods beginning after December 15, 2017. The Company currently intends to adopt ASU 2017-01 on January 1, 2018, and does not expect the adoption to have a material impact on its consolidated financial statements. In January 2017, the FASB issued Accounting Standards Updated No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). The amendments in this update simplify the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual, or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments in ASU 2017-04 are to be applied on a prospective basis and are not expected to have a material impact on the Company's consolidated financial statements. |
Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | ||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments Factors used in determining the fair value of financial assets and liabilities are summarized into three broad categories in accordance with FASB ASC Topic 820, “Fair Value Measurements”:
The factors or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The Company had $140.7 million and $8.3 million of cash equivalents at December 31, 2017 and 2016, respectively, which were primarily investments in money market funds and overnight deposits. The Company has categorized its cash equivalents as a Level 1 financial asset, measured at fair value based on quoted prices in active markets of identical assets. All cash equivalents are in instruments that are convertible to cash daily. The fair value of the Company’s foreign currency contracts as of December 31, 2017 and 2016 are disclosed in Note 3, "Derivative Financial Instruments," and based on Level 2 inputs. The fair value of the Company’s senior unsecured notes as described in Note 11, "Long-Term Debt," is approximately $427.5 million based upon Level 2 inputs at December 31, 2017. The Company does not have any other significant financial assets or liabilities that are measured at fair value. |
Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Note 3. Derivative Financial Instruments Foreign Currency Exchange Rate Risk The Company enters into foreign currency forward contracts not formally designated as hedges to manage the consolidated exchange rate risk associated with the remeasurement of non-functional currency denominated monetary assets and liabilities. Non-functional currency denominated monetary assets and liabilities consist primarily of cash, receivables, payables and intercompany loans. The Company manages exposure to counterparty non-performance credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the terms of such contracts. Changes in fair value of foreign currency forward contracts are recognized in income at the end of each reporting period based on the difference between the contract rate and the spot rate. In general, these gains and losses are offset in the Consolidated Statements of Income by the reciprocal gains and losses from the underlying assets or liabilities which originally gave rise to the exposure. The net amount of the gains and losses related to derivative instruments recorded in other (income) expense, net for the year ended December 31, 2017, 2016 and 2015 were a loss of $9.4 million, $7.9 million and a gain of $1.2 million, respectively. Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent the Company's total exposure to foreign currency gains or losses. The table below presents the net notional amounts of the Company’s outstanding foreign currency forward contracts by currency at December 31, 2017 and 2016 (in thousands):
At December 31, 2017, the Company’s foreign currency forward contracts, in general, had maturities of three months or less. The carrying amount of the foreign exchange contracts included in the Consolidated Balance Sheets are as follows (in thousands):
Interest Rate Swap Contracts On May 31, 2016, the Company drew down $105 million under the revolving credit facility as described in Note 9, "Credit Agreement," and repaid the term loan originally issued under the credit agreement dated April 5, 2013. Interest was accrued and paid monthly based on the one-month LIBOR rate. To manage the interest rate risk arising from the variability in monthly interest expense attributable to the original term loan and amounts drawn under the revolver, the Company entered into two amortizing interest rate swaps with an aggregate notional amount of $105 million. The interest rate swaps were designated, and effective, as cash flow hedges. Note 3. Derivative Financial Instruments - (Continued) Interest Rate Swap Contracts - (Continued) During the year ended December 31, 2017, the Company repaid all amounts outstanding under the revolving credit facility. Concurrently, the Company exited both interest rate swaps which had a combined notional amount at the time of $86.3 million and discontinued the cash flow hedge. The Company reclassified a gain of $0.5 million from accumulated other comprehensive income to interest expense because it was probable that the forecasted variable monthly LIBOR-based interest rate payments would no longer occur. |
Accounts Receivable |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Accounts Receivable Accounts receivable are net of an allowance for doubtful accounts. The following table summarizes the Company’s allowance for doubtful accounts and the activity for 2017, 2016 and 2015 (in thousands):
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Inventories |
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Inventories | Inventories Inventories consist of the following (in thousands):
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Property and Equipment |
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Property and Equipment | Property and Equipment Property and equipment are summarized as follows (in thousands):
Depreciation expense for the years ended December 31, 2017, 2016 and 2015 was $42.3 million, $37.8 million and $32.5 million, respectively. |
Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | Goodwill The carrying value of goodwill and the activity for the two year period ending December 31, 2017 are as follows (in thousands):
During the year ended December 31, 2017, the Company recorded $96.4 million of goodwill primarily in connection with the purchase price allocation associated with Prox Dynamics, AS ("Prox Dynamics"). The Company reviews its goodwill for impairment annually during the third quarter, or more frequently, if events or circumstances indicate that the carrying value of a reporting unit exceeds its fair value. During the third quarter of 2017, the Company completed its annual review of goodwill and determined that no impairment of its recorded goodwill was necessary. During the fourth quarter of 2017, the Company allocated goodwill totaling approximately $13.1 million to assets held for sale related to the planned divestiture of the Consumer and Small and Medium-Sized (SMB) portion of the Security business. See Note 18, "Business Acquisitions and Divestitures," for further discussion. As a result of the reallocation of goodwill to the disposal group, the Company assessed whether there were any potential triggers or indicators of impairment on the retained portion of the Security segment. The Company concluded there had been no significant changes in the reporting unit assessment that would result in a significant change to the future expected cash flows generated from the retained asset groups. As such, as of December 31, 2017, the Company concluded that goodwill was not impaired. |
Intangible Assets |
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Intangible Assets | Intangible Assets Intangible assets are summarized as follows (in thousands):
Note 8. Intangible Assets - (Continued) During the year ended December 31, 2017, the Company recorded $31.4 million of identified intangibles assets in connection with the purchase price allocation associated with Prox Dynamics and reclassed $8.4 million to Assets Held for Sale, net on the Consolidated Balance Sheets related to the Company's planned divestiture of the Consumer and SMB portion of the Security business. During the year ended December 31, 2016, the Company acquired $47.4 million of identifiable intangible assets as part of the acquisitions of Armasight and Point Grey and during the year ended December 31, 2015, the Company acquired $27.4 million of identifiable intangible assets as part of the acquisition of DVTEL. Refer to Note 18, "Business Acquisitions and Divestitures" for further discussion. The aggregate amortization expense recorded in 2017, 2016 and 2015 was $27.5 million, $18.4 million and $16.4 million, respectively. For intangible assets recorded at December 31, 2017, the estimated future aggregate amortization expense for the years ending December 31, 2018 through 2022 is approximately (in thousands):
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Credit Agreement |
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Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Credit Agreements | Credit Agreement On February 8, 2011, the Company entered into a Credit Agreement (“Credit Agreement”) with Bank of America, N.A., U.S. Bank National Association, JPMorgan Chase Bank N.A. and other Lenders. The Credit Agreement provided for a $200 million, five-year revolving line of credit. On April 5, 2013, the Credit Agreement was amended to extend the maturity of the revolving credit facility from April 8, 2016 to April 5, 2018 in addition to incorporating a $150 million term loan facility maturing April 5, 2019. On May 31, 2016, the Credit Agreement was further amended to increase the borrowing capacity to $500 million and to extend the maturity of the revolving credit facility from April 5, 2018 to May 31, 2021. The amendment also incorporated a revised schedule of fees and interest rate spreads. The Company has the right, subject to certain conditions, including approval of additional commitments by qualified lenders, to increase the revolving line of credit under the Credit Agreement by an additional $200 million until May 31, 2021. The Credit Agreement allows the Company and certain designated subsidiaries to borrow in United States dollars, European euros, Swedish kronor, British pound sterling, Japanese yen, Canadian dollars, Australian dollars and other agreed upon currencies. Interest rates under the Credit Agreement are determined based on the type of borrowing. Interest associated with borrowings can be based on the prime lending rate of Bank of America, N.A. or the published Eurocurrency rate (i.e. LIBOR). The borrowings have an applicable margin of 0.125 percent to 2.125 percent depending on the applicable base rate and our consolidated total leverage ratio. Including the respective spreads, the one-month LIBOR interest rate was 2.944 percent per annum and the prime lending rate was 4.875 percent per annum at December 31, 2017. The Credit Agreement requires the Company to pay a commitment fee on the amount of unused revolving commitments at a rate, based on the Company’s total leverage ratio, which ranges from 0.150 percent to 0.300 percent of unused revolving commitments. At December 31, 2017, the commitment fee rate was 0.175 percent per annum. The Credit Agreement contains two financial covenants that require the maintenance of a total leverage ratio and an interest coverage ratio, with which the Company was in compliance at December 31, 2017. The credit facilities available under the Credit Agreement are unsecured. On May 31, 2016, the Company drew down $105 million under the revolving credit facility and repaid the term loan originally issued under the credit agreement dated April 5, 2013. During the year ended December 31, 2017, the Company repaid all amounts outstanding under the revolving credit facility. At December 31, 2017, the Company had $18.4 million of letters of credit outstanding, which reduces the total available revolving credit under the Credit Agreement. |
Accrued Product Warranties |
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Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Product Warranties | Accrued Product Warranties The Company generally provides a twelve to twenty-four month warranty on its products. A provision for the estimated future costs of warranty, based upon historical cost and product performance experience, is recorded when revenue is recognized. The following table summarizes the Company’s warranty liability and activity for 2017, 2016 and 2015 (in thousands):
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Long-Term Debt |
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Long-Term Debt | Long-Term Debt Long-term debt consists of the following (in thousands):
In August 2011, the Company issued $250 million aggregate principal amount of its 3.75 percent senior unsecured notes due September 1, 2016 (the “Notes”). The 2011 Notes were repaid on July 5, 2016 and the Company recorded a $1.3 million loss on the extinguishment of the 2011 Notes in Interest Expense. In June 2016, the Company issued $425 million aggregate principal amount of its 3.125 percent senior unsecured notes due June 15, 2021 (the “2016 Notes”). The net proceeds from the issuance of the 2016 Notes were approximately $421.0 million, after deducting underwriting discounts and offering expenses, which are being amortized over a period of five years. Interest on the 2016 Notes is payable semiannually in arrears on December 15 and June 15. The proceeds from the 2016 Notes were used to repay the principal amount of the 2011 Notes outstanding in July 2016 and are being used for other general corporate purposes, including working capital and capital expenditure needs, business acquisitions and repurchases of the Company’s common stock. On April 5, 2013, the Company borrowed $150 million under the term loan facility incorporated in the Credit Agreement. As discussed in Note 9, "Credit Agreement," of the Notes to the Consolidated Financial Statements above, on May 31, 2016, the Company repaid its term loan and drew down $105.0 million under the revolving credit facility. Interest on amounts outstanding under the revolving credit facility accrued at the one-month LIBOR rate plus the applicable margin for the amount outstanding and is paid monthly in arrears. During the year ended December 31, 2017, the Company repaid all amounts outstanding under the revolving credit facility. |
Commitments |
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Commitments | Commitments The Company leases some of its primary facilities under various operating leases that expire in 2018 through 2027. The Company also leases certain operating machinery and equipment and office equipment under operating lease agreements. Total net rent expense for the years ended December 31, 2017, 2016 and 2015 amounted to $13.9 million, $9.0 million and $12.2 million, respectively. The future minimum obligations under all non-cancelable leases and other contractual obligations are as follows (in thousands):
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Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||
Contingencies | Contingencies Raytheon Litigation FLIR Systems, Inc. and its subsidiary, FLIR Commercial Systems, Inc. (formerly known as Indigo Systems Corporation) (together, the “FLIR Parties”), were named in a lawsuit filed by Raytheon Company (“Raytheon”) on March 2, 2007, in the United States District Court for the Eastern District of Texas. Raytheon's complaint, as amended, asserted claims for tortious interference, patent infringement, trade secret misappropriation, unfair competition, breach of contract, and fraudulent concealment. The FLIR Parties filed an answer to the complaint on September 2, 2008, in which they denied all material allegations. On October 27, 2010, the FLIR Parties and Raytheon entered into a settlement agreement that resolved the patent infringement claims (the "Patent Claims") pursuant to which the FLIR Parties paid $3 million to Raytheon and entitles the FLIR Parties to certain license rights in the patents that were the subject of the Patent Claims. On October 28, 2014, a four-week trial began with respect to Raytheon's remaining claims of misappropriations of trade secrets and claims related to 31 alleged trade secrets. On November 24, 2014, a jury in the United States District Court for the Eastern District of Texas rejected Raytheon’s claims and determined that 27 of the alleged trade secrets were not in fact trade secrets and that neither of the FLIR Parties infringed any of the trade secrets claimed and awarded Raytheon no damages. On March 31, 2016, the United States District Court for the Eastern District of Texas issued a Final Judgment denying Raytheon’s claims and awarding FLIR court costs and denying each of Raytheon’s and FLIR’s Renewed Motions for Judgment as a Matter of Law and denying FLIR’s Amended Rule 54(d) Motion for Attorneys’ Fees and Costs Under the Texas Theft Liability Act. On April 29, 2016, Raytheon filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit of the denial by the United States District Court for the Eastern District of Texas of Raytheon’s Renewed Motion for Judgment as a Matter of Law, or in the Alternative, Motion for New Trial. On May 11, 2016, the FLIR Parties filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit of the Order of the United States District Court for the Eastern District of Texas Denying the FLIR Parties’ Amended Rule 54(d) Motion for Attorneys’ Fees and Costs under the Texas Theft Liability Act, the Order Denying the FLIR Parties’ Renewed Motion For Judgment as a Matter Of Law, and the Final Judgment to the extent it denied the FLIR Parties Attorneys’ Fees and Costs under the Texas Theft Liability Act. The United States Court of Appeals for the Federal Circuit heard the matter on January 12, 2018 and a decision is expected later this year. The matter remains ongoing and is subject to appeal. The Company is unable to estimate the amount or range of potential loss or recovery, if any, which might result if the final determination of this matter is favorable or unfavorable, but an adverse ruling on the merits of the original claims against the FLIR Parties, while remote, could be material.
Matters Involving the United States Department of State and Department of Commerce On October 22, 2014, the Company initially contacted the United States Department of State Office of Defense Trade Controls Compliance (“DDTC”), pursuant to International Traffic in Arms Regulation (“ITAR”) § 127.12(c), regarding the unauthorized export of technical data and defense services to dual and third country nationals in at least four facilities of the Company. On April 27, 2015, the Company submitted its initial report to DDTC regarding the details of the issues raised in the October 22, 2014, submission. DDTC subsequently notified the Company that it was considering administrative proceedings under Part 128 of ITAR and requested a tolling agreement, which the Company executed on June 16, 2015 and referenced certain Company disclosures in addition to the submissions made in conjunction with the October 24, 2014 initial notification. On June 6, 2016, the Company executed a subsequent tolling agreement extending the tolling period for matters to be potentially included in an administrative proceeding for an additional 18 months and at the request of DDTC on December 1, 2017, further extended the tolling agreement for an additional six months through May 9, 2018. DDTC continues its review of the Company’s activities and the Company continues to engage actively with the United States government on these matters. In May 2017, the Company submitted an initial notification to DDTC regarding potential violations related to certain export classifications obtained through the commodity jurisdiction process and a final voluntary disclosure in August 2017. DDTC acknowledged the notification and at the request of DDTC, the Company executed a tolling agreement for this matter, suspending the statute of limitations through July 2018. In June 2017, the United States Department of Commerce Bureau of Industry and Security informed the Company of additional export licensing requirements that restrict the Company’s ability to sell 9hz thermal products without a license to customers in China not identified on a list maintained by the United States Department of Commerce. This action was precipitated by concerns of potential diversion of some of the Company's products to prohibited end users and to countries subject to economic and other sanctions implemented by the United States. The United States Department of Commerce Bureau of Industry and Security subsequently favorably modified these restrictions to reduce the applicability of the restrictions to sales of FLIR's Tau camera cores (as opposed to finished products containing Tau camera cores) to customers in China not identified on a list maintained by the United States Department of Commerce and persons in a country other than those in EAR Country Group A:5 (Supplement No. 1 to Part 740 of the EAR). If the Company is found to have violated applicable rules and regulations with respect to customers and limitations on the end use of the Company’s products, the Company could be subject to substantial fines and penalties, suspension of existing licenses or other authorizations and/or loss or suspension of export privileges. The Company is unable to reasonably estimate the time it may take to resolve these matters or the amount or range of potential loss, penalty or other government action, if any, that may be incurred in connection with these matters. However, an unfavorable outcome could result in substantial fines and penalties or loss or suspension of export privileges or of particular authorizations that could be material to the Company’s financial position, results of operations or cash flows in and following the period in which such an outcome becomes estimable or known. SkyWatch Product Quality Matters In March 2016, the Company learned of potential quality concerns with respect to as many as 313 Level III and Level IV SkyWatch Surveillance Towers sold by FLIR and companies acquired by FLIR from 2002 through 2014. The Company notified customers who purchased the affected SkyWatch Towers of the potential concerns and, as a precautionary measure, also temporarily suspended production of all Level III and Level IV SkyWatch Towers pending the completion of its review and the implementation of any necessary remedial measures. During the quarter ended June 30, 2017, the Company identified the cause of these quality issues and began testing certain remedial solutions to repair the affected SkyWatch Towers. Testing of the remedial solution for certain of the product variations affected was also completed during the quarter ended June 30, 2017. Subsequent to the aforementioned identification and testing, customers who purchased the product configurations for which a remedial solution has been identified and tested were notified of their options to request modifications to their fielded units. While there still remains uncertainty related to estimating the costs associated with a potential remedy and number of units which may require such remedy, the Company currently estimates the range of potential loss to be between $6.9 million and $14.6 million. As no single amount within the range is a better estimate than any other amount within the range, the Company has recorded a liability of $6.9 million as of December 31, 2017. Factors underlying this estimated range of loss may change from time to time, and actual results may vary significantly from this estimate.
Other Matters The Company is also subject to other legal and administrative proceedings, investigations, claims and litigation arising in the ordinary course of business not specifically identified above. In these identified matters and others not specifically identified, the Company records a liability with respect to a matter when management believes it is both probable that a liability has been incurred and the Company can reasonably estimate the amount of the loss. The Company believes it has recorded adequate provisions for any probable and estimable losses for matters in existence on the date hereof. The Company reviews these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. While the outcome of each of these matters is currently not determinable, the Company does not expect that the ultimate resolution of any such matter will individually have a material adverse effect on the Company’s financial position, results of operations or cash flows. The costs to resolve all such matters may in the aggregate have a material adverse effect on the Company’s financial position, results of operations or cash flows. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes New tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), was enacted on December 22, 2017. The Tax Act made broad and complex changes to the United States tax code including, but not limited to, reducing the United States federal corporate tax rate and requiring a one-time transition tax on undistributed earnings of foreign subsidiaries. FASB Accounting Standards Codification 740, "Accounting for Income Taxes," requires companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions is for tax years beginning after December 31, 2017, or in the case of certain other provisions, January 1, 2018. Given the significance of the legislation, the SEC staff issued Staff Accounting Bulletin No. 118, which allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared or analyzed. In connection with the Company's initial analysis of the impact of the Tax Act, the Company recorded a discrete net tax expense of $94.4 million for the period ended December 31, 2017. This amount consists of a net expense of $66.5 million for the transition tax and a net expense of $12.8 million for the remeasurement of the Company's net deferred tax assets using the reduced United States tax rate. In addition, we also recorded a discrete net tax expense of $15.1 million for state income and foreign taxes estimated to be due upon distribution of approximately $1.0 billion of previously undistributed foreign earnings no longer permanently reinvested as of December 31, 2017. For the items above, the Company was able to make reasonable estimates of the impact of the Tax Act and has recorded provisional amounts. These estimates may be impacted by the need for further analysis and future clarification and guidance regarding available tax accounting methods and elections, earnings and profits computations, foreign tax credit calculations, and state tax conformity to federal tax changes. Other significant provisions that are not yet effective but may impact income taxes in future years include: an exemption from U.S. tax on dividends of future foreign earnings, limitation on the current deductibility of net interest expense in excess of 30 percent of adjusted taxable income, a limitation of net operating losses generated after fiscal year 2018 to 80 percent of taxable income, an incremental tax (base erosion anti-abuse tax or "BEAT") on excessive amounts paid to foreign related parties, and a minimum tax on certain foreign earnings in excess of 10 percent of the foreign subsidiaries tangible assets (i.e., global intangible low-taxed income or "GILTI"). The Company is still evaluating whether to make a policy election to treat the GILTI tax as a period expense or to provide U.S. deferred taxes on foreign temporary differences that are expected to generate GILTI income when they reverse in future years.
Pre-tax earnings by significant geographical locations are as follows (in thousands):
The provisions for income taxes are as follows (in thousands):
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events and basis differences that have been recognized in the Company’s financial statements and tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amount and the tax basis of assets and liabilities using the enacted tax rates in effect in the years in which the differences are expected to reverse. Net deferred tax assets (liabilities) were classified on the balance sheet as follows (in thousands):
The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and deferred tax liabilities were as follows (in thousands):
The provision for income taxes differs from the amount of tax determined by applying the applicable United States statutory federal income tax rate to pretax income as a result of the following differences:
The Company's effective tax rate in 2017 is higher than the United States federal tax rate of 35 percent mainly due to the Company's estimate of the impact of the Tax Act. Unrecognized tax benefits for intercompany pricing increased in various jurisdictions in 2017, but this was partially offset by excess tax benefits for stock compensation and the mix of lower foreign tax rates. The foreign tax rate differential in 2016 is mainly due to the impact of amortization and lower statutory rates. The European Union state aid recovery in 2016 relates to the European Commission’s decision regarding the three-year agreement in Belgium, discussed below. The Company's foreign tax rate differential in 2015 is primarily the result of a three-year agreement in Belgium, which expired on July 31, 2015, as well as the impact of lower statutory rates.
At December 31, 2017, the Company had United States tax net operating loss carry-forwards totaling approximately $3.9 million which expire between 2019 and 2031 and are subject to annual limitation under Section 382 of the Internal Revenue Code. In addition, the Company has various state net operating loss carry-forwards totaling approximately $0.9 million which expire between 2023 and 2036. Finally, the Company has various foreign net operating loss carry-forwards totaling approximately $111.1 million, a portion of which expire between 2018 and 2036, and a portion of which have an indefinite carry-forward period. The tax benefits described above are accounted for using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of the assets and liabilities. To the extent that management assesses the realization of such assets to not be more likely than not, a valuation allowance is required to be recorded. As of December 31, 2017, the Company has determined that a valuation allowance against its deferred tax assets of $3.4 million is required, primarily related to certain foreign deductions carried forward and acquired net operating losses. A review of all available positive and negative evidence is considered, including past and future performance, the market environment in which the Company operates, utilization of tax attributes in the past, length of carry-back and carry-forward periods, and evaluation of potential tax planning strategies, when evaluating the realizability of deferred tax assets. The Company believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets. The following table summarizes the activity related to unrecognized tax benefits, including amounts accrued for potential interest and penalties (in thousands):
The unrecognized tax benefits at December 31, 2017 relate to the United States, Belgium, United Kingdom and various other foreign jurisdictions, all of which would affect the Company’s effective tax rate if recognized. On January 11, 2016, the European Commission announced a decision concluding that certain rules under Belgian tax legislation are deemed to be incompatible with European Union regulations on state aid. As a result of this decision, the European Commission has directed the Belgian Government to recover past taxes from certain entities, reflective of disallowed state aid, which impacts one of the Company’s international subsidiaries. The Belgian Government announced they have appealed this decision and filed action for an annulment in the General Court of the European Union, and in July 2016 the Company filed a separate appeal with the General Court of the European Union. In accordance with FASB ASC Topic 740, “Income Taxes,” the Company recorded discrete tax expense of $39.6 million during 2016 related to this matter and on January 10, 2017, received tax assessments from the Belgium government for a similar amount, which the Company has classified as current taxes payable on the Consolidated Balance Sheet as of December 31, 2017. The Company has filed a complaint against the Belgian tax assessments, and the result of this complaint, the appeal with the General Court of the European Union, new information received from the Belgian Government, or other future events may cause the income tax provision associated with the decision to be entirely or partially reversed. The Company classifies interest and penalties related to unrecognized tax benefits in the income tax provision. As of December 31, 2017, the Company had $7.0 million of accrued interest and penalties related to unrecognized tax benefits that are recorded as current and non-current accrued income taxes on the Consolidated Balance Sheet.
The Company files United States federal, state and foreign income tax returns in jurisdictions with varying statutes of limitations. The Company currently has the following tax years open to examination by major taxing jurisdictions:
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Stock-based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation | Stock-based Compensation Stock Incentive Plans The Company has a stock-based compensation program that provides equity incentives for employees, consultants and directors. This program includes non-statutory stock options and nonvested stock awards (referred to as restricted stock unit awards) granted under two plans: the FLIR Systems, Inc. 2002 Stock Incentive Plan (the “2002 Plan”) and the FLIR Systems, Inc. 2011 Stock Incentive Plan (the “2011 Plan”). The Company has discontinued issuing awards out of the 2002 Plan but previously granted awards under the 2002 Plan remain outstanding. The Company has granted time-based options, time-based restricted stock unit awards, market-based restricted stock unit awards and performance-based restricted stock unit awards. Options generally expire ten years from the grant date. Time-based options and restricted stock unit awards generally vest over a three year period. Market-based restricted stock unit awards may be earned based upon the Company's total shareholder return compared to the total shareholder return of the component company at the 60th percentile level in the S&P 500 Index over a three year period. Performance-based restricted stock unit awards granted during the year ended December 31, 2016 may be earned based upon the Company's return on invested capital over a three year period. Performance-based restricted stock unit awards granted during the year ended December 31, 2017 may be earned based upon the Company's operating margin performance over a three year period. Certain shares vested under the performance-based restricted stock unit awards and the market-based restricted stock unit awards must be held by the participant for a period of one year from the vest date. Shares issued as a result of stock option exercises and the distribution of vested restricted stock units are new shares. The Company also has stock options issued as replacement awards in connection with the acquisition of ICx Technologies in 2010. Information with respect to stock option activity for 2017 is as follows:
Information with respect to restricted stock unit activity for 2017 is as follows:
As of December 31, 2017, there were 9,222,000 shares of common stock reserved for future issuance under the stock incentive plans. Employee Stock Purchase Plan The Company has an Employee Stock Purchase Plan (the “ESPP”) which allows employees to purchase shares of the Company’s common stock at 85 percent of the fair market value at the lower of either the date of enrollment or the purchase date. The ESPP provides for six-month offerings commencing on May 1 and November 1 of each year with purchases on April 30 and October 31 of each year. Shares purchased under the ESPP must be held by employees for a period of at least 18 months after the date of purchase. The Company reserved 5,000,000 shares of common stock for issuance under the ESPP. There were 158,000 shares issued at the average purchase price of $27.49 during 2017 and 2,978,000 shares remained available under the ESPP at December 31, 2017 for future issuance. Shares issued for ESPP purchases are new shares. |
Other Employee Benefit Plans |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Employee Benefit Plan | Other Employee Benefit Plans Employee 401(k) Plans The Company has a 401(k) Savings and Retirement Plan (the “Plan”) to provide for voluntary salary deferral contributions on a pre-tax basis for employees within the United States in accordance with Section 401(k) of the Internal Revenue Code of 1986, as amended. The Plan allows for contributions by the Company. The Company made and expensed matching contributions of $8.9 million, $8.1 million and $7.5 million during the years ended December 31, 2017, 2016 and 2015, respectively. Pension Plans The Company previously offered most of the employees outside the United States participation in a defined benefit pension plan that has been curtailed. In addition, the Company previously provided a Supplemental Executive Retirement Plan (the “SERP”) for certain officers of the Company based in the United States. As of December 31, 2017, the last remaining SERP participant retired. Consequently, during the year ended December 31, 2017, the Company recorded an actuarial gain of approximately $1.7 million, primarily associated with the change in projected benefit obligation associated with the adjusted date of expected retirement and related actuarial compensation estimates for the final SERP participant. The Company has recorded changes to the minimum pension liability to accumulated other comprehensive earnings (loss) and the estimated benefit to be paid in 2018 has been reported in other current liabilities. The remaining obligations are recorded in pension and other long-term liabilities. The measurement date used for the pension plans is December 31.
Pension Plans - (Continued) Amounts recognized in other comprehensive income (loss) during the years ended December 31, 2017, 2016 and 2015, net of tax, are as follows (in thousands):
Components of accumulated other comprehensive loss related to the Company’s pension plans as of December 31, 2017 and 2016 are as follows (in thousands):
A summary of the components of the net periodic pension expense for the benefit obligation and fund assets of the plans is as follows (in thousands):
Pension Plans - (Continued) The weighted average assumptions used are as follows:
As a result of the change in the SERP's projected benefit payouts and estimated duration, the Company changed the discount rate determined. As of December 31, 2017, the discount rate is determined using a yield curve and applying the individual spot rates from appropriate maturities to each of the future expected benefit payouts by year to better match the plan's duration. We then discounted back to the measurement date to determine the appropriate single level equivalent discount rate. In prior years, the discount rates used were based upon publicly listed bond indices with durations estimated to be consistent with the respective projected benefit obligations. This change did not have a material impact on the financial statements. Further, as there were no active participants left in the plan as of December 31, 2017, there was no rate of increase for compensation levels included in the December 31, 2017 projected benefit obligation. For the defined benefit pension plan outside the United States, the discount rate is determined by reference to market yields at the end of the reporting period on high quality corporate bonds with similar maturities matching the duration of the projected benefit obligation. A pension liability of $0.8 million and $2.6 million as of December 31, 2017 and 2016, respectively, has been recognized for the pension plans representing the excess of the unfunded accumulated benefit obligation over the accrued pension costs. Benefits expected to be paid under the plans are approximately (in thousands):
Components of net periodic benefit cost are as follows (in thousands):
Pension Plans - (Continued) Components of net periodic benefit cost expected to be recognized from amounts in accumulated other comprehensive earnings (loss) during the year ending December 31, 2018 are as follows (in thousands):
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Operating Segments and Related Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Segments and Related Information | Operating Segments and Related Information Operating Segments The Company has six reportable operating segments as follows: Surveillance The Surveillance segment develops and manufactures enhanced imaging and recognition solutions for a wide variety of military, law enforcement, public safety, and other government customers around the world for the protection of borders, troops, and public welfare. Offerings include airborne, land, maritime, and man-portable multi-spectrum imaging systems, radars, lasers, imaging components, integrated multi-sensor system platforms, and services related to these systems. Instruments The Instruments segment develops and manufactures devices that image, measure, and assess thermal energy, gases, and other environmental elements for industrial, commercial, and scientific applications. Products include thermal imaging cameras, gas detection cameras, firefighting cameras, process automation cameras, and environmental test and measurement devices. Security The Security segment develops and manufactures cameras and video recording systems for use in commercial, critical infrastructure, and home security applications. Products include thermal and visible-spectrum cameras, digital and networked video recorders, and related software and accessories that enable the efficient and effective safeguarding of assets at all hours of the day and through adverse weather conditions. OEM & Emerging Markets The OEM & Emerging Markets segment develops and manufactures thermal and visible-spectrum imaging camera cores and components that are utilized by third parties to create thermal, industrial, and other types of imaging systems. The segment also develops and manufactures intelligent traffic monitoring and signal control systems as well as thermal imaging solutions for use by consumers in the smartphone and mobile devices markets. Maritime The Maritime segment develops and manufactures electronics and imaging instruments for the recreational and commercial maritime market. The segment provides a full suite of networked electronic systems including multi-function helm displays, navigational instruments, autopilots, radars, sonar systems, thermal and visible imaging systems, and communications equipment for boats of all sizes. Detection The Detection segment develops and manufactures sensor instruments and integrated platform solutions for the detection, identification, and suppression of chemical, biological, radiological, nuclear, and explosives threats for military force protection, homeland security, and commercial applications.
Operating Segments - (Continued) The Company’s chief operating decision maker ("CODM"), its Chief Executive Officer, evaluates each of its segment’s performance and allocates resources based on revenue and segment operating income. Intersegment revenues are recorded at cost and are eliminated in consolidation. The Company and each of its segments employ consistent accounting policies. The following tables present revenue, operating income, and assets for the six segments. Operating income as reviewed by the CODM is revenue less cost of goods sold and operating expense, excluding general corporate expenses, acquisition related costs, executive transition costs, amortization of purchased intangible assets, amortization of acquisition-related inventory step-up, costs associated with the SkyWatch product remediation, restructuring charges, and the loss on net assets held for sale. Accounts receivable and inventories for operating segments are regularly reviewed by management and are reported below as segment assets. As of and for the years ended December 31, 2017 and 2016, all remaining assets, liabilities, capital expenditures and depreciation were managed on a Company-wide basis. Operating segment information is as follows (in thousands):
Operating Segments - (Continued) A reconciliation of the Company's consolidated segment operating income to consolidated earnings before income taxes is as follows (in thousands):
Unallocated corporate expenses include general corporate expenses, acquisition related costs and executive transition costs.
Revenue and Long-Lived Assets by Geographic Area Information related to revenue by significant geographical location, determined by the end customer, is as follows (in thousands):
Long-lived assets are comprised of net property and equipment, net identifiable intangible assets, goodwill and other long-term assets. Long-lived assets by significant geographic locations are as follows (in thousands):
Major Customers Revenue derived from major customers is as follows (in thousands):
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Business Acquisitions |
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Business Acquisition | Business Acquisitions and Divestitures DVTEL Inc. During 2015, the Company acquired 100% of the outstanding stock of DVTEL Inc. ("DVTEL"), a provider of software and hardware technologies for advanced video surveillance, for approximately $97.5 million in cash. During 2016, the Company finalized the purchase price allocation which had no change to the previously recorded allocation of $27.4 million to identified intangible assets. These amounts have been recorded within the Company's Security segment. The allocation of the purchase price for DVETEL is as follows (in thousands):
The Company made an election under Section 338 of the Internal Revenue Code of 1986, as amended, which resulted in tax-deductible goodwill related to the acquisition of DVTEL. The Company estimates that the tax-deductible goodwill and intangibles resulting from the election will be approximately $24.8 million, to be amortized for United States tax purposes over a 15-year period. The value of tax-deductible goodwill and intangibles differs from the amounts listed in the purchase price allocation above as the impact of the elections made under Section 338 only affects United States income taxes for the goodwill and intangibles that are owned by the Company's United States subsidiaries. In connection with the allocation of purchase price to the assets acquired and liabilities assumed, the Company identified certain intangible assets. The following table presents the acquired intangible assets, their estimated fair values, and estimated useful lives (in thousands, except years):
Acquisition-date identifiable intangible assets primarily consist of intangibles derived from developed technology, customer relationships, and in-process research and development. Developed technology represents completed software related to internal and external software platforms. In-process research and development represents the value assigned to acquired research and development projects that, as of the acquisition date, had not established technological feasibility and had no alternative future use. The in-process research and development intangible assets are capitalized and accounted for as indefinite-lived intangible assets and are subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project and launch of the product, we will make a separate determination of useful life of the in-process research and development intangible assets and the related amortization will be recorded as an expense over the estimated useful life of the specific projects. An average 10-year useful life for customer relationships has been estimated based on the projected economic benefits associated with this asset. The average 10-year estimated useful life represents the approximate point in the projection period in which a majority of the asset’s cash flows are expected to be realized based on assumed attrition rates. The developed technology, customer relationships, and in-process research and development were valued using the multi-period excess earnings method. Innovative Security Designs, LLC During 2016, the Company acquired the assets of Innovative Security Designs, LLC ("ISD"), a developer of embedded firmware and advanced camera surveillance platforms, for approximately $1.8 million in cash, which resulted in an allocation of $1.6 million to goodwill. These amounts have been recorded in the Company’s Security segment. Armasight, Inc. During 2016, the Company acquired 100% of the outstanding stock of Armasight, Inc. ("Armasight"), a developer of sporting and military optics products, for approximately $43.5 million in cash. The allocation of the purchase price for Armasight is as follows (in thousands):
The $33.0 million of goodwill represents future economic benefits expected to arise from synergies from combining operations and the ability of Armasight to provide the Company domain knowledge and distribution channels in adjacent markets. In connection with the allocation of purchase price to the assets acquired and liabilities assumed, the Company identified certain intangible assets. The following table presents the acquired intangible assets, their estimated fair values, and estimated useful lives (in thousands, except years):
Acquisition-date identifiable intangible assets primarily consist of intangibles derived from customer relationships, trade names and trademarks, and trade secrets. Customer relationships represents Armasight's ability to consistently offer compelling products that appeal to consumer preferences which is the critical factor impacting the decisions of retailers to carry Armasight products. The trade name represents the value of the Armasight name within the outdoor and tactical weapons sight industry. The trade secrets represent the knowledge that is institutionalized within the employees and former shareholders of Armasight and their relationships with key suppliers. Customer relationships were valued using the income approach and the lost income and multi-period excess earnings method. The trade name and trade secrets were valued using the income approach and the relief from royalty method. Point Grey Research, Inc. During 2016, the Company completed a transaction to acquire the assets of Point Grey Research Inc. (“Point Grey”), a global leader in the development of advanced visible imaging cameras and solutions that are used in industrial automation systems, medical diagnostic equipment, people counting systems, intelligent traffic systems, military and defense products, and advanced mapping systems, for approximately $259.2 million in cash. During 2017, the Company finalized the purchase price allocation which had no change to the previously recorded allocation of $39.8 million to identifiable intangible assets and $183.7 million to goodwill. These amounts have been recorded in the Company’s OEM & Emerging Markets segment. The allocation of the purchase price for Point Grey is as follows (in thousands):
The allocation of the purchase price related to this acquisition is based on management’s judgments after evaluating several factors, including valuation assessments of tangible and intangible assets, and estimates of the fair value of liabilities assumed. The goodwill of $183.7 million represents future economic benefits expected to arise from synergies from combining operations and the ability of Point Grey to provide the Company domain knowledge and distribution channels in adjacent markets.
In connection with the allocation of purchase price to the assets acquired and liabilities assumed, the Company identified certain intangible assets. The following table presents the acquired intangible assets, their estimated fair values, and estimated useful lives (in thousands, except years):
Acquisition-date identifiable intangible assets primarily consist of intangibles derived from developed technology, customer relationships, backlog, and non-competition agreements. Developed technology represents the economic advantage of having certain technologies in place that lowers manufacturing and operating costs and drives higher margins. Customer relationships represents the relationships Point Grey has established in the OEM and people counting markets as of the date of the acquisition. Backlog represents “pre-sold” business at the date of acquisition, which provides positive earning streams post acquisition that exceed what is required to provide a return on the other assets employed. Non-competition agreements represent the economic benefit of having agreements with certain current and former employees and shareholders of Point Grey that restrict their ability to compete directly with the Company. The developed technology was valued using the income approach and relief from royalty method. Customer relationships and backlog were valued using the income approach and multi-period excess earnings method. Non-competition agreements were valued using the income approach and the with-and-without method. Prox Dynamics, AS During 2016, the Company acquired 100% of the outstanding stock of Prox Dynamics AS. (“Prox Dynamics”), a leading developer and manufacturer of nano-class UAS for military and para-military intelligence, surveillance, and reconnaissance applications, for approximately $134.4 million in cash, which resulted in the allocation of $11.3 million to net tangible asset and the excess purchase price of approximately $123.1 million to other long-term assets. During 2017, the Company finalized the purchase price allocation, which has been recorded in the Company’s Surveillance business segment. The allocation of the purchase price for Prox Dynamics is as follows (in thousands):
The goodwill of $96.4 million million represents future economic benefits expected to arise from synergies from combining operations the ability of Prox Dynamics to provide the Company domain knowledge and distribution channels in adjacent markets.
In connection with the allocation of purchase price to the assets acquired and liabilities assumed, the Company identified certain intangible assets. The following table presents the acquired intangible assets, their estimated fair values, and estimated useful lives (in thousands, except years):
Acquisition-date identifiable intangible assets primarily consist of intangibles derived from developed technology, customer relationships, patents, and trade name. Developed technology and patents represent the economic advantage of having certain technologies in place that lower manufacturing and operating costs and drive higher margins. Customer relationships represents the relationships Prox Dynamics has established in the military and defense ministries of countries throughout the world. Trade name represents the "Black Hornet" name, which is well recognized within the industry and is known as a leading product within the nano-class UAS segment. The developed technology and customer relationships were valued using the income approach and multi-period excess earnings method. Patents and trade name were valued using the income approach and relief from royalty method. The acquisitions of DVTEL, ISD, Armasight, Point Grey, and Prox Dynamics are not significant as defined in Regulation S-X under the Securities Exchange Act of 1934, nor are they significant compared to the Company's overall results of operations. Consequently, no pro forma financial information is provided. Planned Divestiture of the Consumer and Small and Medium-Sized Security Business During the fourth quarter of 2017, the Company committed to a plan to sell the Consumer and Small and Medium-sized ("SMB") Security business that has a carrying amount of $51.3 million as of December 31, 2017. In the fourth quarter of 2017, all the held for sale criteria were met and all the assets and liabilities of the disposal group were classified as held for sale on the Consolidated Balance Sheets accordingly. The Company estimates the fair value of the disposal group to be $28.8 million. The costs to sell the disposal group, including legal fees, brokers commissions and other closing costs are estimated to be approximately $1.1 million. Consequently, the Company recorded a pre-tax loss on net assets held for sale of $23.6 million as of December 31, 2017 representing the excess of the $51.3 million carrying value over the $27.7 million estimated fair value less costs to sell. The estimated loss on sale has been recorded as loss on net assets held for sale on the Consolidated Statements of Income. This anticipated disposal does not qualify as discontinued operations and therefore, is included in the Company’s continuing operations for all periods presented. The carrying amounts of the major classes of assets and liabilities held for sale included the following (in thousands):
We ceased recording depreciation and amortization on property, plant and equipment and identified intangibles assets, respectively, as of the date the assets triggered held for sale accounting. There were no assets or liabilities classified as held for sale as of December 31, 2016. On February 6, 2018, the Company completed the sale of this business. See Note 21, "Subsequent Events", for further discussion. |
Shareholders' Equity |
12 Months Ended |
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Dec. 31, 2017 | |
Equity [Abstract] | |
Shareholders' Equity | Shareholders’ Equity On February 5, 2015, the Company's Board of Directors authorized the repurchase of up to 15.0 million shares of common stock in the open market or through privately negotiated transactions. This authorization expired on February 5, 2017. On February 8, 2017, the Company’s Board of Directors authorized the repurchase of up to 15.0 million shares of common stock in the open market or through privately negotiated transactions. This authorization expires on February 8, 2019. During the year ended December 31, 2017, the company did not repurchase any shares. During the year ended December 31, 2017, the Company paid dividends quarterly at the rate of $0.15 per share for a total of $82.6 million. During the year ended December 31, 2016, the Company paid dividends quarterly at the rate of $0.12 per share for a total of $65.9 million. During the year ended December 31, 2015, the Company paid dividends quarterly at the rate of $0.11 per share for a total of $61.4 million. |
Restructuring Costs |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Costs | Restructuring Costs During the years ended December 31, 2017, 2016 and 2015, the Company recorded net pre-tax restructuring expenses totaling $0.6 million, $1.4 million and $1.4 million, respectively. In 2013, the Company initiated a realignment plan that included closing six not-to-scale sites in the United States and Europe and a transfer of those operations to the Company's larger facilities ("the 2013 Realignment Program"). The Company also consolidated its optics and laser manufacturing businesses to better realize the benefits of vertical integration in these areas. The Company recorded the restructuring expenses associated with the 2013 Realignment Program in the segments as follows (in thousands):
During the year ended December 31, 2017 and 2016, the Company also incurred other immaterial restructuring charges representing severance costs associated with cost reduction initiatives executed within the Security segment that were not related to the 2013 Realignment Program. Restructuring expenses associated with the 2013 Realignment Program were recorded in the Consolidated Statements of Income as follows (in thousands):
The following table summarizes the restructuring activity associated with the 2013 Realignment Program by cost type (in thousands):
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Subsequent Events |
12 Months Ended |
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Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On January 5, 2018, the Company entered into a definitive agreement to sell the Security segment's Consumer and SMB business. The transaction closed on February 6, 2018 for total cash consideration of approximately $29.0 million. See Note 18, "Business Acquisitions and Divestitures," for additional information. On February 8, 2018, the Company’s Board of Directors declared a quarterly dividend of $0.16 per share on its common stock, payable on March 9, 2018, to shareholders of record as of the close of business on February 23, 2018. The total cash payment of this dividend will be approximately $22.2 million. |
Quarterly Financial Data (Unaudited) |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Data (Unaudited) |
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The sum of the quarterly earnings per share does not always equal the annual earnings per share as a result of the computation of quarterly versus annual average shares outstanding. |
Nature of Business and Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principals of consolidation | Principles of consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions were eliminated. |
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Reclassification | Reclassification The Company made certain reclassifications to the prior years' financial statements to conform them to the presentation as of and for the year ended December 31, 2017. These reclassifications had no effect on consolidated financial position, net earnings, shareholders' equity, or net cash flows for any of the periods presented. |
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Foreign currency translation | Foreign currency translation The assets and liabilities of the Company’s subsidiaries outside the United States are translated into United States dollars at current exchange rates in effect at the balance sheet date. Revenues and expenses are translated at monthly average exchange rates. Resulting translation adjustments are reflected in accumulated other comprehensive earnings (loss) within shareholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in currencies other than the functional currency are reflected as other (income) expense, net, in the Consolidated Statements of Income as incurred. The cumulative translation adjustment included in accumulated other comprehensive earnings (loss) is a loss of $113.0 million and $164.6 million at December 31, 2017 and 2016, respectively. Transaction gains and losses included in other (income) expense, net, are net losses of $0.2 million, $2.2 million, and $2.5 million for the years ended December 31, 2017, 2016 and 2015, |
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Revenue recognition | Revenue recognition Revenue is recognized when persuasive evidence of an arrangement exists, upon delivery of the product to the customer at a fixed or determinable price with a reasonable assurance of collection, passage of title and risk of loss to the customer as indicated by the contractual terms and fulfillment of all significant obligations.
Revenue recognition - (Continued) The Company designs, markets and sells products primarily as commercial, off-the-shelf products. Certain customers request different system configurations, based on standard options or accessories that the Company offers. In general, revenue arrangements do not involve acceptance provisions based upon customer specified acceptance criteria. In those limited circumstances when customer specified acceptance criteria exist, revenue is deferred until customer acceptance if the Company cannot demonstrate the system meets those specifications prior to shipment. For any contracts with multiple elements (i.e., training, installation, additional parts, etc.) the Company allocates revenue among the deliverables primarily based upon objective and reliable evidence of fair value of each element in the arrangement. If objective and reliable evidence of fair value of any element is not available, the Company uses an estimated selling price for purposes of allocating the total arrangement consideration among the elements. Credit is not extended to customers and revenue is not recognized until the Company has determined that collectability is reasonably assured. The Company’s products are sold with warranty provisions that require it to remedy deficiencies in quality or performance of the Company’s products over a specified period of time, generally twelve to twenty-four months, at no cost to its customers. Warranty liabilities are established at the time that revenue is recognized at levels that represent the Company’s estimate of the costs that will be incurred to fulfill those warranty requirements. Provisions for estimated losses on sales or related receivables are recorded when identified. Revenue includes certain shipping and handling costs and is stated net of representative commissions and sales taxes. Service revenue is deferred and recognized over the contract period, as is the case for extended warranty contracts, or recognized as services are provided. |
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Cost of goods sold | Cost of goods sold Cost of goods sold includes materials, labor and overhead costs incurred in the manufacturing of products and services sold in the period as well as warranty costs. Material costs include raw materials, purchased components and sub-assemblies, outside processing and inbound freight costs. Labor and overhead costs consist of direct and indirect manufacturing costs, including wages and fringe benefits, operating supplies, depreciation, occupancy costs, and purchasing, receiving and inspection costs. |
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Research and development | Research and development Expenditures for research and development activities are expensed as incurred. |
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Cash equivalents | Cash equivalents and restricted cash The Company considers short-term investments that are highly liquid, readily convertible into cash and have maturities of less than three months when purchased to be cash equivalents. Cash equivalents at December 31, 2017 and 2016 were $140.7 million and $8.3 million, respectively, which were primarily investments in money market funds and overnight deposits. Restricted cash includes cash that is subject to a legal or contractual restriction by a third party and restricted as to withdrawal or use, including restrictions that require the funds to be used for a specified purpose and restrictions that limit the purpose for which the funds can be used. The Company did not have any restricted cash balances at December 31, 2017 and 2016, respectively. |
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Accounts receivable and allowance for doubtful accounts | Accounts receivable and allowance for doubtful accounts Accounts receivable are stated at the amounts the Company expects to collect. Credit limits are established through a process of reviewing the financial history and stability of each customer. The Company regularly evaluates the collectability of its trade receivables balances based on a combination of factors. If it is determined that a customer will be unable to fully meet its financial obligation, the Company records a specific allowance to reduce the related receivable to the amount expected to be recovered. In addition, the Company also records an allowance for all other customers based on certain other factors including the length of time the receivables are past due and historical collection experience with individual customers. |
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Inventories | Inventories Inventories are stated at the lower of cost or market and include materials, labor, and manufacturing overhead. Cost is determined based on a currently adjusted standard cost basis that approximates actual manufacturing cost on a first-in, first-out basis.
Inventories - (Continued) Inventory write-downs are recorded when conditions exist to indicate that inventories are likely to be in excess of anticipated demand or are obsolete based upon the Company’s assumptions about future demand for its products and market conditions. The Company regularly evaluates its ability to realize the value of inventories based on a combination of factors including the following: historical usage rates, forecasted sales or usage, product end of life dates, estimated current and future market values and new product introductions. When recorded, write-downs reduce the carrying value of the Company’s inventories to their net realizable value and create a new cost-basis in the inventories. Write-downs are reflected in cost of goods sold in the Consolidated Statements of Income. |
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Demonstration Units | Demonstration units The Company’s products which are being used as demonstration units are stated at the lower of cost or market and are included in prepaid expenses and other current assets in the Consolidated Balance Sheets. Demonstration units are available for sale and the Company periodically evaluates them as to marketability and realizable values. The carrying value of demonstration units was $37.6 million and $36.9 million at December 31, 2017 and 2016, respectively. |
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Property and equipment | Property and equipment Property and equipment are stated at cost and are depreciated using a straight-line methodology over their estimated useful lives. Repairs and maintenance are charged to expense as incurred. |
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Goodwill | Goodwill Goodwill is reviewed during the third quarter of each year, or more frequently if warranted, for impairment to determine if events or changes in business conditions indicate that the carrying value may not be recoverable. The Company did not recognize any impairment charges on goodwill during the years ended December 31, 2017, 2016 and 2015. See Note 7, "Goodwill," for additional information. |
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Intangible assets | Intangible assets Intangible assets are amortized using a straight-line methodology over their estimated useful lives. Intangible assets with indefinite useful lives are evaluated annually for impairment, or more frequently if required. The Company did not recognize any impairment charges on intangible assets with indefinite lives during the years ended December 31, 2017, 2016 and 2015. |
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Impairment of long-lived assets | Impairment of long-lived assets Long-lived asset groups are reviewed for impairment when circumstances indicate that the carrying amounts may not be recoverable. Impairment exists when the carrying value is greater than the expected undiscounted future cash flows expected to be provided by the asset group. If impairment exists, the asset group is written down to its fair value. The Company did not recognize any impairment charges on long-lived assets during the years ended December 31, 2017, 2016 and 2015. |
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Advertising costs | Advertising costs Advertising costs, which are included in selling, general and administrative expenses, are expensed as incurred. Advertising costs for the years ended December 31, 2017, 2016 and 2015 were $19.2 million, $19.3 million and $18.7 million, respectively. |
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Cost-basis investments | Cost-basis investments The Company has private company investments, which consist of investments for which the Company does not have the ability to exercise significant influence, and are accounted for under the cost method. The investments are carried at cost and adjusted only when the Company believes that events have occurred that are likely to have a significant other-than-temporary adverse effect on the estimated fair value of the investments. If no such events have occurred, the fair value of the investments is not calculated as it is not required. The carrying value of those investments were $3.1 million and $3.2 million at December 31, 2017 and 2016, respectively. The investments are included in other assets in the Consolidated Balance Sheets. |
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Contingencies | Contingencies The Company is subject to the possibility of loss contingencies arising in the normal course of business. An estimated loss is accrued when the Company determines that it is probable that an asset has been impaired or a liability has been incurred and the amount can be reasonably estimated. The Company regularly evaluates current available information to determine whether such accruals and disclosures should be adjusted. |
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Earnings per share | Earnings per share Basic earnings per share is based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the weighted shares outstanding are increased to include additional shares from the assumed exercise of stock options, if dilutive, and the assumed issuance of shares upon vesting of restricted stock awards. |
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Stock-based compensation | Stock-based compensation The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards and shares expected to be issued under the Company's employee stock purchase plan. Nonvested stock awards (referred to as restricted stock unit awards) are valued based on the fair market value of the Company's stock, discounted for expected dividends, on the date of grant. Restricted stock units containing performance-based vesting criteria are valued on the date of grant based on the fair value of the Company's stock, discounted for expected dividends and an estimate for illiquidity. The fair value of market-based restricted stock units is determined on the date of grant using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation and a discount for illiquidity. The estimated discount for illiquidity is relevant for share based awards that require the plan participant to hold the shares for a specified period of time after the award vests and is estimated using the protective put method. The Company recognizes the compensation expense for all stock-based compensation awards on a straight-line basis over the requisite service period of each award.
Stock-based compensation - (Continued) The following table sets forth the stock-based compensation expense recognized in the Consolidated Statements of Income for the years ended December 31, 2017, 2016 and 2015 (in thousands):
Stock-based compensation expense capitalized in the Consolidated Balance Sheets as of December 31, 2017, 2016 and 2015 is as follows (in thousands):
As of December 31, 2017, the Company had approximately $42.0 million of total unrecognized stock-based compensation costs, net of estimated forfeitures, to be recognized over a weighted average period of 2.09 years. The fair value of the stock-based awards granted in the years ended December 31, 2017, 2016 and 2015 was estimated with the following weighted-average assumptions:
Stock-based compensation - (Continued) The Company uses the United States Treasury (constant maturity) interest rate on the date of grant as the risk-free interest rate and uses historical volatility as the expected volatility. The Company’s determination of expected term is based on an analysis of historical and expected exercise patterns. In 2017, 2016 and 2015, all stock options granted were time-based options. The Company uses an estimated forfeiture rate of 5 percent of the stock-compensation expense of non-executive employees based on an analysis of historical and expected forfeitures. During the years ended December 31, 2017, 2016 and 2015, the Company granted approximately 773,000, 865,000 and 804,000 time-vested restricted stock units, respectively. The fair value of time-vested restricted stock units is fixed and determined on the date of grant based upon the Company's stock price on the date of grant. The weighted average fair values of the time-vested restricted stock units granted during the years ended December 31, 2017, 2016 and 2015 were $36.20, $29.48 and $26.30 per share, respectively. During the year ended December 31, 2016 and 2015, the Company granted approximately 64,000 and 128,000 market-based restricted stock units, respectively. These units may be earned based upon the Company's total shareholder return compared to the total shareholder return over a three year period of the component company at the 60th percentile level in the S&P 500 Index. Shares vested under the market-based restricted stock unit awards must be held by the participant for a period of one year from the vest date. The fair value of the market-based restricted stock units granted during the year ended December 31, 2016 and 2015 was $22.89 and $25.55 per share, respectively. During the years ended December 31, 2017 and 2016, the Company granted approximately 283,000 and 62,000 performance-based restricted stock units, respectively. These units are earned based upon the Company's return on invested capital over a three year period. The fair value of the performance-based restricted units granted during the years ended December 31, 2017 and 2016 was $35.08 and $26.41 per share, respectively. The total fair value of the restricted stock unit awards granted during the year ended December 31, 2017 in the table below of $37.9 million includes $9.9 million of grant date fair value associated with the performance-based restricted stock units. The total fair value of the restricted stock unit awards granted during the year ended December 31, 2016 in the table below of $28.6 million includes $1.5 million of grant date fair value associated with the market-based restricted stock units and $1.6 million of grant date fair value associated with the performance-based restricted stock units. The weighted-average fair value of stock-based compensation awards granted and vested, and the intrinsic value of options exercised during the period were (in thousands, except per share amounts):
The total amount of cash received from the exercise of stock options in the years ended December 31, 2017, 2016 and 2015 was $53.5 million, $7.7 million and $20.8 million, respectively, and the related tax benefits realized from the exercise of the stock options in the years ended December 31, 2017, 2016 and 2015 was $3.0 million, $1.3 million and $3.9 million, respectively. |
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Concentration of risk | Concentration of risk Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of accounts receivable. Concentration of credit risk with respect to accounts receivable is limited because a relatively large number of geographically diverse customers make up the Company’s customer base, thus diversifying the trade credit risk. The Company controls credit risk through credit approvals, credit limits and monitoring procedures. The Company performs credit evaluations for all new customers and requires letters of credit, bank guarantees and advanced payments, if deemed necessary. A substantial portion of the Company’s revenue is derived from sales to United States and foreign government agencies (see Note 17, "Operating Segments and Related Information"). The Company also purchases certain key components from sole or limited source suppliers. The Company maintains cash deposits with major banks that from time to time may exceed federally insured limits. The Company periodically assesses the financial condition of the institutions and instruments in which it invests and adjusts its investment balances to mitigate the risk of principal loss. |
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Use of estimates | Use of estimates The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates and judgments made by management of the Company include matters such as collectability of accounts receivable, realizability of inventories, recoverability of deferred tax assets, impairment tests of goodwill, intangible assets and other long-lived assets, recognition and measurement of loss contingencies and adequacy of warranty accruals. Actual results could differ from those estimates. The Company believes that the estimates used are reasonable. |
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Accumulated other comprehensive earnings | Accumulated other comprehensive earnings (loss) Accumulated other comprehensive earnings (loss) includes cumulative translation adjustments, fair value adjustments on interest rate swap contracts, unrealized gains and losses on available-for-sale securities and changes in minimum liability for pension plans. Foreign currency translation adjustments included in comprehensive income were not tax affected as investments in international affiliates are deemed to be indefinite in duration. The following table sets forth the changes in the balances of each component of accumulated other comprehensive earnings (loss) for the year ended December 31, 2017:
The amounts reclassified from accumulated other comprehensive earnings (loss) for interest rate swap contracts have been recorded to interest expense in the Company's Consolidated Statement of Income for the year ended December 31, 2017. |
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Product warranties | The Company generally provides a twelve to twenty-four month warranty on its products. A provision for the estimated future costs of warranty, based upon historical cost and product performance experience, is recorded when revenue is recognized. |
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Segment reporting | The Company’s chief operating decision maker ("CODM"), its Chief Executive Officer, evaluates each of its segment’s performance and allocates resources based on revenue and segment operating income. Intersegment revenues are recorded at cost and are eliminated in consolidation. The Company and each of its segments employ consistent accounting policies. The following tables present revenue, operating income, and assets for the six segments. Operating income as reviewed by the CODM is revenue less cost of goods sold and operating expense, excluding general corporate expenses, acquisition related costs, executive transition costs, amortization of purchased intangible assets, amortization of acquisition-related inventory step-up, costs associated with the SkyWatch product remediation, restructuring charges, and the loss on net assets held for sale. Accounts receivable and inventories for operating segments are regularly reviewed by management and are reported below as segment assets. As of and for the years ended December 31, 2017 and 2016, all remaining assets, liabilities, capital expenditures and depreciation were managed on a Company-wide basis. |
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Recent accounting pronouncements | Recent accounting pronouncements Effective January 1, 2017, the Company adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"). The standard update simplifies several aspects of the accounting for employee share-based payment transactions, including accounting for income taxes, forfeitures, and statutory withholding requirements, as well as classification in the Consolidated Statements of Cash Flows. As a result of the adoption, on a prospective basis, the Company recognized $4.5 million of excess tax benefits from stock-based compensation as a discrete item in income tax provision for the year ended December 31, 2017. Historically, this amount was recorded as additional paid-in capital. Upon adoption, the Company elected to apply the change retrospectively to the Consolidated Statement of Cash Flows which resulted in a reclassification of excess tax benefits from stock-based compensation of $1.5 million and $8.2 million from cash flows from financing activities to cash flows from operating activities for the year ended December 31, 2016 and 2015, respectively. Additionally, $6.0 million and $9.4 million paid in cash to satisfy withholding requirements for net settlement of restricted stock unit shares vested and stock options exercised has been reclassified from cash flows from operating activities to cash flows from financing activities to conform to the presentation required by the new standard in the Consolidated Statement of Cash Flows for the year ended December 31, 2016 and 2015, respectively. ASU 2016-09 also requires excess tax benefits and deficiencies to be excluded from the assumed future proceeds in the calculation of diluted shares. This change resulted in an increase in diluted weighted average shares outstanding of 492,000 shares for the year ended December 31, 2017. The Company elected not to change its policy on accounting for forfeitures and will continue to estimate a requisite forfeiture rate. Additional amendments to the accounting for income taxes and minimum statutory withholding requirements had no impact on the Company's results of operations. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09" or "Topic 606"), which establishes new guidance under which companies will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also provides for additional disclosure requirements. Subsequently, the FASB has issued several amendments to the new standard to clarify the implementation. ASU 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017 and may be applied retrospectively or on a modified retrospective transition basis. The Company currently intends to adopt ASU 2016-09 on January 1, 2018 using the modified retrospective approach. The Company has substantially completed its review of the accounting systems and processes required from adopting the new standard, including the application of the modified retrospective method for adoption. Additionally, the Company has completed the assessment phase and documentation of new policies and evaluation of it internal controls framework and is currently in the process of gathering data for the new disclosure requirements. The Company does not expect a significant change in its control environment due to the adoption of the new standard. Upon adoption, the Company does not expect a material impact to the opening balance sheet as of January 1, 2018 related to the modified retrospective effect. Although the impact of the new standard will greatly increase the amount of required disclosures the Company expects revenue recognition for the broad portfolio of its products and services offerings to remain largely unchanged. However, the guidance is expected to change the timing of revenue recognition in certain area, including accounting for complex and highly customized systems integrations when there is no alternative use for assets produced and termination for convenience clauses entitle the Company to receive cost plus a reasonable margin in the event of early termination. Such contracts represent a minor subset of the Company's total portfolio, however, such arrangements may represent a significant amount of revenue in a given period. Such contracts and other aspects of the new standard expected to impact the Company are described in further detail below: •Integration, engineering services and highly customized products: Topic 606 requires revenue recognition when (or as) the Company satisfies a performance obligation by transferring control of a promised good or service to a customer. If the Company's performance does not create an asset with an alternative use and termination for convenience clauses provide an enforceable right to payment for performance completed to date (including fees representing a reasonable profit), revenue would be recognized over time as the performance obligation is satisfied, rather than the point in time when final delivery or acceptance occurs. Though not expected to impact the vast majority of the Company's contracts with customers, over-time revenue recognition may be required on certain contracts which would have been recognized at a point in time under current standards.
Recent accounting pronouncements - (Continued) •Contract acquisition costs: Topic 606 requires the deferral and amortization of "incremental" costs incurred to obtain a contract. The primary contract acquisition cost for the Company are sales commissions. While the majority of the Company's sales commissions are not earned upon contract acquisition, all commissions are currently expensed when earned. The change required by Topic 606 may result in the creation of an asset on the opening balance sheet at January 1, 2018. The impact is not expected to be material as the Company has limited agreements providing for commissions earned upon contract acquisition and also because it intends to elect the practical expedient to omit recognition of contract acquisition assets if the amortization period of the asset that otherwise would be recognized is one year or less. •Variable consideration: Some of the Company's contracts with customers include notification or acceptance provisions that preclude revenue recognition because of the requirement for amounts to be fixed or determinable under the current standards. Topic 606 requires the Company to estimate and account for variable consideration using either the probability-weighted expected amount or the most likely amount and estimate the transaction price to recognize when or as control is transferred to the customer. Though not applicable to the vast majority of the Company's contracts, revenue for certain customer contracts may be recognized earlier than it would be under current standards as transaction prices are estimated upon transfer of control rather than at the point when the price is considered fixed or determinable. •Allocation of transaction price: Similar to current standards, Topic 606 requires an allocation of arrangement consideration between deliverables within a transaction. Current GAAP restricts the allocation of revenue that is contingent on future deliverables to current deliverables, however Topic 606 removes this restriction. Though expected to be rare, this change could result in the Company recognizing a portion of a contract earlier during the performance period, even if payment is contingent upon future deliverables. The Company will continue to assess the impact of the adoption as it completes its processes and internal controls necessary to gather information required for the new disclosures beginning in the first quarter ending March 31, 2018. As discussed above, the adoption of the new standard is not expected to have a material impact on the opening balance sheet as of January 1, 2018. However, this expectation is based on many variables, which are subject to change. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The amendments in this update require the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a twelve month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. ASU 2016-02 requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented in the consolidated financial statements. ASU 2016-09 is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted, and the Company currently intends to adopt ASU 2016-02 on January 1, 2019. The Company is assessing the impact ASU 2016-02 will have on its consolidated financial statements and expects that the primary impact upon adoption will be the recognition, on a discounted basis, of its minimum commitments under noncancelable operating leases on its consolidated balance sheets resulting in the recording of right of use assets and lease obligations. The Company's current minimum commitments under noncancelable operating leases are disclosed in Note 12. In October 2016, the FASB issued Accounting Standards Update No. 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory” ("ASU 2016-16"). The amendments in this update eliminate the exception of recognizing, at the time of transfer, current and deferred income taxes for intra-entity asset transfers other than inventory. ASU 2016-16 is effective for interim and annual reporting periods beginning after December 15, 2017 and should be applied on a modified retrospective transition basis. The Company is currently planning to adopt ASU 2016-16 on January 1, 2018. As of December 31, 2017, the Company has a remaining deferred tax benefit of $7.0 million recorded in prepaid expenses and other current assets, which represents the tax benefit that was deferred in accordance with the current GAAP. Upon adoption, the Company will recognize this amount through a cumulative-effect adjustment to retained earnings.
Recent accounting pronouncements - (Continued) In November 2016, the FASB issued Accounting Standards Update No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" ("ASU 2016-18"). This update clarifies guidance on the classification and presentation of restricted cash in the statement of cash flows. The amendment requires restricted cash be included in an entity's cash and cash-equivalent balances in the statement of cash flows and also requires an entity to disclose information about the nature of the restrictions. Further, a reconciliation between the statement of financial position and the statement of cash flows must be disclosed when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash, and restricted cash equivalents. ASU 2016-18 should be applied on a retrospective basis and is effective for interim and annual reporting periods beginning after December 15, 2017. The Company currently intends to adopt ASU 2016-18 on January 1, 2018, and does not expect the adoption to have a material impact on its consolidated financial statements. In January 2017, the FASB issued Accounting Standards Update No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business" ("ASU 2017-01"). The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for interim and annual reporting periods beginning after December 15, 2017. The Company currently intends to adopt ASU 2017-01 on January 1, 2018, and does not expect the adoption to have a material impact on its consolidated financial statements. In January 2017, the FASB issued Accounting Standards Updated No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). The amendments in this update simplify the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual, or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments in ASU 2017-04 are to be applied on a prospective basis and are not expected to have a material impact on the Company's consolidated financial statements. |
Nature of Business and Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of the numerator and denominator utilized in the computation of basic and diluted earnings per share | The following table sets forth the reconciliation of the numerator and denominator utilized in the computation of basic and diluted earnings per share (in thousands):
The effect of stock-based compensation awards for the years ended December 31, 2017, 2016 and 2015 that aggregated 39,000, 233,000 and 354,000 shares, respectively, have been excluded for purposes of diluted earnings per share since the effect of their inclusion would have been anti-dilutive. |
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Supplemental cash flow disclosure | Supplemental cash flow disclosure (in thousands)
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Stock-based compensation expense and related tax benefit recognized in the Consolidated Statements of Income and capitalized in the Consolidated Balance Sheets | The following table sets forth the stock-based compensation expense recognized in the Consolidated Statements of Income for the years ended December 31, 2017, 2016 and 2015 (in thousands):
Stock-based compensation expense capitalized in the Consolidated Balance Sheets as of December 31, 2017, 2016 and 2015 is as follows (in thousands):
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Fair value of the stock-based awards granted weighted-average assumptions | The fair value of the stock-based awards granted in the years ended December 31, 2017, 2016 and 2015 was estimated with the following weighted-average assumptions:
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Fair value of the stock-based awards granted and vested, and intrinsic value of options exercised | The weighted-average fair value of stock-based compensation awards granted and vested, and the intrinsic value of options exercised during the period were (in thousands, except per share amounts):
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Changes in the balances of each component of accumulated other comprehensive earnings (loss) | The following table sets forth the changes in the balances of each component of accumulated other comprehensive earnings (loss) for the year ended December 31, 2017:
Components of accumulated other comprehensive loss related to the Company’s pension plans as of December 31, 2017 and 2016 are as follows (in thousands):
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Derivative Financial Instruments (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notional amounts of outstanding foreign currency forward contracts by currency | Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent the Company's total exposure to foreign currency gains or losses. The table below presents the net notional amounts of the Company’s outstanding foreign currency forward contracts by currency at December 31, 2017 and 2016 (in thousands):
The carrying amount of the foreign exchange contracts included in the Consolidated Balance Sheets are as follows (in thousands):
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Accounts Receivable (Tables) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for doubtful accounts and the activity | The following table summarizes the Company’s allowance for doubtful accounts and the activity for 2017, 2016 and 2015 (in thousands):
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Inventories (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories consist of the following (in thousands):
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Property and Equipment (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment | Property and equipment are summarized as follows (in thousands):
Depreciation expense for the years ended December 31, 2017, 2016 and 2015 was $42.3 million, $37.8 million and $32.5 million, respectively. |
Goodwill (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying value of goodwill by reporting segment and the activity | The carrying value of goodwill and the activity for the two year period ending December 31, 2017 are as follows (in thousands):
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Intangible Assets Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets | Intangible assets are summarized as follows (in thousands):
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Estimated future aggregate amortization expense | For intangible assets recorded at December 31, 2017, the estimated future aggregate amortization expense for the years ending December 31, 2018 through 2022 is approximately (in thousands):
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Accrued Product Warranties (Tables) |
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Summary of Warranty Liability and Activity | The following table summarizes the Company’s warranty liability and activity for 2017, 2016 and 2015 (in thousands):
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Long-Term Debt Long-Term Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt | Long-term debt consists of the following (in thousands):
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Commitments (Tables) |
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Future Minimum Obligations | The future minimum obligations under all non-cancelable leases and other contractual obligations are as follows (in thousands):
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Income Taxes (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pre-tax earnings by significant geographical locations | Pre-tax earnings by significant geographical locations are as follows (in thousands):
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Provisions for income taxes | The provisions for income taxes are as follows (in thousands):
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Deferred tax assets (liabilities) | Net deferred tax assets (liabilities) were classified on the balance sheet as follows (in thousands):
The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and deferred tax liabilities were as follows (in thousands):
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Effective income tax rate reconciliation | The provision for income taxes differs from the amount of tax determined by applying the applicable United States statutory federal income tax rate to pretax income as a result of the following differences:
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Activity related to unrecognized tax benefits, including amounts accrued for potential interest and penalties | The following table summarizes the activity related to unrecognized tax benefits, including amounts accrued for potential interest and penalties (in thousands):
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Tax years open to examination by major taxing jurisdictions | The Company currently has the following tax years open to examination by major taxing jurisdictions:
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Stock-based Compensation (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information with Respect to Stock Option Activity | Information with respect to stock option activity for 2017 is as follows:
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Information with Respect to Restricted Stock Unit Activity | Information with respect to restricted stock unit activity for 2017 is as follows:
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Other Employee Benefit Plans (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amounts recognized in other comprehensive earnings | Amounts recognized in other comprehensive income (loss) during the years ended December 31, 2017, 2016 and 2015, net of tax, are as follows (in thousands):
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Components of accumulated other comprehensive earnings (loss) related to the Company’s pension plans | The following table sets forth the changes in the balances of each component of accumulated other comprehensive earnings (loss) for the year ended December 31, 2017:
Components of accumulated other comprehensive loss related to the Company’s pension plans as of December 31, 2017 and 2016 are as follows (in thousands):
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Schedule of Accumulated Benefit Obligations in Excess of Fair Value of Plan Assets | A summary of the components of the net periodic pension expense for the benefit obligation and fund assets of the plans is as follows (in thousands):
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Weighted average assumptions used | The weighted average assumptions used are as follows:
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Benefits expected to be paid under the plans | Benefits expected to be paid under the plans are approximately (in thousands):
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Components of net periodic benefit cost | Components of net periodic benefit cost are as follows (in thousands):
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Components of net periodic benefit cost expected to be recognized from amounts in accumulated other comprehensive earnings (loss) | Components of net periodic benefit cost expected to be recognized from amounts in accumulated other comprehensive earnings (loss) during the year ending December 31, 2018 are as follows (in thousands):
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Operating Segments and Related Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Segment Information | Operating segment information is as follows (in thousands):
Operating Segments - (Continued) A reconciliation of the Company's consolidated segment operating income to consolidated earnings before income taxes is as follows (in thousands):
Unallocated corporate expenses include general corporate expenses, acquisition related costs and executive transition costs. |
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Segment Assets |
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By Significant Geographical Location | Revenue and Long-Lived Assets by Geographic Area Information related to revenue by significant geographical location, determined by the end customer, is as follows (in thousands):
Long-lived assets are comprised of net property and equipment, net identifiable intangible assets, goodwill and other long-term assets. Long-lived assets by significant geographic locations are as follows (in thousands):
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Revenue Derived from Major Customers | Major Customers Revenue derived from major customers is as follows (in thousands):
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Business Acquisitions and Divestitures (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] | Planned Divestiture of the Consumer and Small and Medium-Sized Security Business During the fourth quarter of 2017, the Company committed to a plan to sell the Consumer and Small and Medium-sized ("SMB") Security business that has a carrying amount of $51.3 million as of December 31, 2017. In the fourth quarter of 2017, all the held for sale criteria were met and all the assets and liabilities of the disposal group were classified as held for sale on the Consolidated Balance Sheets accordingly. The Company estimates the fair value of the disposal group to be $28.8 million. The costs to sell the disposal group, including legal fees, brokers commissions and other closing costs are estimated to be approximately $1.1 million. Consequently, the Company recorded a pre-tax loss on net assets held for sale of $23.6 million as of December 31, 2017 representing the excess of the $51.3 million carrying value over the $27.7 million estimated fair value less costs to sell. The estimated loss on sale has been recorded as loss on net assets held for sale on the Consolidated Statements of Income. This anticipated disposal does not qualify as discontinued operations and therefore, is included in the Company’s continuing operations for all periods presented. The carrying amounts of the major classes of assets and liabilities held for sale included the following (in thousands):
We ceased recording depreciation and amortization on property, plant and equipment and identified intangibles assets, respectively, as of the date the assets triggered held for sale accounting. There were no assets or liabilities classified as held for sale as of December 31, 2016. On February 6, 2018, the Company completed the sale of this business. See Note 21, "Subsequent Events", for further discussion. |
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Disposal Groups, Including Discontinued Operations [Table Text Block] | The carrying amounts of the major classes of assets and liabilities held for sale included the following (in thousands):
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Armasight, Inc. [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | The allocation of the purchase price for Armasight is as follows (in thousands):
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Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block] | The following table presents the acquired intangible assets, their estimated fair values, and estimated useful lives (in thousands, except years):
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DVTEL [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | These amounts have been recorded within the Company's Security segment. The allocation of the purchase price for DVETEL is as follows (in thousands):
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Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block] | The following table presents the acquired intangible assets, their estimated fair values, and estimated useful lives (in thousands, except years):
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Point Grey Research, Inc. [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | The allocation of the purchase price for Point Grey is as follows (in thousands):
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Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block] | The following table presents the acquired intangible assets, their estimated fair values, and estimated useful lives (in thousands, except years):
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Prox Dynamics, AS [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | The allocation of the purchase price for Prox Dynamics is as follows (in thousands):
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Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block] | The following table presents the acquired intangible assets, their estimated fair values, and estimated useful lives (in thousands, except years):
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Held-for-sale [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposal Groups, Including Discontinued Operations [Table Text Block] | The carrying amounts of the major classes of assets and liabilities held for sale included the following (in thousands):
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Restructuring Costs (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Costs [Table Text Block] | The Company recorded the restructuring expenses associated with the 2013 Realignment Program in the segments as follows (in thousands):
During the year ended December 31, 2017 and 2016, the Company also incurred other immaterial restructuring charges representing severance costs associated with cost reduction initiatives executed within the Security segment that were not related to the 2013 Realignment Program. Restructuring expenses associated with the 2013 Realignment Program were recorded in the Consolidated Statements of Income as follows (in thousands):
The following table summarizes the restructuring activity associated with the 2013 Realignment Program by cost type (in thousands):
|
Nature of Business and Significant Accounting Policies (Details) - USD ($) shares in Thousands, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Numerator for earnings per share: | |||
Net earnings for basic and diluted earnings per share | $ 107,223 | $ 166,626 | $ 241,686 |
Denominator for earnings per share: | |||
Weighted average number of common shares outstanding | 137,456 | 137,138 | 139,353 |
Assumed exercise of stock options and vesting of restricted stock awards, net of shares assumed reacquired under the treasury stock method | 2,190 | 1,359 | 1,421 |
Diluted shares outstanding | 139,646 | 138,497 | 140,774 |
Nature of Business and Significant Accounting Policies (Details 2) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Cash paid for: | |||
Interest | $ 15,394 | $ 15,815 | $ 13,039 |
Taxes | $ 72,340 | $ 32,465 | $ 68,534 |
Nature of Business and Significant Accounting Policies (Details 3) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||
Stock-based compensation expense | $ 31,018 | $ 27,797 | $ 25,748 |
Cost of goods sold | |||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||
Stock-based compensation expense | 2,665 | 3,103 | 3,001 |
Research and development | |||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||
Stock-based compensation expense | 5,068 | 4,815 | 4,694 |
Selling General and Administrative Expense | |||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||
Stock-based compensation expense | $ 23,285 | $ 19,879 | $ 18,053 |
Nature of Business and Significant Accounting Policies (Details 4) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Share-based Compensation, Allocation and Classification in Financial Statements [Abstract] | |||
Capitalized in inventory | $ 1,062 | $ 567 | $ 691 |
Fair Value of Financial Instruments (Details) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents at fair value | $ 140.7 | $ 8.3 |
Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value of senior unsecured notes | $ 427.5 |
Derivative Financial Instruments (Details 2) - Foreign exchange contracts - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Other Current Assets | ||
Derivatives [Line Items] | ||
Carrying amount of derivative asset | $ 1,760 | $ 2,369 |
Other Current Liabilities | ||
Derivatives [Line Items] | ||
Carrying amount of derivative liability | $ 579 | $ 75 |
Derivative Financial Instruments (Details 3) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Derivative [Line Items] | ||
Notional Amount | $ 152,984 | $ 262,065 |
Derivative Financial Instruments (Details 4) - USD ($) $ in Millions |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2017 |
May 31, 2016 |
|
Derivative [Line Items] | |||||
Net gain (loss) | $ (9.4) | $ (7.9) | $ (1.2) | ||
Long-term Line of Credit | $ 86.3 | $ 105.0 | |||
Interest Income, Other | $ 0.5 |
Accounts Receivable (Details) - Allowance for Doubtful Accounts [Member] - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Allowance for Doubtful Accounts Receivable [Roll Forward] | |||
Allowance for doubtful accounts, beginning of year | $ 6,457 | $ 6,853 | $ 8,014 |
Charges to costs and expenses | 2,303 | 1,460 | 807 |
Write-offs of uncollectible accounts, net of recoveries | (1,505) | (1,661) | (1,568) |
Currency translation adjustments | 375 | (195) | (400) |
Allowance for doubtful accounts, end of year | $ 7,630 | $ 6,457 | $ 6,853 |
Inventories (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw material and subassemblies | $ 210,615 | $ 200,640 |
Work-in-progress | 47,400 | 43,430 |
Finished goods | 114,168 | 127,301 |
Total inventories | $ 372,183 | $ 371,371 |
Property and Equipment (Details Textual) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Property, Plant and Equipment [Abstract] | |||
Depreciation | $ 42.3 | $ 37.8 | $ 32.5 |
Goodwill (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Goodwill [Roll Forward] | ||
Beginning Balance | $ 801,406 | $ 596,316 |
Goodwill, Acquired During Period | 96,431 | 220,795 |
Goodwill, Translation Adjustments | 25,064 | (15,705) |
Goodwill, Written off Related to Sale of Business Unit | (13,090) | |
Ending Balance | $ 909,811 | $ 801,406 |
Intangible Assets Intangible (Details textual ) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
Nov. 30, 2016 |
---|---|---|---|
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | $ 123,100 | ||
Disposal Group, Including Discontinued Operation, Assets, Current | $ 67,344 | $ 0 | |
Prox Dynamics, AS [Member] | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | $ 31,400 |
Accrued Product Warranties (Details) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017
USD ($)
months
|
Dec. 31, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
|
Movement in Standard Product Warranty Accrual [Roll Forward] | |||
Accrued product warranties, beginning of year | $ 20,845 | $ 16,514 | $ 16,175 |
Amounts paid for warranty services | (16,764) | (19,592) | (12,821) |
Warranty provisions for products sold | 14,422 | 22,928 | 13,074 |
Business acquisitions and disposals | 0 | 1,215 | 395 |
Currency translation adjustments and other | (451) | (220) | (309) |
Accrued product warranties, end of year | 18,052 | 20,845 | 16,514 |
Current accrued product warranties, end of year | 15,024 | 17,476 | 13,406 |
Long-term accrued product warranties, end of ear | $ 3,028 | $ 3,369 | $ 3,108 |
Minimum | |||
Product Warranty Liability [Line Items] | |||
Product warranty term | months | 12 | ||
Maximum | |||
Product Warranty Liability [Line Items] | |||
Product warranty term | months | 24 |
Commitments (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Commitments and Contingencies Disclosure [Abstract] | |||
Total net rent expense | $ 13,900 | $ 9,000 | $ 12,200 |
Net Operating Leases | |||
2017 | 9,862 | ||
2018 | 6,660 | ||
2019 | 5,082 | ||
2020 | 4,275 | ||
2021 | 2,906 | ||
Thereafter | 2,097 | ||
Total minimum payments | 30,882 | ||
Other Contractual Obligations | |||
2017 | 766 | ||
2018 | 0 | ||
2019 | 0 | ||
2020 | 0 | ||
2021 | 0 | ||
Thereafter | 0 | ||
Total minimum payments | $ 766 |
Contingencies (Details) - USD ($) $ in Millions |
Oct. 27, 2010 |
Dec. 31, 2017 |
---|---|---|
Loss Contingencies [Line Items] | ||
Litigation settlement payment | $ 3.0 | |
Loss contingency accrual | $ 6.9 | |
Minimum | ||
Loss Contingencies [Line Items] | ||
Loss contingency, estimate of possible loss | 6.9 | |
Maximum | ||
Loss Contingencies [Line Items] | ||
Loss contingency, estimate of possible loss | $ 14.6 |
Income Taxes (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Earnings from Continuing Operations before Income Taxes [Abstract] | |||
United States | $ 143,924 | $ 124,500 | $ 146,940 |
Foreign | 135,141 | 151,457 | 158,506 |
Earnings before income taxes | 279,065 | 275,957 | 305,446 |
Current tax expense (benefit): | |||
Federal | 112,673 | 36,771 | 35,029 |
State | 5,035 | 5,785 | 6,074 |
Foreign | 19,689 | 64,109 | 19,884 |
Current income tax expense (benefit) | 137,397 | 106,665 | 60,987 |
Deferred tax expense (benefit): | |||
Federal | 34,857 | 1,404 | 10,752 |
State | 473 | 267 | 1,052 |
Foreign | (885) | 995 | (9,031) |
Deferred income taxes | 25,968 | 5,613 | 2,863 |
Deferred Income Tax Expense (Benefit), Excluding Discontinued Operations | 34,445 | 2,666 | 2,773 |
Total provision | $ 171,842 | $ 109,331 | $ 63,760 |
Income Taxes (Details 3) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Income Tax Disclosure [Abstract] | |||
Statutory federal tax rate | 35.00% | 35.00% | 35.00% |
Foreign rate differential | (10.70%) | (11.30%) | (7.80%) |
Foreign, federal and state income tax credits | (2.00%) | (1.20%) | (2.10%) |
State taxes | 1.80% | 2.30% | 2.40% |
Effective Income Tax Rate Reconciliation, Tax Settlement, Foreign, Percent | 0.10% | 14.40% | 0.00% |
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Percent | 0.00% | 0.00% | (6.40%) |
Effective Income Tax Rate Reconciliation,Other Reconciling Items, Percent | 5.10% | 0.00% | 0.00% |
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Percent | 23.80% | 0.00% | 0.00% |
Effective Income Tax Rate Reconciliation, Repatriation of Foreign Earnings, Percent | 5.40% | 0.00% | 0.00% |
Other | 3.10% | 0.40% | (0.20%) |
Effective tax rate | 61.60% | 39.60% | 20.90% |
Income Taxes (Details 4) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |||
Balance, beginning of year | $ 51,851 | $ 14,967 | $ 15,401 |
Increases related to current year tax positions | 17,264 | 40,840 | 1,446 |
Increases related to prior year tax positions | 5,781 | 1,066 | 299 |
Decreases related to prior year tax positions | (759) | (610) | (724) |
Lapse of statute of limitations | (1,260) | (4,070) | (1,455) |
Settlements | (986) | (342) | 0 |
Change due to Currency Translation | 5,384 | 0 | 0 |
Balance, end of year | 77,275 | $ 51,851 | $ 14,967 |
Accrued interest and penalties | $ 7,000 |
Stock-based Compensation (Details 3) |
12 Months Ended |
---|---|
Dec. 31, 2017
$ / shares
shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
ESPP, Weighted Average Purchase Price of Shares Purchased | $ / shares | $ 27.49 |
Employee Stock Purchase Plan (ESPP) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shares of common stock reserved for future issuance under all of the stock incentive plans | 2,978,000 |
Discount from fair market value of the stock | 85.00% |
Shares of common stock reserved for issuance under the ESPP | 5,000,000 |
Number of common stock shares issued | 158,000 |
Other Employee Benefit Plans (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Retirement Benefits [Abstract] | |||
401(k) matching contributions | $ 8.9 | $ 8.1 | $ 7.5 |
Pension liability | $ 0.8 | $ 2.6 |
Other Employee Benefit Plans (Details 2) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Defined Benefit Plan, Accumulated Other Comprehensive (Income) Loss, before Tax [Abstract] | |||
Net earnings (loss) | $ 1,286 | $ 78 | $ 500 |
Prior service cost | (15) | 24 | 161 |
Pension and Other Postretirement Benefit Plans, Accumulated Other Comprehensive Income (Loss), before Tax | 1,271 | 102 | $ 661 |
Pension and Other Postretirement Benefit Plans, Amounts that Will be Amortized from Accumulated Other Comprehensive Income (Loss) in Next Fiscal Year [Abstract] | |||
Net loss | (344) | (1,630) | |
Prior service cost | 0 | 15 | |
Total recognized in AOCI | $ (344) | $ (1,615) |
Other Employee Benefit Plans (Details 4) $ in Thousands |
Dec. 31, 2017
USD ($)
|
---|---|
Retirement Benefits [Abstract] | |
2018 | $ 6,262 |
2019 | 312 |
2020 | 306 |
2021 | 296 |
2022 | 280 |
Five years thereafter | 1,316 |
Total expected future benefit payments | $ 8,772 |
Other Employee Benefit Plans (Details 5) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Defined Benefit Plan, Net Periodic Benefit Cost (Credit) [Abstract] | |||
Service costs | $ 0 | $ 0 | $ 156 |
Interest costs | 386 | 397 | 353 |
Net amortization and deferral | 235 | 260 | 513 |
Net periodic pension costs | 621 | $ 657 | $ 1,022 |
Defined Benefit Plan, Expected Amortization, Next Fiscal Year [Abstract] | |||
Net loss | $ 52 |
Operating Segments and Related Information (Details) |
12 Months Ended |
---|---|
Dec. 31, 2017
segment
| |
Segment Reporting [Abstract] | |
Number of operating segments | 6 |
Operating Segments and Related Information (Details 4) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Segment Reporting, Revenue Reconciling Item [Line Items] | |||||||||||
Revenue | $ 494,784 | $ 464,712 | $ 434,124 | $ 406,814 | $ 474,738 | $ 405,228 | $ 402,729 | $ 379,472 | $ 1,800,434 | $ 1,662,167 | $ 1,557,067 |
United States | |||||||||||
Segment Reporting, Revenue Reconciling Item [Line Items] | |||||||||||
Revenue | 956,438 | 903,582 | 830,485 | ||||||||
Europe [Member] | |||||||||||
Segment Reporting, Revenue Reconciling Item [Line Items] | |||||||||||
Revenue | 375,474 | 338,805 | 338,886 | ||||||||
Asia [Member] | |||||||||||
Segment Reporting, Revenue Reconciling Item [Line Items] | |||||||||||
Revenue | 227,047 | 195,913 | 175,616 | ||||||||
Mid_East/Africa [Member] | |||||||||||
Segment Reporting, Revenue Reconciling Item [Line Items] | |||||||||||
Revenue | 127,796 | 130,890 | 125,848 | ||||||||
Canada/Latin_America [Member] | |||||||||||
Segment Reporting, Revenue Reconciling Item [Line Items] | |||||||||||
Revenue | $ 113,679 | $ 92,977 | $ 86,232 |
Operating Segments and Related Information (Details 5) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Long-lived assets | $ 1,401,806 | $ 1,409,806 |
United States | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Long-lived assets | 797,816 | 676,007 |
Europe [Member] | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Long-lived assets | 343,208 | 673,767 |
Other Geographic Region [Member] | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Long-lived assets | $ 260,782 | $ 60,032 |
Operating Segments and Related Information (Details 6) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Revenue, Major Customer [Line Items] | |||||||||||
Revenue | $ 494,784 | $ 464,712 | $ 434,124 | $ 406,814 | $ 474,738 | $ 405,228 | $ 402,729 | $ 379,472 | $ 1,800,434 | $ 1,662,167 | $ 1,557,067 |
United States government | |||||||||||
Revenue, Major Customer [Line Items] | |||||||||||
Revenue | $ 466,304 | $ 416,341 | $ 321,420 |
Business Acquisitions and Divestitures (Divestitures Textual) (Detail) - Held-for-sale [Member] - Consumer and Small and Medium-Sized Security Business [Member] $ in Millions |
3 Months Ended |
---|---|
Dec. 31, 2017
USD ($)
| |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Carrying amount of disposal group | $ 51.3 |
Fair value of disposal group | 28.8 |
Costs to sell disposal group | 1.1 |
Pre-tax loss on net asset held for sale | 23.6 |
Fair value less costs to sell | $ 27.7 |
Business Acquisitions and Divestitures Divestitures (Details 2) - Consumer and Small and Medium-Sized Security Business [Member] - Held-for-sale [Member] $ in Thousands |
3 Months Ended |
---|---|
Dec. 31, 2017
USD ($)
| |
Disposal Group, Including Discontinued Operation, Assets [Abstract] | |
Accounts receivable, net | $ 20,414 |
Inventories | 43,050 |
Other current assets | 1,031 |
Property and equipment, net | 4,888 |
Intangible assets, net | 8,359 |
Goodwill | 13,090 |
Loss on assets | (23,488) |
Assets held for sale, net | 67,344 |
Disposal Group, Including Discontinued Operation, Liabilities [Abstract] | |
Accounts payable and accrued expenses | 39,544 |
Liabilities held for sale | $ 39,544 |
Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Feb. 08, 2017 |
Feb. 05, 2015 |
|
Stockholders Equity Note [Line Items] | |||||
Common stock authorized to be repurchased, number of shares | 15,000,000.0 | 15,000,000.0 | |||
Common stock repurchased, value | $ 66,057 | $ 123,193 | |||
Common stock dividends, paid per share | $ 0.15 | $ 0.12 | $ 0.11 | ||
Common stock dividends, total cash paid | $ 82,605 | $ 65,920 | $ 61,399 | ||
Payments of Ordinary Dividends, Common Stock | 82,605 | $ 65,920 | $ 61,399 | ||
Common Stock and Additional Paid-in Capital | |||||
Stockholders Equity Note [Line Items] | |||||
Common stock repurchased, shares | 2,132,000 | 4,169,000 | |||
Common stock repurchased, value | $ 24,222 | $ 44,387 | |||
Retained Earnings | |||||
Stockholders Equity Note [Line Items] | |||||
Common stock repurchased, value | 41,835 | 78,806 | |||
Common stock dividends, total cash paid | $ 82,605 | $ 65,920 | $ 61,399 |
Restructuring Costs (Details 2) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Restructuring Cost and Reserve [Line Items] | |||
Restructuring expenses | $ 625 | $ 1,431 | $ 1,361 |
Total COGS and SGA | |||
Restructuring Cost and Reserve [Line Items] | |||
Restructuring expenses | $ 600 | $ 1,400 | $ 1,361 |
Subsequent Events (Details) - Subsequent Event [Member] - USD ($) $ / shares in Units, $ in Millions |
Mar. 09, 2018 |
Feb. 23, 2018 |
Feb. 08, 2018 |
Feb. 06, 2018 |
---|---|---|---|---|
Subsequent Event [Line Items] | ||||
Dividends Payable, Date Declared | Feb. 08, 2018 | |||
Quarterly dividend, value per share | $ 0.16 | |||
Quarterly dividend, date to be paid | Mar. 09, 2018 | |||
Quarterly dividend, date of record | Feb. 23, 2018 | |||
Quarterly dividend, amount declared | $ 22.2 | |||
Proceeds from Divestiture of Businesses | $ 29.0 |
Quarterly Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
||||||||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||||||||||||||||||
Restructuring expenses | $ 625 | $ 1,431 | $ 1,361 | |||||||||||||||||||||
Revenue | $ 494,784 | $ 464,712 | $ 434,124 | $ 406,814 | $ 474,738 | $ 405,228 | $ 402,729 | $ 379,472 | 1,800,434 | 1,662,167 | 1,557,067 | |||||||||||||
Gross profit | 237,832 | 222,891 | 206,732 | 191,321 | [1] | 214,733 | [2] | 191,376 | 183,322 | 177,690 | 858,776 | 767,121 | 753,561 | |||||||||||
Net earnings | $ (50,290) | [3] | $ 63,529 | [3] | $ 51,413 | [3] | $ 42,571 | [3] | $ 61,500 | [4] | $ 58,633 | $ 45,368 | $ 1,125 | $ 107,223 | $ 166,626 | $ 241,686 | ||||||||
Basic earnings per share: | ||||||||||||||||||||||||
Basic earnings per share (in dollars per share) | $ (0.36) | $ 0.46 | $ 0.38 | $ 0.31 | $ 0.45 | $ 0.43 | $ 0.33 | $ 0.01 | $ 0.78 | $ 1.22 | $ 1.73 | |||||||||||||
Diluted earnings per share: | ||||||||||||||||||||||||
Diluted earnings per share (in dollars per share) | $ (0.36) | $ 0.46 | $ 0.37 | $ 0.31 | $ 0.45 | $ 0.43 | $ 0.33 | $ 0.01 | $ 0.77 | $ 1.20 | $ 1.72 | |||||||||||||
|
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