QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |
Global Select Stock Market |
☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ||
Emerging growth company |
PART I. FINANCIAL INFORMATION | ||
Item 1. | Financial Statements | |
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II. OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
FLIR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (Unaudited) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||
Cost of goods sold | |||||||||||||||
Gross profit | |||||||||||||||
Operating expenses: | |||||||||||||||
Research and development | |||||||||||||||
Selling, general and administrative | |||||||||||||||
Restructuring expenses | |||||||||||||||
Total operating expenses | |||||||||||||||
Earnings from operations | |||||||||||||||
Interest expense | |||||||||||||||
Interest income | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Other expense (income), net | ( | ) | |||||||||||||
Earnings before income taxes | |||||||||||||||
Income tax provision | |||||||||||||||
Net earnings | $ | $ | $ | $ | |||||||||||
Net earnings per share: | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ | |||||||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | |||||||||||||||
Diluted |
FLIR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) (Unaudited) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net earnings | $ | $ | $ | $ | |||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Fair value adjustment on derivatives instruments designated as hedges (1) | ( | ) | ( | ) | |||||||||||
Unrealized gain on available-for-sale investments | |||||||||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | ( | ) | |||||||||
Total other comprehensive income (loss) | ( | ) | ( | ) | ( | ) | |||||||||
Comprehensive income | $ | $ | $ | $ |
FLIR SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except for par value) (Unaudited) | |||||||
June 30, | December 31, | ||||||
2020 | 2019 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Accounts receivable, net | |||||||
Inventories | |||||||
Prepaid expenses and other current assets | |||||||
Total current assets | |||||||
Property and equipment, net | |||||||
Deferred income taxes, net | |||||||
Goodwill | |||||||
Intangible assets, net | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | $ | |||||
Deferred revenue | |||||||
Accrued payroll and related liabilities | |||||||
Accrued product warranties | |||||||
Advance payments from customers | |||||||
Accrued expenses | |||||||
Accrued income taxes | |||||||
Other current liabilities | |||||||
Credit facility | |||||||
Long-term debt, current portion | |||||||
Total current liabilities | |||||||
Long-term debt, net of current portion | |||||||
Deferred income taxes | |||||||
Accrued income taxes | |||||||
Other long-term liabilities | |||||||
Shareholders’ equity: | |||||||
Preferred stock, $0.01 par value, 10,000 shares authorized; no shares issued at June 30, 2020, and December 31, 2019 | |||||||
Common stock, $0.01 par value, 500,000 shares authorized, 131,106 and 134,394 shares issued at June 30, 2020, and December 31, 2019, respectively, and additional paid-in capital | |||||||
Retained earnings | |||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Total shareholders’ equity | |||||||
Total liabilities and shareholders' equity | $ | $ |
Common Stock and Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Earnings (Loss) | Total Shareholders' Equity | |||||||||||||
Balance, December 31, 2019 | $ | $ | $ | ( | ) | $ | ||||||||||
Net earnings | ||||||||||||||||
Repurchase of common stock | ( | ) | ( | ) | ( | ) | ||||||||||
Common stock issued pursuant to stock-based compensation plans, net of shares withheld for taxes | ||||||||||||||||
Stock-based compensation | ||||||||||||||||
Dividends paid of $0.17 per share | ( | ) | ( | ) | ||||||||||||
Other comprehensive loss, net of taxes | ( | ) | ( | ) | ||||||||||||
Balance, March 31, 2020 | ( | ) | ||||||||||||||
Net earnings | ||||||||||||||||
Common stock issued pursuant to stock-based compensation plans, net of shares withheld for taxes | ( | ) | ( | ) | ||||||||||||
Stock-based compensation | ||||||||||||||||
Dividends paid of $0.17 per share | ( | ) | ( | ) | ||||||||||||
Other comprehensive loss, net of taxes | ( | ) | ( | ) | ||||||||||||
Balance, June 30, 2020 | $ | $ | $ | ( | ) | $ |
Common Stock and Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Earnings (Loss) | Total Shareholders' Equity | |||||||||||||
Balance, December 31, 2018 | $ | $ | $ | ( | ) | $ | ||||||||||
Adjustment of DTA under ASU 2016-16(1) | ||||||||||||||||
Net earnings | ||||||||||||||||
Repurchase of common stock | ( | ) | ( | ) | ( | ) | ||||||||||
Common stock issued pursuant to stock-based compensation plans, net of shares withheld for taxes | ||||||||||||||||
Stock-based compensation | ||||||||||||||||
Dividends paid of $0.17 per share | ( | ) | ( | ) | ||||||||||||
Other comprehensive loss, net of taxes | ( | ) | ( | ) | ||||||||||||
Balance, March 31, 2019 | ( | ) | ||||||||||||||
Net earnings | ||||||||||||||||
Repurchase of common stock | ( | ) | ( | ) | ( | ) | ||||||||||
Common stock issued pursuant to stock-based compensation plans, net of shares withheld for taxes | ( | ) | ( | ) | ||||||||||||
Stock-based compensation | ||||||||||||||||
Dividends paid of $0.17 per share | ( | ) | ( | ) | ||||||||||||
Other comprehensive income, net of taxes | ||||||||||||||||
Balance, June 30, 2019 | $ | $ | $ | ( | ) | $ |
FLIR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) | |||||||
Six Months Ended June 30, | |||||||
2020 | 2019 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net earnings | $ | $ | |||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Stock-based compensation | |||||||
Loss on disposal of assets | |||||||
Minority interest impairment charges | |||||||
Deferred income taxes | ( | ) | |||||
Other, net | ( | ) | |||||
Increase (decrease) in cash, net of acquisitions, resulting from changes in: | |||||||
Accounts receivable | ( | ) | |||||
Inventories | ( | ) | ( | ) | |||
Prepaid expenses and other current assets | ( | ) | |||||
Other assets | |||||||
Accounts payable | ( | ) | |||||
Deferred revenue | |||||||
Accrued payroll and other liabilities | ( | ) | ( | ) | |||
Accrued income taxes | ( | ) | |||||
Other long-term liabilities | ( | ) | ( | ) | |||
Net cash provided by operating activities | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Additions to property and equipment, net | ( | ) | ( | ) | |||
Proceeds from sale of assets | |||||||
Business acquisitions, net of cash acquired | ( | ) | |||||
Minority interest and other investments | ( | ) | |||||
Net cash used in investing activities | ( | ) | ( | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Net proceeds from credit facility and long-term debt, including current portion | |||||||
Repayment of credit facility and long-term debt | ( | ) | ( | ) | |||
Repurchase of common stock | ( | ) | ( | ) | |||
Dividends paid | ( | ) | ( | ) | |||
Proceeds from shares issued pursuant to stock-based compensation plans | |||||||
Tax paid for net share exercises and issuance of vested restricted stock units | ( | ) | ( | ) | |||
Other financing activities | ( | ) | |||||
Net cash (used in) provided by financing activities | ( | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | |||||
Net increase (decrease) in cash and cash equivalents | ( | ) | |||||
Cash and cash equivalents, beginning of year | |||||||
Cash and cash equivalents, end of period | $ | $ |
Note 1. | Basis of Presentation and Accounting Standards Updates |
Note 2. | Revenue |
Note 3. | Stock-based Compensation |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Cost of goods sold | $ | $ | $ | $ | |||||||||||
Research and development | |||||||||||||||
Selling, general and administrative | |||||||||||||||
Stock-based compensation expense before income taxes | $ | $ | $ | $ |
June 30, | |||||||
2020 | 2019 | ||||||
Capitalized in inventory | $ | $ |
Note 4. | Net Earnings Per Share |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Numerator for earnings per share: | |||||||||||||||
Net earnings for basic and diluted earnings per share | $ | $ | $ | $ | |||||||||||
Denominator for earnings per share: | |||||||||||||||
Weighted average number of common shares outstanding | |||||||||||||||
Assumed exercise of stock options and vesting of restricted stock awards, net of shares assumed reacquired under the treasury stock method | |||||||||||||||
Diluted shares outstanding |
Note 5. | Fair Value of Financial Instruments |
June 30, 2020 | December 31, 2019 | ||||||
Derivative instruments designated as cash flow hedges: | |||||||
Interest Rate Swap | $ | $ | |||||
Derivative instruments designated as fair value hedges: | |||||||
Currency Forward Contracts | |||||||
Derivative instruments not formally designated as hedges: | |||||||
Currency Forward Contracts | |||||||
June 30, | December 31, | |||||||||
Classification | 2020 | 2019 | ||||||||
Derivative instruments designated as cash flow hedges: | ||||||||||
Derivative instruments in asset positions: | ||||||||||
Interest Rate Swap | Prepaid expense and other current assets | $ | $ | |||||||
Derivative instruments in liability positions: | ||||||||||
Interest Rate Swap | Other current liabilities | |||||||||
Interest Rate Swap | Other long-term liabilities | |||||||||
Derivative instruments designated as fair value hedges: | ||||||||||
Derivative instruments in asset positions: | ||||||||||
Currency forward contracts | Prepaid expenses and other current assets | |||||||||
Currency forward contracts | Other assets | |||||||||
Derivative instruments in liability positions: | ||||||||||
Currency forward contracts | Other current liabilities | |||||||||
Currency forward contracts | Other long-term liabilities | |||||||||
Derivative instruments not formally designated as hedges: | ||||||||||
Derivative instruments in asset positions: | ||||||||||
Currency forward contracts | Prepaid expenses and other current assets | |||||||||
Derivative instruments in liability positions: | ||||||||||
Currency forward contracts | Other current liabilities |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
Classification | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
Derivative instruments designated as cash flow hedges: | ||||||||||||||||||
Loss recognized in other comprehensive (income) loss, net of tax | Accumulated other comprehensive loss | $ | $ | $ | $ | |||||||||||||
Loss reclassified from other comprehensive (income) loss to earnings for the effective portion | Interest expense | |||||||||||||||||
Derivative instruments designated as fair value hedges: | ||||||||||||||||||
Loss recognized in earnings for effective portion | Other expense (income), net | |||||||||||||||||
Gain recognized in income for amount excluded from effectiveness testing | Other expense (income), net | ( | ) | ( | ) | |||||||||||||
Loss (gain) recognized in other comprehensive (income) loss, net of tax | Accumulated other comprehensive loss (income) | ( | ) | |||||||||||||||
Derivative instruments not formally designated as hedges: | ||||||||||||||||||
Loss (gain) recognized in earnings | Other expense (income), net | ( | ) | ( | ) | ( | ) |
Note 7. | Accounts Receivable |
Note 8. | Inventories |
June 30, | December 31, | ||||||
2020 | 2019 | ||||||
Raw material and subassemblies | $ | $ | |||||
Work-in-progress | |||||||
Finished goods | |||||||
$ | $ |
Note 9. | Leases |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Operating lease expense | $ | $ | $ | $ | |||||||||||
Short-term lease expense | |||||||||||||||
Variable lease expense | |||||||||||||||
Total lease expense | $ | $ | $ | $ |
June 30, 2020 | December 31, 2019 | |||||
Operating lease right-of-use assets | $ | $ | ||||
Operating lease liabilities | $ | $ |
Note 11. | Goodwill |
Note 11. | Goodwill - (Continued) |
Industrial Technologies | Defense Technologies | Consolidated | ||||||||||
Balance, December 31, 2019 | $ | $ | $ | |||||||||
Goodwill from acquisitions | ( | ) | ( | ) | ||||||||
Currency translation adjustments | ( | ) | ( | ) | ( | ) | ||||||
Balance, June 30, 2020 | $ | $ | $ |
Note 13. | Debt |
June 30, | December 31, | ||||||
2020 | 2019 | ||||||
Unsecured notes | $ | $ | |||||
Credit Agreement (term loans) | |||||||
Credit Agreement (revolving credit facility) | |||||||
Unamortized discounts and issuance costs | ( | ) | ( | ) | |||
Total debt | $ | $ | |||||
Less: Credit facility | |||||||
Less: Long-term debt, current portion | |||||||
Long-term debt, net of current portion | $ | $ |
Note 14. | Accrued Product Warranties |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Accrued product warranties, beginning of period | $ | $ | $ | $ | |||||||||||
Amounts paid for warranty services | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Warranty provisions for products sold | |||||||||||||||
Business acquisition | |||||||||||||||
Currency translation adjustments and other | ( | ) | ( | ) | |||||||||||
Accrued product warranties, end of period | $ | $ | $ | $ | |||||||||||
Current accrued product warranties, end of period | $ | $ | |||||||||||||
Long-term accrued product warranties, end of period | $ | $ |
Note 15. | Contingencies |
Note 16. | Income Taxes |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Income tax provision | $ | $ | $ | $ | |||||||||||
Effective tax rate | % | % | % | % |
Tax Years: | |
United States Federal | 2016-2018 |
State of California | 2015-2018 |
State of Massachusetts | 2015-2018 |
State of Oregon | 2016-2018 |
Sweden | 2012-2018 |
United Kingdom | 2015-2018 |
Belgium | 2012-2018 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenue—External Customers: | |||||||||||||||
Industrial Technologies | $ | $ | $ | $ | |||||||||||
Defense Technologies | |||||||||||||||
$ | $ | $ | $ | ||||||||||||
Revenue—Intersegments: | |||||||||||||||
Industrial Technologies | $ | $ | $ | $ | |||||||||||
Defense Technologies | |||||||||||||||
Eliminations | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
$ | $ | $ | $ | ||||||||||||
Segment operating income: | |||||||||||||||
Industrial Technologies | $ | $ | $ | $ | |||||||||||
Defense Technologies | |||||||||||||||
$ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Consolidated segment operating income | $ | $ | $ | $ | |||||||||||
Unallocated corporate expenses | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Amortization of purchased intangible assets | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Restructuring expenses | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Consolidated earnings from operations | |||||||||||||||
Interest and non-operating expenses, net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Consolidated earnings before income taxes | $ | $ | $ | $ |
June 30, | December 31, | ||||||
2020 | 2019 | ||||||
Operating segment assets: | |||||||
Net accounts receivable, inventories and demonstration assets: | |||||||
Industrial Technologies | $ | $ | |||||
Defense Technologies | |||||||
$ | $ | ||||||
Goodwill: | |||||||
Industrial Technologies | |||||||
Defense Technologies | |||||||
$ | $ | ||||||
Total operating segment assets | $ | $ | |||||
Assets not allocated: | |||||||
Cash and cash equivalents | $ | $ | |||||
Prepaid expenses and other current assets | |||||||
Property and equipment, net | |||||||
Deferred income taxes | |||||||
Intangible assets, net | |||||||
Other assets | |||||||
Total assets | $ | $ |
Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | ||||||||||||||||||||||
Industrial Technologies | Defense Technologies | Total | Industrial Technologies | Defense Technologies | Total | ||||||||||||||||||
United States | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Europe | $ | $ | |||||||||||||||||||||
Asia | $ | $ | |||||||||||||||||||||
Middle East/Africa | $ | $ | |||||||||||||||||||||
Canada/Latin America | $ | $ | |||||||||||||||||||||
$ | $ | $ | $ | $ | $ |
Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | ||||||||||||||||||||||
Industrial Technologies | Defense Technologies | Total | Industrial Technologies | Defense Technologies | Total | ||||||||||||||||||
United States | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Europe | |||||||||||||||||||||||
Asia | |||||||||||||||||||||||
Middle East/Africa | |||||||||||||||||||||||
Canada/Latin America | |||||||||||||||||||||||
$ | $ | $ | $ | $ | $ |
June 30, | December 31, | ||||||
2020 | 2019 | ||||||
United States | $ | $ | |||||
Europe | |||||||
Other foreign | |||||||
$ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
United States government | $ | $ | $ | $ |
Note 18. | Business Acquisitions |
Cash acquired | $ | |||
Other tangible assets and liabilities | ||||
Net deferred taxes | ( | ) | ||
Identified intangible assets | ||||
Goodwill | ||||
Total purchase price | $ |
Estimated Useful Life | Amount | ||||
Developed technology | $ | ||||
In-process research and development | |||||
Trademarks and trade name | |||||
Backlog | |||||
Customer contracts | |||||
$ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Employee separation costs | $ | $ | $ | $ | |||||||||||
Lease consolidation expenses | |||||||||||||||
Third party and other costs | |||||||||||||||
Total Restructuring Program Expenses | $ | $ | $ | $ |
Employee separation costs | Third party and other costs | Total | |||||||||
Balance at December 31, 2019 | $ | $ | $ | ||||||||
Accrual and accrual adjustments | |||||||||||
Cash payments | ( | ) | ( | ) | ( | ) | |||||
Balance at June 30, 2020 | $ | $ | $ |
Note 20. | Subsequent Events |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | risks related to United States government spending decisions and applicable procurement rules and regulations; |
• | negative impacts to operating margins due to reductions in sales or changes in product mix; |
• | impairments in the value of tangible and intangible assets; |
• | unfavorable results of legal proceedings; |
• | risks associated with international sales and business activities, including the regulation of the export and sale of our products worldwide and our ability to obtain and maintain necessary export licenses, as well as the imposition of significant tariffs or other trade barriers; |
• | risks related to subcontractor and supplier performance and financial viability as well as raw material and component availability and pricing; |
• | risks related to currency fluctuations; |
• | adverse general economic conditions or volatility in our primary markets; |
• | our ability to compete effectively and to respond to technological change; |
• | risks related to product defects or errors; |
• | our ability to protect our intellectual property and proprietary rights; |
• | cybersecurity and other security threats and technology disruptions; |
• | our ability to successfully manage acquisitions, investments and divestiture activities and integrate acquired companies; |
• | our ability to achieve the intended benefits of our strategic restructuring; |
• | our ability to attract and retain key senior management and qualified technical, sales and other personnel; |
• | risks to our supply chain, production facilities or other operations, and changes to general, domestic, and foreign economic conditions, due to the COVID-19 pandemic; and |
• | other risks discussed from time to time in filings and reports filed with the Securities and Exchange Commission. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenue | $ | 300.2 | $ | 284.5 | $ | 576.6 | $ | 555.9 | |||||||
Segment operating income | 107.1 | 71.6 | 171.4 | 140.7 | |||||||||||
Segment operating margin | 35.7 | % | 25.2 | % | 29.7 | % | 25.3 | % | |||||||
Total backlog, end of period | $ | 350.7 | $ | 236.8 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenue | $ | 181.8 | $ | 197.5 | $ | 356.3 | $ | 370.9 | |||||||
Segment operating income | 41.2 | 45.8 | 74.3 | 92.7 | |||||||||||
Segment operating margin | 22.6 | % | 23.2 | % | 20.9 | % | 25.0 | % | |||||||
Total backlog, end of period | $ | 562.1 | $ | 572.6 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net cash provided by operating activities | $ | 63,149 | $ | 67,790 | $ | 114,015 | $ | 123,301 | |||||||
Net cash used in investing activities | (14,221 | ) | (31,541 | ) | (26,938 | ) | (622,264 | ) | |||||||
Net cash (used in) provided by financing activities | (28,734 | ) | (52,933 | ) | (28,903 | ) | 255,381 |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
• | We have experienced and may continue to experience disruptions in our supply chain from the actions of governments or businesses intended to contain or slow the spread of the virus, such as closing factories or other operations that produce components necessary for our products, quarantining individuals around major commercial hubs, and/or restricting the transportation of goods and services. |
• | We may experience significant workplace disruptions as a result of employees in our production facilities becoming sick or are quarantined as a result of exposure to COVID-19, which could necessitate closing such facilities or significantly reducing their output for an extended period. |
• | Delays in inspection, acceptance and payment by our customers, many of whom are working remotely, could also affect our sales and cash flows. Limitations on government operations can also impact regulatory approvals such as export licenses that are needed for international sales and deliveries. In addition, we could experience delays in international orders, many of which require lines of credit from local banks whose operations may be impacted by the COVID-19 pandemic. The Defense Technologies segment has and may continue to experience delays in orders from United States and foreign government agencies, and the Industrial Technologies segment has and may continue to experience a decline in demand for industrial and consumer products that are deemed non-essential. As a result of the COVID-19 crisis, there may be changes in our customers’ priorities and practices, as our customers confront competing budget priorities and more limited resources. These changes may impact current and future programs, government payments and other practices, procurements, and funding decisions. |
• | Pursuant to government closure orders intended to contain or slow the spread of the virus, we have been required to close certain of our facilities that perform work that is deemed non-essential. One or more additional facilities could become subject to similar orders, which could further disrupt our operations if the work performed at such facilities cannot be conducted remotely, necessitating the furloughing of some of our employees or a permanent reduction in our workforce. |
• | If we do not respond appropriately to the pandemic, or if customers do not perceive our response to be adequate, we could suffer damage to our reputation and our brands, which could adversely affect our business. |
• | Deterioration of worldwide credit and financial markets could adversely affect our ability to obtain financing on favorable terms and continue to meet our liquidity needs. |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
Number | Description |
3.1 | |
3.2 | |
4.1 | |
4.2 | |
4.3 | |
10.1 | |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
99.1 | |
99.2 | |
99.3 | |
101.INS | Inline XBRL Instance Document |
101.SCH | Inline XBRL Taxonomy Extension Schema Document |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
FLIR SYSTEMS, INC. | ||
Date August 6, 2020 | /s/ Carol P. Lowe | |
Carol P. Lowe | ||
Executive Vice President and Chief Financial Officer | ||
(Duly Authorized and Principal Financial Officer) |
1. | I have reviewed this quarterly report on Form 10-Q 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 August 6, 2020 | /s/ James J. Cannon | |
James J. Cannon | ||
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of FLIR Systems, Inc.; |
2. | Based on my knowledge, this quarterly 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 August 6, 2020 | /s/ Carol P. Lowe | |
Carol P. Lowe | ||
Chief Financial Officer |
Date August 6, 2020 | /s/ James J. Cannon | |
James J. Cannon | ||
President and Chief Executive Officer |
Date August 6, 2020 | /s/ Carol P. Lowe | |
Carol P. Lowe | ||
Chief Financial Officer |
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
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Income Statement [Abstract] | ||||
Revenue | $ 482,015 | $ 481,998 | $ 932,938 | $ 926,734 |
Cost of Goods and Services Sold | 229,815 | 248,590 | 461,370 | 459,465 |
Gross profit | 252,200 | 233,408 | 471,568 | 467,269 |
Operating expenses: | ||||
Research and development | 56,012 | 52,957 | 109,859 | 100,637 |
Selling, general and administrative | 88,676 | 113,713 | 204,918 | 218,203 |
Restructuring expenses | 7,702 | 3,001 | 28,486 | 3,610 |
Total operating expenses | 152,390 | 169,671 | 343,263 | 322,450 |
Earnings from operations | 99,810 | 63,737 | 128,305 | 144,819 |
Interest expense | 6,962 | 7,272 | 13,923 | 12,788 |
Interest income | (127) | (438) | (476) | (1,495) |
Other expense (income), net | 11,081 | (1,220) | 9,766 | 646 |
Earnings before income taxes | 81,894 | 58,123 | 105,092 | 132,880 |
Income tax provision | 20,637 | 12,005 | 28,411 | 25,014 |
Net earnings | $ 61,257 | $ 46,118 | $ 76,681 | $ 107,866 |
Net earnings per share: | ||||
Basic earnings per share (in dollars per share) | $ 0.47 | $ 0.34 | $ 0.58 | $ 0.80 |
Diluted earnings per share (in dollars per share) | $ 0.47 | $ 0.34 | $ 0.57 | $ 0.79 |
Weighted Average Number of Shares Outstanding, Basic | 130,831 | 135,519 | 132,213 | 135,530 |
Weighted Average Number of Shares Outstanding, Diluted | 131,687 | 137,084 | 133,389 | 137,105 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net earnings | $ 61,257 | $ 46,118 | $ 76,681 | $ 107,866 |
Other comprehensive income (loss), net of tax: | ||||
Fair value adjustment on derivatives instruments designated as hedges (1) | 408 | (779) | 3,161 | (1,586) |
Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax, Portion Attributable to Parent | 0 | 4 | 0 | 4 |
Other Comprehensive Income (Loss), Net of Tax | (2,332) | 3,889 | ||
Foreign currency translation adjustments | (2,740) | 4,664 | (23,025) | (2,776) |
Total other comprehensive income (loss) | (2,332) | 3,889 | (19,864) | (4,358) |
Comprehensive income | $ 58,925 | $ 50,007 | $ 56,817 | $ 103,508 |
Consolidated Statements of Comprehensive Income (parenthetical) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Statement of Comprehensive Income [Abstract] | ||||
Other Comprehensive Income (Loss), Derivative, Excluded Component, Increase (Decrease), Adjustments, Tax | $ (0.1) | $ (0.3) | $ (0.5) | $ (0.5) |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
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 | 131,106 | 134,394 |
Basis of Presentation and Significant Accounting Policies |
6 Months Ended |
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Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Nature of Business and Significant Accounting Policies | Basis of Presentation and Accounting Standards Updates The accompanying consolidated financial statements of FLIR Systems, Inc. and its consolidated subsidiaries (the “Company”) are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the Company’s consolidated financial position and results of operations for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. The accompanying consolidated financial statements include the accounts of FLIR Systems, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the year ending December 31, 2020. Recently Adopted Accounting Pronouncements Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13" or "Topic 326"): Effective January 1, 2020, the Company adopted ASU 2016-13 using a modified-retrospective approach. The standard changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life. Adoption of the standard did not have a material impact on the Company's consolidated financial statements. FASB ASU No. 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606" ("ASU 2018-18"): Effective January 1, 2020, the Company adopted ASU 2018-18. The standard clarifies that certain transactions between collaborative arrangement participants should be accounted for under ASC 606, when one participant is a customer, and specifies that a distinct good or service is the unit of account for evaluating whether the transaction is with a customer. The standard also provides guidance on presentation of transactions not in the scope of ASC 606. Adoption of the standard did not have a material impact on the Company's consolidated financial statements. Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes". The standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 including recognizing deferred taxes for investments, performing intra-period allocations and calculating taxes in interim periods. The ASU 2019-12 also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The standard is effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company plans to adopt the standard as of January 1, 2021 and is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which temporarily simplifies the accounting for contract modifications, including hedging relationships, due to the transition from LIBOR and other interbank offered rates to alternative reference interest rates. For example, entities can elect not to remeasure the contracts at the modification date or reassess a previous accounting determination if certain conditions are met. Additionally, entities can elect to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain conditions are met. The new standard was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. The Company is currently evaluating the impact of the transition from LIBOR to alternative reference interest rates as well as the impact it may have on its consolidated financial statements. Reclassifications The Company made certain reclassifications to the prior years' financial statements and notes to the consolidated financial statements to conform them to the presentation as of and for the three and six months ended June 30, 2020. 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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Revenue Revenue |
6 Months Ended |
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Jun. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Revenue | Revenue Revenue Recognition 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. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company regularly enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. In such situations, contract values are allocated to each performance obligation based on its relative estimated standalone selling price. The vast majority of the Company's revenues are recognized at a point in time when goods are transferred to a customer. However, for certain contracts that include highly customized components, if 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, revenue is recognized over time as the performance obligation is satisfied. Revenue includes certain shipping and handling costs and is stated net of third-party agency fees. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of goods sold. Revenue is recognized net of allowances for returns and net of taxes collected from customers which are subsequently remitted to governmental authorities. 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. Service revenue is deferred and recognized over the contract period, as is the case for extended warranty contracts, or recognized as services are provided. See Note 17, "Operating Segments and Related Information - Revenue and Long-Lived Assets by Geographic Area" for information related to the Company’s revenues disaggregated by significant geographical region and operating segment. Contract Balances The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables and deferred revenue and advance payments from customers on the Consolidated Balance Sheets. Contract assets and liabilities are reported on a contract-by-contract basis. The Company had no material deferred contract costs recorded on the Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019. Contract assets: The Company recognizes unbilled receivables as contract assets when the Company has rights to consideration for work completed but has not yet billed at the reporting date. Unbilled receivables are included within accounts receivable, net on the Consolidated Balance Sheets. The balance of unbilled receivables as of June 30, 2020 and December 31, 2019 were $23.3 million and $9.4 million, respectively. Contract liabilities: The Company records contract liabilities when cash payments are received or due in advance of the Company's performance. Contract liabilities include deferred revenue and advance payments from customers. Contract liabilities are classified as either current or long-term in the Consolidated Balance Sheets based on the timing of when the Company expects to recognize revenue. As of June 30, 2020 and December 31, 2019, contract liability balances totaled $56.6 million and $69.1 million, respectively. These balances included amounts classified as long-term as of June 30, 2020 and December 31, 2019 which were $12.1 million and $12.5 million, respectively, and are included within other long-term liabilities in the accompanying Consolidated Balance Sheets. Approximately $37.8 million of revenue recognized during the six months ended June 30, 2020 was included in the combined contract liability balances as of December 31, 2019. Remaining Performance Obligations Remaining performance obligations represent the aggregate transaction price allocated to performance obligations with an original contract term greater than one year which are fully or partially unsatisfied at the end of the period. While the remaining performance obligation disclosure is similar in concept to backlog, the definition of remaining performance obligations excludes contracts that provide the customer with the right to cancel or terminate for convenience with no substantial penalty, even if historical experience indicates the likelihood of cancellation or termination is remote. The Company has elected to exclude contracts with customers with an original term of one year or less from remaining performance obligations while these contracts are included within backlog. Note 2. Revenue - (Continued) Remaining Performance Obligations - (Continued) As of June 30, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $245.6 million. The Company expects to recognize revenue on approximately 84 percent of the remaining performance obligations over the next twelve months, and the remainder recognized thereafter.
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Stock-based compensation |
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Share-based Payment Arrangement, Noncash Expense [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 incentive and non-statutory stock options and non-vested 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, as amended (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. Performance-based restricted stock unit awards granted during the year ended December 31, 2017 were earned based upon the Company's operating margin performance over a three-year period. Performance-based restricted stock unit awards granted during the years ended December 31, 2018 and 2019 may be earned based upon a combination of the Company's revenue and operating 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. 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. The following table sets forth the stock-based compensation expense recognized in the Consolidated Statements of Income (in thousands):
Stock-based compensation expense capitalized in the Consolidated Balance Sheets is as follows (in thousands):
As of June 30, 2020, the Company had approximately $70.9 million of total unrecognized stock-based compensation costs, net of estimated forfeitures, to be recognized over a weighted average period of approximately 2.1 years.
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Net Earnings Per Share Net Earnings Per Share (Notes) |
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Earnings Per Share [Text Block] | Net 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):
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Fair Value of Financial Instruments |
6 Months Ended |
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Jun. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company had approximately $0.7 million of cash equivalents at June 30, 2020 and December 31, 2019, 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 derivative contracts as of June 30, 2020 and December 31, 2019 are disclosed in Note 6, "Derivative Financial Instruments," and are based on Level 2 inputs. The fair value of the Company's borrowings under the Credit Agreement as described in Note 13, "Debt," as of June 30, 2020 approximates the carrying value. The fair value of the Company’s senior unsecured notes as described in Note 13, "Debt," was $432.3 million and $430.1 million based upon Level 2 inputs at June 30, 2020 and December 31, 2019, respectively. The fair value of observable price changes related to the Company's minority interest equity investments are based on Level 3 inputs. During the three months ended June 30, 2020, the Company recognized impairments of $4.8 million associated with its equity minority investments which are included in other expense (income), net in the Consolidated Statements of Income. The Company does not have any other significant financial assets or liabilities that are measured at fair value. See the discussion of accounting guidance for fair value measurements and the factors used in determining the fair value of financial assets and liabilities as reported in Note 1, "Nature of Business and Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
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Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Derivative Financial Instruments The Company's financial position and results of operations are subject to certain financial market risks. The Company regularly assesses these risks and has established risk management practices designed to mitigate the impact of certain foreign currency exchange rate and interest rate risk exposures. The Company does not engage in speculative trading in any financial market. Foreign Currency Contracts The Company uses currency forward contracts, not formally designated as hedges, to manage the consolidated exchange rate risk associated with the remeasurement of certain non-functional currency denominated monetary assets and liabilities primarily by subsidiaries that use U.S. dollars, European euros, Canadian dollars, Swedish kronor, Norwegian kroner, Brazilian real and British pound sterling as their functional currency. Changes in fair value of foreign currency forward contracts are recognized in other (income) expense, net at the end of each reporting period. 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. At June 30, 2020, the Company’s foreign currency forward contracts, not formally designated as hedges, had maturities of three months or less. In addition, the Company manages the risk of changes in the fair value of certain monetary liabilities attributable to changes in exchange rates. The Company manages these risks by using currency forward contracts formally designated and effective as fair value hedges. Hedge effectiveness is generally determined by evaluating the alignment of the hedging instrument's critical terms with the critical terms of the hedged item. The forward points attributable to the hedging instruments are excluded from the assessment of effectiveness and amortized to other expense (income), net using a systematic and rational methodology. Differences between the change in fair value of the excluded component and amounts recognized under the systematic and rational method are recognized in other comprehensive income. The change in fair value of the hedging instruments attributable to the hedged risk is reported in other expense (income), net. The change in fair value of the hedged item attributable to the hedged risk is reported as an adjustment to its carrying value and also included in other expense (income), net. At June 30, 2020, the Company’s foreign currency forward contracts formally designated as fair value hedges had maturities of three years or less. Interest Rate Swap The Company's outstanding debt at June 30, 2020 consists of fixed rate notes and an unsecured credit facility consisting of an unsecured revolving loan facility, an unsecured U.S. dollar term loan and an unsecured Swedish kronor term loan, all of which accrue interest at a floating rate. As discussed in Note 13, "Debt," interest expense on the Company's floating rate debt is calculated based on a fixed spread over the applicable Eurocurrency rate (e.g. LIBOR) subject to a floor of zero percent. Therefore, fluctuations in market interest rates will cause interest expense increases or decreases on a given amount of floating rate debt. The Company is managing its interest rate risk related to certain floating rate debt through an interest rate swap (“swap”) in which the Company receives floating rate payments subject to a floor of zero percent and makes fixed rate payments. The impact of the swap is to fix the floating rate basis for the calculation of interest on the unsecured Swedish kronor term loan at 0.590 percent. The swap is designated and effective as a cash flow hedge with individual swap cash flows recorded as an asset or liability in the Company's Consolidated Balance Sheets at fair value. Hedge effectiveness is generally determined by evaluating the alignment of the hedging instrument's critical terms with the critical terms of the hedged item. Fair value adjustments are recorded as an adjustment to accumulated other comprehensive income. All of the Company's derivative counterparties have investment grade credit ratings. The Company is a party to master netting arrangements that contain features that allow counterparties to net settle amounts arising from multiple separate derivative transactions or net settle in the case of certain triggering events such as a bankruptcy or major default of one of the counterparties to the transaction. The Company has not pledged assets or posted collateral as a requirement for entering into or maintaining derivative positions. The following table presents the gross notional amounts of outstanding derivative instruments (in thousands):
Note 6. Derivative Financial Instruments - (Continued) Interest Rate Swap - (Continued) The following table presents the balance sheet classification and fair value of derivative instruments (in thousands):
The following table presents the statement of income classification of derivative instruments (in thousands):
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Accounts Receivable |
6 Months Ended |
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Jun. 30, 2020 | |
Receivables [Abstract] | |
Accounts Receivable | Accounts Receivable Accounts receivable are net of an allowance for credit losses of $7.4 million and $6.1 million at June 30, 2020 and December 31, 2019, respectively.
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Inventories |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories consist of the following (in thousands):
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Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases Operating leases are included in other assets, other current liabilities, and other long-term liabilities on the Consolidated Balance Sheets. The Company does not have any finance leases at June 30, 2020. Most of the Company’s operating leases are for buildings, warehouses and office space. These leases have remaining lease terms of approximately one year to ten years. The components of lease expense were as follows (in thousands):
Supplemental balance sheet information related to operating leases is as follows (in thousands):
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Property and Equipment |
6 Months Ended |
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Jun. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment are net of accumulated depreciation of $389.1 million and $370.1 million at June 30, 2020 and December 31, 2019, respectively. Depreciation expense for the three months ended June 30, 2020 and 2019 was $11.2 million and $10.8 million, respectively. Depreciation expense for the six months ended June 30, 2020 and 2019 was $23.0 million and $21.2 million, respectively. |
Goodwill |
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | Goodwill In the first quarter of 2020, the Company completed a business reorganization as part of its “Project Be Ready” restructuring plan which resulted in identification of two reportable segments (Industrial Technologies and Defense Technologies). The Company commenced operating and reporting under the new organization structure effective January 1, 2020. See Note 19, “Restructuring” for further information on Project Be Ready and Note 17, "Operating Segments and Related Information" for additional information on the two new reportable operating segments. Goodwill was allocated to identified reporting units using a relative fair value approach. In conjunction with the change in reportable segments, the Company evaluated goodwill for impairment, both before and after the segment change and determined that goodwill was not impaired.
The following table presents changes in the carrying value of goodwill and the activity by reportable segment for the six months ended June 30, 2020 (in thousands):
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. See Note 18, "Business Acquisitions" for additional information on goodwill from acquisitions.
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Intangible Assets |
6 Months Ended |
---|---|
Jun. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible Assets Intangible assets are net of accumulated amortization of $151.0 million and $129.9 million at June 30, 2020 and December 31, 2019, respectively. The aggregate amortization expense for the three months ended June 30, 2020 and 2019 was $11.8 million and $21.1 million, respectively. The aggregate amortization expense for the six months ended June 30, 2020 and 2019 was $23.7 million and $27.0 million, respectively. |
Debt |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt The Company's debt consists of the following (in thousands):
In June 2016, the Company issued $425.0 million aggregate principal amount of its 3.125 percent senior unsecured notes due June 15, 2021 (the “2021 Notes”). The net proceeds from the issuance of the 2021 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 2021 Notes is payable semiannually in arrears on December 15 and June 15. The proceeds from the 2021 Notes were used for general corporate purposes, including working capital and capital expenditure needs, business acquisitions and repurchases of the Company’s common stock. On March 29, 2019, the Company entered into a Second Amended and Restated Credit Agreement (“Credit Agreement”) with Bank of America, N.A., JPMorgan Chase Bank, N.A., U.S. Bank National Association, Citibank, N.A., MUFG Union Bank, N.A., and the other lenders party thereto. The Credit Agreement provides for a $650.0 million unsecured revolving credit facility, a $100.0 million unsecured term loan facility available in U.S. dollars amortizing at 5.000 percent per annum, and a $150.0 million unsecured term loan facility available in Swedish kronor amortizing at 5.0 percent per annum. The Credit Agreement has a term of five years and matures on March 29, 2024. In connection with the closing of the Credit Agreement, the Company made an initial borrowing of $100.0 million in revolving loans, $100.0 million in term loans in U.S. dollars, and the equivalent of $150.0 million in term loans in Swedish kronor and repaid all outstanding amounts under its prior credit agreement. Note 13. Debt - (Continued) The Company has the right, subject to certain conditions, including approval of additional commitments by qualified lenders, to increase the availability under the revolving credit facility by an additional $200.0 million until March 29, 2024. 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 from the type and tenor of the borrowing and includes loans based on the published term Eurocurrency rate (e.g. LIBOR) in which the loan is denominated. The Eurocurrency rate loans have a floor of zero percent and an applicable margin that ranges from 1.000 percent to 1.375 percent depending on the Company’s consolidated total leverage ratio. At June 30, 2020, the borrowing rate on the revolving loan was 1.553 percent per annum, the borrowing rate on the U.S. dollar term loan was 1.683 percent per annum and the borrowing rate on the Swedish kronor term loan was 1.444 percent per annum. The Credit Agreement requires the Company to pay a commitment fee on the amount of unused revolving commitments at a rate, based on our consolidated total leverage ratio, which ranges from 0.125 percent to 0.200 percent of unused revolving commitments. At June 30, 2020, the commitment fee on the amount of unused revolving credit was 0.200 percent per annum. The Credit Agreement contains one financial covenant that requires maintenance of a consolidated total leverage ratio with which the Company was in compliance at June 30, 2020. The facilities available under the Credit Agreement are unsecured. The Credit Agreement also contains language providing for the adoption of a LIBOR successor rate in anticipation of the possibility of LIBOR benchmark reform, consistent with market practice. The Company is engaged in regular dialogue with its lenders and derivatives counterparties to keep apprised of the proposed successor rates in each of the jurisdictions in which there may have a need to execute a financial transaction. Although progress has been made by the various working groups, the Company believes it is too early to accurately assess any financial impact of the LIBOR benchmark reform. To manage the interest rate risk arising from the variability in interest expense attributable to amounts drawn under the Swedish kronor term loan facility, the Company entered into a floored interest rate swap with a Swedish kronor notional amount initially equivalent to $150.0 million. The interest rate swap was designated, and effective, as a cash flow hedge. At June 30, 2020, the Company had $10.8 million of letters of credit outstanding, which reduces the total available revolving credit under the Credit Agreement. On January 11, 2019, a standby letter of credit, not to exceed Swedish kronor 2.2 billion, was issued under a new bilateral letter of credit reimbursement agreement ("L/C Agreement") to secure a payment guarantee required by the Swedish Tax Authorities in order to grant the original respite from paying the tax reassessment described in Note 16, "Income Taxes." The outstanding amount of the L/C Agreement was equivalent to approximately $238.2 million at June 30, 2020. While outstanding amounts under the L/C Agreement do not reduce the available revolving credit from the Credit Agreement, they are considered indebtedness and influence the incremental debt capacity governed by our Credit Agreement covenants. The standby letter of credit was further amended on April 24, 2020 to reflect the new respite.
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Accrued Product Warranties |
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Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Product Warranties | Accrued Product Warranties The following table summarizes the Company’s warranty liability and activity (in thousands):
Note 14. Accrued Product Warranties - (Continued) 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. Long-term accrued product warranties are included in other long-term liabilities on the Consolidated Balance Sheets.
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Contingencies |
6 Months Ended |
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Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies Matters Involving the United States Department of State and Department of Commerce On April 24, 2018, the Company entered into a Consent Agreement with the United States Department of State's Directorate of Defense Trade Controls (“DDTC”) to resolve allegations regarding the unauthorized export of technical data and defense services to dual and third country nationals from certain Company facilities, the failure to properly use and manage export licenses and export authorizations, and failures to report certain payments under 22 CFR Part 130 in potential violation of the International Traffic in Arms Regulation (“ITAR”). The Consent Agreement has a four-year term and provides for: (i) a civil penalty of $30.0 million with $15.0 million of this amount suspended on the condition that the funds have or will be used for Department-approved Consent Agreement remedial compliance measures, (ii) the appointment of an external Special Compliance Official to oversee compliance with the Consent Agreement and the ITAR; (iii) two external audits of the Company’s ITAR compliance program; and (iv) continued implementation of ongoing remedial compliance measures and additional remedial compliance measures related to automated systems and ITAR compliance policies, procedures, and training. During the three-month period ended March 31, 2018, the Company recorded a $15.0 million charge for the portion of the penalty that is not subject to suspension. In April 2018, 2019, and 2020, the Company paid $1.0 million, $3.5 million and $3.5 million, respectively, of the $15.0 million charge and as of June 30, 2020, the remaining amounts payable of $3.5 million and $3.5 million have been recorded in other current liabilities and other long-term liabilities, respectively. The remaining $7.0 million is payable in annual installments of $3.5 million through April 2022. The Company expects recent and future investments in remedial compliance measures will be sufficient to cover the $15.0 million suspension amount. As part of the Consent Agreement, DDTC acknowledged that the Company voluntarily disclosed certain of the alleged Arms Export Control Act and ITAR violations, which were resolved pursuant to the Consent Agreement, cooperated in the DDTC's review, and instituted a number of compliance program improvements. 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. The Company also submitted a voluntary self-disclosure regarding the same matter with the United States Department of Commerce Bureau of Industry and Security ("BIS"). This matter remains under review by DDTC, BIS and the Department of Justice ("DOJ"). DDTC and BIS both acknowledged the submissions, and the Company executed tolling agreements for this matter with each of DDTC, BIS and DOJ. The DDTC and DOJ tolling agreements have lapsed; FLIR is in discussion with DOJ on resolving the matter. The Company executed a tolling agreement with BIS, and has extended the agreement, suspending the statute of limitations through September 1, 2020. In June 2017, BIS informed the Company of additional export licensing requirements that restrict the Company’s ability to sell certain 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 sale without a license or 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. BIS 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 the Export Administration Regulations ("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 export and 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. At this time, based on available information regarding these proceedings, 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. Note 15. Contingencies - (Continued) SkyWatch Product Quality Matters In March 2016, the Company learned of potential quality concerns with respect to as many as 315 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. The Company identified the cause of these quality issues, notified customers of their option to request repair and modification of their in-field units, and has begun in-field repairs of identified affected 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 on remaining units to be between $3.0 million and $9.6 million. As no single amount within the range is a better estimate than any other amount within the range, the Company has recorded an accrual of $3.0 million in other current liabilities as of June 30, 2020. Factors underlying this estimated range of loss may change from time to time, and actual results may vary significantly from this estimate. Shareholder Derivative Lawsuit In June 2020, a shareholder filed a derivative lawsuit in the Court of Chancery for the State of Delaware, Case No. 2020-0464, against the Company, as a nominal defendant, and certain current and former directors of the Company. Pointing to the Company’s 2015 settlement with the United States Securities and Exchange Commission of alleged United States Foreign Corrupt Practices Act violations and 2018 settlement with United States Department of State of alleged export control violations, the complaint alleges that the Company’s directors breached their fiduciary duties by failing to ensure that the Company had internal controls in place that would have prevented the alleged underlying misconduct and these settlements. The complaint also asserts claims for, among other matters, corporate waste and unjust enrichment, and seeks unspecified monetary damages from the individual defendants, injunctive relief, disgorgement of director compensation, and attorneys’ fees and costs. Because the complaint is derivative in nature, it does not seek monetary damages from the Company. However, the Company may be required to advance, and ultimately be responsible for, the legal fees and costs incurred by the individual defendants. The Company expects to file a motion to dismiss in the third quarter of 2020. 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 cannot be predicted with certainty, the Company believes the probability is remote that the outcome of each of these matters 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.
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Text Block] | Income Taxes The provision for income taxes was as follows (in thousands, except percentages):
The effective tax rate for the three and six months ended June 30, 2020 is higher than the United States Federal tax rate of 21.0 percent mainly due to non-recognition of the tax benefit of current year operating losses of a foreign subsidiary, an increase in unrecognized tax benefits related to positions taken on prior year tax returns, the addition of valuation allowance against deferred tax assets related to minority investments, and state taxes. These amounts were offset partially by benefits related to US export sales and research credits. Note 16. Income Taxes - (Continued) As of June 30, 2020 and December 31, 2019, the Company has accrued income tax liabilities of $37.1 million related to the transition tax enacted on December 22, 2017 as part of the Tax Cuts and Jobs Act. Of the amounts accrued, none is expected to be due within one year. The remaining transition tax will not accrue interest and will be paid in annual installments beginning in 2021 through 2024. The Company has not provided United States, state or foreign income taxes for earnings generated after January 1, 2018 by certain subsidiaries outside the United States as management currently intends to reinvest the earnings in operations and other activities outside of the United States indefinitely. Should the Company subsequently elect to repatriate such foreign earnings, the Company would need to accrue and pay state and foreign income taxes, thereby reducing the amount of our cash. United States taxes would generally not be payable due to changes made by the Tax Cuts and Jobs Act. As of June 30, 2020, the Company had approximately $23.0 million of unrecognized tax benefits, of which $21.7 million would affect the Company’s effective tax rate if recognized. The Company anticipates approximately $10.9 million of its net unrecognized tax benefits will be recognized within 12 months as the result of settlements or effective settlements with various tax authorities, the closure of certain audits and the lapse of the applicable statute of limitations. The Company classifies interest and penalties related to unrecognized tax benefits in the income tax provision. As of June 30, 2020, the Company had $4.6 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 Sheets. During the three-month period ended December 31, 2018, the Swedish Tax Authority (“STA”) issued a reassessment of tax for the year ending December 31, 2012 to one of the Company's non-operating subsidiaries in Sweden. The reassessment concerns the use of tax credits applied against capital gains pursuant to European Union Council Directive 2009/133/EC, commonly referred to as the EU Merger Directive, and assesses taxes and penalties totaling approximately $322.2 million (Swedish kronor 3.0 billion). On March 26, 2020, the Company received an adverse judgment from the First Instance Court of Sweden (the “Court”) regarding the STA's reassessment. The Company does not agree with the Court’s ruling, continues to believe the STA's arguments in the reassessment are not in accordance with Swedish tax regulations or the treaty for the avoidance of double taxation between Sweden and Belgium, and has appealed the decision to the Administrative Court of Appeal in Stockholm. Consequently, no adjustment to the Company's unrecognized tax benefits has been recorded in relation to this matter. The Company has received a respite from paying the reassessment until after a decision by the Administrative Court of Appeal by putting in place a bank guarantee to secure possible future payment of the tax and interest. There can be no assurance that the Company’s appeal will be successful. During the three-month period ended September 30, 2019, the European Commission announced the opening of a separate review to assess whether an excess profit tax ruling granted by Belgium to one of the Company's international subsidiaries is in breach of European Union state aid rules. The Company believes all taxes assessed by Belgium have been paid and has not adjusted unrecognized tax benefits in relation to this matter. Management believes that the Company's recorded tax liabilities are adequate in the aggregate for its income tax exposures. On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), the bipartisan $2.0 trillion economic relief package aimed at helping American workers and businesses impacted by the coronavirus pandemic. The CARES Act, along with earlier issued IRS guidance, has allowed the Company to defer certain tax payments. The CARES Act, among other things, also contains numerous other provisions which may benefit the Company. The Company will continue to assess the effect of the CARES Act and ongoing government guidance related to COVID-19 that may be issued. The Company currently has the following tax years open to examination by major taxing jurisdictions:
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Operating Segments and Related Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Business Units and Related Information | Operating Segments and Related Information Operating Segments The Company’s chief operating decision maker ("CODM"), its Chief Executive Officer, evaluates each of its segments’ 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. In the first quarter of 2020, the Company completed a business reorganization as part of its "Project Be Ready" restructuring plan which resulted in identification of two reportable segments (Industrial Technologies and Defense Technologies). The Company commenced operating and reporting under the new organization structure effective January 1, 2020. See Note 19, “Restructuring” for further information on Project Be Ready. Industrial Technologies Segment. The Industrial Technologies 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, manufactures, and services offerings that image, measure, and analyze thermal energy, gases, and other environmental elements for industrial, commercial, and scientific applications, imaging payloads for Unmanned Aerial Systems ("UAS"), and machine vision cameras. Additionally, the segment develops, manufactures, and services fixed-mounted visible and thermal imaging cameras and related analytics software for perimeter security, critical infrastructure, recreational and commercial maritime, and traffic monitoring and control. Offerings include thermal imaging cameras, analytics software, gas detection cameras, firefighting cameras, process automation cameras, environmental test and measurement devices, security cameras, marine electronics, and traffic cameras. Defense Technologies Segment. The Defense Technologies 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. The segment also develops and manufactures sensor instruments and integrated platform solutions for the detection, identification, and suppression of chemical, biological, radiological, nuclear, and explosives ("CBRNE") threats for military force protection, homeland security, and commercial applications. Offerings include airborne, land, maritime, and man-portable multi-spectrum imaging systems, radars, lasers, imaging components, integrated multi-sensor system platforms, CBRNE detectors, nano-class UAS solutions, and services related to these systems. The segment also produces advanced multi-mission unmanned air and ground based systems serving US Department of Defense and Federal government agencies, public safety, and governmental customers in international markets. The following tables present revenue, segment operating income, and segment assets for the two segments. Segment operating income as reviewed by the CODM is revenue less cost of goods sold and operating expenses, excluding general corporate expenses, separation, transaction, and integration costs, amortization of acquired intangible assets, restructuring expenses and asset impairment charges, and discrete legal and compliance matters. Net accounts receivable, inventories and demonstration assets for the operating segments are regularly reviewed by management and are reported below as segment assets. All remaining assets, liabilities, capital expenditures, and depreciation are managed on a Company-wide basis. Segment operating income information is as follows (in thousands):
Note 17. Operating Segments and Related Information - (Continued) 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, separation, transaction, and integration costs, amortization of acquired intangible assets, restructuring expenses and asset impairment charges, and discrete legal and compliance matters. A reconciliation of the Company's consolidated segment operating assets to consolidated total assets is as follows (in thousands):
Note 17. Operating Segments and Related Information - (Continued) 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 consist 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 Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition | Business Acquisitions Endeavor Robotics Holdings, Inc. On March 4, 2019, the Company acquired 100% of the outstanding stock of Endeavor Robotics Holdings, Inc. ("Endeavor"), a privately held developer of tactical unmanned ground vehicles for the global military, public safety, and critical infrastructure markets for approximately $385.9 million in cash. The acquisition enhances the Company’s offerings in unmanned ground systems and expands distribution channels in adjacent markets. During the first quarter of 2020, the Company completed the tax assessment for the short–period return that resulted in a goodwill adjustment of $12.6 million. Accordingly, the Company finalized the purchase price allocation and recorded $102.7 million of identified intangible assets and $271.4 million of goodwill in the Defense Technologies segment. The final allocation of the purchase price for Endeavor is as follows (in thousands):
The goodwill of $271.4 million represents intellectual capital and the acquired assembled workforce, none of which qualify for recognition as a separate intangible asset. All of the goodwill presented above is not expected to be deductible for tax purposes. The Company identified $102.7 million of intangible assets. The following table summarizes the acquired intangible assets and 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, in-process research and development, trademarks and backlog. Developed technology represents the economic advantage of having certain technologies in place that lower manufacturing and operating costs and drive higher margins. In-process research and development consist of proprietary robot technology. Trademarks provide value to the marketing or promotion of an entity and its products or services. 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. The developed technology and in-process research and development were valued using the income approach and relief from royalty method. The trade names and backlog were valued using an income approach method. New England Optical Systems, Inc. On May 1, 2019, the Company acquired 100% of the outstanding stock of New England Optical Systems, Inc., a privately-held engineering and manufacturing company engaged in the design and production of infrared optical assemblies. The transaction consideration included a $21.9 million cash payment with up to an additional $12.0 million in deferred compensation payable over a two-year period. During the first quarter of 2020, the Company finalized the purchase price allocation and concluded that there were no changes to the previously recorded $6.4 million of identified intangible assets and $14.0 million of goodwill in the Industrial Technologies segment as presented in Note 20, "Business Acquisitions and Divestitures" of the Notes to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2019. All of the goodwill is expected to be deductible for tax purposes. The business acquisitions listed above 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.
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Restructuring Costs |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Costs | Restructuring In the first quarter of 2020, the Company initiated a strategy-driven restructuring plan, Project Be Ready, to simplify the Company’s product portfolio and better align resources with higher growth opportunities while reducing costs. Project Be Ready includes an organizational realignment, targeted workforce reductions, and facility optimization initiatives. All previously approved ongoing restructuring activities that were in process as of January 1, 2020 have been consolidated into Project Be Ready. The Company expects to incur total costs of approximately $40.0 million to $55.0 million related to Project Be Ready, including approximately $20.0 million to $25.0 million of employee separation costs, approximately $5.0 million to $10.0 million of facility consolidation expenses, and approximately $15.0 million to $20.0 million of third party and other costs. The Company estimates that a majority of the cumulative pretax costs will be cash outlays related to employee separation, facility consolidation, and third-party expenses and that the costs will continue through 2021. Restructuring expenses related to Project Be Ready were as follows (in thousands):
During the three and six months ended June 30, 2020, the Company recognized a total of $7.7 million and $28.5 million, respectively, of expense in connection with Project Be Ready which have been recorded in “Restructuring Expenses” on the Consolidated Statements of Income. The restructuring liability related to Project Be Ready was as follows (in thousands):
During the three and six months ended June 30, 2019, the Company recognized a total of $3.0 million and $3.6 million, respectively, of expense in connection with other restructuring activities which have been recorded in “Restructuring Expenses” on the Consolidated Statements of Income.
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Subsequent Events |
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Jun. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On August 4, 2020, the Company’s Board of Directors declared a quarterly dividend of $0.17 per share on its common stock, payable on September 4, 2020, to shareholders of record as of the close of business on August 21, 2020. The total cash payment of this dividend will be approximately $22.3 million. On August 3, 2020, the Company issued and sold $500.0 million in aggregate principal amount of its 2.500 percent unsecured senior notes due 2030 (the “2030 Notes”). The public offering was made pursuant to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-234452) on file with the Securities and Exchange Commission, including a final prospectus and prospectus supplement filed by the Company on July 22, 2020. The 2030 Notes were issued under a Supplemental Indenture, dated as of August 3, 2020, between FLIR Systems, Inc. and U.S. Bank National Association, as trustee, to an Indenture, dated as of August 3, 2020, between FLIR Systems, Inc. and the trustee. Note 20. Subsequent Events - (Continued) The underwritten public offering price of the 2030 Notes equaled 99.807 percent of their aggregate principal amount, yielding an effective rate (including financing fees and other regulatory, legal and processing fees) of approximately 2.650 percent per annum to maturity. Interest on the 2030 Notes is payable semiannually in arrears on February 1 and August 1 of each year beginning on February 1, 2021. The 2030 Notes will mature on August 1, 2030, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $494.0 million after deducting underwriting discounts and commissions and estimated transaction expenses. The proceeds from the sale of the Notes will be used to redeem FLIR’s $425.0 million in aggregate principal amount of 3.125 percent notes due June 15, 2021 (the “2021 Notes”), and for general corporate purposes, which may include funding for working capital, investments in our subsidiaries, capital expenditures, acquisitions, and stock repurchases. On July 20, 2020, FLIR issued a notice to holders of the 2021 Notes that it intends to redeem the 2021 Notes in full on August 19, 2020. The Company expects to record a loss on extinguishment of the debt of approximately $9.0 million in the third quarter of 2020.
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Basis of Presentation and Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13" or "Topic 326"): Effective January 1, 2020, the Company adopted ASU 2016-13 using a modified-retrospective approach. The standard changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life. Adoption of the standard did not have a material impact on the Company's consolidated financial statements. FASB ASU No. 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606" ("ASU 2018-18"): Effective January 1, 2020, the Company adopted ASU 2018-18. The standard clarifies that certain transactions between collaborative arrangement participants should be accounted for under ASC 606, when one participant is a customer, and specifies that a distinct good or service is the unit of account for evaluating whether the transaction is with a customer. The standard also provides guidance on presentation of transactions not in the scope of ASC 606. Adoption of the standard did not have a material impact on the Company's consolidated financial statements. Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes". The standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 including recognizing deferred taxes for investments, performing intra-period allocations and calculating taxes in interim periods. The ASU 2019-12 also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The standard is effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company plans to adopt the standard as of January 1, 2021 and is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements.
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Reclassifications [Text Block] | Reclassifications The Company made certain reclassifications to the prior years' financial statements and notes to the consolidated financial statements to conform them to the presentation as of and for the three and six months ended June 30, 2020. 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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Stock-based compensation (Tables) |
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Share-based Payment Arrangement, Noncash Expense [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block] | The following table sets forth the stock-based compensation expense recognized in the Consolidated Statements of Income (in thousands):
Stock-based compensation expense capitalized in the Consolidated Balance Sheets is as follows (in thousands):
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Net Earnings Per Share Net Earnings Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] | 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):
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Derivative Financial Instruments (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments | The following table presents the gross notional amounts of outstanding derivative instruments (in thousands):
The following table presents the balance sheet classification and fair value of derivative instruments (in thousands):
The following table presents the statement of income classification of derivative instruments (in thousands):
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Inventories (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories consist of the following (in thousands):
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Leases (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease Costs | The components of lease expense were as follows (in thousands):
Supplemental balance sheet information related to operating leases is as follows (in thousands):
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Goodwill (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying value and the activity | The following table presents changes in the carrying value of goodwill and the activity by reportable segment for the six months ended June 30, 2020 (in thousands):
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Debt Long-Term Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt | The Company's debt consists of the following (in thousands):
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Accrued Product Warranties (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Warranty Liability and Activity | The following table summarizes the Company’s warranty liability and activity (in thousands):
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Income Taxes (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Income Tax Expense (Benefit) | The provision for income taxes was as follows (in thousands, except percentages):
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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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Operating Segments and Related Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Business Unit Information | egment operating income information is as follows (in thousands):
Note 17. Operating Segments and Related Information - (Continued) Operating Segments - (Continued) A reconciliation of the Company's consolidated segment operating income to consolidated earnings before income taxes is as follows (in thousands):
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Business unit 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 consist 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):
|
Business Acquisitions (Tables) - Endeavor [Member] |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
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Business Acquisition [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | The final allocation of the purchase price for Endeavor 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 summarizes the acquired intangible assets and their estimated fair values and estimated useful lives (in thousands, except years):
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Restructuring Costs (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Costs [Table Text Block] | The restructuring liability related to Project Be Ready was as follows (in thousands):
Restructuring expenses related to Project Be Ready were as follows (in thousands):
|
Basis of Presentation and Significant Accounting Policies (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Accounting Policies [Abstract] | ||
Right-of-use assets | $ 30,341 | $ 35,479 |
Lease liabilities | $ 34,016 | $ 39,291 |
Stock-based Compensation (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Stock-based compensation expense | $ 13,241 | $ 9,188 | $ 20,887 | $ 17,278 |
Cost of Goods Sold [Member] | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Stock-based compensation expese | 1,668 | 709 | 2,735 | 1,556 |
Research and Development Expense [Member] | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Stock-based compensation expese | 2,277 | 1,951 | 3,954 | 3,631 |
Selling, General and Administrative Expenses [Member] | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Stock-based compensation expese | $ 9,296 | $ 6,528 | $ 14,198 | $ 12,091 |
Stock-based compensation Stock-based Compensation (Details 1) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Share-based Payment Arrangement, Noncash Expense [Abstract] | ||
Capitalized in inventory | $ 453 | $ 1,016 |
Stock-based Compensation (Detail textual) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2020
USD ($)
|
Jun. 30, 2020
USD ($)
|
|
Share-based Payment Arrangement, Noncash Expense [Abstract] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent | 85.00% | |
Unrecognized stock-based compensation costs, net of estimated forfeiture | $ 70.9 | $ 70.9 |
Weighted average period of unrecognized stock-based compensation costs, net of estimated forfeiture | 2 years 1 month 6 days |
Net Earnings Per Share Net Earnings Per Share (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Earnings Per Share [Abstract] | ||||
Net Income (loss) Available to Common Stockholders, Basic | $ 61,257 | $ 46,118 | $ 76,681 | $ 107,866 |
Weighted Average Number of Shares Outstanding, Basic | 130,831 | 135,519 | 132,213 | 135,530 |
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements | 856 | 1,565 | 1,176 | 1,575 |
Weighted Average Number of Shares Outstanding, Diluted | 131,687 | 137,084 | 133,389 | 137,105 |
Net Earnings Per Share Net Earnings Per Share (Detail textual) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Earnings Per Share [Abstract] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 1,082,000 | 52,000 | 570,000 | 192,000 |
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Minority interest Impairment Charges | $ 4,803 | $ 0 | |
Level 1 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Cash equivalents at fair value | 700 | ||
Level 2 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Fair value of senior unsecured notes | $ 432,300 | $ 430,100 |
Derivative Financial Instruments (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Interest Rate Swap | ||
Derivative [Line Items] | ||
Derivative fixed rate | 0.59% | |
Designated as Hedging Instrument | Interest Rate Swap | ||
Derivative [Line Items] | ||
Derivative, Notional Amount | $ 139,971 | $ 143,302 |
Designated as Hedging Instrument | Currency Forward Contracts | ||
Derivative [Line Items] | ||
Derivative, Notional Amount | 283,333 | 340,000 |
Not Designated as Hedging Instrument | Currency Forward Contracts | ||
Derivative [Line Items] | ||
Derivative, Notional Amount | $ 188,968 | $ 104,835 |
Accounts Receivable (Details) - USD ($) $ in Millions |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
SEC Schedule, 12-09, Allowance, Credit Loss [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts Receivable, Allowance for Credit Loss | $ 7.4 | $ 6.1 |
Inventories (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw material and subassemblies | $ 239,092 | $ 224,239 |
Work-in-progress | 62,108 | 44,344 |
Finished goods | 132,708 | 120,179 |
Total inventories | $ 433,908 | $ 388,762 |
Leases (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Lessee, Lease, Description [Line Items] | ||||
Operating lease expense | $ 3,045 | $ 2,837 | $ 6,067 | $ 5,472 |
Short-term lease expense | 26 | 327 | 53 | 573 |
Variable lease expense | 546 | 602 | 1,116 | 1,116 |
Total lease expense | $ 3,617 | $ 3,766 | $ 7,236 | $ 7,161 |
Minimum | ||||
Lessee, Lease, Description [Line Items] | ||||
Remaining lease term | 1 year | 1 year | ||
Maximum | ||||
Lessee, Lease, Description [Line Items] | ||||
Remaining lease term | 10 years | 10 years |
Leases - Supplemental Balance Sheet Information (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Leases [Abstract] | ||
Operating lease right-of-use assets | $ 30,341 | $ 35,479 |
Operating lease liabilities | $ 34,016 | $ 39,291 |
Property and Equipment (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
|
Property, Plant and Equipment [Abstract] | |||||
Depreciation | $ 11.2 | $ 10.8 | $ 23.0 | $ 21.2 | |
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment | $ 389.1 | $ 389.1 | $ 370.1 |
Goodwill (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2020
USD ($)
| |
Goodwill [Roll Forward] | |
Beginning Balance | $ 1,364,596 |
Goodwill, Acquired During Period | (12,617) |
Goodwill, Translation Adjustments | (10,990) |
Ending Balance | 1,340,989 |
Industrial Technologies | |
Goodwill [Roll Forward] | |
Beginning Balance | 635,899 |
Goodwill, Acquired During Period | 0 |
Goodwill, Translation Adjustments | (2,478) |
Ending Balance | 633,421 |
Defense Technologies | |
Goodwill [Roll Forward] | |
Beginning Balance | 728,697 |
Goodwill, Acquired During Period | (12,617) |
Goodwill, Translation Adjustments | (8,512) |
Ending Balance | $ 707,568 |
Intangible Assets Intangible Assets (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
|
Intangible Assets [Abstract] | |||||
Finite-Lived Intangible Assets, Accumulated Amortization | $ 151.0 | $ 151.0 | $ 129.9 | ||
Amortization of Intangible Assets | $ 11.8 | $ 21.1 | $ 23.7 | $ 27.0 |
Debt Long-Term Debt (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | $ 425,000 | |
Debt Instrument, Unamortized Discount (Premium) and Debt Issuance Costs, Net | 2,991 | $ 3,689 |
Long-term Debt | 846,730 | 676,863 |
Long-term debt, current portion | 12,465 | 12,444 |
Long-term debt, net of current portion | 643,265 | 648,419 |
Unsecured notes | ||
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | 425,000 | |
Credit Agreement | ||
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | 233,721 | 239,552 |
Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | 191,000 | 16,000 |
Unsecured notes | ||
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | $ 425,000 | $ 425,000 |
Accrued Product Warranties (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
|
Movement in Standard Product Warranty Accrual [Roll Forward] | |||||
Accrued product warranties, beginning of year | $ 19,809 | $ 19,058 | $ 19,143 | $ 18,583 | |
Amounts paid for warranty services | (1,803) | (4,354) | (3,806) | (7,130) | |
Warranty provisions for products sold | 2,229 | 3,793 | 5,089 | 6,207 | |
Business acquisitions and disposals | 0 | 25 | 0 | 899 | |
Currency translation adjustments and other | 113 | 19 | (78) | (18) | |
Accrued product warranties, end of year | 20,348 | 18,541 | 20,348 | 18,541 | |
Current accrued product warranties, end of year | 15,887 | 14,478 | 15,887 | 14,478 | $ 14,611 |
Long-term accrued product warranties, end of ear | $ 4,461 | $ 4,063 | $ 4,461 | $ 4,063 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Current tax expense (benefit): | ||||
Income tax provision | $ 20,637 | $ 12,005 | $ 28,411 | $ 25,014 |
Effective tax rate | 25.20% | 20.70% | 27.00% | 18.80% |
Current income tax expense (benefit) | $ 10,900 | |||
Deferred tax expense (benefit): | ||||
Unrecognized Tax Benefits | $ 23,000 | 23,000 | ||
Deferred Income Tax Expense (Benefit), Excluding Discontinued Operations | $ 21,700 |
Income Taxes (Details 2) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2020
USD ($)
| |
Foreign | |
Income Taxes [Line Items] | |
Income Tax Examination, Estimate of Possible Loss | $ 322.2 |
Transition [Member] | |
Income Taxes [Line Items] | |
Tax Adjustments, Settlements, and Unusual Provisions | $ 37.1 |
Income Taxes (Details 3) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2020
USD ($)
| |
Income Tax Disclosure [Abstract] | |
Statutory federal tax rate | 21.00% |
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued | $ 4.6 |
Operating Segments and Related Information (Details) |
6 Months Ended |
---|---|
Jun. 30, 2020
segment
| |
Segment Reporting [Abstract] | |
Number of operating business units | 2 |
Operating Segments and Related Information (Details 6) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Business Unit Reporting, Asset Reconciling Item [Line Items] | ||
Long-lived assets | $ 1,929,628 | $ 1,988,824 |
United States | ||
Business Unit Reporting, Asset Reconciling Item [Line Items] | ||
Long-lived assets | 1,104,883 | 1,137,375 |
Europe [Member] | ||
Business Unit Reporting, Asset Reconciling Item [Line Items] | ||
Long-lived assets | 416,394 | 435,024 |
Other Geographic Region [Member] | ||
Business Unit Reporting, Asset Reconciling Item [Line Items] | ||
Long-lived assets | $ 408,351 | $ 416,425 |
Operating Segments and Related Information (Details 7) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Revenue, Major Customer [Line Items] | ||||
Revenue | $ 482,015 | $ 481,998 | $ 932,938 | $ 926,734 |
United States government | ||||
Revenue, Major Customer [Line Items] | ||||
Revenue | $ 130,047 | $ 156,161 | $ 262,196 | $ 293,654 |
Business Acquisitions (Detail) - USD ($) $ in Thousands |
24 Months Ended | ||||
---|---|---|---|---|---|
May 01, 2019 |
Mar. 04, 2019 |
Apr. 30, 2021 |
Jun. 30, 2020 |
Dec. 31, 2019 |
|
Business Acquisition [Line Items] | |||||
Goodwill | $ 1,340,989 | $ 1,364,596 | |||
Endeavor [Member] | |||||
Business Acquisition [Line Items] | |||||
Business Combination, Consideration Transferred | $ 385,931 | ||||
Intangible assets acquired | 102,700 | ||||
Identifiable Intangible assets | 102,740 | ||||
Goodwill | $ 271,365 | ||||
NEOS [Member] | |||||
Business Acquisition [Line Items] | |||||
Business Combination, Consideration Transferred | $ 21,900 | ||||
Identifiable Intangible assets | 6,400 | ||||
Goodwill | $ 14,000 | ||||
Subsequent Event | NEOS [Member] | |||||
Business Acquisition [Line Items] | |||||
Business Combination, Consideration Transferred | $ 12,000 |
Restructuring Costs (Details 2) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring expenses | $ 7,702 | $ 3,001 | $ 28,486 | $ 3,610 |
Project Be Ready [Member] | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring expenses | $ 7,702 | $ 0 | $ 28,486 | $ 0 |
Restructuring Costs (Details 3) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring Reserve, Beginning | $ 4,123 | |||
Restructuring expenses | $ 7,702 | $ 3,001 | 28,486 | $ 3,610 |
Utilization | (20,682) | |||
Restructuring Reserve, Ending | 11,927 | 11,927 | ||
Employee Separation costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring Reserve, Beginning | 1,343 | |||
Restructuring expenses | 17,353 | |||
Utilization | (7,603) | |||
Restructuring Reserve, Ending | 11,093 | 11,093 | ||
Third party and other costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring Reserve, Beginning | 2,780 | |||
Restructuring expenses | 11,133 | |||
Utilization | (13,079) | |||
Restructuring Reserve, Ending | $ 834 | $ 834 |
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Sep. 04, 2020 |
Aug. 21, 2020 |
Aug. 04, 2020 |
Aug. 03, 2020 |
Sep. 30, 2020 |
Jun. 30, 2020 |
|
Subsequent Event [Line Items] | ||||||
Long-term Debt, Gross | $ 425.0 | |||||
Senior unsecured notes, interest rate | 3.125% | |||||
Subsequent Event | ||||||
Subsequent Event [Line Items] | ||||||
Dividends Payable, Date Declared | Aug. 04, 2020 | |||||
Quarterly dividend, value per share | $ 0.17 | |||||
Quarterly dividend, date to be paid | Sep. 04, 2020 | |||||
Quarterly dividend, date of record | Aug. 21, 2020 | |||||
Quarterly dividend, amount declared | $ 22.3 | |||||
Long-term Debt, Gross | $ 500.0 | |||||
Senior unsecured notes, interest rate | 2.50% | |||||
Underwritten public offering price, percentage of aggregate principal amount | 99.807% | |||||
Debt Instrument, Interest Rate, Effective Percentage | 2.65% | |||||
Proceeds from Issuance of Long-term Debt | $ 494.0 | |||||
Gain (Loss) on Extinguishment of Debt | $ 9.0 |
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