Prepared by R.R. Donnelley Financial -- Form 10-Q for the period ending 06/30/02

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-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FLztSBwLmP0HQbJuCH8t8qu7QKFVCS2RKZZGKrdQ/vLyGgZWTKu4qWWm9a8PZp8T Wu9ToJolGlWel2Jx59ONpA== 0001032210-02-001154.txt : 20020806 0001032210-02-001154.hdr.sgml : 20020806 20020806130123 ACCESSION NUMBER: 0001032210-02-001154 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLIR SYSTEMS INC CENTRAL INDEX KEY: 0000354908 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812] IRS NUMBER: 930708501 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21918 FILM NUMBER: 02720420 BUSINESS ADDRESS: STREET 1: 16505 SW 72ND AVE CITY: PORTLAND STATE: OR ZIP: 97224 BUSINESS PHONE: 5036843731 MAIL ADDRESS: STREET 1: 16505 SW 72ND AVENUE CITY: PORTLAND STATE: OR ZIP: 97224 10-Q 1 d10q.htm FORM 10-Q FOR THE PERIOD ENDING 06/30/02 Prepared by R.R. Donnelley Financial -- Form 10-Q for the period ending 06/30/02

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2002

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For

the transition period from to

Commission file number 0-21918

FLIR Systems, Inc.

(Exact name of Registrant as specified in its charter)

Oregon		93-0708501
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

16505 S.W. 72nd Avenue, Portland, Oregon		97224
(Address of principal executive offices)		(Zip Code)

(503) 684-3731

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x. No ¨.

At July 31, 2002, there were 16,866,528 shares of the Registrant’s common stock, $0.01, par value, outstanding.

INDEX

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Statements of Operations—Three Months and Six Months Ended June 30, 2002 and 2001	1
	Consolidated Balance Sheets—June 30, 2002 and December 31, 2001	2
	Consolidated Statements of Cash Flows—Six Months Ended June 30, 2002 and 2001	3
	Notes to the Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	13
Item 4.	Submission of Matters to a Vote of Shareholders	14
Item 6.	Exhibits and Current Reports on Form 8-K	14
	Signature	15

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

FLIR SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2002			2001			2002			2001
Revenue	$	63,595		$	51,395		$	121,693		$	101,867
Cost of goods sold		30,777			22,700			57,576			45,881

Gross profit		32,818			28,695			64,117			55,986
Operating expenses:
Research and development		6,460			6,635			13,549			12,740
Selling, general and administrative		14,762			13,490			28,581			26,852

Total operating expenses		21,222			20,125			42,130			39,592
Earnings from operations		11,596			8,570			21,987			16,394
Interest expense		825			2,004			1,143			5,458
Other income, net		(473	)		(50	)		(597	)		(238	)

Earnings before income taxes		11,244			6,616			21,441			11,174
Income tax provision		1,687			992			3,216			1,676

Net earnings	$	9,557		$	5,624		$	18,225		$	9,498

Net earnings per share:
Basic	$	0.57		$	0.38		$	1.09		$	0.65

Diluted	$	0.54		$	0.36		$	1.02		$	0.63

The accompanying notes are an integral part of these consolidated financial statements.

FLIR SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

	June 30, 2002			December 31, 2001
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	11,006		$	15,514
Accounts receivable, net		55,486			57,965
Inventories		50,642			46,560
Prepaid expenses and other current assets		13,988			11,548
Deferred income taxes		8,834			8,834

Total current assets		139,956			140,421
Property and equipment, net		13,698			10,806
Deferred income taxes, net		15,087			15,087
Intangible assets, net		16,803			16,811
Other assets		2,757			1,913

	$	188,301		$	185,038


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Notes payable	$	3,685		$	23,370
Accounts payable		14,525			18,428
Deferred revenue		4,895			5,314
Accrued payroll and other liabilities		27,456			22,538
Accrued income taxes		1,544			747
Current portion of capital lease obligations		126			584

Total current liabilities		52,231			70,981
Pension and other long-term liabilities		7,702			9,209
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $0.01 par value, 10,000 shares authorized; no shares issued at June 30, 2002, and December 31, 2001		—			—
Common stock, $0.01 par value, 30,000 shares authorized, 16,864 and 16,555 shares issued at June 30, 2002, and December 31, 2001, respectively		168			165
Additional paid-in capital		199,038			194,338
Accumulated deficit		(66,639	)		(84,864	)
Accumulated other comprehensive loss		(4,199	)		(4,791	)

Total shareholders’ equity		128,368			104,848

	$	188,301		$	185,038

The accompanying notes are an integral part of these consolidated financial statements.

FLIR SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2002			2001
Cash flows from operating activities:
Net earnings	$	18,225		$	9,498
Income charges not affecting cash:
Depreciation and amortization		2,993			3,942
Disposals and write-offs of property and equipment		33			336
Fair value adjustment on interest swaps		(281	)		510
Deferred income taxes		—			—
Other non-cash items		152			—
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		3,565			(743	)
(Increase) decrease in inventories		(2,806	)		8,822
Increase in prepaid expenses and other current assets		(2,101	)		(246	)
Increase in other assets		(1,198	)		(89	)
Decrease in accounts payable		(4,555	)		(7,270	)
(Decrease) increase in deferred revenue		(471	)		1,607
Increase in accrued payroll and other liabilities		3,471			3,731
Increase (decrease) in accrued income taxes		429			(1,091	)
(Decrease) increase in pension and other long-term liabilities		(1,826	)		126

Cash provided by operating activities		15,630			19,133

Cash flows from investing activities:
Additions to property and equipment		(4,690	)		(3,424	)

Cash used by investing activities		(4,690	)		(3,424	)

Cash flows from financing activities:
Repayment of credit agreement		(19,900	)		(20,500	)
Net increase (decrease) increase in international credit line		215			(78	)
Repayment of capital leases		(459	)		(644	)
Proceeds from exercise of stock options		4,072			1,720
Stock issued pursuant to employee stock purchase plan		456			313

Cash used by financing activities		(15,616	)		(19,189	)

Effect of exchange rate changes on cash		168			(277	)

Net decrease in cash and cash equivalents		(4,508	)		(3,757	)
Cash and cash equivalents, beginning of period		15,514			11,858

Cash and cash equivalents, end of period	$	11,006		$	8,101

The accompanying notes are an integral part of these consolidated financial statements.

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The accompanying consolidated financial statements of FLIR Systems, Inc. (the “Company”) are unaudited and have been prepared by the Company 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 necessary for a fair presentation of the 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 year ended December 31, 2001.

The accompanying financial statements include the accounts of the Company and its wholly owned subsidiaries. All 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, 2002.

Certain reclassifications have been made to prior year’s data to conform to the current year’s presentation. These reclassifications had no impact on previously reported results of operations or shareholders’ equity.

Note 2. Net Earnings Per Share

Basic earnings per share is based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the weighted shares outstanding are increased to include additional shares from the assumed exercise of stock options, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options were exercised and that the proceeds from such exercises were used to acquire shares of common stock at the average market price during the reporting period.

The following table sets forth the reconciliation of the denominator utilized in the computation of basic and diluted earnings per share (in thousands):

	Three Months Ended June 30,		Six Months Ended June 30,
	2002	2001	2002	2001
Weighted average number of common shares outstanding	16,794	14,710	16,723	14,636
Assumed exercises of stock options net of shares assumed reacquired under the treasury stock method	1,024	720	1,084	472

Diluted shares outstanding	17,818	15,430	17,807	15,108

The effect of stock options for the three months ended June 30, 2002 and 2001 that aggregated 302,221 and 428,449, respectively, and for the six months ended June 30, 2002 and 2001 that aggregated 218,630 and 739,919, respectively, have been excluded for purposes of diluted earnings per share since the effect would have been anti-dilutive.

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 3. Inventories

Inventories consist of the following (in thousands):

	June 30, 2002		December 31, 2001
Raw material and subassemblies	$	31,883	$	28,443
Work-in-progress		16,023		11,658
Finished goods		2,736		6,459

	$	50,642	$	46,560

Note 4. Notes Payable

On March 22, 2002, the Company entered into a new Credit Agreement with Bank of America, N.A., KeyBank, N.A., and Union Bank of California, N.A. The agreement provides for a $35 million, three-year revolving line of credit with an option for an additional $25 million during the first two years. Under the Credit Agreement, borrowings will bear interest based upon the prime lending rate of the Bank of America or Eurodollar rates with a provision for a spread over such rates based upon the Company’s leverage ratio. The Credit Agreement contains four financial covenants that require the maintenance of certain fixed charge and leverage ratios in addition to minimum levels of EBITDA and consolidated net worth. The Credit Agreement is collateralized by substantially all assets of the Company. At June 30, 2002, the Company had no amounts outstanding under the Credit Agreement and was in compliance with all covenants.

Additionally, the Company, through one of its subsidiaries, has a 60,000,000 Swedish Kronar (approximately $6.5 million) line of credit at 4.95 percent at June 30, 2002. At June 30, 2002, the Company had $3.7 million outstanding on this line. This credit line is secured primarily by accounts receivable and inventories of the subsidiary and is subject to automatic renewal on an annual basis.

Note 5. Comprehensive Income

Comprehensive income includes foreign currency translation gains and losses that are reflected in shareholders’ equity instead of net income. The following table sets forth the calculation of comprehensive income for the periods indicated (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2002		2001		2002		2001
Net earnings	$	9,557	$	5,624	$	18,225	$	9,498
Foreign currency translation gain (loss)		500		155		592		(952	)

Total comprehensive income	$	10,057	$	5,779	$	18,817	$	8,546

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 5. Comprehensive Income—(Continued)

Foreign currency translation gains and losses represent unrealized gains/losses in the translation of the financial statements of the Company’s subsidiaries in accordance with SFAS No. 52, “Foreign Currency Translation.” The Company has no intention of liquidating the assets of the foreign subsidiaries in the foreseeable future.

Note 6. Litigation

On June 8, 2000, the Securities and Exchange Commission (“SEC”) issued a formal order of investigation of the Company and certain officers, directors, employees and other individuals presently and formerly associated with the Company to determine whether any violations of the federal securities laws occurred during 1998 and 1999. The investigation relates to the Company’s revenue recognition policies, accounting controls, financial reports and other public disclosures during that time period. The Company believes that the investigation relates to, among other things, the same set of facts that gave rise to the restatements of its financial statements for those periods and to class action lawsuits by its shareholders that have now been settled. As part of its investigation, the SEC subpoenaed documents and testimony from the Company’s current and former officers and employees and others.

On February 19, 2002, the staff of the SEC advised the Company that they intend to recommend that the SEC bring a civil injunctive action against the Company seeking a permanent injunction against it for violations of Section 17(a) of the Securities Act of 1933 (the “Securities Act”) and Sections 10(b), 13(a) and 13(b)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rules 10b-5, 12b-20, 13a-1, 13a-13 and 13b2-1 thereunder. These statutes and rules generally include the antifraud provisions of the Securities Act and the antifraud, reporting and record keeping provisions of Exchange Act and the rules thereunder. The recommendation of the SEC staff does not include civil penalties, fines or other claims for damages and is for the years 1998 and 1999.

The Company has engaged in discussions with the staff of the SEC in an attempt to reach a settlement of the legal action contemplated by the staff, but as of this date has been unable to reach agreement on the terms of settlement. The Company has also submitted a written statement to the SEC as to why the Company believes the SEC should not bring the civil injunctive action recommended by the staff. At this time, the Company does not know whether the SEC will authorize the commencement of the injunctive action recommended by its staff or whether the SEC will authorize any other legal action or commence any administrative actions against it. If the Company is not able to negotiate a settlement with the SEC with regard to any such injunctive actions or administrative proceedings, the Company intends to vigorously defend against any such actions or proceedings.

An adverse finding against the Company by the SEC on the terms proposed by the staff could also result in the loss of the Company’s ability to rely on the safe harbor for forward-looking statements provided by the Securities Litigation Reform Act of 1995. In addition, the Company expects to continue to incur expenses associated with responding to the investigation and any legal or administrative proceedings commenced by the SEC involving the Company or former or current officers, directors and employees, and any such proceedings may divert the efforts of the management team from normal business operations.

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 6. Litigation—(Continued)

The Company is also involved in other litigation and various legal matters that are being defended and handled in the ordinary course of business.

The ultimate results of the matters described above cannot presently be determined and the Company does not expect that they will have a material adverse effect on the Company’s results of operations, financial position, or cash flows. Therefore, no adjustments have been made to the accompanying financial statements relative to these matters.

Note 7. Segment Information

The Company has determined its operating segments to be the Imaging and Thermography market segments. The Imaging market is comprised of a broad range of applications that is focused on providing enhanced night vision capabilities where temperature measurement is not required, although differences in temperatures are used to create an image. The Imaging market also includes high performance daylight camera applications. The Thermography market is comprised of a broad range of commercial and industrial applications utilizing infrared cameras to provide precise temperature measurement.

The accounting policies of each segment are the same. The Company evaluates performance based upon revenue for each segment and does not evaluate segment performance on any other income measurement.

Operating segment information for revenue is as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2002		2001		2002		2001
Imaging	$	43,271	$	28,637	$	81,086	$	57,176
Thermography		20,324		22,758		40,607		44,691

	$	63,595	$	51,395	$	121,693	$	101,867

Long-lived assets by significant geographic location is as follows (in thousands):

	June 30, 2002		December 31, 2001
United States	$	8,586	$	8,772
Europe		24,672		20,758

	$	33,258	$	29,530

FLIR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 8. Goodwill

Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142) requires disclosure of what reported net income before extraordinary items and net income would have been in all periods presented exclusive of amortization expense (including any related tax effects) recognized in those periods related to goodwill and other intangible assets that are no longer being amortized. The Company adopted SFAS 142 on January 1, 2002.

The following table illustrates what the Company’s net income and basic and diluted net earnings per share would have been during the three months and six months ended June 30, 2001 and 2002, exclusive of amortization expense related to the goodwill recorded during the acquisition of AGEMA Infrared Systems AB (in thousands, except for per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2002		2001		2002		2001
Reported net income	$	9,557	$	5,624	$	18,225	$	9,498
Add back: Goodwill amortization				243				487

Adjusted net income	$	9,557	$	5,867	$	18,225	$	9,985

Basic earnings per share:
Reported net income	$	0.57	$	0.38	$	1.09	$	0.65
Add back: Goodwill amortization				0.02				0.03
Adjusted net income	$	0.57	$	0.40	$	1.09	$	0.68

Diluted earnings per share:
Reported net income	$	0.54	$	0.36	$	1.02	$	0.63
Add back: Goodwill amortization				0.02				0.03
Adjusted net income	$	0.54	$	0.38	$	1.02	$	0.66

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations:

Revenue. The Company’s revenue for the three months ended June 30, 2002 increased 23.7 percent, from $51.4 million in the second quarter of 2001 to $63.6 million in the second quarter of 2002. The Company’s revenue for the six months ended June 30, 2002 increased 19.5 percent, from $101.9 million in the first six months of 2001 to $121.7 million in the first six months of 2002.

Imaging revenue increased $14.6 million, or 51.1 percent, from $28.6 million in the second quarter of 2001 to $43.3 million in the second quarter of 2002. Imaging revenue for the first six months of 2002 increased $23.9 million, or 41.8 percent, from $57.2 million in the first six months of 2001 to $81.1 million in the first six months of 2002. The increase in Imaging revenue in the second quarter and the first six months of 2002 was primarily due to an increase in units delivered of the Company’s ground-based and airborne imaging products.

Thermography revenue decreased by 10.7 percent, from $22.8 million in the second quarter of 2001 to $20.3 million in the second quarter of 2002. Thermography revenue for the first six months of 2002 decreased by 9.1 percent, from $44.7 million in the first six months of 2001 to $40.6 million in the first six months of 2002. This decrease in Thermography revenue in the second quarter of 2002 was primarily due to production delays involving the new E-Series and P-Series product lines and the effects of more stringent US export licensing requirements. The Company believes these delays to be temporary and expects growth in Thermography revenues over the long term.

The timing of deliveries against large contracts, especially for the Company’s Imaging products, can give rise to quarter to quarter and year over year fluctuations in the mix of revenue. Consequently, year over year comparisons for any given quarter may not be indicative of comparisons using longer time periods. The Company believes that the overall percentage increase in total revenue is indicative of the growth it expects for annual 2002 over that of 2001 but expects that the mix of revenue between the Imaging and Thermography businesses and within certain product categories in the Imaging business will vary from quarter to quarter.

As a percentage of revenue, international sales were 46.9 percent and 39.3 percent for the quarters ended June 30, 2002 and 2001, respectively. International sales for the first six months of 2002 and 2001 were 46.4 percent and 39.6 percent, respectively. While the percentage of revenue from international sales will continue to fluctuate from quarter to quarter due to the timing of shipments under international and domestic government contracts, management anticipates that revenue from international sales as a percentage of total revenue will continue to comprise a significant percentage of revenue.

Gross profit. Gross profit for the quarter ended June 30, 2002 was $32.8 million compared to $28.7 million for the same quarter last year. As a percentage of revenue, gross profit was 51.6 percent in the second quarter of 2002 compared to 55.8 percent in the second quarter of 2001. As a percentage of revenue, gross profit for the first six months of 2002 was 52.7 percent compared to 55.0 percent in the first six months of 2001. The decreases in gross profit percentages are primarily due to increased costs incurred in connection with the production and distribution of new products and from the higher percentage of Imaging revenue, as the margins for those products are typically lower than the margins for Thermography products.

Research and development expense. Research and development expense for the second quarter of 2002 totaled $6.5 million compared to $6.6 million in the second quarter of 2001. Research and development expense for the first six months of 2002 totaled $13.5 million compared to $12.7 million in the first six months of 2001. The increase was primarily attributable to the general growth in the Company’s business. As a percentage of revenue, research and development was 10.2 percent and 12.9 percent for the three months ended June 30, 2002 and 2001, respectively, and 11.1 percent and 12.5 percent for the first six months of 2002 and 2001, respectively.

The Company anticipates annual spending for research and development as a percentage of revenue to be comparable to the level experienced in the first six months of 2002. The overall level of research and development expense reflects the continued emphasis on product development and new product introductions.

Selling, general and administrative expenses. Selling, general and administrative expenses were $14.8 million for the quarter ended June 30, 2002, compared to $13.5 million for the quarter ended June 30, 2001. Selling, general and administrative expenses for the first six months of 2002 were $28.6 million compared to $26.9 million for the first six months of 2001. The increase was primarily due to an increase in sales and marketing expense related to the introduction of new Thermography products and an increase in expenses due to the 2001 acquisition of the Optronics division from SaabTech Electronics AB. Offsetting these costs were some declines in administrative expense, including the discontinuation of goodwill amortization of $0.3 million and $0.6 million for the quarter and the six months ended June 30, 2002, respectively, as required by a new accounting standard. Selling, general and administrative expenses as a percentage of revenue were 23.2 percent and 26.2 percent for the quarters ended June 30, 2002 and 2001, respectively and 23.5 percent and 26.4 percent for the first six months of 2002 and 2001, respectively.

Interest expense. Interest expense decreased from $2.0 million in the second quarter of 2001 to $0.8 million for the quarter ended June 30, 2002. Interest expense decreased from $5.5 million in the first six months of 2001 to $1.1 million in the first six months of 2002. The significant decrease in 2002, as compared to the same periods in 2001 was due to the Company’s repayment of all amounts outstanding under the Credit Agreement.

Income taxes. The income tax provision of $1.7 million and $3.2 million for the three months and six months ended June 30, 2002 represents an effective tax rate of 15 percent, which reflects the Company’s estimate of expected year-end earnings and losses and resultant taxes in its various tax jurisdictions and represents primarily foreign taxes. Management will continue to assess the extent and timing of future profitability and will adjust the effective tax rate as necessary to reflect the impact of actual results.

Liquidity and Capital Resources

At June 30, 2002, the Company had cash on hand, net of short-term borrowings of $7.2 million compared to short-term borrowings, net of cash on hand of $8.4 million at December 31, 2001. The increase in net cash is primarily due to the repayment of all amounts outstanding under the Company’s Credit Agreement early in 2002.

Cash provided by operating activities in the first six months of 2002 was $15.6 million, compared to $19.1 million for the first six months of 2001. Cash provided from operating activities was principally due to net earnings for the period and a reduction in accounts receivable, partially offset by an increase in inventories and other assets and a reduction in accounts payable.

Accounts receivable decreased from $58.0 million at December 31, 2001 to $55.5 million at June 30, 2002, primarily as a result of lower shipments in the second quarter of 2002 compared to the fourth quarter of 2001. Days sales outstanding decreased from 99 days at December 31, 2001 to 83 days at June 30, 2002. The timing of sales, particularly the recording of large system sales, can significantly impact the calculation of days sales outstanding at any point in time.

At June 30, 2002, the Company had inventories on hand of $50.6 million compared to $46.6 million at December 31, 2001. The increase was primarily the result of the anticipation of increased future shipments and recent new product introductions.

At June 30, 2002, the Company had prepaid expenses and other current assets of $14.0 million compared to $11.5 million at December 31, 2001. The increase was primarily due to an increase in the number of sales demonstration units related to new products introduced in our Thermography business.

The Company had accounts payable of $14.5 million at June 30, 2002, compared to $18.4 million at December 31, 2001. The decrease is primarily due to the timing of vendor payments.

The Company had accrued payroll and other current liabilities of $27.5 million, compared to $22.5 million at December 31, 2001. The increase was primarily due to the increase in advance payments made by certain customers and the reclassification of $2.0 million from long-term liabilities related to the interest rate swap agreements, which the Company settled in July 2002.

The Company’s investing activities have consisted primarily of expenditures for fixed assets, which totaled $4.7 million and $3.4 million for the six months ended June 30, 2002 and 2001, respectively. The increased expenditures primarily relate to the new facilities for certain of its operations in Europe.

The Company believes that our existing cash, cash generated by operating activities, available credit facilities and financing available from other sources will be sufficient to meet our cash requirements for the foreseeable future. At the present, the Company does not have any significant capital commitments for the coming year.

Forward-Looking Statements

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995 that are based on current expectations, estimates and projections about the Company’s business, management’s beliefs, and assumptions made by management. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “sees,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to, those discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as those discussed from time to time in the Company’s Securities and Exchange Commission fillings and reports, including the Annual Report on Form 10-K for the year ending December 31, 2001. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this report. If the Company does update or correct one or more forward-looking statement, investors and others should not conclude that the Company will make additional updates or corrections with respect thereto or with respect to other forward-looking statements.

Critical Accounting Policies and Estimates

The Company reaffirms the critical accounting policies and the use of estimates as reported in the Company’s Form 10-K for the year ended December 31, 2001.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company has engaged in discussions with the staff of the SEC in an attempt to reach a settlement of the legal action contemplated by the staff, but as of this date has been unable to reach agreement on the terms of settlement. The Company has also submitted a written statement to the SEC as to why it believes the SEC should not bring the civil injunctive action recommended by the staff. At this time, the Company does not know whether the SEC will authorize the commencement of the injunctive action recommended by its staff or whether the SEC will authorize any other legal action or commence any administrative actions against it. If the Company is not able to negotiate a settlement with the SEC with regard to any such injunctive actions or administrative proceedings, the Company intends to vigorously defend against any such actions or proceedings.

Any legal or injunctive action or administrative proceedings that the SEC may bring against the Company could have a material adverse effect on our business, financial condition and results of operations. An adverse finding against the Company by the SEC on the terms proposed by the staff could also result in the loss of the Company’s ability to rely on the safe harbor for forward-looking statements provided by the Securities Litigation Reform Act of 1995. In addition, the Company expects to continue to incur expenses associated with responding to the investigation and any legal or administrative proceedings commenced by the SEC involving the Company or former or current officers, directors and employees, and any such proceedings may divert the efforts of the management team from normal business operations.

The Company is also involved in other litigation and various legal matters that are being defended and handled in the ordinary course of business.

The ultimate results of the matters described above cannot presently be determined and management does not expect that they will have a material adverse effect on the Company’s results of operations, financial position, or cash flows. Therefore, no adjustments have been made to the accompanying financial statements relative to these matters.

Item 4. Submission of Matters to a Vote of Shareholders

The Company’s annual meeting of shareholders was held on Wednesday, April 24, 2002, at which the following persons were elected to the Board of Directors by a vote of the shareholders, by the votes and terms indicated:

	Vote
Director	For	Withheld Authority	Term Ending
John C. Hart	15,048,328	53,654	2005
Angus L. Macdonald	15,036,078	65,904	2005

In addition, the Company’s 2002 Stock Incentive Plan was approved by a vote of the shareholders, by the following votes:

For		Against		Abstain		Other Unvoted
7,933,746		4,451,737		281,595		2,434,904

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits.

Number		Description
10.28		Amended and Restated 1999 Employee Stock Purchase Plan, amended as of June 4, 2002

99.1		Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.2		Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) During the three months ended June 30, 2002, the Company filed the following report on Form 8-K:

The Company filed a current report on Form 8-K, dated May 20, 2002, reporting under Item 4 and Item 7 the dismissal of Arthur Andersen LLP as its independent auditors and the engagement of KPMG LLP as its new independent auditors.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EX-10.28 3 dex1028.htm AMENDED 1999 EMPLOYEE STOCK PURCHASE PLAN Prepared by R.R. Donnelley Financial -- Amended 1999 Employee Stock Purchase Plan

Exhibit 10.28

FLIR SYSTEMS, INC.

AMENDED AND RESTATED

1999 EMPLOYEE STOCK PURCHASE PLAN

The following provisions constitute the FLIR Systems, Inc. 1999 Employee Stock Purchase Plan.

1. Purpose. The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an “Employee Stock Purchase Plan” under Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code.

2. Definitions.

2.1 “Account” shall mean each separate account maintained for a Participant under the Plan, collectively or singly as the context requires. Each Account shall be credited with a Participant’s contributions, and shall be charged for the purchase of Common Stock. A Participant shall be fully vested in the cash contributions to his or her account at all times. The Plan Administrator may create special types of accounts for administrative reasons, even though the Accounts are not expressly authorized by the Plan.

2.2 “Board” shall mean the Board of Directors of the Company.

2.3 “Code” shall mean the Internal Revenue Code of 1986, as amended.

2.4 “Committee” shall mean the Compensation Committee of the Board.

2.5 “Common Stock” shall mean the Common Stock of the Company.

2.6 “Company” shall mean FLIR Systems, Inc., an Oregon corporation.

2.7 “Compensation” shall mean all base straight time gross earnings plus payments for overtime, shift premiums and sales commissions, but excluding incentive compensation, incentive payments, bonuses, awards, and other compensation.

2.8 “Designated Subsidiary” shall mean each Subsidiary which has been designated by the Board from time to time in its sole discretion as eligible to participate in the Plan.

2.9 “Employee” shall mean an individual who renders services to the Company or to a Designated Subsidiary pursuant to a regular-status employment relationship with such employer. A person rendering services to the Company or to a Designated Subsidiary purportedly as an independent consultant or contractor shall not be an Employee for purposes of the Plan.

2.10 “Enrollment Date” shall mean the first day of each Offering Period.

2.11 “Fair Market Value”

2.11.1 If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation (“NASDAQ”) System, its Fair Market Value shall be the closing sale price for the Common Stock (or the mean of the closing bid and asked prices, if no sales were reported), as quoted on such exchange (or the exchange with the greatest volume of trading in Common Stock) or system on the day of such determination, as reported in The Wall Street Journal or such other source as the Board deems reliable, or;

2.11.2 If the Common Stock is quoted on the NASDAQ system (but not on the National Market System thereof) or is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for the Common Stock on the day of such determination, as reported in The Wall Street Journal or such other source as the Board deems reliable, or;

2.11.3 In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board.

2.12 “NASDAQ” shall mean the National Association of Securities Dealers Automated Quotation System or such other quotation system that supersedes it.

2.13 “Offering Period” shall mean the period of approximately six (6) months, commencing on the first Trading Day on or after a date designated in advance by the Board and terminating on the last Trading Day in the period ending six months later, during which an option granted pursuant to the Plan may be exercised. The duration of Offering Periods may be changed pursuant to Section 4 of this Plan.

2.14 “Participant” shall mean any Employee who is participating in this Plan by meeting the eligibility requirements of Section 3 and has completed a Payroll Deduction Authorization Form.

2.15 “Payroll Participation Form” shall mean the form attached hereto as Exhibit A (or such other form as may be provided by the Company) on which a Participant shall elect to participate in the Plan and designate the percentage of his or her Compensation to be contributed to his or her Account through payroll deductions.

2.16 “Plan” shall mean this Employee Stock Purchase Plan.

2.17 “Purchase Date” shall mean the last day of each Offering Period.

2.18 “Purchase Price” shall mean an amount equal to 85% of the Fair Market Value of a share of Common Stock (i) on the Enrollment Date or (ii) on the Purchase Date, whichever is lower.

2.19 “Reserves” shall mean the number of shares of Common Stock covered by each option under the Plan which have not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but not yet placed under option.

2.20 “Subsidiary” shall mean a corporation, domestic or foreign, of which not less than 50% of the voting shares are held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company of a Subsidiary.

2.21 “Trading Day” shall mean a day on which national stock exchanges and Nasdaq are open for trading.

3. Eligibility.

3.1 A person shall become eligible to participate in the Plan on the first Enrollment Date on or after which he or she first meets all of the following requirements; provided, however, that no one shall become eligible to participate in the Plan prior to the Enrollment Date of the first Offering Period provided for in Section 2.13:

3.1.1 The person’s customary period of employment is for more than twenty (20) hours per week;

3.1.2 The person’s customary period of employment is for more than five (5) months in any calendar year.

3.2 Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) if, immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary, or (ii) which permits his or her rights to purchase stock under all employee stock purchase plans (under Section 423 of the Code) of the Company and Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the fair market value of the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time.

3.3 For purposes of the Plan, eligibility shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company. Where the period of leave exceeds 90 days and the individual’s right to reemployment is not guaranteed either by statute or by contract, eligibility to participate in the Plan will be deemed to have terminated on the 91st day of such leave.

4. Offering Periods. The Plan shall be implemented by consecutive Offering Periods with the first Offering Period commencing on a date designated in advance by the Board, and continuing for six month periods thereafter until terminated in accordance with Section 19 hereof. The Board shall have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future offerings without shareholder approval if such change is announced at least fifteen (15) days prior to the scheduled beginning of the first Offering Period to be affected thereafter.

5. Participation.

5.1 An eligible Employee may become a Participant in the Plan by completing a Payroll Participation Form and filing it with the Company’s Administration Department (as set forth in Section 20 below) at least fifteen (15) days prior to the applicable Enrollment Date, unless a later time for filing the Payroll Participation Form is set by the Board for all eligible Employees with respect to a given Offering Period.

5.2 Payroll deductions for a Participant shall commence on the first payroll period following the Enrollment Date and shall end on the last payroll period in the Offering Period, unless sooner terminated by the Participant as provided in Section 10 hereof.

6. Payroll Deductions.

6.1 At the time a Participant files his or her Payroll Participation Form, he or she shall elect to have payroll deductions made on each payday during the Offering Period in an amount not exceeding ten percent (10%) of the Compensation which he or she receives on each payday during the Offering Period, and the aggregate of such payroll deductions during the Offering Period shall not exceed ten percent (10%) of the Participant’s Compensation during said Offering Period.

6.2 A Participant shall specify that he or she desires to make contributions to the Plan in whole percentages not less than one percent (1%) and not more than ten percent (10%) of the Participant’s Compensation during each pay period in the Offering Period, or such other minimum or maximum percentage as the Board shall establish from time to time.

6.3 All payroll deductions made for a Participant shall be credited to his or her Account under the Plan and will be withheld in whole percentages only. A Participant may not make any additional payments into such Account.

6.4 A Participant may discontinue his or her participation in the Plan as provided in Section 10 hereof, or may increase or decrease the rate of his or her payroll deductions during the Offering Period by filing with the Company (as set forth in Section 20 below) a new Payroll Participation Form authorizing a change in payroll deduction rate. A Participant is limited to making one change during an Offering Period. The change in rate shall be effective with the first full payroll period following fifteen (15) days after the Company’s receipt of a new Payroll Participation Form unless the Company elects to process a given change in participation more quickly. A Participant’s Payroll Participation Form shall remain in effect for successive Offering Periods unless terminated as provided in Section 10.

6.5 Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3.2 hereof, a Participant’s payroll deductions may be decreased to 0% at any time during any Offering Period. Payroll deductions shall recommence at the rate provided in such Participant’s Payroll Participation Form at the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless terminated by the Participant as provided in Section 10.

6.6 At the time the option is exercised, or at the time some or all of the Common Stock issued under the Plan is disposed of, the Participant must make adequate

provision for the Company’s federal, state, or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any time, the Company may, but will not be obligated to, withhold from the Participant’s compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefit attributable to sale or early disposition of Common Stock by the Employee.

7. Option to Purchase Common Stock. On the Enrollment Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on the Purchase Date of such Offering Period (at the applicable Purchase Price) up to a number of shares of the Common Stock determined by dividing such Employee’s payroll deductions accumulated prior to such Purchase Date and retained in the Participant’s account as of the Purchase Date by the applicable Purchase Price; provided that in no event shall an Employee be permitted to purchase during each Offering Period more than a number of shares determined by dividing $12,500 by the Fair Market Value of a share of the Common Stock on the Enrollment Date, and provided further that such purchase shall be subject to the limitations set forth in Sections 3.2 and 12 hereof. Purchase of the Common Stock shall occur as provided in Section 8, unless the Participant has withdrawn pursuant to Section 10, and the option shall expire on the last day of the Offering Period.

8. Purchase of Common Stock. Unless a Participant withdraws from the Plan as provided in Section 10.1 below, his or her option for the purchase of Common Stock will be exercised automatically on the Purchase Date, and the maximum number of full shares subject to option shall be purchased for such Participant at the applicable Purchase Price with the accumulated payroll deductions in his or her account. No fractional shares of Common Stock will be purchased; any payroll deductions accumulated in a Participant’s account which are not sufficient to purchase a full share shall be retained in the Participant’s account for the subsequent Offering Period, subject to earlier withdrawal by the Participant as provided in Section 10 hereof. Any other monies left over in a Participant’s account after the Purchase Date shall be returned to the Participant. During a Participant’s lifetime, a Participant’s option to purchase shares of Common Stock hereunder is exercisable only by him or her.

9. Delivery. As promptly as practicable after each Purchase Date, the Company shall arrange the delivery to each Participant of a certificate for the shares of Common Stock purchased with his or her payroll deductions.

10. Withdrawal; Termination of Employment.

10.1 A Participant may withdraw all but not less than all the payroll deductions credited to his or her account and not yet used to purchase shares of Common Stock under the Plan by giving written notice in the form of Exhibit B to this Plan (or such other form as may be provided by the Company) to the Company (as set forth in Section 20 below) no less than 15 days immediately preceding a Purchase Date. All of the Participant’s payroll deductions credited to his or her Account will be paid to such Participant as soon as practicable after receipt of notice of withdrawal and such Participant’s option for the Offering Period will be automatically terminated, and no further payroll deductions for the purchase of shares will be made during the Offering Period. If a Participant withdraws from an Offering Period, payroll deductions will not

resume at the beginning of the succeeding Offering Period unless the Participant delivers to the Company a new Payroll Participation Form.

10.2 Upon termination of a Participant’s employment for any reason, including death, disability or retirement, or a Participant failing to remain an Employee of the Company for at least twenty (20) hours per week during an Offering Period in which the Employee is a Participant, he or she will be deemed to have elected to withdraw from the Plan and the payroll deductions credited to such Participant’s Account shall be returned to the Participant; or, in the case of death, to the persons entitled thereto under Section 14, and such Participant’s option shall be automatically terminated.

11. Interest. No interest shall accrue on the payroll deductions of a Participant in the Plan.

12. Stock.

12.1 The maximum number of shares of the Company’s Common Stock which shall be made available for sale under the Plan shall be 1,500,000 shares, subject to adjustment upon changes in capitalization of the Company as provided in Section 18. If on a given Purchase Date the number of shares of Common Stock eligible to be purchased exceeds the number of shares then available under the Plan, the Company shall make a pro rata allocation of the shares remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable.

12.2 The Participant will have no interest or voting right in shares covered by his or her option until such shares of Common Stock have been purchased.

12.3 Common Stock to be delivered to a Participant under the Plan will be registered in the name of the Participant or in the name of the Participant and his or her spouse.

13. Administration.

13.1 Administrative Body. The Plan shall be administered by the Committee. Subject to the terms of the Plan, the Committee shall have the power to construe the provisions of the Plan, to determine all questions arising thereunder, and to adopt and amend such rules and regulations for administering the Plan as the Committee deems desirable.

13.2 Rule 16b-3 Limitations. Notwithstanding the provisions of Subsection 13.1, in the event that Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, or any successor provision (“Rule 16b-3”) provides specific requirements for the administrators of plans of this type, the Plan shall be only administered by such a body and in such a manner as shall comply with the applicable requirements of Rule 16b-3.

14. Designation of Beneficiary.

14.1 A Participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the Participant’s account under the Plan in the event of such Participant’s death subsequent to a Purchase Date on which the option is exercised but prior to delivery to such Participant of such shares and cash. In addition, a Participant may file a

written designation of a beneficiary who is to receive any cash from the Participant’s account under the Plan in the event of such Participant’s death prior to a Purchase Date.

14.2 Such designation of beneficiary may be changed by the Participant at any time by written notice as provided in Section 20 below. In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant’s death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

15. Transferability. Neither payroll deductions credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 14 hereof) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10.

16. Use of Funds. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.

17. Reports. Individual accounts will be maintained for each Participant in the Plan. Statements of account will be given to participating Employees at least annually, which statements will set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased and the remaining cash balance, if any.

18. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.

18.1 Changes in Capitalization. Subject to any required action by the shareholders of the Company, the Reserves, as well as the price per share of Common Stock covered by each option under the Plan which has not yet been exercised, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option. The Board may, if it so determines in the exercise of its sole discretion, make provision for adjusting the Reserves, as well as the price per share of Common Stock covered by each outstanding option, in the event

the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of shares of its outstanding Common Stock.

18.2 Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Offering Period will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board.

18.3 Merger or Asset Sale. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each option under the Plan shall be assumed or any equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless the Board determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, to shorten the Offering Period then in progress by setting a new Purchase Date (the “New Purchase Date”) or to cancel each outstanding right to purchase and refund all sums collected from Participants during the Offering Period then in progress. If the Board shortens the Offering Period then in progress in lieu of assumption or substitution in the event of a merger or sale of assets, the Board shall notify each Participant in writing, at least ten (10) business days prior to the New Purchase Date, that the Purchase Date for his option has been changed to the New Purchase Date and that his option will be exercised automatically on the New Purchase Date, unless prior to such date he has withdrawn from the Offering Period as provided in Section 10 hereof. For purposes of this paragraph, an option granted under the Plan shall be deemed to be assumed if, following the sale of assets or merger, the option confers the right to purchase, for each share of option stock subject to the option immediately prior to the sale of assets or merger, the consideration (whether stock, cash or other securities or property) received in the sale of assets or merger by holders of Common Stock for each share of Common Stock held on the effective date of the transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if such consideration received in the sale of assets or merger was not solely common stock of the successor corporation or its parent (as defined in Section 424(e) of the Code), the Board may, with the consent of the successor corporation and the Participant, provide for the consideration to be received upon exercise of the option to be solely common stock of the successor corporation or its parent equal in fair market value to the per share consideration received by holders of Common Stock in the sale of assets or merger.

19. Amendment or Termination.

19.1 The Board may at any time and for any reason terminate or amend the Plan. Except as provided in Section 18, no such termination can affect options previously granted, provided that an Offering Period may be terminated by the Board on any Purchase Date if the Board determines that the termination of the Plan is in the best interests of the Company and its shareholders. Except as provided in Section 18, no amendment may make any change in any option theretofore granted which adversely affects the rights of any Participant.

19.2 Without shareholder consent and without regard to whether any Participant rights may be considered to have been “adversely affected,” the Committee shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts

withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participant’s Compensation, and establish such other limitations or procedures as the Board (or its committee) determines in its sole discretion advisable which are consistent with the Plan.

19.3 The Company shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Rule 16b-3 or with Section 423 of the Code (or any successor rule or statute or other applicable law, rule or regulation, including the requirements of any exchange or quotation system on which the Common Stock is listed or quoted). Such shareholder approval, if required, shall be obtained in such a manner and to such a degree as is required by the applicable law, rule or regulation.

20. Notices. All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company by the Company’s Chief Financial Officer at the Company’s corporate headquarters.

21. Conditions Upon Issuance of Shares of Common Stock. Common Stock shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

As a condition to the purchase of Common Stock, the Company may require the person purchasing such Common Stock to represent and warrant at the time of any such purchase that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.

22. Term of Plan.

22.1 The Plan shall become effective upon the earlier to occur of its adoption by the Board of Directors or its approval by the shareholders of the Company. It shall continue in effect for a term of ten (10) years unless sooner terminated pursuant to Section 19.

22.2 Notwithstanding the above, the Plan is expressly made subject (i) to the approval of the shareholders of the Company within 12 months after the date the Plan is adopted and (ii) at its election, to the receipt by the Company from the Internal Revenue Service of a ruling in scope and content satisfactory to counsel to the Company, affirming the qualification of the Plan within the meaning of Section 423 of the Code. Such shareholder approval shall be obtained in the manner and to the degree required under applicable federal and state law. If the Plan is not so approved by the shareholders within 12 months after the date the Plan is adopted, and if, at the election of the Company a ruling from the Internal Revenue Service is sought but is

not received on or before one year after the Plan’s adoption by the Board, this Plan shall not come into effect. In that case, the Account of each Participant shall forthwith be paid to him or her.

23. Additional Restrictions of Rule 16b-3. The terms and conditions of options granted hereunder to, and the purchase of shares by, persons subject to Section 16 of the Exchange Act shall comply with the applicable provisions of Rule 16b-3. This Plan shall be deemed to contain, and such options shall contain, and the shares issued upon exercise thereof shall be subject to, such additional conditions and restrictions as may be required by Rule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions.

EX-99.1 4 dex991.htm CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER Prepared by R.R. Donnelley Financial -- Certification by the Chief Executive Officer

Exhibit 99.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of FLIR Systems, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Earl R. Lewis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date	August 6, 2002	/S/ EARL R. LEWIS

		Earl R. Lewis President and Chief Executive Officer

EX-99.2 5 dex992.htm CERTIFICATION BY THE CHIEF FINANCIAL OFFICER Prepared by R.R. Donnelley Financial -- Certification by the Chief Financial Officer

Exhibit 99.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of FLIR Systems, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen M. Bailey, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date	August 6, 2002	/S/ STEPHEN M. BAILEY

		Stephen M. Bailey Chief Financial Officer

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FLIR SYSTEMS, INC.

August 6, 2002

/S/ STEPHEN M. BAILEY

Stephen M. Bailey

Sr. Vice President, Finance and Chief Financial Officer

(Principal Accounting and Financial Officer and Duly Authorized Officer)