Nature of Business and Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2013 |
Nature of Business and Significant Accounting Policies [Abstract] | ' |
Nature of Business and Significant Accounting Policies | ' |
Nature of Business and Significant Accounting Policies |
FLIR Systems, Inc. (the "Company") is a world leader in sensor systems that enhance perception and awareness. The Company was founded in 1978 and has since become a premier designer, manufacturer, and marketer of thermal imaging and other sensing products and systems. The Company’s advanced sensors and integrated sensor systems enable the gathering and analysis of critical information through a wide variety of applications in commercial, industrial, and government markets worldwide. |
The Company’s goal is to both enable its customers to benefit from the valuable information produced by advanced sensing technologies and to deliver sustained superior financial performance for its shareholders. The Company creates value for its customers by providing advanced surveillance and tactical defense capabilities, improving personal and public safety and security, facilitating air, ground, and maritime navigation, enhancing enjoyment of the outdoors, providing infrastructure inefficiency information, conveying pre-emptive structural deficiency data, displaying process irregularities, and enabling commercial business opportunities through its continual support and development of new thermal imaging data and analytics applications. The Company’s business model meets the needs of a multitude of customers—it sells off-the-shelf products to a wide variety of markets in an efficient, timely, and affordable manner as well as offers a variety of system configurations to suit specific customer requirements. Centered on the design of products for low cost manufacturing and high volume distribution, the Company’s commercial operating model has been developed over time and provides it with a unique ability to adapt to market changes and meet its customers’ needs. |
Principles of consolidation |
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions were eliminated. |
Reclassification |
The Company made certain reclassifications to the prior years' financial statements to conform them to the presentation as of and for the year ended December 31, 2013. The reclassifications included certain severance expenses of $3.8 million and $0.7 million recognized during the years ended December 31, 2012 and 2011, respectively, that were originally reported in cost of goods sold and are now reported as operating expenses, and certain demonstration assets of $2.3 million that were originally reported as inventory at December 31, 2012 that are now reported in other current assets. In addition, the December 31, 2012 balance sheet has been adjusted for the purchase price accounting that was completed during 2013 associated with the acquisitions of Lorex Technology Inc. ("Lorex") and Traficon International NV ("Traficon"). See Note 7, "Goodwill," Note 8, "Intangible Assets," Note 14, "Income Taxes," and Note 18, "Business Acquisitions" for additional information. These reclassifications had no effect on consolidated financial position, shareholders' equity or net cash flows for any of the periods presented. |
Foreign currency translation |
The assets and liabilities of the Company’s subsidiaries outside the United States are translated into United States dollars at current exchange rates in effect at the balance sheet date. Revenues and expenses are translated at monthly average exchange rates. Resulting translation adjustments are reflected in accumulated other comprehensive earnings within shareholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in currencies other than the functional currency are reflected as other income, net, in the Consolidated Statements of Income as incurred. |
The cumulative translation adjustment included in accumulated other comprehensive earnings is a gain of $26.5 million and a gain of $14.7 million at December 31, 2013 and 2012, respectively. Transaction gains and losses included in other income, net, are a net loss of $0.3 million, a net loss of $3.0 million, and a net gain of $1.1 million for the years ended December 31, 2013, 2012 and 2011, respectively. |
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Note 1. | Nature of Business and Significant Accounting Policies—(Continued) | | | | | | | | | | | | | | | |
Revenue recognition |
Revenue is primarily recognized when persuasive evidence of an arrangement exists, upon delivery of the product to the customer at a fixed or determinable price with a reasonable assurance of collection, passage of title and risk of loss to the customer as indicated by the shipping terms and fulfillment of all significant obligations. |
The Company designs, markets and sells products primarily as commercial, off-the-shelf products. Certain customers request different system configurations, based on standard options or accessories that the Company offers. In general, revenue arrangements do not involve acceptance provisions based upon customer specified acceptance criteria. In those limited circumstances when customer specified acceptance criteria exist, revenue is deferred until customer acceptance if the Company cannot demonstrate the system meets those specifications prior to shipment. For any contracts with multiple elements (i.e., training, installation, additional parts, etc.) the Company allocates revenue among the deliverables primarily based upon objective and reliable evidence of fair value of each element in the arrangement. If objective and reliable evidence of fair value of any element is not available, we use an estimated selling price for purposes of allocating the total arrangement consideration among the elements. Credit is not extended to customers and revenue is not recognized until the Company has determined that the risk of uncollectability is minimal. |
The Company’s products are sold with warranty provisions that require it to remedy deficiencies in quality or performance of the Company’s products over a specified period of time, generally twelve to twenty-four months, at no cost to its customers. Warranty liabilities are established at the time that revenue is recognized at levels that represent the Company’s estimate of the costs that will be incurred to fulfill those warranty requirements. |
Provisions for estimated losses on sales or related receivables are recorded when identified. Revenue includes certain shipping and handling costs and is stated net of representative commissions and sales taxes. Service revenue is deferred and recognized over the contract period, as is the case for extended warranty contracts, or recognized as services are provided. |
Cost of goods sold |
Cost of goods sold includes materials, labor and overhead costs incurred in the manufacturing of products and services sold in the period as well as warranty costs. Material costs include raw materials, purchased components and sub-assemblies, outside processing and inbound freight costs. Labor and overhead costs consist of direct and indirect manufacturing costs, including wages and fringe benefits, operating supplies, depreciation, occupancy costs, and purchasing, receiving and inspection costs. |
Research and development |
Expenditures for research and development activities are expensed as incurred. |
Cash equivalents |
The Company considers short-term investments that are highly liquid, readily convertible into cash and have maturities of less than three months when purchased to be cash equivalents. Cash equivalents at December 31, 2013 and 2012 were $28.5 million and $5.9 million, respectively, which were primarily investments in money market funds. |
Accounts receivable and allowance for doubtful accounts |
Accounts receivable are stated at the amounts the Company expects to collect. Credit limits are established through a process of reviewing the financial history and stability of each customer. The Company regularly evaluates the collectability of its trade receivables balances based on a combination of factors. If it is determined that a customer will be unable to fully meet its financial obligation, the Company records a specific allowance to reduce the related receivable to the amount expected to be recovered. In addition, the Company also records an allowance for all other customers based on certain other factors including the length of time the receivables are past due and historical collection experience with individual customers. |
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Note 1. | Nature of Business and Significant Accounting Policies—(Continued) | | | | | | | | | | | | | | | |
Inventories |
Inventories are generally stated at the lower of cost or market and include materials, labor, and manufacturing overhead. Cost is determined based on a currently adjusted standard cost basis that approximates actual manufacturing cost on a first-in, first-out basis. |
Inventory write-downs are recorded when conditions exist to indicate that inventories are likely to be in excess of anticipated demand or are obsolete based upon the Company’s assumptions about future demand for its products and market conditions. The Company regularly evaluates its ability to realize the value of inventories based on a combination of factors including the following: historical usage rates, forecasted sales or usage, product end of life dates, estimated current and future market values and new product introductions. When recorded, write-downs reduce the carrying value of the Company’s inventories to their net realizable value and create a new cost-basis in the inventories. Write-downs are reflected in cost of goods sold in the Consolidated Statements of Income. |
Demonstration units |
The Company’s products which are being used as demonstration units are stated at the lower of cost or market and are included in prepaid expenses and other current assets in the Consolidated Balance Sheets. Demonstration units are available for sale and the Company periodically evaluates them as to marketability and realizable values. The carrying value of demonstration units was $42.7 million and $35.8 million at December 31, 2013 and 2012, respectively. |
Property and equipment |
Property and equipment are stated at cost and are depreciated using a straight-line methodology over their estimated useful lives. Repairs and maintenance are charged to expense as incurred. |
Goodwill |
Goodwill is reviewed during the third quarter of each year, or more frequently if warranted, for impairment to determine if events or changes in business conditions indicate that the carrying value may not be recoverable. See Note 7, "Goodwill," for additional information. |
Intangible assets |
Intangible assets are amortized using a straight-line methodology over their estimated useful lives. Intangible assets with indefinite useful lives are evaluated annually for impairment, or more frequently if required. The Company did not recognize any impairment charges on intangible assets with indefinite lives during the years ended December 31, 2013, 2012 and 2011. |
Impairment of long-lived assets |
Long-lived asset groups are reviewed for impairment when circumstances indicate that the carrying amounts may not be recoverable. Impairment exists when the carrying value is greater than the expected undiscounted future cash flows expected to be provided by the asset group. If impairment exists, the asset group is written down to its fair value. The Company did not recognize any impairment charges on long-lived assets during the years ended December 31, 2013, 2012 and 2011. |
Advertising costs |
Advertising costs, which are included in selling, general and administrative expenses, are expensed as incurred. Advertising costs for the years ended December 31, 2013, 2012 and 2011 were $10.7 million, $8.5 million and $11.1 million, respectively. |
Cost-basis investments |
The Company has private company investments, which consist of investments for which the Company does not have the ability to exercise significant influence, and are accounted for under the cost method. The investments are carried at cost and adjusted only when the Company believes that events have occurred that are likely to have a significant other-than-temporary adverse effect on the estimated fair value of the investments. If no such events have occurred, the fair value of the investments is not calculated as it is not practicable to do so. The carrying value of those investments was $13.5 million at December 31, 2013 and 2012. The investments are included in other assets in the Consolidated Balance Sheets. |
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Note 1. | Nature of Business and Significant Accounting Policies—(Continued) | | | | | | | | | | | | | | | |
Contingencies |
The Company is subject to the possibility of loss contingencies arising in the normal course of business. An estimated loss is accrued when the Company determines that it is probable that an asset has been impaired or a liability has been incurred and the amount can be reasonably estimated. The Company regularly evaluates current available information to determine whether such accruals should be adjusted. |
Earnings per share |
Basic earnings per share is based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the weighted shares outstanding are increased to include additional shares from the assumed exercise of stock options, if dilutive, assumed issuance of unvested restricted stock awards and from the assumed conversion of the convertible notes. |
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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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| Year Ended December 31, | | | | | |
| 2013 | | 2012 | | 2011 | | | | | |
Numerator for earnings per share: | | | | | | | | | | |
Earnings from continuing operations | $ | 177,015 | | | $ | 225,356 | | | $ | 222,652 | | | | | | |
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Loss from discontinued operations | — | | | (2,958 | ) | | (1,178 | ) | | | | | |
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Net earnings for basic and diluted earnings per share | $ | 177,015 | | | $ | 222,398 | | | $ | 221,474 | | | | | | |
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Denominator for earnings per share: | | | | | | | | | | |
Weighted average number of common shares outstanding | 142,446 | | | 151,634 | | | 158,323 | | | | | | |
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Assumed exercise of stock options and vesting of restricted stock awards, net of shares assumed reacquired under the treasury stock method | 2,149 | | | 1,960 | | | 2,528 | | | | | | |
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Diluted shares outstanding | 144,595 | | | 153,594 | | | 160,851 | | | | | | |
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The effect of stock-based compensation awards for the years ended December 31, 2013, 2012 and 2011 that aggregated 549,000, 1,198,000 and 352,000 shares have been excluded for purposes of diluted earnings per share since the effect would have been anti-dilutive. |
Supplemental cash flow disclosure (in thousands) |
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| Year Ended December 31, | | | | | |
| 2013 | | 2012 | | 2011 | | | | | |
Cash paid for: | | | | | | | | | | |
Interest | $ | 12,922 | | | $ | 10,239 | | | $ | 1,119 | | | | | | |
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Taxes | $ | 88,277 | | | $ | 74,333 | | | $ | 106,215 | | | | | | |
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Note 1. | Nature of Business and Significant Accounting Policies—(Continued) | | | | | | | | | | | | | | | |
Stock-based compensation |
The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards and shares expected to be issued under the Company's employee stock purchase plan. Nonvested stock awards (referred to as restricted stock unit awards) are valued at the fair market value of the Company's stock, discounted for dividends, on the date of grant, except for market-based restricted stock units for which the fair value is determined on the date of grant using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. The Company recognizes the compensation expense for all stock-based compensation awards on a straight-line basis over the requisite service period of each award. |
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The following table sets forth the stock-based compensation expense and related tax benefit recognized in the Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011 (in thousands): |
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| Year Ended December 31, | | | | | |
| 2013 | | 2012 | | 2011 | | | | | |
Cost of goods sold | $ | 2,591 | | | $ | 3,197 | | | $ | 3,306 | | | | | | |
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Research and development | 4,938 | | | 5,001 | | | 5,195 | | | | | | |
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Selling, general and administrative | 20,294 | | | 18,052 | | | 16,416 | | | | | | |
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Stock-based compensation expense before income taxes | 27,823 | | | 26,250 | | | 24,917 | | | | | | |
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Income tax benefit | (8,598 | ) | | (7,737 | ) | | (6,976 | ) | | | | | |
Total stock-based compensation expense after income taxes | $ | 19,225 | | | $ | 18,513 | | | $ | 17,941 | | | | | | |
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Stock-based compensation expense capitalized in the Consolidated Balance Sheets as of December 31, 2013, 2012 and 2011 is as follows (in thousands): |
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| December 31, | | | | | |
| 2013 | | 2012 | | 2011 | | | | | |
Capitalized in inventory | $ | 734 | | | $ | 470 | | | $ | 819 | | | | | | |
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As of December 31, 2013, the Company had approximately $42.7 million of total unrecognized stock-based compensation costs, net of estimated forfeitures, to be recognized over a weighted average period of 1.8 years. |
The fair value of the stock-based awards granted in the years ended December 31, 2013, 2012 and 2011 was estimated with the following weighted-average assumptions: |
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| 2013 | | 2012 | | 2011 | | | | | | | | |
Stock option awards: | | | | | | | | | | | | | |
Risk-free interest rate | 0.3 | % | | 0.4 | % | | 1 | % | | | | | | | | |
Expected dividend yield | 1.5 | % | | 1.3 | % | | 0.7 | % | | | | | | | | |
Expected term | 4.3 years | | | 4.2 years | | | 4.3 years | | | | | | | | | |
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Expected volatility | 33.7 | % | | 39.7 | % | | 42.3 | % | | | | | | | | |
Market-based restricted stock awards: | | | | | | | | | | | | | |
Risk-free interest rate | 0.3 | % | | 0.4 | % | | N/A | | | | | | | | | |
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Expected dividend yield | 0 | % | | 0 | % | | N/A | | | | | | | | | |
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Expected term | 2.2 years | | | 3.0 years | | | N/A | | | | | | | | | |
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Expected volatility | 28.8 | % | | 30.7 | % | | N/A | | | | | | | | | |
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Expected volatility of S&P 500 | 18.1 | % | | 19.6 | % | | N/A | | | | | | | | | |
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Employee stock purchase plan: | | | | | | | | | | | | | |
Risk-free interest rate | 0.1 | % | | 0.2 | % | | 0.1 | % | | | | | | | | |
Expected dividend yield | 1.4 | % | | 1.3 | % | | 0.8 | % | | | | | | | | |
Expected term | 6 months | | | 6 months | | | 6 months | | | | | | | | | |
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Expected volatility | 28.1 | % | | 25.2 | % | | 33.1 | % | | | | | | | | |
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Note 1. | Nature of Business and Significant Accounting Policies—(Continued) | | | | | | | | | | | | | | | |
The Company uses the United States Treasury (constant maturity) interest rate on the date of grant as the risk-free interest rate and uses historical volatility as the expected volatility. The Company’s determination of expected term is based on an analysis of historical and expected exercise patterns. In 2013, 2012 and 2011, all stock options granted were time-based options. The Company uses an estimated forfeiture rate of 5 percent of the stock-compensation expense of non-executive employees based on an analysis of historical and expected forfeitures. |
During the years ended December 31, 2013, 2012 and 2011, the Company granted approximately 1,173,000, 985,000 and 534,000 time-vested restricted stock units, respectively. In addition, during the year ended December 31, 2011, the Company granted approximately 101,000 performance-based restricted stock units. The fair value of time-vested and performance-based restricted stock units is fixed and determined on the date of grant based upon the Company's stock price on the date of grant. The weighted average fair values of the time-vested and performance-based restricted stock units granted during the years ended December 31, 2013, 2012 and 2011 were $23.98, $21.66 and $34.35, respectively. |
During the years ended December 31, 2013 and 2012, the Company also granted approximately 7,000 and 795,000 market-based restricted stock units, respectively. These units may be earned based upon the Company's total shareholder return compared to the total shareholder return of the S&P 500 Index over a three year period. The fair value of the market-based restricted stock units granted during the years ended December 31, 2013 and 2012 was $15.87 and $11.73, respectively. The total fair value of the restricted stock unit awards granted during the years ended December 31, 2013 and 2012 in the table below of $28.2 million and $30.7 million includes $0.1 million and $9.3 million, respectively, of grant date fair value associated with the market-based restricted stock units. |
The weighted-average fair value of stock-based compensation awards granted and vested, and the intrinsic value of options exercised during the period were (in thousands, except per share amounts): |
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| Years Ended December 31, | | | | | |
| 2013 | | 2012 | | 2011 | | | | | |
Stock option awards: | | | | | | | | | | |
Weighted average grant date fair value per share | $ | 5.92 | | | $ | 6.43 | | | $ | 11.61 | | | | | | |
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Total fair value of awards granted | $ | 6,095 | | | $ | 4,104 | | | $ | 4,613 | | | | | | |
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Total fair value of awards vested | $ | 5,059 | | | $ | 6,023 | | | $ | 8,492 | | | | | | |
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Total intrinsic value of options exercised | $ | 4,642 | | | $ | 5,928 | | | $ | 21,234 | | | | | | |
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Restricted stock unit awards: | | | | | | | | | | |
Weighted average grant date fair value per share | $ | 23.94 | | | $ | 17.23 | | | $ | 34.35 | | | | | | |
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Total fair value of awards granted | $ | 28,239 | | | $ | 30,660 | | | $ | 21,822 | | | | | | |
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Total fair value of awards vested | $ | 13,846 | | | $ | 12,710 | | | $ | 19,865 | | | | | | |
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Employee stock purchase plan: | | | | | | | | | | |
Weighted average grant date fair value per share | $ | 5.94 | | | $ | 4.66 | | | $ | 6.99 | | | | | | |
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Total fair value of shares estimated to be issued | $ | 1,169 | | | $ | 1,694 | | | $ | 2,359 | | | | | | |
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The total amount of cash received from the exercise of stock options in the years ended December 31, 2013, 2012 and 2011 was $4.6 million, $3.6 million and $13.8 million, respectively, and the related tax benefit realized from the exercise of the stock options was $0.6 million, $0.1 million and $5.5 million, respectively. |
The Company elected to adopt the “long-haul” method to calculate the historical pool of windfall tax benefits, which calculates on a grant by grant basis, the windfall or excess tax benefit that arose upon the exercise of each stock option, based on a comparison to the total tax deduction to the “as-if” deferred tax asset that would have been recorded had the Company followed the recognition provisions of Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718, “Compensation-Stock Compensation,” since its effective date of January 1, 2006. Additionally, the Company elected to adopt the “tax-law ordering” method of measuring the timing in which tax deductions on stock option exercises should be recognized in the consolidated financial statements. |
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Note 1. | Nature of Business and Significant Accounting Policies—(Continued) | | | | | | | | | | | | | | | |
Concentration of risk |
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of trade receivables. Concentration of credit risk with respect to trade receivables is limited because a relatively large number of geographically diverse customers make up the Company’s customer base, thus diversifying the trade credit risk. The Company controls credit risk through credit approvals, credit limits and monitoring procedures. The Company performs credit evaluations for all new customers and requires letters of credit, bank guarantees and advanced payments, if deemed necessary. |
A substantial portion of the Company’s revenue is derived from sales to United States and foreign government agencies (see Note 17, "Operating Segments and Related Information"). The Company also purchases certain key components from sole or limited source suppliers. |
The Company maintains cash deposits with major banks that from time to time may exceed federally insured limits. The Company periodically assesses the financial condition of the institutions and instruments in which it invests, and adjusts its investment balances to mitigate the risk of principal loss. |
Use of estimates |
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates and judgments made by management of the Company include matters such as collectability of accounts receivable, realizability of inventories, recoverability of deferred tax assets, impairment of goodwill and other long-lived assets, loss contingencies and adequacy of warranty accruals. Actual results could differ from those estimates. The Company believes that the estimates used are reasonable. |
Accumulated other comprehensive earnings |
Accumulated other comprehensive earnings includes cumulative translation adjustments, fair value adjustments on cash flow hedges and changes in minimum liability for pension plans. Foreign currency translation adjustments included in comprehensive income were not tax affected as investments in international affiliates are deemed to be indefinite in duration. |
The following table sets forth the changes in the balances of each component of accumulated other comprehensive income for the year ended December 31. 2013: |
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| | Pension Plans | | Cash Flow | | Foreign | | Total |
Items | Hedge Items | Currency |
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Balance, December 31, 2012 | | $ | (5,127 | ) | | $ | — | | | $ | 14,668 | | | $ | 9,541 | |
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Other comprehensive income before reclassifications, net of tax | | 184 | | | 1,105 | | | 11,838 | | | 13,127 | |
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Amounts reclassified from accumulated other comprehensive earnings, net of tax | | 2,777 | | | 555 | | | — | | | 3,332 | |
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Net current period other comprehensive income, net of tax | | 2,961 | | | 1,660 | | | 11,838 | | | 16,459 | |
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Balance, December 31, 2013 | | $ | (2,166 | ) | | $ | 1,660 | | | $ | 26,506 | | | $ | 26,000 | |
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The amounts reclassified from accumulated other comprehensive earnings for pension plan items have been recorded in selling, general and administrative expenses and amounts reclassified for cash flow hedge items have been recorded to interest expense in the Company's Consolidated Statement of Income for the year ended December 31, 2013. |
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Note 1. | Nature of Business and Significant Accounting Policies—(Continued) | | | | | | | | | | | | | | | |
Recent accounting pronouncements |
In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2013-02, "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" ("ASU 2013-02") which establishes new requirements for disclosing reclassifications of items out of accumulated other comprehensive income and includes identification of the line items in net earnings affected by the reclassifications. ASU 2013-02 is effective for annual and interim periods for fiscal years beginning after December 15, 2012. Accordingly, the Company adopted ASU 2013-02 on January 1, 2013. |
In March 2013, the FASB issued Accounting Standards Update No. 2013-05, "Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity" ("ASU 2013-05") which addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. ASU 2013-05 is effective for annual and interim periods beginning after December 15, 2014. Accordingly, the Company currently intends to adopt ASU 2013-05 on January 1, 2015 and does not expect the adoption of ASU 2013-05 to have a material impact on its consolidated financial statements. |
In July 2013, the FASB issued Accounting Standards Update No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists" ("ASU 2013-11"). ASU 2013-11 amends the guidance related to the presentation of unrecognized tax benefits and allows for the reduction of a deferred tax asset for a net operating loss ("NOL") carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. ASU 2013-11 is effective for annual and interim periods for fiscal years beginning after December 15, 2013, and early adoption is permitted. Since ASU 2013-11 relates only to the presentation of unrecognized tax benefits, we do not expect our adoption of ASU 2013-11 in January 2014 will have a material effect on our financial position, results of operations or cash flows. |