Flir Systems: Diversifying beyond defense contracts

Flir Systems couldn't make the top Northwest companies list 20 years ago — it didn't go public until 1993. But since then, the Wilsonville, Ore., company has appeared 14 times, including three years in the No. 1 position.

Infrared and other imaging systems made by Flir were originally used to perform energy-use audits on vehicles. The government, especially the military, became a prime customer. Thermal imaging and radar-surveillance products are critical for troops' "situational awareness." Flir products are used in everything from explosive detection and border security to navigation safety.

It expanded in the commercial market, as well, with the company developing less expensive infrared and imaging products. For example, BMW offers a night-vision camera that uses Flir technology. Building monitoring, gas detection and food inspection are done with Flir products.

Flir posted an impressive profit margin this past fiscal year of 17.9 percent. It also added 1,136 employees as its diverse base of customers allowed it to cruise through the Great Recession and capitalize on the recovery.

This year, Flir ranks No. 3 in return on assets, a key efficiency yardstick. And it's free of debt.

One question facing Flir is the direction of government procurement in an era where deficit concerns are paramount. CEO Earl Lewis acknowledged the challenge when quarterly earnings were announced in April.

On the other hand, Flir's cost-effective technology may continue to be appealing for military and homeland-security uses compared with expensive hardware of major defense contractors. Lewis told securities analysts, "While (the) U.S. government budget debate has impacted a portion of our business, we see this is a near-term."

Also, the company has become more diversified, with customers in industry and science, as well as internationally. As a result, revenue from Flir's commercial division grew 51 percent in the first quarter of 2011, versus a rise of 13 percent in the government division. The U.S. government now comprises 34 percent of Flir's revenues, still substantial but lower than in earlier years.

Last year saw Flir spend some $400 million on acquisitions, including buying Raymarine Holdings, a leader in marine electronics, and ICx Technologies, which makes detection and surveillance technologies. The company also continues to bring out new products. For example, Fido Next is a handheld device for detecting explosives.

Looking ahead, Lewis sees continued opportunities in the government business here and abroad. Also, "The development of our commercial products and markets suggest a very large runway for future growth."

You may reach Jon Talton at jtalton@seattletimes.com