FLIR Systems, Inc.
Apr 26, 2017

FLIR Systems Announces First Quarter 2017 Financial Results

First Quarter Revenue Growth of 7% Over Prior Year; GAAP Gross Margin Improves 20 Basis Points Over Prior Year; Adjusted Gross Margin Improves 90 Basis Points; GAAP EPS of $0.31; Adjusted EPS of $0.36, Up 13% Over Prior Year; First Quarter Operating Cash Flow Growth of 64% Over Prior Year

WILSONVILLE, OR -- (Marketwired) -- 04/26/17 -- FLIR Systems, Inc. (NASDAQ: FLIR) today announced financial results for the first quarter ended March 31, 2017. First quarter 2017 revenue was $406.8 million, up 7% over first quarter 2016 revenue of $379.5 million. GAAP operating income in the first quarter grew 3% to $59.1 million, compared to $57.4 million in the first quarter of 2016. Adjusted operating income was $69.6 million in the first quarter, which is 12% higher than adjusted operating income of $62.2 million in the first quarter of 2016.

First quarter 2017 GAAP net earnings were $42.6 million, or $0.31 per diluted share, compared with GAAP net earnings of $1.1 million, or $0.01 per diluted share in the first quarter a year ago, which was negatively impacted by a $40 million tax reserve. Adjusted net earnings in the first quarter were $49.6 million and $0.36 per diluted share, which were 13% higher than adjusted net earnings per diluted share of $0.32 in the first quarter of 2016.

Cash provided by operations in the first quarter reached $75.1 million, an increase of 64% over the first quarter of 2016, and was driven by improved use of working capital.

Revenue from the Surveillance segment was $118.7 million, a decrease of 4% from the first quarter results last year. The Instruments segment contributed $77.9 million of revenue during the first quarter, down 2% from the prior year. The Security segment recorded revenue of $45.1 million in the first quarter, down 4% from the prior year. FLIR's OEM & Emerging Markets segment had $84.8 million of revenue, an increase of 77% over the prior year, and was partially driven by the addition of the Integrated Imaging Solutions line of business from the fourth quarter 2016 acquisition of Point Grey Research. Revenue from the Maritime segment was $48.6 million, which was down 6% from the first quarter of 2016. The Detection segment contributed $31.8 million of revenue, an increase of 9% over the prior year.

FLIR's backlog of firm orders for delivery within the next twelve months was approximately $608 million as of March 31, 2017, an increase of $16 million, or 3%, during the quarter.

"Overall, we are pleased with our first quarter results. Improvements in our product mix, processes, and overhead absorption drove a nearly 200 basis point sequential increase in adjusted gross margins," said Andy Teich, President and CEO of FLIR. "We experienced good growth in our revenue and backlog during the quarter, both of which were bolstered by recent acquisitions and several new product launches in our existing businesses. We expect to see an uptick in organic growth in the second quarter and the remainder of the year."

Revenue and Earnings Outlook for 2017

Based on financial results for the first quarter and the outlook for the remainder of the year, FLIR continues to expect revenue in 2017 to be in the range of $1.775 billion to $1.825 billion and adjusted net earnings per diluted share to be in the range of $1.81 to $1.91 per diluted share.

Dividend Declaration

FLIR's Board of Directors has declared a quarterly cash dividend of $0.15 per share on FLIR common stock, payable June 9, 2017, to shareholders of record as of close of business on May 26, 2017.

Conference Call

FLIR has scheduled a conference call at 8:00 a.m. ET (5:00 a.m. PT) today to discuss its results for the quarter. A simultaneous webcast of the conference call and the accompanying summary presentation can be accessed online from a link in the Events section of www.FLIR.com/investor. A replay will be available after 2:00 a.m. ET (11:00 a.m. PT) at this same internet address. Summary first quarter and historical financial data may be accessed online from the Financial Info Database link under the Financials & Filings section at www.FLIR.com/investor.

About FLIR Systems

Founded in 1978 and headquartered in Wilsonville, Oregon, FLIR Systems is a world-leading maker of sensor systems that enhance perception and heighten awareness, helping to save lives, improve productivity, and protect the environment. Through its nearly 3,500 employees, FLIR's vision is to be "The World's Sixth Sense" by leveraging thermal imaging and adjacent technologies to provide innovative, intelligent solutions for security and surveillance, environmental and condition monitoring, outdoor recreation, machine vision, navigation, and advanced threat detection. For more information, please visit www.flir.com and follow @flir.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings release makes reference to non-GAAP measures. With respect to the outlook for the full year 2017, certain items that affect GAAP net income per diluted share are out of the Company's control and/or cannot be reasonably predicted. Consequently, the Company is unable to provide a reasonable estimate of GAAP net income per diluted share or a corresponding reconciliation to GAAP net income per diluted share for the full year. Additional information regarding the reasons the Company uses non-GAAP measures, a reconciliation of these measures to the most directly comparable GAAP measures, and other information relating to these measures are included below, following the GAAP financial information.

Forward-Looking Statements

Statements in this release by Andy Teich and the statements in the section captioned "Revenue and Earnings Outlook for 2017" above are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words "believes," "plans," "anticipates," "expects," "estimates," or similar expressions) should be considered to be forward looking statements. Such statements are based on current expectations, estimates, and projections about FLIR's business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks and uncertainties 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 the following: changes in demand for FLIR's products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, the impact of FLIR's continuing compliance with U.S. export control laws and regulations and similar laws and regulations, the timely receipt of any necessary export licenses, constraints on supplies of critical components, excess or shortage of production capacity, the ability to manufacture and ship the products in the time period required, actual purchases under agreements, the continuing eligibility of FLIR to act as a federal contractor, the amount and availability of appropriated government procurement funds and other risks discussed from time to time in filings and reports filed with the Securities and Exchange Commission. 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 FLIR does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release, or for changes made to this document by wire services or internet service providers.

FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)(Unaudited)
Three Months Ended
March 31,
2017 2016
Revenue $ 406,814 $ 379,472
Cost of goods sold 215,493 201,782
Gross profit 191,321 177,690
Operating expenses:
Research and development 41,983 37,280
Selling, general and administrative 90,252 83,033
Total operating expenses 132,235 120,313
Earnings from operations 59,086 57,377
Interest expense 4,453 3,447
Interest income (271 ) (260 )
Other income, net (660 ) (1,430 )
Earnings before income taxes 55,564 55,620
Income tax provision 12,993 54,495
Net earnings $ 42,571 $ 1,125
Earnings per share:
Basic $ 0.31 $ 0.01
Diluted $ 0.31 $ 0.01
Weighted average shares outstanding:
Basic 136,359 137,496
Diluted 138,239 138,779
FLIR SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)(Unaudited)
March 31, December 31,
2017 2016
ASSETS
Current assets:
Cash and cash equivalents $ 397,436 $ 361,349
Accounts receivable, net 308,740 352,020
Inventories 386,058 371,371
Prepaid expenses and other current assets 83,926 79,917
Total current assets 1,176,160 1,164,657
Property and equipment, net 272,857 271,785
Deferred income taxes, net 45,321 45,243
Goodwill 896,436 801,406
Intangible assets, net 193,099 168,460
Other assets 46,522 168,155
$ 2,630,395 $ 2,619,706
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 110,013 $ 114,225
Deferred revenue 33,989 34,420
Accrued payroll and related liabilities 51,140 52,874
Accrued expenses 28,886 34,022
Accrued income taxes 48,497 51,017
Other current liabilities 53,650 60,154
Current portion long-term debt 15,000 15,000
Total current liabilities 341,175 361,712
Long-term debt 494,737 501,921
Deferred income taxes 2,479 2,331
Accrued income taxes 9,654 9,643
Other long-term liabilities 62,781 65,773
Commitments and contingencies
Shareholders' equity 1,719,569 1,678,326
$ 2,630,395 $ 2,619,706
FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)(Unaudited)
Three Months Ended
March 31,
2017 2016
Cash flows from operating activities:
Net earnings $ 42,571 $ 1,125
Income items not affecting cash:
Depreciation and amortization 17,031 13,939
Deferred income taxes 192 (227 )
Stock-based compensation arrangements 6,246 6,088
Other non-cash items (3,742 ) 5,807
Changes in operating assets and liabilities, net of acquisitions 12,829 19,214
Cash provided by operating activities 75,127 45,946
Cash flows from investing activities:
Additions to property and equipment (13,621 ) (9,992 )
Proceeds from sale of property and equipment 27 4,875
Cash used by investing activities (13,594 ) (5,117 )
Cash flows from financing activities:
Repayments of credit agreement and long-term debt (7,500 ) (3,750 )
Dividends paid (20,456 ) (16,507 )
Proceeds from shares issued pursuant to stock-based compensation plans 1,002 3,989
Tax paid for net share exercises and issuance of vested restricted stock units (1,843 ) (28 )
Other financing activities (1 ) 3
Cash used by financing activities (28,798 ) (16,293 )
Effect of exchange rate changes on cash 3,352 13,292
Net increase in cash and cash equivalents 36,087 37,828
Cash and cash equivalents:
Beginning of period 361,349 472,785
End of period $ 397,436 $ 510,613
FLIR SYSTEMS, INC.
OPERATING SEGMENT PERFORMANCE
(In thousands)(Unaudited)
Three Months Ended
March 31,
2017 2016
SEGMENT REVENUE
Surveillance $ 118,729 $ 124,151
Instruments 77,855 79,418
Security 45,078 47,061
OEM & Emerging Markets 84,765 47,845
Maritime 48,550 51,720
Detection 31,837 29,277
SEGMENT EARNINGS (LOSS) FROM OPERATIONS
Surveillance $ 26,365 $ 35,865
Instruments 21,146 19,981
Security 315 (2,169 )
OEM & Emerging Markets 24,357 10,686
Maritime 5,205 5,806
Detection 8,737 8,237
SEGMENT OPERATING MARGIN
Surveillance 22.2 % 28.9 %
Instruments 27.2 % 25.2 %
Security 0.7 % -4.6 %
OEM & Emerging Markets 28.7 % 22.3 %
Maritime 10.7 % 11.2 %
Detection 27.4 % 28.1 %
FLIR SYSTEMS, INC.
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)(Unaudited)
Three Months Ended
March 31,
2017 2016
Gross profit:
GAAP gross profit $ 191,321 $ 177,690
Amortization of acquired intangible assets 3,558 2,414
Purchase accounting adjustments 1,992 -
Adjusted gross profit $ 196,871 $ 180,104
Gross margin:
GAAP gross margin 47.0 % 46.8 %
Cumulative effect of non-GAAP Adjustments 1.4 % 0.6 %
Adjusted gross margin 48.4 % 47.5 %
Earnings from operations:
GAAP earnings from operations $ 59,086 $ 57,377
Amortization of acquired intangible assets 6,736 4,206
Purchase accounting adjustments 1,992 -
Restructuring charges 88 198
Acquisition related expenses 959 433
Other 770 -
Adjusted earnings from operations $ 69,631 $ 62,214
Operating margin:
GAAP operating margin 14.5 % 15.1 %
Cumulative effect of non-GAAP Adjustments 2.6 % 1.3 %
Adjusted operating margin 17.1 % 16.4 %
Net earnings:
GAAP net earnings $ 42,571 $ 1,125
Amortization of acquired intangible assets 6,736 4,206
Purchase accounting adjustments 1,992 -
Restructuring charges 88 198
Acquisition related expenses 959 433
Other 770 -
Estimated tax benefit of non-GAAP adjustments (2,636 ) (1,209 )
Discrete tax items, net (898 ) 40,259
Adjusted net earnings $ 49,582 $ 45,012
Earnings Per Diluted Share:
GAAP Earnings Per Diluted Share $ 0.31 $ 0.01
Cumulative effect of non-GAAP Adjustments 0.05 0.32
Adjusted Earnings Per Diluted Share $ 0.36 $ 0.32
Weighted average shares outstanding:
Diluted 138,239 138,779

Explanation of Non-GAAP Financial Measures

We report our financial results in accordance with United States generally accepted accounting principles (GAAP). As a supplement to our GAAP financial results, this earnings announcement contains some or all of the following non-GAAP financial measures: (i) adjusted gross profit, (ii) adjusted gross margin (defined as adjusted gross profit divided by revenue), (iii) adjusted operating income, (iv) adjusted operating margin (defined as adjusted operating income divided by revenue), (v) adjusted net income, and (vi) adjusted earnings per diluted share (EPS). These non-GAAP measures of financial performance are not prepared in accordance with GAAP and computational methods may differ from those used by other companies. Additionally, these non-GAAP measures should not be considered a substitute for any other performance measure determined in accordance with GAAP and the Company cautions investors and potential investors to consider these measures in addition to, not as a substitute for, its consolidated financial results as presented in accordance with GAAP. Each of the non-GAAP measures is adjusted from GAAP results and are outlined in the "GAAP to Non-GAAP Reconciliation" tables included within this earnings release.

In calculating non-GAAP financial measures, we exclude certain items (including gains and losses) to facilitate a review of the comparability of our core operating performance on a period-to-period basis. The excluded items represent amortization of acquired intangible assets, purchase accounting adjustments, restructuring charges, acquisition related expenses, gains and losses on cost-basis investments, discrete tax items, and other items we do not consider to be directly related to our core operating performance. We use non-GAAP measures internally to evaluate the core operating performance of our business, for comparison with forecasts and strategic plans and for calculating return on investment. Accordingly, supplementing GAAP financial results with these non-GAAP financial measures enables the comparison of our ongoing operating results in a manner consistent with the metrics reviewed by management. We believe that these non-GAAP measures, when read in conjunction with our GAAP financials, provide useful information to investors by facilitating:

The following are explanations of each type of adjustment that we incorporate into non-GAAP financial measures:

Investor Relations
Shane Harrison
503-498-3547
Email Contact

Source: FLIR Systems, Inc.

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