FLIR Systems, Inc.
Oct 25, 2017

FLIR Systems Announces Third Quarter 2017 Financial Results

Third Quarter Revenue Growth of 15% Over Prior Year

GAAP EPS of $0.46; Adjusted EPS of $0.52, Up 8% Over Prior Year

Backlog reaches $709 million, the highest level in FLIR's history

WILSONVILLE, Ore., Oct. 25, 2017 (GLOBE NEWSWIRE) -- FLIR Systems, Inc. (NASDAQ:FLIR) today announced financial results for the third quarter ended September 30, 2017. Third quarter 2017 revenue was $464.7 million, up 15% over third quarter 2016 revenue of $405.2 million. GAAP operating income in the third quarter grew 8% to $87.1 million, compared to $80.8 million in the third quarter of 2016. Adjusted operating income was $101.1 million in the third quarter, which is 14% higher than adjusted operating income of $89.0 million in the third quarter of 2016.

Third quarter 2017 GAAP net earnings were $63.5 million, or $0.46 per diluted share, compared with GAAP net earnings of $58.6 million, or $0.43 per diluted share in the third quarter a year ago. Adjusted net earnings in the third quarter were $72.7 million, or $0.52 per diluted share, which was 8% higher than adjusted net earnings per diluted share of $0.48 in the third quarter of 2016, where a lower tax rate relative to the current year added $0.02 of income per share.

Revenue from the Surveillance segment was $146.8 million , an increase of 8% from the third quarter results last year. The Instruments segment contributed $91.4 million of revenue during the third quarter, up 11% over the prior year. The Security segment recorded revenue of $65.7 million in the third quarter, up 16% from the prior year. FLIR's OEM & Emerging Markets segment had $87.2 million of revenue, an increase of 39% over the prior year, and was 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 $42.3 million, which was 4% higher than the third quarter of 2016. The Detection segment contributed $31.4 million of revenue, an increase of 19% over the prior year, and was driven by timing of DR-SKO program shipments.

FLIR's backlog of firm orders for delivery within the next twelve months was approximately $709 million as of September 30, 2017, an increase of $64 million, or 10%, during the quarter.

"Our teams executed very well during the third quarter, with all six of our segments exhibiting organic revenue growth. This translated to EPS acceleration and operating cash flow that significantly exceeded net income," said Jim Cannon, President and CEO of FLIR. "Bookings in the quarter drove our backlog to its highest level in our history. This positions us well as we realign our businesses and deploy The FLIR Method for continuous business improvement, initiatives that we expect to drive organic growth, increase profitability, and generate ample cash for us to deploy in ways that enhance shareholder returns."

Revenue and Earnings Outlook for 2017

Based on financial results for the first nine months of the year and the outlook for the remainder of the year, FLIR expects revenue in 2017 to continue to be in the range of $1.775 billion to $1.825 billion and adjusted net earnings per diluted share to now be in the range of $1.83 to $1.88 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 December 8, 2017, to shareholders of record as of close of business on November 24, 2017.

Conference Call

FLIR has scheduled a conference call at 9:00 a.m. ET (6:00 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 & Presentations section of www.FLIR.com/investor. A replay will be available after 12:00 p.m. ET (9:00 a.m. PT) at this same internet address. Summary third 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 earnings 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 earnings per diluted share or a corresponding reconciliation to GAAP net earnings 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 Jim Cannon 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.

Investor Relations
Shane Harrison
503-498-3547
shane.harrison@flir.com


 
 
FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts) (Unaudited)
                
   Three Months Ended Nine Months Ended
    September 30, September 30,
    2017   2016   2017   2016 
          
Revenue   $464,712  $405,228  $1,305,650  $1,187,429 
Cost of goods sold    241,821   213,852   684,706   635,041 
Gross profit    222,891   191,376   620,944   552,388 
          
Operating expenses:         
Research and development   42,873   33,839   127,902   109,327 
Selling, general and administrative   92,932   76,688   280,240   239,623 
Total operating expenses   135,805   110,527   408,142   348,950 
          
Earnings from operations   87,086   80,849   212,802   203,438 
          
Interest expense   3,819   5,736   12,744   13,543 
Interest income   (488)  (336)  (1,114)  (924)
Other (income) expense, net    (778)  241   (2,465)  138 
          
Earnings before income taxes   84,533   75,208   203,637   190,681 
          
Income tax provision   21,004   16,575   46,124   85,555 
          
Net earnings   $63,529  $58,633  $157,513  $105,126 
          
Earnings per share:          
Basic  $0.46  $0.43  $1.15  $0.76 
Diluted  $0.46  $0.43  $1.13  $0.76 
          
Weighted average shares outstanding:         
Basic    137,849    136,963   137,030   137,438 
Diluted    139,419   137,938   138,853   138,594 
          

 

FLIR SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands) (Unaudited)
           
    September 30,           December 31,
    2017 2016
ASSETS      
        
Current assets:      
Cash and cash equivalents    $436,961 $361,349
Accounts receivable, net     345,542   352,020
Inventories    413,005  371,371
Prepaid expenses and other current assets                           86,570  79,917
Total current assets    1,282,078  1,164,657
        
Property and equipment, net     270,023  271,785
Deferred income taxes, net    51,179  45,243
Goodwill    930,846  801,406
Intangible assets, net     183,677  168,460
Other assets    48,472  168,155
    $2,766,275 $2,619,706
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
       
Current liabilities:      
Accounts payable   $127,420 $114,225
Deferred revenue     29,015  34,420
Accrued payroll and related liabilities    67,759  52,874
Accrued expenses    47,528  34,022
Accrued income taxes    46,175  51,017
Other current liabilities    50,041  60,154
Current portion long-term debt    -  15,000
Total current liabilities     367,938  361,712
       
Long-term debt    420,369  501,921
Deferred income taxes     14,569  2,331
Accrued income taxes     14,054  9,643
Other long-term liabilities    59,827  65,773
       
Commitments and contingencies      
       
Shareholders' equity     1,889,518  1,678,326
    $2,766,275 $2,619,706
       

 

FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
          
 Three Months Ended Nine Months Ended
 September 30, September 30,
  2017   2016   2017   2016 
        
Cash flows from operating activities:       
Net earnings $  63,529  $  58,633  $  157,513  $  105,126 
Income items not affecting cash:       
Depreciation and amortization   18,418     14,079     53,426     41,857 
Deferred income taxes   (2,187)    172     (2,337)    (200)
Stock-based compensation arrangements    9,891     6,872     24,745     21,253 
Other non-cash items    (8,796)    4,379     (28,007)    19,830 
Changes in operating assets and liabilities net of acquisitions   23,227     4,656     3,996     34,741 
Cash provided by operating activities    104,082     88,791     209,336     222,607 
        
Cash flows from investing activities:       
Additions to property and equipment    (8,208)    (6,806)    (31,861)    (27,682)
Proceeds from sale of assets    -      2,111     27     6,986 
Business acquisitions, net of cash acquired   -      -      -      (42,445)
Other Investments   -      -      2,859     -  
Cash used by investing activities   (8,208)    (4,695)    (28,975)    (63,141)
        
Cash flows from financing activities:       
Net proceeds from credit agreement         
 and long-term debt   -      (940)    -      524,826 
Repayments of credit agreement and long-term debt   (86,250)    (254,935)    (97,500)    (367,435)
Repurchase of common stock    -      (36,310)    -      (66,057)
Dividends paid    (20,763)    (16,474)    (61,776)    (49,564)
Proceeds from shares issued pursuant to stock-based compensation plans   37,196     806     44,231     7,347 
Tax paid for net share exercises and issuance of vested restricted stock units      (483)    (159)    (9,505)    (5,775)
Other financing activities    (8)    -      (13)    10 
Cash (used) provided by financing activities   (70,308)    (308,012 )    (124,563)    43,352 
         
Effect of exchange rate changes on cash   7,804     (1,575)    19,814     2,085 
        
Net increase (decrease) in cash and cash equivalents    33,370     (225,491)    75,612     204,903 
Cash and cash equivalents:       
Beginning of period   403,591     903,179     361,349     472,785 
End of period$  436,961  $  677,688  $  436,961  $  677,688 
        

 

FLIR SYSTEMS, INC.
OPERATING SEGMENT PERFORMANCE
(In thousands) (Unaudited)
                                                                     
  Three Months Ended Nine Months Ended
  September 30, September 30,
   2017   2016   2017   2016 
SEGMENT REVENUE        
Surveillance $146,805  $136,402  $394,742  $373,993 
Instruments  91,429   82,673   255,253   240,160 
Security  65,660   56,431   160,447   166,872 
OEM & Emerging Markets  87,206    62,719   259,418   167,544 
Maritime  42,256   40,586   145,909   147,469 
Detection  31,356   26,417   89,881   91,391 
         
SEGMENT EARNINGS FROM OPERATIONS         
Surveillance $44,941  $41,428  $104,313  $103,888 
Instruments  29,603   27,578    74,376   67,254 
Security  6,486    4,784   8,090   7,025 
OEM & Emerging Markets  26,931   20,658   77,628   48,100 
Maritime  4,466   3,155   19,060   16,482 
Detection  8,883   6,999   24,644   25,556 
         
SEGMENT OPERATING MARGIN        
Surveillance  30.6%  30.4%  26.4%  27.8%
Instruments  32.4%  33.4%  29.1%  28.0%
Security  9.9 %  8.5%  5.0%   4.2%
OEM & Emerging Markets  30.9%   32.9%  29.9%  28.7%
Maritime  10.6%  7.8%  13.1%  11.2%
Detection  28.3 %  26.5%  27.4%  28.0%
         

 

FLIR SYSTEMS, INC. 
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts) (Unaudited)
                 
   Three Months Ended  Nine Months Ended
  September 30, September 30,
                                 2017   2016   2017   2016 
Gross profit:        
GAAP gross profit $  222,891  $  191,376  $  620,944  $  552,388 
Amortization of acquired intangible assets    3,704     2,127     10,906     6,722 
Purchase accounting adjustments    -      -      1,992     -  
Restructuring charges    -      22     -      -  
Other    1,088     2,000     3,088     2,000 
Adjusted gross profit $  227,683  $  195,525  $  636,930  $  561,110 
         
Gross margin:        
GAAP gross margin  48.0%  47.2%  47.6%  46.5%
Cumulative effect of non-GAAP Adjustments  1.0%  1.0%  1.2%  0.7%
Adjusted gross margin  49.0%  48.3 %  48.8%  47.3%
         
Earnings from operations:        
GAAP earnings from operations $  87,086  $  80,849  $  212,802  $  203,438 
Amortization of acquired intangible assets     7,102     4,329     20,854      12,464 
Purchase accounting adjustments    -      -      1,992     -  
Restructuring charges    542     910     642     1,217 
Acquisition related expenses    526     949     1,864     2,211 
Other    5,890     2,000     13,621     2,000 
Adjusted earnings from operations $  101,146  $  89,037  $  251,775  $  221,330 
         
Operating margin:        
GAAP operating margin  18.7%  20.0%  16.3%   17.1%
Cumulative effect of non-GAAP Adjustments  3.0%  2.0%  3.0%  1.5%
Adjusted operating margin  21.8%  22.0%  19.3%  18.6%
         
Net earnings:         
GAAP net earnings $  63,529  $  58,633  $  157,513  $  105,126 
Amortization of acquired intangible assets    7,102     4,329      20,854     12,464 
Purchase accounting adjustments     -      -      1,992     -  
Restructuring charges    542     910     642     1,217 
Acquisition related expenses    526     949     1,864     2,211 
Other    5,890     3,262     13,621     5,262 
Estimated tax benefit of non-GAAP adjustments    (3,709)    (2,357)    (9,937)    (4,788)
Discrete tax items, net    (1,148)    (100)    (5,804)    40,458 
Adjusted net earnings $  72,732  $  65,626  $  180,745  $  161,950 
         
Earnings Per Diluted Share:        
GAAP Earnings Per Diluted Share $  0.46  $  0.43  $  1.13  $  0.76 
Cumulative effect of non-GAAP Adjustments    0.06     0.05     0.17     0.41 
Adjusted Earnings Per Diluted Share $  0.52  $  0.48  $  1.30  $  1.17 
         
Weighted average shares outstanding:        
Diluted    139,419     137,938     138,853     138,594 
         

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 earnings/income, (iv) adjusted operating margin (defined as adjusted operating income divided by revenue), (v) adjusted net earnings/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:

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Source: FLIR Systems, Inc.

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