FLIR Systems, Inc.
Oct 24, 2014

FLIR Systems Announces Third Quarter 2014 Financial Results

GAAP EPS Increases 16%

WILSONVILLE, OR -- (Marketwired) -- 10/24/14 -- FLIR Systems, Inc. (NASDAQ: FLIR) today announced financial results for the third quarter ended September 30, 2014. Revenue was $375.4 million, up 5% compared to third quarter 2013 revenue of $358.1 million. Operating income in the third quarter was $70 million, compared to $63.5 million in the third quarter of 2013, and was impacted by $4.1 million in pretax charges related to previously-announced restructuring initiatives. Third quarter 2014 net income was $52.9 million, or $0.37 per diluted share, compared with net income of $46.5 million, or $0.32 per diluted share in the third quarter a year ago. The net after tax impact of the restructuring charges in the third quarter was approximately $3.1 million, or $0.02 per diluted share. Cash provided by operations in the third quarter was $33 million.

Revenue from the Instruments segment contributed $82.6 million of revenue during the third quarter, up 7% from the prior year. The OEM & Emerging Markets segment had $56.1 million of revenue, an increase of 2% over the prior year. FLIR's Security segment recorded revenue of $48.6 million in the third quarter, up 37% from the prior year. Revenue from the Maritime segment was $44.7 million, and was up 8% over the third quarter of 2013. Surveillance segment revenue was $119.1 million, a decrease of 6% from the third quarter results last year. The Detection segment contributed $24.2 million of revenue, an increase of 6% from the prior year.

FLIR's backlog of firm orders for delivery within the next twelve months was approximately $579 million as of September 30, 2014, an increase of $31 million, or 6%, during the quarter and an increase of $89 million, or 18%, since the beginning of 2014.

"We are pleased with our third quarter results. Our revenue expansion, improved margins, and strong backlog reflect the execution of our growth and cost reduction initiatives," said Andy Teich, President and CEO of FLIR. "The restructuring program we launched a year ago is proving to be successful from both a financial and organizational efficiency standpoint. Recent product introductions have generated interest in our technology at levels never seen before. Our product innovation continued in the third quarter and we are committed to investing in innovation into the future in order to create new and increasingly-affordable advanced sensing solutions."

Revenue and Earnings Outlook for 2014

Based on financial results for the first nine months of 2014 and the outlook for the remainder of the year, FLIR now expects revenue for the full year 2014 to be in the range of $1.48 billion to $1.53 billion and net earnings, excluding restructuring charges associated with the business realignment, to be in the range of $1.43 to $1.48 per diluted share.

Dividend Declaration

FLIR's Board of Directors has declared a quarterly cash dividend of $0.10 per share on FLIR common stock, payable December 5, 2014, to shareholders of record as of close of business on November 18, 2014.

Conference Call

FLIR has scheduled a conference call at 11:00 a.m. ET (8:00 a.m. PT) today to discuss its results for the quarter. A simultaneous webcast of the conference call may be accessed online from a link in the Events & Presentations section of www.FLIR.com/investor. A replay will be available after 2:00 p.m. ET (11:00 a.m. PT) at this same Internet address. A summary presentation of third quarter financial results and operating highlights is also available online from a link in the Events & Presentations section of www.FLIR.com/investor. Summary third quarter and historical financial data may be accessed online from the Financial Info Database link at www.FLIR.com/investor.

About FLIR Systems

FLIR Systems, Inc. is a world leader in the design, manufacture, and marketing of sensor systems that enhance perception and awareness. FLIR's advanced systems and components are used for a wide variety of thermal imaging, situational awareness, and security applications, including airborne and ground-based surveillance, condition monitoring, navigation, recreation, research and development, manufacturing process control, search and rescue, drug interdiction, transportation safety, border and maritime patrol, environmental monitoring, and chemical, biological, radiological, nuclear, and explosives (CBRNE) threat detection. For more information, visit FLIR's web site at www.FLIR.com.

Forward-Looking Statements

The statements in this release by Andy Teich and the statements in the section captioned "Revenue and Earnings Outlook for 2014" above are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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, FLIR's continuing compliance with U.S. export control laws and regulations, the timely receipt of any required 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 FLIR's Securities and Exchange Commission filings and reports. 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 Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Revenue $ 375,366 $ 358,141 $ 1,096,288 $ 1,096,053
Cost of goods sold 190,980 185,251 560,652 549,134
Gross profit 184,386 172,890 535,636 546,919
Operating expenses:
Research and development 34,022 32,986 106,655 109,271
Selling, general and administrative 76,295 76,365 241,737 234,706
Restructuring expenses 4,060 - 15,420 -
Total operating expenses 114,377 109,351 363,812 343,977
Earnings from operations 70,009 63,539 171,824 202,942
Interest expense 3,663 3,696 11,000 10,361
Interest income (398 ) (256 ) (934 ) (721 )
Other income, net (3,719 ) 53 (4,987 ) (536 )
Earnings from continuing operations before income taxes 70,463 60,046 166,745 193,838
Income tax provision 17,606 13,560 39,236 45,558
Net earnings $ 52,857 $ 46,486 $ 127,509 $ 148,280
Earnings per share:
Basic $ 0.37 $ 0.33 $ 0.90 $ 1.04
Diluted $ 0.37 $ 0.32 $ 0.89 $ 1.02
Weighted average shares outstanding:
Basic 141,433 141,863 141,315 142,849
Diluted 143,413 144,231 143,756 144,831
FLIR SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)(Unaudited)
September 30, December 31,
2014 2013
ASSETS
Current assets:
Cash and cash equivalents $ 565,373 $ 542,476
Accounts receivable, net 298,559 286,573
Inventories 343,300 344,719
Prepaid expenses and other current assets 89,789 97,574
Deferred income taxes, net 38,154 38,389
Total current assets 1,335,175 1,309,731
Property and equipment, net 237,837 234,041
Deferred income taxes, net 18,666 17,883
Goodwill 560,488 575,701
Intangible assets, net 138,991 154,195
Other assets 63,135 51,808
$ 2,354,292 $ 2,343,359
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 90,500 $ 85,730
Deferred revenue 25,831 28,844
Accrued payroll and related liabilities 62,959 62,069
Accrued expenses 38,903 39,316
Accrued income taxes 2,527 663
Other current liabilities 52,106 44,893
Current portion long-term debt 15,000 15,000
Total current liabilities 287,826 276,515
Long-term debt 361,622 372,528
Deferred income taxes 14,001 12,255
Accrued income taxes 19,742 19,996
Other long-term liabilities 49,367 48,685
Commitments and contingencies
Shareholders' equity 1,621,734 1,613,380
$ 2,354,292 $ 2,343,359
FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Cash flows from operating activities:
Net earnings $ 52,857 $ 46,486 $ 127,509 $ 148,280
Income items not affecting cash:
Depreciation and amortization 13,572 14,876 44,278 44,978
Deferred income taxes 56 (64 ) 971 (38 )
Stock-based compensation arrangements 6,803 7,347 24,006 20,673
Gain on sale of certain optics assets (4,129 ) - (4,129 ) -
Other non-cash items 6,840 2,061 3,241 1,485
Changes in operating assets and liabilities (43,013 ) (18,178 ) (32,476 ) 34,413
Cash provided by operating activities 32,986 52,528 163,400 249,791
Cash flows from investing activities:
Additions to property and equipment, net (15,100 ) (13,706 ) (40,928 ) (36,997 )
Business acquisitions, net of cash acquired - (14,908 ) - (20,073 )
Proceeds from sale of certain optics assets 12,000 - 12,000 -
Cash used by investing activities (3,100 ) (28,614 ) (28,928 ) (57,070 )
Cash flows from financing activities:
Proceeds from long term debt - - - 150,000
Repayments of long term debt (3,750 ) (3,750 ) (11,250 ) (7,500 )
Repurchase of common stock (33,621 ) (16,219 ) (76,624 ) (133,049 )
Dividends paid (14,166 ) (12,786 ) (42,410 ) (38,695 )
Proceeds from shares issued pursuant to stock-based compensation plans
5,199

2,067

34,168

5,953
Excess tax benefit of stock options exercised 1,147 459 7,705 928
Other financing activities (21 ) (306 ) (36 ) (1,273 )
Cash used by financing activities (45,212 ) (30,535 ) (88,447 ) (23,636 )
Effect of exchange rate changes on cash (21,374 ) 6,387 (23,128 ) 1,375
Net increase (decrease) in cash and cash equivalents (36,700 ) (234 ) 22,897 170,460
Cash and cash equivalents:
Beginning of period 602,073 492,433 542,476 321,739
End of period $ 565,373 $ 492,199 $ 565,373 $ 492,199
FLIR SYSTEMS, INC.
REVENUE AND EARNINGS FROM OPERATIONS BY SEGMENT
(In thousands)(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
REVENUE - EXTERNAL CUSTOMERS
Surveillance $ 119,127 $ 126,591 342,105 392,439
Instruments 82,560 77,199 $ 250,583 $ 236,011
OEM and Emerging Markets 56,105 54,782 168,895 153,700
Maritime 44,728 41,297 152,533 146,437
Security 48,648 35,409 122,692 99,331
Detection 24,198 22,863 59,480 68,135
$ 375,366 $ 358,141 $ 1,096,288 $ 1,096,053
EARNINGS (LOSS) FROM OPERATIONS
Surveillance $ 30,069 $ 29,836 69,365 97,811
Instruments 23,191 20,433 $ 64,678 $ 63,379
OEM and Emerging Markets 16,121 16,814 45,445 43,453
Maritime 4,614 2,966 23,159 20,447
Security 6,988 4,460 14,560 12,096
Detection 4,168 4,102 5,520 10,546
Other (15,142 ) (15,072 ) (50,903 ) (44,790 )
$ 70,009 $ 63,539 $ 171,824 $ 202,942

Investor Relations
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Source: FLIR Systems, Inc.

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