FLIR Systems, Inc.
Jul 24, 2015

FLIR Systems Announces Second Quarter 2015 Financial Results

Revenue and EPS Increase 6% and 16% Over the Prior Year, Respectively; Year to Date EPS Increases 35% Over the Prior Year

WILSONVILLE, OR -- (Marketwired) -- 07/24/15 -- FLIR Systems, Inc. (NASDAQ: FLIR) today announced financial results for the second quarter ended June 30, 2015. Revenue was $393 million, up 6% compared to second quarter 2014 revenue of $369.4 million. On a constant-currency basis, revenue for the second quarter was up 12% compared to the prior year, as foreign currency exchange fluctuations negatively impacted revenue by approximately $20 million. Operating income in the second quarter was $70.5 million, compared to $59.4 million in the second quarter of 2014. Operating income was impacted by pretax charges related to previously-announced restructuring initiatives of $0.5 million in the second quarter of 2015 and $3.5 million in the second quarter of 2014. Second quarter 2015 net income was $50.5 million, or $0.36 per diluted share, compared with net income of $44.8 million, or $0.31 per diluted share in the second quarter a year ago. Net income was impacted by after-tax restructuring charges of $0.3 million in the second quarter of 2015 and $2.7 million, or $0.02 per diluted share, in the second quarter of 2014. Cash provided by operations in the second quarter of 2015 was $48.9 million.

The Surveillance segment contributed $107.8 million of revenue during the second quarter, down 5% from the prior year. The Instruments segment had $90.3 million of revenue, up 7% versus the prior year, and was negatively impacted by foreign currency exchange fluctuations by approximately $7 million. FLIR's OEM & Emerging Markets segment recorded revenue of $46.3 million in the second quarter, down 9% from the prior year. Revenue from the Maritime segment was $52 million, down 6% from the second quarter of 2014, and was negatively impacted by foreign currency exchange fluctuations by approximately $7 million. Security segment revenue was $60 million, an increase of 34% over the second quarter results last year. The Detection segment contributed $36.5 million of revenue, an increase of 77% from the prior year.

"With currency-neutral revenue growth of approximately 7% and EPS growth of 35%, we have been successful in executing on our strategies in the first half of 2015," said Andy Teich, President and CEO of FLIR. "Innovations in many of our commercial markets have driven broader adoption of our thermal and other sensing technologies. FLIR's commercially-developed, military qualified (CDMQ) model continues to be a positive differentiator in our government and military markets while our restructuring initiatives have proven very beneficial from a profitability standpoint. We look forward to continuing this momentum into the second half of 2015."

FLIR's backlog of firm orders for delivery within the next twelve months was approximately $536 million as of June 30, 2015, a decrease of $21 million, or 4%, during the quarter and a decrease of $12 million, or 2%, from the second quarter of 2014.

Revenue and Earnings Outlook for 2015

Based on financial results for the first half of 2015 and the outlook for the remainder of the year, FLIR continues to expect revenue for the full year 2015 to be in the range of $1.55 billion to $1.6 billion and net earnings, excluding restructuring charges, to be in the range of $1.60 to $1.70 per diluted share.

Dividend Declaration

FLIR's Board of Directors has declared a quarterly cash dividend of $0.11 per share on FLIR common stock, payable September 4, 2015, to shareholders of record as of close of business on August 21, 2015.

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 may be accessed online from a link in the Events & Presentations section of www.FLIR.com/investor. A replay will be available after 11:00 a.m. ET (8:00 a.m. PT) at this same internet address. Summary second 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 2015" 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 Six Months Ended
June 30, June 30,
2015 2014 2015 2014
Revenue $ 392,975 $ 369,380 $ 737,492 $ 720,923
Cost of goods sold 203,360 186,662 371,980 369,673
Gross profit 189,615 182,718 365,512 351,250
Operating expenses:
Research and development 35,154 36,307 69,848 72,633
Selling, general and administrative 83,476 83,500 158,611 165,442
Restructuring expenses 454 3,547 768 11,361
Total operating expenses 119,084 123,354 229,227 249,436
Earnings from operations 70,531 59,364 136,285 101,814
Interest expense 3,358 3,629 7,019 7,337
Interest income (295 ) (272 ) (542 ) (536 )
Other expense (income), net 1,020 (1,070 ) 320 (1,269 )
Earnings before income taxes 66,448 57,077 129,488 96,282
Income tax provision 15,948 12,319 31,078 21,630
Net earnings $ 50,500 $ 44,758 $ 98,410 $ 74,652
Earnings per share:
Basic $ 0.36 $ 0.32 $ 0.70 $ 0.53
Diluted $ 0.36 $ 0.31 $ 0.70 $ 0.52
Weighted average shares outstanding:
Basic 140,063 141,574 139,916 141,255
Diluted 141,491 144,120 141,484 143,964
FLIR SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)(Unaudited)
June 30, December 31,
2015 2014
ASSETS
Current assets:
Cash and cash equivalents $ 560,190 $ 531,374
Accounts receivable, net 327,653 354,658
Inventories 360,571 320,605
Prepaid expenses and other current assets 86,000 93,691
Deferred income taxes, net 38,509 38,873
Total current assets 1,372,923 1,339,201
Property and equipment, net 260,763 247,094
Deferred income taxes, net 20,146 19,941
Goodwill 544,501 553,335
Intangible assets, net 122,344 133,212
Other assets 59,039 61,240
$ 2,379,716 $ 2,354,023
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 121,605 $ 98,173
Deferred revenue 29,989 27,878
Accrued payroll and related liabilities 53,740 62,065
Accrued expenses 35,348 51,810
Accrued income taxes 3,991 4,586
Other current liabilities 50,634 50,045
Current portion long-term debt 15,000 15,000
Total current liabilities 310,307 309,557
Long-term debt 350,715 357,986
Deferred income taxes 13,365 13,905
Accrued income taxes 11,513 11,096
Other long-term liabilities 55,341 51,706
Commitments and contingencies
Shareholders' equity 1,638,475 1,609,773
$ 2,379,716 $ 2,354,023
FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2015 2014 2015 2014
Cash flows from operating activities:
Net earnings $ 50,500 $ 44,758 $ 98,410 $ 74,652
Income items not affecting cash:
Depreciation and amortization 12,122 14,236 24,611 30,706
Deferred income taxes 46 (591 ) 142 915
Stock-based compensation arrangements 8,181 8,447 12,938 17,203
Other non-cash items 2,480 (2,109 ) (823 ) (3,599 )
Changes in operating assets and liabilities (24,397 ) 5,848 (11,419 ) 10,536
Cash provided by operating activities 48,932 70,589 123,859 130,413
Cash flows from investing activities:
Additions to property and equipment, net (17,614 ) (16,239 ) (30,753 ) (25,828 )
Cash used by investing activities (17,614 ) (16,239 ) (30,753 ) (25,828 )
Cash flows from financing activities:
Repayments of long term debt (3,750 ) (3,750 ) (7,500 ) (7,500 )
Repurchase of common stock (31,426 ) (41,237 ) (31,426 ) (43,003 )
Dividends paid (15,397 ) (14,160 ) (30,774 ) (28,245 )
Proceeds from shares issued pursuant to stock-based compensation plans 15,222 20,093 19,636 28,969
Excess tax benefit of stock options exercised 3,262 3,860 4,041 6,559
Other financing activities (1 ) (264 ) (8 ) (14 )
Cash used by financing activities (32,090 ) (35,458 ) (46,031 ) (43,234 )
Effect of exchange rate changes on cash 13,182 (914 ) (18,259 ) (1,754 )
Net increase in cash and cash equivalents 12,410 17,978 28,816 59,597
Cash and cash equivalents:
Beginning of period 547,780 584,095 531,374 542,476
End of period $ 560,190 $ 602,073 $ 560,190 $ 602,073
FLIR SYSTEMS, INC.
REVENUE AND EARNINGS FROM OPERATIONS BY SEGMENT
(In thousands)(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2015 2014 2015 2014
REVENUE
Surveillance $ 107,814 $ 113,641 $ 220,715 $ 236,729
Instruments 90,260 83,968 174,080 168,023
OEM and Emerging Markets 46,285 51,124 86,120 99,039
Maritime 52,030 55,230 103,002 107,805
Security 60,048 44,735 98,854 74,045
Detection 36,538 20,682 54,721 35,282
$ 392,975 $ 369,380 $ 737,492 $ 720,923
EARNINGS (LOSS) FROM OPERATIONS
Surveillance $ 26,378 $ 22,634 $ 56,546 $ 45,900
Instruments 28,341 21,037 56,404 41,486
OEM and Emerging Markets 10,495 13,914 19,274 22,720
Maritime 6,421 9,714 11,210 18,544
Security 7,874 5,886 11,689 7,572
Detection 9,380 3,152 12,059 1,353
Other (18,358 ) (16,973 ) (30,897 ) (35,761 )
$ 70,531 $ 59,364 $ 136,285 $ 101,814

Investor Relations
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Source: FLIR Systems, Inc.

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