FLIR Systems, Inc.
Oct 28, 2015

FLIR Systems Announces Third Quarter 2015 Financial Results

Constant Currency Revenue Growth of 6% and as Reported EPS Growth of 41% Over the Prior Year

WILSONVILLE, OR -- (Marketwired) -- 10/28/15 -- FLIR Systems, Inc. (NASDAQ: FLIR) today announced financial results for the third quarter ended September 30, 2015. Revenue was $381.9 million, up 2% compared to third quarter 2014 revenue of $375.4 million. On a constant-currency basis, revenue for the third quarter was up 6% compared to the prior year, as foreign currency exchange fluctuations negatively impacted revenue by approximately $14 million. Operating income in the third quarter was $76 million, compared to $70 million in the third quarter of 2014. Operating income was impacted by pretax charges related to previously-announced restructuring initiatives of $0.3 million in the third quarter of 2015 and $4.1 million in the third quarter of 2014.

Third quarter 2015 net income was $73.1 million, or $0.52 per diluted share, compared with net income of $52.9 million, or $0.37 per diluted share in the third quarter a year ago. Net income for the third quarter of 2015 included a discrete tax benefit of $17.4 million, or approximately $0.12 per diluted share, related to the release of a previously recorded tax reserve. Cash provided by operations in the third quarter of 2015 was $73.6 million, an increase of 123% compared to the prior year.

The Surveillance segment contributed $131.6 million of revenue during the third quarter, increasing 5% over the prior year. The Instruments segment had $74.8 million of revenue, down 9% from the prior year, and was negatively impacted by foreign currency exchange fluctuations by approximately $6 million, resulting in a 3% decline on a constant currency basis. FLIR's OEM & Emerging Markets segment recorded revenue of $51.4 million in the third quarter, up 3% over the prior year. Revenue from the Maritime segment was $38.9 million, down 13% from the third quarter of 2014, and was negatively impacted by foreign currency exchange fluctuations by approximately $4 million, resulting in a 4% decline on a constant currency basis. Security segment revenue was $59.3 million, an increase of 22% over the third quarter results last year. The Detection segment contributed $25.8 million of revenue, an increase of 7% from the prior year.

FLIR's backlog of firm orders for delivery within the next twelve months was approximately $568 million as of September 30, 2015, an increase of $31 million, or 6%, during the quarter and a decrease of $12 million, or 2%, from the third quarter of 2014.

"In the third quarter we saw constant currency revenue growth of 6%, improved our operating profitability, significantly improved our cash flow, and introduced several new market-defining products, however, the global economic environment created a headwind for our overall performance," said Andy Teich, President and CEO of FLIR. "Our proven ability to advance our sensing technologies, rapidly develop new products, and address new market opportunities enables our mission of being the 'World's Sixth Sense.' We have confidence in our ability to create long-term shareholder value given our focus on innovation, product differentiation, and market positioning."

Revenue and Earnings Outlook for 2015

Based on financial results for the first nine months of 2015 and the outlook for the remainder of the year, FLIR now expects revenue for the full year 2015 to be in the range of $1.52 billion to $1.57 billion and net earnings, excluding restructuring charges and the third quarter discrete tax benefit described above, to be in the range of $1.55 to $1.60 per diluted share. Including the impact of the third quarter discrete tax benefit and an estimated $12 million after-tax gain in the fourth quarter on an investment, net earnings is expected to be in the range of $1.76 to $1.81 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 December 4, 2015, to shareholders of record as of close of business on November 20, 2015.

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 and the accompanying summary presentation may be accessed online from a link in the Events section of www.FLIR.com/investor. A replay will be available after 1:00 p.m. ET (10:00 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

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 Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Revenue $ 381,928 $ 375,366 $ 1,119,420 $ 1,096,288
Cost of goods sold 201,189 190,980 573,169 560,652
Gross profit 180,739 184,386 546,251 535,636
Operating expenses:
Research and development 31,050 34,022 100,898 106,655
Selling, general and administrative 73,380 76,295 231,991 241,737
Restructuring expenses 327 4,060 1,095 15,420
Total operating expenses 104,757 114,377 333,984 363,812
Earnings from operations 75,982 70,009 212,267 171,824
Interest expense 3,670 3,663 10,689 11,000
Interest income (319 ) (398 ) (861 ) (934 )
Other expense (income), net 1,455 (3,719 ) 1,775 (4,987 )
Earnings before income taxes 71,176 70,463 200,664 166,745
Income tax (benefit) provision (1,896 ) 17,606 29,182 39,236
Net earnings $ 73,072 $ 52,857 $ 171,482 $ 127,509
Earnings per share:
Basic $ 0.52 $ 0.37 $ 1.23 $ 0.90
Diluted $ 0.52 $ 0.37 $ 1.21 $ 0.89
Weighted average shares outstanding:
Basic 139,596 141,433 139,808 141,315
Diluted 140,525 143,413 141,262 143,756
FLIR SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)(Unaudited)
September 30, December 31,
2015 2014
ASSETS
Current assets:
Cash and cash equivalents $ 525,376 $ 531,374
Accounts receivable, net 304,270 354,658
Inventories 387,113 320,605
Prepaid expenses and other current assets 90,957 93,691
Deferred income taxes, net 38,484 38,873
Total current assets 1,346,200 1,339,201
Property and equipment, net 269,724 247,094
Deferred income taxes, net 20,521 19,941
Goodwill 541,971 553,335
Intangible assets, net 118,418 133,212
Other assets 57,969 61,240
$ 2,354,803 $ 2,354,023
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 125,739 $ 98,173
Deferred revenue 27,394 27,878
Accrued payroll and related liabilities 55,713 62,065
Accrued expenses 38,516 51,810
Accrued income taxes - 4,586
Other current liabilities 51,521 50,045
Current portion long-term debt 15,000 15,000
Total current liabilities 313,883 309,557
Long-term debt 347,080 357,986
Deferred income taxes 1,012 13,905
Accrued income taxes 11,255 11,096
Other long-term liabilities 56,715 51,706
Commitments and contingencies
Shareholders' equity 1,624,858 1,609,773
$ 2,354,803 $ 2,354,023
FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Cash flows from operating activities:
Net earnings $ 73,072 $ 52,857 $ 171,482 $ 127,509
Income items not affecting cash:
Depreciation and amortization 11,854 13,572 36,465 44,278
Deferred income taxes (17,380 ) 56 (17,238 ) 971
Stock-based compensation arrangements 6,511 6,803 19,449 24,006
Gain on sale of certain optics assets - (4,129 ) - (4,129 )
Other non-cash items 5,169 6,840 4,346 3,241
Changes in operating assets and liabilities (5,606 ) (43,013 ) (17,025 ) (32,476 )
Cash provided by operating activities 73,620 32,986 197,479 163,400
Cash flows from investing activities:
Additions to property and equipment, net (19,363 ) (15,100 ) (50,116 ) (40,928 )
Proceeds from sale of certain optics assets - 12,000 - 12,000
Cash used by investing activities (19,363 ) (3,100 ) (50,116 ) (28,928 )
Cash flows from financing activities:
Repayments of long term debt (3,750 ) (3,750 ) (11,250 ) (11,250 )
Repurchase of common stock (61,955 ) (33,621 ) (93,381 ) (76,624 )
Dividends paid (15,419 ) (14,166 ) (46,193 ) (42,410 )
Proceeds from shares issued pursuant to stock-based compensation plans 1,552 5,199 21,188 34,168
Excess tax benefit of stock options exercised 175 1,147 4,216 7,705
Other financing activities (2 ) (21 ) (10 ) (36 )
Cash used by financing activities (79,399 ) (45,212 ) (125,430 ) (88,447 )
Effect of exchange rate changes on cash (9,672 ) (21,374 ) (27,931 ) (23,128 )
Net (decrease) increase in cash and cash equivalents (34,814 ) (36,700 ) (5,998 ) 22,897
Cash and cash equivalents:
Beginning of period 560,190 602,073 531,374 542,476
End of period $ 525,376 $ 565,373 $ 525,376 $ 565,373
FLIR SYSTEMS, INC.
REVENUE AND EARNINGS FROM OPERATIONS BY SEGMENT
(In thousands) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
REVENUE
Surveillance $ 131,598 $ 125,343 $ 352,312 $ 362,073
Instruments 74,796 82,561 248,877 250,583
OEM and Emerging Markets 51,448 49,888 137,568 148,927
Maritime 38,920 44,728 141,922 152,533
Security 59,331 48,648 158,185 122,692
Detection 25,835 24,198 80,556 59,480
$ 381,928 $ 375,366 $ 1,119,420 $ 1,096,288
EARNINGS (LOSS) FROM OPERATIONS
Surveillance $ 39,918 $ 33,393 $ 96,464 $ 79,293
Instruments 21,555 23,191 77,959 64,678
OEM and Emerging Markets 14,233 12,798 33,507 35,518
Maritime 1,848 4,614 13,058 23,159
Security 7,222 6,988 18,911 14,560
Detection 5,290 4,167 17,349 5,519
Other (14,084 ) (15,142 ) (44,981 ) (50,903 )
$ 75,982 $ 70,009 $ 212,267 $ 171,824

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Source: FLIR Systems, Inc.

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