FLIR Systems Announces First Quarter 2016 Financial Results

WILSONVILLE, OR--(Marketwired - Apr 26, 2016) - FLIR Systems, Inc. (NASDAQ: FLIR) today announced financial results for the first quarter ended March 31, 2016. First quarter 2016 revenue was $379.5 million, up 10% compared to first quarter 2015 revenue of $344.5 million. On a constant currency basis, first quarter 2016 revenue was up 12% versus the prior year. Operating income in the first quarter was $57.4 million, compared to $65.8 million in the first quarter of 2015. Profitability in comparison to the prior year was negatively impacted by product mix shifts, higher production costs, and unusually low corporate expenses in the prior year.

First quarter 2016 net income was $1.1 million, or $0.01 per diluted share, compared with net income of $47.9 million, or $0.34 per diluted share in the first quarter a year ago. Net income in the first quarter of 2016 was negatively impacted by the recording of $40 million of tax reserves related primarily to the previously disclosed ongoing dispute between the European Commission and the Belgium government over certain tax legislation. Excluding the tax reserve expense, earnings per diluted share were $0.30. Cash provided by operations in the first quarter was $44.9 million.

Revenue from the Surveillance segment was $124.2 million, an increase of 10% from the first quarter results last year. The Instruments segment contributed $79.4 million of revenue during the first quarter, down 5% from the prior year and down 3% on a constant currency basis. The Security segment recorded revenue of $47.1 million in the first quarter, up 21% from the prior year. FLIR's OEM & Emerging Markets segment had $47.8 million of revenue, an increase of 20% over the prior year. Revenue from the Maritime segment was $51.7 million, which was up 1% from the first quarter of 2015 and up 5% on a constant currency basis. The Detection segment contributed $29.3 million of revenue, an increase of 61% from the prior year.

FLIR's backlog of firm orders for delivery within the next twelve months was approximately $613 million as of March 31, 2016, an increase of $9 million during the quarter and an increase of $56 million, or 10%, compared to $557 million at the end of the first quarter of 2015.

"We are pleased with the growth we saw in revenue and backlog in the first quarter. Strength in our government businesses drove our backlog to its highest level since 2008," said Andy Teich, President and CEO of FLIR. "While our profitability was negatively impacted by product mix and increased manufacturing costs, we intend to improve our cost management as we move through the rest of the year. Our product development engine continues to deliver innovative solutions for improving overall safety, security, operational efficiency, and environmental protection. As demonstrated by our recent product introductions, our ability to increase the addressable markets in these areas continues to progress."

Revenue and Earnings Outlook for 2016

Based on financial results for the first three months of 2016 and the outlook for the remainder of the year, FLIR continues to expect revenue in 2016 to be in the range of $1.6 billion to $1.65 billion and net earnings to be in the range of $1.60 to $1.70 per diluted share. This guidance excludes the impact of discrete tax items.

Dividend Declaration

FLIR's Board of Directors has declared a quarterly cash dividend of $0.12 per share on FLIR common stock, payable June 3, 2016, to shareholders of record as of close of business on May 20, 2016.

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 2:00 p.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

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

Statements in this release by Andy Teich and the statements in the section captioned "Revenue and Earnings Outlook for 2016" 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,
					2016				2015
Revenue				$	379,472			$	344,517
Cost of goods sold					201,782				168,620
	Gross profit				177,690				175,897
	Operating expenses:
	Research and development				36,411				34,774
	Selling, general and administrative				83,902				75,369
		Total operating expenses			120,313				110,143
		Earnings from operations			57,377				65,754
Interest expense					3,447				3,661
Interest income					(260	)			(247	)
Other income, net					(1,430	)			(700	)
		Earnings before income taxes			55,620				63,040
Income tax provision					54,495				15,130
		Net earnings		$	1,125			$	47,910
Earnings per share:
	Basic			$	0.01			$	0.34
	Diluted			$	0.01			$	0.34
Weighted average shares outstanding:
	Basic				137,496				139,768
	Diluted				138,779				141,472

FLIR SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)(Unaudited)
			March 31,				December 31,
			2016				2015
ASSETS
Current assets:
	Cash and cash equivalents			$	510,613		$	472,785
	Accounts receivable, net				298,530			326,098
	Inventories				398,870			393,092
	Prepaid expenses and other current assets				82,217			95,539
		Total current assets			1,290,230			1,287,514
Property and equipment, net					275,148			272,629
Deferred income taxes, net					55,877			55,429
Goodwill					601,247			596,316
Intangible assets, net					138,639			141,302
Other assets					52,068			53,210
				$	2,413,209		$	2,406,400
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	106,394		$	139,540
	Deferred revenue				33,360			31,933
	Accrued payroll and related liabilities				52,212			54,806
	Accrued expenses				35,163			40,930
	Accrued income taxes				3,227			201
	Other current liabilities				39,984			53,241
	Current portion long-term debt				264,809			264,694
		Total current liabilities			535,149			585,345
Long-term debt					90,000			93,750
Deferred income taxes					3,787			3,623
Accrued income taxes					53,629			10,457
Other long-term liabilities					62,615			63,710
Commitments and contingencies
Shareholders' equity					1,668,029			1,649,515
				$	2,413,209		$	2,406,400

FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)(Unaudited)
				Three Months Ended
				March 31,
				2016				2015
Cash flows from operating activities:
	Net earnings			$	1,125			$	47,910
	Income items not affecting cash:
		Depreciation and amortization			13,939				12,489
		Deferred income taxes			(227	)			96
		Stock-based compensation arrangements			6,088				4,757
	Other non-cash items				5,807				(3,303	)
	Changes in operating assets and liabilities				18,145				12,978
Cash provided by operating activities					44,877				74,927
Cash flows from investing activities:
	Additions to property and equipment				(9,992	)			(13,169	)
	Proceeds from sale of property and equipment.				4,875				30
Cash used by investing activities					(5,117	)			(13,139	)
Cash flows from financing activities:
	Repayments of long term debt				(3,750	)			(3,750	)
	Dividends paid				(16,507	)			(15,377	)
	Proceeds from shares issued pursuant
	to stock-based compensation plans				3,989				4,414
	Excess tax benefit of stock options exercised				1,041				779
	Other financing activities				3				(7	)
Cash used by financing activities					(15,224	)			(13,941	)
Effect of exchange rate on cash					13,292				(31,441	)
Net increase in cash and cash equivalents					37,828				16,406
Cash and cash equivalents:
	Beginning of period				472,785				531,374
	End of period			$	510,613			$	547,780

FLIR SYSTEMS, INC.
REVENUE AND EARNINGS FROM OPERATIONS BY SEGMENT
(In thousands)(Unaudited)
			Three Months Ended
			March 31,
			2016				2015
REVENUE
	Surveillance		$	124,151			$	112,901
	Instruments			79,418				83,821
	Security			47,061				38,806
	OEM & Emerging Markets			47,845				39,834
	Maritime			51,720				50,972
	Detection			29,277				18,183
			$	379,472			$	344,517
EARNINGS (LOSS) FROM OPERATIONS
	Surveillance		$	35,240			$	30,166
	Instruments			19,496				28,063
	Security			(3,645	)			3,816
	OEM & Emerging Markets			10,032				8,779
	Maritime			4,998				4,789
	Detection			7,880				2,680
	Other			(16,624	)			(12,539	)
			$	57,377			$	65,754

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