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FLIR Systems Announces Second Quarter 2015 Financial Results

WILSONVILLE, OR--(Marketwired - Jul 24, 2015) - 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