Teledyne FLIR (FLIR) 8-K Fourth Quarter and Full Year 2014 Financial Results

FLIR Systems Announces

Fourth Quarter and Full Year 2014 Financial Results

Fourth Quarter and Full Year EPS Growth of 155% and 14%, Respectively

Announces 10% Increase in Quarterly Dividend and New Share Repurchase Authorization

WILSONVILLE, OR, February 6, 2015 – FLIR Systems, Inc. (NASDAQ: FLIR) today announced financial results for the fourth quarter and full year ended December 31, 2014. Fourth quarter 2014 revenue was $434.4 million, up 9% compared to fourth quarter 2013 revenue of $400.3 million. Operating income in the fourth quarter was $87.4 million, compared to $37.8 million in the fourth quarter of 2013. Operating income was negatively impacted by $1 million in the fourth quarter of 2014 and $31 million in the fourth quarter of 2013 due to pretax charges related to previously-announced restructuring initiatives and the settlement of executive retirement benefits. Fourth quarter 2014 net income was $72.8 million, or $0.51 per diluted share, compared with net income of $28.7 million, or $0.20 per diluted share in the fourth quarter a year ago. Net income was negatively impacted by $0.7 million, or $0.01 per diluted share, in the fourth quarter of 2014 and $21 million, or $0.15 per diluted share, in the fourth quarter of 2013 due to after-tax restructuring and retirement benefits charges. Cash provided by operations in the fourth quarter was $62.8 million.

Revenue from the Surveillance segment was $150.1 million, an increase of 8% from the fourth quarter results last year. The Instruments segment contributed $103.5 million of revenue during the fourth quarter, up 2% from the prior year. The OEM & Emerging Markets segment had $58 million of revenue, an increase of 8% over the prior year. FLIR’s Security segment recorded revenue of $56.4 million in the fourth quarter, up 35% from the prior year. Revenue from the Maritime segment was $40.1 million, and was down 6% over the fourth quarter of 2013. The Detection segment contributed $26.2 million of revenue, an increase of 19% from the prior year.

For the full year, revenue was $1,530.7 million, up 2% compared to $1,496.4 million for the year ended December 31, 2013. Operating income for 2014 was $259.2

million compared to $240.7 million in 2013. Net income for 2014 was $200.3 million, or $1.39 per diluted share, compared with 2013 net income of $177 million, or $1.22 per diluted share. Cash provided by operations was $226.2 million during the year.

FLIR's backlog of firm orders for delivery within the next twelve months was approximately $547 million as of December 31, 2014, a decrease of $32 million, or 6%, during the quarter and an increase of $57 million, or 12%, compared to the end of 2013.

"We are pleased with the results of the fourth quarter and full year 2014 as they further demonstrate the progress we have made in reaching our goal of becoming ‘the world’s sixth sense.’ During the year we introduced several new products that revolutionized our industry, opened up large consumer markets, and expanded the accessibility of our advanced sensor technologies to a much broader set of people. We were very successful in realigning our operations to better serve our existing and future customers while also reducing our operating costs. And we deployed our capital efficiently and broadly to best position us for growth and to best serve our shareholders,” said Andy Teich, President and CEO of FLIR. “Our innovation engine and initiatives for continuous improvement resulted in increased revenue and meaningful growth in profitability during 2014. There remains more to be accomplished and we look forward to executing our strategies for sustained long term growth.”

Revenue and Earnings Outlook for 2015

FLIR also announced today that it currently expects revenue in 2015 to be in the range of $1.55 billion to $1.6 billion and net earnings to be in the range of $1.60 to $1.70 per diluted share.

Dividend Increase and Declaration

FLIR’s Board of Directors has approved a quarterly cash dividend of $0.11 per share on FLIR common stock, an increase of 10% over the previous paid quarterly dividend of $0.10 per share. The Board of Directors has declared the dividend payable March 6, 2015, to shareholders of record as of close of business on February 20, 2015.

Share Repurchase Program

Also today, FLIR announced that its Board of Directors approved a new share repurchase program that authorizes the repurchase of up to 15 million shares from time to time over the next two years. This authorization represents approximately 11% of FLIR's outstanding common stock as of December 31, 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 and the year. 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 fourth quarter financial results and operating highlights is also available online from a link in the Events & Presentations section of www.FLIR.com/investor. Summary fourth 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

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. 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.

Investor Relations

Shane Harrison

503-498-3547

shane.harrison@flir.com

FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)(Unaudited)
	Three Months Ended						Twelve Months Ended
	December 31, 2014						December 31, 2014
	2014			2013			2014				2013
Revenue	$	434,366		$	400,319		$	1,530,654			$	1,496,372
Cost of goods sold		219,629			210,228			780,281				759,362
Gross profit		214,737			190,091			750,373				737,010
Operating expenses:
Research and development		36,096			38,425			142,751				147,696
Selling, general and administrative		90,258			88,033			331,995				322,739
Restructuring expenses		963			25,832			16,383				25,832
Total operating expenses		127,317			152,290			491,129				496,267
Earnings from operations		87,420			37,801			259,244				240,743
Interest expense		3,593			3,731			14,593				14,091
Interest income		(471	)		(337	)		(1,405		)		(1,058		)
Other expense (income), net		1,514			(741	)		(3,473		)		(1,276		)
Earnings from continuing operations
before income taxes		82,784			35,148			249,529				228,986
Income tax provision		10,032			6,413			49,268				51,971
Net earnings	$	72,752		$	28,735		$	200,261			$	177,015
Earnings per share:
Basic	$	0.52		$	0.20		$	$	1.42		$	$	1.24
Diluted	$	0.51		$	0.20		$	$	1.39		$	$	1.22
Weighted average shares outstanding:
Basic		140,634			141,250			141,143				142,446
Diluted		142,520			143,441			143,569				144,595

FLIR SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)(Unaudited)
	December 31,		December 31,
	2014		2013
ASSETS
Current assets:
Cash and cash equivalents	$	531,374	$	542,476
Accounts receivable, net		359,397		286,573
Inventories		320,605		344,719
Prepaid expenses and other current assets		93,691		97,574
Deferred income taxes, net		33,232		38,389
Total current assets		1,338,299		1,309,731
Property and equipment, net		247,094		234,041
Deferred income taxes, net		25,745		17,883
Goodwill		553,335		575,701
Intangible assets, net		133,212		154,195
Other assets		61,239		51,808
	$	2,358,924	$	2,343,359
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	98,173	$	85,730
Deferred revenue		27,878		28,844
Accrued payroll and related liabilities		62,065		62,069
Accrued expenses		51,810		39,316
Accrued income taxes		4,586		663
Other current liabilities		54,784		44,893
Current portion long-term debt		15,000		15,000
Total current liabilities		314,296		276,515
Long-term debt		357,986		372,528
Deferred income taxes		14,067		12,255
Accrued income taxes		11,096		19,996
Other long-term liabilities		51,706		48,685
Commitments and contingencies
Shareholders’ equity		1,609,773		1,613,380
	$	2,358,924	$	2,343,359

FLIR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)(Unaudited)
	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2014			2013			2014			2013
Cash flows from operating activities:
Net earnings	$	72,752		$	28,735		$	200,261		$	177,015
Income items not affecting cash:
Depreciation and amortization		12,967			17,818			57,245			62,796
Deferred income taxes		(2,214	)		(2,670	)		(1,242	)		(2,709	)
Stock-based compensation
arrangements		6,782			7,150			30,788			27,823
Gain on sale of certain optics assets		—			—			(4,129	)		—
Other non-cash items		(4,032	)		3,080			(791	)		4,564
Changes in operating
assets and liabilities		(23,411	)		51,061			(55,888	)		85,476
Cash provided by operating activities		62,844			105,174			226,244			354,965
Cash flows from investing activities:
Additions to property and equipment, net		(20,333	)		(15,065	)		(61,262	)		(52,061	)
Business acquisitions, net of
cash acquired		—			—			—			(20,073	)
Proceeds from sale of certain
optics assets		—			—			12,000			—
Cash used by investing activities		(20,333	)		(15,065	)		(49,262	)		(72,134	)
Cash flows from financing activities:
Proceeds from long term debt		—			—			—			150,000
Repayments of long term debt		(3,750	)		(3,750	)		(15,000	)		(11,250	)
Repurchase of common stock		(62,614	)		(29,028	)		(139,238	)		(162,078	)
Dividends paid		(14,102	)		(12,709	)		(56,513	)		(51,404	)
Proceeds from shares issued pursuant
to stock-based compensation plans		13,413			2,698			47,581			8,650
Excess tax benefit of stock options
exercised		3,456			141			11,161			1,069
Other financing activities		15			172			(18	)		(1,100	)
Cash used by financing activities		(63,582	)		(42,476	)		(152,027	)		(66,113	)
Effect of exchange rate changes
on cash		(12,928	)		2,644			(36,057	)		4,019
Net increase (decrease)
in cash and cash equivalents		(33,999	)		50,277			(11,102	)		220,737
Cash and cash equivalents:
Beginning of period		565,373			492,199			542,476			321,739
End of period	$	531,374		$	542,476		$	531,374		$	542,476

FLIR SYSTEMS, INC.
REVENUE AND EARNINGS FROM OPERATIONS BY SEGMENT
(In thousands)(Unaudited)
	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2014			2013			2014			2013
REVENUE
Surveillance	$	150,109		$	138,902		$	492,213		$	531,338
Instruments		103,540			101,519			354,124			337,531
OEM and Emerging Markets		57,970			53,504			226,865			207,204
Maritime		40,103			42,638			192,636			189,076
Security		56,398			41,673			179,090			141,005
Detection		26,246			22,083			85,726			90,218
	$	434,366		$	400,319		$	1,530,654		$	1,496,372
EARNINGS (LOSS) FROM OPERATIONS
Surveillance	$	43,683		$	24,284		$	113,048		$	122,094
Instruments		34,277			17,692			98,954			81,070
OEM and Emerging Markets		18,978			9,271			64,423			52,724
Maritime		1,335			1,840			24,494			22,287
Security		10,310			5,244			24,871			17,340
Detection		5,438			(1,658	)		10,958			8,888
Other		(26,601	)		(18,872	)		(77,504	)		(63,660	)
	$	87,420		$	37,801		$	259,244		$	240,743