FLIR Systems (FLIR)
Q2 2012 Earnings Call
July 26, 2012 8:00 am ET
William W. Davis - Senior Vice President, Secretary and General Counsel
Earl R. Lewis - Chairman, Chief Executive Officer, President and Chairman of Strategy & Technology Committee
Andrew C. Teich - President of Commercial Systems
William A. Sundermeier - President of Government Systems Division
Anthony L. Trunzo - Chief Financial Officer and Senior Vice President of Finance
Jeremy W. Devaney - BB&T Capital Markets, Research Division
Peter J. Arment - Sterne Agee & Leach Inc., Research Division
Timothy J. Quillin - Stephens Inc., Research Division
Michael S. Lewis - Lazard Capital Markets LLC, Research Division
Peter J. Skibitski - Drexel Hamilton, LLC, Research Division
Noah Poponak - Goldman Sachs Group Inc., Research Division
Jonathan Ho - William Blair & Company L.L.C., Research Division
Michael F. Ciarmoli - KeyBanc Capital Markets Inc., Research Division
Brian W. Ruttenbur - CRT Capital Group LLC, Research Division
Previous Statements by FLIR
» FLIR Systems' CEO Discusses Q1 2012 Results - Earnings Call Transcript
» FLIR Systems' CEO Discusses Q4 2011 Results - Earnings Call Transcript
» FLIR Systems' CEO Discusses Q3 2011 Results - Earnings Call Transcript
Greetings, and welcome to the FLIR Systems, Inc. Second Quarter 2012 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Wit Davis, Senior Vice President, General Counsel, and Secretary for FLIR Systems Inc. Thank you, Mr. Davis, you may begin.
William W. Davis
Good morning, everyone. Before we begin this conference call, I need to remind you that other than statements as to historical facts, statements made on this conference call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on our current expectations. Words such as expects, anticipates, intends, believes, estimates, and variations of such words and similar expressions are intended to identify such forward-looking statements. All of these statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the press release we issued earlier today for a description of factors that could cause actual results to differ materially from those forecasted. The forward-looking statements we make today speak as of today, and we do not undertake any obligation to update any such statements to reflect events or circumstances occurring after today.
Let me now turn the call over to Earl Lewis, Chairman and CEO of FLIR Systems. Earl?
Earl R. Lewis
Yes, thank you, Wit. And welcome, everyone, and thank you for joining us this morning. As we indicated last week, our second quarter 2012 performance was below our expectations. Global fiscal uncertainty caused by weakness in our maritime predictive maintenance and building markets and our cores business within Commercial Systems was negatively impacted by order delays from several key customers.
The Government Systems divisions have better order flow but revenue and earnings were down compared with last year. In response to lower earnings, we made operational changes during the quarter that resulted in a pretax restructuring charge of approximately $7 million. The restructuring should reduce cost by approximately $17 million per year beginning in the fourth quarter of this year.
We generated $77 million of cash from operations in the second quarter and utilized some of that cash to repurchase 3 million shares of our stock. We also increased our backlog by over $40 million from the end of Q1. Our Commercial business generated about half of this increase and Government, the other half. Our unit volumes continue to grow and many of our systems markets did well, reflecting continuing progress on our strategy to continually lower the cost of ownership of infrared technology.
Given the results for the first half of the year and our re-forecast of the remainder of the year, we've adjusted our outlook for 2012 revenue to between $1 -- or between $1.4 billion and $1.5 billion, and earnings per diluted share between $1.40 and $1.50.
Our current order pipeline backlog and our efforts to streamline our operations indicate a return to growth in our fourth quarter. While there remains some significant unknowns in our markets, such as sequestration softness in Europe in the building markets, we believe this represents an attainable results.
Andy Teich will now discuss the detail performance of Commercial Systems division. Andy?
Andrew C. Teich
Thanks, Earl. The Commercial Systems division finished the second quarter with a decline in revenue of 12% from the second quarter of 2011. The 2 primary drivers of this decline were delayed order flow for our camera cores and reduced sales of our premium thermography products. While these areas of our business did disappoint, we saw a continued growth in our cameras and systems unit volumes which grew 18% over the volume shipped in the second quarter of last year.
Raymarine saw a good revenue growth in the Americas due to shipments of our new E-Series line of multifunction displays, but weakness in the EMEA and APAC regions overshadowed that performance. The recreational marine maritime market remained sluggish, but we've made a significant progress in reducing cost, improving margins and introducing exciting new products. In fact, this quarter, Raymarine achieved its highest operating margin percentage as being acquired by FLIR and is very well positioned for higher margins when the market recovers.
Looking now at our bookings activity for the quarter, TVM bookings dollars declined 10% versus the prior year. The APAC region had low-teens growth in bookings dollars, while the Americas and EMEA regions were down compared to Q2 2011. The 12-month backlog and orders for the TVM segment increased $21 million from the end of the first quarter of this year due primarily to stronger bookings activity during the last few weeks of the quarter. TVM's Thermography business' bookings dollars declined 5% from a year ago driven primarily by the fact that the premium predictive maintenance product lines were negatively impacted by the global economic environment.