FLIR Systems Announces Third Quarter 2006 Financial Results

PORTLAND, OR -- (MARKET WIRE) -- October 26, 2006 -- FLIR Systems, Inc. (NASDAQ: FLIR) announced today that revenue for the third quarter ended September 30, 2006 increased 18% to $133.2 million from $113.0 million for the third quarter of 2005. Earnings from operations increased 29% to $34.0 million, or 25% of revenue, compared with $26.3 million, or 23% of revenue, for the third quarter of 2005. Net earnings for this year's third quarter increased 56% to $27.1 million, or $0.36 per diluted share, compared to net earnings for the third quarter of 2005 of $17.3 million, or $0.22 per diluted share. The Company's income tax rate for the third quarter was 18%, compared with 26% in the third quarter of 2005. During the third quarter, the Company's tax expense was reduced by $3.1 million related primarily to the recognition of deferred tax assets not recognizable in previous periods. Stock based compensation expense for the third quarter of 2006 was $2.8 million, or approximately $0.03 per fully diluted share.

For the first nine months of 2006, revenue increased 10% to $389.1 million from $352.3 million for the same period last year. Earnings from operations for the first nine months of 2006 increased 3% to $81.9 million, or 21% of revenue, from $79.8 million, or 23% of revenue, for the first nine months of 2005. Net earnings increased 8% to $61.1 million, or $0.80 per diluted share, compared to net earnings of $56.6 million, or $0.73 per diluted share, for the first nine months of 2005. The Company recognized stock based compensation expense totaling $7.8 million for the first nine months of 2006, or approximately $0.08 per fully diluted share.

Revenue from the Company's Thermography Division increased 29% over the third quarter of 2005, as a result of stronger international markets and the recent introduction of several new products, including the ThermaCAM ® P640, the recently redesigned ThermaCAM® E-Series and the InfraCAM®.

Revenue from the Company's Government Systems Division increased by 6% in the third quarter to $56.9 million, due to strength in certain major government programs and higher international sales.

Revenue from the Company's Commercial Vision Systems Division increased 29% over the third quarter of last year, to $26.6 million, reflecting strong component and core sales and rapid growth in security applications.

The backlog of orders for delivery within the next twelve months was approximately $244 million at September 30, 2006, an increase of $71 million from the June 30, 2006 backlog of $173 million. The Company's Government Systems Division experienced record orders during the third quarter and accounted for the majority of the backlog increase.

Cash generated from operations totaled $21 million for the third quarter of 2006, and $75 million for the first nine months of the year. At September 30, 2006, the Company had cash and cash equivalents of $112 million. During the quarter, the Company repurchased approximately 4 million shares of its common stock at an average price of approximately $25.36 per share.

Earl Lewis, President and CEO, stated, "I am very pleased with our results for the third quarter. The Government Systems Division had excellent order activity, and we are seeing renewed growth in this business. Our new Thermography products have been very well received, and the Commercial Vision Systems Division is executing well on its focused strategies of building distribution and expanding its product offerings. We are confident in our outlook for the remainder of 2006 and are encouraged by the prospects for 2007."

Revenue and Earnings Guidance for 2006

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

Based on its financial results for the first nine months of 2006, and the outlook for the remainder of the year, management currently expects revenue for 2006 to be in the previously announced range of $570 million to $580 million, and net earnings to be in the range of approximately $1.27 to $1.32 per fully diluted share. This compares with management's previous expectations for 2006 earnings of $1.20 to $1.30 per fully diluted share.

Forward-Looking Statements

The statements in this release by Earl R. Lewis and the statements in the Revenue and Earnings Guidance for 2006 above are forward-looking statements. Such statements are based on current expectations, estimates and projections about the Company'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 the Company's products, product mix, the timing of customer orders and deliveries, the impact of competitive products and pricing, the Company's continuing compliance with US export control laws and regulations, constraints on supplies of critical components, excess or shortage of production capacity, actual purchases under agreements, the continuing eligibility of the Company to act as a federal contractor, the amount and availability of appropriated government procurement funds and other risks discussed from time to time in the Company'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 the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.

Conference Call

FLIR has scheduled a conference call at 8:00 am EDT today. A simultaneous web cast of the conference call may be accessed online from the Calendar of Events link at the investor relations page of www.FLIR.com. A replay will be available approximately one hour after the web cast at these same Internet addresses. For a telephone replay, dial (800) 633-8284, reservation #21304781 after approximately 1:00 p.m. EDT.

About FLIR Systems

FLIR Systems, Inc. is a world leader in the design, manufacture and marketing of thermal imaging and stabilized camera systems for a wide variety of thermography and imaging applications including condition monitoring, research and development, manufacturing process control, airborne observation and broadcast, search and rescue, drug interdiction, surveillance and reconnaissance, navigation safety, border and maritime patrol, environmental monitoring and ground-based security. Visit the Company's web site at www.FLIR.com.

                             FLIR SYSTEMS, INC.

                      CONSOLIDATED STATEMENTS OF INCOME
              (In thousands, except per share amounts)(Unaudited)



                                 Three Months Ended    Nine Months Ended
                                    September 30,         September 30,
                               --------------------  --------------------
                                  2006       2005       2006       2005
                               ---------  ---------- ---------  ---------

Revenue                        $ 133,212  $  113,031 $ 389,101  $ 352,314

Cost of goods sold                57,501      52,911   178,631    162,281
                               ---------  ---------- ---------  ---------
    Gross profit                  75,711      60,120   210,470    190,033

Operating expenses:
  Research and development        13,928      11,777    44,323     39,002
  Selling, general and
   administrative                 27,816      22,002    84,265     71,229
                               ---------  ---------- ---------  ---------
     Total operating expenses     41,744      33,779   128,588    110,231



     Earnings from operations     33,967      26,341    81,882     79,802


Interest expense                   2,266       1,954     6,143      5,921
Other (income) expense, net       (1,448)        949    (4,874)    (2,637)
                               ---------  ---------- ---------  ---------

     Earnings before income
      taxes                       33,149      23,438    80,613     76,518

Income tax provision               6,079       6,094    19,473     19,895
                                ---------  ---------- ---------  ---------

     Net earnings              $  27,070  $   17,344 $  61,140  $  56,623
                               =========  ========== =========  =========

Net earnings per share:
  Basic                        $    0.40  $     0.25 $    0.89  $    0.81
                               ---------  ---------- ---------  ---------
  Diluted                      $    0.36  $     0.22 $    0.80  $    0.73
                               =========  ========== =========  =========

Weighted average shares
 outstanding:
  Basic                           67,478      69,777    68,577     69,617
                               ---------  ---------- ---------  ---------
  Diluted                         79,052      82,292    80,256     82,286
                               =========  ========== =========  =========



                             FLIR SYSTEMS, INC.

                        CONSOLIDATED BALANCE SHEETS
                         (In thousands)(Unaudited)

                                                September 30, December 31,
                                                    2006         2005
                                              -------------- --------------
         ASSETS

Current assets:
  Cash and cash equivalents                   $      112,370 $      107,057
  Accounts receivable, net                           133,902        142,782
  Inventories, net                                   129,262        103,837
  Prepaid expenses and other current assets           39,141         33,153
  Deferred income taxes, net                          21,285         18,709
                                              -------------- --------------
    Total current assets                             435,960        405,538

Property and equipment, net                           76,383         59,479
Deferred income taxes, net                             9,405          8,415
Goodwill                                             159,021        158,065
Intangible assets, net                                42,495         46,901
Other assets                                          17,108         15,981
                                              -------------- --------------
                                              $      740,372 $      694,379
                                              ============== ==============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Notes payable                               $       53,000 $           --
  Accounts payable                                    34,692         34,477
  Deferred revenue                                    11,618         10,297
  Accrued payroll and related liabilities             22,157         20,374
  Accrued product warranties                           5,029          5,059
  Advance payments from customers                      5,294          5,013
  Other current liabilities                           11,888         11,626
  Accrued income taxes                                17,920          3,148
  Current portion of long-term debt                        7             56
                                              -------------- --------------
    Total current liabilities                        161,605         90,050

Long-term debt                                       206,807        206,155
Deferred tax liability, net                            2,799         10,779
Pension and other long-term liabilities               19,728         18,413

Commitments and contingencies

Shareholders’ equity                                 349,433        368,982
                                              -------------- --------------
                                              $      740,372 $      694,379
                                              ============== ==============

Contact Information: Company Contact: Tony Trunzo +1 503.498.3547 www.flir.com