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FLIR reports buyer interest in Raymarine

Raymarine and Mercury partnered to debut assisted docking in February 2019. Eric Colby photo

Raymarine and Mercury partnered to debut assisted docking in February 2019. Eric Colby photo

FLIR Systems said there is interest in its Raymarine brand, as the company last week announced it is evaluating the “divestiture of our Raymarine non-thermal maritime electronics business.” The company has not discussed the value it expects for the unit.

In the wake of a difficult year in its commercial business unit, which includes the marine segment, FLIR said it is reducing complexity in the company and scaling it for the long term while eliminating near-term costs.

The company said it has formally entered the sales process with Raymarine-branded electronics.

“Yes, we have formally entered into that process, and it regards the Raymarine-branded marine electronics business,” CEO Jim Cannon said during a call with investors last week to discuss fourth-quarter results.

“So, to be clear, FLIR-branded thermal maritime products will remain with FLIR now,” Cannon said. “We do have several prospective buyers, and we're in the midst of that process now. And as we mentioned, if we can get to our very clear-eyed valuation expectations, we're able to move very quickly with the transaction. But while it might not be core to FLIR going forward and where we're focused, it really is best-in-class with innovation that will disrupt that market — like DockSense, for example, that we launched last year. So the process is well under way right now.”

The commercial business unit negatively impacted FLIR’s consolidated organic revenue growth and profitability targets for the fourth quarter and the 2019 fiscal year, Cannon said.

“I remain unsatisfied with our recent financial performance, notably our organic top line growth,” he said. “I'm especially disappointed that we did not achieve our revised full-year guidance as a result of the headwinds we faced in our commercial business unit, the lumpy nature of the revenue on certain near-term programs that are difficult to predict, and unforeseen impairment charges on minority investments. We expect the financial and operational trends we experienced in 2019 to persist into the coming year, which is reflected in our 2020 outlook.”

FLIR posted quarterly revenue of $0.55 per share, missing the consensus estimate of $0.62 per share, according to Nasdaq.com. Profits were down 11.29 percent from the previous year.

Stocks dropped following the quarterly earnings release last week, opening at $43.23 this morning. The stock fell 7.5 percent after the quarter missed top- and bottom-line expectations, according to Seeking Alpha. Stocks closed above $54 on Wednesday; the company has a 52-week high of $59.44.

Those drops prompted Baird to cut its rating from “outperform” to “neutral”; SunTrust changed its “buy” rating to “hold.”

As part of its plan, known as Project Be Ready, FLIR is consolidating business units and simplifying its product portfolio to better align the business with strategic priorities, Cannon said.

“In doing so, we have discontinued certain non-core consumer-centric product lines within our outdoor and tactical systems, or OTS, business,” Cannon said. “This process is largely complete.”

Though not “core” to FLIR, the company believes its maritime business is “best-in-class in its industry, with compelling and innovative products that make it an extremely attractive asset,” Cannon said.

The company said it has a clear expectation, relative to the value of the brand, and can move quickly to complete a transaction if the it gets the price it wants.

The remaining divisions in the commercial business unit will be integrated into the industrial business unit, making it one of two units, with the government and defense business unit.

“We believe this effort will help reduce complexity in our business and eliminate unnecessary overhead, helping to improve our cost structure,” Cannon said. “We look forward to discussing these evolving dynamics in more detail at our next investor day, which we plan to host in the third quarter of 2020.”

The company is not further detailing the potential Raymarine transaction at this time, CFO Carol Lowe said.

“When we actually are able to complete the transaction — and we do have a meaningful number of buyers that are currently engaged in the process — then we'll break out that information,” Lowe said.

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