SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)



Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ¨ No ¨

As of ~~April 28,~~October 18, 2017, there were ~~136,455,705~~138,574,234 shares of the registrant’s common stock, $0.01 par value, outstanding.

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements of FLIR Systems, Inc. and its consolidated subsidiaries (the “Company”) are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the Company’s consolidated financial position and results of operations for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

The accompanying consolidated financial statements include the accounts of FLIR Systems, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the year ending December 31, 2017.

Recently Adopted Accounting Pronouncements

Effective January 1, 2017, the Company adopted the Financial Accounting Standards Board ("FASB") Accounting Standards Update 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"). The standard update simplifies several aspects of the accounting for employee share-based payment transactions, including accounting for income taxes, forfeitures, and statutory withholding requirements, as well as classification in the Consolidated Statements of Cash Flows. As a result of the adoption, on a prospective basis, the Company recognized ~~$0.8~~$0.4 million and $4.0 million of excess tax benefits from stock-based compensation as a discrete item in income tax provision for the three and nine months ended ~~March 31, 2017.~~September 30, 2017, respectively. Historically, these amounts were recorded as additional paid-in capital. Upon adoption, the Company elected to apply the change retrospectively to the Consolidated Statement of Cash Flows which resulted in a reclassification of excess tax benefits from stock-based compensation of ~~$1.0~~$1.6 million from cash flows from financing activities to cash flows from operating activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2016. Additionally, ~~less than $0.1~~$5.8 million paid in cash ~~paid~~ to satisfy withholding requirements for net settlement of restricted stock unit shares vested and stock options exercised has been reclassified from cash flows from operating activities to cash flows from financing activities to conform to the presentation required by the new standard in the Consolidated Statement of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2016. ASU 2016-09 also requires excess tax benefits and deficiencies to be excluded from the assumed future proceeds in the calculation of diluted shares. This change resulted in an increase in diluted weighted average shares outstanding of ~~229,000~~215,000 shares and 211,000 shares for the three and nine months ended ~~March 31, 2017.~~September 30, 2017, respectively. The Company elected not to change its policy on accounting for forfeitures and will continue to estimate a requisite forfeiture rate. Additional amendments to the accounting for income taxes and minimum statutory withholding requirements had no impact on the Company's results of operations.

The Company made certain reclassifications to the prior years' financial statements and notes to the consolidated financial statements to conform them to the presentation as of and for the three and nine months ended ~~March 31,~~September 30, 2017. These reclassifications had no effect on consolidated financial position, net earnings, shareholders' equity, or net cash flows for any of the periods presented.

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Stock Incentive Plans

The Company has a stock-based compensation program that provides equity incentives for employees, consultants and directors. This program includes incentive and non-statutory stock options and non-vested stock awards (referred to as restricted stock unit awards) granted under two plans: the FLIR Systems, Inc. 2002 Stock Incentive Plan (the “2002 Plan”) and the FLIR Systems, Inc. 2011 Stock Incentive Plan (the “2011 Plan”). The Company has discontinued issuing awards out of the 2002 Plan but ~~previously granted~~previously-granted awards under the 2002 Plan remain outstanding.

The Company has granted time-based options, time-based restricted stock unit awards, market-based restricted stock unit awards and performance-based restricted stock unit awards. Options generally expire ten years from the grant date. Time-based options and restricted stock unit awards generally vest over a three-year period. Market-based restricted stock unit awards may be earned based upon the Company's total shareholder return compared to the total shareholder return of the component company at the 60th percentile level in the S&P 500 Index over a three-year period. Performance-based restricted stock unit awards may be earned based upon certain profitability metrics as approved by the compensation committee of the Company's board of directors, including return on invested capital or income from operations over athe relevant three-year ~~period.~~periods. Shares vested under the performance-based restricted stock unit awards and the market-based restricted stock unit awards must generally be held by the participant for a period of one year from the vest date.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (the “ESPP”) which allows employees to purchase shares of the Company’s common stock at 85 percent of the fair market value at the lower of either the date of enrollment or the purchase date. The ESPP provides for six-month offerings commencing on May 1 and November 1 of each year with purchases on April 30 and October 31 of each year. Shares purchased under the ESPP must be held by employees for a period of at least 18 months after the date of purchase.

The following table sets forth the stock-based compensation expense recognized in the Consolidated Statements of Income (in thousands):

Stock-based compensation expense capitalized in the Consolidated Balance Sheets is as follows (in thousands):

March 31,
2017 2016
Capitalized in inventory $ 902
$ 790



	September 30,
	2017		2016
Capitalized in inventory	$	1,074	$	585

As of ~~March 31,~~September 30, 2017, the Company had approximately ~~$35.9~~$45.9 million of total unrecognized stock-based compensation costs, net of estimated forfeitures, to be recognized over a weighted average period of ~~1.80~~2.20 years.

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following table sets forth the reconciliation of the numerator and denominator utilized in the computation of basic and diluted earnings per share (in thousands):

The effect of stock-based compensation awards for the three and nine months ended ~~March 31,~~September 30, 2017, which in aggregate consisted of 147,000 and 83,000 shares, respectively; and for the three and nine months ended September 30, 2016, ~~that aggregated 18,000~~which in the aggregate consisted of 322,000 and ~~271,000~~317,000 shares, respectively, have been excluded for purposes of diluted earnings per share since the effect of their inclusion would have been anti-dilutive.

Factors used in determining the fair value of financial assets and liabilities are summarized into three broad categories in accordance with FASB ASC Topic 820, “Fair Value Measurements”:

Level 1 – quoted prices in active markets for identical securities as of the reporting date;

Level 2 – other significant directly or indirectly observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and observable market prices for identical instruments that are traded in less active markets; and

Level 3 – significant inputs that are generally less observable than objective sources, including our own assumptions in determining fair value.

The factors or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

The Company had $~~70.8~~60.8 million and $8.3 million of cash equivalents at ~~March 31,~~September 30, 2017 and December 31, 2016, respectively, which were primarily investments in money market ~~funds.~~funds and overnight deposits. The Company has categorized its cash equivalents as a Level 1 financial asset, measured at fair value based on quoted prices in active markets of identical assets. All cash equivalents are in instruments that are convertible to cash daily. The fair value of the Company’s ~~forward~~foreign currency ~~contracts and interest rate swap~~ contracts as of ~~March 31,~~September 30, 2017 and December 31, 2016, are disclosed in Note 5, "Derivative Financial Instruments," and are based on Level 2 inputs. The fair value of the Company’s senior unsecured notes as described in Note 13, "Long-Term Debt," is approximately $~~428.0~~430.8 million based upon Level 2 inputs at ~~March 31,~~September 30, 2017. ~~The fair value of~~At September 30, 2017, the ~~Company's~~Company had no other borrowings outstanding under the revolving credit ~~agreements and borrowings, also~~facility described in Note ~~13, approximates the carrying value due to the variable market rate used to calculate interest payments.~~13. The Company does not have any other significant financial assets or liabilities that are measured at fair value.

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 5. Derivative Financial Instruments

Foreign Currency Exchange Rate Risk

The Company enters into foreign currency forward contracts not formally designated as hedges to manage the consolidated exchange rate risk associated with the remeasurement of non-functional currency denominated monetary assets and liabilities. Changes in fair value of foreign currency forward contracts are recognized in income at the end of each reporting period based on the difference between the contract rate and the spot rate. In general, these gains and losses are offset in the Consolidated Statements of Income by the reciprocal gains and losses from cash settlement of the underlying assets or liabilities which originally gave rise to the exposure. The net amount of the gains and losses related to derivative instruments recorded in other ~~income,~~(income) expense, net for the three and nine months ended ~~March 31,~~September 30, 2017 were a net gain of $0.2 million and a net loss of $7.3 million, respectively. The net losses for the three and nine months ended September 30, 2016 were a ~~loss~~ of ~~$4.3~~$3.0 million and ~~gain~~ of ~~$7.0~~$4.1 million,, respectively.

The table below presents the net notional amounts of the Company’s outstanding foreign currency forward contracts by currency (in thousands):

At ~~March 31,~~September 30, 2017, the Company’s foreign currency forward contracts, in general, had maturities of three months or less.

The carrying ~~amount~~amounts of the foreign exchange contracts included in the Consolidated Balance Sheets are as follows (in thousands):

March 31, 2017 December 31, 2016
Prepaid Expenses and Other Current Assets Other Current Liabilities Prepaid Expenses and Other Current Assets Other Current Liabilities
Foreign exchange contracts $ 636
$ 1,585
$ 2,369
$ 75



	September 30, 2017				December 31, 2016
	Prepaid Expenses and Other Current Assets		Other Current Liabilities		Prepaid Expenses and Other Current Assets		Other Current Liabilities
Foreign exchange contracts	$	2,269	$	2,737	$	2,369	$	75

Interest Rate Swap Contracts

~~At March~~On May 31, ~~2017,~~2016, the ~~effective interest rate on~~Company drew down $105 million under the ~~borrowings made from the Company's~~ revolving credit facility as described in Note 11, "Credit Agreement," and repaid the term loan originally issued under the credit agreement dated April 5, 2013. Interest was ~~2.37 percent. As~~accrued and paid monthly based on the one-month LIBOR rate. To manage the interest rate risk arising from the variability in monthly interest expense attributable to the original term loan and amounts drawn under the revolver, the Company entered into two amortizing interest rate swaps with an aggregate notional amount of ~~March 31, 2017, the following~~$105 million. The interest rate swaps were ~~outstanding:~~designated, and effective, as cash flow hedges.

Contract Date
Notional Amount
(in millions)
Fixed Rate Effective Date Maturity Date
March 15, 2013 $ 45.0
1.02 % April 5, 2013 March 31, 2019
March 29, 2013 $ 45.0
0.97 % April 5, 2013 March 31, 2019

~~The net fair value carrying amount of~~During the ~~Company's~~quarter ended September 30, 2017, the Company repaid all amounts outstanding under the revolving credit facility. Concurrently, the Company exited both interest rate swaps ~~was $0.7~~which had a combined notional amount at the time of $86.3 million ~~of which $0.2 million has been recorded to prepaid expenses~~ and ~~other current assets and~~discontinued the cash flow hedge. The Company reclassified a gain of $0.5 million ~~has been recorded~~from accumulated other comprehensive income to ~~other assets in~~interest expense because it was probable that the ~~Consolidated Balance Sheet as of~~ ~~March 31, 2017~~.forecasted variable monthly LIBOR-based interest rate payments would no longer occur.

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Accounts receivable are net of an allowance for doubtful accounts of ~~$6.3~~$6.1 million and $6.5 million at ~~March 31,~~September 30, 2017 and December 31, 2016, respectively.

Inventories consist of the following (in thousands):

Note 8. Property and Equipment

Property and equipment are net of accumulated depreciation of ~~$284.9~~$313.6 million and $275.1 million at ~~March 31,~~September 30, 2017 and December 31, 2016, respectively.

The carrying value of goodwill and the activity for the ~~three~~nine months ended ~~March 31,~~September 30, 2017 are as follows (in thousands):

See Note 17, "Operating Segments and Related Information - Operating Segments," of the Notes to the Consolidated Financial Statements for additional information on the carrying value of goodwill by operating segment at ~~March 31,~~September 30, 2017.

See Note 18, "Business Acquisitions," of the Notes to the Consolidated Financial Statements for additional information on the addition of goodwill from acquisitions.

Note 10. Intangible Assets

Intangible assets are net of accumulated amortization of ~~$85.2~~$100.8 million and $77.8 million at ~~March 31,~~September 30, 2017 and December 31, 2016, respectively.

On February 8, 2011, the Company entered into a credit agreement with Bank of America, N.A., U.S. Bank National Association, JPMorgan Chase Bank N.A. and other lenders, as amended on April 5, 2013, October 27, 2015 and May 31, 2016 (the "Credit Agreement") which provides for a $500 million revolving line of credit. At ~~March 31,~~September 30, 2017, the Company had ~~$90 million~~no amounts outstanding under its revolving credit facility ~~pursuant to the Credit Agreement~~ and had ~~$16.5~~$16.9 million of letters of credit outstanding governed by the facility, which reduces the total available revolving credit under the Credit Agreement to ~~$393.5~~$483.1 million.

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following table summarizes the Company’s warranty liability and activity (in thousands):

Note 13. Long-Term Debt

Long-term debt consists of the following (in thousands):

In June 2016, the Company issued $425 million aggregate principal amount of its 3.125 percent senior unsecured notes due June 15, 2021 (the “2016 Notes”). The net proceeds from the issuance of the 2016 Notes were approximately $421.0 million, after deducting underwriting discounts and offering expenses, which are being amortized over a period of five years. Interest on the 2016 Notes is payable semiannually in arrears on December 15 and June 15. The proceeds from the 2016 Notes were used to repay the principal amount of the notes issued in August 2011 and outstanding in July 2016 and are being used for ~~other~~ general corporate purposes, including working capital and capital expenditure needs, business acquisitions and repurchases of the Company’s common stock.

On May 31, 2016, the Company repaid its term loan and drew down $105.0 million under the revolving credit facility. Interest on amounts outstanding under the revolving credit facility ~~accrues~~accrued at the one-month LIBOR rate plus the applicable margin for the amount outstanding and iswas paid monthly in arrears. ~~See Note 5, "Derivative Financial Instruments -~~ ~~Interest Rate Swap Contracts," of~~During the ~~Notes to~~quarter ended September 30, 2017, the ~~Consolidated Financial Statements for additional information on the effective interest rate on~~Company repaid all amounts outstanding under the revolving credit ~~facility at March 31, 2017.~~

~~FLIR SYSTEMS, INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

facility.

The following table summarizes the common stock and additional paid-in capital activity during the ~~three~~nine months ended ~~March 31,~~September 30, 2017 (in thousands):

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

On ~~March 10,~~September 8, 2017, the Company paid a dividend of $0.15 per share on its outstanding common stock to the shareholders of record as of the close of business on ~~February 24,~~August 25, 2017. The total cash payments for dividends during the ~~three~~nine months ended ~~March 31,~~September 30, 2017 were ~~$20.5~~$61.8 million.

FLIR Systems, Inc. and its subsidiary, FLIR Commercial Systems, Inc. (formerly known as Indigo Systems Corporation) (together, the “FLIR Parties”), were named in a lawsuit filed by Raytheon Company (“Raytheon”) on March 2, 2007, in the United States District Court for the Eastern District of Texas. Raytheon's complaint, as amended, asserted claims for tortious interference, patent infringement, trade secret misappropriation, unfair competition, breach of contract, and fraudulent concealment. The FLIR Parties filed an answer to the complaint on September 2, 2008, in which they denied all material allegations. On October 27, 2010, the FLIR Parties and Raytheon entered into a settlement agreement that resolved the patent infringement claims (the "Patent Claims") pursuant to which the FLIR Parties paid $3 million to Raytheon and entitles the FLIR Parties to certain license rights in the patents that were the subject of the Patent Claims. On October 28, 2014, a four-week trial began with respect to Raytheon's remaining claims of misappropriations of trade secrets and claims related to 31 alleged trade secrets. On November 24, 2014, a jury in the United States District Court for the Eastern District of Texas rejected Raytheon’s claims and determined that 27 of the alleged trade secrets were not in fact trade secrets and that neither of the FLIR Parties infringed any of the trade secrets claimed and awarded Raytheon no damages. On March 31, 2016, the United States District Court for the Eastern District of Texas issued a Final Judgment denying Raytheon’s claims and awarding FLIR court costs and denying each of Raytheon’s and FLIR’s Renewed Motions for Judgment as a Matter of Law and denying FLIR’s Amended Rule 54(d) Motion for Attorneys’ Fees and Costs Under the Texas Theft Liability Act.

On April 29, 2016, Raytheon filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit of the denial by the United States District Court for the Eastern District of Texas of Raytheon’s Renewed Motion for Judgment as a Matter of Law, or in the Alternative, Motion for New Trial. On May 11, 2016, the FLIR Parties filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit of the Order of the United States District Court for the Eastern District of Texas Denying the FLIR Parties’ Amended Rule 54(d) Motion for Attorneys’ Fees and Costs under the Texas Theft Liability Act, the Order Denying the FLIR Parties’ Renewed Motion For Judgment as a Matter Of Law, and the Final Judgment to the extent it denied the FLIR Parties Attorneys’ Fees and Costs under the Texas Theft Liability Act. The matter remains ongoing and is subject to ~~appeal and the~~appeal. The Company is unable to estimate the amount or range of potential loss or recovery, if any, which might result if the final determination of this matter is favorable or unfavorable, but an adverse ruling on the merits of the original claims against the FLIR Parties, while remote, could be material.

~~FLIR SYSTEMS, INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~Note 15. Contingencies - (Continued)~~

Matters Involving the United States Department of State and Department of Commerce

On October 22, 2014, the Company initially contacted the United States Department of State Office of Defense Trade Controls Compliance (“~~DDTC”~~DTCC”), pursuant to International Traffic in Arms Regulation (“ITAR”) § 127.12(c), regarding the unauthorized export of technical data and defense services to dual and third country nationals in at least four facilities of the Company. On April 27, 2015, the Company submitted its initial report to ~~DDTC~~DTCC regarding the details of the issues raised in the October 22, 2014, submission. ~~DDTC~~DTCC subsequently notified the Company that it was considering administrative proceedings under Part 128 of ITAR and requested a tolling agreement, which the Company executed on June 16, ~~2015.~~2015 and referenced certain Company disclosures in addition to the submissions made in conjunction with the October 24, 2014 initial notification. On June 6, 2016, the Company executed a subsequent tolling agreement extending the tolling period for matters to be potentially included in an administrative proceeding for an additional 18 months until the end of December 2017. ~~DDTC~~DTCC continues its review of the Company’s activities and the Company continues to engage actively with the United States government on these matters.

In May 2017, the Company submitted an initial notification to DTCC regarding potential violations related to certain export classifications obtained through the commodity jurisdiction process. DTCC acknowledged the notification and at the request of DTCC, the Company executed a tolling agreement for this matter, suspending the statute of limitations for a twelve (12) month period.

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

In June 2017, the United States Department of Commerce Bureau of Industry and Security informed the Company of additional export licensing requirements that restrict the Company’s ability to sell 9hz thermal products without a license to customers in China not identified on a list maintained by the United States Department of Commerce. This action was precipitated by concerns of potential diversion of some of the Company's products to prohibited end users and to countries subject to economic and other sanctions implemented by the United States. If the Company is found to have violated applicable rules and regulations with respect to customers and limitations on the end use of the Company’s products, the Company could be subject to substantial fines and penalties, suspension of existing licenses or other authorizations and/or loss or suspension of export privileges.

The Company is unable to reasonably estimate the time it may take to resolve ~~the matter~~these matters or the amount or range of potential loss, penalty or other government action, if any, that may be incurred in connection with ~~this matter.~~these matters. However, an unfavorable outcome could result in substantial fines and penalties or loss or ~~modification~~suspension of ~~exporting~~export privileges or of particular authorizations that could ~~potentially~~ be material to the Company’s financial ~~condition,~~position, results of operations ~~and~~or cash flows ~~of the Company~~ in and following the period in which such an outcome becomes estimable or known.

SkyWatch Product Quality Matters

In March 2016, the Company learned of potential quality concerns with respect to as many as 312 Level III and Level IV SkyWatch Surveillance Towers sold by FLIR and companies acquired by FLIR from 2002 through 2014. During the quarter ended September 30, 2016, the Company identified the cause of these quality issues and tested certain remedial solutions which may be required to repair the affected SkyWatch Towers. Testing of the remedial solution is ongoing. The Company ~~has~~ notified customers who purchased the affected SkyWatch Towers of the potential concerns and, as a precautionary measure, ~~has~~ also temporarily suspended production of all Level III and Level IV SkyWatch Towers pending the completion of its review and the implementation of any necessary remedial measures. During the quarter ended June 30, 2017, the Company identified the cause of these quality issues and began testing certain remedial solutions to repair the affected SkyWatch Towers. Testing of the remedial solution for certain of the product variations affected was also completed during the quarter ended June 30, 2017. Subsequent to the aforementioned identification and testing, customers who purchased the product configurations for which a remedial solution has been identified and tested were notified of their options to request modifications to their fielded units. While there still remains uncertainty related to estimating the costs associated with a potential remedy and number of units which may require such remedy, the Company currently estimates the range of potential loss to be between ~~$2.5~~$5.6 million and $15 million. As no single amount within the range is a better estimate than any other amount within the range, the Company has recorded a liability of ~~$2.5~~$5.6 million as of ~~December 31, 2016.~~September 30, 2017. Factors underlying this estimated range of loss may change from time to time, and actual results may vary significantly from this ~~estimate~~estimate.

The Company is also subject to other legal and administrative proceedings, investigations, claims and litigation arising in the ordinary course of business not specifically identified above. In these identified matters and others not specifically identified, the Company ~~makes a provision for~~records a liability with respect to a matter when management believes it is both probable that a liability has been incurred and the Company can reasonably estimate the amount of ~~loss can be reasonably estimated for such matter.~~the loss. The Company believes it has recorded adequate provisions for any probable and estimable losses for matters in existence on the date hereof. The Company reviews these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. While the outcome of each of these matters is currently not determinable, the Company does not expect that the ultimate resolution of any such matter will individually have a material adverse effect on the Company’s financial position, results of operations or cash flows. The costs to resolve all such matters may in the aggregate have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The provision for income taxes was as follows:

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 16. Income Taxes

The effective tax rate for the three and nine months ended ~~March 31,~~September 30, 2017, is lower than the USUnited States Federal tax rate of 35 percent mainly due to the mix of lower foreign jurisdiction tax rates, the effect of federal, foreign and state tax credits, excess tax benefits from stock compensation, and other discrete adjustments.

As of ~~March 31,~~September 30, 2017, the Company had approximately ~~$53.5~~$59.5 million of unrecognized tax benefits, all of which would affect the Company’s effective tax rate if recognized. The Company anticipates approximately ~~$40.2~~$47.0 million of its net unrecognized tax benefits will be recognized within 12 months as the result of settlements or effective settlements with various tax authorities, the closure of certain audits and the lapse of the applicable statute of limitations.

~~FLIR SYSTEMS, INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

The Company classifies interest and penalties related to unrecognized tax benefits in the income tax provision. As of ~~March 31,~~September 30, 2017, the Company had ~~$2.3~~$2.5 million of accrued interest and penalties related to unrecognized tax benefits that are recorded as current and non-current accrued income taxes on the Consolidated Balance Sheet.

The Company currently has the following tax years open to examination by major taxing jurisdictions:



	Tax Years:
United States Federal	2013 - 2015
State of California	2013 - 2015
State of Massachusetts	2013 - 2015
State of Oregon	2013 - 2015
Sweden	2012 - 2015
United Kingdom	2012 - 2015
Belgium	2011 - ~~2015~~2016

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 17. Operating Segments and Related Information

Operating Segments

The Company has six reportable operating segments as follows:

Surveillance

The Surveillance segment develops and manufactures enhanced imaging and recognition solutions for a wide variety of military, law enforcement, public safety, and other government customers around the world for the protection of borders, troops, and public welfare. Offerings include airborne, land, maritime, and man-portable multi-spectrum imaging systems, radars, lasers, imaging components, integrated multi-sensor system platforms, and services related to these systems.

Instruments

The Instruments segment develops and manufactures devices that image, measure, and assess thermal energy, gases, and other environmental elements for industrial, commercial, and scientific applications. Products include thermal imaging cameras, gas detection cameras, firefighting cameras, process automation cameras, and environmental test and measurement devices.

Security

The Security segment develops and manufactures cameras, video recording systems, and video ~~recording~~management systems for use in commercial, critical infrastructure, and home security applications. Products include thermal and visible-spectrum cameras, digital and networked video recorders, and related software and accessories that enable the efficient and effective safeguarding of assets at all hours of the day and through adverse weather conditions.

OEM & Emerging Markets

The OEM & Emerging Markets segment develops and manufactures thermal and visible-spectrum imaging camera cores and components that are utilized by third parties to create thermal, industrial, and other types of imaging systems. The segment also develops and manufactures intelligent traffic monitoring and signal control systems, ~~as well as~~imaging payloads for Unmanned Aerial Systems ("UAS"), and thermal imaging solutions for use by consumers in the smartphone and mobile devices markets.

Maritime

The Maritime segment develops and manufactures electronics and imaging instruments for the recreational and commercial maritime market. The segment provides a full suite of networked electronic systems including multi-function helm displays, navigational instruments, autopilots, radars, sonar systems, thermal and visible imaging systems, and communications equipment for boats of all sizes.

~~FLIR SYSTEMS, INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~


~~Note 17.~~	~~Operating Segments and Related Information—(Continued)~~

~~Operating Segments - (Continued)~~

Detection

The Detection segment develops and manufactures sensor instruments and integrated platform solutions for the detection, identification, and suppression of chemical, biological, radiological, nuclear, and explosives ("CBRNE") threats for military force protection, homeland security, and commercial applications.

The Company’s chief operating decision maker ("CODM"), its Chief Executive Officer, evaluates each of its segment’s performance and allocates resources based on revenue and segment operating income. Intersegment revenues are recorded at cost and are eliminated in consolidation. The Company and each of its segments employ consistent accounting policies.

The following tables present revenue, operating income, and assets for the six segments. Operating income as reviewed by the CODM is revenue less cost of goods sold and operating expense, excluding general corporate expenses, acquisition related costs, executive transition costs, amortization of purchased intangible assets, amortization of acquisition-related inventory step-up, costs associated with the SkyWatch product remediation, and restructuring ~~charges and executive transition costs.~~charges. Accounts receivable and inventories for operating segments are regularly reviewed by management and are reported below as segment assets. All remaining assets, liabilities, capital expenditures, and depreciation are managed on a Company-wide basis.

~~Operating segment information is as follows (in thousands):~~

Three Months Ended
March 31,
2017 2016
Revenue—External Customers:
Surveillance $ 118,729
$ 124,151
Instruments 77,855
79,418
Security 45,078
47,061
OEM & Emerging Markets 84,765
47,845
Maritime 48,550
51,720
Detection 31,837 29,277
$ 406,814
$ 379,472
Revenue—Intersegments:
Surveillance $ 4,756
$ 4,224
Instruments 5,790
1,575
Security 3,126
2,473
OEM & Emerging Markets 9,170
8,176
Maritime 677
615
Detection —
—
Eliminations (23,519 ) (17,063 )
$ —
$ —
Segment operating income:
Surveillance $ 26,365
$ 35,865
Instruments 21,146
19,981
Security 315
(2,169 )
OEM & Emerging Markets 24,357
10,686
Maritime 5,205
5,806
Detection 8,737
8,237
$ 86,125
$ 78,406

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 17. Operating Segments and Related Information - (Continued)


~~Note 17.~~	~~Operating Segments and Related Information—(Continued)~~

Operating Segments - (Continued)

Operating segment information is as follows (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue—External Customers:
Surveillance	$	146,805		$	136,402		$	394,742		$	373,993
Instruments	91,429			82,673			255,253			240,160
Security	65,660			56,431			160,447			166,872
OEM & Emerging Markets	87,206			62,719			259,418			167,544
Maritime	42,256			40,586			145,909			147,469
Detection	31,356			26,417			89,881			91,391
	$	464,712		$	405,228		$	1,305,650		$	1,187,429
Revenue—Intersegments:
Surveillance	$	10,115		$	5,001		$	18,203		$	13,980
Instruments	929			709			2,916			3,498
Security	2,931			4,267			9,697			10,575
OEM & Emerging Markets	11,456			7,518			29,986			24,528
Maritime	567			656			1,865			2,728
Detection	2			—			3			31
Eliminations	(26,000		)	(18,151		)	(62,670		)	(55,340		)
	$	—		$	—		$	—		$	—
Segment operating income:
Surveillance	$	44,941		$	41,428		$	104,313		$	103,888
Instruments	29,603			27,578			74,376			67,254
Security	6,486			4,784			8,090			7,025
OEM & Emerging Markets	26,931			20,658			77,628			48,100
Maritime	4,466			3,155			19,060			16,482
Detection	8,883			6,999			24,644			25,556
	$	121,310		$	104,602		$	308,111		$	268,305

A reconciliation of the Company's consolidated segment operating income to consolidated earnings before income taxes is as follows (in thousands):


	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2017			2016
Consolidated segment operating income	$	86,125		$	78,406		$	121,310		$	104,602		$	308,111		$	268,305
Unallocated corporate expenses	(18,223		)	(16,624		)	(25,492		)	(16,514		)	(68,733		)	(49,186		)
Amortization of purchased intangible assets	(6,736		)	(4,207		)	(7,102		)	(4,329		)	(20,854		)	(12,464		)
Amortization of acquisition-related inventory step-up	(1,992		)	—			—			—			(1,992		)	—
SkyWatch product quality accrual							(1,088		)	(2,000		)	(3,088		)	(2,000		)
Restructuring charges	(88		)	(198		)	(542		)	(910		)	(642		)	(1,217		)
Consolidated earnings from operations	$	59,086		$	57,377		87,086			80,849			212,802			203,438
Interest and non-operating expense, net	(3,522		)	(1,757		)	(2,553		)	(5,641		)	(9,165		)	(12,757		)
Consolidated earnings before income taxes	$	55,564		$	55,620		$	84,533		$	75,208		$	203,637		$	190,681

Unallocated corporate expenses include general corporate expenses, acquisition related costs and executive transition costs.

March 31, December 31,
2017 2016
Segment assets (accounts receivable, net and inventories):
Surveillance $ 269,646
$ 283,324
Instruments 111,800
114,681
Security 76,976
93,174
OEM & Emerging Markets 139,791
144,862
Maritime 73,619
61,494
Detection 22,966
25,856

$ 694,798
$ 723,391

March 31, December 31,
2017 2016
Segment goodwill:
Surveillance $ 244,433
$ 152,383
Instruments 148,538
147,595
Security 103,844
102,983
OEM & Emerging Markets 253,074
252,647
Maritime 98,596
97,860
Detection 47,951
47,938
$ 896,436
$ 801,406

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Operating Segments - (Continued)



	September 30,		December 31,
	2017		2016
Segment assets (accounts receivable, net and inventories):
Surveillance	$	290,353	$	283,324
Instruments	132,642		114,681
Security	95,063		93,174
OEM & Emerging Markets	141,212		144,862
Maritime	65,276		61,494
Detection	34,001		25,856
	$	758,547	$	723,391



	September 30,		December 31,
	2017		2016
Segment goodwill:
Surveillance	$	259,400	$	152,383
Instruments	153,677		147,595
Security	111,883		102,983
OEM & Emerging Markets	255,490		252,647
Maritime	102,384		97,860
Detection	48,012		47,938
	$	930,846	$	801,406

Revenue and Long-Lived Assets by Geographic Area

Information related to revenue by significant geographical location, determined by the end customer, is as follows (in thousands):

Long-lived assets by significant geographic locations are as follows (in thousands):

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 17. Operating Segments and Related Information - (Continued)

Operating Segments - (Continued)

Revenue derived from major customers is as follows (in thousands):

Three Months Ended
March 31,
2017 2016
United States government $ 116,235
$ 85,636

~~FLIR SYSTEMS, INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
United States government	$	117,797	$	112,735	$	345,856	$	298,476

Point Grey Research, Inc.

On November 4, 2016, the Company ~~closed a transaction to acquire~~completed the acquisition of the assets of Point Grey Research Inc. (“Point Grey”), a global leader in the development of advanced visible imaging cameras and solutions that are used in industrial automation systems, medical diagnostic equipment, people counting systems, intelligent traffic systems, military and defense products, and advanced mapping systems, for approximately $259.2 million in cash, subject to customary post-closing adjustments. ~~The~~During the third quarter of 2017, the Company ~~has performed a preliminary~~finalized the purchase price allocation which ~~resulted in an~~had no change to the previously recorded allocation of $39.8 million to identifiable intangible assets and $183.7 million to ~~goodwill which has~~goodwill. These amounts have been recorded in the Company’s OEM & Emerging Markets segment.

The ~~preliminary~~ allocation of the purchase price for Point Grey is as follows (in thousands):

The allocation of the purchase price related to this acquisition is ~~preliminary and is~~ based on management’s judgments after evaluating several factors, including ~~preliminary~~ valuation assessments of tangible and intangible assets, and ~~preliminary~~ estimates of the fair value of liabilities assumed. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the valuation of the identifiable intangible assets, property and equipment, and certain other tangible assets and liabilities. The preliminary goodwill of $183.7 million represents future economic benefits expected to arise from synergies from combining operations and the ability of Point Grey to provide the Company domain knowledge and distribution channels in adjacent markets.

In connection with the ~~preliminary~~ allocation of purchase price to the assets acquired and liabilities assumed, the Company identified certain intangible assets. The following table presents the acquired intangible assets, their ~~preliminary~~ estimated fair values, and ~~preliminary~~ estimated useful lives (in thousands, except years):



	Estimated Useful Life	Amount
Developed technology	10 years	$	23,100
Customer relationships	7 years	13,200
Backlog	1 year	2,300
Non-Competition Agreements	5 years	1,000
Other	n/a	200
		$	39,800

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 18. Business Acquisitions - (Continued)

Acquisition-date identifiable intangible assets primarily consist of intangibles derived from developed technology, customer relationships, backlog, and non-competition agreements. Developed technology represents the economic advantage of having certain technologies in place that lower manufacturing and operating costs and drive higher margins. Customer relationships ~~represents~~represent the relationships Point Grey has established in the OEM and people counting markets as of the date of the acquisition. Backlog represents “pre-sold” business at the date of acquisition, which provides positive earning streams post acquisition that exceed what is required to provide a return on the other assets employed. Non-competition agreements represent the economic benefit of having agreements with certain current and former employees and shareholders of Point Grey that restrict their ability to compete directly with the Company.

The developed technology was valued using the income approach and relief from royalty method. Customer relationships and backlog were valued using the income approach and multi-period excess earnings method. Non-competition agreements were valued using the income approach and the with-and-without method.

~~FLIR SYSTEMS, INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

On November 30, 2016, the Company acquired 100% of the outstanding stock of Prox Dynamics AS (“Prox Dynamics”), a leading developer and manufacturer of nano-class ~~unmanned aircraft systems ("UAS")~~UASs for military and para-military intelligence, surveillance, and reconnaissance applications, for approximately $134.1 ~~million~~ in cash, subject to customary post-close adjustments. At December 31, 2016, the Company reported the net tangible assets of $11.3 million in the respective balance sheet accounts and the excess purchase price of $122.8 million in other long-term assets.

During the three months ended March 31, 2017, the Company performed a preliminary purchase price allocation which resulted in an allocation of $31.4 ~~million~~ of identifiable intangible assets and $91.9 million of goodwill in conjunction with the Prox Dynamics acquisition, which has been recorded in the Company’s Surveillance business segment.

~~The preliminary allocation of~~During the three months ended June 30, 2017, the Company finalized the purchase price ~~for Prox Dynamics is as follows (in thousands):~~

Cash acquired $ 11,706
Other tangible assets and liabilities, net (900 )
Identifiable intangible assets 31,400
Goodwill 91,882
Total purchase price $ 134,088

~~The~~ allocation, ~~of the purchase price related~~resulting in a $7.4 decrease to ~~this acquisition is preliminary~~net deferred taxes, and is based on management’s judgments after evaluating several factors, including preliminary valuation assessments of tangible and intangible assets, and preliminary estimates of the fair value of liabilities assumed.a corresponding $7.4 increase in goodwill. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the valuation of the identifiable intangible assets, property and equipment, income taxes (including unrecognized tax benefits), and certain other tangible assets and liabilities. The preliminary goodwill of ~~$91.9 million~~$99.3 represents future economic benefits expected to arise from synergies from combining operations the ability of Prox Dynamics to provide the Company domain knowledge and distribution channels in adjacent markets.

The allocation of the purchase price for Prox Dynamics is as follows (in thousands):



Cash acquired	$	11,706
Other tangible assets and liabilities, net	(900		)
Net deferred taxes	(7,387		)
Identifiable intangible assets	31,400
Goodwill	99,269
Total purchase price	$	134,088



	Estimated Useful Life	Amount
Developed technology	8 years	$	23,400
Customer relationships	7 years	3,500
Patents	8 years	3,100
Trade name	8 years	1,400
		$	31,400

Acquisition-date identifiable intangible assets primarily consist of intangibles derived from developed technology, customer relationships, patents, and trade name. Developed technology and patents represent the economic advantage of having certain technologies in place that lower manufacturing and operating costs and drive higher margins. Customer relationships represents the relationships Prox Dynamics has established in the military and defense ministries of countries throughout the world. Trade name represents the "Black Hornet" name, which is well recognized within the industry and is known as a leading product within the nano-class UAS segment.

FLIR SYSTEMS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 18. Business Acquisitions - (Continued)

The developed technology and customer relationships were valued using the income approach and multi-period excess earnings method. Patents and trade name were valued using the income approach and relief from royalty method.

The acquisitions of Point Grey and Prox Dynamics are not significant as defined in Regulation S-X under the Securities Exchange Act of 1934, nor are they significant compared to the Company's overall results of operations. Consequently, no pro forma financial information is provided.

~~FLIR SYSTEMS, INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

On ~~April 20,~~October 19, 2017, the Company’s Board of Directors declared a quarterly dividend of $0.15 per share on its common stock, payable on ~~June 9,~~December 8, 2017, to shareholders of record as of the close of business on ~~May 26,~~November 24, 2017. The total cash payment of this dividend will be approximately $~~20.5~~20.8 million.

Forward-Looking Statements

This Quarterly Report on Form 10-Q (the “Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part 1,I, Item 2, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and the future results of FLIR Systems, Inc. and its consolidated subsidiaries (“FLIR” or the “Company”) that are based on management’s current expectations, estimates, projections and assumptions about the Company’s business. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “sees,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions 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, but not limited to, those discussed in “Risk Factors” section in Part II, Item 1A of ~~the Company's Annual~~this Report, ~~on Form 10-K filed for the fiscal year ended December 31, 2016,~~ “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part 1,I, Item 2, and elsewhere in this Report as well as those discussed from time to time in the Company’s other Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry, economic, and market conditions. Such forward-looking statements speak only as of the date of this Report or, in the case of any document incorporated by reference, the date of that document, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Report, or for changes made to this document by wire services or Internet service providers. If the Company updates or corrects one or more forward-looking statements, investors and others should not conclude that the Company will make additional updates or corrections with respect to other forward-looking statements.

Consolidated Operating Results

The following discussion of operating results provides an overview of our operations by addressing key elements in our Consolidated Statements of Income. The “Segment Operating Results” section that follows describes the contributions of each of our business segments to our consolidated revenue and earnings from operations. Our six operating segments are: Surveillance, Instruments, Security, OEM & Emerging Markets, Maritime, and Detection. Given the nature of our business, we believe revenue and earnings from operations (including operating margin percentage) are most relevant to an understanding of our performance at a segment level. Additionally, at the segment level we disclose backlog, which represents orders received for products or services for which a sales agreement is in place and delivery is expected within twelve months. See Note 17, "Operating Segments and Related Information," of the Notes to the Consolidated Financial Statements for additional information on the six operating segments.

Revenue. Consolidated revenue for the three months ended ~~March 31,~~September 30, 2017, increased by ~~7.2~~14.7 percent year over year, from ~~$379.5~~$405.2 million in the third quarter of 2016 to $464.7 million in the third quarter of 2017. Consolidated revenue for the nine months ended September 30, 2017, increased by 10.0 percent year over year, from $1,187.4 million in the first ~~quarter~~nine months of 2016 to ~~$406.8~~$1,305.7 million in the first ~~quarter~~nine months of 2017. Revenue increased in all six of our operating segments for three month period ended September 30, 2017. Increases in revenues for the ~~three~~nine month period in our Surveillance, Instruments, and OEM & Emerging Markets ~~and Detection~~ segments were partially offset by declines in revenues in our ~~Surveillance,~~Security, Maritime, ~~Security~~ and ~~Instruments~~Detection segments. The growth for the three month period ended September 30, 2017 occurred in all six of our operating segments, supported by the acquisitions of Prox Dynamics and Point Grey. The acquisitions of Armasight, Prox Dynamics, and Point Grey were the primary drivers in revenue growth for the nine month period ended September 30, 2017 compared to the same periods ended September 30, 2016.

The timing of orders, scheduling of backlog, and fluctuations in demand in various regions of the world can give rise to quarter to quarter and year over year fluctuations in the mix of revenue. Consequently, year over year comparisons for any given quarter may not be indicative of comparisons using longer time periods. While we currently expect total annual revenue for 2017 to be higher than 2016 revenue, unexpected changes in economic conditions from key customer markets or other major unanticipated events may cause total revenue, and the mix of revenue between our segments, to vary from quarter to quarter during the year.

International sales accounted for ~~45.5~~46.0 percent and ~~48.8~~43.4 percent of total revenue for the quarters ended ~~March 31,~~September 30, 2017 and 2016, respectively. The proportion of our international revenue compared to total revenue will fluctuate from quarter to quarter

due to normal variation in order activity across various regions as well as specific factors that may affect one region and not another. Overall, we anticipate that revenue from international sales will continue to comprise a significant percentage of total revenue.

Cost of goods sold. Cost of goods sold for the three and nine months periods ended ~~March 31,~~September 30, 2017 ~~was $215.5~~were $241.8 million and $684.7 million, respectively compared to cost of goods sold for the three and nine months ended ~~March 31,~~September 30, 2016 of ~~$201.8 million.~~$213.9 million and $635.0 million, respectively. The year over year increase in cost of goods sold is primarily related to higher revenues in 2017.

Gross profit. Gross profit for the quarter ended ~~March 31,~~September 30, 2017, was ~~$191.3~~$222.9 million compared to ~~$177.7~~$191.4 million for the same quarter last year. Gross profit for the nine months ended September 30, 2017 was $620.9 million compared to $552.4 million for the nine month period ended September 30, 2016. Gross margin, defined as gross profit divided by revenue, increased from ~~46.8~~47.2 percent in the ~~first~~third quarter of 2016 to ~~47.0~~48.0 percent in the ~~first~~third quarter of 2017 and increased from 46.5 percent for the nine months ended September 30, 2016, to 47.6 percent during the nine months ended September 30, 2017. The increase in gross margin for the ~~three-month period~~three and nine month periods was primarily due to the acquisitions ~~improved manufacturing variances~~ and ~~off-standard costs, and~~favorable product ~~mix, partially offset by changes in currency exchange rates, particularly in our Instruments and Maritime segments.~~mix.

Research and development expenses. Research and development expenses for the ~~first~~third quarter of 2017 totaled ~~$42.0~~$42.9 million, compared to ~~$37.3~~$33.8 million in the ~~first~~third quarter of 2016. Research and development expenses in the first nine months of 2017 were $127.9 million compared to $109.3 million for the first nine months of 2016. The increase in research and development expenses year over year for the three and nine month periods was primarily related to the inclusion of companies acquired in the last 12 months. Research and development expenses as a percentage of revenue were 9.2 percent for the three months ended September 30, 2017 and 8.4 percent for the three months ended September 30, 2016. Research and development expenses as a percentage of revenue ~~were 10.3 percent~~ for the ~~three~~first nine months ~~ended March 31,~~of 2017 ~~and~~were 9.8 percent ~~for~~compared to 9.2 percent during the ~~three~~first nine months ~~ended March 31,~~of 2016. We have, and will continue to have, fluctuations in quarterly spending depending on product development needs and overall business spending priorities and believe that annual spending levels are ~~more~~most indicative of our commitment to research and development. Over the past five annual periods through December 31, 2016, our annual research and development expenses have varied between 8.5 percent and 9.9 percent of revenue, and we currently expect these expenses to remain within that range, on an annual basis, for the foreseeable future.

Selling, general, and administrative expenses. Selling, general, and administrative expenses were ~~$90.3~~$92.9 million and ~~$83.0~~$76.7 million for the quarters ended ~~March 31,~~September 30, 2017 and 2016, respectively. Selling, general and administrative expenses were $280.2 million and $239.6 million for the nine months ended September 30, 2017 and 2016, respectively. The increase in selling, general, and administrative expenses year over year for the three and nine month ~~period~~periods was primarily related to the inclusion of selling, general, and administrative expenses of companies acquired in the last 12 months. Selling, general, and administrative expenses as a percentage of revenue were ~~22.2~~20.0 percent and ~~21.9~~18.9 percent for the quarters ended ~~March 31,~~September 30, 2017 and 2016, respectively. Selling, general and administrative expenses as a percentage of revenue were 21.5 percent and 20.2 percent for the nine month periods ended September 30, 2017 and 2016, respectively. Over the past five annual periods through December 31, 2016, our annual selling, general and administrative expenses have varied between 19.4 percent and 21.7 percent of revenue, and we currently expect these expenses to remain within that range, on an annual basis, for the foreseeable future.

Interest expense. Interest expense for the ~~first~~ three months ofended September 30, 2017, was ~~$4.5~~$3.8 million, compared to ~~$3.4~~$5.7 million for the same period of 2016. Interest expense for the nine months ended September 30, 2017, was $12.7 million, compared to $13.5 million for the nine months ended September 30, 2016. Interest expense in 2017 was primarily associated with the $425 million aggregate principal amount of our 3.125 percent senior unsecured notes and amounts drawn under our credit facility. During the three month period ended September 30, 2017 we paid off the outstanding amount drawn on our credit facility. Interest expense in 2016 was primarily associated with the $250 million aggregate principal amount of our 3.75 percent senior unsecured notes and our term loan that was drawn upon under our credit agreement.

Income taxes. Our income tax provision of ~~$13.0~~$21.0 million and $46.1 million for the three ~~months~~and nine month periods ended ~~March 31,~~September 30, 2017, represents an effective tax rate of ~~23.4 percent. This compares favorably to our~~24.8 percent and 22.6 percent, respectively. Our income tax provision ~~of $54.5 million~~ for the three ~~months~~and nine month periods ended ~~March 31,~~September 30, 2016 was $16.6 million and $85.6 million, which represented an effective tax rate of ~~98.0~~22.0 percent and included discrete tax charges totaling $40.0 million, primarily related to the European Commission’s decision regarding certain tax legislation in Belgium impacting one of our international subsidiaries.44.9 percent, respectively. The effective tax rate for the three and nine months ended ~~March 31,~~September 30, 2017 is lower than the USUnited States Federal tax rate of 35 percent mainly due to the mix of lower foreign jurisdiction tax rates, the effect of federal, foreign and state tax credits, excess tax benefits for stock compensation, and other discrete adjustments.

On The first quarter of 2016 included discrete tax charges totaling $39.6 million related to the January 11, 2016, announcement from the European Commission ~~announced~~of a decision concluding that certain rules under Belgian tax legislation are deemed to be incompatible

with European Union regulations on state aid. As a result of this decision, the European Commission has directed the Belgian Government to recover past taxes from certain entities, reflective of disallowed state aid, which impacts one of the Company’s international subsidiaries. The Belgian Government announced they have appealed this decision and filed action for an annulment in the General Court of the European Union, and in July 2016 the Company filed a separate appeal with the General Court of the European Union. In accordance with FASB ASC Topic 740, “Income Taxes,” the Company recorded discrete tax expense of $39.6 million during 2016, related to this matter and on January 10, 2017, received tax assessments from the Belgium government for a similar amount, which the Company has classified as current taxes payable on the Consolidated Balance Sheet as of ~~March 31,~~September 30, 2017. The Company has filed a complaint against the Belgian tax assessments, and the result of this complaint, the appeal with the General Court of the European Union, new information received from the Belgian Government, or other future events may cause the income tax provision associated with the decision to be entirely or partially reversed.

Segment Operating Results

The Company is currently organized into six reportable operating segments. See Note 17, “Operating Segments and Related Information,” of the Notes to the Consolidated Financial Statements for a description of each segment, including the types of products and services from which each segment derives its revenues. On August 30, 2017, we announced our plans to realign the business operations into three principle business units: Government and Defense, Industrial, and Commercial. The Government and Defense business unit will consist of the current Surveillance and Detection segments, excluding the Outdoor and Tactical Systems (OTS) business; The Industrial business unit will consist of the current Instruments and OEM and Emerging segments, excluding the Intelligent Traffic Systems (ITS) business; and the Commercial business unit will consist of the current Maritime and Security segments, along with the ITS and OTS businesses. With this consolidation, we intend to reduce complexity, realize greater operating synergies, and enhance management focus. We expect to report our financial results in accordance with this new operating structure beginning with the first quarter 2018 operating results. The operating results of our six current reportable operating segments for the three and nine months ended September 30, 2017 are presented below.

Surveillance operating results are as follows (in millions, except percentages):

Surveillance revenue for the ~~three months~~quarter ended ~~March 31,~~September 30, 2017, ~~decreased~~increased by ~~4.4~~7.6 percent compared to the same period of 2016. Surveillance revenue for the nine months ended September 30, 2017, increased by 5.5 percent compared to the same period of 2016. The ~~decrease~~increase in revenue for the quarter ended September 30, 2017, compared to the same period of 2016 was ~~primarily~~driven by increase in sales in Airborne and Weapon Sights markets, and the addition of the Prox Dynamics business, which was acquired in November 2016, partially offset by lower Land market sales. The increase in revenue for the nine months ended September 30, 2017 compared to the same period of 2016 was predominately due to the ~~completion~~addition of ~~a large international government contract in the prior year and a US government contracting delay in the current quarter. This~~Armasight, which was ~~partially offset by revenue from the acquisitions of Armasight~~acquired in June 2016 ~~and~~, the Prox Dynamics business, and increased Airborne sales. The increase in ~~November 2016. Earnings~~earnings from operations for the three and nine month ~~period declined year over year~~periods ended September 30, 2017, compared to the same periods in 2016, was primarily due to ~~a decrease in~~higher revenues ~~as noted above,~~ and ~~higher~~favorable product mix, partially offset by increased operating expenses ~~due~~from the acquired businesses. The increased backlog in the Surveillance segment is largely attributed to the ~~acquisitions of Armasight and Prox Dynamics.~~$74.7 million contract for land surveillance systems from the United States Army received in September 2017.

Instruments operating results are as follows (in millions, except percentages):

Instruments segment revenue for the ~~three~~quarter ended September 30, 2017, increased by 10.6 percent compared to the same period of 2016. Instruments revenue for the nine months ended ~~March 31,~~September 30, 2017, ~~decreased~~increased by ~~2.0~~6.3 percent compared to the same period of 2016. The ~~decrease~~increase in revenue for the three and nine month periods was ~~primarily related~~predominately attributable to ~~a decline~~strength in ~~sales for our building~~the Premium and ~~predictive maintenance and Extech~~Volume Handheld product lines driven by new product launches, supplemented by growth in Optical Gas and Fire products. The revenue growth for the three and nine month periods was partially offset by ~~an increase~~declines in ~~sales from fire products.~~the test and measurement product lines. The increase in earnings from operations for the three and nine months ended ~~March 31,~~September 30, 2017, compared to the same ~~period~~periods of 2016, was primarily due to ~~reduced operating expenses related to cost containment initiatives implemented in 2016, as well as improved gross margins.~~the higher revenue base.

Security operating results are as follows (in millions, except percentages):

Security segment revenue for the ~~three~~quarter ended September 30, 2017, increased by 16.4 percent compared to the same period of 2016. Security revenue for the nine months ended ~~March 31,~~September 30, 2017, decreased by ~~4.2~~3.9 percent compared to the same period of 2016. The increase in revenue for the three month period ended September 30, 2017 was predominately due to growth in the Lorex-branded and other consumer-grade retail sales. The decrease in revenue for the nine month period ended September 30, 2017 compared to the same period ended September 30, 2016 was primarily due to a reduction in sales for consumer-grade security ~~products.~~products in retail channels during the first six months of 2017, partially offset by increased consumer-grade sales through our e-commerce channel. The increase in

earnings from operations for the three and nine months ended ~~March 31,~~September 30, 2017, compared to the same ~~period~~periods of 2016, was ~~primarily~~ due to ~~reduced operating expenses related to~~ cost ~~reduction~~savings initiatives ~~implemented~~ in ~~the second half of 2016, as well as improved gross margins.~~2017.

OEM & Emerging Markets

OEM & Emerging Markets operating results are as follows (in millions, except percentages):

OEM & Emerging Markets segment revenue for the ~~three months~~quarter ended ~~March 31,~~September 30, 2017, increased by ~~77.2~~39.0 percent compared to the same period of 2016. The increase in revenue for the three month period ended September 30, 2017 was primarily related to revenue from the Point Grey business acquired in November 2016, supplemented by growth in our unmanned aerial systems and mobile accessories product lines. OEM & Emerging Markets revenue for the nine months ended September 30, 2017, increased by 54.8 percent compared to the same period of 2016. The increase in revenue for the nine month period was primarily due to the ~~acquisition of~~ Point Grey ~~in November 2016 as well as higher deliveries of cores~~acquisition and ~~components, including continued~~ growth in our ~~Lepton microbolometer core sales.~~cores and traffic product lines. The increase in earnings from operations for the three and nine months ended ~~March 31,~~September 30, 2017, compared to the same ~~period~~periods of 2016, was ~~primarily~~ due to higher revenues. The increase in backlog for the OEM & Emerging Markets segment was primarily attributed to the inclusion of backlog associated with the Point Grey acquisition.

Maritime operating results are as follows (in millions, except percentages):

Maritime segment revenue for the ~~three months~~quarter ended ~~March 31,~~September 30, 2017, ~~decreased~~increased by ~~6.1~~4.1 percent compared to the same period of 2016. The increase was due to sales on the new Axiom line of multi-function displays which began shipping during the second quarter of 2017. Maritime revenue for the nine months ended September 30, 2017, decreased by 1.1 percent. The decrease in revenue ~~is primarily due to a decrease in~~for the ~~Americas and Middle East and Africa regions. On a product basis, there was a decrease in sales~~nine month period of ~~multifunction navigation displays and thermal cameras. The decrease in earnings from operations is primarily due~~2017 compared to the ~~decrease~~same period of the prior year was driven by a decline in ~~revenues. Revenues~~Thermal camera sales, partially offset by the increase in multi-function display sales. The increase in operating income for the three and ~~earnings from operations were also negatively impacted~~nine month periods ended September 30, 2017 compared to the same periods of 2016 was driven by ~~foreign exchange rate changes~~stronger margins on shipments of new products introduced in ~~European currencies.~~2017.

Detection operating results are as follows (in millions, except percentages):

Detection segment revenue for the ~~three months~~quarter ended ~~March 31,~~September 30, 2017, increased by ~~8.7~~18.7 percent compared to same period of 2016. The increase ~~in revenue~~for the quarter ended September 30, 2017 compared to the same period of 2016 was ~~primarily~~ due to ~~increased~~higher shipments ~~from~~of our ~~chemical, biological, radiological, nuclear, and~~

~~explosives ("CBRNE")~~CBRNE threat response systems to the United States government customers and ~~an increase~~higher sales of our ChemBio and Radiation products. Detection revenue for the nine months ended September 30, 2017, decreased by 1.7 percent. The decrease in revenue for the nine month period ending September 30, 2017, compared to the same periods of 2016, was primarily due to lower shipments of our ~~identiFINDER products within~~CBRNE threat response systems during the ~~radiation detection product line. This was partially offset by~~period. These shipments account for a ~~decrease in sales in our chemical~~significant portion of Detection revenues, and ~~biological detection product line.~~timing of delivery schedules impacts periodic results. The increase in earnings from operations ~~is primarily~~for the three month period ended September 30, 2017, compared to the same period of 2016 was due to the ~~increase~~higher revenues in the quarter, while the decrease for the nine months ended September 30, 2017, compared to the same period of 2016 was due to lower revenues.

Liquidity and Capital Resources

At ~~March 31,~~September 30, 2017, we had a total of ~~$397.4~~$437.0 million in cash and cash equivalents, ~~$116.7~~$136.6 million of which ~~was~~resided in the United States and ~~$280.7~~$300.4 million at our foreign subsidiaries, compared to cash and cash equivalents at December 31, 2016, of ~~$361.3~~$361.3 million,, of which ~~$98.3~~$98.3 million ~~was~~ resided in the United States and ~~$263.0~~$263.0 million at our foreign subsidiaries. The increase in cash and cash equivalents during the ~~three~~nine months ended ~~March 31,~~September 30, 2017, was primarily due to cash provided from operations of ~~$75.1~~$209.3 million and proceeds of $44.2 million from shares issued under our stock compensation plans, partially offset by the pay down on our revolving credit facility of $97.5 million, capital expenditures of ~~$13.6~~$31.9 million and dividend payments of ~~$20.5~~$61.8 million.

Cash provided by operating activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2017, totaled ~~$75.1~~$209.3 million,, which primarily consisted of net earnings, adjusted for ~~non-cash charges for~~ depreciation and amortization, stock-based compensation, ~~and~~ other non-cash items and ~~improved use of~~changes in working capital.

Cash used for investing activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2017, totaled ~~$13.6~~$29.0 million,, which primarily consisted of capital expenditures in the ordinary course of business.

Cash used by financing activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2017, totaled ~~$28.8~~$124.6 million,, which primarily consisted of repayment of borrowings under our revolving credit facility and the payment of quarterly dividends, ~~and the quarterly term loan principal payment.~~partially offset by proceeds from share issuances pursuant to our stock plans.

On February 8, 2011, we entered into a Credit Agreement (“Credit Agreement”) with Bank of America, N.A., U.S. Bank National Association, JPMorgan Chase Bank N.A. and other Lenders. The Credit Agreement provides for a $200 million, five-year revolving line of credit. On April 5, 2013, the Credit Agreement was amended to extend the maturity of the revolving credit facility from April 8, 2016 to April 5, 2018, in addition to incorporating a $150 million term loan facility maturing April 5, 2019. On May 31, 2016, the Credit Agreement was further amended to increase the borrowing capacity to $500 million and to extend the maturity of the revolving credit facility from April 5, 2018 to May 31, 2021. The amendment also incorporated a revised schedule of fees and interest rate spreads. We have the right, subject to certain conditions, including approval of additional commitments by qualified lenders, to increase the revolving line of credit under the Credit Agreement by an additional $200 million until May 31, 2021. The Credit Agreement allows us and certain designated subsidiaries to borrow in United States dollars, European euros, Swedish kronor, British pound sterling, Japanese yen, Canadian dollars, Australian dollars, and other agreed upon currencies. Interest rates under the Credit Agreement are determined based on the type of borrowing. Interest associated with borrowings can be based on either the prime lending rate of Bank of America, N.A. or the published Eurocurrency rate (i.e. LIBOR). The borrowings have an applicable margin that ranges from 0.125 percent to 2.125 percent depending on the applicable base rate and our consolidated total leverage ratio. Including the respective spreads, ~~and ignoring the effects of hedging,~~ the one-month Eurocurrency-based borrowing rate was ~~2.357~~2.610 percent per annum and the prime lending-based borrowing rate was ~~4.375~~4.625 percent per annum at ~~March 31,~~September 30, 2017. The Credit Agreement requires us to pay a commitment fee on the amount of unused revolving commitments at a rate, based on our total leverage ratio, which ranges from 0.150 percent to 0.300 percent of unused revolving commitments. At September 30, 2017, the commitment fee on the amount of unused revolving credit was 0.175 percent per annum. The Credit Agreement contains two financial covenants that require the maintenance of a total leverage ratio and an interest coverage ratio, with which the Company was in compliance at ~~March 31,~~September 30, 2017. The credit facilities available under the Credit Agreement are unsecured.

On May 31, 2016, wethe Company drew down $105 million under the revolving credit facility and repaid the term loan ~~facility in full.~~originally issued under the credit agreement dated April 5, 2013. Interest iswas accrued atand paid monthly based on the one-month LIBOR ~~rate plus the scheduled spread and paid monthly. By entering into interest rate swap agreements, we have effectively fixed the basis for calculating~~rate. To manage the interest rate onrisk arising from the variability in monthly interest expense attributable to amounts drawn under the revolver, the Company entered into two amortizing interest rate swaps with an aggregate of $105 million. The interest rate swaps were designated, and effective, as cash flow hedges.

During the quarter ended September 30, 2017, the Company repaid all amounts outstanding under the revolving credit facility. ~~The effective~~Concurrently, the Company exited both interest rate ~~paid for~~swaps which had a combined notional value at the time of $86.3 million. We had $16.9 million of letters of credit outstanding under the Credit Agreement at September 30, 2017, which reduced the total available revolving credit ~~facility is equal to~~under the median fixed rate in the swap agreements plus the credit spread then in effect. At March 31, 2017, the effective interest rate on the revolving credit facility was 2.37 percent. Principal payments of $3.75 million, at our option, will continue to be made in quarterly installments through December 31, 2018 with the final maturity payment including any accrued interest due on April 5, 2019.Credit Agreement.



Oregon		93-0708501
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

27700 SW Parkway Avenue, Wilsonville, Oregon		97070
(Address of principal executive offices)		(Zip Code)



PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Income - Three and Nine Months Ended ~~March 31,~~September 30, 2017 and 2016 (unaudited)	1
	Consolidated Statements of Comprehensive Income - Three and Nine Months Ended ~~March 31,~~September 30, 2017 and 2016 (unaudited)	2
	Consolidated Balance Sheets - ~~March 31,~~September 30, 2017 and December 31, 2016 (unaudited)	3
	Consolidated Statements of Cash Flows - ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2017 and 2016 (unaudited)	4
	Notes to the Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2928
Item 4.	Controls and Procedures	3029
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3130
Item 1A.	Risk Factors	3130
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3138
Item 3.	Defaults Upon Senior Securities	3138
Item 4.	Mine Safety Disclosures	3138
Item 5.	Other Information	3138
Item 6.	Exhibits	3138
Signature		3239

FLIR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (Unaudited)	FLIR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (Unaudited)						FLIR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (Unaudited)

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2017			2016
Revenue	$	406,814		$	379,472		$	464,712		$	405,228		$	1,305,650		$	1,187,429
Cost of goods sold	215,493			201,782			241,821			213,852			684,706			635,041
Gross profit	191,321			177,690			222,891			191,376			620,944			552,388
Operating expenses:
Research and development	41,983			37,280			42,873			33,839			127,902			109,327
Selling, general and administrative	90,252			83,033			92,932			76,688			280,240			239,623
Total operating expenses	132,235			120,313			135,805			110,527			408,142			348,950
Earnings from operations	59,086			57,377			87,086			80,849			212,802			203,438
Interest expense	4,453			3,447			3,819			5,736			12,744			13,543
Interest income	(271		)	(260		)	(488		)	(336		)	(1,114		)	(924		)
Other income, net	(660		)	(1,430		)
Other (income) expense, net							(778		)	241			(2,465		)	138
Earnings before income taxes	55,564			55,620			84,533			75,208			203,637			190,681
Income tax provision	12,993			54,495			21,004			16,575			46,124			85,555
Net earnings	$	42,571		$	1,125		$	63,529		$	58,633		$	157,513		$	105,126

Net earnings per share:
Basic	$	0.31		$	0.01		$	0.46		$	0.43		$	1.15		$	0.76
Diluted	$	0.31		$	0.01		$	0.46		$	0.43		$	1.13		$	0.76

Weighted average shares outstanding:
Basic	136,359			137,496			137,849			136,963			137,030			137,438
Diluted	138,239			138,779			139,419			137,938			138,853			138,594

FLIR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (Unaudited)	FLIR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (Unaudited)						FLIR SYSTEMS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (Unaudited)

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2017			2016
Net earnings	$	42,571		$	1,125		$	63,529		$	58,633		$	157,513		$	105,126
Other comprehensive income (loss), net of tax:
Interest rate swap contracts:
Fair value adjustment on interest rate swap contracts	187			(669		)	—			292			187			(573		)
Realized gain reclassified to earnings							(494		)	—			(494		)	—
Unrealized gain on available-for-sale investments	(1		)	—			(3		)	—			(4		)	—
Foreign currency translation adjustments	13,202			23,361			19,993			(7,724		)	55,788			(9,250		)
Total other comprehensive income	13,388			22,692
Total other comprehensive income (loss)							19,496			(7,432		)	55,477			(9,823		)
Comprehensive income	$	55,959		$	23,817		$	83,025		$	51,201		$	212,990		$	95,303

FLIR SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except for par value) (Unaudited)	FLIR SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except for par value) (Unaudited)						FLIR SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except for par value) (Unaudited)

	March 31,			December 31,			September 30,			December 31,
	2017			2016			2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	397,436		$	361,349		$	436,961		$	361,349
Accounts receivable, net	308,740			352,020			345,542			352,020
Inventories	386,058			371,371			413,005			371,371
Prepaid expenses and other current assets	83,926			79,917			86,570			79,917
Total current assets	1,176,160			1,164,657			1,282,078			1,164,657
Property and equipment, net	272,857			271,785			270,023			271,785
Deferred income taxes, net	45,321			45,243			51,179			45,243
Goodwill	896,436			801,406			930,846			801,406
Intangible assets, net	193,099			168,460			183,677			168,460
Other assets	46,522			168,155			48,472			168,155
Total assets	$	2,630,395		$	2,619,706		$	2,766,275		$	2,619,706
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	110,013		$	114,225		$	127,420		$	114,225
Deferred revenue	33,989			34,420			29,015			34,420
Accrued payroll and related liabilities	51,140			52,874			67,759			52,874
Accrued product warranties	16,642			17,476			16,193			17,476
Advance payments from customers	26,830			26,019			19,260			26,019
Accrued expenses	28,886			34,022			47,528			34,022
Accrued income taxes	48,497			51,017			46,175			51,017
Other current liabilities	10,178			16,659			14,588			16,659
Current portion, long-term debt	15,000			15,000			—			15,000
Total current liabilities	341,175			361,712			367,938			361,712
Long-term debt	494,737			501,921			420,369			501,921
Deferred income taxes	2,479			2,331			14,569			2,331
Accrued income taxes	9,654			9,643			14,054			9,643
Pension and other long-term liabilities	62,781			65,773			59,827			65,773
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $0.01 par value, 10,000 shares authorized; no shares issued at March 31, 2017, and December 31, 2016	—			—
Common stock, $0.01 par value, 500,000 shares authorized, 136,438 and 136,334 shares issued at March 31, 2017, and December 31, 2016, respectively, and additional paid-in capital	17,879			12,139
Preferred stock, $0.01 par value, 10,000 shares authorized; no shares issued at September 30, 2017, and December 31, 2016							—			—
Common stock, $0.01 par value, 500,000 shares authorized, 138,414 and 136,334 shares issued at September 30, 2017, and December 31, 2016, respectively, and additional paid-in capital							72,117			12,139
Retained earnings	1,854,253			1,832,138			1,927,875			1,832,138
Accumulated other comprehensive loss	(152,563		)	(165,951		)	(110,474		)	(165,951		)
Total shareholders’ equity	1,719,569			1,678,326			1,889,518			1,678,326
Total liabilities and shareholders' equity	$	2,630,395		$	2,619,706		$	2,766,275		$	2,619,706



	March 31, 2017				December 31, 2016
	Prepaid Expenses and Other Current Assets		Other Current Liabilities		Prepaid Expenses and Other Current Assets		Other Current Liabilities
Foreign exchange contracts	$	636	$	1,585	$	2,369	$	75



Contract Date	Notional Amount (in millions)		Fixed Rate		Effective Date	Maturity Date
March 15, 2013	$	45.0	1.02	%	April 5, 2013	March 31, 2019
March 29, 2013	$	45.0	0.97	%	April 5, 2013	March 31, 2019


Balance, December 31, 2016	Balance, December 31, 2016	$	801,406	Balance, December 31, 2016	$	801,406
Goodwill from acquisitions	Goodwill from acquisitions	91,945		Goodwill from acquisitions	100,022
Currency translation adjustments and other		3,085
Balance, March 31, 2017		$	896,436
Currency translation adjustments				Currency translation adjustments	29,418
Balance, September 30, 2017				Balance, September 30, 2017	$	930,846


Common stock and additional paid-in capital, December 31, 2016	$	12,139		$	12,139
Common stock issued pursuant to stock-based compensation plans, net	(841		)	34,726
Stock-based compensation	6,581			25,252
Common stock and additional paid-in capital, March 31, 2017	$	17,879
Common stock and additional paid-in capital, September 30, 2017				$	72,117


Cash acquired	$	2,994		$	2,994
Other tangible assets and liabilities, net	35,127			35,064
Net deferred taxes	(2,438		)	(2,438		)
Identifiable intangible assets	39,800			39,800
Goodwill	183,678			183,741
Total purchase price	$	259,161		$	259,161



Number	Description
10.1	^{Separation and Release of Claims Agreement between FLIR Systems, Inc. and Thomas A. Surran effective as of September 30, 2017.(1)}
10.2	^{Executive Officer Severance Plan Agreement between FLIR Systems, Inc. and Thomas A. Surran dated April 24, 2017.(1)}
10.3	^{FLIR Systems, Inc. Executive Officer Severance Plan, effective May 1, 2017.(1)}
10.4	^{Offer Letter (the “Offer Letter”) between FLIR Systems, Inc. and Carol P. Lowe dated as of October 16, 2017 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on October 24, 2017).(1)}
10.5	^{Change of Control Agreement between FLIR Systems, Inc. and Carol P. Lowe attached to the Offer Letter as Attachment A (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed on October 24, 2017).(1)}
31.1	^{Principal Executive Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 302.}
31.2	^{Principal Financial Officer Certification Pursuant to Sarbanes-Oxley Act of 2002, Section 302.}
32.1	^{Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.}
32.2	^{Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.}
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document



		FLIR SYSTEMS, INC.

Date ~~May 3,~~October 27, 2017		/s/ ~~AMIT SINGHI~~Shane R. Harrison
		~~Amit Singhi~~Shane R. Harrison
		Sr. Vice President, ~~Finance~~Corporate Development & Strategy and Interim Chief Financial Officer
		(Duly Authorized and Principal Financial Officer)


	March 31,		December 31,		September 30,		December 31,
	2017		2016		2017		2016
European euro	$	179,979	$	156,352	$	129,730	$	156,352
Swedish kroner	80,790		48,555		75,879		48,555
Canadian dollar	55,044		15,645		46,374		15,645
British pound sterling	21,255		33,862		24,954		33,862
Brazilian real	8,102		2,747		10,386		2,747
Australian dollar					1,960		1,653
Japanese yen	2,896		3,251		898		3,251
Australian dollar	2,034		1,653
Other	271		—		896		—
	$	350,371	$	262,065	$	291,077	$	262,065