SEC Filings

10-Q
LINCOLN ELECTRIC HOLDINGS INC filed this Form 10-Q on 10/30/2017
Entire Document
 
LINCOLN ELECTRIC HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Dollars in thousands, except per share amounts

The following table provides a summary of assets and liabilities as of December 31, 2016, measured at fair value on a recurring basis:
Description
 
Balance as of December 31, 2016
 
Quoted Prices
in Active
Markets for
Identical Assets
or Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 

 
 

 
 

 
 

Foreign exchange contracts
 
$
1,185

 
$

 
$
1,185

 
$

Marketable securities
 
38,922

 

 
38,922

 

Total assets
 
$
40,107

 
$

 
$
40,107

 
$

 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

Foreign exchange contracts
 
$
2,452

 
$

 
$
2,452

 
$

Interest rate swap agreements
 
5,439

 

 
5,439

 

Contingent considerations
 
8,154

 

 

 
8,154

Forward contract
 
15,272

 

 

 
15,272

Deferred compensation
 
25,244

 

 
25,244

 

Total liabilities
 
$
56,561

 
$

 
$
33,135

 
$
23,426

The Company’s derivative contracts are valued at fair value using the market approach.  The Company measures the fair value of foreign exchange contracts and interest rate swap agreements using Level 2 inputs based on observable spot and forward rates in active markets.  During the nine months ended September 30, 2017, there were no transfers between Levels 1, 2 or 3.
The Company measures the fair value of marketable securities using Level 2 inputs based on quoted market prices for similar assets in active markets.
In connection with acquisitions, the Company recorded contingent considerations fair valued at $7,067 as of September 30, 2017. Under the contingent consideration agreements, the amounts to be paid are based upon actual financial results of the acquired entity for specified future periods.  The fair value of the contingent considerations are a Level 3 valuation and fair valued using either a probability weighted discounted cash flow analysis or an option pricing model.
In connection with an acquisition, the Company obtained a controlling financial interest in the acquired entity and at the same time entered into a forward contract to obtain the remaining financial interest in the entity over a three-year period. The final payment associated with the forward contract was paid by the Company in the second quarter of 2017.
The deferred compensation liability is the Company’s obligation under its executive deferred compensation plan.  The Company measures the fair value of the liability using the market values of the participants’ underlying investment fund elections.
The fair value of Cash and cash equivalents, Accounts receivable, Short-term debt excluding the current portion of long-term debt and Trade accounts payable approximated book value due to the short-term nature of these instruments at both September 30, 2017 and December 31, 2016.  The fair value of long-term debt at September 30, 2017 and December 31, 2016, including the current portion, was approximately $676,997 and $669,209, respectively, which was determined using available market information and methodologies requiring judgment.  The carrying value of this debt at such dates was $704,913 and $703,835, respectively.  Since considerable judgment is required in interpreting market information, the fair value of the debt is not necessarily the amount that could be realized in a current market exchange.

21