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Fair value measurement | 6 Months Ended
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Jul. 01, 2018
Fair Value Disclosures [Abstract] |
Fair value measurement | Fair value measurement For a description of the fair value hierarchy, see Note 10 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2017. The following tables provide information regarding the Company's financial assets and liabilities that are measured at fair value on a recurring basis as of July 1, 2018 and December 31, 2017:
| Total carrying value at July 1, 2018 |  | Quoted prices in active markets (Level 1) |  | Significant other observable Inputs (Level 2) |  | Significant unobservable Inputs (Level 3)
| (Dollars in thousands)
Investments in marketable securities | $ | 9,272 |  |  | $ | 9,272 |  |  | $ | — |  |  | $ | — |
Derivative assets | 1,954 |  |  | — |  |  | 1,954 |  |  | — |
Derivative liabilities | 861 |  |  | — |  |  | 861 |  |  | — |
Contingent consideration liabilities | 242,659 |  |  | — |  |  | — |  |  | 242,659 |
| Total carrying value at December 31, 2017 |  | Quoted prices in active markets (Level 1) |  | Significant other observable Inputs (Level 2) |  | Significant unobservable Inputs (Level 3)
| (Dollars in thousands)
Investments in marketable securities | $ | 9,045 |  |  | $ | 9,045 |  |  | $ | — |  |  | $ | — |
Derivative assets | 1,221 |  |  | — |  |  | 1,221 |  |  | — |
Derivative liabilities | 1,426 |  |  | — |  |  | 1,426 |  |  | — |
Contingent consideration liabilities | 272,136 |  |  | — |  |  | — |  |  | 272,136 |
There were no transfers of financial assets or liabilities reported at fair value among Level 1, Level 2 or Level 3 within the fair value hierarchy during the six months ended July 1, 2018. Valuation Techniques The Company’s financial assets valued based upon Level 1 inputs are comprised of investments in marketable securities held in trust, which are available to satisfy benefit obligations under Company benefit plans and other arrangements. The investment assets of the trust are valued using quoted market prices. The Company’s financial assets and liabilities valued based upon Level 2 inputs are comprised of foreign currency forward contracts. The Company uses foreign currency forward contracts to manage foreign currency transaction exposure as well as exposure to foreign currency denominated monetary assets and liabilities. The Company measures the fair value of the foreign currency forward contracts by calculating the amount required to enter into offsetting contracts with similar remaining maturities as of the measurement date, based on quoted market prices, and taking into account the creditworthiness of the counterparties. The Company’s financial liabilities valued based upon Level 3 inputs are comprised of contingent consideration arrangements pertaining to the Company’s acquisitions, which are discussed immediately below. Contingent consideration As of July 1, 2018, the Company estimates that contingent consideration payments will occur in 2018 through 2029, and the maximum amount of undiscounted payments the Company could make under contingent consideration arrangements is $335.2 million. The contingent consideration liabilities, which primarily consist of Company obligations payable if specified net sales goals are achieved, are remeasured to fair value each reporting period using assumptions including estimated revenues (based on internal operational budgets and long-range strategic plans), discount rates, probability of payment and projected payment dates. The contingent consideration fair value measurement is based on significant inputs not observable in the market and therefore constitute Level 3 inputs within the fair value hierarchy. The contingent consideration liability related to the NeoTract acquisition represents the estimated fair value of the Company's obligations to make payments of up to $375 million in the aggregate if specified sales goals are achieved. Specifically, the payments are based on net sales (as defined in the NeoTract acquisition agreement) for the periods from January 1, 2018 through April 30, 2018 and the years ended December 31, 2018, 2019 and 2020. The Company made payments of $75.0 million ($64.2 million of which was paid during the second quarter 2018 and $10.8 million of which was paid during the first week of the third quarter 2018) as a result of the achievement of a sales goal for the period from January 1, 2018 to April 30, 2018. The fair value of the contingent consideration related to the NeoTract acquisition was estimated using a Monte Carlo valuation approach, which simulates future revenues during the earn out-period using management's best estimates. The Company determines the value of its other contingent consideration liabilities based on a probability-weighted discounted cash flow analysis. Increases in projected revenues and probabilities of payment may result in significantly higher fair value measurements; decreases in these items may have the opposite effect. Increases in the discount rates may result in significantly lower fair value measurements; decreases in these items may have the opposite effect. The table below provides additional information regarding the valuation technique and inputs used in determining the fair value of contingent consideration recognized in connection with the NeoTract acquisition.
| Valuation Technique |  | Unobservable Input |  | Range
Contingent consideration | Monte Carlo simulation |  | Revenue volatility |  | 22.3 | %
|  |  | Risk free rate |  | Cost of debt structure |
|  |  | Projected year of payment |  | 2018 - 2021 |
The following table provides information regarding changes, during the six months ended July 1, 2018, in Level 3 financial liabilities related to contingent consideration:
| Contingent consideration
| 2018
| (Dollars in thousands)
Balance - December 31, 2017 | $ | 272,136 |
Additions (1) | 396 |
Payment | (64,372 | )
Revaluations | 34,618 |
Translation adjustment | (119 | )
Balance - July 1, 2018 | $ | 242,659 |
(1) The Company established a liability related to the estimated fair value of contingent consideration associated with the acquired assets from QT Vascular.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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