Summary of Significant Accounting Policies

Basis of Presentation

The Acquisition resulted in a 100% change in ownership of Victor Technologies and is accounted for in accordance with United States accounting guidance for business combinations. Accordingly, the assets acquired and liabilities assumed were recorded at fair value as of December 3, 2010. The provisional amounts recognized for assets acquired and liabilities assumed as of December 3, 2010 were determined by management with the assistance of an externally prepared valuation study of inventories, property, plant and equipment, intangible assets, goodwill, and capital and operating leases. These provisional amounts were updated in the fourth quarter of 2011 upon the completion of such study and the determination of other facts impacting fair value estimates. The adjustments arising from the finalization of the amounts recognized for assets acquired and liabilities assumed did not impact cash flows. However, the Condensed Consolidating Statement of Income for the three and six months ended June 30, 2011 was retrospectively adjusted as a result of these changes. Specifically, these adjustments resulted in immaterial decreases to amortization of intangibles and immaterial increases to operating income, amortization of deferred financing fees, income before income tax provision, income tax provision and net income in the second quarter and first half of 2011.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. These unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of the Company for the three and six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for any other interim period or the year ending December 31, 2012. The quarterly financial data should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

The financial statements include the Company’s accounts and those of its subsidiaries, after the elimination of all significant intercompany balances and transactions. All dollar amounts are presented in thousands, unless otherwise noted, except share amounts.

Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the use of estimates and assumptions that affect the amounts reported in the Company’s condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates. Any significant unanticipated changes in business or market conditions that vary from current expectations could have an impact on the fair value of assets and result in a potential impairment loss.

Deferred Financing Costs

Loan origination fees and other costs incurred in arranging long-term financing are capitalized as deferred financing costs and amortized on an effective interest method over the term of the credit agreement. Deferred financing costs totaled $19,706 and $15,297, less related accumulated amortization of $2,981 and $1,881, at June 30, 2012 and December 31, 2011, respectively.

Product Warranty Programs

Various products are sold with product warranty programs. Provisions for warranty programs are made as the products are sold, and such provisions are adjusted periodically based on current estimates of anticipated warranty costs and charged to cost of sales. The following table provides the activity in the warranty accrual:



	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Balance at beginning of period	$	4,733		$	3,700		$	4,600		$	3,200
Charged to expense	1,126			1,015			2,227			2,630
Warranty payments	(1,099		)	(673		)	(2,067		)	(1,788		)
Balance at end of period	$	4,760		$	4,042		$	4,760		$	4,042

Fair Value

The Company estimated the fair value of the Senior Secured Notes due 2017 at $368,100 and $269,100 at June 30, 2012 and December 31, 2011, respectively, based on available market information. These Senior Secured Notes are considered Level 2 inputs in the three-level fair market value hierarchy.