Fair Value Measurements and Other Financial Instruments

6 Months Ended

Jun. 30, 2012

Fair Value Measurements and Other Financial Instruments [Abstract]

Fair Value Measurements and Other Financial Instruments

(12) Fair Value Measurements and Other Financial Instruments

Fair Value Measurements

In determining fair value of financial instruments, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and consider counterparty credit risk in our assessment of fair value. We determine fair value of our financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

• Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

• Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

The following table details the fair value hierarchy of our financial instruments.

June 30, 2012	Total Fair Value		Level 1		Level 2		Level 3
Cash equivalents	$	11.3	$	—	$	11.3	$	—
Derivative financial instruments net asset (liabilities):
Interest rate swaps	$	1.6	$	—	$	1.6	$	—
Foreign currency forward contracts	$	54.7	$	—	$	54.7	$	—
December 31, 2011	Total Fair Value		Level 1		Level 2		Level 3
Cash equivalents	$	148.9	$	—	$	148.9	$	—
Derivative financial instruments net asset:
Interest rate swaps	$	2.1	$	—	$	2.1	$	—
Foreign currency forward contracts	$	14.9	$	—	$	14.9	$	—

Cash Equivalents

Our cash equivalents at June 30, 2012 consisted of commercial paper (fair value determined using Level 2 inputs). Our cash equivalents at December 31, 2011 consisted of commercial paper and money market accounts (fair value determined using Level 2 inputs). Since these are short-term highly liquid investments with original maturities of three months or less at the date of purchase, they present negligible risk of changes in fair value due to changes in interest rates.

Derivative Financial Instruments

Our foreign currency forward contracts are recorded at fair value on our condensed consolidated balance sheets using an income approach valuation technique based on observable market inputs (Level 2).

Observable market inputs used in the calculation of the fair value of foreign currency forward contracts include foreign currency spot and forward rates obtained from an independent third party market data provider. In addition, other pricing data quoted by various banks and foreign currency dealers involving identical or comparable instruments are included.

Our interest rate swaps are recorded at fair value on our condensed consolidated balance sheet using an income approach valuation technique based on observable market inputs (Level 2). Observable market inputs used in the calculation of the fair value of interest rate swaps include pricing data from counterparties to these swaps, and a comparison is made to other market data including U.S. Treasury yields and swap spreads involving identical or comparable derivative instruments.

Counterparties to these foreign currency forward contracts and interest rate swaps are rated at least A- by Standard & Poor’s and Baa1 by Moody’s. None of these counterparties experienced any significant ratings downgrades in the six months ended June 30, 2012. Credit ratings on some of our counterparties may change during the term of our financial instruments. We closely monitor our counterparties’ credit ratings and if necessary will make any appropriate changes to our financial instruments. The fair value generally reflects the estimated amounts that we would receive or pay to terminate the contracts at the reporting date.

Other Financial Instruments

The following financial instruments are recorded at fair value or at amounts that approximate fair value: (1) receivables, net, (2) certain other current assets, (3) accounts payable and (4) other current liabilities. The carrying amounts reported on our condensed consolidated balance sheets for the above financial instruments closely approximate their fair value due to the short-term nature of these assets and liabilities.

Other liabilities that are recorded at carrying value on our condensed consolidated balance sheets include our senior notes. We utilize a market approach to calculate the fair value of our senior notes. Due to their limited investor base and the face value of some of our senior notes, they may not be actively traded on the date we calculate their fair value. Therefore, we may utilize prices and other relevant information generated by market transactions involving similar securities, reflecting U.S. Treasury yields to calculate the yield to maturity and the price on some of our senior notes. These inputs are provided by an independent third party and are considered to be Level 2 inputs.

We derive our fair value estimates of our various other debt instruments by evaluating the nature and terms of each instrument, considering prevailing economic and market conditions, and examining the cost of similar debt offered at the balance sheet date. We also incorporated our credit default swap rates and currency specific swap rates in the valuation of each debt instrument, as applicable.

These estimates are subjective and involve uncertainties and matters of significant judgment, and therefore we cannot determine them with precision. Changes in assumptions could significantly affect our estimates.

The table below shows the carrying amounts and estimated fair values of our total debt:

	June 30, 2012				December 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
5.625% Senior Notes due July 2013(1)	$	400.7	$	408.5	$	401.0	$	414.1
12% Senior Notes due February 2014(1)		154.9		173.4		156.3		179.8
Term Loan A Facility due October 2016(2)		933.8		933.8		989.9		989.9
7.875% Senior Notes due June 2017		394.0		432.0		393.5		426.0
Term Loan B Facility due October 2018(2)		1,100.7		1,100.7		1,118.8		1,118.8
8.125% Senior Notes due September 2019		750.0		830.8		750.0		824.5
8.375% Senior Notes due September 2021		750.0		841.5		750.0		826.9
6.875% Senior Notes due July 2033		448.6		432.3		448.6		389.3
Other foreign loans		53.3		52.8		37.8		37.4
Other domestic loans		0.8		0.8		1.4		1.3
Total debt	$	4,986.8	$	5,206.6	$	5,047.3	$	5,208.0

(1) The carrying value and fair value of such debt include adjustments due to interest rate swaps. See Note 11, “Derivatives and Hedging Activities.”

(2) Includes non-U.S. dollar tranches.

As of June 30, 2012, we did not have any non–financial assets and liabilities that were carried at fair value on a recurring basis in the consolidated financial statements or for which a fair value measurement was required at June 30, 2012. Included among our non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis are inventories, net property and equipment, goodwill, intangible assets, and asset retirement obligations.