Fair Value Measurements

9 Months Ended

Jun. 30, 2011

Fair Value Measurements

Fair Value Measurements

8.    FAIR VALUE MEASUREMENTS

Fair value is defined as an exit price (i.e., the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date). The methods and assumptions used to measure the fair value of financial instruments are as follows:

Derivatives

The fair value of our interest rate swap agreements and foreign exchange contracts are quantified using the income approach and are based on estimates using standard pricing models. These models take into account the value of future cash flows as of the balance sheet date, discounted to a present value using discount factors that match both the time to maturity and currency of the underlying instruments. The computation of the fair values of these instruments is generally performed by the Company. These standard pricing models utilize inputs which are derived from or corroborated by observable market data such as interest rate yield curves and currency spot and forward rates. In addition, on an ongoing basis, we randomly test a subset of our valuations against valuations received from the transaction's counterparty to validate the accuracy of our standard pricing models.

Refer to Note 7, Financial Instruments, for a description of derivative instruments, including details on the balance sheet line item classifications.

Available-for-Sale Securities

The fair value of available-for-sale securities is based on a market approach, specifically quoted market prices in publicly traded companies from the New York Stock Exchange and NASDAQ. These investments are reported within other noncurrent assets on the consolidated balance sheet, with holding gains and losses recorded to other comprehensive income, net of tax, within total equity.

Long-term Debt

The fair value of our debt is based on estimates using standard pricing models that take into account the value of future cash flows as of the balance sheet date, discounted to a present value using discount factors that match both the time to maturity and currency of the underlying instruments. These standard valuation models utilize observable market data such as interest rate yield curves and currency spot rates. The computation of the fair value of these instruments is generally performed by the Company.

Other Liabilities

Other liabilities include the obligation to purchase 25% of the remaining shares of CryoService Limited (CSL). CSL is not publically traded and therefore, no observable market exists for the shares. The fair value of the outstanding liability was determined using an internally developed valuation model that was based on a multiple of earnings formula. The liability is reported in accrued liabilities on the consolidated balance sheet.

The carrying values and fair values of financial instruments were as follows:

	30 June 2011				30 September 2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets
Derivatives
Foreign exchange contracts		$     43.1		$     43.1		$     74.7		$     74.7
Interest rate swap contracts		29.1		29.1		39.7		39.7
Available-for-sale securities
Airgas investment		—		—		102.5		102.5
Other investments		—		—		1.1		1.1
Liabilities
Derivatives
Foreign exchange contracts		$     47.5		$     47.5		$     50.5		$     50.5
Interest rate swap contracts		3.1		3.1		3.7		3.7
Long-term debt, including current portion		4,067.3		4,266.5		3,842.3		4,146.4
Other liabilities		50.8		50.8		42.0		42.0

The carrying amounts reported in the balance sheet for cash and cash items, trade receivables, payables and accrued liabilities, accrued income taxes, and short-term borrowings approximate fair value due to the short-term nature of these instruments. Accordingly, these items have been excluded from the above table.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:

Level 1	—	Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2	—	Inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability.
Level 3	—	Inputs that are unobservable for the asset or liability based on our own assumptions (about the assumptions market participants would use in pricing the asset or liability).

The following table summarizes assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets:

	30 June 2011								30 September 2010
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets at Fair Value
Derivatives
Foreign exchange contracts	$	43.1	$	—	$	43.1	$	—	$	74.7	$	—	$	74.7	$	—
Interest rate swap contracts		29.1		—		29.1		—		39.7		—		39.7		—
Available-for-sale securities
Airgas investment		—		—		—		—		102.5		102.5		—		—
Other investments		—		—		—		—		1.1		1.1		—		—
Total Assets at Fair Value	$	72.2	$	—	$	72.2	$	—	$	218.0	$	103.6	$	114.4	$	—
Liabilities at Fair Value
Derivatives
Foreign exchange contracts	$	47.5	$	—	$	47.5	$	—	$	50.5	$	—	$	50.5	$	—
Interest rate swap contracts		3.1		—		3.1		—		3.7		—		3.7		—
Other liabilities		50.8		—		—		50.8		42.0		—		—		42.0
Total Liabilities at Fair Value	$	101.4	$	—	$	50.6	$	50.8	$	96.2	$	—	$	54.2	$	42.0

Refer to Note 1, Major Accounting Policies, in our 2010 Form 10-K and Note 7, Financial Instruments, in this quarterly filing for additional information on our accounting and reporting of the fair value of financial instruments.

Changes in the fair value of other liabilities, valued using significant unobservable inputs (Level 3), are presented below:

Balance at 30 September 2010	$	42.0
Expense included in interest expense		.5
Adjustment to initial estimate (see FN 14)		6.1
Balance at 31 December 2010	$	48.6
Expense included in interest expense		1.7
Currency translation adjustment		1.1
Balance at 31 March 2011	$	51.4
Income included in interest expense		(.7	)
Currency translation adjustment		.1
Balance at 30 June 2011	$	50.8