Fair Value Measurements

6 Months Ended

Jul. 02, 2011

Fair Value Measurements

L.         Fair Value Measurements

ASC 820 defines, establishes a consistent framework for measuring, and expands disclosure requirements about fair value. ASC 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs and significant value drivers are observable.

Level 3 — Instruments that are valued using unobservable inputs.

The Company holds various derivative financial instruments that are employed to manage risks, including foreign currency and interest rate exposures. These financial instruments are carried at fair value and are included within the scope of ASC 820. The Company determines the fair value of derivatives through the use of matrix or model pricing, which utilizes verifiable inputs such as market interest and currency rates. When determining the fair value of these financial instruments for which Level 1 evidence does not exist, the Company considers various factors including the following: exchange or market price quotations of similar instruments, time value and volatility factors, the Company’s own credit rating and the credit rating of the counter-party.

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis for each of the hierarchy levels (millions of dollars):

	Total  Carrying Value			Level 1			Level 2			Level 3
July 2, 2011:
Assets:
Money market fund		$	1,016.7		$	1,016.7		$	—		$—
Investment in common stock of Niscayah		$	61.5		$	61.5		$	—		$—
Derivative assets		$	55.0		$	—		$	55.0		$—
Liabilities:
Derivative liabilities		$	121.7		$	—		$	121.7		$—
January 1, 2011:
Assets:
Money market fund		$	716.7		$	716.7		$	—		$—
Derivative assets		$	55.0		$	—		$	55.0		$—
Liabilities:
Derivative liabilities		$	115.7		$	—		$	115.7		$—

A summary of the Company’s financial instruments carrying and fair values at July 2, 2011 and January 1, 2011 follows. Refer to Note I, Derivative Financial Instruments for more details regarding derivative financial instruments, and Note H, Long-Term Debt and Financing Arrangements, for more information regarding carrying values of the Long-term debt shown below.

		Carrying		Carrying		Carrying		Carrying
	July 2, 2011				January 1, 2011
(millions of dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Derivative assets	$	55.0	$	55.0	$	55.0	$	55.0
Liabilities:
Long-term debt, including current portion	$	3,046.0	$	3,287.2	$	3,434.2	$	3,607.1
Derivative liabilities	$	121.7	$	121.7	$	115.7	$	115.7

The fair values of Long-term debt instruments are estimated using a discounted cash flow analysis, based on the Company’s marginal borrowing rates. The fair value of the Company’s variable rate short term borrowings approximate their carrying value at July 2, 2011. The fair values of foreign currency and interest rate swap agreements, comprising the derivative assets and liabilities in the table above, are based on current settlement values.

As discussed in Note D, Accounts and Financing Receivable, the Company has a deferred purchase price receivable related to sales of trade receivables. The deferred purchase price receivable will be repaid in cash as receivables are collected, generally within 30 days, and as such the carrying value of the receivable approximates fair value.

There were no assets measured at fair value on a non-recurring basis during the six months ended July 2, 2011.