Guarantees

9 Months Ended

Sep. 30, 2011

Guarantees

Guarantees

16. Guarantees

The company periodically enters into transactions with customers that provide for residual value guarantees and buyback commitments.  These initial transactions are recorded as deferred revenue and are amortized to income on a straight-line basis over a period equal to that of the customer’s third party financing agreement.  The deferred revenue included in other current and non-current liabilities at September 30, 2011 and December 31, 2010 was $55.7 million and $57.5 million, respectively.  The total amount of residual value guarantees and buyback commitments given by the company and outstanding at September 30, 2011 and December 31, 2010 was $69.0 million and $79.2 million, respectively.  These amounts are not reduced for amounts the company would recover from repossession and subsequent resale of the units.  The residual value guarantees and buyback commitments expire at various times through 2015.

During the nine months ended September 30, 2011 and 2010, the company sold no additional long term notes receivable to third party financing companies. Related to notes sold in other periods, the company guarantees some percentage, up to 100%, of collection of the notes to the financing companies.  The company has accounted for the sales of the notes as a financing of receivables.  The receivables remain on the company’s Consolidated Balance Sheets, net of payments made, in other current and non-current assets, and the company has recognized an obligation equal to the net outstanding balance of the notes in other current and non-current liabilities in the Consolidated Balance Sheets.  The cash flow benefit of these transactions is reflected as financing activities in the Consolidated Statements of Cash Flows.  During the three-months and nine-months ended September 30, 2011, the customers paid $0.6 million and $2.0 million respectively, on the notes to the third party financing companies.  As of September 30, 2011, the outstanding balance of the notes receivables guaranteed by the company was $2.8 million.

In the normal course of business, the company provides its customers a warranty covering workmanship, and in some cases materials, on products manufactured by the company.  Such warranty generally provides that products will be free from defects for periods ranging from 12 to 60 months with certain equipment having longer-term warranties.  If a product fails to comply with the company’s warranty, the company may be obligated, at its expense, to correct any defect by repairing or replacing such defective products.  The company provides for an estimate of costs that may be incurred under its warranty at the time product revenue is recognized.  These costs primarily include labor and materials, as necessary, associated with repair or replacement.  The primary factors that affect the company’s warranty liability include the number of units shipped and historical and anticipated warranty claims.  As these factors are impacted by actual experience and future expectations, the company assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary.  Below is a table summarizing the warranty activity for the nine-months ended September 30, 2011 and the year ended December 31, 2010:

(in millions)	2011			2010
Balance at beginning of period	$	99.9		$	113.1
Accruals for warranties issued during the period	41.9			50.5
Settlements made (in cash or in kind) during the period	(44.9		)	(60.9		)
Currency translation	0.9			(2.8		)
Balance at end of period	$	97.8		$	99.9