Debt and Capital Leases

9 Months Ended

Oct. 03, 2015

Debt

Debt and Capital Leases

Note 5.  Debt and Capital Leases

The estimated fair value of our long-term debt is primarily based on the credit spread above U.S. Treasury securities on notes with similar rates, credit ratings, and remaining maturities.  The fair value of short-term borrowings, which include commercial paper issuances and short-term lines of credit, approximates carrying value given the short duration of these obligations.  The fair value of our total debt was $1.11 billion at October 3, 2015 and $1.22 billion at January 3, 2015. Fair value amounts were determined based primarily on Level 2 inputs, which are inputs other than quoted prices in active markets that are either directly or indirectly observable.

Our various loan agreements contain financial covenants requiring that we maintain specified ratios of total debt and interest expense in relation to certain measures of income.  We were in compliance with our financial covenants as of October 3, 2015.

In May 2015, we extended and amended the lease on our Mentor, Ohio facility for an additional ten years.  This facility is used primarily as the North American headquarters and research center of our Materials Group business. Because ownership of the facility transfers to us at the end of the lease term, it was accounted for as a capital lease. The carrying value of the lease at October 3, 2015 was approximately $26 million, of which approximately $24 million was included in “Long-term debt and capital leases” and approximately $2 million was included in “Short-term borrowings and current portion of long-term debt and capital leases” in the unaudited Condensed Consolidated Balance Sheets at October 3, 2015.