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COMMITMENTS AND GUARANTEES | 9 Months Ended
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Oct. 01, 2022
Commitments and Guarantees [Abstract] |
COMMITMENTS AND GUARANTEES | COMMITMENTS AND GUARANTEES COMMITMENTS — The Company has numerous assets, predominantly real estate, vehicles and equipment, under various lease arrangements. The following is a summary of the Company's right-of-use-assets and lease liabilities:
(Millions of Dollars) | October 1, 2022 |  | January 1, 2022
Right-of-use assets | $402.7 |  | $426.0
Lease liabilities | $411.5 |  | $439.1
Weighted-average incremental borrowing rate | 3.4% |  | 3.5%
Weighted-average remaining term | 6 years |  | 6 years
Right-of-use assets are included within Other assets in the Consolidated Balance Sheets, while lease liabilities are included within Accrued expenses and Other liabilities, as appropriate. The Company determines its incremental borrowing rate based on interest rates from its debt issuances, taking into consideration adjustments for collateral, lease terms and foreign currency. As of October 1, 2022, the Company had unrecognized commitments that require the future purchase of goods or services (unconditional purchase obligations) to provide it with access to products and services at competitive prices. These obligations consist of supplier agreements with long-term minimum material purchase requirements and freight forwarding arrangements with minimum quantity commitments. As of October 1, 2022, the Company had unconditional purchase obligations related to these supplier agreements of $564.7 million, consisting of $48.5 million in 2022, $246.7 million in 2023, $263.1 million in 2024, and $6.4 million in 2025. GUARANTEES — The Company’s financial guarantees at October 1, 2022 are as follows:
(Millions of Dollars) | Term |  | Maximum Potential Payment |  | Carrying Amount of Liability
Guarantees on the residual values of leased assets | One to five years |  | $ | 74.5 |  |  | $ | — |
Standby letters of credit | Up to three years |  | 174.2 |  |  | — |
Commercial customer financing arrangements | Up to six years |  | 75.5 |  |  | 11.9 |
Total |  |  | $ | 324.2 |  |  | $ | 11.9 |
The Company has guaranteed a portion of the residual values of certain leased assets, including one of its major distribution centers and two of its office buildings. The lease guarantees are for an amount up to $74.5 million while the fair value of the underlying assets is estimated at $101.8 million. The related assets would be available to satisfy the guarantee obligations and therefore it is unlikely the Company will incur any future loss associated with these guarantees. The Company has issued $174.2 million in standby letters of credit that guarantee future payments which may be required under certain insurance programs and in relation to certain environmental remediation activities described more fully in Note R, Contingencies. The Company provides various limited and full recourse guarantees to financial institutions that provide financing to U.S. and Canadian Mac Tool distributors and franchisees for their initial purchase of the inventory and trucks necessary to function as a distributor and franchisee. In addition, the Company provides limited and full recourse guarantees to financial institutions that extend credit to certain end retail customers of its U.S. Mac Tool distributors and franchisees. The gross amount guaranteed in these arrangements is $75.5 million and the $11.9 million carrying value of the guarantees issued is recorded in Other liabilities in the Consolidated Balance Sheets. The Company provides warranties on certain products across its businesses. The types of product warranties offered generally range from one year to limited lifetime. There are also certain products with no warranty. Further, the Company sometimes incurs discretionary costs to service its products in connection with product performance issues. Historical warranty and service claim experience forms the basis for warranty obligations recognized. Adjustments are recorded to the warranty liability as new information becomes available. The changes in the carrying amount of product warranties for the nine months ended October 1, 2022 and October 2, 2021 are as follows:
(Millions of Dollars) | 2022 |  | 2021
Balance beginning of period | $ | 134.5 |  |  | $ | 107.9 |
Warranties and guarantees issued | 117.0 |  |  | 108.9 |
Warranty payments and currency | (129.4) |  |  | (118.0) |
Balance end of period | $ | 122.1 |  |  | $ | 98.8 |

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- Definition The entire disclosure for each guarantee obligation, or each group of similar guarantee obligations, including (a) the nature of the guarantee, including its term, how it arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments (undiscounted) the guarantor could be required to make under the guarantee; (c) the current carrying amount of the liability, if any, for the guarantor's obligations under the guarantee; and (d) the nature of any recourse provisions under the guarantee, and any assets held either as collateral or by third parties, and any relevant related party disclosure. Excludes disclosures about product warranties. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 460 -URI https://asc.fasb.org/topic&trid=2155896 + Details
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