Black & Decker 2014 Annual Report Download - page 45

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outstanding shares of Niscayah. The higher capital expenditures in 2012 was mainly due to several consolidations of
distribution centers.
Financing Activities: Cash flows used in financing activities were $766 million in 2014 compared to cash flows provided by
financing activities of $156 million in 2013 and cash flows used in financing activities of $1.337 billion in 2012.
Payments on long-term debt totaled $47 million, $302 million and $1.422 billion in 2014, 2013 and 2012, respectively. The
2014 payments relate to the repurchase of $46 million of 2022 Term Notes. The 2013 payments relate to the repurchase of
$300 million of Black & Decker Corporation 5.75% senior notes, which resulted in the Company paying a premium on the debt
extinguishment of $43 million. The 2012 payments primarily relate to the repurchase of three debt instruments with total
outstanding principal of $900 million, which resulted in the Company paying a premium on the debt extinguishment of $91
million. The Company also repaid $320 million of its Convertible Notes at maturity, in cash, during 2012. The Company had
net repayments of short-term borrowings totaling $391 million in 2014, net short-term borrowings of $389 million in 2013 and
net short-term repayments of $19 million in 2012.
Proceeds from issuances of long-term debt totaled $727 million and $1.524 billion in 2013 and 2012, respectively. In
December 2013, the Company issued $400 million of 5.75% fixed-to-floating junior subordinated debentures bearing interest at
a fixed rate of 5.75% and received $392.0 million of net proceeds. Additionally, the Company issued 3,450,000 Equity Units
comprised of a 1/10, or 10%, undivided beneficial ownership in a $1,000 principal amount 2.25% junior subordinated note due
2018 and a forward common stock purchase contract in which the Company received $335 million in cash proceeds from the
Equity Units, net of underwriting discounts and commission, before offering expenses, and recorded $345 million in long-term
debt. The proceeds were used primarily to repay commercial paper borrowings. In November 2012, the Company issued $800
million of senior unsecured term notes with a fixed annual rate of 2.90% and received $794 million of net proceeds. The
Company also issued $750 million of junior subordinated debentures in the third quarter of 2012 and received $729 million of
net proceeds. The Company used these proceeds to pay down commercial paper. Refer to Note H, Long-Term Debt and
Financing Arrangements, for further information regarding the Company's financing arrangements.
In November 2013, the Company purchased from certain financial institutions “out-of-the-money” capped call options on 12.2
million shares of its common stock (subject to customary anti-dilution adjustments) for an aggregate premium of $74 million,
or an average of $6.03 per share. The contracts for the options provide that they may, at the Company’s election, subject to
certain conditions, be cash settled, physically settled, modified-physically settled, or net-share settled (the default settlement
method). The capped call options have various expiration dates ranging from July 2015 through September 2016 and initially
had an average lower strike price of $86.07 and an average upper strike price of $106.56, subject to customary market
adjustments. In addition, contemporaneously with the issuance of the Equity Units described above and in Note J, Capital
Stock, the Company paid $10 million, or an average of $2.77 per option, to enter into capped call transactions on 3.5 million
shares of common stock with a major financial institution. The lower strike price is $98.80 and the upper strike price is
$112.91. In 2012, the Company purchased from certain financial institutions over the counter “out-of-the-money” capped call
options, subject to adjustments for customary anti-dilution adjustments, on 10.1 million shares of its common stock for an
aggregate premium of $30 million, or an average of $2.92 per share. The capped call options were net-share settled and the
Company received 0.6 million shares in April 2013. The purpose of the capped call options was to reduce share price volatility
on potential future share repurchases. On February 10, 2015, the Company net-share settled 9.1 million of the 12.2 million
capped call options on its common stock and received 911,077 shares using an average reference price of $96.46 per common
share. Additionally, the Company purchased directly from the counterparties participating in the net-share settlement, 3,381,162
shares for $326.1 million, equating to an average price of $96.46 per share. Refer to Note J, Capital Stock, for further
discussion.
During 2013, the Company paid a $43 million premium to extinguish $300 million of its Black & Decker Corporation 5.75%
senior notes due 2016. This premium was offset by gains of $12 million related to the release of fair value adjustments made in
purchase accounting, $8 million from the recognition of gains on previously terminated derivatives and $2 million of accrued
interest, resulting in a net pre-tax loss of $21 million. Additionally, as noted above, during 2012, the Company repurchased
$900 million of outstanding debt by initiating an open market tender offer and paid a premium of $91 million to extinguish the
notes. This premium was offset by gains of $35 million from fair value adjustments made in purchase accounting and $11
million from terminated derivatives, resulting in a net pre-tax loss of $46 million. Refer to Note H, Long-Term Debt and
Financing Arrangements, for further discussion of the debt extinguishments.
In 2014, the Company terminated $400 million of interest rate swaps hedging the Company's $400 million 5.20% notes due
2053, which resulted in cash payments of $33.4 million. During 2012, the Company received $58 million from the termination
of interest rate swaps and paid $103 million in relation to the termination of forward starting interest rate swaps. Refer to Note
I, Derivative Financial Instruments, for further discussion.