Black & Decker 2010 Annual Report Download - page 98

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to a maximum rate of 13.25%. Net proceeds of the issuance were used to partially finance the acquisitions of
Facom (January 1, 2006) and National (November 30, 2005).
In October 2008, the Company repurchased $34.3 million of the ETPS for $24.9 million in cash, and in
December 2008 the Trust was dissolved. Upon the dissolution of the Trust, the $0.1 million investment in the
unconsolidated Trust was unwound with a corresponding reduction in debt. Additionally the Company caused
the remaining $415.7 million of junior subordinated debt securities held by the Trust to be distributed to the
holders of ETPS in exchange for the ETPS upon dissolution of the Trust. A pre-tax gain of $9.4 million was
recognized pertaining to the partial extinguishment of this debt.
In May 2009, the Company repurchased $103.0 million of its junior subordinated debt securities for
$58.7 million in cash. The pre-tax gain recorded associated with this extinguishment was $43.8 million, and
the principal balance of the debt after this extinguishment and at January 2, 2010 was $312.7 million.
In December 2010, the Company redeemed the remaining junior subordinated debt at par without penalty.
Financing of the January 2007 HSM Acquisition
During 2007, the Company initially funded the $546.1 million HSM acquisition with a combination of short-
term borrowings and cash. A $500.0 million 364-day revolving credit bridge facility was entered into on
January 8, 2007, of which $130.0 million was utilized to acquire HSM; the remainder of the HSM purchase
price was funded through commercial paper borrowings and cash.
On March 20, 2007, the Company completed two security offerings: “Equity Units”, which consisted of
$330.0 million of convertible debt and $330.0 million of forward stock purchase contracts and $200.0 million
of unsecured notes (the “2010 Term Notes”). The $488.1 million net cash proceeds of these offerings and the
related financial instruments described below were used to pay down the short-term bridge facility and
commercial paper borrowings.
The 2010 Term Notes matured March 15, 2010.
Equity Units: On March 20, 2007, the Company issued 330,000 Equity Units, each with a stated value of
$1,000. The Equity Units are comprised of a senior convertible note (a “Convertible Note”) and a forward
common stock purchase contract (an “Equity Purchase Contract”). The Company received $320.1 million in
cash proceeds from the Equity Units offering, net of underwriting fees. These proceeds were used to repay
short-term borrowings and, along with $18.8 million in proceeds from the sale of stock warrants, to fund the
$49.3 million cost of the convertible notes hedge as more fully described below.
In November 2008, the Company repurchased $10.0 million of the Equity Units for $5.3 million in cash (the
“$10 Million Repurchase”). To properly account for the transaction, the Equity Unit elements were bifurcated
as effectively the Company paid $10.0 million to extinguish the Convertible Notes and received $4.7 million
from the seller to settle its obligation under the Equity Purchase Contracts. As further detailed below, the
Equity Purchase Contracts obligated the holder to purchase shares of the Company’s common stock on May 17,
2010. At the November 2008 repurchase date, the Company’s common stock had a closing market value of
$25.38. The remaining liability for Contract Adjustment Payment fees, as defined below, associated with the
$10.0 million of settled Equity Purchase Contracts was reversed, resulting in an increase to equity of
$0.7 million. The related $10.0 million in Convertible Note Hedges (the “Bond Hedge”) and Stock Warrants
were unwound with a nominal impact to equity. As a result of the $10 Million Repurchase, there was an
insignificant gain recorded in earnings and a net increase in equity of $5.4 million.
Equity Purchase Contracts:
The Equity Purchase Contracts obligated the holders to purchase on May 17, 2010, newly issued shares of the
Company’s common stock for $320.0 million in cash. Pursuant to that obligation 5,180,776 shares of common
stock were issued on the May 17, 2010 settlement date.
Holders of the Equity Purchase Contract were paid a quarterly contract adjustment payment (“Contract
Adjustment Payment”) of 5.125% per annum, and the first payment thereof was made August 17, 2007. The
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