Black & Decker 2012 Annual Report Download - page 45

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Net financial instrument investing inflows were $6 million in 2012, compared to outflows of $39 million in 2011 and inflows
of $45 million in 2010, pertaining to net investment hedge activity and $30 million of interest rate swap terminations in 2010
following the Merger.
Financing Activities: Cash flow used by financing activities was $1.337 billion in 2012 and $371.8 million in 2011, compared
to cash flows provided by financing activities of $313.6 million in 2010.
Payments on long-term debt totaled $1.422 billion, $403.2 million and $515.8 million in 2012, 2011 and 2010, respectively.
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 the second quarter of 2012. The 2011 repayments pertain to $400
million of term notes that matured in June 2011. The 2010 repayments primarily relate to the maturing of the $200 million term
notes and the $313 million of payments associated with the remarketing of the Convertible Notes. Net repayments of short-term
borrowings totaled $19.1 million, $199.4 million and $263.6 million in 2012, 2011 and 2010, respectively.
Proceeds from issuances of long-term debt totaled $1.524 billion, $421.0 million and $1.009 billion in 2012, 2011 and 2010,
respectively. In November 2012, the Company issued $800 million of senior unsecured term notes with a fixed annual rate of
2.90% and received $793.9 million of net proceeds. The Company also issued $750.0 million of junior subordinated
debentures in the third quarter of 2012 and received $729.4 million of net proceeds. In November 2011, the Company issued
$400 million of senior unsecured term notes with a 3.40% fixed coupon rate and received $399.6 million in proceeds. The
Company used these proceeds to pay down commercial paper. In 2010, the Company received debt proceeds of $396.2 million
relating to the $400 million in senior unsecured term bonds with a 5.20% fixed coupon rate. In connection with this debt
offering, the Company paid $48 million for the termination of two forward starting floating-to-fixed interest rate swaps. In
2010, the Company also completed a security offering of Convertible Preferred Units, which consisted of $632.5 million of
eight-year junior subordinated notes bearing interest at an initial fixed rate of 4.25% per annum and $632.5 million of five-year
forward Purchase Contracts that obligate investors to purchase 6,325,000 shares of the Company’s 4.75% Series B Convertible
Preferred Stock for a price of $100 per share on November 17, 2015. Simultaneous with this offering, the Company entered
into capped call transactions (equity options) and paid a total premium of $50.3 million. Refer to Note H, Long-Term Debt and
Financing Arrangements, further information regarding the Company's financing arrangements.
In 2012, the Company purchased from certain financial institutions over the counter “out-of-the-money” capped call options,
subject to adjustments for standard anti-dilution provisions, on 10,094,144 shares of its common stock for an aggregate
premium of $29.5 million, or an average of $2.92 per share. The purpose of the capped call options is to reduce share price
volatility on potential future share repurchases. Refer to Note J, Capital Stock, for further discussion.
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
$45.5 million. Refer to Note H, Long-Term Debt and Financing Arrangements, for further discussion of the debt
extinguishment. During 2012, the Company also received $58.2 million from the termination of interest rate swaps and paid
$102.6 million in relation to the termination of forward starting interest rate swaps. Refer to Note I, Derivative Financial
Instruments, for further discussion.
The Company repurchased $1.074 billion, $11.1 million and $4.9 million of common stock in 2012, 2011 and 2010,
respectively. In December 2012, the Company executed an accelerated share repurchase ("ASR") contract of $850 million,
which was funded using proceeds from the sale of HHI. The ASR contract terms allowed for an initial delivery of 9.3 million
shares, or the equivalent of 80% of the notional value of the contract. The final delivery of the remaining shares under the
program is expected to be completed during the second quarter of 2013. The total amount of shares to be ultimately delivered,
and therefore, the average price paid per share, will be determined at that time. The Company also repurchased approximately
3.0 million shares of common stock during the second quarter of 2012 for $200 million. Proceeds from the issuance of
common stock totaled $126.4 million, $119.6 million and $396.1 million in 2012, 2011 and 2010, respectively. The amounts
received in 2012 and 2011 mainly relate to the exercise of stock options. The Company received $320 million of cash proceeds
in 2010 from the settlement of the forward stock purchase contracts element of the Equity Units that were issued by the
Company in March 2007.
Cash payments for dividends were $304.0 million, $275.9 million and $201.6 million in 2012, 2011 and 2010, respectively.
The increase in cash dividends in 2012 was primarily attributable to the increase in dividends per common share to $0.49 per
share, as announced in July 2012. The dividend paid to shareholders of record in December 2012 extended the Company's
record for the longest consecutive annual and quarterly dividend payments among industrial companies listed on the New York
Stock Exchange. The increase in 2011 cash dividend payments versus 2010 was attributable to a previous increase in
dividends per common share to $0.41 per share from $0.34 in 2011.