Black & Decker 2012 Annual Report Download - page 46

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Credit Ratings and Liquidity:
The Company maintains strong investment grade credit ratings from the major U.S. rating agencies on its senior unsecured debt
(average A-), as well as its short-term commercial paper borrowings. There have been no changes to any of the ratings during
2012.
Failure to maintain strong investment grade rating levels could adversely affect the Company’s cost of funds, liquidity and
access to capital markets, but would not have an adverse effect on the Company’s ability to access committed credit facilities.
In March 2011, the Company entered into a new four year $1.2 billion committed credit facility (the “Credit Agreement”),
which replaced all formerly existing credit facilities. Borrowings under the Credit Agreement may include U.S. Dollars up to
the $1.2 billion commitment or in Euro or Pounds Sterling subject to a foreign currency sub-limit of $400.0 million and bear
interest at a floating rate dependent upon the denomination of the borrowing. Repayments must be made on March 11, 2015 or
upon an earlier termination date of the Credit Agreement, at the election of the Company. In July 2011, in connection with the
Niscayah acquisition, the Company entered into a $1.25 billion 364 day credit facility (“Facility”). The Facility decreased to
$750 million (as per the terms of the agreement) in December 2011 and was terminated in July 2012 with the concurrent
execution of a new $1.0 billion, 364 day committed credit facility. The new facility contains a 1 year term-out provision and
borrowings under the Credit Agreement may include U.S. Dollars up to the $1.0 billion commitment or in Euro or Pounds
Sterling subject to a foreign currency sub-limit of $400.0 million and bear interest at a floating rate dependent upon the
denomination of the borrowing. Repayments must be made by July 12, 2013 or upon an earlier termination date of the Credit
Agreement, at the election of the Company, unless the term-out provision is exercised. The Company has not drawn on either
of the commitments provided by the Facilities. These credit facilities are designated to be liquidity backstops for the Company's
$2.0 billion commercial paper program.
In the third quarter of 2011, the Company entered into a forward share purchase contract on its common stock, which obligated
the Company to pay $350.0 million, plus an additional amount related to the forward component of the contract, to the financial
institution counterparty not later than August 2013, or earlier at the Company’s option, for the 5,581,400 shares purchased.
The Company elected the early payment option and paid the $362.7 million to the counterparty in January 2013.
On July 25, 2012, the Company issued $750 million of junior subordinated debentures maturing on July 25, 2052 with fixed
interest payable quarterly in arrears at a rate of 5.75% per annum. The Company may, at its election, redeem the debentures in
whole or in part, at par on or after June 25, 2017. The debentures' subordination, long tenor and interest deferral features
provide significant credit protection measures for senior creditors and as a result, the debentures were awarded a 50% equity
credit by S&P and Fitch, and a 25% equity credit by Moody's. The net proceeds of $729 million from the offering was used for
general corporate purposes, including the repayment of short term debt and the refinancing of recent and near term debt
maturities.
In the third quarter of 2012, the Company repurchased $900 million of its long term debt via open market tender and exercise
of its right under the redemption provision of each notes. The initial funding of the repurchased debt was accomplished by
utilizing excess cash on hand and the issuance of Commercial Paper. The Company intends on refinancing a portion of its
outstanding Commercial Paper through the issuance of Long Term Debt in an amount similar to the amount of notes
repurchased.
Refer to Note H, Long-Term Debt and Financing Arrangement, and Note J, Capital Stock, in the Notes to Consolidated
Financial Statements in Item 8 for further discussion of the Company's financing arrangements.
Cash and cash equivalents totaled $716 million as of December 29, 2012, comprised of $99 million in the U.S. and $617
million in foreign jurisdictions. As of December 31, 2011 cash and cash equivalents totaled $907 million, comprised of $82
million in the U.S. and $825 million in foreign jurisdictions. Concurrent with the Black & Decker merger, the Company made a
determination to repatriate certain legacy Black & Decker foreign earnings, on which U.S. income taxes had not previously
been provided. As a result of this repatriation decision, the Company has recorded approximately $436.9 million of associated
deferred tax liabilities at December 29, 2012. Current plans and liquidity requirements do not demonstrate a need to repatriate
other foreign earnings. Accordingly, all other undistributed foreign earnings of the Company are considered to be permanently
reinvested, or will be remitted substantially free of additional tax, consistent with the Company’s overall growth strategy
internationally, including acquisitions and long-term financial objectives. No provision has been made for taxes that might be
payable upon remittance of these undistributed foreign earnings. However, should management determine at a later point to
repatriate additional foreign earnings, the Company would be required to accrue and pay taxes at that time.