Black & Decker 2015 Annual Report Download - page 84

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At January 2, 2016, the Company's carrying value of its $400.0 million 2053 Junior Subordinated Debentures includes a $2.7
million gain pertaining to the fair value adjustment of the fixed-to-floating interest rate swaps.
Unamortized gains and fair value adjustments associated with interest rate swaps are more fully discussed in Note I, Derivative
Financial Instruments.
Commercial Paper and Credit Facilities
At January 2, 2016, and January 3, 2015, the Company had no commercial paper borrowings outstanding against the Company’s
$2.0 billion commercial paper program.
In December 2015, the Company amended and restated its existing five-year $1.5 billion committed credit facility with the
concurrent execution of a new five-year $1.75 billion committed credit facility (the “Credit Agreement”). Borrowings under the
Credit Agreement may include U.S. Dollars up to the $1.75 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 December 18, 2020 or upon an earlier termination date of the Credit Agreement, at
the election of the Company. The Credit Agreement is designated to be a liquidity back-stop for the Company's $2.0 billion
commercial paper program. As of January 2, 2016, the Company has not drawn on this commitment.
In addition, the Company has short-term lines of credit that are primarily uncommitted, with numerous banks, aggregating
$743.8 million, of which $644.1 million was available at January 2, 2016. Short-term arrangements are reviewed annually for
renewal.
At January 2, 2016, the aggregate amount of committed and uncommitted, long- and short-term lines was $2.7 billion, of which
$2.5 million was recorded as short-term borrowings at January 2, 2016 excluding commercial paper borrowings outstanding. In
addition, $99.8 million of the short-term credit lines was utilized primarily pertaining to outstanding letters of credit for which
there are no required or reported debt balances. The weighted average interest rates on short-term borrowings, primarily
commercial paper, for the fiscal years ended January 2, 2016 and January 3, 2015 were 0.4% and 0.2%, respectively.
Equity Units
In December 2013, the Company issued 3,450,000 Equity Units (the “Equity Units”), each with a stated value of $100. The
Equity Units are initially comprised of a 1/10, or 10%, undivided beneficial ownership in a $1,000 principal amount 2.25%
junior subordinated note due 2018 (the “2018 Junior Subordinated Note”) and a forward common stock purchase contract (the
“Equity Purchase Contract”). The Company received approximately $334.7 million in cash proceeds from the Equity Units, net
of underwriting discounts and commissions, before offering expenses, and recorded $345.0 million in long-term debt. The
proceeds were used primarily to repay commercial paper borrowings. The Company also used $9.7 million of the proceeds to
enter into capped call transactions utilized to hedge potential economic dilution as described in more detail below.
Equity Purchase Contracts:
Each Equity Purchase Contract obligates the holders to purchase, on November 17, 2016, for a price of $100, between 1.0122
and 1.2399 shares of the Company’s common stock (subject to customary anti-dilution adjustments) or approximately 3.5 to
4.3 million common shares, respectively. As of January 2, 2016, due to customary anti-dilution provisions, the settlement rate
on the Equity Units Stock was 1.0140 (equivalent to a conversion price of approximately $98.62 per common share). If a
fundamental change occurs, in certain circumstances, the number of shares of common stock deliverable upon settlement of the
Equity Purchase Contracts will be increased by a make-whole amount, resulting in the issuance of a maximum of
approximately 6.1 million shares of common stock. Upon settlement of the Equity Purchase Contracts on November 17, 2016,
the Company will receive additional cash proceeds or debt extinguishment of $345.0 million. The Junior Subordinated 2018
Notes, described further below, are initially pledged as collateral to secure the holders’ obligations to purchase the Company’s
common stock under the terms of the Equity Purchase Contracts. Equity Purchase Contract holders may elect to settle their
obligations under the Equity Purchase Contracts early, in cash.
Holders of the Equity Purchase Contracts are paid contract adjustment payments (“Contract Adjustment Payments”) at a rate of
4.00% per annum, payable quarterly in arrears on February 17, May 17, August 17 and November 17 of each year,
commencing February 17, 2014. The $40.2 million present value of the Contract Adjustment Payments reduced Shareowners’
Equity upon issuance of the Equity Units and a related liability for the present value of the cash payments of $40.2 million was
recorded. As each quarterly Contract Adjustment Payment is made, the related liability is reduced and the difference between
the cash payment and the present value of the Contract Adjustment Payment of approximately $0.6 million is accreted to