Black & Decker 2015 Annual Report Download - page 96

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OTHER EQUITY 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 $73.5 million,
or an average of $6.03 per share. The purpose of the capped call options is to hedge the risk of stock price appreciation between
the lower and upper strike prices of the capped call options for a future share repurchase. In accordance with ASC 815-40 the
premium paid was recorded as a reduction of Shareowners’ equity. 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 April 2016 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 February 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. As of January 2, 2016, due to customary market
adjustments, the lower and upper strike prices of the remaining options are $85.91 and $106.36, respectively. The aggregate fair
value of the remaining options at January 2, 2016 was $48.5 million. In February 2016, the Company net-share settled the
remaining 3.1 million capped call options on its common stock and received 293,142 shares using an average reference price of
$94.34 per common share. Additionally, the Company purchased 1,316,858 shares directly from the counterparty participating
in the net-share settlement for $124.2 million. The Company also repurchased 2,446,287 shares of common stock in February
2016 for $230.9 million, equating to an average price of $94.34.
In December 2012, the Company entered into a forward starting accelerated share repurchase (“ASR”) contract with certain
financial institutions to purchase $850.0 million of the Company's common stock. The Company paid $850.0 million to the
financial institutions and received an initial delivery of 9.3 million shares, which reduced the Company's shares outstanding at
December 29, 2012. The value of the initial shares received on the date of purchase was $680.0 million, reflecting a $72.76
price per share which was recorded as a treasury share purchase for purposes of calculating earnings per share. In accordance
with ASC 815-40, the Company recorded the remaining $170.0 million as a forward contract indexed to its own common stock
in additional paid in capital. In April 2013, the Company settled the contract and received 1.6 million shares determined by the
average price per share paid by the financial institutions during the purchase period. The average price is calculated using the
volume weighted average price ("VWAP") of the Company's stock (inclusive of a VWAP discount) during that period.
In November 2012, the Company purchased from certain financial institutions “out-of-the-money” capped call options, subject
to adjustments for standard anti-dilution provisions, on 10.1 million 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 was to reduce share price volatility on
potential future share repurchases. In accordance with ASC 815-40 the premium paid was recorded as a reduction of
Shareowners’ equity. The average lower strike price was $71.43 and the average upper strike price was $79.75, subject to
customary market adjustments. The capped call options were net-share settled and the Company received 0.6 million shares in
April 2013. The Company recorded the receipt of treasury shares at fair value upon settlement.
Equity Units and Capped Call Transactions
As described more fully in Note H, Long-Term Debt and Financing Arrangements, in December 2013, the Company issued
Equity Units comprised of $345.0 million of Notes and Equity Purchase Contracts. The Equity Purchase Contracts obligate the
holders to purchase on November 17, 2016, for $100, between 1.0122 and 1.2399 shares of the Company’s common stock,
which are equivalent to an initial settlement price of $98.80 and $80.65, respectively, per share of common stock. 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). Upon the November 17, 2016 settlement date,
the Company will issue approximately 3.5 to 4.3 million shares of common stock, subject to customary anti-dilution
adjustments, and expects to receive additional cash proceeds of $345.0 million. 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 the make-whole amount, resulting in the issuance of a maximum of approximately 6.1 million shares of common
stock. Holders may elect to settle their Equity Purchase Contracts early in cash prior to November 17, 2016.