Graco 2010 Annual Report Download - page 65

Newell Rubbermaid Inc. 2010 Annual Report
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NEWELL RUBBERMAID 2010 Annual Report 61
in accounts receivable, net in the Company’s Consolidated Balance Sheet at December 31, 2010. The amount that may be
borrowed under the Receivables Facility is subject to various limitations based on the character of the receivables owned by
the financing subsidiary. As of December 31, 2010, the Company had outstanding borrowings under the Receivables Facility
of $100.0 million, which are classified as short-term debt, and the Company had $100.0 million available for borrowing under
the Receivables Facility. The $100.0 million of outstanding borrowings under the Receivables Facility at December 31, 2010
bear interest at a weighted-average rate of 1.3%.
Under a 2001 receivables facility with a financial institution, the Company created a financing entity that is consolidated in
the Company’s financial statements. Under this facility, the Company regularly entered into transactions with the financing
entity to sell an undivided interest in substantially all of the Company’s U.S. trade receivables to the financing entity. In
September 2006, in accordance with the terms of the facility, the financing entity caused its outstanding preferred debt
securities which were owned by the Company to be exchanged for a two-year floating rate note in an aggregate principal
amount of $448.0 million (the “Note”) and other consideration. In 2008 the maturity date of the Note was extended from
September 2008 to September 2009, and the Note was repaid in September 2009, at which time the Company was able to
access the financing entity’s receivables that secured the Note.
Revolving Credit Facility and Commercial Paper
On November 14, 2005, the Company entered into a syndicated revolving credit facility (the “Revolver”). The Company currently
has $665.0 million available for borrowing under the Revolver, which expires in November 2012. At December 31, 2010 and 2009,
there were no borrowings under the Revolver. The Revolver permits the Company to borrow funds on a variety of interest rate
terms. The Revolver requires, among other things, that the Company maintain certain interest coverage and total indebtedness
to total capital ratios, as defined in the agreement. The Revolver also limits the amount of indebtedness subsidiaries may incur.
As of December 31, 2010, the Company was in compliance with the provisions of the agreement governing the Revolver.
In lieu of borrowings under the Revolver, the Company may issue up to $665.0 million of commercial paper. The Revolver provides
the committed backup liquidity required to issue commercial paper; however, access to the commercial paper markets is dependent
on the Company’s short-term debt credit ratings. Accordingly, commercial paper may be issued only up to the amount available
for borrowing under the Revolver. As of December 31, 2010, the Company had outstanding commercial paper obligations of
$34.0 million, and there was no commercial paper outstanding as of December 31, 2009. The Revolver also provides for the
issuance of up to $100.0 million of standby letters of credit so long as there is a sufficient amount available for borrowing under
the Revolver. There were no standby letters of credit issued or outstanding under the Revolver as of December 31, 2010 and 2009.
Junior Convertible Subordinated Debentures
In 1997, a 100% owned finance subsidiary (the “Subsidiary”) of the Company issued 10.0 million shares of 5.25% convertible preferred
securities (the “Preferred Securities”). Holders of the Preferred Securities are entitled to cumulative cash dividends of 5.25% of
the liquidation preference of $50 per Preferred Security, or $2.625 per year. Each of these Preferred Securities is convertible into
0.9865 of a share of the Company’s common stock. During 2005 and 2004, the Company purchased an aggregate of 1.6 million
shares of its Preferred Securities from holders at an average price of $45.27 per share ($71.3 million). As of December 31, 2010,
the Company fully and unconditionally guarantees the 8.4 million shares of the Preferred Securities issued by the Subsidiary that
were outstanding as of that date, which are callable at 100% of the liquidation preference of $421.2 million.
The proceeds received by the Subsidiary from the issuance of the Preferred Securities were invested in the Company’s 5.25%
Junior Convertible Subordinated Debentures (the “Debentures”). In addition, the Subsidiary received approximately $15.5 million
of the Company’s Debentures as payment for $15.5 million the Company borrowed from the Subsidiary to purchase 100% of the
common equity interests in the Subsidiary. As a result, the Company issued an aggregate of $515.5 million of Debentures, and the
Subsidiary is the sole holder of the Debentures. The Debentures are the sole assets of the Subsidiary, mature on December 1,
2027, bear interest at an annual rate of 5.25%, are payable quarterly and became redeemable by the Company beginning in
December 2001. The Company may defer interest payments on the Debentures for a period of up to 20 consecutive quarters,
during which period distribution payments on the Preferred Securities are also deferred. Under this circumstance, the Company
may not declare or pay any cash distributions with respect to its common or preferred stock or debt securities that do not rank
senior to the Debentures. The Preferred Securities are mandatorily redeemable upon the repayment of the Debentures at
maturity or upon acceleration of the Debentures. As of December 31, 2010, the Company has not elected to defer interest
payments. In connection with the Company’s purchase of the Preferred Securities in 2005 and 2004, the Company negotiated
the early retirement of the corresponding Debentures with the Subsidiary. The Company accounted for these transactions as
extinguishments of debt, which resulted in $436.7 million of Debentures outstanding as of December 31, 2010.
FOOTNOTE 10
CONVERTIBLE NOTE HEDGE AND WARRANT TRANSACTIONS
In connection with the issuance of the Convertible Notes in March 2009, the Company entered into separate convertible note
hedge transactions and warrant transactions with respect to the Company’s common stock to minimize the impact of the potential
dilution upon conversion of the Convertible Notes. The Company purchased call options in private transactions to cover 40.1 million
shares of the Company’s common stock at a strike price of $8.61 per share, subject to adjustment in certain circumstances, for
$69.0 million. The call options generally allowed the Company to receive shares of the Company’s common stock from counterparties
equal to the number of shares of common stock payable to the holders of the Convertible Notes upon conversion. The Company
also sold warrants permitting the purchasers to acquire up to 40.1 million shares of the Company’s common stock at an exercise
price of $11.59 per share, subject to adjustment in certain circumstances, in private transactions for total proceeds of $32.7 million.