Archer Daniels Midland 2007 Annual Report Download - page 39

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31
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
increase in the conversion rate, subject to a stated maximum amount. In addition, in the event of a change in
control, the holders may require the Company to purchase all or a portion of their Notes at a purchase price equal to
100% of the principal amount of the Notes, plus accrued and unpaid interest, if any.
Concurrent with the issuance of the Notes, the Company purchased call options in private transactions at a cost of
$299 million. The purchased call options allow the Company to receive shares of its common stock and/or cash
from the counterparties equal to the amounts of common stock and/or cash related to the excess of the current
market price of the Company’s common stock over the exercise price of the purchased call options. In addition, the
Company sold warrants in private transactions to acquire, subject to customary anti-dilution adjustments, 26.3
million shares of its common stock at an exercise price of $62.56 per share and received proceeds of $170 million.
If the average price of the Company’s common stock during a defined period ending on or about the respective
settlement dates exceeds the exercise price of the warrants, the warrants will be settled, at the Company’s option, in
cash or shares of common stock. The purchased call options and warrants are intended to reduce the potential
dilution upon future conversions of the Notes by effectively increasing the initial conversion price to $62.56 per
share.
Upon closing of the sale of the Notes, $370 million of the net proceeds from the Note issuance and the proceeds
from the warrant transactions were used to repurchase 10.3 million shares of the Company’s common stock under
the Company’s stock repurchase program.
As of June 30, 2007, none of the conditions permitting conversion of the Notes had been satisfied. In addition, as
of June 30, 2007, the market price of the Company’s common stock was not greater than the exercise price of the
purchased call options or warrants.
Contractual Obligations and Off-Balance Sheet Arrangements
In the normal course of business, the Company enters into contracts and commitments which obligate the Company
to make payments in the future. The following table sets forth the Company’s significant future obligations by time
period. Purchases include commodity-based contracts entered into in the normal course of business, which are
further described in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” energy-related
purchase contracts entered into in the normal course of business, and other purchase obligations related to the
Company’s normal business activities. Where applicable, information included in the Company’s consolidated
financial statements and notes is cross-referenced in this table.