Archer Daniels Midland 2009 Annual Report Download - page 63

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Archer Daniels Midland Company
Notes to Consolidated Financial Statements (Continued)
Note 8.
Debt and Financing Arrangements (Continued)
In fiscal year 2008, the Company issued $3.10 billion of additional long-term debt, including $500 million of
debentures issued in December 2007, $700 million of notes issued in March 2008, and $1.75 billion of debentures
issued in June 2008 (the Debentures).
In connection with the issuance of the Debentures in June 2008, the Company issued $1.75 billion of Equity Units.
Equity Units are a combination of debt and forward purchase contract for the holder to purchase the Company’s
common stock. The debt and equity instruments are deemed to be separate instruments as the investor may transfer
or settle the equity instrument separately from the debt instrument.
The forward purchase contract will obligate the buyer to purchase from the Company, no later than June 1, 2011,
for a price of $50 in cash, the following number of shares of the Company’s common stock, subject to anti-dilution
adjustments:
• if the “Applicable Market Value” (AMV) of the Company’s common stock, which is the average
closing price of the Company’s common stock over the 20-trading day period ending on the third
trading day prior to June 1, 2011, equals or exceeds $47.83, 1.0453 shares of the Company’s common
stock;
• if the AMV is less than $47.83, but greater than $39.86, a number of shares of the Company’s common
stock having a value, based on the AMV, equal to $50; and
• if the AMV is less than or equal to $39.86, 1.2544 shares of the Company’s common stock.
The Debentures bear interest at a rate of 4.70% per year, payable quarterly and are due June 1, 2041. The
Debentures will be remarketed in 2011. If this remarketing is successful, the interest rate on the Debentures will be
reset, and thereafter interest will be payable semi-annually at the reset rate. In addition, following a successful
remarketing, the Company may modify certain terms of the Debentures including adjusting the frequency of
interest payments, adjusting the ranking of the Debentures or changing the stated maturity. If there has been no
successful remarketing, the interest rate on the Debentures will not be reset, and the holder of each Equity Unit will
have the right to put its interest in the Debentures to the Company on June 1, 2011 at a put price equal to 100% of
its principal amount plus accrued and unpaid interest. The proceeds of the put right will be deemed to have been
applied against the holder’s obligations under the forward purchase contracts.
The Company will also pay the Equity Unit holder quarterly contract adjustment payments at a rate of 1.55% per
year of the stated amount of $50 per Equity Unit, or $0.775 per year. The present value of the future contract
adjustment payments of $75 million, which is being paid over the three years from the date of issuance, is recorded
as a reduction to shareholders’ equity. The Company also recorded a $35 million decrease in shareholders’ equity
for issuance costs related to the equity portion of the Equity Units. The remaining issuance costs have been
allocated to the debt and will be recognized in earnings over the life of the debt.
The forward purchase contracts issued in connection with the issuance of the debentures in June 2008, will be
settled for the Company’s common stock on June 1, 2011. Until settlement of the forward purchase contract, the
shares of stock underlying each forward purchase contract are not outstanding. The forward purchase contracts will
only be included in the computation of diluted earnings per share to the extent they are dilutive. As of June 30,
2009, the forward purchase contracts were not considered dilutive and therefore not included in the computation of
diluted earnings per share. Basic earnings per share will not be affected until the forward purchase contracts are
settled and the holders thereof become stockholders.