Archer Daniels Midland 2009 Annual Report Download - page 64

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Archer Daniels Midland Company
Notes to Consolidated Financial Statements (Continued)
Note 8.
Debt and Financing Arrangements (Continued)
In February 2007, the Company issued $1.15 billion principal amount of convertible senior notes due in 2014 (the
Notes) in a private placement. The Notes were issued at par and bear interest at a rate of 0.875% per year, payable
semiannually. The Notes are convertible based on a conversion rate of 22.8423 shares per $1,000 principal amount
of Notes (which is equal to a conversion price of approximately $43.78 per share). The Notes may be converted,
subject to adjustment, only under the following circumstances: 1) during any calendar quarter beginning after
March 31, 2007, if the closing price of the Company’s common stock for at least 20 trading days in the 30
consecutive trading days ending on the last trading day of the immediately preceding quarter is more than 140% of
the applicable conversion price per share, which is $1,000 divided by the then applicable conversion rate, 2) during
the five consecutive business day period immediately after any five consecutive trading day period (the note
measurement period) in which the average of the trading price per $1,000 principal amount of Notes was equal to
or less than 98% of the average of the product of the closing price of the Company’s common stock and the
conversion rate at each date during the note measurement period, 3) if the Company makes specified distributions
to its common stockholders or specified corporate transactions occur, or 4) at any time on or after January 15, 2014,
through the business day preceding the maturity date. Upon conversion, a holder would receive an amount in cash
equal to the lesser of 1) $1,000 and 2) the conversion value, as defined. If the conversion value exceeds $1,000, the
Company will deliver, at the Company’s election, cash or common stock or a combination of cash and common
stock for the conversion value in excess of $1,000. If the Notes are converted in connection with a change in
control, as defined, the Company may be required to provide a make-whole premium in the form of an 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. The net cost of the purchased call options and warrant transactions of $130 million was recorded as a
reduction of shareholders’ equity. The Company also recorded a $114 million increase in shareholders’ equity for
the deferred tax asset recognized related to the purchased call options.
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, 2009, none of the conditions permitting conversion of the Notes had been satisfied. In addition, as
of June 30, 2009, the market price of the Company’s common stock was not greater than the exercise price of the
purchased call options or warrants. As of June 30, 2009, no share amounts related to the conversion of the Notes or
exercise of the warrants are included in diluted average shares outstanding.