Crucial 2012 Annual Report Download - page 64

63
Capital Lease Obligations
We have various capital lease obligations due in periodic installments through August 2050 with weighted-average
effective interest rates of 4.9% as of 2012 and 6.1% as of 2011. In 2012, we received $609 million in proceeds from equipment
sale-leaseback transactions and as a result recorded capital lease obligations aggregating $609 million at a weighted-average
effective interest rate of 4.2%, payable in periodic installments through August 2016. In 2011, we received $268 million in
proceeds from equipment sale-leaseback transactions and as a result recorded capital lease obligations aggregating $246 million
at a weighted-average effective interest rate of 5.4%, payable in periodic installments through May 2016.
2014 Notes
In May 2007, we issued $1.3 billion of the 2014 Notes due June 2014, of which $351 million was extinguished in 2011 in
connection with a debt restructure (see "Debt Restructure" below). The initial conversion rate of the 2014 Notes is 70.2679
shares of common stock per $1,000 principal amount, or approximately $14.23 per share. Interest is payable in June and
December of each year.
Conversion Rights: Holders may convert their 2014 Notes under the following circumstances: (1) during any calendar
quarter if the closing price of our common stock for at least 20 trading days in the 30 consecutive trading days ending on the
last trading day of the immediately preceding calendar quarter is more than 130% of the conversion price of the 2014 Notes
(approximately $18.50 per share); (2) if the 2014 Notes have been called for redemption; (3) if specified distributions or
corporate events occur, as set forth in the indenture for the 2014 Notes; (4) if the trading price of the 2014 Notes is less than
98% of the product of the closing price of our common stock and the conversion rate of the 2014 Notes during the periods
specified in the indenture; or (5) at any time on or after March 1, 2014.
We have the option to pay cash, issue shares of common stock or any combination thereof for the aggregate amount due
upon conversion. It is our current intent to settle the principal amount of the 2014 Notes in cash upon conversion. As a result,
upon conversion of the 2014 Notes, only the amounts payable in excess of the principal amounts of the 2014 Notes are
considered in diluted earnings per share under the treasury stock method.
Cash Redemption at Our Option: We may redeem for cash the 2014 Notes if the last reported sale price of our common
stock has been at least 130% of the conversion price (approximately $18.50 per share) for at least 20 trading days during any 30
consecutive trading-day period. The redemption price is the principal amount to be redeemed, plus accrued and unpaid interest.
Cash Repurchase at the Option of the Holder: Upon a change in control or a termination of trading, as defined in the
indenture, holders may require us to repurchase for cash all or a portion of their 2014 Notes at a repurchase price equal to the
principal amount, plus accrued and unpaid interest, if any.
2032C and 2032D Notes
On April 18, 2012, we issued $550 million of the 2032C Notes and $450 million of the 2032D Notes (collectively referred
to as the "2032 Notes"), each due May 2032. Issuance costs for the 2032 Notes totaled $21 million. The initial conversion rate
for the 2032C Notes is 103.8907 shares of common stock per $1,000 principal amount, equivalent to an initial conversion price
of approximately $9.63 per share of common stock. The initial conversion rate for the 2032D Notes is 100.1803 shares of
common stock per $1,000 principal amount, equivalent to an initial conversion price of approximately $9.98 per share of
common stock. Interest is payable in May and November of each year.
Upon issuance of the 2032 Notes, we recorded $805 million of debt, $191 million of additional capital and $17 million of
deferred debt issuance costs (included in other noncurrent assets). The amount recorded as debt is based on the fair value of the
debt component as a standalone instrument and was determined using an average interest rate for similar nonconvertible debt
issued by entities with credit ratings comparable to ours at the time of issuance (Level 2). The difference between the debt
recorded at inception and the principal amount ($104 million for the 2032C Notes and $92 million for the 2032D Notes) is
being accreted to principal as interest expense through May 2019 for the 2032C Notes and May 2021 for the 2032D Notes, the
expected life of the notes.