Fluor 2013 Annual Report Download - page 131

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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
101 percent of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase.
The company is generally not limited under the indenture governing the 2011 Notes in its ability to incur
additional indebtedness provided the company is in compliance with certain restrictive covenants,
including restrictions on liens and restrictions on sale and leaseback transactions.
In February 2004, the company issued $330 million of 1.5% Convertible Senior Notes (the ‘‘2004
Notes’’) due February 15, 2024 and received proceeds of $323 million, net of underwriting discounts. In
December 2004, the company irrevocably elected to pay the principal amount of the 2004 Notes in cash.
Interest on the 2004 Notes is payable semi-annually on February 15 and August 15 of each year. The 2004
Notes are convertible into shares of the company’s common stock par value $0.01 per share, at a
conversion rate of 36.6729 shares per each $1,000 principal amount of the 2004 Notes, subject to
adjustment as described in the indenture. The 2004 Notes are convertible during any fiscal quarter if the
closing price of the company’s common stock for at least 20 trading days in the 30 consecutive trading
day-period ending on the last trading day of the previous fiscal quarter is greater than or equal to
130 percent of the conversion price in effect on that 30th trading day (the ‘‘trigger price’’). The trigger price
is currently $35.45, but is subject to adjustment as outlined in the indenture. The trigger price condition
was satisfied during the fourth quarter of 2013 and 2012 and the 2004 Notes were therefore classified as
short-term debt as of December 31, 2013 and 2012, respectively.
Holders of the 2004 Notes were entitled to require the company to purchase all or a portion of their
2004 Notes on February 17, 2009 and February 15, 2014 at 100 percent of the principal amount plus
accrued and unpaid interest; a de minimis amount of 2004 Notes were tendered for purchase. Holders of
the 2004 Notes will again be entitled to have the company purchase their 2004 Notes at the same price on
February 15, 2019. The 2004 Notes are currently redeemable at the option of the company, in whole or in
part, at 100 percent of the principal amount plus accrued and unpaid interest. In the event of a change of
control of the company, each holder may require the company to repurchase the 2004 Notes for cash, in
whole or in part, at 100 percent of the principal amount plus accrued and unpaid interest.
Pursuant to the requirements of ASC 260-10, ‘‘Earnings per Share,’’ the company includes in the
diluted EPS computations, based on the treasury stock method, shares that may be issuable upon
conversion of the 2004 Notes. On December 30, 2004, the company irrevocably elected to pay the principal
amount of the 2004 Notes in cash, and therefore there is no dilutive impact on EPS unless the average
stock price exceeds the conversion price of $27.27. Upon conversion, shares of the company’s common
stock are issued to satisfy any appreciation between the conversion price and the market price on the date
of conversion. During 2013, holders converted $0.1 million of the 2004 Notes in exchange for the principal
balance owed in cash plus 1,562 shares of the company’s common stock. During 2012, holders converted
$1 million of the 2004 Notes in exchange for the principal balance owed in cash plus 18,899 shares of the
company’s common stock.
The company applies the provisions of ASC 470-20, ‘‘Debt with Conversion and Other Options.’’
ASC 470-20 requires the issuer of a convertible debt instrument to separately account for the liability and
equity components in a manner that reflects the entity’s nonconvertible debt borrowing rate when interest
expense is recognized in subsequent periods.
The following table presents information related to the liability and equity components of the 2004
Notes:
December 31,
(in thousands) 2013 2012
Carrying value of the equity component $19,519 $19,519
Principal amount and carrying value of the liability component 18,398 18,472
F-32