Henry Schein 2009 Annual Report Download - page 92

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HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except share and per share data)
80
Note 9 – Debt – (Continued)
The agreement governing our senior notes provides, among other things, that we will maintain on a
consolidated basis, certain leverage and priority debt ratios and a minimum net worth. The agreement also
contains restrictions relating to transactions with affiliates, annual dividends, mergers and acquisitions and
liens. The agreements limit the distribution of dividends without the prior written consent of the lenders
(limited to $25.0 million, plus 80% of cumulative net income, plus net proceeds from the issuance of
additional capital stock). As of December 26, 2009, the amount of retained earnings free of restrictions
was $962.6 million.
In 2004, we completed an issuance of $240.0 million of convertible debt. These notes are senior
unsecured obligations bearing a fixed annual interest rate of 3.0% and are due to mature on August 15,
2034. Interest on the notes is payable on February 15 and August 15 of each year. The notes are
convertible into our common stock at a conversion ratio of 21.58 shares per one thousand dollars of
principal amount of notes, which is equivalent to a conversion price of $46.34 per share, under the
following circumstances:
• if the price of our common stock is above 130% of the conversion price measured over a
specified number of trading days;
• during the five-business-day period following any 10-consecutive-trading-day period in which
the average of the trading prices for the notes for that 10-trading-day period was less than 98%
of the average conversion value for the notes during that period;
• if the notes have been called for redemption; or
• upon the occurrence of a fundamental change or specified corporate transactions, as defined in
the note agreement.
Upon conversion, we are required to satisfy our conversion obligation with respect to the principal
amount of the notes to be converted, in cash, with any remaining amount to be satisfied in shares of our
common stock. We currently have sufficient availability of funds through our $400.0 million revolving
credit facility (discussed above) along with cash on hand to fully satisfy our debt obligations, including the
cash portion of our convertible debt. We also will pay contingent interest during any six-month-interest
period beginning August 20, 2010, if the average trading price of the notes is above specified levels. We
may redeem some or all of the notes on or after August 20, 2010. The note holders may require us to
purchase all or a portion of the notes on August 15, 2010, 2014, 2019, 2024 and 2029 or, subject to
specified exceptions, upon a change of control event. If we are required by the note holders to purchase all
or a portion of the notes, we will use our existing credit line to fund such purchase; therefore, we have
classified our convertible debt as long-term in our consolidated balance sheet.
Effective December 28, 2008, we adopted the provisions of ASC Topic 470-20, “Debt with
Conversion and Other Options,” as it relates to our convertible debt. ASC Topic 470-20 requires that we
allocate the liability and equity components of the convertible debt and reflect our non-convertible debt
borrowing rate for the interest component of the convertible debt.