Tyson Foods 2009 Annual Report Download - page 55

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during any fiscal quarter after December 27, 2008, if the last reported sale price of our Class A stock for at least 20 trading
days during a period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter is at least
130% of the applicable conversion price on
each applicable trading day (which would currently require our shares to trade at
or above $21.96); or
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during the five business days after any 10 consecutive trading days (measurement period) in which the trading price per
$1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last
reported sale price of our Class A stock and the applicable conversion rate on each such day; or
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upon the occurrence of specified corporate events as defined in the supplemental indenture.
On and after July 15, 2013, until the close of business on the second scheduled trading day immediately preceding the maturity date,
holders may convert their notes at any time, regardless of the foregoing circumstances. Upon conversion, we will deliver cash up to
the aggregate principal amount of the 2013 Notes to be converted and shares of our Class A stock in respect of the remainder, if any,
of our conversion obligation in excess of the aggregate principal amount of the 2013 Notes being converted. As of October 3, 2009,
none of the conditions permitting conversion of the 2013 Notes had been satisfied.
The 2013 Notes were accounted for as a combined instrument. Accordingly, we accounted for the entire agreement as one debt
instrument because the conversion feature does not meet the requirements to be accounted for separately as a derivative financial
instrument.
In connection with the issuance of the 2013 Notes, we entered into separate convertible note hedge transactions with respect to our
common stock to minimize the potential economic dilution upon conversion of the 2013 Notes. We also entered into separate warrant
transactions. We recorded the purchase of the note hedge transactions as a reduction to capital in excess of par value, net of $36
million pertaining to the related deferred tax asset, and we recorded the proceeds of the warrant transactions as an increase to capital
in excess of par value. Subsequent changes in fair value of these instruments are not recognized in the financial statements as long as
the instruments continue to meet the criteria for equity classification.
We purchased call options in private transactions for $94 million that permit us to acquire up to approximately 27 million shares of
our Class A stock at an initial strike price of $16.89 per share, subject to adjustment. The call options allow us to acquire a number of
shares of our Class A stock initially equal to the number of shares of Class A stock issuable to the holders of the 2013 Notes upon
conversion. These call options will terminate upon the maturity of the 2013 Notes.
We sold warrants in private transactions for total proceeds of $44 million. The warrants permit the purchasers to acquire up to
approximately 27 million shares of our Class A stock at an initial exercise price of $22.31 per share, subject to adjustment. The
warrants are exercisable on various dates from January 2014 through March 2014.
The maximum amount of shares that may be issued to satisfy the conversion of the 2013 Notes is limited to 35.9 million
shares. However, the convertible note hedge and warrant transactions, in effect, increase the initial conversion price of the 2013
Notes from $16.89 per share to $22.31 per share, thus reducing the potential future economic dilution associated with conversion of
the 2013 Notes. If our share price is below $22.31 upon conversion of the 2013 Notes, there is no economic net share impact. Upon
conversion, a 10% increase in our share price above the $22.31 conversion price would result in the issuance of 2.5 million
incremental shares. The 2013 Notes and the warrants could have a dilutive effect on our earnings per share to the extent the price of
our Class A stock during a given measurement period exceeds the respective exercise prices of those instruments. The call options are
excluded from the calculation of diluted earnings per share as their impact is anti-dilutive.
2014 Notes
In March 2009, we issued $810 million of senior unsecured notes, which will mature in March 2014. The 2014 Notes carry a 10.50%
interest rate, with interest payments due semi-annually on March 1 and September 1. After the original issue discount of $59 million,
based on an issue price of 92.756% of face value, we received net proceeds of $751 million. In addition, we incurred offering
expenses of $18 million. We used the net proceeds towards the repayment of our borrowings under our former accounts receivable
securitization facility and for other general corporate purposes. We also placed $234 million of the net proceeds in a blocked cash
collateral account which is used for the payment, prepayment, repurchase or defeasance of the 2010 Notes. At October 3, 2009, we
had $140 million remaining in the blocked cash collateral account. The remaining proceeds are recorded in Current Assets as
Restricted Cash in the Consolidated Condensed Balance Sheets. The 2014 Notes are fully and unconditionally guaranteed by
substantially all of our domestic subsidiaries.