Crucial 2013 Annual Report Download - page 79

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2033E and 2033F Notes
On February 12, 2013, we issued $300 million of Convertible Senior Notes due February 2033 (the "2033E Notes") and
$300 million of Convertible Senior Notes due February 2033 (the "2033F Notes" and together with the 2033E Notes, the "2033
Notes"). Issuance costs for the 2033 Notes totaled $16 million. The initial conversion rate for the 2033 Notes is 91.4808
shares of common stock per $1,000 principal amount, equivalent to an initial conversion price of approximately $10.93 per
share of common stock. Interest is payable in February and August of each year.
Upon issuance of the 2033 Notes, we recorded $526 million of debt, $72 million of additional capital and $14 million of
deferred debt issuance costs (included in other noncurrent assets). The amount recorded as debt was 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 fair value measurements). The
difference between the debt recorded at inception and the principal amount ($31 million for the 2033E Notes and $43 million
for the 2033F Notes) is being accreted to principal as interest expense through February 2018 for the 2033E Notes and
February 2020 for the 2033F Notes, the expected life of the notes.
Conversion Rights: Holders may convert their 2033 Notes under the following circumstances: (1) if the 2033 Notes are
called for redemption; (2) 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 preceding calendar quarter is more than 130% of the
conversion price (approximately $14.21 per share) of the 2033 Notes; (3) if the trading price of the 2033 Notes is less than 98%
of the product of the closing price of our common stock and the conversion rate of the 2033 Notes during the periods specified
in the indenture; (4) if specified distributions or corporate events occur, as set forth in the indenture for the 2033 Notes; or (5) at
any time after November 15, 2032.
Upon conversion, we will pay cash equal to the lesser of the aggregate principal amount and the conversion value of the
notes being converted and cash, shares of common stock or a combination of cash and shares of common stock, at our option,
for any remaining conversion obligation. As a result, upon conversion of the 2033 Notes, only the amounts payable in excess
of the principal amounts of the 2033 Notes are considered in diluted earnings per share under the treasury stock method.
Cash Redemption at Our Option: We may redeem for cash the 2033E Notes on or after February 20, 2018 and the 2033F
Notes on or after February 20, 2020. The redemption price will equal the principal amount plus accrued and unpaid interest.
Cash Repurchase at the Option of the Holder: We may be required by the holders of the 2033 Notes to repurchase for
cash all or a portion of the 2033E Notes on February 15, 2018 and on February 15, 2023 and all or a portion of the 2033F Notes
on February 15, 2020 and on February 15, 2023. The repurchase price is equal to the principal amount plus accrued and unpaid
interest. Upon a change in control or a termination of trading, as defined in the indenture, holders of the 2033 Notes may
require us to repurchase for cash all or a portion of their 2033 Notes at a repurchase price equal to the principal amount plus
accrued and unpaid interest.
Other Notes Payable
On August 27, 2013, we borrowed $312 million under a four-year term loan, collateralized by a security interest in certain
production equipment. Principal is payable in equal quarterly installments, commencing on November 27, 2013. Interest
accrues at a variable rate equal to the three-month London Interbank Offered Rate (“LIBOR”) rate plus a margin of 3.25% per
annum, payable quarterly in arrears. Also on August 27, 2013, we entered into a variable-for-fixed interest rate swap calculated
on an aggregate notional amount equal to the scheduled outstanding balance of the loan. The interest rate swap effectively
fixed the rate at 4.2% per annum. The facility agreement contains customary covenants, limitations or restrictions our ability to
create liens or dispose of the equipment securing the facility agreement. The facility also contains a covenant requiring us to
ensure that the ratio of the outstanding loan to the fair market value of the equipment that secures the loan does not exceed 0.8
to 1.0. If such ratio is exceeded, we are required to grant a charge over additional equipment and/or prepay the loan in an
amount sufficient to reduce such ratio to 0.8 to 1.0 or less. The facility agreement also contains customary events of default
which could result in the acceleration of all amounts and cancellation of all commitments under the facility agreement. As of
August 29, 2013, the outstanding balance was $309 million.