XML 50 R14.htm IDEA: XBRL DOCUMENT
v2.4.0.8

Notes Payable | 9 Months Ended
--- | ---
Sep. 30, 2013
Debt Disclosure [Abstract] |
Notes Payable | Notes Payable On July 17, 2013, we issued $400 million aggregate principal amount of senior unsecured notes due 2021 which bear interest at 6.625% per year and will mature on July 15, 2021. We used $15 million of the net proceeds from the issuance to repay the entire amount outstanding under our revolving credit facility and, in October 2013, used $127.6 million to pay the cash consideration portion of the convertible note exchange offers discussed below. We intend to use the remaining net proceeds from the notes issuance to tender for, redeem or repurchase the $213.9 million aggregate principal amount of convertible notes that did not accept the exchange offers discussed below and are currently ou tstanding. The form and timing of any such activity will be dependent upon market conditions and other factors and there can be no assurance that any such transactions can be completed prior to the December 2014 call date for the 5.25% contingent convertible senior notes due December 15, 2029 (the "2029 notes") or the September 2015 maturity date for the 2015 notes. The convertible senior notes included in notes payable are accounted for separately as a liability component and an equity component in the consolidated balance sheets. The liability component and equity component are as follows:
| September 30, 2013 |  | December 31, 2012
| September 2015 Notes |  | December 2029 Notes |  | September 2015 Notes |  | December 2029 Notes |  | December 2024 Notes
| (Dollars in thousands)
Notes payable: |  |  |  |  |  |  |  |  |
Principal amount of liability component | $ | 200,000 |  |  | $ | 115,839 |  |  | $ | 200,000 |  |  | $ | 115,839 |  |  | $ | 28,243 |
Unamortized discount | (16,420 | ) |  | (7,967 | ) |  | (21,944 | ) |  | (12,269 | ) |  | — |
Net carrying amount of liability component | $ | 183,580 |  |  | $ | 107,872 |  |  | $ | 178,056 |  |  | $ | 103,570 |  |  | $ | 28,243 |
Additional paid-in capital: |  |  |  |  |  |  |  |  |
Carrying amount of equity component |  |  | $ | 15,586 |  |  |  |  | $ | 15,586 |  |  | $ | 22,637 |
Amount by which the if-converted value exceeds principal | $ | 54,179 |  |  | $ | 138,958 |  |  | $ | — |  |  | $ | 30,382 |  |  | $ | — |
The discount is being amortized over the expected lives of the notes, which is December 15, 2014 for the 2029 notes and September 15, 2015 for the 2015 notes. The effective interest rates during the discount amortization periods are 8.9% and 11.9% on the 2015 notes and the 2029 notes, respectively. The interest cost recognized in operations for the convertible notes, inclusive of the coupon and amortization of the discount and debt issue costs, was $7.1 million and $21.1 million for the three and nine months ended September 30, 2013, respectively, and $7.1 million and $21.2 million for the same periods in 2012. We are required to include the dilutive effect of the 2029 notes in our diluted earnings per share calculation. Because these notes include a mandatory cash settlement feature for the principal amount, incremental dilutive shares will only exist when the fair value of our common stock at the end of the reporting period exceeds the conversion price per share of $9.57. At September 30, 2013 and 2012, the conversion premium of the 2029 notes was dilutive and the effect has been included in diluted earnings per share for the three and nine months ended September 30, 2013 and 2012. The 2015 notes and the 2015 notes hedges are excluded from the dilutive effect in our diluted earnings per share calculation as they are currently to be settled only in cash. At September 30, 2013, the 2015 warrants that were not assigned to the partial unwind agreement were dilutive as the average price of our commons stock exceeded the $15.81 strike price of the 2015 warrants and the effect has been included in diluted earnings per share for the three and nine months ended September 30, 2013. On March 25, 2013, notice of mandatory redemption was issued for our 2024 notes. $25.8 million principal amount of the convertible notes exercised their conversion rights prior to the April 30, 2013 mandatory redemption date. The holders of these notes received the principal amount of their notes in cash and the conversion premium in shares of our common stock, for which 216,729 shares were issued. The balance of the convertible notes ($2.5 million principal amount) was redeemed for cash. On August 23, 2013, we offered to exchange cash and, in certain circumstances, newly issued shares of our common stock, for any and all of our outstanding 2015 notes and 2029 notes. The exchange offers expired on October 21, 2013, and the results are discussed in Note 9. In 2011, we entered into a three year $160 million revolving line of credit agreement with seven banks. The interest rate is floating at a rate based on our election that will be equal to the alternate base rate (as defined in the credit agreement) plus the applicable margin or the adjusted LIBOR rate (as defined in the credit agreement) plus the applicable margin. We also pay a commitment fee on the available unused portion of the credit facility. The applicable margin and commitment fee rate are based on our credit rating and can change throughout the period of the credit facility. Based upon our current credit rating, the applicable margin is 2.00% for alternate base rate borrowings and 3.00% for adjusted LIBOR rate borrowings and the commitment fee is 0.50%. Under this agreement, we are required to maintain a minimum risk-based capital ratio at American Equity Life, a maximum ratio of debt to total capital, a minimum cash coverage ratio, and a minimum level of statutory surplus at American Equity Life. No amounts were outstanding at September 30, 2013 and December 31, 2012. As part of our investment strategy, we enter into securities repurchase agreements (short-term collateralized borrowings). The maximum amount borrowed during the nine months ended September 30, 2013 was $258.6 million. We had no borrowings under repurchase agreements during the nine months ended September 30, 2012. When we do borrow cash on these repurchase agreements, we pledge collateral in the form of debt securities with fair values approximately equal to the amount due and we use the cash to purchase debt securities ahead of the time we collect the cash from selling annuity policies to avoid a lag between the investment of funds and the obligation to credit interest to policyholders. We earn investment income on the securities purchased with these borrowings at a rate in excess of the cost of these borrowings. Such borrowings averaged $131.5 million and $47.5 million for the three and nine months ended September 30, 2013, respectively. The weighted average interest rate on amounts due under repurchase agreements was 0.17% and 0.18% for the three and nine months ended September 30, 2013, respectively.

X
- Details
Name: | us-gaap_DebtDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 129 -Paragraph 2, 4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
Name: | us-gaap_DebtDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration