DEBT

The following table sets forth information related to the 3.00% convertible senior notes which is included our Condensed Consolidated Balance Sheets:



(In thousands)	Embedded conversion option			Convertible Notes			Discount			Total
Balance at December 31, 2012	$	—		$	—		$	—		$	—
Issuance of 3.00% convertible notes	59,204			175,000			(59,204		)	175,000
Amortization of debt discount	—			—			4,866			4,866
Debt discount write-off associated with conversion of debt	—			—			5,368			5,368
Change in fair value of embedded derivative	41,818			—			—			41,818
Conversion	(1,199		)	(16,936		)	—			(18,135		)
Balance at September 30, 2013	$	99,823		$	158,064		$	(48,970	)	$	208,917

In January 2013, we entered into note purchase agreements (the “Notes”) with qualified institutional buyers and accredited investors (collectively the “Purchaser”) in a private placement in reliance on exemptions from registration under the Securities Act of 1933, (the “Securities Act”). The Purchasers of the Notes include Frost Gamma Investments Trust, a trust affiliated with Dr. Frost, and Hsu Gamma Investment, L.P., an entity affiliated with Dr. Hsiao. The Notes were issued on January 30, 2013. The Notes, which total $175.0 million, bear interest at the rate of 3.00% per year, payable semiannually on February 1 and August 1 of each year, beginning August 1, 2013. The Notes will mature on February 1, 2033, unless earlier repurchased, redeemed or converted. Upon a fundamental change as defined in the instruments governing the Notes, subject to certain exceptions, the holders may require us to repurchase all or any portion of their Notes for cash at a repurchase price equal to 100% of the principal amount of the Notes being repurchased, plus any accrued and unpaid interest to but not including the fundamental change repurchase date.

The Notes will be convertible at any time on or after November 1, 2032, through the second scheduled trading day immediately preceding the maturity date, at the option of the holders. Additionally, holders may convert their Notes prior to the close of business on the scheduled trading day immediately preceding November 1, 2032, under the following circumstances: (1) conversion based upon satisfaction of the trading price condition relating to the Notes; (2) conversion based on the Common Stock price; (3) conversion based upon the occurrence of specified corporate events; or (4) if we call the Notes for redemption. The Notes will be convertible into cash, shares of our Common Stock, or a combination of cash and shares of Common Stock, at our election unless we have made an irrevocable election of net share settlement. The initial conversion rate for the Notes will be 141.4827 shares of Common Stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $7.07 per share of Common Stock), and will be subject to adjustment upon the occurrence of certain events. In addition, we will, in certain circumstances, increase the conversion rate for holders who convert their Notes in connection with a make-whole fundamental change (as defined in the Indenture) and holders who convert upon the occurrence of certain specific events prior to February 1, 2017 (other than in connection with a make-whole fundamental change).

On August 30, 2013, one of the conversion rights of the Notes was triggered. As a result, holders of the Notes converted $16.9 million principal amount into 2,396,145 shares of our Common Stock at a rate of 141.4827 shares of Common Stock per $1,000 principal amount of Notes. We recorded an $8.7 million loss on early conversion of the Notes in Other income (expense), net in our Condensed Consolidated Statement of Operations. The Notes were convertible through September 6, 2013 and may be convertible thereafter, if one or more of the conversion conditions are satisfied.

We may not redeem the Notes prior to February 1, 2017. On or after February 1, 2017 and before February 1, 2019, we may redeem for cash any or all of the Notes but only if the last reported sale price of our Common Stock exceeds 130% of the applicable conversion price for at least 20 trading days during the 30 consecutive trading day period ending on the trading day immediately prior to the date on which we deliver the redemption notice. The redemption price will equal 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest to but not including the redemption date. On or after February 1, 2019, we may redeem for cash any or all of the Notes at a redemption price of 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest up to but not including the redemption date.

The terms of the Notes, include, among others: (i) rights to convert into shares of our Common Stock, including upon a fundamental change; and (ii) a coupon make-whole payment in the event of a conversion by the holders of the Notes on or after February 1, 2017 but prior to February 1, 2019. We have determined that these specific terms are considered to be embedded derivatives. As a result, embedded derivatives are required to be separated from the host contract, the Notes, and carried at fair value when: (a) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract; and (b) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument. We have concluded that the embedded derivatives within the Notes meet these criteria and, as such, must be valued separate and apart from the Notes and recorded at fair value each reporting period.

For purposes of accounting and financial reporting, we combine these embedded derivatives and value them together as one unit of accounting. At each reporting period, we record these embedded derivatives at fair value which is included as a component of the Notes on our Condensed Consolidated Balance Sheets.

We have used a binomial lattice model in order to estimate the fair value of the embedded derivative in the Notes. A binomial lattice model generates two probable outcomes — one up and another down —arising at each point in time, starting from the date of valuation until the maturity date. A lattice was initially used to determine if the Notes would be converted, called or held at each decision point. Within the lattice model, the following assumptions are made: (i) the Notes will be converted early if the conversion value is greater than the holding value; or (ii) the Notes will be called if the holding value is greater than both (a) the redemption price (as defined in the Indenture) and (b) the conversion value plus the coupon make-whole payment at the time. If the Notes are called, then the holder will maximize their value by finding the optimal decision between (1) redeeming at the redemption price and (2) converting the Notes.

Using this lattice, we valued the embedded derivatives using the “with-and-without method,” where the value of the Notes including the embedded derivatives is defined as the “with,” and the value of the Notes excluding the embedded derivatives is defined as the “without.” This method estimates the value of the embedded derivatives by looking at the difference in the values between the Notes with the embedded derivatives and the value of the Notes without the embedded derivatives.

The lattice model requires the following inputs: (i) price of our Common Stock; (ii) Conversion Rate (as defined in the Indenture); (iii) Conversion Price (as defined in the Indenture); (iv) maturity date; (v) risk-free interest rate; (vi) estimated stock volatility; and (vii) estimated credit spread for the Company.

The following table sets forth the inputs to the lattice model used to value the embedded derivative:



	September 30, 2013			Issuance Date
Stock price	$	8.81		$	6.20
Conversion Rate	141.4827			141.4827
Conversion Price	$	7.07		$	7.07
Maturity date	February 1, 2033			February 1, 2033
Risk-free interest rate	1.50		%	1.12		%
Estimated stock volatility	40		%	40		%
Estimated credit spread	948 basis points			944 basis points

The following table sets forth the fair value of the Notes with and without the embedded derivatives, and the fair value of the embedded derivatives as of the issuance date and September 30, 2013. At September 30, 2013 and at issuance date the principal amount of the Notes was $158.1 million and $175.0 million, respectively:



(In thousands)	September 30, 2013		Issuance Date
Fair value of Notes:
With the embedded derivatives	$	210,105	$	175,000
Without the embedded derivatives	$	110,282	$	115,796
Estimated fair value of the embedded derivatives	$	99,823	$	59,204

Changes in certain inputs into the lattice model can have a significant impact on changes in the estimated fair value of the embedded derivatives. For example, a decrease in our estimated credit spread results in an increase in the estimated value of the embedded derivatives. Conversely, a decrease in the price of our Common Stock results in a decrease in the estimated fair value of the embedded derivatives. From the date the Notes were issued through September 30, 2013, we observed an increase in the market price of our Common Stock which primarily resulted in a $41.8 million increase in the estimated fair value of our embedded derivatives recorded in Fair value changes of derivative instruments, net in our Condensed Consolidated Statements of Operations.

We have entered into line of credit agreements with fifteen financial institutions in Chile and Spain. These lines of credit are used primarily as a source of working capital for inventory purchases.

The following table summarizes the amounts outstanding under the lines of credit:



(Dollars in thousands)					Balance Outstanding
Lender	Interest rate on borrowings		Credit line capacity		September 30, 2013		December 31, 2012
Itau Bank	8.04	%	$	3,000	$	2,207	$	2,738
Bank of Chile	7.80	%	3,000		1,967		2,292
BICE Bank	5.50	%	1,500		867		2,451
Corp Banca	5.50	%	—		28		1,248
BBVA Bank	8.29	%	2,500		1,230		2,823
Penta Bank	9.48	%	800		992		833
Security Bank	7.56	%	1,500		1,063		—
BCI	5.50	%	1,000		1,216		—
Estado Bank	6.88	%	2,000		1,732		1,963
Sabadell Bank	7.60	%	203		—		3
Bilbao Vizcaya Bank	4.90	%	406		91		377
Banco Popular	8.25	%	406		—		260
Santander Bank	6.00	%	203		—		—
Banesto	5.80	%	203		4		163
Banca March	6.25	%	270		—		44
Total			$	16,991	$	11,397	$	15,195

At September 30, 2013 and December 31, 2012, the weighted average interest rate on our lines of credit was approximately 7.4% and 6.5%, respectively.

At September 30, 2013 and December 31, 2012, we had mortgage notes and other debt payables related to Farmadiet as follows:



(In thousands)	September 30, 2013		December 31, 2012
Current portion of lines of credit and notes payable	$	1,796	$	2,331
Other long-term liabilities	3,350		3,916
Total mortgage notes and other debt payables	$	5,146	$	6,247

The mortgages and other debts payable mature at various dates ranging from 2015 through 2024 bearing variable interest rates from 2.7% up to 6.3%. The weighted average interest rate on the mortgage notes and other debt payable at September 30, 2013 and December 31, 2012, was 4.2% and 4.5%, respectively.