Interest is payable semi-annually in arrears onMay 15 and November 15 of each year for the 1 percent
notes and onApril 1 and October 1 for the 2 ¾ percent notes.
The 1 percent notes are convertible at the option of the note holders prior to July 1, 2021 only under certain
conditions. On or after July 1, 2021, the notes are initially convertible into approximately 7.5 million shares of
common stock at a conversion price of approximately $66.81 per share. We will settle conversions of the notes,
at our election, in cash, shares of our common stock or a combination of both. We may not redeem the 1 percent
notes prior to maturity, and no sinking fund is provided for them. If we undergo a fundamental change, holders
may require us to purchase for cash all or any portion of their 1 percent notes at a purchase price equal to 100%
of the principal amount of the notes to be purchased, plus accrued and unpaid interest to, but excluding, the
fundamental change purchase date.
The 2¾ percent notes are convertible at the option of the note holders prior to July 1, 2019 only under
certain conditions. On or after July 1, 2019, the notes are convertible into approximately 3.7 million shares of
common stock at a conversion price of approximately $16.63 per share. We will settle conversions of the notes,
at our election, in cash, shares of our common stock or a combination of both. We can redeem the 2¾ percent
notes at our option, in whole or in part, on or after October 5, 2016 if the last reported sale price of our common
stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days
ending on the trading day immediately preceding the date we provide the redemption notice exceeds 130 percent
of the applicable conversion price for the 2¾ percent notes on each such day. The redemption price for the
2¾ percent notes will equal 100 percent of the principal amount being redeemed, plus accrued and unpaid
interest, plus $90 per each $1,000 principal amount being redeemed. Holders of the 2¾ percent notes may
require us to purchase some or all of their notes upon the occurrence of certain fundamental changes, as set forth
in the indenture governing these notes, at a purchase price equal to 100 percent of the principal amount of the
notes to be purchased, plus accrued and unpaid interest.
For the 2¾ percent notes, the price of our common stock exceeded the conversion threshold price during the
quarter ended December 31, 2014. As a result, the 2¾ percent notes are convertible at the option of the holders
during the quarter endingMarch 31, 2015. As of December 31, 2014, the if-converted value of the 2¾ percent
notes, which assumes that the notes will be converted into shares of our common stock, exceeded the principal
amount by $166.2 million. We did not include the potential effect of the conversion of our convertible notes into
our common stock in the computation of diluted net loss per share because the effect would have been
anti-dilutive.
We account for our convertible notes using an accounting standard that requires us to assign a value to our
convertible debt equal to the estimated fair value of similar debt instruments without the conversion feature and
to record the remaining portion in equity. As a result, we recorded our convertible notes at a discount, which we
are amortizing as additional non-cash interest expense over the expected life of the respective debt. We
determined our nonconvertible debt borrowing rate using a combination of the present value of the debt’s cash
flows and a Black-Scholes valuation model. The following table summarizes the nonconvertible borrowing rate,
effective interest and amortization period of our debt discount for our convertible notes:
1 Percent
Convertible
Senior Notes
2¾Percent
Convertible
Senior Notes
2
⅝
Percent
Convertible
Subordinated Notes
Nonconvertible debt borrowing rate . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 percent 8.0 percent
9.3 percent
Effective interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8 percent 8.8 percent
9.8 percent
Amortization period of debt discount . . . . . . . . . . . . . . . . . . . . . . . . .
7 years
7 years
7 years
Interest expense for the year ended December 31, 2014, 2013 and 2012 included $9.6 million, $6.8 million
and $9.8 million, respectively, of non-cash interest expense related to the amortization of the debt discount and
debt issuance costs for our convertible notes.
F-24
