NOTE 5 — CONVERTIBLE SENIOR NOTES DUE 2017

On March 19, 2012, the Company completed the sale of $258.8 million aggregate principal amount of Convertible Notes. The Convertible Notes bear interest at a rate of 2.625% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2012. The Convertible Notes mature on April 1, 2017, unless earlier converted, redeemed or repurchased in accordance with their terms. The Convertible Notes are general senior unsecured obligations and rank (1) senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated in right of payment to the Convertible Notes, (2) equal in right of payment to any of the Company’s future indebtedness and other liabilities of the Company that are not so subordinated, (3) junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness and (4) structurally junior to all future indebtedness incurred by the Company’s subsidiaries and their other liabilities (including trade payables).

Prior to April 6, 2015, the Convertible Notes are not redeemable. On or after April 6, 2015, the Company may redeem for cash all or a part of the Convertible Notes if the closing sale price of its common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the trading day preceding the date it provides notice of the redemption exceeds 130% of the conversion price in effect on each such trading day, subject to certain conditions. The redemption price will equal 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest, if any, to, but excluding the redemption date. If a fundamental change (as defined in the Indenture) occurs prior to the maturity date, holders may require the Company to purchase for cash all or any portion of the Convertible Notes at a purchase price equal to 100% of the principal amount of the Convertible Notes to be purchased plus accrued and unpaid interest, if any, to, but excluding, the fundamental change purchase date.

Holders may convert their Convertible Notes prior to the close of business on the business day immediately preceding January 1, 2017 only upon the occurrence of the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2012, if the closing sale price of the Company’s common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the Convertible Notes in effect on each applicable trading day; (2) during the five consecutive trading-day period following any five consecutive trading-day period in which the trading price for the Convertible Notes for each such trading day was less than 98% of the closing sale price of the Company’s common stock on such date multiplied by the then-current conversion rate; (3) upon the occurrence of specified corporate events; or (4) if the Company calls any Convertible Notes for redemption, at any time until the close of business on the second business day preceding the redemption date. On or after January 1, 2017 until the close of business on the second business day immediately preceding the stated maturity date, holders may surrender their Convertible Notes for conversion at any time, regardless of the foregoing circumstances. At September 30, 2012, the Convertible Notes were not convertible.

Upon conversion of the Convertible Notes, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock at the Company’s election. The initial conversion rate was 9.7586 shares of common stock per $1,000 principal amount of the Convertible Notes, equivalent to a conversion price of approximately $102.47 per share of common stock. On September 21, 2012, following the completion of a two-for-one forward split of the Company’s common stock, the conversion rate was adjusted to 19.5172 shares of common stock per $1,000 principal amount of the Convertible Notes, equivalent to a conversion price of approximately $51.24 per share of common stock. The conversion rate is subject to adjustment in certain events, such as distribution of dividends and stock splits. In addition, upon a Make-Whole Adjustment Event (as defined in the Indenture), the Company will, under certain circumstances, increase the applicable conversion rate for a holder that elects to convert its Convertible Notes in connection with such Make-Whole Adjustment Event.

The debt and equity components of the Convertible Notes have been bifurcated and accounted for separately based on the authoritative accounting guidance in ASC 470-20, “Debt with Conversion and Other Options.” The $258.8 million aggregate principal amount of Convertible Notes was bifurcated between the debt component ($187.1 million) and the equity component ($71.7 million). The amount allocated to the debt component of $187.1 million was estimated based on the fair value of similar debt instruments that do not include an equity conversion feature. The Convertible Notes were recorded at an initial carrying value of $187.1 million, net of $71.7 million in debt discount. The debt discount will be accreted to the carrying value of the Convertible Notes as non-cash interest expense utilizing the effective yield amortization method over the period ending on April 1, 2017, which is the scheduled maturity date of the Convertible Notes. Debt discount amortized during the three and nine months ended September 30, 2012 was $2.9 million and $6.0 million, respectively. At September 30, 2012, the carrying value of the Convertible Notes was $193.1 million, net of $65.7 million of unamortized debt discount.

The Company incurred issuance costs of $8.4 million, consisting primarily of investment banking, legal and other professional fees. These issuance costs were allocated to the debt component ($6.1 million) and the equity component ($2.3 million) in proportion to the allocation of the Convertible Note proceeds. The $6.1 million of issuance costs allocated to the debt component was capitalized and is being amortized as non-cash interest expense utilizing the effective yield amortization method over the period ending on the scheduled maturity date of the Convertible Notes. The $2.3 million of issuance costs allocated to the equity component was charged to additional paid-in capital.

After giving effect to the bifurcation described above, the effective interest rate on the Convertible Notes was 10.71% for the three and nine months ended September 30, 2012. The Company recognized total interest expense of $4.8 million and $10.1 million for the three and nine months ended September 30, 2012, respectively, consisting of $1.7 million and $3.6 million of interest expense, respectively, based on the 2.625% coupon rate of the Convertible Notes and non-cash interest expense of $3.1 million and $6.5 million, respectively, related to the amortization of the debt discount and debt issuance costs.

The following table sets forth the interest expense that is expected to be recorded in the Company’s consolidated statements of operations with respect to the Convertible Notes for each of the periods presented in which they remain outstanding.


	Interest at Coupon Rate of 2.625%		Non-Cash Amortization of Debt Discount		Non-Cash Amortization of Debt Issuance Costs		Total Interest Expense
Expected interest expense for:
Remainder of 2012	$	1,698	$	2,926	$	247	$	4,871
2013		6,792		12,409		1,049		20,250
2014		6,792		13,736		1,161		21,689
2015		6,792		15,207		1,286		23,285
2016		6,792		16,904		1,429		25,125
2017		1,699		4,488		379		6,566

Total	$	30,565	$	65,670	$	5,551	$	101,786