CONVERTIBLE SUBORDINATED NOTES

On March 19, 2014, we issued $143.75 million aggregate principal amount of 2.75% convertible subordinated notes due March 15, 2021 (the “Convertible Notes”). The Convertible Notes bear interest at 2.75% per year. Interest on the Convertible Notes began to accrue on March 19, 2014 and is payable semi-annually in arrears on March 15 and September 15 of each year.

The carrying values of the liability and equity components of the Convertible Notes at December 31, 2015 and September 30, 2016 are reflected in our Consolidated Balance Sheets as follows (in thousands):



	December 31, 2015			September 30, 2016
Long-term liabilities:
Principal amount	$	143,750		$	143,750
Unamortized discount of liability component	(25,754		)	(22,895		)
Convertible Notes issuance costs, net of accumulated amortization of $858 and $1,233 respectively	$	(2,769	)	$	(2,394	)
Carrying value of the liability component	$	115,227		$	118,461

Equity component carrying value	$	17,973		$	17,973

The fair value of the Convertible Notes, which are Level 2 measurements, was approximately $169.6 million at September 30, 2016.

Interest expense on the Convertible Notes included contractual coupon interest expense of approximately $1.0 million for both the three months ended September 30, 2015 and 2016 and $3.0 million for both the nine months ended September 30, 2015 and 2016, respectively. Amortization of debt issuance costs related to our Convertible Notes was approximately $0.1 million for both the three months ended September 30, 2015 and 2016 and $0.4 million for both the nine months ended September 30, 2015 and 2016, respectively. Accretion of the discount on the Convertible Notes was $0.9 million and $1.0 million for the three months ended September 30, 2015 and 2016, respectively, and $2.6 million and $2.9 million for the nine months ended September 30, 2015 and 2016, respectively.

During the three months ended September 30, 2016, an adjustment to the conversion rate of the Convertible Notes was triggered when our Board increased the dividends declared per common share from $0.025 per share to $0.05 per share. The initial conversion rate of the Convertible Notes was 44.3169 shares of our common stock per $1,000 principal amount of Convertible Notes, equivalent to an initial conversion price of approximately $22.56 per share of common stock. The adjusted conversion rate of the Convertible Notes is 44.3639 shares of our common stock per $1,000 principal amount of Convertible Notes, equivalent to an adjusted conversion price of approximately $22.54 per share of common stock.

Beginning January 1, 2016, debt issuance costs are retroactively reflected as a direct deduction from the carrying value of the related debt liability (refer herein to Note 1 to the Consolidated Financial Statements). The unamortized discount and the unamortized debt issuance costs are being amortized using the effective interest method over the remaining term of the Convertible Notes. The effective interest rate on the unamortized discount and the debt issuance costs for the three and nine months ended September 30, 2015 and 2016 was 6.75% and 2.75%, respectively.