Notes Payable

The liability and equity components of our contingent 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:



	June 30, 2011									December 31, 2010
	September 2015 Notes			December 2029 Notes			December 2024 Notes			September 2015 Notes			December 2029 Notes			December 2024 Notes
	(Dollars in thousands)
Notes payable:
Principal amount of liability component	$	200,000		$	115,839		$	74,494		$	200,000		$	115,839		$	74,494
Unamortized discount	(32,185		)	(20,003		)	(906		)	(35,335		)	(22,306		)	(1,857		)
Net carrying amount of liability component	$	167,815		$	95,836		$	73,588		$	164,665		$	93,533		$	72,637
Additional paid-in capital:
Carrying amount of equity component				$	15,586		$	22,637					$	15,586		$	22,637
Amount by which the if-converted value exceeds principal	$	3,360		$	36,104		$	—		$	800		$	34,191		$	—

The discount is being amortized over the expected lives of the notes, which is December 15, 2011 for the 2024 notes, December 15, 2014 for the 2029 notes and September 15, 2015 for the 2015 notes. The expected lives of the notes are based on the dates at which we may redeem the notes or the holders may require us to repurchase the notes. The effective interest rates are 8.9%, 8.5% and 11.9% on the 2015 notes, the 2024 notes and the 2029 notes, respectively. The interest cost recognized in operations for the convertible senior notes, inclusive of the coupon and amortization of the discount and debt issue costs, was $7.9 million and $15.7 million for the three and six months ended June 30, 2011, respectively, and $4.3 million and $8.5 million for the same periods in 2010.

We are required to include the dilutive effect of the 2024 and 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 $14.03 for the 2024 notes and $9.69 for the 2029 notes. At June 30, 2011 the conversion premium of the 2029 notes was dilutive and the effect has been included in diluted earnings per share for the three and six months ended June 30, 2011. 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. The 2015 warrants could have a dilutive effect on our earnings per share to the extent that the price of our common stock exceeds the strike price of the 2015 warrants.