Convertible Debt

In October 2011, the Company issued $400.0 million aggregate principal amount of 1.875% convertible senior notes (the "Notes") in a private placement.

The Notes pay interest semi-annually on April 1 and October 1, which began April 1, 2012, and will mature on October 1, 2016 unless earlier converted or repurchased. The Notes are convertible, subject to certain conditions, into cash, shares of the Company's Common Stock, or a combination of cash and shares of Common Stock, at the Company's option. The initial conversion rate for the Notes is 11.9021 shares of Common Stock (subject to adjustment in certain circumstances) per $1,000 principal amount of the Notes, or a total of approximately 4,760,840 shares upon conversion, which is equal to an initial conversion price of approximately $84.02 per share. A holder of the Notes may surrender its Notes at its option any time prior to the close of business on the business day immediately preceding July 1, 2016, only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on December 31, 2011 (and only during such calendar quarter), if the last reported sale price of the Company's Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five business day period after any ten consecutive trading day period (the "measurement period") in which the trading price, as defined, of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's Common Stock and the conversion rate on each such trading day; (iii) if the Company elects to issue to all or substantially all holders of its Common Stock any rights, options or warrants (other than pursuant to a rights plan) entitling them for a period of not more than 60 calendar days after the record date for such issuance, to subscribe for or purchase shares of the Company's Common Stock, at a price per share less than the average of the last reported sales prices of the Company's Common Stock for the ten consecutive day period ending on, and including, the trading day immediately preceding the declaration date for such issuance; (iv) upon specified distributions to the Company's shareholders; or (v) upon the occurrence of specified corporate transactions, such as a fundamental change (i.e., a change in control), or the Company's Common Stock ceasing to be listed on at least one U.S. national securities exchange. On or after July 1, 2016, holders may convert their Notes at the conversion rate at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date irrespective of the foregoing conditions. In the event that a fundamental change, as defined in the indenture under which the Notes have been issued, occurs prior to maturity of the Notes, the initial conversion rate may be increased to include additional shares upon conversion, or holders can require the Company to purchase from them all or a portion of their Notes for 100% of the principal value plus any accrued and unpaid interest.

The Company has reserved sufficient shares of its Common Stock to satisfy the conversion requirements related to the Notes. The Company may not redeem the Notes prior to their maturity date.

As of December 31, 2014, the "if converted value" exceeded the principal amount of the Notes by $691.6 million.

In accordance with accounting guidance for debt with conversion and other options, the Company accounted for the liability and equity components of the Notes separately. The estimated fair value of the liability component at the date of issuance was $271.1 million, and was computed based on the fair value of similar debt instruments that do not include a conversion feature. The equity component of $120.9 million was recognized as a debt discount and represents the difference between the $392.0 million of gross proceeds from the issuance of the Notes and the $271.1 million estimated fair value of the liability component at the date of issuance. The debt discount is amortized over the expected life of a similar liability without the equity component. The Company determined this expected life to be equal to the term of the Notes, resulting in an amortization period ending October 1, 2016. The effective interest rate used to amortize the debt discount is approximately 10.2%, which was based on the Company's estimated non-convertible borrowing rate as of the date the Notes were issued.

In connection with the offering of the Notes in October 2011, the Company entered into convertible note hedge ("call option") and warrant transactions with multiple counterparties, including an affiliate of the initial purchaser of the Notes. The convertible note hedge transactions cover, subject to customary anti-dilution adjustments, the number of shares of the Company's Common Stock that initially underlie the Notes, and are intended to reduce the potential dilutive impact of the conversion feature of the Notes. The convertible note hedge will terminate upon the earlier of the maturity date of the Notes or the first day the Notes are no longer outstanding. The Company paid $117.5 million for the convertible note hedge, which was recorded as a reduction to additional paid-in capital. The warrant transactions have an initial strike price of approximately $103.41 per share, and may be settled in cash or shares of the Company's Common Stock, at the Company's option. The warrant transactions have a dilutive effect to the extent that the market price per share of the Company's Common Stock exceeds the applicable strike price of the warrants. Proceeds received from the warrant transactions totaled $93.8 million and were recorded as additional paid-in capital. The warrants will become exercisable (and, if not exercised, will expire) at various dates during 2017. The original convertible note hedge and warrants were both considered indexed to the Company's Common Stock and classified as equity; therefore, the convertible note hedge and warrants were not accounted for as derivative instruments. The Company has reserved sufficient shares of its Common Stock to satisfy the potential settlement of the warrants.

During 2014, $230.6 million principal amount of the Company's $400.0 million aggregate principal amount of Notes was surrendered for conversion, of which $220.6 million was settled prior to December 31, 2014. In accordance with the terms of the Notes, the Company elected to settle these conversion obligations through a combination of cash, in an amount equal to the principal amount of the converted Notes, and shares of the Company's Common Stock in respect of any amounts due in excess thereof. Consequently, in connection with the Note conversions during 2014, the Company (i) paid $220.6 million in cash, (ii) issued 2,017,732 shares of Common Stock, (iii) recognized a $33.5 million loss on the debt extinguishment, and (iv) allocated $691.9 million of the settlement consideration provided to the Note holders to the reacquisition of the equity component of the Notes, and recognized such amount as a reduction of stockholder's equity. Settlement on the remaining portion of Notes surrendered during 2014 is anticipated during Q1 2015.

In addition to the Note conversions described above, the Company received notification in the first quarter of 2015 that an additional $6.7 million principal amount of the Notes were surrendered for conversion, and settlement is anticipated during the first quarter of 2015. The Company has elected to settle all conversion obligations for which it has been given notice (which have not yet settled) through a combination of cash and shares (total payment will be based on the average of the volume-weighted-average prices of the Common Stock during the 40 trading-day cash settlement averaging period specified in the indenture governing the Notes). In connection with these Note conversions, the Company exercised a proportionate amount of its convertible note hedges, for which the Company expects to receive shares of Common Stock equivalent to the number of shares the Company will be required to issue to settle the non-cash portion of the related Note conversions.

The net carrying amount of the liability component of the Notes consists of the following:



	As of December 31,
	2014			2013
Total convertible senior notes - par	$	169,400		$	400,000
Unamortized discount	(22,627		)	(79,685		)
	$	146,773		$	320,315

Total interest expense associated with the Notes, net of capitalized interest as applicable (see Note 21), consists of the following:



	Year Ended December 31,
	2014		2013		2012
Contractual coupon interest rate	$	5,036	$	7,230	$	7,503
Amortization of discount and note issuance costs	17,821		22,980		21,623
	$	22,857	$	30,210	$	29,126

As a result of the 2014 Note conversions described above, the Company also exercised a proportionate amount of its convertible note hedges during 2014, for which the Company received 2,017,732 shares of Common Stock, which was equivalent to the number of shares the Company was required to issue to settle the non-cash portion of the related Note conversions. The shares received were recorded as Treasury Stock, at cost, in the Company's Balance Sheet and Statement of Stockholders' Equity.

Also during 2014, the Company entered into agreements to reduce the number of warrants held by the warrant holders. Pursuant to the agreements, the Company paid an aggregate amount of $294.6 million to the warrant holders to reduce the maximum number of shares of Common Stock issuable upon exercise of the warrants from 4,760,840 to 3,540,095 (subject to adjustment from time to time as provided in the applicable warrant agreements).

Additionally in November 2014, the Company entered into an amendment agreement with a warrant holder whereby the parties have agreed to reduce a portion of the number of warrants held by the warrant holder by up to a maximum of 493,229, for an aggregate amount payable by the Company not to exceed $148.5 million. The reduction in the number of warrants will be determined based on the number of warrants with respect to which the warrant holder has closed out its hedge position, provided that the warrant holder does not effect any purchases at a price per share exceeding $397.75 per share, during the period starting on November 26, 2014 and ending no later than February 12, 2015. The Company is obligated to settle any payments due under the amendment agreement in February 2015. Given that the amendment agreement contains a conditional obligation that requires settlement in cash, and the Company's obligation is indexed to the Company's share price, the Company reclassified the estimated fair value of the 493,229 warrants from additional paid-in capital to a liability in November 2014, with such liability subsequently measured at fair value with changes in fair value recognized in earnings. The change in fair value for the year ended December 31, 2014 resulted in the Company recording a gain of $1.2 million.

As a result of the warrant holder closing out a portion of its hedge position prior to December 31, 2014, the Company recorded a $59.8 million accrued liability in connection with the warrant holder reducing the number of warrants it held by 202,560 as of December 31, 2014. The estimated fair value of the remaining liability as of December 31, 2014 is $87.5 million, and is recorded within other current liabilities within the Company's Balance Sheet. During the first quarter of 2015, the warrant holder closed out additional portions of its hedge position, and, as a result, the Company expects to pay an additional $62.0 million to further reduce the number of warrants held by such warrant holder by 206,480. At the expiration of the November 2014 amended agreement, any remaining warrants will be re-measured at fair value and reclassified back to additional paid-in capital, consistent with the original classification of the warrants under the 2011 issuance.