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Debt | 12 Months Ended
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Dec. 31, 2011
Debt |
Debt |
7. Debt Long-term Debt Long-term debt as of December 31, 2011, consists of a mortgage note payable, which is secured by certain land and buildings with carrying amounts aggregating approximately $5.0 million and $5.1 million as of December 31, 2011 and December 31, 2010, respectively. The mortgage note payable ($2.7 million as of December 31, 2011 and $2.9 million as of December 31, 2010) bears interest at an annual rate of 7.91%, with the final payment due on January 1, 2020. The fair market value of this note as of December 31, 2011 and 2010 was approximately $2.9 million and $3.1 million, respectively. Maturity of Long-term Debt Long-term debt matures as follows (in thousands):
2012 |  | $ | 248 |
2013 |  |  | 268 |
2014 |  |  | 290 |
2015 |  |  | 314 |
2016 |  |  | 340 |
Thereafter |  |  | 1,194 |
|  |  | 2,654 |
Less current portion |  |  | 248 |
|  | $ | 2,406 |
Convertible Notes Our convertible notes were initially convertible into 36.7277 shares of common stock per $1,000 principal amount of notes (equivalent to a conversion price of $27.23 per share or a premium of 38% over the closing market price for Veeco's common stock on April 16, 2007). We paid interest on these notes on April 15 and October 15 of each year. The notes were unsecured and were effectively subordinated to all of our senior and secured indebtedness and to all indebtedness and other liabilities of our subsidiaries. During the first quarter of 2011, at the option of the holders, $7.5 million of notes were tendered for conversion at a price of $45.95 per share in a net share settlement. We paid the principal amount of $7.5 million in cash and issued 111,318 shares of our common stock. We recorded a loss on extinguishment totaling $0.3 million related to these transactions. During the second quarter of 2011, we issued a notice of redemption on the remaining outstanding principal balance of notes outstanding. As a result, at the option of the holders, the notes were tendered for conversion at a price of $50.59 per share, calculated as defined in the indenture relating to the notes, in a net share settlement. As a result, we paid the principal amount of $98.1 million in cash and issued 1,660,095 shares of our common stock. We recorded a loss on extinguishment totaling $3.0 million related to these transactions. Certain accounting guidance requires a portion of convertible debt to be allocated to equity. This guidance requires issuers of convertible debt that can be settled in cash to separately account for (i.e., bifurcate) a portion of the debt associated with the conversion feature and reclassify this portion to equity. The liability portion, which represents the fair value of the debt without the conversion feature, is accreted to its face value over the life of the debt using the effective interest method by amortizing the discount between the face amount and the fair value. The amortization is recorded as interest expense. Our convertible notes were subject to this accounting guidance. This additional interest expense did not require the use of cash. The components of interest expense recorded on the notes were as follows (in thousands):
|  | Year ended December 31, |
--- | --- | --- | ---
|  | 2011 |  | 2010 |  | 2009 |
Contractual interest |  | $ | 2,025 |  | $ | 4,355 |  | $ | 4,356 |
Accretion of the discount on the notes |  |  | 1,260 |  |  | 3,058 |  |  | 2,846 |
Total interest expense on the notes |  | $ | 3,285 |  | $ | 7,413 |  | $ | 7,202 |
Effective interest rate |  |  | 6.7 | % |  | 7.0 | % |  | 6.8 | %
The carrying amounts of the liability and equity components of the notes were as follows (in thousands):
|  | December 31, 2011 |  | December 31, 2010 |
--- | --- | --- | --- | --- | ---
Carrying amount of the equity component |  | $ | — |  | $ | 16,318 |
Principal balance of the liability component |  | $ | — |  | $ | 105,574 |
Less: unamortized discount |  |  | — |  |  | 4,436 |
Net carrying value of the liability component |  | $ | — |  | $ | 101,138 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 129 -Paragraph 2, 4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 + Details
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