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Convertible Subordinated Notes | 12 Months Ended
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Dec. 31, 2015
Debt Disclosure [Abstract] |
Convertible Subordinated Notes | CONVERTIBLE SUBORDINATED NOTES On March 19, 2014, we issued $143.75 million aggregate principal amount of 2.75% Convertible Subordinated Notes due 2021 (the “Convertible Notes”). The Convertible Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and were offered only to “qualified institutional buyers” in compliance with Rule 144A under the Securities Act. The Convertible Notes are governed by an indenture dated as of March 19, 2014 between Wilmington Trust, National Association, as Trustee, and us (the “Indenture”). The Convertible Notes bear interest at 2.75%. Interest on the Convertible Notes accrues from March 19, 2014 and is payable semi-annually in arrears on March 15 and September 15 of each year, beginning September 15, 2014. The Convertible Notes are general unsecured obligations and are subordinated in the right of payment to all of our existing and future senior indebtedness and equal in right of payment with our other existing and future subordinated indebtedness. The initial conversion rate of the Convertible Notes is 44.3169 shares of our common stock per $1,000 principal amount of the Convertible Notes, equivalent to an initial conversion price of approximately $22.56 per share of common stock. The conversion rate is subject to adjustment upon the occurrence of certain events, as described in the Indenture. The Convertible Notes mature on March 15, 2021, unless earlier converted or purchased by us. The conversion option of the Convertible Notes is not an embedded derivative. Holders of the Convertible Notes may convert their Convertible Notes at their option at any time prior to December 15, 2020, if certain conditions are met. We may not redeem the Convertible Notes prior to maturity. However, in the event of a fundamental change (as defined in the Indenture), subject to certain conditions, a holder of the Convertible Notes will have the option to require us to purchase all or a portion of its Convertible Notes for cash. The fundamental change purchase price will equal 100% of the principal amount of the Convertible Notes to be purchased, plus any accrued and unpaid interest up to, but excluding, the fundamental change purchase date. We have recorded the issuance of the Convertible Notes per the guidance provided under ASC 470, Topic 20, Debt with Conversion and Other Options, which requires that we separate the Convertible Notes into a liability component and an equity component. The carrying amount of the liability is calculated by measuring the fair value of a similar liability that does not have an associated equity component. The carrying amount of the liability component was determined based on a bond discount rate of 6.75% per year. The carrying amount of the equity component representing the embedded conversion option was determined by deducting the fair value of the liability component from the initial proceeds of the Convertible Notes and is recorded in Additional Paid in Capital (“APIC”) on our Consolidated Balance Sheets. The excess of the principal amount of the liability over its carrying amount is amortized to interest expense using the effective interest method. The expected life of the liability component will not be reassessed in subsequent periods unless the terms are modified. We received gross proceeds of $143.75 million and paid transaction costs of approximately $4.7 million. We used a portion of the proceeds to repay our outstanding balance on our revolving credit facility and to redeem our existing convertible junior subordinated debentures. Refer to Note 15 herein for further discussion of the redemption of the convertible junior subordinated debentures. Total transaction costs of $4.7 million were allocated to the liability and equity components in proportion to the allocation of the initial proceeds and accounted for as debt issuance costs and equity issuance costs, respectively. Debt issuance costs are included in Deferred charges and other non-current assets on our Consolidated Balance Sheets and are being amortized using the effective interest method over the seven year term of the Convertible Notes. Equity issuance costs are included in APIC on our Consolidated Balance Sheets and are not amortized. Additionally, the recognition of the Convertible Notes as two separate components results in a basis difference associated with the liability component which represents a temporary tax difference. As a result, we recognized a deferred tax liability of $12.7 million related to this temporary difference which was recorded as a reduction to APIC and an increase to our deferred tax liability. The deferred tax liability is being amortized over the seven year term of the Convertible Notes. The carrying values of the liability and equity components of the Convertible Notes at December 31, 2015 are reflected on our Consolidated Balance Sheets as follows (in thousands):
| December 31, 2014 |  | December 31, 2015
Long-term liabilities: |  |  |
Principal amount | $ | 143,750 |  |  | $ | 143,750 |
Unamortized discount of liability component | (29,208 | ) |  | (25,754 | )
Carrying value of the liability component | $ | 114,542 |  |  | $ | 117,996 |
Equity component carrying value | $ | 17,973 |  |  | $ | 17,973 |
The fair value of the Convertible Notes, which are Level 2 measurements, was approximately $170.5 million at December 31, 2015. Interest expense for the year ended December 31, 2015 included contractual coupon interest expense of $4.0 million and amortization of debt issuance costs of $0.5 million. Accretion of the discount on the Convertible Notes was approximately $3.5 million for the year ended December 31, 2015. The unamortized discount is being amortized over the remaining term of 62 months. The effective interest rate on the liability component for the year ended December 31, 2015 was 6.75% per year. The aggregate maturities of our Convertible Notes for the five years subsequent to December 31, 2015 and thereafter are as follows (in thousands):
|  | Principal Maturity |  | Discount Amortization |  | Present Value
Years ending December 31, |  |  |  |  |  |
2016 |  | $ | — |  |  | $ | (3,867 | ) |  | $ | (3,867 | )
2017 |  | — |  |  | (4,328 | ) |  | (4,328 | )
2018 |  | — |  |  | (4,844 | ) |  | (4,844 | )
2019 |  | — |  |  | (5,422 | ) |  | (5,422 | )
2020 |  | — |  |  | (6,068 | ) |  | (6,068 | )
2021 and thereafter |  | 143,750 |  |  | (1,225 | ) |  | 142,525 |
|  | $ | 143,750 |  |  | $ | (25,754 | ) |  | $ | 117,996 |

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