Priceline 2010 Annual Report Download - page 174

100
borrowings outstanding under the facility. The Company issued approximately $1.6 million and $2.4 million of
letters of credit under the revolving credit facility as of December 31, 2010 and 2009, respectively.
Convertible Debt
Convertible debt as of December 31, 2010 consists of the following (in thousands):
December 31, 2010
Outstanding
Principal
Amount
Unamortized
Debt
Discount
Carrying
Value
1.25% Convertible Senior Notes due March 2015 $ 575,000 $ (98,770) $ 476,230
0.75% Convertible Senior Notes due September 2013 213 (38) 175
Outstanding convertible debt $ 575,213 $ (98,808) $ 476,405
Convertible debt as of December 31, 2009 consisted of the following (in thousands):
December 31, 2009
Outstanding
Principal
Amount
Unamortized
Debt
Discount
Carrying
Value
0.50% Convertible Senior Notes due September 2011 $ 39,990 $ (4,730) $ 35,260
0.75% Convertible Senior Notes due September 2013 133,000 (31,151) 101,849
2.25% Convertible Senior Notes due January 2025 22,873 (104) 22,769
Outstanding convertible debt $ 195,863 $ (35,985) $ 159,878
Based upon the closing price of the Company’s common stock for the prescribed measurement periods
during the three months ended December 31, 2010 and 2009, the contingent conversion thresholds of the 2013 Notes
were exceeded as of December 31, 2010 and the contingent conversion thresholds of the 2013 Notes, the 2011 Notes
and the 2.25% Convertible Notes due 2025 (the “2025 Notes”) were exceeded as of December 31, 2009.
Accordingly, the carrying value of the aforementioned notes was classified as a current liability at those dates.
Since the notes are convertible at the option of the holder and the principal amount is required to be paid in cash, the
difference between the principal amount and the carrying value of these notes is reflected as convertible debt in
mezzanine on the Company’s Balance Sheets as of those dates. The determination of whether or not the notes are
convertible must continue to be performed on a quarterly basis. Consequently, the 2013 Notes may not be
convertible in future quarters, and therefore may again be classified as long-term debt, if the contingent conversion
thresholds are not met in such quarters. The contingent conversion threshold on the 2015 Notes was not exceeded at
December 31, 2010, and therefore that debt is reported as a non-current liability. The determination of whether or
not the 2015 Notes are convertible must also continue to be performed on a quarterly basis.
If the note holders exercise their option to convert, the Company delivers cash to repay the principal
amount of the notes and delivers shares of common stock or cash, at its option, to satisfy the conversion value in
excess of the principal amount. In cases where holders decide to convert prior to the maturity date or the first stated
put date, the Company writes off the proportionate amount of remaining debt issuance costs to interest expense. In
the year ended December 31, 2010, $39.9 million aggregate principal amount of 2011 Notes, $132.8 million
aggregate principal amount of 2013 Notes and $22.9 million of the 2025 Notes were converted. The Company
delivered cash of $195.6 million to repay the principal amount and issued 3,457,828 shares and delivered $99.8
million in cash in satisfaction of the conversion value in excess of the principal amount for the year ended December
31, 2010.
As of December 31, 2010 and 2009, the estimated market value of the outstanding senior notes was
approximately $0.9 billion and $1.1 billion, respectively. Fair value was estimated based upon actual trades at the
end of the reporting period or the most recent trade available as well as the Company’s stock price at the end of the
reporting period. A substantial portion of the market value of the Company’s debt in excess of the carrying value
relates to the conversion premium on the bonds.
Description of Senior Notes
In March 2010, the Company issued in a private placement $575.0 million aggregate principal amount of
Convertible Senior Notes due March 15, 2015, with an interest rate of 1.25% (the “2015 Notes”). The Company