Priceline 2011 Annual Report Download - page 87

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86
Convertible Debt
Convertible debt as of December 31, 2011 consists of the following (in thousands):
December 31, 2011
1.25% Convertible Senior Notes due March 2015
Outstanding
Principal
Amount
$ 575,000
Unamortized
Debt
Discount
$(77,360)
Carrying
Value
$ 497,640
Convertible debt as of December 31, 2010 consisted of the following (in thousands):
December 31, 2010
1.25% Convertible Senior Notes due March 2015
0.75% Convertible Senior Notes due September 2013
Outstanding convertible debt
Outstanding
Principal
Amount
$ 575,000
213
$ 575,213
Unamortized
Debt
Discount
$(98,770)
(38)
$(98,808)
Carrying
Value
$ 476,230
175
$ 476,405
Based upon the closing price of the Company’s common stock for the prescribed measurement periods during the
three months ended December 31, 2011, the contingent conversion threshold of the 2015 Notes was exceeded. Therefore, the
2015 Notes are convertible at the option of the holders. Accordingly, the Company reported the carrying value of the 2015
Notes as a current liability as of December 31, 2011. Since these notes are convertible at the option of the holders and the
principal amount is required to be paid in cash, the difference between the principal amount and the carrying value is reflected
as convertible debt in the mezzanine section on the Company's Consolidated Balance Sheet. Therefore, with respect to the
2015 Notes, the Company reclassified $77.4 million before tax from additional paid-in-capital to convertible debt in the
mezzanine section on the Company's Consolidated Balance Sheet. The contingent conversion threshold on the 2015 Notes was
not exceeded at December 31, 2010, and therefore on that date the debt was reported as a non-current liability. The
determination of whether or not the 2015 Notes are convertible must continue to be performed on a quarterly basis.
Consequently, the 2015 Notes may not be convertible in future quarters, and therefore may again be classified as long-term
debt, if the contingent conversion threshold is not met in such quarters.
Based upon the closing price of the Company's common stock for the prescribed measurement period during the three
months ended December 31, 2010, the contingent consideration threshold on the 2013 Notes was exceeded. As a result, the
2013 Notes were convertible at the option of the holders as of December 31, 2010, and accordingly were classified as a current
liability as of that date. The remaining outstanding principal amount of the 2013 Notes was converted during the three months
ended June 30, 2011.
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, the Company writes off the proportionate amount
of remaining debt issuance costs to interest expense. In the year ended December 31, 2011, the Company delivered cash of
$0.2 million to repay the principal amount and issued 4,869 shares of its common stock in satisfaction of the conversion value
in excess of the principal amount for convertible debt that was converted prior to maturity. The Company delivered cash of
$195.6 million to repay the principal amount, and issued 3,457,828 shares of its common stock and delivered $99.8 million in
cash in satisfaction of the conversion value in excess of the principal amount for convertible debt converted prior to maturity
for the year ended December 31, 2010.
As of December 31, 2011 and 2010, the estimated market value of the outstanding senior notes was approximately
$0.9 billion for both periods. 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 outstanding principal amount relates to the conversion premium on the
bonds.