Priceline 2015 Annual Report Download - page 109

quarter. In the event that all or substantially all of the Company's common stock is acquired on or prior to the maturity of the 2018 Notes in a transaction in which
the consideration paid to holders of the Company's common stock consists of all or substantially all cash, the Company would be required to make additional
payments in the form of additional shares of common stock to the holders of the 2018 Notes in aggregate value ranging from $0 to approximately $344 million
depending upon the date of the transaction and the then current stock price of the Company. As of December 15, 2017, holders will have the right to convert all or
any portion of the 2018 Notes. The 2018 Notes may not be redeemed by the Company prior to maturity. The holders may require the Company to repurchase the
2018 Notes for cash in certain circumstances. Interest on the 2018 Notes is payable on March 15 and September 15 of each year.
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 paid $13.3 million in debt issuance costs associated with the 2015 Notes for the year ended
December 31, 2010. The 2015 Notes were convertible, subject to certain conditions, into the Company's common stock at a conversion price of approximately
$303.06 per share. In March 2015, in connection with the maturity or conversion prior to maturity of the remaining outstanding 1.25% Convertible Senior Notes,
the Company paid $37.5 million to satisfy the aggregate principal amount due and paid an additional $110.1 million in satisfaction of the conversion value in
excess of the principal amount, which was charged to additional paid-in capital. During the year ended December 31, 2014 , the Company delivered cash of $122.9
million to repay the aggregate principal amount and issued 300,256 shares of its common stock and paid cash of $2.2 million in satisfaction of the conversion value
in excess of the principal amount associated with 1.25% Convertible Senior Notes due March 2015 that were converted prior to maturity. In the year ended
December 31, 2013 , the Company delivered cash of $414.6 million to repay the principal amount and issued 972,235 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.
Accounting guidance requires that cash-settled convertible debt, such as the Company's Convertible Senior Notes, be separated into debt and equity
components at issuance and each be assigned a value. The value assigned to the debt component is the estimated fair value, as of the issuance date, of a similar
bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value, representing the value assigned to the equity
component, is recorded as a debt discount. Debt discount is amortized using the effective interest method over the period from the origination date through the
stated maturity date. The Company estimated the straight debt borrowing rates at debt origination to be 3.50% for the 2018 Notes, 3.13% for the 2020 Notes and
3.18% for the 2021 Notes. The yield to maturity was estimated at an at-market coupon priced at par.
Debt discount after tax of $82.5 million ( $142.9 million before tax) net of financing costs associated with the equity component of convertible debt of
$1.6 million after tax were recorded in additional paid-in capital related to the 2021 Notes at December 31, 2014. Debt discount after tax of $92.4 million ( $154.3
million before tax) net of financing costs associated with the equity component of convertible debt of $0.1 million after tax were recorded in additional paid-in
capital related to the 2020 Notes at June 30, 2013. Debt discount after tax of $80.9 million ( $135.2 million before tax) net of financing costs associated with the
equity component of convertible debt of $2.8 million after tax were recorded in additional paid-in capital related to the 2018 Notes in March 2012. Debt discount
after tax of $69.1 million ( $115.2 million before tax) net of financing costs associated with the equity component of convertible debt of $1.6 million after tax were
recorded in additional paid-in capital related to the 2015 Notes in March 2010.
For the years ended December 31, 2015 , 2014 and 2013 , the Company recognized interest expense of $92.7 million , $75.3 million and $78.2 million ,
respectively, related to convertible notes, comprised of $22.6 million , $17.1 million and $17.7 million , respectively, for the contractual coupon interest, $65.6
million , $54.4 million and $55.7 million , respectively, related to the amortization of debt discount and $4.5 million , $3.8 million and $4.8 million , respectively,
related to the amortization of debt issuance costs. For the years ended December 31, 2015 , 2014 and 2013 , included in the amortization of debt discount
mentioned above was $2.7 million , $2.6 million and $1.5 million , respectively, of original issuance discount amortization related to the 2020 Notes. In addition,
the Company incurred interest expense for the write-off of unamortized debt issuance costs related to debt conversions of $0.5 million and $2.4 million for the
years ended December 31, 2014 and 2013 , respectively. The remaining period for amortization of debt discount and debt issuance costs is the period until the
stated maturity date for the respective debt. The weighted-average effective interest rates for the years ended December 31, 2015 , 2014 , and 2013 are 3.4% ,
3.5% and 4.4% , respectively.
In addition, if the Company's convertible debt is redeemed or converted prior to maturity, a gain or loss on extinguishment is recognized. The gain or
loss is the difference between the fair value of the debt component immediately prior to extinguishment and its carrying value. To estimate the fair value of the
debt at the conversion date, the Company estimated its straight debt borrowing rate, considering its credit rating and straight debt of comparable corporate issuers.
For the years ended December 31, 2014 and 2013 , the Company recognized non-cash losses of $6.3 million ( $3.8 million after tax)
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