Tesla 2016 Annual Report Download - page 63

Taxespayableincludesvalueaddedtax,salestax,propertytax,andincometaxpayables.
AccruedpurchasesreflectliabilitiesrelatedtotheconstructionoftheGigafactory,andengineeringdesignandtestingaccruals.Astheseservicesare
invoiced,thisbalancewillreduceandaccountspayablewillincrease.
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Note 7 - Customer Deposits
Customerdepositsincludecashpaymentsfromcustomersatthetimetheyplaceanorderforavehicleandadditionalpaymentsuptothepointofdelivery
includingthefairvalueofcustomertrade-invehiclesthatareapplicabletowardanewvehiclepurchase.Customerdepositamountsandtimingvarydependingon
thevehiclemodelandcountryofdelivery.Customerdepositsarefullyrefundableuptothepointthevehicleisplacedintotheproductioncycle.Customerdeposits
areincludedincurrentliabilitiesuntilrefundedoruntiltheyareappliedtoacustomer’spurchasebalanceattimeofdelivery.
AsofDecember31,2015and2014,weheld$283.4millionand$257.6millionincustomerdeposits.
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Note 8 - Convertible Notes and Long-term Debt Obligations
0.25% and 1.25% Convertible Senior Notes and Bond Hedge and Warrant Transactions
InMarch2014,weissued$800.0millionprincipalamountof0.25%convertibleseniornotesdue2019(2019Notes)and$1.20billionprincipalamountof
1.25%convertibleseniornotesdue2021(2021Notes)inapublicoffering.InApril2014,weissuedanadditional$120.0millionaggregateprincipalamountof
2019Notesand$180.0millionaggregateprincipalamountof2021Notes,pursuanttotheexerciseinfulloftheoverallotmentoptionsoftheunderwritersofour
March2014publicoffering.Thetotalnetproceedsfromtheseofferings,afterdeductingtransactioncosts,wereapproximately$905.8millionfrom2019Notesand
$1.36billionfrom2021Notes.Weincurred$14.2millionand$21.4millionofdebtissuancecostsinconnectionwiththe2019Notesandthe2021Notes,which
weinitiallyrecordedinotherassetsandareamortizingtointerestexpenseusingtheeffectiveinterestmethodoverthecontractualtermsofthesenotes.Theinterest
ratesarefixedat0.25%and1.25%perannumandarepayablesemi-annuallyinarrearsonMarch1andSeptember1ofeachyear,commencingonSeptember1,
2014.
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Each$1,000ofprincipalofthesenoteswillinitiallybeconvertibleinto2.7788sharesofourcommonstock,whichisequivalenttoaninitialconversion
priceofapproximately$359.87pershare,subjecttoadjustmentupontheoccurrenceofspecifiedevents.Holdersofthesenotesmayconverttheirnotesattheir
optiononorafterDecember1,2018forthe2019NotesandonorafterDecember1,2020forthe2021Notes.Further,holdersofthesenotesmayconverttheir
notesattheiroptionpriortotherespectivedatesabove,onlyunderthefollowingcircumstances:(1)duringanyfiscalquarterbeginningafterthefiscalquarter
endingJune30,2014,ifthelastreportedsalepriceofourcommonstockforatleast20tradingdays(whetherornotconsecutive)duringthelast30consecutive
tradingdaysofimmediatelyprecedingfiscalquarterisgreaterthanorequalto130%oftheconversionpriceoftheapplicablenotesoneachapplicabletradingday;
(2)duringthefivebusinessdayperiodfollowinganyfiveconsecutivetradingdayperiodinwhichthetradingpricefortheapplicablenotesislessthan98%ofthe
averageoftheclosingsalepriceofourcommonstockforeachdayduringsuchfivetradingdayperiod;or(3)ifwemakespecifieddistributionstoholdersofour
commonstockorifspecifiedcorporatetransactionsoccur.Uponconversionofthe2019Notes,wewouldpayordeliverasapplicable,cash,sharesofourcommon
stockoracombinationofcashandsharesofourcommonstock,atourelection.Uponconversionofthe2021Notes,wewouldpaytheholdersincashforthe
principalamountand,ifapplicable,sharesofourcommonstock(subjecttoourrighttodelivercashinlieuofalloraportionofsuchsharesofourcommonstock)
basedonadailyconversionvalue.Ifafundamentalchangeoccurspriortothematuritydate,holdersofthesenotesmayrequireustorepurchasealloraportionof
theirnotesforcashatarepurchasepriceequalto100%oftheprincipalamountofthenotes,plusanyaccruedandunpaidinterest.Inaddition,ifspecificcorporate
eventsoccurpriortotheapplicablematuritydate,wewillincreasetheconversionrateforaholderwhoelectstoconverttheirnotesinconnectionwithsucha
corporateeventincertaincircumstances.Duringthefourthquarterof2015,theclosingpriceofourcommonstockdidnotmeetorexceed130%oftheapplicable
conversionpriceofour2019Notesand2021Notesonatleast20ofthelast30consecutivetradingdaysofthequarter;furthermore,nootherconditionsallowing
holdersofthesenotestoconverthavebeenmetasofDecember31,2015.Therefore,the2019Notesand2021Notesarenotconvertibleduringthefirstquarterof
2016andareclassifiedaslong-termdebt.Shouldtheclosingpriceconditionsbemetinthefirstquarterof2015orafuturequarter,the2019and/orthe2021Notes
willbeconvertibleattheirholders’optionduringtheimmediatelyfollowingquarter.AsofDecember31,2015,theif-convertedvalueofthe2019Notesand2021
Notesdidnotexceedtheprincipalvalueofthosenotes.
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Inaccordancewithaccountingguidanceonembeddedconversionfeatures,wevaluedandbifurcatedtheconversionoptionassociatedwiththenotesfrom
therespectivehostdebtinstrumentandinitiallyrecordedtheconversionoptionof$188.1millionforthe2019Notesand$369.4millionforthe2021Notesin
stockholders’equity.Theresultingdebtdiscountsonthe2019Notesand2021Notesarebeingamortizedtointerestexpenseataneffectiveinterestrateof4.89%
and5.96%,respectively,overthecontractualtermsofthenotes.
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