INDEBTEDNESS

Convertible Senior Notes

In December 2014, we issued $143.8 million of our Convertible Senior Notes due 2019 (the “Notes”) in a registered public offering. The Notes pay 3.0% interest semi-annually in arrears starting on June 1, 2015 and are due December 1, 2019. The initial conversion price was $69.48 per share. Simultaneous with the issuance of the Notes, we entered into “bond hedge” (or purchased call) and “warrant” (or written call) transactions with an affiliate of one of the offering underwriters in order to synthetically raise the initial conversion price of the Notes to $96.21 per share and reduce the potential common stock dilution that may arise from the conversion of the Notes.

The Notes are convertible at the option of the holder under certain circumstances and upon conversion we may elect to settle such conversion in shares of our common stock, cash, or a combination thereof. As a result of our cash conversion option, we separately accounted for the value of the embedded conversion option as a debt discount (with an offset to Additional Paid in Capital (“APIC”)) of $33.6 million. Deferred financing costs are recorded as a reduction of long-term debt in the consolidated balance sheets and are being amortized as additional non-cash interest expense over the term of the debt, since this method was not significantly different from the effective interest method.

The carrying value of the Notes is as follows as of:

	March 31,		December 31,
(in thousands)	2016		2015
Principal amount	$	143,750	$	143,750
Unamortized debt discount		(25,455)		(27,016)
Deferred financing costs		(3,096)		(3,307)
Net carrying value	$	115,199	$	113,427

We had accrued interest of $1.4 million and $0.4 million related to the Notes recorded in Accrued expenses, other in our consolidated balance sheets at March 31, 2016 and December 31, 2015, respectively.

The following table sets forth the components of total interest expense related to the Notes recognized in the accompanying unaudited interim condensed consolidated statements of earnings for the three months ended March 31, 2016 and 2015:

	Three Months Ended
	March 31,		March 31,
(in thousands)	2016		2015
Contractual coupon	$	1,078	$	1,078
Amortization of debt discount		1,562		1,481
Amortization of finance fees		211		211
Capitalized interest		(47)		(9)
	$	2,804	$	2,761

As of March 31, 2016, the effective interest rate on the Notes was 7.8%, on an annualized basis.