Long-Term Debt

Long-term debt consisted of the following at June 30, 2012 and December 31, 2011 (dollars in thousands):



	June 30, 2012		December 31, 2011
2.0% Convertible Senior Notes	$	—	$	256,995
7.5% Senior Notes	477,648		400,000
Total long-term debt	477,648		656,995
Less current portion of 2.0% Convertible Senior Notes	—		256,995
Total long-term debt, less current portion	$	477,648	$	400,000

Senior Notes

On November 16, 2011, the Company issued $400.0 million in aggregate principal amount of 7.5% Senior Notes due November 15, 2019 (the “7.5% Senior Notes”). Interest on the 7.5% Senior Notes is payable semi-annually on May 15 and November 15 of each year, commencing May 15, 2012. The 7.5% Senior Notes rank equally in right of payment with any of the Company’s existing and future indebtedness that is not expressly subordinated thereto, senior in right of payment to any future indebtedness that is expressly subordinated in right of payment thereto and effectively junior to any of the Company’s existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness. In addition, the 7.5% Senior Notes will be structurally subordinated to all indebtedness and other liabilities of the Company’s subsidiaries, unless the Company’s subsidiaries become guarantors of the 7.5% Senior Notes.

On January 18, 2012, the Company issued an additional $75.0 million in aggregate principal amount of unsecured 7.5% Senior Notes due November 15, 2019 at a premium of 103.75%. The additional notes constitute a further issuance of, and are fungible with, the $400.0 million of 7.5% Senior Notes that the Company issued on November 16, 2011 and form a single series of debt securities with the initial notes. Following the issuance of the additional notes, the aggregate principal amount of the 7.5% Senior Notes outstanding was $475.0 million.

The 7.5% Senior Notes contain certain covenants restricting the Company’s ability to, among other things, incur additional indebtedness, pay dividends or make other distributions or payments, repay junior indebtedness, sell assets, make investments, engage in transactions with affiliates, create certain liens and engage in certain types of mergers or acquisitions. These covenants are subject to certain exceptions, including exceptions that allow the Company to incur debt or make restricted payments if certain ratios are met. As of June 30, 2012 and December 31, 2011, the Company believes it was in compliance with all covenants under the 7.5% Senior Notes. The 7.5% Senior Notes provide certain rights to the holders in the event of a change in control such as that caused by the Merger Agreement as discussed below under Subsequent Events (see Note 12). These rights provide that the holders be offered the opportunity to put the 7.5% Senior Notes back to the Company at a price equal to 101.0% of the principal value. The 7.5% Senior Notes had an estimated fair value of 108.5% of the principal value as of June 30, 2012.

Convertible Senior Notes

During the three months ended June 30, 2012, all of the Company's remaining outstanding 2.0% Convertible Senior Notes issued March 28, 2007 (the “2.0% Convertible Senior Notes”) were surrendered for conversion by the noteholders in accordance with the terms and provisions of the indenture governing the notes. On May 15, 2012, the Company issued 2,127,399 shares of its common stock and paid $259.9 million in cash in satisfaction of its obligation with respect thereto, plus accrued and unpaid interest of $2.6 million. The 2.0% Convertible Senior Notes were scheduled to mature on May 15, 2012. The carrying amount of the 2.0% Convertible Senior Notes at December 31, 2011 was $257.0 million. The related unamortized discount of $2.9 million at December 31, 2011 was fully amortized in the period through the date of conversion.

With respect to any conversion value in excess of the principal amount, the Company had the option to settle the excess with cash, shares of its common stock, or a combination thereof, based on a daily conversion value, as defined in the indenture. The conversion rate for the 2.0% Convertible Senior Notes was 23.5114 shares of common stock per one thousand dollars of principal amount of 2.0% Convertible Senior Notes and was equivalent to a conversion price of approximately $42.53 per share of common stock. Consequently, under the provisions of the 2.0% Convertible Senior Notes, as the volume-weighted average price of the Company’s common stock exceeded $42.53 during the relevant observation period for the 2.0% Convertible Senior Notes, the Company settled the conversion value in excess of the principal amount for an aggregate of 2,127,399 shares of its common stock which had a value at the time of issuance of $129.4 million. Pursuant to the convertible note hedge transactions, discussed below, the Company received an equal amount of shares from the counterparty.

The 2.0% Convertible Senior Notes had a dilutive impact to earnings per share for the three and six months ended June 30, 2012 as the average market price of the Company’s common stock of $63.23 and $65.26 for the three and six months ended June 30, 2012, respectively, exceeded the conversion price of $42.53. As of June 30, 2011, the 2.0% Convertible Senior Notes had a dilutive impact to earnings per share as the average market price of the Company’s common stock for the three and six months ended June 30, 2011 of $66.37 and $60.54, respectively, exceeded the conversion price of $42.53.

Concurrent with the issuance of the 2.0% Convertible Senior Notes, the Company purchased convertible note hedges, subject to customary anti-dilution adjustments, covering 6,112,964 shares of its common stock. The convertible note hedges allowed the Company to receive, at its option, shares of its common stock and/or cash equal to the amounts of common stock and/or cash related to the excess conversion value that the Company delivered to the holders of the 2.0% Convertible Senior Notes upon conversion. These convertible note hedges were exercised upon conversion by the noteholders of the Company's remaining outstanding 2.0% Convertible Senior Notes.

Also concurrent with the issuance of the 2.0% Convertible Senior Notes, the Company sold warrants to acquire, subject to customary anti-dilution adjustments, up to 6,112,964 shares of its common stock at an exercise price of $53.77 per share. Under the provisions of the warrant instruments, if the volume-weighted average price of the Company’s common stock exceeds $53.77 at exercise, the Company will be obligated to settle in shares of its common stock an amount equal to approximately $6.1 million for each dollar that the volume-weighted average price of its common stock exceeds $53.77, resulting in a dilutive impact to its earnings. The warrant instruments had a dilutive impact to earnings per share for the three and six months ended June 30, 2012 as the average market price of the Company’s common stock for the three and six months ended June 30, 2012 of $63.23 and $65.26, respectively, exceeded the $53.77 exercise price of the warrants. As of June 30, 2011, the warrant instruments had a dilutive impact to earnings per share as the average market price of the Company’s common stock for the three and six months ended June 30, 2011 of $66.37 and $60.54, respectively, exceeded the $53.77 exercise price of the warrants.

The warrants are separate instruments which did not affect holders’ rights under the 2.0% Convertible Senior Notes. The warrants remain outstanding as of June 30, 2012. Individual components of the warrants expire, in accordance with the terms of the warrant agreement, over the period from August 13, 2012 through October 22, 2012. The warrants contain certain early termination provisions triggered by any change in control such as that caused by the Merger Agreement discussed below under Subsequent Events (see Note 12). Should the Merger be completed prior to the expiration of the warrants on October 22, 2012, the Company would be required to remit significant cancellation payments to the holders of the warrants in accordance with their terms. As discussed below, the Merger is expected to close in the first quarter of 2013, which is subsequent to the expiration of the warrants.

As of June 30, 2012, the Company’s common stock was last traded at a price of $65.91 per share. At this per share value, the Company would be required to deliver approximately $74.2 million in shares of its common stock under the warrant instruments, or approximately 1,126,000 shares of its common stock at that price per share. As of July 30, 2012, the Company's common stock was last traded at a price of $90.10. At this per share value, the Company would be required to deliver approximately $222.1 million in shares of its common stock under the warrant instruments, or approximately 2,465,000 shares of its common stock.