8. Debt

Line of Credit

In September 2013, we entered into a Credit Agreement with Wells Fargo Bank, National Association (Wells Fargo) providing us a $75.0 million revolving loan facility, which may be increased by up to an additional $75.0 million provided certain conditions are met (the 2013 Credit Agreement). At our option, amounts borrowed under the 2013 Credit Agreement bear interest at either the one-month LIBOR rate plus a 0.50 percent margin, or a fluctuating base rate excluding any margin. In addition, we are subject to a monthly commitment fee of 0.06 percent per annum on the average daily unused balance of the facility. In July 2014, we extended the term of the 2013 Credit Agreement to September 30, 2015. Amounts borrowed under the 2013 Credit Agreement are secured by certain of our marketable investments. As of December 31, 2014, we had no outstanding balance on the facility. The 2013 Credit Agreement does not subject us to any financial covenants.

Convertible Notes Due 2016

In October 2011, we issued $250.0 million in aggregate principal value 1.0 percent Convertible Senior Notes due September 15, 2016 (Convertible Notes). The Convertible Notes are unsecured, unsubordinated debt obligations that rank equally with all of our other unsecured and unsubordinated indebtedness. We pay interest semi-annually on March 15 and September 15 of each year. The initial conversion price is $47.69 per share.

Conversion can occur: (1) any time after June 15, 2016; (2) during any calendar quarter that follows a calendar quarter in which the price of our common stock exceeds 130 percent of the conversion price for at least 20 days during the 30 consecutive trading-day period ending on the last trading day of the quarter; (3) during the ten consecutive trading-day period following any five consecutive trading-day period in which the trading price of the Convertible Notes is less than 95 percent of the closing price of our common stock multiplied by the then-current number of shares underlying the Convertible Notes; (4) upon specified distributions to our shareholders; (5) in connection with certain corporate transactions; or (6) in the event that our common stock ceases to be listed on the NASDAQ Global Select Market, the NASDAQ Global Market or the New York Stock Exchange, or any of their respective successors.

The closing price of our common stock exceeded 130 percent of the conversion price of the Convertible Notes for more than 20 trading days during the 30 consecutive trading day period ended December 31, 2014. Consequently, the Convertible Notes are convertible at the election of their holders. As we do not control this conversion right, the Convertible Notes have been classified as a current liability on our consolidated balance sheet at December 31, 2014. We are required to calculate this contingent conversion provision at the end of each quarterly reporting period. Therefore, the convertibility and classification of our Convertible Notes may change depending on the price of our common stock.

At December 31, 2014, the aggregate conversion value of the Convertible Notes exceeded their par value by $238.0 million using a conversion price of $129.49, which was the closing price of our common stock on December 31, 2014.

Upon conversion, holders of our Convertible Notes are entitled to receive: (1) cash equal to the lesser of the par value of the notes or the conversion value (the number of shares underlying the Convertible Notes multiplied by the then current conversion price per share); and (2) to the extent the conversion value exceeds the par value of the notes, shares of our common stock. In the event of a change in control, as defined in the indenture under which the Convertible Notes have been issued, holders can require us to purchase all or a portion of their Convertible Notes for 100 percent of the notes' par value plus any accrued and unpaid interest.

During the three-month period ended December 31, 2014, we settled conversion requests representing $111.3 million in principal value of our Convertible Notes. We paid $111.3 million in principal and issued 1.5 million shares of our common stock during the settlement process. We received 1.5 million shares of our common stock under our convertible note hedge (discussed below under Convertible Note Hedge and Warrant Transactions) from Deutsche Bank AG London (DB London) which we placed into our treasury stock account. We recognized a $4.6 million extinguishment loss with the settlement of these conversions. As of December 31, 2014, there are 2.9 million underlying shares representing the aggregate consideration upon future conversions on the outstanding Convertible Notes.

During the period from January 1, 2015 through February 11, 2015, we settled conversion requests representing $14.0 million in principal value of the Convertible Notes. We paid $14.0 million for the principal value of the notes and issued 193,000 shares of our common stock during the settlement of these conversions. We also received 193,000 shares from our convertible note hedge with DB London at the settlement dates which we placed into our treasury stock account. We expect to recognize a $513,000 extinguishment loss with the settlement of these conversions. As of February 11, 2015, there are 2.6 million underlying shares representing the aggregate consideration upon future conversions on the $124.8 million outstanding principal of the Convertible Notes.

The terms of the Convertible Notes provide for settlement wholly or partially in cash. Consequently, we are required to account for their liability and equity components separately so that the subsequent recognition of interest expense reflects our non-convertible borrowing rate. Accordingly, as of the date of issuance, we estimated the fair value of the Convertible Notes without consideration of the conversion option (Liability Component). The excess of the proceeds received over the estimated fair value of the Liability Component totaling $57.9 million has been recorded as the conversion option (Equity Component) and a corresponding offset has been recognized as a discount to the Convertible Notes to reduce their net carrying value. A portion of the Equity Component equal to the unamortized discount as of December 31, 2014 has been reclassified to temporary equity because one of the contingent conversion criteria had been met at December 31, 2014, as disclosed above. Refer to Note 10—Temporary Equity. We are amortizing the discount over the five-year period ending September 15, 2016 (the expected life of the Liability Component) using the effective interest method and an effective rate of interest of 6.7 percent, which corresponded to our estimated non-convertible borrowing rate at the date of issuance.

Interest expense incurred in connection with our convertible notes consisted of the following (in thousands):

	Year Ended December 31,
	2014		2013		2012
Contractual coupon rate of interest	$	2,151	$	2,500	$	2,500
Discount amortization		11,057		11,178		10,487

Interest expense—convertible notes	$	13,208	$	13,678	$	12,987

The carrying value of our convertible notes consisted of the following (in thousands):

	As of December 31,
	2014			2013
Principal balance	$	138,750		$	250,000
Discount, net of accumulated amortization of $19,819 and $23,783		(12,336	)		(34,155	)

Carrying amount	$	126,414		$	215,845

Convertible Note Hedge and Warrant Transactions

In connection with the issuance of our Convertible Notes, we entered into separate convertible note hedge and warrant transactions with DB London to reduce the potentially dilutive impact of the conversion of our convertible notes. Pursuant to the convertible note hedge, we purchased call options to acquire up to approximately 5.2 million shares of our common stock with a strike price of $47.69. The call options become exercisable upon any conversions and the maturity of the Convertible Notes, and will terminate upon the maturity of the Convertible Notes or the first day the Convertible Notes are no longer outstanding, whichever occurs first. The call options will offset on a share for share basis, any shares of our common stock that we issue upon any conversion or at the maturity of our Convertible Notes. As of December 31, 2014, we had approximately 2.9 million shares of our common stock remaining under the call options after the settlement of $111.3 million of conversion requests during the fourth quarter of 2014. We also sold DB London warrants to acquire up to approximately 5.2 million shares of our common stock with a strike price of $67.56. The warrants will expire incrementally on a series of expiration dates subsequent to the maturity date of our Convertible Notes. Both the convertible note hedge and warrant transactions will be settled on a net-share basis. To the extent that the price of our common stock exceeds the strike price of the warrants on any or all of the series of related incremental expiration dates, we will be required to issue shares of our common stock to DB London.

Mortgage Financing—Wells Fargo Bank

In December 2010, we entered into a Credit Agreement with Wells Fargo and Bank of America, N.A., pursuant to which we obtained a $70.0 million mortgage loan (the 2010 Credit Agreement). The 2010 Credit Agreement matured in December 2014 and we repaid the outstanding $66.5 million principal balance in full. The 2010 Credit Agreement was secured by certain of our facilities in Research Triangle Park, North Carolina and Silver Spring, Maryland. Annual principal payments were based on a twenty-five year amortization schedule using a fixed rate of interest of 7.0 percent and the outstanding debt bore a floating rate of interest per annum based on the one-month LIBOR, plus a credit spread of 3.75 percent.

Interest Expense

Details of interest expense presented on our consolidated statements of operations are as follows (in thousands)

	Year Ended December 31,
	2014		2013			2012
Interest expense	$	17,592	$	18,117		$	17,544
Less: interest capitalized		—		(59	)		(905	)

Total interest expense	$	17,592	$	18,058		$	16,639