11. Convertible Senior Notes

On February 15, 2013, we issued $600.0 million of 4.55% Convertible Senior Notes due 2018 (the “2018 Notes”). The 2018 Notes were sold to the underwriters at a discount of 2.05%, resulting in net proceeds to us of $587.7 million. On July 3, 2013, we issued $460.0 million of 4.00% Convertible Senior Notes due 2019 (the “2019 Notes”). The 2019 Notes were sold to the underwriters at a discount of 2.125%, resulting in net proceeds to us of $450.2 million. The following summarizes the unsecured convertible senior notes (collectively, the “Convertible Notes”) outstanding as of September 30, 2013 (amounts in thousands, except rates):

	Principal Amount		Coupon Rate		Effective Rate (1)		Conversion Rate (2)	Maturity Date	Remaining Period of Amortization
2018 Notes	$	600,000	4.55	%	6.08	%	35.5981	2/15/2018	4.4 years
2019 Notes	$	460,000	4.00	%	5.37	%	37.9896	1/15/2019	5.3 years

	As of September 30, 2013
Total principal	$	1,060,000
Net unamortized discount	(64,928		)
Carrying amount of debt components	$	995,072

Carrying amount of conversion option equity components recorded in additional paid-in capital	$	48,502

(1) Effective rate includes the effects of underwriter purchase discount and the adjustment for the conversion option, the value of which reduced the initial liability and was recorded in additional paid-in-capital.

(2) The conversion rate represents the number of common shares issuable per $1,000 principal amount of Convertible Notes converted. The initial conversion rate for the 2018 Notes was 35.5391, but was adjusted to 35.5981 in accordance with the applicable indenture because the dividend distributions of $0.46 per share declared in each of the second and third quarters of 2013 exceeded the initial dividend threshold amount of $0.44 per share specified in the indenture. No such adjustment was necessary with respect to the 2019 Notes because the initial dividend threshold amount is $0.46 per share in the applicable indenture. The Company has the option to settle any conversions in cash, common shares or a combination thereof. The if-converted value of the Convertible Notes does not exceed their principal amount at September 30, 2013 since the closing market price of the Company’s common stock of $23.97 per share does not exceed the implicit conversion prices of $28.09 per share for the 2018 Notes and $26.32 for the 2019 Notes .

ASC Topic 470-20 requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. ASC 470-20 requires that the initial proceeds from the sale of these notes be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt that could have been issued by the Company at such time. The Company measured the fair value of the debt components of the 2018 Notes and 2019 Notes as of their respective issuance dates based on effective interest rates of 6.08% and 5.37%, respectively. As a result, the Company attributed an aggregate of approximately $48.5 million of the proceeds to the equity components of the notes, which represents the excess proceeds received over the fair value of the liability components of the notes at the date of issuance. The equity components of the Convertible Notes have been reflected within additional paid-in capital in the condensed consolidated balance sheet as of September 30, 2013. The resulting debt discount is being amortized over the period during which the Convertible Notes are expected to be outstanding (the maturity date) as additional non-cash interest expense. The additional non-cash interest expense attributable to each of the Convertible Notes will increase in subsequent reporting periods through the maturity date as the notes accrete to their par value over the same period. The aggregate contractual interest expense was approximately $11.4 million and $21.5 million for the three and nine months ended September 30, 2013, respectively. With respect to the amortization of the discount on the liability components of the Convertible Notes, the Company reported additional non-cash interest expense of approximately $3.0 and $5.7 million for the three and nine months ended September 30, 2013, respectively.

Prior to the close of the business day immediately preceding September 1, 2017 for the 2018 Notes and July 15, 2018 for the 2019 Notes, the Convertible Notes will be convertible only upon satisfaction of one or more of the following conditions: (1) the closing market price of the Company’s common stock is at least 130% of the conversion price of the respective Convertible Notes for at least 20 out of 30 trading days prior to the end of the preceding fiscal quarter, (2) the trading price of the Convertible Notes was less than 98% of the product of (i) the conversion rate and (ii) the closing price of the Company’s common stock during any five consecutive trading day period, (3) the Company issues certain equity instruments at less than the 10-day average closing market price of its common stock or the per-share value of certain distributions exceeds the market price of the Company’s common stock by more than 10% or (4) other specified corporate events (significant consolidation, sale, merger, share exchange, fundamental change, etc.). On or after September 1, 2017 for the 2018 Notes and July 15, 2018 for the 2019 Notes, holders may convert each of their notes at the applicable conversion rate at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date irrespective of the foregoing conditions.