Notes Payable

We have no long-term obligations maturing within the next five years. Our 4.00% Convertible Subordinated Debentures are due in 2031, but we may be required to repay them earlier under the conversion and redemption provisions described below.

4.00% Debentures due 2031

In April 2011, we issued $253,000 of 4.00% Convertible Subordinated Debentures (4.00% Debentures) due 2031 in a private placement pursuant to the SEC Rule 144A under the Securities Act of 1933. Interest on the 4.00% Debentures is payable semi-annually in April and October.

As of July 31, 2014, each one thousand dollars in principal amount of the 4.00% Debentures is convertible, under certain circumstances, into 49.365 shares of our common stock (equivalent to a conversion price of $20.26 per share) for a total of 12,489 shares. The circumstances for conversion include:


•	The market price of our common stock exceeding 120.0% of the conversion price, or $24.31 per share as of July 31, 2014, for at least 20 of the last 30 trading days in the previous fiscal quarter;


•	A call for redemption of the 4.00% Debentures;


•	Specified distributions to holders of our common stock;


•	If a fundamental change, such as a change of control, occurs;


•	During the two months prior to, but not on, the maturity date; or


•	The market price of the 4.00% Debentures declining to less than 98% of the value of the common stock into which the 4.00% Debentures are convertible.

Upon conversion of any 4.00% Debentures, a holder will receive:


(i)	Cash for the lesser of the principal amount of the 4.00% Debentures that are converted or the value of the converted shares; and


(ii)	Cash or shares of common stock, at our election, for the excess, if any, of the value of the converted shares over the principal amount.

If a holder elects to convert their 4.00% Debentures in connection with a fundamental change in the company that occurs prior to April 5, 2016, the holder will also be entitled to receive a make whole premium upon conversion in some circumstances.

As a result of declaring cash dividends during the fiscal year ended January 31, 2014 and the six months ended July 31, 2014, the initial conversion rate for the 4.00% Debentures of 48.6902 shares of our common stock for each one thousand dollars in principal amount of the 4.00% Debentures (equivalent to a conversion price of $20.54 per share of our common stock) has been adjusted to 49.365 shares of our common stock for each one thousand dollars in principal amount of the 4.00% Debentures (equivalent to a conversion price of $20.26 per share of our common stock).

We may redeem some or all of the 4.00% Debentures for cash on or after April 5, 2016 at the following redemption prices expressed as a percentage of principal, plus any accrued and unpaid interest:



Period	Redemption Price
Beginning on April 5, 2016 and ending on March 31, 2017	101.143	%
Beginning on April 1, 2017 and ending on March 31, 2018	100.571	%
On April 1, 2018 and thereafter	100.000	%

The holders, at their option, may redeem the 4.00% Debentures in whole or in part for cash on April 1, 2018, April 1, 2021, and April 1, 2026, and in the event of a fundamental change in the company. In each case, our repurchase price will be 100% of the principal amount of the 4.00% Debentures plus any accrued and unpaid interest.

The 4.00% Debentures contain a conversion feature that the debt may be settled in cash upon conversion, therefore we separately account for the implied liability and equity components of the 4.00% Debentures. The principal amount, unamortized debt discount, net carrying amount of the liability component, and carrying amount of the equity component of the 4.00% Debentures are as follows:



As of	July 31, 2014			January 31, 2014
Principal amount	$	253,000		$	253,000
Unamortized debt discount	(25,724		)	(28,739		)
Net carrying amount of the liability component	$	227,276		$	224,261
Equity component	$	43,930		$	43,930

The unamortized debt discount amortizes to interest expense using the effective interest method through March 2018.

We recognized the following amounts in interest expense in the condensed consolidated statement of income related to the 4.00% Debentures:



	Three months ended July 31,				Six months ended July 31,
	2014		2013		2014		2013
Interest expense at the contractual interest rate	$	2,530	$	2,530	$	5,060	$	5,060
Amortization of debt discount	$	1,521	$	1,416	$	3,015	$	2,807

The effective interest rate on the 4.00% Debentures was 7.25% for the six months ended July 31, 2014 and 2013.