Notes Payable

Notes payable consist of the following:



As of	July 31, 2016		January 31, 2016
4.00% Debentures	$	238,841	$	234,888
Other	5,188		5,188
Notes payable	$	244,029	$	240,076

Our 4.00% 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

In April 2011, we issued $253,000 of 4.00% Debentures 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. The 4.00% Debentures are unsecured obligations.

Each one thousand dollars in principal amount of the 4.00% Debentures is currently convertible, under certain circumstances, into 50.3389 shares of our common stock (equivalent to a conversion price of $19.87 per share). The initial conversion rate for the 4.00% Debentures was 48.6902 shares of our common stock for each one thousand dollars in principal amount (equivalent to a conversion price of $20.54 per share). The conversion rate is adjusted because we declare and pay quarterly cash dividends, beginning in the first quarter of fiscal year 2014.

The 4.00% Debentures are convertible, under certain circumstances, into shares of our common stock at the conversion rate noted above. The circumstances for conversion include:


•	The market price of our common stock exceeding 120% of the conversion price, or $23.84 per share as of July 31, 2016, 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.

As of July 31, 2016, the if-converted value of the 4.00% Debentures to the note holders exceeded the principal amount by $19,032.

As of July 31, 2016, none of the conditions allowing the holders of the 4.00% Debentures to convert the 4.00% Debentures into shares of our common stock were met. The determination of whether or not the 4.00% Debentures are convertible is performed at each balance sheet date and may change from quarter to quarter.

Effective April 5, 2016, we may redeem some or all of the 4.00% Debentures for cash 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 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 allowing for settlement of the debt 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, unamortized debt issuance costs, 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, 2016			January 31, 2016
Principal amount	$	252,957		$	252,957
Unamortized debt discount	(12,530		)	(16,007		)
Unamortized debt issuance costs	(1,586		)	(2,062		)
Net carrying amount of the liability component	$	238,841		$	234,888
Equity component, net of debt issuance costs	$	42,518		$	42,518

The unamortized debt discount and debt issuance costs amortize 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,
	2016		2015		2016		2015
Interest expense at the contractual interest rate	$	2,530	$	2,530	$	5,059	$	5,060
Amortization of debt discount	$	1,754	$	1,633	$	3,477	$	3,237
Amortization of debt issuance costs	$	238	$	238	$	476	$	476

The effective interest rate on the 4.00% Debentures was 7.25% for the six months ended July 31, 2016 and 2015.

Other Notes Payable

In February 2015, we issued a subordinated note payable as part of a business combination. The principal amount of $3,188 was outstanding as of July 31, 2016. The note bears interest at a rate of 4.0% and is due in full on February 25, 2019.

In September 2015, we issued a subordinated note payable as part of a business combination. The principal amount of $2,000 was outstanding as of July 31, 2016. The note bears interest at a rate of 4.0% and is due in full on September 8, 2018.