Notes Payable

Notes payable consist of the following:



As of January 31,	2017			2016
4.00% Debentures	$	242,921		$	234,888
Other	5,188			5,188
Notes payable	248,109			240,076
4.00% Debentures, current portion	(242,921		)	—
Notes payable, long-term	$	5,188		$	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.

Annual maturities of our notes payable are scheduled as follows:



Fiscal years ending January 31,
2019	$	2,000
2020	3,188
Thereafter ⁽¹⁾	252,957
Total	$	258,145

⁽¹⁾The 4.00% Debentures are currently convertible at the option of the holders and would be due in fiscal year 2018 if converted.

4.00% Debentures

In April 2011, we issued $253,000 of 4.00% Debentures in a private placement pursuant to the Securities and Exchange Commission 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 50.4551 shares of our common stock (equivalent to a conversion price of $19.82 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.

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 $23.78 per share as of January 31, 2017, 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 January 31, 2017, the if-converted value of the 4.00% Debentures to the note holders exceeded the principal amount by $218,124.

During the fiscal quarter ended January 31, 2017, the market price of our common stock exceeded 120% of the conversion price for at least 20 of the last 30 trading days of the period. Accordingly, the 4.00% Debentures are convertible at the option of the holders through April 30, 2017. Therefore, the carrying value of the 4.00% Debentures is classified as a current liability. Additionally, the excess of the principal amount over the carrying amount of the 4.00% Debentures is reclassified from permanent equity to temporary equity in our consolidated balance sheet. 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. If this threshold is not met next quarter, the 4.00% Debentures will be reclassified as a long-term liability and the temporary equity will be reclassified to permanent equity in our consolidated balance sheet.

If a holder elects to convert their 4.00% Debentures through April 30, 2017, we would be required to pay cash for at least the principal amount of the converted 4.00% Debentures.

If the proposed acquisition of the Company by Siemens is completed at a price of $37.25 per share and the 4.00% Debentures are converted, an estimated cash payment of $477,000 to the debenture holders would be required, including the impact of the dividend declared on March 2, 2017.

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 January 31,	2017			2016
Principal amount	$	252,957		$	252,957
Unamortized debt discount	(8,926		)	(16,007		)
Unamortized debt issuance costs	(1,110		)	(2,062		)
Net carrying amount of the liability component	$	242,921		$	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. The effective interest rate on the 4.00% Debentures was 7.25% for fiscal years 2017, 2016, and 2015.

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



Fiscal year ended January 31,	2017		2016		2015
Interest expense at the contractual interest rate	$	10,118	$	10,117	$	10,120
Amortization of debt discount	$	7,081	$	6,593	$	6,139
Amortization of debt issuance costs	$	952	$	952	$	952

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 January 31, 2017. 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 January 31, 2017. The note bears interest at a rate of 4.0% and is due in full on September 8, 2018.