Note H: Debt and Credit Facilities

The following table presents the composition of the Company's debt and financial services credit facilities at December 31, 2014 and 2013:

(in thousands)		2014			2013

Senior notes
5.4 percent senior notes due January 2015	$	126,481		$	126,481
8.4 percent senior notes due May 2017		230,000			230,000
6.6 percent senior notes due May 2020		300,000			300,000
5.4 percent senior notes due October 2022		250,000			250,000
Convertible senior notes
1.6 percent convertible senior notes due May 2018		225,000			225,000
0.25 percent convertible senior notes due June 2019		267,500			267,500

Total senior notes and convertible senior notes		1,398,981			1,398,981
Debt discount		(1,673	)		(2,362	)

Senior notes and convertible senior notes, net		1,397,308			1,396,619
Secured notes payable		5,771			689

Total debt	$	1,403,079		$	1,397,308
Financial services credit facilities	$	129,389		$	73,084

At December 31, 2014, maturities of the Company's debt and financial services credit facilities were scheduled as follows:

(in thousands)

2015	$	257,854
2016		3,787
2017		230,000
2018		225,000
2019		267,500
After 2019		550,000

Total	$	1,534,141

Each of the senior notes pays interest semiannually and all, except for the convertible senior notes due May 2018 and June 2019, may be redeemed at a stated redemption price, in whole or in part, at the option of the Company at any time.

During 2013, the Company issued $267.5 million of 0.25 percent convertible senior notes due June 2019. The Company will pay interest on the notes on June 1 and December 1 of each year, which commenced on December 1, 2013. The notes, which mature on June 1, 2019, are initially convertible into shares of the Company's common stock at a conversion rate of 13.3307 shares per $1,000 of their principal amount. This corresponds to an initial conversion price of approximately $75.01 per share and represents a conversion premium of approximately 50.0 percent, based on the closing price of the Company's common stock on May 14, 2013, which was $50.01 per share. The conversion rate of the notes is subject to adjustment upon the following events: the Company issues a dividend or distribution in shares of common stock on all or substantially all of its shares of common stock; the Company subdivides or combines common stock; the Company offers its stockholders the option to purchase additional shares at a price that is less than the average closing price of its common stock from the ten previous trading days; the Company distributes shares of common stock or offers its holders of common stock the option to purchase capital stock or other securities; a corporate spin-off event occurs; the Company pays dividends or distributions to a stockholder, other than a dividend or distribution due to liquidation or a regular cash dividend that does not exceed $0.03 per share per quarter; the Company makes a payment in respect of a tender offer for its common stock that exceeds the average closing price of its common stock from the ten previous trading days; a make-whole adjustment event occurs; or a redemption notice occurs, which includes a change in control or termination of trading. These events may not be considered standard anti-dilution provisions under a conventional convertible debt security scenario. An event that adversely affects the value of the notes may occur, and that event may not result in an adjustment to the conversion rate. All of the conversion rate adjustment events are intended to make the investor whole for the direct effect that the occurrence of such above mentioned dilutive events should have on the price of the underlying shares; they do not adjust for the actual change in the market value of the underlying shares. Therefore, the only variables that could affect the settlement amount would be inputs to the fair value of a fixed-for-fixed forward or option on equity shares. At any time prior to the close of business on the business day immediately preceding the stated maturity date, holders may convert all or any portion of their notes. The notes are fully and unconditionally guaranteed, jointly and severally, by substantially all of the Company's Guarantor Subsidiaries. The Company may not redeem the notes prior to June 6, 2017. On or after that date, it may redeem for cash any or all of the notes, at its option, if the closing sale price of its common stock for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending within 5 trading days immediately preceding the date on which it provides notice of redemption, including the last trading day of such 30 day trading period, exceeds 130 percent of the applicable conversion price on each applicable trading day. The redemption price will equal 100 percent of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the notes. The Company received net proceeds of $260.1 million from this offering prior to offering expenses.

During 2012, the Company issued $250.0 million of 5.4 percent senior notes due October 2022. The Company will pay interest on the notes on April 1 and October 1 of each year, which commenced on April 1, 2013. It received net proceeds of $246.6 million from this offering prior to offering expenses. The notes are fully and unconditionally guaranteed, jointly and severally, by substantially all of the Company's Guarantor Subsidiaries.

Additionally during 2012, the Company issued $225.0 million of 1.6 percent convertible senior notes due May 2018. The Company will pay interest on the notes on May 15 and November 15 of each year, which commenced on November 15, 2012. At any time prior to the close of business on the business day immediately preceding the stated maturity date, holders may convert all or any portion of their convertible senior notes. These notes will mature on May 15, 2018, unless converted earlier by the holder, at its option, or purchased by the Company upon the occurrence of a fundamental change. These notes are initially convertible into shares of the Company's common stock at a conversion rate of 31.2168 shares per $1,000 of their principal amount. This corresponds to an initial conversion price of approximately $32.03 per share and represents a conversion premium of approximately 42.5 percent, based on the closing price of the Company's common stock on May 10, 2012, which was $22.48 per share. The conversion rate of the notes is subject to adjustment upon the following events: the Company issues a dividend or distribution in shares of common stock on all or substantially all of its shares of common stock; the Company subdivides or combines common stock; the Company offers its stockholders the option to purchase additional shares at a price that is less than the average closing price of its common stock from the ten previous trading days; the Company distributes shares of common stock or offers its holders of common stock the option to purchase capital stock or other securities; a corporate spin-off event occurs; the Company pays dividends or distributions to a stockholder, other than a dividend or distribution due to liquidation or a regular cash dividend that does not exceed $0.03 per share per quarter; the Company makes a payment in respect of a tender offer for its common stock that exceeds the average closing price of its common stock from the ten previous trading days; or a make-whole adjustment event occurs, which includes a change in control or termination of trading. These events may not be considered standard anti-dilution provisions under a conventional convertible debt security scenario. An event that adversely affects the value of the notes may occur, and that event may not result in an adjustment to the conversion rate. All of the conversion rate adjustment events are intended to make the investor whole for the direct effect that the occurrence of such above-mentioned dilutive events should have on the price of the underlying shares; they do not adjust for the actual change in the market value of the underlying shares. Therefore, the only variables that could affect the settlement amount would be inputs to the fair value of a fixed-for-fixed forward or option on equity shares. The notes are fully and unconditionally guaranteed, jointly and severally, by substantially all of the Company's Guarantor Subsidiaries. The Company may not redeem the notes prior to the stated maturity date. No sinking fund is provided for the notes. The Company received net proceeds of $218.8 million from this offering prior to offering expenses.

The Company did not redeem or repurchase any debt during the years ended December 31, 2014 and 2013. For the year ended December 31, 2012, the Company paid $177.2 million to redeem and repurchase $167.2 million of its 6.9 percent senior notes due June 2013, resulting in a loss of $9.1 million. The loss resulting from this debt repurchase was included in "Loss related to early retirement of debt, net" within the Consolidated Statements of Earnings.

In January 2015, the Company used existing cash of $126.5 million to settle its 5.4 percent senior notes that matured. (See Note P, "Subsequent Event.")

To provide letters of credit required in the ordinary course of its business, the Company has various secured letter of credit agreements that require it to maintain restricted cash deposits for outstanding letters of credit. Outstanding letters of credit totaled $33.3 million and $93.6 million under these agreements at December 31, 2014 and 2013, respectively.

To finance its land purchases, the Company may also use nonrecourse secured notes payable. Outstanding seller-financed nonrecourse secured notes payable totaled $5.8 million and $689,000 at December 31, 2014 and 2013, respectively.

Senior notes; convertible senior notes; credit facilities; and indenture agreements are subject to certain covenants that include, among other things, restrictions on additional secured debt and the sale of assets. The Company was in compliance with these covenants at December 31, 2014.

During 2014, the Company entered into a $300.0 million unsecured four-year revolving Credit Facility agreement. The Credit Facility provides for a $300.0 million Revolving Credit Facility, which includes a $150.0 million Letter of Credit Subfacility and a $25.0 million swing line facility. In addition, the Credit Facility includes an accordion feature pursuant to which the commitments under the Revolving Credit Facility may be increased, from time to time, up to a principal amount not to exceed $450.0 million, subject to the terms and conditions set forth in the agreement. The commitments for the Letter of Credit Subfacility are not to exceed half of the amount of the commitments for the Revolving Credit Facility. The Credit Facility, which matures on November 21, 2018, provides for the commitments to be extended for up to two additional one-year periods, subject to satisfaction of the terms and conditions set forth therein.

The obligation of the lenders to make advances or issue letters of credit under the Credit Facility is subject to the satisfaction of certain conditions set forth in the credit agreement. If the leverage ratio of the Company and its homebuilding segment subsidiaries exceeds certain thresholds as set forth in the Credit Facility, availability under the Revolving Credit Facility will be subject to a borrowing base as set forth in the agreement.

The Credit Facility contains various representations and warranties, as well as affirmative, negative and financial covenants that the Company considers customary for financings of this type. The financial covenants in the Credit Facility include a maximum leverage ratio covenant; a minimum net worth test; and a minimum interest coverage test or a minimum liquidity test. The financial services segment subsidiaries of the Company are unrestricted subsidiaries under the Credit Facility and certain covenants of the agreement do not apply to the unrestricted subsidiaries. The Credit Facility includes event of default provisions that the Company considers customary for financings of this type. If an event of default under the Credit Facility occurs and is continuing, the commitments under the agreement may be terminated; the amounts outstanding, including all accrued interest and unpaid fees, may be declared payable immediately; and the Company may be required to cash collateralize the outstanding letters of credit issued under this facility. The Credit Facility will be used for general corporate purposes. Certain letters of credit issued and outstanding prior to the Company's entry into the Credit Facility have been deemed letters of credit under the facility and made subject to its terms. Amounts borrowed under the Credit Facility are guaranteed on a joint and several basis by substantially all of the Company's 100 percent-owned homebuilding subsidiaries. Such guarantees are full and unconditional. (See Note M, "Supplemental Guarantor Information.")

Outstanding borrowings under the Credit Facility will bear interest at a fluctuating rate per annum that is equal to the base rate or the reserve adjusted LIBOR rate in each case, plus an applicable margin determined based on changes in the leverage ratio of the Company and its homebuilding segment subsidiaries. The Company did not have any outstanding borrowings against the Revolving Credit Facility at December 31, 2014. Under the Letter of Credit Subfacility, however, the Company had unsecured letters of credit outstanding that totaled $67.7 million at December 31, 2014. The unused borrowing capacity of the Credit Facility at December 31, 2014, totaled $232.3 million.

During 2014, RMCMC entered into a $50.0 million warehouse line of credit with Comerica Bank, which will expire in April 2015. This facility is used to fund, and is secured by, mortgages that were originated by RMCMC and are pending sale. Under the terms of this facility, RMCMC is required to maintain various financial and other covenants and to satisfy certain requirements relating to the mortgages securing the facility. At December 31, 2014, RMCMC was in compliance with these covenants. RMCMC had outstanding borrowings against this facility that totaled $48.5 million at December 31, 2014. The weighted-average effective interest rate on the outstanding borrowings against this credit facility was 3.0 percent at December 31, 2014.

During 2011, RMCMC entered into a $50.0 million repurchase credit facility with JPM, which was subsequently increased to $75.0 million during 2012 and to $100.0 million during 2014, and will expire in November 2015. This facility is used to fund, and is secured by, mortgages that were originated by RMCMC and are pending sale. Under the terms of the facility, RMCMC is required to maintain various financial and other covenants and to satisfy certain requirements relating to the mortgages securing the facility. At December 31, 2014, RMCMC was in compliance with these covenants. RMCMC had outstanding borrowings against this facility that totaled $80.9 million and $73.1 million at December 31, 2014 and 2013, respectively. The weighted-average effective interest rates on the outstanding borrowings against this credit facility were 3.2 and 3.4 percent at December 31, 2014 and 2013, respectively.