Long-Term Debt



	As of December 31,
	2016			2015
	(In millions)
Senior debt	$	388.0		$	91.8
Senior secured notes	—			449.4
Convertible senior notes	240.0			—
Convertible subordinated notes	35.6			84.8
Other debt	—			13.0
Total debt, carrying amount	663.6			639.0
Less: Amounts due within one year	(55.6		)	(5.3		)
Total long-term debt, carrying amount	$	608.0		$	633.7

As of December 31, 2016, the earlier of the Company’s contractual debt principal maturities or the next debt redemption date that could be exercised at the option of the debt holder, are summarized by fiscal year:



	Total		2017		2018		2019		2020		2021		2023
	(In millions)
Senior debt	$	390.0	$	20.0	$	25.0	$	30.0	$	35.0	$	280.0	$	—
Convertible senior notes	300.0		—		—		—		—		—		300.0
Convertible subordinated notes (1)	35.6		35.6		—		—		—		—		—
Total debt principal	$	725.6	$	55.6	$	25.0	$	30.0	$	35.0	$	280.0	$	300.0

_______

(1)

In December 2016, the Company notified holders of its 4¹/₁₆% Debentures that the Company would redeem, on February 3, 2017, all of their 4¹/₁₆% Debentures at a purchase price equal to 100% of the principal amount of the 4¹/₁₆% Debentures to be redeemed, plus any accrued and unpaid interest. In January 2017, $35.6 million of the 4¹/₁₆% Debentures (the entire amount outstanding as of December 31, 2016) were converted to 3.9 million shares of common stock.

a. Senior Debt:



	As of December 31,
	2016			2015
	(In millions)
Term loan, bearing interest at variable rates (rate of 3.02% as of December 31, 2016), maturing in June 2021	$	390.0		$	92.5
Unamortized deferred financing costs	(2.0		)	(0.7		)
Total senior debt	$	388.0		$	91.8

Senior Credit Facility

On June 17, 2016, the Company entered into a new $750.0 million senior secured Senior Credit Facility (the "Senior Credit Facility") with the lenders named therein and Bank of America Merrill Lynch as joint lead arranger and administrative agent. The Senior Credit Facility matures on June 17, 2021 and consists of (i) a $350.0 million revolving line of credit (the "Revolver") and (ii) a $400.0 million term loan (the "Term Loan"). Under the Revolver, up to an aggregate of $100.0 million is available for the issuance of letters of credit and up to an aggregate of $10.0 million is available for swingline loans. The Senior Credit Facility amends and replaces the prior $300.0 million credit facility which was set to mature in May 2019.

On the closing date, the Company borrowed $100.0 million of loans under the Revolver and used the proceeds to repay in full the $90.0 million of outstanding term loans under the prior credit facility, fees incurred for the Senior Credit Facility, and for general corporate purposes. As of December 31, 2016, the Company had $390.0 million outstanding under the Term Loan and had issued $45.3 million letters of credit.

The Term Loan and loans under the Revolver bear interest at LIBOR (or the base rate) plus an applicable margin ranging from 175 to 250 basis points based on the Company's leverage ratio (the "Consolidated Net Leverage Ratio") at the end of the most recent fiscal quarter. In addition to interest, the Company must also pay certain fees including (i) letter of credit fees ranging from 175 to 250 basis points per annum on the amount of issued but undrawn letters of credit and (ii) commitment fees ranging from 30 to 45 basis points per annum on the unused portion of the Revolver.

The Term Loan amortizes at a rate of 5.0% per annum of the original drawn amount starting on September 30, 2016, increasing to 7.5% per annum on September 30, 2018, and increasing to 10.0% per annum from September 30, 2020 to be paid in equal quarterly installments with any remaining amounts, along with outstanding borrowings under the Revolver, due on the maturity date. Outstanding borrowings under the Revolver and the Term Loan may be voluntarily repaid at any time, in whole or in part, without premium or penalty.

Subject to certain restrictions, all the obligations under the Senior Credit Facility will be guaranteed by the Company and the existing and future material domestic subsidiaries, other than Easton (the "Guarantors"). As collateral security for the amount outstanding under the Senior Credit Facility and the guarantees thereof, the Company and the Guarantors (collectively, the "Loan Parties") have granted to the administrative agent for the benefit of the lenders: (i) certain equity interests of the Loan Parties; (ii) first priority liens on substantially all of the tangible and intangible personal property of the Loan Parties; and (iii) first priority liens on certain real properties located in Los Angeles, California, Culpepper, Virginia and Redmond Washington (but excluding all other owned real properties).

The Senior Credit Facility contains covenants requiring the Company to (i) maintain an interest coverage ratio (the "Consolidated Interest Coverage Ratio") of not less than 3.00 to 1.00 and (ii) maintain a Consolidated Net Leverage Ratio not to exceed (a) 4.00 to 1.00 for periods ending December 31, 2016 through September 30, 2017; (b) 3.75 to 1.00 for periods ending from December 31, 2017 through September 30, 2018; and (c) 3.50 to 1.00 for periods ending from December 31, 2018 thereafter, provided that the maximum leverage ratio for all periods shall be increased by 0.50 to 1.00 for two quarters after consummation of a qualified acquisition.

The Company may generally make certain investments, redeem debt subordinated to the Senior Credit Facility and make certain restricted payments (such as stock repurchases) if the Company's Consolidated Net Leverage Ratio does not exceed 3.25 to 1.00 pro forma for such transaction. The Company is otherwise subject to customary covenants including limitations on asset sales, incurrence of additional debt, and limitations on certain investments and restricted payments.



Financial Covenant	Actual Ratios as of December 31, 2016	Required Ratios
Consolidated Interest Coverage Ratio, as defined under the Senior Credit Facility	11.07 to 1.00	Not less than: 3.00 to 1.00
Consolidated Net Leverage Ratio, as defined under the Senior Credit Facility	2.59 to 1.00	Not greater than: 4.00 to 1.00

The Company was in compliance with its financial and non-financial covenants as of December 31, 2016.

b. Senior Secured Notes:



	As of December 31,
	2016		2015
	(In millions)
Senior secured notes, bearing interest at 7.125% per annum, interest payments due in March and September, maturing in March 2021	$	—	$	460.0
Unamortized deferred financing costs	—		(10.6		)
Total senior secured notes	$	—	$	449.4

7.125% Second-Priority Senior Secured Notes

On July 18, 2016, the Company fully redeemed the outstanding principal of its 7¹/₈% Notes.

c. Convertible Senior Notes:



	As of December 31,
	2016			2015
	(In millions)
Senior convertible notes, bearing interest at 2.25% per annum, interest payments due in June and December, maturing in December 2023	$	300.0		$	—
Unamortized discount and deferred financing costs	(60.0		)	—
Total convertible senior notes	$	240.0		$	—

2.25% Convertible Senior Notes

On December 14, 2016, the Company issued $300.0 million aggregate principal amount of 2¼% Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2¼% Notes bear cash interest at a rate of 2.25% per annum on the principal amount of the 2¼% Notes from December 14, 2016, payable semi-annually in arrears on June 15 and December 15 of each year, beginning June 15, 2017. The 2¼% Notes will mature on December 15, 2023, subject to earlier repurchase, redemption or conversion in certain circumstances described below.

The 2¼% Notes are general unsecured senior obligations, which (i) rank senior in right of payment to all of the Company’s existing and future senior indebtedness that is expressly subordinated in right of payment to the 2¼% Notes; (ii) rank equal in right of payment with all of the Company’s existing and future unsecured indebtedness that is not so subordinated; (iii) rank effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and (iv) rank structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.

The 2¼% Notes may be converted into cash, shares of the Company’s common stock or a combination thereof initially at a conversion rate of 38.4615 shares of common stock per $1,000 principal amount of 2¼% Notes (equivalent to a conversion price of approximately $26.00 per share of common stock), subject to adjustment from time to time as described in the indenture governing the 2¼% Notes. Holders may convert their 2¼% Notes at their option (i) at any time prior to the close of business on the business day immediately preceding September 15, 2023 under certain circumstances and (ii) at any time on or after September 15, 2023 until the close of business on the business day immediately preceding the maturity date, irrespective of such circumstances. In addition, if holders of the 2¼% Notes elect to convert their 2¼% Notes in connection with the occurrence of a make-whole fundamental change, as defined in the indenture governing the 2¼% Notes, such holders will be entitled to an increase in the conversion rate upon conversion in certain circumstances.

The Company may redeem for cash all or any portion of the 2¼% Notes, at its option, on or after December 21, 2020, if the last reported sale price of the Company’s common stock has been at least 150% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2¼% Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If a fundamental change, as defined in the indenture governing the 2¼% Notes, occurs prior to maturity, subject to certain conditions, holders of the 2¼% Notes will have the right to require the Company to repurchase all or part of their 2¼% Notes for cash at a fundamental change repurchase price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, up to, but excluding, the fundamental change repurchase date.

The 2¼% Notes contain customary events of default, including, among other things, payment default, covenant default and certain cross-default provisions linked to the payment of other indebtedness of the Company or its significant subsidiaries.

Issuance of the 2¼% Notes generated proceeds of $294.2 million net of debt issuance costs, which were used to repurchase long-term debt and for working capital and other general corporate purposes.

The Company separately accounted for the liability and equity components of the 2¼% Notes. The initial liability component of the 2¼% Notes was valued based on the present value of the future cash flows using an estimated borrowing rate at the date of the issuance for similar debt instruments without the conversion feature, which equals the effective interest rate of 5.8% on the liability component. The equity component, or debt discount, was initially valued equal to the principal value of the 2¼% Notes, less the present value of the future cash flows using an estimated borrowing rate at the date of the issuance for similar debt instruments without a conversion feature, which equated to the initial debt discount. The debt discount is being amortized as a non-cash charge to interest expense over the period from the issuance date through December 15, 2023.

The debt issuance costs of $5.8 million incurred in connection with the issuance of the 2¼% Notes were capitalized and bifurcated into deferred financing costs of $4.7 million and equity issuance costs of $1.1 million. The deferred financing costs are being amortized to interest expense from the issuance date through December 15, 2023.

As of December 31, 2016, the 2¼% Notes consisted of the following (in millions, except years, percentages, conversion rate, and conversion price):



Carrying value, long-term	$	240.0
Unamortized discount and deferred financing costs	60.0
Principal amount	$	300.0
Carrying amount of equity component, net of equity issuance costs	$	54.5
Remaining amortization period (years)	7.0
Effective interest rate	5.8		%
Conversion rate (shares of common stock per $1,000 principal amount)	38.4615
Conversion price (per share of common stock)	$	26.00

The following table presents the interest expense components for the 2¼% Notes for fiscal 2016 (in millions):



Interest expense-contractual interest	$	0.3
Interest expense-amortization of debt discount	0.3
Interest expense-amortization of deferred financing costs (1)	—

________

(1) Less than $0.1 million.

d. Convertible Subordinated Notes:



	As of December 31,
	2016		2015
	(In millions)
Convertible subordinated debentures, bearing interest at 2.25% per annum, interest payments due in May and November, maturing in November 2024	$	—	$	0.2
Convertible subordinated debentures, bearing interest at 4.0625% per annum, interest payments due in June and December, maturing in December 2039	35.6		84.6
Total convertible subordinated notes	$	35.6	$	84.8

2.25% Convertible Subordinated Debentures ("2¹/₄% Debentures")

As of December 31, 2016, the Company fully redeemed the outstanding principal amount of its 2¹/₄% Debentures.

4.0625% Convertible Subordinated Debentures

As of December 31, 2016, the Company had $35.6 million outstanding principal of its 4¹/₁₆% Debentures, convertible into 3.9 million of shares of common stock. In December 2016, the Company notified holders of its 4¹/₁₆% Debentures that the Company would redeem, on February 3, 2017, all of their 4¹/₁₆% Debentures at a purchase price equal to 100% of the principal amount of the 4¹/₁₆% Debentures to be redeemed, plus any accrued and unpaid interest. In January 2017, $35.6 million of the 4¹/₁₆% Debentures (the entire amount outstanding as of December 31, 2016) were converted to 3.9 million shares of common stock.

In December 2009, the Company issued $200.0 million in aggregate principal amount of 4¹/₁₆% Debentures in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 4¹/₁₆% Debentures mature on December 31, 2039, subject to earlier redemption, repurchase, or conversion. Interest on the 4¹/₁₆% Debentures accrues at 4.0625% per annum and is payable semiannually in arrears on June 30 and December 31 of each year, beginning June 30, 2010 (or if any such day is not a business day, payable on the following business day), and the Company may elect to pay interest in cash or, generally on any interest payment that is at least one year after the original issuance date of the 4¹/₁₆% Debentures, in shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s option, subject to certain conditions.

The 4¹/₁₆% Debentures are general unsecured obligations of the Company and rank equal in right of payment to all of the Company’s other existing and future unsecured subordinated indebtedness. The 4¹/₁₆% Debentures rank junior in right of payment to all of the Company’s existing and future senior indebtedness, including all of its obligations under its Senior Credit Facility and all of its existing and future senior subordinated indebtedness. In addition, the 4¹/₁₆% Debentures are effectively subordinated to any of the Company’s collateralized debt, to the extent of such collateral, and to any and all debt and liabilities including trade debt of its subsidiaries.

Each holder of the 4¹/₁₆% Debentures may convert its 4¹/₁₆% Debentures into shares of the Company’s common stock at a conversion rate of 111.0926 shares per $1,000 principal amount, representing a conversion price of approximately $9.00 per share, subject to adjustment. In addition, if the holders elect to convert their 4¹/₁₆% Debentures in connection with the occurrence of certain fundamental changes to the Company as described in the indenture, the holders will be entitled to receive additional shares of common stock upon conversion in some circumstances. Upon any conversion of the 4¹/₁₆% Debentures, subject to certain exceptions, the holders will not receive any cash payment representing accrued and unpaid interest.

The Company may at any time redeem any 4¹/₁₆% Debentures for cash (except as described below with respect to any make-whole premium that may be payable) if the last reported sales price of the Company’s common stock has been at least 150% of the conversion price then in effect for at least twenty (20) trading days during any thirty (30) consecutive trading day period ending within five (5) trading days prior to the date on which the Company provides the notice of redemption.

Each holder may require the Company to repurchase all or part of its 4¹/₁₆% Debentures on December 31, 2019, 2024, 2029 and 2034 (each, an “optional repurchase date”) at an optional repurchase price equal to (1) 100% of their principal amount, plus (2) accrued and unpaid interest, if any, up to, but excluding, the date of repurchase. The Company may elect to pay the optional repurchase price in cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s option, subject to certain conditions.

If a fundamental change to the Company, as described in the indenture governing the 4¹/₁₆% Debentures, occurs prior to maturity, each holder will have the right to require the Company to purchase all or part of its 4¹/₁₆% Debentures for cash at a repurchase price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, up to, but excluding, the repurchase date.

If the Company elects to deliver shares of its common stock as all or part of any interest payment, any make-whole premium or any optional repurchase price, such shares will be valued at the product of (x) the price per share of the Company’s common stock determined during: (i) in the case of any interest payment, the twenty (20) consecutive trading days ending on the second trading day immediately preceding the record date for such interest payment; (ii) in the case of any make-whole premium payable as part of the redemption price, the twenty (20) consecutive trading days ending on the second trading day immediately preceding the redemption date; and (iii) in the case of any optional repurchase price, the forty (40) consecutive trading days ending on the second trading day immediately preceding the optional repurchase date; (in each case, the “averaging period” with respect to such date) using the sum of the daily price fractions (where “daily price fraction” means, for each trading day during the relevant averaging period, 5% in the case of any interest payment or any make-whole premium or 2.5% in the case of any optional repurchase, multiplied by the daily volume weighted average price per share of the Company’s common stock for such day), multiplied by (y) 97.5%. The Company will notify holders at least five (5) business days prior to the start of the relevant averaging period of the extent to which the Company will pay any portion of the related payment using shares of common stock.

Effective December 21, 2010, in accordance with the terms of the indenture, the restrictive legend on the 4¹/₁₆% Debentures was removed and the 4¹/₁₆% Debentures are freely tradable pursuant to Rule 144 under the Securities Act of 1933 without volume restrictions by any holder that is not an affiliate of the Company at the time of sale and has not been an affiliate during the preceding three months.

Issuance of the 4¹/₁₆% Debentures generated net proceeds of $194.1 million, which were used to repurchase long-term debt and other debt related costs.

During fiscal 2014, the Company repurchased $59.6 million principal amount of its 4¹/₁₆% Debentures at various prices ranging from 195% of par to 212% of par. During fiscal 2015, $49.0 million of 4¹/₁₆% Debentures were converted to 5.5 million shares of common stock. During fiscal 2016, $49.0 million of 4¹/₁₆% Debentures were converted to 5.4 million shares of common stock.

e. Other Debt:



	As of December 31,
	2016		2015
	(In millions)
Delayed draw term loan	$	—	$	13.0
Capital lease	—		0.3
Unamortized deferred financing costs	—		(0.3		)
Total other debt	$	—	$	13.0

Delayed Draw Term Loan

During fiscal 2016, the Company retired the remaining principal amount of its delayed draw term loan.