Long-Term Debt



	As of December 31,
	2017			2016
	(In millions)
Senior debt	$	368.3		$	388.0
Convertible senior notes	247.2			240.0
Convertible subordinated notes	—			35.6
Capital lease obligations	0.9			—
Total debt, carrying amount	616.4			663.6
Less: Amounts due within one year	(25.0		)	(55.6		)
Total long-term debt, carrying amount	$	591.4		$	608.0

As of December 31, 2017, 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		2018		2019		2020		2021		Thereafter
	(In millions)
Senior debt	$	370.0	$	25.0	$	30.0	$	35.0	$	280.0	$	—
Convertible senior notes	300.0		—		—		—		—		300.0
Total debt principal	$	670.0	$	25.0	$	30.0	$	35.0	$	280.0	$	300.0

See a summary of the minimum payments under capital lease obligations in Note 6(d).

The Company amortizes deferred financing costs over the estimated life of the related debt (a portion of which is classified as a contra liability). Amortization of deferred financing costs was $1.8 million, $2.0 million, $2.7 million and $0.2 million in fiscal 2017, 2016, 2015 and the one month ended December 31, 2015, respectively.

a. Senior Debt:



	As of December 31,
	2017			2016
	(In millions)
Term loan, bearing interest at variable rates (rate of 3.82% as of December 31, 2017), maturing in June 2021	$	370.0		$	390.0
Unamortized deferred financing costs	(1.7		)	(2.0		)
Total senior debt	$	368.3		$	388.0

On June 17, 2016, the Company entered into a new $750.0 million senior secured senior credit facility (the "Senior Credit Facility"). 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, 2017, the Company had $370.0 million outstanding under the Term Loan, zero borrowings under the Revolver, and had issued $38.6 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 are 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 3.75 to 1.00 for periods ending from December 31, 2017 through September 30, 2018; and 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, 2017	Required Ratios
Consolidated Interest Coverage Ratio, as defined under the Senior Credit Facility	10.13 to 1.00	Not less than: 3.00 to 1.00
Consolidated Net Leverage Ratio, as defined under the Senior Credit Facility	2.64 to 1.00	Not greater than: 3.75 to 1.00

The Company was in compliance with its financial and non-financial covenants as of December 31, 2017.

b. Convertible Senior Notes:



	As of December 31,
	2017			2016
	(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		$	300.0
Unamortized discount and deferred financing costs	(52.8		)	(60.0		)
Total convertible senior notes	$	247.2		$	240.0

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 liability component. 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.

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



	As of December 31,
	2017			2016
Carrying value, long-term	$	247.2		$	240.0
Unamortized discount and deferred financing costs	52.8			60.0
Principal amount	$	300.0		$	300.0
Carrying amount of equity component, net of equity issuance costs	$	54.5		$	54.5
Remaining amortization period (years)	6.0			7.0
Effective interest rate	5.8		%	5.8		%
Conversion rate (shares of common stock per $1,000 principal amount)	38.4615			38.4615
Conversion price (per share of common stock)	$	26.00		$	26.00

Based on the Company's closing stock price of $31.20 on December 31, 2017, the if-converted value of the 2¼% Notes exceeded the aggregate principal amount of the 2¼% Notes by $60.0 million.

The following table presents the interest expense components for the 2¼% Notes:



	Year-Ended December 31,
	2017		2016
	(In millions)
Interest expense-contractual interest	$	6.8	$	0.3
Interest expense-amortization of debt discount	6.7		0.3
Interest expense-amortization of deferred financing costs (1)	0.6		—

________

(1) Less than $0.1 million in fiscal 2016.

c. Convertible Subordinated Notes:



	As of December 31,
	2017		2016
	(In millions)
Convertible subordinated debentures, bearing interest at 4.0625% per annum, interest payments due in June and December, maturing in December 2039	$	—	$	35.6
Total convertible subordinated notes	$	—	$	35.6

As of December 31, 2017, the Company fully redeemed the outstanding principal amount of its 4¹/₁₆% Debentures. 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.

d. Capital Lease Obligations:



	As of December 31,
	2017		2016
	(In millions)
Capital lease obligations	$	0.9	$	—
Total capital lease obligations	$	0.9	$	—

As of December 31, 2017, the Company has capital lease obligations for certain information technology equipment. The future minimum rental commitments under non-cancelable capital leases as of December 31, 2017 were as follows (in millions):



Fiscal 2018	$	0.2
Fiscal 2019	0.2
Fiscal 2020	0.2
Fiscal 2021	0.2
Fiscal 2022	0.2
Total minimum rentals	1.0
Less: imputed interest	(0.1		)
Present value of minimum capital lease payments	$	0.9

In September 2017, the Company entered into an agreement to lease 122,000-square feet of office space in Huntsville, Alabama. The term of the lease is twenty years and is expected to commence in March 2018 resulting in an estimated financial commitment of $47.8 million representing a present value of $24.9 million. The liability has not been recorded as of December 31, 2017 and the commitment minimum payments over the next five fiscal years is as follows: $1.1 million in fiscal 2018, $2.0 million each year for fiscal 2019 through fiscal 2021, $2.1 million in fiscal 2022.

In October 2017, the Company entered into an agreement to lease a new 136,000-square-foot advanced manufacturing facility located in Huntsville, Alabama. The term of the lease is thirty-one years and is expected to commence in December 2018 resulting in an estimated financial commitment of $35.3 million representing a present value of $21.0 million. The liability has not been recorded as of December 31, 2017 and the commitment minimum payments over the next five fiscal years is as follows: $1.1 million in fiscal 2018 and $1.7 million each year for fiscal 2019 through fiscal 2022.