Electronic Arts 2015 Annual Report Download - page 151

Annual Report
We are also currently under income tax examination in the United Kingdom for fiscal years 2010 through 2013,
and in Germany for fiscal years 2008 through 2012. We remain subject to income tax examination for several
other jurisdictions including in France for fiscal years after 2011, in Germany for fiscal years after 2012, in the
United Kingdom for fiscal years after 2013, and in Canada and Switzerland for fiscal years after 2007.
The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if
any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued
for each year. Although potential resolution of uncertain tax positions involve multiple tax periods and
jurisdictions, it is reasonably possible that a reduction of up to $11 million of unrecognized tax benefits may
occur within the next 12 months, some of which, depending on the nature of the settlement or expiration of
statutes of limitations, may affect the Company’s income tax provision and therefore benefit the resulting
effective tax rate. The actual amount could vary significantly depending on the ultimate timing and nature of any
settlements.
(12) FINANCING ARRANGEMENT
0.75% Convertible Senior Notes Due 2016
In July 2011, we issued $632.5 million aggregate principal amount of 0.75% Convertible Senior Notes due 2016
(the “Notes”). The Notes are senior unsecured obligations which pay interest semiannually in arrears at a rate of
0.75% per annum on January 15 and July 15 of each year, beginning on January 15, 2012 and will mature on
July 15, 2016, unless purchased earlier or converted in accordance with their terms prior to such date. The Notes
are senior in right of payment to any unsecured indebtedness that is expressly subordinated in right of payment to
the Notes.
The Notes are convertible into cash and shares of our common stock based on an initial conversion value of
31.5075 shares of our common stock per $1,000 principal amount of Notes (equivalent to an initial conversion
price of approximately $31.74 per share). Upon conversion of the Notes, holders will receive cash up to the
principal amount of each Note, and any excess conversion value will be delivered in shares of our common stock.
Prior to April 15, 2016, the Notes are convertible only if (1) the last reported sale price of the common stock for
at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on
the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 percent of the
conversion price ($41.26 per share) on each applicable trading day (the “Sales Price Condition”); (2) during the
five business day period after any ten consecutive trading day period in which the trading price per $1,000
principal amount of notes falls below 98 percent of the last reported sale price of our common stock multiplied
by the conversion rate on each trading day; or (3) specified corporate transactions, including a change in control,
occur. On or after April 15, 2016, a holder may convert any of its Notes at any time prior to the close of business
on the second scheduled trading day immediately preceding the maturity date. The conversion rate is subject to
customary anti-dilution adjustments (for example, certain dividend distributions or tender or exchange offer of
our common stock), but will not be adjusted for any accrued and unpaid interest. The Notes are not redeemable
prior to maturity except for specified corporate transactions and events of default, and no sinking fund is
provided for the Notes. The Notes do not contain any financial covenants.
Following certain corporate events described in the indenture governing the notes (the “Indenture”) that occur
prior to the maturity date, the conversion rate will be increased for a holder who elects to convert its Notes in
connection with such corporate event in certain circumstances. If we undergo a “fundamental change,” as defined
in the Indenture, subject to certain conditions, holders may require us to purchase for cash all or any portion of
their Notes. The fundamental change purchase price will be 100 percent of the principal amount of the Notes to
be purchased plus any accrued and unpaid interest up to but excluding the fundamental change purchase date.
The Indenture contains customary terms and covenants, including that upon certain events of default occurring
and continuing, either the trustee or the holders of at least 25 percent in principal amount of the outstanding
Notes may declare 100 percent of the principal and accrued and unpaid interest on all the Notes to be due and
payable.
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