Electronic Arts 2015 Annual Report Download - page 153

Annual Report
Separately, in July 2011 we also entered into privately negotiated warrant transactions with certain counterparties
whereby we sold to independent third parties warrants (the “Warrants”) to acquire, subject to customary anti-
dilution adjustments that are substantially the same as the anti-dilution provisions contained in the Notes, up to
19.9 million shares of our common stock (which is also equal to the number of shares of our common stock that
notionally underlie the Notes), with a strike price of $41.14. The Warrants could have a dilutive effect with
respect to our common stock to the extent that the market price per share of our common stock exceeds $41.14
on or prior to the expiration date of the Warrants. We received proceeds of $65 million from the sale of the
Warrants.
Effect of conversion on earning per share (“EPS”)
The Notes have no impact on diluted EPS for periods where the average quarterly price of our common stock is
below the conversion price of $31.74 per share. Prior to conversion, we will include the effect of the additional
shares that may be issued if our common stock price exceeds $31.74 per share using the treasury stock method. If
the average price of our common stock exceeds $41.14 per share for a quarterly period, we will also include the
effect of the additional potential shares that may be issued related to the Warrants using the treasury stock
method. Prior to conversion, the Convertible Note Hedge is not considered for purposes of the EPS calculation,
as its effect would be anti-dilutive. Upon conversion, the Convertible Note Hedge is expected to offset the
dilutive effect of the Notes when the stock price is above $31.74 per share. See Note 17 for additional
information related to our EPS.
Credit Facility
On March 19, 2015, we entered into a $500 million senior unsecured revolving credit facility (“Credit Facility”)
with a syndicate of banks. The credit facility terminates on March 19, 2020 and replaces the Company’s existing
$500 million unsecured credit facility (the “Prior Credit Facility”), which was due to expire on February 29,
2016. No amounts were ever drawn under the Prior Credit Facility. The Credit Facility contains an option to
arrange with existing lenders and/or new lenders for them to provide up to an aggregate of $250 million in
additional commitments for revolving loans. Proceeds of loans made under the credit facility may be used for
general corporate purposes.
The loans bear interest, at our option, at the base rate plus an applicable spread or an adjusted LIBOR rate plus an
applicable spread, in each case with such spread being determined based on our consolidated leverage ratio for
the preceding fiscal quarter. We are also obligated to pay other customary fees for a credit facility of this size and
type. Interest is due and payable in arrears quarterly for loans bearing interest at the base rate and at the end of an
interest period (or at each three month interval in the case of loans with interest periods greater than three
months) in the case of loans bearing interest at the adjusted LIBOR rate. Principal, together with all accrued and
unpaid interest, is due and payable on March 19, 2020.
The credit agreement contains customary affirmative and negative covenants, including covenants that limit or
restrict our ability to, among other things, incur subsidiary indebtedness, grant liens, dispose of all or
substantially all assets and pay dividends or make distributions, in each case subject to customary exceptions for
a credit facility of this size and type. We are also required to maintain compliance with a capitalization ratio and
maintain a minimum level of total liquidity.
The credit agreement contains customary events of default, including among others, non-payment defaults,
covenant defaults, cross-defaults to material indebtedness, bankruptcy and insolvency defaults, material
judgment of defaults and a change of control default, in each case, subject to customary exceptions for a credit
facility of this size and type. The occurrence of an event of default could result in the acceleration of the
obligations under the credit facility, an obligation by any guarantors to repay the obligations in full and an
increase in the applicable interest rate.
As of March 31, 2015, no amounts were outstanding under the Credit Facility. $2 million of debt issuance costs
that were paid in connection with obtaining this credit facility are being amortized to interest expense over the 5
year term of the Credit Facility.
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