GameStop 2012 Annual Report Download - page 62

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Cash used in financing activities was $498.5 million in fiscal 2012, $492.6 million in fiscal 2011 and $555.6
million in fiscal 2010. The cash flows used in financing activities in fiscal 2012 were primarily for the repurchase
of $409.4 million of treasury shares and the payment of dividends on the Company’s Class A Common Stock of
$102.0 million. The cash flows used in financing activities in fiscal 2011 were primarily for the repurchase of
$262.1 million of treasury shares and $250.0 million in principal of the Company’s senior notes. The cash flows
used in financing activities in fiscal 2010 were primarily for the repurchase of $381.2 million of treasury shares
and $200.0 million in principal of the Company’s senior notes. The cash used in financing activities in fiscal
2012, fiscal 2011 and fiscal 2010 was also impacted by cash provided by the issuance of shares associated with
stock option exercises of $11.6 million, $18.1 million and $10.8 million, respectively.
Sources of Liquidity
We utilize cash generated from operations and have funds available to us under our revolving credit facility
to cover seasonal fluctuations in cash flows and to support our various growth initiatives. Our cash and cash
equivalents are carried at cost and consist primarily of time deposits with highly rated commercial banks.
On January 4, 2011, the Company entered into a $400 million credit agreement (the “Revolver”), which
amended and restated, in its entirety, the Company’s prior credit agreement entered into in October 2005 (the
“Credit Agreement”). The Revolver provides for a five-year, $400 million asset-based facility, including a $50
million letter of credit sublimit, secured by substantially all of the Company’s and its domestic subsidiaries’
assets. The Company has the ability to increase the facility, which matures in January 2016, by $150 million
under certain circumstances. The extension of the Revolver to January 2016 reduces our exposure to potential
tightening or other adverse changes in the credit markets.
The availability under the Revolver is limited to a borrowing base which allows the Company to borrow up
to 90% of the appraisal value of the inventory, in each case plus 90% of eligible credit card receivables, net of
certain reserves. Letters of credit reduce the amount available to borrow by their face value. The Company’s
ability to pay cash dividends, redeem options and repurchase shares is generally permitted, except under certain
circumstances, including if Revolver excess availability is less than 20%, or is projected to be within 12 months
after such payment. In addition, if Revolver usage is projected to be equal to or greater than 25% of total
commitments during the prospective 12-month period, the Company is subject to meeting a fixed charge
coverage ratio of 1.1:1.0 prior to making such payments. In the event that excess availability under the Revolver
is at any time less than the greater of (1) $40.0 million or (2) 12.5% of the lesser of the total commitment or the
borrowing base, the Company will be subject to a fixed charge coverage ratio covenant of 1.1:1.0.
The Revolver places certain restrictions on the Company and its subsidiaries, including limitations on asset
sales, additional liens, investments, loans, guarantees, acquisitions and the incurrence of additional
indebtedness. Absent consent from its lenders, the Company may not incur more than $750 million of additional
unsecured indebtedness to be limited to $250 million in general unsecured obligations and $500 million in
unsecured obligations to finance acquisitions valued at $500 million or more. The per annum interest rate under
the Revolver is variable and is calculated by applying a margin (1) for prime rate loans of 1.25% to 1.50% above
the highest of (a) the prime rate of the administrative agent, (b) the federal funds effective rate plus 0.50% or
(c) the London Interbank Offered (“LIBO”) rate for a 30-day interest period as determined on such day plus
1.00%, and (2) for LIBO rate loans of 2.25% to 2.50% above the LIBO rate. The applicable margin is determined
quarterly as a function of the Company’s average daily excess availability under the facility. In addition, the
Company is required to pay a commitment fee of 0.375% or 0.50%, depending on facility usage, for any unused
portion of the total commitment under the Revolver. As of February 2, 2013, the applicable margin was 1.25%
for prime rate loans and 2.25% for LIBO rate loans, while the required commitment fee was 0.50% for the
unused portion of the Revolver.
The Revolver provides for customary events of default with corresponding grace periods, including failure
to pay any principal or interest when due, failure to comply with covenants, any material representation or
warranty made by the Company or the borrowers proving to be false in any material respect, certain bankruptcy,
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