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(19) RESTRUCTURING AND ASSET IMPAIRMENT CHARGES
In October 2001, the Company announced a restructuring plan for EA.com.The restructuring initiatives
involved strategic decisions to discontinue certain product offerings and focus only on key online priorities
that align with its fiscal 2003 operational objectives.The workforce reduction resulted in the termination of
approximately 270 positions.
During fiscal 2002, the Company recorded restructuring charges of $20,303,000, consisting of
$4,173,000 for workforce reductions, $3,312,000 for consolidation of facilities and other administrative
charges, and $12,818,000 for the write-off of non-current assets and facilities.The estimated costs for
workforce reduction included severance charges for terminated employees and costs for certain outplace-
ment service contracts.The consolidation of facilities resulted in the closure of EA.com’s San Diego studio
and consolidation of its San Francisco and Virginia facilities.The estimated costs for consolidation of facilities
included contractual rental commitments under real estate leases for unutilized office space offset by esti-
mated future sub-lease income, costs to close or consolidate facilities, and costs to write off a portion of the
assets from these facilities.
The Company recorded restructuring charges for EA.com in accordance with Emerging Issues Task
Force No. 94-03,
“Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (Including Certain Costs Incurred in a Restructuring)”
,Emerging Issues Task Force No. 95-03,
“Recognition of Liabilities in Connection with a Purchase Business Combination”
,and Staff Accounting
Bulletin No. 100,
“Restructuring and Impairment Charges”
.Adjustments to the restructuring reserves will
be made in future periods, if necessary, based upon current events and circumstances.
As part of the restructuring efforts, the Company assessed the remaining useful lives of goodwill, pur-
chased intangible assets and other long-lived assets and tested the recoverability of its long-lived assets in
accordance with SFAS 121. Management evaluated the impact of consolidating or abandoning certain
EA.com technologies and processes and reviewed the effect of changes to EA.com’s subscription product
offerings in relation to EA.com’s asset base. Based on computations of estimated future net cash flows
attributable to these assets and product offerings, it was determined that there was a need to reduce the
value of certain assets on our balance sheet to reflect their estimated fair value. Impairment charges on
long-lived assets amounted to $12,818,000 and included $11,177,000 relating to consolidated or aban-
doned technologies for the EA.com infrastructure and $1,641,000 of goodwill and intangibles impairment
charges relating to the EA.com’s San Diego and Kesmai studios.There are no assurances that the impair-
ment factors evaluated by management will not change in subsequent periods and accordingly, this could
result in additional impairment charges in future periods.
The pre-tax restructuring charge of $20,303,000 consisted of $6,836,000 in cash outlays and
$13,467,000 in non-cash charges related to the write-offs of non-current assets and facilities. As of March
31, 2002, an aggregate of $4,016,000 in cash had been paid out under the restructuring plan. Of the
remaining cash outlay of $2,820,000, $1,590,000 is expected to occur in fiscal 2003 while the remaining
$1,230,000 will occur in fiscal years 2004 and beyond.
The following table summarizes the activity in the accrued restructuring account in fiscal 2002 (in thousands):
NON-CURRENT
WORKFORCE FACILITIES ASSETS TOTAL
Charged to operations in fiscal 2002 $ 4,173 $ 3,312 $ 12,818 $ 20,303
Charges utilized in cash in fiscal 2002 (3,499) (517) — (4,016)
Charges utilized in non-cash in fiscal 2002 — (581) (12,818) (13,399)
Accrual balance as of March 31, 2002 $ 674 $ 2,214 $ — $ 2,888
The restructuring accrual is included in accrued expenses in Note 12 of the Notes to Consolidated Finan-
cial Statements.
EA 2002 AR
68