Electronic Arts 2007 Annual Report Download - page 117

In connection with our fiscal 2006 international publishing reorganization, in fiscal 2008, we expect to incur
between $5 million and $10 million of restructuring costs. Overall, including charges incurred through
March 31, 2007, we expect to incur between $50 million and $55 million of restructuring costs in connection
with our fiscal 2006 international publishing reorganization, substantially all of which will result in cash
expenditures by 2017. These restructuring costs will consist primarily of employee-related relocation assistance
(approximately $30 million), facility exit costs (approximately $15 million), as well as other reorganization
costs (approximately $7 million).
Interest and Other Income, Net
Interest and other income, net, for fiscal years 2007 and 2006 was as follows (in millions):
March 31,
2007
%ofNet
Revenue
March 31,
2006
%ofNet
Revenue $ Change % Change
$99 3% $64 2% $35 55%
For fiscal 2007, interest and other income, net, increased by $35 million, or 55 percent, as compared to fiscal
2006 primarily due to an increase of $30 million in interest income as a result of higher yields on our cash,
cash equivalent and short-term investment balances and a $7 million decrease in realized net losses recognized
on investments.
Income Taxes
Income taxes for fiscal years 2007 and 2006 were as follows (in millions):
March 31,
2007
Effective
Tax Rate
March 31,
2006
Effective
Tax Rate % Change
$66 48.2% $147 37.6% (55%)
Our effective income tax rates were 48.2 percent and 37.6 percent for fiscal 2007 and fiscal 2006, respectively.
For fiscal 2007, our effective income tax rate was higher than the U.S. statutory rate of 35.0 percent due to a
number of factors, including certain non-deductible stock based compensation expenses related to
SFAS No. 123(R) and additional charges resulting from certain non-deductible acquisition-related costs during
the fourth quarter of fiscal 2007. For fiscal 2006, our effective income tax rate is higher than the U.S. statutory
rate of 35.0 percent for fiscal 2006 due to a number of factors, including the repatriation of foreign earnings in
connection with the American Jobs Creation Act of 2004 (the “Jobs Act”), as discussed below, and additional
charges resulting from certain non-deductible acquisition-related costs during the second and fourth quarters of
fiscal 2006, which were partially offset by other items.
Our effective income tax rates for fiscal 2008 and future periods will depend on a variety of factors. For
example, changes in our business such as acquisitions and intercompany transactions (for example, the
acquisition of and intercompany transactions related to Mythic and DICE), changes in our international
structure, changes in the geographic location of business functions or assets, changes in the geographic mix of
income, as well as changes in, or termination of, our agreements with tax authorities, valuation allowances,
applicable accounting rules, applicable tax laws and regulations, rulings and interpretations thereof, develop-
ments in tax audit and other matters. Also, variations in the estimated and actual level of annual pre-tax
income can affect the overall effective income tax rate for future fiscal years. We incur certain tax expenses
that do not decline proportionately with declines in our consolidated income or increase in consolidated loss.
As a result, in absolute dollar terms, our tax expense will have a greater influence on our effective tax rate at
lower levels of pre-tax income than higher levels. In addition, at lower levels of pre-tax income, our effective
tax rate will be more volatile.
We historically have considered undistributed earnings of our foreign subsidiaries to be indefinitely reinvested
and, accordingly, no U.S. taxes have been provided thereon. With the exception of taking advantage of the
one-time opportunity afforded to us by the Jobs Act, we currently intend to continue to indefinitely reinvest
the undistributed earnings of our foreign subsidiaries.
Annual Report
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