Electronic Arts 2007 Annual Report Download - page 128

Deferred income taxes, net
Our long-term position of deferred income taxes changed by $46 million, from a liability position as of
March 31, 2006 to a net asset position as of March 31, 2007 primarily due to the addition of assets related to
our adoption of SFAS No. 123(R) and the reduction of liabilities due to the amortization of purchased
intangibles.
Financial Condition
We believe that existing cash, cash equivalents, short-term investments, marketable equity securities and cash
generated from operations will be sufficient to meet our operating requirements for at least the next twelve
months, including working capital requirements, capital expenditures, and potential future acquisitions or
strategic investments. We may choose at any time to raise additional capital to strengthen our financial
position, facilitate expansion, pursue strategic acquisitions and investments or to take advantage of business
opportunities as they arise. There can be no assurance, however, that such additional capital will be available
to us on favorable terms, if at all, or that it will not result in substantial dilution to our existing stockholders.
The loan financing arrangements supporting our Redwood City headquarters leases with Keybank National
Association, described in the “Off-Balance Sheet Commitments” section below, are scheduled to expire in July
2008. Upon expiration of the financing, we may request, on behalf of the lessor and subject to lender approval,
an additional one-year extension of the loan financing between the lessor and the lenders. In the event the
lessor’s loan financing with the lenders is not extended, we may loan to the lessor approximately 90 percent of
the financing, and require the lessor to extend the remainder through July 2009, otherwise the leases will
terminate. Upon expiration of the leases, we may purchase the facilities for $247 million, or arrange for a sale
of the facilities to a third party. In the event of a sale to a third party, if the sale price is less than $247 million,
we will be obligated to reimburse the difference between the actual sale price and $247 million, up to
maximum of $222 million, subject to certain provisions of the leases.
As of March 31, 2007, approximately $1,108 million of our cash, cash equivalents, short-term investments and
marketable equity securities that was generated from operations was domiciled in foreign tax jurisdictions.
While we have no plans to repatriate these funds to the United States in the short term, if we choose to do so,
we would accrue and pay additional taxes on any portion of the repatriation where no United States income
tax had been previously provided. During the fourth quarter of fiscal 2006, we repatriated $375 million of
foreign earnings in fiscal 2006 under the Jobs Act. We completed the repatriation in fiscal 2006 which resulted
in a tax expense of $17 million.
We have a “shelf” registration statement on Form S-3 on file with the SEC. This shelf registration statement,
which includes a base prospectus, allows us at any time to offer any combination of securities described in the
prospectus in one or more offerings up to a total amount of $2 billion. Unless otherwise specified in a
prospectus supplement accompanying the base prospectus, we would use the net proceeds from the sale of any
securities offered pursuant to the shelf registration statement for general corporate purposes, including for
working capital, financing capital expenditures, research and development, marketing and distribution efforts
and, if opportunities arise, for acquisitions or strategic alliances. Pending such uses, we may invest the net
proceeds in interest-bearing securities. In addition, we may conduct concurrent or other financings at any time.
Our ability to maintain sufficient liquidity could be affected by various risks and uncertainties including, but
not limited to, those related to customer demand and acceptance of our products on new platforms and new
versions of our products on existing platforms, our ability to collect our accounts receivable as they become
due, successfully achieving our product release schedules and attaining our forecasted sales objectives, the
impact of competition, economic conditions in the United States and abroad, the seasonal and cyclical nature
of our business and operating results, risks of product returns and the other risks described in the “Risk
Factors” section, included in Part I, Item 1A of this report.
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