Electronic Arts 2008 Annual Report Download - page 158

June 30, 2008. This accrual is included in other accrued expenses presented in Note 8 of the Notes to
Consolidated Financial Statements.
During fiscal 2008, we commenced marketing our facility in Chertsey, England for sale. Our reorganization
charges include $50 million to write our Chertsey facility down to its estimated fair value (less costs to sell
the property). We also reclassified the estimated fair value of the Chertsey facility from property and
equipment, net, to other current assets as an asset held for sale on our Consolidated Balance Sheet.
In fiscal 2009, we anticipate incurring approximately $20 million of restructuring charges related to the fiscal
2008 reorganization. Overall, including charges incurred through March 31, 2008, we expect to incur cash and
non-cash charges between $115 million and $125 million by fiscal 2010. These charges will consist primarily
of employee-related costs (approximately $10 million), facility exit costs (approximately $60 million), as well
as other reorganization costs including other contract terminations and IT and consulting costs to assist in the
reorganization of our business support functions (approximately $50 million).
Fiscal 2006 International Publishing Reorganization
In November 2005, we announced plans to establish an international publishing headquarters in Geneva,
Switzerland. Through the quarter ended September 30, 2006, we relocated certain employees to our new
facility in Geneva, closed certain facilities in the United Kingdom, and made other related changes in our
international publishing business.
Since the inception of the restructuring plan, through March 31, 2008, we have incurred restructuring charges
of approximately $35 million, of which $19 million was for employee-related expenses, $9 million for the
closure of certain United Kingdom facilities, and $7 million in other costs. The restructuring accrual of
$9 million related to our fiscal 2006 international publishing reorganization as of March 31, 2008 is expected
to be utilized by March 2017. This accrual is included in other accrued expenses presented in Note 8 of the
Notes to Consolidated Financial Statements.
In connection with our fiscal 2006 international publishing reorganization, in fiscal 2009, we expect to incur
approximately $5 million of restructuring charges. Overall, including charges incurred through March 31,
2008, we expect to incur between $50 million and $55 million of restructuring charges in connection with our
fiscal 2006 international publishing reorganization, substantially all of which will result in cash expenditures
by 2017. These restructuring charges will consist primarily of employee-related relocation assistance (approx-
imately $30 million), facility exit costs (approximately $15 million), as well as other reorganization costs
(approximately $7 million).
Other Restructurings
We engaged in various restructurings based on management decisions. As of March 31, 2008, all $44 million
in cash had been paid out under these restructuring plans.
(7) ROYALTIES AND LICENSES
Our royalty expenses consist of payments to (1) content licensors, (2) independent software developers, and
(3) co-publishing and distribution affiliates. License royalties consist of payments made to celebrities,
professional sports organizations, movie studios and other organizations for our use of their trademarks,
copyrights, personal publicity rights, content and/or other intellectual property. Royalty payments to indepen-
dent software developers are payments for the development of intellectual property related to our games. Co-
publishing and distribution royalties are payments made to third parties for the delivery of product.
Royalty-based obligations with content licensors and distribution affiliates are either paid in advance and
capitalized as prepaid royalties or are accrued as incurred and subsequently paid. These royalty-based
obligations are generally expensed to cost of goods sold generally at the greater of the contractual rate or an
effective royalty rate based on the total projected net revenue. Prepayments made to thinly capitalized
independent software developers and co-publishing affiliates are generally in connection with the development
of a particular product and, therefore, we are generally subject to development risk prior to the release of the
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