Electronic Arts 2011 Annual Report Download - page 157

Download and view the complete annual report

Please find page 157 of the 2011 Electronic Arts annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 192

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189
  • 190
  • 191
  • 192

Annual Report
(7) RESTRUCTURING AND OTHER CHARGES
Restructuring and other restructuring plan-related information as of March 31, 2011 was as follows (in millions):
Fiscal 2011
Restructuring
Fiscal 2010
Restructuring
Fiscal 2009
Restructuring
Other Restructurings
and Reorganization
Total
Work-
force Other
Work-
force
Facilities-
related Other
Work-
force
Facilities-
related Other
Work-
force
Facilities-
related Other
Balances as of March 31,
2008 .................... $— $ — $— $— $— $— $— $— $ 1 $ 9 $ 4 $ 14
Charges to operations ....... — — — — — 32 7 2 4 23 12 80
Charges settled in cash ...... — — — — — (24) (1) — (5) (3) (13) (46)
Charges settled in
non-cash ............... — — — — — — (1) (2) — (22) — (25)
Balances as of March 31,
2009 .................... — — — — — 8 5 — — 7 3 23
Charges to operations ....... — — 62 22 32 1 13 — — 3 7 140
Charges settled in cash ...... — — (29) (2) (1) (9) (11) — — — (10) (62)
Charges settled in
non-cash ............... — — (25) (9) (24) — (4) — — (3) — (65)
Accrual reclassification ..... — — — — — — — — — (7) — (7)
Balances as of March 31,
2010 .................... — — 8 11 7 — 3 — — — — 29
Charges to operations ....... 13 135 — — 13 — — — — — — 161
Charges settled in cash ...... (8) (32) (8) (6) (15) — (1) — — — — (70)
Charges settled in
non-cash ............... (2) (2) — 1 — — — — — — — (3)
Balances as of March 31,
2011 .................... $ 3 $101 $ — $ 6 $ 5 $ — $ 2 $— $— $ — $ — $117
Fiscal 2011 Restructuring
In fiscal year 2011, we announced a plan focused on the restructuring of certain licensing and developer
agreements in an effort to improve the long-term profitability of our packaged goods business. Under this plan,
we amended certain licensing and developer agreements. To a much lesser extent, as part of this restructuring we
had workforce reductions and facilities closures through March 31, 2011. Substantially all of these exit activities
were completed by March 31, 2011.
As part of our fiscal 2011 restructuring plan, we amended certain license agreements to terminate certain rights
we previously had to use the licensors’ intellectual property. However, under these agreements we continue to be
obligated to pay the contractual minimum royalty-based commitments set forth in the original agreements.
Accordingly, we recognized losses and impairments of $102 million representing (1) the net present value of the
estimated payments related to terminating these rights and (2) writing down assets associated with these
agreements to their approximate fair value. In addition, for one agreement, the actual amount of the loss is
variable and subject to periodic adjustments as it is dependent upon the actual revenue we generate from the
games. Because the loss for one agreement will be paid in installments through June 2016, our accrued loss was
computed using the effective interest method. We currently estimate recognizing in future periods through June
2016, approximately $21 million for the accretion of interest expense related to this obligation. This interest
expense will be included in restructuring and other charges in our Consolidated Statement of Operations.
In addition, for the development of certain games, we previously entered into publishing agreements with
independent software developers. Under these agreements, we were obligated to pay the independent software
developers a predetermined amount (a “Minimum Guarantee”) upon delivery of a completed product. The
independent software developers were thinly capitalized and they financed the development of products through
bank borrowings. During fiscal year 2011, in order to more directly influence the development, product quality
and product completion, we amended these agreements whereby we agreed to advance a portion of the Minimum
Guarantee prior to completion of the product which were used by the independent software developers to repay
their bank loans. In addition, we are now committed to advance the remaining portion of the Minimum Guarantee
during the remaining development period. As a result, we have now assumed development risk of the products.
81