Electronic Arts 2011 Annual Report Download - page 158

Because the independent software developers are thinly capitalized, our sole ability to recover the Minimum
Guarantee is effectively through publishing the software product in development. We also have exclusive rights
to exploit the software product once completed. Therefore, we concluded that the substance of the arrangement is
the purchase of research and development that has no alternative future use and was expensed upon acquisition.
Accordingly, we recognized a $31 million charge in our Consolidated Statement of Operations during the fiscal
year ended March 31, 2011. In addition, we will recognize the remaining portion of the Minimum Guarantee to
be advanced during the development period as research and development expense as the services are incurred.
Since the inception of the fiscal 2011 restructuring plan through March 31, 2011, we have incurred charges of
$148 million, consisting of (1) $104 million related to the amendment of certain licensing agreements and other
intangible asset impairment costs, (2) $31 million related to the amendment of certain developer agreements, and
(3) $13 million in employee-related expenses. The $104 million restructuring accrual as of March 31, 2011
related to the fiscal 2011 restructuring is expected to be settled by June 2016. In fiscal year 2012, we anticipate
incurring less than $10 million of restructuring and other charges related to the fiscal 2011 restructuring
(primarily interest expense accretion).
Overall, including $148 million in charges incurred through March 31, 2011, we expect to incur total cash and
non-cash charges between $170 million and $180 million by June 2016. These charges will consist primarily of
(1) charges, including accretion of interest expense, related to the amendment of certain licensing and developer
agreements and other intangible asset impairment costs (approximately $160 million) and (2) employee-related
costs (approximately $15 million).
Fiscal 2010 Restructuring
In fiscal year 2010, we announced a restructuring plan to narrow our product portfolio to provide greater focus on
titles with higher margin opportunities. Under this plan, we reduced our workforce by approximately 1,100
employees and have (1) consolidated or closed various facilities, (2) eliminated certain titles, and (3) incurred IT
and other costs to assist in reorganizing certain activities. The majority of these exit activities were completed by
March 31, 2010.
Since the inception of the fiscal 2010 restructuring plan through March 31, 2011, we have incurred charges of
$129 million, consisting of (1) $62 million in employee-related expenses, (2) $45 million related to intangible
asset impairment costs, abandoned rights to intellectual property, and other costs to assist in the reorganization of
our business support functions, and (3) $22 million related to the closure of certain of our facilities. The $11
million restructuring accrual as of March 31, 2011 related to the fiscal 2010 restructuring is expected to be settled
by September 2013. In fiscal year 2012, we anticipate incurring less than $10 million of restructuring charges
related to the fiscal 2010 restructuring.
Overall, including charges incurred through March 31, 2011, we expect to incur total cash and non-cash charges
of approximately $135 million by March 31, 2012. These charges consist primarily of (1) employee-related costs
($62 million), (2) intangible asset impairment costs, abandoned rights to intellectual property costs, and other
costs to assist in the reorganization of our business support functions (approximately $50 million), (3) facilities
exit costs ($22 million).
Fiscal 2009 Restructuring
In fiscal year 2009, we announced a cost reduction plan as a result of our performance combined with the
economic environment. This plan included a narrowing of our product portfolio, a reduction in our worldwide
workforce of approximately 11 percent, or 1,100 employees, the closure of 10 facilities, and reductions in other
variable costs and capital expenditures.
Since the inception of the fiscal 2009 restructuring plan through March 31, 2011, we have incurred charges of
$55 million, consisting of (1) $33 million in employee-related expenses, (2) $20 million related to the closure of
certain of our facilities, and (3) $2 million related to asset impairments. We do not expect to incur any additional
restructuring charges under this plan. The restructuring accrual of $2 million as of March 31, 2011 related to the
fiscal 2009 restructuring is expected to be settled by September 2016.
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