Electronic Arts 2012 Annual Report Download - page 166

other income, net, in our Consolidated Statements of Operations. The gains and losses on these foreign currency
forward contracts generally offset the gains and losses in the underlying foreign-currency-denominated monetary
assets and liabilities, which are also reported in interest and other income, net, in our Consolidated Statements of
Operations. As of March 31, 2012, we had foreign currency forward contracts to purchase and sell approximately $242
million in foreign currencies. Of this amount, $197 million represented contracts to sell foreign currencies in exchange
for U.S. dollars, $37 million to purchase foreign currency in exchange for U.S. dollars and $8 million to sell foreign
currency in exchange for British pound sterling. As of March 31, 2011, we had foreign currency forward contracts to
purchase and sell approximately $187 million in foreign currencies. Of this amount, $140 million represented contracts
to sell foreign currencies in exchange for U.S. dollars, $31 million to purchase foreign currencies in exchange for U.S.
dollars and $16 million to sell foreign currencies in exchange for British pound sterling. The fair value of our foreign
currency forward contracts was measured using Level 2 inputs and was immaterial as of March 31, 2012 and 2011.
The effect of foreign currency forward contracts in our Consolidated Statements of Operations for the fiscal years
ended March 31, 2012, 2011 and 2010, was as follows (in millions):
Location of Gain (Loss)
Recognized in Income on
Derivative
Amount of Gain (Loss) Recognized in Income on
Derivative
Year Ended March 31,
2012 2011 2010
Foreign currency forward contracts not
designated as hedging instruments . . .
Interest and other income
(expense), net
$21 $(12) $10
(5) BUSINESS COMBINATIONS
Fiscal Year 2012 Acquisitions
PopCap Games Inc.
In August 2011, we acquired all of the outstanding shares of PopCap for an aggregate purchase price of
approximately (1) $645 million in cash and (2) $87 million in privately-placed shares of our common stock to the
founders and chief executive officer of PopCap. In addition, we agreed to grant over a four year period to
PopCap’s employees up to $50 million in long-term equity retention arrangements in the form of restricted stock
unit awards and options to acquire our common stock. These awards and options are accounted for as stock-
based compensation in accordance with ASC 718, Compensation – Stock Compensation. PopCap is a leading
developer of games for mobile phones, tablets, PCs, and social network sites. This acquisition strengthens our
participation in casual gaming and contributes to the growth of our digital product offerings.
The following table summarizes the acquisition date fair value of the consideration transferred which consisted
of the following (in millions):
Cash ................................................................................ $645
Equity ............................................................................... 87
Total purchase price .................................................................. $732
The equity included in the consideration above consisted of privately-placed shares of our common stock, whose
fair value was determined based on the quoted market price of our common stock on the date of acquisition.
In addition, we may be required to pay additional variable cash consideration that is contingent upon the
achievement of certain performance milestones through December 31, 2013 and is limited to a maximum of $550
million based on achievement of certain non-GAAP earnings targets before interest and tax. At the upper end of
the earn-out, the performance targets for earnings before income and taxes (“EBIT”) are approximately $343
million in aggregate PopCap stand-alone EBIT generated over the two-year period ending December 31, 2013.
The estimated fair value of the contingent consideration arrangement at the acquisition date was $95 million. We
estimated the fair value of the contingent consideration using probability assessments of expected future cash
flows over the period in which the obligation is expected to be settled, and applied a discount rate that
appropriately captures a market participant’s view of the risk associated with the obligation.
82