Electronic Arts 2012 Annual Report Download - page 172

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.
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, 2012, we have incurred charges of
$168 million, consisting of (1) $125 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) $12 million in employee-related expenses. The $75 million restructuring accrual as of March 31, 2012 related
to the fiscal 2011 restructuring is expected to be settled by June 2016. In fiscal year 2013 and thereafter, we
anticipate incurring $13 million of restructuring charges related to the fiscal 2011 restructuring resulting from
interest expense accretion.
Overall, including $168 million in charges incurred through March 31, 2012, we expect to incur total cash and
non-cash charges between $180 million and $185 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 $170 million) and (2) employee-related
costs ($12 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, 2012, we have incurred charges of
$135 million, consisting of (1) $62 million in employee-related expenses, (2) $53 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) $20 million related to the closure of certain of our facilities. We do not
expect to incur any additional restructuring charges under this plan. The $1 million restructuring accrual as of
March 31, 2012 related to the fiscal 2010 restructuring is expected to be settled by February 2013.
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, 2012, 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, 2012 related to the
fiscal 2009 restructuring is expected to be settled by September 2016.
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