Electronic Arts 2012 Annual Report Download - page 54

Non-GAAP Financial Measures
The Company uses certain adjusted non-GAAP financial measures when establishing performance-based bonus
and equity award targets, such as non-GAAP diluted earnings per share, non-GAAP net revenue, non-GAAP net
income, non-GAAP profit before tax, and non-GAAP digital revenue. These non-GAAP financial measures
exclude the following items (as applicable, in a given reporting period): acquisition-related expenses, changes in
deferred net revenue (packaged goods and digital content), losses (gains) on strategic investments, amortization
of debt discount, restructuring charges, stock-based compensation, and income tax adjustments, among others. In
addition, for these purposes, we make further adjustments to our publicly disclosed non-GAAP measures to add
back bonus expense. Please refer to Appendix A for more information regarding our use of non-GAAP financial
measures.
Base Salary
A competitive base salary is a crucial component in providing an attractive total compensation package for our
NEOs. The Committee initially sets each NEO’s base salary at a level which reflects the NEO’s position,
responsibilities and experience, as compared to similar executives at comparable companies. On an annual basis,
the Committee reviews and approves any base salary adjustments, considering such factors as individual
performance, pay relative to market, level of responsibilities, complexity of role, and internal compensation
alignment.
As part of its May 2012 compensation review, the Committee decided to increase the base salaries of certain
NEOs for fiscal 2013. Effective June 1, 2012, Mr. Riccitiello’s base salary will increase to $1,030,000,
Mr. Barker’s base salary will increase to $445,000, Mr. Gibeau’s base salary will increase to $710,000,
Mr. Moore’s base salary will increase to $630,000, and Mr. Taneja’s base salary will increase to $600,000. These
increases were consistent with the compensation-setting process described above, and based on the Company’s
financial performance, each NEO’s business unit financial performance (if applicable), strategic and operational
performance, market trends, and other factors unique to each individual, such as their role and experience.
Bonus Funding
As described below, cash bonus awards for Mr. Riccitiello, Mr. Gibeau and Mr. Moore were funded under the
Electronic Arts Inc. Executive Bonus Plan (the “Executive Bonus Plan”) based on the attainment of a
pre-determined non-GAAP net-income performance measure (as described below under “Executive Bonus
Plan”). Bonus funding for Mr. Barker and Mr. Taneja was determined under the broad-based EA Bonus Plan, the
funding of which is discretionary based upon Company, business unit and individual performance. Mr. Brown
resigned effective February 17, 2012, and was not awarded a cash bonus for fiscal 2012.
Executive Bonus Plan
For fiscal 2012, our NEOs (other than Mr. Barker and Mr. Taneja) participated in the Executive Bonus Plan. In
general, officers of the Company who report directly to the Chief Executive Officer at the beginning of each
fiscal year participate in the Executive Bonus Plan. Mr. Taneja joined the Company during the third quarter of
fiscal 2012 and did not participate in the Executive Bonus Plan for fiscal 2012. In his position as Senior Vice
President, Chief Accounting Officer, Mr. Barker reported directly to the Company’s Chief Financial Officer at
the beginning of fiscal 2012 and did not participate in the Executive Bonus Plan for fiscal 2012. Cash bonuses
payable under the Executive Bonus Plan are intended to qualify as tax deductible “performance-based
compensation” under Section 162(m) of the Internal Revenue Code. Funding for the Executive Bonus Plan is
contingent upon the achievement of one or more pre-established Company financial performance measures.
Based on our performance, a maximum bonus award is calculated for each NEO. The Committee may then
exercise its discretion to reduce, but not increase, actual bonus awards based on discretionary factors such as the
performance of the Company, the performance of each NEO’s business unit (if applicable), and the NEO’s
individual performance.
In May 2011, the Committee set the fiscal 2012 performance measure for funding the Executive Bonus Plan. The
maximum bonus funding (“Maximum Bonus Award”) for each participating NEO is the lower of: (1) 300% of
his annual base salary and (2) 0.5% of non-GAAP net income for each NEO other than Mr. Riccitiello, for whom
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