Electronic Arts 2013 Annual Report Download - page 136

$1 million, or less than 1 percent of the total in short-term investments. From time to time, we may liquidate
some or all of our short-term investments to fund operational needs or other activities, such as capital
expenditures, business acquisitions or stock repurchase programs. Depending on which short-term investments
we liquidate to fund these activities, we could recognize a portion, or all, of the gross unrealized gains or losses.
Our marketable equity securities as of March 31, 2012 consisted of common shares of Neowiz. The fair value of
our marketable equity securities decreased by $119 million in fiscal year 2013. The decrease is attributed to the
sale of our investment in Neowiz during fiscal year 2013. We received proceeds of $72 million and realized a
gain of $39 million, net of costs to sell. The realized gain is included in gains on strategic investments, net, in our
Consolidated Statements of Operations.
Contingent Consideration
As of March 31, 2013, primarily in connection with our acquisitions of PopCap, KlickNation, and Chillingo
Limited (“Chillingo”), we may be required to pay an additional $566 million of cash consideration based upon
the achievement of certain performance milestones through March 31, 2015. As of March 31, 2013, we have
accrued $43 million of contingent consideration on our Consolidated Balance Sheet representing the estimated
fair value of the contingent consideration. We have not paid any earn-out to date for the PopCap acquisition.
Fiscal 2013 Restructuring
On May 7, 2012, we announced a restructuring plan to align our cost structure with our ongoing digital
transformation. Under this plan, we reduced our workforce, terminated licensing agreements, and consolidated or
closed various facilities. As of March 31, 2013, we have completed all actions under this restructuring plan.
Since the inception of the fiscal 2013 restructuring plan through March 31, 2013, we have incurred charges of
$22 million, consisting of (1) $10 million in employee-related expenses, (2) $9 million related to license
termination costs, and (3) $3 million related to the closure of certain of our facilities. Substantially all of these
costs have been settled in cash as of March 31, 2013, with the exception of approximately $3 million of license
and lease termination costs, which will be settled by August 2016. We expect to incur cash expenditures through
August 2016 of approximately $2 million through fiscal year 2015 and less than $1 million thereafter.
Fiscal 2011 Restructuring
In connection with our fiscal 2011 restructuring plan, we expect to incur cash expenditures through June 2016 of
approximately (1) $26 million in fiscal year 2014, (2) $18 million in fiscal year 2015, (3) $3 million in fiscal year
2016, and (4) $18 million in fiscal year 2017. The actual cash expenditures are variable as they will be dependent
upon the actual revenue we generate from certain games.
Financing Arrangement
In July 2011, we issued $632.5 million aggregate principal amount of 0.75% Convertible Senior Notes due 2016
(the “Notes”). The Notes are senior unsecured obligations which pay interest semi-annually in arrears at a rate of
0.75 percent per annum on January 15 and July 15 of each year, beginning on January 15, 2012 and will mature
on July 15, 2016, unless earlier purchased or converted in accordance with their terms prior to such date. The
Notes are convertible into cash and shares of our common stock based on an initial conversion value of 31.5075
shares of our common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of
approximately $31.74 per share). Upon conversion of the Notes, holders will receive cash up to the principal
amount of each Note, and any excess conversion value will be delivered in shares of our common stock. We used
the net proceeds of the Notes to finance the cash consideration of our acquisition of PopCap, which closed in
August 2011.
Prior to April 15, 2016, the Notes will be convertible only upon the occurrence of certain events and during
certain periods, and thereafter, at any time until the close of business on the second scheduled trading day
immediately preceding the maturity date of the Notes. The Notes do not contain any financial covenants.
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