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Electronic Arts Inc.
Fiscal Year 2015
Proxy Statement and Annual Report

Table of contents

  • Page 1
    Electronic Arts Inc. Fiscal Year 2015 Proxy Statement and Annual Report

  • Page 2

  • Page 3
    Proxy Statement Notice of 2015 Annual Meeting and Proxy Statement

  • Page 4
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 5
    ... Meeting of Stockholders DATE: August 14, 2015 TIME: 2:00 p.m. (Pacific) PLACE: ELECTRONIC ARTS' HEADQUARTERS Building 250* 209 Redwood Shores Parkway Redwood City, CA 94065 * Please note: Building 250 is located on the headquarters' campus at 250 Shoreline Drive MATTERS TO BE VOTED UPON: Board...

  • Page 6
    ... Policy ...Certain Relationships and Related Person Transactions ...Section 16(a) Beneficial Ownership Reporting Compliance ...Director Attendance at Annual Meeting ...Stockholder Communications with the Board of Directors ...Stockholder Proposals for 2016 Annual Meeting ...Other Business ...Report...

  • Page 7
    ... net revenue and earnings per share guidance, drove higher gross margins, increased our cash provided by operations and invested in new products and services for the future. In fiscal 2015, our share price increased by 104%, making us the 4th best performing stock in the S&P 500 Index over that time...

  • Page 8
    ...EA stock and prohibit directors and executives from pledging EA stock Conduct annual "say on pay" advisory votes Regularly solicit feedback from our largest stockholders on our executive compensation programs È È È What We Don't Do Have a "single-trigger" change in control plan Provide excise tax...

  • Page 9
    ... Founding General Partner, Technology Crossover Ventures Senior Vice President, Google Inc. Private Investor Chairman, Electronic Arts Executive Vice President, Chief Financial Officer, Sabre Corporation Former President, Ford Foundation Executive Vice President, Tribune Publishing Company Chief...

  • Page 10
    ... 7 of 9 Board Operations Number of directors that attended 100% of board and standing committee meetings in fiscal 2015; number of directors that attended at least 78% of all meetings Board Evaluations 6 of 9 9 of 9 Annual Independent Lead Director Rick Simonson (until Annual Meeting) Luis A. Ubi...

  • Page 11
    ...: Corporate Secretary, Electronic Arts Inc., 209 Redwood Shores Parkway, Redwood City, CA 94065 or call (650) 628-1500. How can I get electronic access to the proxy materials? The proxy card provides instructions on how to inform us to send future proxy materials to you electronically by email...

  • Page 12
    ... Wilson (the Company's Chief Executive Officer), Blake Jorgensen (the Company's Chief Financial Officer), and Jacob Schatz (the Company's Senior Vice President, General Counsel and Corporate Secretary) or any of them, each with power of substitution, to vote your shares at the meeting as you have...

  • Page 13
    ...corporate headquarters address listed above); • Signing and returning another proxy with a later date; • Voting by telephone or on the Internet at any time prior to 11:59 p.m. Eastern Time on August 13, 2015 (your latest vote is counted); or • Voting in person at the Annual Meeting. Your proxy...

  • Page 14
    ...for good cause will not serve, as a member of the Board of Directors, the Board of Directors may reduce the number of directors or select a substitute nominee or substitute nominees, as the case may be. In the latter case, if you have completed and returned your proxy card, Mr. Wilson, Mr. Jorgensen...

  • Page 15
    ... of a fiscal period was not the last day of a calendar month. Thus, in this Proxy Statement, "fiscal 2016", "fiscal 2015", "fiscal 2014", "fiscal 2013", "fiscal 2012" and "fiscal 2011" refer to our fiscal years ending or ended (as the case may be) on March 31, 2016, 2015, 2014, 2013, 2012 and 2011...

  • Page 16
    ...a board member on numerous companies, both public and private, and is familiar with a full range of corporate and board functions. His many years of experience in helping companies shape and implement strategy provide the Board of Directors with useful perspectives on matters such as risk management...

  • Page 17
    ... to 2010, Mr. Simonson held a number of executive positions at Nokia Corporation, including Executive Vice President, Head of Mobile Phones and Sourcing, Chief Financial Officer, and Vice President & Head of Customer Finance. Mr. Simonson is also a director of Silver Spring Networks. Mr. Simonson...

  • Page 18
    ...positions at The New York Times Company from June 2005 through October 2014, including Executive Vice President of Digital Products and Services from March 2013 until October 2014, General Manager of NYTimes.com from December 2008 to March 2013, and as Chief Advertising Officer of The New York Times...

  • Page 19
    ... for the Company at this time. Given his 30 years of experience with the Company, more than 15 of which he served as CEO, Mr. Probst has invaluable knowledge regarding the Company and gaming industry and is uniquely positioned to lead the Board of Directors in its review of management's strategic...

  • Page 20
    ... for reviewing from time to time the appropriate skills, characteristics and experience required of the Board of Directors as a whole, as well as its individual members, including such factors as business experience and diversity. In addition, the Nominating and Governance Committee is responsible...

  • Page 21
    ... may do so by writing to EA's Corporate Secretary at Electronic Arts Inc., 209 Redwood Shores Parkway, Redwood City, CA 94065, Attn: Director Nominations. To be considered by the Nominating and Governance Committee in connection with EA's annual meeting of stockholders, recommendations must be...

  • Page 22
    ... officers. RELATED PERSON TRANSACTIONS POLICY Our Board of Directors has adopted a written Related Person Transactions Policy. The purpose of the policy is to describe the procedures used to identify, review, approve or ratify and, if necessary, disclose "related-person transactions" involving EA...

  • Page 23
    ... executive office no later than February 26, 2016. Stockholders who otherwise wish to present a proposal at the 2016 Annual Meeting must deliver written notice of the proposal to our Corporate Secretary at Electronic Arts Inc., 209 Redwood Shores Parkway, Redwood City, CA 94065, by the close...

  • Page 24
    ... BUSINESS The Board of Directors does not know of any other matter that will be presented for consideration at the Annual Meeting except as specified in the notice of the meeting. If any other matter does properly come before the Annual Meeting, or at any adjournment or postponement of the Annual...

  • Page 25
    ...to assist the Board of Directors in its oversight responsibilities relating to the integrity of EA's accounting policies, internal control and financial reporting processes. The Audit Committee reviews EA's quarterly and annual financial statements prior to public earnings releases and submission to...

  • Page 26
    fiscal year 2015 be included for filing with the SEC in the Company's Annual Report. The Audit Committee has also approved the selection of KPMG LLP as the Company's independent auditors for fiscal 2016. AUDIT COMMITTEE Richard A. Simonson (Chairman) Jeffrey T. Huber Denise F. Warren 20

  • Page 27
    ...during fiscal 2015 individual directors were eligible to earn up to $1,000 per day, with the approval of the Board of Directors, for special assignments, which may include providing oversight to management in such areas as sales, marketing, public relations, technology and finance (provided, however...

  • Page 28
    ...based on a closing price of $33.60 for our common stock on the date of grant, July 31, 2014. For additional information regarding the valuation methodology for RSUs, see Note 15, "Stock-Based Compensation and Employee Benefit Plans", to the Consolidated Financial Statements in our Annual Report. The...

  • Page 29
    ... price equal to the fair market value of our common stock on the date of grant. The following table presents information regarding the shares granted to each director during fiscal 2015 who elected to receive all or part of their cash compensation in the form of common stock: (4) Proxy Statement...

  • Page 30
    ... net revenue and earnings per share guidance, drove higher gross margins, increased our cash provided by operations and invested in new products and services for the future. In fiscal 2015, our share price increased by 104%, making us the 4th best performing stock in the S&P 500 Index over that time...

  • Page 31
    ... to our executive officers and increased the percentage of PRSUs from 25% to 50% with vesting tied to the Company's total stockholder return ("TSR") over one-, two- and three-year periods; the remaining 50% of the annual equity award is granted in time-based RSUs ("RSUs") in order to balance pay-for...

  • Page 32
    ...2014, Compensia conducted a comprehensive analysis of our executive compensation programs using publicly available compensation information on our peer group and data from the Radford Global Technology Survey. The analysis included a comparison of the base salary, target cash compensation, long-term...

  • Page 33
    .... In July 2014, we added Kenneth Moss to our executive leadership team as our Chief Technology Officer. In that role, Mr. Moss directs the development of the digital platform for the Company, consolidating and enhancing our server infrastructure to support our products and services, and managing our...

  • Page 34
    ... Dashboard below provides a snapshot of the key elements of our fiscal 2015 and fiscal 2016 executive compensation programs and illustrates that long-term incentives constitute the overwhelming majority of our NEOs' total target direct compensation. Additional information about these key elements is...

  • Page 35
    ... Dragon Age: Inquisition; the operational stability of our fiscal 2015 game launches such as the launch of Battlefield: Hardline; and the development progress of new IP for fiscal 2016, including Star Wars: Battlefront, to determine the funding at 125% of aggregate employee target bonuses. Business...

  • Page 36
    ... the critical and financial success of the Company's fiscal 2015 game launches, including FIFA 15, Madden NFL 15, Dragon Age: Inquisition and Battlefield: Hardline; the Company's significant increase in digital revenue; the success of new products and services; the development of new IP; recognizing...

  • Page 37
    ...; his leadership of the organization, strategy and vision for EA's digital platform and information technology divisions; and his team's support of the Company's products and services, such as the launch quality of the Company's fiscal 2015 games including Battlefield: Hardline. 31 Proxy Statement

  • Page 38
    ..., competitive market practices, including benchmarking data for the position, and internal compensation alignment among our executive officers. The following table shows the value of the Annual Awards granted to Mr. Wilson, Mr. Jorgensen, Mr. Söderlund and Mr. Moore in fiscal 2015 and the New Hire...

  • Page 39
    ... fiscal 2014, including improvements to the Company's operating margins and cash provided by operations; his role in reducing the Company's operating expenses; and managing communications with employees and investors. Mr. Söderlund, Executive Vice President, EA Studios In determining the size of...

  • Page 40
    ... based on the change in our stock price during a Vesting Measurement Period (i.e., approximately the 12-month period, 24-month cumulative period and 36-month cumulative period following of the date of grant), using a 90-day trailing average stock price. If the Company's Relative NASDAQ-100 TSR is at...

  • Page 41
    ... 90 day average stock price (at end of measurement period) EA's TSR EA's Relative NASDAQ-100 TSR Percentile Percentage of Target Shares Earned in May 2015 275.7% 95th 200% June 2012 Fiscal 13-15 $14.26 3 Years June 2013 Fiscal 14-16 $20.35 2 Years $53.42 162.5% 96th 200% 65.1% 97th 200% June 2014...

  • Page 42
    ... in the Electronic Arts Inc. Key Employee Continuity Plan (the "CoC Plan"), which is a "double-trigger" change of control plan that provides our executive officers with payments and benefits if their employment is terminated in connection with a change of control. For more information on the...

  • Page 43
    ... and state insider trading laws. In addition, our insider trading policy prohibits our directors, executive officers and other employees from engaging in any hedging transaction or short sale of our stock or trading in any derivatives of our stock; our directors and Section 16 officers also are...

  • Page 44
    ... Committee has reviewed and discussed with management the Compensation Discussion and Analysis. Based on its review and discussions with management, the Committee recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement. COMMITTEE MEMBERS Jay C. Hoag...

  • Page 45
    ... Position ANDREW WILSON ...2015 Chief Executive Officer 2014 2013 BLAKE JORGENSEN ...2015 Executive Vice President, 2014 Chief Financial Officer 2013 PATRICK SÃ-DERLUND(8) ...2015 Executive Vice President, 2014 EA Studios 2013 PETER MOORE ...2015 Executive Vice President, 2014 Chief Operating...

  • Page 46
    ...Company headquarters in Redwood Shores, California ($36,183), (2) a welcome gift from the EA company store given to Mr. Moss, (3) participation in video game purchase and/or reimbursement program available to all employees and (4) participation in a console reimbursement program available to all new...

  • Page 47
    ... of our 2013 and 2014 fiscal years, respectively. The amounts reported as salary and all other compensation for Mr. Söderlund in fiscal 2015 were derived from an average of the Swedish krona to U.S. dollar exchange rates on the last day of each month during fiscal 2015. The amount reported as non...

  • Page 48
    ...as "Market-Based Restricted Stock Units" in Note 15 "Stock-Based Compensation and Employee Benefit Plans", to the Consolidated Financial Statements in our Annual Report. The number of PRSUs that vest is based on EA's Relative NASDAQ-100 TSR. For additional information regarding the specific terms of...

  • Page 49
    ...assumptions used to calculate fair value, see Note 15 "Stock-Based Compensation and Employee Benefit Plans", of the Consolidated Financial Statements in our Annual Report. (7) RSUs vested as to one-third of the units on May 16, 2015 and will vest as to one-third of the units on each of May 16, 2016...

  • Page 50
    ... Equity Incentive Plan. The market value of the unvested time-based and performance-based RSU awards is determined by multiplying the number of unvested RSUs by $58.24, the closing price of the Company's common stock on March 27, 2015, the last trading day of fiscal 2015. For the RSU awards subject...

  • Page 51
    ... - Proxy Statement Blake Jorgensen ... Patrick Söderlund ... Peter Moore ... Kenneth Moss ...(1) Represents PRSUs at the maximum achievement level of 200% of target. The number of PRSUs that vest is based on EA's Relative NASDAQ-100 TSR. For additional information regarding the specific terms of...

  • Page 52
    ... 2015. The value realized upon vesting of RSUs and PRSUs is calculated by multiplying the number of RSUs and PRSUs vested by the prior day's closing price of EA common stock on the vest date. (2) (3) POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL Electronic Arts Key Employee Continuity...

  • Page 53
    ... or for "good reason") in connection with a change of control of the Company. For purposes of the table below, we have assumed a termination date of March 27, 2015, the last business day of fiscal 2015. The closing price of our common stock on March 27, 2015 (the last trading day of fiscal 2015) was...

  • Page 54
    ... following table and related footnotes gives aggregate information regarding grants under all of our equity incentive plans as of the end of fiscal 2015, including the 2000 Equity Incentive Plan and the 2000 Employee Stock Purchase Plan. Number of Securities Remaining Available for Future Issuance...

  • Page 55
    ... of our common stock. As of May 29, 2015, there were 312,478,429 shares of our common stock outstanding. Except as otherwise indicated, the address for each of our directors and executive officers is c/o Electronic Arts Inc., 209 Redwood Shores Parkway, Redwood City, CA 94065. Shares Owned(1) Right...

  • Page 56
    ... interests therein. The address for each of Mr. Hoag, the Management Companies and the TCV Funds is c/o Technology Crossover Ventures, 528 Ramona Street, Palo Alto, CA 94301. (6) Includes 167,451 shares of common stock held directly by Mr. Probst, 73,238 shares of common stock held by Mr. Probst...

  • Page 57
    ... our director resignation policies, please see the sections of this Proxy Statement entitled "2015 Proxy Statement Summary and Highlights", Commonly Asked Questions and Answers" and "Board of Directors and Corporate Governance". The Board of Directors has nominated the following directors to stand...

  • Page 58
    ... Investor Outreach Program and Resulting Compensation Changes As we discuss in detail beginning on page 25 of this Proxy Statement, in connection with the say on pay vote at our 2014 Annual Meeting, our directors and management spoke with stockholders representing approximately 53% of our stock to...

  • Page 59
    ... long-term knowledge of EA and its subsidiaries is valuable to the Company as discussed further below. Representatives of KPMG LLP have direct access to members of the Audit Committee and the Board of Directors. We expect one or more representatives of KPMG LLP to attend the Annual Meeting in order...

  • Page 60
    ... Public Accountants, and the NASDAQ Stock Market, whether the proposed services are permitted under EA's policies, and whether the proposed services are consistent with the principles of the SEC's auditor independence rules. The Company also annually confirms with each of its directors and executive...

  • Page 61
    ... in the stockholder proposal and supporting statement are the sole responsibility of the proponents. Proxy Statement Proposal No. 4 - Proxy Access for Shareholders RESOLVED: Shareholders of Electronic Arts Inc. (the "Company") ask the board of directors (the "Board) to adopt, and present for...

  • Page 62
    The proposed bylaw terms enjoy strong investor support - votes for similar shareholder proposals averaged 55% from 2012 through September 2014 - and similar bylaws have been adopted by companies of various sizes across industries, including Chesapeake Energy, Hewlett-Packard, Western Union and ...

  • Page 63
    ... achieved working together with our Board. Fiscal 2015 was a year of exceptional performance for EA - we achieved record net revenue, digital net revenue and operating cash flow; our share price increased by 104% making us the 4th best performing stock in the S&P 500 Index over that time period. Our...

  • Page 64
    ... into account the Board's actions to develop a strong corporate governance profile that promotes accountability and responsiveness to stockholders. In recommending that you vote against this proxy access proposal, the Board took into account the following factors that underscore the Company's strong...

  • Page 65
    ...GAAP net revenue) ...GAAP mobile digital net revenue ...Change in deferred net revenue (online-enabled games) ...Non-GAAP mobile digital net revenue ...GAAP gross profit ...Acquisition-related expenses ...Change in deferred net revenue (online-enabled games) ...Loss on licensed intellectual property...

  • Page 66
    ... Acquisition-related expenses • Amortization of debt discount • Change in deferred net revenue (online-enabled games) • College football settlement expenses • Income tax adjustments • Loss on licensed intellectual property commitment (COGS) • Shares from Convertible Bond Hedge • Stock...

  • Page 67
    ... financial measures. Change in Deferred Net Revenue (Online-enabled Games). The majority of our software games can be connected to the Internet whereby a consumer may be able to download unspecified content or updates on a when-and-if-available basis ("unspecified updates") for use with the original...

  • Page 68
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 69
    2014 Annual Report on Form 10-K Annual Report

  • Page 70
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 71
    ...-17948 ELECTRONIC ARTS INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 94-2838567 (I.R.S. Employer Identification No.) 209 Redwood Shores Parkway Redwood City, California (Address of principal executive offices...

  • Page 72
    ELECTRONIC ARTS INC. 2015 FORM 10-K ANNUAL REPORT Table of Contents Page PART I Item 1 Business ...Item 1A Risk Factors ...Item 1B Unresolved Staff Comments ...Item 2 Properties ...Item 3 Legal Proceedings ...Item 4 Mine Safety Disclosures ...PART II Item 5 Market for Registrant's Common Equity, ...

  • Page 73
    ... distribute game software content and services that can be played by consumers on a variety of platforms, including game consoles (such as the PlayStation 3 and PlayStation 4 from Sony, and Xbox 360 and Xbox One from Microsoft), PCs, mobile phones and tablets. Business Annual Report Our Strategy...

  • Page 74
    ...online services can be purchased directly through Sony's PlayStation Network and Microsoft's Xbox LIVE Marketplace. Our PC games and additional content can be downloaded directly through our Origin online platform, as well as through third-party online download stores. Our mobile, tablet and PC free...

  • Page 75
    ... support from our Global Publishing and Marketing organizations, as well as our Digital Platform team. EA Studios EA Studios is home to the largest number of our studios and development teams and is responsible for developing games and related content and services across an expansive range of game...

  • Page 76
    ... are responsible for the distribution, sales, and marketing of our products and services, including operations, and manufacturing functions, as well as our global media advertising sales business and customer support teams. Mobile game publishing is overseen by our EA Mobile organization. Digital...

  • Page 77
    ... as sports leagues and players' associations, film and music companies, performing talent, and other content and technology companies. These agreements typically limit our use of the licensed rights in products for specific time periods. In addition, our products that play on game consoles, mobile...

  • Page 78
    ... to digitally-delivered products, other online content and services sold by the console manufacturers, the console manufacturers pay us either a wholesale price or a percentage royalty on the revenue they derive from their sales. Many key commercial terms of our relationships with Sony and Microsoft...

  • Page 79
    ... based on a number of factors, including title release dates, cancellation or delay of a key event or sports season to which our product release schedule is tied, consumer demand for our products, shipment schedules, content offerings and our revenue recognition policies. Government Regulation We...

  • Page 80
    ...President, EA Studios Chief Technology Officer Chief Marketing Officer Executive Vice President, Business and Legal Affairs Executive Vice President, Chief Talent Officer Senior Vice President, Maxis Senior Vice President, Chief Accounting Officer Senior Vice President, General Counsel and Corporate...

  • Page 81
    ... Board of Directors of Corsair Components, Inc. Mr. Barker graduated from the University of Notre Dame with a B.A. degree in Accounting. Mr. Schatz has served as Senior Vice President, General Counsel and Corporate Secretary since June 2014. Mr. Schatz joined EA in 1999 and prior to his current role...

  • Page 82
    ... risk in those titles and means each major title has greater associated risk. A significant portion of our revenue has historically been derived from games and services based on a few popular franchises. For example, in fiscal year 2015, net revenue generated from the sale of products and services...

  • Page 83
    ... monetize game properties through a variety of new business models, including from digital content delivery such as online distribution of full games and additional content, free-to-download games supported by advertising and/or micro-transactions and subscription services. Forecasting our revenues...

  • Page 84
    ... service launch schedule or to keep up with our competition, which would increase our development expenses. We may also miss opportunities to adopt technology, or develop products and services for new platforms or services that become popular with consumers, which could adversely affect our revenues...

  • Page 85
    ...and data privacy and security laws generally. In the course of our business, we collect, process, store and use consumer information, including personal information, passwords and credit card information. Although we take measures to protect consumer information from unauthorized access, acquisition...

  • Page 86
    ...release of our products in those territories. As we increase the online delivery of our products and services, we are subject to a number of foreign and domestic laws and regulations that affect companies conducting business on the Internet. In addition, laws and regulations relating to user privacy...

  • Page 87
    ... change their user and developer policies and guidelines, which can negatively impact our business. If our channel partners establish terms that restrict our offerings through their channels, or significantly impact the financial terms on which these products or services are offered to our customers...

  • Page 88
    ...business partners may put our business and our reputation at risk. In many cases, these third parties are given access to sensitive and proprietary information in order to provide services and support to our teams. These third parties may misappropriate our information and engage in unauthorized use...

  • Page 89
    ... (1) acquisitions of companies, businesses, intellectual properties, and other assets, (2) minority investments in strategic partners, and (3) investments in new interactive entertainment businesses (e.g., online and mobile publishing platforms) as part of our long-term business strategy. These...

  • Page 90
    ...the credit risk of these counterparties is not secured by any collateral and the amount of that exposure will depend on many factors but, generally, the increase in our exposure will be correlated to the increase in the market price and in the volatility of our common stock. Changes in our tax rates...

  • Page 91
    ...over the period the related assets are transferred to the customer. As we enhance, expand and diversify our business and product offerings, the application of existing or future financial accounting standards, particularly those relating to the way we account for revenue, costs and taxes, could have...

  • Page 92
    ... court review. On December 17, 2013, a purported shareholder class action lawsuit was filed in the United States District Court for the Northern District of California against the Company and certain of its officers by an individual purporting to represent a class of purchasers of EA common stock...

  • Page 93
    ...Our common stock is traded on the NASDAQ Global Select Market under the symbol "EA". The following table sets forth the quarterly high and low closing sales price per share of our common stock from April 1, 2013 through March 31, 2015. Prices High Low Fiscal Year Ended March 31, 2014: First Quarter...

  • Page 94
    ...number of shares repurchased in the fourth quarter of the fiscal year ended March 31, 2015 under the May 2014 program: Maximum Dollar Total Number of Value that May Total Number Shares Purchased as Still Be Purchased of Shares Average Price part of Publicly Under the Program Purchased Paid per Share...

  • Page 95
    ...150 Annual Report $100 $50 $0 3/10 3/11 3/12 3/13 3/14 3/15 Electronic Arts, Inc. NASDAQ Composite S&P 500 RDG Technology Composite * Based on $100 invested on March 31, 2010 in stock or index, including reinvestment of dividends. March 31, 2012 2013 2010 2011 2014 2015 Electronic Arts Inc...

  • Page 96
    Item 6: Selected Financial Data ELECTRONIC ARTS INC. AND SUBSIDIARIES SELECTED FIVE-YEAR CONSOLIDATED FINANCIAL DATA (In millions, except per share data) STATEMENTS OF OPERATIONS DATA 2015 Year Ended March 31, 2014 2013 2012 2011 Net revenue ...Cost of revenue ...Gross profit ...Total operating ...

  • Page 97
    ... Electronic Arts We develop, market, publish and distribute game software content and services that can be played by consumers on a variety of platforms, including video game consoles (such as the PlayStation 3 and 4 from Sony, and the Xbox 360 and Xbox One from Microsoft), PCs, mobile phones and...

  • Page 98
    ... longer periods of time. Additionally, our mobile and PC free-to-download games are available solely via digital delivery and are typically monetized through a business model through which we sell incremental content and/or features in discrete transactions. We also provide our EA Access service for...

  • Page 99
    ...MAUs at each month-end during that period. MAUs are calculated using internal company data based on tracking the activity of user accounts. We also include in this calculation data provided by our third party publishing partners for certain games that we develop but we exclude information from third...

  • Page 100
    ... free-to-download mobile games), (2) massively multi-player online ("MMO") games (both software game and subscription sales), (3) subscriptions for our Battlefield Premium, EA Access and Pogo-branded online game services, and (4) allocated service revenue from sales of software games with an online...

  • Page 101
    ... days based on the units sold of each game, determining the period of time between the date of sale to reseller and the date of sale to the consumer and assessing online gameplay trends. Prior to July 1, 2013, for most sales, we estimated the offering period to be six months and recognized revenue...

  • Page 102
    ... game industry, changes in customer demand, acceptance of our software products, and other related factors. In addition, we monitor the volume of sales to our channel partners and their inventories, as substantial overstocking in the distribution channel could result in high returns or higher price...

  • Page 103
    ... future, actual returns and price protections may materially exceed our estimates as unsold software products in the distribution channels are exposed to rapid changes in consumer preferences, market conditions or technological obsolescence due to new platforms, product updates or competing software...

  • Page 104
    ...This success is dependent upon several factors, such as which operating platforms will be successful in the marketplace. Also, our revenue and earnings are dependent on our ability to meet our product release schedules. Judgments and assumptions about future cash flows and remaining useful lives are...

  • Page 105
    ... product and service sales. Any impairments or losses determined before the launch of a product are generally charged to research and development expense. Impairments or losses determined post-launch are charged to cost of revenue. We evaluate long-lived royalty-based assets for impairment using...

  • Page 106
    ... changes in our international corporate structure, changes in the geographic location of business functions or assets, changes in the geographic mix and amount of income, as well as changes in our agreements with tax authorities, valuation allowances, applicable accounting rules, applicable tax laws...

  • Page 107
    ...sold as packaged goods or as digital downloads and designed for play on video game consoles (such as the PlayStation 3 and 4 from Sony, and the Xbox 360 and One from Microsoft) and PCs, (2) video games for mobile phones and tablets, (3) separate software products and content and online game services...

  • Page 108
    ...(3) the timing of the sale. Our sales are generally deferred and recognized over an estimated nine-month period beginning in the month after shipment for physical games sold through retail and an estimated six-month period for digitally delivered games and content, and therefore, the related revenue...

  • Page 109
    ... through direct download via the Internet. This includes fullgame downloads, extra content, subscriptions, advertising and other, and mobile revenue. Digital revenue includes internally-developed and co-published game software distributed through our direct-to-consumer platform Origin, distributed...

  • Page 110
    ... during the second quarter of fiscal year 2014 for packaged goods sold through retail, and (2) an increase in digital and packaged goods sales during the preceding six and nine-month period. The change in estimated offering period resulted in an estimated increase to net revenue and net income of...

  • Page 111
    ...costs in connection with the development and production of our online games. Research and development expenses also include expenses associated with our digital platform, software licenses and maintenance, and management overhead. Research and development expenses for fiscal years 2015 and 2014 were...

  • Page 112
    ... staff, corporate functions such as finance, legal, human resources, and information technology ("IT"), related overhead costs, fees for professional services such as legal and accounting, and allowances for doubtful accounts. General and administrative expenses for fiscal years 2015 and 2014 were...

  • Page 113
    ... The Simpsons: Tapped Out. Net Revenue by Product Revenue and Service and Other Revenue Our net revenue by product revenue and service and other revenue for fiscal years 2014 and 2013 was as follows (in millions): 2014 Year Ended March 31, 2013 $ Change % Change Annual Report Net revenue: Product...

  • Page 114
    ... to net revenue for fiscal years 2014 and 2013 was as follows (in millions): 2014 Year Ended March 31, 2013 $ Change % Change Packaged goods and other ...Full-game downloads ...Extra content ...Subscriptions, advertising, and other ...Mobile ...Total Digital ...Net Revenue before Revenue Deferral...

  • Page 115
    ...Cost of revenue for fiscal years 2014 and 2013 was as follows (in millions): % of % of Change as a March 31, Related March 31, Related Net % of Related 2014 Net Revenue 2013 Revenue % Change Net Revenue Cost of revenue: Product ...$1,032 Service and other ...315 Total cost of revenue ...$1,347 Cost...

  • Page 116
    ...contingent consideration for fiscal years 2014 and 2013 were as follows (in millions): March 31, 2014 % of Net Revenue March 31, 2013 % of Net Revenue $ Change % Change $(35) (1)% $(64) (2)% $29 45% During fiscal year 2014, acquisition-related contingent consideration credits decreased by $29...

  • Page 117
    ... been provided thereon. In connection with a review of our cash position including potential future cash needs for stock repurchases and debt retirement, we made a one-time repatriation of $700 million from certain of our wholly-owned subsidiaries during the three months ended March 31, 2014. This...

  • Page 118
    ...Activities. Cash provided by operating activities increased $355 million during fiscal year 2015 as compared to fiscal year 2014. The change is primarily due to a $298 million increase in Net Revenue before Revenue Deferral and an $88 million decrease in research and development, marketing and sales...

  • Page 119
    ...stock trading plans. The timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, alternative investment opportunities and other market conditions. We are not obligated to repurchase any specific number of shares...

  • Page 120
    ...krona and Canadian dollar) had a negative impact on our reported international net revenues, but a positive impact on our reported international operating expenses because these amounts were translated at lower rates in fiscal year 2015 than in fiscal year 2014. While we use foreign currency hedging...

  • Page 121
    ...months or less. These transactions are designated and qualify as cash flow hedges. Our hedging programs are designed to reduce, but do not entirely eliminate, the impact of currency exchange rate movements in net revenue and research and development expenses. Balance Sheet Hedging Activities. We use...

  • Page 122
    ...value of our short-term investment portfolio as of March 31, 2015, arising from potential changes in interest rates. The modeling technique estimates the change in fair value from immediate hypothetical parallel shifts in the yield curve of plus or minus 50 basis points ("BPS"), 100 BPS, and 150 BPS...

  • Page 123
    ... 31, 2015, 2014 and 2013 ...Consolidated Statements of Cash Flows for the Years Ended March 31, 2015, 2014 and 2013 ...Notes to Consolidated Financial Statements ...Reports of Independent Registered Public Accounting Firm ...Financial Statement Schedule: The following financial statement schedule of...

  • Page 124
    ELECTRONIC ARTS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except par value data) ASSETS Current assets: Cash and cash equivalents ...Short-term investments ...Receivables, net of allowances of $140 and $186, respectively ...Inventories ...Deferred income taxes, net ...Other ...

  • Page 125
    ... share data) Net revenue: Product ...Service and other ...Total net revenue ...Cost of revenue: Product ...Service and other ...Total cost of revenue ...Gross profit ...Operating expenses: Research and development ...Marketing and sales ...General and administrative ...Acquisition-related contingent...

  • Page 126
    ... ...Total other comprehensive loss, net of tax ...Total comprehensive income (loss) ...Year Ended March 31, 2015 2014 2013 $875 1 - 20 11 (67) (35) $840 $ 8 - - (19) 9 (22) (32) $ 98 (46) (41) (2) 4 (19) (104) (6) $(24) $ See accompanying Notes to Consolidated Financial Statements. 56

  • Page 127
    ELECTRONIC ARTS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In millions, share data in thousands) Common Stock Shares Amount Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income Total Stockholders' Equity Balances as of...

  • Page 128
    ... revenue (online-enabled games) ...Net cash provided by operating activities ...INVESTING ACTIVITIES Capital expenditures ...Proceeds from sale of marketable equity securities ...Proceeds from maturities and sales of short-term investments ...Purchase of short-term investments ...Acquisition-related...

  • Page 129
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES We develop, market, publish and distribute game software content and services that can be played by consumers on a variety of platforms, including video game consoles (such as the...

  • Page 130
    ... than three months at the time of purchase, are accounted for as available-for-sale securities and are recorded at fair value. Cash, cash equivalents and short-term investments are available for use in current operations or other activities such as capital expenditures, business combinations and...

  • Page 131
    ... We derive revenue principally from sales of interactive software games, and related content (e.g., microtransactions) and services on (1) video game consoles (such as the PlayStation 3 and 4 from Sony, and the Xbox 360 and Xbox One from Microsoft) and PCs, and (2) mobile phones and tablets. We...

  • Page 132
    ... free-to-download mobile games), (2) massively multi-player online ("MMO") games (both software game and subscription sales), (3) subscriptions for our Battlefield Premium, EA Access and Pogo-branded online game services, and (4) allocated service revenue from sales of software games with an online...

  • Page 133
    ... for fiscal year 2014. During the fiscal year ended March 31, 2015, this change in estimate resulted in an estimated increase to net revenue and net income of $474 million and an increase of $1.46 of diluted earnings per share. The estimated offering period for digitally distributed games did not...

  • Page 134
    ... collection risk if one or more of these large customers became unable to pay for our products or declared bankruptcy. A significant portion of our revenue has historically been derived from games and services based on a few popular franchises. For example, in fiscal year 2015, net revenue generated...

  • Page 135
    ...the related revenue is recognized. Vendor reimbursements of advertising costs of $43 million, $66 million, and $45 million reduced marketing and sales expense for the fiscal years ended March 31, 2015, 2014 and 2013, respectively. For the fiscal years ended March 31, 2015, 2014 and 2013, advertising...

  • Page 136
    .... We increased noncurrent deferred income tax liabilities by $67 million. As the new accounting standard only impacted presentation, it did not have an impact on the Company's net financial position, results of operations, or cash flows. Impact of Recently Issued Accounting Standards In April 2015...

  • Page 137
    ... reporting. The new standard is effective for annual reporting periods beginning after December 15, 2016. Early application is not permitted. We are required to adopt this standard in the first quarter of fiscal year 2018; however, in April 2015, the FASB issued an exposure draft that would provide...

  • Page 138
    ...Identical Other Significant Financial Observable Unobservable As of Inputs Inputs March 31, Instruments 2015 (Level 1) (Level 2) (Level 3) Balance Sheet Classification Assets Bank and time deposits ...$ 175 Money market funds ...7 Available-for-sale securities: Corporate bonds ...468 U.S. Treasury...

  • Page 139
    ... at Reporting Date Using Quoted Prices in Active Markets for Significant Identical Other Significant Financial Observable Unobservable As of Inputs Inputs March 31, Instruments 2014 (Level 1) (Level 2) (Level 3) Balance Sheet Classification Assets Money market funds ...$ 588 Available-for-sale...

  • Page 140
    ...the financial condition and near-term prospects of the investees, our intent to sell and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value, and any contractual terms impacting the prepayment or settlement process. Based on our review...

  • Page 141
    ... to purchase ...Forward contracts to sell ... $108 $508 $- $18 $8 $1 $179 $363 $- $- $3 $2 The net impact of the effective portion of gains and losses from our cash flow hedging activities in our Consolidated Statements of Operations for the fiscal years ended March 31, 2015, 2014 and 2013 was...

  • Page 142
    ...) The changes in accumulated other comprehensive income (loss) by component, net of tax, for the fiscal years ended March 31, 2015, 2014 and 2013 are as follows (in millions): Unrealized Net Unrealized Net Gains (Losses) on Gains (Losses) on Foreign Currency Available-for-Sale Derivative Translation...

  • Page 143
    ..., 2015 2014 2013 Statement of Operations Classification Gains and losses on available-for-sale securities Gains on strategic investments ...Interest and other income (expense), net ...Net of tax ...Gains and losses on cash flow hedges from forward contracts Net revenue ...Research and development...

  • Page 144
    ...): Year Ended March 31, 2015 2014 2013 Cost of product ...Cost of service and other ...Operating expenses ...Total ... $16 36 14 $66 $33 27 16 $76 $ 55 38 30 $123 Acquisition-related intangible assets are amortized using the straight-line method over the lesser of their estimated useful lives or...

  • Page 145
    ... publicity rights, content and/or other intellectual property. Royalty payments to independent software developers are payments for the development of intellectual property related to our games. Copublishing and distribution royalties are payments made to third parties for the delivery of products...

  • Page 146
    ... product and service sales. Any impairments or losses determined before the launch of a product are generally charged to research and development expense. Impairments or losses determined post-launch are charged to cost of revenue. We evaluate long-lived royalty-based assets for impairment using...

  • Page 147
    ... product or content or other factors) and such commitments were therefore not recorded in our Consolidated Financial Statements. See Note 13 for further information on our developer and licensor commitments. (10) BALANCE SHEET DETAILS Inventories Inventories as of March 31, 2015 and 2014 consisted...

  • Page 148
    ... for physical games sold through retail and an estimated six-month period for digitally-distributed games. However, we expense the cost of revenue related to these transactions during the period in which the product is delivered (rather than on a deferred basis). (11) INCOME TAXES The components...

  • Page 149
    ... years ended March 31, 2015, 2014 and 2013 were as follows: Year Ended March 31, 2015 2014 2013 Statutory federal tax expense rate ...State taxes, net of federal benefit ...Differences between statutory rate and foreign effective tax rate ...Valuation allowance ...Research and development credits...

  • Page 150
    ... ...Changes in unrecognized tax benefits due to foreign currency translation ...Balance as of March 31, 2014 ...Increases in unrecognized tax benefits related to prior year tax positions ...Decreases in unrecognized tax benefits related to prior year tax positions ...Increases in unrecognized tax...

  • Page 151
    ... the last reported sale price of our common stock multiplied by the conversion rate on each trading day; or (3) specified corporate transactions, including a change in control, occur. On or after April 15, 2016, a holder may convert any of its Notes at any time prior to the close of business on the...

  • Page 152
    ...be delivered in shares of our common stock. As of March 31, 2015, there were no shares issued related to the Notes. Subsequent to March 31, 2015, shares issued upon conversion of the Notes were minimal. Based on the closing price of our common stock of $58.24 at the end of the quarter ended March 31...

  • Page 153
    ... assets and pay dividends or make distributions, in each case subject to customary exceptions for a credit facility of this size and type. We are also required to maintain compliance with a capitalization ratio and maintain a minimum level of total liquidity. The credit agreement contains customary...

  • Page 154
    ... Championship); ESPN (content in EA SPORTS games); Hasbro, Inc. (certain of Hasbro's board game intellectual properties); Disney Interactive (Star Wars); Fox Digital Entertainment, Inc. (The Simpsons); and Universal Studios Inc. (Minions). These developer and content license commitments represent...

  • Page 155
    ...obligated to pay the $632.5 million principal amount of the Notes in cash and any excess conversion value in shares of our common stock upon redemption of the Notes at maturity on July 15, 2016, or upon earlier conversion. During the fiscal quarter ended March 31, 2015, the Sales Price Condition was...

  • Page 156
    ... our Consolidated Financial Statements. (14) PREFERRED STOCK As of March 31, 2015 and 2014, we had 10,000,000 shares of preferred stock authorized but unissued. The rights, preferences, and restrictions of the preferred stock may be designated by our Board of Directors without further action by our...

  • Page 157
    ...- 12 months Expected dividends ...None None None None None None The estimated assumptions used in the Monte-Carlo simulation model to value our market-based restricted stock units were as follows: Year Ended March 31, 2015 Year Ended March 31, 2014 Year Ended March 31, 2013 Annual Report Risk-free...

  • Page 158
    ... from stock-based compensation, net of $1 million of deferred tax write-offs. There was no excess tax benefit related to stock-based compensation deductions reported in the financing activities on our Consolidated Statements of Cash Flows during the fiscal year ended March 31, 2013. Summary of...

  • Page 159
    ...2015. Restricted Stock Rights We grant restricted stock rights under our Equity Plan to employees worldwide. Restricted stock units entitle holders to receive shares of common stock at the end of a specified period of time. Upon vesting, the equivalent number of common shares is typically issued net...

  • Page 160
    ... to the performance of companies in the NASDAQ-100 Index for each measurement period, generally over a one-year, two-year cumulative and three-year cumulative period. In the table below, we present shares granted at 100 percent of target of the number of market-based restricted stock units that may...

  • Page 161
    ... stock on the date of commencement of the offering or on the last day of each six-month purchase period. During fiscal year 2015, we issued approximately 1.4 million shares under the ESPP with exercise prices for purchase rights ranging from $22.64 to $32.16. During fiscal years 2015, 2014, and 2013...

  • Page 162
    ...stock trading plans. The timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, alternative investment opportunities and other market conditions. We are not obligated to repurchase any specific number of shares...

  • Page 163
    ... are managed; the criteria used by our Chief Executive Officer, our Chief Operating Decision Maker ("CODM"), to evaluate segment performance; the availability of separate financial information; and overall materiality considerations. Our CODM currently reviews total company operating results...

  • Page 164
    ... 2014 2013 Packaged goods and other ...Digital ...Net revenue ... $2,316 2,199 $4,515 $1,742 1,833 $3,575 $2,357 1,440 $3,797 Year Ended March 31, 2015 2014 2013 Platform net revenue Xbox One, PlayStation 4 ...Xbox 360, PlayStation 3 ...Other consoles ...Total consoles ...PC / Browser ...Mobile...

  • Page 165
    ...31, 2015, 2014 and 2013 is presented below (in millions): Year Ended March 31, 2015 2014 2013 Net revenue from unaffiliated customers North America ...International ...Total ... $1,956 2,559 $4,515 $1,510 2,065 $3,575 $1,701 2,096 $3,797 As of March 31, 2015 2014 Long-lived assets North America...

  • Page 166
    (19) QUARTERLY FINANCIAL AND MARKET INFORMATION (UNAUDITED) (In millions, except per share data) Fiscal 2015 Consolidated Net revenue ...Gross profit ...Operating income ...Net income ...Common Stock Net income per share - Basic ...Net income per share - Diluted ...Common stock price per share High ...

  • Page 167
    ... Registered Public Accounting Firm The Board of Directors and Stockholders Electronic Arts Inc.: We have audited the accompanying consolidated balance sheets of Electronic Arts Inc. and subsidiaries (the Company) as of March 28, 2015 and March 29, 2014, and the related consolidated statements...

  • Page 168
    ... Registered Public Accounting Firm The Board of Directors and Stockholders Electronic Arts Inc.: We have audited Electronic Arts Inc.'s (the Company) internal control over financial reporting as of March 28, 2015, based on criteria established in Internal Control - Integrated Framework (2013...

  • Page 169
    ...processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer...

  • Page 170
    ...the Committee of Sponsoring Organizations of the Treadway Commission (COSO) published an updated Internal Control - Integrated Framework (2013) and related illustrative documents. The Company adopted the new framework during the fiscal year ended March 31, 2015. Item 9B: Other Information None. 100

  • Page 171
    ... information regarding executive officers, which is included in Item 1 of this report, is incorporated herein by reference to the information to be included in our Proxy Statement for our 2015 Annual Meeting of Stockholders (the "Proxy Statement") under the headings "Board of Directors and Corporate...

  • Page 172
    ... the undersigned, thereunto duly authorized. ELECTRONIC ARTS INC. By: /s/ Andrew Wilson Andrew Wilson Chief Executive Officer Date: May 21, 2015 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant...

  • Page 173
    ...QUALIFYING ACCOUNTS Years Ended March 31, 2015, 2014 and 2013 (In millions) Balance at Beginning of Period Charged to Revenue, Costs and Expenses Charged (Credited) to Other Accounts(a) Balance at End of Period Allowance for Doubtful Accounts, Price Protection and Returns Deductions(b) Year Ended...

  • Page 174
    ... Year 2015 Addendum 2000 Equity Incentive Plan, as amended, and related documents 2000 Employee Stock Purchase Plan, as amended Offer Letter for Employment at Electronic Arts Inc. to Andrew Wilson, dated September 15, 2013 Offer Letter for Employment at Electronic Arts Inc. to Blake Jorgensen, dated...

  • Page 175
    ... Licensed Publisher Agreement, dated December 17, 2008, by and between EA International (Studio and Publishing) Limited and Sony Computer Entertainment Europe Limited 10-Q/A Xbox2 Publisher License Agreement, dated May 15, 2005, by and among Electronic Arts Inc., Electronic Arts C.V. and Microsoft...

  • Page 176
    Number Exhibit Title Incorporated by Reference Form File No. Filing Date Filed Herewith 10.28** Durango Publisher License Agreement, dated June 29, 2012, by and among Electronic Arts Inc., EA International (Studio & Publishing) Ltd., Microsoft Licensing, GP and Microsoft Corporation Form of ...

  • Page 177
    ... as Exhibit 101 to this Annual Report on Form 10-K for the year ended March 31, 2015 are the following formatted in eXtensible Business Reporting Language ("XBRL"): (1) Consolidated Balance Sheets, (2) Consolidated Statements of Operations, (3) Consolidated Statements of Comprehensive Income (Loss...

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    Electronic Arts Inc. 209 Redwood Shores Parkway Redwood City, CA 94065 (650) 628-1500 www.ea.com Investor Relations (650) 628-7352 http://investor.ea.com