þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
94-2838567
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
|
|
|
209 Redwood Shores Parkway
Redwood City, California
|
94065
|
(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
|
þ
|
Accelerated filer
|
¨
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Non-accelerated filer
(Do not check if a smaller reporting company)
|
¨
|
Smaller reporting company
|
¨
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 6.
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Item 1.
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Condensed Consolidated Financial Statements (Unaudited)
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(Unaudited)
(In millions, except par value data)
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September 30, 2013
|
|
March 31, 2013
(a)
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,090
|
|
|
$
|
1,292
|
|
Short-term investments
|
328
|
|
|
388
|
|
||
Receivables, net of allowances of $117 and $200, respectively
|
594
|
|
|
312
|
|
||
Inventories
|
58
|
|
|
42
|
|
||
Deferred income taxes, net
|
51
|
|
|
52
|
|
||
Other current assets
|
219
|
|
|
239
|
|
||
Total current assets
|
2,340
|
|
|
2,325
|
|
||
Property and equipment, net
|
532
|
|
|
548
|
|
||
Goodwill
|
1,726
|
|
|
1,721
|
|
||
Acquisition-related intangibles, net
|
216
|
|
|
253
|
|
||
Deferred income taxes, net
|
48
|
|
|
53
|
|
||
Other assets
|
174
|
|
|
170
|
|
||
TOTAL ASSETS
|
$
|
5,036
|
|
|
$
|
5,070
|
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
208
|
|
|
$
|
136
|
|
Accrued and other current liabilities
|
708
|
|
|
737
|
|
||
Deferred net revenue (online-enabled games)
|
935
|
|
|
1,044
|
|
||
Total current liabilities
|
1,851
|
|
|
1,917
|
|
||
0.75% convertible senior notes due 2016, net
|
570
|
|
|
559
|
|
||
Income tax obligations
|
207
|
|
|
205
|
|
||
Deferred income taxes, net
|
1
|
|
|
1
|
|
||
Other liabilities
|
121
|
|
|
121
|
|
||
Total liabilities
|
2,750
|
|
|
2,803
|
|
||
Commitments and contingencies (See Note 13)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $0.01 par value. 10 shares authorized
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value. 1,000 shares authorized; 309 and 302 shares issued and outstanding, respectively
|
3
|
|
|
3
|
|
||
Paid-in capital
|
2,251
|
|
|
2,174
|
|
||
Retained earnings (accumulated deficit)
|
(30
|
)
|
|
21
|
|
||
Accumulated other comprehensive income
|
62
|
|
|
69
|
|
||
Total stockholders’ equity
|
2,286
|
|
|
2,267
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
5,036
|
|
|
$
|
5,070
|
|
(a)
|
Derived from audited consolidated financial statements.
|
(Unaudited)
|
Three Months Ended
September 30, |
|
Six Months Ended
September 30, |
||||||||||||
(In millions, except per share data)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
350
|
|
|
$
|
481
|
|
|
$
|
893
|
|
|
$
|
1,183
|
|
Service and other
|
345
|
|
|
230
|
|
|
751
|
|
|
483
|
|
||||
Total net revenue
|
695
|
|
|
711
|
|
|
1,644
|
|
|
1,666
|
|
||||
Cost of revenue:
|
|
|
|
|
|
|
|
||||||||
Product
|
341
|
|
|
371
|
|
|
471
|
|
|
503
|
|
||||
Service and other
|
72
|
|
|
74
|
|
|
136
|
|
|
147
|
|
||||
Total cost of revenue
|
413
|
|
|
445
|
|
|
607
|
|
|
650
|
|
||||
Gross profit
|
282
|
|
|
266
|
|
|
1,037
|
|
|
1,016
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
283
|
|
|
306
|
|
|
561
|
|
|
588
|
|
||||
Marketing and sales
|
164
|
|
|
219
|
|
|
311
|
|
|
370
|
|
||||
General and administrative
|
129
|
|
|
100
|
|
|
214
|
|
|
188
|
|
||||
Acquisition-related contingent consideration
|
(44
|
)
|
|
—
|
|
|
(37
|
)
|
|
(20
|
)
|
||||
Amortization of intangibles
|
4
|
|
|
7
|
|
|
8
|
|
|
14
|
|
||||
Restructuring and other charges
|
(2
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
25
|
|
||||
Total operating expenses
|
534
|
|
|
630
|
|
|
1,056
|
|
|
1,165
|
|
||||
Operating loss
|
(252
|
)
|
|
(364
|
)
|
|
(19
|
)
|
|
(149
|
)
|
||||
Interest and other income (expense), net
|
(8
|
)
|
|
(4
|
)
|
|
(13
|
)
|
|
(9
|
)
|
||||
Loss before provision for income taxes
|
(260
|
)
|
|
(368
|
)
|
|
(32
|
)
|
|
(158
|
)
|
||||
Provision for income taxes
|
13
|
|
|
13
|
|
|
19
|
|
|
22
|
|
||||
Net loss
|
$
|
(273
|
)
|
|
$
|
(381
|
)
|
|
$
|
(51
|
)
|
|
$
|
(180
|
)
|
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic and Diluted
|
$
|
(0.89
|
)
|
|
$
|
(1.21
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.57
|
)
|
Number of shares used in computation:
|
|
|
|
|
|
|
|
||||||||
Basic and Diluted
|
308
|
|
|
316
|
|
|
306
|
|
|
317
|
|
(Unaudited)
|
Three Months Ended
September 30, |
|
Six Months Ended
September 30, |
||||||||||||
(In millions)
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net loss
|
$
|
(273
|
)
|
|
$
|
(381
|
)
|
|
$
|
(51
|
)
|
|
$
|
(180
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Change in unrealized gains and losses on available-for-sale securities
|
1
|
|
|
17
|
|
|
—
|
|
|
(25
|
)
|
||||
Change in unrealized losses on derivative instruments
|
(9
|
)
|
|
(3
|
)
|
|
(11
|
)
|
|
(2
|
)
|
||||
Reclassification adjustment for realized losses on derivative instruments
|
—
|
|
|
1
|
|
|
2
|
|
|
1
|
|
||||
Foreign currency translation adjustments
|
14
|
|
|
19
|
|
|
2
|
|
|
2
|
|
||||
Total other comprehensive income (loss), net of tax
|
6
|
|
|
34
|
|
|
(7
|
)
|
|
(24
|
)
|
||||
Total comprehensive loss
|
$
|
(267
|
)
|
|
$
|
(347
|
)
|
|
$
|
(58
|
)
|
|
$
|
(204
|
)
|
(Unaudited)
|
Six Months Ended September 30,
|
||||||
(In millions)
|
2013
|
|
2012
|
||||
OPERATING ACTIVITIES
|
|
|
|
||||
Net loss
|
$
|
(51
|
)
|
|
$
|
(180
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation, amortization and accretion, net
|
112
|
|
|
112
|
|
||
Stock-based compensation
|
71
|
|
|
83
|
|
||
Acquisition-related contingent consideration
|
(37
|
)
|
|
(20
|
)
|
||
Non-cash restructuring charges
|
—
|
|
|
7
|
|
||
Change in assets and liabilities:
|
|
|
|
||||
Receivables, net
|
(278
|
)
|
|
(274
|
)
|
||
Inventories
|
(15
|
)
|
|
(13
|
)
|
||
Other assets
|
8
|
|
|
—
|
|
||
Accounts payable
|
77
|
|
|
9
|
|
||
Accrued and other liabilities
|
(37
|
)
|
|
109
|
|
||
Deferred income taxes, net
|
5
|
|
|
(10
|
)
|
||
Deferred net revenue (online-enabled games)
|
(109
|
)
|
|
(95
|
)
|
||
Net cash used in operating activities
|
(254
|
)
|
|
(272
|
)
|
||
INVESTING ACTIVITIES
|
|
|
|
||||
Capital expenditures
|
(53
|
)
|
|
(56
|
)
|
||
Proceeds from maturities and sales of short-term investments
|
250
|
|
|
280
|
|
||
Purchase of short-term investments
|
(191
|
)
|
|
(197
|
)
|
||
Acquisition-related restricted cash
|
—
|
|
|
25
|
|
||
Acquisition of subsidiaries, net of cash acquired
|
(5
|
)
|
|
(10
|
)
|
||
Net cash provided by investing activities
|
1
|
|
|
42
|
|
||
FINANCING ACTIVITIES
|
|
|
|
||||
Proceeds from issuance of common stock
|
50
|
|
|
18
|
|
||
Payment of debt issuance costs
|
—
|
|
|
(2
|
)
|
||
Repurchase and retirement of common stock
|
—
|
|
|
(179
|
)
|
||
Acquisition-related contingent consideration payment
|
(1
|
)
|
|
(26
|
)
|
||
Net cash provided by (used in) financing activities
|
49
|
|
|
(189
|
)
|
||
Effect of foreign exchange on cash and cash equivalents
|
2
|
|
|
(3
|
)
|
||
Decrease in cash and cash equivalents
|
(202
|
)
|
|
(422
|
)
|
||
Beginning cash and cash equivalents
|
1,292
|
|
|
1,293
|
|
||
Ending cash and cash equivalents
|
$
|
1,090
|
|
|
$
|
871
|
|
Supplemental cash flow information:
|
|
|
|
||||
Cash paid during the period for income taxes, net
|
$
|
15
|
|
|
$
|
17
|
|
Cash paid during the period for interest
|
$
|
3
|
|
|
$
|
2
|
|
Non-cash investing activities:
|
|
|
|
||||
Change in unrealized gains and losses on available-for-sale securities, net of taxes
|
$
|
—
|
|
|
$
|
(25
|
)
|
|
Three Months Ended September 30, 2012
|
|
Six Months Ended September 30, 2012
|
||||||||||||||||||||
|
As Previously Reported
|
|
Change
|
|
Reclassified Balance
|
|
As Previously Reported
|
|
Change
|
|
Reclassified Balance
|
||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Research and development
|
$
|
314
|
|
|
$
|
(8
|
)
|
|
$
|
306
|
|
|
$
|
604
|
|
|
$
|
(16
|
)
|
|
$
|
588
|
|
Marketing and sales
|
212
|
|
|
7
|
|
|
219
|
|
|
357
|
|
|
13
|
|
|
370
|
|
||||||
General and administrative
|
99
|
|
|
1
|
|
|
100
|
|
|
185
|
|
|
3
|
|
|
188
|
|
•
|
Level 1
. Quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 2
. Observable inputs other than quoted prices included within Level 1, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities.
|
•
|
Level 3
. Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities.
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
||||||||||||
|
|
|
Quoted Prices in
Active Markets
for Identical
Financial
Instruments
|
|
Significant
Other
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
|
|
||||||||
|
As of
September 30, 2013 |
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Balance Sheet Classification
|
||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
253
|
|
|
$
|
253
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Cash equivalents
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
||||||||
Corporate bonds
|
179
|
|
|
—
|
|
|
179
|
|
|
—
|
|
|
Short-term investments
|
||||
U.S. agency securities
|
58
|
|
|
—
|
|
|
58
|
|
|
—
|
|
|
Short-term investments
|
||||
U.S. Treasury securities
|
54
|
|
|
54
|
|
|
—
|
|
|
—
|
|
|
Short-term investments
|
||||
Commercial paper
|
42
|
|
|
—
|
|
|
42
|
|
|
—
|
|
|
Short-term investments and cash equivalents
|
||||
Deferred compensation plan assets
(a)
|
12
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
Other assets
|
||||
Foreign currency derivatives
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
Other current assets
|
||||
Total assets at fair value
|
$
|
599
|
|
|
$
|
319
|
|
|
$
|
280
|
|
|
$
|
—
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||
Contingent consideration
(b)
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
Accrued and other current
liabilities and other liabilities |
Foreign currency derivatives
|
4
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
Accrued and other current liabilities
|
||||
Total liabilities at fair value
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
2
|
|
|
|
|
|
|
Fair Value Measurements Using Significant
Unobservable Inputs (Level 3)
|
|
|
||||||
|
|
|
|
|
|
|
Contingent
Consideration
|
|
|
||
Balance as of March 31, 2013
|
|
|
|
|
|
|
$
|
43
|
|
|
|
Change in fair value
(c)
|
|
|
|
|
|
|
(37
|
)
|
|
|
|
Payments
(d)
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
Balance as of September 30, 2013
|
|
|
|
|
|
|
$
|
2
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
||||||||||||
|
|
|
Quoted Prices in
Active Markets
for Identical
Financial
Instruments
|
|
Significant
Other
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
|
|
||||||||
|
As of
March 31, 2013 |
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
Balance Sheet Classification
|
||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
469
|
|
|
$
|
469
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Cash equivalents
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
||||||||
Corporate bonds
|
178
|
|
|
—
|
|
|
178
|
|
|
—
|
|
|
Short-term investments
|
||||
U.S. agency securities
|
91
|
|
|
—
|
|
|
91
|
|
|
—
|
|
|
Short-term investments and cash equivalents
|
||||
U.S. Treasury securities
|
88
|
|
|
88
|
|
|
—
|
|
|
—
|
|
|
Short-term investments and cash equivalents
|
||||
Commercial paper
|
73
|
|
|
—
|
|
|
73
|
|
|
—
|
|
|
Short-term investments and cash equivalents
|
||||
Deferred compensation plan assets
(a)
|
11
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
Other assets
|
||||
Foreign currency derivatives
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
Other current assets
|
||||
Total assets at fair value
|
$
|
916
|
|
|
$
|
568
|
|
|
$
|
348
|
|
|
$
|
—
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||
Contingent consideration
(b)
|
$
|
43
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43
|
|
|
Accrued and other current liabilities and other liabilities
|
Total liabilities at fair value
|
$
|
43
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43
|
|
|
|
|
|
|
Fair Value Measurements Using Significant
Unobservable Inputs (Level 3)
|
|
|
||||||
|
|
|
|
|
|
|
Contingent
Consideration
|
|
|
||
Balance as of March 31, 2012
|
|
|
|
|
|
|
$
|
112
|
|
|
|
Change in fair value
(c)
|
|
|
|
|
|
|
(64
|
)
|
|
|
|
Payment
(d)
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
Balance as of March 31, 2013
|
|
|
|
|
|
|
$
|
43
|
|
|
|
(a)
|
The deferred compensation plan assets consist of various mutual funds.
|
(b)
|
The contingent consideration as of
September 30, 2013
and
March 31, 2013
represents the estimated fair value of the additional variable cash consideration payable primarily in connection with our acquisitions of PopCap Games, Inc. (“PopCap”), KlickNation Corporation (“KlickNation”), and Chillingo Limited (“Chillingo”) that are contingent upon the achievement of certain performance milestones. We estimated the fair value of the acquisition-related contingent consideration payable using probability-weighted discounted cash flow models, and applied a discount rate that appropriately captures the risk associated with the obligation. The weighted average of the discount rates used during the
six months ended September 30, 2013
was
16 percent
. The weighted average of the discount rates used during the fiscal year 2013 was
13 percent
. The significant unobservable input used in the fair value measurement of the contingent consideration payable are forecasted earnings. Significant changes in forecasted earnings would result in a significantly higher or lower fair value measurement. At
September 30, 2013
and
March 31, 2013
, the fair market
|
(c)
|
The change in fair value is reported as acquisition-related contingent consideration in our Condensed Consolidated Statements of Operations.
|
(d)
|
During the
six months ended September 30, 2013
, we made payments totaling
$4 million
to settle certain performance milestones achieved in connection with one of our acquisitions. During fiscal year 2013, we made payments totaling
$5 million
to settle certain performance milestones achieved in connection with two of our acquisitions.
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
||||||||||||||||
|
Net Carrying
Value as of
September 30, 2013
|
|
Quoted Prices in
Active Markets
for Identical Assets
|
|
Significant
Other Observable Inputs
|
|
Significant
Unobservable
Inputs
|
|
Total Impairments for the Three Months Ended September 30, 2013
|
|
Total Impairments for the Six Months Ended September 30, 2013
|
||||||||||||
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Royalty-based asset
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17
|
|
Total impairments recorded for non-recurring measurements on assets held as of September 30, 2013
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
As of September 30, 2013
|
|
As of March 31, 2013
|
||||||||||||||||||||||||||||
|
Cost or
Amortized
Cost
|
|
Gross Unrealized
|
|
Fair
Value
|
|
Cost or
Amortized
Cost
|
|
Gross Unrealized
|
|
Fair
Value
|
||||||||||||||||||||
|
Gains
|
|
Losses
|
|
Gains
|
|
Losses
|
|
|||||||||||||||||||||||
Corporate bonds
|
$
|
178
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
179
|
|
|
$
|
177
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
178
|
|
U.S. agency securities
|
58
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
76
|
|
|
—
|
|
|
—
|
|
|
76
|
|
||||||||
U.S. Treasury securities
|
54
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
85
|
|
|
—
|
|
|
—
|
|
|
85
|
|
||||||||
Commercial paper
|
37
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|
49
|
|
|
—
|
|
|
—
|
|
|
49
|
|
||||||||
Short-term investments
|
$
|
327
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
328
|
|
|
$
|
387
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
388
|
|
|
As of September 30, 2013
|
|
As of March 31, 2013
|
||||||||||||
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
||||||||
Short-term investments
|
|
|
|
|
|
|
|
||||||||
Due in 1 year or less
|
$
|
114
|
|
|
$
|
114
|
|
|
$
|
160
|
|
|
$
|
160
|
|
Due in 1-2 years
|
98
|
|
|
99
|
|
|
126
|
|
|
127
|
|
||||
Due in 2-3 years
|
109
|
|
|
109
|
|
|
101
|
|
|
101
|
|
||||
Due in 3-4 years
|
6
|
|
|
6
|
|
|
—
|
|
|
—
|
|
||||
Short-term investments
|
$
|
327
|
|
|
$
|
328
|
|
|
$
|
387
|
|
|
$
|
388
|
|
|
As of September 30, 2013
|
|
As of March 31, 2013
|
||||||||||||
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
||||||||
0.75% Convertible Senior Notes due 2016
|
$
|
570
|
|
|
$
|
692
|
|
|
$
|
559
|
|
|
$
|
614
|
|
|
As of September 30, 2013
|
|
As of March 31, 2013
|
||||||||||||||||||||
|
Notional Amount
|
|
Fair Value
|
|
Notional Amount
|
|
Fair Value
|
||||||||||||||||
|
|
Asset
|
|
Liability
|
|
|
Asset
|
|
Liability
|
||||||||||||||
Option contracts to purchase
|
$
|
49
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Forward contracts to purchase
|
35
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
84
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Option contracts to sell
|
$
|
115
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
149
|
|
|
$
|
6
|
|
|
$
|
—
|
|
Forward contracts to sell
|
115
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
230
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
149
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
Location of Gain (Loss) Recognized in Income on
Derivative
|
|
Amount of Gain (Loss) Recognized in Income on Derivative
|
||||||||||||||
|
Three Months Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||||
Foreign currency forward contracts not designated as hedging instruments
|
Interest and other income (expense), net
|
|
$
|
(5
|
)
|
|
$
|
(6
|
)
|
|
$
|
(5
|
)
|
|
$
|
1
|
|
|
Unrealized Gains (Losses) on Available-for-Sale Securities
|
|
Unrealized Gains (Losses) on Derivative Instruments
|
|
Foreign Currency Translation Adjustments
|
|
Total
|
||||||||
Balances as of June 30, 2013
|
$
|
(5
|
)
|
|
$
|
—
|
|
|
$
|
61
|
|
|
$
|
56
|
|
Other comprehensive income (loss) before reclassifications
|
1
|
|
|
(9
|
)
|
|
14
|
|
|
6
|
|
||||
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net current-period other comprehensive income (loss)
|
1
|
|
|
(9
|
)
|
|
14
|
|
|
6
|
|
||||
Balances as of September 30, 2013
|
$
|
(4
|
)
|
|
$
|
(9
|
)
|
|
$
|
75
|
|
|
$
|
62
|
|
|
Unrealized Gains (Losses) on Available-for-Sale Securities
|
|
Unrealized Gains (Losses) on Derivative Instruments
|
|
Foreign Currency Translation Adjustments
|
|
Total
|
||||||||
Balances as of March 31, 2013
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
$
|
73
|
|
|
$
|
69
|
|
Other comprehensive income (loss) before reclassifications
|
—
|
|
|
(11
|
)
|
|
2
|
|
|
(9
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||
Net current-period other comprehensive income (loss)
|
—
|
|
|
(9
|
)
|
|
2
|
|
|
(7
|
)
|
||||
Balances as of September 30, 2013
|
$
|
(4
|
)
|
|
$
|
(9
|
)
|
|
$
|
75
|
|
|
$
|
62
|
|
|
As of
March 31, 2013 |
|
Activity
|
|
Effects of Foreign Currency Translation
|
|
As of
September 30, 2013 |
||||||||
Goodwill
|
$
|
2,089
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
2,094
|
|
Accumulated impairment
|
(368
|
)
|
|
—
|
|
|
—
|
|
|
(368
|
)
|
||||
Total
|
$
|
1,721
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
1,726
|
|
|
As of September 30, 2013
|
|
As of March 31, 2013
|
||||||||||||||||||||
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Acquisition-
Related
Intangibles, Net
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Acquisition-
Related
Intangibles, Net
|
||||||||||||
Developed and core technology
|
$
|
531
|
|
|
$
|
(354
|
)
|
|
$
|
177
|
|
|
$
|
527
|
|
|
$
|
(324
|
)
|
|
$
|
203
|
|
Trade names and trademarks
|
130
|
|
|
(102
|
)
|
|
28
|
|
|
130
|
|
|
(99
|
)
|
|
31
|
|
||||||
Registered user base and other intangibles
|
87
|
|
|
(86
|
)
|
|
1
|
|
|
87
|
|
|
(84
|
)
|
|
3
|
|
||||||
Carrier contracts and related
|
85
|
|
|
(75
|
)
|
|
10
|
|
|
85
|
|
|
(73
|
)
|
|
12
|
|
||||||
In-process research and development
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||||
Total
|
$
|
833
|
|
|
$
|
(617
|
)
|
|
$
|
216
|
|
|
$
|
833
|
|
|
$
|
(580
|
)
|
|
$
|
253
|
|
|
Three Months Ended
September 30, |
|
Six Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Cost of product
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
17
|
|
|
$
|
17
|
|
Cost of service and other
|
6
|
|
|
6
|
|
|
12
|
|
|
12
|
|
||||
Operating expenses
|
4
|
|
|
7
|
|
|
8
|
|
|
14
|
|
||||
Total
|
$
|
18
|
|
|
$
|
21
|
|
|
$
|
37
|
|
|
$
|
43
|
|
Fiscal Year Ending March 31,
|
|
||
2014 (remaining six months)
|
$
|
37
|
|
2015
|
66
|
|
|
2016
|
53
|
|
|
2017
|
32
|
|
|
2018
|
13
|
|
|
2019
|
8
|
|
|
Thereafter
|
7
|
|
|
Total
|
$
|
216
|
|
|
Fiscal 2013
Restructuring
|
|
Fiscal 2011
Restructuring
|
|
Other
Restructurings and Reorganization
|
|
|
||||||||||||||||
|
Workforce
|
|
Facilities-
related
|
|
Other
|
|
Other
|
|
Facilities-
related
|
|
Total
|
||||||||||||
Balances as of March 31, 2012
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
75
|
|
|
$
|
3
|
|
|
$
|
78
|
|
Charges to operations
|
10
|
|
|
3
|
|
|
9
|
|
|
6
|
|
|
(1
|
)
|
|
27
|
|
||||||
Charges settled in cash
|
(10
|
)
|
|
—
|
|
|
(1
|
)
|
|
(24
|
)
|
|
(1
|
)
|
|
(36
|
)
|
||||||
Changes settled in non-cash
|
—
|
|
|
(1
|
)
|
|
(7
|
)
|
|
—
|
|
|
1
|
|
|
(7
|
)
|
||||||
Balances as of March 31, 2013
|
—
|
|
|
2
|
|
|
1
|
|
|
57
|
|
|
2
|
|
|
62
|
|
||||||
Charges to operations
|
—
|
|
|
1
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(1
|
)
|
||||||
Charges settled in cash
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(3
|
)
|
||||||
Balances as of September 30, 2013
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
54
|
|
|
$
|
2
|
|
|
$
|
58
|
|
|
As of
September 30, 2013 |
|
As of
March 31, 2013 |
||||
Other current assets
|
$
|
73
|
|
|
$
|
63
|
|
Other assets
|
80
|
|
|
93
|
|
||
Royalty-related assets
|
$
|
153
|
|
|
$
|
156
|
|
|
As of
September 30, 2013 |
|
As of
March 31, 2013 |
||||
Accrued royalties
|
$
|
102
|
|
|
$
|
103
|
|
Other accrued expenses
|
18
|
|
|
21
|
|
||
Other liabilities
|
47
|
|
|
46
|
|
||
Royalty-related liabilities
|
$
|
167
|
|
|
$
|
170
|
|
|
As of
September 30, 2013 |
|
As of
March 31, 2013 |
||||
Finished Goods
|
$
|
54
|
|
|
$
|
41
|
|
Raw materials and work in process
|
4
|
|
|
1
|
|
||
Inventories
|
$
|
58
|
|
|
$
|
42
|
|
|
As of
September 30, 2013 |
|
As of
March 31, 2013 |
||||
Computer equipment and software
|
$
|
693
|
|
|
$
|
660
|
|
Buildings
|
337
|
|
|
336
|
|
||
Leasehold improvements
|
129
|
|
|
129
|
|
||
Office equipment, furniture and fixtures
|
70
|
|
|
72
|
|
||
Land
|
63
|
|
|
64
|
|
||
Warehouse equipment and other
|
10
|
|
|
10
|
|
||
Construction in progress
|
9
|
|
|
8
|
|
||
|
1,311
|
|
|
1,279
|
|
||
Less: accumulated depreciation
|
(779
|
)
|
|
(731
|
)
|
||
Property and equipment, net
|
$
|
532
|
|
|
$
|
548
|
|
|
As of
September 30, 2013 |
|
As of
March 31, 2013 |
||||
Other accrued expenses
|
$
|
357
|
|
|
$
|
338
|
|
Accrued compensation and benefits
|
167
|
|
|
217
|
|
||
Accrued royalties
|
102
|
|
|
103
|
|
||
Deferred net revenue (other)
|
82
|
|
|
79
|
|
||
Accrued and other current liabilities
|
$
|
708
|
|
|
$
|
737
|
|
|
As of
September 30, 2013 |
|
As of
March 31, 2013 |
||||
Principal amount of Notes
|
$
|
633
|
|
|
$
|
633
|
|
Unamortized discount of the liability component
|
(63
|
)
|
|
(74
|
)
|
||
Net carrying amount of Notes
|
$
|
570
|
|
|
$
|
559
|
|
Equity component, net
|
$
|
105
|
|
|
$
|
105
|
|
|
Three Months Ended
September 30, |
|
Six Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Amortization of debt discount
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
10
|
|
|
$
|
10
|
|
Amortization of debt issuance costs
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
||||
Coupon interest expense
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
||||
Other interest expense
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Total interest expense
|
$
|
8
|
|
|
$
|
7
|
|
|
$
|
15
|
|
|
$
|
14
|
|
|
|
|
Fiscal Year Ending March 31,
|
||||||||||||||||||||||||||||
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
(Remaining
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Total
|
|
six mos.)
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Thereafter
|
||||||||||||||||
Unrecognized commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Developer/licensor commitments
|
$
|
1,199
|
|
|
$
|
59
|
|
|
$
|
180
|
|
|
$
|
271
|
|
|
$
|
99
|
|
|
$
|
92
|
|
|
$
|
62
|
|
|
$
|
436
|
|
Marketing commitments
|
220
|
|
|
44
|
|
|
35
|
|
|
35
|
|
|
21
|
|
|
20
|
|
|
21
|
|
|
44
|
|
||||||||
Operating leases
|
155
|
|
|
26
|
|
|
44
|
|
|
34
|
|
|
19
|
|
|
14
|
|
|
9
|
|
|
9
|
|
||||||||
0.75% Convertible Senior Notes due 2016 interest
(a)
|
14
|
|
|
2
|
|
|
5
|
|
|
5
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other purchase obligations
|
27
|
|
|
15
|
|
|
10
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total unrecognized commitments
|
1,615
|
|
|
146
|
|
|
274
|
|
|
347
|
|
|
141
|
|
|
126
|
|
|
92
|
|
|
489
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Recognized commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
0.75% Convertible Senior Notes due 2016 principal
(a)
|
633
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
633
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Licensing and lease obligations
(b)
|
80
|
|
|
18
|
|
|
13
|
|
|
12
|
|
|
35
|
|
|
1
|
|
|
1
|
|
|
—
|
|
||||||||
Total recognized commitments
|
713
|
|
|
18
|
|
|
13
|
|
|
12
|
|
|
668
|
|
|
1
|
|
|
1
|
|
|
—
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Total commitments
|
$
|
2,328
|
|
|
$
|
164
|
|
|
$
|
287
|
|
|
$
|
359
|
|
|
$
|
809
|
|
|
$
|
127
|
|
|
$
|
93
|
|
|
$
|
489
|
|
(a)
|
Included in the
$14 million
coupon interest on the
0.75%
Convertible Senior Notes due
2016
is
$1 million
of accrued interest recognized as of
September 30, 2013
. We will be obligated to pay the
$632.5 million
principal amount of the
0.75%
Convertible Senior Notes due
2016
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 redemption. The
$632.5 million
principal amount excludes
$63 million
of unamortized discount of the liability component. See Note 12 for additional information regarding our
0.75%
Convertible Senior Notes due
2016
.
|
(b)
|
See Note 8 for additional information regarding recognized commitments resulting from our restructuring plans. Lease commitments have not been reduced for approximately
$6 million
due in the future from third parties under non-cancelable sub-leases.
|
•
|
We are defending a putative class action lawsuit brought by Ryan Hart, a former college football player, in the United States District Court for the District of New Jersey in June 2009, which alleges that we misappropriated his likeness in our college-themed football game. The complaint seeks actual damages and other unspecified damages, which have not been quantified. In September 2011, the district court granted our motion to dismiss the complaint. On May 21, 2013, the Third Circuit Court of Appeal reversed the district court's decision and remanded the case back to the district court.
|
•
|
The
In re NCAA Student-Athlete Name & Likeness
Licensing
litigation pending in United States District Court for the Northern District of California involves two groups of common claims brought by several different former collegiate student-athletes in 2009. These various actions were consolidated into one action in February 2010. The first group of claims is a class action against us, the NCAA and the Collegiate Licensing Company (CLC) alleging that our college-themed video games misappropriated the likenesses of collegiate student-athletes without their authorization. This group of claims seeks actual damages, statutory damages and other unspecified damages, which have not been quantified. On July 31, 2013, the Ninth Circuit Court of Appeals affirmed the trial court’s denial of our motion to strike the complaint. The second group of claims is a federal antitrust class action against us, the NCAA and the CLC that challenges NCAA/CLC licensing practices and the NCAA By-Laws and regulations. This group of claims seeks unspecified damages, which have not been quantified. In June 2013, the plaintiffs in this second group of claims have asked the district court to certify the case as a class action. The district court has not ruled on their request.
|
•
|
Restricted Stock Units, Restricted Stock, and Performance-Based Restricted Stock Units
. The fair value of restricted stock units, restricted stock, and performance-based restricted stock units (other than market-based restricted stock units) is determined based on the quoted market price of our common stock on the date of grant. Performance-based restricted stock units include grants made (1) to certain members of executive management primarily granted in fiscal year 2009 and (2) in connection with certain acquisitions.
|
•
|
Market-Based Restricted Stock Units
. Market-based restricted stock units consist of grants of performance-based restricted stock units to certain members of executive management that vest contingent upon the achievement of pre-determined market and service conditions (referred to herein as “market-based restricted stock units”). The fair value of our market-based restricted stock units is determined using a Monte-Carlo simulation model. Key assumptions for the Monte-Carlo simulation model are the risk-free interest rate, expected volatility, expected dividends and correlation coefficient.
|
•
|
Stock Options and Employee Stock Purchase Plan
. The fair value of stock options and stock purchase rights granted pursuant to our equity incentive plans and our 2000 Employee Stock Purchase Plan (“ESPP”), respectively, is determined using the Black-Scholes valuation model based on the multiple-award valuation method. Key assumptions of the Black-Scholes valuation model are the risk-free interest rate, expected volatility, expected term and expected dividends.
|
|
Six Months Ended September 30,
|
||||
|
2013
|
|
2012
|
||
Risk-free interest rate
|
0.4
|
%
|
|
0.2 - 0.4%
|
|
Expected volatility
|
16 - 58%
|
|
|
17 - 116%
|
|
Weighted-average volatility
|
31
|
%
|
|
36
|
%
|
Expected dividends
|
None
|
|
|
None
|
|
|
Three Months Ended September 30,
|
|
Six Months Ended September 30,
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Cost of revenue
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Research and development
(a)
|
23
|
|
|
26
|
|
|
43
|
|
|
47
|
|
||||
Marketing and sales
(a)
|
6
|
|
|
9
|
|
|
13
|
|
|
16
|
|
||||
General and administrative
(a)
|
8
|
|
|
9
|
|
|
14
|
|
|
19
|
|
||||
Stock-based compensation expense
|
$
|
38
|
|
|
$
|
44
|
|
|
$
|
71
|
|
|
$
|
83
|
|
(a)
|
During the fourth quarter of fiscal year 2013, we reviewed our operating expenses and reclassified certain amounts, primarily headcount and facilities costs, to align with our current operating structure. As a result, we also reclassified the related prior year stock-based compensation expense amounts within our Condensed Consolidated Statements of Operations for comparability purposes. These reclassifications did not affect the Company’s total stock-based compensation expense.
|
|
Options
(in thousands) |
|
Weighted-
Average
Exercise Price
|
|
Weighted-Average
Remaining
Contractual Term
(in years)
|
|
Aggregate
Intrinsic Value
(in millions)
|
|||||
Outstanding as of March 31, 2013
|
7,802
|
|
|
$
|
34.17
|
|
|
|
|
|
||
Granted
|
7
|
|
|
21.02
|
|
|
|
|
|
|||
Exercised
|
(1,822
|
)
|
|
17.98
|
|
|
|
|
|
|||
Forfeited, cancelled or expired
|
(537
|
)
|
|
45.90
|
|
|
|
|
|
|||
Outstanding as of September 30, 2013
|
5,450
|
|
|
38.41
|
|
|
3.85
|
|
$
|
17
|
|
|
Vested and expected to vest
|
5,430
|
|
|
38.49
|
|
|
3.83
|
|
$
|
17
|
|
|
Exercisable as of September 30, 2013
|
5,204
|
|
|
39.46
|
|
|
3.66
|
|
$
|
14
|
|
|
Restricted Stock
Rights
(in thousands)
|
|
Weighted-
Average Grant
Date Fair Value
|
|||
Balance as of March 31, 2013
|
15,918
|
|
|
$
|
16.85
|
|
Granted
|
6,491
|
|
|
22.64
|
|
|
Vested
|
(5,166
|
)
|
|
17.29
|
|
|
Forfeited or cancelled
|
(1,267
|
)
|
|
17.64
|
|
|
Balance as of September 30, 2013
|
15,976
|
|
|
19.00
|
|
|
Performance-
Based Restricted Stock Units (in thousands) |
|
Weighted-
Average Grant
Date Fair Value
|
|||
Balance as of March 31, 2013
|
1,324
|
|
|
$
|
51.54
|
|
Vested
|
(36
|
)
|
|
15.39
|
|
|
Forfeited or cancelled
|
(1,234
|
)
|
|
54.17
|
|
|
Balance as of September 30, 2013
|
54
|
|
|
15.39
|
|
|
Market-Based
Restricted Stock
Units
(in thousands)
|
|
Weighted-
Average Grant
Date Fair Value
|
|||
Balance as of March 31, 2013
|
925
|
|
|
$
|
19.16
|
|
Granted
|
555
|
|
|
29.52
|
|
|
Vested
|
(304
|
)
|
|
16.01
|
|
|
Forfeited or cancelled
|
(114
|
)
|
|
24.93
|
|
|
Balance as of September 30, 2013
|
1,062
|
|
|
24.86
|
|
|
Three Months Ended
September 30, |
|
Six Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
EA Labels segment:
|
|
|
|
|
|
|
|
||||||||
Net revenue before revenue deferral
|
$
|
1,023
|
|
|
$
|
1,059
|
|
|
$
|
1,505
|
|
|
$
|
1,526
|
|
Depreciation and amortization
|
(10
|
)
|
|
(13
|
)
|
|
(23
|
)
|
|
(29
|
)
|
||||
Other expenses
|
(702
|
)
|
|
(792
|
)
|
|
(1,144
|
)
|
|
(1,253
|
)
|
||||
EA Labels segment profit
|
311
|
|
|
254
|
|
|
338
|
|
|
244
|
|
||||
Reconciliation to consolidated operating loss:
|
|
|
|
|
|
|
|
||||||||
Other:
|
|
|
|
|
|
|
|
||||||||
Revenue deferral
|
(879
|
)
|
|
(880
|
)
|
|
(1,234
|
)
|
|
(1,195
|
)
|
||||
Recognition of revenue deferral
|
534
|
|
|
511
|
|
|
1,343
|
|
|
1,290
|
|
||||
Other net revenue
|
17
|
|
|
21
|
|
|
30
|
|
|
45
|
|
||||
Depreciation and amortization
|
(40
|
)
|
|
(37
|
)
|
|
(76
|
)
|
|
(71
|
)
|
||||
Acquisition-related contingent consideration
|
44
|
|
|
—
|
|
|
37
|
|
|
20
|
|
||||
Restructuring and other charges
|
2
|
|
|
2
|
|
|
1
|
|
|
(25
|
)
|
||||
Stock-based compensation
|
(38
|
)
|
|
(44
|
)
|
|
(71
|
)
|
|
(83
|
)
|
||||
Other expenses
|
(203
|
)
|
|
(191
|
)
|
|
(387
|
)
|
|
(374
|
)
|
||||
Consolidated operating loss
|
$
|
(252
|
)
|
|
$
|
(364
|
)
|
|
$
|
(19
|
)
|
|
$
|
(149
|
)
|
|
Three Months Ended
September 30, |
|
Six Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Publishing and other
|
$
|
223
|
|
|
$
|
365
|
|
|
$
|
675
|
|
|
$
|
957
|
|
Wireless, Internet-derived, advertising (digital)
|
450
|
|
|
324
|
|
|
932
|
|
|
666
|
|
||||
Distribution
|
22
|
|
|
22
|
|
|
37
|
|
|
43
|
|
||||
Net revenue
|
$
|
695
|
|
|
$
|
711
|
|
|
$
|
1,644
|
|
|
$
|
1,666
|
|
|
Three Months Ended
September 30, |
|
Six Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net revenue from unaffiliated customers
|
|
|
|
|
|
|
|
||||||||
North America
|
$
|
303
|
|
|
$
|
329
|
|
|
$
|
698
|
|
|
$
|
779
|
|
International
|
392
|
|
|
382
|
|
|
946
|
|
|
887
|
|
||||
Net revenue
|
$
|
695
|
|
|
$
|
711
|
|
|
$
|
1,644
|
|
|
$
|
1,666
|
|
/s/ KPMG LLP
|
Santa Clara, California
|
November 5, 2013
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
Evidence of an arrangement
. Evidence of an agreement with the customer that reflects the terms and conditions to deliver the related products or services must be present.
|
•
|
Fixed or determinable fee
. If a portion of the arrangement fee is not fixed or determinable, we recognize revenue as the amount becomes fixed or determinable.
|
•
|
Collection is deemed probable
. Collection is deemed probable if we expect the customer to be able to pay amounts under the arrangement as those amounts become due. If we determine that collection is not probable as the amounts become due, we generally conclude that collection becomes probable upon cash collection.
|
•
|
Delivery
. Delivery is considered to occur when a product is shipped and the risk of loss and rewards of ownership have transferred to the customer. For digital downloads, delivery is considered to occur when the software is made available to the customer for download. For services and other, delivery is generally considered to occur as the service is delivered, which is determined based on the underlying service obligation.
|
|
Three Months Ended September 30,
|
|||||||||||||
|
2013
|
|
2012
|
|
$ Change
|
|
% Change
|
|||||||
Net revenue:
|
|
|
|
|
|
|
|
|||||||
Product
|
$
|
350
|
|
|
$
|
481
|
|
|
$
|
(131
|
)
|
|
(27
|
)%
|
Service and other
|
345
|
|
|
230
|
|
|
115
|
|
|
50
|
%
|
|||
Total net revenue
|
$
|
695
|
|
|
$
|
711
|
|
|
$
|
(16
|
)
|
|
(2
|
)%
|
|
Three Months Ended September 30,
|
|||||||||||||
(In millions)
|
2013
|
|
2012
|
|
$ Change
|
|
% Change
|
|||||||
North America
|
$
|
303
|
|
|
$
|
329
|
|
|
$
|
(26
|
)
|
|
(8
|
)%
|
International
|
392
|
|
|
382
|
|
|
10
|
|
|
3
|
%
|
|||
Total net revenue
|
$
|
695
|
|
|
$
|
711
|
|
|
$
|
(16
|
)
|
|
(2
|
)%
|
|
Three Months Ended September 30,
|
|||||||||||||
|
2013
|
|
2012
|
|
$ Change
|
|
% Change
|
|||||||
Publishing and other
|
$
|
670
|
|
|
$
|
744
|
|
|
$
|
(74
|
)
|
|
(10
|
)%
|
Wireless, Internet-derived, and advertising (digital)
|
348
|
|
|
314
|
|
|
34
|
|
|
11
|
%
|
|||
Distribution
|
22
|
|
|
22
|
|
|
—
|
|
|
—
|
%
|
|||
Net Revenue before Revenue Deferral
|
1,040
|
|
|
1,080
|
|
|
(40
|
)
|
|
(4
|
)%
|
|||
|
|
|
|
|
|
|
|
|||||||
Revenue Deferral
|
(879
|
)
|
|
(880
|
)
|
|
1
|
|
|
—
|
%
|
|||
Recognition of Revenue Deferral
|
534
|
|
|
511
|
|
|
23
|
|
|
5
|
%
|
|||
Total net revenue
|
$
|
695
|
|
|
$
|
711
|
|
|
$
|
(16
|
)
|
|
(2
|
)%
|
|
Three Months Ended September 30,
|
||||||
|
2013
|
|
2012
|
||||
Product revenue:
|
|
|
|
||||
Publishing and other
|
$
|
198
|
|
|
$
|
342
|
|
Wireless, Internet-derived, and advertising (digital)
|
130
|
|
|
117
|
|
||
Distribution
|
22
|
|
|
22
|
|
||
Total product revenue
|
350
|
|
|
481
|
|
||
|
|
|
|
||||
Service and other revenue:
|
|
|
|
||||
Publishing and other
|
25
|
|
|
23
|
|
||
Wireless, Internet-derived, and advertising (digital)
|
320
|
|
|
207
|
|
||
Total service and other revenue
|
345
|
|
|
230
|
|
||
Total net revenue
|
$
|
695
|
|
|
$
|
711
|
|
|
Six Months Ended September 30,
|
|||||||||||||
|
2013
|
|
2012
|
|
$ Change
|
|
% Change
|
|||||||
Net revenue:
|
|
|
|
|
|
|
|
|||||||
Product
|
$
|
893
|
|
|
$
|
1,183
|
|
|
$
|
(290
|
)
|
|
(25
|
)%
|
Service and other
|
$
|
751
|
|
|
$
|
483
|
|
|
$
|
268
|
|
|
55
|
%
|
Total net revenue
|
$
|
1,644
|
|
|
$
|
1,666
|
|
|
$
|
(22
|
)
|
|
(1
|
)%
|
|
Six Months Ended September 30,
|
|||||||||||||
(In millions)
|
2013
|
|
2012
|
|
$ Change
|
|
% Change
|
|||||||
North America
|
$
|
698
|
|
|
$
|
779
|
|
|
$
|
(81
|
)
|
|
(10
|
)%
|
International
|
$
|
946
|
|
|
$
|
887
|
|
|
$
|
59
|
|
|
7
|
%
|
Total net revenue
|
$
|
1,644
|
|
|
$
|
1,666
|
|
|
$
|
(22
|
)
|
|
(1
|
)%
|
|
Six Months Ended September 30,
|
|||||||||||||
|
2013
|
|
2012
|
|
$ Change
|
|
% Change
|
|||||||
Publishing and other
|
$
|
772
|
|
|
$
|
890
|
|
|
(118
|
)
|
|
(13
|
)%
|
|
Wireless, Internet-derived, and advertising (digital)
|
$
|
726
|
|
|
$
|
638
|
|
|
88
|
|
|
14
|
%
|
|
Distribution
|
$
|
37
|
|
|
$
|
43
|
|
|
(6
|
)
|
|
(14
|
)%
|
|
Net Revenue before Revenue Deferral
|
$
|
1,535
|
|
|
$
|
1,571
|
|
|
(36
|
)
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
|
|||||||
Revenue Deferral
|
$
|
(1,234
|
)
|
|
$
|
(1,195
|
)
|
|
$
|
(39
|
)
|
|
(3
|
)%
|
Recognition of Revenue Deferral
|
$
|
1,343
|
|
|
$
|
1,290
|
|
|
$
|
53
|
|
|
4
|
%
|
Total net revenue
|
$
|
1,644
|
|
|
$
|
1,666
|
|
|
$
|
(22
|
)
|
|
(1
|
)%
|
|
Six Months Ended September 30,
|
||||||
|
2013
|
|
2012
|
||||
Product revenue:
|
|
|
|
||||
Publishing and other
|
$
|
592
|
|
|
$
|
907
|
|
Wireless, Internet-derived, and advertising (digital)
|
264
|
|
|
233
|
|
||
Distribution
|
37
|
|
|
43
|
|
||
Total product revenue
|
893
|
|
|
1,183
|
|
||
|
|
|
|
||||
Service and other revenue:
|
|
|
|
||||
Publishing and other
|
83
|
|
|
50
|
|
||
Wireless, Internet-derived, and advertising (digital)
|
668
|
|
|
433
|
|
||
Total service and other revenue
|
751
|
|
|
483
|
|
||
Total net revenue
|
$
|
1,644
|
|
|
$
|
1,666
|
|
|
September 30, 2013
|
|
% of
Related
Net Revenue
|
|
September 30, 2012
|
|
% of
Related
Net Revenue
|
|
% Change
|
|
Change as a
% of Related
Net Revenue
|
||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
341
|
|
|
97.4
|
%
|
|
$
|
371
|
|
|
77.1
|
%
|
|
(8.1
|
)%
|
|
20.3
|
%
|
Service and other
|
72
|
|
|
20.9
|
%
|
|
74
|
|
|
32.2
|
%
|
|
(2.7
|
)%
|
|
(11.3
|
)%
|
||
Total cost of revenue
|
$
|
413
|
|
|
59.4
|
%
|
|
$
|
445
|
|
|
62.6
|
%
|
|
(7.2
|
)%
|
|
(3.2
|
)%
|
|
September 30, 2013
|
|
% of
Related
Net Revenue
|
|
September 30, 2012
|
|
% of
Related
Net Revenue
|
|
% Change
|
|
Change as a
% of Related
Net Revenue
|
||||||||
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
471
|
|
|
52.7
|
%
|
|
$
|
503
|
|
|
42.5
|
%
|
|
(6.4
|
)%
|
|
10.2
|
%
|
Service and other
|
136
|
|
|
18.1
|
%
|
|
147
|
|
|
30.4
|
%
|
|
(7.5
|
)%
|
|
(12.3
|
)%
|
||
Total cost of revenue
|
$
|
607
|
|
|
36.9
|
%
|
|
$
|
650
|
|
|
39.0
|
%
|
|
(6.6
|
)%
|
|
(2.1
|
)%
|
|
September 30,
2013 |
|
% of Net
Revenue
|
|
September 30,
2012 |
|
% of Net
Revenue
|
|
$ Change
|
|
% Change
|
|||||||||
Three months ended
|
$
|
283
|
|
|
41
|
%
|
|
$
|
306
|
|
|
43
|
%
|
|
$
|
(23
|
)
|
|
(8
|
)%
|
Six months ended
|
$
|
561
|
|
|
34
|
%
|
|
$
|
588
|
|
|
35
|
%
|
|
$
|
(27
|
)
|
|
(5
|
)%
|
|
September 30,
2013 |
|
% of Net
Revenue
|
|
September 30,
2012 |
|
% of Net
Revenue
|
|
$ Change
|
|
% Change
|
|||||||||
Three months ended
|
$
|
164
|
|
|
24
|
%
|
|
$
|
219
|
|
|
31
|
%
|
|
$
|
(55
|
)
|
|
(25
|
)%
|
Six months ended
|
$
|
311
|
|
|
19
|
%
|
|
$
|
370
|
|
|
22
|
%
|
|
$
|
(59
|
)
|
|
(16
|
)%
|
|
September 30,
2013 |
|
% of Net
Revenue
|
|
September 30,
2012 |
|
% of Net
Revenue
|
|
$ Change
|
|
% Change
|
|||||||||
Three months ended
|
$
|
129
|
|
|
19
|
%
|
|
$
|
100
|
|
|
14
|
%
|
|
$
|
29
|
|
|
29
|
%
|
Six months ended
|
$
|
214
|
|
|
13
|
%
|
|
$
|
188
|
|
|
11
|
%
|
|
$
|
26
|
|
|
14
|
%
|
|
September 30,
2013 |
|
% of Net
Revenue
|
|
September 30,
2012 |
|
% of Net
Revenue
|
|
$ Change
|
|
% Change
|
|||||||||
Three months ended
|
$
|
4
|
|
|
1
|
%
|
|
$
|
7
|
|
|
1
|
%
|
|
$
|
(3
|
)
|
|
(43
|
)%
|
Six months ended
|
$
|
8
|
|
|
—
|
%
|
|
$
|
14
|
|
|
1
|
%
|
|
$
|
(6
|
)
|
|
(43
|
)%
|
|
September 30,
2013 |
|
% of Net
Revenue
|
|
September 30,
2012 |
|
% of Net
Revenue
|
|
$ Change
|
|
% Change
|
|||||||||
Three months ended
|
$
|
(2
|
)
|
|
—
|
%
|
|
$
|
(2
|
)
|
|
—
|
%
|
|
$
|
—
|
|
|
—
|
%
|
Six months ended
|
$
|
(1
|
)
|
|
—
|
%
|
|
$
|
25
|
|
|
2
|
%
|
|
$
|
(26
|
)
|
|
(104
|
)%
|
|
September 30,
2013 |
|
% of Net
Revenue
|
|
September 30,
2012 |
|
% of Net
Revenue
|
|
$ Change
|
|
% Change
|
|||||||||
Three months ended
|
$
|
(8
|
)
|
|
(1
|
)%
|
|
$
|
(4
|
)
|
|
(1
|
)%
|
|
$
|
(4
|
)
|
|
(100
|
)%
|
Six months ended
|
$
|
(13
|
)
|
|
(1
|
)%
|
|
$
|
(9
|
)
|
|
(1
|
)%
|
|
$
|
(4
|
)
|
|
(44
|
)%
|
|
September 30,
2013 |
|
Effective
Tax Rate
|
|
September 30,
2012 |
|
Effective
Tax Rate
|
|
% Change
|
||||||
Three months ended
|
13
|
|
|
5.0
|
%
|
|
$
|
13
|
|
|
3.5
|
%
|
|
—
|
%
|
Six months ended
|
19
|
|
|
59.4
|
%
|
|
$
|
22
|
|
|
13.9
|
%
|
|
(14
|
)%
|
(In millions)
|
As of
September 30, 2013
|
|
As of
March 31, 2013
|
|
(Decrease)
|
||||||
Cash and cash equivalents
|
$
|
1,090
|
|
|
$
|
1,292
|
|
|
$
|
(202
|
)
|
Short-term investments
|
328
|
|
|
388
|
|
|
(60
|
)
|
|||
Total
|
$
|
1,418
|
|
|
$
|
1,680
|
|
|
$
|
(262
|
)
|
Percentage of total assets
|
28
|
%
|
|
33
|
%
|
|
|
|
Six Months Ended September 30,
|
|
|
||||||||
(In millions)
|
2013
|
|
2012
|
|
Change
|
||||||
Cash used in operating activities
|
$
|
(254
|
)
|
|
$
|
(272
|
)
|
|
$
|
18
|
|
Cash provided by investing activities
|
1
|
|
|
42
|
|
|
(41
|
)
|
|||
Cash provided by (used in) financing activities
|
49
|
|
|
(189
|
)
|
|
238
|
|
|||
Effect of foreign exchange on cash and cash equivalents
|
2
|
|
|
(3
|
)
|
|
5
|
|
|||
Net decrease in cash and cash equivalents
|
$
|
(202
|
)
|
|
$
|
(422
|
)
|
|
$
|
220
|
|
|
|
|
Fiscal Year Ending March 31,
|
||||||||||||||||||||||||||||
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
(Remaining
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Total
|
|
six mos.)
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Thereafter
|
||||||||||||||||
Unrecognized commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Developer/licensor commitments
|
$
|
1,199
|
|
|
$
|
59
|
|
|
$
|
180
|
|
|
$
|
271
|
|
|
$
|
99
|
|
|
$
|
92
|
|
|
$
|
62
|
|
|
$
|
436
|
|
Marketing commitments
|
220
|
|
|
44
|
|
|
35
|
|
|
35
|
|
|
21
|
|
|
20
|
|
|
21
|
|
|
44
|
|
||||||||
Operating leases
|
155
|
|
|
26
|
|
|
44
|
|
|
34
|
|
|
19
|
|
|
14
|
|
|
9
|
|
|
9
|
|
||||||||
0.75% Convertible Senior Notes due 2016 interest
(a)
|
14
|
|
|
2
|
|
|
5
|
|
|
5
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other purchase obligations
|
27
|
|
|
15
|
|
|
10
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total unrecognized commitments
|
1,615
|
|
|
146
|
|
|
274
|
|
|
347
|
|
|
141
|
|
|
126
|
|
|
92
|
|
|
489
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Recognized commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
0.75% Convertible Senior Notes due 2016 principal
(a)
|
633
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
633
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Licensing and lease obligations
(b)
|
80
|
|
|
18
|
|
|
13
|
|
|
12
|
|
|
35
|
|
|
1
|
|
|
1
|
|
|
—
|
|
||||||||
Total recognized commitments
|
713
|
|
|
18
|
|
|
13
|
|
|
12
|
|
|
668
|
|
|
1
|
|
|
1
|
|
|
—
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Total commitments
|
$
|
2,328
|
|
|
$
|
164
|
|
|
$
|
287
|
|
|
$
|
359
|
|
|
$
|
809
|
|
|
$
|
127
|
|
|
$
|
93
|
|
|
$
|
489
|
|
(a)
|
Included in the
$14 million
coupon interest on the
0.75%
Convertible Senior Notes due
2016
is
$1 million
of accrued interest recognized as of
September 30, 2013
. We will be obligated to pay the
$632.5 million
principal amount of the
0.75%
Convertible Senior Notes due
2016
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 redemption. The
$632.5 million
principal amount excludes
$63 million
of unamortized discount of the liability component. See Note 12 for additional information regarding our
0.75%
Convertible Senior Notes due
2016
.
|
(b)
|
See Note 8 for additional information regarding recognized commitments resulting from our restructuring plans. Lease commitments have not been reduced for approximately
$6 million
due in the future from third parties under non-cancelable sub-leases.
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
|
As of September 30, 2013
|
|
As of March 31, 2013
|
||||||||||||||||||||
|
Notional Amount
|
|
Fair Value
|
|
Notional Amount
|
|
Fair Value
|
||||||||||||||||
|
|
Asset
|
|
Liability
|
|
|
Asset
|
|
Liability
|
||||||||||||||
Option contracts to purchase
|
$
|
49
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Forward contracts to purchase
|
35
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
84
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Option contracts to sell
|
$
|
115
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
149
|
|
|
$
|
6
|
|
|
$
|
—
|
|
Forward contracts to sell
|
115
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
230
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
149
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
As of
September 30, 2013 |
|
As of
March 31, 2013 |
||||
Corporate bonds
|
$
|
179
|
|
|
$
|
178
|
|
U.S. agency securities
|
58
|
|
|
76
|
|
||
U.S. Treasury securities
|
54
|
|
|
85
|
|
||
Commercial paper
|
37
|
|
|
49
|
|
||
Total short-term investments
|
$
|
328
|
|
|
$
|
388
|
|
(In millions)
|
Valuation of Securities
Given an Interest Rate
Decrease of X Basis Points
|
|
Fair Value
as of
September 30,
2013
|
|
Valuation of Securities
Given an Interest Rate
Increase of X Basis Points
|
||||||||||||||||||||||
(150 BPS)
|
|
(100 BPS)
|
|
(50 BPS)
|
|
50 BPS
|
|
100 BPS
|
|
150 BPS
|
|||||||||||||||||
Corporate bonds
|
$
|
182
|
|
|
$
|
181
|
|
|
$
|
180
|
|
|
$
|
179
|
|
|
$
|
178
|
|
|
$
|
177
|
|
|
$
|
176
|
|
U.S. agency securities
|
60
|
|
|
59
|
|
|
58
|
|
|
58
|
|
|
57
|
|
|
57
|
|
|
56
|
|
|||||||
U.S. Treasury securities
|
56
|
|
|
56
|
|
|
55
|
|
|
54
|
|
|
54
|
|
|
53
|
|
|
52
|
|
|||||||
Commercial paper
|
37
|
|
|
37
|
|
|
37
|
|
|
37
|
|
|
37
|
|
|
37
|
|
|
37
|
|
|||||||
Total short-term investments
|
$
|
335
|
|
|
$
|
333
|
|
|
$
|
330
|
|
|
$
|
328
|
|
|
$
|
326
|
|
|
$
|
324
|
|
|
$
|
321
|
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
•
|
We are defending a putative class action lawsuit brought by Ryan Hart, a former college football player, in the United States District Court for the District of New Jersey in June 2009, which alleges that we misappropriated his likeness in our college-themed football game. The complaint seeks actual damages and other unspecified damages, which have not been quantified. In September 2011, the district court granted our motion to dismiss the complaint. On May 21, 2013, the Third Circuit Court of Appeal reversed the district court's decision and remanded the case back to the district court.
|
•
|
The
In re NCAA Student-Athlete Name & Likeness
Licensing
litigation pending in United States District Court for the Northern District of California involves two groups of common claims brought by several different former collegiate student-athletes in 2009. These various actions were consolidated into one action in February 2010. The first group of claims is a class action against us, the NCAA and the Collegiate Licensing Company (CLC) alleging that our college-themed video games misappropriated the likenesses of collegiate student-athletes without their authorization. This group of claims seeks actual damages, statutory damages and other unspecified damages, which have not been quantified. On July 31, 2013, the Ninth Circuit Court of Appeals affirmed the trial court’s denial of our motion to strike the complaint. The second group of claims is a federal antitrust class action against us, the NCAA and the CLC that challenges NCAA/CLC licensing practices and the NCAA By-Laws and regulations. This group of claims seeks unspecified damages, which have not been quantified. In June 2013, the plaintiffs in this second group of claims have asked the district court to certify the case as a class action. The district court has not ruled on their request.
|
•
|
increase our vulnerability to general adverse economic and industry conditions;
|
•
|
limit our ability to obtain additional financing;
|
•
|
require the dedication of a substantial portion of any cash flow from operations to the payment of principal of, and interest on, our indebtedness, thereby reducing the availability of such cash flow to fund our growth strategy, working capital, capital expenditures and other general corporate purposes;
|
•
|
limit our flexibility in planning for, or reacting to, changes in our business and our industry; and
|
•
|
place us at a competitive disadvantage relative to our competitors with less debt.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 6.
|
Exhibits
|
|
|
ELECTRONIC ARTS INC.
|
|
|
(Registrant)
|
|
|
|
|
|
/s/ Blake Jorgensen
|
DATED:
|
|
Blake Jorgensen
|
November 5, 2013
|
|
Executive Vice President,
|
|
|
Chief Financial Officer
|
*
|
Management contract or compensatory plan or arrangement.
|
†
|
Attached as Exhibit 101 to this Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2013
are the following formatted in eXtensible Business Reporting Language (“XBRL”): (1) Condensed Consolidated Balance Sheets, (2) Condensed Consolidated Statements of Operations, (3) Condensed Consolidated Statements of Comprehensive Loss, (4) Condensed Consolidated Statements of Cash Flows, and (5) Notes to Condensed Consolidated Financial Statements.
|
1)
|
EA Digital Illusions CE AB
, Reg. No. 556710-6520, registered address Box 20068, 104 60 Stockholm
|
2)
|
Patrick Söderlund
(“
you”,
“
your
” or “
yours
”)
|
1.
|
START DATE AND TERM
|
(a)
|
You have been employed since 1 January 2000 under another employment agreement and from 17 September 2013 (the “
Effective Date
”) the terms of this agreement will apply and replace all previous employment agreements.
|
(b)
|
You represent and warrant that:
|
(i)
|
you are not bound by or subject to any court order, agreement, arrangement or undertaking which in any way restricts or prohibits you from entering into this Agreement or from performing your duties under this Agreement;
|
(ii)
|
you are entitled to work in Sweden (and have a valid work permit, if necessary) and will continue to be so entitled throughout your employment with the Company; and
|
(iii)
|
if you cease to be entitled to work in Sweden you will inform the Company of such fact as soon as you become aware of it.
|
2.
|
JOB TITLE AND DUTIES
|
(a)
|
Your job title will be EVP, EA Games Label. To the extent permitted under Swedish law, the Company may make changes to your job title and duties that it considers reasonable to meet business needs, but will give you reasonable notice before doing so. Consequently, the Company reserves the right to request that you carry out the duties of a different position of equivalent status either in addition to or instead of your duties.
|
(b)
|
In addition to your general duties as EVP Games Label you shall:
|
(i)
|
perform any duties assigned to you as long as they are consistent with your job title and comply with such instructions, as the Company shall from time to time issue;
|
(ii)
|
devote the whole of your time, attention and abilities to the Company's affairs during business hours;
|
(iii)
|
act in the best interests of the Company at all times and carry out the performance of your work and general conduct to the highest standards; and
|
(iv)
|
keep the Company at all times promptly and fully informed (in writing if so requested) of your conduct of the business of the Company and provide such explanations in that connection as the Company may require.
|
3.
|
HOURS OF WORK
|
4.
|
PLACE OF WORK
|
(a)
|
Your normal place of work shall be Company’s offices at
Katarinavägen 15, 116 45 Stockholm
or such other place within Sweden as the Company may on reasonable notice require.
|
(b)
|
You may be required to travel on behalf of the Company anywhere within the world but you will not be obliged to reside or spend more than 30 consecutive days outside Sweden on a yearly basis.
|
5.
|
REMUNERATION
|
(a)
|
You will be entitled by way of remuneration to a fixed gross salary at the rate of 4,122,163 SEK per year which fixed salary will accrue on a daily basis. Salary is payable in arrears on the 25th of each month. The Company will pay social security contributions and withhold income tax and other fees and taxes as required under Swedish law.
|
(b)
|
You are eligible to participate in the Company’s discretionary bonus scheme which is payable at the Company’s discretion. The details of the discretionary bonus scheme are available from the Company’s Human Resources department.
|
(c)
|
You agree that the remuneration package provided by the Company is sufficient compensation for overtime and that no separate overtime compensation will be paid by Company to You.
|
(d)
|
Your salary will be reviewed by the Company from time to time in compliance with the applicable collective bargaining agreement.
|
(e)
|
Any payments due from you to the Company may be deducted from your salary and/or any other money due to you from the Company as set out in Clause 16 herein. This consent may be withdrawn by you at any time.
|
(f)
|
In addition to the above and subject to you complying with (and continuing to comply) with any rules or procedures imposed by the Company on the use of cars, your position entitles you to a Company car or cash allowance of 12,391 SEK per month which is given in accordance with the Company car allowance policy which is available from HR.
|
6.
|
PENSION AND INSURANCE
|
7.
|
EMPLOYEE STOCK PLAN
|
8.
|
EXPENSES
|
9.
|
HOLIDAYS
|
(a)
|
You will be entitled to holiday leave according to Swedish law
(Sw. semesterlagen),
the applicable collective bargaining agreement and the Company’s vacation policy (as may be obtained from Company’s Human Resources department). Your actual holiday entitlement is 35 days per year.
|
(b)
|
Upon termination of your employment you shall be entitled to receive payment in lieu of accrued but untaken holiday. In the event that you have exceeded your accrued holiday entitlement, the excess shall be repayable by you at the same rate.
|
10.
|
ILLNESS AND MEDICAL REPORTS
|
11.
|
COMPANY LOYALTY; OTHER BUSINESS INTERESTS
|
12.
|
TERMINATION OF EMPLOYMENT
|
(a)
|
This employment agreement can be terminated by either party giving such notice as applies in accordance with mandatory Swedish law and the applicable collective bargaining agreement. The notice period will vary based on length of employment.
|
(b)
|
In accordance with Swedish law, the Company may terminate your employment immediately (
Sw. avsked
) without notice or without payment in lieu of notice if you are guilty of any gross default or misconduct in connection with or affecting the business of the Company or if you commit any material breach of or non-observance of any of your duties or obligations under this Agreement.
|
13.
|
EFFECTS OF TERMINATION OR EXPIRY; COMPANY PROPERTY, NON-SOLICITATION
|
(a)
|
Upon expiry or termination of your employment you must immediately return to the Company all Company property including keys, security passes, credit cards, documents or other property belonging to or relating to the businesses or affairs of the Company, including all electronic and hard copies of documents containing or referring to Confidential Information (as set out in Clause 14 herein) which may be in the possession or control of you. You may not retain copies, extracts or notes of any of the same.
|
(b)
|
During your employment and for a period of twelve (12) months after the expiry or termination of the employment, you may not, whether directly or indirectly, or on behalf of or in conjunction with any other person, proprietor, company or other entity, solicit or entice away or endeavor to solicit or entice away from the Company any person, proprietor, company or other entity which is or has at any time during the preceding 12 months been a client or a customer of the Company.
|
(c)
|
During your employment and for a period of twelve (12) months after the expiry or termination of your employment, you may not, whether directly or indirectly, or on behalf of or in conjunction with any other person, firm company or other entity, solicit or entice away or engage any employee of the Company.
|
14.
|
CONFIDENTIAL INFORMATION
|
(a)
|
During and after your employment with the Company (without time limit), you must not (unless required to do so by law or protected in doing so by a legal right of protected disclosure):
|
(i)
|
use any trade secrets or confidential information of the Company for any purposes other than the Company’s; or
|
(i)
|
disclose any trade secrets or confidential information to any person other than in properly performing your duties.
|
(b)
|
“
Confidential Information
” means all information relating to the Company’s business practices and methods, customers, employees, suppliers, pricing or pricing strategy, products, services, development plans of products, marketing strategies, Company licenses, third party agreements and any other information which the Company reasonably considers to be confidential.
|
15.
|
INTELLECTUAL PROPERTY
|
(a)
|
As further set forth in the New Hire Agreement, you hereby acknowledge that the Company shall be the sole and exclusive owner of any intellectual property, including but not limited to any copyright in produced materials or any invention made or patented, that results from your employment and you expressly waive any rights thereto. This provision does not waive your right to remuneration under the applicable collective bargaining agreement and/or mandatory Swedish law.
|
(b)
|
You undertake to do anything reasonably required to ensure that such intellectual property rights are assigned to the Company and to assist the Company in taking any action in relation to any possible infringements. In addition, as further set forth in the New Hire Agreement, you shall continuously inform the Company of any games, methods, systems, computer programs, graphic objects, ideas, documentation and any other products or results which you develop in your own time, provided that such development is related to the business or any anticipated research or development of the Company.
|
16.
|
DEDUCTIONS
|
17.
|
GLOBAL INFORMATION AND SYSTEMS USE AND SECURITY POLICY
|
18.
|
COMPANY POLICIES
|
19.
|
HEALTH AND SAFETY AT WORK
|
20.
|
DATA PROTECTION
|
(a)
|
The Company recognizes the importance of protecting the privacy, confidentiality, accuracy and security of your personal information and aims to comply with the provisions of the Swedish Data Protection Act. The Company will hold computer records and personnel files relating to you. These will include personal details form, references, bank details, performance appraisals, holiday and sickness records, salary reviews and remuneration details and other records (which may, where necessary, include sensitive personal data relating to your health, and data held for ethnic monitoring purposes). The Company requires such personal data for personnel administration and management purposes and to comply with its obligations regarding the keeping of employee records.
|
(b)
|
You hereby explicitly consent to the Company collecting and processing your personal data relating to you for personnel administration and management purposes and that it may, where necessary for those purposes, make such data available to its advisers, to authorized employees in its Head Office in Redwood Shores, California or to such other parent, subsidiary or associated company as may be required and to external third parties providing products and/or services to the Company, and as required by law.
|
21.
|
MONITORING
|
22.
|
DISCRIMINATION AND DIGNITY AT WORK
|
23.
|
GOVERNING LAW
|
24.
|
ENTIRE AGREEMENT
|
25.
|
NOTICES
|
26.
|
COLLECTIVE AGREEMENT
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Electronic Arts Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Dated: November 5, 2013
|
By:
|
|
/s/ Andrew Wilson
|
|
|
|
Andrew Wilson
|
|
|
|
Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Electronic Arts Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Dated: November 5, 2013
|
By:
|
|
/s/ Blake Jorgensen
|
|
|
|
Blake Jorgensen
|
|
|
|
Executive Vice President,
|
|
|
|
Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Electronic Arts Inc. for the periods presented therein.
|
/s/ Andrew Wilson
|
Andrew Wilson
|
Chief Executive Officer
|
Electronic Arts Inc.
|
|
November 5, 2013
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Electronic Arts Inc. for the periods presented therein.
|
/s/ Blake Jorgensen
|
Blake Jorgensen
|
Executive Vice President,
|
Chief Financial Officer
|
Electronic Arts Inc.
|
|
November 5, 2013
|