Electronic Arts 2008 Annual Report Download - page 123

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the fourth quarter of fiscal 2006 to realign our resources with our product plan for fiscal 2007 and strategic
opportunities for the new generation of consoles, online and mobile platforms.
During fiscal 2006, restructuring charges related to the establishment of our international publishing headquar-
ters in Geneva, Switzerland were approximately $14 million, of which $8 million was for the closure of
certain United Kingdom facilities. During fiscal 2007, restructuring charges related to the establishment of our
international publishing headquarters in Geneva, Switzerland were approximately $15 million, of which
$10 million was for employee-related expenses.
Interest and Other Income, Net
Interest and other income, net, for fiscal years 2007 and 2006 was as follows (in millions):
March 31,
2007
% of Net
Revenue
March 31,
2006
% of Net
Revenue $ Change % Change
$99 3% $64 2% $35 55%
For fiscal 2007, interest and other income, net, increased by $35 million, or 55 percent, as compared to fiscal
2006 primarily due to an increase of $30 million in interest income as a result of higher yields on our cash,
cash equivalent and short-term investment balances and a $7 million decrease in realized net losses recognized
on investments.
Income Taxes
Income taxes for fiscal years 2007 and 2006 were as follows (in millions):
March 31,
2007
Effective
Tax Rate
March 31,
2006
Effective
Tax Rate % Change
$66 48.2% $147 37.6% (55%)
Our effective income tax rates were 48.2 percent and 37.6 percent for fiscal 2007 and fiscal 2006, respectively.
For fiscal 2007, our effective income tax rate was higher than the U.S. statutory rate of 35.0 percent due to a
number of factors, including certain non-deductible stock based compensation expenses related to
SFAS No. 123(R) and additional charges resulting from certain non-deductible acquisition-related costs during
the fourth quarter of fiscal 2007. For fiscal 2006, our effective income tax rate is higher than the U.S. statutory
rate of 35.0 percent for fiscal 2006 due to a number of factors, including the repatriation of foreign earnings in
connection with the American Jobs Creation Act of 2004 and additional charges resulting from certain non-
deductible acquisition-related costs during the second and fourth quarters of fiscal 2006, which were partially
offset by other items.
Net Income
Net income for fiscal years 2007 and 2006 was as follows (in millions):
March 31,
2007
% of Net
Revenue
March 31,
2006
% of Net
Revenue $ Change % Change
$76 2% $236 8% $(160) (68%)
Net income decreased by $160 million, or 68 percent, in fiscal 2007 as compared to fiscal 2006. The decrease
was due to a $395 million increase in our operating expenses primarily due to (1) an increase of $128 million
in stock-based compensation expense recognized as a result of our adoption of SFAS No. 123(R), (2) an
$83 million increase in our annual bonus expense, and (3) a $75 million increase in additional personnel-
related costs due to an increase in headcount (related in part to our acquisitions and growth in our EA Mobile
business). These increases in operating expenses were mitigated by (1) a $140 million increase in net revenue
and (2) an $81 million decrease in our income tax provision.
Annual Report
47