Restructuring and Other Charges

Restructuring charges and adjustments are recorded as "Restructuring" expenses in our condensed consolidated statements of operations and generally include costs such as, severance and other employee-based charges in excess of standard business practices, costs associated with lease abandonments (less estimates of sublease income), charges related to long-lived assets, and costs of other non-cancellable contracts.

On January 26, 2012, we initiated a plan of restructuring in connection with our updated business strategy in order to better align our operating expenses with the lower expected revenues under the updated strategy (see "Note 15 — Subsequent Events" for further details).

Fiscal 2012 Third Quarter Realignment. In the third quarter of fiscal 2012, we announced weaker-than-expected initial sales of uDraw. This resulted in a reduction of approximately 30 people from our Kids, Family and Casual staff and the cancellation of three titles. In connection with these actions we incurred $1.5 million of cash severance and other employee-based charges (recorded within operating expenses in our condensed consolidated statements of operations) and charges of $3.0 million related to cancelled titles in development (recorded within "Cost of sales — Software development amortization" in our condensed consolidated statements of operations). We do not expect any significant future charges under the fiscal 2012 third quarter realignment.

Fiscal 2012 Second Quarter Realignment. On August 9, 2011, we announced a plan to realign our internal studio development teams and video games in development in order to better match our resources with our target portfolio of interactive entertainment and continue our transition away from traditional console games based on licensed kids' titles and movie entertainment properties. Under this plan, we closed two studios in Australia and eliminated a game development team at one additional studio. We also cancelled two unannounced titles at these locations that were no longer in line with our strategic business priorities. These actions resulted in a reduction of approximately 200 people on our product development staff. The following table summarizes the components and activity under the fiscal 2012 second quarter realignment, classified as "Restructuring" in our condensed consolidated statements of operations, for the three and nine months ended December 31, 2011, and the related restructuring reserve balances (amounts in thousands):



	Three Months Ended December 31, 2011									Nine Months Ended December 31, 2011
	Lease and Contract Terminations			Net Asset Impairments			Total			Lease and Contract Terminations			Net Asset Impairments			Total
Beginning balance	$	2,919		$	—		$	2,919		$	—		$	—		$	—
Charges (benefit) to operations	(68		)	(260		)	(328		)	2,798			1,010			3,808
Non-cash write-offs	—			260			260			—			(1,010		)	(1,010		)
Cash payments, net of sublease income	(784		)	—			(784		)	(784		)	—			(784		)
Foreign currency and other adjustments	303			—			303			356			—			356
Ending balance	$	2,370		$	—		$	2,370		$	2,370		$	—		$	2,370

Additionally, in connection with these actions, in the three and nine months ended December 31, 2011, we incurred a benefit of $0.1 million and charges of $4.3 million, respectively, related to estimates of cash severance and other employee-based charges (recorded within operating expenses in our condensed consolidated statements of operations). In the three and nine months ended December 31, 2011 we incurred charges of $0.2 million and $17.7 million, respectively, related to the cancellation of two unannounced titles in development at these studios (recorded within "Cost of sales — Software development amortization" in our condensed consolidated statements of operations). In the three and nine months ended December 31, 2011 we also incurred gains of $0.4 million and $1.6 million related to accumulated foreign currency translation adjustments (recorded within "Interest and other income (expense), net" in our condensed consolidated statements of operations). Additionally, in the three months ended September 30, 2011, we incurred a $16.0 million charge for an abandoned license (inclusive of $11.0 million in cash charges; all of which are recorded within "Cost of sales — License amortization and royalties" in our condensed consolidated statements of operations). We do not expect any future charges under the fiscal 2012 second quarter realignment, other than additional facility-related charges and adjustments in the event actual and estimated sublease income changes.

Fiscal 2012 First Quarter Realignment. In the first quarter of fiscal 2012, we announced the closure of our studio located in the U.K. as we continued to refine our video game line-up and utilize studio locations in more cost effective markets. The following table summarizes the components and activity under the fiscal 2012 first quarter realignment, classified as "Restructuring" in our condensed consolidated statements of operations, for the three and nine months ended December 31, 2011, and the related restructuring reserve balances (amounts in thousands):



	Three Months Ended December 31, 2011								Nine Months Ended December 31, 2011
	Lease and Contract Terminations			Net Asset Impairments		Total			Lease and Contract Terminations			Net Asset Impairments			Total
Beginning balance	$	632		$	—	$	632		$	—		$	—		$	—
Charges to operations	10			—		10			628			117			745
Non-cash write-offs	—			—		—			—			(117		)	(117		)
Cash payments, net of sublease income	(39		)	—		(39		)	(142		)	—			(142		)
Foreign currency and other adjustments	(3		)	—		(3		)	114			—			114
Ending balance	$	600		$	—	$	600		$	600		$	—		$	600

Additionally, in connection with the U.K. studio closure, in the nine months ended December 31, 2011, we incurred $1.7 million of cash severance and other employee-based charges related to the notification to employees of position eliminations (recorded within operating expenses in our condensed consolidated statements of operations). In the three months ended December 31, 2011 we also incurred a $0.1 million gain and in the nine months ended December 31, 2011 we incurred a $1.6 million loss related to accumulated foreign currency translation adjustments (recorded within "Interest and other income (expense), net" in our condensed consolidated statements of operations). Additionally, in the nine months ended December 31, 2011, we incurred a $1.4 million charge related to the cancellation of an unannounced title in development at this studio (recorded within "Cost of sales — Software development amortization" in our condensed consolidated statements of operations). We do not expect any future charges under the fiscal 2012 first quarter realignment, other than additional facility related charges and adjustments in the event actual and estimated sublease income changes.

Fiscal 2011 Fourth Quarter Realignment. In the fourth quarter of fiscal 2011, we performed an assessment of our product development and publishing staffing models. This resulted in a change to our staffing plans to better address peak service periods, as well as better utilize shared-services and more cost-effective locations. The following table summarizes the components and activity under the fiscal 2011 fourth quarter realignment, classified as "Restructuring" in our condensed consolidated statements of operations, for the three and nine months ended December 31, 2011 and 2010, and the related restructuring reserve balances (amounts in thousands):



	Three Months Ended December 31, 2011								Nine Months Ended December 31, 2011
	Lease and Contract Terminations			Net Asset Impairments		Total			Lease and Contract Terminations			Net Asset Impairments			Total
Beginning balance	$	730		$	—	$	730		$	41		$	—		$	41
Charges (benefit) to operations	(177		)	—		(177		)	561			90			651
Non-cash write-offs	—			—		—			—			(90		)	(90		)
Cash payments, net of sublease income	(69		)	—		(69		)	(197		)	—			(197		)
Foreign currency and other adjustments	107			—		107			186			—			186
Ending balance	$	591		$	—	$	591		$	591		$	—		$	591

Since the inception of the fiscal 2011 fourth quarter realignment through December 31, 2011, total restructuring charges amounted to $0.7 million.

Additionally, in connection with this change, in the three and nine months ended December 31, 2011, we incurred a benefit of $0.1 million and charges of $1.8 million, respectively, related to estimates of cash severance and other employee-based charges (recorded within operating expenses in our condensed consolidated statements of operations), as well as a $0.5 million loss related to accumulated foreign currency translation adjustments (recorded within "Interest and other income (expense), net" in our condensed consolidated statements of operations). We do not expect any future charges under the fiscal 2011 fourth quarter realignment, other than additional facility related charges and adjustments in the event actual and estimated sublease income changes.

Fiscal 2011 Third Quarter Realignment. In the third quarter of our fiscal 2011, we reevaluated our strategy of adapting certain Western content for free-to-play online games in Asian markets. As a result, we cancelled two games, eliminated certain positions, and closed our Korean support office. Restructuring expenses recorded in the nine months ended December 31, 2010 related to the closure of our Korean support office were $14,000, and consisted of lease and other contract termination charges and write-offs of related long-lived assets. The cancellation of the games, Company of Heroes Online and WWE Online, resulted in charges of $9.9 million in the nine months ended December 31, 2010, recorded in "Cost of sales — Software amortization and royalties" in our condensed consolidated statements of operations. Additionally, in the nine months ended December 31, 2010, we incurred $0.8 million of cash severance charges related to eliminated positions, which were classified within operating expenses in our condensed consolidated statements of operations. We do not expect any future charges in relation to these items.

Fiscal 2009 Realignment. During the twelve months ended March 31, 2009 ("fiscal 2009"), we updated our strategic plan in an effort to increase our profitability and cash flow generation. We significantly realigned our business to focus on fewer, higher quality games, and established an operating structure that supports our more focused product strategy. The fiscal 2009 realignment included the cancellation of several titles in development, the closure or spin-off of several of our development studios, and the streamlining of our corporate organization in order to support the new product strategy, including reductions in worldwide personnel. We do not expect any future charges under the fiscal 2009 realignment, other than additional facility related charges and adjustments in the event actual and estimated sublease income changes.

The following table summarizes the restructuring lease and contract termination activity under the fiscal 2009 realignment for the three and nine months ended December 31, 2011 and 2010, and the related restructuring reserve balances (amounts in thousands):



	Three Months Ended December 31,						Nine Months Ended December 31,
	2011			2010			2011			2010
Beginning balance	$	1,296		$	1,486		$	1,335		$	2,392
Charges to operations	15			126			258			133
Non-cash write-offs	—			—			—			—
Cash payments, net of sublease income	(81		)	(356		)	(407		)	(1,214		)
Foreign currency and other adjustments	(4		)	(55		)	40			(110		)
Ending balance	$	1,226		$	1,201		$	1,226		$	1,201

Since the inception of the fiscal 2009 realignment through December 31, 2011, total restructuring charges amounted to $18.8 million.

The aggregated restructuring accrual balances at December 31, 2011 and March 31, 2011 of $4.8 million and $1.3 million, respectively, related to future lease payments for facilities vacated under all of our realignment plans (offset by estimates of future sublease income), and accruals for other non-cancellable contracts. As of December 31, 2011, $1.9 million of the restructuring accrual is included in "Accrued and other current liabilities" and $2.9 million is included in "Other long-term liabilities" in our condensed consolidated balance sheet. As of March 31, 2011, $0.7 million of the restructuring accrual was included in "Accrued and other current liabilities" and $0.6 million was included in "Other long-term liabilities" in our condensed consolidated balance sheet. We expect the final settlement of this accrual to occur by August 1, 2015, which is the last payment date under our lease agreements that were vacated.