Press Release

EX-99.1 3 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

EA’s 22 PLATINUM TITLES DRIVE RECORD FISCAL YEAR RESULTS

Net Revenues up 44 percent to $2.5 billion / Operating Cash Flow $714 million

REDWOOD CITY, CA – May 6, 2003 – Electronic Arts (NASDAQ: ERTS) today announced financial results for the fiscal year and quarter ended March 31, 2003.

Full Year Results

Consolidated net revenues for the fiscal year ending March 31, 2003 were $2.482 billion, up 44 percent compared with $1.725 billion for the prior year. EA had twenty-two platinum titles (over one million units sold) in fiscal 2003. Two franchises – The Sims^™ and Harry Potter^™ – each sold approximately ten million units and four other franchises sold more than five million units: Medal of Honor^™, James Bond^™, FIFA Soccer and Madden NFL^™ Football.

Consolidated net income for the year was $317 million, a 212 percent increase over the prior year. Diluted earnings per share increased 206 percent to $2.17 compared to $0.71. The growth in earnings was driven by higher sales volume, increased gross margin and lower operating costs as a percentage of net revenues. The company incurred asset impairment and restructuring charges of $81 million in the year. These charges lowered fiscal year net income by $56 million (tax-adjusted) and diluted earnings per share by $0.38 (tax-adjusted).

Non-GAAP net income, excluding certain items, was up 190 percent to $385 million. Non-GAAP diluted earnings per share were up 183 percent to $2.63. (Please see Non-GAAP Financial Measures and reconciliation information included in this release.)

Operating cash flow was $714 million as compared to $288 million in the prior fiscal year.

“This was an outstanding year for Electronic Arts,” said Larry Probst, Chairman and Chief Executive Officer. “The company achieved all of its key objectives, and we are the leader on next generation consoles and on the PC. We enter our next fiscal year in great shape and with the strongest product line-up in our history.”

“Our studios produced great entertainment, our publishing organizations delivered record sales results and together as a company, we generated record operating cash flow,” said Warren Jenson, Chief Financial and Administrative Officer. “For the year, operating cash flow was $714 million.”

Highlights for the Year (comparisons are to the fiscal year ending March 31, 2002)

•

Net revenues increased in all territories: North America – up 31 percent to $1.4 billion; Europe – up 69 percent to $879 million; Asia Pacific – up 64 percent to $88 million; Japan – up 37 percent to $80 million.

•

Gross margin was 57 percent versus 53 percent.

•

Operating income of $456 million was up 237 percent. Operating margin reached 18 percent versus eight percent.

•

Non-GAAP operating income, excluding certain items, was $545 million – up 201 percent year-over-year.

•

EA.com was consolidated into the company’s core operations.

•

EA was the number one publisher on the PC. In the U.S., the company had six of the top-10 selling-PC games according to NPD Group / NPD Techworld.

•

EA was the number one publisher on next generation consoles. In the U.S., the company had four of the top-10-selling next generation console titles (includes PlayStation^®2, Xbox^™ and Nintendo GameCube^™ consoles) according to NPD Group / NPD Funworld / TRSTS Video Games Service.

•

EA was named as one of the 100 best companies to work for by Fortune Magazine.

•

EA was ranked as one of the top-50 best-performing major companies by Business Week.

•

EA won thirteen awards at the Sixth Annual Academy of Interactive Arts and Sciences (“AIAS”) ceremony for Battlefield 1942^™; Medal of Honor Allied Assault^™; Medal of Honor Frontline^™; Madden NFL 2003; The Lord of the Rings^™, The Two Towers^™; The Sims Online^™; The Sims^™ Unleashed; and Need for Speed^™ Hot Pursuit 2.

•

Battlefield 1942 was named “Game of the Year” at the AIAS ceremony.

Fourth Quarter Results

Consolidated net revenues for the fourth quarter were $463 million, down one percent compared with $470 million in the prior year. The slight decline in sales was driven by the timing of product releases. In the quarter, 12 products were released as compared to 20 in the prior year. For the quarter, average unit sales volume on new releases was up over 50 percent. The strength of the company’s unit sales performance was driven by The Sims; The Lord of the Rings, The Two Towers; SimCity^™ 4; Command & Conquer^™ Generals; FIFA 2003 and MVP Baseball^™ 2003.

Consolidated net income for the quarter was $9 million, as compared to $47 million in the prior year. Diluted earnings per share were $0.06 in the quarter compared with $0.33 in the prior year. Asset impairment and restructuring charges of $72 million were incurred. These charges lowered fourth quarter net income by $50 million (tax-adjusted) and diluted earnings per share by $0.34 (tax-adjusted).

Non-GAAP net income, excluding certain items, was up seven percent to $59 million. Non-GAAP diluted earnings per share were up three percent to $0.40. (Please see Non-GAAP Financial Measures and reconciliation information included in this release.)

Asset Impairment and Restructuring Charges

Full year charges. Pre-tax asset impairment and restructuring charges of $81 million were incurred during the fiscal year. Asset impairment charges were $66 million and related principally to EA.com. Restructuring charges totaled $15 million and were incurred primarily as a result of lease terminations associated with studio consolidations, the cost to retire outstanding Class B options and employee severance costs.

Fourth quarter charges. Pre-tax asset impairment and restructuring charges of $72 million were incurred during the quarter. Asset impairment charges were $65 million and related principally to EA.com. Restructuring charges totaled $7 million and were associated with lease terminations, employee severance costs and the cost to retire outstanding Class B options.

The majority of outstanding Class B options and shares were acquired or exchanged for Class A equity during the quarter, and EA.com was consolidated into the company’s core operations. As a result, the company intends to eliminate dual class reporting as of April 1, 2003, the start of EA’s new fiscal year.

Business Outlook

The following forward-looking statements reflect expectations as of May 6, 2003. Results may be materially different and are affected by many factors, such as changes in the overall global economy, actual consumer spending, consumer acceptance of our products, development delays and other risk factors detailed in this release.

Fiscal First Quarter Expectations – Ending June 30, 2003

•

Consolidated net revenues are expected to be flat to slightly up compared to the first quarter of the prior year. Prior year revenues were $332 million.

•

Net income is expected to be roughly breakeven.

Fiscal Year Expectations – Ending March 31, 2004

•

Consolidated net revenues are expected to be between $2.8 and $2.9 billion - up 13 to 17 percent year-over-year.

•

Consolidated diluted earnings per share are expected to be between $3.10 and $3.25 – up 43 to 50 percent year-over-year.

Non-GAAP Financial Measures

Electronic Arts uses non-GAAP measures of operating income (loss), net income (loss) and diluted earnings (loss) per share. These non-GAAP measures exclude the following items from the company’s statement of operations:

•

Amortization of intangibles

•

Restructuring and asset impairment charges

•

Other than temporary impairment of investments

•

Charges for acquired in-process technology

The company believes excluding these items is useful for illustrating and explaining operating results and comparisons to prior periods. Management uses these non-GAAP measures in its decision-making to facilitate more relevant operating comparisons.

In addition, non-GAAP operating income (loss), non-GAAP net income (loss) and non-GAAP diluted earnings (loss) per share for EA Core and EA.com reflect these segments on a stand-alone basis and allocate income taxes on a proportional basis to the respective income (loss) for each segment. Because the operations of EA.com have been consolidated into EA’s Core operations, the company will no longer report separate EA Core and EA.com results for future periods.

A reconciliation of GAAP operating income (loss) to non-GAAP operating income (loss); GAAP net income (loss) to non-GAAP net income (loss); and GAAP diluted earnings (loss) per share to non-GAAP diluted earnings (loss) per share are included as part of the supplemental disclosures.

Webcast

Electronic Arts will host a webcast at 2:00 pm PT (5:00 pm ET) on May 6, 2003 at http://investor.ea.com to review the results for the company’s fiscal year and fourth quarter ending March 31, 2003 and to discuss the company’s near term outlook. A replay of the webcast will be posted for two weeks. A copy of this release and supplemental information will be available at http://investor.ea.com.

Some statements set forth in this release including those under the heading “Business Outlook” contain forward-looking statements that involve risks and uncertainties. Statements including words such as “anticipate”, “believe” or “expect” and statements in the future tense are forward-looking statements. These forward-looking statements are subject to business and economic risks and actual events or actual future results could differ materially from those set forth in the forward-looking statements due to such risks and uncertainties. Some of the factors which could cause our results to differ materially include the following: timely development and release of our products; consumer spending trends; retention of key personnel; risks associated with major platform transitions; our limited experience with online games; subscriber acceptance of our online products; potential regulation of our products in key territories; developments in the law regarding protection of our products; and other factors described in our Annual Report on Form 10K for the year ended March 31, 2002 and Form 10Q for the quarter ended December 31, 2002. If any of these risks or uncertainties materializes, our results could differ materially from our expectations described in these forward-looking statements. We do not intend to update these forward-looking statements, including those made under the “Business Outlook” heading.

Note to Editors: The Sims, The Sims Online, SimCity, Medal of Honor, Medal of Honor Frontline, Medal of Honor Allied Assault, Need for Speed, Command & Conquer, MVP Baseball, Ultima, Ultima Online and Age of Shadows are trademarks or registered trademarks of Electronic Arts Inc. in the U.S. and/or other countries. Battlefield 1942 is a trademark of Digital Illusions CE AB. The Lord of the Rings and the characters, names, and places therein, TM The Saul Zaentz Company d/b/a Tolkien Enterprises under license to New Line Productions, Inc. James Bond is a trademark of Danjaq, LLC. NIGHTFIRE and AGENT UNDER FIRE are trademarks of Danjaq, LLC and United Artists Corp. HARRY POTTER, characters, names and related indicia are trademarks of and ^© Warner Bros. NFL, FIFA, NBA, NCAA, NHL, Tiger Woods, PGA TOUR, NASCAR and NASCAR Thunder are trademarks of their respective owners and used with permission. PlayStation is a registered trademark of Sony Computer Entertainment Inc. Xbox is a trademark of Microsoft Corporation in the U.S. and/or other countries. Nintendo GameCube and Game Boy Advance are trademarks of Nintendo. All other trademarks are the property of their respective owners.

For additional information, please contact:

Karen Sansot		Jeff Brown
Director, Investor Relations		Vice President, Corporate Communications
650-628-5597		650-628-7922

ELECTRONIC ARTS

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share data)

	Three Months Ended March 31,						Twelve Months Ended March 31,
	2003			2002			2003			2002
Net revenues	$	463,130		$	469,691		$	2,482,244		$	1,724,675
Cost of goods sold		164,370			205,003			1,072,802			814,783

Gross profit		298,760			264,688			1,409,442			909,892
Operating expenses:
Marketing and sales		72,073			61,410			332,453			241,109
General and administrative		35,493			26,608			130,859			107,059
Research and development		108,819			96,936			400,990			380,564
Amortization of intangibles		746			6,109			7,482			25,418
Restructuring charges		7,176			(63	)		15,102			7,485
Asset impairment charges		64,877			6,315			66,329			12,818

Total operating expenses		289,184			197,315			953,215			774,453

Operating income		9,576			67,373			456,227			135,439
Interest and other income, net		5,337			2,556			5,222			12,848

Income before provision for income taxes and minority interest		14,913			69,929			461,449			148,287
Provision for income taxes		4,623			21,678			143,049			45,969

Income before minority interest		10,290			48,251			318,400			102,318
Minority interest in consolidated joint venture		(1,050	)		(956	)		(1,303	)		(809	)

Net income	$	9,240		$	47,295		$	317,097		$	101,509

Earnings per share—Class A Stockholders
Diluted	$	0.06		$	0.33		$	2.17		$	0.71
Basic	$	0.08		$	0.38		$	2.34		$	0.91

Number of shares used in diluted earnings per share computation		147,055			144,056			146,446			143,142
Number of shares used in basic earnings per share computation		143,471			137,985			140,989			136,832

Loss per share—Class B Stockholders
Diluted	$	(1.18	)	$	(0.76	)	$	(2.77	)	$	(3.77	)
Basic	$	(1.18	)	$	(0.76	)	$	(2.77	)	$	(3.77	)

Number of shares used in diluted loss per share computation		2,092			6,039			4,368			6,026
Number of shares used in basic loss per share computation		2,092			6,039			4,368			6,026

ELECTRONIC ARTS

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

	March 31, 2003		March 31, 2002
ASSETS

Current assets:
Cash, cash equivalents and short-term investments	$	1,587,618	$	796,936
Marketable securities		1,111		6,869
Receivables, less allowances of $164,634 and $115,870, respectively		82,083		190,495
Inventories, net		25,170		23,780
Deferred income taxes		117,180		38,597
Other current assets		97,975		95,866

Total current assets		1,911,137		1,152,543

Property and equipment, net		262,252		308,827
Investment in affiliates		20,277		19,077
Goodwill		86,031		69,050
Other intangibles, net		21,301		41,462
Long-term deferred income taxes		13,523		64,065
Other assets		45,012		44,350

Total Assets	$	2,359,533	$	1,699,374


LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	106,329	$	88,563
Accrued and other liabilities		464,547		364,419

Total current liabilities		570,876		452,982

Minority interest in consolidated joint venture		3,918		3,098

Stockholders’ equity:
Common stock		1,443		1,446
Paid-in capital		857,870		649,777
Retained earnings		923,892		606,795
Accumulated other comprehensive income (loss)		1,534		(14,724	)

Total stockholders’ equity		1,784,739		1,243,294

Total Liabilities, Minority Interest and Stockholders’ Equity	$	2,359,533	$	1,699,374

ELECTRONIC ARTS

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

	Three Months Ended March 31,						Twelve Months Ended March 31,
	2003			2002			2003			2002
OPERATING ACTIVITIES
Net income	$	9,240		$	47,295		$	317,097		$	101,509
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest in consolidated joint venture		1,050			956			1,303			809
Equity in net income of affiliates		(1,254	)		(865	)		(5,467	)		(2,999	)
Gain on sale of affiliate		—			—			—			(200	)
Depreciation and amortization		17,310			27,350			91,639			110,901
Non-cash restructuring and asset impairment charges		64,877			6,896			66,329			13,399
Other than temporary impairment of investment in affiliates		—			—			10,590			—
(Gain)/loss on sale of fixed assets, net		421			(41	)		527			331
Loss on marketable securities		433			96			706			96
Bad debt expense		(746	)		2,219			7,058			9,361
Stock-based compensation		42			836			906			3,099
Tax benefit from exercise of stock options		37,855			5,752			74,620			22,541
Change in assets and liabilities:
Receivables		527,692			270,670			103,125			(25,407	)
Inventories		8,046			1,138			(1,390	)		(8,094	)
Other assets		(20,417	)		45,174			(34,416	)		(1,718	)
Accounts payable		(40,487	)		(65,136	)		17,735			15,502
Accrued and other liabilities		(135,862	)		(4,368	)		93,430			90,996
Deferred income taxes		(37,259	)		(41,559	)		(29,341	)		(42,056	)

Net cash provided by operating activities		430,941			296,413			714,451			288,070

INVESTING ACTIVITIES
Proceeds from sale of property and equipment		59			41			738			299
Proceeds from sale of affiliate		—			—			—			570
Proceeds from sale of marketable securities		—			—			4,794			—
Capital expenditures		(24,638	)		(11,462	)		(59,108	)		(51,518	)
Investment in affiliates, net		(8,792	)		1			(9,323	)		2,919
Purchases of short-term investments		(452,920	)		(153,000	)		(1,049,765	)		(322,484	)
Proceeds from maturities and sales of short-term investments		214,302			27,282			659,517			132,142
Distribution from investment in affiliate		—			—			3,000			—
Dividend to joint venture		—			(2,481	)		(751	)		(2,481	)
Acquisition, net of cash acquired		—			—			(12,868	)		—

Net cash used in investing activities		(271,989	)		(139,619	)		(463,766	)		(240,553	)

FINANCING ACTIVITIES
Proceeds from sale of Class A shares through employee stock plans and other plans		21,819			22,086			131,695			95,642
Proceeds from sale of Class B shares through employee stock plans and other plans		—			99			1			99
Repayment of Class B notes receivable		1,176			—			1,176			—
Purchase of treasury shares		—			—			—			(11,922	)

Net cash provided by financing activities		22,995			22,185			132,872			83,819

Translation adjustment		1,980			(691	)		13,612			1,678

Increase in cash and cash equivalents		183,927			178,288			397,169			133,014
Beginning cash and cash equivalents		766,068			374,538			552,826			419,812

Ending cash and cash equivalents		949,995			552,826			949,995			552,826
Short-term investments		637,623			244,110			637,623			244,110

Ending cash, cash equivalents and short-term investments	$	1,587,618		$	796,936		$	1,587,618		$	796,936

ELECTRONIC ARTS

Unaudited Condensed Consolidating Statements of Operations

(in thousands, except per share data)

	Three Months Ended March 31, 2003									Three Months Ended March 31, 2002
	EA Core (excl. EA.com)			EA.com			Electronic Arts			EA Core (excl. EA.com)			EA.com			Electronic Arts
Net revenues	$	442,372		$	20,758		$	463,130		$	446,095		$	23,596		$	469,691
Cost of goods sold		159,075			5,295			164,370			200,288			4,715			205,003

Gross profit		283,297			15,463			298,760			245,807			18,881			264,688
Operating expenses:
Marketing and sales (note 1)		61,460			10,613			72,073			52,747			8,663			61,410
General and administrative		34,090			1,403			35,493			24,384			2,224			26,608
Research and development (note 2)		87,074			21,745			108,819			67,590			29,346			96,936
Amortization of intangibles		746			—			746			3,273			2,836			6,109
Restructuring charges		3,088			4,088			7,176			—			(63	)		(63	)
Asset impairment charges		1,990			62,887			64,877			—			6,315			6,315

Total operating expenses		188,448			100,736			289,184			147,994			49,321			197,315

Operating income (loss)		94,849			(85,273	)		9,576			97,813			(30,440	)		67,373
Interest and other income (expense), net		5,385			(48	)		5,337			2,607			(51	)		2,556

Income (loss) before provision for income taxes and minority interest		100,234			(85,321	)		14,913			100,420			(30,491	)		69,929
Provision for income taxes		4,623			—			4,623			21,678			—			21,678

Income (loss) before minority interest		95,611			(85,321	)		10,290			78,742			(30,491	)		48,251
Minority interest in consolidated joint venture		(1,050	)		—			(1,050	)		(956	)		—			(956	)

Net income (loss) before retained interest in EA.com		94,561			(85,321	)		9,240			77,786			(30,491	)		47,295
Net loss related to retained interest in EA.com		(82,844	)		82,844			—			(25,917	)		25,917			—

Net income (loss)	$	11,717		$	(2,477	)	$	9,240		$	51,869		$	(4,574	)	$	47,295

Earnings per share—Class A Stockholders
Diluted							$	0.06								$	0.33
Basic							$	0.08								$	0.38
Number of shares used in diluted earnings per share computation								147,055									144,056
Number of shares used in basic earnings per share computation								143,471									137,985

Loss per share—Class B Stockholders
Diluted							$	(1.18	)							$	(0.76	)
Basic							$	(1.18	)							$	(0.76	)
Number of shares used in diluted loss per share computation								2,092									6,039
Number of shares used in basic loss per share computation								2,092									6,039

Non-GAAP Results (In thousands, except per share data)

The following table shows the Company’s non-GAAP results reconciled to the Generally Accepted Accounting Principles (“GAAP”) Consolidated Statements of Operations. The Company’s non-GAAP results do not include amortization of intangibles, restructuring charges, asset impairment charges and other than temporary impairment of investments. In addition, income taxes are allocated to EA Core and EA.com at the consolidated effective tax rate (31%) on a pro rata basis.

	Three Months Ended March 31, 2003									Three Months Ended March 31, 2002
	EA Core (excl. EA.com)			EA.com			Electronic Arts			EA Core (excl. EA.com)			EA.com			Electronic Arts
Net income (loss)—GAAP (note 5)	$	11,717		$	(2,477	)	$	9,240		$	51,869		$	(4,574	)	$	47,295

Net loss related to retained interest in EA.com (note 3)		82,844			(82,844	)		—			25,917			(25,917	)		—
Non-GAAP allocation of income taxes (note 4)		(26,449	)		26,449			—			(9,453	)		9,453			—

Subtotal		68,112			(58,872	)		9,240			68,333			(21,038	)		47,295

Amortization of intangibles		746			—			746			3,273			2,836			6,109
Restructuring charges		3,088			4,088			7,176			—			(63	)		(63	)
Asset impairment charges		1,990			62,887			64,877			—			6,315			6,315
Income taxes effect on the above items		(1,806	)		(20,762	)		(22,568	)		(1,014	)		(2,817	)		(3,831	)

Non-GAAP net income (loss)	$	72,130		$	(12,659	)	$	59,471		$	70,592		$	(14,767	)	$	55,825

Non-GAAP diluted earnings (loss) per share	$	0.49		$	(0.09	)	$	0.40		$	0.49		$	(0.10	)	$	0.39
Number of shares used in diluted earnings (loss) per share computation		147,055			147,055			147,055			144,056			144,056			144,056

Notes:

EA.com marketing and sales includes $4,467K of Carriage Fee for the three months ended March 31, 2003 and $4,466K for the three months ended March 31, 2002.

EA.com development includes $6,507K of Network Development and Support and $2,995K of CRMD for the three months ended March 31, 2003; and includes $12,580K of Network Development and Support and $2,106K of CRMD for the three months ended March 31, 2002.

EA Core maintained approximately 85% retained interest in EA.com through August 2002, 88% retained interest through February 2003 and maintains approximately 99% retained interest in EA.com thereafter and is reflected in the Net income—GAAP for EA Core. The non-GAAP statements exclude the retained interest allocation.

The provision for income taxes was allocated between EA Core and EA.com at the worldwide effective tax rate (31%) based on each segment’s pro rata share of income or loss. The sum of provision (benefit) for EA Core and EA.com is the same as consolidated tax provision.

In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” the Company ceased to amortize goodwill beginning in fiscal 2003. Net income and diluted earnings per share for Class A stockholders for the three months ended March 31, 2002 would have been $49,324K and $0.34, respectively, if the Company did not amortize goodwill for that period.

ELECTRONIC ARTS

Unaudited Condensed Consolidating Statements of Operations

(in thousands, except per share data)

	Twelve Months Ended March 31, 2003									Twelve Months Ended March 31, 2002
	EA Core (excl. EA.com)			EA.com			Electronic Arts			EA Core (excl. EA.com)			EA.com			Electronic Arts
Net revenues	$	2,400,669		$	81,575		$	2,482,244		$	1,647,502		$	77,173		$	1,724,675
Cost of goods sold		1,056,385			16,417			1,072,802			797,894			16,889			814,783

Gross profit		1,344,284			65,158			1,409,442			849,608			60,284			909,892
Operating expenses:
Marketing and sales (note 1)		289,933			42,520			332,453			202,749			38,360			241,109
General and administrative		123,538			7,321			130,859			96,919			10,140			107,059
Research and development (note 2)		299,294			101,696			400,990			250,590			129,974			380,564
Amortization of intangibles		3,526			3,956			7,482			12,888			12,530			25,418
Restructuring charges		11,014			4,088			15,102			—			7,485			7,485
Asset impairment charges		3,442			62,887			66,329			—			12,818			12,818

Total operating expenses		730,747			222,468			953,215			563,146			211,307			774,453

Operating income (loss)		613,537			(157,310	)		456,227			286,462			(151,023	)		135,439
Interest and other income (expense), net		5,452			(230	)		5,222			13,472			(624	)		12,848

Income (loss) before provision for income taxes and minority interest		618,989			(157,540	)		461,449			299,934			(151,647	)		148,287
Provision for income taxes		143,049			—			143,049			45,969			—			45,969

Income (loss) before minority interest		475,940			(157,540	)		318,400			253,965			(151,647	)		102,318
Minority interest in consolidated joint venture		(1,303	)		—			(1,303	)		(809	)		—			(809	)

Net income (loss) before retained interest in EA.com		474,637			(157,540	)		317,097			253,156			(151,647	)		101,509
Net loss related to retained interest in EA.com		(145,425	)		145,425			—			(128,900	)		128,900			—

Net income (loss)	$	329,212		$	(12,115	)	$	317,097		$	124,256		$	(22,747	)	$	101,509

Earnings per share—Class A Stockholders
Diluted							$	2.17								$	0.71
Basic							$	2.34								$	0.91
Number of shares used in diluted earnings per share computation								146,446									143,142
Number of shares used in basic earnings per share computation								140,989									136,832

Loss per share—Class B Stockholders
Diluted							$	(2.77	)							$	(3.77	)
Basic							$	(2.77	)							$	(3.77	)
Number of shares used in diluted loss per share computation								4,368									6,026
Number of shares used in basic loss per share computation								4,368									6,026

Non-GAAP Results (In thousands, except per share data)

	Twelve Months Ended March 31, 2003									Twelve Months Ended March 31, 2002
	EA Core (excl. EA.com)			EA.com			Electronic Arts			EA Core (excl. EA.com)			EA.com			Electronic Arts
Net income (loss)—GAAP (note 6)	$	329,212		$	(12,115	)	$	317,097		$	124,256		$	(22,747	)	$	101,509

Net loss related to retained interest in EA.com (note 3)		145,425			(145,425	)		—			128,900			(128,900	)		—
Non-GAAP allocation of income taxes (note 4)		(48,837	)		48,837			—			(47,011	)		47,011			—

Subtotal		425,800			(108,703	)		317,097			206,145			(104,636	)		101,509

Amortization of intangibles		3,526			3,956			7,482			12,888			12,530			25,418
Restructuring charges		11,014			4,088			15,102			—			7,485			7,485
Asset impairment charges		3,442			62,887			66,329			—			12,818			12,818
Other than temporary impairment of investment in affiliates (note 5)		10,119			—			10,119			—			—			—
Income taxes effect on the above items		(8,712	)		(21,988	)		(30,700	)		(3,995	)		(10,178	)		(14,173	)

Non-GAAP net income (loss)	$	445,189		$	(59,760	)	$	385,429		$	215,038		$	(81,981	)	$	133,057

Non-GAAP diluted earnings (loss) per share	$	3.04		$	(0.41	)	$	2.63		$	1.50		$	(0.57	)	$	0.93
Number of shares used in diluted earnings (loss) per share computation		146,446			146,446			146,446			143,142			143,142			143,142

Notes:

EA.com marketing and sales includes $17,866K of Carriage Fee for the twelve months ended March 31, 2003; and includes $17,864K of Carriage Fee for the twelve months ended March 31, 2002.

EA.com development includes $43,040K of Network Development and Support and $10,047K of CRMD for the twelve months ended March 31, 2003; and includes $59,483K of Network Development and Support and $10,599K of CRMD for the twelve months ended March 31, 2002.

Total other than temporary impairment of investment in affiliates were $10,119K for the twelve months ended March 31, 2003. These are in Interest and Other Income (Expense), net in GAAP financials, and excluded in the non-GAAP results.

In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” the Company ceased to amortize goodwill beginning in fiscal 2003. Net income and diluted earnings per share for Class A stockholders for the twelve months ended March 31, 2002 would have been $110,565K and $0.77, respectively, if the Company did not amortize goodwill for that period.

ELECTRONIC ARTS

Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidating Statements of Operations

(in millions, except per share data)

The following tables show the Company’s non-GAAP results reconciled to the Generally Accepted Accounting Principles (“GAAP”) Consolidated Statements of Operations. The Company’s non-GAAP results do not include amortization of intangibles, restructuring charges, asset impairment charges and other than temporary impairment of investments.

	Q4 FY02			Q1 FY03			Q2 FY03			Q3 FY03			Q4 FY03
QUARTERLY RESULTS

Operating Income
GAAP operating income	$	67		$	6		$	71		$	369		$	10
Adjustments:
Amortization of intangibles		6			2			2			3			1
Restructuring charges		—			—			—			8			7
Asset impairment charges		7			—			—			2			64

Total adjustments		13			2			2			13			72

Non-GAAP operating income	$	80		$	8		$	73		$	382		$	82

Non-GAAP operating income margin – % of net revenues		17	%		3	%		16	%		31	%		18	%

Net Income
GAAP net income	$	47		$	7		$	51		$	250		$	9
Adjustments:
Amortization of intangibles		6			2			2			3			1
Restructuring charges		—			—			—			8			7
Asset impairment charges		7			—			—			2			64
Other than temporary impairment of investment in affiliates		—			—			—			10			—
Income taxes effect on the above items		(4	)		—			(1	)		(8	)		(22	)

Total adjustments		9			2			1			15			50

Non-GAAP net income	$	56		$	9		$	52		$	265		$	59

Non-GAAP net income margin – % of net revenues		12	%		3	%		11	%		21	%		13	%

GAAP diluted earnings per share	$	0.33		$	0.05		$	0.34		$	1.69		$	0.06
Non-GAAP diluted earnings per share	$	0.39		$	0.06		$	0.35		$	1.79		$	0.40
Number of shares used in diluted earnings per share computation		144			145			147			148			147

EA Core Operating Income
GAAP operating income	$	97		$	26		$	94		$	398		$	95
Adjustments:
Amortization of intangibles		4			1			1			1			1
Restructuring charges		—			—			—			8			3
Asset impairment charges		—			—			—			1			2

Total adjustments		4			1			1			10			6

Non-GAAP operating income	$	101		$	27		$	95		$	408		$	101

Non-GAAP operating income margin – % of net revenues		23	%		9	%		22	%		34	%		23	%

TRAILING TWELVE MONTH RESULTS

Operating Income
GAAP operating income	$	135		$	209		$	333		$	513		$	456
Adjustments:
Amortization of intangibles		25			20			16			13			8
Restructuring charges		8			7			7			8			15
Asset impairment charges		13			14			14			9			66

Total adjustments		46			41			37			30			89

Non-GAAP operating income	$	181		$	250		$	370		$	543		$	545

Non-GAAP operating income margin – % of net revenues		11	%		13	%		18	%		22	%		22	%

Net Income
GAAP net income	$	102		$	153		$	237		$	355		$	317
Adjustments:
Amortization of intangibles		25			20			16			13			8
Restructuring charges		8			7			7			8			15
Asset impairment charges		13			14			14			9			66
Other than temporary impairment of investment in affiliates		—			—			—			10			10
Income taxes effect on the above items		(15	)		(11	)		(11	)		(13	)		(31	)

Total adjustments		31			30			26			27			68

Non-GAAP net income	$	133		$	183		$	263		$	382		$	385

Non-GAAP net income margin – % of net revenues		8	%		10	%		13	%		15	%		16	%

GAAP diluted earnings per share	$	0.71		$	1.06		$	1.64		$	2.41		$	2.17
Non-GAAP diluted earnings per share	$	0.93		$	1.26		$	1.82		$	2.59		$	2.63
Number of shares used in diluted earnings per share computation		143			145			145			147			146

EA Core Operating Income
GAAP operating income	$	286		$	341		$	451		$	615		$	613
Adjustments:
Amortization of intangibles		13			11			9			7			4
Restructuring charges		—			—			—			8			11
Asset impairment charges		—			—			—			1			3

Total adjustments		13			11			9			16			18

Non-GAAP operating income	$	299		$	352		$	460		$	631		$	631

Non-GAAP operating income margin – % of net revenues		18	%		20	%		23	%		26	%		26	%

ELECTRONIC ARTS

Unaudited Supplemental Financial Information and Business Metrics

($ in millions, except per share data, SKU count and Headcount)

	Q4 FY02			Q1 FY03			Q2 FY03			Q3 FY03			Q4 FY03			YOY % Growth
CONSOLIDATED FINANCIAL DATA
Net revenues		470			332			453			1,234			463		(1	%)
Net revenues—trailing twelve months (“TTM”)		1,725			1,875			2,088			2,489			2,482		44	%

Gross profit		265			189			253			668			299		13	%
Gross margin—% of net revenues		56	%		57	%		56	%		54	%		65	%
Gross profit—TTM		910			1,008			1,138			1,375			1,409		55	%
Gross margin—TTM % of net revenues		53	%		54	%		55	%		55	%		57	%

Operating income		67			6			71			369			10		(86	%)
Operating income margin—% of net revenues		14	%		2	%		16	%		30	%		2	%
Operating income—TTM		135			209			333			513			456		237	%
Operating income margin—TTM % of net revenues		8	%		11	%		16	%		21	%		18	%

Net income		47			7			51			250			9		(80	%)
Diluted earnings per share	$	0.33		$	0.05		$	0.34		$	1.69		$	0.06		(82	%)
Net income—TTM		102			153			237			355			317		212	%
Diluted earnings per share—TTM	$	0.71		$	1.06		$	1.64		$	2.41		$	2.17		206	%

Non-GAAP operating income*		80			8			73			382			82		3	%
Non-GAAP operating income margin—% of net revenues		17	%		3	%		16	%		31	%		18	%
Non-GAAP operating income—TTM*		181			250			370			543			545		201	%
Non-GAAP operating income margin—TTM % of net revenues		11	%		13	%		18	%		22	%		22	%

Non-GAAP net income*		56			9			52			265			59		7	%
Non-GAAP diluted earnings per share*	$	0.39		$	0.06		$	0.35		$	1.79		$	0.40		3	%
Non-GAAP net income—TTM*		133			183			263			382			385		190	%
Non-GAAP diluted earnings per share—TTM*	$	0.93		$	1.26		$	1.82		$	2.59		$	2.63		183	%

EA CORE FINANCIAL DATA
EA Core net revenues		446			312			434			1,212			442		(1	%)
EA Core net revenues—TTM		1,648			1,793			2,003			2,404			2,400		46	%

EA Core operating income		97			26			94			398			95		(3	%)
EA Core operating income margin—% of net revenues		22	%		8	%		22	%		33	%		21	%
EA Core operating income—TTM		286			341			451			615			613		114	%
EA Core operating income margin—TTM % of net revenues		17	%		19	%		23	%		26	%		26	%

EA.COM FINANCIAL DATA
EA.com net revenues		24			20			19			22			21		(12	%)
EA.com net revenues—TTM		77			82			85			85			82		6	%

EA.com operating loss		(30	)		(20	)		(23	)		(29	)		(85	)	N/A
EA.com operating loss—TTM		(151	)		(132	)		(118	)		(102	)		(157	)	N/A

CASH FLOW DATA
Operating cash flow		296			6			79			198			431		45	%
Operating cash flow—TTM		288			324			453			579			714		148	%

Capital expenditures		12			8			15			11			25		115	%
Capital expenditures—TTM		52			45			45			46			59		15	%

BALANCE SHEET DATA
Cash, cash equivalents and short-term investments		797			827			921			1,165			1,588		99	%
Marketable securities		7			5			6			1			1		(84	%)
Receivables, net		190			118			139			609			82		(57	%)
Inventories, net		24			24			37			33			25		6	%

OTHER
Employees		3,479			3,501			3,704			3,788			3,938		13	%

Please see attached Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidating Statements of Operations

ELECTRONIC ARTS

Unaudited Supplemental Financial Information and Business Metrics

($ in millions, except per share data, SKU count and Headcount)

	Q4 FY02		Q1 FY03		Q2 FY03		Q3 FY03		Q4 FY03		YOY % Growth
GEOGRAPHIC REVENUE MIX
North America Revenue	310		174		313		696		253		(18	%)
Revenue outside North America	160		158		140		538		210		32	%

Europe Revenue	127		126		117		471		165		30	%
Japan Revenue	19		17		9		29		25		28	%
Asia Pacific Revenue	14		15		14		38		20		51	%
Net Revenues	470		332		453		1,234		463		(1	%)

GEOGRAPHIC REVENUE MIX—as a % of Net Revenues
North America Revenue	66	%	52	%	69	%	57	%	55	%
Revenue outside North America	34	%	48	%	31	%	43	%	45	%

Europe Revenue	27	%	38	%	26	%	38	%	36	%
Japan Revenue	4	%	5	%	2	%	2	%	5	%
Asia Pacific Revenue	3	%	5	%	3	%	3	%	4	%

Net Revenues	100	%	100	%	100	%	100	%	100	%

PLATFORM REVENUE MIX
PC	137		76		82		219		121		(11	%)
Sony PlayStation 2	113		135		158		459		158		40	%
Nintendo GameCube	22		15		28		111		23		5	%
Xbox	33		20		37		117		45		33	%
Sony PlayStation	27		13		24		54		9		(65	%)
Game Boy Advance	14		2		4		68		5		(61	%)
Game Boy Color	10		1		2		22		1		(88	%)
License/OEM	6		2		3		5		5		(27	%)
Co-publishing and Distribution	83		47		96		157		75		(10	%)
Other	1		1		—		—		—		(75	%)

Total EA Core Revenues	446		312		434		1,212		442		(1	%)

Subscription	9		8		7		10		13		46	%
Advertising	13		10		9		9		3		(73	%)
Product Sales	—		1		1		2		4		380	%
Direct Sales	2		1		1		1		1		(12	%)
License/OEM	—		—		1		—		—		0	%

Total EA.com Revenues	24		20		19		22		21		(12	%)

Net Revenues	470		332		453		1,234		463		(1	%)

PLATFORM REVENUE MIX—as a % of Net Revenues
PC	29	%	23	%	18	%	18	%	26	%
Sony PlayStation 2	24	%	41	%	35	%	37	%	34	%
Nintendo GameCube	5	%	4	%	6	%	9	%	5	%
Xbox	7	%	6	%	8	%	9	%	10	%
Sony PlayStation	6	%	4	%	6	%	4	%	2	%
Game Boy Advance	3	%	1	%	1	%	6	%	1	%
Game Boy Color	2	%	0	%	0	%	2	%	0	%
License/OEM	1	%	1	%	1	%	0	%	1	%
Co-publishing and Distribution	18	%	14	%	21	%	13	%	16	%
Other	0	%	0	%	0	%	0	%	0	%

Total EA Core Revenues	95	%	94	%	96	%	98	%	95	%

Subscription	2	%	3	%	2	%	1	%	3	%
Advertising	3	%	3	%	2	%	1	%	1	%
Product Sales	0	%	0	%	0	%	0	%	1	%
Direct Sales	0	%	0	%	0	%	0	%	0	%
License/OEM	0	%	0	%	0	%	0	%	0	%

Total EA.com Revenues	5	%	6	%	4	%	2	%	5	%

Net Revenues	100	%	100	%	100	%	100	%	100	%

Platform Sku Release Mix
PC	6		2		3		9		3		(50	%)
Sony PlayStation 2	6		4		4		9		2		(67	%)
Nintendo GameCube	2		2		4		9		2		0	%
Xbox	4		2		3		8		3		(25	%)
Sony PlayStation	—		1		2		3		—		0	%
Game Boy Advance	1		1		1		4		1		0	%
Game Boy Color	—		—		—		1		—		0	%
Online	1		—		1		1		1		0	%

Total skus	20		12		18		44		12		(40	%)

ELECTRONIC ARTS

Post-Ship Advance Write-Off Adjustment

(in Millions)

	Q1			Q2			Q3			Q4			Year
FISCAL 2003

GROSS PROFIT

Pre-adjustment	$	191		$	254		$	675		$	300		$	1,420
% of net revenues		57.4	%		56.1	%		54.7	%		64.8	%		57.2	%

Post-adjustment	$	189		$	253		$	668		$	299		$	1,409
% of net revenues		57.1	%		55.7	%		54.2	%		64.5	%		56.8	%

Change	$	(2	)	$	(1	)	$	(7	)	$	(1	)	$	(11	)

RESEARCH AND DEVELOPMENT

Pre-adjustment	$	92		$	97		$	113		$	110		$	412
% of net revenues		27	%		22	%		9	%		24	%		17	%

Post-adjustment	$	90		$	96		$	106		$	109		$	401
% of net revenues		27	%		21	%		9	%		23	%		16	%

Change	$	(2	)	$	(1	)	$	(7	)	$	(1	)	$	(11	)

FISCAL 2002

GROSS PROFIT

Pre-adjustment	$	93		$	122		$	432		$	270		$	917
% of net revenues		51.1	%		51.0	%		51.9	%		57.4	%		53.2	%

Post-adjustment	$	92		$	122		$	431		$	265		$	910
% of net revenues		50.4	%		50.8	%		51.8	%		56.4	%		52.8	%

Change	$	(1	)	$	—		$	(1	)	$	(5	)	$	(7	)

RESEARCH AND DEVELOPMENT

Pre-adjustment	$	91		$	97		$	98		$	102		$	388
% of net revenues		50	%		41	%		12	%		22	%		22	%

Post-adjustment	$	90		$	97		$	97		$	97		$	381
% of net revenues		49	%		40	%		12	%		21	%		22	%

Change	$	(1	)	$	—		$	(1	)	$	(5	)	$	(7	)

FISCAL 2001

GROSS PROFIT

Pre-adjustment	$	77		$	99		$	334		$	160		$	670
% of net revenues		49.6	%		45.2	%		52.1	%		52.2	%		50.7	%

Post-adjustment	$	75		$	98		$	328		$	156		$	657
% of net revenues		48.2	%		44.5	%		51.2	%		51.0	%		49.7	%

Change	$	(2	)	$	(1	)	$	(6	)	$	(4	)	$	(13	)

RESEARCH AND DEVELOPMENT

Pre-adjustment	$	79		$	90		$	110		$	110		$	389
% of net revenues		51	%		41	%		17	%		36	%		29	%

Post-adjustment	$	77		$	89		$	104		$	106		$	376
% of net revenues		50	%		40	%		16	%		35	%		28	%

Change	$	(2	)	$	(1	)	$	(6	)	$	(4	)	$	(13	)

ELECTRONIC ARTS

Unaudited Supplemental Fact Sheet for Q4 Fiscal 2003

Q4 Product Releases		Platform

• The Sims^™		PlayStation^®2
• MVP Baseball^™ 2003		PlayStation 2
• The Lord of the Rings^™, The Two Towers^™		Xbox^™
• The Sims		Xbox
• MVP Baseball 2003		Xbox
• The Lord of the Rings, The Two Towers		Nintendo GameCube^™
• The Sims		Nintendo GameCube
• James Bond 007^™: Nightfire^™		Game Boy^® Advance
• Ultima Online^™: Age of Shadows^™		Online Packaged Goods
• SimCity^™ 4		PC
• Command & Conquer^™ Generals		PC
• MVP Baseball 2003		PC

Co-pub, International only and Others (not in SKU count)

• Dead to Rights		PlayStation 2
• Battlefield 1942^™: The Road to Rome		PC
• 1503 A.D. The New World		PC

Platinum Titles in Fiscal 2003 (sold at least 1 million units in fiscal year)

• Harry Potter and the Chamber of Secrets^™		• The Sims^™ Vacation Expansion Pack
• Madden NFL^™ 2003		• The Sims^™ Deluxe
• Medal of Honor Frontline^™		• NCAA^® Football 2003
• FIFA Soccer 2003		• Kingdom Hearts
• The Lord of the Rings, The Two Towers		• Tiger Woods PGA TOUR^® 2003
• James Bond 007: Nightfire		• NHL^® 2003
• The Sims		• Harry Potter and the Sorcerer’s Stone^™
• The Sims^™ Unleashed Expansion Pack		• James Bond 007^™ in ... Agent Under Fire^™
• 2002 FIFA World Cup Soccer		• SimCity 4
• Need for Speed^™ Hot Pursuit 2		• NASCAR Thunder^™ 2003
• NBA Live 2003		• Battlefield 1942^™

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