Press release dated May 3, 2006

EX-99.1 2 dex991.htm PRESS RELEASE DATED MAY 3, 2006 Press release dated May 3, 2006

Exhibit 99.1

EA REPORTS FOURTH QUARTER AND FISCAL YEAR 2006 RESULTS

Number One on Xbox 360 in North America

Over 30 Titles in Development for Next Generation Consoles

REDWOOD CITY, CA – May 3, 2006 – Electronic Arts (NASDAQ: ERTS) today announced preliminary financial results for the fourth quarter and fiscal year ended March 31, 2006.

Fourth Quarter Results

Net revenue for the fourth quarter was $641 million, up 16 percent as compared with $553 million for the prior year. Sales were driven by EA SPORTS™ Fight Night Round 3, The Godfather™ The Game, BLACK™, Need for Speed™ Most Wanted, FIFA Street 2 and The Sims™2. Six titles sold over one million copies in the quarter compared with four a year ago.

Net loss for the quarter was $16 million, as compared with net income of $8 million for the prior year. Diluted loss per share was $0.05, as compared with diluted earnings per share of $0.02. The net loss was driven primarily by higher operating costs, including restructuring and acquisition-related charges, and certain tax adjustments recorded in the quarter.

Non-GAAP net income was $43 million as compared with $30 million for the prior year. Non-GAAP net income excludes $59 million of charges principally associated with acquisition-related activities, the repatriation of $375 million in foreign earnings in connection with the American Jobs Creation Act of 2004 and restructuring costs. Non-GAAP net income for the prior year excludes $22 million of charges associated with employment-related litigation and acquisition-related activities.

Non-GAAP diluted earnings per share were $0.14, as compared with $0.09 for the prior year. (Please see Non-GAAP Financial Measures and reconciliation information included in this release.)

Full Year Results

Net revenue for the fiscal year ended March 31, 2006 was $2.951 billion, down six percent as compared with $3.129 billion for the prior year. EA had 27 platinum titles (over one million copies sold) in fiscal 2006 as compared with 31 a year ago. Seven titles sold more than three million copies: Need for Speed Most Wanted, Madden NFL 06, FIFA 06, The Sims 2, Harry Potter and the Goblet of Fire™, NBA Live 06 and Burnout™ Revenge.

Net income for the year was $236 million as compared with $504 million for the prior year. Diluted earnings per share were $0.75 as compared with $1.59.

Non-GAAP net income for the year, which excludes certain items, was $301 million as compared with $543 million for the prior year. Non-GAAP diluted earnings per share were $0.96 as compared with $1.71. (Please see Non-GAAP Financial Measures and reconciliation information included in this release.)

Operating cash flow was $596 million as compared with $634 million a year ago.

“This transition is more than a console upgrade,” said Larry Probst, Chairman and Chief Executive Officer. “In addition to creating games for the PlayStation 3, Xbox 360 and Nintendo Wii, EA is positioning for global leadership in online, handhelds and mobile phones.”

“We continue to invest ahead of revenues for long-term leadership,” said Warren Jenson, Chief Financial and Administrative Officer. “We are well into the console transition and now have more than 30 next generation games in development.”

Highlights for the Year (comparisons are to the fiscal year ended March 31, 2005)

•

Net revenue: North America – down five percent to $1.584 billion; Europe – down nine percent to $1.174 billion; Asia — up seven percent to $193 million. Movements in foreign currency rates contributed $36 million, or one percent, of the decrease in total net revenue.

•

Xbox 360™ net revenue was $140 million, more than offsetting the decline in Xbox® net revenue.

•

Mobility-based net revenue, which includes handhelds and cellular handsets, was $393 million, up $275 million or 233 percent.

•

GAAP operating income was $325 million – compared to $669 million. Operating margin was 11 percent – compared to 21 percent a year ago.

•

Twelve titles reached double-platinum status (over two million copies sold).

•

Need for Speed Most Wanted was the number one title for EA.

•

EA released seven titles on the Xbox 360 resulting in 28 percent life-to date segment share in North America and an estimated 23 percent share in Europe.

•

EA extended its exclusive licenses for FIFA, Tiger Woods and Harry Potter.

•

EA signed an exclusive arrangement to develop games with Steven Spielberg and announced plans to bring The Simpsons to next generation consoles.

•

EA completed the acquisition of JAMDAT Mobile — the leader in mobile interactive entertainment in North America.

•

The Company completed its $750 million stock repurchase program.

Business Outlook

The following forward-looking statements, as well as those made above, reflect expectations as of May 3, 2006. Results may be materially different and are affected by many factors, such as: the timely release of next-generation hardware and the ability of console manufacturers to produce an adequate supply of consoles to meet demand, development delays on EA’s products, changes in foreign exchange rates, the overall global economy, the popular appeal of EA’s products, competition in the industry, EA’s effective tax rate, EA’s ability to secure key licenses and other factors detailed in this release and in EA’s annual and quarterly SEC filings. For example, EA’s expectations for the fiscal year ending March 31, 2007 are dependent on Sony’s ability to successfully launch the PlayStation®3 computer entertainment system in November 2006 and to provide sufficient supplies to satisfy consumer demand during the 2006 holiday season and first quarter of calendar 2007.

Fiscal First Quarter Expectations – Ending June 30, 2006

•

Net revenue is expected to be between $300 and $340 million.

•

GAAP diluted loss per share is expected to be between ($0.42) and ($0.36). This range includes approximately $0.09 of estimated stock-based compensation, $0.03 of amortization of intangible assets and $0.02 of estimated restructuring charges related to the reorganization and establishment of an International Publishing Headquarters in Geneva.

•

Non-GAAP diluted loss per share is expected to be between ($0.28) and ($0.22).

Fiscal Year Expectations – Ending March 31, 2007

•

Net revenue is expected to be between $2.7 and $2.95 billion.

•

GAAP diluted earnings (loss) per share are expected to be between ($0.15) and $0.15. This range includes approximately $0.30 of estimated stock-based compensation, $0.15 of amortization of intangible assets and $0.05 of estimated restructuring charges related to the reorganization and establishment of an International Publishing Headquarters in Geneva.

•

Non-GAAP diluted earnings per share are expected to be between $0.35 and $0.65.

Non-GAAP Financial Measures

To supplement the Company’s unaudited condensed consolidated financial statements presented in accordance with GAAP, Electronic Arts uses certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures used by Electronic Arts include non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share. These non-GAAP financial measures exclude the following items from the Company’s statement of operations:

•

Acquired in-process technology

•

Amortization of intangibles

•

Employee stock-based compensation

•

Restructuring charges

•

Certain litigation expense

•

Income tax adjustments (consisting of the income tax effect of the items listed above and one-time income tax adjustments)

In addition, Electronic Arts may consider whether other significant non-recurring items that arise in the future should also be excluded from the non-GAAP financial measures it uses.

Electronic Arts believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding the Company’s performance by excluding certain items that may not be indicative of the Company’s core business, operating results or future outlook. Electronic Arts’ management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing the Company’s operating results and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons of the Company’s performance to prior periods. Electronic Arts further believes that where the adjustments used in calculating non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share are based on specific, identifiable charges that impact different line items in the Company’s statements of operations (including cost of goods sold, marketing and sales, general and administrative, research and development expense and income tax expense), that it is useful for investors to understand how these specific line items are affected by these adjustments.

In the financial tables below, Electronic Arts has provided a reconciliation of the most comparable GAAP financial measure to each non-GAAP financial measure used in this press release.

Conference Call

Electronic Arts will host a conference call on May 3, 2006 at 2:00 pm PT (5:00 pm ET) to review the results for the fourth quarter and full fiscal year ended March 31, 2006 and to discuss its outlook for the future. During the course of the call, Electronic Arts may also disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live through the following dial-in number (800) 946-0706, access code 220497, or a webcast: http://investor.ea.com.

A dial-in replay of the conference call will be provided until May 10, 2006 at (719) 457-0820, access code 220497. The webcast archive of the conference call will be available for one year at http://investor.ea.com.

Some statements set forth in this release, including the estimates under the heading “Business Outlook,” contain forward-looking statements that are subject to change. Statements including words such as “anticipate”, “believe”, “estimate” or “expect” and statements in the future tense are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual events or actual future results to differ materially from the expectations set forth in the forward-looking statements. Some of the factors which could cause the Company’s results to differ materially from its expectations include the following: the timely release of next-generation hardware; the availability of an adequate supply of current-generation and next-generation hardware units (including the Microsoft Xbox 360, Sony PlayStation 3 and Nintendo Wii); the Company’s ability to predict consumer preferences among competing hardware platforms; consumer spending trends; the seasonal and cyclical nature of the interactive game segment; timely development and release of Electronic Arts’ products; competition in the interactive entertainment industry; the Company’s ability to manage expenses during fiscal year 2007, the Company’s ability to secure licenses to valuable entertainment properties on favorable terms; the Company’s ability to attract and retain key personnel; changes in the Company’s effective tax rates; adoption of new accounting regulations and standards; potential regulation of the Company’s products in key territories; developments in the law regarding protection of the Company’s products; fluctuations in foreign exchange rates; and other factors described in the Company’s annual report on Form 10-K for the year ended March 31, 2005 and Form 10-Q for the quarter ended December 31, 2005. These forward-looking statements speak only as of May 3, 2006. Electronic Arts assumes no obligation and does not intend to update these forward-looking statements, including those made under the “Business Outlook” heading. In addition, the financial results set forth in this release are estimates based on information currently available to Electronic Arts. While Electronic Arts believes these estimates are meaningful, they could differ from the actual amounts that Electronic Arts ultimately reports in its Annual Report on Form 10-K for the fiscal year ended March 31, 2006. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-K for the fiscal year ended March 31, 2006.

About Electronic Arts

Electronic Arts Inc. (EA), headquartered in Redwood City, California, is the world’s leading interactive entertainment software company. Founded in 1982, the company develops, publishes, and distributes interactive software worldwide for videogame systems, personal computers and the Internet. Electronic Arts markets its products under four brand names: EA SPORTS^TM, EA^TM, EA SPORTS BIG^TM and POGO^TM. In fiscal 2006, EA posted revenue of $2.95 billion and had 27 titles that sold more than one million copies. EA’s homepage and online game site is www.ea.com. More information about EA’s products and full text of press releases can be found on the Internet at http://info.ea.com.

Electronic Arts, EA, EA SPORTS, EA SPORTS BIG, POGO, Black, Need for Speed, Burnout and The Sims are trademarks or registered trademarks of Electronic Arts Inc. in the U.S. and/or other countries. FIFA, John Madden, NFL , NBA and Tiger Woods are property of their respective owners and used with permission. The Godfather ™, ® and © 2006 Paramount Pictures. All Rights Reserved. HARRY POTTER and all related characters and elements are trademarks of and © Warner Bros. Entertainment Inc. Harry Potter Publishing Rights © JKR. Xbox and Xbox 360 are registered trademarks or trademarks of Microsoft Corporation in the U.S. and/or other countries. PlayStation is a registered trademark of Sony Computer Entertainment Inc. Wii is a trademark of Nintendo. All other trademarks are the property of their respective owners.

For additional information, please contact:


Tricia Gugler		Jeff Brown
Director, Investor Relations		Vice President, Corporate Communications
650-628-7327		650-628-7922

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in millions, except per share data)


	Three Months Ended March 31,					Year Ended March 31,
	2006			2005		2006			2005^(a)
Net revenue	$	641		$	553	$	2,951		$	3,129
Cost of goods sold		244			233		1,181			1,197

Gross profit		397			320		1,770			1,932

Operating expenses:
Marketing and sales		102			87		431			391
General and administrative		54			66		215			221
Research and development		188			161		758			633
Amortization of intangibles		4			1		7			3
Acquired in-process technology		7			4		8			13
Restructuring charges		17			1		26			2

Total operating expenses		372			320		1,445			1,263

Operating income		25			—		325			669

Interest and other income, net		14			12		64			56

Income before provision for income taxes and minority interest		39			12		389			725
Provision for income taxes		54			4		147			221

Income (loss) before minority interest		(15	)		8		242			504
Minority interest		(1	)		—		(6	)		—

Net income (loss)	$	(16	)	$	8	$	236		$	504

Earnings (loss) per share:
Basic	$	(0.05	)	$	0.02	$	0.78		$	1.65
Diluted	$	(0.05	)	$	0.02	$	0.75		$	1.59

Number of shares used in computation:
Basic		304			309		304			305
Diluted		304			322		314			318

^(a)	Derived from audited financial statements.

Non-GAAP Results (in millions, except per share data)

The following table reconciles the Company’s net income (loss) and diluted earnings per share as presented in its Unaudited Condensed Consolidated Statements of Operations as prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) with its non-GAAP net income and non-GAAP earnings per share. The Company’s non-GAAP net income and non-GAAP earnings per share exclude acquired in-process technology, amortization of intangibles, employee stock-based compensation, restructuring charges, and certain litigation expense. In addition, the Company’s non-GAAP net income and non-GAAP earnings per share also exclude income tax adjustments consisting of the income tax expense associated with the foregoing excluded items and the impact of one-time income tax adjustments.


	Three Months Ended March 31,						Year Ended March 31,
	2006			2005			2006		2005
Net income (loss)	$	(16	)	$	8		$	236	$	504
Acquired in-process technology		7			4			8		13
Amortization of intangibles		8			2			16		5
Employee stock-based compensation		2			2			3		6
Restructuring charges		17			1			26		2
Certain litigation expense		(1	)		21			—		21
Income tax adjustments		26			(8	)		12		(8	)

Non-GAAP net income	$	43		$	30		$	301	$	543

Non-GAAP diluted earnings per share	$	0.14		$	0.09		$	0.96	$	1.71
Number of shares used in non-GAAP diluted earnings per share computation		312			322			314		318

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in millions)


	March 31, 2006		March 31, 2005 ^(a)
ASSETS

Current assets:
Cash, cash equivalents and short-term investments	$	2,272	$	2,958
Marketable equity securities		160		140
Receivables, net of allowances of $232 million and $162 million, respectively		199		296
Inventories		61		62
Deferred income taxes		86		86
Other current assets		234		164

Total current assets		3,012		3,706

Property and equipment, net		392		353
Investment in affiliates		11		10
Goodwill		647		153
Other intangibles, net		232		36
Deferred income taxes		—		19
Other assets		92		93

Total Assets	$	4,386	$	4,370

LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	163	$	134
Accrued and other liabilities		706		673

Total current liabilities		869		807

Other liabilities		97		54

Total liabilities		966		861

Minority interest		12		11

Stockholders’ equity:
Common stock		3		3
Paid-in capital		1,081		1,434
Retained earnings		2,241		2,005
Accumulated other comprehensive income		83		56

Total stockholders’ equity		3,408		3,498

Total Liabilities, Minority Interest and Stockholders’ Equity	$	4,386	$	4,370

^(a)	Derived from audited financial statements.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in millions)


	Three Months Ended March 31,						Year Ended March 31,
	2006			2005			2006			2005 ^(a)
OPERATING ACTIVITIES
Net income (loss)	$	(16	)	$	8		$	236		$	504
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		27			22			95			75
Minority interest		1			—			6			—
Realized (gains) losses on investments and sale of property and equipment		7			2			7			(8	)
Stock-based compensation		2			2			3			6
Tax benefit from exercise of stock options		16			40			133			75
Acquired in-process technology		7			4			8			13
Other operating activities		—			(2	)		—			—
Change in assets and liabilities:
Receivables, net		347			608			104			(80	)
Inventories		8			17			(3	)		(14	)
Other assets		(36	)		(20	)		(71	)		(35	)
Accounts payable		(18	)		(56	)		31			28
Accrued and other liabilities		(13	)		(176	)		39			46
Deferred income taxes		5			25			8			24

Net cash provided by operating activities		337			474			596			634

INVESTING ACTIVITIES
Capital expenditures		(36	)		(44	)		(123	)		(126	)
Proceeds from sale of property and equipment		2			—			2			16
Proceeds from sale of marketable equity securities		—			—			4			4
Purchase of marketable equity securities		—			(90	)		—			(90	)
Purchase of investment in affiliates		—			—			(2	)		(2	)
Proceeds from sale of investment in affiliate		—			—			2			—
Proceeds from maturities and sales of short-term investments		479			99			1,427			996
Purchase of short-term investments		(408	)		(194	)		(755	)		(2,442	)
Acquisition of subsidiary, net of cash acquired		(658	)		(22	)		(661	)		(81	)
Other investing activities		—			1			(2	)		(1	)

Net cash used in investing activities		(621	)		(250	)		(108	)		(1,726	)

FINANCING ACTIVITIES
Proceeds from sale of common stock through employee stock plans and other plans		55			94			206			241
Repurchase and retirement of common stock		—			(10	)		(709	)		(41	)

Net cash provided by (used in) financing activities		55			84			(503	)		200

Effect of foreign exchange on cash and cash equivalents		9			(1	)		(13	)		12

Increase (decrease) in cash and cash equivalents		(220	)		307			(28	)		(880	)
Beginning cash and cash equivalents		1,462			963			1,270			2,150

Ending cash and cash equivalents		1,242			1,270			1,242			1,270
Short-term investments		1,030			1,688			1,030			1,688

Ending cash, cash equivalents and short-term investments	$	2,272		$	2,958		$	2,272		$	2,958

^(a)	Derived from audited financial statements.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

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

(in millions, except per share and percentage data)

GAAP and Non-GAAP Results (in millions, except per share and percentage data)

The following table presents the Company’s Unaudited Condensed Consolidated Statements of Operations as prepared in accordance with GAAP reconciled to its non-GAAP Unaudited Condensed Consolidated Statements of Operations. The Company’s non-GAAP results exclude acquisition accounting expenses (consisting of acquired in-process technology and amortization of intangibles), employee stock-based compensation, restructuring charges, and other charges, if any (consisting of asset impairment charges, certain litigation expense and other-than-temporary impairment of investments in affiliates). In addition, the Company’s non-GAAP results also exclude income tax adjustments consisting of the income tax expense associated with the foregoing excluded items and the impact of one-time income tax adjustments.


	Three Months Ended March 31, 2006													Three Months Ended March 31, 2005
	GAAP Results			Percent of Net Revenue		Total Non-GAAP Adjustments			Non-GAAP Results			Percent of Net Revenue		GAAP Results		Percent of Net Revenue		Total Non-GAAP Adjustments			Non-GAAP Results		Percent of Net Revenue
Net revenue	$	641		100	%	$	—		$	641		100	%	$	553	100	%	$	—		$	553	100	%
Cost of goods sold		244		38	%		(4	)		240		38	%		233	42	%		(1	)		232	42	%

Gross profit		397		62	%		4			401		62	%		320	58	%		1			321	58	%

Operating expenses:
Marketing and sales		102		16	%		—			102		16	%		87	16	%		—			87	16	%
General and administrative		54		8	%		—			54		8	%		66	12	%		(21	)		45	8	%
Research and development		188		29	%		(1	)		187		29	%		161	29	%		(2	)		159	29	%
Amortization of intangibles		4		1	%		(4	)		—		—			1	—			(1	)		—	—
Acquired in-process technology		7		1	%		(7	)		—		—			4	1	%		(4	)		—	—
Restructuring charges		17		3	%		(17	)		—		—			1	—			(1	)		—	—

Total operating expenses		372		58	%		(29	)		343		53	%		320	58	%		(29	)		291	53	%

Operating income		25		4	%		33			58		9	%		—	—			30			30	5	%

Interest and other income, net		14		2	%		—			14		2	%		12	2	%		—			12	2	%

Income before provision for income taxes and minority interest		39		6	%		33			72		11	%		12	2	%		30			42	7	%

Provision for income taxes		54		8	%		(26	)		28		4	%		4	1	%		8			12	2	%

Income (loss) before minority interest		(15	)	(2	)%		59			44		7	%		8	1	%		22			30	5	%

Minority interest		(1	)	—			—			(1	)	—			—	—			—			—	—

Net income (loss)	$	(16	)	(2	)%	$	59		$	43		7	%	$	8	1	%	$	22		$	30	5	%

Earnings (loss) per share:
Basic	$	(0.05	)						$	0.14				$	0.02						$	0.10
Diluted	$	(0.05	)						$	0.14				$	0.02						$	0.09

Number of shares used in computation:
Basic		304								304					309							309
Diluted		304								312					322							322

	Three Months Ended March 31, 2006													Three Months Ended March 31, 2005
	GAAP Results			Percent Change YoY		Total Non- GAAP Adjustments			Non-GAAP Results			Percent Change YoY		GAAP Results		Percent Change YoY		Total Non- GAAP Adjustments			Non-GAAP Results		Percent Change YoY
Cost of goods sold	$	244		5	%	$	(4	)	$	240		3	%	$	233	3	%	$	(1	)	$	232	3	%

Marketing and sales		102		17	%		—			102		17	%		87	30	%		—			87	30	%
General and administrative		54		(18	)%		—			54		20	%		66	43	%		(21	)		45	(2	)%
Research and development		188		17	%		(1	)		187		18	%		161	4	%		(2	)		159	3	%

ELECTRONIC ARTS INC. AND SUBSIDIARIES

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

(in millions, except per share and percentage data)

GAAP and Non-GAAP Results (in millions, except per share and percentage data)


	Year Ended March 31, 2006													Year Ended March 31, 2005
	GAAP Results			Percent of Net Revenue		Total Non-GAAP Adjustments			Non-GAAP Results			Percent of Net Revenue		GAAP Results		Percent of Net Revenue		Total Non-GAAP Adjustments			Non-GAAP Results		Percent of Net Revenue
Net revenue	$	2,951		100	%	$	—		$	2,951		100	%	$	3,129	100	%	$	—		$	3,129	100	%
Cost of goods sold		1,181		40	%		(9	)		1,172		39	%		1,197	38	%		(2	)		1,195	38	%

Gross profit		1,770		60	%		9			1,779		61	%		1,932	62	%		2			1,934	62	%

Operating expenses:
Marketing and sales		431		15	%		—			431		15	%		391	13	%		—			391	13	%
General and administrative		215		7	%		(1	)		214		7	%		221	7	%		(21	)		200	6	%
Research and development		758		26	%		(2	)		756		26	%		633	20	%		(6	)		627	20	%
Amortization of intangibles		7		—			(7	)		—		—			3	—			(3	)		—	—
Acquired in-process technology		8		—			(8	)		—		—			13	1	%		(13	)		—	—
Restructuring charges		26		1	%		(26	)		—		—			2	—			(2	)		—	—

Total operating expenses		1,445		49	%		(44	)		1,401		48	%		1,263	41	%		(45	)		1,218	39	%

Operating income		325		11	%		53			378		13	%		669	21	%		47			716	23	%

Interest and other income, net		64		2	%		—			64		2	%		56	2	%		—			56	2	%

Income before provision for income taxes and minority interest		389		13	%		53			442		15	%		725	23	%		47			772	25	%

Provision for income taxes		147		5	%		(12	)		135		5	%		221	7	%		8			229	8	%

Income before minority interest		242		8	%		65			307		10	%		504	16	%		39			543	17	%

Minority interest		(6	)	—			—			(6	)	—			—	—			—			—	—

Net income	$	236		8	%	$	65		$	301		10	%	$	504	16	%	$	39		$	543	17	%

Earnings per share:
Basic	$	0.78							$	0.99				$	1.65						$	1.78
Diluted	$	0.75							$	0.96				$	1.59						$	1.71

Number of shares used in computation:
Basic		304								304					305							305
Diluted		314								314					318							318

	Year Ended March 31, 2006													Year Ended March 31, 2005
	GAAP Results			Percent Change YoY		Total Non- GAAP Adjustments			Non-GAAP Results			Percent Change YoY		GAAP Results		Percent Change YoY		Total Non- GAAP Adjustments			Non-GAAP Results		Percent Change YoY
Cost of goods sold	$	1,181		(1	)%	$	(9	)	$	1,172		(2	)%	$	1,197	9	%	$	(2	)	$	1,195	8	%

Marketing and sales		431		10	%		—			431		10	%		391	5	%		—			391	6	%
General and administrative		215		(3	)%		(1	)		214		7	%		221	20	%		(21	)		200	8	%
Research and development		758		20	%		(2	)		756		21	%		633	24	%		(6	)		627	23	%

ELECTRONIC ARTS INC. AND SUBSIDIARIES

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

(in millions, except per share data)

GAAP and Non-GAAP Results (in millions, except per share data)


	Three Months Ended March 31, 2006
	GAAP Results			Acquisition Accounting Expenses			Equity Based Compensation			Restructuring Charges			Other⁽¹⁾			Income Tax Adjustments			Total Non-GAAP Adjustments			Non-GAAP Results
Net revenue	$	641		$	—		$	—		$	—		$	—		$	—		$	—		$	641
Cost of goods sold		244			(4	)		—			—			—			—			(4	)		240

Gross profit		397			4			—			—			—			—			4			401

Operating expenses:
Marketing and sales		102			—			—			—			—			—			—			102
General and administrative		54			—			(1	)		—			1			—			—			54
Research and development		188			—			(1	)		—			—			—			(1	)		187
Amortization of intangibles		4			(4	)		—			—			—			—			(4	)		—
Acquired in-process technology		7			(7	)		—			—			—			—			(7	)		—
Restructuring charges		17			—			—			(17	)		—			—			(17	)		—

Total operating expenses		372			(11	)		(2	)		(17	)		1			—			(29	)		343

Operating income		25			15			2			17			(1	)		—			33			58

Interest and other income, net		14			—			—			—			—			—			—			14

Income before provision for income taxes and minority interest		39			15			2			17			(1	)		—			33			72

Provision for income taxes		54			—			—			—			—			(26	)		(26	)		28

Income (loss) before minority interest		(15	)		15			2			17			(1	)		26			59			44

Minority interest		(1	)		—			—			—			—			—			—			(1	)

Net income (loss)	$	(16	)	$	15		$	2		$	17		$	(1	)	$	26		$	59		$	43

Earnings (loss) per share:
Basic	$	(0.05	)																			$	0.14
Diluted	$	(0.05	)																			$	0.14

Number of shares used in computation:
Basic		304																					304
Diluted		304																					312

	Three Months Ended March 31, 2005
	GAAP Results			Acquisition Accounting Expenses			Equity Based Compensation			Restructuring Charges			Other⁽¹⁾			Income Tax Adjustments			Total Non- GAAP Adjustments			Non-GAAP Results
Net revenue	$	553		$	—		$	—		$	—		$	—		$	—		$	—		$	553
Cost of goods sold		233			(1	)		—			—			—			—			(1	)		232

Gross profit		320			1			—			—			—			—			1			321

Operating expenses:
Marketing and sales		87			—			—			—			—			—			—			87
General and administrative		66			—			—			—			(21	)		—			(21	)		45
Research and development		161			—			(2	)		—			—			—			(2	)		159
Amortization of intangibles		1			(1	)		—			—			—			—			(1	)		—
Acquired in-process technology		4			(4	)		—			—			—			—			(4	)		—
Restructuring charges		1			—			—			(1	)		—			—			(1	)		—

Total operating expenses		320			(5	)		(2	)		(1	)		(21	)		—			(29	)		291

Operating income		—			6			2			1			21			—			30			30

Interest and other income, net		12			—			—			—			—			—			—			12

Income before provision for income taxes and minority interest		12			6			2			1			21			—			30			42

Provision for income taxes		4			—			—			—			—			8			8			12

Income before minority interest		8			6			2			1			21			(8	)		22			30

Minority interest		—			—			—			—			—			—			—			—

Net income	$	8		$	6		$	2		$	1		$	21		$	(8	)	$	22		$	30

Earnings per share:
Basic	$	0.02																				$	0.10
Diluted	$	0.02																				$	0.09

Number of shares used in computation:
Basic		309																					309
Diluted		322																					322

⁽¹⁾	Other includes litigation expense of $<1M> and $21M for the three months ended March 31, 2006 and March 31, 2005, respectively.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

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

(in millions, except per share data)

GAAP and Non-GAAP Results (in millions, except per share data)


	Year Ended March 31, 2006
	GAAP Results			Acquisition Accounting Expenses			Equity Based Compensation			Restructuring Charges			Other			Income Tax Adjustments			Total Non-GAAP Adjustments			Non-GAAP Results
Net revenue	$	2,951		$	—		$	—		$	—		$	—		$	—		$	—		$	2,951
Cost of goods sold		1,181			(9	)		—			—			—			—			(9	)		1,172

Gross profit		1,770			9			—			—			—			—			9			1,779

Operating expenses:
Marketing and sales		431			—			—			—			—			—			—			431
General and administrative		215			—			(1	)		—			—			—			(1	)		214
Research and development		758			—			(2	)		—			—			—			(2	)		756
Amortization of intangibles		7			(7	)		—			—			—			—			(7	)		—
Acquired in-process technology		8			(8	)		—			—			—			—			(8	)		—
Restructuring charges		26			—			—			(26	)		—			—			(26	)		—

Total operating expenses		1,445			(15	)		(3	)		(26	)		—			—			(44	)		1,401

Operating income		325			24			3			26			—			—			53			378

Interest and other income, net		64			—			—			—			—			—			—			64

Income before provision for income taxes and minority interest		389			24			3			26			—			—			53			442

Provision for income taxes		147			—			—			—			—			(12	)		(12	)		135

Income before minority interest		242			24			3			26			—			12			65			307

Minority interest		(6	)		—			—			—			—			—			—			(6	)

Net income	$	236		$	24		$	3		$	26		$	—		$	12		$	65		$	301

Earnings per share:
Basic	$	0.78																				$	0.99
Diluted	$	0.75																				$	0.96

Number of shares used in computation:
Basic		304																					304
Diluted		314																					314

	Year Ended March 31, 2005
	GAAP Results			Acquisition Accounting Expenses			Equity Based Compensation			Restructuring Charges			Other⁽¹⁾			Income Tax Adjustments			Total Non-GAAP Adjustments			Non-GAAP Results
Net revenue	$	3,129		$	—		$	—		$	—		$	—		$	—		$	—		$	3,129
Cost of goods sold		1,197			(2	)		—			—			—			—			(2	)		1,195

Gross profit		1,932			2			—			—			—			—			2			1,934

Operating expenses:
Marketing and sales		391			—			—			—			—			—			—			391
General and administrative		221			—			—			—			(21	)		—			(21	)		200
Research and development		633			—			(6	)		—			—			—			(6	)		627
Amortization of intangibles		3			(3	)		—			—			—			—			(3	)		—
Acquired in-process technology		13			(13	)		—			—			—			—			(13	)		—
Restructuring charges		2			—			—			(2	)		—			—			(2	)		—

Total operating expenses		1,263			(16	)		(6	)		(2	)		(21	)		—			(45	)		1,218

Operating income		669			18			6			2			21			—			47			716

Interest and other income, net		56			—			—			—			—			—			—			56

Income before provision for income taxes and minority interest		725			18			6			2			21			—			47			772

Provision for income taxes		221			—			—			—			—			8			8			229

Income before minority interest		504			18			6			2			21			(8	)		39			543

Minority interest		—			—			—			—			—			—			—			—

Net income	$	504		$	18		$	6		$	2		$	21		$	(8	)	$	39		$	543

Earnings per share:
Basic	$	1.65																				$	1.78
Diluted	$	1.59																				$	1.71

Number of shares used in computation:
Basic		305																					305
Diluted		318																					318

⁽¹⁾	Other includes litigation expense of $21M in the year ended March 31, 2005.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

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


	Q4 FY05		Q1 FY06		Q2 FY06		Q3 FY06		Q4 FY06		YOY % Change
CONSOLIDATED FINANCIAL DATA
Net revenue		553		365		675		1,270		641	16%
Net revenue - trailing twelve months (“TTM”)		3,129		3,062		3,021		2,863		2,951	(6)%

Gross profit		320		214		391		768		397	24%
Gross margin - % of net revenue		58%		59%		58%		60%		62%
Gross profit - TTM		1,932		1,891		1,850		1,693		1,770	(8)%
Gross margin - TTM % of net revenue		62%		62%		61%		59%		60%

Operating income (loss)		—		(96)		49		347		25	N/M
Operating income (loss) margin - % of net revenue		—		(26)%		7%		27%		4%
Operating income - TTM		669		548		472		300		325	(51)%
Operating income margin - TTM % of net revenue		21%		18%		16%		10%		11%

Net income (loss)		8		(58)		51		259		(16)	(300)%
Diluted earnings (loss) per share	$	0.02	$	(0.19)	$	0.16	$	0.83	$	(0.05)	(350)%
Net income - TTM		504		422		376		260		236	(53)%
Diluted earnings per share - TTM	$	1.59	$	1.32	$	1.17	$	0.82	$	0.75	(53)%

Non-GAAP operating income (loss) ^(a)		30		(92)		54		359		58	93%
Non-GAAP operating income (loss) margin - % of net revenue		5%		(25)%		8%		28%		9%
Non-GAAP operating income - TTM^(a)		716		599		528		352		378	(47)%
Non-GAAP operating income margin - TTM % of net revenue		23%		20%		17%		12%		13%

Non-GAAP net income (loss) ^(a)		30		(55)		46		268		43	43%
Non-GAAP diluted earnings (loss) per share ^(a)	$	0.09	$	(0.18)	$	0.15	$	0.86	$	0.14	56%
Non-GAAP net income - TTM ^(a)		543		464		412		289		301	(45)%
Non-GAAP diluted earnings per share - TTM ^(a)	$	1.71	$	1.45	$	1.28	$	0.92	$	0.96	(44)%

CASH FLOW DATA
Operating cash flow		474		(31)		12		278		337	(29)%
Operating cash flow - TTM		634		669		592		733		596	(6)%

Capital expenditures		44		33		23		31		36	(18)%
Capital expenditures - TTM		126		133		137		131		123	(2)%

BALANCE SHEET DATA
Cash, cash equivalents and short term investments		2,958		2,573		2,230		2,556		2,272	(23)%
Marketable equity securities		140		176		182		167		160	14%
Receivables, net		296		167		328		567		199	(33)%
Inventories		62		66		74		76		61	(2)%

OTHER
Employees		6,122		6,365		6,608		6,819		7,175	17%
Diluted weighted-average shares		322		308		314		311		304

^(a)	Please see attached Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

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


	Q4 FY05		Q1 FY06		Q2 FY06		Q3 FY06		Q4 FY06		YOY % Change
GEOGRAPHIC REVENUE MIX
North America Revenue	288		184		443		618		340		18%
International Revenue	265		181		232		652		301		14%

Europe Revenue	218		144		191		577		262		20%
Asia Revenue	47		37		41		75		39		(17)%

Net Revenue	553		365		675		1,270		641		16%

GEOGRAPHIC REVENUE MIX - as a % of Net Revenue
North America Revenue	52	%	50	%	66	%	49	%	53	%
International Revenue	48	%	50	%	34	%	51	%	47	%

Europe Revenue	40	%	40	%	28	%	45	%	41	%
Asia Revenue	8	%	10	%	6	%	6	%	6	%

*Net Revenue*	*100*	%	*100*	%	*100*	%	*100*	%	*100*	%

PLATFORM REVENUE MIX
Sony PlayStation 2	196		117		304		495		211		8%
Xbox	83		44		136		152		68		(18)%
Xbox 360	—		—		—		76		64		N/M
Nintendo GameCube	37		22		27		69		17		(54)%
Other consoles	1		—		—		1		—		(100)%

Total Consoles	317		183		467		793		360		14%

PC	85		74		91		148		104		22%

PSP	18		33		45		120		54		200%
Nintendo DS	7		12		8		36		11		57%
Game Boy Advance	9		6		7		35		8		(11)%
Cellular Handsets	—		1		2		1		15		N/M

Total Mobility	34		52		62		192		88		159%

Co-publishing and Distribution	89		30		32		99		52		(42)%

Subscription Services	16		15		14		16		17		6%
Licensing, Advertising & Other	12		11		9		22		20		67%

Total Internet Services, Licensing & Other	28		26		23		38		37		32%

Net Revenue	553		365		675		1,270		641		16%

PLATFORM REVENUE MIX - as a % of Net Revenue
Sony PlayStation 2	36	%	32	%	45	%	39	%	33	%
Xbox	15	%	12	%	20	%	12	%	10	%
Xbox 360	—		—		—		6	%	10	%
Nintendo GameCube	7	%	6	%	4	%	5	%	3	%
Other consoles	—		—		—		—		—

*Total Consoles*	58	%	50	%	69	%	62	%	56	%

PC	15	%	21	%	14	%	12	%	16	%

PSP	3	%	9	%	7	%	9	%	9	%
Nintendo DS	1	%	3	%	1	%	3	%	2	%
Game Boy Advance	2	%	2	%	1	%	3	%	1	%
Cellular Handsets	—		—		—		—		2	%

*Total Mobility*	6	%	14	%	9	%	15	%	14	%

*Co-publishing and Distribution*	16	%	8	%	5	%	8	%	8	%

Subscription Services	3	%	4	%	2	%	1	%	3	%
Licensing, Advertising & Other	2	%	3	%	1	%	2	%	3	%

*Total Internet Services, Licensing & Other*	5	%	7	%	3	%	3	%	6	%

*Net Revenue*	*100*	%	*100*	%	*100*	%	*100*	%	*100*	%

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

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


	Q4 FY05	Q1 FY06	Q2 FY06	Q3 FY06	Q4 FY06	YOY % Change
Platform SKU Release Mix
Sony PlayStation 2	6	3	9	8	8	33%
Xbox	6	3	9	8	8	33%
Xbox 360	—	—	—	5	2	N/M
Nintendo GameCube	5	2	6	5	1	(80)%
Other consoles	—	—	—	—	—	N/M

Total Consoles	17	8	24	26	19	*12%*

PC	5	2	6	7	7	*40%*

PSP	3	3	3	8	2	(33)%
Nintendo DS	—	2	2	5	1	N/M
Game Boy Advance	—	1	2	3	—	N/M

Total Mobility	3	6	7	16	3	—


Total SKUs	25	16	37	49	29	*16%*

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Schedule of Earnings Adjusted for Stock-Based Compensation

(in millions, except per share data)

Had the Company’s stock-based compensation plans been measured on the estimated fair value at the grant dates in accordance with the provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, the Company estimates that its reported net income (loss) and net earnings (loss) per share would have been the pro forma amounts indicated below:


	Three Months Ended March 31,						Year Ended March 31,
	2006			2005			2006			2005
Net income (loss) - as reported	$	(16	)	$	8		$	236		$	504

Stock-based compensation		(13	)		(19	)		(83	)		(79	)


Net income (loss) - pro forma	$	(29	)	$	(11	)	$	153		$	425

Net earnings (loss) per share:
As reported - basic	$	(0.05	)	$	0.02		$	0.78		$	1.65

Pro forma - basic	$	(0.10	)	$	(0.04	)	$	0.50		$	1.39

As reported - diluted	$	(0.05	)	$	0.02		$	0.75		$	1.59

Pro forma - diluted	$	(0.10	)	$	(0.04	)	$	0.49		$	1.35

Note: Commencing April 1, 2006, the Company will adopt SFAS 123R and accordingly begin to expense stock-based compensation in its Condensed Consolidated Statement of Operations.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Fact Sheet for Q4 Fiscal 2006


Q4 Product Releases		Platform
• Arena Football^™		PlayStation^®2
• BLACK^™		PlayStation 2
• FIFA Street 2		PlayStation 2
• EA SPORTS^™ Fight Night Round 3		PlayStation 2
• MVP^™ 06 NCAA^® Baseball		PlayStation 2
• EA SPORTS^™ Rugby 06		PlayStation 2
• The Godfather^™ The Game		PlayStation 2
• The Godfather The Game Collectors Edition		PlayStation 2
• Arena Football		Xbox^®
• BLACK		Xbox
• FIFA Street 2		Xbox
• EA SPORT Fight Night Round 3		Xbox
• MVP 06 NCAA Baseball		Xbox
• EA SPORTS Rugby 06		Xbox
• The Godfather The Game		Xbox
• The Godfather The Game Collectors Edition		Xbox
• Burnout^™ Revenge		XBOX 360^™
• EA SPORT Fight Night Round 3		XBOX 360
• FIFA Street 2		Nintendo GameCube^™
• Battlefield 2^™: Euro Force^™ Booster Pack		PC
• Command & Conquer^™ The First Decade		PC
• The Lord of the Rings^™, The Battle for Middle-earth^™ II Collectors Edition		PC
• The Lord of the Rings, The Battle for Middle-earth II		PC
• EA SPORTS Rugby 06		PC
• The Godfather The Game		PC
• The Sims^™ 2 Open for Business		PC
• FIFA Street 2		PSP^™
• EA SPORT Fight Night Round 3		PSP
• FIFA Street 2		Nintendo DS^™

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

• Day of Defeat^™ Source^™**		PC

**Distribution Deal

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