Electronic Arts 1999 Annual Report Download - page 14

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1999 1998 % change
Interest and other income, net $ 13,180,000 $ 24,811,000 (46.9)
As a percentage of net revenues 1.1% 2.7%
The decrease in interest and other income, net, was primarily attributable to the sale of our 50% ownership interest in
Creative Wonders, LLC in December 1997. The sale resulted in a gain in the prior year of $12,625,000.
1999 1998 % change
Income taxes $ 45,414,000 $ 35,726,000 27.1
Effective tax rate 38.3% 33.0%
Our effective tax rate for fiscal 1999 was negatively affected as there was no tax benefit recorded for a portion of the
charges related to the acquired in-process technology. Excluding the effect of these charges, the effective tax rate for the
current fiscal year would have been 32.0% as compared to a 33.0% tax rate in the corresponding prior year periods. The
lower rate of 32.0% results primarily from a higher portion of international income subject to a lower foreign tax rate as
compared to the prior year and an increase in the federal research and experimental credit.
1999 1998 % change
Minority interest in consolidated
joint venture $ (172,000) $ 28,000 N/M
As a percentage of net revenues 0.0% 0.0%
In the first quarter of fiscal 1999, we formed EA Square KK which is seventy percent owned by us and thirty percent
owned by Square Co. Ltd. (“Square”), a leading developer and publisher of entertainment software in Japan. Minority
interest for fiscal 1999 represents Square’s 30% interest in the net income of EA Square KK.
For fiscal 1998, the minority interest represented the 35% interest in Electronic Arts Victor, Inc. (“EAV”) owned by Victor
Entertainment Industries, Inc. (“VEI”). We acquired the remaining 35% minority ownership interest in EAV held by VEI
in December 1997.
1999 1998 % change
Net income $ 72,872,000 $ 72,562,000 0.4
As a percentage of net revenues 6.0% 8.0%
Reported net income was flat due to the one-time charges related to acquisitions offsetting significantly higher operating
income. The increase in net income, excluding one-time charges, was due to higher revenues and gross profits, offset
by higher operating expenses. For fiscal 1998, net income included a one-time gain on sale of Creative Wonders, LLC in
the amount of $8,459,000, net of taxes, offset by Maxis merger costs and a charge for acquired in-process developments
of $8,236,000, net of taxes. For fiscal 1999, net income included one-time charges for acquired in-process technology of
$37,506,000, net of taxes. Excluding one-time items in both years, as noted above, net income increased to $110,378,000
from $72,339,000, or 53% over the prior year.