Electronic Arts 1999 Annual Report Download - page 16

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North America net revenues increased by 39% to $519,423,000 in fiscal 1998 as compared to $372,616,000 in fiscal
1997. The increase was mainly attributable to strong growth in PlayStation and N64 systems as well as AL product
revenues partially offset by the decline in 16-bit cartridge and Saturn product sales. Net revenues from PlayStation
and N64 products increased $172,496,000 while sales of 16-bit cartridge and Saturn products decreased $62,671,000
in comparison to the prior year. North America AL sales increased $34,355,000, compared to the prior year.
International net revenues increased by 30% to $389,429,000, or 43% of consolidated fiscal 1998 net revenues, compared
to $300,412,000, or 45% of the fiscal 1997 total. The increase in international revenues was due to higher worldwide sales
of PlayStation products and increased sales of PC-CD, N64 and AL products in Europe and Asia Pacific. This was partially
offset by a decrease in 32-bit product sales in Japan, international 16-bit video game cartridge revenues and licensing of
our products.
1998 1997 % change
Cost of goods sold $480,766,000 $ 328,943,000 46.2
As a percentage of net revenues 52.9% 48.9%
Cost of goods sold as a percentage of revenues in fiscal 1998 reflected increased product costs associated with increased
sales of lower margin affiliated label and N64 titles, a decrease in higher margin PC-CD sales as a proportion of total
net revenues and higher professional and celebrity royalties on CD-video game and PC-CD titles as well as higher
manufacturing royalties on CD-video game titles.
Operating Expenses 1998 1997 % change
Marketing and sales $128,308,000 $ 102,072,000 25.7
As a percentage of net revenues 14.1% 15.2%
General and administrative $ 57,838,000 $ 48,489,000 19.3
As a percentage of net revenues 6.4% 7.2%
Research and development $146,199,000 $ 130,755,000 11.8
As a percentage of net revenues 16.1% 19.4%
The increase in marketing and sales expenses was primarily attributable to increased television and print advertising to
support new releases and increased cooperative advertising associated with higher revenues as compared to the prior
year. Increases in marketing and sales expenses were also due to additional headcount related to the continued expansion
of our worldwide distribution business.
The increase in general and administrative expenses was primarily due to an increase in payroll and occupancy costs due
to the opening of additional international offices and additional depreciation related to the installation of new management
information systems worldwide. This increase was partially offset by lower spending in Japan.
The increase in marketing and sales as well as general and administrative expenses were partially offset by savings
attributable to the integration of Maxis in the second quarter of fiscal 1998.
The increase in research and development expenses was due to additional headcount related expenses in North America
and Europe attributable to increased in-house development capacity, higher development costs per title and additional
depreciation of computer equipment.
We released a total of 71 new products in fiscal 1998 compared to 68 in fiscal 1997.