Electronic Arts 1999 Annual Report Download - page 18

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1998 1997 % change
Net income $ 72,562,000 $ 51,327,000 41.4
As a percentage of net revenues 8.0% 7.6%
The increase in net income was due to the growth in revenues and gross margins offset by higher operating expenses.
The impact of the gain on sale of Creative Wonders, LLC was offset by the charge for acquired in-process technology and
merger costs.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, our working capital was $333,256,000 compared to $408,098,000 at March 31, 1998. Cash, cash
equivalents and short-term investments decreased by approximately $61,738,000 in fiscal 1999. We generated $150,768,000
of cash from operations in fiscal 1999. In addition, $30,577,000 was provided through the sale of equity securities under our
stock plans.
Reserves for bad debts and sales returns increased from $51,575,000 at March 31, 1998 to $72,850,000 at March 31, 1999.
Reserves have been charged for returns of product and price protection credits issued for products sold in prior periods.
Management believes these reserves are adequate based on historical experience and its current estimate of potential
returns and allowances.
During fiscal 1999, we invested $122,688,000 in cash for the acquisition of Westwood Studios, Inc., $9,466,000 for the
acquisition of ABC Software, approximately $7,800,000 for investment in affiliates and approximately $8,000,000 in long-
term licenses. In addition, we invested approximately $78,800,000 for new facilities in Europe and Canada and $17,800,000
in computer equipment worldwide. In addition, we repurchased 222,500 shares of our common stock for approximately
$9,001,000.
Our principal source of liquidity is $312,822,000 in cash, cash equivalents and short-term investments. Management
believes the existing cash, cash equivalents, short-term investments, marketable securities and cash generated from opera-
tions will be sufficient to meet cash and investment requirements for the next twelve months and the foreseeable future.
YEAR 2000 READINESS DISCLOSURE
Background of Year 2000 Issues Many currently installed computer systems and software products are
unable to distinguish between twentieth century dates and twenty-first century dates because such systems may have been
developed using two digits rather than four to determine the applicable year. For example, computer programs that have
date-sensitive software may recognize a date using “00” as the year 1900 rather than the year 2000. This error could result
in system failures or miscalculations causing disruptions of operations, including, among other things, a temporary inability to
process transactions, send invoices or engage in similar normal business activities. As a result, many companies’ software
and computer systems may need to be upgraded or replaced to comply with such “Year 2000” requirements.