Electronic Arts 2000 Annual Report Download - page 23

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CHARGE FOR ACQUIRED IN-PROCESS TECHNOLOGY
FISCAL 2000:
•In connection with the acquisition of Kesmai by EA.com in the fourth fiscal quarter of fiscal 2000, we allocated and
expensed $3,869,000 of the purchase price to acquired in-process technology. Kesmai had various projects in progress at
the time of the acquisition. As of the acquisition date, costs to complete Kesmai projects acquired were expected to be
approximately $10,550,000 in future periods. We believe there have been no significant changes to these estimates as of
March 31, 2000. We currently expect to complete the development of these projects at various dates through fiscal 2002
and to publish the projects upon completion. In conjunction with the merger of Kesmai, we accrued approximately
$200,000 related to direct transaction costs and other related costs. At March 31, 2000 there were $133,000 in accruals
remaining related to these items.
•In connection with the acquisitions of two development companies by EA Core, made in the 2nd and 4th quarters of fiscal
2000, we allocated and expensed $2,670,000 of the purchase price to acquired in-process technology.
FISCAL 1999:
•In connection with the acquisition of Westwood by EA Core in September 1998, we allocated and expensed $41,836,000 of
the purchase price to acquired in-process technology.
•Additionally, in connection with the acquisition of two software development companies by EA Core, in the first quarter of
fiscal 1999, we incurred a total charge of $2,279,000 for acquired in-process technology.
These charges were made after we concluded that the in-process technology had not reached technological feasibility and
had no alternative future use after taking into consideration the potential for usage of the software in different products and
resale of the software.
AMORTIZATION OF INTANGIBLES The amortization of intangibles results primarily from the acquisitions of Westwood, Kesmai,
ABC Software and other acquisitions made in fiscal 2000. Amortization of intangibles was $10,866,000 for EA Core and
$1,123,000 for EA.com.
INTEREST AND OTHER INCOME, NET Interest and other income, net, increased in absolute dollars primarily due to realized
gains on sales of marketable securities and the sale of our interest in an affiliate. Those gains were partially offset by a write-
off of a note receivable from an affiliate in the current year as well as a gain on sale of land recognized in the prior year.
INCOME TAXES Our effective tax rate was 31.0% for fiscal 2000 and 38.3% for fiscal 1999. The effective tax rate was lower than
the comparable prior year period (excluding the effect of the one-time charges in the prior year) primarily as a result of a higher
portion of international income for fiscal 2000 subject to a lower foreign tax rate as compared to the prior year. 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 fiscal 1999 would have
been 32.0%.
EA 2000 AR
21
MD&A