Electronic Arts 2000 Annual Report Download - page 28

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The increase in net revenues for EA.com for fiscal 1999 as compared to fiscal 1998 was mainly attributable to the following:
•Higher online revenues from subscriptions for
Ultima Online: The Second Age,
the upgrade to
Ultima Online.
•Mitigated by lower product revenues from
Ultima Online
for fiscal 1999 as compared to fiscal 1998.
The following table presents pro-forma results of operations allocating taxes between EA Core and EA.com. Consolidated
taxes have been allocated to EA Core and EA.com on a pro rata basis based on the consolidated effective tax rates, thereby
giving EA.com the tax benefit of its losses which is utilized by the consolidated group. Such tax benefit could not be recognized
by EA.com on a stand-alone basis. The sum of tax expense and tax benefit for EA Core and EA.com is the same as consolidated
tax expense. This presentation represents how management analyzes each segment of the business (in thousands):
EA Core Adjustments and
Year Ended March 31, 1999 (excl. EA.com) EA.com Eliminations Electronic Arts
Income (loss) before provision for income
taxes and minority interest $ 127,338 $ (8,880) $ – $ 118,458
Provision (benefit) for income taxes 48,256 (2,842) – 45,414
Income (loss) before minority interest 79,082 (6,038) – 73,044
Minority interest in consolidated joint venture (172) – – (172)
Net income (loss) $ 78,910 $ (6,038) $ – $ 72,872
EA Core Adjustments and
Year Ended March 31, 1998 (excl. EA.com) EA.com Eliminations Electronic Arts
Income (loss) before provision for income
taxes and minority interest $ 111,246 $ (2,986) $ – $ 108,260
Provision (benefit) for income taxes 36,711 (985) – 35,726
Income (loss) before minority interest 74,535 (2,001) – 72,534
Minority interest in consolidated joint venture 28 – – 28
Net income (loss) $ 74,563 $ (2,001) $ – $ 72,562
Costs and Expenses, Interest and Other Income, Net, Income Taxes and Net Income
Information about our costs and expenses, interest and other income, net, income taxes and net income for fiscal 1999 and
1998 is presented below:
Percent of Net Revenues
1999 1998
Cost of goods sold 51.4 % 52.9 %
Marketing and sales 13.4 14.1
General and administrative 6.2 6.4
Research and development (includes network development and support) 16.3 16.0
Charge for acquired in-process technology 3.6 0.2
Amortization of intangibles 0.5 –
Merger costs –1.2
Interest and other income, net 1.1 2.7
Income taxes – effective tax rate 38.3 33.0
Net income 6.0 % 8.0 %
MD&A
26