Electronic Arts 2000 Annual Report Download - page 32

LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, our working capital was $440,021,000 compared to $333,256,000 at March 31, 1999. Cash, cash equiva-
lents and short-term investments increased by approximately $26,982,000 in fiscal 2000. We generated $45,336,000 of cash
from operations in fiscal 2000 which was reduced by a payment of $36,000,000 to AOL as discussed below. In addition,
$85,589,000 was provided through the sale of equity securities under our stock plans and $20,000,000 was provided through
the sale of shares of Class B common stock and warrants to AOL.
Reserves for bad debts and sales returns decreased from $72,850,000 at March 31, 1999 to $65,067,000 at March 31, 2000.
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 2000, we invested $22,500,000 in cash for the acquisition of Kesmai and $22,096,000 for other acquisitions
made during the year. In addition, we invested approximately $37,400,000 for new facilities in Europe and Canada and
$61,400,000 in computer equipment worldwide.
Our principal source of liquidity is $339,804,000 in cash, cash equivalents and short-term investments. Management
believes the existing cash, cash equivalents, short-term investments, marketable securities and cash generated from operations
will be sufficient to meet cash and investment requirements of Electronic Arts and EA.com for the next twelve months and the
foreseeable future.
Included in the amounts above is the following for the EA.com business:
•To date EA.com has been funded solely by Electronic Arts (including proceeds from the sale of stock to AOL in the amount of
$20,000,000). This funding has been accounted for as capital contributions from Electronic Arts. Excess cash generated from
operations is transferred to Electronic Arts, and has been accounted for as a return of capital. We anticipate these funding
procedures will continue in the near-term. However, Electronic Arts may, at its discretion, provide funds to EA.com under a
debt arrangement, instead of treating such funding as a capital contribution.
•During fiscal 2000 EA.com used $68,329,000 of cash in operations (including payments to AOL of approximately
$36,000,000), $37,605,000 in capital expenditures for computer equipment, network infrastructure, internal use software
and related third party software, $1,499,000 for an investment in a 3rd party developer, $32,539,000 for the acquisition of
Kesmai and another acquisition, offset by $140,410,000 provided through capital contributions from Electronic Arts.
•During fiscal 1999, EA.com used $9,086,000 of cash in operations and $1,881,000 in capital expenditures for computer
equipment, network infrastructure and related software, offset by $10,967,000 provided through the capital contribution
from Electronic Arts.
As required by Statement of Position 98-1 “Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use”
issued by the American Institute of Certified Public Accountants, EA.com has capitalized consulting, hardware,
software and direct payroll-related costs associated with the implementation of customized internal-use software. These costs
relate to game site application and infrastructure design and development, as well as costs relating to providing customer
account management and building in e-Commerce functionality and interfaces. As of March 31, 2000, EA.com has capitalized
approximately $26,318,000 of these costs. EA.com expects to incur additional costs in the next year in connection with their
effort to build and support the game sites at launch.
MD&A
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