Electronic Arts 2000 Annual Report Download - page 59

In management’s opinion, the unaudited pro forma combined results of operations are not indicative of the actual results
that would have occurred had the acquisition been consummated at the beginning of fiscal 1998 or at the beginning of fis-
cal 1999 or of future operations of the combined companies under the ownership and management of the Company.
(C) ABC SOFTWARE In July 1998, the Company acquired ABC Software AG and ABC Software GmbH (collectively “ABC”), inde-
pendent distributors of entertainment, edutainment and application software in Switzerland and Austria, respectively, for
approximately $9,466,000 in cash (net of cash acquired of $5,099,000) and $570,000 in other consideration. The transaction
has been accounted for under the purchase method. The excess purchase price over the fair value of the net tangible assets
acquired of approximately $7,377,000 was allocated to goodwill and is being amortized over 7 years.
(D) SQUARE CO., LTD. In May 1998, the Company and Square Co., Ltd. (“Square”), a leading developer and publisher of enter-
tainment software in Japan, completed the formation of two new joint ventures in North America and Japan. In North America,
the companies formed Square Electronic Arts, LLC (“Square EA”), which has exclusive publishing rights in North America for
future interactive entertainment titles created by Square. Additionally, the Company has the exclusive right to distribute in
North America products published by this joint venture. The Company contributed $3,000,000 and owns a 30% minority inter-
est in this joint venture while Square owns 70%. This joint venture is accounted for under the equity method.
In Japan, the companies established Electronic Arts Square KK (“EA Square KK”), which will localize and publish in Japan the
Company’s properties originally created in North America and Europe, as well as develop and publish original video games in
Japan. The Company contributed cash and has a 70% majority ownership interest, while Square contributed cash and owns
30%. Accordingly, the assets, liabilities and results of operations for EA Square KK are included in the Company’s Consolidated
Balance Sheets and Results of Operations since June 1, 1998, the date of formation. Square’s 30% interest in EA Square KK has
been reflected as “Minority interest in consolidated joint venture” on the Company’s Consolidated Financial Statements.
(E) MAXIS, INC. On July 25, 1997, the Company completed a merger with Maxis, Inc. (“Maxis”), a California-based interactive
software developer. Under the transaction, approximately 4.1 million shares of Electronic Arts’ stock were exchanged for all out-
standing Maxis common stock. The transaction was accounted for as a pooling of interests. The accompanying financial state-
ments, notes and analyses have been restated for all periods presented to reflect this transaction.
In conjunction with the merger of Maxis, the Company recorded costs of $10,792,000. This charge included direct transaction
fees for investment bankers, attorneys, accountants, and other related costs of approximately $2,781,000 and costs associated
with integrating the operations of the two companies of approximately $8,011,000. Included in the integration costs were
redundant facility costs, severance payments, equipment abandonment costs and other asset write downs, contract termina-
tion charges and other related expenses. Of the total merger costs, approximately $5,185,000 related to cash expenditures
while approximately $5,607,000 related to noncash charges. At March 31, 2000, there were no accruals remaining related to
these merger related costs.
(F) CREATIVE WONDERS, LLC In December 1997, the Company completed the sale of its 50% ownership interest in Creative
Wonders, LLC, a joint venture company formed with the Walt Disney Company for $16,750,000 in cash. The Company recog-
nized a gain of $12,625,000, which is included in interest and other income. Prior to the sale, the Company distributed children’s
interactive titles published and sold by the joint venture into the retail channel. The investment was accounted for under the
equity method prior to sale.
EA 2000 AR
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS