Electronic Arts 2001 Annual Report Download - page 21

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ELECTRONIC ARTS
19
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 effec-
tive 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 and tax benefit. This presentation represents how
management analyzes each segment of the business (in thousands):
EA Core Adjustments and
Year Ended March 31, 2001 (excl. EA.com) EA.com Eliminations Electronic Arts
Income (loss) before provision for
(benefit from) income taxes and
minority interest $ 140,074 $ (153,504) $ – $ (13,430)
Provision for (benefit from) income taxes 43,423 (47,586) – (4,163)
Income (loss) before minority interest 96,651 (105,918) – (9,267)
Minority interest in consolidated joint venture (1,815) – – (1,815)
Net income (loss) $ 94,836 $ (105,918) $ – $ (11,082)
EA Core Adjustments and
Year Ended March 31, 2000 (excl. EA.com) EA.com Eliminations Electronic Arts
Income (loss) before provision for
(benefit from) income taxes and
minority interest $ 224,404 $ (54,590) $ – $ 169,814
Provision for (benefit from) income taxes 69,565 (16,923) – 52,642
Income (loss) before minority interest 154,839 (37,667) – 117,172
Minority interest in consolidated joint venture (421) – – (421)
Net income (loss) $ 154,418 $ (37,667) $ – $ 116,751
Costs and Expenses, Interest and Other Income, Net, Income Taxes
and Net Income (Loss) for both EA Core and EA.com Segments
Cost of Goods Sold
Cost of goods sold for our packaged goods business consists of actual product costs, royalties
expense for celebrities, professional sports organizations and independent software developers, manufacturing
royalties, expense for defective products and operations expense. Cost of goods sold for our subscription busi-
ness consists primarily of data center and bandwidth costs associated with hosting our websites, credit card fees
and intercompany royalties for use of EA properties for subscription games.
Marketing and Sales
Marketing and sales expenses consist of personnel related costs, advertising and marketing
and promotional expenses. In addition, marketing and sales includes the amortization of the AOL carriage and rev-
enue share fees (now referred to as “Carriage Fee”), which began with the launch of EA.com in October. The
Carriage Fee will be amortized straight line over the term of the AOL agreement.
General and Administrative
General and administrative expenses consist of personnel and related expenses of
executive and administrative staff, fees for professional services such as legal and accounting and allowances for
bad debts.