Electronic Arts 2001 Annual Report Download - page 59

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ELECTRONIC ARTS
57
The following table reflects unaudited pro forma combined results of operations of the Company and Kesmai on
the basis that the acquisition had taken place on April 1, 1998 (in thousands, except per share data):
Years Ended March 31, 2000 1999
Net revenues $ 1,421,313 $ 1,223,444
Net income $ 113,996 $ 64,237
Net income per share – basic $ 0.91 $ 0.53
Net income per share – diluted $ 0.86 $ 0.51
Number of shares used in computation – basic 125,660 121,495
Number of shares used in computation – diluted 132,742 126,545
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 1999 or
of future operations of the combined companies under the ownership and management of the Company.
(c) Westwood Studios
In September 1998, the Company completed the acquisition of Westwood Studios, Inc. and
certain assets of the Irvine, California – based Virgin Studio (collectively “Westwood”) for approximately $122,688,000
in cash, including transaction expenses. The adjusted allocation of the excess purchase price over the net tangible
liabilities assumed was $128,573,000 of which, based on management’s estimates prepared in conjunction with a
third party valuation consultant, $41,836,000 was allocated to purchased in-process research and development
and $86,737,000 was allocated to other intangible assets. Amounts allocated to other intangibles include franchise
trade names of $32,357,000, existing technology of $6,510,000, workforces of $1,680,000 and other goodwill of
$46,190,000 and are being amortized over lives ranging from two to twelve years. Purchased in-process research
and development includes the value of products in the development stage that are not considered to have reached
technological feasibility or to have alternative future use. Accordingly, this non-recurring item was expensed in
the Consolidated Statement of Operations upon consummation of the acquisition. The non-recurring charge for in-
process research and development reduced diluted earnings per share by approximately $0.30 in the fiscal year
1999. The results of the operations of Westwood and the estimated fair value of assets acquired and liabilities
assumed are included in the Company’s financial statements from the date of acquisition.
In conjunction with the merger of Westwood, the Company accrued approximately $1,500,000 related to direct
transaction costs and other related accruals. At March 31, 2001, there were $500,000 in accruals remaining related
to these items.
In connection with the Westwood acquisition, the purchase price has been allocated to the assets and liabilities
assumed based upon the fair values on the date of acquisition, as follows (in thousands):
Current assets $ 4,500
Property and equipment 3,257
In-process technology 41,836
Other intangible assets 86,737
Current liabilities (13,642)
Total purchase price $ 122,688