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EA 2002 AR 23
The following table shows our pro forma results reconciled to the Generally Accepted Accounting Principles
(“GAAP”) Consolidated Statements of Operations. Our pro forma results do not include unusual events or
transactions, such as restructuring and asset impairment costs and charge for acquired in-process technol-
ogy, and also excludes amortization of intangibles and non-cash stock compensation charges. In addition,
income taxes are allocated to EA Core and EA.com at the consolidated effective tax rate (31%) on a pro
rata basis.We believe the disclosure of the pro forma net income (loss) and operating profit (loss), which
excludes the items noted in the table below, helps investors more meaningfully evaluate the results of our
ongoing operations. However, we urge investors to carefully review the GAAP financial information included
as part of this Annual Report and compare GAAP financial information with the pro forma financial results
disclosed in this Annual Report.
Reconciliation of GAAP to Pro Forma net income (loss) (in thousands):
FISCAL YEAR ENDED MARCH 31, 2002 MARCH 31, 2001
EA CORE EA CORE
(EXCLUDING ELECTRONIC (EXCLUDING ELECTRONIC
EA.COM) EA.COM ARTS EA.COM) EA.COM ARTS
Net income (loss) - GAAP $124,256 $ (22,747) $ 101,509 $11,944 $ (23,026) $ (11,082)
Net loss related to retained
interest in EA.com (note 1) 128,900 (128,900) — 130,478 (130,478) —
Pro forma allocation of
income taxes (note 2) (47,011) 47,011 — (47,586) 47,586 —
Pro forma net income (loss) 206,145 (104,636) 101,509 94,836 (105,918) (11,082)
Amortization of intangibles 12,888 12,530 25,418 12,829 6,494 19,323
Restructuring and asset
impairment charges —20,303 20,303 ———
Charge for acquired
in-process technology ——— —2,719 2,719
Non-cash stock compensation
for non-employees (note 3) 2,677 422 3,099 2,479 228 2,707
Income tax effect on the
above items (4,825) (10,309) (15,134) (4,745) (2,927) (7,672)
Pro forma net income (loss)
excluding the items above $216,885 $ (81,690) $ 135,195 $105,399 $ (99,404) $ 5,995
1) EA Core maintains approximately 85% retained interest in EA.com and is reflected in the Net income - GAAP for EA Core.The pro forma statements
exclude the retained interest allocation.
2) The provision for income taxes was allocated between EA Core and EA.com at the worldwide effective tax rate (31%) based on each segment's pro rata
share of income or loss.The sum of tax provision for EA Core and EA.com is the same as consolidated tax provision.
3) Total non-cash stock compensation charges are included in Research and Development in GAAP financials, and excluded in the pro forma.
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 and other organizations and independent software developers, manufacturing
royalties, expense for defective products and operations expense. Cost of goods sold for our subscription
business consists primarily of data center and bandwidth costs associated with hosting our websites, credit
card fees and royalties for use of EA and third party properties. Cost of goods sold for our advertising business
consists primarily of ad serving costs.
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 fee (“Carriage
Fee”), which began with the launch of EA.com in October 2000.The Carriage Fee is being amortized
straight-line over the term of the AOL agreement.