Electronic Arts 2005 Annual Report Download - page 150

Due to our Ñscal 2003 restructuring related to EA.com, (see Note 6 of the Notes to Consolidated Financial
Statements), Class B net income per share reporting is no longer required. The Diluted EPS calculation for
common stock, presented above for 2003, included the potential dilution from the conversion of Class B
common stock to common stock in the event that an initial public oÅering for Class B common stock did not
occur. Net income used for the calculation of Diluted EPS for common stock was $317 million for the Ñscal
year ended March 31, 2003. This net income included the remaining interest in EA.com (100 percent of
EA.com losses) which was directly attributable to outstanding Class B shares owned by third parties, which
would have been included in the common stock EPS calculation in the event that an initial public oÅering for
Class B common stock did not occur.
Due to the net loss attributable for the year ended March 31, 2003 on a diluted basis to Class B Stockholders,
all stock options have been excluded from the Diluted EPS calculation as their inclusion would have been
antidilutive. Had net income been reported for this period, an additional 1 million shares would have been
added to diluted potential common stock for Class B common stock for the year ended March 31, 2003.
(16) RELATED PARTY TRANSACTIONS
On June 24, 2002, we hired Warren Jenson as our Chief Financial and Administrative OÇcer and agreed to
loan him $4,000,000, to be forgiven over four years based on his continuing employment. The loan does not
bear interest. On June 24, 2004, pursuant to the terms of the loan agreement, we forgave two million dollars of
the loan and provided Mr. Jenson approximately $1.6 million to oÅset the tax implications of the forgiveness.
As of March 31, 2005, the remaining outstanding loan balance was $2,000,000, which will be forgiven on
June 24, 2006, provided that Mr. Jenson has not voluntarily resigned his employment with us or been
terminated for cause prior to that time. No additional funds will be provided to oÅset the tax implications of
the forgiveness of the remaining two million dollars.
In April 2002, we agreed to pay certain taxes incurred by Bruce McMillan, Executive Vice President, Group
Studio Head of EA Canada, arising from his temporary employment with us in the United Kingdom.
Mr. McMillan agreed to reimburse us for those payments upon receipt of his corresponding tax refund from
the Canadian taxing authorities. We subsequently paid approximately $168,704 and $32,931 in October 2002
and April 2003, respectively, to the UK Inland Revenue for taxes incurred by Mr. McMillan. In May 2003,
Mr. McMillan became an executive oÇcer of Electronic Arts. As of January 22, 2004, Mr. McMillan had
repaid us the entire amount of the tax payments we made on his behalf.
(17) SEGMENT INFORMATION
SFAS No. 131, ""Disclosures About Segments of an Enterprise and Related Information'', establishes
standards for the reporting by public business enterprises of information about product lines, geographic areas
and major customers. The method for determining what information to report is based on the way that
management organizes our operating segments for making operational decisions and assessments of Ñnancial
performance.
Our chief operating decision maker is considered to be our Chief Executive OÇcer (""CEO''). The CEO
reviews Ñnancial information presented on a consolidated basis accompanied by disaggregated information
about revenue by geographic region and by product lines for purposes of making operating decisions and
assessing Ñnancial performance.
In Ñscal 2003, we operated and reviewed our business in two business segments:
‚ EA Core business segment: creation, marketing and distribution of entertainment software.
‚ EA.com business segment: creation, marketing and distribution of entertainment software which can
be played or sold online, ongoing management of subscriptions of online games and web site
advertising.
In March 2003, we consolidated the operations of the EA.com business segment into our core business. We
consider online functionality to be integral to our existing and future products. Accordingly, beginning April 1,
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