Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File No. 0-17948
ELECTRONIC ARTS INC.
Delaware | 94-2838567 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
209 Redwood Shores Parkway | ||
Redwood City, California | 94065 | |
(Address of principal executive offices) | (Zip Code) |
(650) 628-1500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YESS NOo
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YESS NOo
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Outstanding as of | ||||||
Par Value | August 1, 2005 | |||||
Common Stock | $ | 0.01 | 303,519,559 |
FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2005
Page | ||||||||
3 | ||||||||
4 | ||||||||
5 | ||||||||
6 | ||||||||
18 | ||||||||
19 | ||||||||
43 | ||||||||
46 | ||||||||
47 | ||||||||
47 | ||||||||
48 | ||||||||
49 | ||||||||
50 | ||||||||
EXHIBIT 10.1 | ||||||||
EXHIBIT 10.2 | ||||||||
EXHIBIT 10.3 | ||||||||
EXHIBIT 10.4 | ||||||||
EXHIBIT 10.5 | ||||||||
EXHIBIT 10.6 | ||||||||
EXHIBIT 10.7 | ||||||||
EXHIBIT 15.1 | ||||||||
EXHIBIT 31.1 | ||||||||
EXHIBIT 31.2 | ||||||||
EXHIBIT 32.1 | ||||||||
EXHIBIT 32.2 |
2
Table of Contents
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) | June 30, | March 31, | ||||||
(In millions, except par value data) | 2005 | 2005 (a) | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 874 | $ | 1,270 | ||||
Short-term investments | 1,699 | 1,688 | ||||||
Marketable equity securities | 176 | 140 | ||||||
Receivables, net of allowances of $111 and $162, respectively | 167 | 296 | ||||||
Inventories | 66 | 62 | ||||||
Deferred income taxes | 87 | 86 | ||||||
Other current assets | 194 | 164 | ||||||
Total current assets | 3,263 | 3,706 | ||||||
Property and equipment, net | 359 | 353 | ||||||
Investments in affiliates | 9 | 10 | ||||||
Goodwill | 155 | 153 | ||||||
Other intangibles, net | 33 | 36 | ||||||
Deferred income taxes | 17 | 19 | ||||||
Other assets | 82 | 93 | ||||||
TOTAL ASSETS | $ | 3,918 | $ | 4,370 | ||||
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 113 | $ | 134 | ||||
Accrued and other liabilities | 597 | 694 | ||||||
Total current liabilities | 710 | 828 | ||||||
Other liabilities | 31 | 33 | ||||||
TOTAL LIABILITIES | 741 | 861 | ||||||
Commitments and contingencies | – | – | ||||||
Minority interest | 10 | 11 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.01 par value. 10 shares authorized | – | – | ||||||
Common stock, $0.01 par value. 1,000 shares authorized; 305 and 310 shares issued and outstanding, respectively | 3 | 3 | ||||||
Paid-in capital | 1,121 | 1,434 | ||||||
Retained earnings | 1,947 | 2,005 | ||||||
Accumulated other comprehensive income | 96 | 56 | ||||||
Total stockholders’ equity | 3,167 | 3,498 | ||||||
TOTAL LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY | $ | 3,918 | $ | 4,370 | ||||
(a) | Derived from audited financial statements. |
3
Table of Contents
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended | ||||||||
(Unaudited) | June 30, | |||||||
(In millions, except per share data) | 2005 | 2004 | ||||||
Net revenue | $ | 365 | $ | 432 | ||||
Cost of goods sold | 151 | 177 | ||||||
Gross profit | 214 | 255 | ||||||
Operating expenses: | ||||||||
Marketing and sales | 75 | 63 | ||||||
General and administrative | 51 | 35 | ||||||
Research and development | 183 | 131 | ||||||
Amortization of intangibles | 1 | 1 | ||||||
Total operating expenses | 310 | 230 | ||||||
Operating income (loss) | (96 | ) | 25 | |||||
Interest and other income, net | 17 | 9 | ||||||
Income (loss) before provision for (benefit from) income taxes and minority interest | (79 | ) | 34 | |||||
Provision for (benefit from) income taxes | (23 | ) | 10 | |||||
Income (loss) before minority interest | (56 | ) | 24 | |||||
Minority Interest | (2 | ) | — | |||||
Net income (loss) | $ | (58 | ) | $ | 24 | |||
Net income (loss) per share: | ||||||||
Basic | $ | (0.19 | ) | $ | 0.08 | |||
Diluted | $ | (0.19 | ) | $ | 0.08 | |||
Number of shares used in computation: | ||||||||
Basic | 308 | 302 | ||||||
Diluted | 308 | 316 |
4
Table of Contents
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended | ||||||||
(Unaudited) | June 30, | |||||||
(In millions) | 2005 | 2004 | ||||||
OPERATING ACTIVITIES | ||||||||
Net income (loss) | $ | (58 | ) | $ | 24 | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Depreciation and amortization | 23 | 16 | ||||||
Minority interest | 2 | – | ||||||
Realized (gains) losses on investments and on sale of property and equipment | 1 | (2 | ) | |||||
Tax benefit from exercise of stock options | 5 | 13 | ||||||
Other operating activities | – | (1 | ) | |||||
Change in assets and liabilities: | ||||||||
Receivables, net | 142 | 37 | ||||||
Inventories | 1 | 1 | ||||||
Other assets | (12 | ) | – | |||||
Accounts payable | (25 | ) | (48 | ) | ||||
Accrued and other liabilities | (110 | ) | (106 | ) | ||||
Net cash used in operating activities | (31 | ) | (66 | ) | ||||
INVESTING ACTIVITIES | ||||||||
Capital expenditures | (33 | ) | (26 | ) | ||||
Proceeds from sale of property and equipment | – | 15 | ||||||
Proceeds from sale of marketable equity securities | 4 | – | ||||||
Purchase of short-term investments | (138 | ) | (1,557 | ) | ||||
Proceeds from maturities and sales of short-term investments | 134 | 572 | ||||||
Acquisition of subsidiary, net of cash acquired | (3 | ) | – | |||||
Other investing activities | (1 | ) | – | |||||
Net cash used in investing activities | (37 | ) | (996 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Proceeds from sales of common stock through employee stock plans and other plans | 19 | 44 | ||||||
Repurchase and retirement of common stock | (337 | ) | – | |||||
Net cash provided by (used in) financing activities | (318 | ) | 44 | |||||
Effect of foreign exchange on cash and cash equivalents | (10 | ) | 1 | |||||
Decrease in cash and cash equivalents | (396 | ) | (1,017 | ) | ||||
Beginning cash and cash equivalents | 1,270 | 2,150 | ||||||
Ending cash and cash equivalents | 874 | 1,133 | ||||||
Short-term investments | 1,699 | 1,236 | ||||||
Ending cash, cash equivalents and short-term investments | $ | 2,573 | $ | 2,369 | ||||
Supplemental cash flow information: | ||||||||
Cash paid during the period for income taxes | $ | 5 | $ | 3 | ||||
Non-cash investing activities: | ||||||||
Change in unrealized gain (loss) on investments, net | $ | 47 | $ | (13 | ) | |||
5
Table of Contents
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Fiscal Years Ended | Number of Weeks | Fiscal Period End Date | ||
March 31, 2006 | 53 weeks | April 1, 2006 | ||
March 31, 2005 | 52 weeks | March 26, 2005 |
Fiscal Quarters Ended | Number of Weeks | Fiscal Period End Date | ||
June 30, 2005 | 14 weeks | July 2, 2005 | ||
June 30, 2004 | 13 weeks | June 26, 2004 |
6
Table of Contents
Three Months Ended | ||||||||
June 30, | ||||||||
2005 | 2004 | |||||||
Risk-free interest rate | 3.7 | % | 3.0 | % | ||||
Expected volatility | 35 | % | 40 | % | ||||
Expected life of stock options (in years) | 3.2 | 3.2 | ||||||
Expected life of employee stock purchase plans (in months) | 6 | 6 | ||||||
Assumed dividends | None | None |
Three Months Ended | ||||||||
June 30, | ||||||||
(In millions, except per share data) | 2005 | 2004 | ||||||
Net income (loss): | ||||||||
As reported | $ | (58 | ) | $ | 24 | |||
Deduct: Total stock-based employee compensation expense determined under fair-value-based method for all awards, net of related tax effects | (25 | ) | (19 | ) | ||||
Pro forma | $ | (83 | ) | $ | 5 | |||
Net income (loss) per share: | ||||||||
As reported – basic | $ | (0.19 | ) | $ | 0.08 | |||
Pro forma – basic | $ | (0.27 | ) | $ | 0.02 | |||
As reported – diluted | $ | (0.19 | ) | $ | 0.08 | |||
Pro forma – diluted | $ | (0.27 | ) | $ | 0.01 |
7
Table of Contents
Effects of | ||||||||||||||||
As of | Foreign | As of | ||||||||||||||
March 31, | Goodwill | Currency | June 30, | |||||||||||||
2005 | Acquired | Translation | 2005 | |||||||||||||
Goodwill | $ | 153 | $ | 3 | $ | (1 | ) | $ | 155 | |||||||
As of June 30, 2005 | ||||||||||||||||||||
Gross | Other | |||||||||||||||||||
Carrying | Accumulated | Intangibles, | ||||||||||||||||||
Amount | Amortization | Impairment | Other | Net | ||||||||||||||||
Developed/Core Technology | $ | 47 | $ | (24 | ) | $ | (9 | ) | $ | 1 | $ | 15 | ||||||||
Tradename | 37 | (19 | ) | (1 | ) | – | 17 | |||||||||||||
Subscribers and Other Intangibles | 11 | (7 | ) | (2 | ) | (1 | ) | 1 | ||||||||||||
Total | $ | 95 | $ | (50 | ) | $ | (12 | ) | $ | – | $ | 33 | ||||||||
As of March 31, 2005 | ||||||||||||||||||||
Gross | Other | |||||||||||||||||||
Carrying | Accumulated | Intangibles, | ||||||||||||||||||
Amount | Amortization | Impairment | Other | Net | ||||||||||||||||
Developed/Core Technology | $ | 47 | $ | (22 | ) | $ | (9 | ) | $ | 1 | $ | 17 | ||||||||
Tradename | 37 | (18 | ) | (1 | ) | – | 18 | |||||||||||||
Subscribers and Other Intangibles | 11 | (7 | ) | (2 | ) | (1 | ) | 1 | ||||||||||||
Total | $ | 95 | $ | (47 | ) | $ | (12 | ) | $ | – | $ | 36 | ||||||||
Fiscal Year Ending March 31, | ||||
2006 (remaining 9 months) | $ | 8 | ||
2007 | 10 | |||
2008 | 6 | |||
2009 | 3 | |||
2010 | 2 | |||
Thereafter | 4 | |||
Total | $ | 33 | ||
8
Table of Contents
Accrual | Charges | Accrual | ||||||||||||||
Beginning | Utilized | Adjustments | Ending | |||||||||||||
Balance | in Cash | to Operations | Balance | |||||||||||||
Three Months Ended June 30, 2005 | ||||||||||||||||
Facilities-related | $ | 10 | $ | (1 | ) | $ | – | $ | 9 | |||||||
Year Ended March 31, 2005 | ||||||||||||||||
Workforce | $ | 2 | $ | (2 | ) | $ | – | $ | – | |||||||
Facilities-related | 12 | (4 | ) | 2 | 10 | |||||||||||
Total | $ | 14 | $ | (6 | ) | $ | 2 | $ | 10 | |||||||
9
Table of Contents
As of | As of | |||||||
June 30, | March 31, | |||||||
2005 | 2005 | |||||||
Other current assets | $ | 113 | $ | 59 | ||||
Other assets | 68 | 76 | ||||||
Royalty-related assets | $ | 181 | $ | 135 | ||||
As of | As of | |||||||
June 30, | March 31, | |||||||
2005 | 2005 | |||||||
Accrued liabilities | $ | 61 | $ | 88 | ||||
Other liabilities | 31 | 33 | ||||||
Accrued royalties | $ | 92 | $ | 121 | ||||
Inventories as of June 30, 2005 and March 31, 2005 consisted of (in millions):
As of | As of | |||||||
June 30, | March 31, | |||||||
2005 | 2005 | |||||||
Raw materials and work in process | $ | 2 | $ | 2 | ||||
Finished goods (including manufacturing royalties) | 64 | 60 | ||||||
Inventories | $ | 66 | $ | 62 | ||||
10
Table of Contents
Property and equipment, net, as of June 30, 2005 and March 31, 2005 consisted of (in millions):
As of | As of | |||||||
June 30, | March 31, | |||||||
2005 | 2005 | |||||||
Computer equipment and software | $ | 397 | $ | 381 | ||||
Buildings | 114 | 106 | ||||||
Leasehold improvements | 77 | 73 | ||||||
Land | 59 | 60 | ||||||
Office equipment, furniture and fixtures | 55 | 53 | ||||||
Warehouse equipment and other | 12 | 12 | ||||||
Construction in progress | 36 | 43 | ||||||
750 | 728 | |||||||
Less: Accumulated depreciation and amortization | (391 | ) | (375 | ) | ||||
Property and equipment, net | $ | 359 | $ | 353 | ||||
Accrued and other liabilities as of June 30, 2005 and March 31, 2005 consisted of (in millions):
As of | As of | |||||||
June 30, | March 31, | |||||||
2005 | 2005 | |||||||
Accrued income taxes | $ | 237 | $ | 267 | ||||
Other accrued expenses | 156 | 172 | ||||||
Accrued compensation and benefits | 99 | 132 | ||||||
Accrued royalties | 61 | 88 | ||||||
Deferred revenue | 44 | 35 | ||||||
Accrued and other liabilities | $ | 597 | $ | 694 | ||||
Lease Commitments and Residual Value Guarantees
We lease certain of our current facilities and certain equipment under non-cancelable operating lease agreements. We are required to pay property taxes, insurance and normal maintenance costs for certain of our facilities and will be required to pay any increases over the base year of these expenses on the remainder of our facilities.
11
Table of Contents
Actual as of | ||||||||||||
Financial Covenants | Requirement | June 30, 2005 | ||||||||||
Consolidated Net Worth (in millions) | equal to or greater than | $ | 2,061 | $ | 3,167 | |||||||
Fixed Charge Coverage Ratio | equal to or greater than | 3.00 | 15.77 | |||||||||
Total Consolidated Debt to Capital | equal to or less than | 60% | 7.2% | |||||||||
Quick Ratio – Q1 & Q2 | equal to or greater than | 1.00 | 11.10 | |||||||||
Q3 & Q4 | equal to or greater than | 1.75 | N/A |
12
Table of Contents
Contractual Obligations | Commercial Commitment | |||||||||||||||||||
Fiscal Year | Developer/ | Bank and | ||||||||||||||||||
Ending | Licensor | Other | ||||||||||||||||||
March 31, | Leases | Commitments(1) | Marketing | Guarantees | Total | |||||||||||||||
2006 (remaining nine months) | $ | 34 | $ | 76 | $ | 34 | $ | 3 | $ | 147 | ||||||||||
2007 | 30 | 137 | 34 | – | 201 | |||||||||||||||
2008 | 23 | 125 | 30 | – | 178 | |||||||||||||||
2009 | 17 | 134 | 30 | – | 181 | |||||||||||||||
2010 | 13 | 121 | 31 | – | 165 | |||||||||||||||
Thereafter | 35 | 830 | 197 | – | 1,062 | |||||||||||||||
Total | $ | 152 | $ | 1,423 | $ | 356 | $ | 3 | $ | 1,934 | ||||||||||
(1) Developer/licensor commitments include $44 million of commitments to developers or licensors that have been recorded in current and long-term liabilities and a corresponding amount in current and long-term assets in our Condensed Consolidated Balance Sheets as of June 30, 2005 because the developer or licensor does not have any performance obligations to us.
Litigation
On July 29, 2004, a class action lawsuit,Kirschenbaum v. Electronic Arts Inc., was filed against us in Superior Court in San Mateo, California. The complaint alleges that we improperly classified “Image Production Employees” in California as exempt employees and seeks injunctive relief, unspecified monetary damages, interest and attorneys’ fees. The complaint was first amended on or about November 30, 2004 to add two former employees as named-plaintiffs, and amended again on or about January 5, 2005 to add another former employee as a named-plaintiff. The allegations in the complaint were not materially changed by the amendments.
13
Table of Contents
Director Indemnity Agreements
We have entered into indemnification agreements with the members of our Board of Directors at the time they join the Board to indemnify them to the extent permitted by law against any and all liabilities, costs, expenses, amounts paid in settlement and damages incurred by the directors as a result of any lawsuit, or any judicial, administrative or investigative proceeding in which the directors are sued as a result of their service as members of our Board of Directors.
Three Months Ended | ||||||||
June 30, | ||||||||
2005 | 2004 | |||||||
Net income (loss) | $ | (58 | ) | $ | 24 | |||
Other comprehensive income (loss): | ||||||||
Change in unrealized gain (loss) on investments, net of tax expense (benefit) of $0 and $(5), respectively | 47 | (8 | ) | |||||
Change in unrealized gain on derivative instruments, net of tax expense of $1 and $0, respectively | 4 | – | ||||||
Foreign currency translation adjustments | (11 | ) | (5 | ) | ||||
Total other comprehensive income (loss) | $ | 40 | $ | (13 | ) | |||
Total comprehensive income (loss) | $ | (18 | ) | $ | 11 | |||
14
Table of Contents
Three Months Ended | ||||||||
June 30, | ||||||||
(In millions, except per share data): | 2005 | 2004 | ||||||
Net income (loss) | $ | (58 | ) | $ | 24 | |||
Shares used to compute net income (loss) per share: | ||||||||
Weighted-average common stock outstanding – basic | 308 | 302 | ||||||
Dilutive potential common stock equivalents | – | 14 | ||||||
Weighted-average common stock outstanding – diluted | 308 | 316 | ||||||
Net income (loss) per share: | ||||||||
Basic | $ | (0.19 | ) | $ | 0.08 | |||
Diluted | $ | (0.19 | ) | $ | 0.08 |
15
Table of Contents
Three Months Ended | ||||||||
June 30, | ||||||||
2005 | 2004 | |||||||
Consoles | ||||||||
PlayStation 2 | $ | 117 | $ | 162 | ||||
Xbox | 44 | 57 | ||||||
Nintendo GameCube | 22 | 26 | ||||||
Other consoles | – | 2 | ||||||
Total Consoles | 183 | 247 | ||||||
PC | 74 | 67 | ||||||
Mobility | ||||||||
PSP | 33 | – | ||||||
Nintendo DS | 12 | – | ||||||
Game Boy Advance | 6 | 18 | ||||||
Cellular Handsets | 1 | – | ||||||
Total Mobility | 52 | 18 | ||||||
Co-publishing and Distribution | 30 | 67 | ||||||
Internet Services, Licensing and Other | ||||||||
Subscription Services | 15 | 13 | ||||||
Licensing, Advertising and Other | 11 | 20 | ||||||
Total Internet Services, Licensing and Other | 26 | 33 | ||||||
Total Net Revenue | $ | 365 | $ | 432 | ||||
North | Asia | |||||||||||||||
America | Europe | Pacific | Total | |||||||||||||
Three months ended June 30, 2005 | ||||||||||||||||
Net revenue from unaffiliated customers | $ | 184 | $ | 144 | $ | 37 | $ | 365 | ||||||||
Interest income, net | 13 | 7 | – | 20 | ||||||||||||
Depreciation and amortization | 14 | 8 | 1 | 23 | ||||||||||||
Total assets | 2,603 | 1,246 | 69 | 3,918 | ||||||||||||
Capital expenditures | 26 | 5 | 2 | 33 | ||||||||||||
Long-lived assets | 326 | 211 | 10 | 547 | ||||||||||||
Three months ended June 30, 2004 | ||||||||||||||||
Net revenue from unaffiliated customers | $ | 211 | $ | 190 | $ | 31 | $ | 432 | ||||||||
Interest income, net | 7 | 1 | – | 8 | ||||||||||||
Depreciation and amortization | 9 | 6 | 1 | 16 | ||||||||||||
Total assets | 2,538 | 768 | 64 | 3,370 | ||||||||||||
Capital expenditures | 21 | 4 | 1 | 26 | ||||||||||||
Long-lived assets | 257 | 140 | 6 | 403 |
16
Table of Contents
17
Table of Contents
Electronic Arts Inc.:
KPMG LLP
Mountain View, California
August 3, 2005
18
Table of Contents
19
Table of Contents
20
Table of Contents
• | Evidence of an arrangement: Evidence of an agreement with the customer that reflects the terms and conditions to deliver products must be present in order to recognize revenue. |
21
Table of Contents
• | Delivery: Delivery is considered to occur when the products are shipped and risk of loss has been transferred to the customer. For online games and services, revenue is recognized as the service is provided. | ||
• | Fixed or determinable fee: If a portion of the arrangement fee is not fixed or determinable, we recognize that amount as revenue when the amount becomes fixed or determinable. | ||
• | Collection is deemed probable: At the time of the transaction, we conduct a credit review of each customer involved in a significant transaction to determine the creditworthiness of the customer. Collection is deemed probable if we expect the customer to be able to pay amounts under the arrangement as those amounts become due. If we determine that collection is not probable, we recognize revenue when collection becomes probable (generally upon cash collection). |
22
Table of Contents
23
Table of Contents
Fiscal Years Ended | Number of Weeks | Fiscal Period End Date | ||
March 31, 2006 | 53 weeks | April 1, 2006 | ||
March 31, 2005 | 52 weeks | March 26, 2005 |
Fiscal Quarters Ended | Number of Weeks | Fiscal Period End Date | ||
June 30, 2005 | 14 weeks | July 2, 2005 | ||
June 30, 2004 | 13 weeks | June 26, 2004 |
24
Table of Contents
Three Months Ended June 30, | Increase / | % | ||||||||||||||||||||||
2005 | 2004 | (Decrease) | Change | |||||||||||||||||||||
North America | $ | 184 | 50.4 | % | $ | 211 | 48.9 | % | $ | (27 | ) | (13.1 | %) | |||||||||||
Europe | 144 | 39.5 | % | 190 | 44.0 | % | (46 | ) | (24.0 | %) | ||||||||||||||
Asia Pacific | 37 | 10.1 | % | 31 | 7.1 | % | 6 | 20.8 | % | |||||||||||||||
International | 181 | 49.6 | % | 221 | 51.1 | % | (40 | ) | (17.8 | %) | ||||||||||||||
Total Net Revenue | $ | 365 | 100.0 | % | $ | 432 | 100.0 | % | $ | (67 | ) | (15.5 | %) | |||||||||||
25
Table of Contents
Three Months Ended June 30, | Increase/ | % | ||||||||||||||||||||||
2005 | 2004 | (Decrease) | Change | |||||||||||||||||||||
Consoles | ||||||||||||||||||||||||
PlayStation 2 | $ | 117 | 32.2 | % | $ | 162 | 37.4 | % | $ | (45 | ) | (27.6 | %) | |||||||||||
Xbox | 44 | 12.0 | % | 57 | 13.3 | % | (13 | ) | (23.4 | %) | ||||||||||||||
Nintendo GameCube | 22 | 6.1 | % | 26 | 6.1 | % | (4 | ) | (16.1 | %) | ||||||||||||||
Other consoles | – | 0.0 | % | 2 | 0.5 | % | (2 | ) | (92.1 | %) | ||||||||||||||
Total Consoles | 183 | 50.3 | % | 247 | 57.3 | % | (64 | ) | (25.9 | %) | ||||||||||||||
PC | 74 | 20.3 | % | 67 | 15.5 | % | 7 | 11.1 | % | |||||||||||||||
Mobility | ||||||||||||||||||||||||
PSP | 33 | 8.8 | % | – | 0.0 | % | 33 | N/A | ||||||||||||||||
Nintendo DS | 12 | 3.3 | % | – | 0.0 | % | 12 | N/A | ||||||||||||||||
Game Boy Advance | 6 | 1.7 | % | 18 | 4.2 | % | (12 | ) | (65.5 | %) | ||||||||||||||
Cellular Handsets | 1 | 0.3 | % | – | 0.0 | % | 1 | N/A | ||||||||||||||||
Total Mobility | 52 | 14.1 | % | 18 | 4.2 | % | 34 | 180.1 | % | |||||||||||||||
Co-publishing and Distribution | 30 | 8.1 | % | 67 | 15.6 | % | (37 | ) | (55.8 | %) | ||||||||||||||
Internet Services, Licensing and Other | ||||||||||||||||||||||||
Subscription Services | 15 | 4.2 | % | 13 | 2.9 | % | 2 | 21.3 | % | |||||||||||||||
Licensing, Advertising and Other | 11 | 3.0 | % | 20 | 4.5 | % | (9 | ) | (43.6 | %) | ||||||||||||||
Total Internet Services, Licensing and Other | 26 | 7.2 | % | 33 | 7.4 | % | (7 | ) | (18.4 | %) | ||||||||||||||
Total Net Revenue | $ | 365 | 100.0 | % | $ | 432 | 100.0 | % | $ | (67 | ) | (15.5 | %) | |||||||||||
26
Table of Contents
June 30, 2005 | % of Net Revenue | June 30, 2004 | % of Net Revenue | % Change | ||||||||
$ | 151 | 41.2% | $ | 177 | 40.9% | (15.0%) | ||||||
27
Table of Contents
• | Lower license royalties as a percentage of total net revenue primarily due to a higher mix of products sold based on wholly-owned intellectual property during the three months ended June 30, 2005 as compared to the three months ended June 30, 2004. We estimate that lower license royalties as a percentage of total net revenue increased gross margin by 2.9 percent. | ||
• | Lower co-publishing and distribution royalties as a percentage of total net revenue due to the lower volume of co-publishing and distribution net revenue during the three months ended June 30, 2005 as compared to the three months ended June 30, 2004. We estimate that lower co-publishing and distribution royalties as a percentage of total net revenue increased gross margin by 0.4 percent. | ||
• | Partially offset by higher third-party development royalties as a percentage of total net revenue primarily due to a higher mix of externally developed titles versus internally developed titles in the three months ended June 30, 2005 as compared to the three months ended June 30, 2004. We estimate that higher development royalties as a percentage of total net revenue decreased gross margin by 0.9 percent. |
June 30, 2005 | % of Net Revenue | June 30, 2004 | % of Net Revenue | $ Change | % Change | |||||||||||
$ | 75 | 20.6% | $ | 63 | 14.6% | $ | 12 | 19.0% | ||||||||
• | An increase of $8 million in personnel-related costs resulting from an increase in headcount and facilities-related expenses in support of the growth of our marketing and sales functions worldwide. | ||
• | An increase of $4 million in our marketing and advertising, promotional and related contracted services expenses primarily due to increased advertising in North America to support our current year releases. |
28
Table of Contents
June 30, 2005 | % of Net Revenue | June 30, 2004 | % of Net Revenue | $ Change | % Change | |||||||||||
$ | 51 | 14.0% | $ | 35 | 8.1% | $ | 16 | 45.1% | ||||||||
• | An increase of $7 million in personnel and facility-related costs primarily due to an increase in headcount to help support the growth of our administrative functions worldwide. | ||
• | An increase of $5 million in professional and contracted services to support our business. |
June 30, 2005 | % of Net Revenue | June 30, 2004 | % of Net Revenue | $ Change | % Change | |||||||||||
$ | 183 | 50.1% | $ | 131 | 30.3% | $ | 52 | 39.9% | ||||||||
• | An increase of $49 million in personnel-related costs primarily related to (1) an increase in employee headcount in our Canadian and European studios as a result of increased internal development and the development of games for next-generation tools, technologies and titles, as well as our recent consolidations of DICE and Criterion and (2) the fact that there were 14 weeks in the three months ended June 30, 2005 as compared to only 13 weeks in the three months ended June 30, 2004. | ||
• | An increase of $11 million in facilities-related expenses to help support the growth of our research and development functions worldwide, as well as the fact that there were 14 weeks in the three months ended June 30, 2005 as compared to only 13 weeks in the three months ended June 30, 2004. |
June 30, 2005 | % of Net Revenue | June 30, 2004 | % of Net Revenue | $ Change | % Change | |||||||||||
$ | 17 | 4.6% | $ | 9 | 2.1% | $ | 8 | 84.7% | ||||||||
29
Table of Contents
June 30, 2005 | Effective Tax Rate | June 30, 2004 | Effective Tax Rate | % Change | ||||||||
$ | (23) | 29.0% | $ | 10 | 29.0% | (330.1%) | ||||||
30
Table of Contents
31
Table of Contents
As of June 30, | ||||||||||||
(In millions) | 2005 | 2004 | Increase | |||||||||
Cash, cash equivalents and short-term investments | $ | 2,573 | $ | 2,369 | $ | 204 | ||||||
Marketable equity securities | 176 | 2 | 174 | |||||||||
Total | $ | 2,749 | $ | 2,371 | $ | 378 | ||||||
Percentage of total assets | 70.2 | % | 70.4 | % |
Three Months Ended | ||||||||||||
June 30, | Increase / | |||||||||||
(In millions) | 2005 | 2004 | (Decrease) | |||||||||
Cash used in operating activities | $ | (31 | ) | $ | (66 | ) | $ | 35 | ||||
Cash used in investing activities | (37 | ) | (996 | ) | 959 | |||||||
Cash provided by (used in) financing activities | (318 | ) | 44 | (362 | ) | |||||||
Effect of foreign exchange on cash and cash equivalents | (10 | ) | 1 | (11 | ) | |||||||
Net decrease in cash and cash equivalents | $ | (396 | ) | $ | (1,017 | ) | $ | 621 | ||||
During the three months ended June 30, 2005, we used $31 million of cash from operating activities as compared to the use of $66 million for the three months ended June 30, 2004. The decrease in cash used in operating activities resulted primarily from the collection of our receivables partially offset by the overall decline in net income for the first quarter of fiscal 2006 as compared to the first quarter of fiscal 2005. We expect to generate significant operating cash flow during the remainder of fiscal 2006. For the three months ended June 30, 2005, our primary use of cash in non-operating activities consisted of $337 million for the repurchase and retirement of our common stock and $33 million in capital expenditures primarily related to the expansion of our Vancouver studio and upgrades to our worldwide ERP systems. We anticipate making continued capital investments in our Vancouver studio during fiscal 2006 as well as completing the remaining $372 million of our $750 million share repurchase program by September 30, 2005.
As of June 30, 2005, 34 percent of our portfolio of cash, cash equivalents and short-term investments consisted of cash and cash equivalents and 66 percent of our portfolio consisted of short-term investments. As of March 31, 2005, 43 percent of our portfolio consisted of cash and cash equivalents and 57 percent of our portfolio consisted of short-term investments. Due to our mix of fixed and variable rate securities, our short-term investment portfolio is susceptible to changes in short-term interest rates. As of June 30, 2005, our short-term investments had gross unrealized losses of approximately $15 million, or 0.9 percent of the total in short-term investments. From time to time, we may liquidate some or all of our short-term investments to fund operational needs or other activities, such as capital expenditures, business acquisitions or stock repurchase programs. Depending on the short-term investments that we liquidate to fund these activities, we could recognize a portion of the gross unrealized losses.
Our gross accounts receivable balance was $278 million and $458 million as of June 30, 2005 and March 31, 2005, respectively. The decrease in our accounts receivable balance was due to lower sales volumes in the first quarter of fiscal 2006 as compared to the fourth quarter of fiscal 2005 and the collection of receivables from the fourth quarter of fiscal 2005, which was expected as we traditionally have lower sales during our first fiscal quarter as compared to our fourth fiscal quarter. We expect our accounts receivable balance to increase during the three months ending September 30, 2005 based on our seasonal product release schedule. Reserves for sales returns, pricing allowances and doubtful accounts decreased from $162 million as of March 31, 2005 to $111 million as of June 30, 2005. As expected, principally due to the seasonality of our business, both sales returns and price protection reserves decreased in absolute dollars and as a percentage of trailing nine month net revenue and increased as a percentage of trailing six month net revenue as of June 30, 2005 as compared to March 31, 2005. Sales returns and price protection reserves as a percentage of six and nine month revenue remained relatively flat as compared to the quarter ended June 30, 2004. We believe these reserves are adequate based on historical experience and our current estimate of potential returns and allowances.
32
Table of Contents
Inventories increased to $66 million as of June 30, 2005 from $62 million as of March 31, 2005 primarily due to the buildup of inventory in connection with the release ofNCAA® Football 06at the beginning of the second quarter of fiscal 2006. Other thanNCAA Football 06, no single title represented more than $4 million of inventory as of June 30, 2005.
Other current assets increased to $194 million as of June 30, 2005, from $164 million as of March 31, 2005, primarily due to an increase in prepaid royalties as we continue to invest in our product development and content. The increase was partially offset by a decrease in our VAT receivable.
Accounts payable decreased to $113 million as of June 30, 2005, from $134 million as of March 31, 2005, primarily due to the lower sales volume we experienced in the first quarter of fiscal 2006 as compared to the fourth quarter of fiscal 2005.
Our accrued and other liabilities decreased to $597 million as of June 30, 2005 from $694 million as of March 31, 2005. The decrease was due to decreases in accrued compensation and benefits, accrued income taxes and accrued royalties. We anticipate our accrued and other liabilities balance will increase during the three months ending September 30, 2005 primarily due to an increase in royalties payable.
We believe that existing cash, cash equivalents, short-term investments, marketable equity securities and cash generated from operations will be sufficient to meet our operating requirements for at least the next twelve months, including working capital requirements, capital expenditures, potential future acquisitions or strategic investments, and funding of our stock repurchase program. We may choose at any time to raise additional capital to strengthen our financial position, facilitate expansion, pursue strategic acquisitions and investments or to take advantage of business opportunities as they arise. There can be no guarantee that such additional capital will be available to us on favorable terms, if at all, or that it will not result in substantial dilution to our existing stockholders.
33
Table of Contents
In July 2002, we provided an irrevocable standby letter of credit to Nintendo of Europe. The standby letter of credit guarantees performance of our obligations to pay Nintendo of Europe for trade payables. The original letter of credit guaranteed our obligations to Nintendo of Europe of up to€18 million. In April 2005, we reduced the guarantee to€8 million. This standby letter of credit expired in July 2005 and was renewed through July 2006. As of June 30, 2005, we had less than€1 million payable to Nintendo of Europe covered by this standby letter of credit.
The products produced by our studios are designed and created by our employee designers, artists, software programmers and by non-employee software developers (“independent artists” or “third-party developers”). We typically advance development funds to the independent artists and third-party developers during development of our games, usually in installment payments made upon the completion of specified development milestones. Contractually, these payments are considered advances against subsequent royalties on the sales of the products. These terms are set forth in written agreements entered into with the independent artists and third-party developers. In addition, we have certain celebrity, league and content license contracts that contain minimum guarantee payments and marketing commitments that are not dependent on any deliverables. Celebrities and organizations with whom we have contracts include: ESPN (content in EA SPORTSTM games); FIFA and UEFA (professional soccer); NASCAR (stock car racing); John Madden (professional football); National Basketball Association (professional basketball); PGA TOUR (professional golf); Tiger Woods (professional golf); National Hockey League and NHLPA (professional hockey); Warner Bros. (Harry Potter, Batman and Superman); MGM/ Danjaq (James Bond); New Line Productions (The Lord of the Rings); Saul Zaentz Company (The Lord of the Rings); Marvel Enterprises (fighting); National Football League, Arena Football League and PLAYERS Inc. (professional football); Collegiate Licensing Company (collegiate football and basketball); ISC (stock car racing); Island Def Jam (fighting); and Viacom Consumer Products (The Godfather). These developer and content license commitments represent the sum of (i) the cash payments due under non-royalty-bearing licenses and services agreements, and (ii) the minimum payments and advances against royalties due under royalty-bearing licenses and services agreements, the majority of which are conditional upon performance by the counterparty. These minimum guarantee payments and any related marketing commitments are included in the table below.
34
Table of Contents
Contractual Obligations | Commercial Commitment | |||||||||||||||||||
Developer/ | ||||||||||||||||||||
Fiscal Year | Licensor | Bank and | ||||||||||||||||||
Ending March 31, | Leases(1) | Commitments(2) | Marketing | Other Guarantees | Total | |||||||||||||||
2006 (remaining nine months) | $ | 34 | $ | 76 | $ | 34 | $ | 3 | $ | 147 | ||||||||||
2007 | 30 | 137 | 34 | – | 201 | |||||||||||||||
2008 | 23 | 125 | 30 | – | 178 | |||||||||||||||
2009 | 17 | 134 | 30 | – | 181 | |||||||||||||||
2010 | 13 | 121 | 31 | – | 165 | |||||||||||||||
Thereafter | 35 | 830 | 197 | – | 1,062 | |||||||||||||||
Total | $ | 152 | $ | 1,423 | $ | 356 | $ | 3 | $ | 1,934 | ||||||||||
(1) See discussion on operating leases in the “Off-Balance Sheet Commitments” section below for additional information.
We lease certain of our current facilities and certain equipment under non-cancelable operating lease agreements. We are required to pay property taxes, insurance and normal maintenance costs for certain of our facilities and will be required to pay any increases over the base year of these expenses on the remainder of our facilities.
35
Table of Contents
Actual as of | ||||||||||||
Financial Covenants | Requirement | June 30, 2005 | ||||||||||
Consolidated Net Worth (in millions) | equal to or greater than | $ | 2,061 | $ | 3,167 | |||||||
Fixed Charge Coverage Ratio | equal to or greater than | 3.00 | 15.77 | |||||||||
Total Consolidated Debt to Capital | equal to or less than | 60% | 7.2% | |||||||||
Quick Ratio – Q1 & Q2 | equal to or greater than | 1.00 | 11.10 | |||||||||
Q3 & Q4 | equal to or greater than | 1.75 | N/A |
36
Table of Contents
37
Table of Contents
38
Table of Contents
39
Table of Contents
40
Table of Contents
41
Table of Contents
• | The need to implement or remediate controls, procedures and policies appropriate for a public company in an acquired company that, prior to the acquisition, lacked these controls, procedures and policies, | ||
• | Cultural challenges associated with integrating employees from an acquired company or business into our organization, | ||
• | Retaining key employees from the businesses we acquire, | ||
• | The need to integrate an acquired company’s accounting, management information, human resource and other administrative systems to permit effective management, and | ||
• | To the extent that we engage in strategic transactions outside of the United States, we face additional risks, including risks related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. |
42
Table of Contents
From time to time, we hedge some of our foreign currency risk related to anticipated foreign-currency-denominated sales transactions by purchasing option contracts that generally have maturities of 15 months or less. These transactions are designated and qualify as cash flow hedges. The derivative assets associated with our hedging activities are recorded at fair value in other current assets in the Condensed Consolidated Balance Sheets. The effective portion of gains or losses resulting from changes in fair value is initially reported as a component of accumulated other comprehensive income, net of any tax effects, in stockholders’ equity and subsequently reclassified into net revenue in the period when the forecasted transaction actually occurs. The ineffective portion of gains or losses resulting from changes in fair value is reported in interest and other income, net in the Condensed Consolidated Statements of Operations. Our hedging programs reduce, but do not entirely eliminate, the impact of currency exchange rate movements. The fair value of our foreign currency option contracts purchased and included in other current assets was $9 million as of June 30, 2005.
43
Table of Contents
Our exposure to market risk for changes in interest rates relates primarily to our short-term investment portfolio. We manage our interest rate risk by maintaining an investment portfolio generally consisting of debt instruments of high credit quality and relatively short average maturities. Additionally, the contractual terms of the securities do not permit the issuer to call, prepay or otherwise settle the securities at prices less than the stated par value of the securities. We also do not use derivative financial instruments in our short-term investment portfolio.
As of June 30 | As of March 31 | |||||||
2005 | 2005 | |||||||
U.S. government agencies | $ | 1,158 | $ | 1,168 | ||||
U.S. government bonds | 339 | 298 | ||||||
Corporate bonds | 181 | 180 | ||||||
Asset-backed securities | 21 | 42 | ||||||
Total short-term investments | $ | 1,699 | $ | 1,688 | ||||
Fair Value | ||||||||||||||||||||||||||||
Valuation of Securities Given an Interest | as of | Valuation of Securities Given an Interest | ||||||||||||||||||||||||||
(In millions) | Rate Decrease of X Basis Points | June 30, | Rate Increase of X Basis Points | |||||||||||||||||||||||||
(150 BPS) | (100 BPS) | (50 BPS) | 2005 | 50 BPS | 100 BPS | 150 BPS | ||||||||||||||||||||||
U.S. government agencies | $ | 1,164 | $ | 1,163 | $ | 1,161 | $ | 1,158 | $ | 1,151 | $ | 1,146 | $ | 1,140 | ||||||||||||||
U.S. government bonds | 347 | 345 | 342 | 339 | 336 | 333 | 330 | |||||||||||||||||||||
Corporate bonds | 186 | 184 | 183 | 181 | 180 | 178 | 177 | |||||||||||||||||||||
Asset-backed securities | 21 | 21 | 21 | 21 | 21 | 21 | 21 | |||||||||||||||||||||
Total short-term investments | $ | 1,718 | $ | 1,713 | $ | 1,707 | $ | 1,699 | $ | 1,688 | $ | 1,678 | $ | 1,668 | ||||||||||||||
44
Table of Contents
The values of our equity investments in publicly traded companies are subject to market price volatility. As of June 30, 2005, our marketable equity securities were classified as available-for-sale and, consequently, were recorded in the Condensed Consolidated Balance Sheet at fair market value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income, net of any tax effects, in stockholders’ equity. The fair value of our marketable equity securities was $176 million and $140 million as of June 30, 2005 and March 31, 2005, respectively.
Valuation of Securities Given an X | Fair Value | Valuation of Securities Given an X | ||||||||||||||||||||||||||
Percentage Decrease in Each Stock’s | as of | Percentage Increase in Each Stock’s | ||||||||||||||||||||||||||
(In millions) | Market Price | June 30, | Market Price | |||||||||||||||||||||||||
(75%) | (50%) | (25%) | 2005 | 25% | 50% | 75% | ||||||||||||||||||||||
Marketable Equity Securities | $ | 44 | $ | 88 | $ | 132 | $ | 176 | $ | 220 | $ | 263 | $ | 307 |
45
Table of Contents
46
Table of Contents
Item 1. | Legal Proceedings | |
On July 29, 2004, a class action lawsuit,Kirschenbaum v. Electronic Arts Inc., was filed against us in Superior Court in San Mateo, California. The complaint alleges that we improperly classified “Image Production Employees” in California as exempt employees and seeks injunctive relief, unspecified monetary damages, interest and attorneys’ fees. The complaint was first amended on or about November 30, 2004 to add two former employees as named-plaintiffs, and amended again on or about January 5, 2005 to add another former employee as a named-plaintiff. The allegations in the complaint were not materially changed by the amendments. | ||
On February 14, 2005, a second employment-related class action lawsuit,Hasty v. Electronic Arts Inc.,was filed against us in Superior Court in San Mateo, California. The complaint alleges that we improperly classified “Engineers” in California as exempt employees and seeks injunctive relief, unspecified monetary damages, interest and attorneys’ fees. On or about March 16, 2005, we received a first amended complaint, which contains the same material allegations as the original complaint. We answered the first amended complaint on April 20, 2005. | ||
On March 24, 2005, a class action lawsuit was filed against us and certain of our officers and directors. The complaint, which asserts claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegedly false and misleading statements, was filed in the United States District Court, Northern District of California, by an individual purporting to represent a class of purchasers of EA common stock. Additional class action lawsuits have been filed in the same court by other individuals asserting the same claims against us. On May 9, 2005, the court consolidated the complaints, and on June 13, 2005, the court appointed lead plaintiff and lead counsel pursuant to the requirements of the Private Securities Litigation Reform Act of 1995. An amended consolidated complaint has not yet been filed. Separately, on April 12, 2005, a shareholder derivative action was filed in San Mateo Superior Court against certain of our officers and directors. This suit asserts claims based on substantially the same factual allegations set forth in the federal class action lawsuits. Two other shareholder derivative actions have been filed in San Mateo Superior Court based on the same claims. Two of the three derivative actions have been consolidated; a request to consolidate the third is currently pending. In addition, two other shareholder derivative actions based on substantially the same allegations have been filed in the United States District Court, Northern District of California. We have not responded to any of the complaints. | ||
In addition, we are subject to other claims and litigation arising in the ordinary course of business. Our management considers that any liability from any reasonably foreseeable disposition of such other claims and litigation, individually or in the aggregate, would not have a material adverse effect on our consolidated financial position or results of operations. |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
On October 18, 2004, our Board of Directors authorized a program to repurchase up to an aggregate of $750 million of shares of our common stock. Pursuant to the authorization, we may repurchase shares of our common stock from time to time in the open market or through privately negotiated transactions over the course of a twelve-month period. The following table summarizes the number of shares repurchased for the three months ended June 30, 2005: |
Total Number of | Maximum Dollar Value | |||||||||||||||
Shares Purchased | of Shares that May Yet | |||||||||||||||
Total Number | as Part of Publicly | Be Purchased Under the | ||||||||||||||
of Shares | Average Price | Announced | Program | |||||||||||||
Period | Purchased | Paid per Share | Program | (in millions) | ||||||||||||
April 1 – 30, 2005 | – | – | – | $ | 709 | |||||||||||
May 1 – 31, 2005 | 5,076,300 | $ | 52.52 | 5,076,300 | $ | 443 | ||||||||||
June 1 – 30, 2005 | 1,218,003 | $ | 58.02 | 1,218,003 | $ | 372 |
47
Table of Contents
Item 6. | Exhibits | |||
The following exhibits (other than exhibits 32.1 and 32.2, which are furnished with this report) are filed as part of this report: | ||||
Exhibit | ||||
Number | Title | |||
10.1 | Guaranty, dated as of December 6, 2000, by Electronic Arts Inc. in favor of Selco Service Corporation, Victory Receivables Corporation, The Bank Of Tokyo-Mitsubushi, Ltd., various Liquidity Banks, and Keybank National Association. | |||
10.2 | Guaranty, dated as of July 16, 2001, by Electronic Arts Inc. in favor of Flatirons Funding, Limited Partnership, Victory Receivables Corporation, The Bank of Tokyo-Mitsubushi, Ltd., various Liquidity Banks and Tranche B Banks, and KeyBank National Association. | |||
10.3 | First Amendment to Participation Agreement, dated as of May 13, 2002, by and among Electronic Arts Redwood, Inc., Electronic Arts Inc., Flatirons Funding, Limited Partnership, Victory Receivables Corporation, The Bank of Tokyo-Mitsubushi, Ltd., various Liquidity Banks, KeyBank National Association, and The Bank of Nova Scotia. | |||
10.4 | Omnibus Amendment Agreement (2001 transaction), dated as of September 15, 2004, Electronic Arts Redwood, LLC, Electronic Arts, Inc., Selco Service Corporation, Victory Receivables Corporation, The Bank Of Tokyo-Mitsubishi, Ltd., various Liquidity Banks, and KeyBank National Association. | |||
10.5 | Omnibus Amendment Agreement (2000 transaction), dated as of September 15, 2004, by and among Electronic Arts Redwood, LLC, Electronic Arts, Inc., Selco Service Corporation, Victory Receivables Corporation, The Bank Of Tokyo-Mitsubishi, Ltd., various Liquidity Banks, and KeyBank National Association. | |||
10.6 | Omnibus Amendment (2000 transaction), dated as of July 11, 2005, among Electronic Arts Redwood LLC, Electronic Arts Inc., Selco Service Corporation, Victory Receivables Corporation, The Bank of Tokyo-Mitsubishi, Ltd., New York Branch, various Liquidity Banks, Deutsche Bank Trust Company Americas, and KeyBank National Association. | |||
10.7 | Omnibus Amendment (2001 transaction), dated as of July 11, 2005, among Electronic Arts Redwood LLC, Electronic Arts Inc., Selco Service Corporation, Victory Receivables Corporation, The Bank of Tokyo-Mitsubishi, Ltd., New York Branch, various Liquidity Banks, Deutsche Bank Trust Company Americas, The Bank of Nova Scotia, and KeyBank National Association. | |||
15.1 | Awareness Letter of KPMG LLP, Independent Registered Public Accounting Firm. | |||
31.1 | Certification of Chairman and Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
31.2 | Certification of Executive Vice President, Chief Financial and Administrative Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||
Additional exhibits furnished with this report: | ||||
32.1 | Certification of Chairman and Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||
32.2 | Certification of Executive Vice President, Chief Financial and Administrative Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
48
Table of Contents
ELECTRONIC ARTS INC. (Registrant) | |||||
/s/ Warren C. Jenson | |||||
DATED: | WARREN C. JENSON | ||||
August 3, 2005 | Executive Vice President, Chief Financial and Administrative Officer |
49
Table of Contents
FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2005
EXHIBIT | ||
NUMBER | EXHIBIT TITLE | |
10.1 | Guaranty, dated as of December 6, 2000, by Electronic Arts Inc. in favor of Selco Service | |
10.2 | Guaranty, dated as of July 16, 2001, by Electronic Arts Inc. in favor of Flatirons Funding, Limited | |
10.3 | First Amendment to Participation Agreement, dated as of May 13, 2002, by and among Electronic | |
10.4 | Omnibus Amendment Agreement (2001 transaction), dated as of September 15, 2004, Electronic | |
10.5 | Omnibus Amendment Agreement (2000 transaction), dated as of September 15, 2004, by and | |
10.6 | Omnibus Amendment (2000 transaction), dated as of July 11, 2005, among Electronic Arts | |
10.7 | Omnibus Amendment (2001 transaction), dated as of July 11, 2005, among Electronic Arts | |
15.1 | Awareness Letter of KPMG LLP, Independent Registered Public Accounting Firm. | |
31.1 | Certification of Chairman and Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange | |
31.2 | Certification of Executive Vice President, Chief Financial and Administrative Officer pursuant to | |
Additional exhibits furnished with this report: | ||
32.1 | Certification of Chairman and Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange | |
32.2 | Certification of Executive Vice President, Chief Financial and Administrative Officer pursuant to |
50