Exhibit 99.1
EA ANNOUNCES STRONG SECOND QUARTER RESULTS
Announces Two-For-One Stock Split – Fourth Split in EA History
Record Holiday Quarter Expected
REDWOOD CITY, CA – October 22, 2003 – Electronic Arts (NASDAQ: ERTS) today announced financial results for the fiscal second quarter ended September 30, 2003.
Net revenue for the second quarter was $530 million, up 17 percent as compared with $453 million for the fiscal quarter ended September 30, 2002. Sales were driven byMadden NFL 2004, NCAA® Football 2004,Tiger Woods PGA TOUR® 2004, NHL® 2004and NASCAR Thunder™ 2004.Madden NFL 2004and NCAA Football 2004 had record sales in the quarter – having sold more than 3.6 million and 1.3 million units, respectively.
Net income for the quarter was $77 million, a 52 percent increase over the same period a year ago. Diluted earnings per share for the quarter increased 47 percent to $0.50 as compared with $0.34 for the prior year. The growth in earnings was driven by increased revenue and a higher gross margin.
Trailing twelve month operating cash flow was $657 million, or $4.45 a share, up 45 percent from $454 million, or $3.14 a share, for the same period a year ago.
Non-GAAP net income in the second quarter, excluding certain items, was up 49 percent to $77 million. Non-GAAP diluted earnings per share were up 43 percent to $0.50. (Please see Non-GAAP Financial Measures and reconciliation information included in this release.)
“EA is once again decisively winning the football category,” said Larry Probst, Chairman and Chief Executive Officer. “Madden NFL 2004 is the clear number one andNCAA Football 2004 a solid number two. Looking ahead, our holiday line-up is the strongest in EA history with titles like The Lord of the Rings, The Return of the King;Medal of Honor Rising Sun;Harry Potter: Quidditch World Cup;Need for Speed Underground;SSX 3;FIFA Soccer 2004 andNBA Live 2004.
“This was a great quarter and we continue to be on track for another record year,” said Warren Jenson, Chief Financial and Administrative Officer. “We continue to deliver growth, earnings and significant operating cash flow.”
Highlights for the Quarter(comparisons are to the quarter ended September 30, 2002)
| • | Net revenue: North America – up 14 percent to $358 million; Europe – up 24 percent to $145 million; Asia Pacific – up 28 percent to $18 million; Japan – down 3 percent to $9 million. Net revenue was favorably impacted by changes in foreign currency rates by approximately $14 million. |
| • | Gross margin was 59.7 percent versus 55.7 percent. |
| • | Operating income was $102 million – up 43 percent. Operating margin increased 3.5 points year-over-year to 19 percent. |
| • | EA was the number one U.S. publisher on current generation consoles. In the U.S., the Company had four of the top-ten-selling current generation console titles (includes PlayStation®2, Xbox™ and Nintendo GameCube™ consoles) based on dollar sales according to The NPD Group / NPD Funworld® / TRSTS®. |
| • | EA was the number one U.S. publisher on the PC.In the U.S., the Company had four of the top-ten-selling PC games for July and August based on dollar sales according to The NPD Group / NPD Techworld. |
| • | Madden NFL 2004 and NCAA Football 2004 received Metacritic ratings of 95 and 94, respectively, for their PlayStation 2 releases. On each platform released, they were the #1 and #2 selling football titles for the quarter. |
| • | EA continued to expand its world-class studios.Earlier this month, EA announced the expansion of its UK studios through the acquisition of Studio 33, a globally recognized game developer. EA also announced plans to locate its Los Angeles studio in a new state-of-the-art facility in Playa Vista, California. |
Business Outlook
The following forward-looking statements reflect expectations as of October 22, 2003. Results may be materially different and are affected by many factors, such as changes in the overall global economy, actual consumer spending, consumer acceptance of our products, development delays and other risk factors referenced below in this release.
Fiscal Third Quarter Expectations – Ending December 31, 2003
| • | Net revenue is expected to be between $1.425 and $1.475 billion – up 16 to 20 percent year-over-year. |
| • | Diluted earnings per share are expected to be between $2.30 and $2.40 – up 36 to 42 percent year-over-year. |
Fiscal Year Expectations – Ending March 31, 2004
| • | Net revenue is expected to be between $2.850 and $2.930 billion – up 15 to 18 percent year-over-year. |
| • | Diluted earnings per share are expected to be between $3.35 and $3.50 – up 54 to 61 percent year-over-year. |
Stock Split
The Company’s Board of Directors has approved a two-for-one stock split of its Class A common stock. This is the fourth stock split in the Company’s history. The split will be accomplished through a share-for-share stock dividend to Class A common stockholders of record as of November 3, 2003. Each Class A common stockholder will receive one additional share of Class A common stock for every share of Class A common stock held on the record date. Distribution of additional shares will be made on or about November 17, 2003. Trading at a post-split price is expected to begin on November 18, 2003.
Non-GAAP Financial Measures
Electronic Arts uses non-GAAP measures of operating income, net income and diluted earnings per share. These non-GAAP measures exclude the following items, including the related tax effect, from the Company’s statement of operations:
| • | Amortization of intangibles |
| • | Restructuring and asset impairment charges |
| • | Other-than-temporary impairment of investments in affiliates |
| • | Charges for acquired in-process technology |
The Company believes that excluding these items is useful for illustrating and explaining operating results and comparisons to prior periods. Management considers these non-GAAP measures in its decision-making to facilitate more relevant operating comparisons.
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A reconciliation of GAAP operating income to non-GAAP operating income; GAAP net income to non-GAAP net income; and GAAP diluted earnings per share to non-GAAP diluted earnings per share are included as part of the supplemental disclosures to this release.
Webcast
Electronic Arts will host a webcast at 2:00 pm PT (5:00 pm ET) on October 22, 2003 athttp://investor.ea.com to review the results for the Company’s quarter ending September 30, 2003 and to discuss the Company’s near-term outlook. A replay of the webcast will be posted for two weeks. A copy of this release and supplemental information will be available athttp://investor.ea.com.
Some statements set forth in this release, including those under the heading “Business Outlook,” contain forward-looking statements that involve risks and uncertainties. Statements including words such as “anticipate”, “believe” or “expect” and statements in the future tense are forward-looking statements. These forward-looking statements are subject to business and economic risks and actual events or actual future results could differ materially from those set forth in the forward-looking statements due to such risks and uncertainties. Some of the factors which could cause our results to differ materially include the following: our ability to predict consumer preferences among competing hardware platforms; the seasonality and cyclical nature of the interactive game segment; timely development and release of our products; our ability to secure licenses to valuable entertainment properties; consumer spending trends; retention of key personnel; adoption of new accounting regulations and standards; potential regulation of our products in key territories; developments in the law regarding protection of our products; and other factors described in our Annual Report on Form 10K for the year ended March 31, 2003. If any of these risks or uncertainties materializes, our results could differ materially from our expectations described in these forward-looking statements. We do not intend to update these forward-looking statements, including those made under the “Business Outlook” heading.
Note to Editors: Need for Speed and Medal of Honor are trademarks or registered trademarks of Electronic Arts Inc. in the U.S. and/or other countries. The Lord of the Rings and The Return of the King are trademarks of The Saul Zaentz Company d/b/a Tolkien Enterprises under license to New Line Productions, Inc. HARRY POTTER and all related characters and elements are trademarks of and © Warner Bros. Entertainment Inc. Harry Potter Publishing Rights © JKR. NFL, NHL, Tiger Woods, PGA TOUR, NBA, NCAA, NASCAR Thunder and FIFA are trademarks of their respective owners and used with permission. PlayStation is a registered trademark of Sony Computer Entertainment Inc. Xbox is a trademark of Microsoft Corporation in the U.S. and/or other countries and used under license. Nintendo GameCube is a trademark of Nintendo. All other trademarks are the property of their respective owners.
For additional information, please contact:
Karen Sansot | | Jeff Brown |
Director, Investor Relations | | Vice President, Corporate Communications |
650-628-5597 | | 650-628-7922 |
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ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)
| | Three Months Ended September 30,
| | | Six Months Ended September 30,
| |
| | 2003
| | 2002
| | | 2003
| | 2002
| |
Net revenue | | $ | 530,005 | | $ | 453,490 | | | $ | 883,386 | | $ | 785,388 | |
Cost of goods sold | | | 213,762 | | | 200,867 | | | | 363,725 | | | 343,321 | |
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Gross profit | | | 316,243 | | | 252,623 | | | | 519,661 | | | 442,067 | |
Operating expenses: | | | | | | | | | | | | | | |
Marketing and sales | | | 64,041 | | | 55,514 | | | | 123,125 | | | 120,888 | |
General and administrative | | | 36,032 | | | 27,453 | | | | 66,792 | | | 53,116 | |
Research and development | | | 113,493 | | | 96,164 | | | | 204,615 | | | 186,044 | |
Amortization of intangibles | | | 810 | | | 2,246 | | | | 1,490 | | | 4,491 | |
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Total operating expenses | | | 214,376 | | | 181,377 | | | | 396,022 | | | 364,539 | |
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Operating income | | | 101,867 | | | 71,246 | | | | 123,639 | | | 77,528 | |
Interest and other income, net | | | 9,130 | | | 1,177 | | | | 13,979 | | | 4,324 | |
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Income before provision for income taxes and minority interest | | | 110,997 | | | 72,423 | | | | 137,618 | | | 81,852 | |
Provision for income taxes | | | 34,409 | | | 22,451 | | | | 42,662 | | | 25,374 | |
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Income before minority interest | | | 76,588 | | | 49,972 | | | | 94,956 | | | 56,478 | |
Minority interest in consolidated joint venture | | | — | | | 262 | | | | — | | | 1,160 | |
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Net income | | $ | 76,588 | | $ | 50,234 | | | $ | 94,956 | | $ | 57,638 | |
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Class A common stock: | | | | | | | | | | | | | | |
Net income: | | | | | | | | | | | | | | |
Diluted | | $ | 76,588 | | $ | 50,234 | | | $ | 94,956 | | $ | 57,638 | |
Basic | | $ | 76,588 | | $ | 53,407 | | | $ | 94,956 | | $ | 63,801 | |
Earnings per share: | | | | | | | | | | | | | | |
Diluted | | $ | 0.50 | | $ | 0.34 | | | $ | 0.62 | | $ | 0.39 | |
Basic | | $ | 0.52 | | $ | 0.38 | | | $ | 0.65 | | $ | 0.46 | |
Number of shares used in computation: | | | | | | | | | | | | | | |
Diluted | | | 153,890 | | | 146,619 | | | | 152,006 | | | 146,269 | |
Basic | | | 147,418 | | | 139,843 | | | | 146,132 | | | 139,317 | |
Class B common stock: | | | | | | | | | | | | | | |
Net loss, net of retained interest in EA.com | | | N/A | | $ | (3,173 | ) | | | N/A | | $ | (6,163 | ) |
Net loss per share: | | | | | | | | | | | | | | |
Diluted | | | N/A | | $ | (0.57 | ) | | | N/A | | $ | (1.07 | ) |
Basic | | | N/A | | $ | (0.57 | ) | | | N/A | | $ | (1.07 | ) |
Number of shares used in computation: | | | | | | | | | | | | | | |
Diluted | | | N/A | | | 5,547 | | | | N/A | | | 5,759 | |
Basic | | | N/A | | | 5,547 | | | | N/A | | | 5,759 | |
Non-GAAP Results (In thousands, except per share data)
The following table shows the Company’s non-GAAP results reconciled to the Generally Accepted Accounting Principles (“GAAP”) Consolidated Statements of Operations. The Company’s non-GAAP results do not include amortization of intangibles, restructuring charges, asset impairment charges, other-than-temporary impairment of investments in affiliates and charges for acquired in-process technology. In addition, income taxes are calculated on a consolidated effective tax rate of 31%.
| | Three Months Ended September 30,
| | | Six Months Ended September 30,
| |
| | 2003
| | | 2002
| | | 2003
| | | 2002
| |
Net income | | $ | 76,588 | | | $ | 50,234 | | | $ | 94,956 | | | $ | 57,638 | |
Amortization of intangibles | | | 810 | | | | 2,246 | | | | 1,490 | | | | 4,491 | |
Income taxes effect on the above items | | | (251 | ) | | | (696 | ) | | | (462 | ) | | | (1,392 | ) |
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Non-GAAP net income | | $ | 77,147 | | | $ | 51,784 | | | $ | 95,984 | | | $ | 60,737 | |
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Class A common stock: | | | | | | | | | | | | | | | | |
Non-GAAP diluted earnings per share | | $ | 0.50 | | | $ | 0.35 | | | $ | 0.63 | | | $ | 0.42 | |
Number of shares used in diluted earnings per share computation | | | 153,890 | | | | 146,619 | | | | 152,006 | | | | 146,269 | |
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
| | September 30, 2003
| | March 31, 2003(a)
|
ASSETS | | | | | | |
Current assets: | | | | | | |
Cash, cash equivalents and short-term investments | | $ | 1,734,174 | | $ | 1,587,618 |
Marketable equity securities | | | 771 | | | 1,111 |
Receivables, less allowances of $126,806 and $164,634, respectively | | | 202,802 | | | 82,083 |
Inventories, net (b) | | | 39,209 | | | 39,679 |
Deferred income taxes | | | 117,682 | | | 117,180 |
Other current assets (b) | | | 98,405 | | | 83,466 |
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Total current assets | | | 2,193,043 | | | 1,911,137 |
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Property and equipment, net | | | 273,305 | | | 262,252 |
Investment in affiliates | | | 12,909 | | | 20,277 |
Goodwill | | | 88,650 | | | 86,031 |
Other intangibles, net | | | 19,784 | | | 21,301 |
Long-term deferred income taxes | | | 13,840 | | | 13,523 |
Other assets | | | 15,503 | | | 45,012 |
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Total Assets | | $ | 2,617,034 | | $ | 2,359,533 |
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LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY | | | | | | |
Current liabilities: | | | | | | |
Accounts payable | | $ | 129,348 | | $ | 106,329 |
Accrued and other liabilities | | | 416,251 | | | 464,547 |
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Total current liabilities | | | 545,599 | | | 570,876 |
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Minority interest in consolidated joint venture | | | — | | | 3,918 |
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Stockholders’ equity: | | | | | | |
Common stock | | | 1,487 | | | 1,443 |
Paid-in capital | | | 1,038,202 | | | 857,870 |
Retained earnings | | | 1,018,848 | | | 923,892 |
Accumulated other comprehensive income | | | 12,898 | | | 1,534 |
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Total stockholders’ equity | | | 2,071,435 | | | 1,784,739 |
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Total Liabilities, Minority Interest and Stockholders’ Equity | | $ | 2,617,034 | | $ | 2,359,533 |
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(a) | Derived from audited financial statements. |
(b) | The March 31, 2003 balance sheet reflects a $14.5 million reclassification of prepaid manufacturing royalties from Other current assets to Inventories, net to conform to fiscal 2004 presentation. |
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
| | Three Months Ended September 30,
| | | Six Months Ended September 30,
| |
| | 2003
| | | 2002
| | | 2003
| | | 2002
| |
OPERATING ACTIVITIES | | | | | | | | | | | | | | | | |
Net income | | $ | 76,588 | | | $ | 50,234 | | | $ | 94,956 | | | $ | 57,638 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | | | | | | | | | | | | | |
Minority interest in consolidated joint venture | | | — | | | | (262 | ) | | | — | | | | (1,160 | ) |
Equity in net income of investment in affiliates | | | (113 | ) | | | (1,074 | ) | | | (113 | ) | | | (1,313 | ) |
Depreciation and amortization | | | 17,624 | | | | 25,067 | | | | 30,847 | | | | 49,373 | |
Other-than-temporary impairment of investment in affiliates and marketable securities | | | 589 | | | | 2,359 | | | | 589 | | | | 2,830 | |
(Gain)/ loss on sale of property, equipment and marketable securities | | | (8 | ) | | | 20 | | | | 45 | | | | 115 | |
Stock-based compensation | | | 235 | | | | 1,007 | | | | 429 | | | | 2,161 | |
Tax benefit from exercise of stock options | | | 20,026 | | | | 11,666 | | | | 40,169 | | | | 16,866 | |
Change in assets and liabilities: | | | | | | | | | | | | | | | | |
Account receivables, net | | | (188,832 | ) | | | (19,248 | ) | | | (133,034 | ) | | | 52,900 | |
Inventories, net | | | (13,928 | ) | | | (33,502 | ) | | | (406 | ) | | | (38,586 | ) |
Other assets | | | 16,928 | | | | (30,552 | ) | | | 13,167 | | | | (59,870 | ) |
Accounts payable | | | 71,372 | | | | 33,963 | | | | 25,309 | | | | 31,726 | |
Accrued and other liabilities | | | 62,077 | | | | 39,248 | | | | (43,711 | ) | | | (27,111 | ) |
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Net cash provided by operating activities | | | 62,558 | | | | 78,926 | | | | 28,247 | | | | 85,569 | |
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INVESTING ACTIVITIES | | | | | | | | | | | | | | | | |
Proceeds from sale of property and equipment | | | 50 | | | | 32 | | | | 88 | | | | 411 | |
Proceeds from sale of investment in affiliate | | | — | | | | — | | | | 8,467 | | | | — | |
Capital expenditures | | | (16,503 | ) | | | (14,977 | ) | | | (28,690 | ) | | | (23,386 | ) |
Purchase of investment in affiliate | | | — | | | | (251 | ) | | | — | | | | (405 | ) |
Purchases of short-term investments | | | (539,403 | ) | | | (240,480 | ) | | | (1,270,579 | ) | | | (264,480 | ) |
Proceeds from maturities and sales of short-term investments | | | (9,954 | ) | | | 186,481 | | | | 547,792 | | | | 218,268 | |
Distribution from investment in affiliate | | | — | | | | 3,000 | | | | — | | | | 3,000 | |
Acquisition of subsidiary, net of cash required | | | — | | | | (12,868 | ) | | | — | | | | (12,868 | ) |
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Net cash used in investing activities | | | (565,810 | ) | | | (79,063 | ) | | | (742,922 | ) | | | (79,460 | ) |
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FINANCING ACTIVITIES | | | | | | | | | | | | | | | | |
Proceeds from sale of common stock through employee stock plans and other plans | | | 67,010 | | | | 41,388 | | | | 139,875 | | | | 61,282 | |
Purchase of Class B common stock | | | (225 | ) | | | — | | | | (225 | ) | | | — | |
Dividend to joint venture and purchase of minority interest investment | | | — | | | | — | | | | (5,100 | ) | | | — | |
Proceeds from minority interest investment | | | — | | | | (751 | ) | | | — | | | | (751 | ) |
Repayment of Class B notes receivable | | | (7 | ) | | | — | | | | 128 | | | | — | |
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Net cash provided by financing activities | | | 66,778 | | | | 40,637 | | | | 134,678 | | | | 60,531 | |
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Effect of foreign exchange on cash and cash equivalents | | | 1,902 | | | | (1,567 | ) | | | 6,127 | | | | 8,005 | |
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Increase (decrease) in cash and cash equivalents | | | (434,572 | ) | | | 38,933 | | | | (573,870 | ) | | | 74,645 | |
Beginning cash and cash equivalents | | | 810,697 | | | | 588,538 | | | | 949,995 | | | | 552,826 | |
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Ending cash and cash equivalents | | | 376,125 | | | | 627,471 | | | | 376,125 | | | | 627,471 | |
Short-term investments | | | 1,358,049 | | | | 293,297 | | | | 1,358,049 | | | | 293,297 | |
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Ending cash, cash equivalents and short-term investments | | $ | 1,734,174 | | | $ | 920,768 | | | $ | 1,734,174 | | | $ | 920,768 | |
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ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations
(in millions, except per share data)
The following tables show the Company’s non-GAAP results reconciled to the Generally Accepted Accounting Principles (“GAAP”) Consolidated Statements of Operations. The Company’s non-GAAP results do not include amortization of intangibles, restructuring charges, asset impairment charges, other-than-temporary impairment of investments in affiliates, charges for acquired in-process technology and their related income tax effect.
| | Q2 FY03 | | | Q3 FY03 | | | Q4 FY03 | | | Q1 FY04 | | | Q2 FY04 | |
QUARTERLY RESULTS | | | | | | | | | | | | | | | | | | | | |
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Operating Income | | | | | | | | | | | | | | | | | | | | |
GAAP operating income | | $ | 71 | | | $ | 369 | | | $ | 10 | | | $ | 22 | | | $ | 102 | |
Adjustments: | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles | | | 2 | | | | 3 | | | | 1 | | | | — | | | | 1 | |
Restructuring charges | | | — | | | | 8 | | | | 7 | | | | — | | | | — | |
Asset impairment charges | | | — | | | | 2 | | | | 64 | | | | — | | | | — | |
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Total adjustments | | | 2 | | | | 13 | | | | 72 | | | | — | | | | 1 | |
Non-GAAP operating income | | $ | 73 | | | $ | 382 | | | $ | 82 | | | $ | 22 | | | $ | 103 | |
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Non-GAAP operating income margin—% of net revenue | | | 16 | % | | | 31 | % | | | 18 | % | | | 6 | % | | | 19 | % |
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Net Income | | | | | | | | | | | | | | | | | | | | |
GAAP net income | | $ | 50 | | | $ | 250 | | | $ | 9 | | | $ | 18 | | | $ | 77 | |
Adjustments: | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles | | | 2 | | | | 3 | | | | 1 | | | | 1 | | | | — | |
Restructuring charges | | | — | | | | 8 | | | | 7 | | | | — | | | | — | |
Asset impairment charges | | | — | | | | 2 | | | | 64 | | | | — | | | | — | |
Other-than-temporary impairment of investment in affiliates | | | — | | | | 10 | | | | — | | | | — | | | | — | |
Income taxes effect on the above items | | | — | | | | (8 | ) | | | (22 | ) | | | — | | | | — | |
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Total adjustments | | | 2 | | | | 15 | | | | 50 | | | | 1 | | | | — | |
Non-GAAP net income | | $ | 52 | | | $ | 265 | | | $ | 59 | | | $ | 19 | | | $ | 77 | |
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Non-GAAP net income margin—% of net revenue | | | 11 | % | | | 21 | % | | | 13 | % | | | 5 | % | | | 15 | % |
GAAP diluted earnings per share | | $ | 0.34 | | | $ | 1.69 | | | $ | 0.06 | | | $ | 0.12 | | | $ | 0.50 | |
Non-GAAP diluted earnings per share | | $ | 0.35 | | | $ | 1.79 | | | $ | 0.40 | | | $ | 0.13 | | | $ | 0.50 | |
Number of shares used in diluted earnings per share computation | | | 147 | | | | 148 | | | | 147 | | | | 150 | | | | 154 | |
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TRAILING TWELVE MONTH RESULTS | | | | | | | | | | | | | | | | | | | | |
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Operating Income | | | | | | | | | | | | | | | | | | | | |
GAAP operating income | | $ | 333 | | | $ | 513 | | | $ | 456 | | | $ | 472 | | | $ | 503 | |
Adjustments: | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles | | | 16 | | | | 13 | | | | 8 | | | | 6 | | | | 5 | |
Restructuring charges | | | 7 | | | | 8 | | | | 15 | | | | 15 | | | | 15 | |
Asset impairment charges | | | 14 | | | | 9 | | | | 66 | | | | 66 | | | | 66 | |
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Total adjustments | | | 37 | | | | 30 | | | | 89 | | | | 87 | | | | 86 | |
Non-GAAP operating income | | $ | 370 | | | $ | 543 | | | $ | 545 | | | $ | 559 | | | $ | 589 | |
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Non-GAAP operating income margin—% of net revenue | | | 18 | % | | | 22 | % | | | 22 | % | | | 22 | % | | | 23 | % |
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Net Income | | | | | | | | | | | | | | | | | | | | |
GAAP net income | | $ | 237 | | | $ | 355 | | | $ | 317 | | | $ | 328 | | | $ | 354 | |
Adjustments: | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles | | | 16 | | | | 13 | | | | 8 | | | | 7 | | | | 5 | |
Restructuring charges | | | 7 | | | | 8 | | | | 15 | | | | 15 | | | | 15 | |
Asset impairment charges | | | 14 | | | | 9 | | | | 66 | | | | 66 | | | | 66 | |
Other-than-temporary impairment of investment in affiliates | | | — | | | | 10 | | | | 10 | | | | 10 | | | | 10 | |
Income taxes effect on the above items | | | (11 | ) | | | (13 | ) | | | (31 | ) | | | (31 | ) | | | (30 | ) |
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Total adjustments | | | 26 | | | | 27 | | | | 68 | | | | 67 | | | | 66 | |
Non-GAAP net income | | $ | 263 | | | $ | 382 | | | $ | 385 | | | $ | 395 | | | $ | 420 | |
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Non-GAAP net income margin—% of net revenue | | | 13 | % | | | 15 | % | | | 16 | % | | | 16 | % | | | 16 | % |
GAAP diluted earnings per share | | $ | 1.64 | | | $ | 2.41 | | | $ | 2.17 | | | $ | 2.21 | | | $ | 2.37 | |
Non-GAAP diluted earnings per share | | $ | 1.82 | | | $ | 2.59 | | | $ | 2.63 | | | $ | 2.67 | | | $ | 2.82 | |
Number of shares used in diluted earnings per share computation | | | 145 | | | | 147 | | | | 146 | | | | 148 | | | | 149 | |
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
($ in millions, except per share data, SKU count and Headcount)
| | Q2 FY03 | | | Q3 FY03 | | | Q4 FY03 | | | Q1 FY04 | | | Q2 FY04 | | | YOY % Growth | |
CONSOLIDATED FINANCIAL DATA | | | | | | | | | | | | | | | | | | | | | | | |
Net revenue | | | 453 | | | | 1,234 | | | | 463 | | | | 353 | | | | 530 | | | 17 | % |
Net revenue—trailing twelve months (“TTM”) | | | 2,088 | | | | 2,489 | | | | 2,482 | | | | 2,503 | | | | 2,580 | | | 24 | % |
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Gross profit | | | 253 | | | | 668 | | | | 299 | | | | 203 | | | | 316 | | | 25 | % |
Gross margin—% of net revenue | | | 56 | % | | | 54 | % | | | 65 | % | | | 58 | % | | | 60 | % | | | |
Gross profit—TTM | | | 1,138 | | | | 1,375 | | | | 1,409 | | | | 1,423 | | | | 1,486 | | | 31 | % |
Gross margin—TTM % of net revenue | | | 55 | % | | | 55 | % | | | 57 | % | | | 57 | % | | | 58 | % | | | |
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Operating income | | | 71 | | | | 369 | | | | 10 | | | | 22 | | | | 102 | | | 43 | % |
Operating income margin—% of net revenue | | | 16 | % | | | 30 | % | | | 2 | % | | | 6 | % | | | 19 | % | | | |
Operating income—TTM | | | 333 | | | | 513 | | | | 456 | | | | 472 | | | | 503 | | | 51 | % |
Operating income margin—TTM % of net revenue | | | 16 | % | | | 21 | % | | | 18 | % | | | 19 | % | | | 19 | % | | | |
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Net income | | | 50 | | | | 250 | | | | 9 | | | | 18 | | | | 77 | | | 52 | % |
Diluted earnings per share | | $ | 0.34 | | | $ | 1.69 | | | $ | 0.06 | | | $ | 0.12 | | | $ | 0.50 | | | 47 | % |
Net income—TTM | | | 237 | | | | 355 | | | | 317 | | | | 328 | | | | 354 | | | 49 | % |
Diluted earnings per share—TTM | | $ | 1.64 | | | $ | 2.41 | | | $ | 2.17 | | | $ | 2.21 | | | $ | 2.37 | | | 45 | % |
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Non-GAAP operating income(a) | | | 73 | | | | 382 | | | | 82 | | | | 22 | | | | 103 | | | 40 | % |
Non-GAAP operating income margin—% of net revenue | | | 16 | % | | | 31 | % | | | 18 | % | | | 6 | % | | | 19 | % | | | |
Non-GAAP operating income—TTM(a) | | | 370 | | | | 543 | | | | 545 | | | | 559 | | | | 589 | | | 59 | % |
Non-GAAP operating income margin—TTM % of net revenue | | | 18 | % | | | 22 | % | | | 22 | % | | | 22 | % | | | 23 | % | | | |
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Non-GAAP net income(a) | | | 52 | | | | 265 | | | | 59 | | | | 19 | | | | 77 | | | 49 | % |
Non-GAAP diluted earnings per share(a) | | $ | 0.35 | | | $ | 1.79 | | | $ | 0.40 | | | $ | 0.13 | | | $ | 0.50 | | | 43 | % |
Non-GAAP net income—TTM(a) | | | 263 | | | | 382 | | | | 385 | | | | 395 | | | | 420 | | | 60 | % |
Non-GAAP diluted earnings per share—TTM(a) | | $ | 1.82 | | | $ | 2.59 | | | $ | 2.63 | | | $ | 2.67 | | | $ | 2.82 | | | 55 | % |
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CASH FLOW DATA | | | | | | | | | | | | | | | | | | | | | | | |
Operating cash flow | | | 79 | | | | 197 | | | | 431 | | | | (34 | ) | | | 63 | | | (21 | )% |
Operating cash flow—TTM | | | 454 | | | | 579 | | | | 714 | | | | 673 | | | | 657 | | | 45 | % |
Capital expenditures | | | 15 | | | | 11 | | | | 25 | | | | 12 | | | | 17 | | | 10 | % |
Capital expenditures—TTM | | | 45 | | | | 46 | | | | 59 | | | | 63 | | | | 65 | | | 43 | % |
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BALANCE SHEET DATA | | | | | | | | | | | | | | | | | | | | | | | |
Cash, cash equivalents and short term investments | | | 921 | | | | 1,165 | | | | 1,588 | | | | 1,622 | | | | 1,734 | | | 88 | % |
Marketable equity securities | | | 6 | | | | 1 | | | | 1 | | | | 1 | | | | 1 | | | (88 | )% |
Account receivables, net | | | 139 | | | | 609 | | | | 82 | | | | 37 | | | | 203 | | | 46 | % |
Inventories, net | | | 73 | | | | 54 | | | | 40 | | | | 26 | | | | 39 | | | (47 | )% |
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OTHER | | | | | | | | | | | | | | | | | | | | | | | |
Employees | | | 3,704 | | | | 3,788 | | | | 3,938 | | | | 4,017 | | | | 4,180 | | | 13 | % |
(a) | Please see attached Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations. |
ELECTRONIC ARTS INC. AND SUBSIDARIES
Unaudited Supplemental Financial Information and Business Metrics
($ in millions, except per share data, SKU count and Headcount)
| | Q2 FY03 | | | Q3 FY03 | | | Q4 FY03 | | | Q1 FY04 | | | Q2 FY04 | | | YOY% Growth | |
GEOGRAPHIC REVENUE MIX | | | | | | | | | | | | | | | | | | |
North America Revenue | | 313 | | | 696 | | | 253 | | | 199 | | | 358 | | | 14 | % |
Revenue outside North America | | 140 | | | 538 | | | 210 | | | 154 | | | 172 | | | 23 | % |
Europe Revenue | | 117 | | | 471 | | | 165 | | | 128 | | | 145 | | | 24 | % |
Japan Revenue | | 9 | | | 29 | | | 25 | | | 12 | | | 9 | | | (3 | %) |
Asia Pacific Revenue | | 14 | | | 38 | | | 20 | | | 14 | | | 18 | | | 28 | % |
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Net Revenue | | 453 | | | 1,234 | | | 463 | | | 353 | | | 530 | | | 17 | % |
GEOGRAPHIC REVENUE MIX—as a % of Net Revenue | | | | | | | | | | | | | | | | | | |
North America Revenue | | 69 | % | | 57 | % | | 55 | % | | 56 | % | | 68 | % | | | |
Revenue outside North America | | 31 | % | | 43 | % | | 45 | % | | 44 | % | | 32 | % | | | |
Europe Revenue | | 26 | % | | 38 | % | | 36 | % | | 36 | % | | 27 | % | | | |
Japan Revenue | | 2 | % | | 2 | % | | 5 | % | | 4 | % | | 2 | % | | | |
Asia Pacific Revenue | | 3 | % | | 3 | % | | 4 | % | | 4 | % | | 3 | % | | | |
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Net Revenue | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | | |
PLATFORM REVENUE MIX | | | | | | | | | | | | | | | | | | |
Sony PlayStation 2 | | 159 | | | 460 | | | 158 | | | 118 | | | 221 | | | 39 | % |
PC | | 82 | | | 219 | | | 122 | | | 80 | | | 93 | | | 13 | % |
Xbox | | 37 | | | 117 | | | 45 | | | 31 | | | 69 | | | 83 | % |
Nintendo GameCube | | 28 | | | 111 | | | 23 | | | 21 | | | 25 | | | (12 | %) |
Game Boy Advance | | 4 | | | 68 | | | 5 | | | 2 | | | 4 | | | 4 | % |
Sony PlayStation | | 24 | | | 54 | | | 9 | | | 6 | | | 8 | | | (69 | %) |
Co-publishing and Distribution | | 96 | | | 157 | | | 75 | | | 72 | | | 92 | | | (4 | %) |
Subscription Services | | 8 | | | 12 | | | 17 | | | 14 | | | 11 | | | 34 | % |
Advertising, Programming, Licensing and Other | | 15 | | | 36 | | | 9 | | | 9 | | | 7 | | | (47 | %) |
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Net Revenue | | 453 | | | 1,234 | | | 463 | | | 353 | | | 530 | | | 17 | % |
PLATFORM REVENUE MIX—as a % of Net Revenue | | | | | | | | | | | | | | | | | | |
Sony PlayStation 2 | | 35 | % | | 37 | % | | 34 | % | | 33 | % | | 42 | % | | | |
PC | | 18 | % | | 18 | % | | 26 | % | | 23 | % | | 18 | % | | | |
Xbox | | 8 | % | | 9 | % | | 10 | % | | 9 | % | | 13 | % | | | |
Nintendo GameCube | | 6 | % | | 9 | % | | 5 | % | | 6 | % | | 5 | % | | | |
Game Boy Advance | | 1 | % | | 6 | % | | 1 | % | | 1 | % | | 1 | % | | | |
Sony PlayStation | | 6 | % | | 4 | % | | 2 | % | | 2 | % | | 1 | % | | | |
Co-publishing and Distribution | | 21 | % | | 13 | % | | 16 | % | | 20 | % | | 17 | % | | | |
Subscription Services | | 2 | % | | 1 | % | | 4 | % | | 4 | % | | 2 | % | | | |
Advertising, Programming, Licensing and Other | | 3 | % | | 3 | % | | 2 | % | | 2 | % | | 1 | % | | | |
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Net Revenue | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | | |
Platform SKU Release Mix | | | | | | | | | | | | | | | | | | |
Sony PlayStation 2 | | 4 | | | 9 | | | 2 | | | 3 | | | 6 | | | 50 | % |
PC | | 3 | | | 9 | | | 3 | | | 2 | | | 10 | | | 233 | % |
Xbox | | 3 | | | 8 | | | 3 | | | 2 | | | 5 | | | 67 | % |
Nintendo GameCube | | 4 | | | 9 | | | 2 | | | 3 | | | 4 | | | 0 | % |
Game Boy Advance | | 1 | | | 4 | | | 1 | | | — | | | 1 | | | 0 | % |
Sony PlayStation | | 2 | | | 3 | | | — | | | — | | | 2 | | | 0 | % |
Online and Other | | 1 | | | 2 | | | 1 | | | — | | | — | | | (100 | %) |
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Total SKUs | | 18 | | | 44 | | | 12 | | | 10 | | | 28 | | | 56 | % |
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ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Fact Sheet for Q2 Fiscal 2004
Q2 Product Releases | | Platform |
| | |
Ÿ | | EA SPORTS™ Rugby 2004 | | PlayStation®2 |
Ÿ | | Madden NFL 2004 | | PlayStation 2 |
Ÿ | | NASCAR Thunder™ 2004 | | PlayStation 2 |
Ÿ | | NCAA® Football 2004 | | PlayStation 2 |
Ÿ | | NHL® 2004 | | PlayStation 2 |
Ÿ | | Tiger Woods PGA TOUR® 2004 | | PlayStation 2 |
Ÿ | | Madden NFL 2004 | | Xbox™ |
Ÿ | | NASCAR Thunder 2004 | | Xbox |
Ÿ | | NCAA Football 2004 | | Xbox |
Ÿ | | NHL 2004 | | Xbox |
Ÿ | | Tiger Woods PGA TOUR 2004 | | Xbox |
Ÿ | | Madden NFL 2004 | | Nintendo GameCube™ |
Ÿ | | NCAA Football 2004 | | Nintendo GameCube |
Ÿ | | NHL 2004 | | Nintendo GameCube |
Ÿ | | Tiger Woods PGA TOUR 2004 | | Nintendo GameCube |
Ÿ | | Madden NFL 2004 | | PlayStation |
Ÿ | | NASCAR Thunder 2004 | | PlayStation |
Ÿ | | Madden NFL 2004 | | Game Boy® Advance |
Ÿ | | EA SPORTS Rugby 2004 | | PC |
Ÿ | | Command & Conquer™ Generals Zero Hour | | PC |
Ÿ | | Madden NFL 2004 | | PC |
Ÿ | | Medal of Honor Allied Assault™ Breakthrough | | PC |
Ÿ | | NASCAR Thunder 2004 | | PC |
Ÿ | | NHL 2004 | | PC |
Ÿ | | SimCity™ 4 Deluxe Edition | | PC |
Ÿ | | SimCity™ 4 Rush Hour | | PC |
Ÿ | | The Sims Double Deluxe | | PC |
Ÿ | | Tiger Woods PGA TOUR 2004 | | PC |
|
Co-pub, International only and Others (not in SKU count) |
| | |
Ÿ | | Aliens Natural Selection | | PlayStation 2 |
Ÿ | | Freedom Fighters™ | | PlayStation 2 |
Ÿ | | Soul Calibur II | | PlayStation 2 |
Ÿ | | Aliens Natural Selection | | Xbox |
Ÿ | | Freedom Fighters | | Xbox |
Ÿ | | Soul Calibur II | | Xbox |
Ÿ | | Disney’s Party | | Nintendo GameCube |
Ÿ | | Drome Racers | | Nintendo GameCube |
Ÿ | | Freedom Fighters | | Nintendo GameCube |
Ÿ | | Disney’s Party | | Game Boy® Advance |
Ÿ | | Battlefield 1942™: Secret Weapons of WWII | | PC |
Ÿ | | Freedom Fighters | | PC |
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