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Electronic Arts Annual Report, Year Ended Mar 31, 1997

Filing Date
Filed June 23, 1997
Period End
March 31, 1997
Security
EA
In the record · 2016–202610-K1210-Q328-K135

EA filed 12 annual reports (10-K), 32 quarterly reports (10-Q) and 135 current reports (8-K) between 2016 and 2026.

  1. FY2017 annual report10-K · May ’17May ’17
  2. Leadership change8-K · Nov ’19Nov ’19
  3. Leadership change8-K · Nov ’21Nov ’21
  4. Material agreement8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K filed June 23, 1997. Cited figures are marked; the original filing is the authoritative source.

Electronic Arts reported fiscal 1997 (year ended March 31, 1997) net revenues of $624.8 milliona, up 17.5% from $531.9 million, and net income of $53.0 million, up 30.9%.

Diluted EPS was $0.96b versus $0.75. Gross margin improved to 50.1% (cost of goods sold fell to 49.9% of revenue from 51.4%), and operating income rose 25.8% to $67.3 million. Growth was driven by the shift to 32-bit CD-based platforms: PlayStation sales rose to $185.3 million (30% of revenue) from $50.5 million, and PC-CD revenue reached $178.3 million.

16-bit cartridge revenue fell sharply, with Genesis down to 10% of revenue and SNES to 4%, reflecting the platform transition. The balance sheet remains strong, with $230.1 millionc in cash and short-term investments, working capital of $241.6 million, and no debt. Operating cash flow was $80.6 million.

The company has never paid cash dividends. International revenue grew 28%d to 46% of the total, with Europe up 42%, while Japan declined 19%. Key risks for investors include heavy dependence on Sony PlayStation (30% of revenue) and on hardware licensors who are also competitors, a seasonal and hit-driven business, the expected decline of Genesis and SNES revenue in fiscal 1998, limited N64 shipments until calendar 1998, and a pending pooling-of-interests merger with Maxis (about 4.1 million shares) expected to close in the September 1997 quarter.

02—Key points

Key Highlights

  1. Net revenues rose 17.5% to $624.8 million, and net income rose 30.9% to $53.0 million (EPS $0.96 vs. $0.75).
  2. Gross margin expanded to 50.1% from 48.6%, and operating income grew 25.8% to $67.3 million.
  3. PlayStation became the largest single platform at $185.3 million (30% of revenue), and 32-bit CD-video game revenue reached 36% of total revenue.
  4. 16-bit cartridge revenue fell to $89.2 million from $202.6 million as the market transitioned to CD-based platforms; Genesis and SNES releases are being wound down.
  5. Balance sheet is strong, with $230.1 million in cash and short-term investments, no debt, and $241.6 million in working capital.
  6. Concentration risk: Madden Football '97 represented 11% of revenue, and hardware licensors (Sony, Nintendo, Sega) are also direct competitors.
  7. Pending merger with Maxis (about 4.1 million shares, pooling of interests) expected to close in the quarter ending September 30, 1997.

03—Questions

Frequently Asked Questions

  1. What drove EA's revenue growth in fiscal 1997?

    Growth came mainly from 32-bit CD-based products. PlayStation sales rose to $185.3 million from $50.5 million, and PC-CD revenue increased to $178.3 million from $140.6 million. These gains more than offset a $113 million decline in 16-bit cartridge sales.

  2. How concentrated is EA's business on specific platforms and titles?

    Sony's PlayStation accounted for about 30% of net revenue, and Madden Football '97 alone made up 11%. No single customer exceeded 10% of revenue. EA depends on hardware licensors that also compete with it, and it has limited control over manufacturing and supply for PlayStation and N64 products.

  3. Is EA's balance sheet and cash position sound?

    Yes. EA had $230.1 million in cash and short-term investments, $241.6 million in working capital, and no funded debt. Operating cash flow was $80.6 million, up from $8.7 million. Management believes existing resources are sufficient for the foreseeable future.

  4. What are the main risks for fiscal 1998?

    Genesis and SNES revenue is expected to decline further, and N64 products will not ship in significant volume until calendar 1998. Product delays, hit-driven sales, rising celebrity and platform royalties, and pressure on margins from price protection and distribution costs could all affect results. Management also warned that the first quarter of fiscal 1998 could fall short of analyst expectations.

  5. Are there pending acquisitions or other material events?

    EA agreed on June 4, 1997 to merge with Maxis, Inc. through an exchange of about 4.1 million EA shares, to be accounted for as a pooling of interests. The deal is expected to close in the quarter ending September 30, 1997. Separately, EA's union agreements with SAG and AFTRA expire in June 1997, which creates uncertainty for video-heavy products.

04—Continue

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