10-QPeriod: Q3 FY2002

ELECTRONIC ARTS INC. Quarterly Report for Q3 Ended Dec 31, 2001

Filed February 14, 2002For Securities:EA

Summary

Electronic Arts Inc. (EA) reported strong revenue growth for the three and nine months ended December 31, 2001, compared to the prior year, driven by new game console launches and continued demand for existing platforms. The company saw significant increases in net revenues, particularly in Europe and North America, fueled by titles on PlayStation 2, Xbox, and Nintendo GameCube. Despite overall revenue growth, EA.com, the online segment, incurred substantial operating losses and announced a restructuring plan involving workforce reductions and facility consolidation to improve its cost structure. The company ended the period with a healthy cash position, which management believes is sufficient for its operational needs. Key financial highlights include a substantial increase in net revenues, reaching $832.9 million for the quarter and $1.25 billion for the nine months. Gross profit also saw a considerable rise. However, operating income was significantly impacted by restructuring and asset impairment charges totaling $14.1 million related to EA.com. Despite these charges and ongoing investments in its online division, EA reported a net income of $132.3 million for the quarter, a significant improvement from the prior year's $88.0 million, and $54.2 million for the nine months.

Key Highlights

  • 1Net revenues increased by 30.1% to $832.9 million for the three months ended December 31, 2001, and by 23.6% to $1.25 billion for the nine months ended December 31, 2001, compared to the prior year periods.
  • 2Operating income for the three months ended December 31, 2001, significantly increased to $188.5 million from $125.4 million in the prior year, despite a substantial restructuring charge.
  • 3Net income for the three months ended December 31, 2001, rose to $132.3 million ($0.92 diluted EPS) from $88.0 million ($0.63 diluted EPS) in the prior year.
  • 4The company reported $14.1 million in restructuring and asset impairment charges related to EA.com's plan to reduce workforce and consolidate facilities.
  • 5Cash, cash equivalents, and short-term investments stood at $486.8 million as of December 31, 2001, an increase from $466.5 million at the end of the prior fiscal year.
  • 6New platform revenues from Xbox and Nintendo GameCube contributed $44.6 million and $27.5 million respectively in the third quarter of fiscal 2002.
  • 7The company's balance sheet showed total assets of $1.7 billion as of December 31, 2001, with total stockholders' equity at $1.17 billion.

Frequently Asked Questions

Electronic Arts demonstrated strong revenue growth, with net revenues increasing by 30.1% for the three months and 23.6% for the nine months ended December 31, 2001, compared to the prior year. Net income also saw a significant increase, rising to $132.3 million for the quarter, indicating improved profitability.

Revenue growth was primarily driven by strong sales on new gaming platforms like the PlayStation 2, Xbox, and Nintendo GameCube, as well as continued demand for titles on established platforms. Geographic regions like Europe and North America showed particularly strong increases in net revenues.

EA.com continues to incur substantial operating losses despite revenue generation from online subscriptions and advertising. The company announced a restructuring plan for EA.com, including workforce reductions and facility consolidation, to improve its cost structure. Management anticipates continued funding from Electronic Arts for EA.com's operations.

EA maintains a strong liquidity position with $486.8 million in cash, cash equivalents, and short-term investments as of December 31, 2001. The company's operating activities used cash, but financing activities provided cash. Management believes its current financial resources are sufficient to meet its short-term and long-term requirements.