EA Reports Record $1.23 Billion Quarter; Driven by Harry Potter, James Bond, FIFA Soccer

Business Wire, Jan 29, 2003

Business Editors

REDWOOD CITY, Calif.--(BUSINESS WIRE)--Jan. 29, 2003

Electronic Arts (NASDAQ:ERTS) today announced record financial results for the fiscal quarter ended December 31, 2002. Consolidated net revenues for the quarter were $1.23 billion, up 48 percent compared with $833 million for the fiscal quarter ending December 31, 2001. Net revenues were driven by: Harry Potter and the Chamber of Secrets(TM), James Bond 007: Nightfire(TM), FIFA Soccer 2003, The Lord of the Rings(TM), The Two Towers(TM), Need for Speed(TM) Hot Pursuit 2, NBA Live 2003 and Medal of Honor Frontline(TM).

Consolidated net income for the quarter was $250 million, an 89 percent increase over the prior year. Diluted earnings per share for the quarter was $1.69, up 84 percent, or $0.77, year over year.

"This was a historic holiday season for the Company," said Larry Probst, Chairman and Chief Executive Officer of Electronic Arts. "EA became the first third-party publisher to achieve a billion dollar quarter. Eleven titles sold more than one million units. Our global development and publishing organizations have never been stronger."

In the U.S., EA had five of the top ten titles on the industry leading PlayStation(R)2 computer entertainment system and five of the top ten titles on the PC. In Europe, EA had 4 titles that sold more than one million units each and FIFA 2003 outsold its nearest competitor by 2.5:1 across all platforms.

"Our results again demonstrate the global strength of EA," said Warren Jenson, Chief Financial and Administrative Officer. "While revenues grew by 48 percent to $1.23 billion, we also delivered on the bottom line. EA's net income increased by 89 percent to $250 million and our trailing twelve month operating cash flow was $580 million."

Highlights for the Quarter (comparisons are to the quarter ending December 31, 2001)

-- Net revenues increased in all territories: North America - up 36 percent to $696 million; Europe - up 68 percent to $471 million; Asia Pacific - up 75 percent to $38 million; Japan - up 41 percent to $29 million.

-- Gross margin was 55 percent versus 52 percent.

-- Operating income margin reached 30 percent versus 23 percent.

-- In the U.S., EA had five of the top ten titles on the leading PlayStation(R)2 console - Madden NFL(TM)2003, The Lord of the Rings, The Two Towers, Kingdom Hearts, NBA Live 2003 and James Bond 007: Nightfire - according to NPDFunworld TRSTS.

-- EA had five of the top ten selling PC games in the U.S. - The Sims(TM)Deluxe, The Sims(TM)Unleashed Expansion Pack, Harry Potter and the Chamber of Secrets, Medal of Honor Allied Assault(TM)and Battlefield 1942(TM)- according to NPD Techworld.

-- NBA Live 2003 sold one million units at retail in the U.S., outselling its nearest competitor by over 2:1 - according to NPDFunworld TRSTS.

-- The Sims Online(TM) was introduced on December 17, 2002. Through January 28, 2003, approximately 105,000 units have sold through and approximately 82,000 individuals are registered players.

-- In Europe, EA had four titles that sold over one million units

- Harry Potter and the Chamber of Secrets, FIFA Soccer 2003,

James Bond 007: Nightfire and The Lord of the Rings, The Two

Towers.

-- For calendar 2002, EA had 22 titles that sold more than a

million units each.

Studio Restructuring

In the fourth quarter, EA will begin the consolidation of our Los Angeles, Irvine and Las Vegas studios into a major game development studio in Los Angeles. Once complete, we will have major centralized studio operations in Vancouver, British Columbia; Redwood Shores, Walnut Creek, and Los Angeles, California; Orlando, Florida; Tokyo, Japan; and Chertsey, United Kingdom.

Business Outlook

The following forward-looking statements reflect EA's expectations as of January 29, 2003. Results may be materially different and are affected by many factors, such as changes in the overall global economy, actual consumer spending, product development delays, subscriber acceptance of our online products and other risk factors detailed in this release.

Fiscal Fourth Quarter - Ending March 31, 2003

-- Consolidated net revenues are expected to be between $420

million and $460 million.

-- Consolidated diluted earnings per share are expected to be

between $0.27 and $0.35. This range does not factor in studio

restructuring charges, which are still being determined.

Fiscal Year - Ending March 31, 2003

-- Consolidated net revenues are expected to be between $2.439

and $2.479 billion.

-- Consolidated diluted earnings per share are expected to be

between $2.37 and $2.45. This range does not factor in studio

restructuring charges, which are still being determined.

Supplemental Pro Forma Disclosure

Pro forma results are included in the financial schedules attached to this report as a supplement to EA's GAAP (Generally Accepted Accounting Principles) results. The Company believes pro forma results are useful in illustrating and explaining operating results and comparisons to prior periods.

Pro forma results exclude the following items from the Company's statement of operations: