Electronic Arts 2002 Annual Report Download - page 29

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General and Administrative
% OF NET % OF NET
2002 REVENUES 2001 REVENUES % CHANGE
$107,059,000 6.2% $104,041,000 7.9% 2.9%
General and administrative expenses increased 2.9% for fiscal 2002, primarily attributed to:
|•••»$1,000,000 contribution to charity organizations providing support for the September 11th tragedy.
|•••»Increase in payroll and occupancy costs to support the increased growth in North America.
|•••»Increase in bad debt expense of $1,820,000 due to higher product sales.
Research and Development
% OF NET % OF NET
2002 REVENUES 2001 REVENUES % CHANGE
Research and development $317,654,000 18.4% $325,777,000 24.6% (2.5%)
Network development
and support 59,483,000 3.5% 51,794,000 3.9% 14.8%
Customer relationship
management 10,599,000 0.6% 11,357,000 0.9% (6.7%)
Total research and
development $387,736,000 22.5% $388,928,000 29.4% (0.3%)
RESEARCH AND DEVELOPMENT EXPENSES (EXCLUDING NETWORK DEVELOPMENT
AND SUPPORT AND CUSTOMER RELATIONSHIP MANAGEMENT)
Research and development expenses (excluding Network Development and Support and Customer Relation-
ship Management) decreased in absolute dollars by 2.5% for fiscal 2002, primarily attributed to:
|•••»Headcount reductions in EA.com in October 2001 (see Charge for Restructuring and Impairment
discussion below).
|•••»Replacement of EA.com’s free games channel with Pogo free games.
|•••»Offset by increased payroll costs due to higher headcount in EA studios,net of co-development arrangements.
|•••»Offset by increased spending on EA.com online projects in development, primarily
The Sims Online
and
Earth & Beyond™
.
We expect research and development spending to increase in fiscal 2003 due to an increase in development
spending for next generation console products including the PlayStation 2, Xbox and Nintendo GameCube,
as well as extending our investment in the PC platform.
NETWORK DEVELOPMENT AND SUPPORT
Network development and support expenses increased in absolute dollars by 14.8% for fiscal 2002 primar-
ily due to:
|•••»Increased depreciation related to both hardware and internally developed software that began when
the site went live in October 2000.
|•••»Increased headcount and network-related costs associated with Pogo.
|•••»Partially offset by reduced consultant costs related to project and site enhancements.
The expense run rate has been reduced as a result of the restructuring. We do not expect expenses to
increase in fiscal 2003.
CUSTOMER RELATIONSHIP MANAGEMENT
Customer relationship management expenses decreased in absolute dollars by 6.7% for fiscal 2002 primarily
due to headcount reductions in EA.com that occurred in October 2001 as part of the restructuring plan
(see Charge for Restructuring and Impairment discussion below).
EA 2002 AR 25