2K Sports 2008 Annual Report Download - page 87

developer of the Bully franchise. Total consideration paid upon acquisition was $6,068, consisting of $3,740
in cash, 53,033 shares of our unregistered common stock and $975 of development advances paid prior to
the acquisition. The terms of the transaction also include additional contingent deferred payments of up to
$15,000 payable in cash or stock, based on meeting certain employment provisions, the release of several
titles, and achievements based on sales of specific titles. The goodwill recorded in connection with this
acquisition is deductible for tax purposes.
In December 2007, we acquired all of the outstanding capital stock of 2K Czech, formerly known as
Illusion Softworks, a.s. (‘‘2K Czech’’), the Czech Republic developer of the Mafia video game franchise.
The acquisition reflects our strategy to add high-value intellectual property and development studios to our
portfolio. Total consideration paid upon acquisition was $32,908, consisting primarily of 1,496,647 shares of
our unregistered common stock and $4,645 of development advances paid prior to the acquisition. The
terms of the transaction also include additional contingent deferred payments in cash and stock of up to
$10,000, which is expected to be allocated between purchase price and employee compensation expense
when the conditions requiring their payment are met. We are currently evaluating the opportunity to claim
tax deductions for the goodwill.
In November 2005, we acquired all of the outstanding capital stock of Firaxis Games, Inc., a developer of
PC and strategy titles, including the Sid Meier’s Civilization franchise. Total consideration paid upon
acquisition was $15,442 including 678,683 shares of our unregistered common stock and $4,085 of
development advances paid prior to the acquisition. We also agreed to make additional contingent
deferred cash payments of up to $11,250 based on future product sales, of which approximately $10,000
will be recorded as additional purchase price and $1,250 will be recorded as employee compensation
expense when the conditions requiring their payment are met. The goodwill recorded in connection with
this acquisition is not deductible for tax purposes.
6. INVENTORY
As of October 31, 2008 and 2007, inventory consisted of:
October 31, October 31,
2008 2007
Finished products $ 96,139 $91,512
Parts and supplies 8,096 7,819
Inventory $104,235 $99,331
Estimated product returns included in inventory at October 31, 2008 and 2007 were $9,394 and $9,758,
respectively.
7. SOFTWARE DEVELOPMENT COSTS AND LICENSES
Details of our capitalized software development costs and licenses were as follows:
October 31, 2008 October 31, 2007
Current Non-current Current Non-current
Software development costs, internally developed $ 72,381 $39,508 $122,307 $ 7,869
Software development costs, externally developed 37,422 20,495 8,572 24,297
Licenses 3,633 1,988 10,562 2,299
Software development costs and licenses $113,436 $61,991 $141,441 $34,465
Software development costs and licenses as of October 31, 2008 and October 31, 2007 included $136,687
and $153,121, respectively, related to titles that have not been released.
77