Blizzard 2004 Annual Report Download - page 32

Investment Income, Net
(In thousands) % of % of
March 31, Consolidated March 31, Consolidated Increase/ Percent
2003 Net Revenue 2002 Net Revenue (Decrease) Change
$8,560 1% $2,546 1% $6,014 236%
Investment income, net for the year ended March 31, 2003 was $8.6 million as compared to $2.5 million for the
year ended March 31, 2002. The increase is primarily due to higher average cash and short-term investment balances
during fiscal 2003, partially offset by lower market rates.
Provision for Income Taxes
(In thousands) % of % of
March 31, Pre-Tax March 31, Pre-Tax Increase/ Percent
2003 Income 2002 Income (Decrease) Change
$37,227 36% $30,882 37% $6,345 21%
The income tax provision of $37.2 million for the year ended March 31, 2003 reflects our effective income tax
rate of 36%. The significant items that generated the variance between our effective rate and our statutory rate of
35% were state taxes and an increase in our deferred tax asset valuation allowance, partially offset by research and
development tax credits and the impact of foreign tax rate differentials. The realization of deferred tax assets depends
primarily on the generation of future taxable income. We believe that it is more likely than not that we will generate
taxable income sufficient to realize the benefit of net deferred tax assets recognized.
Quarterly Operating Results
Our quarterly operating results have in the past varied significantly and will likely vary significantly in the future, depend-
ing on numerous factors, several of which are not under our control. For a detailed description of these factors see our
Form 10-K filed with the Securities and Exchange Commission. Our business also has experienced and is expected to
continue to experience significant seasonality, largely due to consumer buying patterns and our product release sched-
ule focusing on those patterns. Net revenues typically are significantly higher during the fourth calendar quarter, prima-
rily due to the increased demand for consumer software during the year-end holiday buying season. Accordingly, we
believe that period-to-period comparisons of our operating results are not necessarily meaningful and should not be
relied upon as indications of future performance.
The following table is a comparative breakdown of our quarterly results for the immediately preceding eight quarters
(amounts in thousands, except per share data):
Restated(1)
March 31, Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30,
Quarter ended 2004 2003(2) 2003 2003 2003(2) 2002 2002 2002
Net revenues $162,897 $508,511 $117,523 $158,725 $125,001 $378,685 $169,172 $191,258
Operating income (loss) 4,643 116,961 (16,933) 5,146 (14,444) 66,761 11,334 31,196
Net income (loss) 6,664 76,981 (10,093) 4,163 (7,957) 44,347 9,086 20,704
Basic earnings (loss)
per share 0.05 0.58 (0.08) 0.03 (0.06) 0.30 0.06 0.15
Diluted earnings (loss)
per share 0.04 0.53 (0.08) 0.03 (0.06) 0.28 0.06 0.14
(1) Consolidated financial information has been restated for the effect of our three-for-two stock split effected in the form of a 50% stock dividend to shareholders of
record as of February 23, 2004, paid March 15, 2004.
(2) See Note 5, “Software Development Costs and Intellectual Property Licenses” of the Notes to the Consolidated Financial Statements included elsewhere in
this Annual Report.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Activision, Inc. — 2004 Annual Report
page 34