Blizzard 2005 Annual Report Download - page 28

RESULTS OF OPERATIONS—FISCAL YEARS ENDED MARCH 31, 2005 AND 2004
Net฀income฀for฀the฀year฀ended฀March฀31,฀2005฀was฀$138.3฀million฀or฀$0.66฀per฀diluted฀share,฀as฀compared฀to฀$77.7฀million฀or฀$0.40฀per฀diluted฀share฀for฀the฀year฀ended฀
March฀31,฀2004.
Net Revenues
We฀primarily฀derive฀revenue฀from฀sales฀of฀packaged฀interactive฀software฀games฀designed฀for฀play฀on฀video฀game฀consoles฀(such฀as฀the฀PS2,฀Xbox฀and฀GameCube),฀PCs฀and฀
hand-held฀game฀devices฀(such฀as฀the฀GBA,฀NDS฀and฀PSP).฀We฀also฀derive฀revenue฀from฀our฀distribution฀business฀in฀Europe฀that฀provides฀logistical฀and฀sales฀services฀to฀
third-party฀publishers฀of฀interactive฀entertainment฀software,฀our฀own฀publishing฀operations฀and฀third-party฀manufacturers฀of฀interactive฀entertainment฀hardware.
The฀following฀table฀details฀our฀consolidated฀net฀revenues฀by฀business฀segment฀and฀our฀publishing฀net฀revenues฀by฀territory฀for฀the฀years฀ended฀March฀31,฀2005฀and฀2004฀
(in฀thousands):
Year ended March 31, 2005 2004
Increase/
(Decrease)
Percent
Change
Publishing฀net฀revenues
฀ North฀America฀ $ 696,325 $ 446,812 $249,513 56%
฀ Europe 341,946 197,300 144,646 73%
฀ Other 34,458 21,620 12,838 59%
฀ Total฀international 376,404 218,920 157,484 72%
Total฀publishing฀net฀revenues 1,072,729 665,732 406,997 61%
Distribution฀net฀revenues 333,128 281,924 51,204 18%
Consolidated฀net฀revenues $ 1,405,857 $ 947,656 $458,201 48%
Consolidated฀net฀revenues฀increased฀48%฀from฀$947.7฀million฀for฀the฀year฀ended฀March฀31,฀2004฀to฀$1,405.9฀million฀for฀the฀year฀ended฀March฀31,฀2005.฀This฀increase฀was฀
principally฀generated฀by฀our฀publishing฀business.฀The฀increase฀in฀consolidated฀net฀revenues฀was฀driven฀by฀the฀following:
•฀ ฀Strong฀performances฀from฀our฀publishing฀business฀on฀the฀releases฀of฀our฀largest฀ever฀lineup฀of฀titles฀including:฀ Spider-Man 2, Call of Duty: Finest Hour, THUG 2, Shrek 2,
X-Men Legends, Doom 3, Lemony Snicket’s A Series of Unfortunate Events, Shark Tale, Cabela’s Big Game Hunter 2005 ฀and฀ Rome: Total War .฀The฀strength฀of฀these฀titles฀combined฀with฀the฀significant฀
sales฀and฀marketing฀investment฀led฀to฀over฀ten฀million-unit฀selling฀titles฀and฀achievement฀of฀our฀goal฀of฀having฀four฀multi-million-unit฀selling฀titles.฀We฀also฀had฀strong฀
catalog฀sales฀from฀a฀number฀of฀our฀franchises฀including฀Tony฀Hawk,฀True฀Crime,฀Spider-Man฀and฀Call฀of฀Duty.฀As฀a฀result฀of฀the฀strong฀performance฀of฀our฀key฀fiscal฀
2005฀releases,฀we฀were฀able฀to฀maintain฀the฀original฀price฀points฀for฀those฀titles฀for฀an฀extended฀period฀of฀time.
•฀ ฀Continued฀focus฀on฀international฀publishing฀expansion฀with฀the฀opening฀of฀offices฀in฀Spain฀and฀Italy฀and฀an฀increased฀focus฀on฀other฀territories฀contributing฀to฀an฀
increase฀in฀International฀Publishing฀revenues฀of฀72%฀over฀fiscal฀2004.
•฀ ฀An฀increase฀in฀our฀hand-held฀platform฀presence฀growing฀consolidated฀hand-held฀revenues฀by฀$118.7฀million฀or฀274%฀from฀$43.3฀million฀for฀the฀year฀ended฀March฀31,฀
2004฀to฀$162.0฀million฀for฀the฀year฀ended฀March฀31,฀2005.฀This฀was฀driven฀by฀a฀significant฀increase฀in฀the฀number฀of฀GBA฀titles฀released฀from฀four฀titles฀in฀fiscal฀2004฀
to฀eleven฀titles฀in฀fiscal฀2005,฀and฀by฀the฀introduction฀of฀the฀PSP฀and฀NDS฀platforms,฀for฀which฀we฀released฀a฀combined฀total฀of฀three฀titles.
•฀ ฀International฀net฀revenues฀benefited฀from฀the฀strong฀year-over-year฀strengthening฀of฀the฀Euro฀(“EUR”)฀and฀Great฀British฀Pound฀(“GBP”)฀in฀relation฀to฀the฀U.S.฀dollar.฀
We฀estimate฀that฀foreign฀exchange฀rates฀increased฀reported฀net฀revenues฀by฀approximately฀$55.3฀million.฀Excluding฀the฀impact฀of฀changing฀foreign฀currency฀rates,฀
our฀international฀net฀revenues฀increased฀31%฀year-over-year.
page 26
Activision, Inc. — 2005 Annual Report
Management’s Discussion and Analysis of Financial Condition and Results of Operations