Blizzard 2005 Annual Report Download - page 36

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Distribution฀operating฀income฀for฀the฀year฀ended฀March฀31,฀2005฀increased฀over฀the฀same฀period฀last฀year,฀from฀$16.6฀million฀to฀$23.7฀million.฀Excluding฀the฀impact฀of฀
changes฀in฀foreign฀currency฀rates,฀distribution฀operating฀income฀for฀the฀year฀ended฀March฀31,฀2005฀increased฀approximately฀$5.4฀million฀from฀the฀same฀period฀last฀year.฀
Distribution฀operating฀income฀for฀the฀year฀ended฀March฀31,฀2005฀benefited฀from฀the฀positive฀impact฀of฀the฀year-over-year฀strengthening฀of฀the฀EUR฀and฀the฀GBP฀in฀relation฀
to฀the฀U.S.฀dollar.฀The฀$5.4฀million฀increase฀was฀primarily฀due฀to฀continued฀growth฀industry-wide฀in฀the฀software฀market฀combined฀with฀a฀change฀in฀the฀product฀mix฀of฀
hardware฀versus฀software฀sales฀as฀software฀tends฀to฀be฀a฀higher฀margin฀business.
Investment Income, Net
(In thousands)
March 31, 2005
% of Consolidated
Net Revenues March 31, 2004
% of Consolidated
Net Revenues Increase/(Decrease) Percent Change
$13,092 1% $6,175 —% $6,917 112%
Investment฀income,฀net฀for฀the฀year฀ended฀March฀31,฀2005฀was฀$13.1฀million฀as฀compared฀to฀$6.2฀million฀for฀the฀year฀ended฀March฀31,฀2004.฀The฀increase฀was฀primarily฀
due฀to฀higher฀invested฀balances฀combined฀with฀rising฀yields฀during฀the฀year฀ended฀March฀31,฀2005฀as฀compared฀to฀2004.
Provision for Income Taxes
(In thousands)
March 31, 2005
% of
Pre-Tax Income March 31, 2004
% of
Pre-Tax Income Increase/(Decrease) Percent Change
$59,328 30% $38,277 33% $21,051 55%
The฀income฀tax฀provision฀of฀$59.3฀million฀for฀the฀year฀ended฀March฀31,฀2005฀reflects฀our฀effective฀income฀tax฀rate฀of฀30%.฀The฀significant฀items฀that฀generated฀the฀variance฀
between฀our฀effective฀rate฀and฀our฀statutory฀rate฀of฀35%฀were฀research฀and฀development฀tax฀credits฀and฀the฀impact฀of฀foreign฀tax฀rate฀differentials,฀partially฀offset฀by฀an฀
increase฀ in฀ our฀ deferred฀ tax฀ asset฀ valuation฀ allowance฀ and฀ state฀ taxes.฀ 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.
page 34
Activision, Inc. — 2005 Annual Report
Management’s Discussion and Analysis of Financial Condition and Results of Operations