Blizzard 2005 Annual Report Download - page 48

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Reserves฀for฀returns,฀price฀protection฀and฀bad฀debt฀increased฀from฀$47.0฀million฀at฀March฀31,฀2004฀to฀$69.2฀million฀at฀March฀31,฀2005฀while฀reserves฀as฀a฀percentage฀
of฀gross฀receivables฀declined฀from฀43%฀to฀39%.฀The฀change฀in฀reserves฀is฀primarily฀due฀to฀the฀strong฀sell-through฀to฀end฀consumers฀of฀our฀key฀third฀quarter฀fiscal฀
2005฀releases.
Inventories
(Amounts in thousands) March 31, 2005 March 31, 2004
Increase/
(Decrease)
Inventories $48,018 $26,427 $21,591
The฀increase฀in฀inventories฀was฀driven฀by฀our฀publishing฀business,฀primarily฀the฀result฀of:
•฀ ฀Inventory฀buildup฀for฀our฀highly฀anticipated฀early฀April฀2005฀release฀of฀
Doom 3
฀for฀the฀Xbox฀console.
Software Development and Intellectual Property Licenses
(Amounts in thousands) March 31, 2005 March 31, 2004
Increase/
(Decrease)
Software฀development฀and฀intellectual฀property฀licenses $127,340 $135,201 $(7,861)
The฀decrease฀in฀software฀development฀and฀intellectual฀property฀licenses฀was฀primarily฀the฀result฀of:
•฀ ฀Releases฀of฀titles฀in฀fiscal฀2005฀with฀large฀intellectual฀property฀licenses฀or฀developer฀advances฀as฀of฀March฀31,฀2004.฀These฀titles฀included฀
Spider-Man 2, Shrek 2, THUG 2,
Call of Duty, Doom 3, Lemony Snicket’s A Series of Unfortunate Events, Shark Tale
฀and฀
Rome: Total War.
Partially฀offset฀by:
•฀ ฀Continued฀investment฀ in฀software฀development฀ and฀ intellectual฀ property฀licenses.฀We฀spent฀approximately฀$126.9฀ million฀ in฀the฀year฀ended฀March฀ 31,฀2005฀in฀
connection฀with฀the฀acquisition฀of฀ publishing฀or฀ distribution฀rights฀ for฀ products฀ being฀ developed฀by฀third฀parties,฀payments฀on฀ license฀agreements฀granting฀ us฀
long-term฀rights฀to฀intellectual฀property฀of฀third฀parties,฀as฀well฀as฀the฀capitalization฀of฀product฀development฀costs฀relating฀to฀internally฀developed฀products.
Accounts Payable
(Amounts in thousands) March 31, 2005 March 31, 2004
Increase/
(Decrease)
Accounts฀payable $108,984 $72,874 $36,110
The฀increase฀in฀accounts฀payable฀was฀primarily฀the฀result฀of:
•฀ ฀Increased฀inventory฀purchases฀by฀our฀publishing฀business฀as฀a฀result฀of฀highly฀anticipated฀release฀of฀
Doom 3
฀for฀the฀Xbox฀in฀early฀April฀2005.
•฀ ฀Increases฀in฀our฀fourth฀quarter฀European฀sales฀volume฀and฀inventory฀purchases฀related฀to฀our฀focus฀on฀international฀expansion,฀including฀our฀addition฀of฀offices฀in฀
Spain฀and฀Italy฀and฀the฀release฀of฀three฀hit฀affiliate฀titles฀in฀the฀fourth฀quarter฀of฀fiscal฀2005.
page 46
Activision, Inc. — 2005 Annual Report
Management’s Discussion and Analysis of Financial Condition and Results of Operations