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39
A C T I V I S I O N , I N C . • • 2 0 0 7 A N N U A L R E P O R T
and development tax credits, the impact of foreign tax rate differentials, and the elimination of the
valuation allowance for research and development tax credits, partially offset by state taxes and
the establishment of tax reserves for these credits and other deferred tax assets. 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.
Net Income
Net income for the year ended March 31, 2007 was $85.8 million or $0.28 per diluted share, as com-
pared to $40.3 million or $0.14 per diluted share for the year ended March 31, 2006.
Results of Operations—Fiscal Years Ended March 31, 2006 and 2005
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, Xbox360, 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 enter-
tainment 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, 2006 and 2005 (in thousands):
For the years ended March 31, 2006 2005
Increase/
(Decrease)
Percent
Change
Publishing net revenues
North America $ 710,040 $ 696,325 $ 13,715 2%
Europe 404,157 341,946 62,211 18%
Other 40,466 34,458 6,008 17%
Total international 444,623 376,404 68,219 18%
Total publishing net revenues 1,154,663 1,072,729 81,934 8%
Distribution net revenues 313,337 333,128 (19,791) (6)%
Consolidated net revenues $ 1,468,000 $ 1,405,857 $ 62,143 4%
Consolidated net revenues increased 4% from $1,405.9 million for the year ended March 31, 2005 to
$1,468.0 million for the year ended March 31, 2006. This increase in consolidated net revenues was
solely generated by our publishing business and was driven by the following:
• An increase year over year in the number of titles released. Our fiscal 2006 launch schedule
included the largest slate of new releases in our history. In fiscal 2006, we released seventeen
major titles including the following major releases: Doom 3 for the Xbox, Madagascar, Fantastic
Four, Ultimate Spider-Man, X-Men Legends II, THAW, Call of Duty 2, Call of Duty 2: Big Red One, GUN,
True Crime: New York City, QUAKE 4, Shrek SuperSlam, The Movies, Cabela’s Dangerous Hunts 2, and World
Series of Poker. In addition, four of these titles, Call of Duty 2, THAW, QUAKE 4, and GUN, were
released concurrently with the release of the Xbox360 platform at a premium retail price of
$59.99. This compares to fourteen titles in fiscal 2005, which included the following major