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52
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
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Intellectual Property Licenses
(amounts in thousands)
March 31,
2007
March 31,
2006
Increase/
(Decrease)
Intellectual property licenses $100,274 $87,046 $13,228
Intellectual property licenses increased from $87.0 million at March 31, 2006 to $100.3 million at
March 31, 2007. The increase in intellectual property licenses was primarily the result of:
• Continued investment in intellectual property licenses totaling $23.2 million in fiscal 2007 for
license agreements granting us long-term rights to intellectual property of third parties, such
as our agreement with MGM Interactive and EON Productions Ltd. to develop and publish
interactive entertainment games based on the James Bond license.
Partially offset by:
• $10.0 million of amortization of intellectual property licenses mostly related to releases in the
first quarter of fiscal 2007.
Accounts Payable
(amounts in thousands)
March 31,
2007
March 31,
2006
Increase/
(Decrease)
Accounts payable $136,517 $88,994 $47,523
The increase in accounts payable of $47.5 million from March 31, 2006 to March 31, 2007 primarily
reflects amounts due to support the significant launch slate in the first quarter of fiscal 2008 versus
no similar launches in the same quarter of fiscal 2007.
Accrued Expenses
(amounts in thousands)
March 31,
2007
March 31,
2006
Increase/
(Decrease)
Accrued expenses $204,652 $104,862 $99,790
The increase in accrued expenses was primarily driven by:
• Tax reserves recorded in fiscal 2007 as a result of improved profitability leading to utilization of
net operating loss carryforwards.
• Increased annual bonuses as a result of company performance.
• Increased royalties payable due to higher percentage of products being developed externally.
Credit Facilities
We have revolving credit facilities with our Centresoft subsidiary located in the UK (the “UK Facility”)
and our NBG subsidiary located in Germany (the “German Facility”). The UK Facility provided
Centresoft with the ability to borrow up to GBP 12.0 million ($23.6 million), including issuing letters
of credit, on a revolving basis as of March 31, 2007. Furthermore, under the UK Facility, Centresoft
provided a GBP 0.6 million ($1.2 million) guarantee for the benefit of our CD Contact subsidiary as of
March 31, 2006. The UK Facility bore interest at LIBOR plus 2.0% as of March 31, 2007, is collateral-
ized by substantially all of the assets of the subsidiary and expires in January 2008.
The UK Facility also contains various covenants that require the subsidiary to maintain specified
financial ratios related to, among others, fixed charges. As of March 31, 2006, we were in compliance
with these covenants. No borrowings were outstanding against the UK Facility as of March 31, 2006.
The German Facility provided for revolving loans up to EUR 0.5 million ($0.7 million) as of March 31,
2007, bore interest at a Eurocurrency rate plus 2.5%, is collateralized by certain of the subsidiary’s
property and equipment and has no expiration date. No borrowings were outstanding against the
German Facility as of March 31, 2007.