Electronic Arts 2004 Annual Report Download - page 57

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2004. We believe these reserves are adequate based on historical experience and our current estimate of
potential returns and allowances.
Inventories
Inventories increased to $55.1 million as of March 31, 2004 from $39.7 million as of March 31, 2003 primarily
due to overall growth in Europe. We typically have a higher inventory balance, as a percentage of net revenue,
on hand in Europe compared to North America, due to the need to provide multiple language versions of
each title in that region. No single title represented more than $4.0 million of inventory as of March 31, 2004.
Other Current Assets
Other current assets increased to $143.9 million as of March 31, 2004 from $83.5 million as of March 31, 2003
primarily due to increases in volume rebates and advertising credits owed to us by our suppliers and VAT
receivable, both relating to the growth of our business, oÅset by lower prepaid royalties as we continue to
increase internal title development.
Accounts Payable
Accounts payable increased to $114.1 million as of March 31, 2004 from $106.3 million as of March 31, 2003
primarily due to the higher sales volume we experienced in the fourth quarter of Ñscal 2004 as compared to
Ñscal 2003.
Accrued and Other Liabilities
Our accrued and other liabilities increased to $608.2 million as of March 31, 2004 from $464.5 million as of
March 31, 2003, as a result of the overall increase in our sales and related operational expenses and proÑt.
The increase was due to increases in income taxes payable, accrued compensation and beneÑts, accrued
development, deferred revenue and VAT payable. We anticipate our accrued and other liabilities balance to
decline following our tax and bonus payments during the three months ended June 30, 2004.
Financial Condition
We believe the existing cash, cash equivalents, short-term investments, marketable equity securities and cash
generated from operations will be suÇcient to meet our operating requirements for at least the next twelve
months, including working capital requirements, capital expenditures and potential future acquisitions or
strategic investments. We may choose at any time to raise additional capital to strengthen our Ñnancial
position, facilitate expansion, pursue strategic investments or to take advantage of business opportunities as
they arise. There can be no guarantee that such additional capital will be available to us on favorable terms, if
at all, or that it will not result in substantial dilution to our existing stockholders.
A portion of our cash is generated from operations domiciled in foreign tax jurisdictions (approximately
$554.4 million as of March 31, 2004) that is designated as indeÑnitely reinvested in the respective tax
jurisdiction. While we have no plans to repatriate these funds to the United States in the short-term, if we
were required to do so to fund our operations in the United States, we would accrue and pay additional taxes in
connection with their repatriation.
On January 8, 2004, we Ñled an amended registration statement on Form S-3 with the Securities and
Exchange Commission. This registration statement, including the base prospectus contained therein, became
eÅective on January 15, 2004 and uses a ""shelf'' registration process. This shelf registration statement allows
us, at any time, to oÅer any combination of securities described in the prospectus in one or more oÅerings up
to a total amount of $2.0 billion. Unless otherwise speciÑed in a prospectus supplement accompanying the
base prospectus, we will use the net proceeds from the sale of any securities oÅered pursuant to the shelf
registration statement for general corporate purposes, including for working capital, Ñnancing capital
expenditures, research and development, marketing and distribution eÅorts and, if opportunities arise, for
acquisitions or strategic alliances. Pending such uses, we may invest the net proceeds in interest-bearing
securities. In addition, we may conduct concurrent or other Ñnancings at any time.
Our ability to maintain suÇcient liquidity could be aÅected by various risks and uncertainties including, but
not limited to, those related to customer demand and acceptance of our titles on new platforms and new
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