Electronic Arts 2007 Annual Report Download - page 127

we have engaged in, evaluated, and expect to continue to engage in and evaluate, a wide array of potential
strategic transactions.
In April 2007, we expanded our commercial agreements with and made strategic equity investments in Neowiz
Corporation and its online gaming subsidiary, Neowiz Games. We purchased stock representing in aggregate
approximately 19 percent of each of Neowiz and Neowiz Games for approximately $108 million. Based in
Korea, Neowiz is an online media and gaming company with which we partnered in 2006 to launch EA Sports
FIFA Online in Korea.
Short-term investments and marketable equity securities
Due to our mix of fixed and variable rate securities, our short-term investment portfolio is susceptible to
changes in short-term interest rates. As of March 31, 2007, our short-term investments had gross unrealized
gains of $2 million, or less than 1 percent of the total in short-term investments, and gross unrealized losses of
approximately $1 million, or less than 1 percent of the total in short-term investments. From time to time, we
may liquidate some or all of our short-term investments to fund operational needs or other activities, such as
capital expenditures, business acquisitions or stock repurchase programs. Depending on which short-term
investments we liquidate to fund these activities, we could recognize a portion, or all, of the gross unrealized
gains or losses.
Marketable equity securities increased to $341 million as of March 31, 2007, from $160 million as of
March 31, 2006, due to an increase in the fair value of our investment in Ubisoft Entertainment.
Receivables, net
Our gross accounts receivable balances were $470 million and $431 million as of March 31, 2007 and 2006,
respectively. The increase in our accounts receivable balance was primarily due to a higher percentage of net
revenue recognized in the last month of our fourth quarter of fiscal 2007 as compared to the fourth quarter of
fiscal 2006. Reserves for sales returns, pricing allowances and doubtful accounts decreased in absolute dollars
from $232 million as of March 31, 2006 to $214 million as of March 31, 2007. As a percentage of trailing
nine month net revenue, reserves decreased from 9 percent as of March 31, 2006, to 8 percent as of March 31,
2007. We believe these reserves are adequate based on historical experience and our current estimate of
potential returns, pricing allowances and doubtful accounts.
Inventories
Inventories increased slightly to $62 million as of March 31, 2007 from $61 million as of March 31, 2006.
Other than Need for Speed Carbon, no single title represented more than $3 million of inventory as of
March 31, 2007.
Other current assets
Other current assets decreased to $219 million as of March 31, 2007, from $234 million as of March 31,
2006, primarily due to the timing of the collection of advertising credits owed to us by our vendors that were
earned in fiscal 2007, partially offset by an increase in value added taxes receivable.
Accounts payable
Accounts payable increased to $180 million as of March 31, 2007, from $163 million as of March 31, 2006,
primarily due to higher inventory purchases to support our business in the fourth quarter of fiscal 2007 as
compared to the fourth quarter of fiscal 2006.
Accrued and other current liabilities
Our accrued and other liabilities increased to $823 million as of March 31, 2007 from $697 million as of
March 31, 2006. The increase was primarily due to an increase of (1) $84 million in accrued compensation
and benefits and (2) $50 million in income taxes payable.
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