Activision, Inc. — 2004 Annual Report Management’s Discussion and Analysis of Financial Condition  and Results of Operations third parties, as well as the capitalization of product development costs relating to internally developed products. We expect that we will continue to make significant expenditures relating to our investment in software development and intellectual property licenses. Our future cash commitments relating to these investments are detailed below in “Commitments.” Cash flows from operations are affected by our ability to release highly successful or “hit” titles. Though many of these titles have substantial production or acquisition costs and marketing budgets, once a title recoups these costs, incremental net revenues typically will directly and positively impact cash flows. The principal components comprising cash flows from operating activities for the year ended March 31, 2004  included favorable operating results and increases in accounts payable, partially offset by increases in accounts receiv- able and our continued investment in software development and intellectual property licenses. See an analysis of the change in key balance sheet accounts below in “Key Balance Sheet Accounts.” We expect that a primary source of future liquidity, both short-term and long-term, will be the result of cash flows from continuing operations. In recent years, the primary drivers of cash used in investing activities typically have included capital expenditures,  acquisitions of privately held interactive software development companies and the net effect of purchases and sales/maturities of short-term investment vehicles. The goal of our short-term investments is to maximize return while  minimizing risk, maintaining liquidity, coordinating with anticipated working capital needs and providing for prudent investment diversification. Cash Flows from Investing Activities For the year ended March 31, 2004, cash flows used in investing activities were primarily the result of capital  expenditures and the utilization of approximately $3.5 million of cash to acquire the privately held interactive software development company, Infinity Ward. We have historically financed our acquisitions through the issuance of shares  of common stock or a combination of common stock and cash. We will continue to evaluate potential acquisition  candidates as to the benefit they bring to us. In recent years, the primary drivers of cash provided by financing activities have related to transactions involving our common stock, including the issuance of shares of common stock to employees and the public, the purchase of  treasury shares, as well as the use of structured stock repurchase transactions. In recent years, we have not utilized debt financing as a significant source of cash flows. However, we do have available at certain of our international locations, credit facilities, which are described below in “Credit Facilities,” that can be utilized if needed. Cash Flows from Financing Activities The cash provided by financing activities for the year ended March 31, 2004 primarily is the result of the maturity  of structured stock repurchase transactions, partially offset by cash used to purchase treasury stock and enter into  additional structured stock repurchase transactions. During fiscal 2003, our Board of Directors authorized a buyback program under which we can repurchase up to $350.0 million of our common stock. Under the program, shares may be purchased as determined by management and within certain guidelines, from time to time, in the open market or in privately negotiated transactions, including privately negotiated structured stock repurchase transactions and through transactions in the options markets. Depending on market conditions and other factors, these purchases may be com- menced or suspended at any time or from time to time without prior notice. In the past, we have entered into structured stock repurchase transactions that were settled in cash or stock based on the market price of our common stock on the date of the settlement. Upon settlement, we either had our capital investment returned with a premium or received shares of our common stock, depending, respectively, on whether the market price of our common stock was above or below a pre-determined price agreed in connection with each such transaction. As of March 31, 2004, we had approximately $226.2 million available for utilization under the buyback program and no outstanding structured stock repurchase transactions. We actively manage our capital structure and balance sheet as a component of our overall  page 36