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During the three months ended December 31, 2003, we executed a realignment of our product portfolio driven by the evolution of the video game market, which is increasingly dominated by high quality products that are based on rec- ognizable franchises and supported with big marketing programs. We completed a comprehensive review of our prod- uct portfolio in which we evaluated each product based on a number of criteria, including: the strength of the franchise, the projected product quality, the potential responsiveness of the product to aggressive marketing support and the financial risk in the event of product failure. As a result of this review, we believe that we have an extensive slate of high-potential properties in development. However, we also found that certain projects had a lower likelihood of achieving acceptable levels of operating performance and that continued pursuit of these projects would create a substantial opportunity cost as it related to our slate of high-potential projects. Accordingly, in the three months ended December 31, 2003, we canceled the development of ten products which we believed were unlikely to produce an acceptable level of return on our investment. In connection with the cancellation of these products, we recorded a pre-tax charge of approximately $21 million which is included in the consolidated statement of operations in product development expense. 

For the year ended March 31, 2003, amortization and write-offs of capitalized software development costs and intellectual property licenses included approximately $15.0 million recorded in the fourth quarter as the result of the assessment of the recoverability of capitalized development costs relating to certain projects and certain of our invest- ments in long-term licensing agreements. 

## 6. Inventories 

Our inventories consist of the following (amounts in thousands): 

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## 7. Property and Equipment, Net 

Property and equipment, net was comprised of the following (amounts in thousands): 

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Depreciation expense for the years ended March 31, 2004, 2003 and 2002 was $10.0 million, $8.1 million and $6.2 million, respectively. 

