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## Management’s Discussion and Analysis of Financial Condition and Results of Operations 

General and administrative expenses for the year ended March 31, 2004 decreased $1.9 million over the same period last year, from $46.5 million to $44.6 million. As a percentage of consolidated net revenues, general and administrative expenses remained constant at 5%. The decrease in absolute dollars was primarily due to: 

• Lower bad debt expense of approximately $3.9 million. 

• The incurrence in the first quarter of fiscal 2003 of $1.0 million of merger related expenses by our publishing business. 

• An approximate $2.0 million charge incurred in fiscal 2003 by our distribution business for the relocation of our UK distribution facility. 

Partially offset by: 

• A $5.2 million year-over-year increase in general and administrative employee related costs in both our publishing and distribution businesses. 

## Operating Income 

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Publishing operating income for the year ended March 31, 2004 increased $14.1 million from the same period last year, from $79.1 million to $93.2 million. International publishing operating income for the year ended March 31, 2004 benefited from the positive impact of the year-over-year strengthening of the EUR and the GBP in relation to the U.S. dollar. Excluding the impact of changes in foreign currency rates, publishing operating income for the year ended March 31, 2004 increased approximately $7.8 million from the same period last year. This increase is prima- rily due to: 

• Strong performance in both the domestic and international markets of our fiscal 2004 third quarter title releases. Partially offset by: 

• Increased sales and marketing spending. 

• The product development charge recorded in the fiscal 2004 third quarter in connection with the cancellation of ten products. 

Distribution operating income for the year ended March 31, 2004 increased slightly over the same period last year, from $15.7 million to $16.6 million. Distribution operating income for the year ended March 31, 2004 benefited from the positive impact of the year-over-year strengthening of the EUR and the GBP in relation to the U.S. dollar. Excluding the impact of changes in foreign currency rates, distribution operating income for the year ended March 31, 2004 was down slightly by approximately $0.9 million from the same period last year. This decrease is primarily due to an increase in general and administrative employee related costs. 

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