THQ 2005 Annual Report Download - page 40

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17
Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations
Overview
The following is a summary discussion of our operating results and the primary trends that affect our
business. Management believes that an understanding of these trends is important to understandour
results for the fiscal year ended March 31, 2005 (“fiscal 2005”), as well as our future prospects. This
summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion
and analysis provided elsewhere in this Form 10-K, including in the remainder of “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” or the consolidated financial
statements and related notes. The discussion and analysis herein may be understood more fully by
reference to the consolidated financial statements and notes to the consolidated financial statements. All
references to “we,” “us,” “our,” “THQ,” or the “Company” in the following discussion and analysis mean
THQ Inc. and its subsidiaries.
Overview of Fiscal 2005 Results
We are a leading worldwide developer and publisher of interactive entertainment software. Our fiscal 2005
highlights include the following:
•We published six titles that shipped more than one millionunits:
•The Incredibles: more than 4.5 million units
•The SpongeBob SquarePants Movie: more than 2.5 million units
•WWE SmackDown! Vs. Raw: more than2 million units
•Finding Nemo: more than 2million units (over 7million life-to-date)
•SpongeBob SquarePants: Battle for Bikini Bottom: more than one millionunits (over 3 million
life-to-date)
•Full SpectrumWarrior: more than one million units
•We grew international revenues to 38% of net sales from 29% a year ago, bolstered by the
increased global appeal of our products and brands and our expanded sales organization.
•We more than doubled our internal product development personnel to over 900 from just over 400
a year ago, enabling us to develop more franchises internally and to help establish a leadership
position early in the next console cycle.
•Our wireless revenues more than tripled to $25 million from $7 million a year ago, fueled by sales of
games based on the major sports leagues, Nickelodeon, MotoGP, and as a result of consolidating
Minick in fiscal 2005.
•We renewed our exclusive master license agreement with Nickelodeon through2010 and extended
our relationship with Pixar Animation Studios to publish games based on that studio’s next four
films after Cars, which we are developing pursuant to our current license from Disney/Pixar,
providing a solid foundation for revenue and profit growth through the back half of the current
hardware cycle and well into the next generation of hardware.
Our profitability is dependent upon revenues from the sales of our video game software. Net sales in fiscal
2005 increased 18% over the fiscal year ended March 31, 2004 (“fiscal 2004”), from $640.8 million to
$756.7 million. The increase in net sales for fiscal 2005 was primarily attributable to worldwide sales of the
six titles listed above. In fiscal 2004, we published four titles which shipped more than one million units.