THQ 2005 Annual Report Download - page 49

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26
•strong catalog sales of Disney/Pixar’s Finding Nemo, MX Unleashed and SpongeBob SquarePants:
Battle for Bikini Bottom. Catalog sales are sales of titles released in prior fiscal years.
North American sales in fiscal 2004 were driven by:
•the performance of Disney/Pixar’s Finding Nemo, SpongeBob SquarePants: Battle f or Bikini Bottom,
and WWE SmackDown! Here Comes the Pain; and
•strong sales of original titles MX Unleashed and Tak and the Power of Juju.
Year-over-year net sales growth in North America was primarily due to sales of The SpongeBob
SquarePants Movie game, which was released in conjunction with the holiday movie; sales of Full Spectrum
Warrior and The Punisher; and strong sales of our catalog titles in fiscal 2005. These items were partially
offset by the release of a significantly fewer number ofSKUs in fiscal 2005 than in fiscal 2004.
While we expect net sales in North America to continue to constitute the largest portion of our net sales in
fiscal 2006, we expect net sales for North America as a percentage of total sales to decrease as we continue
to expand our international direct sales and product mix. Since we expect our overall consolidated net sales
in fiscal 2006 to be approximately the same as consolidated net sales in fiscal 2005, we expect a slight
decline of sales of our games in North America in fiscal 2006.
International
For fiscal 2005, international net sales increased by 53%, to $286.1 million from $187.4 million in fiscal
2004 driven by:
•sales of Disney/Pixar’s The Incredibles, The SpongeBob SquarePantsMovie and WWE SmackDown!
Vs. Raw; and
•strong sales of original titles Full SpectrumWarrior, the Punisher and Warhammer 40,000: Dawn
of War.
International sales in fiscal 2004 were driven by:
•the performance of Disney/Pixar’s Finding Nemo and WWE SmackDown! Here Comes the Pain; and
•two original products targeted at the core gamer, Broken Sword and Warhammer 40,000:
Fire Warrior.
Year-over-year international net sales growth was primarily due to increased sales of each of our three
products targeted at the mass-market in fiscal 2005 as compared to sales of titles from the same brands in
fiscal 2004; and stronger sales of our three key original products targeted at the core gamer in fiscal 2005
than our two key titles in fiscal 2004.
In addition to sales of our products, the strengthening of foreign exchange rates, primarily the Great
British Pound (“GBP”) and the European Currency Unit (“Euro”), increased reported international net
sales by $19.5 million in fiscal 2005. Excluding the impacts of foreign exchange rates, international net sales
increased by 42%.
We will continue to focus on expanding sales internationally in fiscal 2006, as we expand our product
portfolio and direct sales forces in the international markets. In early 2005, we established a presence in
Austria and Spain inorder to facilitate direct sales of our products into the Austria, Spain and Portugal
markets. In fiscal 2006, we expect to expand our presence in Eastern Europe, the Benelux countries, Italy,
the Nordic territories, New Zealand and Japan.