THQ 2005 Annual Report Download - page 54

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The increase in fiscal 2005 compared to fiscal 2004 was primarily due to Full Spectrum Warrior and
Warhammer40,000: Dawn of War. In fiscal 2004, sales were primarily driven by the strong performance of
Disney/ Pixar’s Finding Nemo and international sales of Broken Sword 3.
Additionally, we released 67 PC titles published by our ValuSoft division, including World Poker
Championship, duringfiscal 2005, and we released 52 PC titles published from our ValuSoft division in
fiscal 2004.
Other Net Sales
Other net sales primarily consist of sales from older platforms. Fiscal 2005 and 2004 are primarily made up
of sales from Sony PlayStation products.
Costs and Expenses, Interest Income, Other Income, Income Taxes and MinorityInterest
The following table sets forth information about our costs and expenses, interest income, other income,
income taxes, and minority interest for the periods indicated as a percentage of total net sales:
Percent of Net Sales
Fiscal Year Ended
March 31,
2005 2004
Costs and expenses:
Cost of sales............................................ 33.0% 35.8 %
License amortization and royalties ........................ 11.4 11.1
Software development amortization ....................... 12.4 16.5
Product development. ................................... 9.65
.8
Selling and marketing ................................... 15.3 14.4
Payment to venture partner .............................. 1.31
.5
General and administrative .............................. 7.27
.3
Total costs and expenses................................... 90.2 92.4
Income from operations................................... 9.87.6
Interest income ........................................... 0.50.4
Other income ............................................ 0.00.6
Income before income taxes and minority interest. ............ 10.3 8.6
Income taxes ............................................. 2.03.0
Income before minority interest............................ 8.35.6
Minority interest.......................................... 0.00.0
Net income .............................................. 8.3% 5.6 %
Our costs and expenses increased in fiscal 2005 to $682.8 million, from $592.0 million in fiscal 2004;
however, total costs and expenses as a percentage of net sales decreased from 92% of net sales to 90% of
net sales. As a percentage of net sales, the greatest increase in costs were due to product development
expenses as we more than doubled the size of our internal product development organization, aggressively
ramped up development of next-generation console games and increased development of wireless games.
We believe that the expenditures we made in fiscal 2005 for product development have helped position us
to be a leader early on in the next-generation of video game platforms.
Cost of Sales (in thousands)
Year Ended
March 31,2005% of net sales
Year Ended
March 31,2004% of net sales % change
$250,055 33.0% $ 229,218 35.8%(2.8)%