THQ 2005 Annual Report Download - page 64

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Liquidity and Capital Resources
Our total assets as of March 31, 2005 were $747.4 million, as compared to $527.2million as of March 31,
2004. Of the total assets at March 31, 2005, $522.6 million, or 70%, were current assets, with$331.2
million, or 44% of this amount, in cash, cash equivalents and short-term investments. Other significant
currentassets atMarch 31, 2005 included $73.7 million of netaccounts receivable, and $57.1 million of
software development assets. The amountof our accounts receivable is subject to significant variations as a
consequence of the seasonality of our sales and the timing of shipments within the quarter. Of the total
assets at March31, 2004, $397.1 million were current assets, with$253.0 million of this amount, in cash,
cash equivalents and short-term investments.
At March 31, 2005, our total current liabilities were $120.9 million, which consisted primarily of $43.7
million of accruedexpenses, $36.5 million of accounts payable and $33.1 millionof accrued royalties. Total
current liabilities were $87.4 million at March 31, 2004. The increase in current liabilities in fiscal 2005
reflects the growth of our business and the significant revenue increase in the third and fourth quarters of
fiscal 2005 compared to the same periods in fiscal 2004.
Changes in Cash Flow
March 31, 2005March 31, 2004Change
(In thousands)
Cash provided by operating activities...................... $60,455 $71,154 $(10,699)
Cash usedin investingactivities........................... (77,891) (53,153) (24,738)
Cash provided by (used in) financing activities.............. 33,764 (3,873) 37,637
Effect of exchange rate changes on cash.................... 6054,079 (3,474)
Net increase in cash and cash equivalents................... $16,933 $18,207 $(1,274)
Our principal source of cash is from sales of our packaged software for video gameconsoles, handheld
game platforms, and personal computers. We also derive cash by revenue received from cellular carriers
for providing content for wireless devices. We expect cash collections in fiscal 2006 to remain
approximately equal to cash collections in fiscal 2005, as we expect our total net sales to be roughly the
same in both fiscal years.
Our principal uses of cash are for product purchases of discs and cartridges along with associated
manufacturer’s royalties, payments to external developers and licensors, the costs of internal software
development, and selling and marketing expenses. In fiscal 2006, we expect to use more cash than we did in
fiscal 2005. We expect this increase in use of cash will be primarily attributable to (i) increased
development of next-generation platform products, which have higher development costs thancurrent
generation platform products; (ii) increased marketing expenses associated with the release of titles based
on new original intellectual properties; and (iii) our continued ramp-up of the wireless platform and
increased product development of wireless games.
During fiscal 2005, we generated $60.5 million of cash from operating activities, as compared to $71.2
million generated from operating activities for fiscal 2004. Cash provided by operations during fiscal 2005
was approximately equivalent to our net income. The decline in cash provided by operations was caused by
an increase in our spending for licenses, software development and income taxes offset by an increase in
our net income and the timing of the collectionsof our sales compared to fiscal 2004. We expect to
continue to make significant expenditures infiscal 2006 relating to our investment in software development
and intellectual property licenses.
Cash used in investing activities increased by $24.7 million for fiscal 2005, as compared to fiscal 2004
primarily due to our fiscal 2005 acquisitions of Relic and Blue Tongue and our additional investment in
Minick.