THQ 2004 Annual Report Download - page 38

CHANGE IN FISCAL YEAR
On February 13, 2003, we announced that the Board of Directors approved a change of our fiscal year end from December 31 to March 31, effective January
1, 2003. This change resulted in a three month transitional reporting period ended March 31, 2003. References to Transition 2003, unless otherwise indicated,
refer to the three-month transitional period ended March 31, 2003. This discussion compares: (i) the fiscal year ended March 31, 2004 (“fiscal 2004”)
with the twelve months ended March 31, 2003 (unaudited); and (ii) our fiscal years ended December 31, 2002 and 2001 (“fiscal 2002” and “fiscal 2001”),
respectively.
SELECTED CONSOLIDATED STATEMENTS OF OPERATIONS DATA
The following table sets forth certain consolidated statements of operations data for the periods indicated as a percentage of total net sales (In thousands):
Year Ended March 31, Year Ended December 31,
2004(a) 2003(b)(c) 2002(c) 2001
(Unaudited)
Net sales $ 640,846 100.0% $ 467,647 100.0% $ 480,529 100.0% $ 378,992 100.0%
Costs and expenses:
Cost of sales 229,218 35.8 178,291 38.1 185,593 38.6 154,898 40.9
License amortization and royalties 71,132 11.1 38,988 8.3 40,476 8.4 33,144 8.7
Software development amortization 105,632 16.5 84,916 18.2 83,698 17.4 35,144 9.3
Product development 36,850 5.8 36,531 7.8 34,696 7.2 17,774 4.7
Selling and marketing 92,475 14.4 70,978 15.2 66,443 13.8 46,745 12.3
Payment to venture partner 9,675 1.5 9,218 2.0 10,146 2.1 8,673 2.3
General and administrative 47,006 7.3 36,794 7.9 34,993 7.4 28,470 7.5
Total costs and expenses 591,988 92.4 455,716 97.5 456,045 94.9 324,848 85.7
Income from operations 48,858 7.6 11,931 2.6 24,484 5.1 54,144 14.3
Interest income, net 2,378 0.4 4,833 1.0 5,277 1.1 2,572 0.7
Other income (expense) 4,000 0.6 (12,409) (2.6) (10,006) (2.1) — —
Income before income taxes 55,236 8.6 4,355 0.9 19,755 4.1 56,716 15.0
Income taxes 19,397 3.0 1,812 0.4 6,761 1.4 20,703 5.5
Net income $ 35,839 5.6% 2,543 0.5% $ 12,994 2.7% $ 36,013 9.5%
(a) Net income includes a $4.0 million settlement of dispute with directors’ and officers’ insurance carrier.
(b) Net income includes a charge of $1.8 million due to the other than temporary impairment of our investment in Yuke’s Co., Ltd. (See – “Note 8 – Other Long-Term Assets”). We
also changed our fiscal year end from December 31 to March 31, effective January 1, 2003.
(c) Net income includes a charge of $7.9 million, net of tax for the cancellation of 20 SKUs as well as a charge of $4.6 million, net of tax related to the settlement of a class action
lawsuit and a charge of $1.1 million, net of tax related to the write-off of inventory and software development for “WWF”-branded games that we had been prevented from shipping
pursuant to an action by the World Wide Fund for Nature against World Wrestling Entertainment, Inc. and a charge of $2.8 million, net of tax related to the discontinuation of our
online joint venture in the United Kingdom (Network Interactive Sports, Ltd.).
The following table breaks down net sales by territory for the periods indicated as a percentage of total net sales (In thousands):
NET SALES BY TERRITORY
Year Ended March 31, Year Ended December 31,
2004 2003 2002 2001
North America $ 453,426 70.8% $ 358,233 76.6% $ 358,124 74.5% $ 262,676 69.3%
United Kingdom 88,325 13.8 61,189 13.1 67,218 14.0 60,240 15.9
Germany 44,571 6.9 22,205 4.7 26,051 5.5 25,517 6.7
France 28,961 4.5 11,986 2.6 14,556 3.0 18,185 4.8
Asia Pacific 25,563 4.0 14,034 3.0 14,580 3.0 12,374 3.3
Total net sales $ 640,846 100.0% $ 467,647 100.0% $ 480,529 100.0% $ 378,992 100.0%