THQ 2006 Annual Report Download - page 51

Download and view the complete annual report

Please find page 51 of the 2006 THQ annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 96

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96

43
Product Development (in thousands)
Year Ended
March 31,2005% of net sales
Year Ended
March 31,2004% of net sales % change
$72,959 9.6% $36,850 5.8% 98.0%
Product development expense primarily consists of expenses incurred by internal development studios and
payments made to external development studios prior to products reaching technological feasibility. For
fiscal 2005, product development expenses increased by $36.1 million from fiscal 2004. This increase was
primarily due to the following factors: (1) a significant increase in internal development headcount to
approximately 900 from 400 compared to fiscal 2004 due in part to the acquisitions of Relic and Blue
Tongue and the formation of Concrete Games, (2) spending on development for games for next-
generation platforms, and (3) increased spending on product development for our wireless content as we
continue to increase our wireless product offerings.
Selling and Marketing (in thousands)
Year Ended
March 31,2005% of net sales
Year Ended
March 31,2004% of net sales % change
$110,514 14.6% $ 87,119 13.6%26.9%
Selling and marketing expense consists of personnel-related costs, advertising and promotional expenses.
For fiscal 2005, selling and marketing expenses increased as a percentage of net sales as compared to fiscal
2004. Selling and marketing expenses increased in absolute dollars by $23.4 million for fiscal 2005
compared to fiscal 2004. This increase was primarily due to promotional efforts to support the new releases
of original titles The Punisher and Full Spectrum Warrior, as well as Disney/Pixar’s The Incredibles, The
SpongeBob SquarePants Movie, and WWE SmackDown! vs. Raw, and other releases.
Payment to Venture Partner (in thousands)
Year Ended
March 31,2005% of net sales
Year Ended
March 31,2004% of net sales % change
$9,774 1.3 % $9,675 1.5% 1.0%
The payment made to venture partner is related to the joint license agreement that THQ and JAKKS
Pacific, Inc. have with the WWE under which our role is to develop, manufacture, distribute, market and
sell WWE video games. Payment to venture partner increased slightly in absolute dollars for fiscal 2005
compared to fiscal 2004. The increase is in direct relation to the increases in sales of games based upon the
WWE license infiscal 2005 as compared to fiscal 2004.
General and Administrative (in thousands)
Year Ended
March 31,2005% of net sales
Year Ended
March 31,2004% of net sales % change
$54,831 7.2% $47,006 7.3% 16.6%
General and administrative expenses consist of personnel and related expenses of executive and
administrative staff, fees for professional services such as legal and accounting, depreciation and
amortization, allowances for bad debts, foreign exchange transaction gains and losses, and facilities.
General and administrative expenses increased by $7.8 million for fiscal 2005 as compared to fiscal 2004.
Fiscal 2004 included a charge of $7.0 million for doubtful accounts related to KB Toys’ bankruptcy filing.
Excluding this $7.0 million expense, general and administrative expenses increased by $14.8 million for