THQ 2006 Annual Report Download - page 82

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74
found to be unlawful. We intend to vigorously protect our rights and, if necessary, pursue appropriate
claims against third parties.
On March 30, 2006, WWE’s counsel wrote a letterto our counsel and counsel for JAKKS, alleging
breaches by the THQ/JAKKS joint venture of the video game license related to the manner of distribution
and payment of royalties to the WWE with respect to sales of the WWE video games in Japan. WWE
demanded that the alleged breaches be cured within the time periods provided in the video game license,
while reserving all of its rights, including its alleged right of termination of the video game license. On
April 28, 2006, our counsel responded on behalf of the THQ/JAKKS joint venture, asserting, among other
things, that the WWE had been aware and had consented to the manner of distribution in Japan and the
payment of royalties with respect to such sales and, in addition, had separately released the joint venture
from any claims with respect to such matter as a result of a settlement of an audit of the THQ/JAKKS joint
venture. We have also provided documentation to the WWE’s counsel in support of our position. WWE’s
counsel has subsequently responded by letter, reiterating its claims and reservation of all rights, and has
requested additional information regarding sales of WWE video games in Japan and certain other Asian
countries. We are currently developing our response to WWE’s counsel’s most recent communications. We
believe we have several bases for defending any claim of breach of the video game license agreement
resulting from the manner of distribution of WWE-licensed products in Japan and other Asian territories.
Due to the early status of this litigation with WWE we cannot estimate a possible loss, if any. Games we
develop based upon our WWE license have contributed to approximately 15% of our net sales during each
of the three years in the period ended March 31, 2006. The loss of the WWE license would have a negative
impact on our future financial results.
Other
Additionally, we are involved in routine litigation arising in the ordinary course of our business. In the
opinion of our management, none of this pending routine litigation will have a material adverse effect on
our consolidated financial condition or results of operations.
18. Segment and Geographic Information
We operate in one reportable segment in which we are a developer, publisher and distributor of interactive
entertainment software for home video game consoles, handheld platforms and personal computers. The
following information sets forth geographic information on our sales and total assets for the fiscal years
ended March 31, 2006, 2005 and 2004 (in thousands):
North
America Europe
Asia
Pacific Consolidated
Year ended March 31, 2006
Net sales to unaffiliated customers ................... $489,945 $269,928 $46,687 $806,560
Total assets........................................ 776,27262,664 11,678 850,614
Year ended March 31, 2005
Net sales to unaffiliated customers ................... $470,619 $245,083 $41,029 $756,731
Total assets........................................ 672,28464,948 10,161 747,393
Year ended March 31, 2004
Net sales to unaffiliated customers ................... $453,426 $161,857 $25,563 $640,846
Totalassets........................................ 479,198 41,515 6,438 527,151
Our largest single customer accounted for 19% of our gross sales in fiscal 2006, 14% of our gross sales in
fiscal 2005 and 19% of our gross sales in fiscal 2004.