THQ 2008 Annual Report Download - page 50

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Income Taxes
We recorded an income tax benefit of $35.8 million for fiscal 2008 as compared to income tax expense of
$26.2 million for fiscal 2007. The income tax benefit in fiscal 2008 reflects an effective tax rate of 49%,
which is higher than our statutory rate of 35%. The significant items that generated the variance between
our effective tax rate and the statutory tax rate for fiscal 2008 were (i) the partial release of the reserve on
previous years’ research and development tax credits, (ii) fiscal 2008 research and development tax credits,
and (iii) tax free interest income.
The income tax expense for fiscal 2007 reflects an effective income tax rate of 29%, which is lower than our
statutory rate of 35%. The significant items that generated the variance between our effective tax rate and
the statutory tax rate for fiscal 2007 were research and development tax credits and tax free interest
income.
Minority Interest and Discontinued Operations
Minority interest reflects the income allocable to equity interests in Minick that are not owned by THQ.
Prior to December 1, 2006, we owned 50% of Minick’s outstanding common stock and controlled its board
of directors. On December 1, 2006, we sold our interest in Minick. As of March 31, 2008 we have received
approximately $18.6 million in cash due to the sale of Minick. We recognized gains of $1.5 million and
$3.1 million in fiscal 2008 and fiscal 2007, respectively, related to the sale of Minick. These gains are
presented as ‘‘Gain on sale of discontinued operations, net of tax’’ in our consolidated statements of
operations. Pursuant to the Minick sale agreement, we may receive additional consideration of
approximately $1.2 million during the three months ended June 30, 2008. If such amounts are received, the
additional gain recognized will be reported in discontinued operations in the period the proceeds are
collected. The results of Minick’s operations were not material to any of the periods presented and have
therefore not been reclassified as discontinued operations.
Comparison of Fiscal 2007 to Fiscal 2006
Net income from continuing operations for fiscal 2007 was $65.0 million, or $0.96 per diluted share,
compared to net income from continuing operations of $32.1 million, or $0.49 per diluted share, for fiscal
2006. Net income for fiscal 2007 was $68.0 million, or $1.01 per diluted share, and included a $3.1 million
gain on sale of discontinued operations.
Net Sales
We derive revenue principally from sales of packaged interactive software games designed for play on
video game consoles, handheld devices and personal computers. We also derive revenue through
downloads by mobile phone users of our wireless content.
The following table details our net sales by territory for fiscal 2007 and 2006 (in thousands):
Fiscal Year Ended March 31, Increase/
2007 2006 (Decrease) % Change
North America ......... $ 600,159 58.4% $489,945 60.7% $110,214 22.5%
Europe .............. 365,406 35.6 269,928 33.5 95,478 35.4%
Asia Pacific ........... 61,291 6.0 46,687 5.8 14,604 31.3%
International .......... 426,697 41.6 316,615 39.3 110,082 34.8%
Consolidated net sales . . . $1,026,856 100.0% $806,560 100.0% $220,296 27.3%
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