THQ 2008 Annual Report Download - page 57

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General and Administrative (in thousands)
Year Ended Year Ended
March 31, 2007 % of net sales March 31, 2006 % of net sales % change
$78,413 7.6% $57,944 7.2% 35.3%
General and administrative expenses consist of personnel and related expenses of executive and
administrative staff, as well as fees for professional services such as legal and accounting. General and
administrative expenses increased by $20.5 million in fiscal 2007 as compared to fiscal 2006. The increase
was primarily due to $10.7 million of stock-based compensation expense due to our adoption of FAS 123R
in our first quarter of fiscal 2007, which was $9.2 million higher than in fiscal 2006. The increase is also
attributable to $5.0 million in legal and accounting fees incurred in connection with the investigation of our
historical stock option grant practices and $0.8 million for the related payroll tax effects.
Interest and Other Income, net
Interest and other income consists of interest earned on our short-term investments as well as gains and
losses resulting from exchange rate changes for transactions denominated in currencies other than the
functional currency. Interest and other income increased by $4.9 million in fiscal 2007 as compared to fiscal
2006. The increase was primarily due to higher average yields on our short-term investment balances.
Income Taxes
The effective income tax rate was 29% for fiscal 2007 and 19% for fiscal 2006. The fiscal 2006 effective
income tax rate benefited from the following factors: (1) a higher ratio of research and development tax
credits to pre-tax income and (2) a higher ratio of tax exempt interest income to overall pre-tax income. If
fiscal 2006 pretax income were the same as in fiscal 2005 the effective tax rate would have been
approximately 28%. The tax rate for fiscal 2007 is higher because of non-deductible stock-based
compensation expense recognized under FAS 123R.
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, 2007 we received
approximately $17.1 million in cash and recognized a gain of approximately $3.1 million in discontinued
operations due to the sale. The results of Minick’s operations were not material to any of the periods
presented and have therefore not been reclassified as discontinued operations.
Liquidity and Capital Resources
(In thousands) March 31, 2008 March 31, 2007 Change
Cash and cash equivalents .......................... $247,820 $174,748 $ 73,072
Short-term investments ............................ 69,684 283,210 (213,526)
Cash, cash equivalents and short-term investments ...... $317,504 $457,958 $(140,454)
Percentage of total assets .......................... 29% 45%
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