THQ 2008 Annual Report Download - page 81

in shares issued, and the remaining $3.9 million may be paid in future years depending on whether certain
pre-tax income targets are met pursuant to the purchase agreements:
• Big Huge Games, Inc., located in Timonium, Maryland, a leading development studio focused on
the Role-Playing-Game genre;
• Universomo Ltd., located in Tampere, Finland, a developer of interactive entertainment software
for all major mobile platforms;
• Elephant Entertainment, LLC, located in Minneapolis, Minnesota, a publisher and distributor of
casual PC games.
Pursuant to the terms of our acquisitions of Big Huge Games and Universomo, there is a potential
additional consideration, up to $6.6 million, related to their meeting certain post-acquisition performance
targets that can be earned in future years. Of the $6.6 million, $1.9 million is payable in cash (contractually
denominated as 1.2 million Euros) and will be recognized as additional purchase price if paid, and
$4.7 million is payable in stock and will be recognized as post-acquisition expenses, if earned.
Goodwill and other intangible assets recognized in the above transactions amounted to $30.3 million and
$6.1 million, respectively, $34.9 million of which is not expected to be deductible for income tax purposes.
The acquisitions were accounted for using the purchase method in accordance with FAS 141 ‘‘Business
Combinations.’’ Accordingly, the net assets were recorded at their estimated fair values, and operating
results were included in our financial statements from the date of acquisition. The preliminary purchase
price allocation, including the allocation of goodwill, will be updated as additional information becomes
available. We did not present pro forma information as these acquisitions were immaterial to our financial
position and results of operations.
In each of fiscal 2008 and fiscal 2007, we paid the former shareholders of ValuSoft additional consideration
of $1.8 million for reaching certain pre-tax income targets pursuant to the purchase agreement. In 2002, we
acquired the assets of ValuSoft, Inc. for a total cost of $14.2 million, which was paid primarily in cash. Since
then, we have paid the former shareholders of ValuSoft total additional consideration in the amount of
$11.0 million because ValuSoft reached certain pre-tax income targets in the five years subsequent to the
acquisition. No amounts of additional consideration are outstanding as of March 31, 2008. Goodwill
recognized in the original transaction and in the payments of the additional consideration has amounted to
$23.0 million and is expected to be deductible for income tax purposes.
6. Goodwill
The changes in the carrying amount of goodwill for the fiscal years ended March 31, 2008 and 2007 were as
follows (in thousands):
Balance at March 31, 2006 ................................... $ 90,872
Sale of 50% interest in Minick Holdings AG (‘‘Minick’’) ........... (9,598)
Goodwill acquired ....................................... 3,753
Additional consideration paid for ValuSoft ...................... 1,800
Effect of foreign currency exchange rates and other ............... 1,861
Balance at March 31, 2007 ................................... $ 88,688
Goodwill acquired ....................................... 30,329
Additional consideration paid for ValuSoft ...................... 1,800
Effect of foreign currency exchange rates and other ............... 1,568
Balance at March 31, 2008 ................................... $122,385
We performed an annual review of goodwill impairment in each of the fiscal years ended March 31, 2008,
2007 and 2006 and found no impairment.
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