THQ 2009 Annual Report Download - page 53

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Our primary sources of liquidity are cash, cash equivalents, and short-term investments. Our principal
source of cash is from (1) sales of packaged interactive software games designed for play on video game
consoles, personal computers and handheld devices, (2) downloads by mobile phone users of our wireless
content, (3) interactive online-enabled packaged goods, digital distribution of our products and
downloadable content/micro-transactions, and (4) in-game advertising. Our principal uses of cash are for
product purchases of discs and cartridges along with associated manufacturer’s royalties, payments to
external developers and licensors, the costs of internal software development, and selling and marketing
expenses.
Because we did not generate positive cash flow in fiscal year 2009, our cash, cash equivalents and
short-term investments have decreased from $317.5 million as of March 31, 2008 to $140.7 million as of
March 31, 2009. The primary reasons for the decrease were lower sales in fiscal 2009 compared with the
prior year, increased spending on capitalized software, the timing of large license and other payments as
well as expenses related to the implementation of our business realignment plan, as described below.
In November 2008, we announced an update to our strategic plan and a business realignment initiative that
resulted in the cancellation of several titles that were in development, the closure of five of our studios, a
reduction in development personnel, and the streamlining of our corporate organization.
In February 2009, in response to continuing macroeconomic uncertainty, we announced additional
realignment plans in order to further streamline our product development and corporate operations and
reduce future cash outflows. As outlined in our strategic plan and business realignment, these initiatives
resulted in the additional cancellation of titles in development, studio closures and a reduction in
development and corporate personnel. Upon completion of a few remaining studio personnel actions, we
will have closed several of our studios and will have reduced headcount by approximately 600 people,
which represents approximately 24% of our prior total staff. We expect to continue to realize efficiencies
from the November 2008 and February 2009 initiatives in fiscal 2010. These actions negatively affected our
cash in fiscal 2009 by approximately $10.4 million, primarily a result of severance and other employee-
related costs, and lease and other contract termination costs.
Cash Flow from Operating Activities. Cash used in operating activities increased by $184.5 million for the
fiscal year ended March 31, 2009 as compared to last fiscal year. The increase in cash used was primarily a
result of an increase in our net loss for the year ended March 31, 2009 as compared to last fiscal year,
partially offset by non-cash goodwill impairment and higher amortization of licenses and software
development in fiscal 2009 as compared to fiscal 2008. Additionally, we had larger investments in software
development and prepaid licenses and we had higher payments to our vendors in fiscal 2009 as compared
to fiscal 2008. These increases in cash usage were partially offset by higher collections of accounts
receivable and fewer product purchases reflected in our ending inventory balance.
Cash Flow from Investing Activities. Cash provided by investing activities decreased by $46.3 million for
the fiscal year ended March 31, 2009, as compared to last fiscal year. The decrease in cash provided was
primarily due to movement between our investments and our cash balances, offset by a decrease in capital
spend for the fiscal year ended March 31, 2009, as compared to last fiscal year.
Cash Flow from Financing Activities. Cash provided by financing activities increased by $60.5 million for
the fiscal year ended March 31, 2009, as compared to last fiscal year. The increase in cash provided was
primarily due to common stock repurchases of $54.9 in fiscal year 2008; we had no repurchases of our
common stock in fiscal 2009. The increase in cash provided by financing activities is also the result of net
borrowings of $24.4 under our secured credit line.
Key Balance Sheet Accounts
Accounts Receivable. Accounts receivable decreased $52.4 million in fiscal year 2009, from $112.8 million
at March 31, 2008 to $60.4 million at March 31, 2009. The decrease in net accounts receivable is primarily
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