THQ 2010 Annual Report Download - page 34

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fiscal 2010 as compared to fiscal 2009. These decreases were primarily due to i) more focused selling and
marketing spend on our key titles in fiscal 2010 as compared to fiscal 2009 and ii) reductions in sales and
marketing personnel-related costs resulting from actions taken as part of our fiscal 2009 business
realignment, including lower stock-based compensation expense. Additionally, the decrease as a percent of
net sales in fiscal 2010 was due to high net sales from our first game based on the UFC franchise,
UFC 2009
Undisputed
, relative to its marketing spend.
General and Administrative (in thousands)
Year Ended
March 31, 2010
% of net sales
Year Ended
March 31, 2009
% of net sales
% change
$57,879 6.4% $76,884 9.3% (24.7)%
General and administrative expenses consist of personnel and related expenses of executive and
administrative staff and fees for professional services such as legal and accounting. General and
administrative expenses decreased in fiscal 2010 by $19.0 million, as compared to fiscal 2009. The decrease
was primarily due to bad debt expense recognized in fiscal 2009 due to the bankruptcy of certain customers
as well as recoveries of certain of those bad debts in fiscal 2010. Additionally, general and administrative
expenses decreased due to reductions in personnel-related costs resulting from actions taken as part of our
fiscal 2009 business realignment, including lower stock-based compensation expense, partially offset by the
lack of bonus expense in fiscal 2009.
Goodwill Impairment
In connection with the preparation of the fiscal 2009 third quarter financial statements, we performed an
interim impairment test of goodwill at December 31, 2008 and recorded goodwill impairment charges of
$118.8 million during fiscal 2009, representing the entire amount of our previously recorded goodwill. We did
not have goodwill impairment charges in fiscal 2010.
Restructuring
Restructuring charges include the costs associated with lease abandonments less estimates of sublease
income, write-offs of related long-lived assets due to the studio closures, as well as costs of other non-
cancellable contracts. During fiscal 2009, we updated our strategic plan in an effort to increase our
profitability and cash flow generation. We significantly realigned our business to focus on fewer, higher
quality games, and have established an operating structure that supports our more focused product strategy.
The realignment included the cancellation of several titles in development, the closure or spin-off of several
of our development studios, and the streamlining of our corporate organization in order to support the new
product strategy, including reductions in worldwide personnel. As a result of these initiatives, we recorded
restructuring charges of $5.7 million in fiscal 2010, and $12.3 million in fiscal 2009. We do not expect any
future charges under the fiscal 2009 realignment, other than additional facility related charges in the event
actual and estimated sublease income changes. For further information related to our restructuring charges,
see “Note 9—Restructuring” in the notes to the consolidated financial statements included in Item 8.
Interes t and Other Income (Expense), net
Interest and other income (expense), net consists of interest earned on our investments, gains and losses
resulting from exchange rate changes for transactions denominated in currencies other than the functional
currency, and interest expense and amortization of debt issuance costs on our $100.0 million 5.00%
convertible senior notes (“Notes”). For further discussion of the Notes, see “Note 11—Convertible Senior
Notes” in the notes to the consolidated financial statements included in Item 8. Interest and other income
(expense), net decreased by $2.5 million in fiscal 2010, as compared to fiscal 2009. Excluding the
recognition of a $6.3 million other-than-temporary impairment loss on our investments in fiscal 2009, interest
and other income (expense), net, decreased $8.8 million due to:
• lower average yields and investment balances, as compared to fiscal 2009;
• interest expense on our Notes in fiscal 2010; and
• foreign currency transaction losses.
There were no other-than-temporary impairment losses in fiscal 2010.