THQ 2010 Annual Report Download - page 35

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27
Income Taxes
Income tax expense for fiscal 2010 was $0.2 million, which primarily represents foreign and U.S. state taxes
offset by a $3.6 million valuation allowance release related to the recognition of a net operating loss benefit
claimed pursuant to a change in tax law, compared to income tax expense of $46.2 million in fiscal 2009.
The change in income taxes is primarily attributable to the recording of a valuation allowance for deferred tax
assets in fiscal 2009 and income taxes incurred in foreign jurisdictions, which are not reduced by losses in
the United States. The effective tax rate differs significantly from the federal statutory rate primarily due to
losses in the United States that are fully offset by a valuation allowance to the extent that such losses were
not subject to the new five year loss carry-back provisions.
Noncontrolling Interest
The noncontrolling interest of $2.9 million in fiscal 2010 reflects the loss allocable to equity interests in
THQ*ICE LLC (a joint venture with ICE Entertainment). The loss allocable to equity interests in THQ*ICE LLC
was $0.3 million in fiscal 2009. This noncontrolling interest reflects the loss allocable to equity interests that
are not owned by THQ. We sold our interest in THQ*ICE LLC on April 30, 2010 and thus after this date, we
will not have income or loss attributable to noncontrolling interest.
Discontinued Operations
In December 2006, we sold our 50% interest in Minick Holding AG (“Minick”). As of December 31, 2008 we
received $20.6 million in cash from the sale of Minick, and we recognized a gain of $2.1 million in the nine
months ended December 31, 2008. The gain is presented as “Gain on sale of discontinued operations, net
of tax” in our fiscal 2009 consolidated statement of operations. Pursuant to the Minick sale agreement, no
additional consideration was outstanding as of June 30, 2008.
Comparison of Fi scal 2009 to Fiscal 2008
Our net loss from continuing operations for fiscal 2009 was $433.5 million, or $6.48 per diluted share,
compared to a net loss from continuing operations of $36.9 million, or $0.55 per diluted share, for fiscal
2008. Our net loss for fiscal 2009 was $431.1 million, or $6.45 per diluted share, and included a $2.1 million
gain on sale of discontinued operations.
Net Sales
In fiscal 2009 and 2008, net sales were $830.0 million and $1,030.5 million, respectively.
Net sales for fiscal 2009 were impacted by the deferral or recognition of revenue from the sale of titles with
significant online functionality. The balance of deferred revenue related to these titles is included within
accrued and other current liabilities in our consolidated balance sheets. We also defer certain costs related to
these titles; these costs are included within software development, and prepaid expenses and other current
assets in our consolidated balance sheets.
Net sales decreased by $200.5 million in fiscal 2009 as compared to fiscal 2008, from $1,030.5 million to
$830.0 million. Worldwide net sales in fiscal 2009 were primarily driven by sales of
WWE SmackDown vs. Raw
2009
,
Saints Row 2,
and
WALL•E
. As more fully described below, the main factors that contributed to the
decrease in our net sales were, i) an overall softening in our kids business, ii) decline in sales of our games
based on the WWE license, and iii) unfavorable changes in foreign currency translation rates.
Net Sales by New Releases and Catalog Ti tles
The following table details our net sales by new releases (titles initially released in the respective fiscal year)
and catalog titles (titles released in fiscal years previous to the respective fiscal year) for fiscal 2009 and 2008
(in thousands):
Fiscal Year Ended March 31,
Increase/
2009
2008
(Decrease)
%
Change
New releases......
.
$556,384 67.0% $755,126 73.3% $(198,742) (26.3)%
Catalog ...............
.
273,579 33.0 275,341 26.7 (1,762) (0.6)%
Consolidated
net sales .............
.
$829,963 100.0% $1,030,467 100.0% $(200,504) (19.5)%