THQ 2010 Annual Report Download - page 38

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30
Venture partner expense is related to the license agreement that the LLC joint venture, comprised of THQ
and Jakks, had with WWE (see “Note 17—Settlement Agreements” in the notes to the consolidated financial
statements included in Item 8). Venture partner expense decreased by $4.3 million in fiscal 2009 as
compared to fiscal 2008. This decrease is due to an overall decrease in net sales of games based on the
WWE license.
Product Development (in thousands)
Year Ended
March 31, 2009
% of net sales
Year Ended
March 31, 2008
% of net sales
% change
$109,201 13.2% $128,869 12.5% 15.3%
Product development expense primarily consists of expenses incurred by internal development studios and
payments made to external development studios prior to products reaching technological feasibility. Product
development expense decreased by $19.7 million in fiscal 2009 as compared to fiscal 2008. This decrease is
primarily due to decreases in internal development spending resulting from the closure of several of our
studios as part of our business realignment as well as an increase in spend on products that have reached
technological feasibility. These decreases were partially offset by an increase in expense due to severance
payments made to product development employees as part of our business realignment.
Selling and Marketing (in thousands)
Year Ended
March 31, 2009
% of net sales
Year Ended
March 31, 2008
% of net sales
% change
$162,183 19.5% $175,288 17.0% 7.5%
Selling and marketing expenses consist of advertising, promotional expenses, and sales and marketing
personnel-related costs. In fiscal 2009, selling and marketing expenses decreased on a dollar basis by
$13.1 million as compared to fiscal 2008. This decrease was primarily due to lower marketing spend on
Smackdown vs. Raw 2009
in fiscal 2009 as compared to
Smackdown vs. Raw 2008
in fiscal 2008 and high
marketing spend in the fourth quarter of fiscal 2008 due to the launch of our owned intellectual property
Frontlines: Fuel of War
.
In fiscal 2009, selling and marketing expenses increased by 2.5 points as a percentage of net sales as
compared to fiscal 2008. This increase is primarily due to a decrease in net sales primarily due to lower
average selling prices in fiscal 2009 as compared to fiscal 2008 as well as fewer units shipped of our fiscal
2009 new releases as compared to fiscal 2008.
General and Administrative (in thousands)
Year Ended
March 31, 2009
% of net sales
Year Ended
March 31, 2008
% of net sales
% change
$76,884 9.3% $69,901 6.8% 10.0%
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 services. General
and administrative expenses increased by $7.0 million in fiscal 2009 as compared to fiscal 2008. The
increase was primarily due to $10.1 million additional bad debt expense in fiscal 2009 as compared to fiscal
2008 resulting from the bankruptcy of certain customers, partially offset by a decrease in employee related
expenses.
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.
Restructuring
Restructuring charges consist primarily of lease and other contact termination costs and asset impairments
related to facility closures. Restructuring charges were $12.3 million in fiscal 2009. We had no restructuring
charges in fiscal 2008.