THQ 2010 Annual Report Download - page 39

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31
Interes t and Other Income (Expense), net
Interest and other income (expense), net, consists of interest earned on our investments as well as gains
and losses resulting from exchange rate changes for transactions denominated in currencies other than the
functional currency. Interest and other income (expense), net, decreased by $14.9 million in fiscal 2009 as
compared to fiscal 2008. The decrease in fiscal 2009 was primarily due to the recognition of a $6.3 million
other-than-temporary impairment loss on our investments, as well as lower average yields on a lower average
investment balance in fiscal 2009 as compared to fiscal 2008.
Income Taxes
We recorded an income tax expense of $46.2 million for fiscal 2009 as compared to income tax benefit of
$35.8 million for fiscal 2008. The income tax expense in fiscal 2009 reflects an effective tax rate of (12%),
which is different than our statutory rate of 35%. The significant items that generated the variance between
our effective tax rate and the statutory tax rate for fiscal 2009 were (i) recording of a valuation allowance
against deferred tax assets, (ii) goodwill impairment, the majority of which is not tax deductible, (iii) fiscal 2009
research and development tax credits, and (iv) tax free interest income.
The income tax benefit for fiscal 2008 reflects an effective income tax rate of 49%, which is higher than our
statutory rate of 35%. The significant items that generated the variance between our effective tax rate and
the statutory tax rate for fiscal 2008 were (i) the partial release of the reserve on previous years’ research and
development tax credits, (ii) fiscal 2008 research and development tax credits, and (iii) tax free interest
income.
Noncontrolling Interest
The noncontrolling interest of $0.3 million in fiscal 2009 reflects the loss allocable to equity interests in
THQ*ICE LLC (a joint venture with ICE Entertainment formed in fiscal 2009). This noncontrolling interest
reflects the loss allocable to equity interests that are not owned by THQ.
Discontinued Operations
In December 2006, we sold our 50% interest in 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
consolidated statement of operations. Pursuant to the Minick sale agreement, no additional consideration
was outstanding as of June 30, 2008.
Liquidity and Capital Resources
(In
thou sand s)
March 31, 2010
March 31, 2009
Change
Cash and cash equivalents .......................................................... $188,378 $131,858 $56,520
Short-term investments .................................................................. 82,941 8,804 74,137
Cash, cash equivalents and short-term investments............. $271,319 $140,662 $130,657
Percentage of total assets ............................................................ 38% 24%
Year Ended March 31,
(In
thou sand s)
2010
2009
Change
Cash provided by (used in) operating activities ....................................... $33,385 $(194,174) $227,559
Cash provided by (used in) investing activities......................................... (69,784) 59,533 (129,317)
Cash provided by financing activities ........................................................ 86,418 33,954 52,464
Effect of exchange rate changes on cash ............................................... 6,501
(15,275) 21,776
Net increase (decrease) in cash and cash equivalents ...................... $56,520 $(115,962) $172,482
Our primary sources of liquidity are cash, cash equivalents, and short-term investments. Our principal source
of cash is from sales of interactive software games designed for play on video game consoles, handheld
devices and PCs, including via the Internet. Our principal uses of cash are for product purchases of discs