THQ 2011 Annual Report Download - page 38

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Our operating expenses decreased $196.6 million, or 41%, in fiscal 2010 compared to fiscal 2009. This decrease was primarily
due to goodwill impairment charges of $118.8 million recognized in fiscal 2009, as well as lower product development, selling
and marketing, and general and administrative costs in fiscal 2010 due to the actions taken as part of our fiscal 2009 business
realignment.
Product Development (amounts in thousands)
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$87,233
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9.7%
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$109,201
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13.2%
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(20.1)%
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. Once a product has reached technological
feasibility the related development costs are capitalized to software development. Product development expense decreased
$22.0 million in fiscal 2010 compared to fiscal 2009. The decrease was primarily due to decreases in internal development spending
primarily resulting from actions taken as part of our fiscal 2009 business realignment, including our more focused product strategy
and the closure of several of our studios.
Selling and Marketing (amounts in thousands)
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$131,954
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14.7%
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$162,183
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19.5%
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(18.6)%
Selling and marketing expenses consist of advertising, promotional expenses, and personnel-related costs. Selling and marketing
expenses decreased $30.2 million and by 4.8 points as a percent of net sales in fiscal 2010 compared to fiscal 2009. These decreases
were primarily due to i) more focused selling and marketing spend on our key titles in fiscal 2010 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 (amounts in thousands)
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$57,879
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6.4%
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$76,884
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9.3%
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(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
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
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