THQ 2011 Annual Report Download - page 40

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Cash provided by (used in) operating activities
Cash provided by (used in) investing activities
Cash provided by (used in) financing activities
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Generally, our primary sources of liquidity are cash, cash equivalents, and short-term investments. In addition, as further discussed
below, we may elect to sell or borrow against certain of our eligible North American accounts receivable. 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, and from sales of uDraw. Our principal uses of cash are for product purchases of discs and cartridges along with
associated manufacturer's royalties, purchases of hardware components for uDraw, payments to external developers and licensors,
the costs of internal software development, and selling and marketing expenses.
Consistent with our previously stated strategy, fiscal 2011 was a year for investment in our pipeline of games as we positioned
ourselves for significant growth in fiscal 2012 and beyond. As a result, in fiscal 2011 our cash, cash equivalents and short-term
investments decreased $185.7 million, from $271.3 million at March 31, 2010 to $85.6 million at March 31, 2011. The decrease
is primarily due to our investments in software development and licenses as well as the timing of collections and payments related
to our late fiscal fourth quarter releases. As a result of expected cash collections during fiscal 2012 related to the March 2011
release of Homefront and the scheduled fiscal 2012 releases of core games such as Red Faction Armageddon, Warhammer 40,000:
Space Marine, and Saints Row: The Third, we expect to generate significant positive cash flow in the second half of fiscal 2012.
Cash Flow from Operating Activities. Cash used in operating activities increased $230.3 million in fiscal 2011 compared to
fiscal 2010. The increase in cash used was primarily due to higher accounts receivable at the end of fiscal 2011 related to the
March 2011 release of Homefront; this increase in accounts receivable was partially offset by higher accounts payable. Also
contributing to the increase in cash used in operating activities were larger investments in software development and licenses in
fiscal 2011 compared to fiscal 2010, as well as the larger net loss during fiscal 2011 compared to fiscal 2010 (adjusted for non-
cash reconciling items such as depreciation, amortization and changes in deferred net revenue and related expenses).
Cash Flow from Investing Activities. Cash provided by investing activities increased $166.8 million in fiscal 2011 compared
to fiscal 2010. The increase in cash provided was primarily due to proceeds from sales and maturities of short-term investments.
Cash Flow from Financing Activities. Excluding the proceeds from the issuance of the Notes on August 4, 2009, cash flow
from financing activities was relatively flat in fiscal 2011 compared to fiscal 2010.
Effect of exchange rate changes on cash. Changes in foreign currency translation rates increased our reported cash balance by
$9.0 million.
Key Balance Sheet Accounts
Total current assets at March 31, 2011 were $599.7 million, up from $562.5 million at March 31, 2010. In addition to cash, cash
equivalents and short-term investments, our current assets consisted primarily of:
Accounts Receivable. Accounts receivable increased $120.3 million, from $41.3 million at March 31, 2010 to $161.6 million at
March 31, 2011. Net accounts receivable was higher at the end of fiscal 2011 compared to fiscal 2010, primarily due to the March
2011 release of Homefront. Accounts receivable allowances were $87.6 million as of March 31, 2011, a $10.0 million increase
from March 31, 2010. Allowances for price protection and returns as a percentage of trailing nine month net sales, excluding the
impact of changes in deferred net revenue, were 11% and 10% as of March 31, 2011 and 2010, respectively. We believe our current
reserves are adequate based on historical experience, inventory remaining in the retail channel and the rate of inventory sell-
through in the retail channel.
Inventory. Inventory increased $17.9 million, from $14.0 million at March 31, 2010 to $31.9 million at March 31, 2011. The
increase in inventory was primarily due to inventory on hand of uDraw at the end of fiscal 2011 as well as higher inventory on
hand of fiscal fourth quarter releases and fiscal first quarter releases. Inventory turns, excluding the impact of changes in deferred
costs, on a rolling twelve month basis were 14 and 12 at March 31, 2011 and 2010, respectively.
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