THQ 2012 Annual Report Download - page 40

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The increase in selling and marketing expenses as a percent of net sales was primarily due to promotional efforts to support
certain titles that were released late in the fourth quarter of fiscal 2011 for which the related revenues were deferred. Also
contributing to the increase as a percent of net sales was:
• higher advertising support for UFC Undisputed 2010 in fiscal 2011 relative to its net sales compared to UFC 2009
Undisputed in fiscal 2010,
• an increase in advertising support for our catalog titles in fiscal 2011 relative to their net sales compared to fiscal 2010, and
• an increase in advertising support for our future releases.
General and Administrative (amounts in thousands)
Fiscal Year Ended
March 31, 2011 % of net sales
Fiscal Year Ended
March 31, 2010 % of net sales % chan
g
e
$45,356 6.8% $57,879 6.4%
(
21.6
)
%
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 2011 by $12.5
million, compared to fiscal 2010. The decrease was primarily due to lower personnel related costs and lower legal costs due to
litigation that was settled in fiscal 2010.
Restructuring
Restructuring charges include any of the costs associated with lease abandonments (less estimates of sublease income), write-
offs of related long-lived assets due to studio closures, as well as costs of other non-cancellable contracts. In fiscal 2011,
restructuring charges and adjustments were minimal and primarily reflected facility related charges and adjustments due to
changes in actual and estimated sublease income related to our fiscal 2009 realignment. For further information related to our
restructuring plans and charges and the events and decisions that gave rise to such charges, see "Note 8 — Restructuring and
Other Charges" in the notes to the consolidated financial statements included in Item 8.
Interest and Other Income (Expense), net
Interest and other income (expense), net consists of interest earned on our investments, gains and losses resulting from
exchange rate changes for transactions denominated in currencies other than the functional currency, and interest expense, net
of capitalization and amortization of debt issuance costs on our $100.0 million 5% convertible senior notes ("Notes"). For
further discussion of the Notes, see "Note 9 — Debt" in the notes to the consolidated financial statements included in Item 8.
Interest and other income (expense), net for fiscal 2011 was income of $0.5 million and primarily represented foreign currency
gains and interest income, as substantially all interest expense for the year was capitalized to software development. Interest
and other income (expense), net for fiscal 2010 was an expense of $2.1 million, which primarily represented $3.8 million in
interest expense which was not capitalized, and foreign currency losses, offset by interest income. (See "Note 21 — Quarterly
Financial Data (Unaudited)" in the notes to the consolidated financial statements included in Item 8 for further discussion of
our capitalization of interest expense on our Notes.)
Income Taxes
Income tax expense for fiscal 2011 was $0.9 million, which primarily represents foreign taxes and U.S. state taxes offset by a
$1.6 million benefit related to the release of a valuation allowance on previously unrecognized tax benefits, compared to
income tax expense of $0.2 million in fiscal 2010. The change in income taxes is primarily attributable to 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 are not subject to loss carry-back provisions.
Noncontrolling Interest
We sold our interest in THQ*ICE LLC (a joint venture with ICE Entertainment, Inc.) on April 30, 2010 and recognized an
insignificant gain. In fiscal 2010, we recognized $2.9 million of noncontrolling interest reflecting the loss allocable to equity
interests in THQ*ICE LLC that were not owned by THQ.