THQ 2012 Annual Report Download - page 55

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THQ INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
We are a leading worldwide developer and publisher of interactive entertainment software for all popular game systems,
including:
• home video game consoles such as the Microsoft Xbox 360 and Xbox 360 Kinect (collectively referred to as
"Xbox 360"), Nintendo Wii ("Wii"), and Sony PlayStation 3 ("PS3");
• handheld platforms such as the Nintendo DS, DSi and 3DS (collectively referred to as "DS"), and Sony PlayStation
Portable ("PSP");
• wireless devices based on the Apple iOS (including the iPhone, iTouch and iPad), Google Android, and Windows
Mobile platforms;
• personal computers ("PCs"), including games played online; and
• the Internet, including on social networking sites such as Facebook.
In addition to titles published on the wireless devices noted above, we also develop and publish titles (and supplemental
downloadable content) for digital distribution via Sony's PlayStation Network ("PSN") and Microsoft's Xbox
LIVE Marketplace ("Xbox LIVE") and Xbox LIVE Arcade ("XBLA"), as well as digitally offer our PC titles through online
download stores and services such as Amazon, OnLive, Origin, and Valve.
Our titles span multiple categories, including action, adventure, fighting, role-playing, simulation, and strategy. We have
created, licensed and acquired a group of highly recognizable brands, which we market to a variety of consumer demographics
ranging from products targeted at core gamers to products targeted to mass market. Our portfolio of key franchises currently
includes:
• games based on our owned intellectual properties including Company of Heroes, Darksiders, Homefront, inSANE, and
Saints Row; and new properties in development by Patrice Désilets and Turtle Rock Studio, and
• core games based on licensed properties including Games Workshop's Warhammer 40,000 universe, Metro, and
World Wrestling Entertainment ("WWE").
We develop our products using both internal and external development resources. The internal resources consist of producers,
game designers, software engineers, artists, animators and game testers located within our internal development studios and
corporate headquarters. The external development resources consist of third-party software developers and other independent
resources such as artists, voice-over actors and composers.
Our global sales network includes offices throughout North America, Europe and Australia. In the U.S. and Canada, we market
and distribute games directly to mass merchandisers, consumer electronic stores, discount warehouses and other national retail
chain stores. Internationally, we market and distribute games on a direct-to-retail basis in the territories where we have a direct
sales force and to a lesser extent, in the territories where we do not have a direct sales force, third parties distribute our games.
We also globally market and distribute games digitally via the Internet and through high-end wireless devices, such as the
iPhone, iTouch and iPad, as well as wireless devices run on the Google Android and Windows Mobile platforms.
In January 2011, we sold certain wireless carrier contracts and one of our wholly-owned subsidiaries that had been involved in
publishing and developing a portion of our content sold on legacy wireless platforms for an insignificant gain. We are
continuing our investment in the wireless platforms with the carrier contracts retained, focusing on the development of games
for use in products based on the Apple iOS, Google Android and Microsoft Windows Mobile operating systems. In March
2012, we sold certain assets and liabilities, including the rights to distribute certain titles from our portfolio of value PC
products, for a small gain.
At March 31, 2012, we had working capital of $18.7 million, including cash and cash equivalents of $76.0 million. Included in
our working capital is a net reduction of $68.5 million related to the non-cash deferral of revenue, net of related expenses.
During the year ended March 31, 2012, we made a number of changes to our organization and product lineup. We
discontinued a number of titles in our product pipeline that did not fit our strategic objectives, thus reducing future product
development expenses. We reduced the number of internal development studios from eleven to five. We exited markets, sold
or reconfigured games and product lines that did not meet internal profitability thresholds or were no longer central to our go-
forward strategy. We negotiated with our kids' and movie-based licensors to reduce our future license commitments. We
reduced costs and headcount in our corporate and global publishing organizations as well as our studios impacted by the
changes in our product line-up. In January 2012, we implemented a plan of restructuring in order to better align our operating
expenses with the lower expected revenues under the updated strategy. In connection with this realignment, we significantly
reduced other future product development expenditures which did not align with our current strategy. The majority of the