THQ 2012 Annual Report Download - page 65

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57
we recorded a gain of $1.6 million related to the sale of various assets and liabilities related to our value PC products (recorded
within "Interest and other income (expense), net" in our consolidated statements of operations). Finally, we completed
negotiations with four of our kids' licensors, which resulted in reductions to the carrying value of our licenses, software
development, and accrued royalties of $28.9 million, $5.7 million, and $32.3 million, respectively, as well as the recognition of
a net charge of $2.4 million recorded in "Cost of sales — License amortization and royalties" expense in our consolidated
statements of operations. These fiscal 2012 fourth quarter actions will have reduced headcount by approximately 370 people.
We do not expect any significant future charges under the fiscal 2012 fourth quarter realignment, other than additional facility-
related charges and adjustments in the event actual and estimated sublease income changes.
Fiscal 2012 Third Quarter Realignment. In the third quarter of fiscal 2012, we announced weaker-than-expected initial sales of
uDraw. This resulted in a reduction of approximately 30 people from our Kids, Family and Casual staff and the cancellation of
three titles. In connection with these actions we incurred $1.5 million of cash severance and other employee-based charges
(recorded within operating expenses in our consolidated statements of operations) and charges of $3.0 million related to
cancelled titles in development (recorded within "Cost of sales — Software development amortization" in our consolidated
statements of operations). We do not expect any significant future charges under the fiscal 2012 third quarter realignment.
Fiscal 2012 Second Quarter Realignment. On August 9, 2011, we announced a plan to realign our internal studio development
teams and video games in development in order to better match our resources with our target portfolio of interactive
entertainment and continue our transition away from traditional console games based on licensed kids' titles and movie
entertainment properties. Under this plan, we closed two studios in Australia and eliminated a game development team at one
additional studio. We also cancelled two unannounced titles at these locations that were no longer in line with our strategic
business priorities. These actions resulted in a reduction of approximately 200 people on our product development staff. The
following table summarizes the components and activity under the fiscal 2012 second quarter realignment, classified as
"Restructuring" in our consolidated statements of operations, for fiscal 2012, and the related restructuring reserve balances
(amounts in thousands):
Fiscal Year Ended March 31, 2012
Lease and
Contract
Terminations
Net Asset
Im
p
airments Total
Be
g
innin
g
balance $
—
$
—
$
—
Char
g
es to o
p
erations 3,094 1,002 4,096
Non-cash write-offs
—
(
1,002
)
(
1,002
)
Cash payments, net of sublease
income
(
1,112
)
—
(
1,112
)
Foreign currency and other
ad
j
ustments 359
—
359
Endin
g
balance $ 2,341 $
—
$ 2,341
Additionally, in connection with these actions, in fiscal 2012, we incurred charges of $4.3 million, respectively, related to
estimates of cash severance and other employee-based charges (recorded within operating expenses in our consolidated
statements of operations). In fiscal 2012 we incurred charges of $19.1 million, related to the cancellation of two unannounced
titles in development at these studios (recorded within "Cost of sales — Software development amortization" in our
consolidated statements of operations). In fiscal 2012, we also incurred gains of $2.0 million related to accumulated foreign
currency translation adjustments (recorded within "Interest and other income (expense), net" in our consolidated statements of
operations). Additionally, in fiscal 2012, we incurred a $16.0 million charge for an abandoned license (inclusive of $11.0
million in cash charges; all of which are recorded within "Cost of sales — License amortization and royalties" in our
consolidated statements of operations). We do not expect any future charges under the fiscal 2012 second quarter realignment,
other than additional facility-related charges and adjustments in the event actual and estimated sublease income changes.
Fiscal 2012 First Quarter Realignment. In the first quarter of fiscal 2012, we announced the closure of our studio located in
the U.K. as we continued to refine our video game line-up and utilize studio locations in more cost effective markets. The
following table summarizes the components and activity under the fiscal 2012 first quarter realignment, classified as
"Restructuring" in our consolidated statements of operations, for fiscal 2012, and the related restructuring reserve balances
(amounts in thousands):