2K Sports 2004 Annual Report Download - page 60

reduction in connection with its former warehouse space and will seek to sublease this space in April 2005.
Both the rent reduction and leasehold payments will be amortized over the life of the new lease. The
transition to the new facility is planned to be completed by the end of May 2005.
Future minimum rental payments required as of October 31, 2004 are as follows:
Years ending October 31:
2005 .................................................................... $ 9,997
2006 .................................................................... 8,206
2007 .................................................................... 7,754
2008 .................................................................... 7,285
2009 .................................................................... 13,434
Thereafter ............................................................... 15,302
Total minimum lease payments ......................................... 61,978
Less minimum rentals to be received under subleases .................. 130
Total .................................................................... $61,848
Rent expense amounted to $9,713, $7,445 and $5,090, for the years ended October 31, 2004, 2003, and
2002, respectively.
Legal and Other Proceedings
In November 2004, the Company submitted an offer of settlement of the previously announced investigation
by the Enforcement Division of the Securities and Exchange Commission to the Staff of the Commission. The
Staff has agreed to recommend the offer of settlement to the Commission. If approved by the Commission,
the proposed settlement, under which the Company would neither admit nor deny the allegations of a
Complaint, would fully resolve all claims relating to the investigation that commenced in December 2001.
Pursuant to the offer of settlement, the Company would pay a civil penalty of $7.5 million, which has been
accrued in the accompanying financial statements, and would be enjoined from future violations of the federal
securities laws.
The Company is involved in routine litigation in the ordinary course of its business, which in management’s
opinion will not have a material adverse effect on the Company’s financial condition, cash flows or results
of operations.
Other
The Company periodically enters into distribution agreements to purchase various software games that require
the Company to make minimum guaranteed payments. These agreements, which expire between March 15,
2005 and December 31, 2005, require remaining aggregate minimum guaranteed payments of $7,487 at
October 31, 2004. Additionally, assuming performance by third-party developers, the Company has
outstanding commitments under various software development agreements to pay developers an aggregate of
$82,342 during fiscal 2005. The Company also expects to spend $3,500 in fiscal 2005 in connection with the
continued improvement of our software systems for its domestic and international operations. In addition, the
Company expects to spend $4,500 in fiscal 2005 on leasehold improvements and equipment for the warehouse
in Ohio.
Effective May 2004, the Company entered into a three-year agreement with SEGA Corporation, whereby it
co-publishes and exclusively distributes SEGA’s sports titles. Under the current arrangement, the Company is
entitled to receive all of the revenue and profit, if any, from the sale of the sports titles developed by Visual
Concepts and Kush, and it is obligated to pay for development and marketing costs of the sports titles. The
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
11. COMMITMENTS AND CONTINGENCIES (Continued)
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