Blizzard 2005 Annual Report Download - page 80

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Lease Obligations
We฀lease฀certain฀ of฀ our฀ facilities฀ under฀non-cancelable฀ operating฀ lease฀agreements.฀Total฀future฀minimum฀lease฀ commitments฀ as฀of฀March฀ 31,฀ 2005฀is฀approximately฀
$63.4฀million,฀which฀is฀scheduled฀to฀be฀paid฀as฀follows฀(amounts฀in฀thousands):
Year ended March 31,
2006 $ 11,990
2007 11,440
2008 7,906
2009 6,620
2010 5,783
Thereafter 19,626
Total $ 63,365
Facilities฀rent฀expense฀for฀the฀years฀ended฀March฀31,฀2005,฀2004฀and฀2003฀was฀approximately฀$10.6฀million,฀$8.7฀million฀and฀$7.6฀million,฀respectively.
Legal Proceedings
On฀March฀5,฀2004,฀a฀class฀action฀lawsuit฀was฀filed฀against฀us฀and฀certain฀of฀our฀current฀and฀former฀officers฀and฀directors.฀The฀complaint,฀which฀asserts฀claims฀under฀
Sections฀10(b)฀and฀20(a)฀of฀the฀Securities฀Exchange฀Act฀of฀1934฀based฀on฀allegations฀that฀our฀revenues฀and฀assets฀were฀overstated฀during฀the฀period฀between฀February฀
1,฀2001฀and฀December฀17,฀2002,฀was฀filed฀in฀the฀United฀States฀District฀Court,฀Central฀District฀of฀California฀by฀the฀Construction฀Industry฀and฀Carpenters฀Joint฀Pension฀Trust฀
for฀Southern฀Nevada฀purporting฀to฀represent฀a฀class฀of฀purchasers฀of฀Activision฀stock.฀Five฀additional฀purported฀class฀actions฀have฀subsequently฀been฀filed฀by฀Gianni฀
Angeloni,฀ Christopher฀ Hinton,฀ Stephen฀ Anish,฀ the฀ Alaska฀ Electrical฀ Pension฀ Fund,฀ and฀ Joseph฀ A.฀ Romans฀ asserting฀ the฀ same฀ claims.฀ Consistent฀ with฀ the฀ Private฀
Securities฀Litigation฀Reform฀Act฀(“PSLRA”),฀the฀court฀appointed฀lead฀plaintiffs฀consolidating฀the฀six฀putative฀securities฀class฀actions฀into฀a฀single฀case.฀In฀an฀Order฀dated฀
May฀16,฀2005,฀the฀court฀dismissed฀the฀consolidated฀complaint฀because฀the฀plaintiffs฀failed฀to฀satisfy฀the฀heightened฀pleading฀standards฀of฀the฀PSLRA.฀The฀court฀did,฀
however,฀ give฀ the฀ lead฀ plaintiffs฀ leave฀ to฀ file฀ an฀ amended฀ consolidated฀complaint฀ within฀ 30฀ days฀ of฀ the฀ order.฀We฀ do฀not฀ know฀ whether฀ the฀ lead฀ plaintiffs฀ will฀file฀ an฀
amended฀consolidated฀complaint,฀but฀in฀the฀event฀that฀one฀is฀filed,฀we฀intend฀to฀vigorously฀defend฀the฀case฀at฀such฀time.
In฀addition,฀on฀March฀12,฀2004,฀a฀shareholder฀derivative฀lawsuit฀captioned฀“Frank฀Capovilla,฀Derivatively฀on฀Behalf฀of฀Activision,฀Inc.฀v.฀Robert฀Kotick,฀et฀al.”฀was฀filed,฀
purportedly฀on฀behalf฀of฀Activision,฀which฀in฀large฀measure฀asserts฀the฀identical฀claims฀set฀forth฀in฀the฀federal฀class฀action฀lawsuit.฀That฀complaint฀was฀filed฀in฀California฀
Superior฀Court฀for฀the฀County฀of฀Los฀Angeles.฀Also,฀on฀March฀22,฀2005,฀a฀new฀derivative฀lawsuit฀captioned฀“Ramalingham฀Balamohan,฀Derivatively฀on฀Behalf฀of฀Nominal฀
Defendant฀Activision,฀Inc.฀v.฀Robert฀Kotick,฀et฀al.”฀was฀filed฀in฀the฀Federal฀Court฀of฀Los฀Angeles.฀This฀complaint฀makes฀the฀same฀allegations฀as฀the฀previous฀complaints,฀but฀
it฀names฀all฀the฀current฀directors฀as฀defendants.฀We฀strongly฀deny฀allegations฀in฀both฀derivative฀cases฀and฀will฀vigorously฀defend฀these฀cases.฀In฀the฀California฀derivative฀
case,฀Activision,฀as฀nominal฀defendant,฀filed฀a฀motion฀to฀stay฀all฀proceedings.฀The฀case,฀and฀all฀motion฀practice฀and฀responsive฀pleadings,฀has฀been฀held฀in฀abeyance฀
pending฀a฀status฀conference฀with฀the฀court.฀In฀the฀Federal฀derivative฀case,฀plaintiff฀filed฀a฀notice฀of฀dismissal฀of฀the฀action,฀without฀prejudice฀on฀or฀about฀June฀3,฀2005.
On฀July฀11,฀2003,฀we฀were฀informed฀by฀the฀staff฀of฀the฀Securities฀and฀Exchange฀Commission฀that฀the฀Securities฀and฀Exchange฀Commission฀has฀commenced฀a฀non-public฀
formal฀investigation฀captioned฀“In฀the฀Matter฀of฀Certain฀Video฀ Game฀Manufacturers฀and฀ Distributors.”฀The฀investigation฀appears฀to฀be฀focused฀on฀ certain฀accounting฀
practices฀common฀to฀the฀interactive฀entertainment฀industry,฀with฀specific฀emphasis฀on฀revenue฀recognition.฀In฀connection฀with฀this฀inquiry,฀the฀Securities฀and฀Exchange฀
Commission฀submitted฀to฀us฀a฀request฀for฀information.฀We฀responded฀to฀this฀inquiry฀on฀September฀2,฀2003.฀To฀date,฀we฀have฀not฀received฀a฀request฀from฀the฀Securities฀
and฀Exchange฀Commission฀ for฀any฀ additional฀ information.฀ The฀ Securities฀ and฀ Exchange฀Commission฀staff฀ also฀ informed฀ us฀ that฀other฀ companies฀ in฀the฀ video฀ game฀
industry฀received฀similar฀requests฀for฀information.฀The฀Securities฀and฀Exchange฀Commission฀has฀advised฀us฀that฀this฀request฀for฀information฀should฀not฀be฀construed฀as฀
an฀indication฀from฀the฀Securities฀and฀Exchange฀Commission฀or฀its฀staff฀that฀any฀violation฀of฀the฀law฀has฀occurred,฀nor฀should฀it฀reflect฀negatively฀on฀any฀person,฀entity฀or฀
security.฀We฀have฀cooperated฀and฀intend฀to฀continue฀to฀cooperate฀fully฀with฀the฀Securities฀and฀Exchange฀Commission฀in฀the฀conduct฀of฀this฀inquiry.
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Activision, Inc. — 2005 Annual Report