THQ 2010 Annual Report Download - page 41

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33
Licenses.
Our investment in licenses, including the long-term portion, increased by $47.4 million, from
$92.9 million at March 31, 2009 to $140.3 million at March 31, 2010. The increase was primarily due to the
eight-year license agreement we entered into with WWE on December 22, 2009 and multi-property
agreements with DreamWorks Animation and Sony Pictures Consumer Products. This increase is also
reflected within accrued and other current liabilities as well as other long-term liabilities in the consolidated
balance sheet at March 31, 2010.
Software Development.
Capitalized software development, including the long-term portion, decreased by
$3.5 million, from $162.5 million at March 31, 2009 to $159.0 million at March 31, 2010. Approximately 82%
of the software development asset balance at March 31, 2010 is for games that have expected release
dates in fiscal 2011 and beyond.
Total current liabilities at March 31, 2010, were $190.9 million, down from $254.6 million at March 31, 2009.
Current liabilities consist primarily of:
Accounts Payable.
Accounts payable increased by $0.2 million, from $40.1 million at March 31, 2009 to
$40.3 million at March 31, 2010.
Accrued and Other Current Liabilities.
Accrued and other current liabilities decreased by $52.8 million, from
$190.1 million at March 31, 2009 to $137.3 million at March 31, 2010. The decrease was primarily due to the
settlement agreement we entered into with Jakks, which established the preferred payment rate to Jakks for
WWE video games sold under a license granted by WWE for the period beginning July 1, 2006 and ending
December 31, 2009, at a rate 40% lower than the previous contract rate. As a result of establishing the
preferred payment rate for the period under dispute, we revised our previous estimate, which resulted in a
one-time reduction in accrued venture partner expense of $24.2 million. In addition, during the three months
ended September 30, 2009, we paid Jakks $33.5 million, which we had previously not paid, pending the
settlement of the preferred return rate matter (for additional information see “Note 6—Balance Sheet Details”
in the notes to the consolidated financial statements included in Item 8).
Secured Credit Lines.
Secured credit lines decreased by $11.2 million, from $24.4 million at March 31, 2009
to $13.2 million at March 31, 2010 due to net repayments of borrowings under our margin account with Wells
Fargo and our line of credit with UBS. Borrowings under our secured credit lines relate to our ARS; see
“Note 3—Investment Securities” for further information related to our ARS and “Note 10—Secured Credit
Lines” for further information on our secured credit lines, both in the notes to the consolidated financial
statements included in Item 8.
Our liabilities at March 31, 2010 also consisted of:
Other long-term liabilities.
Other long-term liabilities increased by $65.3 million, from $33.5 million at
March 31, 2009 to $98.8 million at March 31, 2010. The increase was primarily due to the eight-year license
agreement we entered into with WWE on December 22, 2009 and multi-property agreements with
DreamWorks Animation and Sony Pictures Consumer Products. Also contributing to the increase is a portion
of the consideration payable to Jakks related to the agreement that terminated the LLC operating agreement
(see “Note 17—Settlement Agreements” in the notes to the consolidated financial statements included in
Item 8).
Convertible Senior Notes.
We issued the Notes on August 4, 2009 (see “Note 11—Convertible Senior Notes”
in the notes to the consolidated financial statements included in Item 8).
Inflation
Our management currently believes that inflation has not had, and does not currently have, a material impact
on continuing operations.
Financial Condition
At March 31, 2010, we held cash, cash equivalents, short-term investments, and short term investments—
pledged, net of borrowings on secured credit lines, of $280.8 million. We believe that this amount will be
sufficient to meet our operating requirements for at least the next twelve months, including working capital
requirements and contractual obligations, capital expenditures, and potential future acquisitions or strategic
investments.