THQ 2005 Annual Report Download - page 65

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Short-term investments increased by $61.2 million in fiscal 2005. Short-term investments are primarily
auction rate securities. The interest rates on these securities are typically reset to market prevailing rates
every 50 days or less, and in all cases every 90 days or less, but have longer stated maturities. Prior to the
end of fiscal 2005, we classified auction rate securities in cash and cash equivalents. Prior period
information was reclassified, including the impact on cash flow from investing activities, to conform to the
current year presentation. There was no impact on net income or cash flow from operating activities as a
result of the reclassification. We had $209.4 million of investments in auction rate securities asof
March 31, 2005. In the previously reported consolidated statement of cash flows for the year ended
March 31, 2004, cash used in investing activities related to these short-term investments of $166.0 million
was included in cash and cash equivalents.
Cash provided by financing activities increased by $37.6 million for fiscal 2005, as compared to fiscal 2004,
primarily due to the exercise of stock options.
Guarantees and Commitments
A summary of annual minimum contractual obligations and commercial commitments as of March 31,
2005 is as follows (in thousands):
Contractual Obligations and Commercial Commitments
Fiscal
Years Ending
March 31,
License /
Software
Development
Commitments(1) Advertising(2) Leases(3)
Letters of
Credit(4) Other(5) Total
2006 .......... $82,157 $ 16,362 $7,659 $ 3,800$ 2 ,000 $111,978
2007 .......... 54,221 5,7968,482 —2,000 70,499
2008 .......... 43,424 2,4988,751 ——
54,673
2009 .......... 37,000 2,3358,357 ——
47,692
2010 .......... 12,000 1,7527,515 ——21,267
Thereafter .... 22,000 —28,586 ——5
0,586
$250,802 $ 28,743 $ 6 9,350 $ 3,800$ 4 ,000 $356,695
(1) Licenses and Software Development . We enter into contractual agreements with third parties for the
rights to intellectual property and for the development of products. Under these agreements, we
commit to provide specified payments to an intellectual property holder or developer. Assumingall
contractual provisions are met, the total future minimum contract commitments for contracts in place
as of March 31, 2005 are approximately $250.8 million. License/software development commitments
included $78.3 million of commitments to licensors that have been included in our consolidated
balance sheet as of March 31, 2005 because the licensors do not have any significant performance
obligations to us. These commitments were included in both current and long-term licenses and
accrued royalties.
(2) Advertising. We have certain minimum advertising commitments under most of our major license
agreements. These minimum commitments generally range from 2% to 12% of net sales related to the
respective license. We estimate that our minimum commitment for advertising in fiscal 2006 will be
$16.4 million.
(3) Leases. We are committed under operating leases with lease termination dates through 2015. On
December 30, 2004, we entered into a lease for premises consisting of approximately 103,000 rentable
square feet of office space located in Agoura Hills, California, which we intend to use as our corporate
headquarters. Our current corporate headquarters lease expires in October 2005. Most of our leases
contain rent escalations.
(4)Letters of Credit. We had approximately $3.8 million in obligations under our credit facility with
respect to letters of credit and no outstanding borrowings.