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46
short-term as they are expected to be paid out within a year as well as an increase in amounts due to third-
party developers for the production of our games.
Inflation
Our management currently believes that inflation has not had a material impact on continuing operations.
Financial Condition
We believe the existing cash, cash equivalents, short-term investments, and cash generated from operations
will be sufficient to meet our operating requirements for at least the next twelve months, including working
capital requirements, capital expenditures and potential future acquisitions or strategic investments. We
may choose at any time to raise additional capital to strengthen our cash position, facilitate expansion,
pursue strategic investments or to take advantage of business opportunities as they arise.
Our ability to maintain sufficient liquidity could be affected by various risks and uncertainties described in
Item 1A “Risk Factors” in this Annual Report on Form 10-K.
Guarantees and Commitments
A summary of annual minimum contractual obligations and commercial commitments as of March 31,
2006 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
2007 ........... $97,558 $ 21,762 $ 11,332 $7,563 $ 1,463$139,678
2008 ........... 39,102 14,616 11,595 ——65,313
2009 ........... 39,613 13,184 11,189 ——63,986
2010 ........... 37,000 9,77710,812 ——
57,589
2011 ........... 22,000 9,77710,137 ——
41,914
Thereafter ..... ——28,779 ——28,779
$235,273 $ 69,116 $ 8 3,844 $7,563 $ 1,463 $397,259
(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. Assuming all
contractual provisions are met, the total future minimum contract commitments for contracts in place
as of March 31, 2006 are approximately $235.3 million. License/software development commitments in
the table above include $74.2 million of commitments to licensors that are included in our
consolidated balance sheet as of March 31, 2006 because the licensors do not have any significant
performance obligations to us. These commitments are 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 2007 will be
$21.8 million.
(3) Leases. We are committed under operating leases with lease termination dates through2015. Most
of our leases contain rent escalations.
(4) Letters of Credit. As of March 31, 2006, we were in compliance with all the covenants under our
credit facility, had outstanding letters of credit of approximately $7.6 million and no borrowings.