THQ 2008 Annual Report Download - page 60

Guarantees and Commitments
A summary of annual minimum contractual obligations and commercial commitments as of March 31,
2008 is as follows (in thousands):
Contractual Obligations and Commercial Commitments(6)
License /
Fiscal Software
Years Ending Development Letters of
March 31, Commitments(1) Advertising(2) Leases(3) Credit(4) Other(5) Total
2009 ............. $110,316 $13,009 $17,011 $30,914 $5,347 $176,597
2010 ............. 46,630 15,543 16,062 — 1,388 79,623
2011 ............. 14,038 8,532 14,766 — — 37,336
2012 ............. 2,850 1,547 12,497 — — 16,894
2013 ............. 600 1,547 9,170 — — 11,317
Thereafter ......... 500 1,160 17,998 — — 19,658
$174,934 $41,338 $87,504 $30,914 $6,735 $341,425
(1) Licenses and Software Development. We enter into contractual arrangements 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, 2008 are approximately $174.9 million. License/software development commitments in
the table above include $55.4 million of commitments to licensors that are included in our
consolidated balance sheet as of March 31, 2008 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 2009 will be
$13.0 million.
(3) Leases. We are committed under operating leases with lease termination dates through 2015. Most
of our leases contain rent escalations. Rent expense was $16.1 million, $14.0 million and $10.6 million
for the fiscal years ended March 31, 2008, 2007 and 2006, respectively.
(4) Letters of Credit. As of March 31, 2008, we had outstanding letters of credit of approximately
$30.9 million. On October 3, 2006, we entered into an agreement with a bank primarily to provide
stand-by letters of credit to a platform manufacturer from whom we purchase products. We pledged
cash equivalents and investments to the bank as collateral in an amount equal to 110% of the amount
of the outstanding stand-by letters of credit.
(5) Other. As of March 31, 2008, we had purchase commitments of approximately $2.8 million, included
in the table above, pertaining to various international distribution agreements signed in fiscal 2008 for
products that are expected to ship on various dates during fiscal 2009. These agreements have two
year terms and are contractually denominated as 1.8 million Euros.
Pursuant to the terms of our acquisitions of Universomo, Big Huge Games and Elephant
Entertainment combined, there is additional consideration of $3.9 million included in accrued and
other current liabilities in our March 31, 2008 consolidated balance sheet and included in the table
above. In addition, we may have to pay additional consideration of $1.9 million in cash (contractually
denominated as 1.2 million Euros) and $4.7 million in stock in future years if such sellers attain certain
agreed upon targets, as set forth in the relevant purchase agreement.
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