THQ 2011 Annual Report Download - page 67

for facilities vacated under the fiscal 2009 realignment, offset by estimates of future sublease income. We expect the final settlement
of this accrual to occur by August 1, 2015, which is the last payment date under our lease agreements that were abandoned.
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In October 2008, in conjunction with the UBS Agreement (see "Note 4 — Investment Securities"), we entered into a Credit
Agreement with UBS Bank USA, which allowed us to borrow up to 75% of the market value of the ARS (as determined by UBS)
at any time, on a no net interest basis, to the extent that such ARS continued to be illiquid or until June 30, 2010. Borrowings
under the credit line were due on demand and were secured by certain of our ARS held with UBS. In the three months ended
June 30, 2010, we repaid the entire amount outstanding under the credit line, which was $13.2 million. At June 30, 2010 we had
no borrowings outstanding under the Credit Agreement and the credit line was terminated, pursuant to its terms, on July 2, 2010.
In December 2008, we obtained a margin account at Wells Fargo & Company for the purpose of borrowing against our ARS; this
account was terminated in the three months ended December 31, 2009.
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On August 4, 2009, we issued $100.0 million 5% convertible senior notes ("Notes"). After offering costs, the net proceeds to
THQ were $96.8 million. The Notes are due August 15, 2014, unless earlier converted, redeemed or repurchased. The Notes pay
interest semiannually, in arrears on February 15 and August 15 of each year, beginning February 15, 2010, through maturity and
are convertible at each holder's option at any time prior to the close of business on the trading day immediately preceding the
maturity date. The Notes are our unsecured and unsubordinated obligations.
The Notes are initially convertible into shares of our common stock at a conversion rate of 117.4743 shares of common stock per
$1,000 principal amount of Notes, equivalent to an initial conversion price of approximately $8.51 per share. At this conversion
rate and upon conversion of 100% of our Notes outstanding at March 31, 2011, our Notes would convert into 11.7 million shares
of common stock. The conversion rate is subject to adjustment in certain events such as a stock split, the declaration of a dividend
or the issuance of additional shares. Also, the conversion rate will be subject to an increase in certain events constituting a make-
whole fundamental change; provided, however, that the maximum number of shares to be issued thereunder cannot exceed 14.7
million, subject to adjustment. The Notes will be redeemable, in whole or in part, at our option, at any time after August 20, 2012
for cash, at a redemption price of 100% of the principal amount of the Notes, plus accrued but unpaid interest, if the price of a
share of our common stock has been at least 150% of the conversion price then in effect for specified periods. In the case of
certain events such as the acquisition or liquidation of THQ, or delisting of our common stock from a U.S. national securities
exchange, holders may require us to repurchase all or a portion of the Notes for cash at a purchase price of 100% of the principal
amount of the Notes, plus accrued and unpaid interest.
Costs incurred related to the Notes offering amounted to $3.2 million and are classified as "Other long-term assets, net" in our
consolidated balance sheets at March 31, 2011; these costs are being amortized over the term of the Notes. Amortization expense
associated with these costs is classified as "Interest and other income (expense), net" in our consolidated statements of operations
and was $0.6 million and $0.4 million in fiscal 2011 and fiscal 2010, respectively.
As discussed in “Note 2 — Summary of Significant Accounting Policies” and as further discussed in "Note 25 — Quarterly
Financial Data (Unaudited)," we capitalize interest expense to software development. The following table summarizes the interest
expense included in our consolidated balance sheets as a component of software development (amounts in thousands):
Balance at March 31, 2010
Interest expense capitalized during the period
Amortization of capitalized interest expense
Balance at March 31, 2011
$—
4,990
(672)
$ 4,318
Interest expense related to the Notes that is not capitalized to software development is classified as "Interest and other income
(expense), net" in our consolidated statements of operations and was $10,000 and $3.1 million in fiscal 2011 and fiscal 2010,
respectively. The effective interest rate, before capitalization of any interest expense and including amortization of debt issuance
costs, was 5.65% and 5.35% in fiscal 2011 and fiscal 2010, respectively.
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