THQ 2012 Annual Report Download - page 45

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in the lease commitments shown in the table above. Rent expense was $12.1 million, $13.5 million, and $13.9 million for
fiscal years 2012, 2011, and 2010, respectively.
(4) Debt. We issued the Notes on August 4, 2009. 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. Absent any conversions, we
expect to pay $5.0 million in each of the fiscal years 2013 and 2014, and $2.5 million in fiscal 2015, for an aggregate of
$12.5 million in interest payments over the remaining term of the Notes (see "Note 9 — Debt" in the notes to the
consolidated financial statements included in Part II, Item 8).
(5) Other. As discussed more fully in "Note 14 —Joint Venture and Settlement Agreements" in the notes to the consolidated
financial statements included in Part II, Item 8, amounts payable to Jakks totaling $8.0 million are reflected in the table
above. The present value of these amounts is included in "Accrued and other current liabilities" and "Other long-term
liabilities" in our consolidated balance sheet at March 31, 2012 (see "Note 4— Balance Sheet Details" in the notes to the
consolidated financial statements included in Part II, Item 8). The remaining other commitments included in the table
above are also included as current or long-term liabilities in our March 31, 2012 consolidated balance sheet.
(6) We have omitted unrecognized tax benefits from this table due to the inherent uncertainty regarding the timing and amount
of certain payments related to these unrecognized tax benefits. The underlying positions have not been fully developed
under audit to quantify at this time. At March 31, 2012, we had $3.8 million of unrecognized tax benefits. See "Note 16
—Income Taxes" in the notes to the consolidated financial statements included in Part II, Item 8 for further information
regarding the unrecognized tax benefits.
Manufacturer Indemnification. We must indemnify the platform manufacturers (Microsoft, Nintendo, Sony) of our games with
respect to all loss, liability and expenses resulting from any claim against such manufacturer involving the development,
marketing, sale or use of our games, including any claims for copyright or trademark infringement brought against such
manufacturer. As a result, we bear a risk that the properties upon which the titles of our games are based, or that the
information and technology licensed from others and incorporated into the products, may infringe the rights of third parties.
Our agreements with our third-party software developers and property licensors typically provide indemnification rights for us
with respect to certain matters. However, if a manufacturer brings a claim against us for indemnification, the developers or
licensors may not have sufficient resources to, in turn, indemnify us.
Indemnity Agreements. We have entered into indemnification agreements with the members of our Board of Directors, our
Chief Executive Officer and our Chief Financial Officer, to provide a contractual right of indemnification to such persons to the
extent permitted by law against any and all liabilities, costs, expenses, amounts paid in settlement and damages incurred by any
such person as a result of any lawsuit, or any judicial, administrative or investigative proceeding in which such person is sued
as a result of service as a member of our Board of Directors, as Chief Executive Officer or as Chief Financial Officer. The
indemnification agreements provide specific procedures and time frames with respect to requests for indemnification and
clarify the benefits and remedies available to the indemnitees in the event of an indemnification request.
Litigation. We are subject to ordinary routine claims and litigation incidental to our business. We do not believe that any
liability from any reasonably foreseeable disposition of such claims and litigation, individually or in the aggregate, would have
a material adverse effect on our financial position or results of operations.
Critical Accounting Estimates
The Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated
financial statements, which have been prepared in accordance with accounting principles generally accepted in the United
States of America. The preparation of these consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the
date of our consolidated financial statements and the reported amounts of net sales and expenses during the reporting period.
The estimates discussed below are considered by management to be critical because they are both important to the portrayal of
our financial condition and results of operations and because their application places the most significant demands on
management's judgment, with financial reporting results relying on estimates about the effect of matters that are inherently
uncertain. Specific risks for these critical accounting estimates are described in the following paragraphs. For all of these
estimates, we caution that actual results may differ materially from these estimates under different assumptions or conditions.
Accounts receivable allowances. We derive revenue from sales of packaged software for video game systems and PCs and
sales of content and services over the Internet and for wireless devices. Product sales are recognized net of allowances for price
protection and returns and various customer discounts. We typically only allow returns for our PC products; however, we may
decide to provide price protection or allow returns for our retail video game sales after we analyze: (i) inventory remaining in