Electronic Arts 1999 Annual Report Download - page 35

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NOTE 3: COMMITMENTS
Lease Obligations
The Company leases certain of its current facilities and certain equipment under non-cancelable operating lease
agreements. The Company is required to pay property taxes, insurance and normal maintenance costs for certain of
its facilities and will be required to pay any increases over the base year of these expenses on the remainder of the
Company’s facilities.
In February 1995, the Company entered into a master operating lease, as subsequently amended, for land and a building to
be constructed in Redwood City, California. The initial term of the lease is for a period of three years from November 30,
1998. Monthly lease payments are based upon the London InterBank Offered Rate. The Company has the option to
purchase the property for the unamortized financed balance at any time after the non-cancelable lease term, or it may
terminate the lease at any time after the non-cancelable term by arranging a third party sale or by making a termination
payment. Should the Company elect to terminate the lease, it will guarantee a residual value of up to 85% of the unamor-
tized value of the property. As part of the agreement, the Company must also comply with certain financial covenants.
Total future minimum lease commitments as of March 31, 1999 are:
(In thousands)
Year ended March 31:
2000 $ 18,284
2001 13,758
2002 6,144
2003 4,709
2004 3,770
Thereafter 5,024
$ 51,689
Total rent expense for all operating leases was $19,480,000, $13,842,000 and $11,430,000, for the fiscal years ended
March 31, 1999, 1998 and 1997, respectively.
NOTE 4: CONCENTRATION OF CREDIT RISK
The Company extends credit to various companies in the retail and mass merchandising industry. Collection of trade
receivables may be affected by changes in economic or other industry conditions and may, accordingly, impact the
Company’s overall credit risk. Although the Company generally does not require collateral, the Company performs ongoing
credit evaluations of its customers and reserves for potential credit losses are maintained.
Short-term investments are placed with high credit-quality financial institutions or in short-duration high quality securities.
The Company limits the amount of credit exposure in any one institution or type of investment instrument.