Electronic Arts 2007 Annual Report Download - page 96

lenders through July 2007. On May 14, 2007 the lenders extended this financing again for an additional year
through July 2008. We may request, on behalf of the lessor and subject to lender approval, an additional one-
year extension of the loan financing between the lessor and the lenders. In the event the lessor’s loan financing
with the lenders is not extended, we may loan to the lessor approximately 90 percent of the financing, and
require the lessor to extend the remainder through July 2009, otherwise the lease will terminate. We account
for the Phase Two Lease arrangement as an operating lease in accordance with SFAS No. 13, as amended.
We believe that, as of March 31, 2007, the estimated fair values of both properties under these operating
leases exceeded their respective guaranteed residual values.
Guildford, Orlando, Los Angeles and Vancouver Studios; Louisville Distribution Center
In February 2006, we entered into an agreement with an independent third party to lease a studio facility in
Guildford, Surrey, United Kingdom, which commenced in June 2006 and will expire in May 2016. The facility
comprises a total of approximately 95,000 square feet, which we use for research and development functions.
Our rental obligation under this agreement is approximately $33 million over the initial ten-year term of the
lease.
In June 2004, we entered into a lease agreement, amended in December 2005, with an independent third party
for a studio facility in Orlando, Florida. The lease commenced in January 2005 and expires in June 2010, with
one five-year option to extend the lease term. The campus facilities comprise a total of 140,000 square feet
and provide space for research and development functions. Our rental obligation over the initial five-and-a-half
year term of the lease is $15 million.
In July 2003, we entered into a lease agreement with an independent third party (the “Landlord”) for a studio
facility in Los Angeles, California, which commenced in October 2003 and expires in September 2013 with
two five-year options to extend the lease term. Additionally, we have options to purchase the property after
five and ten years based on the fair market value of the property at the date of sale, a right of first offer to
purchase the property upon terms offered by the Landlord, and a right to share in the profits from a sale of the
property. Existing campus facilities comprise a total of 243,000 square feet and provide space for research and
development functions. Our rental obligation under this agreement is $50 million over the initial ten-year term
of the lease. This commitment is offset by expected sublease income of $6 million for a sublease to an
affiliate of the Landlord of 18,000 square feet of the Los Angeles facility, which commenced in October 2003
and expires in September 2013, with options of early termination by the affiliate after five years and by us
after four and five years.
In October 2002, we entered into a lease agreement, with an independent third party for a studio facility in
Vancouver, British Columbia, Canada, which commenced in May 2003 and expires in April 2013. We
amended the lease in October 2003. The facility comprises a total of approximately 65,000 square feet and
provides space for research and development functions. Our rental obligation under this agreement is
approximately $16 million over the initial ten-year term of the lease.
Our North American distribution is supported by a centralized warehouse facility that we lease in Louisville,
Kentucky, occupying 250,000 square feet.
In addition to the properties discussed above, we have other properties under lease which have been included
in our restructuring costs as discussed in Note 6 of the Notes to Consolidated Financial Statements included in
Item 8 of this report. While we continually evaluate our facility requirements, we believe that suitable
additional or substitute space will be available as needed to accommodate our future needs.
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