2K Sports 2004 Annual Report Download - page 59

subsidiaries. Available borrowings under the agreement are reduced by the amount of the outstanding standby
letter of credit, which is $1,560 at October 31, 2004. The loan agreement contains certain financial and other
covenants, including the maintenance of consolidated net worth, consolidated leverage ratio and consolidated
fixed charge coverage ratio. As of October 31, 2004, the Company was in compliance with such covenants.
The loan agreement limits or prohibits the Company from declaring or paying cash dividends, merging or
consolidating with another corporation, selling assets (other than in the ordinary course of business), creating
liens and incurring additional indebtedness. The Company had no outstanding borrowings under the revolving
line of credit as of October 31, 2004 and 2003.
In February 2001, the Company’s United Kingdom subsidiary entered into a credit facility agreement, as
amended in March 2002 and April 2004, with Lloyds TSB Bank plc (“Lloyds”) under which Lloyds agreed
to make available borrowings of up to approximately $24,000. Advances under the credit facility bear interest
at the rate of 1.25% per annum over the bank’s base rate, and are guaranteed by the Company. Available
borrowings under the agreement are reduced by the amount of outstanding guarantees. The facility expires on
March 31, 2005. The Company had no material guarantees and no outstanding borrowings under this facility
as of October 31, 2004 and 2003.
10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities as of October 31, 2004 and 2003 consist of:
2004 2003
Accrued co-op advertising and product rebates .................... $ 3,487 $ 3,985
Accrued VAT and payroll taxes .................................... 16,865 11,593
Royalties payable .................................................. 70,113 16,502
Deferred revenue .................................................. 3,448 2,358
Sales commissions................................................. 2,238 2,400
Guarantee payable ................................................. 3,594 —
Provision for settlement ........................................... 7,500 —
Other .............................................................. 21,285 20,045
Total ............................................................... $128,530 $56,883
11. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases 32 office and warehouse facilities. The offices are under non-cancelable operating leases
expiring at various times from December 2004 to September 2014. In addition, the Company has leased
certain equipment, furniture and auto leases under non-cancelable operating leases, which expire through
March 2008. Some of the leases have fixed rent increases and also include inducements to enter into the lease.
The effect of such amounts are deferred and recognized on a straight-line basis over the related lease term.
The Company’s principal executive offices are located at 622 Broadway, New York, New York. The Company
has recently leased additional space at 622 Broadway to accommodate its expanded operations. In connection
with signing a ten-year lease, the Company provided a standby letter of credit of $1,560.
The Company leases approximately 206,000 square feet of office and warehouse space in Cincinnati, Ohio
and pays $1,100 per annum, plus taxes and insurance, under the lease, which expires in May 2006. Effective
September 2004, the Company entered into a ten-year lease for 400,000 square feet of new office and
warehouse space and will pay approximately $1,000 per annum under the lease, plus taxes and insurance.
In addition, the Company will receive funds for leasehold improvements. The Company is entitled to a rent
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share amounts)
9. LINES OF CREDIT (Continued)
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