Dell 1998 Annual Report Download - page 33

pay taxes, maintenance and repair costs.
Future minimum lease payments under all non-cancelable leases as of January 29,
1999 are as follows: $31 million in 2000; $27 million in 2001; $18 million in
2002; $14 million in 2003; $11 million in 2004; and $324 million thereafter.
Rent expense under all of the Company's leases totaled $58 million, $36 million
and $33 million for fiscal years 1999, 1998 and 1997, respectively.
Legal Matters -- The Company is subject to various legal proceedings and claims
arising in the ordinary course of business. The Company's management does not
expect that the outcome in any of these legal proceedings, individually or
collectively, will have a material adverse effect on the Company's financial
condition, results of operations or cash flows.
Certain Concentrations -- All of the Company's foreign currency exchange and
interest rate derivative instruments involve elements of market and credit risk
in excess of the amounts recognized in the accompanying consolidated financial
statements. The counterparties to the financial instruments consist of a number
of major financial institutions. In addition to limiting the amount of
agreements and contracts it enters into with any one party, the Company monitors
its positions with and the credit quality of the counterparties to these
financial instruments. The Company does not anticipate nonperformance by any of
the counterparties.
The Company's marketable securities are placed with high quality financial
institutions and companies. The Company currently invests primarily in debt
securities that have maturities of less than three years. Management believes
that no significant concentration of credit risk for marketable securities
exists for the Company.
The Company markets and sales its products and services to large corporate,
government, medical and education customers, small-to-medium businesses and
individuals. Its receivables from such parties are well diversified.
The Company purchases a number of components from single sources. In some cases,
alternative sources of supply are not available. In other cases, the Company may
establish a working relationship with a single source, even when multiple
suppliers are available, if the Company believes it is advantageous to do so due
to performance, quality, support, delivery, capacity or price considerations. If
the supply of a critical single-source material or component were delayed or
curtailed, the Company's ability to ship the related product in desired
quantities and in a timely manner could be adversely affected. Even where
alternative sources of supply are available, qualification of the alternative
suppliers and establishment of reliable supplies could result in delays and a
possible loss of sales, which could affect operating results adversely.
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NOTE 10 -- RELATED PARTY TRANSACTIONS
During fiscal year 1998, the Company and Newcourt Credit Group Inc. ("Newcourt")
formed a joint venture, Dell Financial Services L.P. ("DFS"), to provide leasing
and other financial services to the Company's customers. The Company has a 70%
equity interest in DFS; however, as the Company does not exercise control over
DFS, it accounts for the investment under the equity method. During fiscal year
1999, DFS originated financing arrangements for the Company's customers totaling
$895 million. The Company's investment in DFS at January 29, 1999 and February
1, 1998, was not material to the Company's financial position or results of
operations.
NOTE 11 -- SEGMENT INFORMATION
As described in Note 1, the Company adopted SFAS No. 131 in fiscal year 1999.
The Company has three reportable business segments: the Americas, Europe and
Asia-Pacific and Japan regions.
The Company conducts operations worldwide and is managed on a geographic basis,
with those geographic segments being the Americas, Europe and Asia-Pacific and
Japan regions. The Americas segment, which is based in Round Rock, Texas, covers
the U.S., Canada and Latin America. The European segment, which is based in
Bracknell, England, covers the European countries and also some countries in the
Middle East and Africa. The Asia-Pacific/Japan segment covers the Pacific Rim,
including Japan, Australia and New Zealand, and is based in Hong Kong (for areas
other than Japan) and Kawasaki, Japan (for Japan). The Company's operations are
primarily concentrated in the North America, Europe and Asia-Pacific and Japan
regions.
The accounting policies of the geographic segments are the same as those
described in the summary of significant accounting policies. The Company
allocates resources to and evaluates performance of its geographic segments
based on operating income. Transfers between geographic areas are recorded using
internal transfer prices set by the Company.
The table below presents information about the Company's reportable segments: