Creative 2003 Annual Report Download - page 31

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30
NOTE 4 – PRODUCT WARRANTIES
The warranty period for the bulk of Creative’s products typically ranges between 1 to 3 years. The product warranty accrual
reflects management’s best estimate of probable liability under its product warranties. Management determines the warranty
provision based on known product failures (if any), historical experience, and other currently available evidence.
Changes in the product warranty accrual for the fiscal year 2003 was as follows (in US$’000):
June 30,
2003
Balance as of June 30, 2002 $ 2,292
Accruals for warranties issued during the period 2,660
Adjustments related to pre-existing warranties (include changes in estimates) (94)
Settlements made (in cash or in kind) during the period (2,023)
Balance as of June 30, 2003 $ 2,835
NOTE 5 – LEASES AND COMMITMENTS
Creative leases the use of land and certain of its facilities and equipment under non-cancelable operating lease arrangements.
The land and facility leases expire at various dates through 2052 and provide for fixed rental rates during the terms of the leases.
Minimum future lease payments for non-cancelable leases as of June 30, 2003, are as follows (in US$’000):
Operating
Leases
Fiscal years ended June 30,
2004 $ 9,976
2005 8,101
2006 5,926
2007 2,580
2008 1,252
Thereafter 13,104
Total minimum lease payments $ 40,939
Rental expense under all operating leases was $11.9 million, $10.7 million and $11.8 million for fiscal 2003, 2002 and
2001, respectively.
Future minimum lease obligations, which are secured by the underlying assets, as of June 30, 2003, under capital leases
are as follows (in US$’000):
Capital
Leases
Fiscal years ended June 30,
2004 $ 1,999
2005 1,410
2006 68
2007 49
2008 –
Thereafter –
Total minimum lease payments $ 3,526
Less: Amount representing interest (93)
Total capital lease obligations $ 3,433
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS