Creative 2005 Annual Report Download - page 31

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31
As of June 30
2005 2004
Long term obligations:
Long term debt $ 194,555 $ 23,553
Capital lease obligations 888 4,097
Deferred tax liability 14,012 7,964
Total long term obligations $ 209,455 $ 35,614
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 2005 were as follows (in US$’000):
As of June 30
2005 2004
Balance at the beginning of the year $ 6,232 $ 2,835
Accruals for warranties issued during the period 27,603 8,417
Adjustments related to pre-existing warranties (include changes in estimates) (176) (149)
Settlements made (in cash or in kind) during the period (21,241) (4,871)
Balance at the end of the year $ 12,418 $ 6,232
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, 2005, are as follows (in US$’000):
Operating Leases
Fiscal years ended June 30,
2006 $ 8,648
2007 3,732
2008 1,653
2009 1,061
2010 848
Thereafter 11,882
Total minimum lease payments $ 27,824
Rental expense under all operating leases was $13.4 million, $14.1 million and $12.2 million for fiscal 2005, 2004 and 2003, respectively.