expenditures just to maintain current levels of sales of our titles.  Competitors with more extensive lines and popular titles frequently have greater bargaining power with retailers. Accordingly, we may not be able to achieve the levels of promotional support and shelf space that such competitors receive. Returns of our published titles and price concessions may adversely affect our operating results. We are exposed to the risk of product returns and price concessions with respect to our cus- tomers. Our distribution arrangements with customers do not give them the right to return titles to us or to cancel firm orders. However, we sometimes accept product returns from our distribution customers for stock balancing and negotiate accommodations to customers which include credits and returns, when demand for specific products falls below expectations. We accept returns and grant price conces- sions in connection with our publishing arrangements. Revenue is rec- ognized after deducting estimated reserves for returns and price con- cessions. We believe that we can reliably estimate future returns and price concessions. However, if return rates and price concessions for our published titles exceed our reserves, our net sales will decline. The interactive entertainment software industry is highly com- petitive. We compete for both licenses to properties and the sale of interactive entertainment software with Sony, Microsoft and Nintendo, each of which is a large developer and marketer of software for its own platforms. Each of these competitors has the financial resources to withstand significant price competition and to implement extensive advertising campaigns, particularly for prime-time television spots. These companies may also increase their own software development efforts or focus on developing software products for third-party plat- forms. We also compete with domestic companies such as Electronic Arts, Activision, THQ, Midway Games, Acclaim Entertainment and Atari and international companies such as Sega, Vivendi, Ubi Soft, Eidos, Capcom, Konami and Namco. Some of our competitors have greater financial, technical, personnel and other resources than we do, and are able to carry larger inventories and make higher offers to licensors and developers for commercially desirable properties than we can. Our titles also compete with other forms of entertainment such as motion pictures, television and audio and video products  featuring similar themes, online computer programs and forms  of entertainment which may be less expensive or provide other advantages to consumers. Our distribution business also operates in a highly competitive environment. The intense competition that characterizes our industry is based primarily on breadth, availability and quality of product lines; price; terms and conditions of sale; credit terms and availability; speed and accuracy of delivery; and effectiveness of sales and marketing pro- grams. Our competitors include regional, national and international distributors, as well as hardware manufacturers and software publish- ers. We may lose market share or be forced in the future to reduce our prices in response to the actions of our competitors, and thereby experience a reduction in our gross margins. Increased competition for limited shelf space and promotional support from retailers could affect the success of our business and require us to incur greater expenses to market our titles. Retailers have limited shelf space and promotional resources, and competition is intense among an increasing number of newly introduced interac- tive entertainment software titles for adequate levels of shelf space and promotional support. Competition for retail shelf space is expect- ed to increase, which may require us to increase our marketing Several proposals have been made for federal legislation to regu- late the interactive entertainment software, motion picture and recording industries, including a proposal to adopt a common rating system for interactive entertainment software, television and music containing violence or sexually explicit material, and the Federal Trade Commission has issued reports with respect to the marketing  of such material to minors. Consumer advocacy groups have also opposed sales of interactive entertainment software containing  graphic violence or sexually explicit material by pressing for  Rating systems for interactive entertainment software, potential legislation and consumer opposition could inhibit sales of our prod- ucts. Trade organizations within the video game industry require inter- active entertainment software publishers to provide consumers with information relating to graphic violence, profanity or sexually explicit material contained in software titles, and impose penalties for non- compliance. Certain countries have also established similar rating  systems as prerequisites for sales of interactive entertainment software in such countries. In some instances, we may be required to modify our products to comply with the requirements of such rating systems, which could delay the release of those products in such countries. Our software titles receive a rating of “E” (age 6 and older), “T” (age 13 and over) or “M” (age 17 and over). Most of our new titles (including Grand Theft Auto 3 ,  Grand Theft Auto: Vice City ,  Max Payne 2 :  The Fall of Max Payne ,  Manhunt  and Mafia ) have received an “M” rating. We believe that we comply with such rating systems and properly  display the ratings and content descriptions received for our titles. We are subject to credit and collection risks. Our sales are  typically made on credit. We do not hold any collateral to secure payment by our customers. As a result, we are subject to credit risks, particularly in the event that any of our receivables represent sales to a limited number of retailers or are concentrated in foreign markets. We recently terminated our domestic receivables insurance. Although we continually assess the creditworthiness of our customers, which  are principally large, national retailers, if we are unable to collect our accounts receivable as they become due, it could adversely affect our financial condition. A limited number of customers may account for a significant portion of our sales. Sales to our five largest customers accounted for approximately 38.6%, 31.4% and 20.8%, respectively, of our net sales for the years ended October 31, 2003, 2002 and 2001. For the year ended October 31, 2003, sales of our products to Wal-Mart accounted for 11.4% of our net sales. Our sales are made primarily pursuant to purchase orders without long-term agreements or other commitments. Our customers may terminate their relationship with  us at any time. The loss of our relationships with principal customers or a decline in sales to principal customers could harm our operating results. Bankruptcies or consolidations of certain large retail cus- tomers could also seriously hurt our business. 23