Citrix 2005 Annual Report Download - page 33

Download and view the complete annual report

Please find page 33 of the 2005 Citrix annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 72

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72

The฀following฀table฀summarizes฀our฀significant฀contractual฀obligations฀at฀December฀31,฀2005฀and฀the฀future฀periods฀in฀which฀such฀
obligations฀are฀expected฀to฀be฀settled฀in฀cash.฀Additional฀details฀regarding฀these฀obligations฀are฀provided฀in฀the฀notes฀to฀our฀
consolidated฀financial฀statements฀(in฀thousands):
Payments฀Due฀by฀Period
Total
Less฀Than฀
1฀Year
1–3฀
Years
4–5฀
Years
More฀Than฀
5฀Years
Operating฀lease฀obligations $฀ 81,545 $฀19,560 $฀23,660 $฀12,506 $฀25,819
Synthetic฀lease฀obligations 10,542 3,142 6,417 983 —
Term฀loan(1) 31,000 — 31,000 — —
Interest฀payments฀on฀term฀loan(1) 1,592 1,433 159 — —
฀ Total฀contractual฀obligations(2) $฀124,679 $฀24,135 $฀61,236 $฀13,489 $฀25,819
(1)฀ ฀The฀Term฀Loan฀was฀paid฀in฀full฀in฀February฀2006฀and฀we฀incurred฀approximately฀$0.2฀million฀in฀interest฀payments฀related฀to฀the฀Term฀Loan฀in฀2006.
(2)฀ ฀Total฀contractual฀obligations฀do฀not฀include฀agreements฀where฀our฀commitment฀is฀variable฀in฀nature฀or฀where฀cancellation฀without฀payment฀provisions฀exist.
As฀of฀December฀31,฀2005,฀we฀did฀not฀have฀any฀individually฀material฀capital฀lease฀obligations,฀purchase฀obligations,฀or฀other฀material฀
long-term฀commitments฀reflected฀on฀our฀consolidated฀balance฀sheets.
Off-Balance฀Sheet฀Arrangement
During฀2002,฀we฀became฀a฀party฀to฀a฀synthetic฀lease฀arrangement฀totaling฀approximately฀$61.0฀million฀for฀our฀corporate฀headquarters฀
office฀space฀in฀Fort฀Lauderdale,฀Florida.฀The฀synthetic฀lease฀represents฀a฀form฀of฀off-balance฀sheet฀financing฀under฀which฀an฀unrelated฀
third฀party฀lessor฀funded฀100%฀of฀the฀costs฀of฀acquiring฀the฀property฀and฀leases฀the฀asset฀to฀us.฀The฀synthetic฀lease฀qualifies฀as฀
an฀operating฀lease฀for฀accounting฀purposes฀and฀as฀a฀financing฀lease฀for฀tax฀purposes.฀We฀do฀not฀include฀the฀property฀or฀the฀lease฀
debt฀as฀an฀asset฀or฀a฀liability฀on฀our฀accompanying฀consolidated฀balance฀sheets.฀Consequently,฀payments฀made฀pursuant฀to฀the฀
lease฀are฀recorded฀as฀operating฀expenses฀in฀our฀consolidated฀statements฀of฀income.฀We฀entered฀into฀the฀synthetic฀lease฀in฀order฀
to฀lease฀our฀headquarters฀properties฀under฀more฀favorable฀terms฀than฀under฀our฀previous฀lease฀arrangements.฀We฀do฀not฀materially฀
rely฀on฀off-balance฀sheet฀arrangements฀for฀our฀liquidity฀or฀as฀capital฀resources.฀For฀information฀regarding฀cash฀outflows฀associated฀
with฀our฀lease฀payments฀see฀“Contractual฀Obligations.”
The฀initial฀term฀of฀the฀synthetic฀lease฀is฀seven฀years.฀Upon฀approval฀by฀the฀lessor,฀we฀can฀renew฀the฀lease฀twice฀for฀additional฀two-year฀
periods.฀The฀lease฀payments฀vary฀based฀on฀LIBOR,฀plus฀a฀margin.฀At฀any฀time฀during฀the฀lease฀term,฀we฀have฀the฀option฀to฀sublease฀
the฀property฀and฀upon฀thirty฀days’฀written฀ notice,฀we฀have฀the฀option฀to฀purchase฀ the฀property฀for฀an฀amount฀representing฀the฀
original฀property฀cost฀and฀transaction฀fees฀of฀approximately฀$61.0฀million฀plus฀any฀lease฀breakage฀costs฀and฀outstanding฀amounts฀
owed.฀Upon฀at฀least฀180฀days฀notice฀prior฀to฀the฀termination฀of฀the฀initial฀lease฀term,฀we฀have฀the฀option฀to฀remarket฀the฀property฀
for฀sale฀to฀a฀third฀party.฀If฀we฀choose฀not฀to฀purchase฀the฀property฀at฀the฀end฀of฀the฀lease฀term,฀we฀have฀guaranteed฀a฀residual฀value฀
to฀the฀lessor฀of฀approximately฀$51.9฀million฀and฀possession฀of฀the฀buildings฀will฀be฀returned฀to฀the฀lessor.฀On฀a฀periodic฀basis,฀we฀
evaluate฀the฀property฀for฀indications฀of฀permanent฀impairment.฀If฀an฀evaluation฀were฀to฀indicate฀that฀the฀fair฀value฀of฀the฀property฀
were฀to฀decline฀below฀$51.9฀million,฀we฀would฀be฀responsible฀for฀the฀difference฀under฀our฀residual฀value฀guarantee,฀which฀could฀
have฀a฀material฀adverse฀effect฀on฀our฀results฀of฀operations฀and฀financial฀condition.
The฀ synthetic฀ lease฀ includes฀ certain฀ financial฀ covenants฀ including฀ a฀ requirement฀ for฀ us฀ to฀ maintain฀ a฀ restricted฀ cash,฀ cash฀
equivalent฀or฀investment฀balance฀of฀approximately฀$62.8฀million฀as฀collateral,฀which฀is฀classified฀as฀restricted฀cash฀equivalents฀and฀
investments฀in฀our฀accompanying฀consolidated฀balance฀sheets.฀We฀maintain฀the฀ability฀to฀manage฀the฀composition฀of฀restricted฀
investments฀within฀ certain฀ limits฀and฀to฀withdraw฀and฀use฀excess฀ investment฀earnings฀from฀ the฀ pledged฀ collateral฀for฀operating฀
purposes.฀Additionally,฀we฀must฀maintain฀a฀minimum฀net฀cash฀and฀investment฀balance฀of฀$100.0฀million,฀excluding฀our฀collateral-
ized฀investments,฀equity฀investments฀and฀outstanding฀debt฀as฀of฀the฀end฀of฀each฀fiscal฀quarter.฀As฀of฀December฀31,฀2005,฀we฀had฀
approximately฀$422.9฀million฀in฀cash฀and฀investments฀in฀excess฀of฀this฀required฀level.฀The฀synthetic฀lease฀includes฀non-financial฀
covenants,฀ including฀ the฀ maintenance฀ of฀ the฀ property฀ and฀ adequate฀ insurance,฀ prompt฀ delivery฀ of฀ financial฀ statements฀ to฀ the฀
administrative฀agent฀of฀the฀lessor฀and฀prompt฀payment฀of฀taxes฀associated฀with฀the฀property.฀As฀of฀December฀31,฀2005,฀we฀were฀
in฀compliance฀with฀all฀material฀provisions฀of฀the฀arrangement.
Page฀31