Citrix 2005 Annual Report Download - page 61

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Page฀59
$355.7฀million.฀The฀Company฀used฀the฀proceeds฀from฀its฀held-to-maturity฀investments฀that฀matured฀on฀March฀22,฀2004฀and฀cash฀
on฀ hand฀ to฀ fund฀ the฀ redemption.฀ At฀ the฀ date฀ of฀ redemption,฀the฀ Company฀ incurred฀ a฀ charge฀ for฀ the฀ write-off฀ of฀ the฀ remaining฀
deferred฀debt฀issuance฀costs฀of฀approximately฀$7.2฀million.
9.฀FAIR฀VALUES฀OF฀FINANCIAL฀INSTRUMENTS
The฀carrying฀value฀of฀cash฀and฀cash฀equivalents,฀accounts฀receivable,฀accounts฀payable฀and฀accrued฀expenses฀approximate฀their฀
fair฀value฀due฀to฀the฀short฀maturity฀of฀these฀items.฀The฀Company’s฀investments฀classified฀as฀available-for-sale฀securities,฀including฀
restricted฀investments,฀are฀carried฀at฀fair฀value฀on฀the฀accompanying฀consolidated฀balance฀sheets฀based฀primarily฀on฀quoted฀market฀
prices฀for฀such฀financial฀instruments.฀The฀Company’s฀Term฀Loan฀carrying฀value฀approximates฀fair฀value฀due฀to฀its฀market฀rate฀of฀
interest.฀The฀aggregate฀fair฀value฀of฀the฀Company’s฀available-for-sale฀investments฀was฀$76.9฀million฀and฀$479.6฀million฀at฀December฀31,฀
2005฀and฀2004,฀respectively.
10.฀COMMITMENTS฀AND฀CONTINGENCIES
The฀Company฀leases฀certain฀office฀space฀and฀equipment฀under฀various฀operating฀leases.฀In฀addition฀to฀rent,฀the฀leases฀require฀the฀
Company฀to฀pay฀for฀taxes,฀insurance,฀maintenance฀and฀other฀operating฀expenses.฀Certain฀of฀these฀leases฀contain฀stated฀escalation฀
clauses฀while฀others฀contain฀renewal฀options.฀The฀Company฀recognizes฀rent฀expense฀on฀a฀straight-line฀basis฀over฀the฀term฀of฀the฀
lease,฀excluding฀renewal฀periods,฀unless฀renewal฀of฀the฀lease฀is฀reasonably฀assured.
Rental฀expense฀for฀the฀years฀ended฀December฀31,฀2005,฀2004฀and฀2003฀totaled฀approximately฀$21.2฀million,฀$18.0฀million฀and฀
$16.4฀million,฀respectively.฀Sublease฀income฀for฀the฀years฀ended฀December฀31,฀2005,฀2004฀and฀2003฀was฀approximately฀$0.8฀million,฀
$1.6฀ million฀ and฀ $2.0฀ million,฀ respectively.฀ Lease฀ commitments฀ under฀ non-cancelable฀ operating฀ leases฀ with฀ initial฀ or฀ remaining฀
terms฀in฀excess฀of฀one฀year฀and฀sublease฀income฀associated฀with฀non-cancelable฀subleases,฀including฀estimated฀future฀payments฀
under฀the฀Company’s฀synthetic฀lease฀arrangement,฀are฀as฀follows:
(In฀thousands) Operating฀Leases Sublease฀Income
Years฀ending฀December฀31,
฀ 2006 $฀22,702 $฀1,236
฀ 2007 17,142 1,267
฀ 2008 12,935 1,299
฀ 2009 9,027 1,319
฀ 2010 4,462 585
฀ Thereafter 25,819 561
$฀92,087 $฀6,267
During฀2002,฀the฀Company฀became฀a฀party฀to฀a฀synthetic฀lease฀arrangement฀totaling฀approximately฀$61.0฀million฀for฀its฀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฀the฀Company.฀
The฀ synthetic฀ lease฀ qualifies฀ as฀ an฀ operating฀ lease฀ for฀ accounting฀ purposes฀ and฀ as฀ a฀ financing฀ lease฀ for฀ tax฀ purposes.฀ The฀
Company฀ does฀ not฀ include฀ the฀ property฀ or฀ the฀ related฀ lease฀ debt฀ as฀ an฀ asset฀ or฀ a฀ liability฀ in฀ its฀ consolidated฀ balance฀ sheets.฀
Consequently,฀payments฀made฀pursuant฀to฀the฀lease฀are฀recorded฀as฀operating฀expenses฀in฀the฀Company’s฀consolidated฀statements฀
of฀income.฀The฀Company฀entered฀into฀the฀synthetic฀lease฀in฀order฀to฀lease฀its฀headquarters฀properties฀under฀more฀favorable฀terms฀
than฀under฀its฀previous฀lease฀arrangements.
The฀initial฀term฀of฀the฀synthetic฀lease฀is฀seven฀years.฀Upon฀approval฀by฀the฀lessor,฀the฀Company฀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,฀the฀Company฀has฀the฀
option฀to฀sublease฀the฀property฀and฀upon฀thirty-days’฀written฀notice,฀the฀Company฀has฀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,฀the฀Company฀has฀the฀option฀
to฀remarket฀the฀property฀for฀sale฀to฀a฀third฀party.฀If฀the฀Company฀chooses฀not฀to฀purchase฀the฀property฀at฀the฀end฀of฀the฀lease฀term,฀
it฀has฀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,฀the฀Company฀evaluates฀the฀property฀for฀indicators฀of฀impairment.฀If฀an฀evaluation฀were฀to฀indicate฀
that฀fair฀value฀of฀the฀building฀were฀to฀decline฀below฀$51.9฀million,฀the฀Company฀would฀be฀responsible฀for฀the฀difference฀under฀its฀
residual฀value฀guarantee,฀which฀could฀have฀a฀material฀adverse฀effect฀on฀the฀Company’s฀results฀of฀operations฀and฀financial฀condition.