Citrix 2005 Annual Report Download - page 62

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Page฀60
The฀synthetic฀lease฀includes฀certain฀financial฀covenants฀including฀a฀requirement฀for฀the฀Company฀to฀maintain฀a฀pledged฀balance฀of฀
approximately฀$62.8฀million฀in฀cash฀and/or฀investment฀securities฀as฀collateral.฀This฀amount฀is฀included฀in฀restricted฀cash฀equivalents฀
and฀investments฀in฀the฀accompanying฀consolidated฀balance฀sheets.฀The฀Company฀maintains฀the฀ability฀to฀manage฀the฀composition฀
of฀the฀restricted฀investments฀within฀certain฀limits฀and฀to฀withdraw฀and฀use฀excess฀investment฀earnings฀from฀the฀restricted฀collateral฀
for฀ operating฀ purposes.฀ Additionally,฀ the฀ Company฀ must฀ maintain฀ a฀ minimum฀ cash฀ and฀ investment฀ balance฀ of฀ $100.0฀ million,฀
excluding฀the฀Company’s฀collateralized฀investments,฀equity฀investments฀and฀outstanding฀debt฀as฀of฀the฀end฀of฀each฀fiscal฀quarter.฀
As฀of฀December฀31,฀2005,฀the฀Company฀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฀ lender฀ of฀ the฀ lessor฀ and฀ prompt฀ payment฀ of฀ taxes฀ associated฀ with฀ the฀ property.฀ As฀ of฀
December฀31,฀2005,฀the฀Company฀was฀in฀compliance฀with฀all฀material฀provisions฀of฀the฀arrangement.
In฀January฀2003,฀the฀FASB฀issued฀FASB฀Interpretation฀(“FIN”)฀No.฀46,฀Consolidation฀of฀Variable฀Interest฀Entities,฀which฀addresses฀the฀
consolidation฀of฀variable฀interest฀entities฀in฀which฀an฀enterprise฀absorbs฀a฀majority฀of฀the฀entity’s฀expected฀losses,฀receives฀a฀majority฀
of฀the฀entity’s฀expected฀residual฀returns,฀or฀both,฀as฀a฀result฀of฀ownership,฀contractual฀or฀other฀financial฀interests฀in฀the฀entity.฀In฀
December฀ 2003,฀ the฀ FASB฀ issued฀ FIN฀ No.฀ 46฀ (revised).฀ FIN฀ No.฀ 46฀ (revised)฀ was฀ effective฀ immediately฀ for฀ certain฀ disclosure฀
requirements฀and฀variable฀interest฀entities฀referred฀to฀as฀special-purpose฀entities฀for฀periods฀ending฀after฀December฀15,฀2003฀and฀for฀
all฀types฀of฀entities฀for฀financial฀statements฀for฀periods฀ending฀after฀March฀15,฀2004.฀The฀Company฀determined฀that฀it฀was฀not฀required฀
to฀consolidate฀the฀lessor,฀the฀leased฀facility฀or฀the฀related฀debt฀upon฀the฀adoption฀of฀FIN฀No.฀46฀(revised).฀Accordingly,฀there฀was฀no฀
impact฀on฀its฀financial฀position,฀results฀of฀operations฀or฀cash฀flows฀from฀adoption.฀However,฀if฀the฀lessor฀were฀to฀change฀its฀ownership฀
of฀the฀property฀or฀significantly฀change฀its฀ownership฀of฀other฀properties฀that฀it฀currently฀holds,฀the฀Company฀could฀be฀required฀to฀
consolidate฀the฀entity,฀the฀leased฀facility฀and฀the฀debt฀in฀a฀future฀period.
During฀2002฀and฀2001,฀the฀Company฀took฀actions฀to฀consolidate฀certain฀of฀its฀offices,฀including฀the฀exit฀of฀certain฀leased฀office฀
space฀ and฀the฀ abandonment฀of฀certain฀leasehold฀improvements.฀Lease฀obligations฀related฀to฀these฀existing฀operating฀leases฀
continue฀to฀2025฀with฀a฀total฀remaining฀obligation฀at฀December฀31,฀2005฀of฀approximately฀$18.9฀million,฀of฀which฀$1.8฀million฀was฀
accrued฀for฀as฀of฀December฀31,฀2005,฀and฀is฀reflected฀in฀accrued฀expenses฀and฀other฀liabilities฀in฀the฀accompanying฀consolidated฀
balance฀sheets.฀In฀calculating฀this฀accrual,฀the฀Company฀made฀estimates,฀based฀on฀market฀information,฀including฀the฀estimated฀
vacancy฀ periods฀ and฀ sublease฀ rates฀ and฀ opportunities.฀ The฀ Company฀ periodically฀ re-evaluates฀ its฀ estimates฀ and฀ if฀ actual฀
circumstances฀prove฀to฀be฀materially฀worse฀than฀management฀has฀estimated,฀the฀total฀charges฀for฀these฀vacant฀facilities฀could฀be฀
significantly฀higher.
11.฀INCOME฀TAXES
The฀United฀States฀and฀foreign฀components฀of฀income฀before฀income฀taxes฀are฀as฀follows:
(In฀thousands) 2005 2004 2003
United฀States $฀ 59,492 $฀ 29,017 $฀ 45,820
Foreign 166,016 135,416 114,867
฀ Total $฀225,508 $฀164,433 $฀160,687
The฀components฀of฀the฀provision฀for฀income฀taxes฀are฀as฀follows:
(In฀thousands) 2005 2004 2003
Current:
฀ Federal $฀ 52,181 $฀ 23,763 $฀ 20,887
฀ Foreign 16,118 8,974 5,435
฀ State 5,217 2,510 6,079
฀ ฀ Total฀current 73,516 35,247 32,401
Deferred (14,348) (2,360) 1,343
฀ ฀ Total฀provision฀for฀income฀taxes $฀ 59,168 $฀ 32,887 $฀ 33,744
Citrix฀Systems,฀Inc.
Notes฀to฀Consolidated฀Financial฀Statements฀(Continued)