Salesforce.com 2007 Annual Report Download - page 83

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Table of Contents
salesforce.com, inc.
Notes to Consolidated Financial Statements—(Continued)
United States, Canada, United Kingdom, Japan and Australia. During the quarter ended January 31, 2008, the Internal Revenue Service initiated an
examination of the Company's federal income tax return for fiscal 2006. This audit may be completed within the next 12 months. While it is difficult to
predict the final outcome of any particular uncertain tax position, management does not believe that it is reasonably possible that the estimates of
unrecognized tax benefits will change significantly in the next twelve months.
8. Commitments and Contingencies
Letters of Credit
As of January 31, 2008, the Company had a total of $5.9 million in letters of credit outstanding substantially in favor of its landlords for office space in
San Francisco, California, New York City, Singapore, Sweden and Switzerland. These letters of credit renew annually and mature at various dates through
December 2015.
Leases
The Company leases office space and equipment under noncancelable operating and capital leases with various expiration dates.
As of January 31, 2008, the future minimum lease payments under noncancelable operating and capital leases are as follows (in thousands):
Capital
Leases
Operating
Leases
Fiscal Period:
Fiscal 2009 $ 7 $ 82,078
Fiscal 2010 — 54,658
Fiscal 2011 — 44,012
Fiscal 2012 — 35,602
Fiscal 2013 — 32,947
Thereafter — 63,932
Total minimum lease payments $ 7 $ 313,229
The terms of the lease agreements provide for rental payments on a graduated basis. The Company recognizes rent expense on the straight-line basis
over the lease period and has accrued for rent expense incurred but not paid. Of the total operating lease commitment balance of $313.2 million, $259.8
million is related to facilities space. The remaining $53.4 million commitment is related to computer equipment and other leases.
Our agreements for the facilities and certain services provide us with the option to renew. Our future contractual obligations would change if we
exercised these options.
Rent expense for fiscal 2008, 2007 and 2006 was $23.0 million, $16.8 million and $11.4 million, respectively.
In March 2005, the Company entered into an agreement with its primary landlord that released it from a portion of the future obligations associated
with the remaining 4,000 square feet of San Francisco office space that was abandoned in December 2001 in exchange for an agreement to lease additional
space elsewhere in the building at fair value. Accordingly, the Company recorded a $285,000 credit to reflect the reversal of a portion of the accrual that was
directly related to the previously abandoned space.
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