Shutterfly 2007 Annual Report Download - page 68

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Table of Contents
SHUTTERFLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)
Rent expense is recorded on a straight-line basis over the lease term. When a lease provides for fixed escalations of the minimum rental
payments, the difference between the straight-line rent charged to expense, and the amount payable under the lease is recognized as deferred
rent.
The Company leases certain equipment, software and colocation services under non-cancelable capital leases, operating leases or long-
term
agreements that expire at various dates through the year 2010. The leased equipment is subject to a security interest. The total outstanding
obligation under capital leases at December 31, 2006 and 2005 was $3,703 and $5,149, respectively.
At December 31, 2006, the total future minimum payments under non-cancelable scheduled rentals are as follows:
Purchase obligations consist of non-cancelable marketing agreements and colocation services. As of December 31, 2006, the Company’s
purchase obligations totaled $4,006.
Indemnifications
In the normal course of business, the Company enters into contracts and agreements that contain a variety of representation and warranties
and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves future claims that
may be made against the Company, but have not yet been made. To date, the Company has not paid any claims or been required to defend any
action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification
obligations.
In accordance with its bylaws, the Company has indemnification obligations to its officers and directors for certain events or occurrences,
subject to certain limits, while they are serving at the Company’s request in such a capacity. There have been no claims to date and the
Company has a director and officer insurance policy that enables it to recover a portion of any amounts paid for future claims.
Contingencies
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The
Company accrues contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably
estimated.
63
Operating
Capital
Leases
Leases
Year Ending:
2007
$
1,462
$
2,095
2008
1,704
1,364
2009
2,080
483
2010
1,397
—
2011 and thereafter
2,620
—
Total minimum lease payments
$
9,263
3,942
Less: amount representing interest
(239
)
Present value of future minimum lease payments
3,703
Less: current portion
(1,961
)
Non
-
current portion of capital lease obligations
$
1,742