VMware 2010 Annual Report Download - page 99

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Table of Contents
VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
There were no material settlements during 2010. Due to the increased complexity in international operations, including judgments in
determining the appropriate tax jurisdictions for revenue and expense items, the Company’s unrecognized tax benefits will likely increase in
2011. The Company cannot reasonably estimate the increase.
VMware is subject to U.S. federal income tax and various state, local and international income taxes in numerous jurisdictions. VMware’s
domestic and international tax liabilities are subject to the allocation of revenues and expenses in different jurisdictions and the timing of
recognizing revenues and expenses. Additionally, the amount of income taxes paid is subject to the VMware’s interpretation of applicable tax
laws in the jurisdictions in which it files.
The U.S. federal income tax audit for 2007 and 2008 commenced during 2009 and is expected to conclude in 2011. VMware has income
tax audits in progress in numerous state, local and international jurisdictions in which it operates. In the VMware international jurisdictions that
comprise a significant portion of its operations, the years that may be examined vary, with the earliest year being 2004. Based on the outcome of
examinations of VMware, the result of the expiration of statutes of limitations for specific jurisdictions or the result of ruling requests from
taxing authorities, it is reasonably possible that the related unrecognized tax benefits could change from those recorded in the statement of
financial position. It is possible that one or more of these audits may be finalized within the next twelve months. However, based on the status of
examinations, and the protocol of finalizing audits, it is not possible to estimate the impact of such changes, if any, to the previously recorded
uncertain tax positions.
J. Commitments and Contingencies
Litigation
VMware is named from time to time as a party to lawsuits in the normal course of its business. In such cases it is VMware’s policy to
defend against such claims, or if considered appropriate, negotiate a settlement on commercially reasonable terms. However, no assurance can be
given that VMware will be able to negotiate settlements on commercially reasonable terms, or at all, or that any litigation resulting from such
claims would not have a material adverse effect on the consolidated cash flows, results of operations, and financial position, or consolidated
financial statements taken as a whole.
Operating Lease Commitments
VMware leases office facilities and equipment under various operating leases. Facility leases generally include renewal options. Rent
expense for the years ended December 31, 2010, 2009 and 2008 was $46.4 million, $41.2 million and $38.0 million, respectively. VMware’s
future lease commitments at December 31, 2010 were as follows (table in thousands):
The amount of the future lease commitments after 2015 is primarily for the ground lease on VMware’s Palo Alto, California headquarter
facilities, which expires in 2057. As several of VMware’s operating leases are
96
2011
$
40,798
2012
34,659
2013
28,456
2014
23,567
2015
18,860
Thereafter
274,962
Total minimum lease payments
$
421,302