VMware 2011 Annual Report Download - page 88

Table of Contents VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
H. Accrued Expenses and Other
Accrued expenses as of December 31, 2011 and 2010 consisted of the following (table in thousands):
Accrued partner liabilities relate to rebates and marketing development fund accruals for channel partners, system vendors and systems
integrators, as well as accrued royalties.
I. Unearned Revenues
Unearned revenues as of December 31, 2011 and 2010 consisted of the following (table in thousands):
Unearned license revenues are recognized either ratably or upon the delivery of existing products, future products or services. Future
products include, in some cases, emerging products that are offered as part of product promotions where the purchaser of an existing product is
entitled to receive a promotional product at no additional charge. VMware regularly offers product promotions as a strategy to improve
awareness of its emerging products. To the extent promotional products have not been delivered and VSOE of fair value cannot be established,
the revenue for the entire order is deferred until such time as all product delivery obligations have been fulfilled. Unearned license revenue may
also be recognized ratably, which is generally due to a right to receive unspecified future products or a lack of VSOE of fair value on the
software maintenance element of the arrangement. Unearned software maintenance revenues are attributable to VMware's growing base of
maintenance contracts and are recognized ratably over terms of one to five years with a weighted-average remaining term at December 31, 2011
of approximately 1.9 years. Unearned professional services revenues result primarily from prepaid professional services, including training, and
are recognized as the services are delivered.
J. Note Payable to EMC
In April 2007, VMware declared an $800.0 million dividend to EMC paid in the form of a note payable, with interest payable quarterly in
arrears and an original maturity date of April 2012 . As of December 31, 2011 , $450.0 million remained outstanding. In June 2011, VMware
and EMC amended and restated the note to extend the maturity date of the note to April 16, 2015 and to modify the principal amount of the note
to reflect the outstanding balance of $450.0 million . The interest rate continues to reset quarterly and bears an interest rate of the 90 -Day
LIBOR plus 55 basis points. In the years ended December 31, 2011 , 2010 and 2009 , $3.9 million , $4.1 million and $6.5 million , respectively,
of interest expense were recorded related to the note payable. The note may be repaid prior to the maturity date without penalty. No repayments
of principal were made during 2011 and 2010 .
K. Income Taxes
The domestic and foreign components of income before provisions for income taxes were as follows (table in thousands):
79
December 31,
2011
2010
Salaries, commissions, bonuses and benefits
$
287,248
$
242,180
Accrued partner liabilities
124,359
94,676
Other
176,043
122,957
Total
$
587,650
$
459,813
December 31,
2011
2010
Unearned license revenues
$
389,225
$
267,056
Unearned software maintenance revenues
2,133,512
1,461,322
Unearned professional services revenues
185,681
131,716
Total unearned revenues
$
2,708,418
$
1,860,094
For the Year Ended December 31,
2011 2010 2009
Domestic
$
112,423
$
127,293
$
31,690
International
681,990
289,082
191,759
Total
$
794,413
$
416,375
$
223,449