Citrix 2006 Annual Report Download - page 96

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The Company’s credit facility agreement contains a
number of affirmative and negative covenants. Because
of delays in filing the Company’s Annual Report on Form
10-K for the year ended December 31, 2006, its Quarterly
Report on Form 10-Q for the three months ended
March 31, 2007 and its Quarterly Report on Form 10-Q
for the three months ended June 30, 2007, the Company
was at risk of breaching the affirmative covenants
requiring certain financial statements to be provided to
its lender within 90 days after the end of the Company’s
fiscal year and 45 days after the end of the Company’s
fiscal quarters. The Company received waivers related
to these covenant breaches to extend the due date of
such financial statements until September 30, 2007. The
Company has notified its Lenders that the Company will
provide such financial statements by the extension date.
Term Loan
Effective on August 9, 2005, a subsidiary of the
Company entered into a term loan facility (the “Term
Loan”) with the Lenders. The Term Loan provided for
an eighteen-month single-draw term loan facility in the
aggregate amount of $100.0 million. The Term Loan
bore interest at a rate of LIBOR plus 0.5% and adjusted
in the range of 0.5% to 1.25% above LIBOR based on
the level of the subsidiary’s total debt and its adjusted
EBITDA, as described in the agreement. Borrowings
under the Term Loan were guaranteed by the Company
and certain of its United States and foreign subsidiaries,
which guarantees were secured by a pledge of shares
of certain foreign subsidiaries. In addition, the Company
was required to pay a quarterly facility fee ranging from
0.125% to 0.25% based on the aggregate amount of the
Term Loan and the level of the Company’s total debt and
its adjusted EBITDA. The Term Loan was paid in full in
February 2006.
Interest expense on the Company’s borrowings in 2006
was not material and interest expense incurred on its
long-term borrowings in 2005 was $1.7 million. The
Credit Facility, as amended, contains customary default
provisions, and the Company must comply with various
financial and non-financial covenants. The financial
covenants consist of a minimum interest coverage ratio
and a maximum consolidated leverage ratio. The primary
non-financial covenants limit the Company’s ability to
pay dividends (other than pursuant to the Dividend
Reinvestment Plan executed under the American Jobs
Creation Act), conduct certain mergers or acquisitions,
make certain investments and loans, incur future
indebtedness or liens, alter the Company’s capital structure
or sell stock or assets, subject to certain limits.
Convertible Subordinated Debentures
In March 1999, the Company sold $850 million principal
amount at maturity of its zero coupon convertible
subordinated debentures (the “Debentures”) due
March 22, 2019, in a private placement. The Debentures
were priced with a yield to maturity of 5.25% and resulted
in net proceeds to the Company of approximately
$291.9 million, net of original issue discount and net
of debt issuance costs of approximately $9.6 million.
On March 22, 2004, the Company redeemed the
outstanding Debentures for approximately $355.7 million.
The Company used the proceeds from its held-to-
maturity investments that matured on March 22, 2004
and cash on hand to fund the redemption. At the date
of redemption, the Company incurred a charge for the
write-off of the remaining deferred debt issuance costs of
approximately $7.2 million.
10. Fair Values of Financial Instruments
The carrying value of cash and cash equivalents,
accounts receivable, accounts payable and accrued
expenses approximate their fair value due to the short
maturity of these items. The Company’s investments
classified as available-for-sale securities, including
restricted investments, are carried at fair value on the
accompanying consolidated balance sheets based
primarily on quoted market prices for such financial
instruments. The carrying value of the Term Loan
approximated fair value due to its market rate of interest.
The aggregate fair value of the Company’s available-for-
sale investments was $440.1 million and $76.9 million at
December 31, 2006 and 2005, respectively.
11. Commitments and Contingencies
Leases
The Company leases certain office space and equipment
under various operating leases. In addition to rent, the
leases require the Company to pay for taxes, insurance,
maintenance and other operating expenses. Certain of