Citrix 2007 Annual Report Download - page 107

CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Rental expense for the years ended December 31, 2007, 2006 and 2005 totaled approximately $33.5 million,
$24.9 million and $21.2 million, respectively. Sublease income for the years ended December 31, 2007, 2006 and
2005 was approximately $0.8 million, $0.7 million and $0.8 million, respectively. Lease commitments under
non-cancelable operating leases with initial or remaining terms in excess of one year and sublease income
associated with non-cancelable subleases, including estimated future payments under the Company’s synthetic
lease arrangement, are as follows:
Operating
Leases
Sublease
Income
(In thousands)
Years ending December 31,
2008 ....................................... $ 42,269 $ 813
2009 ....................................... 36,145 257
2010 ....................................... 29,726 —
2011 ....................................... 24,900 —
2012 ....................................... 20,825 —
Thereafter ................................... 53,371 —
$207,236 $1,070
Off-Balance Sheet Arrangement
During 2002, the Company became a party to a synthetic lease arrangement totaling approximately $61.0
million for its corporate headquarters office space in Fort Lauderdale, Florida. The synthetic lease represents a
form of off-balance sheet financing under which an unrelated third-party lessor funded 100% of the costs of
acquiring the property and leases the asset to the Company. The synthetic lease qualifies as an operating lease for
accounting purposes and as a financing lease for tax purposes. The Company does not include the property or the
related lease debt as an asset or a liability in its consolidated balance sheets. Consequently, payments made
pursuant to the lease are recorded as operating expenses in the Company’s consolidated statements of income.
The Company entered into the synthetic lease in order to lease its headquarters properties under more favorable
terms than under its previous lease arrangements.
The initial term of the synthetic lease is seven years. Upon approval by the lessor, the Company can renew
the lease twice for additional two-year periods. The lease payments vary based on LIBOR plus a margin. At any
time during the lease term, the Company has the option to sublease the property and upon a thirty-day written
notice, the Company has the option to purchase the property for an amount representing the original property cost
and transaction fees of approximately $61.0 million plus any lease breakage costs and outstanding amounts
owed. Upon at least 180 days notice prior to the termination of the initial lease term, the Company has the option
to remarket the property for sale to a third party. If the Company chooses not to purchase the property at the end
of the lease term, it has guaranteed a residual value to the lessor of approximately $51.9 million and possession
of the buildings will be returned to the lessor. On a periodic basis, the Company evaluates the property for
indicators of impairment. If an evaluation were to indicate that fair value of the property had declined below
$51.9 million, the Company would be responsible for the difference under its residual value guarantee, which
could have a material adverse effect on the Company’s results of operations and financial condition.
The synthetic lease includes certain financial covenants including a requirement for the Company to
maintain a pledged balance of approximately $62.8 million in cash and/or investment securities as collateral.
This amount is included in restricted cash equivalents and investments in the accompanying consolidated balance
sheets. The Company maintains the ability to manage the composition of the restricted investments within certain
F-33