Citrix 2007 Annual Report Download - page 108

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CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
limits and to withdraw and use excess investment earnings from the restricted collateral for operating purposes.
Additionally, the Company must maintain a minimum cash and investment balance of $100.0 million, excluding
the Company’s collateralized investments, equity investments and outstanding debt as of the end of each fiscal
quarter. As of December 31, 2007, the Company had approximately $696.9 million in cash and investments in
excess of this required level. The synthetic lease includes non-financial covenants, including the maintenance of
the property and adequate insurance, prompt delivery of financial statements to the administrative agent of the
lessor and prompt payment of taxes associated with the property. As of December 31, 2007, the Company was in
compliance with all material provisions of the arrangement.
In January 2003, the FASB issued FASB Interpretation (“FIN”) No. 46, Consolidation of Variable Interest
Entities, which addresses the consolidation of variable interest entities in which an enterprise absorbs a majority
of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of
ownership, contractual or other financial interests in the entity. In December 2003, the FASB issued FIN No. 46
(revised). FIN No. 46 (revised) was effective immediately for certain disclosure requirements and variable
interest entities referred to as special-purpose entities for periods ending after December 15, 2003 and for all
types of entities for financial statements for periods ending after March 15, 2004. The Company determined that
it was not required to consolidate the lessor, the leased facility or the related debt upon the adoption of FIN
No. 46 (revised). Accordingly, there was no impact on its financial position, results of operations or cash flows
from adoption. However, if the lessor were to change its ownership of the property or significantly change its
ownership of other properties that it currently holds, the Company could be required to consolidate the entity, the
leased facility and the debt in a future period.
Office Leases
During 2002 and 2001, the Company took actions to consolidate certain of its offices, including the exit of
certain leased office space and the abandonment of certain leasehold improvements. During the third quarter of
2006, the Company entered into an agreement, which assigned the operating lease and all remaining liabilities
related to one of the closed offices to a third party. Lease obligations related to the remaining existing operating
lease continues to 2018 with a total remaining obligation at December 31, 2007 of approximately $8.3 million, of
which $1.3 million was accrued as of December 31, 2007, and is reflected in accrued expenses and other
liabilities in the accompanying consolidated balance sheets. In calculating this accrual, the Company made
estimates, based on market information, including the estimated vacancy periods and sublease rates and
opportunities. The Company periodically re-evaluates its estimates and if actual circumstances prove to be
materially worse than management has estimated, the total charges for these vacant facilities could be
significantly higher.
Legal Matters
Due to the nature of its business, the Company is subject to patent infringement claims. In 2006, the
Company was sued in the United States District Court for the Northern District of Ohio for alleged patent
infringement by its Online Services division’s GoToMyPC service and in the United States District Court for the
Southern District of Florida for alleged patent infringement by its Online Services division’s GoToMyPC and
GoToMeeting services. The complaints name Citrix Systems, Inc. and Citrix Online LLC, a wholly-owned
subsidiary of Citrix Systems, Inc., as defendants and seek unspecified damages and other relief. In January 2007,
a similar suit naming Citrix Systems, Inc. was filed in the United States District Court of the Eastern District of
Texas. In response, the Company filed answers denying infringement and alleging, among other things, that the
asserted claims of these patents are invalid. With respect to the Northern District of Ohio case, on November 2,
2006, the court held a hearing for the purpose of construing disputed terms of the claims of the patent-in-suit, and
F-34