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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 76.04

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To: kvkkc1 who wrote (58739)	3/28/2002 3:32:57 PM
From: JakeStraw	Read Replies (2) of 77400

Companies disclose synthetic leases marketwatch.com By Leticia Williams, CBS.MarketWatch.com WASHINGTON (CBS.MW) -- After Enron's off-balance-sheet charades revealed a mountain of hidden debt, some companies are letting the skeletons out of their own closets. Cypress Semiconductor (CY), for one, revealed Thursday in its annual report that it received a waiver of default regarding a "synthetic lease" agreement. Synthetic leases allow companies to legally keep the cost of real estate off of their books. They provide certain tax benefits and were a little-known financing tool commonly used by companies before Enron's misuse of special purpose entities brought off-the-books transactions under the scrutiny of regulators and investors. Though the San Jose, Calif.-based semiconductor manufacturer had provided information regarding the leases in previous filings, they had not before been specified as synthetic leases. A call to the company for further comment was not immediately returned. Cypress Semiconductor said if it had been required to purchase all of its off-balance sheet leases at Dec. 31, it cost the company $76.3 million. The company said it has about $75 million in restricted cash as collateral for the lease obligations. Companies can finance equipment or corporate real estate with a synthetic lease. The transaction shows up on a company's books as a capital transaction for tax purposes and as an operating lease for accounting purposes. A company can then depreciate the real estate and deduct the interest payments without recording the transaction in its financial statements. Earlier this week, online auction operator EBay (EBAY) identified a previously disclosed $126 million five-year lease as a synthetic lease for the first-time in its annual report. And in the latest quarterly report from Cisco Systems (CSCO), the company said guaranteed residual value on its office property was at least $1.6 billion as of Jan. 26. Cisco, a long-time proponent of synthetic leases, has disclosed information regarding the obligations in previous filings.

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