Citrix 2005 Annual Report Download - page 29

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Page฀27
Write-Off฀of฀Deferred฀Debt฀Issuance฀Costs
Year฀Ended฀December฀31, 2005฀฀
Compared฀to
2004฀
Compared฀to
(In฀thousands) 2005 2004 2003 2004 2003
Write-off฀of฀deferred฀debt฀issuance฀costs $฀ — $฀7,219 $฀฀฀฀฀— $฀(7,219) $฀7,219
In฀2004,฀we฀incurred฀a฀charge฀of฀approximately฀$7.2฀million฀for฀our฀remaining฀prepaid฀issuance฀costs฀as฀a฀result฀of฀the฀redemption฀
of฀our฀convertible฀subordinated฀debentures.฀For฀more฀information฀on฀our฀convertible฀subordinated฀debentures฀see฀“Management’s฀
Discussion฀and฀Analysis฀of฀Financial฀Condition฀and฀Results฀of฀Operations—Liquidity฀and฀Capital฀Resources”฀and฀Note฀8฀to฀our฀
consolidated฀financial฀statements.
Other฀(Expense)฀Income,฀Net
Year฀Ended฀December฀31, 2005฀฀
Compared฀to
2004฀
Compared฀to
(In฀thousands) 2005 2004 2003 2004 2003
Other฀(expense)฀income,฀net $฀(368) $฀2,754 $฀3,458 $฀(3,122) $฀(704)
Other฀(expense)฀income,฀net฀is฀primarily฀comprised฀of฀remeasurement฀and฀foreign฀currency฀transaction฀gains฀(losses),฀other-than-
temporary฀declines฀in฀the฀value฀of฀our฀equity฀investments฀and฀realized฀gains฀(losses)฀on฀the฀sale฀of฀available-for-sale฀investments.฀
The฀$3.1฀million฀decrease฀in฀other฀ (expense)฀income,฀net฀during฀2005฀compared฀to฀2004฀was฀due฀primarily฀ to฀losses฀on฀the฀
remeasurement฀ of฀ our฀ foreign฀ currency฀transactions฀partially฀ offset฀by฀realized฀ gains฀on฀ the฀sale฀ of฀ certain฀ of฀our฀ investments.฀
Other฀(expense)฀income,฀net฀remained฀relatively฀constant฀during฀2004฀compared฀to฀2003.
Income฀Taxes
On฀October฀22,฀2004,฀the฀American฀Jobs฀Creation฀Act,฀or฀the฀AJCA,฀was฀signed฀into฀law.฀The฀AJCA฀provided฀for฀an฀85%฀dividends฀
received฀deduction฀on฀dividend฀distributions฀of฀foreign฀earnings฀to฀a฀U.S.฀taxpayer,฀if฀certain฀conditions฀are฀met.฀During฀the฀second฀
quarter฀of฀fiscal฀2005,฀we฀completed฀our฀evaluation฀of฀the฀effects฀of฀the฀repatriation฀provision฀of฀the฀AJCA฀and฀our฀Chief฀Executive฀
Officer฀and฀Board฀of฀Directors฀approved฀our฀dividend฀reinvestment฀plan,฀or฀DRP,฀under฀the฀AJCA.฀During฀2005,฀we฀repatriated฀
approximately฀$503.0฀million฀of฀certain฀foreign฀earnings,฀of฀which฀$500.0฀million฀qualified฀for฀the฀85%฀dividends฀received฀deduction.฀
During฀2005,฀we฀recorded฀an฀estimated฀tax฀provision฀of฀approximately฀$24.4฀million฀related฀to฀the฀repatriation.฀Additionally,฀during฀
2005,฀we฀recorded฀the฀reversal฀of฀approximately฀$8.8฀million฀for฀income฀taxes฀on฀certain฀foreign฀earnings฀for฀which฀a฀deferred฀tax฀
liability฀had฀been฀previously฀recorded.
We฀maintain฀certain฀operational฀and฀administrative฀processes฀in฀overseas฀subsidiaries฀and฀our฀foreign฀earnings฀are฀taxed฀at฀lower฀
foreign฀tax฀rates.฀Other฀than฀through฀the฀one-time฀repatriation฀provision฀within฀the฀AJCA฀completed฀during฀2005,฀we฀do฀not฀expect฀to฀
remit฀earnings฀from฀our฀foreign฀subsidiaries.฀Accordingly,฀since฀2000฀we฀have฀not฀provided฀for฀deferred฀taxes฀on฀foreign฀earnings.
In฀2005,฀our฀effective฀tax฀rate฀increased฀to฀26%฀from฀20%฀in฀2004,฀primarily฀due฀to฀the฀tax฀impact฀of฀the฀dividend฀repatriated฀under฀
the฀ AJCA.฀ In฀2004,฀our฀effective฀tax฀ rate฀decreased฀ to฀ 20%฀ from฀ 21%฀ in฀ 2003,฀ primarily฀ due฀ to฀an฀ increase฀in฀ annual฀ taxable฀
income฀in฀our฀geographic฀locations฀that฀are฀taxed฀at฀a฀lower฀rate.฀Our฀effective฀tax฀rate฀may฀fluctuate฀throughout฀2006฀based฀on฀a฀
number฀of฀factors฀including฀variations฀in฀estimated฀taxable฀income฀in฀our฀geographic฀locations,฀completed฀and฀potential฀acquisitions,฀
changes฀in฀statutory฀tax฀rates฀and฀the฀tax฀effects฀of฀SFAS฀No.฀123R,฀among฀others.
LIQUIDITY฀AND฀CAPITAL฀RESOURCES
During฀2005,฀we฀generated฀positive฀operating฀cash฀flows฀of฀$293.1฀million.฀These฀cash฀flows฀related฀primarily฀to฀net฀income฀of฀
$166.3฀million,฀adjusted฀for,฀among฀other฀things,฀tax฀benefits฀from฀the฀exercise฀of฀non-statutory฀stock฀options฀and฀disqualifying฀
dispositions฀of฀incentive฀stock฀options฀of฀$38.3฀million,฀non-cash฀charges,฀including฀depreciation฀and฀amortization฀of฀$50.4฀million,฀
the฀write-off฀of฀in-process฀research฀and฀development฀associated฀with฀the฀2005฀Acquisitions฀of฀$7.0฀million,฀provision฀for฀product฀
returns฀of฀$6.0฀million,฀amortization฀of฀deferred฀stock-based฀compensation฀of฀$4.3฀million฀and฀an฀aggregate฀increase฀in฀cash฀flow฀
from฀our฀operating฀assets฀and฀liabilities฀of฀$34.6฀million฀partially฀offset฀by฀a฀deferred฀income฀tax฀benefit฀of฀$14.3฀million.฀Our฀investing฀
activities฀provided฀$160.3฀million฀of฀cash฀consisting฀primarily฀of฀the฀net฀proceeds,฀after฀reinvestment,฀from฀sales฀and฀maturities฀of฀
our฀available-for-sale฀investments฀of฀$355.0฀million฀partially฀offset฀by฀cash฀paid฀for฀the฀2005฀Acquisitions,฀net฀of฀cash฀acquired,฀
of฀$168.3฀million฀and฀the฀expenditure฀of฀$26.4฀million฀for฀the฀purchase฀of฀property฀and฀equipment.฀Our฀financing฀activities฀used฀