Citrix 2005 Annual Report Download - page 63

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Page฀61
The฀significant฀components฀of฀the฀Company’s฀deferred฀tax฀assets฀and฀liabilities฀consisted฀of฀the฀following:
December฀31,
(In฀thousands) 2005 2004
Deferred฀tax฀assets:
฀ Accruals฀and฀reserves $฀ 9,838 $฀ 6,422
฀ Depreciation฀and฀amortization —2,663
฀ Tax฀credits 30,268 25,547
฀ Net฀operating฀losses 69,619 22,684
฀ Other 1,184 4,265
฀ Valuation฀allowance (1,332) (1,332)
฀ ฀ Total฀deferred฀tax฀assets 109,577 60,249
Deferred฀tax฀liabilities:
฀ Acquired฀technology (29,154) (10,712)
฀ Depreciation฀and฀amortization (265) —
฀ Prepaid฀expenses (4,590) —
฀ Foreign฀earnings —(8,753)
฀ ฀ Total฀deferred฀tax฀liabilities (34,009) (19,465)
฀ ฀ Total฀net฀deferred฀tax฀assets $฀ 75,568 $฀40,784
SFAS฀No.฀109,฀Accounting฀for฀Income฀Taxes,฀requires฀a฀valuation฀allowance฀to฀reduce฀the฀deferred฀tax฀assets฀reported฀if฀it฀is฀not฀
more฀likely฀than฀not฀that฀some฀portion฀or฀all฀of฀the฀deferred฀tax฀assets฀will฀be฀realized.฀At฀December฀31,฀2005,฀the฀Company฀has฀
recorded฀a฀valuation฀allowance฀of฀approximately฀$1.3฀million฀relating฀to฀deferred฀tax฀assets฀for฀foreign฀tax฀credit฀carryovers.
During฀the฀years฀ended฀December฀31,฀2005,฀2004฀and฀2003,฀the฀Company฀recognized฀tax฀benefits฀related฀to฀the฀exercise฀of฀
employee฀stock฀options฀in฀the฀amount฀of฀$38.3฀million,฀$20.9฀million฀and฀$10.3฀million,฀respectively.฀These฀benefits฀were฀recorded฀
to฀additional฀paid-in฀capital.฀At฀December฀31,฀2005,฀the฀Company฀had฀approximately฀$9.9฀million฀of฀additional฀U.S.฀net฀operating฀
loss฀carryforwards฀resulting฀from฀stock฀options,฀a฀substantial฀portion฀of฀which฀begins฀to฀expire฀in฀2020.฀The฀Company฀will฀record฀
the฀benefit฀of฀the฀net฀operating฀loss฀carryforwards฀generated฀from฀the฀exercise฀of฀employee฀stock฀options฀in฀the฀period฀that฀the฀net฀
operating฀loss฀carryforwards฀are฀utilized.
At฀December฀31,฀2005,฀the฀Company฀had฀$176.8฀million฀of฀remaining฀net฀operating฀loss฀carryforwards฀from฀acquisitions.฀The฀
utilization฀of฀these฀net฀operating฀loss฀carryforwards฀are฀limited฀in฀any฀one฀year฀pursuant฀to฀Internal฀Revenue฀Code฀Section฀382฀and฀
begin฀to฀expire฀in฀2020.
At฀December฀31,฀2005,฀the฀Company฀had฀research฀and฀development฀tax฀credit฀carryforwards฀of฀approximately฀$12.6฀million฀that฀
expire฀beginning฀in฀2008.฀The฀Company฀had฀foreign฀tax฀credit฀carryforwards฀of฀approximately฀$17.7฀million฀at฀December฀31,฀2005฀
that฀expire฀beginning฀in฀2009.฀Additionally,฀the฀Company฀has฀utilized฀its฀remaining฀alternative฀minimum฀tax฀credit฀carryforwards฀at฀
December฀31,฀2005.
A฀reconciliation฀of฀the฀Company’s฀effective฀tax฀rate฀to฀the฀statutory฀federal฀rate฀is฀as฀follows:
Year฀Ended฀December฀31,
2005 2004 2003
Federal฀statutory฀taxes 35.0% 35.0% 35.0%
State฀income฀taxes,฀net฀of฀federal฀tax฀benefit 4.4 4.5 3.8
Foreign฀operations (19.5) (27.0) (21.7)
Permanent฀differences 2.4 5.0 1.7
Tax฀credits (2.4) — (1.7)
AJCA฀dividend 6.9 — —
Other (0.6) 3.0 2.6
Change฀in฀valuation฀allowance —(0.5) 1.3
26.2% 20.0% 21.0%