Citrix 2005 Annual Report Download - page 64

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Page฀62
The฀Company’s฀tax฀ provision฀ is฀based฀ on฀expected฀ income,฀ statutory฀ tax฀ rates฀ and฀ tax฀planning฀ opportunities฀ available฀ in฀the฀
various฀jurisdictions฀in฀which฀the฀Company฀operates.฀In฀the฀ordinary฀course฀of฀global฀business,฀there฀are฀transactions฀for฀which฀
the฀ultimate฀tax฀outcome฀is฀uncertain,฀thus฀judgment฀is฀required฀in฀determining฀the฀worldwide฀provision฀for฀income฀taxes฀and฀the฀
associated฀realizability฀of฀deferred฀tax฀assets฀and฀liabilities.฀The฀Company฀establishes฀reserves฀when฀it฀becomes฀probable฀that฀a฀
tax฀ return฀ position฀ may฀ be฀ challenged฀ and฀ that฀ the฀ Company฀ may฀ not฀ succeed฀ in฀ completely฀ defending฀ that฀ challenge.฀ The฀
Company฀adjusts฀these฀reserves฀in฀light฀of฀changing฀facts฀and฀circumstances,฀such฀as฀the฀settlement฀of฀a฀tax฀audit.฀The฀Company’s฀
annual฀tax฀rate฀includes฀the฀impact฀of฀reserve฀provisions฀and฀changes฀to฀reserves.฀While฀it฀is฀often฀difficult฀to฀predict฀the฀final฀outcome฀
or฀the฀timing฀of฀resolution฀of฀any฀particular฀tax฀matter,฀the฀Company฀believes฀that฀its฀reserves฀reflect฀the฀probable฀outcome฀of฀known฀
tax฀contingencies.฀Resolution฀of฀the฀tax฀contingencies฀would฀be฀recognized฀as฀an฀increase฀or฀decrease฀to฀the฀Company’s฀tax฀rate฀
in฀the฀period฀of฀resolution.
On฀October฀22,฀2004,฀the฀American฀Jobs฀Creation฀Act฀(“AJCA”)฀was฀signed฀into฀law.฀The฀AJCA฀provides฀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,฀ the฀ Company฀ completed฀ its฀ evaluation฀ of฀ the฀ effects฀ of฀ the฀ repatriation฀ provision฀ of฀ the฀ AJCA,฀ and฀ the฀
Company’s฀ Chief฀ Executive฀ Officer฀ and฀ Board฀ of฀ Directors฀ approved฀ its฀ DRP฀ under฀ the฀ AJCA.฀ On฀ September฀ 27,฀ 2005,฀ the฀
Company฀repatriated฀approximately฀$503฀million฀of฀certain฀foreign฀earnings,฀of฀which฀$500฀million฀qualified฀for฀the฀85%฀dividends฀
received฀deduction.฀During฀2005,฀the฀Company฀recorded฀an฀estimated฀tax฀provision฀of฀approximately฀$24.4฀million฀related฀to฀the฀
repatriation.฀Additionally,฀during฀2005,฀the฀Company฀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.฀ Other฀ than฀ the฀ one-time฀ repatriation฀ provision฀
under฀the฀AJCA,฀the฀Company฀does฀not฀expect฀to฀remit฀earnings฀from฀its฀foreign฀subsidiaries.
12.฀GEOGRAPHIC฀INFORMATION฀AND฀SIGNIFICANT฀CUSTOMERS
The฀Company฀operates฀in฀a฀single฀market฀consisting฀of฀the฀design,฀development,฀marketing,฀sales฀and฀support฀of฀access฀infrastructure฀
software฀and฀services฀for฀applications฀and฀online฀services.฀The฀Company’s฀revenues฀are฀derived฀from฀sales฀of฀its฀Access฀Suite฀
products฀and฀related฀services฀in฀the฀Americas,฀EMEA฀and฀Asia-Pacific฀regions฀and฀from฀online฀services฀sold฀by฀its฀Online฀Services฀
division.฀These฀three฀geographic฀regions฀and฀the฀Online฀Services฀division฀constitute฀the฀Company’s฀four฀reportable฀segments.
The฀Company฀does฀not฀engage฀in฀intercompany฀revenue฀transfers฀between฀segments.฀The฀Company’s฀management฀evaluates฀
performance฀based฀primarily฀on฀revenues฀in฀the฀geographic฀locations฀in฀which฀the฀Company฀operates฀and฀separately฀evaluates฀rev-
enues฀from฀the฀Online฀Services฀division.฀Segment฀profit฀for฀each฀segment฀includes฀certain฀sales,฀marketing,฀general฀and฀administrative฀
expenses฀directly฀attributable฀to฀the฀segment฀and฀excludes฀certain฀expenses฀that฀are฀managed฀outside฀the฀reportable฀segments.฀
Costs฀excluded฀from฀segment฀profit฀primarily฀consist฀of฀research฀and฀development฀costs฀associated฀with฀the฀Access฀Suite฀products,฀
amortization฀of฀core฀ and฀ product฀ technology,฀ amortization฀ of฀ other฀ intangible฀assets,฀ interest,฀ corporate฀ expenses฀ and฀ income฀
taxes,฀as฀well฀ as,฀charges฀for฀in-process฀research฀and฀development.฀Corporate฀expenses฀are฀ comprised฀primarily฀ of฀corporate฀
marketing฀costs,฀operations฀and฀certain฀general฀and฀administrative฀expenses,฀which฀are฀separately฀managed.฀Accounting฀policies฀
of฀the฀segments฀are฀the฀same฀as฀the฀Company’s฀consolidated฀accounting฀policies.
Citrix฀Systems,฀Inc.
Notes฀to฀Consolidated฀Financial฀Statements฀(Continued)