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The Power of Virtual Computing.
Annual Report 2009

Table of contents

  • Page 1
    A n n u a l Re por t 2009 The Power of Virtual Computing.

  • Page 2
    ... except per share data) Net revenues Cost of revenues: Cost of product license revenues Cost of services revenues Amortization of product related intangible assets Total cost of revenues Gross margin Operating expenses Research and development Sales, marketing and services General and administrative...

  • Page 3
    ... of Internet users. As we look into the future, we believe we can go much further. Citrix is leading with software that delivers desktops, collaboration tools, customer support, and infrastructure as-a-service-from anywhere, on demand, to everywhere. Annual Report 2009 • Citrix Systems, Inc...

  • Page 4
    ... percent, increased EPS by 11 percent and reported record net income of $334 million, all on a non-GAAP basis. Very good financial results in a not-so-good business climate. Citrix has consistently generated strong cash ï¬,ow, which is an excellent indicator of business performance. Last year, our...

  • Page 5
    ... is the power to optimize business-by shifting work to more optimal locations, people or devices-effortlessly and quickly. For example, moving the work of one department or person to another to reduce costs or handle peak demand. Or moving a meeting from the office to the web to save time and money...

  • Page 6
    ... support session powered by Citrix in 2009. And we hosted over 80 million remote access connections with our market-leading GoToMyPC solution for PCs and Macs. As a result, Citrix now holds a solid position as one of the top five SaaS vendors in the world. 4 Annual Report 2009 • Citrix Systems...

  • Page 7
    ... down to ride out the storm. Citrix took a different approach. We acted quickly to retool our cost structure, get more competitive, make strategic investments, and double down on markets we believed were ripe for rapid expansion as spending returns. Annual Report 2009 • Citrix Systems, Inc. 5

  • Page 8
    ... are just in time to help people and businesses do extraordinary things-with a simpler is better approach. On behalf of the board and our employees, we thank you for your support and confidence. Mark Templeton President and Chief Executive Officer 6 Annual Report 2009 • Citrix Systems, Inc...

  • Page 9
    ...Lauderdale, Florida 33309 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (954) 267-3000 Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.001 Par Value The NASDAQ Stock Market LLC (Title of each class) (Name...

  • Page 10
    ...66 Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal Accounting Fees and Services...

  • Page 11
    ... greater business agility using Citrix technologies that virtualize business meetings, user support, client hardware, desktop operating systems, applications, networks, server hardware and cloud services. We market and license our products directly to enterprise customers, over the web, and through...

  • Page 12
    ...subscribe to our GoToMyPC remote access service, to network engineers that purchase our NetScaler web application devices, or the IT professional that licenses our XenDesktop infrastructure products. This section provides an overview of our major product and services offerings. Desktop Solutions Our...

  • Page 13
    ...secure encrypted connection, enables individuals to remotely use any resources hosted on their desktop just as though they were sitting in front of it. GoToMyPC® Pro, tailored for the needs of professionals and small offices, supports up to 50 PCs, rolls out secure, remote access for multiple users...

  • Page 14
    ... systems. • Application Networking Products Citrix NetScaler, Citrix Access Gateway and Citrix Repeater Solutions improve the performance, security and costs of delivering applications, desktops and web content over both public and private networks: • Citrix® NetScaler® is an all-in-one Web...

  • Page 15
    ...cases, end-users can also choose from a Citrix-delivered fee-based support program ranging from one-time incident charges to an enterprise-level support agreement covering multiple sites and servers. In addition, we also provide free technical advice through online support systems, including our Web...

  • Page 16
    management of applications, desktops, end-users, servers, licenses and other system components for greater efficiency and lower cost. ICA enhances information security by minimizing or eliminating data from traveling across the network by sending and receiving encrypted representation of screen ...

  • Page 17
    ... for software updates, technical support and online services. Perpetual licenses allow our customers to use the version of software initially purchased into perpetuity, while term-based licenses are limited to a specified period of time. Software update subscriptions give customers the right to...

  • Page 18
    ... infrastructure products, solutions and services through our Citrix Partner Network program to members known as Citrix Solution Advisorsâ„¢. In addition, our Online Services division provides software as a service through direct corporate sales and direct over-the-web through our Websites. In 2009...

  • Page 19
    ... detailed information on our international revenues, please refer to Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2009. Operations For our application networking products, including NetScaler, Access Gateway and Repeater...

  • Page 20
    ... are performed internally in the United States and by independent contractors on a purchase order basis in Ireland, depending upon the customer's geographic market. Master software CD-ROMs, development of user manuals, packaging designs, initial product quality control and testing are primarily...

  • Page 21
    ... VMWare's View product. We believe XenDesktop gives Citrix a competitive advantage by providing customers multiple ways to manage desktops within one, integrated desktop virtualization system. Online Services Our SaaS products for web collaboration, remote support, and remote access continue to...

  • Page 22
    ... agreements to protect our proprietary technology. We have trademarks or registered trademarks in the United States and other countries, including Citrix®, Citrix Access Gateway™, Citrix Cloud Center™, Citrix Essentials™, Citrix Receiver™, Citrix Repeater™, Citrix Subscription Advantage...

  • Page 23
    ..., development and offerings of products and services, including our Desktop Solutions, Online Services and Datacenter and Cloud Solutions, market positioning, Citrix Ready, our Partner Network, Product Licenses, License Updates, Technical Services, cash and non-cash charges, product and price...

  • Page 24
    ...financial, technical, sales and marketing and other resources than we do. For example, our ability to market our Desktop Solutions, including XenDesktop, XenApp, and other future product offerings and upgrades, could be affected by Microsoft's licensing and pricing scheme for client devices, servers...

  • Page 25
    ...branch office application delivery and WAN optimization, virtual desktop delivery, secure sockets layers/virtual private network, gateways, on-demand assistance, online collaboration and IP telephony, can materially impact our ability to compete in these markets. Our current principal competitors in...

  • Page 26
    ...or new releases of our current products and services, those delays or shortfalls could have a material adverse effect on our business, results of operations and financial condition. We believe that we could incur additional development costs, acquisition costs and royalties and as we develop, buy or...

  • Page 27
    ... personnel in connection with our future acquisitions; however, any of these employees will be able to terminate his or her relationship with us at any time. If we cannot retain and add the necessary staff and resources for these acquired businesses, our ability to develop acquired products, markets...

  • Page 28
    ... our force of sales professionals that work closely with partners to sell to primary information technology, or IT, buyers, including Strategic IT Executives, Network Architects, IT Infrastructure Managers, Desktop Operations Managers and Server Operations Managers, to address the multiple selling...

  • Page 29
    ...; undetected errors or unauthorized use of a third-party's code in products of the acquired companies; the diversion of management's attention from normal daily operations of the business; potential difficulties in completing projects associated with purchased in-process research and development...

  • Page 30
    ... our base of channel relationships by adding and training more channel members with abilities to reach larger enterprise customers and to sell our newer products. This strategy will require additional resources, as we will need to expand our internal sales and service coverage of these customers...

  • Page 31
    ... Citrix Partner Network and other programs, we are currently investing, and intend to continue to invest, significant resources to develop these channels, which could reduce our profits. We could change our licensing programs or subscription renewal programs, which could negatively impact the timing...

  • Page 32
    ... our results of operations, financial condition and cash flows. We have credit exposure to our hedging counterparties. In order to minimize volatility in earnings associated with fluctuations in the value of foreign currency relative to the U.S. dollar, we use financial instruments to hedge our...

  • Page 33
    ... that use the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software, and/or that we license such modifications or derivative works under the terms of the particular open source...

  • Page 34
    ...be required to release the source code of our proprietary software, which could substantially help our competitors develop products that are similar to or better than ours. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third...

  • Page 35
    ... adverse effect on our business, results of operations and financial condition. Large enterprise customers usually request special pricing and purchase of multiple years of subscription and maintenance up-front and generally have longer sales cycles, which could negatively impact our revenues. By...

  • Page 36
    ... from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers and adversely affect our business, financial condition or results of operations. Our products could contain errors that could delay the release of new products and may...

  • Page 37
    ...for accessing the Web may also be imposed. Any regulation imposing greater fees for Web use or restricting information exchange over the Web could result in a decline in the use of the Web and the viability of Web-based services, which would significantly adversely affect our financial condition and...

  • Page 38
    ... systems and Website. Significant portions of our computer equipment, intellectual property resources and personnel, including critical resources dedicated to research and development and administrative support functions are presently located at our corporate headquarters in Fort Lauderdale, Florida...

  • Page 39
    ... affect the market price of our stock include actual or anticipated variations in operating and financial results; analyst reports or recommendations; changes in interest rates; and other events or factors, many of which are beyond our control. The stock market in general, The NASDAQ Global...

  • Page 40
    ... square feet related to our Americas segment and 212,733 square feet related to our Online Services division. Included in this total square footage is 234,913 square feet relating to properties surrounding our corporate headquarters located in Fort Lauderdale, Florida. We lease and sublease a total...

  • Page 41
    ... ended December 31, 2009. Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate dollar value of Shares that may yet be Purchased under the Plans or Programs (in thousands) Total Number of Shares Purchased(1,2) Average Price Paid per Share October 1, 2009...

  • Page 42
    ... our stock-based compensation programs, stock repurchases made under our stock repurchase program and shares issued in connection with our acquisitions. See Notes 3, 7 and 8 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2009. 34...

  • Page 43
    ... greater business agility using Citrix technologies that virtualize business meetings, user support, client hardware, desktop operating systems, applications, networks, server hardware and cloud services. We market and license our products directly to enterprise customers, over the web, and through...

  • Page 44
    ... a high level of interest in desktop virtualization. We currently expect our Product License revenue to increase when comparing the first quarter of 2010 to the first quarter of 2009. The increase in License Updates revenue was driven by renewals of our Subscription Advantage product over a larger...

  • Page 45
    ... for our acquisitions were based on estimated discounted future cash flows, royalty rates and historical data, among other information. Purchased in-process research and development, or IPR&D, of $1.1 million and $9.8 million was expensed immediately upon the closing of the acquisition of Vapps...

  • Page 46
    .... Customers may also elect to purchase subscriptions for license updates, when not bundled with the initial product license. Customers may also elect to purchase maintenance, technical support, product training or consulting services. We allocate revenue to license updates, maintenance and any other...

  • Page 47
    ... product to the end-user. Allowances for estimated product returns amounted to approximately $1.6 million at December 31, 2009 and 2008. We have not reduced and have no current plans to reduce our prices for inventory currently held by distributors or resellers. Accordingly, there were no reserves...

  • Page 48
    ...See Notes 2 and 7 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2009 for further information regarding our adoption of the authoritative guidance for stock-based compensation. Valuation and Classification of Investments Effective...

  • Page 49
    ..." for more information on our investments and fair value measurements. Product Related Technology Assets We have acquired our product related technology assets from our business combinations and other third party agreements. In applying purchase accounting, we allocate a portion of purchase price of...

  • Page 50
    ... Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2009 for additional information regarding our reportable segments. We evaluate goodwill among these segments, which represent our reporting units. We account for goodwill in...

  • Page 51
    ... ...Cost of net revenues: Cost of product license revenues ...Cost of services revenues ...Amortization of product related intangible assets ...Total cost of net revenues ...Gross margin ...Operating expenses: Research and development ...Sales, marketing and services ...General and administrative...

  • Page 52
    ... software upgrades, enhancements and maintenance releases when and if they become available during the term of the subscription. Online Services revenues consist primarily of fees related to online service agreements from our web collaboration, connectivity and remote support products, GoToMeeting...

  • Page 53
    ... are primarily comprised of License Updates revenue from our Subscription Advantage product, Online Services revenues from annual service agreements for our online services products and Technical Services revenues related to our support services and consulting contracts. Deferred revenues increased...

  • Page 54
    .... In the Americas segment, the increase in net revenue was primarily due to renewals related to our Subscription Advantage program and increased sales of our support and consulting services. When comparing 2009 to 2008 License Updates revenue increased $25.3 million and Technical Services revenue...

  • Page 55
    ... 450 full-time positions and the consolidation of excess facilities. Due to the Strategic Restructuring Program, compensation and employee related costs across all functional areas including research and development, sales, marketing and services and general and administrative expenses decreased...

  • Page 56
    ...stock option granting practices which were reduced upon agreement with the Internal Revenue Service. We currently expect that when comparing operating expenses for the year ended December 31, 2010 compared to the year ended December 31, 2009 operating expenses will increase. Research and Development...

  • Page 57
    ...an increase in legal fees of $8.7 million. For more information regarding our acquisitions see, "- Overview" and Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2009. General and administrative expenses increased during 2008...

  • Page 58
    ... acquisitions, see "- Overview" and Note 3 to our consolidated financial statements in this Annual Report on Form 10-K for the year ended December 31, 2009. Our efforts with respect to the acquired technologies currently consist of design and development that may be required to support the release...

  • Page 59
    ... rates earned on cash equivalents and investment balances. For more information see "- Overview" and "- Liquidity and Capital Resources" and Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2009. Interest Expense Year Ended...

  • Page 60
    ...additional tax liabilities and adversely affect our results of operations, financial condition and cash flows. We are required to estimate our income taxes in each of the jurisdictions in which we operate as part of the process of preparing our consolidated financial statements. At December 31, 2009...

  • Page 61
    ... of property and equipment, including the purchase of our headquarters building and $68.4 million in cash paid for licensing agreements and acquisitions. These investing cash outflows are partially offset by the net sales and maturities of our available-for-sale investments of $90.9 million. Our...

  • Page 62
    ... the event of immediate cash needs. Our short-term and long-term investments primarily consist of interest-bearing securities. See "- Liquidity and Capital Resources" and Note 4 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2009...

  • Page 63
    ..., whose underlying assets are generally student loans that are substantially backed by the federal government under the Federal Family Education Loan Program through investment accounts managed by UBS Financial Services, Inc., or UBS. The market for municipal auction rate securities in our portfolio...

  • Page 64
    ... a discount rate that considers both the time period between the reporting date and the first date we will be able to exercise our right to put the auction rate securities to UBS per the terms of the Settlement and the credit worthiness of UBS. During 2008, we measured our AIG Capped Floater using...

  • Page 65
    ... institutions using general corporate funds in order to lower the average cost to acquire shares. These programs include terms that require us to make up-front payments to the counterparty financial institution and result in the receipt of stock during or at the end of the term of the agreement or...

  • Page 66
    ... office space in Santa Clara, CA. The rental commencement date will not begin until 2011 and the pricing for the lease will not be finalized until a future date. Accordingly, the future payment obligations related to this lease are not included in the table above. Purchase obligations represent non...

  • Page 67
    ...2 and 14 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2009. Exposure to Exchange Rates A substantial majority of our overseas expense and capital purchasing activities are transacted in local currencies, including Euros, British...

  • Page 68
    ... 2009. ITEM 8. FINANCIAL STATEMENTS AND SCHEDULES Our consolidated financial statements and related financial statement schedule, together with the report of independent registered public accounting firm, appear at pages F-1 through F-45 of this Annual Report on Form 10-K for the year ended December...

  • Page 69
    ...recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our President and Chief Executive Officer and our...

  • Page 70
    ...and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2009 of Citrix Systems, Inc. and our report dated February 23, 2010 expressed an unqualified opinion thereon. /s/ Ernst & Young, LLP Certified Public Accountants Fort Lauderdale, Florida February 23...

  • Page 71
    ITEM 9B. OTHER INFORMATION None 63

  • Page 72
    ... Equity Compensation Plan Information The following table (in thousands, except option price) provides information as of December 31, 2009 about the securities authorized for issuance to the Company's employees and non-employee directors under its fixed stock-based compensation plans: (C) Number of...

  • Page 73
    ... Securities and Exchange Commission not later than 120 days after the close of the Company's fiscal year ended December 31, 2009. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required under this item is incorporated herein by reference to the Company's definitive proxy statement...

  • Page 74
    ... consolidated financial statement schedule is included in Item 8: Valuation and Qualifying Accounts 3. List of Exhibits. Exhibit No. Description 2.1 2.2 (14) (17) Agreement and Plan of Merger, dated as of August 4, 2006, by and among Citrix Systems, Inc., Banyan Acquisition Corporation, Orbital...

  • Page 75
    ... other financial institutions Term Loan Agreement dated as of August 9, 2005 by and among Citrix Systems, Inc., Citrix Systems International GMBH, JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc. and certain other financial institutions NetScaler, Inc. 1997 Stock Plan Type # 3 License Form...

  • Page 76
    ... National Association Form of Restricted Stock Unit Agreement Amendment No. 1 to Credit Agreement, dated as of September 19, 2008, among Citrix Systems, Inc., Citrix International GmbH, JPMorgan Chase Bank, N.A., JP Morgan Securities, Inc. and certain other financial institutions Form of Long Term...

  • Page 77
    ... Incorporated by reference herein to Exhibit 3.1 to the Company's Current Report on Form 8- K dated as of February 13, 2009. (22) Incorporated by reference herein to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2007. (23) Incorporated by reference herein to...

  • Page 78
    ..., IL 60604 and 3 World Financial Center, Suite 400, New York, NY 10281-1022. (c) Financial Statement Schedule. The Company hereby files as part of this Annual Report on Form 10-K for the year ended December 31, 2009 the consolidated financial statement schedule listed in Item 15(a)(2) above, which...

  • Page 79
    ... duly authorized, in Fort Lauderdale, Florida on the 23rd day of February, 2010. CITRIX SYSTEMS, INC By: /S/ MARK B. TEMPLETON Mark B. Templeton President and Chief Executive Officer POWER OF ATTORNEY AND SIGNATURES We, the undersigned officers and directors of Citrix Systems, Inc., hereby...

  • Page 80
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 81
    ...and Financial Statement Schedule The following consolidated financial statements of Citrix Systems, Inc. are included in Item 8: Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets-December 31, 2009 and 2008 ...Consolidated Statements of Income-Years ended December...

  • Page 82
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 83
    ..., the consolidated financial position of Citrix Systems, Inc. at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also...

  • Page 84
    ... value) Assets Current assets: Cash and cash equivalents ...Short-term investments - available-for-sale ...Accounts receivable, net of allowances of $4,836 and $8,702 at December 31, 2009 and 2008, respectively ...Inventories, net ...Prepaid expenses and other current assets ...Current portion of...

  • Page 85
    CITRIX SYSTEMS, INC. CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31, 2009 2008 2007 (In thousands, except per share information) Revenues: Product licenses ...License updates ...Online services ...Technical services ...Total net revenues ...Cost of net revenues: Cost of product license ...

  • Page 86
    ... INCOME (In thousands) Common Stock Shares Amount Additional Paid In Capital Balance at December 31, 2006 ...238,156 Impact of adoption of FIN No. 48 on accumulated retained earnings on January 1, 2007 ...- Shares issued under stock-based compensation plans ...6,788 Stock-based compensation...

  • Page 87
    Retained Earnings Accumulated Other Comprehensive Income (Loss) Common Stock in Treasury Shares Amount Total Stockholders' Equity Total Comprehensive Income $1,006,706 (12,398 214,483 $ 4,180 1,521 50 - (59,465 5,376) - - - - - $(1,202,365 212,114) - - - - - $1,464,289 (12,398) 113,009 ...

  • Page 88
    ... ...Stock-based compensation expense ...In-process research and development ...Loss (gain) on available-for-sale investments ...Benefit related to adjustment of payroll taxes ...Provision for doubtful accounts ...Provision for product returns ...Provision for inventory reserves ...Deferred income...

  • Page 89
    ... using the Company's technologies that virtualize business meetings, user support, client hardware, desktop operating systems, applications, networks, server hardware and cloud services. The Company markets and licenses its products directly to enterprise customers, over the web, and through systems...

  • Page 90
    ... years for computer equipment, software, office equipment and furniture, the lesser of the lease term or five years for leasehold improvements, which is the estimated useful life, seven years for the Company's enterprise resource planning system and 40 years for buildings. During 2009 and 2008, the...

  • Page 91
    ...fiscal 2009, the Company changed the annual impairment test date from December 31 to October 1. This change was made to allow for more time and better support in the completion of the assessment prior to the Company's filing of its Annual Report on Form 10-K as a large accelerated filer. In addition...

  • Page 92
    ... includes amortization of customer relationships, trade names and covenants not to compete and is reported as an operating expense in the accompanying consolidated statements of income. Estimated future annual amortization expense is as follows (in thousands): Year ending December 31, 2010 ...2011...

  • Page 93
    ...manufacturers. The Company's product licenses are generally perpetual. The Company also separately sells license updates and services, which may include product training, technical support and consulting services, as well as online services. The Company's software products are purchased by small and...

  • Page 94
    ... and an executed product license agreement from the end-user. For technical support, product training and consulting services, the Company requires a purchase order and an executed agreement. For online services, the Company requires the customer or the reseller to electronically accept the terms of...

  • Page 95
    ... basis. Customers may also elect to purchase subscriptions for license updates, when not bundled with the initial product purchase. Technical support, product training or consulting services may be purchased separately by the customer. Online services are sold separately. The Company allocates...

  • Page 96
    ... expense, server capacity costs and royalties. In addition, the Company is a party to licensing agreements with various entities, which give the Company the right to use certain software code in its products or in the development of future products in exchange for the payment of fixed fees or...

  • Page 97
    ...and purchases advertising from, online media providers to advertise its online services products. The Company also has cooperative advertising agreements with certain distributors and resellers whereby the Company will reimburse distributors and resellers for qualified advertising of Citrix products...

  • Page 98
    ... the provision for doubtful accounts receivable, the provision to reduce obsolete or excess inventory to market, the provision for estimated returns, as well as sales allowances, the assumptions used in the valuation of stock-based awards, the assumptions used in the discounted cash flows to mark...

  • Page 99
    ... the Company's acquisitions were based on estimated discounted future cash flows, royalty rates and historical data, among other information. Purchased in-process research and development ("IPR&D") of $1.1 million and $9.8 million was expensed immediately upon the closing of the acquisition of Vapps...

  • Page 100
    ...to 36%. The rate of return included a factor that takes into account the uncertainty surrounding the successful development of the IPR&D. In 2009, the Company adopted new accounting rules for acquisitions and future IPR&D will be capitalized. 4. INVESTMENTS Available-for-sale Investments Investments...

  • Page 101
    ..., whose underlying assets are generally student loans that are substantially backed by the federal government under the Federal Family Education Loan Program through investment accounts managed by UBS Financial Services, Inc. ("UBS"). The market for municipal auction rate securities in the Company...

  • Page 102
    ... on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement...

  • Page 103
    ... the time period between the reporting date and the first date the Company is able to exercise its right to put the auction rate securities to UBS per the terms of the Settlement along with considerations of the credit worthiness of UBS. During 2008, the Company measured its AIG Capped Floater using...

  • Page 104
    ..., as well as consultants and non-employee directors of the Company. Currently, the 2005 Plan provides for the issuance of a maximum of 32,100,000 shares of common stock. Under the 2005 Plan, ISOs must be granted at exercise prices no less than fair market value on the date of grant, except...

  • Page 105
    ... the total stock-based compensation recognized by income statement classification is as follows (in thousands): Income Statement Classifications 2009 2008 2007 Cost of services revenues ...Research and development ...Sales, marketing and services ...General and administrative ...Total ... $ 1,868...

  • Page 106
    ... Option Valuation Information under FASB's Authoritative Guidance The Company currently uses the Black-Scholes option pricing model to determine the fair value of its stock options. The determination of the fair value of stock-based payment awards on the date of grant using an optionpricing model is...

  • Page 107
    ... vest 33.33% on each anniversary subsequent to the date of the award. Each non-vested stock unit, upon vesting, represents the right to receive one share of the Company's common stock. If the performance goals are not met, no compensation cost will ultimately be recognized in that period and any...

  • Page 108
    ... based on service at a rate of 33.33% on each anniversary date. The Company also awards non-vested stock units to its non-employee directors annually. These units vest monthly in equal installments based on service and, upon vesting, each stock unit represents the right to receive one share of the...

  • Page 109
    ... future. Accordingly, the Company used a dividend yield of zero in its model. The following table summarizes the Company's restricted stock unit awards for the year ended December 31, 2009: WeightedAverage Fair Value at Grant Date Number of Shares Restricted stock unit awards at December 31...

  • Page 110
    ... financial institutions using general corporate funds in order to lower the average cost to acquire shares. These programs include terms that require the Company to make up-front payments to the counterparty financial institution and result in the receipt of stock during or at the end of the term...

  • Page 111
    ... primary non-financial covenants contain certain limits on the Company's ability to pay dividends, conduct certain mergers or acquisitions, make certain investments and loans, incur future indebtedness or liens, alter the Company's capital structure or sell stock or assets. As of December 31, 2009...

  • Page 112
    ..., the Company entered into a lease to acquire additional office space in Santa Clara, CA. The rental commencement date will not begin until 2011 and the pricing for the lease will not be finalized until a future date. Accordingly, the future payment obligations related to this lease are not included...

  • Page 113
    CITRIX SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS the authoritative guidance, the Company must continue to monitor the conditions that are subject to the guarantees and indemnifications, as required under existing generally accepted accounting principles, to identify if a loss has been...

  • Page 114
    ... loss carry forwards from acquisitions. The utilization of these net operating loss carry forwards are limited in any one year pursuant to Internal Revenue Code Section 382 and begin to expire in 2018. At December 31, 2009, the Company had research and development tax credit carry forwards of...

  • Page 115
    ...of operations and financial condition. Regardless of whether this matter is resolved in the Company's favor, this matter could be expensive and time-consuming to defend. During the fourth quarter of 2009, the IRS commenced its examination of the Company's U.S. federal income tax returns for the 2006...

  • Page 116
    ... managed outside the reportable segments. Costs excluded from segment profit primarily consist of certain research and development costs associated with the Company's Desktop Solutions and Datacenter and Cloud Solutions, restructuring charges, stock-based compensation costs, amortization of product...

  • Page 117
    CITRIX SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS primarily of corporate marketing costs, stock-based compensation costs, operations and certain general and administrative expenses, which are separately managed. Accounting policies of the Company's segments are the same as its ...

  • Page 118
    ...In addition to evaluating the Company's profitability by geography, including the Company's Online Services division, its CODM also evaluates revenues by product groupings. Accordingly, the following table presents revenues for Product Licenses, License Updates and product related Technical Services...

  • Page 119
    ... of sales from the Company's application networking products, NetScaler, Access Gateway and Branch Repeater and the Company's server virtualization products, essentials for XenServer and Hyper-V. 13. RESTRUCTURING During the first quarter of 2009, the Company announced a restructuring program and...

  • Page 120
    ... of future cash flows caused by changes in currency exchange rates, the Company has established a program that uses foreign exchange forward contracts to hedge its exposure to these potential changes. The terms of these instruments, and the hedged transactions to which they relate, generally do not...

  • Page 121
    ... The Effect of Derivative Instruments on Financial Performance For the Year ended December 31, (In thousands) Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Effective Portion) Derivatives in Cash Flow Hedging Relationships Amount of Gain (Loss...

  • Page 122
    CITRIX SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: Year Ended December 31, 2009 2008 2007 (In thousands, except per share information) Numerator: Net income ...Denominator: ...

  • Page 123
    ... 15, 2010. The Company is currently evaluating this standard and the potential impact on its financial position and results of operations. 17. SUBSEQUENT EVENTS The Company has evaluated subsequent events through February 23, 2010, the date of the issuance of this Annual Report on Form 10-K. F-43

  • Page 124
    CITRIX SYSTEMS, INC. SUPPLEMENTAL FINANCIAL INFORMATION QUARTERLY FINANCIAL INFORMATION (UNAUDITED) First Quarter Second Third Fourth Quarter Quarter Quarter (In thousands, except per share amounts) Total Year 2009 Net revenues ...Gross margin ...Income from operations ...Net income ...Basic ...

  • Page 125
    CITRIX SYSTEMS, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS Beginning of Period Charged to Costs and Expenses Charged to Other Accounts Deductions (In thousands) Balance at End of Period 2009 Deducted from asset accounts: Allowance for doubtful accounts ...Allowance for returns ...Valuation ...

  • Page 126
    ...-laws of the Company Specimen certificate representing the Common Stock Fourth Amended and Restated 1995 Stock Plan Second Amended and Restated 1995 Non-Employee Director Stock Option Plan Second Amended and Restated 2000 Director and Officer Stock Option and Incentive Plan 2000 Director and Officer...

  • Page 127
    ... other financial institutions Term Loan Agreement dated as of August 9, 2005 by and among Citrix Systems, Inc., Citrix Systems International GMBH, JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc. and certain other financial institutions NetScaler, Inc. 1997 Stock Plan Type # 3 License Form...

  • Page 128
    ... Term Incentive Agreement Fifth Amendment to Citrix Systems, Inc. 2005 Equity Incentive Plan Form of Amendment to Restricted Stock Unit Agreement Preferability Letter of Independent Registered Public Accounting Firm List of Subsidiaries Consent of Independent Registered Public Accounting Firm Power...

  • Page 129
    ... Incorporated by reference herein to Exhibit 3.1 to the Company's Current Report on Form 8- K dated as of February 13, 2009. (22) Incorporated by reference herein to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2007. (23) Incorporated by reference herein to...

  • Page 130
    ... or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. b) By: /s/ MARK B. TEMPLETON Mark B. Templeton President and Chief Executive Officer (Principal Executive Officer) Date: February 23, 2010

  • Page 131
    ... information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. b) By: /S/ DAVID J. HENSHALL David J. Henshall Chief Financial Officer (Principal Financial Officer) Date...

  • Page 132
    ...the Annual Report of Citrix Systems, Inc. (the "Company") on Form 10-K for the period ending December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Mark B. Templeton, Chief Executive Officer of the Company, and David J. Henshall, Chief Financial...

  • Page 133
    ...-process research and development related to business combinations. The following table shows the non-GAAP financial measures used in this Annual Report reconciled to the most directly comparable GAAP financial measures. Twelve Months Ended December 31, 2009 2008 GAAP net income Add: stock-based...

  • Page 134
    ... addition to GAAP financial results because it believes that these non-GAAP financial measures provide useful information to certain investors and financial analysts for comparison across accounting periods not inï¬,uenced by certain non-cash items that are not used by management when evaluating...

  • Page 135
    ... and services, including our Desktop Solutions, Online Services and Datacenter and Cloud Solutions and XenClient, market positioning, Citrix Ready, our Partner Network, our partnership with Microsoft, Product Licenses, License Updates, Technical Services, cash and non-cash charges, product and price...

  • Page 136
    ... of dividends) Annual Return Percentage Years Ended Company Name/Index Citrix Systems, Inc. S&P...Ended Dec 06 110.59 121.48 114.01 114.31 Dec 07 155.40 128.16 123.71 131.87 Dec 08 96.36 80.74 73.11 81.68 Dec 09 170.11 102.11 105.61 121.42 Peer Group consists of companies with a SIC Code...

  • Page 137
    ...Independent Registered Public Accountants Ernst & Young LLP 100 Northeast Third Avenue, Suite 700 Fort Lauderdale, FL 33301 Annual Meeting of Stockholders The Annual Meeting of Shareholders of Citrix Systems, Inc. will be held on May 26, 2010 at 5:00 p.m., PST 4988 Great America Parkway Santa Clara...

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