Citrix 2009 Annual Report Download - page 106

CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Options
Options granted during the year were granted pursuant to the Company’s 2005 Plan. Options granted
pursuant to the 2005 Plan typically have a five year life and vest over three years at a rate of 33.3% of the shares
underlying the option one year from date of grant and at a rate of 2.78% monthly thereafter. A summary of the
status and activity of the Company’s fixed option awards is as follows:
Options
Number of
Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life
(in years)
Aggregate
Intrinsic Value
(in thousands)
Outstanding at December 31, 2008 .................. 29,463,553 $30.20 2.79
Granted ........................................ 3,637,422 23.80
Exercised ...................................... (8,151,141) 20.36
Forfeited or expired .............................. (3,319,430) 38.16
Outstanding at December 31, 2009 .................. 21,630,404 31.61 2.62 $269,767
Vested or expected to vest at December 31, 2009 ....... 21,039,111 31.77 2.58 $260,383
Exercisable at December 31, 2009 ................... 14,139,723 35.01 2.03 $146,790
The Company recognized stock-based compensation expense of $78.6 million, $93.8 million and $54.6
million related to options for the years ended December 31, 2009, 2008 and 2007, respectively. As of
December 31, 2009, there was $78.1 million of total unrecognized compensation cost related to stock options.
That cost is expected to be recognized over a weighted-average period of 1.43 years. The total intrinsic value of
stock options exercised during 2009, 2008 and 2007 was $97.7 million, $44.8 million and $92.8 million,
respectively.
Stock 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 option-
pricing model is affected by the Company’s stock price, as well as assumptions regarding a number of complex
and subjective variables. These variables include the Company’s expected stock price, volatility over the term of
the awards, actual employee exercise behaviors, risk-free interest rate and expected dividends. For purposes of
valuing stock options, the Company determined the expected volatility factor by considering the implied
volatility in two-year market-traded options of the Company’s common stock based on third party volatility
quotes in accordance with the provisions of Staff Accounting Bulletin (“SAB”) No. 107, Share Based Payment.
The Company’s decision to use implied volatility was based upon the availability of actively traded options on
the Company’s common stock and its assessment that implied volatility is more representative of future stock
price trends than historical volatility. The approximate risk free interest rate was based on the implied yield
available on U.S. Treasury zero-coupon issues with remaining terms equivalent to the Company’s expected term
on its options. The expected term of the Company’s stock options was based on the historical employee exercise
patterns. The Company also periodically analyzes its historical pattern of option exercises based on certain
demographic characteristics and determined that there were no meaningful differences in option exercise activity
based on the demographic characteristics. The Company does not intend to pay dividends on its common stock in
the foreseeable future. Accordingly, the Company used a dividend yield of zero in its option pricing model. The
weighted average fair value of stock options granted during 2009, 2008 and 2007 was $7.22, $10.47 and $11.71,
respectively.
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