Citrix 2012 Annual Report Download - page 93

CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-27
The detail of the total stock-based compensation recognized by income statement classification is as follows (in
thousands):
Income Statement Classifications 2012 2011 2010
Cost of services revenues $ 2,111 $ 1,584 $ 1,363
Research and development 54,616 31,763 54,123
Sales, marketing and services 51,519 31,354 28,704
General and administrative 41,694 28,208 19,568
Total $ 149,940 $ 92,909 $ 103,758
Stock Options
Stock options granted under 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. The Company also
assumes stock options from certain of its acquisitions for which the vesting period is typically reset to 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. See
Note 3 for more information related to acquisitions.
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, 2011 10,699,905 $ 48.06 3.24
Granted 398,634 69.91
Assumed 11,860 6.87
Exercised (3,136,511) 34.56
Forfeited or expired (384,356) 59.46
Outstanding at December 31, 2012 7,589,532 54.15 2.70 $ 120,299
Vested or expected to vest 7,392,833 53.92 2.68 $ 118,535
Exercisable at December 31, 2012 4,835,085 49.52 2.26 $ 94,374
The Company recognized stock-based compensation expense of $56.4 million, $48.2 million and $67.0 million related to
options for the years ended December 31, 2012, 2011 and 2010, respectively. As of December 31, 2012, there was $68.9
million of total unrecognized compensation cost related to stock options. That cost is expected to be recognized over a
weighted-average period of 1.60 years. The total intrinsic value of stock options exercised during 2012, 2011 and 2010 was
$131.4 million, $169.2 million and $293.7 million, respectively.
Stock Option Valuation Information
The Company currently uses the Black-Scholes option pricing model to determine the fair value of 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 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 terms on stock options. The expected term of 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