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CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-24
Income Statement Classifications 2013 2012 2011
Cost of services revenues $ 2,540 $ 2,111 $ 1,584
Research and development 63,448 54,616 31,763
Sales, marketing and services 65,549 51,519 31,354
General and administrative 52,404 41,694 28,208
Total $ 183,941 $ 149,940 $ 92,909
Stock Options
Stock options granted under the 2005 Plan typically have a five-year life and vest over three years, with 33.3% of the
shares underlying the option vesting on the first anniversary of the date of grant and the remainder of the underlying shares
vesting in equal installments at a rate of 2.78% thereafter (the "Standard Vesting Rate"). 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 the Standard
Vesting Rate. During the first quarter of 2013, the Company assumed in-the-money options from the Zenprise acquisition. 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, 2012 7,589,532 $ 54.15 2.70
Assumed 285,817 11.85
Exercised (2,168,531) 33.97
Forfeited or expired (299,841) 60.90
Outstanding at December 31, 2013 5,406,977 59.64 2.15 $ 57,583
Vested or expected to vest 5,366,212 59.78 2.14 $ 56,548
Exercisable at December 31, 2013 4,438,465 61.88 1.93 $ 38,167
The Company recognized stock-based compensation expense of $48.9 million, $56.4 million and $48.2 million related to
options for the years ended December 31, 2013, 2012 and 2011, respectively. As of December 31, 2013, there was $29.7
million of total unrecognized compensation cost related to stock options. That cost is expected to be recognized over a
weighted-average period of 1.22 years. The total intrinsic value of stock options exercised during 2013, 2012 and 2011 was
$77.7 million, $131.4 million and $169.2 million, respectively.
Stock Option Valuation Information
The Company 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. In years when a significant number of stock options are granted, the Company analyzes
its historical pattern of option exercises based on certain demographic characteristics annually and has historically determined
that there were no meaningful differences in option exercise activity based on 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 and/or assumed during 2013, 2012
and 2011 was $56.97, $23.95 and $29.91, respectively.