Citrix 2014 Annual Report Download - page 54

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ended December 31, 2013. The decrease in the effective tax rate when comparing the year ended December 31, 2014 to the
year ended December 31, 2013 was primarily due to the impact of the IRS settlement for the tax years 2009 and 2010 that
closed during the three months ended June 30, 2014 and the decrease in pre-tax earnings.
We currently target our effective tax rate to increase in 2015 compared to 2014 due to the expiration of the federal
research and development credit.
Our effective tax rate generally differs from the U.S. federal statutory rate of 35% due primarily to lower tax rates on
earnings generated by our foreign operations that are taxed primarily in Switzerland. We have not provided for U.S. taxes for
those earnings because we plan to reinvest all of those earnings indefinitely outside the United States. Our effective tax rate
will fluctuate based on the mix of earnings from our U.S. and foreign jurisdictions. Accordingly, earnings from the production
and distribution of our products and services through our foreign headquarters in Switzerland are currently taxed at lower
income tax rates than earnings from our U.S. operations.
The federal research and development credit expired on December 31, 2013. On December 19, 2014, the Tax Increase
Prevention Act of 2014 was signed into law. Under this act, the federal research and development credit was retroactively
extended for amounts paid or incurred after December 31, 2013 and before January 1, 2015. The effects of these changes in the
tax law result in net tax benefits of approximately $12.3 million, which was recognized in the fourth quarter of 2014, the
quarter in which the law was enacted. This credit has not been extended for the 2015 tax year and may increase the effective tax
rate in future years if not extended.
Liquidity and Capital Resources
During 2014, we generated operating cash flows of $846.0 million. These operating cash flows related primarily to net
income of $251.7 million, adjusted for, among other things, non-cash charges, including depreciation and amortization
expenses of $330.3 million and stock-based compensation expense of $169.3 million. Also contributing to these cash inflows
was an aggregate increase in operating assets and liabilities of $96.9 million, net of effects of acquisitions. Our investing
activities used $569.5 million of cash consisting primarily of net purchases of investments of $289.7 million, cash paid for the
purchase of property and equipment of $165.4 million and cash paid for acquisitions of $101.1 million. Our financing activities
used cash of $292.7 million primarily due to stock repurchases of $1.6 billion, the purchase of hedges on the convertible senior
notes of $184.3 million and cash paid for tax withholding on vested stock awards of $33.7 million. This financing cash outflow
was partially offset by proceeds from the issuance of convertible senior notes of $1.4 billion, proceeds from the issuance of
warrants of $101.8 million and the issuance of common stock under our employee stock-based compensation plans of $46.6
million.
During 2013, we generated operating cash flows of $928.3 million. These operating cash flows related primarily to net
income of $339.5 million, adjusted for, among other things, non-cash charges including depreciation and amortization expenses
of $267.5 million and stock-based compensation expense of $183.9 million. Also contributing to these cash inflows was an
aggregate increase in operating assets and liabilities of $190.5 million, net of the effects of acquisitions. Our investing activities
used $938.2 million of cash consisting primarily of cash paid for acquisitions of $334.9 million, the purchase of property and
equipment of $162.9 million and $19.0 million in cash paid for licensing agreements and product related intangible assets and
other investments. These investing cash outflows were partially offset by net sales of investments of $433.5 million. Our
financing activities used cash of $352.3 million primarily due to stock repurchases of $406.3 million. This financing cash
outflow was partially offset by proceeds received from the issuance of common stock under our employee stock-based
compensation plans of $73.7 million.
Convertible Senior Notes and Accelerated Share Repurchase
In April 2014, we completed a private placement of $1.25 billion principal amount of 0.500% Convertible Senior Notes
due 2019. Thereafter, in May 2014, we issued an additional $187.5 million principal amount of Convertible Notes pursuant to
the full exercise of the over-allotment option granted to the initial purchasers in the offering, or the Over-Allotment Option. The
net proceeds from this offering were approximately $1.42 billion (including the proceeds from the Over-Allotment Option),
after deducting the initial purchasers’ discounts and commissions and the offering expenses payable by us. We used
approximately $82.5 million of the net proceeds to pay the cost of certain bond hedges entered into in connection with the
offering (after such cost was partially offset by the proceeds to us from certain warrant transactions). Please see Note 12 to our
consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2014 for
additional details on the Convertible Notes offering and the related bond hedges and warrant transactions.
We used the remainder of the net proceeds from the offering and a portion of our existing cash and investments to
purchase an aggregate of approximately $1.5 billion of our common stock under our share repurchase program. We used
approximately $101.0 million to purchase shares of our common stock from certain purchasers of the Convertible Notes in