Citrix 2014 Annual Report Download - page 60

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about our market risk includes “forward-looking statements” that involve risks and
uncertainties. Actual results could differ materially from those projected in the forward-looking statements. The analysis
methods we used to assess and mitigate risk discussed below should not be considered projections of future events, gains or
losses.
We are exposed to financial market risks, including changes in foreign currency exchange rates and interest rates that
could adversely affect our results of operations or financial condition. To mitigate foreign currency risk, we utilize derivative
financial instruments. The counterparties to our derivative instruments are major financial institutions. All of the potential
changes noted below are based on sensitivity analyses performed on our financial position as of December 31, 2014. Actual
results could differ materially.
Discussions of our accounting policies for derivatives and hedging activities are included in Notes 2 and 14 to our
consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2014.
Exposure to Exchange Rates
A substantial majority of our overseas expense and capital purchasing activities are transacted in local currencies,
including Euros, British pounds sterling, Japanese yen, Australian dollars, Swiss francs, Indian rupees, Hong Kong dollars,
Canadian dollars, Singapore dollars and Chinese renminbi. To reduce the volatility of future cash flows caused by changes in
currency exchange rates, we have established a hedging program. We use foreign currency forward contracts to hedge certain
forecasted foreign currency expenditures. Our hedging program significantly reduces, but does not entirely eliminate, the
impact of currency exchange rate movements.
At December 31, 2014 and 2013, we had in place foreign currency forward sale contracts with a notional amount of
$60.9 million and $49.7 million, respectively, and foreign currency forward purchase contracts with a notional amount of
$209.2 million and $210.7 million, respectively. At December 31, 2014, these contracts had an aggregate fair value liability of
$8.5 million and at December 31, 2013, these contracts had an aggregate fair value asset of $3.2 million. Based on a
hypothetical 10% appreciation of the U.S. dollar from December 31, 2014 market rates, the fair value of our foreign currency
forward contracts would decrease by $14.0 million. Conversely, a hypothetical 10% depreciation of the U.S. dollar from
December 31, 2014 market rates would increase the fair value of our foreign currency forward contracts by $14.0 million,
resulting in a net asset position. In these hypothetical movements, foreign operating costs would move in the opposite direction.
This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to
the direct effects of changes in exchange rates quantified above, changes in exchange rates could also change the dollar value
of sales and affect the volume of sales as the prices of our competitors’ products become more or less attractive. We do not
anticipate any material adverse impact to our consolidated financial position, results of operations, or cash flows as a result of
these foreign exchange forward contracts.
Exposure to Interest Rates
We have interest rate exposures resulting from our interest-based available-for-sale investments. We maintain available-
for-sale investments in debt securities and we limit the amount of credit exposure to any one issuer or type of instrument. The
securities in our investment portfolio are not leveraged. The securities classified as available-for-sale are subject to interest rate
risk. The modeling technique used measures the change in fair values arising from an immediate hypothetical shift in market
interest rates and assumes that ending fair values include principal plus accrued interest and reinvestment income. If market
interest rates were to increase by 100 basis points from December 31, 2014 and 2013 levels, the fair value of the available-for-
sale portfolio would decline by approximately $15.9 million and $13.2 million, respectively. If market interest rates were to
decrease by 100 basis points from December 31, 2014 and 2013 levels, the fair value of the available-for-sale portfolio would
increase by approximately $11.0 million and $8.0 million, respectively. These amounts are determined by considering the
impact of the hypothetical interest rate movements on our available-for-sale and trading investment portfolios. This analysis
does not consider the effect of credit risk as a result of the changes in overall economic activity that could exist in such an
environment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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-41 of this Annual Report on Form 10-K for the year ended
December 31, 2014.