Citrix 2006 Annual Report Download - page 100

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Purchase Obligations
The Company has agreements with suppliers to purchase
inventory and estimates that its non-cancelable obligations
under these agreements for the fiscal year ended
December 31, 2007 to be approximately $9.3 million.
Contingent Liabilities Related to Internal Revenue Code
Section 409A
Because virtually all holders of stock options granted by
the Company were not involved in or aware of the incorrect
pricing of certain options, the Company has taken and
intends to take further actions to address certain adverse
tax consequences that may be incurred by the holders of
such incorrectly priced options. The primary adverse tax
consequence is that the re-measured options vesting after
December 31, 2004 subject the option holder to a penalty
tax under Section 409A of the IRC (and, as applicable,
similar excise taxes under state laws). As a result during
the first quarter of 2007, the Company has recorded
$2.5 million, net of income tax, in liabilities related to the
anticipated payment by the Company of payroll and excise
taxes on behalf of the Company’s employees for options
that were exercised during open tax years under the related
statutes. The Company expects to incur approximately
$0.9 million, net of income tax, in additional charges to
correct future adverse tax consequences under IRC
Section 409A related to future employee option exercises
of incorrectly priced options.
12. Income Taxes
The United States and foreign components of income
before income taxes are as follows:
(In thousands) 2006 2005 2004
(restated) (restated)
United States $ 65,363 $ 59,141 $ 28,920
Foreign 177,718 165,213 135,416
Total $ 243,081 $ 224,354 $ 164,336
The components of the provision for income taxes are as
follows:
(In thousands) 2006 2005 2004
(restated) (restated)
Current:
Federal $ 46,073 $ 52,181 $ 23,763
Foreign 14,176 16,118 8,974
State 4,186 5,217 2,511
Total current 64,435 73,516 35,248
Deferred (4,351) (14,771) (2,199)
Total provision $ 60,084 $ 58,745 $ 33,049
The significant components of the Company’s deferred tax
assets and liabilities consisted of the following:
December 31,
(In thousands) 2006 2005
(restated)
Deferred tax assets:
Accruals and reserves $ 12,363 $ 9,838
Depreciation and amortization 3,856 —
Tax credits 36,077 30,268
Net operating losses 52,756 70,530
Other 5,869 1,184
Stock option compensation 17,199 16,415
Valuation allowance (1,332) (1,332)
Total deferred tax assets 126,788 126,903
Deferred tax liabilities:
Acquired technology (27,572) (29,154)
Depreciation and amortization —(265)
Prepaid expenses (4,830) (4,590)
Total deferred tax liabilities (32,402) (34,009)
Total net deferred tax assets $ 94,386 $ 92,894
SFAS No. 109, Accounting for Income Taxes, requires
a valuation allowance to reduce the deferred tax assets
reported if it is not more likely than not that some
portion or all of the deferred tax assets will be realized.
At December 31, 2006, the Company has recorded a
valuation allowance of approximately $1.3 million relating to
deferred tax assets for foreign tax credit carryovers.
During the years ended December 31, 2006, 2005, and
2004, the Company recognized tax benefits related to
the exercise of employee stock options in the amount of
$40.6 million, $35.0 million, and $16.5 million, respectively.
These benefits were recorded to additional paid-in capital.
At December 31, 2006, the Company does not have any
U.S. net operating loss carryforwards remaining that result
from stock options. The Company records the benefit of
the net operating loss carryforwards generated from the
exercise of employee stock options in the period that the
net operating loss carryforwards are utilized.
At December 31, 2006, the Company had $135.9 million of
remaining net operating loss carryforwards from acquisitions.
The utilization of these net operating loss carryforwards are
limited in any one year pursuant to Internal Revenue Code
Section 382 and begin to expire in 2021.