Citrix 2006 Annual Report Download - page 21

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Citrix Systems, Inc.  Annual Report
• information concerning the date or dates on which
a stock option was entered into our stock option
tracking system, Equity Edge;
• information obtained during interviews conducted
by the Audit Committee’s outside counsel of
numerous individuals, including current and
former officers, directors, employees and outside
professionals; and
• analyses of our option grant performed
by consultants engaged on behalf of the
Audit Committee.
Consistent with current accounting literature and published
guidance from the staff of the SEC, we classified grants
during the eleven-year period subject to the investigation
into categories based on grant type and process by
which the grant was finalized. The principal categories
related to annual and non-annual grants in three time
periods: (1) January 1996 through May 1998; (2) May 1998
through November 2003; and (3) November 2003 through
December 2006. We also separately categorized grants
to non-employee directors. The last grant with a revised
measurement date was awarded in March 2005.There were
no revised measurement dates in 2006. A summary of pre-
tax stock-based compensation expense related to options
awarded in each time period, in thousands, is as follows:
Time Period
Pre-Tax
Stock-based
Compensation
Expense
January 1996 through May 1998 (includes two grants made in December 1995) $62,171
May 1998 through November 2003 103,272
November 2003 through December 2005 224
Cumulative effect at December 31, 2005 $165,667
January 1996 – May 1998: In the restatement, we corrected
the measurement dates for all 50 original grants dates
during this period, consisting of approximately 24.2 million
options. We also revised measurement dates for all grants
(consisting of two employee new hire grants) in December
1995, which was the month we completed our initial
public offering.
After completion of its investigation, the Audit Committee
concluded that we likely selected grant dates retrospective
for many stock options granted to employees and
executives during the January 1996 through May 1998
period. In addition, the required granting actions for
many of these grants were not completed on the original
measurement date. During this period, a substantial
majority of the grants were approved using unanimous
written consent forms signed by the Compensation
Committee for which, in most cases, there was no
documentary evidence of when approval was obtained. As
discussed above, for grants where there was insufficient
evidence to determine when approval was obtained, we
generally used the date of the first in-person Board of
Directors meeting after the evidence suggested that the
amount and terms of the grant were final as the revised
measurement date for financial accounting purposes.
Where evidence existed of advance approval by the
Compensation Committee (such as facsimile header dates
on signed unanimous written consent forms), we used
this information as evidence of when the Compensation
Committee approval was obtained, and used that
date as the revised measurement date for financial
accounting purposes.
May 1998 – November 2003: During this period we issued
approximately 70.5 million options over 87 grant dates.
In the restatement, we corrected measurement dates for
approximately 50.6 million options granted on 79 of the 87
grants dates. We made these corrections because we did not
complete the required granting actions by the original grant
date, including, obtaining approvals from the Compensation
Committee and not finalizing the amounts or recipients as of
the original grant date.