Citrix 2006 Annual Report Download - page 53

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Citrix Systems, Inc.  Annual Report
due to the sale of the underlying available-for-sale
investments. For more information see Notes 5 and 14 to
our consolidated financial statements included elsewhere
in this Annual Report.
During 2005, we entered into the Credit Facility, as
amended in 2006, or the Amended Credit Facility.
Accordingly, we could be exposed to market risk from
changes in interest rates on our long-term debt. This
exposure relates to our $100.0 million Amended Credit
Facility. Borrowings under the Amended Credit Facility
currently bear interest at variable rates based on LIBOR
plus 0.32% and adjusts in the future in the range of 0.32%
to 0.80% above LIBOR based on our level of total debt and
our adjusted earnings before interest, taxes, depreciation
and amortization, or EBITDA. A hypothetical 1% interest
rate change would not have any current impact on our
results of operations as we have no amounts outstanding
on the Amended Credit Facility as of December 31, 2006.
In April 2002, we entered into a synthetic lease with
a substantive lessor totaling approximately $61.0
million related to office space utilized for our corporate
headquarters in Fort Lauderdale, Florida. Payments under
this synthetic lease are indexed to a variable interest
rate (LIBOR plus a margin). Based upon our interest rate
exposure under this synthetic lease at December 31, 2006,
a 100 basis point change in the current interest rate would
have an immaterial effect on our financial position and
results of operations. In addition to interest rate exposure,
if the fair value of our headquarters property, under this
synthetic lease, were to significantly decline, there could be
a material adverse effect on our results of operations and
financial condition.
As described in Note 2 to our consolidated financial
statements and in “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” included
elsewhere in this Annual Report in the fourth quarter of
2006, the Audit Committee of our Board of Directors
commenced a voluntary, independent investigation of our
stock option granting practices and related accounting
during the period from January 1996 through December
2006. This investigation was conducted by the Audit
Committee with the assistance of independent outside
legal counsel and outside forensic accounting consultants.
The Audit Committee completed its review in the second
quarter of 2007. In addition, management also reviewed
all grants (consisting of two employee new hire grants)
in December 1995, which was the month we completed
our initial public offering, and all grants to non-employee
directors. Based on the results of the Audit Committee’s
investigation and our review, we have revised the
measurement dates for certain stock options granted
during the period from December 1995 to March 2005,
which required a restatement of our previously issued
financial statements.
The revised measurement dates resulted from deficiencies
in our internal control over financial reporting that existed
in prior periods. The last revised measurement date was
in March 2005 and there were no adjustments related to
options granted in 2006. We believe that the likelihood
that a material error in our financial statements could
have originated during 2006 and not have been detected
as of December 31, 2006 is remote. In coming to this
conclusion, management considered, among other things,
changes that we have made in our stock option granting
practices, which are described below, and the impact of
the adjustments to our financial statements for the years
ended December 31, 2005 and 2004. The adjustments
to our consolidated financial statements as of and for the
years ended December 31, 2005 and 2004 principally
resulted from the vesting and tax impacts of measurement
date revisions made to options granted prior to 2004.