Citrix 2006 Annual Report Download - page 68

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• information contained in personnel files maintained
for employees who were granted options;
• electronic mail messages and other electronic files
retrieved from the Company’s computer system
and in back up media;
• documentation prepared in connection with the
Company’s annual performance reviews of employees
as part of the process of determining the allocation of
stock option grants to individual employees;
• information as to the date of hire of the employee
receiving the option grant, including (if the grant was
a new hire grant) the date of any offer letter;
• correspondence, memoranda and other
documentation supporting the option grant;
• information concerning the date or dates on which a
stock option was entered into the Company’s 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 the Company’s 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, the Company
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. The Company 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, the
Company corrected the measurement dates for all 50
original grants dates during this period, consisting of
approximately 24.2 million options. The Company also
revised measurement dates for all grants (consisting of two
employee new hire grants) in December 1995, which was
the month the Company completed its initial public offering.
After completion of its investigation, the Audit Committee
concluded that the Company followed processes and
procedures that likely led to the retrospective selection of
grant dates 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, the