Citrix 2006 Annual Report Download - page 84

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Accounting for Stock-Based Compensation
The Company has various stock-based compensation
plans for its employees and outside directors. Effective
January 1, 2006, the Company adopted the fair value
recognition provisions of SFAS No. 123R, Share-Based
Payment , and related interpretations using the
modified-prospective transition method. Under that
method, compensation cost recognized in 2006 includes
(a) compensation cost for all stock-based awards granted
prior to, but not yet vested as of January 1, 2006 based on
the grant date fair value estimated in accordance with the
original provisions of SFAS No. 123 and (b) compensation
cost for all stock-based awards granted on or subsequent
to January 1, 2006, based on the grant-date fair value
estimated in accordance with the provisions of SFAS
No. 123R. Results for prior periods have not been restated.
Prior to January 1, 2006, the Company accounted for its
stock-based compensation plans under the recognition
and measurement provisions of Accounting Principles
Board (“APB”) Opinion No. 25, Accounting for Stock
Issued to Employees , and related interpretations, as
permitted by SFAS No. 123, Accounting for Stock-
Based Compensation. The Company did not recognize
compensation cost related to stock options granted
to its employees and non-employee directors that had
an exercise price equal to or above the market value of
the underlying common stock on the date of grant in its
consolidated statement of income prior to January 1, 2006.
See Note 7 for further information regarding the Company’s
stock-based compensation plans.
Earnings per Share
Basic earnings per share is calculated by dividing income
available to stockholders by the weighted-average number
of common shares outstanding during each period.
Diluted earnings per share is computed using the weighted
average number of common and dilutive common share
equivalents outstanding during the period. Dilutive
common share equivalents consist of shares issuable
upon the exercise of certain stock options (calculated
using the treasury stock method). Certain shares under
the Company’s stock-based compensation programs
were excluded from the computation of diluted earnings
per share due to their anti-dilutive effect for the respective
periods in which they were outstanding. The reconciliation
of the numerator and denominator of the earnings per
share calculation is presented in Note 15.
Reclassifications
Certain reclassifications of the prior years’ financial
statements have been made to conform to the current
year’s presentation.
4. Acquisitions
2006 Acquisitions
During 2006, the Company acquired all of the issued
and outstanding capital stock of two privately held
companies, Reflectent Software, Inc., a provider of
solutions to monitor the real-time performance of client-
server, Web and desktop applications from an end-user
perspective, and Orbital Data Corporation, a provider
of solutions that optimize the delivery of applications
over wide area networks, (the “2006 Acquisitions”). The
2006 Acquisitions strengthen the Company’s Application
Delivery Infrastructure products which are designed to
offer comprehensive solutions across all dimensions
of application delivery. The total consideration for the
2006 Acquisitions was $68.0 million comprised of cash
paid of $65.1 million and other costs related primarily to
estimated direct transaction costs of $2.9 million including
approximately $0.3 million related to stock-based awards
that were granted and vested upon consummation of
the acquisitions. As part of the 2006 Acquisitions, the
Company assumed approximately 0.4 million non-vested
stock-based awards upon the closing of the transaction.
See Note 7 for more information regarding the stock-
based awards assumed. Revenues from the acquired
products are primarily included in the Company’s Product
License revenue and Technical Services revenue in the
accompanying consolidated statements of income.
The sources of funds for consideration paid in these
transactions consisted of available cash and investments.
The 2006 Acquisitions results of operations have been
included in the Company’s consolidate results of operations
beginning after the date of the respective acquisitions and
are not significant in relation to the Company’s consolidated
financial statements. Accordingly, they are excluded from