Citrix 2006 Annual Report Download - page 91

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
Citrix Systems, Inc.  Annual Report
Pro Forma Information Under SFAS No. 123 for Periods
Prior to January 1, 2006
The following table illustrates the effect on net earnings
and earnings per share if the Company had applied the fair
value recognition provisions of SFAS No. 123 to stock-
based awards in 2005 and 2004 (in thousands, except per
share information):
2005 2004
(restated) (restated)
Net income:
As reported $ 165,609 $ 131,287
Add: Total stock-based employee compensation included in net income as reported,
net of related tax effects 5,767 5,159
Deduct: Total stock-based employee compensation expense determined under fair
value based method for all awards, net of related tax effects (38,475) (47,002)
Pro forma $ 132,901 $ 89,444
Basic earnings per share:
As reported $ 0.96 $ 0.78
Pro forma $ 0.77 $ 0.53
Diluted earnings per share:
As reported $ 0.93 $ 0.75
Pro forma $ 0.75 $ 0.51
For purposes of the pro forma calculations, the fair value of
each option was estimated on the date of the grant using
the Black-Scholes option-pricing model, assuming no
expected dividends, and the following assumptions:
Stock Options
granted during
2005 2004
Expected volatility factor 0.31–0.35 0.38–0.49
Approximate risk free interest rate 3.7%-4.4% 3.0%-3.5%
Expected term (in years) 3.32 3.32 – 4.76
The Company estimated the expected volatility factor
based upon implied and historical data. The approximate
risk free interest rate was based on the implied yield
available on U.S. Treasury zero-coupon issues with
remaining terms equivalent to the Company’s expected
term. The expected term of the Company’s stock options
was based on the historical exercise patterns considering
changes in vesting periods and contractual terms. The
weighted average fair value of stock options granted during
2005 and 2004 was $9.18 and $7.37, respectively. The
total intrinsic value of stock options exercised during 2005
and 2004 was $62.9 million and $41.5 million, respectively.
Forfeitures were recognized as they occurred.
For purposes of the pro forma calculations, the fair value
of each stock-based award related to the 1995 ESPP
was estimated using the Black-Scholes option-pricing
model, assuming no expected dividends, and the following
assumptions:
2005 2004
Expected volatility factor 0.28–0.33 0.36-0.42
Approximate risk free
interest rate 2.5%–3.4% 1.0%-1.6%
Expected term 6฀months 6 months
The Company estimated the expected volatility factor
based on historical data. The approximate risk free
interest rate was based on the implied yield available on
U.S. Treasury zero-coupon issues with remaining term
equivalent to the Company’s expected term. The expected
term for the 1995 ESPP is the six month Payment Period.
The weighted average fair value of the shares purchased
under the 1995 ESPP during 2005 and 2004 was $16.48
and $15.98, respectively.
Valuation and Expense Information under SFAS No. 123R
The Company recorded stock-based compensation costs
of $61.6 million and recognized a tax benefit related to
stock-based compensation of $57.1 million in 2006. As
required by SFAS No. 123R, the Company estimates
forfeitures of employee stock options and recognizes
compensation cost only for those awards expected to
vest. Forfeiture rates are determined based on historical
experience. Estimated forfeitures are adjusted to actual
forfeiture experience as needed.