Citrix 2007 Annual Report Download

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Transforming the datacenter into a delivery center.
Virtualize.
Optimize.
Collaborate.
Deliver.
2007
Annual
Report
J
J

Table of contents

  • Page 1
    V i r t u a l i z e . O p t i m i z e . Collaborate. D e l i v e r . Transforming the datacenter into a delivery center. 2 0 0 7 A n n u a l R e p o r t

  • Page 2
    ... Cost of product revenues Cost of services revenues Amortization of product related intangible assets Total cost of revenues Gross margin Operating expenses Research and development Sales, marketing and support General and administrative Amortization of other intangible assets In-process research...

  • Page 3
    ... on building long-term value, for customers, for employees and for stockholders. Results like this are a credit to Citrix employees, families, and business partners. I'd like to gratefully thank each one of them. This kind of business velocity has taught us a lot about strategic transformation. It...

  • Page 4
    ...-art of Windows® application delivery. This also included the launch of a brand new "Platinum Edition" of Presentation Server - incorporating Citrix Access Gateway, Password Manager and EdgeSight technologies - offering our most strategic customers a comprehensive "end-to-end" system. Revenue from...

  • Page 5
    ... of computing components are fundamental ingredients for lowering computing costs and for dynamic application delivery. Citrix now has the most complete vision, technologies, and product portfolio for delivering desktops and applications from a dynamic server infrastructure. I like the position...

  • Page 6
    ... your datacenters into delivery centers." The Citrix Delivery Center product family includes our four primary product lines for enterprise customers - XenDesktop, XenApp, XenServer and NetScaler. And, it distinguishes these products as strategic components of an end-to-end system. Into the Future...

  • Page 7
    ...Lauderdale, Florida 33309 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (954) 267-3000 Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.001 Par Value The NASDAQ Stock Market LLC (Title of each class) (Name...

  • Page 8
    ...Schedules ...63 Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal Accounting Fees...

  • Page 9
    ..., develop and market technology solutions that allow applications to be delivered, supported, and shared on-demand with high performance, enhanced security, and improved total cost of ownership, or TCO. We market and license our products through multiple channels such as value-added resellers, or...

  • Page 10
    ... point for client-server applications, files and internal Websites, and quickly delivers on-demand access to users at a convenient location. Access Essentials both enables access and controls it, with wizard-driven installation and operation. • Application Networking • Citrix® NetScaler® Web...

  • Page 11
    ..., fast delivery of Windows desktops to any office worker over any network. Citrix XenDesktop will combine a powerful desktop delivery controller, based on Citrix Desktop Server™ with native ICA® protocol support, Xen virtualization infrastructure for hosting any number of virtual desktops in the...

  • Page 12
    ...communications between multiple Citrix Delivery Center products, called Citrix Workflow Studio. It will allow a simpler and faster integration of Citrix products as well as support third-party solutions. Online Services Online Services is focused on developing and marketing Web-based access, support...

  • Page 13
    ...cases, end-users can also choose from a Citrix-delivered fee-based support program ranging from one-time incident charges to an enterprise-level support agreement covering multiple sites and servers. In addition, we also provide free technical advice through online support systems, including our Web...

  • Page 14
    ... sells Web-based remote support systems to corporate help desks. We offer perpetual and term-based software licenses for our Delivery Systems and Virtualization and Management Systems products, along with annual subscriptions for software maintenance, technical support and online services. Perpetual...

  • Page 15
    ... us access to the source code for Microsoft Windows Server 2008, formerly code named "Longhorn," and in September 2007 we signed a source code license with Microsoft for the general release version of Windows Server 2008. The technology collaboration agreement has a five-year term which expires...

  • Page 16
    ... the usage of our Citrix Delivery Center products within our customer's IT organization. Our marketing department provides training, sales event support, sales collateral, advertising, direct mail and public relations coverage to our indirect channels to aid in market development and in attracting...

  • Page 17
    ... We control all purchasing, inventory, scheduling, order processing and accounting functions related to our operations. For our Application and Server Virtualization products, including our XenServer product, and our Application Performance Monitoring products, production, warehousing and shipping...

  • Page 18
    ...services that provide alternatives to our products and services, including those relating to application, server and desktop virtualization, Web application optimization, application performance monitoring, branch office application delivery, WAN optimization, SSL/VPN, gateways, on-demand assistance...

  • Page 19
    ... concerning new products, product development and offerings, Application Networking, Application Virtualization, Subscription Advantage, XenApp (formerly Presentation Server), NetScaler, XenServer and XenDesktop, Citrix Ready, WANscaler and Access Gateway, our Partner Network historical stock option...

  • Page 20
    ... product portfolio and customer base. We expect that the acquisition will move us into adjacent server and desktop virtualization markets that will allow us to extend our leadership in the broader Application Delivery Infrastructure market by adding key enabling technologies that make the end-to-end...

  • Page 21
    ..., Access Essentials, Password Manager and other future product offerings and upgrades, could be affected by Microsoft's licensing and pricing scheme for client devices, servers and applications. Further, the announcement of the release, and the actual release, of new Windows-based server operating...

  • Page 22
    ...For example, we cannot guarantee that our Citrix Delivery Center and Online Services products will achieve the broad market acceptance by our channel partners and entities with which we have a technology relationship, customers and prospective customers necessary to generate significant revenue. In...

  • Page 23
    ... a three-year source code license with Microsoft for the general release version of Windows Server 2008. These arrangements include a technology initiative for closer collaboration on terminal server functionality in future server operating systems, continued access to source code for key components...

  • Page 24
    ... Managers and Desktop Operations Managers, to address the multiple selling and buying opportunities presented by our expanded product lines. These and other account penetration efforts are part of our strategy to increase the usage of our Citrix Delivery Center products within our customer...

  • Page 25
    ... rate determined by our management to be consistent with industry discount rates and the risks inherent in our current business model. Due to uncertain market conditions and potential changes in our strategy and product portfolio, it is possible that the forecasts we use to support our goodwill...

  • Page 26
    ... re-evaluate our licensing programs and subscription renewal programs, including specific license models, delivery methods, and terms and conditions, to market our current and future products and services. We could implement new licensing programs and subscription renewal programs, including...

  • Page 27
    ... Networking, Server Virtualization and Application Performance Monitoring products. If our customers do not continue to purchase our Subscription Advantage product, our License Updates revenue and deferred revenue would decrease significantly and our results of operations and financial condition...

  • Page 28
    ... is made against us and we fail to develop or license a substitute technology or negotiate a suitable settlement arrangement, our business, results of operations, financial condition and cash flows could be materially adversely affected. • If open source software programmers, many of whom we do...

  • Page 29
    ... would be available from reliable alternative sources. In either event, our development expenses could be increased and our product release and upgrade schedules could be delayed. Moreover, if third party software programmers fail to adequately further develop and enhance the Xen hypervisor...

  • Page 30
    ... our Application Networking products, including our NetScaler products, Access Gateway products and WANScaler products are primarily performed by a third-party contract manufacturer. We do not typically have long-term supply agreements with our suppliers; and, in most cases, we purchase the products...

  • Page 31
    ... components from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers and adversely affect our business, financial condition or results of operations. Our products could contain errors that could delay the release of new products and...

  • Page 32
    ... internal technology systems and Website. Significant portions of our computer equipment, intellectual property resources and personnel, including critical resources dedicated to research and development and administrative support functions are presently located at our corporate headquarters in Fort...

  • Page 33
    ...non-cash charges, could have a material adverse effect on us. As described in the Explanatory Note to our Annual Report on Form 10-K for the year ended December 31, 2006, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in Note 2 to our consolidated...

  • Page 34
    ... could lose some or all of its value. Some of the factors that could significantly affect the market price of our stock include actual or anticipated variations in operating and financial results; analyst reports or recommendations; changes in interest rates; and other events or factors, many of...

  • Page 35
    ... Payment, a complex accounting standard that requires companies to expense the fair value of employee stock options and similar awards. The application of SFAS No. 123R requires significant judgment and the use of estimates, particularly surrounding stock price volatility, option forfeiture rates...

  • Page 36
    ... of office space in the United States, Canada and Latin America, which is comprised of 474,150 square feet related to our Americas segment, 187,127 square feet related to our Online Services division and 470,418 square feet relating to our corporate headquarters located in Fort Lauderdale, Florida...

  • Page 37
    ... Crouse v. Citrix, et al. (Case No. 07-16249-03) were filed in the Circuit Court for Broward County, Florida state court against certain of our current and former directors and officers, and against us as a nominal defendant. These actions assert, among other things, that certain stock option grants...

  • Page 38
    ... Mr. Sullivan. No other persons were nominated, nor received votes, for election as a director of the Company at the 2007 annual meeting. The other directors of the Company whose terms continued after the 2007 annual meeting were Murray J. Demo, Asiff S. Hirji, Thomas F. Bogan and Gary E. Morin. The...

  • Page 39
    ... following table (in thousands, except option price) provides information as of December 31, 2007 about the securities authorized for issuance to our employees and non-employee directors under our fixed stock-based compensation plans: (C) Number of securities remaining available for future issuance...

  • Page 40
    ... consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007. These amounts represent the cumulative average of the price paid per share for shares acquired in open market purchases and those received under our prepaid stock repurchase programs...

  • Page 41
    ... under our stock-based compensation programs, stock repurchases made under our stock repurchase program and shares issued in connection with our acquisitions. See Notes 3, 6 and 7 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31...

  • Page 42
    ..., supported and shared on-demand with high performance, enhanced security and improved total cost of ownership, or TCO. We market and license our products through multiple channels such as value-added resellers, channel distributors, system integrators, independent software vendors, our Websites and...

  • Page 43
    ...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...

  • Page 44
    ... all of the goodwill to our Americas segment. In-process Research and Development for Acquisitions The fair values used in determining the purchase price allocation for certain intangible assets for our acquisitions were based on estimated discounted future cash flows, royalty rates and historical...

  • Page 45
    ...the end-user with free enhancements and upgrades to the licensed product on a when and if available basis. Customers may also elect to purchase subscriptions for license updates, when not bundled with the initial product release or purchase, technical support, product training or consulting services...

  • Page 46
    .... We did not recognize compensation cost related to stock options granted to our 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 our consolidated statement of income prior to January 1, 2006...

  • Page 47
    ... and other third party agreements. In applying purchase accounting, we allocate a portion of purchase price of acquired companies to the core and product technology assets acquired based on their estimated fair values. We typically engage third party appraisal firms to assist us in determining the...

  • Page 48
    ..., development and marketing of technology solutions that deliver applications on-demand. Our revenues are derived from sales of our Citrix Delivery Center products and related technical services in the Americas, EMEA, and Asia-Pacific regions and from online services sold by our Online Services...

  • Page 49
    ..., development and marketing of technology solutions that deliver applications on-demand with high performance, enhanced security and improved total cost of ownership, or TCO. We market and license our products through multiple channels such as value added resellers, channel distributors, system...

  • Page 50
    ... our consolidated statements of income data and presentation of that data as a percentage of change from period-to-period. Year Ended December 31, 2007 2006 2005 (In thousands) 2007 2006 Compared to Compared to 2006 2005 Revenues: Product licenses ...License updates ...Online services ...Technical...

  • Page 51
    ... Licenses, License Updates, Online Services and Technical Services. Product Licenses primarily represent fees related to the licensing of the following products Our Application Virtualization products, including XenApp (formerly Presentation Server) and Access Essentials; Our Application Networking...

  • Page 52
    ... support related to the implementation of our Application Virtualization products. Deferred Revenue Deferred revenues are primarily comprised of License Updates revenue from our Subscription Advantage product, Online Services revenues from annual service agreements for our online services products...

  • Page 53
    ... product offerings. For detailed information on international revenues, please refer to Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007. Segment Revenues An analysis of our reportable segment net revenue is presented...

  • Page 54
    ... services related to our Application Virtualization products, increases in sales of our Online Services products, the full year impact and increased sales of support and educational services related to our Application Networking products and the impact of stock-based compensation expenses related...

  • Page 55
    ... and hire personnel. For more information regarding our acquisitions see, "Management's Discussion and Analysis of Financial Condition and Results of Operations-Overview" and Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December...

  • Page 56
    ...acquisitions see, "Management's Discussion and Analysis of Financial Condition and Results of Operations-Overview" and Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007. In-Process Research and Development 2007 Year Ended...

  • Page 57
    ... and proceeds received from employee stock-based compensation plans, partially offset by an increase in cash paid for acquisitions and capital expenditures. Interest income increased during 2006 as compared to 2005 due to higher interest rates earned on overall higher average cash, cash equivalent...

  • Page 58
    ... received deduction on dividend distributions of foreign earnings to a U.S. taxpayer, if certain conditions are met. During the second quarter of fiscal 2005, we completed our evaluation of the effects of the repatriation provision of the AJCA and our Chief Executive Officer and Board of Directors...

  • Page 59
    ... million of cash paid under our stock repurchase programs and $8.0 million paid on our debt. These cash outflows are partially offset by $118.4 million in proceeds received from employee stock compensation plans and $17.8 million related to excess tax benefits from the exercise of stock-based awards...

  • Page 60
    ... maintain individually significant accounts receivable balances from our distributors or customers, which are comprised of large business enterprises, governments and small and medium-sized businesses. If the financial condition of our distributors or customers deteriorates, our operating results...

  • Page 61
    ... program in order to lower the average cost to acquire shares. These programs include terms that require us to make up-front payments to the counterparty financial institution and result in the receipt of stock during or at the end of the term of the agreement or the receipt of either stock or cash...

  • Page 62
    ... to purchase inventory ordered before year-end. Total contractual obligations do not include agreements where our commitment is variable in nature or where cancellations without payment provisions exist and excludes $27.3 million of liabilities related to uncertain tax positions recorded in...

  • Page 63
    ..., capital expenditures were primarily related to application and infrastructure delivery to enable growth and enhance management reporting capabilities and leasehold improvements. During 2006, capital expenditures were primarily related to the implementation of certain systems to streamline business...

  • Page 64
    ...of the IRC (and, as applicable, similar excise taxes under state laws). As a result during 2007, we recorded $3.4 million, net of income tax benefits, in liabilities related to the anticipated payment by us of payroll and excise taxes on behalf of our employees for options that were exercised during...

  • Page 65
    ...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...

  • Page 66
    ... Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our President and Chief Executive Officer...

  • Page 67
    ... the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Citrix Systems, Inc. as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders' equity and comprehensive income, and cash flows for each of the...

  • Page 68
    ... to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company's fiscal year ended December 31, 2007. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required under this item is incorporated...

  • Page 69
    ... Schedules. The following consolidated financial statement schedule is included in Item 8: Valuation and Qualifying Accounts 3. List of Exhibits. Exhibit No. Description 2.1 (16) Agreement and Plan of Merger dated as of June 1, 2005 by and among Citrix Systems, Inc., NCAR Acquisition Corporation...

  • Page 70
    ... (10) Amended and Restated 2003 Stock Incentive Plan of Net6 Inc. (a subsidiary of Citrix Systems, Inc.) Microsoft Master Source Code Agreement by and between the Company and Microsoft dated December 16, 2004 License Form by and between the Company and Microsoft Corporation dated December 16, 2004...

  • Page 71
    ... Citrix Systems, Inc., Citrix Systems International GMBH, JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc. and certain other financial institutions 10.30 10.31* (21) NetScaler, Inc. 1997 Stock Plan 10.32 (31) Type # 3 License Form by and between the Company and Microsoft Corporation dated...

  • Page 72
    ... 30, 2006. (28) Incorporated by reference herein to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006. (29) Incorporated by reference herein to Exhibit 10.1 to the Company's Current Report on Form 8-K dated as of September 27, 2006. (30) Incorporated by...

  • Page 73
    ... offices at 175 W. Jackson Boulevard, Suite 900, Chicago, IL 60604 and 3 World Financial Center, Suite 400, New York, NY 10281-1022. (c) Financial Statement Schedule. The Company hereby files as part of this Annual Report on Form 10-K for the year ended December 31, 2007 the consolidated financial...

  • Page 74
    ... has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Fort Lauderdale, Florida on the 27th day of February, 2008. CITRIX SYSTEMS, INC By: /s/ MARK B. TEMPLETON Mark B. Templeton President and Chief Executive Officer POWER OF ATTORNEY AND...

  • Page 75
    ...and Financial Statement Schedule The following consolidated financial statements of Citrix Systems, Inc. are included in Item 8: Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets-December 31, 2007 and 2006 ...Consolidated Statements of Income-Years ended December...

  • Page 76
    Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of Citrix Systems, Inc. We have audited the accompanying consolidated balance sheets Citrix Systems, Inc. as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders'...

  • Page 77
    CITRIX SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par value) December 31, 2007 2006 Assets Current assets: Cash and cash equivalents ...Short-term investments ...Accounts receivable, net of allowances of $4,561 and $4,037 in 2007 and 2006, respectively ...Inventories, net ......

  • Page 78
    CITRIX SYSTEMS, INC. CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31, 2007 2006 2005 (In thousands, except per share information) Revenues: Product licenses ...License updates ...Online services ...Technical services ...Total net revenues ...Cost of revenues: Cost of product license ...

  • Page 79
    [This page intentionally left blank] F-5

  • Page 80
    ...issued under stock-based compensation plans ...Stock-based compensation expense ...Common stock issued under employee stock purchase plan ...Common stock issued related to acquisitions ...Tax benefit from employer stock plans ...Write-off of deferred compensation ...Stock repurchases ...Cash paid in...

  • Page 81
    Retained Earnings Accumulated Other Comprehensive Income (Loss) Deferred Compensation Common Stock in Treasury Shares Amount Total Stockholders' Equity Total Comprehensive Income $ 658,100 165,609 $7,489 11,485) - (467) - $(7,196) - - - - (14,220 (42,608 7,357) - - - - - $ (732,679 ...

  • Page 82
    ...expense ...In-process research and development ...Provision for doubtful accounts ...Provision for product returns ...Provision for inventory reserves ...Deferred income tax benefit ...Tax effect of stock-based compensation ...Excess tax benefit from exercise of stock options ...Other non-cash items...

  • Page 83
    ... supported, and shared on-demand with high performance, enhanced security, and improved total cost of ownership. The Company markets and licenses its products through multiple channels such as value-added resellers, channel distributors, system integrators, independent software vendors, its Websites...

  • Page 84
    ... Receivable The Company's accounts receivable are due primarily from value-added resellers, distributors and end customers. Collateral is not required. Product returns are provided for in the consolidated financial statements and have historically been within management's expectations. The Company...

  • Page 85
    ...the Company's goodwill at December 31, 2007 and December 31, 2006 was associated with the Americas and Online Services reportable segments. See Note 3 for acquisitions and Note 12 for segment information. Intangible Assets The Company has intangible assets with finite lives that are recorded at cost...

  • Page 86
    ...of customer relationships, trade names, covenants not to compete and patents. Amortization of product related intangible assets includes amortization of core and product technologies and patents and is reported as a cost of revenues in the accompanying consolidated statements of income. Amortization...

  • Page 87
    .... The Company also separately sells license updates and services, which may include product training, technical support and consulting services, as well as online services. The Company's software products are purchased by medium and small-sized businesses, with a minimal number of locations, and...

  • Page 88
    ... an executed product license agreement from the end-user. For technical support, product training and consulting services, the Company requires a purchase order and an executed agreement. For online services, the Company requires the customer or the reseller to electronically accept the terms of an...

  • Page 89
    CITRIX SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company licenses most of its software products bundled with a one year contract for license updates that provide the end-user with free enhancements and upgrades to the licensed product on a when and if available basis. Customers ...

  • Page 90
    ... entities, which give the Company the right to use certain software code in its products or in the development of future products in exchange for the payment of fixed fees or amounts based upon the sales of the related product. The licensing agreements generally have terms ranging from one to five...

  • Page 91
    CITRIX SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Advertising Costs The Company expenses advertising costs as incurred. The Company has advertising agreements with, and purchases advertising from, online media providers to advertise its online services products. The Company also has ...

  • Page 92
    ...-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 statements of income...

  • Page 93
    ... of cash paid of $50.3 million and acquisition related costs of approximately $1.4 million. As part of the Ardence Acquisition, the Company assumed approximately 0.1 million non-vested stock-based awards and approximately 0.1 million stock options upon the closing of the transaction. The sources of...

  • Page 94
    ..., 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 Citrix Delivery Center products which...

  • Page 95
    ... all of the goodwill to its Americas segment. In-process Research and Development The fair values used in determining the purchase price allocation for certain intangible assets for the Company's acquisitions were based on estimated discounted future cash flows, royalty rates and historical data...

  • Page 96
    ... SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. CASH AND INVESTMENTS Cash and cash equivalents and investments consist of the following: December 31, 2007 2006 (In thousands) Cash and cash equivalents: Cash ...Commercial paper ...Agency securities ...Money market funds ...Corporate...

  • Page 97
    ... close future auctions or refinance their obligations and their credit ratings deteriorate, the Company may be required to adjust the carrying value of these securities and recognize an impairment charge for an other-than-temporary decline in the fair values. Based on the Company's available cash...

  • Page 98
    ... options, at the exercise price of the related option. Non-vested stock awards may be granted for such consideration in cash, other property or services, or a combination thereof, as determined by the Company's Compensation Committee of its Board of Directors. All stock-based awards are exercisable...

  • Page 99
    CITRIX SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Under the 2005 ESPP, all full-time and certain part-time employees of the Company are eligible to purchase common stock of the Company twice per year at the end of a six month payment period (a "Payment Period"). During each Payment ...

  • Page 100
    ... been any significant changes in facts and circumstances that would affect its forfeiture rate quarterly. Estimated forfeitures are adjusted to actual forfeiture experience as needed. The Company recorded stock-based compensation costs, related deferred tax assets and tax benefits of $65.5 million...

  • Page 101
    ... terms of the Offer provided that current employees, who are not Section 16 officers of the Company, could elect to have discounted options amended to increase their exercise price per share to be equal to the fair market value used for financial reporting purposes and to receive a cash payment with...

  • Page 102
    ... was $11.71. The Company estimated the fair value of the stock options assumed in the 2007 Acquisitions on the date of grant using the Black-Scholes option-pricing model, applying the following assumptions: Expected volatility factor ...Approximate risk free interest rate ...Expected term (in years...

  • Page 103
    CITRIX SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS were achieved, and the shares were awarded. As part of the Company's 2005 Acquisitions, it assumed 25,179 shares of non-vested stock held by certain employees of the acquired companies. The non-vested stock assumed vested monthly based ...

  • Page 104
    ... SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS vest 33.33% on each anniversary subsequent to the date of the award. Each non-vested stock unit, upon vesting, will represent the right to receive one share of the Company's common stock. If the performance goals are not met, no compensation...

  • Page 105
    ... in order to lower the average cost to acquire shares. These programs include terms that require the Company to make up-front payments to the counterparty financial institution and result in the receipt of stock during or at the end of the term of the agreement or the receipt of either stock or cash...

  • Page 106
    ... mergers or acquisitions, make certain investments and loans, incur future indebtedness or liens, alter the Company's capital structure or sell stock or assets, subject to certain limits. 9. FAIR VALUES OF FINANCIAL INSTRUMENTS The carrying value of cash and cash equivalents, accounts receivable...

  • Page 107
    ... balance sheets. Consequently, payments made pursuant to the lease are recorded as operating expenses in the Company's consolidated statements of income. The Company entered into the synthetic lease in order to lease its headquarters properties under more favorable terms than under its previous...

  • Page 108
    ... actions to consolidate certain of its offices, including the exit of certain leased office space and the abandonment of certain leasehold improvements. During the third quarter of 2006, the Company entered into an agreement, which assigned the operating lease and all remaining liabilities related...

  • Page 109
    ... v. Citrix, et al. (Case No. 07-16249-03) were filed in the Circuit Court for Broward County, Florida state court against certain of the Company's current and former directors and officers, and against the Company as a nominal defendant. These actions assert, among other things, that certain stock...

  • Page 110
    ...has agreements with suppliers to purchase inventory and estimates that its non-cancelable obligations under these agreements for the fiscal year ended December 31, 2008 to be approximately $11.1 million. Liabilities Related to Internal Revenue Code Section 409A Because virtually all holders of stock...

  • Page 111
    CITRIX SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. INCOME TAXES The United States and foreign components of income before income taxes are as follows: 2007 2006 (In thousands) 2005 United States ...Foreign ...Total ...The components of the provision for income taxes are as follows:...

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    ... statutory federal rate is as follows: Year Ended December 31, 2007 2006 2005 Federal statutory taxes ...State income taxes, net of federal tax benefit ...Foreign operations ...Permanent differences ...Tax credits ...American Jobs Creation Act dividend ...Stock option compensation ...Change in FIN...

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    ... consisting of the design, development and marketing of technology solutions that allow applications to be delivered, supported and shared on-demand. The Company's revenues are derived from sales of its Citrix Delivery Center products and related technical services in the Americas, EMEA and Asia...

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    ...profit primarily consist of certain research and development costs associated with the Company's application delivery infrastructure products, stock-based compensation costs, amortization of core and product technology, amortization of other intangible assets, interest, corporate expenses and income...

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    ... and long-term investments and to a lesser extent goodwill associated with the Company's 2007 Acquisitions. See Note 3 for additional information regarding the Company's acquisitions. Export revenue represents shipments of finished goods and services from the United States to international customers...

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    ... its CODM also evaluates revenues by product groupings. Accordingly, the following table presents revenues for Product licenses, License updates and product related Technical services by product grouping for the Company's Application Virtualization products, Application Networking products and other...

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    ... swap instruments are recorded in earnings along with related designated changes in the value of the underlying investments. There were no material fair value hedges outstanding as of December 31, 2007 or 2006. There was no material ineffectiveness of the Company's interest rate swaps for the period...

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    ...was not a director of XenSource. The Company's acquisition of XenSource provided a return to all the partners of the Sevin Rosen Funds, including Mr. Dow. The allocation of XenSource purchase price to Mr. Dow through the general partner entities of the Sevin Rosen Funds related to the acquisition of...

  • Page 119
    ... SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS owns 278,564 shares of the Company's common stock. Mr. Dow did not attend the meeting at which the Company's Board approved the transaction and recused himself from the vote to approve the transaction. Consistent with the Company's policies...

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    SUPPLEMENTAL FINANCIAL INFORMATION QUARTERLY FINANCIAL INFORMATION (UNAUDITED) First Quarter Second Third Fourth Quarter Quarter Quarter Total Year (In thousands, except per share amounts) 2007 Net revenues ...Gross margin ...Income from operations ...Net income ...Basic earnings per common share ...

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    CITRIX SYSTEMS, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS Beginning of Period Charged Charged to Costs and to Other Expenses Accounts Deductions (In thousands) Balance at End of Period 2007 Deducted from asset accounts: Allowance for doubtful accounts ...Allowance for returns ...Allowance ...

  • Page 122
    ... of Citrix Systems, Inc.) Amended and Restated 2003 Stock Incentive Plan of Net6 Inc. (a subsidiary of Citrix Systems, Inc.) Microsoft Master Source Code Agreement by and between the Company and Microsoft dated December 16, 2004 License Form by and between the Company and Microsoft Corporation dated...

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    ... Term Loan Agreement dated as of August 9, 2005 by and among Citrix Systems, Inc., Citrix Systems International GMBH, JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc. and certain other financial institutions NetScaler, Inc. 1997 Stock Plan Type # 3 License Form by and between the Company...

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    ...& Young LLP Power of Attorney (Included in signature page) Rule 13a-14(a) / 15d-14(a) Certifications Rule 13a-14(a) / 15d-14(a) Certifications Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Indicates a management contract or any...

  • Page 125
    ... 30, 2006. (28) Incorporated by reference herein to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006. (29) Incorporated by reference herein to Exhibit 10.1 to the Company's Current Report on Form 8-K dated as of September 27, 2006. (30) Incorporated by...

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    ... the registrant's ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. By: /s/ MARK B. TEMPLETON b) Mark...

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    ... to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. By: /s/ DAVID J. HENSHALL David J. Henshall Chief Financial...

  • Page 128
    ... SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Citrix Systems, Inc. (the "Company") on Form 10-K for the period ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Mark B. Templeton, Chief Executive Officer of the...

  • Page 129
    ...16.34 INDEXED RETURNS Years Ending Base Period Dec '02 100 100 100 100 Company Name / Index Citrix Systems, Inc. ...companies with an SIC code of 7372. COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN $350 $300 $250 $200 $150 $100 $50 $0 | | | | | | 2002 2003 2004 2005 2006 2007 Citrix Systems...

  • Page 130
    ... Delivery Center, new products, product development and offerings, Application Networking, Application Virtualization, Subscription Advantage, XenApp (formerly Presentation Server), NetScaler, XenServer and XenDesktop, Citrix Ready, WANScaler and Access Gateway, our Partner Network historical stock...

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    ...Independent Registered Public Accountants Ernst & Young LLP 100 Northeast Third Avenue, Suite 700 Fort Lauderdale, FL 33301 Annual Meeting of Stockholders The Annual Meeting of Stockholders of Citrix Systems, Inc. will be held on May 30, 2008 at 2:00 p.m. 4988 Great America Parkway Santa Clara, CA...

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    Citrix Systems, Inc. 851 Cypress Creek Road Fort Lauderdale, FL 33309 USA J citrix.com