Citrix 2007 Annual Report Download - page 102

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CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Option Valuation Information under SFAS No. 123R
The Company estimates the fair value of each stock option on the date of grant using the Black-Scholes
option-pricing model, applying the following assumptions and amortizing that value to expense over the option’s
vesting period using the ratable approach:
Stock Options granted during
2007 2006
Expected volatility factor ........................................... 0.33 - 0.37 0.30 - 0.37
Approximate risk free interest rate .................................... 3.6% - 4.7% 4.5% - 4.9%
Expected term (in years) ............................................ 3.37 - 3.38 3.00 - 3.34
Expected dividend yield ............................................ 0% 0%
For purposes of determining the expected volatility factor, the Company considered implied volatility in
two-year market-traded options of the Company’s common stock based on third party volatility quotes in
accordance with the provisions of SAB No. 107. The Company’s decision to use implied volatility was based
upon the availability of actively traded options on the Company’s common stock and its assessment that implied
volatility is more representative of future stock price trends than historical volatility. 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 on its options. The expected term of the Company’s stock options
was based on the historical employee exercise patterns. The Company also analyzed its historical pattern of
option exercises based on certain demographic characteristics and determined that there were no meaningful
differences in option exercise activity based on the demographic characteristics. The Company does not intend to
pay dividends on its common stock in the foreseeable future. Accordingly, the Company used a dividend yield of
zero in its option pricing model. The weighted average fair value of stock options granted during 2007 from the
2005 Plan 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 ................................. 0.37
Approximate risk free interest rate .......................... 3.8% - 3.9%
Expected term (in years) .................................. 2.00 - 2.75
Expected dividend yield .................................. 0%
The expected term of the Company’s stock options was based on the historical employee exercise patterns
of discounted options. For purposes of determining the expected volatility factor, the Company considered
implied volatility in two-year market-traded options of the Company’s common stock based on third party
volatility quotes, which is consistent with the expected term for these options. 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 on its options. The weighted average fair value of stock options
assumed in conjunction with the 2007 Acquisitions was $35.52.
Non-vested Stock
Shares of non-vested stock assumed in conjunction with the Company’s XenSource Acquisition vest 50%
on the first anniversary of the grant date and 50% on the second anniversary of the grant date based on service. In
2006, the Company awarded shares of non-vested stock pursuant to the 2005 Plan to a certain senior member of
management that vested upon achieving certain employee retention goals in 2007 and 2006. The retention goals
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