Citrix 2007 Annual Report Download - page 112

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CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SFAS No. 109, Accounting for Income Taxes, requires a valuation allowance to reduce the deferred tax
assets reported if it is not more likely than not that some portion or all of the deferred tax assets will be realized.
At December 31, 2007, the Company determined that no valuation allowance relating to deferred tax assets for
foreign tax credit carryovers was necessary.
During the years ended December 31, 2007, 2006, and 2005, the Company recognized net tax benefits
related to the exercise of employee stock options in the amount of $15.5 million, $40.6 million, and $35.0
million, respectively. These benefits were recorded to additional paid-in capital. At December 31, 2007, the
Company does not have any U.S. net operating loss carryforwards remaining that result from stock options. The
Company records the benefit of the net operating loss carryforwards generated from the exercise of employee
stock options in the period that the net operating loss carryforwards are utilized.
At December 31, 2007, the Company had $142.9 million of remaining net operating loss carryforwards
from acquisitions. The utilization of these net operating loss carryforwards are limited in any one year pursuant
to Internal Revenue Code Section 382 and begin to expire in 2020.
At December 31, 2007, the Company had research and development tax credit carryforwards of
approximately $7.0 million that expire beginning in 2021. Additionally, the Company has other general business
credits at December 31, 2007 of approximately $0.9 million that expire 2025.
A reconciliation of the Company’s effective tax rate to the statutory federal rate is as follows:
Year Ended December 31,
2007 2006 2005
Federal statutory taxes ................................... 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit ................. 4.1 3.8 4.4
Foreign operations ...................................... (21.4) (20.9) (19.5)
Permanent differences ................................... 3.0 5.4 2.2
Tax credits ............................................ (3.2) (2.0) (2.4)
American Jobs Creation Act dividend ....................... — — 6.9
Stock option compensation ............................... 1.4 3.4 —
Change in FIN No. 48 accrual ............................. (3.8) — —
Other ................................................. (0.1) — (0.4)
Change in valuation allowance ............................ (0.5) — —
14.5% 24.7% 26.2%
The Company and one or more of its subsidiaries is subject to United States, (“U.S.”) federal income taxes
in the U.S., as well as income taxes of multiple state and foreign jurisdictions. With few exceptions, the
Company is no longer subject to U.S. federal, state and local, or non- U.S. income tax examinations by tax
authorities for years prior to 2004. The Internal Revenue Service commenced an examination of the Company’s
U.S. federal income tax returns for 2004 and 2005 in the third quarter of 2006.
F-38