Citrix 2007 Annual Report Download - page 64

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During 2002 and 2001, we took actions to consolidate certain of our offices, including the exit of certain
leased office space and the abandonment of certain leasehold improvements. During the third quarter of 2006, we
entered into an agreement, which assigned the operating lease and all remaining liability related to one of the
closed offices to a third party. Lease obligations related to the remaining existing operating lease continue to
2018 with a total remaining obligation at December 31, 2007 of approximately $8.3 million, of which $1.3
million was accrued as of December 31, 2007, and is reflected in accrued expenses and other liabilities in our
consolidated financial statements. In calculating this accrual, we made estimates, based on market information,
including the estimated vacancy periods and sublease rates and opportunities. We periodically re-evaluate our
estimates; and if actual circumstances prove to be materially worse than management has estimated, the total
charges for these vacant facilities could be significantly higher.
Because virtually all holders of stock options granted by us were not involved in or aware of the incorrect
pricing of certain options, we have taken and intend to take further actions to address certain adverse tax
consequences that may be incurred by the holders of such incorrectly priced options. The primary adverse tax
consequence is that the re-measured options vesting after December 31, 2004 subject the option holder to a
penalty tax under Section 409A 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 open tax
years under the related statutes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about our market risk includes “forward-looking statements” that involve risks
and uncertainties. Actual results could differ materially from those projected in the forward-looking statements.
The analysis methods we used to assess and mitigate risk discussed below should not be considered projections
of future events, gains or losses.
We are exposed to financial market risks, including changes in foreign currency exchange rates and interest
rates that could adversely affect our results of operations or financial condition. To mitigate foreign currency
risk, we utilize derivative financial instruments. The counterparties to our derivative instruments are major
financial institutions. All of the potential changes noted below are based on sensitivity analyses performed on our
financial position as of December 31, 2007. Actual results could differ materially.
Discussions of our accounting policies for derivatives and hedging activities are included in Notes 2 and 13
to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended
December 31, 2007.
Exposure to Exchange Rates
A substantial majority of our overseas expense and capital purchasing activities are transacted in local
currencies, including Euros, British pounds sterling, Australian dollars, Swiss francs, Indian rupees, Japanese
yen, Singapore dollars, Hong Kong dollars, Canadian dollars, Danish krone and Swedish krona. To reduce our
exposure to a reduction in U.S. dollar value and the volatility of future cash flows caused by changes in currency
exchange rates, we have established a hedging program. We use foreign currency forward contracts to hedge
certain forecasted foreign currency expenditures. Our hedging program significantly reduces, but does not
entirely eliminate, the impact of currency exchange rate movements.
At December 31, 2007 and 2006, we had in place foreign currency forward sale contracts with a notional
amount of $104.3 million and $56.0 million, respectively, and foreign currency forward purchase contracts with a
notional amount of $311.1 million and $220.0 million, respectively. At December 31, 2007, these contracts had
an aggregate fair asset value of $5.8 million and at December 31, 2006, these contracts had an aggregate fair
liability value of $4.6 million. Based on a hypothetical 10% appreciation of the U.S. dollar from December 31,
58