Citrix 2007 Annual Report Download - page 95

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CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$43.7 million to goodwill, $17.3 million to core and product technology and $3.6 million to other intangible
assets. The Company assigned all of the goodwill to its Americas segment.
2005 Acquisitions
During 2005, the Company acquired all of the issued and outstanding capital stock of two privately held
companies, NetScaler, Inc. and Teros, Inc. (the “2005 Acquisitions”) for a total of $172.8 million in cash,
6.6 million shares of the Company’s common stock valued at $154.8 million and estimated direct transaction
costs of $6.2 million. The Company also assumed $20.6 million in non-vested stock-based compensation upon
the closing of the NetScaler transaction that was accounted for in accordance with FASB Interpretation No. 44,
Accounting for Certain Transactions Involving Stock Compensation (an Interpretation of APB Opinion No. 25)
and was recorded as deferred compensation in the accompanying 2005 consolidated balance sheet.The assumed
awards had an excess of fair value over intrinsic value of $0.5 million, which is reflected in the total
consideration for the transaction. In addition, in 2006, the Company received an immaterial number of shares
related to non-tendering payees of the 2005 Acquisitions. The 2005 Acquisitions further extend the Company’s
Citrix Delivery Center products, which are designed to offer comprehensive solutions across all dimensions of
application delivery. Revenues from the acquired products are primarily included in the Company’s Product
License revenue and Technical Services revenue in the accompanying consolidated statements of income. In
connection with the 2005 Acquisitions, the Company allocated $230.0 million to goodwill, $40.2 million to core
technology and $35.8 million to other intangible assets. The Company assigned 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,
among other information. Purchased in-process research and development (“IPR&D”) of $9.8 million, $1.0
million and $7.0 million was expensed immediately upon the closing of the 2007 Acquisitions, 2006 Acquisitions
and 2005 Acquisitions, respectively, in accordance with FASB Interpretation No. 4, Applicability of FASB
Statement No. 2 to Business Combinations Accounted for by the Purchase Method, due to the fact that it
pertained to technology that was not currently technologically feasible, meaning it had not reached the working
model stage, did not contain all of the major functions planned for the product, was not ready for initial customer
testing and had no alternative future use. The fair value assigned to IPR&D was determined using the income
approach, which includes estimating the revenue and expenses associated with a project’s sales cycle and by
estimating the amount of after-tax cash flows attributable to the projects. The future cash flows were discounted
to present value utilizing an appropriate risk-adjusted rate of return, which ranged from 19% to 36%. The rate of
return included a factor that takes into account the uncertainty surrounding the successful development of the
IPR&D.
F-21