Citrix 2008 Annual Report Download

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Annual Report 2008

Table of contents

  • Page 1
    A n n u al Repo rt 2008

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

  • Page 3
    ... the year with an aggressive game plan: to transform IT into an on-demand service by centralizing the delivery of applications and desktops; to build on our strong web collaboration franchise; and to help customers transform static datacenters into dynamic "delivery centers." This drove many signi...

  • Page 4
    .... The cover of our 2006 Annual Report said "Over the next decade, delivering applications to people -wherever they work and play-will become a defining issue for IT. Why? Because applications are the language of business. Winners will be ï¬,uent with application delivery. Others will lag behind...

  • Page 5
    ... customer segments. Renewal rates for license updates continued at a healthy pace in the mid-80% range, reï¬,ecting the strategic value of XenApp and positive future commitment. For delivering Windows desktops as an IT service, we introduced XenDesktop-a ground breaking desktop delivery solution...

  • Page 6
    ...critical computing. SAP, which already uses Citrix XenApp to deliver their own SAP apps to more than 50,000 end users, selected XenServer to virtualize 500 servers by the middle of 2009. In fact, over 5,000 customers have already put XenServer to work. 4 Annual Report 2008 • Citrix Systems, Inc.

  • Page 7
    ..., we've also released a powerful new version of XenServer that's completely free. This radically changes the economics for millions of servers that are not yet virtualized, and makes it easy for customers to upgrade to the more advanced management features in Citrix Essentials when they're ready...

  • Page 8
    ...rst client-side 'bare metal' hypervisor technology, developed in collaboration with Intel. This partnership will result in a new Xen-based hypervisor that runs directly on a user's PC or laptop, allowing both personal and business desktops to run securely and independently. One industry analyst said...

  • Page 9
    ... vision. Citrix Delivery Center, a single, unifying family of our enterprise IT products, allows inï¬,exible, static datacenters to become dynamic, responsive delivery centers. Citrix Online services leverage the power of the web to enable boundary-less collaboration, communication and support. With...

  • Page 10
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 11
    ... No.) 851 West Cypress Creek Road Fort 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...

  • Page 12
    ... 11 Item 12 Item 13 Item 14 Part IV: Item 15 Exhibits, Financial Statement Schedules ...68 Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and...

  • Page 13
    ...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 VARs, channel distributors, system...

  • Page 14
    ... resources. Based on the high-performance Xen virtualization engine, XenServer combines comprehensive server virtualization capabilities with scalability, performance and ease-of-use. The product line ranges from Citrix XenServer Express Edition, a single-server solution available for free download...

  • Page 15
    ... for the needs of professionals and small offices, supports up to 50 PCs, rolls out secure, remote access for multiple users in minutes, and features an administration Website in which managers can add, suspend and delete users and run usage reports. GoToMyPC® Corporate is built for businesses...

  • Page 16
    ...We also offer GoToMeeting® Corporate which supports multiple organizer accounts, unlimited meetings with up to 25 attendees, robust reporting, additional customization options and advanced administrative capabilities. GoToAssist® is a leading, online, remote technical-support solution that enables...

  • Page 17
    ...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 18
    ... remote support systems to corporate help desks. We offer perpetual and term-based software licenses for our Citrix Delivery Centerâ„¢ products, along with annual subscriptions for software maintenance, technical support and online services. Perpetual licenses allow our customers to use the version...

  • Page 19
    ... trusted solutions designed to meet various business needs. Through an online catalog and our Citrix Ready branding program, customers can easily find and build a trusted application delivery infrastructure. For further information on the Citrix Partner Network see "-Sales, Marketing and Support...

  • Page 20
    ... 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 new customers. In addition, marketing for our Online Services division utilizes multiple venues...

  • Page 21
    ... financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2008. Operations We control all purchasing, inventory, scheduling, order processing and accounting functions related to our operations. For our Application and Server Virtualization products, production...

  • Page 22
    ... optimizing our server virtualization products for other Citrix products and third party products to offer end-to-end application delivery solutions. Application Networking-Our NetScaler or web application delivery products compete against other established competitors including, Cisco Systems, Inc...

  • Page 23
    ...Citrix Access Gateway™, Citrix App Receiver™, Citrix Delivery Center™, Citrix EasyCall™, Citrix Provisioning Server™, Citrix RepeaterTM, Citrix Subscription Advantage™, Citrix Synergy™, Branch Repeater™, GoToAssist®, GoToMeeting®, GoToMyPC®, GoToWebinar®, HDX™, ICA®, NetScaler...

  • Page 24
    ...Citrix Delivery Center, Desktop Virtualization, Server Virtualization, Application Virtualization, Subscription Advantage, XenApp, NetScaler, XenServer and XenDesktop, Citrix Ready, Citrix Repeater products and Access Gateway, our Partner Network, Product Licenses, cash and non-cash charges, product...

  • Page 25
    ... our sales force generally needs to explain and demonstrate the benefits of a large-scale deployment of our product to potential and existing customers prior to sale; our service personnel typically spend a significant amount of time assisting potential customers in their testing and evaluation of...

  • Page 26
    ..., 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 systems or products...

  • Page 27
    ...and development, and enhancements to our product portfolio and customer base. The acquisition of XenSource moved us into the adjacent server and desktop virtualization markets, which we believe will allow us to extend our leadership in the broader Application Delivery Infrastructure market by adding...

  • Page 28
    ... 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 services functionality in future server operating systems, continued access to source code for key components...

  • Page 29
    ... Managers, Desktop Operations Managers and Server 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...

  • Page 30
    ...royalties, as we develop, license or buy new technologies or enhancements to our existing products and services. These added costs and royalties could increase our cost of revenues and operating expenses and lower our gross margins. Furthermore, we expect that our effective tax rate may increase due...

  • Page 31
    ... of goodwill. Fair values are based on discounted cash flows using a discount 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...

  • Page 32
    ... 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 33
    ... 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 would be adversely affected. As our international...

  • Page 34
    ... For example, we derive a significant portion of our sales from licensing our packaged products under "shrink wrap" or "click-to-accept" license agreements that are not signed by licensees and electronic enterprise customer licensing arrangements that are delivered electronically, all of which could...

  • Page 35
    ... our obligations under the various applicable licenses for open source software that we use such that we have not triggered any of these conditions, there is little or no legal precedent governing the interpretation of many of the terms of these types of licenses. As a result, the potential impact...

  • Page 36
    ... or sell those products, our business, results of operations and financial condition could be materially adversely affected. If we lose access to third-party licenses, releases of our products could be delayed. We believe that we will continue to rely, in part, on third-party licenses to enhance and...

  • Page 37
    Issues arising during the upgrade of our enterprise resource planning system could affect our operating results and ability to manage our business effectively. We are in the process of upgrading our SAP enterprise resource planning, or ERP, computer system to enhance operating efficiencies and ...

  • Page 38
    ...or our inability to obtain products or 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...

  • Page 39
    ... be significant for breaches of payment card data. In the case of an actual breach of payment card data, we could incur potential fines at the discretion of the credit card companies. These fines could include penalties for all compromised account numbers, the costs of any additional fraud detection...

  • Page 40
    ... 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 Lauderdale, Florida...

  • Page 41
    ... market price of our stock, regardless of our actual operating performance. Changes or modifications in financial accounting standards related to business combinations may have a material adverse impact on our reported results of operations. In December 2007, the Financial Accounting Standards Board...

  • Page 42
    ...,433 square feet related to our Online Services division and 200,856 square feet relating to properties surrounding our corporate headquarters located in Fort Lauderdale, Florida. Included in this total square footage is 469,032 square feet of office space in California, and 273,720 square feet of...

  • Page 43
    ... in various litigation matters generally arising out of the normal course of business. Although it is difficult to predict the ultimate outcome of these cases, we believe that the ultimate outcome will not materially affect our business, financial position, results of operations or cash flows. ITEM...

  • Page 44
    ... program for the quarter ended December 31, 2008. Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate dollar value of Shares that may yet be Purchased under the Plans or Programs (in thousands) Total Number of Shares Purchased (1) Average Price Paid...

  • Page 45
    ... financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2008. (2) 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 46
    ... innovative and high-value solutions through Citrix Delivery Center is the key to meeting customer and partner needs and achieving our future growth. Further, from an operations standpoint, in order to operate more efficiently and to drive long-term changes in our cost model, on January 28, 2009...

  • Page 47
    ... operating costs that include reprioritizing internal projects, reducing contract workers and limiting travel spending. Summary of Results For the year ended December 31, 2008 compared to the year ended December 31, 2007, we delivered the following financial performance Product License revenue...

  • Page 48
    ... all of the issued and outstanding capital stock of two privately held companies, Ardence Delaware Inc., a leading provider of solutions that allow information technology administrators to set up and configure PCs, servers, and Web servers in real time from a centrally managed source, and XenSource...

  • Page 49
    ...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 50
    ... we receive customer payments. We license most of our products bundled with a one year contract for license updates that provide the end-user with free enhancements and unspecified upgrades to the licensed product on a when and if available basis. Customers may also elect to purchase subscriptions...

  • Page 51
    ... revenue until the delivery of the product to the end-user. Allowances for estimated product returns amounted to approximately $1.6 million and $1.7 million at December 31, 2008 and 2007, respectively. We have not reduced and have no current plans to reduce our prices for inventory currently held by...

  • Page 52
    ... with other companies that use different models, methods and assumptions. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. These characteristics are not present in our...

  • Page 53
    ... tax purposes. We operate in a single industry segment consisting of the design, 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...

  • Page 54
    ..., 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 55
    ...License Updates, Online Services and Technical Services. Product Licenses primarily represent fees related to the licensing of the following major products Our Application Virtualization products, including XenApp; Our Application Networking products, including NetScaler, Citrix Repeater and Access...

  • Page 56
    ... 12 to 24 months. Subscription Advantage is an annual renewable program that provides subscribers with automatic delivery of unspecified software upgrades, enhancements and maintenance releases when and if they become available during the term of the subscription. Online Services revenues consist...

  • Page 57
    ... 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 and Technical Services revenues related to our support services and consulting contracts. Deferred...

  • Page 58
    ... financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2008. We currently anticipate cost of product license revenues will decrease when comparing the first quarter of 2009 to the fourth quarter of 2008 consistent with Product License sales. Cost of product...

  • Page 59
    ... contract workers and limiting travel spending. Due to the Strategic Restructuring Program, we expect that in 2009, we will experience decreases in operating expenses across all operating areas including research and development, sales, marketing and support and general and administrative expenses...

  • Page 60
    ...generating activities, which is reflected as cost of service revenues rather than sales, marketing and services expense. For more information regarding our acquisitions see, "-Overview" and Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended...

  • Page 61
    ... useful lives in the net amount of $84.5 million. For more information regarding our acquisitions see, "-Overview" and Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2008. In-Process Research and Development 2008 Year Ended...

  • Page 62
    ...primarily from an increase in cash from operations and proceeds received from employee stock-based compensation plans, partially offset by an increase in cash paid for acquisitions and capital expenditures. For more information see "-Overview" and "-Liquidity and Capital Resources" and Note 3 to our...

  • Page 63
    .... The Internal Revenue Service commenced an examination of our U.S. federal income tax returns for 2004 and 2005 in the third quarter of 2006. We are required to estimate our income taxes in each of the jurisdictions in which we operate as part of the process of preparing our consolidated financial...

  • Page 64
    ....5 million paid for stock repurchases. This cash outflow was partially offset by $44.4 million in proceeds received from employee stock compensation plans and $5.6 million related to excess tax benefits from the exercise of stock-based awards. During 2007, we generated positive operating cash flows...

  • Page 65
    ... an increase in cash from operations and proceeds received from employee stock-based compensation plans, partially offset by an increase in cash paid for capital expenditures, licensing agreements and acquisitions, net of cash acquired. We generally invest our cash and cash equivalents in investment...

  • Page 66
    ..., whose underlying assets are generally student loans that are substantially backed by the federal government under the Federal Family Education Loan Program through investment accounts managed by UBS Financial Services, Inc., or UBS. The market for municipal auction rate securities in our portfolio...

  • Page 67
    ... in investment securities and cash equivalents pledged as collateral for specified obligations under our synthetic lease arrangement. We were a party to a synthetic lease arrangement for our corporate headquarters office space in Fort Lauderdale, Florida. The initial term of the synthetic lease...

  • Page 68
    ... for more than 10% of our accounts receivable. For more information regarding significant customers see Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2008. Credit Facility and Term Loan Effective on August 9, 2005, we...

  • Page 69
    ... with large financial institutions using general corporate funds 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 the agreement or the...

  • Page 70
    ... totaling approximately $61.0 million for our corporate headquarters office space in Fort Lauderdale, Florida. The synthetic lease represented a form of off-balance sheet financing under which an unrelated third-party lessor funded 100% of the costs of acquiring the property and leased the...

  • Page 71
    ...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, 2008. Exposure to Exchange Rates A substantial majority of our...

  • Page 72
    ...-for-sale and trading are subject to interest rate risk. The modeling technique used measures the change in fair values arising from an immediate hypothetical shift in market interest rates and assumes that ending fair values include principal plus accrued interest and reinvestment income. If...

  • Page 73
    ... and communicated to our management, including our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Control Over Financial Reporting During the quarter ended...

  • Page 74
    ... and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2008 of Citrix Systems, Inc. and our report dated February 24, 2009 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Certified Public Accountants Fort Lauderdale, Florida February 24...

  • Page 75
    ..., officers and employees permits our officers, directors and certain other persons to enter into trading plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. We have been advised that David Friedman, our General Counsel, Senior Vice President, Human Resources...

  • Page 76
    PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required under this item is incorporated herein by reference to the Company's definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange ...

  • Page 77
    ... to the Company's definitive proxy statement pursuant 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, 2008. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES...

  • Page 78
    ... financial statement schedule is included in Item 8: Valuation and Qualifying Accounts 3. List of Exhibits. Exhibit No. Description 2.1 (13) 2.2 (14) Agreement and Plan of Merger dated as of June 1, 2005 by and among Citrix Systems, Inc., NCAR Acquisition Corporation, NCAR LLC, NetScaler...

  • Page 79
    ... 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...

  • Page 80
    ... Agreement, dated as of September 19, 2008, among Citrix Systems, Inc., Citrix International GmbH, JPMorgan Chase Bank, N.A., JP Morgan Securities, Inc. and certain other financial institutions List of Subsidiaries Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm Power...

  • Page 81
    ...30, 2006. Incorporated by reference herein to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 2006. Incorporated by reference herein to Exhibit 10.1 to the Company's Current Report on Form 8-K dated as of October 19, 2007. Incorporated by reference herein to...

  • Page 82
    ... at the Commission's regional 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, 2008...

  • Page 83
    ... duly authorized, in Fort Lauderdale, Florida on the 27th day of February, 2009. CITRIX SYSTEMS, INC By: /s/ MARK B. TEMPLETON Mark B. Templeton President and Chief Executive Officer POWER OF ATTORNEY AND SIGNATURES We, the undersigned officers and directors of Citrix Systems, Inc., hereby...

  • Page 84
    ...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, 2008 and 2007 ...Consolidated Statements of Income-Years ended December...

  • Page 85
    ..., Citrix Systems, Inc. changed its method of accounting for uncertain tax positions as of January, 1, 2007. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Citrix Systems, Inc.'s internal control over financial reporting as...

  • Page 86
    ... (In thousands, except par value) Assets Current assets: Cash and cash equivalents ...Short-term investments - available-for-sale ...Accounts receivable, net of allowances of $8,702 and $4,561 in 2008 and 2007, respectively ...Inventories, net ...Prepaid expenses and other current assets ...Current...

  • Page 87
    ... cost of net revenues ...Gross margin ...Operating expenses: Research and development ...Sales, marketing and services ...General and administrative ...Amortization of other intangible assets ...In-process research and development ...Total operating expenses ...Income from operations ...Interest...

  • Page 88
    ... 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...

  • Page 89
    Retained Earnings Accumulated Other Comprehensive Income (Loss) Deferred Compensation Common Stock in Treasury Shares Amount Total Stockholders' Equity Total Comprehensive Income $823,709 182,997 $ (4,463 8,406 237 - $(21,417 21,417 - - - - - - (49,965 9,501) - 1 - - - $ (907,496 294,...

  • Page 90
    ...research and development ...Loss (gain) on available-for-sale investments ...Benefit related to adjustment of payroll taxes ...Provision for doubtful accounts ...Provision for product returns ...Provision for inventory reserves ...Deferred income tax benefit ...Tax effect of stock-based compensation...

  • Page 91
    ... solutions that allow applications to be delivered, 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...

  • Page 92
    CITRIX SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accounts 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 ...

  • Page 93
    ... subject to an annual impairment test. There was no impairment of goodwill as a result of the annual impairment tests completed during the fourth quarters of 2008 and 2007. Excluding goodwill, the Company has no intangible assets deemed to have indefinite lives. See Note 3 for acquisitions and Note...

  • Page 94
    .... 98-1, the Company capitalizes external direct costs of materials and services used in the project and internal costs such as payroll and benefits of those employees directly associated with the development of internal use software and software developed related to its online service offerings. The...

  • Page 95
    ... and 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...

  • Page 96
    ... fees related to the licensing of the Company's software and appliance products. These revenues are reflected net of sales allowances, cooperative advertising agreements and provisions for stock balancing return rights. License Updates consist of fees related to the Subscription Advantage program...

  • Page 97
    ... 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 98
    ... with any single financial institution. 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 cooperative advertising...

  • Page 99
    ...the Company's results of operations, financial condition and cash flows. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in...

  • Page 100
    CITRIX SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accounting for Stock-Based Compensation The Company has various stock-based compensation plans for its employees and outside directors. Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. ...

  • Page 101
    ... PCs, servers, and Web servers in real time from a centrally managed source, and XenSource, Inc., a privately held leader in enterprise-grade virtual infrastructure solutions (the "2007 Acquisitions"). The 2007 Acquisitions positioned the Company in adjacent server and desktop virtualization markets...

  • Page 102
    ..., 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 total consideration for the 2006 Acquisitions was $68.0 million comprised of cash paid...

  • Page 103
    ... Company's unrealized loss in Corporate Bonds is primarily comprised of an investment issued by AIG Matched Funding Corporation (the "AIG Capped Floater") with a face value of $50.0 million, which matures in September 2011. American International Group, Inc. ("AIG"), as the issuer's parent, provided...

  • Page 104
    ... assets are generally student loans that are substantially backed by the federal government under the Federal Family Education Loan Program through investment accounts managed by UBS Financial Services, Inc. ("UBS"). The market for municipal auction rate securities in the Company's portfolio began...

  • Page 105
    ... either directly or indirectly; and Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and the majority of the Company...

  • Page 106
    ... 62,003 66,436 $191,383 7. EMPLOYEE STOCK-BASED COMPENSATION AND BENEFIT PLANS Plans The Company's stock-based compensation program is a broad based, long-term retention program that is intended to attract and reward talented employees and align stockholder and employee interests. As of December 31...

  • Page 107
    ... thereof, as determined by the Company's Compensation Committee of its Board of Directors. All stock-based awards are exercisable upon vesting. The Company's policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight line basis over...

  • Page 108
    CITRIX SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The detail of the total stock-based compensation recognized by income statement classification is as follows (in thousands): Income Statement Classifications 2008 2007 2006 Cost of services revenues ...Research and development ...Sales...

  • Page 109
    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 ...

  • Page 110
    ... goals related to building the executive management team. The performance goals were met during 2007 and the award vests based on service at a rate of 33.33% on each anniversary date. The Company also awards non-vested stock units to its non-employee directors annually. These units vest monthly in...

  • Page 111
    ... using general corporate funds 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...

  • Page 112
    CITRIX SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS price of $30.77. In addition, during the year the Company made up-front payments of $114.4 million to certain financial institutions related to structured stock repurchase agreements. Preferred Stock The Company is authorized to issue ...

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    ... totaling approximately $61.0 million for its corporate headquarters office space in Fort Lauderdale, Florida. The synthetic lease represented a form of off-balance sheet financing under which an unrelated third-party lessor funded 100% of the costs of acquiring the property and leased the...

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    ...insurance, prompt delivery of financial statements to the administrative agent of the lessor and prompt payment of taxes associated with the property. Following the termination of the synthetic lease, the Company ceased to be bound by these covenants. Office Leases The Company has an operating lease...

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    ... with suppliers to purchase inventory and estimates its non-cancelable obligations under these agreements for the fiscal year ended December 31, 2009 to be approximately $6.3 million. Liabilities Related to Payroll Taxes In the fourth quarter of 2008, the Company recorded a reduction to operating...

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    ...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 2018. At December 31, 2008, the Company had research and development tax credit carryforwards...

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    ... taxes ...35.0% 35.0% 35.0% State income taxes, net of federal tax benefit ...4.3 4.1 3.8 Foreign operations ...(30.1) (21.4) (20.9) Permanent differences ...(0.2) 3.0 5.4 Tax credits ...(5.3) (3.2) (2.0) Stock option compensation ...4.9 1.4 3.4 Change in accruals for uncertain tax positions...

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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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    ...) (193,873) Consolidated income before income taxes ...(1) $ 196,923 $ 250,908 $ 243,081 Represents expenses presented to management only on a consolidated basis and not allocated to the geographic operating segments. Identifiable assets classified by the Company's reportable segments are shown...

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    ... 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 products and Online services revenues for the Online Services division's products, for the years ended...

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    ...protect against fluctuations in operating expenses and the volatility of future cash flows caused by changes in currency exchange rates, the Company has established a program that uses foreign exchange forward contracts to hedge its exposure to these potential changes. The terms of these instruments...

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    CITRIX SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. RECENT ACCOUNTING PRONOUNCEMENTS In December 2007, the FASB issued SFAS No. 141R, Business Combinations, SFAS No. 141R will require, among other things, the expensing of direct transaction costs, including deal costs and ...

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    CITRIX SYSTEMS, INC. SUPPLEMENTAL FINANCIAL INFORMATION QUARTERLY FINANCIAL INFORMATION (UNAUDITED) First Quarter Second Third Fourth Quarter Quarter Quarter Total Year (In thousands, except per share amounts) 2008 Net revenues ...Gross margin ...Income from operations ...Net income ...Basic ...

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    CITRIX SYSTEMS, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS Beginning of Period Charged to Costs and Expenses Charged to Other Accounts Deductions (In thousands) Balance at End of Period 2008 Deducted from asset accounts: Allowance for doubtful accounts ...Allowance for returns ...Valuation ...

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    ... 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 (with...

  • Page 126
    ... 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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    ... Agreement, dated as of September 19, 2008, among Citrix Systems, Inc., Citrix International GmbH, JPMorgan Chase Bank, N.A., JP Morgan Securities, Inc. and certain other financial institutions List of Subsidiaries Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm Power...

  • Page 128
    ...) Incorporated by reference herein to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 2006. (29) Incorporated by reference herein to Exhibit 10.1 to the Company's Current Report on Form 8-K dated as of October 19, 2007. (30) Incorporated by reference herein...

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    ... (42) Incorporated by reference herein to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008. (43) Incorporated by reference herein to Exhibit A to the Company's Definitive Proxy Statement filed with the Commission on April 29, 2008. (44) Incorporated by...

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    ... 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 B. Templeton President and Chief Executive Officer (Principal Executive Officer) Date: February 27, 2009

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    ... 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 Officer (Principal Financial Officer) b) Date: February 27, 2009

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    ... OF 2002 In connection with the Annual Report of Citrix Systems, Inc. (the "Company") on Form 10-K for the period ending December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Mark B. Templeton, Chief Executive Officer of the Company, and David...

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    .... Three Months Ended December 31, 2008 GAAP operating margin Add: stock-based compensation Add: amortization of product related intangible assets Add: amortization of other intangible assets Add: in-process research and development Less: payroll tax benefit related to stock option investigation Non...

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    ... and understands that some investors and financial analysts find this information helpful in analyzing the Company's gross margins, operating expenses and net income and comparing the Company's financial performance to that of its peer companies and competitors. Management excludes the expenses...

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    ... Delivery Center, Desktop Virtualization, Server Virtualization, Application Virtualization, Subscription Advantage, XenApp, NetScaler, XenServer and XenDesktop, Citrix Ready, Citrix Essentials, Citrix Repeater products and Access Gateway, our Partner Network, Product Licenses, cash and non-cash...

  • Page 136
    ... To Shareholders (Includes reinvestment of dividends) Annual Return Percentage Years Ending Company Name/Index Citrix Systems, Inc. S&P 500 Index Nasdaq Index Peer Group Dec 04 15.60 10.88 8.41 11.29 Dec 05 17.46 4.91 2.20 -1.84 Dec 06 -5.85 15.79 10.26 15.86 ...

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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 Shareholders of Citrix Systems, Inc. will be held on May 29, 2009 at 9:00 a.m., PST 4988 Great America Parkway Santa Clara...

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