Citrix 2009 Annual Report Download - page 134

Pursuant to the requirements of Regulation G, Citrix Systems, Inc. (the “Company”) has provided a reconciliation of each non-
GAAP financial measure used in this 2009 Annual Report to the most directly comparable GAAP financial measure. These measures
differ from GAAP in that they exclude amortization primarily related to business combinations, the write-off of in-process research
and development, stock-based compensation expenses, charges associated with the Company’s 2009 restructuring program, the
non-cash benefit related to the adjustment of payroll taxes accrued in connection with the Company’s voluntary, independent
investigation of historical stock option granting practices that was concluded in 2007 and the related tax effect of those items. The
Company’s basis for these adjustments is described below.
Management uses these non-GAAP measures for internal reporting and forecasting purposes, when publicly providing its business
outlook, to evaluate the Company’s performance and to evaluate and compensate the Company’s executives. The Company has
provided these non-GAAP financial measures in addition to GAAP financial results because it believes that these non-GAAP financial
measures provide useful information to certain investors and financial analysts for comparison across accounting periods not
influenced by certain non-cash items that are not used by management when evaluating the Company’s historical and prospective
financial performance. In addition, the Company has historically provided this or similar information 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 typically excludes the amounts described above when evaluating the Company’s operating performance and
believes that the resulting non-GAAP measures are useful to investors and financial analysts in assessing the Company’s operating
performance due to the following factors:
The Company does not acquire businesses on a predictable cycle. The Company, therefore, believes that the presentation
of non-GAAP measures that adjust for the impact of amortization, in-process research and development and certain
stock-based compensation expenses and the related tax effects that are primarily related to business combinations,
provide investors and financial analysts with a consistent basis for comparison across accounting periods; and, therefore,
are useful to investors and financial analysts in helping them to better understand the Company’s operating results and
underlying operational trends.
Amortization costs and the related tax effects are fixed at the time of an acquisition, are then amortized over a period of
several years after the acquisition and generally cannot be changed or influenced by management after the acquisition.
Although stock-based compensation is an important aspect of the compensation of the Company’s employees and
executives, stock-based compensation expense is generally fixed at the time of grant, then amortized over a period
of several years after the grant of the stock-based instrument, and generally cannot be changed or influenced by
management after the grant.
The charges incurred in conjunction with the Company’s restructuring program, which relate to reductions in headcount
and exit costs associated with consolidating certain facilities, are not anticipated to be ongoing costs; and, thus, are
outside of the normal operations of the Company’s business. The Company, therefore, believes that the exclusion of
these charges will better help investors and financial analysts understand the Company’s operating results and
underlying operational trends as compared to prior periods.
The non-cash benefit related to payroll taxes originally arose out of the Company’s voluntary, independent investigation
of its historical stock option granting practices but was a benefit in the fourth quarter of 2008, the exclusion of which
will better help investors and financial analysts understand the Company’s operating results and underlying operational
trends as compared to prior periods.
These non-GAAP financial measures are not prepared in accordance with accounting principles generally accepted in the United
States (“GAAP”) and may differ from the non-GAAP information used by other companies. There are significant limitations
associated with the use of non-GAAP financial measures. The additional non-GAAP financial information presented here should be
considered in conjunction with, and not as a substitute for or superior to, the financial information presented in accordance with
GAAP (such as net income and earnings per share) and should not be considered measures of the Company’s liquidity. Furthermore,
the Company in the future may exclude amortization and in-process research and development primarily related to new business
combinations, additional charges related to its restructuring program and the related tax effects from financial measures that it
releases, and the Company expects to continue to incur stock-based compensation expenses.
Twelve Months Ended December 31,
2009 2008
GAAP operating margin 11.1% 10.7%
Add: stock-based compensation 6.9% 7.9%
Add: amortization product related intangible assets 3.0% 3.0%
Add: amortization of other intangible assets 1.3% 1.4%
Add: restructuring charges 1.6% -
Add: in-process research and development - 0.1%
Less: payroll tax benefit related to stock option
investigation
-(0.4)%
Non-GAAP operating margin 23.9% 22.7%
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