Statement Of Financial Position
Statement Of Financial Position Classified (USD $) | ||
In Thousands | Jun. 30, 2009
| Dec. 31, 2008
|
Current assets: | ||
Cash and cash equivalents | $294,210 | $326,121 |
Short-term investments-available-for-sale | 285,465 | 249,175 |
Accounts receivable, net of allowances of $7,168 and $8,702 at June 30, 2009 and December 31, 2008, respectively | 224,184 | 231,296 |
Inventories, net | 9,864 | 11,226 |
Prepaid expenses and other current assets | 104,414 | 84,530 |
Current portion of deferred tax assets, net | 34,252 | 37,792 |
Total current assets | 952,389 | 940,140 |
Long-term investments-trading | 39,318 | 37,919 |
Long-term investments-available-for-sale | 368,351 | 237,666 |
Property and equipment, net | 254,025 | 254,334 |
Goodwill | 899,618 | 904,504 |
Other intangible assets, net | 242,203 | 270,222 |
Long-term portion of deferred tax assets, net | 15,137 | 12,936 |
Other assets | 45,227 | 36,585 |
Assets, Total | 2,816,268 | 2,694,306 |
Current liabilities: | ||
Accounts payable | 42,586 | 46,672 |
Accrued expenses and other current liabilities | 186,668 | 195,550 |
Current portion of deferred revenues | 490,276 | 488,695 |
Total current liabilities | 719,530 | 730,917 |
Long-term portion of deferred revenues | 47,774 | 44,780 |
Other liabilities | 1,126 | 744 |
Commitments and contingencies | 0 | 0 |
Stockholders' equity: | ||
Preferred stock at $.01 par value: 5,000 shares authorized, none issued and outstanding | 0 | 0 |
Common stock at $.001 par value: 1,000,000 shares authorized; 260,379 and 255,755 shares issued and outstanding at June 30, 2009 and December 31, 2008, respectively | 260 | 256 |
Additional paid-in capital | 2,440,444 | 2,305,187 |
Retained earnings | 1,436,513 | 1,387,067 |
Accumulated other comprehensive loss | (5,592) | (15,852) |
Stockholders Equity Subtotal Before Treasury Stock, Total | 3,871,625 | 3,676,658 |
Less- common stock in treasury, at cost (78,121 and 75,699 shares at June 30, 2009 and December 31, 2008, respectively) | (1,823,787) | (1,758,793) |
Total stockholders' equity | 2,047,838 | 1,917,865 |
Liabilities and Stockholders' Equity, Total | $2,816,268 | $2,694,306 |
1_Statement Of Financial Positi
Statement Of Financial Position Classified (Parenthetical) (USD $) | ||
In Thousands, except Per Share data | Jun. 30, 2009
| Dec. 31, 2008
|
Accounts receivable, allowances | $7,168 | $8,702 |
Preferred stock, par value | 0.01 | 0.01 |
Preferred stock, shares authorized | 5,000 | 5,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | 0.001 | 0.001 |
Common stock, shares authorized | 1,000,000 | 1,000,000 |
Common stock, shares issued | 260,379 | 255,755 |
Common stock, shares outstanding | 260,379 | 255,755 |
common stock in treasury, shares | 78,121 | 75,699 |
Statement Of Income
Statement Of Income (USD $) | ||||
In Thousands, except Per Share data | 3 Months Ended
Jun. 30, 2009 | 3 Months Ended
Jun. 30, 2008 | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
Revenues: | ||||
Product licenses | $129,692 | $153,458 | $241,592 | $300,418 |
License updates | 149,334 | 137,279 | 297,532 | 271,213 |
Online services | 75,350 | 63,687 | 147,330 | 125,672 |
Technical services | 38,452 | 37,306 | 75,432 | 71,461 |
Total net revenues | 392,828 | 391,730 | 761,886 | 768,764 |
Cost of net revenues: | ||||
Cost of product license revenues | 11,506 | 12,781 | 23,000 | 23,922 |
Cost of services revenues | 21,132 | 20,100 | 42,755 | 38,797 |
Amortization of product related intangible assets | 11,423 | 12,976 | 23,522 | 23,569 |
Total cost of net revenues | 44,061 | 45,857 | 89,277 | 86,288 |
Gross margin | 348,767 | 345,873 | 672,609 | 682,476 |
Operating expenses: | ||||
Research and development | 75,160 | 73,965 | 146,197 | 145,495 |
Sales, marketing and services | 167,130 | 169,244 | 330,719 | 335,689 |
General and administrative | 59,552 | 68,067 | 118,041 | 130,704 |
Restructuring | 2,036 | 0 | 22,766 | 0 |
Amortization of other intangibles | 5,163 | 5,707 | 10,157 | 11,407 |
Total operating expenses | 309,041 | 316,983 | 627,880 | 623,295 |
Income from operations | 39,726 | 28,890 | 44,729 | 59,181 |
Interest income | 4,393 | 7,599 | 7,108 | 17,916 |
Interest expense | (34) | (55) | (158) | (110) |
Other income (expense), net | 710 | (1,222) | (712) | (3,013) |
Income before income taxes | 44,795 | 35,212 | 50,967 | 73,974 |
Income taxes | 2,276 | 563 | 1,521 | 4,947 |
Net income | $42,519 | $34,649 | $49,446 | $69,027 |
Earnings per share: | ||||
Basic | 0.23 | 0.19 | 0.27 | 0.37 |
Diluted | 0.23 | 0.18 | 0.27 | 0.37 |
Weighted average shares outstanding: | ||||
Basic | 181,567 | 183,595 | 180,960 | 184,541 |
Diluted | 184,740 | 188,021 | 183,560 | 189,004 |
Statement Of Cash Flows Indirec
Statement Of Cash Flows Indirect (USD $) | ||
In Thousands | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
Operating Activities | ||
Net income | $49,446 | $69,027 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Amortization of intangible assets | 33,679 | 34,976 |
Depreciation and amortization of property and equipment | 34,558 | 24,302 |
Stock-based compensation expense | 56,588 | 60,988 |
(Gain) loss on investments | (85) | 2,832 |
Provision for doubtful accounts | 1,307 | 1,071 |
Provision for product returns | 1,722 | 868 |
Provision for inventory reserves | 1,517 | 258 |
Tax effect of stock-based compensation | (5,480) | 4,000 |
Excess tax benefit from exercise of stock options | (2,898) | (4,800) |
Goodwill adjustment | 5,393 | 0 |
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies | (689) | 1,110 |
Other non-cash items | 1,462 | 2,351 |
Total adjustments to reconcile net income to net cash provided by operating activities | 127,074 | 127,956 |
Changes in operating assets and liabilities, net of the effects of acquisitions: | ||
Accounts receivable | 5,546 | 1,431 |
Inventories | (154) | (3,450) |
Prepaid expenses and other current assets | (29,625) | (14,583) |
Other assets | (4,104) | 563 |
Deferred tax assets, net | 1,124 | (6,402) |
Accounts payable | (5,223) | (15,027) |
Accrued expenses and other current liabilities | 19,100 | (5,908) |
Deferred revenues | 4,574 | 32,853 |
Other liabilities | 431 | (5,149) |
Total changes in operating assets and liabilities, net of the effects of acquisitions | (8,331) | (15,672) |
Net cash provided by operating activities | 168,189 | 181,311 |
Investing Activities | ||
Purchases of available-for-sale investments | (544,315) | (385,490) |
Proceeds from sales of available-for-sale investments | 247,111 | 133,545 |
Proceeds from maturities of available-for-sale investments | 128,570 | 201,635 |
Purchases of property and equipment | (40,166) | (62,287) |
Purchases of other assets | (3,000) | 0 |
Cash paid for acquisitions, net of cash acquired | (1,420) | (2,139) |
Cash paid for licensing agreements and product related intangible assets | (1,850) | (31,531) |
Net cash used in investing activities | (215,070) | (146,267) |
Financing Activities | ||
Proceeds from issuance of common stock under stock-based compensation plans | 77,201 | 32,011 |
Excess tax benefit from exercise of stock options | 2,898 | 4,800 |
Stock repurchases, net | (64,994) | (150,143) |
Payments on debt | 0 | (407) |
Net cash provided (used in) by financing activities | 15,105 | (113,739) |
Effect of exchange rate changes on cash and cash equivalents | (135) | 2,327 |
Change in cash and cash equivalents | (31,911) | (76,368) |
Cash and cash equivalents at beginning of period | 326,121 | 223,749 |
Cash and cash equivalents at end of period | $294,210 | $147,381 |
Notes to Financial Statements
Notes to Financial Statements | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Notes to Financial Statements [Abstract] | |
1. BASIS OF PRESENTATION | 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Citrix Systems, Inc. (the Company) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. All adjustments, which, in the opinion of management, are considered necessary for a fair presentation of the results of operations for the periods shown, are of a normal recurring nature and have been reflected in the condensed consolidated financial statements. In addition, the Company has evaluated subsequent events through August7, 2009, the date of the issuance of this Form 10-Q. The results of operations for the periods presented are not necessarily indicative of the results expected for the full year or for any future period partially because of the seasonality of the Companys business. Historically, the Companys revenue for the fourth quarter of any year is typically higher than the revenue for the first quarter of the subsequent year. The information included in these condensed consolidated financial statements should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations contained in this report and the condensed consolidated financial statements and accompanying notes included in the Companys Annual Report on Form 10-K for the year ended December31, 2008. During the second quarter of 2009, the Company determined that it had incorrectly recorded acquisition-related payments to certain employees in connection with the October 2007 acquisition of XenSource, Inc. as purchase consideration and goodwill when it should have been recorded as compensation expense. Accordingly, in the second quarter of 2009, the Company recorded $5.4 million of compensation expense related to this item, of which $4.6 million related to prior periods, with a corresponding decrease to goodwill. As this adjustment was related to the correction of an error, the Company performed the analysis required by Staff Accounting Bulletin 99, Materiality, and Staff Accounting Bulletin 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements. Based on this analysis, the Company concluded that the effect of the error was not material to the prior fiscal years from both a quantitative and qualitative perspective and is not anticipated to be material to the full fiscal year of 2009. In accordance with the guidance set forth in paragraph 29 of APB Opinion No.28, Interim Financial Reporting, the Company corrected and disclosed this error in the quarter ended June30, 2009. |
2. SIGNIFICANT ACCOUNTING POLICIES | 2. SIGNIFICANT ACCOUNTING POLICIES 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 the condensed consolidated financial statements and accompanying notes. While the Company believes that such estimates are fair when considered in conjunction with the condensed consolidated financial statements and accompanying notes, the actual amount of such estimates, when known, will vary from these estimates. Investments Short-term and long-term investments at June30, 2009 and December31, 2008 primarily consist of agency securities, corporate securities, municipal securities, government securities and commercial paper. Investments classified as available-for-sale are stated at fair value with unrealized gains and losses, net of taxes, reported in accumulated other comprehensive loss. Investments classified as trading securities are stated at fair value with unrealized gains and losses reported in earnings. The Company classifies its available-for-sale investments as current and non-current based on their actual remaining time to maturity. The Company does not recognize changes in the fair value of its available-for-sale investments in income unless a decline in value is considered other-than-temporary in accordance with the Financial Accounting Standards Board (the FASB) Staff Position 115-2, Recognition and Presentation of Other-Than-Temporary Impairment, (FSP No.115-2). The Company adopted FSP No.115-2 in the second quarter of 2009 and there was no impact to the Companys results of operations upon adoption. The Companys investment policy is designed to limit exposure to any one issuer depending on credit quality. The Company uses information provided by third parties to adjust the carrying value of certain of its investments to fair value at the end of each period. Fair values are based on valuation models that use market quotes and, for certain investments, assumptions as to the creditworthiness of the entities issuing those underlying instruments. Inventory Inventories are stated at the lower of cost or market on an average cost method and primarily consist of finished goods as of June30, 2009 and December31, 2008. Revenue Recognition The Company markets and licenses products primarily through multiple channels such as value-added resellers, channel distributors, system integrators, independent software vendors, its Websites and original equipment manufacturers. The Companys product licenses are generally perpetual. The Company also separately sells license updates and services, which may include product training, technical support and consulting services, as well as online services. The Companys software revenue recognition policies are in compliance with SOP 97-2 and related amendments and interpretations. Because the Companys Online Services provide applications as an online service, the Company also follows the provisions of Securities and Exchange Commission Staff Accounting Bulletin (SAB) No.104, Revenue Recognition. The Company recogniz |
3. EARNINGS PER SHARE | 3. EARNINGS PER SHARE Basic earnings per share is calculated by dividing income available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share is computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon the exercise of stock awards (calculated using the treasury stock method) during the period they were outstanding. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share information): ThreeMonthsended June30, SixMonthsended June30, 2009 2008 2009 2008 Numerator: Net income $ 42,519 $ 34,649 $ 49,446 $ 69,027 Denominator: Denominator for basic earnings per share weighted-average shares outstanding 181,567 183,595 180,960 184,541 Effect of dilutive employee stock awards 3,173 4,426 2,600 4,463 Denominator for diluted earnings per share weighted-average shares outstanding 184,740 188,021 183,560 189,004 Basic earnings per share $ 0.23 $ 0.19 $ 0.27 $ 0.37 Diluted earnings per share $ 0.23 $ 0.18 $ 0.27 $ 0.37 Anti-dilutive weighted-average shares 23,619 24,499 23,154 23,418 |
4. ACQUISITIONS | 4. ACQUISITIONS 2008 Acquisition In October 2008, the Company acquired all of the issued and outstanding securities of Vapps, Inc. (Vapps), a privately held Delaware corporation headquartered in Hoboken, New Jersey. Vapps offers high quality audio conferencing solutions to small and medium sized businesses and enterprise and service provider markets that complement the Companys online services products. The total consideration for this transaction was approximately $26.6 million in cash, including $1.0 million in transaction costs. In addition, if certain financial and operational milestones are achieved by the Vapps business, contingent consideration of up to approximately $4.4 million may be earned. The sources of funds for this transaction consisted of available cash and investments. In addition, the Company assumed approximately 0.1million unvested stock options upon the closing of the transaction. Revenues from Vapps are included in the Companys Online Services revenue. The Vapps results of operations have been included in the Companys consolidated results of operations beginning after the date of its acquisition. In connection with the acquisition of Vapps, the Company allocated $19.6 million to goodwill, $8.2 million to product related technologies and $2.6 million to other intangible assets. The goodwill related to the acquisition of Vapps was assigned to the Companys Online Services segment and is not deductible for tax purposes. See Note 9 for segment information. Purchase Accounting for Acquisitions The fair values used in determining the purchase price allocation for certain intangible assets for the Companys acquisition was based on estimated discounted future cash flows, royalty rates and historical data, among other information. Purchased in-process research and development (IPRD) of $1.1 million was expensed immediately upon the closing of the acquisition of Vapps in accordance with FASB Interpretation No.4, Applicability of FASB Statement No.2 to Business Combinations Accounted for by the Purchase Method, because 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 IPRD was determined using the income approach, which includes estimating the revenue and expenses associated with a projects 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 21% to 25%. The rate of return determination included a factor that takes into account the uncertainty surrounding the successful development of the IPRD. |
5. INVESTMENTS | 5. INVESTMENTS Available-for-sale Investments Investments in available-for-sale securities at fair value were as follows for the periods ended (in thousands): June30, 2009 December31, 2008 Description of the Securities Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Agency securities $ 339,932 $ 1,856 $ (560 ) $ 341,228 $ 258,574 $ 2,291 $ (1,074 ) $ 259,791 Corporate securities 229,202 1,205 (14,912 ) 215,495 164,255 295 (14,775 ) 149,775 Municipal securities 57,140 108 (12 ) 57,236 39,646 132 (17 ) 39,761 Government securities 38,245 353 (35 ) 38,563 28,450 263 (52 ) 28,661 Money market funds 1,294 1,294 1,976 1,976 Commercial paper 4,274 9 4,283 Other 2,594 2,594 Total $ 665,813 $ 3,522 $ (15,519 ) $ 653,816 $ 499,769 $ 2,990 $ (15,918 ) $ 486,841 The change in net unrealized gains (losses) on available-for-sale securities recorded in other comprehensive income includes unrealized gains (losses) that arose from changes in market value of specifically identified securities that were held during the period and gains (losses) that were previously unrealized, but have been recognized in current period net income due to sales or maturities of available-for-sale securities. This reclassification has no effect on total comprehensive income or stockholders equity and was immaterial for all periods presented. For the three and six months ended June30, 2009, the Company received proceeds from sales of available-for-sale investments of $223.7 million and $247.1 million, respectively, and for the three and six months ended June30, 2008, it received proceeds from the sales of available-for-sale investments of $66.6 million and $133.5 million, respectively. For the three and six months ended June30, 2009, the Company had realized gains on the sales of available-for-sale investments of $0.3 million. There were no realized losses on the sales of available-for-sale investments during those periods. For the three and six months ended June30, 2008, the Company had realized gains on the sales of available- for-sale investments of $0.1 million and $0.3 million, respectively. There were no material realized losses on the sales of available- for-sale investments during those periods. All realized gains and losses related to the sales of available-for-sale investments are included in other income (expense), net, in the accompanying condensed consolidated statements of income The average remaining maturities of the Companys short-term and long-term available-for-sale investments at June30, 2009 were approximately six months and 12 years, respectively. Unrealized Losses on |
6. FAIR VALUE MEASUREMENTS | 6. FAIR VALUE MEASUREMENTS On January1, 2008, the Company adopted SFAS No.157, Fair Value Measurements, which, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. SFAS No.157 clarifies that fair value is an exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS No.157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2. Inputs, other than the quoted prices in active markets, that are observable 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. Assets and Liabilities Measured at Fair Value on a Recurring Basis AsofJune30, 2009 Quoted Prices In ActiveMarkets for Identical Assets(Level1) Significant Other Observable Inputs(Level2) Significant Unobservable Inputs(Level3) (in thousands) Short-term investments- available-for-sale $ 285,465 $ 285,465 $ $ Prepaid expenses and other current assets 15,318 15,318 Other assets 5,986 5,986 Long-term investments- trading 39,318 39,318 Long-term investments- available-for-sale 368,351 332,731 35,620 Accrued expenses and other current liabilities 7,376 7,376 The Company measures its cash flow hedges, which are classified as prepaid expenses and other current assets and accrued expenses and other current liabilities, at fair value based on indicative prices in active markets and generally measures its investments in available-for-sale securities at fair value based on quoted prices in active markets for identical securities. Due to the illiquidity in the municipal auction rate securities market caused by failed auctions, the Companys valuation technique for certain of its municipal auction rate securities was to measure such securities at fair value using a discounted cash flow model. In its discounted cash flow model, the Company used several assumptions to derive a fair value for its investments in municipal auction rate securities, including a discount rate based on the credit quality of the underlying investments and a factor to further discount the investments for the illiquidity currently present in the market for these securities. Accordingly, these trading investments are included in Level 3. Also included in Level 3 is the Put Option. In order to determine the fair value of the Put Opti |
7. STOCK-BASED COMPENSATION | 7. STOCK-BASED COMPENSATION The Companys 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 June30, 2009, the Company had two stock-based compensation plans under which it was granting stock options and non-vested stock units. The Company is currently granting stock-based awards from its 2005 Equity Incentive Plan (as amended, the 2005 Plan) and its 2005 Employee Stock Purchase Plan (the 2005 ESPP). In connection with certain of the Companys acquisitions, the Company has assumed several plans from the acquired companies. The Companys Board of Directors has provided that no new awards will be granted under the Companys acquired stock plans. The Companys superseded and expired stock plans include the Amended and Restated 1995 Stock Plan, Second Amended and Restated 2000 Director and Officer Stock Option and Incentive Plan, Second Amended and Restated 1995 Non-Employee Director Stock Option Plan and Third Amended and Restated 1995 Employee Stock Purchase Plan. Awards previously granted under these plans and still outstanding typically expire ten years from the date of grant and will continue to be subject to all the terms and conditions of such plans, as applicable. Under the terms of the 2005 Plan, the Company is authorized to grant incentive stock options (ISOs), non-qualified stock options (NSOs), non-vested stock, non-vested stock units, stock appreciation rights (SARs), and performance units and to make stock-based awards to full and part-time employees of the Company and its subsidiaries or affiliates, where legally eligible to participate, as well as consultants and non-employee directors of the Company. Currently, the 2005 Plan provides for the issuance of a maximum of 32,100,000 shares of common stock of which 5,600,000 shares were authorized by the Companys Board of Directors in April 2009 and subsequently approved by its stockholders in May 2009. Under the 2005 Plan, ISOs must be granted at exercise prices no less than fair market value on the date of grant, except for ISOs granted to employees who own more than 10% of the Companys combined voting power, for which the exercise prices must be no less than 110% of the fair market value at the date of grant. NSOs and SARs must be granted at no less than fair market value on the date of grant, or in the case of SARs in tandem with options, at the exercise price of the related option. Non-vested stock awards may be granted for such consideration in cash, other property or services, or a combination thereof, as determined by the Companys Compensation Committee of its Board of Directors. All stock-based awards are exercisable upon vesting. The Companys policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award. As of June30, 2009, there were 40,380,839 shares of common stock reserved for issuance pursuant to the Companys stock-based compensation plans and the Company had authorization under its 2005 Plan to grant 12,7 |
8. LONG-TERM DEBT | 8. LONG-TERM DEBT Effective on August9, 2005, the Company entered into a revolving credit facility (the Credit Facility) with a group of financial institutions (the Lenders). Effective September27, 2006, the Company entered into an amendment and restatement of its Credit Facility (the Amendment). The Amendment decreased the overall range of interest rates the Company must pay on amounts outstanding on the Credit Facility and lowered the facility fee. In addition, the Amendment extended the term of the Credit Facility. The Credit Facility, as amended, allows the Company to increase the revolving credit commitment up to a maximum aggregate revolving credit commitment of $175.0 million. The Credit Facility, as amended, currently provides for a revolving line of credit that will expire on September27, 2011 in the aggregate amount of $100.0 million, subject to continued covenant compliance. A portion of the revolving line of credit (i)in the aggregate amount of $25.0 million may be available for issuances of letters of credit and (ii)in the aggregate amount of $15.0 million may be available for swing line loans. The Credit Facility, as amended, currently bears interest at LIBOR plus 0.32% and adjusts in the range of 0.32% to 0.80% above LIBOR based on the level of the Companys total debt and its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) as defined in the agreement. In addition, the Company is required to pay a quarterly facility fee ranging from 0.08% to 0.20% based on the aggregate amount available under the Credit Facility, as amended, and the level of the Companys total debt and its adjusted EBITDA. Borrowings under the Credit Facility, as amended, are guaranteed by the Company and certain of the Companys U.S. and foreign subsidiaries, which guarantees are secured by a pledge of shares of certain foreign subsidiaries. As of June30, 2009, there were no amounts outstanding under the Credit Facility, as amended. The Credit Facility, as amended, contains customary default provisions, and the Company must comply with various financial and non-financial covenants. The financial covenants consist of a minimum interest coverage ratio and a maximum consolidated leverage ratio. The primary non-financial covenants contain certain limits on the Companys ability to pay dividends, conduct certain mergers or acquisitions, make certain investments and loans, incur future indebtedness or liens, alter the Companys capital structure or sell stock or assets. As of June30, 2009, the Company was in compliance with all covenants of the Credit Facility. |
9. SEGMENT INFORMATION | 9. SEGMENT INFORMATION The Company operates in a single industry segment consisting of the design, development and marketing of technology solutions that allow applications to be delivered, supported and shared on-demand. The Companys revenues are derived from sales of its Citrix Delivery Center products and related technical services in the Americas, Europe, the Middle East and Africa (EMEA) and Asia-Pacific regions and from its online services sold by its Online Services division. These three geographic regions and the Online Services division constitute the Companys four reportable segments. The Company does not engage in intercompany revenue transfers between segments. The Companys chief operating decision maker (CODM) evaluates the Companys performance based primarily on profitability in the geographic locations in which the Company operates and separately evaluates the performance of its Online Services division. Segment profit for each segment includes certain sales, marketing, general and administrative expenses directly attributable to the segment, including research and development costs in the Online Services division and excludes certain expenses that are managed outside the reportable segments. Costs excluded from segment profit primarily consist of certain research and development costs associated with the Citrix Delivery Center products, restructuring charges, stock-based compensation costs, amortization of product related technology, amortization of other intangible assets, interest, corporate expenses and income taxes. Corporate expenses are comprised primarily of corporate marketing costs, stock-based compensation costs, operations and certain general and administrative expenses, which are separately managed. Accounting policies of the Companys segments are the same as its consolidated accounting policies. Net revenues and segment profit, classified by the Companys four reportable segments are as follows (in thousands): ThreeMonthsEnded June30, SixMonthsEnded June30, 2009 2008 2009 2008 Net revenues: Americas (1) $ 173,753 $ 168,015 $ 329,543 $ 324,838 EMEA (2) 112,637 127,493 225,355 254,415 Asia-Pacific 31,088 32,535 59,658 63,839 Online Services division 75,350 63,687 147,330 125,672 Consolidated $ 392,828 $ 391,730 $ 761,886 $ 768,764 Segment profit: Americas (1) $ 96,491 $ 84,168 $ 174,705 $ 157,456 EMEA (2) 72,975 78,828 143,954 162,698 Asia-Pacific 6,738 5,817 11,393 11,692 Online Services division 21,964 18,059 42,215 36,242 Unallocated expenses (3): Amortization of intangible assets (16,586 ) (18,683 ) (33,679 ) (34,976 ) Research and development (68,416 ) (67,650 ) (132,135 ) (132,652 ) Restructuring (2,036 ) (22,766 ) Net inte |
10. RESTRUCTURING | 10. RESTRUCTURING During the first quarter of 2009, the Company announced a restructuring program and reduced its headcount by approximately 450 full-time positions. The restructuring program is expected to be substantially completed by the end of 2009. Restructuring charges related to the reduction of the Companys headcount and non-cancelable lease costs related to the consolidation and exiting of excess facilities by segment consists of the following (in thousands): ThreeMonthsEnded June30, 2009 SixMonthsEnded June30, 2009 Americas $ 1,791 $ 13,199 EMEA 33 7,354 Asia-Pacific 84 1,624 Online Services division 128 589 Total restructuring charges $ 2,036 $ 22,766 Restructuring accruals As of June30, 2009, of the aggregate $2.0 million in outstanding restructuring liability, $1.6 million relates to non-cancelable lease costs related to the consolidation of excess facilities that the Company expects to pay over the lives of the related obligations through fiscal 2011. The Company expects to consolidate additional excess facilities during the remainder of the year and as a result estimates that it will incur an additional $4.5 million to $5.0 million in expense. The activity in the Companys restructuring accruals for the six months ended June30, 2009 is summarized as follows (in thousands): Total Balance at January1, 2009 $ Employee severance and related costs 21,123 Non-cancelable lease costs and other charges 1,580 Impairment of tenant improvement, furniture, and fixed assets 63 Payments (20,724 ) Reversal of previous charges Balance at June30, 2009 $ 2,042 As of June30, 2009, restructuring accruals by segment consisted of the following (in thousands): Total Americas $ 1,652 EMEA 390 Asia-Pacific Online services division Total restructuring accruals $ 2,042 |
11. DERIVATIVE FINANCIAL INSTRUMENTS | 11. DERIVATIVE FINANCIAL INSTRUMENTS Cash Flow Hedges As of June30, 2009, the Companys derivative assets and liabilities resulted from cash flow hedges related to its forecasted operating expenses transacted in local currencies. A substantial portion of the Companys overseas expenses are and will continue to be transacted in local currencies. To 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, and the hedged transactions to which they relate, generally do not exceed 12 months and the maximum term is 18 months. Generally, when the dollar is weak, foreign currency denominated expenses will be higher, and these higher expenses will be partially offset by the gains realized from the Companys hedging contracts. Conversely, if the dollar is strong, foreign currency denominated expenses will be lower. These lower expenses will in turn be partially offset by the losses incurred from the Companys hedging contracts. The change in the derivative component in accumulated other comprehensive loss includes unrealized gains or losses that arose from changes in market value of the effective portion of derivatives that were held during the period, and gains or losses that were previously unrealized but have been recognized in the same line item as the forecasted transaction in current period net income due to termination or maturities of derivative contracts. This reclassification has no effect on total comprehensive income or stockholders equity. The total cumulative unrealized gain (loss) on cash flow derivative instruments was $7.1 million and $(3.0) million at June30, 2009 and December31, 2008, respectively, and is included in accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets. The net unrealized gain as of June30, 2009 is expected to be recognized in income over the next twelve months at the same time the hedged items are recognized in income. As of June30, 2009, the Company had the following net notional foreign currency forward contracts outstanding (in thousands): Foreign Currency Currency Denomination Australian dollars AUD37,152 British pounds sterling GBP 32,657 Canadian dollars CAD 6,470 Euro EUR45,433 Danish krone DKK 16,383 Hong Kong dollars HKD 68,354 Indian rupees INR782,290 Japanese yen JPY948,365 Singapore dollars SGD 13,242 Swiss francs CHF 23,809 Derivatives not Designated as Hedges The Company utilizes certain derivative instruments that either do not qualify or are not designated for hedge accounting treatment under SFAS No.133, Accounting for Derivative Instruments and Hedging Activities. Accordingly, changes in the fair value of these contracts are recorded in other income (expense), net. A substantial portion of the Companys overseas assets and liabilities are and will continue to be denominated in local currencies. To protect against |
12. COMPREHENSIVE INCOME | 12. COMPREHENSIVE INCOME The components of comprehensive income, net of tax, are as follows (in thousands): Three Months Ended June30, Six Months Ended June30, 2009 2008 2009 2008 Net income $ 42,519 $ 34,649 $ 49,446 $ 69,027 Other comprehensive income: Change in unrealized gain (loss) on available-for-sale securities 2,653 (1,020 ) 185 (215 ) Net change due to derivative instruments 15,752 (4,301 ) 10,075 1,309 Comprehensive income $ 60,924 $ 29,328 $ 59,706 $ 70,121 The components of accumulated other comprehensive income, net of tax, are as follows (in thousands): June30, 2009 December31, 2008 Unrealized loss on available-for-sale securities $ (12,713 ) $ (12,897 ) Unrealized gain (loss) on derivative instruments 7,121 (2,955 ) Accumulated other comprehensive loss $ (5,592 ) $ (15,852 ) |
13. INCOME TAXES | 13. INCOME TAXES The Companys net unrecognized tax benefits totaled approximately $29.4 million and $28.3 million as of June30, 2009 and December31, 2008, respectively. There were no amounts included in the balance at June30, 2009 of tax positions, which would not affect the annual effective tax rate, and approximately $0.2 million of accrued interest on tax positions, which is included in income tax expense. The Company and one or more of its subsidiaries is subject to federal income taxes in the United States, 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 Companys U.S. federal income tax returns for 2004 and 2005 in the third quarter of 2006. The Company is required to estimate its income taxes in each of the jurisdictions in which it operates as part of the process of preparing its condensed consolidated financial statements. At June30, 2009, the Company had approximately $49.4 million in deferred tax assets. SFAS No.109, Accounting for Income Taxes, requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company reviews deferred tax assets periodically for recoverability and makes estimates and judgments regarding the expected geographic sources of taxable income and gains from investments, as well as tax planning strategies in assessing the need for a valuation allowance. In the ordinary course of global business, there are transactions for which the ultimate tax outcome is uncertain; thus, judgment is required in determining the worldwide provision for income taxes. The Company provides for income taxes on transactions based on its estimate of the probable liability. The Company adjusts its provision as appropriate for changes that impact its underlying judgments. Changes that impact provision estimates include such items as jurisdictional interpretations on tax filing positions based on the results of tax audits and general tax authority rulings. Due to the evolving nature of tax rules combined with the large number of jurisdictions in which the Company operates, it is possible that the Companys estimates of its tax liability and the realizability of its deferred tax assets could change in the future, which may result in additional tax liabilities and adversely affect the Companys results of operations, financial condition and cash flows. The Company maintains certain operational and administrative processes in overseas subsidiaries and its foreign earnings are taxed at lower foreign tax rates. The Company does not expect to remit earnings from its foreign subsidiaries. The Companys effective tax rate was approximately 5.1% and 1.6% for the three months ended June30, 2009 and 2008, respectively, and 3.0% and 6.7% for the six months ended June30, 2009 and 2008, respectively. |
14. STOCK REPURCHASE PROGRAMS | 14. STOCK REPURCHASE PROGRAMS The Companys Board of Directors authorized an ongoing stock repurchase program with a total repurchase authority granted to the Company of $2.1 billion, of which $300.0 million was approved in April 2009. The Company may use the approved dollar authority to repurchase stock at any time until the approved amounts are exhausted. The objective of the Companys stock repurchase program is to improve stockholders returns. At June30, 2009, approximately $312.0 million was available to repurchase common stock pursuant to the stock repurchase program. All shares repurchased are recorded as treasury stock. A portion of the funds used to repurchase stock over the course of the program was provided by proceeds from employee stock option exercises and the related tax benefit. The Company is authorized to make open market purchases of its common stock using general corporate funds. Additionally, from time to time, the Company has entered into structured stock repurchase arrangements with large financial institutions 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 or the receipt of either stock or cash at the maturity of the agreement, depending on market conditions. During the three months ended June30, 2009, the Company expended approximately $40.0 million on open market purchases, repurchasing 1,319,000 shares of outstanding common stock at an average price of $30.32. In addition, as of June30, 2009, the Company did not have any prepaid notional amounts remaining under its structured stock repurchase programs and it did not make any up-front payments to financial institutions related to structured stock repurchase agreements. During the six months ended June30, 2009, the Company expended approximately $65.0 million on open market purchases, repurchasing 2,422,300 shares of outstanding common stock at an average price of $26.83. In addition, during the period, the Company did not make any up-front payments to financial institutions related to structured stock repurchase agreements. During the three months ended June30, 2008, the Company took delivery of 478,145 shares at an average price of $31.85 per share from its structured repurchase agreements and it expended approximately $55.0 million on open market purchases, repurchasing 1,616,933 shares of outstanding common stock at an average price of $33.99. In addition, during the three months ended June30, 2008 the Company made up-front payments of $20.0 million to certain financial institutions related to structured stock repurchase agreements. During the six months ended June30, 2008, the Company took delivery of 2,908,645 shares at an average price of $35.44 per share from its structured repurchase agreements and it expended approximately $116.3 million on open market purchases, repurchasing 3,421,333 shares of outstanding common stock at an average price of $33.98. In addition, during the six months ended June30, 2 |
15. COMMITMENTS AND CONTINGENCIES | 15. COMMITMENTS AND CONTINGENCIES Leases The Company leases certain office space and equipment under various operating leases. In addition to rent, the leases require the Company to pay for taxes, insurance, maintenance and other operating expenses. Certain of these leases contain stated escalation clauses while others contain renewal options. The Company recognizes rent expense on a straight-line basis over the term of the lease, excluding renewal periods, unless renewal of the lease is reasonably assured. The Company has an operating lease obligation related to a property that is not fully utilized which continues to 2018 with a total remaining obligation at June30, 2009 of approximately $5.3 million, of which $1.0 million was accrued as of June30, 2009, and is reflected in accrued expenses and other current liabilities and other liabilities in the accompanying condensed consolidated balance sheets. In calculating this accrual, the Company made estimates, based on market information, including the estimated vacancy periods and sublease rates and opportunities. The Company periodically re-evaluates its estimates related to this vacant facility. Legal Matters Due to the nature of the Companys business, it is subject to patent infringement claims, including current suits against it or one or more of its wholly-owned subsidiaries by Realtime Data, LLC, SSL Services, LLC, and 01 Communiqu Laboratory Inc. alleging infringement by various Citrix products and services. These complaints were filed separately in the United States District Court for the Eastern District of Texas in April 2008 and in January 2007, and in the United States District Court for the Northern District of Ohio in February 2006, respectively, and seek unspecified damages and other relief. The Company believes that it has meritorious defenses to the allegations made in these complaints and intends to vigorously defend these lawsuits; however, it is unable currently to determine the ultimate outcome of these or similar matters or the potential exposure to loss, if any. In addition, the Company is a defendant 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, the Company believes that the ultimate outcome will not materially affect its business, financial position, results of operations or cash flows. Guarantees FIN No.45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, requires certain guarantees to be recorded at fair value and requires a guarantor to make disclosures, even when the likelihood of making any payments under the guarantee is remote. For those guarantees and indemnifications that do not fall within the initial recognition and measurement requirements of FIN No.45, the Company must continue to monitor the conditions that are subject to the guarantees and indemnifications, as required under existing generally accepted accounting principles, to identify if a loss has been incurred. If the Company determines that it is probable that a loss has been incurred, any such |
16. RECENT ACCOUNTING PRONOUNCEMENTS | 16. RECENT ACCOUNTING PRONOUNCEMENTS In June 2009, the FASB issued SFAS No.168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. SFAS No 168 establishes the FASB Accounting Standards Codification (Codification), which was officially launched on July1, 2009, and became the primary source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under the authority of Federal securities laws are also sources of authoritative GAAP for SEC registrants. The subsequent issuances of new standards will be in the form of Accounting Standards Updates that will be included in the Codification. SFAS No.168 is effective for financial statements issued for interim and annual periods ending after September15, 2009. As such, the Company plans to adopt SFAS No.168 in connection with its third quarter 2009 reporting. As the Codification is not intended to change GAAP, the adoption of SFAS No.168 will have no impact on the Companys consolidated financial position, results of operations and cash flows. In June 2009, the FASB issued SFAS No.167, Amendments to FASB Interpretation No.46(R). SFAS No.167, which amends FASB Interpretation No.46 (revised December 2003), Consolidation of Variable Interest Entities, (FIN No.46(R)), prescribes a qualitative model for identifying whether a company has a controlling financial interest in a variable interest entity (VIE) and eliminates the quantitative model prescribed by FIN No.46(R). The new model identifies two primary characteristics of a controlling financial interest: (1)provides a company with the power to direct significant activities of the VIE, and (2)obligates a company to absorb losses of and/or provides rights to receive benefits from the VIE. SFAS No.167 requires a company to reassess on an ongoing basis whether it holds a controlling financial interest in a VIE. A company that holds a controlling financial interest is deemed to be the primary beneficiary of the VIE and is required to consolidate the VIE. This statement is effective for fiscal years beginning after November15, 2009. As such, the Company plans to adopt SFAS No.167 effective January1, 2010 and is currently evaluating the impact of adopting this standard. |
Document Information
Document Information | |
6 Months Ended
Jun. 30, 2009 USD / shares | |
Document Information [Text Block] | |
Document Type | 10-Q |
Amendment Flag | false |
Amendment Description | N.A. |
Document Period End Date | 2009-06-30 |
Entity Information
Entity Information (USD $) | |||
6 Months Ended
Jun. 30, 2009 | Aug. 04, 2009
| Jun. 30, 2008
| |
Entity [Text Block] | |||
Trading Symbol | CTXS | ||
Entity Registrant Name | CITRIX SYSTEMS INC | ||
Entity Central Index Key | 0000877890 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 183,044,436 | ||
Entity Public Float | $5,275,208,469 |