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See our 2002 Online Review
To find out more about Citrix, see
highlights of our past year, and find
out how we’re creating successful
enterprise access infrastructure solutions
for customers, visit our 2002 Online
Review at: www.onlineannuals.com/citrix
“Fewer than
two dozen software companies
have achieved and maintained
annual revenues above
$1■ billion.
We have that goal in our sights
and believe that we are well-positioned
to join this elite group of
great software companies.”
- President and CEO Mark B. Templeton
Citrix Systems, Inc.
851 West Cypress Creek Road
Fort Lauderdale, FL 33309 USA
www.citrix.com
2002 Annual Report
Citrix Systems, Inc. (Nasdaq: CTXS) is
the global leader in access infrastructure.
The most trusted name in enterprise
access, the Citrix® MetaFrame® Access Suite
enables people to easily and securely access
the on-demand enterprise, from just
about anywhere, anytime, using any device,
over any connection. Nearly 50 million
people in more than 120,000 organiza-
tions around the world use Citrix every
day. Citrix customers include 100% of the
Fortune 100 companies, 95% of the Fortune
500 and 95% of the FT European 100.
Based in Fort Lauderdale, Florida,
Citrix has offices in over 20 countries, and
more than 5,000 channel partners in over
100 countries.
See our 2002 Online Review
To find out more about Citrix,
see highlights of our past year,
and find out how we’re creating
successful enterprise access
infrastructure solutions for
customers, visit our 2002
Online Review at:
www.onlineannuals.com/citrix
Citrix 2002 Annual Report
World Headquarters
Annual Meeting of Stockholders
Citrix Systems, Inc.
851 West Cypress Creek Road
Fort Lauderdale, FL 33309 USA
Tel: +1 (954) 267 3000
Tel: +1 (800) 424 8749
www.citrix.com
Americas Headquarters
Citrix Systems, Inc.
851 West Cypress Creek Road
Fort Lauderdale, FL 33309 USA
Tel: +1 (800) 437 7503
European Headquarters
Citrix Systems International GmbH
Rheinweg 9
8200 Schaffhausen
Switzerland
Tel: +41 (52) 635 7700
www.eu.citrix.com
Asia/Pacific Headquarters
Citrix Systems Australia Pty Ltd.
Level 3, 1 Julius Avenue
Riverside Corporate Park
North Ryde NSW 2113
Sydney, Australia
Tel: +61 (0) 2 8870 0800
© 2003 Citrix Systems, Inc. All rights reserved. Citrix®, ICA®,
MetaFrame®, MetaFrame XP™ and the Citrix logo are the registered
trademarks or trademarks of Citrix Systems, Inc. in the United
States and other countries. Microsoft®, Windows® and Windows
NT® are registered trademarks of Microsoft Corporation in the
United States and/or other countries. All other trademarks and
registered trademarks are the property of their respective owners.
The Annual Meeting of Stockholders of
Citrix Systems, Inc. will be held on May 15,
2003 at 2 p.m. at:
Westin Fort Lauderdale Hotel
400 Corporate Drive
Fort Lauderdale, FL 33334 USA
Stock Trading Information
Nasdaq National Market symbol: CTXS
Transfer Agent and Registrar
EquiServe Trust Company
P.O. Box 43010
Providence, RI 02940
Tel: +1 (816) 843 4299
www.equiserve.com
Independent Certified Public Accountants
Ernst & Young LLP
Phillips Point, West Tower
777 S. Flagler Drive, Suite 1200
West Palm Beach, FL 33401
Investor Relations
Requests for information should be
directed to:
Investor Relations
Citrix Systems, Inc.
851 West Cypress Creek Road
Fort Lauderdale, FL 33309 USA
Tel: +1 (888) 595 CTXS (2897)
www.citrix.com/investors/
The Citrix Annual Report and Form 10-K
are available electronically at Citrix online:
www.citrix.com
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1
Citrix 2002 Annual Report
Mark B. Templeton President and CEO
Dear Citrix shareholders:
Every company has a story.
More than just a sequence of events, it is a set of choices and responses, of
actions and reactions, that reveals who a company is, what it stands for, and
how it is likely to fare in the future.
The story of Citrix Systems began in 1989, when the company was founded
with the vision of simplifying information access. We could call this start-up
period our “Surviving” phase. Slowly, with determination and six years of
hard work, Citrix grew to 80 employees and $14.6 million in revenues.
Phase 2 of the Citrix story began with our IPO in December 1995 – the
“Thriving” phase. One of Fortune’s “100 Fastest-Growing Companies,” our
revenue increased by more than an order of magnitude in the next six years,
reaching $591.6 million in 2001. That put us in the top 10% by revenue of
all independent software vendors. We were a market leader in server-based
computing, with market share of 76.8%, according to market research firm
IDC. Around the world, approximately 35 million people were relying on
Citrix for anytime, anywhere, any-device, any-connection access to the
on-demand enterprise.
Then came 2002 – an extremely difficult year for IT spending.
2
.
6
1
9
5
$
.
4
7
2
5
$
Last year was our most challenging year since we went public in 1995. The
first two quarters were especially tough. Clearly, we had entered a new phase
in our company story. It was time to regroup.
We assessed our business: A grand-slam product – Citrix® MetaFrame XPTM,
the most widely deployed presentation server in the world. A channel network
with thousands of global resellers, distributors, system integrators and other
partners in more than 100 countries, which had proven extremely effective in
driving broad adoption of Citrix technology. In fact, nearly 50 million people
in more than 120,000 organizations globally use Citrix today. And these cus-
tomers, based on our “world-class” loyalty rating of 94%, are very loyal indeed.
With a limited product line and a single go-to-market strategy, we had
achieved an extremely high customer presence, but had a long way to go in terms
of our penetration of these organizations. Herein lies the opportunity.
We’ve seen the “Surviving” and the “Thriving” phases – now we’re in the
“Driving” phase. At mid-year, we took decisive actions to drive MetaFrame
standardization in our customer base.
Our new product strategy is to consolidate access infrastructure, historically
fragmented into “piece parts” provided by multiple vendors, into one com-
prehensive solution. The Citrix® MetaFrame® Access Suite is an integrated
access infrastructure solution that extends the core MetaFrame capabilities
across an expanding array of enterprise access requirements, including presen-
tation and application conferencing, device and network services, aggregation
and personalization, and security and identity management.
It was just as important for us to diversify our go-to-market approaches as
it was our product set. We added a second sales model to our channel: a new
“high customer-touch” Enterprise Relationship Manager (ERM) program
designed to drive deeper relationships with our key customers.
.
4
0
7
4
$
.
3
3
0
4
$
.
6
8
4
2
$
98 99 00 01 02
Annual Revenues
in millions
3
.
2
4
1
$
8
.
8
4
1
$
4
.
7
1
1
$
9
.
8
1
1
$
q1
q2
q3
q4
2002 Quarterly
Revenues
in millions
3
Citrix 2002 Annual Report
We launched these changes in mid-2002, and in the third quarter returned
to revenue growth quarter-over-quarter. In the fourth quarter we saw an even
stronger gain in revenues, achieving one of our best quarters ever. But this
is the really important part: Six of our top ten fourth-quarter deals were
re-orders, and eight of these top ten deals were greater than $500,000,
including three over $1 million. Looking at the entire year, the number of
deals greater than $500,000 in 2002 increased by 26% over 2001. We
believe that our customer relationships are starting to drive MetaFrame
standardization.
Our market opportunity is large, and growing. An increasingly mobile, global
workforce needs access to the on-demand enterprise to make informed business
decisions faster, be more productive, and provide better customer service
from anywhere in the world. And companies need simpler and more cost-
effective ways to consolidate and manage enterprise IT resources. The inter-
section of these two intensifying market needs is our sweet spot.
We think we have a great story – for our shareholders, our employees, our
business partners, and most of all for our customers. Though it’s still early,
this story has already revealed much about who we are, what we stand for, and
where we’re going. We are the global leader in enterprise access infrastructure.
We stand for enabling anytime, anywhere, any-device, any-connection access
to the on-demand enterprise. And as for where we’re going – our goal is to
surpass $1 billion, and we believe that will be only the beginning.
Thanks for your confidence and for joining us on this journey.
Mark B. Templeton
President and CEO
4
Corporate Officers
Board of Directors
Mark B. Templeton
President and Chief Executive Officer
John C. Burris
Senior Vice President, Worldwide Sales and
Services
David R. Friedman
Vice President, General Counsel and Secretary
Kate Hutchison
Senior Vice President, Marketing
Robert G. Kruger
Senior Vice President, Product Development
and Chief Technology Officer
Jeanne M. Moreno
Senior Vice President, Corporate Services
and Chief Information Officer
David Urbani
Acting Chief Financial Officer
Vice President, Finance and
Corporate Controller
Thomas F. Bogan
President and Chief Operating Officer
Rational Software Corporation
Kevin R. Compton
General Partner
Kleiner Perkins Caufield & Byers
Stephen M. Dow
Chairman of the Board
Citrix Systems, Inc.
General Partner
Sevin Rosen Funds
Gary E. Morin
Executive Vice President and
Chief Financial Officer
Lexmark International, Inc.
Tyrone F. Pike
President and Chief Executive Officer
Cemaphore Systems, Inc.
Mark B. Templeton
President and Chief Executive Officer
Citrix Systems, Inc.
John W. White
Former Vice President and Chief
Information Officer
Compaq Computer Corporation
Note Regarding Forward-Looking Statements
This Annual Report contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange
Act of 1934. The forward-looking statements in this Annual Report do not constitute guarantees of future performance. Those statements involve a number
of factors that could cause actual results to differ materially, including risks associated with the company’s business involving the company’s products, their
development and distribution, economic and competitive factors and the company’s key strategic relationships and other risks detailed in the company’s
filings with the Securities and Exchange Commission. Citrix assumes no obligation to update any forward-looking information contained in this Annual
Report or with respect to the statements made herein.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
¥
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 ®FEE REQUIRED©
For the Ñscal year ended December 31, 2002
or
n
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 ®NO FEE
REQUIRED©
For the transition period from
to
Commission File Number 0-27084
CITRIX SYSTEMS, INC.
(Exact name of registrant as speciÑed in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
851 West Cypress Creek Road
Fort Lauderdale, Florida
(Address of principal executive oÇces)
75-2275152
(I.R.S. Employer
IdentiÑcation No.)
33309
(Zip Code)
Registrant's telephone number, including area code:
(954) 267-3000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
(Title of class)
Indicate by check mark whether the registrant (1) has Ñled all reports required to be Ñled by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to Ñle such reports), and (2) has been subject to such Ñling requirements for
the past 90 days. Yes ¥
No n
Indicate by check mark if disclosure of delinquent Ñlers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrant's knowledge, in deÑnitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. n
Indicate by check mark whether the registrant is an accelerated Ñler (as deÑned in Exchange Act
Rule 12b-2). Yes ¥
No n
The aggregate market value of Common Stock held by non-aÇliates of the registrant as of the last
business day of the registrant's most recently completed second Ñscal quarter (based on the last reported sale
price on The Nasdaq National Market as of such date) was $1,071,867,321. As of March 7, 2003 there were
164,990,942 shares of the registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information required pursuant to Part III of this report is incorporated by reference from the
Company's deÑnitive proxy statement, relating to the annual meeting of stockholders to be held in May 2003,
pursuant to Regulation 14A to be Ñled with the Securities and Exchange Commission.
ITEM 1. BUSINESS
General
Citrix Systems, Inc. (""Citrix'' or the ""Company''), a Delaware corporation founded on April 17, 1989, is
a leading supplier of access infrastructure software and services that enable the eÅective and eÇcient
enterprise-wide deployment and management of applications and information, including those designed for
Microsoft» Windows» operating systems, for UNIX» operating systems, such as Sun SolarisTM, HP-UX or
IBM» AIX» (collectively ""UNIX operating systems'') and for Web-based information systems. The
Company's MetaFrame» products permit organizations to provide secure access to Windows based, Web-
based and UNIX applications without regard to location, network connection, or type of client hardware
platforms. The Company markets and licenses its products through multiple channels such as value-added
resellers, distributors, system integrators and independent software vendors, managed by the Company's
worldwide sales force. The Company also promotes its products through relationships with a wide variety of
industry participants, including Microsoft Corporation (""Microsoft'').
The Business Need for SimpliÑed Access to Information
Globalization, increasing worker mobility and computing devices and the expectation of ""instant'' results
set by the Internet have made it vital for businesses to supply users with fast, simple and secure access to
information and applications so that they can work eÅectively from anywhere, on any type of device or
network connection. However, enterprises face signiÑcant roadblocks to access, especially complexities and
incompatibilities among computing platforms and infrastructures, applications and communications protocols.
Demand has increased for systems that oÅer users a standard, consistent interface on any device, fast
transmission of data over a variety of networks, and the ability to deliver applications and information securely
to local and remote users over public networks, especially the Internet. Some of the challenges to true virtual
access are:
‚ Mixed Application Environments. Many businesses today use a mix of application platforms, making
it diÇcult to deploy applications and information to all users. For example, deploying both UNIX and
Windows applications to a user may require separate devices or emulation software.
‚ Mixed Device Environments. The growing popularity of wireless and diverse information appliances is
adding to the wide array of client devices used in many enterprises. Such a mix of devices can cause
accessibility and support problems.
‚ Remote Users. The diversity of network connection types, protocols and transmission speeds limits
the ability of organizations to deploy Windows, UNIX, JavaTM and Web-based applications on a cost-
eÅective and eÇcient basis to remote users such as mobile workers, telecommuters and branch oÇce
personnel.
‚ Extended Enterprise. The extension of enterprise information systems to external users, such as
suppliers, distributors and customers, creates application deployment issues that are outside the control
of information systems managers. These include the quality, performance and security of the network
connection, the client platform involved and the technical expertise of the external user.
‚ Internet and e-Business Initiatives. With the global adoption of the Internet and the drive to
e-business, organizations need solutions for Web-enabling existing business applications without the
time and cost required for re-engineering so they can be quickly included in corporate portals, intranets,
extranets, and e-business infrastructures.
‚ Security. Delivering sensitive business information to remote users, especially over the Internet, raises
concerns about protecting data and ensuring privacy.
Enabling ""The On-Demand Enterprise''
Citrix aims to address these challenges by enabling any number of people, from anywhere in the world,
using any kind of computing device, over any network connection, to access the on-demand enterprise.
2
Citrix access infrastructure software enables workers to Ñnd, organize and interactively work with business
applications and information securely from virtually anywhere. At the same time, Citrix access infrastructure
software enables corporate information technology (""IT'') teams to centrally provide, manage and support
secure access to applications, including those designed for Windows, Web and UNIX operating systems, while
monitoring service quality, measuring resource usage and controlling access. Citrix» products and services
enable enterprise resources to be eÇciently and securely available ""on demand'' across the Internet, intranets,
extranets, wide area networks, local area networks and wireless networks to remote and mobile employees.
Citrix access infrastructure software enables organizations to reduce the costs of corporate computing,
increase employee productivity, gain Öexibility to technological change within their data centers, improve
resilience to business interruption and gain greater control over the quality of enterprise IT services.
The Citrix» Software Suite For Enterprise Resource Access
Citrix's strategy is to provide an integrated suite of technologies, products and services that allow
customers to achieve the following business solutions for enterprise resource access:
‚ Remote OÇce Connectivity. Citrix provides users in remote oÇces with what they need for maximum
productivity: full-featured access to virtually any application, quickly and with no compromise to the
user experience, and with consistent and reliable performance. Citrix's scalable server-based architec-
ture allows instant delivery of enterprise applications, which means new application or user provisioning
that once took weeks can now be completed in minutes. Companies can leverage existing IT
investments and extend their existing computing environments to oÇces nearly anywhere. And because
control is server-based, applications can be delivered and managed with speed, ease, and conÑdence
from a single reliable point.
‚ Application Deployment. Citrix provides a server-based system to streamline application delivery,
consolidate key corporate data and reduce the time and resources required to deploy, implement and
manage a full range of business applications Ì from enterprise resource planning and customer
resource management to oÇce productivity software. Updates to client code occur on a centralized
server, reducing the impact on users and IT staÅ when market pressures force business processes to
change. New users and acquired companies can be quickly added to the application user base, leading
to near-immediate access and productivity. This solution Web-enables any existing Windows or UNIX
applications, makes Web-based applications more eÇcient and easier to manage, and can oÅer
substantial savings and improvements in security and stability.
‚ Workforce Mobility. Citrix access infrastructure software and services enhance workforce productiv-
ity by allowing virtually ""any location, any device, any network'' connectivity to full-featured enterprise
applications and information without the need to download data provided minimum system and
network requirements are met. With Citrix workforce mobility solutions, mobile professionals can
access the same feature-rich software as their colleagues at headquarters. IT staÅs gain the ability to
centrally add and more easily support new users and applications as needs change. And corporate
leaders appreciate the cost eÅectiveness of enhanced performance and security provided by a system in
which applications and data reside safely on a centrally managed server with only mouse clicks and
screen refreshes crossing the network.
‚ Business Continuity. Citrix access infrastructure software and services are designed to deliver
uninterrupted access to enterprise applications across servers when a sudden information system
interruption occurs. Citrix provides a vital component of a complete business continuity solution that
can reduce the impact of natural, accidental, or man-made disruptions to the business by securely
delivering critical applications and information from a fail-over data center not aÅected by the
interruption. Files and applications are stored and managed centrally, giving users fast, easy and secure
Web-based access to the resources they need and freeing IT staÅs to focus on restoring corporate
systems rather than reinstalling individual desktops. Citrix technology can preserve employees' ability
to access corporate information from alternative locations, enabling the organization to conduct
business without signiÑcant interruption.
3
Citrix Technology
Citrix products are based on a full range of industry-standard technologies. In addition, some Citrix
products also include the Company's proprietary technologies known as the Independent Computing
Architecture (""ICA'') protocol, which allows an application's graphical user interface to be displayed on
virtually any client device while the application logic is executed on a central server. Because the ICA»
protocol moves client-based application processing to the server, this approach enables centralized manage-
ment of applications, users, servers, licenses and other system components for greater eÇciency and lower
cost.
The Company's ICA» technology also minimizes the amount of data traveling across a user's network as
only encrypted screen refreshes, keystrokes and mouse clicks are transported to and from the client device.
This increases remote access security, improves application performance and allows even wireless access to the
latest, most powerful applications and information.
The Citrix products are also based on the industry-standard Extensible Markup Language (""XML'').
Leveraging XML assures open systems interaction for customers regardless of data source or platform. And by
supporting XML, which is the standard for future Web services-based applications, Citrix helps customers get
from the client/server world of today to the Web services environments of tomorrow.
Citrix Products
The Company's products are marketed under the Citrix MetaFrame» brand and include MetaFrame 1.8
for Windows Terminal Server and the MetaFrame XPTM presentation servers and the MetaFrame Secure
Access Manager. Citrix MetaFrame products run primarily on Microsoft Windows server operating systems.
The Company also provides a MetaFrame presentation server that runs on UNIX operating systems. This
suite of infrastructure software and services enable organizations to better deploy, manage and access
applications across the extended enterprise to a variety of client devices, operating platforms or network
connections.
The MetaFrame software suite includes two products that work together and can also be used separately.
These products are licensed with software subscription, or Citrix Subscription AdvantageTM, oÅering
customers all updates, when and if they become available during the Ñrst year of their license.
‚ MetaFrame Presentation Servers. Citrix MetaFrame presentation servers are available for both
Windows based applications and UNIX based applications. The MetaFrame XP presentation servers
for Windows based products are optimized for Windows NT», Windows 2000 and Windows XP
applications. These servers are designed to support large-scale implementations with as many as
100,000 users on 1,000 or more servers. MetaFrame XP presentation server for Windows is oÅered in
three editions Ì MetaFrame XPs, MetaFrame XPa and MetaFrame XPe. Each edition is tailored to
speciÑc customer needs and computing environments.
‚ Citrix MetaFrame Secure Access Manager.
Introduced in June 2002 as NFuse» Elite, Citrix
MetaFrame Secure Access Manager is based on technology acquired from Sequoia Software
Corporation in April 2001. Citrix MetaFrame Secure Access Manager provides secure, single-point
access over the Web to a wide range of internal and external information resources including
applications, data resources, documents, Web content and services. With a powerful set of easy-to-use,
wizard-driven conÑguration tools, information technology administrators can enable browser-based
access to the entire enterprise Ì personalized to each user's needs, with secure connectivity over the
Web.
‚ Citrix Subscription Advantage. To provide customers with the easiest and most convenient way to
keep their Citrix software current, the Company markets software under the Citrix Subscription
Advantage brand for an additional fee. Citrix Subscription Advantage is the Company's terminology
for post-contract support (""PCS''). Citrix Subscription Advantage is an annual, renewable program
that provides subscribers with automatic delivery of software upgrades, enhancements and mainte-
nance releases when and if they become available during the term of their subscription.
4
Collectively, these products accounted for approximately 89%, 86%, and 85% of the Company's net
revenues in 2002, 2001, and 2000, respectively.
Citrix» Services
Citrix provides a portfolio of technical services designed to allow the Company's end-customers and
entities with which it has a technology relationship to maximize the value of Citrix access infrastructure
software. These services are available as a feature of the Company's business-development program and are
available for additional fees to end-customers.
‚ Citrix Consulting ServicesTM (""CCS''). The objective of CCS is to help ensure the successful
implementation of Citrix technologies. Tested methodologies, certiÑed professionals and best practices
developed from real-world experience allow CCS to provide expert guidance and support to our
partners and customers to maximize the eÅectiveness of their total application server computing
environment.
‚ Citrix Technical Support Services. To accommodate the unique ongoing support needs of customers,
preferred support services are speciÑcally designed to address the variety of challenges facing
application server software environments. Citrix oÅers Ñve support-level options, global coverage and
personalized relations management.
‚ Product Training & CertiÑcation. A series of courses are designed to allow customers and channel
members to learn new skills and eÅective strategies to help plan, implement and administer Citrix
products. Students may attend courses at one of over 300 Citrix Authorized Learning CentersTM
(""CALC'') worldwide.
Services revenue accounted for approximately 8% of the Company's net revenues in 2002 and 7% in 2001
and 2000.
Citrix Customers
Citrix's primary target markets for its current products and services are large and medium-sized
organizations in commercial, government and education sectors. Currently, Citrix has more than 120,000
customers worldwide, including 100% of the Fortune 100, 95% of the Fortune 500 and 95% of the Financial
Times FT Europe 100. During 2002, Citrix's enterprise customers included U.S. Department of Health and
Human Services, Deutsche Telecom, Banco Bilbao Vizcaya Argentaris, Swiss Federal Railways, Deutsche
Angestellten Krankenkasse and Ministry of Finance of the State of North Rhine Westphalia.
The Company's software licenses are generally perpetual and are oÅered in both ""shrink wrapped'' and
electronic-based forms. The Company distributes its software using various formats including traditional
""boxed'' packages for small projects and customers, and electronically downloaded formats for its large
projects and customers.
For medium to large-sized projects, which typically consist of large ""multi-server'' environments, the
Company oÅers electronic volume-based licensing programs. These programs provide for volume-based
licensing that allow usage of the Company's products both on a department or enterprise-wide basis. These
licenses include electronically delivered ""software activation keys'' that enable feature conÑguration ordered
by the customer. Depending on the license type and customer preference, the software media is delivered by a
channel distributor or directly by the Company. The Company has invested, and continues to invest, in large-
account relationship professionals, license fulÑllment channels and entities with which we have service-
oriented system integration relationships to assist these larger customers with broader usage of the Company's
software infrastructure.
These large-account selling investments have contributed to an increase in sales of MetaFrame software
under these electronically delivered volume-based licensing arrangements in 2002 as compared to 2001. For
the years ended December 31, 2002 and 2001, sales under volume-based licensing arrangements constituted
5
39% and 27%, respectively, of product sales, a portion of which has been deferred. The Company plans to hire
additional end-customer sales professionals to increase its marketing eÅorts aimed at large corporate accounts.
Technology Relationships
The Company has entered into a number of technology relationships to develop customer markets for its
products, broaden the use of the ICA protocol as an emerging industry standard technology for distributed
Windows and non Windows applications and to accelerate the development of its existing and future product
lines.
Microsoft. Since its inception, the Company has had a number of license agreements with Microsoft,
including licenses relating to Microsoft OS/2, Windows 3.x, Windows for Workgroups, Windows NT,
Windows CE and Internet Explorer. These agreements have provided the Company with access to certain
Microsoft source and object code, technical support and other materials. The license agreements had an initial
term that expired in September 1994 and was subsequently extended until September 2001.
In May 1997, the Company entered into a Ñve-year joint license, development and marketing agreement
with Microsoft, (as amended, the ""Microsoft Development Agreement''), pursuant to which the Company
licensed its multi-user Windows NT extensions to Microsoft for inclusion in future versions of Windows NT
server software. Pursuant to the Microsoft Development Agreement, the Company's multi-user Windows NT
extensions technology was incorporated into Microsoft's NT Terminal Server, which was released in July
1998, and Windows 2000 Server, which was released in February 2000. Additionally, Microsoft agreed to
endorse only the Company's ICA protocol as the preferred way to provide multi-user Windows access for
devices other than Windows client devices, an obligation that expired in November 1999. Since November
1999, Microsoft has been permitted to market or endorse other methods to provide multi-user Windows access
to non-Windows client devices, and these methods compete with products of the Company. This agreement
with Microsoft expired in May 2002. See ""Management's Discussion and Analysis of Financial Condition and
Results of Operations Ì Overview,'' and ""Management's Discussion and Analysis of Financial Condition and
Results of Operations Ì Certain Factors Which May AÅect Future Results.''
In May 2002, the Company signed an agreement with Microsoft to formalize continued access to
Microsoft Windows Server source code. Under this agreement, the Company will have access to source code
for Microsoft server operating systems from Windows 2000 Server and beyond, including access to terminal
services source code, during the three-year term of the agreement. This agreement does not provide for
payments to or from Microsoft.
There can be no assurances that the Company's agreements with Microsoft will be extended or renewed
by Microsoft upon their respective expirations or that, if renewed or extended, such agreements will be on
terms favorable to the Company.
Additional Relationships. As of December 31, 2002, the Company had entered into approximately 130
ICA license agreements. Currently, more than 200 diÅerent devices incorporate Citrix ICA, ranging from
Linux terminals to information appliances, such as wireless phones and handheld devices. ICA licensees
include Wyse Technologies, Hewlett-Packard, Neoware, Fujitsu, Hitachi, Motorola, Samsung, Sharp, Symbol
Technologies and Nokia, among others.
In addition, the Citrix Business AllianceTM (""CBA'') is a coalition of industry-leading companies from
across the IT spectrum who work with the Company to design and market complementary solutions for the
Company and CBA customers. By the end of 2002, CBA membership had grown to approximately
1,200 members, including hardware, software, global and regional consulting alliances. CBA members include
Microsoft, Dell, IBM, EMC2, Hewlett-Packard, Siebel Systems, PeopleSoft, SAP AG, JD Edwards, Mercury
Interactive, Fujitsu, Verizon Wireless, Sprint PCS, Sun Microsystems and National Semiconductor.
Research and Development
The Company focuses its research and development eÅorts on developing new products and core
technologies for its markets and further enhancing the functionality, reliability, performance and Öexibility of
existing products. The Company solicits extensive input concerning product development from users, both
directly from end-customers and indirectly through its channel distributors.
6
The Company believes that its software development team and core technologies represent a signiÑcant
competitive advantage for the Company. Included in the software development team is a group focused on
research activities that include prototyping ways to integrate emerging technologies and standards into the
Company's product oÅerings, such as emerging Web services technologies and Microsoft's new Windows
Server 2003 technologies. Other groups within the software development team have expertise in XML-based
software development, multi-tier Web-based application development and deployment, secure sockets layers-
based (""SSL'') secure access, and application ""sandbox'' technologies. The software development team also
includes a number of key employees who were instrumental in the release of Microsoft's Window's NT 4.0
Terminal Server Edition, have expertise in UNIX operating system environments (Solaris, AIX, HP-UX, and
Linux), and were key members from the engineering team that developed the original version of OS/2 at
IBM. During 2002, 2001 and 2000, the Company incurred research and development expenses of approxi-
mately $68.9 million, $67.7 million and $50.6 million, respectively.
Sales, Marketing and Support
The Company markets and licenses its products through multiple channels worldwide, including value
added resellers, distributors, System Integrators (""SI''s) and Independent Software Vendors (""ISV''s),
managed by the Company's worldwide sales force. The Company provides training and certiÑcation to
integrators, value-added resellers and consultants for a full-range of MetaFrame-based application deployment
and management solutions and services through its Citrix Solutions NetworkTM (""CSN'') program.
As of December 31, 2002, the Company had relationships with approximately 100 distributors and
approximately 5,200 CSN providers worldwide. A number of entities with which the Company has channel
relationships provide additional end-customer sales channels for the Company's products under either a Citrix
brand or embedded in the licensee's own software product.
During 2002, the Company took steps to improve the eÅectiveness of its channel relationships. The
Company plans to continue to take actions to strengthen its channel relationships, including improving
channel incentive programs, eliminating non-performing channel relationships, adding new members with
expertise in selling into new vertical markets and forming additional relationships with global and regional SIs
and ISVs. SIs and ISVs are currently expected to become a more central part of Citrix's strategy in the
enterprise and government markets. New programs supporting each group were launched in 2002. The SI
program includes members such as IBM, HP, Computer Sciences Corporation, Electronic Data Systems
Corporation, Schlumberger, Siemens and Unisys. The ISV program has a strong representation across
industry verticals such as healthcare, telecom, Ñnancial, manufacturing, retail and government. Vendors in the
ISV program include Amdocs, Cerner, Dell, McKesson, Siemens Medical Health Solutions, Reynolds &
Reynolds and ESRI.
The Company's sales and marketing organization actively supports its distributors and resellers. The
Company's marketing department provides training, sales event support, sales collateral, advertising, direct
mail and public relations coverage to its indirect channels to aid in market development and in attracting new
customers. The Company's sales organization consists of Ñeld-based systems sales engineers and corporate
sales professionals. Additional sales personnel, based in North America, Europe, Africa, Asia, Australia and
South America, support these Ñeld personnel. See ""Management's Discussion and Analysis of Financial
Condition and Results of Operations Ì Results of Operations'' and Note 12 to the Company's Notes to
Consolidated Financial Statements for information regarding the Company's geographic segments. These
additional sales personnel recruit prospective customers, provide technical advice with respect to the
Company's products and work closely with key distributors and resellers of the Company's products. During
2002, the Company grew its end-customer sales force of sales professionals that work closely with medium and
large enterprise customers to achieve the appropriate combination of relationships for licensing, integration
and consulting to meet customers' needs. These and other account penetration eÅorts are part of the
Company's strategy to increase the usage of Citrix software within the customer's IT organization.
The Company provides most of its distributors with product return rights only for the purpose of stock
balancing. These transactions are estimated and provided for at the time of sale as a reduction of revenue.
Stock balancing rights permit distributors to return products to the Company, subject to ordering an equal
dollar amount of other Citrix products. The Company is not obligated to accept product returns from its
7
distributors under any other conditions, unless the product item is defective in manufacture. Product items
returned to the Company under the stock-balancing program must be in new, unused and unopened condition.
The Company also provides most of its distributors with price protection rights. Price protection rights require
that the Company grant retroactive price adjustments for inventories of Citrix products held by distributors if
the Company lowers its prices for such products within a speciÑed time period. In the event that the Company
decides to reduce its prices, it will establish a reserve to cover exposure to distributor inventory. The Company
has not reduced and has no current plans to reduce the prices of its products for inventory currently held by
distributors or resellers.
The majority of the Company's service activities are related to post-sale technical support, pre- and post-
sale consulting and product training services. Post-sale technical support is oÅered through Citrix-operated
support centers located in the United States, Ireland and Australia. The Company provides technical advice to
channel distributors and entities with which the Company has a technology relationship, who act as the Ñrst
line of technical assistance for end-customers, in most cases. In some cases, end-customers 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, the Company also provides free
technical advice through on-line support systems, including its Web-based ""Knowledge Center.'' For pre- and
post-sale consulting, Citrix Consulting Services (""CCS''), a consulting services organization, provides both
exploratory and fee-based consulting services. These services include on-site systems design and implementa-
tion services targeted primarily at enterprise-level clients with complex IT environments. The CCS organiza-
tion is also responsible for the development of best practice knowledge that is disseminated to businesses with
which Citrix has a business relationship and end-customers through training and written documentation.
Leveraging these best practices enables the Company's integration resellers to provide more complex systems,
reach new buyers within existing customer organizations and provide more sophisticated system proposals to
prospective customers. Training services in selling techniques and technical expertise areas are provided
through the Company's CALC program, which includes approximately 300 of the world's leading IT training
organizations. These training programs are designed for businesses and end-customers and include courses for
system administration and advanced system integration. CALCs are staÅed with instructors that have been
certiÑed by Citrix and teach their students using Citrix-developed courseware.
Operations
The Company controls all purchasing, inventory, scheduling, order processing and accounting functions
related to its operations. Production, warehousing and shipping are performed both internally and by
independent contractors on a purchase order basis in the United States and in Ireland, depending upon the
customer's geographic market. Master software CD-ROMs, development of user manuals, packaging designs,
initial product quality control and testing are performed at the Company's facilities. In some cases,
independent contractors duplicate CD-ROMs, print documentation, and package and assemble product to the
Company's speciÑcations. To date, the Company has not experienced any material diÇculties or delays in the
manufacture and assembly of its products. Internal manufacturing capabilities and independent contractors
provide a redundant source of manufacture and assembly.
The Company generally ships products upon receipt of an order. As a result, the Company does not have
signiÑcant backlog at any given time, and does not consider backlog to be a signiÑcant indicator of future
performance.
Competition
The Company believes that other software companies have entered or could enter the market with
solutions that involve a similar approach to the Citrix access infrastructure software. In particular, Tarantella
Inc., GraphOn Corporation, Netilla Networks, Inc., and New Moon Systems, Inc. market products that claim
to have functions similar to those found in Citrix MetaFrame.
In addition, alternative products exist that directly or indirectly compete with the Company's products
and anticipated future product oÅerings. Existing or new products that extend Internet software to provide
database access or interactive computing could materially impact the Company's ability to sell its products in
this market. Competitors in this market include Microsoft, IBM, Oracle, Sun Microsystems and other makers
8
of Web-application software. As markets for the Company's products continue to develop, additional
companies, including companies with signiÑcant market presence in the computer hardware, software and
networking industries could enter the markets in which the Company competes and further intensify
competition. These competitors and other potential competitors often have signiÑcantly greater Ñnancial,
technical, sales, marketing, support and other resources than the Company. There can be no assurance that
the Company will be able to establish and maintain a market position in the face of increased competition.
Additionally, price competition could become more signiÑcant in the future; although the Company believes
that price has historically been a less signiÑcant competitive factor than product performance, reliability and
functionality. The Company may not be able to maintain its historic prices, which could adversely aÅect the
Company's business, results of operations and Ñnancial condition.
See ""Ì Technology Relationships'' and ""Management's Discussion and Analysis of Financial Conditions
and Results of Operations Ì Certain Factors Which May AÅect Future Results.'' The announcement of the
release, and the actual release, of products competitive to the Company's existing and future product lines,
could cause existing and potential customers of the Company to postpone or cancel plans to license certain of
the Company's existing and future product oÅerings, which would adversely impact the Company's business,
results of operations and Ñnancial condition.
Proprietary Technology
The Company's success is dependent upon certain proprietary technologies and core intellectual property.
The Company has been awarded a number of domestic and foreign patents and has a number of pending
patent applications in the United States and foreign countries. The Company's technology is also protected
under copyright laws. However, patent protection and existing copyright laws aÅord only limited protection for
the Company's technology. In addition, the laws of some foreign countries do not protect the Company's
proprietary rights to the same extent, as do the laws of the United States. Accordingly, the Company also
relies on trade secret protection and conÑdentiality and proprietary information agreements to protect its
proprietary technology. The Company has trademarks or registered trademarks in the United States and other
countries, including Citrix», ICA», MetaFrame», MetaFrameXPTM and the Citrix» logo. The loss of any
material trade secret, trademark, trade name or copyright could have a material adverse eÅect on the
Company. There can be no assurance that the Company's eÅorts to protect its proprietary technology rights
will be successful. Despite the Company's precautions, it could be possible for unauthorized third parties to
copy certain portions of the Company's products or to obtain and use information that the Company regards as
proprietary. A signiÑcant portion of the Company's sales is derived from the licensing of Company packaged
products under ""shrink wrap'' and ""click-to-accept'' electronic license agreements that are not signed by
licensees and volume-based licensing agreements that are delivered electronically, all of which could be
unenforceable under the laws of many jurisdictions in which the Company licenses its products. Additionally,
third parties have asserted infringement claims against the Company and, as the number of products and
competitors in its industry segments increases and the functionality of these products overlap, the Company
could become increasingly subject to infringement claims. Companies and inventors are more frequently
seeking to patent software and business methods because of developments in the law that could extend the
ability to obtain such patents. As a result, the Company could receive more patent infringement claims.
Responding to any infringement claim, regardless of its validity, could result in costly litigation or require the
Company to obtain a license to intellectual property rights of those third parties. Licenses may not be available
on reasonable terms or at all. In addition, attention to these claims could divert management's time and
attention from developing the Company's business. Although the Company does not believe that its products
infringe on the rights of third parties, if a successful claim is made against the Company and the Company
fails to develop or license a substitute technology, the Company's business, results of operations, Ñnancial
condition or cash Öows could be materially adversely aÅected.
While the Company's competitive position could be aÅected by its ability to protect its proprietary
information, the Company believes that because of the rapid pace of technological change in the industry,
factors such as the technical expertise, knowledge and innovative skill of the Company's management and
technical personnel, its technology relationships, name recognition, the timeliness and quality of support
services provided by the Company and its ability to rapidly develop, enhance and market software products
9
could be more signiÑcant in maintaining the Company's competitive position. See ""Management's Discussion
and Analysis of Financial Condition and Results of Operations Ì Certain Factors Which May AÅect Future
Results.''
Available Information
The Company's Internet address is http://www.citrix.com. The Company makes available, free of
charge, on or through the Company's Internet website its annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, proxy statement on Form DEF 14A and any amendments to those
reports Ñled or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act as soon as
reasonably practicable after such material is electronically Ñled with or furnished to the SEC.
Employees
As of December 31, 2002, the Company had approximately 1,670 employees. The Company believes its
relations with employees are good. The Company's relations with its French employees are governed by
certain labor regulations in the region.
ITEM 2. PROPERTIES
The Company's corporate oÇces are located in Fort Lauderdale, Florida. The Company has either
subleased or plans to sublease certain of the space in various buildings for the remainder of their respective
lease terms. The Company's corporate oÇces occupy leased and subleased oÇce space totaling approximately
390,000 square feet, including leased space under the Company's synthetic lease. For more information
regarding the Company's synthetic lease, see ""Management's Discussion and Analysis of Financial Condition
and Results of Operations Ì Liquidity and Capital Resources'' and Note 10 to the Consolidated Financial
Statements. In addition, the Company leases approximately 139,000 square feet of oÇce space in other
locations in the United States and Canada.
The Company leases and subleases a total of approximately 238,000 square feet of oÇce space in various
other facilities in Europe, Latin America and the Asia PaciÑc region. In addition, the Company owns land and
buildings in the United Kingdom with approximately 48,000 square feet of oÇce space.
ITEM 3. LEGAL PROCEEDINGS
In February 2002, a stockholder Ñled a complaint (the ""Complaint'') in the Court of Chancery of the
State of Delaware against the Company and certain of its current and former oÇcers and directors. The
Complaint purported to state a direct claim on behalf of a putative class of stockholders and a derivative claim
nominally on behalf of the Company for breach of Ñduciary duty based on the Company's alleged failure to
disclose all material information concerning the Company's business and operations in connection with a
proposal to be voted on at the Company's annual meeting of stockholders in May 2000. The Complaint
asserted claims similar to those alleged by such stockholder in a suit that was Ñled in September 2000, and
subsequently voluntarily dismissed without prejudice in July 2001. The Complaint sought compensatory
damages, rescission of the Company's 2000 Director and OÇcer Stock Option and Incentive Plan, and other
related relief. The parties have since agreed to a non-monetary settlement of the action not involving the
validity of the 2000 Director and OÇcer Stock Option and Incentive Plan. The settlement is subject to
approval by the court. A hearing on the approval of the settlement has not yet been scheduled.
In addition, the Company is a defendant in various matters of litigation generally arising out of the
normal course of business. Although it is diÇcult to predict the ultimate outcome of these cases, management
believes, based on discussions with counsel, that any ultimate liability would not materially aÅect the
Company's Ñnancial position, result of operations or cash Öows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Price Range of Common Stock and Dividend Policy
The Company's Common Stock is currently traded on The Nasdaq National Market under the symbol
""CTXS.'' The following table sets forth the high and low closing prices for the Company's Common Stock as
reported on The Nasdaq National Market for the periods indicated, as adjusted to the nearest cent. Such
information reÖects inter-dealer prices, without retail markup, markdown or commission and may not
represent actual transactions.
High
Low
Year Ended December 31, 2003:
First quarter (through March 7, 2003) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $14.76
$11.59
Year Ended December 31, 2002:
Fourth quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $13.33
Third quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 6.52
Second quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $17.39
First quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $23.98
Year Ended December 31, 2001:
Fourth quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $25.80
Third quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $36.69
Second quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $34.90
First quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $36.63
$ 5.87
$ 5.00
$ 5.51
$13.50
$19.81
$18.38
$18.19
$17.31
On March 7, 2003, the last reported sale price of the Common Stock on The Nasdaq National Market
was $11.65 per share. As of March 7, 2003, there were approximately 1,129 holders of record of the Common
Stock.
The Company currently intends to retain any earnings for use in its business and to repurchase shares of
its Common Stock. The Company does not currently anticipate paying any cash dividends on its capital stock
in the foreseeable future.
In connection with the Company's stock repurchase program, in October 2000, the Board of Directors
approved a program authorizing the Company to sell put warrants that entitle the holder of each warrant to
sell to the Company, generally by physical delivery, one share of the Company's Common Stock at a speciÑed
price. See ""Management's Discussion and Analysis of Financial Condition and Results of Opera-
tions Ì Liquidity and Capital Resources,'' for information regarding the Company's sale of put warrants
during 2002. The issuance of these securities is exempt from registration under Section 4(2) of the Securities
Act of 1933.
11
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
2002
Year Ended December 31,
2000
(In thousands, except per share data)
1999
2001
1998
Consolidated Statements of Income Data:
Net revenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cost of revenues (excluding amortization, presented
separately below) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Gross marginÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Operating expenses:
Research and development ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Sales, marketing and support ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
General and administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Amortization of intangible assets(a) ÏÏÏÏÏÏÏÏÏÏÏ
In-process research and developmentÏÏÏÏÏÏÏÏÏÏÏ
Write-down of technology(b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 527,448
$ 591,629
$ 470,446
$ 403,285
$ 248,636
19,030
29,848
29,054
14,579
16,682
508,418
561,781
441,392
388,706
231,954
68,923
235,393
88,946
11,296
Ì
Ì
67,699
224,108
85,212
48,831
2,580
Ì
50,622
180,384
58,685
30,395
Ì
9,081
37,363
121,302
37,757
18,480
2,300
Ì
22,858
74,855
20,131
10,190
18,416
Ì
Total operating expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
404,558
428,430
329,167
217,202
146,450
Income from operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other expense, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income before income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Diluted earnings per share(c)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
103,860
30,943
(18,163)
(3,483)
113,157
19,237
133,351
42,006
(20,553)
(2,253)
152,551
47,291
112,225
41,313
(17,099)
(1,422)
135,017
40,505
171,504
25,302
(12,532)
(1,549)
182,725
65,781
$
$
93,920
$ 105,260
0.52
$
0.54
$
$
94,512
$ 116,944
0.47
$
0.61
$
$
85,504
10,878
(133)
(777)
95,472
34,370
61,102
0.33
Diluted weighted-average shares outstanding(c)(d)
179,359
194,498
199,731
192,566
182,594
Consolidated Balance Sheet Data:
Working capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Long term debt, capital lease obligations, put
warrants and common stock subject to
repurchase ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Stockholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2002
2001
December 31,
2000
(In thousands)
1999
1998
$ 186,410
1,161,531
$ 153,554
1,208,230
$ 427,344
1,112,573
$ 433,249
1,037,857
$ 158,900
431,380
350,024
614,590
362,768
647,330
346,229
592,875
313,940
533,070
48
297,454
(a) On January 1, 2002, the Company adopted Statement of Financial Accounting Standards (""SFAS'')
No. 142, Goodwill and Other Intangible Assets. Pursuant to SFAS No. 142, the Company ceased
amortizing goodwill. See Note 2 to the Company's consolidated Ñnancial statements.
(b) In the fourth quarter of 2000, the Company recorded impairment write-downs of previously acquired core
technology of $9.1 million, as further discussed in ""Management's Discussion and Analysis of Financial
Condition and Results of Operations Ì Results of Operations.''
(c) Diluted earnings per share and diluted weighted-average shares outstanding have been adjusted to reÖect
the two-for-one stock split in the form of a stock dividend declared on May 17, 1996 and paid on June 4,
1996 to holders of record of the Company's Common Stock on May 28, 1996; the three-for-two stock
split in the form of a stock dividend declared on January 25, 1998 and paid on February 20, 1998 to
holders of record of the Company's Common Stock on February 12, 1998; the two-for-one stock split in
12
the form of a stock dividend declared on March 1, 1999 and paid on March 25, 1999 to holders of record
of the Company's Common Stock on March 17, 1999; and the two-for-one stock split in the form of a
stock dividend declared on January 19, 2000 and paid on February 16, 2000 to holders of record of the
Company's Common Stock on January 31, 2000.
(d) Pursuant to the Company's stock repurchase programs, the eÅect on the calculation of weighted average
shares outstanding from repurchase activities was 8.2 million, 3.2 million and 0.8 million in 2002, 2001
and 2000, respectively. There were no stock repurchases prior to 2000.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
We develop, market, license and support access infrastructure software and services that enable eÅective
and eÇcient enterprise-wide deployment and management of applications and information, including those
designed for Microsoft Windows operating systems, for UNIX operating systems, such as Sun Solaris,
HP-UX or IBM-AIX, or collectively UNIX operating systems, and for Web-based information systems. Our
largest source of revenue is the MetaFrame XPTM Presentation Server products. Our MetaFrame products,
which we began shipping in the second quarter of 1998, permit organizations to provide access to Windows
based, Web-based, and UNIX applications without regard to location, network connection or type of client
hardware platforms. We market and license our products through multiple channels such as value-added
resellers, distributors, system integrators and independent software vendors, managed by our worldwide sales
force. We also promote our products through relationships with a wide variety of industry participants,
including Microsoft Corporation.
In May 1997, we entered into a Ñve-year joint license, development and marketing agreement with
Microsoft, which expired in May 2002. Under that agreement, or the Microsoft Development Agreement, we
licensed our multi-user Windows NT extensions to Microsoft for inclusion in certain versions of its Windows
NT server software. We recognized revenue from the Microsoft Development Agreement ratably over the
Ñve-year term of the contract in other revenues in the accompanying consolidated statements of income.
In May 2002, we signed an agreement with Microsoft to formalize continued access to Microsoft
Windows Server source code. Under this agreement, we will have access to source code for current and future
Microsoft server operating systems from Windows 2000 Server and beyond, including access to terminal
services source code, during the three-year term of the agreement. This agreement does not provide for
payments to or from Microsoft.
Acquisitions
We have acquired technology related to our strategic objectives. In April 2001, we acquired Sequoia
Software Corporation for $182.6 million in cash. Sequoia provided XML-based portal software. The Sequoia
technology is a core component of our MetaFrame Secure Access Manager software that was launched in
June 2002 as NFuse Elite.
In February 2000, we acquired all of the operating assets of Innovex Group, Inc. for approximately
$47.8 million. On the date of the acquisition, we paid approximately $28.9 million in cash, including closing
costs. Under the terms of the acquisition agreement, we were required to pay the remaining purchase price,
plus interest, if certain events occurred. During 2001, these events occurred and, as a result, we paid the
remaining purchase price and the associated interest of $10.5 million in cash in August 2001 and $10.7 million
in cash in February 2002. We have no remaining contingent obligations.
We accounted for these acquisitions under the purchase method of accounting in accordance with
Accounting Principles Board, or APB, Opinion No. 16, Accounting for Business Combinations. We allocated
the cost of the acquisitions to the assets acquired and the liabilities assumed based on their estimated fair
values. Except for the Innovex acquisition, a portion of the acquired intangible assets were related to research
and development that had not reached technological feasibility and for which there was no alternative future
use.
Critical Accounting Policies and Estimates
Our discussion and analysis of Ñnancial condition and results of operations are based upon our
consolidated Ñnancial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these Ñnancial statements requires us to make
estimates and judgments that aÅect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent liabilities. We base these estimates on our historical experience and on various
14
other assumptions that we believe to be reasonable under the circumstances, and these estimates form the
basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent
from other sources. We periodically evaluate these estimates and judgments based on available information
and experience. Actual results could diÅer from our estimates under diÅerent assumptions and conditions. If
actual results signiÑcantly diÅer from our estimates, our Ñnancial condition and results of operations could be
materially impacted.
We believe that the accounting policies described below are critical to understanding our business, results
of operations and Ñnancial condition because they involve more signiÑcant judgments and estimates used in
the preparation of our consolidated Ñnancial statements. We have discussed the development, selection and
application of our critical accounting policies with the audit committee of our board of directors, and our audit
committee has reviewed our disclosure relating to our critical accounting policies in this ""Management's
Discussion and Analysis of Financial Condition and Results of Operations.''
Other signiÑcant accounting policies, primarily those with lower levels of uncertainty than those discussed
below, are also critical to understanding our consolidated Ñnancial statements. The notes to our consolidated
Ñnancial statements contain additional information related to our accounting policies and should be read in
conjunction with this discussion.
Cash Equivalents and Investments. The fair value of certain of our cash equivalents and investments is
dependent on the performance of the companies or funds in which we invest, including equity investments that
are accounted for under the cost method due to the limited extent of our ownership interest and lack of our
ability to exert signiÑcant inÖuence, and the volatility inherent in these investment markets. We periodically
evaluate the carrying value of our investments to determine if there has been any impairment of value that is
other-than-temporary, which would require us to write-down the investments. In assessing potential impair-
ment, we consider the extent to which recorded costs exceed market values, the duration of any decline in
market values and the forecasted Ñnancial performance of the issuers. During the year ended December 31,
2002, we recorded $1.3 million and during the year ended December 31, 2001, we recorded $7.7 million of
write-downs resulting from other-than-temporary declines in fair value of certain of our investments. At
December 31, 2002, we had $0.2 million in remaining equity investments classiÑed as long-term investments
in our consolidated balance sheet. For further information regarding risks related to our cash and investments
balances, see ""Management's Discussion and Analysis of Financial Condition and Results of Operations Ì
Liquidity and Capital Resources,'' ""Quantitative and Qualitative Disclosures About Market Risk'' and note 2
to our consolidated Ñnancial statements.
We rely on third party valuations in order to adjust the carrying value of certain of our investments and
derivative instruments 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 investments.
At December 31, 2002, approximately $63 million in investment securities were pledged as collateral for
speciÑed obligations under our synthetic lease. In addition, at December 31, 2002, approximately $109 million
in investment securities were pledged as collateral for our credit default contracts. We maintain the ability to
manage the composition of the pledged investments and accordingly, these securities are not reÖected as
restricted investments in our accompanying consolidated balance sheets. For further information see notes 10
and 13 to our consolidated Ñnancial statements.
Provision for Doubtful Accounts Receivable. Our judgment is required in the assessment of the
collectibility of our customer accounts and other receivables. We provide for potential uncollectible accounts
receivable based on an evaluation of customer speciÑc information, historical collection experience and
economic market conditions. If market conditions decline, or if the Ñnancial condition of our customers or
distributors deteriorates, actual collection experience may not meet our prior expectations and could result in
increased bad debt expenses. The allowance for doubtful accounts receivable was $6.1 million at Decem-
ber 31, 2002 and $3.7 million at December 31, 2001. The increase during 2002 represents reserves based on
the Ñnancial condition of certain distributors, none of which are individually signiÑcant. In previous years our
bad debt write-oÅs have not been signiÑcant.
15
Long-lived Assets. The determination of the useful lives of our long-lived assets and whether an asset's
value is impaired involves signiÑcant judgment. These judgments include, but are not limited to obsolescence,
market conditions and contract life. Useful lives of internal use software, property and equipment are generally
from three to seven years. We depreciate buildings over a 40-year period.
We review for impairment of long-lived assets and certain identiÑable intangible assets to be held and
used whenever we believe that events or changes in circumstances indicate that we may not fully recover the
carrying amount of such assets. Determination of recoverability is based on an estimate of undiscounted future
cash Öows resulting from the use of the asset and its eventual disposition. We base measurement of an
impairment loss for long-lived assets and certain identiÑable intangible assets that our management expects to
hold and use on the fair value of the asset. We report long-lived assets and certain identiÑable intangible assets
to be disposed of at the lower of the carrying amount or fair value minus the costs to sell such assets. During
2002, we recognized $2.0 million in asset impairment charges primarily due to the consolidation of certain of
our oÇces that resulted in the abandonment of certain leasehold improvements. As of December 31, 2002, we
have determined that there were no other triggering events requiring additional impairment analysis.
EÅective January 1, 2002, we adopted Statement of Financial Accounting Standard, or SFAS, No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, which establishes a single accounting model
for the impairment or disposal of long-lived assets, including discontinued operations. SFAS No. 144
supersedes SFAS No. 121 and APB Opinion No. 30, Reporting the Results of Operations Ì Reporting the
EÅects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions. Our adoption of these policies did not have a material impact on our consolidated
results of operations and Ñnancial position.
Core and Product Technology Assets. We review acquired core and product technology assets for
impairment on a periodic basis by comparing the estimated net realizable value to the unamortized cost of the
technology. The core and product technology assets acquired in our Sequoia acquisition form the basis for our
MetaFrame Secure Access Manager product, launched in June 2002 as NFuse Elite. The recoverability of
this technology is primarily dependent upon our ability to commercialize these products. The estimated net
realizable value of the purchased Sequoia technology is based on the estimated undiscounted future cash Öows
associated with our MetaFrame Secure Access Manager. Our revenues are forecasted based on data received
from pilot evaluations and early adopters, rate projections on our installed customer base, and estimates from
our sales channels and end-customer sales force. Our assumptions about future revenues and expenses require
signiÑcant judgment associated with the forecast of MetaFrame Secure Access Manager. Due to the lack of
historical data related to MetaFrame Secure Access Manager, actual revenues and costs could vary
signiÑcantly from these forecasted amounts. As of December 31, 2002, we estimated that the net realizable
value of these core and product technology assets is greater than the $24.5 million unamortized cost of these
assets. If these products are not ultimately accepted by our channel or entities with which we have technology
relationships or customers, and there is no alternative future use for this technology, we could determine that
some or all of the remaining $24.5 million carrying value of the related core and product technology assets are
impaired. In the event of impairment, we could be required to incur a charge to earnings that could have a
material adverse eÅect on our results of operations.
Goodwill and Other Intangibles. At December 31, 2002, we had $152.4 million in indeÑnite lived
goodwill and other intangibles primarily related to our acquisition of Sequoia. We operate in a single market
consisting of the design, development, marketing and support of access infrastructure software and services for
enterprise applications. Our revenues are derived from sales in the Americas, Europe, the Middle East and
Africa, or EMEA, and Asia-PaciÑc regions. These three geographic regions constitute our reportable
segments. See note 12 to our consolidated Ñnancial statements for additional information regarding our
geographic segments. We evaluate goodwill along these geographic segments. Substantially all of our goodwill
at December 31, 2002 was associated with our Americas reportable segment.
On January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets. As a result of
adopting SFAS No. 142, our goodwill and certain intangible assets are no longer amortized but are subject to
an annual impairment test. In accordance with SFAS No. 142, we ceased amortizing goodwill with a net book
16
value at January 1, 2002 of $152.4 million, including $10.1 million of acquired workforce previously classiÑed
as purchased intangible assets. Excluding goodwill, we have no intangible assets deemed to have indeÑnite
lives.
We use judgment in assessing goodwill and other intangible assets for impairment. Goodwill is reviewed
for impairment annually, or sooner if events or changes in circumstances indicate that the carrying amount
could exceed fair value. Fair values are based on discounted cash Öows using a discount rate determined by our
management to be consistent with industry discount rates and the risks inherent in our current business model.
As of December 31, 2002, we concluded that we could realize our goodwill and other intangibles based upon
projected discounted cash Öows. Due to uncertain market conditions and potential changes in our strategy and
product portfolio, it is possible that the forecasts we use to support our goodwill and other intangible assets
could change in the future, which could result in non-cash charges that would adversely aÅect our results of
operations and Ñnancial condition.
Current and Deferred Tax Assets. 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 Ñnancial statements. We
determined the $55.1 million carrying value of our net deferred tax assets based upon certain estimates and
assumptions, including the assumption that we will be able to generate enough future tax deductions in certain
tax jurisdictions. If these estimates and assumptions change in the future, we could be required to record
valuation allowances against our deferred tax assets resulting in additional income tax expenses.
Revenue Recognition. The accounting related to revenue recognition in the software industry is complex
and aÅected by interpretations of the rules and an understanding of industry practices, both of which are
subject to change. As a result, revenue recognition accounting rules require us to make signiÑcant judgments.
In addition, our judgment is required in assessing the probability of collection, which is generally based on
evaluation of customer speciÑc information, historical collection experience and economic market conditions.
We market and license software products through value-added resellers, channel distributors, system
integrators and independent software vendors, managed by our worldwide sales force. Our software licenses
are generally perpetual, and are delivered by means of traditional packaged products and electronically,
typically under volume-based licensing programs. Our packaged products are typically purchased by medium
and small-sized businesses with fewer locations and the software license is delivered with the packaged
product.
Volume-based license arrangements are used with more complex multi-server environments typically
found in larger business enterprises that deploy our products on a department or enterprise-wide basis, which
could require diÅerences in product features and functionality at various customer locations. The end-
customer license agreement with enterprise customers is typically customized based on these factors. Once we
receive a purchase order from the channel distributor, the volume-based licenses are electronically delivered to
the customer with ""software activation keys'' that enable the feature conÑguration ordered by the end-
customer. Depending on the size of the enterprise, software may be delivered indirectly by the channel
distributor or directly by us pursuant to a purchase order from the channel distributor.
We recognize revenue when it is earned. Our revenue recognition policies are in compliance with the
American Institute of CertiÑed Public Accountants Statement of Position, or SOP, 97-2 (as amended by SOP
98-4 and SOP 98-9) and related interpretations, Software Revenue Recognition. We recognize revenue when
all of the following criteria are met: persuasive evidence of the arrangement exists; delivery has occurred and
we have no remaining obligations; the fee is Ñxed or determinable; and collectibility is probable. We deÑne
these four criteria as follows:
‚ Persuasive evidence of the arrangement exists. We recognize revenue on packaged product upon
shipment to distributors and resellers. For packaged product sales, it is our customary practice to
require a purchase order from distributors who have previously negotiated a master packaged product
distribution or resale agreement. For volume-based licensing, we typically require a purchase order
from the distributor or reseller and an executed standard software license agreement from the end-
customer. We require a purchase order for training and services.
17
‚ Delivery has occurred and we have no remaining obligations. Our standard delivery method is free-on-
board shipping point. Consequently, we consider delivery of our packaged product to have occurred
when the products are shipped to distributors pursuant to an agreement and purchase order. We
consider delivery of licenses under electronic licensing agreements to have occurred when the related
products are shipped and the end-customer has been electronically provided with the licenses that
include the activation keys that allow the end-customer to take immediate possession of the software.
For training and service revenue recognition, we fulÑll our obligation when the services are performed.
‚ The fee is Ñxed or determinable. In the normal course of business, we do not provide end-customers
the right to a refund of any portion of their license fees or extended payment terms. When we sell our
software products separately, we determine vendor speciÑc objective evidence, or VSOE, by the price
charged for each product. In software arrangements that include the rights to multiple software
products, post-contract customer support, or PCS, and/or other services, we allocate the total
arrangement fee among each deliverable based on the relative fair value of each of the deliverables
based on VSOE. If we cannot objectively determine the fair value of each undelivered element based
on VSOE, we defer revenue until all elements are delivered, all services have been performed, or until
fair value can be objectively determined.
‚ Collectibility is probable. We determine collectibility on a customer-by-customer basis. We typically
sell to distributors or resellers for whom there are histories of successful collection. New customers are
subject to a credit review process that evaluates the customers' Ñnancial position and ultimately their
ability to pay. Customers are subject to an ongoing credit review process. If we determine from the
outset of an arrangement that collectibility is not probable, we defer revenue recognition until customer
payment is received and the other parameters of revenue recognition described above have been
achieved. Our judgment is required in assessing the probability of collection, which is generally based
on evaluation of customer speciÑc information, historical experience and economic market conditions.
If market conditions decline, or, if the Ñnancial condition of our distributors or end-customers
deteriorates, we may be unable to determine that collectibility is probable, and we could be required to
defer the recognition of revenues until we receive customer payment.
For certain software products that are only sold bundled with PCS, we allocate revenue to the delivered
software product using the residual method. Under the residual method, we do not sell the software products
separately and thus we are generally unable to determine VSOE of fair value for the product. Therefore, we
allocate discounts inherent in the arrangement entirely to the software product and the portion of the fee
initially allocated to PCS and deferred is generally higher than in arrangements with established VSOE for the
software product. Depending on future product releases or changes in customer demand, we may oÅer
additional products that are only sold bundled with PCS. If we do this, the use of the residual method will
become more prevalent, which could impact the timing of our revenue recognition since more of the sales
proceeds would be allocated to the PCS portion of the arrangement and recognized over the PCS period. We
also sell PCS separately through our Citrix Subscription Advantage renewal program, and we determine
VSOE by the renewal price charged. We base technical service and PCS revenues from customer
maintenance fees for ongoing customer support and product updates and upgrades on the price charged or
derived value of the undelivered elements and are recognized ratably over the term of the contract, which is
typically 12 to 24 months. We include technical service revenues in net revenues in the consolidated
statements of income.
In the normal course of business, we do not permit product returns, but we do provide most of our
distributors and value added resellers with stock balancing and price protection rights. Stock balancing rights
permit distributors to return products to us, subject to ordering an equal dollar amount of our products. Price
protection rights require that we grant retroactive price adjustments for inventories of our products held by
distributors or resellers if we lower our prices for such products. We establish provisions for estimated returns
for stock balancing and price protection rights, as well as other sales allowances, concurrently with the
recognition of revenue. The provisions are established based upon consideration of a variety of factors,
including, among other things, historical return rates for both speciÑc products and distributors, estimated
distributor inventory levels by product, the impact of any new product releases and projected economic
conditions. Actual product returns for stock balancing and price protection provisions incurred are, however,
18
dependent upon future events, including the amount of stock balancing activity by our distributors and the
level of distributor inventories at the time of any price adjustments. We continually monitor the factors that
inÖuence the pricing of our products and distributor inventory levels and makes adjustments to these
provisions when we believe actual returns and other allowances could diÅer from established reserves. Our
ability to recognize revenues upon shipment to our distributors is predicated on our ability to reliably estimate
future product returns and rotation. If actual return experience or changes in market condition impairs our
ability to estimate returns and rotation, we would be required to defer the recognition of revenue until the
delivery of the product to the end-user customer. Allowances for estimated product returns amounted to
approximately $10.5 million at December 31, 2002 and $8.3 million at December 31, 2001. We have not
reduced and have no current plans to reduce our prices for inventory currently held by distributors or resellers.
Accordingly, there were no reserves required for price protection at December 31, 2002 or 2001. We record
estimated reductions to revenue for customer programs and incentive oÅerings including volume-based
incentives. If market conditions were to decline, we could take actions to increase our customer incentive
oÅerings and possibly result in an incremental reduction to our revenue at the time the incentive is oÅered.
Accounting for Stock-Based Compensation. SFAS No. 123, Accounting for Stock-Based Compensation,
deÑnes a fair value method of accounting for issuance of stock options and other equity instruments. Under the
fair value method, compensation cost is measured at the grant date based on the fair value of the award and is
recognized over the service period, which is usually the vesting period. Pursuant to SFAS No. 123, companies
are not required to adopt the fair value method of accounting for employee stock-based transactions.
Companies are permitted to account for such transactions under APB Opinion No. 25, Accounting for Stock
Issued to Employees, but are required to disclose in a note to the consolidated Ñnancial statements pro forma
net income and per share amounts as if a company had applied the methods prescribed by SFAS No. 123.
We apply APB Opinion No. 25 and related interpretations, which do not require us to recognize
compensation cost, in accounting for stock options granted to employees and non-employee directors, and we
have complied with the disclosure requirements of SFAS No. 123. Except for non-employee directors, we
have not granted any options to non-employees. For further information regarding our stock option plans, see
note 6 to our consolidated Ñnancial statements.
The following discussion relating to the individual Ñnancial statement captions, our overall Ñnancial
performance, operations and Ñnancial position should be read in conjunction with the factors and events
described in ""Management's Discussion and Analysis of Financial Condition and Results of Operations Ì
Overview'' and ""Management's Discussion and Analysis of Financial Condition and Results of Operations Ì
Certain Factors Which May AÅect Future Results'' which could impact our future performance and Ñnancial
position.
19
Results of Operations
The following table sets forth our consolidated statements of income data and presentation of that data as
a percentage of change from period-to-period.
Year Ended December 31,
2001
2000
2002
2002
Compared to
2001
2001
Compared to
2000
Net revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cost of revenues (excluding amortization,
$527,448
$591,629
$470,446
(10.8)%
25.8%
presented separately below) ÏÏÏÏÏÏÏÏÏÏÏ
19,030
29,848
29,054
Gross margin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Operating expenses:
508,418
561,781
441,392
Research and developmentÏÏÏÏÏÏÏÏÏÏÏÏ
Sales, marketing and support ÏÏÏÏÏÏÏÏÏÏ
General and administrativeÏÏÏÏÏÏÏÏÏÏÏÏ
Amortization of intangible assetsÏÏÏÏÏÏÏ
In-process research and development ÏÏÏ
Write-down of technology ÏÏÏÏÏÏÏÏÏÏÏÏ
68,923
235,393
88,946
11,296
Ì
Ì
67,699
224,108
85,212
48,831
2,580
Ì
50,622
180,384
58,685
30,395
Ì
9,081
Total operating expensesÏÏÏÏÏÏÏÏÏÏÏÏ
404,558
428,430
329,167
Income from operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other expense, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
103,860
30,943
(18,163)
(3,483)
Income before income taxes ÏÏÏÏÏÏÏÏÏÏÏÏ
Income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
113,157
19,237
133,351
42,006
(20,553)
(2,253)
152,551
47,291
112,225
41,313
(17,099)
(1,422)
135,017
40,505
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 93,920
$105,260
$ 94,512
(36.2)
(9.5)
1.8
5.0
4.4
(76.9)
*
*
(5.6)
(22.1)
(26.3)
(11.6)
54.6
(25.8)
(59.3)
(10.8)
2.7
27.3
33.7
24.2
45.2
60.7
*
*
30.2
18.8
1.7
20.2
58.4
13.0
16.8
11.4
* not meaningful.
Net Revenues. Our operations consist of the design, development, marketing and support of access
infrastructure software and services that enable eÅective and eÇcient enterprise-wide deployment and
management of applications and information.
We present net revenues in the following three categories outlined below: License Revenue, Technical
Services Revenue, and Royalty Revenue. License Revenue primarily represents fees related to the licensing of
our MetaFrame products, Subscription Advantage (our terminology for PCS), additional user licenses and
management products (such as load balancing and resource management products). Technical Services
Revenue consists primarily of technical support services, product training and certiÑcation, and consulting
services related to implementation of our software products. We recognize Technical Services and PCS
revenues from customer maintenance fees or ongoing customer support ratably over the term of the contract,
which is typically 12 to 24 months. Royalty Revenue represents the fees recognized in connection with the
Microsoft Development Agreement, which expired in May 2002.
The decrease in net revenues in 2002 was due primarily to a decrease in the number of MetaFrame
licenses sold, which resulted from a decrease in packaged product sales due to an overall weakness in
information technology spending and a reduction in packaged product inventory held by our distributors. In
the near term, we do not anticipate further material reductions in packaged product inventory held by our
distributors. The decrease in packaged product sales was partially oÅset by an increase in volume-based
licensing sales, mainly to medium and large customers. In addition, the decrease in net revenue also resulted
20
from a signiÑcant decline in Royalty Revenue due to the expiration of the Microsoft Development Agreement
in May 2002.
The increase in net revenues in 2001 was primarily attributable to an increase in License Revenue
resulting from an increase in the number of MetaFrame licenses sold for Windows operating systems,
speciÑcally due to market acceptance of our MetaFrame XP access infrastructure software introduced in
February 2001. The increase in net revenues in 2001 also resulted from an increase in Technical Services
Revenue due primarily to an increase in larger scale volume-based licensing arrangements that typically
require professional services to ensure successful implementation of our technologies.
Deferred revenues as of December 31, 2002 primarily related to Citrix Subscription Advantage and
Technical Services revenues. Excluding those deferred revenues associated with the Microsoft Development
Agreement, deferred Citrix Subscription Advantage and Technical Services Revenues increased approxi-
mately $32 million as compared to December 31, 2001. This increase was due primarily to increased renewals
of Citrix Subscription Advantage.
An analysis of our net revenues is presented below:
Year Ended December 31,
2001
2000
2002
Revenue
Growth
2001 to 2002
Revenue
Growth
2000 to 2001
License Revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Technical Services RevenueÏÏÏÏÏÏÏÏÏÏÏÏÏ
Royalty Revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$468,827
44,539
14,082
$511,147
40,652
39,830
$400,156
30,392
39,898
(8.3)%
9.6
(64.6)
Net Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$527,448
$591,629
$470,446
(10.8)
27.7%
33.8
(0.2)
25.8
International and Segment Revenues.
International revenues (sales outside of the United States)
accounted for approximately 53.7% of our net revenues for the year ended December 31, 2002, 48.0% of our
net revenues for the year ended December 31, 2001, and 40.3% of our net revenues for the year ended
December 31, 2000. During 2002, the signiÑcant increase in our international revenues as a percentage of net
revenues was primarily due to a weakness in packaged product sales in the United States and the expiration of
the Microsoft Development Agreement in May 2002. During 2001, the signiÑcant increase in our international
revenues as a percentage of net revenues was primarily the result of increased sales and marketing eÅorts and
continued demand for our products in Europe and Asia, as well as the economic impact of slower information
technology spending in the United States during 2001. We expect that the diÇcult economic conditions that
existed in 2002 will persist in 2003.
An analysis of our geographic segment net revenue as a percentage of net revenue is presented below:
Year Ended December 31,
2000
2001
2002
Revenue
Growth
2001 to 2002
Revenue
Growth
2000 to 2001
Americas(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
EMEA(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Asia-PaciÑc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other(3)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
48.4% 48.9% 52.8%
36.6
39.7
7.8
9.2
6.7
2.7
33.7
5.0
8.5
(11.6)%
(3.3)
5.2
(64.6)
Consolidated net revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
100.0% 100.0% 100.0%
(10.8)
16.4%
36.6
95.8
(0.2)
25.8
(1) Our Americas segment is comprised of the United States, Canada and Latin America.
(2) DeÑned as Europe, Middle East and Africa.
(3) Represents royalty fees in connection with the Microsoft Development Agreement, which expired during May 2002.
With respect to our geographic segment revenues, the decrease in net revenues during 2002 as compared
to 2001 was due primarily to the factors mentioned above, as well as a decline in packaged product sales in
Europe. During 2001, revenues notably increased in our Asia-PaciÑc segment, particularly due to increased
21
sales in Japan, and in our EMEA segment, particularly due to increased sales in Europe. For additional
information on international revenues, please refer to note 12 to our consolidated Ñnancial statements.
Cost of Revenues. Cost of revenues consisted primarily of the cost of royalties, product media and
duplication, manuals, packaging materials and shipping expense. Cost of revenues also consisted of compensa-
tion and other personnel-related costs of providing consulting services. We expensed all development costs
incurred in connection with the Microsoft Development Agreement as incurred in cost of other revenues. Our
cost of revenues excludes amortization of core technology, which is shown as a component of amortization
expense in our consolidated statements of income. During 2001, we implemented a new enterprise resource
planning system. As a result of this implementation, we have an enhanced ability to obtain information
regarding personnel-related costs of providing consulting services revenues. The decrease in the cost of
revenues for 2002 as compared to 2001, is primarily attributable to our ability to identify certain non-revenue
generating services expenses and classify such costs as operating expenses. Volume-based license sales are
typically fulÑlled with a nominal level of product media and the licenses are delivered electronically. The cost
of fulÑlling such sales is less than traditional packaged product sales, thereby reducing costs of revenues as a
percentage of revenue.
The increase in cost of revenues for 2001 was due to an overall increase in our packaged product sales and
increases in compensation and other costs of providing services revenues. These increases were oÅset in part
by a reduction of the level of inventory necessary to fulÑll customer orders due to increased market acceptance
of volume-based licenses.
Gross Margin. Gross margin as a percent of revenue was 96.4% for 2002, 95.0% for 2001 and 93.8% for
2000. The increase in gross margin as a percentage of net revenue from 2001 to 2002 was primarily due to the
decrease in cost of revenues as discussed above. The increase in gross margin as a percentage of net revenue
from 2000 to 2001 was primarily due to larger reserves for obsolete inventory recorded in 2000. To a lesser
extent, the increase in gross margin during 2001 was also due to an increase in volume-based licensing, as
discussed above. We currently anticipate that in the next 12 months, gross margin as a percentage of net
revenues will remain relatively unchanged as compared with current levels. However, gross margin could
Öuctuate from time to time based on a number of factors attributable to the cost of revenues as described
above.
As further discussed below, during 2002 we reduced our worldwide workforce by approximately 10%
(approximately 200 employees) and consolidated certain functions from our Salt Lake City, Utah and
Columbia, Maryland facilities into our Fort Lauderdale, Florida facility. As a result of such actions, we
incurred expenses of approximately $10.9 million, primarily for severance and related facility expenses, of
which approximately $7.0 million were included in research and development expenses, $2.8 million were
included in sales, marketing and support expenses and $1.1 million were included in general and administra-
tive expenses. We currently expect that increases in insurance premiums and higher foreign currency
expenses, impacted by a weaker dollar exchange rate, and investments in new products, will oÅset savings
from these actions.
Research and Development Expenses. Research and development expenses consisted primarily of
personnel-related costs. We expensed all development costs included in the research and development of
software products and enhancements to existing products as incurred except for core technologies acquired.
Research and development expenses increased during 2002 primarily from an increase in staÇng and
associated salaries that primarily related to the Sequoia acquisition in the second quarter of 2001, additional
costs for severance for the worldwide workforce reduction, and relocation and facility related charges
associated with the consolidation of our Salt Lake City, Utah and Columbia, Maryland development teams
into our remaining engineering facilities during 2002. These increases were partially oÅset by a reduction in
costs for third party software, external consultants and developers and a decrease in personnel costs due to the
worldwide workforce reduction.
Research and development expenses increased in 2001 primarily from additional staÇng, associated
salaries and related expenses. The increase in 2001 was also due to costs incurred for third party software and
22
external consultants and developers used to expand and enhance our product lines, including feature releases
of MetaFrame and research and development eÅorts on anticipated future product oÅerings.
Sales, Marketing and Support Expenses. Sales, marketing and support expenses increased during 2002
primarily from additional end-customer sales personnel hired during 2001 and 2002 particularly for medium to
large customers, an increase in staÇng and associated salaries related to the Sequoia acquisition during 2001,
and severance charges associated with our worldwide workforce reduction. To a lesser extent, the reallocation
of certain non-revenue generating services expense from cost of revenues to operating expenses also
contributed to the increase. The increase was partially oÅset by a reduction in marketing costs due to a refocus
in marketing programs spending based on the current operating environment, and the reallocation of certain
overhead expenses to other departments, primarily depreciation expense to certain general and administrative
cost centers.
Sales, marketing and support expenses increased in 2001 primarily from increased personnel for sales,
services and marketing and associated salaries, commissions and related expenses focused on our sales,
consulting and marketing eÅorts. Included in such marketing eÅorts in 2001 was the expansion of our end-
customer sales force in connection with marketing to large corporate enterprise accounts. The increase was
also due to a higher level of marketing programs directed at customer and business partner acquisition and
retention, and additional promotional activities related to speciÑc products, such as MetaFrame XP introduced
in February 2001.
General and Administrative Expenses. General and administrative expenses increased in 2002 primarily
from a reallocation of certain overhead expenses from other departments to general and administrative
expenses, primarily depreciation expense from certain sales, marketing and support cost centers into certain
general and administrative cost centers.
General and administrative expenses increased in 2001 primarily from increased staÅ, associated salaries
and related expenses necessary to support overall increases in the scope of our operations. The increase during
2001 also resulted from increased depreciation from our enterprise resource planning system implemented in
2001, as well as the reallocation of certain overhead costs from other departments into certain general and
administrative cost centers and an increase in consulting and accounting fees.
Amortization of Intangible Assets. On January 1, 2002, we adopted SFAS No. 142, Goodwill and Other
Intangible Assets. Under the new rules, we no longer amortize goodwill and intangible assets deemed to have
indeÑnite lives but subject them to an annual impairment test. At the date of adoption, we had unamortized
goodwill, including acquired workforce, in the amount of $152.4 million, which is no longer amortized. The
decrease in amortization of intangible assets during 2002 was substantially due to the adoption of SFAS
No. 142. Other intangibles of $36.6 million at January 1, 2002 continue to be amortized over their useful lives.
As of December 31, 2002, we had unamortized identiÑed intangible assets with estimable useful lives in the
net amount of $30.8 million. We recorded $11.3 million during 2002 and $48.8 million, during 2001 in
amortization expense.
In accordance with SFAS No. 142, we completed the required impairment tests of goodwill and
indeÑnite-lived intangible assets at the date of adoption and again during the fourth quarter of 2002. There
were no impairment charges recorded as a result of the adoption of SFAS No. 142 or impairment tests. See
""Management's Discussion and Analysis of Financial Condition and Results of Operations Ì Certain Factors
Which May AÅect Future Results.''
The increase in amortization of goodwill and identiÑable intangible assets in 2001 was primarily due to
our acquisition of Sequoia in April 2001. This acquisition resulted in additional goodwill and identiÑable
intangible assets of approximately $169.9 million at the date of acquisition. Additionally, for 2001, the increase
was also due to additional goodwill of approximately $16.2 million associated with contingent purchase price
payments related to the acquisition of Innovex.
In-Process Research and Development.
In April 2001, we acquired Sequoia, of which $2.6 million of the
purchase price was allocated to in-process research and development, or IPR&D. The amounts allocated to
23
IPR&D had not yet reached technological feasibility, had no alternative future use and were written oÅ at the
time of the acquisition. There were no write-oÅs of IPR&D during 2002.
Write-Down of Technology. We periodically review our Ñnite lived intangible assets to determine if any
impairment exists. In June 1998, we completed the acquisition of APM Ltd., or APM. The acquired core
technology consisted primarily of a Java software product that would operate in a MetaFrame server
environment. At the time of the acquisition, we anticipated that there would be a growing demand for Java
client applications. After the acquisition, the market did not develop as we originally anticipated. In the second
quarter of 2000, we changed the Java application server product to a Java Performance Pack product, which
adds performance enhancements and management tools to our other products. By the fourth quarter of 2000,
we had developed a Java Performance Pack and had assessed the market demand for this technology. As of
December 31, 2000, we did not believe that there were suÇcient projected cash Öows to support the net book
value of the core technology associated with the APM acquisition. In addition, we determined that there was
no alternative future use for the acquired technology. As a result, we recorded a write-down of $7.3 million,
representing the net book value of the APM core technology as of December 31, 2000.
In July 1998, we completed the acquisition of VDOnet Corporation Ltd., or VDOnet. The acquired core
technology consisted primarily of the ICA Video Services project, which allowed video applications and
applications containing videos to be viewed on an ICA client. Subsequent development eÅorts resulted in the
VideoFrameTM 1.0 product, which shipped in the third quarter of 1999, but resulted in few sales to end-
customers. After the acquisition, we explored alternative uses for the acquired technology. By the third quarter
of 2000, we had explored uses related primarily to delivering video applications in a server-based computing
environment and video streaming with ICA devices. In the fourth quarter of 2000, we reviewed potential
modiÑcations to our cash Öow projections based on identiÑed alternative uses for the technology. As a result of
our evaluation, we did not believe that there were suÇcient projected cash Öows to support the carrying value
of the core technology. As a result, we recorded a write-down of $1.8 million, representing the net book value
of the VDOnet core technology as of December 31, 2000.
Interest Income.
Interest income decreased during 2002 primarily due to a decrease in interest rates.
During 2002, we terminated an interest rate swap agreement with a notional amount of $174.6 million and in
December 2002, we sold the investments underlying this swap agreement. As a result, the decrease in interest
income during 2002 was partially oÅset by interest income of approximately $3.4 million recognized as a result
of the termination of this interest rate swap and the hedging relationship. For more information see ""Liquidity
and Capital Resources'' and note 13 to our consolidated Ñnancial statements.
Interest income increased in 2001 as compared to 2000 principally from our decision to change the
composition of our investment portfolio in the fourth quarter of 2000 from tax-exempt and taxable to
predominantly taxable securities, partially oÅset by a decrease in interest rates during 2001.
Interest Expense. The decrease in interest expense for 2002 as compared to 2001 was due primarily to
interest expense incurred during 2001 on contingent payments associated with the Innovex acquisition.
The increase in interest expense for 2001 as compared to 2000 was primarily due to interest on contingent
payments associated with the Innovex acquisition, as well as the accretion of the original issue discount related
to the zero coupon convertible subordinated debentures issued in March 1999.
Other Expense, Net. Other expense, net is primarily comprised of other-than-temporary declines in the
value of our equity investments and realized gains (losses) on the sale of available-for-sale investments, as
well as, remeasurement and foreign currency transaction gains (losses). The increase in other expense, net for
2002 as compared to other expense, net in 2001 was the result of $2.1 million of losses from other-than-
temporary declines in the fair value of certain of our equity investments and realized losses on the sale of
available-for-sale securities, as well as approximately $1.1 million in remeasurement and foreign currency
transaction losses.
The change in other expense, net for 2001 as compared to other expense, net for 2000 was the result of
$7.7 million of losses recorded in 2001 resulting from other-than-temporary declines in the fair value of certain
of our equity investments, as well as approximately $2.4 million in remeasurement and foreign currency
24
transaction losses partially oÅset by realized gains of $8.0 million associated with purchases and sales of
available-for-sale securities and associated contracts.
Income Taxes. The decrease in the eÅective tax rate from 31% in 2001 to 17% in 2002 was due
primarily to the adoption of SFAS No. 142, pursuant to which amortization of goodwill, which previously
increased taxable income in the determination of our eÅective tax rate, ceased. The reduction in the tax rate
was also due to higher tax credits related to our foreign operations and research and development, and the
cessation of revenues from the Microsoft Development Agreement, which expired in May 2002.
The increase in the eÅective tax rate from 30% in 2000 to 31% in 2001 resulted primarily from non-
deductible goodwill associated with the acquisition of Sequoia oÅset in part by a rate decrease resulting from
increased foreign earnings which were taxed at lower foreign tax rates.
Liquidity and Capital Resources
During 2002, we generated positive operating cash Öows of $187.1 million. These cash Öows related
primarily to net income of $93.9 million, adjusted for, among other things, tax beneÑts from the exercise of
non-statutory stock options and disqualifying dispositions of incentive stock options of $25.7 million, non-cash
charges, including depreciation and amortization expenses of $41.4 million, provisions for product returns of
$25.3 million (primarily due to our stock rotation program) and the accretion of original issue discount and
amortization of Ñnancing costs on our convertible subordinated debentures of $17.7 million. These cash
inÖows were partially oÅset by an aggregate decrease in cash Öow from our operating assets and liabilities of
$16.9 million. Our investing activities provided $0.1 million of cash consisting primarily of the net proceeds,
after reinvestment, from sales and maturities of investments of $29.0 million, oÅset by the expenditure of
$19.1 million for the purchase of property and equipment and net cash paid for acquisitions (a contingent
payment resulting from the February 2000 Innovex acquisition) of approximately $10.7 million. Our Ñnancing
activities used cash of $184.2 million related primarily to the expenditure of $192.1 million for the stock and
debt repurchase programs, partially oÅset by the proceeds received from employee stock compensation plans
and the sale of put warrants of $8.0 million.
During 2001, we generated positive operating cash Öows of $229.8 million. These cash Öows related
primarily to net income of $105.3 million, adjusted for, among other things, tax beneÑts from the exercise of
non-statutory stock options and disqualifying dispositions of incentive stock options of $28.0 million, non-cash
charges, including depreciation and amortization expenses of $79.6 million, provisions for product returns of
$22.5 million (primarily due to our stock rotation program) and the accretion of original issue discount and
amortization of Ñnancing costs on our convertible subordinated debentures of $17.9 million. These cash
inÖows were partially oÅset by an aggregate decrease in cash Öow from our operating assets and liabilities of
$38.3 million. Our investing activities used $382.2 million of cash consisting primarily of net cash paid for
acquisitions (primarily in connection with the acquisition of Sequoia) of $183.8 million, the net purchase of
investments of $137.9 million and $60.6 million for our purchase of property and equipment and costs
associated with our enterprise resource planning, or ERP, system implementation. Approximately $12.0 mil-
lion was capitalized through December 31, 2001, related to our ERP system. We used $83.0 million in cash in
Ñnancing activities related primarily to our expenditure of $210.2 million for stock repurchase programs,
partially oÅset by the proceeds from the issuance of common stock under our employee stock compensation
plans of $117.4 million and $12.0 million generated from premiums received upon the sale of put warrants.
Cash and Investments
As of December 31, 2002, we had $719.4 million in cash and investments, including $142.7 million in
cash and cash equivalents. In addition, we had $186.4 million in working capital at December 31, 2002. The
$27.3 million decrease in cash and investments as compared to December 31, 2001, is due primarily to
continued common stock and debt repurchases, capital expenditures and a contingent acquisition payment as
discussed above, partially oÅset by positive cash Öow from operations. We generally invest our cash and cash
equivalents in investment grade, highly liquid securities to allow for Öexibility in the event of immediate cash
25
needs. Our short and long-term investments, other than $0.2 million of equity investments, consist of interest
bearing securities.
In December 2000, we invested $158.1 million in a trust managed by an investment advisor. The purpose
of the trust is to maintain suÇcient liquidity in the event that our debentures are redeemed in March 2004.
Our investment in the trust matures on March 22, 2004, and comprises all of the trust's assets. The trust's
assets primarily consist of AAA-rated zero-coupon corporate securities. The trust entered into a credit risk
swap agreement with the investment advisor, which eÅectively increased the yield on the trust's assets and for
which value the trust assumed the credit risk of ten investment-grade companies. The eÅective yield of the
trust, including the credit risk swap agreement, is 6.72% and the principal balance will accrete to $195 million
in March 2004. Therefore, beginning with the quarter ending March 31, 2003, we will classify the investment
as a short-term investment in our consolidated balance sheet to reÖect the amount that will be due within one
year of the balance sheet date. We record our investment in the trust and the underlying investments and swap
as held-to-maturity zero-coupon corporate security in our consolidated Ñnancial statements. We do not
recognize changes in the fair value of the held-to-maturity investment unless a decline in the fair value of the
trust is other-than-temporary, in which case we would recognize a loss in earnings. Our investment is at risk to
the extent that one of the underlying corporate securities has a credit event resulting in non-payment to the
counterparty that may include bankruptcy, dissolution, or insolvency of the issuers. There have been no losses
associated with the trust's underlying corporate securities to date. The amortized cost of our investment in the
trust was approximately $180.4 million at December 31, 2002 and $169.0 million at December 31, 2001,
which we classiÑed as long-term corporate investments in our consolidated balance sheets. At December 31,
2002, the fair value of the trust's assets was $180.2 million.
In addition, we have invested in other instruments with similar credit risk features. This means that these
investments are at risk to the extent that the entities issuing the underlying corporate securities have credit
events above speciÑed amounts that result in a loss to the counterparty. There have been no credit events
associated with the entities issuing the underlying corporate securities to date. For more information see
notes 4 and 13 to our consolidated Ñnancial statements.
In November 2001, we entered into an interest rate swap agreement with a notional amount of
approximately $174.6 million. The interest rate swap agreement eÅectively converted a like amount of Öoating
rate notes in our investment portfolio to a synthetic zero coupon investment due in March 2004 with a
maturity value of approximately $190 million. In October 2002, we terminated this interest rate swap
agreement. Upon termination, we received a cash payment of $9.2 million as settlement under the swap
agreement, and gained approximately $2.4 million in accumulated other comprehensive income (loss), net of
taxes. We previously accounted for the interest rate swap as a cash Öow hedge in accordance with the
provisions of SFAS No. 133. During December 2002, certain investments underlying the swap were sold, and
hedge accounting was terminated and the associated other comprehensive income was recognized through
earnings.
Accounts Receivable, Net
At December 31, 2002, we had approximately $69.5 million in accounts receivable, net of allowances.
The modest increase in accounts receivable as compared to 2001 is primarily attributed to an increase in sales
in the Asia-PaciÑc region for the fourth quarter of 2002 as compared to the fourth quarter of 2001, partially
oÅset by an increase in worldwide allowances. From time to time, we could maintain individually signiÑcant
accounts receivable balances from our distributors or customers, which are comprised of large business
enterprises, governments and small and medium-sized businesses. If the Ñnancial condition of our distributors
or customers deteriorates, our operating results could be adversely aÅected. One such distributor accounted for
approximately 7% of gross accounts receivable as of December 31, 2002. In 2001, this distributor accounted
for 14% of gross accounts receivable. During these periods, no other distributor or customer accounted for
more than 10% of accounts receivable.
26
Convertible Subordinated Debentures
In March 1999, we sold $850 million principal amount at maturity of our zero coupon convertible
subordinated debentures due in March 2019, in a private placement. The debentures were priced with a yield
to maturity of 5.25%. Our net proceeds were approximately $291.9 million, net of original issue discount and
net of debt issuance costs of $9.6 million. Except under limited circumstances, we will pay no interest prior to
maturity. The security holders can convert the debentures at any time on or before the maturity date at a
conversion rate of 14.0612 shares of our common stock for each $1,000 principal amount at maturity of the
debentures, subject to adjustment in certain events. We can redeem the debentures on or after March 22,
2004, and the holders of the debentures can require us to repurchase the debentures on Ñxed dates and at set
redemption prices (equal to the issue price plus accrued original issue discount) beginning on March 22, 2004.
Accordingly, beginning with the quarter ended March 31, 2003, we will classify the debentures as a current
liability on our consolidated balance sheet to reÖect the amount that will be payable on demand within one
year of the balance sheet date. We will maintain suÇcient liquidity in the event that holders of the debentures
require us to redeem or we elect to repurchase the debentures.
In October 2000, our board of directors approved a program authorizing us to spend up to $25 million to
repurchase debentures in open market purchases. Additionally, in April 2002 our board of directors granted us
the additional authority to repurchase up to $100 million in debentures through private transactions, bringing
our total repurchase authority up to $125 million. As of December 31, 2002, we have repurchased 76,000 units
for approximately $29.9 million, which represents $76.0 million in principal amount at maturity. During 2002,
we adopted SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections earlier than required, and therefore we recorded an operating
gain of approximately $1.6 million during 2002 as a result of our debenture repurchases. The board of
directors' limited authorization to repurchase the debentures allows us to repurchase debentures when market
conditions are favorable.
In December 2000, we invested $158.1 million in investments accounted for as held-to-maturity
corporate securities to maintain suÇcient liquidity in the event that our debentures are redeemed in March
2004. Based on the $195.0 million expected maturity value of the investments in March 2004, the proceeds of
the investments will be suÇcient to fund the redemption of approximately 55% of the debentures, if required.
We believe that we will have suÇcient cash and investments to fund the redemption of the remaining
debentures in 2004, if required.
Stock Repurchase Program
Our board of directors has authorized $600 million of repurchase authority under our stock repurchase
program, in order to manage actual and anticipated dilution. We record all repurchased shares as treasury
stock.
We are authorized to make open market purchases of our common stock using general corporate funds.
During 2002, we purchased 9,300,000 shares of outstanding common stock on the open market for
approximately $75.7 million (at an average per share price of $8.14).
From time to time, we enter into arrangements with Ñnancial institutions as part of our share repurchase
program in order to lower our average cost to acquire shares. These arrangements are described below.
We were party to two agreements, executed during 2001 and 2000, with a large Ñnancial institution, to
purchase approximately 7.3 million shares of our common stock at various times in private transactions. Under
the terms of the agreements, we paid this institution an aggregate of $150 million, with the ultimate number of
shares repurchased dependent on market conditions. In May 2002, the agreements were terminated and, upon
termination, we received 3.0 million of the remaining shares. We received a total of 7,209,286 shares pursuant
to these agreements. During 2002, we entered into a new agreement, as amended, with this Ñnancial
institution in a private transaction to purchase up to 3.8 million shares of our common stock at various times
through February 2003. Pursuant to the terms of the agreement, we paid $25 million to this institution during
the third quarter of 2002. During 2002, we received 2,655,469 shares under this agreement with a total value of
27
$18.5 million. The agreement matured in February 2003 and we received 390,830 of the remaining shares with
a total value of $6.5 million.
During 2002, we entered into two private structured stock repurchase transactions with a large Ñnancial
institution. Under the terms of the Ñrst agreement and in exchange for an up front payment of $25 million, we
were entitled to receive shares of our common stock or a predetermined cash amount at the expiration of the
agreement dependent upon the closing price of our common stock at maturity. Upon expiration of the
agreement in December 2002, we received approximately $29.3 million in cash. Under the terms of the second
agreement and in exchange for an up front payment of $25 million, we are entitled to receive approximately
2.2 million shares of our common stock or a predetermined cash amount at expiration of the agreement in
March 2003. The form of settlement at maturity of the second transaction will be dependent upon the closing
market price of our common stock.
We sell put warrants that entitle the holder of each warrant to sell to us, generally by physical delivery,
one share of our common stock at a speciÑed price. During 2002, we sold 2,300,000 put warrants at an average
strike price of $11.10 and received premium proceeds of $3.3 million. During 2002, we paid $42.9 million for
the purchase of 2,050,000 shares upon the exercise of outstanding put warrants, and 600,000 put warrants
expired unexercised. As of December 31, 2002, 950,000 put warrants with exercise prices ranging from $7.18
to $12.58 were outstanding, and expired on various dates between January and March 2003. As of
December 31, 2002, we had a total potential repurchase obligation of approximately $9.9 million associated
with the outstanding put warrants, of which $7.3 million is classiÑed as a put warrant obligation on our
consolidated balance sheet. The remaining $2.6 million of outstanding put warrants permit a net-share
settlement at our option and are not recorded as a put warrant obligation in our consolidated balance sheet.
The outstanding put warrants classiÑed as a put warrant obligation in our consolidated balance sheet will be
reclassiÑed to stockholders' equity when the warrant is exercised or when it expires. Under the terms of the put
warrant agreements, we must maintain certain levels of cash and investment balances. As of December 31,
2002, we were in compliance with those required levels.
In December 2002, we entered into an agreement with a counterparty, which required that the
counterparty sell to us up to 1,560,000 shares of our common stock at Ñxed prices if our common stock trades
at designated levels between December 16, 2002 and January 23, 2003. As of December 31, 2002, we had a
potential remaining repurchase obligation associated with this agreement of approximately $9.1 million, which
is classiÑed as common stock subject to repurchase in our consolidated balance sheet. During January 2003,
this agreement expired and no shares were repurchased.
We expended an aggregate of $161.1 million during 2002 and $198.2 million during 2001, net of
premiums received under all stock repurchase transactions. Since inception of our stock repurchase programs,
the average cost of shares acquired was $16.41 per share compared to an average close price during open
trading windows of $20.26 per share. Due to the fact that the amount of certain shares received will not be
determined until contract maturity, these per share amounts exclude up front payments under structured stock
repurchase contracts that had a maturity subsequent to December 31, 2002.
Commitments
In April 2002, we entered into a synthetic lease with a substantive lessor totaling approximately
$61.0 million for our corporate headquarters oÇce space in Fort Lauderdale, Florida. The synthetic lease
represents a form of oÅ-balance sheet Ñnancing under which an unrelated third party lessor funded 100% of
the costs of acquiring the property and leases the asset to us. The synthetic lease qualiÑes as an operating lease
for accounting purposes and as a Ñnancing lease for tax purposes. We do not include the property or the lease
debt as an asset or a liability on our consolidated balance sheet. Consequently, we include payments made
pursuant to the lease as operating expenses in our consolidated statements of income. We entered into the
synthetic lease in order to lease our headquarters properties under more favorable terms than under our
previous lease arrangements.
The initial term of the synthetic lease is seven years. Upon approval by the lessor, we can renew the lease
twice for additional two-year periods. The lease payments vary based on the London Interbank OÅered Rate,
28
or LIBOR, plus a margin. At any time during the lease term, we have the option to sublease the property, and
upon thirty-days' written notice, we have the option to purchase the property for an amount representing the
original property cost and transaction fees of approximately $61.0 million plus any lease breakage costs and
outstanding amounts owed. Upon at least 180 days notice prior to the termination of the initial lease term, we
have the option to remarket the property for sale to a third party. If we choose not to purchase the property at
the end of the lease term, we have guaranteed a residual value to the lessor of approximately $51.9 million and
possession of the buildings will be returned to the lessor. If the fair value of the building were to decline below
$51.9 million, we would have to make up the diÅerence under our residual value guarantee, which could have
a material adverse eÅect on our results of operations and Ñnancial condition.
The synthetic lease includes certain Ñnancial covenants including a requirement for us to maintain a
pledged balance of approximately $63.0 million in cash and/or investment securities as collateral. We manage
the composition of the pledged investments and investment earnings are available for operating purposes.
Additionally, we must maintain a minimum cash and investment balance of $100.0 million, excluding our
debentures, collateralized investments and equity investments, as of the end of each Ñscal quarter. As of
December 31, 2002, we had approximately $113.5 million in cash and investments in excess of those required
levels. The synthetic lease includes non-Ñnancial covenants including the maintenance of the properties and
adequate insurance, prompt delivery of Ñnancial statements to the lender of the lessor and prompt payment of
taxes associated with the properties. As of December 31, 2002 we were in compliance with all material
provisions of the arrangement.
Estimated future payments due under this lease are $1.4 million for 2003, $2.6 million for 2004,
$3.6 million for 2005, $3.7 for 2006 million and $3.7 million for 2007. Estimated lease payments thereafter
total $4.8 million. We have subleased to other entities some of our leased real property under the synthetic
lease.
We lease a signiÑcant portion of our worldwide facilities under non-cancelable operating leases. Future
payments due under these non-cancelable operating leases are $18.2 million for the year ending December 31,
2003, $15.7 million for the year ending December 31, 2004, $15.2 million for the year ending December 31,
2005, $14.3 million for the year ending December 31, 2006 and 11.6 million for the year ending December 31,
2007. Thereafter, payments due total $41.2 million.
Capital expenditures were $19.1 million during 2002, $60.6 million during 2001 and $43.5 million during
2000. During 2002, capital expenditures were primarily related to leasehold improvements on newly occupied
buildings. The decrease, as compared to 2001, is due to expenditures in 2001 for buildings, land and our ERP
system. In the normal course of business, we enter into commitments related to capital expenditures, however,
we currently have no material contractual commitments for capital expenditures over the next 12 months.
During 2002 and 2001, we took actions to consolidate certain of our oÇces, including the exit of certain
leased oÇce space and the abandonment of certain leasehold improvements. Lease obligations related to these
existing operating leases continue to October 2018 with a total remaining obligation of approximately
$28.5 million, of which $6.8 million, net of anticipated sublease income, was accrued for as of December 31,
2002, and is reÖected in accrued expenses in our consolidated Ñnancial statements. In calculating this accrual,
we made estimates, based on market information, including the estimated vacancy periods and sublease rates
and opportunities. If actual circumstances prove to be materially worse than management has estimated, the
total charges for these vacant facilities could be signiÑcantly higher.
During 2002 and 2001, signiÑcant portions of our cash inÖows were generated by operations. Although we
believe existing cash and investments together with cash Öow expected from operations will be suÇcient to
meet operating and capital expenditures requirements for the next 12 months, future operating results and
expected cash Öow from operations could vary if we experience a decrease in customer demand or a decrease
in customer acceptance of future product oÅerings. We could from time to time seek to raise additional funds
through the issuance of debt or equity securities. We continue to search for suitable acquisition candidates and
could acquire or make investments in companies we believe are related to our strategic objectives. Such
29
investments could reduce our available working capital. We currently expect that the diÇcult economic
conditions that existed during 2002 will persist in 2003.
Certain Factors Which May AÅect Future Results
Our operating results and Ñnancial condition have varied in the past and could in the future vary
signiÑcantly depending on a number of factors. From time to time, information provided by us or statements
made by our employees could contain ""forward-looking'' information that involves risks and uncertainties. In
particular, statements contained in this Form 10-K, and in the documents incorporated by reference into this
Form 10-K, that are not historical facts, including, but not limited to statements concerning new products,
product development and oÅerings, product and price competition, deferred revenues, the Microsoft source
licensing agreement, economic and market conditions, revenue recognition, growth of revenues, product
concentration, market competition, marketing eÅorts, technology relationships, investments in foreign opera-
tions and markets, reinvestment of foreign earnings, gross margins, goodwill, intangible assets, impairment
charges, accounts receivable, amortization, reserves, in-process research and development valuation, foreign
currency hedging transactions, interest income, anticipated operating and capital expenditure requirements,
reductions in operating expenses, expenses related to workforce reductions, leasing and subleasing activities,
acquisitions, debt redemption obligations, stock repurchases, investment transactions, litigation matters,
intellectual property matters, including proprietary technology protection, distribution channels, packaged
product inventories, stock price, deferred tax assets, licensing models, sales cycles, trading plans and potential
debt or equity Ñnancings constitute forward-looking statements and are made under the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. These statements are neither promises nor
guarantees. Our actual results of operations and Ñnancial condition have varied and could in the future vary
signiÑcantly from those stated in any forward-looking statements. The following factors, among others, could
cause actual results to diÅer materially from those contained in forward-looking statements made in this
Form 10-K, in the documents incorporated by reference into this Form 10-K or presented elsewhere by our
management from time to time. Such factors, among others, could have a material adverse eÅect upon our
business, results of operations and Ñnancial condition.
If Microsoft terminates or fails to renew our license agreement, fails to continue to commercialize
Windows or designs Windows so that it is no longer interoperable with our products, our business could
be adversely aÅected.
Microsoft is the leading provider of desktop operating systems. We depend upon the license of key
technology from Microsoft, including certain source and object code licenses and technical support. In
May 2002, we signed an agreement with Microsoft to formalize continued access to Microsoft Windows
Server source code. Under this agreement, we will have access to source code for current and future Microsoft
server operating systems, including access to terminal services source code, during the three year term of the
agreement. Our relationship with Microsoft is subject to the following risks and uncertainties, which
individually, or in the aggregate, could cause a material adverse eÅect in our business, results of operations and
Ñnancial condition:
‚ Dependence on Microsoft for Commercialization. Our ability to successfully commercialize Citrix
MetaFrame access infrastructure depends on Microsoft's ability to market Windows NT Server 4.0,
Terminal Server Editions and Windows 2000 Servers and the upcoming Windows Server 2003, or
collectively Windows Server Operating Systems, products. We do not have control over Microsoft's
distributors and resellers and, to our knowledge, Microsoft's distributors and resellers are not obligated
to purchase products from Microsoft. Additionally, there could be delays in the release and shipment of
future versions of Windows Server Operating Systems.
‚ Termination of the Microsoft Source Licensing Agreement. Microsoft could terminate the current
agreement before the expiration of the three-year term for breach and upon our change of control. If
Microsoft does terminate the current agreement, our restricted access to source code for current and
future Microsoft server operating systems could negatively impact our ability to release future products
and enhancements.
30
‚ Interoperability. Future product oÅerings by Microsoft may not provide for interoperability with our
products. The lack of interoperability between present or future Microsoft products and our products,
could cause a material adverse eÅect on our business, results of operations and Ñnancial condition.
Our agreements with Microsoft are short in duration. There can be no assurances that our current
agreements with Microsoft will be extended or renewed by Microsoft after their respective expirations or that,
if renewed such agreements will be on terms favorable to us. Our failure to renew certain terms of these
agreements with Microsoft could result in an adverse eÅect on our business, results of operations and Ñnancial
condition.
Our business could be adversely impacted by conditions aÅecting the information technology market in
particular.
The demand for our products depends substantially upon the general demand for business-related
computer hardware and software, which Öuctuates based on numerous factors, including capital spending
levels, the spending levels and growth of our current and prospective customers and general economic
conditions. Fluctuations in the demand for our products could have a material adverse eÅect on our business,
results of operations and Ñnancial condition. In 2002, adverse economic conditions decreased demand for our
products and negatively impacted our Ñnancial results. If the current trend of decreased and slower
informational technology spending continues, it could continue to negatively impact our business, results of
operations and Ñnancial condition.
Our long sales cycle for enterprise-wide sales could make it diÇcult to predict our quarterly operating
results.
In recent quarters, a growing number of our large and medium-sized customers have decided to
implement our volume-based licensing programs on a department or enterprise-wide basis. For convenience,
the licenses under these arrangements are electronically delivered to our customers. Our long sales cycle for
these large-scale deployments makes it diÇcult to predict when these sales will occur, and we may not be able
to sustain these sales on a predictable basis. For example, our electronically delivered licensing arrangements
constituted 39% of our product sales in the year ended December 31, 2002, a portion of which has been
deferred.
We have a long sales cycle for these enterprise-wide sales because:
‚ our sales force generally needs to explain and demonstrate the beneÑts of a large-scale deployment of
our product to potential and existing customers prior to sale;
‚ our service personnel typically spend a signiÑcant amount of time assisting potential customers in their
testing and evaluation of our product;
‚ our customers are typically large and medium size organizations that carefully research their
technology needs and the many potential projects prior to making capital expenditures for software
infrastructure; and
‚ before making a purchase, our potential customers usually must get approvals from various levels of
decision makers within their organizations, and this process can be lengthy.
The continued long sales cycle for these large-scale deployment sales could make it diÇcult to predict the
quarter in which sales will occur. Delays in sales could cause signiÑcant variability in our revenue and
operating results for any particular period.
Our accounting policies could require us to take an impairment charge to earnings, particularly during
diÇcult economic conditions.
We have adopted accounting policies that could require us to take a charge to earnings related to our
Sequoia acquisition. In July 2001, we adopted SFAS No. 141, Business Combinations, and in January 2002,
we adopted SFAS No. 142, Goodwill and Other Intangible Assets. As a result, we no longer amortize goodwill
31
and intangible assets deemed to have indeÑnite lives. However, we continue to amortize certain product and
core technologies, trademarks, patents and other intangibles. We periodically evaluate our intangible assets,
including goodwill, for impairment. If we determine that any of our intangible assets are impaired, we could be
required to take a related charge to earnings.
In particular, at December 31, 2002, we had $30.8 million, net, of unamortized identiÑed intangibles with
estimable useful lives, of which $24.5 million consists of product and core technology we purchased in the
acquisition of Sequoia. We commercialized and currently market the Sequoia technology through our secure
access infrastructure software, which includes Citrix MetaFrame Secure Access Manager. However, our
channel distributors and entities with which we have technology relationships, customers or prospective
customers may not purchase or widely accept our new line of products. If we are unsuccessful in selling this
new line of products, we could determine that the value of the purchased technology is impaired in whole or in
part and take a charge to earnings. An impairment charge could have a material adverse eÅect on our results
of operations and Ñnancial condition.
If we do not develop new products and enhancements to our existing products, we may not be successful.
The markets for our products are characterized by:
‚ rapid technological change;
‚ evolving industry standards;
‚ Öuctuations in customer demand;
‚ changes in customer requirements; and
‚ frequent new product introductions and enhancements.
Our future success depends on our ability to continually enhance our current products and develop and
introduce new products that our customers choose to buy. If we are unable to keep pace with technological
developments and customer demands by introducing new products and enhancements, our business, results of
operations and Ñnancial condition could be adversely aÅected. Our future success could be hindered by:
‚ delays in our introduction of new products;
‚ delays in market acceptance of new products or new releases of our current products; and
‚ our, or a competitor's, announcement of new product enhancements or technologies that could replace
or shorten the life cycle of our existing product oÅerings.
For example, we cannot guarantee that our secure access infrastructure software, Citrix MetaFrame
Secure Access Manager, will achieve the broad market acceptance by our channel and entities with which we
have a technology relationship, customers and prospective customers necessary to generate signiÑcant revenue.
In addition, we cannot guarantee that we will be able to respond eÅectively to technological changes or new
product announcements by others. If we experience material delays or sales shortfalls with respect to our new
products or new releases of our current products, those delays or shortfalls could have a material adverse eÅect
on our business, results of operations and Ñnancial condition.
We believe that we could incur additional costs and royalties as we develop, license or buy new
technologies or enhancements to our existing products. These added costs and royalties could increase our cost
of revenues and operating expenses. However, we cannot currently quantify the costs for such transactions that
have not yet occurred. In addition, we may need to use a substantial portion of our cash and investments to
fund these additional costs.
We face intense competition, which could result in fewer customer orders and reduced revenues and
margins.
We compete in intensely competitive markets. Some of our competitors and potential competitors have
signiÑcantly greater Ñnancial, technical, sales and marketing and other resources than us.
32
Microsoft includes its Remote Desktop Protocol, or RDP, as a component in certain Windows Server
Operating Systems, which has certain of the capabilities of our ICA» protocol, and oÅers customers a
competitive solution. Further, our ability to market the MetaFrame product suite, the MetaFrame Secure
Access Manager products and other future product oÅerings could be aÅected by Microsoft's licensing and
pricing scheme for client devices, which attach to Windows Server Operating Systems and utilize our
products. Moreover, the announcement of the release, and the actual release, of new Window based server
operating systems or products incorporating similar features to our products could cause our existing and
potential customers to postpone or cancel plans to license certain of our existing and future product oÅerings,
which could adversely impact our business, results of operations and Ñnancial condition. Future product
oÅerings by Microsoft could be competitive with our current MetaFrame software suite, and any of our future
product oÅerings.
Furthermore, the Microsoft Development Agreement expired in May 2002. Consequently, Microsoft is
no longer contractually restricted from changing its Windows Server Operating Systems to render them
inoperable with our MetaFrame product oÅerings. Further, Microsoft is no longer restricted from assisting
third parties to compete with our MetaFrame products.
In addition, alternative products for Web applications in the Internet software market directly and
indirectly compete with our current products and anticipated future product oÅerings. Existing or new
products that extend Internet software to provide Web-based information access or interactive computing
(such as Microsoft Windows Server 2003 products) can materially impact our ability to sell our products in
this market. Our competitors in this market include Microsoft, Oracle, Sun Microsystems, and other makers
of Web application server software.
As the markets for our products continue to develop, additional companies, including companies with
signiÑcant market presence in the computer hardware, software and networking industries could enter the
markets in which we compete and further intensify competition. In addition, we believe price competition
could become a more signiÑcant competitive factor in the future. As a result, we may not be able to maintain
our historic prices and margins, which could adversely aÅect our business, results of operations and Ñnancial
condition.
We could change our licensing models or the percentage of our revenue represented by deferred revenues
could increase, which could negatively impact our recognition of revenue.
We continually re-evaluate our licensing programs, including speciÑc license models, delivery methods,
and terms and conditions, to market our current and future products and services. We could implement new
licensing programs, including oÅering speciÑed and unspeciÑed enhancements to our current and future
product and service lines. For example, on October 1, 2002, we implemented new volume-based licensing
programs. We could recognize revenues associated with those enhancements after the initial shipment or
licensing of the software product or over the product's life cycle. We could implement diÅerent licensing
models in certain circumstances, for which we would recognize licensing fees over a longer period, which
could decrease our current revenue. For example, we recognize Citrix Subscription Advantage and Technical
Services revenues from customer maintenance fees or ongoing customer support ratably over the term of the
contract, which is typically 12 to 24 months. Deferred revenues from Citrix Subscription Advantage and
Technical Services increased by approximately $32 million in 2002 as compared to 2001. The timing of the
implementation of new licensing programs, the timing of the release of such enhancements and other factors
could impact the timing of our recognition of revenues and related expenses associated with our products,
related enhancements and services and could adversely aÅect our operating results and Ñnancial condition.
As our international sales and operations grow, we could become increasingly subject to additional risks
that could harm our business.
We conduct signiÑcant sales and customer support operations in countries outside of the United States.
For the year ended December 31, 2002, we derived 53.7% of our revenues from sales outside the United
States. Our continued growth and proÑtability could require us to further expand our international operations.
33
To successfully expand international sales, we must establish additional foreign operations, hire additional
personnel and recruit additional international resellers. Our international operations are subject to a variety of
risks, which could cause international revenues to Öuctuate. These risks include:
‚ Öuctuations in foreign currency exchange rates, including our ability to adequately hedge our foreign
exchange risks;
‚ compliance with foreign regulatory and market requirements;
‚ variability of foreign economic, political and labor conditions;
‚ changing restrictions imposed by regulatory requirements, tariÅs or other trade barriers or by United
States export laws;
‚ longer accounts receivable payment cycles;
‚ potentially adverse tax consequences, including restrictions on repatriation of earnings;
‚ diÇculties in protecting intellectual property; and
‚ burdens of complying with a wide variety of foreign laws.
Our success depends, in part, on our ability to anticipate and address these risks. We cannot guarantee
that these or other factors will not adversely aÅect our business or operating results. In particular, a decrease in
demand for software and services in any particular region could adversely aÅect our future operating results.
Our results are subject to Öuctuations in foreign currency exchange rates. Changes in the value of foreign
currencies in 2002 relative to the value of the U.S. dollar were generally hedged to minimize adverse impacts
on our operating proÑt. However, since we generally hedge only one year in advance of anticipated foreign
currency expenses, operations will be impacted adversely in Ñscal 2003. The U.S. dollar weakened during 2002
relative to other currencies. If the value of the U.S. dollar continues to weaken relative to other currencies in
which we do business, our results could be adversely aÅected in 2004 as well when these currencies are
remeasured for the purposes of converting them to U.S. dollars for our Ñnancial statements.
Sales of our MetaFrame product suite constitutes a substantial majority of our revenue.
We anticipate that sales of our MetaFrame product suite and related enhancements will constitute a
substantial majority of our revenue for the foreseeable future. Our ability to continue to generate revenue from
our MetaFrame product line will depend on market acceptance of Windows Server Operating Systems and/or
UNIX Operating Systems. Declines in demand for our MetaFrame products could occur as a result of:
‚ new competitive product releases and updates to existing products,
‚ price competition,
‚ technological change,
‚ decreasing or stagnant information technology spending levels,
‚ general economic conditions, or
‚ lack of success of entities with which we have a technology relationship.
If our customers do not continue to purchase our MetaFrame products as a result of these or other
factors, our revenue would decrease and our results of operations and Ñnancial condition would be adversely
aÅected.
Our synthetic lease is an oÅ-balance sheet arrangement that could negatively aÅect our Ñnancial
condition and results.
In April 2002, we entered into a seven-year synthetic lease with a substantive lessor for our headquarters
oÇce buildings in Fort Lauderdale, Florida. The synthetic lease qualiÑes for operating lease accounting
34
treatment under SFAS No. 13, Accounting for Leases, so we do not include the property or the lease debt on
our consolidated balance sheet. If new or proposed accounting standards are adopted by accounting standards
organizations and governmental authorities, we may be required to include the property and the lease debt in
our consolidated Ñnancial statements, and as a result we would incur additional depreciation expenses.
Under the lease, we must maintain a pledged balance of approximately $63 million in cash and/or
investment securities with an aÇliate of the lessor, serving as collateral agent. We are able to manage the
composition of the pledged investments and investment earnings are available for operating purposes. If we
default on our commitments under the synthetic lease and cannot remedy the default in a timely manner, the
lessor could take the pledged assets and transfer ownership of the real estate to us.
We could purchase the property at any time during the lease term, with thirty days' written notice, for the
original property cost plus transaction fees and lease breakage fees. If we purchase the property, we will be
required to add the property to our consolidated balance sheet. At any time during the lease term, we could
also re-lease the property or remarket the property for sale to a third party. If we remarket the property for sale
to a third party, we could be required to Ñnd alternate headquarter facilities on terms that may not be as
favorable as the current arrangement. If we elect not to purchase the property at the end of the lease term, we
have guaranteed a minimum residual value of approximately $51.9 million to the lessor. Therefore, if the fair
value of the property declines below $51.9 million, we would have to make up the diÅerence under our residual
value guarantee, which could have a material adverse eÅect on our results of operations and Ñnancial
condition. For further information on our synthetic lease, please refer to ""Liquidity and Capital Resources''
and note 10 to our consolidated Ñnancial statements.
Our proprietary rights could oÅer only limited protection. Our products could infringe third-party
intellectual property rights, which could result in material costs.
Our eÅorts to protect our proprietary rights may not be successful. We rely primarily on a combination of
copyright, trademark, patent and trade secret laws, conÑdentiality procedures and contractual provisions, to
protect our proprietary rights. The loss of any material trade secret, trademark, trade name, patent or
copyright could have a material adverse eÅect on our business. Despite our precautions, it could be possible for
unauthorized third parties to copy or reverse engineer certain portions of our products or to otherwise obtain
and use our proprietary information. If we cannot protect our proprietary technology against unauthorized
copying or use, we may not remain competitive. Any patents owned by us could be invalidated, circumvented
or challenged. Any of our pending or future patent applications, whether or not being currently challenged,
may not be issued with the scope we seek, if at all, and if issued, may not provide any meaningful protection or
competitive advantage.
In addition, our ability to protect our proprietary rights could be aÅected by:
‚ DiÅerences in International Law; Enforceability of Licenses. The laws of some foreign countries do
not protect our intellectual property to the same extent as do the laws of the United States and Canada.
For example, we derive a signiÑcant portion of our sales from licensing our packaged products under
""shrink wrap'' license agreements that are not signed by licensees and electronic volume-based
licensing agreements that could be unenforceable under the laws of certain foreign jurisdictions.
‚ Third Party Infringement Claims. As the number of products and competitors in our industry
segments increases and the functionality of these products overlap, we could become increasingly
subject to infringement claims. Companies and inventors are more frequently seeking to patent
software and business methods because of developments in the law that could extend the ability to
obtain such patents. As a result, we could receive patent infringement claims. Responding to any
infringement claim, regardless of its validity, could result in costly litigation or require us to obtain a
license to intellectual property rights of those third parties. Licenses may not be available on reasonable
terms or at all. In addition, attention to these claims could divert our management's time and attention
from developing our business. If a successful claim is made against us and we fail to develop or license
35
a substitute technology, our business, results of operations, Ñnancial condition or cash Öows could be
materially adversely aÅected.
We are subject to risks associated with our technology relationships.
Our business depends on technology relationships. We cannot assure you that those relationships will
continue in the future. In addition to our relationship with Microsoft, we rely on technology relationships with
IBM, HP, Dell and others. We depend on the entities with which we have technology relationships to
successfully test our products, to incorporate our technology into their products and to market and sell those
products. We cannot assure you that we will be able to maintain our current technology relationships or to
develop additional technology relationships. If any entities in which we have a technology relationship are
unable to incorporate our technology into their products or to market or sell those products, our business,
operating results and Ñnancial condition could be materially adversely aÅected.
If we lose access to third party licenses, shipments of our products could be delayed.
We believe that we will continue to rely, in part, on third party licenses to enhance and diÅerentiate our
products. Third party licensing arrangements are subject to a number of risks and uncertainties, including:
‚ undetected errors in the third party's software;
‚ disagreement over the scope of the license and other key terms, such as royalties payable; and
‚ infringement actions brought by third party licensees.
If we lose or are unable to maintain any of these third party licenses, it could delay the shipment or
release of our products. Any delays could have a material adverse eÅect on our business, results of operations
and Ñnancial condition.
Our success depends on our ability to attract and retain large enterprise customers.
We must retain and continue to expand our ability to reach and penetrate large enterprise customers by
adding eÅective channel distributors and expanding our consulting services. Our inability to attract and retain
large enterprise customers could have a material adverse eÅect on our business, results of operations and
Ñnancial condition. Large enterprise customers usually request special pricing and generally have longer sales
cycles, which could negatively impact our revenues. Additionally, as we attempt to attract and penetrate large
enterprise customers, we could need to increase corporate branding and marketing activities, which could
increase our operating expenses. These eÅorts may not proportionally increase our operating revenues and
could reduce our proÑts.
Our business could be adversely aÅected if we are unable to expand and diversify our distribution
channels.
We intend to continue to expand our distribution channels by leveraging our relationships with
independent hardware and software vendors and system integrators to encourage them to recommend or
distribute our products. In addition, an integral part of our strategy is to diversify our base of channel
relationships by adding more channel members with abilities to reach larger enterprise customers. This will
require additional resources as we will need to expand our internal sales and service coverage of these
customers. If we fail in these eÅorts and cannot expand or diversify our distribution channels, our business
could be adversely aÅected. In addition to this diversiÑcation of our base, we will need to maintain a healthy
mix of members who cater to smaller customers. We could need to add and remove distribution members to
maintain customer satisfaction and a steady adoption rate of our products, which could increase our operating
expenses. We are currently investing, and intend to continue to invest, signiÑcant resources to develop these
channels, which could reduce our proÑts.
36
If we do not generate suÇcient cash Öow from operations in the future, we may not be able to fund our
operations and fulÑll our future obligations.
Our ability to generate suÇcient cash Öow from operations to fund our product development and oÅerings
and make payments on our debt and other obligations depends on a range of economic, competitive and
business factors, many of which are outside our control. We cannot assure you that our business will generate
suÇcient cash Öow from operations, that currently anticipated cost savings and operating improvements will
be realized on schedule or at all, or that we will be able to liquidate our investments, sell assets or raise equity
when needed or desirable. In December 2000, we invested $158.1 million in a trust managed by an investment
advisor in order to maintain suÇcient liquidity in the event that our debentures are redeemed in March 2004.
If the value of the investments in the trust signiÑcantly decreases, the proceeds of the trust combined with our
other cash and investments may not be suÇcient to fund the redemption of our outstanding debentures in
2004, if required. An inability to fund our operations or fulÑll outstanding obligations could have a material
adverse eÅect on our business, Ñnancial condition and results of operations. For further information, please
refer to ""Liquidity and Capital Resources.''
We rely on indirect distribution channels and major distributors that we do not control.
We rely signiÑcantly on independent distributors and resellers to market and distribute our products. We
do not control our distributors and resellers. Additionally, our distributors and resellers are not obligated to buy
our products and could also represent other lines of products. Some of our distributors and resellers maintain
inventories of our packaged products for resale to our smaller end-user customers. If distributors and resellers
reduce their inventory of our packaged products, our business could be adversely aÅected. In the quarter
ended December 31, 2002, we believe that our distributors and resellers held smaller inventories of packaged
products as compared to inventories they held in prior quarters. Further, we could maintain individually
signiÑcant accounts receivable balances with certain distributors. For example, one of our distributors
accounted for approximately 7% of gross accounts receivable as of December 31, 2002. As of December 31,
2001, the same distributor accounted for 14% of gross accounts receivable. The Ñnancial condition of our
distributors could deteriorate and distributors could signiÑcantly delay or default on their payment obligations.
Any signiÑcant delays or defaults could have a material adverse eÅect on our business, results of operations
and Ñnancial condition.
Our products could contain errors that could delay the release of new products and may not be detected
until after our products are shipped.
Despite signiÑcant testing by us and by current and potential customers, our products, especially new
products or releases, could contain errors. In some cases, these errors may not be discovered until after
commercial shipments have been made. Errors in our products could delay the development or release of new
products and could adversely aÅect market acceptance of our products. Additionally, our products depend on
third party products, which could contain defects and could reduce the performance of our products or render
them useless. Because our products are often used in mission-critical applications, errors in our products or the
products of third parties upon which our products rely could give rise to warranty or other claims by our
customers.
Our research and development purchased in acquisitions is subject to certain risks.
In the past we have re-evaluated the amounts charged to in-process research and development in
connection with acquisitions and licensing arrangements. The amount and rate of amortization of those
amounts are subject to a number of risks and uncertainties. The risks and uncertainties include the eÅects of
any changes in accounting standards or guidance adopted by the SEC or the accounting profession. Any
changes in accounting standards or guidance adopted by the SEC could materially adversely aÅect our future
results of operations through increased amortization expense. We cannot assure you that actual revenues and
operating proÑt attributable to acquired in-process research and development will match the projections we
used to initially value in-process research and development when we acquired it. Ongoing operations and
37
Ñnancial results for acquired assets and licensed technology, and for our business as a whole, are subject to a
variety of risks, which we may not have known or been able to estimate at the time of the transactions.
Furthermore, we cannot guarantee that we will succeed in our eÅorts to integrate and further develop our
acquired technologies. In 1999 and 2001, we acquired certain in-process software technologies from ViewSoft
and Sequoia. We are currently working on integrating some of the acquired technologies into our anticipated
future product oÅerings and on associated design, development and rework required to integrate the
technologies. However, we cannot guarantee we will be successful in our eÅorts to integrate and further
develop these technologies. If we fail to complete the development of our anticipated future product oÅerings,
or if we fail to complete them in a timely manner, our Ñnancial condition and results of operations could be
materially adversely aÅected. We cannot currently determine the impact those delays could have on our
business, future results of operations and Ñnancial condition. We could incur additional charges in later
periods to reÖect costs associated with completing those projects.
Acquisitions present many risks, and we may not realize the Ñnancial and strategic goals we anticipate
at the time of an acquisition.
Acquisitions of high-technology companies are inherently risky. We cannot assure anyone that our
previous acquisitions, including the purchase of Sequoia, or any future acquisitions will be successful. The
risks we commonly encounter are:
‚ diÇculties integrating the operations, technologies, and products of the acquired companies;
‚ the risk of diverting management's attention from normal daily operations of the business;
‚ potential diÇculties in completing projects associated with purchased in-process research and
development;
‚ risks of entering markets in which we have no or limited direct prior experience and where competitors
have stronger market positions;
‚ the potential loss of key employees of the acquired company; and
‚ an uncertain sales and earnings stream from the acquired company, which could unexpectedly dilute
our earnings.
These factors could have a material adverse eÅect on our business, results of operations and Ñnancial
condition. We cannot guarantee that the combined company resulting from any acquisition can continue to
support the growth achieved by the companies separately. We must also focus on our ability to manage and
integrate any acquisition. Our failure to manage growth eÅectively and successfully integrate acquired
companies could adversely aÅect our business and operating results.
If we lose key personnel or cannot hire enough qualiÑed employees, our ability to manage our business
could be adversely aÅected.
Our success depends, in large part, upon the services of a number of key employees. We do not have long-
term employment agreements with any of our key personnel. Any oÇcer or employee can terminate his or her
relationship with us at any time. The eÅective management of our growth, if any, could depend upon our
ability to retain our highly skilled technical, managerial, Ñnance and marketing personnel. If any of those
employees leave, we will need to attract and retain replacements for them. We could also need to add key
personnel in the future. The market for these qualiÑed employees is competitive. We could Ñnd it diÇcult to
successfully attract, assimilate or retain suÇciently qualiÑed personnel. Also, we could need to hire additional
personnel to develop new products, product enhancements and technologies. If we cannot add the necessary
staÅ and resources, our ability to develop future enhancements and features to our existing or future products
could be delayed. Any delays could have a material adverse eÅect on our business, results of operations and
Ñnancial condition.
38
If product returns or price adjustments exceed our reserves, our operating results could be adversely
aÅected.
We provide most of our distributors with product return rights only for the purpose of stock balancing,
which generally permit our distributors to return products to us, subject to ordering an equal dollar amount of
our products. We also provide price protection rights to most of our distributors. Price protection rights require
that we grant retroactive price adjustments for inventories of our products held by distributors if we lower our
prices for those products within a speciÑed time period. To cover our exposure to these product returns and
price adjustments, we establish reserves based on our evaluation of historical product trends and current
marketing plans. However, we cannot assure you that our reserves will be suÇcient to cover our future product
returns and price adjustments. If we inadequately forecast reserves, our operating results could be adversely
aÅected.
Increased political and social turmoil could adversely impact our business.
Increasing political and social turmoil, such as terrorist and military actions, can be expected to put
further pressure on economic conditions in the United States and foreign jurisdictions. These conditions make
it diÇcult for us, and our customers, to accurately forecast and plan future business activities and could have a
material adverse eÅect on our business, Ñnancial condition and results of operations.
Our stock price could be volatile, and you could lose the value of your investment.
Our stock price has been volatile and has Öuctuated signiÑcantly to date. The trading price of our stock is
likely to continue to be highly volatile and subject to wide Öuctuations. Your investment in our stock could
lose value. Some of the factors that could signiÑcantly aÅect the market price of our stock include:
‚ actual or anticipated variations in operating and Ñnancial results;
‚ analyst reports or recommendations;
‚ changes in interest rates; and
‚ other events or factors, many of which are beyond our control.
The stock market in general, The Nasdaq National Market and the market for software companies and
technology companies in particular, have experienced extreme price and volume Öuctuations. These broad
market and industry factors could materially and adversely aÅect the market price of our stock, regardless of
our actual operating performance.
If we fail to manage our operations and control expenses eÅectively, our future operating results could
be adversely aÅected.
Historically, the scope of our operations, the number of our employees and the geographic area of our
operations have grown rapidly. In addition, we have acquired both domestic and international companies. This
growth and the assimilation of acquired operations and their employees could continue to place a signiÑcant
strain on our managerial, operational and Ñnancial resources. To manage our growth, if any, eÅectively, we
need to continue to implement and improve additional management and Ñnancial systems and controls. We
may not be able to manage the current scope of our operations or future growth eÅectively and still exploit
market opportunities for our products and services in a timely and cost-eÅective way. Our future operating
results could also depend on our ability to manage:
‚ our expanding product line,
‚ our marketing and sales organizations, and
‚ our client support organization as installations of our products increase.
39
We took steps to reduce operating expenses commencing in the fourth quarter of 2002, however our
operating expenses in 2003 could exceed our operating expenses in 2002. An increase in operating expenses
could reduce our income from operations and cash Öows from operating activities in the future.
Our business and investments could be adversely impacted by unfavorable economic conditions.
General economic and market conditions, and other factors outside our control, could adversely aÅect our
business and impair the value of our investments. Any further downturn in general economic conditions could
result in a reduction in demand for our products and services and could harm our business. In addition, an
economic downturn could result in an impairment in the value of our investments requiring us to record losses
related to such investments. An impairment in the value of these investments may disrupt our ongoing
business and distract management. As of December 31, 2002, we had $576.7 million of short and long-term
investments with various issuers and Ñnancial institutions. In many cases we do not attempt to reduce or
eliminate our market exposure on these investments and could incur losses related to the impairment of these
investments. Fluctuations in economic and market conditions could adversely eÅect the value of our
investments, and we could lose some of our investment portfolio. A total loss of an investment could adversely
aÅect our results of operations and Ñnancial condition. For further information on these investments, please
refer to ""Liquidity and Capital Resources.''
Our revenue may not grow, and if we do not successfully manage our expenses, our business could be
negatively impacted.
We attribute most of our growth during recent years to the introduction of the MetaFrame software for
Windows operating systems in mid-1998. We cannot assure you that the infrastructure software markets in
which we operate, will grow. We cannot assure that the release of our secure access infrastructure software
suite, including the MetaFrame Secure Access Manager, or other new products will increase our revenue
growth rate.
In addition, to the extent our revenue grows, if at all, we believe that our cost of revenues and certain
operating expenses could also increase. In the third quarter of 2002, we took actions to reduce operating
expenses starting in the fourth quarter of 2002. We cannot assure you that our operating expenses will be lower
than our estimated or actual revenues in any given quarter. If we experience a shortfall in revenue in any given
quarter, we likely will not be able to further reduce operating expenses quickly in response. Any signiÑcant
shortfall in revenue could immediately and adversely aÅect our results of operations for that quarter. Also, due
to the Ñxed nature of many of our expenses and our current expectation for revenue growth, our income from
operations and cash Öows from operating and investing activities could be lower than in recent years.
40
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about our market risk includes ""forward-looking statements'' that involve risks
and uncertainties. Actual results could diÅer materially from those projected in the forward-looking
statements. The analysis methods we used to assess and mitigate risk discussed below should not be
considered projections of future events, gains or losses.
We are exposed to Ñnancial market risks, including changes in interest rates and foreign currency
exchange rates that could adversely aÅect our results of operations or Ñnancial condition. To mitigate foreign
currency and interest rate risk, we utilize derivative Ñnancial instruments. The counter-parties to our derivative
instruments are major Ñnancial institutions. All of the potential changes noted below are based on sensitivity
analyses performed on our Ñnancial position as of December 31, 2002. Actual results could diÅer materially.
Discussions of our accounting policies for derivatives and hedging activities are included in notes 2 and 13
to our consolidated Ñnancial statements.
Exposure to Exchange Rates
A substantial majority of our overseas expense and capital purchasing activities are transacted in local
currencies, primarily British pounds sterling, Euros, Swiss francs, Japanese yen and Australian dollars. To
reduce exposure to reduction in U.S. dollar value and the volatility of future cash Öows caused by changes in
currency exchange rates, we have established a hedging program. We use foreign currency forward contracts
to hedge certain forecasted foreign currency expenditures. Our hedging program signiÑcantly reduces, but does
not entirely eliminate, the impact of currency exchange rate movements.
At December 31, 2002 and 2001, we had in place foreign currency forward sale contracts with a notional
amount of $48.9 million and $13.1 million, respectively, and foreign currency forward purchase contracts with
a notional amount of $128.4 million and $60.9 million, respectively. At December 31, 2002 and 2001, these
contracts had an aggregate fair value of $3.6 million and $0.2 million, respectively. Based on a hypothetical
10% appreciation of the U.S. dollar from December 31, 2002 market rates the fair value of our foreign
currency forward contracts would decrease by $8.3 million. Conversely, a hypothetical 10% depreciation of the
U.S. dollar from December 31, 2002 market rates would increase the fair value of our foreign currency
forward contracts by $8.3 million. Foreign operating costs in these hypothetical movements would move in the
opposite direction. This calculation assumes that each exchange rate would change in the same direction
relative to the U.S. dollar. In addition to the direct eÅects of changes in exchange rates quantiÑed above,
changes in exchange rates could also change the dollar value of sales and aÅect the volume of sales as
competitors products become more or less attractive. Our sensitivity analysis of the eÅects of changes in
foreign currency exchange rates does not factor in a potential change in levels of local currency prices or sales
reported in U.S. dollars. We do not anticipate any material adverse impact to our consolidated Ñnancial
position, results of operations, or cash Öows as a result of these forward foreign exchange contracts.
Exposure to Interest Rates
In order to better manage our exposure to interest rate risk, in December 2002 we entered into 12 interest
rate swap agreements. The swap agreements, with an aggregate notional amount of $208.0 million convert the
Ñxed rate return on 12 of our available-for-sale securities, to a Öoating rate. The aggregate fair value of the
interest rate swaps at December 31, 2002 was a liability of $3.4 million. Based upon a hypothetical 1% increase
in the market interest rate as of December 31, 2002, the fair value of these aggregated liabilities would have
decreased by approximately $8.2 million. Based on a hypothetical 1% decrease in the market interest rate as of
December 31, 2002, the fair value of these aggregated liabilities would have increased by approximately
$8.4 million. The underlying assets would experience oÅsetting gains and losses. We also maintain available-
for-sale and held-to-maturity investments in debt securities, which limits the amount of credit exposure to any
one issue, issuer, or type of instrument. The securities in our investment portfolio are not leveraged. The
securities classiÑed as available-for-sale 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, dividends and reinvestment income. If
41
market interest rates were to increase by 100 basis points from December 31, 2002 and 2001 levels, the fair
value of the available-for-sale portfolio would decline by approximately $0.6 million and $1.1 million,
respectively. This sensitivity analysis on our available-for-sale portfolio excludes the underlying investments to
our 12 interest rate swaps discussed above, as the interest rate risk related to those investments has been
eÅectively hedged. For more information see note 13 to our consolidated Ñnancial statements.
These amounts are determined by considering the impact of the hypothetical interest rates on our interest
rate swap agreements and its available-for-sale and held-to-maturity investment portfolios. This analysis does
not consider the eÅect of credit risk as a result of the reduced level of overall economic activity that could exist
in such an environment.
In April 2002, we entered into a synthetic lease with a substantive lessor totaling approximately
$61 million related to oÇce space utilized for our corporate headquarters. Payments under this synthetic lease
are indexed to a variable interest rate (LIBOR plus a margin). Based upon our interest rate exposure under
this synthetic lease at December 31, 2002, a 100 basis point change in the current interest rate would have an
immaterial eÅect on our Ñnancial position and results of operations. In addition to interest rate exposure, if the
fair value of our headquarters building in Fort Lauderdale, Florida were to signiÑcantly decline, there could be
a material adverse eÅect on our results of operations and Ñnancial condition.
ITEM 8. FINANCIAL STATEMENTS AND SCHEDULES
The Company's Consolidated Financial Statements and related Ñnancial statement schedule, together
with the report of independent certiÑed public accountants, appear at pages F-1 through F-37, respectively, of
this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on accounting or Ñnancial disclosure
matters during the Company's two most recent Ñscal years.
42
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required under this item is incorporated herein by reference to the Company's deÑnitive
proxy statement pursuant to Regulation 14A, which proxy statement will be Ñled with the Securities and
Exchange Commission not later than 120 days after the close of the Company's Ñscal year ended
December 31, 2002.
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated herein by reference to the Company's deÑnitive
proxy statement pursuant to Regulation 14A, which proxy statement will be Ñled with the Securities and
Exchange Commission not later than 120 days after the close of the Company's Ñscal year ended
December 31, 2002.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required under this item is incorporated herein by reference to the Company's deÑnitive
proxy statement pursuant to Regulation 14A, which proxy statement will be Ñled with the Securities and
Exchange Commission not later than 120 days after the close of the Company's Ñscal year ended
December 31, 2002.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under this item is incorporated herein by reference to the Company's deÑnitive
proxy statement pursuant to Regulation 14A, which proxy statement will be Ñled with the Securities and
Exchange Commission not later than 120 days after the close of the Company's Ñscal year ended
December 31, 2002.
ITEM 14. CONTROLS AND PROCEDURES
As of a date (the ""Evaluation Date'') within ninety days prior to the Ñling date of this Annual Report on
Form 10-K, the Company, under the supervision and with the participation of the Company's management,
including the Company's Chief Executive OÇcer and the Company's Vice President, Finance and Acting
Chief Financial OÇcer, evaluated the eÅectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as
amended (the ""Exchange Act''). Based upon that evaluation, the Company's Chief Executive OÇcer and the
Company's Vice President, Finance and Acting Chief Financial OÇcer concluded that, as of the Evaluation
Date, the Company's disclosure controls and procedures are eÅective in ensuring that material information
relating to the Company (including its consolidated subsidiaries) required to be disclosed by the Company in
the reports that it Ñles or submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods speciÑed in the Securities and Exchange Commission's rules and forms, including
ensuring that such material information is accumulated and communicated to the Company's management,
including the Company's Chief Executive OÇcer and the Company's Vice President, Finance and Acting
Chief Financial OÇcer, as appropriate to allow timely decisions regarding required disclosure. There were no
signiÑcant changes in the Company's internal controls or, to the knowledge of the Company, in other factors
that could signiÑcantly aÅect the Company's internal controls subsequent to the Evaluation Date.
43
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements.
For a list of the consolidated Ñnancial information included herein, see Index on Page F-1.
2. Financial Statement Schedules.
The following consolidated Ñnancial statement schedule is included in Item 8:
Valuation and Qualifying Accounts
3. List of Exhibits.
Exhibit No.
Description
2.3(1)
2.4(9)
3.1(2)
3.2(2)
3.3(3)
4.1(2)
4.2(4)
4.3(4)
4.3(4)
Asset Purchase Agreement dated February 15, 2000 by and among the Company, Innovex
Group, Inc. and certain stockholders of Innovex
Agreement and Plan of Merger, dated as of March 20, 2001, by and among Citrix Systems,
Inc., Soundgarden Acquisition Corp. and Sequoia Software Corporation
Amended and Restated CertiÑcate of Incorporation of the Company
Amended and Restated By-laws of the Company
CertiÑcate of Amendment of Amended and Restated CertiÑcate of Incorporation
Specimen certiÑcate representing the Common Stock
Indenture by and between the Company and State Street Bank and Trust Company as
Trustee dated as of March 22, 1999, including the form of Debenture.
Form of Debenture (included in Exhibit 4.2).
Registration Rights Agreement by and between the Company and Credit Suisse First Boston
Corporation dated as of March 22, 1999.
10.1(2)*
1989 Stock Option Plan
10.2(10)*
Third Amended and Restated 1995 Stock Plan
10.3(10)*
Second Amended and Restated 1995 Non-Employee Director Stock Option Plan
10.4*
Third Amended and Restated 1995 Employee Stock Purchase Plan
10.5(5)*
Amended and Restated 2000 Director and OÇcer Stock Option and Incentive Plan
10.6(2)
10.7(2)
10.8(2)
10.9(2)
10.10(2)
10.11(2)
10.12(2)
10.13(2)
Microsoft Corporation Source Code Agreement between the Company and Microsoft
Corporation (""Microsoft'') dated November 15, 1989
Amendment No. 1 to the Source Code Agreement between the Company and Microsoft
dated October 1, 1992
License Agreement for Microsoft OS/2 Version Releases 1.x, 2.x between the Company and
Microsoft dated August 15, 1990
Amendment No. 1 to the License Agreement between the Company and Microsoft dated
August 15, 1990, Contract No. 5198-0228 dated May 6, 1991
Amendment No. 2 to License Agreement between the Company and Microsoft for Microsoft
OS/2 Version Releases 1.x, 2.x, dated October 1, 1992
Amendment No. 3 to the License Agreement between the Company and Microsoft dated
August 15, 1990, Contract No. 5198-0228 dated January 1, 1994
Amendment No. 4 to the License Agreement between the Company and Microsoft dated
August 15, 1990, dated January 31, 1995
Strategic Alliance Agreement between the Company and Microsoft dated December 12,
1991
10.14(2)
Form of IndemniÑcation Agreement
44
Exhibit No.
10.15(6)
10.16(7)
10.17(8)
Description
License, Development and Marketing Agreement dated July 9, 1996 between the Company
and Microsoft Corporation
License, Development and Marketing Agreement dated May 9, 1997 between the Company
and Microsoft Corporation
Amendment No. 1 to License, Development and Marketing Agreement dated May 9, 1997
between The Company and Microsoft Corporation
10.18(10)
Employment Agreement dated as of August 1, 2001 by and between the Company and
Roger W. Roberts
10.19(10) Amendment to Employment Agreement with Roger W. Roberts as of January 17, 2002
10.20(11) Microsoft Master Source Code Agreement by and between the Company and Microsoft,
dated May 15, 2002
10.21(11)
10.22(11)
License Form by and between the Company and Microsoft Corporation, dated May 15, 2002
(with certain information omitted pursuant to a request for conÑdential treatment and Ñled
separately with the Securities and Exchange Commission)
Participation Agreement dated as of April 23, 2002, by and among Citrix Systems, Inc.,
Citrix Capital Corp., Selco Service Corporation and Key Corporate Capital, Inc. (the
""Participation Agreement'') (with certain information omitted pursuant to a request for
conÑdential treatment and Ñled separately with the Securities and Exchange Commission)
10.23(11) Amendment No. 1 to Participation Agreement dated as of June 17, 2002 (with certain
information omitted pursuant to a request for conÑdential treatment and Ñled separately with
the Securities and Exchange Commission)
10.24(11) Master Lease dated as of April 23, 2002 by and between Citrix Systems, Inc. and Selco
Service Corporation (with certain information omitted pursuant to a request for conÑdential
treatment and Ñled separately with the Securities and Exchange Commission)
10.25
Amendment to Employment Agreement with Roger W. Roberts as of July 31, 2002
21.1
23.1
24.1
99.1
99.2
List of Subsidiaries
Consent of Ernst & Young LLP
Power of Attorney (Included in signature page)
CertiÑcation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
CertiÑcation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
*
Indicates a management contract or any compensatory plan, contract or arrangement.
(1) Incorporated herein by reference to Exhibit 2.3 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1999.
(2) Incorporated herein by reference to the exhibits to the Company's Registration Statement on Form S-1
(File No. 33-98542), as amended.
(3) Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000.
(4) Incorporated herein by reference to exhibits of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999.
(5) Incorporated herein by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2000.
(6) Incorporated herein by reference to Exhibit 10 of the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996.
45
(7) Incorporated herein by reference to Exhibit 10 of the Company's Current Report on Form 8-K dated as
of May 9, 1997.
(8) Incorporated herein by reference to Exhibit 10 of the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998.
(9) Incorporated by reference herein to Exhibit 2 of the Company's Schedule 13D Report dated as of
March 28, 2001.
(10) Incorporated by reference herein to exhibits of the Company's Annual Report on Form 10-K for the
year ended December 31, 2001.
(11) Incorporated by reference herein to exhibits of the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002.
(b) Reports on Form 8-K.
There were no reports on Form 8-K Ñled by the Company during the fourth quarter of 2002.
(c) Exhibits.
The Company hereby Ñles as part of this Form 10-K the exhibits listed in Item 15(a)(3) above. Exhibits
which are incorporated herein by reference can be inspected and copied at the public reference facilities
maintained by the Securities and Exchange Commission, 450 Fifth Street, N.W., Room 1024, Washington,
D.C., and at the Commission's regional oÇces at CitiCorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661-2511 233 Broadway, 13th Öoor, New York, NY 10279. Copies of such material can also be
obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
29549, at prescribed rates.
(d) Financial Statement Schedule.
The Company hereby Ñles as part of this Form 10-K the consolidated Ñnancial statement schedule listed
in Item 15(a)(2) above, which is attached hereto.
46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized,
in Fort Lauderdale, Florida on the 24th day of March, 2003.
CITRIX SYSTEMS, INC.
By: /s/
MARK B. TEMPLETON
Mark B. Templeton
President and Chief Executive OÇcer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned oÇcers and directors of Citrix Systems, Inc., hereby severally constitute and appoint
Mark B. Templeton and David D. Urbani, and each of them singly, our true and lawful attorneys, with full
power to them and each of them singly, to sign for us in our names in the capacities indicated below, all
amendments to this report, and generally to do all things in our names and on our behalf in such capacities to
enable Citrix Systems, Inc. to comply with the provisions of the Securities Exchange Act of 1934, as
amended, and all requirements of the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacities indicated below on the 24th day of
March, 2003.
Signature
Title(s)
/s/
MARK B. TEMPLETON
President, Chief Executive OÇcer and Director (Principal
Mark B. Templeton
Executive OÇcer)
/s/
DAVID D. URBANI
David D. Urbani
Acting Chief Financial OÇcer (Principal Financial
OÇcer) and Vice President, Finance (Principal
Accounting OÇcer)
/s/
STEPHEN M. DOW
Chairman of the Board of Directors
Stephen M. Dow
/s/
KEVIN R. COMPTON
Director
/s/
/s/
Kevin R. Compton
TYRONE F. PIKE
Tyrone F. Pike
JOHN W. WHITE
John W. White
Director
Director
47
I, Mark B. Templeton, certify that:
CERTIFICATIONS
1. I have reviewed this annual report on Form 10-K of Citrix Systems, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the Ñnancial statements, and other Ñnancial information included in this
annual report, fairly present in all material respects the Ñnancial condition, results of operations and
cash Öows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying oÇcers and I are responsible for establishing and maintaining
disclosure controls and procedures (as deÑned in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a. Designed such disclosure controls and procedures to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being prepared;
b. Evaluated the eÅectiveness of the registrant's disclosure controls and procedures as of a date
within 90 days prior to the Ñling date of this annual report (the ""Evaluation Date''); and
c. Presented in this annual report our conclusions about the eÅectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying oÇcers and I have disclosed, based on our most recent evaluation, to
the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent function):
a. All signiÑcant deÑciencies in the design or operation of internal controls which could adversely
aÅect the registrant's ability to record, process, summarize and report Ñnancial data and have
identiÑed for the registrant's auditors any material weaknesses in internal controls; and
b. Any fraud, whether or not material, that involves management or other employees who have a
signiÑcant role in the registrant's internal controls; and
6. The registrant's other certifying oÇcers and I have indicated in this annual report whether or not there
were signiÑcant changes in internal controls or in other factors that could signiÑcantly aÅect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with
regard to signiÑcant deÑciencies and material weaknesses.
By:
/s/ MARK B. TEMPLETON
Mark B. Templeton
Chief Executive OÇcer
(Principal Executive OÇcer)
Date: March 24, 2003
48
I, David D. Urbani, certify that:
CERTIFICATIONS
1. I have reviewed this annual report on Form 10-K of Citrix Systems, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the Ñnancial statements, and other Ñnancial information included in this
annual report, fairly present in all material respects the Ñnancial condition, results of operations and
cash Öows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying oÇcers and I are responsible for establishing and maintaining
disclosure controls and procedures (as deÑned in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a. Designed such disclosure controls and procedures to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being prepared;
b. Evaluated the eÅectiveness of the registrant's disclosure controls and procedures as of a date
within 90 days prior to the Ñling date of this annual report (the ""Evaluation Date''); and
c. Presented in this annual report our conclusions about the eÅectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying oÇcers and I have disclosed, based on our most recent evaluation, to
the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent function):
a. All signiÑcant deÑciencies in the design or operation of internal controls which could adversely
aÅect the registrant's ability to record, process, summarize and report Ñnancial data and have
identiÑed for the registrant's auditors any material weaknesses in internal controls; and
b. Any fraud, whether or not material, that involves management or other employees who have a
signiÑcant role in the registrant's internal controls; and
6. The registrant's other certifying oÇcers and I have indicated in this annual report whether or not there
were signiÑcant changes in internal controls or in other factors that could signiÑcantly aÅect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with
regard to signiÑcant deÑciencies and material weaknesses.
Date: March 24, 2003
/s/ DAVID D. URBANI
David D. Urbani
Acting Chief Financial OÇcer
(Principal Financial OÇcer)
By:
49
List of Financial Statements and Financial Statement Schedule
CITRIX SYSTEMS, INC.
The following consolidated Ñnancial statements of Citrix Systems, Inc. are included in Item 8:
Report of Independent CertiÑed Public Accountants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Consolidated Balance Sheets Ì December 31, 2002 and 2001. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Consolidated Statements of Income Ì Years ended December 31, 2002, 2001 and 2000 ÏÏÏÏÏÏÏÏÏ
Consolidated Statements of Stockholders' Equity and Comprehensive Income Ì Years ended
December 31, 2002, 2001 and 2000ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Consolidated Statements of Cash Flows Ì Years ended December 31, 2002, 2001 and 2000ÏÏÏÏÏÏ
Notes to Consolidated Financial Statements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
The following consolidated Ñnancial statement schedule of Citrix Systems, Inc. is included in
F-2
F-3
F-4
F-5
F-6
F-7
Item 15(a):
Schedule II Valuation and Qualifying Accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
F-37
All other schedules for which provision is made in the applicable accounting regulation of the Securities
and Exchange Commission are not required under the related instructions or are inapplicable and therefore
have been omitted.
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Citrix Systems, Inc.
We have audited the accompanying consolidated balance sheets of Citrix Systems, Inc. as of Decem-
ber 31, 2002 and 2001, and the related consolidated statements of income, stockholders' equity and
comprehensive income, and cash Öows for each of the three years in the period ended December 31, 2002. Our
audits also included the Ñnancial statement schedule listed in the Index at Item 15(a). These Ñnancial
statements and schedule are the responsibility of the Company's management. Our responsibility is to express
an opinion on these Ñnancial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
Ñnancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Ñnancial statements. An audit also includes assessing the
accounting principles used and signiÑcant estimates made by management, as well as evaluating the overall
Ñnancial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the Ñnancial statements referred to above present fairly, in all material respects, the
consolidated Ñnancial position of Citrix Systems, Inc. at December 31, 2002 and 2001, and the consolidated
results of its operations and its cash Öows for each of the three years in the period ended December 31, 2002,
in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the
related Ñnancial statement schedule, when considered in relation to the basic Ñnancial statements taken as a
whole, presents fairly in all material respects the information set forth therein.
As discussed in Note 2 to the consolidated Ñnancial statements, eÅective January 1, 2002, the Company
changed its method of accounting for goodwill and certain intangible assets as a result of adopting Statement
of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets.
/s/ ERNST & YOUNG LLP
West Palm Beach, Florida
January 14, 2003
F-2
CITRIX SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
2002
2001
(In thousands, except
par value)
Current assets:
Assets
Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 142,700
Short-term investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
77,213
Accounts receivable, net of allowances of $16,538 and $12,069 at 2002 and
$ 139,693
77,078
2001, respectively ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Inventories ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Prepaid taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other prepaids and current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Current portion of deferred tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Long-term investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Property and equipment, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Goodwill, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other intangible assets, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Long-term portion of deferred tax assets, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other assets, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
69,471
1,774
2,128
32,498
49,515
375,299
499,491
76,534
152,364
30,849
5,587
21,407
65,032
3,568
6,069
21,444
33,171
346,055
529,894
90,110
152,364
36,613
25,071
28,123
$1,161,531
$1,208,230
Current liabilities:
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
Current portion of deferred revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
92,926
95,963
$ 111,928
80,573
Total current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Long-term portion of deferred revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Convertible subordinated debentures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Commitments and contingencies
Put warrants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Common stock subject to repurchase ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Stockholders' equity:
Preferred stock at $.01 par value: 5,000 shares authorized, none issued and
outstanding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Common stock at $.001 par value: 1,000,000 shares authorized; 197,426 and
196,627 issued at 2002 and 2001, respectively ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Additional paid-in capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Retained earningsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Accumulated other comprehensive income (loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
188,889
8,028
333,549
7,340
9,135
192,501
5,631
346,214
16,554
Ì
Ì
Ì
197
595,959
519,797
3,833
1,119,786
197
507,857
425,877
(84)
933,847
Less Ì common stock in treasury, at cost (29,290 and 11,450 shares in 2002
and 2001, respectively) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(505,196)
(286,517)
Total stockholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
614,590
647,330
$1,161,531
$1,208,230
See accompanying notes.
F-3
CITRIX SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
2002
Year Ended December 31,
2001
(In thousands, except per share
information)
2000
Revenues:
Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $513,365
14,083
Other revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$551,799
39,830
$430,548
39,898
Total net revenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
527,448
591,629
470,446
Cost of revenues:
Cost of revenues (excluding amortization, presented separately
below) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cost of other revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total cost of revenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Gross margin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Operating expenses:
19,030
Ì
19,030
29,848
Ì
29,848
28,483
571
29,054
508,418
561,781
441,392
Research and development ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Sales, marketing and supportÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
General and administrative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Amortization of intangible assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
In-process research and development ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Write-down of technology ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
68,923
235,393
88,946
11,296
Ì
Ì
67,699
224,108
85,212
48,831
2,580
Ì
50,622
180,384
58,685
30,395
Ì
9,081
Total operating expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
404,558
428,430
329,167
Income from operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other expense, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
103,860
30,943
(18,163)
(3,483)
Income before income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
113,157
19,237
133,351
42,006
(20,553)
(2,253)
152,551
47,291
112,225
41,313
(17,099)
(1,422)
135,017
40,505
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 93,920
$105,260
$ 94,512
Earnings per common share:
Basic earnings per shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
0.53
$
0.57
$
0.51
Weighted average shares outstanding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
177,428
185,460
184,804
Earnings per common share Ì assuming dilution:
Diluted earnings per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
0.52
$
0.54
$
0.47
Weighted average shares outstanding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
179,359
194,498
199,731
See accompanying notes.
F-4
CITRIX SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (loss)
Treasury Stock
Shares
Amount
Total
Stockholders'
Equity
Total
Comprehensive
Income
Balance at December 31, 1999 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 181,093
$ 181
$309,321
$226,105
$(2,537)
Ì $
Exercise of stock options ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
6,698
Common stock issued under employee stock
purchase plan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Common stock issued upon debt conversion ÏÏÏÏÏÏ
Tax beneÑt from employer stock plans ÏÏÏÏÏÏÏÏÏÏÏ
Proceeds from sale of put warrants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Put warrant obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Repurchase of common stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash paid in advance for share repurchase contract,
net of shares received ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Unrealized loss on available-for-sale securities, net
of taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total comprehensive income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
78
3
Ì
Ì
Ì
Ì
Ì
Ì
Ì
7
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
69,146
1,262
73
63,923
4,870
(15,732)
Ì
(81,810)
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
94,512
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
(406)
Ì
Balance at December 31, 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 187,872
Exercise of stock options ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
8,541
188
9
351,053
113,331
320,617
(2,943)
(3,817)
(76,040)
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
(3,817)
(76,040)
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
$ 533,070
69,153
1,262
73
63,923
4,870
(15,732)
(76,040)
(81,810)
(406)
$
(406)
94,512
94,512
$ 94,106
592,875
113,340
4,008
2
28,011
12,019
(822)
(7,633)
(210,477)
(210,477)
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
255
84
$
84
2,775
105,260
2,775
105,260
$108,119
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
105,260
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
84
2,775
Ì
4,008
2
28,011
12,019
(822)
Ì
255
Ì
Ì
Ì
Common stock issued under employee stock
purchase plan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
214
Common stock issued upon debt conversion ÏÏÏÏÏÏ
Tax beneÑt from employer stock plans ÏÏÏÏÏÏÏÏÏÏÏ
Proceeds from sale of put warrants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Put warrant obligations, net of expired put warrants
Repurchase of common stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash paid in advance for share repurchase contract,
net of shares received ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Unrealized gain on forward contracts and interest
rate swap, net of reclassiÑcation adjustments and
net of tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Unrealized gain on available-for-sale securities, net
of taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total comprehensive income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Balance at December 31, 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 196,627
Exercise of stock options ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
551
Common stock issued under employee stock
purchase plan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
248
Tax beneÑt from employer stock plans ÏÏÏÏÏÏÏÏÏÏÏ
Proceeds from sale of put warrants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Put warrant obligations, net of expired put warrants
Repurchase of common stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Common stock subject to repurchase ÏÏÏÏÏÏÏÏÏÏÏÏ
Cash paid in advance for share repurchase
contracts, net of shares received and maturitiesÏÏ
Unrealized gain on forward contracts and interest
rate swaps, net of reclassiÑcation adjustments
and net of taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Unrealized gain on available-for-sale securities, net
of taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total comprehensive income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
197
1
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
507,857
425,877
(84)
(11,450)
(286,517)
647,330
3,369
1,301
25,735
3,310
9,215
Ì
(9,135)
54,307
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
93,920
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
3,428
489
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
3,370
1,301
25,735
3,310
9,215
(17,840)
(218,679)
(218,679)
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
Ì
(9,135)
54,307
3,428
$
3,428
489
93,920
489
93,920
$ 97,837
Balance at December 31, 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 197,426
$ 197*
$595,959
$519,797
$ 3,833
(29,290)
$(505,196)
$ 614,590*
* Amounts do not add due to rounding
See accompanying notes.
F-5
CITRIX SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
2002
Year Ended December 31,
2001
(In thousands)
2000
Operating activities
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of intangible assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Depreciation and amortization of property and equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Realized (gain) loss on the repurchase of convertible subordinated
debentures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Realized gain on the termination of interest rate swapÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Loss on abandonment of Ñxed assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Realized losses and other-than-temporary decline in fair value of investments
In-process research and development ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Write-down of technology ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Provision for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Provision for product returns ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Provision for inventory reserves ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Deferred income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Tax beneÑt related to the exercise of non-statutory stock options and
disqualiÑed dispositions of incentive stock options ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Accretion of original issue discount and amortization of Ñnancing cost ÏÏÏÏÏÏ
Total adjustments to reconcile net income to net cash provided by
$
93,920
$ 105,260
$
94,512
11,296
30,142
(1,547)
(3,356)
2,006
2,095
Ì
Ì
3,486
25,282
1,407
(4,218)
25,735
17,711
48,831
30,757
360
Ì
247
7,689
2,580
Ì
2,784
22,533
2,292
(1,063)
28,011
17,853
30,395
19,853
Ì
Ì
Ì
Ì
Ì
9,081
377
27,883
6,932
6,240
63,923
16,911
operating activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
110,039
162,874
181,595
Changes in operating assets and liabilities, net of eÅects of acquisitions:
Accounts receivable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Inventories ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Prepaid expenses and other current assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Deferred tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Accounts payable and accrued expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Deferred revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income taxes payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Total changes in operating assets and liabilities, net of eÅects of
acquisitionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net cash provided by operating activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Investing activities
Purchases of investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Proceeds from sales and maturities of investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Purchases of property and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Proceeds from termination of interest rate swap ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash paid for acquisitions, net of cash acquired ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash paid for licensing agreement ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net cash provided by (used in) investing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Financing activities
Proceeds from issuance of common stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash paid to repurchase convertible subordinated debentures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash paid under stock repurchase programs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Proceeds from sale of put warrants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net cash used in Ñnancing activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Change in cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash and cash equivalents at beginning of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Cash and cash equivalents at end of yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(33,205)
387
(1,387)
5,661
6,480
(65)
17,787
(12,514)
(50,665)
(1,238)
12,648
(12,034)
3,534
5,523
(8,630)
12,571
(8,625)
(3,762)
4,614
(2)
(8,440)
18,799
(26,987)
(8,467)
(16,856)
187,103
(38,291)
229,843
(32,870)
243,237
(364,482)
393,454
(19,104)
3,902
(10,680)
(3,000)
90
(553,490)
415,633
(60,557)
Ì
(183,754)
Ì
(382,168)
(569,795)
642,986
(43,532)
Ì
(30,102)
(1,333)
(1,776)
4,671
(27,773)
(164,372)
3,310
(22)
(184,186)
3,007
139,693
$ 142,700
117,350
(2,141)
(210,222)
12,019
(13)
(83,007)
(235,332)
375,025
$ 139,693
70,488
Ì
(157,850)
4,870
(60)
(82,552)
158,909
216,116
$ 375,025
Supplemental Cash Flow Information
The Company paid income taxes of approximately $14,222, $7,991 and $9,277 in 2002, 2001 and 2000,
respectively. Additionally, the Company paid interest of approximately $4,155, $1,221 and $23 during the
years ended December 31, 2002, 2001 and 2000, respectively.
See accompanying notes.
F-6
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Citrix Systems, Inc. (""Citrix'' or the ""Company''), a Delaware corporation founded on April 17, 1989, is
a leading supplier of corporate application and information access infrastructure software and services that
enable the eÅective and eÇcient enterprise-wide deployment and management of applications and informa-
tion, including those designed for Microsoft» Windows» operating systems, for UNIX» operating systems,
such as Sun SolarisTM, HP-UX, or IBM»-AIX» (collectively, ""UNIX operating systems'') and for Web-
based information systems. The Company's MetaFrame» products permit organizations to provide secure
access to Windows based, Web-based and UNIX applications without regard to location, network connection
or type of client hardware platforms. The Company markets and licenses its products through multiple
channels such as value-added resellers, distributors, system integrators and independent software vendors,
managed by the Company's worldwide sales force.
2. SIGNIFICANT ACCOUNTING POLICIES
Consolidation Policy
The consolidated Ñnancial statements of the Company include the accounts of its wholly-owned
subsidiaries in the Americas, Europe and Asia-PaciÑc. All signiÑcant transactions and balances between the
Company and its subsidiaries have been eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents at December 31, 2002 include marketable securities, which are primarily
municipal securities, money market funds, corporate securities and commercial paper with initial or remaining
contractual maturities when purchased of three months or less. The Company minimizes its credit risk
associated with cash and cash equivalents by investing primarily in investment grade, highly liquid instruments
and periodically evaluating the credit quality of its primary Ñnancial institutions.
Investments
Short and long-term investments at December 31, 2002 primarily consist of corporate securities,
government securities and municipal securities. Investments classiÑed as available-for-sale are stated at fair
value with unrealized gains and losses, net of taxes, reported in accumulated other comprehensive income
(loss). Investments classiÑed as held-to-maturity are stated at amortized cost. The Company does not
recognize changes in the fair value of certain investments in income unless a decline in value is considered
other-than-temporary.
From time to time, the Company makes equity investments that are accounted for under the cost method
due to the limited extent of the Company's ownership interest and the lack of the Company's ability to exert
signiÑcant inÖuence over the investees. As of December 31, 2002 and 2001, such investments were recorded at
the lower of cost or estimated net realizable value. The Company periodically evaluates the carrying value of
its investments to determine if there has been any impairment of value that is other-than-temporary. During
2002 and 2001, the Company recorded $2.1 million and $7.7 million, respectively, of losses resulting from
sales of available-for-sale securities and other-than-temporary declines in fair value of certain of the
Company's investments. Amounts included in accumulated other comprehensive income (loss) in prior
periods are reclassiÑed to earnings using the speciÑc identiÑcation method. At December 31, 2002, the
Company's remaining equity investments were approximately $0.2 million.
The Company minimizes its credit risk associated with investments by investing primarily in investment
grade, highly liquid securities. The Company maintains investments with various Ñnancial institutions and the
Company's policy is designed to limit exposure to any one institution depending on credit quality. Periodic
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
evaluations of the relative credit standing of those Ñnancial institutions are considered in the Company's
investment strategy.
At December 31, 2002, approximately $63 million in investment securities were pledged as collateral for
speciÑed obligations under the Company's synthetic lease. In addition, at December 31, 2002, approximately
$109 million in investment securities were pledged as collateral for the Company's credit default contracts.
The Company maintains the ability to manage the composition of the pledged investments. Accordingly, these
securities are not reÖected as restricted investments in the accompanying consolidated balance sheets. For
further information see Notes 10 and 13.
The Company relies on third party valuations to adjust the carrying value of certain of its investments and
derivative instruments 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 investments.
Accounts Receivable
Substantially all of the Company's accounts receivable are due from value-added resellers and distribu-
tors of computer software. Collateral is not required. Credit losses and expected product returns are provided
for in the consolidated Ñnancial statements and have been within management's expectations. If the Ñnancial
condition of a signiÑcant distributor or customer were to deteriorate, the Company's operating results could be
adversely aÅected. One distributor accounted for approximately 7% and 14% of gross accounts receivable at
December 31, 2002 and 2001, respectively. No other distributor or customer accounted for more than 10% of
gross accounts receivable.
Inventories
Inventories, consisting primarily of raw materials, are stated at the lower of cost (determined by the Ñrst-
in, Ñrst-out method) or market. When necessary, a provision has been made to reduce obsolete or excess
inventories to market.
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets, which is generally three years for computer equipment, software, oÇce
equipment and furniture, the lesser of the lease term or Ñve years for leasehold improvements, seven years for
the enterprise resource planning system and 40 years for buildings. Assets under capital leases are amortized
over the shorter of the asset life or the remaining lease term. Amortization of assets under capital leases is
included in depreciation expense. Accumulated amortization of equipment under capital leases approximated
$0.4 million at December 31, 2002 and 2001, respectively.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
Property and equipment consist of the following:
December 31,
2002
2001
(In thousands)
Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 17,781
53,109
Computer equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
40,312
Software ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
17,062
Equipment and furniture ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
29,277
Leasehold improvements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
9,062
Land ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
411
Equipment under capital leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 17,583
50,561
38,028
13,250
25,930
9,062
451
Less accumulated depreciation and amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
167,014
(90,480)
154,865
(64,755)
$ 76,534
$ 90,110
Long-Lived Assets
The Company reviews for impairment of long-lived assets and certain identiÑable intangible assets to be
held and used whenever events or changes in circumstances indicate that the carrying amount of such assets
may not be fully recoverable. Determination of recoverability is based on an estimate of undiscounted future
cash Öows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss
for long-lived assets and certain identiÑable intangible assets that management expects to hold and use is
based on the fair value of the asset. Long-lived assets and certain identiÑable intangible assets to be disposed
of are reported at the lower of carrying amount or fair value less costs to sell. During 2002, the Company
recognized $2.0 million in asset impairment charges primarily due to the consolidation of certain of its oÇces
resulting in the abandonment of certain leasehold improvements. These charges are reÖected in operating
expenses in the accompanying consolidated statements of income and primarily related to the Americas
geographic segment. As of December 31, 2002, we have determined that there were no other triggering events
requiring additional impairment analysis.
Software Developed or Obtained for Internal Use
The Company accounts for internal use software pursuant to Statement of Position No. (""SOP'') 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Pursuant to the SOP,
the Company capitalizes external direct costs of materials and services used in the project and internal costs
such as payroll and beneÑts of those employees directly associated with the development of the software. The
amount of costs capitalized in 2002 and 2001 relating to internal use software were $3.4 million and
$16.7 million, respectively, consisting principally of purchased software and services provided by external
vendors. These costs are being amortized over the estimated useful life of the software developed, which is
generally three to seven years and are included in property and equipment in the accompanying consolidated
balance sheets.
Software Development Costs
Statement of Financial Accounting Standard (""SFAS'') No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed, requires certain software development costs to be
capitalized upon the establishment of technological feasibility. The establishment of technological feasibility
and the ongoing assessment of the recoverability of these costs requires considerable judgment by manage-
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
ment with respect to certain external factors such as anticipated future revenue, estimated economic life, and
changes in software and hardware technologies. Software development costs incurred beyond the establish-
ment of technological feasibility have not been signiÑcant.
Goodwill and other intangible assets
EÅective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets.
As a result of adopting SFAS No. 142, the Company's goodwill and certain intangible assets are no longer
amortized, but are subject to an annual impairment test. In accordance with SFAS No. 142, the Company
ceased amortizing goodwill with a net book value at January 1, 2002 of $152.4 million, including $10.1 million
of acquired workforce previously classiÑed as purchased intangible assets. There was no impairment of
goodwill or other intangible assets as a result of adopting SFAS No. 142 or the annual impairment completed
during the fourth quarter of 2002. Excluding goodwill, the Company has no intangible assets deemed to have
indeÑnite lives. Substantially all of the Company's goodwill at December 31, 2002 was associated with the
Americas reportable segment. See Note 12 for segment information.
The following table provides a reconciliation of reported net income for the years ended December 31,
2001 and 2000 to net income adjusted as if SFAS No. 142 had been applied as of the beginning of 2000. Some
amounts may not add due to rounding.
Year Ended December 31,
2001
2000
(In thousands, except per
share amounts)
Net income as reportedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $105,260
33,659
Goodwill amortization, net of taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 94,512
15,661
Adjusted net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $138,919
$110,173
BASIC EARNINGS PER SHARE:
Earnings per share as reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
Goodwill amortization, net of taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Adjusted earnings per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
DILUTED EARNINGS PER SHARE:
Earnings per share as reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
Goodwill amortization, net of taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Adjusted earnings per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
0.57
0.18
0.75
0.54
0.17
0.71
$
$
$
$
0.51
0.08
0.60
0.47
0.08
0.55
Intangible Assets
Intangible assets are recorded at cost, less accumulated amortization. Amortization is computed over the
estimated useful lives of the respective assets, generally three to Ñve years, except for patents, which are
amortized over 10 years. In accordance with SFAS No. 86, the Company carries core and product technology
at net realizable value and reviews this technology for impairment on a periodic basis by comparing the
estimated net realizable value to the unamortized cost of the technology. There has been no impairment of
these assets to date.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
Intangible assets consist of the following (in thousands):
December 31, 2002
December 31, 2001
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
Amortized intangible assets:
Core and product technologies ÏÏÏÏÏ
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$81,686
8,460
TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$90,146
$52,056
7,241
$59,297
$76,686
7,928
$84,614
Estimated future annual amortization expense is as follows (in thousands):
Year ending December 31,
2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$41,245
6,756
$48,001
$11,685
8,894
7,600
2,074
124
Revenue Recognition
The Company markets and licenses software products through value-added resellers, channel distributors,
system integrators and independent software vendors, managed by the Company's worldwide sales force. The
Company's software licenses are generally perpetual, and are delivered by means of traditional packaged
products and electronically, typically under volume-based licensing programs. The Company's packaged
products are typically purchased by medium and small-sized businesses with fewer locations and the software
license is delivered with the packaged product.
Volume-based license arrangements are used with more complex multi-server environments typically
found in larger business enterprises that deploy the Company's products on a department or enterprise-wide
basis, which could require diÅerences in product features and functionality at various customer locations. The
end-customer license agreement with enterprise customers is typically customized based on these factors.
Once the Company receives a purchase order from the channel distributor, the volume-based licenses are
electronically delivered to the customer with ""software activation keys'' that enable the feature conÑguration
ordered by the end-customer. Depending on the size of the enterprise, software may be delivered indirectly by
the channel distributor or directly by the Company pursuant to a purchase order from the channel distributor.
Revenue is recognized when it is earned. The Company's revenue recognition policies are in compliance
with the American Institute of CertiÑed Public Accountants Statement of Position (""SOP'') 97-2 (as
amended by SOP 98-4 and SOP 98-9) and related interpretations, Software Revenue Recognition. The
Company recognizes revenue when all of the following criteria are met: persuasive evidence of the
arrangement exists; delivery has occurred and the Company has no remaining obligations; the fee is Ñxed or
determinable; and collectibility is probable. The Company deÑnes these four criteria as follows:
‚ Persuasive evidence of the arrangement exists. The Company recognizes revenue on packaged product
upon shipment to distributors and resellers. For packaged product sales, it is the Company's customary
practice to require a purchase order from distributors who have previously negotiated a master
packaged product distribution or resale agreement. For volume-based licensing, the Company typically
requires a purchase order from the distributor or reseller and an executed standard software license
agreement from the end-customer. The Company requires a purchase order for training and services.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
‚ Delivery has occurred and the Company has no remaining obligations. The Company's standard
delivery method is free-on-board shipping point. Consequently, it considers delivery of packaged
product to have occurred when the products are shipped to distributors pursuant to an agreement and
purchase order. The Company considers delivery of licenses under electronic licensing agreements to
have occurred when the related products are shipped and the end-customer has been electronically
provided with the licenses that include the activation keys that allow the end-customer to take
immediate possession of the software. For training and service revenue recognition, the Company
fulÑlls its obligation when the services are performed.
‚ The fee is Ñxed or determinable. In the normal course of business, the Company does not provide end-
customers the right to a refund of any portion of their license fees or extended payment terms. When
the Company sells its software products separately, vendor speciÑc objective evidence (""VSOE'') is
determined by the price charged for each product. In software arrangements that include the rights to
multiple software products, post-contract customer support (""PCS'') and/or other services, the
Company allocates the total arrangement fee among each deliverable based on the relative fair value of
each of the deliverables based on VSOE. If management cannot objectively determine the fair value of
each undelivered element based on VSOE, revenue recognition is deferred until all elements are
delivered, all services have been performed, or until fair value can be objectively determined.
‚ Collectibility is probable. The Company determines collectibility on a customer-by-customer basis.
The Company typically sells to distributors or resellers for whom there are histories of successful
collection. New customers are subject to a credit review process that evaluates the customers' Ñnancial
position and ultimately their ability to pay. Customers are subject to an ongoing credit review process.
If the Company determines from the outset of an arrangement that collectibility is not probable,
revenue recognition is deferred until customer payment is received and the other parameters of revenue
recognition described above have been achieved. Management's judgment is required in assessing the
probability of collection, which is generally based on evaluation of customer speciÑc information,
historical experience and economic market conditions. If market conditions decline, or, if the Ñnancial
condition of distributors or end-customers deteriorates, the Company may be unable to determine that
collectibility is probable, and it could be required to defer the recognition of revenues until the
Company receives customer payment.
For certain software products that are only sold bundled with PCS, the Company allocates revenue to the
delivered software product using the residual method. Under the residual method, the Company does not sell
the software products separately and thus is generally unable to determine VSOE of fair value for the product.
Therefore, the Company allocates discounts inherent in the arrangement entirely to the software product and
the portion of the fee initially allocated to PCS and deferred is generally higher than in arrangements with
established VSOE for the software product. Depending on future product releases or changes in customer
demand, the Company may oÅer additional products that are only sold bundled with PCS. If the Company
does this, the use of the residual method will become more prevalent, which could impact the timing of
revenue recognition since more of the sales proceeds would be allocated to the PCS portion of the
arrangement and recognized over the PCS period. The Company also sells PCS separately through the
Subscription Advantage renewal program, and it determines VSOE by the renewal price charged. The
Company bases technical service and PCS revenues from customer maintenance fees for ongoing customer
support and product updates and upgrades on the price charged or derived value of the undelivered elements
and are recognized ratably over the term of the contract, which is typically 12 to 24 months. The Company
includes technical service revenues in net revenues in the consolidated statements of income.
In the normal course of business, the Company does not permit product returns, but it does provide most
of its distributors and value added resellers with stock balancing and price protection rights. Stock balancing
rights permit distributors to return products to the Company, subject to ordering an equal dollar amount of
products.
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
Price protection rights require that the Company grant retroactive price adjustments for inventories of its
products held by distributors or resellers if it lowers prices for such products. The Company establishes
provisions for estimated returns for stock balancing and price protection rights, as well as other sales
allowances, concurrently with the recognition of revenue. The provisions are established based upon
consideration of a variety of factors, including, among other things, historical return rates for both speciÑc
products and distributors, estimated distributor inventory levels by product, the impact of any new product
releases and projected economic conditions. Actual product returns for stock balancing and price protection
provisions incurred are, however, dependent upon future events, including the amount of stock balancing
activity by distributors and the level of distributor inventories at the time of any price adjustments. The
Company continually monitors the factors that inÖuence the pricing of its products and distributor inventory
levels and makes adjustments to these provisions when it believes actual returns and other allowances could
diÅer from established reserves. The Company's ability to recognize revenues upon shipment to distributors is
predicated on its ability to reliably estimate future product returns and rotation. If actual return experience or
changes in market condition impairs the Company's ability to estimate returns and rotation, it would be
required to defer the recognition of revenue until the delivery of the product to the end-user customer.
Allowances for estimated product returns amounted to approximately $10.5 million at December 31, 2002 and
$8.3 million at December 31, 2001. The Company has not reduced and has no current plans to reduce its
prices for inventory currently held by distributors or resellers. Accordingly, there were no reserves required for
price protection at December 31, 2002 or 2001. The Company records estimated reductions to revenue for
customer programs and incentive oÅerings including volume-based incentives. If market conditions were to
decline, the Company could take actions to increase its customer incentive oÅerings and possibly result in an
incremental reduction to its revenue at the time the incentive is oÅered.
The Company provides consulting services to certain license customers. The services consist of network
conÑguration and optimization and are typically performed prior to the customers' purchase and implementa-
tion of the Company's software products. Services are not essential to the functionality of the Company's
software and do not constitute modiÑcations to the Company's software. Revenue from services, support
arrangements and training programs and materials, which totaled $44.5 million, $40.7 million and $30.4 mil-
lion for the years ended December 31, 2002, 2001 and 2000, respectively, is recognized when the services are
provided and the other criteria of revenue recognition have been met. Such items are included in net revenues.
The costs for providing consulting services are included in cost of sales. The costs of providing training and
services are included in sales, marketing and support expenses.
In May 1997, the Company entered into a Ñve year joint license, development and marketing agreement
with Microsoft Corporation (""Microsoft'') (as amended, the ""Microsoft Development Agreement''), pursu-
ant to which the Company licensed its multi-user Windows NT extensions to Microsoft for inclusion in certain
versions of Windows NT server software. Revenue from the Microsoft Development Agreement was
recognized ratably over the Ñve-year term of the contract, which expired in May 2002. Revenues recognized
pursuant to the Microsoft Development Agreement are included in other revenues in the accompanying
consolidated statements of income.
Product Concentration
The Company derives a substantial portion of its revenues from one software product and anticipates that
this product and future derivative products and product lines based upon this technology, if any, will constitute
a majority of its revenue for the foreseeable future. The Company could experience declines in demand for
products, whether as a result of general economic conditions, new competitive product releases, price
competition, lack of success of its strategic partners, technological change or other factors.
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
Cost of Revenues
Cost of revenues consist primarily of compensation and other personnel-related costs of providing
consulting services, as well as, the cost of royalties, product media and duplication, manuals, packaging
materials and shipping expense. The Company is a party to licensing agreements with various 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 a Ñxed fee or certain amounts based upon the sales of the related
product. The licensing agreements generally have terms ranging from one to Ñve years, and generally include
renewal options. However, some agreements may be perpetual unless expressly terminated. Royalties and
other costs related to these agreements are included in cost of revenues. All development costs incurred in
connection with the Microsoft Development Agreement, were expensed as incurred as cost of other revenues.
The Company's cost of revenues excludes amortization of acquired core and product technologies, which is
included in amortization of intangible assets in the accompanying consolidated statements of income.
Foreign Currency
The functional currency of each of the Company's wholly-owned foreign subsidiaries is the U.S. dollar.
Assets and liabilities of the subsidiaries are remeasured into U.S. dollars at year-end exchange rates, and
revenues and expenses are remeasured at average rates prevailing during the year. Remeasurement and foreign
currency transaction losses of approximately $1.1 million, $2.4 million and $0.1 million for the years ended
December 31, 2002, 2001, and 2000, respectively, are included in other expense, net in the accompanying
consolidated statements of income.
Derivatives and Hedging Activities
In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and its
related interpretations and amendments, the Company records derivatives as either assets or liabilities on the
balance sheet and measures those instruments at fair value. Derivatives not designated as hedging instruments,
if any, are adjusted to fair value through earnings as other income (expense) in the current period. For
derivatives that are designated as and qualify as eÅective cash Öow hedges, the portion of gain or loss on the
derivative instrument eÅective at oÅsetting changes in the hedged item is reported as a component of
accumulated other comprehensive income (loss) and reclassiÑed into earnings as operating income (ex-
pense) when the hedged transaction aÅects earnings. For derivative instruments that are designated as and
qualify as eÅective fair value hedges, the gain or loss on the derivative instrument as well as the oÅsetting gain
or loss on the hedged item attributable to the hedged risk is recognized in current earnings as interest income
(expense) during the period of the change in fair values. The application of the provisions of SFAS No. 133
could impact the volatility of earnings.
The Company formally documents all relationships between hedging instruments and hedged items, as
well as its risk-management objective and strategy for undertaking various hedge transactions. This process
includes attributing all derivatives that are designated as cash Öow hedges to Öoating rate assets or liabilities or
forecasted transactions and attributing all derivatives that are designated as fair value hedges to Ñxed rate
assets or liabilities. The Company also formally assesses, both at the inception of the hedge and on an ongoing
basis, whether each derivative is highly eÅective in oÅsetting changes in cash Öows or fair value of the hedged
item. Fluctuations in the value of the derivative instruments are generally oÅset by changes in the hedged
item; however, if it is determined that a derivative is not highly eÅective as a hedge or if a derivative ceases to
be a highly eÅective hedge, the Company will discontinue hedge accounting prospectively for the aÅected
derivative.
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
Advertising Expense
The Company expenses advertising costs as incurred. The Company has cooperative advertising
agreements with certain distributors and resellers whereby the Company will reimburse distributors and
resellers for qualiÑed advertising of Citrix products. Reimbursement is made once the distributor or reseller
provides substantiation of qualiÑed expenditures. The Company estimates the impact of this program and
recognizes it at the time of product sale as a component of sales, marketing and support expenses in the
accompanying consolidated statements of income. The Company recognized advertising expenses of approxi-
mately $10.0 million, $11.1 million and $10.7 million, during the years ended December 31, 2002, 2001 and
2000, respectively.
Income Taxes
The Company is required to estimate income taxes in each of the jurisdictions in which it operates as part
of the process of preparing the consolidated Ñnancial statements. Deferred income tax assets and liabilities are
determined based upon diÅerences between the Ñnancial statement and income tax bases of assets and
liabilities using enacted tax rates in eÅect for the year in which the diÅerences are expected to reverse. The
realization of deferred tax assets is based on historical tax positions and expectations about future taxable
income. Valuation allowances are recorded related to deferred tax assets if their realization does not meet the
""not more likely than not'' criteria of SFAS No. 109, Accounting for Income Taxes. Except for amounts
previously provided for in the consolidated Ñnancial statements, earnings of overseas subsidiaries are
considered permanently reinvested.
Use of Estimates
The preparation of Ñnancial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that aÅect the amounts reported in
the consolidated Ñnancial statements and accompanying notes. SigniÑcant estimates made by management
include the provision for doubtful accounts receivables, provision for sales returns and stock rotation, valuation
of the Company's goodwill and acquired workforce, net realizable value of core and product technology and
the amortization and depreciation periods for intangible and long-lived assets. While the Company believes
that such estimates are fair when considered in conjunction with the consolidated Ñnancial position and results
of operations taken as a whole, the actual amounts of such estimates, when known, will vary from these
estimates.
Accounting for Stock-Based Compensation
SFAS No. 123, Accounting for Stock-Based Compensation, deÑnes a fair value method of accounting for
issuance of stock options and other equity instruments. Under the fair value method, compensation cost is
measured at the grant date based on the fair value of the award and is recognized over the service period,
which is usually the vesting period. Pursuant to SFAS No. 123, companies are not required to adopt the fair
value method of accounting for employee stock-based transactions. Companies are permitted to account for
such transactions under Accounting Principles Board (""APB'') Opinion No. 25, Accounting for Stock Issued
to Employees, but are required to disclose in a note to the consolidated Ñnancial statements pro forma net
income and per share amounts as if a company had applied the methods prescribed by SFAS No. 123.
The Company applies APB Opinion No. 25 and related interpretations in accounting for its plans, stock
options granted to employees and non-employee directors and has complied with the disclosure requirements
of SFAS No. 123. Except for non-employee directors, the Company has not granted any options to non-
employees. See Note 6 for more information regarding the Company's stock option plans.
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
Earnings Per Share
Dilutive common share equivalents consist of shares issuable upon the exercise of certain stock options
(calculated using the treasury stock method) and put warrants (calculated using the reverse treasury stock
method). All common share and per share data, except par value per share, have been retroactively adjusted
to reÖect the two-for-one stock split of the Company's Common Stock eÅective February 16, 2000, which is
further discussed in Note 7.
ReclassiÑcations
Certain reclassiÑcations of the prior years' Ñnancial statements have been made to conform to the current
year's presentation.
3. ACQUISITIONS
In April 2001, the Company completed the acquisition of Sequoia Software Corporation (""Sequoia'') for
approximately $182.6 million. A portion of the purchase price was allocated to in-process research and
development (""IPR&D''), which the Company concluded had not reached technological feasibility and for
which there was no alternative future use after taking into consideration the potential use of technologies in
diÅerent products, the stage of development and life cycle of each project, resale of the software and internal
use. The value of the respective purchased IPR&D was expensed at the time of the transaction and resulted in
a pre-tax charge to the Company's operations of approximately $2.6 million in 2001.
In February 2000, the Company acquired all of the operating assets of the Innovex Group, Inc.
(""Innovex'') for approximately $47.8 million. At the date of acquisition, the Company paid approximately
$28.7 million in consideration and $0.2 million in transaction costs, respectively. Pursuant to the acquisition
agreement, the remaining purchase consideration, plus interest, was contingently payable based on future
events. During 2001, these contingencies were met, resulting in approximately $16.2 million of additional
purchase price and $2.9 million in compensation to the former owners. Pursuant to the acquisition agreement,
payment of $10.5 million of the contingent amounts and associated interest was made in August 2001 and
$10.7 million was paid in 2002. There are no remaining contingent obligations.
Each acquisition was accounted for under the purchase method of accounting. The consolidated Ñnancial
statements reÖect the operations of the acquired businesses for the periods after their respective dates of
acquisition. The purchase consideration was allocated to the acquired assets and liabilities based on fair values
as follows:
Net assets acquired ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,259
9,908
Purchased identiÑable intangibles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Ì
Purchased in-process research and development ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
32,944
Goodwill ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 10,058
46,775
2,580
123,157
Total purchase consideration ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $45,111
$182,570
Innovex
Sequoia
(In thousands)
During the fourth quarter of 2000, the Company did not believe that there were suÇcient projected cash
Öows or alternative future uses to support the net book value of core technology associated with certain
acquisitions made prior to 2000. As a result, the Company wrote oÅ $9.1 million of certain core technology as
of December 31, 2000.
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
4. CASH AND INVESTMENTS
The summary of the Company's cash and cash equivalents and investments consists of the following:
December 31,
2002
2001
(In thousands)
Cash and cash equivalents:
Cash ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 35,377
60,953
Municipal securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
35,573
Money market funds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
9,769
Corporate securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
1,028
Commercial paper ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Ì
Government securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 55,209
16,855
20,515
39,482
3,682
3,950
Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $142,700
$139,693
Short-term investments:
Corporate securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 44,355
29,781
Government securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
3,077
Municipal securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 68,912
3,990
4,176
Short-term investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 77,213
$ 77,078
Long-term investments:
Corporate securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $351,065
124,906
Government securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
23,294
Municipal securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
226
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$503,138
22,063
3,132
1,561
Long-term investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $499,491
$529,894
The unrealized gain (loss) associated with each individual category of cash and investments was not
signiÑcant for either of the periods presented.
In December 2000, the Company invested $158.1 million in a trust managed by an investment advisor.
The purpose of the trust is to maintain suÇcient liquidity in the event that the Company's debentures are
redeemed in March 2004. The Company's investment in the trust matures on March 22, 2004, and comprises
all of the trust's assets. The trust's assets primarily consist of AAA-rated zero-coupon corporate securities.
The trust entered into a credit risk swap agreement with the investment advisor, which eÅectively increased
the yield on the trust's assets and for which value the trust assumed the credit risk of ten investment-grade
companies. The eÅective yield of the trust, including the credit risk swap agreement, is 6.72% and the
principal balance will accrete to $195 million in March 2004. The Company records its investment in the trust
and the underlying investments and swap as held-to-maturity zero-coupon corporate security in its consoli-
dated Ñnancial statements. The Company does not recognize changes in the fair value of the held-to-maturity
investment unless a decline in the fair value of the trust is other-than-temporary, in which case the Company
would recognize a loss in earnings. The Company's investment is at risk to the extent that one of the
underlying corporate securities has a credit event resulting in non-payment to the counterparty that may
include bankruptcy, dissolution, or insolvency of the issuers. There have been no losses associated with the
trust's underlying corporate securities to date. The amortized cost of the Company's investment in the trust
was approximately $180.4 million at December 31, 2002 and $169.0 million at December 31, 2001, which was
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
classiÑed as long-term corporate investments in our consolidated balance sheets. At December 31, 2002, the
fair value of the trust's assets was $180.2 million.
Other than the Trust investments described above, the Company's short and long-term investments are
classiÑed as available-for-sale and are recorded at fair value. Gross realized gains and gross realized losses on
sales of securities and other-than-temporary write downs of investments classiÑed as available-for-sale, using
the speciÑc identiÑcation method, were $0.7 million and $2.8 million, respectively, for the year ended
December 31, 2002 and $8.1 million and $7.7 million respectively, for the year ended December 31, 2001. At
December 31, 2002, the average original contractual maturity of the Company's short-term available-for-sale
investments was approximately 17 months. The Company's long-term available-for-sale investments at
December 31, 2002 include $297.2 million of investments with original contractual maturities ranging from
one to Ñve years, $20.5 million of investments with original contractual maturities ranging from Ñve to 10 years
and $1.1 million of investments with contractual maturities of 35 years. The average remaining maturities of
the Company's short and long-term available-for-sale investments at December 31, 2002 was four and
42 months, respectively. The Company also owns $0.2 million in equity investments not due at a single
maturity date classiÑed as long-term investments.
During 2002 the Company invested in two instruments with an aggregate amount of $38 million that
include structured credit risk features whereby the Company's investment is at risk to the extent that several
of the underlying corporate securities, above speciÑed threshold amounts, have credit events that result in a
loss to the counterparty that may include bankruptcy, dissolution or insolvency of the issuers. The risk level of
these instruments is equivalent to an ""AA'' single security. There have been no credit events associated with
the underlying corporate securities to date. If, in the future, one of these instruments has credit events, which
would accrue to the Company, the Company's investment will be reduced to fund the loss, not to exceed the
principal value of the investment.
The change in net unrealized securities gains (losses) recognized in other comprehensive income
includes unrealized gains (losses) that arose from changes in market value of 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 of available-for-sale securities. This reclassiÑcation has no eÅect on total comprehensive
income or stockholders' equity and was immaterial for all periods presented.
In connection with the Company's eÅorts to manage the credit quality and maturities of its investment
portfolio, during 2001 the Company sold corporate debt securities with an accreted value of $165.5 million
that were previously designated as held-to-maturity and purchased higher credit quality corporate debt
securities with interest rates that reset quarterly. Additionally, during 2001, the Company terminated a
forward bond purchase agreement previously designated as a hedge of forecasted purchases of corporate
security investments. The sale of securities and the termination of the forward bond purchase agreement
resulted in a realized gain of approximately $8.0 million, which is included in other expense, net in the 2001
consolidated statement of income.
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
December 31,
2002
2001
(In thousands)
Accounts payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $11,913
19,200
Accrued compensation and employee beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
11,872
Accrued cooperative advertising and marketing programs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
20,543
Accrued taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
29,398
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 10,635
17,510
20,368
35,885
27,530
$92,926
$111,928
6. EMPLOYEE STOCK COMPENSATION AND BENEFIT PLANS
Stock Compensation Plans
As of December 31, 2002, the Company has Ñve stock-based compensation plans, which are described
below. The Company grants stock options for a Ñxed number of shares to employees with an exercise price
equal to or above the fair value of the shares at the date of grant. As mentioned in Note 2, the Company
applies the intrinsic value method under APB Opinion No. 25 and related interpretations in accounting for its
plans. Accordingly, no compensation cost has been recognized for its Ñxed stock plans and its stock purchase
plan. However, the impact on the Company's Ñnancial statements from the use of options is reÖected in the
calculation of earnings per share in the form of dilution (see Note 14).
The Company has elected to follow APB Opinion No. 25 because the alternative fair value accounting
provided for under SFAS No. 123 requires use of option valuation models, including the Black-Scholes model,
that were developed for use with traded options which have no vesting restrictions and are fully transferable, as
opposed to employee stock options, which are typically non-transferable and last up to ten years. Currently,
management believes there is not one agreed upon option valuation method that is comparable among all
reporting companies. SpeciÑcally, the Black-Scholes model requires the input of highly subjective assump-
tions, including assumptions related to the expected stock price volatility over the expected life of the option.
Because the Company's stock-based awards to employees have characteristics signiÑcantly diÅerent from
those of traded options and because changes in the subjective input assumptions can materially aÅect the fair
value estimate, in management's opinion, the existing pricing models do not necessarily provide a reliable
single measure of the fair value of its stock-based awards to employees. Since the Black-Scholes model is
based on statistical expectations, the calculation can result in substantial earnings volatility that may not agree,
as to timing or amount, with the actual gain or loss accrued or realized by the option holder.
Had compensation cost for the Company's Ñve stock-based compensation plans been determined based
on the fair value at the grant dates for grants under those plans consistent with the method of SFAS No. 123,
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
the Company's cash Öows would have remained unchanged, however net income and earnings per share would
have been reduced to the pro forma amounts indicated below:
2002
2001
(In thousands, except per share
information)
2000
Net income (loss)
As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 93,920
$105,260
$ 94,512
Pro formaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(61,852)
$(41,188)
$(38,036)
Basic earnings (loss) per share
As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
0.53
Pro formaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
(0.35)
Diluted earnings (loss) per share
As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
0.52
Pro formaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
(0.35)
$
$
$
$
0.57
(0.22)
0.54
(0.22)
$
$
$
$
0.51
(0.21)
0.47
(0.21)
For purposes of the pro forma calculations, the fair value of each option is estimated on the date of the
grant using the Black-Scholes option-pricing model, assuming no expected dividends and the following
assumptions:
2002 Grants
2001 Grants
2000 Grants
Expected volatility factor ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Approximate risk free interest rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Expected lives ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.60 years
0.69
4.0%
0.60
5.0%
4.68 years
0.80
6.0%
4.64 years
Volatility is a measure of the amount by which a stock price is expected to Öuctuate during the expected
life of the option. Much of the value of a stock option is derived from its potential for appreciation. This
potential is reÖected in the volatility of the underlying stock, which can be measured by periodic changes in
the historical stock price. The higher the volatility, the higher the fair value of the option.
The risk-free interest rate represents the current rate associated with zero coupon U.S. Government
securities with a remaining term equal to the expected life of the options being valued. The risk-free interest
rate is used in determining the stock's forward value, and only modestly impacts the fair value of the option.
The higher the risk-free interest rate, the higher the fair value of the option.
The expected life of the option is a measure of the amount of time it is expected to take for an employee
to exercise their option. Estimating expected lives involves consideration of several factors, including the
characteristics of employees receiving the option awards, the vesting period of the awards, historical exercise
patterns of employees, and the expected volatility of the underlying stock. The longer the expected life, the
more time the option holder has available to allow the stock price to increase, and thus the higher the option's
fair value.
The determination of the fair value of all options is based on the assumptions described in the preceding
paragraphs, and because additional option grants are expected to be made each year and forfeitures will occur
when employees leave the Company, the above pro forma disclosures are not representative of pro forma
eÅects on reported net income (loss) for future years.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
Fixed Stock Option Plans
The Company's amended and restated 1995 Stock Plan (the ""1995 Plan'') was originally adopted by the
Board on September 28, 1995 and approved by the Company's stockholders in October 1995. Under the terms
of the 1995 Plan the Company is authorized to grant incentive stock options (""ISOs'') and nonqualiÑed stock
options (""NSOs''), make stock awards and provide the opportunity to purchase stock to employees, directors
and oÇcers and consultants of the Company. The 1995 Plan, as amended, provides for the issuance of a
maximum of 69,945,623 (as adjusted for stock splits) shares of Common Stock, plus, eÅective January 1,
2001 and each year thereafter, a number of shares of Common Stock equal to 5% of the total number of shares
of Common Stock issued and outstanding as of December 31 of the preceding year. Under the 1995 Plan, a
maximum of 60,000,000 ISOs may be granted and ISOs must be granted at exercise prices no less than
market value at the date of grant, except for ISOs granted to employees who own more than 10% of the
Company's combined voting power, for which the exercise prices will be no less than 110% of the market value
at the date of grant. NSOs, stock awards or stock purchases may be granted or authorized, as applicable, at
prices no less than the minimum legal consideration required. Under the 1995 Plan, as amended, ISOs must
be granted at exercise prices no less than market value at the date of grant, provided however, that if an NSO
is expressly granted in lieu of a reasonable amount of salary or cash bonus, the exercise price may be equal to
or greater than 85% of the fair market value at the date of such grant. ISOs and NSOs expire ten years from
the date of grant. All options are exercisable upon vesting. The options typically vest over four years at a rate
of 25% of the shares underlying the option one year from the date of grant and at a rate of 2.08% monthly
thereafter.
The Company's amended and restated 2000 Director and OÇcer Stock Option and Incentive Plan (the
""2000 Plan'') was originally adopted by the Board of Directors and approved by the Company's stockholders
on May 18, 2000. Under the terms of the 2000 Plan, the Company is authorized to make stock awards, provide
eligible individuals with the opportunity to purchase stock, grant ISOs and grant NSOs to oÇcers and
directors of the Company. The 2000 Plan provides for the issuance of up to 4,000,000 shares, plus, eÅective on
January 1, 2001, on January 1 of each year, a number of shares of Common Stock equal to one-half of one
percent (0.5%) of the total number of shares of Common Stock issued and outstanding as of December 31 of
the preceding year. Notwithstanding the foregoing, no more than 3,000,000 shares of Common Stock may be
issued pursuant to the exercise of incentive stock options granted under the 2000 Plan. Under the 2000 Plan,
ISOs must be granted at exercise prices no less than market value at the date of grant, provided however, that
if an NSO is expressly granted in lieu of a reasonable amount of salary or cash bonus, the exercise price may
be equal to or greater than 85% of the fair market value at the date of such grant. ISOs and NSOs expire ten
years from date of grant. All options are exercisable upon vesting. The options typically vest over four years at
a rate of 25% of the shares underlying the option one year from date of grant and at a rate of 2.08% monthly
thereafter.
The amended and restated 1995 Non-Employee Director Stock Option Plan (the ""Director Option
Plan'') was adopted by the Board of Directors on September 28, 1995 and approved by the Company's
stockholders in October 1995. The Director Option Plan provides for the grant of options to purchase a
maximum of 3,600,000 (as adjusted for stock splits) shares of Common Stock of the Company to non-
employee directors of the Company.
Under the current terms of the Director Option Plan, each director who is not also an employee of the
Company and who is Ñrst elected as a director will receive, upon the date of his or her initial election, an
option to purchase 60,000 shares of Common Stock. Such options will vest at a rate of 33.33% per year from
the date of the grant for the Ñrst year and vest at a rate of 2.78% monthly thereafter. In addition, in the
calendar year following a director's Ñrst election to the Board of Directors, on the Ñrst business day of the
month following the Annual Stockholders' meeting, such director would receive an additional option to
purchase 20,000 shares of Common Stock, which shall vest at a rate of 8.33% per month, provided such
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
director continues to serve on the Board of Directors at the time of grant. All options granted under the
Director Option Plan have an exercise price equal to the fair market value of the Common Stock on the date
of grant and a term of ten years from the date of grant. Options are exercisable to the extent vested only while
the optionee is serving as a director of the Company or within 90 days after the optionee ceases to serve as a
director of the Company.
The Company's 1989 Stock Option Plan (the ""1989 Plan'') as amended, permitted the Company to grant
ISOs and NSOs to purchase up to 25,256,544 (as adjusted for stock splits) shares of the Company's Common
Stock. Under the 1989 Plan, options may be granted at exercise prices no less than market value at the date of
grant. All options are fully exercisable from the date of grant and are subject to a repurchase option in favor of
the Company which lapses as to 25.00% of the shares underlying the option one year from the date of grant
and as to 2.08% monthly thereafter. If the purchaser of stock pursuant to the 1989 Plan is terminated from
employment with the Company, the Company has the right and option to purchase from the employee, at the
price paid for the shares by the employee, the number of unvested shares at the date of termination. No shares
have been repurchased under this Plan. EÅective November 1999 no further options may be granted under
this Plan.
A summary of the status and activity of the Company's stock option plans is as follows:
2002
Year Ended December 31,
2001
2000
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Exercise
Price
Shares
Outstanding at beginning of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
39,596,278
$28.92
43,288,840
$25.67
42,358,350
$18.28
Granted at market value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
9,274,497
9.98
8,351,092
30.68
12,671,582
42.38
Granted above market value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
355,626
17.92
Ì
Ì
Ì
Ì
ExercisedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(550,791)
6.12
(8,545,575)
13.27
(6,692,488)
10.32
Forfeited ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(7,455,093)
30.86
(3,498,079)
31.06
(5,048,604)
25.65
Outstanding at end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
41,220,517
24.51
39,596,278
28.92
43,288,840
25.67
Options exercisable at end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,101,550
27.01
18,140,094
26.02
14,364,325
16.49
Weighted-average fair value of options granted
during the year at market value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Weighted-average fair value of options granted
during the year above market value ÏÏÏÏÏÏÏÏÏÏÏ
5.80
8.57
$16.63
Ì
$28.07
Ì
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
Information about stock options outstanding as of December 31, 2002 is as follows:
Range of
Exercise Prices
Options
Outstanding at
December 31, 2002
Weighted
Average
Remaining
Contractual Life
Weighted
Average
Exercise Price
Options
Exercisable at
December 31, 2002
Weighted
Average
Exercise Price
Options Outstanding
Options Exercisable
5.60
$ 0.13 to $
$ 5.84 to $ 13.31
$13.55 to $ 15.34
$15.34 to $ 16.94
$17.39 to $ 21.67
$22.19 to $ 24.38
$24.39 to $ 25.55
$25.69 to $ 35.01
$35.49 to $ 44.66
$48.44 to $104.00
4,814,448
4,750,650
3,782,130
4,629,666
3,741,623
4,125,217
4,414,087
3,414,456
3,739,886
3,808,354
41,220,517
Stock Purchase Plan
8.31
6.97
7.51
7.18
7.09
7.13
6.62
7.52
8.22
7.13
7.36
$ 4.87
$ 9.40
$15.09
$15.98
$19.47
$23.26
$25.41
$30.34
$37.44
$75.19
$24.51
914,872
2,812,680
1,746,230
2,966,322
2,536,552
2,953,269
3,540,743
2,090,999
1,827,503
2,712,380
24,101,550
$ 1.75
$ 9.68
$14.98
$16.03
$19.67
$23.31
$25.43
$30.11
$39.47
$75.41
$27.01
The amended and restated 1995 Employee Stock Purchase Plan (the ""1995 Purchase Plan'') was
originally adopted by the Board of Directors on September 28, 1995 and approved by the Company's
stockholders in October 1995. The 1995 Purchase Plan provides for the issuance of a maximum of
9,000,000 shares of Common Stock upon the exercise of nontransferable options granted to participating
employees. All U.S.-based employees of the Company, whose customary employment is 20 hours or more per
week and more than Ñve months in any calendar year, and employees of certain international subsidiaries, are
eligible to participate in the 1995 Purchase Plan. Employees who would immediately after the grant own 5% or
more of the Company's Common Stock, and directors who are not employees of the Company, may not
participate in the 1995 Purchase Plan. To participate in the 1995 Purchase Plan, an employee must authorize
the Company to deduct an amount (not less than 1% nor more than 10% of a participant's total cash
compensation to a maximum of $25,000) from his or her pay during six-month periods (each a Plan Period).
The maximum number of shares of Common Stock an employee may purchase in any Plan Period is
6,000 shares subject to certain other limitations. The exercise price for the option for each Plan Period is 85%
of the lesser of the market price of the Common Stock on the Ñrst or last business day of the Plan Period. If an
employee is not a participant on the last day of the Plan Period, such employee is not entitled to exercise his or
her option, and the amount of his or her accumulated payroll deductions are refunded. An employee's rights
under the 1995 Purchase Plan terminate upon his or her voluntary withdrawal from the 1995 Purchase Plan at
any time or upon termination of employment. Under the 1995 Purchase Plan, the Company issued
248,027 shares, 213,907 shares and 77,781 shares in 2002, 2001, and 2000, respectively.
BeneÑt Plan
The Company maintains a 401(k) beneÑt plan (the ""Plan'') allowing eligible U.S.-based employees to
contribute up to 15% of their annual compensation, limited to an annual maximum amount as set periodically
by the Internal Revenue Service. The Company, at its discretion, may contribute up to $0.50 on each dollar of
employee contribution, limited to a maximum of 6% of the employee's annual contribution. The Company's
matching contributions for 2002, 2001 and 2000 were $2.0 million, $1.8 million and $1.2 million, respectively.
The Company's contributions vest over a four-year period at 25% per year.
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
7. CAPITAL STOCK
Common Stock
The Company has reserved for future issuance 71,221,641 shares of Common Stock for the exercise of
stock options outstanding or available for grant and 10,880,486 shares for the conversion of the zero coupon
convertible debentures into Common Stock.
On May 18, 2000, the stockholders approved an increase of authorized Common Stock from
400,000,000 shares, $0.001 par value per share to 1,000,000,000 shares, $0.001 par value per share.
Stock Repurchase Programs
The Company's Board of Directors has authorized $600 million of repurchase authority under the
Company's stock repurchase program, the objective of which is to manage actual and anticipated dilution. All
shares repurchased are recorded as treasury stock.
The Company is authorized to make open market purchases paid out of general corporate funds. During
the years ended December 31, 2002 and 2001, the Company purchased 9,300,000 and 3,135,500 shares,
respectively of outstanding Common Stock on the open market for approximately $75.7 million and
$90.7 million (at an average per share price of $8.14 and $28.92), respectively.
From time to time, the Company enters into arrangements with Ñnancial institutions as part of the share
repurchase program in order to lower the Company's average cost to acquire shares. These arrangements are
described below.
The Company was a party to two agreements, executed during 2001 and 2000, with a large Ñnancial
institution, to purchase approximately 7.3 million shares of the Company's Common Stock at various times in
private transactions. Pursuant to the terms of the agreements, an aggregate of $150 million was paid to this
institution, with the ultimate number of shares repurchased dependent on market conditions. In May 2002, the
agreements were terminated and, upon termination, the Company received 3.0 million of the remaining
shares. The Company received a total of 7,209,286 shares pursuant to these agreements. During 2002, the
Company entered into a new agreement, as amended, with this Ñnancial institution in a private transaction to
purchase up to 3.8 million shares of the Company's Common Stock at various times through February 2003.
Pursuant to the terms of the agreement, $25 million was paid to this institution during the third quarter of
2002. During 2002, the Company received 2,655,469 shares under this agreement with a total value of
$18.5 million. The agreement matured in February 2003 and the Company received 390,830 of the remaining
shares with a total value of $6.5 million.
During 2002, the Company entered into two private structured stock repurchase transactions with a large
Ñnancial institution. Under the terms of the Ñrst agreement and in exchange for an up front payment of
$25 million, the Company was entitled to receive shares of its Common Stock or a predetermined cash
amount at the expiration of the agreement dependent upon the closing price of the Company's Common Stock
at maturity. Upon expiration of the agreement in December 2002, the Company received approximately
$29.3 million in cash. Under the terms of the second agreement and in exchange for an up front payment of
$25 million, the Company is entitled to receive approximately 2.2 million shares of its Common Stock or a
predetermined cash amount at expiration of the agreement in March 2003. The form of settlement at maturity
of the second transaction will be dependent upon the closing market price of the Company's Common Stock.
The Company sells put warrants that entitle the holder of each warrant to sell to the Company, generally
by physical delivery, one share of the Company's Common Stock at a speciÑed price. During 2002, the
Company sold 2,300,000 put warrants at an average strike price of $11.10 and received premium proceeds of
approximately $3.3 million. During 2002, the Company paid $42.9 million for the purchase of 2,050,000 shares
upon the exercise of outstanding put warrants, while 600,000 put warrants expired unexercised. As of
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
December 31, 2002, 950,000 put warrants were outstanding, with exercise prices ranging from $7.18 to $12.58,
and expired on various dates between January and March 2003. As of December 31, 2002, the Company has a
total potential repurchase obligation of approximately $9.9 million associated with outstanding put warrants, of
which $7.3 million is classiÑed as a put warrant obligation in the accompanying consolidated balance sheet.
The remaining $2.6 million of outstanding put warrants permit a net-share settlement at the Company's option
and are not recorded as a put warrant obligation in the consolidated balance sheet. The outstanding put
warrants classiÑed as a put warrant obligation on the consolidated balance sheet will be reclassiÑed to
stockholders' equity when each warrant is exercised or when it expires. Under the terms of certain put warrant
agreements, the Company must maintain certain levels of cash and investment balances. As of December 31,
2002, the Company was in compliance with the required levels.
In December 2002, the Company entered into an agreement with a large Ñnancial institution requiring
that this institution sell to the Company up to 1,560,000 million shares of the Company's Common Stock at
Ñxed prices if the Company's common stock trades at designated levels between December 16, 2002 and
January 23, 2003. As of December 31, 2002, the Company had a potential remaining repurchase obligation
associated with this agreement of approximately $9.1 million, which is classiÑed as common stock subject to
repurchase in the accompanying consolidated balance sheet. During January 2003, this agreement expired and
no shares were repurchased.
Stock Splits
On January 19, 2000, the Company announced a two-for-one stock split in the form of a stock dividend
paid on February 16, 2000, to stockholders of record as of January 31, 2000.
The number of options issuable and previously granted and their respective exercise prices under the
Company's stock option plans have been proportionately adjusted to reÖect stock splits. The accompanying
consolidated Ñnancial statements have been retroactively restated to reÖect stock splits.
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock, $0.01 par value per share. The
Company has no present plans to issue such shares.
8. CONVERTIBLE SUBORDINATED DEBENTURES
In March 1999, the Company sold $850 million principal amount at maturity of its zero coupon
convertible subordinated debentures (the ""Debentures'') due March 22, 2019, in a private placement. The
Debentures were priced with a yield to maturity of 5.25% and resulted in net proceeds to the Company of
approximately $291.9 million, net of original issue discount and net of debt issuance costs of $9.6 million.
Except under limited circumstances, no interest will be paid on the Debentures prior to maturity. The
Debentures are convertible at the option of the security holder at any time on or before the maturity date at a
conversion rate of 14.0612 shares of the Company's Common Stock for each $1,000 principal amount at
maturity of Debentures, subject to adjustment in certain events. The Company could redeem the Debentures
on or after March 22, 2004. Holders could require the Company to repurchase the Debentures, on Ñxed dates
and at set redemption prices (equal to the issue price plus accrued original issue discount), beginning on
March 22, 2004. In October 2000, the Board of Directors approved a program authorizing the Company to
repurchase up to $25 million of the Debentures in open market purchases. Additionally, in April 2002, the
Board of Directors granted additional authority of $100 million to the Company to repurchase Debentures
through private transactions, bringing the total repurchase authority to $125 million. The Board of Directors'
authorization to repurchase the Debentures allows the Company to repurchase Debentures when market
conditions are favorable. As of December 31, 2002, 76,000 units of the Company's Debentures representing
$76.0 million in principal amount at maturity, have been repurchased under these programs for $29.9 million.
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
During 2002, the Company early adopted the provisions of SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections, and accordingly, the
Company recorded an operating gain of approximately $1.6 million during 2002 as a result of Debenture
repurchases since the date of adoption.
9. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued
expenses approximate their fair value due to the short maturity of these items. The Company's investments
classiÑed as available-for-sale securities are carried at fair value on the accompanying consolidated balance
sheets, based primarily on quoted market prices for such Ñnancial instruments. The aggregate fair value of the
Company's available-for-sale investments was $396.3 million and $437.9 million at December 31, 2002 and
2001, respectively. The Company's held-to-maturity investments had a carrying value of $180.4 million and
$169.0 million at December 31, 2002 and 2001, respectively, and an aggregate fair value of $180.2 million and
$170.7 million at December 31, 2002 and 2001, respectively, based on dealer quotation. The carrying amount
of the Company's Debentures at December 31, 2002 and 2001 were approximately $333.5 million and
$346.2 million, respectively. The fair value of the Debentures, based on the quoted market price as of
December 31, 2002 and 2001 were approximately $334.0 million and $388.0 million, respectively.
10. COMMITMENTS AND CONTINGENCIES
The Company leases certain oÇce 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.
Rental expense for the years ended December 31, 2002, 2001 and 2000 totaled approximately
$24.4 million, $17.1 million and $8.7 million, respectively. Rental expense for 2002 includes lease losses
associated with the vacancy of certain of the Company's leased properties, as discussed below. Sublease
income for the year ended December 31, 2002 was approximately $1.7 million and there was no sublease
income during 2001. Lease commitments under non-cancelable operating leases with initial or remaining
terms in excess of one year and sublease income associated with non-cancelable subleases are as follows:
Operating
Leases
Sublease
Income
(In thousands)
Years ending December 31,
2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 18,170
15,693
2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
15,162
2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
14,283
2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
11,604
2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
41,190
Thereafter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$2,708
1,596
506
363
268
250
$116,102
$5,691
In April 2002, the Company entered into a synthetic lease with a substantive lessor totaling approxi-
mately $61.0 million for its corporate headquarters oÇce space in Fort Lauderdale, Florida. The synthetic
lease represents a form of oÅ-balance sheet Ñnancing under which an unrelated third party lessor funded 100%
of the costs of acquiring the property and leases the asset to the Company. The synthetic lease qualiÑes as an
operating lease for accounting purposes and as a Ñnancing lease for tax purposes. The Company does not
include the property or the lease debt as an asset or a liability on its consolidated balance sheet. Consequently,
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
payments are made pursuant to the lease as operating expenses in the Company's consolidated statements of
income. The Company entered into the synthetic lease in order to lease its headquarters properties under more
favorable terms than under its previous lease arrangements.
The initial term of the synthetic lease is seven years. Upon approval by the lessor, the Company can
renew the lease twice for additional two-year periods. The lease payments vary based on the London Interbank
OÅered Rate, or LIBOR, plus a margin. At any time during the lease term, the Company has the option to
sublease the property and upon thirty-days' written notice, the Company has the option to purchase the
property for an amount representing the original property cost and transaction fees of approximately
$61.0 million plus any lease breakage costs and outstanding amounts owed. Upon at least 180 days notice prior
to the termination of the initial lease term, the Company has the option to remarket the property for sale to a
third party. If the Company chooses not to purchase the property at the end of the lease term, it has
guaranteed a residual value to the lessor of approximately $51.9 million and possession of the buildings will be
returned to the lessor. If the fair value of the building were to decline below $51.9 million, the Company would
have to make up the diÅerence under its residual value guarantee, which could have a material adverse eÅect
on the Company's results of operations and Ñnancial condition.
The synthetic lease includes certain Ñnancial covenants including a requirement for the Company to
maintain a pledged balance of approximately $63.0 million in cash and/or investment securities as collateral.
The Company manages the composition of the pledged investments and investment earnings are available for
operating purposes. Additionally, the Company must maintain a minimum cash and investment balance of
$100.0 million, excluding the Company's Debentures, collateralized investments and equity investments, as of
the end of each Ñscal quarter. As of December 31, 2002, the Company had approximately $113.5 million in
cash and investments in excess of those required levels. The synthetic lease includes non-Ñnancial covenants
including the maintenance of the properties and adequate insurance, prompt delivery of Ñnancial statements to
the lender of the lessor and prompt payment of taxes associated with the properties. As of December 31, 2002,
the Company was in compliance with all material provisions of the arrangement.
During 2002 and 2001, the Company took actions to consolidate certain of its oÇces, including the exit of
certain leased oÇce space and the abandonment of certain leasehold improvements. Lease obligations related
to these existing operating leases continue to 2018 with a total remaining obligation at December 31, 2002 of
approximately $28.5 million, of which $6.8 million, net of anticipated sublease income, was accrued for as of
December 31, 2002, and is reÖected in accrued expenses in the accompanying consolidated Ñnancial
statements. In calculating this accrual, the Company made estimates, based on market information, including
the estimated vacancy periods and sublease rates and opportunities. If actual circumstances prove to be
materially worse than management has estimated, the total charges for these vacant facilities could be
signiÑcantly higher.
11.
INCOME TAXES
The United States and foreign components of income before income taxes are as follows:
United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 33,865
79,292
Foreign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2002
2001
(In thousands)
$ 57,096
95,455
2000
$ 80,465
54,552
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $113,157
$152,551
$135,017
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
The components of the provision for income taxes are as follows:
2002
2001
(In thousands)
2000
Current:
Federal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $13,786
5,389
Foreign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
4,280
State ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$38,469
6,319
3,566
Total current ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Deferred ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
23,455
(4,218)
48,354
(1,063)
$29,252
3,428
1,585
34,265
6,240
Total provision for income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$19,237
$47,291
$40,505
The signiÑcant components of the Company's deferred tax assets and liabilities consisted of the following:
December 31,
2002
2001
(In thousands)
Deferred tax assets:
Acquired technology ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $16,463
Ì
Deferred revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
4,901
Accounts receivable allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
2,587
Depreciation and amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
21,824
Tax credits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
8,896
Net operating lossesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
9,184
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$16,726
5,833
2,901
4,597
13,264
17,346
6,328
Total deferred tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
63,855
66,995
Deferred tax liabilities:
Foreign earnings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(8,753)
(8,753)
Total deferred tax liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(8,753)
(8,753)
Total net deferred tax assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $55,102
$58,242
During the years ended December 31, 2002, 2001, and 2000, the Company recognized tax beneÑts related
to the exercise of employee stock options in the amount of $25.7 million, $28.0 million and $63.9 million,
respectively. This beneÑt was recorded to additional paid-in capital. At December 31, 2002, the Company had
approximately $35.4 million of U.S. net operating loss carryforwards, a substantial portion of which begins to
expire in 2020. The Company will record the beneÑt of the net operating loss carryforwards generated from the
exercise of employee stock options, through additional paid-in capital when the net operating loss carryfor-
wards are utilized.
During 2001, the Company acquired an entity with approximately $37.9 million of net operating loss
carryforwards. Additionally, the Company had approximately $6.8 million of net operating loss carryforwards
from prior acquisitions. These net operating loss carryforwards are limited in any one year pursuant to Internal
Revenue Code Section 382 and begin to expire in 2010. The Company had approximately $22.9 million of
remaining net operating losses at December 31, 2002 subject to Internal Revenue Code Section 382
limitations.
At December 31, 2002, the Company had research and development tax credit carryforwards of
approximately $9.0 million that expire beginning in 2018. The Company had foreign tax credit carryforwards
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
of approximately $10.7 million at December 31, 2002 that expire beginning in 2003. Additionally, the
Company had alternative minimum tax credit carryforwards of approximately $2.1 million at December 31,
2002. These credits do not expire.
The Company does not expect to remit earnings from its foreign subsidiaries. Accordingly, during 2002
and 2001 the Company did not provide for deferred taxes on foreign earnings.
A reconciliation of the Company's eÅective tax rate to the statutory federal rate is as follows:
Year Ended December 31,
2001
2000
2002
(In thousands)
35.0% 35.0% 35.0%
Federal statutory taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
3.8
State income taxes, net of federal tax beneÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
3.8
(20.2)
Foreign operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (17.9)
Ì
Ì
Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
7.4
Ì
Intangible assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
1.8
0.5
Other permanent diÅerences ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(0.8)
(7.6)
Tax credits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
4.0
3.2
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
3.8
(14.6)
(4.4)
2.3
2.3
0.5
5.1
17.0% 31.0% 30.0%
12. GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS
The Company operates in a single market consisting of the design, development, marketing, sales and
support of access infrastructure software and services for enterprise applications. The Company's revenues are
derived from sales in the Americas, Europe, the Middle East and Africa (""EMEA'') and Asia-PaciÑc regions.
These three geographic regions constitute the Company's reportable segments.
The Company does not engage in intercompany revenue transfers between segments. The Company's
management evaluates performance based primarily on revenues in the geographic locations in which the
Company operates. Segment proÑt for each segment includes certain sales, marketing, general and adminis-
trative expenses directly attributable to the segment and excludes certain expenses that are managed outside
the reportable segments. Costs excluded from segment proÑt primarily consist of research and development
costs, amortization of intangible assets, interest, corporate expenses and income taxes, as well as, non-
recurring charges for in-process research and development and write-down of technology. Corporate expenses
are comprised primarily of corporate marketing costs, operations and certain general and administrative
expenses, which are separately managed. Accounting policies of the segments are the same as the Company's
consolidated accounting policies.
Previously, the Company formed wholly-owned subsidiaries in various locations within EMEA and Asia-
PaciÑc. These subsidiaries are responsible for sales and distribution of the Company's products. Prior to the
formation of these subsidiaries, sales in these geographic segments were classiÑed as export sales from the
Americas segment. For purposes of the presentation of segment information, the sales previously reported as
Americas export sales have been reclassiÑed to the geographical segments where the sale was made for each of
the periods presented.
In July 2001, the Company implemented a new enterprise resource planning system. The new system was
designed to provide a structure that would meet the growing demands of the Company and to provide
management improved focus on the results of operations and the Company's Ñnancial resources. The features
and functionality of the new system allowed the Company to summarize and classify information included in
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
the results of operations diÅerently than that provided by the Company's legacy information systems. The
Company began planning for the new information system in 2000, and as a result, detailed transaction
information for 2001 and 2000, prior to the implementation of the new system, was retained and converted to
the new system. Information for the years ended 2001 and 2000 has been reclassiÑed to reÖect these changes.
Net revenues and segment proÑt for 2002, 2001 and 2000 classiÑed by the major geographic area in which
the Company operates, are presented below.
2002
2001
(In thousands)
2000
Net revenues:
Americas ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $255,438
209,520
EMEA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
48,408
Asia-PaciÑc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
14,082
Other(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 289,017
216,766
46,016
39,830
$248,398
158,645
23,505
39,898
Consolidated ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $527,448
$ 591,629
$470,446
Segment proÑt:
Americas ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $122,553
123,126
EMEA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
18,839
Asia-PaciÑc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
14,082
Unallocated expenses(2):
$ 163,621
134,096
22,880
39,830
$149,856
102,356
2,610
39,898
Amortization of intangibles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
In-process research and development ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Research and development ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Write-down of technology ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net interest and other incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other corporate expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
(11,296)
Ì
(68,923)
Ì
9,297
(94,521)
(48,831)
(2,580)
(67,699)
Ì
19,200
(107,966)
(30,395)
Ì
(50,622)
(9,081)
22,792
(92,397)
Consolidated income before income taxes ÏÏÏÏÏÏÏÏÏÏÏÏ
$113,157
$ 152,551
$135,017
(1) Represents royalty fees in connection with the Microsoft Development Agreement, which expired in May
2002.
(2) Represents expenses presented to management only on a consolidated basis and not allocated to the
geographic operating segments.
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
IdentiÑable assets classiÑed by major geographic area in which the Company operates are shown below.
Long-lived assets consist of property, plant and equipment, net:
December 31,
2002
2001
(In thousands)
IdentiÑable assets:
Americas ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 752,841
378,831
EMEAÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
29,859
Asia-PaciÑcÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$ 945,299
241,943
20,988
Total identiÑable assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,161,531
$1,208,230
Long-lived assets, net:
United States ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
United Kingdom ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Other foreign countries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
38,089
33,663
4,782
$
50,601
33,029
6,480
Total long-lived assets, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
76,534
$
90,110
To purchase certain investments during 2002, the Company initiated an inter-segment loan whereby the
Americas transferred approximately $134 million to EMEA. The decrease in the Americas identiÑable assets
and increase in EMEA's identiÑable assets is primarily the result of this agreement. This loan was repaid
during early 2003.
Export revenue represents shipments of Ñnished goods and services from the United States to
international customers. As of July 1, 2000, the Company was shipping Ñnished goods to European and Asia-
PaciÑc customers from its warehouse location in Europe. Shipments from the United States to international
customers were as follows:
2002
Years Ended December 31,
2001
(In thousands)
2000
Asia-PaciÑc ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ Ì $ Ì $11,249
7,274
Other(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
21,392
25,297
$25,297
$21,392
$18,523
(1) Represents Latin America and Canada geographic locations, which are included as part of the Americas
geographic segment.
The Company had net revenue attributed to individual distributors in excess of 10% of total net sales as
follows. There were no individual end-customers that represented greater than 10% of net sales for any of the
years presented.
Year Ended December 31,
2001
2000
2002
Distributor A ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Distributor B ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Distributor C ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
13%
10%
8%
13%
10%
9%
13%
12%
10%
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
The Company also tracks revenue according to the following three categories: License Revenue,
Technical Services Revenue and Royalty Revenue, but does not track expenses or identiÑable assets by
category. As a result, these revenue categories do not constitute segments in accordance with SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information. Additional information regarding
revenue by categories is as follows:
2002
Year Ended December 31,
2001
(In thousands)
2000
Revenues:
License Revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $468,827
44,539
Technical Services Revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
14,082
Royalty Revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$511,147
40,652
39,830
$400,156
30,392
39,898
Net Revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $527,448
$591,629
$470,446
13. DERIVATIVE FINANCIAL INSTRUMENTS
Cash Flow Hedges. A substantial portion of the Company's anticipated overseas expense and capital
purchasing activities are transacted in local currencies. To protect against reductions in value and the volatility
of future cash Öows caused by changes in currency exchange rates, the Company has established a hedging
program. The Company uses forward foreign exchange contracts to reduce a portion of its exposure to these
potential changes. The terms of such instruments, and the hedging transactions to which they relate, generally
do not exceed 12 months. Principal currencies hedged are British pounds sterling, Euros, Swiss francs,
Japanese yen and Australian dollars. The Company could choose not to hedge certain foreign exchange
transaction exposures due to immateriality, prohibitive economic cost of hedging particular exposures, and
availability of appropriate hedging instruments. At December 31, 2002 and 2001, the Company had in place
foreign currency forward sale contracts with a notional amount of $48.9 million and $13.1 million, respectively,
and foreign currency forward purchase contracts with a notional amount of $128.4 million and $60.9 million,
respectively. The aggregate net fair value of these contracts at December 31, 2002 and 2001 were recorded as
assets of $3.6 million and $0.2 million, respectively.
In order to manage its exposure to interest rate risk, in November 2001, the Company entered into an
interest rate swap agreement with a notional amount of $174.6 million that was to expire in March 2004. The
swap converted the Öoating rate return on certain of the Company's available for sale investment securities to
a Ñxed interest rate. In October 2002, the Company terminated this interest rate swap agreement. Upon
termination, the Company received a cash payment of $9.2 million as settlement under the swap agreement,
and there was approximately $2.4 million in accumulated other comprehensive income, net of taxes. The swap
was previously accounted for as an eÅective cash Öow hedge, and in accordance with the provisions of SFAS
No. 133, the remaining $2.4 million, net of taxes, in accumulated other comprehensive income was to be
recognized in interest income ratably along with the interest cash Öows from the investments through the
original termination date of the swap in March 2004. As a result of the sale of certain investments underlying
this swap agreement in December 2002, the forecasted interest cash Öows from the investments were no longer
probable and interest income of approximately $3.4 million related to the terminated swap was recognized.
In connection with the eÅorts to manage the credit quality and maturities of its available-for-sale
investment portfolio, during 2001 the Company terminated a forward bond purchase agreement previously
designated as a hedge of forecasted purchases of corporate security investments. As a result, the Company
recorded a realized gain of $1.4 million, which is included in other expense, net on the 2001 consolidated
statements of income. At the time of the sale, the Company realized approximately $0.5 million of amounts
previously classiÑed in accumulated other comprehensive loss.
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
Fair Value Hedges. The Company uses derivatives to hedge against the change in fair value of certain of
its available-for-sale securities due to changes in interest rates. During December 2002, the Company entered
into 12 interest rate swap agreements with an aggregate notional amount of $208.0 million related to
12 speciÑc available-for-sale securities. The swaps qualify for the short-cut method of accounting and expire
on various dates through November 2007. The instruments swap the Ñxed rate interest on the underlying
investments to a variable rate based on LIBOR plus a speciÑed margin. Changes in the fair value of the
derivatives are recorded in earnings along with related designated changes in the value of the underlying
investments.
Derivatives not Designated as Hedges. The Company utilizes credit default contracts for investment
purposes that either do not qualify or are not designated for hedge accounting treatment under SFAS No. 133.
Accordingly, changes in the fair value of these contracts are recorded in other expense, net, if any. Under the
terms of these contracts, the Company assumes the default risk, above a certain threshold, of a portfolio of
speciÑed high credit quality referenced issuers in exchange for a Ñxed yield that is recorded in interest income.
In the event of default by underlying referenced issuers above speciÑed amounts, the Company will pay the
counterparty an amount equivalent to its loss, not to exceed the notional value of the contract. The primary
risk associated with these transactions is the default risk of the underlying issuers. The risk levels of these
instruments are equivalent to ""AAA'' and ""Super AAA'' single securities. The purpose of the credit default
contracts is to increase the eÅective yield on certain of the Company's available-for-sale investments.
During December 2002, the Company entered into two credit default contracts with an aggregate
notional amount of $100.0 million that expire during December 2007. The Company has pledged $104 million
of investment securities as collateral for these contracts. The Company maintains the ability to manage the
composition of the pledged investments. Accordingly, these securities are not reÖected as restricted
investments in the accompanying consolidated balance sheets. The Ñxed yield earned on these contracts was
not material at December 31, 2002, and is included in interest income in the accompanying consolidated
statements of income. For the year ended December 31, 2002, there was no change in fair value of these credit
default contracts and there were no credit events related to the underlying reference issuers.
The ineÅectiveness of hedges on existing derivative instruments for the year ended December 31, 2002,
was not material. As of December 31, 2002, the Company recorded $6.3 million of derivative assets and
$6.2 million of derivative liabilities, representing the fair values of the Company's outstanding derivative
instruments in other current assets and accrued expenses in the accompanying consolidated balance sheets.
The change in net unrealized derivative gains (losses) recognized in other comprehensive income
includes unrealized gains (losses) that arose from changes in market value of derivatives that were held during
the period, and gains (losses) that were previously unrealized, but have been recognized in current period net
income due to termination or maturities of derivative contracts. This reclassiÑcation has no eÅect on total
comprehensive income or stockholders' equity.
The following table presents these components of other comprehensive income, net of tax:
2002
2001
Unrealized gains (losses)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3,512
ReclassiÑcation for realized gains (losses) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$84
(84) Ì
Increase (decrease) in net unrealized derivative gains recognized in other
comprehensive gain (loss)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3,428
$84
F-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
14. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
2002
Year Ended December 31,
2001
(In thousands, except per share
information)
2000
Numerator:
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 93,920
$105,260
$ 94,512
Denominator:
Denominator for basic earnings per share Ì weighted
average shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
177,428
185,460
184,804
EÅect of dilutive securities:
Put warrantsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Employee stock options ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
3
1,928
Ì
9,038
41
14,886
Denominator for diluted earnings per share Ì adjusted
weighted-average shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
179,359
194,498
199,731
Basic earnings per shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $
0.53
Diluted earnings per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$
0.52
$
$
0.57
0.54
$
$
0.51
0.47
Antidilutive weighted shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
50,919
45,454
41,943
The above antidilutive weighted shares to purchase shares of Common Stock includes certain shares
under the Company's stock option program, certain put warrants under the Company's stock repurchase
program and Common Stock potentially issuable on the conversion of the Debentures and were not included
in computing diluted earnings per share because their eÅects were antidilutive for the respective periods.
15. RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 143, Accounting for Asset Retirement Obligations, establishes accounting standards for the
recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also
provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets.
SFAS No. 143 is eÅective in Ñscal years beginning after June 15, 2002, with early adoption permitted. The
Company expects that the adoption of SFAS No. 143 will not have a material impact on its consolidated
Ñnancial position, results of operations or cash Öows upon adoption. The Company plans to adopt SFAS
No. 143 eÅective January 1, 2003.
In April 2002, the Financial Accounting Standards Board (""FASB'') issued SFAS No. 145, Rescission
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections''
SFAS No. 145, among other things, requires gains and losses on extinguishment of debt to be classiÑed as part
of continuing operations rather than treated as extraordinary, as previously required in accordance with
SFAS 4. SFAS No. 145 also modiÑes accounting for subleases where the original lessee remains the
secondary obligor and requires certain modiÑcations to capital leases to be treated as a sale-leaseback
transaction. The Company early adopted the provisions of SFAS No. 145, during 2002 and recorded
$1.6 million in gains from the repurchase of the Debentures as part of continuing operations in the
accompanying consolidated statements of income.
In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 nulliÑes the guidance previously provided under Emerging Issues Task Force Issue
F-34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
CITRIX SYSTEMS, INC.
No. 94-3, ""Liability Recognition for Certain Employee Termination BeneÑts and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring).'' Among other things, SFAS No. 146 requires
that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred
as opposed to when there is commitment to a restructuring plan as set forth under the nulliÑed guidance. The
Company will adopt SFAS No. 146 on January 1, 2003 and expects no material impact from adoption on its
Ñnancial position, results of operations or cash Öows.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation Ì
Transition and Disclosure. SFAS No. 148 provides alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee compensation. This statement also
amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim Ñnancial statements regarding the method of accounting for stock-based employee compensation and
the eÅect of the method used on reported results. SFAS No. 148 is eÅective for Ñscal years beginning after
December 15, 2002. The Company expects no material impact on its Ñnancial position, results of operations or
cash Öows from adoption.
In November 2002, the FASB issued FASB Interpretation (""FIN'') No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN
No. 45 elaborates on the disclosures to be made by a guarantor in its interim and annual Ñnancial statements
about its obligations under certain guarantees that it has issued. FIN No. 45 also clariÑes requirements for the
recognition of guarantees at the onset of an arrangement. The initial recognition and measurement provisions
of FIN No. 45 are applicable on a prospective basis to guarantees issued or modiÑed after December 31, 2002.
The disclosure requirements of FIN No. 45 are eÅective for interim or annual Ñnancial statements after
December 15, 2002. The Company implemented the disclosure requirements of FIN No. 45 at December 31,
2002. The Company had no material impact on its Ñnancial position, results of operations or cash Öows as a
result of this implementation.
In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities, which
addresses consolidation by a business of variable interest entities in which it is the primary beneÑciary. FIN
No. 46 is eÅective immediately for certain disclosure requirements and for variable interest entities created
after January 1, 2003, and in the Ñrst Ñscal year or interim period beginning after June 15, 2003 for all other
variable interest entities. The Company is currently in the process of determining the eÅects, if any, on its
Ñnancial position, results of operations and cash Öows that will result from the adoption of FIN No. 46.
16. LEGAL MATTERS
In February 2002, a stockholder Ñled a complaint (the ""Complaint'') in the Court of Chancery of the
State of Delaware against the Company and certain of its current and former oÇcers and directors. The
Complaint purported to state a direct claim on behalf of a putative class of stockholders and a derivative claim
nominally on behalf of the Company for breach of Ñduciary duty based on the Company's alleged failure to
disclose all material information concerning the Company's business and operations in connection with a
proposal to be voted on at the Company's annual meeting of stockholders in May 2000. The Complaint
asserted claims similar to those alleged by such stockholder in a suit that was Ñled in September 2000, and
subsequently voluntarily dismissed without prejudice in July 2001. The Complaint sought compensatory
damages, rescission of the Company's 2000 Director and OÇcer Stock Option and Incentive Plan, and other
related relief. The parties have since agreed to a non-monetary settlement of the action not involving the
validity of the 2000 Director and OÇcer Stock Option and Incentive Plan. The settlement is subject to
approval by the court. A hearing on the approval of the settlement has not yet been scheduled.
In addition, the Company is a defendant in various matters of litigation generally arising out of the
normal course of business. Although it is diÇcult to predict the ultimate outcome of these cases, management
believes, based on discussions with counsel, that any ultimate liability would not materially aÅect the
Company's Ñnancial position, result of operations or cash Öows.
F-35
SUPPLEMENTAL FINANCIAL INFORMATION
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
2002
Net revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Gross margin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income from operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Basic earnings per common share ÏÏÏÏÏÏÏÏÏ
Diluted earnings per common share ÏÏÏÏÏÏÏ
2001
Net revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Gross margin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Income from operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Basic earnings per common share ÏÏÏÏÏÏÏÏÏ
Diluted earnings per common share ÏÏÏÏÏÏÏ
First
Quarter
$142,310
137,558
30,942
26,689
0.14
0.14
$132,812
125,500
35,596
28,935
0.16
0.15
Second
Quarter
Third
Quarter
(In thousands, except per share amounts)
Fourth
Quarter
$117,456
112,698
10,276
10,849
0.06
0.06
$147,274
140,051
31,192
22,894
0.12
0.12
$118,898
114,523
17,368
16,815
0.10
0.10
$153,495
145,922
32,384
27,790
0.15
0.14
$148,784
143,639
45,274
39,567
0.23
0.23
$158,048
150,308
34,179
25,641
0.14
0.13
Total Year
$527,448
508,418
103,860
93,920
0.53
0.52(a)
$591,629
561,781
133,351
105,260
0.57
0.54
(a) The sum of the quarterly earnings per share amounts do not add to the annual earnings per share amount
due to the weighting of common and common equivalent shares outstanding during each of the respective
periods.
F-36
CITRIX SYSTEMS, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Beginning
of Period
Charged to
Costs and
Expenses
Charged
to Other
Accounts
(In thousands)
Deductions
Balance
at End
of Period
2002
Deducted from asset accounts:
Allowance for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏ
Allowance for returns ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Allowance for inventory obsolescence ÏÏÏÏÏÏÏ
$3,726
8,343
1,570
$3,486
Ì
1,407
$
Ì
25,282(1)
Ì
$ 1,162(2) $ 6,050
10,488
504
23,137
2,473
2001
Deducted from asset accounts:
Allowance for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏ
Allowance for returns ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Allowance for inventory obsolescence ÏÏÏÏÏÏÏ
$1,431
9,170
722
$2,784
Ì
2,292
$ 2,483(3)
22,533(1)
Ì
$ 2,972(2) $ 3,726
8,343
1,570
23,360
1,444
2000
Deducted from asset accounts:
Allowance for doubtful accounts ÏÏÏÏÏÏÏÏÏÏÏ
Allowance for returns ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
Allowance for inventory obsolescence ÏÏÏÏÏÏÏ
$1,545
6,696
912
$ 377
Ì
6,932
$
Ì
27,883(1)
Ì
$
491(2) $ 1,431
9,170
722
25,409
7,122
(1) Netted against revenues.
(2) Uncollectible accounts written oÅ, net of recoveries.
(3) Addition from the Sequoia acquisition.
F-37
Exhibit
No.
EXHIBIT INDEX
Description
2.3(1) Asset Purchase Agreement dated February 15, 2000 by and among the Company, Innovex Group,
Inc. and certain stockholders of Innovex
2.4(9) Agreement and Plan of Merger, dated as of March 20, 2001, by and among Citrix Systems, Inc.,
Soundgarden Acquisition Corp. and Sequoia Software Corporation
4.3(4)
4.3(4)
3.1(2) Amended and Restated CertiÑcate of Incorporation of the Company
3.2(2) Amended and Restated By-laws of the Company
3.3(3)
4.1(2)
4.2(4)
CertiÑcate of Amendment of Amended and Restated CertiÑcate of Incorporation
Specimen certiÑcate representing the Common Stock
Indenture by and between the Company and State Street Bank and Trust Company as Trustee
dated as of March 22, 1999, including the form of Debenture.
Form of Debenture (included in Exhibit 4.2).
Registration Rights Agreement by and between the Company and Credit Suisse First Boston
Corporation dated as of March 22, 1999.
1989 Stock Option Plan
10.1(2)*
10.2(10)* Third Amended and Restated 1995 Stock Plan
10.3(10)* Second Amended and Restated 1995 Non-Employee Director Stock Option Plan
10.4*
10.5(5)* Amended and Restated 2000 Director and OÇcer Stock Option and Incentive Plan
10.6(2) Microsoft Corporation Source Code Agreement between the Company and Microsoft Corporation
Third Amended and Restated 1995 Employee Stock Purchase Plan
(""Microsoft'') dated November 15, 1989
10.7(2) Amendment No. 1 to the Source Code Agreement between the Company and Microsoft dated
10.8(2)
October 1, 1992
License Agreement for Microsoft OS/2 Version Releases 1.x, 2.x between the Company and
Microsoft dated August 15, 1990
10.9(2) Amendment No. 1 to the License Agreement between the Company and Microsoft dated
August 15, 1990, Contract No. 5198-0228 dated May 6, 1991
10.10(2) Amendment No. 2 to License Agreement between the Company and Microsoft for Microsoft
OS/2 Version Releases 1.x, 2.x, dated October 1, 1992
10.11(2) Amendment No. 3 to the License Agreement between the Company and Microsoft dated
August 15, 1990, Contract No. 5198-0228 dated January 1, 1994
10.12(2) Amendment No. 4 to the License Agreement between the Company and Microsoft dated
August 15, 1990, dated January 31, 1995
10.13(2) Strategic Alliance Agreement between the Company and Microsoft dated December 12, 1991
10.14(2) Form of IndemniÑcation Agreement
10.15(6) License, Development and Marketing Agreement dated July 9, 1996 between the Company and
Microsoft Corporation
10.16(7) License, Development and Marketing Agreement dated May 9, 1997 between the Company and
Microsoft Corporation
10.17(8) Amendment No. 1 to License, Development and Marketing Agreement dated May 9, 1997
between The Company and Microsoft Corporation
10.18(10) Employment Agreement dated as of August 1, 2001 by and between the Company and Roger W.
Roberts
10.19(10) Amendment to Employment Agreement with Roger W. Roberts as of January 17, 2002
10.20(11) Microsoft Master Source Code Agreement by and between the Company and Microsoft, dated
May 15, 2002
Exhibit
No.
Description
10.21(11) License Form by and between the Company and Microsoft Corporation, dated May 15, 2002 (with
certain information omitted pursuant to a request for conÑdential treatment and Ñled separately
with the Securities and Exchange Commission)
10.22(11) Participation Agreement dated as of April 23, 2002, by and among Citrix Systems, Inc., Citrix
Capital Corp., Selco Service Corporation and Key Corporate Capital, Inc. (the ""Participation
Agreement'') (with certain information omitted pursuant to a request for conÑdential treatment
and Ñled separately with the Securities and Exchange Commission)
10.23(11) Amendment No. 1 to Participation Agreement dated as of June 17, 2002 (with certain information
omitted pursuant to a request for conÑdential treatment and Ñled separately with the Securities
and Exchange Commission)
10.24(11) Master Lease dated as of April 23, 2002 by and between Citrix Systems, Inc. and Selco Service
Corporation (with certain information omitted pursuant to a request for conÑdential treatment and
Ñled separately with the Securities and Exchange Commission)
Amendment to Employment Agreement with Roger W. Roberts as of July 31, 2002
List of Subsidiaries
Consent of Ernst & Young LLP
Power of Attorney (Included in signature page)
CertiÑcation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
CertiÑcation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
10.25
21.1
23.1
24.1
99.1
99.2
*
Indicates a management contract or any compensatory plan, contract or arrangement.
(1) Incorporated herein by reference to Exhibit 2.3 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1999.
(2) Incorporated herein by reference to the exhibits to the Company's Registration Statement on Form S-1
(File No. 33-98542), as amended.
(3) Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000.
(4) Incorporated herein by reference to exhibits of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999.
(5) Incorporated herein by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2000.
(6) Incorporated herein by reference to Exhibit 10 of the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996.
(7) Incorporated herein by reference to Exhibit 10 of the Company's Current Report on Form 8-K dated as
of May 9, 1997.
(8) Incorporated herein by reference to Exhibit 10 of the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998.
(9) Incorporated by reference herein to Exhibit 2 of the Company's Schedule 13D Report dated as of
March 28, 2001.
(10) Incorporated herein by reference to exhibits to the Company's Annual Report on Form 10-K for the
year ended December 31, 2001.
(11) Incorporated by reference herein to exhibits of the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002.
Citrix Systems, Inc. (Nasdaq: CTXS) is
the global leader in access infrastructure.
The most trusted name in enterprise
access, the Citrix® MetaFrame® Access Suite
enables people to easily and securely access
the on-demand enterprise, from just
about anywhere, anytime, using any device,
over any connection. Nearly 50 million
people in more than 120,000 organiza-
tions around the world use Citrix every
day. Citrix customers include 100% of the
Fortune 100 companies, 95% of the Fortune
500 and 95% of the FT European 100.
Based in Fort Lauderdale, Florida,
Citrix has offices in over 20 countries, and
more than 5,000 channel partners in over
100 countries.
See our 2002 Online Review
To find out more about Citrix,
see highlights of our past year,
and find out how we’re creating
successful enterprise access
infrastructure solutions for
customers, visit our 2002
Online Review at:
www.onlineannuals.com/citrix
Citrix 2002 Annual Report
World Headquarters
Annual Meeting of Stockholders
Citrix Systems, Inc.
851 West Cypress Creek Road
Fort Lauderdale, FL 33309 USA
Tel: +1 (954) 267 3000
Tel: +1 (800) 424 8749
www.citrix.com
Americas Headquarters
Citrix Systems, Inc.
851 West Cypress Creek Road
Fort Lauderdale, FL 33309 USA
Tel: +1 (800) 437 7503
European Headquarters
Citrix Systems International GmbH
Rheinweg 9
8200 Schaffhausen
Switzerland
Tel: +41 (52) 635 7700
www.eu.citrix.com
Asia/Pacific Headquarters
Citrix Systems Australia Pty Ltd.
Level 3, 1 Julius Avenue
Riverside Corporate Park
North Ryde NSW 2113
Sydney, Australia
Tel: +61 (0) 2 8870 0800
© 2003 Citrix Systems, Inc. All rights reserved. Citrix®, ICA®,
MetaFrame®, MetaFrame XP™ and the Citrix logo are the registered
trademarks or trademarks of Citrix Systems, Inc. in the United
States and other countries. Microsoft®, Windows® and Windows
NT® are registered trademarks of Microsoft Corporation in the
United States and/or other countries. All other trademarks and
registered trademarks are the property of their respective owners.
The Annual Meeting of Stockholders of
Citrix Systems, Inc. will be held on May 15,
2003 at 2 p.m. at:
Westin Fort Lauderdale Hotel
400 Corporate Drive
Fort Lauderdale, FL 33334 USA
Stock Trading Information
Nasdaq National Market symbol: CTXS
Transfer Agent and Registrar
EquiServe Trust Company
P.O. Box 43010
Providence, RI 02940
Tel: +1 (816) 843 4299
www.equiserve.com
Independent Certified Public Accountants
Ernst & Young LLP
Phillips Point, West Tower
777 S. Flagler Drive, Suite 1200
West Palm Beach, FL 33401
Investor Relations
Requests for information should be
directed to:
Investor Relations
Citrix Systems, Inc.
851 West Cypress Creek Road
Fort Lauderdale, FL 33309 USA
Tel: +1 (888) 595 CTXS (2897)
www.citrix.com/investors/
The Citrix Annual Report and Form 10-K
are available electronically at Citrix online:
www.citrix.com
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See our 2002 Online Review
To find out more about Citrix, see
highlights of our past year, and find
out how we’re creating successful
enterprise access infrastructure solutions
for customers, visit our 2002 Online
Review at: www.onlineannuals.com/citrix
“Fewer than
two dozen software companies
have achieved and maintained
annual revenues above
$1■ billion.
We have that goal in our sights
and believe that we are well-positioned
to join this elite group of
great software companies.”
- President and CEO Mark B. Templeton
Citrix Systems, Inc.
851 West Cypress Creek Road
Fort Lauderdale, FL 33309 USA
www.citrix.com
2002 Annual Report