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Annual Report 2012
The cloud company that enables mobile workstyles
FINANCIAL HIGHLIGHTS
In thousands, except per share data
Net revenues
Cost of net revenues:
Cost of product license revenues
Cost of services and maintenance revenues
Amortization of product related intangible assets
Total cost of net revenues
Gross margin
Operating expenses:
Research and development
Sales, marketing and services
General and administrative
Amortization of other intangible assets
Restructuring
Total operating expenses
Income from operations
Other income, net
Income before income taxes
Income taxes
Consolidated net income
Less: Net loss attributable to non-controlling interest
Total net income
Earnings per share - diluted
Weighted average shares outstanding - diluted
Year ended December 31
2012
2011
2010
2,586,123
2,206,392
1,874,662
96,962
227,150
80,025
404,137
74,393
164,465
54,741
293,599
66,682
115,080
50,504
232,266
2,181,986
1,912,793
1,642,396
450,571
1,060,829
245,259
34,549
—
380,674
885,066
213,673
16,390
24
361,376
771,660
173,394
14,279
971
1,791,208
1,495,827
1,321,680
390,778
19,451
410,229
57,682
352,547
—
352,547
1.86
189,129
416,966
13,531
430,497
74,867
355,630
692
356,322
1.87
190,641
320,716
13,104
333,820
57,379
276,441
624
277,065
1.46
190,335
$2,586
$2,206
$1,875
$1.87
$1.86
$1.46
$819
$679
$616
2010 2011 2012
2010 2011 2012
2010 2011 2012
Revenue (millions)
Earnings Per Share
Operating Cash Flow (millions)
Annual Report 2012 Citrix Systems, Inc.
Mark Templeton
President and CEO
Fellow shareholders,
As we head into 2013, I couldn’t be more excited about the future. Our goal at Citrix has always been
to help people experience work and life in harmony. And that vision has never been more relevant
than it is today.
Every day, our cloud computing technologies help millions of people around the world work better,
and live better. Our business at Citrix is singularly focused on making this vision a reality. We believe
enabling mobile workstyles is not only good for people, it’s good for business.
This vision is clearly resonating with customers as they leverage the synergies we’re realizing across
our product families. Like the healthcare providers who use our enterprise mobility solutions to help
doctors and nurses spend less time in the office, and more time with patients. The financial services
companies who rely on our desktop virtualization technology to deliver unprecedented business
agility, while keeping confidential data secure at all times. Or mobile operators, and the more than
2 billion subscribers they serve, who depend on our cloud networking solutions to optimize network
efficiency and maximize the user experience of the mobile video and web services they provide.
Our growing market relevance is clearly reflected in our business performance.
2012 was a record year across financial, operational and strategic dimensions. Overall revenue was
up 17% to $2.59 billion, while non-GAAP earnings per share increased 16% to $2.87. Revenue from
our SaaS business, license updates and maintenance, and professional services grew 19%, 20%,
and 30% respectively – all helping to increase deferred revenue by 25% to a record $1.2 billion. Later,
in the annual report section, you can find a full reconciliation between our non-GAAP and GAAP
performance. We’ve never been stronger – financially or strategically. I’m proud of our performance
in 2012, and grateful for an amazing team of more than 8,000 employees who delivered impressive
results, despite a volatile global environment.
Our growth demonstrates the continued momentum we’re seeing in the “new era” markets we serve
– fueled by the rise of mobile computing, the emergence of the enterprise cloud, and the build-out
of hosted cloud services. In aggregate, our markets are growing three times faster than overall IT
spending, with a total addressable opportunity estimated to top $19 billion by 2015.
No one is better positioned to take advantage of these trends than Citrix. We’re driving at the intersection
of mobile workstyles and cloud services where the rules governing IT are changing in our favor.
Annual Report 2012 Citrix Systems, Inc.
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4/3/13 4:10 PM
Work is no longer a place. Meetings and workspaces are mobile. Desktops, once considered
devices, are increasingly delivered as services from the cloud – giving employees easy access to
their apps and data from any laptop, smartphone or tablet. Simplicity is disrupting complexity. The
long-held focus on “building and operating” computing systems is rapidly moving to “aggregating and
delivering” services from a wide range of sources.
For customers, navigating these intersections can be difficult – especially for those burdened by the
cost and complexity of legacy systems. IT is no longer exclusively in the decider’s seat. Consumer
innovation is driving the shift from the PC as the singular platform for work, to a vast array of devices,
apps and data. Increasingly, IT decision-making is being shaped by the forces of BYO, personal
cloud services, and a millennial generation with digital ideas about where, when and how work is
done. The speed of business is increasing. Keeping pace with these changes can feel overwhelming,
even in the best run companies.
Through innovation, thought leadership, and a commitment to “any-ness”, Citrix is guiding our
customers through this intersection. The business outcomes we’re driving are both tangible and
profound: accelerating business innovation; simplifying merger integrations; transforming computing
costs; ensuring regulatory compliance; increasing employee productivity; improving talent acquisition
and retention; enabling new-age workplace design; and creating greener enterprises.
No matter how you look at it, the way people work is changing, driven by an unprecedented
convergence of mobile, social, and generational forces. Employees today want to move seamlessly
across a diverse mix of devices and locations throughout the day, collaborating with others, and
sharing information as they go. And companies want the flexibility to move at the speed of business.
At Citrix, we’re committed to helping customers make this transition – with cloud computing products
that enable mobile workstyles. It’s an approach that’s better for business, better for IT, and better for
people. It’s not just a game changer, it’s a life changer. It’s freedom. And with that freedom, we make a
difference. Because we believe when people experience work and life in harmony, companies take off.
On behalf of the Board and our employees, we thank you for your support and confidence.
Mark Templeton
President and Chief Executive Officer
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Annual Report 2012 Citrix Systems, Inc.
6751_AnnualReportLetter2012_8.25x10.75in_Final.indd 2
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2012
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
.
Commission File Number 0-27084
CITRIX SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
75-2275152
(IRS Employer
Identification No.)
851 West Cypress Creek Road
Fort Lauderdale, Florida 33309
(Address of principal executive offices, including zip code)
Registrant’s Telephone Number, Including Area Code:
(954) 267-3000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.001 Par Value
(Title of each class)
The NASDAQ Stock Market LLC
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed 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 file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). x Yes o No
Indicate by check mark if disclosure of delinquent filers 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 definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in 12b-2 of the Exchange Act.
x Large accelerated filer
o Non-accelerated filer
o Accelerated filer
o Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The aggregate market value of Common Stock held by non-affiliates of the registrant computed by reference to the price of the registrant’s Common Stock as
of the last business day of the registrant’s most recently completed second fiscal quarter (based on the last reported sale price on The Nasdaq Global Select Market as
of such date) was $15,573,480,450. As of February 15, 2013 there were 186,403,835 shares of the registrant’s Common Stock, $.001 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2012.
Portions of such definitive proxy statement are incorporated by reference into Part III of this Annual Report on Form 10-K.
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CITRIX SYSTEMS, INC.
TABLE OF CONTENTS
Part I:
Business
Risk Factors
Item 1
Item 1A.
Item 1B. Unresolved Staff Comments
Item 2
Item 3
Legal Proceedings
Properties
Item 4
Mine Safety Disclosures
Part II:
Item 5
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 6
Item 7
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9
Controls and Procedures
Item 9A.
Other Information
Item 9B.
Part III:
Part IV:
Item 10
Item 11
Item 12
Item 13
Item 14
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accounting Fees and Services
Item 15
Exhibits, Financial Statement Schedules
2
PART I
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results
could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such
actual results to differ materially from those set forth in these forward-looking statements are included in Part I,
Item 1A “Risk Factors” beginning on page 14.
ITEM 1. BUSINESS
General
Citrix is a cloud computing company that enables mobile workstyles - empowering people to work and collaborate from
anywhere, accessing enterprise apps and data on any of the latest devices, as easily as they would in their own office - simply
and securely. Citrix cloud computing solutions help IT and service providers build both private and public clouds, leveraging
virtualization and networking technologies to deliver high-performance, elastic and cost-effective services for mobile
workstyles.
We market and license our products directly to enterprise customers, over the Web, and through systems integrators, or
SIs, in addition to indirectly through value-added resellers, or VARs, value-added distributors, or VADs, and original equipment
manufacturers, or OEMs.
Citrix is a Delaware corporation founded on April 17, 1989.
Business Overview
For over two decades, we have pursued our long-term vision: a world where people can experience work and life in
harmony. We've led several waves of innovation to help our customers realize that vision. Today, mobility and cloud services
offer us the greatest opportunities to continue to advance that vision.
We see very clearly two forces impacting our customers' IT organizations - consumerization and industrialization of IT.
These forces are creating two rapidly growing gaps, between the consumer computing experience and the enterprise
experience, and between the speed and flexibility of the cloud versus that of traditional enterprise IT.
These forces are accelerating the disruption of our accustomed ways of computing; but they are also enabling the
reinvention of work, of computing and of business - in a concept called mobile workstyles, enabled by cloud services.
We are combining our products and technologies in the areas of mobility, desktop virtualization, cloud networking, cloud
platforms, collaboration, and data sharing into a compelling set of solutions that power mobile workstyles and cloud
services. An overview of our current products and solutions follows.
Products and Services
Our products and services target customers of all sizes, from individuals and professional consumers, to large global
enterprises. Two divisions, the Enterprise division, comprised of Mobile and Desktop and Networking and Cloud and the
Online Services division, comprised of Collaboration and Data, administer the research and development, product marketing,
and product management for our offerings. Broadly, as an organizing principle, we group our offerings in the following main
categories within our two divisions:
Mobile and Desktop
Desktop Virtualization
Our Desktop Virtualization products are built to transform and reduce the cost of traditional desktop management by
virtualizing the desktop and applications in the datacenter.
•
Citrix® XenDesktop® is a fully integrated desktop virtualization system that gives customers the flexibility to
deliver desktops and apps as cloud services - enabling mobile workstyles and simplifying desktop management.
XenDesktop breaks down traditional cost barriers by reducing server and storage costs through the use of pooled
desktops that can be personalized on-demand. XenDesktop is available in multiple editions designed for different
requirements, from simple VDI-only deployments to sophisticated, enterprise-class desktop and application
delivery services that can meet the needs of everything from basic call center environments to high-powered
graphics workstations. In XenDesktop Enterprise and Platinum editions, customers also receive the industry-
leading Citrix XenApp to manage and mobilize Windows applications. FlexCast delivery technology powers all
these options for delivering desktops and apps, for different types of users and use cases, while optimizing solution
3
costs. XenDesktop includes Citrix HDX technologies to give users a high-definition experience - even when using
multimedia, real-time collaboration, USB devices, and 3D graphics content - while consuming less bandwidth than
competing solutions.
• Citrix® XenApp® is a widely deployed solution that allows Windows applications to be delivered as cloud services
to Android and iOS mobile devices, Macs, PCs and thin clients. XenApp enables mobile workstyles by running
applications in the security of the data center and using HDX technologies to deliver the user experience to any
device, anywhere. XenApp can optimize the application experience for smartphones, tablets and touchscreen
laptops, providing intuitive touch capabilities for the latest generation of devices. Keeping applications under the
centralized control of IT administrators enhances data security and reduces the costs of managing applications on
every PC. XenApp runs on all current versions of Microsoft® Windows Server® and tightly integrates with the
Microsoft® Desktop Optimization Pack, Microsoft App-V, and Microsoft System Center. Our joint solution lowers
the cost of delivering and maintaining Windows applications for all users in the enterprise. The capabilities of
XenApp are available standalone as well as with XenDesktop Enterprise and Platinum Editions.
Citrix®AppDNA application lifecycle management software enables enterprises to discover, automate, model and
manage applications for faster application migration, easier application virtualization and streamlined application
management. AppDNA software combines application insight with accurate application testing, remediation and
compatibility.
Citrix® VDI-in-a-Box™ is an easy, affordable, all-in-one, appliance-based, desktop virtualization solution aimed at
departmental, branch office, and other small to medium sized deployments. Running on off-the-shelf servers, the
solution enables IT to quickly and easily deliver centrally-managed virtual desktops to virtually any user, on
virtually any device.
Citrix® XenClient® is a high-performance, bare-metal hypervisor that runs directly on the client device hardware,
dividing up the resources of the machine and enabling multiple operating systems to run side by side in complete
isolation. XenClient is available as a free download on citrix.com.
•
•
•
Citrix Receiver is the client side of XenApp and XenDesktop. Citrix Receiver is available as a free download from
citrix.com supporting numerous types of client devices. Citrix Receiver uses the Citrix HDX Technologies (discussed below) to
communicate with XenApp and XenDesktop.
Mobility
In January 2013, Citrix acquired Zenprise, a leader in mobile device management. Zenprise and existing Citrix mobile
technology, namely CloudGateway, will serve as the foundation for the Citrix mobile platform. Initially, we will offer
CloudGateway and XenMobile as a Mobile Solutions bundle.
• Citrix CloudGateway™ is a unified service broker that aggregates, controls and delivers Windows, Web, Software as a
Service, or SaaS, and mobile applications to virtually any device. CloudGateway provides end-users with an intuitive
single point of access and self- service to all of their business applications on virtually any device. CloudGateway also
provides IT with a comprehensive single point of aggregation and control for applications and users.
• XenMobile MDM™ provides role-based management, configuration and security of corporate and employee-owned
devices. IT can enroll and manage any device, blacklist or whitelist apps, detect jailbroken devices and perform a full or
selective wipe of a device that is out of compliance. Users can use any device they choose, while IT can ensure compliance
of corporate assets and the security of corporate content on the device.
Networking and Cloud
Networking and Cloud includes our Cloud Platform and Cloud Networking products. Our Cloud Platform products help
organizations build clouds, transform and deliver apps and desktops as cloud services. Our Cloud Networking products allow
organizations to deliver these cloud services to any device with high performance, security and reliability.
In July 2012, Citrix completed the acquisition of privately held Bytemobile, a leading provider of data and video
optimization solutions for mobile network operators. This acquisition gives Citrix a strategic foothold in the core infrastructure
of more than 130 mobile operators in 60 countries around the world, significantly extending the company's market reach, and
enhancing the broader Citrix strategy of powering mobile workstyles and cloud services. Bytemobile is part of our Cloud
Networking group. The principle offering, Bytemobile Smart Capacity, is described below.
Cloud Networking
• Citrix® NetScaler® is an all-in-one Web application delivery controller designed to make applications run five times
faster by application accelerator methods such as hypertext transfer protocol, or HTTP compression and caching,
ensuring application availability through the advanced L4-7 load balancer and content switching methods; increase
4
application security with an integrated application firewall; and substantially lower costs by offloading servers to
enable server consolidation.
• Bytemobile Smart Capacity™ solutions encompass a range of functionality that helps network operators effectively
address the traffic challenges and revenue opportunities of the mobile data revolution. These solutions include video
optimization, web optimization, policy control, mobile analytics, adaptive traffic management, and quality of
experience management.
• Citrix CloudBridge™ connects enterprise datacenters to any end point required of a network branches, public and
private clouds, data centers and other third party providers. The flexibility of CloudBridge allows enterprises to turn
on optimization and acceleration features to ensure quality of experience for desktops, applications, video and
multimedia applications for branch and mobile users. CloudBridge is optimized for virtual desktops and applications
delivered by XenDesktop and XenApp.
Cloud Platform
• Citrix CloudPortal™ is a comprehensive portal for provisioning hosted applications, desktops, services and
infrastructure as a service, or IaaS, from the cloud. The multi-tenant platform automates business and operations
support services thereby saving time and money while empowering customers with self-service day-to-day
administration. CloudPortal simplifies cloud services by making management consistent and easy through a Web
portal for on-boarding, provisioning, adds-moves-changes and usage reports.
• Citrix CloudPlatform™ powered by Apache CloudStack™, provides an advanced open source software platform to
build highly scalable and reliable private and public cloud computing environments. With CloudPlatform, customers
can quickly and easily build cloud services within their existing infrastructure and start realizing the benefits of this
transformative service delivery model without the overhead of integration, professional services and complex
deployment schedules.
• Citrix®XenServer® offers a complete virtualization platform enabling companies to create and manage virtual
infrastructures for servers, desktops and clouds. Built on the powerful open source-based Xen hypervisor, XenServer
is designed for efficient management of Windows® and Linux® virtual servers, delivering cost-effective server
consolidation and business continuity.
Collaboration and Data
Collaboration and Data products allow organizations to enable mobile workstyles and offer employees the ability to move
seamlessly across a diverse mix of devices and collaborate and share information during their day.
Collaboration
• GoToMeeting® is an easy-to-use, secure and cost-effective product for online meetings, sales demonstrations and
collaborative gatherings. GoToMeeting users can easily host, attend or participate in online meetings from a Mac, PC,
iPad, iPhone or Android device. GoToMeeting comes equipped with toll-based conference dial-in numbers, Voice over
Internet Protocol (VoIP) and HDFaces® high-definition video conferencing. It features an advanced, secure
communication architecture that uses industry-standard SSL encryption. Users can hold unlimited meetings of any
length with up to 25 attendees for a flat-fee subscription price. GoToMeeting is available in French, German, Italian,
Spanish, Chinese and English. GoToMeeting also comes with application programming interfaces (APIs), allowing
users to integrate GoToMeeting into management systems and websites. GoToMeeting is also supports multiple
organizer accounts, more robust reporting and advanced administrative capabilities for corporate customers.
• GoToWebinar® is an easy-to-use, do-it-yourself webinar product, allowing organizations to increase market reach and
effectively present online to geographically dispersed audiences. GoToWebinar users can easily host, attend or
participate in a webinar session from a Mac or PC without significant training or IT support; attendees can join from a
Mac, PC, iPad, iPhone or Android device. GoToWebinar includes such features as full-service registration with real-
time reports; customized branding; automated email templates; polling and survey capabilities; a webinar dashboard
for monitoring attendance and participation; easy presenter controls for changing presenters; and Voice over Internet
protocol (VoIP) and toll-based phone options. GoToWebinar also offers registration and reporting application
programming interfaces (APIs) via the GoTo Developer Center. Users can hold unlimited webinars of any length with
up to 1,000 attendees for a flat-fee subscription price. For those requiring full-scale video content, GoToWebcast users
can hold unlimited online events for one flat-fee subscription price, with up to 5,000 attendees. GoToWebcast Premier
offers a custom-built event, which includes moderator assistance and webinar planning for events up to 20,000
attendees.
• Podio™ is a social collaborative work platform supporting people and teams working the way they want to through
seamlessly providing social activity streams, a fully customizable App Market, and integrations with other services,
5
including GoToMeeting and ShareFile - all within an intuitive experience available on the web and across Android,
iPhone and iPad mobile devices.
• GoToTraining® is an easy-to-use and secure online training product that enables individuals and enterprises to provide
interactive training sessions to customers and employees in any location.
• GoToMyPC® is an online service that enables mobile workstyles by providing secure, remote access to a PC or Mac
from virtually any Internet-connected computer, as well as from supported iOS or Android mobile devices, such as the
iPad, iPhone, Kindle Fire, Samsung Galaxy. GoToMyPC sets up easily with a secure encrypted connection and
enables individuals to remotely use any resources hosted on their desktop just as though they were sitting in front of it.
• GoToAssist® provides easy-to-use cloud-based IT support solutions to deliver maximum uptime for people and their
computers, mobile devices and apps. GoToAssist's integrated toolset is built specifically for IT managers, consultants
and managed service providers.
Data Sharing
•
ShareFile® is a secure, cloud-based file sharing and storage solution built for business. Allowing users to connect and
share data from any computer or mobile device with Internet access, ShareFile enables collaboration anytime,
anywhere. It replaces insecure and inconsistent methods of transferring large and confidential files including email
attachment, FTP and consumer cloud storage services. ShareFile protects client data throughout the storage and
transfer process, using up to 256-bit encryption and Secure Socket Layer (SSL) or Transport Layer Security (TLS)
encryption protocols for transfer and 256-bit encryption for files at rest on ShareFile servers. Password protection and
granular access to folders and files stored with ShareFile ensure that data remains in control of the company and
available to users on a need-to-know basis. ShareFile also offers a number of desktop tools that allow users to
integrate secure file exchange into their normal workflow, including ShareFile Sync, the ShareFile Plugin for
Microsoft Outlook and the ShareFile Desktop Widget. With ShareFile Enterprise, organizations can manage their data
on-premises in customer-managed StorageZones, choose Citrix-managed secure cloud options or create a mix of both.
As a customer-centric company, ShareFile also provides a custom-branded online interface, individual training and
support to every client.
License Updates and Maintenance
We provide several ways for customers to receive upgrades, support and maintenance for products.
•
•
Subscription Advantage provides customers access to the latest product version updates when and if available during
their membership term. These updates include major changes to the product architecture and updates to the feature set
of a product. Citrix software products eligible for participating in the Subscription Advantage program come with the
first year of Subscription Advantage embedded into the cost of the product.
Technical Support Services are specifically designed to address the variety of challenges facing access infrastructure
environments. We offer several support-level options, global coverage and personalized relationship management.
Post-sale technical support is offered through Citrix-operated support centers located in the United States, Ireland,
Japan, Hong Kong, Australia, Singapore and India. In most cases, we provide technical advice to channel distributors
and entities with which we have a technology relationship, who act as the first line of technical assistance for end-
users.
• Premier Support provides 24x7x365 unlimited-incidents worldwide support for Citrix software products covered by
Subscription Advantage. Available at the time of product purchase or with a Subscription Advantage renewal, Premier
Support is offered on a per license basis.
• Hardware Maintenance provides technical support from the Citrix experts to diagnose and resolve issues encountered
with appliances, the latest software upgrades and replacement of malfunctioning appliances to minimize
organizational downtime. Additionally, dedicated account management is available as an add-on to the program for an
even higher level of service.
•
Software Maintenance combines 24x7x365 unlimited worldwide support with product version upgrades. The first year
of Software Maintenance is required with the corresponding product purchase.
Professional Services
We provide a portfolio of professional services to our business partners and customers to manage the quality of
implementation, operation and support of our solutions. These services are available for additional fees paid on an annual or
transactional basis.
• Citrix Consulting helps support the successful implementation of Citrix technologies and solutions through the use of
proven methodologies, tools and published best practices. Citrix Consulting focuses on strategic engagements with
6
enterprise customers who have complex, mission-critical, or large-scale Citrix deployments. These engagements are
typically fee-based on-site engagements for the most challenging projects in scope and complexity, requiring
consultants who are uniquely qualified with project methodology and Citrix product expertise. Citrix Consulting is
also responsible for the development of best practice knowledge that is disseminated to businesses with which we
have a business relationship and end-users through training and written documentation. Leveraging these best
practices enables our integration resellers to provide more complex systems, reach new buyers within existing
customer organizations and provide more sophisticated system proposals to prospective customers. Citrix Consulting
has worked with Fortune Global 500 companies, technology providers, and government organizations to deliver
solutions that achieve their unique technical and business objectives.
• Product Training & Certification helps enable our customers and partners to be successful with Citrix and achieve
their business objectives faster. Authorized Citrix training is available when and how it is needed. Traditional or virtual
instructor-led training offerings feature Citrix Certified Instructors delivering training in a classroom or remote setting
at one of approximately 400 Citrix Authorized Learning Centers™, or CALCs, worldwide. CALCs are staffed with
instructors that have been certified by us and teach their students using Citrix-developed courseware. Self-Paced
Online offerings, available to students 24 hours a day, seven days a week, provide technically robust course content
without an instructor and include hands-on practice via virtual labs. Certifications validate key skills and are available
for administrators, engineers, architects and sales professionals.
Technology
Our products are based on a full range of industry-standard technologies. In addition, certain of our products are also
based on our proprietary technologies.
• Citrix HDX Technologies is a family of innovations that optimize the end-to-end user experience in virtual desktop and
virtual application environments. These technologies incorporate our ICA protocol, which consists of server- and
client-side technology that allows graphical user interfaces to be transmitted securely over any network, and include
HDX Broadcast, MediaStream, Realtime, 3D, Plug-n-Play and IntelliCache features which work together to provide a
high-definition user experience across a wide array of applications, devices and networks.
• Citrix FlexCast® technologies combine a range of desktop and application virtualization innovations that work in
concert to enable enterprise IT departments the ability to support a wide range of use cases.
• Citrix personalization technologies increase desktop virtualization adoption by providing a personalized end-user
experience while optimizing resource usage in the data center and overall TCO.
• NetScaler® Software Packet Engine, or the Packet Engine, forms the foundation of our NetScaler line of products. The
Packet Engine allows high-performance networking and packet processing without the need for special purpose
hardware.
• NetScaler® nCore™ Technology is an architecture which enables execution of multiple Packet Engines in parallel. nCore
technology allows the distribution of packet flows across multiple central processing unit cores to achieve efficient,
high-performance parallel processing across multiple Packet Engines. The new architecture incorporates innovations
in flow distribution and state sharing and provides for efficient execution across Packet Engines.
• Citrix CloudPortal Business Manager enables organizations to provide product catalogs and billing system integration
for their public clouds.
• Citrix Internet Overlay Platform is our foundational technology for GoToMeeting, GoToWebinar, GoToTraining and
GoToAssist. The platform implements one of the largest multicast overlay data networks in the world using the
Internet. It provides proprietary screen-sharing technology that separately optimizes screen transmission for each
endpoint device (such as a remote PC during an online meeting or remote access session).
• Citrix PSTN/VoIP Bridge is core technology that allows the seamless integration of Public Switched Telephone
Network/Voice over Internet Protocol, or PSTN/VoIP, in our products that use our audio conferencing.
• HDFaces in GoToMeeting delivers high-definition video conferencing and one-to-many video streaming over the
public Internet. It includes proprietary network transport protocols and transcoding software that optimize video
quality for each endpoint device.
Innovation is a core Citrix competency. We have many additional unique inventions that are important enablers of our
continued leadership in desktop virtualization, mobility, cloud networking, cloud platforms, collaboration and data sharing.
7
Customers
We believe that the primary IT buyers involved in decision-making related to our solutions are the following:
•
Strategic IT Executives including chief information officers, chief technology officers and vice presidents of
infrastructure, who have responsibility for ensuring that IT services are enablers to business initiatives and are
delivered with the best performance, availability, security and cost.
• Desktop Operations Managers who are responsible for managing Windows Desktop environments including corporate
help desks.
•
IT Infrastructure Managers who are responsible for managing and delivering Windows-based applications.
• Network Architects who are responsible for delivering Web-based applications who have primary responsibility for
the WAN infrastructure for all applications.
•
Server Operations Managers who are responsible for specifying datacenter systems and managing daily operations.
• Directors of IT, messaging and mobility, who are, respectively, responsible for Exchange and defining mobile
strategies and solutions.
•
•
Individuals and prosumers, who are responsible for choosing personal solutions and helping small businesses select
simple-to-use computing solutions.
Small Business Owners who are responsible for choosing the systems needed to support their business goals, such as
SaaS.
• CTO office and engineering department (managers, architects, etc.) for telecommunications service providers are the
primary buyers of our Bytemobile Smart Capacity solutions.
The IT buyers for our products include a wide variety of industries including those in financial services, technology, healthcare,
education, government and telecom.
We offer perpetual and term-based software licenses for our products, along with annual subscriptions for software
updates, technical support and SaaS. Perpetual licenses allow our customers to use the version of software initially purchased
into perpetuity, while term-based licenses are limited to a specified period of time. Software update subscriptions give
customers the right to upgrade to new software versions if and when any updates are delivered during the subscription term.
Perpetual license software products come primarily in electronic-based forms and, in selected markets, we offer pre-packaged
shrink-wrap products to meet local customer needs. Our SaaS products are accessed over the Internet for usage during the
subscription period. Our hardware appliances come pre-loaded with software for which customers can purchase perpetual
licenses and annual support and maintenance.
Technology Relationships
We have a number of technology relationships in place to accelerate the development of existing and future products and
go-to-market. These relationships include cross-licensing, OEM, and other arrangements that result in better solutions for our
customers.
Microsoft
We have collaborated with Microsoft on various technologies, including terminal services, cloud networking and
virtualization. Since our inception, we have had a number of license agreements with Microsoft, including patent cross-licenses
and source code licensing agreements that have provided us access to source code for versions of Microsoft Windows Server.
These agreements are not required for our software development processes on Windows Server and do not provide for
payments to or from Microsoft.
Cisco
We have a technology collaboration with Cisco Systems, Inc., or Cisco, to develop and deliver solutions that help
customers simplify and accelerate large-scale desktop virtualization deployments, including high-definition virtual desktops
and applications and improved end-user experiences, over a highly secure Citrix® HDX-enabled Cisco network. We licensed
the specifications of ICA® to Cisco as part of this agreement.
In October 2012, Cisco and Citrix announced a new relationship in three strategic areas: cloud networking, cloud
orchestration and mobile workstyles. As part of this strategic partnership, Cisco and Citrix intend to integrate their technologies
to jointly deliver innovative solutions for the mobile-cloud era. The expanded partnership will include investments in people
and resources to drive market-leading technology innovation, solution integration and validation, customer support, and joint
go-to-market investment on a global basis.
8
Additional Relationships
Over the past year, our partners have expanded their focus on the broad range of Citrix products. Some examples include
Alcatel-Lucent, who OEMs Citrix CloudPlatform as a part of their CloudBand solution, and Dell who OEMs VDI-in-a-box as
an appliance, called DVS-Simplified, and XenDesktop, called DVS-Enterprise. HP, IBM and Fujitsu also have multiple
offerings in the market with XenDesktop. Announced in 2012, Amazon now re-sells Citrix NetScaler and Citrix CloudBridge in
its Advanced Web Services, or AWS, Marketplace.
Through our Citrix Ready program, more than 21,000 products have been verified to work with Citrix technologies. In
addition, numerous partners proactively incorporate Citrix products and technologies such as Receiver, XenServer,
XenDesktop, XenClient, XenApp, NetScaler, CloudGateway, VDI-in-a-Box and HDX (ICA) technology into their customer
offerings. Our HDX and Receiver technologies are often included with or offered for thin clients, industry-standard servers and
mobile devices, such as Apple's iPhone and iPad, Windows Mobile, Blackberry and Google Android devices. Licensees include
Dell, Fujitsu and Hewlett Packard, among others. Our XenClient technology was developed in cooperation with Intel and is
licensed for shipment by desktop computer manufacturers, including Dell and Hewlett Packard.
Research and Development
We focus our research and development efforts on developing new products and core technologies in our core markets
and to further enhancing the functionality, reliability, performance and flexibility of existing products. We solicit extensive
feedback concerning product development from customers, both directly from and indirectly through our channel distributors.
We believe that our software development teams and core technologies represent a significant competitive advantage for
us. Included in the software development teams is a group focused on research activities that include prototyping ways to
integrate emerging technologies and standards into our product offerings, such as emerging Web services technologies,
management standards and Microsoft's newest technologies. Many groups within the software development teams have
expertise in Extensible Markup Language, or XML, based software development, integration of acquired technology, multi-tier
Web-based application development and deployment, SSL secure access, hypervisor technologies, cloud technologies,
networking technologies, VoIP-based audio technology, Web-based video technology and building SaaS. We incurred research
and development expenses of approximately $450.6 million in 2012, $380.7 million in 2011 and $361.4 million in 2010. In
addition to internal research and development, Citrix also supports an eco-system of early stage companies via our Startup
Accelerator program which provides seed capital for new technologies.
Sales, Marketing and Services
We market and license our products and services through multiple channels worldwide, including Value-Added Resellers
known as Citrix Solution Advisors™, VADs, Service Providers, SIs, Independent Software Vendors (ISVs), direct over-the-
Web and OEMs. These distribution channels are managed by our worldwide sales and services organization. We provide
training and certification to Solution Advisors, integrators, and consultants for the full-range of Citrix products, solutions and
services through our Citrix Partner Network. In addition, our Online Services division provides Enterprise SaaS offerings
through direct corporate sales, Solution Advisors, and direct over-the-Web through our websites.
In 2012, we continued to focus on increasing the productivity of our existing partners and building capacity through
recruitment of new partners to sell and implement our expanding product portfolio. Our channel incentive program, Citrix
Advisor Rewards™, is an innovative influencer program that rewards our partners for registering projects and providing value-
added selling even if they do not fulfill the product. In 2012, we offered additional Advisor Rewards incentives to increase
partner mindshare, limit channel conflict and increase partner loyalty to us.
As Citrix continues to evolve as a cloud computing company enabling mobile workstyles, we have also been cultivating a
base of over 2,000 partners for XenDesktop and XenApp known as the Citrix Service Provider program. These partners
consume technology on a subscription basis in order to deliver IT Services to multiple corporate entities. Our Citrix Service
Provider channel is one of the fastest growing channels at Citrix today, and we see the demand increasing for these cloud-based
services as small and mid-sized businesses require an outsourced model for their IT.
For all of our channels, we regularly take actions to improve the effectiveness of our partner programs and strengthen our
channel relationships, including managing non-performing partners, adding new partners with expertise in selling into new
markets and forming additional strategic global and national partnerships. SI and ISV engagement continues to be a substantial
part of our strategy in the large enterprise and government markets. The SI program includes organizations such as Accenture,
Atos Origin, Computer Sciences Corporation, Dimension Data, Hewlett Packard, Fujitsu, IBM Global Services, Wipro and
TATA Consultancy Services Limited, among others. The ISV program has a strong representation from targeted industry
verticals such as healthcare, financial services and telecommunications. Members in the ISV program include Cerner
9
Corporation, Epic Systems Corporation, McKesson Corporation, Microsoft, Oracle Corporation, SAP AG and Siemens Medical
Health Solutions, among many others.
Our corporate marketing organization provides sales event support, sales collateral, advertising, direct mail, industry
analyst relations and public relations coverage to our indirect channels to aid in market development and in attracting new
customers. Our partner development organization actively supports our partners to improve their commitment and capabilities
with Citrix solutions. Our customer sales organization consists of field-based systems sales engineers and corporate sales
professionals who work directly with our largest customers, and coordinate integration services provided by our partners.
Additional sales personnel, working in central locations and in the field, provide additional support including recruitment of
prospective partners and technical training with respect to our products.
Although we have thousands of partnerships, one distributor, Ingram Micro, accounted for 16% of our net revenues in
2012, 17% of our total net revenues in 2011 and 17% of our total net revenues in 2010. Our distributor arrangements with
Ingram Micro consist of several non-exclusive, independently negotiated agreements with its subsidiaries, each of which covers
different countries or regions. Each of these agreements is separately negotiated and is independent of any other contract (such
as a master distribution agreement), one of which was individually responsible for over 10% of our total net revenues in each of
the last three fiscal years. In addition, there was no individual VAR that accounted for over 10% of our total net revenues in
2012, 2011 and 2010.
We are not obligated to accept product returns from our channel distributors under any conditions, unless the product
item is defective in manufacture. See “Management's Discussion and Analysis of Financial Condition and Results of
Operations-Critical Accounting Policies and Estimates” and Note 2 to our consolidated financial statements included in this
Annual Report on Form 10-K for the year ended December 31, 2012 for information regarding our revenue recognition policy.
International revenues (sales outside the United States) accounted for approximately 45.3% of our net revenues for the
year ended December 31, 2012, 43.2% of our net revenues for the year ended December 31, 2011 and 42.7% of our net
revenues for the year ended December 31, 2010. For detailed information on our international revenues, please refer to Note 11
to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2012.
Segment Revenue
Our revenues are derived from our Enterprise division products, which primarily include Mobile and Desktop products,
Networking and Cloud products and related license updates and maintenance, support and professional services and from our
Online Services division's Collaboration and Data products. The Enterprise division and the Online Services division constitute
our two reportable segments. See Note 11 to our consolidated financial statements included in this Annual Report on Form 10-
K for the year ended December 31, 2012.
Operations
For our Cloud Networking products, including NetScaler and Cloud Bridge, we employ manufacturing capabilities
through independent contractors to provide a redundant source of manufacture and assembly. Independent contractors provide
us with the flexibility needed to meet our customer product and delivery requirements. We have manufacturing relationships
primarily with Flextronics, Super Micro Computer, Inc., Hewlett Packard and IBM (primarily for Bytemobile Smart Capacity)
under which we have subcontracted the majority of our hardware manufacturing activity. These third-party contract
manufacturers also provide final test, warehousing and shipping services. This subcontracting activity extends from prototypes
to full production and includes activities such as material procurement, final assembly, test, control, shipment to our customers
and repairs. Together with our contract manufacturers, we design, specify and monitor the tests that are required to meet
internal and external quality standards. Our contract manufacturers manufacture our products based on forecasted demand for
our products. Each of the contract manufacturers procures components necessary to assemble the products in our forecast and
test the products according to our specifications. We are dual-sourced on our components, however, in some instances, those
sources may be located in the same geographic area. Accordingly, if a natural disaster occurred in one of those areas, we may
need to seek additional sources. Products are then shipped to our channel distributors, VARs or end-users. If the products go
unsold for specified periods of time, we may incur carrying charges or obsolete material charges for products ordered to meet
our forecast or customer orders. In 2012, we did not experience any material difficulties or significant delays in the
manufacture and assembly of our products.
We control all purchasing, inventory, scheduling, order processing and accounting functions related to our operations. For
our software products, production, warehousing and shipping are performed by our independent contractor HP, Ireland. Master
software CD-ROMs, development of user manuals, packaging designs, initial product quality control and testing are primarily
performed at our facilities. In some cases, independent contractors also duplicate CD-ROMs, print documentation and package
and assemble products to our specifications.
10
While it is generally our practice to promptly ship product upon receipt of properly finalized purchase orders, we
sometimes have orders that have not shipped upon receipt of a purchase order. Although the amount of such product license
orders may vary, the amount, if any, of such orders at the end of a fiscal year is not material to our business. We do not believe
that backlog, as of any particular date, is a reliable indicator of future performance.
We believe that our fourth quarter revenues and expenses are affected by a number of seasonal factors, including the lapse
of many corporations' fiscal year budgets and an increase in amounts paid pursuant to our sales compensation plans due to
compensation plan accelerators that are often triggered in the fourth quarter. We believe that these seasonal factors are common
within our industry. Such factors historically have resulted in first quarter revenues in any year being lower than the
immediately preceding fourth quarter. We expect this trend to continue through the first quarter of 2013. In addition, our
European operations generally generate lower revenues in the summer months because of the generally reduced economic
activity in Europe during the summer. This seasonal factor also typically results in higher fourth quarter revenues.
Competition
We sell our products in intensely competitive markets. Some of our competitors and potential competitors have
significantly greater financial, technical, sales and marketing and other resources than we do. As the markets for our products
and services continue to develop, additional companies, including those with significant market presence in the computer
appliances, 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 significant competitive factor in the future. As a result, we may
not be able to maintain our historic prices and margins, which could adversely affect our business, results of operations and
financial condition. See “-Technology Relationships” and Part I-Item 1A entitled “Risk Factors” included in this Annual Report
on Form 10-K for the year ended December 31, 2012.
Mobile and Desktop
Our Desktop Virtualization products are based on an alternative technology platform the success of which will depend on
organizations and customers perceiving technological and operational benefits and cost savings associated with adopting
desktop virtualization solutions. Our primary competition in this market is the existing IT desktop management practice of
manually configuring physical desktops, which is time-consuming, expensive and inconsistent. We also face numerous
competitors that provide automation of these processes and alternative approaches, including VMWare's View product and
Oracle Corporation, or Oracle's, broad virtualization stack which is a feature of its operating system and management software.
We believe XenDesktop gives Citrix a competitive advantage by providing customers multiple ways to manage desktops within
one, integrated desktop virtualization system.
Cloud Gateway also faces competition from VMware and a host of other, smaller solution providers. We believe Citrix
offers the only integrated solution that aggregates, controls and delivers Windows, Web, SaaS and mobile applications to
virtually any device, bringing all of the various components together. Further, we believe that our end-user experience has a
competitive edge when compared to the alternative solutions due to the intuitiveness and self-service features of our offering.
XenMobile and Mobile Solutions Bundle compete with AirWatch, MobileIron and Good Technology. We believe we
differentiate ourselves from these competitors by providing the most complete solution on the market, providing mobile device
management (MDM), mobile application management (MAM) and core wireless applications, including secure wireless email,
calendar and browser.
Networking and Cloud
Our NetScaler products compete against other established competitors, including, F5 Networks, Inc., or F5 and to a lesser
extent, A10 Networks. Both compete with us for traditional enterprise sales opportunities, while F5 is our principal competitor
in the Internet-centric market segment. We continue to enhance NetScaler's feature capability and aggressively market
NetScaler to our existing customer base.
Our Bytemobile Smart Capacity product's primary competition is a network engineering organization that elects not to
employ the type of optimization solution we offer. In addition, Bytemobile Smart Capacity competes with single-purpose or
limited-purpose vendors that address a portion of what our product offers and may or may not partner with other vendors to
complete their offerings. Our Bytemobile Smart Capacity product is the market share leader in the video and web optimization
market, with a large installed base of tier-one mobile network operator customers. We believe that Bytemobile Smart Capacity
has competitive advantages both in core optimization technology and in its ability to consolidate disparate hardware and
software functionality into a single managed network element.
Competition for CloudBridge, which includes the product formerly known as Branch Repeater, comes in the form of
alternative approaches to making the cloud a secure extension of a company's on-premise enterprise network, such as WAN
optimization, Internet protocol security, or IPSec, or multi-protocol label switching, or MPLS, network solutions, among
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others. F5 is a key competitor in this space. With regards to WAN optimization, CloudBridge also competes with Cisco and
Riverbed Technology, Inc., or Riverbed. Cisco has the largest market share, benefiting from its leadership in the networking
market. Riverbed is a less established company than Citrix, but has the advantage of being focused solely on WAN
optimization. We believe CloudBridge is a more feature-rich solution than the other alternatives and provides superior
flexibility as part of NetScaler.
VMware is also the main competitor for our CloudPlatform product (formerly CloudStack), which is an advanced
platform for building highly scalable and reliable cloud computing environments, and our CloudPortal product, which is a
comprehensive portal for provisioning hosted applications, desktops, services and IaaS. Unlike VMware's products, our
CloudPlatform and CloudPortal products draw on the successful models and experience of large, public cloud implementations
and apply them to enterprise, private clouds. The differentiation and experience of our products is expanded when coupled with
our NetScaler and XenServer products, both of which are used in large, public cloud implementations. Additionally,
OpenStack, an open source project, provides an alternative solution to our CloudPlatform product. We believe CloudPlatform
has a competitive advantage as it is production ready for cloud deployment.
In the server virtualization market, we compete directly with VMware, which was first to market with this technology and
is widely regarded as the market leader. In addition, we also compete with Microsoft's Windows Server 2012 with Hyper-V.
Microsoft first entered this market in 2008 and has since established its position as a leader in this space. To a lesser extent, and
mostly only in the niche technology areas of test and development, we compete with RedHat, who recently expanded into this
market. We believe XenServer, our server virtualization product, has features that are competitive with VMware's ESX Server
in terms of performance, scalability and other enterprise-class capabilities. XenServer is offered as a free download, which
significantly increases the reach of server virtualization to customers of all sizes and geographies. We monetize the XenServer
product with premium editions that extend the platform to enable organizations of any size to integrate and automate
management processes, delivering a virtual datacenter solution.
Collaboration and Data
Our products for collaboration continue to maintain solid leadership positions in extremely competitive markets,
particularly among, Small to Medium-sized Businesses, or SMBs. We differentiate our SaaS offerings by designing simple,
secure, reliable and cost-efficient products that deliver a superior customer experience. Our competitors range from large,
established technology firms to small, Internet-based startups.
In Collaboration, we compete primarily with Cisco's WebEx, Microsoft Lync and Skype, as well as collaboration
solutions from Adobe Systems, Inc., or Adobe. Additionally we compete with freemium products such as Logmein's Join.me
and Google's Google + Hangouts. Our GoToMeeting, GoToWebinar and GoToTraining products have proven to be competitive
based on ease-of-use and the All You Can Meet® pricing model. In addition, we offer advanced VoIP-based audio technology,
which allows us to market audio conference calling services directly to SMBs and enterprises. We further differentiate our
collaboration products by integrating PSTN, VoIP and toll-free audio services. We believe these features give us competitive
advantage among individual, prosumer and SMB customers. We further expanded our collaboration offerings with
GoToTraining®, an online training product purpose-built for the corporate training market.
We have been a market leader with our GoToMyPC product for many years. Our direct competition includes LogMeIn,
Inc., or LogMeIn, free solutions such as Microsoft's Live Mesh and those from many Internet startups. In addition, new remote
access features in desktop operating systems like Microsoft Windows and Macintosh OSX provide alternatives to our solution.
We endeavor to differentiate our products by continuing our focus on security, ease-of-use and support for multiple desktop
operating systems.
Our GoToAssist product has achieved the largest market share for Web-based clientless remote support. This product
includes a version purpose-built for individual users, consultants and small businesses, positioning Citrix as the only provider
of remote support solutions for all segments of the market. In remote support, we compete with Cisco's WebEx and LogMeIn.
In the data sharing market, ShareFile's direct competition includes Dropbox, Inc., Box, Inc. and YouSendIt, Inc., as well
as legacy solutions like traditional file transfer protocol, or FTP, in the SMB market. Many of these competitors have strong
brand recognition through their consumer and free versions of their products. However, we believe ShareFile offers a superior
solution as it is built specifically for the needs of businesses. In the Enterprise segment, there are fewer direct competitors to the
ShareFile product. Increased competition is anticipated as large enterprises need to deploy secure data syncing and sharing
solutions for a growing mobile workforce. We believe that Citrix's strong reputation in the Enterprise market, along with
ShareFile's integration into Citrix products such as Receiver, and our unique ability to store data on-premise or in the Cloud,
will be a key differentiator.
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Proprietary Technology
Our success is dependent upon certain proprietary technologies and core intellectual property. We have been awarded
numerous domestic and foreign patents and have numerous pending patent applications in the United States and foreign
countries. Our technology is also protected under copyright laws. Additionally, we rely on trade secret protection and
confidentiality and proprietary information agreements to protect our proprietary technology. We have trademarks or registered
trademarks in the United States and other countries, including Bytemobile®, Citrix®, Citrix Access Gateway™, Citrix
Receiver™, Citrix Synergy™, CloudGateway™, CloudPortal™, GoToMeeting®, GoToWebinar®, NetScaler®, Podio™,
ShareFile®, Xen®, XenApp®, XenClient®, XenDesktop®, XenMobile® and XenServer®. While our competitive position could
be affected by our ability to protect our proprietary information, we believe that because of the rapid pace of technological
change in the industry, factors such as the technical expertise, knowledge and innovative skill of our management and technical
personnel, our technology relationships, name recognition, the timeliness and quality of support services provided by us and
our ability to rapidly develop, enhance and market software products could be more significant in maintaining our competitive
position. See Part I-Item 1A entitled “Risk Factors” included in this Annual Report on Form 10-K for the year ended
December 31, 2012.
Available Information
Our Internet address is http://www.citrix.com. We make available, free of charge, on or through our website our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and any amendments to
those reports filed 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 filed with or furnished to the Securities and Exchange Commission. The
information on our website is not part of this Annual Report on Form 10-K for the year ended December 31, 2012.
Employees
As of December 31, 2012, we had 8,212 employees. We believe our relations with employees are good. In certain
countries outside the United States, our relations with employees are governed by labor regulations that provide for specific
terms of employment between our company and our employees.
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ITEM 1A. RISK FACTORS
Our operating results and financial condition have varied in the past and could in the future vary significantly depending
on a number of factors. From time to time, information provided by us or statements made by our employees contain “forward-
looking” information that involves risks and uncertainties. In particular, statements contained in this Annual Report on Form
10-K for the year ended December 31, 2012, and in the documents incorporated by reference into this Annual Report on Form
10-K for the year ended December 31, 2012, that are not historical facts, including, but not limited to, statements concerning
new products, product development and offerings of products and services, market positioning, distribution and sales channels,
our partners and other strategic or technology relationships, financial information and results of operations for future periods,
product and price competition, strategy and growth initiatives, seasonal factors, natural disasters, stock-based compensation,
licensing and subscription renewal programs, international operations and expansion, investment transactions and valuations of
investments and derivative instruments, reinvestment or repatriation of foreign earnings, fluctuations in foreign exchange rates,
tax matters, acquisitions, stock repurchases, changes in accounting rules or guidance, changes in domestic and foreign
economic conditions and credit markets, delays or reductions in technology purchases, liquidity, litigation matters, and
intellectual property matters constitute forward-looking statements and are made under the safe harbor provisions of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These statements are neither promises nor guarantees. Our actual results of operations and financial condition could vary
materially from those stated in any forward-looking statements. The following factors, among others, could cause actual results
to differ materially from those contained in forward-looking statements made in this Annual Report on Form 10-K for the year
ended December 31, 2012, in the documents incorporated by reference into this Annual Report on Form 10-K or presented
elsewhere by our management from time to time. Such factors, among others, could have a material adverse effect upon our
business, results of operations and financial condition. We caution readers not to place undue reliance on any forward-looking
statements, which only speak as of the date made. We undertake no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which such statement is made.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
Our business could be adversely impacted by conditions affecting the information technology market.
The demand for our products and services depends substantially upon the general demand for business-related computer
appliances and software, which fluctuates based on numerous factors, including capital spending levels, the spending levels and
growth of our current and prospective customers, and general economic conditions. Moreover, the purchase of our products is
often discretionary and may involve a significant commitment of capital and other resources. Future economic projections for
the information technology sector are uncertain as companies continue to reassess their spending for technology projects. If our
current and prospective customers engage in restructuring and other efforts to cut costs they may significantly reduce their
information technology expenditures. Fluctuations in the demand for our products and services could have a material adverse
effect on our business, results of operations and financial condition.
If we do not develop new products and services, integrate acquired products and services and enhance our existing products
and services, our business, results of operations and financial condition could be adversely affected.
The markets for our products and services are characterized by:
•
•
•
•
•
rapid technological change;
evolving industry standards;
fluctuations in customer demand;
changes in customer requirements; and
frequent new product and service introductions and enhancements.
Our future success depends on our ability to continually enhance our current products and services, integrate acquired
products and services, and develop and introduce new products and services that our customers choose to buy. The emerging
markets for our next generation of products and services have yet to be defined. If we are unable to keep pace with
technological developments, expectations of the emerging markets and customer demands by introducing new products and
services and enhancements, our business, results of operations and financial condition could be adversely affected. Our future
success could be hindered by:
•
•
•
delays in our introduction of new products and services;
delays in market acceptance of new products and services or new releases of our current products and services;
our failure to maintain relevance in the evolving marketplace; and
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•
our, or a competitor's, announcement of new product or service enhancements or technologies that could replace or
shorten the life cycle of our existing product and service offerings.
We believe the demand for technology has and will continue to shift from the types of products and services we and our
competitors have sold in the past to a new generation of products we now offer. We cannot guarantee that our Mobile and
Desktop, Networking and Cloud and Collaboration and Data products will achieve the broad market acceptance by our channel
and strategic partners, customers and prospective customers necessary to generate significant revenue in the future. In addition,
we cannot guarantee that we will be able to respond effectively to technological changes or new product announcements by
others. If we experience material delays or sales shortfalls with respect to our new products and services or new releases of our
current products and services, those delays or shortfalls could have a material adverse effect on our business, results of
operations and financial condition.
In order to be successful, we must attract, engage, retain and integrate key employees, and failure to do so could have an
adverse effect on our ability to manage our business.
Our success depends, in large part, on our ability to attract, engage, retain, and integrate qualified executives and other
key employees throughout all areas of our business. Identifying, developing internally or hiring externally, training and
retaining highly-skilled managerial, technical, sales and services, finance and marketing personnel are critical to our future, and
competition for experienced employees can be intense. In order to attract and retain executives and other key employees in a
competitive marketplace, we must provide a competitive compensation package, including cash- and equity-based
compensation. If we do not obtain the stockholder approval needed to continue granting equity compensation in a competitive
manner, our ability to attract, retain, and motivate executives and key employees could be weakened. Failure to successfully
hire executives and key employees or the loss of any executives and key employees could have a significant impact on our
operations. Further, changes in our management team may be disruptive to our business, and any failure to successfully
integrate key new hires or promoted employees could adversely affect our business and results of operations.
Adverse changes in general global economic conditions could adversely affect our operating results.
As a globally operated company, we are subject to the risks arising from adverse changes in global economic and market
conditions. The worldwide economy underwent unprecedented turmoil in the past four years and continues to experience stock
market volatility, difficulties in the financial services sector, financial instability related to the sovereign debt situation in
Europe, reduced corporate profits and capital spending, and economic uncertainties. Although some of these conditions appear
to be abating, there are a number of mixed indicators, the severity and length of time these economic and market conditions
may persist is unknown, and the rate and pace of recovery in individual economies is also uncertain. The continuing uncertainty
about future global economic conditions could negatively impact our current and prospective customers and result in delays or
reductions in technology purchases. As a result, we could experience fewer orders, longer sales cycles, slower adoption of new
technologies and increased price competition, any of which could materially and adversely affect our business, results of
operations and financial condition. Adverse economic conditions also may negatively impact our ability to obtain payment for
outstanding debts owed to us by our customers or other parties with whom we do business.
Our Desktop Virtualization products are an alternative to the traditional way of managing desktops, and the growing market
for this line of products and services remains uncertain and may result in slower revenue growth than we have historically
experienced.
Our Desktop Virtualization products are based on an alternative technology platform, the success of which will depend on
organizations and customers perceiving technological and operational benefits and cost savings associated with adopting
desktop virtualization solutions. Although we have experienced success with this platform, the market for our Desktop
Virtualization products remains uncertain because customers may experience challenges in implementing desktop virtualization
as they may create complex deployments. In addition, our primary competition in desktop virtualization is the existing IT
practice of managing physical desktops as devices, and the success of our Desktop Virtualization products will depend on
information technology executives' continuing to rethink how desktops can be delivered more effectively and efficiently. To the
extent that there is slower adoption of desktop virtualization solutions, the revenue growth associated with our Desktop
Virtualization products may be slower than we have historically experienced, which could adversely affect our business, results
of operations and financial condition.
We anticipate that sales of our Desktop Virtualization products and related enhancements and upgrades will constitute a
majority of our revenue for the foreseeable future. Declines and variability in demand for our Desktop Virtualization products
could occur as a result of:
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termination of our product offerings and enhancements;
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potential market saturation;
technological change;
general economic conditions;
complexities and cost in implementation;
failure to deliver satisfactory technical support;
dissatisfied customers; or
lack of success of entities with which we have a technology relationship.
In addition, there continues to be an increase to the number of alternatives to Windows operating system powered
desktops, in particular mobile devices such as smartphones and tablet computers. Users may increasingly turn to these devices
to perform functions that would have been traditionally performed by desktops and laptops, which in turn may shrink the
market for our Desktop Virtualization products.
If our customers do not continue to purchase our Desktop Virtualization products as a result of these or other factors, our
revenue would decrease and our results of operations and financial condition would be adversely affected. In addition,
modification or termination of certain of our Desktop Virtualization products may cause variability in our revenue and make it
difficult to predict our revenue growth and trends in our Desktop Virtualization products as our customers adjust their
purchasing decisions in response to such events.
We face intense competition, which could result in customer loss, fewer customer orders and reduced revenues and margins.
We sell our products and services in intensely competitive markets. Some of our competitors and potential competitors
have significantly greater financial, technical, sales and marketing and other resources than we do. For example, our ability to
market our Mobile and Desktop products and other future product offerings and upgrades, could be affected by a competitor's
packaging, licensing and pricing scheme for client devices, servers and applications. Further, the announcement of the release,
and the actual release, of new 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 and service offerings. In addition,
alternatives for our Mobile and Desktop and Networking and Cloud products directly and indirectly compete with our current
product lines and services. Existing or new products and services that provide alternatives to our products and services could
materially impact our ability to compete in these markets. As the markets for our products and services, especially those
products in early stages of development, continue to develop, additional companies, including companies with significant
market presence in the computer hardware, software, cloud, mobile and related industries, could enter the markets in which we
compete and further intensify competition. In addition, we believe price competition could become a more significant
competitive factor in the future. As a result, we may not be able to maintain our historic prices and margins, which could
adversely affect our business, results of operations and financial condition.
Industry consolidation may result in increased competition.
Some of our competitors have made acquisitions or entered into partnerships or other strategic relationships to offer a
more comprehensive solution than they had previously offered. Additionally, as IT companies attempt to strengthen or maintain
their market positions in the evolving desktop and application virtualization, collaboration and data sharing, mobility, cloud
networking and cloud platform markets, these companies continue to seek to deliver comprehensive IT solutions to end users
and combine enterprise-level hardware and software solutions that may compete with our virtualization, mobility and
collaboration and data sharing solutions. These consolidators or potential consolidators may have significantly greater financial,
technical and other resources than we do and may be better positioned to acquire and offer complementary products and
services. The companies resulting from these possible combinations may create more compelling product and service offerings
and be able to offer greater pricing flexibility or sales and marketing support for such offerings than we can. These heightened
competitive pressures could result in a loss of customers or a reduction in our revenues or revenue growth rates, all of which
could adversely affect our business, results of operations and financial condition.
Actual or perceived security vulnerabilities in our products and services or cyberattacks on our networks could have a
material adverse impact on our business and results of operations.
Use of our products and services may involve the transmission and/or storage of data, including in certain instances
customers' business and personally identifiable information. Thus, maintaining the security of products, computers, computer
networks and data storage resources is a critical issue for us and our customers, as security breaches could result in product or
service vulnerabilities and loss of and/or unauthorized access to confidential information. We devote significant resources to
address security vulnerabilities in our products and services through engineering more secure products and services, enhancing
security and reliability features in our products and services, deploying security updates to address security vulnerabilities and
seeking to respond to known security incidents in sufficient time to minimize any potential adverse impact. Experienced
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hackers, cybercriminals and perpetrators of advanced persistent threats may be able to penetrate our network security and
misappropriate or compromise our confidential information or that of third parties, create system disruptions, product or service
vulnerabilities or cause shutdowns. These perpetrators of cyberattacks also may be able to develop and deploy viruses, worms,
malware and other malicious software programs that attack our products and services, our networks or otherwise exploit any
security vulnerabilities of our products, services and networks. However, because techniques used to obtain unauthorized
access to or sabotage systems change frequently and generally are not recognized until long after being launched against a
target, we may be unable to anticipate these techniques or to implement adequate preventative measures. A breach of our
security measures as a result of third-party action, malware, employee error, malfeasance or otherwise could result in:
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harm to our reputation or brand, which could lead some customers to seek to cancel subscriptions, stop using certain
of our products or services, reduce or delay future purchases of our products or services, or use competing products
or services;
individual and/or class action lawsuits, which could result in financial judgments against us and which would cause
us to incur legal fees and costs;
state or federal enforcement action, which could result in fines and/or penalties and which would cause us to incur
legal fees and costs; and/or
additional costs associated with responding to the cyberattack, such as the costs of providing individuals and/or data
owners with notice of the breach, legal fees, the costs of any additional fraud detection activities required by credit
card associations, and costs incurred by credit card issuers associated with the compromise and additional
monitoring of systems for further fraudulent activity.
Any of these actions could materially adversely impact our business and results of operations.
Regulation of the Web and telecommunications, privacy and data security may adversely affect sales of our Collaboration
and Data products and result in increased compliance costs.
As Web commerce continues to evolve, increasing regulation by federal, state or foreign agencies and industry groups
becomes more likely. For example, we believe increased regulation is likely with respect to the solicitation, collection,
processing or use of personal, financial and consumer information as regulatory authorities around the world are considering a
number of legislative and regulatory proposals concerning data protection, privacy and data security. In addition, the
interpretation and application of consumer and data protection laws and industry standards in the United States, Europe and
elsewhere are often uncertain and in flux. The application of existing laws to cloud-based solutions is particularly uncertain and
cloud-based solutions may be subject to further regulation, the impact of which cannot be fully understood at this time.
Moreover, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data and
privacy practices. If so, in addition to the possibility of fines, this could result in an order requiring that we change our data and
privacy practices, which could have an adverse effect on our business and results of operations. Complying with these various
laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our
business. Also, any new regulation, or interpretation of existing regulation, imposing greater fees or taxes on Web-based
services, such as collaboration and data sharing services and audio services, or restricting information exchange over the Web,
could result in a decline in the use and adversely affect sales of our Collaboration and Data products and our results of
operations.
Our Data Sharing products may involve the storage and transmission of protected health information, or PHI, that is
subject to the Health Insurance Portability and Accountability Act, or HIPAA. HIPAA, amended by the Health Information
Technology for Economic and Clinical Health Act, or the HITECH ACT, has significantly increased the civil money penalties
for violations of patient privacy rights protected under HIPAA. As a result of the HITECH ACT, business associates who have
access to PHI provided by hospitals, healthcare providers, health insurance companies and other covered entities are now
directly subject to HIPAA, including the new enforcement scheme and inspection requirements. We are required to comply
with HIPAA's stringent data security requirement and we may be liable for sanctions and penalties for any failure to so comply.
Furthermore, we may be required to incur additional expenses in order to comply with the HITECH Act and any further
amendments to and/or modifications of these requirements.
In addition, the establishment and operation of Citrix Communications, LLC, our competitive local exchange and
interexchange carrier, subjects us to risks associated with owning and operating a federally regulated telecommunications
entity. In 2012, in an effort to increase the user audio quality experience of our Collaboration products, we registered Citrix
Communications which allows us to control the audio function of our Collaboration products and competes with established
local telephone companies by providing its own network and switching. We can also route telecommunications traffic to the
most cost effective data centers resulting in cost savings. Our failure to comply with applicable law, regulations or reporting
requirements could result in monetary penalties or revocations of our authority to provide telephone services. Changes in
federal or state regulations or interpretations of FCC orders could result in an increase to our compliance costs, have an adverse
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effect on our cost structure or negatively impact the right to use access circuits currently available to us. This could also result
in a decline in customer use and adversely affect sales of our Collaboration products and our results of operations.
Our products could contain errors that could delay the release of new products or that may not be detected until after our
products are shipped.
Despite significant testing by us and by current and potential customers, our products, especially new products or releases
or acquired products, 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 affect
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, which may have a material adverse effect on our business, financial condition and results of
operations.
We may experience outages, data loss and service disruptions of our Collaboration and Data products and Networking and
Cloud products, which could significantly and adversely affect our financial condition and operating results.
The increasing user traffic and complexity of our Collaboration and Sharing products and Networking and Cloud products
demands more computing power. We have spent and expect to continue to spend substantial amounts to adequately resource
our Collaboration and Data products and Networking and Cloud products and to upgrade our technology and network
infrastructure to handle the increased traffic of our collaboration and data products. Maintaining and expanding the capacity
and geographic footprint of our infrastructure is expensive and complex. Inefficiencies or operational failures, including
temporary service outages and temporary or permanent loss of customer data, could diminish the perceived quality and
reliability of our services, and result in liability claims by customers and other third parties, damage to our reputation and loss
of current and potential customers, any of which could materially and adversely affect our financial condition and results of
operations.
Our long sales cycle for Desktop Virtualization and Bytemobile Smart Capacity products could cause significant variability
in our revenue and operating results for any particular period.
Generally, a substantial portion of our large and medium-sized customers implement our Desktop Virtualization products
on a departmental or enterprise-wide basis. We have a long sales cycle for these departmental or enterprise-wide sales because:
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our sales force generally needs to explain and demonstrate the benefits of a large-scale deployment of our product
to potential and existing customers prior to sale;
our service personnel typically spend a significant amount of time assisting potential customers in their testing and
evaluation of our products and services;
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.
Our long sales cycle for these products makes it difficult to predict when these sales will occur, and we may not be able
to sustain these sales on a predictable basis. In addition, the long sales cycle for these products makes it difficult to predict the
quarter in which sales will occur. Delays in sales could cause significant variability in our revenue and operating results for any
particular period, and large projects with significant IT components may fail to meet our customers' business requirements or
be canceled before delivery, which likewise could adversely affect our revenue and operating results for any particular period.
Similarly, our Bytemobile Smart Capacity products have a long and unpredictable sales cycle, and the timing of the
related revenue is difficult to predict. Because our sales of Bytemobile Smart Capacity products are focused on the
telecommunications market, we are subject to lengthy internal budgeting, approval and competitive evaluation processes that
such customers generally require.
In addition, our business is subject to seasonal fluctuations and are generally highest in our fourth fiscal quarter which we
believe is due to the lapse of customers' fiscal year budgets and an increase in amounts paid pursuant to our sales compensation
plans due to compensation plan accelerators that are often triggered in the fourth quarter. We believe that these seasonal factors
are common within our industry. In addition, our European operations generally generate lower revenues in the summer months
because of the generally reduced economic activity in Europe during the summer.
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Our success depends on our ability to attract and retain and further access large enterprise customers.
We must retain and continue to expand our ability to reach and access large enterprise customers by adding effective
value-added distributors, or VADs, system integrators, or SIs and expanding our direct sales teams and consulting services. Our
inability to attract and retain large enterprise customers could have a material adverse effect on our business, results of
operations and financial condition. Large enterprise customers usually request special pricing and purchase of multiple years of
subscription and maintenance up-front and generally have longer sales cycles, which could negatively impact our revenues. By
allowing these customers to purchase multiple years of subscription or maintenance up-front and by granting special pricing,
such as bundled pricing or discounts, to these large customers, we may have to defer recognition of some or all of the revenue
from such sales. This deferral could reduce our revenues and operating profits for a given reporting period. Additionally, as we
attempt to attract and penetrate large enterprise customers, we may need to invest in resources to coordinate among channel
partners and internal sales, engineering and consulting resources and increase corporate branding and marketing activities,
which could increase our operating expenses. These efforts may not proportionally increase our operating revenues and could
reduce our profits.
Changes to our licensing or subscription renewal programs, or bundling of our products, could negatively impact the timing
of our recognition of revenue.
We continually re-evaluate our licensing programs and subscription renewal programs, including specific license models,
delivery methods, and terms and conditions, to market our current and future products and services. We could implement new
licensing programs and subscription renewal programs, including promotional trade-up programs or offering specified
enhancements to our current and future product and service lines. Such changes could result in deferring revenue recognition
until the specified enhancement is delivered or at the end of the contract term as opposed to upon the initial shipment or
licensing of our software product. We could implement different licensing models in certain circumstances, for which we would
recognize licensing fees over a longer period, including offering additional products in a SaaS model. Changes to our licensing
programs and subscription renewal programs, including the timing of the release of enhancements, upgrades, maintenance
releases, the term of the contract, discounts, promotions and other factors, could impact the timing of the recognition of revenue
for our products, related enhancements and services and could adversely affect our operating results and financial condition.
Further, we may be required to defer the recognition of revenue that we receive from the sale of certain bundled products,
if we have not established vendor specific objective evidence, or VSOE, for the undelivered elements in the arrangement in
accordance with generally accepted accounting principles in the United States, or GAAP. A delay in the recognition of revenue
from sales of these bundled products may cause fluctuations in our quarterly financial results and may adversely affect our
operating margins. Similarly, companies that we acquire may operate with different cost and margin structures, which could
further cause fluctuations in our operating results and adversely affect our operating margins. Moreover, if our quarterly
financial results or our predictions of future financial results fail to meet the expectations of securities analysts and investors,
our stock price could be negatively affected.
Sales and renewals of our license updates and maintenance products constitute a large portion of our deferred revenue.
We anticipate that sales and renewals of our license updates and maintenance products will continue to constitute a
substantial portion of our deferred revenue. Our ability to continue to generate both recognized and deferred revenue from our
license updates and maintenance products will depend on our customers continuing to perceive value in automatic delivery of
our software upgrades and enhancements. A decrease in demand for our license updates and maintenance products could occur
as a result of a decrease in demand for our Mobile and Desktop products and our Networking and Cloud products. If our
customers do not continue to purchase our license updates and maintenance products, our deferred revenue would decrease
significantly and our results of operations and financial condition would be adversely affected.
As we expand our international footprint, we could become subject to additional risks that could harm our business.
We conduct significant sales and customer support, development and engineering operations in countries outside of the
United States. During the year ended December 31, 2012, we derived approximately 45.3% of our revenues from sales outside
the United States. Our continued growth and profitability could require us to further expand our international operations. To
successfully maintain and expand international sales, we may need to establish additional foreign operations, hire additional
personnel and recruit additional international resellers. In addition, there is significant competition for entry into high growth
markets where we may seek to expand, such as China and Eastern Europe. Our international operations are subject to a variety
of risks, which could cause fluctuations in the results of our international operations. These risks include:
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compliance with foreign regulatory and market requirements;
variability of foreign economic, political and labor conditions;
changing restrictions imposed by regulatory requirements, tariffs or other trade barriers or by U.S. export laws;
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longer accounts receivable payment cycles;
potentially adverse tax consequences;
difficulties in protecting intellectual property;
burdens of complying with a wide variety of foreign laws; and
as we generate cash flow in non-U.S. jurisdictions, if required, we may experience difficulty transferring such
funds to the U.S. in a tax efficient manner.
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 affect our business or results of operations.
Our business could be harmed if we do not effectively manage our direct sales force alone and in combination with our
distribution channels.
We utilize a direct sales force, as well as a network of distribution channels, to sell our products and services. We may
experience difficulty in hiring, retaining and motivating our direct sales force team, and sales representatives will require
substantial amounts of training, including regular updates to cover new and upgraded products and services, particularly in
connection with our acquisitions. Moreover, our recent hires and sales personnel added through our recent acquisition activity
may not become as productive as we would like, as in most cases it takes a significant period of time before they achieve full
productivity.
Successfully managing the interaction of our direct sales force and channel partners to reach various potential customers
for our products and services is a complex process. If we are unsuccessful in balancing the growth and expansion of our various
sales channels, growth in one area might harm our relationships or efforts in another channel. In addition, each sales channel
has distinct risks and costs, and therefore, our failure to implement the most advantageous balance in the sales model for our
products and services could materially and adversely affect our revenue and profitability.
We rely on indirect distribution channels and major distributors that we do not control.
We rely significantly on independent distributors and resellers to market and distribute our products and appliances. For
instance, one distributor, Ingram Micro, accounted for 16% of our net revenues in 2012. Our distributor arrangements with
Ingram Micro consist of several non-exclusive, independently negotiated agreements with our subsidiaries, each of which cover
different countries or regions. In addition, our reseller base is relatively concentrated. We maintain and periodically revise our
sales incentive programs for our independent distributors and resellers, and such program revisions may adversely impact our
results of operations. Our competitors may in some cases be effective in providing incentives to current or potential distributors
and resellers to favor their products or to prevent or reduce sales of our products. The loss of or reduction in sales to our
distributors or resellers could materially reduce our revenues. Further, we could maintain individually significant accounts
receivable balances with certain distributors. The financial condition of our distributors could deteriorate and distributors could
significantly delay or default on their payment obligations. Any significant delays, defaults or terminations could have a
material adverse effect on our business, results of operations and financial condition.
We plan to diversify our base of channel relationships by adding and training more channel members with abilities to
reach larger enterprise customers and to sell our newer products. We also plan to create relationships with new channel
partners, such as systems integrators and OEMs. In addition to this diversification of our base, we will need to maintain a
healthy mix of channel members who service smaller customers. We may 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.
Through our Citrix Partner Network and other programs, we are currently investing, and intend to continue to invest,
significant resources to develop these channels, which could reduce our profits.
For certain of our products we rely on third-party suppliers and contract manufacturers, making us vulnerable to supply
problems and price fluctuations.
We rely on a concentrated number of third-party suppliers, who provide hardware or hardware components for our
products, and contract manufacturers. For example, the production, final test, warehousing and shipping for our Networking
and Cloud products that contain a hardware component, are primarily performed by a third-party contract manufacturer. We do
not typically have long-term supply agreements with our suppliers; and, in most cases, we purchase the products and
components on an as-needed purchase order basis. While we have not, to date, experienced any material difficulties or delays in
the manufacture and assembly of our products, our suppliers may encounter problems during manufacturing due to a variety of
reasons, including failure to follow specific protocols and procedures, failure to comply with applicable regulations, or the need
to implement costly or time-consuming protocols to comply with applicable regulations (including regulations related to
conflict minerals), equipment malfunction, natural disasters and environmental factors, any of which could delay or impede
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their ability to meet our demand. Although we are seeking to diversity our relationships in the area, our reliance on these third-
party suppliers and contract manufacturers subjects us to risks that could harm our business, especially if these third-party
suppliers and contract manufacturers remain concentrated in number.
There may be delays associated with establishing additional or replacement suppliers, particularly for components that
are available only from limited sources. Any interruption or delay in the supply of products or components, or our inability to
obtain products or components from alternate sources at acceptable prices in a timely manner, could impair our ability to meet
the demand of our customers and adversely affect our business, financial condition or results of operations.
We are exposed to fluctuations in foreign currency exchange rates, which could adversely affect our future operating
results.
Our results of operations are subject to fluctuations in exchange rates, which could adversely affect our future revenue
and overall operating results. In order to minimize volatility in earnings associated with fluctuations in the value of foreign
currency relative to the U.S. dollar, we use financial instruments to hedge our exposure to foreign currencies as we deem
appropriate for a portion of our expenses, which are denominated in the local currency of our foreign subsidiaries. We generally
initiate our hedging of currency exchange risks one year in advance of anticipated foreign currency expenses for those
currencies to which we have the greatest exposure. When the dollar is weak, foreign currency denominated expenses will be
higher, and these higher expenses will be partially offset by the gains realized from our hedging contracts. If the dollar is
strong, foreign currency denominated expenses will be lower. These lower expenses will in turn be partially offset by the losses
incurred from our hedging contracts. There is a risk that there will be fluctuations in foreign currency exchange rates beyond
the one year timeframe for which we hedge our risk and there is no guarantee that we will accurately forecast the expenses we
are hedging. Changes in the value of foreign currencies relative to the value of the U.S. dollar could adversely affect future
revenue and operating results. In addition, as a result of entering into these contracts with counterparties who are unrelated to
us, the risk of a counterparty default exists in fulfilling the hedge contract. Should there be a counterparty default, we could be
unable to recover anticipated net gains from the transactions.
If we fail to effectively manage our growth, our future operating results could be adversely affected.
Historically, the scope of our operations, the number of our employees and the geographic area of our operations and our
revenue 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 significant strain on our managerial,
operational and financial resources as our future acquisition activities accelerate our business expansion. We need to continue
to implement and improve additional management and financial systems and controls. We may not be able to manage the
current scope of our operations or future growth effectively and still exploit market opportunities for our products and services
in a timely and cost-effective way and we may not meet our scalability expectations. Our future operating results could be
adversely affected if we are unable to manage our expanding product lines, our marketing and sales organizations and our client
support organization to the extent required for any increase in installations of our products.
If operating margins and gross margins decline, our future operating results could be adversely affected.
Our operating margins in our new initiatives may be lower than those we have achieved in our more mature products and
services markets, and our new initiatives may not generate sufficient revenue to recoup our investments in them. If we are not
able to recoup our investment by normalizing our margins or reducing our costs through integration of new initiatives it could
adversely affect our business, results of operations and financial condition.
If we do not generate sufficient cash flow from operations in the future, we may not be able to fund our product
development efforts and acquisitions or fulfill our future obligations.
Our ability to generate sufficient cash flow from operations to fund our operations and product development efforts,
including the payment of cash consideration in acquisitions and the payment of our other obligations, depends on a range of
economic, competitive and business factors, many of which are outside of our control. We cannot assure you that our business
will generate sufficient cash flow from operations, or that we will be able to liquidate our investments, repatriate cash and
investments held in our overseas subsidiaries, sell assets or raise equity or debt financings when needed or desirable. An
inability to fund our operations or fulfill outstanding obligations could have a material adverse effect on our business, financial
condition and results of operations. For further information, please refer to “Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital Resources.”
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RISKS RELATED TO ACQUISITIONS AND STRATEGIC RELATIONSHIPS
Acquisitions present many risks, and we may not realize the financial and strategic goals we anticipate at the time of an
acquisition.
Our growth is dependent upon market growth, our ability to enhance existing products and services, and our ability to
introduce new products and services on a timely basis. In recent years, we have addressed and intend to continue to address the
need to develop new products and services and enhance existing products and services through acquisitions of other companies,
product lines and/or technologies. However, acquisitions, including those of high-technology companies, are inherently risky.
We cannot provide any assurance that any of our acquisitions or future acquisitions will be successful in helping us reach our
financial and strategic goals. The risks we commonly encounter in undertaking, managing and integrating acquisitions are:
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an uncertain revenue and earnings stream from the acquired company, which could dilute our earnings;
difficulties and delays integrating the personnel, operations, technologies, products and systems of the acquired
companies;
undetected errors or unauthorized use of a third-party's code in products of the acquired companies;
our ongoing business may be disrupted and our management's attention may be diverted by acquisition, transition
or integration activities;
the need to implement controls, procedures and policies appropriate for a larger public company at companies that
prior to acquisition had lacked such controls, procedures and policies;
difficulties managing or integrating an acquired company's technologies or lines of business;
potential difficulties in completing projects associated with purchased in-process research and development;
entry into markets in which we have no or limited direct prior experience and where competitors have stronger
market positions and which are highly competitive;
the potential loss of key employees of the acquired company;
potential difficulties integrating the acquired products and services into our sales channel;
assuming pre-existing contractual relationships of an acquired company that we would not have otherwise entered
into, the termination or modification of which may be costly or disruptive to our business;
being subject to unfavorable revenue recognition or other accounting treatment as a result of an acquired company's
practices; and
intellectual property claims or disputes.
Our failure to manage growth effectively and successfully integrate acquired companies due to these or other factors
could have a material adverse effect on our business, results of operations and financial condition. Further, our 2013 operating
plan assumes a significant level of financial performance from our acquisitions that were completed during 2012 and if these
acquired companies or technologies do not perform as we expect, our operating results could be materially and adversely
affected.
In addition, we may not have the opportunity to make suitable acquisitions on favorable terms in the future, which could
negatively impact the growth of our business. We expect that other companies in our industry will compete with us to acquire
compatible businesses. This competition could increase prices for businesses and technologies that we would likely pursue, and
our competitors may have greater resources than we do to complete these acquisitions.
If we determine that any of our goodwill or intangible assets, including technology purchased in acquisitions, are impaired,
we would be required to take a charge to earnings, which could have a material adverse effect on our results of operations.
We have a significant amount of goodwill and other intangible assets, such as product related intangible assets, from our
acquisitions. We do not amortize goodwill and intangible assets that are deemed to have indefinite lives. However, we do
amortize certain product related technologies, trademarks, patents and other intangibles and we periodically evaluate them for
impairment. We review goodwill for impairment annually, or sooner if events or changes in circumstances indicate that the
carrying amount could exceed fair value, at the reporting unit level, which for us, also represents our operating segments. 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 affect our results of operations and financial condition. If we determine that any of the goodwill or other
intangible assets associated with our acquisitions is impaired, then we would be required to reduce the value of those assets or
to write them off completely by taking a charge to current earnings. If we are required to write down or write off all or a portion
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of those assets, or if financial analysts or investors believe we may need to take such action in the future, our stock price and
operating results could be materially and adversely affected.
Furthermore, impairment testing requires significant judgment, including the identification of reporting units based on
our internal reporting structure that reflects the way we manage our business and operations and to which our goodwill and
intangible assets would be assigned. In 2011, we early adopted authoritative guidance, which provides entities with an option to
perform a qualitative assessment to determine whether further quantitative impairment testing for goodwill is necessary where
we estimate future revenue, consider market factors and estimate our future cash flows. Significant judgments are required to
estimate the fair value of our goodwill and intangible assets, including estimating future cash flows, determining appropriate
discount rates, estimating the applicable tax rates, foreign exchange rates and interest rates, projecting the future industry trends
and market conditions, and making other assumptions. Although we believe the assumptions, judgments and estimates we have
made have been reasonable and appropriate, different assumptions, judgments and estimates, particularly when implementing
new assessment methodology such as we did in 2011, could materially affect our results of operations. Changes in these
estimates and assumptions, including changes in our reporting structure, could materially affect our determinations of fair
value.
Our inability to maintain or develop our strategic and technology relationships could adversely affect our business.
Our business depends on strategic and technology relationships. We cannot assure you that those relationships will
continue in the future. We rely on strategic or technology relationships with companies such as Microsoft, Intel, Cisco, Dell,
Hewlett-Packard Company and others. We depend on the entities with which we have strategic or 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 strategic and technology relationships or to develop additional
strategic and technology relationships. In addition, one of our strategic partners may decide to team with another company or
develop its own integrated solution that could compete with our products. If the companies with which we have strategic or
technology relationships are unable to incorporate our technology into their products or to market or sell those products, our
business, results of operations and financial condition could be materially adversely affected.
RISKS RELATED TO INTELLECTUAL PROPERTY AND BRAND RECOGNITION
Our efforts to protect our intellectual property may not be successful, which could materially and adversely affect our
business.
We rely primarily on a combination of copyright, trademark, patent and trade secret laws, confidentiality procedures and
contractual provisions to protect our source code and other intellectual property. The loss of any material trade secret,
trademark, tradename, patent or copyright could have a material adverse effect on our business. Despite our precautions, it
could be possible for unauthorized third parties to copy, disclose or reverse engineer certain portions of our products or to
otherwise obtain and use our proprietary source code, in which case we could potentially lose future trade secret protection for
that source code. If we cannot protect our proprietary source code against unauthorized copying, disclosure or use,
unauthorized third parties could develop products similar to or better than ours.
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 of protection 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 affected by differences in international law and the
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 significant portion of our sales from licensing our products
under “click-to-accept” license agreements that are not signed by licensees and electronic enterprise customer licensing
arrangements that are delivered electronically, all of which could be unenforceable under the laws of many foreign jurisdictions
in which we license our products.
Our products and services, including products obtained through acquisitions, could infringe third-party intellectual
property rights, which could result in material litigation costs.
We are increasingly subject to patent infringement claims and may in the future be subject to claims alleging the
unauthorized use of a third-party's code in our products. This may occur for a variety of reasons, including:
•
•
the expansion of our product lines, such as our Mobile and Desktop and Networking and Cloud products, and
related technical services and expansion of our Online Services division's Collaboration and Data products,
through product development and acquisitions;
an increase in patent infringement litigation commenced by non-practicing entities;
23
•
•
•
•
•
an increase in the number of competitors in our industry segments and the resulting increase in the number of
related products and services and the overlap in the functionality of those products and services;
an increase in the number of competitors in our industry segments and the resulting increase in the number of
related products and services and the overlap in the functionality of those products and services;
an increase in the risk that our competitors and third parties could use their own intellectual property rights to limit
our freedom to operate and exploit our products, or to otherwise block us from taking full advantage of our
markets;
our products and services may rely on the technology of others and, therefore, require us to obtain intellectual
property licenses from third parties in order for us to commercialize our products or services and we may not be
able to obtain or continue to obtain licenses from these third parties on reasonable terms; and
the unauthorized use of third-party code in our product development process.
Companies and inventors are more frequently seeking to patent software. As a result, we could receive more patent
infringement claims. Responding to any infringement claim, regardless of its validity or merit, could result in costly litigation.
Further, intellectual property litigation could compel us to do one or more of the following:
•
•
•
•
pay damages (including the potential for treble damages), license fees or royalties (including royalties for past
periods) to the party claiming infringement;
stop licensing products or providing services that use the challenged intellectual property;
obtain a license from the owner of the infringed intellectual property to sell or use the relevant technology, which
license may not be available on reasonable terms, or at all; or
redesign the challenged technology, which could be time consuming and costly, or not be accomplished.
If we were compelled to take any of these actions, our business, results of operations or financial condition may suffer.
Our use of “open source” software could negatively impact our ability to sell our products and subject us to possible
litigation.
The products or technologies acquired, licensed or developed by us may incorporate so-called “open source” software,
and we may incorporate open source software into other products in the future. Such open source software is generally licensed
by its authors or other third parties under open source licenses, including, for example, the GNU General Public License, the
GNU Lesser General Public License, “Apache-style” licenses, “Berkeley Software Distribution,” “BSD-style” licenses, and
other open source licenses. We monitor our use of open source software in an effort to avoid subjecting our products to
conditions we do not intend. Although we believe that we have complied with our obligations under the various applicable
licenses for open source software that we use such that we have not triggered any of these conditions, there is little or no legal
precedent governing the interpretation of many of the terms of these types of licenses. As a result, the potential impact of these
terms on our business may result in unanticipated obligations regarding our products and technologies, such as requirements
that we offer our products that use the open source software for no cost, that we make available source code for modifications
or derivative works we create based upon, incorporating or using the open source software, and/or that we license such
modifications or derivative works under the terms of the particular open source license.
If an author or other third party that distributes open source software were to allege that we had not complied with the
conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such
allegations. If our defenses were not successful, we could be subject to significant damages, enjoined from the distribution of
our products that contained open source software, and required to comply with the terms of the applicable license, which could
disrupt the distribution and sale of some of our products. In addition, if we combine our proprietary software with open source
software in an unintended manner, under some open source licenses we could be required to publicly release the source code of
our proprietary software.
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of
third-party commercial software, as open source licensors generally do not provide warranties or assurance of title or controls
on the origin of the software.
If open source software programmers, many of whom we do not employ, do not continue to develop and enhance the open
source technologies we utilize, we may be unable to develop Cloud Platform products, adequately enhance our existing
cloud products or meet customer requirements for innovation, quality and price of cloud products.
We rely to a significant degree on an informal community of independent open source software programmers to develop
and enhance the Xen hypervisor, which is the heart of the XenServer virtualization product. Similarly, a small community of
software developers are primarily responsible for the development and enhancement of the open source CloudStack platform. If
these programmers fail to adequately further develop and enhance our open source technologies, we would need to further
24
develop and enhance these technologies with our own resources. Additionally, the CloudStack IaaS software platform is still an
emerging technology, making it difficult for us to predict the level of its adoption in the market. In any event, our development
expenses could be increased and our product release and upgrade schedules could be delayed. Delays in developing,
completing or shipping new or enhanced products could result in delayed or reduced revenue for those products and could also
adversely affect customer acceptance of those offerings.
Our business depends on maintaining and protecting our strong collection of brands.
The Citrix product and service brands that we have developed has significantly contributed to the success of our business.
Maintaining and enhancing the Citrix product and service brands is critical to expanding our base of customers and partners.
We may be subject to reputational risks if others adopt similar marks in an effort to misappropriate and profit on our brand
name and do not provide the same level of quality as is delivered by our products and services. In order to maintain, enhance
and protect our brands, we may be required to make substantial investments that may not be successful. If we fail to maintain,
enhance and protect the Citrix brands, if we incur excessive expenses in this effort or if customers or potential customers are
confused by others' trademarks, our business, operating results, and financial condition may be materially and adversely
affected.
If we lose access to third-party licenses, releases of our products could be delayed.
We believe that we will continue to rely, in part, on third-party licenses to enhance and differentiate our products. Third-
party licensing arrangements are subject to a number of risks and uncertainties, including:
•
•
•
•
•
undetected errors or unauthorized use of another person's code in the third party's software;
disagreement over the scope of the license and other key terms, such as royalties payable;
infringement actions brought by third-party licensees;
that third parties will create solutions that directly compete with our products; and
termination or expiration of the license.
If we lose or are unable to maintain any of these third-party licenses or are required to modify software obtained under
third-party licenses, it could delay the release of our products. Any delays could have a material adverse effect on our business,
results of operations and financial condition.
RISKS RELATED TO OUR COMMON STOCK AND EXTERNAL FACTORS
Natural disasters or other unanticipated catastrophes that result in a disruption of our operations could negatively impact
our results of operations.
Our worldwide operations are dependent on our network infrastructure, internal technology systems and website.
Significant portions of our computer equipment, intellectual property resources and personnel, including critical resources
dedicated to research and development and administrative support functions are presently located at our corporate headquarters
in Fort Lauderdale, Florida, an area of the country that is particularly prone to hurricanes, and at our various locations in
California, an area of the country that is particularly prone to earthquakes. We also have operations in various domestic and
international locations that expose us to additional diverse risks. The occurrence of natural disasters, such as hurricanes, floods
or earthquakes, or other unanticipated catastrophes, such as telecommunications failures, cyber-attacks, fires or terrorist attacks,
at any of the locations in which we or our key partners, suppliers and customers do business, could cause interruptions in our
operations. For example, hurricanes have passed through southern Florida causing extensive damage to the region. In addition,
even in the absence of direct damage to our operations, large disasters, terrorist attacks or other casualty events could have a
significant impact on our partners', suppliers' and customers' businesses, which in turn could result in a negative impact on our
results of operations. Extensive or multiple disruptions in our operations, or our partners', suppliers' or customers' businesses,
due to natural disasters or other unanticipated catastrophes could have a material adverse effect on our results of operations.
Our investment portfolio has been subject to impairment charges due to adverse capital market conditions, financing
challenges encountered by private companies we have invested in and may be further adversely impacted by volatility in the
capital markets.
Our investment portfolio as of December 31, 2012 primarily consisted of agency securities, corporate securities,
government securities, commercial paper and municipal securities. As a result of adverse financial market conditions in recent
years, investments in some financial instruments posed risks arising from liquidity and credit concerns. Future adverse market
conditions and volatility could create similar risks for investments in financial instruments. Although we follow an established
investment policy and seek to minimize the credit risk associated with investments by investing primarily in investment grade,
25
highly liquid securities and by limiting exposure to any one issuer depending on credit quality, we cannot give any assurances
that the assets in our investment portfolio will not lose value, become impaired, or suffer from illiquidity.
Future market conditions and volatility could require us to record impairment charges for other-than-temporary declines
in fair market value in our available-for-sale investments, which could adversely affect our results of operations. Moreover,
fluctuations in economic and market conditions could adversely affect the market value of our investments, and we could lose
some of the principal value of our investment portfolio. A total loss of an investment, dependent on an individual security's par
value, or a significant decline in the value of our investment portfolio could adversely affect our financial condition.
In addition, we invest in private companies to further our strategic objectives and support our key business initiatives.
Such investments include equity or debt instruments, and many of these instruments are non-marketable at the time of our
initial investment. The companies in which we invest may fail or lose value because they may not be able to secure additional
funding, obtain favorable investment terms for future financings, or participate in liquidity events such as public offerings,
mergers, and private sales. If any of these private companies fail or lose value, we could be required to impair or write-off all or
part of our investment in that company.
Unanticipated changes in our tax rates or our exposure to additional income tax liabilities could affect our operating results
and financial condition.
Our future effective tax rates could be favorably or unfavorably affected by unanticipated changes in the valuation of our
deferred tax assets and liabilities, the geographic mix of our revenue, or by changes in tax laws or their interpretation.
Significant judgment is required in determining our worldwide provision for income taxes. In addition, we are subject to the
continuous examination of our income tax returns by tax authorities, including the Internal Revenue Service, or the IRS. We
regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our
provision for income taxes. There can be no assurance, however, that the outcomes from these continuous examinations will
not have an adverse effect on our operating results and financial condition. Additionally, due to the evolving nature of tax rules
combined with the large number of jurisdictions in which we operate, it is possible that our estimates of our tax liability and the
realizability of our deferred tax assets could change in the future, which may result in additional tax liabilities and adversely
affect our results of operations, financial condition and cash flows.
Our stock price could be volatile, particularly during times of economic uncertainty and volatility in domestic and
international stock markets, and you could lose the value of your investment.
Our stock price has been volatile and has fluctuated significantly in the past. The trading price of our stock is likely to
continue to be volatile and subject to fluctuations in the future. Your investment in our stock could lose some or all of its value.
Some of the factors that could significantly affect the market price of our stock include:
•
•
•
•
actual or anticipated variations in operating and financial results;
analyst reports or recommendations;
rumors, announcements, or press articles regarding our or our competitors' operations, management, organization,
financial condition, or financial statements; and
other events or factors, many of which are beyond our control.
The stock market in general, The NASDAQ Global Select Market, and the market for software companies and
technology companies in particular, have experienced extreme price and volume fluctuations. These fluctuations have often
been unrelated or disproportionate to operating performance. These forces reached unprecedented levels in the second half of
2008, resulting in the bankruptcy or acquisition of, or government assistance to, several major domestic and international
financial institutions and a material decline in economic conditions. In particular, the U.S. equity markets experienced
significant price and volume fluctuations that have affected the market prices of equity securities of many technology
companies, continuing through 2012. During 2012, our stock price has experienced volatility, with the closing price of our
common stock on The NASDAQ Global Select Market having ranged from $57.34 on November 14, 2012 to $87.30 on May 1,
2012. These broad market and industry factors could materially and adversely affect the market price of our stock, regardless of
our actual operating performance.
Changes or modifications in financial accounting standards may have a material adverse impact on our reported results of
operations or financial condition.
From time to time, the Financial Accounting Standards Board, or FASB, either alone or jointly with the International
Accounting Standards Board, or IASB, promulgates new accounting principles that could have a material adverse impact on
our reported results of operations or financial condition. For example, FASB is currently working together with the IASB to
26
converge certain accounting principles and facilitate more comparable financial reporting between companies who are required
to follow Generally Accepted Accounting Principles, or GAAP, and those who are required to follow International Financial
Reporting Standards, or IFRS. These efforts may result in different accounting principles under GAAP, which may have a
material impact on the way in which we report financial results in areas including, among others, revenue recognition, lease
accounting, and financial statement presentation. We expect the SEC to make a determination in the future regarding the
incorporation of IFRS into the financial reporting system for U.S. companies. A change in accounting principles from GAAP to
IFRS would be costly to implement and may have a material impact on our financial statements and may retroactively
adversely affect previously reported transactions.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We have received no written comments regarding our periodic or current reports from the staff of the Securities and
Exchange Commission that were issued 180 days or more preceding the end of our 2012 fiscal year that remain unresolved.
ITEM 2. PROPERTIES
We lease and sublease office space in the Americas, which is comprised of the United States, Canada and Latin America,
EMEA, which is comprised of Europe, the Middle East and Africa, and Asia-Pacific. The following table presents the location
and square footage of our leased office space by reporting segment as of December 31, 2012:
Americas
EMEA
Asia-Pacific
Total
Enterprise division
Online Services
division
(square footage)
829,271
369,666
484,678
1,683,615
407,367
84,969
2,724
495,060
In addition, we own land and buildings in Fort Lauderdale, Florida with approximately 313,385 square feet of office
space used for our corporate headquarters and 42,000 square feet of office space in EMEA related to our Enterprise division.
We believe that our existing facilities are adequate for our current needs. As additional space is needed in the future, we
believe that suitable space will be available in the required locations on commercially reasonable terms.
27
ITEM 3. LEGAL PROCEEDINGS
Due to the nature of our business, we are subject to patent infringement claims, including current suits against us or one
or more of our wholly-owned subsidiaries alleging infringement by various Citrix products and services. We believe that we
have meritorious defenses to the allegations made in these pending suits and intend to vigorously defend these lawsuits;
however, we are unable currently to determine the ultimate outcome of these or similar matters or the potential exposure to
loss, if any.
In addition, we are a defendant in various litigation matters generally arising out of the normal course of business.
Although it is difficult to predict the ultimate outcomes of these cases, we believe that the ultimate outcomes will not materially
affect our business, financial position, results of operations or cash flows.
On April 11, 2008, SSL Services, LLC, or SSL Services, filed a suit for patent infringement against us in the United States
District Court for the Eastern District of Texas, or the SSL Matter. SSL Services alleged that we infringed U.S. Patent Nos.
6,061,796, or the '796 patent, and 6,158,011, or the '011 patent. We denied infringement and asserted that the patents-in-suit
were invalid. A jury trial was held on SSL Services' claims, and on June 18, 2012, the jury found that we did not infringe the
'796 patent and found that we willfully infringe the '011 patent through the sale and use of certain products. The jury awarded
SSL Services $10.0 million. On September 17, 2012, the court issued a final judgment confirming the jury award of $10.0
million in damages and added $5.0 million in enhanced damages and approximately $5.0 million in prejudgment interest on the
damages award. We do not believe that any of our products infringe the '011 patent, and we believe that the '011 patent is
invalid. Accordingly, no accrual has been made related to this matter. We intend to vigorously appeal the district court's
judgment on the '011 patent.
In addition to the SSL Matter and due to the nature of our business, we are subject to patent infringement claims,
including current suits against it or one or more of its wholly-owned subsidiaries alleging infringement by various Company
products and services, or the Other Matters. We believe that we have meritorious defenses to the allegations made in our
pending cases and intend to vigorously defend these lawsuits; however, we are unable currently to determine the ultimate
outcome of these or similar matters. In addition, we are a defendant in various litigation matters generally arising out of the
normal course of business. Although it is difficult to predict the ultimate outcomes of these cases, we believe that it is not
reasonably possible that the ultimate outcomes will materially and adversely affect our business, financial position, results of
operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
28
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Price Range of Common Stock and Dividend Policy
Our common stock is currently traded on The NASDAQ Global Select Market under the symbol CTXS. The following
table sets forth the high and low sales prices for our common stock as reported on The NASDAQ Global Select Market for the
periods indicated, as adjusted to the nearest cent.
Year Ended December 31, 2012:
Fourth quarter
Third quarter
Second quarter
First quarter
Year Ended December 31, 2011:
Fourth quarter
Third quarter
Second quarter
First quarter
High
Low
77.82
85.65
87.99
80.70
78.00
84.00
88.49
73.99
$
$
$
$
$
$
$
$
56.57
68.17
69.89
60.15
51.60
50.21
71.43
61.24
$
$
$
$
$
$
$
$
On February 15, 2013, the last reported sale price of our common stock on The NASDAQ Global Select Market was
$72.62 per share. As of February 15, 2013, there were approximately 724 holders of record of our common stock.
We currently intend to retain any earnings for use in our business, for investment in acquisitions and to repurchase shares
of our common stock. We have not paid any cash dividends on our capital stock in the last two years and do not currently
anticipate paying any cash dividends on our capital stock in the foreseeable future.
Issuer Purchases of Equity Securities
Our Board of Directors has authorized an ongoing stock repurchase program with a total repurchase authority granted to
us of $3.4 billion. We may use the approved dollar authority to repurchase stock at any time until the approved amount is
exhausted. The objective of the stock repurchase program is to improve stockholders’ returns. At December 31, 2012,
approximately $335.6 million was available to repurchase common stock pursuant to the stock repurchase program. All shares
repurchased are recorded as treasury stock. The following table shows the monthly activity related to our stock repurchase
program for the quarter ended December 31, 2012.
October 1, 2012 through October 31, 2012
November 1, 2012 through November 30, 2012
December 1, 2012 through December 31, 2012
Total
Total Number
of Shares
Purchased (1)
Average
Price Paid
per Share
368,171
456,346
406,641
1,231,158
$
$
$
$
67.80
60.87
63.85
63.93
Total Number
of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs
Approximate dollar
value of Shares that
may yet be
Purchased under the
Plans or Programs
(in thousands)(2)
359,600
439,100
390,317
1,189,017
$
$
$
$
387,299
360,567
335,610
335,610
(1) Represents shares acquired in open market purchases and 42,141 shares withheld from stock units that vested in the
fourth quarter of 2012 to satisfy minimum tax withholding obligations that arose on the vesting of stock units. We
expended approximately $76.1 million during the quarter ended December 31, 2012 for repurchases of our common
stock. For more information see Note 8 to our condensed consolidated financial statements.
(2) Shares withheld from stock units that vested to satisfy minimum tax withholding obligations that arose on the vesting
of stock units do not deplete the dollar amount available for purchases under the repurchase program.
29
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data is derived from our consolidated financial statements. This data should
be read in conjunction with the consolidated financial statements and notes thereto, and with Item 7, Management’s Discussion
and Analysis of Financial Condition and Results of Operations.
Consolidated Statements of Income Data:
Net revenues
Cost of net revenues(a)(c)
Gross margin
Operating expenses(c)
Income from operations
Interest income
Other income (expense), net
Income before income taxes
Income taxes
Consolidated net income
Less: Net loss attributable to non-controlling
interest
Net income attributable to Citrix Systems, Inc.
Net income per share attributable to Citrix
Systems, Inc. stockholders — diluted(b)
Consolidated Balance Sheet Data:
Total assets
Total equity
Year Ended December 31,
2012
2011
2010
2009
2008
(In thousands, except per share data)
$ 2,586,123
404,137
2,181,986
1,791,208
390,778
10,152
9,299
410,229
57,682
352,547
$ 2,206,392
293,599
1,912,793
1,495,827
416,966
13,819
(288)
430,497
74,867
355,630
$ 1,874,662
232,266
1,642,396
1,321,680
320,716
14,577
(1,473)
333,820
57,379
276,441
$ 1,614,088
195,197
1,418,891
1,240,214
178,677
14,683
532
193,892
2,875
191,017
$ 1,583,354
181,635
1,401,719
1,231,718
170,001
31,506
(4,584)
196,923
18,647
178,276
—
352,547
1.86
$
$
$
$
692
356,322
1.87
$
$
624
277,065
1.46
$
$
—
191,017
1.03
$
$
—
178,276
0.96
December 31,
2012
2011
2010
2009
2008
(In thousands)
$ 4,796,402
3,121,777
$ 4,099,541
2,730,490
$ 3,703,600
2,560,588
$ 3,091,147
2,188,507
$ 2,694,306
1,917,865
(a)
(b)
(c)
Cost of net revenues includes amortization of product related intangible assets of $80.0 million, $54.7 million, $50.5 million, $47.9
million and $48.0 million in 2012, 2011, 2010, 2009 and 2008, respectively.
Our diluted weighted–average shares outstanding primarily fluctuates based on the level of shares issued under our stock-based
compensation programs, stock repurchases made under our stock repurchase program and shares issued in connection with our
acquisitions. See Notes 3, 7 and 8 to our consolidated financial statements included in this Annual Report on Form 10-K for the
year ended December 31, 2012.
As discussed in Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended
December 31, 2012, we revised our methodology for allocating certain information technology, or IT, support costs to more closely
align these costs to the employees directly utilizing the related assets and services and to reflect how management assesses the cost
of headcount in 2012. As a result, certain IT support costs have been reclassified from operating expenses to cost of goods sold. All
periods above has been reclassified to conform to current year presentation.
30
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
Citrix is a cloud computing company that enables mobile workstyles- empowering people to work and collaborate from
anywhere, accessing enterprise apps and data on any of the latest devices, as easily as they would in their own office- simply
and securely. Citrix cloud computing solutions help IT and service providers build both private and public clouds, leveraging
virtualization and networking technologies to deliver high-performance, elastic and cost-effective services for mobile
workstyles.
We market and license our products directly to enterprise customers, over the Web, and through systems integrators, or
SIs, in addition to indirectly through value-added resellers, or VARs, value-added distributors, or VADs, and original equipment
manufacturers, or OEMs.
Citrix is a Delaware corporation founded on April 17, 1989.
Executive Summary
We believe our approach is unique in the market because we have combined innovative technologies to enable and power
mobile workstyles. Our technologies mobilize desktops, apps, workloads and people to help our customers drive business
value. Our Mobile and Desktop products are leaders in the area of desktop management, including Desktop Virtualization
marketed as XenDesktop and XenApp. In addition, in January of 2013, we acquired Zenprise, Inc., or Zenprise, and its mobile
device management, or MDM, products, which will be integrated with our Citrix CloudGateway product offering to provide
customers a complete solution for mobile enterprise management. Our Networking and Cloud products offer customers a
value-added approach to building and delivering IT to end-users, including our Cloud Networking products, which allow our
customers to deliver services to mobile users with high performance, security and reliability, and our Cloud Platform products,
which allow our customers to build scalable and reliable private and public cloud computing environments. We believe this
combination of products allows us to deliver a comprehensive end-to-end mobile lifestyles solution, and one that we believe,
when considered as a whole, is competitively differentiated by its feature set and interoperability.
In today’s business environment there is a sharp focus on IT products and services that can reduce cost and deliver a
quick, tangible return on investment, or ROI. With our customers focused on economic value in technology solutions, we
continue highlighting our products’ abilities to reduce IT costs, increase business flexibility and deliver ROI with a simpler
more flexible approach to computing.
In 2011, we saw uncertainties surrounding IT spending, particularly in the European markets. Through the third quarter
of 2012, we continued to encounter hesitancy on the part of customers in initiating large capital projects causing opportunities
to be pushed into the future or to be split into smaller transactions. In the fourth quarter of 2012, we saw improvements in
demand across all geographies, which contributed to our overall Product and license revenue growth. See our Summary of
Results section below.
Although we experienced greater demand in the fourth quarter of 2012, we believe that continued economic uncertainty
may adversely affect sales of our products and services and may result in longer sales cycles, slower adoption of technologies
and increased price competition, particularly in North America and Europe.
In 2013, we plan to focus on helping our customers embrace and power mobile workstyles and build cloud infrastructure
so cloud services can be delivered virtually anywhere with a high quality user experience. We plan to sustain the long-term
growth of our businesses around the world by expanding our go-to-market reach and direct customer touch through hiring
additional enterprise account managers and expanding consulting and technical support capacity; investing in product
innovation, bringing new technologies to market and improving integration across our product portfolio to drive simplicity and
better end-user experience; and making selective and strategic acquisitions of technology, talent and/or businesses. We also
plan to invest in new service provider channel programs that allow our partners to upgrade their capabilities in desktop
virtualization, giving us more capacity to drive strategic Mobile and Desktop transactions and to cross-sell Cloud Networking,
Cloud Platforms, Collaboration and Data Sharing.
Enterprise division
Our Desktop Virtualization products are built to transform and reduce the cost of traditional desktop management by
virtualizing the desktop, with our XenDesktop product, and virtualizing applications, with our XenApp product, in a customer’s
datacenter. We are moving the delivery of desktops and related applications to an on-demand service rather than the delivery of
a device. We continue to see growing customer interest in XenDesktop and, in addition, by making the XenDesktop trade-up
program a standard program, we are maximizing our XenApp install base and driving continued XenDesktop adoption.
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In January 2013, we completed our acquisition of Zenprise, a privately held leading innovator in MDM. We are currently
working to integrate the Zenprise products for MDM with our Citrix CloudGateway product for managing mobile apps and
data to offer our enterprise IT customers comprehensive products that make it easier to manage and secure devices, apps and
data, while allowing users to embrace mobile workstyles and access enterprise apps from virtually any device. We believe our
Mobility products will offer a comprehensive approach that can transform organizations into mobile enterprises with the
security and control IT requires, the ease of use and flexibility users desire, and the productivity business demands.
Our Cloud Networking products power mobile workstyles while altering the traditional economics of the datacenter by
providing greater levels of flexibility of computing resources, especially with respect to servers, improving application
performance and thereby reducing the amount of processing power involved, and allowing easy reconfiguration of servers by
permitting storage and network infrastructure to be added-in virtually rather than physically. Our Cloud Networking products
are also enhancing our differentiation and driving customer interest around desktop virtualization as enterprises are finding
good leverage in deploying these technologies together.
In July 2012, we acquired Bytemobile, Inc., or Bytemobile, a privately held leading provider of data and video
optimization solutions for mobile network operators. The Bytemobile acquisition has given us a strategic foothold in the core
infrastructure of certain mobile operators which are experiencing rapid growth in network traffic, driven by the combination of
new consumer devices, rich multimedia content, and high speed 3G, 4G and LTE networks. Our Bytemobile Smart Capacity
products combined with our Citrix NetScaler line of Cloud Networking products enhance our broader strategy of powering
mobile workstyles and cloud services and allow us to offer mobile operators combined solutions that deliver a high quality user
experience to mobile subscribers.
Our Cloud Platform products allow our customers to build scalable and reliable private and public cloud computing
environments where customers can quickly and easily build cloud services within their existing infrastructure and provision
hosted applications, desktops, services and infrastructure as a service, or IaaS, from the cloud.
Online Services division
Our Online Services division is focused on developing and marketing Collaboration and Data products. These products
are primarily marketed via the web to large enterprises, medium and small businesses, prosumers and individuals. Our Online
Services division's Collaboration products offer secure and cost-effective solutions that allow users to host and actively
participate in online meetings, webinars and training sessions remotely and reduce costs associated with business travel. In
addition, we offer products that offer users a secure, simple and cost efficient way to access their desktops remotely and support
over the Internet on-demand. In the second quarter of 2012, we acquired Podio ApS, or Podio, a privately held provider of a
cloud-based collaborative work platform. Podio became part of our Online Services division and is a natural extension of our
collaboration business, providing today's mobile workforce an easy, secure and social way to come together and work as teams.
Our Data Sharing product, ShareFile, makes it easy for businesses of all sizes to securely store, sync and share business
documents and files, both inside and outside the company. ShareFile's centralized cloud storage capability also allows users to
share files across multiple devices and access them from any location.
Reclassifications
During the first quarter of 2012, we performed a review of the presentation of certain of our revenue categories and
adopted a revised presentation, which we believe is more comparable to those presented by other companies in our industry and
better reflects our evolving product and service offerings. As a result, technical support, hardware maintenance and software
updates revenues, which were previously presented in Technical services and License updates are classified together as License
updates and maintenance. A corresponding change was made to rename Cost of services revenues to Cost of services and
maintenance revenues; however, there was no change in classification. Product training and certification and consulting
services, which were previously presented in Technical services, are classified together as Professional services. Product
licenses has been renamed to Product and licenses to more appropriately describe its composition of both software and
hardware, however, there was no change in classification. The composition and classification of Software as a service remained
unchanged. This change in presentation will not affect our total net revenues, total cost of net revenues or gross margin.
Additionally, during the first quarter of 2012, we revised our methodology for allocating certain IT support costs to more
closely align these costs to the employees directly utilizing the related assets and services and to reflect how management
assesses the cost of headcount. As a result, certain IT support costs have been reclassified from General and administrative
expenses to Cost of services and maintenance revenues, Research and development expenses and Sales, marketing and services
expenses based on the headcount in each of these functional areas. This change in presentation will not affect our income from
operations or cash flows.
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Conforming changes have been made for all prior periods presented. See Note 2 to our consolidated financial statements
for more information regarding the reclassifications described above.
Summary of Results
For the year ended December 31, 2012 compared to the year ended December 31, 2011, we delivered the following
financial performance:
•
•
Product and license revenue increased 11.6% to $830.6 million;
Software as a Service revenue increased 18.9% to $511.3 million;
• License updates and maintenance revenue increased 19.7% to $1,125.1 million;
•
Professional services revenue increased 30.1% to $119.1 million;
• Operating income decreased 6.3% to $390.8 million; and
• Diluted earnings per share decreased 0.3% to $1.86.
The increase in our Product and licenses revenue was primarily driven by sales of our Networking and Cloud products,
led by NetScaler and increased sales of our Mobile and Desktop products, led by XenDesktop. We currently target our Product
and licenses revenue to increase when comparing the first quarter of 2013 to the first quarter of 2012. Our Software as a service
revenue increased due to increased sales of our Collaboration products, led by GoToMeeting and our Data Sharing product,
ShareFile. The increase in License updates and maintenance revenue was primarily due to an increase in renewals and sales of
our Subscription Advantage product and an increase in maintenance revenues, primarily driven by increased sales of our
Networking and Cloud products, led by NetScaler. Professional services revenue increased primarily due to increases in
consulting revenues related to increased implementation sales of our Enterprise division’s products. We currently target that
total revenue to increase when comparing the first quarter of 2013 to the first quarter of 2012. In addition, when comparing the
2013 fiscal year to the 2012 fiscal year we target total revenue to increase. The decrease in Operating income and diluted net
income per share when comparing 2012 to 2011 was primarily due to an increase in stock-based compensation costs primarily
related to our retention-focused annual stock grant to key employees and our recent acquisitions and an increase in amortization
of intangible assets primarily related to our recent acquisitions. Also contributing to the decrease is an increase in Cost of net
revenues due to increases in sales of products with a hardware component and increased sales of our services, both of which
have a higher cost than our software products.
2012 Acquisitions
Podio
In April 2012, we acquired all of the issued and outstanding securities of Podio, a privately-held provider of a cloud-based
collaborative work platform. Podio became part of our Online Services division and expands our offerings of integrated cloud-
based support for team-based collaboration. The total consideration for this transaction was approximately $43.6 million, net of
$1.7 million of cash acquired, and was paid in cash. Transaction costs associated with the acquisition were approximately $0.5
million, all of which we expensed during the year ended December 31, 2012 and are included in General and administrative
expense in our accompanying consolidated statements of income in this Annual Report on Form 10-K for the year ended
December 31, 2012. In addition, in connection with the acquisition, we assumed non-vested stock units which were converted
into the right to receive up to 127,668 shares of our common stock, for which the vesting period reset fully upon the closing of
the transaction.
Bytemobile
In July 2012, we acquired all of the issued and outstanding securities of Bytemobile, a privately-held provider of data and
video optimization solutions for mobile network operators. Bytemobile became part of our Enterprise division and extends our
industry reach into the mobile and cloud markets. The total consideration for this transaction was approximately $399.5
million, net of $5.6 million of cash acquired, and was paid in cash. Transaction costs associated with the acquisition were
approximately $2.1 million, all of which we expensed during the year ended December 31, 2012 and are included in General
and administrative expense in the accompanying consolidated statements of income in this Annual Report on Form 10-K for
the year ended December 31, 2012.
2012 Other Acquisitions
During the first quarter of 2012, we acquired all of the issued and outstanding securities of a privately-held company for
total cash consideration of approximately $24.6 million, net of $0.6 million of cash acquired. This business became part of our
Enterprise division. Transaction costs associated with the acquisition were approximately $0.5 million, of which we expensed
$0.4 million and $0.1 million during the years ended December 31, 2012 and 2011, respectively, and are included in General
and administrative expense in the accompanying consolidated statements of income in this Annual Report on Form 10-K for
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the year ended December 31, 2012. In addition, in connection with this acquisition, we assumed non-vested stock units which
were converted into the right to receive up to 13,481 shares of our common stock and assumed certain stock options which are
exercisable for 12,017 shares of our common stock, for which the vesting period reset fully upon the closing of the transaction.
During the second quarter of 2012, we acquired all of the issued and outstanding securities of two privately-held
companies for a total cash consideration of approximately $15.4 million, net of $0.2 million of cash acquired. The businesses
became part of our Enterprise division. Transaction costs associated with the acquisitions were approximately $0.4 million, all
of which we expensed during the year ended December 31, 2012 and are included in General and administrative expense in the
accompanying consolidated statements of income in this Annual Report on Form 10-K for the year ended December 31, 2012.
In addition, in connection with the acquisitions, we assumed non-vested stock units which were converted into the right to
receive, in the aggregate, up to 66,459 shares of our common stock, for which the vesting period reset fully upon the closing of
each respective transaction.
During the third quarter of 2012, we acquired all of the issued and outstanding securities of two privately-held companies
for a total cash consideration of approximately $5.3 million. One of the businesses became part of our Enterprise division and
the other became part of our Online Services division. Transaction costs associated with the acquisitions were approximately
$0.2 million, all of which we expensed during the year ended December 31, 2012 and are included in General and
administrative expense in the accompanying consolidated statements of income in this Annual Report on Form 10-K for the
year ended December 31, 2012. In addition, in connection with the acquisitions, we assumed non-vested stock units which
were converted into the right to receive, in the aggregate, up to 13,487 shares of our common stock, for which the vesting
period reset fully upon the closing of each respective transaction.
We have included the effects of all of the companies acquired in 2012 in our results of operations prospectively from the
date of each acquisition.
2011 Acquisitions
Netviewer AG
In February 2011, we acquired all of the issued and outstanding securities of Netviewer AG, or Netviewer, a privately
held European SaaS vendor in collaboration and IT services. Netviewer became part of our Online Services division and the
acquisition enables the extension of our Online Services business in Europe. The total consideration for this transaction was
approximately $107.5 million, net of $6.3 million of cash acquired, and was paid in cash. Transaction costs associated with the
acquisition were approximately $3.1 million, of which we expensed $1.1 million and $2.0 million during the years ended
December 31, 2011 and 2010, respectively, and are included in General and administrative expense in the accompanying
consolidated statements of income in this Annual Report on Form 10-K for the year ended December 31, 2012. In addition, in
connection with the acquisition, we assumed non-vested stock units, which were converted into the right to receive up to
99,100 shares of our common stock, for which the vesting period reset fully upon the closing of the transaction.
Cloud.com
In July 2011, we acquired all of the issued and outstanding securities of Cloud.com Inc., or Cloud.com, a privately-held
provider of software infrastructure platforms for cloud providers. Cloud.com became part of our Enterprise division and the
acquisition further establishes us as a leader in infrastructure for the growing cloud provider market. The total consideration for
this transaction was approximately $158.8 million, net of $5.6 million of cash acquired, and was paid in cash. Transaction costs
associated with the acquisition were approximately $2.9 million, all of which we expensed during the year ended December 31,
2011, and are included in General and administrative expense in the accompanying consolidated statements of income in this
Annual Report on Form 10-K for the year ended December 31, 2012. In addition, in connection with the acquisition we
assumed non-vested stock units, which were converted into the right to receive up to 288,742 shares of our common stock and
certain stock options which are exercisable for 183,780 shares of our common stock, for which the vesting period reset fully
upon the closing of the transaction.
RingCube
In August 2011, we acquired all of the issued and outstanding securities of RingCube Technologies, Inc., or RingCube, a
privately-held company that specializes in user personalization technology for virtual desktops. RingCube became part of our
Enterprise division and the acquisition further solidifies our position in desktop virtualization. The total consideration for this
transaction was approximately $32.2 million, net of $0.5 million of cash acquired, and was paid in cash. Transaction costs
associated with the acquisition were approximately $0.6 million, all of which we expensed during the year ended December 31,
2011, and are included in General and administrative expense in the accompanying consolidated statements of income in this
Annual Report on Form 10-K for the year ended December 31, 2012. In addition, in connection with the RingCube acquisition,
we assumed non-vested stock units which were converted into the right to receive up to 58,439 shares of our common stock, for
which the vesting period reset fully upon the closing of the transaction.
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ShareFile
In October 2011, we acquired all of the issued and outstanding securities of Novell Labs, Inc. d/b/a ShareFile, or
ShareFile, a privately-held provider of secure data sharing and collaboration solutions. ShareFile initially became part of our
Enterprise division and in the first quarter of 2012 it was transferred to our Online Services division. The total consideration for
this transaction was approximately $54.0 million, net of $1.7 million of cash acquired, and was paid in cash. Transaction costs
associated with the acquisition were approximately $0.7 million, all of which we expensed during the year ended December 31,
2011 and are included in General and administrative expense in our consolidated statements of income included in this Annual
Report on Form 10-K for the year ended December 31, 2012. In addition, in connection with the acquisition we assumed non-
vested stock units, which were converted into the right to receive up to 180,697 shares of our common stock and assumed
certain stock options which are exercisable for 390,775 shares of our common stock, for which the vesting period reset fully
upon the closing of the transaction.
App-DNA
In November 2011, we acquired all of the issued and outstanding securities of App-DNA, a privately-held company that
specializes in application migration and management. App-DNA became part of our Enterprise division. The total consideration
for this transaction was approximately $90.8 million, net of $3.2 million of cash acquired, and was paid in cash. Transaction
costs associated with the acquisition were approximately $1.3 million, all of which we expensed during the year ended
December 31, 2011, and are included in General and administrative expense in our consolidated statements of income included
in this Annual Report on Form 10-K for the year ended December 31, 2012. In addition, in connection with the acquisition we
assumed non-vested stock units, which were converted into the right to receive up to 114,487 shares of our common stock, for
which the vesting period reset fully upon the closing of the transaction.
2011 Other Acquisition
During the first quarter of 2011, we acquired certain assets of a wholly-owned subsidiary of a privately-held company for
total cash consideration of approximately $10.5 million. We accounted for this acquisition as a business combination in
accordance with the authoritative guidance and it became part of our Enterprise division, thereby expanding our solutions
portfolio for service providers and developing unique integrations with our application delivery solutions.
We have included the effects of all of the companies acquired in 2011 in our results of operations prospectively from the
date of each acquisition.
Purchase of Non-Controlling Interest
Kaviza Inc.
In May 2011, we acquired all of the non-controlling interest of Kaviza Inc., or Kaviza, a provider of virtual desktop
infrastructure solutions, for $17.2 million. As a result of this transaction, we have obtained a 100% interest in this subsidiary. In
accordance with the authoritative guidance, the excess of the proceeds paid over the carrying amount of the non-controlling
interest of Kaviza has been reflected as a reduction of additional paid-in capital. In addition, in connection with the purchase of
the non-controlling interest of Kaviza, we assumed non-vested stock units which were converted into the right to receive up to
88,687 shares of our common stock and assumed certain stock options which are exercisable for 33,301 shares of our common
stock, with existing vesting schedules.
Subsequent Events
On January 2, 2013, we acquired all of the issued and outstanding securities of Zenprise, Inc., or Zenprise, a privately-
held leader in mobile device management. We will integrate the Zenprise products for mobile device management, with our
Citrix CloudGateway™ products for managing mobile apps and data. The total preliminary consideration for this transaction
was approximately $324.2 million, net of $2.9 million of cash acquired, and was paid in cash. Transaction costs associated with
the acquisition are currently estimated at $0.7 million, of which we expensed approximately $0.5 million during the year ended
December 31, 2012 and are included in General and administrative expense in our consolidated statements of income included
in this Annual Report on Form 10-K for the year ended December 31, 2012. In addition, in connection with the acquisition, we
assumed certain stock options which are exercisable for 285,817 shares of our common stock, for which the vesting period
reset fully upon the closing of the transaction.
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Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and judgments that affect 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 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 differ from our estimates under different assumptions and conditions. If actual results significantly differ from our
estimates, our financial 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 financial condition because they involve more significant judgments and estimates used in the preparation of our
consolidated financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made
based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that
could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially
impact our consolidated financial 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 independent auditors, and our Audit
Committee has reviewed our disclosure relating to our critical accounting policies and estimates in this “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended
December 31, 2012 describes the significant accounting policies and methods used in the preparation of our Consolidated
Financial Statements.
Revenue Recognition
We recognize revenue when it is earned and when all of the following criteria are met: persuasive evidence of the
arrangement exists; delivery has occurred or the service has been provided and we have no remaining obligations; the fee is
fixed or determinable; and collectability is probable. We define these four criteria as follows:
• Persuasive evidence of the arrangement exists. We primarily sell our software products via electronic or paper
licenses and typically require a purchase order from the distributor, reseller or end-user (depending on the
arrangement) who have previously negotiated a master distribution or resale agreement and an executed product
license agreement from the end-user. For appliance sales, our customary practice is to require a purchase order from
distributors and resellers who have previously negotiated a master packaged product distribution or resale agreement.
We typically recognize revenue upon shipment for our appliance sales. For maintenance, technical support, product
training and consulting services, we require a purchase order and an executed agreement. For SaaS, we generally
require the customer or the reseller to electronically accept the terms of an online services agreement or execute a
contract.
• Delivery has occurred and we have no remaining obligations. We consider delivery of licenses under electronic
licensing agreements to have occurred when the related products are shipped and the end-user has been electronically
provided the software activation keys that allow the end-user to take immediate possession of the product. For
hardware appliance sales, our standard delivery method is free-on-board shipping point. Consequently, we consider
delivery of appliances to have occurred when the products are shipped pursuant to an agreement and purchase order.
For SaaS, delivery occurs upon providing the users with their login id and password. For product training and
consulting services, we fulfill our obligation when the services are performed. For license updates, maintenance and
technical support, we assume that our obligation is satisfied ratably over the respective terms of the agreements,
which are typically 12 to 24 months. For SaaS, we assume that our obligation is satisfied ratably over the respective
terms of the agreements, which are typically 12 months.
•
The fee is fixed or determinable. In the normal course of business, we do not provide customers with the right to a
refund of any portion of their license fees or extended payment terms. The fees are considered fixed or determinable
upon establishment of an arrangement that contains the final terms of the sale including description, quantity and
price of each product or service purchased. For SaaS, the fee is considered fixed or determinable if it is not subject to
refund or adjustment.
• Collectability is probable. We determine collectability on a customer-by-customer basis and generally do not require
collateral. We typically sell product licenses and license updates to distributors or resellers for whom there are
histories of successful collection. New customers are typically subject to a credit review process that evaluates their
financial position and ultimately their ability to pay. Customers are also subject to an ongoing credit review process.
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If we determine from the outset of an arrangement that collectability 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
an evaluation of customer specific information, historical experience and economic market conditions.
The majority of our product license revenue consists of revenue from the sale of stand-alone software products. Stand-
alone software sales generally include a perpetual license to our software and are subject to the industry specific software
revenue recognition guidance. In accordance with this guidance, we allocate revenue to license updates related to our stand-
alone software and any other undelivered elements of the arrangement based on VSOE of fair value of each element and such
amounts are deferred until the applicable delivery criteria and other revenue recognition criteria described above have been
met. The balance of the revenues, net of any discounts inherent in the arrangement, is recognized at the outset of the
arrangement using the residual method as the product licenses are delivered. If management cannot objectively determine the
fair value of each undelivered element based on VSOE of fair value, revenue recognition is deferred until all elements are
delivered, all services have been performed, or until fair value can be objectively determined. We also make certain judgments
to record estimated reductions to revenue for customer programs and incentive offerings including volume-based incentives, at
the time sales are recorded.
Our hardware appliances contain software components that are essential to the overall functionality of the products. For
hardware appliance transactions entered into prior to January 1, 2011, revenue for arrangements with multiple elements, such as
sales of products that included services, was allocated to each element using the residual method based on the VSOE of the fair
value of the undelivered items pursuant to authoritative guidance. Under the residual method, the amount of revenue allocated
to delivered elements equals the total arrangement consideration less the aggregate fair value of any undelivered elements. If
VSOE of one or more undelivered items does not exist, revenue from the entire arrangement is deferred and recognized at the
earlier of: (i) delivery of those elements or (ii) when fair value can be established unless maintenance is the only undelivered
element, in which case, the entire arrangement fee is recognized ratably over the contractual support period.
For hardware appliance transactions entered into subsequent to January 1, 2011, the arrangement consideration is
allocated to stand-alone software deliverables as a group and the non-software deliverables based on the relative selling prices
of using the selling price hierarchy in the amended revenue recognition guidance. The selling price hierarchy for a deliverable
is based on its VSOE if available, third-party evidence, or TPE, if VSOE is not available, or estimated selling price if neither
VSOE nor TPE is available. We then recognize revenue on each deliverable in accordance with our policies for product and
service revenue recognition. VSOE of selling price is based on the price charged when the element is sold separately. In
determining VSOE, we require that a substantial majority of the selling prices fall within a reasonable range based on historical
discounting trends for specific products and services. TPE of selling price is established by evaluating competitor products or
services in stand-alone sales to similarly situated customers. However, as our products contain a significant element of
proprietary technology and our solutions offer substantially different features and functionality, the comparable pricing of
products with similar functionality typically cannot be obtained. Additionally, as we are unable to reliably determine what
competitors products’ selling prices are on a stand-alone basis, we are not typically able to determine TPE. The estimate of
selling price is established considering multiple factors including, but not limited to, pricing practices in different geographies
and through different sales channels and competitor pricing strategies.
For our non-software deliverables we allocate the arrangement consideration based on the relative selling price of the
deliverables. For our hardware appliances we use ESP as our selling price. For our support and services, we generally use
VSOE as our selling price. When we are unable to establish selling price using VSOE for our support and services, we use ESP
in our allocation of arrangement consideration.
Our SaaS products are considered service arrangements per the authoritative guidance; accordingly, fees related to online
service agreements are recognized ratably over the contract term. In addition, SaaS revenues may also include set-up fees,
which are recognized ratably over the contract term or the expected customer life, whichever is longer. Generally, our SaaS is
sold separately and not bundled with Enterprise division products and services. See Note 2 to our consolidated financial
statements included in this Annual Report on Form 10-K for the year ended December 31, 2012 for further information on our
revenue recognition.
Stock-Based Compensation
Under the fair value recognition provisions of the authoritative guidance, stock-based compensation cost is measured at
the grant date based on the fair value of the award and is recognized as expense over the requisite service or performance
period, which is the vesting period. We currently use the Black-Scholes option pricing model to determine the fair value of
stock options and a Monte Carlo simulation model to determine the fair of non-vested stock unit awards that vest based on
market and service conditions. The determination of the fair value of stock-based payment awards on the date of grant using an
37
option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective
variables. These variables include our expected stock price volatility over the term of the awards, the expected term of the
award, the risk-free interest rate and any expected dividends.
For stock options, we determine the expected volatility factor, by utilizing the implied volatility in two-year market-
traded options on our common stock based on third party volatility quotes in accordance with the provisions of Staff
Accounting Bulletin, or SAB, No. 107. Our decision to use implied volatility was based upon the availability of actively traded
options on our common stock and our assessment that implied volatility is more representative of future stock price trends than
historical volatility. The expected term of our options is based on historical employee exercise patterns. We also periodically
analyze our historical pattern of option exercises based on certain demographic characteristics and we determined that there
were no meaningful differences in option exercise activity based on demographic characteristics. The approximate risk free
interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with remaining terms equivalent to the
expected term on our options. We do not intend to pay dividends on our common stock in the foreseeable future and,
accordingly, we used a dividend yield of zero in the option pricing model.
For non-vested stock unit awards that vest based on market and service conditions, the attainment level under each award
will be based on our total return to stockholders over the performance period compared to the return on the Nasdaq Composite
Total Return Index, or the XCMP. The range of expected volatilities utilized was based on the historical volatilities of our
common stock and the XCMP. We utilize historical volatility to value these awards because historical stock prices were used to
develop the correlation coefficients between our stock performance and the XCMP in order to model the stock price
movements. The volatilities used were calculated over the most recent 2.75 year period, which was the remaining term of the
performance period at the date of grant. The risk free interest rate was based on the implied yield available on U.S. Treasury
zero-coupon issues with remaining terms equivalent to the remaining performance period. We do not intend to pay dividends on
our common stock in the foreseeable future; accordingly, we used a dividend yield of zero in our model.
In 2010 and 2011, we issued non-vested stock units with performance goals to senior level employees. The number of
non-vested stock units underlying each award may be determined based on a range of attainment within defined performance
goals. We are required to estimate the attainment that will be achieved related to the defined performance goals and number of
non-vested stock units that will ultimately be awarded in order to recognize compensation expense over the vesting period. If
our initial estimates of performance goal attainment change, the related expense may fluctuate from quarter to quarter based on
those estimates and if the performance goals are not met, no compensation cost will be recognized and any previously
recognized compensation cost will be reversed.
We are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual
forfeitures differ from those estimates. We use historical data to estimate pre-vesting option forfeitures and record stock-based
compensation expense only for those awards that are expected to vest. All stock-based payment awards that vest based on
service, including those with graded vesting schedules, are amortized on a straight-line basis over the requisite service periods
of the awards, which are generally the vesting periods.
As of December 31, 2012, there was $264.4 million of total unrecognized compensation cost related to options and non-
vested stock units. That cost is expected to be recognized over a weighted-average period of 1.98 years.
If factors change and we employ different assumptions for estimating grant date fair value for our stock-based awards or
in future periods if we decide to use a different valuation model, the stock-based compensation expense we recognize in future
periods may differ significantly from what we have recorded in the current period and could materially affect our operating
income, net income and earnings per share. This may result in a lack of consistency in future periods and materially affect the
fair value estimate of stock-based payments. It may also result in a lack of comparability with other companies that use
different models, methods and assumptions. The Black-Scholes option-pricing model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully transferable. These characteristics are not present in
our option grants. Existing valuation models, including the Black-Scholes models and Monte Carlo simulations, may not
provide reliable measures of the fair values of our stock-based compensation. Consequently, there is a risk that our estimates of
the fair values of our stock-based compensation awards on the grant dates may bear little resemblance to the actual values
realized upon the exercise, expiration, early termination or forfeiture of those stock-based payments in the future. Certain
stock-based payments, such as employee stock options, may expire with little or no intrinsic value compared to the fair values
originally estimated on the grant date and reported in our financial statements. Alternatively, the value realized from these
instruments may be significantly higher than the fair values originally estimated on the grant date and reported in our financial
statements. There is currently no market-based mechanism or other practical application to verify the reliability and accuracy of
the estimates stemming from these valuation models, nor is there a means to compare and adjust the estimates to actual values.
See Notes 2 and 7 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended
December 31, 2012 for further information regarding our adoption of the authoritative guidance for stock-based compensation.
38
Valuation and Classification of Investments
The authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date (an exit price). Our available-for-sale
investments are measured to fair value on a recurring basis and accordingly are carried at fair value. In addition, we hold
investments that are accounted for based on the cost method. These investments are periodically reviewed for impairment and
when indicators of impairment exist, are measured to fair value as appropriate on a non-recurring basis. In determining the fair
value of our investments we are sometimes required to use various alternative valuation techniques. The authoritative guidance
establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the
use of unobservable inputs by requiring that the most observable inputs be used when available.
The authoritative guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair
value as follows: Level 1, observable inputs such as quoted prices in active markets for identical assets or liabilities, Level 2,
inputs, other than quoted prices in active markets, that are observable either directly or indirectly, and Level 3, unobservable
inputs in which there is little or no market data, which requires us to develop our own assumptions. Observable inputs are those
that market participants would use in pricing the asset or liability that are based on market data obtained from independent
sources, such as market quoted prices. When Level 1 observable inputs for our investments are not available to determine their
fair value, we must then use other inputs which may include indicative pricing for securities from the same issuer with similar
terms, yield curve information, benchmark data, prepayment speeds and credit quality or unobservable inputs that reflect our
estimates of the assumptions market participants would use in pricing the investments based on the best information available
in the circumstances. When valuation techniques, other than those described as Level 1 are utilized, management must make
estimations and judgments in determining the fair value for its investments. The degree to which management’s estimation and
judgment is required is generally dependent upon the market pricing available for the investments, the availability of
observable inputs, the frequency of trading in the investments and the investment’s complexity. If we make different judgments
regarding unobservable inputs we could potentially reach different conclusions regarding the fair value of our investments.
After we have determined the fair value of our investments, for those that are in an unrealized loss position, we must then
determine if the investment is other-than-temporarily impaired. We review our investments quarterly for indicators of other-
than-temporary impairment. This determination requires significant judgment and if different judgments are used the
classification of the losses related to our investments could differ. In making this judgment, we employ a systematic
methodology that considers available quantitative and qualitative evidence in evaluating potential impairment of our
investments. If the carrying value of an available-for-sale investment exceeds its fair value, we evaluate, among other factors,
general market conditions, the duration and extent to which the fair value is less than carrying value our intent to retain or sell
the investment and whether it is more likely than not that we will not be required to sell the investment before the recovery of
its amortized cost basis, which may not be until maturity. We also consider specific adverse conditions related to the financial
health of and business outlook for the issuer, including industry and sector performance, rating agency actions and changes in
credit default swap levels. For our cost method investments, our quarterly review of impairment indicators encompasses the
analysis of specific criteria of the entity, such as cash position, financing needs, operational performance, management changes,
competition and turnaround potential. If any of the above impairment indicators are present, we further evaluate whether an
other-than-temporary impairment should be recorded. Once a decline in fair value is determined to be other-than-temporary, an
impairment charge is recorded and a new cost basis in the investment is established. See Notes 4 and 5 to our consolidated
financial statements and “Liquidity and Capital Resources” for more information on our investments and fair value
measurements.
Intangible Assets
We have acquired product related technology assets and other intangible assets from acquisitions and other third party
agreements. We allocate the purchase price of acquired intangible assets acquired through third party agreements based on their
estimated relative fair values. We allocate a portion of purchase price of acquired companies to the product related technology
assets and other intangible assets acquired based on their estimated fair values. We typically engage third party appraisal firms
to assist us in determining the fair values and useful lives of product related technology assets and other intangible assets
acquired. Such valuations and useful life determinations require us to make significant estimates and assumptions. These
estimates are based on historical experience and information obtained from the management of the acquired companies and are
inherently uncertain. Critical estimates in determining the fair value and useful lives of the product related technology assets
include but are not limited to future expected cash flows earned from the product related technology and discount rates applied
in determining the present value of those cash flows. Critical estimates in valuing certain other intangible assets include but are
not limited to future expected cash flows from customer contracts, customer lists, distribution agreements, patents, brand
awareness and market position, as well as discount rates.
39
Management's estimates of fair value are based upon assumptions believed to be reasonable. Unanticipated events and
circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.
We monitor acquired intangible assets for impairment on a periodic basis by reviewing indicators of impairment. If an
indicator exists we compare the estimated net realizable value to the unamortized cost of the intangible asset. The
recoverability of the intangible assets is primarily dependent upon our ability to commercialize products utilizing the acquired
technologies, retain existing customers and customer contracts, and maintain brand awareness. The estimated net realizable
value of the acquired intangible assets is based on the estimated undiscounted future cash flows derived from such intangible
assets. Our assumptions about future revenues and expenses require significant judgment associated with the forecast of the
performance of our products, customer retention rates and ability to secure and maintain our market position. Actual revenues
and costs could vary significantly from these forecasted amounts. As of December 31, 2012, the estimated undiscounted future
cash flows expected from product related technology assets and other intangible assets from these acquisitions is sufficient to
recover their carrying value. If these products are not ultimately accepted by our customers and distributors, and there is no
alternative future use for the technology; or if we fail to retain acquired customers or successfully market acquired brands, we
could determine that some or all of the remaining $556.2 million carrying value of our acquired intangible assets is impaired. In
the event of impairment, we would record an impairment charge to earnings that could have a material adverse effect on our
results of operations.
Goodwill
The excess of the fair value of purchase price over the fair values of the identifiable assets and liabilities from our
acquisitions is recorded as goodwill. At December 31, 2012, we had $1,518.2 million in goodwill related to our acquisitions.
The goodwill recorded in relation to these acquisitions is not deductible for tax purposes. Our revenues are derived from sales
of our Enterprise division products, which include our Mobile and Desktop products, Networking and Cloud products and
related license updates and maintenance and from sales of our Online Services division’s Collaboration and Data products. The
Enterprise division and the Online Services division constitute our two reportable segments. See Note 11 to our consolidated
financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2012 for additional
information regarding our reportable segments. We evaluate goodwill between these segments, which represent our reporting
units.
We account for goodwill in accordance with FASB’s authoritative guidance, which requires that goodwill and certain
intangible assets are not amortized, but are subject to an annual impairment test. We complete our goodwill and certain
intangible assets impairment test on an annual basis, during the fourth quarter of our fiscal year, or more frequently, if changes
in facts and circumstances indicate that an impairment in the value of goodwill and certain intangible assets recorded on our
balance sheet may exist. In 2011, we early adopted the authoritative guidance, which provides entities with an option to
perform a qualitative assessment to determine whether further quantitative impairment testing for goodwill and certain
intangible assets is necessary, which we refer to as the Qualitative Screen. In performing the Qualitative Screen, we are
required to make assumptions and judgments including but not limited to the following: the evaluation of macroeconomic
conditions as related to our business, industry and market trends, and the overall future financial performance of our reporting
units and future opportunities in the markets in which they operate. If after performing the Qualitative Screen impairment
indicators are present, we would perform a quantitative impairment test to estimate the fair value of goodwill and certain
intangible assets. In doing so, we would estimate future revenue, consider market factors and estimate our future cash flows.
Based on these key assumptions, judgments and estimates, we determine whether we need to record an impairment charge to
reduce the value of the goodwill and certain intangible assets carried on our balance sheet to its estimated fair value.
Assumptions, judgments and estimates about future values are complex and often subjective and can be affected by a variety of
factors, including external factors such as industry and economic trends, and internal factors such as changes in our business
strategy or our internal forecasts. Although we believe the assumptions, judgments and estimates we have made have been
reasonable and appropriate, different assumptions, judgments and estimates could materially affect our results of operations.
We performed the Qualitative Screen for our goodwill impairment test in the fourth quarter of 2012. As a result of the
Qualitative Screen, no further quantitative impairment test was deemed necessary. There was no impairment of goodwill as a
result of the annual impairment tests completed during the fourth quarters of 2012 and 2011.
40
Income Taxes
We are required to estimate our income taxes in each of the jurisdictions in which we operate as part of the process of
preparing our consolidated financial statements. At December 31, 2012, we had approximately $59.3 million in net deferred tax
assets. The authoritative guidance requires a valuation allowance to reduce the deferred tax assets reported if, based on the
weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We
review deferred tax assets periodically for recoverability and make estimates and judgments regarding the expected geographic
sources of taxable income and gains from investments, as well as tax planning strategies in assessing the need for a valuation
allowance. At December 31, 2012, we determined that a $18.2 million valuation allowance relating to deferred tax assets for
net operating losses and tax credits was necessary. If the estimates and assumptions used in our determination change in the
future, we could be required to revise our estimates of the valuation allowances against our deferred tax assets and adjust our
provisions for additional income taxes.
In the ordinary course of global business, there are transactions for which the ultimate tax outcome is uncertain, thus
judgment is required in determining the worldwide provision for income taxes. We provide for income taxes on transactions
based on our estimate of the probable liability. We adjust our provision as appropriate for changes that impact our underlying
judgments. Changes that impact provision estimates include such items as jurisdictional interpretations on tax filing positions
based on the results of tax audits and general tax authority rulings. Due to the evolving nature of tax rules combined with the
large number of jurisdictions in which we operate, it is possible that our estimates of our tax liability and the realizability of our
deferred tax assets could change in the future, which may result in additional tax liabilities and adversely affect our results of
operations, financial condition and cash flows.
The following discussion relating to the individual financial statement captions, our overall financial performance,
operations and financial position should be read in conjunction with the factors and events described in “— Overview” and Part
1 – Item 1A entitled “Risk Factors,” included in this Annual Report on Form 10-K for the year ended December 31, 2012,
which could impact our future performance and financial position.
41
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 year-to-year (in thousands other than percentages):
Revenues:
Product and licenses
Software as a service
License updates and maintenance
Professional services
Total net revenues
Cost of net revenues:
Cost of product and license revenues
Cost of services and maintenance revenues
Amortization of product related intangible assets
Total cost of net revenues
Gross margin
Operating expenses:
Research and development
Sales, marketing and services
General and administrative
Amortization of other intangible assets
Restructuring
Total operating expenses
Income from operations
Interest income
Other income (expense), net
Income before income taxes
Income taxes
Consolidated net income
Less: Net loss attributable to non-controlling interest
Year Ended December 31,
2012
2011
2010
2012
Compared to
2011
2011
Compared to
2010
$
830,645
$
744,513
$
619,452
11.6 %
20.2%
511,323
1,125,094
119,061
430,213
940,181
91,485
360,617
835,386
59,207
2,586,123
2,206,392
1,874,662
96,962
227,150
80,025
404,137
74,393
164,465
54,741
293,599
66,682
115,080
50,504
232,266
2,181,986
1,912,793
1,642,396
450,571
1,060,829
245,259
34,549
—
380,674
885,066
213,673
16,390
24
361,376
771,660
173,394
14,279
971
1,791,208
1,495,827
1,321,680
390,778
10,152
9,299
410,229
57,682
352,547
—
416,966
13,819
(288)
430,497
74,867
355,630
692
320,716
14,577
(1,473)
333,820
57,379
276,441
624
18.9
19.7
30.1
17.2
30.3
38.1
46.2
37.6
14.1
18.4
19.9
14.8
110.8
19.7
(6.3)
(26.5)
(4.7)
(23.0)
(0.9)
*
*
*
19.3
12.5
54.5
17.7
11.6
42.9
8.4
26.4
16.5
5.3
14.7
23.2
14.8
*
13.2
30.0
(5.2)
*
29.0
30.5
28.6
*
Net income attributable to Citrix Systems, Inc.
$
352,547
$
356,322
$
277,065
(1.1)%
28.6%
*
not meaningful
Revenues by Segment
Net revenues of our Enterprise division include Product and licenses, License updates and maintenance, and Professional
services. Product and licenses primarily represent fees related to the licensing of the following major products:
• Mobile and Desktop (formerly Desktop Solutions) is primarily comprised of our desktop virtualization products
XenDesktop and XenApp; and
• Networking and Cloud (formerly Datacenter and Cloud Solutions) is primarily comprised of cloud networking
products, which include NetScaler, Cloud Bridge (including our product formerly known as Branch Repeater) and
Bytemobile Smart Capacity, and the cloud platform products which include XenServer, CloudPlatform (formerly
CloudStack) and CloudPortal.
In addition, we offer incentive programs to our VADs and VARs to stimulate demand for our products. Product and
license revenues associated with these programs are partially offset by these incentives to our VADs and VARs.
42
License updates and maintenance consists of:
• Our Subscription Advantage program, an annual renewable program that provides subscribers with automatic
delivery of unspecified software upgrades, enhancements and maintenance releases when and if they become
available during the term of the subscription, for which fees are recognized ratably over the term of the contract,
which is typically 12 to 24 months; and
• Our maintenance fees, which include technical support and hardware and software maintenance, and which are
recognized ratably over the contract term.
Professional services revenues are comprised of:
•
•
Fees from consulting services related to implementation of our products, which are recognized as the services are
provided; and
Fees from product training and certification, which are recognized as the services are provided.
Our Online Services division’s revenues, which are recognized ratably over the contractual term, consist of fees related to
our SaaS products including:
• Collaboration products, which primarily include GoToMeeting, GoToWebinar, GoToTraining, GoToMyPC and
GoToAssist;
• Data Sharing product, which primarily includes ShareFile.
During the first quarter of 2012, we performed a review of the historical manner of presentation of certain of its revenue
categories and adopted a revised presentation, which we believe is more comparable to those presented by other companies in
the industry and better reflects our evolving product and service offerings. As a result, technical support, hardware maintenance
and software updates revenues, which were previously presented in Technical services and License updates are classified
together as License updates and maintenance. A corresponding change was made to rename Cost of services revenues to Cost
of services and maintenance revenues; however, there was no change in classification. Product training and certification and
consulting services, which were previously presented in Technical services, are classified together as Professional services.
Product licenses has been renamed to Product and licenses to more appropriately describe its composition of both software and
hardware, however, there was no change in classification. The composition and classification of Software as a service remained
unchanged. This change in manner of presentation will not affect our total net revenues, total cost of net revenues or gross
margin.
Year Ended December 31,
2012
2011
2010
2012
Compared to
2011
2011
Compared to
2010
(In thousands)
$
830,645
$
744,513
$
619,452
$
86,132
$
125,061
511,323
1,125,094
119,061
430,213
940,181
91,485
360,617
835,386
59,207
81,110
184,913
27,576
69,596
104,795
32,278
$
2,586,123
$
2,206,392
$ 1,874,662
$
379,731
$
331,730
Revenues:
Product and licenses
Software as a Service
License updates and maintenance
Professional Services
Total net revenues
Product and licenses
Product and licenses revenue increased during 2012 when compared to 2011 primarily due to increased sales of our
Networking and Cloud products, led by NetScaler, of $60.0 million and increased sales of our Mobile and Desktop products,
led by XenDesktop, of $27.1 million. Product and licenses revenue increased during 2011 when compared to 2010 primarily
due to increased sales of our Mobile and Desktop products, led by XenDesktop of $74.1 million and increased sales of our
Networking and Cloud products, led by NetScaler, of $48.7 million. We currently target Product and licenses revenue to
increase when comparing the first quarter of 2013 to the first quarter of 2012.
Software as a Service
Software as a Service revenue increased during 2012 when compared to 2011 primarily due to increased sales of our
Online Services division's Collaboration products of $61.0 million and due to increased sales of our Data Sharing products of
$19.3 million. Software as a Service revenue increased during 2011 compared to 2010 primarily due to increased sales of our
Online Services division's Collaboration products. We currently target our Software as a Service revenue to increase when
43
comparing the first quarter of 2013 to the first quarter of 2012 and when comparing the first quarter of 2013 to the fourth
quarter of 2012 due primarily to increased sales of our Collaboration products.
License updates and maintenance
License updates and maintenance revenue increased during 2012 when compared to 2011 primarily due to an increase in
sales and renewals of our Subscription Advantage product of $114.6 million, and an increase in maintenance revenues of $45.2
million, primarily driven by increased sales of our Networking and Cloud products, led by NetScaler. License updates and
maintenance revenue increased during 2011 when compared to 2010 primarily due to an increase in Subscription Advantage
renewal sales of $59.5 million and an increase in maintenance revenues of $33.9 million, primarily driven by increased sales of
our Networking and Cloud products, led by NetScaler. We currently are targeting that License updates and maintenance
revenue will increase when comparing the first quarter of 2013 to the first quarter of 2012 and when comparing the first quarter
of 2013 to the fourth quarter of 2012.
Professional services
Professional services revenue increased during 2012 when compared to 2011 and during 2011 when compared to 2010
primarily due to increases in consulting revenues related to increased implementation sales of our Enterprise division’s
products. We currently target Professional services revenue to increase when comparing the first quarter of 2013 to the first
quarter of 2012 consistent with the increase in Product and license revenue described above.
Deferred Revenue
Deferred revenues are primarily comprised of License updates and maintenance revenue from our Subscription
Advantage product as well as maintenance and support contracts for our software and hardware products. Deferred revenues
also includes SaaS revenue from annual service agreements for our online services and Professional services revenue primarily
related to our consulting contracts. Deferred revenues increased approximately $238.1 million as of December 31, 2012
compared to December 31, 2011 primarily due to an increase in new and renewal sales of our Subscription Advantage product,
led by XenDesktop, of $133.1 million; an increase in support sales related to our Enterprise division's products of $30.8
million, an increase in sales of maintenance contracts, led by sales of NetScaler, of $23.5 million; and an increase related to
Bytemobile of $19.2 million. Also contributing to the overall increase in deferred revenue is an increase in multi-year contracts
with our larger customers of our Enterprise division. We currently target deferred revenue to continue to increase in 2013.
While it is generally our practice to promptly ship our products upon receipt of properly finalized purchase orders, we
sometimes have product license orders that have not shipped. Although the amount of such product license orders may vary, the
amount, if any, of such product license orders at the end of a particular period has not been material to total revenue at the end
of any reporting period. We do not believe that backlog, as of any particular date, is a reliable indicator of future performance.
International Revenues
International revenues (sales outside the United States) accounted for approximately 45.3% of our net revenues for the
year ended December 31, 2012, 43.2% of our net revenues for the year ended December 31, 2011 and 42.7% of our net
revenues for the year ended December 31, 2010. For detailed information on international revenues, please refer to Note 11 to
our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2012.
Segment Revenues
Our revenues are derived from sales of Enterprise division products which primarily include Mobility and Desktop
products, Networking and Cloud products and related License updates and maintenance and Professional services and from our
Online Services division’s Collaboration and Data products. The Enterprise division and the Online Services division constitute
our two reportable segments.
An analysis of our reportable segment net revenue is presented below (in thousands):
Year Ended December 31,
Revenue
Growth
Revenue
Growth
2012
2011
2010
2012 to 2011
2011 to 2010
Enterprise division
Online Services division
Consolidated net revenues
$
$
2,074,800
511,323
2,586,123
$
$
1,778,646
427,746
(In thousands)
$
1,514,045
360,617
2,206,392
$
1,874,662
16.7%
19.5%
17.2%
17.5%
18.6%
17.7%
44
With respect to our segment revenues, the increase in net revenues for the comparative periods presented was due
primarily to the factors previously discussed above. See Note 11 of our consolidated financial statements included in this
Annual Report on Form 10-K for the year ended December 31, 2012 for additional information on our segment revenues.
Cost of Net Revenues
Year Ended December 31,
2012
2011
2010
2012
Compared to
2011
2011
Compared to
2010
Cost of product and license revenues
$
96,962
$
74,393
(In thousands)
66,682
$
$
22,569
$
Cost of services and maintenance revenues
Amortization of product related intangible assets
227,150
80,025
164,465
54,741
115,080
50,504
62,685
25,284
7,711
49,385
4,237
Total cost of net revenues
$
404,137
$ 293,599
$ 232,266
$
110,538
$
61,333
Cost of product and license revenues consist primarily of hardware, product media and duplication, manuals, packaging
materials, shipping expense and royalties. Cost of services and maintenance revenues consist primarily of compensation and
other personnel-related costs of providing technical support and consulting, as well as the costs related to providing our SaaS.
Also included in cost of net revenues is amortization of product related intangible assets.
Cost of product and license revenues increased during 2012 when compared to 2011 and during 2011 when compared to
2010 primarily due to increased sales of our Networking and Cloud products, as described above, many of which contain
hardware components that have a higher cost than our other software products. We currently are targeting cost of product and
license revenues will increase when comparing the first quarter of 2013 to the first quarter of 2012 consistent with the targeted
increase in sales of our hardware products.
Cost of services and maintenance revenues increased during 2012 compared to 2011 consistent with the increase in sales
of our Collaboration products and continuing investment in infrastructure to support the voice and video offerings in our
Collaboration products of $20.0 million. Also contributing to the increase in Cost of services and maintenance revenues is an
increase in maintenance and support costs of $16.6 million and consulting costs of $15.7 million related to increased sales of
our Enterprise division's products as described above. Cost of services and maintenance revenues increased during 2011
compared to 2010 consistent with the increase in revenue of Professional services related to our Enterprise division's products
as described above. We currently are targeting cost of services and maintenance revenues will increase when comparing the
first quarter of 2013 to the first quarter of 2012 consistent with the increase in Software as a Service and Professional services
revenues as discussed above.
Gross Margin
Gross margin as a percent of revenue was 84.4% for 2012, 86.7% for 2011 and 87.6% for 2010. The decrease in gross
margin as a percentage of net revenue for all periods presented was primarily due to the increase in sales of products with a
hardware component and increased sales of our services both of which have a higher cost than our software products. When
comparing the first quarter of 2013 to the first quarter of 2012, we expect a slight decline in gross margin, consistent with our
targeted increase in sales of our hardware products and services.
Operating Expenses
Foreign Currency Impact on Operating Expenses
The functional currency for all of our wholly-owned foreign subsidiaries in our Enterprise division is the U.S. dollar. A
substantial majority of our overseas operating expenses and capital purchasing activities are transacted in local currencies and
are therefore subject to fluctuations in foreign currency exchange rates. In order to minimize the impact on our operating
results, we generally initiate our hedging of currency exchange risks up to 15 months in advance of anticipated foreign
currency expenses. When the dollar is weak, the resulting increase to foreign currency denominated expenses will be partially
offset by the gain in our hedging contracts. When the dollar is strong, the resulting decrease to foreign currency denominated
expenses will be partially offset by the loss in our hedging contracts. There is a risk that there will be fluctuations in foreign
currency exchange rates beyond the timeframe for which we hedge our risk.
45
Research and Development Expenses
Year Ended December 31,
2012
2011
2010
2012
Compared to
2011
2011
Compared to
2010
(In thousands)
Research and development
$
450,571
$
380,674
$
361,376
$
69,897
$
19,298
Research and development expenses consisted primarily of personnel related costs and facility and equipment costs
directly related to our research and development activities. We expensed substantially all development costs included in the
research and development of our products.
Research and development expenses increased during 2012 as compared to 2011 due to a $35.8 million increase in
compensation and other employee-related costs, primarily related to increased headcount due to strategic hiring and
acquisitions, and an increase in stock-based compensation expense of $22.0 million, primarily related to retention-focused
awards granted to new and existing employees and assumed in conjunction with our acquisitions. Also contributing to the
increase in Research and development expenses when comparing 2012 to 2011 is a $13.5 million increase in facilities costs and
related depreciation, consistent with the increase in headcount.
Research and development expenses increased during 2011 as compared to 2010 primarily due to a $36.4 million
increase in compensation and other employee related costs primarily related to increased headcount due to strategic hiring and
acquisitions. Partially offsetting the increases in research and development costs when comparing 2011 to 2010 is a $22.4
million decrease in stock-based compensation expense due to stock-based awards related to certain acquisitions that fully
vested. The increase primarily relates to the strategic hiring of employees in research and development as discussed above in
our Executive Summary.
Sales, Marketing and Services Expenses
Year Ended December 31,
2012
2011
2010
2012
Compared to
2011
2011
Compared to
2010
(In thousands)
Sales, marketing and services
$
1,060,829
$
885,066
$
771,660
$
175,763
$
113,406
Sales, marketing and services expenses consisted primarily of personnel related costs, including sales commissions, pre-
sales support, the costs of marketing programs aimed at increasing revenue, such as brand development, advertising, trade
shows, public relations and other market development programs and costs related to our facilities, equipment and information
systems that are directly related to our sales, marketing and services activities.
Sales, marketing and services expenses increased during 2012 compared to 2011 primarily due to a $132.9 million
increase in compensation, including variable and stock-based compensation and employee-related costs due to additional
headcount in our sales force and professional services group, as well as from our acquisitions. Also contributing to the increase
in Sales, marketing and services expense when comparing 2012 to 2011 is an $18.7 million increase in facilities costs and
related depreciation, consistent with the increase in headcount.
Sales, marketing and services expenses increased during 2011 compared to 2010 primarily due to an $81.1 million
increase in compensation, including variable compensation and employee-related costs due to additional headcount in our sales
force and professional services group, as well as from our acquisitions. Also contributing to the increase in sales, marketing and
services expense was a $10.6 million increase in facilities costs and related depreciation, consistent with the increase in
headcount and a $10.3 million increase in marketing program costs related to various marketing campaigns and events.
General and Administrative Expenses
General and administrative
$
245,259
$
213,673
(In thousands)
$
173,394
$
31,586
$
40,279
Year Ended December 31,
2012
2011
2010
2012
Compared to
2011
2011
Compared to
2010
General and administrative expenses consisted primarily of personnel related costs and expenses related to outside
consultants assisting with information systems, as well as accounting and legal fees.
46
General and administrative expenses increased during 2012 compared to 2011 primarily due to an increase in
compensation and employee related costs of $20.2 million due to additional headcount, primarily in operations, as well as from
our acquisitions. Also contributing to the increase in General and administrative expense when comparing 2012 to 2011 is an
increase in stock-based compensation expense of $13.6 million related to retention-focused stock-based awards granted to new
and existing employees and assumed in connection with acquisitions.
General and administrative expenses increased during 2011 compared to 2010 primarily due to an increase in
compensation and employee related costs of $30.4 million due to additional headcount, primarily in IT, facilities and
operations, to support our growth and a related increase in stock-based compensation of $8.6 million. Also contributing to the
increase in general and administrative expense is a $9.9 million increase in professional fees primarily related to acquisitions
and strategic investment activity.
2013 Operating Expense Outlook
When comparing the first quarter of 2013 to the fourth quarter of 2012, we are targeting operating expenses to increase in
Research and development; Sales, marketing and services and General and administrative primarily due to the acquisition of
Zenprise completed in the first quarter of 2013. In addition, we are targeting an increase in Research and development as we
continue to bring to market new technologies and improve integration of existing technologies and in Sales, marketing and
services as we continue to focus on hiring to expand our go-to-market capacity and customer direct touch, as well as increasing
consulting and technical support capacity.
Amortization of Other Intangible Assets
Amortization of other intangible assets
$
34,549
$
16,390
(In thousands)
$
14,279
$
18,159
$
2,111
Year Ended December 31,
2012
2011
2010
2012
Compared to
2011
2011
Compared to
2010
Amortization of other intangible assets consists of amortization of customer relationships, trade names and covenants not
to compete primarily related to our acquisitions. The increase in Amortization of other intangible assets when comparing 2012
to 2011 was primarily due to amortization of other intangible assets acquired in conjunction with our acquisitions, primarily
Bytemobile. Also contributing to the increase is a $5.2 million impairment related to our decision to contribute our CloudStack
tradename acquired in conjunction with our acquisition of Cloud.com to the Apache Software Foundation in 2012.
The increase in amortization of other intangible assets during 2011 as compared to 2010 was primarily due to acquired
intangible assets related to 2011 acquisitions of $5.9 million offset by other acquired customer related intangible assets
becoming fully amortized during 2011 of $4.0 million.
As of December 31, 2012, we had unamortized other identified intangible assets with estimable useful lives in the net
amount of $275.8 million. For more information regarding our acquisitions see, “— Overview” and Note 3 to our consolidated
financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2012.
Other Income (Expense), Net
Year Ended December 31,
2012
2011
2010
2012
Compared to
2011
2011
Compared to
2010
(In thousands)
Other income (expense), net
$
9,299
$
(288) $
(1,473) $
9,587
$
1,185
Other income (expense), net is primarily comprised of remeasurement of foreign currency transaction gains (losses),
realized gains (losses) related to changes in the fair value of our investments that have a decline in fair value that is considered
other-than-temporary, recognized gains (losses) related to investments and interest expense which was not material for all
periods presented.
Other income (expense), net increased when comparing 2012 to 2011 primarily due to $16.5 million increase in gain on
our strategic investments due to the sale of companies that we invested in, partially offset by a loss on remeasurement of our
foreign currency transactions of $7.9 million.
Other income (expense), net increased when comparing 2011 to 2010 primarily due to a gain on remeasurement of our
foreign currency transactions of $3.5 million and a decrease in losses recognized on prepayments at par of securities purchased
at a premium within our available-for-sale investment portfolio of $0.6 million partially offset by an impairment recognized on
47
a cost method investment of $3.5 million. For more information see “— Liquidity and Capital Resources” and Note 4 to our
consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2012.
Income Taxes
We and certain of our subsidiaries are subject to U.S. federal income taxes, as well as income taxes of multiple state and
foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S., income tax
examinations by tax authorities for years prior to 2009.
In the ordinary course of global business, there are transactions for which the ultimate tax outcome is uncertain and
judgment is required in determining the worldwide provision for income taxes. We provide for income taxes on transactions
based on our estimate of the probable liability. We adjust our provision as appropriate for changes that impact our underlying
judgments. Changes that impact provision estimates include such items as jurisdictional interpretations on tax filing positions
based on the results of tax audits and general tax authority rulings. Due to the evolving nature of tax rules combined with the
large number of jurisdictions in which we operate, it is possible that our estimates of our tax liability and the realizability of our
deferred tax assets could change in the future, which may result in additional tax liabilities and adversely affect our results of
operations, financial condition and cash flows.
In June 2010, we reached a settlement in principle with the Internal Revenue Service, or IRS, regarding certain
previously disclosed income tax deficiencies asserted in a Revenue Agent’s Report, or the RAR, the terms of which were
approved in June 2012, or the Final Approval. Under the terms of the settlement, we agreed to an assessment of income tax
deficiencies in full settlement of all open claims under the RAR and resolved with finality for future years all of the transfer
pricing issues raised in the RAR. Based on this, we incurred a charge of $13.1 million in 2010 in accordance with the
authoritative guidance. In connection with the Final Approval, we finalized the tax deficiency calculations and formally closed
all of our open issues with the IRS relating to the 2004 and 2005 tax years. Because there were no changes from the agreement
reached in 2010, no additional amounts have been included in income tax expense during 2012.
Also, in June 2012, we closed our IRS examination for the 2006 through 2008 tax years. We recognized a net tax benefit
of $30.0 million in 2012 related to the closing of tax audits with the IRS for the 2006 through 2008 tax years, due to the
reduction of the liability for uncertain tax positions for the closed tax years.
We are required to estimate our income taxes in each of the jurisdictions in which we operate as part of the process of
preparing our consolidated financial statements. At December 31, 2012, we had approximately $59.3 million in net deferred tax
assets. The authoritative guidance requires a valuation allowance to reduce the deferred tax assets reported if, based on the
weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We
review deferred tax assets periodically for recoverability and make estimates and judgments regarding the expected geographic
sources of taxable income and gains from investments, as well as tax planning strategies in assessing the need for a valuation
allowance. At December 31, 2012, we determined that $18.2 million valuation allowance relating to deferred tax assets for net
operating losses and tax credits was necessary. If the estimates and assumptions used in our determination change in the future,
we could be required to revise our estimates of the valuation allowances against our deferred tax assets and adjust our
provisions for additional income taxes.
We maintain certain strategic management and operational activities in overseas subsidiaries and our foreign earnings are
taxed at rates that are generally lower than in the United States. We do not expect to remit earnings from our foreign
subsidiaries. Our effective tax rate was approximately 14.1% for the year ended December 31, 2012 and 17.4% for the year
ended December 31, 2011. The decrease in the effective tax rate when comparing the year ended December 31, 2012 to the
year ended December 31, 2011 was primarily due to the impact of the IRS settlement for the tax years 2006 through 2008,
partially offset by the expiration of the U.S. research and development tax credit for the 2012 tax year.
Our effective tax rate generally differs from the U.S. federal statutory rate of 35% due primarily to lower tax rates on
earnings generated by our foreign operations that are taxed primarily in Switzerland. We have not provided for U.S. taxes for
those earnings because we plan to reinvest all of those earnings indefinitely outside the United States. Our effective tax rate
will fluctuate based on the mix of earnings from our U.S. and foreign jurisdictions. Accordingly, earnings from the production
and distribution of our products and services through our foreign headquarters in Switzerland are currently taxed at lower
income tax rates than earnings from our U.S. operations.
The federal research and development credit expired on December 31, 2011. On January 2, 2013, the American Taxpayer
Relief Act of 2012 was signed into law. Under this act, the federal research and development credit was retroactively extended
for amounts paid or incurred after December 31, 2011 and before January 1, 2014. The effects of these changes in the tax law
will result in net tax benefits of approximately $9.4 million, which will be recognized in the first quarter of 2013, which is the
quarter in which the law was enacted.
48
Liquidity and Capital Resources
During 2012, we generated operating cash flows of $818.5 million. These operating cash flows related primarily to net
income of $352.5 million, adjusted for, among other things, non-cash charges, including depreciation and amortization
expenses of $214.9 million and stock-based compensation expense of $149.9 million. Also contributing to these cash inflows
was an aggregate increase in operating assets and liabilities of $180.5 million, net of effects of acquisitions. Our investing
activities used $357.9 million of cash consisting primarily of cash paid for acquisitions of $487.2 million, the purchase of
property and equipment of $123.0 million and $34.4 million in cash paid for licensing agreements and product related
intangible assets and other investments. These investing cash outflows were partially offset by net sales of investments of
$258.9 million. Our financing activities used cash of $149.8 million primarily due to stock repurchases of $251.0 million. This
financing cash outflow was partially offset by proceeds received from the issuance of common stock under our employee stock-
based compensation plans of $108.4 million.
During 2011, we generated operating cash flows of $679.1 million. These operating cash flows related primarily to net
income of $355.6 million, adjusted for, among other things, non-cash charges including depreciation and amortization expenses
of $159.3 million and stock-based compensation expense of $92.9 million. Also contributing to these cash inflows was an
aggregate increase in operating assets and liabilities of $73.9 million, net of the effects of acquisitions. Our investing activities
used $451.2 million of cash consisting primarily of cash paid for acquisitions of $455.4 million, the purchase of property and
equipment of $111.9 million and $32.3 million in cash paid for licensing agreements and product related intangible assets and
other investments. These investing cash outflows were partially offset by net sales of investments of $148.4 million. Our
financing activities used cash of $292.6 million primarily due to stock repurchases of $424.8 million. This financing cash
outflow was partially offset by proceeds received from the issuance of common stock under our employee stock-based
compensation plans of $125.6 million.
Historically, significant portions of our cash inflows were generated by our operations. We currently expect this trend to
continue throughout 2013. We believe that our existing cash and investments together with cash flows expected from
operations will be sufficient to meet expected operating and capital expenditure requirements for the next 12 months. We
continue to search for suitable acquisition candidates and could acquire or make investments in companies we believe are
related to our strategic objectives. We could from time to time seek to raise additional funds through the issuance of debt or
equity securities for larger acquisitions.
Cash, Cash Equivalents and Investments
Cash, cash equivalents and investments
December 31,
2012
2011
2012
Compared to
2011
$
1,523,944
(In thousands)
$
1,477,601
$
46,343
The increase in cash, cash equivalents and investments at December 31, 2012 as compared to December 31, 2011, is
primarily due to cash provided by our operating activities of $818.5 million and cash received from the issuance of common
stock under our employee stock-based compensation plans of $108.4 million, partially offset by cash paid for acquisitions, net
of cash acquired, of $487.2 million, expenditures made on stock repurchases of $251.0 million, purchases of property and
equipment of $123.0 million and purchases of cost method investments and product-related intangible assets of $34.4 million.
As of December 31, 2012, $779.8 million of the $1,523.9 million of cash, cash equivalents and investments was held by our
foreign subsidiaries. If these funds are needed for our operations in the United States, we would be required to accrue and pay
U.S. taxes to repatriate these funds. Our current plans are not expected to require repatriation of cash and investments to fund
our U.S. operations and, as a result, we intend to permanently reinvest our foreign earnings. See “– Liquidity and Capital
Resources.” We generally invest our cash and cash equivalents in investment grade, highly liquid securities to allow for
flexibility in the event of immediate cash needs. Our short-term and long-term investments primarily consist of interest-bearing
securities.
Fair Value Measurements
The authoritative guidance defines fair value as an exit price, representing the amount that would either be received to
sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a
market-based measurement that should be determined based on assumptions that market participants would use in pricing an
asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value as follows:
•
Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;
49
•
•
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop
its own assumptions.
Available-for-sale securities included in Level 2 are valued utilizing inputs obtained from an independent pricing service,
or the Service, which uses quoted market prices for identical or comparable instruments rather than direct observations of
quoted prices in active markets. The Service gathers observable inputs for all of our fixed income securities from a variety of
industry data providers including, for example, large custodial institutions and other third-party sources. Once the observable
inputs are gathered by the Service, all data points are considered and an average price is determined. The Service’s providers
utilize a variety of inputs to determine their quoted prices. These inputs may include interest rates, known historical trades,
yield curve information, benchmark data, prepayment speeds, credit quality and broker/dealer quotes. Substantially all of our
available-for-sale investments are valued utilizing inputs obtained from the Service and accordingly are categorized as Level 2
in the table below. We periodically independently assess the pricing obtained from the Service and historically have not
adjusted the Service's pricing as a result of this assessment. Available-for-sale securities are included in Level 3 when relevant
observable inputs for a security are not available.
Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect
the classification of assets and liabilities within the fair value hierarchy. In certain instances, the inputs used to measure fair
value may meet the definition of more than one level of the fair value hierarchy. The input with the lowest level priority is used
to determine the applicable level in the fair value hierarchy.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Our fixed income available-for-sale security portfolio generally consists of high quality, investment grade securities from
diverse issuers with a minimum credit rating of A-/A3 and a weighted-average credit rating of AA-/Aa3. We values these
securities based on pricing from the Service, whose sources may use quoted prices in active markets for identical assets (Level
1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair
value, and accordingly, we classify all of our fixed income available-for-sale securities as Level 2. See Note 4 to our
consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2012 for more
information regarding our available-for-sale investments.
We measure our cash flow hedges, which are classified as Prepaid expenses and other current assets and Accrued
expenses and other current liabilities, at fair value based on indicative prices in active markets (Level 2 inputs).
Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)
We have invested in convertible debt securities of certain early-stage entities that are classified as available-for-sale
investments. As quoted prices in active markets or other observable inputs were not available for these investments, in order to
measure them at fair value, we utilized a discounted cash flow model using a discount rate reflecting the market risk inherent in
holding securities of an early-stage enterprise, adjusted by the probability-weighted exit possibilities associated with the
convertible debt securities. This methodology required us to make assumptions that were not directly or indirectly observable
regarding the fair value of the convertible debt securities; accordingly they are a Level 3 valuation and is included in the
"Purchases of Level 3 securities" line in the table below. During the third quarter of 2012, one of these investments in a
convertible debt security with a carrying amount of $5.0 million was determined to be impaired based on the discounted cash
flow model referenced above and has been written down to its fair value of $2.5 million, resulting in an impairment charge of
$2.5 million. The valuation performed to determine the fair value of the convertible debt security required us to make
assumptions that were not directly or indirectly observable; accordingly it is a Level 3 valuation and is included in the table
below. See Note 4 for more information regarding our available-for-sale investments.
Balance at December 31, 2011
Purchases of Level 3 securities
Transfers out of Level 3
Total realized losses included in earnings
Balance at December 31, 2012
Investments
(in thousands)
$
$
3,696
7,605
(5,460)
(2,500)
3,341
Transfers out of Level 3 relate to certain of our investments in convertible debt securities of early-stage entities that were
classified as available-for-sale investments to cost method investments upon conversion to equity ownership, which are
50
included in Other assets in our accompanying consolidated balance sheets. Realized losses included in earnings for the period
are reported in Other income (expense), net in the accompanying consolidated statements of income.
Assets Measured at Fair Value on a Non-recurring Basis Using Significant Unobservable Inputs (Level 3)
During 2012, certain of our cost method investments with a carrying value of $13.0 million were determined to be
impaired and have been written down to their combined fair value of $9.5 million, resulting in an impairment charge of $3.5
million, which is included in Other income (expense), net in our consolidated financial statements for the year ended
December 31, 2012. In determining the fair value of cost method investments we consider many factors including but not
limited to operating performance of the investee, the amount of cash that the investee has on-hand, the ability to obtain
additional financing and the overall market conditions in which the investee operates. The fair value of the cost method
investment represents a Level 3 valuation as the assumptions used in valuing this investment were not directly or indirectly
observable.
Additional Disclosures Regarding Fair Value Measurements
The carrying value of accounts receivable, accounts payable and accrued expenses and other current liabilities
approximate their fair value due to the short maturity of these items.
Accounts Receivable, Net
Accounts receivable
Allowance for returns
Allowance for doubtful accounts
Accounts receivable, net
December 31,
2012
2011
2012
Compared to
2011
(In thousands)
$
$
$
637,403
(2,564)
(3,883)
630,956
$
488,356
(1,361)
(2,564)
484,431
$
$
149,047
(1,203)
(1,319)
146,525
The increase in accounts receivable at December 31, 2012 compared to December 31, 2011 was primarily due to increase
in sales, particularly in the last month of 2012 compared to the last month of 2011. The activity in our allowance for returns
was comprised primarily of $10.7 million of provisions for returns recorded during 2012 partially offset by $9.5 million in
credits issued for returns. The activity in our allowance for doubtful accounts was comprised primarily of $2.9 million in
additional provisions for doubtful accounts of which $1.1 million was in connection with our acquisitions during 2012, offset
by $1.6 million of uncollectible accounts written off, net of recoveries.
From time to time, we could maintain individually significant accounts receivable balances from our distributors or
customers, which are comprised of large business enterprises, governments and small and medium-sized businesses. If the
financial condition of our distributors or customers deteriorates, our operating results could be adversely affected. At
December 31, 2012, one distributor, Ingram Micro, accounted for 11% of our accounts receivable. At December 31, 2011, one
distributor, Ingram Micro, accounted for 14% of our accounts receivable. For more information regarding significant customers
see Note 11 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended
December 31, 2012.
Stock Repurchase Program
Our Board of Directors authorized an ongoing stock repurchase program with a total repurchase authority granted to us of
$3.4 billion. We may use the approved dollar authority to repurchase stock at any time until the approved amounts are
exhausted. The objective of our stock repurchase program is to improve stockholders’ returns. At December 31, 2012,
approximately $335.6 million was available to repurchase common stock pursuant to the stock repurchase program. All shares
repurchased are recorded as treasury stock in our consolidated balance sheets included in this Annual Report on Form 10-K for
the year ended December 31, 2012. A portion of the funds used to repurchase stock over the course of the program was
provided by proceeds from employee stock option exercises and the related tax benefit.
We are authorized to make open market purchases of our common stock using general corporate funds through open
market purchases or pursuant to a Rule 10b5-1 plan. Additionally, from time to time, we may enter into structured stock
repurchase arrangements with large financial institutions using general corporate funds in order to lower the average cost to
acquire shares. These programs include terms that require us to make up-front payments to the counterparty financial institution
and result in the receipt of stock during or at the end of the agreement or the receipt of either stock or cash at the maturity of the
agreement, depending on market conditions. We did not enter into any structured stock repurchase agreements in 2012 or 2011.
51
During the year ended December 31, 2012, we expended approximately $251.0 million on open market purchases,
repurchasing 3,550,817 shares of outstanding common stock at an average price of $70.69.
During the year ended December 31, 2011, we expended approximately $424.8 million on open market purchases,
repurchasing 6,275,470 shares of outstanding common stock at an average price of $67.70.
During the year ended December 31, 2010, we expended approximately $434.8 million on open market purchases,
repurchasing 8,157,400 shares of outstanding common stock at an average price of $53.31. In addition, during the third quarter
of 2010, we made an up-front payment of $15.0 million to a financial institution related to a structured stock repurchase
agreement. At the maturity of the agreement in the fourth quarter of 2010, we received $16.1 million in cash, including
premiums, and did not take delivery of any shares related to the agreement due to market conditions.
Shares for Tax Withholding
During the years ended December 31, 2012, 2011 and 2010, we withheld 269,745 shares, 182,203 shares and 123,489
shares, respectively, from stock units that vested. Amounts withheld to satisfy minimum tax withholding obligations that arose
on the vesting of stock unit awards was $20.2 million for 2012, $13.3 million for 2011 and $6.3 million for 2010. These shares
are reflected as treasury stock in our consolidated balance sheets included in this Annual Report on Form 10-K for the year
ended December 31, 2012 and the related cash outlays reduce our total stock repurchase authority.
Contractual Obligations and Off-Balance Sheet Arrangement
Contractual Obligations
We have certain contractual obligations that are recorded as liabilities in our consolidated financial statements. Other
items, such as operating lease obligations, are not recognized as liabilities in our consolidated financial statements, but are
required to be disclosed in the notes to our consolidated financial statements.
The following table summarizes our significant contractual obligations at December 31, 2012 and the future periods in
which such obligations are expected to be settled in cash. Additional details regarding these obligations are provided in the
notes to our consolidated financial statements (in thousands):
Operating lease obligations(1)
Purchase obligations(2)
Total contractual obligations(3)
Total
261,395
25,300
286,695
$
$
$
$
Payments due by period
Less than 1 Year
1-3 Years
3-5 Years
66,554
25,300
91,854
$
$
105,614
—
105,614
$
$
56,922
—
56,922
More than 5 Years
32,305
$
—
32,305
$
(1)
In 2012, we entered into a lease to acquire additional office space in Santa Clara, CA. The rental commencement date
will not begin until 2015 and the pricing for the lease will not be finalized until a future date. Accordingly, the future
payment obligations related to this lease are not included in the table above.
(2) Purchase obligations represent non-cancelable commitments to purchase inventory ordered before year-end of
approximately $17.4 million and a contingent obligation to purchase inventory, which is based on amount of usage, of
approximately $7.9 million.
(3) Total contractual obligations do not include agreements where our commitment is variable in nature or where
cancellations without payment provisions exist and excludes $43.9 million of liabilities related to uncertain tax
positions recorded in accordance with authoritative guidance, because we could not make reasonably reliable
estimates of the period or amount of cash settlement with the respective taxing authorities. See Note 10 to our
consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2012
for further information.
As of December 31, 2012, we did not have any individually material capital lease obligations or other material long-term
commitments reflected on our consolidated balance sheets.
Office Leases
We have an operating lease obligation through 2017 related to a property that is not utilized. At December 31, 2012, the
total remaining obligation on this lease was approximately $1.4 million, all of which was accrued as of December 31, 2012,
and is reflected in accrued expenses and other current liabilities and other liabilities in our consolidated financial statements
included in this Annual Report on Form 10-K for the year ended December 31, 2012.
52
Off-Balance Sheet Arrangements
We do not have any special purpose entities or off-balance sheet financing arrangements.
53
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 differ 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 financial market risks, including changes in foreign currency exchange rates and interest rates that
could adversely affect our results of operations or financial condition. To mitigate foreign currency risk, we utilize derivative
financial instruments. The counterparties to our derivative instruments are major financial institutions. All of the potential
changes noted below are based on sensitivity analyses performed on our financial position as of December 31, 2012. Actual
results could differ materially.
Discussions of our accounting policies for derivatives and hedging activities are included in Notes 2 and 12 to our
consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2012.
Exposure to Exchange Rates
A substantial majority of our overseas expense and capital purchasing activities are transacted in local currencies,
including Euros, British pounds sterling, Japanese yen, Australian dollars, Swiss francs, Indian rupees, Hong Kong dollars,
Canadian dollars, Singapore dollars and Chinese renminbi. To reduce our exposure to a reduction in U.S. dollar value and the
volatility of future cash flows 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
significantly reduces, but does not entirely eliminate, the impact of currency exchange rate movements.
At December 31, 2012 and 2011, we had in place foreign currency forward sale contracts with a notional amount of
$104.2 million and $78.0 million, respectively, and foreign currency forward purchase contracts with a notional amount of
$252.8 million and $187.4 million, respectively. At December 31, 2012, these contracts had an aggregate fair value asset of
$0.4 million and at December 31, 2011, these contracts had an aggregate fair value liability of $5.6 million. Based on a
hypothetical 10% appreciation of the U.S. dollar from December 31, 2012 market rates, the fair value of our foreign currency
forward contracts would decrease by $14.9 million. Conversely, a hypothetical 10% depreciation of the U.S. dollar from
December 31, 2012 market rates would increase the fair value of our foreign currency forward contracts by $14.9 million,
resulting in a net asset position. In these hypothetical movements, foreign operating costs 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 effects of changes in exchange rates quantified above, changes in exchange rates could also change the dollar value
of sales and affect the volume of sales as the prices of our competitors’ products become more or less attractive. We do not
anticipate any material adverse impact to our consolidated financial position, results of operations, or cash flows as a result of
these foreign exchange forward contracts.
Exposure to Interest Rates
We have interest rate exposures resulting from our interest-based available-for-sale investments. We maintain available-
for-sale investments in debt securities and we limit the amount of credit exposure to any one issuer or type of instrument. The
securities in our investment portfolio are not leveraged. The securities classified 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 and reinvestment income. If market
interest rates were to increase by 100 basis points from December 31, 2012 and 2011 levels, the fair value of the available-for-
sale portfolio would decline by approximately $9.2 million and $10.7 million, respectively. If market interest rates were to
decrease by 100 basis points from December 31, 2012 and 2011 levels, the fair value of the available-for-sale portfolio would
increase by approximately $5.1 million and $3.5 million, respectively. These amounts are determined by considering the impact
of the hypothetical interest rate movements on our available-for-sale and trading investment portfolios. This analysis does not
consider the effect of credit risk as a result of the changes in overall economic activity that could exist in such an environment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements and related financial statement schedule, together with the report of independent
registered public accounting firm, appear at pages F-1 through F-38 of this Annual Report on Form 10-K for the year ended
December 31, 2012.
54
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There have been no changes in or disagreements with our independent registered public accountants on accounting or
financial disclosure matters during our two most recent fiscal years.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of December 31, 2012, our management, with the participation of our President and Chief Executive Officer and our
Executive Vice President, Operations and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures pursuant to Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange
Act. Based upon that evaluation, our President and Chief Executive Officer and our Executive Vice President, Operations and
Chief Financial Officer concluded that, as of December 31, 2012, our disclosure controls and procedures were effective in
ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s
rules and forms, including ensuring that such material information is accumulated and communicated to our management,
including our President and Chief Executive Officer and our Executive Vice President, Operations and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
During the quarter ended December 31, 2012, there were no changes in our internal control over financial reporting that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as
such term is defined in Exchange Act Rule 13a – 15(f). Our internal control system was designed to provide reasonable
assurance to our management and the Board of Directors regarding the preparation and fair presentation of published financial
statements. All internal control systems, no matter how well designed have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation. Our management assessed the effectiveness of our internal control over financial reporting as of December 31,
2012. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission, or COSO, in Internal Control—Integrated Framework (the COSO criteria). Based on our
assessment we believe that, as of December 31, 2012, our internal control over financial reporting is effective based on those
criteria. The effectiveness of our internal control over financial reporting as of December 31, 2012 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as stated in their report which appears below.
55
The Board of Directors and Stockholders of Citrix Systems, Inc.
Report of Independent Registered Public Accounting Firm
We have audited Citrix Systems, Inc.'s internal control over financial reporting as of December 31, 2012, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Citrix Systems, Inc.'s management is responsible for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Citrix Systems, Inc. maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2012, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Citrix Systems, Inc. as of December 31, 2012 and 2011, and the related consolidated
statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December
31, 2012 of Citrix Systems, Inc. and our report dated February 21, 2013 expressed an unqualified opinion thereon.
Boca Raton, Florida
February 21, 2013
/s/ Ernst & Young LLP
Certified Public Accountants
56
ITEM 9B. OTHER INFORMATION
Our policy governing transactions in our securities by our directors, officers and employees permits our officers, directors
and certain other persons to enter into trading plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as
amended. We have been advised that Stephen Dow, a member of our Board of Directors and Catherine Courage, our Senior
Vice President, Customer Experience, each entered into a new trading plan in the fourth quarter of 2012 in accordance with
Rule 10b5-1 and our policy governing transactions in our securities to exercise soon to expire stock options. We have also been
advised that, in the fourth quarter of 2012, Murray Demo, a member of our Board of Directors, entered into an amendment to
the trading plan he previously entered into in the third quarter of 2012. We undertake no obligation to update or revise the
information provided herein, including for revision or termination of an established trading plan.
57
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement
pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than
120 days after the close of the Company’s fiscal year ended December 31, 2012.
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement
pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than
120 days after the close of the Company’s fiscal year ended December 31, 2012.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement
pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than
120 days after the close of the Company’s fiscal year ended December 31, 2012.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement
pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than
120 days after the close of the Company’s fiscal year ended December 31, 2012.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement
pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than
120 days after the close of the Company’s fiscal year ended December 31, 2012.
58
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) 1. Consolidated Financial Statements.
PART IV
For a list of the consolidated financial information included herein, see page F-1.
2. Financial Statement Schedules.
The following consolidated financial statement schedule is included in Item 8:
Valuation and Qualifying Accounts
3. List of Exhibits.
Exhibit No.
3.1
3.2
3.3
3.4
4.1
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
Description
Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to
Exhibit 3.2 to the Company's Registration Statement on Form S-1 (File No. 33-98542), as amended)
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference herein to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year
ended December 31, 2007)
Amended and Restated By-laws of the Company (incorporated by reference herein to Exhibit 3.1 to the
Company's Current Report on Form 8-K dated as of December 12, 2007)
Amendment No. 1 to the Amended and Restated By-laws of the Company (incorporated herein by reference
to Exhibit 3.1 to the Company's Current Report on Form 8-K dated as of February 20, 2009)
Specimen certificate representing Common Stock (incorporated herein by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-1 (File No. 33-98542), as amended)
Second Amended and Restated 1995 Non-Employee Director Stock Option Plan (incorporated by reference
herein to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2007)
Amended and Restated 2000 Director and Officer Stock Option and Incentive Plan (incorporated by
reference herein to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended
December 31, 2008)
2000 Director and Officer Stock Option and Incentive Plan, Non-Qualified Stock Option Agreement
(incorporated by reference herein to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year
ended December 31, 2009)
2000 Director and Officer Stock Option and Incentive Plan, Incentive Stock Option Agreement (incorporated
by reference herein to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended
December 31, 2009)
Amended and Restated 2005 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 of the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010)
First Amendment to Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan (incorporated
herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated as of May 28, 2010)
Second Amendment to the Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan
(incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated as of
June 2, 2011)
Third Amendment to the Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan
(incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated as of
June 2, 2011)
Fourth Amendment to the Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan
(incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated as of
May 31, 2012)
Form of Global Stock Option Agreement under the Citrix Systems, Inc. Amended and Restated 2005 Equity
Incentive Plan (incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2011)
Form of Restricted Stock Unit Agreement For Non-Employee Directors under the Citrix Systems, Inc.
Amended and Restated 2005 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 of the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2011)
Form of Global Restricted Stock Unit Agreement under the Citrix Systems, Inc. Amended and Restated 2005
Equity Incentive Plan (Performance Based Awards) (incorporated herein by reference to Exhibit 10.3 of the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2011)
59
Exhibit No.
10.13*
10.14*
10.15*
10.16*
Description
Form of Global Restricted Stock Unit Agreement under the Citrix Systems, Inc. Amended and Restated 2005
Equity Incentive Plan (Time Based Awards) (incorporated herein by reference to Exhibit 10.4 of the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2011)
Form of Global Restricted Stock Unit Agreement under the Citrix Systems, Inc. Amended and Restated 2005
Equity Incentive Plan (Long Term Incentive) (incorporated by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2012)
Form of Long Term Incentive Agreement under the Citrix Systems, Inc. Amended and Restated 2005 Equity
Incentive Plan (incorporated by reference herein to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2009)
Amended and Restated 2005 Employee Stock Purchase Plan (incorporated by reference herein to Exhibit
10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011)
10.17*†
Amendment to Amended and Restated 2005 Employee Stock Purchase Plan
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24*
10.25*†
21.1†
23.1†
24.1
31.1†
31.2†
32.1††
101†††
*
†
††
†††
Citrix Systems, Inc. Executive Bonus Plan (incorporated by reference herein to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2008)
Change in Control Agreement dated as of August 4, 2005 by and between the Company and Mark B.
Templeton (incorporated by reference herein to Exhibit 10.11 to the Company's Annual Report on Form 10-K
for the year ended December 31, 2010)
Form of Change in Control Agreement by and between the Company and each of David J. Henshall, David R.
Freidman, Brett M. Caine, Alvaro J. Monserrat and John Gordon Payne (incorporated by reference herein to
Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010)
Form of First Amendment to Change of Control Agreement (Chief Executive Officer) between the Company
and Mark Templeton (incorporated by reference herein to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2008)
Form of First Amendment to Change of Control Agreement between the Company and each of Brett M. Caine,
David J. Henshall, David R. Friedman, Alvaro J. Monserrat, John Gordon Payne and Wesley Wasson (together
with Mark Templeton, the “Executive Officers”) (incorporated by reference herein to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2008)
Form of Amendment to Change in Control Agreements by and between the Company and each of David J.
Henshall, David R. Freidman, Brett M. Caine, Alvaro J. Monserrat and John Gordon Payne (incorporated
herein by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2011)
Form of Indemnification Agreement by and between the Company and each of its Directors and Executive
Officers (incorporated herein by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2011)
Form of 2012 Change in Control Agreement by and between the Company and Catherine Courage
List of Subsidiaries
Consent of Independent Registered Public Accounting Firm
Power of Attorney (included in signature page)
Rule 13a-14(a) / 15d-14(a) Certifications
Rule 13a-14(a) / 15d-14(a) Certifications
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
XBRL (eXtensible Business Reporting Language). The following materials from Citrix Systems, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 2012 formatted in XBRL: (i) the Consolidated Balance
Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive
Income (iv) the Consolidated Statements of Equity, (v) the Consolidated Statements of Cash Flows and (vi)
notes to consolidated financial statements.
Indicates a management contract or a compensatory plan, contract or arrangement.
Filed herewith.
Furnished herewith.
As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11
and 12 of the Securities Act of 1933 and Section 18 of the Securities Act of 1934.
60
(b) Exhibits.
The Company hereby files as part of this Annual Report on Form 10-K for the year ended December 31, 2012, 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, 100 F Street, N.E., Washington, D.C.,
20549 and at the Commission’s regional offices at 175 W. Jackson Boulevard, Suite 900, Chicago, IL 60604 and 3 World
Financial Center, Suite 400, New York, NY 10281-1022.
(c) Financial Statement Schedule.
The Company hereby files as part of this Annual Report on Form 10-K for the year ended December 31, 2012 the
consolidated financial statement schedule listed in Item 15(a)(2) above, which is attached hereto.
61
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 21st day
of February, 2013.
SIGNATURES
By:
CITRIX SYSTEMS, INC.
/s/ MARK B. TEMPLETON
Mark B. Templeton
President and Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Citrix Systems, Inc., hereby severally constitute and appoint Mark B.
Templeton and David J. Henshall, 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 21st day of February, 2013.
Signature
Title(s)
/S/ MARK B. TEMPLETON
Mark B. Templeton
President, Chief Executive Officer and Director (Principal
Executive Officer)
/S/ DAVID J. HENSHALL
David J. Henshall
Chief Financial Officer and Executive Vice President,
Operations (Principal Financial and Accounting Officer)
/S/ THOMAS F. BOGAN
Chairman of the Board of Directors
Thomas F. Bogan
/S/ NANCI CALDWELL
Director
Nanci Caldwell
/S/ MURRAY J. DEMO
Director
Murray J. Demo
/S/ STEPHEN M. DOW
Director
Stephen M. Dow
/S/ ASIFF S. HIRJI
Director
Asiff S. Hirji
/S/ GARY E. MORIN
Director
Gary E. Morin
/S/ GODFREY R. SULLIVAN
Director
Godfrey R. Sullivan
62
List of Financial Statements and Financial Statement Schedule
CITRIX SYSTEMS, INC.
The following consolidated financial statements of Citrix Systems, Inc. are included in Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets — December 31, 2012 and 2011
Consolidated Statements of Income — Years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Comprehensive Income — Years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Equity — Years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Cash Flows — Years ended December 31, 2012, 2011 and 2010
Notes to Consolidated Financial Statements
The following consolidated financial statement schedule of Citrix Systems, Inc. is included in Item 15(a):
Schedule II Valuation and Qualifying Accounts
F-2
F-3
F-4
F-5
F-6
8
F-
9
F-
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 Registered Public Accounting Firm
The Board of Directors and Stockholders of Citrix Systems, Inc.
We have audited the accompanying consolidated balance sheets of Citrix Systems, Inc. as of December 31, 2012 and 2011, and
the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the
period ended December 31, 2012. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These
financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion
on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position
of Citrix Systems, Inc. at December 31, 2012 and 2011, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Citrix
Systems, Inc.'s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 21, 2013 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Certified Public Accountants
Boca Raton, Florida
February 21, 2013
F-2
CITRIX SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
Current assets:
Assets
Cash and cash equivalents
Short-term investments — available-for-sale
Accounts receivable, net of allowances of $6,448 and $3,925 at December 31, 2012 and
2011, respectively
Inventories, net
Prepaid expenses and other current assets
Current portion of deferred tax assets, net
Total current assets
Long-term investments — available-for-sale
Property and equipment, net
Goodwill
Other intangible assets, net
Long-term portion of deferred tax assets, net
Other assets
Total assets
Current liabilities:
Liabilities and Equity
Accounts payable
Accrued expenses and other current liabilities
Income taxes payable
Current portion of deferred tax liabilities, net
Current portion of deferred revenues
Total current liabilities
Long-term portion of deferred revenues
Other liabilities
Commitments and contingencies
Stockholders' equity:
Preferred stock at $.01 par value: 5,000 shares authorized, none issued and outstanding
Common stock at $.001 par value: 1,000,000 shares authorized; 287,123 and 282,774
shares issued and outstanding at December 31, 2012 and 2011, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
December 31,
2012
December 31,
2011
(In thousands, except par value)
$
643,609
285,022
$
333,296
406,461
$
$
630,956
10,723
106,579
36,846
1,713,735
595,313
303,294
1,518,219
556,205
43,097
66,539
4,796,402
71,116
256,259
49,346
876
965,276
1,342,873
232,719
99,033
$
$
484,431
8,507
95,419
44,916
1,373,030
737,844
277,429
1,239,120
343,372
67,479
61,267
4,099,541
58,034
214,836
8,300
79,318
818,642
1,179,130
141,241
48,680
—
—
287
3,691,111
2,564,018
(7,705)
6,247,711
283
3,385,053
2,211,471
(11,561)
5,585,246
Less — common stock in treasury, at cost (100,781 and 96,960 shares at December 31,
2012 and 2011, respectively)
Total stockholders' equity
Total liabilities and stockholders' equity
(3,125,934)
3,121,777
4,796,402
$
(2,854,756)
2,730,490
4,099,541
$
See accompanying notes.
F-3
CITRIX SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2012
2011
2010
(In thousands, except per share information)
Revenues:
Product and licenses
Software as a service
License updates and maintenance
Professional services
Total net revenues
Cost of net revenues:
Cost of product and license revenues
Cost of services and maintenance revenues
Amortization of product related intangible assets
Total cost of net revenues
Gross margin
Operating expenses:
Research and development
Sales, marketing and services
General and administrative
Amortization of other intangible assets
Restructuring
Total operating expenses
Income from operations
Interest income
Other income (expense), net
Income before income taxes
Income taxes
Consolidated net income
Less: Net loss attributable to non-controlling interest
Net income attributable to Citrix Systems, Inc.
Net income per share attributable to Citrix Systems, Inc.
stockholders:
Net income per share attributable to Citrix Systems, Inc.
stockholders — basic
Net income per share attributable to Citrix Systems, Inc.
stockholders — diluted
Weighted average shares outstanding:
$
$
$
Basic
Diluted
$
830,645
$
744,513
$
511,323
1,125,094
119,061
2,586,123
96,962
227,150
80,025
404,137
430,213
940,181
91,485
619,452
360,617
835,386
59,207
2,206,392
1,874,662
74,393
164,465
54,741
293,599
66,682
115,080
50,504
232,266
2,181,986
1,912,793
1,642,396
450,571
1,060,829
245,259
34,549
—
380,674
885,066
213,673
16,390
24
361,376
771,660
173,394
14,279
971
1,791,208
1,495,827
1,321,680
390,778
10,152
9,299
410,229
57,682
352,547
—
416,966
13,819
(288)
430,497
74,867
355,630
692
320,716
14,577
(1,473)
333,820
57,379
276,441
624
352,547
$
356,322
$
277,065
1.89
1.86
$
$
1.90
1.87
$
$
1.49
1.46
186,722
189,129
187,315
190,641
185,959
190,335
See accompanying notes.
F-4
CITRIX SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31,
2012
2011
(In thousands)
2010
Consolidated net income
Other comprehensive income (loss):
$
352,547
$
355,630
$
276,441
Change in foreign currency translation adjustment
2,457
(4,595)
(702)
Available for sale securities:
Change in net unrealized gains
Less: reclassification adjustment for net (gains) losses
included in net income
Net change
(Loss) gain on pension liability
Cash flow hedges:
Change in unrealized gains
Less: reclassification adjustment for net losses (gains)
included in net income
Net change
3,603
(3,443)
160
(3,925)
293
1,343
1,636
634
(653)
(2,784)
5,817
5,164
(8,475)
(11,259)
Other comprehensive income (loss)
3,856
(13,584)
2,376
2,014
4,390
(1,348)
170
1,573
1,743
4,083
Comprehensive income
356,403
342,046
280,524
Less: Comprehensive income attributable to non-controlling
interest
—
Comprehensive income attributable to Citrix Systems, Inc.
$
356,403
$
(692)
341,354
$
(624)
279,900
See accompanying notes.
F-5
CITRIX SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
Common Stock
Shares
264,831
12,800
—
361
—
—
—
—
—
—
—
—
—
277,992
4,472
—
310
—
—
—
—
—
—
—
—
—
282,774
3,983
—
366
—
—
—
—
—
—
—
—
—
287,123
Amount
265
$
12
—
1
—
—
—
—
—
—
—
—
—
278
4
—
1
—
—
—
—
—
—
—
—
—
283
3
—
1
—
—
—
—
—
—
—
—
—
287
$
Balance at December 31, 2009
Shares issued under stock-based compensation plans
Stock-based compensation expense
Common stock issued under employee stock purchase plan
Tax benefit from employer stock plans
Stock repurchases, net
Restricted shares turned in for tax withholding
Purchase of non-controlling interest
Unrealized gain on forward contracts net of
reclassification adjustments and net of taxes
Unrealized gain on available-for-sale securities, net of tax
Foreign currency translation adjustments
Other comprehensive loss on pension liability, net of tax
Net income
Balance at December 31, 2010
Shares issued under stock-based compensation plans
Stock-based compensation expense
Common stock issued under employee stock purchase plan
Tax benefit from employer stock plans
Stock repurchases, net
Restricted shares turned in for tax withholding
Purchase of non-controlling interest
Unrealized loss on forward contracts net of reclassification
adjustments and net of taxes
Unrealized gain on available-for-sale securities, net of tax
Foreign currency translation adjustments
Other comprehensive gain on pension liability, net of tax
Net income
Balance at December 31, 2011
Shares issued under stock-based compensation plans
Stock-based compensation expense
Common stock issued under employee stock purchase plan
Tax benefit from employer stock plans
Stock repurchases, net
Restricted shares turned in for tax withholding
Other
Unrealized gain on forward contracts net of reclassification
adjustments and net of taxes
Unrealized gain on available-for-sale securities, net of tax
Foreign currency translation adjustments
Other comprehensive loss on pension liability, net of tax
Net income
Balance at December 31, 2012
* Amounts do not sum due to rounding.
See accompanying notes.
F-6
Additional
Paid In
Capital
$ 2,587,727
353,543
100,908
17,364
51,544
1,100
—
—
—
—
—
—
—
3,112,186
125,602
89,422
21,098
50,003
—
—
(13,258)
—
—
—
—
—
3,385,053
108,402
145,967
24,888
24,839
—
—
1,962
—
—
—
—
—
$ 3,691,111
Retained
Earnings
$ 1,578,084
Accumulated
Other
Comprehensive
(Loss) Income
$
(2,060)
Common Stock
in Treasury
Shares
(82,222)
Amount
$ (1,975,509)
Non-
Controlling
Interest
$
Total
Equity
$ 2,188,507
(8,157)
(123)
(434,839)
(6,298)
8,221
277,065
1,855,149
(90,502)
(2,416,645 ) *
(624)
7,597
276,441
2,560,588 *
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,743
4,390
(702)
(1,348)
2,023
(11,259)
1,636
(4,595)
634
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,164
160
2,457
(3,925)
—
(7,705)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
356,322
2,211,471
(11,561)
(96,960)
(2,854,756) *
(6,276)
(182)
(424,849)
(13,262)
(3,551)
(270)
(251,008)
(20,170)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(6,905)
(692)
353,555
100,908
17,365
51,544
(433,739)
(6,298)
8,221
1,743
4,390
(702)
(1,348)
125,606
89,422
21,099
50,003
(424,849)
(13,262)
(20,163)
(11,259)
1,636
(4,595)
634
355,630
2,730,490
108,405
145,967
24,889
24,839
(251,008)
(20,170)
1,962
5,164
160
2,457
(3,925)
352,547
$ 2,564,018
$
(100,781)
$ (3,125,934)
$
352,547
$ 3,121,777
Balance at December 31, 2009
Shares issued under stock-based compensation plans
Stock-based compensation expense
Common stock issued under employee stock purchase plan
Tax benefit from employer stock plans
Stock repurchases, net
Restricted shares turned in for tax withholding
Purchase of non-controlling interest
Unrealized gain on forward contracts net of
reclassification adjustments and net of taxes
Unrealized gain on available-for-sale securities, net of tax
Foreign currency translation adjustments
Other comprehensive loss on pension liability, net of tax
Net income
Balance at December 31, 2010
Shares issued under stock-based compensation plans
Stock-based compensation expense
Common stock issued under employee stock purchase plan
Tax benefit from employer stock plans
Stock repurchases, net
Restricted shares turned in for tax withholding
Purchase of non-controlling interest
Unrealized loss on forward contracts net of reclassification
adjustments and net of taxes
Unrealized gain on available-for-sale securities, net of tax
Foreign currency translation adjustments
Other comprehensive gain on pension liability, net of tax
Net income
Balance at December 31, 2011
Shares issued under stock-based compensation plans
Stock-based compensation expense
Common stock issued under employee stock purchase plan
Tax benefit from employer stock plans
Stock repurchases, net
Restricted shares turned in for tax withholding
Other
Unrealized gain on forward contracts net of reclassification
adjustments and net of taxes
Unrealized gain on available-for-sale securities, net of tax
Foreign currency translation adjustments
Other comprehensive loss on pension liability, net of tax
Net income
Balance at December 31, 2012
* Amounts do not sum due to rounding.
Common Stock
Amount
$
265
Shares
264,831
12,800
—
361
Additional
Paid In
Capital
$ 2,587,727
353,543
100,908
17,364
51,544
1,100
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,112,186
125,602
89,422
21,098
50,003
(13,258)
3,385,053
108,402
145,967
24,888
24,839
1,962
278
12
—
1
—
—
—
—
—
—
—
—
—
—
4
1
—
—
—
—
—
—
—
—
—
3
—
1
—
—
—
—
—
—
—
—
—
283
277,992
4,472
—
310
282,774
3,983
—
366
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Retained
Earnings
$ 1,578,084
—
—
—
—
—
—
—
—
—
—
—
277,065
1,855,149
—
—
—
—
—
—
—
—
—
—
—
356,322
2,211,471
—
—
—
—
—
—
—
Accumulated
Other
Comprehensive
(Loss) Income
(2,060)
$
—
—
—
—
—
—
—
1,743
4,390
(702)
(1,348)
—
2,023
—
—
—
—
—
—
—
(11,259)
1,636
(4,595)
634
—
(11,561)
—
—
—
—
—
—
—
5,164
160
2,457
(3,925)
—
(7,705)
287,123
$
287
$ 3,691,111
—
—
—
—
352,547
$ 2,564,018
$
Common Stock
in Treasury
Shares
(82,222)
—
—
—
—
(8,157)
(123)
—
—
—
—
—
—
(90,502)
—
—
—
—
(6,276)
(182)
—
—
—
—
—
—
(96,960)
—
—
—
—
(3,551)
(270)
—
—
—
—
—
—
(100,781)
Amount
$ (1,975,509)
—
—
—
—
(434,839)
(6,298)
—
—
—
—
—
—
(2,416,645 ) *
—
—
—
—
(424,849)
(13,262)
—
—
—
—
—
—
(2,854,756) *
—
—
—
—
(251,008)
(20,170)
—
—
—
—
—
—
$ (3,125,934)
Non-
Controlling
Interest
$
$
—
—
—
—
—
—
—
8,221
—
—
—
—
(624)
7,597
—
—
—
—
—
—
(6,905)
—
—
—
—
(692)
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
Equity
$ 2,188,507
353,555
100,908
17,365
51,544
(433,739)
(6,298)
8,221
1,743
4,390
(702)
(1,348)
276,441
2,560,588 *
125,606
89,422
21,099
50,003
(424,849)
(13,262)
(20,163)
(11,259)
1,636
(4,595)
634
355,630
2,730,490
108,405
145,967
24,889
24,839
(251,008)
(20,170)
1,962
5,164
160
2,457
(3,925)
352,547
$ 3,121,777
F-7
CITRIX SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2012
2011
(In thousands)
2010
$
352,547
$
355,630
$
276,441
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets
Depreciation and amortization of property and equipment
Stock-based compensation expense
(Gain) loss on investments
Provision for doubtful accounts
Provision for product returns
Provision for inventory reserves
Deferred income tax benefit
Tax effect of stock-based compensation
Excess tax benefit from exercise of stock options
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies
Other non-cash items
Total adjustments to reconcile net income to net cash provided by operating activities
Changes in operating assets and liabilities, net of the effects of acquisitions:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Other assets
Accounts payable
Accrued expenses and other current liabilities
Income taxes, net
Deferred revenues
Other liabilities
Total changes in operating assets and liabilities, net of the effects of acquisitions
Net cash provided by operating activities
Investing Activities
Purchases of available-for-sale investments
Proceeds from sales of available-for-sale investments
Proceeds from maturities of available-for-sale investments
Proceeds from repayments of trading securities
Proceeds from the sales of cost method investments
Purchases of property and equipment
Purchases of cost method investments
Cash paid for acquisitions, net of cash acquired
Cash paid for licensing agreements and product related intangible assets
Other
Net cash used in investing activities
Financing Activities
Proceeds from issuance of common stock under stock-based compensation plans
Repayment of acquired debt
Excess tax benefit from exercise of stock options
Purchase of non-controlling interest
Stock repurchases, net
Cash paid for tax withholding on vested stock awards
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Cash Flow Information
Cash paid for income taxes
Cash paid for interest
$
$
$
See accompanying notes.
F-8
114,574
100,299
149,940
(14,477)
1,784
10,743
1,022
(70,791)
24,839
(35,374)
1,706
1,178
285,443
(107,628)
(2,024)
(9,195)
(1,497)
(426)
45,135
(4,408)
216,798
43,782
180,537
818,527
71,131
88,124
92,909
1,343
266
5,541
1,570
(16,229)
50,003
(51,659)
1,895
4,733
249,627
(95,481)
(3,097)
1,407
(562)
(11,758)
(20,996)
25,180
168,994
10,178
73,865
679,122
64,783
73,375
103,758
2,014
2,035
2,717
2,876
(46,676)
51,544
(60,164)
(1,984)
781
195,059
(79,058)
(1,192)
(37,319)
3,785
9,612
49,938
37,501
160,121
1,404
144,792
616,292
(1,435,367)
(1,360,677)
(1,287,438)
1,256,295
437,991
—
24,252
(122,958)
(6,622)
(487,221)
(27,760)
3,450
(357,940)
108,406
(24,346)
35,374
—
(251,008)
(20,170)
1,962
(149,782)
(492)
310,313
333,296
643,609
32,355
305
$
$
$
856,182
652,939
—
—
(111,932)
(16,879)
(455,377)
(15,437)
—
(451,181)
125,606
(11,561)
51,659
(17,207)
(424,849)
(13,262)
(3,000)
(292,614)
1,807
(62,866)
396,162
333,296
12,195
139
$
$
$
474,130
433,792
44,560
—
(75,376)
(9,485)
(20,510)
(16,715)
—
(457,042)
353,557
—
60,164
—
(433,739)
(6,298)
—
(26,316)
1,785
134,719
261,443
396,162
42,902
276
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Citrix Systems, Inc. ("Citrix" or the "Company"), is a Delaware corporation founded on April 17, 1989. Citrix is a cloud
computing company that enables mobile workstyles; empowering people to work and collaborate from anywhere, accessing
enterprise applications and data on any of the latest devices, as easily as they would in their own office; simply and
securely. Citrix cloud computing solutions help IT and service providers build both private and public clouds, leveraging
virtualization and networking technologies to deliver high-performance, elastic and cost-effective services for mobile
workstyles.
Citrix markets and licenses its products directly to enterprise customers, over the Web, and through systems integrators
("SIs"), in addition to indirectly through value-added resellers ("VARs"), value-added distributors ("VADs") and original
equipment manufacturers ("OEMs").
2. SIGNIFICANT ACCOUNTING POLICIES
Consolidation Policy
The consolidated financial statements of the Company include the accounts of its wholly-owned subsidiaries in the
Americas, Europe, the Middle East and Africa (“EMEA”), Asia-Pacific and the Online Services division. All significant
transactions and balances between the Company and its subsidiaries have been eliminated in consolidation. In addition, the
Company presents non-controlling interests of less-than-wholly-owned subsidiaries within the equity section of its consolidated
financial statements in accordance with the authoritative guidance for the presentation and disclosure of non-controlling
interests of a consolidated subsidiary.
Cash and Cash Equivalents
Cash and cash equivalents at December 31, 2012 and 2011 include marketable securities, which are primarily money
market funds, commercial paper, agency, and government securities, municipal securities and corporate securities with initial or
remaining contractual maturities when purchased of three months or less.
Investments
Short-term and long-term investments at December 31, 2012 and 2011 primarily consist of agency securities, corporate
securities, municipal securities and government securities. Investments classified as available-for-sale are stated at fair value
with unrealized gains and losses, net of taxes, reported in accumulated other comprehensive loss. The Company classifies its
available-for-sale investments as current and non-current based on their actual remaining time to maturity. The Company does
not recognize changes in the fair value of its available-for-sale investments in income unless a decline in value is considered
other-than-temporary in accordance with the authoritative guidance.
The Company’s investment policy is designed to limit exposure to any one issuer depending on credit quality. The
Company uses information provided by third parties to adjust the carrying value of certain of its investments to fair value at the
end of each period. Fair values are based on a variety of inputs and may include interest rates, known historical trades, yield
curve information, benchmark data, prepayment speeds, credit quality and broker/dealer quotes.
Accounts Receivable
The Company’s accounts receivable are due primarily from VARs, VADs and end customers. Collateral is not required.
The Company also maintains allowances for doubtful accounts for estimated losses resulting from the inability of the
Company’s customers to make payments. The Company periodically reviews these estimated allowances, including an analysis
of the customers’ payment history and creditworthiness, the age of the trade receivable balances and current economic
conditions that may affect a customer’s ability to make payments. Based on this review, the Company specifically reserves for
those accounts deemed uncollectible. When receivables are determined to be uncollectible, principal amounts of such
receivables outstanding are deducted from the allowance. The allowance for doubtful accounts was $3.8 million and $2.5
million as of December 31, 2012 and 2011, respectively. If the financial condition of a significant distributor or customer were
to deteriorate, the Company’s operating results could be adversely affected. One distributor, Ingram Micro, accounted for 11%
and 14% of gross accounts receivable at December 31, 2012 and 2011, respectively.
Inventory
Inventories are stated at the lower of cost or market on a standard cost basis, which approximates actual cost. The
Company’s inventories primarily consist of finished goods as of December 31, 2012 and December 31, 2011.
F-9
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, office equipment and furniture, the
lesser of the lease term or five years for leasehold improvements, which is the estimated useful life, seven years for the
Company’s enterprise resource planning system and 40 years for buildings.
During 2012 and 2011, the Company retired $5.3 million and $33.1 million, respectively, in property and equipment that
were no longer in use. At the time of retirement, the remaining net book value of these assets was not material and no material
asset retirement obligations were associated with them.
Property and equipment consist of the following:
Buildings
Computer equipment
Software
Equipment and furniture
Leasehold improvements
Less accumulated depreciation and amortization
Land
Total
Long-Lived Assets
December 31,
2012
2011
(In thousands)
$
$
76,202
179,199
271,292
86,483
152,808
765,984
(479,459)
16,769
303,294
$
$
72,100
152,795
224,750
64,493
131,586
645,724
(384,179)
15,884
277,429
The Company reviews for impairment of long-lived assets and certain identifiable 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 flows resulting from the use of the asset
and its eventual disposition. Measurement of an impairment loss is based on the fair value of the asset compared to its carrying
value. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount
or fair value less costs to sell.
During 2012, 2011 and 2010, the Company did not recognize any impairment charges associated with its long-lived
assets. For the year ended December 31, 2012, the Company decided to contribute its CloudStack tradename acquired in
conjunction with its acquisition of Cloud.com to the Apache Software Foundation. As a result, the carrying value of the
CloudStack tradename was written down to zero, resulting in a $5.2 million impairment, which was recorded in Amortization
of other intangible assets in the accompanying consolidated statements of income. During 2011 and 2010, the Company did not
recognize any impairment charges associated with its intangible assets.
Goodwill
The Company accounts for goodwill in accordance with the authoritative guidance, which requires that goodwill and
certain intangible assets are not amortized, but are subject to an annual impairment test. There was no impairment of goodwill
or indefinite lived intangible assets as a result of the annual impairment tests analyses completed during the fourth quarters of
2012 and 2011, respectively. The authoritative guidance provides entities with an option to perform a qualitative assessment to
determine whether further quantitative impairment testing is necessary. The Company performed the qualitative assessment
when it performed its goodwill impairment test in the fourth quarter of 2012. As a result of the qualitative analysis no further
quantitative impairment test was deemed necessary. In-process R&D acquired in connection with the Company's 2012
acquisitions was not material. See Note 3 for acquisitions and Note 11 for segment information.
F-10
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the change in goodwill allocated to the Company’s reportable segments during 2012 and
2011 (in thousands):
Enterprise division $
Online Services
division
Balance at
January 1,
2012
Additions
Other
Balance at
December
31, 2012
Balance at
January 1,
2011
Additions
Other
Balance at
December 31,
2011
956,504
$257,379
$(55,303) (2)
$1,158,580
$
733,720
$ 224,039
$ (1,255) $
956,504
282,616
26,481
50,542 (2)
359,639
187,380
98,725
(3,489)
282,616
Consolidated
$ 1,239,120
$283,860 (1)
$ (4,761)
$1,518,219
$
921,100
$ 322,764 (1)
$ (4,744) $ 1,239,120
(1) Amount primarily relates to acquisitions. See Note 3 for more information regarding the Company’s acquisitions.
(2) Amount primarily relates to reclassification of goodwill between segments. In the first quarter of 2012, the Company
transferred the business acquired in its acquisition of Novell Labs, Inc. (d/b/a "ShareFile") from its Enterprise division to
its Online Services division. Also included in the Online Services division is foreign currency translation. See Note 3 for
more information regarding the Company's acquisitions and Note 11 for more information regarding the Company's
segments.
Intangible Assets
The Company has intangible assets which were primarily acquired in conjunction with business combinations and
technology purchases. Intangible assets with finite lives are recorded at cost, less accumulated amortization. Amortization is
recognized on a straight-line basis over the estimated useful lives of the respective assets, generally three to seven years, except
for patents, which are amortized over the lesser of their remaining life or ten years. In accordance with the authoritative
guidance, the Company records acquired product related intangible assets 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.
In-process R&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment
thereafter. When in-process R&D projects are completed, the corresponding amount is reclassified as an amortizable purchased
intangible asset and is amortized over the asset's estimated useful life.
Intangible assets consist of the following (in thousands):
Product related intangible assets
Other
Total
Product related intangible assets
Other
Total
December 31, 2012
Gross Carrying
Amount
Accumulated
Amortization
Weighted-
Average Life
$
$
620,032
446,601
1,066,633
$
$
339,608
170,820
510,428
5.60
7.28
6.29
December 31, 2011
Gross Carrying
Amount
Accumulated
Amortization
Weighted-
Average Life
$
$
472,582
274,816
747,398
$
$
268,332
135,694
404,026
5.83
6.83
6.20
Other intangible assets consist primarily of customer relationships, trade names, covenants not to compete and patents.
Amortization of product related intangible assets includes amortization of product related technologies and patents and is
reported as a Cost of net revenues in the accompanying consolidated statements of income. Amortization of other intangible
assets includes amortization of customer relationships, trade names and covenants not to compete and is reported as an
Operating expense in the accompanying consolidated statements of income. The Company monitors its intangible assets for
indicators of impairment. If the Company determines an impairment has occurred, it will write-down the intangible asset to its
fair value. For the year ended December 31, 2012, Amortization of other intangible assets includes a $5.2 million impairment
related to the Company's decision to contribute its CloudStack tradename acquired in conjunction with its acquisition of
Cloud.com to the Apache Software Foundation. As a result, the carrying value of the CloudStack tradename was written down
to zero. See Note 3 for more information regarding the Company's acquisitions.
F-11
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Estimated future annual amortization expense is as follows (in thousands):
Year ending December 31,
2013
2014
2015
2016
2017
$
126,205
118,000
96,368
75,108
47,510
Software Development Costs
The authoritative guidance requires certain internal software development costs related to software to be sold to be
capitalized upon the establishment of technological feasibility. Software development costs incurred subsequent to achieving
technological feasibility have not been significant and substantially all software development costs have been expensed as
incurred.
Internal Use Software
In accordance with the authoritative guidance, the Company capitalizes external direct costs of materials and services and
internal costs such as payroll and benefits of those employees directly associated with the development of new functionality in
internal use software and software developed related to its software as a service (“SaaS”) offerings. The amount of costs
capitalized in 2012 and 2011 relating to internal use software was $51.5 million and $43.3 million, respectively. These costs are
being amortized over the estimated useful life of the software, which is generally three to seven years, and are included in
property and equipment in the accompanying consolidated balance sheets. The total amounts charged to expense relating to
internal use software was approximately $44.5 million, $37.2 million and $24.7 million, during the years ended December 31,
2012, 2011 and 2010, respectively.
Revenue Recognition
Net revenues include the following categories: Product and licenses, Software as a service, License updates and
maintenance and Professional services. Product and license revenues primarily represent fees related to the licensing of the
Company’s software and hardware appliance products. These revenues are reflected net of sales allowances, cooperative
advertising agreements, partner incentive programs and provisions for returns. Shipping charges billed to customers are
included in Product and license revenue and the related shipping costs are included in Cost of product and license revenue.
SaaS revenues consist primarily of fees related to online service agreements, which are recognized ratably over the contract
term, which is typically 12 months. In addition, SaaS revenues may also include set-up fees, which are recognized ratably over
the contract term or the expected customer life, whichever is longer. License updates and maintenance revenues consist of fees
related to the Subscription Advantage program and maintenance fees, which include technical support and hardware and
software maintenance. The Company licenses many of its virtualization products bundled with a one-year contract for its
Subscription Advantage program. Subscription Advantage is a renewable program that provides subscribers with immediate
access to software upgrades, enhancements and maintenance releases when and if they become available during the term of the
contract. Subscription Advantage and maintenance fees are recognized ratably over the term of the contract, which is typically
12 to 24 months. The Company capitalizes certain third-party commissions related to Subscription Advantage renewals. The
capitalized commissions are amortized to Sales, marketing and services expense at the time the related deferred revenue is
recognized as revenue. Hardware and software maintenance and support contracts are typically sold separately. Hardware
maintenance includes technical support, the latest software upgrades and replacement of malfunctioning appliances. Dedicated
account management is available as an add-on to the program for a higher level of service. Software maintenance includes
unlimited support with product version upgrades. Professional services revenues are comprised of fees from consulting services
related to the implementation of the Company’s products and fees from product training and certification, which are recognized
as the services are provided.
The Company recognizes revenue when it is earned and when all of the following criteria are met: persuasive evidence of
the arrangement exists; delivery has occurred or the service has been provided and the Company has no remaining obligations;
the fee is fixed or determinable; and collectability is probable. The Company defines these four criteria as follows:
• Persuasive evidence of the arrangement exists. The Company primarily sells its software products via electronic
licenses and typically requires a purchase order from the distributor, reseller or end-user (depending on the
arrangement) who have previously negotiated a master distribution or resale agreement and an executed product
license agreement from the end-user. For appliance sales, it is the Company’s customary practice to require a
purchase order from distributors and resellers who have previously negotiated a master packaged product distribution
F-12
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
or resale agreement. The Company typically recognizes revenue upon shipment for its appliance sales. For
maintenance, technical support, product training and consulting services, the Company requires a purchase order and
an executed agreement. For SaaS, the Company generally requires the customer or the reseller to electronically
accept the terms of an online services agreement or execute a contract.
• Delivery has occurred and the Company has no remaining obligations. The Company considers delivery of licenses
under electronic licensing agreements to have occurred when the related products are shipped and the end-user has
been electronically provided the software activation keys that allow the end-user to take immediate possession of the
product. For hardware appliance sales, the Company’s standard delivery method is free-on-board shipping point.
Consequently, it considers delivery of appliances to have occurred when they are shipped pursuant to an agreement
and purchase order. For SaaS, delivery occurs upon providing the users with their login id and password. For product
training and consulting services, the Company fulfills its obligation when the services are performed. For license
updates and maintenance, the Company assumes that its obligation is satisfied ratably over the respective terms of the
agreements, which are typically 12 to 24 months. For SaaS, the Company assumes that its obligation is satisfied
ratably over the respective terms of the agreements, which are typically 12 months.
•
The fee is fixed or determinable. In the normal course of business, the Company does not provide customers the right
to a refund of any portion of their license fees or extended payment terms. The fees are considered fixed or
determinable upon establishment of an arrangement that contains the final terms of the sale including description,
quantity and price of each product or service purchased. For SaaS, the fee is considered fixed or determinable if it is
not subject to refund or adjustment.
• Collectability is probable. The Company determines collectability on a customer-by-customer basis and generally
does not require collateral. The Company typically sells product licenses and license updates to distributors or
resellers for whom there are histories of successful collection. New customers are typically subject to a credit review
process that evaluates their financial position and ultimately their ability to pay. Customers are also subject to an
ongoing credit review process. If the Company determines from the outset of an arrangement that collectability 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 an evaluation of customer specific information, historical experience and
economic market conditions.
The majority of the Company’s product and license revenue consists of revenue from the sale of stand-alone software
products. Stand-alone software sales generally include a perpetual license to the Company’s software and is subject to the
industry specific software revenue recognition guidance. In accordance with this guidance, the Company allocates revenue to
license updates related to its stand-alone software and any other undelivered elements of the arrangement based on vendor
specific objective evidence (“VSOE”) of fair value of each element and such amounts are deferred until the applicable delivery
criteria and other revenue recognition criteria described above have been met. The balance of the revenues, net of any discounts
inherent in the arrangement, is recognized at the outset of the arrangement using the residual method as the product licenses are
delivered. If management cannot objectively determine the fair value of each undelivered element based on VSOE of fair value,
revenue recognition is deferred until all elements are delivered, all services have been performed, or until fair value can be
objectively determined.
The Company’s hardware appliances contain software components that are essential to the overall functionality of the
products. For hardware appliance transactions entered into prior to January 1, 2011, revenue for arrangements with multiple
elements, such as sales of products that included services, was allocated to each element using the residual method based on the
VSOE of the fair value of the undelivered items pursuant to the authoritative guidance. Under the residual method, the amount
of revenue allocated to delivered elements equals the total arrangement consideration less the aggregate fair value of any
undelivered elements. If VSOE of one or more undelivered items does not exist, revenue from the entire arrangement is
deferred and recognized at the earlier of: (i) delivery of those elements or (ii) when fair value can be established unless
maintenance is the only undelivered element, in which case, the entire arrangement fee is recognized ratably over the
contractual support period.
For hardware appliance transactions entered into subsequent to January 1, 2011, the arrangement consideration is
allocated to stand-alone software deliverables as a group and the non-software deliverables based on the relative selling prices
using the selling price hierarchy in the amended revenue recognition guidance. The selling price hierarchy for a deliverable is
based on its VSOE if available, third-party evidence of selling price ("TPE") if VSOE is not available, or estimated selling
price ("ESP") if neither VSOE nor TPE is available. The Company then recognizes revenue on each deliverable in accordance
with its policies for product and service revenue recognition. VSOE of selling price is based on the price charged when the
F-13
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
element is sold separately. In determining VSOE, the Company requires that a substantial majority of the selling prices fall
within a reasonable range based on historical discounting trends for specific products and services. TPE of selling price is
established by evaluating competitor products or services in stand-alone sales to similarly situated customers. However, as the
Company’s products contain a significant element of proprietary technology and its solutions offer substantially different
features and functionality, the comparable pricing of products with similar functionality typically cannot be obtained.
Additionally, as the Company is unable to reliably determine what competitors products’ selling prices are on a stand-alone
basis, the Company is not typically able to determine TPE. The estimate of selling price is established considering multiple
factors including, but not limited to, pricing practices in different geographies and through different sales channels and
competitor pricing strategies.
For the Company’s non-software deliverables, it allocates the arrangement consideration based on the relative selling
price of the deliverables. For the Company’s hardware appliances, it uses ESP as its selling price. For the Company’s support
and services, it generally uses VSOE as its selling price. When the Company is unable to establish selling price using VSOE for
its support and services, the Company uses ESP in its allocation of arrangement consideration.
The Company’s SaaS products are considered service arrangements per the authoritative guidance; accordingly, the
Company follows the provisions of Securities and Exchange Commission Staff Accounting Bulletin (“SAB”) No. 104, Revenue
Recognition, when accounting for these service arrangements. Generally, the Company’s SaaS is sold separately and not
bundled with the Enterprise division’s products and services.
In the normal course of business, the Company is not obligated to accept product returns from its distributors under any
conditions, unless the product item is defective in manufacture. The Company establishes provisions for estimated returns, 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, recent and historical return rates for both specific products
and distributors and the impact of any new product releases and projected economic conditions. Product returns are provided
for in the consolidated financial statements and have historically been within management’s expectations. Allowances for
estimated product returns amounted to approximately $2.6 million and $1.4 million at December 31, 2012 and December 31,
2011, respectively. The Company also records estimated reductions to revenue for customer programs and incentive offerings
including volume-based incentives. The Company could take actions to increase its customer incentive offerings, which could
result in an incremental reduction to revenue at the time the incentive is offered.
Product Concentration
The Company derives a substantial portion of its revenues from its Mobile and Desktop products, which include its
XenDesktop and XenApp products and related services, and anticipates that these products and future derivative products and
product lines based upon this technology will continue to constitute a majority of its revenue. The Company could experience
declines in demand for its Mobile and Desktop products and other products, whether as a result of general economic conditions,
the delay or reduction in technology purchases, new competitive product releases, price competition, lack of success of its
strategic partners, technological change or other factors.
Cost of Net Revenues
Cost of product and license revenues consists primarily of hardware, product media and duplication, manuals, packaging
materials, shipping expense, server capacity costs and royalties. In addition, 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 fixed fees or amounts based upon the sales of the related product. The licensing
agreements generally have terms ranging from one to five 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 net revenues. Cost of services and maintenance revenue consists primarily of compensation and other personnel-related
costs of providing technical support and consulting, as well as the Company’s SaaS. Also included in cost of net revenues is
amortization of product related intangible assets which includes acquired core and product technology and associated patents.
Foreign Currency
The functional currency for all of the Company’s wholly-owned foreign subsidiaries in its Enterprise division is the U.S.
dollar. Monetary assets and liabilities of such subsidiaries are remeasured into U.S. dollars at exchange rates in effect at the
balance sheet date, and revenues and expenses are remeasured at average rates prevailing during the year. The functional
currency of the Company’s wholly-owned foreign subsidiaries of its Online Services division is the currency of the country in
which each subsidiary is located. The Company translates assets and liabilities of these foreign subsidiaries at exchange rates in
effect at the balance sheet date. The Company includes accumulated net translation adjustments in equity as a component of
F-14
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
accumulated other comprehensive loss. Foreign currency transaction gains and losses are the result of exchange rate changes on
transactions denominated in currencies other than the functional currency, including U.S. dollars. The remeasurement of those
foreign currency transactions is included in determining net income or loss for the period of exchange. Remeasurement and
foreign currency transaction gains of approximately $3.3 million, $4.7 million and $3.5 million for the years ended
December 31, 2012, 2011, and 2010, respectively, are included in other income (expense), net, in the accompanying
consolidated statements of income.
Derivatives and Hedging Activities
In accordance with the authoritative guidance, the Company records derivatives at fair value as either assets or liabilities
on the balance sheet. For derivatives that are designated as and qualify as effective cash flow hedges, the portion of gain or loss
on the derivative instrument effective at offsetting changes in the hedged item is reported as a component of accumulated other
comprehensive (loss) income and reclassified into earnings as operating expense, net, when the hedged transaction affects
earnings. For derivative instruments that are designated as and qualify as effective fair value hedges, the gain or loss on the
derivative instrument as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, is recognized in
current earnings as interest income or interest expense during the period of the change in fair values. Derivatives not designated
as hedging instruments are adjusted to fair value through earnings as other income (expense), net, in the period during which
changes in fair value occur. The application of the authoritative guidance 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 flow hedges to floating rate assets or liabilities or forecasted transactions and attributing all
derivatives that are designated as fair value hedges to fixed 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 effective in offsetting changes in cash
flows or fair value of the hedged item. Fluctuations in the value of the derivative instruments are generally offset by changes in
the hedged item; however, if it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a
highly effective hedge, the Company will discontinue hedge accounting prospectively for the affected derivative.
The Company is exposed to risk of default by its hedging counterparties. Although this risk is concentrated among a
limited number of counterparties, the Company’s foreign exchange hedging policy attempts to minimize this risk by placing
limits on the amount of exposure that may exist with any single financial institution at a time.
Pension Liability
The Company provides retirement benefits to certain employees who are not U.S. based. Generally, benefits under these
programs are based on an employee’s length of service and level of compensation. The majority of these programs are
commonly referred to as termination indemnities, which provide retirement benefits in accordance with programs mandated by
the governments of the countries in which such employees work.
The Company had accrued $9.8 million and $5.1 million for these pension liabilities at December 31, 2012 and 2011,
respectively. Expenses for the program for 2012, 2011 and 2010 amounted to $1.5 million, $1.8 million and $1.1 million,
respectively.
Advertising Costs
The Company expenses advertising costs as incurred. The Company has advertising agreements with, and purchases
advertising from, online media providers to advertise its SaaS. The Company also has cooperative advertising agreements with
certain distributors and resellers whereby the Company will reimburse distributors and resellers for qualified advertising of
Company products. Reimbursement is made once the distributor, reseller or provider provides substantiation of qualified
expenses. The Company estimates the impact of these expenses and recognizes them at the time of product sales as a reduction
of net revenue in the accompanying consolidated statements of income. The total costs the Company recognized related to
advertising were approximately $137.5 million, $130.8 million and $123.0 million, during the years ended December 31, 2012,
2011 and 2010, respectively.
F-15
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
The Company and one or more of its subsidiaries is subject to United States federal income taxes, as well as income taxes
of multiple state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and
local, or non-U.S. income tax examinations by tax authorities for years prior to 2009.
In the ordinary course of global business, there are transactions for which the ultimate tax outcome is uncertain; thus,
judgment is required in determining the worldwide provision for income taxes. The Company provides for income taxes on
transactions based on its estimate of the probable liability. The Company adjusts its provision as appropriate for changes that
impact its underlying judgments. Changes that impact provision estimates include such items as jurisdictional interpretations on
tax filing positions based on the results of tax audits and general tax authority rulings. Due to the evolving nature of tax rules
combined with the large number of jurisdictions in which the Company operates, estimates of its tax liability and the
realizability of its deferred tax assets could change in the future, which may result in additional tax liabilities and adversely
affect the Company’s results of operations, financial condition and cash flows.
The Company is required to estimate its income taxes in each of the jurisdictions in which it operates as part of the
process of preparing its consolidated financial statements. The authoritative guidance requires a valuation allowance to reduce
the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The Company reviews deferred tax assets periodically for recoverability and makes
estimates and judgments regarding the expected geographic sources of taxable income and gains from investments, as well as
tax planning strategies in assessing the need for a valuation allowance.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Significant estimates made by management include the provision for doubtful accounts
receivable, the provision to reduce obsolete or excess inventory to market, the provision for estimated returns, as well as sales
allowances, the assumptions used in the valuation of stock-based awards, the assumptions used in the discounted cash flows to
mark certain of its investments to market, the valuation of the Company’s goodwill, net realizable value of product related and
other intangible assets, the provision for vacant facility costs, the provision for income taxes 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 financial position and results of operations taken as a whole, the actual
amounts of such items, when known, will vary from these estimates.
Accounting for Stock-Based Compensation Plans
The Company has various stock-based compensation plans for its employees and outside directors and accounts for
stock-based compensation arrangements in accordance with the authoritative guidance, which requires the Company to
measure and record compensation expense in its consolidated financial statements using a fair value method. See Note 7 for
further information regarding the Company’s stock-based compensation plans.
Net Income Per Share Attributable to Citrix Systems, Inc. Stockholders
Net income per share attributable to Citrix Systems, Inc. stockholders - basic is calculated by dividing income available
to stockholders by the weighted-average number of common shares outstanding during each period. Net income per share
attributable to Citrix Systems, Inc. stockholders - diluted is computed using the weighted-average number of common and
dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable
upon the vesting or exercise of stock awards (calculated using the treasury stock method) during the period they were
outstanding. Certain shares under the Company’s stock-based compensation programs were excluded from the computation of
diluted earnings per share due to their anti-dilutive effect for the respective periods in which they were outstanding. The
reconciliation of the numerator and denominator of the earnings per share calculation is presented in Note 13.
Reclassifications
During the first quarter of 2012, the Company performed a review of the historical manner of presentation of certain of
its revenue categories and adopted a revised presentation, which the Company believes is more comparable to those presented
by other companies in the industry and better reflects the Company's evolving product and service offerings. As a result,
technical support, hardware maintenance and software updates revenues, which were previously presented in Technical services
and License updates are classified together as License updates and maintenance. A corresponding change was made to rename
Cost of services revenues to Cost of services and maintenance revenues; however, there was no change in classification.
F-16
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Product training and certification and consulting services, which were previously presented in Technical services, are classified
together as Professional services. Product licenses has been renamed to Product and licenses to more appropriately describe its
composition of both software and hardware, however, there was no change in classification. The composition and classification
of Software as a service remained unchanged. This change in manner of presentation will not affect the Company's total net
revenues, total cost of net revenues or gross margin. Conforming changes have been made for all periods presented, as follows
(in thousands):
Year Ended December 31, 2011
As Previously Reported
Amount Reclassified
As Reported Herein
Revenues:
Revenues:
License updates
Technical services (1)
Total
$
$
741,834
289,832
1,031,666
$
$
198,347
(198,347)
—
License updates and maintenance (2)
Professional services (3)
Total
$
940,181
91,485
$
1,031,666
Year Ended December 31, 2010
As Previously Reported
Amount Reclassified
As Reported Herein
Revenues:
Revenues:
License updates
Technical services (1)
Total
$
$
682,246
212,347
894,593
$
$
153,140
(153,140)
—
License updates and maintenance (2)
Professional services (3)
Total
$
$
835,386
59,207
894,593
(1) Technical services revenue was comprised of hardware maintenance, consulting services, product training and certification
and technical support.
(2) License updates and maintenance is comprised of license updates, hardware and software maintenance and technical
support.
(3) Professional services is comprised of consulting services and product training and certification.
Additionally, during the first quarter of 2012, the Company revised its methodology for allocating certain information
technology ("IT") support costs to more closely align these costs to the employees directly utilizing the related assets and
services and to reflect how management assesses the cost of headcount. As a result, certain IT support costs have been
reclassified from General and administrative expenses to Cost of services and maintenance revenues, Research and
development expenses and Sales, marketing and services expenses based on the headcount in each of these functional areas.
This change in presentation will not affect the Company's income from operations or cash flows. Conforming changes have
been made for all prior periods presented, as follows (in thousands):
Year Ended December 31, 2011
As Previously Reported
Amount Reclassified
Cost of services revenues
$
153,063
$
Research and development
Sales, marketing and services
General and administrative
343,727
839,818
307,270
Total
$ 1,643,878
$
As Reported Herein
Cost of services and maintenance
revenues
Research and development
11,402
36,947
Sales, marketing and services
45,248
(93,597) General and administrative
Total
—
As Previously Reported
Amount Reclassified
Cost of services revenues
$
106,234
$
8,846
As Reported Herein
Cost of services and maintenance
revenues
Year Ended December 31, 2010
Research and development
Sales, marketing and services
General and administrative
326,647
729,754
258,875
Total
$ 1,421,510
$
34,729
Research and development
Sales, marketing and services
41,906
(85,481) General and administrative
Total
—
F-17
$
164,465
380,674
885,066
213,673
$ 1,643,878
$
115,080
361,376
771,660
173,394
$ 1,421,510
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. ACQUISITIONS
2012 Acquisitions
Podio
In April 2012, the Company acquired all of the issued and outstanding securities of Podio ApS (“Podio”), a privately-held
provider of a cloud-based collaborative work platform. Podio became part of the Company's Online Services division and
expands the Company's offerings of integrated cloud-based support for team-based collaboration. The total consideration for
this transaction was approximately $43.6 million, net of $1.7 million of cash acquired, and was paid in cash. Transaction costs
associated with the acquisition were approximately $0.5 million, all of which the Company expensed during the year ended
December 31, 2012 and are included in General and administrative expense in the accompanying consolidated statements of
income. In addition, in connection with the acquisition, the Company assumed non-vested stock units which were converted
into the right to receive up to 127,668 shares of the Company's common stock, for which the vesting period reset fully upon the
closing of the transaction.
Bytemobile
In July 2012, the Company acquired all of the issued and outstanding securities of Bytemobile, Inc. (“Bytemobile”), a
privately-held provider of data and video optimization solutions for mobile network operators. Bytemobile became part of the
Company's Enterprise division and extends the Company's industry reach into the mobile and cloud markets. The total
consideration for this transaction was approximately $399.5 million, net of $5.6 million of cash acquired, and was paid in cash.
Transaction costs associated with the acquisition were approximately $2.1 million, all of which the Company expensed during
the year ended December 31, 2012 and are included in General and administrative expense in the accompanying consolidated
statements of income.
2012 Other Acquisitions
During the first quarter of 2012, the Company acquired all of the issued and outstanding securities of a privately-held
company for total cash consideration of approximately $24.6 million, net of $0.6 million of cash acquired. This business
became part of the Company’s Enterprise division. Transaction costs associated with the acquisition were approximately $0.5
million, of which the Company expensed $0.4 million and $0.1 million during the years ended December 31, 2012 and 2011,
respectively, and are included in General and administrative expense in the accompanying consolidated statements of income.
In addition, in connection with this acquisition, the Company assumed non-vested stock units which were converted into the
right to receive up to 13,481 shares of the Company's common stock and assumed certain stock options which are exercisable
for 12,017 shares of the Company's common stock, for which the vesting period reset fully upon the closing of the transaction.
During the second quarter of 2012, the Company acquired all of the issued and outstanding securities of two privately-
held companies for a total cash consideration of approximately $15.4 million, net of $0.2 million of cash acquired. The
businesses became part of the Company's Enterprise division. Transaction costs associated with the acquisitions were
approximately $0.4 million, all of which the Company expensed during the year ended December 31, 2012 and are included in
General and administrative expense in the accompanying consolidated statements of income. In addition, in connection with
the acquisitions, the Company assumed non-vested stock units which were converted into the right to receive, in the aggregate,
up to 66,459 shares of the Company's common stock, for which the vesting period reset fully upon the closing of each
respective transaction.
During the third quarter of 2012, the Company acquired all of the issued and outstanding securities of two privately-held
companies for a total cash consideration of approximately $5.3 million. One of the businesses became part of the Company's
Enterprise division and the other became part of the Company's Online Services division. Transaction costs associated with the
acquisitions were approximately $0.2 million, all of which the Company expensed during the year ended December 31, 2012
and are included in General and administrative expense in the accompanying consolidated statements of income. In addition, in
connection with the acquisitions, the Company assumed non-vested stock units which were converted into the right to receive,
in the aggregate, up to 13,487 shares of the Company's common stock, for which the vesting period reset fully upon the closing
of each respective transaction.
The five acquisitions discussed in this section captioned 2012 Other Acquisitions will collectively be referred to herein as
the "2012 Other Acquisitions".
F-18
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Purchase Accounting for the Acquisitions in 2012
The purchase prices for the companies acquired during the year ended December 31, 2012, which include Podio,
Bytemobile and the 2012 Other Acquisitions (collectively, the "2012 Acquisitions"), were allocated to the respective acquired
company's net tangible and intangible assets based on their estimated fair values as of the date of the acquisition. The
allocations of the total purchase prices are summarized below (in thousands):
Current assets
Other assets
Property and equipment
Deferred tax assets, non-current
Intangible assets
Goodwill
Assets acquired
Current liabilities assumed
Long-term liabilities assumed
Deferred tax liabilities, non-current
Net assets acquired
Podio
Bytemobile
2012 Other Acquisitions
Asset Life
4-5 years
Indefinite
Purchase
Price
Allocation
1,906
$
33
—
—
24,600
25,473
52,012
(609)
—
(6,150)
45,253
$
Asset Life
Purchase
Price
Allocation
$ 58,849
7,406
2,484 Various
1-9 years
Indefinite
39,976
248,900
225,344
582,959
(57,569)
(4,487)
(115,768)
$ 405,135
Purchase
Price
Allocation
$ 2,585
75
209
11,752
29,002
33,042
76,665
(7,494)
(7,760)
(11,039)
$ 50,372
Asset Life
Various
3-5 years
Indefinite
Current assets acquired in connection with the 2012 Acquisitions consisted primarily of cash and accounts receivable.
Current liabilities assumed in connection with the 2012 Acquisitions consisted primarily of current portion of deferred
revenues, short-term payables, other accrued expenses and short-term debt which was paid in full subsequent to the respective
acquisition date. Long-term liabilities assumed in connection with the 2012 Acquisitions consisted of other long-term liabilities,
long-term portion of deferred revenues and long-term debt which was paid in full subsequent to the respective acquisition date.
The fair value of assets acquired and liabilities assumed was based upon a preliminary valuation and our estimates and
assumptions are subject to change within the measurement period. The primary areas of the purchase price that are not yet
finalized are deferred revenue of Bytemobile and certain income tax assets and liabilities related to the 2012 acquisitions.
Goodwill from the Podio, Bytemobile and the 2012 Other Acquisitions was assigned to the Company's division of which each
business became a part, as indicated above. The goodwill related to the 2012 Acquisitions is not deductible for tax purposes.
See Note 11 for segment information. The goodwill amounts are comprised primarily of expected synergies from combining
operations and other intangible assets that do not qualify for separate recognition.
Revenues from the Podio, Bytemobile and the 2012 Other Acquisitions are included in the revenue as of the date of
acquisition of the Company's division of which each business became a part, as indicated above. The Company has included
the effect of the 2012 Acquisitions in its results of operations prospectively from the date of each acquisition.
Identifiable intangible assets acquired in connection with the 2012 Acquisitions (in thousands) and their weighted-average
lives are as follows:
Trade names
Customer relationships
Core and product technologies
In-process R&D (1)
Total
Podio
Asset Life
$
—
Bytemobile
6,000
— $
Asset Life
6.0 years
2012 Other
Acquisitions
—
$
Asset Life
—
3,900
4.0 years
141,500
9.0 years
2,100
3.0 years
20,700
5.0 years
100,500
4.8 years
26,902
4.5 years
—
—
900
Indefinite
$
24,600
$ 248,900
—
29,002
(1) Capitalized acquired in-process R&D costs will remain capitalized until such time as the projects are complete, at which
point they will be amortized, or they will be written off when it is probable the projects will not be completed.
F-19
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro-forma information combines the consolidated results of operations of the Company, Podio,
Bytemobile, and the 2012 Other Acquisitions as if the acquisitions had occurred at the beginning of fiscal year 2011 (in
thousands, except per share data):
Revenues
Income from operations
Net income
Per share - basic
Per share - diluted
2011 Acquisitions
Netviewer AG
Year Ended December 31,
2012
2,603,284
$
$
337,735
316,916
1.70
1.68
2011
2,252,182
306,506
282,699
1.51
1.48
In February 2011, the Company acquired all of the issued and outstanding securities of Netviewer AG ("Netviewer”), a
privately held European SaaS vendor in collaboration and IT services. Netviewer became part of the Company’s Online
Services division and the acquisition enables the extension of its Online Services business in Europe. The total consideration
for this transaction was approximately $107.5 million, net of $6.3 million of cash acquired, and was paid in cash. Transaction
costs associated with the acquisition were approximately $3.1 million, of which the Company expensed $1.1 million and $2.0
million during the years ended December 31, 2011 and 2010, respectively, and are included in general and administrative
expense in the accompanying consolidated statement of income. The Company recorded approximately $98.7 million of
goodwill, which is not deductible for tax purposes, and acquired $28.8 million of identifiable intangible assets, of which $3.2
million is related to product related intangible assets and $25.6 million is related to other intangible assets. In addition, in
connection with the acquisition, the Company assumed non-vested stock units which were converted into the right to receive up
to 99,100 shares of the Company's common stock, for which the vesting period reset fully upon the closing of the transaction.
Cloud.com
In July 2011, the Company acquired all of the issued and outstanding securities of Cloud.com, Inc. ("Cloud.com"), a
privately held provider of software infrastructure platforms for cloud providers. Cloud.com became part of the Company’s
Enterprise division and the acquisition further establishes the Company as a leader in infrastructure for the growing cloud
provider market. The total consideration for this transaction was approximately $158.8 million, net of $5.6 million of cash
acquired, and was paid in cash. Transaction costs associated with the acquisition were approximately $2.9 million, all of which
the Company expensed during the year ended December 31, 2011, and are included in general and administrative expense in
the accompanying consolidated statements of income. The Company recorded approximately $98.3 million of goodwill, which
is not deductible for tax purposes, and acquired $89.0 million of identifiable intangible assets, of which $58.0 million is related
to product related intangible assets and $31.0 million is related to other intangible assets. In addition, in connection with the
acquisition, the Company assumed non-vested stock units which were converted into the right to receive up to 288,742 shares
of the Company's common stock and certain stock options which are exercisable for 183,780 shares of the Company's common
stock, for which the vesting period reset fully upon the closing of the transaction.
ShareFile
In October 2011, the Company acquired all of the issued and outstanding securities of ShareFile, a privately held provider
of secure data sharing and collaboration solutions. ShareFile initially became part of the Company's Enterprise division, and in
the first quarter of 2012 it was transferred to the Company's Online Services division. The total consideration for this
transaction was approximately $54.0 million, net of $1.7 million of cash acquired, and was paid in cash. Transaction costs
associated with the acquisition were approximately $0.7 million, all of which the Company expensed during the year ended
December 31, 2011, and are included in general and administrative expense in the accompanying consolidated statements of
income. The Company recorded approximately $49.3 million of goodwill, which is not deductible for tax purposes, and
acquired $28.2 million of identifiable intangible assets, of which $16.0 million is related to product related intangible assets and
$12.2 million is related to other intangible assets. In addition, in connection with the acquisition, the Company assumed non-
vested stock units which were converted into the right to receive up to 180,697 shares of the Company's common stock and
assumed certain stock options which are exercisable for 390,775 shares of the Company's common stock, for which the vesting
period reset fully upon the closing of the transaction.
F-20
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
App-DNA
In November 2011, the Company acquired all of the issued and outstanding securities of App-DNA, a privately held
company that specializes in application migration and management. App-DNA became part of the Company's Enterprise
division. The total consideration for this transaction was approximately $90.8 million, net of $3.2 million of cash acquired, and
was paid in cash. Transaction costs associated with the acquisition were approximately $1.3 million, all of which the Company
expensed during the year ended December 31, 2011 and are included in general and administrative expense in the
accompanying consolidated statements of income. The Company recorded approximately $57.7 million of goodwill, which is
not deductible for tax purposes, and acquired $44.8 million of identifiable intangible assets, of which $36.7 million is related to
product related intangible assets and $8.1 million is related to other intangible assets. In addition, in connection with the
acquisition, the Company assumed non-vested stock units which were converted into the right to receive up to 114,487 shares
of the Company's common stock, for which the vesting period reset fully upon the closing of the transaction.
2011 Other Acquisitions
During the first quarter of 2011, the Company acquired certain assets of a wholly-owned subsidiary of a privately-held
company for total cash consideration of approximately $10.5 million. The Company accounted for this acquisition as a business
combination in accordance with the authoritative guidance and it became part of the Company’s Enterprise division, thereby
expanding the Company’s solutions portfolio for service providers and developing integrations with the Company’s application
delivery solutions.
In August 2011, the Company acquired all of the issued and outstanding securities of RingCube Technologies, Inc. (the
"RingCube Acquisition" or "RingCube"), a privately held company that specializes in user personalization technology for
virtual desktops. RingCube became part of the Company’s Enterprise division and the acquisition further solidifies the
Company's position in desktop virtualization. The total consideration for this transaction was approximately $32.2 million, net
of $0.5 million of cash acquired, and was paid in cash. Transaction costs associated with the acquisition were approximately
$0.6 million, all of which the Company expensed during the year ended December 31, 2011, and are included in general and
administrative expense in the accompanying consolidated statements of income. In addition, in connection with the RingCube
Acquisition, the Company assumed non-vested stock units which were converted into the right to receive up to 58,439 shares of
the Company's common stock, for which the vesting period reset fully upon the closing of the transaction.
Purchase of Non-Controlling Interest
Kaviza Inc.
The Company presents non-controlling interests of less-than-wholly-owned subsidiaries within the equity section of its
consolidated financial statements in accordance with the authoritative guidance for the presentation and disclosure of non-
controlling interests of consolidated subsidiaries. In May 2011, the Company acquired all of the non-controlling interest of
Kaviza Inc. (“Kaviza”), a provider of virtual desktop infrastructure solutions, for $17.2 million. As a result of this transaction,
the Company has obtained a 100% interest in this subsidiary. In accordance with the authoritative guidance, the excess of the
proceeds paid over the carrying amount of the non-controlling interest of Kaviza has been reflected as a reduction of additional
paid-in capital. In addition, in connection with the purchase of the non-controlling interest of Kaviza, the Company assumed
non-vested stock units which were converted into the right to receive up to 88,687 shares of the Company's common stock and
assumed certain stock options which are exercisable for 33,301 shares of the Company's common stock, which were assumed
with existing vesting schedules.
Subsequent Events
On January 2, 2013, the Company acquired all of the issued and outstanding securities of Zenprise, Inc. ("Zenprise"), a
privately-held leader in mobile device management. Citrix will integrate the Zenprise offering for mobile device management,
with its Citrix CloudGateway™ for managing mobile apps and data. The total preliminary consideration for this transaction
was approximately $324.2 million, net of $2.9 million of cash acquired, and was paid in cash. Transaction costs associated with
the acquisition are currently estimated at $0.7 million, of which the Company expensed approximately $0.5 million during the
year ended December 31, 2012 and are included in General and administrative expense in the accompanying condensed
consolidated statements of income. In addition, in connection with the acquisition, the Company assumed certain stock options
which are exercisable for 285,817 shares of the Company's common stock, for which the vesting period reset fully upon the
closing of the transaction.
F-21
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INVESTMENTS
Available-for-sale Investments
Investments in available-for-sale securities at fair value were as follows for the periods ended (in thousands):
December 31, 2012
December 31, 2011
Description of the Securities
Agency securities
Corporate securities
Municipal securities
Government securities
Total
Amortized
Cost
$ 400,365
404,546
32,214
39,863
$ 876,988
Gross
Unrealized
Gains
$
$
2,347
947
114
131
3,539
$
$
Gross
Unrealized
Losses
Fair Value
(5) $ 402,707
405,322
32,313
39,993
(192) $ 880,335
(171)
(15)
(1)
Amortized
Cost
$ 641,997
392,365
80,004
26,056
$1,140,422
Gross
Unrealized
Gains
$
$
4,506
618
57
206
5,387
Gross
Unrealized
Losses
$
Fair Value
(279) $ 646,224
391,793
80,026
26,262
$ (1,504) $1,144,305
(1,190)
(35)
—
The change in net unrealized gains (losses) on available-for-sale securities recorded in Other comprehensive income
(loss) includes unrealized gains (losses) that arose from changes in market value of specifically identified securities that were
held during the period, gains (losses) that were previously unrealized, but have been recognized in current period net income
due to sales, as well as prepayments of available-for-sale investments purchased at a premium. This reclassification has no
effect on total comprehensive income or equity and was not material for all periods presented.
The average remaining maturities of the Company’s short-term and long-term available-for-sale investments at
December 31, 2012 were approximately five months and four years, respectively.
Realized Gains and Losses on Available-for-sale Investments
For the years ended December 31, 2012 and 2011, the Company had realized gains on the sales of available-for-sale
investments of $4.1 million and $0.4 million, respectively. For the years ended December 31, 2012 and 2011, the Company had
realized losses on available-for-sale investments of $0.8 million and $1.8 million, respectively, primarily related to
prepayments at par of securities purchased at a premium. All realized gains and losses related to the sales of available-for-sale
investments are included in other income (expense), net, in the accompanying consolidated statements of income.
The Company continues to monitor its overall investment portfolio and if the credit ratings of the issuers of its
investments deteriorate or if the issuers experience financial difficulty, including bankruptcy, the Company may be required to
make adjustments to the carrying value of the securities in its investment portfolio and recognize impairment charges for
declines in fair value that are determined to be other-than-temporary.
Other-Than-Temporary Impairment on Available-for-Sale Investments
During the third quarter of 2012, one of the Company’s available-for-sale investments with a carrying amount of $5.0
million was determined to be other-than-temporarily impaired. As a result of this determination, the investment was written
down to its fair value of $2.5 million, resulting in an impairment charge of $2.5 million. The impairment charge is included in
Other income (expense), net in the accompanying consolidated statements of income. See Note 5 for more information.
Unrealized Losses on Available-for-Sale Investments
The gross unrealized losses on the Company’s available-for-sale investments that are not deemed to be other-than-
temporarily impaired were $0.2 million and $1.5 million as of December 31, 2012 and 2011, respectively. The decrease in gross
unrealized losses when comparing December 31, 2012 to December 31, 2011 was primarily due to changes in interest rates.
Because the Company does not intend to sell any of its investments in an unrealized loss position and it is more likely than not
that it will not be required to sell the securities before the recovery of its amortized cost basis, which may not occur until
maturity, it does not consider the securities to be other-than-temporarily impaired.
Cost Method Investments
The Company held direct investments in privately-held companies of approximately $26.2 million and $32.2 million as
of December 31, 2012 and 2011, respectively, which are accounted for based on the cost method and are included in Other
assets in the accompanying consolidated balance sheets. The Company periodically reviews these investments for impairment.
If the Company determines that an other-than-temporary impairment has occurred, it will write-down the investment to its fair
value. During 2012, certain companies in which the Company held direct investments were acquired by third parties and as a
F-22
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
result of these sales transactions the Company recorded a gain of $16.5 million, which was included in Other income (expense),
net in the accompanying consolidated statements of income. The Company also determined that certain cost method
investments were impaired during 2012 and recorded a total charge of $3.5 million, which is included in Other income
(expense), net in the accompanying consolidated statements of income. During 2011, the Company determined one of its cost
method investments was impaired and recorded a charge of $3.5 million, which is included in Other income (expense), net in
the accompanying consolidated statements of income. See Note 5 for more information.
5. FAIR VALUE MEASUREMENTS
The authoritative guidance defines fair value as an exit price, representing the amount that would either be received to
sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a
market-based measurement that should be determined based on assumptions that market participants would use in pricing an
asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value as follows:
•
•
•
Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop
its own assumptions.
Available-for-sale securities included in Level 2 are valued utilizing inputs obtained from an independent pricing service
(the “Service”) which uses quoted market prices for identical or comparable instruments rather than direct observations of
quoted prices in active markets. The Service gathers observable inputs for all of the Company’s fixed income securities from a
variety of industry data providers including, for example, large custodial institutions and other third-party sources. Once the
observable inputs are gathered by the Service, all data points are considered and an average price is determined. The Service’s
providers utilize a variety of inputs to determine their quoted prices. These inputs may include interest rates, known historical
trades, yield curve information, benchmark data, prepayment speeds, credit quality and broker/dealer quotes. Substantially all
of the Company’s available-for-sale investments are valued utilizing inputs obtained from the Service and accordingly are
categorized as Level 2 in the table below. The Company periodically independently assesses the pricing obtained from the
Service and historically has not adjusted the Service's pricing as a result of this assessment. Available-for-sale securities are
included in Level 3 when relevant observable inputs for a security are not available.
The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and
may affect the classification of assets and liabilities within the fair value hierarchy. In certain instances, the inputs used to
measure fair value may meet the definition of more than one level of the fair value hierarchy. The input with the lowest level
priority is used to determine the applicable level in the fair value hierarchy.
F-23
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assets and Liabilities Measured at Fair Value on a Recurring Basis
As of December 31,
2012
Quoted
Prices In
Active Markets
for Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
(in thousands)
Assets:
Cash and cash equivalents:
Money market funds
Corporate securities
Cash
Available-for-sale securities:
Agency securities
Corporate securities
Municipal securities
Government securities
Prepaid expenses and other current assets:
Foreign currency derivatives
Total assets
Accrued expenses and other current liabilities:
Foreign currency derivatives
Total liabilities
$
$
$
$
123,519
16,476
503,614
123,519
—
503,614
$
— $
16,476
—
402,707
401,981
32,313
39,993
—
—
—
—
—
627,133
$
4,157
897,627
—
— $
4,162
4,162
$
$
—
—
—
—
3,341
—
—
—
3,341
—
—
402,707
405,322
32,313
39,993
4,157
1,528,101
4,162
4,162
$
$
Assets:
Cash and cash equivalents:
Money market funds
Corporate securities
Municipal securities
Cash
Available-for-sale securities:
Agency securities
Corporate securities
Municipal securities
Government securities
Prepaid expenses and other current assets:
Foreign currency derivatives
Total assets
Accrued expenses and other current liabilities:
Foreign currency derivatives
Total liabilities
As of December 31,
2011
Quoted
Prices In
Active Markets
for Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
(in thousands)
$
$
$
101,056
38,738
3,435
190,067
646,224
391,793
80,026
26,262
2,831
1,480,432
8,454
8,454
$
$
$
101,056
—
—
190,067
—
—
—
—
$
— $
38,738
3,435
—
646,224
388,097
80,026
26,262
—
291,123
$
2,831
1,185,613
—
— $
8,454
8,454
$
$
—
—
—
—
—
3,696
—
—
—
3,696
—
—
The Company’s fixed income available-for-sale security portfolio generally consists of high quality, investment grade
securities from diverse issuers with a minimum credit rating of A-/A3 and a weighted-average credit rating of AA-/Aa3. The
Company values these securities based on pricing from the Service, whose sources may use quoted prices in active markets for
identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2
inputs) in determining fair value, and accordingly, the Company classifies all of its fixed income available-for-sale securities as
Level 2.
F-24
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company measures its cash flow hedges, which are classified as Prepaid expenses and other current assets and
Accrued expenses and other current liabilities, at fair value based on indicative prices in active markets (Level 2 inputs).
Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)
The Company has invested in convertible debt securities of certain early-stage entities that are classified as available-for-
sale investments. As quoted prices in active markets or other observable inputs were not available for these investments, in
order to measure them at fair value, the Company utilized a discounted cash flow model using a discount rate reflecting the
market risk inherent in holding securities of an early-stage enterprise, adjusted by the probability-weighted exit possibilities
associated with the convertible debt securities. This methodology required the Company to make assumptions that were not
directly or indirectly observable regarding the fair value of the convertible debt securities; accordingly they are a Level 3
valuation and is included in the "Purchases of Level 3 securities" line in the table below. During 2012, one of these investments
in a convertible debt security with a carrying amount of $5.0 million was determined to be impaired based on the discounted
cash flow model referenced above and has been written down to its fair value of $2.5 million, resulting in an impairment charge
of $2.5 million. The valuation performed to determine the fair value of the convertible debt security required the Company to
make assumptions that were not directly or indirectly observable; accordingly it is a Level 3 valuation and is included in the
table below. See Note 4 for more information regarding the Company’s available-for-sale investments.
Balance at December 31, 2011
Purchases of Level 3 securities
Transfers out of Level 3
Total realized losses included in earnings
Balance at December 31, 2012
Investments
(in thousands)
3,696
$
7,605
(5,460)
(2,500)
3,341
$
Transfers out of Level 3 relate to certain of the Company's investments in convertible debt securities of early-stage
entities that were classified as available-for-sale investments to cost method investments upon conversion to equity ownership,
which are included in Other assets in the accompanying consolidated balance sheets. Realized losses included in earnings for
the period are reported in Other income (expense), net in the accompanying consolidated statements of income.
Assets Measured at Fair Value on a Non-recurring Basis Using Significant Unobservable Inputs (Level 3)
During 2012, certain cost method investments with a combined carrying value of $13.0 million were determined to be
impaired and have been written down to their fair value of $9.5 million, resulting in an impairment charge of $3.5 million. The
impairment charge is included in Other income (expense), net in the accompanying consolidated financial statements for the
year ended December 31, 2012. In determining the fair value of cost method investments, the Company considers many factors
including but not limited to operating performance of the investee, the amount of cash that the investee has on-hand, the ability
to obtain additional financing and the overall market conditions in which the investee operates. The fair value of the cost
method investment represents a Level 3 valuation as the assumptions used in valuing this investment were not directly or
indirectly observable. See Note 4 for more information regarding cost method investments.
Additional Disclosures Regarding Fair Value Measurements
The carrying value of accounts receivable, accounts payable and accrued expenses and other current liabilities
approximate their fair value due to the short maturity of these items.
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses consist of the following:
Accrued compensation and employee benefits
Other accrued expenses
Total
F-25
December 31,
2012
2011
(In thousands)
$
$
130,835
125,424
256,259
$
$
106,474
108,362
214,836
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. EMPLOYEE STOCK-BASED COMPENSATION AND BENEFIT PLANS
Plans
The Company’s stock-based compensation program is a long-term retention program that is intended to attract and
reward talented employees and align stockholder and employee interests. As of December 31, 2012, the Company had two
stock-based compensation plans under which it was granting stock options and non-vested stock units. The Company is
currently granting stock-based awards from its Amended and Restated 2005 Equity Incentive Plan (as amended, the “2005
Plan”) and its Amended and Restated 2005 Employee Stock Purchase Plan (as amended, the “2005 ESPP”). In connection with
certain of the Company’s acquisitions, the Company has assumed certain plans from acquired companies. The Company’s
Board of Directors has provided that no new awards will be granted under the Company’s acquired stock plans. Awards
previously granted under the Company's superseded and expired stock plans that are still outstanding typically expire ten years
from the date of grant and will continue to be subject to all the terms and conditions of such plans, as applicable. The
Company’s superseded and expired stock plans include the Amended and Restated 1995 Stock Plan, Second Amended and
Restated 2000 Director and Officer Stock Option and Incentive Plan and Second Amended and Restated 1995 Non-Employee
Director Stock Option Plan.
Under the terms of the 2005 Plan, the Company is authorized to grant incentive stock options (“ISOs”), non-qualified
stock options (“NSOs”), non-vested stock, non-vested stock units, stock appreciation rights (“SARs”), and performance units
and to make stock-based awards to full and part-time employees of the Company and its subsidiaries or affiliates, where legally
eligible to participate, as well as to consultants and non-employee directors of the Company. Currently, the 2005 Plan provides
for the issuance of a maximum of 48,600,000 shares of common stock. Under the 2005 Plan, ISOs must be granted at exercise
prices no less than fair market value on the date of grant, except for ISOs granted to employees who own more than 10% of the
Company’s combined voting power, for which the exercise prices must be no less than 110% of the fair market value at the date
of grant. NSOs and SARs must be granted at no less than fair market value on the date of grant, or in the case of SARs in
tandem with options, at the exercise price of the related option. Non-vested stock awards may be granted for such consideration
in cash, other property or services, or a combination thereof, as determined by the Company’s Compensation Committee of its
Board of Directors. Stock-based awards are generally exercisable or issuable upon vesting. The Company’s policy is to
recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over
the requisite service period for the entire award. As of December 31, 2012, there were 30,315,044 shares of common stock
reserved for issuance pursuant to the Company’s stock-based compensation plans and the Company had authorization under its
2005 Plan to grant 18,801,748 additional stock-based awards.
Under the 2005 ESPP, all full-time and certain part-time employees of the Company are eligible to purchase common
stock of the Company twice per year at the end of a six-month payment period (a “Payment Period”). During each Payment
Period, eligible employees who so elect may authorize payroll deductions in an amount no less than 1% nor greater than 10%
of his or her base pay for each payroll period in the Payment Period. At the end of each Payment Period, the accumulated
deductions are used to purchase shares of common stock from the Company up to a maximum of 12,000 shares for any one
employee during a Payment Period. Shares are purchased at a price equal to 85% of the fair market value of the Company’s
common stock on the last business day of a Payment Period. Employees who, after exercising their rights to purchase shares of
common stock in the 2005 ESPP, would own shares representing 5% or more of the voting power of the Company’s common
stock, are ineligible to participate under the 2005 ESPP. The 2005 ESPP provides for the issuance of a maximum of 10,000,000
shares of common stock. As of December 31, 2012, 2,581,202 shares had been issued under the 2005 ESPP. The Company
recorded stock-based compensation costs related to the 2005 ESPP of $4.0 million, $3.5 million and $2.8 million for the years
ended December 31, 2012, 2011 and 2010, respectively.
Expense Information under the Authoritative Guidance
As required by the authoritative guidance, the Company estimates forfeitures of employee stock options and recognizes
compensation costs only for those awards expected to vest. Forfeiture rates are determined based on historical experience. The
Company also considers whether there have been any significant changes in facts and circumstances that would affect its
forfeiture rate quarterly. Estimated forfeitures are adjusted to actual forfeiture experience as needed. The Company recorded
stock-based compensation costs, related deferred tax assets and tax benefits of $149.9 million, $46.7 million and $65.8 million,
respectively, in 2012, $92.9 million, $28.4 million and $67.9 million, respectively, in 2011 and $103.8 million, $31.1 million
and $100.1 million, respectively, in 2010.
F-26
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The detail of the total stock-based compensation recognized by income statement classification is as follows (in
thousands):
Income Statement Classifications
Cost of services revenues
Research and development
Sales, marketing and services
General and administrative
Total
Stock Options
2012
2011
2010
2,111
$
1,584
$
54,616
51,519
41,694
31,763
31,354
28,208
149,940
$
92,909
$
1,363
54,123
28,704
19,568
103,758
$
$
Stock options granted under the 2005 Plan typically have a five-year life and vest over three years at a rate of 33.3% of
the shares underlying the option one year from date of grant and at a rate of 2.78% monthly thereafter. The Company also
assumes stock options from certain of its acquisitions for which the vesting period is typically reset to vest over three years at a
rate of 33.3% of the shares underlying the option one year from date of grant and at a rate of 2.78% monthly thereafter. See
Note 3 for more information related to acquisitions.
A summary of the status and activity of the Company’s fixed option awards is as follows:
Options
Outstanding at December 31, 2011
Granted
Assumed
Exercised
Forfeited or expired
Outstanding at December 31, 2012
Vested or expected to vest
Exercisable at December 31, 2012
Number of
Options
Weighted-
Average
Exercise
Price
$
10,699,905
398,634
11,860
(3,136,511)
(384,356)
7,589,532
7,392,833
4,835,085
48.06
69.91
6.87
34.56
59.46
54.15
53.92
49.52
Weighted-
Average
Remaining
Contractual
Life
(in years)
3.24
Aggregate
Intrinsic
Value
(in thousands)
2.70
2.68
2.26
$
$
$
120,299
118,535
94,374
The Company recognized stock-based compensation expense of $56.4 million, $48.2 million and $67.0 million related to
options for the years ended December 31, 2012, 2011 and 2010, respectively. As of December 31, 2012, there was $68.9
million of total unrecognized compensation cost related to stock options. That cost is expected to be recognized over a
weighted-average period of 1.60 years. The total intrinsic value of stock options exercised during 2012, 2011 and 2010 was
$131.4 million, $169.2 million and $293.7 million, respectively.
Stock Option Valuation Information
The Company currently uses the Black-Scholes option pricing model to determine the fair value of stock options. The
determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by
the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables. These variables
include the Company’s expected stock price, volatility over the term of the awards, actual employee exercise behaviors, risk-
free interest rate and expected dividends. For purposes of valuing stock options, the Company determined the expected
volatility factor by considering the implied volatility in two-year market-traded options of the Company’s common stock based
on third party volatility quotes in accordance with the provisions of SAB No. 107, Share Based Payment. The Company’s
decision to use implied volatility was based upon the availability of actively traded options on the Company’s common stock
and its assessment that implied volatility is more representative of future stock price trends than historical volatility. The
approximate risk free interest rate was based on the implied yield available on U.S. Treasury zero-coupon issues with
remaining terms equivalent to the Company’s expected terms on stock options. The expected term of stock options was based
on the historical employee exercise patterns. The Company also periodically analyzes its historical pattern of option exercises
based on certain demographic characteristics and determined that there were no meaningful differences in option exercise
activity based on the demographic characteristics. The Company does not intend to pay dividends on its common stock in the
F-27
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
foreseeable future. Accordingly, the Company used a dividend yield of zero in its option pricing model. The weighted-average
fair value of stock options granted during 2012, 2011 and 2010 was $23.95, $29.91 and $13.74, respectively.
The assumptions used to value option grants under the 2005 Plan are as follows:
Expected volatility factor
Approximate risk free interest rate
Expected term (in years)
Expected dividend yield
Non-vested Stock Units
Market and Service Condition Stock Units
Stock options granted during
2012
0.38 - 0.43
0.5% - 0.7%
3.91
0%
2011
0.38 - 0.50
0.6% - 1.1%
3.27 - 3.91
0%
2010
0.31 - 0.37
0.9% - 1.6%
3.06 - 3.27
0%
In March 2012, the Company granted senior level employees non-vested stock unit awards representing, in the aggregate,
418,809 non-vested stock units, based on certain target market and service conditions. The number of non-vested stock units
underlying each award will be determined within sixty days of the calendar year following the end of a three-year performance
period ending December 31, 2014. The attainment level under the award will be based on the Company's total return to
stockholders over the performance period compared to the return on the Nasdaq Composite Total Return Index (the "XCMP").
If the Company's return is positive and meets or exceeds the indexed return, the number of non-vested stock units issued will be
based on interpolation, with the maximum number of non-vested stock units issuable pursuant to the award capped at 200% of
the target number of non-vested stock units set forth in the award agreement if the Company's return exceeds the indexed return
by 40% or more. If the Company's return over the performance period is positive but underperforms the index, a number of
non-vested stock units will be issued, below the target award, based on interpolation; however, no non-vested stock units will
be issued if the Company's return underperforms the index by more than 20% over the performance period. In the event the
Company's return to stockholders is negative but still meets or exceeds the indexed return, only 75% of the target award shall
be issued. The extent to which the awardee will vest in the award, if at all, if the awardee is not employed by the Company at
the end of the performance period is dependent upon the timing and character of the termination as provided in the award
agreement. Each non-vested stock unit, upon vesting, represents the right to receive one share of the Company's common stock.
The market condition requirements are reflected in the grant date fair value of the award, and the compensation expense
for the award will be recognized assuming that the requisite service is rendered regardless of whether the market conditions are
achieved. The grant date fair value of the non-vested performance stock unit awards was determined through the use of a
Monte Carlo simulation model, which utilized multiple input variables that determined the probability of satisfying the market
condition requirements applicable to each award as follows:
Expected volatility factor
Risk free interest rate
Expected dividend yield
0.21 - 0.39
0.47%
0%
The range of expected volatilities utilized was based on the historical volatilities of the Company's common stock and
the XCMP. The Company chose to use historical volatility to value these awards because historical stock prices were used to
develop the correlation coefficients between the Company and the XCMP in order to model the stock price movements. The
volatilities used were calculated over the most recent 2.75 year period, which was the remaining term of the performance
period at the date of grant. The risk free interest rate was based on the implied yield available on U.S. Treasury zero-coupon
issues with remaining terms equivalent to the remaining performance period. The Company does not intend to pay dividends on
its common stock in the foreseeable future. Accordingly, the Company used a dividend yield of zero in its model. The estimated
fair value of each award was $89.95 as of the date of grant.
F-28
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Service Based Stock Units
The Company also awards senior level and certain other employees non-vested stock units granted under the 2005 Plan
that vest based on service. The majority of these non-vested stock unit awards vest 33.33% on each anniversary subsequent to
the date of the award. The remaining awards vest 100% on the third anniversary of the grant date. Each non-vested stock unit,
upon vesting, represents the right to receive one share of the Company’s common stock. In addition, the Company awards non-
vested stock units to all of its non-employee directors. These awards vest monthly in 12 equal installments based on service
and, upon vesting, each stock unit represents the right to receive one share of the Company's common stock.
Performance Stock Units
The Company may award senior level employees non-vested performance stock units granted under the 2005 Plan. For
2011, as in prior years, the number of non-vested stock units underlying each award was determined following completion of
the one-year performance period applicable to the award and was based on achievement of a specific corporate financial
performance goal determined at the time of the award. If the performance goal was less than 90% attained, then no non-vested
stock units would have been issued pursuant to the authorized award. For performance at and above 90%, the number of non-
vested stock units issued was based on a graduated slope, with the maximum number of non-vested stock units issuable
pursuant to the award capped at 125% of the base number of non-vested stock units set forth in the award agreement. The
Company was required to estimate the attainment expected to be achieved related to the defined performance goals and the
number of non-vested stock units that were ultimately to be awarded in order to recognize compensation expense over the
vesting period. Upon attainment of the performance goal, the non-vested stock units vest 33.33% on each anniversary
subsequent to the date of the award. Each non-vested stock unit, upon vesting, represents the right to receive one share of the
Company’s common stock. If the performance goals were not met, no compensation cost would have been recognized in that
period and any previously recognized compensation cost would have been reversed. The Company did not grant any non-
vested performance stock units during 2012, and no performance periods are currently open for non-vested performance stock
units.
The following table summarizes the Company's non-vested stock unit activity for the year ended December 31, 2012:
Non-vested stock units at December 31, 2011
Granted
Vested
Forfeited
Non-vested stock units at December 31, 2012
Number of
Shares
$
2,139,828
2,465,988
(838,978)
(159,277)
3,607,561
Weighted-
Average
Fair Value
at Grant Date
64.05
78.72
59.95
72.20
74.70
For the years ended December 31, 2012, 2011 and 2010, the Company recognized stock-based compensation expense of
$89.5 million, $40.0 million and $19.3 million, respectively, related to non-vested stock units. The fair value of the non-vested
stock units released in 2012, 2011, and 2010 was $50.3 million, $21.3 million and $11.6 million, respectively. As of
December 31, 2012, there was $195.5 million of total unrecognized compensation cost related to non-vested stock units. The
unrecognized cost is expected to be recognized over a weighted-average period of 2.12 years.
Benefit Plan
The Company maintains a 401(k) benefit plan allowing eligible U.S.-based employees to contribute up to 60% of their
annual compensation, limited to an annual maximum amount as set periodically by the IRS. The Company, at its discretion,
may contribute up to $0.50 for each dollar of employee contribution. The Company’s total matching contribution to an
employee is typically made at 3% of the employee’s annual compensation. The Company’s matching contributions were $10.5
million, $9.1 million and $8.0 million in 2012, 2011 and 2010, respectively. The Company’s contributions vest over a four-year
period at 25% per year.
F-29
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. CAPITAL STOCK
Stock Repurchase Programs
The Company’s Board of Directors authorized an ongoing stock repurchase program with a total repurchase authority
granted to the Company of $3.4 billion. The Company may use the approved dollar authority to repurchase stock at any time
until the approved amount is exhausted. The objective of the Company’s stock repurchase program is to improve stockholders’
returns. At December 31, 2012, approximately $335.6 million was available to repurchase common stock pursuant to the stock
repurchase program. All shares repurchased are recorded as treasury stock in the Company's consolidated balance sheets. A
portion of the funds used to repurchase stock over the course of the program was provided by proceeds from employee stock
option exercises and the related tax benefit.
The Company is authorized to make open market purchases of its common stock using general corporate funds through
open market purchases or pursuant to a Rule 10b5-1 plan. Additionally, from time to time, the Company may enter into
structured stock repurchase arrangements with large financial institutions using general corporate funds in order to lower the
average cost to acquire shares. These programs include terms that require the Company to make up-front payments to the
counterparty financial institution and result in the receipt of stock during or at the end of the term of the agreement or the
receipt of either stock or cash at the maturity of the agreement, depending on market conditions. The Company did not enter
into any structured stock repurchase agreements in 2012 or 2011.
During the year ended December 31, 2012, the Company expended approximately $251.0 million on open market
purchases, repurchasing 3,550,817 shares of outstanding common stock at an average price of $70.69.
During the year ended December 31, 2011, the Company expended approximately $424.8 million on open market
purchases, repurchasing 6,275,470 shares of outstanding common stock at an average price of $67.70.
During the year ended December 31, 2010, the Company expended approximately $434.8 million on open market
purchases, repurchasing 8,157,400 shares of outstanding common stock at an average price of $53.31. In addition, during the
third quarter of 2010, the Company made an up-front payment of $15.0 million to a financial institution related to a structured
stock repurchase agreement. At the maturity of the agreement in the fourth quarter of 2010, the Company received $16.1
million in cash, including premiums, and did not take delivery of any shares related to the agreement due to market conditions.
Shares for Tax Withholding
During the years ended December 31, 2012, 2011 and 2010, the Company withheld 269,745 shares, 182,203 shares and
123,489 shares, respectively, from stock units that vested. Amounts withheld to satisfy minimum tax withholding obligations
that arose on the vesting of stock units was $20.2 million, $13.3 million and $6.3 million, for 2012, 2011 and 2010,
respectively. These shares are reflected as treasury stock in the Company's consolidated balance sheets and statements of equity
and the related cash outlays reduce the Company's total stock repurchase authority.
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock, $0.01 par value per share. No shares of such
preferred stock were issued and outstanding at December 31, 2012 or 2011.
9. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases certain office space and equipment under various operating leases. In addition to rent, the leases
require the Company to pay for taxes, insurance, maintenance and other operating expenses. Certain of these leases contain
stated escalation clauses while others contain renewal options. The Company recognizes rent expense on a straight-line basis
over the term of the lease, excluding renewal periods, unless renewal of the lease is reasonably assured.
Rental expense for the years ended December 31, 2012, 2011 and 2010 totaled approximately $65.1 million, $56.5
million and $54.6 million, respectively. Sublease income for the years ended December 31, 2012, 2011 and 2010 was
approximately $0.2 million, $0.2 million and $0.2 million, respectively. 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:
F-30
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ending December 31,
2013
2014
2015
2016
2017
Thereafter
Total
Operating
Leases
Sublease
Income
(In thousands)
$
$
66,554
58,549
47,065
37,859
19,063
32,305
261,395
$
$
193
—
—
—
—
—
193
The Company has an operating lease obligation through 2017 related to one property that is not utilized. At December 31,
2012, the total remaining obligation on this lease was approximately $1.4 million, all of which was accrued as of December 31,
2012, and is reflected in accrued expenses and other current liabilities and other liabilities in the accompanying consolidated
balance sheets.
Legal Matters
Due to the nature of the Company’s business, it is subject to patent infringement claims, including current suits against it
or one or more of its wholly-owned subsidiaries alleging infringement by various Company products and services. The
Company believes that it has meritorious defenses to the allegations made in its pending cases and intends to vigorously defend
these lawsuits; however, it is unable currently to determine the ultimate outcome of these or similar matters or the potential
exposure to loss, if any.
In addition, the Company is a defendant in various litigation matters generally arising out of the normal course of
business. Although it is difficult to predict the ultimate outcomes of these cases, the Company believes that the ultimate
outcomes will not materially affect its business, financial position, results of operations or cash flows.
The Company accrues a liability for legal contingencies when it believes that it is both probable that a liability has been
incurred and that it can reasonably estimate the amount of the loss. The Company reviews these accruals and adjusts them to
reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new
information is obtained and the Company's views on the probable outcomes of claims, suits, assessments, investigations or legal
proceedings change, changes in the Company's accrued liabilities would be recorded in the period in which such determination
is made. For the Other Matters referenced below, the amount of liability is not probable or the amount cannot be reasonably
estimated; and, therefore, accruals have not been made. In addition, in accordance with the relevant authoritative guidance, for
matters in which the likelihood of material loss is at least reasonably possible, the Company provides disclosure of the possible
loss or range of loss. If a reasonable estimate cannot be made, however, the Company will provide disclosure to that effect.
On April 11, 2008, SSL Services, LLC (“SSL Services”) filed a suit for patent infringement against the Company in the
United States District Court for the Eastern District of Texas (the “SSL Matter”). SSL Services alleged that the Company
infringed U.S. Patent Nos. 6,061,796 (the “'796 patent”) and 6,158,011 (the “'011 patent”). The Company denied infringement
and asserted that the patents-in-suit were invalid. A jury trial was held on SSL Services' claims, and on June 18, 2012, the jury
found that the Company does not infringe the '796 patent and found that the Company willfully infringes the '011 patent
through the sale and use of certain products. The jury awarded SSL Services $10.0 million. On September 17, 2012, the court
issued a final judgment confirming the jury award of $10.0 million in damages and added $5.0 million in enhanced damages
and approximately $5.0 million in prejudgment interest on the damages award. The Company does not believe that any of its
products infringe the '011 patent, and the Company believes that the '011 patent is invalid. Accordingly, no accrual has been
made related to this matter. The Company intends to vigorously appeal the district court's judgment on the '011 patent.
In addition to the SSL Matter and due to the nature of the Company's business, the Company is subject to patent
infringement claims, including current suits against it or one or more of its wholly-owned subsidiaries alleging infringement by
various Company products and services (the "Other Matters"). The Company believes that it has meritorious defenses to the
allegations made in its pending cases and intends to vigorously defend these lawsuits; however, it is unable currently to
determine the ultimate outcome of these or similar matters. In addition, the Company is a defendant in various litigation matters
generally arising out of the normal course of business. Although it is difficult to predict the ultimate outcomes of these cases,
the Company believes that it is not reasonably possible that the ultimate outcomes will materially and adversely affect its
business, financial position, results of operations or cash flows.
F-31
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Guarantees
The authoritative guidance requires certain guarantees to be recorded at fair value and requires a guarantor to make
disclosures, even when the likelihood of making any payments under the guarantee is remote. For those guarantees and
indemnifications that do not fall within the initial recognition and measurement requirements of the authoritative guidance, the
Company must continue to monitor the conditions that are subject to the guarantees and indemnifications, as required under
existing generally accepted accounting principles, to identify if a loss has been incurred. If the Company determines that it is
probable that a loss has been incurred, any such estimable loss would be recognized. The initial recognition and measurement
requirements do not apply to the provisions contained in the majority of the Company’s software license agreements that
indemnify licensees of the Company’s software from damages and costs resulting from claims alleging that the Company’s
software infringes the intellectual property rights of a third party. The Company has not made material payments pursuant to
these provisions as of December 31, 2012. The Company has not identified any losses that are probable under these provisions
and, accordingly, the Company has not recorded a liability related to these indemnification provisions.
Purchase Obligations
The Company has agreements with suppliers to purchase inventory and estimates its non-cancelable obligations under
these agreements for the fiscal year ended December 31, 2013 to be approximately $17.4 million. The Company also has
contingent obligations to purchase inventory for the fiscal year ended December 31, 2013, which are based on amount of usage,
of approximately $7.9 million. The Company does not have any purchase obligations beyond December 31, 2013.
10. INCOME TAXES
The United States and foreign components of income before income taxes are as follows:
United States
Foreign
Total
2012
2011
(In thousands)
$
$
200,802
209,427
410,229
$
$
176,824
253,673
430,497
$
$
The components of the provision for income taxes are as follows:
Current:
Federal
Foreign
State
Total current
Deferred:
Federal
Foreign
State
Total deferred
Total provision
2012
2011
(In thousands)
$
$
81,019
30,059
17,395
128,473
(64,960)
1,409
(7,240)
(70,791)
57,682
$
$
50,022
29,169
11,905
91,096
(8,631)
(4,792)
(2,806)
(16,229)
74,867
$
$
2010
2010
124,337
209,483
333,820
69,540
25,467
9,048
104,055
(20,476)
(5,349)
(20,851)
(46,676)
57,379
F-32
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the breakdown between current and non-current net deferred tax assets:
Deferred tax assets - current
Deferred tax liabilities - current
Deferred tax assets- non current
Deferred tax liabilities - non current
Total net deferred tax assets
December 31,
2012
2011
(In thousands)
$
$
36,846
(876)
43,097
(19,756)
59,311
$
$
44,916
(119)
67,479
(18,948)
93,328
The significant components of the Company’s deferred tax assets and liabilities consisted of the following:
Deferred tax assets:
Accruals and reserves
Deferred revenue
Tax credits
Net operating losses
Other
Stock option compensation
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Acquired technology
Prepaid expenses
Total deferred tax liabilities
Total net deferred tax assets
December 31,
2012
2011
(In thousands)
$
$
$
36,128
41,820
43,657
89,856
8,452
54,852
(18,185)
256,580
(40,159)
(140,017)
(17,093)
(197,269)
59,311
$
31,191
25,365
60,331
61,205
8,580
38,834
(9,235)
216,271
(27,648)
(78,456)
(16,839)
(122,943)
93,328
The authoritative guidance requires a valuation allowance to reduce the deferred tax assets reported if it is not more likely
than not that some portion or all of the deferred tax assets will be realized. At December 31, 2012, the Company determined
that an $18.2 million valuation allowance relating to deferred tax assets for net operating losses and tax credits was necessary.
The Company does not expect to remit earnings from its foreign subsidiaries. Undistributed earnings of the Company’s
foreign subsidiaries amounted to approximately $1,525.0 million at December 31, 2012. Those earnings are considered to be
permanently reinvested and, accordingly, no U.S. federal and state income taxes have been provided thereon. Upon distribution
of those earnings in the form of dividends or otherwise, the Company could be subject to both U.S. income taxes (subject to an
adjustment for foreign tax credits) and withholding taxes payable to various foreign countries. The Company maintains certain
strategic management and operational activities in overseas subsidiaries and its foreign earnings are taxed at rates that are
generally lower than in the United States. The Company does not expect to remit earnings from its foreign subsidiaries.
At December 31, 2012, the Company had $216.0 million of remaining net operating loss carry forwards in the United
States from acquisitions. The utilization of these net operating loss carry forwards are limited in any one year pursuant to
Internal Revenue Code Section 382 and begin to expire in 2019. At December 31, 2012, the Company had $28.0 million of
remaining net operating loss carry forwards in foreign jurisdictions that do not expire.
At December 31, 2012, the Company had research and development tax credit carry forwards of approximately $47.9
million that begin to expire in 2024.
F-33
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the Company’s effective tax rate to the statutory federal rate is as follows:
Federal statutory taxes
State income taxes, net of federal tax benefit
Foreign operations
Permanent differences
Tax credits
Stock option compensation
Change in accruals for uncertain tax positions
Other
Year Ended December 31,
2012
2011
2010
35.0%
1.9
(10.2)
(2.0)
(4.7)
0.1
(5.3)
(0.7)
14.1%
35.0%
1.7
(14.5)
1.2
(7.1)
0.1
1.4
(0.4)
17.4%
35.0%
3.3
(16.8)
1.1
(10.4)
(0.4)
5.3
0.1
17.2%
The Company’s effective tax rate generally differs from the U.S. federal statutory rate of 35% due primarily to lower tax
rates on earnings generated by the Company’s foreign operations that are taxed primarily in Switzerland. The Company has not
provided for U.S. taxes for those earnings because it plans to reinvest all of those earnings indefinitely outside the United
States. It was not practicable to determine the amount of unrecognized deferred tax liability for temporary differences related to
investments in foreign subsidiaries.
The Company and certain of its subsidiaries are subject to U.S. federal income taxes, as well as income taxes of multiple
state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-
U.S. income tax examinations by tax authorities for years prior to 2009.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2012
and 2011 is as follows (in thousands):
Balance at January 1, 2011
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions related to the expiration of statutes of limitations
Settlements
Balance at December 31, 2011
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions related to the expiration of statutes of limitations
Settlements
Balance at December 31, 2012
$
$
70,090
8,656
722
(269)
—
79,199
2,459
9,558
(33,594)
(13,718)
43,904
The Company's unrecognized tax benefits may change significantly over the next 12 months.
The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense.
During the year ended December 31, 2012, the Company recognized $0.2 million of expense related to interest and penalties.
The Company has approximately $0.1 million for the payment of interest and penalties accrued at December 31, 2012.
In June 2010, the Company reached a settlement in principle with the Internal Revenue Service (“IRS”) regarding certain
previously disclosed income tax deficiencies asserted in a Revenue Agent’s Report (the “RAR”), the terms of which were
approved in June 2012 (the "Final Approval"). Under the terms of the settlement, the Company agreed to an assessment of
income tax deficiencies in full settlement of all open claims under the RAR and resolved with finality for future years all of the
transfer pricing issues raised in the RAR. Based on this, the Company incurred a charge of $13.1 million in 2010 in accordance
with the authoritative guidance. In connection with the Final Approval, the Company finalized the tax deficiency calculations
and formally closed all of its open issues with the IRS relating to the 2004 and 2005 tax years. Because there were no changes
from the agreement reached in 2010, no additional amounts have been included in income tax expense during 2012.
F-34
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Also, in June 2012, the Company closed its IRS examination for the 2006 through 2008 tax years. The Company
recognized a net tax benefit of $30.0 million in 2012 related to the closing of tax audits with the IRS for the 2006 through 2008
tax years, the impact of the closure on subsequent years and the reduction of the Company's uncertain tax positions for the
closed tax years.
The federal research and development credit expired on December 31, 2011. On January 2, 2013, the American Taxpayer
Relief Act of 2012 was signed into law. Under this act, the federal research and development credit was retroactively extended
for amounts paid or incurred after December 31, 2011 and before January 1, 2014. The effects of these changes in the tax law
will result in net tax benefits of approximately $9.4 million, which will be recognized in the first quarter of 2013, which is the
quarter in which the law was enacted.
11. SEGMENT INFORMATION
The Company’s revenues are derived from its Enterprise division products, which primarily include its Mobile and
Desktop products, Networking and Cloud products and related license updates and maintenance and professional services and
from its Online Services division’s Collaboration and Data products. The Enterprise division and the Online Services division
constitute the Company’s two reportable segments.
The Company does not engage in intercompany revenue transfers between segments. The Company’s chief operating
decision maker (“CODM”) evaluates the Company’s performance based primarily on profitability from its Enterprise division
products and Online Services division products. Segment profit for each segment includes certain research and development,
sales, marketing, general and administrative expenses directly attributable to the segment as well as other corporate costs
allocated to the segment and excludes certain expenses that are managed outside of the reportable segments. Costs excluded
from segment profit primarily consist of certain restructuring charges, stock-based compensation costs, amortization of product
related intangible assets, amortization of other intangible assets, net interest and other income (expense), net. Accounting
policies of the Company’s segments are the same as its consolidated accounting policies. In the first quarter of 2012, the
Company transferred the business acquired in its acquisition of ShareFile from its Enterprise division to its Online Services
division.
International revenues (sales outside of the United States) accounted for approximately 45.3%, 43.2% and 42.7% of the
Company’s net revenues for the year ended December 31, 2012, 2011, and 2010, respectively. Net revenues and segment profit
for 2012, 2011 and 2010 classified by the Company’s reportable segments, are presented below:
Net revenues:
Enterprise division
Online Services division
Consolidated
Segment profit:
Enterprise division
Online Services division
Unallocated expenses (1):
Amortization of intangible assets
Restructuring
Net interest and other income
Stock-based compensation
Consolidated income before income taxes
2012
2011
(In thousands)
2010
$
$
$
$
2,074,800
511,323
2,586,123
562,794
92,498
(114,574)
—
19,451
(149,940)
410,229
$
$
$
$
1,778,646
427,746
2,206,392
504,883
76,147
(71,131)
(24)
13,531
(92,909)
430,497
$
$
$
$
1,514,045
360,617
1,874,662
403,722
86,506
(64,783)
(971)
13,104
(103,758)
333,820
(1) Represents expenses presented to management on a consolidated basis only and not allocated to the operating segments.
Identifiable assets classified by the Company’s reportable segments are shown below. Long-lived assets consist of
property and equipment, net, and are shown below.
F-35
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Identifiable assets:
Enterprise division
Online Services division
Total identifiable assets
Long-lived assets, net:
United States
United Kingdom
Other countries
Total long-lived assets, net
December 31,
2012
2011
(In thousands)
4,246,292
550,110
4,796,402
$
$
3,619,989
479,552
4,099,541
December 31,
2012
2011
(In thousands)
231,812
30,633
40,849
303,294
$
$
223,076
28,344
26,009
277,429
$
$
$
$
The increases in identifiable assets are primarily due to goodwill and intangible assets recorded in conjunction with the
Company's 2012 Acquisitions. See Note 3 for additional information regarding the Company’s acquisitions.
In fiscal years 2012, 2011 and 2010, one distributor, Ingram Micro, accounted for 16%, 17% and 17%, respectively, of
the Company’s total net revenues. The Company’s distributor arrangements with Ingram Micro consist of several non-
exclusive, independently negotiated agreements with its subsidiaries, each of which cover different countries or regions. Each
of these agreements is separately negotiated and is independent of any other contract (such as a master distribution agreement),
one of which was individually responsible for over 10% of the Company’s total net revenues in each of the last three fiscal
years. In fiscal years 2012, 2011 and 2010, there were no resellers that accounted for over 10% of the Company’s total net
revenues. Total net revenues associated with Ingram Micro are included in the Company's Enterprise division.
Revenues by product grouping for the Company’s Enterprise division and Online Services division were as follows for
the years ended:
Net revenues:
Enterprise division
Mobile and Desktop revenues(1)
Networking and Cloud revenues(2)
Professional services(3)
Other
Total Enterprise division revenues
Online Services division revenues
Total net revenues
2012
December 31,
2011
(In thousands)
2010
$
1,440,293
$
1,278,798
$
494,225
119,061
21,221
2,074,800
511,323
385,518
91,496
22,834
1,778,646
427,746
$
2,586,123
$
2,206,392
$
1,137,326
298,649
59,371
18,699
1,514,045
360,617
1,874,662
(1) Mobile and Desktop revenues (formerly Desktop Solutions) are primarily comprised of sales from the Company’s desktop
virtualization products, XenDesktop and XenApp, and related license updates and maintenance and support.
(2) Networking and Cloud revenues (formerly Datacenter and Cloud Solutions) are primarily comprised of sales from the
Company’s cloud networking products which include NetScaler, Cloud Bridge (includes product formerly known as
Branch Repeater) and Bytemobile Smart Capacity, and the Company’s cloud platform products which include XenServer,
CloudPlatform (formerly CloudStack) and CloudPortal and related license updates and maintenance.
(3) Professional services revenues are primarily comprised of revenues from consulting services and product training and
certification services.
F-36
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenues by Geographic Location
The following table presents revenues by segment and geographic location, for the years ended:
Net revenues:
Enterprise division
Americas
EMEA
Asia-Pacific
Total Enterprise division revenues
Online Services division
Americas
EMEA
Asia-Pacific
Total Online Services division revenues
Total net revenues
2012
December 31,
2011
(In thousands)
2010
$
1,106,801
$
993,062
$
691,111
276,888
2,074,800
433,263
63,484
14,576
511,323
576,953
208,631
1,778,646
367,260
50,711
9,775
427,746
$
2,586,123
$
2,206,392
$
837,689
519,828
156,528
1,514,045
330,493
23,258
6,866
360,617
1,874,662
Export revenue represents shipments of finished goods and services from the United States to international customers,
primarily in Latin America and Canada. Shipments from the United States to international customers for 2012, 2011 and 2010
were $127.4 million, $106.0 million and $95.0 million, respectively.
12. DERIVATIVE FINANCIAL INSTRUMENTS
Derivatives Designated as Hedging Instruments
As of December 31, 2012, the Company’s derivative assets and liabilities primarily resulted from cash flow hedges
related to its forecasted operating expenses transacted in local currencies. A substantial portion of the Company’s overseas
expenses are and will continue to be transacted in local currencies. To protect against fluctuations in operating expenses and the
volatility of future cash flows caused by changes in currency exchange rates, the Company has established a program that uses
foreign exchange forward contracts to hedge its exposure to these potential changes. The terms of these instruments, and the
hedged transactions to which they relate, generally do not exceed twelve months and the maximum term is eighteen months.
Generally, when the dollar is weak, foreign currency denominated expenses will be higher, and these higher expenses will
be partially offset by the gains realized from the Company’s hedging contracts. Conversely, if the dollar is strong, foreign
currency denominated expenses will be lower. These lower expenses will in turn be partially offset by the losses incurred from
the Company’s hedging contracts. The change in the derivative component in accumulated other comprehensive loss includes
unrealized gains or losses that arose from changes in market value of the effective portion of derivatives that were held during
the period, and gains or losses that were previously unrealized but have been recognized in the same line item as the forecasted
transaction in current period net income due to termination or maturities of derivative contracts. This reclassification has no
effect on total comprehensive income or equity.
The total cumulative unrealized loss on cash flow derivative instruments was nil and $(5.2) million at December 31, 2012
and 2011, respectively, and is included in accumulated other comprehensive loss in the accompanying consolidated balance
sheets. The net unrealized loss as of December 31, 2012 is expected to be recognized in income over the next twelve months at
the same time the hedged items are recognized in income.
Derivatives not Designated as Hedges
A substantial portion of the Company’s overseas assets and liabilities are and will continue to be denominated in local
currencies. To protect against fluctuations in earnings caused by changes in currency exchange rates when remeasuring the
Company’s balance sheet, it utilizes foreign exchange forward contracts to hedge its exposure to this potential volatility.
These contracts are not designated for hedge accounting treatment under the authoritative guidance. Accordingly, changes
in the fair value of these contracts are recorded in other income (expense), net.
F-37
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Values of Derivative Instruments
Asset Derivatives
Liability Derivatives
(In thousands)
December 31, 2012
December 31, 2011
December 31, 2012
December 31, 2011
Balance Sheet
Location
Prepaid
expenses
and other
current
assets
Fair
Value
$4,157
Balance Sheet
Location
Prepaid
expenses
and other
current
assets
Fair
Value
$2,762
Balance Sheet
Location
Accrued
expenses
and other
current
liabilities
Fair
Value
$4,162
Balance Sheet
Location
Accrued
expenses
and other
current
liabilities
Fair
Value
$8,252
Asset Derivatives
Liability Derivatives
(In thousands)
December 31, 2012
December 31, 2011
December 31, 2012
December 31, 2011
Balance Sheet
Location
Prepaid
expenses
and other
current
assets
Fair
Value
$448
Balance Sheet
Location
Prepaid
expenses
and other
current
assets
Fair
Value
$69
Balance Sheet
Location
Accrued
expenses
and other
current
liabilities
Fair
Value
$52
Balance Sheet
Location
Accrued
expenses
and other
current
liabilities
Fair
Value
$202
Derivatives
Designated as
Hedging Instruments
Foreign currency
forward contracts
Derivatives Not
Designated as
Hedging Instruments
Foreign currency
forward contracts
The Effect of Derivative Instruments on Financial Performance
For the Year ended December 31,
(In thousands)
Amount of Gain
(Loss) Recognized in Other
Comprehensive Income (Loss)
(Effective Portion)
Location of (Loss)
Gain Reclassified
from Accumulated Other
Comprehensive Loss into
Income
(Effective Portion)
Derivatives in Cash Flow
Hedging Relationships
Amount of (Loss)
Gain Reclassified from
Accumulated Other
Comprehensive Loss
(Effective Portion)
2012
2011
Foreign currency forward contracts
$
5,164
$
2012
2011
(11,259)
Operating expenses
$
(5,817) $
8,475
There was no material ineffectiveness in the Company’s foreign currency hedging program in the periods presented.
For the Year ended December 31,
(In thousands)
Derivatives Not Designated as Hedging
Instruments
Location of
(Loss) Gain Recognized in Income on
Derivative
Amount of (Loss)
Gain Recognized in Income on Derivative
2012
2011
Foreign currency forward contracts
Other income (expense), net
$
(1,341) $
567
F-38
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Outstanding Foreign Currency Forward Contracts
As of December 31, 2012, the Company had the following net notional foreign currency forward contracts outstanding
(in thousands):
Foreign Currency
Australian dollars
British pounds sterling
Canadian dollars
Chinese renminbi
Danish krone
Euro
Hong Kong dollars
Indian rupees
Japanese yen
Singapore dollars
Swiss francs
Currency
Denomination
AUD 7,574
GBP 32,158
CAD 5,855
CNY 61,066
DKK 4,800
EUR 24,250
HKD 51,999
INR 909,790
JPY 605,633
SGD 9,543
CHF 16,976
13. NET INCOME PER SHARE ATTRIBUTABLE TO CITRIX SYSTEMS, INC. STOCKHOLDERS
The following table sets forth the computation of basic and diluted net income per share attributable to Citrix Systems,
Inc. stockholders (in thousands, except per share information):
Year Ended December 31,
2012
2011
2010
Numerator:
Net income attributable to Citrix Systems, Inc. stockholders
$
352,547
$
356,322
$
277,065
Denominator:
Denominator for basic earnings per share — weighted-average shares
outstanding
186,722
187,315
185,959
Effect of dilutive employee stock awards:
Employee stock awards
Denominator for diluted earnings per share — weighted-average
shares outstanding
Net income per share attributable to Citrix Systems, Inc. stockholders —
basic
Net income per share attributable to Citrix Systems, Inc. stockholders —
diluted
$
$
Anti-dilutive weighted-average shares
2,407
3,326
4,376
189,129
190,641
190,335
$
$
1.89
1.86
3,464
$
$
1.90
1.87
2,576
1.49
1.46
2,288
14. RECENT ACCOUNTING PRONOUNCEMENTS
There have been no new accounting pronouncements made effective during the year ended December 31, 2012 that
would significantly impact the Company.
F-3
9
CITRIX SYSTEMS, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
2012
Net revenues
Gross margin
Income from operations
Net income attributable to Citrix Systems, Inc.
Net income per share attributable to Citrix Systems,
Inc. stockholders – basic
Net income per share attributable to Citrix Systems,
Inc. stockholders – diluted
2011
Net revenues
Gross margin
Income from operations
Net income attributable to Citrix Systems, Inc.
Net income per share attributable to Citrix Systems,
Inc. stockholders – basic
Net income per share attributable to Citrix Systems,
Inc. stockholders – diluted
$
$
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total Year
(In thousands, except per share amounts)
$
589,495
503,152
80,750
68,267
$
$
615,210
520,852
82,192
92,006
641,422
535,354
82,415
78,245
739,996
622,628
145,421
114,029
$ 2,586,123
2,181,986
390,778
352,547
0.37
0.36
0.49
0.49
0.42
0.41
0.61
0.60
1.89
1.86
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total Year
(In thousands, except per share amounts)
$
490,888
430,911
80,883
73,503
$
$
530,790
458,957
95,590
81,944
565,348
485,659
104,679
92,176
619,366
537,266
135,814
108,699
$ 2,206,392
1,912,793
416,966
356,322
0.39
0.38
0.44
0.43
0.49
0.49
0.59
0.58
1.90
1.87
The sum of the quarterly net income 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.
CITRIX SYSTEMS, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Beginning
of Period
Charged
to Costs and
Expenses
Charged
to Other
Accounts
Deductions
Balance
at End
of Period
(In thousands)
2012
Deducted from asset accounts:
Allowance for doubtful accounts
Allowance for returns
Valuation allowance for deferred tax
assets
2011
Deducted from asset accounts:
Allowance for doubtful accounts
Allowance for returns
Valuation allowance for deferred tax
assets
2010
Deducted from asset accounts:
Allowance for doubtful accounts
Allowance for returns
Valuation allowance for deferred tax
assets
$
$
$
2,564
1,361
9,235
$
1,784
—
$
1,119
10,742
(3) $
(1)
1,584
9,539
(2) $
(4)
3,883
2,564
—
8,950
(6)
—
18,185
$
3,409
850
13,999
266
—
—
$
1,468
5,542
(3) $
(1)
2,579
5,031
(2) $
(4)
(4,764)
(5)
—
2,564
1,361
9,235
3,219
1,617
8,680
$
$
2,035
—
— (3) $
(1)
2,427
1,845
3,194
(2) $
(4)
3,409
850
—
5,319
(5)
—
13,999
(1)
(2)
(3)
(4)
(5)
(6)
Charged against revenues.
Uncollectible accounts written off, net of recoveries.
Adjustments from acquisitions.
Credits issued for returns.
Related to deferred tax assets on unrealized losses and acquisitions.
Related to deferred tax assets on foreign tax credits, net operating loss carryforwards, and depreciation.
EXHIBIT INDEX
Exhibit No.
3.1
3.2
3.3
3.4
4.1
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
Description
Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to
Exhibit 3.2 to the Company's Registration Statement on Form S-1 (File No. 33-98542), as amended)
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference herein to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year
ended December 31, 2007)
Amended and Restated By-laws of the Company (incorporated by reference herein to Exhibit 3.1 to the
Company's Current Report on Form 8-K dated as of December 12, 2007)
Amendment No. 1 to the Amended and Restated By-laws of the Company (incorporated herein by reference to
Exhibit 3.1 to the Company's Current Report on Form 8-K dated as of February 20, 2009)
Specimen certificate representing Common Stock (incorporated herein by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-1 (File No. 33-98542), as amended)
Second Amended and Restated 1995 Non-Employee Director Stock Option Plan (incorporated by reference
herein to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2007)
Amended and Restated 2000 Director and Officer Stock Option and Incentive Plan (incorporated by reference
herein to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008)
2000 Director and Officer Stock Option and Incentive Plan, Non-Qualified Stock Option Agreement
(incorporated by reference herein to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year
ended December 31, 2009)
2000 Director and Officer Stock Option and Incentive Plan, Incentive Stock Option Agreement (incorporated by
reference herein to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended
December 31, 2009)
Amended and Restated 2005 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 of the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010)
First Amendment to Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan (incorporated
herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated as of May 28, 2010)
Second Amendment to the Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan
(incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated as of
June 2, 2011)
Third Amendment to the Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan (incorporated
herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated as of June 2, 2011)
Fourth Amendment to the Citrix Systems, Inc. Amended and Restated 2005 Equity Incentive Plan (incorporated
herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated as of May 31, 2012)
Form of Global Stock Option Agreement under the Citrix Systems, Inc. Amended and Restated 2005 Equity
Incentive Plan (incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2011)
Form of Restricted Stock Unit Agreement For Non-Employee Directors under the Citrix Systems, Inc. Amended
and Restated 2005 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 of the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2011)
Form of Global Restricted Stock Unit Agreement under the Citrix Systems, Inc. Amended and Restated 2005
Equity Incentive Plan (Performance Based Awards) (incorporated herein by reference to Exhibit 10.3 of the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2011)
Exhibit No.
10.13*
10.14*
10.15*
10.16*
Description
Form of Global Restricted Stock Unit Agreement under the Citrix Systems, Inc. Amended and Restated 2005
Equity Incentive Plan (Time Based Awards) (incorporated herein by reference to Exhibit 10.4 of the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2011)
Form of Global Restricted Stock Unit Agreement under the Citrix Systems, Inc. Amended and Restated 2005
Equity Incentive Plan (Long Term Incentive) (incorporated by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2012)
Form of Long Term Incentive Agreement under the Citrix Systems, Inc. Amended and Restated 2005 Equity
Incentive Plan (incorporated by reference herein to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2009)
Amended and Restated 2005 Employee Stock Purchase Plan (incorporated by reference herein to Exhibit
10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011)
10.17*†
Amendment to Amended and Restated 2005 Employee Stock Purchase Plan
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24*
10.25*†
21.1†
23.1†
24.1
31.1†
31.2†
32.1††
101†††
Citrix Systems, Inc. Executive Bonus Plan (incorporated by reference herein to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2008)
Change in Control Agreement dated as of August 4, 2005 by and between the Company and Mark B.
Templeton (incorporated by reference herein to Exhibit 10.11 to the Company's Annual Report on Form 10-K
for the year ended December 31, 2010)
Form of Change in Control Agreement by and between the Company and each of David J. Henshall, David R.
Freidman, Brett M. Caine, Alvaro J. Monserrat and John Gordon Payne (incorporated by reference herein to
Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010)
Form of First Amendment to Change of Control Agreement (Chief Executive Officer) between the Company
and Mark Templeton (incorporated by reference herein to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2008)
Form of First Amendment to Change of Control Agreement between the Company and each of Brett M. Caine,
David J. Henshall, David R. Friedman, Alvaro J. Monserrat, John Gordon Payne and Wesley Wasson (together
with Mark Templeton, the “Executive Officers”) (incorporated by reference herein to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2008)
Form of Amendment to Change in Control Agreements by and between the Company and each of David J.
Henshall, David R. Freidman, Brett M. Caine, Alvaro J. Monserrat and John Gordon Payne (incorporated
herein by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2011)
Form of Indemnification Agreement by and between the Company and each of its Directors and Executive
Officers (incorporated herein by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2011)
Form of 2012 Change in Control Agreement by and between the Company and Catherine Courage
List of Subsidiaries
Consent of Independent Registered Public Accounting Firm
Power of Attorney (included in signature page)
Rule 13a-14(a) / 15d-14(a) Certifications
Rule 13a-14(a) / 15d-14(a) Certifications
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
XBRL (eXtensible Business Reporting Language). The following materials from Citrix Systems, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 2012 formatted in XBRL: (i) the Consolidated Balance
Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive
Income (iv) the Consolidated Statements of Equity, (v) the Consolidated Statements of Cash Flows and (vi)
notes to consolidated financial statements.
*
†
††
†††
Indicates a management contract or a compensatory plan, contract or arrangement.
Filed herewith.
Furnished herewith.
As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11
and 12 of the Securities Act of 1933 and Section 18 of the Securities Act of 1934.
(This page intentionally left blank.)
(This page intentionally left blank.)
(This page intentionally left blank.)
Information Concerning Non-GAAP Financial Measures Used in This Annual Report (Unaudited)
GAAP diluted earnings per share for the twelve months ended December 31, 2012 was $1.86. Non-GAAP diluted
earnings per share for the twelve months ended December 31, 2012 was $2.87. GAAP diluted earnings per share for the
twelve months ended December 31, 2012 decreased (0.5) percent from GAAP diluted earnings per share for the twelve
months ended December 31, 2011. Non-GAAP diluted earnings per share for the twelve months ended December 31,
2012 grew 15.7 percent from non-GAAP diluted earnings per share for the twelve months ended December 31, 2011.
Non-GAAP earnings per share excludes the effects of the amortization of acquired intangible assets, stock-based
compensation expenses, and the tax effects related to those items.
The following table shows the non-GAAP financial measures used in this Annual Report reconciled to the most directly
comparable GAAP financial measures.
GAAP earnings per share – diluted
Add: stock-based compensation
Add: amortization of product related intangible assets
Add: amortization of other intangible assets
Less: tax effects related to above items
Non-GAAP earnings per share – diluted
Twelve Months Ended December 31, 2012
$1.86
0.79
0.43
0.18
(0.39)
$2.87
Change in Earnings per Share
GAAP earnings per share change
Change attributable to stock-based compensation, amortization
of intangible assets, and tax effects related to those items
Non-GAAP earnings per share change
Twelve Months Ended December 31, 2012
compared to
Twelve Months Ended December 31, 2011
(0.5)%
16.2
15.7%
6751_AnnualReportLetter2012_8.25x10.75in_Final.indd 5
4/3/13 4:10 PM
Annual Report 2012 Citrix Systems, Inc.
Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of each non-GAAP financial
measure used in this 2012 Annual Report to the most directly comparable GAAP financial measure. These measures
differ from GAAP in that they exclude amortization primarily related to acquired intangible assets, stock-based
compensation expenses and the related tax effect of those items. The Company’s basis for these adjustments is
described below.
Management uses these non-GAAP measures for internal reporting and forecasting purposes, when publicly providing its
business outlook, to evaluate the Company’s performance and to evaluate and compensate the Company’s executives.
The Company has provided these non-GAAP financial measures in addition to GAAP financial results because it
believes that these non-GAAP financial measures provide useful information to certain investors and financial analysts for
comparison across accounting periods not influenced by certain non-cash items that are not used by management when
evaluating the Company’s historical and prospective financial performance. In addition, the Company has historically
provided this or similar information and understands that some investors and financial analysts find this information helpful
in analyzing the Company’s operating margins, operating expenses and net income and comparing the Company’s
financial performance to that of its peer companies and competitors.
Management typically excludes the amounts described above when evaluating the Company’s operating performance
and believes that the resulting non-GAAP measures are useful to investors and financial analysts in assessing the
Company’s operating performance due to the following factors:
• The Company does not acquire businesses on a predictable cycle. The Company, therefore,
believes that the presentation of non-GAAP measures that adjust for the impact of amortization and
certain stock-based compensation expenses and the related tax effects that are primarily related to
acquisitions, provide investors and financial analysts with a consistent basis for comparison across
accounting periods and, therefore, are useful to investors and financial analysts in helping them to
better understand the Company’s operating results and underlying operational trends.
• Amortization costs and the related tax effects are fixed at the time of an acquisition, are then
amortized over a period of several years after the acquisition and generally cannot be changed or
influenced by management after the acquisition.
• Although stock-based compensation is an important aspect of the compensation of the Company’s
employees and executives, stock-based compensation expense is generally fixed at the time of
grant, then amortized over a period of several years after the grant of the stock-based instrument,
and generally cannot be changed or influenced by management after the grant.
These non-GAAP financial measures are not prepared in accordance with accounting principles generally accepted
in the United States (“GAAP”) and may differ from the non-GAAP information used by other companies. There are
significant limitations associated with the use of non-GAAP financial measures. The additional non-GAAP financial
information presented here should be considered in conjunction with, and not as a substitute for or superior to, the
financial information presented in accordance with GAAP (such as net income and earnings per share) and should not
be considered measures of the Company’s liquidity. Furthermore, the Company in the future may exclude amortization
primarily related to newly acquired intangible assets, and the related tax effects from financial measures that it releases,
and the Company expects to continue to incur stock-based compensation expenses.
Annual Report 2012 Citrix Systems, Inc.
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Note Regarding Forward-Looking Statements
This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual operating results and financial
condition have varied in the past and could in the future vary significantly depending on a number of factors. From time
to time, information provided by us or statements made by our employees contain “forward-looking” information that
involves risks and uncertainties. In particular, statements contained in this Annual Report for the year ended December
31, 2012, and in the documents incorporated by reference into this Annual Report, that are not historical facts, including,
but not limited to, statements concerning new products, product development and offerings of products and services,
market positioning, distribution and sales channels, our partners and other strategic or technology relationships,
financial information and results of operations for future periods, product and price competition, strategy and growth
initiatives, seasonal factors, natural disasters, stock-based compensation, licensing and subscription renewal programs,
international operations and expansion, investment transactions and valuations of investments and derivative instruments,
reinvestment or repatriation of foreign earnings, fluctuations in foreign exchange rates, tax matters, acquisitions, stock
repurchases, changes in accounting rules or guidance, changes in domestic and foreign economic conditions and credit
markets, delays or reductions in technology purchases, liquidity, litigation matters, and intellectual property matters
constitute forward-looking statements and are made under the safe harbor provisions of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These statements are neither promises nor guarantees. Our actual results of operations and financial condition could
vary materially from those stated in any forward-looking statements. The following factors, among others, could cause
actual results to differ materially from those contained in forward-looking statements made in this Annual Report, in the
documents incorporated by reference into this Annual Report or presented elsewhere by our management from time to
time: conditions affecting the information technology market; our ability to develop new products and services, integrate
acquired products and services and enhance our existing products and services; our ability to attract, engage, retain and
integrate key employees; changes in global economic conditions; changes in the market for our Desktop Virtualization line
of products and services; the impact of competition on our customer base and customer orders; industry consolidation;
actual or perceived security vulnerabilities in our products and services; regulation of the Web, privacy and data security;
the existence of errors in our products; outages, data loss and disruptions of our Collaboration and Data products and
Networking and Cloud products; the length of the sales cycle for our Desktop Virtualization and Bytemobile Smart
Capacity products; our ability to attract and retain, and further access, large enterprise customers; changes to our
licensing or subscription renewal programs or bundling of our products; sales and renewals of our license updates and
maintenance products; the expansion of our international footprint; our ability to effectively manage our direct sales force;
changes implemented by indirect distribution channels and major distributors; supply problems and price fluctuations
of our third-party suppliers and contract manufacturers; fluctuations in foreign currency exchange rates; our ability to
effectively manage our growth; achievement of operating margins and gross margins; whether we generate sufficient
cash flow from operations to fund our product development efforts and acquisitions or fulfill our future obligations; the
realization of financial and strategic goals we anticipate at the time of an acquisition; the impairment of any of our goodwill
or intangible assets; the maintenance and development of our strategic and technology relationships; our ability to protect
our intellectual property; the potential for our products and services to infringe third-party intellectual property rights; our
use of “open source” software and the continued development and enhancement of the open source technologies we
utilize; the maintenance and protection of our collection of brands; access to third-party licenses; natural disasters or
other unanticipated catastrophes; changes in capital market conditions and the ability of the private companies in which
we invest to obtain financing; unanticipated changes in our tax rates or our exposure to additional income tax liabilities;
the volatility of our stock price and changes or modifications in financial accounting standards, as well as other risks
detailed in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the
year ended December 31, 2012, or in the documents incorporated by reference into the Annual Report on Form 10-K for
the year ended December 31, 2012. Such factors, among others, could have a material adverse effect upon our business,
results of operations and financial condition. We caution readers not to place undue reliance on any forward-looking
statements, which only speak as of the date made. We undertake no obligation to update any forward-looking statement
to reflect events or circumstances after the date on which such statement is made.
©2013 Citrix Systems, Inc. All rights reserved. Citrix® is a registered trademark of Citrix Systems, Inc. and/or one or
more of its subsidiaries, and may be registered in the U.S. Patent and Trademark Office and in other countries. All other
trademarks and registered trademarks are property of their respective owners.
Annual Report 2012 Citrix Systems, Inc.
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Total Return To Shareholders (Includes reinvestment of dividends)
ANNUAL RETURN PERCENTAGE
Company Name/Index
Citrix Systems, Inc.
S&P 500 Index
Nasdaq Index
Peer Group
INDEXED RETURNS
Company Name/Index
Citrix Systems, Inc.
S&P 500 Index
Nasdaq Index
Peer Group
Years Ending
Dec 08
Dec 09
Dec 10
Dec 11
Dec 12
-37.99
-37.00
-40.97
-38.22
76.54
26.46
39.32
48.56
64.41
15.06
18.32
10.28
-11.24
2.11
1.35
-6.16
8.07
16.00
12.33
18.87
Base Period
Dec 07
100
100
100
100
Dec 08
62.01
63.00
59.03
61.78
Dec 09
109.47
79.67
82.25
91.78
Dec 10
179.98
91.68
97.32
101.22
Dec 11
159.75
93.61
98.63
94.98
Years Ending
Dec 12
172.64
108.59
110.78
112.90
Comparison of cumulative five year total return
Peer Group consists of companies with an SIC code of 7372.
$200
$150
$100
$50
$0
2007
2008
2009
2010
2011
2012
Citrix Systems, Inc.
Nasdaq Index
S&P 500 Index
Peer Group
Annual Report 2012 Citrix Systems, Inc.
6751_AnnualReportLetter2012_8.25x10.75in_Final.indd 8
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CORPORATE INFORMATION
Citrix (NASDAQ:CTXS) is the cloud computing company that enables mobile workstyles -
empowering people to work and collaborate from anywhere, accessing apps and data on
any of the latest devices, as easily as they would in their own office—simply and securely.
Citrix cloud computing solutions help IT and service providers build both private and public
clouds - leveraging virtualization and networking technologies to deliver high-performance,
elastic and cost-effective services for mobile workstyles. With market leading solutions for
mobility, desktop virtualization, cloud networking, cloud platforms, collaboration, and data
sharing, Citrix helps organizations of all sizes achieve the kind of speed and agility necessary
to succeed in an increasingly mobile and dynamic world. Citrix products are in use at more
than 260,000 organizations and by over 100 million users globally. Annual revenue in 2012
was $2.59 billion. Learn more at www.citrix.com.
Major Operational Centers
Bangalore, India
Chalfont, United Kingdom
Dublin, Ireland
Ft. Lauderdale, FL, USA
Hong Kong, China
Schaffhausen, Switzerland
Santa Barbara, CA, USA
Santa Clara, CA, USA
Sydney, Australia
Tokyo, Japan
STOCKHOLDER INFORMATION
Corporate Officers
Board of Directors
Investor Relations
Mark B. Templeton
President and Chief Executive Officer
Thomas F. Bogan
Partner, Greylock Partners
Citrix’s stock trades on the NASDAQ Global
Select Market under the ticker symbol CTXS.
Brett M. Caine
Senior Vice President and General Manager,
Online Services Division
Nanci Caldwell
Former Executive Vice President and CMO,
PeopleSoft, Inc.
The Citrix Annual Report and Form 10-K are
available electronically at
www.citrix.com/annualreport.
Catherine Courage
Senior Vice President, Customer Experience
Steve Daheb
Senior Vice President, Chief Marketing Officer
David R. Friedman
General Counsel and Senior Vice President,
Human Resources
David J. Henshall
Executive Vice President, Operations,
Chief Financial Officer and Treasurer
Al J. Monserrat
Senior Vice President, Sales and Services
Gordon Payne
Senior Vice President, Solutions
Sudhakar Ramakrishna
Senior Vice President and General Manager,
Desktop and Cloud
Murray J. Demo
Former Executive Vice President and Chief
Financial Officer, Dolby Laboratories
Stephen M. Dow
General Partner, Sevin Rosen Funds
Asiff S. Hirji
Partner, TPG Capital, L.P.
Gary E. Morin
Former Executive Vice President and
Chief Financial Officer, Lexmark
International, Inc.
Godfrey R. Sullivan
President and Chief Executive Officer,
Splunk Inc.
Mark B. Templeton
President and Chief Executive Officer,
Citrix Systems, Inc.
For further information about Citrix,
additional copies of this report, Form 10-K,
or other financial information without charge,
contact:
Citrix Systems, Inc.
Attn: Investor Relations
851 W. Cypress Creek Road
Fort Lauderdale, FL 33309
United States
Tel: +1 954 267 3000
Tel: +1 800 424 8749
www.citrix.com/investors
Annual Meeting of Shareholders
The Annual Meeting of Shareholders of
Citrix Systems, Inc. will be held
on May 23, 2013 at 4:00p.m., PST
Transfer Agent and Registrar
Computershare Trust Company, N.A.
P.O. Box 43023
Providence, RI 02940
Tel: +1 877 282 1168
www.computershare.com
Independent Registered
Public Accountants
Ernst & Young LLP
5 00 Town Center Circle
Boca Raton
, FL 33
486
1
, Suite 00
5
The Hilton Anaheim
777 West Convention Way
Anaheim, CA 92802
United States
Annual Report 2012 Citrix Systems, Inc.
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