Annual Report 2013
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We empower the original
mobile device: you
New ways to work better.
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FINANCIAL HIGHLIGHTS
(In thousands, except per share data)
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
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
2013
2,918,434
114,932
289,990
97,873
502,795
Year ended December 31
2012
2011
2,586,123
2,206,392
96,962
227,150
80,025
404,137
74,393
164,465
54,741
293,599
2,415,639
2,181,986
1,912,793
516,338
1,216,680
260,236
41,668
—
2,034,922
380,717
7,173
387,890
48,367
339,523
—
339,523
1.80
188,245
450,571
1,060,829
245,259
34,549
—
380,674
885,066
213,673
16,390
24
1,791,208
1,495,827
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
Revenue (millions)
Earnings Per Share
Operating Cash Flow (millions)
$2,918
$2,586
$2,206
$1.87
$1.86
$928
$819
$679
$1.80
2011
2012
2013
2011
2012
2013
2011
2012
2013
CORPORATE INFORMATION
Citrix (NASDAQ:CTXS) is a leader in virtualization, networking and cloud services to enable
new ways for people to work better. Citrix solutions help IT and service providers to build,
manage and secure, virtual and mobile workspaces that seamlessly deliver apps, desktops,
data and services to anyone, on any device, over any network or cloud. This year Citrix is
celebrating 25 years of innovation, making IT simpler and people more productive with
mobile workstyles. With annual revenue in 2013 of $2.9 billion, Citrix solutions are in use at
more than 330,000 organizations and by over 100 million people globally. 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.
Nanci E. Caldwell
Former Executive Vice President and
Chief Marketing Officer, 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 A. Daheb
Senior Vice President and
Chief Marketing Officer
David R. Friedman
General Counsel and Senior Vice President,
Human Resources
David J. Henshall
Executive Vice President, Chief Operating
Officer and Chief Financial Officer
Christopher Hylen
Senior Vice President and General Manager,
SaaS Division
Alvaro J. Monserrat
Senior Vice President, Sales and Services
Sudhakar Ramakrishna
Senior Vice President and General Manager,
Enterprise and Service Provider Division
Robert D. Daleo
Former Vice Chairman,
Thomson Reuters Corporation
Murray J. Demo
Former Executive Vice President and
Chief Financial Officer, Dolby Laboratories
Stephen M. Dow
General Partner, Sevin Rosen Funds
Asiff S. Hirji
Founder, Inflekxion LLC
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.
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
5100 Town Center Circle, Suite 500
Boca Raton, FL 33486
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 22,
2014 at 4:00p.m., PST
Citrix Headquarters
4988 Great America Parkway
Santa Clara, CA 95054
United States
Annual Report 2013 Citrix Systems, Inc.
Annual Report 2013 Citrix Systems, Inc.
Annual Report 2013 Citrix Systems, Inc.
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Mark Templeton
President and CEO
David Henshall
COO and CFO
Fellow shareholders,
Twenty-five years ago, when Citrix was founded, we envisioned a future enabled by new ways of
working. We continued to realize our vision for mobile workstyles in 2013, guided by a sense of
purpose that people should be able to securely work from anywhere, on-demand.
2013 Business Performance
We’re proud of the Citrix team and our partners. In 2013, we drove significant transformation
across the business by putting a major focus on mobility and mobile solutions.
This past year was a critical first step in the “pivot to mobile,” while growing revenue to $2.92
billion, an increase of 13%. We also delivered an increase in non-GAAP earnings per share of 5%.
While we produced record results in 2013, our earnings reflected an acceleration of revenue
mix from our Cloud Networking businesses and continued contribution from our SaaS and
Mobile Platforms. Later, in the annual report section, you can find a full reconciliation between our
non-GAAP and GAAP performance.
Our balance sheet is robust, including $1.4 billion in deferred revenue and nearly $1.6 billion in net
cash & investments. Our cash flow from operating activities increased 13% last year to almost $930
million, and we returned $437 million to shareholders through stock repurchases.
We are leveraging the tectonic shifts in the computing landscape, driven by three powerful forces.
1. Personal Mobility – the growing urgency for IT to enable personal devices, individual
productivity & work-life harmony
2. Enterprise Cloud Evolution – the rapid transformation of enterprise datacenters into
Amazon-style private clouds
3. Cloud Services Build-out – the broad, global investment by service providers, telcos and
mobile network operators in next generation infrastructure and high-value IT services
These market drivers shaped our strategic investments and priorities in 2013.
Our growth shows there is real momentum behind the move to cloud and mobility. Business
mobility is no longer a dream, but an imperative – making people, IT and businesses more flexible,
efficient and agile. The focus of our customer offerings, in aggregate, are growing faster than
overall IT spending, with an addressable market opportunity that we believe will surpass $20 billion
by 2015.
Annual Report 2013 Citrix Systems, Inc.
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Our Strategy: Enabling The Transformation to a New Style of IT
Simplicity is disrupting complexity. The long-held focus of IT “building and operating” computing
systems is rapidly moving to “aggregating and delivering” services from a wide range of sources.
When information and applications are accessible anywhere from a secure, “mobile workspace”
work is no longer a physical place. Meetings go virtual and work goes mobile. Desktops, once
considered devices, are increasingly delivered as services from the cloud – giving employees easy
access to applications and data from any laptop, smartphone or tablet.
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. At the same time, businesses need core infrastructure that
enables fast response to change – from reorganization and optimizations to mergers and market
expansions.
Citrix is also transforming the datacenter with visionary networking solutions, powering the
world’s largest cloud services and consolidating best-in-class application-aware networking
engines. And our SaaS division offerings, while primarily aimed at the SMB market, complement
our enterprise and service provider strategy and vision, providing collaboration and information
sharing services, both as stand-alone products and platform components of our integrated
solutions.
Looking Ahead
As we celebrate the 25th anniversary of Citrix in 2014, we are incredibly excited about our future.
We believe Citrix is uniquely positioned to capitalize on the consumerization of IT, the Cloud-
service era and mobility trends to deliver ongoing growth for our employees, customers and
shareholders. Our end-to-end portfolio of solutions, experience, partner network and mobile
workspace strategy differentiate us from other players, both large and small.
Helping our customers solve business challenges and seize the speed of change is what drives and
inspires us. Through innovation, thought leadership and a compelling vision of the future of work,
we’re making a difference every day at many thousands of organizations that are embarking on
this journey with us. What we do is more than a game changer – it’s a life changer – and we take
that responsibility seriously.
On behalf of the Board and our employees, we thank you for your support and confidence.
Sincerely,
Mark Templeton
President and CEO
David Henshall
COO and CFO
Annual Report 2013 Citrix Systems, Inc.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2013
or
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
No
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
No
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
No
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
Yes
period that the registrant was required to submit and post such files).
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.
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.
Large accelerated filer
Non-accelerated filer
Accelerated filer
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
No
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 $11,044,768,169. As of February 14, 2014 there were 183,753,307 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,
2013. Portions of such definitive proxy statement are incorporated by reference into Part III of this Annual Report on Form 10-K.
CITRIX SYSTEMS, INC.
TABLE OF CONTENTS
Part I:
Part II:
Part III:
Part IV:
Business
Risk Factors
Item 1
Item 1A.
Item 1B. Unresolved Staff Comments
Item 2
Properties
Item 3
Item 4
Legal Proceedings
Mine Safety Disclosures
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
Item 9
Item 9A.
Item 9B.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
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
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28
28
28
29
30
31
51
51
52
52
54
55
55
55
55
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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 leader in virtualization, networking and cloud infrastructure to enable new ways for people to work better.
Citrix solutions help IT and service providers to build, manage and secure virtual and mobile workspaces that seamlessly
deliver apps, desktops, data and services to virtually anyone, on any device, over any network or cloud.
We market and license our products directly to 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, original equipment
manufacturers, or OEMs and service providers.
Citrix is a Delaware corporation founded on April 17, 1989.
Business Overview
For over twenty five years, we have pursued our long-term vision: a world where people can experience work and life
their way. We have 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 three forces impacting our customers' IT organizations - consumerization, transformation and
fragmentation 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 traditional enterprise IT.
These forces are accelerating the disruption of our accustomed ways of computing and legacy platforms; 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 and application 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 and Service Provider division (formerly Infrastructure division) and the Software as a
Service, or SaaS division (formerly Online Services division), administer the research and development, product marketing,
and product management for our offerings. Our Enterprise and Service Provider division is comprised of Mobile and Desktop
and Networking and Cloud products. Our SaaS division is comprised of Collaboration and Data products. Broadly, as an
organizing principle, we group our offerings in the following main categories within our two divisions:
Mobile and Desktop
Desktop and Application Virtualization
Our Desktop and Application Virtualization products are built to transform and reduce the cost of traditional desktop
management by virtualizing the desktop and applications in the datacenter and delivering a cloud-like service to users
anywhere on any device.
•
Citrix® XenDesktop® is a fully integrated desktop virtualization system that gives customers the flexibility to
deliver desktops and applications 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
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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 costs. XenDesktop includes 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® XenClient® Enterprise 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 HDX technologies
(discussed below) to communicate with XenApp and XenDesktop.
Mobility
Our Enterprise Mobility Management products help organizations secure and manage mobile devices along with the apps
and data that reside on the mobile device. XenMobile® allows IT to easily meet mobile device security and compliance
requirements for BYO and corporate liable devices while giving users the freedom to experience work and life their way.
Unlike other mobile device management, or MDM and mobile application management, or MAM products, XenMobile
provides the quickest path to productivity for mobile users with the low cost of ownership:
• XenMobile® Enterprise is a comprehensive solution to manage mobile devices, apps, and data. Users have single-click
access to all of their mobile, SaaS and Windows apps from a unified corporate app store, including seamlessly
integrated email, browser, data sharing and support apps. IT gains control over mobile devices with full configuration,
security, provisioning and support capabilities. Flexible deployment options give IT the choice to manage XenMobile
in the cloud or on-premise. In addition, XenMobile securely delivers Worx Mobile Apps, mobile apps built for
businesses using the Worx App Software Development Kit, or SDK and found through the Worx App Gallery. With
XenMobile, IT can meet their compliance and control needs while users get the freedom to experience work and life
their way.
• 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 Networking and Cloud Platform 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 cloud services to any device with high performance, security and reliability.
4
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
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 mobile 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 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 Business Manager™ 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.
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, or participate in online meetings from a Mac, PC, iPad,
iPhone, Windows 8 tablet, Windows Phone or Android device. GoToMeeting comes equipped with integrated
conference dial-in numbers, Voice over Internet Protocol, or VoIP and HDFaces® high-definition video conferencing.
It features an advanced, secure communication architecture that uses industry-standard secure sockets layer, or SSL,
encryption.
• 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, PC or mobile device 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; high-
definition webcam sharing for up to 6 organizers and panelists and VoIP and toll-based phone options.
• Podio™ is a tool for small to medium-sized businesses, or SMBs, to organize and track their projects and everyday
work. Podio workspaces enable teams to structure their work with Podio Apps that they build themselves, to suit their
processes. These workspaces are designed to increase transparency, and foster greater accountability, knowledge
sharing and employee engagement. Podio works seamlessly on both web and mobile.
• 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. GoToTraining users can easily create
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curriculums for their students from a Mac or PC without significant training or IT support; attendees can join from a
Mac, PC, iPad, or iPhone. GoToTraining includes such features as full-service registration with real-time reports;
materials; automated email templates; polling and survey capabilities as well as testing; and high-definition webcam
sharing for up to 6 participants and VoIP and toll-based phone options.
• 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 and, 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. ShareFile enables business
professionals to manage and share data securely and easily and solves the mobility and collaboration needs of users. 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 SSL or Transport Layer Security, or 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. 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.
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 made 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 our
customers’ IT 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 Citrix experts to diagnose and resolve issues encountered
with appliances. It also offers 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 when
available. The first year of Software Maintenance is required with certain corresponding product purchases.
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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
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 open source 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, Mobile, Plug-n-Play RichGraphics, WAN Optimization and Adaptive
Orchestration 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 total cost of ownership, or 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.
• ByteMobile® Adaptive Traffic Management System combines functions such as video and web optimization, caching,
policy control, and reporting and analytics into a single centrally managed element. These functions are performed
based on dynamic awareness of mobile carrier traffic conditions and also based on User Experience Indexing (UXI),
where the quality of a single mobile subscriber’s data experience can be tracked and enhanced by automated
modifications made to network performance.
• Citrix XenMobile® is our foundational technology that delivers a holistic mobile computing platform. Its main
components include MDM, MAM and a set of mobile applications including secure email, web browsing, and data
sharing on a host of mobile platforms including iOS, Android and Windows mobile.
• Citrix CloudPortal™ Business Manager is a service aggregation, catalog, billing, and chargeback solution that enables
service providers and IT organizations to offer cloud services.
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• 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, GoToWebinar and GoToTraining 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 and application virtualization, mobility, cloud networking, cloud platforms, collaboration and
data sharing.
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, chief information security
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.
•
• Directors of Messaging and Mobility, who are, respectively, responsible for Exchange and defining mobile strategies
and solutions for securing and managing mobile devices including their content and 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.
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.
• Line of business and functional executives that determine the need for our SaaS offerings at certain enterprises.
• Chief technology officer office and engineering department (managers, architects, etc.) for telecommunications service
providers are the primary buyers of our ByteMobile Smart Capacity solutions.
• Chief information officer office and engineering departments within service providers, using Citrix product to deliver
desktops and applications as hosted cloud services.
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, joint reference architectures, 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
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payments to or from Microsoft. Our two companies have a long-standing go-to-market partnership, and that continues to grow
as we introduce more joint solutions in new areas such as XenDeskop on Azure.
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 license the
specifications of ICA® to Cisco as part of this agreement.
In October 2012, Cisco and Citrix announced an expanded relationship in three strategic areas: cloud networking, cloud
orchestration and mobile workstyles. In 2013, we delivered solutions in all three areas. Cisco introduced an OEM version of
our Netscaler Application Delivery Controller technology, called Citrix Netscaler 1000V, which is sold as a part of their Cloud
Virtual Network Services architecture platform. We are also delivering tight integration between appliance versions of Citrix
NetScaler and Cisco’s higher end Nexus 7000 product line. Also announced by Cisco this year is a new joint Desktop as a
Service solution offering targeted at service provider companies.
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 XenDesktop, for
their DVS-Enterprise solution. HP, IBM and Fujitsu also have multiple offerings in the market with XenDesktop, XenMobile
and NetScaler. We have also built relationships with NetApp and CA Technologies that complement the benefits provided by
Citrix XenServer, XenDesktop, XenApp and CloudPlatform. Amazon now re-sells Citrix NetScaler, Citrix CloudBridge, and
Citrix XenMobile in its Amazon Web Services, or AWS Marketplace, and we collaborate to allow customers to run
XenDesktop on the AWS platform.
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, and HDX (ICA) technologies 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,
Samsung, Fujitsu and Hewlett Packard, among others.
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 $516.3 million in 2013, $450.6 million in 2012 and $380.7 million in 2011. 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 thousands of Value-
Added Resellers known as Citrix Solution Advisors™, Value-Added Distributors, hosted Service Providers, System Integrators,
or SIs, Independent Software Vendors, or ISVs, direct over-the-Web and OEMs. These distribution channels are managed by
our worldwide sales and services organization. We provide training and certification opportunities to our channel partners and
consultants for the full-range of Citrix products, solutions and services through our Citrix Partner Network. In addition, our
SaaS division provides our collaboration and data sharing offerings through direct corporate sales, Solution Advisors, and direct
over-the-Web through our websites.
In 2013, we made global partner program changes to help Solution Advisors develop new opportunities and
specializations, engage at a deeper level with customers and lead in mobile workstyle solutions and cloud services. The changes
included: differentiated Citrix Advisor Rewards by partner level; Citrix Opportunity Registration discounts for cloud
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networking deals; clear, published criteria for achieving Gold and Platinum status; and refreshed certification requirements
paired with no cost training subscriptions for Gold and Platinum levels to expedite acquisition of the latest knowledge and
skills. 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. Solution Advisors who achieve Gold or Platinum status
through sales volume and training investments earn higher rewards. Introduced in 2013, Citrix Opportunity Registration
provides qualified partners with a competitive edge in cloud networking through an additional upfront discount on the
opportunities they register. We continued to focus on increasing the productivity of our existing partners and building capacity
through targeted recruitment, introducing programs to increase partner mindshare, limit channel conflict and increase partner
loyalty to us.
As Citrix continues to lead with cloud services, we have been cultivating a global base of over 2,600 partners within the
Citrix Service Provider program. These partners, consisting of managed service providers, IT hosting companies and Telcos,
license Citrix desktop, application, networking and MDM products on a monthly subscription basis. With these technologies
partners then create various vertically differentiated offers of their own, consisting of cloud-hosted applications and cloud-
hosted desktops, that they then resell both to SMBs and to enterprise IT. Besides supplying technology, Citrix is actively
engaged in assisting these partners develop their hosted businesses by supplying business and marketing assistance.
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
Corporation, Epic Systems Corporation, McKesson Corporation, and Siemens Medical Health Solutions, among many others.
Our corporate marketing organization provides sales and industry event support, demand generation, web and social
marketing, sales tools and 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 14% of our net revenues in
2013, 16% of our total net revenues in 2012 and 17% of our total net revenues in 2011. 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
2013, 2012 and 2011.
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, 2013 for information regarding our revenue recognition policy.
International revenues (sales outside the United States) accounted for approximately 45.4% of our net revenues for the
year ended December 31, 2013, 45.3% of our net revenues for the year ended December 31, 2012 and 43.2% of our net
revenues for the year ended December 31, 2011. 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, 2013.
Segment Revenue
Our revenues are derived from our Enterprise and Service Provider 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 SaaS division's Collaboration and Data products. The Enterprise and Service Provider division and the
SaaS 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, 2013.
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Operations
For our Cloud Networking products, including NetScaler and Cloud Bridge, we use independent contractors to provide a
redundant source of manufacture and assembly capabilities. Independent contractors provide us with the flexibility needed to
meet our product quality and delivery requirements. We have manufacturing relationships that we enter into in the ordinary
course of business, primarily with Flextronics and IBM (primarily for ByteMobile Smart Capacity) under which we have
subcontracted the majority of our hardware manufacturing activity, generally on a purchase order basis. 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 2013, 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 contractors HP, Ireland and
Digital River. 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.
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 2014. 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, 2013.
Mobile and Desktop
Our Desktop and Application 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 and application 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 subject
to inconsistency. We also face numerous competitors that provide automation of these processes and alternative approaches,
including VMware's Horizon 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 and XenApp give Citrix a competitive advantage by
providing customers multiple ways to virtualize and deliver desktops and or apps with one, integrated virtualization system and
delivering a higher performance user experience.
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Our Enterprise Mobility Management product line, XenMobile, competes with VMware, MobileIron, Good Technology
and other smaller competitors. We believe we differentiate ourselves from these competitors by providing the most complete
solution on the market, with MDM, MAM and core mobile applications, including secure mobile email, calendar and browser.
We also see competition from competitors that are combining mobile and desktop technologies. VMware is an example
with their Horizon Suite, positioned as a platform for workforce mobility. We believe the Citrix solution, enabled by the Xen
suite of products, is the best solution available today that can securely deliver a mobile workspace - all Windows, Web, SaaS
and native mobile applications, data and virtual desktops - to any device, anywhere. 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.
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 as well as expanding into telco and cloud provider markets.
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 a 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, 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 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, 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 line by selling maintenance and updates, which aligns with our CloudPlatform go-to-market strategy.
Collaboration and Data
Our products for collaboration continue to maintain solid leadership positions in extremely competitive markets,
particularly among, 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 WebEx, Microsoft Lync and Skype, and conferencing call solutions
from Intercall, PGi, AT&T and Verizon. Additionally we compete with freemium products such as Logmein's Join.me and
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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, combined with built-in VoIP and toll-based PSTN audio
services. We further differentiate our collaboration products by integrating OpenVoice toll-free seamlessly with the built-in
VoIP and toll audio services and having purpose-built solutions for marketing and training use cases. We believe these features
give us competitive advantage among individual, prosumer and SMB customers.
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 a large 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 HighTail, Inc. (formerly
YouSendIt), 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 XenMobile, and our unique
ability to store data on-premise or in the Cloud, will be a key differentiator.
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 established proprietary
trademark rights in markets across the globe, and own trademark registrations and pending registration applications 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, 2013.
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, 2013.
Employees
As of December 31, 2013, we had 9,166 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, 2013, and in the documents incorporated by reference into this Annual Report on Form
10-K for the year ended December 31, 2013, that are not historical facts, including, but not limited to, statements concerning
the impact of the global economy and uncertainty in the IT spending environment; the success and growth of our product lines,
including transitions in the markets for our desktop virtualization and collaboration products and services; our ability to
develop and commercialize new products and services, including enterprise mobility and cloud platform products, while
growing our established virtualization, networking and collaboration products and services; disruptions due to changes and
transitions in key personnel and succession risks, including but not limited to risks related to the timing and outcome of our
CEO search; the introduction of new products by competitors or the entry of new competitors into the markets for our products
and services; changes in our revenue mix towards products and services with lower gross margins; seasonal fluctuations in our
business; failure to execute our sales and marketing plans; failure to successfully partner with key distributors, resellers, system
integrators, service providers and strategic partners and the company's reliance on and the success of those partners for the
marketing and distribution of our products; our ability to maintain and expand our business in small sized and large enterprise
accounts; the size, timing and recognition of revenue from significant orders; the success of investments in our product groups,
foreign operations and vertical and geographic markets; our ability to make suitable acquisitions on favorable terms in the
future; risks associated with acquisitions, including failure to further develop and successfully market the technology and
products of acquired companies, failure to achieve or maintain anticipated revenues and operating performance contributions
from acquisitions, which could dilute earnings, the retention of key employees from acquired companies, difficulties and delays
integrating personnel, operations, technologies and products, disruption to our ongoing business and diversion of management's
attention from our ongoing business; the recruitment and retention of qualified employees; risks in effectively controlling
operating expenses, including failure to manage untargeted expenses; the effect of new accounting pronouncements on revenue
and expense recognition; the risks associated with securing data and maintaining security of our networks and customer data
stored by our services; failure to comply with federal, state and international regulations; litigation and disputes, including
challenges to our intellectual property rights or allegations of infringement of the intellectual property rights of others; the
inability to further innovate our technology or enter into new businesses due to the intellectual property rights of others;
changes in our pricing and licensing models, promotional programs and product mix, all of which may impact revenue
recognition; charges in the event of the impairment of acquired assets, investments or licenses; international market readiness,
execution and other risks associated with the markets for our products and services; unanticipated changes in tax rates, non-
renewal of tax credits or exposure to additional tax liabilities; risks of political and social turmoil 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, 2013, 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 and
services is often discretionary and may involve a significant commitment of capital and other resources. Future economic
projections for the information technology sector are uncertain and highlight an industry in transition from legacy platforms to
mobile, cloud, big data and social solutions. If our current and prospective customers cut costs they may significantly reduce
their information technology expenditures. Additionally, if our current and prospective customers shift their information
technology spending more rapidly towards newer technologies and solutions, the demand for our products and services most
aligned with legacy platforms (such as our Desktop Virtualization products) could decrease. Fluctuations in the demand for our
products and services could have a material adverse effect on our business, results of operations and financial condition.
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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:
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rapid technological change;
evolving industry standards;
fluctuations in customer demand;
changing and increasingly sophisticated customer needs; 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. The introduction of third-party solutions
embodying new technologies and the emergence of new industry standards could make our existing and future software
solutions obsolete and unmarketable. If we are unable to keep pace with technological developments of third parties,
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:
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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 support services in a timely manner;
our failure to identify and address significant product quality issues;
our inability to position our and/or price our products and services to meet the market demand;
our failure to maintain relevance in the evolving marketplace; and
third party’s introduction of new products, or services or technologies that could replace, make obsolete 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 and services. We cannot guarantee that our Enterprise
Mobility Management and Desktop and Application Virtualization products, Cloud Platform and Cloud Networking products
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.
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. We compete based on our
ability to offer to our customers the most current and desired product and services features. We expect that competition will
continue to be intense, and there is a risk that our competitors' products may be less costly or, especially with respect to our
Collaboration and Data Products, free, provide better performance or include additional features when compared to our
products. Additionally, there is a risk that our products may become outdated or that our market share may erode. 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. 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, networking, mobile, collaboration, data sharing 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.
We expect to continue to face additional competition as new participants enter our markets. As our businesses continue to
expand globally, we may see new and increased competition in different geographic regions. The generally low barriers to entry
in certain of our businesses increase the potential for challenges from new industry competitors which for certain of our
businesses may include small and medium sized businesses or larger more established companies. Smaller companies new to
our market have more flexibility to develop on more agile platforms and have greater ability to adapt their strategy and cost
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structures which may give them a competitive advantage with our current or prospective customers. We may also see increased
competition from new types of products as the options for mobile and cloud, networking and collaboration and data sharing
solutions increase. Further, as our industry evolves and our company grows, companies with which we have strategic alliances
may become competitors in other product areas or our current competitors may enter into new strategic relationships with new
or existing competitors, all of which may further increase the competitive pressures we face. We expect to continue to face
additional competition as new participants enter our markets. As we continue to expand globally, we may see new competitors
in different geographic regions.
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. Competition for
qualified personnel in our industry is intense because of the limited number of people available with the necessary technical
skills and understanding of products in our industry. The loss of services of any key personnel, the inability to retain and attract
qualified personnel in the future or delays in hiring may harm our business and results of operations.
Effective succession planning is also important to our long-term success. Failure to ensure effective transfer of knowledge
and smooth transitions involving key employees could hinder our strategic planning and execution. In January 2014, we
announced that Mark B. Templeton, our President and Chief Executive Officer, intends to retire within the next year. There are
no assurances concerning the timing or outcome of our search for a new Chief Executive Officer. Our ability to execute our
business strategies and attract and retain key executives may be adversely affected by the uncertainty associated with the
transition to a successor CEO.
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. Continued economic uncertainty across all geographic locations may adversely affect sales of our products and
services and may result in longer sales cycles, slower adoption of technologies and increased price competition. Additionally, in
response to sustained economic uncertainty, many national and local governments that are current or prospective customers for
our products and services have also made, or announced plans to make, significant spending cutbacks which could reduce the
amount of government spending on IT and the potential demand for our products and services from government organizations.
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 and Application Virtualization products are an alternative to the traditional way of managing desktops, and
various factors could cause this line of products and services to result in slower revenue growth than we have historically
experienced.
The success of our Desktop and Application Virtualization products depends in part on organizations and customers
perceiving technological and operational benefits and cost savings associated with adopting desktop and application
virtualization solutions. Although we have experienced success with this platform, some customers may experience challenges
in implementing desktop and application virtualization due to complexity as they may create complex deployments. In
addition, our primary competition in desktop and application virtualization is the existing IT practice of managing physical
desktops as devices, and the success of our Desktop and Application Virtualization products may 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 and application virtualization solutions, the revenue growth associated with our Desktop
and Application 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 and Application 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 and
Application Virtualization products could occur as a result of:
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new competitive product releases and updates to existing products;
industry trend to focus on the delivery of applications especially on mobile devices;
introduction of potential disruptive technology by third parties;
termination of our product offerings and enhancements;
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 reduce the
market for our Desktop and Application Virtualization products.
If our customers do not continue to purchase our Desktop and Application 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 and Application Virtualization products may cause variability in
our revenue and make it difficult to predict our revenue growth and trends in our Desktop and Application Virtualization
products as our customers adjust their purchasing decisions in response to such events.
Industry consolidation may result in increased competition.
There has been a trend toward industry consolidation in our markets for several years. We expect this trend to continue as
companies attempt to strengthen or hold their market positions in an evolving industry and as companies are acquired or are
unable to continue operations. For example, 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, computer networks and
data storage resources is important 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 addressing security vulnerabilities in our
products and services through our efforts to engineer more secure products and services, enhance security and reliability
features in our products and services, deploy security updates to address security vulnerabilities and seeking to respond to
known security incidents in sufficient time to minimize any potential adverse impact. Despite our preventive efforts, last year
unauthorized parties have penetrated certain of our systems leading to the revocation of a code signing certificate in August
2013. Generally speaking, unauthorized parties may attempt to 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. Because techniques used by these perpetrators 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. We can make no assurance that we will be able to detect,
prevent, timely and adequately address, or mitigate the negative effects of cyberattacks or other security breaches.
A breach of our security measures as a result of third-party action, malware, employee error, malfeasance or otherwise
could result in (among other consequences):
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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 or the payment of
settlement amounts, which would cause us to incur legal fees and costs;
state or federal enforcement action, which could result in fines and/or penalties or other sanctions and which would
cause us to incur legal fees and costs; and/or
in the event that we or one of our customers were the victim of a cyberattack or other security breach, additional
costs associated with responding to such breach, such as investigative and remediation costs, and the costs of
providing data owners or others with notice of the breach, legal fees, the costs of any additional fraud detection
activities required by such customers' credit card issuers, 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 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 products and our results of operations.
Our Collaboration and Data 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. To the extent,
we are required to comply with HIPAA's stringent data security requirement, 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.
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.
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We may experience outages, data loss and service disruptions of our Collaboration and Data products and Cloud Platform
and Cloud Networking products, which could significantly and adversely affect our financial condition and operating
results.
The increasing user traffic and complexity of our Collaboration and Data products, specifically those using Voice over
Internet protocol and high-definition video conferencing features, and Cloud Platform and Cloud Networking 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 Cloud Platform and Cloud Networking 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.
Certain of the offerings from our Enterprise and Service Provider division have sales cycles which are long and/or
unpredictable which could cause significant variability and unpredictability in our revenue and operating results for any
particular period.
Generally, a substantial portion of our large and medium-sized customers implement our Desktop and Application
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 solutions have a long and unpredictable sales cycle, and the timing of the
related revenue is difficult to predict. Because sales of our ByteMobile Smart Capacity solutions are focused on the
telecommunications market, we are subject to lengthy internal budgeting, approval and competitive evaluation processes that
such customers generally require.
Overall the timing of our revenue is difficult to predict. Our quarterly sales have historically reflected an uneven pattern
in which a disproportionate percentage of a quarter’s total sales occur in the last month, weeks and days of each quarter. 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.
If we fail to convert our free users to paying customers or retain existing customers of our Collaboration and Data Products,
our revenue and results of operations would be adversely affected.
Initially many users of our Collaboration and Data Products utilize such products free of charge through free trials or
freemium versions of the products or lower priced/limited functionality versions of the products. We seek to convert these free
trial users to paying customers and, where appropriate, to upsell customers on lower priced/limited functionality versions of our
product to higher priced/full functionality versions. If our rate of conversion or upsell suffers for any reason, our revenue may
decline. We sell our Collaboration and Data Products pursuant to subscription agreements. Such customers may cancel their
subscription after their subscription period expires. We may not be able to accurately predict future trends in customer
cancellation, and our customers’ continuation rates may decline or fluctuate because of several factors, including their
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satisfaction or dissatisfaction with our Collaboration and Data products, the prices of such products, the prices of products
offered by our competitors or reductions in our customers’ spending levels. If our customers cancel their subscriptions for our
Collaboration and Data Products our revenue may grow more slowly than expected or decline, and our operating results and
financial condition could be adversely impacted.
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 other partners, as well as 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.
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, 2013, we derived approximately 45.4% 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, Middle East 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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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;
regional data privacy laws that apply to the transmission of our customers’ data across international borders;
health or similar issues such as pandemic or epidemic;
difficulties in staffing and managing international operations;
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.
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 approximately 14% of our net revenues in 2013. 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.
Our Cloud Networking business could suffer if there are any interruptions or delays in the supply of hardware or hardware
components from our third-party sources.
We rely on a concentrated number of third-party suppliers, who provide hardware or hardware components for our Cloud
Networking products, and contract manufacturers. If we are required to change suppliers, there could be a delay in the supply
of our hardware or hardware components and our ability to meet the demands of our customers could be adversely affected,
which could cause the loss of Cloud Networking sales and existing or potential customers and delayed revenue recognition and
adversely affect our results of operations. While we have not, to date, experienced any material difficulties or delays in the
manufacture and assembly of our Cloud Networking 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 their ability to meet our demand.
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
21
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. We may
experience a decline in gross margin as the mix of our revenue may include more products with a hardware component and
increased sales of our services, both of which have a higher cost than our software products. 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.”
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:
•
•
•
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;
22
•
•
•
•
•
•
•
•
•
•
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 2014 operating
plan assumes a significant level of financial performance from our acquisitions that were completed during 2012 and 2013 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.
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, 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. In addition, 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 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.
Our inability to maintain or develop our strategic and technology relationships could adversely affect our business.
We have several strategic and technology relationships with large and complex organizations, such as Microsoft and
Cisco, and other companies with which we work to offer complementary products and services. We depend on the companies
with which we have strategic relationships to successfully test our products, to incorporate our technology into their products
and to market and sell those products. There can be no assurance we will realize the expected benefits from these strategic
relationships or that they will continue in the future. If successful, these relationships may be mutually beneficial and result in
industry growth. However, such relationships carry an element of risk because, in most cases, we must compete in some
business areas with a company with which we have a strategic relationship and, at the same time, cooperate with that company
in other business areas. Also, if these companies fail to perform or if these relationships fail to materialize as expected, we
23
could suffer delays in product development, reduced sales or other operational difficulties and 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 Enterprise Mobility Management and Desktop and Application
Virtualization and Cloud Platform and Cloud Networking products, and related technical services and expansion of
our Collaboration and Data products, through product development and acquisitions;
an increase in patent infringement litigation commenced by non-practicing entities;
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.
24
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
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;
25
•
•
•
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, 2013 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,
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.
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 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.
26
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 results of operations, financial condition and cash flows could be further affected by lapses in or expiration of the
availability of tax credits, including the federal research and development tax credit. This tax credit expired on December 31,
2013, and may not be renewed or extended, or if renewed or extended, may be renewed or extended on terms significantly less
favorable to us or on terms resulting in our disqualification from the benefits of the tax credit.
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 fluctuations may continue in the future and this could
materially and adversely affect the market price of our stock, regardless of operating performance.
Changes or modifications in financial accounting standards may have a material adverse impact on our reported results of
operations or financial condition.
A change or modification in accounting policies can have a significant effect on our reported results and may even
affect our reporting of transactions completed before the change is effective. New pronouncements and varying interpretations
of existing pronouncements have occurred with frequency and may occur in the future. Changes to existing rules, or changes to
the interpretations of existing rules, could lead to changes in our accounting practices, and such changes could materially
adversely affect our reported financial results or the way we conduct our business.
27
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 2013 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, 2013:
Americas
EMEA
Asia-Pacific
Total
Enterprise and Service
Provider division
SaaS
division
(square footage)
895,812
288,033
579,131
1,762,976
211,986
96,486
1,476
309,948
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, approximately 40,000 square feet of office space in Goleta, California related to our
SaaS division, and 42,000 square feet of office space in EMEA related to our Enterprise and Service Provider 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.
ITEM 3. LEGAL PROCEEDINGS
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. The Company has appealed 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 us or one or more of our wholly-owned subsidiaries alleging infringement by various Citrix
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 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 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, 2013:
Fourth quarter
Third quarter
Second quarter
First quarter
Year Ended December 31, 2012:
Fourth quarter
Third quarter
Second quarter
First quarter
High
Low
71.74
77.16
72.65
75.50
77.82
85.65
87.99
80.70
$
$
$
$
$
$
$
$
54.52
60.50
58.00
65.52
56.57
68.17
69.89
60.15
$
$
$
$
$
$
$
$
On February 14, 2014, the last reported sale price of our common stock on The NASDAQ Global Select Market was
$57.14 per share. As of February 14, 2014, there were approximately 656 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 $3.9 billion, of which $500.0 million was approved in October 2013. 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, 2013, approximately $429.3 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, 2013.
October 1, 2013 through October 31, 2013
November 1, 2013 through November 30, 2013
December 1, 2013 through December 31, 2013
Total
Total Number
of Shares
Purchased (1)
Average
Price Paid
per Share
927,281
3,421,506
30,437
4,379,224
$
$
$
$
57.63
57.89
58.64
57.84
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)
918,954
3,404,982
$
$
— $
$
4,323,936
626,395
429,284
429,284
429,284
(1) Represents shares acquired in open market purchases and 55,288 shares withheld from stock units that vested in the
fourth quarter of 2013 to satisfy minimum tax withholding obligations that arose on the vesting of stock units. We
expended approximately $249.9 million during the quarter ended December 31, 2013 for repurchases of our common
stock. For more information see Note 8 to our 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)
Gross margin
Operating expenses
Income from operations
Interest income
Other (expense) income, 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
Year Ended December 31,
2013
2012
2011
2010
2009
(In thousands, except per share data)
$ 2,918,434
502,795
2,415,639
2,034,922
380,717
8,194
(1,021)
387,890
48,367
339,523
$ 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
—
339,523
1.80
$
$
$
$
—
352,547
1.86
$
$
692
356,322
1.87
$
$
624
277,065
1.46
$
$
—
191,017
1.03
Weighted average shares outstanding - diluted
188,245
189,129
190,641
190,335
184,985
Consolidated Balance Sheet Data:
Total assets
Total equity
December 31,
2013
2012
2011
2010
2009
(In thousands)
$ 5,212,249
3,319,807
$ 4,796,402
3,121,777
$ 4,099,541
2,730,490
$ 3,703,600
2,560,588
$ 3,091,147
2,188,507
(a)
Cost of net revenues includes amortization of product related intangible assets of $97.9 million, $80.0 million, $54.7 million, $50.5
million, and $47.9 million in 2013, 2012, 2011, 2010 and 2009, respectively.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
Citrix is a leader in virtualization, networking and cloud infrastructure to enable new ways for people to work better.
Citrix solutions help IT and service providers to build, manage and secure virtual and mobile workspaces that seamlessly
deliver apps, desktops, data and services to virtually anyone, on any device, over any network or cloud.
We market and license our products directly to 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, original equipment
manufacturers, or OEMs and service providers.
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 into solutions that
enable and power mobile workstyles. Our technologies mobilize desktops, apps, data and people to help our customers drive
business value. Our Mobile and Desktop products are leaders in the area of desktop and app management, including Desktop
and Application Virtualization products, marketed as XenDesktop and XenApp and mobile device management, or MDM, and
mobile application management, including XenMobile products. Our Networking and Cloud products also offer customers a
value-added approach to building and delivering cloud services to end-users. Our Cloud Networking products allow our
customers to deliver IT services to users with high performance, security and reliability, and our Cloud Platform products 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 workstyles solution; and one that we believe, when
considered as a whole, is competitively differentiated by its feature set and interoperability. 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.
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. We are focused on helping our customers, as they invest in IT products and
services, to reduce IT costs, increase business flexibility and deliver ROI by offering a simpler more flexible approach to
computing.
In 2013, we generally saw unevenness in the global IT spending environment and encountered hesitancy on the part of
customers in initiating large capital projects while transitioning their top priorities to mobile workstyles. In addition, during the
second half of 2013, we introduced new product offerings in our Desktop and Application Virtualization business focused on
reducing installation time and total cost of ownership. Although we expect a multi-year product cycle from this offering, we
initially experienced longer than normal customer evaluations causing longer than anticipated sales cycles. We found this
dynamic across all markets and all geographies contributing to the Product and licenses revenue results in our Desktop products
when comparing the year ended December 31, 2013 to the year ended December 31, 2012. See our Summary of Results section
below.
We believe that continued economic uncertainty and the transition of computing and legacy platforms to mobile, cloud,
big data and social solutions may adversely affect sales of our products and services and may result in longer sales cycles,
slower adoption of technologies and increased price competition.
We are focused 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; investing in product
innovation and improving integration across our product portfolio to drive simplicity and end-user experience.
Enterprise and Service Provider division
Our Desktop and Application 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 providing the capabilities for our customers to transform the delivery of desktops
and related applications to an on-demand service rather than the delivery of a device.
In January 2013, we completed our acquisition of Zenprise Inc., or Zenprise, a privately held leading innovator in MDM,
which we market as XenMobile. We have integrated and expanded the XenMobile MDM technologies into a new solution,
which is now offered as XenMobile Enterprise edition. This new offering offers our enterprise IT customers a comprehensive
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product that make it easier to manage and secure mobile devices, apps and data, while allowing users to embrace mobile
workstyles and access enterprise apps from virtually any device. We believe our Mobility products 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 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.
As we enhance the feature set and interoperability of our Mobility and Cloud Networking products, we drive increased
customer interest around desktop and application virtualization and data sharing, because enterprises find leverage in deploying
these technologies together for an end-to-end mobile workstyles solution.
SaaS division
Our SaaS division is focused on developing and marketing Collaboration and Data products. These products are primarily
marketed via the web to enterprises, medium and small businesses, prosumers and individuals. Our SaaS segment'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. 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. In addition, through our Remote Access and IT Support solutions, we offer
products that provide users a secure, simple and cost efficient way to access their desktops remotely and provide support over
the Internet on-demand.
Summary of Results
For the year ended December 31, 2013 compared to the year ended December 31, 2012, we delivered the following
financial performance:
•
•
Product and license revenue increased 7.3% to $891.6 million;
Software as a service revenue increased 14.0% to $582.9 million;
• License updates and maintenance revenue increased 16.0% to $1,305.1 million;
•
Professional services revenue increased 16.6% to $138.9 million;
• Gross margin as a percentage of revenue decreased 1.6% to 82.8%;
• Operating income decreased 2.6% to $380.7 million; and
• Diluted earnings per share decreased 3.2% to $1.80.
The increase in our Product and licenses revenue was primarily driven by sales of our Networking and Cloud products,
led by NetScaler, partially offset by a decrease in sales of our desktop and application virtualization products. 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 maintenance
revenues, primarily driven by increased sales of maintenance and support across all of our Enterprise and Service Provider
division's products and increased renewals of our Subscription Advantage product. The increase in Professional services
revenue was primarily due to increases in consulting revenues related to increased implementation sales of our Enterprise and
Service Provider division's products. We currently target total revenue to increase when comparing the first quarter of 2014 to
the first quarter of 2013. In addition, when comparing the 2014 fiscal year to the 2013 fiscal year we target total revenue to
increase. The decrease in 2013 in gross margin as a percentage of net revenue is primarily due to the increase in sales of our
Networking and Cloud products with a hardware component and increased sales of our services, both of which have a higher
cost than our software products. We currently target gross margin as a percentage of net revenue to decline slightly when
comparing the first quarter of 2014 to the first quarter of 2013, consistent with our targeted increase in sales of our hardware
products and services. The decrease in Operating income and diluted net income per share when comparing 2013 to 2012 was
primarily due to an increase in stock-based compensation costs primarily related to our retention-focused annual stock grant to
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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 in Operating income and diluted net income per share is the decrease in gross
margin as a percentage of net revenue, as discussed above.
2013 Acquisitions
Zenprise
In January 2013, we acquired all of the issued and outstanding securities of Zenprise, a privately-held leader in mobile
device management. Zenprise became part of our Enterprise and Service Provider division, in which Citrix has integrated the
Zenprise offering for mobile device management into its XenMobile Enterprise edition. The total consideration for this
transaction was approximately $324.0 million, net of $2.9 million of cash acquired, and was paid in cash. Transaction costs
associated with the acquisition were approximately $0.6 million, of which we expensed approximately $0.1 million during the
year ended December 31, 2013 and are included in General and administrative expense in the accompanying consolidated
statements of income. 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.
2013 Other Acquisitions
During the third quarter of 2013, we acquired all of the issued and outstanding securities of a privately-held company. The
total cash consideration for this transaction was approximately $5.3 million. We will pay contingent consideration of up to $3.0
million in cash upon the satisfaction of certain milestone achievements, as defined pursuant to the share purchase agreement.
This business became part of our SaaS division. Transaction costs associated with the acquisition were approximately $0.2
million, all of which we expensed during the year ended December 31, 2013, and are included in General and administrative
expense in the accompanying consolidated statements of income.
During the fourth quarter of 2013, we acquired all of the issued and outstanding securities of a privately-held company.
The total cash consideration for this transaction was approximately $5.5 million. This business became part of our Enterprise
and Service Provider division. Transaction costs associated with the acquisition were approximately $0.2 million, all of which
we expensed during the year ended December 31, 2013, and are included in General and administrative expense in the
accompanying consolidated statements of income.
We have included the effects of all of the companies acquired in 2013 in our results of operations prospectively from the
date of each acquisition.
2012 Acquisitions
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 and Service Provider
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.
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 SaaS 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 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.
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 and Service Provider division. Transaction costs associated with the acquisition were approximately $0.5 million, of
which we expensed $0.4 million 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 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
33
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 and Service Provider 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 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 and Service
Provider division and the other became part of our SaaS 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 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.
Subsequent Events
On January 8, 2014, we acquired all of the issued and outstanding securities of Framehawk. The Framehawk solution,
which optimizes the delivery of virtual desktops and applications to mobile devices, will be combined with Citrix HDX
technologies in the Citrix XenApp and XenDesktop products to deliver an unparalleled user experience over highly latent and
erratic mobile network conditions. The total preliminary consideration for this transaction was approximately $27.9 million, net
of $0.3 million of cash acquired, and was paid in cash. Transaction costs associated with the acquisition are currently estimated
at $0.1 million, all of which we expensed during the year ended December 31, 2013 and are included in General and
administrative expense in the accompanying consolidated statements of income.
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, 2013 describes the significant accounting policies and methods used in the preparation of our Consolidated
Financial Statements.
34
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 and maintenance,
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.
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 and 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.
For hardware appliance and software transactions, 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 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
35
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 transactions 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 and Service Provider 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, 2013 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
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. In years when a
significant number of stock options are granted, we analyze our historical pattern of option exercises based on certain
demographic characteristics annually and have historically 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.
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, 2013, there was $267.6 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 2.14 years.
36
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, 2013 for further information regarding our adoption of the authoritative guidance for stock-based compensation.
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. 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
37
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.
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 for 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, 2013, 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 $509.6 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, 2013, we had $1,768.9 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 and Service Provider division products, which include our Mobile and Desktop products, Networking and
Cloud products and related license updates and maintenance and from sales of our SaaS division’s Collaboration and Data
products. The Enterprise and Service Provider division and the SaaS 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,
2013 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 the fourth quarter of 2013, we performed a qualitative assessment to determine whether further quantitative
impairment testing for goodwill and certain intangible assets is necessary, which we refer to this assessment 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
38
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. 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 2013 and 2012.
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, 2013, we had approximately $150.4 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, 2013, we determined that a $26.5 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, 2013,
which could impact our future performance and financial position.
39
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 (expense) income, net
Income before income taxes
Income taxes
Consolidated net income
Less: Net loss attributable to non-controlling interest
Year Ended December 31,
2013
2012
2011
2013
Compared to
2012
2012
Compared to
2011
$
891,630
$
830,645
$
744,513
7.3 %
11.6 %
582,872
511,323
1,305,053
1,125,094
138,879
119,061
430,213
940,181
91,485
2,918,434
2,586,123
2,206,392
114,932
289,990
97,873
502,795
96,962
227,150
80,025
404,137
74,393
164,465
54,741
293,599
2,415,639
2,181,986
1,912,793
516,338
450,571
1,216,680
1,060,829
260,236
41,668
—
245,259
34,549
—
380,674
885,066
213,673
16,390
24
2,034,922
1,791,208
1,495,827
380,717
8,194
(1,021)
387,890
48,367
339,523
—
390,778
10,152
9,299
410,229
57,682
352,547
—
416,966
13,819
(288)
430,497
74,867
355,630
692
14.0
16.0
16.6
12.8
18.5
27.7
22.3
24.4
10.7
14.6
14.7
6.1
20.6
13.6
(2.6)
(19.3)
(5.4)
(16.1)
(3.7)
*
*
*
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)
*
*
*
Net income attributable to Citrix Systems, Inc.
$
339,523
$
352,547
$
356,322
(3.7)%
(1.1)%
*
not meaningful
Revenues by Segment
Net revenues of our Enterprise and Service Provider 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 is primarily comprised of our desktop and application virtualization products, which include
XenDesktop and XenApp and our mobility products which include XenMobile products; and
• Networking and Cloud is primarily comprised of our cloud networking products, which include NetScaler, Cloud
Bridge and ByteMobile Smart Capacity, and our cloud platform products, which include XenServer, CloudPlatform
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.
40
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 SaaS 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 and GoToTraining;
• Data Sharing product, which primarily includes ShareFile;
• Remote Access product, GoToMyPC; and
• Remote IT Support products, which primarily include GoToAssist.
Year Ended December 31,
2013
2012
2011
2013
Compared to
2012
2012
Compared to
2011
(In thousands)
$
891,630
$
830,645
$
744,513
$
60,985
$
582,872
1,305,053
138,879
511,323
1,125,094
119,061
430,213
940,181
91,485
71,549
179,959
19,818
86,132
81,110
184,913
27,576
$
2,918,434
$
2,586,123
$ 2,206,392
$
332,311
$
379,731
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 2013 when compared to 2012 primarily due to increased sales of our cloud
networking products of $92.0 million, led by NetScaler, and increased sales of our mobility products of $26.2 million, partially
offset by a decrease in sales of our desktop and application virtualization products of $60.0 million. Product and licenses
revenue increased during 2012 when compared to 2011 primarily due to increased sales of our cloud networking products of
$60.0 million, led by NetScaler, and increased sales of our desktop and application virtualization products, led by XenDesktop
of $27.1 million. We currently target Product and licenses revenue to increase when comparing the first quarter of 2014 to the
first quarter of 2013.
Software as a Service
Software as a Service revenue increased during 2013 when compared to 2012 primarily due to increased sales of our
Collaboration products of $45.4 million and due to increased sales of our Data Sharing products of $15.9 million. Software as a
Service revenue increased during 2012 compared to 2011 primarily due to increased sales of our Collaboration products of
$61.0 million and increased sales of our Data Sharing products of $19.3 million. We currently target our Software as a Service
revenue to increase when comparing the first quarter of 2014 to the first quarter of 2013 and when comparing the first quarter
of 2014 to the fourth quarter of 2013.
License updates and maintenance
License updates and maintenance revenue increased during 2013 when compared to 2012 primarily due to an increase in
maintenance revenues of $100.3 million, primarily driven by increased sales of maintenance and support contracts across all of
our Enterprise and Service Provider division's products and an increase in sales and renewals of our Subscription Advantage
product of $79.7 million. 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
41
maintenance revenues of $45.2 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 2014 to the first quarter of 2013.
Professional services
Professional services revenue increased during 2013 when compared to 2012 and during 2012 when compared to 2011
primarily due to increases in consulting revenues related to increased implementation sales of our Enterprise and Service
Provider division's products. We currently target Professional services revenue to increase when comparing the first quarter of
2014 to the first quarter of 2013 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 include revenue from annual service agreements for our SaaS products and Professional services revenue primarily related
to our consulting contracts. Deferred revenues increased approximately $213.7 million as of December 31, 2013 compared to
December 31, 2012 primarily due to increased new and renewal sales of our Subscription Advantage product of $106.2 million;
increased sales of our hardware and software maintenance contracts of $44.4 million and increased support contracts primarily
related to our Mobile and Desktop products of $34.8 million. We currently target deferred revenue to increase in 2014.
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 45.4% of our net revenues for the
year ended December 31, 2013, 45.3% of our net revenues for the year ended December 31, 2012 and 43.2% of our net
revenues for the year ended December 31, 2011. 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, 2013.
Segment Revenues
Our revenues are derived from sales of Enterprise and Service Provider 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 SaaS division’s Collaboration and Data products. The Enterprise and Service Provider division and the
SaaS division constitute our two reportable segments.
An analysis of our reportable segment net revenue is presented below:
Year Ended December 31,
Revenue
Growth
Revenue
Growth
2013
2012
2011
2013 to 2012
2012 to 2011
(In thousands)
Enterprise and Service Provider
division
SaaS division
Consolidated net revenues
$
$
2,335,562
582,872
2,918,434
$
$
2,074,800
511,323
2,586,123
$
$
1,778,646
427,746
2,206,392
12.6%
14.0%
12.8%
16.7%
19.5%
17.2%
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, 2013 for additional information on our segment revenues.
42
Cost of Net Revenues
Year Ended December 31,
2013
2012
2011
2013
Compared to
2012
2012
Compared to
2011
(In thousands)
Cost of product and license revenues
$
114,932
$
96,962
$
74,393
$
17,970
$
Cost of services and maintenance revenues
Amortization of product related intangible assets
289,990
97,873
227,150
80,025
164,465
54,741
62,840
17,848
22,569
62,685
25,284
Total cost of net revenues
$
502,795
$ 404,137
$ 293,599
$
98,658
$
110,538
Cost of product and license revenues consists primarily of hardware, shipping expense, royalties, product media and
duplication, manuals and packaging materials. Cost of services and maintenance revenues consists primarily of compensation
and other personnel-related costs of providing technical support and consulting, as well as the costs related to providing our
SaaS, which includes the cost to support the voice and video offerings in our Collaboration products. Also included in Cost of
net revenues is amortization of product related intangible assets.
Cost of product and license revenues increased during 2013 when compared to 2012 and during 2012 when compared to
2011 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 2014 to the first quarter of 2013 consistent with the targeted
increase in sales of our hardware products.
Cost of services and maintenance revenues increased during 2013 compared to 2012 consistent with the increase in sales
of our Collaboration products and cost for infrastructure to support the voice and video offerings in our Collaboration products
of $30.5 million. Also contributing to the increase in Cost of services and maintenance revenues is an increase in consulting
costs of $16.8 million and maintenance and support costs of $15.1 million related to increased sales of our Enterprise and
Service Provider division's products as described above. 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 and Service Provider division's products as
described above. We currently are targeting cost of services and maintenance revenues will increase when comparing the first
quarter of 2014 to the first quarter of 2013 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 82.8% for 2013, 84.4% for 2012 and 86.7% for 2011. The decrease in gross
margin as a percentage of net revenue is primarily due to the increase in sales of our Networking and Cloud 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 2014 to the first quarter of 2013, 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 and Service Provider 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 12 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.
43
Research and Development Expenses
Year Ended December 31,
2013
2012
2011
2013
Compared to
2012
2012
Compared to
2011
(In thousands)
Research and development
$
516,338
$
450,571
$
380,674
$
65,767
$
69,897
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 2013 as compared to 2012 primarily due to an increase in
compensation, including stock-based compensation and employee-related costs, primarily related to increased headcount from
strategic hiring and acquisitions.
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.
Sales, Marketing and Services Expenses
Year Ended December 31,
2013
2012
2011
2013
Compared to
2012
2012
Compared to
2011
(In thousands)
Sales, marketing and services
$
1,216,680
$
1,060,829
$
885,066
$
155,851
$
175,763
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 2013 compared to 2012 primarily due to a $91.5 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 2013 to 2012 is a $30.9 million increase in facilities costs and
related depreciation, consistent with the increase in headcount and a $21.0 million increase in marketing program costs related
to various marketing campaigns and events.
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.
General and Administrative Expenses
Year Ended December 31,
2013
2012
2011
2013
Compared to
2012
2012
Compared to
2011
(In thousands)
General and administrative
$
260,236
$
245,259
$
213,673
$
14,977
$
31,586
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.
General and administrative expenses increased during 2013 compared to 2012 primarily due to an increase in
compensation and employee related costs of $11.8 million due to additional headcount, primarily in information technology
44
and facilities, as well as from our acquisitions. Also contributing to the increase in General and administrative expense when
comparing 2013 to 2012 is an increase in stock-based compensation expense of $10.7 million related to retention-focused
stock-based awards granted to new and existing employees and assumed in connection with acquisitions. These increases were
partially offset by a decrease in certain facility and depreciation costs of $7.7 million due to a lower allocation of these costs as
employees are being added at a slower rate in general and administrative functions compared to research and development and
sales, marketing and services.
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.
2014 Operating Expense Outlook
When comparing the first quarter of 2014 to the fourth quarter of 2013, we are targeting operating expenses to 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
Year Ended December 31,
2013
2012
2011
2013
Compared to
2012
2012
Compared to
2011
(In thousands)
Amortization of other intangible assets
$
41,668
$
34,549
$
16,390
$
7,119
$
18,159
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 2013
to 2012 was primarily due to amortization of other intangible assets acquired in conjunction with our acquisitions, primarily
Zenprise.
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.
As of December 31, 2013, we had unamortized other identified intangible assets with estimable useful lives in the net
amount of $260.5 million. For more information regarding our acquisitions see, “— Overview” and Note 3 to our consolidated
financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2013.
Other (expense) income, net
Year Ended December 31,
2013
2012
2011
2013
Compared to
2012
2012
Compared to
2011
(In thousands)
Other (expense) income, net
$
(1,021) $
9,299
$
(288) $
(10,320) $
9,587
Other (expense) income, net is primarily comprised of remeasurement of foreign currency transaction gains (losses),
realized losses related to changes in the fair value of our investments that have a decline in fair value considered other-than-
temporary and recognized gains (losses) related to our investments and interest expense, which was not material for all periods
presented.
The change in Other (expense) income, net when comparing 2013 to 2012 is primarily driven by strategic investment
activity. 2013 included a gain of $6.0 million and 2012 included a gain of $16.5 million from the sales of companies we invest
in.
The change in Other (expense) income, net when comparing 2012 to 2011 is primarily due to a $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. 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, 2013.
45
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.
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, 2013, we had approximately $150.4 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, 2013, we determined that $26.5 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 12.5% for the year ended December 31, 2013 and 14.1% for the year
ended December 31, 2012. The decrease in the effective tax rate when comparing the year ended December 31, 2013 to the
year ended December 31, 2012 was primarily due to 2012 not including the U.S. research and development tax credit and 2013
including the U.S. research and development tax credit for both the 2012 and 2013 tax years as the law extending the credit for
2012 was not enacted until 2013.
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
resulted in net tax benefits of approximately $10.7 million, which were recognized in 2013, the year in which the law was
enacted.
We currently target our effective tax rate to increase in 2014 compared to 2013 due to the expiration of the U.S. research
and development tax credit, which has not been renewed.
46
Liquidity and Capital Resources
During 2013, we generated operating cash flows of $928.3 million. These operating cash flows related primarily to net
income of $339.5 million, adjusted for, among other things, non-cash charges, including depreciation and amortization
expenses of $267.5 million and stock-based compensation expense of $183.9 million. Also contributing to these cash inflows
was an aggregate increase in operating assets and liabilities of $182.3 million, net of effects of acquisitions. Our investing
activities used $938.2 million of cash consisting primarily of net purchases of investments of $433.5 million, cash paid for
acquisitions of $334.9 million and cash paid for the purchase of property and equipment of $162.9 million. Our financing
activities used cash of $352.3 million primarily due to stock repurchases of $406.3 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 $73.7 million.
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 the 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.
Historically, significant portions of our cash inflows were generated by our operations. We currently expect this trend to
continue throughout 2014. 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
December 31,
2013
2012
(In thousands)
2013
Compared to
2012
Cash, cash equivalents and investments
$
1,590,416
$
1,523,944
$
66,472
The increase in cash, cash equivalents and investments at December 31, 2013 as compared to December 31, 2012, is
primarily due to cash provided by our operating activities of $928.3 million and cash received from the issuance of common
stock under our employee stock-based compensation plans of $73.7 million, partially offset by expenditures made on stock
repurchases of $406.3 million, cash paid for acquisitions, net of cash acquired, of $334.9 million and purchases of property and
equipment of $162.9 million. As of December 31, 2013, $1,059.9 million of the $1,590.4 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;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
47
•
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 minimum 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, 2013
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 included in the table
below.
Balance at December 31, 2012
Purchases of Level 3 securities
Transfers out of Level 3
Balance at December 31, 2013
Investments
(in thousands)
$
$
3,341
9,700
(2,750)
10,291
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
included in Other assets in our accompanying consolidated balance sheets.
Assets Measured at Fair Value on a Non-recurring Basis Using Significant Unobservable Inputs (Level 3)
During 2013, certain cost method investments with a combined carrying value of $9.3 million were determined to be
impaired and have been written down to their fair values of $5.6 million, resulting in impairment charges of $3.7 million.
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 values of $9.5 million resulting in impairment charges of $3.5 million.
48
The impairment charges are included in Other (expense) income, net in the accompanying consolidated financial
statements for the years ended December 31, 2013 and 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. See Note 4 to our consolidated financial statements included in this Annual Report on Form
10-K for the year ended December 31, 2013 for further 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.
Accounts Receivable, Net
Accounts receivable
Allowance for returns
Allowance for doubtful accounts
Accounts receivable, net
December 31,
2013
2012
(In thousands)
2013
Compared to
2012
$
$
660,175
(2,062)
(3,292)
654,821
$
$
637,403
(2,564)
(3,883)
630,956
$
$
22,772
502
591
23,865
The increase in accounts receivable at December 31, 2013 compared to December 31, 2012 was primarily due to an
increase in sales, particularly in the last month of 2013 compared to the last month of 2012. The activity in our allowance for
returns was comprised primarily of $5.0 million in credits issued for returns partially offset by $4.5 million of provisions for
returns recorded during 2013. The activity in our allowance for doubtful accounts was comprised primarily of $1.6 million of
uncollectible accounts written off, net of recoveries, partially offset by $1.0 million in additional provisions for doubtful
accounts.
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, 2013, one distributor, Ingram Micro, accounted for 10% of our accounts receivable. At December 31, 2012, one
distributor, Ingram Micro, accounted for 11% 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, 2013.
Stock Repurchase Program
Our Board of Directors authorized an ongoing stock repurchase program with a total repurchase authority granted to us of
$3.9 billion, of which $500.0 million was approved in October 2013. 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, 2013, approximately $429.3 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, 2013. 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.
During the year ended December 31, 2013, we expended approximately $406.3 million on open market purchases,
repurchasing 6,563,986 shares of outstanding common stock at an average price of $61.90.
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.
49
Shares for Tax Withholding
During the years ended December 31, 2013, we withheld 444,657 shares, in 2012 we withheld 269,745 shares and in
2011, we withheld 182,203 shares from stock units that vested. Amounts withheld to satisfy minimum tax withholding
obligations that arose on the vesting of stock unit awards was $31.0 million for 2013, $20.2 million for 2012 and $13.3 million
for 2011. 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, 2013 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, 2013 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
276,590
31,300
307,890
$
$
$
$
Payments due by period
Less than 1 Year
1-3 Years
3-5 Years
60,982
31,300
92,282
$
$
86,123
—
86,123
$
$
40,600
—
40,600
More than 5 Years
88,885
$
—
88,885
$
(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 $13.1 million and a contingent obligation to purchase inventory, which is based on amount of usage, of
approximately $18.2 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 $63.8 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, 2013
for further information.
As of December 31, 2013, we did not have any individually material capital lease obligations or other material long-term
commitments reflected on our consolidated balance sheets.
Off-Balance Sheet Arrangements
We do not have any special purpose entities or off-balance sheet financing arrangements.
50
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, 2013. 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, 2013.
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 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, 2013 and 2012, we had in place foreign currency forward sale contracts with a notional amount of
$49.7 million and $104.2 million, respectively, and foreign currency forward purchase contracts with a notional amount of
$210.7 million and $252.8 million, respectively. At December 31, 2013, these contracts had an aggregate fair value asset of
$3.2 million and at December 31, 2012, these contracts had an aggregate fair value asset of $0.4 million. Based on a
hypothetical 10% appreciation of the U.S. dollar from December 31, 2013 market rates, the fair value of our foreign currency
forward contracts would decrease by $16.4 million. Conversely, a hypothetical 10% depreciation of the U.S. dollar from
December 31, 2013 market rates would increase the fair value of our foreign currency forward contracts by $16.4 million. 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, 2013 and 2012 levels, the fair value of the available-for-
sale portfolio would decline by approximately $13.2 million and $9.2 million, respectively. If market interest rates were to
decrease by 100 basis points from December 31, 2013 and 2012 levels, the fair value of the available-for-sale portfolio would
increase by approximately $8.0 million and $5.1 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-36 of this Annual Report on Form 10-K for the year ended
December 31, 2013.
51
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, 2013, our management, with the participation of our President and Chief Executive Officer and our
Executive Vice President, Chief Operating Officer 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,
Chief Operating Officer and Chief Financial Officer concluded that, as of December 31, 2013, 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, Chief Operating
Officer 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, 2013, 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,
2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission, or COSO, in the 1992 Internal Control—Integrated Framework (the COSO criteria). Based on our
assessment we believe that, as of December 31, 2013, 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, 2013 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as stated in their report which appears below.
52
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, 2013, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (1992 framework) (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, 2013, 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, 2013 and 2012, 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, 2013 and our report dated February 20, 2014 expressed an unqualified opinion thereon.
Boca Raton, Florida
February 20, 2014
/s/ Ernst & Young LLP
Certified Public Accountants
53
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 Sudhakar Ramakrishna, our Senior
Vice President and General Manager Enterprise and Service Provider Division, each entered into a new trading plan in the
fourth quarter of 2013 in accordance with Rule 10b5-1 and our policy governing transactions in our securities. We undertake no
obligation to update or revise the information provided herein, including for revision or termination of an established trading
plan.
54
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, 2013.
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, 2013.
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, 2013.
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, 2013.
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, 2013.
55
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.
56
Exhibit No.
Description
3.1
3.2
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*
10.13*
10.14*
10.15*
Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to
Exhibit 3.1 to the Company's Current Report on Form 8-K filed on May 29, 2013
Amended and Restated By-laws of the Company (incorporated herein by reference to Exhibit 3.2 to the
Company's Current Report on Form 8-K filed on May 29, 2013
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)
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)
Fifth Amendment to 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 June 30, 2013)
Sixth 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 filed on
May 29, 2013)
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)
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)
Amendment to Amended and Restated 2005 Employee Stock Purchase Plan (incorporated by reference
herein to Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended
December 31, 2012)
10.16*†
Citrix Systems, Inc. Executive Bonus Plan
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)
10.17*
57
Exhibit No.
Description
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
Form of First Amendment to Change of Control Agreement between the Company and each of Brett M.
Caine, David J. Henshall, David R. Friedman and Alvaro J. Monserrat (together with Mark Templeton,
the “Executive Officers”)
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 and Alvaro J. Monserrat (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 Change in Control Agreement by and between the Company and each of Catherine Courage,
Steve Daheb, Sudhakar Ramakrishna and Christopher Hylen (incorporated by reference herein to Exhibit
10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012)
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, 2013 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.
10.18*
10.19*†
10.20*†
10.21*
10.22*
10.23*
21.1†
23.1†
24.1
31.1†
31.2†
32.1††
101†
*
†
††
Indicates a management contract or a compensatory plan, contract or arrangement.
Filed herewith.
Furnished herewith.
58
(b) Exhibits.
The Company hereby files as part of this Annual Report on Form 10-K for the year ended December 31, 2013, 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, 2013 the
consolidated financial statement schedule listed in Item 15(a)(2) above, which is attached hereto.
59
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 20th day
of February, 2014.
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 20th day of February, 2014.
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
Executive Vice President, Chief Operating Officer and
Chief Financial Officer (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/ ROBERT D. DALEO
Director
Robert D. Daleo
/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
60
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, 2013 and 2012
Consolidated Statements of Income — Years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Comprehensive Income — Years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Equity — Years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Cash Flows — Years ended December 31, 2013, 2012 and 2011
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
F-7
F-8
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
The Board of Directors and Stockholders of Citrix Systems, Inc.
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Citrix Systems, Inc. as of December 31, 2013 and 2012, 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, 2013. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements 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, 2013 and 2012, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 2013, 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, 2013, based on criteria established in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework)
and our report dated February 20, 2014 expressed an unqualified opinion thereon.
Boca Raton, Florida
February 20, 2014
/s/ Ernst & Young LLP
Certified Public Accountants
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 $5,354 and $6,448 at December 31, 2013 and
2012, 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 Stockholders' Equity
Accounts payable
Accrued expenses and other current liabilities
Income taxes payable
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; 291,078 and 287,123
shares issued and outstanding at December 31, 2013 and 2012, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
December 31,
2013
December 31,
2012
(In thousands, except par value)
$
280,740
453,976
$
643,609
285,022
$
$
654,821
14,107
110,981
48,470
1,563,095
855,700
338,996
1,768,949
509,595
115,418
60,496
5,212,249
78,452
257,606
29,322
1,098,681
1,464,061
313,059
115,322
$
$
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
257,135
49,346
965,276
1,342,873
232,719
99,033
—
—
291
3,974,297
2,903,541
4,951
6,883,080
287
3,691,111
2,564,018
(7,705)
6,247,711
Less - common stock in treasury, at cost (107,789 and 100,781 shares at December 31,
2013 and 2012, respectively)
Total stockholders' equity
Total liabilities and stockholders' equity
(3,563,273)
3,319,807
5,212,249
$
(3,125,934)
3,121,777
4,796,402
$
See accompanying notes.
F-3
CITRIX SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
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 (expense) income, 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
Year Ended December 31,
2013
2012
2011
(In thousands, except per share information)
$
891,630
$
830,645
$
582,872
1,305,053
138,879
2,918,434
114,932
289,990
97,873
502,795
511,323
1,125,094
119,061
2,586,123
96,962
227,150
80,025
404,137
744,513
430,213
940,181
91,485
2,206,392
74,393
164,465
54,741
293,599
2,415,639
2,181,986
1,912,793
516,338
1,216,680
260,236
41,668
—
2,034,922
380,717
8,194
(1,021)
387,890
48,367
339,523
—
450,571
1,060,829
245,259
34,549
—
1,791,208
390,778
10,152
9,299
410,229
57,682
352,547
—
380,674
885,066
213,673
16,390
24
1,495,827
416,966
13,819
(288)
430,497
74,867
355,630
692
339,523
$
352,547
$
356,322
1.82
1.80
$
$
1.89
1.86
$
$
1.90
1.87
186,672
188,245
186,722
189,129
187,315
190,641
See accompanying notes.
F-4
CITRIX SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31,
2013
2012
(In thousands)
2011
Consolidated net income
Other comprehensive income (loss):
$
339,523
$
352,547
$
355,630
Change in foreign currency translation adjustment
8,482
2,457
(4,595)
Available for sale securities:
Change in net unrealized gains
Less: reclassification adjustment for net (gains) losses
included in net income
Net change (net of tax effect)
Gain (loss) on pension liability
Cash flow hedges:
Change in unrealized gains
Less: reclassification adjustment for net losses (gains)
included in net income
Net change (net of tax effect)
Other comprehensive income (loss)
(985)
3,603
(203)
(1,188)
(3,443)
160
2,500
(3,925)
(67)
(653)
2,929
2,862
12,656
5,817
5,164
3,856
293
1,343
1,636
634
(2,784)
(8,475)
(11,259)
(13,584)
Comprehensive income
352,179
356,403
342,046
Less: Comprehensive income attributable to non-controlling
interest
—
—
Comprehensive income attributable to Citrix Systems, Inc.
$
352,179
$
356,403
$
(692)
341,354
See accompanying notes.
F-5
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B
CITRIX SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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 stock-based compensation, net
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
Income taxes, net
Accounts payable
Accrued expenses and other current liabilities
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 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 stock-based compensation
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-7
Year Ended December 31,
2013
2012
(In thousands)
2011
$
339,523
$
352,547
$
355,630
139,541
127,959
183,941
(2,441)
1,046
4,473
1,905
(51,848)
8,129
(12,552)
5,888
434
406,475
(22,951)
(5,591)
(862)
5,076
(35,316)
3,092
22,515
201,455
14,927
182,345
928,343
(1,703,976)
766,192
504,314
12,067
(162,889)
(6,824)
(334,881)
(12,153)
—
(938,150)
73,655
(2,061)
12,552
—
(406,326)
(31,013)
912
(352,281)
(781)
(362,869)
643,609
280,740
92,672
127
$
$
$
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)
(4,408)
(426)
45,135
216,798
43,782
180,537
818,527
(1,435,367)
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
—
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(20,170)
1,962
(149,782)
(492)
310,313
333,296
643,609
32,355
305
$
$
$
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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)
25,180
(11,758)
(20,996)
168,994
10,178
73,865
679,122
(1,360,677)
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
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 leader
in virtualization, networking and cloud infrastructure to enable new ways for people to work better. Citrix solutions help IT and
service providers to build, manage and secure virtual and mobile workspaces that seamlessly deliver apps, desktops, data and
services to virtually anyone, on any device, over any network or cloud.
Citrix markets and licenses its products directly to customers, over the Web, and through systems integrators ("SIs"), in
addition to indirectly through value-added resellers ("VARs"), value-added distributors ("VADs"), original equipment
manufacturers ("OEMs"), and service providers.
The Company’s revenues are derived from its Enterprise and Service Provider 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 Software as a Service ("SaaS") products, which primarily include Collaboration and Data Sharing,
Remote Access and Remote IT Support products. Enterprise and Service Provider (formerly Infrastructure division) and SaaS
constitute the Company's two reportable segments. See Note 11 for more information on the Company's segments.
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 SaaS division. All significant transactions and
balances between the Company and its subsidiaries have been eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents at December 31, 2013 and 2012 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, 2013 and 2012 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 income (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 attributable primarily to VARs, VADs and end customers. Collateral is generally
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 by
conducting an analysis of the customer's 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 $3.3
million and $3.8 million as of December 31, 2013 and 2012, 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 10% and 11% of gross accounts receivable at December 31, 2013 and 2012, 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, 2013 and 2012.
F-8
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 and software, the lesser of the lease term or ten
years for leasehold improvements, which is the estimated useful life, seven years for office equipment and furniture and the
Company’s enterprise resource planning system and 40 years for buildings.
During 2013 and 2012, the Company retired $10.3 million and $5.3 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
Assets under construction
Land
Total
Long-Lived Assets
December 31,
2013
2012
(In thousands)
$
$
85,092
204,110
316,902
105,145
168,990
880,239
(597,268)
28,438
27,587
338,996
$
$
76,202
178,948
259,225
86,362
149,731
750,468
(479,460)
15,517
16,769
303,294
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.
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 2013 and 2011, 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
2013 and 2012, 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 2013. As a result of the qualitative analysis, no further
quantitative impairment test was deemed necessary. See Note 3 for acquisitions and Note 11 for segment information.
F-9
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the change in goodwill allocated to the Company’s reportable segments during 2013 and
2012 (in thousands):
Balance at
January 1,
2013
Additions
Other
Balance at
December
31, 2013
Balance at
January 1,
2012
Additions
Other
Balance at
December 31,
2012
$ 1,158,580
$ 248,800
$ (5,224) (2) $ 1,402,156
$
956,504
$ 257,379
$ (55,303) (4) $ 1,158,580
Consolidated
$ 1,518,219
$ 251,468 (1)
$
(738)
$ 1,768,949
$ 1,239,120
359,639
2,668
4,486 (3)
366,793
282,616
26,481
$ 283,860 (1
)
50,542 (4)
359,639
$ (4,761)
$ 1,518,219
Enterprise and
Service Provider
division
SaaS division
(1) Amount primarily relates to acquisitions. See Note 3 for more information regarding the Company’s acquisitions.
(2) Amount primarily relates to adjustments to the preliminary purchase price allocation for certain 2012 Acquisitions.
(3) Amount primarily relates to foreign currency translation.
(4) 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 and Service
Provider division to its SaaS division. Also included in the SaaS division is foreign currency translation.
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, 2013
Gross Carrying
Amount
Accumulated
Amortization
$
$
677,509
482,918
1,160,427
$
$
428,418
222,414
650,832
December 31, 2012
Gross Carrying
Amount
Accumulated
Amortization
$
$
620,032
446,601
1,066,633
$
$
339,608
170,820
510,428
Weighted-
Average Life
(Years)
5.60
7.52
6.38
Weighted-
Average Life
(Years)
5.60
7.28
6.29
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. There were no impairments for the year ended December 31, 2013. 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
F-10
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
result, the carrying value of the CloudStack tradename was written down to zero. See Note 3 for more information regarding
the Company's acquisitions.
Estimated future annual amortization expense is as follows (in thousands):
Year ending December 31,
2014
2015
2016
2017
2018
$
132,956
111,016
88,749
61,057
47,618
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. The Company's 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 2013 and 2012 relating to internal use software was $62.7 million and $51.5 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 $58.6 million, $44.5 million and $37.2 million, during the years ended December 31,
2013, 2012 and 2011, 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 licenses 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
F-11
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
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.
For hardware appliance and software transactions, 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 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 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
F-12
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 transactions, 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 products are sold separately and
not bundled with the Enterprise and Service Provider 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 $2.1 million and $2.6 million at December 31, 2013 and December 31,
2012, 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. 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 are
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 and Service
Provider 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 SaaS 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 Accumulated other comprehensive income (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 (losses) gains of approximately $(4.9) million, $(3.3) million and $4.7 million
for the years ended December 31, 2013, 2012, and 2011, respectively, are included in Other (expense) income, net, in the
accompanying consolidated statements of income.
F-13
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 income (loss) and reclassified into earnings as operating expense, net, when the hedged transaction affects
earnings. Derivatives not designated as hedging instruments are adjusted to fair value through earnings as Other (expense)
income, 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. 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 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 $9.2 million and $9.8 million for these pension liabilities at December 31, 2013 and 2012,
respectively. Expenses for the programs for 2013, 2012 and 2011 amounted to $3.5 million, $1.5 million and $1.8 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 $146.5 million, $137.5 million and $130.8 million, during the years ended December 31, 2013,
2012 and 2011, respectively.
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
F-14
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
Certain reclassifications of the prior years' amounts have been made to conform to the current year's presentation. In the
Property and Equipment table above, the Company determined it was more practical to present Assets under construction on a
separate line as opposed to including the amounts within each asset class. Therefore, the reclassifications only resulted in
changes to the amounts between asset classes.
3. ACQUISITIONS
2013 Acquisitions
Zenprise
In January 2013, the Company acquired all of the issued and outstanding securities of Zenprise, Inc. ("Zenprise"), a
privately-held leader in mobile device management. Zenprise became part of the Company's Enterprise and Service Provider
division, in which Citrix has integrated the Zenprise offering for mobile device management into its XenMobile Enterprise
edition. The total consideration for this transaction was approximately $324.0 million, net of $2.9 million of cash acquired, and
was paid in cash. Transaction costs associated with the acquisition were approximately $0.6 million, of which the Company
expensed approximately $0.1 million during the year ended December 31, 2013 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 certain stock options, which are exercisable for up to 285,817 shares of the Company's common stock, for which the
vesting period reset fully upon the closing of the transaction.
F-15
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2013 Other Acquisitions
During the third quarter of 2013, the Company acquired all of the issued and outstanding securities of a privately-held
company. The total cash consideration for this transaction was approximately $5.3 million. The Company will pay contingent
consideration of up to $3.0 million in cash upon the satisfaction of certain milestone achievements, as defined pursuant to the
share purchase agreement. This business became part of the Company's SaaS division. Transaction costs associated with the
acquisition were approximately $0.2 million, all of which the Company expensed during the year ended December 31, 2013,
and are included in General and administrative expense in the accompanying consolidated statements of income.
During the fourth quarter of 2013, the Company acquired all of the issued and outstanding securities of a privately-held
company. The total cash consideration for this transaction was approximately $5.5 million. This business became part of the
Company's Enterprise and Service Provider division. Transaction costs associated with the acquisition were approximately $0.2
million, all of which the Company expensed during the year ended December 31, 2013, and are included in General and
administrative expense in the accompanying consolidated statements of income.
The two acquisitions discussed in this section captioned 2013 Other Acquisitions will collectively be referred to herein as
the "2013 Other Acquisitions".
Purchase Accounting for the Acquisitions in 2013
The purchase prices for the companies acquired during the year ended December 31, 2013, which include Zenprise and the
2013 Other Acquisitions (collectively, the "2013 Acquisitions"), were allocated to the acquired net tangible and intangible
assets based on estimated fair values as of the date of the acquisition. The allocation 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
Deferred tax liabilities, current
Long-term liabilities assumed
Deferred tax liabilities, non-current
Net assets acquired
Zenprise
2013 Other Acquisitions
Asset Life
5-6 years
Indefinite
Asset Life
Purchase
Price
Allocation
10,943
$
668
431 Various
1-7 years
Indefinite
38,785
69,200
247,273
367,300
(8,475)
—
(3,107)
(28,725)
$ 326,993
Purchase
Price
Allocation
$ 3,586
—
—
3,177
11,300
4,195
22,258
(3,950)
(2,000)
(1,000)
(1,699)
$ 13,609
Current assets acquired in connection with the 2013 Acquisitions consisted primarily of cash and accounts receivable.
Current liabilities assumed in connection with the 2013 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 2013 Acquisitions consisted of other long-term liabilities
and long-term portion of deferred revenues.
The Company continues to evaluate certain income tax assets and liabilities related to the 2013 Other Acquisitions.
Goodwill from the 2013 Acquisitions was assigned to the respective segments each businesses became part of. The goodwill
related to the 2013 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 2013 Acquisitions are included in the revenues of each business's respective segment. The Company
has included the effect of the 2013 Acquisitions in its results of operations prospectively from the date of acquisition.
F-16
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Identifiable intangible assets acquired in connection with the 2013 Acquisitions (in thousands) and the weighted-average
lives are as follows:
Trade names
Non-compete agreements
Customer relationships
Core and product technologies
In-process R&D (1)
Total
Zenprise
Asset Life
2013 Other
Acquisitions
Asset Life
$
2,400
3.0 years
$
700
1.0 year
18,300
7.0 years
47,800
6.0 years
—
$
69,200
—
—
3,600
6.0 years
6,300
5.0 years
1,400
Indefinite
$
11,300
(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.
The following unaudited pro-forma information combines the consolidated results of the operations of the Company and
the 2013 Acquisitions as if the acquisitions had occurred at the beginning of fiscal year 2012 (in thousands, except per share
data):
Revenues
Income from operations
Net income
Per share - basic
Per share - diluted
2012 Acquisitions
ByteMobile
Year Ended December 31,
2013
2012
$
2,921,604
$
2,596,227
376,936
336,250
1.80
1.79
333,077
314,300
1.68
1.66
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 and Service Provider 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. Revenues from the ByteMobile acquisition are included in the revenue of
the Company's Enterprise and Service Provider division. The Company has included the effect of the ByteMobile acquisition in
its results of operations prospectively from the date of acquisition.
Purchase Accounting for the ByteMobile acquisition
During the twelve months ended December 31, 2013, the Company made net adjustments to goodwill of approximately
$3.3 million to the purchase price allocation associated with the ByteMobile acquisition. Goodwill from the ByteMobile
acquisition was assigned to the Company's Enterprise and Service Provider division. The goodwill related to the ByteMobile
acquisition is not deductible for tax purposes. See Note 2 for information on adjustments to goodwill and 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.
F-17
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The purchase price for ByteMobile was allocated to the acquired net tangible and intangible assets based on its estimated
fair value as of the date of the acquisition. The allocation of the total purchase price is 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
ByteMobile
Asset Life
Purchase
Price
Allocation
$ 57,796
7,406
2,484 Various
1-9 years
Indefinite
44,934
248,900
221,914
583,434
(62,313)
(4,083)
(111,904)
$ 405,134
Current assets acquired in connection with the ByteMobile acquisition consisted primarily of cash and accounts
receivable. Current liabilities assumed in connection with the ByteMobile acquisition 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
acquisition date. Long-term liabilities assumed in connection with the ByteMobile acquisition consisted of other long-term
liabilities, long-term portion of deferred revenues and long-term debt, which was paid in full subsequent to the acquisition date.
Identifiable intangible assets acquired in connection with the ByteMobile acquisition included trade names of $6.0 million with
a weighted-average asset life of 6.0 years, customer relationships of $141.5 million with a weighted-average life of 9.0 years,
and core and product technologies of $101.4 million with a weighted-average life of 4.8 years.
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 SaaS 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. The Company
recorded approximately $24.5 million of goodwill, which is not deductible for tax purposes, and acquired $24.6 million of
identifiable intangible assets, of which $20.7 million is related to product related intangible assets and $3.9 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 127,668 shares of the Company's common stock, for which the vesting period
reset fully upon the closing of the transaction.
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 and Service Provider 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. The Company recorded approximately $22.8 million of goodwill, which is not deductible
for tax purposes, and acquired $11.0 million of identifiable intangible assets, all of which is related to product related intangible
assets. 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 and Service Provider division. Transaction costs associated with the
F-18
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 and Service Provider division and the other became part of the Company's SaaS 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.
Subsequent Events
On January 8, 2014, the Company acquired all of the issued and outstanding securities of Framehawk, Inc.
("Framehawk"). The Framehawk solution, which optimizes the delivery of virtual desktops and applications to mobile devices,
will be combined with HDX technology in the Citrix XenApp and XenDesktop products to deliver an unparalleled user
experience under adverse network conditions. The total preliminary consideration for this transaction was approximately $27.9
million, net of $0.3 million of cash acquired, and was paid in cash. Transaction costs associated with the acquisition are
currently estimated at $0.1 million, all of which the Company expensed during the year ended December 31, 2013 and are
included in General and administrative expense in the accompanying consolidated statements of income.
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, 2013
Gross
Gross
Unrealized
Unrealized
Losses
Gains
Description of the Securities
Agency securities
Corporate securities
Municipal securities
Government securities
Total
Amortized
Cost
$ 453,922
643,360
53,698
156,930
$1,307,910
$
$
1,177
947
81
196
2,401
$
$
Fair Value
(349) $ 454,750
644,091
(216)
53,756
(23)
(47)
157,079
(635) $1,309,676
Amortized
Cost
$ 400,365
404,546
32,214
39,863
$ 876,988
December 31, 2012
Gross
Gross
Unrealized
Unrealized
Losses
Gains
$
$
2,347
947
114
131
3,539
$
$
Fair Value
(5) $ 402,707
405,322
32,313
39,993
(192) $ 880,335
(171)
(15)
(1)
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. See Note 14 for more
information related to comprehensive income.
The average remaining maturities of the Company’s short-term and long-term available-for-sale investments at
December 31, 2013 were approximately five months and three years, respectively.
Realized Gains and Losses on Available-for-sale Investments
For the years ended December 31, 2013 and 2012, the Company had realized gains on the sales of available-for-sale
investments of $3.0 million and $4.1 million, respectively. For the years ended December 31, 2013 and 2012, the Company had
realized losses on available-for-sale investments of $2.7 million and $0.8 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 (expense) income, 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
F-19
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
There were no other-than-temporarily impaired available-for-sale investments during the twelve months ended
December 31, 2013. During 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
(expense) income, net in the accompanying consolidated statements of income.
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 $0.6 million and $0.2 million as of December 31, 2013 and 2012, respectively. 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 $24.3 million and $26.2 million as
of December 31, 2013 and 2012, 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 2013 and 2012, certain companies in which the Company held direct investments were acquired by third parties
and as a result of these sales transactions the Company recorded gains of $6.0 million and $16.5 million, respectively, which
was included in Other (expense) income, net in the accompanying consolidated statements of income. The Company
determined that certain cost method investments were impaired during 2013, 2012 and 2011 and recorded a total charge of $3.7
million, $3.5 million, and $3.5 million, respectively, which is included in Other (expense) income, 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
F-20
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
Assets:
Cash and cash equivalents:
Cash
Money market funds
Corporate securities
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
Assets:
Cash and cash equivalents:
Cash
Money market funds
Corporate securities
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,
2013
Quoted
Prices In
Active Markets
for Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
(in thousands)
$
$
$
$
$
$
$
227,528
52,823
389
$
227,528
52,823
—
— $
—
389
454,750
644,091
53,756
157,079
4,952
1,595,368
1,743
1,743
$
$
—
—
—
—
454,750
633,801
53,756
157,079
—
280,351
$
4,952
1,304,727
—
— $
1,743
1,743
$
$
—
—
—
—
10,291
—
—
—
10,291
—
—
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)
$
503,614
123,519
16,476
$
503,614
123,519
—
— $
—
16,476
402,707
405,322
32,313
39,993
4,157
1,528,101
4,162
4,162
$
$
—
—
—
—
402,707
401,981
32,313
39,993
—
627,133
$
4,157
897,627
—
— $
4,162
4,162
$
$
—
—
—
—
3,341
—
—
—
3,341
—
—
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 minimum 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
F-21
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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 included in the table below.
Balance at December 31, 2012
Purchases of Level 3 securities
Transfers out of Level 3
Balance at December 31, 2013
Investments
(in thousands)
$
$
3,341
9,700
(2,750)
10,291
Transfers out of Level 3 relate to certain of the Company's investments in convertible debt securities of early-stage
entities that were previously 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.
Assets Measured at Fair Value on a Non-recurring Basis Using Significant Unobservable Inputs (Level 3)
During 2013 and 2012, certain cost method investments with a combined carrying value of $9.3 million and $13.0
million, respectively, were determined to be impaired and have been written down to their fair values of $5.6 million and $9.5
million, respectively, resulting in impairment charges of $3.7 million and $3.5 million, respectively. The impairment charges
are included in Other (expense) income, net in the accompanying consolidated financial statements for the years ended
December 31, 2013 and 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-22
December 31,
2013
2012
(In thousands)
$
$
141,065
116,541
257,606
$
$
130,835
126,300
257,135
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, 2013, 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 February 2014,
the Company's Board of Directors approved the 2014 Equity Incentive Plan, which is subject to stockholder approval at the
Company Annual Meeting of Stockholders on May 22, 2014. There will be no grants under this plan until the plan is approved
by the Company's stockholders. 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 plan includes the Amended and Restated 1995 Stock
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, 2013, there were 26,960,367 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 16,605,208 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, 2013, 2,991,834 shares had been issued under the 2005 ESPP. The Company
recorded stock-based compensation costs related to the 2005 ESPP of $4.9 million, $4.0 million and $3.5 million for the years
ended December 31, 2013, 2012 and 2011, respectively.
Expense Information under the Authoritative Guidance
As required by the authoritative guidance, the Company estimates forfeitures of stock awards 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 $183.9 million, $57.1 million and $55.7 million,
respectively, in 2013, $149.9 million, $46.7 million and $65.8 million, respectively, in 2012 and $92.9 million, $28.4 million
and $67.9 million, respectively, in 2011.
The detail of the total stock-based compensation recognized by income statement classification is as follows (in
thousands):
F-23
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Statement Classifications
Cost of services revenues
Research and development
Sales, marketing and services
General and administrative
Total
Stock Options
2013
2012
2011
2,540
$
2,111
$
63,448
65,549
52,404
54,616
51,519
41,694
183,941
$
149,940
$
1,584
31,763
31,354
28,208
92,909
$
$
Stock options granted under the 2005 Plan typically have a five-year life and vest over three years, with 33.3% of the
shares underlying the option vesting on the first anniversary of the date of grant and the remainder of the underlying shares
vesting in equal installments at a rate of 2.78% thereafter (the "Standard Vesting Rate"). 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 the Standard
Vesting Rate. During the first quarter of 2013, the Company assumed in-the-money options from the Zenprise acquisition. 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, 2012
Assumed
Exercised
Forfeited or expired
Outstanding at December 31, 2013
Vested or expected to vest
Exercisable at December 31, 2013
Number of
Options
Weighted-
Average
Exercise
Price
$
7,589,532
285,817
(2,168,531)
(299,841)
5,406,977
5,366,212
4,438,465
54.15
11.85
33.97
60.90
59.64
59.78
61.88
Weighted-
Average
Remaining
Contractual
Life
(in years)
2.70
Aggregate
Intrinsic
Value
(in thousands)
2.15
2.14
1.93
$
$
$
57,583
56,548
38,167
The Company recognized stock-based compensation expense of $48.9 million, $56.4 million and $48.2 million related to
options for the years ended December 31, 2013, 2012 and 2011, respectively. As of December 31, 2013, there was $29.7
million of total unrecognized compensation cost related to stock options. That cost is expected to be recognized over a
weighted-average period of 1.22 years. The total intrinsic value of stock options exercised during 2013, 2012 and 2011 was
$77.7 million, $131.4 million and $169.2 million, respectively.
Stock Option Valuation Information
The Company 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. In years when a significant number of stock options are granted, the Company analyzes
its historical pattern of option exercises based on certain demographic characteristics annually and has historically determined
that there were no meaningful differences in option exercise activity based on demographic characteristics. 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 option pricing model. The weighted-average fair value of stock options granted and/or assumed during 2013, 2012
and 2011 was $56.97, $23.95 and $29.91, respectively.
F-24
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The assumptions used to value options granted and/or assumed 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 or assumed during
2013
0.39
0.4%
3.35
0%
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%
In March 2013 and 2012, the Company granted senior level employees non-vested stock unit awards representing, in the
aggregate, 399,029 and 418,809 non-vested stock units, respectively, that vest based on certain target market performance 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, 2015 for the March 2013 awards and
December 31, 2014 for the March 2012 awards. 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. If the awardee is not employed by the Company at the end of the performance period; the
extent to which the awardee will vest in the award, if at all, 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
March 2013 Grant
March 2012 Grant
0.16 - 0.42
0.33%
0%
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 as of the date of grant was $89.93 for the March 2013 grant and $89.95 for the March 2012 grant.
F-25
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.
The following table summarizes the Company's non-vested stock unit activity for the year ended December 31, 2013:
Non-vested stock units at December 31, 2012
Granted
Vested
Forfeited
Non-vested stock units at December 31, 2013
Number of
Shares
$
3,607,561
2,765,386
(1,375,165)
(365,803)
4,631,979
Weighted-
Average
Fair Value
at Grant Date
74.70
71.84
69.36
76.16
74.47
For the years ended December 31, 2013, 2012 and 2011, the Company recognized stock-based compensation expense of
$130.2 million, $89.5 million and $40.0 million, respectively, related to non-vested stock units. The fair value of the non-vested
stock units released in 2013, 2012, and 2011 was $95.4 million, $50.3 million and $21.3 million, respectively. As of
December 31, 2013, there was $237.8 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 1.96 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 $12.7
million, $10.5 million and $9.1 million in 2013, 2012 and 2011, respectively. The Company’s contributions vest over a four-
year period at 25% per year.
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 $3.9 billion, of which $500.0 million was approved in October 2013. 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, 2013, approximately $429.3
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.
During the year ended December 31, 2013, the Company expended approximately $406.3 million on open market
purchases, repurchasing 6,563,986 shares of outstanding common stock at an average price of $61.90.
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.
F-26
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Shares for Tax Withholding
During the years ended December 31, 2013, 2012 and 2011, the Company withheld 444,657 shares, 269,745 shares and
182,203 shares, respectively, from stock units that vested. Amounts withheld to satisfy minimum tax withholding obligations
that arose on the vesting of stock units was $31.0 million, $20.2 million and $13.3 million, for 2013, 2012 and 2011,
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, 2013 or 2012.
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, 2013, 2012 and 2011 totaled approximately $70.9 million, $65.1
million and $56.5 million, respectively. Sublease income for the years ended December 31, 2013, 2012 and 2011 was
approximately $0.3 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:
Years ending December 31,
2014
2015
2016
2017
2018
Thereafter
Total
Legal Matters
Operating
Leases
Sublease
Income
(In thousands)
$
$
60,982
46,770
39,353
22,064
18,536
88,885
276,590
$
$
255
260
227
218
203
—
1,163
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
F-27
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 has appealed 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 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 it is not reasonably possible that the ultimate outcomes will
materially and adversely affect its business, financial position, results of operations or cash flows.
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, 2013. 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, 2014 to be approximately $13.1 million. The Company also has
contingent obligations to purchase inventory for the fiscal year ended December 31, 2014, which are based on amount of usage,
of approximately $18.2 million. The Company does not have any purchase obligations beyond December 31, 2014.
10. INCOME TAXES
The United States and foreign components of income before income taxes are as follows:
United States
Foreign
Total
2013
2012
(In thousands)
2011
$
$
142,085
245,805
387,890
$
$
200,802
209,427
410,229
$
$
176,824
253,673
430,497
F-28
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
2013
2012
(In thousands)
2011
$
$
51,389
37,221
11,605
100,215
(34,897)
(8,413)
(8,538)
(51,848)
48,367
$
$
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
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,
2013
2012
(In thousands)
$
$
48,470
(364)
115,418
(13,127)
150,397
$
$
36,846
(876)
43,097
(19,756)
59,311
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 based compensation
Depreciation and amortization
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,
2013
2012
(In thousands)
$
25,556
55,688
60,519
103,329
10,537
72,074
1,675
(26,465)
302,913
—
(136,258)
(16,258)
(152,516)
150,397
$
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
$
$
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, 2013, the Company determined
that a $26.5 million valuation allowance relating to deferred tax assets for net operating losses and tax credits was necessary.
F-29
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company does not expect to remit earnings from its foreign subsidiaries. Undistributed earnings of the Company’s
foreign subsidiaries amounted to approximately $1,238.0 million at December 31, 2013. 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.
At December 31, 2013, the Company had $220.0 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, 2013, the Company had $52.0 million of
remaining net operating loss carry forwards in foreign jurisdictions that do not expire.
At December 31, 2013, the Company had research and development tax credit carry forwards of approximately $55.6
million that begin to expire in 2024.
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,
2013
2012
2011
35.0%
1.2
(14.8)
(1.1)
(10.9)
0.4
3.3
(0.6)
12.5%
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%
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, 2013
and 2012 is as follows (in thousands):
Balance at January 1, 2012
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
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, 2013
F-30
$
$
79,199
2,459
9,558
(33,594)
(13,718)
43,904
13,694
10,611
(2,116)
(2,301)
63,792
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2013, the Company recognized $0.8 million of expense related to interest and penalties.
The Company has no amounts accrued for the payment of interest and penalties at December 31, 2013.
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 $10.7 million, which were recognized in 2013, the year in which the law was
enacted.
11. SEGMENT INFORMATION
The Enterprise and Service Provider division and the SaaS 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 and Service
Provider division products and SaaS 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 (expense)
income, net. Accounting policies of the Company’s segments are the same as its consolidated accounting policies.
International revenues (sales outside of the United States) accounted for approximately 45.4%, 45.3% and 43.2% of the
Company’s net revenues for the year ended December 31, 2013, 2012, and 2011, respectively. Net revenues and segment profit
for 2013, 2012 and 2011 classified by the Company’s reportable segments, are presented below:
Net revenues:
Enterprise and Service Provider division
SaaS division
Consolidated
Segment profit:
Enterprise and Services Provider division
SaaS division
Unallocated expenses (1):
Amortization of intangible assets
Restructuring
Net interest and other income
Stock-based compensation
Consolidated income before income taxes
2013
2012
(In thousands)
2011
$
$
$
$
2,335,562
582,872
2,918,434
588,138
116,061
(139,541)
—
7,173
(183,941)
387,890
$
$
$
$
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) Represents expenses presented to management on a consolidated basis only and not allocated to the operating segments.
F-31
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Identifiable assets:
Enterprise and Service Provider division
SaaS division
Total identifiable assets
Long-lived assets, net:
United States
United Kingdom
Other countries
Total long-lived assets, net
December 31,
2013
2012
(In thousands)
4,662,724
549,525
5,212,249
$
$
4,246,292
550,110
4,796,402
December 31,
2013
2012
(In thousands)
258,114
29,382
51,500
338,996
$
$
231,812
30,633
40,849
303,294
$
$
$
$
The increases in identifiable assets are primarily due to goodwill and intangible assets recorded in conjunction with the
Company's 2013 Acquisitions. See Note 3 for additional information regarding the Company’s acquisitions.
In fiscal years 2013, 2012 and 2011, one distributor, Ingram Micro, accounted for 14%, 16% 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 2013, 2012 and 2011, 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 and Service Provider
division.
Revenues by product grouping for the Company’s Enterprise and Service Provider division and SaaS division were as
follows for the years ended:
Net revenues:
Enterprise and Service Provider division
Mobile and Desktop revenues(1)
Networking and Cloud revenues(2)
Professional services(3)
Other
Total Enterprise and Service Provider division
revenues
SaaS division revenues
Total net revenues
2013
December 31,
2012
(In thousands)
2011
$
1,549,383
$
1,450,850
$
634,598
138,879
12,702
2,335,562
582,872
496,608
119,061
8,281
2,074,800
511,323
$
2,918,434
$
2,586,123
$
1,278,798
385,518
91,496
22,834
1,778,646
427,746
2,206,392
(1) Mobile and Desktop revenues are primarily comprised of sales from the Company’s desktop and application virtualization
products, XenDesktop and XenApp, and the Company's Mobility products, which include XenMobile and related license
updates and maintenance and support.
F-32
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) Networking and Cloud revenues are primarily comprised of sales from the Company’s cloud networking products, which
include NetScaler, CloudBridge and ByteMobile Smart Capacity, and the Company’s cloud platform products which
include XenServer, CloudPlatform and CloudPortal and related license updates and maintenance and support.
(3) Professional services revenues are primarily comprised of revenues from consulting services and product training and
certification services.
Revenues by Geographic Location
The following table presents revenues by segment and geographic location, for the years ended:
Net revenues:
Enterprise and Service Provider division
Americas
EMEA
Asia-Pacific
Total Enterprise and Service Provider division revenues
SaaS division
Americas
EMEA
Asia-Pacific
Total SaaS division revenues
Total net revenues
2013
December 31,
2012
(In thousands)
2011
$
1,263,673
$
1,106,801
$
785,862
286,027
2,335,562
488,307
73,529
21,036
582,872
691,111
276,888
2,074,800
433,263
63,484
14,576
511,323
$
2,918,434
$
2,586,123
$
993,062
576,953
208,631
1,778,646
367,260
50,711
9,775
427,746
2,206,392
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 2013, 2012 and 2011
were $215.3 million, $127.4 million and $106.0 million, respectively.
12. DERIVATIVE FINANCIAL INSTRUMENTS
Derivatives Designated as Hedging Instruments
As of December 31, 2013, 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 income (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 gain on cash flow derivative instruments was $2.9 million and nil at December 31, 2013
and 2012, respectively, and is included in Accumulated other comprehensive income (loss) in the accompanying consolidated
balance sheets. The net unrealized gain as of December 31, 2013 is expected to be recognized in income over the next twelve
months at the same time the hedged items are recognized in income.
F-33
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 (expense) income, net.
Fair Values of Derivative Instruments
Asset Derivatives
Liability Derivatives
(In thousands)
December 31, 2013
December 31, 2012
December 31, 2013
December 31, 2012
Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Prepaid
expenses
and other
current
assets
Prepaid
expenses
and other
current
assets
Accrued
expenses
and other
current
liabilities
$4,157
Accrued
expenses
and other
current
liabilities
$1,578
$4,559
$4,162
Asset Derivatives
Liability Derivatives
(In thousands)
December 31, 2013
December 31, 2012
December 31, 2013
December 31, 2012
Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Prepaid
expenses
and other
current
assets
Prepaid
expenses
and other
current
assets
Accrued
expenses
and other
current
liabilities
$448
$393
Accrued
expenses
and other
current
liabilities
$52
$165
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
Derivatives in Cash Flow
Hedging Relationships
For the Year ended December 31,
Amount of Gain
Recognized in Other
Comprehensive Income (Loss)
(Effective Portion)
2013
2012
(In thousands)
Location of Loss Reclassified
from Accumulated Other
Comprehensive Income
(Loss) into Income
(Effective Portion)
Amount of Loss Reclassified from
Accumulated Other
Comprehensive Income (Loss)
(Effective Portion)
2013
2012
Foreign currency forward contracts
$
2,862
$
5,164
Operating expenses
$
(2,929) $
(5,817)
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 Gain
(Loss) Recognized in Income on
Derivative
Amount of Gain (Loss)
Recognized in Income on Derivative
2013
2012
Foreign currency forward contracts
Other (expense) income, net
$
3,138
$
(1,341)
F-34
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Outstanding Foreign Currency Forward Contracts
As of December 31, 2013, 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
New Zealand dollars
Singapore dollars
Swiss francs
Currency
Denomination
AUD 8,012
GBP 34,475
CAD 6,714
CNY 81,250
DKK 1,500
EUR 27,820
HKD 51,063
INR 1,201,622
JPY 169,004
NZD 300
SGD 12,600
CHF 19,741
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,
2013
2012
2011
Numerator:
Net income attributable to Citrix Systems, Inc. stockholders
$
339,523
$
352,547
$
356,322
Denominator:
Denominator for basic earnings per share - weighted-average shares
outstanding
186,672
186,722
187,315
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
1,573
2,407
3,326
188,245
189,129
190,641
$
$
1.82
1.80
3,647
$
$
1.89
1.86
3,464
1.90
1.87
2,576
F-35
CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. COMPREHENSIVE INCOME
The changes in Accumulated other comprehensive income (loss) by component, net of tax, are as follows (in thousands):
Foreign currency
Unrealized
gain (loss) on
available-for-
sale securities
Unrealized
gain (loss) on
derivative
instruments
(In thousands)
Other
comprehensive
gain (loss) on
pension
liability
Total
Balance at December 31, 2012
$
(3,024) $
2,426
$
(10) $
(7,097) $
(7,705)
Other comprehensive income before
reclassifications
Amounts reclassified from Accumulated
other comprehensive income (loss)
Net current period other comprehensive income
8,482
—
8,482
Balance at December 31, 2013
$
5,458
$
(985)
(67)
2,500
9,930
(203)
(1,188)
1,238
2,929
2,862
$
2,852
$
—
2,500
(4,597) $
2,726
12,656
4,951
Income tax expense or benefit allocated to each component of other comprehensive income is not material.
Reclassifications out of Accumulated other comprehensive income (loss) are as follows (in thousands):
Details about Accumulated other comprehensive income
(loss) components
Unrealized net gain on available-for-sale
securities
Unrealized net losses on cash flow hedges
For the Twelve Months Ended December 31, 2013
(In thousands)
Amount reclassified from Accumulated
other comprehensive income (loss), net
of tax
Affected line item in the Consolidated
Statements of Income
$
$
203
(2,929)
(2,726)
Other (expense) income, net
Operating expenses *
* Operating expenses amounts allocated to Research and development, Sales, marketing and services, and General and
administrative are not individually significant.
15. RECENT ACCOUNTING PRONOUNCEMENTS
In July 2013, the Financial Accounting Standards Board issued an accounting standard update that provides explicit
guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carry forward, a
similar tax loss, or a tax credit carry forward exists. Under the new standard, the Company's unrecognized tax benefit, or a
portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for
a net operating loss carry forward, a similar tax loss, or a tax credit carry forward. This accounting standard update will be
effective for the Company beginning in the first quarter of fiscal year 2014 and applied prospectively. The Company is
currently evaluating the impact of this accounting standard update on its consolidated financial statements.
F-36
CITRIX SYSTEMS, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
2013
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
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
$
$
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total Year
(In thousands, except per share amounts)
$
$
672,899
557,985
56,608
59,688
730,384
603,144
75,888
64,461
712,731
588,798
87,367
76,730
$
802,420
665,712
160,854
138,644
$ 2,918,434
2,415,639
380,717
339,523
0.32
0.32
0.34
0.34
0.41
0.41
0.75
0.74
1.82
1.80
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
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.
The Consolidated Statement of Cash Flows for the year ended December 31, 2013 reflects an adjustment of approximately
$17.3 million made to the captions “Excess tax benefit from stock based compensation” and “Income taxes, net” for the three
months ended March 31, 2013. Accordingly, the adjusted net cash provided by operating activities and net cash used in
financing activities for the three months ended March 31, 2013 is approximately $266.6 million and $28.9 million, respectively.
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)
2013
Deducted from asset accounts:
Allowance for doubtful accounts
Allowance for returns
Valuation allowance for deferred tax
assets
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
$
$
$
$
3,883
2,564
$
1,046
—
—
4,473
18,185
—
8,280
$
1,637
4,975
(2) $
(4)
3,292
2,062
—
26,465
(1)
(6)
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
(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 No.
Description
EXHIBIT INDEX
3.1
3.2
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*
10.13*
10.14*
10.15*
10.16*†
10.17*
Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to
Exhibit 3.1 to the Company's Current Report on Form 8-K filed on May 29, 2013
Amended and Restated By-laws of the Company (incorporated herein by reference to Exhibit 3.2 to the
Company's Current Report on Form 8-K filed on May 29, 2013
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)
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)
Fifth Amendment to 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 June
30, 2013)
Sixth 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 filed on May 29, 2013)
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)
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)
Amendment to Amended and Restated 2005 Employee Stock Purchase Plan (incorporated by reference herein
to Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012)
Citrix Systems, Inc. Executive Bonus Plan
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)
Exhibit No.
Description
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
Form of First Amendment to Change of Control Agreement between the Company and each of Brett M. Caine,
David J. Henshall, David R. Friedman and Alvaro J. Monserrat (together with Mark Templeton, the
“Executive Officers”)
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 and Alvaro J. Monserrat (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 Change in Control Agreement by and between the Company and each of Catherine Courage, Steve
Daheb, Sudhakar Ramakrishna and Christopher Hylen (incorporated by reference herein to Exhibit 10.25 to
the Company's Annual Report on Form 10-K for the year ended December 31, 2012)
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, 2013 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.
10.18*
10.19*†
10.20*†
10.21*
10.22*
10.23*
21.1†
23.1†
24.1
31.1†
31.2†
32.1††
101†
*
†
††
Information Concerning Non-GAAP Financial Measures Used in This Annual Report (Unaudited)
GAAP diluted earnings per share for the twelve months ended December 31, 2013 was $1.80. Non-GAAP diluted
earnings per share for the twelve months ended December 31, 2013 was $3.02. GAAP diluted earnings per share
for the twelve months ended December 31, 2013 decreased (3.2) percent from GAAP diluted earnings per share for
the twelve months ended December 31, 2012. Non-GAAP diluted earnings per share for the twelve months ended
December 31, 2013 grew 5.2 percent from non-GAAP diluted earnings per share for the twelve months ended
December 31, 2012. 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
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, 2013
$1.80
0.98
0.52
0.22
(0.50)
$3.02
Twelve Months Ended December 31, 2013
compared to
Twelve Months Ended December 31, 2012
(3.2)%
8.0
5.2%
Annual Report 2013 Citrix Systems, Inc.
265650_Citrix_Narr_R3.indd 5
4/8/14 10:30 AM
Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of each non-GAAP financial
measure used in this 2013 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 2013 Citrix Systems, Inc.
265650_Citrix_Narr_R3.indd 6
4/8/14 10:30 AM
Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of each non-GAAP financial
measure used in this 2013 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.
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. 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 for the
year ended December 31, 2013, and in the documents incorporated by reference into this Annual Report, that are not
historical facts, including, but not limited to, statements concerning our plans, objectives and strategies, the IT spending
environment, Citrix’s growth, new products, product development and offerings of products and services, addressable
market and market positioning, financial information, product competition, and strategy and growth initiatives,
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: the impact of the global economy and uncertainty in the IT spending environment; the success
and growth of our product lines, including transitions in the markets for our desktop virtualization and collaboration
products and services; our ability to develop and commercialize new products and services, including enterprise
mobility and cloud platform products, while growing our established virtualization, networking and collaboration
products and services; disruptions due to changes and transitions in key personnel and succession risks, including
but not limited to risks related to the timing and outcome of our CEO search; the introduction of new products by
competitors or the entry of new competitors into the markets for our products and services; changes in our revenue
mix towards products and services with lower gross margins; seasonal fluctuations in our business; failure to execute
our sales and marketing plans; failure to successfully partner with key distributors, resellers, system integrators, service
providers and strategic partners and the company’s reliance on and the success of those partners for the marketing
and distribution of our products; our ability to maintain and expand our business in small sized and large enterprise
accounts; the size, timing and recognition of revenue from significant orders; the success of investments in our product
groups, foreign operations and vertical and geographic markets; our ability to make suitable acquisitions on favorable
terms in the future; risks associated with acquisitions, including failure to further develop and successfully market the
technology and products of acquired companies, failure to achieve or maintain anticipated revenues and operating
performance contributions from acquisitions, which could dilute earnings, the retention of key employees from
acquired companies, difficulties and delays integrating personnel, operations, technologies and products, disruption
to our ongoing business and diversion of management’s attention from our ongoing business; the recruitment and
retention of qualified employees; risks in effectively controlling operating expenses, including failure to manage
untargeted expenses; the effect of new accounting pronouncements on revenue and expense recognition; the risks
associated with securing data and maintaining security of our networks and customer data stored by our services;
failure to comply with federal, state and international regulations; litigation and disputes, including challenges to our
intellectual property rights or allegations of infringement of the intellectual property rights of others; the inability
to further innovate our technology or enter into new businesses due to the intellectual property rights of others;
changes in our pricing and licensing models, promotional programs and product mix, all of which may impact revenue
recognition; charges in the event of the impairment of acquired assets, investments or licenses; international market
readiness, execution and other risks associated with the markets for our products and services; unanticipated changes
in tax rates, non-renewal of tax credits or exposure to additional tax liabilities; risks of political and social turmoil, 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, 2013, or in the documents incorporated by reference into the Annual
Report on Form 10-K for the year ended December 31, 2013. 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.
©2014 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 2013 Citrix Systems, Inc.
265650_Citrix_Narr_R3.indd 7
4/8/14 10:30 AM
Total Return To Shareholders (Includes reinvestment of dividends)
ANNUAL RETURN PERCENTAGE
Company Name / Index
Dec 09
Dec 10
Citrix Systems, Inc.
S&P 500 Index
Nasdaq Index
Peer Group
INDEXED RETURNS
76.54
26.46
45.32
48.48
64.41
15.06
18.02
10.25
Dec 11
-11.24
2.11
-0.83
-5.86
Years Ending
Dec 12
Dec 13
8.07
16.00
17.45
18.93
-3.61
32.39
40.12
29.69
Years Ending
Company Name / Index
Citrix Systems, Inc.
S&P 500 Index
Nasdaq Index
Peer Group
Base Period
Dec 08
Dec 09
Dec 10
Dec 11
Dec 12
Dec 13
100
100
100
100
176.54
126.46
145.32
148.48
290.24
145.51
171.50
163.70
257.62
148.59
170.08
154.11
278.40
172.37
199.76
183.29
268.35
228.19
279.90
237.71
Peer Group consists of companies with an SIC code of 7372.
Comparison of cumulative five year total return
$350
$300
$250
$200
$150
$100
$50
$0
2008
2009
2010
2011
2012
2013
Citrix Systems, Inc.
S&P 500 Index
Nasdaq Index
Peer Group
Annual Report 2013 Citrix Systems, Inc.
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FINANCIAL HIGHLIGHTS
(In thousands, except per share data)
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
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
2013
2,918,434
114,932
289,990
97,873
502,795
Year ended December 31
2012
2011
2,586,123
2,206,392
96,962
227,150
80,025
404,137
74,393
164,465
54,741
293,599
2,415,639
2,181,986
1,912,793
516,338
1,216,680
260,236
41,668
—
2,034,922
380,717
7,173
387,890
48,367
339,523
—
339,523
1.80
188,245
450,571
1,060,829
245,259
34,549
—
380,674
885,066
213,673
16,390
24
1,791,208
1,495,827
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
Revenue (millions)
Earnings Per Share
Operating Cash Flow (millions)
$2,918
$2,586
$2,206
$1.87
$1.86
$928
$819
$679
$1.80
2011
2012
2013
2011
2012
2013
2011
2012
2013
CORPORATE INFORMATION
Citrix (NASDAQ:CTXS) is a leader in virtualization, networking and cloud services to enable
new ways for people to work better. Citrix solutions help IT and service providers to build,
manage and secure, virtual and mobile workspaces that seamlessly deliver apps, desktops,
data and services to anyone, on any device, over any network or cloud. This year Citrix is
celebrating 25 years of innovation, making IT simpler and people more productive with
mobile workstyles. With annual revenue in 2013 of $2.9 billion, Citrix solutions are in use at
more than 330,000 organizations and by over 100 million people globally. 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.
Nanci E. Caldwell
Former Executive Vice President and
Chief Marketing Officer, 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 A. Daheb
Senior Vice President and
Chief Marketing Officer
David R. Friedman
General Counsel and Senior Vice President,
Human Resources
David J. Henshall
Executive Vice President, Chief Operating
Officer and Chief Financial Officer
Christopher Hylen
Senior Vice President and General Manager,
SaaS Division
Alvaro J. Monserrat
Senior Vice President, Sales and Services
Sudhakar Ramakrishna
Senior Vice President and General Manager,
Enterprise and Service Provider Division
Robert D. Daleo
Former Vice Chairman,
Thomson Reuters Corporation
Murray J. Demo
Former Executive Vice President and
Chief Financial Officer, Dolby Laboratories
Stephen M. Dow
General Partner, Sevin Rosen Funds
Asiff S. Hirji
Founder, Inflekxion LLC
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.
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
5100 Town Center Circle, Suite 500
Boca Raton, FL 33486
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 22,
2014 at 4:00p.m., PST
Citrix Headquarters
4988 Great America Parkway
Santa Clara, CA 95054
United States
Annual Report 2013 Citrix Systems, Inc.
Annual Report 2013 Citrix Systems, Inc.
Annual Report 2013 Citrix Systems, Inc.
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Annual Report 2013
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We empower the original
mobile device: you
New ways to work better.
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