Back to GetFilings.com
1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
MARCH 31, 2000.
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 0-17781
- --------------------------------------------------------------------------------
SYMANTEC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 77-0181864
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20330 STEVENS CREEK BLVD, CUPERTINO, CALIFORNIA 95014-2132
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (408) 253-9600
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
NONE NONE
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE, AND RELATED STOCK PURCHASE RIGHTS
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filer 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. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Symantec common stock on
June 16, 2000 as reported on the Nasdaq National Market and with respect to the
Delrina exchangeable stock on the Toronto Stock Exchange:
$ 4,199,100,283
Number of shares outstanding of each of the registrant's classes of common
stock, including 1,361,015 shares of Delrina exchangeable stock, as of June 16,
2000:
60,691,603
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement to be delivered to stockholders in
connection with the Annual Meeting of Stockholders to be held September 18,
2000, are incorporated by reference into Part III.
================================================================================
2
SYMANTEC CORPORATION
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2000
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business............................................................... 1
Item 2. Properties............................................................. 10
Item 3. Legal Proceedings...................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders.................... 11
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters................................................................ 12
Item 6. Selected Financial Data................................................ 13
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 14
Item 7A. Quantitative and Qualitative Disclosures about Market Risk............. 30
Item 8. Financial Statements and Supplementary Data............................ 31
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................... 31
PART III
Item 10. Directors and Executive Officers of the Registrant..................... 32
Item 11. Executive Compensation................................................. 34
Item 12. Security Ownership of Certain Beneficial Owners and Management......... 34
Item 13. Certain Relationships and Related Transactions......................... 34
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........ 35
Signatures...................................................................... 73
3
"Symantec," "we," "us," and "our" refer to Symantec Corporation and all of its
subsidiaries. This document contains references to trademarks and trade names of
other companies.
PART I
ITEM 1: BUSINESS
FORWARD-LOOKING STATEMENTS
The following discussion contains forward-looking statements that involve known
and unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others things, those risk factors set forth in this
section and in the section of this report entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations." We identify
forward-looking statements by words such as "may," "will," "should," "could,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or similar terms that refer to the future. We cannot
guarantee future results, levels of activity, performance or achievements.
INTRODUCTION
Symantec, a world leader in Internet security technology, provides a broad range
of content and network security solutions to individuals and enterprises. We are
a leading provider of virus protection, risk management, Internet content and
e-mail filtering, remote management and mobile code detection technologies to
enterprise and individual customers.
We have a 52/53-week fiscal accounting year. Accordingly, all references as of
and for the periods ended March 31, 2000, 1999 and 1998 reflect amounts as of
and for the periods ended March 31, 2000, April 2, 1999 and April 3, 1998,
respectively. The fiscal accounting years ended March 31, 2000 and April 2, 1999
each comprised 52 weeks of operations and the fiscal accounting year ended April
3, 1998 comprised 53 weeks of operations.
BUSINESS OVERVIEW
In the past, we have organized our business on a product group basis. In fiscal
2000, we restructured our internal operations and management to allow us to
organize our resources by customer segment. We currently view our business in
five customer-centered segments; Consumer and Small Business, Enterprise
Solutions, e-Support, Professional Services and Other. See Note 17 of Notes to
Consolidated Financial Statements in this Form 10-K, for financial information
related to our operating segments.
In addition to our internal restructuring, we added key technologies by
acquiring URLabs, L-3 Network Security's operations and 20/20 Software. These
acquisitions will enable us to:
- increase our addressable market opportunities;
- broaden our security offerings;
- acquire a talented base of UNIX employees; and
- develop a consulting service organization within our company.
Furthermore, we divested the ACT! and Visual Cafe product lines to focus our
strategy in the Internet security market.
CONSUMER AND SMALL BUSINESS
Our Consumer and Small Business segment provides solutions to individual users,
home offices and small businesses. The division's charter is to ensure that
consumers and their information are secure and protected in a connected world.
Most of the products that we are currently marketing or developing feature
LiveUpdate. This feature enables users to easily download content updates
including virus definitions, firewall rules, URL databases and uninstall
scripts.
Norton AntiVirus and Norton AntiVirus for Macintosh run in a computer's
background and protect against, detect and eliminate computer viruses. This
software covers multiple sources of infection, including the Internet, e-mail
attachments, floppy disks, shared files and networks. Norton AntiVirus also
enables the user to download, via our
1
4
LiveUpdate function, new virus definitions created by the Symantec AntiVirus
Research Center ("SARC"), which provides 24 hours a day, 7 days a week research
and analysis capability to ensure that customers have the highest level of
protection available. Retail or consumer versions of this software run on
Windows 95, Windows 98, Windows 2000, Windows NT and Macintosh operating
systems.
Norton Internet Security 2000 is an integrated suite that provides total
Internet protection for the home computer. The suite includes Norton AntiVirus,
Norton Personal Firewall, Norton Personal Privacy and Norton Parental Controls.
Norton AntiVirus stops viruses, malicious Java applets and ActiveX controls.
Norton Personal Firewall prevents hackers from accessing the computer's files or
using the computer in other Internet-based attacks. Norton Internet Security
2000 also helps restrict user access to specified Web sites, newsgroups and
other areas of the Internet and restricts the submission of personal information
through Web forms without the user's approvals. Banner ads also can be blocked
by the users of Norton Internet Security 2000. Norton Internet Security 2000
runs on Windows 95, Windows 98 and Windows NT operating systems.
Norton SystemWorks is a fully integrated suite of problem-solving utilities that
protects PC users from viruses and crashes, solves problems, removes unneeded
files and updates users' applications. Included in this suite are the latest
complete versions of five of our products: Norton AntiVirus, Norton Utilities,
Norton CleanSweep, Norton CrashGuard and Norton Web Services. Norton SystemWorks
is based on proprietary technologies that work together to integrate these five
Symantec products. Versions of Norton SystemWorks run on the Windows 95 and
Windows 98 operating systems.
Norton Ghost Personal Edition is high-performance software for copying all data,
or cloning a hard drive. Technically proficient home computer users can use it
to migrate data files, applications and system settings when replacing an old PC
with a new one; clone an entire hard drive when upgrading their hardware; create
compressed hard disk backups; and restore disk images during disaster recovery.
Norton Ghost Personal Edition is compatible with all Microsoft PC operating
systems, including Windows CE, and all personal computer partition types, except
for Windows 2000. Its flexible interface is designed to give users precise
control over the cloning process.
Norton Utilities and Norton Utilities for Macintosh are sets of system utilities
that fix and prevent computer problems, optimize system performance, recover
lost files and rescue unresponsive systems. The latest versions of Norton
Utilities for Windows have extended data protection capabilities, including
crash protection and registry repair. In addition, Norton Utilities provides an
advanced and thorough disk optimization system that optimizes the system based
upon the way the particular computer is used. Versions of Norton Utilities run
on the Windows, Windows 95, Windows 98, MS-DOS and Macintosh operating systems.
Norton Cleansweep removes unneeded software programs and files from a user's
hard drive. The software removes unneeded Internet files, speeds hard drive
cleanup and facilitates file removal. Versions of Norton CleanSweep run on the
Windows 95, Windows 98 and Windows NT operating systems.
Norton Web Services is an online subscription-based website that downloads
Norton technology to Windows 95 and Windows 98 users via the Internet. Norton
Web Services features LiveUpdate Pro, a service that is designed to locate and
install patches, updates and drivers specific to users' installed hardware and
software. Another service on the site, VitalCheck, is designed to scan a user's
computer for viruses and disk errors and provide fixes.
Norton 2000 addressed Year 2000 issues for desktop personal computers. Norton
2000 ran on the Windows 95, Windows 98 and Windows NT operating systems. This
product was sold during fiscal 2000, with a significant amount of sales
occurring in the December quarter. Subsequent to the rollover to the Year 2000,
sales of Norton 2000 have significantly declined and in March 2000, we
discontinued selling Norton 2000.
WinFax PRO enables users to send, receive and manage faxes through their PC.
WinFax PRO provides background faxing, which allows users to continue working on
other applications while sending or receiving a fax. WinFax PRO can send faxes
via the Internet or a regular phone line, using enhanced fax compression,
increasing the speed at which faxes are transmitted. Other features include a
paging function, which enables the computer to notify users, via their pagers or
PCS cell phones, of the receipt of an incoming fax. WinFax PRO also enables
users to send laser-quality faxes, supports a
2
5
non-dedicated fax host and allows faxes to be automatically forwarded to another
fax number or an e-mail address. Versions of WinFax PRO run on the Windows 95,
Windows 98 and Windows NT operating systems.
ENTERPRISE SOLUTIONS
The objective of our Enterprise Solutions segment is to provide a broad range of
security solutions for our enterprise customers. Our corporate customers need to
protect their businesses from the threats associated with the use of the
Internet. These threats are both external and internal to the organization.
External threats include such things as viruses or hacker intrusions; internal
threats include undesired use of network resources or potential liability
stemming from abuse of Internet access.
Our Enterprise Solutions products are available to customers in a variety of
ways. We offer each product as either a stand-alone product or as a combined
solution, allowing the customer to determine what is most effective for them.
The Enterprise Solutions segment currently focuses on two areas: Content
Security and Network Security.
ENTERPRISE SOLUTIONS - CONTENT SECURITY
Content security is a core element of Internet security that combines multi-tier
protection against viruses and mobile code with the management of Internet
communications for sensitive content or misuse of data. Mobile code, frequently
referred to as viruses or malicious code, refers to executable programs that are
used with a specific malicious intent in mind. Users of our content security
solutions are able to take action to protect their enterprise from risks
associated with using Internet resources. This includes scanning or monitoring
data that enters, leaves or travels inside the organization, as well as
detecting and eliminating malicious code that may be introduced into a company's
network. Using Symantec's content security software solutions, managers can
control user access to information from the Internet and help ensure that users
focus on data for work productivity, rather than leisure activities. Elements of
content security include virus and mobile code protection and e-mail and
Internet content scanning and filtering.
Virus and Mobile Code Protection
Our anti-virus solutions protect computers and networks at multiple entry points
from known and unknown threats. Anti-virus protection provides automatic
protection from virus attacks that can occur when files are exchanged over the
Internet. Protection from virus attacks is the most well-known and largest
market component within the content security space.
Norton AntiVirus provides virus protection for computers running in every tier
of an enterprise's network, including desktops, file and print servers, mail
servers, Internet gateways and firewalls. Norton AntiVirus also enables
corporations to keep their virus definitions up to date via Live Update. Norton
AntiVirus runs on all major operating systems, including MS-DOS, Microsoft
Windows, Windows 95, Windows 98, Windows 2000, Windows NT, Macintosh and
Solaris. The Norton AntiVirus product line also includes support for Lotus
Notes, Microsoft Exchange and Novell NetWare.
E-mail Content Scanning and Filtering
Our e-mail content scanning and filtering solutions help protect proprietary
information and can reduce liability exposure and improve productivity for
e-mail application users. Content can be scanned for proprietary information and
for inappropriate words and phrases to ensure a company's e-mail policies are
enforced. Filtering can also increase bandwidth by countering e-mail address
forgery attacks.
Mail-Gear provides control over the organization's e-mail. With the ease and
convenience with which information can be exchanged via e-mail comes the risk of
spam, pornography, solicitations, harassment and forged messages. Mail-Gear
allows the enterprise to establish per-user, per-computer and per-group access
permissions and customized content scanning. It allows the enterprise to create
unlimited dictionaries and allow or deny address lists that can be uniquely
applied. Mail-Gear also provides comprehensive reporting and scheduling features
to protect the enterprise from misuse of e-mail and ensure accountability.
Mail-Gear can be configured to act as a filter to an organization's e-mail
gateway. This allows organizations that already have an established e-mail
infrastructure to conveniently provide filtering without having to restructure
their entire e-mail setup. For client-based e-mail access, Mail-Gear features
the Mail-Gear Web Client, which requires only a standard Web browser to send and
receive e-mail. Users can readily
3
6
access their mailboxes, address books and preferences, as well as compose
messages from anywhere on the LAN or the Internet, without the need for
proprietary mail software. Added to this functionality is a POP3 mail handler
for delivering e-mail to client-based applications such as Eudora, Microsoft
Outlook and Netscape Messenger. Mail-Gear runs on Windows NT and Red Hat Linux
operating systems.
Internet Content Scanning and Filtering
Our Internet content scanning and filtering solutions allow organizations and
individuals to control and focus Internet usage for increased productivity and
potentially decreased liability exposure. Content is scanned and filtered based
on lists of sensitivities, specific addresses and context.
I-Gear is a server-based Internet security product that features flexible
control and monitoring of Internet access. I-Gear features per-user Internet
access permissions that can be scheduled by date and time of day or by location.
Control of Internet access in the organization can be achieved with a
combination of list-based and context-sensitive filtering protection. I-Gear is
a tool rather than simply Internet filtering software because it allows the user
to decide what material is acceptable and what is not. I-Gear runs on Windows
NT, Solaris and Red Hat Linux operating systems.
ENTERPRISE SOLUTIONS - NETWORK SECURITY
Network security is another core element of Internet security that encompasses
network vulnerability assessment of the potential dangers to the organization
from information flows to and from the Internet. Users of our network security
solutions are able to assess vulnerabilities to the network or system and/or
detect the occurrence of malicious activities on systems and networks.
Our vulnerability assessment solutions provide the tools and services to
automate the detection and correction of common inactive and network
configuration errors.
Retriever is a proactive network security management tool that automatically
discovers and maps network components, identifies vulnerabilities, provides
safeguard and policy recommendations and performs customizable network audits.
Unlike many other security tools, Retriever helps develop a baseline for
implementing best-practice security policies, which can be easily monitored and
enforced without jeopardizing network performance. Retriever runs on Windows 95,
Windows 98 and Windows NT operating systems.
Expert is a network risk analysis tool that can measure and manage network
security risk and perform meaningful business impact analysis. Expert identifies
the assets and critical business functions most at risk to a company and
assesses the potential business impact and financial loss incurred in the event
of a network attack or failure. Expert can be used together with Retriever at
the enterprise level to help determine precise security levels and practices,
while Retriever at the local area network ("LAN") level monitors and enforces
those levels and practices. Expert runs on Windows 95, Windows 98 and Windows NT
operating systems.
E-SUPPORT
Our e-Support segment offers products that enable companies to be more effective
and efficient within their IT departments. Remote management solutions help
remote professionals to remain productive while providing companies access to
information, applications and data from any location.
pcANYWHERE offers secure, reliable, fast and flexible point-to-point remote
computing via a multitude of communications media including Internet, serial,
LAN, ISDN, cable modems and infrared. pcANYWHERE enables a remote PC user to
control and transfer data to and from a host PC. The remote PC, laptop or PC
terminal controls the operation of the often distant host PC. In addition to
enabling a remote user to run a distant PC, pcANYWHERE allows users at the host
machine to view the operations being conducted from the remote site. Versions of
this software support Windows, Windows 95, Windows 98, Windows 2000, Windows NT,
Windows CE and MS-DOS applications. pcANYWHERE also provides a pcANYWHERE JAVA
client, a Netscape browser plug-in and an Internet Explorer ActiveX control.
Norton Ghost Enterprise Edition is a PC cloning solution that allows fast disk
image management, rollout and ongoing PC configuration. Norton Ghost Enterprise
Edition provides technology for fast, reliable PC imaging and management that
serves to reduce IT costs by providing a means to restore and configure machines
that have been
4
7
cloned. The centralized management console enables IT personnel to initiate,
configure and manage the cloning of Windows 95, Windows 98, Windows 2000 and
Windows NT workstations across the network from a single location, saving
valuable time and resources.
Procomm Plus is an integrated data communications solution that is designed to
enable users to reliably send and receive information between a PC and a
mainframe or minicomputer. Versions of Procomm Plus support Windows, Windows 95,
Windows 98, Windows NT 4.0 and MS-DOS applications.
PROFESSIONAL SERVICES
Our Professional Services division provides fee-based technical support and
consulting services to enterprise customers to assist them with the planning,
design and implementation of enterprise security solutions in the anti-virus and
Internet content filtering technologies. In addition, we provide complete
vulnerability and security assessments of enterprise customer information
systems.
RECENT ACQUISITIONS AND DIVESTITURES
ACQUISITIONS
Since our initial public offering on June 23, 1989, we have completed
acquisitions of 22 businesses. Our recent acquisitions are as follows:
- 20/20 Software, Inc. in the March 2000 quarter;
- L-3 Network Security's operations also in the March 2000 quarter;
- URLabs in the September 1999 quarter;
- Quarterdeck Corporation in the March 1999 quarter;
- Intel Corporation's anti-virus business in the September 1998 quarter;
- Binary Research Limited's operations in the June 1998 quarter;
- International Business Machine's anti-virus business also in the June
1998 quarter;
- Fast Track, Inc., in the June 1996 quarter; and
- Delrina Corporation, in the December 1995 quarter.
With the exception of Fast Track and Delrina, we accounted for each of these
acquisitions as a purchase and, accordingly, we have included the operating
results of these businesses in our consolidated financial statements since their
respective dates of acquisition. Fast Track and Delrina were accounted for as
poolings of interest. Accordingly, we have restated all financial information to
reflect the combined operations of Delrina, however, since Fast Track had
results of operations that were not material to our consolidated financial
statements, we did not restate any financial information related to Fast Track.
In the past we have acquired businesses including Peter Norton Computing, Inc.
on August 31, 1990. We continue to use the Norton brand name for products
subsequently developed and marketed by us. See Note 3 of Notes to Consolidated
Financial Statements in this Form 10-K.
DIVESTITURES
We divested the Visual Cafe and substantially all of the ACT! product lines on
December 31, 1999, and have included their results in our Other business
segment. These divestitures enabled us to focus our efforts and resources on our
Internet security business. These products comprised a significant part of our
business prior to their disposition.
ACT! provides a ready-to-use contact database and integrated calendar, making it
a complete solution for effectively managing business relationships.
Visual Cafe provides a solution for building applications and development tools
for JAVA environments.
5
8
SALES AND MARKETING, INTERNATIONAL SALES AND CUSTOMER SUPPORT
We market our products worldwide utilizing a multi-channel strategy of direct
and indirect sales through independent software distributors, major retail
chains and resellers.
SALES AND MARKETING
We sell our products to individuals and enterprise users primarily through
distributors and resellers. Our products are available to customers through
channels that include: distributors, retail, mail order, corporate resellers,
Internet-based resellers or "e-tailers," value added resellers, original
equipment manufacturers, educational institutions and Internet service providers
("ISP"s). We also sell some of our products and product upgrades through direct
mail and over the Internet. We sell corporate site licenses through our
distribution and corporate reseller channels.
We maintain distribution relationships with major independent distributors.
These distributors stock our products for redistribution to independent dealers,
consultants and other resellers. We also maintain relationships with major
retailers, while marketing to these retailers through independent distributors.
Our sales force works closely with our major distributor and reseller accounts
to manage the flow of orders, inventory levels and sell-through to customers. We
also work closely with them to manage promotions and other selling activities.
Our agreements with distributors are generally nonexclusive and may be
terminated by either party without cause. These distributors are not within our
control and are not obligated to purchase products from us. These distributors
also represent other vendors' product lines. For information with respect to
distributors that represent more than 10% of our revenues, see Note 17 of Notes
to Consolidated Financial Statements of this Form 10-K.
Our marketing activities include:
- advertising in trade, technical and business publications;
- on-line advertising;
- public relations;
- cooperative marketing with distributors, resellers and dealers;
- direct mailings to existing and prospective end-users; and
- participation in trade and computer shows.
We typically offer two types of rebate programs: volume incentive rebates and
rebates to end-users. Volume incentive rebates are made available to our
distributors and resellers. The distributor or reseller earns a rebate based
upon their purchases and their sale of products to end-users. Volume incentive
rebates are accrued when revenue is recorded. From time to time, we also make
rebates available to end-users of various products acquired through major
retailers. End-user rebates are accrued when revenue is recorded.
Our return policy allows distributors, subject to various limitations, to return
purchased products in exchange for new products or for credit towards future
purchases. End users may return products through dealers and distributors for a
full refund, within a reasonable period from the date of purchase. Also subject
to limitations, retailers may return older versions of products. Various
distributors and resellers have different return policies that may impact the
level of products that are returned to us. Product returns occur when we
introduce upgrades and new versions of products or when distributors order too
much product. In addition, competitive factors often require us to offer rights
of return for products that distributors or retail stores are unable to sell.
For further discussion, see Summary of Significant Accounting Policies and Notes
to Consolidated Financial Statements in this Form 10-K.
INTERNATIONAL SALES
Revenues outside of North America represented approximately 41%, 37% and 34% of
our net revenues for fiscal 2000, 1999 and 1998, respectively.
The majority of our net revenues from Europe are derived from sales by
affiliates of our major United States distributors. In other countries, we sell
our products through authorized distributors. In some countries, these
distributors are restricted to specified territories. We adapt some of our
products by translating the documentation and software, where necessary, and
preparing marketing programs for each local market.
We have marketing offices in Argentina, Australia, Brazil, Canada, China,
Columbia, Czech Republic, Finland, France, Germany, Holland, Hong Kong, Hungary,
India, Israel, Italy, Japan, Korea, Malaysia, Mexico, New Zealand, Norway,
Poland, Russia, Singapore, South Africa, Sweden, Switzerland, Taiwan, United
Arab Emirates and the
6
9
United Kingdom. These local offices facilitate our
marketing and distribution in international markets. Our international
operations are subject to various risks common to international operations,
including:
- government regulations;
- import restrictions;
- currency fluctuations;
- repatriation restrictions; and
- in some jurisdictions, reduced protection for our copyrights and
trademarks.
CUSTOMER SUPPORT
Our product support program provides a wide variety of free and fee-based
technical support services to our customers. We provide most of our customers
with unlimited free online support. For some of our international customers we
provide free telephone support, limited to a period of 30 to 90 days. We plan to
transition a significant amount of these international customers to unlimited
free online support, over the next two years. Through LiveUpdate, we provide
online access to application bug fixes and/or patches for most of our currently
marketed and developed products. In addition, we offer both enterprise and
consumer customers a variety of fee-based options designed to meet their
technical support requirements. We revise these fee-based support programs from
time to time as customer requirements change and as market trends dictate.
PRODUCT DEVELOPMENT, PARTNERSHIPS AND ACQUISITIONS
We use a multiple product sourcing strategy that includes, as necessary:
- internal development;
- licensing from third parties; and
- acquisitions of technologies, product lines or companies.
We develop software products that are designed to operate on a variety of
operating systems. We typically develop new products and enhancements of
existing products through our business segments with support from our core
technology group. Each segment is responsible for its own design, development,
documentation and quality assurance.
Independent contractors are used for aspects of the product development process.
In addition, elements of some of our products are licensed from third-party
developers.
We use strategic acquisitions, as necessary, to provide certain technology,
people and products for our overall product strategy. We have completed a number
of acquisitions and dispositions of technologies, companies and products and may
acquire and dispose of other technologies, companies and products in the future.
As discussed above, we acquired several companies and segments of certain
businesses, and divested our Visual Cafe and ACT! product lines during fiscal
2000. For further discussion, see Note 3 of Notes to Consolidated Financial
Statements in this Form 10-K.
COMPETITION
The computer software market is intensely competitive and is subject to rapid
changes in technology. It is influenced by the strategic direction of major
computer hardware manufacturers, ISPs, Application Service Providers ("ASP"s)
and operating system providers. Our competitiveness depends on our ability to
deliver products that meet our customers' needs by enhancing existing solutions
and offering successful new solutions on a timely basis. We have limited
resources, and as a result, we must deploy resources thoughtfully. The principal
competitive factors in our consumer and small business, enterprise solutions and
e-Support segments are quality, employment of the most advanced technology,
price, reputation, breadth of product offerings, customer support and sales and
marketing terms. In our professional services segment, the principal competitive
factors include technical capability, responsiveness, price and reputation
within the industry.
Competition in the consumer and small business market is intense. Some of the
companies that offer competing products to our Consumer and Small Business
offerings include Network Associates, McAfee.com, PowerQuest, Network ICE,
Computer Associates, WebSense, Secure Computing, Panda, Norman and Trend Micro.
With the recent outbreaks of viruses and other Internet-based security threats,
several other companies have entered the market and may become significant
competitors in the future.
7
10
We compete against several companies in the Virus and Mobile Code Protection
market, which is where we sell our anti-virus products. Some of the companies
that we compete against in this area are Network Associates, McAfee.com,
Computer Associates, Panda, Norman and Trend Micro. WebSense, N2H2, JSB
Software, Network Associates, Trend Micro and Secure Computing have products
that compete directly with our e-mail and Internet content scanning and
filtering products. We compete against ISS Group, AXENT Technologies and Network
Associates in the network security marketplace. Our e-Support products
pcANYWHERE and Norton Ghost Enterprise Edition, compete with Traveling Software,
Stac Software, Netopia and other programs.
Price competition is intense with most of our products. We expect price
competition to continue to increase and become even more significant in the
future, which may reduce our profit margins.
We also face competition from a number of other products that offer levels of
functionality different from those offered by our products, or that were
designed for a somewhat different group of end-users than those targeted by us.
Operating system vendors such as Microsoft have added features to new versions
of their products that provide some of the same functions offered in our
products. Microsoft has incorporated advanced utilities in Windows 95, Windows
98 and Windows 2000, and we believe this trend will continue. In addition,
several other operating systems are gaining market acceptance, such as Red Hat
Linux, Solaris and Unix-based operating systems, and they may also incorporate
advanced utilities or other functionality offered in our products. While we plan
to continue to improve our products with a view toward providing enhanced
functionality over that provided in current and future operating systems, these
efforts may be unsuccessful and any improved products may not be commercially
accepted by users. We will also continue to attempt to cooperate with operating
system vendors to make our products compatible with those operating systems,
while at the same time, differentiating our utility products from features
included in these operating systems. Our efforts in this regard may be
unsuccessful.
The demand for some of our products, including those currently under
development, may decrease, if, among other reasons:
- Microsoft includes additional product features in future releases of
Windows;
- hardware vendors incorporate additional server-based network management
and security tools into network operating systems; or
- competitors license certain of their products to Microsoft or original
equipment manufacturers for inclusion in their operating systems or
products.
In addition, we compete with other computer software companies for access to
retail distribution channels and for the attention of customers at the retail
level and in corporate accounts. We also compete with other software companies
to acquire products or companies and to publish software developed by third
parties.
Many of our existing and potential competitors may have greater financial,
marketing or technological resources than we do. We believe that competition in
the industry will continue to intensify as most major software companies expand
their product lines into additional product categories.
MANUFACTURING
Our product development groups produce a set of master CD-ROMs or diskettes and
documentation for each product that are then duplicated and packaged into
products by the manufacturing organization. All of our domestic manufacturing
and order fulfillment is performed by an outside contractor under the
supervision of our manufacturing organization. Domestic purchasing of all raw
materials is done by Symantec personnel in our Cupertino, California facility.
The manufacturing steps that are subcontracted to outside organizations include
the duplication of diskettes and replication of CD-ROMs, printing of
documentation materials and assembly of the final packages. We perform diskette
duplication and assembly of the final package in our Dublin, Ireland
manufacturing facility for most products distributed outside of North America.
INTELLECTUAL PROPERTY
We regard our software as proprietary. We attempt to protect our software
technology by relying on a combination of copyright, patent, trade secret and
trademark laws, restrictions on disclosure and other methods. Litigation may be
necessary to enforce our intellectual property rights, to protect trade secrets
or trademarks or to determine the validity
8
11
and scope of the proprietary rights of others. Furthermore, other parties have
asserted and may, in the future, assert infringement claims against us. See Note
15 of Notes to Consolidated Financial Statements of this Form 10-K. These claims
and any litigation may result in invalidation of our proprietary rights.
Litigation, even if not meritorious, could result in substantial costs and
diversion of resources and management attention.
EMPLOYEES
As of March 31, 2000, we employed approximately 2,600 people worldwide,
including approximately 1,500 in sales, marketing and related staff activities,
500 in product development and 600 in management, manufacturing, administration
and finance. None of our employees are represented by a labor union and we have
experienced no work stoppages. We believe that relations with our employees are
good. Competition in recruiting personnel in the software industry is intense.
We believe that our future success will depend in part on our ability to recruit
and retain highly skilled management, marketing and technical personnel. We
believe that we must provide personnel with a competitive compensation package,
which necessitates the continued availability of stock options and shares to be
issued under our employee stock option and purchase plans.
9
12
ITEM 2: PROPERTIES
Our principal locations, all of which are leased, are as follows:
Approximate Expiration
Size of
Location Purpose (in square feet) Lease
- -------------------- -------------------------------- ---------------- ------------
North America
Cupertino, California
Emerging Business Research and development 160,000 2006
(City Center 1)
Corporate Headquarters Administration, sales and marketing 144,000 2006
(City Center 2)
Eugene, Oregon Customer service and technical 156,000 2006
support
Santa Monica, California Research and development 107,000 2007
and marketing
Toronto, Canada Sales and technical support 79,000 2005
Beaverton, Oregon Research and development, sales 56,000 2001
and marketing
Newport News, Virginia Research and development, sales 32,000 2006
and marketing
San Antonio, Texas Research and development 27,000 2007
and marketing
International
Dublin, Ireland Administration, manufacturing 80,000 2026
and translations
Leiden, Holland Administration, sales, marketing 27,000 2003
and technical support
Our principal administrative, sales and marketing facility, as well as certain
research and development and support facilities, are located in Cupertino,
California. We lease a number of additional facilities for marketing and
research and development in the United States, Canada and New Zealand and for
marketing in Argentina, Australia, Brazil, China, Columbia, Czech Republic,
Finland, France, Germany, Holland, Hong Kong, Hungary, India, Israel, Italy,
Japan, Korea, Malaysia, Mexico, Norway, Poland, Russia, Singapore, South Africa,
Sweden, Switzerland, Taiwan, United Arab Emirates and the United Kingdom.
We believe that our facilities are adequate for current needs and that
additional or substitute space will be available as needed to accommodate any
future expansion of our operations.
10
13
ITEM 3: LEGAL PROCEEDINGS
Information with respect to this Item may be found in Note 15 of Notes to
Consolidated Financial Statements of this Form 10-K.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders during the quarter
ended March 31, 2000.
11
14
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is traded on the Nasdaq National Market under the Nasdaq symbol
"SYMC." The high and low closing sales prices set forth below are as reported on
the Nasdaq National Market.
Fiscal 2000 Fiscal 1999
-------------------------------------- --------------------------------------
Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
2000 1999 1999 1999 1999 1998 1998 1998
-------- -------- ----------------- -------- -------- -------- --------
High $ 80.81 $ 66.44 $ 35.97 $28.00 $22.88 $21.81 $28.00 $32.13
Low 48.06 36.75 25.75 13.00 14.47 8.69 10.13 22.63
Delrina exchangeable stock has been traded on the Toronto Stock Exchange under
the symbol "DE" since the acquisition of Delrina by Symantec on November 22,
1995. The high and low closing sales prices set forth below are in Canadian
dollars as reported on the Toronto Stock Exchange. Delrina exchangeable stock is
exchangeable at the option of the stockholders on a one-for-one basis into our
common stock.
Fiscal 2000 Fiscal 1999
------------------------------------- --------------------------------------
Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
2000 1999 1999 1999 1999 1998 1998 1998
-------- -------- ----------------- -------- -------- -------- --------
(In Canadian dollars)
High $116.00 $ 99.00 $ 54.00 $40.50 $34.60 $33.00 $41.75 $46.50
Low 70.00 55.00 38.50 20.00 22.45 13.20 16.60 32.75
As of March 31, 2000, there were approximately 663 stockholders of record,
including approximately 22 holders of record of Delrina exchangeable shares. We
have not paid cash dividends in the last three years. In addition, our bank line
of credit does not allow for the payment of cash dividends on our common stock.
See Note 7 of Notes to Consolidated Financial Statements of this Form 10-K.
12
15
ITEM 6: SELECTED FINANCIAL DATA
The following selected financial data is qualified in its entirety by and should
be read in conjunction with the more detailed consolidated financial statements
and related notes included elsewhere herein.
During fiscal 2000, we acquired URLabs, L-3 Network Security's operations and
20/20 Software. During fiscal 1999, we acquired Quarterdeck, Intel's and IBM's
anti-virus businesses and the operations of Binary. Each of these acquisitions
was accounted for as a purchase and, accordingly, the operating results of these
businesses have been included in our consolidated financial statements since
their respective dates of acquisition. We did not complete any acquisitions
during fiscal 1998. During fiscal 1997, we acquired Fast Track, Inc. in a
transaction accounted for as a pooling of interests. Since the results of
operations of Fast Track were not material to our consolidated financial
statements, amounts prior to the date of acquisition were not restated to
reflect the combined operations of the companies. In fiscal 1996, we acquired
Delrina Corporation in a transaction accounted for as a pooling of interests,
and therefore, we have restated the results of operations for all periods
presented to reflect the consolidated results of Delrina and Symantec.
On December 31, 1999, we divested our ACT! and Visual Cafe product lines.
Because the divestitures of the ACT! and Visual Cafe product lines were
effective at the close of business on December 31, 1999, these product lines are
included in the results of operations through that date for the year ended March
31, 2000.
FIVE-YEAR SUMMARY
Year Ended March 31,
(In thousands, except ---------------------------------------------------------------------
net income (loss) per share) 2000 1999 1998 1997 1996
- -------------------------------------- --------- --------- --------- --------- ---------
Statements of Operations Data:
Net revenues $ 745,725 $ 592,628 $ 532,940 $ 452,933 $ 445,432
Acquisition, restructuring and
other expenses 13,318 38,395 -- 8,585 27,617
Operating income (loss) 135,203 27,841 54,924 17,550 (48,279)
Net income (loss) 170,148 50,201 85,089 26,068 (39,783)
Net income (loss) per share - basic $ 2.94 $ 0.89 $ 1.52 $ 0.48 $ (0.76)
Net income (loss) per share - diluted $ 2.73 $ 0.86 $ 1.42 $ 0.47 $ (0.76)
Shares used to compute net
income (loss) per share - basic 57,870 56,601 56,097 54,705 52,664
Shares used to compute net
income (loss) per share - diluted 62,214 59,289 60,281 55,407 52,664
March 31,
------------------------------------------------------
(In thousands) 2000 1999 1998 1997 1996
- -------------------------------- -------- -------- -------- -------- --------
Balance Sheet Data:
Working capital $319,020 $ 94,036 $175,537 $129,569 $134,643
Total assets 846,027 563,476 476,460 339,398 282,674
Long-term obligations, less
current portion 1,553 1,455 5,951 15,066 15,393
Stockholders' equity 617,957 345,113 317,507 217,979 180,317
13
16
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS
The following discussion contains forward-looking statements that involve known
and unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance, or achievements to be materially
different from any future results, levels of activity, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, those risk factors set forth in this
section and elsewhere in this report. We identify forward-looking statements by
words such as "may," "will," "should," "could," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," or "continue"
or similar terms that refer to the future. We cannot guarantee future results,
levels of activity, performance or achievements.
OVERVIEW
Symantec, a world leader in Internet security technology, provides a broad range
of content and network security solutions to individuals and enterprises. As a
leader in Internet security, we offer a breadth of solutions including virus
protection, risk management, Internet content and e-mail filtering, remote
management and mobile code detection technologies to enterprises and individual
customers. Founded in 1982, we have offices in 33 countries worldwide.
Recent Acquisitions
During the last three fiscal years, we completed the following acquisitions and
divestitures:
In March 2000, we purchased 100% of the outstanding common stock of 20/20
Software. The transaction was accounted for as a purchase and will be paid for
in cash. We recorded goodwill and acquired product rights in connection with
this acquisition. We are amortizing these intangible assets over 5 years.
Also in March 2000, we acquired L-3 Network Security's operations. The
transaction was accounted for as a purchase and was paid for with cash. We
recorded goodwill and other intangible assets in the transaction. We wrote off
the acquired in-process research and development. We are amortizing the value of
the goodwill, acquired product rights and other intangibles over 5 years.
In July 1999, we purchased 100% of the outstanding common stock of URLabs. The
transaction was accounted for as a purchase and was paid for with cash. We
recorded goodwill and other intangible assets in connection with the
acquisition. We wrote off the acquired in-process research and development. We
are amortizing the value of the goodwill, acquired product rights and other
intangibles over a 5-year period.
In November 1998, we completed a tender offer for the common stock of
Quarterdeck, obtaining 63% of the outstanding shares. In March 1999, Quarterdeck
shareholders approved the acquisition by Symantec of the remaining outstanding
shares of Quarterdeck. The acquisition of Quarterdeck was accounted for as a
purchase and was paid for with cash. We recorded acquired product rights,
goodwill, workforce in place and other intangible assets for the respective
purchases. We wrote off the acquired in-process research and development. We are
amortizing the value of the workforce in place over 2 years. We are amortizing
the value of the remaining intangibles, acquired product rights and goodwill
over 5 years.
In September 1998, we entered into an agreement with Intel to acquire its
anti-virus business and to license its systems management technology. The
acquisition was accounted for as a purchase and was paid for with cash. We
recorded acquired product rights and other intangibles as of the date of the
acquisition. We wrote off the acquired in-process research and development. We
are amortizing the value of the intangible assets over 5 years.
In June 1998, we acquired the operations of Binary. The acquisition was
accounted for as a purchase and was paid for with cash. We recorded intangible
assets of acquired product rights and workforce in place as of the date of the
acquisition. We wrote off the acquired in-process research and development. We
are amortizing the value of the workforce in place and acquired product rights
over 4 years.
In May 1998, we entered into an agreement with IBM to acquire its immune system
technology and related anti-virus patents. The acquisition was accounted for as
a purchase and was paid for with cash and debt. We recorded
14
17
intangible assets of prepaid research and development, customer base and
goodwill. We wrote-off the acquired in-process research and development. We
amortized the value of prepaid research and development over 1 year. We are
amortizing the value of both the goodwill and customer base over 5 years.
We did not complete any acquisitions during fiscal 1998.
Recent divestitures
On December 31, 1999, we divested our ACT! and Visual Cafe product lines.
Because the divestitures of the ACT! and Visual Cafe product lines were
effective at the close of business on December 31, 1999, these product lines are
included in the results of operations through December 31, 1999.
See Note 3 of the Notes to Consolidated Financial Statements in this Form 10-K.
RESULTS OF OPERATIONS
The following table sets forth each item from our consolidated statements of
income as a percentage of net revenues and the percentage change in the total
amount of each item for the periods indicated.
Period-to-Period
Percentage
Increase (Decrease)
----------------------
Year Ended March 31, 2000 1999
--------------------------- Compared Compared
2000 1999 1998 to 1999 to 1998
------ ------ ----- --------- ---------
Net revenues 100% 100% 100% 26% 11%
Cost of revenues 16 16 16 25 10
------ ------ -----
Gross margin 84 84 84 26 11
Operating expenses:
Research and development 15 17 17 7 11
Sales and marketing 41 48 49 7 10
General and administrative 6 6 7 18 (6)
Amortization of goodwill 2 1 -- 190 *
Amortization of intangibles from
acquisitions -- -- -- * *
Acquired in-process research and
development 1 5 -- (84) *
Restructuring and other expenses 1 1 -- 77 *
Litigation judgment -- 1 -- (100) *
------ ------ -----
Total operating expenses 66 79 73 5 20
------ ------ -----
Operating income 18 5 11 386 (49)
Interest income 2 2 2 (1) 3
Interest expense -- -- -- * *
Income, net of expense, from sale of
technologies and product lines 15 7 8 161 (9)
Other income (expense), net -- -- -- * *
------ ------ -----
Income before income taxes 35 14 21 209 (26)
Provision for income taxes 12 6 5 164 22
------ ------ -----
Net income 23% 8% 16% 239 (41)
====== ====== =====
* Percentage change is not meaningful
NET REVENUES
Net revenues increased 26% from $593 million in fiscal 1999 to $746 million in
fiscal 2000. Net revenues increased 11% from $533 million in fiscal 1998 to $593
million in fiscal 1999. The increase in fiscal 2000 as compared to fiscal
15
18
1999 and the increase in fiscal 1999 as compared to fiscal 1998 were largely due
to increased sales to our corporate customers, introductions of new products and
increased sales outside of North America.
CONSUMER AND SMALL BUSINESS
Our Consumer and Small Business segment represented approximately 43%, 44% and
57% of total net revenues for fiscal 2000, 1999 and 1998, respectively. Although
net revenues for this segment decreased as a percentage of net revenues, net
revenues in absolute dollars increased in fiscal 2000 as compared to fiscal
1999. This increase was primarily due to outbreaks of significant viruses, new
releases of both new and existing products and our customers preparing for the
Year 2000 rollover. These factors contributed to growth in sales of Norton
AntiVirus, Norton SystemWorks and Norton 2000. We have discontinued Norton 2000
and we no longer expect any future sales from this product.
Net revenues in absolute dollars decreased in the Consumer and Small Business
segment in fiscal 1999 over fiscal 1998, due to price competition for some of
our products. However, we did experience increased revenue from sales of Norton
AntiVirus and our successful introduction of suite products. These increases
were offset by reductions in net revenues for Norton Utilities. During fiscal
2000, 1999 and 1998, the financial impact of product price reductions for
certain of our principal products was offset by the increase in the volume of
products sold.
ENTERPRISE SOLUTIONS AND E-SUPPORT
Our Enterprise Solutions and e-Support segments represented approximately 49%,
43% and 29% of total net revenues for fiscal 2000, 1999 and 1998, respectively.
Net revenues increased in fiscal 2000 as compared to fiscal 1999 primarily due
to strong demand for our e-Support products Norton Ghost and pcANYWHERE and
increases due to virus outbreaks and Year 2000 preparation by enterprises. Net
revenues increased in fiscal 1999 as compared to fiscal 1998 primarily due to
increased sales of pcANYWHERE and the new release of Norton Ghost.
INTERNATIONAL
Net revenues outside of North America represented 41%, 37% and 34% of total net
revenues for fiscal 2000, 1999 and 1998, respectively. International net
revenues increased by $89 million in fiscal 2000 to $308 million, from $219
million in fiscal 1999. This increase in net revenues was the result of
increased sales in Europe and Japan. Net revenues from sales outside of North
America were $219 million and $179 million and represented 37% and 34% of net
revenues in fiscal 1999 and 1998, respectively. The increase was also largely
due to stronger sales to Europe and Japan. Weaknesses in currencies fixed to the
euro during fiscal 2000, slightly offset by strengths in other currencies,
negatively impacted our international revenue growth by approximately $15
million. The impact in fiscal 1999 was less than $1 million.
PRO FORMA REVENUE GIVING EFFECT TO DIVESTITURES
For comparative purposes, the following table displays, on a pro forma basis,
our net revenues excluding the ACT! and Visual Cafe product lines:
Year ended March 31,
--------------------------------------
(In thousands) 2000 1999 1998
----------- ----------- ---------
Pro forma net revenues $ 704,875 $ 530,100 $ 469,623
PRODUCT RETURNS
We estimate and maintain reserves for product returns. Product returns
principally relate to stock balancing and the replacement of obsolete products,
which are offset by orders of equal or greater value for the current versions of
the products. The mix of products returned from the distributors/resellers as
compared to products sold to the distributors/resellers does not impact the
gross margins, as our gross margins are consistent across our various product
families. Changes in the level of product returns and related product returns
provision are generally offset by a change in the level of gross revenue. As a
result, the product returns provision did not have a material impact on reported
net revenues in any period presented.
GROSS MARGIN
Gross margin represents net revenues less cost of revenues. Cost of revenues
consists primarily of manufacturing expenses, costs for producing manuals,
packaging costs, royalties paid to third parties under publishing contracts and
16
19
amortization and write-off of capitalized software. Gross margin was 84% of net
revenues in fiscal 2000, 1999 and 1998.
CAPITALIZED SOFTWARE
As indicated in the overview, during fiscal 2000 we acquired URLabs, L-3 Network
Security's operations and 20/20 Software. As a result, we recorded acquired
capitalized software, or acquired product rights, of approximately $5 million,
$3 million and $2 million, respectively. In fiscal 1999 we acquired Binary's
operations, Intel's anti-virus business and Quarterdeck. After adjusting for the
final purchase price allocations, we recorded acquired product rights of
approximately $17 million, $10 million and $8 million, respectively. See Note 3
of Notes to Consolidated Financial Statements in this Form 10-K.
Amortization of acquired product rights, which are included in cost of revenues,
totaled approximately $10 million, $6 million and $1 million in fiscal 2000,
1999 and 1998, respectively. The decrease in fiscal 2000 from fiscal 1999 is
primarily due to a full year of amortization on our fiscal 1999 acquisitions and
the acquisition of URLabs in fiscal 2000. As the L-3 Network Security and 20/20
Software acquisitions were not complete until late March 2000, there was no
significant amortization in fiscal 2000 related to these acquisitions. The
increase in fiscal 1999 from fiscal 1998 is primarily due to additional
amortization related to acquired product rights associated with our acquisition
of Intel's anti-virus business and the acquisitions of Binary's operations and
Quarterdeck. The amortization of our fiscal 2000 and 1999 acquisitions will
occur over the next 3 to 5 years. See Note 4 of Notes to Consolidated Financial
Statements in this Form 10-K.
RESEARCH AND DEVELOPMENT EXPENSES
We charge research and development expenditures to operations as incurred. As a
percentage of net revenues, research and development expenses were 15% for
fiscal 2000 and remained flat at 17% for fiscal 1999 and fiscal 1998. The
decrease in research and development expenses as a percentage of net revenues in
fiscal 2000 from fiscal 1999 largely resulted from overall growth in our net
revenues.
Although research and development expenses decreased as a percentage of net
revenues, absolute dollars increased 7% to approximately $108 million in fiscal
2000 from $102 million in fiscal 1999. The increase was a result of increases in
software development costs paid to additional contractors, employee related
expenses and additional costs for settlements related to disputes over
technology rights in fiscal 2000, offset by a reduction of research and
development expenses resulting from our divestitures of the Visual Cafe and ACT!
product lines.
Research and development expenses increased 11% to approximately $102 million in
fiscal 1999 from $91 million in fiscal 1998. The increase was a result of
increased spending on new product development.
SALES AND MARKETING EXPENSES
Sales and marketing expenses were 41%, 48% and 49%, of net revenues for fiscal
2000, 1999 and 1998, respectively.
The sales and marketing expenses were approximately $307 million, $286 million
and $261 million in fiscal 2000, 1999 and 1998, respectively. The absolute
dollar increase in sales and marketing expenses in fiscal 2000 as compared to
fiscal 1999 is primarily related to increased headcount and related salaries,
commissions and other performance-based compensation. The absolute dollar
increase in sales and marketing dollars for fiscal 1999 over fiscal 1998 is
primarily due to increased headcount, as well as increased spending in
advertising and promotional expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were 6% of net revenues in fiscal 2000 and
1999 and 7% of net revenues in fiscal 1998.
General and administrative expenses were approximately $42 million, $36 million
and $38 million in fiscal 2000, 1999 and 1998, respectively. The absolute dollar
increase in general and administrative expenses in fiscal 2000 as compared to
fiscal 1999 was primarily due to increases in salaries and benefits, legal fees
and write-offs of certain uncollectible receivables, offset by reductions in
certain consulting expenses incurred in fiscal 1999. General and administrative
expenses in absolute dollars decreased in fiscal 1999 as compared to fiscal
1998, primarily due to reductions in our information system costs.
17
20
AMORTIZATION OF GOODWILL
Amortization of goodwill increased 190% from approximately $6 million in fiscal
1999 to $18 million in fiscal 2000. The increase is primarily related to the
acquisitions in fiscal 2000 and 1999. Amortization of goodwill in fiscal 2000 is
primarily related to amortization of goodwill associated with the acquisitions
of Quarterdeck, URLabs and IBM's anti-virus business with amortization of
approximately $10 million, $5 million and $2 million, respectively.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT EXPENSES
In fiscal 2000 we acquired URLabs and L-3 Network Security's operations. In
fiscal 1999, we acquired IBM's and Intel's anti-virus businesses, Binary's
operations and Quarterdeck.
We wrote-off approximately $4 million and $28 million of acquired in-process
research and development associated with these acquisitions in fiscal 2000 and
1999, respectively. These write-offs were necessary because the acquired
technologies had not yet reached technological feasibility and there were no
alternative uses.
We are using the acquired in-process research and development associated with
the fiscal 2000 acquisitions to create Internet security intrusion detection,
vulnerability assessment, new anti-virus products and enhanced management and
administrative capabilities to be integrated into our products over the next
year. There were no acquired in-process research and development expenses in
fiscal 1998.
The efforts required to develop the acquired in-process technology principally
relate to the completion of all planning, designing, development and testing
activities that are necessary to establish that the product or service can be
produced to meet its design specifications including features, functions and
performance. We expect the acquired in-process technology to be developed into
commercially feasible products. However, there are no assurances that this will
occur. If we fail to complete these products in their entirety, or in a timely
manner, we may not continue to attract new users, we may be unable to retain our
existing users and the value of the other intangible assets may become impaired.
We determined the fair value of the acquired in-process technology for each of
the purchases by estimating the projected cash flows related to these projects,
including the cost to complete the acquired in-process technologies and future
revenues to be earned upon commercialization of the products. We discounted the
resulting cash flows back to their net present values. We based the net cash
flows from such projects on our analysis of the respective markets and estimates
of revenues and operating profits related to these projects.
A valuation specialist used our estimates to establish the amount of acquired
in-process research and development to be written off for these acquisitions in
fiscal 2000 and 1999. As a result, we wrote-off $3.1 million and $1.2 million in
connection with our acquisitions of L-3 Network Security and URLabs,
respectively, in fiscal 2000 using the following analyses:
L-3 NETWORK SECURITY
This discussion contains forward-looking statements of certain aspects of our
future operating results from the operations of L-3 Network Security ("L-3").
Actual results may differ from the estimates expressly or implicitly referred to
by these forward-looking statements.
The in-process technology acquired in the L-3 acquisition consisted primarily of
research and development related to the next generation of Retriever and Expert.
Retriever and Expert products are designed for assisting enterprises in
vulnerability assessment.
L-3's research and development was focused on providing more robust features in
its development of the next generation products of Retriever and Expert. We plan
on discontinuing sales of the Expert product since many of its functionalities
are expected to be largely superseded by the next generation of Retriever.
We assumed that revenue attributable to L-3's in-process technology would be
approximately $1 million in the first year and increase in the second and third
years of the 6-year projection period at annual rates of 543% and 82%,
respectively, and then decrease at rates of 3%, 20% and 45%, over the remaining
three years. We projected annual
18
21
revenues to range from approximately $1 million to $13 million over the
projected period. These projections were based on:
- aggregate growth rates for the business as a whole;
- individual product revenues;
- anticipated product development cycles; and
- the life of the underlying technology.
We estimated selling, general and administrative expenses for the in-process
technology to be 221% of revenue in the first year, reducing to 45% in each of
the remaining 5 years of the 6-year projection period.
We projected operating results before acquisition related amortization charges
to range from a $2 million loss during the first year to a $3 million profit
during the third year. The operating profits would then decrease 3% in the
fourth year to 45% by the sixth year, resulting in profits of approximately $3
million, $3 million and $1 million, respectively. Because we assumed that most
product development costs would be incurred in the first year, thereby reducing
operating expenses as a percentage of revenue in later years, we anticipate that
operating profit will increase faster than revenue in the early years.
We estimated costs to be incurred to reach technological feasibility of the
in-process technologies from L-3 as of the date of the acquisition to total
approximately $0.3 million. We estimated the in-process technology to be between
68% to 77% complete at that time. In addition, we began building an intrusion
detection product leveraging L-3's core technology, which we plan to release in
the second half of fiscal 2001.
We used a discount rate of 25% for valuing the in-process technologies from L-3,
which we believe reflects the risk associated with the completion of these
research and development projects and the estimated future economic benefits to
be generated subsequent to their completion. This discount rate is higher than
the weighted average cost of capital of 20%, due to the fact that the technology
had not reached technological feasibility as of the date of the valuation.
The assumptions and projections discussed for the technologies acquired from L-3
were based on information available at the time and should not be taken as
indications of actual results, which could vary materially based on the risks
and uncertainties identified in the risk factors set forth in this Form 10-K.
URLABS
This discussion contains forward-looking statements of certain aspects of our
future operating results from URLabs. Actual results may differ from the
estimates expressly or implicitly referred to by these forward-looking
statements.
The in-process technology acquired in the URLabs acquisition primarily consisted
of research and development related to the next generation of URLabs' two main
products, I-Gear 3.5 and Mail Gear 1.2. The I-Gear and Mail Gear product lines
are designed for content management use in URL filtering and e-mail filtering,
respectively. URLabs' research and development was focused on providing more
robust features in its development of the next generation products of I-Gear 3.5
and Mail Gear 1.2.
We assumed that revenue attributable to URLabs' in-process technology would be
approximately $4 million in the first year and increase in the second and third
years of the 5-year projection period at annual rates of 77% and 40%,
respectively, and then decrease at rates of 2% and 38% over the remaining two
years. We projected annual revenues to range from approximately $4 million to
$11 million over the projected period. These projections were based on:
- aggregate growth rates for the business as a whole;
- individual product revenues;
- anticipated product development cycles; and
- the life of the underlying technology.
We estimated selling, general and administrative expenses for the in-process
technology to be approximately 69% of revenue in the first year, reducing to
approximately 50% in each of the remaining 4 years of the 5-year projection
period.
19
22
We projected operating profit before acquisition related amortization charges to
increase from less than $1 million during the first year to approximately $2.5
million during the third year. We projected that operating profits would then
decrease from 7% to 35% during the remaining two years, resulting in profits of
approximately $2.4 million and $1.5 million, respectively. Because we assumed
that most product development costs would be incurred in the first
year, reducing operating expenses as a percentage of revenue in later years, we
anticipate operating profit to increase faster than revenue in the early years.
We estimated costs to be incurred to reach technological feasibility of the
in-process technologies from URLabs as of the date of the acquisition to total
approximately $0.2 million. We estimated the in-process technology to be between
30% to 40% complete at that time. We projected the introduction of acquired
in-process technologies in the marketplace during calendar year 2000, and it was
introduced at the end of the December 1999 quarter.
We used a discount rate of 30% for valuing the in-process technologies from
URLabs, which we believe reflects the risk associated with the completion of
these research and development projects and the estimated future economic
benefits to be generated subsequent to their completion. This discount rate is
higher than the weighted average cost of capital of 25%, due to the fact that
the technology had not reached technological feasibility as of the date of the
valuation. The rates used for URLabs are higher than the rates used for L-3 due
to differences in the economic environments at the time of each acquisition,
such as the equities market and the interest rate environment.
The assumptions and projections discussed for the technologies acquired from
URLabs were based on information available at the time and should not be taken
as indications of actual results, which could vary materially based on the risks
and uncertainties identified in the risk factors set forth in this Form 10-K.
IBM
The in-process technology acquired in the IBM purchase primarily consisted of
the IBM immune system technology and related anti-virus patents. We have
integrated this technology into our anti-virus products. The original
assumptions and projections discussed in prior filings for the immune system and
related anti-virus technology acquired from IBM have not significantly changed.
BINARY
The in-process technology acquired in the Binary acquisition primarily consisted
of disk cloning technologies associated with Ghost, the flagship product of
Binary, which has been added to our product offerings. The assumptions and
projections discussed in prior filings for the disk cloning technologies
acquired from Binary have not significantly changed.
INTEL
The in-process technology acquired in the Intel purchase consists of the LANDesk
anti-virus technology, which resides in the LANDesk virus protect product line.
This technology has been integrated into our corporate anti-virus offerings. The
assumptions and projections discussed in prior filings for the LANDesk
anti-virus technology acquired from Intel have not significantly changed.
QUARTERDECK
The in-process technology acquired in our acquisition of Quarterdeck consisted
of projects related to Quarterdeck's CleanSweep product line. These technologies
have been integrated into Norton SystemWorks and is sold as a stand-alone
product. The assumptions and projections discussed in prior filings for the
projects related to Quarterdeck's CleanSweep product line have not significantly
changed.
RESTRUCTURING AND OTHER EXPENSES
During the March 2000 quarter, we reduced our operations in our Melville and
Toronto sites, thereby reducing our workforce by 96 employees. Each of these
employees received a separation package. As a result, we vacated the facility in
Melville and we are reducing the space occupied in Toronto. We recorded
approximately $3.4 million for employee severance, outplacement and abandonment
of certain facilities and equipment during the March 2000 quarter. In addition,
we provided approximately $0.7 million for costs of severance, related benefits
and outplacement
20
23
services for two members of senior management due to the realignment of our
business units and their resulting departures during the March 2000 quarter.
During the December 1999 quarter, we reduced our Internet Tools business unit's
workforce and reduced our Sales workforce. There were 48 employees in the
Internet Tools business unit affected, resulting in approximately $1.8 million
of severance, related benefits and outplacement services being accrued during
the December 1999 quarter. The Sales workforce reduction affected 10 employees,
resulting in approximately $0.4 million of severance, related benefits and
outplacement services being accrued in the December 1999 quarter.
During the September 1999 quarter, we provided approximately $0.7 million for
costs of severance, related benefits and outplacement services for two members
of senior management due to the realignment of our business units and their
resulting departures. We also accrued approximately $2.7 million for certain
costs related to an agreement reached with our former CEO in the June 1999
quarter. These costs were comprised of severance and acceleration of unvested
stock options.
During the September 1998 quarter, we made a decision to restructure our
operations and outsource domestic manufacturing operations. As a result, we
originally recorded a $3.8 million charge for personnel severance to reduce the
workforce by approximately 5% in both domestic and international operations and
a $1.3 million charge for the planned abandonment of a manufacturing facility
lease. These estimates were subsequently revised in the September 1999 quarter,
resulting in a reduction in the personnel severance and outplacement accruals by
approximately $0.7 million.
There were no restructuring and other expenses incurred in fiscal 1998. See Note
12 of Notes to Consolidated Financial Statements in this Form 10-K.
LITIGATION JUDGMENT
During the June 1998 quarter, we accrued litigation expenses of approximately $6
million related to a judgment by a Canadian court on a decade-old copyright
action assumed by us as a result of our acquisition of Delrina Corporation. See
Note 15 of the Notes to Consolidated Financial Statements in this Form 10-K.
INTEREST INCOME, INTEREST EXPENSE AND OTHER INCOME (EXPENSE)
Interest income was relatively flat at approximately $13 million in fiscal 2000,
1999 and 1998.
Interest expense was approximately $2 million in fiscal 1999 and $1 million in
fiscal 1998. The interest expense in fiscal 1999 and 1998 was principally
related to our convertible subordinated debentures, which were converted into
our common stock in February 1999 and for interest on Quarterdeck's subordinated
notes that were paid off in March 1999.
Other income (expense) is primarily comprised of foreign currency exchange gains
and losses from fluctuations in currency exchange rates. In fiscal 2000 there
was approximately $1 million in income due to gains on unhedged foreign currency
exposures. Foreign currency exchange gains and losses accounted for
approximately $2 million in income in fiscal 1999, which primarily resulted from
the write-off of the cumulative translation adjustment related to the payoff of
an intercompany loan.
INCOME, NET OF EXPENSE, FROM SALE OF TECHNOLOGIES AND PRODUCT LINES
The components of income, net of expense, from sale of technologies and product
lines are as follows:
Year Ended March 31,
--------------------------------------
(In thousands) 2000 1999 1998
----------- ----------- ---------
Gain on divestiture of:
Visual Cafe product line $ 68,523 $ -- $ --
ACT! product line 18,285 -- --
Royalties from Interact 5,000 -- --
Transition fees 894 -- --
Payments from HP and JetForm 14,656 41,155 45,421
----------- ----------- ---------
Income, net of expense, from sale of
technologies and product lines $ 107,358 $ 41,155 $ 45,421
=========== =========== =========
21
24
Gain on Divestiture of Visual Cafe
On December 31, 1999, we sold the principal assets and liabilities of the Visual
Cafe product line to WebGain, Inc. ("WebGain"). The assets primarily consisted
of fixed assets and intangible assets. The liabilities related to certain
revenue deferrals. In exchange for the assets and liabilities sold to WebGain,
we received $75.0 million in a lump-sum cash payment on December 31, 1999. We
wrote-off or transferred approximately $4.7 million of capitalized software,
fixed assets and inventory related to the Visual Cafe product line. In addition,
we accrued approximately $1.4 million in transaction costs and $0.4 million in
retention packages for the affected employees. As a result, we recorded a
pre-tax gain of approximately $68.5 million on the divestiture.
Gain on Divestiture of ACT! and Royalties from Interact
On December 31, 1999, we licensed, on an exclusive basis, to Interact Commerce
Corporation, previously SalesLogix Corporation ("Interact"), substantially all
of the ACT! product line technology for a period of four years. In addition, we
sold the inventory and fixed assets related to the ACT! product line to
Interact. In consideration for the license and assets, Interact transferred to
us 623,247 shares of its unregistered common stock. These shares were valued at
approximately $20 million as of December 6, 1999, the date the license was
signed and the date the number of shares was determined. As a result of the
license, we recognized approximately $20 million of income from the shares
received and wrote-off or transferred to Interact approximately $0.4 million of
inventory and fixed assets attributed to the ACT! product line. In addition, we
accrued approximately $1.3 million for transaction related costs incurred at
December 31, 1999. After recognizing the above amounts, we recorded a pre-tax
gain of approximately $18.3 million.
In addition to the shares received from Interact, we will receive quarterly
royalty payments for four years. Interact will pay these royalties based on
future revenues, up to an aggregate maximum of $57 million. Because the
royalties are not guaranteed and the quarterly amounts to be received are not
determinable until earned, we are recognizing these royalties, as payments are
due. The first payment of $5 million, which was due and payable on March 31,
2000, was recorded as income, net of expense, from sale of technologies and
product lines in the March 2000 quarter. The payment was subsequently received
in the June 2000 quarter.
Transition Fees
In accordance with individual transition agreements, WebGain and Interact will
pay us a fee for invoicing, collecting receivables, shipping and other
operational and support activities, until such time as they have the ability to
take over these activities. As of March 31, 2000, we billed them for a total
amount of $4 million. Approximately $3.1 million of these fees were
reimbursement of incremental costs incurred during the transition period to
provide these services, which we would otherwise not have incurred, and as such,
we have offset our operating expenses by this amount and have recorded the
remaining amount of $0.9 million in income, net of expenses, from sale of
technologies and product lines.
Payments from HP and JetForm
Payments from HP and JetForm are associated with our sale of certain software
products, technologies and tangible assets to JetForm Corporation ("JetForm")
and the Hewlett-Packard Company ("HP") during fiscal 1997. The payments
decreased from approximately $41 million in fiscal 1999 to $15 million in fiscal
2000. These payments also decreased $4 million from approximately $45 million in
fiscal 1998 to $41 million in fiscal 1999. The payments declined in fiscal 2000
and 1999, because the HP payments ended in the December 1998 quarter and the
payments from JetForm have been declining in accordance with the payment terms.
The last JetForm payment of approximately $0.4 million was received in the June
2000 quarter.
INCOME TAXES
Our effective tax rate on income before one-time charges (acquired in-process
research and development and restructuring and other expenses), goodwill
amortization expense and gain on sale of product lines, was 32% for fiscal 2000
and 1999. Our effective tax rate was 24% for fiscal 1998. Our fiscal 2000 and
1999 effective tax rates were lower than the U.S. federal and state combined
statutory rate primarily due to a lower statutory tax rate on our Irish
operations. In addition, our fiscal 1998 effective tax rate was lower due to the
utilization of previously unbenefited losses and credits. We project our
effective tax rate to be 32% in fiscal 2001. This projection, however, is
subject to change due to potential tax law changes and fluctuations in the
geographic allocation of earnings.
22
25
The effective tax rate on income after goodwill amortization, but before
one-time charges was 34%, 32% and 24% for fiscal 2000, 1999 and 1998,
respectively, reflecting the partial non-deductibility of goodwill amortization
in fiscal 2000. In addition, for fiscal 2000, tax has been provided on the gain
on sale of product lines at an effective tax rate of 34%. This rate is also
lower than the U.S. federal and state combined statutory rate because a portion
of the gain is attributable to our Irish operations and, accordingly, subject to
a lower tax rate.
Our tax provision for fiscal 2000, 1999 and 1998 includes tax benefits
attributable to one-time charges of $3.9 million, $2.0 million and zero,
respectively.
Realization of a significant portion of the $79 million of net deferred tax
assets is dependent on our ability to generate sufficient future U.S. taxable
income. The amount of future U.S. taxable income that would have to be generated
in order to realize the net deferred tax assets is approximately $175 million.
We believe it is more likely than not that the $79 million of net deferred tax
assets will be realized based on historical earnings and expected levels of
future U.S. taxable income. Levels of future taxable income are subject to the
various risks and uncertainties discussed in the Risk Factors section of this
Form 10-K. A valuation allowance against net deferred tax assets may be
necessary if it is more likely than not that all or a portion of the net
deferred tax assets will not be realized. We will assess the need for a
valuation allowance on a quarterly basis.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents, short-term investments and long-term investments
increased approximately $235 million to $432 million at the end of fiscal 2000
from $197 million at the end of fiscal 1999. This increase is largely due to
cash provided from operations, net proceeds from the exercise of stock options
under our stock option plans, sales of common stock through our employee stock
purchase plan and the receipt of restricted stock and cash from our divestitures
of the ACT! and Visual Cafe product lines.
Quarterdeck had issued $25 million of 6% convertible senior subordinated notes,
or Notes, due in 2001. These Notes were issued to an institutional investor in a
private placement pursuant to the terms of a Note Agreement dated March 1, 1996.
These Notes were paid in full on March 30, 1999.
In addition to cash and short-term investments, we have $82 million of
restricted investments related to collateral requirements under certain lease
agreements. We are obligated under these lease agreements for two office
buildings in Cupertino, California to maintain a restricted cash balance
invested in U.S. Treasury securities with maturities not to exceed three years.
In accordance with the lease terms, these funds are not available to meet our
operating cash requirements. We are in compliance with our covenants on these
lease agreements as of March 31, 2000. Future acquisitions or other events could
cause us to be in violation of these covenants.
In May 2000, we amended our $10 million line of credit, which expires in May
2001, to minimize the potential violation of certain financial covenants due to
future acquisitions. The amendment allows for future acquisitions of less than
$75 million in cash, annually. We were in compliance with the debt covenants for
this line of credit as of March 31, 2000. As of March 31, 2000, there were no
borrowings and less than $1 million of standby letters of credit outstanding
under this line. Future acquisitions could cause us to be in violation of the
line of credit covenants. However, we believe that if the line of credit is
canceled or amounts are not available under the line, there will not be a
material adverse impact on our financial results, liquidity or capital
resources.
Net cash provided by operating activities was approximately $224 million and was
comprised of net income of approximately $170 million, non-cash related expenses
of $55 million and a net increase in assets and liabilities of $109 million.
Net trade accounts receivable decreased $26 million to approximately $47 million
and to 30 days sales outstanding at March 31, 2000 from approximately $76
million and 39 days sales outstanding at March 31, 1999.
Net cash used in investing activities was approximately $330 million and was
comprised of $75 million in proceeds from our divestiture of the Visual Cafe
product line, offset by $87 million in payments made in connection with our
recent acquisitions, $288 million in net purchases of marketable securities and
$30 million of capital expenditures.
On June 9, 1998, the Board of Directors of Symantec authorized the repurchase of
up to 5% of our outstanding common stock before December 31, 1998. We completed
the repurchase as of October 31, 1998, repurchasing
23
26
approximately 3 million shares for approximately $56 million at prices ranging
from $13.10 to $27.21 per share. The repurchased shares were used for employee
stock purchase programs and option grants.
On March 22, 1999, the Board authorized the repurchase of up to $75 million of
our outstanding common stock. As of March 31, 2000, we have purchased 1 million
shares at prices ranging from $17.90 to $19.90, for an aggregate amount of $18.7
million.
We believe that existing cash and short-term investments and cash generated from
operating results will be sufficient to fund operations for the next year.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and for
hedging activities. In June 1999, the FASB issued SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133, which defers the adoption of SFAS No. 133 for one
year. SFAS 133 will be effective for Symantec at the beginning of the June 2001
quarter for both annual and interim reporting periods. We are evaluating the
potential impact of this accounting pronouncement on our required disclosures
and accounting practices.
In March 2000, the FASB issued Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensation, an interpretation of APB Opinion No.
25. This Interpretation clarifies the application of Opinion No. 25 for certain
issues including: (a) the definition of an employee for purposes of applying
Opinion No. 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence of various modifications to
the terms of a previously fixed stock option or award and (d) the accounting for
an exchange of stock compensation awards in a business combination. In general,
this Interpretation is effective July 1, 2000. We do not expect the adoption of
Interpretation No. 44 to have a material effect on our consolidated financial
position or results of operations.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
Revenue Recognition in Financial Statements. In March 2000, the SEC released SAB
No. 101A, which defers reporting the effects of the adoption of SAB No. 101
until our first fiscal quarter of fiscal 2001. We are currently evaluating the
potential impact of SAB No. 101 on our required disclosures and accounting
practices.
24
27
BUSINESS RISK FACTORS
The following discussion contains forward-looking statements that involve known
and unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others things, those risk factors set forth in this
section and elsewhere in this report. We identify forward-looking statements by
words such as "may," "will," "should," "could," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential," or "continue"
or similar terms that refer to the future. We cannot guarantee future results,
levels of activity, performance or achievements.
OUR INCREASED SALES OF ENTERPRISE-WIDE SITE LICENSES MAY INCREASE FLUCTUATIONS
IN OUR FINANCIAL RESULTS. Sales of enterprise-wide site licenses through our
Enterprise Solutions segment are a major and expanding portion of our business.
This enterprise market has significantly different characteristics than the
consumer market and requires different skills and resources to penetrate.
Licensing arrangements tend to involve a longer sales cycle than sales through
other distribution channels, require greater investment of resources in
establishing the enterprise relationship and can sometimes result in lower
operating margins. The timing of the execution of volume licenses, or their
nonrenewal or renegotiation by large customers, could cause our results of
operations to vary significantly from quarter to quarter and could have a
material adverse impact on our results of operations.
WE RECENTLY RESTRUCTURED OUR INTERNAL FOCUS AND OPERATIONS AND WE COULD INCUR
ADVERSE OPERATING CONSEQUENCES AS A RESULT OF THESE CHANGES. In fiscal 2000, we
restructured our operations on the basis of a customer segment orientation
rather than a product structure. We also divested two product lines that did not
fit with our future focus. Changes of this nature inevitably cause disruptions
within an organization that may adversely affect results as the changes are
being absorbed, and these changes may not achieve their desired long-term
benefits. Overseeing these changes requires significant attention from our
senior management and may detract from management's ability to focus on other
important opportunities or problems that might confront us. We have lost
personnel, including management, and we may continue to do so as a consequence
of these types of changes. In addition, we may not be able to introduce new
products that are as beneficial to us as those that we divested.
OUR SOFTWARE PRODUCTS AND WEB SITE MAY BE SUBJECT TO INTENTIONAL DISRUPTION.
Although we believe we have sufficient controls in place to prevent intentional
disruptions, such as software viruses specifically designed to impede the
performance of our products, we expect to be an ongoing target of such
disruptions. Similarly, experienced computer programmers, or hackers, may
attempt to penetrate our network security or the security of our web site and
misappropriate proprietary information or cause interruptions of our services.
Our activities could be substantially disrupted and our reputation, and future
sales, harmed if these efforts are successful.
OUR MARKETS ARE HIGHLY COMPETITIVE AND OUR OPERATING RESULTS AND FINANCIAL
CONDITION COULD BE ADVERSELY AFFECTED BY THIS COMPETITION. Our markets are
intensely competitive. This competition could adversely affect our operating
results by reducing our sales or the prices we can charge for our products.
Recently many of our competitors have significantly reduced the price of utility
and anti-virus products and further price reductions could occur for these or
other of our products, which would likely have a negative affect on our margins
and could reduce our sales. Our ability to remain competitive depends on our
ability to enhance our products or produce new products that are compatible with
new products introduced by the major hardware and operating system providers. We
have no control, and sometimes limited visibility, into the development efforts
of these third parties and we may not be able to respond effectively or timely
to their new products and enhancements. In addition, we have limited resources
and we must make strategic decisions as to how to best allocate our resources to
position ourselves for changes in our markets. We may from time to time allocate
resources to projects or markets that do not develop as rapidly or fully as we
expect. We may fail to allocate resources to third party products or to markets
that are more successful than we anticipate.
INTRODUCTION OF NEW OPERATING SYSTEMS MAY ADVERSELY AFFECT OUR FINANCIAL RESULTS
AND STOCK PRICE. The inclusion of security or anti-virus tools in new operating
systems and hardware packages could adversely affect our sales. For example, the
inclusion of features by Microsoft in new or upcoming versions of Windows, such
as current and future editions of Windows 2000, which directly compete with our
products, may decrease or delay the demand for certain of our products,
including those currently under development and products specifically intended
for Windows 2000. Additionally, as hardware vendors incorporate additional
server-based network management and security tools into network operating
systems, the demand may decrease for some of our products, including those
currently under development.
25
28
Our financial results and our stock price declined significantly within
approximately six months after the releases of Windows 3.1, Windows 95 and
Windows 98, which in some cases also caused the additional requirement for
hardware upgrades that resulted in shifts in customer spending from software to
hardware. The Professional Edition of Windows 2000 was released in February
2000, and, as a result, we could face adverse financial results and additional
stock price declines.
With the rise of Linux-based operating systems being introduced into the market,
we may lose market share if we are unable to significantly penetrate the
Linux-based market timely and effectively.
OUR EARNINGS AND STOCK PRICE ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS. Due to the
factors noted throughout this section, our earnings and stock price have been
and may continue to be subject to significant volatility. There have been
previous quarters in which we have experienced shortfalls in revenue and
earnings from levels expected by securities analysts and investors, which have
had an immediate and significant adverse effect on the trading price of our
common stock. This may occur again in the future.
OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS. While
our diverse product line has tended to lessen fluctuations in quarterly net
revenues, these fluctuations have occurred in the past, and may occur in the
future. Fluctuations may be caused by a number of factors, including:
- the timing of announcements and releases of new or enhanced versions of
our products and product upgrades;
- the introduction of competitive products by existing or new competitors;
- reduced demand for any given product;
- seasonality in the end-of-period buying patterns of foreign and domestic
software markets; and
- the market's transition between operating systems.
A significant portion of our net revenues have historically been generated
during the last month of a fiscal quarter. Most resellers tend to make a
majority of their purchases at the end of a fiscal quarter. In addition, many
enterprise customers negotiate site licenses near the end of each quarter. In
part, this is because these two groups are able, or believe that they are able,
to negotiate lower prices and more favorable terms at that time. Our reliance on
a large portion of revenue occurring at the end of the quarter and the increase
in the dollar value of transactions that occur at the end of a quarter can
result in increased uncertainty relating to quarterly revenues. Due to this
end-of-period buying pattern, forecasts may not be achieved, either because
expected sales do not occur or because they occur at lower prices or on terms
that are less favorable to us. In addition, these factors increase the chances
that our results could diverge from the expectations of investors and analysts.
WE FACE RISKS ASSOCIATED WITH OUR FOREIGN OPERATIONS. A significant portion of
our net revenues, manufacturing costs and operating expenses result from
transactions outside of the United States, often in foreign currencies. As a
result, our operating results may be materially and adversely affected by
fluctuations in currency exchange rates and general uncertainty with each
country's political and economic structure. In addition, the laws of some other
countries do not protect intellectual property rights as effectively as is the
case in the United States and we may be subject to a greater risk of
unauthorized use of our products.
WE MUST EFFECTIVELY ADAPT TO CHANGES IN THE DYNAMIC TECHNOLOGICAL ENVIRONMENT.
We are increasingly focused on the Internet security market, which, in turn, is
dependent on further acceptance of the Internet. The following critical issues
concerning the use of the Internet remain unresolved and may affect the market
for our products and the use of the Internet as a medium to distribute or
support our software products and the functionality of some of our products:
- security;
- reliability;
- cost;
- ease of use;
- accessibility;
- quality of service; or
- potential tax or other government regulations.
26
29
In addition, new technologies, such as non PC-based Internet access devices and
handheld organizers are gaining acceptance. We must adapt to these changing
technological demands. If we are unable to timely assimilate changes brought
about by the Internet and non PC-based environments, our future net revenues and
operating results could be adversely affected.
THE RESULTS OF OUR RESEARCH AND DEVELOPMENT EFFORTS ARE UNCERTAIN. We believe
that we will need to incur significant research and development expenditures to
remain competitive. The products we are currently developing or may develop in
the future may not be technologically successful. In addition, the length of our
product development cycle has generally been greater than we originally
expected. We are likely to experience delays in future product development. If
they are not technologically successful, our resulting products may not achieve
market acceptance or compete effectively with products of our competitors.
WE ARE DEPENDENT UPON CERTAIN DISTRIBUTION CHANNELS. A large portion of our
sales is made through the retail distribution channel, which is subject to
events that create unpredictability in consumer demand. This increases the risk
that we may not plan effectively for the future, which could result in adverse
operating results in future periods. Our retail distribution customers also
carry our competitors' products. These retail distributors may have limited
capital to invest in inventory. Their decisions to purchase our products are
partly a function of pricing, terms and special promotions offered by our
competitors and other factors that we do not control nor can we predict. Our
agreements with retail distributors are generally nonexclusive and may be
terminated by them or by us without cause. We would be adversely affected if
companies in our chain of distributors chose to increase purchases from our
competition relative to the amount they buy from us.
Some distributors and resellers have experienced financial difficulties in the
past. Distributors that account for a significant portion of our sales may
experience financial difficulties in the future. If these distributors do
experience financial difficulties and we are unable to move their inventories to
other distributors, we may experience reduced sales or increased write-offs,
which would adversely affect our operating results.
WE MAY BE UNSUCCESSFUL IN UTILIZING NEW DISTRIBUTION CHANNELS. We currently
offer a broad range of products and services over the Internet, which is a
relatively new distribution channel for our business. We may not be able to
effectively adapt our existing, or adopt new, methods of distributing our
software products utilizing the rapidly evolving Internet and related
technologies. The adoption of new channels may adversely impact existing
channels and/or product pricing, which may reduce our future revenues and
profitability.
CHANNEL FILL AND PRODUCT RETURNS MAY NEGATIVELY AFFECT OUR NET REVENUES. Our
pattern of net revenues and earnings may be affected by "channel fill."
Distributors may fill their distribution channels in anticipation of price
increases, sales promotions or incentives. Channels may also become filled
simply because the distributors do not sell their inventories to retail
distribution or from retailers to end-users as anticipated. If sales to
retailers or end-users do not occur at a sufficient rate, distributors will
delay purchases or cancel orders in later periods or return prior purchases in
order to reduce their inventories.
Product returns can occur when we introduce upgrades and new versions of
products or when distributors or retailers have excess inventories. Our return
policy allows distributors, subject to various limitations, to return purchased
products in exchange for new products or for credit towards future purchases.
End-users may return our products through dealers and distributors within a
reasonable period from the date of purchase for a full refund. In addition,
subject to limitations, retailers may return older versions of our products. We
estimate and maintain reserves for product returns. Future returns could,
however, exceed the reserves we have established, which could have a material
adverse affect on our operating results.
THE TRANSITION TO INTEGRATED SUITES OF UTILITIES MAY RESULT IN REDUCED CONSUMER
REVENUES. We and our competitors sell integrated suites of utility products for
prices significantly less than the aggregate price of the stand-alone products
that are included in these suites when sold separately. As a result of the shift
to integrated utility suites, price competition is intense in the consumer
market and we have experienced cannibalization of our stand-alone products that
are included within the suite. Additionally, our products may not compete
effectively with competitors' integrated suites introduced in the future.
WE DEPEND ON OUR INTERNAL COMMUNICATIONS SYSTEMS THAT MAY BE DISRUPTED. Our
order entry and product shipping centers are geographically dispersed. A
business disruption could occur as a result of natural disasters or the
interruption in service by communications carriers. If our communications
between these centers are disrupted,
27
30
particularly at the end of a fiscal quarter, we may suffer an unexpected
shortfall in net revenues and a resulting adverse impact on our operating
results. Communications and Internet connectivity disruptions may also cause
delays in customer access to our Internet-based services or product sales.
WE ARE INVOLVED IN LITIGATION, AND MAY IN THE FUTURE BE INVOLVED IN LITIGATION,
WHICH COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS. From time to time, we may be
subject to claims that we have infringed the intellectual property rights of
others, that our products are not Year 2000 compliant or other product liability
claims, or other claims incidental to our business. We are currently involved in
a number of judicial and administrative proceedings. For a discussion of our
current litigation, see Note 15 of Notes to Consolidated Financial Statements of
this Form 10-K. We intend to defend all of these lawsuits vigorously. We may
suffer an unfavorable outcome in one or more of these cases. Depending on the
amount and timing of any unfavorable resolutions of these lawsuits, our future
results of operations or cash flows could be materially adversely affected in a
particular period.
Although infringement claims may ultimately prove to be without merit, they are
expensive to defend and may consume our resources or divert our attention from
day-to-day operations. If a third party alleges that we have infringed their
intellectual property rights, we may choose to litigate the claim and/or seek an
appropriate license from the third party. If we engage in litigation and the
third party is found to have a valid patent claim against us and a license is
not available on reasonable terms, our business, operating results and financial
condition may be materially adversely affected.
Defects and errors could be found in current versions of our products, future
upgrades to current products or newly developed and released products. Software
defects could result in delays in market acceptance or unexpected reprogramming
costs, which could materially adversely affect our operating results. Most of
our license agreements with customers contain provisions designed to limit our
exposure to potential product liability claims. It is possible, however, that
these provisions limiting our liability may not be valid as a result of federal,
state, local or foreign laws or ordinances or unfavorable judicial decisions.
THE TREND TOWARD CONSOLIDATION IN OUR INDUSTRY MAY IMPEDE OUR ABILITY TO COMPETE
EFFECTIVELY. Consolidation is underway among companies in the software industry
as firms seek to offer more extensive suites of software products and broader
arrays of software solutions. Changes resulting from this consolidation may
negatively impact our competitive condition. In addition, to the extent that we
seek to expand our product lines, and skills and capacity through acquisitions,
the trend toward consolidation may result in our encountering competition, and
paying higher prices, for acquired businesses.
WE HAVE GROWN, AND MAY CONTINUE TO GROW THROUGH ACQUISITIONS, WHICH GIVE RISE TO
A NUMBER OF RISKS THAT COULD HAVE ADVERSE CONSEQUENCES FOR OUR FUTURE OPERATING
RESULTS. We have made seven acquisitions within the last two fiscal years and
may complete material acquisitions in the future. Integrating acquired
businesses into our existing business may distract our management focus from
other opportunities and challenges. Our past acquisitions have given rise to,
and future acquisitions may result in, substantial levels of goodwill and other
intangible assets that will be amortized in future years and our future
operating results will be adversely affected if we do not achieve benefits from
these acquisitions commensurate with these charges. In addition, a number of our
recent acquisitions have resulted in our incurring substantial write-offs of
acquired in-process research and development costs and this also may occur as a
result of future acquisitions. We may issue equity, or incur debt financing, for
future acquisitions that are dilutive to our existing stockholders.
WE MUST ATTRACT AND RETAIN PERSONNEL WHILE COMPETITION FOR PERSONNEL IN OUR
INDUSTRY IS INTENSE. We believe that our future success will depend in part on
our ability to recruit and retain highly skilled management, marketing and
technical personnel, particularly as we focus on enterprise-wide applications.
Competition in recruiting personnel in the software industry is intense. To
accomplish this, we believe that we must provide personnel with a competitive
compensation package, including stock options, which requires ongoing
stockholder approval. Such approval may not be forthcoming and, as a result, we
may be impaired in our efforts to attract necessary personnel.
WE MAY EXPERIENCE DISRUPTION OF OUR INTERNAL SYSTEMS AS A RESULT OF THE YEAR
2000. In order to prepare for the Year 2000, we completed a major evaluation of
our internal applications, systems and databases. We modified or replaced
portions of our hardware and associated software to enable our operational
systems and networks to function properly with respect to dates January 1, 2000
and thereafter. The cost to complete the Year 2000 project was approximately
$1.5 million and has been expensed as incurred. We will continue to evaluate
interfaces between our
28
31
systems and third-party systems, such as those of key suppliers, distributors
and financial institutions, for Year 2000 functionality. Although the Year 2000
rollover did not cause any significant problems, as discussed below, we may
still encounter problems as operations uncover processes not yet utilized. In
addition, the systems of other companies with which we do business may not have
completely addressed Year 2000 problems. Based on this, we expect the process of
evaluating third-party Year 2000 compliance to be ongoing.
OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS MAY NOT BE ADEQUATELY PROTECTED
FROM ALL UNAUTHORIZED USES. We regard our software as proprietary and underlying
technology as proprietary. We seek to protect our proprietary rights through a
combination of confidentiality agreements and copyright, patent, trademark and
trade secret laws. Third parties may copy aspects of our products or otherwise
obtain and use our proprietary information without authorization or develop
similar technology independently. All of our products are protected by copyright
and we have a number of patents and patent applications pending. We may not
achieve the desired protection from, and third parties may design around, our
patents. In addition, existing copyright laws afford limited practical
protection. Furthermore, the laws of some foreign countries do not offer the
same level of protection of our proprietary rights as the laws of the United
States. Any legal action that we may bring to protect proprietary information
could be expensive and may distract management from day-to-day operations.
INCREASED UTILIZATION AND COSTS OF OUR TECHNICAL SUPPORT SERVICES MAY ADVERSELY
AFFECT OUR FINANCIAL RESULTS. Like many companies in the software industry,
technical support costs comprise a significant portion of our operating costs
and expenses. Over the short term, we may be unable to respond to fluctuations
in customer demand for support services. We also may be unable to modify the
format of our support services to compete with changes in support services
provided by competitors. Further customer demand for these services could cause
increases in the costs of providing such services and adversely affect our
operating results.
29
32
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not have significant exposure to changing interest rates because of the
low levels of marketable securities on our balance sheet. We do not undertake
any specific actions to cover our exposure to interest rate risk and we are not
a party to any interest rate risk management transactions. We do not purchase or
hold any derivative financial instruments for trading purposes.
INTEREST RATE SENSITIVITY
As of March 31, 2000, the fair market value of our financial instruments with
exposure to interest risk was approximately US $308 million and euro 133
million. Sensitivity analysis for a six-month horizon was performed on our
floating rate and fixed rate financial investments and floating rate
liabilities.
Parallel shifts in the yield curve of both +/-50 basis point (+/-10% of our
weighted average interest rate) would result in changes in fair market values
for these investments and floating rate liabilities of less than $1 million. For
the euro investments, parallel shifts in the yield curve of both +/-50 basis
point (+/-10% of our weighted average interest rate) would result in changes in
fair market values for these investments of approximately less than euro 1
million.
EQUITY SENSITIVITY
We are exposed to equity price risk on the marketable portion of our portfolio
of equity securities. We typically do not attempt to reduce or eliminate the
market exposure on our securities. As of March 31, 2000, these securities
consisted of approximately 600,000 shares of Interact Commerce Corporation, a
publicly traded company (Nasdaq symbol "IACT"), with a market value of
approximately $16.9 million. We believe that it is reasonably possible that the
prices of these securities could experience a 50% adverse change in the near
term. Assuming a 50% adverse change, these securities would decrease in value by
approximately $8.5 million, based on the value of the securities as of March 31,
2000. Since April 2000, many high-technology stocks experienced increased
volatility and a significant decrease in value, including these shares. If these
securities had been valued using prices as of June 16, 2000, the value of these
securities would have decreased by approximately an additional $9.3 million
subsequent to March 31, 2000. The value of these securities may vary over time
and the value as of June 16, 2000 of approximately $7.6 million is not
necessarily indicative of future performance.
EXCHANGE RATE SENSITIVITY
We conduct business in 37 international currencies through our worldwide
operations. We have established a foreign currency hedging program, utilizing
foreign currency forward exchange contracts, or forward contracts, of one fiscal
month duration to hedge various foreign currency transaction exposures. Under
this program, increases or decreases in our foreign currency transactions are
offset by gains and losses on the forward contracts to mitigate the risk of
material foreign currency transaction losses. We do not use forward contracts
for trading purposes. At the end of each fiscal month, all foreign currency
assets and liabilities are revalued using the month end spot rate of the
maturing forward contracts and the realized gains and losses are recorded and
included in net income as a component of other income (expense).
We believe that the use of foreign currency financial instruments should reduce
the risks that arise from conducting business in international markets. We
employ established policies and procedures governing the use of financial
instruments to manage our exposure to such risks.
We use sensitivity analyses to quantify the impact market risk exposure may have
on the fair market values of our financial instruments. The financial
instruments included in the sensitivity analyses consist of all of our foreign
currency assets and liabilities and all derivative instruments, principally
forward contracts. The sensitivity analyses assesses the risk of loss in fair
market values from the impact of hypothetical changes of instantaneous, parallel
shifts in exchange rates and interest rates yield curves on market sensitive
instruments over a six-month horizon. Exchange rates rarely move in the same
direction. The assumption that exchange rates change in a parallel fashion may
overstate the impact of changing exchange rates on assets and liabilities
denominated in a foreign currency.
As of March 31, 2000, the net fair value liability of our foreign currency
financial instruments was approximately US $230 million. A 10% movement in the
levels of foreign currency exchange rates against the U.S. dollar would result
30
33
in a decrease in the fair value of our financial instruments by approximately US
$21 million or an increase in the fair value of our financial instruments by
approximately US $23 million.
This quantification of exposure to the market risk associated with foreign
financial instruments does not take into account the offsetting impact of
changes in the fair value of our foreign denominated assets, liabilities and
firm commitments.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ANNUAL FINANCIAL STATEMENTS: See Part IV, Item 14 of this Form 10-K.
SELECTED QUARTERLY DATA
We have a 52/53-week fiscal accounting year. Accordingly, we have presented
quarterly fiscal periods comprised of 13 weeks as follows:
(In thousands, except net income per share; unaudited)
Fiscal 2000 Fiscal 1999
----------------------------------------- -----------------------------------------
Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
2000 1999 1999 1999 1999 1998 1998 1998
-------- -------- -------- -------- -------- -------- -------- --------
Net revenues $187,205 $200,847 $182,535 $175,138 $169,618 $155,206 $130,034 $137,770
Gross margin 158,196 170,048 151,893 144,515 141,168 128,718 108,697 117,487
Restructuring and
other expenses 7,059 2,246 1,240 2,773 740 7,560 10,122 19,973
Income, net of
expense, from sale
of technologies
and product lines 7,491 89,967 5,010 4,890 5,957 9,850 10,027 15,321
Net income 31,576 89,013 25,832 23,727 24,758 15,883 1,945 7,615
Net income per share -
basic $ 0.53 $ 1.52 $ 0.45 $ 0.42 $ 0.44 $ 0.29 $ 0.03 $ 0.13
diluted $ 0.49 $ 1.41 $ 0.43 $ 0.41 $ 0.43 $ 0.28 $ 0.03 $ 0.13
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
31
34
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item with respect to Directors may be found in the
section captioned "Election of Symantec Directors" appearing in the definitive
Proxy Statement that we will deliver to stockholders in connection with the
Annual Meeting of Stockholders to be held on September 18, 2000. That
information is incorporated herein by reference. Information required by this
Item with respect to compliance with Section 16(a) of the Securities Exchange
Act of 1934, as amended, may be found in the section captioned "Section 16(a)
Beneficial Ownership Reporting Compliance" appearing in the definitive Proxy
Statement. That information is incorporated herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT:
The executive officers of the Company are as follows:
NAME AGE POSITION
- ---- --- --------
John W. Thompson 51 Chairman, President and Chief Executive Officer
Stephen G. Cullen 34 Senior Vice President, Consumer Products Division
Dieter Giesbrecht 56 Senior Vice President, International
Gail E. Hamilton 50 Senior Vice President, Enterprise Solutions Division
Ron Moritz 37 Senior Vice President and Chief Technical Officer
Greg Myers 50 Senior Vice President, Finance and Chief Financial
Officer
Dana E. Siebert 40 Executive Vice President, Worldwide Sales and Service
Gary Warren 38 Senior Vice President, Business Development
Derek Witte 43 Senior Vice President, Worldwide Operations and
Secretary
The Board of Directors chooses executive officers, who then serve at the Board's
discretion. There is no family relationship between any of our directors or
executive officers and any other director or executive officer of Symantec.
JOHN W. THOMPSON has served as President, Chief Executive Officer and Chairman
of the Board of Directors, since April 1999. Mr. Thompson joined Symantec after
28 years at IBM Corporation. In his most recent position as General Manager of
IBM Americas, he was responsible for sales and support of IBM's technology
products and services in the United States, Canada and Latin America. Prior to
his position with IBM Americas, he was General Manager, Personal Software
Products, responsible for the development and marketing of O/S2, IBM's
Intel-based operating systems and other products. Mr. Thompson is a member of
the board of directors at Parago and Nisource. He has served as chairman of the
Florida A&M University Industry Cluster and the Illinois Governor's Human
Resource Advisory Council. Mr. Thompson holds an undergraduate degree in
business administration from Florida A&M University and a master's degree in
management science from MIT's Sloan School of Management.
STEPHEN G. CULLEN is Senior Vice President, Consumer Products Division and is
responsible for our worldwide consumer business and product strategy, which
includes the Norton brand and its problem-solving solutions. Mr. Cullen joined
Symantec in 1996 and has held senior marketing, product management and general
management positions at both a regional and business unit level. Prior to
joining Symantec, he was Director of Marketing for Concur Technologies (formerly
Portable Software) where he was instrumental in establishing the company as an
enterprise travel and entertainment expense management firm. Prior to that, he
held senior marketing and product management positions with Contact Software and
Delrina Corporation, which were both acquired by Symantec.
DIETER GIESBRECHT has served as Senior Vice President, International, since
January 2000. He is responsible for all worldwide business outside the US and
Canada, including all sales and marketing functions. He joined Symantec in 1996
as vice president and managing director, Europe, Middle East and Africa, a
position he held for three years. He has held a number of executive positions in
the IT and semiconductor industries for companies including Digital Research,
Lotus Development, Mohawk Data Science, Teradyne and LTX. Mr. Giesbrecht has a
degree from the Technical University of Furtwangen, Germany.
32
35
GAIL E. HAMILTON joined Symantec in March 2000, as Senior Vice President,
Enterprise Solutions Division. She leads the development and extension of
Symantec's enterprise-focused solutions, including e-Support. Prior to joining
Symantec, she served as the general manager of the Communications Platform
Division for Compaq Computers, where she was responsible for the UNIX and NT
server businesses targeting communications companies. Prior to that, she was the
general manager of the Telecom Platform Division at Hewlett-Packard Company,
where she was responsible for the adjunct computers, wide-area networking and
broadband Internet businesses. Ms. Hamilton received a bachelor's degree in
electrical engineering and computer science from the University of Colorado and
has a master's degree in electrical engineering and administration from Stanford
University.
RON MORITZ joined Symantec in February 2000 as Senior Vice President and Chief
Technical Officer. He leads Symantec's Core Technology group. Mr. Moritz joined
Symantec after his tenure with Finjan Software, Inc., where he served as chief
technology officer and was responsible for establishing and maintaining the
company's technological standards and vision. Mr. Moritz attended Case Western
Reserve University, where he received his master's degrees in engineering and
business administration, and a bachelor's degree in mathematics.
GREG MYERS has served as Vice President of Finance and Chief Financial Officer
for Symantec since January 1999. Mr. Myers was promoted to Senior Vice President
in March 2000. Mr. Myers is responsible for worldwide finance. Previous to his
appointment as the Company's CFO in January 1999, Mr. Myers was Symantec's Vice
President of Finance, where he was responsible for worldwide accounting,
financial and strategic planning and business development. From 1997 through
mid-1998 Mr. Myers was Vice President of financial planning and analysis for
Symantec. In this role, Mr. Myers managed the Company's strategic planning
process, the Company's budget and financial planning function and the worldwide
financial controller organization. From 1993 to 1996, Mr. Myers was the director
of financial planning and analysis function, where he was responsible for the
budget, forecasting and financial analysis functions within Symantec. Mr. Myers
holds an undergraduate degree from Cal-State University, Hayward and holds a
Masters in Business Administration from the University of Santa Clara.
DANA E. SIEBERT is Executive Vice President for Worldwide Sales, Marketing and
Services. Previously, Mr. Siebert served as Vice President, Americas and prior
to that, Vice President, Worldwide Sales of Symantec and has also held the
position of Vice President, Worldwide Services of Symantec. Mr. Siebert joined
Symantec in September 1987. From 1985 to 1987, he was a Sales Manager at THINK
Technologies, which we acquired. Mr. Siebert holds a Bachelor of Science degree
in Business Administration from the University of New Hampshire.
GARY WARREN has served as Senior Vice President, Business Development, since
July 1999. Mr. Warren was the Chief Executive Officer and President of URLabs,
prior to its acquisition by Symantec in July 1999, where he engineered the
URLabs Content Management product strategy. He received a bachelor's degree in
aeronautical engineering from Embry-Riddle Aeronautical University and received
a master's degree in computational fluid dynamics from Mississippi State
University.
DEREK WITTE is Senior Vice President, Worldwide Operations and Secretary.
Previously, Mr. Witte served as Vice President, General Counsel and Secretary of
Symantec. Mr. Witte joined Symantec in October 1990. Mr. Witte holds a law
degree and a Bachelor of Arts degree in Economics from the University of
California at Berkeley. Mr. Witte has been a member of the California bar since
1981.
33
36
ITEM 11: EXECUTIVE COMPENSATION
Information with respect to this Item may be found in the section captioned
"Executive Compensation" appearing in the definitive Proxy Statement to be
delivered to stockholders in connection with the Annual Meeting of Stockholders
to be held on September 18, 2000. Such information is incorporated herein by
reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this Item may be found in the section captioned
"Security Ownership of Certain Beneficial Owners and Management" appearing in
the definitive Proxy Statement to be delivered to stockholders in connection
with the Annual Meeting of Stockholders to be held on September 18, 2000. Such
information is incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this Item may be found in the section captioned
"Executive Compensation - Certain Transactions" appearing in the definitive
Proxy Statement to be delivered to stockholders in connection with the Annual
Meeting of Stockholders to be held on September 18, 2000. Such information is
incorporated herein by reference.
34
37
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Upon written request, Symantec will provide, without charge, a copy of our
annual report on Form 10-K, including the consolidated financial statements,
financial statement schedules and any exhibits for our most recent fiscal year.
All requests should be sent to:
Helyn Corcos
Investor Relations
Symantec Corporation
20330 Stevens Creek Boulevard
Cupertino, California 95014
408-446-8891
(a) The following documents are filed as part of this report:
Page
Number
------
1. Consolidated Financial Statements.
Report of Ernst & Young LLP, Independent Auditors........................... 43
Consolidated Balance Sheets as of March 31, 2000 and 1999................... 44
Consolidated Statements of Income for the Years Ended
March 31, 2000, 1999 and 1998........................................... 45
Consolidated Statements of Stockholders' Equity for the Years
Ended March 31, 2000, 1999 and 1998..................................... 46
Consolidated Statements of Cash Flow for the Years Ended
March 31, 2000, 1999 and 1998........................................... 47
Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements....................................... 49
2. Financial Statement Schedules. The following financial statement schedule of
Symantec Corporation for the years ended March 31, 2000, 1999 and 1998 is
filed as part of this Form 10-K and should be read in conjunction with the
Consolidated Financial Statements of Symantec Corporation.
Schedule
II Valuation and Qualifying Accounts.................................... 74
Schedules other than that listed above have been omitted since they are
either not required, not applicable or the information is otherwise
included.
3. Exhibits. The following exhibits are filed as part of, or incorporated by
reference into, this Form 10-K:
3.01 The Registrant's Restated Certificate of Incorporation. (Incorporated
by reference to Annex G filed with the Registrant's Joint Management
Information Circular and Proxy Statement (No. 000-17781) dated
October 17, 1995.)
3.02 The Registrant's Bylaws. (Incorporated by reference to Exhibit 3.02
filed with the Registrant's Registration Statement on Form S-1 (No.
33-28655) originally filed May 19, 1989, and amendment No. 1 thereto
filed June 21, 1989, which Registration Statement became effective
June 22, 1989.)
3.03 The Registrant's Bylaws, as amended and restated effective August 11,
1998. (Incorporated by reference to Exhibit 3.1 filed with the
Registrant's Current Report 8-K filed August 19, 1998.)
4.01 Registration Rights Agreement. (Incorporated by reference to Exhibit
4.02 filed with the Registrant's Registration Statement on Form S-4
(No. 33-35385) initially filed June 13, 1990.)
4.02 Amendment No. One to Registration Rights Agreement. (Incorporated by
reference to Exhibit 4.03 filed with the Registrant's Annual Report
on Form 10-K for the year ended April 2, 1993.)
4.03 Amendment No. Two to Registration Rights Agreement. (Incorporated by
reference to Exhibit 4.04 filed with the Registrant's Annual Report
on Form 10-K for the year ended April 2, 1993.)
35
38
4.04 Plan of Arrangement and Exchangeable Share Provisions related to the
acquisition of Delrina. (Incorporated by reference to Annex D filed
with the Registrant's Joint Management Information Circular and
Proxy Statement dated October 17, 1995.)
4.05 Support Agreement, dated November 22, 1995, between Symantec and
Delrina. (Incorporated by reference to Annex E filed with the
Registrant's Joint Management Information Circular and Proxy
Statement dated October 17, 1995.)
4.06 Form of Voting and Exchange Trust Agreement, dated November 22,
1995, between Symantec and Delrina. (Incorporated by reference to
Annex F filed with the Registrant's Joint Management Information
Circular and Proxy Statement dated October 17, 1995.)
4.07 Rights Agreement, dated as of August 12, 1998, between Symantec
Corporation and BankBoston, N.A., as Rights Agent, which includes as
Exhibit A the Form of Certificate of Designations of Series A Junior
Participating Preferred Stock, as Exhibit B the Form of Right
Certificate and as Exhibit C the Summary of Rights to Purchase
Preferred Shares. (Incorporated by reference to Exhibit 4.1 filed
with the Registrant's Form 8-A filed August 19, 1998.)
10.01 Amended Agreement Respecting Certain Rights of Publicity.
(Incorporated by reference to Exhibit 10.04 filed with the
Registrant's Registration Statement on Form S-4 (No. 33-35385)
initially filed June 13, 1990.)
10.02* Form of Stock Option Agreement and Form of Stock Option Exercise
Request, as currently in effect, under the Registrant's 1988
Employees Stock Option Plan. (Incorporated by reference to Exhibit
10.10 filed with the Registrant's Registration Statement on Form S-4
(No. 33-35385) initially filed June 13, 1990.)
10.03* Form of Stock Option Grant and Stock Option Exercise Notice and
Agreement under the Registrant's 1988 Directors Stock Option Plan.
(Incorporated by reference to Exhibit 10.12 filed with the
Registrant's Registration Statement on Form S-4 (No. 33-35385)
initially filed June 13, 1990.)
10.04* 1988 Employees Stock Option Plan, as amended to date. (Incorporated
by reference to Exhibit 4.02 filed with the Registrant's
Registration Statement on Form S-8 (No. 33-88694) filed January 23,
1995.)
10.05* 1989 Employee Stock Purchase Plan, as amended to date.
(Incorporated by reference to Exhibit 4.01 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-18353)
filed December 20, 1996.)
10.06* 1988 Directors Stock Option Plan, as amended to date. (Incorporated
by reference to Exhibit 10.09 filed with the Registrant's Annual
Report on Form 10-K for the year ended April 2, 1993.)
10.07* 1993 Directors Stock Option Plan, as amended. (Incorporated by
reference to Exhibit 10.07 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994.)
10.08* 1994 Patent Incentive Plan. (Incorporated by reference to Exhibit
4.01 filed with the Registrant's Registration Statement on Form S-8
(No. 33-60141) filed June 9, 1995.)
10.09* Symantec Corporation 1996 Equity Incentive Plan. (Incorporated by
reference to Exhibit 4.01 filed with the Registrant's Registration
Statement on Form S-8 (No. 333-18355) filed December 20, 1996.)
10.10* Symantec Corporation 1996 Equity Incentive Plan, as amended.
(Incorporated by reference to Exhibit 4.01 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-39175)
filed October 31, 1997.)
10.11* Symantec Corporation Deferred Compensation Plan, dated as of
November 7, 1996. (Incorporated by reference to Exhibit 10.11 filed
with the Registrant's Annual Report on Form 10-K for the year ended
March 28, 1997.)
10.12* Symantec Corporation Restricted Stock Purchase Agreement, dated
April 14, 1999. (Incorporated by reference to Exhibit 4.03 filed
with the Registrant's Registration Statement on Form S-8 (No.
333-31632) filed March 3, 2000.)
10.13* Symantec Corporation Stock Option Grant, dated April 14, 1999.
(Incorporated by reference to Exhibit 4.03 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-31540)
filed March 3, 2000.)
- -----------------
* Indicates a management contract or compensatory plan or arrangement.
36
39
10.14* Symantec Corporation Acquisition Plan, dated July 15, 1999.
(Incorporated by reference to Exhibit 4.03 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-31526)
filed March 3, 2000.)
10.15 Participation Agreement, dated as of October 18, 1996, by and among
Symantec Corporation, Sumitomo Bank Leasing and Financing, Inc., The
Sumitomo Bank, Limited, San Francisco Branch and the other Various
Financial Institutions Identified Herein and the Sumitomo Bank,
Limited, San Francisco Branch. (Incorporated by reference to Exhibit
10.01 filed with the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 27, 1996.)
10.16 Participation Agreement, as amended by that certain Master Amendment
No. 2, dated as of September 21, 1998, between Symantec Corporation,
Sumitomo Bank Leasing and Finance, Inc. and The Sumitomo Bank,
Limited. (Incorporated by reference to Exhibit 10.02 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 2, 1998.)
10.17 Amended and Restated Participation Agreement, dated as of February
9, 1999 by and among Symantec Corporation, Sumitomo Bank Leasing and
Financing, Inc, The Bank of Nova Scotia, the other Various Financial
Institutions Identified Herein and the Sumitomo Bank, Limited, Los
Angeles Branch. (Incorporated by reference to Exhibit 10.15 filed
with the Registrant's Annual Report on Form 10-K for the year ended
April 2, 1999.)
10.18 Amended and Restated Participation Agreement, dated as of February
2, 2000, by and among Symantec Corporation, Sumitomo Bank Leasing
and Financing, Inc, The Bank of Nova Scotia, the other Various
Financial Institutions Identified Herein and the Sumitomo Bank,
Limited, Los Angeles Branch.
10.19 Appendix A to Participation Agreement, Master Lease, Lease
Supplements Loan Agreements, Pledge Agreement, Lessor Mortgages and
Guaranty. (Incorporated by reference to Exhibit 10.02 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 27, 1996.)
10.20 Restated and amended Appendix A to Participation Agreement, Master
Lease, Lease Supplements Loan Agreements, Pledge Agreement, Lessor
Mortgages, and Guaranty. (Incorporated by reference to Exhibit 10.17
filed with the Registrant's Annual Report on Form 10-K for the year
ended April 2, 1999.)
10.21 Master Lease and Deed of Trust, as amended, dated as of October
18, 1996, between Symantec Corporation and Sumitomo Bank Leasing and
Finance, Inc. (Incorporated by reference to Exhibit 10.14 filed with
the Registrant's Annual Report on Form 10-K for the year ended March
28, 1997.)
10.22 Amended and Restated Master Lease and Deed of Trust, dated as of
February 9, 1999, between Symantec Corporation and Sumitomo Bank
Leasing and Finance, Inc. (Incorporated by reference to Exhibit
10.19 filed with the Registrant's Annual Report on Form 10-K for the
year ended April 2, 1999.)
10.23 Guaranty, dated as of October 18, 1996, made by Symantec Corporation
in favor of Various Financial Institutions and The Sumitomo Bank,
Limited, San Francisco Branch. (Incorporated by reference to Exhibit
10.05 filed with the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 27, 1996).
10.24 Amended and Restated Guaranty, dated as of February 9, 1999, made by
Symantec Corporation in favor of Various Financial Institutions
Identified Herein and The Sumitomo Bank, Limited, San Francisco
Branch. (Incorporated by reference to Exhibit 10.21 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 2,
1999.)
10.25 Pledge Agreement, dated as of October 18, 1996, made by Symantec
Corporation, in favor of Sumitomo Bank, Limited, San Francisco
Branch for the benefit of the Lenders, and Donaldson, Lufkin,
Jenrette Securities Corporations, as collateral agent. (Incorporated
by reference to Exhibit 10.06 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 27, 1996.)
10.26 Pledge Agreement, as amended, by that certain Master Amendment No.
2, dated as of September 21, 1998, between Symantec Corporation, the
Bank, and Donaldson, Lufkin & Jenrette Securities Corporation.
(Incorporated by reference to Exhibit 10.02 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 2, 1998.)
- -------------
* Indicates a management contract or compensatory plan or arrangement.
37
40
10.27 Amended and Restated Pledge Agreement, dated as of February 2, 1999,
made by Symantec Corporation and Delrina Corporation, in favor of
Sumitomo Bank, Limited, Los Angeles Branch for the benefit of the
Lenders, and Donaldson, Lufkin, Jenrette Securities Corporations, as
collateral agent. (Incorporated by reference to Exhibit 10.24 filed
with the Registrant's Annual Report on Form 10-K for the year ended
April 2, 1999.)
10.28 Assignment of Lease and Rent, as amended, dated as of October 18,
1996, from Sumitomo Bank Leasing and Finance, Inc., The Sumitomo
Bank, Limited, San Francisco Branch. (Incorporated by reference to
Exhibit 10.17 filed with the Registrant's Annual Report on Form 10-K
for the year ended March 28, 1997.)
10.29 Amended and Restated Assignment of Lease and Rent, dated as of
February 9, 1999, from Sumitomo Bank Leasing and Finance, Inc., The
Sumitomo Bank, Limited, San Francisco Branch. (Incorporated by
reference to Exhibit 10.26 filed with the Registrant's Annual Report
on Form 10-K for the year ended April 2, 1999.)
10.30 Agreement of Purchase and Sale of Cupertino City Center One between
Cigna Property and Casualty Insurance Company and Symantec
Corporation. (Incorporated by reference to Exhibit 10.18 filed with
the Registrant's Annual Report on Form 10-K for the year ended March
28, 1997.)
10.31 Agreement for Purchase and Sale and Escrow Instructions of 10201
Torre Avenue, Cupertino, CA. (Incorporated by reference to Exhibit
10.19 filed with the Registrant's Annual Report on Form 10-K for the
year ended March 28, 1997.)
10.32 Agreement for Purchase and Sale and Escrow Instructions, as amended,
dated as of May 31, 1996. (Incorporated by reference to Exhibit
10.20 filed with the Registrant's Annual Report on Form 10-K for the
year ended March 28, 1997.)
10.33 Agreement for Exchange and Purchase and Escrow Instructions, dated
September 22, 1998, between Symantec Corporation with respect to
CCC5 and WHQ and TST Development, L.L.C. with respect to CCC2.
(Incorporated by reference to Exhibit 10.06 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 2, 1998.)
10.34 Agreement for Exchange and Purchase and Escrow Instructions, as
amended, dated November 4, 1998, between Symantec Corporation and
TST Development, L.L.C. (Incorporated by reference to Exhibit 10.07
filed with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended October 2, 1998.)
10.35 Amendment No. 1 of Agreement for Exchange and Purchase and Escrow
Instructions, dated as of November 4, 1998, between Symantec
Corporation and TST Development, L.L.C. (Incorporated by reference
to Exhibit 10.01 filed with the Registrant's Quarterly Report on
Form 10-Q for the quarter ended January 1, 1999.)
10.36 Amendment No. 2 of Agreement for Exchange and Purchase and Escrow
Instructions, dated as of November 20, 1998, between Symantec
Corporation and TST Development, L.L.C. (Incorporated by reference
to Exhibit 10.02 filed with the Registrant's Quarterly Report on
Form 10-Q for the quarter ended January 1, 1999.)
10.37 Amendment No. 3 of Agreement for Exchange and Purchase and Escrow
Instructions, dated as of December 4, 1998, between Symantec
Corporation and TST Development, L.L.C. (Incorporated by reference
to Exhibit 10.03 filed with the Registrant's Quarterly Report on
Form 10-Q for the quarter ended January 1, 1999.)
10.38 Amendment No. 4 of Agreement for Exchange and Purchase and Escrow
Instructions, dated as of December 15, 1998, between Symantec
Corporation and TST Development, L.L.C. (Incorporated by reference
to Exhibit 10.04 filed with the Registrant's Quarterly Report on
Form 10-Q for the quarter ended January 1, 1999.)
10.39 Amended and Restated Credit Agreement, dated May 29, 2000, by and
between Symantec Corporation and Bank of America, N.A.
10.40 Loan Agreement, dated as of October 18, 1996, among Sumitomo Bank
Leasing and Finance, Inc., Various Financial Institutions Identified
Herein and The Sumitomo Bank, Limited, San Francisco
- ---------------
* Indicates a management contract or compensatory plan or arrangement.
38
41
Branch. (Incorporated by reference to Exhibit 10.21 filed with the
Registrant's Annual Report on Form 10-K for the year ended March 28,
1997.)
10.41 Amended and Restated Loan Agreement, dated as of February 9, 1999,
among Sumitomo Bank Leasing and Finance, Inc.3, Various Financial
Institution Identified Herein, The Bank of Nova Scotia and The
Sumitomo Bank, Limited, Los Angeles Branch. (Incorporated by
reference to Exhibit 10.37 filed with the Registrant's Annual Report
on Form 10-K for the year ended April 2, 1999.)
10.42 Construction Agency Agreement, dated as of March 3, 1997, between
Sumitomo Bank Leasing and Finance, Inc., and Symantec Corporation.
(Incorporated by reference to Exhibit 10.22 filed with the
Registrant's Annual Report on Form 10-K for the year ended March 28,
1997.)
10.43 Construction Agency Agreement, dated as of February 9, 1999, between
Sumitomo Bank Leasing and Finance, Inc., and Symantec Corporation.
(Incorporated by reference to Exhibit 10.39 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 2,
1999.)
10.44 Limited Waiver and Amendment, dated September 30, 1999, by and among
Symantec Corporation, Sumitomo Bank Lease and Finance, Inc., The
Bank of Nova Scotia, and The Sumitomo Bank, Limited. (Incorporated
by reference to Exhibit 10.03 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended October 1, 1999.)
10.45 Symantec - CC5 Office Building and Parking Structure, as amended,
dated as of May 5, 1997, made by and between Symantec Corporation
and Webcor Builders. (Incorporated by reference to Exhibit 10.23
filed with the Registrant's Annual Report on Form 10-K for the year
ended March 28, 1997.)
10.46 Office building lease, dated as of April 10, 1991, between the
Registrant and Maguire Thomas Partners Colorado Place regarding
property located in Santa Monica, California. (Incorporated by
reference to Exhibit 10.25 filed with the Registrant's Annual Report
on Form 10-K for the year ended March 31, 1991.)
10.47 Office building lease, as amended, dated as of September 1, 1997,
between Colorado Place Partners, LLC and Symantec Corporation
regarding property located in Santa Monica, California.
(Incorporated by reference to Exhibit 10.01 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
July 3, 1998.)
10.48 Fifth Amendment to Lease, dated as of June 24, 1999, by and between
Colorado Place Partners, LLC and Symantec Corporation, regarding
property located in Santa Monica, California. (Incorporated by
reference to Exhibit 10.01 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended October 1, 1999.)
10.49 Office building lease, as amended, dated as of May 1, 1998, by and
between RND Funding Company I and Symantec Corporation regarding
property located in Sunnyvale, California. (Incorporated by
reference to Exhibit 10.01 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended October 2, 1998.)
10.50 Office building lease, dated as of April 19, 1995, between the
Registrant and CIGNA Property and Casualty Insurance Company
regarding property located in Cupertino, California. (Incorporated
by reference to Exhibit 10.16 filed with the Registrant's Annual
Report on Form 10-K for the year ended March 31, 1995.)
10.51 Office building lease, as amended, dated as of December 1, 1995,
between Delrina (Canada) Corporation and Sherway Centre Limited
regarding property located in Toronto, Canada. (Incorporated by
reference to Exhibit 10.01 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended December 29, 1995.)
10.52 Office building lease, as amended, dated as of December 17, 1996,
between Delrina (Canada) Corporation, Delrina Corporation and
Sherway Centre Limited regarding property located in Toronto,
Canada. (Incorporated by reference to Exhibit 10.02 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
July 3, 1998.)
10.53 Office building lease, dated as of April 9, 1998, between Hill
Samuel Bank Limited and Symantec (UK) Limited and Symantec
Corporation regarding property located in Maidenhead, United
Kingdom. (Incorporated by reference to Exhibit 10.03 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
July 3, 1998.)
- ---------------------
* Indicates a management contract or compensatory plan or arrangement.
39
42
10.54 Form of Indemnity Agreement with Officers and Directors.
(Incorporated by reference to Exhibit 10.17 filed with the
Registrant's Registration Statement on Form S-1 (No. 33-28655)
originally filed May 19, 1989, and amendment No. 1 thereto filed
June 21, 1989, which Registration Statement became effective June
22, 1989.)
10.55* Full Recourse Promissory Note and Pledge Agreement between the
Company and Gordon E. Eubanks, Jr. (Incorporated by reference to
Exhibit 10.19 filed with the Registrant's Annual Report on Form 10-K
for the year ended April 2, 1993.)
10.56* Form of Promissory Note and Pledge Agreement between the Company
and certain executives. (Incorporated by reference to Exhibit 10.20
filed with the Registrant's Annual Report on Form 10-K for the year
ended April 2, 1993.)
10.57* Promissory Note between the Company and Mansour Safai.
(Incorporated by reference to Exhibit 10.52 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 2,
1999.)
10.58* Promissory Note between the Company and Keith Robinson.
(Incorporated by reference to Exhibit 10.53 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 2,
1999.)
10.59* Promissory Note between the Company and John W. Thompson.
(Incorporated by reference to Exhibit 10.54 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 2,
1999.)
10.60* Form of Housing Assistance Agreement between the Company and
certain executives. (Incorporated by reference to Exhibit 10.26
filed with the Registrant's Registration Statement on Form S-4 (No.
33-35385) initially filed June 13, 1990.)
10.61 Note Purchase Agreement, dated April 2, 1993, among Symantec
Corporation, Morgan Guaranty Trust Company of New York, as Trustee,
J. P. Morgan Investments Management, Inc., as Investment Manager and
The Northwestern Mutual Life Insurance Company, including Form of
Convertible Subordinated Notes. (Incorporated by reference to
Exhibit 10.30 filed with the Registrant's Annual Report on Form 10-K
for the year ended April 2, 1993.)
10.62 The Registrant's Section 401(k) Plan, as amended. (Incorporated by
reference to Exhibit 10.25 filed with the Registrant's Annual Report
on Form 10-K for the year ended March 31, 1995.)
10.63* Form of Executive Compensation Agreement between the Company and
certain executives. (Incorporated by reference to Exhibit 10.25
filed with the Registrant's Annual Report on Form 10-K for the year
ended March 31, 1995.)
10.64* Form of President and CEO Annual Incentive Plan.
10.65* Form of Vice President Annual Incentive Plan (No Division/Business
Unit Objectives.)
10.66* Form of Vice President Annual Incentive Plan (With
Division/Business Unit Objectives.)
10.67 Assignment of Copyright and Other Intellectual Property Rights.
(Incorporated by reference to appendix to Prospectus/Proxy Statement
filed with the Registrant's Registration Statement on Form S-4 (No.
33-35385) initially filed June 13, 1990.)
10.68* Retirement and Consulting Agreement between the Company and Gordon
E. Eubanks, Jr. (Incorporated by reference to Exhibit 10.62 filed
with the Registrant's Annual Report on Form 10-K for the year ended
April 2, 1999.)
10.69* Supplemental Option Vesting and Severance Arrangement terms and
conditions between the Company and Greg Myers. (Incorporated by
reference to Exhibit 10.63 filed with the Registrant's Annual Report
on Form 10-K for the year ended April 2, 1999.)
10.70* Employment Agreement between Symantec Corporation and John W.
Thompson. (Incorporated by reference to Exhibit 10.67 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 2,
1999.)
10.71 Combination Agreement between Symantec Corporation and Delrina
Corporation dated July 5, 1995. (Incorporated by reference to
Exhibit 10.01 filed with the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995.)
10.72 Asset Purchase Agreement, dated as September 26, 1996, by and
between Delrina and JetForm. (Incorporated by reference to Exhibit
2.01 filed with the Registrant's Current Report of Form 8-K filed
September 26, 1996.)
- ----------------
* Indicates a management contract or compensatory plan or arrangement.
40
43
10.73 Asset Purchase Agreement, as amended, dated as of March 28, 1998, by
and between Delrina and JetForm. (Incorporated by reference to
Exhibit 10.44 filed with the Registrant's Annual Report on Form 10-K
for the year ended April 3, 1998.)
10.74 Asset Purchase Agreement, as amended, dated as of June 29, 1998, by
and between Delrina and JetForm. (Incorporated by reference to
Exhibit 10.05 filed with the Registrant's Quarterly Report on Form
10-Q for the quarter ended July 3, 1998.)
10.75 Asset Purchase Agreement, as amended, dated as of March 27, 1997, by
and between Hewlett-Packard Company and Symantec Corporation.
(Incorporated by reference to Exhibit 10.43 filed with the
Registrant's Annual Report on Form 10-K for the year ended March 28,
1997.)
10.76 Master Agreement, dated May 18, 1998, between International Business
Machines Corporation and Symantec Corporation. (Confidential
treatment has been requested with respect to portions of this
exhibit.) (Incorporated by reference to Exhibit 10.46 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 3,
1998.)
10.77 Asset Purchase Agreement, dated as of June 24, 1998, among Symantec
Corporation and its wholly-owned subsidiary, Symantec Limited and
Binary Research Ltd. and its wholly-owned subsidiary, Binary
Research International, Inc. (Incorporated by reference to Exhibit
10.04 filed with the Registrant's Quarterly Report on Form 10-Q for
the quarter ended July 3, 1998.)
10.78 Software License Agreement, dated as of September 27, 1998, between
Symantec Corporation and Intel Corporation. (Incorporated by
reference to Exhibit 10.1 filed with the Registrant's Current Report
of Form 8-K filed October 5, 1998.)
10.79 Asset Purchase Agreement, dated December 10, 1999, among the
Registrant, Symantec Limited, BEA Systems, Inc., and WB Information
Corporation. (Incorporated by reference to Exhibit 99.01 filed with
the Registrant's Form 8-K, filed January 14, 2000.)
10.80 Software License Agreement, dated December 6, 1999, by and among
SalesLogix Corporation, Symantec Corporation and Symantec Limited.
(Incorporated by reference to Exhibit 99.01 filed with the
Registrant's Form 8-K, filed January 14, 2000.)
10.81 Class action complaint filed by the law firm of Milberg Weiss
Bershad Hynes & Lerach in Superior Court of the State of California,
County of Santa Clara against the Company and several of its current
and former officers and directors. (Incorporated by reference to
Exhibit 10.35 filed with the Registrant's Annual Report of Form 10-K
for the year ended March 31, 1996.)
21.01 Subsidiaries of the Registrant.
23.01 Consent of Ernst & Young LLP, Independent Auditors.
27.01 Financial Data Schedule for the Year Ended March 31, 2000.
(b) Reports on Form 8-K:
A report on Form 8-K was filed by the Company on January 14, 2000, reporting
that the Company completed the transfer of the principal assets and
intangible assets associated with the Visual Cafe product line. This
announcement was pursuant to an Asset Purchase Agreement dated December 10,
1999, by and between Symantec Corporation, Symantec Limited, BEA Systems,
Inc., and WB Information Corporation.
A report on Form 8-K was filed by the Company on January 14, 2000, reporting
that the Company had licensed certain technology and completed the transfer
of certain assets and liabilities of the ACT! product line to SalesLogix
Corporation. This announcement was pursuant to an exclusive Software License
Agreement dated December 6, 1999, by and among Symantec Corporation,
Symantec Limited and SalesLogix Corporation.
(c) Exhibits: The Registrant hereby files as part of this Form 10-K the exhibits
listed in Item 14(a)3, as set forth above.
(d) Financial Statement Schedules: The Registrant hereby files as part of this
Form 10-K the schedule listed in Item 14(a) 2, as set forth on page 79.
- ----------------
* Indicates a management contract or compensatory plan or arrangement.
41
44
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Ernst & Young LLP, Independent Auditors............................... 43
Consolidated Balance Sheets as of March 31, 2000 and 1999....................... 44
Consolidated Statements of Income for the years ended March 31, 2000,
1999 and 1998.............................................................. 45
Consolidated Statements of Stockholders' Equity for the years ended
March 31, 2000, 1999 and 1998............................................... 46
Consolidated Statements of Cash Flow for the years ended March 31, 2000,
1999 and 1998............................................................... 47
Summary of Significant Accounting Policies...................................... 49
Notes to Consolidated Financial Statements...................................... 53
42
45
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Symantec Corporation
We have audited the accompanying consolidated balance sheets of Symantec
Corporation as of March 31, 2000 and 1999 and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended March 31, 2000. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the 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 Symantec
Corporation at March 31, 2000 and 1999 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 2000, in conformity with accounting principles generally accepted in
the United States. 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.
/S/ ERNST & YOUNG LLP
San Jose, California
April 27, 2000
43
46
SYMANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31,
-----------------------
(In thousands) 2000 1999
- --------------------------------------------------------------- --------- ---------
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $ 431,550 $ 192,755
Trade accounts receivable 47,266 76,386
Inventories 5,675 6,377
Deferred income taxes 40,189 22,636
Other 20,857 12,790
--------- ---------
Total current assets 545,537 310,944
Long-term investments -- 4,270
Restricted investments 81,956 71,405
Equipment and leasehold improvements 51,905 52,887
Deferred income taxes 38,827 5,519
Purchased product rights and capitalized software 34,070 36,209
Goodwill 82,972 75,224
Other 10,760 7,018
--------- ---------
$ 846,027 $ 563,476
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 43,030 $ 45,862
Accrued compensation and benefits 25,714 20,788
Deferred revenue 90,813 55,965
Other accrued expenses 61,594 75,954
Income taxes payable 5,366 18,339
--------- ---------
Total current liabilities 226,517 216,908
Long-term obligations 1,553 1,455
Commitments and contingencies
Stockholders' equity:
Preferred stock (par value: $0.01 authorized: 1,000; issued
and outstanding: none) -- --
Common stock (par value: $0.01 authorized: 100,000; issued and
outstanding: 60,309 and 56,872 shares) 603 569
Capital in excess of par value 435,663 315,698
Notes receivable from stockholders (24) (144)
Accumulated other comprehensive loss (27,707) (19,110)
Unearned compensation (677) --
Retained earnings 210,099 48,100
--------- ---------
Total stockholders' equity 617,957 345,113
--------- ---------
$ 846,027 $ 563,476
========= =========
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
44
47
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended March 31,
--------------------------------------
(In thousands, except net income per share) 2000 1999 1998
- ------------------------------------------------- --------- --------- ---------
Net revenues $ 745,725 $ 592,628 $ 532,940
Cost of revenues 121,073 96,558 87,431
--------- --------- ---------
Gross margin 624,652 496,070 445,509
Operating expenses:
Research and development 108,425 101,563 91,332
Sales and marketing 306,755 286,144 261,190
General and administrative 42,150 35,722 38,063
Amortization of goodwill 17,884 6,175 --
Amortization of intangibles from acquisitions 917 230 --
Acquired in-process research and development 4,300 27,465 --
Restructuring and other expenses 9,018 5,105 --
Litigation judgment -- 5,825 --
--------- --------- ---------
Total operating expenses 489,449 468,229 390,585
--------- --------- ---------
Operating income 135,203 27,841 54,924
Interest income 13,408 13,552 13,160
Interest expense (22) (1,839) (1,218)
Income, net of expense, from sale of technologies
and product lines 107,358 41,155 45,421
Other income (expense), net 1,344 2,464 (190)
--------- --------- ---------
Income before income taxes 257,291 83,173 112,097
Provision for income taxes 87,143 32,972 27,008
--------- --------- ---------
Net income $ 170,148 $ 50,201 $ 85,089
========= ========= =========
Net income per share - basic $ 2.94 $ 0.89 $ 1.52
========= ========= =========
Net income per share - diluted $ 2.73 $ 0.86 $ 1.42
========= ========= =========
Shares used to compute net income per share - basic 57,870 56,601 56,097
========= ========= =========
Shares used to compute net income per share - diluted 62,214 59,289 60,281
========= ========= =========
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
45
48
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Notes Accum
Capital in Receivable Other
Common Excess of from Comp Unearned
(In thousands) Stock Par Value Stockholders Loss Compensation
--------- --------- ------------- -------- ------------
Balances, March 31, 1997 $ 554 $ 291,572 $ (144) $ (7,604) $ --
Components of comprehensive
income:
Net income -- -- -- -- --
Unrealized gain on
short-term investments -- -- -- 181 --
Translation adjustment -- -- -- (5,136) --
Total comprehensive income
Issued common stock:
2,622 shares under stock plans 26 32,998 -- -- --
60 shares from conversion of
convertible debentures 1 715 -- -- --
Repurchased 1,000 shares of
common stock (10) (21,336) -- -- --
Income tax benefit related to
stock options -- 7,000 -- -- --
--------- --------- ------------- -------- -------------
Balances, March 31, 1998 571 310,949 (144) (12,559) --
Components of comprehensive
income:
Net income -- -- -- -- --
Unrealized loss on
short-term investments -- -- -- (461) --
Translation adjustment -- -- -- (6,090) --
Total comprehensive income
Issued common stock:
1,447 shares under stock plans 15 19,798 -- -- --
1,190 shares from conversion of
convertible debentures 12 14,272 -- -- --
Repurchased 2,875 shares of
common stock (29) (35,521) -- -- --
Income tax benefit related to
stock options -- 6,200 -- -- --
--------- --------- ------------- -------- -------------
Balances, March 31, 1999 569 315,698 (144) (19,110) --
Components of comprehensive
income:
Net income -- -- -- -- --
Unrealized loss on
short-term investments -- -- -- (2,069) --
Translation adjustment -- -- -- (6,528) --
Total comprehensive income
Issued common stock:
4,338 shares under stock plans 43 70,640 -- -- --
100 shares of restricted stock 1 1,299 -- -- (1,300)
Amortization of unearned
compensation -- -- -- -- 623
Agreement with former CEO -- 1,232 120 -- --
Repurchased 1,000 shares of
common stock (10) (10,571) -- -- --
Income tax benefit related to
stock options -- 57,365 -- -- --
--------- --------- ------------- -------- -------------
Balances, March 31, 2000 $ 603 $ 435,663 $ (24) $(27,707) $ (677)
========= ========= ============= ======== =============
Retained
Earnings Total
(Accumulated Stockholders'
(In thousands) Deficit) Equity
- -------------------------------- ------------- -------------
Balances, March 31, 1997 $ (66,399) $ 217,979
Components of comprehensive
income:
Net income 85,089 85,089
Unrealized gain on
short-term investments -- 181
Translation adjustment -- (5,136)
-------------
Total comprehensive income 80,134
-------------
Issued common stock:
2,622 shares under stock plans -- 33,024
60 shares from conversion of
convertible debentures -- 716
Repurchased 1,000 shares of
common stock -- (21,346)
Income tax benefit related to
stock options -- 7,000
------------- -------------
Balances, March 31, 1998 18,690 317,507
Components of comprehensive
income:
Net income 50,201 50,201
Unrealized loss on
short-term investments -- -- (461)
Translation adjustment -- (6,090)
-------------
Total comprehensive income 43,650
-------------
Issued common stock:
1,447 shares under stock plans -- 19,813
1,190 shares from conversion of
convertible debentures -- 14,284
Repurchased 2,875 shares of
common stock (20,791) (56,341)
Income tax benefit related to
stock options -- 6,200
------------- -------------
Balances, March 31, 1999 48,100 345,113
Components of comprehensive
income:
Net income 170,148 170,148
Unrealized loss on
short-term investments -- (2,069)
Translation adjustment -- (6,528)
-------------
Total comprehensive income 161,551
-------------
Issued common stock:
4,338 shares under stock plans -- 70,683
100 shares of restricted stock -- --
Amortization of unearned
compensation -- 623
Agreement with former CEO -- 1,352
Repurchased 1,000 shares of
common stock (8,149) (18,730)
Income tax benefit related to
stock options -- 57,365
------------- -------------
Balances, March 31, 2000 $ 210,099 $ 617,957
============= =============
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
46
49
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
Year Ended March 31,
--------------------------------------
(In thousands) 2000 1999 1998
- --------------------------------------------------- --------- --------- ---------
OPERATING ACTIVITIES:
Net income $ 170,148 $ 50,201 $ 85,089
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of equipment and
leasehold improvements 25,011 23,988 25,231
Amortization and write-off of purchased
product rights and capitalized software costs 7,719 6,031 1,466
Amortization of goodwill 17,884 6,175 --
Write-off of equipment and leasehold improvements 3,283 1,210 1,225
Acquired in-process research and development 4,300 27,465 --
Deferred income taxes (26,263) (8,528) (6,915)
Gain on divestiture of ACT! product line (18,285) -- --
Gain on divestiture of Visual Cafe product line (68,523) -- --
Net change in assets and liabilities, excluding
effects of acquisitions:
Trade accounts receivable 26,495 (6,487) (22,873)
Inventories (150) (2,997) 1,040
Other current assets (2,184) 4,386 (1,839)
Other assets (4,508) (716) (556)
Accounts payable (1,463) 869 5,568
Accrued compensation and benefits 5,931 (2,363) 5,371
Deferred revenue 34,848 30,428 13,987
Other accrued expenses 2,858 (5,817) 31
Income taxes payable (11,432) (6,511) 17,051
Long-term obligations 1,190 -- --
Income tax benefit from stock options 57,365 6,200 7,000
--------- --------- ---------
Net cash provided by operating activities 224,224 123,534 130,876
--------- --------- ---------
INVESTING ACTIVITIES:
Capital expenditures (28,455) (25,141) (26,339)
Purchased intangibles (1,138) (4,555) (948)
Proceeds from divestiture of Visual Cafe product line 75,000 -- --
Purchase of L-3 Network Security's operations (20,090) -- --
Purchase of URLabs (42,100) -- --
Payment of debt related to purchase of IBM's
anti-virus business (8,000) (8,000) --
Payment for remaining minority interest in
Quarterdeck (16,394) -- --
Purchase of majority interest in Quarterdeck -- (32,857) --
Purchase of Intel's anti-virus business -- (11,889) --
Purchase of Binary Research Limited's operations -- (27,500) --
Cash acquired in business purchases 61 922 --
Purchases of marketable securities (569,688) (242,096) (230,891)
Proceeds from sales of marketable securities 286,607 313,530 174,087
Purchases of long-term, restricted investments (10,551) (12,035) (11,922)
Proceeds from sales of long-term investments 4,270 -- --
--------- --------- ---------
Net cash used in investing activities (330,478) (49,621) (96,013)
--------- --------- ---------
FINANCING ACTIVITIES:
Repayment of subordinated debentures -- (25,000) --
Repurchases of Company's common stock (18,730) (56,341) (21,346)
Net proceeds from sale of common stock and other 71,314 19,352 33,108
Principal payments on long-term obligations (1,092) -- --
---------- --------- ---------
Net cash provided by (used in) financing activities 51,492 (61,989) 11,762
--------- --------- ---------
Effect of exchange rate fluctuations on
cash and cash equivalents (1,128) (7,074) (3,370)
--------- --------- ---------
(Decrease) increase in cash and cash equivalents (55,890) 4,850 43,255
Beginning cash and cash equivalents 143,863 139,013 95,758
--------- --------- ---------
Ending cash and cash equivalents $ 87,973 $ 143,863 $ 139,013
========= ========= =========
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
47
50
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income taxes paid (net of refunds) during the year $ 66,309 $ 39,923 $ 6,037
Interest paid on convertible subordinated
debentures and long-term obligations $ -- $ 1,616 $ 1,150
Conversion of subordinated debentures $ -- $ 14,284 $ --
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
48
51
SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Symantec, a world leader in Internet security technology, provides a broad range
of content and network security solutions to individuals and enterprises.
Symantec is also a leading provider of virus protection, risk management,
Internet content and e-mail filtering, remote management and mobile code
detection technologies to enterprises and individual customers.
Founded in 1982, we have offices in 33 countries worldwide.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Symantec Corporation and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Acquisitions and Divestitures
During the September 1999 quarter, we acquired URLabs. During the March 2000
quarter, we acquired L-3 Network Security's operations and 20/20 Software. Each
of these acquisitions was accounted for as a purchase and, accordingly, their
operating results have been included in our consolidated financial statements
since their respective dates of acquisition. See Note 3 of Notes to Consolidated
Financial Statements in this Form 10-K.
During the March 1999 quarter, we acquired Quarterdeck. During the September
1998 quarter, we acquired Intel's anti-virus business. During the June 1998
quarter, we acquired IBM's anti-virus business and Binary Research Limited's
operations. Each of these acquisitions was accounted for as a purchase and,
accordingly, their operating results have been included in our consolidated
financial statements since their respective dates of acquisition. See Note 3 of
Notes to Consolidated Financial Statements in this Form 10-K.
We made no acquisitions during fiscal 1998.
On December 31, 1999, we divested our Visual Cafe and substantially all of our
ACT! product lines. Because these divestitures were effective at the close of
business on December 31, 1999, these product lines are included in the results
of operations through December 31, 1999 and are included in our results of
operations for fiscal 1999 and 1998. See Note 3 of Notes to Consolidated
Financial Statements in this Form 10-K.
Fiscal Years
Symantec has a 52/53-week fiscal accounting year. Accordingly, all references as
of and for the periods ended March 31, 2000, 1999 and 1998 reflect amounts as of
and for the periods ended March 31, 2000, April 2, 1999 and April 3, 1998,
respectively. The fiscal accounting years ended March 31, 2000 and April 2, 1999
each comprised 52 weeks of operations and the fiscal accounting year ended April
3, 1998 comprised 53 weeks of operations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Foreign Currency Translation
The functional currency of our foreign subsidiaries is the local currency.
Assets and liabilities denominated in foreign currencies are translated using
the exchange rate on the balance sheet dates. The translation adjustments
resulting from this process are shown separately as a component of stockholders'
equity. Revenues and expenses are translated using average exchange rates
prevailing during the year. Foreign currency transaction gains and losses are
included in the determination of net income.
Revenue Recognition
Under Statement of Position ("SOP") 97-2 as modified by SOP 98-4 and SOP 98-9,
we recognize revenue upon:
- persuasive evidence of an arrangement;
- delivery of software to the customer;
- determination that there are no significant post-delivery obligations;
and
- collection of a fixed or determinable license fee is considered
probable.
49
52
SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
We defer revenue relating to all distribution and reseller channel inventory in
excess of defined inventory levels in these channels. We offer the right of
return of our products under various policies. We estimate and maintain reserves
for product returns. We recognize revenue upon shipment when no significant
vendor obligations remain and collection of the receivable, net of provisions
for estimated returns, is probable.
Revenues related to significant post-contract support agreements (generally
product maintenance agreements) are deferred and recognized over the period of
the agreements. The estimated cost for providing post-contract support
(generally telephone support) is accrued at the time of the sale and is included
in sales and marketing expense.
Royalty revenues are recognized as earned unless collection of such revenues is
not assured. When collection is not assured, revenues are recognized as payments
are received.
Cash Equivalents, Investments and Restricted Investments
Symantec considers investments in highly liquid instruments purchased with an
original maturity of 90 days or less to be cash equivalents. All of our cash
equivalents, short-term investments, long-term investments and restricted
investments are classified as available-for-sale as of the balance sheet dates.
These securities are reported at fair market value and any unrealized gains and
losses, net of applicable tax effects, are included in stockholders' equity.
Realized gains and losses and declines in value judged to be
other-than-temporary are included in interest income. The cost of securities
sold is based upon the specific identification method.
Derivative Financial Instruments
Symantec utilizes natural hedging to mitigate our foreign currency exposures and
hedges certain residual exposures through the use of one-month foreign exchange
forward contracts. We enter into foreign exchange forward contracts with
financial institutions primarily to minimize currency exchange risks associated
with certain balance sheet positions. Gains and losses on the contracts are
included in other income in the period that gains and losses on the underlying
transactions are recognized and generally offset. The fair value of foreign
currency exchange forward contracts approximates cost due to the short maturity
periods.
Inventories
Inventories are valued at the lower of cost or market. Cost is principally
determined using currently adjusted standards, which approximate actual cost on
a first-in, first-out basis.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost, net of accumulated
depreciation and amortization. Depreciation and amortization is provided on a
straight-line basis over the estimated useful lives of the respective assets,
generally the shorter of the lease term or three to seven years.
Purchased product rights and capitalized software
Purchased product rights, technologies and capitalized software are comprised of
acquired software ("product rights") and are stated at cost less accumulated
amortization. Amortization is provided on a straight-line basis over the
estimated useful lives of the respective assets, generally three to five years.
Goodwill
Goodwill is recorded through acquisitions and is stated at cost less accumulated
amortization. Amortization is provided on a straight-line basis over the
estimated useful lives of the respective assets, generally four to five years.
Reviews are regularly performed to determine whether facts or circumstances
exist which indicate that the carrying values of assets are impaired.
Impairment, if any, is based on the excess of the carrying amount over the fair
value of the assets. No impairment has been indicated to date.
Income Taxes
Income taxes are computed in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109, Accounting for Income Taxes.
Net Income Per Share
Basic net income per share is computed using the weighted average number of
common shares outstanding during the periods. Diluted net income per share is
computed using the weighted average number of common shares outstanding and
potentially dilutive common shares during the periods. Diluted net income per
share also includes
50
53
SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
the assumed conversion of all of the outstanding convertible subordinated
debentures and assumed exercising of options, if dilutive in the period.
Concentrations of Credit Risk
Symantec's product revenues are concentrated in the software industry, which is
highly competitive and rapidly changing. Significant technological changes in
the industry or customer requirements, or the emergence of competitive products
with new capabilities or technologies, could adversely affect operating results.
In addition, a significant portion of our revenues and net income is derived
from international sales and independent agents and distributors. Fluctuations
of the U.S. dollar against foreign currencies, changes in local regulatory or
economic conditions, piracy or nonperformance by independent agents or
distributors could adversely affect operating results.
Financial instruments that potentially subject us to concentrations of credit
risk consist principally of short-term and long-term investments, restricted
investments and trade accounts receivable. Our investment portfolio is
diversified and consists of investment grade securities. We are exposed to
credit risks in the event of default by these institutions to the extent of the
amount recorded on the balance sheet. The credit risk in our trade accounts
receivable is substantially mitigated by our credit evaluation process,
reasonably short collection terms and the geographical dispersion of sales
transactions. We generally do not require collateral and maintain reserves for
potential credit losses and such losses have been within management's
expectations.
Legal Expenses
We accrue estimated legal expenses for lawsuits only when both of the conditions
of SFAS No. 5 Accounting for Contingencies, are met. Costs for external attorney
fees are accrued when the likelihood of the incurrence of the related costs is
probable and management has the ability to estimate such costs. If both of these
conditions are not met, management records the related legal expenses when
incurred. Amounts accrued by us are not discounted. The material assumptions
used to estimate the amount of legal expenses include:
- The monthly legal expense incurred by our external attorneys on the
particular case being evaluated;
- Communication between us and our external attorneys on the expected
duration of the lawsuit and the estimated expenses during that time;
- Our intentions regarding these lawsuits, e.g. to defend vigorously, to
take to trial and the minimum amounts within the estimated range for
which we would be willing to settle if settlement discussions were to
occur;
- Deductible amounts under our insurance policies; and
- Past experiences with similar lawsuits.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities. In June
1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133,
which defers the adoption of SFAS No. 133 for one year. SFAS 133 will be
effective for us at the beginning of the June 2001 quarter for both annual and
interim reporting periods. We are currently evaluating the potential impact of
this accounting pronouncement on our required disclosures and accounting
practices.
In March 2000, the FASB issued Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensation, an interpretation of APB Opinion No.
25. This Interpretation clarifies the application of Opinion No. 25 for certain
issues including: (a) the definition of an employee for purposes of applying
Opinion No. 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence of various modifications to
the terms of a previously fixed stock option or award and (d) the accounting for
an exchange of stock compensation awards in a business combination. In general,
this Interpretation is effective July 1, 2000. We do not expect the adoption of
Interpretation No. 44 to have a material effect on our consolidated financial
position or results of operations.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
Revenue Recognition in Financial Statements. In March 2000, the SEC released SAB
No. 101A, which defers reporting the effects of the adoption of
51
54
SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
SAB No. 101 until our first fiscal quarter of fiscal 2001. We are currently
evaluating the potential impact of SAB No. 101 on our required disclosures and
accounting practices.
Reclassifications
Certain previously reported amounts have been reclassified to conform to the
current presentation format with no impact on net income. All financial
information has been restated to conform to this presentation.
52
55
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BALANCE SHEET INFORMATION
March 31,
(In thousands) 2000 1999
- ----------------------------------------------------------------- --------- ---------
Cash, cash equivalents and short-term investments:
Cash $ 60,103 $ 41,031
Cash equivalents 27,870 102,832
Short-term investments 343,577 48,892
--------- ---------
$ 431,550 $ 192,755
========= =========
Trade accounts receivable:
Receivables $ 53,710 $ 81,332
Less: allowance for doubtful accounts (6,444) (4,946)
--------- ---------
$ 47,266 $ 76,386
========= =========
Inventories:
Raw materials $ 2,483 $ 1,887
Finished goods 3,192 4,490
--------- ---------
$ 5,675 $ 6,377
========= =========
Equipment and leasehold improvements:
Computer hardware and software $ 142,290 $ 134,745
Office furniture and equipment 39,330 33,705
Leasehold improvements 19,585 22,516
--------- ---------
201,205 190,966
Less: accumulated depreciation and amortization (149,300) (138,079)
--------- ---------
$ 51,905 $ 52,887
========= =========
Purchased product rights and capitalized software:
Purchased product rights and technologies $ 54,592 $ 47,181
Capitalized software development costs 2,397 2,377
Less: accumulated amortization of purchased product
rights and technologies (20,522) (11,112)
Less: accumulated amortization of capitalized
software development costs (2,397) (2,237)
--------- ---------
$ 34,070 $ 36,209
========= =========
Goodwill:
Goodwill $ 107,032 $ 81,400
Less: accumulated amortization (24,060) (6,176)
--------- ---------
$ 82,972 $ 75,224
========= =========
Accumulated other comprehensive loss:
Unrealized loss on available-for-sale investments $ (2,373) $ (304)
Cumulative translation adjustment (25,334) (18,806)
--------- ---------
$ (27,707) $ (19,110)
========= =========
NOTE 2. INCOME STATEMENT INFORMATION
Year Ended March 31,
--------------------------------------
(In thousands) 2000 1999 1998
-------------------------------------------- --------- --------- ---------
Technical support costs included in sales
and marketing $ 32,427 $ 34,219 $ 38,582
Advertising expense $ 43,630 $ 50,779 $ 46,814
Technical support costs included in sales and marketing relate to the estimated
cost of providing post-contract support (generally telephone support) that is
accrued at the time of product sale. Advertising expenditures are charged to
operations as incurred.
53
56
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 3. ACQUISITIONS AND DIVESTITURES
Acquisition of 20/20 Software
On March 31, 2000, we purchased 100% of the outstanding common stock of 20/20
Software ("20/20") for up to $16.5 million. The terms of the agreement require
two guaranteed payments totaling approximately $7.5 million plus contingent
payments based on targeted future sales of certain of our products. The
contingency period will be from July 1, 2000 to June 30, 2001. The maximum
contingency payment per the agreement is $9.0 million. The transaction was
accounted for as a purchase. In connection with the transaction, we recorded
approximately $6.1 million for goodwill and $2.3 million for acquired product
rights, offset by $0.9 million in related income tax liabilities. As we pay
additional amounts over the contingency period, we will record additional
goodwill equal to these payments. The goodwill and acquired product rights will
be amortized over a 5-year period.
Acquisition of L-3 Network Security
On March 9, 2000, we acquired the operations of L-3 Network Security ("L-3") for
a one-time cash payment of approximately $20.1 million. The transaction was
accounted for as a purchase. In connection with the transaction, we recorded
approximately $3.1 million for acquired in-process research and development,
$12.4 million for goodwill, $3.4 million for acquired product rights and $1.2
million for other tangible and intangible assets. A valuation specialist used
our estimates to establish the amount of acquired in-process research and
development. The goodwill and other intangibles are being amortized over a
5-year period.
Acquisition of URLabs
On July 21, 1999, we purchased 100% of the outstanding common stock of URLabs
for a one-time cash payment of approximately $42.1 million. The transaction was
accounted for as a purchase. In connection with the transaction, we recorded
approximately $1.2 million for acquired in-process research and development,
$37.0 million for goodwill, $5.0 million for acquired product rights and $1.6
million for other intangible assets, offset by approximately $2.7 million in
related income tax liabilities. A valuation specialist used our estimates to
establish the amount of acquired in-process research and development. The
goodwill and other intangibles are being amortized over a 5-year period.
The following table outlines the values of the above referenced fiscal 2000
acquisitions' net tangible and intangible assets:
Allocated Purchase Price Components (in thousands)
--------------------------------------------------------------------------------------------------------
Acquired Acquired Income Other
Purchase In-Process Product Other Tax Assets
Price R&D Rights Goodwill Intangibles Liabilities Acquired
--------------------------------------------------------------------------------------------------------
URLabs $42,700 $1,200 $ 5,000 $37,000 $ 1,610 $ (2,710) $ 600
L-3 20,240 3,100 3,400 12,396 1,060 -- 284
20/20 7,538 -- 2,250 6,111 -- (900) 77
------- ------ ------- ------- ------------- ------------- -------------
Total $70,478 $4,300 $10,650 $55,507 $ 2,670 $ (3,610) $ 961
======= ====== ======= ======= ============= ============= =============
The consolidated financial statements reflect the preliminary allocations of the
purchase price for these fiscal 2000 acquisitions. The allocation has not been
finalized due to certain pre-acquisition contingencies identified. Accordingly,
in fiscal 2001 the allocation of purchase price and its components may change,
as these contingencies are resolved.
Acquisition of Quarterdeck
On October 15, 1998, we signed a definitive merger agreement to acquire
Quarterdeck. On November 17, 1998, we completed our tender offer for the common
stock of Quarterdeck acquiring an approximately 63% interest. On March 29, 1999,
we acquired Quarterdeck's remaining shares through a cash merger at the tender
offer price of $0.52 per share in accordance with the definitive merger
agreement. The transaction was accounted for as a purchase. Under the
transaction, we recorded approximately $8.3 million of acquired in-process
research and
54
57
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
development, $8.5 million of acquired product rights, $65.9 million of goodwill
and $2.7 million of other intangibles. A valuation specialist used our estimates
to establish the amount of acquired in-process research and development. The
amounts related to workforce in place are being amortized over 2 years. The
acquired product rights, goodwill and other intangibles are being amortized over
a 5-year period. During fiscal 2000, we resolved certain pre-acquisition
contingencies, and as a result, we made final purchase price allocations and
reduced the purchase price and the amount allocated to goodwill by approximately
$1.7 million. In addition, we reclassified the amount initially allocated to
goodwill by $26 million due to a change in the characterization of the purchase
for tax purposes. As a result of this change, goodwill was reduced and deferred
tax assets were increased by $26 million. In addition, Quarterdeck had issued
$25 million of 6% convertible senior subordinated notes, due in 2001, to an
institutional investor in a private placement pursuant to the terms of a Note
Agreement dated March 1, 1996. The Notes were paid in full without any premium
on March 30, 1999.
Acquisition of Intel's anti-virus business
On September 28, 1998, we entered into an agreement whereby we purchased Intel
Corporation's anti-virus business for approximately $16.5 million. We also
licensed Intel's systems management technology. Intel promoted Norton AntiVirus
through its worldwide reseller channels. The transaction was accounted for as a
purchase. Under the transaction, we recorded approximately $5.0 million for
acquired in-process research and development, $10.7 million for acquired product
rights and $0.8 million for certain intangible assets. A valuation specialist
used our estimates to establish the amount of acquired in-process research and
development. The acquired product rights and intangibles are being amortized
over a 5-year period. During fiscal 2000, we resolved certain pre-acquisition
contingencies and as a result, we made final purchase price allocations and
reduced the purchase price and the amount allocated to acquired product rights
by approximately $0.9 million.
Acquisition of Binary operations
On June 24, 1998, we purchased the operations of Binary, an Auckland, New
Zealand-based company, for approximately $27.9 million. The transaction was
accounted for as a purchase. Under the transaction, we recorded approximately
$7.1 million for acquired in-process research and development and $16.9 million
for acquired product rights, with the remaining $3.8 million of the purchase
price allocated to goodwill and net tangible and intangible assets. A valuation
specialist used our estimates to establish the amount of acquired in-process
research and development. The acquired product rights, goodwill and intangibles
are being amortized over a 4-year period. During fiscal 2000, we resolved
certain pre-acquisition contingencies and as a result, we made final purchase
price allocations and reduced the purchase price and the amount allocated to
goodwill by $2.3 million.
Acquisition of IBM's anti-virus business
Effective May 18, 1998, we entered into a Master Agreement with IBM to acquire
rights to IBM's digital immune technology. In addition, we assumed the majority
of IBM's license arrangements with customers of IBM anti-virus products. In
return for the various rights we acquired from IBM, we agreed to pay $16 million
in installments over a specified period as well as pay royalties on revenues
received by us from distribution of immune-enabled Symantec products and immune
services provided by us using the digital immune technology. The royalties are
subject to specified maximums and vary by time periods with ultimate termination
of royalties as of a specified date. We also entered into a patent
cross-licensing agreement under which the parties licensed to each other their
respective patent portfolios. The transaction was accounted for as a purchase.
As of March 31, 2000, we paid the entire $16 million to IBM. In addition, we
assumed liabilities of $3.0 million and incurred additional expenses of
approximately $1.0 million as part of the transaction. Under the transaction, we
recorded approximately $7.1 million for acquired in-process research and
development, $11.9 million for goodwill and $1.2 million for certain prepaid
research and development and other assets. A valuation specialist used our
estimates to establish the amount of acquired in-process research and
development. Goodwill will be amortized over 5 years.
55
58
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The following table outlines the value of the above referenced fiscal 1999
acquisitions' net tangible and intangible assets, adjusted for final purchase
price allocations, as certain pre-acquisition contingencies that existed upon
acquisition have been resolved:
Allocated Purchase Price Components (in thousands)
-----------------------------------------------------------------------------------------------------
Acquired Acquired Deferred
Purchase In-Process Product Other Prepaid Tax
Price R&D Rights Goodwill Intangibles R&D Asset
-----------------------------------------------------------------------------------------------------
IBM $ 20,250 $ 7,100 $ -- $ 11,850 $ 100 $ 1,200 $ --
Binary 25,571 7,100 16,900 1,451 120 -- --
Intel 15,625 5,017 9,797 -- 811 -- --
Quarterdeck 83,732 8,300 8,480 38,223 2,729 -- 26,000
-------- ------- ------- ---------- ----------- ----------- -----------
Total $145,178 $27,517 $35,177 $ 51,524 $ 3,760 $ 1,200 $ 26,000
======== ======= ======= ========== =========== =========== ===========
We made no acquisitions during fiscal 1998.
PRO FORMA
The following unaudited pro forma results of operations for fiscal 2000 and 1999
are as if the acquisitions of Binary, Quarterdeck, URLabs, L-3 and 20/20 had
occurred at the beginning of fiscal 1999. The pro forma information excludes
approximately $19.7 million of acquired in-process research and development. The
pro forma information has been prepared for comparative purposes only and is not
indicative of what operating results would have been if the acquisitions had
taken place at the beginning of fiscal 1999 or of future operating results.
Financial information for IBM's and Intel's anti-virus businesses were not
available and as such have not been included in this pro forma information.
Year Ended March 31,
-----------------------
(In thousands, except per share data; unaudited) 2000 1999
- ------------------------------------------------ --------- ---------
Net revenues $ 748,930 $ 619,947
========= =========
Net income $ 158,586 $ 22,494
========= =========
Basic net income per share $ 2.74 $ 0.40
========= =========
Diluted net income per share $ 2.55 $ 0.38
========= =========
Divestiture of the Visual Cafe and ACT! product lines
On December 31, 1999, we entered into an Asset Purchase Agreement, whereby we
sold the principal assets and liabilities of the Visual Cafe product line to
WebGain, Inc. ("WebGain"). The assets primarily consisted of fixed assets and
intangible assets. The liabilities related to certain revenue deferrals recorded
on our balance sheet as of December 31, 1999. In exchange for the assets and
liabilities sold, we received $75.0 million in a lump-sum cash payment on
December 31, 1999. We wrote-off or transferred approximately $4.7 million of
capitalized software, fixed assets and inventory related to the Visual Cafe
product line. In addition, we accrued approximately $1.4 million in transaction
costs and $0.4 million in retention packages for the affected employees. As a
result, we recorded a pre-tax gain of approximately $68.5 million on the
divestiture, which is recorded in income, net of expenses, from sale of
technologies and product lines on the Consolidated Statements of Income.
On December 31, 1999, we entered into an exclusive Software License Agreement
("License") and licensed, on an exclusive basis, to Interact Commerce
Corporation, previously SalesLogix ("Interact"), substantially all of the ACT!
product line technology for a period of four years. In addition, the inventory
and fixed assets related to the ACT! product line were sold to Interact. In
consideration for the license and assets, Interact transferred to us 623,247
shares of its unregistered common stock. These shares were valued at
approximately $20.0 million as of December 6, 1999, the date the License was
signed and the date the number of shares were determined. In addition to these
56
59
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
shares received, we will receive quarterly royalty payments for four years, and
the first payment of $5.0 million was due and payable on March 31, 2000. The
payment was subsequently received in the June 2000 quarter. Interact will pay
these royalties based on a formula set forth in the License, up to an aggregate
maximum of $57.0 million, which will be recorded in income, net of expenses,
from sale of technologies and product lines on the Consolidated Statements of
Income.
Because the royalties from Interact are not guaranteed and the quarterly amounts
to be received were not determinable at December 31, 1999, we will recognize the
royalties as earned. At the end of the four-year period, Interact has the
exclusive option, for a period of 30 days, to purchase the licensed technology
from us for $60.0 million less all royalties paid to us to date. As a result of
the License, we recognized approximately $20.0 million from the shares received
and wrote-off or transferred to Interact $0.4 million of inventory and fixed
assets attributed to the ACT! product line. In addition, we accrued
approximately $1.3 million for transaction related costs. After recognizing
these above amounts, we recorded a pre-tax gain of approximately $18.3 million,
which is recorded in income, net of expenses, from sale of technologies and
product lines on the Consolidated Statements of Income.
Transition Fees
In accordance with individual transition agreements, WebGain and Interact will
pay us a fee for invoicing, collecting receivables, shipping and other
operational and support activities, until such time as they have the ability to
take over these activities. As of March 31, 2000, we billed them for a total
amount of approximately $4.0 million. Approximately $3.1 million of these fees
were reimbursement of incremental costs incurred during the transition period to
provide these services, which we would otherwise not have incurred, and as such,
we have offset our operating expenses by this amount and have recorded the
remaining amount of $0.9 million in income, net of expenses, from sale of
technologies and product lines.
Divestiture of Network Administration
In March 1997, we sold our network administration technologies and related
tangible assets to the Hewlett-Packard Company ("HP"), resulting in the receipt
of approximately $1 million of income, net of expenses, from sale of
technologies and product lines and a $2 million research and development
reimbursement in fiscal 1997. Additionally, a two-year quarterly royalty payment
stream, not to exceed a present value of $27 million as of March 1997, commenced
in fiscal 1998, which was solely contingent on future sales of certain HP
products. Royalty payments from HP ended during the December 1998 quarter. Due
to the uncertainty regarding the amounts upon which these royalties would have
been determined, we recognized these amounts as they were received from HP. We
recognized income, net of expenses, from sale of technologies and product lines
of approximately $7 million and $22 million from HP during fiscal 1999 and 1998,
respectively.
In connection with the sale to HP during fiscal 1997, we wrote-off approximately
$7 million of unamortized software development costs and less than $1 million of
unamortized purchased product rights, as well as incurred approximately $2
million of legal, accounting and other costs associated with the transaction.
Divestiture of Electronic Forms
During September 1996, we sold our electronic forms software product line and
related tangible assets to JetForm Corporation ("JetForm") for approximately
$100 million, payable over four years in quarterly installments through the June
2000 quarter. During February 1998, the purchase agreement was amended to
accelerate certain quarterly payments during the remaining payment term in
exchange for a reduction in the total sale price to approximately $93 million.
During June 1998, the purchase agreement was amended once again to modify
certain payments, however, the total sales price remained at $93 million.
JetForm has the option to tender payment in either cash or in registered JetForm
common stock, within a contractually defined quantity threshold. Due to the
uncertainty regarding the ultimate collectibility of these installments, we are
recognizing the related amounts as payments are due and collectibility is
assured from JetForm. We recognized income, net of expenses, from sale of
technologies and product lines of approximately $15 million, $34 million and $24
million from JetForm during fiscal 2000, 1999 and 1998, respectively.
57
60
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The components of income, net of expenses, from sale of technologies and product
lines are as follows:
Year Ended March 31,
--------------------------------------
(In thousands) 2000 1999 1998
- ------------------------------- ----------- ----------- ---------
Gain on divestiture of:
Visual Cafe product line $ 68,523 $ -- $ --
ACT! product line 18,285 -- --
Royalties from Interact 5,000 -- --
Transition fees 894 -- --
Payments from HP and JetForm 14,656 41,155 45,421
----------- ----------- ---------
Income, net of expense, from sale of
technologies and product lines $ 107,358 $ 41,155 $ 45,421
=========== =========== =========
NOTE 4. PURCHASED PRODUCT RIGHTS AND CAPITALIZED SOFTWARE
During fiscal 2000, we recorded approximately $11 million of acquired product
rights, primarily related to our acquisitions of URLabs, L-3 and 20/20. During
fiscal 1999, we recorded approximately $35 million of acquired product rights,
primarily related to our acquisitions of Binary, Intel's anti-virus business and
Quarterdeck. See Note 3 of Notes to Consolidated Financial Statements.
Amortization of purchased product rights and capitalized software expense
totaled approximately $10 million, $6 million and $1 million in fiscal 2000,
1999 and 1998, respectively, and is recorded in cost of revenues. The
amortization will occur over the next 3 to 5 years. See Note 3 of Notes to
Consolidated Financial Statements.
NOTE 5. CASH EQUIVALENTS, INVESTMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Available-For-Sale Investments and Trading Investments
All cash equivalents, short-term investments, long-term investments and
restricted investments have been classified as available-for-sale securities,
except for our trading securities. During fiscal 2000, we maintained a trading
asset portfolio to generate returns that offset changes in certain liabilities
related to deferred compensation arrangements. The trading assets consist of
marketable equity securities and, have a fair value of approximately $0.8
million and $0.5 million as of March 31, 2000 and 1999, respectively. These
trading assets have been included in the available-for-sale tabular disclosure,
due to their immaterial amounts.
The estimated fair value of the cash equivalents, short-term investments and
long-term investments consisted of the following:
March 31,
----------------------
Cash equivalents, short and long-term investments (in thousands) 2000 1999
- ---------------------------------------------------------------- --------- ---------
Money market funds $ 8,929 $ 19,891
Corporate securities 324,834 53,839
Bank securities and deposits 4,790 60,322
Taxable auction rate securities 16,027 10,010
US government and government-sponsored securities -- 11,932
Equity securities 16,867 --
--------- ---------
Total available-for-sale and trading investments $ 371,447 $ 155,994
========= =========
The estimated fair value of available-for-sale and trading investments by
contractual maturity as of March 31, 2000 is as follows:
Cash equivalents, short and long-term investments (in thousands)
- ----------------------------------------------------------------
Due in one year or less $ 354,580
No maturity (equity securities) 16,867
---------
$ 371,447
=========
58
61
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Except for equity securities, fair values of cash equivalents, short-term
investments, long-term investments and trading assets approximate cost primarily
due to the short-term maturities of the investments and the absence of changes
in security credit ratings. Equity securities consist of 623,247 unregistered
shares of Interact Commerce Corporation, a publicly traded company, with an
unrealized loss of approximately $3 million as of March 31, 2000. Since April
2000, many high-technology stocks experienced a significant decrease in value,
including these shares. As of June 16, 2000, the value of these shares was
approximately $7.6 million, reflecting an additional unrealized loss of $9.3
million subsequent to March 31, 2000. These shares are not registered, and
therefore, are subject to restrictions upon sale. However, we do have the
ability, at our option, to register and sell these shares within twelve months
following March 31, 2000.
As of March 31, 2000 and 1999, the estimated fair value of our restricted
investments were $82 million and $71 million, respectively, and consisted of US
government and government-sponsored securities. The restricted marketable
securities have a contractual maturity of less than one year.
Our available-for-sale restricted investments relate to certain collateral
requirements for lease agreements associated with our corporate facilities in
Cupertino, California. Fair values of the restricted investments approximate
cost due to the short-term maturities of the investments and the absence of
changes in security credit ratings.
Unrealized losses on all available-for-sale securities are reported as a
component of stockholders' equity, net of tax effect, of approximately $2.4
million and $0.3 million as of March 31, 2000 and 1999, respectively.
During the period covered by the consolidated financial statements, we did not
use any derivative instrument for trading purposes. We utilize some natural
hedging to mitigate our foreign currency exposures and we hedge certain residual
exposures through the use of one-month foreign exchange forward contracts. We
enter into foreign exchange forward contracts with financial institutions
primarily to protect against currency exchange risks associated with certain
balance sheet positions. The fair value of foreign exchange forward contracts is
based on quoted market prices. At March 31, 2000, outstanding forward exchange
contracts had a notional amount of approximately $163 million, all of which
mature in 35 days or less. The net liability of forward contracts was a notional
amount of approximately $43 million at March 31, 2000. The fair value of foreign
currency exchange forward contracts approximates cost due to the short maturity
periods. We do not hedge our translation risk.
NOTE 6. CONVERTIBLE SUBORDINATED DEBENTURES
On April 2, 1993, we issued convertible subordinated debentures totaling $25
million. The debentures bore interest at 7.75% payable semiannually and were
convertible into Symantec common stock at $12 per share at the option of the
investor. The debentures were due in three equal annual installments beginning
in 1999 and were redeemable at the option of the investors in the event of a
change in control of Symantec or the sale of all or substantially all of its
assets. At our option, we could redeem the notes at any time with 30 to 60 days
notice; however, we would have incurred a prepayment penalty for early
redemption. The holders were entitled to certain registration rights relating to
the shares of common stock resulting from the conversion of the debentures. In
fiscal 1996 and 1998, convertible subordinated debentures totaling approximately
$11 million were converted into Symantec common stock. During February 1999, the
entire remaining $14 million principal amount of our convertible subordinated
debentures were converted into approximately 1.2 million shares of Symantec
common stock. The conversion to shares of common stock was exempt from
registration under the Securities Act of 1933.
Our acquired subsidiary, Quarterdeck, had issued 6% convertible senior
subordinated notes totaling $25 million, due in 2001, to an institutional
investor in a private placement pursuant to the terms of a Note Agreement dated
March 1, 1996. These Notes were paid in full on March 30, 1999.
NOTE 7. LINE OF CREDIT
We have a $10 million bank line of credit, which expires in May 2001. The line
of credit was renewed and amended in May 2000, to minimize the potential
violation of certain financial covenants due to future acquisitions. The
amendment permits future acquisitions of less than $75 million in cash,
annually. The line of credit is available for general corporate purposes and
bears interest at either the banks' reference (prime) interest rate (9.00% at
March 31, 2000); the U.S. offshore rate (6.29% at March 31, 2000) plus 1.25%; a
CD rate (6.23% at March 31, 2000), plus 1.25%; or LIBOR (6.29% at March 31,
2000) plus 1.25%, at our discretion. As of March 31, 2000, we are in
59
62
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
compliance with all covenants under this credit agreement and there were no
borrowings and less than $1 million in standby letters of credit outstanding
under this line. Future acquisitions or payment of dividends by us may cause us
to be in violation of the line of credit covenants. However, we believe that if
the line of credit was canceled or amounts were not available under the line,
there would not be a material adverse impact on our financial results, liquidity
or capital resources.
NOTE 8. COMMITMENTS
We lease all of our facilities and certain equipment under operating leases that
expire at various dates through 2026. We currently sublease some space under
various operating leases that will expire at various dates through 2004.
The future fiscal year minimum operating lease commitments were as follows at
March 31, 2000:
(In thousands)
- -------------------------------
2001 $ 14,462
2002 11,131
2003 9,222
2004 8,155
2005 6,732
Thereafter 26,703
---------
Operating lease commitments 76,405
Sublease income (12,420)
---------
Net operating lease commitments $ 63,985
=========
Rent expense charged to operations totaled approximately $16 million, $15
million and $14 million for the years ended March 31, 2000, 1999 and 1998,
respectively.
In fiscal 1997, we entered into lease agreements for two existing office
buildings, City Center One ("CC1") and World Headquarters ("WHQ"), land and one
office building under construction in Cupertino, California, City Center Five
("CC5"). In fiscal 1999, the landlord exchanged CC5 for another building, City
Center Two ("CC2") in Cupertino, California and committed to sell WHQ. In fiscal
2000, we completed the appropriate leasehold improvements to CC2, and vacated
WHQ. As we have moved into CC2, we were relieved of the lease liability
associated with WHQ. Lease payments are based on the three-month LIBOR in effect
at the beginning of each fiscal quarter. We have the right to acquire the
related properties at any time during the seven-year lease period. If, at the
end of the lease term we do not renew the lease, purchase the property under
lease or arrange a third party purchase, then we will be obligated to the lessor
for a guaranteed residual amount equal to a specified percentage of the lessor's
purchase price of the property. We will also be obligated to the lessor for all
or some portion of this amount if the price paid by the third party is below the
guaranteed residual amount. The guaranteed residual payment on the lease
agreements for the two office buildings totals approximately $68 million. As
security against these guaranteed residual payments, we are required to maintain
a corresponding investment in U.S. Treasury securities with maturities not to
exceed three years. We are restricted in our use of these investments per the
terms of the lease agreement. At March 31, 2000, the investments total
approximately $82 million and are classified as non-current restricted
investments within the financial statements. In accordance with the lease terms,
these funds are not available to meet operating cash requirements. In addition,
we are obligated to comply with certain financial covenants. Future acquisitions
may cause us to be in violation of these financial covenants.
We currently occupy a portion of these office buildings and have assumed the
right to sub-lease income provided by the other tenants. The sub-lease
agreements have terms expiring in February 2001 through October 2004.
60
63
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 9. INCOME TAXES
The components of the provision for income taxes were as follows:
Year Ended March 31,
--------------------------------------
(In thousands) 2000 1999 1998
- ------------------ --------- --------- ---------
Current:
Federal $ 51,193 $ 11,649 $ 13,615
State 16,600 5,335 4,879
International 27,995 22,226 15,368
--------- --------- ---------
95,788 39,210 33,862
Deferred:
Federal (5,735) (1,949) (5,788)
State (1,957) (597) (2,247)
International (953) (3,692) 1,181
--------- ---------- ---------
(8,645) (6,238) (6,854)
--------- --------- ---------
$ 87,143 $ 32,972 $ 27,008
========= ========= =========
The difference between our effective income tax rate and the federal statutory
income tax rate as a percentage of income before income taxes was as follows:
Year Ended March 31,
----------------------------------------
2000 1999 1998
-------- -------- --------
Federal statutory rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 3.0 3.5 1.5
Acquired in-process research and development charges
with no tax benefit -- 7.1 --
Non-deductible goodwill amortization 2.1 -- --
Impact of international operations (5.6) (3.9) (4.0)
Benefit of pre-acquisition losses of acquired entities -- -- (10.1)
Other, net (0.6) (2.1) 1.7
-------- -------- --------
33.9% 39.6% 24.1%
======== ======== ========
The principal components of deferred tax assets were as follows:
March 31,
------------------------
(In thousands) 2000 1999
- ----------------------------------------------- --------- ---------
Tax credit carryforwards $ 3,891 $ 232
Net operating loss carryforwards of acquired companies 18,949 2,927
Inventory valuation accounts 1,756 3,057
Other reserves and accruals not
currently tax deductible 6,749 10,943
Accrued compensation and benefits 3,751 3,722
Deferred revenue 4,864 6,019
Sales incentive programs 5,768 5,195
Reserve for returns and allowances 15,806 9,536
Acquired in-process research and development expenses
and other intangible assets 7,535 9,135
Unrealized loss on available-for-sale investments 2,224 --
Other 7,723 7,854
--------- ---------
79,016 58,620
Valuation allowance -- (30,465)
--------- ---------
$ 79,016 $ 28,155
========= =========
Realization of a significant portion of the $79 million of net deferred tax
asset is dependent upon our ability to generate sufficient future U.S. taxable
income. We believe that it is more likely than not that the asset will be
61
64
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
realized based on historical and forecasted U.S. earnings, and accordingly, the
valuation allowance has been reduced to zero as of March 31, 2000. The change in
the valuation allowance for the years ended March 31, 2000, 1999 and 1998 was a
net decrease of approximately $30 million, a net increase of $5 million, and a
net decrease of $15 million, respectively. Of the $30 million decrease in the
valuation allowance during the year ended March 31, 2000, approximately $21
million was attributable to previously unbenefitted stock option deductions, the
benefit of which was credited to stockholders' equity.
In the December 2000 quarter, we made a decision to forego a Section 338
election in connection with our acquisition of Quarterdeck. Accordingly, a $26
million deferred tax asset was established for the tax carryforward attributes
of Quarterdeck. The offsetting adjustment reduced goodwill. (See Note 3 of Notes
to Consolidated Financial Statements.) Additionally, we eliminated the
accounting for $6 million of deferred tax assets and valuation allowance related
to the acquired technology of Quarterdeck.
As of March 31, 2000, we have tax credit carryforwards of approximately $4
million that expire in fiscal 2003 through 2005. In addition, we have net
operating loss carryforwards, attributable primarily to Quarterdeck, of
approximately $46 million that expire in fiscal 2011 through 2019. Because of
the "change in ownership" provisions of the Internal Revenue Code of 1986, the
net operating loss carryforwards of Quarterdeck are subject to an annual
limitation of approximately $2 million regarding their utilization against
taxable income in future periods.
Pretax income from international operations was approximately $117 million, $64
million and $65 million for the years ended March 31, 2000, 1999 and 1998,
respectively.
No provision has been made for federal or state income taxes on unremitted
earnings of certain of our foreign subsidiaries (cumulative $195 million at
March 31, 2000) since we plan to indefinitely reinvest all such earnings. At
March 31, 2000, the unrecognized deferred tax liability for these earnings was
approximately $50 million.
NOTE 10. EMPLOYEE BENEFITS
401(k) Plan
We maintain a salary deferral 401(k) plan for all of our domestic employees.
This plan allows employees to contribute up to 15% of their pretax salary up to
the maximum dollar limitation prescribed by the Internal Revenue Code. We match
100% of the first $500 of employees' contributions and then 50% of the
employee's contribution up to 6% of the employees' eligible compensation. Our
contributions under the plan were approximately $2 million for each of the years
ended March 31, 2000, 1999 and 1998.
Employee Stock Purchase Plans
In October 1989, we established the 1989 Employee Stock Purchase Plan ("89
Plan") and reserved a total of approximately 3.4 million shares of common stock
for issuance under this plan. Subject to certain limitations, our employees may
purchase, through payroll deductions of 2% to 10% of compensation, shares of
common stock at a price per share that is the lesser of 85% of the fair market
value as of the beginning of the offering period or the end of the purchase
period. As of March 31, 2000, approximately 3.1 million shares had been issued
and 0.3 million shares remain available under the 89 Plan.
On September 17, 1998, our stockholders approved the 1998 Employee Stock
Purchase Plan ("98 Plan"). The 98 Plan was subsequently amended by our
stockholders on September 15, 1999, increasing the shares available for issuance
from approximately 0.5 million to 1.3 million and to increase the limit on such
shares by 1% of our outstanding shares of Common Stock on each subsequent
January 1 during the term of the 98 Plan. On January 1, 2000, the number of
shares available for issuance automatically increased by approximately 0.6
million shares to 1.9 million shares. As of March 31, 2000, approximately 0.1
million shares had been issued and 1.8 million shares remain available under the
98 Plan.
Stock Award Plans
During fiscal 1996, we registered 0.4 million shares to be issued under the
terms of the 1994 Patent Incentive Plan. The purpose of this plan is to increase
awareness of the importance of patents to our business and to provide employees
with incentives to pursue patent protection for new technologies that may be
valuable to us. Our executive officers are not eligible for awards under the
1994 Patent Incentive Plan. As of March 31, 2000, a total of approximately
26,000 shares had been issued under this plan.
62
65
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
In March 1998, the Board of Directors approved the terms of the 1998 Star Award
Bonus Plan, under which we may grant up to 5,000 shares of common stock to
employees who perform exceptionally in a given quarter. Directors and executive
officers are not eligible to receive awards under this plan. Stock awards under
this plan are recorded as compensation expense at the time of issuance. The
Board of Directors reserved 20,000 shares of common stock for issuance under
this plan. As of March 31, 2000, a total of 1,300 shares had been issued under
this plan.
Stock Option Plans
We maintain stock option plans pursuant to which an aggregate total of
approximately 26.3 million shares of common stock have been reserved for
issuance as incentive and nonqualified stock options to employees, officers,
directors, consultants, independent contractors and advisors to us (or of any
parent, subsidiary or affiliate of Symantec as the Board of Directors or
committee may determine). The purpose of these plans are to attract, retain and
motivate eligible persons whose present and potential contributions are
important to our success by offering them an opportunity to participate in our
future performance through awards of stock options and stock bonuses. Under the
terms of these plans, the option exercise price may not be less than 100% of the
fair market value on the date of grant, the options have a maximum term of ten
years and generally vest over a four-year period.
On May 14, 1996, Symantec stockholders approved the 1996 Equity Incentive Plan
and a total of approximately 6.7 million shares of common stock had been
reserved for issuance under this plan. On September 17, 1998, stockholders
approved an amendment to increase the number of shares reserved for issuance by
approximately 2.3 million to 9.0 million shares. On September 15, 1999,
stockholders approved an additional amendment to increase the number of shares
reserved for issuance by approximately 3.2 million to 12.2 million shares. As of
March 31, 2000 a total of 8.4 million shares had been issued and are outstanding
under this plan.
Stock option activity was as follows:
Weighted
Average
Exercise
Number Price Per
(In thousands, except weighted average exercise price per share) of Shares Shares
- ---------------------------------------------------------------- --------- ---------
Outstanding at March 31, 1997 9,042 $ 13.61
Granted 3,857 22.74
Exercised (2,158) 12.73
Canceled (1,413) 15.29
---------
Outstanding at March 31, 1998 9,328 17.32
Granted 3,331 20.18
Exercised (991) 13.40
Canceled (1,140) 19.28
---------
Outstanding at March 31, 1999 10,528 18.37
Granted 5,181 44.93
Exercised (3,937) 16.03
Canceled (1,753) 20.46
---------
Outstanding at March 31, 2000 10,019 $ 32.67
=========
Stock option balances are as follows:
(In thousands) March 31,
- --------------------------- -----------------------
2000 1999
--------- ---------
Authorized and/or outstanding 11,512 11,707
Available for future grants 1,493 1,179
Exercisable and vested 2,446 3,965
63
66
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The following tables summarize information about options outstanding at March
31, 2000:
Outstanding options Exercisable options
--------------------------------------------- ----------------------------
Weighted
average Weighted Weighted
Number of contractual average Number of average
shares (in life exercise shares (in exercise
Range of Exercise Prices thousands) (in years) price thousands) price
- ------------------------------ ---------- ------------- ------------ ----------- -----------
$ 4.15 - $ 11.00 268 5.58 $ 10.54 224 $ 10.63
11.06 - 18.06 2,681 7.67 14.11 959 14.40
18.19 - 26.94 3,196 7.98 22.74 1,165 22.91
27.00 - 40.00 1,022 8.93 31.16 96 30.80
43.31 - 75.75 2,592 9.76 62.36 2 47.75
76.56 - 80.81 260 9.94 78.72 -- --
----------- -----------
10,019 8.44 $ 32.67 2,446 $ 18.78
=========== ===========
These options will expire if not exercised by specific dates ranging from April
2000 to March 2010. Prices for options exercised during the three-year period
ended March 31, 2000 ranged from $3.14 to $39.13.
In 1999, we issued 100,000 restricted shares to our CEO for a purchase price of
par ($0.01 per share), vesting 50% at each anniversary date beginning April 14,
2000. Unearned compensation equivalent to the market value of the common stock
on the date of grant, less par, was charged to stockholders' equity and is being
amortized into compensation expense over the vesting term. At March 31, 2000,
there were 100,000 restricted shares outstanding with none vested.
We elected to follow APB Opinion No. 25, Accounting for Stock Issued to
Employees, in accounting for our employee stock options because, as discussed
below, the alternative fair value accounting provided for under SFAS No. 123,
Accounting for Stock-Based Compensation, requires the use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB No. 25, because the exercise price of our employee stock options generally
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized in our financial statements.
Pro forma information regarding net income and earnings per share is required by
SFAS No. 123. This information is required to be determined as if we had
accounted for our employee stock options (including shares issued under the
Employee Stock Purchase Plans, collectively called "options") granted subsequent
to March 31, 1995 under the fair value method of that statement. The fair value
of options granted in fiscal 2000, 1999 and 1998 reported below has been
estimated at the date of grant using the Black-Scholes option-pricing model
assuming no expected dividends and the following weighted average assumptions:
Employee Stock Options Employee Stock Purchase Plans
------------------------------ ------------------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- -------- -------- --------
Expected life (years) 4.99 5.27 4.84 0.50 0.50 0.50
Expected volatility 0.65 0.66 0.61 0.68 0.79 0.55
Risk free interest rate 6.5% 5.1% 5.4% 5.2% 4.8% 5.2%
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
our options have characteristics significantly different from those of traded
options and because changes in the subjective input assumptions can materially
affect the fair value estimate, in our opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of our options.
The weighted average estimated fair values of employee stock options for fiscal
2000, 1999 and 1998 were $27.24, $12.56 and $13.44 per share, respectively. The
weighted average estimated fair value of employee stock purchase rights granted
under the Employee Stock Purchase Plans during fiscal 2000, 1999 and 1998 were
$20.05, $10.47 and $14.71, respectively.
64
67
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period (for employee stock
options) and the six-month purchase period (for stock purchases under the
Employee Stock Purchase Plans). Our pro forma information is as follows:
Year Ended March 31,
------------------------------------------------------
(In thousands, except per share data) 2000 1999 1998
- ------------------------------------------- ------------- ------------- -------------
Net income - Basic - Pro forma $ 137,829 $ 25,100 $ 68,601
Net income - Diluted - Pro forma 137,829 25,727 69,293
Net income per share - Basic - Pro forma 2.49 0.47 1.29
Net income per share - Diluted - Pro forma 2.31 0.45 1.19
The effects on pro forma disclosures of applying SFAS No. 123 are not likely to
be representative of the effects on pro forma disclosures of future years.
Because SFAS 123 is applicable only to options granted subsequent to March 31,
1995, its pro forma effect is not fully reflected until the beginning of fiscal
2000.
NOTE 11. COMMON STOCK REPURCHASES
On April 29, 1997, the Board of Directors of Symantec (the "Board"), authorized
the repurchase of up to 1.0 million shares of Symantec common stock by June 13,
1997. As of June 13, 1997, we completed the repurchase of 0.5 million shares at
prices ranging from $16.57 to $17.00 per share. Authorization to repurchase the
remaining 0.5 million shares expired as of March 31, 1998.
On November 24, 1997, the Board authorized the repurchase of up to 0.5 million
shares of Symantec common stock. As of December 4, 1997, we completed the
repurchase of 0.5 million shares at prices ranging from $25.25 to $26.81 per
share.
On June 9, 1998, the Board authorized the repurchase of up to 5% of our
outstanding common stock before December 31, 1998. We completed the repurchase
as of October 30, 1998, repurchasing a total of approximately 2.9 million shares
at prices ranging from $13.10 to $27.21, for an aggregate amount of
approximately $56 million.
On March 22, 1999, the Board authorized the repurchase of up to $75 million of
Symantec common stock with no expiration date. As of March 31, 2000, we have
repurchased 1.0 million shares at prices ranging from $17.90 to $19.87, for an
aggregate amount of approximately $19 million.
NOTE 12. RESTRUCTURING AND OTHER EXPENSES
Restructuring and other expenses consist of the following:
Year Ended March 31,
--------------------------------------
(In thousands) 2000 1999 1998
- --------------------------------- --------- --------- ---------
Employee severance and outplacement $ 8,065 $ 3,800 $ --
Excess facilities and equipment 953 1,305 --
--------- --------- ---------
Total restructuring and other expenses $ 9,018 $ 5,105 $ --
========= ========= =========
During the March 2000 quarter, we reduced our operations in our Melville and
Toronto sites, thereby reducing our workforce by 96 employees. Each of these
employees received a separation package. As a result, we vacated the facility in
Melville and we are reducing the space occupied in Toronto. We recorded
approximately $3.4 million for employee severance, outplacement and abandonment
of certain facilities and equipment during the March 2000 quarter. In addition,
we provided approximately $0.7 million for costs of severance, related benefits
and outplacement services for two members of senior management due to the
realignment of our business units and their resulting departures during the
March 2000 quarter.
During the December 1999 quarter, we reduced our Internet Tools business unit's
workforce and reduced our Sales workforce. There were 48 employees in the
Internet Tools business unit affected, resulting in approximately $1.8 million
of severance, related benefits and outplacement services being accrued during
the
65
68
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
December 1999 quarter. The Sales workforce reduction affected 10
employees, resulting in approximately $0.4 million of severance, related
benefits and outplacement services being accrued in the December 1999 quarter.
During the September 1999 quarter, we provided approximately $0.7 million for
costs of severance, related benefits and outplacement services for two members
of senior management due to the realignment of our business units and their
resulting departures. We also accrued approximately $2.7 million for certain
costs related to an agreement reached with our former CEO in the June 1999
quarter. These costs were comprised of severance and acceleration of unvested
options, which were recorded in the Consolidated Statements of Income and
Stockholders' Equity.
Details of the fiscal 2000 restructuring charges are as follows:
Cash/ Restructuring Amount Amount Balance
(In thousands) Non-cash Charge Paid Adjusted at 3/31/00
- --------------------------------------- ------------- ------------- ---------- ---------- ----------
Employee severance and outplacement Cash $ 8,733 $ (7,113) $ -- $ 1,620
Excess facilities and equipment Cash &Non-cash 953 (346) -- 607
------------- --------- ---------- ----------
Total restructuring and other expenses $ 9,686 $ (7,459) $ -- $ 2,227
============= ========= ========== ==========
During the September 1998 quarter, we made a decision to restructure our
operations and outsource domestic manufacturing operations. As a result, we
originally recorded a $3.8 million charge for personnel severance to reduce the
workforce by approximately 5% in both domestic and international operations and
a $1.3 million charge for the planned abandonment of a manufacturing facility
lease. These estimates were subsequently revised in the September 1999 quarter,
resulting in a reduction in the personnel severance and outplacement accruals by
approximately $0.7 million.
Details of the fiscal 1999 restructuring charges are as follows:
Cash/ Restructuring Amount Amount Balance
(In thousands) Non-cash Charge Paid Adjusted at 3/31/00
- --------------------------------------- ------------- ------------- -------- -------- -----------
Employee severance and out-placement Cash $ 3,800 $ (3,800) $ -- $ --
Excess facilities and equipment Cash &Non-cash 1,305 (392) (668) 245
------------- -------- -------- -----------
Total restructuring and other expenses $ 5,105 $ (4,192) $ (668) $ 245
============= ========= ======== ===========
There were no restructuring and other expenses incurred in fiscal 1998.
The exit plans associated with each of the reductions in workforce and facility
closures above specifically identified all the significant actions, including:
- the names of individuals who would not continue employment with us;
- the termination dates and severance packages for each terminating
employee;
- the planned date we would vacate the facilities which were under
existing operating leases; and
- the specific excess equipment, furniture, fixtures and leasehold
improvements to be disposed of.
Employee severance and outplacement was primarily comprised of severance
packages for employees who were to be terminated as a result of the
restructuring. As part of the restructuring plan, we specifically identified
those individuals who would not continue employment with us. The severance
periods ranged from one to six months. The total cost of the severance packages
was accrued and included in the restructuring charge after the identified
employees had their severance packages communicated to them. Additionally, we
accrued estimated costs associated with outplacement services to be provided to
terminating employees, as these costs have no future economic benefit to us. The
remaining accrual at March 31, 2000 was for outstanding severance and
outplacement costs.
Excess facilities and equipment included remaining lease payments associated
with building leases subsequent to their abandonment dates. The cash outlays for
these leases are to be made over the remaining term of each lease. In addition,
we reserved for the write-off of site-specific equipment, furniture, fixtures
and leasehold improvements,
66
69
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
which would no longer be utilized. The accrual at March 31, 2000 relates to the
remaining lease payments, which will be paid over the remaining lease term
subsequent to the abandonment of each facility.
NOTE 13. NET INCOME PER SHARE
The components of net income per share were as follows:
Year Ended March 31,
------------------------------------------------------
(In thousands, except per share data) 2000 1999 1998
- ------------------------------------- ------------- ------------- -------------
BASIC NET INCOME PER SHARE
Net income $ 170,148 $ 50,201 $ 85,089
============= ============= =============
Weighted average number of common
shares outstanding during the period 57,870 56,601 56,097
============= ============= =============
Basic net income per share $ 2.94 $ 0.89 $ 1.52
============= ============= =============
DILUTED NET INCOME PER SHARE
Net income $ 170,148 $ 50,201 $ 85,089
Interest on convertible subordinated
debentures, net of income tax effect -- 627 692
------------- ------------- -------------
Net income, as adjusted $ 170,148 $ 50,828 $ 85,781
============= ============= =============
Weighted average number of common
shares outstanding during the period 57,870 56,601 56,097
Shares issuable from assumed exercise
of options 4,344 1,684 2,964
Shares issuable from assumed conversion
of convertible subordinated debentures -- 1,004 1,220
------------- ------------- -------------
Total shares for purpose of calculating
diluted net income per share 62,214 59,289 60,281
============= ============= =============
Diluted net income per share $ 2.73 $ 0.86 $ 1.42
============= ============= =============
For the twelve months ended March 31, 2000, shares issuable from assumed
exercise of options exclude approximately 464,000 options, as their effect on
diluted net income per share would have been anti-dilutive.
NOTE 14. OTHER COMPREHENSIVE INCOME (LOSS)
We adopted SFAS No. 130, Reporting Comprehensive Income, beginning with the
quarter ended June 30, 1998. SFAS No. 130 established new rules for the
reporting and disclosure of other comprehensive income (loss) and its
components; however, it has no impact on our net income or stockholders' equity.
The components of other comprehensive income (loss), net of tax, are as follows:
Year ended March 31,
--------------------------------------
(In thousands) 2000 1999 1998
- ------------------------------------ --------- --------- ---------
Other comprehensive loss:
Change in unrealized (loss) gain on
available-for-sale investments,
net of a tax (benefit) provision of ($983),
($290) and $35. $ (2,089) $ (616) $ 181
Reclassification adjustment for gains
included in net income, net of a tax
provision of $9, $73 and $0. 20 155 --
Change in cumulative translation
adjustment, net of a tax (benefit)
of ($3,072), ($1,476) and ($993). (6,528) (6,090) (5,136)
--------- --------- --------
Total other comprehensive loss $ (8,597) $ (6,551) $ (4,955)
========= ========= ========
67
70
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 15. LITIGATION
On March 18, 1996, a class action complaint was filed by the law firm of
Milberg, Weiss, Bershad, Hynes & Lerach in the Superior Court of the State of
California, County of Santa Clara, against us and several of our current and
former officers and directors. The complaint alleged that our insiders inflated
our stock price and then sold stock based on inside information that our sales
were not going to meet analysts' expectations. The complaint sought damages of
an unspecified amount. The complaint had been refiled twice in state court, most
recently on January 13, 1997, following our demurrers directed to previous
complaints. On January 7, 1997, the same plaintiffs filed a complaint in the
United States District Court, Northern District of California, based on the same
facts as the state court complaint, for violation of the Securities Exchange Act
of 1934. The district court dismissed that complaint and plaintiffs served an
amended complaint in April 1998. Our motion to dismiss the new federal complaint
was granted in part, substantially narrowing the complaint. In July 1999, we
reached an agreement in principle to settle these cases on terms that would have
no material financial impact on us. In October 1999, the Federal Court approved
the settlement, and in December 1999, the state court action was dismissed.
On April 23, 1997, we filed a lawsuit against McAfee Associates, Inc., which
pursuant to a merger has become Network Associates, Inc. ("Network Associates"),
in the United States District Court, Northern District of California, for
copyright infringement and unfair competition. On October 6, 1997, the court
found that we had demonstrated a likelihood of success on the merits of certain
copyright claims and issued a preliminary injunction (i) prohibiting Network
Associates from infringing our rights in specified materials by marketing,
selling, transferring or directly or indirectly copying into any new Network
Associates product or new version of an existing product that has our code, (ii)
requiring Network Associates to notify distributors who were still selling
versions of PC Medic 97 that had our code to tell customers that they should
upgrade to versions that did not contain our code and (iii) requiring Network
Associates to provide us and the court with a sample of the notice to be used.
On October 17, 1997, we amended our complaint to include additional claims for
copyright infringement and misappropriation of trade secrets, based on
additional evidence found in the discovery process. On April 1, 1998, we amended
our complaint to add claims for misappropriation of trade secrets, Racketeer
Influenced and Corrupt Organizations Act ("RICO") and related claims based on
additional evidence uncovered in the litigation. Following motions by Network
Associates, the court dismissed our unfair competition and trade secret claims
regarding the copyrighted code and its RICO and interference claims. On October
22, 1998, the court consolidated this case with the case against Network
Associates and the case brought by CyberMedia, both of which are described
below. In December 1999, we agreed to a settlement resolving this and the
consolidated cases discussed below. During the December 1999 quarter, we accrued
approximately $3 million related to fees and settlement costs. This amount has
been reflected in research and development expenses in the Consolidated
Statements of Income.
On September 4, 1998, we filed a lawsuit against Network Associates in the
United States District Court, Northern District of California, for copyright
infringement, trade secret misappropriation and unfair competition. This case
was also settled as part of the above mentioned case.
On February 4, 1998, CyberMedia, Inc. ("CyberMedia"), which in September 1998,
was acquired by Network Associates, filed a lawsuit in the United States
District Court, Northern District of California, against us, ZebraSoft Inc. and
others, alleging that our Norton Uninstall Deluxe infringed CyberMedia's
copyright and asserting related state law claims. This case was resolved as part
of the settlement with Network Associates described above.
On September 15, 1997, Hilgraeve Corporation ("Hilgraeve") filed a lawsuit in
the United States District Court, Eastern District of Michigan, against us,
alleging that unspecified Symantec products infringe a patent owned by
Hilgraeve. The lawsuit requested damages, injunctive relief, costs and attorney
fees. In March 2000, the court granted our summary judgment motions and
dismissed the case. The plaintiff has appealed the dismissal and we have
cross-appealed.
On February 19, 1998, a class action complaint was filed by the law firm of
Milberg, Weiss, Bershad, Hynes & Lerach in Santa Clara County Superior Court, on
behalf of a class of purchasers of pre-version 4.0 Norton AntiVirus products. A
similar complaint was filed in the same court on March 6, 1998, by an Oregon law
firm. Those actions were consolidated and a consolidated amended complaint was
filed in late October 1998. The complaint originally purported to assert claims
for breach of implied warranty, fraud, unfair business practices and violation
of California's Consumer Legal Remedies Act, among others, arising from the
alleged inability of earlier versions of
68
71
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Norton AntiVirus to function properly after the year 2000. All but the unfair
business practice claims have been dismissed following our demurrer. The
complaint seeks unspecified damages and injunctive relief. We believe that these
claims have no merit and we intend to defend the actions vigorously.
In July 1998, the Ontario Court of Justice (General Division) ruled that we
should pay a total of approximately $6.8 million for damages and legal costs to
Triolet Systems, Inc. and Brian Duncombe in a decade-old copyright action, for
damages arising from the grant of a preliminary injunction against the
defendant. The damages were awarded following the court's ruling that evidence
presented later in the case showed the injunction was not warranted. We
inherited this case through our acquisition of Delrina Corporation, which was
the plaintiff in this lawsuit. We have appealed the decision, however, we
recorded a charge of approximately $5.8 million in the June 1998 quarter,
representing the unaccrued portion of the judgment plus costs. As of March 31,
2000, we believe that we have adequately accrued for both the judgment and all
legal costs.
In March 1997, a class action complaint was filed against Quarterdeck in San
Diego County Superior Court. The case was later transferred to Los Angeles
County Superior Court. The complaint, purportedly on behalf of a class of
purchasers of Quarterdeck's MagnaRAM2 product, sought damages and injunctive
relief under the Consumers Legal Remedies Act and Business and Professions Code
sections beginning with 17200 and 17500. In November 1999, we resolved this case
with no material financial impact on the Company.
In October 1997, a complaint was filed in the United States District Court for
the District of Utah on behalf of PowerQuest Corporation ("PowerQuest") against
Quarterdeck. The complaint alleges that Quarterdeck's partitioning software
(included in Partition-It and Partition-It Extra Strength) violates a patent
held by PowerQuest. In January 1998, PowerQuest obtained a second patent
relating to partitioning and has amended its complaint to allege infringement of
that patent as well. The plaintiff seeks an injunction against distribution of
Partition-It and Partition-It Extra Strength and monetary damages. We believe
this claim has no merit and we intend to defend the action vigorously.
On July 30, 1998, a class action complaint was filed against Quarterdeck in the
Supreme Court of the State of New York, County of New York, on behalf of a
purported class of purchasers of Procomm Plus version 4.0 for Windows product
("Product"). The complaint purported to assert claims for breach of warranty and
violation of New York's Consumer Protection From Deceptive Acts and Practices
Act arising from the Product's inability to process dates containing the year
2000. The complaint was dismissed and the court entered judgment in
Quarterdeck's favor in April 1999. This judgment was affirmed on appeal in
December 1999.
On December 23, 1999, Altiris Inc. ("Altiris") filed a lawsuit in the United
States District Court, District of Utah, against us, alleging that unspecified
Symantec products including Norton Ghost Enterprise Edition, infringed a patent
owned by Altiris. The lawsuit requests damages, injunctive relief, costs and
attorney fees. We believe this claim has no merit and we intend to defend the
action vigorously.
Over the past few years, it has become common for software companies, including
us, to receive claims of patent infringement. We are currently evaluating claims
of patent infringement asserted by several parties, with respect to certain of
our products. While we believe that we have valid defenses to these claims, the
outcome of any related litigation or negotiation could have a material adverse
impact on our future results of operations or cash flows.
We are also involved in a number of other judicial and administrative
proceedings incidental to our business. We intend to defend all of the
aforementioned pending lawsuits vigorously and although adverse decisions (or
settlements) may occur in one or more of the cases, the final resolution of
these lawsuits, individually or in the aggregate, is not expected to have a
material adverse affect on our financial condition, although it is not possible
to estimate the possible loss or losses from each of these cases. Depending,
however, on the amount and timing of an unfavorable resolution of these
lawsuits, it is possible that our future results of operations or cash flows
could be materially adversely affected in a particular period. We have accrued
certain estimated legal fees and expenses related to certain of these matters;
however, actual amounts may differ materially from those estimated amounts.
The legal expenses accrued by us are deemed probable because the lawsuits have
been filed, management has determined its plans of action with regards to the
cases and accordingly knows that it will incur legal expenses related to the
particular lawsuit. Utilizing the assumptions noted in the accounting policy,
management is able to estimate a minimum amount of legal fees to be incurred in
these lawsuits.
69
72
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The total amount of legal expenses accrued as of the respective year-ends and
the amounts expensed for the years ended are reflected below:
Balance as of March 31, 1998 $ 2.5 million Amount expensed in fiscal 1998 $ 4.9 million
Balance as of March 31, 1999 $ 7.2 million Amount expensed in fiscal 1999 $10.1 million
Balance as of March 31, 2000 $ 8.7 million Amount expensed in fiscal 2000 $ 7.3 million
NOTE 16. ADOPTION OF STOCKHOLDER RIGHTS PLAN
On August 11, 1998, the Board adopted a stockholder rights plan designed to
ensure orderly consideration of any future unsolicited acquisition attempt to
ensure fair value of the Company for its stockholders.
In connection with the plan, the Board declared a dividend of one preferred
share purchase right for each share of Symantec common stock outstanding on
August 21, 1998 (the "Record Date"). The Board further directed the issuance of
one such right with respect to each share of Symantec common stock that is
issued after the Record Date, except in certain circumstances. The rights will
expire on August 12, 2008.
The rights are initially attached to Symantec common stock and will not trade
separately. If a person or a group (an "Acquiring Person") acquires 20% or more
of our common stock, or announces an intention to make a tender offer for 20% or
more of our common stock, the rights will be distributed and will thereafter
trade separately from the common stock. Each right will be exercisable for
1/1000th of a share of a newly designated Series A Junior Participating
Preferred Stock at an exercise price of $150.00. The preferred stock has been
structured so that the value of 1/1000th of a share of such preferred stock will
approximate the value of one share of common stock. Upon a person becoming an
Acquiring Person, holders of the rights (other than the Acquiring Person) will
have the right to acquire shares of our common stock at a substantially
discounted price.
If a person becomes an Acquiring Person and we are acquired in a merger or other
business combination, or 50% or more of its assets are sold to an Acquiring
Person, the holder of rights (other than the Acquiring Person) will have the
right to receive shares of common stock of the acquiring corporation at a
substantially discounted price. After a person has become an Acquiring Person,
the Board, at its option, requires the exchange of outstanding rights (other
than those held by the Acquiring Person) for common stock at an exchange ratio
of one share of Symantec common stock per right.
The Board may redeem outstanding rights at any time prior to a person becoming
an Acquiring Person at a price of $0.001 per right. Prior to such time, the
terms of the rights may be amended by the Board. In addition, the Board also
amended our bylaws to: permit only the Chairman, President or the Board to call
a special meeting of the stockholders; require that the Board be given prior
notice of a stockholder proposal to take action by written consent so that a
record date for such action can be established; require advance notice to the
Board of stockholder-sponsored proposals for consideration at annual meetings
and for stockholder nominations for the election of directors; permit the Board
to meet on one- rather than two-day advance notice; and conform the bylaws to
applicable provisions of Delaware law regarding the inspection of elections at
stockholder meetings.
NOTE 17. SEGMENT INFORMATION
Our operating segments are significant strategic business units that offer
different products and services, distinguished by customer needs. We have five
operating segments: Consumer and Small Business, Enterprise Solutions,
e-Support, Professional Services and Other.
The Consumer and Small Business segment focuses on delivering our security and
problem-solving products to individual users and small companies. The Enterprise
Solutions segment focuses on delivering more complex and specialized products to
meet the needs of organizations' networks and support for their large workforce
throughout the organization. The e-Support segment focuses on helping IT
departments be more effective and efficient through remote management solutions.
The Professional Services segment is focused on providing technical support to
our customers and assisting organizations to understand and implement Internet
security infrastructure and policy management. The Other segment is comprised of
sunset products, products nearing the end of their life cycle, and operations
from our ACT! and Visual Cafe divested product lines. Also included in the Other
segment are all
70
73
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
indirect costs, general and administrative expenses and charges that are
one-time in nature, such as acquired in- process research and development,
judgment settlements and restructuring and other expenses which are not charged
to the other operating segments.
We shifted our focus to these new business segments during fiscal 2000. In the
past, our business segments were aligned more towards product groups. Due to
this change, we have presented the fiscal 1999 and 1998 segment information to
conform to our current segments.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. There are no intersegment sales.
Symantec's Chief Executive Officer and the Chief Financial Officer evaluate
performance based on direct profit or loss from operations before income taxes
not including nonrecurring gains and losses, foreign exchange gains and losses
and miscellaneous other income and expenses. Assets and liabilities are not
discretely allocated or reviewed by segment.
Consumer
and Small Enterprise Professional Total
(In thousands) Business Solutions e-Support Services Other Company
- ------------------------------------------------------------------------------------------------------------------------
FISCAL 2000
Revenue from
external customers $ 317,438 $ 152,654 $ 213,734 $ 19,434 $ 42,465 $ 745,725
Operating income (loss) 160,429 74,946 178,320 (3,201) (275,291) 135,203
Depreciation &
amortization expense 13,932 6,700 9,380 853 1,865 32,730
FISCAL 1999
Revenue from
external customers 263,483 90,277 166,724 8,501 63,643 592,628
Operating income (loss) 108,723 37,108 136,945 (2,440) (252,495) 27,841
Depreciation &
amortization expense 13,347 4,573 8,445 431 3,223 30,019
FISCAL 1998
Revenue from
external customers 303,529 36,874 119,684 3,910 68,943 532,940
Operating income (loss) 162,116 5,223 91,500 (3,732) (200,183) 54,924
Depreciation &
amortization expense 15,205 1,847 5,995 196 3,454 26,697
GEOGRAPHICAL INFORMATION
March 31,
--------------------------------------
(In thousands) 2000 1999 1998
- -------------------------------- --------- --------- ---------
Net revenues from external customers:
United States $ 409,952 $ 353,734 $ 334,976
Other foreign countries 335,773 238,894 197,964
--------- --------- ---------
$ 745,725 $ 592,628 $ 532,940
========= ========= =========
71
74
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Long-lived assets:
United States $ 159,392 $ 151,972 $ 36,126
Ireland 4,905 6,335 6,943
Japan 3,965 3,497 3,163
Canada 1,851 2,017 3,142
Other foreign countries 9,594 7,504 4,919
--------- --------- ---------
$ 179,707 $ 171,325 $ 54,293
========= ========= =========
SIGNIFICANT CUSTOMERS
The following distributors covered all segments and accounted for more than 10%
of net revenues during fiscal 2000, 1999 and 1998:
Year Ended March 31,
--------------------------------------
2000 1999 1998
--------- --------- ---------
Ingram Micro, Inc. 39% 47% 36%
Tech Data Corp. 12 19 12
Merisel 11 13 11
72
75
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SYMANTEC CORPORATION
(Registrant)
By /s/ John W. Thompson
----------------------------------
(John W. Thompson,
Chairman, President and
Chief Executive Officer)
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 and on the dates indicated below.
Signature Title Date
- ------------------------------------ ----------------------------- ---------------
CHIEF EXECUTIVE OFFICER:
/s/ John W. Thompson Chairman, President, Chief June 26, 2000
- ------------------------------------ Executive Officer and Director
(John W. Thompson.)
CHIEF FINANCIAL OFFICER AND CHIEF
ACCOUNTING OFFICER:
/s/ Gregory Myers Chief Financial Officer June 26, 2000
- ------------------------------------
(Gregory Myers)
DIRECTORS:
/s/ Tania Amochaev Director June 26, 2000
- ------------------------------------
(Tania Amochaev)
/s/ Charles M. Boesenberg Director June 26, 2000
- ------------------------------------
(Charles M. Boesenberg)
/s/ Walter W. Bregman Director June 26, 2000
- ------------------------------------
(Walter W. Bregman)
/s/ Carl D. Carman Director June 26, 2000
- ------------------------------------
(Carl D. Carman)
/s/ Robert R. B. Dykes Director June 26, 2000
- ------------------------------------
(Robert R. B. Dykes)
/s/ Per-Kristian Halvorsen Director June 26, 2000
- ------------------------------------
(Per-Kristian Halvorsen)
/s/ Robert S. Miller Director June 26, 2000
- ------------------------------------
(Robert S. Miller)
/s/ Bill Owens Director June 26, 2000
- ------------------------------------
(Bill Owens)
/s/ Daniel H. Schulman Director June 26, 2000
- ------------------------------------
(Daniel H. Schulman)
73
76
SCHEDULE II
SYMANTEC CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
Balance at Charged to Balance at
Beginning Costs and End
of Period Expenses Write-offs of Period
- ------------------------------------ ---------- ---------- ---------- ---------
Allowance for doubtful accounts:
Year ended March 31, 1998 $ 4,300 $ 1,036 $ (920) $ 4,416
Year ended March 31, 1999 4,416 609 (79) 4,946
Year ended March 31, 2000 4,946 4,031 (2,533) 6,444
74
77
EXHIBIT INDEX
3.01 The Registrant's Restated Certificate of Incorporation. (Incorporated
by reference to Annex G filed with the Registrant's Joint Management
Information Circular and Proxy Statement (No. 000-17781) dated
October 17, 1995.)
3.02 The Registrant's Bylaws. (Incorporated by reference to Exhibit 3.02
filed with the Registrant's Registration Statement on Form S-1 (No.
33-28655) originally filed May 19, 1989, and amendment No. 1 thereto
filed June 21, 1989, which Registration Statement became effective
June 22, 1989.)
3.03 The Registrant's Bylaws, as amended and restated effective August 11,
1998. (Incorporated by reference to Exhibit 3.1 filed with the
Registrant's Current Report 8-K filed August 19, 1998.)
4.01 Registration Rights Agreement. (Incorporated by reference to Exhibit
4.02 filed with the Registrant's Registration Statement on Form S-4
(No. 33-35385) initially filed June 13, 1990.)
4.02 Amendment No. One to Registration Rights Agreement. (Incorporated by
reference to Exhibit 4.03 filed with the Registrant's Annual Report
on Form 10-K for the year ended April 2, 1993.)
4.03 Amendment No. Two to Registration Rights Agreement. (Incorporated by
reference to Exhibit 4.04 filed with the Registrant's Annual Report
on Form 10-K for the year ended April 2, 1993.)
4.04 Plan of Arrangement and Exchangeable Share Provisions related to the
acquisition of Delrina. (Incorporated by reference to Annex D filed
with the Registrant's Joint Management Information Circular and
Proxy Statement dated October 17, 1995.)
4.05 Support Agreement, dated November 22, 1995, between Symantec and
Delrina. (Incorporated by reference to Annex E filed with the
Registrant's Joint Management Information Circular and Proxy
Statement dated October 17, 1995.)
4.06 Form of Voting and Exchange Trust Agreement, dated November 22,
1995, between Symantec and Delrina. (Incorporated by reference to
Annex F filed with the Registrant's Joint Management Information
Circular and Proxy Statement dated October 17, 1995.)
4.07 Rights Agreement, dated as of August 12, 1998, between Symantec
Corporation and BankBoston, N.A., as Rights Agent, which includes as
Exhibit A the Form of Certificate of Designations of Series A Junior
Participating Preferred Stock, as Exhibit B the Form of Right
Certificate and as Exhibit C the Summary of Rights to Purchase
Preferred Shares. (Incorporated by reference to Exhibit 4.1 filed
with the Registrant's Form 8-A filed August 19, 1998.)
10.01 Amended Agreement Respecting Certain Rights of Publicity.
(Incorporated by reference to Exhibit 10.04 filed with the
Registrant's Registration Statement on Form S-4 (No. 33-35385)
initially filed June 13, 1990.)
10.02* Form of Stock Option Agreement and Form of Stock Option Exercise
Request, as currently in effect, under the Registrant's 1988
Employees Stock Option Plan. (Incorporated by reference to Exhibit
10.10 filed with the Registrant's Registration Statement on Form S-4
(No. 33-35385) initially filed June 13, 1990.)
10.03* Form of Stock Option Grant and Stock Option Exercise Notice and
Agreement under the Registrant's 1988 Directors Stock Option Plan.
(Incorporated by reference to Exhibit 10.12 filed with the
Registrant's Registration Statement on Form S-4 (No. 33-35385)
initially filed June 13, 1990.)
10.04* 1988 Employees Stock Option Plan, as amended to date. (Incorporated
by reference to Exhibit 4.02 filed with the Registrant's
Registration Statement on Form S-8 (No. 33-88694) filed January 23,
1995.)
10.05* 1989 Employee Stock Purchase Plan, as amended to date.
(Incorporated by reference to Exhibit 4.01 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-18353)
filed December 20, 1996.)
10.06* 1988 Directors Stock Option Plan, as amended to date. (Incorporated
by reference to Exhibit 10.09 filed with the Registrant's Annual
Report on Form 10-K for the year ended April 2, 1993.)
10.07* 1993 Directors Stock Option Plan, as amended. (Incorporated by
reference to Exhibit 10.07 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994.)
10.08* 1994 Patent Incentive Plan. (Incorporated by reference to Exhibit
4.01 filed with the Registrant's Registration Statement on Form S-8
(No. 33-60141) filed June 9, 1995.)
10.09* Symantec Corporation 1996 Equity Incentive Plan. (Incorporated by
reference to Exhibit 4.01 filed with the Registrant's Registration
Statement on Form S-8 (No. 333-18355) filed December 20, 1996.)
10.10* Symantec Corporation 1996 Equity Incentive Plan, as amended.
(Incorporated by reference to Exhibit 4.01 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-39175)
filed October 31, 1997.)
10.11* Symantec Corporation Deferred Compensation Plan, dated as of
November 7, 1996. (Incorporated by reference to Exhibit 10.11 filed
with the Registrant's Annual Report on Form 10-K for the year ended
March 28, 1997.)
10.12* Symantec Corporation Restricted Stock Purchase Agreement, dated
April 14, 1999. (Incorporated by reference to Exhibit 4.03 filed
with the Registrant's Registration Statement on Form S-8 (No.
333-31632) filed March 3, 2000.)
10.13* Symantec Corporation Stock Option Grant, dated April 14, 1999.
(Incorporated by reference to Exhibit 4.03 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-31540)
filed March 3, 2000.)
- -----------------
* Indicates a management contract or compensatory plan or arrangement.
78
10.14* Symantec Corporation Acquisition Plan, dated July 15, 1999.
(Incorporated by reference to Exhibit 4.03 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-31526)
filed March 3, 2000.)
10.15 Participation Agreement, dated as of October 18, 1996, by and among
Symantec Corporation, Sumitomo Bank Leasing and Financing, Inc., The
Sumitomo Bank, Limited, San Francisco Branch and the other Various
Financial Institutions Identified Herein and the Sumitomo Bank,
Limited, San Francisco Branch. (Incorporated by reference to Exhibit
10.01 filed with the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 27, 1996.)
10.16 Participation Agreement, as amended by that certain Master Amendment
No. 2, dated as of September 21, 1998, between Symantec Corporation,
Sumitomo Bank Leasing and Finance, Inc. and The Sumitomo Bank,
Limited. (Incorporated by reference to Exhibit 10.02 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 2, 1998.)
10.17 Amended and Restated Participation Agreement, dated as of February
9, 1999 by and among Symantec Corporation, Sumitomo Bank Leasing and
Financing, Inc, The Bank of Nova Scotia, the other Various Financial
Institutions Identified Herein and the Sumitomo Bank, Limited, Los
Angeles Branch. (Incorporated by reference to Exhibit 10.15 filed
with the Registrant's Annual Report on Form 10-K for the year ended
April 2, 1999.)
10.18 Amended and Restated Participation Agreement, dated as of February
2, 2000, by and among Symantec Corporation, Sumitomo Bank Leasing
and Financing, Inc, The Bank of Nova Scotia, the other Various
Financial Institutions Identified Herein and the Sumitomo Bank,
Limited, Los Angeles Branch.
10.19 Appendix A to Participation Agreement, Master Lease, Lease
Supplements Loan Agreements, Pledge Agreement, Lessor Mortgages and
Guaranty. (Incorporated by reference to Exhibit 10.02 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 27, 1996.)
10.20 Restated and amended Appendix A to Participation Agreement, Master
Lease, Lease Supplements Loan Agreements, Pledge Agreement, Lessor
Mortgages, and Guaranty. (Incorporated by reference to Exhibit 10.17
filed with the Registrant's Annual Report on Form 10-K for the year
ended April 2, 1999.)
10.21 Master Lease and Deed of Trust, as amended, dated as of October
18, 1996, between Symantec Corporation and Sumitomo Bank Leasing and
Finance, Inc. (Incorporated by reference to Exhibit 10.14 filed with
the Registrant's Annual Report on Form 10-K for the year ended March
28, 1997.)
10.22 Amended and Restated Master Lease and Deed of Trust, dated as of
February 9, 1999, between Symantec Corporation and Sumitomo Bank
Leasing and Finance, Inc. (Incorporated by reference to Exhibit
10.19 filed with the Registrant's Annual Report on Form 10-K for the
year ended April 2, 1999.)
10.23 Guaranty, dated as of October 18, 1996, made by Symantec Corporation
in favor of Various Financial Institutions and The Sumitomo Bank,
Limited, San Francisco Branch. (Incorporated by reference to Exhibit
10.05 filed with the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 27, 1996).
10.24 Amended and Restated Guaranty, dated as of February 9, 1999, made by
Symantec Corporation in favor of Various Financial Institutions
Identified Herein and The Sumitomo Bank, Limited, San Francisco
Branch. (Incorporated by reference to Exhibit 10.21 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 2,
1999.)
10.25 Pledge Agreement, dated as of October 18, 1996, made by Symantec
Corporation, in favor of Sumitomo Bank, Limited, San Francisco
Branch for the benefit of the Lenders, and Donaldson, Lufkin,
Jenrette Securities Corporations, as collateral agent. (Incorporated
by reference to Exhibit 10.06 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 27, 1996.)
10.26 Pledge Agreement, as amended, by that certain Master Amendment No.
2, dated as of September 21, 1998, between Symantec Corporation, the
Bank, and Donaldson, Lufkin & Jenrette Securities Corporation.
(Incorporated by reference to Exhibit 10.02 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 2, 1998.)
- -------------
* Indicates a management contract or compensatory plan or arrangement.
79
10.27 Amended and Restated Pledge Agreement, dated as of February 2, 1999,
made by Symantec Corporation and Delrina Corporation, in favor of
Sumitomo Bank, Limited, Los Angeles Branch for the benefit of the
Lenders, and Donaldson, Lufkin, Jenrette Securities Corporations, as
collateral agent. (Incorporated by reference to Exhibit 10.24 filed
with the Registrant's Annual Report on Form 10-K for the year ended
April 2, 1999.)
10.28 Assignment of Lease and Rent, as amended, dated as of October 18,
1996, from Sumitomo Bank Leasing and Finance, Inc., The Sumitomo
Bank, Limited, San Francisco Branch. (Incorporated by reference to
Exhibit 10.17 filed with the Registrant's Annual Report on Form 10-K
for the year ended March 28, 1997.)
10.29 Amended and Restated Assignment of Lease and Rent, dated as of
February 9, 1999, from Sumitomo Bank Leasing and Finance, Inc., The
Sumitomo Bank, Limited, San Francisco Branch. (Incorporated by
reference to Exhibit 10.26 filed with the Registrant's Annual Report
on Form 10-K for the year ended April 2, 1999.)
10.30 Agreement of Purchase and Sale of Cupertino City Center One between
Cigna Property and Casualty Insurance Company and Symantec
Corporation. (Incorporated by reference to Exhibit 10.18 filed with
the Registrant's Annual Report on Form 10-K for the year ended March
28, 1997.)
10.31 Agreement for Purchase and Sale and Escrow Instructions of 10201
Torre Avenue, Cupertino, CA. (Incorporated by reference to Exhibit
10.19 filed with the Registrant's Annual Report on Form 10-K for the
year ended March 28, 1997.)
10.32 Agreement for Purchase and Sale and Escrow Instructions, as amended,
dated as of May 31, 1996. (Incorporated by reference to Exhibit
10.20 filed with the Registrant's Annual Report on Form 10-K for the
year ended March 28, 1997.)
10.33 Agreement for Exchange and Purchase and Escrow Instructions, dated
September 22, 1998, between Symantec Corporation with respect to
CCC5 and WHQ and TST Development, L.L.C. with respect to CCC2.
(Incorporated by reference to Exhibit 10.06 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 2, 1998.)
10.34 Agreement for Exchange and Purchase and Escrow Instructions, as
amended, dated November 4, 1998, between Symantec Corporation and
TST Development, L.L.C. (Incorporated by reference to Exhibit 10.07
filed with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended October 2, 1998.)
10.35 Amendment No. 1 of Agreement for Exchange and Purchase and Escrow
Instructions, dated as of November 4, 1998, between Symantec
Corporation and TST Development, L.L.C. (Incorporated by reference
to Exhibit 10.01 filed with the Registrant's Quarterly Report on
Form 10-Q for the quarter ended January 1, 1999.)
10.36 Amendment No. 2 of Agreement for Exchange and Purchase and Escrow
Instructions, dated as of November 20, 1998, between Symantec
Corporation and TST Development, L.L.C. (Incorporated by reference
to Exhibit 10.02 filed with the Registrant's Quarterly Report on
Form 10-Q for the quarter ended January 1, 1999.)
10.37 Amendment No. 3 of Agreement for Exchange and Purchase and Escrow
Instructions, dated as of December 4, 1998, between Symantec
Corporation and TST Development, L.L.C. (Incorporated by reference
to Exhibit 10.03 filed with the Registrant's Quarterly Report on
Form 10-Q for the quarter ended January 1, 1999.)
10.38 Amendment No. 4 of Agreement for Exchange and Purchase and Escrow
Instructions, dated as of December 15, 1998, between Symantec
Corporation and TST Development, L.L.C. (Incorporated by reference
to Exhibit 10.04 filed with the Registrant's Quarterly Report on
Form 10-Q for the quarter ended January 1, 1999.)
10.39 Amended and Restated Credit Agreement, dated May 29, 2000, by and
between Symantec Corporation and Bank of America, N.A.
10.40 Loan Agreement, dated as of October 18, 1996, among Sumitomo Bank
Leasing and Finance, Inc., Various Financial Institutions Identified
Herein and The Sumitomo Bank, Limited, San Francisco
- ---------------
* Indicates a management contract or compensatory plan or arrangement.
80
Branch. (Incorporated by reference to Exhibit 10.21 filed with the
Registrant's Annual Report on Form 10-K for the year ended March 28,
1997.)
10.41 Amended and Restated Loan Agreement, dated as of February 9, 1999,
among Sumitomo Bank Leasing and Finance, Inc.3, Various Financial
Institution Identified Herein, The Bank of Nova Scotia and The
Sumitomo Bank, Limited, Los Angeles Branch. (Incorporated by
reference to Exhibit 10.37 filed with the Registrant's Annual Report
on Form 10-K for the year ended April 2, 1999.)
10.42 Construction Agency Agreement, dated as of March 3, 1997, between
Sumitomo Bank Leasing and Finance, Inc., and Symantec Corporation.
(Incorporated by reference to Exhibit 10.22 filed with the
Registrant's Annual Report on Form 10-K for the year ended March 28,
1997.)
10.43 Construction Agency Agreement, dated as of February 9, 1999, between
Sumitomo Bank Leasing and Finance, Inc., and Symantec Corporation.
(Incorporated by reference to Exhibit 10.39 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 2,
1999.)
10.44 Limited Waiver and Amendment, dated September 30, 1999, by and among
Symantec Corporation, Sumitomo Bank Lease and Finance, Inc., The
Bank of Nova Scotia, and The Sumitomo Bank, Limited. (Incorporated
by reference to Exhibit 10.03 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended October 1, 1999.)
10.45 Symantec - CC5 Office Building and Parking Structure, as amended,
dated as of May 5, 1997, made by and between Symantec Corporation
and Webcor Builders. (Incorporated by reference to Exhibit 10.23
filed with the Registrant's Annual Report on Form 10-K for the year
ended March 28, 1997.)
10.46 Office building lease, dated as of April 10, 1991, between the
Registrant and Maguire Thomas Partners Colorado Place regarding
property located in Santa Monica, California. (Incorporated by
reference to Exhibit 10.25 filed with the Registrant's Annual Report
on Form 10-K for the year ended March 31, 1991.)
10.47 Office building lease, as amended, dated as of September 1, 1997,
between Colorado Place Partners, LLC and Symantec Corporation
regarding property located in Santa Monica, California.
(Incorporated by reference to Exhibit 10.01 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
July 3, 1998.)
10.48 Fifth Amendment to Lease, dated as of June 24, 1999, by and between
Colorado Place Partners, LLC and Symantec Corporation, regarding
property located in Santa Monica, California. (Incorporated by
reference to Exhibit 10.01 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended October 1, 1999.)
10.49 Office building lease, as amended, dated as of May 1, 1998, by and
between RND Funding Company I and Symantec Corporation regarding
property located in Sunnyvale, California. (Incorporated by
reference to Exhibit 10.01 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended October 2, 1998.)
10.50 Office building lease, dated as of April 19, 1995, between the
Registrant and CIGNA Property and Casualty Insurance Company
regarding property located in Cupertino, California. (Incorporated
by reference to Exhibit 10.16 filed with the Registrant's Annual
Report on Form 10-K for the year ended March 31, 1995.)
10.51 Office building lease, as amended, dated as of December 1, 1995,
between Delrina (Canada) Corporation and Sherway Centre Limited
regarding property located in Toronto, Canada. (Incorporated by
reference to Exhibit 10.01 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended December 29, 1995.)
10.52 Office building lease, as amended, dated as of December 17, 1996,
between Delrina (Canada) Corporation, Delrina Corporation and
Sherway Centre Limited regarding property located in Toronto,
Canada. (Incorporated by reference to Exhibit 10.02 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
July 3, 1998.)
10.53 Office building lease, dated as of April 9, 1998, between Hill
Samuel Bank Limited and Symantec (UK) Limited and Symantec
Corporation regarding property located in Maidenhead, United
Kingdom. (Incorporated by reference to Exhibit 10.03 filed with the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
July 3, 1998.)
- ---------------------
* Indicates a management contract or compensatory plan or arrangement.
81
10.54 Form of Indemnity Agreement with Officers and Directors.
(Incorporated by reference to Exhibit 10.17 filed with the
Registrant's Registration Statement on Form S-1 (No. 33-28655)
originally filed May 19, 1989, and amendment No. 1 thereto filed
June 21, 1989, which Registration Statement became effective June
22, 1989.)
10.55* Full Recourse Promissory Note and Pledge Agreement between the
Company and Gordon E. Eubanks, Jr. (Incorporated by reference to
Exhibit 10.19 filed with the Registrant's Annual Report on Form 10-K
for the year ended April 2, 1993.)
10.56* Form of Promissory Note and Pledge Agreement between the Company
and certain executives. (Incorporated by reference to Exhibit 10.20
filed with the Registrant's Annual Report on Form 10-K for the year
ended April 2, 1993.)
10.57* Promissory Note between the Company and Mansour Safai.
(Incorporated by reference to Exhibit 10.52 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 2,
1999.)
10.58* Promissory Note between the Company and Keith Robinson.
(Incorporated by reference to Exhibit 10.53 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 2,
1999.)
10.59* Promissory Note between the Company and John W. Thompson.
(Incorporated by reference to Exhibit 10.54 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 2,
1999.)
10.60* Form of Housing Assistance Agreement between the Company and
certain executives. (Incorporated by reference to Exhibit 10.26
filed with the Registrant's Registration Statement on Form S-4 (No.
33-35385) initially filed June 13, 1990.)
10.61 Note Purchase Agreement, dated April 2, 1993, among Symantec
Corporation, Morgan Guaranty Trust Company of New York, as Trustee,
J. P. Morgan Investments Management, Inc., as Investment Manager and
The Northwestern Mutual Life Insurance Company, including Form of
Convertible Subordinated Notes. (Incorporated by reference to
Exhibit 10.30 filed with the Registrant's Annual Report on Form 10-K
for the year ended April 2, 1993.)
10.62 The Registrant's Section 401(k) Plan, as amended. (Incorporated by
reference to Exhibit 10.25 filed with the Registrant's Annual Report
on Form 10-K for the year ended March 31, 1995.)
10.63* Form of Executive Compensation Agreement between the Company and
certain executives. (Incorporated by reference to Exhibit 10.25
filed with the Registrant's Annual Report on Form 10-K for the year
ended March 31, 1995.)
10.64* Form of President and CEO Annual Incentive Plan.
10.65* Form of Vice President Annual Incentive Plan (No Division/Business
Unit Objectives.)
10.66* Form of Vice President Annual Incentive Plan (With
Division/Business Unit Objectives.)
10.67 Assignment of Copyright and Other Intellectual Property Rights.
(Incorporated by reference to appendix to Prospectus/Proxy Statement
filed with the Registrant's Registration Statement on Form S-4 (No.
33-35385) initially filed June 13, 1990.)
10.68* Retirement and Consulting Agreement between the Company and Gordon
E. Eubanks, Jr. (Incorporated by reference to Exhibit 10.62 filed
with the Registrant's Annual Report on Form 10-K for the year ended
April 2, 1999.)
10.69* Supplemental Option Vesting and Severance Arrangement terms and
conditions between the Company and Greg Myers. (Incorporated by
reference to Exhibit 10.63 filed with the Registrant's Annual Report
on Form 10-K for the year ended April 2, 1999.)
10.70* Employment Agreement between Symantec Corporation and John W.
Thompson. (Incorporated by reference to Exhibit 10.67 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 2,
1999.)
10.71 Combination Agreement between Symantec Corporation and Delrina
Corporation dated July 5, 1995. (Incorporated by reference to
Exhibit 10.01 filed with the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995.)
10.72 Asset Purchase Agreement, dated as September 26, 1996, by and
between Delrina and JetForm. (Incorporated by reference to Exhibit
2.01 filed with the Registrant's Current Report of Form 8-K filed
September 26, 1996.)
- ----------------
* Indicates a management contract or compensatory plan or arrangement.
82
10.73 Asset Purchase Agreement, as amended, dated as of March 28, 1998, by
and between Delrina and JetForm. (Incorporated by reference to
Exhibit 10.44 filed with the Registrant's Annual Report on Form 10-K
for the year ended April 3, 1998.)
10.74 Asset Purchase Agreement, as amended, dated as of June 29, 1998, by
and between Delrina and JetForm. (Incorporated by reference to
Exhibit 10.05 filed with the Registrant's Quarterly Report on Form
10-Q for the quarter ended July 3, 1998.)
10.75 Asset Purchase Agreement, as amended, dated as of March 27, 1997, by
and between Hewlett-Packard Company and Symantec Corporation.
(Incorporated by reference to Exhibit 10.43 filed with the
Registrant's Annual Report on Form 10-K for the year ended March 28,
1997.)
10.76 Master Agreement, dated May 18, 1998, between International Business
Machines Corporation and Symantec Corporation. (Confidential
treatment has been requested with respect to portions of this
exhibit.) (Incorporated by reference to Exhibit 10.46 filed with the
Registrant's Annual Report on Form 10-K for the year ended April 3,
1998.)
10.77 Asset Purchase Agreement, dated as of June 24, 1998, among Symantec
Corporation and its wholly-owned subsidiary, Symantec Limited and
Binary Research Ltd. and its wholly-owned subsidiary, Binary
Research International, Inc. (Incorporated by reference to Exhibit
10.04 filed with the Registrant's Quarterly Report on Form 10-Q for
the quarter ended July 3, 1998.)
10.78 Software License Agreement, dated as of September 27, 1998, between
Symantec Corporation and Intel Corporation. (Incorporated by
reference to Exhibit 10.1 filed with the Registrant's Current Report
of Form 8-K filed October 5, 1998.)
10.79 Asset Purchase Agreement, dated December 10, 1999, among the
Registrant, Symantec Limited, BEA Systems, Inc., and WB Information
Corporation. (Incorporated by reference to Exhibit 99.01 filed with
the Registrant's Form 8-K, filed January 14, 2000.)
10.80 Software License Agreement, dated December 6, 1999, by and among
SalesLogix Corporation, Symantec Corporation and Symantec Limited.
(Incorporated by reference to Exhibit 99.01 filed with the
Registrant's Form 8-K, filed January 14, 2000.)
10.81 Class action complaint filed by the law firm of Milberg Weiss
Bershad Hynes & Lerach in Superior Court of the State of California,
County of Santa Clara against the Company and several of its current
and former officers and directors. (Incorporated by reference to
Exhibit 10.35 filed with the Registrant's Annual Report of Form 10-K
for the year ended March 31, 1996.)
21.01 Subsidiaries of the Registrant.
23.01 Consent of Ernst & Young LLP, Independent Auditors.
27.01 Financial Data Schedule for the Year Ended March 31, 2000.
(b) Reports on Form 8-K:
A report on Form 8-K was filed by the Company on January 14, 2000, reporting
that the Company completed the transfer of the principal assets and
intangible assets associated with the Visual Cafe product line. This
announcement was pursuant to an Asset Purchase Agreement dated December 10,
1999, by and between Symantec Corporation, Symantec Limited, BEA Systems,
Inc., and WB Information Corporation.
A report on Form 8-K was filed by the Company on January 14, 2000, reporting
that the Company had licensed certain technology and completed the transfer
of certain assets and liabilities of the ACT! product line to SalesLogix
Corporation. This announcement was pursuant to an exclusive Software License
Agreement dated December 6, 1999, by and among Symantec Corporation,
Symantec Limited and SalesLogix Corporation.
(c) Exhibits: The Registrant hereby files as part of this Form 10-K the exhibits
listed in Item 14(a)3, as set forth above.
(d) Financial Statement Schedules: The Registrant hereby files as part of this
Form 10-K the schedule listed in Item 14(a)2, as set forth on page 74.
- ----------------
* Indicates a management contract or compensatory plan or arrangement.