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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 30, 2001.
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
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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) 517-8000
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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 15, 2001 as reported on the Nasdaq National Market and with respect to the
Delrina exchangeable stock on the Toronto Stock Exchange:
$ 3,849,258,561
Number of shares outstanding of each of the registrant's classes of common
stock, including 1,203,844 shares of Delrina exchangeable stock, as of June 15,
2001:
73,938,889
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 12,
2001, are incorporated by reference into Part III.
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SYMANTEC CORPORATION
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 30, 2001
TABLE OF CONTENTS
PART I
Page
----
Item 1. Business.............................................................................. 1
Item 2. Properties............................................................................ 9
Item 3. Legal Proceedings..................................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders................................... 10
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................. 11
Item 6. Selected Financial Data............................................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................................... 13
Item 7A. Quantitative and Qualitative Disclosures about Market Risk............................ 29
Item 8. Financial Statements and Supplementary Data........................................... 30
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure............................................................................ 30
PART III
Item 10. Directors and Executive Officers of the Registrant.................................... 31
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....................................................................................... 77
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"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 and uncertainties. Our actual results, levels of activity,
performance or achievements may be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. Factors that may cause or contribute to this
difference 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 -- Business Risk
Factors." 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, firewall, virtual private network, or
VPN, vulnerability management, intrusion detection, remote management
technologies and security services to consumers and enterprises around the
world. Our Norton brand of consumer security products leads the market in
worldwide retail sales and industry awards. Founded in 1982, we have offices in
37 countries worldwide.
We have a 52/53-week fiscal accounting year. Accordingly, all references as of
and for the periods ended March 31, 2001, 2000 and 1999 reflect amounts as of
and for the periods ended March 30, 2001, March 31, 2000 and April 2, 1999,
respectively. The fiscal accounting years ended March 30, 2001, March 31, 2000
and April 2, 1999 each comprised 52 weeks of operations.
BUSINESS OVERVIEW
In fiscal 2001, we added key technologies by acquiring AXENT Technologies, Inc.
This acquisition will enable us to:
- provide enterprise customers with comprehensive security solutions;
- combine service offerings to provide a broader range of security
services and consulting; and
- accelerate new product development with one of the largest teams of
enterprise security professionals in the industry.
We currently view our business in five operating segments: Consumer Products,
Enterprise Security, Enterprise Administration, Services and Other. For further
discussion on financial information related to our operating segments, see Note
17 of Notes to Consolidated Financial Statements of this Form 10-K.
CONSUMER PRODUCTS
Our Consumer Products segment provides solutions to individual users, home
offices and small businesses. The segment'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 subscribe to easily downloadable content updates
including virus definitions, firewall rules, URL databases and uninstall
scripts. Our consumer products run primarily on Windows and Macintosh operating
systems. Symantec AntiVirus also runs on Palm OS.
Norton AntiVirus runs in a computer's background and protects against, detects
and eliminates computer viruses. This software covers multiple sources of
infection, including the Internet, e-mail attachments, floppy disks, shared
files and networks. Norton AntiVirus keeps virus definitions up to date.
Automatic LiveUpdate detects new definitions created by Symantec AntiVirus
Research Center and downloads and installs those definitions on the user's
computer, eliminating the need for users to manually update virus definitions.
Symantec AntiVirus Research Center provides 24
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hours a day, 7 days a week research and analysis capability to ensure that
customers have the highest level of protection available.
Norton Internet Security is a fully integrated suite that provides total
Internet protection for the home computer. The suite includes Norton AntiVirus,
Norton Personal Firewall, and Norton Privacy Control. The Family Edition of
Norton Internet Security includes Norton Parental Control. 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 also helps
restrict user access to specified Web sites and restricts the submission of
personal information through Web forms without the user's approvals (Family
Edition only). The users of Norton Internet Security also can block banner ads.
Norton SystemWorks is a fully integrated suite of problem-solving utilities that
protects PC users from viruses and crashes, solves Windows problems, removes
unneeded files, and updates users' applications. Included in this suite are the
latest complete versions of our products: Norton AntiVirus, Norton Utilities,
and Norton CleanSweep. Also included are Internet-based services such as Norton
Web Services, provided by CNET and Symantec Web Partners.
ENTERPRISE SECURITY
The objective of our Enterprise Security segment is to provide organizations
with technology, services and response capabilities to deal with their specific
security needs. In addition to our virus protection and filtering products, we
have expanded our technology offerings to include intrusion detection,
vulnerability management, web access management, and firewalls/VPN protection.
We have also expanded our solutions to multiple platforms and to all levels of
the enterprise network: gateways, servers and clients (desktop PCs, laptops,
mobile devices, and PDAs). At the gateway level, our products run on Windows NT,
Solaris, and Linux platforms. Our products at the server level operate on
Windows NT, UNIX, Linux, and other key server platforms. At the end user level,
our products run on the Windows platform.
Virus Protection and Filtering
Our virus protection and filtering technology is a core element of Internet
security that combines multi-tier protection against viruses with the management
of Internet communications for sensitive content or misuse of data. Users of our
virus protection and filtering products 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. Our virus protection and e-mail and
Internet content filtering technologies protect gateways, servers and clients at
multiple entry points from known and unknown threats. Protection from virus
attacks is the most well-known and largest market component of the enterprise
security area.
Symantec AntiVirus provides virus protection for computers running in every tier
of an enterprise's network, including Internet gateways, desktops, file and
print servers, mail servers and firewalls. Symantec AntiVirus also enables
corporations to keep their virus definitions up to date via LiveUpdate.
CarrierScan Server enables companies to tightly integrate anti-virus scanning
and repair capabilities into services such as Web-based e-mail, Web-based file
sharing, Internet-available databases and other applications that deliver files
over the Internet. CarrierScan Server can be deployed on one or more servers
inside a company's infrastructure.
Firewalls/VPN
We offer firewall solutions from the gateway to end devices. Firewalls are not
only installed at the Internet gateways, but desktop firewalls also are
installed at clients as well as internal firewalls around key servers.
Symantec Desktop Firewall enables administrators to quickly roll out a highly
effective solution that works intelligently in the background, monitoring both
inbound and outbound communications. Since Symantec Desktop Firewall is
optimized for always-on broadband connections such as DSL and cable modems that
are favored by mobile users, it is a highly effective solution for securing
remote communications.
Symantec Enterprise Firewall provides an advanced perimeter security solution
without compromising network performance. It protects against unwanted
intrusion, while allowing approved business traffic to traverse the enterprise
network.
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VelociRaptor Firewall appliance is an integrated hardware/software solution that
ensures the security of vital information. With VelociRaptor Firewall, one
simply "plugs and protects" to provide a robust, secure connection to the
Internet, regardless of the organization size.
PowerVPN Server is designed to reduce the cost of managing remote access to
enterprise networks while enabling improved integration with valuable
supply-chain partners. Its technology ensures that corporations know and can
control traffic passing at the application and network levels.
Intrusion Detection
Organizations must protect information from unwanted users and hackers and
control access to information to maintain business integrity. At the gateway and
server level, our intrusion detection products will monitor systems for such
patterns of misuse and abuse and can warn organizations before systems are
misused or information is stolen.
Intruder Alert detects unauthorized and malicious activity, keeping systems,
applications and data secure from misuse and abuse. If these systems are
threatened, Intruder Alert can notify the user and take action to prevent
information theft or loss.
NetProwler complements existing security countermeasures and fortifies a
company's e-business initiatives by offering dynamic network intrusion detection
that transparently examines network traffic. It instantly identifies, logs, and
terminates unauthorized use, misuse and abuse of computer systems by internal
saboteurs and external hackers.
Vulnerability Management
At the gateway and server level, our vulnerability management products find
system vulnerabilities and ensure security policy compliance to proactively
reduce business risk. The initial step to reduce corporate risk is to
effectively measure compliance to a business security policy and detect
vulnerabilities where critical information resides. It is important to
understand the effectiveness of a security policy in order to properly define,
manage and enforce business policies and assess possible threats.
Enterprise Security Manager gives companies the ability to automate the
planning, management and control of security policies from a single location,
thereby saving time and money. Enterprise Security Manager provides an efficient
means of managing and controlling the policy while providing reports that enable
companies to prove tangible evidence of progress across the enterprise, from
their own workstations.
NetRecon is a network vulnerability management tool that discovers, analyzes and
reports holes in network security. NetRecon achieves this by conducting an
external review of network security by scanning and probing systems on the
network. NetRecon reenacts common intrusion or attack scenarios to identify and
report network vulnerabilities, while suggesting corrective actions.
Web Access Management
Our Web Access Management solutions enable customers, partners, suppliers and
employees to connect to a network safely, reducing operational costs and
enabling new business opportunities.
Webthority's advanced product architecture provides sophisticated and secure
control of valuable e-business data by handling user identification,
authorization and access control through the combination of a proxy server,
authentication agents and central management server.
ENTERPRISE ADMINISTRATION
Our Enterprise Administration 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, DSL, cable modems and infrared. pcAnywhere enables a remote PC user
to control and transfer data to and from a host PC. In addition, the remote PC,
laptop or PC terminal controls the operation of the often-distant host PC and
allows users at the host machine to view the operations being conducted from the
remote site.
Ghost Corporate Edition is a PC cloning solution that allows fast disk image
management, rollout and ongoing PC configuration. Ghost Corporate 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 cloned. The centralized
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management console enables IT personnel to initiate, configure and manage the
cloning of workstations across the network from a single location, saving
valuable time and resources.
SERVICES
Symantec Security Services provides information security solutions that
incorporate best-of-breed technology, security best practices and expertise and
global resources to help enable E-business success. Through its comprehensive
offerings, Symantec Security Services delivers holistic security assessments,
planning and implementation, proactive solutions for security management and
response, and knowledge transfer to develop internal security skills.
Consulting Services enables organizations to implement best-practices security
measures across the enterprise through comprehensive security assessments and
holistic planning and design. Consulting Services develops strategies for
managing and reducing risks to help organizations protect business-critical
assets.
Implementation Services provides the expertise that enables rapid technology
implementations and maximizes the value of security investments. Through
hands-on deployments of advanced security systems and technologies,
Implementation Services allows organizations to leverage the best-practices
security experience of industry experts in order to gain maximum enterprise
protection.
Managed Security Services provides a comprehensive array of outsourced security
management, monitoring, and response services that helps organizations solve
security problems cost effectively. Managed Security Services allows
organizations to leverage the knowledge of Internet security experts in order to
protect the value of their networked assets and infrastructure.
Education Services provides the training, skills development and certifications
that enable organizations to optimize the operation and administration of their
security systems. By developing and maintaining internal staff knowledge,
organizations can maximize the return on their security investments.
OTHER
Our Other segment is comprised of sunset products, products nearing the end of
their life cycle, and operations from our Visual Cafe and ACT! divested product
lines.
RECENT ACQUISITIONS AND DIVESTITURES
ACQUISITIONS
Since our initial public offering on June 23, 1989, we have completed
acquisitions of 23 businesses. Our recent acquisitions are as follows:
- AXENT Technologies, Inc. in the December 2000 quarter;
- 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; and
- IBM Corporation's anti-virus business also in the June 1998 quarter.
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. We have
acquired several businesses in the past, 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. For further discussion on our recent
acquisitions, see Note 3 of Notes to Consolidated Financial Statements of 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 the results prior to disposition in our
Other operating 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.
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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, resellers, and value-added resellers focusing on security solutions and
system integrators.
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, or ISPs. 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, corporate reseller, value-added resellers and system
integrator channels, in addition to our direct sales force.
We maintain distribution relationships with major independent distributors.
These distributors stock our packaged products for redistribution to independent
dealers, consultants and other resellers. We also maintain relationships with
major retailers, while marketing directly to these retailers through independent
distributors and cooperative marketing arrangements. Our indirect 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 marketing 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;
- radio broadcast 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 within the United States: 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 the volume of their purchases and their sale of products to
end-users. Volume incentive rebates are accrued as an offset to revenue when
revenue is recorded. From time to time, we also make rebates available to
individual end-users or consumers of various products acquired through major
retailers. End-user rebates are accrued as an offset to revenue when revenue is
recorded.
Product returns occur when we introduce upgrades and new versions of products or
when distributors or retailers have excess inventories, subject to various
contractual limitations. Our return policy allows distributors, subject to these
contractual 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 for a full refund within a reasonably
short period from the date of purchase. We estimate and maintain reserves for
such product returns. For further discussion, see Summary of Significant
Accounting Policies and Notes to Consolidated Financial Statements of this Form
10-K.
INTERNATIONAL SALES
Revenues outside of North America represented approximately 45%, 41% and 37% of
our net revenues for fiscal 2001, 2000 and 1999, respectively.
The majority of our net revenues from Europe are derived from sales by
affiliates of our major United States distributors. Additionally, we sell our
products through authorized distributors, which may be restricted to specified
territories. For some of our products, we translate the documentation, software
and packaging into the local language and prepare marketing programs for each
local market.
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We have marketing offices in Argentina, Australia, Austria, Belgium, Brazil,
Canada, China, Columbia, Czech Republic, Denmark, Finland, France, Germany,
Holland, Hong Kong, Hungary, India, Israel, Italy, Japan, Malaysia, Mexico, New
Zealand, Norway, Poland, Russia, Singapore, South Africa, South Korea, Spain,
Sweden, Switzerland, Taiwan, Turkey, United Arab Emirates and the 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
Consumer Product Support
Our product support program provides free self-help online services to all
consumer customers worldwide. In some countries, access to free telephone
support is also provided for a limited period of 30 to 90 days, depending upon
the country. After the initial period, telephone support is provided for a fee
throughout North America, as well as portions of Asia Pacific and Europe. For
some of our international customers, we continue to transition our product
support to be entirely fee based telephone support, along with free self-help
online support. Through LiveUpdate, we provide online access to application bug
fixes and/or patches for most of our currently marketed and developed products.
Enterprise Security Support
Our product support program provides annual support contracts to all enterprise
customers worldwide. Our annual support contracts provide 1) hot-line service
delivered by telephone, fax, e-mail and over the Internet; 2) immediate patches
for severe problems; 3) periodic software updates; 4) access to our technical
knowledge base and FAQ facility; and 5) an invitation to the annual user group
meeting.
We revise these fee-based support programs from time to time as customer
requirements change and as market trends dictate.
PRODUCT DEVELOPMENT, PARTNERSHIPS, INVESTMENTS AND ACQUISITIONS
We use a multiple product sourcing strategy that includes, as necessary:
- internal development;
- licensing from third parties;
- investment in companies; 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 focused product development groups 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 invest in companies with emerging technologies and companies that promote the
sale and use of our products. These investments are done in lieu of an
acquisition when timing is inappropriate or when the business models and sectors
fall out of our strategic requirements. These investments are complementary and
can enhance both financial returns and market growth.
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 of technologies, companies, and products and dispositions of
technologies and products and may acquire and/or dispose of other technologies,
companies and products in the future. For further discussion on our acquisitions
and divestitures, see Note 3 of Notes to Consolidated Financial Statements of
this Form 10-K.
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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, or ASPs,
key application software vendors and operating system providers. Our
competitiveness depends on our ability to deliver products that meet our
customers' needs by enhancing our existing solutions and offering reliable,
scalable and standardized 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 products and enterprise security and
administration segments are quality, employment of the most advanced technology,
time to market, price, reputation, breadth of product offerings, customer
support, brand recognition, and sales and marketing teams. In our services
segment, the principal competitive factors include technical capability,
customer responsiveness, price, ability to attract and retain talented and
experienced personnel, and reputation within the industry.
Competition in the consumer products market is intense. Some of the companies
that offer competing products to our Consumer Products offerings include
F-Secure, Internet Security Services, or ISS, McAfee.com, Network Associates,
Norman, Panda, Secure Computing, Sophos, and ZoneLabs. 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.
In the Enterprise Security and Administration market, we compete against several
companies who offer competing products to our technology solutions
(firewalls/VPN, intrusion detection, vulnerability management, web access
management, and virus protection) and support. Some of the companies that we
compete against are BindView, Checkpoint, Cisco, Computer Associates, ISS,
Netopia, Network Associates, Norman, Nortel, Panda, PentaSafe, PowerQuest, Stac
Software, SonicWALL, Traveling Software, Trend Micro, and WebSense.
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, Windows 2000, Windows Millennium Edition, and Windows XP, 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.
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MANUFACTURING
Our product development groups produce a set of master CD-ROMs or diskettes and
documentation for each product that are then duplicated or replicated and
packaged into products by our logistics organization. All of our domestic
manufacturing and order fulfillment is performed by an outside contractor under
the supervision of our domestic logistics organization. Purchasing of all raw
materials is done by Symantec personnel in our Cupertino, California facility
and Dublin, Ireland facility for products manufactured in those countries. The
manufacturing steps that are subcontracted to outside organizations include the
duplication of diskettes and replication of CD-ROMs, printing of documentation
materials and retail boxes, and assembly of the final packages. We perform
diskette duplication, assembly of the final packages, and order fulfillment in
our Dublin, Ireland manufacturing facility for most products distributed outside
of North and South 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 and scope of the proprietary rights
of others. Furthermore, other parties have asserted and may, in the future,
assert infringement claims against us. For further discussion on our current
litigation, 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, 2001, we employed approximately 3,800 people worldwide,
including approximately 1,950 in sales, marketing and related staff activities,
950 in product development, 100 in consulting services, and 800 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.
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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 Administration and sales 165,000 2006
(City Center 1)
Corporate Headquarters Administration, sales and marketing 144,000 2006
(City Center 2)
Eugene, Oregon Customer service, technical 162,000 2006
support and administration
Santa Monica, California Research and development 108,000 2007
and marketing
Beaverton, Oregon Research and development, sales, 81,000 2005
marketing and administration
Toronto, Canada Administration, sales, and technical 61,000 2005
support
San Antonio, Texas Research and development 28,000 2007
and marketing
Newport News, Virginia Research and development and sales 26,000 2006
International
Dublin, Ireland Administration, manufacturing 107,500 2026
and localization
Leiden, Holland Administration, sales, marketing 36,000 2004
and technical support
Our principal administrative, sales and marketing facilities are located in
Cupertino, California. We lease a number of additional facilities for
administrative, marketing, localization and technical support in the United
States, Canada, Ireland, Japan, the Netherlands, New Zealand and Taiwan; for
administration, marketing and technical support in Australia, Brazil, China,
India, Malaysia, Singapore and South Korea; and for administration and marketing
in Argentina, Austria, Belgium, Czech Republic, Denmark, Finland, France,
Germany, Hungary, Israel, Italy, Mexico, Norway, Poland, Russia, South Africa,
Spain, Sweden, Switzerland, Turkey, United Arab Emirates and the United Kingdom.
On March 30, 2001, we entered into a master lease agreement for land and the
construction of two office buildings, one approximately 100,000 square feet in
Newport News, Virginia, effective June 6, 2001, and another approximately
175,000 to 200,000 square feet in Springfield, Oregon, effective April 6, 2001.
For further discussion on this lease, see Note 8 of Notes to Consolidated
Financial Statements of this Form 10-K.
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.
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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, which is incorporated
herein by this reference.
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, 2001.
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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 2001 Fiscal 2000
-------------------------------------------- --------------------------------------------
Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
2001 2000 2000 2000 2000 1999 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
High $ 52.69 $ 45.25 $ 63.69 $ 71.50 $ 80.81 $ 66.44 $ 35.97 $ 28.00
Low 33.56 29.81 41.38 52.56 48.06 36.75 25.75 13.00
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 2001 Fiscal 2000
-------------------------------------------- --------------------------------------------
Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
2001 2000 2000 2000 2000 1999 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
High $ 80.00 $ 67.00 $ 93.00 $ 105.00 $ 116.00 $ 99.00 $ 54.00 $ 40.50
Low 58.05 42.50 63.00 79.00 70.00 55.00 38.50 20.00
As of March 31, 2001, there were approximately 986 stockholders of record,
including approximately 21 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.
For further discussion on our line of credit, see Note 7 of Notes to
Consolidated Financial Statements of this Form 10-K.
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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 2001, we acquired AXENT. 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 Research. 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.
On December 31, 1999, we divested our Visual Cafe and ACT! product lines.
Because the divestitures of the Visual Cafe and ACT! 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 per share) 2001 2000 1999 1998 1997
- ------------------------------------- ---------- ---------- ---------- ---------- ----------
Statements of Income Data:
Net revenues $ 853,554 $ 745,725 $ 592,628 $ 532,940 $ 452,933
Amortization of goodwill 71,336 17,884 6,175 -- --
Acquired in-process research and
development 22,300 4,300 27,465 -- 3,050
Litigation judgment, restructuring
and other expenses 3,664 9,018 10,930 -- 5,535
Operating income 109,600 135,203 27,841 54,924 17,550
Net income 63,936 170,148 50,201 85,089 26,068
Net income per share - basic $ 0.99 $ 2.94 $ 0.89 $ 1.52 $ 0.48
Net income per share - diluted $ 0.94 $ 2.73 $ 0.86 $ 1.42 $ 0.47
Shares used to compute net
income per share - basic 64,737 57,870 56,601 56,097 54,705
Shares used to compute net
income per share - diluted 68,237 62,214 59,289 60,281 55,407
March 31,
------------------------------------------------------------------
(In thousands) 2001 2000 1999 1998 1997
- ------------------------------------- ---------- ---------- ---------- ---------- ----------
Balance Sheet Data:
Working capital $ 369,184 $ 319,020 $ 94,036 $ 175,537 $ 129,569
Total assets 1,791,581 846,027 563,476 476,460 339,398
Long-term obligations, less
current portion 2,363 1,553 1,455 5,951 15,066
Stockholders' equity 1,376,501 617,957 345,113 317,507 217,979
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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 and uncertainties. Our actual results, levels of activity,
performance, or achievements may be materially different from any future
results, levels of activity, performance, or achievements expressed or implied
by such forward-looking statements. Factors that may cause or contribute to this
difference 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. We are
a leading provider of virus protection, firewall, virtual private network,
vulnerability management, intrusion detection, remote management technologies
and security services to consumers and enterprises around the world. Founded in
1982, we have offices in 37 countries worldwide.
During the last three fiscal years, we completed the following acquisitions and
divestitures:
Recent Acquisitions
In December 2000, we acquired 100% of the outstanding common stock of AXENT in
exchange for Symantec common stock. The transaction was accounted for as a
purchase. We recorded goodwill and other intangible assets in connection with
this acquisition and are amortizing these assets over four years. We wrote off
the acquired in-process research and development at the time of acquisition.
In March 2000, we purchased 100% of the outstanding common stock of 20/20
Software. The transaction was accounted for as a purchase and was paid for in
cash. We recorded goodwill and acquired product rights in connection with this
acquisition and are amortizing these assets over five years. We wrote off the
acquired in-process research and development at the time of acquisition.
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 connection with the acquisition
and are amortizing these assets over five years. We wrote off the acquired
in-process research and development at the time of acquisition.
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
and are amortizing these assets over five years. We wrote off the acquired
in-process research and development at the time of acquisition.
In November 1998, we completed a tender offer for the common stock of
Quarterdeck, obtaining 63% of the outstanding shares. In March 1999, we acquired
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 in
connection with the acquisition. We amortized the value of the
workforce-in-place over two years. We are amortizing the value of the remaining
intangibles, acquired product rights and goodwill over five years. We wrote off
the acquired in-process research and development at the time of acquisition.
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 and are amortizing the value of these assets over five years. We
wrote off the acquired in-process research and development at the time of
acquisition.
In June 1998, we acquired the operations of Binary Research, including the
"Ghost" product line. The acquisition was accounted for as a purchase and was
paid for with cash. We recorded intangible assets of acquired product rights and
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workforce-in-place as of the date of the acquisition and are amortizing the
value of the workforce-in-place and acquired product rights over four years. We
wrote off the acquired in-process research and development at the time
acquisition.
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. We recorded intangible assets of prepaid
research and development, customer base and goodwill. We amortized the value of
prepaid research and development over one year. We are amortizing the value of
both the goodwill and customer base over five years. We wrote off the acquired
in-process research and development at the time of acquisition.
Recent divestitures
On December 31, 1999, we divested our Visual Cafe and ACT! product lines.
Because the divestitures of the Visual Cafe and ACT! 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.
For further discussion on our recent acquisitions and divestitures, see Note 3
of the Notes to Consolidated Financial Statements of this Form 10-K.
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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, 2001 2000
--------------------------------- Compared Compared
2001 2000 1999 to 2000 to 1999
------- ------ ------ ----------- -----------
Net revenues 100% 100% 100% 14% 26%
Cost of revenues 15 16 16 2 25
------- ------ ------
Gross margin 85 84 84 17 26
Operating expenses:
Research and development 15 15 17 17 7
Sales and marketing 41 41 48 14 7
General and administrative 5 6 6 6 18
Amortization of goodwill 8 2 1 299 190
Amortization of intangibles from
acquisitions -- -- -- * *
Acquired in-process research and
development 3 1 5 419 (84)
Restructuring and other expenses -- 1 1 (59) 77
Litigation judgment -- -- 1 -- (100)
------- ------ ------
Total operating expenses 72 66 79 27 5
------- ------ ------
Operating income 13 18 5 (19) 386
Interest income 4 2 2 148 (1)
Interest expense -- -- -- * *
Income, net of expense, from sale of
technologies and product lines 2 15 7 (81) 161
Other income (expense), net (3) -- -- * *
------- ------ ------
Income before income taxes 16 35 14 (45) 209
Provision for income taxes 9 12 6 (12) 164
------- ------ ------
Net income 7% 23% 8% (62) 239
======= ====== ======
* Percentage change is not meaningful
NET REVENUES
Net revenues increased 14% from $746 million in fiscal 2000 to $854 million in
fiscal 2001. Net revenues increased 26% from $593 million in fiscal 1999 to $746
million in fiscal 2000. The increase in fiscal 2001 as compared to fiscal 2000
and the increase in fiscal 2000 as compared to fiscal 1999 were largely due to
increased sales to our enterprise customers, introductions of new products and
increased sales outside of North America. During the December 2000 quarter, we
acquired AXENT, which contributed approximately $42 million to our total net
revenues for fiscal 2001.
CONSUMER PRODUCTS
Our Consumer Products segment represented approximately 39%, 43% and 45% of
total net revenues for fiscal 2001, 2000 and 1999, respectively. Although net
revenues for this segment decreased as a percentage of net revenues, net
revenues in absolute dollars increased in fiscal 2001 as compared to fiscal
2000. Despite the slow-down in the personal computer sales environment, the
absolute dollars increased primarily due to the increase in customer focus on
protecting their home computers from Internet related attacks. This factor
contributed to growth in sales of our Norton Internet Security product, which
was introduced in the March 2000 quarter.
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Net revenues in absolute dollars increased in the Consumer Products segment in
fiscal 2000 over fiscal 1999. This increase was primarily due to increased sales
of our antivirus products following 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 since discontinued our
Norton 2000 product.
During fiscal 2001, 2000 and 1999, the financial impact of product price
reductions for certain of our products was offset by the increase in the volume
of products sold.
ENTERPRISE SECURITY AND ADMINISTRATION
Our Enterprise Security and Administration segments represented approximately
60%, 51% and 44% of total net revenues for fiscal 2001, 2000 and 1999,
respectively. Net revenues increased in fiscal 2001 as compared to 2000 due to
the continued strength of our virus protection solution, growth from our
vulnerability management and intrusion detection solutions as a result of the
AXENT acquisition, and the new release of our Ghost Corporate Edition product.
Net revenues increased in fiscal 2000 as compared to fiscal 1999 primarily due
to strong demand for our Enterprise Administration products Ghost Corporate
Edition and pcAnywhere and increases due to virus outbreaks and Year 2000
preparation.
SERVICES AND OTHER
Our Services and Other segments represented approximately 1%, 6% and 11% of
total net revenues for fiscal 2001, 2000 and 1999, respectively. The decrease in
fiscal 2001 and 2000 is due to our divestiture of the Visual Cafe and ACT!
product lines in December 1999, which is included in the Other segment.
INTERNATIONAL
Net revenues outside of North America represented 45%, 41% and 37% of total net
revenues for fiscal 2001, 2000 and 1999, respectively. International net
revenues increased by $74 million in fiscal 2001 to $382 million from $308
million in 2000. This increase in net revenues was the result of increased sales
in Europe and Japan. Net revenues from sales outside of North America increased
by $89 million in fiscal 2000 to $308 million from $219 million in fiscal 1999.
This increase was also largely due to stronger sales in Europe and Japan.
Weaknesses in currencies fixed to the euro during fiscal 2001, slightly offset
by strengths in other currencies, negatively impacted our international revenue
growth by approximately $44 million. The impact in fiscal 2000 was approximately
$15 million.
PRO FORMA REVENUE GIVING EFFECT TO THE ACQUISITION OF AXENT AND DIVESTITURES
For comparative purposes, the following table displays, on a pro forma basis,
our net revenues as if the acquisition of AXENT had occurred at the beginning of
fiscal 1999 and excluding the divested Visual Cafe and ACT! product lines:
Year ended March 31,
-------------------------------------------
(In thousands) 2001 2000 1999
- -------------------------------- ----------- ----------- -----------
Pro forma net revenues $ 944,150 $ 826,587 $ 632,243
Quarterly pro forma net revenues for the year ended March 31, 2001 would have
been as follows, for the quarter ended:
Consumer Enterprise Enterprise Total
(In thousands) Products Security Administration Services Other Company
- ----------------------------------------------------------------------------------------------
June 2000 $ 75,203 $ 85,998 $ 60,567 $ 2,836 $ 807 $225,411
September 2000 78,260 85,816 58,726 2,642 937 226,381
December 2000 93,761 92,005 53,747 1,995 244 241,752
March 2001 85,444 105,354 57,604 1,835 369 250,606
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 our distributors/resellers as
compared to products sold to our
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distributors/resellers does not impact our gross margin, as our gross margin is
materially 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
amortization and write-off of acquired product rights. Gross margin was 85% of
net revenues in fiscal 2001 and 84% of net revenues in fiscal 2000 and 1999. The
improvement in gross margin in fiscal 2001 was primarily due to higher margins
associated with the increase in enterprise related sales and cost savings
achieved in reduced packaging costs.
ACQUIRED PRODUCT RIGHTS
As indicated in the overview, during fiscal 2001 we acquired AXENT and recorded
approximately $86 million in acquired product rights. During fiscal 2000, we
acquired URLabs, L-3 Network Security's operations and 20/20 Software and
recorded approximately $11 million in acquired product rights. Amortization of
these intangibles, which are included in cost of revenues, totaled approximately
$17 million, $10 million and $6 million in fiscal 2001, 2000 and 1999,
respectively. The amortization of intangible assets from our fiscal 2001 and
2000 acquisitions will occur over the next 5 years.
For further discussion on acquired product rights and related amortization, see
Notes 3 and 4 of Notes to Consolidated Financial Statements of 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 remained flat at
15% for fiscal 2001 and 2000 and were 17% for fiscal 1999. The overall growth in
our net revenues was the primary reason for the decrease in research and
development expenses as a percentage of net revenues in fiscal 2000 as compared
to fiscal 1999.
Although research and development expenses remained flat as a percentage of net
revenues, absolute dollars increased 17% to approximately $127 million in fiscal
2001 from $108 million in fiscal 2000. The increase was a result of Enterprise
Security segment hiring, salary increases and other employee related expenses
and AXENT related research and development expenses which were included from the
date of acquisition. This increase was partially offset by the lack of expenses
in fiscal 2001 associated with the divested Visual Cafe and ACT! product lines
and the patent claim settlements in the Consumer Products segment.
Research and development expenses 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.
SALES AND MARKETING EXPENSES
Sales and marketing expenses as a percentage of net revenues remained flat at
41% for fiscal 2001 and 2000 and was 48% for fiscal 1999.
Sales and marketing expenses were approximately $350 million, $307 million and
$286 million in fiscal 2001, 2000 and 1999, respectively. The absolute dollar
increase in sales and marketing expenses in fiscal 2001 as compared to fiscal
2000 was primarily related to Enterprise Security segment hiring and increase in
salaries, commissions and other performance based compensation and AXENT related
sales and marketing expenses which were included from the date of acquisition.
The absolute dollar increase in sales and marketing dollars for fiscal 2000 over
fiscal 1999 was also due to increased headcount, related salaries, commission
and other performance based compensation.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses as a percentage of net revenues were 5% in
fiscal 2001 and 6% in fiscal 2000 and 1999.
General and administrative expenses were approximately $45 million, $42 million
and $36 million in fiscal 2001, 2000 and 1999, respectively. The absolute dollar
increase in general and administrative expenses in fiscal 2001 as compared to
fiscal 2000 was primarily due to an increase in salary related expenses and
other general administrative expenses, offset by a reduction in bad debt
expenses. General and administrative expenses in absolute dollars increased in
fiscal
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2000 as compared to fiscal 1999, primarily due to increases in salaries and
benefits, legal fees and bad debt expenses, offset by reductions in certain
consulting expenses incurred in fiscal 1999.
AMORTIZATION OF GOODWILL
Amortization of goodwill increased 299% to approximately $71 million in fiscal
2001 from $18 million in fiscal 2000. The increase was related to amortization
of goodwill associated with the acquisition of AXENT in fiscal 2001.
Amortization of goodwill increased 190% to approximately $18 million in fiscal
2000 from $6 million in fiscal 1999. The increase was related to the
amortization of goodwill associated with the acquisitions of URLabs, L-3 Network
Security's operations and 20/20 Software in fiscal 2000.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT EXPENSES
In fiscal 2001, we acquired AXENT. 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 Research's operations and Quarterdeck.
We wrote off approximately $22 million, $4 million and $27 million of acquired
in-process research and development associated with these acquisitions in fiscal
2001, 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.
The efforts required to develop the acquired in-process technology principally
relate to the completion of all planning, design, 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 2001, 2000 and 1999. As a result, we wrote off $22 million in connection
with our acquisition of AXENT in fiscal 2001 using the following analysis:
AXENT
The following discussion contains forward-looking statements of certain aspects
of our expected future operating results from the operations of AXENT. Actual
results may differ from the estimates expressly or implicitly referred to by
these forward-looking statements. Factors that may cause such differences
include those identified in the Business Risk Factors set forth in this Item 7.
We are using the acquired in-process research and development associated with
AXENT to create additional opportunities in Internet security, primarily in the
assessment and management of securing networks for enterprises.
The in-process technology acquired in the AXENT acquisition consisted primarily
of research and development related to the next generation of ESM, Intruder
Alert, Raptor Firewall, Webthority and other projects. AXENT's research and
development was focused on providing more robust features in its development of
these next generation products.
We assumed that revenue attributable to AXENT's in-process technologies would be
approximately $43 million in the first year and increase in the second and third
years of the five-year projection period at annual rates of 59% and 2%,
respectively, and then decrease at rates of 16% and 37% over the remaining two
years. We projected annual revenues to range between approximately $37 million
and $70 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.
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We estimated selling, general and administrative expenses for the in-process
technology to be 45% of revenue in each year of the five-year projection period.
We projected operating results before acquisition related amortization charges
to range from an $8 million profit during the first year to an $18 million
profit during each of the second and third years. We projected that the
operating profits would then decrease 16% in the fourth year and 38% in the
fifth year, resulting in profits of approximately $15 million and $9 million,
respectively.
We estimated costs to be incurred to reach technological feasibility of the
in-process technologies from AXENT as of the date of the acquisition to total
approximately $4.7 million. We estimated the in-process technology to be between
40% and 60% complete at that time.
We used a discount rate of 25% for valuing the in-process technologies from
AXENT, 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 15%, due to the risks
related 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
AXENT 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 Business Risk Factors set forth in this Item
7.
L-3 NETWORK SECURITY
The in-process technology acquired in the L-3 Network Security purchase
consisted primarily of research and development related to the next generation
of Retriever and Expert. We have integrated this technology into our
vulnerability management products. The original assumptions and projections
discussed in prior filings for the research and development acquired from L-3
Networks Security have not significantly changed.
URLABS
The in-process technology acquired in the URLabs purchase consisted primarily of
research and development related to the next generation of URLabs' two main
products, I-Gear and Mail-Gear, which have been added to our product offerings.
The original assumptions and projections discussed in prior filings for the
research and development acquired from URLabs have not significantly changed.
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 RESEARCH
The in-process technology acquired in the Binary Research acquisition primarily
consisted of disk cloning technologies associated with Ghost, the flagship
product of Binary Research, which has been added to our product offerings. The
assumptions and projections discussed in prior filings for the disk cloning
technologies acquired from Binary Research have not significantly changed.
INTEL
The in-process technology acquired in the Intel purchase consisted 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 are 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.
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RESTRUCTURING AND OTHER EXPENSES
During the March 2001 quarter, we reorganized various operating functions,
thereby reducing our workforce by 50 employees, and recorded approximately $1.1
million for the costs of severance, related benefits and outplacement services.
In addition, we provided approximately $1.2 million for costs of severance and
related benefits for six members of our senior management due to a realignment
of certain responsibilities.
During the December 2000 quarter, we reduced a portion of our operations in
Toronto, thereby reducing our workforce by 10 employees, and recorded
approximately $0.4 million for the costs of severance, related benefits and
abandonment of certain equipment. In addition, approximately $0.9 million was
provided for costs of severance and related benefits for four members of our
senior management due to a realignment of certain responsibilities.
During the March 2000 quarter, we reduced our operations in our Melville and
Toronto sites, thereby reducing our workforce by 96 employees. As a result, we
vacated the facility in Melville and we reduced 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 a charge of approximately
$1.8 million for severance, related benefits and outplacement services. The
sales workforce reduction affected 10 employees, resulting in a charge of
approximately $0.4 million for severance, related benefits and outplacement
services.
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 recorded 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 the 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.
For further discussion on restructuring and other expenses, see Note 12 of Notes
to Consolidated Financial Statements of 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. For
further discussion on our current litigation, see Note 15 of the Notes to
Consolidated Financial Statements of this Form 10-K.
INTEREST INCOME, INTEREST EXPENSE AND OTHER INCOME (EXPENSE)
Interest income was approximately $33 million in 2001 and was relatively flat at
$13 million in fiscal 2000 and 1999. Interest income increased 148% in fiscal
2001 over fiscal 2000. The increase was primarily due to a higher average cash
balance during fiscal 2001 as compared to prior years.
Interest expense was approximately $2 million in fiscal 1999. The interest
expense in fiscal 1999 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.
Interest expense was not significant in fiscal 2001 and 2000.
Other expense, net was approximately $23 million in fiscal 2001 and consisted
primarily of net losses on our equity investments. Other income, net was
approximately $1 million and $2 million in fiscal 2000 and 1999, respectively,
and was primarily comprised of gains and losses from non-functional currency
exchange transactions. For further
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discussion on the net loss on our equity investments, see Note 5 of Notes to
Consolidated Financial Statements of this Form 10-K.
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) 2001 2000 1999
- ------------------------------------ ------- -------- -------
Royalties from Interact $19,250 $ 5,000 $ --
Gain on divestiture of:
Visual Cafe product line -- 68,523 --
ACT! product line -- 18,285 --
Transition fees 801 894 --
Payments from HP and JetForm 397 14,656 41,155
------- -------- -------
Income, net of expense, from sale of
technologies and product lines $20,448 $107,358 $41,155
======= ======== =======
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., or 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 substantially all of the ACT! product line
technology, on an exclusive basis, to Interact Commerce Corporation, previously
SalesLogix Corporation, or Interact, 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, which was offset by approximately $0.4 million of inventory and fixed
assets attributed to the ACT! product line that was written off and transferred
to Interact. 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. During the
March 2001 quarter, Interact entered into a plan to merge with The Sage Group
plc and we recorded a loss of approximately $12.5 million as other expense
related to the other than temporary decline in value of our investment in
Interact. For further discussion on our investment in Interact, see Note 5 of
Notes to Consolidated Financial Statements of this Form 10-K.
In addition to the shares received from Interact, Interact is required to pay us
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. We recorded approximately $19.3 million and $5 million of royalty payments
in income, net of expense, from sale of technologies and product lines in fiscal
2001 and 2000, respectively.
Transition Fees
In accordance with individual transition agreements, WebGain and Interact paid
us fees for invoicing, collecting receivables, shipping and other operational
and support activities through fiscal 2001, until they had the ability to take
over these activities. We recorded approximately $0.8 million and $0.9 million
for these fees during fiscal 2001 and 2000, respectively, in income, net of
expense, from sale of technologies and product lines.
Payments from HP and JetForm
Payments from HP and JetForm were associated with our sale of certain software
products, technologies and tangible assets to the Hewlett-Packard Company and
JetForm Corporation during fiscal 1997. The payments decreased from
approximately $15 million in fiscal 2000 to $0.4 million in fiscal 2001. These
payments also decreased from
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approximately $41 million in fiscal 1999 to $15 million in fiscal 2000. The
payments declined in fiscal 2001 and 2000, because the HP payments ended in the
December 1998 quarter and the payments from JetForm ended in the June 2000
quarter.
INCOME TAXES
Our effective tax rate on income before one-time charges (acquired in-process
research and development, restructuring and other expenses), goodwill
amortization expense and gain on sale of product lines was 32% for fiscal 2001,
2000 and 1999. Our fiscal 2001, 2000 and 1999 effective 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.
Our effective tax rate on income was 55%, 34% and 40% for fiscal 2001, 2000 and
1999, respectively. The higher effective tax rate in fiscal 2001 reflects the
non-deductibility of acquired in-process research and development and
substantially all of the goodwill amortization. The higher effective tax rate in
fiscal 1999 reflects the non-deductibility of acquired in-process research and
development. In addition, for fiscal 2000, tax was provided on the gain on sale
of product lines at an effective tax rate of 34%. This rate is 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 Irish
tax rate.
Realization of a significant portion of the $80 million of net deferred tax
assets is dependent on our ability to generate future U.S. taxable income of
approximately $145 million.
We believe that it is more likely than not that the $80 million of 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 Business Risk Factors set forth
in this Item 7. Additional 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 additional
valuation allowance on a quarterly basis.
We project our effective tax rate on income before goodwill amortization to be
32% in fiscal 2002. This projection, however, is subject to change due to
potential tax law changes and fluctuations in the geographic allocation of
earnings.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and short-term investments increased approximately $125
million to $557 million at the end of fiscal 2001 from $432 million at the end
of fiscal 2000. This increase was largely due to cash provided from operations,
including royalty income from Interact, net proceeds from the exercise of stock
options under our stock option plans, sales of common stock through our employee
stock purchase plan, and acquired AXENT cash balances. The cash provided by
these factors was partially offset by cash paid to repurchase common stock, for
capital expenditures, and for marketable securities and investments.
In addition to cash and short-term investments, we have $75 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. This lease is classified as an operating lease. We
were in compliance with our covenants on these lease agreements as of March 31,
2001. Future acquisitions or other events could cause us to be in violation of
these covenants.
On March 30, 2001, we entered into a master lease agreement for land and the
construction of two office buildings in Newport News, Virginia, effective June
6, 2001, and Eugene, Oregon, effective April 6, 2001. We are obligated under the
lease agreement to maintain a restricted cash balance invested in U.S. Treasury
securities with maturities not to exceed two years, during the construction
period, or in certificates of deposit issued by certain lenders, after the
construction period. In accordance with the lease terms, these funds are not
available to meet our operating cash requirements. As of March 31, 2001, we had
no restricted funds associated with these facilities. This lease is classified
as an operating lease. In addition, we are obligated to comply with certain
financial covenants. Future acquisitions or other events could cause us to be in
violation of these financial covenants.
As of March 31, 2001, we also had a $10 million line of credit that expired May
2001. We were in compliance with the debt covenants for this line of credit as
of March 31, 2001. There were no borrowings and less than $1 million of
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standby letters of credit outstanding under this line as of March 31, 2001.
Although we did not renew this line of credit, we believe that there will not be
a material adverse impact on our financial results, liquidity or capital
resources.
Net cash provided by operating activities was approximately $325 million and was
comprised of net income of approximately $64 million, non-cash related expenses
of $149 million and a net increase of $112 million in liabilities, net of an
increase in assets.
Net trade accounts receivable increased $70 million to approximately $117
million at March 31, 2001 from approximately $47 million at March 31, 2000. The
increase in accounts receivable was primarily due to the acquisition of AXENT's
accounts receivable balances and increases in our Enterprise Security and
international sales.
Net cash provided by investing activities was approximately $24 million and was
comprised primarily of $60 million in net proceeds from sales of marketable
securities and investments and $37 million in acquired AXENT cash balances,
offset by $73 million of capital expenditures and other investing activities.
On March 22, 1999, the Board authorized the repurchase of up to $75 million of
our outstanding common stock. On January 16, 2001, the Board replaced this
authorization with a new authorization to repurchase up to $700 million, not to
exceed 15 million shares, of Symantec common stock with no expiration date.
During fiscal 2001, we repurchased 5.0 million shares at prices ranging from
$46.07 to $51.16, for an aggregate amount of approximately $244 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
On February 14, 2001, the Financial Accounting Standards Board, or FASB, issued
a limited revision of its September 7, 1999 exposure Draft, Business
Combinations and Intangible Assets, that proposes to significantly change the
accounting for goodwill acquired in a purchase business combination. Under the
revised proposal, goodwill would not be amortized but would be reviewed for
impairment annually and if certain events occur or circumstances exist. Goodwill
impairment charges would be presented as a separate line item within the
operating section of the income statement. The nonamortization approach would
apply to previously recorded goodwill as well as goodwill arising from
acquisitions completed after the application of the new standard. Amortization
of the remaining book value of goodwill would cease and the new impairment-only
approach would apply. The FASB expects to release the final statement in July
2001. We will not adopt the provisions of the proposed statement, which defers
reporting the effects of the proposed statement, until our first quarter of
fiscal 2003.
In June 1998, the FASB issued Statement of Financial Accounting Standards, or
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 do not expect the adoption of this accounting
pronouncement to have a material effect on our consolidated financial position
or results of operations.
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BUSINESS RISK FACTORS
The following discussion contains forward-looking statements that involve known
and unknown risks and uncertainties. Our actual results, levels of activity,
performance or achievements may be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. Factors that may cause or contribute to this
difference 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.
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 eight acquisitions within the last three fiscal years,
with our acquisition of AXENT being the largest and most recent. Integrating
acquired businesses 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 may be amortized or written off in future years. 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
to finance future acquisitions that are dilutive to our existing stockholders.
CONTINUED INTEGRATION OF AXENT MAY BE DIFFICULT, WHICH MAY ADVERSELY AFFECT
OPERATIONS. We have been in the process of integrating AXENT into our operations
since the date of acquisition. This integration of AXENT with our business,
however, has been and will continue to be a complex, time-consuming and
expensive process and may disrupt our business if not accomplished in a timely
and efficient manner. We must operate as a combined organization utilizing
common information and communications systems, operating procedures, financial
controls and human resources practices.
We may still encounter substantial difficulties, costs and delays involved in
integrating our operations, including:
- potential conflicts between business cultures;
- perceived adverse changes in business focus;
- potential conflicts in distribution, marketing or other
important relationships;
- the loss of key employees; and/or
- the diversion of management's attention from other ongoing
business concerns.
Further, the market price of our common stock could decline if:
- the integration of AXENT is unsuccessful;
- we are unable to successfully market our products and services
to AXENT's customers or AXENT's products and services to our
customers;
- we do not achieve the perceived benefits of the merger as
rapidly as, or to the extent, anticipated by financial or
industry analysts, or such analysts do not perceive the same
benefits to the merger as both AXENT and we do; or
- the effect of the merger on our financial results is not
consistent with the expectations of financial or industry
analysts.
OUR INCREASED SALES OF ENTERPRISE-WIDE SITE LICENSES MAY INCREASE FLUCTUATIONS
IN OUR FINANCIAL RESULTS. Sales of enterprise-wide site licenses through our
Enterprise Security segment have been increasing and now represent a major
portion of our business. This portion of our business could increase
significantly due to our recent acquisition of AXENT. This enterprise market has
significantly different characteristics than the consumer market and different
skills and resources are needed to penetrate this market. 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
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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 EXPECT TO MAKE SUBSTANTIAL CHANGES TO OUR INFORMATION SYSTEMS THAT COULD
DISRUPT OUR BUSINESS. The information systems that support our accounting,
finance, order management and manufacturing systems are based on Oracle 10.7,
and many of the business applications used in other aspects of our business have
been tightly coupled with Oracle 10.7. Oracle has released a new version, 11i,
and has announced that support for 10.7 will be discontinued at the end of 2001.
In addition, as our business has grown, we have developed needs for an
increasingly robust customer relationship management, or CRM, system. During
fiscal 2002, we will be implementing Oracle 11i and a new CRM system. These
types of transitions frequently prove disruptive to the underlying business of
an enterprise and may cause us to incur higher costs than we anticipate. Failure
to manage a smooth transition to the new systems could result in a material
adverse effect on our business operations.
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. Our
ability to remain competitive depends, in part, on our ability to enhance our
products or develop new products that are compatible with new hardware and
operating systems. We have no control over, and limited insight into,
development efforts by third parties with respect to new hardware and operating
systems and we may not be able to respond effectively or timely to such changes
in the market. In addition, we have limited resources and we must make strategic
decisions as to the best allocation of 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 virus protection 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 Windows XP, 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 XP.
Our financial results and our stock price declined significantly following the
releases of Windows 3.1, Windows 95 and Windows 98. The release of future
editions of Windows, including Windows XP in our December 2001 quarter, could
adversely affect our financial results and stock price. 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.
OUR EARNINGS AND STOCK PRICE ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS. Due to
many factors, including those noted in 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.
FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS HAVE AFFECTED OUR STOCK PRICE IN
THE PAST AND COULD AFFECT OUR STOCK PRICE IN THE FUTURE. If our quarterly
operating results fail to meet the expectations of analysts and investors, the
trading price of shares of our common stock could be negatively affected. Our
quarterly operating results have varied substantially in the past and may vary
substantially in the future depending upon 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 new releases of operating
systems.
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In addition to the foregoing factors, the risk of quarterly fluctuations is
increased by the fact that a significant portion of our net revenues has
historically been generated during the last month of each 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 future operating results could be materially and adversely affected
by fluctuations in currency exchange rates and general uncertainty with each
country's political and economic structure.
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 and increased use 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; and
- potential tax or other government regulations.
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
and we are likely to experience delays in future product development. If our
resulting products are not technologically successful, they 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 cause 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 and cannot 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 purchase 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
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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.
PRODUCT RETURNS MAY NEGATIVELY AFFECT OUR NET REVENUES. Product returns can
occur when we introduce upgrades and new versions of products or when
distributors or retailers have excess inventories, subject to various
contractual limitations. Our return policy allows distributors, subject to these
contractual limitations, to return purchased productsin exchange for new
products or for credit towards future purchases. End-users may return our
products through dealers and distributors for a full refund within a reasonably
short period from the date of purchase. We estimate and maintain reserves for
such product returns which to date have been materially consistent with our
actual experience. Future returns could, however, exceed the reserves we have
established, which could have a material adverse effect on our operating
results.
WE DEPEND ON INTERNAL COMMUNICATIONS SYSTEMS THAT MAY BE DISRUPTED. Our order
management and product shipping centers are geographically dispersed. A business
disruption could occur as a result of natural disasters, intermittent power
shortages in the State of California, or the interruption in service by
communications carriers. If our communications between these centers are
disrupted, 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 EXPOSED TO GENERAL ECONOMIC AND MARKET CONDITIONS AND THE CURRENT
ECONOMIC DOWNTURN MAY ADVERSELY AFFECT FUTURE REVENUE. Our business is subject
to the effects of general economic conditions and, in particular, market
conditions in the software and computer industries. Our operating results could
be adversely affected as a result of recent unfavorable global economic
conditions and reduced spending. If these economic conditions do not improve, or
if we experience a worsening in global economic conditions, we may experience
material adverse impacts on our business, operating results and financial
condition.
WE ARE SUBJECT TO LITIGATION THAT 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, or other product liability claims, or
other claims incidental to our business. We are currently involved in a number
of lawsuits. 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. However, it is possible that we could 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.
THE TREND TOWARD CONSOLIDATION IN THE SOFTWARE INDUSTRY COULD 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 MUST ATTRACT AND RETAIN PERSONNEL WHILE COMPETITION FOR PERSONNEL IN OUR
INDUSTRY IS INTENSE. 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. To accomplish this, we believe that we must provide
personnel with a competitive compensation package, including stock options,
which require ongoing stockholder approval. Such approval may not be forthcoming
and, as a result, we may be impaired in our efforts to attract necessary
personnel.
OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS MAY NOT BE ADEQUATELY PROTECTED
FROM ALL UNAUTHORIZED USES. We regard our software 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
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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 laws, 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, and we may be subject to
unauthorized use of our products. Any legal action that we may bring to protect
proprietary information could be expensive and may distract management from
day-to-day operations.
OUR PRODUCTS ARE COMPLEX AND ARE OPERATED IN A WIDE VARIETY OF COMPUTER
CONFIGURATIONS, WHICH COULD RESULT IN ERRORS OR PRODUCT FAILURES. Because we
offer very complex products, undetected errors, failures or bugs may occur when
they are first introduced or when new versions are released. Our products often
are installed and used in large-scale computing environments with different
operating systems, system management software and equipment and networking
configurations, which may cause errors or failures in our products or may expose
undetected errors, failures or bugs in our products. In the past, we have
discovered software errors, failures and bugs in certain of our product
offerings after their introduction and have experienced delays or lost revenues
during the period required to correct these errors. Our customers' computer
environments are often characterized by a wide variety of standard and
non-standard configurations that make pre-release testing for programming or
compatibility errors very difficult and time-consuming. Despite testing by us
and by others, errors, failures or bugs may not be found in new products or
releases after commencement of commercial shipments. Errors, failures or bugs in
products released by us could result in negative publicity, product returns,
loss of or delay in market acceptance of our products or claims by customers or
others. Alleviating such problems could require significant expenditures of our
capital and resources and could cause interruptions, delays or cessation of our
product licensing, which would adversely affect results of operations.
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 may not prove effective in limiting our
liability.
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.
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ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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, 2001, the fair market value of our financial instruments with
exposure to interest risk was approximately US $317 million and euro 244
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 points 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 points would result in changes in fair
market values for these investments of less than euro 1 million.
EXCHANGE RATE SENSITIVITY
We conduct business in 36 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 non-functional
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 forward contracts 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. However, significant changes in exchange rates may still
result in adverse effects on our operating results.
We use sensitivity analyses to quantify the impact that market risk exposures
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.
As of March 31, 2001, the notional amount of our forward contracts was
approximately US $215 million. A +/-10% movement in the levels of foreign
currency exchange rates would result in a decrease in our forward contracts by
approximately US $1 million and an increase in our forward contracts by
approximately US $1 million, respectively. 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.
As of March 31, 2001, the fair value of our investments denominated in foreign
currencies was approximately US $212 million. A +/-10% movement in the levels of
foreign currency exchange rates would result in an increase in the fair value of
our investments by approximately US $22 million and a decrease in the fair value
of our investments by approximately US $22 million, respectively.
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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 (loss) per share; unaudited)
Fiscal 2001 Fiscal 2000
--------------------------------------------- ---------------------------------------------
Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
2001 2000 2000 2000 2000 1999 1999 1999
--------- --------- --------- -------- -------- -------- --------- ---------
Net revenues $250,606 $219,294 $192,296 $191,358 $187,205 $200,847 $182,535 $175,138
Gross margin 212,129 188,356 165,688 163,521 158,196 170,048 151,893 144,515
Amortization of
goodwill 48,994 11,965 5,202 5,175 4,493 4,287 5,169 3,935
Acquired in-process
research and
development -- 22,300 -- -- 3,100 -- 1,200 --
Restructuring and
other expenses 2,382 1,282 -- -- 3,959 2,246 40 2,773
Income, net of
expense, from sale
of technologies
and product lines 4,250 5,000 5,284 5,914 7,491 89,967 5,010 4,890
Net income (loss) (27,448) 13,874 39,113 38,397 31,576 89,013 25,832 23,727
Net income (loss)
per share -
basic $ (0.37) $ 0.22 $ 0.64 $ 0.63 $ 0.53 $ 1.52 $ 0.45 $ 0.42
diluted $ (0.37) $ 0.21 $ 0.61 $ 0.60 $ 0.49 $ 1.41 $ 0.43 $ 0.41
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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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 12, 2001. 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 52 Chairman, President and Chief Executive Officer
Arthur F. Courville 42 Senior Vice President, General Counsel and Secretary
Stephen G. Cullen 35 Senior Vice President, Consumer Products Division
Donald E. Frischmann 57 Senior Vice President, Communications and Brand Management
Dieter Giesbrecht 57 Senior Vice President, Worldwide Sales, Marketing and Services
Gail E. Hamilton 51 Executive Vice President, Product Delivery and Response
Greg Myers 51 Senior Vice President, Finance and Chief Financial Officer
Rebecca Ranninger 42 Senior Vice President, Human Resources
Dana E. Siebert 41 Executive Vice President and General Manager, Service Provider
and Solutions Division
Gary Warren 39 Senior Vice President, Market Development
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 Chairman of the Board of Directors, President,
and Chief Executive Officer 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 of United Parcel Service, Inc.; NiSource Inc.; and
Seagate Technology, Inc. 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.
ARTHUR F. COURVILLE is Senior Vice President, General Counsel and Secretary. Mr.
Courville joined Symantec in 1993, and was promoted to Director of the Legal
Department in 1994. In 1997, Mr. Courville took the position of Director of
Product Management for the Internet Tools Business Unit of Symantec, where he
was responsible for all product management activities related to Java
programming and HTML editing products. Mr. Courville later returned to the Legal
Department as Senior Director before his appointment as Vice President and
General Counsel in 1999. Before joining Symantec, Mr. Courville practiced law
with the law firm of Gibson, Dunn & Crutcher. Mr. Courville is a member of the
board of directors of the Business Software Alliance and is also a designated
trustee of the Software Patent Institute. Mr. Courville holds a Bachelor of Arts
(A.B.) degree in Economics from Stanford University, a law degree from Boalt
Hall School of Law at the University of California, Berkeley and a Masters of
Business Administration from the Haas School of Business at the University of
California, Berkeley.
STEPHEN G. CULLEN is Senior Vice President, Consumer Products Division and is
responsible for Symantec's worldwide consumer business and product strategy,
which includes the Norton brand and its problem-solving
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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 the global leader in enterprise travel and
entertainment expense management. Prior to that, he held senior marketing and
product management positions with Contact Software and Delrina Corporation,
which were both acquired by Symantec. From 1986 to 1991, Mr. Cullen held senior
sales, product management and marketing positions with Micrografx, the first
commercial Windows software developer. Throughout the early 1980's, he held
retail and business-to-business sales and management positions at The Computer
Store and Basic Computer.
DONALD E. FRISCHMANN joined Symantec in October 1999, as Senior Vice President,
Communications and Brand Management. Mr. Frischmann is responsible for
Symantec's global communications and brand management activities including
public relations, customer and employee communications, investor relations, and
public affairs. Prior to joining Symantec, Mr. Frischmann was a communications
executive at IBM for 29 years where he held a number of management and executive
positions. His responsibilities included: public relations for all IBM products;
marketing and communications for key product line transitions and major software
products; and public relations outreach programs for IBM sponsored art
exhibitions and PBS programming. His most recent position prior to joining
Symantec was Vice President, Communications for IBM sales and distribution
operations in the Americas with responsibility for public relations, employee
and customer communications. Prior to joining IBM, Mr. Frischmann was a Captain
in the United States Air Force. He holds a bachelor's degree from Fordam
University.
DIETER GIESBRECHT is Senior Vice President, Worldwide Sales, Marketing and
Services. In this role, Mr. Giesbrecht is responsible for worldwide business,
including sales and marketing functions, in the company's four regions: Japan,
Asia/Pacific, Europe and the Americas. Previously, Mr. Giesbrecht served as
Senior Vice President, International, and prior to that, as Vice President and
Managing Director, Europe, Middle East and Africa. Mr. Giesbrecht has more than
20 years experience in the PC and client/server software industry. Before
joining Symantec in 1996, he 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.
GAIL E. HAMILTON has served as Executive Vice President, Product Delivery and
Response since April 2001. In this role, Ms. Hamilton leads the development and
extension of the full range of Symantec's security solutions. Ms. Hamilton
joined Symantec in March 2000 and previously served as Senior Vice President,
Enterprise Solutions Division. She has more than 20 years' experience growing
leading technology and services businesses serving the enterprise market. 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 has held numerous
positions in both community and corporate boards, including the Colorado Opera
Festival and the University Of Colorado Alumni Association. She has served on
the board of DigitalMoJo, Inc. since March of 2001. 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.
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. As of December
2000, Mr. Myers is also responsible for the information technology and worldwide
logistics and facilities functions. Prior 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. Before joining Symantec in 1993, Mr. Myers
was with Novell Corporation for five years as their director of financial
planning and analysis. Prior to Novell, Mr. Myers held various financial
management positions for a number of companies within Silicon Valley since 1975.
Mr. Myers holds an undergraduate degree from Cal-State University, Hayward and
holds a Masters in Business Administration from the University of Santa Clara.
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REBECCA RANNINGER is Senior Vice President, Human Resources. In this role, Ms.
Ranninger directs a worldwide human resources organization, which serves all of
Symantec's employees. Included in Ms. Ranninger's responsibilities are
compensation, benefits, HR Information Systems, training, recruiting, staffing,
legal compliance and talent management, in addition to a worldwide Human
Resource Services Organization that works closely with management on all
strategic and functional workforce issues. Prior to 1997, Ms. Ranninger served
for over six years as Senior Director, Legal. Her work as in-house legal counsel
for Symantec covered various legal aspects of the software industry, including
litigation, human resources, mergers and acquisitions, international sales,
intellectual property, and software licensing negotiations. Ms. Ranninger served
for two years as a member of the Board of Directors of the Software Publisher's
Association. She has published articles and taught classes on employment
litigation, tort reform, securities litigation, sexual harassment, and
international software licensing issues. Before joining Symantec in 1991, Ms.
Ranninger was a business litigator with the San Francisco law firm of Heller,
Ehrman, White and McAuliffe. Ms. Ranninger holds a juris doctorate from Stanford
University School of Law, a bachelor's degree in jurisprudence from Oxford
University, and a bachelor's degree Magna Cum Laude from Harvard University.
DANA E. SIEBERT is Executive Vice President and General Manager, Service
Provider Solutions Division. Previously, Mr. Siebert served as Executive Vice
President for Worldwide Sales, Marketing and Services, and prior to that, Vice
President, Americas. Mr. Siebert has also held the position of Vice President,
Worldwide Sales of Symantec and prior to that, 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 where he was responsible
for U.S. corporate, OEM and international sales. Previously, he held a number of
sales management positions in high technology companies including Wang
Laboratories, Computerland Corporation and Burroughs Corporation. Mr. Siebert is
a member of the Board of Directors of TimeLine Solutions, Percon, Inc., and Funk
& Associates. Mr. Siebert holds a Bachelor of Science degree in Business
Administration from the University of New Hampshire and is a member of the
Software Publishers Association. Mr. Siebert resigned as an executive officer in
May 2001 and left the company in June 2001.
GARY WARREN is Senior Vice President, Market Development. Previously, Mr. Warren
served as Senior Vice President of Operations Service Provider Solutions
Division and prior to that, Senior Vice President, Business Development. Before
joining Symantec, 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.
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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 12, 2001. 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 12, 2001. 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 12, 2001. Such information is
incorporated herein by reference.
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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
408-517-8324
(a) The following documents are filed as part of this report:
Page
Number
------
1. Consolidated Financial Statements.
Report of Ernst & Young LLP, Independent Auditors........................................... 44
Consolidated Balance Sheets as of March 31, 2001 and 2000................................... 45
Consolidated Statements of Income for the Years Ended
March 31, 2001, 2000 and 1999........................................................... 46
Consolidated Statements of Stockholders' Equity for the Years
Ended March 31, 2001, 2000 and 1999..................................................... 47
Consolidated Statements of Cash Flow for the Years Ended
March 31, 2001, 2000 and 1999........................................................... 48
Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements....................................................... 51
2. Financial Statement Schedules. The following financial statement schedule of Symantec
Corporation for the years ended March 31, 2001, 2000 and 1999 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..................................................... 78
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:
--------
2.01 The AXENT Merger Agreement. (Incorporated by reference to Registrant's Report on Form S-4 (No.
333-46264) filed September 20, 2000.)
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.)
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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.
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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.
(Incorporated by reference to Exhibit 10.18 filed with the Registrant's Annual Report on Form 10-K
for the year ended March 31, 2000.)
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 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.)
10.32 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.)
10.33 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.)
10.34 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.)
10.35 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.)
10.36 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.)
10.37 Amended and Restated Credit Agreement, dated May 29, 2000, by and between Symantec Corporation and Bank of America,
N.A. (Incorporated by reference to Exhibit 10.39 filed with the Registrant's Annual Report on Form 10-K for the
year ended March 31, 2000.)
10.38 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 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.)
10.39 Amended and Restated Loan Agreement, dated as of February 9, 1999, among Sumitomo Bank Leasing and Finance, Inc.,
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.)
10.40 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.)
38
41
10.41 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.)
10.42 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.)
10.43 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.)
10.44 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.)
10.45 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.)
10.46 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.)
10.47 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.)
10.48 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.)
10.49 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.)
10.50 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.)
10.51* 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.)
10.52* 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.)
10.53* 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.)
10.54* 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.)
- -------------------------
*Indicates a management contract or compensatory plan or arrangement.
39
42
10.55 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.)
10.56 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.)
10.57* Form of President and CEO Annual Incentive Plan. (Incorporated by reference to Exhibit 10.64 filed with the
Registrant's Annual Report on Form 10-K for the year ended March 31, 2000.)
10.58* Form of Vice President Annual Incentive Plan (No Division/Business Unit Objectives.) (Incorporated by reference
to Exhibit 10.65 filed with the Registrant's Annual Report on Form 10-K for the year ended March 31, 2000.)
10.59* Form of Vice President Annual Incentive Plan (With Division/Business Unit Objectives.) (Incorporated by reference
to Exhibit 10.66 filed with the Registrant's Annual Report on Form 10-K for the year ended March 31, 2000.)
10.60 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.)
10.61* 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.)
10.62* 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.)
10.63* 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.)
10.64 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.)
10.65 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.)
10.66 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.)
10.67 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.)
10.68 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.)
10.69 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.)
10.70 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.)
- -------------------------
*Indicates a management contract or compensatory plan or arrangement.
40
43
10.71 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.)
10.72 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.)
10.73 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.)
10.74 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.)
10.75* Symantec Corporation 1999 Acquisition Plan Stock Option Agreement with Acceleration by and between Symantec
Corporation and Gary P. Warren. (Incorporated by reference to Exhibit 10.01 filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.)
10.76* Employment offer by and between Symantec Corporation and Ron Moritz. (Incorporated by reference to Exhibit 10.02
filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.)
10.77* Employment offer by and between Symantec Corporation and Gail Hamilton. (Incorporated by reference to Exhibit 10.03
filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.)
10.78* The Registrant's 2000 Directors Equity Incentive Plan. (Incorporated by reference to Exhibit 99.1 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-47648) filed October 10, 2000.)
10.79* AXENT Technologies, Inc. 1999 Incentive Stock Plan. (Incorporated by reference to Exhibit 99.3 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-52200) filed December 19, 2000.)
10.80* AXENT Technologies, Inc. 1998 Incentive Stock Plan. (Incorporated by reference to Exhibit 99.4 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-52200) filed December 19, 2000.)
10.81* AXENT Technologies, Inc. 1996 Amended and Restated Stock Option Plan. (Incorporated by reference to Exhibit 99.5
filed with the Registrant's Registration Statement on Form S-8 (No. 333-52200) filed December 19, 2000.)
10.82* AXENT Technologies, Inc. 1996 Amended and Restated Directors' Stock Option Plan. (Incorporated by reference to
Exhibit 99.6 filed with the Registrant's Registration Statement on Form S-8 (No. 333-52200) filed December 19,
2000.)
10.83* AXENT Technologies, Inc. Amended and Restated 1991 Stock Option Plan. (Incorporated by reference to Exhibit 99.7
filed with the Registrant's Registration Statement on Form S-8 (No. 333-52200) filed December 19, 2000.)
10.84* AXENT Technologies, Inc. 1998 Exchange Option Plan. (Incorporated by reference to Exhibit 99.8 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-52200) filed December 19, 2000.)
10.85* AXENT Technologies, Inc. 1999 PassGo Technologies Exchange Option Plan. (Incorporated by reference to Exhibit 99.9
filed with the Registrant's Registration Statement on Form S-8 (No. 333-52200) filed December 19, 2000.)
10.86* AXENT Technologies, Inc. Internet Tools 1997 Equity Incentive Plan. (Incorporated by reference to Exhibit 99.10
filed with the Registrant's Registration Statement on Form S-8 (No. 333-52200) filed December 19, 2000.)
10.87* AssureNet Pathways, Inc. Restated 1982 Stock Option Plan assumed by AXENT Technologies, Inc. (Incorporated by
reference to Exhibit 99.11 filed with the Registrant's Registration Statement on Form S-8 (No. 333-52200) filed
December 19, 2000.)
- -------------------------
*Indicates a management contract or compensatory plan or arrangement.
41
44
10.88* AXENT Technologies, Inc. 1998 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 99.12 filed with
the Registrant's Registration Statement on Form S-8 (No. 333-52200) filed December 19, 2000.)
10.89* Termination agreement by and between Symantec Corporation and Derek Witte. (Incorporated by reference to Exhibit
10.15 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 29, 2000.)
10.90* Termination agreement by and between Symantec Corporation and Ron Moritz. (Incorporated by reference to Exhibit
10.15 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 29, 2000.)
10.91* Symantec Corporation 2001 Non-Qualified Equity Incentive Plan. (Incorporated by reference to Exhibit 99.1 filed with
the Registrant's Registration Statement on Form S-8 (No. 333-56874) filed March 12, 2001.)
10.92* Symantec Corporation 1998 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 99.2 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-52200) filed December 19, 2000.)
10.93* Symantec Executive Severance Plan.
10.94 Participation Agreement, dated as of March 30, 2001, by and among Symantec Corporation, The Symantec 2001 Trust,
Wilmington Trust Company, the Holders and Lenders (as defined in the Participation Agreement), Fuji Bank,
Limited, KeyBank National Association, and The Bank of Nova Scotia.
10.95 Annex A to Participation Agreement.
10.96 First Amendment to Annex A to Participation Agreement, dated as of June 6, 2001.
10.97 Master Lease Agreement, dated as of March 30, 2001, between The Symantec 2001 Trust and Symantec Corporation.
10.98 Lease Supplement No. 1, dated as of April 6, 2001, between The Symantec 2001 Trust and Symantec Corporation.
10.99 Lease Supplement No. 2, dated as of June 6, 2001, between The Symantec 2001 Trust and Symantec Corporation.
10.001 Pledge and Security Agreement, dated as of March 30, 2001, between Symantec Corporation and The Bank of Nova
Scotia.
10.002 Construction Agency Agreement, dated as of March 30, 2001, between The Symantec 2001 Trust and Symantec Corporation.
10.003 Supplement No. 1 to Construction Agency Agreement, dated as of April 6, 2001, between The Symantec 2001 Trust and
Symantec Corporation.
10.004 Supplement No. 2 to Construction Agency Agreement, dated as of June 6, 2001, between The Symantec 2001 Trust and
Symantec Corporation.
21.01 Subsidiaries of the Registrant.
23.01 Consent of Ernst & Young LLP, Independent Auditors.
(b) Reports on Form 8-K:
A report on Form 8-K was filed by the Company on January 9, 2001 and Form
8-KA was filed by the Company on March 5, 2001, reporting that AXENT
Technologies, Inc. ("AXENT") became a wholly-owned subsidiary of the
Company and all outstanding shares of AXENT's common stock were converted
into 0.5 shares of the Company's common stock. The transaction was pursuant
to an Agreement and Plan of Merger dated July 26, 2000, and was accounted
for as a purchase.
A report on Form 8-K was filed by the Company on May 1, 2001, reporting
that Dana E. Siebert, Executive Vice President, Service Provider Solutions
Division, had decided to leave the Company for personal reasons. The
organization that reported to Mr. Siebert will become a part of the
Company's enterprise business operations.
- -------------------------
*Indicates a management contract or compensatory plan or arrangement.
42
45
(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 above.
43
46
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Ernst & Young LLP, Independent Auditors................................................ 45
Consolidated Balance Sheets as of March 31, 2001 and 2000........................................ 46
Consolidated Statements of Income for the years ended March 31, 2001, 2000 and 1999.............. 47
Consolidated Statements of Stockholders' Equity for the years ended March 31, 2001,
2000 and 1999............................................................................... 48
Consolidated Statements of Cash Flow for the years ended March 31, 2001, 2000 and 1999........... 49
Summary of Significant Accounting Policies....................................................... 51
Notes to Consolidated Financial Statements....................................................... 55
44
47
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, 2001 and 2000, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended March 31, 2001. 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, 2001 and 2000, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 2001, 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 24, 2001
45
48
SYMANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31,
-----------------------------
(In thousands, except par value) 2001 2000
- ----------------------------------------------------------------------------------------- ----------- -----------
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $ 557,027 $ 431,550
Trade accounts receivable 116,661 47,266
Inventories 5,855 5,675
Deferred income taxes 76,426 40,189
Other 25,932 20,857
----------- -----------
Total current assets 781,901 545,537
Restricted investments 74,534 81,956
Equipment and leasehold improvements, net 93,219 51,905
Deferred income taxes 3,900 38,827
Acquired product rights, net 104,287 34,070
Goodwill, net 713,550 82,972
Other, net 20,190 10,760
----------- -----------
$ 1,791,581 $ 846,027
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 66,109 $ 43,030
Accrued compensation and benefits 46,420 25,714
Deferred revenue 183,256 90,813
Other accrued expenses 43,385 61,594
Income taxes payable 73,547 5,366
----------- -----------
Total current liabilities 412,717 226,517
Long-term obligations 2,363 1,553
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: 300,000; issued and
outstanding: 72,006 and 60,309 shares) 720 603
Capital in excess of par value 1,319,257 435,663
Notes receivable from stockholders -- (24)
Accumulated other comprehensive loss (48,872) (27,707)
Unearned compensation (895) (677)
Retained earnings 106,291 210,099
----------- -----------
Total stockholders' equity 1,376,501 617,957
----------- -----------
$ 1,791,581 $ 846,027
=========== ===========
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 INCOME
Year Ended March 31,
-----------------------------------------
(In thousands, except net income per share) 2001 2000 1999
- --------------------------------------------------------- --------- --------- ---------
Net revenues $ 853,554 $ 745,725 $ 592,628
Cost of revenues 123,860 121,073 96,558
--------- --------- ---------
Gross margin 729,694 624,652 496,070
Operating expenses:
Research and development 126,673 108,425 101,563
Sales and marketing 349,921 306,755 286,144
General and administrative 44,784 42,150 35,722
Amortization of goodwill 71,336 17,884 6,175
Amortization of other intangibles from acquisitions 1,416 917 230
Acquired in-process research and development 22,300 4,300 27,465
Restructuring and other expenses 3,664 9,018 5,105
Litigation judgment -- -- 5,825
--------- --------- ---------
Total operating expenses 620,094 489,449 468,229
--------- --------- ---------
Operating income 109,600 135,203 27,841
Interest income 33,257 13,408 13,552
Interest expense -- (22) (1,839)
Income, net of expense, from sale of technologies
and product lines 20,448 107,358 41,155
Other income (expense), net (22,525) 1,344 2,464
--------- --------- ---------
Income before income taxes 140,780 257,291 83,173
Provision for income taxes 76,844 87,143 32,972
--------- --------- ---------
Net income $ 63,936 $ 170,148 $ 50,201
========= ========= =========
Net income per share - basic $ 0.99 $ 2.94 $ 0.89
========= ========= =========
Net income per share - diluted $ 0.94 $ 2.73 $ 0.86
========= ========= =========
Shares used to compute net income per share - basic 64,737 57,870 56,601
========= ========= =========
Shares used to compute net income per share - diluted 68,237 62,214 59,289
========= ========= =========
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
47
50
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Notes Accum
Capital in Receivable Other Total
Common Excess of from Comp Unearned Retained Stockholders'
(In thousands) Stock Par Value Stockholders Loss Compensation Earnings Equity
- ------------------------------ ----------- ----------- ----------- ----------- ----------- ----------- ------------
Balances, March 31, 1998 $ 571 $ 310,949 $ (144) $ (12,559) $ -- $ 18,690 $ 317,507
Components of comprehensive
income:
Net income -- -- -- -- -- 50,201 50,201
Unrealized loss on
short-term investments -- -- -- (461) -- -- (461)
Translation adjustment -- -- -- (6,090) -- -- (6,090)
-----------
Total comprehensive income 43,650
-----------
Issued common stock:
1,447 shares under stock plans 15 19,798 -- -- -- -- 19,813
1,190 shares from conversion of
convertible debentures 12 14,272 -- -- -- -- 14,284
Repurchased 2,875 shares of
common stock (29) (35,521) -- -- -- (20,791) (56,341)
Income tax benefit related to
stock options -- 6,200 -- -- -- -- 6,200
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances, March 31, 1999 569 315,698 (144) (19,110) -- 48,100 345,113
Components of comprehensive
income:
Net income -- -- -- -- -- 170,148 170,148
Unrealized loss on
short-term investments -- -- -- (2,069) -- -- (2,069)
Translation adjustment -- -- -- (6,528) -- -- (6,528)
-----------
Total comprehensive income 161,551
-----------
Issued common stock:
4,338 shares under stock plans 43 70,640 -- -- -- -- 70,683
100 shares of restricted stock 1 1,299 -- -- (1,300) -- --
Amortization of unearned
compensation -- -- -- -- 623 -- 623
Agreement with former CEO -- 1,232 120 -- -- -- 1,352
Repurchased 1,000 shares of
common stock (10) (10,571) -- -- -- (8,149)
(18,730)
Income tax benefit related to
stock options -- 57,365 -- -- -- -- 57,365
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances, March 31, 2000 603 435,663 (24) (27,707) (677) 210,099 617,957
Components of comprehensive
income:
Net income -- -- -- -- -- 63,936 63,936
Unrealized gain on
short-term investments -- -- -- 2,987 -- -- 2,987
Translation adjustment -- -- -- (24,152) -- -- (24,152)
-----------
Total comprehensive income 42,771
-----------
Issued common stock:
2,168 shares under stock plans 22 45,612 -- -- -- -- 45,634
14,528 shares to AXENT
stockholders and assumption
of outstanding AXENT stock
options 145 906,212 -- -- (992) -- 905,365
Amortization of unearned
compensation -- -- -- -- 774 -- 774
Repayment of notes receivable
from stockholder -- -- 24 -- -- -- 24
Repurchased 5,000 shares of
common stock (50) (76,616) -- -- -- (167,744) (244,410)
Income tax benefit related to
stock options -- 8,386 -- -- -- -- 8,386
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances, March 31, 2001 $ 720 $ 1,319,257 $ -- $ (48,872) $ (895) $ 106,291 $ 1,376,501
=========== =========== =========== =========== =========== =========== ===========
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
48
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SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
Year Ended March 31,
---------------------------------------
(In thousands) 2001 2000 1999
- ------------------------------------------------------------------------------ --------- --------- ---------
OPERATING ACTIVITIES:
Net income $ 63,936 $ 170,148 $ 50,201
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of equipment and
leasehold improvements 31,977 25,011 23,988
Amortization and write-off of acquired product rights 16,112 7,719 6,031
Amortization of goodwill and other intangibles from acquisitions 72,752 18,801 6,405
Write-off of equipment and leasehold improvements -- 3,283 1,210
Acquired in-process research and development 22,300 4,300 27,465
Deferred income taxes (18,333) (26,263) (8,528)
Net loss on equity investments 24,226 -- --
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 (48,165) 26,495 (6,487)
Inventories (390) (150) (2,997)
Other current assets (4,585) (2,184) 4,386
Other assets 3,368 (5,425) (946)
Accounts payable 14,556 (1,463) 869
Accrued compensation and benefits 21,517 5,931 (2,363)
Deferred revenue 72,594 34,848 30,428
Other accrued expenses (26,391) 2,858 (5,817)
Income taxes payable 69,490 (11,432) (6,511)
Long-term obligations 1,173 1,190 --
Income tax benefit from stock options 8,386 57,365 6,200
--------- --------- ---------
Net cash provided by operating activities 324,523 224,224 123,534
--------- --------- ---------
INVESTING ACTIVITIES:
Capital expenditures (61,172) (28,455) (25,141)
Purchased intangibles (1,500) (1,138) (4,555)
Purchase of equity investments (18,000) -- --
Payments for purchase of 20/20 Software (10,760) -- --
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) --
Payments for the purchase of IBM's anti-virus business -- (8,000) (8,000)
Payments for the purchase of Quarterdeck -- (16,394) (32,857)
Purchase of Intel's anti-virus business -- -- (11,889)
Purchase of Binary Research's operations -- -- (27,500)
Cash acquired in business purchases 37,414 61 922
Purchases of marketable securities (591,776) (569,688) (242,096)
Proceeds from sales of marketable securities 662,592 286,607 313,530
Purchases of long-term, restricted investments -- (10,551) (12,035)
Proceeds from sales of long-term investments 7,422 4,270 --
--------- --------- ---------
Net cash provided by (used in) investing activities 24,220 (330,478) (49,621)
--------- --------- ---------
FINANCING ACTIVITIES:
Repayment of subordinated debentures -- -- (25,000)
Repurchases of Company's common stock (244,410) (18,730) (56,341)
Net proceeds from sale of common stock and other 46,432 71,314 19,352
Principal payments on long-term obligations (363) (1,092) --
--------- --------- ---------
Net cash (used in) provided by financing activities (198,341) 51,492 (61,989)
--------- --------- ---------
Effect of exchange rate fluctuations on cash and cash equivalents (10,452) (1,128) (7,074)
--------- --------- ---------
Increase (decrease) in cash and cash equivalents 139,950 (55,890) 4,850
Beginning cash and cash equivalents 87,973 143,863 139,013
--------- --------- ---------
Ending cash and cash equivalents $ 227,923 $ 87,973 $ 143,863
========= ========= =========
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
49
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SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
Supplemental cash flow disclosures (in thousands):
Income taxes paid (net of refunds) during the year $ 24,223 $66,309 $ 39,923
Interest paid on convertible subordinated debentures and
long-term obligations $ -- $ -- $ 1,616
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.
50
53
SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Symantec Corporation, 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, firewall, virtual
private network, vulnerability management, intrusion detection, remote
management technologies and security services to consumers and enterprises
around the world.
Founded in 1982, we have offices in 37 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 December 2000 quarter, we acquired AXENT Technologies, Inc. This
acquisition was accounted for as a purchase and, accordingly, their operating
results have been included in our consolidated financial statements since the
date of acquisition.
During the March 2000 quarter, we acquired L-3 Network Security's operations and
20/20 Software. During the September 1999 quarter, we acquired URLabs. 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.
During the June 1998 quarter, we acquired IBM's anti-virus business and Binary
Research's operations. During the September 1998 quarter, we acquired Intel's
anti-virus business. During the December 1998 quarter, we completed a tender
offer for the common stock of Quarterdeck, obtaining 63% of the outstanding
shares. During the March 1999 quarter, we acquired the remaining shares of
Quarterdeck. 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.
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.
See Note 3 of Notes to Consolidated Financial Statements.
Fiscal Years
We have a 52/53-week fiscal accounting year. Accordingly, all references as of
and for the periods ended March 31, 2001, 2000, and 1999 reflect amounts as of
and for the periods ended March 30, 2001, March 31, 2000, and April 2, 1999,
respectively. The fiscal accounting years ended March 30, 2001, March 31, 2000
and April 2, 1999 each comprised 52 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.
51
54
SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Revenue Recognition
Revenue is recognized under Statement of Position, or SOP, 97-2 as modified by
SOP 98-9, when the following conditions have been met:
- persuasive evidence of an arrangement;
- passage of title;
- delivery has occurred or services have been rendered;
- if applicable, customer acceptance;
- collection of a fixed or determinable license fee is considered
reasonably assured; and
- if appropriate, reasonable estimates of future returns.
Revenue is derived primarily from sales of packaged products, perpetual license
agreements, product maintenance and professional services.
Packaged products are sold through a multi-tiered distribution channel. We defer
revenue relating to all distribution and reseller channel inventory in excess of
certain 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 and channel and end-user rebates and account for these reserves as an
offset to revenue. For packaged products, which generally include insignificant
post-contract support obligations (generally telephone support), the estimated
cost for providing post-contract support is accrued at the time of the sale.
We enter into perpetual software license agreements through direct sales to
customers and indirect sales with distributors and resellers. The license
agreements generally include product maintenance agreements, which are deferred
and recognized ratably over the period of the agreements.
Our professional services include consulting, implementation, education, and
managed security services. Consulting and implementation services revenue are
recognized as services are performed and upon written acceptance from customers.
Education services revenue is recognized as services are performed. Managed
security services revenue is recognized ratably over the period that such
contracted services are provided.
In arrangements that include software licenses and maintenance and/or
professional services ("multiple elements"), we allocate and defer revenue for
the undelivered items, based on vendor-specific objective evidence of fair
value, and recognize the difference between the total arrangement fee and the
amount deferred for the undelivered items as revenue. If vendor-specific
objective evidence does not exist for undelivered items such as maintenance or
professional services, then the entire arrangement fee is recognized over the
performance period.
During the fourth quarter of fiscal 2001, we adopted Staff Accounting Bulletin,
or SAB, No. 101, Revenue Recognition in Financial Statements. The adoption of
SAB No. 101 did not have a material effect on our consolidated statement of
financial position or results of operations and no restatement of prior quarters
was necessary.
Cash Equivalents, Short-term Investments and Restricted Investments
We consider 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 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 as a component in stockholders' equity, as accumulated
other comprehensive income (loss). Realized gains and losses on cash
equivalents, short-term investments and restricted investments are included in
interest income. Realized gains and losses and declines in value judged to be
other than temporary on equity investments are included in other income
(expense). The cost of securities sold is based upon the specific identification
method.
Derivative Financial Instruments
We utilize natural hedging to mitigate our foreign currency exposures and hedge
certain residual exposures through the use of one-month foreign currency forward
exchange contracts. We enter into foreign currency forward exchange 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 (expense) in the period that gains and
losses on the underlying transactions are recognized and generally offset. The
fair value of foreign currency forward exchange contracts approximates cost due
to the short maturity periods.
52
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SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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. Inventory consists of raw materials and finished
goods.
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.
Acquired Product Rights
Acquired product rights are comprised of purchased product rights, technologies
and workforce-in-place and capitalized software 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 goodwill, generally four to five years.
Long-Lived Assets
Long-lived assets, including equipment, leasehold improvements, acquired product
rights and goodwill, are evaluated for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss would be recognized when the sum of the
undiscounted future net cash flows expected to result from the use of the asset
and its eventual disposition is less than its carrying amount. Such impairment
loss would be measured as the difference between the carrying amount of the
asset and its fair value based on the present value of estimated future cash
flows. No impairments have been indicated to date.
Income Taxes
Income taxes are computed in accordance with Statement of Financial Accounting
Standards, or SFAS, No. 109, Accounting for Income Taxes.
Stock-Based Compensation
We account for stock-based awards to employees using the intrinsic value method
in accordance with Accounting Principles Board Opinion, or APB, No. 25,
Accounting for Stock Issued to Employees, and to nonemployees using the fair
value method in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation. In addition, we apply applicable provisions of Financial
Accounting Standards Board, or FASB, Interpretation, or FIN, No. 44, Accounting
for Certain Transactions Involving Stock Compensation, an interpretation of APB
No. 25.
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 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
Our 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 cash equivalents, short-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
53
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SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
receivable is substantially mitigated by our credit evaluation process,
reasonably short collection terms and the geographical dispersion of sales
transactions. We 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
On February 14, 2001, the FASB issued a limited revision of its September 7,
1999 exposure Draft, Business Combinations and Intangible Assets, that proposes
to significantly change the accounting for goodwill acquired in a purchase
business combination. Under the revised proposal, goodwill would not be
amortized but would be reviewed for impairment annually and if certain events
occur or circumstances exist. Goodwill impairment charges would be presented as
a separate line item within the operating section of the income statement. The
nonamortization approach would apply to previously recorded goodwill as well as
goodwill arising from acquisitions completed after the application of the new
standard. Amortization of the remaining book value of goodwill would cease and
the new impairment-only approach would apply. The FASB expects to release the
final statement in July 2001. We will not adopt the provisions of the proposed
statement, which defers reporting the effects of the proposed statement, until
our first quarter of fiscal 2003.
In June 1998, the 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 do not expect the
adoption of this accounting pronouncement to have a material effect on our
consolidated financial position or results of operations.
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.
54
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BALANCE SHEET INFORMATION
March 31,
------------------------
(In thousands) 2001 2000
- --------------------------------------------------------------------------- --------- ---------
Cash, cash equivalents and short-term investments:
Cash $ 97,685 $ 60,103
Cash equivalents 130,238 27,870
Short-term investments 329,104 343,577
--------- ---------
$ 557,027 $ 431,550
========= =========
Trade accounts receivable:
Receivables $ 125,000 $ 53,710
Less: allowance for doubtful accounts (8,339) (6,444)
--------- ---------
$ 116,661 $ 47,266
========= =========
Equipment and leasehold improvements:
Computer hardware and software $ 189,497 $ 142,290
Office furniture and equipment 43,752 39,330
Leasehold improvements 30,313 19,585
--------- ---------
263,562 201,205
Less: accumulated depreciation and amortization (170,343) (149,300)
--------- ---------
$ 93,219 $ 51,905
========= =========
Acquired product rights:
Purchased product rights, technologies and workforce-in-place $ 136,029 $ 54,592
Capitalized software development costs -- 2,397
Less: accumulated amortization of purchased product rights, technologies
and workforce-in-place (31,742) (20,522)
Less: accumulated amortization of capitalized software development costs -- (2,397)
--------- ---------
$ 104,287 $ 34,070
========= =========
Goodwill:
Goodwill $ 808,947 $ 107,032
Less: accumulated amortization (95,397) (24,060)
--------- ---------
$ 713,550 $ 82,972
========= =========
Accumulated other comprehensive loss:
Unrealized gain (loss) on available-for-sale investments $ 614 $ (2,373)
Cumulative translation adjustment (49,486) (25,334)
--------- ---------
$ (48,872) $ (27,707)
========= =========
NOTE 2. INCOME STATEMENT INFORMATION
Year Ended March 31,
-------------------------------
(In thousands) 2001 2000 1999
- ------------------------------------------------------- ------- ------- -------
Technical support costs included in sales and marketing $26,968 $32,427 $34,219
Advertising expense $46,884 $43,630 $50,779
Technical support costs included in sales and marketing relate to the estimated
cost of providing free post-contract support (generally telephone support) that
is accrued at the time of product sale. Advertising expenditures are charged to
operations as incurred.
55
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 3. ACQUISITIONS AND DIVESTITURES
Acquisition of AXENT
On December 18, 2000, we acquired 100% of the outstanding common stock of AXENT
Technologies, Inc., or AXENT, by issuing approximately 14,528,000 shares of our
common stock to AXENT shareholders, based on a predetermined exchange ratio of
0.50 shares of Symantec common stock for each share of AXENT common stock. We
also assumed all of the outstanding AXENT employee stock options valued at
approximately $87 million. We also accrued, as part of the purchase price,
approximately $18 million in acquisition related expenses, which included
financial advisory, legal and accounting, duplicative site and fixed assets, and
severance costs. As of March 31, 2001, the remaining accrual of approximately $3
million relates primarily to legal and accounting, duplicative site and
severance costs. The transaction was accounted for as a purchase. The combined
total of the common stock issued, options assumed and acquisition costs is
approximately $925 million, based on the average of the closing prices of our
common stock on the agreement date of July 26, 2000 and for the three days
before and after July 26, 2000.
With respect to stock options assumed as part of the acquisition, all AXENT
employee stock options were exchanged for Symantec stock options and are
included in the purchase price based on their fair value as of July 26, 2000.
Any unvested AXENT options exchanged for unvested Symantec options are also
included in the purchase price based on their fair value; however, the portion
of the intrinsic value of the unvested options that will be deemed to be earned
over the remaining vesting period of those options has been allocated to
deferred compensation and will be amortized over the remaining vesting period.
The fair value of the options to be assumed has been based on the Black-Scholes
option pricing model using the following assumptions: fair market value of the
underlying shares which is based on the average closing price of Symantec's
common stock on July 26, 2000 and for the three days before and after July 26,
2000; the remaining contractual life of each option was used for the expected
life; expected volatility of 0.65; no expected dividend rate; and risk-free
interest rate of 6.5%. The value of the deferred compensation of approximately
$1 million was derived using the guidance of FIN No. 44.
After certain adjustments made during the March 2001 quarter, the aggregate
adjusted purchase price has been allocated as follows, based on an independent
appraisal of the AXENT intangibles and in-process research and development (in
thousands):
Net tangible assets of AXENT $ 130,517
In-process research and development 22,300
Tradename 4,100
Workforce-in-place 10,670
Developed technology 75,500
Deferred income taxes (19,080)
Deferred compensation 992
Goodwill 699,660
---------
Total purchase price $ 924,659
=========
The consolidated financial statements reflect the preliminary allocations of the
purchase price for the AXENT acquisition. The allocation has not been finalized
due to certain identified pre-acquisition contingencies. Accordingly, in fiscal
2002 the allocation of purchase price and its components may change as these
contingencies are resolved.
In-process research and development had not reached technological feasibility
based on identifiable technological risk factors which indicate that even though
successful completion is expected, it was not assured at the acquisition date
and accordingly has been charged to operations. The amount allocated to
tradename, workforce-in-place and developed technology is being amortized over
the estimated useful lives of four years. The purchase price in excess of
tangible assets and identifiable intangible assets has been allocated to
goodwill and will be amortized over its expected useful life of four years.
The tangible assets of AXENT acquired in the merger principally include cash,
marketable securities, accounts receivable and fixed assets. Liabilities of
AXENT assumed in the merger principally include accounts payable and obligations
associated with providing ongoing maintenance and technical support contracts.
56
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Acquisition of 20/20 Software
On March 31, 2000, we purchased 100% of the outstanding common stock of 20/20
Software, or 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 is 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 originally
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. During
the September 2000 quarter, we resolved certain contingencies and as a result,
we increased the purchase price and the amount allocated to goodwill by
approximately $0.5 million. During the March 2001 quarter, an additional amount
of approximately $4.2 million was recorded as goodwill. The additional amount of
$4.2 million represents contingent payments recorded during fiscal 2001, of
which $1.5 million remains as an accrual at March 31, 2001. 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 five-year period.
Acquisition of L-3 Network Security
On March 9, 2000, we acquired the operations of L-3 Network Security, or 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, $3.9 million for acquired product rights and $0.7
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
five-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, $5.2 million for acquired product rights and $1.4
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 five-year period.
The following table outlines the values of the above referenced fiscal 2000
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 Income Other
Purchase In-Process Product Other Tax Assets
Price R&D Rights Goodwill Intangibles Liabilities Acquired
-------- ---------- -------- -------- ----------- ----------- --------
URLabs $ 42,700 $ 1,200 $ 5,210 $ 37,000 $ 1,400 $(2,710) $ 600
L-3 20,240 3,100 3,860 12,396 600 -- 284
20/20 12,294 -- 2,250 10,867 -- (900) 77
-------- ------- ------- -------- ------- ------- -----
Total $ 75,234 $ 4,300 $11,320 $ 60,263 $ 2,000 $(3,610) $ 961
======== ======= ======= ======== ======= ======= =====
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 development, $8.5 million of acquired product rights, $65.9 million
of goodwill and $2.7 million of other
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SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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 were amortized over two years. The acquired product rights,
goodwill and other intangibles are being amortized over a five-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. During fiscal
2001, we reclassified the amount initially allocated to goodwill by an
additional $2.5 million due to a change in the characterization of the purchase
for tax purposes. As a result of these changes, goodwill was reduced and
deferred tax assets were increased by a total of $28.5 million. Quarterdeck had
also 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. 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 five-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 Research, 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 $17.0 million
for acquired product rights, with the remaining $3.8 million of the purchase
price allocated to goodwill. 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
four-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 had 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 is being amortized over a five-year period.
58
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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 17,020 1,451 -- -- --
Intel 15,625 5,017 9,797 -- 811 -- --
Quarterdeck 83,732 8,300 8,520 35,723 2,689 -- 28,500
------------------------------------------------------------------------------------------
Total $145,178 $27,517 $35,337 $49,024 $3,600 $1,200 $28,500
==========================================================================================
PRO FORMA
The following unaudited pro forma results of operations for fiscal 2001 and 2000
are as if the AXENT acquisition had occurred at the beginning of fiscal 2000.
The pro forma information excludes $22.3 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 2000 or of future
operating results.
Year Ended March 31,
---------------------------------
(In thousands, except net income per share; unaudited) 2001 2000
- ------------------------------------------------------ -------------- --------------
Net revenues $ 944,150 $ 867,437
============== ==============
Net income $ 75,841 $ 169,312
============== ==============
Basic net income per share $ 0.98 $ 2.34
============== ==============
Diluted net income per share $ 0.97 $ 2.23
============== ==============
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., or 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 and 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 was 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,
or License, and licensed substantially all of the ACT! product line technology,
on an exclusive basis, to Interact Commerce Corporation, previously SalesLogix,
or Interact, 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 was determined. In addition to these shares received, Interact
is required to pay us quarterly royalty payments for four years. 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.
59
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Because the royalties from Interact are not guaranteed and the quarterly amounts
to be received were not determinable at December 31, 1999, we have been and will
continue to recognize the royalties as earned. We recognized income, net of
expense, from sale of technologies and product lines of approximately $19.3
million and $5 million from Interact during fiscal 2001 and 2000, respectively.
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 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 in fiscal 2000, which was recorded
in income, net of expenses, from sale of technologies and product lines on the
Consolidated Statements of Income. During the March 2001 quarter, Interact
entered into a plan to merge with The Sage Group plc and we recorded a loss of
approximately $12.5 million as other expense related to the other than temporary
decline in value of our investment in Interact. See Note 5 of Notes to
Consolidated Financial Statements.
Transition Fees
In accordance with individual transition agreements, WebGain and Interact paid
us fees for invoicing, collecting receivables, shipping and other operational
and support activities through fiscal 2001, until they had the ability to take
over these activities. We recorded approximately $0.8 million and $0.9 million
for these fees during fiscal 2001 and 2000, respectively, in income, net of
expenses, from sale of technologies and product lines. We do not anticipate any
future transition fees from WebGain or Interact.
Divestiture of Network Administration and Electronic Forms
In March 1997, we sold our network administration technologies and related
tangible assets to the Hewlett-Packard Company, or HP. We received royalty
payments from HP of approximately $7 million and $22 million during fiscal 1999
and 1998, respectively. 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.
During September 1996, we sold our electronic forms software product line and
related tangible assets to JetForm Corporation, or JetForm, payable in
installments through the June 2000 quarter. We received installment payments
from JetForm of approximately $0.4 million, $15 million and $34 million during
fiscal 2001, 2000 and 1999, respectively. Due to the uncertainty regarding the
ultimate collectibility of these installments, we recognized the related amounts
as payments were due and collectibility was assured from JetForm.
Royalty payments from HP and installment payments from JetForm were recorded in
income, net of expenses, from sale of technologies and product lines.
The components of income, net of expenses, from sale of technologies and product
lines were as follows:
Year Ended March 31,
----------------------------------
(In thousands) 2001 2000 1999
- ----------------------------------------- -------- -------- --------
Royalties from Interact $ 19,250 $ 5,000 $ --
Gain on divestiture of:
Visual Cafe product line -- 68,523 --
ACT! product line -- 18,285 --
Transition fees 801 894 --
Payments from HP and JetForm 397 14,656 41,155
-------- -------- --------
Income, net of expense, from sale of
technologies and product lines $ 20,448 $107,358 $ 41,155
======== ======== ========
60
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 4. ACQUIRED PRODUCT RIGHTS
During fiscal 2001, we recorded approximately $86 million of acquired product
rights, related to our acquisition of AXENT. 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 Research, Intel's anti-virus business and Quarterdeck.
Amortization of acquired product rights totaled approximately $17 million, $10
million and $6 million in fiscal 2001, 2000 and 1999, respectively, and is
recorded in cost of revenues. The amortization will occur over the next five
years.
See Note 3 of Notes to Consolidated Financial Statements.
NOTE 5. CASH EQUIVALENTS AND INVESTMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Available-For-Sale Investments and Trading Investments
All cash equivalents, short-term investments and restricted investments have
been classified as available-for-sale securities, except for our trading
securities. We maintain a trading asset portfolio for our deferred compensation
arrangements that consists of marketable equity securities and have a fair value
of approximately $1.2 million and $0.8 million as of March 31, 2001 and 2000,
respectively. Any activity related to these trading assets has a corresponding
effect on the related liability. 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 and short-term investments
consisted of the following:
March 31,
---------------------
Cash equivalents and short-term investments (in thousands) 2001 2000
- ----------------------------------------------------------------- -------- --------
Money market funds $ 66,597 $ 8,929
Corporate securities 218,010 324,834
Bank securities and deposits 146,988 4,790
Taxable auction rate securities 5,006 16,027
US government and government-sponsored securities 15,262 --
Equity securities 7,479 16,867
-------- --------
Total available-for-sale and trading investments $459,342 $371,447
======== ========
The estimated fair value of available-for-sale and trading investments by
contractual maturity as of March 31, 2001 was as follows:
Cash equivalents and short-term investments (in thousands)
- ----------------------------------------------------------
Due in one year or less $401,894
Due after one year and through 2 years 49,969
No maturity (equity securities) 7,479
--------
$459,342
========
Except for equity securities, fair values of cash equivalents, short-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 approximately 600,000 shares of Interact,
a publicly traded company, which will be merged with another entity, whereby
shareholders of Interact are entitled to receive $12.00 per share, subject to
applicable withholdings, upon surrender of each stock certificate. A loss of
approximately $12.5 million was recognized as other expense during the March
2001 quarter for other than temporary decline in the value of this investment.
As of March 31, 2001, we held unregistered equity securities of $5.4 million in
a privately held company, which are classified as Other Assets. The fair value
of these equity securities are recorded at cost, decreased for the other than
temporary decline in value of $12.6 million, which was recognized during the
March 2001 quarter as other expense.
61
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
As a result of our acquisition of AXENT, we acquired unregistered equity
securities in another privately held company. During the March 2001 quarter, we
recorded a gain on the investment of approximately $1 million as other income,
as a result of the privately held company being acquired by another entity.
As of March 31, 2001 and 2000, the estimated fair value of our restricted
investments was $75 million and $82 million, respectively, and consisted of U.S.
Treasury 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 $0.6
million and $2.4 million as of March 31, 2001 and 2000, 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 currency forward exchange
contracts, or forward contracts. We enter into forward contracts with financial
institutions primarily to protect against currency exchange risks associated
with certain balance sheet positions. The fair value of forward contracts is
based on quoted market prices. At March 31, 2001, the notional amount of our
forward contracts was approximately $215 million, all of which mature in 35 days
or less. The fair value of 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 had a $10 million bank line of credit that expired in May 2001. The line of
credit was available for general corporate purposes and bore interest at either
the banks' reference (prime) interest rate (8.00% at March 31, 2001); the U.S.
offshore rate (4.88% at March 31, 2001) plus 1.25%; a CD rate (4.82% at March
31, 2001), plus 1.25%; or LIBOR (4.88% at March 31, 2001) plus 1.25%, at our
discretion. As of March 31, 2001, we were in 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.
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.
62
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The future fiscal year minimum operating lease commitments were as follows at
March 31, 2001:
(In thousands)
- -------------------------------
2002 $ 19,853
2003 17,010
2004 14,656
2005 9,640
2006 7,035
Thereafter 19,336
--------
Operating lease commitments 87,530
Sublease income (11,585)
--------
Net operating lease commitments $ 75,945
========
Rent expense charged to operations totaled approximately $23 million, $16
million and $15 million for the years ended March 31, 2001, 2000 and 1999,
respectively.
In fiscal 1997, we entered into lease agreements for two existing office
buildings, City Center One, or CC1, and World Headquarters, or WHQ, land and one
office building under construction in Cupertino, California, City Center Five,
or CC5. In fiscal 1999, the landlord exchanged CC5 for another building, City
Center Two, or CC2, in Cupertino, California and committed to sell WHQ. In
fiscal 2000, we completed the appropriate leasehold improvements to CC2, and
vacated WHQ. When we 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, 2001, the investments total
approximately $75 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. This lease is
classified as an operating lease. In addition, we are obligated to comply with
certain financial covenants. Future acquisitions may cause us to be in violation
of these financial covenants.
On March 30, 2001, we entered into a master lease agreement for land and the
construction of two office buildings, one approximately 100,000 square feet in
Newport News, Virginia, effective June 6, 2001, and another approximately
175,000 to 200,000 square feet in Springfield, Oregon, effective April 6, 2001.
Our lease payments will vary based on one-, three- or six-month LIBOR plus a
margin. We have the right to acquire the related properties at any time during
the six and one-half year lease period, which includes an eighteen-month
construction period. If, at the end of the lease term we do not renew the lease,
purchase the properties 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 properties. 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 facilities
totals approximately $55 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 two years, during the
construction period, or in certificates of deposit issued by certain lenders,
after the construction period. We are restricted in our use of these investments
per the terms of the lease agreement. As of March 31, 2001, we had no restricted
funds associated with these facilities. This lease is classified as an operating
lease. In addition, we are obligated to comply with certain financial covenants.
Future acquisitions may cause us to be in violation of these financial
covenants.
63
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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) 2001 2000 1999
- ---------------------------------------- --------- --------- ---------
Current:
Federal $ 55,019 $ 51,193 $ 11,649
State 14,741 16,600 5,335
International 30,411 27,995 22,226
--------- --------- ---------
100,171 95,788 39,210
Deferred:
Federal (16,677) (5,735) (1,949)
State (5,386) (1,957) (597)
International (1,264) (953) (3,692)
--------- --------- ---------
(23,327) (8,645) (6,238)
--------- --------- ---------
$ 76,844 $ 87,143 $ 32,972
========= ========= =========
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,
--------------------------------------
2001 2000 1999
-------- -------- --------
Federal statutory rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 4.3 3.0 3.5
Acquired in-process research and development charges
with no tax benefit 5.5 -- 7.1
Non-deductible goodwill amortization 16.8 2.1 --
Foreign earnings taxed at less than the federal rate (11.5) (5.6) (3.9)
Valuation allowance for potential non-deductible loss on investment 3.1 -- --
Other, net 1.4 (0.6) (2.1)
-------- -------- --------
54.6% 33.9% 39.6%
======== ======== ========
64
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The principal components of deferred tax assets were as follows:
March 31,
------------------------
(In thousands) 2001 2000
- ----------------------------------------------------------------- --------- ---------
Deferred tax assets:
Tax credit carryforwards $ 6,222 $ 3,891
Net operating loss carryforwards of acquired companies 27,267 18,949
Inventory valuation accounts 1,461 1,756
Other reserves and accruals not currently tax deductible 12,221 6,749
Accrued compensation and benefits 7,799 3,751
Deferred revenue 7,394 4,864
Sales incentive programs 2,803 5,768
Reserve for returns and allowances 7,924 15,806
Bad debt reserves not currently tax deductible 2,220 1,735
Loss on investments not currently tax deductible 10,199 2,224
Intercompany profit elimination 10,808 --
Book over tax depreciation 9,075 7,008
Other 6,075 6,515
--------- ---------
111,468 79,016
Valuation allowance (5,111) --
--------- ---------
Deferred tax assets 106,357 79,016
Deferred tax liability:
Acquired intangible assets (24,229) --
Unremitted earnings of foreign subsidiaries (1,802) --
--------- ---------
Net deferred tax assets $ 80,326 $ 79,016
========= =========
Realization of a significant portion of the $80 million of net deferred tax
assets 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
realized based on historical and forecasted U.S. earnings. The change in the
valuation allowance for fiscal 2001 and 2000 was a net increase of approximately
$5 million and a net decrease of approximately $30 million, respectively. The
net increase in the valuation allowance during fiscal 2001 is attributable to a
write-down of an equity investment, the loss of which may not be deductible for
tax purposes. Of the $30 million decrease in the valuation allowance during
fiscal 2000, approximately $21 million was attributable to previously
unbenefitted stock option deductions, the benefit of which was credited to
stockholders' equity.
In connection with the acquisition of AXENT, a $19 million net deferred tax
liability was established. This amount represents a $35 million deferred tax
liability set up on certain acquired intangibles, net of a $16 million deferred
tax asset set up for the tax carryforward attributes of AXENT. The offsetting
adjustment was to increase goodwill. See Note 3 of Notes to Consolidated
Financial Statements.
As of March 31, 2001, we have tax credit carryforwards of approximately $6
million that expire in fiscal 2004 through 2006. In addition, we have net
operating loss carryforwards attributable to Quarterdeck of approximately $43
million that expire in fiscal 2011 through 2019. We also have net operating loss
carryforwards attributable to AXENT of approximately $24 million that expire in
fiscal 2007 through 2020. Because of the "change in ownership" provisions of the
Internal Revenue Code of 1986, the net operating loss carryforwards of
Quarterdeck and AXENT are subject to an annual limitation of approximately $2.4
million and $10 million, respectively, regarding their utilization against
taxable income in future periods.
Pretax income from international operations was approximately $145 million, $117
million and $64 million for fiscal 2001, 2000 and 1999, respectively.
No provision has been made for federal or state income taxes on $280 million of
cumulative unremitted earnings of certain of our foreign subsidiaries as of
March 31, 2001, since we plan to indefinitely reinvest these earnings. At March
31, 2001, the unrecognized deferred tax liability for these earnings was
approximately $73 million.
65
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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 20% 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
employees' contribution. The maximum employer match in any given plan year is 3%
of the employees' eligible compensation. Our contributions under the plan were
approximately $3 million for the year ended March 31, 2001 and $2 million for
each of the years ended March 31, 2000 and 1999.
Employee Stock Purchase Plans
In October 1989, we established the 1989 Employee Stock Purchase Plan, or 89
Purchase Plan. Since inception, we have 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, 2001, approximately 3.3 million
shares had been issued and no shares remain available under the 89 Purchase
Plan.
On September 17, 1998, our stockholders approved the 1998 Employee Stock
Purchase Plan, or 98 Purchase Plan. The 98 Purchase Plan was subsequently
amended by our stockholders on September 15, 1999 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 Purchase Plan. On January 1, 2001, the
number of shares available for issuance automatically increased by approximately
800,000 shares to 2.6 million shares. As of March 31, 2001, approximately
300,000 shares had been issued and 2.3 million shares remain available under the
98 Purchase Plan.
In December 2000, as a result of our acquisition of AXENT, we assumed all
outstanding purchase rights under AXENT's 1998 Employee Stock Purchase Plan, or
AXENT Purchase Plan. The AXENT Purchase Plan was amended such that each
then-outstanding purchase right would be exercisable upon the same terms and
conditions as under the AXENT Purchase Plan immediately before the acquisition.
Each purchase right would be exercisable for Symantec common stock equal to a
ratio of 0.5 of the number of shares of AXENT common stock for which such
purchase right would otherwise have been exercisable determined as of the
relevant grant date under the AXENT Purchase Plan at a purchase price per share
equal to 85% of the lower of (i) fair market value of a share of AXENT common
stock at the relevant grant date under the AXENT Purchase Plan divided by 0.5 or
(ii) the fair market value of a share of Symantec common stock on the relevant
purchase date. Each purchase right granted under the AXENT Plan shall terminate,
if it has not previously terminated by its terms, on the date that the holder
thereof enrolls in our 98 Purchase Plan.
Stock Award Plans
During fiscal 1996, we registered 400,000 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, 2001, a total of approximately
28,000 shares had been issued under this plan.
In March 1998, the Board of Directors approved the terms of the 1998 Star Award
Bonus Plan, under which we may issue 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. The Board of
Directors reserved 20,000 shares of common stock for issuance under this plan.
As of March 31, 2001, a total of 1,300 shares had been issued under this plan.
This plan will be terminated, as management is not currently using this plan to
issue common stock to employees.
In September 2000, shareholders approved the 2000 Directors Equity Incentive
Plan and reserved 25,000 shares for issuance under this plan. The purpose of
this plan is to provide the members of the Board of Directors with an
opportunity to receive common stock for all or a portion of the retainer payable
to each director for serving as a member. Each director may elect to receive 50%
to 100% of the retainer to be paid in the form of stock. As of March 31, 2001, a
total of approximately 4,000 shares had been issued under this plan.
66
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Stock awards issued under these stock award plans are recorded as compensation
expense.
Stock Option Plans
We maintain stock option plans pursuant to which an aggregate total of
approximately 34.7 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 is 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 and the options have a maximum term of
ten years and generally vest over a four-year period.
On May 14, 1996, our 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 and September 15, 1999,
stockholders approved amendments to increase the number of shares reserved for
issuance by approximately 2.3 million and 3.2 million shares, respectively, to a
total of approximately 12.2 million shares. On September 18, 2000 and December
15, 2000, stockholders approved amendments to increase the numbers of shares
reserved for issuance by 3.0 million and 2.4 million shares, respectively, to a
total of approximately 17.6 million shares. As of March 31, 2001 approximately
13.0 million options were outstanding under this plan.
In December 2000, as a result of our acquisition of AXENT, we assumed all
outstanding AXENT stock options. Each AXENT stock option assumed by us is
subject to the same terms and conditions as the original grant and generally
vest over four years and expires ten years from the date of grant. Each option
was adjusted at a ratio of 0.5 shares of Symantec common stock for each one
share of AXENT common stock, and the exercise price was adjusted by multiplying
the exercise price by 0.5.
In January 2001, the Board of Directors approved the terms of the 2001
Non-Qualified Equity Incentive Plan, or 2001 Non-Qualified Plan, under which we
grant 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. Options awarded
to insiders may not exceed in the aggregate fifty (50%) percent of all shares
that are available for grant under the 2001 Non-Qualified Plan and employees of
the company who are not insiders must receive at least fifty (50%) percent of
all shares that are available for grant under the 2001 Non-Qualified Plan. A
person may be granted more than one award under the 2001 Non-Qualified Plan. The
Board of Directors reserved 3.0 million shares of common stock for issuance
under the 2001 Non-Qualified Plan. As of March 31, 2001, approximately 300,000
options were outstanding under this plan.
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Stock option activity was as follows:
Weighted
Average
Exercise
Number Price Per
(In thousands, except weighted average exercise price per share) of Shares Share
- ---------------------------------------------------------------- --------- ---------
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
Granted 9,167 39.14
Exercised (1,771) 20.60
Canceled (1,551) 41.76
-------
Outstanding at March 31, 2001 15,864 $ 36.86
=======
Stock option balances were as follows:
(In thousands) March 31,
- --------------------------------------- -----------------
2001 2000
------ ------
Authorized and/or outstanding 19,917 11,512
Available for future grants 4,053 1,493
Exercisable and vested 4,784 2,446
The following tables summarize information about options outstanding at March
31, 2001:
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
- ------------------------ ---------- ----------- ---------- ----------- -----------
$ 5.62 - $19.94 2,948 7.10 $ 15.30 1,770 $ 15.23
20.00 - 34.50 3,982 7.68 28.84 1,599 25.63
34.56 - 34.56 3,094 9.72 34.56 -- --
34.94 - 52.56 2,812 9.09 43.88 759 41.52
52.63 - 71.13 2,652 8.87 62.59 578 62.19
71.38 - 80.81 376 8.87 75.94 78 76.49
------ ----------
15,864 8.45 $ 36.86 4,784 $ 29.55
====== ==========
These options will expire if not exercised by specific dates through March 2011.
Prices for options exercised during the three-year period ended March 31, 2001
ranged from $1.00 to $47.38.
In 1999, we issued 100,000 restricted shares to our current 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, 2001, there were 100,000 restricted shares outstanding with 50,000 vested.
The remaining 50,000 shares vested in April 2001.
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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 2001, 2000, and 1999 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
--------------------------------- ---------------------------------
2001 2000 1999 2001 1999 1998
------- ------- ------- ------- ------- -------
Expected life (years) 5.01 4.99 5.27 0.50 0.50 0.50
Expected volatility 0.71 0.65 0.66 0.84 0.68 0.79
Risk free interest rate 4.5% 6.5% 5.1% 6.0% 5.2% 4.8%
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 granted
during fiscal 2001, 2000 and 1999 were $25.40, $27.24 and $12.56 per share,
respectively. The weighted average estimated fair value of employee stock
purchase rights granted under the Employee Stock Purchase Plans during fiscal
2001, 2000 and 1999 were $21.05, $20.05 and $10.47, respectively.
For purposes of pro forma disclosure, 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. Options assumed as the result of our acquisition
of AXENT were not included in the estimated fair value. Shares purchased through
the AXENT Purchase Plan subsequent to the closing date of the AXENT acquisition
were included in the estimated fair value and was included in the pro forma
information as follows:
Year Ended March 31,
-------------------------------------------
(In thousands, except per share data) 2001 2000 1999
- -------------------------------------------- ----------- ----------- -----------
Net income -- basic -- pro forma $ 7,256 $ 137,829 $ 25,100
Net income -- diluted -- pro forma 7,256 137,829 25,727
Net income per share -- basic -- pro forma 0.12 2.49 0.47
Net income per share -- diluted -- pro forma 0.11 2.31 0.45
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.
NOTE 11. COMMON STOCK REPURCHASES
On January 16, 2001, the Board of Directors replaced the March 22, 1999 stock
repurchase program with a new authorization to repurchase up to $700 million,
not to exceed 15 million shares, worth of Symantec common stock with no
expiration date. During fiscal 2001, we repurchased 5.0 million shares at prices
ranging from $46.07 to $51.16, for an aggregate amount of approximately $244
million.
On March 22, 1999, the Board of Directors authorized the repurchase of up to $75
million of Symantec common
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
stock with no expiration date. During fiscal 2000, we repurchased 1.0 million
shares at prices ranging from $17.90 to $19.87, for an aggregate amount of
approximately $19 million.
On June 9, 1998, the Board of Directors 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.
NOTE 12. RESTRUCTURING AND OTHER EXPENSES
Restructuring and other expenses consisted of the following:
Year Ended March 31,
-------------------------------------------
(In thousands) 2001 2000 1999
- --------------------------------------------- ----------- ----------- -----------
Employee severance and outplacement $ 3,524 $ 8,065 $ 3,800
Excess facilities and equipment 140 953 1,305
----------- ----------- -----------
Total restructuring and other expenses $ 3,664 $ 9,018 $ 5,105
=========== =========== ===========
During the March 2001 quarter, we reorganized various operating functions,
thereby reducing our workforce by 50 employees, and recorded approximately $1.1
million for the costs of severance, related benefits and outplacement services.
In addition, we provided approximately $1.2 million for costs of severance and
related benefits for six members of our senior management due to a realignment
of certain responsibilities. As of March 31, 2001, we had an accrual of $1.7
million related to employee severance and outplacement services that will be
paid during the June 2001 quarter.
During the December 2000 quarter, we reduced a portion of our operations in
Toronto, thereby reducing our workforce by 10 employees, and recorded
approximately $0.4 million for the costs of severance, related benefits and
abandonment of certain equipment. In addition, approximately $0.9 million was
provided for costs of severance and related benefits for four members of our
senior management due to a realignment of certain responsibilities. These
severance and related benefits were paid by the end of the March 2001 quarter.
Details of the fiscal 2001 restructuring and other expenses were as follows:
Cash/ Original Amount Amount Balance
(In thousands) Non-cash Charge Paid/Used Adjusted at 3/31/01
- ----------------------------------- ------------ ----------- ----------- ----------- -----------
Employee severance and outplacement Cash $ 3,524 $ (1,785) $ -- $ 1,739
Excess equipment Non-cash 140 (140) -- --
----------- ----------- ----------- -----------
Total restructuring and other expenses $ 3,664 $ (1,925) $ -- $ 1,739
=========== =========== =========== ===========
During the March 2000 quarter, we reduced our operations in our Melville and
Toronto sites, thereby reducing our workforce by 96 employees. As a result, we
vacated the facility in Melville and reduced 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 a charge of approximately
$1.8 million for severance, related benefits and outplacement services. The
sales workforce reduction affected 10 employees, resulting in a charge of
approximately $0.4 million for severance, related benefits and outplacement
services.
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 recorded 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.
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Details of the fiscal 2000 restructuring charges were as follows:
Cash/ Original Amount Amount Balance
(In thousands) Non-cash Charge Paid/Used Adjusted at 3/31/01
- ----------------------------------- ------------- ----------- ----------- ----------- -----------
Employee severance and outplacement Cash/non-cash $ 8,733 $ (8,733) $ -- $ --
Excess facilities and equipment Cash/non-cash 953 (473) -- 480
----------- ----------- ----------- -----------
Total restructuring and other expenses $ 9,686 $ (9,206) $ -- $ 480
=========== =========== =========== ===========
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 were as follows:
Cash/ Original Amount Amount Balance
(In thousands) Non-cash Charge Paid/Used Adjusted at 3/31/01
- ------------------------------------ ------------- ----------- ----------- ----------- -----------
Employee severance and out-placement Cash $ 3,800 $ (3,132) $ (668) $ --
Excess facilities and equipment Cash/non-cash 1,305 (1,195) -- 110
----------- ----------- ----------- -----------
Total restructuring and other expenses $ 5,105 $ (4,327) $ (668) $ 110
=========== =========== =========== ===========
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 terminated as a result of the restructurings. As
part of each 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 a 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, 2001 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, which would no longer be utilized. The accrual at
March 31, 2001 relates to the remaining lease payments, which will be paid over
the remaining lease term subsequent to the abandonment of each facility.
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
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) 2001 2000 1999
- -------------------------------------------- -------- -------- --------
BASIC NET INCOME PER SHARE
Net income $ 63,936 $170,148 $ 50,201
======== ======== ========
Weighted average number of common
shares outstanding during the period 64,737 57,870 56,601
======== ======== ========
Basic net income per share $ 0.99 $ 2.94 $ 0.89
======== ======== ========
DILUTED NET INCOME PER SHARE
Net income $ 63,936 $170,148 $ 50,201
Interest on convertible subordinated
debentures, net of income tax effect -- -- 627
-------- -------- --------
Net income, as adjusted $ 63,936 $170,148 $ 50,828
======== ======== ========
Weighted average number of common
shares outstanding during the period 64,737 57,870 56,601
Shares issuable from assumed exercise
of options 3,500 4,344 1,684
Shares issuable from assumed conversion
of convertible subordinated debentures -- -- 1,004
-------- -------- --------
Total shares for purpose of calculating
diluted net income per share 68,237 62,214 59,289
======== ======== ========
Diluted net income per share $ 0.94 $ 2.73 $ 0.86
======== ======== ========
For the year ended March 31, 2001, shares issuable from assumed exercise of
options exclude approximately 4,157,000 options, as their effect on diluted net
income per share would have been anti-dilutive.
NOTE 14. OTHER COMPREHENSIVE LOSS
The components of other comprehensive loss, net of tax, were as follows:
Year ended March 31,
------------------------------------
(In thousands) 2001 2000 1999
- ------------------------------------------------------- -------- -------- --------
Other comprehensive loss:
Change in unrealized gain (loss) on
available-for-sale investments,
net of a tax provision (benefit) of $1,406,
($974) and ($217) $ 2,987 $ (2,069) $ (461)
Change in cumulative translation
adjustment, net of a tax (benefit)
of ($11,366), ($3,072) and ($1,476) (24,152) (6,528) (6,090)
-------- -------- --------
Total other comprehensive loss $(21,165) $ (8,597) $ (6,551)
======== ======== ========
NOTE 15. LITIGATION
On December 23, 1999, Altiris Inc. 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.
On May 12, 1999, a venture capital entity and a former stockholder owning less
than a majority share of CKS Limited, which AXENT acquired in March 1999,
commenced an action in the Suffolk County Superior Court in Boston,
Massachusetts against AXENT and its directors. The action alleges violations of
the Massachusetts Uniform Securities Act, negligent misrepresentations and
unfair trade practices. We inherited this case upon its acquisition of
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
AXENT. We believe the claims are without merit and intend to vigorously defend
the action.
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,
2001, we believe that we have adequately accrued for both the judgment and all
legal costs.
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 Norton AntiVirus to function properly
after the year 2000. All but the unfair business practice claims were dismissed
following our demurrer. In December 2000, the unfair business practice claims
were dismissed, and the case was resolved 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, 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 September 15, 1997, Hilgraeve Corporation, or 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. A hearing on the appeals took place in May 2001, but no decision
has been issued.
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.
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The total amount of legal and settlement expenses accrued as of the respective
year-ends and the amounts expensed for the years ended are reflected below:
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
Balance as of March 31, 2001 $ 8.4 million Amount expensed in fiscal 2001 $ 3.4 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 us for our 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 the
Record Date, August 21, 1998. 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 Products, Enterprise Security, Enterprise
Administration, Services and Other.
The Consumer Products segment focuses on delivering our security and
problem-solving products to individual users, home offices and small businesses.
The Enterprise Security segment focuses on providing organizations with
technology, services and response capabilities to deal with their specific
needs. The Enterprise Administration segment focuses on offering products that
enable companies to be more effective and efficient within their IT departments.
The Services segment is focused on providing information security solutions that
incorporate best-of-breed technology, security best practices and expertise and
global resources to help enable E-business success. The Other segment is
comprised of sunset products, products nearing the end of their life cycle, and
operations from our Visual Cafe and ACT! divested product lines. Also included
in the Other segment are all indirect costs, general and administrative
expenses, amortization of goodwill 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.
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
We shifted our focus to these new business segments during fiscal 2000, with
additional realignment in fiscal 2001. Due to this change, we have presented the
fiscal 2000 and 1999 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. Our
chief executive officer and 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 Enterprise Enterprise Total
(In thousands) Products Security Administration Services Other Company
- --------------------------------------------------------------------------------------------------------------
Fiscal 2001
Revenue from
external customers $ 332,668 $ 285,627 $ 230,644 $ 2,280 $ 2,335 $ 853,554
Operating income (loss) 129,815 24,310 154,406 (7,113) (191,818) 109,600
Depreciation &
amortization expense 13,112 16,891 4,928 607 85,303 120,841
Fiscal 2000
Revenue from
external customers 318,995 166,846 216,710 427 42,747 745,725
Operating income (loss) 135,334 19,802 138,260 220 (158,413) 135,203
Depreciation &
amortization expense 9,846 7,883 4,206 11 29,585 51,531
Fiscal 1999
Revenue from
external customers 265,252 91,625 168,007 3,815 63,929 592,628
Operating income (loss) 98,543 (26,196) 101,579 3,796 (149,881) 27,841
Depreciation &
amortization expense 8,861 6,262 3,531 1 17,769 36,424
Geographical Information
Year Ended March 31,
----------------------------------
(In thousands) 2001 2000 1999
- --------------------------------------------- -------- -------- --------
Net revenues from external customers:
United States $440,512 $409,952 $353,734
Other foreign countries 413,042 335,773 238,894
-------- -------- --------
$853,554 $745,725 $592,628
======== ======== ========
75
78
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
March 31,
----------------------------------
(In thousands) 2001 2000 1999
- ---------------------------------------- -------- -------- --------
Long-lived assets:
- ------------------
United States $905,379 $159,392 $151,972
United Kingdom 5,779 805 554
Ireland 5,602 4,905 6,335
Japan 4,043 3,965 3,497
Canada 1,243 1,851 2,017
Other foreign countries 9,200 8,789 6,950
-------- -------- --------
$931,246 $179,707 $171,325
======== ======== ========
SIGNIFICANT CUSTOMERS
The following distributors covered all segments and accounted for more than 10%
of net revenues during fiscal 2001, 2000 and 1999:
Year Ended March 31,
--------------------------------------------
2001 2000 1999
----------- ----------- -----------
Ingram Micro, Inc. 26% 39% 47%
Tech Data Corp. * 12 19
Merisel * 11 13
* Amount is less than 10% of net revenues
76
79
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 22, 2001
- ---------------------------------------------------- Executive Officer and Director
(John W. Thompson.)
CHIEF FINANCIAL OFFICER AND CHIEF ACCOUNTING OFFICER:
/s/ Gregory Myers Chief Financial Officer June 22, 2001
- ----------------------------------------------------
(Gregory Myers)
DIRECTORS:
/s/ Tania Amochaev Director June 22, 2001
- ----------------------------------------------------
(Tania Amochaev)
/s/ Charles M. Boesenberg Director June 22, 2001
- ----------------------------------------------------
(Charles M. Boesenberg)
/s/ Per-Kristian Halvorsen Director June 22, 2001
- ----------------------------------------------------
(Per-Kristian Halvorsen)
/s/ Robert S. Miller Director June 22, 2001
- ----------------------------------------------------
(Robert S. Miller)
/s/ Bill Owens Director June 22, 2001
- ----------------------------------------------------
(Bill Owens)
/s/ Georges Reyes Director June 22, 2001
- ----------------------------------------------------
(Georges Reyes)
/s/ Daniel H. Schulman Director June 22, 2001
- ----------------------------------------------------
(Daniel H. Schulman)
80
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, 1999 $ 4,416 $ 609 $ (79) $ 4,946
Year ended March 31, 2000 4,946 4,031 (2,533) 6,444
Year ended March 31, 2001 6,444 3,287 (1,392) 8,339
* During fiscal 2001, amount represents a balance sheet increase in allowance
for doubtful accounts as a result of a balance acquired from our acquisition
of AXENT. Bad dept expense was not significant during fiscal 2001.
81
EXHIBIT INDEX
Exhibits. The following exhibits are filed as part of, or incorporated by
reference into, this Form 10-K:
2.01 The AXENT Merger Agreement. (Incorporated by reference to
Registrant's Report on Form S-4 (No. 333-46264) filed September
20, 2000.)
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.)
82
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.)
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.)
83
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. (Incorporated by
reference to Exhibit 10.18 filed with the Registrant's Annual
Report on Form 10-K for the year ended March 31, 2000.)
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.)
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.)
84
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 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.)
10.32 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.)
10.33 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.)
10.34 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.)
10.35 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.)
10.36 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.)
10.37 Amended and Restated Credit Agreement, dated May 29, 2000, by and
between Symantec Corporation and Bank of America, N.A.
(Incorporated by reference to Exhibit 10.39 filed with the
Registrant's Annual Report on Form 10-K for the year ended March
31, 2000.)
10.38 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
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.)
10.39 Amended and Restated Loan Agreement, dated as of February 9,
1999, among Sumitomo Bank Leasing and Finance, Inc., 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.)
10.40 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.)
10.41 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.)
10.42 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
85
to Exhibit 10.25 filed with the Registrant's Annual Report on
Form 10-K for the year ended March 31, 1991.)
10.43 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.)
10.44 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.)
10.45 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.)
10.46 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.)
10.47 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.)
10.48 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.)
10.49 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.)
10.50 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.)
10.51* 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.)
10.52* 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.)
10.53* 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.)
10.54* 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.)
10.55 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.)
10.56 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.)
10.57* Form of President and CEO Annual Incentive Plan. (Incorporated by
reference to Exhibit 10.64 filed with the Registrant's Annual
Report on Form 10-K for the year ended March 31, 2000.)
86
10.58* Form of Vice President Annual Incentive Plan (No
Division/Business Unit Objectives.) (Incorporated by reference to
Exhibit 10.65 filed with the Registrant's Annual Report on Form
10-K for the year ended March 31, 2000.)
10.59* Form of Vice President Annual Incentive Plan (With
Division/Business Unit Objectives.) (Incorporated by reference to
Exhibit 10.66 filed with the Registrant's Annual Report on Form
10-K for the year ended March 31, 2000.)
10.60 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.)
10.61* 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.)
10.62* 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.)
10.63* 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.)
10.64 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.)
10.65 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.)
10.66 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.)
10.67 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.)
10.68 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.)
10.69 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.)
10.70 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.)
10.71 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.)
10.72 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.)
10.73 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.)
10.74 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
87
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.)
10.75* Symantec Corporation 1999 Acquisition Plan Stock Option Agreement
with Acceleration by and between Symantec Corporation and Gary P.
Warren. (Incorporated by reference to Exhibit 10.01 filed with
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000.)
10.76* Employment offer by and between Symantec Corporation and Ron
Moritz. (Incorporated by reference to Exhibit 10.02 filed with
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000.)
10.77* Employment offer by and between Symantec Corporation and Gail
Hamilton. (Incorporated by reference to Exhibit 10.03 filed with
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000.)
10.78* The Registrant's 2000 Directors Equity Incentive Plan.
(Incorporated by reference to Exhibit 99.1 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-47648)
filed October 10, 2000.)
10.79* AXENT Technologies, Inc. 1999 Incentive Stock Plan. (Incorporated
by reference to Exhibit 99.3 filed with the Registrant's
Registration Statement on Form S-8 (No. 333-52200) filed December
19, 2000.)
10.80* AXENT Technologies, Inc. 1998 Incentive Stock Plan. (Incorporated
by reference to Exhibit 99.4 filed with the Registrant's
Registration Statement on Form S-8 (No. 333-52200) filed December
19, 2000.)
10.81* AXENT Technologies, Inc. 1996 Amended and Restated Stock Option
Plan. (Incorporated by reference to Exhibit 99.5 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-52200)
filed December 19, 2000.)
10.82* AXENT Technologies, Inc. 1996 Amended and Restated Directors'
Stock Option Plan. (Incorporated by reference to Exhibit 99.6
filed with the Registrant's Registration Statement on Form S-8
(No. 333-52200) filed December 19, 2000.)
10.83* AXENT Technologies, Inc. Amended and Restated 1991 Stock Option
Plan. (Incorporated by reference to Exhibit 99.7 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-52200)
filed December 19, 2000.)
10.84* AXENT Technologies, Inc. 1998 Exchange Option Plan. (Incorporated
by reference to Exhibit 99.8 filed with the Registrant's
Registration Statement on Form S-8 (No. 333-52200) filed December
19, 2000.)
10.85* AXENT Technologies, Inc. 1999 PassGo Technologies Exchange Option
Plan. (Incorporated by reference to Exhibit 99.9 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-52200)
filed December 19, 2000.)
10.86* AXENT Technologies, Inc. Internet Tools 1997 Equity Incentive
Plan. (Incorporated by reference to Exhibit 99.10 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-52200)
filed December 19, 2000.)
10.87* AssureNet Pathways, Inc. Restated 1982 Stock Option Plan assumed
by AXENT Technologies, Inc. (Incorporated by reference to Exhibit
99.11 filed with the Registrant's Registration Statement on Form
S-8 (No. 333-52200) filed December 19, 2000.)
10.88* AXENT Technologies, Inc. 1998 Employee Stock Purchase Plan.
(Incorporated by reference to Exhibit 99.12 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-52200)
filed December 19, 2000.)
10.89* Termination agreement by and between Symantec Corporation and
Derek Witte. (Incorporated by reference to Exhibit 10.15 filed
with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 29, 2000.)
10.90* Termination agreement by and between Symantec Corporation and Ron
Moritz. (Incorporated by reference to Exhibit 10.15 filed with
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended December 29, 2000.)
10.91* Symantec Corporation 2001 Non-Qualified Equity Incentive Plan.
(Incorporated by reference to Exhibit 99.1 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-56874)
filed March 12, 2001.)
88
10.92* Symantec Corporation 1998 Employee Stock Purchase Plan.
(Incorporated by reference to Exhibit 99.2 filed with the
Registrant's Registration Statement on Form S-8 (No. 333-52200)
filed December 19, 2000.)
10.93* Symantec Executive Severance Plan
10.94 Participation Agreement, dated as of March 30, 2001, by and among
Symantec Corporation, The Symantec 2001 Trust, Wilmington Trust
Company, the Holders and Lenders (as defined in the Participation
Agreement), Fuji Bank, Limited, KeyBank National Association, and
The Bank of Nova Scotia.
10.95 Annex A to Participation Agreement
10.96 First Amendment to Annex A to Participation Agreement, dated as
of June 6, 2001.
10.97 Master Lease Agreement, dated as of March 30, 2001, between The
Symantec 2001 Trust and Symantec Corporation.
10.98 Lease Supplement No. 1, dated as of April 6, 2001, between The
Symantec 2001 Trust and Symantec Corporation.
10.99 Lease Supplement No. 2, dated as of June 6, 2001, between The
Symantec 2001 Trust and Symantec Corporation.
10.001 Pledge and Security Agreement, dated as of March 30, 2001,
between Symantec Corporation and The Bank of Nova Scotia.
10.002 Construction Agency Agreement, dated as of March 30, 2001,
between The Symantec 2001 Trust and Symantec Corporation.
10.003 Supplement No. 1 to Construction Agency Agreement, dated as of
April 6, 2001, between The Symantec 2001 Trust and Symantec
Corporation.
10.004 Supplement No. 2 to Construction Agency Agreement, dated as of
June 6, 2001, between The Symantec 2001 Trust and Symantec
Corporation.
21.01 Subsidiaries of the Registrant.
23.01 Consent of Ernst & Young LLP, Independent Auditors.
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* Indicates a management contract or compensatory plan or arrangement.