e10vkza
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
Amendment No. 1
|
|
|
(Mark One) |
|
|
þ
|
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
|
|
|
For the Fiscal Year Ended April 2, 2004 |
|
OR |
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
|
|
|
For the transition period
from to . |
Commission File Number:
SYMANTEC CORPORATION
(Exact name of the Registrant as specified in its charter)
|
|
|
Delaware
|
|
77-0181864 |
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S. Employer
Identification No.) |
20330 Stevens Creek Blvd., Cupertino 95014
(Address of principal executive offices)
(408) 517-8000
(The Registrants telephone number, including area
code)
Securities registered pursuant to section 12(b) of the
Act: none
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, $0.01 par value, 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 þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrants 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. o
Indicate by check mark whether the Registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange
Act). Yes þ No o
Aggregate market value of the voting stock held by
non-affiliates of the Registrant, based upon the closing sale
price of Symantec common stock on October 3, 2003 as
reported on the Nasdaq National Market:
$10,059,568,000
Number of shares outstanding of the Registrants common
stock as of May 28,2004:
311,834,597
(This amount does not reflect the two-for-one stock split,
effected as a stock dividend, which occurred on
November 30, 2004.)
SYMANTEC CORPORATION
TABLE OF CONTENTS
|
|
|
|
|
PART I |
Item 1.
|
|
Business |
|
2 |
Item 7.
|
|
Managements Discussion and Analysis of Financial Condition
and Results
of Operations |
|
11 |
PART IV |
Item 15.
|
|
Exhibits, Financial Statement Schedules, and Reports on
Form 8-K (Summary of Significant Accounting Policies and
Notes to Consolidated Financial Statements) |
|
36 |
Signatures |
|
81 |
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.
Forward-looking Statements and Factors That May Affect Future
Results
The discussion following below and throughout this report
contains forward-looking statements, which are subject to safe
harbors under the Securities Act of 1933 and the Securities
Exchange Act of 1934. The words expects,
plans, anticipates,
believes, estimates,
predicts, projects, and similar
expressions identify forward-looking statements. In addition,
statements that refer to projections of our future financial
performance, anticipated growth and trends in our businesses,
the anticipated impacts of acquisitions and other
characterizations of future events or circumstances are
forward-looking statements. These statements are only
predictions, based on our current expectations about future
events. We cannot guarantee future results, performance or
achievements or that predictions or current expectations will be
accurate. We do not undertake any obligation to update these
forward-looking statements to reflect events occurring or
circumstances arising after the date of this report. These
forward-looking statements involve risks and uncertainties, and
our actual results, performance or achievements could differ
materially from those expressed or implied by the
forward-looking statements on the basis of several factors,
including those that we discuss under Business Risk Factors
beginning on page 28. We encourage you to read that
section carefully.
EXPLANATORY NOTE
We are filing this Amendment No. 1 to our Annual Report on
Form 10-K for our fiscal year ended March 31, 2004 in
response to comments by the Staff of the Securities and Exchange
Commission in connection with its review of our registration
statement on Form S-4 filed February 11, 2005 in
connection with our proposed acquisition of VERITAS Software
Corporation. This Form 10-K/A speaks as of the original
filing date and has not been updated to reflect events occurring
subsequent to the original filing date.
The following is a list of the items of the annual report
amended hereby (including a brief description of the change to
each such item):
|
|
|
|
|
Disclosure of the identities of the two distributors who each
accounted for more than 10% of our revenues during our fiscal
year 2004. |
|
|
Item 7. |
Managements Discussion and Analysis of Financial
Condition and Results of Operations |
|
|
|
|
|
Discussion of critical accounting estimates regarding revenue
recognition |
|
|
|
Elimination of any reference to an independent appraisal firm
with respect to valuation of business combinations |
|
|
|
Additional disclosure regarding instances where multiple factors
contributed to a change in our operating results |
|
|
Item 15. |
Exhibits, Financial Statement Schedules and Reports on
Form 8-K |
|
|
|
|
|
Changes to the form of reports of independent registered public
accounting firms issued by KPMG, LLP and Ernst & Young, LLP |
|
|
|
Changes to the following Notes to the Consolidated Financial
Statements: |
|
|
|
|
|
Note 2. Sales and Marketing Expense Information |
|
|
|
Note 3. Acquisitions and Divestitures |
|
|
|
Note 4. Goodwill, Acquired Product Rights and Other
Intangible Assets |
|
|
|
Note 16. Segment Information |
|
|
|
|
|
Additional disclosures relating to reserves for product returns
and rebates included in Schedule II |
PART I
Introduction
Symantec is the global leader in information security providing
a broad range of software, appliances and services designed to
help individuals, small and mid-sized businesses, and large
enterprises secure and manage their IT infrastructure.
Symantecs Norton brand of products is the worldwide leader
in consumer security and problem-solving solutions. Founded in
1982, we have offices in 38 countries worldwide.
We file registration statements, periodic and current reports,
proxy statements and other materials with the Securities and
Exchange Commission. You may read and copy any materials we file
with the SEC at the SECs Public Reference Room at
450 Fifth Street, NW, Washington, DC 20549. You may obtain
information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains a web site
at www.sec.gov that contains reports, proxy and
information statements and other information regarding issuers
that file electronically with the SEC, including our filings.
2
Our Internet address is www.symantec.com. We make
available, free of charge, our annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on
Form 8-K, and any amendments to those reports filed
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 through our Investor Relations web site,
located at www.symantec.com/invest/index.html, as soon as
reasonably practicable after they are electronically filed with
or furnished to the SEC. The contents of our website are not
incorporated into, or otherwise to be regarded as a part of,
this Annual Report on Form 10-K.
Business Overview
We currently view our business in five operating segments:
Consumer Products, Enterprise Security, Enterprise
Administration, Services and Other. For financial information
related to our operating segments, see Note 16 of the Notes
to Consolidated Financial Statements of this Annual Report on
Form 10-K.
Our Consumer Products segment focuses on delivering our Internet
security and problem-solving products to individual users, home
offices and small businesses. Symantecs Norton brand of
consumer security products is a market leader in desktop
protection, with integrated products that work seamlessly to
protect customers computers from virus outbreaks or
malicious hacker attacks. Most of the products that we are
currently marketing or developing feature
LiveUpdatetm.
This feature enables users to easily download security updates
including virus definitions, firewall rules, URL databases and
uninstall scripts. Our consumer products run primarily on
Windows® and Macintosh® operating systems. Our
Consumer Products segment represented 47%, 41% and 35% of net
revenues during fiscal 2004, 2003 and 2002, respectively.
Product offerings in the Consumer Products segment include
Norton
AntiVirustm,
Norton Internet
Securitytm
and Norton
SystemWorkstm.
Our Enterprise Security segment provides best-of-breed security
solutions for all tiers of a network: at the gateways between
the network and the outside world, at the servers that act as
the networks vital organs, and at end-user devices
including desktop PCs, laptops and handhelds. Our comprehensive
solutions include virus protection and content filtering,
firewall and virtual private networking, or VPN, intrusion
prevention, and security management. In addition, we have
expanded our technology offerings to include integrated
solutions at the gateway and client levels, which combine
several of our individual technology solutions, and early
warning solutions. 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 client level,
our products run on the Windows platform. Our Enterprise
Security segment represented 39%, 42% and 42% of net revenues
during fiscal 2004, 2003, and 2002, respectively.
Our virus protection and content filtering technologies provide
protection at the gateway, server, and client tiers against
known and unknown threats. 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
companys network. Products and services providing
protection from virus attacks represent the most well-known and
largest market component of the enterprise security area.
Product offerings include Symantec
AntiVirustm
and Symantec
AntiVirustm
Scan Engine.
An integrated solution combines multiple security technologies
with management, customer service and support, and advance
research. Integrated solutions are designed to work together as
a unified system, providing better overall protection, quicker
response and more efficient management. Product offerings
include
Symantectm
Gateway Security and
Symantectm
Client Security.
3
Firewalls provide protection against unwanted intrusion while
enabling the flow of approved traffic. VPN solutions are
designed to enable employees and business partners to remotely
access an enterprise network in a secure, cost effective manner.
We offer firewall and VPN solutions that protect throughout the
network, including at Internet gateways, gateways to sensitive
internal networks and at client devices. Product offerings
include
Symantectm
Enterprise Firewall with VPN,
Symantectm
Firewall/ VPN Appliance, and
Symantectm
Clientless VPN Appliance.
At the gateway and server level, our policy compliance
management solutions help customers define, manage, and enforce
policies from a central location as well as probe for network
vulnerabilities and suggest remedies 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.
Symantec security management products provide a comprehensive
solution allowing for the consolidation of security events, the
containment of security threats and the centralization of
security policy enforcement. These products are built on an
open, interoperable framework that enables us to work together
with third party solutions to provide secure, manageable, and
scalable enterprise security. Product offerings include Symantec
Enterprise Security
Managertm,
Symantectm
Event Manager and
Symantectm
Incident Manager.
Symantecs early warning solutions provide organizations
with customized and comprehensive notifications of cyber attacks
worldwide, with countermeasures to prevent attacks before they
occur, enabling them to mitigate risk and manage threats. These
solutions are supported by
Symantectm
Security Response, our Internet security research and support
organization. Product offerings include Symantec
DeepSighttm
Alert Services and Symantec
DeepSighttm
Threat Management System.
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 monitor systems for patterns of misuse and
abuse and can warn organizations before systems are misused or
information is stolen. Product offerings include Symantec
ManHunttm,
Symantec Intruder
Alerttm
and
Symantectm
Decoy Server.
|
|
|
Enterprise Administration |
Our Enterprise Administration segment offers open and modular
products and services that enable companies to effectively and
efficiently manage their IT infrastructures. Our solutions are
used to optimize the security and availability of our
customers information, while reducing operational costs,
increasing IT quality of service, reducing complexity, and
enhancing our customers ability to rapidly respond to
constant business and technological change. This is typically
accomplished by transforming existing manual IT processes into
automated and unattended operations that can be performed on
multiple systems simultaneously across the enterprise, in a
dynamic and adaptive manner.
Our solutions allow customers to manage virtually any function
at any point in the lifecycle of their computing systems and
devices, from network auto-discovery and IT asset management, to
operating system provisioning and application deployment,
ongoing security updates and configuration management, rapid
backup and disaster recovery, de-provisioning, and Help Desk
remote control. Our Enterprise Administration segment
represented 12%, 15% and 21% of net revenues during fiscal 2004,
2003 and 2002, respectively. Product offerings include Symantec
Ghosttm
Enterprise Edition,
pcAnywheretm,
the ON
iCommandtm
product family, V2i
Protectortm,
PartitionMagictm
Pro,
VolumeManagertm,
ServerMagictm
for NetWare® and OEM Factory Solutions.
4
Our Services segment provides information security solutions
that incorporate advanced technology, security best practices
and expertise and global resources to help enable e-business
success. Through its comprehensive offerings, our Services
segment delivers holistic security assessments, planning and
implementation, proactive solutions for security management and
response and knowledge transfer to develop internal security
skills. Our Services segment represented 2%, 2% and 1% of net
revenues during fiscal 2004, 2003 and 2002, respectively.
Services offerings include
Symantectm
Managed Security Services,
Symantectm
Consulting Services and
Symantectm
Education Services.
Our Other segment is comprised of sunset products, products
nearing the end of their life cycle.
Sales, Marketing and Customers
In addition to our direct sales force, we license our enterprise
and consumer products through our distributor, corporate
reseller, value-added reseller and system integrator channels.
We sell our consumer products to individuals and small
offices/home offices around the world through a multi-tiered
distribution network. Our products are available to customers
through channels that include: distributors, retailers, direct
marketers, Internet-based resellers, original equipment
manufacturers, educational institutions and Internet service
providers. We also sell some of our products and product
upgrades through direct mail/e-mail and over the Internet, in
conjunction with channel partners.
We maintain distribution relationships with major independent
distributors. Our indirect sales force works closely with our
major distributor and reseller accounts to manage the flow of
orders, inventory levels and sales to customers. We also work
closely with them to execute channel marketing promotions and
other cooperative marketing activities.
Our agreements with distributors are generally nonexclusive and
may be terminated by either party at any time without cause.
These distributors are not within our control and are not
obligated to purchase products from us. They also distribute
other vendors product lines.
In fiscal 2004, 2003 and 2002, two distributors, Ingram Micro
Inc. and Tech Data Product Management, Inc., each accounted for
more than 10% of our total net revenues.
Our marketing activities include:
|
|
|
|
|
advertising in consumer, trade, technical and business
publications; |
|
|
|
on-line advertising; |
|
|
|
radio broadcast advertising; |
|
|
|
public relations; |
|
|
|
production of brochures, sales tools, multi-media product
demonstrations, packaging and other collateral; |
|
|
|
targeted customer communications through the Symantec web site,
including regularly scheduled web-based seminars and online
newsletters; |
|
|
|
cooperative marketing with distributors, resellers and industry
partners; |
|
|
|
direct mailings and e-mailings to existing end-users and
prospects; |
|
|
|
the use of tools such as trialware and
Symantectm
Security Check, a web-based tool for users to assess the
security vulnerabilities on their computers (consumer only); |
|
|
|
participation in focused trade and computer shows, sponsorship
of industry analyst conferences, and execution of Symantec road
shows, seminars and user group conferences; and |
5
|
|
|
|
|
primary market research to understand evolving customer needs
and buying behaviors. |
For our consumer products, we typically offer two types of
rebate programs within most countries: volume incentive rebates
to channel partners and promotional rebates to end-users. The
distributor or reseller earns a volume incentive rebate
primarily based upon their sale of products to end-users. From
time to time, we also make rebates available to individual users
of various products acquired through major retailers. We
regularly offer upgrade rebates to existing customers purchasing
a new version of a product. Both volume incentive rebates and
end-user rebates are accrued as an offset to revenue when
revenue is originally recorded.
International Sales
Revenues from sales outside of the United States represented
52%, 49% and 47% of our net revenues during fiscal 2004, 2003
and 2002, respectively. Our international revenues consisted of
sales primarily in the Europe, Middle East and Africa, or EMEA,
region and sales from this region represented 33%, 30% and 27%
of our net revenues during fiscal 2004, 2003 and 2002,
respectively. Additional financial information regarding our
international sales is provided in Note 16 of the Notes to
Consolidated Financial Statements.
The majority of our net revenues from EMEA 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 most of our consumer products, we translate the
documentation, software and packaging into the local language
and prepare marketing programs for each local market.
We have marketing offices in Australia, Austria, Belgium,
Brazil, Canada, China, Czech Republic, Denmark, Finland, France,
Germany, Greece, Hong Kong, Hungary, India, Ireland, Israel,
Italy, Japan, Malaysia, Mexico, the Netherlands, New Zealand,
Norway, Poland, Portugal, Russia, Saudi Arabia, 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 but not
restricted to:
|
|
|
|
|
government regulations; |
|
|
|
export and import restrictions; |
|
|
|
currency fluctuations; |
|
|
|
repatriation restrictions; and |
|
|
|
in some jurisdictions, reduced protection for our copyrights and
trademarks. |
Symantec Security Response
Symantec Security Response is a team of dedicated intrusion
experts, security engineers, virus hunters and global technical
support teams that work in tandem to provide extensive coverage
for enterprises and consumers. Symantec Security Response
provides customers with comprehensive, global, 24x7 Internet
security expertise to guard against todays blended
Internet threats, which are threats that are multi-faceted in
their operating methods and effects.
Symantec Security Response addresses blended threats by
providing a thorough analysis of Internet security threats,
evaluating how threats work together, then offering
recommendations on protection. This allows us to respond to
complex security threats in a more holistic, preventive manner.
A Symantec Security Response analysis can show how multiple
threats work together, how this could impact a customer, and how
to protect against these threats.
Symantec Security Response delivers knowledgeable, proactive
security protection through product security policies and best
practice guidelines that can be updated and distributed through
automated processes. Additionally, Symantec Security Response
provides rapid reactive security protection through its incident
response program, including emergency security signatures and
policies, as well as outbound communications such as alerting
services.
6
Symantec Security Response not only provides time-sensitive
security advisories using web updates, but also provides
alerting services, technical support and media alerts. Symantec
Security Response is committed to educating the general public
about key security threats and trends through published white
papers and speaking engagements worldwide.
The research centers for Symantec Security Response are focused
on collecting and analyzing the latest malware threats, from
network security threats and vulnerabilities to viruses and
worms. When a new threat or vulnerability is discovered,
Symantec Security Response experts provide rapid emergency
response, focusing on communication with customers and delivery
of security updates for our security products. Research centers
are located around the world, including the United States, Asia
Pacific and Europe.
To ensure that customers are utilizing the most recent
technologies available for addressing security issues, Symantec
Security Response experts leverage our sophisticated back-end
product architecture. This architecture allows users to receive
the latest security updates including intrusion
detection signatures and virus definitions
automatically in the event of a new security threat or outbreak.
LiveUpdate technology simplifies and speeds the process of
receiving and implementing security updates for our security
product offerings at the server, gateway and desktop levels.
With more than 300 experts in Internet security, desktop and
network management, our global technical support team is
available around the clock. Our technical support experts
provide customers with information on product implementation and
usage, as well as countermeasures and identification tools for
new threats.
We maintain centralized support facilities throughout the world
to drive rapid response to complex queries. Support is available
in multiple languages, including Dutch, English, French, German,
Italian, Japanese, Korean, Mandarin, Portuguese and Spanish.
|
|
|
Enterprise Security Support |
Our enterprise security support program offers annual support
contracts to enterprise customers worldwide. Our standard annual
support contracts provide 1) unlimited 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. Inclusive in these standard annual support
contracts are virus definitions and intrusion detection
signatures created by Symantec Security Response. Customers may
augment their standard annual support contract with services
such as 24x7 telephone and web support, advanced alerting
services, additional designated callers (contacts) and
additional language support, as well as a Technical
Account Manager, assigned to work closely with an
organization and act as a focal point for all issues.
Our consumer product support program provides free self-help
online services to all consumer customers worldwide, as well as
free e-mail support. A team of product experts, editors and
language translators are dedicated to maintaining the robustness
of the online knowledge base. Generally, telephone product
support is provided for a fee. For customers that subscribe to
them, the latest virus definitions and application bug fixes
and/or patches for most of our currently marketed and developed
products are downloaded automatically through LiveUpdate,
created by Symantec Security Response.
We revise these fee-based support programs from time to time as
customer requirements change and as market trends dictate. These
programs may vary slightly by region.
7
Recent Acquisitions and Divestitures
Acquisitions
Since our initial public offering on June 23, 1989, we have
completed acquisitions of 33 businesses. Our recent acquisitions
included:
|
|
|
|
|
ON Technology Corp. in the March 2004 quarter; |
|
|
|
PowerQuest, Inc. and SafeWeb, Inc. in the December 2003 quarter; |
|
|
|
Nexland, Inc. in the September 2003 quarter; |
|
|
|
Riptech, Inc., Recourse Technologies, Inc., SecurityFocus, Inc.,
and Mountain Wave, Inc. in the September 2002 quarter; and |
|
|
|
Lindner & Pelc Consult GmbH and Foster-Melliar
Limiteds enterprise security management division in the
September 2001 quarter. |
We accounted for each of these acquisitions as a business
purchase and, accordingly, we have included the operating
results of these businesses in our consolidated financial
statements from their respective dates of acquisition. See
Note 3 of the Notes to Consolidated Financial Statements
for further discussion of the above acquisitions. We also have
acquired several other businesses in the past, including Peter
Norton Computing, Inc. on August 31, 1990. We continue to
use the Norton brand name for certain consumer products
developed and marketed by us.
In April 2003, we purchased certain assets related to Roxio
Inc.s
GoBacktm
computer recovery software business. In addition, in August
2003, we purchased a security technology patent as part of a
legal settlement in Hilgraeve, Inc. v. Symantec
Corporation.
In August 2001, we sold assets and transferred liabilities and
employees related to our Web Access Management product line to
PassGo Technologies, Ltd. and agreed to license them the related
technology for a period of four years through August 2005. In
December 1999, we licensed substantially all of the ACT! Product
line technology to Interact Commerce Corporation for a period of
four years through December 2003.
For further discussion on our recent acquisitions and
divestitures, see Note 3 of the Notes to Consolidated
Financial Statements.
Product Development, Partnerships, Investments and
Acquisitions
We use a multiple product sourcing strategy that includes:
|
|
|
|
|
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. Each product development group is
responsible for its own design, development, documentation and
quality assurance. Our research and development expenditures for
each of the last three years are further discussed under
Managements Discussion and Analysis of Financial
Condition and Results of Operations Research and
Development Expenses.
Independent contractors are used for aspects of the product
development process. In addition, elements of some of our
products are licensed from third parties.
8
We invest in companies with emerging technologies and companies
that promote the sale and use of our products and services.
These investments are made in lieu of an acquisition when timing
is inappropriate or when the business models and sectors fall
out of our strategic requirements. We pursue investments, which
we believe will be 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 and
services strategy. We consider both time to market and potential
market share growth when evaluating acquisitions of
technologies, product lines or companies. We have completed a
number of acquisitions of technologies, companies and products
in the past, and have also disposed of technologies and
products. We 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 the Notes
to Consolidated Financial Statements.
Competition
Our markets are competitive and are subject to rapid changes in
technology. They are influenced by the constant change in
Internet security threats and the strategic direction of major
software and operating system providers, network equipment and
computer hardware manufacturers, Internet service providers,
application service providers and key application software
vendors. Our competitiveness depends on our ability to deliver
products that meet our customers needs by enhancing our
existing solutions and services and offering reliable, scalable
and standardized new solutions on a timely basis. We have
limited resources, and as a result, we must deploy our available
resources thoughtfully. The principal competitive factors in our
Consumer Products, Enterprise Security and Enterprise
Administration segments are quality, employment of the most
advanced technology, time to market, price, reputation,
financial stability, 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, financial
stability, and reputation within the industry.
In the enterprise security and administration markets, we
compete against many companies who offer competing products to
our technology solutions and competing services to our response
and support. In the area of antivirus and filtering products,
some of the companies we compete against are Computer
Associates, McAfee Security (formerly Network Associates),
Sophos, Trend Micro, and WebSense. In addition, Microsoft has
announced its intent to offer Service Pack 2, which checks
for active and current anti-virus software on desktops and
refers the user to software vendors. In the area of
firewall and VPN, some of the companies we compete against
are Check Point Software, Cisco, Juniper, SonicWALL and
Watchguard. In the area of intrusion detection and security
management, some of the companies we compete against are
Bindview, Internet Security Services, NetIQ and Tipping Point.
In the areas of remote management, imaging provisioning, backup,
recovery and asset management, some of the companies we compete
against are Altiris, Laplink, Marimba and Veritas. In addition,
we face indirect or potential competition from operating system
providers and network equipment and computer hardware
manufacturers, who provide or may provide various security
solutions and functions in their current and future products.
These competitors have significant advantages due to their
ability to influence or control the computing platforms,
security layers and network tiers on, or in, which security
products operate. In addition, these competitors generally have
significantly greater financial, marketing or technological
resources than we do. We believe that our ability to compete in
the enterprise security and administration markets going forward
depends in part on providing simplified, solution-oriented
offerings that address multiple aspects of enterprise security.
Some of the companies that offer competing products to our
Consumer Products offerings include Check Point Software,
Internet Security Services, Kroll, McAfee Security (formerly
Network Associates), Norman, Panda and Trend Micro. With the
recent outbreaks of viruses and other Internet-based security
threats, several other companies have entered the market and may
become significant competitors in the future.
Our Enterprise Security Services compete with companies such as
Counterpane, IBM, Internet Security Services, Ubizen and
Verisign.
9
Price competition is intense with most of our products and
services. 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. Microsoft has
added security features to new versions of its operating system
products that provide some of the same functions offered in our
products. Microsofts acquisition of GeCads antivirus
technology could lead it to include antivirus functions in
future versions of its operating system products. In addition,
vendors of other operating systems, such as Red Hat® Linux,
Solaris and Unix-based operating systems, may also incorporate
some of the 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
those 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, including Cisco, incorporate additional
server-based network management and security tools into network
operating systems; |
|
|
|
Microsoft, network equipment or computer hardware manufacturers
license, develop or acquire technology or products that provide
functionality directly competitive with our product and service
offerings. |
In addition, we compete with other computer software companies,
operating system providers and network equipment and computer
hardware manufacturers 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, operating system providers and network equipment and
computer hardware manufacturers to acquire products or companies
and to publish software developed by third parties.
Some of our existing and potential competitors have greater
financial, marketing or technological resources than we do. We
believe that competition in the industry will continue to
intensify as other major software companies expand their product
lines into additional product categories, and as operating
system providers, network equipment and computer hardware
manufacturers attempt to leverage their strengths at the
computing platform, security layer and network tier to compete
more aggressively in the market for security solutions.
Manufacturing
Our product development groups produce a set of master CD-ROMs
or diskettes and documentation for each product that is then
duplicated or replicated and packaged into products by our
logistics organization. United States purchasing of all raw
materials is done by an outside organization. This outside
contractor, under the supervision of our domestic logistics
organization, performs all of our domestic manufacturing and
order fulfillment. The manufacturing steps that are
subcontracted to outside organizations include the replication
of CD-ROMs, printing of documentation materials and retail
boxes, and assembly of the final packages. Purchasing is done by
Symantec personnel for products manufactured in our Dublin,
Ireland facilities. For most products distributed outside of
North and South America, our Dublin, Ireland manufacturing
facility performs diskette duplication, assembly of the final
packages, and order fulfillment. Our Dublin, Ireland
manufacturing facility also subcontracts to outside
organizations for the replication of CD-ROMs and printing of
documentation materials and retail boxes.
10
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. In particular, we have a
substantial number of registered trademarks and currently hold a
substantial number of patents in the United States, as well as
patent holdings in other countries, which expire at various
times over the next twenty years. We regularly file other
applications for patents and trademarks in order to protect
proprietary intellectual property that we believe are important
to our business. We also license some intellectual property from
third parties for use in our products.
We face a number of risks relating to our intellectual property,
including unauthorized use and unauthorized copying, or piracy,
of our software solutions. 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. Patents that have been issued
to us could be determined to be invalid and may not be
enforceable against competitive products in every jurisdiction.
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 the Notes to
Consolidated Financial Statements. 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. In
addition, third party licenses may not continue to be available
to us on commercially acceptable terms, or at all.
Employees
As of March 31, 2004, we employed approximately 5,300
people worldwide, including approximately 2,800 in sales,
marketing and related staff activities (with approximately 800
employees in our direct sales force), 1,300 in product
development, 300 in services and 900 in management,
manufacturing, administration and finance. In connection with
the relocation of our Leiden, Netherlands operations to Dublin,
Ireland in early fiscal year 2003, a group of employees in the
Leiden facility joined a union to negotiate the proposed terms
of the transfer of operations to our Dublin facility, focusing
primarily on severance benefits for employees that did not
relocate to Dublin. Except for these terminated employees, no
other employees are represented by a labor union. We believe
that relations with our employees are good.
|
|
Item 7: |
Managements Discussion and Analysis of Financial
Condition and Results of Operations |
Symantec is the global leader in information security providing
a broad range of software, appliances and services designed to
help individuals, small and mid-sized businesses, and large
enterprises secure and manage their IT infrastructure.
Symantecs Norton brand of products is the worldwide leader
in consumer security and problem-solving solutions. Founded in
1982, we have offices in 38 countries worldwide.
We have a 52/53-week fiscal accounting year. Accordingly, all
references as of and for the periods ended March 31, 2004,
2003 and 2002 reflect amounts as of and for the periods ended
April 2, 2004, March 28, 2003, and March 29,
2002, respectively. The fiscal accounting year ended
April 2, 2004, is comprised of 53 weeks of operations
while the fiscal accounting years ended March 28, 2003 and
March 29, 2002 each is comprised of 52 weeks of
operations. The fiscal accounting year ending April 1, 2005
will comprise of 52 weeks of operations.
Critical Accounting Estimates
The preparation of our consolidated financial statements and
related notes requires us to make estimates, which include
judgments and assumptions, that affect the reported amounts of
assets, liabilities, revenue and expenses, and related
disclosure of contingent assets and liabilities. We have based
our estimates on historical experience and on various
assumptions that are believed to be reasonable under the
circumstances and we evaluate our estimates on a regular basis
and make changes accordingly. Historically, our estimates
relative to our critical accounting estimates have not differed
materially from actual results, however actual results may
differ from these estimates under different conditions.
11
A critical accounting estimate is based on judgments and
assumptions about matters that are highly uncertain at the time
the estimate is made. Different estimates that reasonably could
have been used, or changes in accounting estimates could
materially impact the financial statements. We believe that the
estimates described below represent our critical accounting
estimates, as they have the greatest potential impact on our
consolidated financial statements. We also refer you to our
Summary of Significant Accounting Policies beginning
on page 52 in this Annual Report on Form 10-K.
We recognize revenue in accordance with generally accepted
accounting principles that have been prescribed for the software
industry. Revenue recognition requirements in the software
industry are very complex and they require us to make many
estimates.
In applying our revenue recognition policy, we must determine
which portions of our revenue are recognized currently and which
portions must be deferred. In order to determine current and
deferred revenue, we make estimates with regard to future
deliverable products and services and the appropriate pricing
for those products and services. Our estimates regarding future
products and services could differ from actual events.
We expect our distributors and resellers to maintain adequate
inventory to meet future customer demand, which is generally 4
to 6 weeks of customer demand based on recent buying trends. We
ship product to our distributors and resellers at their request
and based on their valid purchase orders. Our distributors and
resellers base the quantity of their orders on their estimates
to meet future customer demand, which may exceed our expected
level of a 4 to 6 week supply. We offer limited rights of return
if the inventory held by our distributors and resellers is below
the expected level of a 4 to 6 week supply. We estimate future
returns under these limited rights of return in accordance with
Statement of Financial Accounting Standards (SFAS)
No. 48, Revenue Recognition When Right of Return Exists.
We typically offer liberal rights of return if inventory held by
our distributors and resellers exceeds the expected level.
Because we cannot reasonably estimate the amount of excess
inventory that will be returned, we do not recognize revenue or
record accounts receivable for the amount in excess of the
expected inventory levels. On the same basis, we reduce the
associated cost of revenues, which is primarily related to
materials, and include this amount in inventory. We recognize
these revenues and the associated cost of revenues when the
liberal rights of return expire, which is when the inventory
levels no longer exceed the expected level of a 4 to 6 week
supply. If we made different estimates, material differences may
result in the amount and timing of our net revenues and cost of
revenues for any period presented.
As of each of the fiscal years ended March 31, 2004, 2003
and 2002, the amount of net revenues not recognized related to
excess inventory represented no more than 4% of total net
revenues recognized during each of the years then ended.
Associated costs that were included in inventory as of each of
the fiscal years ended March 31, 2004, 2003 and 2002,
represented no more than 2% of the total cost of revenues
recorded during each of the years then ended.
In arrangements that include multiple elements, including
perpetual software licenses and maintenance and/or services, and
packaged products with content updates, we allocate and defer
revenue for the undelivered items based on vendor-specific
objective evidence, or VSOE, of fair value of the undelivered
elements, and recognize the difference between the total
arrangement fee and the amount deferred for the undelivered
items as revenue. Our deferred revenue consists primarily of the
unamortized balance of enterprise product maintenance and
consumer product content updates and totaled $971 million
as of March 31, 2004, of which $92 million was
represented as long-term deferred revenue, on the Consolidated
Balance Sheet. VSOE of each element is based on the price for
which the undelivered element is sold separately. We determine
fair value of the undelivered elements based on historical
evidence of our stand-alone sales of these elements to third
parties. When VSOE does not exist for undelivered items such as
maintenance, then the entire arrangement fee is recognized
ratably over the performance period. Changes to the elements in
a software arrangement, the ability to identify VSOE for those
elements, the fair value of the
12
respective elements, and changes to a products estimated
life cycle could materially impact the amount of earned and
unearned revenue.
|
|
|
Reserves for Product Returns |
End-users may return our products, primarily within our Consumer
Products and Enterprise Administration segments, through
distributors and resellers or to us directly for a full refund
within a reasonably short period from the date of purchase. Our
estimated reserves for such end-user product returns, which are
recorded as an offset to revenue, are based primarily on
historical trends. We also consider other factors such as the
timing of upgrades and new versions of products, current market
conditions, economic trends and changes in technology. In
addition, we fully reserve for obsolete products in the
distribution channels as an offset to revenue. If we made
different estimates, material differences may result in the
amount and timing of our net revenues for any period presented.
More or less product may be returned from what was estimated
and/or the amount of inventory in the channel could be different
than what is estimated. These factors and unanticipated changes
in the economic and industry environment could make our return
estimates differ from actual results.
We estimate and record reserves as an offset to revenue for
channel and end-user rebates, related primarily to products
within our Consumer Products, Enterprise Security and Enterprise
Administration segments. Our estimated reserves for channel
volume incentive rebates are based on distributors and
resellers actual performance against the terms and
conditions of volume incentive rebate programs, which are
typically entered into quarterly. Our reserves for end-user
rebates are estimated on the terms and conditions of the
promotional programs, actual sales during the promotion, amount
of actual redemptions received, historical redemption trends by
product and by type of promotional program and the value of the
rebate. We also consider current market conditions and economic
trends when estimating our reserves for rebates. If we made
different estimates, material differences may result in the
amount and timing of our net revenues for any period presented.
When we acquire businesses, we allocate the purchase price to
tangible assets and liabilities acquired and identifiable
intangible assets. Any residual purchase price is recorded as
goodwill. The allocation of the purchase price requires
management to make significant estimates in determining the fair
values of assets acquired and liabilities assumed, especially
with respect to intangible assets. These estimates are based on
historical experience and information obtained from the
management of the acquired companies. These estimates can
include, but are not limited to, the cash flows that an asset is
expected to generate in the future, the appropriate weighted
average cost of capital, and the cost savings expected to be
derived from acquiring an asset. These estimates are inherently
uncertain and unpredictable. In addition, unanticipated events
and circumstances may occur which may affect the accuracy or
validity of such estimates.
At March 31, 2004, goodwill was $1.1 billion, acquired
product rights was $121 million, and other identifiable
intangible assets was $10 million. We assess the impairment
of goodwill within our reportable units annually, or more often
if events or changes in circumstances indicate that the carrying
value may not be recoverable. We assess the impairment of
acquired product rights and other identifiable intangible assets
whenever events or changes in circumstances indicate that its
carrying amount may not be recoverable. An impairment loss would
be recognized when the sum of the discounted 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. The estimate of
cash flow is based upon, among other things, certain assumptions
about expected future operating performance and an appropriate
discount rate determined by our management. Our estimates of
discounted cash flows may differ from actual cash flows due to,
among other things, economic conditions, changes to the business
model or changes in operating performance. If we made different
estimates, material differences may result in write-downs of net
long-lived and intangible assets, which would be reflected by
charges to our operating results for any period presented.
13
|
|
|
Accounting for Excess Facilities |
We have estimated expenses for excess facilities related to
consolidating, moving and relocating various groups or sites as
a result of restructuring activities and business acquisitions.
In determining our estimates, we obtained information from third
party leasing agents to calculate anticipated third party
sublease income and the vacancy period prior to finding a
sub-lessee. Market conditions will affect our ability to
sublease facilities on terms consistent with our estimates. Our
ability to sublease facilities on schedule or to negotiate lease
terms resulting in higher or lower sublease income than
estimated will affect our accrual for site closures. Differences
between estimates of related broker commissions, tenant
improvements and related exit costs may increase or decrease our
accrual upon final negotiation. If we made different estimates
regarding these various components of our excess facilities
costs, the amount recorded for any period presented could vary
materially from those actually recorded.
We make significant estimates to determine our current provision
for income taxes, as well as deferred tax assets and liabilities
and our income taxes payable. Our estimates relative to the
current provision for income taxes take into account current tax
laws, our interpretation of current tax laws and possible
outcomes of current and future audits conducted by foreign and
domestic tax authorities. Changes in tax laws or our
interpretation of tax laws and the resolution of current and
future tax audits could significantly impact the amounts
provided for income taxes in our financial position and results
of operations.
We also assess the likelihood that our net deferred tax assets
will be realized. Realization of our net deferred tax assets is
dependent upon future United States taxable income and future
taxable income in certain foreign jurisdictions, as well as our
implementation of prudent and feasible tax planning strategies.
Our estimates regarding future profitability may change due to
future market conditions, changes in United States or
international tax laws and other factors. To the extent we
believe it is more likely than not that some portion or all of
our net deferred tax assets will not be realized, we establish a
valuation allowance against the deferred tax assets. To the
extent we establish a valuation allowance or change the
allowance in a period, we reflect the change with a
corresponding increase or decrease to our tax provision in our
Consolidated Statements of Operations.
From time to time, we are involved in disputes that arise in the
ordinary course of business, and we do not expect this trend to
change in the future. We are currently involved in the legal
proceedings as discussed in Note 15 of the Notes to
Consolidated Financial Statements.
When the likelihood of the incurrence of costs related to our
legal proceedings is probable and management has the ability to
estimate such costs, we provide for estimates of external legal
fees and any probable losses through charges to our Consolidated
Statements of Operations. These estimates have been based on our
assessment of the facts and circumstances at each balance sheet
date and are subject to change based upon new information and
intervening events. Our accrual for legal contingencies as of
March 31, 2004 represented insignificant amounts related to
external legal fees and no amounts were accrued for probable
losses, as we believe that we have meritorious defenses to the
claims against us, and we will defend ourselves vigorously.
However, even if we are successful, estimated costs for external
legal fees could be more than anticipated. And, if we are
unsuccessful, we might be forced to pay significant damages and
licensing fees, or modify our business practices for which we
have not accrued any amounts for loss contingencies. Any such
results could materially harm our business and could result in a
material adverse impact on the financial position, results of
operations or cash flows.
14
Results of Operations
Overview
Our goal for fiscal 2004 was to continue serving customer needs
while reshaping the competitive landscape by offering integrated
solutions.
Within the Consumer Products segment, we grew our base of
individual users and accelerated our expansion into the small
business market. In addition, we released new versions of our
award winning consumer products, including Norton Internet
Security, Norton AntiVirus,
Nortontm
Personal Firewall, Norton
AntiSpamtm
and Norton SystemWorks, which includes
Nortontm
Password Manager. These new products provide protection from
viruses, intrusion attempts and piracy threats, and offer
expanded protection from emerging threats.
Within the Enterprise Security segment, we continued to enhance
and expand our product portfolio in order to address the
evolving threat environment with the release of our new line of
integrated solutions: the Symantec Gateway Security, Symantec
Deep Sight Threat Management System, Symantec Enterprise
Security Manager, Symantec Incident Manager and Symantec
ManHunt. In addition, we maintained our focus on delivering
strong integrated solutions, enhanced manageability, and more
comprehensive intrusion protection.
Within the Enterprise Administration segment, sales of our
pcAnywhere product continued to decline and we expect this trend
to continue due to the extended functionality of Microsoft
operating system products. Conversely, the Enterprise
Administration segment benefited from our new product
introductions related to our business acquisitions of ON
Technology and PowerQuest in the second half of fiscal 2004.
Net revenue during fiscal 2004 increased as compared to fiscal
2003 due primarily to increased sales of our consumer and
enterprise security products, which can be attributable to the
numerous security threat outbreaks that occurred during fiscal
2004, including the Beagle, Welchia, Blaster, Sobig, MyDoom and
Netsky viruses. In addition, increased demand for our security
protection solutions from large organizations as well as from
small businesses and consumers also contributed to the growth.
Net revenue during fiscal 2003 increased as compared to fiscal
2002 due primarily to increased sales of our consumer and
enterprise security products, which can be attributable to the
numerous security threat outbreaks that occurred during fiscal
2003, including the Code Red, Nimda, Klez, Bugbear and Slammer
viruses.
From a regional standpoint, sales outside of the United States
contributed strongly to revenue growth while sales in the United
States also grew during these periods. Strength in major foreign
currencies during fiscal 2004 and fiscal 2003 also positively
impacted our international revenue growth.
A significant portion of our deferred revenue balance of
$590 million as of March 31, 2003 contributed to our
total net revenues during fiscal 2004. Deferred revenue
increased during fiscal 2004 as compared to fiscal 2003 due
primarily to increased maintenance obligations. We anticipate
that approximately one-third of our deferred revenue balance of
$971 million as of March 31, 2004 will contribute to
our net revenues during the June 2004 quarter.
Headcount during fiscal 2004 increased as compared to fiscal
2003 due primarily to the growth of the company and due to
business acquisitions. Of this increase, approximately 60% was
due to the growth of the company and approximately 40% was due
to business acquisitions.
For total operations, net income (loss) was $371 million,
$248 million and $(28) million during fiscal year
2004, 2003 and 2002, respectively, or $1.07, $0.77 and $(0.10),
respectively, in diluted net income (loss) per share.
During fiscal 2004, we acquired the following businesses and
intangible assets:
|
|
|
|
|
On April 17, 2003, we purchased certain assets related to
Roxio Inc.s GoBack computer recovery software business for
$13 million in cash. |
15
|
|
|
|
|
On July 17, 2003, we completed the acquisition of Nexland,
Inc., a technology driven Internet security company whose
Internet Protocol based networking appliances are installed at
enterprise branches and telecommuter offices worldwide, for
$21 million in cash. |
|
|
|
On August 6, 2003, we purchased a security technology
patent as part of a settlement in Hilgraeve, Inc. v.
Symantec Corporation for $63 million in cash. |
|
|
|
On October 15, 2003, we completed the acquisition of
SafeWeb, Inc. a provider of SSL VPN appliances, for
$27 million in cash. |
|
|
|
On December 5, 2003, we completed the acquisition of
PowerQuest Inc., a global provider of automated deployment and
recovery solutions for corporations and individual users, for
$154 million in cash. |
|
|
|
On February 13, 2004, we completed the acquisition of ON
Technology Corp., a provider of solutions which enable
organizations and service providers to manage the full lifecycle
of their computing systems over corporate networks, for an
estimated $109 million in cash. |
On May 19, 2004, we entered into an agreement to acquire
Brightmail, Inc., a developer of e-mail services and software
for application service providers, Internet service providers,
portals and enterprises, for an estimated $370 million in
cash. The acquisition is expected to close in July 2004, subject
to the satisfaction of closing conditions.
Information about the various factors that management deems
important in contributing to our operating results for fiscal
year 2004, 2003 and 2002 is provided in the discussion below.
Net Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Net revenues
|
|
$ |
1,870,129 |
|
|
$ |
1,406,946 |
|
|
$ |
1,071,438 |
|
|
|
33 |
% |
|
|
31 |
% |
Net revenues increased during fiscal 2004 as compared to fiscal
2003 due primarily to an increase of $302 million and
$143 million in sales of our consumer and enterprise
security products, respectively. The increased sales of these
products were due primarily to continuing growth in demand for
our consumer security protection products and our enterprise
virus protection solutions. We believe that a significant
portion of the growth in demand during fiscal 2004 was
attributable to the numerous security threat outbreaks that
occurred during the year and may not be sustainable.
Net revenues increased during fiscal 2003 as compared to fiscal
2002 due primarily to an increase of $194 million and
$139 million in sales of our consumer and enterprise
security products, respectively. The increased sales of these
products were due primarily to continuing growth in demand for
our virus protection solutions from large organizations as well
as from small businesses and consumers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Consumer Products revenues
|
|
$ |
871,980 |
|
|
$ |
570,266 |
|
|
$ |
376,137 |
|
|
|
53 |
% |
|
|
52 |
% |
Percentage of total net revenues
|
|
|
47 |
% |
|
|
41 |
% |
|
|
35 |
% |
|
|
|
|
|
|
|
|
Our Consumer Products segment focuses on delivering our Internet
security and problem-solving products to individual users, home
offices and small businesses. We believe that a significant
portion of the growth during fiscal 2004 was attributable to the
numerous security threat outbreaks that occurred in August 2003
and February 2004, and these growth rates may not be
sustainable. Our sales through original equipment
16
manufacturers and sales through our electronic distribution
channel, including our subscription renewal business, also
contributed to the increase in sales during fiscal 2004. These
sales grew by $223 million in 2004 as compared to 2003.
Specifically, the increase in revenue from our Consumer Products
segment during fiscal 2004 as compared to fiscal 2003 was due
primarily to increases of $188 million and
$129 million in sales of our Norton AntiVirus and Norton
Internet Security products, respectively. These increases were
offset slightly by a decrease in sales of our other consumer
products.
Revenue from our Consumer Products segment increased during
fiscal 2003 as compared to fiscal 2002. Our sales through
original equipment manufacturers and sales through our
electronic distribution channel, including our subscription
renewal business, contributed to the increase in sales during
fiscal 2003, as we made infrastructure improvements to our
online subscription renewal service at the end of fiscal 2002.
These sales grew by $154 million in 2003 as compared to
2002 as a result of increase volume and prices. Specifically,
the increase in revenue from our Consumer Products segment
during fiscal 2003 as compared to fiscal 2002 was due primarily
to stronger than expected consumer and small business spending,
which contributed to the increase in sales of our Norton
AntiVirus and Norton Internet Security products in the amount of
$124 million and $52 million, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Enterprise Security revenues
|
|
$ |
736,531 |
|
|
$ |
593,552 |
|
|
$ |
454,925 |
|
|
|
24 |
% |
|
|
30 |
% |
Percentage of total net revenues
|
|
|
39 |
% |
|
|
42 |
% |
|
|
42 |
% |
|
|
|
|
|
|
|
|
Our Enterprise Security segment provides security solutions for
all tiers of a network: at the gateways between the network and
the outside world, at the servers that act as the networks
vital organs, and at end-user devices, including desktop PCs,
laptops and handhelds. Revenue from our Enterprise Security
segment increased during fiscal 2004 as compared to fiscal 2003
due primarily to a $131 million increase in sales of our
virus protection solutions. Similarly, revenue from our
Enterprise Security segment increased during fiscal 2003 as
compared to fiscal 2002 due primarily to a $117 million
increase in sales of our virus protection solutions.
|
|
|
Enterprise Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Enterprise Administration revenues
|
|
$ |
219,604 |
|
|
$ |
215,017 |
|
|
$ |
222,543 |
|
|
|
2 |
% |
|
|
(3 |
)% |
Percentage of total net revenues
|
|
|
12 |
% |
|
|
15 |
% |
|
|
21 |
% |
|
|
|
|
|
|
|
|
Our Enterprise Administration segment offers open and modular
products and services that enable companies to effectively and
efficiently manage their IT infrastructures. Revenue from our
Enterprise Administration segment increased during fiscal 2004
as compared to fiscal 2003 due primarily to sales of PowerQuest
products of $18 million and sales of ON Technology products
of $6 million, after the respective dates of acquisition.
These increases were offset by a decrease in sales of our
pcAnywhere product of $19 million. Revenue from our
Enterprise Administration segment decreased during fiscal 2003
as compared to fiscal 2002 due primarily to a decrease in sales
of our pcAnywhere product of $13 million, partially offset
by growth in our Ghost Corporate Edition product of
$6 million.
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Services revenues
|
|
$ |
41,682 |
|
|
$ |
26,377 |
|
|
$ |
10,905 |
|
|
|
58 |
% |
|
|
142 |
% |
Percentage of total net revenues
|
|
|
2 |
% |
|
|
2 |
% |
|
|
1 |
% |
|
|
|
|
|
|
|
|
Our Services segment provides information security solutions
that incorporate advanced technology, security best practices
and expertise, and global resources to help enable e-business
success. The increase in revenue from our services segment
during fiscal 2004 as compared to fiscal 2003 and during fiscal
2003 as compared to fiscal 2002 were due primarily to increased
sales from our managed security services, which represented
$27 million and $14 million of net revenues during
fiscal 2004 and fiscal 2003, respectively. In fiscal 2002,
services revenues were mainly comprised of consulting revenue of
$8 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Other revenues
|
|
$ |
332 |
|
|
$ |
1,734 |
|
|
$ |
6,928 |
|
|
|
(81 |
)% |
|
|
(75 |
)% |
Percentage of total net revenues
|
|
|
* |
|
|
|
* |
|
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
* |
Percentage not meaningful |
Our Other segment is comprised of sunset products and products
nearing the end of their life cycle.
|
|
|
Net Revenues by Geographic Region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
United States
|
|
$ |
896,452 |
|
|
$ |
714,111 |
|
|
$ |
566,837 |
|
|
|
26 |
% |
|
|
26 |
% |
Percentage of total net revenues
|
|
|
48 |
% |
|
|
51 |
% |
|
|
53 |
% |
|
|
|
|
|
|
|
|
EMEA
|
|
$ |
616,504 |
|
|
$ |
415,495 |
|
|
$ |
293,111 |
|
|
|
48 |
% |
|
|
42 |
% |
Percentage of total net revenues
|
|
|
33 |
% |
|
|
30 |
% |
|
|
27 |
% |
|
|
|
|
|
|
|
|
Asia Pacific
|
|
$ |
94,546 |
|
|
$ |
76,760 |
|
|
$ |
60,406 |
|
|
|
23 |
% |
|
|
27 |
% |
Percentage of total net revenues
|
|
|
5 |
% |
|
|
5 |
% |
|
|
6 |
% |
|
|
|
|
|
|
|
|
Japan
|
|
$ |
153,004 |
|
|
$ |
112,304 |
|
|
$ |
85,569 |
|
|
|
36 |
% |
|
|
31 |
% |
Percentage of total net revenues
|
|
|
8 |
% |
|
|
8 |
% |
|
|
8 |
% |
|
|
|
|
|
|
|
|
Canada
|
|
$ |
70,718 |
|
|
$ |
54,241 |
|
|
$ |
38,835 |
|
|
|
30 |
% |
|
|
40 |
% |
Percentage of total net revenues
|
|
|
4 |
% |
|
|
4 |
% |
|
|
4 |
% |
|
|
|
|
|
|
|
|
Latin America
|
|
$ |
38,905 |
|
|
$ |
34,035 |
|
|
$ |
26,680 |
|
|
|
14 |
% |
|
|
28 |
% |
Percentage of total net revenues
|
|
|
2 |
% |
|
|
2 |
% |
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
$ |
1,870,129 |
|
|
$ |
1,406,946 |
|
|
$ |
1,071,438 |
|
|
|
33 |
% |
|
|
31 |
% |
Net revenues from customers outside of the United States
represented approximately 52%, 49% and 47% of net revenues
during fiscal year 2004, 2003 and 2002. International net
revenues increased during fiscal 2004 as compared to fiscal 2003
due primarily to sales growth of $201 million and
$41 million in the Europe, Middle East and Africa, or EMEA,
region and Japan, respectively. In addition, international
revenues increased due to increased sales of our anti-virus
products in our Consumer Products and Enterprise Security
segments.
18
International net revenues increased during fiscal 2003 as
compared to fiscal 2002 due primarily to sales growth of
$122 million and $27 million in the EMEA region and
Japan, respectively. In addition, international net revenues
increased due to increased customer awareness related to
security threats and due to infrastructure improvements made to
our online subscription renewal service at the end of fiscal
2002, whereby consumers are able to download software updates
from the Internet.
Strength in major foreign currencies during fiscal 2004, as
compared to the average major foreign currency rates during
fiscal 2003, positively impacted our international revenue
growth by $128 million due primarily to the strength of the
Euro. Strength in major foreign currencies during fiscal 2003,
as compared to the average major foreign currency rates during
fiscal 2002, positively impacted our international revenue
growth by $66 million due primarily to the strength of the
Euro. We are unable to predict the extent to which revenues in
future periods will be impacted by changes in foreign currency
rates. If international sales become a greater proportion of our
total sales in the future, changes in foreign exchange rates may
have a potentially greater impact on our revenues and operating
results.
Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Gross profit
|
|
$ |
1,542,575 |
|
|
$ |
1,156,830 |
|
|
$ |
875,535 |
|
|
|
33 |
% |
|
|
32 |
% |
Gross margin
|
|
|
82 |
% |
|
|
82 |
% |
|
|
82 |
% |
|
|
|
|
|
|
|
|
Gross profit represents net revenues less cost of revenues. Cost
of revenues consists primarily of costs for producing manuals
and CDs, packaging costs, fee-based technical support costs,
amortization of acquired product rights, payments to original
equipment manufacturers under revenue sharing arrangements,
costs of services, royalties paid to third parties under
technology licensing agreements, and manufacturing expenses.
Gross margin remained flat at approximately 82% during fiscal
year 2004, 2003 and 2002. We anticipate that our services
revenues may grow and comprise a higher percentage of our total
revenues in future periods, in which case our gross margin would
likely decrease, as our services typically have higher cost of
revenues than our software products.
Acquired product rights are comprised of purchased product
rights, technologies, databases and revenue related
order backlog and contracts from acquired companies. During
fiscal 2004, we recorded $90 million in acquired product
rights as follows (in thousands):
|
|
|
|
|
Hilgraeve patent settlement
|
|
$ |
48,583 |
|
PowerQuest
|
|
|
19,600 |
|
Roxio, Incs GoBack computer recovery system
|
|
|
12,583 |
|
ON Technology
|
|
|
7,410 |
|
Nexland
|
|
|
1,000 |
|
SafeWeb
|
|
|
1,000 |
|
|
|
|
|
Total
|
|
$ |
90,176 |
|
During fiscal 2003, we recorded $41 million in acquired
product rights as follows (in thousands):
|
|
|
|
|
Recourse
|
|
$ |
19,000 |
|
Riptech
|
|
|
12,700 |
|
SecurityFocus
|
|
|
6,840 |
|
Mountain Wave
|
|
|
2,000 |
|
|
|
|
|
Total
|
|
$ |
40,540 |
|
19
Amortization of acquired product rights was $42 million,
$32 million and $32 million in fiscal 2004, 2003 and
2002, respectively. Amortization of acquired product rights was
included in Cost of revenues in the Consolidated Statements of
Operations, except for an immaterial amount related to the
divested Web Access Management product line, which was included
in Income, net of expense, from sale of technologies and product
lines in the Consolidated Statement of Operations.
For further discussion on acquired product rights and related
amortization, see Notes 3 and 4 of the Notes to
Consolidated Financial Statements.
Operating Expenses
|
|
|
Research and Development Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Expenses
|
|
$ |
252,284 |
|
|
$ |
197,271 |
|
|
$ |
163,979 |
|
|
|
28 |
% |
|
|
20 |
% |
Percentage of total net revenues
|
|
|
13 |
% |
|
|
14 |
% |
|
|
15 |
% |
|
|
|
|
|
|
|
|
The increase in research and development expenses in fiscal
2004, as compared to fiscal 2003, resulted primarily from a
$26 million increase in employee compensation due to
increased headcount. In addition, research and development
expenses increased by $14 million due to additional
overhead costs resulting from a greater infrastructure needed to
support overall company growth. The remaining increase was
related to increased variable research and development costs due
to growth of the company, including new product offerings from
business acquisitions.
The increase in research and development expense in fiscal 2003,
as compared to fiscal 2002, resulted primarily from a
$20 million increase in employee compensation due to
increased headcount. In addition, research and development
expenses increased by $6 million due to additional overhead
costs.
|
|
|
Sales and Marketing Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Expenses
|
|
$ |
660,573 |
|
|
$ |
525,029 |
|
|
$ |
425,951 |
|
|
|
26 |
% |
|
|
23 |
% |
Percentage of total net revenues
|
|
|
35 |
% |
|
|
37 |
% |
|
|
40 |
% |
|
|
|
|
|
|
|
|
The increase in sales and marketing expenses in fiscal 2004, as
compared to fiscal 2003 was due primarily to an increase in
employee headcount resulting in an additional $77 million
of employee compensation cost. In addition, we spent
$20 million more on advertising and promotion activities
during fiscal 2004, as compared to the prior year. The remaining
increase was related to increased variable sales and marketing
expenses associated with increased sales.
The increase in sales and marketing expenses in fiscal 2003, as
compared to fiscal 2002, was due primarily to an increase in
employee headcount resulting in an additional $55 million
of employee compensation costs. In addition, we spent
$15 million more on advertising and promotional activities
during fiscal 2003, as compared to the prior year. The remaining
increase was related to increased variable sales and marketing
expenses associated with increased sales.
20
|
|
|
General and Administrative Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Expenses
|
|
$ |
94,645 |
|
|
$ |
74,442 |
|
|
$ |
55,131 |
|
|
|
27 |
% |
|
|
35 |
% |
Percentage of total net revenues
|
|
|
5 |
% |
|
|
5 |
% |
|
|
5 |
% |
|
|
|
|
|
|
|
|
The increase in general and administrative expenses in fiscal
2004, as compared to fiscal 2003, was due primarily to an
increase of $14 million in additional compensation cost
resulting from increased headcount. The increase was also
attributable to additional overhead costs resulting from a
greater infrastructure needed to support overall company growth.
The increase in general and administrative expenses in fiscal
2003, as compared to fiscal 2002, was due primarily to an
increase of $10 million in additional compensation cost
resulting from increased headcount. The increase was also
attributable to additional overhead costs resulting from a
greater infrastructure needed to support overall company growth.
During fiscal 2002, we recorded $197 million of
amortization of goodwill. In accordance with
SFAS No. 142, the carrying values of goodwill and
intangible assets deemed to have indefinite lives are no longer
amortized as of April 1, 2002. Therefore, there was no
corresponding expense in fiscal 2004 and 2003.
Goodwill is tested for impairment on an annual basis. We
completed our annual goodwill impairment required by
SFAS No. 142 during the March 2004 quarter and
determined that there was no impairment of goodwill. We will
continue to test for impairment during the fourth quarter of
each year, or earlier if indicators of impairment exist.
|
|
|
Amortization of Other Intangibles from Acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Expenses
|
|
$ |
2,954 |
|
|
$ |
2,787 |
|
|
$ |
2,144 |
|
|
|
6 |
% |
|
|
30 |
% |
Percentage of total net revenues
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
* |
Percentage not meaningful |
The increase in amortization of other intangibles from
acquisitions in fiscal 2004 as compared to fiscal 2003 was
primarily related to the amortization of other intangible assets
acquired with the purchase of ON Technology in February 2004,
PowerQuest in December 2003 and Nexland in July 2003. This
increase was offset by certain other intangibles being fully
amortized during fiscal 2004. The increase in amortization of
other intangibles from acquisitions in fiscal 2003 as compared
to fiscal 2002 was primarily related to the amortization of
other intangibles acquired with the purchase of Recourse and
SecurityFocus in August 2002.
|
|
|
Acquired In-Process Research and Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Expenses
|
|
$ |
3,710 |
|
|
$ |
4,700 |
|
|
|
|
|
|
|
(21 |
)% |
|
|
* |
|
Percentage of total net revenues
|
|
|
* |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Percentage not meaningful |
21
Acquired in-process research and development during fiscal 2004
resulted from our acquisitions of ON Technology, PowerQuest and
Nexland. Acquired in-process research and development during
fiscal 2003 resulted from our acquisitions of Riptech,
SecurityFocus and Recourse.
The efforts required to develop the acquired in-process
technology principally relate to the completion of all planning,
design, development and test 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 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 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.
The in-process technology acquired in the ON Technology
acquisition consisted primarily of research and development
related to its next generation CCM/iCommand and iPatch products,
which enable organizations and service providers to manage the
full lifecycle of their computing systems over corporate
networks. We are using this technology in order to construct a
common platform for our Enterprise Administration segment
products.
The in-process technology acquired in the PowerQuest acquisition
consisted primarily of research and development related to its
Virtual Volume Imaging technology, which provides the capability
to recover from server or desktop failures and minimize system
downtime. We are integrating this technology into our Enterprise
Administration segment product offerings.
The in-process technology acquired in the Nexland acquisition
consisted primarily of research and development related to a
next generation firewall product. We integrated this technology
into our firewall and appliance series of products within our
Enterprise Security segment.
The in-process technology acquired in the Riptech acquisition
consisted primarily of research and development related to the
fourth generation of its Caltarian technology, which provides
real-time information protection through around-the-clock
monitoring, analysis and response. We integrated this technology
into our managed security services within our Services segment.
The in-process technology acquired in the SecurityFocus
acquisition consisted primarily of research and development
related to new versions of DeepSight Threat Management System
and DeepSight Analyzer products, which are threat management
systems that provide early warnings of attack, as well as
countermeasures to defend these attacks. We integrated this
technology into our vulnerability management products within our
Enterprise Security segment.
The in-process technology acquired in the Recourse acquisition
consisted primarily of research and development related to new
versions of ManHunt, a network intrusion detection system. We
integrated this technology into our intrusion detection products
within our Enterprise Security segment.
22
|
|
|
Restructuring, Site Closures and Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Expenses
|
|
$ |
907 |
|
|
$ |
11,089 |
|
|
$ |
20,428 |
|
|
|
(92 |
)% |
|
|
(46 |
)% |
Percentage of total net revenues
|
|
|
* |
|
|
|
1 |
% |
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
* |
Percentage not meaningful |
During fiscal 2004, we recorded an insignificant amount for
costs of severance, related benefits and outplacement services
for a member of our senior management team and adjustments to
prior period restructuring provisions.
During fiscal 2003, we recorded $10 million for costs of
severance, related benefits and outplacement services and
$3 million for costs associated with the consolidation of
certain facilities in the United States and Europe. The costs
resulted from relocating certain development, sales and finance
activities, realigning certain worldwide marketing efforts and
outsourcing our North American and European consumer support
functions. As a result, we terminated 424 employees. In
addition, during fiscal 2003, we recorded $2 million to
decrease prior period restructuring provisions.
During fiscal 2002, we recorded $18 million for costs
associated with the excess facilities and fixed assets
associated with relocating certain sites in the United States
and Europe. We moved our operations in Newport News, Virginia to
a larger facility and we relocated our North American support
group from Eugene, Oregon to an expanded facility in
Springfield, Oregon. In addition, we consolidated our European
support functions by relocating our Leiden, Netherlands
operations to Dublin, Ireland and consolidating most of our
United Kingdom facilities to one facility in Maidenhead, UK. We
also recorded $2 million of costs of severance, related
benefits and outplacement services, as we reorganized and
consolidated various operating functions. As a result, we
terminated 87 employees.
For further discussion on restructuring, site closures and
other, see Note 13 of the Notes to Consolidated Financial
Statements.
In August 2003, we purchased a security technology patent as
part of a settlement in Hilgraeve, Inc. versus Symantec
Corporation. As part of the settlement, we also received
licenses to the remaining patents in Hilgraeves portfolio.
The total cost of purchasing the patent and licensing additional
patents was $63 million, which was paid in cash in August
2003. Under the transaction, we recorded $14 million of
patent settlement costs in the June 2003 quarter, representing
costs related to benefits received by us in and prior to the
June 2003 quarter. During the September 2003 quarter, we
recorded acquired product rights of $49 million, which are
being amortized to cost of goods sold over the remaining life of
the primary patent, which expires in June 2011. There was no
corresponding expense recorded during fiscal 2003 or fiscal 2002.
During the March 2002 quarter, we accrued litigation expenses of
$3 million for post-judgment interest and other costs
related to a judgment by a Canadian court on a decade-old
copyright action assumed by us as a result of our acquisition of
Delrina Corporation. For further discussion on our current
litigation, see Note 15 of the Notes to Consolidated
Financial Statements. There was no corresponding expense
recorded during fiscal 2004 or fiscal 2003.
23
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Operating income
|
|
$ |
513,585 |
|
|
$ |
341,512 |
|
|
$ |
8,041 |
|
|
|
50 |
% |
|
|
* |
|
Percentage of total net revenues
|
|
|
27 |
% |
|
|
24 |
% |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
* |
Percentage not meaningful |
Operating income increased during fiscal 2004 as compared to
fiscal 2003 due primarily to increased revenue growth of 33%
during fiscal 2004, offset by increased headcount related costs
and related operating expenses. Operating income increased
during fiscal 2003 as compared to fiscal 2002 due primarily to
the adoption of SFAS No. 142. As a result, in fiscal
2003, we recorded no amortization of goodwill, compared with a
charge of $197 million during fiscal 2002. In addition,
revenue growth of 31% contributed to the increase in operating
income during fiscal 2003.
Interest and Other Income (Expense), Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Interest income
|
|
$ |
38,257 |
|
|
$ |
37,704 |
|
|
$ |
31,717 |
|
|
|
1 |
% |
|
|
19 |
% |
Percentage of total net revenues
|
|
|
2 |
% |
|
|
3 |
% |
|
|
3 |
% |
|
|
|
|
|
|
|
|
Interest expense
|
|
$ |
(21,164 |
) |
|
$ |
(21,166 |
) |
|
$ |
(9,169 |
) |
|
|
* |
|
|
|
131 |
% |
Percentage of total net revenues
|
|
|
1 |
% |
|
|
2 |
% |
|
|
1 |
% |
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
$ |
1,997 |
|
|
$ |
(1,297 |
) |
|
$ |
(627 |
) |
|
|
* |
|
|
|
107 |
% |
Percentage of total net revenues
|
|
|
* |
|
|
|
* |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
* |
Percentage not meaningful |
The increase in interest income in fiscal 2004 as compared to
fiscal 2003 was due to higher average invested cash balances,
partially offset by lower average interest rates. The increase
in interest income in fiscal 2003 as compared to fiscal 2002 was
due to higher average invested cash balances.
Interest expense during fiscal 2004, 2003 and 2002 was primarily
related to the issuance of our $600 million
3% convertible subordinated notes in October 2001.
Other income (expense), net during fiscal 2004, 2003 and 2002
was comprised primarily of immaterial amounts of rental income,
offset by banking fees.
Income, Net of Expense, From Sale of Technologies and Product
Lines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Income
|
|
$ |
9,547 |
|
|
$ |
6,878 |
|
|
$ |
15,536 |
|
|
|
39 |
% |
|
|
(56 |
)% |
Percentage of total net revenues
|
|
|
1 |
% |
|
|
* |
|
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
* |
Percentage not meaningful |
Income, net of expense, from sale of technologies and product
lines primarily related to royalty payments received in
connection with the licensing of substantially all of the ACT!
product line technology to Interact Commerce Corporation for a
period of four years through December 2003. During fiscal 2003,
this royalty income was offset by the write-off of
$3 million of developed technology related to the Web Access
24
Management products due to impairment. The December 2003 quarter
payments represent the final royalty and buy-out payments
related to the divestiture of our ACT! product line as Interact
exercised its option to purchase the licensed technology from us
for $60 million less all royalties paid to us to date.
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
% Change | |
|
% Change | |
|
|
| |
|
Fiscal 2003 | |
|
Fiscal 2002 | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
to 2004 | |
|
to 2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ in thousands) | |
Provision
|
|
$ |
171,603 |
|
|
$ |
115,193 |
|
|
$ |
73,649 |
|
|
|
49 |
% |
|
|
56 |
% |
Percentage of total net revenues
|
|
|
9 |
% |
|
|
8 |
% |
|
|
7 |
% |
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
32 |
% |
|
|
32 |
% |
|
|
162 |
% |
|
|
|
|
|
|
|
|
Our effective tax rate on income before taxes was approximately
32%, 32% and 162% during fiscal 2004, 2003 and 2002
respectively. The higher effective tax rate in fiscal 2002
reflects the non-deductibility of acquired in-process research
and development and substantially all of the goodwill
amortization.
Realization of our net deferred tax asset at March 31, 2004
is dependent primarily upon future United States taxable income
and our implementation of tax planning strategies. We believe it
is more likely than not that the net deferred tax assets will be
realized based on historical earnings and expected levels of
future taxable income as well as the implementation of tax
planning strategies.
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. An 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 an
additional valuation allowance on a quarterly basis.
Liquidity and Capital Resources
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Net cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$ |
902,605 |
|
|
$ |
599,238 |
|
|
$ |
511,197 |
|
|
Investing activities
|
|
|
(517,298 |
) |
|
|
(771,973 |
) |
|
|
(869,263 |
) |
|
Financing activities
|
|
|
129,154 |
|
|
|
73,379 |
|
|
|
514,062 |
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
30,095 |
|
|
|
14,725 |
|
|
|
(4,682 |
) |
Net change in cash and cash equivalents
|
|
|
544,556 |
|
|
|
(84,631 |
) |
|
|
151,314 |
|
Our principal source of liquidity as of March 31, 2004 is
our existing cash, cash equivalents and short-term investments
of $2.4 billion, as well as cash that we generate over time
from our operations. During fiscal 2004, cash and cash
equivalents increased by $545 million and short-term
investments increased by $160 million. This increase is
primarily due to cash provided by operations and proceeds from
the sale of common stock through our employee benefit plans,
offset by payments for business acquisitions, purchases of
intangible assets and capital expenditures.
The increase in operating cash flow in fiscal 2004, as compared
with fiscal 2003, was primarily the result of an increase in net
income of $122 million, an increase in deferred revenue of
$123 million and an increase in income taxes payable of
$35 million. The increase in deferred revenue was due to a
greater volume and term of software maintenance agreements and
the increase in income taxes payable was due to improved
profitability. The increase in operating cashflow was partially
offset by an increase in accounts receivable of $35 million
due to higher sales in the month of March 2004 compared to the
month of March 2003. The higher March 2004
25
sales resulted from greater sales of our consumer and enterprise
products due to the security threat outbreaks that occurred
during February 2004, including the MyDoom and Netsky viruses.
The increase in operating cash flow in fiscal 2003, as compared
with fiscal 2002, was primarily the result of improved
profitability. Net income increased $277 million, however
fiscal 2002 net income included a non-cash charge of
$197 million for the amortization of goodwill. We ceased
amortizing goodwill in fiscal 2003 in accordance with
SFAS 142. Excluding the amortization of goodwill, net
income increased $80 million in fiscal 2003, compared to
fiscal 2002. The increase in operating cash flow in fiscal 2003
was also the result of increased deferred revenue of
$70 million and an increase in income taxes payable of
$39 million. The increase in deferred revenue was due to a
greater volume of software maintenance agreements and the
increase in income taxes payable was due to improved
profitability. The increase in operating cashflow was partially
offset by an increase in accounts receivable of $74 million
due to higher sales in the month of March 2003 compared to the
month of March 2002 due to an unusually low net trade accounts
receivable balance at March 31, 2002 as compared to the
prior six quarter-end balances. In prior quarters, we had
generated a larger percentage of net revenues during the last
month of each quarter.
During the past three fiscal years our investing activities have
included purchases of property and equipment, purchases of
businesses and intangible assets, and purchases and sales of
short-term available-for-sale securities.
Net cash used in investing activities decreased in fiscal 2004,
as compared to fiscal 2003, due primarily to a decrease in net
purchases of marketable securities of $269 million and a
decrease in capital expenditures of $81 million. The higher
capital expenditures in fiscal 2003 resulted from our purchase
of four of our facilities that were classified as operating
leases under synthetic lease transactions by purchasing the land
and buildings. The decrease in cash used in investing activities
was also affected by a $30 million increase in cash
payments for acquisitions of businesses and intangible assets
during fiscal 2004.
Net cash used in investing activities decreased in fiscal 2003,
as compared to fiscal 2002, due primarily to a decrease in net
purchases of marketable securities and restricted investments of
$520 million, offset by a $371 million increase in
cash payments for acquisitions of businesses and technologies
and a $51 million increase in capital expenditures during
fiscal 2003.
During the past three fiscal years, our financing activities
have included cash proceeds from the sale of our common stock
through employee benefit plans, cash payments for the repurchase
of our common stock and the issuance of our $600 million
3% convertible subordinated notes.
Net cash provided by financing activities increased in fiscal
2004, as compared to fiscal 2003, due to an increase of
$51 million of net proceeds from the sale of common stock
through our employee benefit plans.
Net cash provided by financing activities decreased in fiscal
2003, as compared to fiscal 2002, due to the $585 million
of proceeds received upon the issuance of our
3% convertible subordinated notes, net of debt issuance
costs. This decrease was offset by a $140 million decrease
in cash spent to repurchase our common stock.
On October 24, 2001, we completed a private offering of
$600 million of 3% convertible subordinated notes due
November 1, 2006, the net proceeds of which were
$585 million. The notes are convertible into shares of our
common stock by the holders at any time before maturity at a
conversion price of $17.07 per share, subject to certain
adjustments. During fiscal 2004 and 2003, an insignificant
principal amount of our notes were converted into shares of our
common stock. No shares were converted during fiscal 2002. We
may redeem the remaining notes on or after November 5,
2004, at a redemption price of 100.75% of stated principal
during the period November 5, 2004 through October 31,
2005 and 100% thereafter. Interest is paid semi-annually and we
commenced making these payments on May 1, 2002. Debt
issuance costs of $16 million
26
related to the notes is amortized on a straight-line basis
through November 1, 2006. We have reserved
35.1 million shares of common stock for issuance upon
conversion of the notes.
On January 16, 2001, the Board of Directors replaced an
earlier stock repurchase program with a new authorization to
repurchase up to $700 million of Symantec common stock, not
to exceed 60.0 million shares, with no expiration date. On
January 20, 2004, the Board of Directors increased the
dollar amount of the companys authorized stock repurchase
program from $700 million to $940 million, without any
specific limit on the number of shares to be repurchased. In
connection with the additional $240 million authorization,
we adopted a repurchase plan under Rule 10b5-1 and intend
to repurchase $60 million of shares during each calendar
2004 quarter.
During fiscal 2004, we repurchased 1.5 million shares under
the amended stock repurchase program, at prices ranging from
$39.03 to $41.63 per share, for an aggregate amount of
$60 million. During fiscal 2003, we repurchased
4.4 million shares at prices ranging from $13.97 to
$14.98 per share, for an aggregate amount of
$64 million. During fiscal 2002, we repurchased
19.3 million shares at prices ranging from $8.89 to
$12.25 per share, for an aggregate amount of
$204 million. As of March 31, 2004, $367 million
remained authorized for future repurchases, of which
$180 million is expected to be utilized through the 10b5-1
plan through December 2004.
Contractual Obligations
The contractual obligations presented in the table below
represent our estimates of future payments under fixed
contractual obligations and commitments. Changes in our business
needs, cancellation provisions, changing interest rates and
other factors may result in actual payments differing from the
estimates. We cannot provide certainty regarding the timing and
amounts of payments. We have presented below a summary of the
most significant assumptions used in our information within the
context of our consolidated financial position, results of
operations and cash flows. The following table summarizes our
fixed contractual obligations and commitments as of
March 31, 2004 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due in | |
|
|
Total | |
|
| |
|
|
Payments | |
|
|
|
Fiscal 2006 | |
|
Fiscal 2008 | |
|
Fiscal 2010 | |
|
|
Due | |
|
Fiscal 2005 | |
|
and 2007 | |
|
and 2009 | |
|
and Thereafter | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Convertible subordinated notes
|
|
$ |
599,987 |
|
|
$ |
|
|
|
$ |
599,987 |
|
|
$ |
|
|
|
$ |
|
|
Purchase obligations
|
|
|
57,745 |
|
|
|
57,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
118,434 |
|
|
|
35,637 |
|
|
|
53,676 |
|
|
|
18,402 |
|
|
|
10,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$ |
776,166 |
|
|
$ |
93,382 |
|
|
$ |
653,663 |
|
|
$ |
18,402 |
|
|
$ |
10,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have certain royalty commitments associated with the shipment
and licensing of certain products. Royalty expense is generally
based on a dollar amount per unit shipped or a percentage of
underlying revenue and has not been included in the table above.
Certain royalty commitments have minimum commitment obligations;
however, as of March 31, 2004 all such obligations are
immaterial.
On May 21, 2004, we entered into an agreement to purchase
Brightmail, Inc. for an estimated $370 million. The
completion of this acquisition is subject to customary closing
conditions, and is expected to close in July 2004. We expect to
integrate this technology into our Enterprise Security segment.
We believe that existing cash, cash equivalents and short-term
investments, as well as cash generated from operating results
will be sufficient to fund operations for at least the next year.
Newly Adopted And Recently Issued Accounting
Pronouncements
In August 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. Under
SFAS No. 143, the fair value of a liability for an
asset retirement obligation must be recognized in the period in
which it is incurred if a reasonable estimate of fair value can
be made. The associated asset retirement costs are capitalized
as part of the carrying amount of the long-lived asset.
SFAS No. 143 became effective for
27
Symantec beginning in the first quarter of fiscal 2004 and the
adoption of this statement did not have a material impact on our
financial position or results of operations.
In December 2003, the FASB revised Interpretation No. 46,
Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51 (FIN 46R), which
addresses how a business enterprise should evaluate whether it
has a controlling interest in an entity through means other than
voting rights and accordingly should consolidate the entity.
FIN 46R replaces FASB Interpretation No. 46, which was
issued in January 2003. Before concluding that it is appropriate
to apply the voting interest consolidation model to an entity,
an enterprise must first determine that the entity is not a
variable interest entity or a special purpose entity.
FIN 46R became effective for Symantec during fiscal 2004
and the adoption of this statement did not have a material
impact on our financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, which
provides guidance for classification and measurement of certain
financial instruments with characteristics of both liabilities
and equity. SFAS No. 150 became effective for
financial instruments entered into or modified after
May 31, 2003, and otherwise became effective for Symantec
beginning the second quarter of fiscal 2004 and the adoption of
this statement did not have a material impact on our financial
position or results of operations.
Business Risk Factors
Fluctuations in our quarterly operating results have affected
our stock price in the past and could affect our stock price in
the future. Our quarterly operating results have fluctuated
in the past, and are likely to vary significantly in the future,
based on a number of factors related to our industry and the
markets for our products. If our quarterly operating results or
our predictions of future operating results fail to meet the
expectations of analysts and investors, our stock price could be
negatively affected. Factors that are likely to cause our
operating results to fluctuate include:
|
|
|
|
|
Reduced demand for any given product; |
|
|
|
Uncertainty about and customer confidence in current economic
conditions; |
|
|
|
Unfavorable fluctuations in foreign currency exchange rates; |
|
|
|
The markets transition between new releases of operating
systems; |
|
|
|
The introduction of competitive products; |
|
|
|
Seasonality in the end-of-period buying patterns of foreign and
domestic software customers; and |
|
|
|
The timing of announcements and releases of new or enhanced
versions of our products and product upgrades. |
In addition, during fiscal 2004, 2003 and 2002, our operating
results were materially affected by non-standard charges,
including the following:
|
|
|
|
|
Acquired in-process research and development; |
|
|
|
Restructuring, site closures and other charges; |
|
|
|
Litigation settlements; and |
|
|
|
Asset impairment charges |
Any volatility in our quarterly operating results may make it
more difficult for us to raise capital in the future or pursue
acquisitions that involve issuances of our common stock or
securities convertible or exercisable into our common stock.
There is uncertainty as to whether or not we will be able to
sustain the growth rates in sales of our products, particularly
in consumer security products. Over the last nine quarters,
we experienced a higher than expected rate of growth in sales of
our consumer security protection products, and we expect that we
will
28
not be able to sustain this high growth rate on a consistent
basis. We believe that consumer security protection sales have
been spurred by a number of factors over this period of time,
including increased broadband usage and increased awareness of
security threats to consumer systems, including the recently
well publicized, Beagle, Welchia, Blaster, Sobig, MyDoom, NetSky
and Sasser viruses. The impact of these factors may diminish
over time, and it is possible that our growth rates in sales of
security protection products may decline.
We have grown, and may continue to grow, through acquisitions
that give rise to risks that could adversely affect our future
operating results. We completed four acquisitions each
during fiscal 2004 and fiscal 2003, and announced an agreement
to complete an acquisition in the first quarter of fiscal 2005
and we will likely pursue future acquisitions. Integrating
acquired businesses has been and will continue to be a complex,
time consuming and expensive process. To integrate acquired
businesses, we must implement our technology systems in the
acquired operations and assimilate and manage the personnel of
the acquired operations. Our success in completing the
integration of acquired businesses may impact the market
acceptance of such acquisitions, and our willingness to acquire
additional businesses in the future. Further, the difficulties
of integrating acquired businesses could disrupt our ongoing
business, distract our management focus from other opportunities
and challenges, and increase our expenses and working capital
requirements. We may face difficulties in entering markets in
which we have no or limited direct prior experience and where
competitors in such markets have stronger market positions. Our
acquisitions may cause us to recognize substantial amounts of
goodwill and other intangible assets that will be subject to
impairment testing and amortization, and we may assume
liabilities. In addition, acquisitions may result in substantial
restructuring and other related expenses and write-offs of
acquired in-process research and development costs. Further, we
may need to issue equity or incur additional debt to finance
future acquisitions, which could be dilutive to our existing
stockholders or could increase our leverage. Any of these and
other factors could harm our ability to achieve anticipated
levels of profitability from acquired operations or to realize
other anticipated benefits of an acquisition. Mergers and
acquisitions of high technology companies are inherently risky,
and no assurance can be given that our previous or future
acquisitions will be successful and will not materially
adversely affect our business, operating results or financial
condition.
Introduction and integration of new products and technologies
may adversely affect our financial results. We have recently
introduced new products, such as
Symantectm
Enterprise Security Architecture, or
SESAtm,
newly acquired products and products incorporating newly
acquired technology, including technologies acquired in the
following transactions:
|
|
|
|
|
On February 13, 2004, we completed the acquisition of On
Technology Corp., a provider of solutions which enable
organizations and service providers to manage the full lifecycle
of their computing systems over corporate networks. |
|
|
|
On December 5, 2003, we completed the acquisition of
PowerQuest Inc., a global provider of automated deployment and
recovery solutions for corporations and individual users. |
|
|
|
On October 15, 2003 we acquired SafeWeb, Inc., a provider
of SSL VPN appliances. |
|
|
|
On July 17, 2003, we completed the acquisition of Nexland,
Inc., a technology driven Internet security company whose
Internet Protocol based networking appliances are installed at
enterprise branches and telecommuter offices worldwide. |
These technologies may not achieve market acceptance and/or may
not be able to compete with products either currently in the
market or introduced in the future. If these technologies do not
achieve market success, our financial results, and the trading
price of our common stock could be adversely affected.
Our efforts to develop and sell appliances and integrated
solutions may not be successful and our future net revenues and
operating results could be adversely affected. We have been
in the appliance business for a short period of time. Because of
our limited experience with the manufacturing of appliances, and
because our appliances generate lower gross margins than our
software products, our efforts to develop and sell appliances
may not be as successful as we anticipate. In addition, our
strategy for future growth includes integrating our various
security technologies, management, customer service and support
into a single enterprise security solution. We have begun
implementing this strategy by selling integrated solutions, such
as Symantec
29
Gateway Security and Symantec Client Security. Our integrated
solutions may not achieve market acceptance and may not be able
to compete with solutions either currently in the market or
introduced in the future. If we are unable to achieve market
acceptance or compete effectively with solutions of our
competitors, our future net revenues and operating results could
be adversely affected.
Economic conditions, and conditions affecting the network
security market in particular, may have a negative impact on our
revenues and margins. The market for our products depends on
various economic conditions including those affecting the
network security, Internet infrastructure and other related
markets. Consumer demand for our products depends, in part, on
global economic conditions. On the enterprise side, any slowdown
in corporate earnings or tightening of corporate budgets may
cause potential customers to delay or cancel security projects,
reduce their overall or security-specific information technology
budgets, or reduce or cancel orders for our products. Further,
if economic conditions deteriorate, customers may experience
financial difficulty, cease operations or fail to budget for the
purchase of our products. This, in turn, may lead to longer
sales cycles, price pressures and collection issues, causing us
to realize lower revenues and margins. In addition, many parts
of the world are experiencing economic instability, and we
cannot predict how these conditions may affect our customers or
business.
Our international operations involve risks, and may be
subject to political or other non-economic barriers in certain
countries. In light of recent terrorist activity and
political and military instability internationally, governments
could enact additional regulations or restrictions on the use,
import or export of encryption technologies. Further, our
failure to obtain any required export approval of our
technologies, particularly our encryption technologies, could
impede our international sales. The additional regulation of
encryption technologies could delay or prevent the acceptance
and use of encryption products and public networks for secure
communications. This might decrease demand for our products and
services.
We are exposed to fluctuations in foreign currency exchange
rates, which could adversely affect our financial results. A
significant portion of our manufacturing costs and operating
expenses result from transactions outside of the United States,
often in foreign currencies. International sales comprised
approximately 52%, 49% and 47% of our total sales in fiscal
2004, 2003 and 2002, respectively. Although our fiscal 2004
operating results have been positively affected by changes in
foreign currency rates, our future operating results will
continue to be subject to fluctuations in foreign currency
rates, and we may be negatively affected by fluctuations in
foreign currency rates in the future, especially if
international sales continue to grow as a percentage of our
total sales.
Our markets are competitive and our financial results and
financial condition could be adversely affected if we are unable
to anticipate or react to this competition. Our markets are
competitive. If we are unable to anticipate or react to this
competition, our operating results could be adversely affected
by reducing our sales or the prices we can charge for our
products. Many of our competitors have significantly lowered,
and may continue to lower, the price of their products and we
may have to do the same to remain competitive. 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
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 also fail to allocate
resources to third party products, to markets or to business
models that are ultimately more successful than we anticipate.
Operating system providers and network equipment and computer
hardware manufacturers are becoming substantial competitors in
the market for security solutions, which could adversely affect
our financial results. Large operating system providers and
network equipment and computer hardware manufacturers with
significantly greater financial, marketing or technological
resources than we have may leverage their strengths at the
computing platform, security layer and network tier levels to
compete more aggressively in the market for security solutions.
Our failure to adapt effectively to the continued development,
acquisition, or licensing of
30
security solutions technology or product rights by one or more
of these competitors could negatively impact our competitive
position in the market for security solutions.
For example, the continued inclusion of security, remote access
or virus protection tools in new operating systems and hardware
packages could adversely affect our sales. In particular,
Microsoft has added security and remote access features to new
versions of its operating system products that provide some of
the same functions offered in our products. This competition may
decrease or delay the demand for certain of our products,
including those currently under development. Furthermore, as
hardware vendors incorporate security functions in their network
equipment or integrate security within their network and system
management products, the demand for some of our products may
decrease, including those currently under development.
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 and broader arrays of software
products, as well as integrated software and hardware solutions.
Changes resulting from this consolidation may negatively impact
our competitive position. In addition, to the extent that we
seek to expand our product lines, managerial and technical
personnel skills and capacity through acquisitions, the trend
toward consolidation may result in our encountering competition,
and paying higher prices, for acquired businesses.
Demand for our products is subject to seasonal trends, which
could make our stock price more volatile. Although there is
no assurance this trend will continue, our sales of consumer
products have been seasonal, with higher sales generally in our
December and March quarters. To the extent seasonality makes it
more difficult to predict our revenues and value our business,
our stock price may suffer and the volatility of our stock may
increase.
Military actions around the globe could create economic
conditions that reduce demand for our products and services by
businesses, consumers and government agencies. Political and
military instability could slow spending within our target
markets, delay sales cycles and otherwise adversely affect our
ability to generate revenue and operate effectively. Government
demand for our products and services is dictated by budgetary
cycles and funding availability and this demand may be adversely
affected by a redirection of spending for military or other
objectives.
Our financial forecasts may not be achieved, due to the
unpredictability of end-of-period buying patterns, which could
make our stock price more volatile. The risk of quarterly
fluctuations is increased by the fact that a significant portion
of our quarterly net revenues has historically been generated
during the last month of each fiscal quarter. Most resellers
have tended 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. Due to
these end-of-period buying patterns, 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. This increases the chances that our results could diverge
from the expectations of investors and analysts, which could
make our stock price more volatile.
Increased reliance on sales of enterprise licenses may result
in greater fluctuations in, or otherwise adversely affect, our
financial results. Sales of enterprise licenses through our
Enterprise Security segment represent a major portion of our
business. Enterprise licensing arrangements involve a longer
sales cycle than sales through other distribution channels,
require greater investment of resources in establishing the
enterprise relationship, may involve greater pricing pressure
and sometimes result in lower operating margins. In addition,
the timing of the execution of volume licenses, or their
non-renewal 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. In addition, longer license periods impede our
ability to increase prices due to increased costs and may
adversely impact our operating margins.
If we are unable to attract and retain personnel in a
competitive marketplace, the growth and success of our business
could be adversely affected. We believe that our future
success will depend in part on our ability to recruit and retain
highly skilled management, sales, marketing and technical
personnel. To accomplish this, we believe that we must provide
personnel with a competitive compensation package, including
stock options.
31
Increases in shares available for issuance under our stock
options plans require stockholder approval in many cases, and
institutional stockholders, or stockholders generally, may not
approve future increases. Additionally, the FASB proposed a new
standard that would require companies to include compensation
expense in their statement of operations relating to the
issuance of employee stock options. As a result, we may decide
to issue fewer stock options and may be impaired in our efforts
to attract and retain necessary personnel.
We are dependent upon certain partners to distribute our
products and we would be adversely affected if these
relationships terminate or diminish. A large portion of our
enterprise sales are made through value-added and other
resellers, and a large portion of our consumer sales are made
through the retail distribution channel. Reliance on these
channels subjects us to events that cause unpredictability in
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 distribution partners may also offer our
competitors products. Their decisions to sell 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 partners are
generally nonexclusive and may be terminated by them or by us
without cause. We would be adversely affected if companies in
our partner program chose to sell greater amounts of competitive
offerings relative to the amount they sell of our offerings.
In addition, we sell our consumer products through original
equipment manufacturers, or OEMs, who bundle our antivirus and
other products with their PCs. We continuously seek to establish
new OEM relationships and, conversely, may encounter OEMs that
decide either to replace third party security software with
their own or switch to a competitors product. When we lose
an OEM relationship, our consumer sales could be adversely
affected unless and until we are able to establish new
relationships of similar significance.
Some distribution partners have experienced financial
difficulties in the past, and may experience them in the future.
If these partners do suffer financial difficulties, we may have
reduced sales or increased write-offs, which would adversely
affect our operating results.
If we are unable to effectively adapt to changes in the
dynamic technological environment, our future revenues and
operating results could be adversely affected. 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 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
wireless based environments, our future net revenues and
operating results could be adversely affected.
Our research and development efforts may be more costly and
time-consuming than anticipated and the results may be
unsuccessful, which could adversely impact our financial
results. We will need to continue to incur significant
research and development expenditures in future periods as we
strive to remain competitive. The length of our product
development cycle for new products and product enhancements has
frequently been greater than we originally expected, and we are
likely to experience delays in future product development. In
addition, a portion of our development efforts has not been
technologically successful and certain products have not
achieved market acceptance. As a result, the products we are
currently developing or may develop in the future may not be
technologically successful, achieve market acceptance or compete
effectively with products of our competitors.
Our products are complex and operate 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,
32
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. In addition, if an actual or perceived breach of network
security occurs in one of our end customers security
systems, regardless of whether the breach is attributable to our
products, the market perception of the effectiveness of our
products could be harmed. Because the techniques used by
computer hackers to access or sabotage networks change
frequently and may not be recognized until launched against a
target, we may be unable to anticipate these techniques.
Alleviating any of these problems could require significant
expenditures of our capital and resources and could cause
interruptions, delays or cessation of our product licensing,
which could cause us to lose existing or potential customers and
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.
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 products in
exchange for new products or credit towards future purchases.
End-users may return our products for a full refund within a
reasonably short period from the date of purchase. Future
returns could exceed the reserves we have established for
product returns, which could have a material adverse effect on
our operating results.
Increased customer demands on our technical support services
may adversely affect our financial results. We may be unable
to respond quickly enough to short-term increases 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, without corresponding revenue could
increase costs and adversely affect our operating results.
We have outsourced the majority of our worldwide consumer
support functions. As such, we are highly dependent on the
on-going business success of the companies with whom we have
contracted to provide these services. If these companies
experience financial difficulties, do not maintain sufficiently
skilled workers and resources to satisfy our contracts or
otherwise fail to perform at a sufficient level under these
contracts, the level of support services to our customers may be
significantly disrupted, which could materially harm our
relationships with these customers.
Our inability to timely distribute our products and services
over the Internet, including security patches and updated virus
definitions via our LiveUpdate feature, could adversely affect
our business. Our ability to maintain and increase the speed
with which we provide services to consumers and to increase the
scope of these services is limited by and dependent upon the
speed and reliability of the Internet. As we incorporate the
LiveUpdate technology into more of our products, we are
increasingly reliant on the Internet as a means to distribute
our security patches and updated virus definitions to our
customers. Accordingly, if we, or our customers, are unable to
utilize the Internet due to a failure of technology,
infrastructure or other reasons, our ability to provide services
may suffer, which could lead to a decrease in revenues. In
addition, the infrastructure required to support the increase in
on-line sales may be insufficient, if our on-lines sales
increase at a rate significantly greater than anticipated.
Terrorist activity could target the Internet, computer
systems and networks, and security providers, which could
adversely affect our ability to generate revenue. Any
significant interruption of the Internet, computer systems
and/or networks could adversely impact our ability to rapidly
and efficiently provide anti-virus and other product updates to
our customers.
33
Our software products and web site may be subject to
intentional disruption, which could adversely impact our
reputation and future sales. Although we believe we have
sufficient controls in place to prevent intentional disruptions,
we expect to be an ongoing target of attacks specifically
designed to impede the performance of our products. 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. Uninterrupted online availability
of our web site is becoming increasingly important, as online
subscription renewals comprise a larger portion of our revenues.
Our activities could be adversely affected, and our reputation
and future sales harmed, if these intentionally disruptive
efforts are successful.
We are subject to litigation that could adversely affect our
financial results. From time to time, we are subjected to
product liability claims, including claims that we have
infringed the intellectual property rights of others, as well as
other legal claims incidental to our business. We are currently
involved in a number of lawsuits, all of which we intend to
defend 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. For example, in the June
2003 quarter, we paid $63 million in relation to the
Hilgraeve technology patent settlement, of which
$14 million was charged to operating expenses in the June
2003 quarter, and the remainder was capitalized and will be
amortized to cost of revenues through June 2011.
Piracy of our software may have a significant adverse impact
on our net revenues. Although we are unable to quantify the
extent of piracy of our software products, software piracy may
depress our net revenues. While this would adversely affect
revenue domestically, lost revenue is believed to be even more
significant outside of the United States, particularly in
countries where laws are less protective of intellectual
property rights. We engage in efforts to educate consumers on
the benefits of licensing genuine products and to educate
lawmakers on the advantages of a business climate where
intellectual property rights are protected, and we cooperate
with the Business Software Alliance in their efforts to combat
piracy. However, these efforts may not affect the piracy of our
products.
Our intellectual property and proprietary rights may not be
adequately protected from all unauthorized uses, which could
adversely impact our financial results. 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 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.
We continue to make substantial changes to our information
systems that could disrupt our business and our financial
results. We plan to continuously improve our Enterprise
Resource Planning, Customer Relationship Management and Data
Warehouse Information systems to support the form, functionality
and scale of the business.
34
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 and the ongoing operations and
support of the new systems could materially harm our business
operations.
In addition, our order management and product shipping centers
are geographically dispersed. A business disruption could occur
as a result of natural disasters or the interruption in service
by communications carriers. If our communications between these
centers are disrupted, 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.
Communication outages, Internet connectivity disruptions, and/or
increased volumes of electronic distribution transactions may
also cause delays in customer access to our Internet-based
services or product sales.
We hold minority interests in non-public companies and if
these companies face financial difficulties in their operations,
our investments could be impaired and could adversely affect our
financial results. We continue to hold minority interests in
privately held companies. These investments are inherently risky
because these companies are still in the development stage and
depend on third parties for financing to support their ongoing
operations. In addition, the markets for their technologies or
products are typically in the early stages and may never
develop. If these companies do no have adequate cash funding to
support their operations, or if they encounter difficulties
developing their technologies or products, our investments in
these companies may be impaired and could adversely affect our
financial results.
We may be subject to a higher effective tax rate that could
negatively affect our financial results and financial
position. Our effective tax rate could be adversely affected
by several factors, many of which are outside of our control.
Our future effective tax rate could be unfavorably affected by
unanticipated changes in the mix of earnings in countries with
differing statutory tax rates. We are also subject to changes in
tax laws or their interpretations in the various jurisdictions
in which we operate which may adversely impact our effective tax
rate. In addition, our effective tax rate could be affected by
the changes in accounting and tax treatment of stock-based
compensation.
If the carrying value of our long-lived assets is not
recoverable, an impairment loss must be recognized which would
adversely affect our financial results. We evaluate our
long-lived assets, including property and equipment, goodwill,
acquired product rights and other intangible assets, whenever
events or circumstances occur which indicate that these assets
might be impaired. In addition, goodwill is evaluated annually
for impairment in the fourth quarter of each fiscal year,
regardless of events and circumstances. We will continue to
evaluate the recoverability of the carrying amount of our
long-lived assets, and we may incur substantial impairment
charges, which could adversely affect our financial results.
35
|
|
Item 8: |
Financial Statements and Supplementary Data |
Annual Financial Statements
See Part IV, Item 15 of this Annual Report on
Form 10-K.
Selected Quarterly Data
We have a 52/53-week fiscal accounting year. Accordingly, we
have presented quarterly fiscal periods, comprised of
13/14 weeks, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2004 | |
|
Fiscal 2003 | |
|
|
| |
|
| |
|
|
Mar. 31, | |
|
Dec. 31, | |
|
Sep. 30, | |
|
Jun. 30, | |
|
Mar. 31, | |
|
Dec. 31, | |
|
Sep. 30, | |
|
Jun. 30, | |
|
|
2004 | |
|
2003 | |
|
2003 | |
|
2003(c) | |
|
2003 | |
|
2002 | |
|
2002 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except net income per share) | |
Net revenues
|
|
$ |
556,435 |
|
|
$ |
493,905 |
|
|
$ |
428,665 |
|
|
$ |
391,124 |
|
|
$ |
390,039 |
|
|
$ |
375,635 |
|
|
$ |
325,231 |
|
|
$ |
316,041 |
|
Gross profit
|
|
|
458,877 |
|
|
|
406,297 |
|
|
|
353,855 |
|
|
|
323,546 |
|
|
|
321,814 |
|
|
|
310,355 |
|
|
|
264,072 |
|
|
|
260,589 |
|
Acquired in-process research and development
|
|
|
1,110 |
|
|
|
1,600 |
|
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,700 |
|
|
|
|
|
Restructuring, site closures and other
|
|
|
463 |
|
|
|
(126 |
) |
|
|
2 |
|
|
|
568 |
|
|
|
6,657 |
|
|
|
(442 |
) |
|
|
(1,179 |
) |
|
|
6,053 |
|
Patent settlement(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
164,923 |
|
|
|
153,584 |
|
|
|
115,622 |
|
|
|
79,456 |
|
|
|
91,973 |
|
|
|
101,157 |
|
|
|
70,392 |
|
|
|
77,990 |
|
Net income
|
|
|
116,929 |
|
|
|
111,476 |
|
|
|
83,433 |
|
|
|
58,781 |
|
|
|
68,143 |
|
|
|
71,732 |
|
|
|
51,994 |
|
|
|
56,569 |
|
Net income per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
basic(b)
|
|
$ |
0.38 |
|
|
$ |
0.36 |
|
|
$ |
0.27 |
|
|
$ |
0.20 |
|
|
$ |
0.23 |
|
|
$ |
0.25 |
|
|
$ |
0.18 |
|
|
$ |
0.20 |
|
|
diluted(b)
|
|
$ |
0.33 |
|
|
$ |
0.32 |
|
|
$ |
0.24 |
|
|
$ |
0.18 |
|
|
$ |
0.21 |
|
|
$ |
0.22 |
|
|
$ |
0.16 |
|
|
$ |
0.18 |
|
|
|
(a) |
On August 6, 2003, we purchased a security technology
patent as part of a settlement in Hilgraeve, Inc. v.
Symantec Corporation. For more information, see Note 4 of
the Notes to Consolidated Financial Statements. |
|
(b) |
Per share amounts reflect the two-for-one stock splits effected
as a stock dividend, which occurred on November 19, 2003. |
|
(c) |
The three months ended June 30, 2003 comprised
14 weeks of activity. |
PART IV
|
|
Item 15: |
Exhibits, Financial Statement Schedules and Reports on
Form 8-K |
Upon written request, we will provide, without charge, a copy of
our Annual Report on Form 10-K, including the consolidated
financial statements, financial statement schedule 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 |
36
(a) The following documents are filed as part of this
report:
|
|
|
|
|
|
|
|
|
|
|
Page | |
|
|
|
|
Number | |
|
|
|
|
| |
1.
|
|
Consolidated Financial Statements: |
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm |
|
|
42 |
|
|
|
Report of Independent Registered Public Accounting Firm |
|
|
43 |
|
|
|
Consolidated Balance Sheets as of March 31, 2004 and 2003 |
|
|
44 |
|
|
|
Consolidated Statements of Operations for the years ended
March 31, 2004, 2003 and 2002 |
|
|
45 |
|
|
|
Consolidated Statements of Stockholders Equity for the
years ended March 31, 2004, 2003 and 2002 |
|
|
46 |
|
|
|
Consolidated Statements of Cash Flows for the years ended
March 31, 2004, 2003 and 2002 |
|
|
47 |
|
|
|
Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements |
|
|
48 |
|
2.
|
|
Financial Statement Schedule: The following financial statement
schedule of Symantec Corporation for the years ended
March 31, 2004, 2003 and 2002 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 |
|
|
82 |
|
|
|
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: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
|
|
|
|
| |
|
|
Exhibit | |
|
|
|
|
|
Filing | |
|
Herewith | |
Number | |
|
Exhibit Description |
|
Form | |
|
File No. | |
|
Exhibit | |
|
Date | |
|
Filed | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
2 |
.01 |
|
Agreement and Plan of Merger, dated as of September 23,
2003, among Symantec Corporation, Quartz Acquisition Corp.,
PowerQuest, Inc. and John Fife, as representative.** |
|
|
10-Q |
|
|
|
|
|
|
|
10.01 |
|
|
|
02/13/04 |
|
|
|
|
|
|
|
2 |
.02 |
|
Agreement and Plan of Merger, dated as of October 27, 2003,
by and among Symantec Corporation, Outlaw Acquisition
Corporation and OnTechnology Corporation.** |
|
|
10-Q |
|
|
|
|
|
|
|
10.02 |
|
|
|
02/13/04 |
|
|
|
|
|
|
|
2 |
.03 |
|
Agreement and Plan of Merger dated as of May 19, 2004 among
Symantec Corporation, Brazil Acquisition Corp., Brightmail
Incorporated and John C. Colligan, as Representative.** |
|
|
10-K |
|
|
|
|
|
|
|
2.03 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
3 |
.01 |
|
Symantec Corporation Restated Certificate of Incorporation. |
|
|
10-K |
|
|
|
|
|
|
|
3.01 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
3 |
.02 |
|
Symantec Corporation Bylaws, as amended and restated effective
August 11, 1998. |
|
|
8-K |
|
|
|
|
|
|
|
3.1 |
|
|
|
08/19/98 |
|
|
|
|
|
|
|
4 |
.01 |
|
Registration Rights Agreement between Symantec Corporation and
Certain of its Stockholders. |
|
|
S-4 |
|
|
|
33-35385 |
|
|
|
4.02 |
|
|
|
06/13/90 |
|
|
|
|
|
|
|
4 |
.02 |
|
Amendment No. One to Registration Rights Agreement. |
|
|
10-K |
|
|
|
|
|
|
|
4.02 |
|
|
|
06/16/03 |
|
|
|
|
|
|
|
4 |
.03 |
|
Amendment No. Two to Registration Rights Agreement. |
|
|
10-K |
|
|
|
|
|
|
|
4.03 |
|
|
|
06/16/03 |
|
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
|
|
|
|
| |
|
|
Exhibit | |
|
|
|
|
|
Filing | |
|
Herewith | |
Number | |
|
Exhibit Description |
|
Form | |
|
File No. | |
|
Exhibit | |
|
Date | |
|
Filed | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
4 |
.04 |
|
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. |
|
|
8-A |
|
|
|
|
|
|
|
4.1 |
|
|
|
08/19/98 |
|
|
|
|
|
|
|
4 |
.05 |
|
Form of Note for Symantec Corporation 3% Convertible
Subordinated Notes due November 1, 2006. |
|
|
S-3 |
|
|
|
333-77072 |
|
|
|
4.08 |
|
|
|
01/22/02 |
|
|
|
|
|
|
|
4 |
.06 |
|
Indenture between Symantec Corporation, as Issuer, and State
Street Bank and Trust Company of California, N.A., as Trustee,
dated October 24, 2001 related to Symantec
Corporations 3% Convertible Subordinated Notes due
November 1, 2006. |
|
|
S-3 |
|
|
|
333-77072 |
|
|
|
4.09 |
|
|
|
01/22/02 |
|
|
|
|
|
|
|
4 |
.07 |
|
Registration Rights Agreement between Symantec Corporation and
Credit Suisse First Boston Corporation dated October 24,
2001 related to Symantec Corporations 3% Convertible
Subordinated Notes due November 1, 2006. |
|
|
S-3 |
|
|
|
333-77072 |
|
|
|
4.10 |
|
|
|
01/22/02 |
|
|
|
|
|
|
|
10 |
.01 |
|
Form of Indemnity Agreement with Officers and Directors and
Amendment No. 1. |
|
|
S-1 |
|
|
|
33-28655 |
|
|
|
10.17 |
|
|
|
05/19/89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/21/89 |
|
|
|
|
|
|
|
10 |
.02* |
|
Symantec Corporation 1994 Patent Incentive Plan. |
|
|
S-8 |
|
|
|
33-60141 |
|
|
|
4.01 |
|
|
|
06/09/95 |
|
|
|
|
|
|
|
10 |
.03* |
|
Symantec Corporation 1996 Equity Incentive Plan, as amended and
Form of Stock Option Agreement |
|
|
10-K |
|
|
|
|
|
|
|
10.03 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.04* |
|
Symantec Corporation Deferred Compensation Plan, dated as of
November 7, 1996. |
|
|
10-K |
|
|
|
|
|
|
|
10.11 |
|
|
|
06/24/97 |
|
|
|
|
|
|
|
10 |
.5* |
|
Symantec Corporation 1998 Employee Stock Purchase Plan. |
|
|
S-8 |
|
|
|
333-52200 |
|
|
|
99.2 |
|
|
|
12/19/00 |
|
|
|
|
|
|
|
10 |
.6* |
|
Symantec Corporation Acquisition Plan, dated July 15, 1999. |
|
|
S-8 |
|
|
|
333-31526 |
|
|
|
4.03 |
|
|
|
03/02/00 |
|
|
|
|
|
|
|
10 |
.7* |
|
Symantec Corporation 2000 Directors Equity Incentive Plan. |
|
|
S-8 |
|
|
|
333-47648 |
|
|
|
99.1 |
|
|
|
10/10/00 |
|
|
|
|
|
|
|
10 |
.8* |
|
Symantec Corporation 2001 Non-Qualified Equity Incentive Plan. |
|
|
S-8 |
|
|
|
333-56874 |
|
|
|
99.1 |
|
|
|
03/12/01 |
|
|
|
|
|
|
|
10 |
.9* |
|
2002 Executive Officers Stock Purchase Plan. |
|
|
10-Q |
|
|
|
|
|
|
|
10.02 |
|
|
|
11/12/02 |
|
|
|
|
|
|
|
10 |
.11* |
|
Supplemental Option Vesting and Severance Arrangement terms and
conditions between Symantec Corporation and Greg Myers. |
|
|
10-K |
|
|
|
|
|
|
|
10.63 |
|
|
|
07/01/99 |
|
|
|
|
|
|
|
10 |
.12* |
|
Employment Agreement between Symantec Corporation and John W.
Thompson. |
|
|
10-K |
|
|
|
|
|
|
|
10.67 |
|
|
|
07/01/99 |
|
|
|
|
|
|
|
10 |
.13* |
|
Symantec Corporation Stock Option Grant to John W. Thompson,
dated April 14, 1999. |
|
|
S-8 |
|
|
|
333-31540 |
|
|
|
4.03 |
|
|
|
03/03/00 |
|
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
|
|
|
|
| |
|
|
Exhibit | |
|
|
|
|
|
Filing | |
|
Herewith | |
Number | |
|
Exhibit Description |
|
Form | |
|
File No. | |
|
Exhibit | |
|
Date | |
|
Filed | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
10 |
.14* |
|
Symantec Corporation Stock Option Grant to John W. Thompson,
dated January 1, 2000. |
|
|
S-8 |
|
|
|
333-102096 |
|
|
|
99.3 |
|
|
|
12/20/02 |
|
|
|
|
|
|
|
10 |
.15* |
|
Employment offer by and between Symantec Corporation and Gail
Hamilton. |
|
|
10-Q |
|
|
|
|
|
|
|
10.03 |
|
|
|
08/11/00 |
|
|
|
|
|
|
|
10 |
.16* |
|
Offer Letter between Symantec Corporation and John Schwarz,
dated December 20, 2001. |
|
|
10-Q |
|
|
|
|
|
|
|
10.02 |
|
|
|
02/07/02 |
|
|
|
|
|
|
|
10 |
.17* |
|
Symantec Corporation Executive Severance Plan. |
|
|
10-K |
|
|
|
|
|
|
|
10.93 |
|
|
|
06/22/01 |
|
|
|
|
|
|
|
10 |
.18* |
|
Symantec Senior Executive Incentive Plan. |
|
|
10-K |
|
|
|
|
|
|
|
10.18 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.19* |
|
FY04 Executive Annual Incentive Plan Management
Committee Members, President and Chief Operating Officer |
|
|
10-K |
|
|
|
|
|
|
|
10.27 |
|
|
|
06/16/03 |
|
|
|
|
|
|
|
10 |
.20* |
|
FY04 Executive Annual Incentive Plan. Vice
President Plan (Non-Management Committee Members). |
|
|
10-K |
|
|
|
|
|
|
|
10.28 |
|
|
|
06/16/03 |
|
|
|
|
|
|
|
10 |
.21* |
|
FY05 Executive Annual Incentive Plan Vice
Presidents |
|
|
10-K |
|
|
|
|
|
|
|
10.21 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.22* |
|
FY05 Executive Annual Incentive Plan Vice
Presidents, Sales |
|
|
10-K |
|
|
|
|
|
|
|
10.22 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.23* |
|
FY05 Executive Annual Incentive Plan Vice
President, Business Unit Leaders. |
|
|
10-K |
|
|
|
|
|
|
|
10.23 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.24* |
|
FY05 Executive Annual Incentive Plan Senior
Vice Presidents, non Business Unit. |
|
|
10-K |
|
|
|
|
|
|
|
10.24 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.25* |
|
FY05 Executive Annual Incentive Plan President
and Chief Operating Officer |
|
|
10-K |
|
|
|
|
|
|
|
10.25 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.26* |
|
FY05 Executive Annual Incentive Plan Chairman
and Chief Salesman. |
|
|
10-K |
|
|
|
|
|
|
|
10.26 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.27 |
|
Office building lease, dated as of April 10, 1991, between
Symantec Corporation and Maguire Thomas Partners Colorado Place
regarding property located in Santa Monica, California. |
|
|
10-K |
|
|
|
|
|
|
|
23.02 |
|
|
|
06/16/03 |
|
|
|
|
|
|
|
10 |
.28 |
|
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. |
|
|
10-Q |
|
|
|
|
|
|
|
10.01 |
|
|
|
11/15/99 |
|
|
|
|
|
|
|
10 |
.29 |
|
Amended Agreement Respecting Certain Rights of Publicity. |
|
|
S-4 |
|
|
|
33-35385 |
|
|
|
10.04 |
|
|
|
06/13/90 |
|
|
|
|
|
|
|
10 |
.30 |
|
Assignment of Copyright and Other Intellectual Property Rights. |
|
|
S-4 |
|
|
|
33-35385 |
|
|
|
10.37 |
|
|
|
06/13/90 |
|
|
|
|
|
|
|
12 |
.01 |
|
Statement Regarding Computation of Ratios |
|
|
10-K |
|
|
|
|
|
|
|
12.01 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
21 |
.01 |
|
Subsidiaries of Symantec Corporation. |
|
|
10-K |
|
|
|
|
|
|
|
21.01 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
23 |
.01 |
|
Consent of Independent Registered Public Accounting Firm |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
|
|
|
|
| |
|
|
Exhibit | |
|
|
|
|
|
Filing | |
|
Herewith | |
Number | |
|
Exhibit Description |
|
Form | |
|
File No. | |
|
Exhibit | |
|
Date | |
|
Filed | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
23 |
.02 |
|
Consent of Independent Registered Public Accounting Firm |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
31 |
.01 |
|
Firm Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
31 |
.02 |
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
32 |
.01*** |
|
Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
32 |
.02*** |
|
Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
* |
Indicates a management contract or compensatory plan or
arrangement. |
|
|
|
|
** |
The exhibits and schedules to this agreement have been omitted
pursuant to Item 601(b)(2) of Regulation S-K. We will
furnish copies of any of the exhibits and schedules to the
Securities and Exchange Commission upon request. |
|
|
*** |
This exhibit is being furnished, rather than filed, and shall
not be deemed incorporated by reference into any filing, in
accordance with Item 601 of Regulation S-K. |
(b) Reports on Form 8-K:
|
|
|
|
|
|
|
|
|
Date Filed or | |
|
|
|
|
Furnished | |
|
Item No. | |
|
Description |
| |
|
| |
|
|
|
January 21, 2004 |
|
|
|
Items 5, 7 and 12 |
|
|
Announced an increase to stock repurchase plan and associated
10b5-1 plan and results of operations for our fiscal quarter
ended December 31, 2003.* |
|
January 21, 2004 |
|
|
|
Items 5, 7 |
|
|
Announced the appointment of Franciscus Lion to the Board of
Directors. |
|
February 5, 2004 |
|
|
|
Item 5 |
|
|
Announced that Rebecca Ranninger, Symantecs Senior VP
Human Resources, adopted a 10b5-1 plan. |
|
March 9, 2004 |
|
|
|
Item 5 |
|
|
Announced that George Reyes, a director of Symantec, adopted a
10b5-1 plan. |
|
|
* |
The furnished portions of this 8-K are not to be deemed filed or
incorporated by reference into any filing. |
(c) Exhibits: We hereby file as part of this Form 10-K
the exhibits listed in Item 15(a)3, as set forth above.
(d) Financial Statement Schedules: We hereby file as part
of this Annual Report on Form 10-K the schedule listed in
Item 15(a)2, as set forth above.
40
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page | |
|
|
| |
|
|
|
42 |
|
|
|
|
43 |
|
|
|
|
44 |
|
|
|
|
45 |
|
|
|
|
46 |
|
|
|
|
47 |
|
|
|
|
48 |
|
|
|
|
56 |
|
41
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Symantec Corporation:
We have audited the accompanying consolidated balance sheets of
Symantec Corporation and subsidiaries (the Company) as of
March 31, 2004 and 2003, and the related consolidated
statements of operations, stockholders equity and cash
flows for each of the years in the two-year period ended
March 31, 2004. Our audits also included the financial
statement schedule listed in the Index at Item 15(a) for
each of the years in the two-year period ended March 31,
2004. These consolidated financial statements and schedule are
the responsibility of the Companys 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 the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Symantec Corporation and subsidiaries as of
March 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the years in the
two-year period ended March 31, 2004, in conformity with
U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule for each of
the years in the two-year period ended March 31, 2004, when
considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
As described in the Summary of Significant Accounting Policies
to the consolidated financial statements, the Company adopted
Statement of Financial Accounting Standard No. 142
(SFAS No. 142), Goodwill and Other
Intangible Assets, as of April 1, 2002.
Mountain View, California
April 26, 2004, except as to Notes 17 and 19
which are as of June 10, 2004 and the
financial statement schedule listed in the
Index at Item 15(a) which is as of March 23, 2005
42
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Symantec Corporation
We have audited the accompanying consolidated statements of
operations, stockholders equity, and cash flows of
Symantec Corporation for the year ended March 31, 2002. Our
audit also included the financial statement schedule listed in
the Index at Item 15(a) for the year ended March 31,
2002. These financial statements and schedule are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above,
present fairly, in all material respects, the consolidated
results of operations and cash flows of Symantec Corporation for
the year ended March 31, 2002, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
San Jose, California
April 22, 2002
43
SYMANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(In thousands, except | |
|
|
par value) | |
ASSETS |
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and short-term investments
|
|
$ |
2,410,331 |
|
|
$ |
1,705,658 |
|
|
Trade accounts receivable, net
|
|
|
259,152 |
|
|
|
149,664 |
|
|
Inventories
|
|
|
15,134 |
|
|
|
5,912 |
|
|
Current deferred income taxes
|
|
|
98,438 |
|
|
|
92,284 |
|
|
Other current assets
|
|
|
59,079 |
|
|
|
34,628 |
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
2,842,134 |
|
|
|
1,988,146 |
|
Property, equipment and leasehold improvements, net
|
|
|
378,367 |
|
|
|
333,275 |
|
Long-term deferred income taxes
|
|
|
|
|
|
|
7,986 |
|
Acquired product rights, net
|
|
|
120,938 |
|
|
|
73,125 |
|
Goodwill
|
|
|
1,080,759 |
|
|
|
833,449 |
|
Other long-term assets
|
|
|
34,300 |
|
|
|
29,749 |
|
|
|
|
|
|
|
|
|
|
$ |
4,456,498 |
|
|
$ |
3,265,730 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
71,654 |
|
|
$ |
67,720 |
|
|
Accrued compensation and benefits
|
|
|
116,770 |
|
|
|
90,947 |
|
|
Current deferred revenue
|
|
|
878,716 |
|
|
|
530,378 |
|
|
Other accrued expenses
|
|
|
92,595 |
|
|
|
69,363 |
|
|
Income taxes payable
|
|
|
127,305 |
|
|
|
76,965 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,287,040 |
|
|
|
835,373 |
|
Convertible subordinated notes
|
|
|
599,987 |
|
|
|
599,998 |
|
Long-term deferred revenue
|
|
|
92,481 |
|
|
|
59,251 |
|
Long-term deferred tax liabilities
|
|
|
44,750 |
|
|
|
|
|
Other long-term obligations
|
|
|
6,032 |
|
|
|
6,729 |
|
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: 900,000; issued and
outstanding: 311,854 and 148,785 shares, respectively)
|
|
|
3,119 |
|
|
|
1,488 |
|
|
Capital in excess of par value
|
|
|
1,573,466 |
|
|
|
1,335,028 |
|
|
Accumulated other comprehensive income
|
|
|
125,484 |
|
|
|
30,121 |
|
|
Retained earnings
|
|
|
724,139 |
|
|
|
397,742 |
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
2,426,208 |
|
|
|
1,764,379 |
|
|
|
|
|
|
|
|
|
|
$ |
4,456,498 |
|
|
$ |
3,265,730 |
|
|
|
|
|
|
|
|
The accompanying Summary of Significant Accounting Policies and
Notes to Consolidated Financial Statements are an integral part
of these statements.
44
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands, except net income | |
|
|
(loss) per share) | |
Net revenues
|
|
$ |
1,870,129 |
|
|
$ |
1,406,946 |
|
|
$ |
1,071,438 |
|
Cost of revenues
|
|
|
327,554 |
|
|
|
250,116 |
|
|
|
195,903 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,542,575 |
|
|
|
1,156,830 |
|
|
|
875,535 |
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
252,284 |
|
|
|
197,271 |
|
|
|
163,979 |
|
|
Sales and marketing
|
|
|
660,573 |
|
|
|
525,029 |
|
|
|
425,951 |
|
|
General and administrative
|
|
|
94,645 |
|
|
|
74,442 |
|
|
|
55,131 |
|
|
Amortization of goodwill
|
|
|
|
|
|
|
|
|
|
|
196,806 |
|
|
Amortization of other intangibles from acquisitions
|
|
|
2,954 |
|
|
|
2,787 |
|
|
|
2,144 |
|
|
Acquired in-process research and development
|
|
|
3,710 |
|
|
|
4,700 |
|
|
|
|
|
|
Restructuring, site closures and other
|
|
|
907 |
|
|
|
11,089 |
|
|
|
20,428 |
|
|
Patent settlement
|
|
|
13,917 |
|
|
|
|
|
|
|
|
|
|
Litigation judgment
|
|
|
|
|
|
|
|
|
|
|
3,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,028,990 |
|
|
|
815,318 |
|
|
|
867,494 |
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
513,585 |
|
|
|
341,512 |
|
|
|
8,041 |
|
|
Interest income
|
|
|
38,257 |
|
|
|
37,704 |
|
|
|
31,717 |
|
|
Interest expense
|
|
|
(21,164 |
) |
|
|
(21,166 |
) |
|
|
(9,169 |
) |
|
Income, net of expense, from sale of technologies and product
lines
|
|
|
9,547 |
|
|
|
6,878 |
|
|
|
15,536 |
|
|
Other income (expense), net
|
|
|
1,997 |
|
|
|
(1,297 |
) |
|
|
(627 |
) |
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
542,222 |
|
|
|
363,631 |
|
|
|
45,498 |
|
|
Provision for income taxes
|
|
|
171,603 |
|
|
|
115,193 |
|
|
|
73,649 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
370,619 |
|
|
$ |
248,438 |
|
|
$ |
(28,151 |
) |
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share basic
|
|
$ |
1.21 |
|
|
$ |
0.85 |
|
|
$ |
(0.10 |
) |
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share diluted
|
|
$ |
1.07 |
|
|
$ |
0.77 |
|
|
$ |
(0.10 |
) |
|
|
|
|
|
|
|
|
|
|
Shares used to compute net income (loss) per share
basic
|
|
|
305,985 |
|
|
|
290,790 |
|
|
|
287,208 |
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute net income (loss) per share
diluted
|
|
|
359,555 |
|
|
|
341,436 |
|
|
|
287,208 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying Summary of Significant Accounting Policies and
Notes to Consolidated Financial Statements are an integral part
of these statements.
45
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated | |
|
|
|
|
|
|
|
|
Common Stock | |
|
Capital | |
|
Other | |
|
|
|
|
|
Total | |
|
|
| |
|
Excess of | |
|
Comprehensive | |
|
Unearned | |
|
Retained | |
|
Stockholders | |
|
|
Shares | |
|
Amount | |
|
Par Value | |
|
Income (Loss) | |
|
Compensation | |
|
Earnings | |
|
Equity | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Balances, March 31, 2001
|
|
|
72,006 |
|
|
$ |
720 |
|
|
$ |
1,179,675 |
|
|
$ |
(48,872 |
) |
|
$ |
(895 |
) |
|
$ |
245,873 |
|
|
$ |
1,376,501 |
|
Components of comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,151 |
) |
|
|
(28,151 |
) |
|
Unrealized gain on available-for-sale securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104 |
|
|
|
|
|
|
|
|
|
|
|
104 |
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,245 |
) |
|
|
|
|
|
|
|
|
|
|
(4,245 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,292 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock under employee stock benefit plans
|
|
|
6,114 |
|
|
|
61 |
|
|
|
133,281 |
|
|
|
|
|
|
|
|
|
|
|
(8 |
) |
|
|
133,334 |
|
Stock dividend
|
|
|
70,259 |
|
|
|
703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(703 |
) |
|
|
|
|
Amortization of unearned compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
523 |
|
|
|
|
|
|
|
523 |
|
Repurchases of common stock
|
|
|
(4,820 |
) |
|
|
(48 |
) |
|
|
(165,013 |
) |
|
|
|
|
|
|
|
|
|
|
(39,359 |
) |
|
|
(204,420 |
) |
Income tax benefit related to employee stock transactions
|
|
|
|
|
|
|
|
|
|
|
46,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2002
|
|
|
143,559 |
|
|
|
1,436 |
|
|
|
1,194,173 |
|
|
|
(53,013 |
) |
|
|
(372 |
) |
|
|
177,652 |
|
|
|
1,319,876 |
|
Components of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
248,438 |
|
|
|
248,438 |
|
|
Unrealized gain on available-for-sale securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,023 |
|
|
|
|
|
|
|
|
|
|
|
1,023 |
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,111 |
|
|
|
|
|
|
|
|
|
|
|
82,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
331,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock under employee stock benefit plans
|
|
|
7,449 |
|
|
|
74 |
|
|
|
137,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,339 |
|
Amortization of unearned compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
372 |
|
|
|
|
|
|
|
372 |
|
Repurchases of common stock
|
|
|
(2,223 |
) |
|
|
(22 |
) |
|
|
(35,962 |
) |
|
|
|
|
|
|
|
|
|
|
(28,348 |
) |
|
|
(64,332 |
) |
Conversion of convertible debt
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Income tax benefit related to employee stock transactions
|
|
|
|
|
|
|
|
|
|
|
39,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2003
|
|
|
148,785 |
|
|
|
1,488 |
|
|
|
1,335,028 |
|
|
|
30,121 |
|
|
|
|
|
|
|
397,742 |
|
|
|
1,764,379 |
|
Components of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
370,619 |
|
|
|
370,619 |
|
|
Unrealized loss on available-for-sale securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,420 |
) |
|
|
|
|
|
|
|
|
|
|
(1,420 |
) |
|
Translation adjustment, net of tax of $13,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,783 |
|
|
|
|
|
|
|
|
|
|
|
96,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
465,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock under employee stock benefit plans
|
|
|
10,383 |
|
|
|
103 |
|
|
|
189,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189,154 |
|
Stock dividend
|
|
|
154,179 |
|
|
|
1,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,542 |
) |
|
|
|
|
Repurchases of common stock
|
|
|
(1,493 |
) |
|
|
(15 |
) |
|
|
(17,305 |
) |
|
|
|
|
|
|
|
|
|
|
(42,680 |
) |
|
|
(60,000 |
) |
Conversion of convertible debt
|
|
|
|
|
|
|
1 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
Income tax benefit related to employee stock transactions
|
|
|
|
|
|
|
|
|
|
|
66,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2004
|
|
|
311,854 |
|
|
$ |
3,119 |
|
|
$ |
1,573,466 |
|
|
$ |
125,484 |
|
|
$ |
|
|
|
$ |
724,139 |
|
|
$ |
2,426,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying Summary of Significant Accounting Policies and
Notes to Consolidated Financial Statements are an integral part
of these statements.
46
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands) | |
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
370,619 |
|
|
$ |
248,438 |
|
|
$ |
(28,151 |
) |
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of property, equipment and
leasehold improvements
|
|
|
75,886 |
|
|
|
56,794 |
|
|
|
38,777 |
|
|
|
Amortization of debt issuance costs
|
|
|
3,165 |
|
|
|
3,168 |
|
|
|
1,300 |
|
|
|
Amortization of discounts and premiums on investments, net
|
|
|
(7,142 |
) |
|
|
5,103 |
|
|
|
1,155 |
|
|
|
Amortization and write-off of acquired product rights
|
|
|
42,363 |
|
|
|
34,834 |
|
|
|
32,685 |
|
|
|
Amortization of goodwill and other intangibles from acquisitions
|
|
|
2,954 |
|
|
|
2,787 |
|
|
|
198,950 |
|
|
|
Impairment of equity investments
|
|
|
3,047 |
|
|
|
750 |
|
|
|
|
|
|
|
Write-off of equipment and leasehold improvements
|
|
|
2,052 |
|
|
|
4,569 |
|
|
|
7,232 |
|
|
|
Write-off of acquired in-process research and development
|
|
|
3,710 |
|
|
|
4,700 |
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
27,181 |
|
|
|
(4,393 |
) |
|
|
13,482 |
|
|
|
Gain on divestiture of the web access management product line
|
|
|
|
|
|
|
|
|
|
|
(392 |
) |
|
|
Income tax benefit from stock options
|
|
|
66,682 |
|
|
|
39,550 |
|
|
|
46,230 |
|
|
|
Net change in assets and liabilities, excluding effects of
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
(82,687 |
) |
|
|
(47,732 |
) |
|
|
26,628 |
|
|
|
|
Inventories
|
|
|
(8,303 |
) |
|
|
2,223 |
|
|
|
(1,638 |
) |
|
|
|
Other current assets
|
|
|
(19,840 |
) |
|
|
(4,728 |
) |
|
|
6,000 |
|
|
|
|
Other long-term assets
|
|
|
(1,591 |
) |
|
|
(65 |
) |
|
|
174 |
|
|
|
|
Accounts payable
|
|
|
(7,846 |
) |
|
|
(14,304 |
) |
|
|
4,414 |
|
|
|
|
Accrued compensation and benefits
|
|
|
17,836 |
|
|
|
29,663 |
|
|
|
8,112 |
|
|
|
|
Deferred revenue
|
|
|
345,394 |
|
|
|
222,580 |
|
|
|
152,376 |
|
|
|
|
Other accrued expenses
|
|
|
16,221 |
|
|
|
(1,643 |
) |
|
|
23,066 |
|
|
|
|
Income taxes payable
|
|
|
53,602 |
|
|
|
18,896 |
|
|
|
(20,471 |
) |
|
|
|
Other long-term obligations
|
|
|
(698 |
) |
|
|
(1,952 |
) |
|
|
1,268 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
902,605 |
|
|
|
599,238 |
|
|
|
511,197 |
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(111,210 |
) |
|
|
(192,194 |
) |
|
|
(140,857 |
) |
|
Purchased intangibles
|
|
|
(61,166 |
) |
|
|
(2,200 |
) |
|
|
(1,060 |
) |
|
Payments for business acquisitions, net of cash acquired
|
|
|
(286,862 |
) |
|
|
(375,863 |
) |
|
|
(5,672 |
) |
|
Purchase of equity investments
|
|
|
(3,972 |
) |
|
|
(2,837 |
) |
|
|
(3,000 |
) |
|
Purchases of marketable securities
|
|
|
(4,729,249 |
) |
|
|
(2,394,557 |
) |
|
|
(1,311,697 |
) |
|
Proceeds from sales of marketable securities
|
|
|
4,675,161 |
|
|
|
2,071,365 |
|
|
|
642,802 |
|
|
Proceeds from (purchases of) long-term restricted investments
|
|
|
|
|
|
|
124,313 |
|
|
|
(49,779 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(517,298 |
) |
|
|
(771,973 |
) |
|
|
(869,263 |
) |
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from issuance of convertible subordinated notes
|
|
|
|
|
|
|
|
|
|
|
584,625 |
|
|
Repurchases of common stock
|
|
|
(60,000 |
) |
|
|
(64,332 |
) |
|
|
(204,420 |
) |
|
Net proceeds from sale of common stock
|
|
|
189,154 |
|
|
|
137,711 |
|
|
|
133,857 |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
129,154 |
|
|
|
73,379 |
|
|
|
514,062 |
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuations on cash and cash equivalents
|
|
|
30,095 |
|
|
|
14,725 |
|
|
|
(4,682 |
) |
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
544,556 |
|
|
|
(84,631 |
) |
|
|
151,314 |
|
Beginning cash and cash equivalents
|
|
|
294,606 |
|
|
|
379,237 |
|
|
|
227,923 |
|
|
|
|
|
|
|
|
|
|
|
Ending cash and cash equivalents
|
|
$ |
839,162 |
|
|
$ |
294,606 |
|
|
$ |
379,237 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid (net of refunds) during the year
|
|
$ |
34,955 |
|
|
$ |
61,628 |
|
|
$ |
34,240 |
|
Interest expense paid during the year
|
|
$ |
18,000 |
|
|
$ |
18,350 |
|
|
$ |
|
|
The accompanying Summary of Significant Accounting Policies and
Notes to Consolidated Financial Statements are an integral part
of these statements.
47
SYMANTEC CORPORATION
Summary of Significant Accounting Policies
Business
Symantec Corporation (we, us, and
our refer to Symantec Corporation and all of its
subsidiaries) is the global leader in information security
providing a broad range of software, appliances and services
designed to help individuals, small and mid-sized businesses,
and large enterprises secure and manage their IT infrastructure.
Symantecs Norton brand of products is the worldwide leader
in consumer security and problem-solving solutions. Founded in
1982, we have offices in 38 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 three years ended March 31, 2004, we acquired
the following businesses:
|
|
|
|
|
ON Technology Corp. in the March 2004 quarter |
|
|
|
PowerQuest, Inc. and SafeWeb, Inc. in the December 2003 quarter; |
|
|
|
Nexland, Inc. in the September 2003 quarter; |
|
|
|
Riptech, Inc., Recourse Technologies, Inc., SecurityFocus, Inc.,
and Mountain Wave, Inc. in the September 2002 quarter; and |
|
|
|
Lindner & Pelc Consult GmbH and Foster-Melliar
Limiteds enterprise security management division in the
September 2001 quarter. |
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.
In August 2001, we sold assets and transferred liabilities and
employees related to our Web Access Management product line to
PassGo Technologies, Ltd. and agreed to license them the related
technology for a period of four years through August 2005. In
December 1999, we licensed substantially all of the ACT! Product
line technology to Interact Commerce Corporation for a period of
four years through December 2003.
See Note 3 of the Notes to Consolidated Financial
Statements for further discussion.
Fiscal Years
We have a 52/53-week fiscal accounting year. Accordingly, all
references as of and for the periods ended March 31, 2004,
2003 and 2002 reflect amounts as of and for the periods ended
April 2, 2004, March 28, 2003, and March 29,
2002, respectively. The fiscal accounting year ended
April 2, 2004, comprised of 53 weeks of operations
while the fiscal accounting years ended March 28, 2003 and
March 29, 2002 each comprised of 52 weeks of
operations. The fiscal accounting year ending April 1, 2005
will comprise 52 weeks of operations.
Symantec share and per share amounts in the Consolidated
Statements of Operations and the Notes to Consolidated Financial
Statements retroactively reflect the two-for-one stock split
effected as a stock dividend, which occurred on
November 19, 2003. This amendment on Form 10-K/A does
not reflect the two-for-one stock split, effected as a stock
dividend, which occurred on November 30, 2004.
48
SYMANTEC CORPORATION
Summary of Significant Accounting
Policies (Continued)
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 consolidated 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 included as a component of stockholders equity
in accumulated other comprehensive income (loss). 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 (loss). Deferred
tax assets (liabilities) are established on the cumulative
translation adjustment attributable to unremitted foreign
earnings that are not intended to be indefinitely reinvested.
Revenue Recognition
We derive revenue primarily from sales of packaged products,
perpetual license agreements, product maintenance and services,
and recognize this revenue when the following conditions have
been met:
|
|
|
|
|
persuasive evidence of an arrangement exists; |
|
|
|
passage of title occurs; |
|
|
|
delivery has occurred or services have been rendered; |
|
|
|
if applicable, customer acceptance has been received; |
|
|
|
collection of a fixed or determinable license fee is considered
probable; and |
|
|
|
if appropriate, reasonable estimates of future product returns
have been made. |
We sell packaged software products through a multi-tiered
distribution channel. We also sell electronic download and
packaged products, via the Internet. We separately sell annual
content update subscriptions directly to end-users primarily via
the Internet. We do not recognize package product revenue on all
distribution and reseller channel inventory in excess of
specified inventory levels in these channels. We defer the
portion of revenue from package and electronic download products
related to content updates. Revenue related to content updates
is deferred and recognized ratably over the year that such
updates are provided. We offer the right of return of our
products under various policies and programs with our
distributors, resellers and end-user customers. We estimate and
record reserves for end-user product returns as an offset to
revenue.
We offer channel and end-user rebates for products within our
Enterprise Security, Enterprise Administration and Consumer
Products segments. Our estimated reserves for channel volume
incentive rebates are based on distributors and
resellers actual performance against the terms and
conditions of volume incentive rebate programs, which are
typically entered into quarterly. Our reserves for end-user
rebates are estimated on the terms and conditions of the
promotional program, actual sales during the promotion, amount
of actual redemptions received, historical redemption trends by
product and by type of promotional program and the value of the
rebate. We estimate and record reserves for channel and end-user
rebates, and we account for these reserves as an offset to
revenue.
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, for which the related revenue is
deferred and recognized ratably over the period of the
agreements.
49
SYMANTEC CORPORATION
Summary of Significant Accounting
Policies (Continued)
Our services include managed security services, consulting and
education. We recognize managed security services revenue
ratably over the period that such contracted services are
provided. We recognize consulting services revenue as services
are performed or upon written acceptance from customers, if
applicable. We recognize education services revenue as services
are performed.
In arrangements that include multiple elements, including
perpetual software licenses and maintenance and/or services and
packaged products with content updates, we allocate and defer
revenue for the undelivered items based on vendor-specific
objective evidence, or VSOE, of fair value of the undelivered
elements, and recognize the difference between the total
arrangement fee and the amount deferred for the undelivered
items as revenue. Our deferred revenue consists primarily of the
unamortized balance of enterprise product maintenance and
consumer product content updates.
VSOE of each element is based on the price for which the
undelivered element is sold separately. We determine fair value
of the undelivered elements based on historical evidence of our
stand-alone sales of these elements to third parties. When VSOE
does not exist for undelivered items such as maintenance, then
the entire arrangement fee is recognized ratably over the
performance period.
Cash Equivalents and Short-term Investments
We consider investments in highly liquid instruments purchased
with an original maturity of 90 days or less to be cash
equivalents. Our short-term investments, classified as
available-for-sale as of the respective balance sheet dates, are
reported at fair value with unrealized gains and losses, net of
tax, included in Accumulated other comprehensive income (loss)
within Stockholders Equity on the Consolidated Balance
Sheet. Realized gains and losses and declines in value judged to
be other than temporary on available-for-sale securities are
included in Other income (expense), net in the Consolidated
Statement of Operations. The cost of securities sold is based
upon the specific identification method.
Trade Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount
and are not interest bearing. We maintain an allowance for
doubtful accounts to reserve for potentially uncollectible trade
receivables. We also review our trade receivables by aging
category to identify specific customers with known disputes or
collectibility issues. We exercise judgment when determining the
adequacy of these reserves as we evaluate historical bad debt
trends, general economic conditions in the United States and
internationally, and changes in customer financial conditions.
Equity Investments
We have equity investments in privately held companies for
business and strategic purposes. These investments are included
in Other long-term assets on the Consolidated Balance Sheet and
are accounted for under the cost method as we do not have
significant influence over these investees. Under the cost
method, the investment is recorded at its initial cost and is
periodically reviewed for impairment. We regularly review our
investees actual and forecasted operating results,
financial position and liquidity, and business and industry
factors in assessing whether a decline in value of an equity
investment has occurred that is other than temporary. When such
a decline in value is identified, the fair value of the equity
investment is estimated based on the preceding factors and an
impairment loss is recognized in Other income (expense), net in
the Consolidated Statement of Operations.
Derivative Financial Instruments
We utilize some natural hedging to mitigate our foreign currency
exposures and we manage certain residual exposures through the
use of one-month forward foreign exchange contracts. We enter
into forward
50
SYMANTEC CORPORATION
Summary of Significant Accounting
Policies (Continued)
foreign exchange contracts with high-quality financial
institutions primarily to minimize currency exchange risks
associated with certain balance sheet positions denominated in
foreign currencies. Gains and losses on the contracts are
included in Other income (expense), net in the Consolidated
Statement of Operations in the period that gains and losses on
the underlying transactions are recognized. The gains and losses
on the contracts generally offset the gains and losses on the
underlying transactions. The fair value of forward foreign
exchange contracts approximates cost due to the short maturity
periods.
Inventories
Inventories are valued at the lower of cost or market. Cost is
principally determined using currently adjusted standards, which
approximate actual cost on a first-in, first-out basis.
Inventory consists of raw materials and finished goods.
Property, Equipment and Leasehold Improvements
Property, 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
as follows:
|
|
|
|
|
computer hardware and software two to three years; |
|
|
|
office furniture and equipment three to five years; |
|
|
|
leasehold improvements the shorter of the lease term
or seven years; and |
|
|
|
buildings twenty five to thirty years. |
Acquired Product Rights
Acquired product rights are comprised of purchased product
rights, technologies, databases and revenue related order
backlog and contracts from acquired companies. Acquired product
rights are stated at cost less accumulated amortization.
Amortization of acquired product rights is provided on a
straight-line basis over the estimated useful lives of the
respective assets, generally one to five years, and is primarily
included in Cost of revenues in the Consolidated Statements of
Operations. On April 1, 2002, we adopted Statement of
Financial Accounting Standards, or SFAS, No. 142,
Goodwill and Other Intangibles. As a result, the net
balance of workforce-in-place, that was previously included in
acquired product rights, was reclassified to goodwill and is no
longer amortized, but is subject to impairment testing at least
annually.
Goodwill and Other Intangible Assets
We account for goodwill and other intangible assets in
accordance with SFAS No. 142. SFAS No. 142
requires that goodwill and identifiable intangible assets with
indefinite useful lives no longer be amortized, but instead be
tested for impairment at least annually. SFAS No. 142
also requires that intangible assets with estimable useful lives
be amortized over their respective estimated useful lives and
reviewed for impairment in accordance with
SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. On April 1, 2002, we
ceased the amortization of goodwill, in accordance with
SFAS No. 142, and will test goodwill annually for
impairment or more frequently if events and circumstances
warrant.
Long-Lived Assets
On April 1, 2002, we adopted SFAS No. 144 which
requires that long-lived and intangible assets, including
property, equipment, leasehold improvements and acquired product
rights, be 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
51
SYMANTEC CORPORATION
Summary of Significant Accounting
Policies (Continued)
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. Assets to be
disposed of would be separately presented in the balance sheet
and reported at the lower of the carrying amount or fair value
less costs to sell, and no longer depreciated. The assets and
liabilities of a disposal group classified as held for sale
would be presented separately in the appropriate asset and
liability sections of the balance sheet. The adoption of this
standard did not have an effect on our financial position or our
operating results.
Income Taxes
The provision for income taxes is computed using the liability
method, under which deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary
differences between the financial reporting and tax bases of
assets and liabilities and of net operating loss and tax credit
carryforwards. Deferred tax assets are reduced by a valuation
allowance when it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
Net Income (Loss) Per Share
Basic net income (loss) per share is computed using the weighted
average number of common shares outstanding during the periods.
Diluted net income (loss) per share is computed using the
weighted average number of common shares outstanding and
potentially dilutive common shares outstanding during the
periods. Potentially dilutive common shares include the assumed
conversion of all of the outstanding convertible subordinated
notes and assumed exercising of stock options using the treasury
stock method, if dilutive in the period. Potentially dilutive
common shares are excluded in net loss periods, as their effect
would be antidilutive.
Stock-Based Compensation
We elected to follow APB No. 25, Accounting for Stock
Issued to Employees, in accounting for our employee stock
options because 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.
We account for stock-based compensation 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 No. 44, Accounting for
Certain Transactions Involving Stock Compensation, an
interpretation of APB No. 25. Our stock plans are described
in Note 12. 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 consolidated financial
statements.
52
SYMANTEC CORPORATION
Summary of Significant Accounting
Policies (Continued)
Pro forma information regarding net income (loss) and net income
(loss) 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 Plan, collectively called options,
granted subsequent to March 31, 1995 under the fair value
method of that statement. The following table illustrates the
effect on net income (loss) and net income (loss) per share as
if we had applied the fair value recognition provisions of
SFAS No. 123 to stock-based employee compensation for
each of the three years ended March 31, 2004, 2003 and 2002:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
Net income (loss), as reported
|
|
$ |
370,619 |
|
|
$ |
248,438 |
|
|
$ |
(28,151 |
) |
|
Add: Amortization of unearned compensation included in reported
net income, net of tax
|
|
|
|
|
|
|
253 |
|
|
|
|
|
|
Less: Stock-based employee compensation expense excluded from
reported net income (loss), net of tax
|
|
|
(98,083 |
) |
|
|
(89,036 |
) |
|
|
(79,141 |
) |
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss)
|
|
$ |
272,536 |
|
|
$ |
159,655 |
|
|
$ |
(107,292 |
) |
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$ |
1.21 |
|
|
$ |
0.85 |
|
|
$ |
(0.10 |
) |
|
Pro forma
|
|
$ |
0.89 |
|
|
$ |
0.55 |
|
|
$ |
(0.37 |
) |
Diluted net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$ |
1.07 |
|
|
$ |
0.77 |
|
|
$ |
(0.10 |
) |
|
Pro forma
|
|
$ |
0.81 |
|
|
$ |
0.53 |
|
|
$ |
(0.37 |
) |
The fair value of options granted during fiscal 2004, 2003 and
2002 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 | |
|
Employee Stock | |
|
|
Options | |
|
Purchase Plans | |
|
|
| |
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Expected life (years)
|
|
|
5.14 |
|
|
|
5.23 |
|
|
|
5.62 |
|
|
|
0.50 |
|
|
|
0.50 |
|
|
|
0.50 |
|
Expected volatility
|
|
|
0.69 |
|
|
|
0.72 |
|
|
|
0.76 |
|
|
|
0.46 |
|
|
|
0.59 |
|
|
|
0.80 |
|
Risk free interest rate
|
|
|
3.00 |
% |
|
|
3.12 |
% |
|
|
4.60 |
% |
|
|
1.00 |
% |
|
|
1.35 |
% |
|
|
2.70 |
% |
The weighted average estimated fair values of employee stock
options granted during fiscal 2004, 2003 and 2002 were $17.45,
$11.18 and $10.33 per share, respectively. The weighted
average estimated fair value of employee stock purchase rights
granted under the Employee Stock Purchase Plan during fiscal
2004, 2003 and 2002 were $10.18, $8.93 and $7.28, respectively.
For purposes of pro forma disclosure, the estimated fair value
of the options was 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 Plan. Options assumed as a result of our acquisition of
AXENT Technologies 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 were included in the
pro forma information above.
53
SYMANTEC CORPORATION
Summary of Significant Accounting
Policies (Continued)
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
(loss) is derived from international sales and independent
agents and distributors. Fluctuations of the United States
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 and trade accounts
receivable. Our investment portfolio is diversified and consists
of investment grade securities. Our investment policy limits the
amount of credit risk exposure to any one issuer and in any one
country. We are exposed to credit risks in the event of default
by the issuers to the extent of the amount recorded on the
balance sheet. The credit risk in our trade accounts receivable
is substantially mitigated by our credit evaluation process,
reasonably short collection terms and the geographical
dispersion of sales transactions. We maintain reserves for
potential credit losses and such losses have been within
managements expectations.
Legal Expenses
We accrue estimated legal expenses 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 strategy regarding these lawsuits; |
|
|
|
deductible amounts under our insurance policies; and |
|
|
|
past experiences with similar lawsuits. |
Accumulated Other Comprehensive Income
We report comprehensive income or loss in accordance with the
provisions of SFAS No. 130, Reporting Comprehensive
Income, which establishes standards for reporting
comprehensive income and its components in the financial
statements. The components of other comprehensive income (loss)
consist of unrealized gains and losses on marketable securities,
net of taxes and foreign currency translation adjustments, net
of taxes. Unrealized gains and losses on our available-for-sale
securities is immaterial for all periods presented.
Comprehensive income (loss) and the components of accumulated
other comprehensive income are presented in the accompanying
Consolidated Statements of Stockholders Equity.
Newly Adopted and Recently Issued Accounting
Pronouncements
In August 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. Under
SFAS No. 143, the fair value of a liability for an
asset retirement obligation must be recognized in the period in
which it is incurred if a reasonable estimate of fair value can
be made. The associated asset retirement costs are capitalized
as part of the carrying amount of the long-lived asset.
SFAS No. 143 became effective for
54
SYMANTEC CORPORATION
Summary of Significant Accounting
Policies (Continued)
Symantec beginning in the first quarter of fiscal 2004 and the
adoption of this statement did not have a material impact on our
financial position or results of operations.
In December 2003, the FASB revised Interpretation No. 46,
Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51 (FIN 46R),
which addresses how a business enterprise should evaluate
whether it has a controlling interest in an entity through means
other than voting rights and accordingly should consolidate the
entity. FIN 46R replaces FASB Interpretation No. 46 ,
which was issued in January 2003. Before concluding that it is
appropriate to apply the voting interest consolidation model to
an entity, an enterprise must first determine that the entity is
not a variable interest entity or a special purpose entity.
FIN 46R became effective for Symantec during fiscal 2004
and the adoption of this statement did not have a material
impact on our financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, which
provides guidance for classification and measurement of certain
financial instruments with characteristics of both liabilities
and equity. SFAS No. 150 became effective for
financial instruments entered into or modified after
May 31, 2003, and otherwise became effective for Symantec
beginning the second quarter of fiscal 2004 and the adoption of
this statement did not have a material impact on our financial
position or results of operations.
Reclassifications
Certain previously reported amounts have been reclassified to
conform to the current financial statement presentation with no
impact on net income (loss). See Note 17 and Note 18
of the Notes to Consolidated Financial Statements for further
information regarding the reclassifications.
55
SYMANTEC CORPORATION
Notes to Consolidated Financial Statements
|
|
Note 1. |
Consolidated Balance Sheet Information |
|
|
|
|
|
|
|
|
|
|
|
March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(In thousands) | |
Cash, cash equivalents and short-term investments:
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
174,389 |
|
|
$ |
111,687 |
|
Cash equivalents
|
|
|
664,773 |
|
|
|
182,919 |
|
|
|
|
|
|
|
|
|
|
|
839,162 |
|
|
|
294,606 |
|
Short-term investments
|
|
|
1,571,169 |
|
|
|
1,411,052 |
|
|
|
|
|
|
|
|
|
|
$ |
2,410,331 |
|
|
$ |
1,705,658 |
|
|
|
|
|
|
|
|
Trade accounts receivable, net:
|
|
|
|
|
|
|
|
|
Receivables
|
|
$ |
264,826 |
|
|
$ |
159,417 |
|
Less: allowance for doubtful accounts
|
|
|
(5,674 |
) |
|
|
(9,753 |
) |
|
|
|
|
|
|
|
|
|
$ |
259,152 |
|
|
$ |
149,664 |
|
|
|
|
|
|
|
|
Property, equipment and leasehold improvements, net:
|
|
|
|
|
|
|
|
|
Computer hardware and software
|
|
$ |
378,866 |
|
|
$ |
306,679 |
|
Office furniture and equipment
|
|
|
74,120 |
|
|
|
65,535 |
|
Buildings
|
|
|
148,782 |
|
|
|
142,915 |
|
Land
|
|
|
50,688 |
|
|
|
29,362 |
|
Leasehold improvements
|
|
|
77,040 |
|
|
|
54,483 |
|
|
|
|
|
|
|
|
|
|
|
729,496 |
|
|
|
598,974 |
|
Less: accumulated depreciation and amortization
|
|
|
(351,129 |
) |
|
|
(265,699 |
) |
|
|
|
|
|
|
|
|
|
$ |
378,367 |
|
|
$ |
333,275 |
|
|
|
|
|
|
|
|
|
|
Note 2. |
Sales and Marketing Expense Information |
Technical support costs, included in Sales and marketing, relate
to the cost of providing free post-contract support and were
accrued at the time of product sale. Technical support costs
included in Sales and marketing in the Consolidated Statements
of Operations for fiscal 2004, 2003 and 2002 were
$20 million, $20 million and $16 million,
respectively.
Advertising costs are charged to operations as incurred.
Advertising costs included in Sales and marketing in the
Consolidated Statements of Operations for fiscal 2004, 2003, and
2002 were $128 million, $108 million and
$93 million (unaudited), respectively.
|
|
Note 3. |
Acquisitions and Divestitures |
During fiscal 2004, we acquired two public and two
privately-held companies for a total of $311 million in
cash, including acquisition-related expense resulting from
financial advisory, legal and accounting services and duplicate
sites and severance costs. Approximately $5 million of
acquisition-related expenses remains as an
56
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
accrual as of March 31, 2004. We expect that the
acquisition of these emerging technologies will strengthen our
competitive position in the enterprise administration and
enterprise security markets. We recorded goodwill in connection
with each of these acquisitions. In each acquisition, goodwill
resulted primarily from our expectation of synergies from the
integration of the acquired companys technology with our
technology and the acquired companys access to our global
distribution network. In addition, each acquired company
provided a knowledgeable and experienced workforce. The results
of operations of the acquired companies have been included in
our operations as of the dates of acquisition. ON Technology
Corp. and PowerQuest, Inc. are included in our Enterprise
Administration segment, and SafeWeb, Inc. and Nexland, Inc. are
included in our Enterprise Security segment. For details of the
purchase price allocations, refer to Table 3.1 below.
On February 13, 2004, we acquired ON Technology, a global
provider of enterprise infrastructure management solutions, for
$109 million in cash, including $7 million of
acquisition-related expenses. We expect the acquisition to
strengthen our competitive position in the enterprise
administration market by allowing us to provide a unified
solution that will help customers create a secure enterprise
infrastructure. ON Technologys software distribution and
configuration management capabilities will be a critical
component to the end-to-end system Symantec is establishing to
help customers build, manage and protect their IT
infrastructures.
On December 5, 2003, we acquired PowerQuest, a global
provider of automated deployment and recovery solutions for
corporations and individual users, for $154 million in
cash, including $4 million of acquisition-related expenses.
We expect the acquisition to strengthen our competitive position
in the enterprise administration market by enabling us to
deliver solutions that allow customers to build, manage and
protect their IT infrastructures with end-to-end security
management capabilities.
On October 15, 2003, we acquired SafeWeb, a provider of SSL
VPN appliances, for $27 million in cash, including minimal
acquisition-related expenses. We expect the acquisition to
strengthen our competitive position in the enterprise security
market by allowing us to offer SafeWebs Secure Extranet
Appliance technology designed to reduce the cost and complexity
of deploying, managing and maintaining secure access to remote
users.
On July 17, 2003, we acquired Nexland, an Internet security
company whose Internet Protocol based networking appliances are
installed at enterprise branches and telecommuter offices
worldwide, for $21 million in cash, including minimal
acquisition-related expenses. We expect the acquisition to
strengthen our competitive position in the enterprise security
solutions market as it is expected to allow us to further
develop Symantec integrated solutions.
57
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
Table 3.1: Fiscal Year 2004 Purchase Price Allocations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred | |
|
|
|
|
|
|
|
|
Acquired | |
|
|
|
|
|
Tax | |
|
Other Assets | |
|
|
Purchase | |
|
Acquired | |
|
Product | |
|
|
|
Other | |
|
(Liabilities) | |
|
(Liabilities), | |
|
|
Price | |
|
IPR&D | |
|
Rights | |
|
Goodwill | |
|
Intangibles | |
|
Assets, Net | |
|
Net | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
ON Technology
|
|
$ |
109,356 |
|
|
$ |
1,110 |
|
|
$ |
7,410 |
|
|
$ |
86,016 |
|
|
$ |
5,660 |
|
|
$ |
(5,260 |
) |
|
$ |
14,420 |
|
PowerQuest
|
|
|
154,347 |
|
|
|
1,600 |
|
|
|
19,600 |
|
|
|
119,922 |
|
|
|
2,400 |
|
|
|
(5,300 |
) |
|
|
16,125 |
|
SafeWeb
|
|
|
26,569 |
|
|
|
|
|
|
|
1,000 |
|
|
|
21,603 |
|
|
|
|
|
|
|
3,600 |
|
|
|
366 |
|
Nexland
|
|
|
20,891 |
|
|
|
1,000 |
|
|
|
1,000 |
|
|
|
20,791 |
|
|
|
60 |
|
|
|
547 |
|
|
|
(2,507 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
311,163 |
|
|
$ |
3,710 |
|
|
$ |
29,010 |
|
|
$ |
248,332 |
|
|
$ |
8,120 |
|
|
$ |
(6,413 |
) |
|
$ |
28,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our fiscal 2004 acquisitions were considered immaterial for pro
forma financial disclosure, both individually and in the
aggregate.
|
|
|
Fiscal Year 2003 Acquisitions |
During fiscal 2003, we acquired four privately-held companies
for a total of $382 million in cash, including
acquisition-related expenses resulting from financial advisory,
legal and accounting services and duplicate sites and severance
costs. These acquisitions helped strengthen our competitive
position in the enterprise security solutions and managed
security services markets. We recorded goodwill in connection
with each of these acquisitions. In each acquisition, goodwill
resulted primarily from our expectation of synergies from the
integration of the acquired companys technology with our
technology and the acquired companys access to our global
distribution network. In addition, each acquired company
provided a knowledgeable and experienced workforce. The results
of operations of the acquired companies have been included in
our operations as of the dates of acquisition. These acquired
companies are included in our Enterprise Security segment, with
the exception of Riptech, Inc., which is included in our
Services segment. For details of the purchase price allocations,
including subsequent adjustments, see Table 3.2 below.
On August 19, 2002, we acquired Riptech, a provider of
scalable, real-time managed security services that protect
clients through advanced outsourced security monitoring and
professional services, for $148 million in cash, including
$3 million of acquisition-related expenses. During the
12 months subsequent to the acquisition, we revised
estimates related to certain liabilities, and as a result, we
decreased the purchase price and goodwill by $1 million.
On August 19, 2002, we acquired Recourse Technologies,
Inc., a provider of security threat management solutions that
detect, analyze and respond to both known and novel threats,
including intrusions, internal attacks and denial of service
attacks, for $139 million in cash, including
$3 million of acquisition-related expenses. During the
12 months subsequent to the acquisition, we revised
estimates related to certain liabilities, and as a result, we
decreased the purchase price and goodwill by $1 million.
On August 5, 2002, we acquired SecurityFocus, Inc., a
provider of enterprise security threat management systems,
providing global early warning of cyber attacks, customized and
comprehensive threat alerts, and countermeasures to prevent
attacks before they occur, for $76 million in cash,
including minimal acquisition-
58
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
related expenses. During the 12 months subsequent to the
acquisition, we revised estimates related to certain
liabilities, and as a result, we decreased the purchase price
and goodwill by an immaterial amount.
On July 2, 2002, we acquired Mountain Wave, Inc., a
provider of automated attack sensing and warning software and
services for real-time enterprise security operations
management, for $21 million in cash, including minimal
acquisition-related expenses.
The following table summarizes the allocation of the purchase
price, adjusted for revised estimates related to certain
liabilities, for each of the acquisitions during fiscal 2003 (in
thousands):
Table 3.2: Fiscal Year 2003 Purchase Price Allocations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired | |
|
|
|
|
|
Deferred | |
|
Other Assets | |
|
|
Purchase | |
|
Acquired | |
|
Product | |
|
|
|
Other | |
|
Tax | |
|
(Liabilities), | |
|
|
Price | |
|
IPR&D | |
|
Rights | |
|
Goodwill | |
|
Intangibles | |
|
Assets, Net | |
|
Net | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Riptech
|
|
$ |
147,446 |
|
|
$ |
2,100 |
|
|
$ |
12,700 |
|
|
$ |
116,543 |
|
|
$ |
|
|
|
$ |
7,974 |
|
|
$ |
8,129 |
|
Recourse
|
|
|
137,555 |
|
|
|
1,000 |
|
|
|
19,000 |
|
|
|
108,546 |
|
|
|
2,164 |
|
|
|
9,090 |
|
|
|
(2,245 |
) |
SecurityFocus
|
|
|
76,177 |
|
|
|
1,600 |
|
|
|
6,840 |
|
|
|
64,091 |
|
|
|
2,100 |
|
|
|
503 |
|
|
|
1,043 |
|
Mountain Wave
|
|
|
20,698 |
|
|
|
|
|
|
|
2,000 |
|
|
|
17,320 |
|
|
|
|
|
|
|
1,740 |
|
|
|
(362 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
381,876 |
|
|
$ |
4,700 |
|
|
$ |
40,540 |
|
|
$ |
306,500 |
|
|
$ |
4,264 |
|
|
$ |
19,307 |
|
|
$ |
6,565 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our fiscal 2003 acquisitions were considered immaterial for pro
forma financial disclosure, both individually and in the
aggregate.
|
|
|
Fiscal Year 2002 Acquisitions |
During fiscal 2002, we acquired one privately-held company and
one company division for a total of $4 million in cash,
which was recorded as goodwill in the Consolidated Balance
Sheet. We acquired Lindner & Pelc Consult GmbH, a
security services and implementation company in Berlin, Germany,
for $2 million in cash and the enterprise security
management division of Foster-Melliar Limited, an IT services
company located in Johannesburg, South Africa for
$2 million in cash. The results of operations of the
acquired company and division have been included in our
operations as of the dates of acquisition. These acquired
companies are included in our Services segment.
Under the terms of both acquisition agreements, we were liable
for contingency payments based on targeted future sales through
fiscal 2004. During fiscal 2004, 2003 and 2002, we paid
insignificant amounts of contingency payments in accordance with
these agreements, which was recorded as compensation expense.
|
|
|
Accounting for Intangible Assets |
In connection with our acquisitions described above, we wrote
off acquired in-process research and development of
$4 million and $5 million in fiscal 2004 and 2003,
respectively, because the acquired technologies had not reached
technological feasibility and had no alternative uses. The
efforts required to develop the acquired in-process technology
principally related to the completion of all planning, design,
development and test activities that were necessary to establish
that the product or service could be produced to meet its design
specifications, including features, functions and performance.
We determined the fair value of the acquired in-process
technology for these purchases by estimating the projected cash
flows related to the projects and future revenues to be earned
upon commercialization of the products. We discounted the
59
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
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.
In connection with our acquisitions described above, the amounts
allocated to acquired product rights are being amortized to cost
of revenues over their useful lives of one to five years.
In connection with our acquisitions described above, the amounts
allocated to other intangibles include customer relationships,
tradenames, and customer lists, and are being amortized to
operating expenses over their useful lives of one to seven years.
See Note 4 of the Notes to Consolidated Financial
Statements for a schedule of other intangibles as of
March 31, 2004 and 2003, including the value and useful
life by category.
|
|
|
Web Access Management Product Line |
On August 24, 2001, we sold assets and transferred
liabilities and employees related to our Web Access Management
product line to PassGo Technologies, Ltd. We also entered into
an exclusive license and option agreement with PassGo whereby
they licensed our Web Access Management technology products. In
consideration for the license, PassGo is required to pay us
quarterly royalties based on their net revenue starting at 30%
and declining to 10% over a four-year period through August
2005. Because the royalties are not guaranteed and the quarterly
amounts to be received are not determinable until earned, we
recognized these royalties as payments were due. The pre-tax
gain on the divestiture, the subsequent royalties received, and
the amortization of the developed technology related to the Web
Access Management products has been recorded in Income, net of
expense, from sale of technologies and product lines in the
Consolidated Statements of Operations and has been immaterial.
During fiscal 2003, we wrote off $3 million of developed
technology related to the Web Access Management product line due
to impairment, which was also recorded in Income, net of
expense, from sale of technologies and product lines in the
Consolidated Statements of Operations. Income and expenses
related to Web Access Management product line are provided in
Table 3.3 below on a net basis.
PassGo has an option to purchase the technology at a price
starting at $18.8 million and declining to
$3.3 million over a four-year period through August 2005.
As of March 31, 2004, PassGo had not exercised their option
to purchase.
On December 31, 1999, we licensed substantially all of the
ACT! product line technology to Interact Commerce Corporation
for a period of four years through December 2003. In
consideration for the license, Interact was required to pay us
quarterly royalty payments. Because the royalties were not
guaranteed and the quarterly amounts to be received were not
determinable until earned, we recognized these royalties as
payments were due. At the end of the four-year period, Interact
had an exclusive option to purchase the licensed technology from
us for $60 million less all royalties paid to us to date.
In December 2003, Interact
60
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
exercised its option and we transferred the technology to them.
Royalties, including the December 2003 purchase payment, are
provided in Table 3.3 below.
Table 3.3: Income, net of expense, from sale of technologies
and product lines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands) | |
ACT! product line
|
|
$ |
9,750 |
|
|
$ |
10,500 |
|
|
$ |
15,500 |
|
Web Access Management product line
|
|
|
(203 |
) |
|
|
(3,622 |
) |
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
Income, net of expense, from sale of technologies and product
lines
|
|
$ |
9,547 |
|
|
$ |
6,878 |
|
|
$ |
15,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 4. |
Goodwill, Acquired Product Rights and Other Intangible
Assets |
With the adoption of SFAS No. 142, we ceased the
amortization of goodwill and recharacterized acquired
workforce-in-place (and the related deferred tax liability) as
goodwill on April 1, 2002. Accordingly, there was no
amortization of goodwill and acquired workforce-in-place during
fiscal 2004 and 2003.
The following table presents a reconciliation of previously
reported net income (loss) and net income (loss) per share to
the amounts adjusted for the exclusion of the amortization of
goodwill and acquired workforce-in-place, net of the related
income tax effect:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
|
|
|
|
(Unaudited) | |
|
|
(In thousands, except per share data) | |
Net income (loss), as reported
|
|
$ |
370,619 |
|
|
$ |
248,438 |
|
|
$ |
(28,151 |
) |
Amortization of goodwill and acquired workforce-in-place, net of
tax benefit of $0, $0 and $2,745 (unaudited), respectively
|
|
|
|
|
|
|
|
|
|
|
194,061 |
|
|
|
|
|
|
|
|
|
|
|
Net income, as adjusted
|
|
$ |
370,619 |
|
|
$ |
248,438 |
|
|
$ |
165,910 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share basic, as reported
|
|
$ |
1.21 |
|
|
$ |
0.85 |
|
|
$ |
(0.10 |
) |
Amortization of goodwill and acquired workforce-in-place, net of
tax benefit
|
|
|
|
|
|
|
|
|
|
|
0.68 |
|
|
|
|
|
|
|
|
|
|
|
Net income per share basic, as adjusted
|
|
|
1.21 |
|
|
|
0.85 |
|
|
|
0.58 |
|
Effect of dilutive securities
|
|
|
(0.14 |
) |
|
|
(0.08 |
) |
|
|
(0.04 |
) |
|
|
|
|
|
|
|
|
|
|
Net income per share diluted, as adjusted
|
|
$ |
1.07 |
|
|
$ |
0.77 |
|
|
$ |
0.54 |
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute net income (loss) per share
basic, as adjusted
|
|
|
305,985 |
|
|
|
290,790 |
|
|
|
287,208 |
|
Shares issuable from assumed conversion of options
|
|
|
18,421 |
|
|
|
15,496 |
|
|
|
15,186 |
|
Shares issuable from assumed conversion of convertible
subordinated notes
|
|
|
35,149 |
|
|
|
35,150 |
|
|
|
15,160 |
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute net income per share diluted,
as adjusted
|
|
|
359,555 |
|
|
|
341,436 |
|
|
|
317,554 |
|
|
|
|
|
|
|
|
|
|
|
For fiscal year 2004, 2003, and 2002 net income per share
(diluted), as adjusted is calculated using the if-converted
method. Under this method, the numerator excludes the interest
expense from the 3% convertible
61
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
subordinated notes, net of income tax, of $14 million for
fiscal year 2004 and 2003 and $6 million (unaudited) for
fiscal year 2002.
Goodwill by operating segment was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise | |
|
Enterprise | |
|
|
|
Consumer | |
|
|
|
|
Security | |
|
Administration | |
|
Services | |
|
Products | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Balance, as of March 31, 2003
|
|
$ |
696,646 |
|
|
$ |
8,377 |
|
|
$ |
119,094 |
|
|
$ |
9,332 |
|
|
$ |
833,449 |
|
Goodwill acquired during fiscal 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ON Technology
|
|
|
|
|
|
|
86,016 |
|
|
|
|
|
|
|
|
|
|
|
86,016 |
|
PowerQuest
|
|
|
|
|
|
|
119,922 |
|
|
|
|
|
|
|
|
|
|
|
119,922 |
|
Safeweb
|
|
|
21,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,603 |
|
Nexland
|
|
|
20,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,791 |
|
Goodwill adjustments
|
|
|
(1,022 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,022 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, as of March 31, 2004
|
|
$ |
738,018 |
|
|
$ |
214,315 |
|
|
$ |
119,094 |
|
|
$ |
9,332 |
|
|
$ |
1,080,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill is tested for impairment on an annual basis. We
completed our annual goodwill impairment required by
SFAS No. 142 during the March 2004 quarter and
determined that there was no impairment of goodwill. We will
continue to test for impairment during the fourth quarter of
each year, or earlier if indicators of impairment exist.
Acquired product rights were subject to amortization as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(In thousands) | |
Acquired product rights, net:
|
|
|
|
|
|
|
|
|
Acquired product rights
|
|
$ |
255,818 |
|
|
$ |
165,642 |
|
Less: accumulated amortization
|
|
|
(134,880 |
) |
|
|
(92,517 |
) |
|
|
|
|
|
|
|
|
|
$ |
120,938 |
|
|
$ |
73,125 |
|
|
|
|
|
|
|
|
Other intangible assets are included in Other long-term assets
on the Consolidated Balance Sheets and were subject to
amortization as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2004 | |
|
|
| |
|
|
Gross Carrying | |
|
Accumulated | |
|
Net Carrying | |
|
|
Amount | |
|
Amortization | |
|
Amount | |
|
|
| |
|
| |
|
| |
Other Intangible Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer base
|
|
$ |
11,410 |
|
|
$ |
(4,229 |
) |
|
$ |
7,181 |
|
Tradename
|
|
|
6,910 |
|
|
|
(5,345 |
) |
|
|
1,565 |
|
Marketing related assets
|
|
|
2,100 |
|
|
|
(875 |
) |
|
|
1,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,420 |
|
|
$ |
(10,449 |
) |
|
$ |
9,971 |
|
|
|
|
|
|
|
|
|
|
|
62
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2004 | |
|
|
| |
|
|
Gross Carrying | |
|
Accumulated | |
|
Net Carrying | |
|
|
Amount | |
|
Amortization | |
|
Amount | |
|
|
| |
|
| |
|
| |
Other Intangible Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer base
|
|
$ |
4,200 |
|
|
$ |
(3,321 |
) |
|
$ |
879 |
|
Tradename
|
|
|
6,000 |
|
|
|
(3,825 |
) |
|
|
2,175 |
|
Marketing related assets
|
|
|
2,100 |
|
|
|
(350 |
) |
|
|
1,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
12,300 |
|
|
$ |
(7,496 |
) |
|
$ |
4,804 |
|
|
|
|
|
|
|
|
|
|
|
On August 6, 2003, we purchased a security technology
patent as part of a settlement in Hilgraeve, Inc. v.
Symantec Corporation. As part of the settlement, we also
received licenses to the remaining patents in Hilgraeves
portfolio. The total cost of purchasing the patent and licensing
additional patents was $63 million, which was paid in cash
in August 2003. Under the transaction, we recorded
$14 million of patent settlement costs in the June 2003
quarter that was deemed related to benefits received by us in
and prior to the June 2003 quarter. In addition, we recorded
$49 million for acquired product rights in the September
2003 quarter. The acquired product rights are being amortized to
cost of revenues over the remaining life of the primary patent,
which expires in June 2011.
On April 17, 2003, we purchased acquired product rights
related to Roxio Inc.s GoBack computer recovery software
business for $13 million in cash. The acquired product
rights will be amortized to cost of revenues over their
estimated useful life of three years.
During fiscal 2004, 2003 and 2002, amortization expense for
acquired product rights was $42 million, $32 million
and $32 million, respectively. Amortization of acquired
product rights was included in Cost of revenues in the
Consolidated Statements of Operations, except for an immaterial
amount related to the divested Web Access Management product
line, which was included in Income, net of expense, from sale of
technologies and product lines in the Statement of Operations.
The future annual amortization expense for acquired product
rights, based upon our existing acquired product rights and
their current useful lives, is estimated to be the following as
of March 31, 2004:
|
|
|
|
|
2005
|
|
$ |
41 million |
|
2006
|
|
$ |
27 million |
|
2007
|
|
$ |
19 million |
|
2008
|
|
$ |
12 million |
|
2009
|
|
$ |
8 million |
|
During fiscal 2004, 2003 and 2002, amortization expense for
other intangible assets was $3 million, $3 million and
$2 million, respectively. The future annual amortization
expense for other intangible assets, based upon our existing
intangible assets and their current useful lives, is estimated
to be the following as of March 31, 2004:
|
|
|
|
|
2005
|
|
$ |
3 million |
|
2006
|
|
$ |
2 million |
|
2007
|
|
$ |
2 million |
|
2008
|
|
$ |
1 million |
|
2009
|
|
$ |
1 million |
|
63
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
|
|
|
Cash Equivalents and Short-term Investments |
The estimated fair value of the cash equivalents and short-term
investments consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(In thousands) | |
Corporate securities
|
|
$ |
1,388,382 |
|
|
$ |
688,805 |
|
Taxable auction rate securities
|
|
|
328,400 |
|
|
|
258,250 |
|
Money market funds
|
|
|
149,269 |
|
|
|
151,307 |
|
Asset backed securities
|
|
|
|
|
|
|
176,860 |
|
Corporate bonds
|
|
|
95,201 |
|
|
|
63,448 |
|
United States government and government-sponsored securities
|
|
|
194,633 |
|
|
|
218,082 |
|
Bank securities and deposits
|
|
|
80,057 |
|
|
|
37,219 |
|
|
|
|
|
|
|
|
|
Total available-for-sale and trading investments
|
|
|
2,235,942 |
|
|
|
1,593,971 |
|
Less: amounts classified as cash equivalents
|
|
|
(664,773 |
) |
|
|
(182,919 |
) |
|
|
|
|
|
|
|
|
|
$ |
1,571,169 |
|
|
$ |
1,411,052 |
|
|
|
|
|
|
|
|
The estimated fair value of cash equivalents and short-term
investments by contractual maturity as of March 31, 2004
was as follows:
|
|
|
|
|
|
|
(In thousands) | |
Due in one year or less
|
|
$ |
1,773,932 |
|
Due after one year and through 3 years
|
|
|
462,010 |
|
|
|
|
|
|
|
$ |
2,235,942 |
|
|
|
|
|
Fair values of cash equivalents and short-term investments
approximate cost primarily due to the short-term maturities of
the investments and the absence of changes in security credit
ratings.
Unrealized gains and losses on available-for-sale securities
were reported as a component of Stockholders Equity and
were immaterial for all periods presented.
|
|
|
Equity Investments in Privately Held Companies |
As of March 31, 2004 and 2003, we held equity investments
with a carrying value of $11 million in several privately
held companies. These investments were recorded at cost as we do
not have significant influence over the investee and are
classified as Other long-term assets on the Consolidated Balance
Sheets. During fiscal 2004 and 2003 we recognized a decline in
value of these investments determined to be other-than-temporary
of $3 million and $1 million, respectively. During
fiscal 2003 and 2002, declines in our unregistered equity
investment value were immaterial. The other than temporary
declines in fair value were recorded as Other expense, net on
the Consolidated Statements of Operations.
|
|
|
Derivative Financial Instruments |
During the periods covered by the consolidated financial
statements, we did not use any derivative instrument for trading
purposes. We utilize some natural hedging to mitigate our
exposures and we manage certain residual balance sheet exposures
through the use of one-month forward foreign exchange contracts.
We enter into forward foreign exchange contracts with financial
institutions primarily to minimize currency exchange risks
associated with certain balance sheet positions. The fair value
of forward foreign exchange
64
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
contracts approximates cost due to the short maturity periods.
As of March 31, 2004, the notional amount of our forward
foreign exchange contracts was $113 million, all of which
mature in 35 days or less. We do not hedge our foreign
currency translation risk.
|
|
Note 6. |
Convertible Subordinated Notes |
On October 24, 2001, we completed a private offering of
$600 million of 3% convertible subordinated notes due
November 1, 2006, the net proceeds of which were
$585 million. The notes are convertible into shares of our
common stock by the holders at any time before maturity at a
conversion price of $17.07 per share, subject to certain
adjustments. During fiscal 2004 and 2003, an insignificant
principal amount of our notes were converted into shares of our
common stock. No shares were converted during fiscal 2002. We
may redeem the remaining notes on or after November 5,
2004, at a redemption price of 100.75% of stated principal
during the period November 5, 2004 through October 31,
2005 and 100% thereafter. Interest is paid semi-annually and we
commenced making these payments on May 1, 2002. Debt
issuance costs of $16 million, related to the notes, are
amortized on a straight-line basis through November 1,
2006. We have reserved 35.1 million shares of common stock
for issuance upon conversion of the notes.
We lease certain of our facilities and equipment under operating
leases that expire at various dates through 2018. We currently
sublease some space under various operating leases that will
expire at various dates through 2012.
The future fiscal year minimum operating lease commitments were
as follows as of March 31, 2004:
|
|
|
|
|
|
|
(In thousands) | |
2005
|
|
$ |
35,637 |
|
2006
|
|
|
30,774 |
|
2007
|
|
|
22,902 |
|
2008
|
|
|
13,046 |
|
2009
|
|
|
5,356 |
|
Thereafter
|
|
|
10,719 |
|
|
|
|
|
Operating lease commitments
|
|
|
118,434 |
|
Sublease income
|
|
|
(17,846 |
) |
|
|
|
|
Net operating lease commitments
|
|
$ |
100,588 |
|
|
|
|
|
Based on existing subleases, we expect to record future sublease
income of $6 million, $6 million and $3 million
during fiscal 2005, 2006, 2007, respectively, and immaterial
amounts thereafter.
Rent expense charged to operations totaled $27 million,
$25 million and $25 million during fiscal 2004, 2003
and 2002, respectively.
In March 2003, we terminated our operating lease obligations for
four facilities located in Cupertino, California, Springfield,
Oregon, and Newport News, Virginia by purchasing the land and
buildings for $124 million.
On October 22, 2003, our Board of Directors approved a
two-for-one stock split of Symantecs common stock effected
in the form of a stock dividend. Shareowners of record at the
close of business on November 5, 2003 were issued one
additional share of common stock for each share owned as of that
date. The stock split
65
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
increased the number of total shares outstanding from
154 million shares to 308 million shares. The
additional shares resulting from the stock dividend were issued
in book-entry form on November 19, 2003. Symantec share and
per share amounts in the Consolidated Statements of Operations
and the Notes to Consolidated Financial Statements retroactively
reflect the two-for-one stock split effected as a stock
dividend, which occurred on November 19, 2003.
|
|
Note 9. |
Common Stock Repurchases |
On January 16, 2001, the Board of Directors replaced an
earlier stock repurchase program with a new authorization to
repurchase up to $700 million of Symantec common stock, not
to exceed 60.0 million shares, with no expiration date. On
January 20, 2004, the Board of Directors increased the
dollar amount of the companys authorized stock repurchase
program from $700 million to $940 million, without any
specific limit on the number of shares to be repurchased. In
connection with the additional $240 million authorization,
we adopted a repurchase plan under Rule 10b5-1 and intend
to repurchase $60 million of shares during each calendar
2004 quarter.
During fiscal 2004, we repurchased 1.5 million shares under
the amended stock repurchase program, at prices ranging from
$39.03 to $41.63 per share, for an aggregate amount of
$60 million. During fiscal 2003, we repurchased
4.4 million shares at prices ranging from $13.97 to
$14.98 per share, for an aggregate amount of
$64 million. During fiscal 2002, we repurchased
19.3 million shares at prices ranging from $8.89 to
$12.25 per share, for an aggregate amount of
$204 million. As of March 31, 2004, $367 million
remained authorized for future repurchases, of which
$180 million is expected to be utilized through the 10b5-1
plan through December 2004.
|
|
Note 10. |
Net Income (Loss) Per Share |
The components of net income (loss) per share were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
Basic Net Income (Loss) Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
370,619 |
|
|
$ |
248,438 |
|
|
$ |
(28,151 |
) |
Weighted average number of common shares outstanding during the
period
|
|
|
305,985 |
|
|
|
290,790 |
|
|
|
287,208 |
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share
|
|
$ |
1.21 |
|
|
$ |
0.85 |
|
|
$ |
(0.10 |
) |
|
|
|
|
|
|
|
|
|
|
Diluted Net Income (Loss) Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
370,619 |
|
|
$ |
248,438 |
|
|
$ |
(28,151 |
) |
Interest on convertible subordinated notes, net of income tax
effect
|
|
|
14,392 |
|
|
|
14,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss), as adjusted
|
|
$ |
385,011 |
|
|
$ |
262,831 |
|
|
$ |
(28,151 |
) |
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding during the
period
|
|
|
305,985 |
|
|
|
290,790 |
|
|
|
287,208 |
|
Shares issuable from assumed exercise of options using the
treasury stock method
|
|
|
18,421 |
|
|
|
15,496 |
|
|
|
|
|
Shares issuable from assumed conversion of convertible
subordinated notes
|
|
|
35,149 |
|
|
|
35,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares for purpose of calculating diluted net income
(loss) per share
|
|
|
359,555 |
|
|
|
341,436 |
|
|
|
287,208 |
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share
|
|
$ |
1.07 |
|
|
$ |
0.77 |
|
|
$ |
(0.10 |
) |
|
|
|
|
|
|
|
|
|
|
66
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
During fiscal 2004, 2003 and 2002, 0.8 million,
1.4 million and 27.6 million shares, respectively,
issuable from assumed exercise of options were excluded from the
computation of diluted net income (loss) per share, as the
effect would have been anti-dilutive.
During fiscal 2002, 15.2 million shares issuable upon
conversion of the 3% convertible subordinated notes were
excluded from the computation of diluted net loss per share, as
their effect would have been anti-dilutive.
|
|
Note 11. |
Adoption of Stockholder Rights Plan |
On August 11, 1998, the Board of Directors 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 of Directors declared and
paid a dividend of one preferred share purchase right for each
share of Symantec common stock outstanding on the record date,
August 21, 1998. 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.
If the rights become exercisable, each right (other than rights
held by the Acquiring Person) will entitle the holder to
purchase, at a price equal to the exercise price of the right, a
number of shares of our common stock having a then-current value
of twice the exercise price of the right. If, after the rights
become exercisable, we agree to merge into another entity or we
sell more than 50% of our assets, each right will entitle the
holder to purchase, at a price equal to the exercise price of
the right, a number of shares of common stock of such entity
having a then-current value of twice the exercise price.
We may exchange the rights at a ratio of one share of common
stock for each right (other than the Acquiring Person) at any
time after an Acquiring Person acquires 20% or more of our
common stock but before such person acquires 50% or more of our
common stock. We may also redeem the rights at our option at a
price of $0.001 per right at any time before an Acquiring
Person has acquired 20% or more of our common stock. The rights
will expire on August 12, 2008.
|
|
Note 12. |
Employee Benefits |
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
$7 million, $4 million and $4 million during
fiscal 2004, 2003 and 2002, respectively.
During fiscal 1999, we issued 400,000 restricted shares to our
current CEO for a purchase price equal to the par value of the
shares at the date of issuance, vesting 50% at each anniversary
date, with the first anniversary date being 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 was amortized into compensation
expense on a straight-line basis over the vesting term. As of
March 31, 2004, there were 400,000 shares fully vested
and outstanding.
67
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
|
|
|
2002 Executive Officers Stock Purchase Plan |
In September 2002, our stockholders approved the 2002 Executive
Officers Stock Purchase Plan and reserved
250,000 shares of common stock for issuance thereunder, of
which none are subject to adjustment pursuant to changes in
capital. The purpose of the plan is to provide executive
officers with a convenient means to acquire an equity interest
in Symantec at fair market value by applying a portion or all of
their respective bonus payments towards the purchase price. Each
executive officer may purchase up to 10,000 shares in any
fiscal year. As of March 31, 2004, no shares have been
issued under the plan and the entire 250,000 shares remain
available for future issuance. Shares reserved for issuance
under this plan have not been adjusted for the stock dividend.
|
|
|
1998 Employee Stock Purchase Plan |
In September 1998, our stockholders approved the 1998 Employee
Stock Purchase Plan and reserved 2.0 million shares of
common stock for issuance thereunder. In September 1999, the
plan was amended by our stockholders to increase the shares
available for issuance by 3.0 million and to add an
evergreen provision whereby the number of shares
available for issuance increases automatically on January 1 of
each year (beginning in 2000) by 1% of our outstanding shares of
common stock on each immediately preceding December 31
during the term of the plan, provided that the aggregate number
of shares issued over the term of the plan does not exceed
32.0 million shares. As of March 31, 2004,
12.7 million shares remain available for issuance under the
plan, including 3.1 million shares added in connection with
the evergreen provision on January 1, 2004 but
which have not yet been registered.
Subject to certain limitations, our employees may purchase,
through payroll deductions of 2% to 10% of their 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
two-year offering period or the end of the six-month purchase
period. Under the Employee Stock Purchase Plan 1.4 million,
2.2 million and 1.9 million shares were issued during
fiscal 2004, 2003 and 2002, respectively, representing
$23 million, $17 million and $14 million in
contributions, respectively. As of March 31, 2004, a total
of 6.6 million shares had been issued under this plan.
|
|
|
2000 Director Equity Incentive Plan |
In September 2000, our stockholders approved the
2000 Directors Equity Incentive Plan and reserved
25,000 shares of common stock for issuance thereunder, of
which none are subject to adjustment pursuant to changes in
capital. 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, 2004, a total of 15,000 shares
had been issued under this plan and 10,000 shares remained
available for future issuance. Shares reserved for issuance
under this plan have not been adjusted for the stock dividend.
|
|
|
1994 Patent Incentive Plan |
In January 1995, the Board of Directors approved the terms of
the 1994 Patent Incentive Plan and reserved 1.6 million
shares of common stock for issuance thereunder. 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, and no employee is
eligible to receive more than 200,000 shares of common
stock at any time during the term of the plan. As of
March 31, 2004, a total of 117,000 shares had
68
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
been issued under this plan. On March 13, 2004, the Board
of Directors terminated this plan, therefore no further shares
may be issued.
We maintain stock option plans pursuant to which an aggregate
total of 62.6 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 vests
over a four-year period.
|
|
|
2001 Non-Qualified Equity Incentive Plan |
In January 2001, the Board of Directors approved the terms of
the 2001 Non-Qualified Equity Incentive Plan and reserved for
issuance 12.0 million shares for issuance thereunder. Under
this plan, 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, defined as officers, directors or other persons
subject to Section 16 of the Securities Exchange Act of
1934, may not exceed in the aggregate fifty (50%) percent of all
shares that are available for grant under the 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 plan. The terms of this plan are similar to those of our
1996 Equity Incentive Plan, except that it was adopted, and may
be amended, without stockholder approval. As of March 31,
2004, 2.0 million options were outstanding under this plan
and 7.6 million remained available for future issuance.
In July 1999, the Board of Directors approved the terms of the
1999 Acquisition Plan and reserved 2.0 million shares of
common stock for issuance thereunder. Options awarded to
officers may not exceed in the aggregate thirty (30%) percent of
all shares that are available for grant under the plan. The
terms of this plan are similar to those of our 1996 Equity
Incentive Plan, except that it was adopted, and may be amended,
without stockholder approval. As of March 31, 2004, 108,000
options were outstanding under this plan and none remain
available for future issuance.
|
|
|
1996 Equity Incentive Plan |
In May 1996, our stockholders approved the 1996 Equity Incentive
Plan and reserved 16.3 million shares of common stock for
issuance thereunder. Subsequently, our stockholders approved a
number of amendments that increased the number of shares of
common stock reserved for issuance under the plan to a total of
97.8 million shares. As of March 31, 2004,
36.2 million options were outstanding under this plan and
15.3 million remained available for future issuance.
|
|
|
Executive Stock Option Grants |
In accordance with the employment agreement dated April 11,
1999 between our current CEO and Symantec, the Board of
Directors approved the issuance of a non-qualified stock option
to acquire 800,000 shares of common stock to the CEO. The
option was granted at 100% of the fair market value on the
69
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
date of grant, has a term life of ten years and vests over a
five-year period. As of March 31, 2004, 610,000 options
were outstanding.
On December 20, 1999 a non-qualified option to acquire
80,000 shares was approved for grant to the CEO and was
deemed granted on January 1, 2000. The option was granted
at 100% of the fair market value on the date of grant, has a
term life of ten years and vests over a four-year period. As of
March 31, 2004, all options were still outstanding under
this plan.
|
|
|
1988 Employee Stock Option Plan |
The 1988 Employee Stock Option Plan was superseded by the 1996
Equity Incentive Plan. As of March 31, 2004, 114,000
options were outstanding under the 1998 Employee Stock Option
Plan and no further option may be granted.
|
|
|
Acquired Stock Option Plans |
We assumed stock option plans in connection with our
acquisitions of AXENT Technologies in December 2000, Delrina
Corporation in May 1996, and Central Point Software in June
1994. As of March 31, 2004, 652,000 options were
outstanding under these plans and no further options may be
granted.
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted | |
|
|
|
|
Average | |
|
|
|
|
Exercise | |
|
|
Number | |
|
Price per | |
|
|
of Shares | |
|
Share | |
|
|
| |
|
| |
|
|
(In thousands, except | |
|
|
weighted average | |
|
|
exercise price per | |
|
|
share) | |
Outstanding as of March 31, 2001
|
|
|
63,456 |
|
|
$ |
9.22 |
|
Granted
|
|
|
16,900 |
|
|
$ |
15.13 |
|
Exercised
|
|
|
(16,508 |
) |
|
$ |
7.28 |
|
Canceled
|
|
|
(6,280 |
) |
|
$ |
10.34 |
|
|
|
|
|
|
|
|
Outstanding as of March 31, 2002
|
|
|
57,568 |
|
|
$ |
11.39 |
|
Granted
|
|
|
7,096 |
|
|
$ |
18.06 |
|
Exercised
|
|
|
(12,780 |
) |
|
$ |
9.46 |
|
Canceled
|
|
|
(4,646 |
) |
|
$ |
13.42 |
|
|
|
|
|
|
|
|
Outstanding as of March 31, 2003
|
|
|
47,238 |
|
|
$ |
12.71 |
|
Granted
|
|
|
9,498 |
|
|
$ |
28.97 |
|
Exercised
|
|
|
(14,354 |
) |
|
$ |
11.65 |
|
Canceled
|
|
|
(2,611 |
) |
|
$ |
16.52 |
|
|
|
|
|
|
|
|
Outstanding as of March 31, 2004
|
|
|
39,771 |
|
|
$ |
16.72 |
|
|
|
|
|
|
|
|
Options exercisable at:
|
|
|
|
|
|
|
|
|
March 31, 2004
|
|
|
17,824 |
|
|
$ |
11.90 |
|
March 31, 2003
|
|
|
18,574 |
|
|
$ |
11.08 |
|
March 31, 2002
|
|
|
16,868 |
|
|
$ |
9.50 |
|
70
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
The following table summarizes information about options
outstanding as of March 31, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Options | |
|
Exercisable Options | |
|
|
| |
|
| |
|
|
|
|
Weighted | |
|
Weighted | |
|
|
|
Weighted | |
|
|
|
|
Average | |
|
Average | |
|
|
|
Average | |
|
|
Number of | |
|
Contractual | |
|
Exercise | |
|
Number of | |
|
Exercise | |
Range of Exercise Prices |
|
Shares | |
|
Life | |
|
Price | |
|
Shares | |
|
Price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
|
(In years) | |
|
|
|
(In thousands) | |
|
|
$ 2.38 - $ 8.64
|
|
|
9,563 |
|
|
|
5.95 |
|
|
$ |
7.21 |
|
|
|
7,093 |
|
|
$ |
6.76 |
|
$ 8.67 - $16.09
|
|
|
8,679 |
|
|
|
6.81 |
|
|
$ |
13.12 |
|
|
|
5,420 |
|
|
$ |
13.11 |
|
$16.16 - $17.22
|
|
|
9,178 |
|
|
|
7.51 |
|
|
$ |
16.58 |
|
|
|
3,991 |
|
|
$ |
16.70 |
|
$17.22 - $29.24
|
|
|
9,439 |
|
|
|
8.87 |
|
|
$ |
24.03 |
|
|
|
1,272 |
|
|
$ |
19.54 |
|
$29.63 - $47.26
|
|
|
2,912 |
|
|
|
9.67 |
|
|
$ |
35.51 |
|
|
|
48 |
|
|
$ |
32.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,771 |
|
|
|
7.46 |
|
|
$ |
16.72 |
|
|
|
17,824 |
|
|
$ |
11.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These options will expire if not exercised by specific dates
through March 2014. Prices for options exercised during the
three years ended March 31, 2004 ranged from $1.41 to
$33.63.
|
|
|
Shares Authorizations and Reserves |
In August 2003, our stockholders approved an increase to our
authorized common shares from 300 million to
900 million.
As of March 31, 2004, we had reserved the following shares
of authorized but unissued common stock:
|
|
|
|
|
|
Conversion of 3% Convertible Subordinated Notes
|
|
|
35,149,000 |
|
Stock Purchase Plans*
|
|
|
12,995,000 |
|
Stock Award Plans
|
|
|
10,000 |
|
Employee Stock Option Plans
|
|
|
62,601,000 |
|
|
|
|
|
|
Total
|
|
|
110,755,000 |
|
|
|
|
|
|
|
* |
Includes 3,103,000 shares related to the 1998 Employee
Stock Purchase Plan which were authorized under the
evergreen provision on January 1, 2004 but
which have not yet been registered. |
|
|
Note 13. |
Restructuring, Site Closures and Other |
Restructuring, site closures and other consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Restructuring provision
|
|
$ |
465 |
|
|
$ |
13,113 |
|
|
$ |
20,428 |
|
Adjustments to prior restructuring provisions
|
|
|
442 |
|
|
|
(2,024 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring, site closures and other
|
|
$ |
907 |
|
|
$ |
11,089 |
|
|
$ |
20,428 |
|
|
|
|
|
|
|
|
|
|
|
71
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
During fiscal 2004, we recorded costs of severance, related
benefits and outplacement services for a member of our senior
management team, which was subsequently adjusted as provided
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original | |
|
Amount |
|
Amount | |
|
Balance at | |
|
|
Cash/Non-cash | |
|
Charge | |
|
Paid/Used |
|
Adjusted | |
|
3/31/04 | |
|
|
| |
|
| |
|
|
|
| |
|
| |
|
|
(In thousands) | |
Employee severance and benefits
|
|
|
Cash |
|
|
$ |
465 |
|
|
$ |
|
|
|
$ |
(242 |
) |
|
$ |
223 |
|
The Company anticipates that the remaining restructuring reserve
balance will be paid by the end of fiscal year 2005.
During fiscal 2003, we recorded costs of severance, related
benefits and outplacement services and costs associated with the
consolidation of certain facilities in the United States and
Europe. The costs resulted from relocating certain development,
sales and finance activities, realigning certain worldwide
marketing efforts and outsourcing our North American and
European consumer support functions. As a result, we terminated
424 employees. The fiscal 2003 restructuring provision was
subsequently reduced as costs were lower than anticipated.
The following table sets forth an analysis of the components of
the fiscal 2003 restructuring plans, the provision adjustments
that followed, and payments made against the reserve as of
March 31, 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original | |
|
Amount | |
|
Amount | |
|
Balance at | |
|
|
Cash/Non-cash | |
|
Charge | |
|
Paid/Used | |
|
Adjusted | |
|
3/31/04 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Employee severance and outplacement
|
|
|
Cash |
|
|
$ |
9,606 |
|
|
$ |
(7,969 |
) |
|
$ |
(1,637 |
) |
|
$ |
|
|
Excess facilities and fixed assets
|
|
|
Cash/non-cash |
|
|
|
3,507 |
|
|
|
(3,321 |
) |
|
|
(72 |
) |
|
|
114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring, site closures and other
|
|
|
|
|
|
$ |
13,113 |
|
|
$ |
(11,290 |
) |
|
$ |
(1,709 |
) |
|
$ |
114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company anticipates that the remaining restructuring reserve
balance will be paid by the end of fiscal year 2005.
During fiscal 2002, we recorded costs associated with the excess
facilities and fixed assets associated with relocating certain
sites in the United States and Europe. We moved our operations
in Newport News, Virginia to a larger facility and we relocated
our North American support group from Eugene, Oregon to an
expanded facility in Springfield, Oregon. In addition, we
consolidated our European support functions by relocating our
Leiden, Netherlands operations to Dublin, Ireland and
consolidating most of our United Kingdom facilities to one
facility in Maidenhead, UK.
During fiscal 2002, we also recorded costs of severance, related
benefits and outplacement services, as we reorganized and
consolidated various operating functions. As a result, we
terminated 87 employees. The fiscal 2002 restructuring provision
was subsequently adjusted in fiscal 2003, as actual costs were
higher/(lower) than anticipated.
72
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
The following table sets forth an analysis of the components of
the fiscal 2002 restructuring plans, the provision adjustments
that followed, and payments made against the reserve as of
March 31, 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original | |
|
Amount | |
|
Amount | |
|
Balance at | |
|
|
Cash/Non-cash | |
|
Charge | |
|
Paid/Used | |
|
Adjusted | |
|
3/31/04 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Employee severance and outplacement
|
|
|
Cash |
|
|
$ |
2,639 |
|
|
$ |
(2,585 |
) |
|
$ |
(54 |
) |
|
$ |
|
|
Excess facilities and fixed assets
|
|
|
Cash/non-cash |
|
|
|
17,789 |
|
|
|
(15,668 |
) |
|
|
423 |
|
|
|
2,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring, site closures and other
|
|
|
|
|
|
$ |
20,428 |
|
|
$ |
(18,253 |
) |
|
$ |
369 |
|
|
$ |
2,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company anticipates that the remaining restructuring reserve
balance related to our United Kingdom facilities will be paid by
the end of fiscal 2006.
The components of the provision for income taxes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$ |
60,528 |
|
|
$ |
58,732 |
|
|
$ |
24,508 |
|
|
State
|
|
|
18,084 |
|
|
|
15,045 |
|
|
|
9,543 |
|
|
International
|
|
|
65,810 |
|
|
|
45,809 |
|
|
|
26,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144,422 |
|
|
|
119,586 |
|
|
|
60,096 |
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
24,248 |
|
|
|
(620 |
) |
|
|
13,802 |
|
|
State
|
|
|
4,401 |
|
|
|
(2,465 |
) |
|
|
1,512 |
|
|
International
|
|
|
(1,468 |
) |
|
|
(1,308 |
) |
|
|
(1,761 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
27,181 |
|
|
|
(4,393 |
) |
|
|
13,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
171,603 |
|
|
$ |
115,193 |
|
|
$ |
73,649 |
|
|
|
|
|
|
|
|
|
|
|
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, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
Federal statutory rate
|
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
State taxes, net of federal benefit
|
|
|
2.6 |
|
|
|
2.1 |
|
|
|
15.8 |
|
Non-deductible goodwill amortization
|
|
|
|
|
|
|
|
|
|
|
148.5 |
|
Foreign earnings taxed at less than the federal rate
|
|
|
(7.0 |
) |
|
|
(5.7 |
) |
|
|
(30.8 |
) |
Research tax credits
|
|
|
|
|
|
|
|
|
|
|
(2.2 |
) |
Benefit of exempt foreign sales income
|
|
|
|
|
|
|
|
|
|
|
(2.0 |
) |
Other, net
|
|
|
1.0 |
|
|
|
0.3 |
|
|
|
(2.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
31.6 |
% |
|
|
31.7 |
% |
|
|
161.9 |
% |
|
|
|
|
|
|
|
|
|
|
73
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
The principal components of deferred tax assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(In thousands) | |
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Tax credit carryforwards
|
|
$ |
18,219 |
|
|
$ |
8,712 |
|
|
Net operating loss carryforwards of acquired companies
|
|
|
41,990 |
|
|
|
43,874 |
|
|
Other accruals and reserves not currently tax deductible
|
|
|
41,077 |
|
|
|
49,485 |
|
|
Deferred revenue
|
|
|
25,258 |
|
|
|
21,000 |
|
|
Loss on investments not currently tax deductible
|
|
|
6,705 |
|
|
|
10,375 |
|
|
Other
|
|
|
6,264 |
|
|
|
7,117 |
|
|
|
|
|
|
|
|
|
|
|
139,513 |
|
|
|
140,563 |
|
Valuation allowance
|
|
|
(6,705 |
) |
|
|
(5,111 |
) |
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
132,808 |
|
|
|
135,452 |
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Acquired intangible assets
|
|
|
(13,326 |
) |
|
|
(13,010 |
) |
|
Tax over book depreciation
|
|
|
(14,073 |
) |
|
|
(8,012 |
) |
|
Unremitted earnings of foreign subsidiaries
|
|
|
(51,721 |
) |
|
|
(14,160 |
) |
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$ |
53,688 |
|
|
$ |
100,270 |
|
|
|
|
|
|
|
|
Realization of a significant portion of the $54 million of
net deferred tax assets is dependent upon our ability to
generate sufficient future taxable income and the implementation
of tax planning strategies. We believe it is more likely than
not that the net deferred tax assets will be realized based on
historical earnings, expected levels of future taxable income in
the United States and certain foreign jurisdictions, and the
implementation of tax planning strategies. The valuation
allowance increased by $2 million during fiscal 2004 and
remained unchanged during fiscal 2003.
As of March 31, 2004, we have tax credit carryforwards of
$18 million that expire in fiscal 2005 through 2022. In
addition, we have net operating loss carryforwards attributable
to various acquired companies of $117 million that expire
in fiscal 2018 through 2023. These net operating loss
carryforwards are subject to an annual limitation under Internal
Revenue Code §382, but are expected to be fully realized.
Pretax income from international operations was
$354 million, $225 million and $168 million for
fiscal 2004, 2003 and 2002, respectively.
No provision has been made for federal or state income taxes on
$740 million of cumulative unremitted earnings of certain
of our foreign subsidiaries as of March 31, 2004, since we
plan to indefinitely reinvest these earnings. As of
March 31, 2004, the unrecognized deferred tax liability for
these earnings was $221 million.
On November 17, 2003, Health & Sport LLC filed a
lawsuit on behalf of itself and purportedly on behalf of the
general public and a class including purchasers of Norton
AntiVirus 2004 and/or Norton Internet Security 2004 in the
California Superior Court, San Francisco County. The
complaint alleges violations of California Business and
Professions Code 17200 and 17500 and breach of express and
implied warranties in connection with the specified products.
The complaint seeks damages and injunctive and other equitable
relief, as well as costs and attorneys fees. We intend to
defend the action vigorously.
74
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
On October 20, 2003, Marilyn Johnston filed a lawsuit on
behalf of herself and purportedly on behalf of the general
public and an undefined class in the California Superior Court,
San Diego County. The complaint alleges violations of
California Civil Code section 1787.8 and Business and
Professions Code 17200 arising from the collection of telephone
number information in connection with online credit card
transactions. The complaint seeks damages and injunctive and
other equitable relief, as well as costs and attorneys fees. We
intend to defend the action vigorously.
On March 28, 2003, Ronald Pearce filed a lawsuit on behalf
of himself and purportedly on behalf of the general public of
the United States and Canada in the California Superior Court,
Santa Clara County, alleging violations of California
Business and Professions Code section 17200 and false
advertising in connection with our
WinFaxtm
Pro product. The complaint seeks damages and injunctive and
other equitable relief, as well as costs and attorney fees. We
intend to defend the action vigorously.
On February 27, 2003, PowerQuest filed a lawsuit against us
in the United States District Court, District of Utah, alleging
that our Ghost product infringed a patent owned by them. The
complaint sought damages and injunctive relief. The case was
dismissed following Symantecs December 2003 acquisition of
PowerQuest.
On February 7, 2003, Cathy Baker filed a lawsuit against
us, Microsoft and two retailers in the California Superior
Court, Marin County, purportedly on behalf of the general public
of California and of a class of certain purchasers of software
products. An amended complaint filed in May 2003 added Greg
Johnson as plaintiff and Adobe Systems and another retailer as
defendants. The complaint alleged that our refund policies
violated consumer warranty and unfair business practice laws.
The lawsuit sought damages, rescission and injunctive relief, as
well as costs and attorney fees. In April 2004, the matter was
resolved with no material payment by Symantec, and the
litigation has been dismissed.
On November 29, 2002, William Pereira filed a purported
class action lawsuit against a local retailer and us in the
Supreme Court of New York, New York County, alleging breach of
contract and deceptive business practices in connection with
rebates offered by us. The complaint was served March 26,
2003. The complaint sought damages, costs and attorney fees. The
parties stipulated to dismiss the case in June 2003.
On June 14, 2002, Hark Chan and Techsearch LLC filed a
lawsuit against us in the United States District Court for the
Northern District of California, alleging that unspecified
products sold on CD-ROM with Internet hyperlinks and/or with the
LiveUpdate feature infringed a patent owned by Techsearch.
Subsequently, IP Innovation LLC was added as a plaintiff. The
lawsuit requested damages, injunctive relief, costs and attorney
fees. In September 2003, the matter was resolved with no
material payment by Symantec, and the litigation has been
dismissed.
On December 23, 1999, Altiris Inc. filed a lawsuit against
us in the United States District Court, District of Utah,
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. In October 2001, a stipulated judgment of
non-infringement was entered following the courts ruling
construing the claims of the Altiris patent, and in February
2003, the Court of Appeals for the Federal Circuit reversed the
judgment and remanded the case. We intend to defend the action
vigorously. In April 2004, we filed a lawsuit against Altiris in
the United States District Court, Eastern District of Texas,
alleging that several Altiris products infringe three patents
owned by Symantec.
In July 1998, the Ontario Court of Justice (General Division)
ruled that we should pay a total of $5 million for damages,
plus interest, to Triolet Systems, Inc. and Brian Duncombe in a
decade-old copyright action, for damages arising from the grant
of a preliminary injunction against them. The damages were
awarded following the courts 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.
Our appeal of the decision was denied, and our request for
further review of that decision was also
75
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
denied. We recorded a charge of $6 million during the June
1998 quarter, representing the unaccrued portion of the judgment
plus costs, and an additional charge of $3 million for
post-judgment interest and other costs during the March 2002
quarter. In January 2003, we paid the judgment, interest and
costs of $7 million. We expect to pay the remaining balance
of costs upon further determination by the court. As of
March 31, 2004, we believe that we have adequately accrued
for both the damages and costs.
In October 1997, a complaint was filed in the United States
District Court for the District of Utah on behalf of PowerQuest,
against Quarterdeck, which we acquired in March 1999. The
complaint alleged that Quarterdecks partitioning software,
included in
Partition-Ittm
and Partition-It Extra Strength, violated a patent held by
PowerQuest. In January 1998, PowerQuest obtained a second patent
relating to partitioning and amended its complaint to allege
infringement of that patent as well. PowerQuest added us as a
defendant and sought an injunction against distribution of the
Partition-It and Partition-It Extra Strength products and
monetary damages. The case was dismissed following
Symantecs December 2003 acquisition of PowerQuest.
On September 15, 1997, Hilgraeve Corporation filed a
lawsuit in the United States District Court, Eastern District of
Michigan, against us, alleging that unspecified Symantec
products infringed 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. In September 2001, the Court of Appeals
for the Federal Circuit reversed the summary judgment and
ordered the case returned to the District Court. On
August 6, 2003, Symantec acquired the asserted patent and
the parties settled the litigation. The total cost of purchasing
the patent and licensing additional patents was
$63 million, which was paid in cash in August 2003.
Over the past few years, it has become common for software
companies, including us, to receive claims of patent
infringement. At any given time, we are evaluating claims of
patent infringement asserted by several parties, with respect to
certain of our products. 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 that are incidental to our business.
We intend to defend all of the aforementioned pending lawsuits
vigorously. Although adverse decisions (or settlements) may
occur in one or more of the cases, and it is not possible to
estimate the possible loss or losses from each of these 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. 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. More information regarding how we account for our legal
costs and the risks associated with our estimates can be found
in our Summary of Significant Accounting Policies under
Legal Expenses on page 56 and our Critical
Accounting Estimates under Legal Contingencies
on page 17.
|
|
Note 16. |
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: Enterprise
Security, Enterprise Administration, Consumer Products, Services
and Other.
Our Consumer Products segment focuses on delivering our Internet
security and problem-solving products to individual users, home
offices and small businesses. Our Enterprise Security segment
provides security solutions for all tiers of a network: at the
gateways between the network and the outside world, at the
servers that act as the networks vital organs, and at
end-user devices, including desktop PCs, laptops and handhelds.
Our Enterprise Administration segment offers open and modular
products and services that enable companies to effectively and
efficiently manage their IT infrastructures. Our Services
segment provides information security solutions that incorporate
advanced technology, security best practices and expertise, and
global resources to help enable e-business success. Our Other
segment is comprised of sunset products and
76
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
products nearing the end of their life cycle. Also included in
the Other segment are all indirect costs, general and
administrative expenses, amortization of goodwill (through
March 31, 2002) and other intangible assets, and other
assets and charges, such as acquired in-process research and
development, legal judgments and settlements, and restructuring
and site closures which are not charged to the other operating
segments.
During fiscal 2003, we realigned certain expenses within our
operating segments and reclassified fiscal 2002 information to
conform to the fiscal 2003 presentation. In addition, beginning
in fiscal 2003, we appropriately presented the amortization of
other intangible assets within Depreciation and amortization
expense by segment for fiscal 2002.
The accounting policies of the segments are the same as those
described in the summary of significant accounting polices, with
the exception of the amortization of acquired product rights,
which is included entirely in our Other segment. There are no
intersegment sales. Our chief operating decision maker evaluates
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. The majority of our assets and liabilities are not
discretely allocated or reviewed by segment. The depreciation
and amortization of our property, equipment and leasehold
improvements are allocated based on headcount, unless
specifically identified by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer | |
|
Enterprise | |
|
Enterprise | |
|
|
|
|
|
Total | |
|
|
Products | |
|
Security | |
|
Administration | |
|
Services | |
|
Other | |
|
Company | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(In thousands) | |
|
|
|
|
Fiscal 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
$ |
871,980 |
|
|
$ |
736,531 |
|
|
$ |
219,604 |
|
|
$ |
41,682 |
|
|
$ |
332 |
|
|
$ |
1,870,129 |
|
Operating income (loss)
|
|
|
530,473 |
|
|
|
134,627 |
|
|
|
143,634 |
|
|
|
(11,122 |
) |
|
|
(284,027 |
) |
|
|
513,585 |
|
Depreciation & amortization expense
|
|
|
3,684 |
|
|
|
14,452 |
|
|
|
653 |
|
|
|
5,566 |
|
|
|
92,871 |
|
|
|
117,226 |
|
|
Fiscal 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
|
570,266 |
|
|
|
593,552 |
|
|
|
215,017 |
|
|
|
26,377 |
|
|
|
1,734 |
|
|
|
1,406,946 |
|
Operating income (loss)
|
|
|
293,695 |
|
|
|
119,226 |
|
|
|
160,077 |
|
|
|
(26,099 |
) |
|
|
(205,387 |
) |
|
|
341,512 |
|
Depreciation & amortization expense
|
|
|
3,414 |
|
|
|
12,206 |
|
|
|
373 |
|
|
|
3,103 |
|
|
|
80,903 |
|
|
|
99,999 |
|
|
Fiscal 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
|
|
376,137 |
|
|
|
454,925 |
|
|
|
222,543 |
|
|
|
10,905 |
|
|
|
6,928 |
|
|
|
1,071,438 |
|
Operating income (loss) (unaudited)
|
|
|
145,839 |
|
|
|
114,930 |
|
|
|
155,080 |
|
|
|
(24,042 |
) |
|
|
(383,766 |
) |
|
|
8,041 |
|
Depreciation & amortization expense (unaudited)
|
|
|
2,741 |
|
|
|
10,789 |
|
|
|
439 |
|
|
|
631 |
|
|
|
258,267 |
|
|
|
272,867 |
|
77
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
The following table represents revenue amounts reported for
products shipped to customers in the corresponding regions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Net revenues from external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$ |
896,452 |
|
|
$ |
714,111 |
|
|
$ |
566,837 |
|
Other foreign countries(*)
|
|
|
973,677 |
|
|
|
692,835 |
|
|
|
504,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,870,129 |
|
|
$ |
1,406,946 |
|
|
$ |
1,071,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(In thousands) | |
Long-lived assets (excluding deferred income taxes):
|
|
|
|
|
|
|
|
|
United States
|
|
$ |
1,500,192 |
|
|
$ |
1,186,071 |
|
Other foreign countries(*)
|
|
|
114,172 |
|
|
|
83,527 |
|
|
|
|
|
|
|
|
|
|
$ |
1,614,364 |
|
|
$ |
1,269,598 |
|
|
|
|
|
|
|
|
|
|
(*) |
No individual country represented more than 10% of the
respective totals. |
In fiscal 2004, 2003 and 2002, two distributors each accounted
for more than 10% of our total net revenues.
|
|
Note 17. |
Fiscal 2004 Reclassifications of Previously Reported
Financial Information |
As of March 31, 2004, we reclassified certain previously
reported amounts to conform to the current presentation format
with no impact on net income (loss).
We have revised our disclosure of advertising costs for fiscal
2003 and 2002 reported in Note 2 to include all costs
defined by Statement of Position 93-7, Reporting on
Advertising Costs. Advertising costs are included in Sales
and marketing expense in the Consolidated Statements of
Operations. Our revision was for disclosure purposes only, with
no impact to total Sales and marketing expense for fiscal 2003
and 2002.
|
|
|
Consolidated Balance Sheet |
As of March 31, 2004, the long-term portion of deferred
revenue grew to $92 million and was presented separately as
a long-term liability on the Consolidated Balance Sheet. The
Consolidated Balance Sheet as of March 31, 2003 has been
reclassified to conform to the current presentation format.
78
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
A summary of reclassifications on the Consolidated Balance Sheet
as of March 31, 2003 is as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2003 | |
|
|
| |
|
|
|
|
As Reclassified | |
|
|
As Originally | |
|
in this fiscal 2004 | |
|
|
Reported | |
|
Form 10-K | |
|
|
| |
|
| |
|
|
(In thousands) | |
Current deferred revenue
|
|
$ |
589,629 |
|
|
$ |
530,378 |
|
Total current liabilities
|
|
|
894,624 |
|
|
|
835,373 |
|
Long-term deferred revenue
|
|
|
|
|
|
|
59,251 |
|
|
|
|
Consolidated Statement of Cash Flows |
We have reclassified certain amounts in the Consolidated
Statement of Cash Flows for the year ended March 31, 2003
to conform to current presentation. Expenses resulting from
business acquisitions have been reclassified from Other accrued
expenses within Operating Activities, to Payments for business
acquisitions, net of cash acquired within Investing Activities.
In addition, we reclassified certain amounts from Amortization
of discounts and premiums on investments, net within Operating
Activities to Purchases of marketable securities within
Investing Activities. Amounts prior to fiscal 2003 are
considered immaterial for reclassification.
A summary of reclassifications in the Statement of Cash Flows
for the year ended March 31, 2003 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2003 | |
|
|
| |
|
|
As Originally | |
|
As Reclassified in | |
|
|
Reported | |
|
2004 Form 10-K | |
|
|
| |
|
| |
|
|
(In thousands) | |
Net cash provided by operating activities
|
|
$ |
583,905 |
|
|
$ |
599,238 |
|
Net cash used in investing activities
|
|
|
(756,640 |
) |
|
|
(771,973 |
) |
|
|
Note 18. |
Fiscal 2003 Reclassifications of Previously Reported
Financial Information |
As of March 31, 2003, we reclassified certain previously
reported amounts to conform to the current presentation format
with no impact on net income (loss).
Subsequent to March 31, 2002, we revised our methodology
for allocating certain costs, including the allocation of
technical support costs between sales and marketing expenses and
cost of revenues and the allocation of certain general and
administrative expenses between cost of revenues and operating
expenses. As a result, we have reclassified the related balances
for the year ended March 31, 2002 in the Consolidated
Statements of Operations and in Note 2 and Note 16
(Segment Information).
79
SYMANTEC CORPORATION
Notes to Consolidated Financial
Statements (Continued)
A summary of reclassifications in the Consolidated Statements of
Operations for the year ended March 31, 2002 was as follows:
|
|
|
Consolidated Statements of Operations |
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31, 2002 | |
|
|
| |
|
|
|
|
As Reclassified in | |
|
|
As Originally | |
|
this Fiscal 2004 | |
|
|
Reported | |
|
Form 10-K | |
|
|
| |
|
| |
|
|
(In thousands) | |
Cost of revenues
|
|
$ |
194,610 |
|
|
$ |
195,903 |
|
Gross profit
|
|
|
876,828 |
|
|
|
875,535 |
|
Sales and marketing
|
|
|
428,495 |
|
|
|
425,951 |
|
General and administrative
|
|
|
53,880 |
|
|
|
55,131 |
|
Total operating expenses
|
|
|
868,787 |
|
|
|
867,494 |
|
|
|
Note 19. |
Subsequent Events |
In May 2004, we repurchased 1.3 million shares at prices
ranging from $44.89 to $49.20 per share, for an aggregate
amount of $60 million.
On May 19, 2004, we entered into an agreement to acquire
Brightmail, Inc., a developer of e-mail services and software
for application service providers, Internet service providers,
portals and enterprises, for an estimated $370 million in
cash. The acquisition is expected to close in July 2004, subject
to the satisfaction of closing conditions. We expect to
integrate this technology into our Enterprise Security segment.
80
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) |
May 17, 2005
|
|
By /s/ John W. Thompson |
|
|
(John W. Thompson,
Chairman and Chief
Executive Officer) |
81
Schedule II
SYMANTEC CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at | |
|
Charged to | |
|
|
|
Balance at | |
|
|
Beginning | |
|
Costs and | |
|
|
|
End of | |
|
|
of Period | |
|
Expenses | |
|
Write-Offs | |
|
Period | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
(In thousands) | |
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2004
|
|
$ |
9,753 |
|
|
$ |
61 |
|
|
$ |
(4,140 |
) |
|
$ |
5,674 |
|
|
Year ended March 31, 2003
|
|
|
10,081 |
|
|
|
456 |
|
|
|
(784 |
) |
|
|
9,753 |
|
|
Year ended March 31, 2002
|
|
|
8,339 |
|
|
|
2,349 |
|
|
|
(607 |
) |
|
|
10,081 |
|
Reserve for product returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2004
|
|
$ |
5,393 |
|
|
$ |
45,895 |
|
|
$ |
(44,675 |
) |
|
$ |
6,613 |
|
|
Year ended March 31, 2003
|
|
|
13,711 |
|
|
|
36,489 |
|
|
|
(44,807 |
) |
|
|
5,393 |
|
|
Year ended March 31, 2002 (unaudited)
|
|
|
15,668 |
|
|
|
54,113 |
|
|
|
(56,070 |
) |
|
|
13,711 |
|
Reserve for rebates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2004
|
|
$ |
33,926 |
|
|
$ |
162,448 |
|
|
$ |
(150,142 |
) |
|
$ |
46,232 |
|
|
Year ended March 31, 2003
|
|
|
33,683 |
|
|
|
116,736 |
|
|
|
(116,493 |
) |
|
|
33,926 |
|
|
Year ended March 31, 2002 (unaudited)
|
|
|
21,019 |
|
|
|
97,036 |
|
|
|
(84,372 |
) |
|
|
33,683 |
|
82
EXHIBIT INDEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
|
|
|
|
| |
|
|
Exhibit | |
|
|
|
|
|
Filing | |
|
Filed | |
Number | |
|
Exhibit Description |
|
Form | |
|
File No. | |
|
Exhibit | |
|
Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
2 |
.01 |
|
Agreement and Plan of Merger, dated as of September 23,
2003, among Symantec Corporation, Quartz Acquisition Corp.,
PowerQuest, Inc. and John Fife, as representative.** |
|
|
10-Q |
|
|
|
|
|
|
|
10.01 |
|
|
|
02/13/04 |
|
|
|
|
|
|
|
2 |
.02 |
|
Agreement and Plan of Merger, dated as of October 27, 2003,
by and among Symantec Corporation, Outlaw Acquisition
Corporation and OnTechnology Corporation.** |
|
|
10-Q |
|
|
|
|
|
|
|
10.02 |
|
|
|
02/13/04 |
|
|
|
|
|
|
|
2 |
.03 |
|
Agreement and Plan of Merger dated as of May 19, 2004 among
Symantec Corporation, Brazil Acquisition Corp., Brightmail
Incorporated and John C. Colligan, as Representative.** |
|
|
10-K |
|
|
|
|
|
|
|
2.03 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
3 |
.01 |
|
Symantec Corporation Restated Certificate of Incorporation. |
|
|
10-K |
|
|
|
|
|
|
|
3.01 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
3 |
.02 |
|
Symantec Corporation Bylaws, as amended and restated effective
August 11, 1998. |
|
|
8-K |
|
|
|
|
|
|
|
3.1 |
|
|
|
08/19/98 |
|
|
|
|
|
|
|
4 |
.01 |
|
Registration Rights Agreement between Symantec Corporation and
Certain of its Stockholders. |
|
|
S-4 |
|
|
|
33-35385 |
|
|
|
4.02 |
|
|
|
06/13/90 |
|
|
|
|
|
|
|
4 |
.02 |
|
Amendment No. One to Registration Rights Agreement. |
|
|
10-K |
|
|
|
|
|
|
|
4.02 |
|
|
|
06/16/03 |
|
|
|
|
|
|
|
4 |
.03 |
|
Amendment No. Two to Registration Rights Agreement. |
|
|
10-K |
|
|
|
|
|
|
|
4.03 |
|
|
|
06/16/03 |
|
|
|
|
|
|
|
4 |
.04 |
|
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. |
|
|
8-A |
|
|
|
|
|
|
|
4.1 |
|
|
|
08/19/98 |
|
|
|
|
|
|
|
4 |
.05 |
|
Form of Note for Symantec Corporation 3% Convertible
Subordinated Notes due November 1, 2006. |
|
|
S-3 |
|
|
|
333-77072 |
|
|
|
4.08 |
|
|
|
01/22/02 |
|
|
|
|
|
|
|
4 |
.06 |
|
Indenture between Symantec Corporation, as Issuer, and State
Street Bank and Trust Company of California, N.A., as Trustee,
dated October 24, 2001 related to Symantec
Corporations 3% Convertible Subordinated Notes due
November 1, 2006. |
|
|
S-3 |
|
|
|
333-77072 |
|
|
|
4.09 |
|
|
|
01/22/02 |
|
|
|
|
|
|
|
4 |
.07 |
|
Registration Rights Agreement between Symantec Corporation and
Credit Suisse First Boston Corporation dated October 24,
2001 related to Symantec Corporations 3% Convertible
Subordinated Notes due November 1, 2006. |
|
|
S-3 |
|
|
|
333-77072 |
|
|
|
4.10 |
|
|
|
01/22/02 |
|
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
|
|
|
|
| |
|
|
Exhibit | |
|
|
|
|
|
Filing | |
|
Filed | |
Number | |
|
Exhibit Description |
|
Form | |
|
File No. | |
|
Exhibit | |
|
Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
10 |
.01 |
|
Form of Indemnity Agreement with Officers and Directors and
Amendment No. 1. |
|
|
S-1 |
|
|
|
33-28655 |
|
|
|
10.17 |
|
|
05/19/89 06/21/89 |
|
|
|
|
|
|
10 |
.02* |
|
Symantec Corporation 1994 Patent Incentive Plan. |
|
|
S-8 |
|
|
|
33-60141 |
|
|
|
4.01 |
|
|
|
06/09/95 |
|
|
|
|
|
|
|
10 |
.03* |
|
Symantec Corporation 1996 Equity Incentive Plan, as amended and
Form of Stock Option Agreement. |
|
|
10-K |
|
|
|
|
|
|
|
10.03 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.04* |
|
Symantec Corporation Deferred Compensation Plan, dated as of
November 7, 1996. |
|
|
10-K |
|
|
|
|
|
|
|
10.11 |
|
|
|
06/24/97 |
|
|
|
|
|
|
|
10 |
.5* |
|
Symantec Corporation 1998 Employee Stock Purchase Plan. |
|
|
S-8 |
|
|
|
333-52200 |
|
|
|
99.2 |
|
|
|
12/19/00 |
|
|
|
|
|
|
|
10 |
.6* |
|
Symantec Corporation Acquisition Plan, dated July 15, 1999. |
|
|
S-8 |
|
|
|
333-31526 |
|
|
|
4.03 |
|
|
|
03/02/00 |
|
|
|
|
|
|
|
10 |
.7* |
|
Symantec Corporation 2000 Directors Equity Incentive Plan. |
|
|
S-8 |
|
|
|
333-47648 |
|
|
|
99.1 |
|
|
|
10/10/00 |
|
|
|
|
|
|
|
10 |
.8* |
|
Symantec Corporation 2001 Non-Qualified Equity Incentive Plan. |
|
|
S-8 |
|
|
|
333-56874 |
|
|
|
99.1 |
|
|
|
03/12/01 |
|
|
|
|
|
|
|
10 |
.9* |
|
2002 Executive Officers Stock Purchase Plan. |
|
|
10-Q |
|
|
|
|
|
|
|
10.02 |
|
|
|
11/12/02 |
|
|
|
|
|
|
|
10 |
.11* |
|
Supplemental Option Vesting and Severance Arrangement terms and
conditions between Symantec Corporation and Greg Myers. |
|
|
10-K |
|
|
|
|
|
|
|
10.63 |
|
|
|
07/01/99 |
|
|
|
|
|
|
|
10 |
.12* |
|
Employment Agreement between Symantec Corporation and John W.
Thompson. |
|
|
10-K |
|
|
|
|
|
|
|
10.67 |
|
|
|
07/01/99 |
|
|
|
|
|
|
|
10 |
.13* |
|
Symantec Corporation Stock Option Grant to John W. Thompson,
dated April 14, 1999. |
|
|
S-8 |
|
|
|
333-31540 |
|
|
|
4.03 |
|
|
|
03/03/00 |
|
|
|
|
|
|
|
10 |
.14* |
|
Symantec Corporation Stock Option Grant to John W. Thompson,
dated January 1, 2000. |
|
|
S-8 |
|
|
|
333-102096 |
|
|
|
99.3 |
|
|
|
12/20/02 |
|
|
|
|
|
|
|
10 |
.15* |
|
Employment offer by and between Symantec Corporation and Gail
Hamilton. |
|
|
10-Q |
|
|
|
|
|
|
|
10.03 |
|
|
|
08/11/00 |
|
|
|
|
|
|
|
10 |
.16* |
|
Offer Letter between Symantec Corporation and John Schwarz,
dated December 20, 2001. |
|
|
10-Q |
|
|
|
|
|
|
|
10.02 |
|
|
|
02/07/02 |
|
|
|
|
|
|
|
10 |
.17* |
|
Symantec Corporation Executive Severance Plan. |
|
|
10-K |
|
|
|
|
|
|
|
10.93 |
|
|
|
06/22/01 |
|
|
|
|
|
|
|
10 |
.18* |
|
Symantec Senior Executive Incentive Plan. |
|
|
10-K |
|
|
|
|
|
|
|
10.18 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.19* |
|
FY04 Executive Annual Incentive Plan Management
Committee Members, President and Chief Operating Officer. |
|
|
10-K |
|
|
|
|
|
|
|
10.27 |
|
|
|
06/16/03 |
|
|
|
|
|
|
|
10 |
.20* |
|
FY04 Executive Annual Incentive Plan Vice President
Plan (Non-Management Committee Members). |
|
|
10-K |
|
|
|
|
|
|
|
10.28 |
|
|
|
06/16/03 |
|
|
|
|
|
|
|
10 |
.21* |
|
FY05 Executive Annual Incentive Plan Vice Presidents. |
|
|
10-K |
|
|
|
|
|
|
|
10.21 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.22* |
|
FY05 Executive Annual Incentive Plan Vice
Presidents, Sales. |
|
|
10-K |
|
|
|
|
|
|
|
10.22 |
|
|
|
06/14/04 |
|
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
|
|
|
|
| |
|
|
Exhibit | |
|
|
|
|
|
Filing | |
|
Filed | |
Number | |
|
Exhibit Description |
|
Form | |
|
File No. | |
|
Exhibit | |
|
Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
10 |
.23* |
|
FY05 Executive Annual Incentive Plan Vice President,
Business Unit Leaders. |
|
|
10-K |
|
|
|
|
|
|
|
10.23 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.24* |
|
FY05 Executive Annual Incentive Plan Senior Vice
Presidents, non Business Unit. |
|
|
10-K |
|
|
|
|
|
|
|
10.24 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.25* |
|
FY05 Executive Annual Incentive Plan President and
Chief Operating Officer. |
|
|
10-K |
|
|
|
|
|
|
|
10.25 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.26* |
|
FY05 Executive Annual Incentive Plan Chairman and
Chief Salesman. |
|
|
10-K |
|
|
|
|
|
|
|
10.26 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
10 |
.27 |
|
Office building lease, dated as of April 10, 1991, between
Symantec Corporation and Maguire Thomas Partners Colorado Place
regarding property located in Santa Monica, California. |
|
|
10-K |
|
|
|
|
|
|
|
23.02 |
|
|
|
06/16/03 |
|
|
|
|
|
|
|
10 |
.28 |
|
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. |
|
|
10-Q |
|
|
|
|
|
|
|
10.01 |
|
|
|
11/15/99 |
|
|
|
|
|
|
|
10 |
.29 |
|
Amended Agreement Respecting Certain Rights of Publicity. |
|
|
S-4 |
|
|
|
33-35385 |
|
|
|
10.04 |
|
|
|
06/13/90 |
|
|
|
|
|
|
|
10 |
.30 |
|
Assignment of Copyright and Other Intellectual Property Rights. |
|
|
S-4 |
|
|
|
33-35385 |
|
|
|
10.37 |
|
|
|
06/13/90 |
|
|
|
|
|
|
|
12 |
.01 |
|
Statement Regarding Computation of Ratios. |
|
|
10-K |
|
|
|
|
|
|
|
12.01 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
21 |
.01 |
|
Subsidiaries of Symantec Corporation. |
|
|
10-K |
|
|
|
|
|
|
|
21.01 |
|
|
|
06/14/04 |
|
|
|
|
|
|
|
23 |
.01 |
|
Consent of Independent Registered Public Accounting Firm |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
23 |
.02 |
|
Consent of Independent Registered Public Accounting Firm |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
31 |
.01 |
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
31 |
.02 |
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
32 |
.01*** |
|
Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
32 |
.02*** |
|
Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
* |
Indicates a management contract or compensatory plan or
arrangement. |
|
|
|
|
** |
The exhibits and schedules to this agreement have been omitted
pursuant to Item 601(b)(2) of Regulation S-K. We will
furnish copies of any of the exhibits and schedules to the
Securities and Exchange Commission upon request. |
|
|
*** |
This exhibit is being furnished, rather than filed, and shall
not be deemed incorporated by reference into any filing, in
accordance with Item 601 of Regulation S-K. |
85